EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AND PLAN OF REORGANIZATION
BY AND AMONG
HA-LO INDUSTRIES, INC.,
XXXXXXXXX.XXX, INC.,
AND
HA-LO INDUSTRIES, INC.
THIS AGREEMENT AND PLAN OF MERGER AND PLAN OF REORGANIZATION dated as
of January 17, 2000 (this "AGREEMENT") is by and among HA-LO Industries, Inc.,
an Illinois corporation ("Acquiror"), HA-LO Industries, Inc., a Delaware
corporation ("ACQUIROR SUB"), and Xxxxxxxxx.xxx, Inc., a Delaware corporation
f/k/a XxxXxxxx.xxx, Inc. (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the Company has been formed for the purpose of and is in the
start-up phase of preparing to engage in the business of the development, sale,
marketing and distribution of advertising specialty, premium and promotional
products and other products and services primarily through the Internet;
WHEREAS, the stockholders set forth on Section 3.03(a) of the Company
Disclosure Schedules are all of the stockholders of the Company (each, a
"STOCKHOLDER" and collectively the "STOCKHOLDERS");
WHEREAS, upon the terms and subject to the conditions of this Agreement
and in accordance with the Delaware General Corporation Law of the State of
Delaware (the "DGCL" or "DELAWARE LAW") the Company will merge with and into
Acquiror Sub, a wholly-owned subsidiary of Acquiror (the "MERGER");
WHEREAS, the Board of Directors and Stockholders of the Company have
determined that the Merger is in the best interest of the Company and its
stockholders, and have approved and adopted this Agreement and consented to the
transactions contemplated hereby;
WHEREAS, the Board of Directors of Acquiror has determined that the
Merger and the transactions contemplated hereby are in the best interests of
Acquiror and its shareholders and has determined to submit and recommend the
Merger and the issuance of Acquiror Common Stock and Acquiror Series A
Convertible Preferred Stock in connection therewith (the "SHARE ISSUANCE") to
its shareholders for their approval to the extent such approval is required by
law or the rules of The New York Stock Exchange ("NYSE");
WHEREAS, the Board of Directors and sole stockholder of Acquiror Sub
have determined that the Merger is in the best interests of Acquiror Sub and its
stockholder, and have approved and adopted this Agreement and consented to the
transactions contemplated hereby; and
WHEREAS, the parties hereto intend for the Merger to qualify, for
federal income tax purposes, as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties agree as follows:
ARTICLE I
THE MERGER TRANSACTION
SECTION 1.01 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Delaware Law and this
Agreement, at the "Effective Time" (as hereafter defined), the Company shall
be merged with Acquiror Sub. As a result of the Merger, the separate
corporate existence of the Company shall cease and Acquiror Sub shall
continue as the surviving corporation of the Merger (hereafter, the
"SURVIVING CORPORATION").
SECTION 1.02 EFFECTIVE TIME. At the Closing , the parties shall cause
the Merger to be consummated by filing of a certificate of merger (the
"CERTIFICATE OF MERGER") with the Delaware Secretary of State in such form as
required by, and executed in accordance with, the relevant provisions of
Delaware Law (the date and time of such filing is the "EFFECTIVE TIME").
SECTION 1.03 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law
and this Agreement. Without limiting the generality of those laws, and
subject to their provisions, at the Effective Time, all the properties,
rights, privileges, powers and franchises of Acquiror Sub and the Company
shall vest in the Surviving Corporation, and all debts, liabilities and
duties of Acquiror Sub and the Company shall become the debts, liabilities
and duties of the Surviving Corporation.
SECTION 1.04 CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective
Time, the Certificate of Incorporation and Bylaws of Acquiror Sub shall be
the Certificate of Incorporation and Bylaws of the Surviving Corporation.
Subject to the limitations in this Agreement, Acquiror reserves the right,
exercisable in its sole discretion on and after the Effective Time, to amend,
or cause to be amended, the Certificate of Incorporation and Bylaws of the
Surviving Corporation.
SECTION 1.05 DIRECTORS AND OFFICERS. At the Effective Time, the officers
and directors of the Surviving Corporation shall be the officers and
directors of the Company immediately prior to the Effective Time, and until
their respective successors are duly elected or appointed and qualified.
SECTION 1.06 TAKING NECESSARY ACTION; FURTHER ACTION. The parties shall
each use reasonable efforts to take all actions as may be necessary or
appropriate to effectuate the Merger as soon as possible consistent with the
terms and conditions of this Agreement. If, at any time following the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full
right, title and possession to all properties, rights, privileges,
immunities, powers and franchises of its constituent corporations, the
directors and officers of the Surviving Corporation are fully authorized, in
the name of each constituent corporation, to take, and shall take, all such
lawful and necessary action, to carry out the purposes of this Agreement.
SECTION 1.07 THE CLOSING. The closing of the transactions contemplated
by this Agreement will take place at the offices of Xxxx, Xxxxxx & Xxxxxxxxx,
Chicago, Illinois, and will be effective at the Effective Time. On the terms
and subject to the conditions of this Agreement and provided that this
Agreement has not been terminated pursuant to Article VIII, the closing of
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the Merger (the "CLOSING") will take place at 10:00 a.m., local time in
Chicago, Illinois, on the date which is the third business day to occur on or
after the satisfaction of the conditions set forth in Section 7.1, provided
that if all conditions set forth in Article VII are not fulfilled or waived
on such third business day, then the Closing shall be automatically extended
from time to time until the first subsequent business day on which all such
conditions are so satisfied or waived, subject to Section 8.01(e), unless
another date or place is agreed to in writing by the parties. The date on
which the Closing occurs is referred to herein as the "CLOSING DATE." At the
Closing, (a) Acquiror shall deliver, and each Stockholder will be entitled to
receive, upon surrender to Acquiror of certificates representing shares of
Company Common Stock or shares of Company Preferred Stock, as the case may
be, for cancellation, certificates representing the number of shares of
Acquiror Common Stock and/or Acquiror Series A Preferred Stock that such
Stockholder is entitled to receive pursuant to Section 2.01 hereof, , and (b)
the parties shall execute and deliver or make the deliveries set forth in
Sections 7.01 and 7.02 hereof. In the event any certificate representing
shares of Company Common Stock or shares of Company Preferred Stock shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such certificate to be lost, stolen or destroyed
and, if reasonably required by Acquiror, the posting by such Person of a bond
in such amount as Acquiror may determine is reasonably necessary as indemnity
against any claim that may be made against it with respect to such
certificate, Acquiror will issue in exchange for such lost, stolen or
destroyed certificate the shares of Acquiror Common Stock and/or Acquiror
Series A Preferred Stock and any cash in lieu of fractional shares
deliverable in respect thereof pursuant to this Agreement.
ARTICLE II
EXCHANGE OF CERTIFICATES
SECTION 2.01 MERGER CONSIDERATION.
(a) (i) At the Effective Time, by virtue of the Merger,
Acquiror shall pay to the Stockholders Two Hundred and Forty Million
Dollars ($240,000,000) (the "MERGER CONSIDERATION"), payable by the
assumption of the Company Options pursuant to Section 6.13 and as
follows:
(A) Nineteen Million Dollars ($19,000,000) in cash MINUS
Expenses of the Stockholders and the Company in
excess of $500,000 pursuant to section 8.03(a) hereof
(the "CASH CONSIDERATION");
(B) Shares of Acquiror's Series A Convertible Preferred
Stock, without par value ("ACQUIROR SERIES A
PREFERRED STOCK"), valued at its liquidation value,
with an aggregate liquidation value of Fifty-One
Million Dollars ($51,000,000) (the "PREFERRED STOCK
CONSIDERATION"); and
(C) Shares of Acquiror's common stock, without par value
("ACQUIROR COMMON STOCK"), valued at the Acquiror
Share Price, with an aggregate value of the Merger
Consideration, MINUS Seventy Million Dollars
($70,000,000).
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Provided, however, that, at the Effective Time, Merger
Consideration valued at $25,000,000 (the "CAP"), shall be withheld from
the Escrowed Stockholders and held pursuant to the Escrow Agreements
referred to in Section 2.04 hereof;
(ii) "ACQUIROR SHARE PRICE" or "SHARE VALUE" shall
mean the lesser of (A) $10.00, or (B) the average closing
price of the Acquiror Common Stock as reported on the NYSE for
all trading days during the twenty-five (25) day period which
consists of the fifteen (15) calendar days prior to the date
hereof and the ten (10) calendar days following the date
hereof; provided, however, that if such average closing price
of the Acquiror Common Stock is less than $6.00, then Acquiror
Share Price shall mean $6.00;
(iii) "SERIES B PORTION" shall mean the Merger
Consideration multiplied by a fraction, the numerator of which
equals the number of shares of the Company's Series B
Preferred Stock, $.001 par value per share ("COMPANY SERIES B
PREFERRED STOCK") outstanding immediately prior to the
Effective Time multiplied by the number of shares of Company
Common Stock into which each share of Company Series B
Preferred is then convertible and the denominator of which
equals the total number of shares of the Company's Common
Stock (whether Company Class A Common Stock or Company Class B
Common Stock) (collectively, the "COMPANY COMMON STOCK"),
outstanding immediately prior to the Effective Time assuming
the exercise and/or conversion of the Silicon Warrant and all
Company Options (whether or not then exercisable) then
outstanding and the conversion of all Company Preferred Stock
(including, without limitation, the Company Series A Preferred
Stock and Series B Preferred Stock) into Company Common Stock
prior to the Effective Time (such denominator, the "COMPANY
FULLY DILUTED SHARES");
(iv) "SERIES A PORTION" shall mean the Merger
Consideration multiplied by a fraction, the numerator of which
is equal to the number of shares of the Company's Series A
Preferred Stock, $.001 par value per share ("COMPANY SERIES A
PREFERRED STOCK") outstanding immediately prior to the
Effective Time multiplied by the number of shares of Company
Common Stock into which each share of Company Series A
Preferred Stock is then convertible, and the denominator of
which equals the Company Fully Diluted Shares;
(v) "COMMON STOCK PORTION" shall mean the Merger
Consideration multiplied by a fraction, the numerator of which
equal the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time and the denominator of
which equals the Company Fully Diluted Shares.
(b) EFFECT ON COMPANY STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of any holder
of shares of the Company Common Stock, the Company's Preferred Stock,
$.001 par value per share ("COMPANY PREFERRED STOCK"), Acquiror Common
Stock or Acquiror Sub Stock:
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(i) CANCELLATION OF TREASURY STOCK AND COMPANY-OWNED
STOCK. Each share of Company Common Stock or Company Preferred
Stock that is owned by the Company shall automatically be
cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor;
provided, however, that any shares of Company Common Stock or
Company Preferred Stock (A) held by the Company for the
account of another individual or entity ("PERSON"), (B) as to
which the Company is or may be required to act as a fiduciary
or in a similar capacity or (C) the cancellation of which
would violate any legal duties or obligations of the Company,
in each case shall not be cancelled but, instead, shall be
treated as set forth in Section 2.01(b)(ii).
(ii) CONVERSION OF COMPANY SERIES B PREFERRED STOCK.
The issued and outstanding shares of the Company Series B
Preferred Stock (other than shares to be cancelled in
accordance with Section 2.01(a)(i)) shall be converted into
the right to receive, in the aggregate, the Series B Portion,
payable as follows: (A) cash in an amount equal to the Cash
Consideration multiplied by a fraction, the numerator of which
is sixteen (16) and the denominator of which is nineteen (19)
(the "SERIES B CASH AMOUNT") plus (B) shares of Acquiror
Series A Preferred Stock with an aggregate liquidation value
of an amount (the "SERIES B PREFERRED STOCK AMOUNT") equal to
the Series B Portion MINUS the Series B Cash Amount. Each
issued and outstanding share of Company Series B Preferred
Stock shall be entitled to its pro rata share of the Series B
Portion, based upon the total shares of Company Series B
Preferred Stock outstanding at the Effective Time.
(iii) CONVERSION OF COMPANY SERIES A PREFERRED STOCK.
The issued and outstanding shares of Company Series A
Preferred Stock (other than shares to be cancelled in
accordance with Section 2.01(a)(i)) shall be converted into
the right to receive, in the aggregate, an amount equal to the
Series A Portion, payable as follows: (A) cash in an amount
equal to the Cash Consideration multiplied by a fraction, the
numerator of which is three (3) and the denominator of which
is nineteen (19) (the "SERIES A CASH AMOUNT"), (B) shares of
Acquiror Series A Preferred Stock with an aggregate
liquidation value as described in the next sentence (the
"SERIES A PREFERRED STOCK AMOUNT"), and (C) Shares of Acquiror
Common Stock with an aggregate value, valued at the Acquiror
Share Price, of the Series A Portion MINUS the Series A Cash
Amount MINUS the Series A Preferred Stock Amount. The Series A
Preferred Stock Amount shall equal the product of (x) the
Preferred Stock Consideration MINUS the Series B Preferred
Stock Amount multiplied by (y) a fraction, the numerator of
which is the Series A Portion MINUS the Series A Cash Amount
and the denominator of which is which is the Merger
Consideration MINUS the Series B Portion MINUS the Series A
Cash Amount. Each issued and outstanding share of Company
Series A Preferred Stock shall be entitled to its pro rata
share of the Series A Portion based upon the total number of
shares of Company Series A Preferred Stock outstanding at the
Effective Time.
(iv) CONVERSION OF COMPANY COMMON STOCK. The issued
and outstanding shares of Company Common Stock (other than
shares to be canceled
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in accordance with Section 2.01(a)(i)) shall be converted
into the right to receive, in the aggregate an amount equal
to the Common Stock Portion, payable as follows: (A) shares
of Acquiror Series A Preferred Stock with an aggregate
liquidation value as described in the next sentence (the
"COMMON PREFERRED STOCK AMOUNT"), and (B) shares of
Acquiror Common Stock, with an aggregate value, valued at
the Acquiror Share Price, of the Common Stock Portion MINUS
the Common Preferred Stock Amount. The Common Preferred Stock
Amount equals the product of (x) the Preferred Stock
Consideration MINUS the Series B Preferred Stock Amount MINUS
the Series A Preferred Stock Amount multiplied by (y) a
fraction, the numerator of which is the number of shares of
Common Stock outstanding and the denominator of which is the
difference between Company Fully Diluted Shares and the number
of shares of Common Stock issuable upon the conversion of the
Preferred Shares outstanding as of the Effective Time. Each
issued and outstanding share of Company Common Stock shall be
entitled to its pro rata share of the Common Stock Portion,
based upon the total number of shares of Company Common Stock
outstanding at the Effective Time.
(v) CERTIFICATES. Certificates, if any, previously
representing Company Common Stock or Company Preferred Stock
shall, together with such duly executed documents and other
instruments of transfer as may reasonably be required by
Acquiror, upon presentment be immediately exchanged for
certificates representing whole shares of Acquiror Common
Stock and/or Acquiror Series A Preferred Stock, as applicable,
issued in consideration therefor, without interest. All shares
of Acquiror Common Stock and/or Acquiror Series A Preferred
Stock, as applicable, issued upon conversion of shares of
Company Common Stock and Company Preferred Stock in accordance
with the terms of this Agreement shall be deemed to have been
issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock and Company Preferred Stock and
to have been issued and outstanding as of the Effective Time.
(c) ACQUIROR SUB STOCK. Each issued and outstanding share of
common stock, no par value, of Acquiror Sub ("ACQUIROR SUB STOCK")
shall be converted into one share of the common stock, no par value, of
the Surviving Corporation ("SURVIVOR STOCK"). Certificates, if any,
previously representing Acquiror Sub Stock shall, together with such
duly executed documents and other instruments of transfer as may
reasonably be required by Acquiror, upon presentment be immediately
exchanged for certificates representing whole shares of Survivor Stock
issued in consideration therefor, without interest.
(d) ACKNOWLEDGEMENT. The parties hereto agree and acknowledge
that, notwithstanding anything to the contrary contained in this
Section 2.01, each of (i) the Series B Portion, the Series A Portion
and the Common Stock Portion, and (ii) the aggregate of the cash paid
and the value of the shares of Acquiror's Series A Preferred Stock and
Common Stock issued pursuant to Sections 2.01(b)(ii), (iii) and (iv),
as such value is determined pursuant to such Sections, must equal the
Merger Consisderation MINUS the sum of (A) the Expenses of the
Stockholders and the Company in excess of $500,000 pursuant to Section
8.03(a) hereof and (B) the aggregate value of Acquiror Common Stock and
Acquiror Series A Preferred Stock which would be issued on
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exercise of all Adjusted Options outstanding at the Effective Time,
valued in accordance with this Section 2.01, less the aggregate
exercise price of such Adjusted Options.
SECTION 2.02 STOCK TRANSFER BOOKS. On and as of the Effective
Time, the transfer books of the Company shall be closed and thereafter, and
except as provided in Sections 2.03 and 7.02(j), there shall be no further
registration of transfers of interests in the Company on the records of the
Company.
SECTION 2.03 OTHER COMPANY SECURITIES AND OPTIONS. As of the
Effective Time, each outstanding share of common, preferred or convertible
capital stock other than the shares of Company Common Stock and Company
Preferred Stock ("OTHER COMPANY SECURITIES"), together with all options and
warrants (other than the Company Options and the Silicon Warrant) or other
rights, agreements, arrangements or commitments (collectively, the "OTHER
COMPANY OPTIONS") to sell or purchase shares of Company Common Stock, Company
Preferred Stock or Other Company Securities, whether written, oral,
authorized, outstanding, issued, unissued, vested or unvested, shall be
cancelled and terminated, and of no further force or effect. Prior to the
Effective Time, except as provided in Section 2.03 of the Company Disclosure
Schedules, the Company shall use all reasonable efforts to take all corporate
and/or other action necessary to effectuate the cancellation and termination
of all Other Company Securities and Other Company Options.
SECTION 2.04 ESCROW AGREEMENTS. Twenty-Five Million Dollars
($25,000,000) of the Merger Consideration, in the form of Acquiror Common
Stock and Acquiror Series A Preferred Stock and valued in accordance with
Section 2.01, rounded up to the nearest whole share (the "ESCROW SHARES")
will be deposited and held in escrow in accordance with separate Escrow
Agreements in the form of EXHIBIT A attached hereto (the "ESCROW AGREEMENTS")
with the Stockholders listed on Section 2.04 of the Company Disclosure
Schedules (the "ESCROWED STOCKHOLDERS") as the sole source of indemnification
payments that may become due to Acquiror under Article IX. The Escrow Shares
will be deposited pursuant to the Escrow Agreements from the Escrowed
Stockholders in the percentages set forth on Section 2.04 of the Company
Disclosure Schedules.
SECTION 2.05 EMPLOYMENT ESCROW AGREEMENTS. Twenty percent (20%) of
the Merger Consideration in value (determined in accordance with Section
2.01, received by each of the Stockholders listed on Section 2.05 of the
Company Disclosures Schedules, will be deposited and held in escrow in
accordance with separate Employment Escrow Agreements in the form of EXHIBIT
A-1 attached hereto. Such deposits will be in the form of Acquiror Common
Stock, rounded up to the nearest whole share.
SECTION 2.06 DISSENTING SHARES. Any holder of shares of Company
Common Stock or Company Preferred Stock that are outstanding on the record
date for the determination of which holders will be entitled to vote for or
against the Merger who did not vote such shares in favor of the Merger
("DISSENTING SHARES") will be entitled to exercise dissenters' rights
pursuant to Section 262 of the DGCL with respect to such Dissenting Shares,
provided that such holder meets all requirements of the DGCL with respect to
such Dissenting Shares, and will not be entitled to receive any Merger
Consideration, unless otherwise provided by the DGCL or agreed in writing by
Acquiror. The Company, the Surviving Corporation and Acquiror, as
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applicable, will, after consultation with one another, give such notices with
respect to dissenters' rights as may be required by the DGCL and other
applicable law as soon as practicable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The term "COMPANY ADVERSE EFFECT," as used in this Agreement, shall
mean any change or event that, individually or when taken together with all
other such changes or events, would reasonably be considered to be materially
adverse to the financial condition, business, business prospects or results of
operations of the Company, taken as a whole; provided, however, the occurrence
of any change or event (i) described in any Section of the Company Disclosure
Schedules attached to this Agreement (the "COMPANY DISCLOSURE SCHEDULES"), (ii)
resulting from the entry into this Agreement or the transactions contemplated
hereby or the public announcement thereof (in accordance with Section 6.09
hereof), or (iii) resulting from or arising in connection with (A) any
occurrence or condition affecting any of the online, e-commerce, promotional or
decorated products industries generally, (B) any changes in economic, market,
regulatory, banking, monetary, political or other similar conditions or (C) any
occurrence or condition affecting the Internet (or any particular portion
thereof) generally, shall not, individually or in the aggregate, constitute a
Company Adverse Effect.
The term "SUBSIDIARY" (or its plural) as used in this Agreement with
respect to the Company, Stockholders, Acquiror, Acquiror Sub or any other
entity, shall mean any corporation, partnership, limited liability company,
limited liability partnership, joint venture or other entity of which the
Company, Stockholders, Acquiror, Acquiror Sub or other entity, as the case may
be (either alone or through or together with any other subsidiary), owns,
directly or indirectly, a majority of the stock or other equity interests
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other entity.
For purposes of this Article III, and as generally applied to the
Company, the term "KNOWLEDGE" means the actual knowledge, upon due inquiry of
Xxxx Xxxxxxx ("XXXX"), Xxxx Xxxxxxxxx ("XXXX") (each, a "PRINCIPAL EXECUTIVE"
and together, the "PRINCIPAL EXECUTIVES") and each of Xxxx Xxxxxxxx, Xxxxxxxx
XxxXxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxxxxxxx and Xxx Xxxxxxx (collectively, the
"KEY EMPLOYEES").
The Company represents and warrants, as of the date of this Agreement,
to Acquiror and Acquiror Sub that, except as specifically described in the
Company Disclosure Schedules, the statements contained in this Article III are
true and correct with respect to the Company and its business. Any disclosure
set forth on any particular Section of the Company Disclosure Schedules shall be
deemed disclosed in reference to all Sections of the Company Disclosure
Schedules to which such disclosure may be reasonably applicable.
SECTION 3.01 ORGANIZATION AND QUALIFICATION; EQUITY INVESTMENTS.
The Company is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware. Except as set forth on
Section 3.01 of the Company Disclosure Schedules, the Company does not own,
directly or indirectly, five percent (5%) or more of the voting stock or
other equity interests in another Person. The Company possesses all requisite
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corporate power and corporate authority to own, lease and operate its
properties and/or to carry on its business as it is now being conducted, and
is duly qualified and in good standing to do business in each jurisdiction in
which the nature of the business conducted by the Company or the ownership or
leasing of its properties makes such qualification necessary, other than
where the failure to do so would not have a Company Adverse Effect. The
Company was duly incorporated on March 22, 1999; no predecessor Person
conducted the business of the Company.
SECTION 3.02 CERTIFICATE OF INCORPORATION; BYLAWS. The Company has
furnished to Acquiror complete and correct copies of its Certificate of
Incorporation and Bylaws, as amended or restated. The Company is not in
violation of any provision of its Certificate of Incorporation or Bylaws.
SECTION 3.03 CAPITALIZATION OF THE COMPANY.
(a) As of January 16, 2000, the authorized capital stock of
the Company consists solely of:
(i) 40,000,000 duly authorized shares of Company
Common Stock, consisting of 36,895,000 shares of Class B
(voting) Common Stock ("COMPANY CLASS B COMMON STOCK") and
3,105,000 shares of Class A (non-voting) Common Stock
("COMPANY CLASS A COMMON STOCK"), of which:
(A) 16,500,000 shares of Company Class B
Common Stock are issued and outstanding, all of which
are held of record and beneficially by the Persons
and in the amounts set forth on Section 3.03(a) of
the Company Disclosure Schedules;
(B) 3,105,000 shares of Company Class A
Common Stock have been duly and validly reserved for
issuance under the 1999 Stock Option Plan of the
Company (the "PLAN"), of which 395,000 shares are
outstanding pursuant to the exercise of such options,
______ shares are subject to outstanding options and
_______ shares are not subject to any outstanding
options; such options are held of record by the
Persons and in the amounts set forth on Section
3.03(a) of the Company Disclosure Schedules (the
"COMPANY OPTIONS"); and
(C) 8,682,080 shares of Class B Common Stock
are duly and validly reserved for issuance upon the
conversion of the Company Series A Preferred Stock
and the Company Series B Preferred Stock and for
issuance upon exercise of the Silicon Warrant.
(ii) 7,153,711 duly authorized shares of Company
Preferred Stock of which:
(A) 1,500,000 shares are designated as
Company Series A Preferred Stock, all of which are
issued and outstanding, and all of which are held of
record and beneficially by the Persons and in the
amounts set forth on Section 3.03(a) of the Company
Disclosure Schedules; and
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(B) 5,653,711 shares are designated as
Company Series B Preferred Stock, of which 5,653,711
are issued and outstanding, and which are held of
record by the Persons and in the amounts set forth on
Section 3.03(a) of the Company Disclosure Schedules.
(b) No Other Company Securities are issued and outstanding.
Section 3.03(b) of the Company Disclosure Schedules contains a list of
all outstanding warrants, options, agreements, convertible securities
(other than Company Preferred Stock and the Silicon Warrant) and other
commitments pursuant to which the Company is or may become obligated to
issue, sell or otherwise transfer any Company Common Stock or Company
Preferred Stock, which list names all Persons entitled to receive such
Company Common Stock or Company Preferred Stock and sets forth the
shares of Company Common Stock or Company Preferred Stock required to
be issued thereunder. Except as described in Section 3.03(b) of the
Company Disclosure Schedules, no shares of Company Common Stock or
Company Preferred Stock are held in treasury or are reserved for any
other purpose.
(c) All outstanding shares of Company Common Stock and Company
Preferred Stock are, and as of the Effective Time will be, duly
authorized, validly issued, fully paid and non-assessable, and not
subject to preemptive rights created by statute, the Company's
Certificate of Incorporation or Bylaws, or, except as set forth in
Section 3.03(c) of the Company Disclosure Schedules, any agreement as
to which the Company is party or by which it is bound.
(d) Except as disclosed in Section 3.03(b) of the Company
Disclosure Schedules, there are no Other Company Options obligating the
Company to register for sale any capital stock or other equity
interests in the Company. Except as disclosed in Section 3.03(d) of the
Company Disclosure Schedules, as of the date of this Agreement there
are no obligations, contingent or otherwise, of the Company to (x)
repurchase, redeem or otherwise acquire any Company Common Stock or
Company Preferred Stock, or (y) provide funds to, or make any material
investment in (in the form of a loan, capital contribution or
otherwise), or provide any guarantee with respect to the obligations
of, any Person.
(e) The Stockholders hold of record all of the outstanding
shares of Company Common Stock and Company Preferred Stock. To the
knowledge of the Company, all shares of the Company Common Stock and
the Company Preferred Stock are free and clear of all liabilities,
liens, charges, security interests, adverse claims, pledges,
restrictions, encumbrances and demands whatsoever. To the knowledge of
the Company, no other Person has any right, title or interest in or to
such shares of Company Common Stock or Company Preferred Stock, whether
by reason of any purchase agreement, Law, option, assignment, contract
(written or oral) or otherwise. Neither the Company nor, to the
knowledge of the Company, any Stockholder has entered into, issued or
given, or agreed to enter into, issue or give, any person other than
Acquiror or Acquiror Sub an option, warrant, right, put, or call
relating to, or any security convertible into, any shares of Company
Common Stock or Company Preferred Stock or any such convertible
security. For the purposes of this Agreement, the terms "LAW" or "LAWS"
shall mean any
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foreign, U.S. federal, state, provincial, local or municipal law,
statute, rule, ordinance, regulation, order, writ, injunction, judgment
or decree.
(f) All issued Company Common Stock and Company Preferred
Stock has been issued in transactions exempt from registration under
the the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "SECURITIES ACT"), and the
rules and regulations promulgated thereunder, and all applicable state
securities or blue sky laws and the rules and regulations thereunder
("BLUE SKY LAWS"), and the Company has not violated the Securities Act
or any Blue Sky Laws in connection with the issuance of any such stock.
SECTION 3.04 AUTHORITY. The Company possesses the requisite
corporate power and corporate authority to execute and deliver this
Agreement, including the Exhibits attached hereto, to perform its obligations
under this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action,
including the approval by the Company's Stockholders and directors, and no
other proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated by this Agreement.
This Agreement has been duly executed and delivered by the Company, and
assuming the due authorization, execution and delivery by Acquiror and
Acquiror Sub, constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms and conditions.
SECTION 3.05 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company
will not: (i) conflict with or violate the Company's Certificate of
Incorporation or Bylaws, (ii) subject to (x) obtaining the consents,
authorizations, approvals and permits of, and making filings with or
notifications to, any governmental or regulatory authority, domestic or
foreign (collectively, "GOVERNMENTAL ENTITIES"), pursuant to the
applicable requirements of Laws, including but not limited to the
Securities Act, the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder (the "EXCHANGE ACT"),
Blue Sky Laws, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the "HSR
ACT") (including, without limitation, with respect to the acquisition
by any Stockholder of shares of Acquiror Common Stock or Acquiror
Series A Preferred Stock in the Merger), the Code, and the filing and
recordation of appropriate merger documents as required by Delaware Law
and (y) obtaining the consents, approvals, authorizations or permits
described in Section 3.05(b) of the Company Disclosure Schedules,
conflict with or violate any laws applicable to the Company or by which
any of its properties is bound or affected; or (iii) except as set
forth in Section 3.05(b) of the Company Disclosure Schedules, result in
any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the
properties or assets of the Company pursuant to, any note, bond,
mortgage, indenture, contract,
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agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company is a party or by which the Company or
any of its properties is bound or affected.
(b) The execution and delivery of this Agreement by
the Company does not require, and neither the performance nor
compliance with the terms hereof by the Company requires, any consent,
approval, authorization or permit of, or filing with or notification
to, any Governmental Entities or other Persons, except for (i)
applicable requirements, if any, of the Securities Act, the Exchange
Act, Blue Sky Laws, the HSR Act (including, without limitation, with
respect to the acquisition by any Stockholder of shares of Acquiror
Common Stock or Acquiror Series A Preferred Stock in the Merger), the
NYSE and the Code, (ii) the consents, approvals, authorizations or
permits described in Section 3.05(b) of the Company Disclosure
Schedules, (iii) any consent or approval required for an assignment of
a contract or agreement by operation of law pursuant to the Merger (and
not required expressly under such contract or agreement upon a change
of control or merger) and (iv) the filing and recordation of
appropriate merger documents as required by Delaware Law.
SECTION 3.06 PERMITS; COMPLIANCE. The Company is in possession of
all material franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and
orders necessary for the Company to own, lease and operate its properties or
to carry on its business as it is now being conducted (each, a "COMPANY
PERMIT") and no suspension, revocation or cancellation of any such Company
Permit is pending or, to the knowledge of the Company, threatened. The
Company is not operating in material conflict with, or in material default or
violation of (i) any Law applicable to the Company or by which its properties
are bound or affected, or (ii) any Company Permit. Each Company Permit
material to the operations of the Company is listed in Section 3.06 to the
Company Disclosure Schedules.
SECTION 3.07 FINANCIAL STATEMENTS.
(a) Except as disclosed in Section 3.07(a) of the Company
Disclosure Schedules, the unaudited Balance Sheets, Income Statements,
Statements of Cash Flow and Statements of Equity of the Company as at
and for the calendar eleven (11) month period ended November 30, 1999
(collectively, the "COMPANY FINANCIAL STATEMENTS") delivered to
Acquiror prior to the date of this Agreement (i) have been prepared
from, and are in agreement with, the books, records and accounts of the
Company, (ii) fairly present in all material respects the financial
position of the Company as of the dates thereof, and (iii) fairly
present, in all material respects, the results of operations of the
Company for the periods indicated; PROVIDED, HOWEVER, the Company
Financial Statements are subject to normal or recurring adjustments at
the Company's fiscal year-end, have not necessarily been prepared in
accordance with United States generally accepted accounting principles
and standards ("GAAP") and do not contain footnotes and other
presentation items that would be required by GAAP.
(b) The Company has no liabilities or indebtedness of any
nature whatsoever, except for (i) liabilities and indebtedness set
forth in the Balance Sheets included in the Company Financial
Statements dated November 30, 1999 (the "MOST RECENT
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STATEMENTS"), (ii) liabilities and indebtedness which have arisen
after the date of the Most Recent Statements in the ordinary course
of business of the Company, (iii) liabilities and indebtedness set
forth in Section 3.07(b) of the Company Disclosure Schedules,
(iv) liabilities and indebtedness incurred in connection with the
transaction contemplated herein, and (v) except as otherwise set forth
in this Section 3.07(b), any such liability or indebtedness in each
case less than $100,000, and less than $1,000,000 in aggregate
liabilities or indebtedness.
SECTION 3.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in Section 3.08 of the Company Disclosure Schedules, since the
incorporation of the Company, (i) there has not been, and the Company has no
knowledge of any facts that are not reflected in the Most Recent Statements
and are reasonably likely to result in, any event or events causing a Company
Adverse Effect, and (ii) to the date of this Agreement, there has not been
any material change by the Company in its accounting methods, principles or
practices except any such change after the date of this Agreement mandated by
a change in GAAP.
SECTION 3.09 ABSENCE OF LITIGATION.
(a) There are no claims, actions, suits, litigation,
proceedings, arbitrations or investigations of any kind affecting the
Company, at law or in equity (including actions or proceedings seeking
injunctive relief), which are pending or, to the knowledge of the
Company, threatened. There is no action pending or, to the knowledge of
the Company, threatened seeking to enjoin or restrain the Merger or any
of the transactions contemplated by this Agreement.
(b) Except as set forth in Section 3.09(b) of the Company
Disclosure Schedules, the Company is not subject to any continuing
order of, consent decree, settlement agreement or other similar written
agreement with any Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Governmental Entity or arbitrator,
including, without limitation, cease-and-desist orders.
SECTION 3.10 CONTRACTS; NO DEFAULT.
(a) Section 3.10(a) of the Company Disclosure Schedules lists
the following written undischarged contracts of the Company:
(i) any written arrangement (or group of related
written arrangements) for the lease of tangible personal
property or real property from or to third parties with annual
payments exceeding $50,000 or with a term exceeding one year;
(ii) any written arrangement concerning a
partnership, limited liability company, distributorship,
agency, marketing agreement or joint venture;
(iii) contracts under which the Company has
created, incurred, assumed, or guaranteed (or may create,
incur, assume, or guarantee) indebtedness for borrowed money
in excess of $50,000;
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(iv) contracts which relate to inventory
purchases or capital expenditures involving an expenditure (or
series thereof) in excess of Fifty Thousand Dollars ($50,000),
performance of which by both parties has not been completed;
(v) contracts which relate to bonus and
incentive plans or similar plans providing for the payment of
bonuses, commissions, incentive compensation or similar
result-based remuneration to service providers to the Company
other than employees;
(vi) contracts with any labor union or contract
for the employment of any officer, individual employee or
other Person on a full-time, part-time or consulting basis,
and any written material contract for the engagement of any
consultants or independent contractors;
(vii) contracts which by their terms limit the
right of any employee of the Company to engage in, or to
compete with the Company in, any business conducted by the
Company prior to the Effective Time; and contracts which by
their terms limit the right of the Company or, to the
knowledge of the Company, any employee of the Company to
engage in, or to compete with any Person (other than the
Company) in, any business conducted by the Company prior to
the Effective Time;
(viii) other than purchase orders entered into
in the ordinary course of the Company's business, all
contracts of more than $50,000 under which the work by the
Company is not yet complete or under which the Company
otherwise has on-going obligations in excess of $50,000;
(ix) contracts with any Stockholder or any of
their respective Affiliates with respect to which the
consequences of a default or termination would reasonably be
expected to have a Company Adverse Effect;
(x) contracts which constitute a guaranty of any
obligation for borrowed money or other financial obligation,
other than endorsements made for collection in the Company's
ordinary course of business, or any agreement with respect to
the lending or investing of funds to or in other Persons;
(xi) other than contracts for the sale and
purchase of inventory entered into in the Company's ordinary
course of business, any contract or group of related contracts
with the same party (or group of related parties) for or
relating to the purchase or sale of products or services under
which the undelivered balance of products and services has a
selling price in excess of $250,000;
(xii) any other contract or group of related
contracts with the same party requiring payments after the
date hereof to or by the Company of more than $250,000;
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(xiii) any agreement with any employee, the
benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction of the
nature contemplated by this Agreement involving the Company;
(xiv) any agreement or plan the benefits of which
will be increased or accelerated by the occurrence of the
transactions contemplated by this Agreement;
(xv) any other written arrangement or group of
related written arrangements not entered into in the Company's
ordinary course of business the breach, default or termination
of which would have a Company Adverse Effect;
(xvi) any written arrangement or contract to
which the Company is a party which is capable of being
terminated by the other party expressly upon the occurrence
of a transaction of the nature contemplated by this Agreement;
(xvii) any contract which cannot readily be
fulfilled or performed by the Company on time without express
penalty or without extraordinary expenditure of money, which
penalty or expenditure would reasonably be expected to have a
Company Adverse Effect;
(xviii) concern a lease or agreement relating in
any manner to real estate; or
(ixx) relate to royalty or licensing contracts,
or contracts requiring similar payments (including software
license agreements) involving, or which may reasonably in the
future involve, an amount in excess of Fifty Thousand Dollars
($50,000) annually.
(b) The Company has made available to Acquiror a correct and
complete copy of each agreement (including all amendments thereto)
listed in Section 3.10(a) of the Company Disclosure Schedules. With
respect to each agreement so listed (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect; (B) the agreement
(excluding agreements requiring consent or approval for an assignment
by operation of law pursuant to the Merger (and not expressly requiring
consent or approval upon a change of control or merger)) will continue
to be legal, valid, binding, and enforceable and in full force and
effect on identical terms immediately after the Effective Time at the
terms in effect immediately prior to the Effective Time; (C) neither
the Company nor, to the knowledge of the Company, any other party to
the arrangement, is in material breach or default (including, with
respect to any express or implied warranty), and no event has occurred
which with notice or lapse of time or both would constitute a material
breach or default or permit termination, modification, or acceleration
thereunder, except in each case for any breaches, defaults,
terminations, modifications or accelerations which have been cured or
waived or breaches, defaults, terminations, modifications or
accelerations which are not reasonably likely to result in a Company
Adverse Effect; and (D) to the Company's knowledge, no party has
repudiated any
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provision of any such arrangement. Except as set forth on
Section 3.10(b) of the Company Disclosure Schedules, the Company is
not a party to any legally binding verbal contract which, if reduced to
written form, would be required to be listed in the Company Disclosure
Schedules under the terms of this Section 3.10.
(c) For the purpose of this Agreement, (i) the term
"AFFILIATE," means (x) any Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person, and (y) with respect
to a Principal Executive, also such Principal Executive's spouse,
children and descendants, and the respective spouses of each, or a
trust for the benefit of any such Person, (ii) the term "CONTROL"
(including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise,
and (iii) the term "CONTRACTS" means the contracts and agreements
required to be listed in Sections 3.10(a) and 3.10(b) of the Company
Disclosure Schedules.
SECTION 3.11 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Section 3.11(a) of the Company Disclosure Schedules sets
forth all pension, retirement, savings, disability, medical, dental,
health, life (including any individual life insurance policy as to
which the Company is owner, beneficiary or both of such policy), death
benefit, group insurance, profit sharing, deferred compensation, stock
option, bonus, incentive, vacation pay, severance pay, "cafeteria" or
"flexible benefit" plans, or other employee benefit plans, trusts,
arrangements, contracts, agreements, policies or commitments (including
without limitation, any employee pension benefit plan as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and any employee welfare benefit plan as defined in
Section 3(1) of ERISA), under which current or former employees of the
Company or its "Plan Affiliates" are entitled to participate by reason
of their employment with the Company or its Plan Affiliates, whether or
not any of the foregoing is funded, and whether insured or self-funded,
to which the Company is a party or a sponsor or a fiduciary thereof or
by which the Company (or any of its rights, properties or assets) is
bound, or (ii) with respect to which the Company could reasonably
expect to have any liability (whether or not such plan, trust,
arrangement, contract, agreement, policy or commitment is still in
effect or frozen as to benefits or assets) (collectively, the "EMPLOYEE
BENEFIT PLANS").
(b) For purposes of this Agreement, the term "PLAN AFFILIATE"
shall mean any trade or business (whether or not incorporated) that is
part of the same controlled group, or under common control with, or
part of an affiliated service group that includes, the Company or
Acquiror, as applicable, within the meaning of Section 414(b), (c), (m)
or (o) of the Code.
(c) As used in this Agreement, "PENSION PLAN" means any
Employee Benefit Plan which is an employee pension benefit plan as
defined in ERISA, or is otherwise a
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pension, savings or retirement plan or a plan of deferred compensation,
and the term "WELFARE PLAN" means any Employee Benefit Plan which is
not a Pension Plan.
(d) With respect to the Employee Benefit Plans:
(i) there are no Employee Benefit Plans which
are multiemployer plans as defined in Section 3(37) of ERISA,
and the Company has not (A) incurred nor reasonably expects to
incur, any direct or indirect liability under or by operation
of Title IV of ERISA, or (B) failed to make any contribution
when due as required by Section 412 of the Code;
(ii) there are no Employee Benefit Plans which
promise or provide health or life benefits to retirees or
former employees of the Company other than as required by Part
6 of Subtitle B of Title I of ERISA or Section 4980 of the
Code or other applicable state continuation coverage law, or
otherwise as identified in Section 3.11(d) of the Company
Disclosure Schedules;
(iii) except as disclosed in Section 3.11(d) of
the Company Disclosure Schedules, each Employee Benefit Plan
has at all times been operated and administered in material
compliance with the applicable requirements of ERISA, the Code
and any other applicable law (including regulations and
rulings thereunder), and its terms;
(iv)each Pension Plan identified in Section
3.11(a) of the Company Disclosure Schedules has received a
favorable determination letter from the Internal Revenue
Service ("IRS") stating that such Plan is qualified under
Section 401(a) of the Code, meets all the requirements of the
Code and that any trust or trusts associated with the plan are
tax exempt under Section 501(a) of the Code. Any trust or
trusts associated with such Pension Plans are tax exempt under
Section 501(a) of the Code. To the knowledge of the Company,
there is no reason why the tax-qualified or registered status
of any such Pension Plan should be revoked, whether
retroactively or prospectively, by any Governmental Entity
pursuant to applicable Laws. All amendments to the Pension
Plans which were required to be made through the date hereof
and the Effective Time under Section 401(a) of the Code
subsequent to the issuance of each such Plan's determination
letter have been made, including all amendments required to be
made by each respective date by the Tax Reform Act of 1986,
and any other Laws or legislation affecting such Employee
Benefit Plans;
(v) to the knowledge of the Company, no actual
or threatened disputes, lawsuits, claims (other than routine
claims for benefits), investigations, audits or complaints to,
or by, any person or Governmental Entity have been filed or
are pending with respect to any Employee Benefit Plan or its
sponsor, or such sponsor's subsidiaries or Plan Affiliates, in
connection with any Employee Benefit Plan, or the fiduciaries
responsible for such Employee Benefit Plan, and to the
knowledge of the Company, no state of facts or conditions
exist which reasonably could be expected to subject such
Company to any material liability
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(other than routine claims for benefits) in accordance with
the terms of such Employee Pension Plan or pursuant to
applicable Laws;
(vi)except as disclosed in Section 3.11(d) of
the Company Disclosure Schedules, the following clauses are
true with respect to each Employee Benefit Plan:
(A) all material filings required by ERISA,
the Code or any other applicable Laws, have been
timely filed and all material notices and disclosures
to Plan participants required by same have been
timely provided;
(B) the Company has not made, nor has it
committed to make, whether in writing or orally, any
representation, payment, contribution or award to or
under any Employee Benefit Plan (other than as
required by its terms, the Code or ERISA;
(C) all contributions and payments made or
accrued with respect to each Employee Benefit Plan
required to be disclosed in Section 3.11(a) of the
Company Disclosure Schedules are deductible in full
under the Code. All contributions, premiums or
payments required to be made with respect to each
such Employee Benefit Plan have been or will
hereafter be made on or before their due date(s):
(D) except as disclosed in Section 3.11(d)
of the Company Disclosure Schedules, with respect to
each Employee Benefit Plan maintained with respect to
employees of the Company, the Company has delivered
to Acquiror true and complete copies of the following
documents:
(1) plan documents, subsequent plan
amendments, and any and all other documents
that establish or describe the existence of
the plan, trust, arrangement, contract,
policy or commitment;
(2) summary plan descriptions and
summaries of material amendments and
modifications;
(3) the most recent tax-qualified
determination letters received from, or
applications pending with, the IRS with
respect to Pension Plans;
(4) the three most recent annual
information returns (if applicable),
including related schedules and audited
financial statements and opinions of
independent certified public accountants,
for each Employee Benefit Plan filed on IRS
Form 5500 for Employee Benefit Plans adopted
by the Company; and
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(5) all related trust agreements,
insurance contracts or other funding
agreements that implement each such Employee
Benefit Plan.
(vii) at no time has the Company adopted any
Pension Plan which is or could become subject to Title IV of
ERISA or the funding standards of Section 412 of the Code. The
Company has not incurred any liability to, or adopted any
Employee Benefit Plan or other arrangement which may expose it
to liability of any nature whatsoever, to (i) the Pension
Benefit Guarantee Corporation under Title IV or Section 502 of
ERISA, or (ii) the IRS under Chapter 43 of the Code;
(viii) with respect to each Employee Benefit Plan,
there has not occurred, and no person or entity is
contractually bound to enter into, any nonexempt "prohibited
transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA, or any other transaction contrary to the
terms of such Employee Benefit Plan which could result in
material liability to the Company.
(e) The Company has complied in all material respects with the
provisions of ERISA and the Code with respect to each Pension Plan and
Welfare Plan heretofore adopted or currently in effect for the benefit
of its employees. Each Employee Benefit Plan described in Section
3.11(a) of the Company Disclosure Schedules may, by its express terms,
be amended or terminated, in whole or in part.
(f) Except as disclosed in Section 3.11(f) of the Company
Disclosure Schedules, no payment that is owed or may become due
(pursuant to any agreement with the Company existing prior to the
Effective Time) to any director, officer, employee or agent of the
Company shall result in the imposition of, tax under Section 280G or
4999 of the Code, nor is the Company obligated, orally or in writing,
to "gross up" or otherwise compensate any such person due to the
imposition of an excise or similar tax on payments made to such person
by the Company.
(g) Except as disclosed in Section 3.11(g) of the Company
Disclosure Schedules or as expressly provided by the terms of this
Agreement, the consummation of the transactions contemplated by this
Agreement will not accelerate or terminate, nor does there exist any
basis for the acceleration or termination of, (i) benefits payable to
employees of or other compensated personnel at the Company under any
Employee Benefit Plan, Welfare Plan, or other plan, arrangement,
contract or agreement, written or oral, (ii) a participant's vesting
credits or years of service under any Pension Plan or Welfare Plan, or
(iii) accruals with respect to any other benefits or amounts reserved
under any such plan or arrangement.
(h) Section 3.11(h) of the Company Disclosure Schedules lists,
as of the date of this Agreement, all collective bargaining or other
labor union contracts to which the Company is a party and which is
applicable to persons employed by the Company. There is no pending or,
to the knowledge of the Company, threatened, labor dispute, strike or
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work stoppage against the Company which may materially interfere with
the business activities of the Company, its revenues, profits, cash
flows, or other results of operations. The Company has no knowledge of
the commission of any unfair labor practices in connection with the
operation of the Company business, and there is not now pending or, to
the knowledge of the Company, threatened, any charge, complaint or
other proceeding against the Company by the National Labor Relations
Board, or comparable Governmental Entities.
(i) At no time has any Plan Affiliate adopted any Pension Plan
which is or could become subject to Title IV of ERISA or the funding
standards of Section 412 of the Code or contributed or been obligated
to contribute to any multiemployer plans as defined in Section 3(37) of
ERISA.
SECTION 3.12 TAXES.
(a) (i) Except as disclosed in Section 3.12(a) of the
Company Disclosure Schedules, all material Returns in
respect of Taxes required to be filed prior to the date hereof
with respect to the Company have been or will be timely filed
(including extensions).
(ii) Except as disclosed in Section 3.12(a) of
the Company Disclosure Schedules, all Taxes of the Company due
prior to the date hereof, whether or not shown on the Returns,
have been or will be timely paid by the party to whom
chargeable and all payments of estimated Taxes required to be
made with respect to the Company under the Code or any
comparable provision of foreign, federal, state, provincial or
local Law have been made on the basis of the applicable
party's good faith estimate of the required installments.
(iii) Except as disclosed in Section 3.12(a) of
the Company Disclosure Schedules, all Returns filed by the
Company (or, in cases where amended Returns have been filed,
such Returns (as amended) are true, correct and complete in
all material respects.
(iv) All Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, Stockholder or other third
party by the Company have been withheld and, to the extent
required, paid to the relevant taxing authority.
(v) No material adjustment relating to any
Return has been proposed in writing by any Tax authority,
except proposed adjustments that have been resolved prior to
the date hereof.
(vi) There are no outstanding subpoenas or
requests for information to which the Company has received
notice with respect to any Return of the Company, or the Taxes
reflected on such Returns.
(vii) There are no Tax liens on any assets of
the Company other than liens for Taxes not yet due or payable
or being contested in good faith.
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(viii) Except as disclosed on Section 3.12(a) to
the Company Disclosure Schedules, the Company has not been at
any time a member or shareholder of any partnership, limited
liability company, corporation or joint venture or the holder
of a beneficial interest in any trust for any period for which
the statute of limitations for any Tax potentially applicable
as a result of such membership or holding has not expired.
(ix) Except as disclosed on Section 3.12(a) to the
Company Disclosure Schedules and as expressly set forth by the
terms of this Agreement, neither the Company nor any of its
subsidiaries were a party to any agreement, contract, or
arrangement that would result, separately or in the aggregate,
in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code by reason of the Merger.
(x) All material Taxes required to be withheld,
collected or deposited by the Company during any taxable
period for which the statute of limitations on an assessment
remains open have been timely withheld, collected or deposited
and to the extent required, have been paid to the relevant Tax
authority.
(b) (i) Except as expressly provided in this
subdivision (i), the Company does not have any material income
reportable for a period ending after the Effective Time but
attributable to an installment sale occurring in or a change
in accounting method made for a period ending at or prior to
the Effective Time which resulted in a deferred reporting of
income from such transaction or from such change in accounting
method (other than a deferred intercompany transaction).
(ii) No written Tax sharing or allocation agreement
exists involving the Company.
(iii) Except as disclosed on Section 3.12(b) of
the Company Disclosure Schedules, the Company does not have
any unused net operating loss, unused net capital loss, unused
credit, unused foreign tax credit, or excess charitable
contribution for federal income tax purposes as of the
Effective Time.
(c) For purposes of this Agreement, "TAX" or "TAXES" shall
mean any and all taxes, payable to any foreign, federal, state,
provincial, local or foreign governmental entity or taxing authority or
agency, including, without limitation,
(i) income, franchise, net worth, profits,
gross receipts, minimum, alternative minimum, estimated, ad
valorem, value added, sales, use, goods and services, real or
personal property, capital stock, license, payroll,
withholding, FICA, FUTA, disability, employment, social
security, Medicare, workers compensation, unemployment
compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains
taxes;
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(ii) customs duties, imposts, charges, levies or
other similar assessments of any kind; and
(iii) interest, penalties and additions to tax
imposed with respect thereto.
As used herein, the term "RETURNS" shall mean any and all returns,
reports, information returns and information statements with respect to
Taxes required to be filed with the IRS or any U.S. state or any other
governmental entity or tax authority or agency, whether domestic or
foreign, including, without limitation, consolidated and combined
Returns. For the purpose of this Section 3.12, references to the
Company and its subsidiaries shall include former subsidiaries of the
Company for periods during which such entities were owned, directly or
indirectly, by the Company.
SECTION 3.13 INTELLECTUAL PROPERTY RIGHTS. Except as set forth in
Section 3.13 of the Company Disclosure Schedules or in the last sentence of
this Section 3.13, the Company owns or possesses the right or license to use
all patents, trademarks, service marks, trade names, domain names, slogans,
trade secrets and other tangible or intangible proprietary confidential
information (including scientific and technical information, design
processes, operating processes, schematics, procedures, formulae, data
processing techniques, software, the specialized information and technology
embodied in communications program materials, software documentation and
other program and system designs), which it has used or currently uses (the
"INTELLECTUAL PROPERTY") without any known conflict or alleged conflict with,
or infringement of, the rights of others, and the Company's public use of any
of such Intellectual Property which the Company is currently using internally
and which it currently intends to commence using publicly shall not conflict
with, or infringe upon, the rights of others. All Intellectual Property owned
by the Company is referred to herein as the "OWNED INTELLECTUAL PROPERTY."
All Intellectual Property currently licensed to the Company is referred to
herein as the "LICENSED INTELLECTUAL PROPERTY." Section 3.13 of the Company
Disclosure Schedules identifies (i) all Owned Intellectual Property
consisting of issued domestic and foreign patents and patent applications
pending, patent applications in process, domain name registrations, common
law trademarks which are material to the Company's business as currently
operated or as planned to be operated with such trademarks which the Company
is currently using internally and currently intends to commence using
publicly, domestic and foreign trademark registrations and trademark
registration applications, copyright registrations, copyright registration
applications, common law service marks which are material to the Company's
business as currently operated or as planned to be operated with such
trademarks which the Company is currently using internally and currently
intends to commence using publicly, service xxxx registrations, service xxxx
registration applications and written know-how agreements, and rights
acquired through litigation, and (ii) all of the material Licensed
Intellectual Property (other than computer software which is generally
commercially available). Except as set forth in Section 3.13 of the Company
Disclosure Schedules, the agreements for Licensed Intellectual Property
(including computer software) are in full force and effect; the rights of the
Company thereunder are free and clear of all adverse claims, options, liens,
charges, security interests and encumbrances; and no defaults exist
thereunder. The Company has not been served with any notice or summons
regarding any interference, opposition or cancellation proceedings or
infringement suits, nor to the knowledge of the Company or any of Xxxxx
Xxxxx, Xxxx Xxxxx,
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Xxxx Xxxxxxx and Xxxx Xxxxxx (the "Additional IT Personnel") has the Company
received any threat of such action, with respect to any Intellectual
Property. To the knowledge of the Company and the Additional IT Personnel,
the Company has not been charged with infringing any patent, copyright,
trademark right or other intellectual property right of any person, and
neither the Company nor any of the Additional IT Personnel has any knowledge
of any third party's use of any Intellectual Property in a manner that
infringes upon the rights of the Company or any third party. The Intellectual
Property comprises all of the intellectual property rights and licenses
pertaining thereto necessary for the Company to conduct its business as
formerly operated, and as currently planned to be operated, except for such
licenses and intellectual property rights set forth in Section 3.13 of the
Company Disclosure Schedules. The Company has not taken or allowed there to
be taken any action to cause any of the material Intellectual Property to be
abandoned, or failed to take such action necessary to prevent such material
Intellectual Property from being abandoned. Section 3.13 of the Company
Disclosure Schedules identifies all parties (other than the Company's
employees) who have created any portion of the Owned Intellectual Property,
and the Company has obtained from each of such persons a valid and
enforceable written assignment of any and all rights which they would
otherwise have in the Owned Intellectual Property. The Company has obtained
written agreements or other adequate assurances from all of its current and
former employees and from each third party with whom it has shared any of its
confidential proprietary information, pursuant to which such employees and
other third parties have acknowledged that such information is confidential
proprietary information of the Company and have undertaken to maintain such
information as confidential in accordance with the terms thereof.
Notwithstanding any other provision of this Section 3.13 to the contrary, the
Company shall not be deemed to be in breach of any of its representations or
warranties set forth in this Section 3.13 as a result of any use which may be
made of the trademark STARBELLY at any time following the Effective Time, and
the terms of this Section 3.13 shall be applicable to the trademark STARBELLY
solely with respect to the use thereof prior to the Effective Time.
SECTION 3.14 CERTAIN BUSINESS PRACTICES AND REGULATIONS. Neither
the Company nor any of its executive officers or directors has, to the
knowledge of the Company, (i) made or agreed to make any contribution,
payment or gift to any customer, client, supplier, governmental official,
employee or agent where either the contribution, payment or gift or the
purpose thereof was illegal under any applicable law, (ii) fraudulently
established or maintained any unrecorded fund or asset for any purpose or
knowingly made any false entries on its books and records for any reason, or
(iii) made or agreed to make any contribution, or reimbursed any political
gift or contribution made by any other person, to any candidate for foreign,
federal, state, provincial or local public office in violation under any
applicable law.
SECTION 3.15 REAL PROPERTY. The Company owns no real property.
Section 3.15(1) to the Company Disclosure Schedules sets forth a complete
description of all real property leased by the Company as of the date of this
Agreement ("REAL PROPERTY"). The Company has furnished Acquiror or its
counsel true and complete copies of (i) the most recent lease with respect to
each parcel of Real Property, and (ii) a written description of each oral
contract, arrangement or understanding relating to Real Property. Except as
set forth in Section 3.15(2) to the Company Disclosure Schedules:
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(a) There is no condemnation proceeding or eminent domain
proceeding pending or, to the knowledge of the Company, threatened,
against any Real Property.
(b) The Company does not have any interest in, or any right or
obligation to acquire any interest in, any real property other than
Real Property.
(c) The rental set forth in each lease for Real Property is
the actual rental being paid, and there are no separate agreements or
understandings with respect to the same not set forth in Section
3.15(2) to the Company Disclosure Schedules.
(d) The Company and any Affiliate which is lessee under a
lease for Real Property has, as of the date hereof, and shall have at
the Effective Time, the full right to exercise any and all renewal
options contained therein.
(e) There are no written or oral contracts between the Company
or any Affiliate and any third party relating to any claim by such
third party of any right to all or any part of the interest of the
Company or Affiliate in any Real Property.
(f) All security deposits required under leases for Real
Property have been made and no forfeiture with respect thereto has been
claimed by any of the lessors.
(g) Each Real Property is subject to a binding written lease
which is in full force and effect and neither the Company nor, to the
Company's knowledge, any other party to such lease is in breach of any
term thereunder.
(h) The premises with respect to each lease referenced in
subparagraph (f) above is in a state of good repair and as of the date
hereof and at the Effective Time, there will be no accrued obligation
of the tenant thereunder for maintenance or repair of the premises
which had not yet been performed.
SECTION 3.16 ENVIRONMENTAL REPRESENTATIONS. The Company is in
material compliance with, and does not have any material liability applicable
under any Environmental Law, and to the knowledge of the Company, the Real
Property has not been used by any other person in violation of, any
Environmental Laws. For purposes of this Agreement, the term "ENVIRONMENTAL
LAWS" shall mean all foreign, federal, state, and local laws specifically
relating to protection of the environment, or to protection of the public
health from releases into the environment of hazardous substances, pollutants
or contaminants, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
the Resource Conservation and Recovery Act of 1976, as amended, and U.S.
state tort laws and common laws.
SECTION 3.17 BROKERS. Except for matters disclosed in Section 3.17
of the Company Disclosure Schedules, no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
SECTION 3.18 TITLE TO ASSETS. Except for matters disclosed in
Section 3.18 of the Company Disclosure Schedules, the Company is the owner of
and has good and valid title to, or
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in the case of leased property has a valid leasehold interest in, all of its
properties and assets, including those assets and properties reflected in the
Company Financial Statements, free and clear of all liens, claims or
encumbrances.
SECTION 3.19 RELATED PARTY TRANSACTIONS. To the knowledge of the
Company and except for any interests disclosed on Section 3.19 of the Company
Disclosure Schedules, neither the Company nor either Principal Executive has
any material direct interest in any material supplier, customer or client of
the Company or in any person from whom or to whom the Company leases any
material property, or in any other person, firm or entity with whom the
Company transacts material business of any nature. Section 3.19 to the
Company Disclosure Schedules identifies and describes all material contracts
to which the Company is a party and to which any Principal Executive is
directly also a party.
SECTION 3.20 OFFICERS AND DIRECTORS. Section 3.20 to the Company
Disclosure Schedules sets forth a list of the names and addresses of all
executive officers and directors of the Company as of the date hereof.
SECTION 3.21 POWERS OF ATTORNEY. Except as set forth in Section
3.21 of the Company Disclosure Schedules, the Company has not given a power
of attorney (irrevocable or otherwise) to any person or entity for any
purpose whatsoever, which is currently valid and in effect.
SECTION 3.22 INFORMATION SUPPLIED. None of the information
supplied or to be supplied by the Company specifically for inclusion in the
Proxy Statement will, on the date such Proxy Statement is first mailed to
Acquiror's shareholders or at the time of the Shareholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be state therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
SECTION 3.23 OWNERSHIP OF ACQUIROR COMMON STOCK. Except as set
forth on Section 3.23 of the Company Disclosure Schedules, as of the date
hereof, neither the Company nor, to the knowledge of the Company, any
Principal Executive or his Affiliates (i) beneficially owns (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, or (ii) is party
to any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in each case, shares of Acquiror Common
Stock.
SECTION 3.24 THE COMPANY'S WEBSITE. The Company's Internet website
(the "WEBSITE") is a reasonably stable, secure and redundant website with
regard to both bandwidth and server needs, taking into account all facts and
circumstances. The current capacity of the Website is sufficient to permit
reasonable access by at least 500 simultaneous users, and the Website has
been designed and developed such that its capacity may readily be expanded to
address currently projected increases in the Website's average daily number
of users. At all times following the date on which the Website is complete,
operational and accessible from the Internet (the "Website Launch Date") the
Website will be capable of being operational and accessible from the Internet
as described above no less than ninety-eight percent (98%) of the time,
measured with respect to semiannual periods commencing at the Effective Time,
and determined without regard to periods when the Website is not operational
and accessible from
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the Internet due to (i) the Company's development efforts and upgrades, or
(ii) viruses transmitted over the Internet, failures of systems controlled by
third parties such as Ameritech Corp. or Level 3, Inc., or other causes
beyond the reasonable control of the Company (it being understood and agreed
that the Website is intended to be operational and accessible from the
Internet 24 hours per day, and not merely during business hours). The Company
has prepared and implemented a reasonable disaster recovery contingency plan
pursuant to which the Company or its designee will be able to restore the
Website and recover the database of information collected by the Company with
respect to users of the Website within a reasonably prompt period following
any fire or other disaster which may occur at the Company's facilities.
SECTION 3.25 THE YEAR 2000 PROBLEM. Except as set forth in
Section 3.25 of the Company Disclosure Schedules:
(a) None of the computer systems owned or operated by the
Company or by any third party on behalf of the Company, and no
machinery, equipment, fixtures, inventory or other system which is
owned, leased or operated by the Company or by any third party on
behalf of the Company and controlled by one or more computer processors
(collectively, the "COMPUTER SYSTEMS") will result in a material
failure or disruption of any of the Company's business, operations,
financial reporting, tax reporting, inventory management, accounts
receivable systems, accounts payable systems, invoicing, delivery,
personnel management or records, benefits records or administration, or
any other records or systems as a result of being incapable of
recognizing and correctly calculating dates on or after January 1,
2000, or unable to perform any of its intended functions in a proper
and efficient manner as a result of its use with data containing any
date on or after January 1, 2000 (the "YEAR 2000 PROBLEM")
(b) Section 3.25 of the Company Disclosure Schedules contains
a true, correct and complete list of all written studies, audits,
surveys, reports and investigations conducted by or on behalf of the
Company with respect to the Year 2000 Problem.
SECTION 3.26 TECHNOLOGY SYSTEMS. The Company's integrated
fulfillment systems used for inventory and production management and control,
its StoreBuilder software systems, its product information databases, its
online product configurator, its online catalog/ordering system, its computer
hardware and network systems and its security systems (collectively, the
"Technology Systems") are reasonably stable, secure and redundant with regard
to processing power, bandwidth and data storage capacity, taking into account
all facts and circumstances. The Technology Systems are adequate to perform
their intended functions for the Company assuming (i) 500 simultaneous users
of the Website, and (ii) order processing and fulfillment at the volumes
currently projected by the Company for calendar year 2000 as reflected on
Section 3.13 of the Company Disclosure Schedules, and are scalable to support
substantial growth in the numbers of such visitors, order submissions and
order fulfillments. Without limiting the generality of the foregoing, the
Technology Systems have the following characteristics and are currently
capable of performing the following functions:
(a) receiving and processing customer orders from the
Website and affiliate websites;
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(b) providing feedback to customer on order receipt;
(c) providing order status information to the customer;
(d) establishing an order database that can be used to
drive operations;
(e) internally tracking order status from submission through
steps of operations to product delivery;
(f) evaluating the orders received so that they can be
fulfilled;
(g) providing information to generate purchase orders and
production orders in accordance with blank garment needs and
artist/production assignments and schedules;
(h) establishing and maintaining a master image database;
(i) receiving images uploaded from customers for review,
enabling improvement for production purposes, and updating a master
image database;
(j) supplying quality digital images from a master image
database that can ultimately and efficiently be used in production;
(k) processing credit card transactions for payment
receipt/transfer of funds to the Company;
(l) processing purchase orders to be billed as accounts
receivable;
(m) establishing and maintaining a customer database that
supports customer service and marketing efforts; and
(n) preserving and protecting the security of the
Technology Systems, including without limitation the Website and
affiliate websites which are hosted on the Company's servers, and
preserving and protecting the confidentiality of all transactions
processed using the Technology Systems, using passwords, firewalls and
other methods which are reasonable taking into account all facts and
circumstances.
SECTION 3.27 LIMITATION ON WARRANTIES. Notwithstanding anything to
the contrary contained in this Agreement, the Company makes no implied
warranty of any kind whatsoever, and makes no representation with respect to
(i) any matter not expressly set forth in this Article III, or (ii) the
future profitability, future earnings or other future performance of the
Company. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR SUB
The term "ACQUIROR ADVERSE EFFECT" as used in this Agreement shall mean
any change or event that, individually or when taken together with all other
such changes or events, would reasonably be considered to be materially adverse
to the financial condition, business, business prospects or results of
operations of Acquiror or any of its subsidiaries, taken as a whole; provided,
however, that a decline in the market value of Acquiror Common Stock in and of
itself shall not constitute an Acquiror Adverse Effect, and the occurrence of
any change or event (i) described in any Section of the Acquiror Disclosure
Schedules attached to this Agreement (the "ACQUIROR DISCLOSURE SCHEDULES"), (ii)
resulting from the entry into this Agreement or the transactions contemplated
hereby or the public announcement thereof (in accordance with Section 6.09
hereof), or (iii) resulting from or arising in connection with (A) any
occurrence or condition affecting any of the online, e-commerce, promotional or
decorated products industries generally, (B) any changes in economic, market,
regulatory, banking, monetary, political or other similar conditions or (C) any
occurrence or condition affecting the Internet (or any particular portion
thereof) generally, shall not, individually or in the aggregate, constitute an
Acquiror Adverse Effect.
Acquiror and Acquiror Sub, jointly and severally, represent and
warrant, as of the date of this Agreement, to the Company that, except as set
forth on the Acquiror Disclosure Schedules (and making reference to the
particular section of this Agreement to which exception is being taken), the
statements contained in this Article IV are true and correct with respect to
Acquiror and Acquiror Sub, and their respective businesses. Any disclosure set
forth on any particular Section of the Acquiror Disclosure Schedules shall be
deemed disclosed in reference to all Sections of the Acquiror Disclosure
Schedules to which such disclosure may be reasonably applicable.
SECTION 4.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
Acquiror and Acquiror Sub is a corporation, duly incorporated, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted and each of Acquiror and Acquiror Sub is duly qualified and in good
standing to do business in each jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, other than where the failure to do so would not
have an Acquiror Adverse Effect.
SECTION 4.02 ARTICLES OF INCORPORATION; BYLAWS. Acquiror has
furnished to the Company a complete and correct copy of its Articles of
Incorporation and Bylaws, as amended or restated, and a complete and correct
copy of the Certificate of Incorporation and Bylaws, as amended or restated,
of Acquiror Sub. Neither Acquiror nor Acquiror Sub is in violation of any of
the provisions of its Articles of Incorporation or Certificate of
Incorporation, as applicable, or its Bylaws.
SECTION 4.03 CAPITALIZATION OF ACQUIROR AND ACQUIROR SUB.
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(a) The authorized capital stock of Acquiror consists of
100,000,000 shares of Acquiror Common Stock, of which 48,724,790 were
issued and outstanding as of January 14, 2000, and 10,000,000 shares of
Preferred Stock, no par value ("ACQUIROR PREFERRED STOCK"), none of
which are issued and outstanding. The authorized capital stock of
Acquiror Sub consists of 1,000 shares of Common Stock, no par value per
share ("ACQUIROR SUB COMMON STOCK"), of which, as of the date of this
Agreement, 1,000 shares are issued and outstanding. On the date of this
Agreement, all issued and outstanding shares of Acquiror Common Stock
and Acquiror Sub Common Stock are, and at the Effective Time all issued
and outstanding shares of Acquiror Common Stock, Acquiror Series A
Preferred Stock and Acquiror Sub Common Stock will be, duly authorized,
validly issued, fully paid and non-assessable. Acquiror is the record
holder of all issued and outstanding shares of Acquiror Sub Common
Stock, and such shares are owned by Acquiror free and clear of any and
all security interests, liens, claims, pledges, agreements, limitations
on Acquiror's voting rights, charges or other encumbrances of any
nature whatsoever.
(b) 9,000,000 shares of Acquiror Common Stock have been duly
and validly reserved for issuance under the HA-LO Industries, Inc. 1997
Stock Plan (Amended and Restated) of Acquiror (the "1997 ACQUIROR
PLAN"), of which, as of December 31, 1999, shares are outstanding
pursuant to the exercise of such options, 7,491,056 shares are subject
to outstanding options and 1,242,469 shares are not subject to any
outstanding options; 5,834,822 shares of Acquiror Common Stock have
been duly and validly reserved for issuance under the HA-LO Industries,
Inc. Stock Plan of Acquiror (together with the 1997 Acquiror Plan, the
"ACQUIROR PLANS"), of which, as of December 31, 1999, shares are
outstanding pursuant to the exercise of such options, 2,807,765 shares
are subject to outstanding options, 832,727 shares are not subject to
any outstanding options, 269,056 shares are subject to outstanding
options issued outside of the Acquiror Plans, and 486,417 shares are
subject to outstanding warrants held by Xxxxxxxxxx Xxxx & Co.,
Incorporated (all such options are the "ACQUIROR OPTIONS"); and
(c) Except as set forth on Section 4.03(c) of the Acquiror
Disclosure Schedules, no shares of common, preferred or convertible
capital stock (other than the shares of Acquiror Common Stock, Acquiror
Sub Common Stock and Acquiror Preferred Stock), options (other than the
Acquiror Options), warrants or other rights, agreements, arrangements
or commitments to sell or purchase shares of Acquiror Common Stock,
Acquiror Sub Common Stock or Acquiror Preferred Stock from Acquiror or
Acquiror Sub are issued or outstanding. Section 4.03(c) of the Acquiror
Disclosure Schedules contains a list of all outstanding warrants,
options (other than Acquiror Options), agreements, convertible
securities and other commitments pursuant to which Acquiror or Acquiror
Sub is or may become obligated to issue, sell or otherwise transfer any
Acquiror Common Stock, Acquiror Sub Common Stock or Acquiror Preferred
Stock, which list names all Persons entitled to receive such Acquiror
Common Stock, Acquiror Sub Common Stock or Acquiror Preferred Stock
and sets forth the shares of Acquiror Common Stock, Acquiror Sub Common
Stock or Acquiror Preferred Stock required to be issued thereunder.
Except for Acquiror Options and as described in Section 4.03(c) of the
Acquiror Disclosure Schedules, no shares of Acquiror Common Stock,
Acquiror Sub
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Common Stock or Acquiror Preferred Stock are held in treasury or are
reserved for any other purpose.
(d) All outstanding shares of Acquiror Common Stock and
Acquiror Sub Common Stock are, and as of the Effective Time will be,
duly authorized, validly issued, fully paid and non-assessable, and not
subject to preemptive rights created by statute, Acquiror's Articles of
Incorporation or Bylaws, or Acquiror Sub's Certificate of Incorporation
or Bylaws or, except as set forth in Section 4.03(d) of the Acquiror
Disclosure Schedules, any agreement as to which Acquiror or Acquiror
Sub is party or by which it is bound.
(e) Except as disclosed in Section 4.03(e) of the Acquiror
Disclosure Schedules, other than Acquiror Options, there are no options
outstanding obligating Acquiror or Acquiror Sub to register for sale
any capital stock or other equity interests in Acquiror or Acquiror
Sub. Except as disclosed in Section 4.03(e) of the Acquiror Disclosure
Schedules, as of the date of this Agreement there are no obligations,
contingent or otherwise, of Acquiror or Acquiror Sub to (x) repurchase,
redeem or otherwise acquire any Acquiror Common Stock, Acquiror Sub
Common Stock or Acquiror Preferred Stock, or (y) provide funds to, or
make any material investment in (in the form of a loan, capital
contribution or otherwise), or provide any guarantee with respect to
the obligations of, any Person (other than subsidiaries of Acquiror).
SECTION 4.04 AUTHORITY.
(a) Each of Acquiror and Acquiror Sub has the requisite
corporate power and corporate authority to enter into this Agreement
and, subject to the approval of the Share Issuance by affirmative vote
of the holders of a majority of the shares of Acquiror Common Stock
present and entitled to vote at the Shareholders Meeting, to consummate
the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Acquiror and Acquiror Sub, and the
consummation by Acquiror and Acquiror Sub of the transactions
contemplated by this Agreement, have been duly authorized by all
necessary corporate action (other than the Shareholder Approval) and no
other proceedings on the part of Acquiror or Acquiror Sub (other than
the Shareholders Meeting) are necessary to authorize this Agreement or
to consummate the transactions contemplated by this Agreement. This
Agreement has been duly executed and delivered by Acquiror and Acquiror
Sub and, assuming the due authorization, execution and delivery by the
Company, constitutes the legal, valid and binding obligations of
Acquiror and Acquiror Sub enforceable in accordance with its terms and
conditions.
(b) The Board of Directors of Acquiror (a) has declared as
advisable and fair to and in the best interests of Acquiror and its
shareholders and resolved to recommend to its shareholders (i) the
Merger and (ii) the Share Issuance, and (b) has approved this Agreement
and all agreements and transactions contemplated hereby and thereby.
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SECTION 4.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS; OTHER
MATTERS.
(a) The execution and delivery of this Agreement by Acquiror
and Acquiror Sub do not, and the performance of this Agreement by
Acquiror and Acquiror Sub, will not (i) conflict with or violate the
Articles, By-Laws or equivalent organizational documents of Acquiror or
Acquiror Sub, (ii) subject to (x) obtaining the consents, approvals,
authorizations and permits of, and making filings or notifications to,
any Governmental Entities pursuant to the applicable requirements, if
any, of Laws, including but not limited to the Securities Act, the
Exchange Act, Blue Sky Laws, the HSR Act (including, without
limitation, with respect to the acquisition by any Stockholder of
shares of Acquiror Common Stock or Acquiror Series A Preferred Stock in
the Merger), the NYSE, the Code and the filing and recordation of
appropriate merger documents as required by Delaware Law, and (y)
obtaining the consents, approvals, authorizations or permits described
in Section 4.05(b) of the Acquiror Disclosure Schedules, conflict with
or violate any Laws applicable to Acquiror or Acquiror Sub or by which
any of their respective properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on
any of the properties or assets of Acquiror or Acquiror Sub pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
Acquiror or Acquiror Sub is a party or by which Acquiror or Acquiror
Sub or any of their respective properties is bound or affected, except
for any such conflicts or violations described in clause (ii), or
breaches or defaults described in clause (iii) that would not have an
Acquiror Adverse Effect.
(b) The execution and delivery of this Agreement by Acquiror
and Acquiror Sub do not, and neither the performance nor compliance
with the terms hereof, by Acquiror and Acquiror Sub requires any
consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entities or other persons, except for
(i) applicable requirements, if any, of the Securities Act, the
Exchange Act, Blue Sky Laws, the HSR Act (including, without
limitation, with respect to the acquisition by any Stockholder of
shares of Acquiror Common Stock or Acquiror Series A Preferred Stock in
the Merger), the NYSE and the Code, (ii) the consents, approvals,
authorizations or permits described in Section 4.05(b) of the Acquiror
Disclosure Schedules, and (iii) the filing and recordation of
appropriate merger documents as required by Delaware Law.
SECTION 4.06 SECURITIES REPORTS; FINANCIAL STATEMENTS.
(a) Since December 31, 1997, Acquiror and its subsidiaries
have timely filed (x) all forms, reports, statements, registration
statements and other documents required to be filed (or filed by
reference) with (i) the Securities and Exchange Commission (the
"COMMISSION"), including without limitation, (A) all Annual Reports on
Form 10-K, (B) all Quarterly Reports on Form 10-Q, (C) all Proxy
Statements relating to meetings of shareholders, (D) all required
current reports on Form 8-K, (E) all other reports and registration
statements, and (F) all amendments and supplements to all such reports
and registration statements, and (ii) any applicable state securities
authorities, and (y) all
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forms, reports, statements and other documents required to be filed
with any other applicable federal or state regulatory authorities,
except where failure to file any such forms, reports, statements and
other documents under this clause (y) would not have an Acquiror
Adverse Effect (all such forms, reports, statements, registration
statements and other documents referred to in this Subsection (a)
are, collectively, "ACQUIROR REPORTS").
(b) The Acquiror Reports complied as of their respective dates
in all material respects with the then applicable requirements of the
Securities Act and the Exchange. As of their respective dates, the
Acquiror Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except as disclosed in
Section 4.06(b) of the Acquiror Disclosure Schedules, each of
Acquiror's consolidated financial statements (including any notes to
such financial statements) included within the Acquiror Reports (i) has
been prepared in all material respects in accordance with the published
rules and regulations of GAAP and the Commission applied on a
consistent basis throughout the periods involved, and (ii) fairly
present in all material respects, the consolidated financial position
of Acquiror as of the respective dates thereof and the consolidated
results of operations and cash flows for the periods indicated;
provided, however, the interim financial statements of Acquiror may (x)
be subject to normal or recurring adjustments at Acquiror's fiscal
year-end, (y) not necessarily be indicative of results for a
full-fiscal year, and (z) contain pro-forma financial information which
is not necessarily indicative of Acquiror's consolidated financial
position.
(c) Acquiror has no liabilities or indebtedness of any nature
whatsoever, except for (i) liabilities and indebtedness set forth in
Acquiror Reports filed prior to January 1, 2000, (ii) liabilities and
indebtedness which have arisen after September 30, 1999 in the ordinary
course of business of Acquiror, (iii) liabilities and indebtedness set
forth in Section 4.06(c) of the Acquiror Disclosure Schedules, (iv)
liabilities and indebtedness incurred in connection with the
transaction contemplated herein, and (v) except as otherwise set forth
in this Section 4.06(c), any such liability in each case less than
$1,000,000 or less than $10,000,000 in aggregate liabilities.
SECTION 4.07 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Acquiror Disclosure Schedules, since September 30, 1999, (i)
there has not been, and Acquiror has no knowledge of any facts that are
reasonably likely to result in, any event or events causing an Acquiror
Adverse Effect, and (ii) to the date of this Agreement, there has not been
any material change by Acquiror in its accounting methods, principles or
practices except any such change after the date of this Agreement mandated by
a change in GAAP.
SECTION 4.08 ABSENCE OF LITIGATION.
(a) Except as set forth in an Acquiror Report filed with the
Commission prior to the date hereof, there is no claim, action, suit,
litigation, proceeding, arbitration, or, to the knowledge of Acquiror,
investigation of any kind affecting Acquiror or any of its
subsidiaries, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or, to the knowledge of Acquiror,
threatened, except for claims, actions,
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suits, litigations, proceedings, arbitrations or investigations which
cannot reasonably be expected to have an Acquiror Adverse Effect. There
is no action pending or, to the best knowledge of the Acquiror or
Acquiror Sub, threatened seeking to enjoin or restrain the Merger or
any transaction contemplated by the Merger.
(b) Except as set forth in an Acquiror Report filed with the
Commission prior to the date hereof, neither Acquiror nor any of its
subsidiaries is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to
the knowledge of Acquiror, continuing investigation by, any
Governmental Entity, or any judgment, order, writ, injunction, decree
or award of any Governmental Entity or arbitrator, including, without
limitation, cease-and-desist or other orders, except for such matters
which cannot reasonably be expected to have an Acquiror Adverse Effect.
SECTION 4.09 OWNERSHIP OF ACQUIROR SUB. All of the outstanding
capital stock of Acquiror Sub is owned directly by Acquiror.
SECTION 4.10 BROKERS. Except as disclosed in Section 4.10 of the
Acquiror Disclosure Schedules, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Acquiror.
SECTION 4.11 INFORMATION SUPPLIED. The Proxy Statement will not,
on the date such Proxy Statement is first mailed to Acquiror's shareholders
and at the time of the Shareholders Meeting contain any untrue statement of a
material fact or omit to state any material fact required to be state therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
SECTION 4.12 OPINION OF FINANCIAL ADVISOR. The Board of Directors
of Acquiror has received the opinion of Credit Suisse First Boston
Corporation, dated the date hereof, to the effect that, as of such date, the
Merger Consideration is fair to Acquiror from a financial point of view.
SECTION 4.13 VOTING REQUIREMENTS. The affirmative vote of the
holders of a majority of the shares of Acquiror Common Stock present and
entitled to vote at the Shareholders Meeting is the only vote of the holders
of any class or series of Acquiror's capital stock necessary to approve the
Merger, the Share Issuance and the transactions contemplated hereby.
SECTION 4.14 NO PRIOR ACTIVITIES. Acquiror Sub has not incurred,
directly or indirectly, any liabilities or obligations, except those incurred
in connection with its incorporation or with the negotiation of this
Agreement and consummation of the transactions contemplated hereby. Acquiror
Sub has not engaged, directly or indirectly, in any business or activity of
any type or kind, or entered into any agreement or arrangement with any
person or entity, or become subject to or bound by any obligation or
undertaking, that is not contemplated by or in connection with this Agreement
and the transactions contemplated hereby.
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SECTION 4.15 ERISA COMPLIANCE.
(a) Except as disclosed in the Acquiror Reports, with respect
to any collective bargaining agreement or any material bonus, profit
sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization,
medical or other plan, arrangement or understanding providing benefits
to any current or former employee, officer or director of Acquiror or
any of its wholly-owned subsidiaries (collectively, the "ACQUIROR
BENEFIT PLANS"), no event has occurred and, to the knowledge of
Acquiror, there exists no condition or set of circumstances, in
connection with which Acquiror or any of its subsidiaries could be
subject to any liability that individually or in the aggregate would
have an Acquiror Adverse Effect under ERISA, the Code or any other
applicable Law.
(b) Except as disclosed in the Acquiror Reports, each Acquiror
Benefit Plan has been administered in accordance with its terms, except
for any failures so to administer any Acquiror Benefit Plan that
individually or in the aggregate would not reasonably be expected to
have an Acquiror Adverse Effect. Acquiror, its subsidiaries and all of
the Acquiror Benefit Plans are in compliance with the applicable
provisions of ERISA, the Code and all other applicable laws and the
terms of all applicable collective bargaining agreements, except for
any failures to be in such compliance that individually or in the
aggregate would not reasonably be expected to have an Acquiror Adverse
Effect. Each Acquiror Benefit Plan that is intended to be qualified
under Section 401(a) or 401(k) of the Code has received a favorable
determination letter from the IRS that it is so qualified and each
trust established in connection with any Acquiror Benefit Plan that is
intended to be exempt from federal income taxation under Section 501(a)
of the Code has received a determination letter from the IRS that such
trust is so exempt. To the knowledge of Acquiror, no fact or event has
occurred since that date of any determination letter from the IRS which
is reasonably likely to affect adversely the qualified status of any
such Acquiror Benefit Plan or the exempt status of any such trust,
except for any occurrence that individually or in the aggregate would
not reasonably be expected to have an Acquiror Adverse Effect.
(c) Except as any of the following either individually or in
the aggregate would not reasonably be expected to have an Acquiror
Adverse Effect or as disclosed in the Acquiror Reports, (x) neither
Acquiror nor any Plan Affiliate of Acquiror has incurred any liability
under Title IV of ERISA and no condition exists that presents a risk to
Acquiror or any Plan Affiliate of Acquiror of incurring any such
liability (other than liability for benefits or premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary course), (y) no
Acquiror Benefit Plan has incurred an "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA or Section 412 of the Code)
whether or not waived and (z) to the knowledge of Acquiror, there are
not any facts or circumstances that would materially change the funded
status of any Acquiror Benefit Plan that is a "defined benefit" plan
(as defined in Section 3(35) of ERISA) since the date of the most
recent actuarial report for such plan. No Acquiror Benefit Plan is a
"multi employer plan" within the meaning of Section 3(37) of ERISA.
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(d) Neither Acquiror nor any of its subsidiaries is a party to
any collective bargaining or other labor union contract applicable to
persons employed by Acquiror or any of its subsidiaries and no
collective bargaining agreement is being negotiated by Acquiror or any
of its subsidiaries, in each case that is material to Acquiror and its
subsidiaries taken as a whole. As of the date of this Agreement, there
is no labor dispute, strike or work stoppage against Acquiror or any of
its subsidiaries pending or, to the knowledge of Acquiror, threatened
which may interfere with the respective business activities of Acquiror
or any of its subsidiaries, except where such dispute, strike or work
stoppage individually or in the aggregate would not reasonably be
expected to have an Acquiror Adverse Effect. As of the date of this
Agreement, to the knowledge of Acquiror, none of Acquiror, any of its
subsidiaries or any of their respective representatives or employees
has committed any unfair labor practice in connection with the
operation of the respective businesses of Acquiror or any of its
subsidiaries, and there is no charge or complaint against Acquiror or
any of its subsidiaries by the National Labor Relations Board or any
comparable governmental agency pending or threatened in writing, except
for any occurrence that individually or in the aggregate would not
reasonably be expected to have an Acquiror Adverse Effect.
(e) No Acquiror Benefit Plan provides medical benefits
(whether or not insured) with respect to current or former employees
after retirement or other termination of service the cost of which is
material to Acquiror and its subsidiaries taken as a whole.
(f) No amounts payable under the Acquiror Benefit Plans solely
as a result of the consummation of the transactions contemplated by
this Agreement will fail to be deductible for federal income tax
purposes by virtue of Section 280G of the Code. The consummation of the
transactions contemplated by this Agreement will not, either alone or
in combination with another event, (A) entitle any current or former
employee, officer or director of Acquiror or any Plan Affiliate of
Acquiror to severance pay, unemployment compensation or any other
payment, except as expressly provided in this Agreement, (B) accelerate
the time of payment or vesting, or increase the amount of compensation
due any such employee, officer or director or (C) constitute a "change
of control" under any Acquiror Benefit Plan, and Acquiror and its board
of directors have taken all required actions to effect the foregoing.
SECTION 4.16 TAXES.
(a) Except as disclosed in the Acquiror Reports, each of
Acquiror and its subsidiaries has filed all material Returns and
reports required to be filed by it and all such Returns and reports are
complete and correct in all material respects, or requests for
extensions to file such Returns or reports have been timely filed,
granted and have not expired, except to the extent that such failures
to file, to be complete or correct or to have extensions granted that
remain in effect individually or in the aggregate would not have an
Acquiror Adverse Effect. Acquiror and each of its subsidiaries has paid
(or Acquiror has paid on its behalf) all Taxes shown as due on such
Returns, and the most recent financial statements contained in the
Acquiror Reports reflect an adequate reserve for all taxes payable by
Acquiror and its subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements.
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(b) Except as disclosed in the Acquiror Reports, no
deficiencies for any taxes have been proposed, asserted or assessed
against Acquiror or any of its subsidiaries that are not adequately
reserved for, except for deficiencies that individually or in the
aggregate would not have an Acquiror Adverse Effect.
(c) Neither Acquiror nor any of its subsidiaries has taken any
action or knows of any fact, agreement, plan or other circumstance that
is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
SECTION 4.17 STATE TAKEOVER STATUTE; SHAREHOLDERS' RIGHTS PLANS.
The Board of Directors of Acquiror has approved the terms of this Agreement
and the consummation of the Merger and the other transactions contemplated
hereby and, assuming the accuracy of the Company's representation and
warranty contained in Section 3.23, such approval constitutes approval of the
Merger and the other transactions contemplated by this Agreement by the
Acquiror Board of Directors under Section 5/7.85 of the Illinois Business
Corporation Act of 1983, as amended, and represents all the actions necessary
to ensure that the super majority voting requirement of Section 5/7.85 of the
Illinois Business Corporation Act of 1983, as amended, does not apply to the
Company or the Stockholders in connection with the Merger and the other
transactions contemplated by this Agreement. To the knowledge of Acquiror, no
other state takeover statute is applicable to the Merger or the other
transactions contemplated by this Agreement. Acquiror has not adopted and
does not have in effect any shareholders rights plan, and Acquiror's board of
directors has not approved any such plan and has not authorized submission of
any such plan for shareholder approval.
SECTION 4.18 INTELLECTUAL PROPERTY.
(a) Except as disclosed in the Acquiror Reports, Acquiror and
its subsidiaries own or have a valid license to use all trademarks,
service marks and trade names (including any registrations or
applications for registration of any of the foregoing) (collectively,
the "Acquiror Intellectual Property") necessary to carry on its
business substantially as currently conducted, except for such Acquiror
Intellectual property the failure of which to own or validly license
individually or in the aggregate would not reasonably be expected to
have an Acquiror Adverse Effect. Neither Acquiror nor any such
subsidiary has received any notice of infringement of or conflict with,
and, to Acquiror's knowledge, there are no infringements of or
conflicts with, the rights of others with respect to the use of any
Acquiror Intellectual property that individually or in the aggregate,
in either such case, would reasonably be expected to have an Acquiror
Adverse Effect.
(b) The consummation of the Merger and the other transactions
contemplated by this Agreement will not result in the loss by Acquiror
of any rights to use computer and telecommunication software including
source and object code and documentation and any other media
(including, without limitation, manuals, journals and reference books)
necessary to carry on its business substantially as currently conducted
and the loss of which would have an Acquiror Adverse Effect.
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SECTION 4.19 CERTAIN CONTRACTS. Except as set forth in Section
4.19 of the Acquiror Disclosure Schedule, the Acquiror Reports or as
permitted pursuant to Sections 5.03 and 5.04, neither Acquiror nor any of its
subsidiaries is a party to or bound by (i) any "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K of the Commission) or
any written undisclosed material contracts of Acquiror or Acquiror Sub to
lease real property (except for any such contracts copies of which have been
made available to the Company) or (ii) any non-competition agreement or any
other agreement or obligation which purports to limit in any material respect
the manner in which, or the localities in which, all or any substantial
portion of the business of Acquiror and its subsidiaries, taken as a whole,
is or would be conducted. Section 4.19 of the Acquiror Disclosure Schedules
sets forth all ongoing written agreements between Acquiror (or any of its
subsidiaries) and each of Xxxx X. Xxxxxx, Xx., Xxx Xxxxxxxx and Xxxxxx X.
Xxxxxx.
SECTION 4.20 ENVIRONMENTAL MATTERS. Except as would not,
individually or in the aggregate, have an Acquiror Adverse Effect or as
disclosed in the Acquiror Reports filed and publicly available prior to the
date of this Agreement, Acquiror and its subsidiaries are in material
compliance with, and do not have any material liability applicable under any
Environmental Law, and to the knowledge of Acquiror and Acquiror Sub, the
real property owned or leased by Acquiror or its subsidiaries has not been
used by any other person in violation of, any Environmental Laws.
SECTION 4.21 RELATED PARTY TRANSACTIONS. To the knowledge of
Acquiror and except for any interests disclosed on Section 4.21 of the
Acquiror Disclosure Schedules or as disclosed in the Acquiror Reports,
neither Acquiror nor any of its directors or executive officers, have any
material direct interest in any material supplier, customer or client of
Acquiror or in any person from whom or to whom Acquiror leases any material
property, or in any other person, firm or entity with whom Acquiror transacts
material business of any nature. Section 4.21 to the Acquiror Disclosure
Schedules or the Acquiror Reports identify and describe all material
contracts to which Acquiror is a party and to which any director or executive
officer is directly also a party.
SECTION 4.22 CERTAIN BUSINESS PRACTICES AND REGULATIONS. Neither
Acquiror nor any of its executive officers or directors has, to the knowledge
of Acquiror, (i) made or agreed to make any contribution, payment or gift to
any customer, client, supplier, governmental official, employee or agent
where either the contribution, payment or gift or the purpose thereof was
illegal under any applicable law, (ii) fraudulently established or maintained
any unrecorded fund or asset for any purpose or knowingly made any false
entries on its books and records for any reason, or (iii) made or agreed to
make any contribution, or reimbursed any political gift or contribution made
by any other person, to any candidate for foreign, federal, state, provincial
or local public office in violation under any applicable law.
SECTION 4.23 LIMITATION ON WARRANTIES. Notwithstanding anything to
the contrary contained in this Agreement, Acquiror and Acquiror Sub make no
implied warranty of any kind whatsoever, and make no representation with
respect to (i) any matter not expressly set forth in this Article IV, or (ii)
the future profitability, future earnings or other future performance of
Acquiror or Acquiror Sub. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.
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ARTICLE V
COVENANTS RELATING TO THE CONDUCT OF THE COMPANY BUSINESS
SECTION 5.01 AFFIRMATIVE COVENANTS OF THE COMPANY. The Company
hereby covenants and agrees with Acquiror and Acquiror Sub that, prior to the
Effective Time, unless otherwise expressly contemplated by this Agreement or
consented to, in writing, by Acquiror, which consent shall not be
unreasonably withheld, the Company shall, subject to the limitations
contained in this Agreement:
(a) Operate its business in the usual and ordinary course,
consistent with its reasonable past practice and that certain
Confidential Private Placement Memorandum of the Company, dated
November 1999 (the "OFFERING MEMO");
(b) Subject to the limitations contained in this Agreement,
use reasonable best efforts to preserve intact its business
organization and assets, maintain its material rights and franchises,
retain the services of its officers, key employees and managers, and
maintain existing good relationships with its material customers,
clients, vendors and suppliers, all consistent with the Offering Memo;
(c) Use reasonable efforts to keep in full force and effect
all liability insurance and bonds comparable in amount and scope of
coverage to that currently maintained.
(d) Subject to applicable law, confer with Acquiror from
time-to-time at Acquiror's reasonable request to report on all
reasonable operational matters.
(e) File its federal and state income tax Returns, and all
required state and local income and franchise tax Returns for the
fiscal tax year coinciding with or ending in 1999 (if applicable), on
or before the due date for filing such Returns (including extensions).
SECTION 5.02 NEGATIVE COVENANTS OF THE COMPANY. Except as
expressly contemplated by this Agreement, as set forth on Section 5.02 to the
Company Disclosure Schedules or as otherwise consented to in writing by
Acquiror, which consent shall not be unreasonably withheld, from the date of
this Agreement until the Effective Time, the Company shall not do any of the
following:
(a) Except as consistent with the past practice of the Company
or as contemplated by the Offering Memo or that is reasonably
appropriate to consummate the Merger, (i) increase the compensation or
any commission payable or to become payable to any director, officer,
employee or independent contractor, except for increases in salary,
bonuses or wages payable or to become payable to employees or
independent contractors who are not directors or officers, (ii) grant
any severance or termination pay or enter into any severance agreement
with, any director, officer or employee, (iii) enter into any
employment agreement of any nature whatsoever with any director,
officer or employee that would extend beyond the Effective Time, except
on an at-will basis, or (iv) establish, adopt, enter into or amend any
employee benefit plan, except as may be
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required to comply with applicable Law (provided that the actions under
clauses (i), (ii) and (iii) shall only require notice to, and not
consent by, Acquiror);
(b) Except as contemplated by the Offering Memo or as
contemplated by the Merger, make any material change in the overall
nature of its business;
(c) Make (or commit to make) capital expenditures in an amount
which exceeds One Million Dollars ($1,000,000) or to the extent that
such expenditures do not relate to the conduct of the Company's
business consistent with the Offering Memo and the Company's past
practice;
(d) Declare or pay, or agree to declare or pay, any dividend
on, or make any other distribution in respect of, outstanding Company
Common Stock, Company Preferred Stock, Other Company Securities,
Company Options or Other Company Options;
(e) (i) Redeem, purchase or otherwise acquire any of its
capital stock or any securities or obligations convertible into or
exchangeable for any of its capital stock, or any options, warrants or
conversion or other rights to acquire any of its capital stock or any
such securities or obligations, (ii) effect any reorganization or
recapitalization, or (iii) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in lieu of or in substitution for shares of its capital
stock;
(f) Except pursuant to the Plan, issue, deliver, award, grant
or sell, or authorize the issuance, delivery, award, grant or sale of
(including the grant of any security interests, liens, claims, pledges,
limitations in voting rights, charges or other encumbrances), any
shares of any class of its capital stock (including shares held in
treasury), any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or options to
acquire any such shares, or amend or otherwise modify the terms of any
such rights, warrants or options, the effect of which shall be to make
such terms more favorable to the holders thereof (including without
limitation the acceleration of the vesting of any options other than as
contemplated by this Agreement);
(g) Acquire or agree to acquire, by merging or consolidating
with, by purchasing a controlling equity interest in or all or
substantially all of the assets of, or by any other manner, any
material business;
(h) Sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage,
pledge, transfer or otherwise dispose of, its material assets to the
extent not consistent with its past practice;
(i) Adopt any amendments to its Certificate of Incorporation
or Bylaws;
(j) Incur any liability or any obligation for borrowed money
or purchase money indebtedness, whether or not evidenced by a contract,
note, bond, debenture or similar instrument, other than liabilities and
obligations up to One Million Dollars
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($1,000,000) which relate to the conduct of the Company's business
consistent with the Offering Memo and the Company's past practice;
(k) Agree in writing or otherwise to do any of the foregoing
unless the terms of such agreement are terminable upon closing of the
Merger contemplated in this Agreement;
(l) (i) perform any act which, if performed, would prevent or
excuse the performance of this Agreement by the Company, or (ii) fail
to perform any act which, if omitted to be performed, would prevent or
excuse the performance of this Agreement by the Company; or
(m) Initiate, solicit, continue or encourage (including by way
of furnishing any information or assistance in connection with) any
inquiries or the making of any offer that constitutes, or may
reasonably be expected to lead to, any "Competing Transaction" (as such
term is defined below), or enter into discussions or negotiations with
any person or entity in furtherance of such inquiries or to obtain a
Competing Transaction or enter into any agreement with respect to a
Competing Transaction. The Company shall promptly notify Acquiror if
any such inquiries or proposals are received by the Company or by any
of its officers, directors, financial advisors, attorneys, accountants
or other representatives. For purposes of this Agreement, the term
"COMPETING TRANSACTION" shall mean any of the following involving the
Company (other than the Merger): (i) any merger, consolidation,
exchange, material business combination, or other similar material
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of all or substantially all of the assets of the
Company in a single transaction or series of related transactions;
(iii) any sale of or exchange for any outstanding capital stock or
equity of the Company; or (iv) any agreement to, or announcement by the
Company of a proposal, plan or intention, to do any of the foregoing.
SECTION 5.03 AFFIRMATIVE COVENANTS OF ACQUIROR. Acquiror hereby
covenants and agrees with the Company that, prior to the Effective Time,
unless otherwise expressly contemplated by this Agreement or consented to, in
writing, by the Company, which consent shall not be unreasonably withheld,
Acquiror shall, subject to the limitations contained in this Agreement:
(a) Operate its business in the usual and ordinary course,
consistent with its reasonable past practice and its 2000 budget, a
copy of which has been provided to the Company (the "BUDGET");
(b) Subject to the limitations contained in this Agreement,
use reasonable best efforts to preserve intact its business
organization and assets, maintain its material rights and franchises,
retain the services of its officers, key employees and managers, and
maintain existing good relationships with its material customers,
clients, vendors and suppliers, all consistent with the Budget;
(c) Use reasonable efforts to keep in full force and effect
all liability insurance and bonds comparable in amount and scope of
coverage to that currently maintained.
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(d) Subject to applicable law, confer with the Company from
time-to-time at the Company's reasonable request to report on all
reasonable operational matters.
(e) File its federal and state income tax Returns, and all
required state and local income and franchise tax Returns for the
fiscal tax year coinciding with or ending in 1999 (if applicable), on
or before the due date for filing such Returns (including extensions).
SECTION 5.04 NEGATIVE COVENANTS OF ACQUIROR AND ACQUIROR SUB.
Except as expressly contemplated by this Agreement or disclosed in the
Acquiror Disclosure Schedules or otherwise consented to in writing by the
Company, which consent shall not be unreasonably withheld, from the date of
this Agreement to the Effective Time, Acquiror shall not (and shall not
permit the Acquiror Sub to) and Acquiror Sub shall not:
(a) Except as consistent with the past practice of Acquiror or
as contemplated by the Budget or that is reasonably appropriate to
consummate the Merger, (i) increase the compensation or any commission
payable or to become payable to any director, officer, employee or
independent contractor, except for increases in salary, bonuses or
wages payable or to become payable to employees or independent
contractors who are not directors or officers, (ii) grant any severance
or termination pay or enter into any severance agreement with, any
director, officer or employee, (iii) enter into any employment
agreement of any nature whatsoever with any director, officer or
employee that would extend beyond the Effective Time, except on an
at-will basis, or (iv) establish, adopt, enter into or amend any
employee benefit plan, except as may be required to comply with
applicable Law (provided that the actions under clauses (i), (ii) and
(iii) shall only require notice to, and not consent by, the Company),.
(b) Except as contemplated by the Budget or as contemplated by
the Merger, make any material change in the overall nature of its
business.
(c) Declare or pay, or agree to declare or pay, any dividend
on, or make any other distribution in respect of, outstanding Acquiror
Common Stock, Acquiror Sub Common Stock or Acquiror Options;
(d) Make (or commit to make) capital expenditures in an amount
which exceeds Ten Million Dollars ($10,000,000) or to the extent that
such expenditures do not relate to the conduct of Acquiror's business
consistent with its past practice;
(e) (i) Redeem, purchase or otherwise acquire any of its
capital stock or any securities or obligations convertible into or
exchangeable for any of its capital stock, or any options, warrants or
conversion or other rights to acquire any of its capital stock or any
such securities or obligations, (ii) effect any reorganization or
recapitalization, or (iii) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in lieu of or in substitution for shares of its capital
stock;
(f) Except pursuant to the Acquiror Plans or as permitted by
Section 5.04(g) hereof, issue, deliver, award, grant or sell, or
authorize the issuance, delivery, award, grant or sale of (including
the grant of any security interests, liens, claims, pledges,
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limitations in voting rights, charges or other encumbrances), any
shares of any class of its capital stock (including shares held in
treasury), any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or options to
acquire any such shares, or amend or otherwise modify the terms of any
such rights, warrants or options, the effect of which shall be to make
such terms more favorable to the holders thereof;
(g) Acquire or agree to acquire, by merging or consolidating
with, by purchasing a controlling equity interest in or all or
substantially all of the assets of, or by any other manner, any
material business, except for such acquisitions made in the ordinary
course of business consistent with past practice with the consideration
equal to less than Five Million Dollars ($5,000,000) for any such
transaction;
(h) Sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage,
pledge, transfer or otherwise dispose of, its material assets, other
than in the ordinary course of business consistent with past practice;
(i) Other than as contemplated by this Agreement, adopt any
amendments to its Articles or Certificate of Incorporation, as
applicable, or Bylaws;
(j) Other than in connection with the financing of the
transactions contemplated by this Agreement and the effect thereof on
Acquiror's budget, incur any liability or any obligation for borrowed
money or purchase money indebtedness, whether or not evidenced by a
contract, note, bond, debenture or similar instrument other than
liabilities and obligations up to Twenty Five Million Dollars
($25,000,000) to the extent that they relate to the conduct of
Acquiror's business in the ordinary course of business and consistent
with past practice;
(k) Agree in writing or otherwise to do any of the foregoing
unless the terms of such agreement are terminable upon closing of the
Merger contemplated in this Agreement;
(l) (i) perform any act which, if performed, would prevent or
excuse the performance of this Agreement by Acquiror or Acquiror Sub,
or (ii) fail to perform any act which, if omitted to be performed,
would prevent or excuse the performance of this Agreement by Acquiror
or Acquiror Sub; or
(m) Initiate, solicit, continue or encourage (including by way
of furnishing any information or assistance in connection with) any
inquiries or the making of any offer that constitutes, or may
reasonably be expected to lead to, any "Acquiror Competing Transaction"
(as such term is defined below), or enter into discussions or
negotiations with any person or entity in furtherance of such inquiries
or to obtain an Acquiror Competing Transaction or enter into any
agreement with respect to an Acquiror Competing Transaction. Acquiror
shall promptly notify the Company if any such inquiries or proposals
are received by Acquiror, by any material subsidiary of Acquiror or by
any of its or their officers, directors, financial advisors, attorneys,
accountants or other representatives. For purposes of this Agreement,
the term "ACQUIROR COMPETING
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TRANSACTION") shall mean any of the following involving Acquiror or any
material subsidiary of Acquiror (other than the Merger): (i) except as
required by Acquiror's Board of Directors' fiduciary duties, as advised
in writing by counsel to Acquiror, any merger, consolidation, exchange,
material business combination, or other similar material transaction
(except with respect to transactions permitted pursuant to
Section 5.04(g)); (ii) except as required by Acquiror's Board of
Directors' fiduciary duties, as advised in writing by counsel to
Acquiror, any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of all or substantially all of the assets of Acquiror
in a single transaction or series of related transactions; (iii) except
as required by Acquiror's Board of Directors' fiduciary duties, as
advised in writing by counsel to Acquiror, any sale of or exchange for
(including, without limitation, by merger or tender offer) all of the
outstanding capital stock or equity of Acquiror; or (iv) any agreement
to, or announcement by Acquiror of a proposal, plan or intention, to do
any of the foregoing. If Acquiror shall exercise its rights with
respect to fiduciary duties, a copy of such opinion shall be furnished
to the Company three (3) business days prior to taking any action
required by such fiduciary duties.
SECTION 5.05 ACCESS AND INFORMATION.
(a) Upon reasonable prior notice from Acquiror, the Company
shall afford to Acquiror and its officers, employees, accountants,
consultants, legal counsel and other representatives, reasonable access
during business hours to (i) the properties and locations at which the
Company is conducting business activities, (ii) the managers, officers
and management personnel of the Company at all such locations, and
(iii) all information (including, if available, original documents and
Returns) concerning the business, properties, contracts, records and
personnel of the Company. The Company shall permit Acquiror to make
copies of such books, records and other documents as Acquiror
reasonably considers necessary or appropriate for the purpose of
familiarizing itself with the business, properties, contracts, records
and personnel of the Company, and/or for obtaining any approvals,
consents, licenses or permits for the transactions contemplated by this
Agreement.
(b) Upon reasonable prior notice from the Company, Acquiror
shall afford to the Company and its officers, employees, accountants,
consultants, legal counsel and other representatives, reasonable access
during business hours to (i) the properties and locations at which
Acquiror is conducting substantially all of its business activities,
(ii) the managers, officers and management personnel of Acquiror at all
such locations, and (iii) all information (including, if available,
original documents and Returns) concerning the business, properties,
contracts, records and personnel of Acquiror. Acquiror shall permit the
Company to make copies of such books, records and other documents as
the Company reasonably considers necessary or appropriate for the
purpose of familiarizing itself with the business, properties,
contracts, records and personnel of Acquiror, and/or for obtaining any
approvals, consents, licenses or permits for the transactions
contemplated by this Agreement.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 TAX TREATMENT. All parties shall use reasonable
efforts to cause the Merger to qualify, and shall not knowingly take any
actions which could prevent the merger from qualifying as a reorganization
and from having each of the parties to this Agreement from being parties to
such reorganization within the meaning of Section 368 of the Code. Following
the Effective Time, neither the Surviving Corporation, Acquiror nor any of
their Affiliates shall take any action, cause any action to be taken, fail to
take any action or cause any action to fail to be taken, which action or
failure to act could cause the Merger to fail to qualify as a reorganization
under Section 368(a) of the Code.
SECTION 6.02 STOCKHOLDER AGREEMENTS. Shares of Acquiror Common
Stock and Acquiror Series A Preferred Stock are being issued by Acquiror to
the Stockholders under the Merger in reliance upon the representations,
warranties and agreements of the Stockholders set forth in a Stockholder
Agreement in the form of EXHIBIT B attached hereto (each, a "STOCKHOLDER
AGREEMENT").
SECTION 6.03 STEP REGISTRATION OF ACQUIROR COMMON STOCK. Within
ten (10) days following the Effective Time, Acquiror shall effect the
registration for resale of twenty-five percent (25%) of the Acquiror Common
Stock issued to the Stockholders in the Merger or underlying shares of
Acquiror Series A Preferred Stock issued to the Stockholders in the Merger.
Acquiror further agrees that (i) it shall effect the registration for resale
of an additional fifteen percent (15%) of the original total number of shares
of Acquiror Common Stock issued in the Merger or underlying shares of
Acquiror Series A Preferred Stock issued to the Stockholders in the Merger on
or prior to the last day of the three (3) month period beginning at the
Effective Time, (ii) it shall effect the registration for resale of an
additional thirty-three and one-third percent (33 1/3%) of the original total
number of shares of Acquiror Common Stock issued in the Merger or underlying
shares of Acquiror Series A Preferred Stock issued in the Merger on or prior
to the last day of the nine (9) month period beginning at the Effective Time,
and (iv) it shall effect the registration for resale of the balance of such
shares of Acquiror Common Stock or Acquiror Common Stock underlying shares of
Acquiror Series A Preferred Stock issued hereunder which have not been
registered for resale under the Securities Act ("UNREGISTERED SHARES")
(including the Escrow Shares, which shares shall be the last shares of
Acquiror Common Stock registered under this Section 6.03) on or prior to the
second anniversary of the Effective Time, to the extent such shares are then
owned by the Stockholders; Acquiror shall use all reasonable efforts to
effect the registration of the shares for resale under the Securities Act, by
performing the obligations set forth in those Registration Rights Agreements,
to be entered into prior to the Effective Time between Acquiror and various
Stockholders listed on Schedule 6.03, the form of which is attached hereto as
EXHIBIT C (the "REGISTRATION RIGHTS AGREEMENTS"). No Stockholder shall
receive the registration rights provided in this Section 6.03 until such
Stockholder has executed and delivered to Acquiror a Registration Rights
Agreement. Registration of the Escrow Shares shall not affect the terms of
the Escrow Agreements or otherwise constitute a release of such shares from
escrow. Each such shareholder listed on Schedule 6.03 shall be entitled to
enter into its own registration rights agreement with Acquiror.
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Any stockholders not listed on Schedule 6.03 shall be entitled to enter into
a registration rights agreement in form and substance substantially similar
to the Registration Rights Agreement.
SECTION 6.04 PREPARATION OF ACQUIROR'S PROXY STATEMENT;
SHAREHOLDERS MEETING.
(a) As soon as practicable following the date of this
Agreement, Acquiror shall prepare and file with the Commission and
cause to be cleared a proxy statement (the "PROXY STATEMENT") in
connection with the submission of the Share Issuance and the Merger to
Acquiror's shareholders for their approval (the "SHAREHOLDER
APPROVAL"). Acquiror shall cause the Proxy Statement to be mailed to
Acquiror's shareholders as soon as practicable after its review, if
any, by the Commission. Acquiror will advise the Company, promptly
after it receives notice thereof, of the time when the Proxy Statement
or any amendment thereto has been filed, of any request by the
Commission or its staff for amendment of the Proxy Statement, if any,
or comments thereon and responses thereto or requests by the Commission
or its staff for additional information. Drafts of the Proxy Statement
and any amendments shall be provided to the Company and its counsel not
less than three business days prior to filing and all filings shall be
subject to the reasonable approval of the Company and its counsel. Each
of the Company and Acquiror agrees that the information provided by it
for inclusion in the Proxy Statement, and each amendment or supplement
thereto, at the time of mailing thereof and at the time of the meeting
of shareholders of Acquiror, will not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any
time prior to the Effective Time, any information relating to Acquiror
or the Company, or any of their respective Affiliates, officers or
directors, should be discovered by Acquiror or the Company which should
be set forth in an amendment to the Proxy Statement, so that such
document would not include any misstatement of a material fact or omit
to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
the party which discovers such information shall promptly notify the
other party hereto and an appropriate amendment describing such
information shall be promptly filed with the Commission and, to the
extent required by Law, disseminated to Acquiror's shareholders.
(b) Acquiror shall, as soon as possible following the date of
this Agreement, duly call, give notice of, convene and hold a meeting
of its shareholders (the "SHAREHOLDERS MEETING") for the purpose of
obtaining the Shareholder Approval and shall, through its board of
directors (if not in breach of their fiduciary duties), recommend to
its shareholders the approval and adoption of this Agreement, the
Merger, the Share Issuance and the other agreements and transactions
contemplated hereby.
(c) Acquiror will use its best efforts to hold the
Shareholders Meeting as soon as possible after the date hereof.
(d) Acquiror will use its best efforts to obtain the
Shareholder Approval and to list the Acquiror Common Stock to be issued
in the Merger or issuable upon the conversion of Acquiror Series A
Preferred Stock with the NYSE.
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SECTION 6.05 RATIFICATION OF COMPANY APPROVAL. On the date hereof,
the Company shall have provided Acquiror with documents, in such form and
substance as reasonably requested by Acquiror, executed by the Stockholders
listed on Section 6.05 of the Company Disclosure Schedules (the "PRINCIPAL
STOCKHOLDERS") and directors of the Company, affirming and ratifying their
approval of and consent to the Merger and the other transactions contemplated
hereunder.
SECTION 6.06 APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) The Company and Acquiror shall use all reasonable efforts
to (i) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary, proper or advisable under
applicable Laws or otherwise to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable,
(ii) obtain from any Governmental Entities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be
obtained or made by the Company or Acquiror or any of their respective
subsidiaries in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions
contemplated herein, including, without limitation, the Merger, and
(iii) make all necessary filings, and thereafter make any other
required submissions, with respect to this Agreement and the Merger
required under (A) the Securities Act and the Exchange Act, and any
other applicable securities Laws, (B) the HSR Act (including, without
limitation, with respect to the acquisition by any Stockholder of
shares of Acquiror Common Stock or Acquiror Series A Preferred Stock in
the Merger), and (C) any other applicable Law; provided, however, that
the Company and Acquiror shall cooperate with each other in connection
with the making of all such filings, including providing copies of all
such documents to the non-filing party and its advisors prior to filing
and, if requested, to accept all reasonable additions, deletions or
changes suggested in connection therewith, and the Company, Acquiror
and Acquiror Sub shall not respond to any regulatory authority without
the consent of the other parties hereto. The Company and Acquiror shall
(and the Company shall cause the Principal Executives to) furnish to
each other all information required for any application or other filing
to be made pursuant to the rules and regulations of any applicable Law
(including, if so requested by Acquiror, all information required to be
included in the Resale Prospectus or a proxy statement) in connection
with the transactions contemplated by this Agreement.
(b) The Company and Acquiror shall give (or shall cause their
respective subsidiaries or Affiliates to give) (and the Company shall
cause the Principal Executives to give) any notices to third parties,
and use, and cause their respective subsidiaries to use, all reasonable
efforts to obtain any third party consents required to prevent a
Company Adverse Effect from occurring prior to or after the Effective
Time or an Acquiror Adverse Effect from occurring prior to or after the
Effective Time (collectively, "MATERIAL CONSENTS").
(c) From the date of this Agreement until the Effective Time,
the Company shall promptly notify Acquiror in writing of any pending
or, to the knowledge of the Company, threatened action, proceeding or
investigation by any Governmental Entity or any other person (i)
challenging or seeking damages in connection with the Merger and
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conversion of the Company Common Stock and/or Company Preferred Stock
into Acquiror Common Stock and/or Acquiror Series A Preferred Stock
pursuant to the Merger, or (ii) seeking to restrain or prohibit the
consummation of the Merger, the other transactions contemplated under
this Agreement, or otherwise limit the right of Acquiror or its
subsidiaries to own or operate all or any portion of the businesses or
assets of the Company or the Surviving Corporation, which in either
case is reasonably likely to have a Company Adverse Effect prior to or
after the Effective Time, or an Acquiror Adverse Effect after the
Effective Time.
(d) From the date of this Agreement until the Effective Time,
Acquiror shall promptly notify the Company in writing of any pending
or, to the knowledge of Acquiror, threatened action, proceeding or
investigation by any Governmental Entity or any other person (i)
challenging or seeking damages in connection with the Merger or the
conversion of the Company Common Stock and/or Company Preferred Stock
into Acquiror Common Stock and/or Acquiror Series A Preferred Stock
pursuant to the Merger, or (ii) seeking to restrain or prohibit the
consummation of the Merger or the other transactions contemplated under
this Agreement, or in either case reasonably likely to have an Acquiror
Adverse Effect prior to the Effective Time.
(e) Each of Acquiror and the Company shall cooperate with each
other in obtaining the Tax Opinion. In connection therewith, each of
Acquiror and the Company shall deliver to Altheimer & Xxxx (or other
nationally recognized counsel selected by the Company) customary
representation letters in form and substance reasonably satisfactory to
such counsel and the Company and Acquiror shall use reasonable efforts
to obtain any representation letters from appropriate stockholders and
shall deliver any such letters obtained to Altheimer & Xxxx.
SECTION 6.07 UPDATE DISCLOSURE; BREACHES. From and after the date
of this Agreement until the Effective Time, the Company, on the one hand, and
Acquiror and Acquiror Sub, on the other hand, shall promptly notify the other
by written update to its Disclosure Schedules of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
be likely to cause any condition to the obligations of any party to effect
the Merger and the other transactions contemplated by this Agreement not to
be satisfied, or (ii) the failure of the Company or Acquiror or Acquiror Sub,
as the case may be, to comply with or satisfy any covenant or agreement to be
complied with or satisfied by it pursuant to this Agreement which would be
likely to result in any condition to the obligations of any party to effect
the Merger and the other transactions contemplated by this Agreement not to
be satisfied; provided, however, that, except as otherwise provided in this
Agreement, the delivery of any notice pursuant to this Section 6.07 shall not
be deemed to cure any breach of any representation or warranty requiring
disclosure of such matter prior to the date of this Agreement, or otherwise
limit or affect the remedies available hereunder to the party receiving such
notice.
SECTION 6.08 PUBLIC ANNOUNCEMENTS. Subject to applicable Law, each
of Acquiror and the Company shall obtain the other party's prior approval
(which shall not be unreasonably withheld) of the contents of all public
announcements (including press releases) with respect to the Merger or this
Agreement. The Company and Acquiror acknowledge and
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agrees that any such press release or other public announcement respecting
the Merger or this Agreement shall be disseminated only in coordination
between the Company and Acquiror.
SECTION 6.09 OBLIGATIONS OF ACQUIROR SUB. Acquiror shall, for the
benefit of the Company and its Stockholders, take all reasonable action
necessary to cause Acquiror Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth
in this Agreement.
SECTION 6.10 CERTIFICATES. Each certificate representing
Unregistered Shares owned by a Stockholder shall bear legends substantially
as follows:
(a) All certificates representing Acquiror Common Stock and
Acquiror Series A Preferred Stock shall bear a legend reading
substantially as follows:
"The securities represented by this certificate were issued in
a private placement, without registration under the Securities
Act of 1933 and in reliance on the holder's representation
that such securities were being acquired for investment and
not for resale. No transfer of such securities may be made on
the books of the issuer unless accompanied by an opinion of
counsel reasonably satisfactory to the issuer, that such
transfer may properly be made without registration under the
Securities Act of 1933 or that such securities have been so
registered under a registration statement which is in effect
at the date of such transfer."
(b) Certificates delivered under the Escrow Agreements shall
also bear the following endorsement:
"The securities represented by this certificate are also
subject to restrictions on transfer and to the rights of
issuer and issuer's affiliate, to cancel such securities, on
the terms and conditions set forth in an Agreement and Plan of
Merger and Plan of Reorganization dated as of January __, 2000
and an Escrow Agreement, dated as of ___________, 2000, a copy
of each of which may be obtained from the issuer or from the
holder of this certificate. No transfer of such securities
will be made on the books of issuer unless accompanied by
evidence of compliance with the terms of such agreements."
These legends shall be the only ones appearing on the
certificates. The legend in (a) shall be removed by Acquiror upon
request made on or after the second anniversary of the Effective Time
and shall also be removed in connection with the resale of shares of
Acquiror Common Stock pursuant to the Registration Rights Agreements.
Upon release of any such certificates from the Escrow Agreements, the
legend set forth in Section 6.10(b) shall be removed.
SECTION 6.11 ACQUIROR BOARD REPRESENTATION. At the Effective Time,
the Board of Directors of Acquiror shall be reconstituted so that it is no
more than eleven (11) members and so that it contains as members such number
of directors as designated by the Principal Executives (the "BOARD
DESIGNEES"), rounded up to the next whole number, as shall cause such Board
Designees to represent that portion of the Board of Directors of Acquiror
equal to the
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product of the total number of directors on such Board (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage
that the aggregate number of shares of Acquiror Common Stock to be issued
pursuant to this Agreement (or issuable upon conversion of Acquiror Series A
Preferred Stock to be issued pursuant to this Agreement) and to be
beneficially owned by the Stockholders bears to the total number of shares of
Acquiror Common Stock to be outstanding at the Effective Time or then
issuable upon conversion of Acquiror Series A Preferred Stock to be then
outstanding. In order to satisfy its obligations hereunder, Acquiror further
agrees prior to the Effective Time to amend its Bylaws and to take such other
action as reasonably requested by the Company.
SECTION 6.12 STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS.
During the period from the date hereof through the Effective Time, the
Company may not terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it is a party (other than
the Letter of Confidentiality pursuant to its terms or by written agreement
of the parties thereto). During such period, the Company shall enforce, to
the fullest extent permitted under applicable Law, the provisions of any such
agreement, including by reasonable efforts to obtain injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court of the United States of America or of any
state having jurisdiction.
SECTION 6.13 COMPANY OPTIONS UNDER THE PLAN.
(a) As of the Effective Time, (i) each outstanding Company
Option shall be assumed by Acquiror and become and represent an option
(an "ADJUSTED OPTION") to purchase (A) the number of shares of Acquiror
Common Stock decreased to the nearest whole share, determined by
multiplying (I) the number of shares of Acquiror Common Stock to be
issued upon conversion of one share of Company Common Stock pursuant to
Section 2.01(b)(iv) of this Agreement by (II) a fraction (the "Option
Number") the numerator of which is one and the denominator is the
number of shares of Acquiror Common Stock to be issued upon conversion
of one share of Company Common Stock pursuant to Section 2.01(b)(iv) of
this Agreement, and (B) the number of shares of Series Preferred Stock
to be issued upon conversion on one share of Company Common Stock
pursuant to Section 2.01(b)(iv) of this Agreement by the Option Number,
at an exercise price per Adjusted Option equal to the exercise price
for each such Company Stock Option, divided by the Option Number
(rounded down to the nearest whole cent), and all references in each
such option to the Company shall be deemed to refer to Acquiror, where
appropriate; provided, however, that the adjustments provided in this
clause (i) with respect to any options which are "incentive stock
options" (as defined in Section 422 of the Code) or which are described
in Section 423 of the Code, shall be effected in a manner consistent
with the requirements of Section 424(a) of the Code, and (ii) Acquiror
shall assume the obligations of the Company under the Plan. The other
terms of each Adjusted Option, and the plans or agreements under which
they were issued, shall continue to apply in accordance with their
terms. The date of grant of each Adjusted Option shall be the date on
which the corresponding Company Option was granted.
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(b) The Company and Acquiror agree that the Plan shall be
amended, to the extent necessary, to reflect the transactions
contemplated by this Agreement, including, but not limited to the
conversion of shares of Company Class A Common Stock held or to be
awarded or paid pursuant to the Plan, into shares of Acquiror Common
Stock on a basis consistent with the transactions contemplated by this
Agreement. The Company and Acquiror agree to submit the amendments to
the Plan to their respective stockholders, if such submission is
determined to be necessary by counsel to the Company or Acquiror after
consultation with one another; provided, however that such approval
shall not be a condition to the consummation of the Merger.
(c) Acquiror shall (i) reserve for issuance the number of
shares of Acquiror Common Stock that will become subject to the Plan
and (ii) issue or cause to be issued the appropriate number of shares
of Acquiror Common Stock pursuant to the Plan, upon the exercise or
maturation of rights existing thereunder on the Effective Time or
thereafter granted or awarded. No later than the Effective Time,
Acquiror shall prepare and file with the Commission a registration
statement on Form S-8 (or other appropriate form) registering a number
of shares of Acquiror Common Stock necessary to fulfill Acquiror's
obligations under this Section 6.13(c). Such registration statement
shall be kept effective and the current status of the prospectus
required thereby shall be maintained for at least as long as Adjusted
Options remain outstanding.
(d) As soon as practicable after the Effective Time, Acquiror
shall deliver to the holders of Company Options appropriate notices
setting forth such holders' rights pursuant to the Plan and the
agreements evidencing the grants of such Company Options and that such
Company Options and the related agreements shall be assumed by Acquiror
and shall continue in effect on the same terms and conditions (subject
to the adjustments required by this Section after giving effect to the
Merger); provided that Acquiror shall make good faith efforts to so
deliver such notices on the same day as the Effective Time.
(e) Prior to the Effective Time, the Company may cause (i)
fifty percent (50%) of all Company Options held by each Key Employee to
become fully vested at the Effective Time (and the remainder of such
employee's Company Options shall vest on the date they would have
otherwise vested absent such accelerated vesting), and (ii)
thirty-three and one-third percent (33 1/3%) of all Company Options
held by each employee of the Company (other than the Principal
Executives or Key Employees) to become fully vested at the Effective
Time (and the remainder of such employee's Company Options shall vest
on the date they would have otherwise vested absent such accelerated
vesting).
(f) Between the date hereof and the Effective Time, the
Company will prohibit (in accordance with the terms of the Plan)
exercises of Company Options to the extent that the issuance hereunder
of the Merger Consideration would not be excempt from the Securities
Act.
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SECTION 6.14 CONDITIONAL FUNDING.
(a) If the Effective Time shall not occur on or prior to March
1, 2000 (and Acquiror possesses no right to terminate this Agreement
under Article VIII), Acquiror shall on such date make an unsecured loan
to the Company in immediately available funds in the amount of
$5,000,000, with the Company's repayment obligation solely evidenced by
a subordinated note substantially in the form of EXHIBIT D attached
hereto.
(b) If the Effective Time shall not occur on or prior to April
1, 2000 (and Acquiror possesses no right to terminate this Agreement
under Article VIII), Acquiror shall on such date make an unsecured loan
to the Company in immediately available funds in the amount of
$5,000,000, with the Company's repayment obligation solely evidenced by
a subordinated note substantially in the form of EXHIBIT D attached
hereto.
(c) Any funding under Section 6.14(b) shall be in addition to
any funding pursuant to Section 6.14(a). The Company shall not be
required to issue any note to Acquiror in respect of a loan under
Sections 6.14(a) or (b) until Acquiror has initiated the funding of
such loans in immediately available funds. For the purposes of this
Agreement, "FUNDING NOTES" shall mean the notes referenced in this
Section 6.14.
SECTION 6.15 EMPLOYEE AND RELATED MATTERS.
(a) For a period of one year following the Effective Time,
Acquiror shall provide the Company's employees with retirement, health,
welfare and other employee benefits that are substantially equivalent
to, and no less favorable than, those provided to Acquiror's employees
who are similarly situated. To the extent that service is relevant for
eligibility and vesting (and, solely for purposes of calculating
entitlement to vacation and sick days, benefit accruals) under any
retirement plan, employee benefit plan, program or arrangement
established or maintained by Acquiror or any of its subsidiaries for
the benefit of employees located in the United States of Acquiror and
any of its subsidiaries; such plan, program or arrangement shall (i)
credit Company employees for service on or prior to the Effective Time
with the Company, (ii) credit any pre-existing conditions, to the same
extent eligible for coverage under a Company Benefit Plan and (iii)
recognize, for purposes of annual deductible and out-of-pocket limits
under its medical and dental plans, deductible and out-of-pocket
expenses paid by the Company's employees in the calendar year in which
the Effective Time occurs.
(b) For a period of three years following the Effective Time,
other than as approved by the Principal Executives, Acquiror shall not
relocate the Key Employees or the technology department to a location
other than the Company's present location or a location connected to
the UPSHOT division of Acquiror.
SECTION 6.16 INDEMNIFICATION.
(a) From and after the Effective Time, the Surviving
Corporation shall, and Acquiror shall cause the Surviving Corporation
to, provide exculpation and indemnification for each Person who is now
or has been at any time prior to the date hereof or who becomes prior
to the Effective Time, an officer, agent, employee or
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director of the Company (the "COMPANY INDEMNIFIED PARTIES") which is
the same as the exculpation and indemnification provided to the
Company Indemnified Parties by the Company immediately prior to the
Effective Time in its Certificate of Incorporation and Bylaws, as in
effect on the date hereof; provided, that such exculpation and
indemnification covers actions on or prior to the Effective Time,
including, without limitation, all transactions contemplated by this
Agreement (or that limitation of the indemnification obligations of
the Escrowed Stockholders under Article IX hereof and excluding
actions (other than with respect to appraisal rights pursuant to
applicable Delaware Law) brought by Stockholders who did not vote
for, or submit their written consent to approve, the Merger).
(b) In the event that the Acquiror or Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or
merges into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any
Person, then, and in each such case, the successors and assigns of such
entity shall assume the obligations set forth in this Section 6.16,
which obligations are expressly intended to be for the irrevocable
benefit of, and shall be enforceable by, each director and officer
covered hereby.
(c) Acquiror guarantees, unconditionally and absolutely, the
performance of Surviving Corporation's and Acquiror Sub's obligations
under this Section 6.16.
(d) Acquiror shall cause to be maintained (to the extent
commercially available) in effect for not less than six years from the
Effective Time policies of directors' and officers' liability
insurance, for the benefit of directors and officers of the Company
prior to the Effective Time, with respect to matters occurring prior to
the Effective Time in amounts and on a basis not less favorable than
Acquiror provides for its officers and directors.
(e) Each of the Company Indemnified Parties shall be entitled
to enforce the covenants contained in this Section 6.16 and Acquiror
and Acquiror Sub acknowledge and agree that each Company Indemnified
Party would suffer irreparable harm and that no adequate remedy at law
exists for a breach of such covenants and such Company Indemnified
Party shall be entitled to injunctive relief and specific performance
in the event of any breach of any provision in this Section 6.16. This
Section 6.16 is intended for the irrevocable benefit of, and to grant
third party rights to, the Company Indemnified Parties and their
successors, assigns and heirs and shall be binding on all successors
and assigns of Acquiror and Acquiror Sub, including without limitation
the Surviving Corporation.
SECTION 6.17 COMMITMENT LOANS; FACILITY.
(a) Simultaneously herewith or on the next busineess day
hereafter, Acquiror shall make an unsecured loan to the Company in
immediately available funds in the amount of $5,000,000, with the
Company's repayment obligation solely evidenced by a subordinated note
substantially in the form of EXHIBIT D attached hereto (such note,
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together with that certain unsecured loan in the amount of $5,000,000
made by Acquiror to the Company pursuant to that certain Promissory
Note, dated January 6, 2000, are referenced hereinafter as the
"COMMITMENT NOTES"). Acquiror and Acquiror Sub agree and acknowledge
that such loan shall in no way reduce, modify or offset all or any
portion of the Merger Consideration or the rights or remedies of the
Company or the Stockholders whether under or at law or in equity.
(b) On or prior to February 28, 2000, Acquiror shall provide
evidence reasonably satisfactory to the Company that Acquiror has a
working capital facility with substantially the same terms as its
current facility (the "FACILITY").
SECTION 6.18 LISTING. Acquiror agrees to authorize for listing on
the NYSE the shares of Acquiror Common Stock comprising the Merger
Consideration (including shares of Acquiror Common Stock issuable upon
conversion of Acquiror Series A Preferred Stock), and those required to be
reserved for issuance upon exercise of Adjusted Options assumed in connection
with the Merger, by filing with the NYSE a Supplemental Listing Application
(or such other form as may be required by the NYSE) in a timely manner prior
to the Closing or otherwise in accordance with the rules and regulations of
the NYSE.
SECTION 6.19 STRUCTURE OF MERGER. The parties hereto acknowledge
that, at the written request of the Company, the parties shall amend this
Agreement for the purpose of restructuring the Merger so that the Company is
the "Surviving Corporation" hereunder. Any such amendment shall contain
appropriate modifications to the provisions of this Agreement as if such
restructured Merger were originally the form of Merger contemplated by this
Agreement. Any such request shall be made at least ten (10) business days
prior to the Effective Time and only if this Agreement has not been
terminated pursuant to Article VIII hereof.
SECTION 6.20 CERTAIN RESOLUTIONS. Prior to the consummation of the
Merger, and as a condition to the Company's obligations to close the Merger,
Acquiror agrees to take all actions reasonably necessary to secure an
exemption from Section 16(b) of the Securities Exchange Act of 1934, pursuant
to Rule 16b-3 under that Act, for all acquisitions, dispositions and
reacquisitions of equity securities of Acquiror to occur directly or
indirectly as a result of the Merger, pursuant to the Merger Agreement, the
related Escrow Agreements or otherwise, by each of the following persons (or
any entities in which they hold interest) who will become directors or
officers of Acquiror at the time the Merger is consummated; (provided,
however, that the foregoing agreement shall not limit Acquiror's rights or
remedies under the Merger Agreement, the related Escrow Agreements or other
agreements contemplated thereby): Xxxxxxx Xxxxxxx, Xxxx Xxxxxxxxx, Xxxxxxx
Xxxxxx, and Xxxxxxx Xxxxx.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect the Merger and
the other transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Effective
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Time of the following conditions, any or all of which may be waived, in whole
or in part, to the extent permitted by applicable Law:
(a) NO ACTION OR PROCEEDING. No order of a court or an
administrative agency shall be in effect which enjoins, restrains,
conditions or prohibits the consummation of the transactions
contemplated by this Agreement, and no Governmental Entity shall have
commenced litigation to enjoin, restrain, or prevent consummation of
the transactions contemplated by this Agreement.
(b) CONSENTS. All material approvals and Material Consents
shall have been obtained from any and all Governmental Entities whose
approval or consent is necessary to the authorization of this Agreement
or the consummation of the Merger and where the failure to obtain such
approval or consent would have an Acquiror Significant Adverse Effect
or a Company Significant Adverse Effect. The applicable waiting
periods, if any, together with any extensions thereof, under the HSR
Act shall have expired or been terminated (including, without
limitation, with respect to the acquisition of Acquiror Common Stock or
Acquiror Series A Preferred Stock by any Stockholder of the Company).
(c) NYSE LISTING. The shares of Acquiror Common Stock issuable
to the Stockholders as contemplated by this Agreement (including shares
of Acquiror Common Stock issuable upon conversion of Acquiror Series A
Preferred Stock issuable to the Stockholders as contemplated by this
Agreement), shall have been approved for listing on the NYSE, subject
to official notice of issuance.
SECTION 7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR AND
ACQUIROR SUB. The obligations of Acquiror and Acquiror Sub to effect the
Merger and the other transactions contemplated in this Agreement are also
subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects, except
where the failure to be so true and correct would not have a Company
Significant Adverse Effect, in each case as though made on and as of
the Effective Time, and Acquiror shall have received a certificate of
the Chief Executive Officer (acting in such capacity) of the Company to
that effect (which certificate shall be included in EXHIBIT E hereto).
(b) AGREEMENTS AND COVENANTS; OTHER MATTERS. The Company shall
have performed or complied in all material respects with all material
agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and Acquiror
shall have received a certificate of the Chief Executive Officer
(acting in such capacity) of the Company to that effect (which
certificate shall be included in EXHIBIT E hereto).
(c) EMPLOYMENT AND OTHER AGREEMENTS. Acquiror, on behalf of
the Surviving Corporation, shall have received from (i) Xxxx, an
executed Employment Agreement in the form of EXHIBIT F hereto (the
"XXXX EMPLOYMENT AGREEMENT"), and (ii) Xxxx, an
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executed Employment Agreement in the form of EXHIBIT G hereto (the
"XXXX EMPLOYMENT AGREEMENT"), and all such Employment Agreements
shall be in full force or become effective at and as of the
Effective Time (the Company hereby acknowledges and agrees that the
execution of the Employment Agreements by each Principal Executive
and their respective promises to perform their obligations therein
are a material inducement to the execution and performance by
Acquiror and Acquiror Sub of their respective obligations herein).
In addition, Acquiror shall have received from each Principal
Executive an executed Agreement and Covenant Against Unfair
Competition, in the form of EXHIBIT H hereto.
(d) STOCKHOLDER AND DIRECTOR RESOLUTIONS; CERTIFICATE OF
INCORPORATION AND BYLAWS. Acquiror shall have received (i) resolutions
of the Company's Stockholders and directors, dated on or prior to the
date hereof, and certified by the Company's Chief Executive Officer,
acting in such capacity, approving, ratifying and confirming the
consummation of the Merger and other transactions contemplated by this
Agreement, and (ii) copies of the Certificate of Incorporation and
Bylaws of the Company certified by the Company's Chief Executive
Officer, acting in such capacity, as being the true Certificate of
Incorporation and Bylaws of the Company as of the Effective Date.
(e) OTHER DOCUMENTS AND INSTRUMENTS. Acquiror shall have
received such other certificates, instruments and other documents
reasonably required to effectuate the transactions contemplated hereby,
or to confirm to Acquiror the effectiveness thereof.
(f) SATISFACTION OF DEBTS. The Principal Stockholders and all
other officers and directors of the Company, together with their
spouses, blood relations and affiliates, shall have taken reasonable
efforts to pay in full, with interest if applicable, all of their
outstanding indebtedness to the Company, whether or not then due.
(g) CERTIFICATES OF GOOD STANDING. Acquiror shall have
received Certificates of Good Standing from the Secretary of State of
Delaware and Illinois with respect to the Company dated within four (4)
days of the Effective Time.
(h) SHAREHOLDER APPROVAL. The Shareholder Approval shall have
been obtained.
(i) ESCROW AGREEMENTS. Acquiror shall have received from the
Escrowed Stockholders executed Escrow Agreements.
(j) EXERCISE OF WARRANT. Acquiror shall have received evidence
reasonably satisfactory to Acquiror demonstrating that Silicon Valley
Bank ("SVB") has either (A) exercised that certain Warrant to Purchase
Stock, issued to Silicon Valley Bank by the Company on September 16,
1999 (the "SILICON WARRANT"), for shares of Company Series B Preferred
Stock in accordance with its terms and converted such Company Series B
Preferred Stock into Company Class B Common Stock or (B) consented to
treat such Warrant as if so exercised and converted immediately prior
to the Merger such that in the Merger SVB receives the Merger
Consideration to be received by holders of Company Common Stock as
provided in Section 2.01(a) hereof.
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(k) SIDE LETTER. Acquiror shall have received from each
Principal Executive a side letter in the form of EXHIBIT I attached
hereto, whereby such Principal Executive agrees to indemnify Acquiror
and the Surviving Corporation for liabilities incurred as a result of
the conduct of Persons (other than the Company, Acquiror, Acquiror Sub
and interest therein) owned, directly or indirectly, by such Principal
Executive.
SECTION 7.03 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger and the other transactions
contemplated in this Agreement are also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Acquiror and Acquiror Sub contained
in this Agreement shall be true and correct in all material respects,
except where the failure to be so true and correct would not have an
Acquiror Significant Adverse Effect, in each case as though made on and
as of the Effective Time, and the Company shall have received a
certificate of the Chief Financial Officer of Acquiror and Acquiror Sub
to that effect (which certificate shall be included in EXHIBIT E
hereto).
(b) AGREEMENTS AND COVENANTS. Acquiror and its subsidiaries
shall have performed or complied in all material respects with all
material agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Effective Time,
and the Company shall have received a certificate of the Chief
Financial Officer of Acquiror and Acquiror Sub to that effect (which
certificate shall be included in EXHIBIT E hereto).
(c) EMPLOYMENT AND NONCOMPETITION AGREEMENTS. Each Principal
Executive entering into an Employment Agreement and an Agreement and
Covenant Against Unfair Competition with Acquiror and/or the Surviving
Corporation shall have received an executed counterpart thereof from
Acquiror and/or the Surviving Corporation.
(d) ESCROW AGREEMENTS. The Escrowed Stockholders shall have
received from Acquiror and Acquiror Sub executed Escrow Agreements.
(e) CERTIFICATES OF GOOD STANDING. The Company shall have
received Certificates of Good Standing from the Secretary of State of
Delaware and Illinois with respect to Acquiror and Acquiror Sub dated
within four (4) days of the Effective Time.
(f) TAX OPINION. The Company shall have received an opinion
dated the Closing Date from Altheimer & Xxxx (or other nationally
recognized counsel selected by the Company ) (the "TAX OPINION"), which
may be based upon such certificates and letters dated the Closing Date
as are acceptable to such counsel, to the effect that, the merger will
qualify as a reorganization within the meaning of Code ss. 368(a) and
each of the parties to this Agreement shall be a party to such
reorganization and therefore, for federal income tax purposes, the
Stockholders shall recognize no income, gain or loss upon the Merger
except to the extent of any cash consideration actually received or
deemed received.
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(g) ACQUIROR RELEASES. Each of the Principal Executives shall
have received from Acquiror a Release of Claims in the form of EXHIBIT
J attached hereto.
(h) ACQUIROR SERIES A PREFERRED STOCK. Acquiror shall have
filed with the Secretary of State of the State of Illinois a Statement
of Resolution Establishing Series (or an Amendment to its Articles of
Incorporation), which shall designate the Acquiror Series A Convertible
Preferred Stock in accordance with the terms set forth on EXHIBIT K
attached hereto.
(i) OTHER DOCUMENTS AND INSTRUMENTS. The Company shall have
received such other certificates, instruments and other documents
reasonably required to effectuate the transactions contemplated hereby,
or to confirm the effectiveness thereof.
(j) REGISTRATION RIGHTS AGREEMENT. Each Stockholder executing
a Registration Rights Agreement pursuant to Section 6.03 hereof shall
have received an executed counterpart Registration Rights Agreement
from Acquiror.
(k) The Shareholder Approval shall have been received.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 TERMINATION. Subject to Section 8.02 and 8.03 hereof,
this Agreement and the Merger may be terminated at any time prior to the
Effective Time in the following manner:
(a) by mutual consent of Acquiror and the Company;
(b) by Acquiror, if (i) (A)there has been a material breach by
the Company of any material covenant or agreement on its part to be
performed under this Agreement, and such breach is not cured within
thirty (30) days (or such earlier time one day before this Agreement
may be terminated pursuant to paragraph (e) below) following receipt by
the Company of written notice thereof from Acquiror (or is not capable
of cure), or (B) any one or more of the representations and warranties
of the Company contained in Article III of this Agreement is in
material breach and such breach is not cured within thirty (30) days
(or such earlier time one day before this Agreement may be terminated
pursuant to paragraph (e) below) following receipt by the Company of
written notice thereof from Acquiror (or is not capable of cure), and
(ii) the aggregate potential Damages which would reasonably be likely
to be sustained, directly or indirectly, by Acquiror as a result of
such breach exceed Fourteen Million Dollars ($14,000,000) (a "COMPANY
SIGNIFICANT ADVERSE EFFECT");
(c) by the Company, if (i) (A) there has been a material
breach by Acquiror or Acquiror Sub of any material covenant or
agreement on either of their part to be performed under this Agreement,
and such breach is not cured within thirty (30) days (or such earlier
time one day before this Agreement may be terminated pursuant to
paragraph (e) below) following receipt by Acquiror of written notice
thereof from the
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Company (or is not capable of cure), or (B) any one or more of the
representations and warranties of Acquiror or Acquiror Sub contained
in Article IV of this Agreement is in material breach and such
breach is not cured within thirty (30) days (or such earlier time
one day before this Agreement may be terminated pursuant to
paragraph (e) below) following receipt by Acquiror of written notice
thereof from the Company (or is not capable of cure), and (ii)
(other than with respect to payment of the Merger Consideration in
which case this clause (ii) shall not apply) the aggregate potential
Damages which would reasonably be likely to be sustained, directly
or indirectly, by the Company as a result of such breach exceed
Forty Million Dollars ($40,000,000) (an "ACQUIROR SIGNIFICANT
ADVERSE EFFECT");
(d) by Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting
consummation of the Merger shall have become final and nonappealable;
or
(e) by Acquiror or the Company if (i) the Shareholder Approval
shall not have been obtained at the Shareholders Meeting duly convened
therefor or at any adjournment or postponement thereof, or (ii) the
Merger shall not have been consummated on or prior to April 15, 2000
(the "OUTSIDE DATE"); PROVIDED, HOWEVER, that, at the request of any
party, the Outside Date shall be automatically extended until April 29,
2000.
(f) by the Company (i) if, by February 28, 2000, Acquiror has
not renewed the Facility, or (ii) if Acquiror takes action pursuant to
its fiduarciary duties as contemplated by Section 5.04(m) in connection
with an Acquiror Competing Transaction.
SECTION 8.02 EFFECT OF TERMINATION. Except as provided in Section
8.03, upon the proper termination of this Agreement in accordance with the
provisions of Section 8.01 hereof, this Agreement shall be null and void, and
all other rights and obligations of Acquiror, Acquiror Sub, the Company, and
the Stockholders under this Agreement shall forthwith cease and have no
further force or effect; provided that the provisions of Sections 6.14 and
6.17 shall remain in full force and effect and the payments made pursuant
thereto shall continue to be governed by the terms thereof and, to the extent
applicable, any notes delivered pursuant thereto. In the event of the
termination of this Agreement as provided in Section 8.01, each party, if so
requested by the other party, will return promptly every document furnished
to it by or on behalf of the other party in connection with the transaction
contemplated hereby, whether so obtained before or after the execution of
this Agreement, and any copies thereof (except for copies of documents
publicly available) which may have been made, and will cause its
representatives and any representatives of financial institutions and
investors and others to whom such documents were furnished promptly to return
such documents and any copies thereof any of them may have made. The
obligation of that certain Letter of Confidentiality, dated November 24, 1999
(the "LETTER OF CONFIDENTIALITY"), by and between the Company and Acquiror,
shall terminate upon any termination of this Agreement. This Section 8.02
shall survive any termination of this Agreement.
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SECTION 8.03 FEES AND EXPENSES; OTHER MATTERS.
(a) Except as specifically provided in subsections (c) and
(d), below, all "Expenses" (as hereafter defined) incurred by the
parties hereto shall be borne solely and entirely by the party which
has incurred the same in the event this Agreement is terminated;
provided, however, that if the Merger becomes effective, up to $500,000
of the accounting and legal Expenses of the Stockholders and the
Company shall be paid by the Company or, at the Company's option, by
Acquiror in cash, and any Expenses above such amount shall reduce the
payment of the Cash Consideration in accordance with Section 2.01
hereto. Notwithstanding anything herein to the contrary, Expenses may
be paid by a party at any time prior to the Effective Time, and if so
paid prior to the Effective Time shall nonethless be taken into account
in calculating such $500,000 of Expenses.
(b) As used in this Agreement, the term "EXPENSES" shall
include all out-of-pocket expenses and disbursements (including,
without limitation, all fees and expenses of counsel, accountants,
experts and consultants to a party hereto and its affiliates) incurred
by a party or on its behalf or on behalf of its stockholders or
Affiliates in connection with or related to the authorization,
preparation, negotiation and execution of this Agreement, the
preparation of the Proxy Statement and all other matters related to the
closing of the transactions contemplated herein.
(c) (i) The Company agrees that if Acquiror shall terminate
this Agreement pursuant to Section 8.01(b) and without fault of its
own, the Company shall, on the Payment Date , jointly and severally pay
to Acquiror an amount equal to the sum of Acquiror's and Acquiror Sub's
Expenses incurred in connection with this Agreement up to a maximum of
$500,000.
(ii) Acquiror agrees that if the Company shall
terminate this Agreement pursuant to Section 8.01(c) and without fault
of its own, Acquiror shall, on the Payment Date, pay to the Company an
amount equal to the sum of the Company's Expenses incurred in
connection with this Agreement up to a maximum of $500,000.
(iii) Acquiror agrees that if either Acquiror or the
Company shall terminate this Agreement pursuant to Sections 8.01(e)(i)
or the Company shall terminate this Agreement pursuant to 8.01(f),
Acquiror shall, on the Payment Date, pay to the Company the sum of the
Company's Expenses incurred in connection with this Agreement up to a
maximum of $500,000 and aggregate actual Damages sustained, directly or
indirectly, by the Company as a result of such termination, not to
exceed Ten Million Dollars ($10,000,000) (payment of which Damages
shall, to the extent of outstanding indebtedness of the Company under
the Commitment Notes, be satisfied by set-off against such outstanding
indebtedness under the Commitment Notes).
(d) The parties hereto agree that, in the event of a
termination of this Agreement pursuant to Section 8.01, the only relief
and remedy available to either party therefor and the maximum monetary
liability of either party therefor shall be as provided in this Section
8.03.
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(e) Any demand for the payment of Expenses shall itemize in
reasonable detail all qualifying disbursements and accruals, and
notwithstanding one party's payment of another party's Expenses, the
party incurring such items may update and/or supplement its demand at
any time and from time to time, until the expiration of sixty (60) days
from the date of the initial demand. All Expenses owing in accordance
with this Section 8.03 shall be made by wire transfer of immediately
available funds to an account designated by the party so entitled to
receive payment therefor and shall be made not later than two (2)
business days after delivery by one party to the other of demand and
proper itemization thereof ("PAYMENT DATE").
(f) (i) The Company agrees that (A) it shall promptly pay to
Acquiror the aggregate actual Damages sustained, directly or
indirectly, by Acquiror, not to exceed Ten Million Dollars
($10,000,000) and (B) all outstanding Funding Notes and Commitment
Notes shall become due and immediately payable, if Acquiror shall
terminate this Agreement pursuant to Section 8.01(b) under
circumstances in which the Company's breach of this Agreement giving
rise to such right of termination by Acquiror was a bad faith,
intentional and willful and material breach of this Agreement, made
with knowledge and understanding that the action or inaction, as the
case made be, giving rise to such breach would in fact constitute such
an intentional and willful and material breach.
(ii) The Company agrees that all outstanding Funding
Notes and Commitment Notes shall become due and payable (at the 11%
default interest rate set forth therein) within six (6) months after
Acquiror's termination of this Agreement pursuant to Section 8.01(b)
under circumstances in which the Company's breach of this Agreement
giving rise to such right of termination by Acquiror was not in bad
faith or willful (to the degree set forth in subsection (i) above.
(g) (i) Acquiror agrees that it shall promptly pay to the
Company the aggregate actual Damages sustained, directly or indirectly,
by the Company, not to exceed Ten Million Dollars ($10,000,000), (which
payment shall, to the extent of the outstanding indebtedness under the
Commitment Notes, be satisfied by Acquiror's set-off against the
outstanding indebtedness owed by the Company under the Commitment
Notes) if the Company shall terminate this Agreement pursuant to
Section 8.01(c) under circumstances in which Acquiror's breach of this
Agreement giving rise to such right of termination by the Company was a
bad faith, intentional and willful and material breach of this
Agreement, made with knowledge and understanding that the action or
inaction, as the case made be, giving rise to such breach would in fact
constitute such an intentional and willful and material breach.
(ii) Acquiror agrees that the respective maturity
dates of the outstanding Commitment Notes and Funding Notes shall be
extended by one (1) year if the Company's termination of this Agreement
pursuant to Section 8.01(c) occurs under circumstances in which
Acquiror's breach of this Agreement giving rise to such right of
termination by the Company was not in bad faith or willful (to the
degree set forth in subsection (i) above); provided that mandatory
prepayment provisions under the terms of such notes shall remain in
effect.
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(h) The parties hereto also agree that, in the event of a
termination of this Agreement pursuant to Section 8.01(e)(ii), which
termination results from delays caused by the Commission's review of
the Proxy Statement or by review under the HSR Act, the respective
maturity dates of the Commitment Notes and Funding Notes shall be
extended by one (1) year. Unless already extended pursuant to the
previous sentence or accelerated pursuant to this Article VIII, the
respective maturity dates of the Commitment Notes and Funding Notes
shall be extended by one year if (i) this Agreement has been properly
terminated pursuant to Section 8.01, (ii) the Company is not a
breaching party of this Agreement and (iii) the Company is not able to
repay its indebtedness reflected in any such note in the ordinary
course of its business; provided that mandatory prepayment provisions
under the terms of such notes shall remain in effect.
ARTICLE IX
INDEMNIFICATION MATTERS
SECTION 9.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Notwithstanding the closing of the Merger, the representations
and warranties of the Company, Acquiror and Acquiror Sub contained in this
Agreement and in any certificate delivered hereunder shall survive the
Effective Time (the "SURVIVAL PERIOD") until the expiration of one (1) year
following the Effective Time. The covenants and agreements contained herein
to be performed or complied with on or prior to the Effective Time shall
expire at the Effective Time. The covenants and agreements contained herein
to be performed or complied with after the Effective Time and the parties'
liabilities in respect of a breach thereof (other than the covenant to
indemnify against breaches of the representations and warranties of the
parties), shall survive the Effective Time until such covenants and
agreements have been performed or complied with, or until they shall have
expired in accordance with their respective terms.
SECTION 9.02 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF
ACQUIROR. From and after the Effective Time, Acquiror and the Surviving
Corporation shall be indemnified and saved harmless from and against any and
all costs, expenses, losses, damages and liabilities (including reasonable
legal and other professional fees and costs of investigation) (collectively,
"DAMAGES") incurred or suffered directly or indirectly by Acquiror or the
Surviving Corporation and proximately resulting from the breach of any one or
more of the representations or warranties contained in this Agreement and in
any certificate delivered hereunder or covenants or agreements of the Company
made in this Agreement and in any certificate delivered hereunder; payment
thereof shall be made only by the delivery to Acquiror of shares of Acquiror
Common Stock or shares of Acquiror Series A Preferred Stock pursuant to the
Escrow Agreements. Except as provided in Section 9.03 hereof, such
indemnification and all Damages due to Acquiror or Acquiror Sub under this
Agreement shall be subject to the following limitations:
(a) in valuing the Acquiror Common Stock (including shares of
Acquiror Common Stock issuable upon conversion of Acquiror Series A
Preferred Stock), for purposes of payment of any indemnification
obligation under this Section 9.02(a), such shares of Acquiror Common
Stock shall in all events be valued at the Share Value; in valuing the
Acquiror Series A Preferred Stock for payment of any indemnification
obligation under this Section 9.02(a), such Shares of Acquiror Series A
Preferred Stock
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shall in all events be valued at Liquidation Value (as such terms
defined is the Certificate of Designation set forth on Exhibit K
hereto). Any such set-off against the Acquiror Common Stock or
Acquiror Series A Preferred Stock shall be treated as a reduction of
the Merger Consideration received by the Stockholders in the Merger,
and any and all Returns filed in connection with the Merger after
such set-off shall so reflect; and
(b) Acquiror shall not be entitled to any recovery under this
Section 9.02 unless a claim for indemnification is made within the one
(1) year period immediately following the Effective Time.
(c) Acquiror shall not be entitled to recover under this
Section 9.02 until the total amount which Acquiror would recover under
Section 9.02, but for this paragraph, exceeds Five Million Dollars
($5,000,000), and then such Indemnitee shall be entitled to recover
only for the excess over Five Million Dollars ($5,000,000);
(d) Acquiror shall not be entitled to recover:
(i) with respect to consequential damages of any
kind, damages consisting of business interruption or lost profits
(regardless of the characterization thereof), damages computed on a
multiple of revenues or earnings or projected revenue or earnings or
any similar basis, or with respect to punitive damages;
(ii) to the extent the aggregate claims under this
Section 9.02 exceed the Cap; or
(iii) to the extent the subject matter of the claim
is covered by insurance (including title insurance) held by the
Company, the Surviving Corporation or Acquiror.
SECTION 9.03 OTHER PROVISIONS. Anything in this Agreement to the
contrary notwithstanding, following the Effective Time, any and all claims
for indemnification by Acquiror pursuant to Section 9.02 hereof shall be
enforceable solely to the extent of the Escrow Shares in the escrow accounts
to be established under and governed in accordance with the Escrow Agreements
referenced in Section 2.04. The shares of Acquiror Common Stock and Acquiror
Series A Preferred Stock held in such Escrow Agreements referenced in Section
2.04 shall be deemed to secure Acquiror and Acquiror Sub's rights to
indemnification hereunder and shall be Acquiror's and Acquiror Sub's sole
recourse for any claims for indemnification under Section 9.02 hereof.
SECTION 9.04 ACQUIROR'S INDEMNIFICATION. From and after the
Effective Time, Acquiror covenants and agrees to indemnify and save harmless
all Stockholders from and against any and all Damages incurred or suffered
directly or indirectly by them and proximately resulting from or attributable
to the breach of any one or more of the representations or warranties or
covenants or agreements of Acquiror or Acquiror Sub made in this Agreement.
Such indemnification by Acquiror and all Damages due to Stockholders or the
Company under this Agreement shall be subject to the following limitations:
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(a) the Stockholders shall not be entitled to any recovery
under this Section 9.04 unless a claim for indemnification is made
within the one (1) year period immediately following the Effective
Time.
(b) the Stockholders shall not be entitled to recover under
this Section 9.04 until the total amount which all Stockholders would
recover under Section 9.04, but for this paragraph, exceeds Fifteen
Million Dollars ($15,000,000), and then such Indemnitees shall be
entitled to recover only for the excess over Fifteen Million Dollars
($15,000,000);
(c) the Stockholders shall not be entitled to recover:
(i) with respect to consequential damages of any
kind, damages consisting of business interruption or lost profits
(regardless of the characterization thereof), damages computed on a
multiple of revenues or earnings or projected revenue or earnings or
any similar basis, or with respect to punitive damages; or
(ii) to the extent the aggregate claims under this
Section 9.04 exceed Twenty Nine Million Dollars ($29,000,000).
SECTION 9.05 INDEMNIFICATION PROCEDURES.
(a) In the event that any party hereto (which, for the
purposes of this Section 9.05, includes all Stockholders) shall sustain
or incur any Damages in respect of which indemnification may be sought
by such party pursuant to this Agreement, the party to be indemnified
hereunder (the "Indemnitee") shall assert a claim for indemnification,
prior to the expiration of the applicable indemnification period by
serving written notice on the party providing indemnification (the
"Indemnitor"), stating the nature and basis of such claim.
(b) In case any party has received actual notice of any claim
asserted by a third party or any action or administrative or other
proceeding in respect of which claim, action or proceeding such party
believes, in good faith, indemnity properly may be sought against the
other party pursuant to this Agreement, the Indemnitee shall, within
twenty (20) days of receiving such notice, give notice thereof in
writing to the Indemnitor, but failure to give such notice within such
time period shall relieve the Indemnitor of its indemnification
obligation only to the extent of actual prejudice resulting therefrom.
Within fifteen (15) days after receipt of notice of such claim, action
or proceeding, the Indemnitor may give the Indemnitee written notice of
its election to conduct the defense of such claim, action or
proceeding; provided, however, that the Indemnitee shall have the right
to participate in the defense thereof, but such participation shall be
solely at the expense of the Indemnitee, without a right of further
reimbursement. Until the Indemnitee has received notice of the
Indemnitor's election whether to defend any claim, action or
proceeding, the Indemnitee shall take reasonable steps to defend (but
may not settle) such claim, action or proceeding. If the Indemnitor has
not so notified the Indemnitee in writing within the time hereinabove
provided of its election to conduct the defense of such claim, action
or proceeding, the Indemnitee shall conduct the defense of
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any such claim, action or proceeding; provided that the Indemnitee
shall not at any time settle, compromise or satisfy any such claim,
action or proceeding without the written consent of the Indemnitor.
Any such settlement, compromise or satisfaction made by the
Indemnitee with the Indemnitor's consent of, or any such final
judgment or decree entered in, any claim, action or proceeding
defended only by the Indemnitee shall be binding upon the
Indemnitor. The Indemnitor with respect to such Damages shall be
subrogated to the right of action, if at all, of the Indemnitee
against any other person arising from the matter from which the
claim for Damages has arisen.
SECTION 9.06 INDEMNIFICATION EXCLUSIVE REMEDY. Indemnification
pursuant to the provisions of this Article IX shall be the exclusive remedy
of the parties for any misrepresentation or breach of any warranty or
covenant contained herein or in any closing certificate required hereunder or
for any state of facts which could be deemed to constitute such a breach if
properly asserted. Without limiting the generality of the preceding sentence,
no legal action sounding in tort or strict liability may be maintained by any
party.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 NOTICES. All notices and other communications given
or made pursuant to this Agreement shall be in writing and shall be deemed to
have been duly given or made, and shall be effective upon receipt, if
delivered personally, or the next business day if sent by reputable overnight
courier to the parties at the following addresses (or at such other address
for a party as shall be specified by like changes of address) or sent by
electronic transmission to the telecopier number specified below (with a copy
sent by overnight courier or delivered as provided hereinabove):
If to Acquiror or Acquiror Sub:
HA-LO Industries, Inc.
0000 Xxxx Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, CFO
Facsimile number: 847.647.4970
with a copy to:
Xxxxx X. Xxxxxxxx
Xxxx, Xxxxxx & Xxxxxxxxx
Two X. XxXxxxx Street
Suite 2100
Xxxxxxx, Xxxxxxxx 00000
Facsimile number: 312.269.1747
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If to the Company:
Xxxxxxxxx.xxx, Inc.
0000 X. Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
Facsimile number: 773.262.6694
with a copy to:
Xxxxx X. Xxxxxxxxx
Altheimer & Xxxx
00 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile number: 312.715.4800
SECTION 10.02 AMENDMENT. This Agreement may only be amended by the
parties hereto by an instrument in writing signed by all of such parties.
SECTION 10.03 WAIVER. Any party may (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive in writing any inaccuracies in the representations and warranties of
the other party contained in this Agreement or in any document delivered
pursuant to this Agreement, and (iii) waive compliance by the other party
with any of the agreements or conditions contained in this Agreement. Any
such extension or waiver shall only be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
SECTION 10.04 HEADINGS. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. As used herein, "including" means
"including, without limitation."
SECTION 10.05 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by a court of
competent jurisdiction, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as possible in
an acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible. In the event the parties are unable to
agree upon any such modification, this Agreement shall remain in full force
and effect without the deleted provision.
SECTION 10.06 ENTIRE AGREEMENT. This Agreement (together with the
Exhibits, and the Company Disclosure Schedules and Acquiror Disclosure
Schedules and the other documents delivered pursuant hereto), constitutes the
entire agreement of the parties and supersede all prior agreements and
undertakings, both written and oral, between the parties, or any of them,
with respect to the subject matter hereof, except for the Letter of
Confidentiality (which shall remain in full force and effect in accordance
with the terms and conditions
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contained therein, notwithstanding anything contained in this Agreement which
can be construed to the contrary; such Letter of Confidentiality shall be
deemed void at the Effective Time) and, except as otherwise expressly
provided herein, is not intended to confer upon any other Person any rights
or remedies hereunder. The inclusion of any item in the Company Disclosure
Schedules or the Acquiror Disclosure Schedules shall not be deemed evidence
of the materiality of such item for purposes of this Agreement. The parties
make no representations or warranties to each other, except as contained in
this Agreement, and any and all prior representations and warranties made by
any party or its representatives, whether orally or in writing, shall be
deemed to have been merged into this Agreement, it being intended that no
such prior representations or warranties shall survive the execution and
delivery of this Agreement. Acquiror and Acquiror Sub acknowledge that they
have conducted an independent investigation of the financial condition,
assets (including, without limitation, the Company's Intellectual Property
and the Company's website), liabilities, properties, results of operations
and prospects of the Company in making its determination as to the propriety
of the transactions contemplated by this Agreement and the agreements
ancillary hereto, and in entering into this Agreement, have relied solely on
the results of said investigation and on the representations and warranties
of the Company expressly contained in this Agreement. The Company
acknowledges that it has conducted an independent investigation of the
financial condition, assets, liabilities, properties, results of operations
and prospects of Acquiror in making its determination as to the propriety of
the transactions contemplated by this Agreement and the agreements ancillary
hereto, and in entering into this Agreement, have relied solely on the
results of said investigation and on the representations and warranties of
Acquiror expressly contained in this Agreement.
SECTION 10.07 SPECIFIC PERFORMANCE. Notwithstanding any termination
right granted in Article VIII, in the event of the nonfulfillment of any
condition to a party's closing obligations, in the alternative, such party
may elect to do one of the following: (i) proceed to close despite the
nonfulfillment of any closing condition, it being understood that
consummation of the Closing shall not be deemed a waiver of a breach of any
representation, warranty or covenant and of such party's rights and remedies
with respect thereto to the extent that such party shall have knowledge of
such breach and the Closing shall nonetheless occur; (ii) decline to close,
terminate this Agreement as provided in Article VIII, and thereafter seek
damages to the extent, but only to the extent, permitted in Article VIII; or
(iii) seek specific performance of the obligations of the other party. Each
party hereby agrees that in the event of any breach by such party of this
Agreement, the remedies available to the other party at law would be
inadequate and that such party's obligations under this Agreement may be
specifically enforced. The parties hereto recognize and agree that in the
event that, in breach of this Agreement, a party refuses to consummate the
Merger, money damages would be inadequate and the other party would have no
adequate remedy at law. Accordingly, the parties hereto agree that such a
party shall have the right, in addition to any other rights and remedies
existing in its favor, to enforce its rights and the other parties'
obligations under this Agreement by an action or actions for specific
performance, injunctive and/or equitable relief, without proof of actual
damages and without posting a bond or other security, in order to enforce or
prevent any violations (whether anticipatory, continuing or future) of this
Agreement. The rights granted under this Section 10.07 shall be in addition
to any other remedies available pursuant to this Agreement.
SECTION 10.08 ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise without the written consent of all parties
hereto.
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SECTION 10.09 PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party, and nothing in this
Agreement, express or implied, other than the right to receive the
consideration payable in the Merger pursuant to Article II and the rights
under Sections 6.01, 6.03 and 6.16, is intended to or shall confer upon any
other Person any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.
SECTION 10.10 GOVERNING LAW. Except to the extent that Delaware Law
governs the Merger, this Agreement shall be governed by and construed in
accordance with the Laws of the State of Illinois, regardless of the Laws
that might otherwise govern under applicable principles of conflicts of law.
SECTION 10.11 COUNTERPARTS. This Agreement may be executed in or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
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IN WITNESS THEREOF, Acquiror, Acquiror Sub and the Company have caused
this Agreement to be executed as of the date first written above, in the case of
each corporate entity, by their respective officers duly authorized.
HA-LO INDUSTRIES, INC., an Illinois
corporation
By:
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Its:
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HA-LO INDUSTRIES, INC., a Delaware
corporation
By:
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Its:
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XXXXXXXXX.XXX, INC., a Delaware corporation
By:
----------------------------------
Its:
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