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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
THE SOURCE INFORMATION MANAGEMENT COMPANY,
SOURCE-INTERLINK ACQUISITION, INC.,
THE INTERLINK COMPANIES, INC.
AND
THE SHAREHOLDERS AND OPTION HOLDERS OF
THE INTERLINK COMPANIES, INC.
MAY 31, 2001
AND
CONSENT TO MERGER
BY
THE SHAREHOLDERS OF
THE INTERLINK COMPANIES, INC.
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TABLE OF CONTENTS
1. Definitions............................................................................... 4
2. The Merger................................................................................ 8
(a) Effect of Merger..................................................................... 8
(b) Procedure for Payment................................................................ 9
(c) Dividends............................................................................ 9
(d) Fractional Shares.................................................................... 9
(e) Closing of Transfer Records.......................................................... 9
(f) Consents of Sellers to Merger........................................................ 9
(g) The Closing..........................................................................10
(h) Deliveries at the Closing............................................................10
3. Representations and Warranties Concerning the Merger......................................10
(a) Representations and Warranties of the Sellers........................................10
(b) Representations and Warranties of the Buyer and BuyerSub.............................11
4. Representations and Warranties Concerning the Company and Its Subsidiaries................12
(a) Organization, Qualification, and Corporate Power.....................................12
(b) Capitalization.......................................................................12
(c) Noncontravention.....................................................................12
(d) Brokers' Fees........................................................................12
(e) Title to Assets......................................................................12
(f) Subsidiaries.........................................................................12
(g) Financial Statements.................................................................12
(h) Events Subsequent to Most Recent Fiscal Year End.....................................12
(i) Undisclosed Liabilities..............................................................12
(j) Legal Compliance.....................................................................12
(k) Tax Matters..........................................................................12
(l) Real Property........................................................................12
(m) Intellectual Property................................................................12
(n) Tangible Assets......................................................................12
(o) Inventory............................................................................12
(p) Contracts............................................................................12
(q) Notes and Accounts Receivable........................................................12
(r) Powers of Attorney...................................................................12
(s) Insurance............................................................................12
(t) Litigation...........................................................................12
(u) Employees............................................................................12
(v) Employee Benefits....................................................................12
(w) Guaranties...........................................................................12
(x) Environment, Health, and Safety Matters..............................................12
(y) Certain Business Relationships With the Company and Its Subsidiaries.................12
(z) Disclosure...........................................................................12
5. Pre-Closing Covenants.....................................................................12
(a) General..............................................................................12
(b) Notices and Consents.................................................................12
(c) Operation of Business................................................................12
(d) Preservation of Business.............................................................12
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(e) Full Access..........................................................................12
(f) Notice of Developments...............................................................12
(g) Exclusivity..........................................................................12
6. Post-Closing Covenants....................................................................12
(a) General..............................................................................12
(b) Litigation Support...................................................................12
(c) Transition...........................................................................12
(d) Confidentiality......................................................................12
(e) Covenant Not to Compete..............................................................12
(f) Buyer Shares.........................................................................12
(g) Registration Rights..................................................................12
(h) Limitations on Sale of Buyer Shares..................................................12
7. Conditions to Obligation to Close.........................................................12
(a) Conditions to Obligation of the Buyer................................................12
(b) Conditions to Obligation of the Company..............................................12
8. Survival of Representation and Warranties.................................................12
9. Tax Matters...............................................................................12
(a) Certain Taxes........................................................................12
(b) Tax Free Treatment...................................................................12
(c) Withholding Obligations..............................................................12
10. Termination...............................................................................12
(a) Termination of Agreement.............................................................12
(b) Effect of Termination................................................................12
11. Miscellaneous.............................................................................12
(a) Press Releases and Public Announcements..............................................12
(b) No Third-Party Beneficiaries.........................................................12
(c) Entire Agreement.....................................................................12
(d) Succession and Assignment............................................................12
(e) Counterparts.........................................................................12
(f) Headings.............................................................................12
(g) Notices..............................................................................12
(h) Governing Law........................................................................12
(i) Amendments and Waivers...............................................................12
(j) Severability.........................................................................12
(k) Expenses.............................................................................12
(l) Construction.........................................................................12
(m) Incorporation of Exhibits, Annexes, and Schedules....................................12
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Exhibit A-1 - Shareholders of the Company
Exhibit A-2 - Number of Buyer Shares to Each Holder of Common Stock
Exhibit A-3 - Cash Consideration to each Holder of Preferred Stock/Fractional
Share Distributions
Exhibit B - Historical Financial Statements
Exhibit C - Form of Employment Agreements - Xxxxxx Xxxxx and Xxxxx Xxxxxxxx
Exhibit D - Form of Opinion of Counsel to the Sellers
Exhibit E - Form of Opinion of Counsel to the Buyer
Annex I - Exceptions to the Sellers' Representations and Warranties
Concerning the Merger
Annex II - Exceptions to the Buyer's Representations and Warranties
Concerning the Merger
Disclosure Schedule - Exceptions to Representations and Warranties
Concerning the Company and Its Subsidiaries
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger ("Agreement") entered into on May 31,
2001, by and among THE SOURCE INFORMATION MANAGEMENT COMPANY, a Missouri
corporation (the "Buyer"), SOURCE-INTERLINK ACQUISITION, INC., a Delaware
corporation and a wholly owned subsidiary of Buyer (the "BuyerSub"), THE
INTERLINK COMPANIES, INC., a Delaware corporation (the "Company") (formerly
DEYCO ACQUISITION CORPORATION) and THE SHAREHOLDERS AND OPTION HOLDERS OF THE
COMPANY LISTED ON EXHIBIT A (collectively the "Sellers" and singularly a
"Seller"). The Buyer, the Company and the Sellers are referred to collectively
herein as the "Parties".
WHEREAS, Sellers, in the aggregate, own of record and beneficially (i)
1,232,329 shares of the Common Stock of the Company, representing 100% of the
issued and outstanding Common Stock of the Company (other than the shares and
convertible securities owned by Buyer and the Options); (ii) Options to purchase
100,000 shares of Common Stock; and (iii) 1,200 shares of the Company's Series A
Preferred Stock, representing 100% of the issued and outstanding Series A
Preferred Stock;
WHEREAS, Buyer owns (i) 235,117 shares of the Company's Common Stock,
representing approximately 15%, on a fully diluted basis, of the issued and
outstanding Common Stock of the Company (excluding Options and the convertible
securities held by Buyer), and (ii) 294,497 shares of the Series B Preferred
Stock, representing 100% of the Series B Preferred Stock;
WHEREAS, Buyer acquired the Common Stock and Series B Preferred Stock
pursuant to the Investment and Services Agreement ("Investment Agreement") dated
October 31, 2000 between the Company and Buyer, as amended, and the documents
referenced therein (the "Financing");
WHEREAS, the Investment Agreement, inter alia, constituted a portion of
the financing for the Company's acquisition of the capital stock of certain
entities as described in the Stock Purchase Agreement dated August 18, 2000 (as
amended, the "Acquisition Agreement") between the Company and Yaqui Investments
Limited, a company duly organized under the laws of British Virgin Islands
("Yaqui"), which acquisition was consummated on February 22, 2001 (such
acquisition and related financing by Yaqui being referred to herein as the "IPD
Transaction"). In connection with the IPD Transaction, certain subsidiaries of
the Company entered into a financing arrangement (the "Congress Financing") with
Congress Financial Corporation (Western); and
WHEREAS, this Agreement contemplates a merger (the "Merger") in which
the Buyer will acquire the Company, in a merger transaction.
WHEREAS, the parties intend that the Merger will qualify as a tax-free
"reorganization" under Section 368(a)(1(A) and Section 368(a)(2)(D) of the Code.
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Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act but in the case of the Company
excludes the Buyer and its Affiliates.
"Affiliated Group" means any affiliated group within the meaning of
Code ss.1504(a) or any similar group defined under a similar provision of state,
local, or foreign law.
"Applicable Rate" means the corporate base rate of interest publicly
announced from time to time by Bank of America, N.A.
"Buyer" has the meaning set forth in the preface above.
"Buyer Owned Shares" means Company Shares owned by Buyer.
"Buyer SEC Reports" shall mean the Buyer's Annual Report on Form 10-K
for the fiscal year ended January 31, 2001.
"Buyer Shares" means shares of common stock, par value $0.01 per share,
of Buyer.
"BuyerSub" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in ss.2(g) below.
"Closing Date" has the meaning set forth in ss.2(g) below.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code ss.4980B.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means all of the common stock of the Company, $.001 par
value per share.
"Company" has the meaning set forth in the preface above.
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"Company Shares" means all of the Common Stock and the Series A
Preferred Stock.
"Confidential Information" means any information concerning the
businesses and affairs of the Company and its Subsidiaries that is not already
generally available to the public.
"Consent" has the meaning set forth in ss. 2(f) below.
"Controlled Groups" has the meaning set forth in Code ss.1563.
"Disclosure Schedule" has the meaning set forth in ss.4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, and all common law concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity which is treated as a single
employer with each Seller for purposes of Code ss.414.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Financial Statement" has the meaning set forth in ss.4(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Income Tax" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
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"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Merger" has the meaning set forth in the Recitals above.
"Most Recent Fiscal Year End" has the meaning set forth in ss.4(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"Options" shall mean (i) options to acquire 100,000 shares of Common
Stock of the Company at an exercise price of $2.14 per share, issued pursuant to
a Stock Option Plan dated March 11, 1999 and held by the Option holders as
provided on Exhibit A.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" means those encumbrances set forth in ss. 4(l)
of the Disclosure Schedule, liens for taxes not yet due or payable, and those
agreements, covenants, conditions, easements, encroachments, restrictions and
other matters which do not adversely affect in any material respect (x) the
Company's or its Subsidiaries' title to such real property or (y) the current
use, occupancy or value of such real property.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
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"Principal Holders" shall mean Xxxxxx X. Xxxxxx, Xxxx Xxxxxx, Xxxxx
Xxxxx, Xxxxx Xxxxxxxx and Xxxxx Xxxxxx.
"Prohibited Transaction" has the meaning set forth in ERISA ss. 406 and
Code ss. 4975.
"Reportable Event" has the meaning set forth in ERISA ss. 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Seller(s)" has the meaning set forth in the preface above.
"Series A Preferred Stock" means all of the preferred stock of the
Company designated as Series A Redeemable Preferred Stock, $.001 par value per
share.
"Series B Preferred Stock" means all of the preferred stock of the
Company designated as Series B Convertible Preferred Stock, $.001 par value per
share.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax Return" shall mean any report, return, information return,
declaration, claim for refund, exhibit, information return or other information,
including any schedules or attachments thereto, and any amendments to any of the
foregoing required to be supplied to a Taxing Authority in connection with
Taxes.
"Taxes" shall mean any federal, state, local, or foreign taxes,
including, without limitation, income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, Social Security (or similar),
unemployment, worker's compensation, disability, utility, production, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on-minimum, estimated and other taxes, governmental fees or
like charges of any kind whatsoever, including any interest, penalties, or
additions thereto, imposed by a Governmental Entity ("Taxing Authority") whether
disputed or not; and "Tax" means any one of them.
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2. The Merger. On and subject to the terms and conditions of this
Agreement, the Company will merge with and into BuyerSub at the
Effective Time. BuyerSub shall be the corporation surviving the Merger
(the "Surviving Corporation") as a wholly-owned subsidiary of Buyer.
(a) Effect of Merger.
(i) General. The Merger shall become effective at the time
(the "Effective Time") the Company and BuyerSub file the Certificate of
Merger with the Secretary of State of the State of Delaware. The Merger
shall have the effect set forth in the Delaware General Corporation
Law. The Surviving Corporation may, at any time after the Effective
Time, take any action (including executing and delivering any document)
in the name and on behalf of any of the Company, BuyerSub or the Buyer
in order to carry out and effectuate the transactions contemplated by
this Agreement.
(ii) Certificate of Incorporation. The Certificate of
Incorporation of BuyerSub in effect at and as of the Effective Time
(other than Article I of such certificate of incorporation, providing
for the name of the corporation, which shall be replaced by Article I
of the certificate of incorporation of the Company) will become the
Certificate of Incorporation of the Surviving Corporation.
(iii) Bylaws. The Bylaws of BuyerSub in effect at and as of
the Effective Time will become the Bylaws of the Surviving Corporation
without any modification or amendment in the Merger.
(iv) Directors and Officers. The directors and officers of
BuyerSub in office at and as of the Effective Time will remain the
directors and officers of the Surviving Corporation.
(v) Conversion of Company Shares and Options. At and as of the
Effective Time, (m) each share of Common Stock (other than any
Dissenting Share or Buyer-owned Share) shall be converted into the
right to receive 0.7442 of a Buyer Share, (n) each Option, to the
extent not exercised, shall be canceled and converted into the right to
receive 0.4280 of a Buyer Share, (o) each share of Series A Preferred
Stock shall be canceled and converted into the right to receive $1,000
in cash (p) each Buyer Owned Share shall be cancelled and (q) each
outstanding share of common stock of BuyerSub shall remain outstanding.
Notwithstanding the foregoing, if any Options are exercised prior to
Closing, the conversion ratios shall be proportionately adjusted so
that the aggregate number of Buyer Shares issued in the Merger shall
remain 980,000. No Company Shares shall be deemed to be outstanding or
to have any rights other than those set forth above in this ss. 2(a)(v)
after the Effective Time.
(vi) Potential Additional Shares. At Closing, pursuant to an
employment agreement to be entered into between Xxxxx Xxxxxxxx and
InterLink, Xx. Xxxxxxxx will receive 20,000 Buyer Shares (the "Xxxxxxxx
Shares") which shares shall be forfeited if, for any reason, Xx.
Xxxxxxxx is not in the employ of InterLink, Buyer or any of their
respective affiliates on the first anniversary of the Closing Date. If
the Xxxxxxxx Shares
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are forfeited, they will be distributed to the holders of Common Stock
and Options in the same proportions as the Buyer Shares are distributed
as a result of the Merger.
The aggregate number of Buyer Shares to be delivered pursuant
to this ss. 2(a)(v) in exchange for the Common Stock and the Options shall be
approximately 980,000 and the aggregate cash consideration to be delivered
pursuant to this ss. 2(a)(v) in exchange for the Series A Preferred Stock shall
be $1,200,000.
The number of Buyer Shares to be received by each of the
holders of Common Stock is listed on Exhibit A-2. The total amount of cash
consideration to be received by each Seller (either in exchange for such
Seller's Preferred Stock and/or due to any cash owed to a Seller as a result of
ss. 2(d)) is listed on Exhibit A-3.
(b) Procedure for Payment. Promptly after the Effective time, (x) each
holder of Common Shares, Series A Preferred Shares or Options shall deliver to
Buyer his or her Certificate or Certificates for such shares (or his or her
Option Agreement), duly endorsed, and Buyer will cause to be delivered to each
such holder the certificate for Buyer Shares or cash to which such holder is
entitled.
(c) Dividends. The Buyer will not pay any dividend or make any
distribution on any Buyer Shares (with a record date at or after the Effective
Time) to any record holder of outstanding Common Shares or Options until the
holder surrenders for exchange his, her or its certificates which represented
the Common Shares or Option Agreement.
(d) Fractional Shares. The Buyer will not be required to issue any
fractional Buyer Shares as a result of the Merger. In lieu of fractional Buyer
Shares to which a Seller would otherwise be entitled, Buyer will pay such Seller
the cash value of such fractional shares based upon a value of $5.00 for each
whole Buyer Share.
(e) Closing of Transfer Records. After the close of business on the
Closing Date, transfers of Company Shares outstanding prior to the Effective
Time shall not be made on the stock transfer books of the Surviving Corporation.
(f) Consents of Sellers to Merger. Each holder of Company Shares who
executes this Agreement, by executing this Agreement, hereby consents, pursuant
to Section 228 of the Delaware General Corporation Law, to the Merger as
outlined in this Agreement (the "Consent"). This Consent is given pursuant to
Section 228 of the Delaware General Corporation Law in lieu of a vote at a
meeting of shareholders.
(g) The Closing. The closing of the Merger (the "Closing") shall take
place at the offices of Xxxxxxxxx Xxxxxxxx LLP in St. Louis, Missouri, or at
another mutually agreeable location, commencing at 9:00 a.m. local time on the
second business day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as the Buyer and the Company
may mutually determine (the "Closing Date").
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(h) Deliveries at the Closing. At the Closing of the Transaction, (i)
the Company will deliver to the Buyer the various certificates, instruments, and
documents referred to in ss. 7(a) below, (ii) the Buyer will deliver to the
Company the various certificates, instruments, and documents referred to in
ss. 7(b) below, (iii) each of the Sellers will deliver to the Buyer stock
certificates and/or Option Agreements representing all of his, her or its
Company Shares and/or Options, endorsed in blank (other than the Option
Agreements) or accompanied by duly executed assignment documents, and (iv) the
Buyer will deliver to each of the Sellers the consideration specified in
ss. 2(a)(v)
3. Representations and Warranties Concerning the Merger.
(a) Representations and Warranties of the Sellers. Each of the Sellers
represents and warrants to the Buyer that the statements contained in this
ss. 3(a) are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
ss. 3(a)), in each case, with respect to himself or itself, except as set forth
in Annex I attached hereto.
(i) Organization of Certain Sellers. If the Seller is a
corporation or limited partnership, the Seller is duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or formation, as the case may be.
(ii) Authorization of Merger. Seller has full power and
authority (including, if the Seller is a corporation or limited
partnership, full corporate or partnership power and authority) to
execute and deliver this Agreement and to perform his, her or its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its
terms and conditions. The Seller need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the Merger.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the Merger, will (A) violate
any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject or, if the
Seller is a corporation, any provision of its charter or bylaws or, if
the Seller is a limited partnership, any provision of its certificate
of limited partnership or partnership agreement or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which the Seller is a party or by which he, she or it is bound or to
which any of his, her or its assets are subject.
(iv) Brokers' Fees. Seller has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the Merger for which the Buyer or the Company could become
liable or obligated.
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(v) Investment. Seller (A) understands that the Buyer Shares
have not been, and will not be, except pursuant to Section 6.g,
registered under the Securities Act, or under any state securities
laws, and is being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (B) is
acquiring the Buyer Shares solely for his, her or its own account for
investment purposes, and not with a view to the distribution thereof,
(C) is a sophisticated investor with knowledge and experience in
business and financial matters, (D) has received certain information
concerning the Buyer and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks
inherent in holding the Buyer Shares, (E) is able to bear the economic
risk and lack of liquidity inherent in holding the Buyer Shares, and
(F) is an Accredited Investor for the reasons set forth on Annex I.
(vi) Company Shares. The Seller holds of record and owns
beneficially the number of Company Shares and Options set forth next to
his, her or its name on Exhibit A-1, free and clear of any restrictions
on transfer (other than the Stockholder's Agreement (the "Stockholder's
Agreement") dated as of March 11, 1999 between the Company and Xxxxx
Xxxxxx and any restrictions under the Securities Act and state
securities laws), taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands.
Other than with respect to the Options and any convertible securities
held by the Buyer, the Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require the
Seller to sell, transfer, or otherwise dispose of any capital stock of
the Company (other than this Agreement). The Seller is not a party to
any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of the Company.
(b) Representations and Warranties of the Buyer and BuyerSub. The Buyer
and BuyerSub represent and warrant to the Sellers that the statements contained
in this ss. 3(b) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this ss. 3(b)), except as set forth in Annex II attached hereto.
(i) Organization of Buyer and BuyerSub. Buyer and BuyerSub are
corporations duly organized, validly existing, and in good standing
under the laws of the jurisdiction of their respective incorporation.
Buyer and BuyerSub are duly authorized to conduct business and are in
good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification
would not have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of
the Buyer and BuyerSub, taken as a whole.
(ii) Authorization of Merger. Buyer and BuyerSub have full
power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform their respective
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of each of Buyer and BuyerSub, enforceable in
accordance with its terms and conditions. Neither Buyer nor BuyerSub
need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the Merger.
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(iii) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the Merger, will (A) violate
any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer or BuyerSub is subject
or any provision of their respective charters or bylaws or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which Buyer or BuyerSub is a party or by which either of them is
bound or to which any either of their assets is subject.
(iv) Brokers' Fees. Neither Buyer nor BuyerSub has any
liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the Merger for which any Seller could
become liable or obligated.
(v) Investment. Neither Buyer nor BuyerSub is acquiring the
Company Shares with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
(vi) Consents and Approvals. The execution, delivery and
performance by Buyer and BuyerSub of this Agreement and the
consummation of the Merger does not require the consent or approval of,
or filing with, any governmental entity or other Person or entity
except such consents, approvals and filings, of which the failure to
obtain or make would not, individually or in the aggregate, have a
material adverse effect on the ability of the Buyer and BuyerSub to
consummate the Merger, and except for consents which have been
obtained.
(vii) Capital Stock and Related Matters. As of the date
hereof: (i) the Buyer's authorized capital stock consisted of
40,000,000 shares of Buyer Common Stock and 2,000,000 shares of
preferred stock, par value $1.00 per share, of which 17,257,108 shares
of Common Stock and no shares of such preferred stock are outstanding;
(ii) except as set forth in the Buyer SEC Reports, neither the Buyer
nor any of its Subsidiaries has outstanding any stock or other
securities convertible into or exchangeable for any shares of capital
stock, any rights to subscribe for or to purchase or any options for
the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of
any other character relating to the issuance of, any capital stock, or
any stock or securities convertible into or exchangeable for any
capital stock; and (iii) neither the Buyer nor any of its Subsidiaries
is subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of capital stock.
(viii) Authorization and Validity of Buyer Shares. The Buyer
Shares, when issued in accordance with the terms of this Agreement,
will be duly authorized, validly issued, fully paid and nonassessable.
(ix) Buyer SEC Reports. As of their respective dates, the
Buyer SEC Reports complied in all material respects with the
requirements of the Securities Exchange Act of
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1934 (the "Exchange Act") and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder
applicable to such Buyer SEC Reports. As of their respective dates, the
Buyer SEC 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. The audited consolidated
financial statements and unaudited interim financial statements of the
Buyer and its Subsidiaries included in the Buyer SEC Reports comply as
to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the
Commission with respect thereto. The financial statements included in
the Buyer SEC Reports: have been prepared in accordance with GAAP
applied on a consistent basis (except as may be indicated therein or in
the notes thereto); and present fairly, in all material respects, the
financial position of the Buyer and its Subsidiaries as at the dates
thereof and the results of their operations and cash flow for the
periods then ended subject, in the case of the unaudited interim
financial statements, to normal year-end audit adjustments and any
other adjustments described therein and the fact that certain
information and notes have been condensed or omitted in accordance with
the Exchange Act and the rules promulgated thereunder. The Buyer has
filed with the Commission all Buyer SEC Reports required to be filed by
the Buyer with the Commission.
(x) Absence of Certain Changes or Events. Since January 31,
2001, there has not been any material adverse change in the business,
operations, properties, assets or condition (financial or other) of the
Buyer and its Subsidiaries taken as a whole, or any event that has had
a material adverse effect on the foregoing, and, to the knowledge of
the Buyer, no factor or condition exists and no event has occurred that
would be likely to result in any such change, other than changes in
general economic conditions and changes which generally affect the
industries in which the Buyer and its Subsidiaries operate.
(xi) Acquisition of Company Shares. The Buyer is acquiring the
Series A Preferred Stock, the Common Stock and the Options for its own
account for investment and not with a view towards the resale, transfer
or distribution thereof, nor with any present intention of distributing
such shares. The Buyer understands that none of the Series A Preferred
Stock, the Common Stock and the Options have been registered under the
Securities Act or any state securities law, by reason of their issuance
in a transaction exempt from the registration requirements of the
Securities Act and such laws, which exemption depends upon, among other
things, the bona fide nature of the Buyer's investment intent as
expressed herein. The Buyer also understands that such securities must
be held indefinitely unless they are subsequently registered under the
Securities Act and such laws or a subsequent disposition thereof is
exempt from registration.
(xii) Accuracy of Information. None of the representations,
warranties or statements of the Buyer contained in this Agreement, or
in the Exhibits hereto, contains any untrue statement of a material
fact.
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4. Representations and Warranties Concerning the Company and Its
Subsidiaries. The Principal Holders represent and warrant to the Buyer that the
statements contained in this ss.4 are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this ss.4), except as set forth in the disclosure
schedule delivered by the Company to the Buyer on the date hereof (the
"Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this ss.4.
(a) Organization, Qualification, and Corporate Power. Each of the
Company and its Subsidiaries is an entity duly organized, validly existing, and
in good standing under the laws of the jurisdiction of its formation. Each of
the Company and its Subsidiaries is duly authorized to conduct business and is
in good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a material
adverse effect on the business, financial condition, operations, results of
operations, or future prospects of the Company and its Subsidiaries, taken as a
whole. Each of the Company and its Subsidiaries has full corporate or limited
liability company power, as the case may be, and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. ss.4(a) of the Disclosure Schedule lists the directors and officers
of each of the Company and its Subsidiaries.
(b) Capitalization. The entire authorized capital stock of the Company
consists of 3,200,000 shares of capital stock consisting of (i) 2,500,000 shares
of Common Stock, of which 1,547,861 shares are issued and outstanding and
952,139 are held in treasury and (ii) 700,000 shares of undesignated preferred
stock of which 1,200 are issued and outstanding shares as Series A Preferred
Stock and of which 294,497 are issued and outstanding as Series B Preferred
Stock. All of the issued and outstanding Company Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the respective Sellers as set forth on Exhibit A-1. Other than the
Options and the convertible securities held by Buyer, there are no outstanding
or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that could
require the Company to issue, sell, or otherwise cause to become outstanding any
of its capital stock. The Options are held by the Option holders in the amounts
listed on Exhibit A-1. Except for the Stockholder's Agreement, there are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company. Except for the
Stockholder's Agreement, there are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock of
the Company.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the Merger, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which any of the Company and its Subsidiaries is subject or any
provision of the charter or bylaws of any of the Company and its Subsidiaries or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement (other than in
connection with the IPD Transaction or the Congress Financing, which consents
are specifically identified on ss. 4(c) of the Disclosure Schedule and all
consents which
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have been waived by the Buyer including all consents relating to leases),
contract, lease, license, instrument, or other arrangement to which any of the
Company and its Subsidiaries is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Security Interest
upon any of its assets), except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice,
or Security Interest would not have a material adverse effect on the business,
financial condition, operations, results of operations, or future prospects of
the Company and its Subsidiaries, taken as a whole, or on the ability of the
Parties to consummate the Merger. Other than in connection with the IPD
Transaction or the Congress Financing, which are specifically identified on ss.
4(c) of the Disclosure Schedule and all consents which have been waived by the
Buyer including all consents relating to leases, none of the Company and its
Subsidiaries needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the Merger, except where the failure to give
notice, to file, or to obtain any authorization, consent, or approval would not
have a material adverse effect on the business, financial condition, operations,
results of operations, or future prospects of the Company and its Subsidiaries,
taken as a whole, or on the ability of the Parties to consummate the Merger.
(d) Brokers' Fees. None of the Company and its Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the Merger.
(e) Title to Assets. The Company and its Subsidiaries have good title
to, or a valid leasehold interest in, the real properties and good and
marketable title to or valid leasehold interests in the assets used by them,
located on their premises, or shown on the balance sheet for the Most Recent
Fiscal Year End or acquired after the date thereof, free and clear of all
Security Interests, except for properties and assets disposed of in the Ordinary
Course of Business since the date of the balance sheet for the Most Recent
Fiscal Year End.
(f) Subsidiaries. ss.4(f) of the Disclosure Schedule sets forth for
each Subsidiary of the Company (i) its name and jurisdiction of incorporation,
(ii) the number of shares of authorized capital stock of each class of its
capital stock, (iii) the number of issued and outstanding shares of each class
of its capital stock, the names of the holders thereof, and the number of shares
held by each such holder, and (iv) the number of shares of its capital stock
held in treasury. All of the issued and outstanding shares of capital stock of
each Subsidiary of the Company have been duly authorized and are validly issued,
fully paid, and nonassessable. The Company holds of record and owns beneficially
all of the outstanding shares of each Subsidiary of the Company, including but
not limited to International Periodical Distributors, Inc., a Nevada
corporation, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws and other than
pursuant to the documents set forth on ss.4(f) of the Disclosure Schedule
relating to the IPD Transaction and the Congress Financing), taxes, Security
Interests, options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. Other than the Options and the Series B Preferred Stock,
there are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require any of the Company and its Subsidiaries to sell,
transfer, or otherwise dispose of any capital stock of any of its Subsidiaries
or that could require any Subsidiary of the Company to issue, sell, or otherwise
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cause to become outstanding any of its own capital stock. There are no
outstanding stock appreciation, phantom stock, profit participation, or similar
rights with respect to any Subsidiary of the Company. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of any capital stock of any Subsidiary of the Company. None of the
Company and its Subsidiaries controls directly or indirectly or has any direct
or indirect equity participation in any corporation, partnership, trust, or
other business association which is not a Subsidiary of the Company.
(g) Financial Statements. Attached hereto as Exhibit B are the
following financial statements (collectively the "Financial Statements"):
audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the year ended December 31,
2000 (the "Most Recent Fiscal Year End") for the Company and its Subsidiaries.
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the period covered
thereby and present fairly the financial condition of the Company and its
Subsidiaries as of such date and the results of operations of the Company and
its Subsidiaries for such period.
(h) Events Subsequent to Most Recent Fiscal Year End. Except as set
forth on ss. 4(h) of the Disclosure Schedule, since the Most Recent Fiscal Year
End, there has not been any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of the Company
and its Subsidiaries taken as a whole. Without limiting the generality of the
foregoing, since that date, other than pursuant to the documents relating to the
Financing, any transaction with Buyer and pursuant to the documents set forth on
ss.4(f) of the Disclosure Schedule relating to the IPD Transaction and the
Congress Financing:
(i) none of the Company and its Subsidiaries has sold, leased,
transferred, or assigned any material assets, tangible or intangible,
outside the Ordinary Course of Business;
(ii) none of the Company and its Subsidiaries has entered into
any material agreement, contract, lease, or license outside the
Ordinary Course of Business;
(iii) to the Knowledge of the Principal Holders, no party
(including any of the Company and its Subsidiaries) has accelerated,
terminated, made material modifications to, or canceled any material
agreement, contract, lease, or license to which any of the Company and
its Subsidiaries is a party or by which any of them is bound;
(iv) none of the Company and its Subsidiaries has imposed any
Security Interest upon any of its assets, tangible or intangible;
(v) none of the Company and its Subsidiaries has made any
material capital expenditures outside the Ordinary Course of Business;
(vi) none of the Company and its Subsidiaries has made any
material capital investment in, or any material loan to, any other
Person outside the Ordinary Course of Business;
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(vii) the Company and its Subsidiaries have not created,
incurred, assumed, or guaranteed more than $10,000 in aggregate
indebtedness for borrowed money and capitalized lease obligations;
(viii) none of the Company and its Subsidiaries has granted
any license or sublicense of any material rights under or with respect
to any Intellectual Property;
(ix) there has been no change made or authorized in the
charter or bylaws of any of the Company and its Subsidiaries;
(x) none of the Company and its Subsidiaries has issued, sold,
or otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of its capital stock;
(xi) other than intercompany dividends, none of the Company
and its Subsidiaries has declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of
its capital stock;
(xii) none of the Company and its Subsidiaries has experienced
any material damage, destruction, or loss (whether or not covered by
insurance) to its property;
(xiii) none of the Company and its Subsidiaries has made any
loan to, or entered into any other transaction with, any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(xiv) none of the Company and its Subsidiaries has entered
into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement;
(xv) none of the Company and its Subsidiaries has granted any
increase in the base compensation of any of its directors, officers,
and employees outside the Ordinary Course of Business;
(xvi) none of the Company and its Subsidiaries has adopted,
amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of
any of its directors, officers, and employees (or taken any such action
with respect to any other Employee Benefit Plan);
(xvii) none of the Company and its Subsidiaries has made any
other material change in employment terms for any of its directors,
officers, and employees outside the Ordinary Course of Business; and
(xviii) none of the Company and its Subsidiaries has committed
to any of the foregoing.
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(i) Undisclosed Liabilities. None of the Company and its
Subsidiaries has any material liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including any liability for taxes), except for (i) liabilities set forth on the
face of the balance sheet for the most recent Fiscal Year End (rather than in
any notes thereto) and (ii) liabilities which have arisen after the Most Recent
Fiscal Year End in the Ordinary Course of Business.
(j) Legal Compliance. Each of the Company and its Subsidiaries has
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply, except where the failure to comply would not have a
material adverse effect on the business, financial condition, operations,
results of operations, or future prospects of the Company and its Subsidiaries,
taken as a whole.
(k) Tax Matters.
----------------
(i) Each of the Company and its Subsidiaries have filed all
material Income Tax Returns that they were required to file. All such
Income Tax Returns were correct and complete in all material respects.
All material Income Taxes owed by any of the Company and its
Subsidiaries (whether or not shown on any Income Tax Return) have been
paid. None of the Company and its Subsidiaries currently is the
beneficiary of any extension of time within which to file any Income
Tax Return.
(ii) There is no material dispute or claim concerning any
Income Tax liability of any of the Company and its Subsidiaries either
(A) claimed or raised by any Taxing Authority in writing or (B) as to
which any of the Principal Holders and the directors and officers of
the Company and its Subsidiaries has Knowledge based upon personal
contact with any agent of such authority.
(iii) ss.4(k) of the Disclosure Schedule lists all federal,
state, local, and foreign Income Tax Returns filed with respect to any
of the Company and its Subsidiaries for taxable periods ended on or
after December 31, 1998, indicates those Income Tax Returns that have
been audited, and indicates those Income Tax Returns that currently are
the subject of audit. The Company has delivered to the Buyer correct
and complete copies of all federal Income Tax Returns, examination
reports, and statements of deficiencies assessed against, or agreed to
by any of the Company and its Subsidiaries since December 31, 1998.
None of the Company and its Subsidiaries has waived any statute of
limitation in respect of Income Taxes or agreed to any extension of
time with respect to an Income Tax assessment or deficiency.
(iv) None of the Company and its Subsidiaries has filed a
consent under Code ss.341(f) concerning collapsible corporations. None
of the Company and its Subsidiaries has made any material payments, is
obligated to make any material payments, or is a party to any agreement
that under certain circumstances could obligate it to make any
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material payments that will not be deductible under Code ss.280G. None
of the Company and its Subsidiaries has been a United States real
property holding corporation within the meaning of Code ss.897(c)(2)
during the applicable period specified in Code ss.897(c)(1)(A)(ii).
None of the Company and its Subsidiaries is a party to any tax
allocation or sharing agreement. None of the Company and its
Subsidiaries (A) has been a member of an Affiliated Group filing a
consolidated federal Income Tax Return (other than a group the common
parent of which was the Company) or (B) has any liability for the taxes
of any Person (other than any of the Company and its Subsidiaries)
under Reg. ss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(v) The unpaid Income Taxes of the Company and its
Subsidiaries (A) did not, as of the Most Recent Fiscal Year End, exceed
by any material amount the reserve for Income Tax liability (rather
than any reserve for deferred taxes established to reflect timing
differences between book and tax income) set forth on the face of the
balance sheet for the Most Recent Fiscal Year End (rather than in any
notes thereto) and (B) will not exceed by any material amount that
reserve as adjusted for operations and transactions through the Closing
Date in accordance with the past custom and practice of the Company and
its Subsidiaries in filing their Income Tax Returns.
(l) Real Property.
------------------
(i) Neither the Company nor any of its Subsidiaries owns any
real property.
(ii) ss.4(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to any of the
Company and its Subsidiaries. The Company has delivered to the Buyer
correct and complete copies of the leases and subleases listed in
ss.4(l)(ii) of the Disclosure Schedule (as amended to date). With
respect to each material lease and sublease listed in ss.4(l)(ii) of
the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all material
respects;
(B) to the Knowledge of the Principal Holders, no
party to the lease or sublease is in material breach or
default, and no event has occurred which, with notice or lapse
of time, would constitute a material breach or default or
permit termination, modification, or acceleration thereunder;
(C) to the Knowledge of the Principal Holders, no
party to the lease or sublease has repudiated any material
provision thereof;
(D) there are no material disputes, oral agreements,
or forbearance programs in effect as to the lease or sublease;
(E) none of the Company and its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust,
or encumbered any interest in the leasehold or subleasehold;
and
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(F) to the Knowledge of the Principal Holders, all
facilities leased or subleased thereunder have received all
approvals of governmental authorities (including material
licenses and permits) required in connection with the
operation thereof, and have been operated and maintained in
accordance with applicable laws, rules, and regulations in all
material respects.
(m) Intellectual Property.
--------------------------
(i) to the Knowledge of the Principal Holders, none of the
Company and its Subsidiaries has interfered with, infringed upon,
misappropriated, or violated any material Intellectual Property rights
of third parties in any material respect, and none of the Principal
Holders and the directors and officers of the Company and its
Subsidiaries has ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation,
or violation (including any claim that any of the Company and its
Subsidiaries must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of the Principal
Holders and the directors and officers of the Company and its
Subsidiaries, no third party has interfered with, infringed upon,
misappropriated, or violated any material Intellectual Property rights
of any of the Company and its Subsidiaries in any material respect.
(ii) ss.4(m)(ii) of the Disclosure Schedule identifies each
patent or registration which has been issued to any of the Company and
its Subsidiaries with respect to any of its Intellectual Property,
identifies each pending patent application or application for
registration which any of the Company and its Subsidiaries has made
with respect to any of its Intellectual Property, and identifies each
material license, agreement, or other permission which any of the
Company and its Subsidiaries has granted to any third party with
respect to any of its Intellectual Property (together with any
exceptions). The Company has delivered to the Buyer correct and
complete copies of all such patents, registrations, applications,
licenses, agreements, and permissions (as amended to date). ss.4(m)(ii)
of the Disclosure Schedule also identifies each material trade name or
unregistered trademark used by any of the Company and its Subsidiaries
in connection with any of its businesses. With respect to each item of
Intellectual Property required to be identified in ss.4(m)(ii) of the
Disclosure Schedule:
(A) to the Knowledge of the Principal Holders, the
Company and its Subsidiaries possess all right, title, and
interest in and to the item, free and clear of any Security
Interest, license, or other restriction (other than pursuant
to the IPD Transaction and the Congress Financing);
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Knowledge of any of the Principal Holders and the
directors and officers of the Company and its Subsidiaries, is
threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
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(D) none of the Company and its Subsidiaries has ever
agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other
conflict with respect to the item.
(iii) ss.4(m)(iii) of the Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and
that any of the Company and its Subsidiaries uses pursuant to license,
sublicense, agreement, or permission. The Company has delivered to the
Buyer correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each
item of Intellectual Property required to be identified in ss.4(m)(iii)
of the Disclosure Schedule:
(A) to the Knowledge of the Principal Holders, the
license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force
and effect in all material respects;
(B) to the Knowledge of the Principal Holders, no
party to the license, sublicense, agreement, or permission is
in material breach or default, and no event has occurred which
with notice or lapse of time would constitute a material
breach or default or permit termination, modification, or
acceleration thereunder;
(C) to the Knowledge of the Principal Holders, no
party to the license, sublicense, agreement, or permission has
repudiated any material provision thereof; and
(D) none of the Company and its Subsidiaries has
granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(n) Tangible Assets. The buildings, machinery, equipment, and other
tangible assets that the Company and its Subsidiaries own and lease are free
from material defects (patent and latent), have been maintained in accordance
with normal industry practice, and are in good operating condition and repair
(subject to normal wear and tear).
(o) Inventory. The inventory of the Company and its Subsidiaries is
merchantable and fit for the purpose for which it was procured or manufactured,
and none of such inventory is slow-moving, obsolete, damaged, or defective,
subject only to the reserve for inventory writedown set forth on the face of the
balance sheet for the Most Recent Fiscal Year End (rather than in any notes
thereto) as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company and its
Subsidiaries.
(p) Contracts.ss.4(p) of the Disclosure Schedule lists the following
contracts and other agreements to which any of the Company and its Subsidiaries
is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $10,000 per annum;
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(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year or involve consideration in excess of $10,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$10,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any material agreement concerning confidentiality or
noncompetition;
(vi) any material agreement with any of the Sellers and their
Affiliates (other than the Company and its Subsidiaries);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $10,000 or providing material severance
benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any agreement under which the consequences of a default
or termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of the Company and its Subsidiaries, taken as a whole; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
The Company has delivered to the Buyer a correct and complete copy of each
written agreement listed in ss.4(p) of the Disclosure Schedule (as amended to
date). With respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect in all material respects; (B)
to the Knowledge of the Principal Holders, no party is in material breach or
default, and no event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination, modification, or
acceleration, under the agreement; and (C) no party has repudiated any material
provision of the agreement.
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(q) Notes and Accounts Receivable. All notes and accounts receivable of
the Company and its Subsidiaries are reflected properly on their books and
records, are valid receivables subject to no setoffs or counterclaims, are
current and collectible, and will be collected in accordance with their terms at
their recorded amounts, subject only to the reserve for bad debts set forth on
the face of the balance sheet for the Most Recent Fiscal Year End (rather than
in any notes thereto) as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of the Company and
its Subsidiaries.
(r) Powers of Attorney. To the Knowledge of any of the Principal
Holders and the directors and officers of the Company and its Subsidiaries,
there are no material outstanding powers of attorney executed on behalf of any
of the Company and its Subsidiaries.
(s) Insurance. ss.4(s) of the Disclosure Schedule sets forth the
following information with respect to each material insurance policy (including
policies providing property, casualty, liability, and workers compensation
coverage and bond and surety arrangements) with respect to which any of the
Company and its Subsidiaries is a party, a named insured, or otherwise the
beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage is on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other material loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect in all material respects; (B)
neither any of the Company and its Subsidiaries nor, to the Knowledge of the
Principal Holders, any other party to the policy is in material breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a material breach or default, or permit termination,
modification, or acceleration, under the policy; and (C) to the Knowledge of the
Principal Holders, no party to the policy has repudiated any material provision
thereof. ss.4(s) of the Disclosure Schedule describes any material
self-insurance arrangements affecting any of the Company and its Subsidiaries.
(t) Litigation. ss.4(t) of the Disclosure Schedule sets forth each
instance in which any of the Company and its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to the Knowledge of any of the Principal Holders and the directors and
officers of the Company and its Subsidiaries, is threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-
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judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
(u) Employees.
--------------
(i) To the Knowledge of any of the Principal Holders and the
directors and officers of the Company and its Subsidiaries, no
executive, key employee, or significant group of employees plans to
terminate employment with any of the Company and its Subsidiaries
during the next 12 months. None of the Company and its Subsidiaries is
a party to or bound by any collective bargaining agreement, nor has any
of them experienced any strike or material grievance, claim of unfair
labor practices, or other collective bargaining dispute within the past
two years. None of the Company and its Subsidiaries has committed any
material unfair labor practice. None of the Principal Holders and the
directors and officers of the Company and its Subsidiaries has any
Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees
of any of the Company and its Subsidiaries.
(ii) No current or former employee of any of the Company or
its Subsidiaries has a formal or informal written claim against any of
the Company or its Subsdiaries, which is currently pending, on account
or for:
(A) Overtime pay, other than overtime pay for the
current payroll period;
(B) Wages or salary for any period other than the
current payroll period;
(C) Vacation, time off or pay in lieu of vacation or
time off, or other than that earned with respect to the
current fiscal year; or
(D) Any violation of any law relating to minimum
wages or maximum hours of work; or
(E) Violation of any federal, state or local
anti-discrimination statute, breach of the terms of employment
or wrongful discharge, whether arising under any contract or
statute, or any tort.
(v) Employee Benefits.
----------------------
(i) ss.4(v) of the Disclosure Schedule lists each Employee
Benefit Plan that any of the Company and its Subsidiaries maintains or
to which any of the Company and its Subsidiaries contributes or has any
obligation to contribute.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all material respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
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(B) All required reports and descriptions (including
Form 5500 Annual Reports, summary annual reports, PBGC-l's,
and summary plan descriptions) have been timely filed and
distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of COBRA have been met in all
material respects with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions)
which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing
Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Company and its
Subsidiaries. All premiums or other payments for all periods
ending on or before the Closing Date have been paid with
respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a
"qualified plan" under Code ss.401(a), has received a
favorable determination letter from the Internal Revenue
Service that it is a "qualified plan," and to the Knowledge of
any of the Principal Holders there are no facts or
circumstances that could result in the revocation of such
determination letter.
(E) The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multiemployer Plan) equals or exceeds the
present value of all vested and nonvested liabilities
thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for determination.
(F) The Company has made available to the Buyer
correct and complete copies of the plan documents and summary
plan descriptions, the most recent determination letter
received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, audit reports, attorney responses to
auditor's requests and all related trust agreements, insurance
contracts, and other funding agreements which implement each
such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that any of
the Company, its Subsidiaries, and any ERISA Affiliate maintains or
ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer
Plan) has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other
than any Multiemployer Plan) has
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been instituted or, to the Knowledge of any of the Principal
Holders and the directors and officers of the Company and its
Subsidiaries, threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has
any liability for material breach of fiduciary duty or any
other material failure to act or comply in connection with the
administration or investment of the assets of any such
Employee Benefit Plan. No action, suit, proceeding, hearing,
or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or, to the
Knowledge of any of the Principal Holders and the directors
and officers of the Company and its Subsidiaries, threatened.
(C) None of the Company and its Subsidiaries has
incurred any material liability (whether known or unknown,
whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due) to the PBGC
(other than PBGC premium payments) or otherwise under Title IV
of ERISA (including any withdrawal liability as defined in
ERISA ss.4201) or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit
Plan.
(iii) None of the Company, its Subsidiaries, and the other
members of the Controlled Group that includes the Company and its
Subsidiaries contributes to, ever has contributed to, or ever has been
required to contribute to any Multiemployer Plan or has any material
liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due),
including any withdrawal liability (as defined in ERISA ss.4201), under
any Multiemployer Plan.
(iv) None of the Company and its Subsidiaries maintains or
ever has maintained or contributes, ever has contributed, or ever has
been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with COBRA).
(v) Neither the Company nor any of its Subsidiaries has any
liability or potential liability with respect to an Employee Benefit
Plan sponsored by or contributed to by an ERISA Affiliate.
(vi) No event has occurred and no circumstances exist which
could result (x) in a material increase in the premium costs of any
Employee Benefit Plan of any of the Company or its Subsidiaries which
is insured, or (y) in a material increase in benefit costs of any
Employee Benefit Plan of any of the Company or its Subsidiaries which
is self-insured.
(w) Guaranties. Other than the guaranties set forth on ss. 4(w) of the
Disclosure Schedule relating to the IPD Transaction and the Congress Financing,
none of the Company and
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its Subsidiaries is a guarantor or otherwise is responsible for any liability or
obligation (including indebtedness) of any other Person.
(x) Environment, Health, and Safety Matters.
--------------------------------------------
(i) Each of the Company, its Subsidiaries, and, to the
Knowledge of the Principal Holders, their respective predecessors and
Affiliates has complied and is in compliance, in each case in all
material respects, with all Environmental, Health, and Safety
Requirements.
(ii) Without limiting the generality of the foregoing, each of
the Company, its Subsidiaries, and, to the Knowledge of the Principal
Holders, their respective Affiliates, has obtained, has complied, and
is in compliance with, in each case in all material respects, all
material permits, licenses and other authorizations that are required
pursuant to Environmental, Health, and Safety Requirements for the
occupation of its facilities and the operation of its business; a list
of all such material permits, licenses and other authorizations is set
forth on the attached "Environmental and Safety Permits Schedule."
(iii) None of the Company, its Subsidiaries, or their
respective Affiliates has received any written or oral notice, report
or other information regarding any actual or alleged material violation
of Environmental, Health, and Safety Requirements, or any material
liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any
material investigatory, remedial or corrective obligations, relating to
any of them or its facilities arising under Environmental, Health, and
Safety Requirements.
(iv) Except as set forth on the attached "Environmental and
Safety Matters Schedule", to the Knowledge of the Principal Holders,
none of the following exists at any property or facility owned or
operated by the Company or its Subsidiaries: (1) underground storage
tanks, (2) asbestos-containing material in any friable and damaged form
or condition, (3) materials or equipment containing polychlorinated
biphenyls, or (4) landfills, surface impoundments, or disposal areas.
(v) None of the Company, its Subsidiaries, or, to the
Knowledge of the Principal Holders, any of their respective
predecessors or Affiliates has treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled, or released any
substance, including without limitation any hazardous substance, or
owned or operated any property or facility (and no such property or
facility is contaminated by any such substance) in a manner that has
given or would give rise to material liabilities, including any
material liability for response costs, corrective action costs,
personal injury, property damage, natural resources damages or attorney
fees, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA") or the
Solid Waste Disposal Act, as amended ("SWDA") or any other
Environmental, Health, and Safety Requirements.
(vi) Neither this Agreement nor the consummation of the Merger
will result in any material obligations for site investigation or
cleanup, or notification to or consent of
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government agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer"
Environmental, Health, and Safety Requirements.
(y) Certain Business Relationships With the Company and Its
Subsidiaries. None of the Sellers and their Affiliates has been involved in any
material business arrangement or relationship with any of the Company and its
Subsidiaries within the past 12 months, and none of the Sellers and their
Affiliates owns any material asset, tangible or intangible, which is used in the
business of any of the Company and its Subsidiaries.
(z) Disclosure. The representations and warranties contained in this
ss.4 do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this ss.4 not misleading.
(5) Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his, her or its reasonable
best efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the Merger (including
satisfaction, but not waiver, of the closing conditions set forth in ss.7
below).
(b) Notices and Consents. The Company and its Subsidiaries will give
any notices to third parties, and will use their reasonable best efforts to
obtain any third party consents, that the Buyer reasonably may request in
connection with the matters referred to in ss.4(c) above. Each of the Company,
the Buyer and BuyerSub will give any notices to, make any filings with, and use
its reasonable best efforts to obtain any authorizations, consents, and
approvals of governments and governmental agencies in connection with the
matters referred to in ss.3(a)(ii), ss.3(b)(ii), and ss.4(c) above.
(c) Operation of Business. The Company and its Subsidiaries will not
engage in any practice, take any action, or enter into any transaction outside
the Ordinary Course of Business. Other than transactions among the Subsidiaries
or between the Company and the Subsidiaries, without limiting the generality of
the foregoing, the Company and its Subsidiaries will not declare, set aside, or
pay any dividend or make any distribution with respect to its capital stock or
redeem, purchase, or otherwise acquire any of its capital stock, or otherwise
engage in any practice, take any action, or enter into any transaction of the
sort described in ss.4(h) above. Notwithstanding the foregoing, the Company may
declare and pay a cash dividend on its Capital Stock in an aggregate amount not
to exceed cash received by the Company upon exercise of Options occurring after
May 24, 2001 and prior to closing.
(d) Preservation of Business. Each of the Company and its Subsidiaries
will keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers, and employees.
(e) Full Access. Each of the Company and its Subsidiaries will permit
representatives of the Buyer to have full access at all reasonable times, and in
a manner so as not
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to interfere with the normal business operations of the Company and its
Subsidiaries, to all premises, properties, personnel, books, records (including
tax records), contracts, and documents of or pertaining to each of the Company
and its Subsidiaries. The Buyer will treat and hold as such any Confidential
Information it receives from the Company and its Subsidiaries in the course of
the reviews contemplated by this ss.5(e), will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement is
terminated for any reason whatsoever, will return to the Company and its
Subsidiaries all tangible embodiments (and all copies) of the Confidential
Information which are in its possession.
(f) Notice of Developments. The Company will give prompt written notice
to the Buyer of any material adverse development causing a breach of any of the
representations and warranties in ss.4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his, her or its own representations and warranties in ss.3
above. No disclosure by any Party pursuant to this ss.5(f), however, shall be
deemed to amend or supplement Annex I, Annex II, or the Disclosure Schedule or
to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(g) Exclusivity. Neither the Company nor any of its Subsidiaries will
(i) solicit, initiate, or encourage the submission of any proposal or offer from
any Person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets, of any of the Company and
its Subsidiaries (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. None of the Sellers will vote their
Company Shares in favor of any such acquisition structured as a merger,
consolidation, or share exchange.
(6) Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party. The Sellers
acknowledge and agree that from and after the Closing the Buyer will be entitled
to possession of all documents, books, records (including tax records),
agreements, and financial data of any sort relating to the Company and its
Subsidiaries.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of the Company and its Subsidiaries, each of
the other Parties will cooperate with him, her or it and his, her or its counsel
in the contest or defense, make available their personnel, and provide such
testimony and access to their books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party.
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(c) Transition. None of the Sellers will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of any of the Company and its
Subsidiaries from maintaining the same business relationships with the Company
and its Subsidiaries after the Closing as it maintained with the Company and its
Subsidiaries prior to the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold as such
all of the Confidential Information, if any, received by such Seller, refrain
from using any of such Confidential Information except in connection with this
Agreement, and deliver promptly to the Buyer or destroy, at the request and
option of the Buyer, all tangible embodiments (and all copies) of such
Confidential Information which are in his, her or its possession. In the event
that any of the Sellers is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this ss.6(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, any of the Sellers is, on
the advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, that Seller may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing
Seller shall use his, her or its reasonable best efforts to obtain, at the
reasonable request of the Buyer and at the expense of the Buyer, an order or
other assurance that confidential treatment will be accorded to such portion of
the Confidential Information required to be disclosed as the Buyer shall
designate.
(e) Covenant Not to Compete. For a period of three years from and after
the Closing Date, none of the Principal Holders will engage directly or
indirectly in any business that any of the Company and its Subsidiaries conducts
as of the Closing Date in any geographic area in which any of the Company and
its Subsidiaries conducts that business as of the Closing Date; provided,
however, that no owner of less than 1% of the outstanding stock of any
publicly-traded corporation shall be deemed to engage solely by reason thereof
in any of its businesses. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this ss.6(e) is invalid or
unenforceable, the affected Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(f) Buyer Shares. The Buyer Shares will be imprinted with a legend
substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
SECTION 4(2) OF THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"),
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AND THE REGULATIONS PROMULGATED THEREUNDER AND, ACCORDINGLY, MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE REGISTRATION
REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS ALSO SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN AN
AGREEMENT AND PLAN OF MERGER AMONG THE ISSUER, THE INTERLINK COMPANIES,
INC. AND CERTAIN FORMER SHAREHOLDERS OF THE INTERLINK COMPANIES INC.
THE ISSUER WILL FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF
WITHOUT CHARGE UPON WRITTEN REQUEST.
The holder desiring to transfer Buyer Shares first must furnish the Buyer with
(i) a written opinion reasonably satisfactory to the Buyer in form and substance
from counsel reasonably satisfactory to the Buyer by reason of experience to the
effect that the holder may transfer the Buyer Shares as desired without
registration under the Securities Act and (ii) a written undertaking executed by
the desired transferee reasonably satisfactory to the Buyer in form and
substance agreeing to be bound by the restrictions on transfer contained herein.
(g) Registration Rights.
(i) No later than six (6) months following the Closing Date,
Buyer shall use its reasonable efforts to cause all of the Stock to be
registered for resale pursuant to the Securities Act.
(ii) The registration referred to in ss. 6(g)(i) shall be
accomplished at the sole expense of Buyer, except that the holder of
the Stock so registered shall be responsible for all commissions and
underwriters' discounts incurred in connection with the sale of such
holder's Stock.
(iii) As used in this Agreement, "Stock" shall refer to the
Buyer Shares issued in connection with this Merger and any other
securities issued as a result of stock dividends, stock splits or other
capital adjustments or exchanges in connection with such Buyer Shares.
(iv) The registration rights granted by this Agreement shall
be for the benefit of the Sellers or any transferee who is the record
owner of Stock transferred to such transferee by any of the Sellers in
a transaction not involving any public offering.
(h) Limitations on Sale of Buyer Shares. After the Buyer Shares are
registered pursuant to ss. 6(g), none of the Sellers shall, prior to the
one-year anniversary of the Closing Date, (i) sell the Buyer Shares in the open
market unless the Buyer Shares are sold at a price higher than the previous
days' closing price and no lower than the then prevailing bid price as
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quoted by Nasdaq; and (ii) sell the Buyer Shares in excess of the volume
limitations expressed in Rule 144 under the Securities Act, in each case, other
than in a private transaction.
(7) Conditions to Obligation to Close.
--------------------------------------
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the Merger is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth inss.3(a)
andss.4 above shall be true and correct in all material respects at and
as of the Closing Date;
(ii) the Company and the Sellers shall have performed and
complied with all of their respective covenants hereunder in all
material respects through the Closing;
(iii) the Company and its Subsidiaries shall have procured all
of the material third party consents specified in ss.5(b) above;
(iv) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of the Merger, (B) cause Merger to be
rescinded following consummation, (C) affect adversely the right of the
Buyer to own the Company Shares and to control the Company and its
Subsidiaries, or (D) affect materially and adversely the right of any
of the Company and its Subsidiaries to own its assets and to operate
its businesses (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
(v) the Company shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above
inss.7(a)(i)-(iv) is satisfied in all respects;
(vi) approval of the Merger by the Buyer's primary lender;
(vii) the execution and delivery of employment agreement
between the Buyer and Xxxxxx Xxxxx and International Periodical
Distributors, Inc. and Xxxxx Xxxxxxxx in form and substance
substantially as set forth in Exhibit C hereto;
(viii) the Buyer shall have received from counsel to the
Company an opinion in form and substance as set forth in Exhibit D
attached hereto, addressed to the Buyer, and dated as of the Closing
Date; and
(ix) all actions to be taken by the Company and the Sellers in
connection with consummation of the Merger and all certificates,
opinions, instruments, and other documents required to effect the
Merger contemplated hereby will be reasonably satisfactory in form and
substance to the Buyer.
The Buyer may waive any condition specified in this ss.7(a) if it executes a
writing so stating at or prior to the Closing.
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(b) Conditions to Obligation of the Company. The obligation of the
Company to consummate the Merger is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in ss.3(b)
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of the Merger, (B) cause Merger to be
rescinded following consummation (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect) or (C) adversely
affect the rights of the Sellers to own the Buyer Shares;
(iv) the Buyer shall have delivered to the Company a
certificate to the effect that each of the conditions specified above
in ss.7(b)(i)-(iii) is satisfied in all respects;
(v) Xxxxxx X. Xxxxxx shall have been elected to the Board of
Directors of Buyer;
(vi) the execution and delivery of employment agreements
between the Buyer and Xxxxxx Xxxxx and International Periodical
Distributors, Inc. and Xxxxx Xxxxxxxx in form and substance
substantially as set forth on Exhibit C;
(vii) the Company shall have received from counsel to the
Buyer an opinion in form and substance as set forth in Exhibit E
attached hereto, addressed to the Sellers, and dated as of the Closing
Date; and
(viii) all actions to be taken by the Buyer in connection with
consummation of the Merger and all certificates, opinions, instruments,
and other documents required to effect the Merger will be reasonably
satisfactory in form and substance to the Company.
The Company may waive any condition specified in this ss.7(b) if they execute a
writing so stating at or prior to the Closing.
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8. Survival of Representation and Warranties. The representations and
warranties of each Seller contained in ss. 3, and, of each Principal Holder
contained in xx.xx. 4(a), 4(b), 4(d) and 4(f) shall survive the Merger and
claims with respect thereto shall be governed by the applicable statute of
limitations. The obligations of any Principal Holder or other Seller for breach
of any of the foregoing representations and warranties shall be several and
shall not exceed the aggregate value of the Buyer Stock (valued at $5.00 per
share) and the cash consideration received by such Principal Holder or other
Seller.
All other representation and warranties of the Principal Holders and the
other Sellers contained in ss. 4 shall not survive the Merger and no Seller
shall have any liability with respect thereto, excepting any claims based on
intentional misrepresentation, including, but not limited to fraud.
The representations and warranties of Buyer contained in ss. 3(b)(i), (ii)
and (iv) shall survive the Merger and claims with respect thereto shall be
governed by the applicable statute of limitations. All other representations and
warranties of Buyer shall not survive the Merger and Buyer shall have no
liability with respect thereto, excepting any claims based on intentional
misrepresentation, including, but not limited to fraud.
9. Tax Matters.
(a) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any New York
City Transfer Tax and any similar tax imposed in other states or subdivisions),
shall be paid by Sellers when due, and Sellers will, at their own expense, file
all necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and fees,
and, if required by applicable law, Buyer will, and will cause its affiliates
to, join in the execution of any such Tax Returns and other documentation.
(b) Tax Free Treatment. Buyer and BuyerSub shall not take any action
after the signing of this Agreement which would reasonably be expected to cause
the Merger contemplated herein to fail to qualify as a tax-free reorganization
under Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code.
(c) Withholding Obligations. The Buyer shall cause the Company to
comply with all federal, state and local withholding obligations for Taxes with
respect to the exchange of Options for Interlink Common Stock pursuant to ss.
2(a)(v) of this Agreement.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyer and the Company may terminate this Agreement by
mutual written consent at any time prior to the Closing;
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(ii) the Buyer may terminate this Agreement by giving written
notice to the Company at any time prior to the Closing (A) in the event the
Company or any of the Sellers has breached any material representation,
warranty, or covenant contained in this Agreement in any material respect, the
Buyer has notified the Company of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach or (B) if the
Closing shall not have occurred on or before May 31, 2001, by reason of the
failure of any condition precedent under ss. 7(a) hereof (unless the failure
results primarily from the Buyer itself breaching any representation, warranty,
or covenant contained in this Agreement); and
(iii) the Company may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A) in the event the Buyer
or BuyerSub has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Company has notified
the Buyer of the breach, and the breach has continued without cure for a period
of 30 days after the notice of breach or (B) if the Closing shall not have
occurred on or before May 31, 2001, by reason of the failure of any condition
precedent under ss. 7(b) hereof (unless the failure results primarily from the
Company or any of the Sellers themselves breaching any representation, warranty,
or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to ss. 10(a) above, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach); provided, however, that the
confidentiality provisions contained in ss. 5(e) above shall survive
termination.
11. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the Buyer and the Company;
provided, however, that Buyer or the Company may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable to advise the Buyer or the Company, as
the case may be, prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his, her or its rights, interests, or obligations
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38
hereunder without the prior written approval of the Buyer and the Company;
provided, however, that the Buyer may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or all of
which cases the Buyer nonetheless shall remain responsible for the performance
of all of its obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers: Copy to:
------------------ --------
The InterLink Companies, Inc. Willkie, Xxxx & Xxxxxxxxx
c/o HelloNetwork 000 Xxxxxxx Xxxxxx
000 Xxxxxxxx, Xxxxx 000 Xxx Xxxx, XX 00000-0000
Xxx Xxxx, XX 00000 Attn: Xxxxxxx Xxxxxxx, Esq.
Attn: Xxxxxx X. Xxxxxx
If to the Buyer: Copy to:
--------------- -------
The Source Information Management Xxxxxxxxx Xxxxxxxx LLP
Company One Metropolitan Square, Suite 0000
Xxx Xxxx Xxxxx Xxxxx, Xxxxx 000 Xx. Xxxxx, XX 00000
Xx. Xxxxx, XX 00000 Attn: Xxxx X. Xxxxxx, Xx., Esq.
Attn: S. Xxxxxx Xxxxxx, CEO
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
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(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Company. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Each of the Parties, the Company, and its Subsidiaries
will bear his, her or its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the Merger. The Sellers
agree that none of the Company and its Subsidiaries has borne or will bear any
of the Sellers' costs and expenses (including any of their legal fees and
expenses) in connection with this Agreement or the Merger.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(m) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as
of the date first above written.
BUYER:
------
THE SOURCE INFORMATION
MANAGEMENT COMPANY
By: /s/ S. Xxxxxx Xxxxxx
------------------------------------
S. Xxxxxx Xxxxxx, Chairman & CEO
BUYERSUB:
---------
SOURCE-INTERLINK ACQUISITION, INC.
By: /s/ S. Xxxxxx Xxxxxx
------------------------------------
S. Xxxxxx Xxxxxx, President
COMPANY:
--------
THE INTERLINK COMPANIES, INC.
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: President/Chief Executive Officer
[Signature Pages of Sellers Follow]
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Date
------
SELLERS:
--------
KISYR CORP., a New York corporation
By: Xxx Xxxxxx May 30, 2001
---------------------------------------------
Its: Chief Executive Officer
XXXXXX FAMILY PARTNERSHIP, L.P., a
Colorado limited partnership
By: Xxxx Xxxxxx May 31, 2001
---------------------------------------------
Its: General Partner
/s/ Xxxxxxx X. Xxxxxxx May 31, 2001
---------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxx Xxxxx May 31, 2001
---------------------------------------------
Xxxxx Xxxxx
/s/ Xxxxxxx X. Xxxxx May 31, 2001
---------------------------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxxx Xxxxxxxx May 31, 2001
---------------------------------------------
G. Xxxxx Xxxxxxxx
/s/ Xxxxxx X. Xxxxxxxx May 31, 2001
---------------------------------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxxxxx Xxxxxxxxxxx/ Xxxxxxx Xxxxxxxxxxx May 31, 2001
---------------------------------------------
Xxxxxxxx Xxxxxxxxxxx/ Xxxxxxx X. Xxxxxxxxxxx
/s/ Xxxxxxx X. Xxxxxxxx May 31, 2001
---------------------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxxxxx Xxxxxxx/Xxxx Xxxxxxx May 30, 2001
---------------------------------------------
Xxxxxxx Xxxxxxx/Xxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxx May 31, 2001
---------------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxxxx May 31, 2001
---------------------------------------------
Xxxx X. Xxxxxxxx
/s/ JEFCO FBO Xxxx Xxxxxxxx XXX Rollover May 31, 2001
---------------------------------------------
JEFCO FBO Xxxx Xxxxxxxx XXX Rollover
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Date
------
/s/ Xxxxxx X. Xxxxxxxx May 31, 2001
---------------------------------------------
Xxxxxx X. Xxxxxxxx
OCEAN STRATEGIC HOLDINGS, LIMITED, a BVI
Corporation
By: Xxxxxx Xxxxx May 30, 2001
---------------------------------------------
Its:Authorized Signatory
/s/ Xxxxxxx Xxxxxx May 31, 2001
---------------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxxx May 31, 2001
---------------------------------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxxxx May 30, 2001
---------------------------------------------
Xxxxx X. Xxxxxxxx
/s/ Xxxxx X. Xxxxxx May 31, 2001
---------------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxx Xxxxxx May 31, 2001
---------------------------------------------
Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx May 31, 2001
---------------------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxx May 30, 2001
---------------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxxx X. Xxxxxxxx May 31, 2001
---------------------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ G. Xxxxx Xxxxxxxx May 31, 2001
---------------------------------------------
G. Xxxxx Xxxxxxxx
/s/ Xxxxx Xxxxxx May 31, 2001
---------------------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxx/Xxxx Xxxxxxx May 31, 2001
---------------------------------------------
Xxxxxx Xxxxxxx/Xxxx Xxxxxxx
/s/ Xxxxx Xxxxxxxx May 31, 2001
---------------------------------------------
Xxxxx Xxxxxxxx
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Date
------
/s/ Xxxxxx Xxxxxx May 30, 2001
---------------------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxx Xxxxxxx May 31, 2001
---------------------------------------------
Xxxxx Xxxxxxx
/s/ Xxxxxx Xxxxx May 31, 2001
---------------------------------------------
Xxxxxx Xxxxx
/s/ Kara Wojciacyzk May 31, 2001
---------------------------------------------
Kara Wojciacyzk
/s/ Xxxxx X. Xxxxxx May 31, 2001
---------------------------------------------
Xxxxx X. Xxxxxx
39
