Exhibit 10.1
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AGREEMENT AND PLAN OF MERGER
DATED OCTOBER 16, 2001,
AMONG
SYNERGY 2000, INC.,
INFINITY TECHNOLOGY SOLUTIONS, INC.,
CONVERT-TECH, INC.,
XXXXXXX X. XXXXXX, XX.
XXXXXX FAMILY REVOCABLE TRUST,
XXXXXXX XXXX XXXXXX,
XXXXXX XXXX XXXXXX,
XXXXXX XXXX XXXXXX,
AND
XXXXXXX X. XXXXX
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated October 16,
2001, among Synergy 2000, Inc., a Delaware corporation ("Parent"); Infinity
Technology Solutions, Inc., a Delaware corporation and a subsidiary of Parent
("Sub"); Convert-Tech, Inc., a California corporation (the "Company"); Xxxxxxx
X. Xxxxxx, Xx. ("Principal"), and those entities and persons listed on Exhibit A
(the "Shareholders").
RECITALS
A. Parent, Sub and the Company intend to effect a merger of the Company
into Sub (the "Merger") in accordance with this Agreement, the General
Corporation Law of the State of Delaware (the "DGCL") and the General
Corporation Law of the State of California ("CGCL"). Upon consummation of the
Merger, the Company will cease to exist and Sub will continue as a wholly-owned
subsidiary of Parent.
B. This Agreement has been approved by the respective boards of
directors of Parent, Sub and the Company.
C. The parties intend that the Merger will be treated as a tax free
reorganization as described in Section 368 of the Internal Revenue Code of 1986,
as amended (the "Code").
D. The Shareholders (as defined herein) have voted for approval of this
Agreement and the Merger in accordance with all legal requirements for
shareholder approval under the CGCL.
AGREEMENT
The parties to this Agreement hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the DGCL and the CGCL, the Company shall be
merged with and into Sub at the Effective Time (as defined below). At the
Effective Time, the separate existence of the Company shall cease, and Sub shall
continue as the surviving corporation (the "Surviving Corporation") under the
name Infinity Technology Solutions, Inc.
1.2 CLOSING
The closing of the Merger (the "Closing") shall take place at the
offices of Parent at 00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx,
00000, as soon as practicable (but in any event within three business days)
following the execution and delivery of this Agreement, or at such other date,
time and place as Parent and the Shareholders may agree. The date on which the
Closing takes place is referred to herein as the "Closing Date".
1.3 EFFECTIVE TIME OF THE MERGER. The Company shall file a Certificate
of Merger conforming to the requirements of Section 252(c) of the DGCL with the
Secretary of State of the State of Delaware and an Agreement of Merger
conforming to the requirements of Section 1103 of the CGCL with the Secretary of
State of the State of California (collectively, the "Certificates of Merger").
The Merger shall become effective at such time as all Certificates of Merger are
duly filed with the Secretary of State of the State of Delaware and the
Secretary of State of the State of California, respectively (the "Effective
Time").
1.4 EFFECTS OF THE MERGER . The Merger shall have the effects set forth
in this Agreement and in the applicable provisions of the DGCL and the CGCL.
1.5 CERTIFICATE OF INCORPORATION; BY-LAWS (a) The certificate of
incorporation of Sub, as in effect immediately prior to the Effective Time,
shall be the certificate of incorporation of the Surviving Corporation until
thereafter amended as provided therein or by applicable law, a true copy thereof
is attached as Exhibit B hereto.
(b) The By-laws of Sub, as in effect immediately prior to the Effective
Time, which are attached as Exhibit C hereto shall be the By-laws of the
Surviving Corporation until thereafter amended as provided therein or by
applicable law.
ARTICLE II
CANCELLATION OF THE CAPITAL STOCK OF THE COMPANY AND PAYMENT
WITH RESPECT THERETO
2.1 CONSIDERATION. At the Effective Time, by virtue of the Merger and
without any action by the parties (1) all of the outstanding shares of capital
stock of the Company (the "Company Shares") shall be converted into the right to
receive, in the aggregate, five million (5,000,000) shares of Common Stock of
the Parent ("Parent Common Stock") (the aggregate number of such shares of
Parent Common Stock, collectively, the "Merger Consideration"); and (2) all of
the outstanding shares of Company Shares shall cease to be outstanding, and
shall be cancelled and retired and shall cease to exist, and each holder of
certificates representing Company Shares (the "Company Share Certificates")
shall cease to have any rights with respect thereto, except the right to receive
its pro rata portion of the Merger Consideration upon the surrender of the
Company Share Certificates in accordance with this Section.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE PRINCIPAL
Whenever any representation and warranties set forth in this Agreement
are qualified as to the "knowledge", such term means the actual knowledge, after
due and diligent inquiry, of such party's officers, directors and other
managers, provided that such persons shall have made due and diligent inquiry of
those employees whom such officers, directors and managers reasonably believe
would have actual knowledge of the matters represented.
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the financial
condition, property, assets (including intangible assets), liabilities,
business, operations or results of operations of the Company. In this Agreement,
any reference to a "Material Adverse Effect" with respect to the Company means
any event, change or effect that is materially adverse to the financial
condition, properties, assets, liabilities, business, operations or results of
operations of, the Company.
Each of the Shareholders and the Principal, jointly and severally,
hereby represents and warrants to Parent the following, except as set forth in a
disclosure schedule delivered to Parent at the Closing, a copy of which is
attached as Exhibit D hereto (the "Company Disclosure Schedule"):
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly incorporated, duly organized, validly existing and in good
standing under the laws of the State of California. The Company has all
requisite corporate power and authority to own and operate its properties and
assets, to execute and deliver this Agreement and to carry on its business as
presently conducted and as presently proposed to be conducted. The Company is
duly qualified and is authorized to do business and is in good standing as a
foreign corporation in all jurisdictions in which the nature of its activities
and of its properties (both owned and leased) makes such qualification necessary
and in which failure to so qualify would have a Material Adverse Effect on the
Company. The Company has no subsidiaries and owns no securities of any other
corporation, limited partnership, limited liability company or other entity. The
Company is not a participant in any joint venture, partnership, limited
liability company or similar arrangement.
3.2 CAPITALIZATION. (a) The authorized capital stock of the Company,
immediately prior to the Closing, will consist of 25,000 shares of common stock,
no par value, of which 9,375 (the "Company Shares") are issued and outstanding.
The Company has not authorized the issuance of any other capital stock. The
Shares (A) have been duly authorized and validly issued to the parties and in
the amounts listed on Exhibit A hereto, (B) are fully paid and nonassessable and
are free of any liens or encumbrances, and (C) were issued in compliance with
all applicable state and federal laws concerning the offer, sale and issuance of
securities. There are no authorized or outstanding subscriptions, warrants,
options, contracts, rights (pre-emptive or otherwise), puts, calls, exchangeable
or convertible securities, commitments or demands of any character relating to
any authorized and issued or unissued shares of the capital stock of the Company
or other instruments convertible into or exchangeable for such stock, or which
obligate the Company to seek authorization to issue additional shares of any
class of stock or to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of capital stock of
the Company or obligating the Company to grant, extend, accelerate the vesting
of, change the price of, or otherwise amend or enter into any such option,
warrant, call, right, commitment or agreement, other than created by virtue of
this Agreement or the transactions contemplated hereby. The Company Shares are
not subject to any pre-emptive rights or rights of first refusal created by
statute, the Articles of Incorporation or Bylaws of Company or any agreement to
which the Company is a party or by which it is bound. There are no contracts,
commitments or agreements relating to the voting, purchase or sale of Company
and any of its Shareholders and, to the knowledge of the Company, between or
among any of the Company's Shareholders.
(b) Each of the Shareholders has, and at the Effective Time will have,
good and valid title to, and beneficial ownership of, the Company Shares set
forth on Exhibit A.
(c) The Merger does not constitute and will not constitute an event
under any capital stock or convertible security or any anti-dilution or similar
provision of any agreement to which the Company is a party or by which it is
bound or affected, which shall either increase the number of shares or units of
capital stock issuable upon conversion of any securities or upon exercise of any
warrant or right to subscribe to or purchase any stock or similar security, or
decrease the consideration per share or unit of capital stock to be received by
the Company upon such conversion or exercise.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. The Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
3.4 FINANCIAL STATEMENTS. The Company has delivered to Parent its
unaudited Statement of Income and Balance Sheets for the two fiscal years ended
December 31, 2000 and 1999 (collectively, the "Unaudited Financial Statements")
and its unaudited Statement of Income and Balance Sheets as of and for the
six-month period ended June 30, 2001 (collectively, the "Interim Financial
Statements" and together with the Unaudited Financial Statements, the "Company
Financial Statements"). The Company has also delivered to Parent a schedule of
receivables and payables as of August 31, 2001 (the "Receivables and Payables
Schedule"). The Company Financial Statements and the Receivables and Payables
Schedule are in accordance with the books and records of the Company, are
complete and correct in all material respects, have been derived from the books
and records of the Company, and present fairly the financial condition and
position of the Company for the periods covered and at June 30, 2001 (the
"Company Statement Date") with respect to the Company Financial Statements, and
at August 31, 2001 with respect to the Receivables and Payables Schedule, and
other dates therein specified and the results of its operations for the periods
therein specified; provided that the Company Financial Statements and the
Receivables and Payables Schedule have not been audited or compiled by an
independent accountant and are not prepared in accordance with generally
accepted accounting principles ("GAAP") (including the accrual of expenses or
liabilities) and provided further that the unaudited interim financial
statements are subject to normal recurring year-end adjustments and the Company
Financial Statements do not contain all footnotes required under GAAP. To the
knowledge of the Company, no account receivable reflected on the Receivables and
Payables Schedule is uncollectible or subject to counterclaim or offset, except
reserved against thereon. All accounts payable reflected on the Receivables and
Payables Schedule are currently within their respective terms and are neither in
default nor otherwise past due by more than ninety (90) days.
3.5 NO UNDISCLOSED LIABILITIES. The Company has no obligations or
liabilities that are not disclosed or reflected in the Company Financial
Statements, except current liabilities incurred, and obligations entered into,
in the ordinary course of business subsequent to the Company Statement Date.
3.6 AGREEMENTS; ACTION.
(a) There are no agreements, understandings or proposed transactions
between the Company and any of its officers or directors, or any family member
of any of its officers or directors, or any affiliate thereof.
(b) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
is a party or by which it is bound which may involve (i) obligations (contingent
or otherwise) of, or payments to, the Company in excess of $10,000, or (ii) the
license of any patent, copyright, trade secret or other proprietary right to or
from the Company or (iii) provisions restricting or affecting the development,
manufacture or distribution of the Company's products or services, or (iv)
indemnification by the Company with respect to infringements of proprietary
rights, other than indemnification provisions contained in purchase orders or
license agreements arising in the ordinary course of business.
(c) Except as set forth in the Company Financial Statements, since the
Company Statement Date, the Company has not (i) declared or paid any dividends,
or authorized or made any distribution upon or with respect to any of its
capital stock, (ii) incurred any indebtedness for money borrowed or any other
liabilities (other than with respect to indebtedness and other obligations
incurred in the ordinary course of business), (iii) made any loans or advances
to any person, other than ordinary and reasonable advances for travel expenses,
other than in the ordinary course of business, or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than in the ordinary
course of business.
(d) For the purposes of subsection (b) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
subsections.
3.7 INTERESTED PARTY TRANSACTIONS. The Company is not indebted to nor
does it owe any contractual commitment or arrangement to, with or for the
benefit of, any director, officer, employee, affiliate or agent of (except for
amounts due as normal as due as normal salaries and bonuses and reimbursement of
expenses in the ordinary course of the Company's current business), and is not
indebted to, nor does it owe any contractual commitment or arrangement to, with
or for the benefit of, the Company. Except for normal salaries and bonuses and
reimbursement of expenses in the ordinary course of the Company's current
business, and otherwise disclosed on the Closing Balance Sheet, the Company has
not made any payments, loans or advances of any kind, or paid any dividends or
distributions of any kind, to or for the benefit of any shareholder of the
Company, or any of their respective affiliates, associates or family members.
3.8 CHANGES. Since the Company Statement Date, the Company has
conducted its business in the ordinary course consistent with past practice and
there has not been:
(a) Any change in the assets, liabilities, financial condition or
operations of the Company from that reflected in the Company Financial
Statements, other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is reasonably expected to have a
Materially Adverse Effect;
(b) Any resignation or termination of any key officers of the Company,
and the Company, to the best of its knowledge, does not know of the impending
resignation or termination of employment of any such officer;
(c) Any change in the contingent obligations of the Company by way of
guaranty, endorsement, indemnity, warranty or otherwise;
(d) Any cancellation, compromise or waiver by the Company of a valuable
right or of a material debt owed to it;
(e) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company;
(f) Any change in any compensation arrangement or agreement with any
employee, officer, director or stockholder, except as contemplated herein;
(g) Any declaration or payment of any dividend or other distribution of
the assets of the Company or any purchase or redemption of any of its
outstanding equity interests;
(h) Any debt, obligation or liability incurred, assumed or guaranteed
by the Company, except those for immaterial amounts;
(i) Any sale, transfer or lease of the assets of the Company;
(j) Any physical damage, destruction or loss (whether or a Materially
Adverse Effect;
(k) Any issuance or sale of any shares of the capital stock or other
securities of the Company or grant of any options with respect thereto, or any
modification of any of the capital stock of the Company;
(l) Any mortgage, pledge or lien incurred with respect to any of the
assets (tangible or intangible) of the Company;
(m) Any discharge, satisfaction or payment of any obligation or
liability other than current liabilities reflected in the Company Financial
Statements and current liabilities incurred since the Company Statement Date, in
each case in the ordinary course of business;
(n) Any transaction entered into by the Company other than in the
ordinary course of business;
(o) Any other event or condition of any character that, either
individually or in the aggregate, has had or is reasonably likely to have a
Materially Adverse Effect ; or
(p) Any agreement by the Company to do any of the things described in
the preceding clauses (a) through (o) (other than an agreement with Parent and
its representatives regarding the transactions contemplated by this Agreement.)
3.9 TITLE TO PROPERTIES AND ASSETS; LIENS. Section 3.9 of the Company
Disclosure Schedule identifies each parcel of real property leased by the
Company (the "Leased Property"). The Company does not own any interest in real
property. The Company has good, and valid leasehold title to the Leased Property
and good and valid title to the personal property, tangible and intangible,
reflected in the Interim Financial Statements (except properties, interests in
properties and assets sold or otherwise disposed of since the Company Statement
Date in the ordinary course of business), or with respect to leased or licensed
properties and assets, valid leasehold or licensed interests in, free and clear
of all mortgages, liens, pledges, charges or encumbrances of any kind or
character, except (i) the lien of current taxes not yet due and payable, (ii)
such imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties, (iii) those liens of the lessor under any leasehold
and (iv) liens securing debt which is reflected on the Interim Financial
Statements. Such assets constitute all of the assets and properties, tangible
and intangible, reasonably necessary to conduct Company's business substantially
as presently conducted. The plants, property and equipment of Company that are
used in the operations of its businesses are in good operating condition and
repair, subject to normal wear and tear.
3.10 INTELLECTUAL PROPERTY. The Company owns, or is licensed or
otherwise possesses legally enforceable rights to use all patents, trademarks,
trade names, domain names, service marks, copyrights, and any applications
therefor, schematics, technology, know-how, trade secrets, inventions, ideas,
algorithms, processes, computer software programs or applications (in source
code and/or object code form), and tangible or intangible proprietary
information or material ("Intellectual Property") that are used or proposed to
be used in the business of the Company as currently conducted or as proposed to
be conducted by the Company ("Company Intellectual Property"). Except as set
forth on Section 3.10 of the Company Disclosure Schedule, the Company has not
(i) licensed, or agreed under any condition to license or deliver, any of
Company Intellectual Property in source code form to any party or for resale to
any third-party other than a license to customers for their own use to modify
their systems, or (ii) entered into any exclusive agreements relating to its
Intellectual Property with any party (except with regard to any graphical user
interface).
(a) Section 3.10(a) of the Company Disclosure Schedule lists (i) all
patents and patent applications and all registered trademarks (and trademarks
for which an application has been filed), trade names, domain names, and service
marks, registered copyrights, included in the Company Intellectual Property,
including the jurisdictions in which each such Intellectual Property right has
been issued or registered or in which any application for such issuance and
registration has been filed, (ii) all licenses, sublicenses and other agreements
as to which the Company is a party and pursuant to which any person is
authorized to use any Intellectual Property and (iii) all licenses, sublicenses
and other agreements as to which Company is a party and pursuant to which
Company is authorized to use any third party patents, trademarks or copyrights,
including software ("Third Party Intellectual Property Rights") which are
incorporated in, are, or form a part of any Company product.
(b) To the Company's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any Company Intellectual
Property, or any Intellectual Property right of any third party to the extent
licensed by or through the Company, by any third party, including any employee
or former employee of the Company. The Company has not entered into any
agreement to indemnify any other person against any charge of infringement of
any Intellectual Property, other than indemnification provisions contained in
purchase orders or license agreements arising in the ordinary course of
business.
(c) The Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Company Intellectual Property or Third Party Intellectual Property Rights.
(d) The Company does not have any patents, registered trademarks,
registered service marks or registered copyrights. The Company (i) has not been
sued in any suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party; (ii) has no knowledge that
the manufacturing, marketing, licensing or sale of its products infringes any
patent, trademark, service xxxx, copyright, trade secret or other proprietary
right of any third party and (iii) has not brought any action, suit or
proceeding for infringement of Intellectual Property or breach of any license or
agreement involving the Company Intellectual Property against any third party.
3.11 LITIGATION. There is no action, suit, arbitration, audit or other
proceeding or investigation pending, or to the Company's knowledge, threatened
against the Company or any of its properties or any of its officers or directors
(in their capacity as such) before any agency, court or tribunal, foreign or
domestic. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, other proceeding or investigation by
the Company currently pending or which the Company intends to initiate.
3.12 TAX RETURNS AND PAYMENTS.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean all
taxes imposed by any governmental authority, including, but not limited to,
income, capital gains, license, gross receipts, net worth, capital stock,
profits, stamp, occupation, transfer, value added, excise, franchise, sales,
use, property (whether real, personal or mixed), employment, unemployment,
disability, withholding, social security and workers' compensation taxes and
estimated income and franchise tax payments, and interest, penalties, fines
costs and assessments.
(b) The Company has filed or caused to be filed on a timely basis all
federal, state, local, foreign and other tax returns, reports and declarations
(collectively, "Tax Returns") required to be filed by the Company and has paid
all Taxes due and payable with respect to the periods covered by such Tax
Returns (whether or not reflected thereon). All Tax Returns filed by the Company
are true, complete and correct in all material respects. No deficiency in Taxes
for any period has been asserted by any taxing authority that remains unpaid at
the date hereof. No written inquiries or notices have been received by the
Company from a taxing authority with respect to possible claims for Taxes which
have not been resolved prior to the date hereof. There are no liens for Taxes on
any of the assets of the Company or any of the shares of stock of the Company.
Section 3.12(b) to the Company Disclosure Schedule hereto sets forth a complete
and accurate list of all jurisdictions in which such Tax Returns are currently
required to be filed and the type of such Tax Return. No Tax Return of the
Company has ever been audited. There is no liability for any Tax to be imposed
upon the Company's properties or assets as of the date of this Agreement that is
not adequately provided for. The Company has not executed any waiver of any
statute of limitations on the assessment or calculation of any Tax or
governmental charge. The Company has withheld and, except for amounts not yet
due, paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee. The Company has properly classified its
service providers as independent contractors for tax purposes.
(c) The Company has not incurred any Tax liability other than in the
ordinary course of business. Section 3.12(c) to the Company Disclosure Schedule
hereto contains an accurate and adequate estimate as of the date hereof of the
amount of all accrued and unpaid Taxes of the Company for all periods through
and including the Closing Date.
(d) The Company has delivered to Parent true and complete copies of all
Tax Returns filed by the Company since its inception.
(e) The Company is not a party to any tax sharing or tax allocation
agreement nor does the Company owe any amount under any such agreement. The
Company has not filed any disclosures under Section 6662 or comparable
provisions of state, local or foreign law to prevent the imposition of penalties
with respect to any Tax reporting position taken on any tax return.
(f) The Company has been a validly electing S corporation within the
meaning of Section 1361 and 1362 of the Code at all times since September 1998.
3.13 INVESTMENT COMPANY. The Company is not and is not controlled by or
affiliated with an "investment company" within the meaning of the Investment
Company Act of 1940 other than solely as a result of this Agreement.
3.14 EMPLOYMENT MATTERS.
(a) To the knowledge of the Company, the Company is in compliance in
all material respects with all currently applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health and employment
practices, alien employment and hiring, and is not engaged in any unfair labor
practice.
(b) The Company has no collective bargaining agreement with any of its
employees. There is no labor union organizing activity pending or, to the
Company's knowledge, threatened with respect to the Company. Except as
contemplated hereby, no employee has any agreement or contract, written or
verbal, regarding such employee's continued employment by the Company. As of the
Closing, the Company will not be a party to or bound by any currently effective
employment contract, deferred compensation arrangement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other material employee
compensation plan or agreement. To the knowledge of the Company, no employee of
the Company, nor any consultant with whom the Company has contracted, is in
material violation of any term of any employment contract, proprietary
information agreement or any other agreement relating to the right of any such
individual to be employed by, or to contract with, the Company because of the
nature of the business to be conducted by the Company; and the continued
employment by the Company of its present employees, and the performance of the
Company's contracts with its independent contractors, will not result in any
such violation. The Company has not received any notice alleging that any such
violation has occurred. Except as contemplated hereby, no employee of the
Company has been granted the right to continued employment by the Company or to
any material compensation following termination of employment with the Company.
(c) There are no pending claims against the Company under any workers
compensation plan or policy or for long term disability. There are no
controversies pending or, to the Company's knowledge, threatened, between the
Company and any of its employees which controversies have or could reasonably be
expected to result in an action, suit, proceeding, claim, arbitration or
investigation before any agency, court or tribunal, foreign or domestic. No
employee of the Company has given notice to the Company, nor does the Company
have any knowledge, that any such employee intends to terminate his or her
employment with the Company.
(d) Section 3.14(d) of the Company Disclosure Schedule lists completely
and accurately all employees of the Company, together with each such employee's
job title.
3.15 REGISTRATION RIGHTS. The Company is currently not under any
obligation, and has not granted any rights, to register any of the Company's
presently outstanding securities or any of its securities that may hereafter be
issued.
3.16 COMPLIANCE WITH LAWS; GOVERNMENTAL CONSENTS; PERMITS. The Company
is not in violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any instrumentality or
agency thereof in respect of the conduct of its business or the ownership of its
properties, which alone or together with any other violations would have a
Material Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement and the Merger, except for (i) the filing of the
Certificates of Merger, together with the required officers' certificates; (ii)
such governmental consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state securities
laws and the securities laws of any foreign country; and (iii) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on the Company and
would not prevent, or materially alter or delay any of the transactions
contemplated by this Agreement. The Company has all material franchises,
permits, licenses and any similar authority necessary for the conduct of its
business as now being conducted by it.
3.17 MINUTE BOOKS. The minute books of the Company made available to
Parent contain a complete and accurate summary of all meetings of the board of
directors or any committee thereof and shareholders or actions by written
consent since the time of incorporation of the Company through the date of this
Agreement, and reflect all transactions referred to in such minutes accurately
in all material respects.
3.18 INSURANCE. A complete and correct list of all of the insurance
policies held by the Company is listed on Section 3.18 of the Company Disclosure
Schedule. There is no material claim pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds. All premiums due and payable under all such policies
and bonds have been paid and the Company is otherwise in compliance with the
terms of such policies and bonds. The Company has no knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
3.19 EMPLOYMENT BENEFIT PLANS-ERISA. Except as disclosed on Section
3.19 of the Company Disclosure Schedule, neither the Company nor any ERISA
Affiliate (defined below) maintains, administers, contributes to or is obligated
to contribute to, nor has the Company or any ERISA Affiliate since inception of
the Company, maintained, administered, contributed to or been obligated to
contribute to, nor do the employees of the Company or any ERISA Affiliate
receive as a condition of employment with the Company, benefits pursuant to any
employee pension benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), including,
without limitation, any multi-employer plan as defined in Section 3(37) of
ERISA, nor does the Company maintain any employee welfare benefit plan (as
defined in Section 3(1) of ERISA); or bonus, deferred compensation, stock
purchase, stock option, severance plan, salary continuation, vacation, sick
leave, material fringe benefit, incentive, insurance, welfare or similar
compensatory arrangement. Any plan disclosed on Section 3.19 of the Company
Disclosure Schedule has been operated in all material respects in compliance
with its terms and in compliance with all applicable law, including ERISA and
the Code. "ERISA Affiliate" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated) under
common control and all other entities which, together with the Company, are
treated as a single employer under any or all of Sections 414(b), (c), (m) or
(o) of the Internal Revenue Code on either the date of this Agreement or at any
time during the period of five (5) years ending on the date hereof.
3.20 INTERESTED PARTY TRANSACTIONS. Except as set forth in Section 3.20
of the Company Disclosure Schedule, no officer, director or stockholder of the
Company has or has had, either directly or indirectly, (a) an interest in any
person which (i) furnishes or sells services or products which are furnished or
sold or are proposed to be furnished or sold by the Company, or (ii) purchases
from or sells or furnishes to the Company any goods or services, or (b) a
beneficial interest in any contract or agreement (other than employment or
similar agreements) to which the Company is a party or by which it may be bound
or affected.
3.21 ENVIRONMENTAL MATTERS.
(a) No hazardous material, hazardous substance or toxic substance as
defined in applicable environmental laws, rules and regulations ("Hazardous
Materials") (i) to the Company's knowledge, has been released, stored,
generated, used, treated, deposited or disposed of on or under or is located on
or under any real property currently or previously owned or leased by the
Company, (ii) is presently maintained, used, generated, or permitted to remain
in place by the Company in violation of any applicable law, (iii) to the
Company's knowledge, is required by applicable law to be removed, treated or
mitigated by the Company, given the nature of its present condition, location,
nature, material or maintenance, or (iv) to the Company's knowledge, is of a
type, location, material, nature or condition which requires special
notification to third parties by the Company under applicable law.
(b) The Company has maintained its properties and assets and conducted
its business in all material respects in accordance with all federal, state and
local statutes, laws, rules and regulations pertaining to conservation and
protection of the environment and the release, treatment, discharge, use,
handling, storage, production and disposal of Hazardous Materials.
(c) No notice, citation, summons or order has been received by the
Company and no investigation or review is pending or, to the knowledge of the
Company, threatened by any governmental or other entity, with respect to (i) any
alleged violation by the Company of any environmental statute, ordinance, rule,
regulation or order of any governmental entity, or (ii) any alleged failure by
the Company to have any environmental permit, certificate, license, approval,
registration or authorization required in connection with its business, or (iii)
any use, possession, generation, treatment, storage, recycling, transportation,
release or disposal by or on behalf of the Company of any Hazardous Material.
3.22 BROKERS' AND FINDERS' FEES. The Company has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.23 SHAREHOLDER VOTING; WAIVER OF DISSENTERS' RIGHTS. All holders of
the outstanding Company Shares have voted for approval of the Merger or acted to
approve the Merger through valid written consents and have waived any
dissenters' rights as provided in Section 1300 of the CGCL.
3.24 CERTAIN AGREEMENTS AFFECTED BY THE MERGER. Neither the execution
and delivery of this Agreement nor the consummation of the transaction
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of the Company, (ii)
materially increase any benefits otherwise payable by the Company to its
employees, agents, consultants and directors, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
3.25 BANK ACCOUNTS. Section 3.25 of the Company Disclosure Schedule
sets forth a true and correct list the names and addresses of all banks, other
institutions and state governmental departments at which the Company has
accounts, deposits or safety deposit boxes, or special deposits required to be
held by such state governmental departments with the nature of such account and
the names of all persons authorized to draw on or give instructions with respect
to such accounts or deposits, or to have access thereto, and the names and
addresses of all persons, if any, holding a power-of-attorney on behalf of the
Company.
3.26 MATERIAL CONTRACTS. Except for the contracts and agreements
described in Section 3.26 of the Company Disclosure Schedule (collectively, the
"Material Contracts") the Company is not a party to or bound by any Material
Contract, including without limitation:
(a) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than
$10,000 over the life of the contract;
(b) any contract that expires or may be renewed at the option of any
person other than the Company so as to expire more than one year after the date
of this Agreement;
(c) any trust indenture, mortgage, promissory note, loan agreement or
other contract for the borrowing of money, any currency exchange, commodities or
other hedging arrangement or any leasing transaction of the type required to be
capitalized in accordance with GAAP;
(d) any contract of capital expenditures in excess of $10,000 in the
aggregate;
(e) any contract limiting the freedom of the Company to engage in any
line of business or to compete with any other corporation, partnership, limited
liability company, trust, individual or other entity, or any confidentiality,
secrecy or non-disclosure contract;
(f) any contract pursuant to which the Company is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property, pursuant to which payments in excess of $10,000 remain
outstanding;
(g) any contract with any person with whom the Company does not deal at
arm's length; or
(h) any agreement of guarantee, support, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other Person.
3.27 NO BREACH OF MATERIAL CONTRACT. The Company has performed, in all
material respects, the obligations required to be performed by it and is
entitled to all benefits under, and, to the knowledge of the Company, is not
alleged to be default in respect of any Material Contract. Each of the Material
Contracts is in full force and effect, unamended (except as disclosed in Section
3.26 to the Company Disclosure Schedule) and there exists no default or event of
default or event, occurrence, condition or act, with respect to the Company or,
to the knowledge of the Company, with respect to the other contracting party,
which, with the giving of notice, the lapse of the time or the happening of any
other event or conditions, would default or event of default under any Material
Contract. True, correct and complete copies of all Material Contracts have been
delivered to the Parent.
3.28 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default of any term of its Articles of Incorporation or its Bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is a party or by which it is bound or of any statute, rule
or regulation applicable to the Company. The execution and delivery of this
Agreement by the Company does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation
(including, but not limited to, any increase in payments due to any entity or
person) or loss of any benefit under (i) any provision of the Certificate of
Incorporation or Bylaws of the Company, as amended, or (ii) any material
mortgage, indenture, lease, contract or other material agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its properties
or assets.
3.29 AUTHORIZATION OF SHAREHOLDERS; BINDING OBLIGATIONS. Each of the
Shareholders has all requisite power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of each of
the Shareholders. This Agreement has been duly executed and delivered by each of
the Shareholders and constitutes the valid and binding obligation of each of the
Shareholders enforceable against the Shareholders in accordance with its terms
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
3.30 SHAREHOLDERS' COMPLIANCE WITH OTHER INSTRUMENTS. Each of the
Shareholders is not in violation of, or in default under, any term of its
governing agreements, or of any provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is a party or by which it is bound
or of any statute, rule or regulation applicable to it. The execution and
delivery of and compliance with this Agreement pursuant hereto will not result
in any such violation, or be in conflict with or constitute a default under any
such term, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of conflict with, or result in any violation of, or default
under (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation (including,
but not limited to, any increase in payments due to any entity or person) or
loss of any benefit under (i) any provision of the governing agreements of the
Shareholders, or (ii) any material mortgage, indenture, lease, contract or other
material agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Shareholders or any of their properties or assets.
3.31 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Shareholders and the Principal herein or in the Company
Disclosure Schedule, or certificate furnished by the Shareholders and the
Principal pursuant to this Agreement, when all such documents are read together
in their entirety, contains or will contain at the Effective Time any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub, jointly and severally, hereby represent and warrant to
the Shareholders that except as set forth in the disclosure schedule delivered
to the Shareholders at Closing, attached as Exhibit E (the "Parent/Sub
Disclosure Schedule") and SEC Documents (as defined herein):
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of Parent and
Sub is a corporation duly incorporated, duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and Sub
has all requisite corporate power and authority to own and operate its
properties and assets, to execute and deliver this Agreement and to carry on its
business as presently conducted and as presently proposed to be conducted. Each
of Parent and Sub is duly qualified and is authorized to do business and is in
good standing as a foreign corporation in all jurisdictions in which the nature
of its activities and of its properties (both owned and leased) makes such
qualification necessary and in which failure to so qualify might reasonably be
expected, individually, or in the aggregate, to have a Materially Adverse
Effect. Except as set forth on Section 4.1 of the Parent/Sub Disclosure
Schedule, neither Parent nor Sub own any securities of any other corporation,
limited partnership, limited liability company or other entity. Neither Parent
nor Sub is a participant in any joint venture, partnership, limited liability
company or similar arrangement.
4.2 CAPITALIZATION. (a) Set forth on Section 4.2 of the Parent/Sub
Disclosure Schedule is the capitalization of Parent immediately prior to the
Closing Date, prior to giving effect to the transactions contemplated by this
Agreement. Except as set forth in Section 4.2 of the Parent/Sub Disclosure
Schedule, there are no authorized or outstanding subscriptions, warrants,
options, contracts, rights (pre-emptive or otherwise), puts, calls, exchangeable
or convertible securities, commitments or demands of any character relating to
any authorized and issued or unissued shares of the capital stock of the Parent
or other instruments convertible into or exchangeable for such stock, or which
obligate the Parent to seek authorization to issue additional shares of any
class of stock or to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of capital stock of
the Parent or obligating the Parent to grant, extend, accelerate the vesting of,
change the price of, or otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement, other than created by virtue of this
Agreement or the transactions contemplated hereby.
(b) The Merger does not constitute and will not constitute an event
under any capital stock or convertible security or any anti-dilution or similar
provision of any agreement to which Parent or Sub is a party or by which it is
bound or affected, which shall either increase the number of shares or units of
capital stock issuable upon conversion of any securities or upon exercise of any
warrant or right to subscribe to or purchase any stock or similar security, or
decrease the consideration per share or unit of capital stock to be received by
Parent or by Sub upon such conversion or exercise.
4.3 AUTHORIZATION; BINDING OBLIGATIONS. Each of the Parent and Sub has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of each of
the Parent and Sub. This Agreement has been duly executed and delivered by each
of the Parent and Sub and constitutes the valid and binding obligation of each
of the Parent and Sub enforceable against the Parent and Sub in accordance with
its terms subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
4.4 SEC DOCUMENTS. As of the dates when filed and of the Closing, each
Annual Report, Quarterly Report and each other document filed with the
Securities and Exchange Commission ("SEC") pursuant to Sections 13 or 15(d) of
the Securities Exchange Act of 1934 (other than any document which is not deemed
to be filed under applicable SEC rules and regulations) (collectively, "SEC
Documents") does not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein, in the light of the circumstances in which they were made, not
misleading.
4.5 FINANCIAL STATEMENTS. The Parent has delivered to the Shareholders
its audited Statement of Operations and Balance Sheets for the fiscal year ended
December 31, 2000 (the "Parent Financial Statements"). The Parent Financial
Statements are in accordance with the books and records of the Parent, are
complete and correct in all material respects, and present fairly the financial
condition and position of Parent for the periods covered and as of December 31,
2000, (the "Parent Statement Date"), and other dates therein specified and the
results of its operations for the periods therein specified. The Parent
Financial Statements have been audited by an independent accountant and the
Parent Financial Statements are prepared in accordance with GAAP.
4.6 COMPLIANCE WITH OTHER INSTRUMENTS. Parent and Sub are not in
violation or default of any term of their Certificates of Incorporation or its
By-laws, or of any provision of any mortgage, indenture, contract, agreement,
instrument or contract to which it is a party or by which it is bound or of any
statute, rule or regulation applicable to Parent or Sub. The execution and
delivery of and compliance with this Agreement pursuant hereto will not result
in any such violation, or be in conflict with or constitute a default under any
such term, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of conflict with, or result in any violation of, or default
under (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation (including,
but not limited to, any increase in payments due to any entity or person) or
loss of any benefit under (i) any provision of the Certificate of Incorporation
or By-laws of the Parent or Sub, as amended, or (ii) any material mortgage,
indenture, lease, contract or other material agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Parent or any of its properties
or assets.
4.7 OFFERING VALID. Assuming the accuracy of the representations and
warranties of each Shareholder in its Representation Letter, a form of which is
attached as Exhibit F hereto, the sale of the Merger Consideration will be
exempt from the registration requirements of the Securities Act of 1933, and
will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws. The Merger Consideration, as of the
Effective Time, (a) will have been duly authorized and validly issued to the
Shareholders and (b) will be fully paid and nonassessable and will be free of
any liens or encumbrances. Any required filings with respect to the Merger
Consideration will be made in compliance with applicable securities laws and
state blue sky laws.
4.8 INVESTMENT COMPANY. Parent is not and is not controlled by or
affiliated with an "investment company" within the meaning of the Investment
Company Act of 1940.
4.9 SUB FORMED FOR THE PURPOSE OF THIS TRANSACTION. Sub was formed
solely for the purpose of engaging in the transaction contemplated hereby and
has not engaged in any business activities or conducted any operations other
than in connection with the transaction contemplated hereby. Any and all
outstanding Sub capital stock has been validly authorized and issued. All of the
issued and outstanding shares of capital stock of Sub are owned of record or
beneficially by Parent free and clear of any liens, mortgages, pledges or any
other types of encumbrances.
4.10 COMPLIANCE WITH LAWS; GOVERNMENTAL CONSENTS; PERMITS.
Neither Parent nor Sub is in violation of any applicable statute, rule,
regulation, order or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business or
the ownership of its properties, which alone or together with any other
violations would have a Material Adverse Effect. No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection with
the execution and delivery of this Agreement and the Merger except for (i) the
filing of the Certificates of Merger, together with the required officers'
certificates; (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country; and (iii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on the Parent
or Sub and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement. Parent and Sub have all material
franchises, permits, licenses and any similar authority necessary for the
conduct of each of their businesses as now being conducted by it, and can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as presently planned to be conducted.
4.11 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Parent and the Sub herein or in the Parent/Sub Disclosure
Schedule, or certificate furnished by Parent pursuant to this Agreement, when
all such documents are read together in their entirety, contains or will contain
at the Effective Time any untrue statement of a material fact, or omits or will
omit at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
ARTICLE V
INDEMNIFICATION
5.1 PARENT INDEMNIFICATION. Parent ("Parent Indemnifying Party") agrees
to defend, indemnify and save and hold harmless each of the Shareholders (the
"Shareholders Indemnified Party") from and against any and all losses, costs,
expenses, liabilities, claims or damages (including, without limitation,
reasonable fees and disbursements of counsel) (collectively, "Claims"), net of
any recoveries by the Shareholder Indemnified Party under existing insurance
policies or indemnities from third parties, arising out of or resulting from:
(i) any breach of any representation, warranty, covenant or agreement made by
Parent or Sub in this Agreement or in any instrument delivered on the Closing
Date by Parent; (ii) any legal, administrative or other proceedings brought by a
third party arising out of the transactions contemplated by this Agreement other
than such proceedings attributable to the gross negligence or willful misconduct
of the Shareholders; or (iii) any actual or threatened claim, suit, action or
proceeding arising out of or resulting from the conduct by Parent or Sub of its
business or operations, or Parent's or Sub's occupancy or use of its properties
or assets, prior to the Closing Date.
5.2 SHAREHOLDERS' INDEMNIFICATION. Each of the Shareholders (the
"Shareholders Indemnifying Party"), jointly and severally, agree to defend,
indemnify and save and hold harmless each of Parent and Sub and their respective
affiliates, officers, directors, agents and employees, and each person, if any,
who controls or may control Parent within the meaning of the Securities Act of
1933, as amended, (the "Parent/Sub Indemnified Party") from and against any and
all Claims, net of any recoveries by the Parent/Sub Indemnified Party under
existing insurance policies or indemnities from third parties, arising out of or
resulting from: (i) any breach of any representation, warranty, covenant or
agreement made by the Shareholders in this Agreement, or in any instrument
delivered on the Closing Date by the Shareholders; (ii) any legal,
administrative or other proceedings brought by a third party arising out of the
transactions contemplated by this Agreement caused by the gross negligence or
willful misconduct of the Shareholders; or (iii) any actual or threatened claim,
suit, action or proceeding arising out of or resulting from the conduct by
Company of its business or operations, or Company's occupancy or use of its
properties or assets, prior to the Closing Date.
5.3 PROCEDURE. Each party entitled to be indemnified pursuant to this
Article V (each, an "Indemnified Party") shall notify the party obligated to
indemnify such Indemnified Party (the "Indemnifying Party") in writing of any
claim or action against such Indemnified Party in respect of which the
Indemnifying Party is or may be obligated to provide indemnification on account
of Sections 5.1 or 5.2, promptly after the receipt of notice of the commencement
thereof. The omission of any Indemnified Party so to notify the Indemnifying
Party of any such claim or action shall not relieve the Indemnifying Party from
any liability which the Indemnifying Party may have to such Indemnified Party
except to the extent the Indemnifying Party shall have been prejudiced by the
omission or delay of such Indemnified Party so to notify the Indemnifying Party
pursuant to this Section 5.3. If any such action shall be brought against any
Indemnified Party and it shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein and, to
the extent that the Indemnifying Party may wish to assume the defense thereof,
with counsel reasonably satisfactory to such Indemnified Party, and after notice
from the Indemnifying Party to such Indemnified Party of its election so to
assume the defense thereof, the Indemnifying Party will not be liable to such
Indemnified Party under Sections 5.1 or 5.2 for any legal or other expense
subsequently incurred by such Indemnified Party in connection with the defense
thereof nor for any settlement thereof entered into without the consent of the
Indemnifying Party; PROVIDED, HOWEVER, that (i) if the Indemnifying Party shall
fail or refuse to assume the defense of such action, (ii) if there is a conflict
between the positions of the Indemnifying Party and of the Indemnified Party in
defending such action or (iii) there are legal defenses available to such
Indemnified Party different from or in addition to those available to the
Indemnifying Party, then one separate counsel for the Indemnified Party shall be
entitled to participate in and conduct the defense or such different defenses
and the Indemnifying Party shall be liable for any reasonable legal or other
expenses incurred by the Indemnified Party in connection with the defense.
5.4 INDEMNIFICATION NON-EXCLUSIVE. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common law remedy any party may have for breach of representation,
warranty, covenant or agreement.
5.5 MANNER OF INDEMNIFICATION.
(a) Subject to Sections 5.5(b)-(c), 5.6 and 5.7, within thirty (30)
days of receipt of an indemnification notice by the Indemnifying Party: (i) if
the Indemnifying Party is the Parent, the Parent Indemnifying Party shall
satisfy such claim by the payment of cash to the Shareholders Indemnified Party
for the full amount of such claim; and (ii) if the Indemnifying Party is the
Shareholders Indemnifying Party, the Shareholders Indemnifying Party shall
satisfy such claim by the payment of cash for the full amount of such claim.
(b) If the Indemnifying Party disagrees with the claim for
indemnification, it shall, within thirty (30) days of receipt of notice, deliver
to the Indemnified Party written notice of disagreement with such claim
specifying in reasonable detail the nature and extent of the disagreement. In
the event that the Indemnifying Party delivers such notice of disagreement
within said thirty (30) day period, the Indemnified Party shall have no right to
indemnification for such disputed claim hereunder until the parties resolve the
dispute.
(c) If a Principal or Shareholder is an Indemnifying Party and fails to
respond to an indemnity claim as set forth in Section 5.5(a) or 5.5(b) hereof
within thirty (30) days of receipt of such notice, the Parent/Sub Indemnified
Party, in its sole discretion, without prejudice to any other legal remedy
available to it, may obtain payment from the Shareholders in cash.
5.6 RESOLUTION OF CONFLICTS.
(a) In the event that the Indemnifying Party delivers a notice of
disagreement within the allotted thirty (30) day period, the Indemnified Party
shall have fifteen (15) days to respond in a written statement to the objection
of the Indemnifying Party. If after such fifteen (15) day period, there remains
a dispute as to any claims, the Indemnifying Party and Indemnified Party shall
attempt in good faith for thirty (30) days to agree upon the rights of the
respective parties with respect to each of such claims.
(b) If no agreement can be reached after good faith negotiation in
accordance with Section 5.6(a), the parties shall have the right to avail
themselves of all rights and remedies available at law and equity, subject to
Sections 7.13 and 7.14 herein.
5.7 THRESHOLD. The Indemnified Party shall not be permitted to enforce
any Claims until the aggregate of all Claims exceeds $10,000 (the "Threshold
Amount") and such amount is determined pursuant to this Article V to be payable.
Once the aggregate amount of Claims is in excess of the Threshold Amount, all
Claims, including those Claims below the Threshold Amount, may be pursued except
as otherwise limited by this Agreement. Notwithstanding the foregoing, any
Claims arising out of any breach of representations and warranties set forth in
Sections 3.2, 3.12 and 3.20 or a breach of covenant set forth in Section 6.2
shall not be subject to the Threshold Amount requirements set forth in this
Section 5.7.
ARTICLE VI
COVENANTS
6.1 EMPLOYEE CONFIDENTIALITY AGREEMENTS; EMPLOYEE AGREEMENTS. The
parties hereto shall cooperate with one another to have Sub enter into Employee
Confidentiality, Non-Competition and Disclosure and Assignment of Work Product
agreements with each employee listed on Section 6.1 of the Parent/Sub Disclosure
Schedule hereto. Sub shall enter into employment agreements with the Principal,
substantially in the form attached as Exhibit G.
6.2 CERTAIN TAX MATTERS. The Shareholders and Principals shall be
responsible, at their sole expense, for the timely preparation and filing of all
income Tax Returns of the Company and shall be liable for the payment of any and
all Taxes for the short taxable period ending at the Effective Time and for any
other taxable period ending prior to the Effective Time. The Shareholders and
Principals shall cause such Tax Returns to be prepared in a manner consistent
with past practice of the Company. Each of the parties hereto covenants and
agrees that it shall not take any action, or fail to take any action, that would
cause the Merger to fail to qualify as a reorganization under Section 368(a) of
the Code.
6.3 OPINION OF SHAREHOLDERS' COUNSEL. The obligations of the Parent/Sub
shall be subject to the receipt from counsel to Shareholders of an opinion,
dated the Closing Date, substantially in the form of Exhibit H.
6.4 OPINION OF PARENT/SUB'S COUNSEL. The obligations of the
Shareholders shall be subject to the receipt from Xxxxxx X. Xxxxxx, Esq.,
counsel to the Parent and the Sub, of an opinion, dated the Closing Date,
substantially in the form of Exhibit I.
6.5 NON-COMPETITION AND NON-SOLICITATION. In consideration of, among
other things, the Merger Consideration set forth in this Agreement, and with the
understanding that the Principal will be privy to the trade secrets concerning
the methods and practices of the Parent and the Sub, and to protect the Parent
and the Sub from unauthorized disclosure of such trade secrets, during the
period of the Principal's employment with Sub and thereafter, the Principal will
be subject to certain restrictive non-competition and non-solicitation covenants
as more fully described in the Employment Agreement attached as Exhibit G
hereto.
6.6 ASSIGNMENT OF CONTRACTS. All agreements entered into by the
Principal personally for the lease of equipment used in the Company's business
are listed on Section 6.6 of the Company Disclosure Schedule. The Shareholders
and Principal agree to use their best efforts to obtain consents to assign each
lease listed on Section 6.6 of the Company Disclosure Schedule from the
Principal to Sub.
6.7 GUARANTEE OF OBLIGATIONS. Parent agrees to guarantee the payment
obligations of Sub pursuant to the Employment Agreement between Sub and the
Principal, dated as of the date hereof.
6.8 ACCESS TO RECORDS. Parent and Sub agree to provide the Principal
with access to all books, records and tax information of the Company for periods
prior to the Closing, and to cooperate with the Principal with respect to
responding to reasonable requests made in connection with audits of the
Principal or the Shareholders for the periods prior to the Closing or with
respect to, among other things, the Principal's and Shareholders' tax returns as
it may relate to their ownership of the Company.
ARTICLE VII
MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal substantive laws, without reference to such state's principles of
conflicts of law, of the State of California.
7.2 SURVIVAL. The representations, warranties and agreements made
herein by the parties shall survive any investigation made by the other party
and the Closing for the period ending eighteen months from the Closing,
PROVIDED, HOWEVER, that (i) representations and warranties as to matters set
forth in Sections 3.12 and 3.19 will survive until 90 days following the
expiration of the applicable statute of limitations, and (ii) claims based upon
a willful, grossly negligent, fraudulent or intentional misrepresentation may be
made until barred by the applicable statute of limitation. The agreements set
forth in Article V shall survive the Effective Time and the Closing.
7.3 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, permitted assigns, heirs,
executors and administrators of the parties hereto.
7.4 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Company Disclosure Schedule and the Parent Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, (b) are not intended to confer upon any other person any rights or
remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except that Parent or Sub may assign any of their respective rights to
a wholly-owned, direct or indirect subsidiary of Parent.
7.5 SEVERABILITY. If any provision of the Agreement shall be determined
to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
7.6 AMENDMENT. This Agreement may be amended or modified only upon the
written consent of the Shareholders and Parent.
7.7 WAIVERS, DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach, default or
noncompliance by another party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of or in any similar
breach, default or noncompliance thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on any party's part of any breach,
default or noncompliance under this Agreement or any waiver on such party's part
of any provisions or conditions of this Agreement must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies under this Agreement afforded to any party shall be cumulative and not
alternative.
7.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) five (5) business days after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or
(iii) one (1) business day after deposit with a nationally recognized overnight
courier, specifying next business day delivery, with written verification of
receipt. All communications shall be sent:
(a) If to Parent or Sub, to:
Synergy 2000, Inc.
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxx Xxxxxx, Xx.
Facsimile: (000) 000-0000
(b) If to Company to:
Convert-Tech, Inc.
0000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
(b) If to the Shareholders to:
Their respective addresses set forth on Exhibit A hereto.
7.9 EXPENSES. The Company shall pay and remain liable for the costs and
expenses that the Company and the Shareholders incur with respect to the
negotiation, execution, delivery and performance of the Agreement (including all
ancillary documents relating hereto), up to a maximum of $20,000. The
Shareholders shall pay and remain liable for the remainder of the costs and
expenses that the Company and the Shareholders incur with respect to the
negotiation, execution, delivery and performance of the Agreement (including all
ancillary documents relating hereto). Parent shall pay and remain liable for the
costs and expenses that it incurs in connection with the negotiation, execution
and delivery of this Agreement (including all ancillary documents relating
hereto).
7.10 HEADINGS. The headings of the sections and subsections of the
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
7.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.12 PRONOUNS. All pronouns contained herein and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the parties hereto may require.
7.13 CONSENT TO EXCLUSIVE JURISDICTION. EACH PARTY HERETO HEREBY
CONSENTS TO THE EXCLUSIVE JURISDICTION OF A FEDERAL COURT LOCATED WITHIN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, (OR IF THERE SHALL NOT BE FEDERAL
JURISDICTION IN SUCH COURT, A STATE COURT LOCATED WITHIN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA) AND IRREVOCABLY AGREES THAT ALL ACTIONS OR OTHER
PROCEEDINGS RELATING TO OR ARISING OUT OF THIS AGREEMENT SHALL BE TRIED ONLY IN
SUCH COURT. EACH OF THE PARTIES HERETO HEREBY CONSENTS TO SERVICE OF PROCESS IN
ANY SUCH ACTION OR OTHER PROCEEDING IN ANY MANNER PERMITTED BY THE LAWS OF THE
STATE OF CALIFORNIA, AGREES THAT SERVICE OF PROCESS BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO THE PERSONS AND AT THE ADDRESSES SET FORTH IN
SECTION 7.8 ABOVE, IS REASONABLY CALCULATED TO GIVE ACTUAL NOTICE, AND WAIVES
AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY
SUCH ACTION OR OTHER PROCEEDING ANY CLAIM THAT SUCH SERVICE OF PROCESS DOES NOT
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS.
7.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ITS RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR SUBJECT MATTER HEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO
BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO SUBJECT MATTER OF THIS TRANSACTION.
7.15 PUBLIC DISCLOSURE. All publicity relating to this Agreement and
the transactions contemplated hereby shall be subject to the mutual approval of
Parent and Company and, except as otherwise may be required by applicable law,
no public announcement or disclosure of the terms or existence of this Agreement
or the transactions contemplated hereby or thereby shall be made by any party
(or any of its affiliates or representatives) without the prior written consent
of the other parties, which consent shall not be unreasonably withheld. To the
extent Parent is required by applicable law to disclose publicly or to make any
public announcement of the terms or existence of this Agreement or the
transactions contemplated hereby or thereby, Parent shall, to the extent
possible within the applicable time constraints, give Company reasonable, actual
prior notice of such disclosure and use best efforts to agree with Company on
the form of such disclosure.
7.16 TRANSFER TAXES. All stock transfer, real estate transfer,
documentary, stamp recording, sales and use and other similar taxes (including
interest, penalties and additions to any such taxes) incurred in connection with
this Agreement shall be paid by the Parent.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement, to be signed by their respective officers thereunto duly authorized,
all as of the date first above written.
SYNERGY 2000, INC.
By: /s/ Xxx Xxxxxx, Xx.
----------------------------------------
Name: Xxx Xxxxxx, Xx.
Title: President
INFINITY TECHNOLOGY SOLUTIONS, INC.
By: /s/ Xxx Xxxxxx, Xx.
----------------------------------------
Name: Xxx Xxxxxx, Xx.
Title: President
CONVERT-TECH, INC.
By: Xxxxxxx X. Xxxxxx, Xx.
----------------------------------------
Name: Xxxxxxx X. Xxxxxx, Xx.
Title: President
/s/ Xxxxxxx X. Xxxxxx, Xx.
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XXXXXXX X. XXXXXX, XX.
XXXXXX FAMILY REVOCABLE TRUST,
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
--------------------------------------------
Xxxxxxx X. Xxxxxx, Xx., Co-Trustee
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx, Co-Trustee
/s/ Xxxxxxx X. Xxxxxx, Xx., Attorney-in-Fact
--------------------------------------------
XXXXXXX XXXX XXXXXX
/s/ Xxxxxxx X. Xxxxxx, Xx., Attorney-in-Fact
--------------------------------------------
XXXXXX XXXX XXXXXX
/s/ Xxxxxxx X. Xxxxxx, Xx., Guardian
--------------------------------------------
XXXXXX XXXX XXXXXX
/s/ Xxxxxxx X. Xxxxx
--------------------------------------------
XXXXXXX X. XXXXX
EXHIBITS
Exhibit A List of Shareholders
Exhibit B Certificate of Incorporation of Infinity Technology Solutions,
Inc.
Exhibit C By-Laws of Infinity Technology Solutions, Inc.
Exhibit D Disclosure Schedule of Convert-Tech, Inc.
Exhibit E Disclosure Schedule of Synergy 2000, Inc. and Infinity
Technology Solutions, Inc.
Exhibit F Representation Letter
Exhibit G Employment Agreement of Xxxxxxx X. Xxxxxx, Xx.
Exhibit H Form of Opinion of Counsel of Convert-Tech, Inc. Shareholders
Exhibit I Form of Opinion of Counsel of Synergy 2000, Inc. and Infinity
Technology Solutions, Inc.
Exhibit A
Shareholders
Shareholder and Address Number of Company Shares Owned
Xxxxxx Family Revocable Trust 7,125
0000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxxx Xxxx Xxxxxx 127
0000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxx Xxxxxx 127
0000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxx Xxxxxx 121
0000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxxx X. Xxxxx 1,875
00000 Xxxxx Xxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
