AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), made and entered into
as of November 19, 2001, among Vizacom Inc., a Delaware corporation ("Buyer"),
SpaceLogix Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Buyer ("Merger Sub"), and SpaceLogix, Inc., a Delaware corporation
("Seller").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the Delaware General Corporation Law ("Delaware Law"), Buyer
and Seller will enter into a business combination transaction pursuant to which
Seller will merge with and into Merger Sub (the "Merger").
B. The Board of Directors of Buyer has (i) determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Buyer and fair to, and in the best interests of, Buyer and its stockholders,
(ii) approved this Agreement, the Merger and the other transactions contemplated
by this Agreement, and (iii) recommended the approval of this Agreement to the
stockholders of Buyer.
C. The Board of Directors of Seller has (i) determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Seller and fair to, and in the best interests of, Seller and its stockholders,
(ii) approved this Agreement, the Merger and the other transactions contemplated
by this Agreement, and (iii) recommended the approval of this Agreement to the
stockholders of Seller.
D. Buyer and Merger Sub, on the one hand, and Seller on the other
hand, desire to make certain representations and warranties and other agreements
in connection with the Merger.
E. The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, premises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Seller shall be merged with and into
Merger Sub, the separate corporate existence of Seller shall cease and Merger
Sub shall continue as the surviving corporation. Merger Sub as the surviving
corporation after the Merger is consummated is hereinafter sometimes referred to
as the "Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware in accordance with the relevant provisions of Delaware
Law (the time of such filing (or such later time as may be agreed in writing by
the parties and specified in the Certificate of Merger) being the "Effective
Time") as soon as practicable on or after the Closing Date (as hereinafter in
this Section defined). The closing of the Merger (the "Closing") shall take
place at the offices of Xxxxxxx & Xxxxxxxx, LLC, 50 Xxxxxxx Xxxxxxxxx Xxxxxxxxx
- Xxxxx 000, Xxxxxxx Xxxxx, Xxx Xxxx 00000, at a time and date to be specified
by the parties, which shall be no later than the second business day after the
satisfaction or waiver of the conditions set forth in Article VI, or at such
other time, date and location as the parties hereto agree in writing (the
"Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of Merger, and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Seller and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Seller and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws.
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(a) At the Effective Time, the Certificate of Incorporation of
Merger 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 by law and such Certificate of Incorporation; provided,
however, that, at the Effective Time, the Certificate of Incorporation of the
Surviving Corporation shall be amended so that the name of the Surviving
Corporation shall be "SpaceLogix, Inc."
(b) At the Effective Time, the Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law and such
Bylaws.
1.5 Directors and Officers. The directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, to serve in such capacity until their respective successors are
duly elected and qualified. The officers of Merger
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Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, to serve in such capacity at the pleasure of the Board of
Directors of the Surviving Corporation and until their successors are duly
appointed and qualified. Immediately following the Effective Time, the officers
and directors of the Surviving Corporation shall be as set forth in Schedule 1.5
hereto.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, Seller or the holders of any
of the following securities:
(a) Conversion of Seller Common Stock. Each share of common
stock, par value $.01 per share, of Seller (the "Seller Common Stock") issued
and outstanding immediately prior to the Effective Time (other than any shares
of Seller Common Stock to be canceled pursuant to Section 1.6(d) and any
Dissenting Shares (as defined in and to the extent provided in Section 1.7(a))
will be canceled and extinguished and automatically converted (subject to
Sections 1.6(h) and (i)) into the right to receive 1.3210 shares of common
stock, par value $.001 per share, of Buyer (the "Buyer Common Stock") and
warrants to purchase .2735 shares of Buyer Common Stock in the form of Exhibit A
hereto (the "Exchange Ratio") upon surrender of the certificate representing
such share of Seller Common Stock as provided in Section 1.8 (or in the case of
a lost, stolen or destroyed certificate, upon delivery of an affidavit (and
bond, if required) in the manner provided in Section 1.10).
(b) Conversion of Seller Series A Preferred Stock. Each share of
Series A preferred stock, par value $.01 per share, of Seller (the "Seller
Series A Preferred Stock") issued and outstanding immediately prior to the
Effective Time (other than any shares of Seller Series A Preferred Stock to be
canceled pursuant to Section 1.6(d) and any Dissenting Shares (as defined in and
to the extent provided in Section 1.7(a)) will be canceled and extinguished and
automatically converted (subject to Sections 1.6(h) and (i)) into the right to
receive .5377 shares of Buyer Common Stock (the "Series A Preferred Exchange
Ratio") upon surrender of the certificate representing such share of Seller
Series A Preferred Stock as provided in Section 1.8 (or in the case of a lost,
stolen or destroyed certificate, upon delivery of an affidavit (and bond, if
required) in the manner provided in Section 1.10).
(c) Conversion of Seller Series B Preferred Stock. Each share of
Series B preferred stock, par value $.01 per share, of Seller (the "Seller
Series B Preferred Stock" and collectively with the Seller Series A Preferred
Stock and Seller Common Stock, the "Seller Capital Stock") issued and
outstanding immediately prior to the Effective Time (other than any shares of
Seller Series B Preferred Stock to be canceled pursuant to Section 1.6(d) and
any Dissenting Shares (as defined in and to the extent provided in Section
1.7(a)) will be canceled and extinguished and automatically converted (subject
to Sections 1.6(h) and (i)) into the right to receive .5377 shares of Buyer
Common Stock (the "Series B Preferred Exchange Ratio") upon surrender of the
certificate representing such share of Seller Series B Preferred Stock as
provided in Section 1.8 (or in the case of a lost, stolen or destroyed
certificate, upon delivery of an affidavit (and bond, if required) in the manner
provided in Section 1.10).
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(d) Cancellation of Buyer-Owned Stock. Each share of Seller
Capital Stock held in the treasury of Seller or owned by Merger Sub, Buyer or
any direct or indirect wholly owned subsidiary of Seller or Buyer immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(e) Cancellation of Seller Stock Options.
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(i) On or prior to the Effective Time, all options ("Seller Stock
Options") to purchase shares of Seller Common Stock issued pursuant to Seller's
2001 Stock Plan (the "Stock Plan") shall be canceled with the consent of the
holder of each such Seller Stock Option, and the Stock Plan shall be terminated.
Seller shall take all actions necessary to cause all of such Seller Stock
Options to be so canceled and shall deliver to Buyer at Closing evidence of the
consent of each such holder to such cancellation.
(ii) As of the Effective Time, Buyer shall grant options under
its stock option plans to purchase an aggregate of 156,817 shares of Buyer
Common Stock at a per share exercise price equal to 110% of the closing price of
the Buyer Common Stock on the Nasdaq SmallCap Market, or such other securities
exchange or quotation system which is the principal trading market for the Buyer
Common Stock on the day prior to Closing, to the former employees of Seller
listed on Schedule 1.6(e), upon the terms and subject to the conditions
contained in Buyer's stock option plan pursuant to which such options are issued
and Buyer's standard form of stock option agreement, except as set forth
in Schedule 1.6(e).
(f) Conversion of Seller Warrants. At the Effective Time, each
outstanding warrant to purchase shares of Seller Common Stock (each a "Seller
Warrant"), whether or not exercisable, will be assumed by Buyer. Each Seller
Warrant so assumed by Buyer under this Agreement will continue to have, and be
subject to, the same terms and conditions set forth in the applicable Seller
Warrant immediately prior to the Effective Time (including, without limitation,
any repurchase rights), except that (i) each Seller Warrant will be exercisable
(or will become exercisable in accordance with its terms) for that number of
whole shares of Buyer Common Stock equal to the product of the number of shares
of Seller Common Stock that were issuable upon exercise of such Seller Warrant
immediately prior to the Effective Time multiplied by 1.5945 (the "Warrant
Exchange Ratio"), rounded down to the nearest whole number of shares of Buyer
Common Stock, and (ii) the per share exercise price for the shares of Buyer
Common Stock issuable upon exercise of such assumed Seller Warrant will be equal
to 110% of the closing price of the Buyer Common Stock on the Nasdaq SmallCap
Market, or such other securities exchange or quotation system which is the
principal trading market for the Buyer Common Stock on the day prior to Closing.
After the Effective Time, Buyer will issue to each holder of an outstanding
Seller Warrant a notice describing the foregoing assumption of such Seller
Warrant by Buyer.
(g) Capital Stock of Merger Sub. Each share of common stock, per
value $.01 per share, of Merger Sub issued and outstanding immediately prior
to the Effective Time shall be one validly issued, fully paid and nonassessable
share of common stock, par value $.01 per share, of the Surviving Corporation.
Each stock certificate of Merger Sub evidencing ownership of any
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such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.
(h) Adjustments to Exchange Ratio. Each of the Exchange Ratio,
Series A Preferred Exchange Ratio, Series B Preferred Exchange Ratio and Warrant
Exchange Ratio shall be adjusted to reflect fully the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into either Buyer Common Stock or Seller Capital Stock),
reorganization, recapitalization or other like change with respect to Buyer
Common Stock or Seller Capital Stock occurring on or after the date hereof and
prior to the Effective Time, except in connection with any dividend of up to
400,000 shares of Buyer Common Stock by Seller to its shareholders. Further, in
the event that the issuance of an aggregate 209,580 shares of Buyer Common Stock
to Xxxxxxx XxXxxxxx and Xxxxx X. Xxxxx is not approved by the stockholders of
Buyer, the Exchange Ratio, Series A Preferred Exchange Ratio, Series B Preferred
Exchange Ratio and Warrant Exchange Ratio shall be adjusted downward
proportionately such that 209,580 less shares of Buyer Common Stock (assuming
the Seller Stock Options and Seller Warrants assumed by Buyer are fully
exercised) are issued to the stockholders, option holders and warrant holders of
Seller.
(i) Fractional Shares. No fraction of a share of Buyer Common Stock
will be issued by virtue of the Merger, but, in lieu thereof, each holder of
shares of Seller Capital Stock who would otherwise be entitled to a fraction
of a share of Buyer Common Stock (after aggregating all fractional shares of
Buyer Common Stock to be received by such holder), shall receive from Buyer an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the closing price of the Buyer Common Stock on
the Nasdaq SmallCap Market, or such other securities exchange or quotation
system which is the principal trading market for the Buyer Common Stock on the
day prior to Closing.
1.7 Dissenting Shares.
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(a) Notwithstanding any provision of this Agreement to the
contrary, the shares of any holder of Seller Capital Stock who has demanded and
perfected appraisal rights for such shares in accordance with Delaware Law and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal rights ("Dissenting Shares") shall not be converted into or represent
a right to receive Buyer Common Stock pursuant to Sections 1.6(a), (b) or (c),
as the case may be, but the holder thereof shall only be entitled to such rights
as are granted by Delaware Law.
(b) Notwithstanding the foregoing, if any holder of shares of Seler
Capital Stock who demands appraisal of such shares under Delaware Law shall
effectively withdraw the right to appraisal, then, as of the later of the
Effective Time or the occurrence of such effective withdrawal, such holder's
shares shall automatically be converted into and represent only the right to
receive Buyer Common Stock at the applicable exchange ratio specified in
Sections 1.6(a) - (c), without interest thereon, upon surrender of the
certificate representing such shares.
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(c) Seller shall give Buyer (i) prompt notice of any written
demands for appraisal of any shares of Seller Capital Stock, withdrawals of such
demands, and any other instruments served pursuant to Delaware Law and received
by Seller which relate to any such demand for appraisal and (ii) the opportunity
to participate in all negotiations and proceedings which take place prior to the
Effective Time with respect to demands for appraisal under Delaware Law. Seller
shall not, except with the prior written consent of Buyer or as may be required
by applicable law, voluntarily make any payment with respect to any demands for
appraisal of Seller Capital Stock or offer to settle or settle any such demands.
1.8 Exchange of Certificates.
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(a) Exchange Procedures. At the Closing, Buyer shall give
irrevocable instructions to American Stock Transfer & Trust Company, subject to
surrender for cancellation of certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding shares of Seller
Capital Stock, to issue to the stockholders of Seller, subject to deposit into
escrow pursuant to Section 1.13 hereof, certificates representing that number of
whole shares of Buyer Common Stock determined pursuant to Section 1.6(a), (b) or
(c), as the case may be, a check representing cash in lieu of any fractional
shares pursuant to Section 1.6(i), and any dividends or distributions payable
pursuant to Section 1.8(b) to which the stockholders of Seller may be entitled.
Until surrendered as contemplated by this Section 1.8(a), each certificate
representing shares of Seller Capital Stock shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender
the certificate representing Buyer Common Stock and cash in lieu of any
fractional shares. Upon surrender of the certificate(s) representing shares of
Seller Capital Stock by a stockholder of Seller for cancellation, such
stockholder shall receive the Buyer Common Stock issuable in the Merger to which
such stockholder is entitled, less the Buyer Common Stock to be placed in escrow
pursuant to Section 1.13, if applicable, with respect to such stockholder.
(b) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Buyer Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Buyer Common Stock represented thereby until the holder
of record of such Certificate shall surrender such Certificate. Subject to
applicable law, following surrender of any such Certificate, there shall be paid
to the record holder thereof, without interest, the amount of dividends or other
distributions with a record date after the Effective Time payable with respect
to the number of whole shares of Buyer Common Stock to which such record holder
is entitled.
(c) Transfers of Ownership. If any certificate for shares of
Buyer Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition to the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Buyer or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Buyer Common Stock in any name other than that of the registered
holder of the Certificate
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surrendered, or established to the satisfaction of Buyer or any agent designated
by it that such tax has been paid or is not payable.
(d) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, neither the Buyer, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Buyer Common Stock or Seller
Capital Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Seller Capital Stock. All shares of
Buyer Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid in respect thereof
pursuant to Section 1.6(i) and 1.8(b)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Seller Capital
Stock and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Seller Capital Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Buyer shall issue in exchange for
such lost, stolen or destroyed Certificates, upon the making of an affidavit of
that fact by the holder thereof, together with an agreement of indemnity, such
whole number of shares of Buyer Common Stock into which the shares of Seller
Capital Stock evidenced thereby shall have been converted, cash for fractional
shares, if any, as may be required pursuant to Section 1.6(i) and any dividends
or distributions payable pursuant to Section 1.8(b); provided, however, that
Buyer may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Buyer with respect to the Certificates alleged to
have been lost, stolen or destroyed.
1.11 Tax and Accounting Consequences. It is intended by the parties hereto
that the Merger shall constitute a tax-free reorganization within the meaning of
Section 368(a)(i)(A) of the Code. The parties hereto adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Income Tax Regulations.
1.12 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Seller and Merger Sub, the officers and directors of Seller
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is consistent with this Agreement.
1.13 Escrow. Seller shall cause certain of its stockholders to deposit (or
cause to be deposited) at Closing with Borstein & Xxxxxxxxx, as escrow
agent (the "Escrow Agent"), under
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the Escrow Agreement (the "Escrow Agreement") among the Escrow Agent, Buyer,
Xxxxxxxx Xxxxxxxxx Holding Company, Inc., and each such stockholder, in the form
attached hereto as Exhibit B, certificates representing 750,000 shares of the
Buyer Common Stock in the aggregate, to be held and released by the Escrow Agent
pursuant to and in accordance with the terms and conditions of the Escrow
Agreement.
1.14 Restricted Stock. All unvested shares of Seller Common Stock and
shares of Seller Common Stock subject to first refusal and/or repurchase rights
of the Seller existing at the Effective Time shall be converted into Buyer
Common Stock pursuant to Section 1.6(a) and shall continue to, as applicable,
vest on the same terms and conditions, and/or be subject to identical first
refusal or repurchase rights of Buyer, as provided under the stock plan and/or
restricted stock agreement pursuant to which such shares of Seller Common Stock
were issued.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer and Merger Sub, subject to
the exceptions disclosed in writing in the disclosure schedules attached hereto
supplied by Seller to Buyer and Merger Sub (the disclosures contained on any
schedule or subsection of a schedule being deemed a disclosure under all other
applicable schedules or subsections of schedules), as follows:
2.1 Organization of Seller. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power to own, lease and operate its property
and to carry on its business as now being conducted and as proposed to be
conducted, and is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a Material Adverse Effect (as defined below) on Seller. Except as set
forth in Schedule 2.1, Seller does not own, of record or beneficially, any
direct or indirect equity or other interest in any entity or any right
(contingent or otherwise) to acquire any equity interest in any business or
entity. Seller has delivered or made available a true and correct copy of the
Certificate of Incorporation and Bylaws of Seller, each as amended to date, to
counsel for Buyer. When used in connection with Seller, the term "Material
Adverse Effect" means, for purposes of this Agreement, any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), financial condition, results of operations or prospects of Seller.
2.2 Seller Capital Structure. The authorized capital stock of Seller
consists of 5,000,000 shares of Seller Common Stock and 3,000,000 shares of
Seller Preferred Stock, of which 1,500,000 shares have been designated as Series
A Preferred Stock and 1,000,000 shares have been designated as Series B
Preferred Stock. As of the date of this Agreement, there were issued and
outstanding 925,428 shares of Seller Common Stock and 903,000 shares of Seller
Series A Preferred Stock. Seller intends to issue no more than 450,000 shares of
Seller Series B Preferred Stock on or prior to the Effective Date. All
outstanding shares of Seller Capital Stock are duly authorized, validly issued,
fully paid and non-assessable and, to the knowledge of Seller, are held by the
stockholders of Seller, free and clear of any Encumbrances (as hereinafter
defined), and are not subject to preemptive rights created by statute, the
Certificate of
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Incorporation or Bylaws of Seller or any agreement or document to which Seller
is a party or by which it is bound. Schedule 2.2 lists each outstanding option
or warrant to acquire shares of the Seller Capital Stock as of the date of this
Agreement, the name of the holder of such option or warrant, the number of
shares subject to such option or warrant, the exercise price of such option or
warrant, the number of shares as to which such option or warrant will have
vested at such date and whether the exercisability of such option or warrant
will be accelerated in any way by the transactions contemplated by this
Agreement or for any other reason, and the extent of such acceleration, if any.
All shares of Seller Capital Stock subject to issuance upon exercise of the
options or warrants listed on Schedule 2.2, upon issuance in accordance with the
terms and conditions specified in the instruments pursuant to which such shares
are issuable, will be duly authorized, validly issued, fully paid and
nonassessable.
2.3 Obligations With Respect to Seller Capital Stock. Except as set forth
in Section 2.2, there are no equity securities of any class of Seller, or any
securities exchangeable or convertible into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. Except as set forth in
Section 2.2, Schedule 2.2 or Schedule 2.3, there are no options, warrants,
equity securities, calls, rights (including preemptive rights), commitments or
agreements of any character to which Seller is a party or by which it is bound
obligating Seller to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of Seller Capital Stock, or obligating
Seller to grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security, call, right, commitment or agreement. There
are no registration rights and, to the knowledge of Seller, there are no voting
trusts, proxies or other agreements or understandings, with respect to any
equity security of any class of Seller.
2.4 Authority.
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(a) Seller has all requisite corporate power and authority to
enter into this Agreement and the other documents to be executed by Seller in
connection herewith (the "Seller Ancillary Agreements") and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Seller Ancillary Agreements, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by the
Board of Directors of Seller. This Agreement has been, and the Seller Ancillary
Agreements at the Closing shall be, duly executed and delivered by Seller and,
assuming the due authorization, execution and delivery by Buyer and Merger Sub,
constitute the valid and binding obligation of Seller, enforceable in accordance
with their terms, except as enforceability may be limited by bankruptcy and
other similar laws and general principles of equity. The execution and delivery
of this Agreement and the Seller Ancillary Agreements by Seller does not, and
the performance of this Agreement and the Seller Ancillary Agreements by Seller
will not, (i) conflict with or violate the Certificate of Incorporation or
Bylaws of Seller, (ii) subject to the compliance with the requirements set forth
in Section 2.4(b) below, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Seller or by which its properties are
bound or affected, or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or impair Seller's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination,
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amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of Seller pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Seller is a party or by
which Seller or its properties is bound or affected except, with respect to
clauses (ii) and (iii), for any such conflicts, violations, defaults or other
occurrences that would not have a Material Adverse Effect on Seller. Schedule
2.4 lists all consents, waivers and approvals under any of Seller's agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to Seller in connection with the
execution and delivery of this Agreement or the Seller Ancillary Agreements or
the consummation of the transactions contemplated hereby or thereby, except for
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware.
2.5 Seller Financial Statements. The audited financial statements of Seller
(including any related notes thereto) delivered by Seller to Buyer and attached
hereto on Schedule 2.5 (the "Seller Financials"), were prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto) and fairly present the financial position of Seller as at the
respective dates thereof and the results of its operations and cash flows for
the periods indicated. Except as disclosed in the Seller Financials or Schedule
2.5, Seller does not have any liabilities (absolute, accrued, contingent or
otherwise) of a nature required to be disclosed on a balance sheet or in the
related notes to the financial statements which are, individually or in the
aggregate, material to the business, results of operations or financial
condition of Seller, except liabilities incurred since the date of the Balance
Sheet of Seller contained in the Seller Financials in the ordinary course of
business consistent with past practices.
2.6 Absence of Certain Changes or Events. Except as set forth in Schedule
2.6, since April 26, 2001, the date of Seller's incorporation, Seller has
carried on its businesses in the ordinary course and in all material respects
consistent with past practice. Except as set forth in Schedule 2.6, since April
26, 2001, Seller has not:
(a) incurred any obligation or liability (whether absolute, accrued,
contingent or otherwise), except pursuant to the terms of this Agreement or
except in the ordinary course of business and consistent with past practice;
(b) suffered any damage, destruction or loss, whether or not
covered by insurance, affecting its properties, assets or business, to the
extent that the same exceeds $10,000 individually or $25,000 in the aggregate;
(c) mortgaged, pledged or subjected to any lien, charge or other
Encumbrance any of its assets, tangible or intangible, except in the ordinary
course of business and consistent with past practice;
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(d) sold or transferred any of its assets, except in the ordinary
course of business and consistent with past practice, or canceled or compromised
any material debts or waived any claims or rights of a material nature;
(e) leased, licensed or granted to any person or entity any rights in
any of its assets or properties outside the ordinary course of business and
inconsistent with past practice;
(f) experienced any material adverse change in its financial
condition, results of operations, cash flows, assets, liabilities, business,
operations or prospects;
(g) made any change in any accounting principle or practice or in its
method of applying any such principle or practice;
(h) issued any additional shares of Seller Capital Stock or any
options, warrants or other rights to purchase, or any securities convertible
into or exchangeable for, shares of Seller Capital Stock;
(i) declared or paid any dividends on or made any other distributions
(however characterized) in respect of shares of Seller Capital Stock;
(j) repurchased or redeemed any shares of Seller Capital Stock;
(k) granted any general or specific increase in the salary,
commission rate or other compensation (including, without limitation, bonuses,
profit sharing or deferred compensation) payable or to become payable to any of
its employees or agents, except as required under existing contractual
obligations of Seller, or adopted any Seller Benefit Plan (as that term is
hereinafter defined), or increased, augmented or improved the benefits granted
to or for the benefit of any Seller Employee (as that term is hereinafter
defined) under any Seller Benefit Plan; or
(l) entered into any agreement to do any of the foregoing.
2.7 Taxes.
------
(a) Except as set forth in Schedule 2.7, all returns and reports
relating to Taxes (as hereinafter defined) which are required to be filed with
respect to Seller on or before the date hereof or which will be required to be
filed on or before the Closing Date have been, or will be, duly and timely filed
and all such returns and reports are, or will be, complete and correct in all
material respects. Except as set forth in Schedule 2.7, all Taxes, assessments,
fees and other governmental charges imposed on or with respect to Seller which
have become due and payable on or before the Closing Date have been, or will be
prior to the Closing Date, paid in a timely manner by Seller, or shall be
accrued for in the Seller Financials or in the books of Seller. Except as set
forth in Schedule 2.7 hereto, there are no actions or proceedings currently
pending or, to the knowledge of Seller, threatened against Seller by any
Governmental Entity for the assessment or collection of Taxes, no claim for the
assessment or collection of Taxes has been
11
asserted or, to the knowledge of Seller, threatened, against Seller, and there
are no matters under discussion by Seller with any Governmental Entity regarding
claims for the assessment or collection of Taxes against Seller. Except as set
forth in Schedule 2.7, there are no agreements, waivers or applications by
Seller for an extension of time for the assessment or payment of any Taxes.
There are no Tax liens on any of the assets of Seller (other than any lien for
current Taxes not yet due and payable). No claim has ever been made by any
Governmental Entity in a jurisdiction where Seller does not file Tax returns or
reports that it is or may be subject to taxation by that jurisdiction. Seller is
not a party to any Tax allocation or sharing agreement. Seller is not and has
never been a member of an affiliated group of corporations filing a consolidated
U.S. Income Tax return and is not liable, as a transferee or successor (by
contract or otherwise), for the Taxes of any corporation that previously was a
member of such an affiliated group.
(b) For purposes of this Agreement, the terms "Tax" and "Taxes"
shall mean and include any and all foreign, national, Federal, state,
local or other income, franchise, sales, gross receipts, use, value added, goods
and services, withholding, employment, payroll, social security, unemployment,
real and personal property, stamp duty, customs duty and intangibles tax and all
other taxes of any nature, deficiencies, fees, assessments, interest, penalties
or any other governmental charges, duties, impositions and liabilities of
whatever nature, including, without limitation, any installment payment for
taxes and contributions or other amounts determined with respect to compensation
paid to directors, officers, employees or independent contractors, from time to
time imposed by or required to be paid to any governmental authority (including
penalties and additions to taxes thereon, penalties for failure to file a return
or report and interest on any of the foregoing).
(c) Seller has not, with regard to any assets or property held,
acquired or to be acquired by Seller, filed a consent to the application of
Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code").
(d) Seller does not conduct any operations or sales which have
been or are required to be reported to the Internal Revenue Service (the "IRS")
under the provisions of Section 999 of the Code.
2.8 Intellectual Property.
----------------------
(a) To the knowledge of Seller, Seller owns, or has the right
to use, sell or license all patents, trademarks, trade names, service marks,
copyrights and other intellectual property necessary or required for the conduct
of its business as presently conducted (such intellectual property and the
rights thereto are collectively referred to herein as the "Seller IP Rights"),
except for any failure to own or have the right to use, sell or license that
would not reasonably be expected to have a Material Adverse Effect on Seller.
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not constitute
a breach of any instrument or agreement governing any Seller IP Rights (the
"Seller IP Rights Agreements"), will
12
not cause the forfeiture or termination or give rise to a right of forfeiture or
termination of any Seller IP Rights or impair the right of Seller, the Surviving
Corporation or Buyer to use, sell or license any Seller IP Rights or portion
thereof, except for the occurrence of any such breach, forfeiture, termination
or impairment that would not reasonably be expected to, individually or in the
aggregate, result in a Material Adverse Effect on Seller.
(c) To the knowledge of Seller, (i) neither the manufacture,
marketing, license, sale or intended use of any product or technology currently
licensed or sold or under development by Seller violates any license or
agreement between Seller and any third party or infringes any intellectual
property right of any other party; and (ii) there is no pending or, to the
knowledge of Seller, threatened, claim, arbitration or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any Seller IP
Rights, nor has Seller received any written notice asserting that any Seller IP
Rights or the proposed use, sale, license or disposition thereof conflicts or
will conflict with the rights of any other party, except, with respect to
clauses (i) and (ii), for any violations, infringements, claims or litigation
that would not reasonably be expected to have a Material Adverse Effect on
Seller.
(d) Seller has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all Seller IP Rights.
2.9 Compliance; Permits; Restrictions.
----------------------------------
(a) Seller is not in conflict with, or in default or violation
of, (i) any law, rule, regulation, order, judgment or decree applicable to
Seller or by which its properties are bound or affected or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Seller is a party or by which Seller or
its properties are bound or affected, except for any conflicts, defaults or
violations which would not reasonably be expected to have a Material Adverse
Effect on Seller. No investigation or review by any Governmental Entity is
pending or, to the knowledge of Seller, threatened against Seller, nor has any
Governmental Entity indicated an intention to conduct the same, other than, in
each such case, those the outcome of which would not reasonably be expected to
have a Material Adverse Effect on Seller.
(b) Seller holds all permits, licenses, variances, exemptions,
orders and approvals from Governmental Entities which are material to the
operation of the business of Seller (collectively, the "Seller Permits"). Seller
is in compliance with the terms of all Seller Permits, except where the failure
to hold the same or to so comply would not reasonably be expected to have a
Material Adverse Effect on Seller.
2.10 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Seller has received any
notice of assertion, nor, to the knowledge of Seller, is there a threat of an
action, suit, proceeding, claim, arbitration or investigation against Seller
which would reasonably be expected to have a Material Adverse Effect on Seller,
or which in any manner challenges or seeks to prevent, enjoin, alter or delay
any of the transactions contemplated by this Agreement.
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2.11 Brokers' and Finders' Fees. Seller has not incurred, nor will it or
they incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
2.12 Employees; Employee Benefits.
-----------------------------
(a) Schedule 2.12 sets forth the names of all employees of
Seller as of the date of this Agreement (the "Seller Employees") and, with
respect to each Seller Employee, such Seller Employee's job title and the date
of commencement of employment of such Seller Employee. Seller has accrued on its
books and records all obligations for salaries, vacations, benefits and other
compensation with respect to its Seller Employees and any of its Former Seller
Employees (as defined below), to the extent required by GAAP, including, but not
limited to, severance, bonuses, incentive and deferred compensation, and all
commissions and other fees payable to salespeople, sales representatives and
other agents. Seller does not currently offer, and has never offered, retiree
health and insurance benefits to Seller Employees and Former Seller Employees,
and Seller does not have any liabilities (contingent or otherwise) with respect
thereto. Except as set forth in Schedule 2.12, there are no outstanding loans
from Seller to any Seller Employee or any other third party. Complete and
correct copies of all written agreements with or concerning Seller Employees,
including, without limitation, union and collective bargaining agreements, and
all employment policies, and all amendments and supplements thereto, have been
delivered to Buyer, and a list of all such agreements and policies is set forth
in Schedule 2.12. None of the Seller Employees has, to the knowledge of Seller,
indicated a desire to terminate his or her employment other than at normal
retirement age, or any intention to terminate his or her employment in
connection with the transactions contemplated by this Agreement. Except as set
forth in Schedule 2.12, since its formation, Seller has not, except in the
ordinary course of business and consistent with past practice, (i) increased the
salary or other compensation payable or to become payable to or for the benefit
of any of the Seller Employees, (ii) provided any of the Seller Employees with
any increased security or tenure of employment, (iii) increased the amounts
payable to any of the Seller Employees upon the termination of any such person's
employment or (iv) adopted, increased, augmented or improved benefits granted to
or for the benefit of any of the Seller Employees under any Seller Benefit Plan.
(b) Seller has complied at all times and in all material
respects with all laws, statutes, rules and regulations applicable with respect
to employees in each of the jurisdictions in which it operates and/or does
business. Seller has complied in all material respects with Title VII of the
Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act,
as amended, the Americans with Disabilities Act, the Family Medical Leave Act,
the Fair Labor Standards Act, as amended, the National Labor Relations Act, and
all applicable laws, statutes and regulations governing payment of minimum wages
and overtime rates, labor standards, working conditions, the withholding and
payment of Taxes or any other kind of governmental charge from compensation,
terms and conditions of employment, workplace safety, workers' compensation,
disability pay, social benefits whether or not imposed by a governmental
program, discriminatory practices, including, without limitation, with respect
to employment and discharge, or otherwise relating to the conduct of employers
with respect to employees or potential employees (collectively, the "Employee
Laws"), and there have been no claims made
14
or, to the knowledge of Seller, threatened thereunder against Seller arising out
of or relating to or alleging any violation of any of the foregoing. Seller has
complied in all material respects with the employment eligibility verification
form requirements under the Immigration and Naturalization Act, as amended
("INA"), with respect to Seller Employees, Seller has complied with the
paperwork provisions and anti-discrimination provisions of the INA and Seller
has obtained and maintained the employee records and I-9 forms with respect to
the Seller Employees in proper order as required by law. Seller is not currently
employing any Seller Employees who are not citizens of the United States or who
are not authorized to work in the United States. There are no controversies,
strikes, work stoppages, picketing, filed grievances, job actions, unfair labor
practice charges, investigations, complaints, disputes or other proceedings
pending or threatened between Seller and any of the Seller Employees or Former
Seller Employees (as defined below); no labor union or other collective
bargaining unit represents or has ever represented any of the Seller Employees
in connection with their employment with Seller; Seller has no knowledge of any
organizational effort by any labor union or other collective bargaining agent
currently under way or threatened with respect to any Seller Employees; no
negotiation with or consent of any labor union or other collective bargaining
unit representing Seller Employees is required to consummate the transactions
contemplated by this Agreement; and Seller has not incurred any liability under
the Worker Adjustment Retraining Notification Act ("WARN") or similar state and
local laws.
(c) None of the Seller Employees are "leased employees" within
the meaning of Section 414(n) of the Code. Schedule 2.12 sets forth a list of
each defined benefit and defined contribution plan, stock ownership plan,
executive compensation program or arrangement, bonus plan, incentive
compensation plan or arrangement, deferred compensation agreement or
arrangement, supplemental retirement plan or arrangement, vacation pay,
sickness, disability or death benefit plan (whether provided through insurance,
on a funded or unfunded basis or otherwise), medical or life insurance plan,
providing benefits to any Seller Employee, retiree or Former Seller Employee or
any of their dependents, survivors or beneficiaries, employee stock option or
stock purchase plan, severance pay, termination or salary continuation plan,
Section 125 cafeteria plan, fringe benefit plan, and each other employee benefit
plan, program or arrangement, including, without limitation, each "employee
benefit plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), which is maintained by Seller
for the benefit of or relating to any of the Seller Employees or to any former
employees of Seller (the "Former Seller Employees") or their dependents,
survivors or beneficiaries, whether or not legally binding, and for which Seller
could reasonably have any liabilities, all of which are herein referred to as
the "Seller Benefit Plans." Except as set forth on Schedule 2.12(c), none of
Buyer, Merger Sub, Surviving Corporation or Seller will incur any liability
under any severance agreement, deferred compensation agreement, employment
agreement, similar agreement or Seller Benefit Plan as a result of the
consummation of the transactions contemplated by this Agreement.
(d) Each Seller Benefit Plan which is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) meets the requirements of
Section 401(a) of the Code; the trust, if any, forming part of such plan is
exempt from U.S. Federal income Tax under Section 501(a) of the Code; a
favorable determination letter has been issued by the IRS after January 1,
15
1994 with respect to each plan and trust and each amendment thereto; and since
the date of such determination letter there are no circumstances which are
likely to adversely affect the qualification of such plan. No Seller Benefit
Plan is a "voluntary employees beneficiary association" (within the meaning of
Section 501(c)(9) of the Code) and there have been no other "welfare benefit
funds" relating to Seller Employees or Former Seller Employees within the
meaning of Section 419 of the Code. No event or condition exists with respect to
any Seller Benefit Plan that could subject Seller to any Tax under Section 4980B
of the Code or, for plan years beginning before January 1, 1989, Section 162(k)
of the Code. With respect to each Seller Benefit Plan, Seller has heretofore
delivered to Buyer complete and correct copies of the following documents, where
applicable: (i) the most recent annual report (Form 5500 series), together with
schedules, as required, filed with the IRS, and any financial statements and
opinions required by Section 103(a)(3) of ERISA, (ii) the most recent
determination letter issued by the IRS, (iii) the most recent summary plan
description and all modifications, (iv) the text of the Seller Benefit Plan and
of any trust, insurance or annuity contracts maintained in connection therewith,
(v) the most recent actuarial report, if any, relating to the Seller Benefit
Plan and (vi) the most recent actuarial valuation, study or estimate of any
retiree medical and life insurance benefits plan or supplemental retirement
benefit plan.
(e) Except as set forth on Schedule 2.12, neither Seller nor any
corporation or other trade or business under common control with Seller (as
determined pursuant to Section 414(b) or (c) of the Code) (a "Common Control
Entity") maintains or contributes to or in any way directly or indirectly has
any liability (whether contingent or otherwise) with respect to, any
"multiemployer plan," within the meaning of Section 3(37) or 4001(a)(3) of
ERISA, or any other employee pension benefit plan subject to Title IV of ERISA
or Section 412 of the Code; no Seller Benefit Plan or of any Common Control
Entity is subject to Title IV of ERISA. No contingent or other liability with
respect to which Seller has or could have any liability exists under Title IV of
ERISA to the Pension Benefit Guaranty Corporation (the "PBGC") or to any Seller
Benefit Plan; and no assets of the Seller are subject to a lien under Sections
4064 or 4068 of ERISA. Except as set forth on in Schedule 2.12, all
contributions required to be made to or with respect to each Seller Benefit Plan
with respect to the service of Seller Employees or Former Seller Employees prior
to the date hereof have been made or have been accrued for in the books and
records of Seller for all periods through the date hereof. Seller does not have
any obligation to provide post-retirement medical or other benefits to Seller
Employees or Former Seller Employees or their survivors, dependents and
beneficiaries, except as may be required by Section 4980B of the Code or Part 6
of Title I of ERISA or applicable state medical benefits continuation law and
Seller may terminate any such post-retirement medical or other benefits upon
thirty (30) days' notice or less without any liability therefor.
(f) None of the Seller Benefit Plans has been subject to a
"reportable event," within the meaning of Section 4043 of ERISA (whether or not
waived), within the 24-month period ended on the date hereof; there have been no
"prohibited transactions" within the meaning of Section 4975 of the Code or Part
4 of Subtitle B of Title I of ERISA in connection with any of the Seller Benefit
Plans that, assuming the taxable period of such transaction expired as of the
date hereof, could subject Seller to a Tax or penalty imposed by either Section
4975 of the Code or Section 502(i) of ERISA in an amount which could have a
Material Adverse Effect; none of
16
the Seller Benefit Plans which are subject to Section 412 of the Code has
incurred any "accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code and Seller is not subject to a lien under
Section 412(n) of the Code; each Seller Benefit Plan has, in all material
respects, been administered to date in accordance with the applicable provisions
of ERISA, the Code and applicable law and with the terms and provisions of all
documents, contracts or agreements pursuant to which such Seller Benefit Plan is
maintained; all reports and information required to be filed with the Department
of Labor, the IRS or the PBGC with respect to any Seller Benefit Plan have been
timely filed or delivered; there is no arbitration, claim or suit pending or, to
the knowledge of Seller, threatened, involving a Seller Benefit Plan (other than
routine claims for benefits), and, to the knowledge of Seller, there is no basis
for such a claim; none of the Seller Benefit Plans nor any fiduciary thereof has
been, to the knowledge of Seller, the direct or indirect subject of an order or
investigation or examination by a governmental or quasi-governmental agency and
there are no matters pending before the IRS, the Department of Labor, or any
other governmental agency with respect to a Seller Benefit Plan; and there has
not been and will be no "parachute payment" (as defined in Section 280G(b)(2) of
the Code) to any of the Seller Employees prior to the Closing or as a result of
the transactions contemplated by this Agreement.
2.13 Absence of Liens and Encumbrances. Seller has good, valid and
marketable title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of its properties and assets, real, personal and
mixed, tangible and intangible, used in its business, free and clear of any
mortgages, pledges, security interests, liens, claims, charges, equities,
conditional sales contracts, restrictive reservations, options, first refusal
rights or encumbrances of any nature whatsoever ("Encumbrances").
2.14 Environmental Matters.
----------------------
(a) Hazardous Material. To Seller's knowledge, no underground
storage tanks and no amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (each, a "Hazardous Material"), but excluding
office and janitorial supplies, are present in the soil, groundwater, building
materials or ambient air of any real property currently occupied by Seller, and
Seller has not received any notice that it is allegedly liable for the presence
of Hazardous Materials in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that Seller has at any
time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. To Seller's knowledge, Seller
has not transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of any law
in effect on or before the Closing Date, nor has Seller disposed of,
transported, sold, or manufactured any product containing a Hazardous
17
Material (collectively "Hazardous Materials Activities") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) Permits. Seller currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Seller Environmental
Permits") necessary for the conduct of Seller's Hazardous Materials Activities
as currently conducted and other businesses of Seller as such activities and
businesses are currently being conducted, except where the failure to so hold
could not have a Material Adverse Effect on Seller.
(d) Environmental Liabilities. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the knowledge of Seller, threatened concerning any Seller
Environmental Permit or any Hazardous Materials Activity of Seller. Seller is
not aware of any fact or circumstance which could involve Seller in any
environmental litigation or impose upon Seller any environmental liability that
would have a Material Adverse Effect on Seller.
2.15 Major Customers. Seller has not received any notice or other written
communication from any customer of Seller terminating or reducing, or setting
forth an intention to terminate or reduce in the future, or otherwise reflecting
a material adverse change in, the business relationship between such customer
and Seller and, to the knowledge of Seller, there has never been any material
adverse change in the business relationship of Seller with any such customer.
2.16 Agreements, Contracts and Commitments. (a) Except as set forth in
Schedule 2.16, Seller is not a party to or bound by:
(i) any collective bargaining agreements;
(ii) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other Seller Benefit Plans
or arrangements;
(iii) any employment or consulting agreement, contract or
commitment not terminable by Seller on no more than 30 days' notice without
liability;
(iv) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(v) any agreement of indemnification or guaranty not entered into in
the ordinary course of business other than indemnification agreements between
Seller and any of its officers or directors;
18
(vi) any agreement, contract or commitment containing any covenant
limiting the freedom of Seller to engage in any line of business or compete with
any person;
(vii) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $25,000 and not
cancelable without penalty;
(viii) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary
course of business or any ownership interest in any corporation, partnership,
joint venture or other business enterprise;
(ix) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit;
(x) any joint marketing, sales or development agreement;
(xi) any distribution agreement (identifying any that contain
exclusivity provisions);
(xii) any royalty agreement; or
(xiii) any other agreement, contract or commitment (excluding
real and personal property leases) which involve payment by Seller under any
such agreement, contract or commitment of $10,000 or more in the aggregate.
(b) Schedule 2.16 contains a complete and correct list of all Seller
Contracts (as defined below) which are valid and binding upon Seller and, to
Seller's knowledge, any other party to said Seller Contract, whether written or
oral. Neither Seller, nor to the knowledge of Seller, any other party to a
Seller Contract (as defined below), has breached, violated or defaulted under,
or received notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which Seller is a party or by which it is bound of the type set forth in
Schedule 2.16 or described in clauses (i) through (xiii) above (any such
agreement, contract or commitment, a "Seller Contract") in such a manner as
would permit any other party to cancel or terminate any such Seller Contract, or
would permit any other party to seek damages.
2.17 Change of Control Payments. Except as set forth on Schedule 2.17,
there are no plans or agreements pursuant to which any amounts may become
payable (whether currently or in the future) to current or former officers or
directors of Seller as a result of or in connection with the Merger.
2.18 Title to Properties and Related Matters.
----------------------------------------
(a) Seller does not own or lease any real property.
19
(b) All items of equipment, machinery, vehicles, furniture,
fixtures and other tangible personal property currently owned or used by Seller
as of the date hereof are in reasonable operating condition and repair, ordinary
wear and tear excepted, taking into consideration its age and period of use, are
physically located at or about Seller's place of business or where it otherwise
conducts its business and are owned outright by Seller or validly leased under
one of the leases set forth in Schedule 2.18. No material items of such personal
property are subject to any agreement, arrangement or understanding for its use
by any person other than Seller. To the knowledge of Seller, the maintenance and
operation thereof has complied in all material respects with all applicable
laws, regulations, ordinances, contractual commitments and obligations. Except
as set forth in the Schedule 2.18 or as disclosed in the Seller Financials, no
item of tangible personal property owned or used by Seller is subject to any
conditional sale agreement, installment sale agreement or title retention
agreement or arrangement of any kind; as to each material item of personal
property subject to any such agreement or arrangement, the Schedule 2.18 set
forth a brief description of the property in question and the amount and
repayment terms of the underlying obligation.
(c) Schedule 2.18 sets forth a complete and correct list and
summary description of all tangible personal property leases to which Seller is
a party (either as lessor or lessee), together with a brief description of the
property leased and identifying the date and term of the lease, the amount and
timing of lease payments and any renewal or purchase options, provided that,
with respect to personal property leases, only those leases wherein the property
leased has a fair market value exceeding $1,000 or the total annual rental
payments exceed $5,000 ("Material Personal Property Leases") shall be required
to be disclosed. Seller has made available to Buyer complete and correct copies
of each lease (and any amendments thereto) listed in Schedule 2.18. Except as
set forth in Schedule 2.18, (i) each such lease is in full force and effect;
(ii) all lease payments due to date on any such lease have been paid, and
neither Seller nor (to the knowledge of Seller) any other party is in default
under any such lease, and no event has occurred which constitutes, or with the
lapse of time or the giving of notice or both would constitute, a default by
Seller or (to the knowledge of Seller) any other party under such lease; (iii)
there are no disputes or disagreements between Seller, on the one hand, and any
other party, on the other hand, with respect to any such lease; and (iv) the
lessor under each such lease has consented or been given notice (where such
consent or the giving of such notice is necessary) sufficient that such lease
shall remain in full force and effect following the consummation of the
transactions contemplated by this Agreement without any modification in the
rights or obligations of the lessee under any such lease.
0.00.Xxxxxxxx Software.
------------------
(a) Schedule 2.19 sets forth a complete and correct list of all
computer systems and software which are used by Seller in the administration
and/or financial accounting of its business (the "Seller Proprietary Software").
Except as set forth in Schedule 2.19, Seller is the owner or licensee of the
Seller Proprietary Software, and, to the knowledge of Seller, the Seller
Proprietary Software does not infringe any patent, copyright, trade secret,
service xxxx, trademark or any other right of any third party.
20
(b) Seller warrants that (i) all non-Seller Proprietary
Software material to the conduct of its business was commercially available at
the time of its acquisition by Seller and was acquired by Seller though normal
business channels and (ii) neither Seller, nor any affiliates, agents or
third-party consultants (but only with respect to services rendered to Seller)
are in breach of any licensing arrangements (including, without limitation,
payment of applicable user fees) with respect to any non-Seller Proprietary
Software.
2.20 Board of Directors and Stockholder Approval. The Board of Directors of
Seller has, as of the date of this Agreement, determined (i) that the Merger is
fair to and in the best interests of Seller and its stockholders, and (ii) to
recommend that the stockholders of Seller approve this Agreement.
2.21 Minute Books. The minute books of Seller made available to counsel for
Buyer are the only minute books of Seller and contain a reasonably accurate
summary, in all material respects, of all meetings of directors (or committees
thereof) and stockholders or actions by written consent since the time of
incorporation of Seller.
2.22 Material Suppliers; Inventories.
--------------------------------
(a) Seller purchases its supplies and materials from a number of
suppliers, none of which represented more than five percent (5%) of aggregate
purchases of Seller, except as set forth on Schedule 2.22. None of the suppliers
has given Seller any notice or other written communication terminating,
suspending or materially reducing, or setting forth an intention to terminate,
suspend or materially reduce in the future, or otherwise reflecting any change,
occurrence or other event that has resulted in or is reasonably likely to result
in, individually or in the aggregate, a Material Adverse Effect in the business
relationship between such supplier and Seller and, to the knowledge of Seller,
there has not been any adverse change in the business relationship of Seller
with any such supplier.
(b) The inventory of materials used by the Seller in the conduct of
its business (the "Seller Inventory") is owned by it free and clear of any
Encumbrances, and all of the Seller Inventory, if any, is serviceable and
in good condition, reasonable wear and tear excepted.
2.23 Compliance with Applicable Law. Seller is not in violation of any
applicable foreign or domestic laws, rules, regulations, ordinances, codes,
judgments, orders, injunctions, writs or decrees of any Federal, state, local or
foreign court or governmental body or agency thereof to which it may be subject
which are applicable to or which would reasonably be expected to affect the
respective businesses or operations of Seller, except for any violations which
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. No claims have been filed against Seller, and Seller
has not received any notice, alleging any such violation, nor, to the knowledge
of Seller, is there any inquiry, investigation or proceeding relating thereto.
2.24 Accounts Receivable. Schedule 2.24 sets forth all of Seller's accounts
receivable as of the date specified in Schedule 2.24, which date is no less than
thirty days prior to the date
21
hereof. All such accounts receivable of Seller and those arising after the date
set forth on Schedule 2.24 and prior to Closing (collectively, the "Seller
Receivables") (a) arose and will arise from bona fide sales of goods or services
in the ordinary course of business and consistent with past practice; (b) are
owned and will be owned by Seller at Closing free and clear of any Encumbrances;
and (c) are accurately and fairly reflected on the Seller Financials or, with
respect to Seller Receivables created after the date of the Seller Financials
and through the Closing Date, are and will be accurately and fairly reflected in
the books and records of Seller.
2.25 Accounts Payable. Schedule 2.25 sets forth all of the Seller's
accounts payable as of the date specified in Schedule 2.25, which date is no
less than thirty days prior to the date hereof, grouped by those which are, as
of the date of this Agreement, currently due and payable without penalty, past
due from 1-30 days, past due from 31-60 days, past due from 61-90 days and past
due more than 90 days. All accounts payable of Seller set forth on Schedule 2.25
and those arising after the date thereof and prior to Closing (collective, the
"Seller Payables") (a) arose and will arise from bonafide purchases of goods or
services in the ordinary course of business and consistent with past practice
and (b) are accurately and fairly reflected on the Seller Financials or, with
respect to Seller Payables created after the date of the Seller Financials, are
and will be accurately and fairly reflected in the books and records of Seller.
2.26 Insurance. Schedule 2.26 contains a complete and correct list of all
insurance policies carried by, or covering, Seller with respect to their
businesses, together with, in respect of each such policy, the name of the
insurance carrier, the policy number, the risk insured against, the limits of
coverage, the policy term, and the expiration date thereof. All such policies
are in full force and effect, and no notice of cancellation has been given with
respect to any such policy. All premiums due thereon have been paid in a timely
manner. Seller believes that the policies of insurance identified in Schedule
2.26 adequately insure Seller.
2.27 Bank Accounts; Powers of Attorney. The Seller has previously provided
Buyer with a complete and correct list showing: (a) all banks in which Seller
maintains a bank account or safe deposit box (collectively, "Bank Accounts"),
together with, as to each such Bank Account, the account number, the names of
all signatories thereof and the authorized powers of each such signatory and,
with respect to each such safe deposit box, the number thereof and the names of
all persons having access thereto; and (b) the names of all persons holding
powers of attorney from Seller and a summary statement of the terms thereof.
2.28 Transactions with Related Parties. Schedule 2.28 contains an accurate
and complete list and description of all agreements, arrangements and
understandings (including outstanding indebtedness) which are currently in
effect or which occurred at any time after December 31, 1999 between Seller and
any of the following: (i) each director and officer of Seller; (ii) the spouses,
children, grandchildren, siblings, parents, grandparents, uncles, aunts, nieces,
nephews or first cousins of any such director or officer or their spouses
(collectively, "near relatives"); (iii) any trust for the benefit of any such
director or officer of Seller or any of their respective near relatives; and
(iv) any corporation, partnership, joint venture or other entity owned or
controlled by any such director or officer or any of their respective near
relatives.
22
2.29 Warranties. Seller has previously delivered to Buyer copies of all
past and present standard and other express warranties extended by Seller with
respect to the products and services now or in the past six years sold by
Seller. Seller has not, and Seller knows of no basis for, any material liability
as a result of claims against Seller based on products sold and services
rendered by Seller on or prior to the date hereof, nor has Seller received any
notices from any person threatening any such claim.
2.30 Proxy Statement/SEC Filings. None of the information supplied or to be
supplied by Seller in writing for inclusion or incorporation by reference in any
proxy statement to be furnished to Buyer's stockholders, or in any required
filing with the Securities and Exchange Commission ("SEC") related to the
Merger, will, on the date any such proxy statement is delivered to Buyer's
stockholders or any such filing with the SEC is made, contain any untrue
statement of a material fact or omit to state any 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.
2.31 Disclosure. No representation or warranty by Seller contained in this
Agreement (including, without limitation, Section 2.1 through 2.30, inclusive),
nor any other statement, schedule, certificate or other document delivered or to
be delivered by Seller to Buyer or Merger Sub pursuant hereto or in connection
with the transactions contemplated by this Agreement, contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements made herein or therein,
in the light of the circumstances in which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Buyer and Merger Sub represent and warrant to Seller, subject to the
exceptions disclosed in writing in the disclosure schedules attached hereto
supplied by Buyer to Seller (the disclosures contained on any schedule or
subsection of a schedule being deemed a disclosure under all other applicable
schedules or subsections of schedules), as follows:
3.1 Organization of Buyer. Buyer and its subsidiaries listed on Schedule
3.1 (collectively, the subsidiaries of Buyer are referred to collectively as the
"Buyer Subsidiaries" or individually as a "Buyer Subsidiary", and together with
the Buyer, as the "Buyer Group") is each a corporation duly organized, validly
existing and, except as set forth on Schedule 3.1, in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have a Material Adverse Effect (as defined
below) on Buyer Group. Set forth on Schedule 3.1 is a true and complete list of
all of Buyer's subsidiaries, together with the jurisdiction of incorporation of
each subsidiary and Buyer's equity interest therein. Merger Sub has no
subsidiaries. Except for PWR Systems, Inc., Renaissance Multimedia, Inc. and
Software Publishing Corporation, the Buyer
23
Subsidiaries have no material assets, liabilities or operations. Buyer has
delivered or made available a true and correct copy of the Certificate of
Incorporation and Bylaws of Buyer and similar governing instruments of each
Buyer Group member, each as amended to date, to counsel for Seller. When used in
connection with Buyer Group, the term "Material Adverse Effect" means, for
purposes of this Agreement, any change, event or effect that is materially
adverse to the business, assets (including intangible assets), financial
condition or results of operations of Buyer Group taken as a whole.
3.2 Buyer and Merger Sub Capital Structure. The authorized capital stock of
Buyer consists of 60,000,000 shares of Buyer Common Stock, of which there were
2,523,867 shares issued and outstanding as of the date of this Agreement, and
2,000,000 shares of serial preferred stock, par value $.001 per share, of which
no shares were issued or outstanding as of the date of this Agreement. The
authorized capital stock of Merger Sub consists of 1,000 shares of Common Stock,
par value $.001 per share, 100 shares of which, as of the date of this
Agreement, are issued and outstanding and are held by Buyer. All outstanding
shares of the Buyer Common Stock are duly authorized, validly issued, fully paid
and non-assessable and are not subject to preemptive rights created by statute,
the Certificate of Incorporation or Bylaws of Buyer or any agreement or document
to which Buyer is a party or by which it is bound. As of the date of this
Agreement, Buyer had reserved an aggregate of 1,077,909 shares of Common Stock,
net of exercises, for issuance to employees, officers, directors, advisors and
consultants pursuant to Buyer's stock option plans, under which options to
purchase an aggregate of 999,427 shares of Buyer Common Stock have been granted,
as set forth on Schedule 3.2. In addition, Buyer has outstanding options and
warrants to purchase up to 369,970 shares of Buyer Common Stock granted outside
the Buyer's stock option plans, as set forth on Schedule 3.2. All shares of the
Buyer Common Stock subject to issuance as aforesaid, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable.
3.3 Obligations With Respect to Buyer Common Stock. Except as set forth in
Section 3.2 or Schedule 3.3, there are no equity securities of any class of
Buyer, or any securities exchangeable or convertible into or exercisable for
such equity securities, issued, reserved for issuance or outstanding. Except for
securities Buyer owns, directly or indirectly through one or more subsidiaries,
there are no equity securities of any class of any subsidiary of Buyer, or any
security exchangeable or convertible into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. Except as set forth in
Section 3.2 or in Schedule 3.3, there are no options, warrants, equity
securities, calls, rights (including preemptive rights), commitments or
agreements of any character to which Buyer or any of its subsidiaries is a party
or by which it is bound obligating Buyer or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition, of any
shares of Buyer Common Stock or Buyer preferred stock or obligating Buyer or any
of its subsidiaries to grant, extend, accelerate the vesting of or enter into
any such option, warrant, equity security, call, right, commitment or agreement.
Except as set forth on Schedule 3.3, there are no registration rights and, to
the knowledge of Buyer there are no voting trusts, proxies or other agreements
or understandings with respect to
24
any equity security of any class of Buyer or with respect to any equity security
of any class of any of its subsidiaries.
3.4 Authority.
----------
(a) Each of Buyer and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and the other documents to be
executed by Buyer and Merger Sub in connection herewith (the "Buyer Ancillary
Agreements") and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Buyer Ancillary Agreements
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by the Board of Directors of Buyer and, in the case of this
Agreement, Merger Sub. This Agreement has been, and the Buyer Ancillary
Agreements at the Closing will be, duly executed and delivered by each of Buyer
and Merger Sub and, assuming the due authorization, execution and delivery of
this Agreement by Seller, constitute the valid and binding obligations of each
of Buyer and Merger Sub, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. Except as set forth on Schedule 3.4, the execution and
delivery of this Agreement and the Buyer Ancillary Agreements by each of Buyer
and Merger Sub does not, and the performance of this Agreement and the Buyer
Ancillary Agreements by each of Buyer and Merger Sub will not, (i) conflict with
or violate the Certificate of Incorporation or Bylaws of Buyer or Merger Sub,
(ii) subject to compliance with the requirements set forth in Section 3.4(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Buyer or Merger Sub or by which any of their respective
properties is bound or affected, or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or impair Buyer's rights or alter the rights or obligations of
any third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Buyer or Merger Sub pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Buyer or Merger Sub
is a party or by which Buyer or Merger Sub or any of their respective properties
are bound or affected, except, with respect to clauses (ii) and (iii), for any
such conflicts, violations, defaults or other occurrences that would not have a
Material Adverse Effect on Buyer Group. Schedule 3.4 lists all consents, waivers
and approvals under any of Buyer's agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to Buyer or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, and (ii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable Federal and state securities laws and the laws of any
foreign country.
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3.5 Buyer Financial Statements. Each of the audited consolidated financial
statements of Buyer as of and for the years ended December 31, 1999 and 2000
(including, in each case, any related notes thereto) filed by Buyer with the SEC
(the "Audited Buyer Financials"), was prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of Buyer and its subsidiaries as at the respective dates thereof and
the consolidated results of its operations and cash flows for the periods
indicated. Each of the unaudited interim financial statements of Buyer ("Interim
Buyer Financials", and together with the Audited Buyer Financials, the "Buyer
Financials") as of and for the nine month period ended September 30, 2001 filed
by Buyer with the SEC, was prepared on a basis consistent with the preparation
of the Audited Buyer Financials, except for the exclusion of footnotes and
except that such Interim Buyer Financials were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount, and except as set forth on Schedule 3.5. The balance sheet
of Buyer as of September 30, 2001 is hereinafter referred to as the "Buyer
Balance Sheet." Except as disclosed in the Buyer Financials, neither Buyer nor
any of its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise) of a nature required to be disclosed on a balance sheet or in the
related notes to the consolidated financial statements which are, individually
or in the aggregate, material to the business, results of operations or
financial condition of Buyer and its subsidiaries taken as a whole, except
liabilities incurred since the date of the Buyer Balance Sheet in the ordinary
course of business consistent with past practices.
3.6 Absence of Certain Changes or Events. Except as set forth in Schedule
3.6, since December 31, 2000, Buyer Group has carried on its business in the
ordinary course and in all material respects consistent with past practice.
Except as set forth in Schedule 3.6, since December 31, 2000, no Buyer Group
member has:
(a) incurred any obligation or liability (whether absolute,
accrued, contingent or otherwise), except pursuant to the terms of this
Agreement or except in the ordinary course of business and consistent with past
practice;
(b) suffered any damage, destruction or loss, whether or not
covered by insurance, affecting its properties, assets or business, to the
extent that the same exceeds $10,000 individually or $25,000 in the aggregate;
(c) mortgaged, pledged or subjected to any lien, charge or other
Encumbrance any of its assets, tangible or intangible, except in the
ordinary course of business and consistent with past practice;
(d) sold or transferred any of its assets, except in the ordinary
course of business and consistent with past practice, or canceled or
compromised any material debts or waived any claims or rights of a material
nature;
(e) leased, licensed or granted to any person or entity any rights in
any of its assets or properties outside the ordinary course of business and
inconsistent with past practice;
26
(f) experienced any material adverse change in its financial
condition, results of operations, cash flows, assets, liabilities, business or
operations;
(g) made any change in any accounting principle or practice or in its
method of applying any such principle or practice;
(h) issued any additional shares of its capital stock or any
options, warrants or other rights to purchase, or any securities convertible
into or exchangeable for, shares of its capital stock;
(i) declared or paid any dividends on or made any other distributions
(however characterized) in respect of shares of its capital stock;
(j) repurchased or redeemed any shares of its capital stock;
(k) granted any general or specific increase in the salary,
commission rate or other compensation (including, without limitation, bonuses,
profit sharing or deferred compensation) payable or to become payable to any of
its employees or agents, except as required under existing contractual
obligations of the Buyer Group member, or adopted any Buyer Group Benefit Plan,
or increased, augmented or improved the benefits granted to or for the benefit
of any Buyer Employee (as that term is hereinafter defined) under any Buyer
Group Benefit Plan; or
(l) entered into any agreement to do any of the foregoing.
3.7 Taxes.
------
(a) Except as set forth in Schedule 3.7, all returns and reports
relating to Taxes (as hereinafter defined) which are required to be filed with
respect to the Buyer Group or any of its individual members on or before the
date hereof or which will be required to be filed on or before the Closing Date
have been, or will be, duly and timely filed and all such returns and reports
are, or will be, complete and correct in all material respects. Except as set
forth in Schedule 3.7, all Taxes, assessments, fees and other governmental
charges imposed on or with respect to the Buyer Group or any of its individual
members which have become due and payable on or before the Closing Date have
been, or will be prior to the Closing Date, paid in a timely manner by Buyer or
the applicable Buyer Group member, or shall be accrued for in the Buyer
Financials or in the books of Buyer or the applicable Buyer Group member. Except
as set forth in Schedule 3.7 hereto, there are no actions or proceedings
currently pending or, to the knowledge of Buyer, threatened against a Buyer
Group member by any Governmental Entity for the assessment or collection of
Taxes, no claim for the assessment or collection of Taxes has been asserted or,
to the knowledge of Buyer, threatened, against a Buyer Group member, and there
are no matters under discussion by a Buyer Group member with any Governmental
Entity regarding claims for the assessment or collection of Taxes against such
Buyer Group member. Except as set forth in Schedule 3.7, there are no
agreements, waivers or applications by a Buyer Group member for an extension of
time for the assessment or payment of any Taxes. There are
27
no Tax liens on any of the assets of a Buyer Group member (other than any lien
for current Taxes not yet due and payable). No claim has ever been made by any
Governmental Entity in a jurisdiction where a Buyer Group member does not file
Tax returns or reports that it is or may be subject to taxation by that
jurisdiction. No Buyer Group member is a party to any Tax allocation or sharing
agreement. Except as set forth on Schedule 3.7, no Buyer Group member is or has
ever been a member of an affiliated group of corporations filing a consolidated
U.S. Income Tax return and is not liable, as a transferee or successor (by
contract or otherwise), for the Taxes of any corporation that previously was a
member of such an affiliated group.
(b) No Buyer Group member has, with regard to any assets or
property held, acquired or to be acquired by such Buyer Group member, filed a
consent to the application of Section 341(f) of the Code.
(c) No Buyer Group member conducts any operations or sales
which have been or are required to be reported to the IRS under the provisions
of Section 999 of the Code.
3.8 Intellectual Property.
----------------------
(a) To the knowledge of Buyer, each Buyer Group member owns, or
has the right to use, sell or license all patents, trademarks, trade names,
service marks, copyrights and other intellectual property necessary or required
for the conduct of its business as presently conducted (such intellectual
property and the rights thereto are collectively referred to herein as the
"Buyer Group IP Rights"), except for any failure to own or have the right to
use, sell or license that would not reasonably be expected to have a Material
Adverse Effect on Buyer Group.
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute
a breach of any instrument or agreement governing any Buyer Group IP Rights (the
"Buyer Group IP Rights Agreements"), will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any Buyer
Group IP Rights or impair the right of a Buyer Group member or the Surviving
Corporation to use, sell or license any Buyer IP Group Rights or portion
thereof, except for the occurrence of any such breach, forfeiture, termination
or impairment that would not reasonably be expected to, individually or in the
aggregate, result in a Material Adverse Effect on Buyer Group.
(c) To the knowledge of Buyer, except as set forth on Schedule
3.8, (i) neither the manufacture, marketing, license, sale or intended use of
any product or technology currently licensed or sold or under development by
Buyer violates any license or agreement between any Buyer Group member and any
third party or infringes any intellectual property right of any other party; and
(ii) there is no pending or, to the knowledge of Buyer, threatened, claim,
arbitration or litigation contesting the validity, ownership or right to use,
sell, license or dispose of any Buyer Group IP Rights, nor has any Buyer Group
member received any written notice asserting that any Buyer Group IP Rights or
the proposed use, sale, license or disposition thereof conflicts or will
conflict with the rights of any other party, except, with respect to clauses (i)
and (ii), for any
28
violations, infringements, claims or litigation that would not reasonably be
expected to have a Material Adverse Effect on Buyer Group.
(d) Except as set forth on Schedule 3.8, Buyer Group has taken
reasonable and practicable steps designed to safeguard and maintain the secrecy
and confidentiality of, and its proprietary rights in, all Buyer Group IP
Rights.
3.9 Compliance; Permits; Restrictions.
----------------------------------
(a) Except as set forth on Schedule 3.9, no Buyer Group member
is in conflict with, or in default or violation of, (i) any law, rule,
regulation, order, judgment or decree applicable to it or by which its
properties are bound or affected or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which it is a party or by which it or its properties are bound or
affected, except for any conflicts, defaults or violations which would not
reasonably be expected to have a Material Adverse Effect on Buyer Group. No
investigation or review by any Governmental Entity is pending or, to the
knowledge of Buyer, threatened against any Buyer Group member, nor has any
Governmental Entity indicated an intention to conduct the same, other than, in
each such case, those the outcome of which would not reasonably be expected to
have a Material Adverse Effect on Buyer Group.
(b) Each Buyer Group member holds all permits, licenses,
variances, exemp tions, orders and approvals from Governmental Entities which
are material to the operation of its business (collectively, the "Buyer
Permits"). Buyer Group is in compliance with the terms of all Buyer Permits,
except where the failure to hold the same or to so comply would not reasonably
be expected to have a Material Adverse Effect on Buyer Group.
3.10 Litigation. Except as set forth on Schedule 3.10, there is no action,
suit, proceeding, claim, arbitration or investigation pending, or as to which
any Buyer Group has received any notice of assertion nor, to the knowledge of
Buyer, is there a threat of an action, suit, proceeding, claim, arbitration or
investigation against any Buyer Group member which would reasonably be expected
to have a Material Adverse Effect on Buyer Group, or which in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement.
3.11 Brokers' and Finders' Fees. Except as set forth on Schedule 3.11,
Buyer has not incurred, nor will it incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.12 Employees; Employee Benefits.
-----------------------------
(a) Schedule 3.12 sets forth the names of all Employees of each
Buyer Group member as of the date of this Agreement (the "Buyer Employees")
and, with respect to each Buyer Employee, such Buyer Employee's job title and
the date of commencement of employment
29
of such Buyer Employee. Each Buyer Group member has accrued on its books and
records all obligations for salaries, vacations, benefits and other compensation
with respect to its Buyer Employees and any of its Former Buyer Employees (as
defined below), to the extent required by GAAP, including, but not limited to,
severance, bonuses, incentive and deferred compensation, and all commissions and
other fees payable to salespeople, sales representatives and other agents. No
Buyer Group member currently offers, and has never offered, retiree health and
insurance benefits to Buyer Employees and Former Buyer Employees, and no Buyer
Group member has any liabilities (contingent or otherwise) with respect thereto.
Except as set forth in Schedule 3.12, there are no outstanding loans from any
Buyer Group member to any Buyer Employee or any other third party. Complete and
correct copies of all written agreements with or concerning Buyer Employees,
including, without limitation, union and collective bargaining agreements, and
all employment policies, and all amendments and supplements thereto, have been
delivered to Seller, and a list of all such agreements and policies is set forth
in Schedule 3.12. None of the Buyer Employees has, to the knowledge of Buyer,
indicated a desire to terminate his or her employment other than at normal
retirement age, or any intention to terminate his or her employment in
connection with the transactions contemplated by this Agreement. Except as set
forth in Schedule 3.12, since December 31, 2000, no Buyer Group member has,
except in the ordinary course of business and consistent with past practice, (i)
increased the salary or other compensation payable or to become payable to or
for the benefit of any of the Buyer Employees, (ii) provided any of the Buyer
Employees with any increased security or tenure of employment, (iii) increased
the amounts payable to any of the Buyer Employees upon the termination of any
such person's employment or (iv) adopted, increased, augmented or improved
benefits granted to or for the benefit of any of the Buyer Employees under any
Buyer Group Benefit Plan.
(b) Each Buyer Group member has complied at all times and in all
material respects with all laws, statutes, rules and regulations applicable
with respect to employees in each of the jurisdictions in which it operates
and/or does business. Each Buyer Group member has complied in all material
respects with all Employee Laws, and there have been no claims made or, to the
knowledge of Buyer, threatened thereunder against any Buyer Group member arising
out of or relating to or alleging any violation of any of the foregoing. Each
Buyer Group member has complied in all material respects with the employment
eligibility verification form requirements under the INA, with respect to Buyer
Employees, and each Buyer Group member has complied with the paperwork
provisions and anti-discrimination provisions of the INA and has obtained and
maintained the employee records and I-9 forms with respect to the Buyer
Employees in proper order as required by law. No Buyer Group member is currently
employing any Buyer Employees who are not citizens of the United States or who
are not authorized to work in the United States. There are no controversies,
strikes, work stoppages, picketing, filed grievances, job actions, unfair labor
practice charges, investigations, complaints, disputes or other proceedings
pending or threatened between any Buyer Group member and any of the Buyer
Employees or Former Buyer Employees (as defined below); no labor union or other
collective bargaining unit represents or has ever represented any of the Buyer
Employees in connection with their employment with any Buyer Group member; Buyer
has no knowledge of any organizational effort by any labor union or other
collective bargaining unit currently under way or threatened with respect to any
Buyer Employees; no negotiation with or consent of any labor union or other
collective bargaining agent representing Buyer Employees is required to
30
consummate the transactions contemplated by this Agreement; and no Buyer Group
member has incurred any liability under WARN or similar state and local laws.
(c) Except for temporary clerical personnel, none of the Buyer
Employees are "leased employees" within the meaning of Section 414(n) of the
Code. Schedule 3.12 sets forth a list of each defined benefit and defined
contribution plan, stock ownership plan, executive compensation program or
arrangement, bonus plan, incentive compensation plan or arrangement, deferred
compensation agreement or arrangement, supplemental retirement plan or
arrangement, vacation pay, sickness, disability or death benefit plan (whether
provided through insurance, on a funded or unfunded basis or otherwise), medical
or life insurance plan, providing benefits to any Buyer Employee, retiree or
Former Buyer Employee or any of their dependents, survivors or beneficiaries,
employee stock option or stock purchase plan, severance pay, termination or
salary continuation plan, Section 125 cafeteria plan, fringe benefit plan, and
each other employee benefit plan, program or arrangement, including, without
limitation, each "employee benefit plan" within the meaning of Section 3(3) of
ERISA, which is maintained by each Buyer Group member for the benefit of or
relating to any of the Buyer Employees or to any former employees of such Buyer
Group member (the "Former Buyer Employees") or their dependents, survivors or
beneficiaries, whether or not legally binding, and for which a Buyer Group
member could reasonably have any liabilities, all of which are herein referred
to as the "Buyer Group Benefit Plans." None of the Buyer Group members will
incur any liability under any severance agreement, deferred compensation
agreement, employment agreement, similar agreement or Buyer Group Benefit Plan
as a result of the consummation of the transactions contemplated by this
Agreement.
(d) Each Buyer Group Benefit Plan which is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) meets the requirements
of Section 401(a) of the Code; the trust, if any, forming part of such
plan is exempt from U.S. Federal income Tax under Section 501(a) of the
Code; a favorable determination letter has been issued by the IRS after January
1, 1994 with respect to each plan and trust and each amendment thereto; and
since the date of such determination letter there are no circumstances which are
likely to adversely affect the qualification of such plan. No Buyer Group
Benefit Plan is a "voluntary employees beneficiary association" (within the
meaning of Section 501(c)(9) of the Code) and there have been no other "welfare
benefit funds" relating to Buyer Employees or Former Buyer Employees within the
meaning of Section 419 of the Code. No event or condition exists with respect to
any Buyer Group Benefit Plan that could subject any Buyer Group member to any
Tax under Section 4980B of the Code or, for plan years beginning before January
1, 1989, Section 162(k) of the Code. With respect to each Buyer Group Benefit
Plan, Buyer has heretofore delivered to Seller complete and correct copies of
the following documents, where applicable: (i) the most recent annual report
(Form 5500 series), together with schedules, as required, filed with the IRS,
and any financial statements and opinions required by Section 103(a)(3) of
ERISA, (ii) the most recent determination letter issued by the IRS, (iii) the
most recent summary plan description and all modifications, (iv) the text of the
Buyer Group Benefit Plan and of any trust, insurance or annuity contracts
maintained in connection therewith, (v) the most recent actuarial report, if
any, relating to the Buyer Group Benefit Plan and (vi) the most recent actuarial
valuation, study or
31
estimate of any retiree medical and life insurance benefits plan or supplemental
retirement benefit plan.
(e) Except as set forth on Schedule 3.12, no Buyer Group member
or any corporation or other trade or business under common control with
Buyer (as determined pursuant to Section 414(b) or (c) of the Code) (a "Common
Control Entity") maintains or contributes to or in any way directly or
indirectly has any liability (whether contingent or otherwise) with respect to,
any "multiemployer plan," within the meaning of Section 3(37) or 4001(a)(3) of
ERISA, or any other employee pension benefit plan subject to Title IV of ERISA
or Section 412 of the Code; no Buyer Group Benefit Plan or of any Common Control
Entity is subject to Title IV of ERISA. No contingent or other liability with
respect to which, any Buyer Group member has or could have any liability exists
under Title IV of ERISA to the PBGC or to any Buyer Group Benefit Plan; and no
assets of any Buyer Group member are subject to a lien under Sections 4064 or
4068 of ERISA. Except as set forth on in Schedule 3.12, all contributions
required to be made to or with respect to each Buyer Group Benefit Plan with
respect to the service of Buyer Employees or Former Buyer Employees prior to the
date hereof have been made or have been accrued for in the books and records of
the applicable Buyer Group member for all periods through the date hereof. No
Buyer Group member has any obligation to provide post-retirement medical or
other benefits to Buyer Employees or Former Buyer Employees or their survivors,
dependents and beneficiaries, except as may be required by Section 4980B of the
Code or Part 6 of Title I of ERISA or applicable state medical benefits
continuation law and each Buyer Group member may terminate any such
post-retirement medical or other benefits upon thirty (30) days' notice or less
without any liability therefor.
(f) None of the Buyer Group Benefit Plans have been subject to a
"reportable event," within the meaning of Section 4043 of ERISA (whether or
not waived), within the 24-month period ended on the date hereof; there have
been no "prohibited transactions" within the meaning of Section 4975 of the Code
or Part 4 of Subtitle B of Title I of ERISA in connection with any of the Buyer
Group Benefit Plans that, assuming the taxable period of such transaction
expired as of the date hereof, could subject Buyer to a Tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA in an amount which
could have a Material Adverse Effect; none of the Buyer Group Benefit Plans
which are subject to Section 412 of the Code has incurred any "accumulated
funding deficiency" (whether or not waived) within the meaning of Section 412 of
the Code and no Buyer Group member is subject to a lien under Section 412(n) of
the Code; each Buyer Group Benefit Plan has, in all material respects, been
administered to date in accordance with the applicable provisions of ERISA, the
Code and applicable law and with the terms and provisions of all documents,
contracts or agreements pursuant to which such Buyer Group Benefit Plan is
maintained; all reports and information required to be filed with the Department
of Labor, the IRS or the PBGC with respect to any Buyer Group Benefit Plan have
been timely filed or delivered; there is no arbitration, claim or suit pending
or, to the knowledge of Buyer, threatened, involving a Buyer Group Benefit Plan
(other than routine claims for benefits), and, to the knowledge of Buyer, there
is no basis for such a claim; none of the Buyer Group Benefit Plans nor any
fiduciary thereof has been, to the knowledge of Buyer, the direct or indirect
subject of an order or investigation or examination by a governmental or
quasi-governmental agency and there are no matters pending before the IRS,
32
the Department of Labor, or any other governmental agency with respect to a
Buyer Group Benefit Plan; and there has not been and will be no "parachute
payment" (as defined in Section 280G(b)(2) of the Code) to any of the Buyer
Employees prior to the Closing or as a result of the transactions contemplated
by this Agreement.
3.13 Absence of Liens and Encumbrances. Except as set forth on Schedule
3.13, each Buyer Group member has good, valid and marketable title to, or, in
the case of leased properties and assets, valid leasehold interests in, all of
its properties and assets, real, personal and mixed, tangible and intangible,
used in its business, free and clear of any Encumbrances.
3.14 Environmental Matters.
----------------------
(a) Hazardous Material. To Buyer's knowledge, no underground
storage tanks and no amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (each, a "Hazardous Material"), but excluding
office and janitorial supplies, are present in the soil, groundwater, building
materials or ambient air of any real property currently occupied by any Buyer
Group member, and no Buyer Group member has received any notice that it is
allegedly liable for the presence of Hazardous Materials in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that any Buyer Group member has at any time owned, operated,
occupied or leased.
(b) Hazardous Materials Activities. No Buyer Group member has
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has a Buyer Group member disposed of,
transported, sold, or manufactured any product containing a Hazardous Material
(collectively "Hazardous Materials Activities") in violation of any rule,
regulation, treaty or statute promulgated by any Governmental Entity in effect
prior to or as of the date hereof to prohibit, regulate or control Hazardous
Materials or any Hazardous Material Activity.
(c) Permits. Each Buyer Group member currently holds all
environmental approvals, permits, licenses, clearances and consents (the "Buyer
Environmental Permits") necessary for the conduct of its Hazardous Materials
Activities as currently conducted and other of its businesses as such activities
and businesses are currently being conducted, except where the failure to so
hold could not have a Material Adverse Effect on Buyer Group.
(d) Environmental Liabilities. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the knowledge of Buyer, threatened concerning any Buyer
Environmental Permit or any Hazardous Materials
33
Activity of Buyer. Buyer is not aware of any fact or circumstance which could
involve any Buyer Group member in any environmental litigation or impose upon
Buyer any environmental liability that would have a Material Adverse Effect on
Buyer Group.
3.15 Major Customers. Except as set forth on Schedule 3.15, no Buyer Group
member has received any notice or other written communication from any of its
customers terminating or reducing, or setting forth an intention to terminate or
reduce in the future, or otherwise reflecting a material adverse change in, the
business relationship between such customer and the Buyer Group member and, to
the knowledge of Buyer, there has not been any material adverse change in the
business relationship of any Buyer Group member with any such customer since
December 31, 1999.
3.16 Agreements, Contracts and Commitments. (a) Except as set forth in
Schedule 3.16, no Buyer Group member is a party to or bound by:
(i) any collective bargaining agreements;
(ii) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other Buyer Group Benefit
Plans or arrangements;
(iii) any employment or consulting agreement, contract or
commitment not terminable by the Buyer Group member on no more than 30 days'
notice without liability;
(iv) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(v) any agreement of indemnification or guaranty not entered into
in the ordinary course of business other than indemnification agreements
between the Buyer Group member and any of its officers or directors;
(vi) any agreement, contract or commitment containing any covenant
limiting the freedom of a Buyer Group member to engage in any line of
business or compete with any person;
(vii) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $25,000 and
not cancelable without penalty;
(viii) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary
course of business or any ownership interest in any corporation, partnership,
joint venture or other business enterprise;
34
(ix) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit;
(x) any joint marketing, sales or development agreement;
(xi) any distribution agreement (identifying any that contain
exclusivity provisions);
(xii)any royalty agreement; or
(xiii) any other agreement, contract or commitment (excluding real
and personal property leases) which involve payment by the Buyer Group
member under any such agreement, contract or commitment of $10,000 or more in
the aggregate.
(b) Schedule 3.16 contains a complete and correct list of all Buyer
Contracts (as defined below) which are valid and binding upon any Buyer Group
member and to the Buyer's knowledge, any other party to said Buyer Contract,
whether written or oral. All Buyer Contracts to which a related party of Buyer
is a party are on terms no less favorable to Buyer than would be obtained from
an unrelated third party. No Buyer Group member, nor to the knowledge of Buyer,
any other party to a Buyer Contract (as defined below), has breached, violated
or defaulted under, or received notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which a Buyer Group member is a party or
by which it is bound of the type set forth in Schedule 3.16 or described in
clauses (i) through (xiii) above (any such agreement, contract or commitment, a
"Buyer Contract") in such a manner as would permit any other party to cancel or
terminate any such Buyer Contract, or would permit any other party to seek
damages.
3.17 Change of Control Payments. Except as set forth on Schedule 3.17,
there are no plans or agreements pursuant to which any amounts may become
payable (whether currently or in the future) to current or former officers or
directors of any Buyer Group member as a result of or in connection with the
Merger.
3.18 Title to Properties and Related Matters.
----------------------------------------
(a) Schedule 3.18 contains a complete and correct list and
description of all real property leased by any Buyer Group member (the "Buyer
Leased Real Property"), in each case indicating the persons or entities from
whom such property is being leased. The applicable Buyer Group member has good
and marketable title to all structures, plants, leasehold improvements, systems,
fixtures and other property located on or about any of the Buyer Leased Real
Property which it owns, as reflected in the Buyer Financials, free of any
Encumbrances, and none of such material assets is subject to any agreement,
arrangement or understanding for their use by any person other than the
applicable Buyer Group member. Except as set forth in Schedule 3.18, no work has
been performed on or with respect to or in connection with any of the Buyer
Leased Real Property that would cause such Buyer Leased Real Property to become
subject to any mechanics', materialmen's, workmen's, repairmen's, carriers' or
similar liens in
35
excess of $5,000 individually or $25,000 in the aggregate. The structures,
plants, improvements, systems and fixtures (including, without limitation,
storage tanks or other impoundment vessels, whether above or below ground)
located on each such parcel of Buyer Leased Real Property conform in all
material respects with all Federal, state and local statutes and laws and, to
the knowledge of Buyer, all ordinances, rules, regulations and similar
governmental and regulatory requirements (except as set forth in the Schedule
3.18 hereto) and are in reasonable operating condition and repair, ordinary wear
and tear excepted, taking into consideration their respective ages and periods
of use. Each such parcel of Buyer Leased Real Property, in view of the purposes
for which it is currently used or for which it is proposed to be used pursuant
to existing plans, conforms in all material respects with all covenants or
restrictions of record and conforms in all material respects with all applicable
building codes and zoning requirements, and current, valid certificates of
occupancy (or equivalent governmental approvals) have been issued for each item
of Buyer Leased Real Property; provided that, for purposes of this sentence, a
"material" non-conformity shall be deemed to include, without limitation, any
condition giving rise to liabilities, costs or expenses of $5,000 or more
individually or $25,000 in the aggregate; and Buyer is not aware of any proposed
material change in any such governmental or regulatory requirements or in any
such zoning requirements. All existing electrical, plumbing, fire sprinkler,
lighting, air conditioning, heating, ventilation, elevator and other mechanical
systems located in or about the Buyer Leased Real Property are in reasonable
operating condition and repair, ordinary wear and tear excepted, taking into
consideration their respective ages and periods of use. The maintenance and
operation of such items located in or about Buyer Leased Real Property is and
has been conducted in compliance in all material respects with the terms and
conditions of all leases to which a Buyer Group member is a party and all
material maintenance or repair projects (which, for purposes hereof, shall be
deemed to include any one or more items requiring expenditures by a Buyer Group
member in excess of $5,000 for each item of Buyer Leased Real Property) required
to be undertaken by a Buyer Group member under the terms of such leases within
the first year following the Closing Date have been disclosed in Schedule 3.18.
To the knowledge of Buyer, the applicable Buyer Group member has the benefit of
all material easements, rights-of-way and similar rights necessary to conduct
its businesses as presently conducted and to use the items of Buyer Leased Real
Property as currently used, including, without limitation, easements and
licenses for pipelines, power lines, water lines, roadways and other access. All
such easements and rights are valid, binding and in full force and effect, any
amounts due and payable thereon to date have been paid or have been fully
accrued for in the books and records of the applicable Buyer Group member, as
applicable, neither the applicable Buyer Group member nor, to the knowledge of
Buyer, any other party thereto is in default thereunder, and there exists no
event or condition affecting the applicable Buyer Group member, or, to the
knowledge of the Buyer, any other party thereto, which, with the passage of time
or the giving of notice or both, would constitute a material default thereunder,
which, for purposes hereof, shall be deemed to include, without limitation, any
individual or series of defaults resulting in liabilities, costs or expenses of
$10,000 or more individually or $25,000 in the aggregate. No such easement or
right will be breached by, nor will any party thereto be given a right of
termination as a result of, the transactions contemplated by this Agreement. No
Buyer Group member currently owns any real property.
36
(b) All items of equipment, machinery, vehicles, furniture,
fixtures and other tangible personal property currently owned or used by Buyer
Group as of the date hereof are in reasonable operating condition and repair,
ordinary wear and tear excepted, taking into consideration its age and period of
use, are physically located at or about a Buyer Group member's place of business
or where it otherwise conducts its business and are owned outright by a Buyer
Group member or validly leased under one of the leases set forth in Schedule
3.18. No material items of such personal property are subject to any agreement,
arrangement or understanding for its use by any person other than the applicable
Buyer Group member. To the knowledge of Buyer, the maintenance and operation
thereof has complied in all material respects with all applicable laws,
regulations, ordinances, contractual commitments and obligations. Except as set
forth in the Schedule 3.18 or as disclosed in the Buyer Financials, no item of
tangible personal property owned or used by a Buyer Group member is subject to
any conditional sale agreement, installment sale agreement or title retention
agreement or arrangement of any kind; as to each material item of personal
property subject to any such agreement or arrangement, the Schedule 3.18 set
forth a brief description of the property in question and the amount and
repayment terms of the underlying obligation.
(c) Schedule 3.18 sets forth a complete and correct list and
summary description of all tangible personal property leases to which a Buyer
Group member is a party (either as lessor or lessee), together with a brief
description of the property leased and identifying the date and term of the
lease, the amount and timing of lease payments and any renewal or purchase
options, provided that, with respect to personal property leases, only Material
Personal Property Leases shall be required to be disclosed. Buyer has made
available to Seller complete and correct copies of each lease (and any
amendments thereto) listed in Schedule 3.18. Except as set forth in Schedule
3.18, (i) each such lease is in full force and effect; (ii) all lease payments
due to date on any such lease have been paid, and no Buyer Group member nor (to
the knowledge of Buyer) any other party is in default under any such lease, and
no event has occurred which constitutes, or with the lapse of time or the giving
of notice or both would constitute, a default by the applicable Buyer Group
member or (to the knowledge of Buyer) any other party under such lease; (iii)
there are no disputes or disagreements between the applicable Buyer Group
member, on the one hand, and any other party, on the other hand, with respect to
any such lease; and (iv) the lessor under each such lease has consented or been
given notice (where such consent or the giving of such notice is necessary)
sufficient that such lease shall remain in full force and effect following the
consummation of the transactions contemplated by this Agreement without any
modification in the rights or obligations of the lessee under any such lease.
0.00.Xxxxxxxx Software.
------------------
(a) Schedule 3.19 sets forth a complete and correct list of all
computer systems and software which are used by Buyer Group in the
administration and/or financial accounting of its business (the "Buyer
Proprietary Software"). Except as set forth in Schedule 3.19, Buyer Group is the
owner or licensee of the Buyer Proprietary Software, and, to the knowledge of
Buyer, the Buyer Proprietary Software does not infringe any patent, copyright,
trade secret, service xxxx, trademark or any other right of any third party.
37
(b) Buyer warrants that (i) all non-Buyer Proprietary Software
material to the conduct of the Buyer Group business was commercially available
at the time of its acquisition by Buyer Group and was acquired by Buyer Group
through normal business channels and (ii) neither Buyer Group, nor any
affiliates, agents or third-party consultants (but only with respect to services
rendered to Buyer) are in breach of any licensing arrangements (including,
without limitation, payment of applicable user fees) with respect to any
non-Buyer Proprietary Software.
3.20 Board of Directors and Stockholder Approval. The Board of Directors of
Buyer has, as of the date of this Agreement, determined (i) that the Merger is
fair to and in the best interests of Buyer and its stockholders, and (ii) to
recommend that the stockholders of Buyer approve this Agreement.
3.21 Minute Books. The minute books of Buyer made available to counsel for
Buyer are the only minute books of Buyer and contain a reasonably accurate
summary, in all material respects, of all meetings of directors (or committees
thereof) and stockholders or actions by written consent since the time of
incorporation of Buyer.
3.22 Material Suppliers; Inventories.
--------------------------------
(a) Each Buyer Group member purchases its supplies and materials
from a number of suppliers, none of which represented in the fiscal years
ended December 31, 1999 and 2000 more than five percent (5%) of aggregate
purchases of such Buyer Group member, except as set forth on Schedule 3.22. None
of the suppliers has given any Buyer Group member any notice or other written
communication terminating, suspending or materially reducing, or setting forth
an intention to terminate, suspend or materially reduce in the future, or
otherwise reflecting any change, occurrence or other event that has resulted in
or is reasonably likely to result in, individually or in the aggregate, a
Material Adverse Effect in the business relationship between such supplier and a
Buyer Group member and, to the knowledge of Buyer, there has not been any
adverse change in the business relationship of a Buyer Group member with any
such supplier since December 31, 1999.
(b) Except as set forth on Schedule 3.22, the inventory of
materials used by each Buyer Group member in the conduct of its business (the
"Buyer Inventory") is owned by it free and clear of any Encumbrances, and all of
the Buyer Inventory is serviceable and in good condition, reasonable wear and
tear excepted.
3.23 Compliance with Applicable Law. Except as set forth on Schedule 3.23,
no Buyer Group member is in violation of any applicable foreign or domestic
laws, rules, regulations, ordinances, codes, judgments, orders, injunctions,
writs or decrees of any Federal, state, local or foreign court or governmental
body or agency thereof to which it may be subject which are applicable to or
which could reasonably be expected to affect its respective businesses or
operations, except for any violations which would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Buyer
Group. No claims have been filed against a Buyer Group member, and no Buyer
Group member has received any notice,
38
alleging any such violation, nor, to the knowledge of Buyer, is there any
inquiry, investigation or proceeding relating thereto.
3.24 Accounts Receivable. Schedule 3.24 sets forth each Buyer Group
member's accounts receivable as of the date specified in Schedule 3.24, which
date is no less than thirty days prior to the date hereof. All such accounts
receivable and those arising after the date set forth on Schedule 3.24 and prior
to Closing (collectively, the "Buyer Receivables") (a) arose and will arise from
bona fide sales of goods or services in the ordinary course of business and
consistent with past practice; (b) are owned and will be owned by the applicable
Buyer Group member at Closing free and clear of any Encumbrances; and (c) are
accurately and fairly reflected on the Buyer Financials or, with respect to
Buyer Receivables created after the date of the Buyer Financials and through the
Closing Date, are and will be accurately and fairly reflected in the books and
records of Buyer.
3.25 Accounts Payable. Schedule 3.25 sets forth each Buyer Group member's
accounts payable as of the date specified in Schedule 3.25, which date is no
less than thirty days prior to the date hereof, grouped by those which are, as
of the date of this Agreement, currently due and payable without penalty, past
due from 1-30 days, past due from 31-60 days, past due from 61-90 days, and past
due more than 90 days. All such accounts payable as of the date set forth on
Schedule 3.25 and those arising after the date thereof and prior to Closing
(collectively, the "Buyer Payables") (a) arose and will arise from bonafide
purchases of goods or services in the ordinary course of business and consistent
with past practice and (b) are accurately and fairly reflected on the Buyer
Financials or, with respect to Buyer Payables created after the date of the
Buyer Financials, are and will be accurately and fairly reflected in the books
and records of the appropriate Buyer Group member.
3.26 Insurance. Schedule 3.26 contains a complete and correct list of all
insurance policies carried by, or covering, each Buyer Group member with respect
to their businesses, together with, in respect of each such policy, the name of
the insurance carrier, the policy number, the risk insured against, the limits
of coverage, the policy term, and the expiration date thereof. All such policies
are in full force and effect, and no notice of cancellation has been given with
respect to any such policy. All premiums due thereon have been paid in a timely
manner. Buyer believes that the policies of insurance identified in Schedule
3.26 adequately insure each Buyer Group member.
3.27 Bank Accounts; Powers of Attorney. The Buyer has previously provided
Seller with a complete and correct list showing: (a) all banks in which a Buyer
Group member maintains a bank account or safe deposit box (collectively, "Bank
Accounts"), together with, as to each such Bank Account, the account number, the
names of all signatories thereof and the authorized powers of each such
signatory and, with respect to each such safe deposit box, the number thereof
and the names of all persons having access thereto; and (b) the names of all
persons holding powers of attorney from a Buyer Group member and a summary
statement of the terms thereof.
39
3.28 Transactions with Related Parties. Schedule 3.28 contains an accurate
and complete list and description of all agreements, arrangements and
understandings (including outstanding indebtedness) which are currently in
effect or which occurred at any time after December 31, 1999 between any Buyer
Group member and any of the following: (i) each director and officer of any
Buyer Group member; (ii) the spouses, children, grandchildren, siblings,
parents, grandparents, uncles, aunts, nieces, nephews or first cousins of any
such director or officer or their spouses (collectively, "near relatives");
(iii) any trust for the benefit of any such director or officer of any Buyer
Group member or any of their respective near relatives; and (iv) any
corporation, partnership, joint venture or other entity owned or controlled by
any such director or officer or any of their respective near relatives.
3.29 Warranties. Buyer has previously delivered to Seller copies of all
past and present standard and other express warranties extended by any Buyer
Group member with respect to the products and services now or in the past six
years sold by any Buyer Group member. No Buyer Group member has, and Buyer knows
of no basis for, any material liability as a result of claims against any Buyer
Group member based on products sold and services rendered by a Buyer Group
member on or prior to the date hereof, nor has any Buyer Group member received
any notices from any person threatening any such claim.
3.30 Proxy Statement/SEC Filings. None of the information included or
incorporated by reference in any proxy statement furnished to Buyer's
stockholders, or in any required filing with the SEC related to the Merger,
except for information relating to Seller provided by Seller, will, on the date
any such proxy statement is delivered to Buyer's stockholders or any such filing
with the SEC is made, contain any untrue statement of a material fact or omit to
state any 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.
3.31 SEC Documents. The Buyer has timely filed with the SEC all required
reports, proxy statements, registration statements, forms and other documents
required to be filed by it with the SEC since January 1, 1998 (the "Buyer SEC
Documents"). As of their respective dates, and giving effect to any amendment
thereto, the Buyer SEC Documents, including any financial statements and
schedules included therein, complied in all material respects with requirements
of all applicable federal securities laws, and the applicable rules and
regulations of the SEC, each as in effect on the date so filed, and none of the
Buyer SEC Documents, when filed (or, if amended or superseded by a filing prior
to the date hereof, then on the date of such filing), contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. No forms,
reports and documents filed after the date of this Agreement and prior to the
Effective Time by the Buyer will contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. No Buyer subsidiary is subject to the
periodic reporting requirements of the Securities Exchange Act of 1934 or is
required to file any form, report or other document with the SEC, the Nasdaq
SmallCap Market or any other stock exchange or governmental entity.
40
3.32 Merger Sub's Operations. Merger Sub has not incurred, directly or
indirectly, any liabilities or obligations, and has acquired no assets of any
kind, except those incurred or acquired in connection with its incorporation or
with the negotiation of this Agreement and the consummation of the transactions
contemplated hereby. Merger Sub has been formed solely to facilitate the
transactions contemplated by this Agreement and is not engaged, directly or
indirectly, in any business or activity of any type or kind.
3.33 Disclosure. No representation or warranty by Buyer contained in this
Agreement (including, without limitation, Section 3.1 through 3.32, inclusive),
nor any other statement, schedule, certificate or other document delivered or to
be delivered by Buyer to Seller or pursuant hereto or in connection with the
transactions contemplated by this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances in which they were made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of this Agreement
and continuing until the earlier of (A) the termination of this Agreement
pursuant to its terms or (B) the Effective Time, Buyer and Seller agree, and
Buyer agrees to cause each Buyer Group member, (i) to carry on its respective
business diligently and in accordance with good commercial practice, (ii) except
as set forth on Schedule 4.1, to carry on its respective business in the usual,
regular and ordinary course, in substantially the same manner as heretofore
conducted, (iii) to pay its respective debts and taxes when due, subject to good
faith disputes over such debts or taxes, (iv) to pay or perform other material
obligations when due, (vi) to use its respective commercially reasonable efforts
consistent with past practices and policies to (1) preserve intact its present
business organization, (2) keep available the services of its present officers
and employees and (3) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. In furtherance of the foregoing and subject to applicable law, Seller
and Buyer each agree to confer with the other, as promptly as practicable, prior
to taking any material actions or making any material management decisions with
respect to the conduct of business. In addition, neither Buyer nor Seller shall
do any of the following, and Buyer shall not cause or permit any Buyer Group
member to do any of the following, without the prior written consent of the
other, except as set forth on Schedule 4.1:
(a) Waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or restricted stock, or reprice
options granted under any employee, consultant or director stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) Enter into any material partnership arrangements, joint
development agreements or strategic alliances;
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(c) Grant any severance or termination pay to any officer or
employee except payments in amounts consistent with policies and past practices
or pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to the other, or adopt any new
severance plan;
(d) Transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to the Seller IP
Rights or the Buyer IP Rights or enter into grants to future patent rights,
other than in the ordinary course of business;
(e) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any capital
stock or split, combine or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock;
(f) Repurchase or otherwise acquire, directly or indirectly,
any shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan;
(g) Issue, deliver, sell, authorize or propose the issuance,
delivery or sale of, any shares of capital stock or any securities convertible
into shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock, or any securities convertible into shares
of capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than
shares of Buyer Common Stock pursuant to the terms hereof;
(h) Cause, permit or propose any amendments to any charter document
or Bylaw;
(i) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a material portion of the
assets of, or by any other manner, any business or any corporation, partnership
interest, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of Seller or Buyer, as the
case may be, or enter into any joint venture, strategic partnership or alliance,
other than in the ordinary course of business consistent with past practice;
(j) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Seller or Buyer, as the case may be, except in the ordinary
course of business consistent with past practice;
(k) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the ordinary
course of business) or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire debt securities of Buyer or
Seller or guarantee any debt securities of others;
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(l) Adopt or amend any employee benefit or stock purchase or
option plan, or enter into any employment contract, pay any special bonus or
special remuneration to any director or employee, or increase the salaries or
wage rates of its officers or employees other than in the ordinary course of
business, consistent with past practice;
(m) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business;
(n) Make any grant of exclusive rights to any third party; or
(o) Agree in writing or otherwise to take any of the actions
described in Section 4.1 (a) through (n) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Voting Agreement. The Buyer will use its best efforts to cause the
Buyer's stockholders listed on Schedule 5.1 to have delivered to Seller on or
before the date of this Agreement a Voting Agreement in the form attached hereto
as Exhibit C executed by each of Buyer's stockholders listed on Schedule 5.1.
5.2 Access to Information; Confidentiality.
---------------------------------------
(a) Each of Buyer and Seller will afford the other party and its
accountants, counsel and other representatives reasonable access during
normal business hours to the properties, books, records and personnel of the
other party and its subsidiaries during the period prior to the Effective Time
to obtain all information concerning the business, including the status of
product development efforts, properties, results of operations and personnel of
such party, as the other party may reasonably request.
(b) Each of Buyer and Seller will furnish one another with certain
product, financial, marketing, organization, technical and other information
related to each of the Buyer and its subsidiaries and Seller (such
information regarding the Buyer and its subsidiaries is referred to as "Buyer
Confidential Information" and such information regarding Seller is referred to
as "Seller Confidential Information" and collectively, the "Confidential
Information"). Confidential Information includes not only written information
but also information transferred orally, visually, electronically or by other
means.
(c) Except as set forth in Section 5.5 hereof, neither Buyer nor
Seller, as the case may be, nor their respective directors, officers, employees,
representatives, agents and advisors ("Representatives"), will disclose to any
person the fact that any investigations, discussions or negotiations are taking
place between the parties concerning the Merger or any of the terms, conditions
or other facts with respect to the Merger, including the status thereof. Each
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of Buyer and Seller agree to be responsible for any breach of this Agreement by
their respective Representatives.
(d) The Confidential Information will be used by the Buyer and
Seller solely for the purpose of evaluating the desirability of entering into
the Merger. All Confidential Information shall be kept secret and confidential
and shall not be disclosed to anyone except to a limited group of employees,
directors and officers of the Buyer and Seller who are actually engaged in the
Merger. Confidential Information may also be disclosed to outside professional
advisors similarly engaged by Buyer or Seller. Each person to whom such
Confidential Information is disclosed must be advised of its confidential nature
and of the terms of this Agreement and (unless already bound by obligations of
confidentiality) must agree to abide by such terms.
(e) Upon any termination of this Agreement, (i) Buyer and Seller
will either destroy or return to each other the Confidential Information
that is in tangible form, including any copies that may have been made, and
destroy all abstracts, summaries thereof, or references thereto in documents,
and certify to each other in writing that the foregoing has been completed, and
(ii) Buyer, Seller, and their respective Representatives and subsidiaries, will
not use any of the Confidential Information with respect to, or in furtherance
of, any of their respective businesses, or in the business of anyone else,
whether or not in competition with the Buyer or Seller, or for any other purpose
whatsoever.
(f) Confidential Information does not include any information that
was available to Buyer or Seller, as the case may be, on a non-confidential
basis prior to the receipt of such information or which thereafter became
publicly available not as a result of a breach by either party of this
Agreement. Information shall be deemed "publicly available" if it becomes a
matter of public knowledge or is contained in materials available to the public
or is obtained from any source other than the Buyer or Seller or their
respective Representatives, provided that such source has not entered into a
confidentiality agreement with the Buyer or Seller, as the case may be, with
respect to such information or obtained the information from an entity or person
party to a confidentiality agreement with the Buyer or Seller.
(g) In the event that the Buyer or Seller or anyone to whom the
Confidential Information was transmitted pursuant to this Agreement becomes
legally compelled to disclose any of the Confidential Information, such party
will provide the other party with prompt notice so that the Buyer or Seller, as
the case may be, may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Agreement. In the event the Buyer
or Seller, as the case may be, is unable to obtain such protective order or
other appropriate remedy, only that portion of the Confidential Information
which, as advised by a written opinion of counsel, is legally required shall be
furnished. Best efforts shall be exercised to obtain a protective order or other
reliable assurance that confidential treatment will be accorded the Confidential
Information so disclosed.
(h) Seller hereby acknowledges and will advise its Representatives
who receive the Confidential Information, that the United States securities laws
prohibit any person
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who has material, non-public information concerning the matters which are the
subject of this Agreement from purchasing or selling securities of the parties
hereto (and options, warrants and rights relating thereto) and from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person (including, without limitation,
any Representatives) is likely to purchase or sell such securities.
(i) Buyer and Seller each understand and agree that money damages
would not be a sufficient remedy for any breach of this Agreement by either
party or their Representatives, and that the damaged party and its
Representatives shall be entitled to specific performance and/or injunctive
relief as a remedy for any such breach of this Agreement and that these shall be
in addition to all other remedies available at law or in equity. This Agreement
is made for the benefit of both the Buyer and Seller, respectively, and no
failure or delay by the Buyer, Seller or their Representatives in exercising any
right, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege under
this Agreement.
5.3 No Solicitation by Seller. From and after the date of this Agreement
until the earlier of 122 days after the date hereof or termination of this
Agreement pursuant to its terms, Seller will not, except as may be required of
the Board of Directors of Seller in connection with the exercise of its
fiduciary duty, (i) negotiate with any potential merger partner or acquirer of
the capital stock of Seller, (ii) pledge, hypothecate, sell or otherwise dispose
of substantially all of its assets other than a pledge or hypothecation in
connection with a debt facility or similar financing, (iii) enter into an
agreement with respect to the merger or other acquisition of Seller, or (iv)
sell, hypothecate or transfer substantially all of its capital stock.
Notwithstanding anything herein to the contrary, Seller shall not be prohibited
from engaging in discussions or negotiations with potential acquisition targets
that it may acquire. In the event that Seller takes or causes to be taken any
action described in subsections (i)-(iv) of this Section 5.3, or if Seller's
shareholders do not approve this Agreement and, as a result, Buyer terminates
this Agreement pursuant to Section 8.1(h), Seller shall immediately pay to Buyer
$50,000.
5.4 No Solicitation by Buyer. From and after the date of this Agreement
until the earlier of 122 days after the date hereof or termination of this
Agreement pursuant to its terms, Buyer will not, except as may be required of
the Board of Directors of Buyer in connection with the exercise of its fiduciary
duty, (i) negotiate with any potential merger partner or acquirer of the capital
stock of Buyer, (ii) pledge, hypothecate, sell or otherwise dispose of
substantially all of its assets other than a pledge or hypothecation in
connection with a debt facility or similar financing, (iii) enter into an
agreement with respect to the merger or other acquisition of Buyer, or (iv)
sell, hypothecate or transfer substantially all of its capital stock.
Notwithstanding anything herein to the contrary, Buyer shall not be prohibited
from engaging in discussions or negotiations with potential acquisition targets
that it may acquire. In the event that Buyer takes or causes to be taken any
action described in subsections (i)-(iv) of this Section 5.4, or if Buyer's
shareholders do not approve the issuance of the Buyer Common Stock contemplated
hereby and, as a result, Seller terminates this Agreement pursuant to Section
8.1(h), Buyer shall immediately pay to Seller $50,000.
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5.5 Public Disclosure. Buyer and Seller will consult with each other before
issuing any press release or otherwise making any public statement with respect
to the Merger or this Agreement and will not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law.
5.6 Legal Requirements. Each of Buyer, Merger Sub, and Seller will take all
reasonable actions necessary or desirable to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals of or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement. Buyer will use its commercially
reasonable efforts to take such steps as may be necessary to comply with the
securities and Blue Sky laws of all jurisdictions which are applicable to the
issuance of Buyer Common Stock pursuant hereto. Seller will use commercially
reasonable efforts to assist Buyer as may be necessary to comply with the
securities and Blue Sky laws of all jurisdictions which are applicable in
connection with the issuance of Buyer Common Stock pursuant hereto.
5.7 Third Party Consents. As soon as practicable following the date hereof,
Buyer and Seller will each use its commercially reasonable efforts to obtain all
material consents, waivers and approvals under any of its or its subsidiaries'
agreements, contracts, licenses or leases required to be obtained by it in
connection with the consummation of the transactions contemplated hereby.
5.8 FIRPTA. At or prior to the Closing, Seller, if requested by Buyer,
shall deliver to the IRS a notice that the Seller Capital Stock is not a "U.S.
Real Property Interest" as defined and in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2).
5.9 Notification of Certain Matters. Buyer and Merger Sub will give prompt
notice to Seller, and Seller will give prompt notice to Buyer and Merger Sub, of
the occurrence, or failure to occur, of any event, which occurrence or failure
to occur would be reasonably likely to cause (a) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement to the Effective Time or (b) any
material failure of Buyer and Merger Sub or Seller, as the case may be, or of
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement. Notwithstanding the above, the delivery of any notice pursuant
to this section will not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
5.10 Best Efforts and Further Assurances. Subject to the respective rights
and obligations of Buyer, Merger Sub and Seller under this Agreement, each of
the parties to this Agreement will use its or their best efforts to effectuate
the Merger and the other transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to closing under this Agreement. Each party
hereto, at the reasonable request of another party hereto, will execute and
46
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
5.11 Tax-Free Reorganization. Buyer and Seller will each use its
commercially reasonable efforts to cause the Merger to be treated as a tax-free
reorganization within the meaning of Section 368 of the Code. Buyer and Seller
will each make available to the other party and their respective legal counsel
copies of all returns requested by the other party.
5.12 Seller Employees. Buyer and Seller will each use their respective best
efforts to retain for the benefit of the Surviving Corporation all Seller
Employees determined by both Buyer and Seller to be necessary to Seller's
operations.
5.13 Meetings of Stockholders. Promptly after the date hereof, Buyer and
Seller shall each take all necessary action in accordance with Delaware law and
their respective Certificate of Incorporation and Bylaws, to obtain the
requisite approval of the Merger from their respective stockholders.
5.14 Board of Directors of Buyer. The Board of Directors of Buyer will take
all actions necessary to cause the Board of Directors of Buyer immediately after
the Effective Time to include one member appointed by Seller of a six member
Board of Directors of Buyer. In addition, the Board of Directors of Buyer shall
appoint one additional independent director reasonably acceptable to Seller who
will also qualify for the Audit Committee of the Board of Directors.
5.15 Stock Options. As of the Effective Time, or as soon as practicable
thereafter, Buyer shall grant options under its stock option plans to purchase
at least 400,000 shares of Buyer Common Stock to key officers and directors of
Buyer and its subsidiaries, subject to approval by the current management of
Seller.
5.16 Proxy Material and SEC Filings.
-------------------------------
(a) Promptly following the date of this Agreement, Buyer shall
prepare a proxy statement relating to the approval by the Buyer's stockholders
of the issuance of the Buyer Common Stock contemplated by this Agreement (the
"Proxy Statement"). Seller shall promptly furnish to Buyer such information as
may be reasonably requested by Buyer in connection with the preparation of the
Proxy Statement. Buyer shall file the Proxy Statement, in preliminary form, with
the SEC as promptly as reasonably practicable, and Buyer shall use its
reasonable efforts to promptly resolve any SEC comments with respect to the
preliminary Proxy Statement. Buyer shall use all reasonable efforts to cause the
Proxy Statement to be mailed to its stockholders as promptly as practicable and
in accordance with all applicable laws, rules and regulations.
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(b) All filings by Buyer with the SEC in connection with the
transactions contemplated hereby, including the Proxy Statement, and any
amendment or supplement thereto, shall be subject to the prior review and
comment of Seller.
(c) Each of Seller and Buyer agree that if it should become
aware, prior to the Effective Time, of any information furnished by it that
would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to make the statements therein in light of the circumstances under
which they were made, not false or misleading, it shall inform the other party
to take the necessary steps to correct the Proxy Statement.
5.17 Director and Officer Liability. The parties agree that all rights to
indemnification and all limitations on liability existing in favor of any
Indemnitee (as defined below) as provided under Delaware law, in the Certificate
of Incorporation and Bylaws of the Seller and in any agreement between
Indemnitee and Seller as in effect on the date of this Agreement shall survive
the Merger and continue in full force and effect in accordance with its terms.
For three years after the Effective Time, Buyer shall cause the Surviving
Corporation to indemnify and hold harmless the individuals who on or prior to
the Effective Time, were officers, directors, employees or agents of the Seller
(the "Indemnitees") to the same extent as described in the foregoing sentence.
In the event any claim with respect to which indemnification is available
pursuant to the foregoing provisions is asserted or made within such three-year
period (whether or not service of process has been made on an Indemnitee within
such three-year period), all rights to indemnification shall continue until such
claim is disposed of or all judgements, orders, decrees or other rulings in
connection with such claim are fully satisfied.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) No Order. No Governmental Entity shall have enacted, issued
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary
or permanent) which is in effect and which has the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger.
(b) Litigation. The absence of any pending or threatened
litigation by or against Buyer, any Buyer Subsidiary or Seller or other
contingent liabilities or obligations, which could prevent the Closing of the
Merger or materially adversely affect Buyer's or Seller's business, except for
any litigation pending as of the date hereof and which has been disclosed in the
Disclosure Schedules to this Agreement.
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(c) Third Party Consents. Any necessary consents or waivers by
any Governmental Entity or third party to the Merger shall have been obtained,
including any consents, waivers or approvals disclosed in Schedules 2.4 or 3.4.
(d) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved and adopted, and the Merger
shall have been duly approved, by the requisite vote under applicable law by the
stockholders of Seller, and the issuance of the Buyer Common Stock contemplated
hereby shall have been duly approved by the stockholders of Buyer.
(e) Tax-Free Reorganization. The Merger shall qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Code.
6.2 Additional Conditions to Obligations of Seller. The obligations of
Seller to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Effective Time of each of the following conditions, any of
which may be waived, in writing, exclusively by Seller:
(a) Representations and Warranties. The representations and
warranties of Buyer and Merger Sub contained in this Agreement shall be true and
correct on and as of the Effective Time, except for changes contemplated by this
Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
the Effective Time, except, in all such cases where the failure to be so true
and correct, would not reasonably be expected to have a Material Adverse Effect
on Buyer Group; and Seller shall have received a certificate to such effect
signed on behalf of Buyer and Merger Sub by the President or Chief Financial
Officer of Buyer and Merger Sub;
(b) Agreements and Covenants. Buyer and Merger Sub shall have
performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Effective
Time, and Seller shall have received a certificate to such effect signed on
behalf of Buyer and Merger Sub by the President or Chief Financial Officer of
Buyer and Merger Sub;
(c) Material Adverse Effect. No Material Adverse Effect with respect
to Buyer Group shall have occurred since the date of this Agreement;
(d) K&M Agreements. The agreement, dated as of September 30, 2001,
between Buyer and Xxxxxxx & Xxxxxxxx, LLC ("K&M"), restructuring
approximately $739,000 in liabilities to K&M, and all other agreements referred
to therein, as such agreement or agreements may be modified with the consent of
Seller, such consent not to be unreasonably withheld, to accommodate any
transaction that any Buyer Group member may enter into with XX Xxxxxx Chase,
shall be effective;
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(e) Xxxxxxx XxXxxxxx and Xxxxx Xxxxx Agreements. The Amendment
No. 3, dated as of September 28, 2001, to Agreement and Plan of Merger, dated
February 28, 2000, among Buyer, PWR Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Buyer, PC Workstation Rentals, Inc. d/b/a PWR
Systems, a New York corporation, and Xxxxx X. Xxxxx and Xxxxxxx XxXxxxxx, and
the Amendments No. 1 to Employment Agreement, dated as of September 28, 2001,
between Buyer and Xxxxx Xxxxx and Xxxxxxx XxXxxxxx, and all other agreements
referred to therein, as such agreement or agreements may be modified with the
consent of Seller, such consent not to be unreasonably withheld, to accommodate
any transaction that any Buyer Group member may enter into with XX Xxxxxx Chase,
shall be effective; and
(f) Deliverables. Buyer and Merger Sub shall have delivered all of
the Buyer Deliverables (as defined below).
6.3 Additional Conditions to the Obligations of Buyer and Merger Sub. The
obligations of Buyer and Merger Sub to consummate and effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
Buyer and Merger Sub:
(a) Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct in
all respects on and as of the Effective Time, except for changes contemplated by
this Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
the Effective Time, except, in all such cases where the failure to be so true
and correct, would not have a Material Adverse Effect on Seller; and Buyer and
Merger Sub shall have received a certificate to such effect signed on behalf of
Seller by the President or Chief Financial Officer of Seller;
(b) Agreements and Covenants. Seller shall have performed or
complied with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time, and the
Buyer and Merger Sub shall have received a certificate to such effect as to the
Seller signed on behalf of Seller by the President or Chief Financial Officer of
Seller;
(c) Material Adverse Effect. No Material Adverse Effect with respect
to Seller shall have occurred since the date of this Agreement;
(d) Net Tangible Assets. Seller shall have net tangible assets
(exclusive of the $650,000 bridge loan from Buyer to Seller) of not less than
$50,000. For purposes hereof, net tangible assets shall mean all assets less
all liabilities, exclusive of goodwill;
(e) Deliverables. Seller shall have delivered all of the Seller
Deliverables (as defined below); and
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(f) Fairness Opinion. Buyer shall have received a written opinion
from HCFP/Xxxxxxx Securities, LLC or another investment banking firm, to the
effect that as of the date hereof, the consideration to be paid by Buyer in
connection with the Merger is fair to Buyer and its stockholders, from a
financial point of view.
(g) Cancellation of Seller Stock Options and Stock Plan. All
Seller Stock Options shall have been canceled with the consent of the holders of
such Seller Stock Options and the Stock Plan shall have been terminated.
ARTICLE VII
DELIVERIES AT CLOSING
7.1 Deliveries to Seller. At the Closing Buyer and Merger Sub shall deliver
to Seller the following (collectively, the "Buyer Deliverables"):
(a) Employment Agreement. An Employment Agreement between Buyer and
Xxxx Block, in the form set forth in Exhibit D;
(b) Registration Rights Agreement. A Registration Rights Agreement
between Buyer and the stockholders of Seller who execute the Registration Rights
Agreement, in the form set forth as Exhibit E, executed by Buyer;
(c) Legal Opinion. A legal opinion of Xxxxxxx & Xxxxxxxx, LLC,
counsel to Buyer and Merger Sub, in the form set forth as Exhibit F;
(d) Certificates of Good Standing. A Certificate of Good Standing
with respect to Buyer and Merger Sub, respectively, issued by the Secretary of
State of the State of Delaware, and Certificates of Good Standing as a Foreign
Corporation Authorized to do Business issued by the Secretary of State of the
State of New York with respect to Buyer and Merger Sub;
(e) Certificates of Officer of Buyer. Certificates executed by the
President or Chief Financial Officer of Buyer and Merger Sub with respect to the
matters referred to in (i) Section 6.2(a) and (ii) Section 6.2(b), respectively;
and
(f) Escrow Agreement. The Escrow Agreement, executed by Buyer.
7.2 Deliveries to Buyer and Merger Sub. At the Closing, Seller shall
deliver to Buyer and Merger Sub the following (collectively, the "Seller
Deliverables"):
(a) Employment Agreement. An Employment Agreement between Buyer and
Xxxx Block, in the form set forth in Exhibit D, executed by Xxxx Block;
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(b) Representation Letter. A Representation Letter addressed to
Buyer from each stockholder and warrantholder of Seller in the form set forth
as Exhibit G executed by such stockholders and warrantholders;
(c) Legal Opinion. A legal opinion from Xxxxxx, X'Xxxxxxx, XxXxxxxx
& Xxxxxx, LLP, counsel to Seller, in the form set forth as Exhibit H and an
enforceability opinion of Xxxxx Xxxxxxx, Esq. in form and substance reasonably
satisfactory to Buyer;
(d) Certificates of Good Standing. A Certificate of Good Standing
of Seller issued by the Secretary of State of the State of Delaware and
Certificates of Good Standing of Seller from every jurisdiction in which Seller
is required to be authorized to do business as a foreign corporation;
(e) Certificate of an Officer of Seller. Certificates executed by
the President or Chief Financial Officer of Seller with respect to the matters
referred to in (i) Section 6.3(a) and (ii) Section 6.3(b);
(f) Financials. Seller shall deliver financial statements of Seller
as may be reasonably requested by Buyer;
(g) Assignments. Buyer shall have received from Seller an executed
copy of all assignments, if any, under any agreement of Seller required to
effectuate an assignment of Seller's rights, interests or obligations under
such agreement to Buyer;
(h) Escrow Agreement. The Escrow Agreement, executed by each
stockholder of Seller designated as a signatory thereto; and
(i) Cancellation Agreements. The consents to cancellation of the
Seller Stock Options referred to in Section 1.6(e).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of the Merger by
the stockholders of Seller or approval of the issuance of the Buyer Common Stock
by the stockholders of Buyer:
(a) by mutual written consent duly authorized by the Boards of
Directors of Buyer and Seller;
(b) by either Seller or Buyer, if the Merger shall not have been
consummated by February 28, 2002; provided, however, that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to any
party whose action or failure to act has been a
52
principal cause of or resulted in the failure of the Merger to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement;
(c) by either Seller or Buyer, if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall
have issued an order, decree or ruling or taken any other action (an "Order"),
in any case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger, which Order is final and nonappealable;
(d) by Seller, upon a material breach of any representation,
warranty, covenant or agreement on the part of Buyer set forth in this
Agreement, or if any representation or warranty of Buyer shall have become
untrue in any material respect, in either case such that the conditions set
forth in Section 6.2 would not be satisfied as of the time of such breach or as
of the time such representation or warranty shall have become untrue; provided,
that, if such inaccuracy in Buyer's representations and warranties or breach by
Buyer is curable by Buyer through the exercise of its commercially reasonable
efforts within fifteen days of the time such representation or warranty shall
have become untrue or such breach, then Seller may not terminate this Agree ment
under this Section 8.1(d) during such fifteen-day period if Buyer continues to
exercise such commercially reasonable efforts;
(e) by Buyer, upon a material breach of any representation,
warranty, covenant or agreement on the part of Seller set forth in this
Agreement, or if any representation or warranty of Seller shall have become
untrue in any material respect, in either case such that the conditions set
forth in Section 6.3 would not be satisfied as of the time of such breach or as
of the time such representation or warranty shall have become untrue; provided,
that, if such inaccuracy in the Company's representations and warranties or
breach by Seller is curable by Seller through the exercise of its commercially
reasonable efforts within fifteen days of the time such representation or
warranty shall have become untrue or such breach, then Buyer may not terminate
this Agree ment under this Section 8.1(e) during such fifteen-day period if
Seller continues to exercise such commercially reasonable efforts;
(f) by Seller, if there shall have occurred any Material Adverse
Effect with respect to Buyer Group since the date of this Agreement;
(g) by Buyer, if there shall have occurred any Material Adverse
Effect with respect to Seller since the date of this Agreement;
(h) by either Seller or Buyer, if the required approvals of the
stockholders of Buyer or Seller contemplated by this Agreement shall not
have been obtained by reason of the failure to obtain the required vote upon a
vote taken at a meeting of stockholders duly convened therefor or at any
adjournment thereof; provided that the right to terminate this Agreement under
this Section 8.1(h) shall not be available to any party where the failure to
obtain stockholder approval of such party shall have been caused by the action
or failure to act of such party in breach of this Agreement.
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8.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 8.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 8.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 8.2, Section 8.3 and Article 9, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any willful breach of this Agreement. No termination of this
Agreement shall affect the obligations of the parties contained in Section 5.2
hereof, all of which obligations shall survive termination of this Agreement in
accordance with their terms.
8.3 Fees and Expenses. If the Merger is not consummated, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses. If the
Merger is consummated, Buyer will pay all costs and expenses incurred in
connection with the Merger, including, without limitation, preparation of the
Agreement and the legal, accounting, printing or other costs necessary to
prepare the Proxy Statement.
8.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of the parties hereto.
8.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification.
----------------
(a) From and after the Closing, Buyer will indemnify Seller, and
its respective officers, directors and stockholders, against, and hold
Seller, and its respective officers, directors and stockholders, harmless from
any and all liability, damage, deficiency, loss, cost or expense (including
reasonable attorneys' fees and expenses) that are based upon or that arise out
of any breach of or any default in any covenant made by Buyer herein, and,
subject to Section 9.2 hereof, any misrepresentation or any breach of any
representation or warranty made by Buyer herein.
(b) The stockholders of Seller who execute the Escrow Agreement (the
"Indemnifying Seller Stockholders") will indemnify, subject to the provisions
of the Escrow
54
Agreement, Buyer, Merger Sub and the Surviving Corporation and their respective
officers, directors and stockholders, against, and hold Buyer, Merger Sub, and
their respective officers, directors and stockholders harmless from, any and all
liability, damage, deficiency, loss, cost or expense (including reasonable
attorneys' fees and expenses) that are based upon or arise out of any breach of
or default in any covenant made by Seller herein, and, subject to Section 9.2
hereof, any misrepresentation or any breach of any representation or warranty
made by Seller herein.
(c) Each party entitled to indemnification under this Agreement
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party becomes aware of any claim by a third party for which indemnification
is available hereunder, the delivery of which notice shall require the
Indemnifying Party (at its expense) to assume the defense of any claim or
any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be reasonably satisfactory to the Indemnified Party, and the Indemnified
Party may participate in such defense, but only at such Indemnified Party's
expense, and provided further, that the omission by any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
indemnification obligations under this Agreement except to the extent that such
Indemnifying Party is irreparably damaged as a result of the failure to give
notice. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, (i) consent to the
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation, or (ii) consent to the entry of any judgement or enter into any
settlement that may materially adversely affect the Indemnified Party.
Notwithstanding the foregoing, the Indemnified Party shall have the right at all
times to take over and assume control of the defense, settlement, negotiations
or lawsuit relating to any claim or demand, provided, however, that if the
Indemnified Party does so take over and assume control, the amount of the
indemnity by the Indemnifying Party shall be limited to the amount which the
Indemnifying Party has immediately prior to such time indicated it would be
willing to pay to adjust and settle such claim or demand. In the event that the
Indemnifying Party does not accept the defense of any matter as above provided,
the Indemnified Party shall have the full right to defend against any such claim
or demand, and shall be entitled to settle or agree to pay in full such claim or
demand, in its sole discretion, and all costs and expenses relating thereto
(including without limitation legal fees and expenses) shall be borne by the
Indemnifying Party. In any event, the Buyer and Seller shall cooperate in the
defense of such action and the records of each shall be available to the other
with respect to such defense.
9.2. Time and Manner of Claims. Buyer, on one hand, and the Indemnifying
Seller Stockholders, on the other hand, shall be liable for damages arising from
misrepresentations or breaches of any representations or warranties under
Section 9.1 only to the extent that notice of a claim therefor is asserted by
the other in writing and delivered prior to the first anniversary of the Closing
Date. The representations, warranties, covenants, agreements and indemnities
contained in this Agreement shall survive the execution and delivery of this
Agreement, any examination
55
by or on behalf of such parties, and the completion of the transactions
contemplated hereby until the first anniversary of the Closing Date.
9.3 Limitation on Claims.
---------------------
(a) Notwithstanding anything contained in this Agreement to the
contrary, neither the Indemnifying Seller Stockholders, on one hand, nor
Buyer, Merger Sub and Surviving Corporation, on the other hand, shall be
entitled to claim for the breach of any representation or warranty set forth
herein (other than with respect to a breach of Section 2.2, 2.3, 2.7, 3.2, 3.3,
or 3.7) except to the extent that the aggregate amount of its present claims in
respect of (a) such breaches, and (b) all prior claims for breaches of
representations and warranties hereunder, exceeds an aggregate of $100,000, at
which time all claiming parties shall be entitled to claim the full amount of
its damages for all breaches by the other parties hereto of such representations
or warranties, subject to the limitations set forth in Sections 9(b) and (c).
(b) Neither the Indemnifying Seller Stockholders, on one hand,
nor Buyer, Merger Sub and Surviving Corporation, on the other hand, will be
liable in any event for any claims made or damages payable under this Section 9
aggregating more than Five Hundred Thousand Dollars ($500,000).
(c) The claims of any party for indemnification shall be reduced
by tax benefits or insurance proceeds available to such party, and no
multiplier shall be used for calculation of claims for damages. Damages for any
claims under this Section 9 shall in no event include any special,
consequential, exemplary, speculative or punitive damages or any other damages
postulating or including a measure or calculation of lost profits or advantages
or similar method or theory.
(d) All damages payable by an Indemnifying Party to an Indemnified
Party shall be payable, at the option of the Indemnifying Party, in cash or
by transfer to the Indemnified Party of Buyer common stock held by the
Indemnifying Party. If the Indemnifying Party elects to transfer Buyer common
stock in satisfaction of its payment obligations, each share of Buyer common
stock transferred by the Indemnifying Party shall be valued (the "Agreed Value")
at the higher of (i) the average closing bid price of Buyer's common stock for
the five trading days prior to the Closing Date as quoted on the Nasdaq SmallCap
Market or such other securities exchange or quotation system which is the then
principal trading market for the Buyer Common Stock, or (ii) the average closing
bid price of the Buyer's common stock for the five trading days prior to the
date on which such transfer is made as quoted on the Nasdaq SmallCap Market or
such other securities exchange or quotation system which is the then principal
trading market for the Buyer Common Stock.
56
ARTICLE X
GENERAL PROVISIONS
10.1 Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented
without the written consent of each of the parties hereto. Any of the Buyer,
Merger Sub or Seller may, by written notice to the others, (i) waive any of the
conditions to its obligations hereunder or extend the time for the performance
of any of the obligations or actions of the other, (ii) waive any inaccuracies
in the representations of the other contained in this Agreement or in any
documents delivered pursuant to this Agreement, (iii) waive compliance with any
of the covenants of the other contained in this Agreement and (iv) waive or
modify performance of any of the obligations of the other. No action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action or compliance with any representation, warranty, condition or
agreement contained herein. Waiver of the breach of any one or more provisions
of this Agreement shall not be deemed or construed to be a waiver of other
breaches or subsequent breaches of the same provisions.
10.2 Notices. All notices, demands, requests and other communications
required or otherwise given under this Agreement shall be in writing and shall
be deemed to have been duly given if: (i) delivered by hand against written
receipt therefor, (ii) forwarded by a third party company or governmental entity
providing delivery services in the ordinary course of business which guarantees
delivery the following business day, (iii) mailed by registered or certified
mail, return receipt requested, postage prepaid, or (iv) transmitted by
facsimile transmission electronically confirmed for receipt, in full, by the
other party no later than 5:00 pm, local time, on the date of transmission,
addressed as follows:
If to Buyer, to: Vizacom Inc.
0000 Xxxxxxxx Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx & Xxxxxxxx, LLC
00 Xxxxxxx Xxxxxxxxx Xxxxxxxxx - Xxxxx 000
Xxxxxxx Field, New York 11553
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Merger Sub, to: SpaceLogix Acquisition Corp.
0000 Xxxxxxxx Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: President
Facsimile: (000) 000-0000
57
with a copy to: Xxxxxxx & Xxxxxxxx, LLC
00 Xxxxxxx Xxxxxxxxx Xxxxxxxxx - Xxxxx 000
Xxxxxxx Field, New York 11553
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Seller, to: SpaceLogix, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to: Xxxxxx, O'Connell, DeMallie, & Lougee, LLP
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
or, at such other address as such party shall have furnished to each of the
other parties hereto in accordance with this Section 10.2. Each such notice,
demand, request or other communication shall be deemed given (i) on the date of
such delivery by hand, (ii) on the first business day following the date of such
delivery to the overnight delivery service or facsimile transmission, or (iii)
three business days following such mailing.
10.3 Interpretation; Knowledge.
--------------------------
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
(b) For purposes of this Agreement, the term "knowledge" means,
with respect to any matter in question, that the executive officers of Buyer,
Merger Sub, or Seller, as the case may be, have actual knowledge of such
matter.
(c) In the event any director or executive officer of Buyer or
Seller, at the time of execution of this Agreement or at Closing, has actual
knowledge of an inaccuracy of a representation or warranty of the other, then
such inaccuracy, to the extent of such knowledge, shall not be deemed to be a
breach of such representation or warranty.
(d) In an effort to provide Seller with full disclosure, Buyer
has disclosed on the disclosure schedules hereto items that may or may not be
material. Accordingly, any such disclosure shall not be deemed an admission as
to the materiality of the item disclosed.
58
10.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.5 Entire Agreement. This Agreement and the documents and instruments and
other agreements among the parties hereto as contemplated by or referred to
herein, including the information set forth in the schedules to this Agreement,
(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, it being understood that the Confidentiality Agreement shall continue in
full force and effect until the Closing and shall survive any termination of
this Agreement and (b) are not intended to confer upon any other person any
rights or remedies hereunder, except as set forth herein.
10.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
10.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
10.8 Governing Law; Jurisdiction; Service of Process. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of law thereof. Each of the parties irrevocably agrees
that the other party may enforce any claim arising under this Agreement and will
irrevocably agree with respect to any claim arising from the transaction
contemplated hereby in the courts of the State of New York or United States
District Court for the Southern District of New York, as the party bringing the
claim may so choose. For the purpose of any action, suit, or proceeding
initiated in such courts with respect to any such claim, each of the parties
irrevocably submits to the jurisdiction of such courts. Each of the parties
shall waive, to the fullest extent allowed by law, any objection which it may
now or hereafter have to
59
venue of any such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding in such court has been brought in
an inconvenient forum.
10.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties.
10.11 Further Assurances. Each party hereto covenants and agrees with all
other parties hereto to promptly execute, deliver, file and/or record such
agreements, instruments, certificates and other documents and to do and perform
such other and further acts and things as any other party hereto may reasonably
request or as may otherwise be necessary or proper to consummate and perfect the
transactions contemplated hereby.
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IN WITNESS WHEREOF, Buyer, Merger Sub, and Seller have caused this
Agreement to be signed by themselves or their duly authorized respective
officers, all as of the date first written above.
VIZACOM INC.
By: /s/ Xxxxxxx XxXxxxxx
-----------------------------------
Xxxxxxx XxXxxxxx
President
SPACELOGIX ACQUISITION CORP.
By: /s/ Xxxxxxx XxXxxxxx
-----------------------------------
Xxxxxxx XxXxxxxx
President
SPACELOGIX, INC.
By: /s/ Xxxxx Xxxxx
-----------------------------------
Name: Xxxxx Xxxxx
Title: President & CEO
61
