EQUITY TRANSFER AND REORGANIZATION AGREEMENT,
dated as of August 10, 2000 (this "Agreement"), by
and among DYNAMIC INTERNATIONAL, LTD., a Nevada
corporation (the "Company"), XXXXXX X. XXXXXXXX
("X. Xxxxxxxx"), XXXXX XXXXXXXX ("X. Xxxxxxxx and
collectively with X. Xxxxxxxx, the "Xxxxxxxx
Parties"), EMERGENT MANAGEMENT COMPANY, LLC, a
Delaware limited liability company (the "Managing
Member") which is the managing member of EMERGENT
VENTURES, LLC, a Delaware limited liability
company ("Emergent Ventures"), and the holders of
membership interests of Emergent Ventures listed
on the signature pages hereof (the "Emergent
Members").
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The Emergent Members are the holders of 100% of the outstanding
membership interests in Emergent Ventures (the "Emergent Interests").
The Xxxxxxxx Parties beneficially own, in the aggregate, approximately
64.4% of the outstanding common stock, par value $.001 (the "Company Common
Stock"), of the Company.
The Emergent Members desire to transfer the Emergent Interests to the
Company.
In consideration of the Emergent Interests, the Company desires to
issue to the Emergent Members that number of shares of Company Common Stock
which, following the issuance thereof, will constitute 90% of the then issued
and outstanding shares of Company Common Stock calculated on a fully diluted
basis.
As an inducement to the Emergent Members to transfer the Emergent
Interests to the Company, the Company desires to transfer all of the assets and
liabilities of the Company to a newly-formed wholly-owned subsidiary of the
Company ("Newco") and to distribute (the "Distribution") 100% of the capital
stock of Newco to the holders of Company Common Stock as constituted immediately
prior to the issuance of shares of Company Common Stock to the Emergent Members.
The Board of Directors of the Company and the Managing Member have
approved the transactions contemplated hereby upon the terms and subject to the
conditions set forth herein.
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It is intended that no party to this Agreement will recognize any gain
or loss for federal income tax purposes as a result of the issuance of shares of
Company Common Stock thereto. It is also intended that the Distribution shall
qualify for federal income tax purposes as a reorganization within the meaning
of Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the
"Code").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE TRANSACTIONS
SECTION 1.1 THE EQUITY TRANSFER TRANSACTIONS. Subject to the terms and
conditions contained herein, at the Closing (as defined below), (i) the Emergent
Members agree that they shall transfer (the "Emergent Interest Transfer") the
Emergent Interests to the Company, and (ii) the Company agrees that it shall
issue (the "Company Common Stock Issuance" and collectively with the Emergent
Interest Transfer, the "Equity Transfer Transactions") to the Emergent Members
an aggregate of 39,755,178 fully paid and nonassessable shares of Company Common
Stock (the "Share Consideration") such that, after the issuance thereof, the
Share Consideration shall constitute 90% of the then issued and outstanding
shares of Company Common Stock calculated on a fully diluted basis. The Share
Consideration shall be issued to the Emergent Members on a pro-rata basis based
on their relative percentage interest ownership of the Emergent Interests.
SECTION 1.2 THE ASSET TRANSFER TRANSACTION. As promptly as practicable
following the date hereof, but in no event later than immediately prior to
consummation of the Equity Transfer Transactions, the Company agrees that it
shall (i) transfer to Newco all of the assets of the Company including, without
limitation, whatever rights the Company has to use the real property located at
00 Xxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx, excluding only its corporate minute book
and its franchise as a corporation (the "Transferred Assets"), and all of the
Assumed Liabilities (as defined below) of the Company as constituted immediately
prior to the consummation of the Equity Transfer Transactions, and (ii) cause
Newco to acquire the Transferred Assets, assume the Assumed Liabilities and
indemnify the Company against any liabilities relating to or arising out of the
Transferred Assets and the Assumed Liabilities. The transfer of the Transferred
Assets and the assumption of the Assumed Liabilities are hereinafter
collectively referred to as the "Asset Transfer Transaction." The Asset Transfer
Transaction shall be effected pursuant to an Asset Transfer Agreement in a form
reasonably satisfactory to the Managing Member. As used in this Agreement, the
term "Assumed Liabilities" means all debts, liabilities or obligations
whatsoever of the Company (other than the Retained Liability (as defined below))
that arise out of or relate to the Transferred Assets or the business of the
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Company as conducted prior to the Closing Date, whether arising before or after
the Closing and whether known or unknown, fixed or contingent, including,
without limitation, any and all debts, liabilities or obligations of the Company
to MG Holding Corp. ("MG"), Citibank, N.A. ("Citibank"), and The Chase Manhattan
Bank ("Chase Manhattan" and collectively with MG and Citibank, the "Lenders").
As used in this Agreement, the term "Retained Liability" means indebtedness of
the Company to Chase Manhattan in an amount not to exceed $250,000.
SECTION 1.3 THE NEWCO DISTRIBUTION. Immediately following the
consummation of the Asset Transfer Transaction and prior to the consummation of
the Equity Transfer Transactions, the Company agrees that it shall distribute
(the "Newco Distribution" and collectively with the Equity Transfer Transactions
and the Asset Transfer Transaction, the "Transactions") to the Current Company
Stockholders (as defined below) 100% of the issued and outstanding shares of
common stock of Newco. The Distribution shall be made on a pro-rata basis to the
Current Company Stockholders based on their relative ownership of shares of
Company Common Stock. For purposes of this Agreement, "Current Company
Stockholders" means those persons and entities that beneficially own, in the
aggregate, 100% of the issued and outstanding shares of Company Common Stock on
the date of the Asset Transfer Transaction, prior to and without giving effect
to the issuance of the Share Consideration.
SECTION 1.4 COMPANY COMMON STOCK. Each share of Company Common Stock
that is issued and outstanding immediately prior to the issuance of the Share
Consideration will remain issued and outstanding.
SECTION 1.5 DISCLOSURE SCHEDULES. Simultaneously with the execution of
this Agreement, (a) the Company shall deliver a schedule relating to the Company
(the "Company Disclosure Schedule"), and (b) the Managing Member shall deliver a
schedule relating to Emergent Ventures (the "Managing Member Disclosure
Schedule" and collectively, with the Company Disclosure Schedule, the
"Disclosure Schedules") setting forth the matters required to be set forth in
the Disclosure Schedules as described elsewhere in this Agreement. The
Disclosure Schedules shall be deemed to be part of this Agreement.
SECTION 1.6 ANTI-DILUTION PROVISION. If between the date of this
Agreement and the Closing Date the outstanding shares of Company Common Stock
shall have been changed into a different number of shares or a different class,
in both cases by reason of any stock dividend, subdivision, reclassification,
recapitalization, split-up, combination or exchange of shares, the Share
Consideration shall be appropriately adjusted.
SECTION 1.7 FURTHER ACTION. If at any time after the Closing Date, the
Company shall consider that any further assignments, conveyances, agreements,
documents, instruments or assurances in law or any other things are necessary or
desirable to carry out the provisions of this Agreement, the Xxxxxxxx Parties
and the officers of the Company and Newco shall execute and deliver, upon the
Company's reasonable request, any instruments or assurances, and do all other
things necessary or proper to carry out the provisions of this Agreement.
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ARTICLE II
COMPANY MATTERS
SECTION 2.1 DIRECTORS.
(a) The directors of the Company immediately prior to the Closing Date
(as hereinafter defined) other than X. Xxxxxxxx shall each resign as of the
Closing Date.
(b) From and after the Closing Date the Board of Directors of the
Company shall (i) be set at not less than three (3) members and (ii) consist
initially of the following individuals:
Xxxxxx Xxx
Xxxx Xxxxxxx
Xxxxxx X. Xxxxxxxx
Such individuals shall serve as directors until their respective
successors have been duly elected or appointed and qualified or until death,
resignation or removal in accordance with the Certificate of Incorporation and
By-laws of the Company.
SECTION 2.2 OFFICERS.
(a) The officers of the Company immediately prior to the Closing Date
shall each resign as of the Closing Date.
(b) From and after the Closing Date the following persons shall be, and
hereby are, elected as the officers of the Company, with corresponding
positions:
Xxxxxx Xxx
Xxxx Xxxxxxx
Such individuals shall serve as officers in the capacity as indicated
until their respective successors have been duly elected or appointed and
qualified or until death, resignation or removal in accordance with the
Certificate of Incorporation and By-laws of the Company.
SECTION 2.3 OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company
agrees that, as soon as practicable following the Closing, it shall obtain
officer and director liability insurance in such amount as is commercially
reasonable and appropriate.
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ARTICLE III
THE CLOSING
SECTION 3.1 CLOSING. Subject to the prior satisfaction or waiver of the
conditions set forth in Article IX hereof, the closing (the "Closing") of the
Equity Transfer Transactions shall take place at the offices of Xxxxxxxxxxxx
Xxxx & Xxxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the third
business day following the date on which the last of the conditions set forth in
Article VIII hereof is fulfilled or waived, or at such other time and place as
the Company and the Managing Member shall agree (the date on which the closing
occurs being the "Closing Date").
SECTION 3.2 CLOSING DELIVERIES BY THE COMPANY. At the Closing, the
Company shall:
(a) issue the Share Consideration to the Emergent Members; and
(b) deliver to the Managing Member the certificates and other documents
to be delivered pursuant to Section 9.3 hereof.
SECTION 3.3 CLOSING DELIVERIES BY THE EMERGENT MEMBERS . At the
Closing, the Emergent Members shall deliver the Emergent Interests to the
Company, together with appropriate instruments of transfer.
SECTION 3.4 CLOSING DELIVERIES BY THE MANAGING MEMBER. At the Closing,
the Managing Member shall deliver to the Company the certificates and other
documents to be delivered pursuant to Section 9.2 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE XXXXXXXX PARTIES
The Company and the Xxxxxxxx Parties, on a joint and several basis,
hereby represent and warrant to the Managing Member and the Emergent Members as
follows (subject in each case to such exceptions as are set forth or
cross-referenced in the attached Disclosure Schedule in the labeled section
corresponding to the caption of the representation or warranty to which such
exceptions relate):
SECTION 4.1 ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. The Company has all requisite corporate power to carry
on its business as it is now being conducted and is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
set forth in Section 4.1 of the Company Disclosure Schedule, and to the
knowledge of the Xxxxxxxx Parties, such jurisdictions are the only ones in which
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the properties owned, leased or operated by the Company or the nature of the
business conducted by the Company makes such qualification necessary, except
where the failure to qualify (individually or in the aggregate) will not have
any Material Adverse Effect on the Company. "Material Adverse Effect" means,
with respect to the Company or Emergent Ventures (as applicable), a liability or
charge in excess of $50,000 or an impairment or preclusion of its ability to
consummate the transactions contemplated hereby. The copies of the Certificate
of Incorporation and By-laws of the Company, as amended to date and delivered to
the Managing Member, are true and complete copies of these documents as now in
effect. The minute books of the Company are accurate in all material respects.
SECTION 4.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock. As of July 31, 2000, (i)
4,417,242 shares of Company Common Stock were issued and outstanding, (ii)
1,200,000 Class B Public Warrants (the "Class B Public Warrants") providing for
the issuance, upon exercise, of 1,200,000 shares of Company Common Stock, which
Class B Public Warrants are exercisable at $15.00 per warrant, were issued and
outstanding (iii) 120,000 Underwriter Warrants (the "Underwriter Warrants")
providing for the issuance, upon exercise, of 120,000 Units (with each Unit
consisting of (x) one share of Company Common Stock and (y) one Class B Public
Warrant (each an "Underwriter Class B Public Warrant") (which Underwriter Class
B Public Warrant provides for the issuance, upon exercise, of one share of
Company Common Stock at an exercise price per warrant equal to $16.50), which
Underwriter Warrants are exercisable at $8.25 per warrant, were issued and
outstanding, and (iv) 1,440,000 shares of Company Common Stock were reserved for
issuance upon the exercise of the Class B Public Warrants, the Units underlying
the Underwriter Warrants and the Underwriter Class B Public Warrants. All of the
outstanding securities of the Company are duly authorized, validly issued, fully
paid and non-assessable, and were not issued in violation of the preemptive
rights of any person. Schedule 4.2 contains a complete and accurate list, as of
the date hereof, of all record holders of shares of Company Common Stock, Class
B Public Warrants and Underwriter Warrants and the amount of each owned by each
such holder. The shares of Company Common Stock comprising the Share
Consideration to be issued on the Closing Date, when issued in accordance with
the terms of this Agreement, shall be duly authorized, validly issued, fully
paid and non-assessable. All of the outstanding securities of Company, including
the Company Common Stock, the Class B Public Warrants and the Underwriter
Warrants, were issued in compliance with all applicable securities laws. No
shares of capital stock are held in the treasury of the Company. Except as
stated in this Section 4.2, there are no outstanding subscriptions, options,
warrants, calls or rights of any kind issued or granted by, or binding upon the
Company, to purchase or otherwise acquire any shares of Company Common Stock or
other securities of the Company. Except as stated in this Section 4.2, there are
no outstanding securities convertible or exchangeable, actually or contingently,
into shares of Company Common Stock or other securities of the Company.
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SECTION 4.3 SUBSIDIARIES. There are no Company Subsidiaries. As used
herein, the term "Company Subsidiary" shall mean any corporation or other entity
of which the Company, directly or indirectly, controls or which the Company
owns, directly or indirectly, 50% or more of the stock or other voting
interests, the holders of which are, ordinarily or generally, in the absence of
contingencies (which contingencies have not occurred) or understandings (which
understandings have not yet been required to be performed) entitled to vote for
the election of a majority of the board of directors or any similar governing
body. Except as set forth in the Company Disclosure Schedule, the Company does
not own any capital stock in any other corporation or similar business entity
nor is the Company a partner in any partnership or joint venture.
SECTION 4.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) The Company
has full corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The Company's execution and
delivery of this Agreement, its execution and delivery at the Closing of the
Asset Transfer Agreement, and its consummation of the transactions contemplated
hereby and thereby, have been duly authorized by its Board of Directors and no
other corporate proceedings on its part are necessary to authorize its execution
and delivery of this Agreement and its consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company, and constitutes the Company's valid and binding
agreement, enforceable against it in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles (the
"Bankruptcy Exception"). The Asset Transfer Agreement, at the Closing, shall
have been duly and validly executed and delivered by the Company, and shall
constitute the Company's valid and binding agreement, enforceable against it in
accordance with its terms, except that such enforcement may be subject to the
Bankruptcy Exception.
(b) Except as set forth on Schedule 4.4 of the Disclosure Schedule, the
Company's execution and delivery of this Agreement and the Asset Transfer
Agreement does not and will not, and its consummation of the transactions
contemplated hereby and thereby will not, violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of its properties or
assets under any of the terms, conditions or provisions of (i) its Certificate
of Incorporation or By-Laws, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to it or any of its properties or assets, or
(iii) any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument, obligation or agreement
of any kind to which it is now a party or by which it or any of its properties
or assets may be bound, excluding from the foregoing clauses (ii) and (iii),
such violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests, charges or encumbrances that would not,
in the aggregate, have a Material Adverse Effect on the Company.
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(c) No declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the Company's execution and delivery of this
Agreement or its consummation of the transactions contemplated hereby, other
than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be, would
not, in the aggregate, have a Material Adverse Effect on the Company.
SECTION 4.5 THE COMPANY'S SEC REPORTS. The Company Common Stock is
registered under Section 12 of the Exchange Act. Except as set forth in the
Company Disclosure Schedule, since its discharge from its Chapter 11 Bankruptcy
Proceeding in the United States Bankruptcy Court for the Southern District of
New York on May 23, 1996 (the "Discharge Date"), the Company has filed on a
timely basis all reports, registrations and other documents, together with any
amendments thereto, required to be filed under the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including but not limited to reports on Forms
10-K, 10-Q and 8-K, and the Company will file on a timely basis all such
reports, registrations and other documents required to be filed by it from the
date of this Agreement to the Closing Date (all such reports, registrations and
documents, including its Form 8-A and all reports, registrations and documents
filed or to be filed with the SEC, including the registration statement relating
to the Company's outstanding common stock and warrants, are collectively
referred to as the "Company's SEC Reports"). As of their respective dates, the
Company's SEC Reports complied or will comply in all material respects with all
rules and regulations promulgated by the SEC and did not or will not 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 therein, in light
of the circumstances under which they were made, not misleading. The Company has
provided to the Managing Member a true and complete copy of all of the Company's
SEC Reports filed on or prior to the date hereof, and will promptly provide to
the Managing Member a true and complete copy of any such reports filed after the
date hereof and prior to the Closing Date.
SECTION 4.6 CONTRACTS LISTED; NO DEFAULT. All material contracts,
agreements, licenses, leases, easements, permits, rights of way, commitments,
and understandings, written or oral, connected with or relating in any respect
to the present operations of the Company (except employment or other agreements
terminable at will) are, with the exception of this Agreement, described in the
Company's SEC Reports and listed as exhibits thereto (the "Company Contracts").
To the knowledge of the Xxxxxxxx Parties, the Company is not in material default
or breach of any provision of the Company Contracts.
SECTION 4.7 LITIGATION. Except as set forth in Schedule 4.7 of the
Company Disclosure Schedule there is no (i) claim, action, suit or proceeding
pending or, to the knowledge of the Xxxxxxxx Parties, threatened against or
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directly relating to the Company before any court or governmental or regulatory
authority or body or arbitration tribunal, or (ii) outstanding judgment, order,
writ, injunction or decree, or application, request or motion therefor, of any
court, governmental agency or arbitration tribunal in a proceeding to which the
Company or any of its assets was or is a party except, in the case of clauses
(i) and (ii) above, such as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
SECTION 4.8 TAXES. Except as disclosed in Section 4.8 of the Company
Disclosure Schedule: (i) the Company has prepared and timely filed or will
timely file with the appropriate governmental agencies all material franchise,
income and all other material Tax (as hereinafter defined) returns and reports
(Tax returns and reports are hereinafter collectively referred to as "Tax
Returns") required to be filed for any period on or before the Closing Date,
taking into account any extension of time to file granted to or obtained on
behalf of the Company (copies of which for the three preceding fiscal years have
been delivered to the Managing Member); (ii) all material Taxes of the Company
(whether or not reported) in respect of the post-Discharge Date period have been
paid in full to the proper authorities or fully accrued appear on the books of
the Company, other than such Taxes as are being contested in good faith by
appropriate proceedings and are adequately reserved for in accordance with
generally accepted accounting principles ("GAAP"); (iii) all deficiencies
resulting from Tax examinations of federal, state and foreign income sales and
franchise and all other material Tax Returns filed by the Company since the
Discharge Date have either been paid or adequately reserved for in accordance
with GAAP; (iv) to the knowledge of the Xxxxxxxx Parties, (a) no material
deficiency has been asserted or assessed against the Company and is pending, and
(b) no examination of the Company is pending or threatened for any material
amount of Tax by any taxing authority (with respect to any such action, Section
4.8 of the Company Disclosure Schedule sets forth the periods at issue and the
category of Tax, and the examining authorities' and any corresponding revenue
agents' reports relating to the issue provided to the Company have been
delivered to the Managing Member); (v) no extension of the period for assessment
or collection of any material Tax is currently in effect and no extension of
time within which to file any material Tax Return has been requested, which Tax
Return has not since been filed; (vi) to the knowledge of the Xxxxxxxx Parties,
no material Tax liens have been filed with respect to any Taxes; (vii) the
Company has not agreed to make any adjustment by reason of a change in its
accounting methods that would affect the taxable income or deductions of the
Company for any period ending after the Closing Date; (viii) the Company has
made timely payments of all Taxes required to be deducted and withheld from the
wages paid to their employees; (ix) there are no Tax sharing agreements or
arrangements with any party other than the Company under which the Company will
have any obligation or liability on or after the Closing Date; (x) the Company
has the net operating loss carryforwards set forth in Section 4.8 of the Company
Disclosure Schedule, (xi) the Company has no overall foreign losses as defined
in Section 904(f)(2) of the Code; (xii) to the knowledge of the Xxxxxxxx
Parties, all payments, other than payments of dividends, since the Discharge
Date will be deductible or capitalizable for Tax purposes (including any
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payments made by the Company pursuant to any transaction contemplated by this
Agreement), except for any payments the failure of which to be deductible or
capitalizable would not, individually or in the aggregate, have a Material
Adverse Effect on the Company; (xiii) to the knowledge of the Xxxxxxxx Parties,
there are no transfer pricing agreements made by the Company with any taxation
authority; (xiv) the Company has not made an election under Section 341(f) of
the Code; and (xv) the Company is not obligated to make any payments that would
constitute excess parachute payments within the meaning of Section 280G of the
Code.
"Tax" or "Taxes" shall mean all federal, state, local and foreign
taxes, duties, levies, charges and assessments of any nature, including social
security payments and deductibles relating to wages, salaries and benefits and
payments to subcontractors (to the extent required under applicable Tax law),
and also including all interest, penalties and additions imposed with respect to
such amounts.
SECTION 4.9 EMPLOYEE BENEFIT PLANS; ERISA. Except as set forth in
Section 4.9 of the Company Disclosure Schedule:
(a) there are no "employee pension benefit plans" as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), covering employees (or former employees) employed in the United
States, maintained or contributed by the Company or any of its ERISA Affiliates
(as hereinafter defined), or to which the Company or any of its ERISA Affiliates
contributes or is obligated to make payments thereunder or otherwise may have
any liability ("Pension Benefit Plans"). For purposes of this Agreement, "ERISA
Affiliate" shall mean any person (as defined in Section 3(9) of ERISA) that is a
member of any group of persons described in Section 414(b), (c), (m) or (o) of
the Code of which the Company is a member.
(b) The Company has delivered to the Managing Member true and complete
copies of all "welfare benefit plans" (as defined in Section 3(1) of ERISA)
covering employees (or former employees) employed in the United States,
maintained or contributed to by the Company ("Welfare Plans"), all
multi-employer plans (as defined in Section 3(37) of ERISA) covering employees
(or former employees) employed in the United States to which the Company or any
of its ERISA Affiliates is required to make contributions or otherwise may have
any liability, and, to the extent covering employees (or former employees)
employed in the United States, all stock bonus, stock option, restricted stock,
stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance and vacation plans maintained or contributed to by the
Company.
(c) The Company, and each of the Pension Benefit Plans and Welfare
Plans, are in material compliance with the applicable provisions of ERISA and
other applicable laws.
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(d) All contributions to, and payments from, the Pension Benefit Plans
which are required to have been made in accordance with the Pension Benefit
Plans and, when applicable, Section 302 of ERISA or Section 412 of the Code have
been timely made.
(e) The Pension Benefit Plans intended to qualify under Section 401 of
the Code have been determined by the Internal Revenue Service ("IRS") to be so
qualified and, to the Company's knowledge, nothing has occurred with respect to
the operation of such Pension Benefit Plans which would cause the loss of such
qualification or exemption or the imposition of any material liability, penalty
or tax under ERISA or the Code. Such plans have been or will be amended on a
timely basis to comply with changes to the Code made by the Tax Reform Act of
1986 and other applicable legislative, regulatory or administrative
requirements.
(f) There are (i) no investigations pending or, to the knowledge of the
Xxxxxxxx Parties, threatened by any governmental entity involving the Pension
Benefit Plans or Welfare Plans, (ii) no termination proceedings involving the
Pension Benefit Plans and (iii) no pending or, to the knowledge of the Xxxxxxxx
Parties, threatened claims (other than routine claims for benefits), suits or
proceedings against any Pension Benefit or Welfare Plan, against the assets of
any of the trusts under any Pension Benefit or Welfare Plan or against any
fiduciary of any Pension Benefit or Welfare Plan with respect to the operation
of such plan or asserting any rights or claims to benefits under any Pension
Benefit Plan or against the assets of any trust under such plan, nor, to the
knowledge of the Xxxxxxxx Parties, are there any facts which would give rise to
any liability.
(g) To the knowledge of the Xxxxxxxx Parties, neither the Company nor
any of its employees or principal shareholders, nor any trustee, administrator,
other fiduciary or any other "party in interest" or "disqualified person" with
respect to the Pension Benefit Plans or Welfare Plans, has engaged in a
"prohibited transaction" (as such term is defined in Section 4975 of the Code or
Section 406 of ERISA) which would be reasonably likely to result in a tax or
penalty on the Company under Section 4975 of the Code or Section 502(i) of
ERISA.
(h) Neither any Pension Benefit Plan subject to Title IV of ERISA nor
any trust created thereunder has been terminated nor have there been any
"reportable events" (as defined in Section 4043 of ERISA and the regulations
thereunder) with respect to either thereof, except any such event which would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company nor has there been any event with respect to any Pension Benefit Plan
requiring disclosure under Section 4063(a) of ERISA or any event with respect to
any Pension Benefit Plan requiring disclosure under Section 4041(c)(3)(C) of
ERISA.
(i) Neither the Company nor any ERISA Affiliate has incurred any
currently outstanding liability to the Pension Benefit Guaranty Corporation (the
"PBGC") or to a trustee appointed under Section 4042(b) or (c) of ERISA other
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than for the payment of premiums, all of which have been paid when due. No
Pension Benefit Plan has applied for, or received, a waiver of the minimum
funding standards imposed by Section 412 of the Code.
(j) Neither the Company nor any of the ERISA Affiliates has any
liability (including any contingent liability under Section 4204 of ERISA) with
respect to any multi-employer plan, within the meaning of Section 3(37) of
ERISA, covering employees (or former employees) employed in the United States.
(k) With respect to each of the Pension Benefit and Welfare Plans,
true, correct and complete copies of the following documents have been delivered
to the Managing Member: (i) the current plans and related trust documents,
including amendments thereto, (ii) any current summary plan descriptions, (iii)
the most recent Forms 5500, financial statements and actuarial reports, if
applicable, and (iv) the most recent IRS determination letter, if applicable.
(l) Neither the Company nor any organization to which the Company is a
successor or parent corporation, within the meaning of Section 4069(b) of ERISA,
nor any of their ERISA Affiliates has engaged in any transaction, within the
meaning of Section 4069(a) of ERISA.
(m) None of the Welfare Plans maintained by the Company are retiree
life or retiree health insurance plans which provide for continuing benefits or
coverage for any participant or any beneficiary of a participant following
termination of employment, except as may be required under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), or except at
the expense of the participant or the participant's beneficiary. The Company has
complied with the notice and continuation requirements of Section 4980B of the
Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder except where the failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(n) No liability under any Pension Benefit or Welfare Plan has been
funded nor has any such obligation been satisfied with the purchase of a
contract from an insurance company as to which the Company has received notice
that such insurance company is in rehabilitation.
(o) The consummation of the Transactions will not result in an increase
in the amount of compensation or benefits or accelerate the vesting or timing of
payment of any benefits or compensation payable to or in respect of any employee
of the Company.
SECTION 4.10 NO VIOLATION OF LAW. Except as set forth in Section 4.10
of the Company Disclosure Schedule, the Company is not in violation of, and has
not been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any governmental
or regulatory body or authority, except for violations which, in the aggregate,
do not have, and would not reasonably be expected to have, a Material Adverse
12
Effect on the Company. The Company has not received any written notice that any
investigation or review with respect to it by any governmental or regulatory
body or authority is pending or threatened, other than, in each case, those the
outcome of which, as far as reasonably can be foreseen, would not reasonably be
expected to have a Material Adverse Effect on the Company. The Company has all
permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to conduct its
business as presently conducted, except for those, the absence of which, alone
or in the aggregate, would not have a Material Adverse Effect on the Company
(collectively, "Permits"). The Company (a) has duly and timely filed all reports
and other information required to be filed with any governmental or regulatory
authority in connection with its Permits, and (b) is not in violation of the
terms of any of its Permits, except for such omissions or delays in filings,
reports or violations which, alone or in the aggregate, would not have a
Material Adverse Effect on the Company. Section 4.11 of the Company Disclosure
Schedule contains a list of Permits.
SECTION 4.11 ENVIRONMENTAL MATTERS. (a) To the knowledge of the
Xxxxxxxx Parties, the Company and the properties and assets used in its business
(including the Real Properties (as hereinafter defined)) occupied by the Company
are in material compliance with all applicable Environmental Laws (as
hereinafter defined), which compliance includes, without limitation, the
possession of all material licenses, permits, registrations and other
governmental authorizations (collectively, "Environmental Authorizations")
required under applicable Environmental Laws and material compliance with the
terms and conditions thereof. To the knowledge of the Xxxxxxxx Parties, since
the Discharge Date, the Company has not received any communication, whether from
a Governmental Authority (as hereinafter defined), citizen group, employee or
otherwise, that alleges that the Company or any of the properties or assets used
in its business (including the Real Properties) is not in full compliance with
Environmental Laws.
(b) There is no Environmental Notice (as hereinafter defined) that (i)
is pending or, to the knowledge of the Xxxxxxxx Parties, threatened against the
Company, (ii) is pending or, to the knowledge of the Xxxxxxxx Parties,
threatened against any person or entity whose liability for such Environmental
Notice may have been retained or assumed contractually or otherwise by the
Company, or (iii) to the knowledge of the Xxxxxxxx Parties, could subject the
Managing Member or Emergent Ventures to any risk of loss or damages, in each
case which is reasonably likely to have a Material Adverse Effect on the
Company.
(c) Except as set forth in Section 4.11 of the Company Disclosure
Schedule, and to the knowledge of the Xxxxxxxx Parties, there are no past or
present actions, activities, circumstances, conditions, events or incidents
arising out of, based upon, resulting from or relating to the operation,
ownership or use by the Company of any properties or assets (including the Real
Properties) currently owned, operated, leased or used by the Company, including,
without limitation, the emission, discharge, disposal or other release of any
Hazardous Material (as hereinafter defined) in or into the Environment (as
13
hereinafter defined), that (i) could reasonably be expected to result in the
incurrence by the Company of material liabilities under Environmental Laws, (ii)
could reasonably be expected to form the basis of any Environmental Notice
relating to a material risk of loss or damage against or with respect to the
Company, or against any persons or entity whose liability for any Environmental
Notice may have been retained or assumed (contractually or otherwise) by or
could be imputed or attributed by law to the Company or (iii) could subject the
Company to any material risk of loss or damages.
(d) Without in any way limiting the generality of the foregoing, to the
knowledge of the Xxxxxxxx Parties, and except as set forth in Section 4.11 of
the Company Disclosure Schedule, (1) there are and have been no underground or
above ground storage tanks or other storage receptacles, or related piping used
for storage or transport of Hazardous Materials, located on, at or under
property (including the Real Properties) owned, operated, leased or used by the
Company, (2) there are and have been no polychlorinated biphenyls used or stored
by the Company, (3) there are and have been no properties (including the Real
Properties) currently or formerly owned, operated, managed, leased or used by
the Company (or any of its predecessors in interest) at which Hazardous
Materials generated, used, owned, managed, stored or controlled by the Company
may have been disposed of or otherwise released into the Environment in
violation of the law and (4) there is no friable asbestos contained in or
forming part of any building, building component, structure or office space
owned, operated, leased or used by the Company, in each case which is reasonably
likely to have a Material Adverse Effect.
(e) To the knowledge of the Xxxxxxxx Parties, since the Discharge Date
no lien has been recorded in the public records under Environmental Laws with
respect to any properties, assets or facilities (including the Real Properties)
owned, operated, managed, leased or used by the Company.
(f) To the knowledge of the Xxxxxxxx Parties, the Company has given the
Managing Member and its authorized representatives access to all material
records and files in its possession relating to actual or potential compliance
or liability issues of the Company under Environmental Laws, including, without
limitation, all reports, studies, analyses, tests or monitoring results
pertaining to the existence of Hazardous Materials or any other environmental
concern relating to properties, assets or facilities (including the Real
Properties) currently or formerly owned, operated, managed, leased, used or
controlled by the Company, or otherwise concerning compliance with or liability
under Environmental Laws.
(g) To the knowledge of the Xxxxxxxx Parties, there has been no
disposal, release, discharge, spillage, uncontrolled loss, seepage or filtration
of Hazardous Material on-site at any properties, assets or facilities (including
the Real Properties) at which business operations of the Company are or have
been conducted in material violation of the law (the "Properties") and, except
as set forth in Section 4.11 of the Company Disclosure Schedule, any Hazardous
Material which remains on the Properties is being managed in all material
respects in accordance with applicable state and Federal law and the regulations
adopted thereunder.
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(h) For purposes of this Agreement:
(i) "Environment" shall mean any surface water, ground water,
or drinking water supply, land surface or subsurface strata,
or ambient air and includes, without limitation, any indoor
location.
(ii) "Environmental Laws" shall mean (i) the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. 9601 et seq.; (ii) the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. ?9601 et
seq.; (iii) the Toxic Substances Control Act, as amended, 15
U.S.C. ?9601 et seq.; and (iv) any other federal or state law
or regulation relating to the protection of the Environment.
(iii) "Environmental Notice" shall mean any written notice or
claim by any Governmental Authority or other third party
alleging liability (including, without limitation, potential
liability for investigatory costs, clean-up costs,
governmental costs, compliance costs or harm, injuries or
damages to any person, property, natural resources, or any
fines or penalties) arising out of, based upon, resulting from
or relating to any Environmental Law.
(iv) "Governmental Authority" shall mean any government or
political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality, or
any court, tribunal, grand jury or arbitrator, in each case
whether foreign or domestic.
(v) "Hazardous Material" shall mean any substance included
within the definition of "hazardous substance," "hazardous
waste," "toxic substance," "toxic pollutant," "hazardous
pollutant," or any similar term under any Environmental Law
and specifically includes polychlorinated biphenyls and
petroleum, oil, or petroleum or oil products, derivatives or
constituents, including, without limitation, crude oil or any
fraction thereof, excluding, however, a substance present only
in de minimis quantities that (i) does not present a material
risk of harm to public health or the Environment and that (ii)
would not be the subject of an enforcement action if brought
to the attention of appropriate governmental agencies.
(vi) "Real Property" shall mean all right, title and interest
of the Company (including any leasehold estate) in and to a
parcel of real property owned or operated by the Company
together with, in each case, all improvements and appurtenant
fixtures, equipment, personal property, easements and other
property and rights incidental to the ownership, lease or
operation thereof.
15
SECTION 4.12 INSURANCE. The Company is covered by insurance policies,
or renewals thereof, as identified and described in Section 4.12 of the Company
Disclosure Schedule. To the knowledge of the Xxxxxxxx Parties, there is no
material liability under any insurance policy in the nature of a retroactive
rate adjustment or loss sharing or similar arrangement except as set forth on
the Company Disclosure Schedule.
SECTION 4.13 LEASES. To the knowledge of the Xxxxxxxx Parties, the
Company is not in default in the performance of any material provision of any
lease to which it is a party, whether as lessor or lessee.
SECTION 4.14 LABOR MATTERS. The Company is not a party to any union
contract or other collective bargaining agreement, other than those set forth in
Section 4.14 of the Company Disclosure Schedule, true and complete copies of
which contracts have been delivered to the Managing Member. The Company is in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and the Company is not engaged in any unfair labor practice.
There is no labor strike, slowdown or stoppage pending (or, to the knowledge of
the Xxxxxxxx Parties, any labor strike or stoppage threatened) against or
affecting the Company. No petition for certification has been filed and is
pending before the National Labor Relations Board with respect to any employees
of the Company who are not currently organized.
SECTION 4.15 EMPLOYEES. Except as set forth in the Company's SEC
Reports or in Section 4.15 of the Company Disclosure Schedule, the Company is
not a party to any employment, management services, consultation or other
contract or agreement with any past or present officer, director or employee or,
to the knowledge of the Xxxxxxxx Parties, any entity affiliated with any past or
present officer, director or employee.
SECTION 4.16 FINANCIAL STATEMENTS. The financial statements of the
Company included in the Company's SEC Reports (the "Company Financial
Statements") present fairly, in all material respects, the financial position of
the Company as of the respective dates and the results of its operations for the
periods covered in accordance with GAAP and in accordance with Regulation S-X of
the SEC (subject, in the case of audited period financial statements, to
recurring year-end adjustments which, individually or collectively, are not
material). Without limiting the generality of the foregoing, (i) except as set
forth in the Company Disclosure Schedule, there is no basis for any assertion
against the Company of any material debt, liability or obligation of any nature
not fully reflected or reserved against in the Company Financial Statements or
in the notes thereto; and (ii) there are no assets of the Company, the value of
which (in the reasonable judgment of the Company) is materially overstated in
the Company Financial Statements. Except as disclosed in the Company Financial
Statements or in the Company Disclosure Schedule, the Company has no known
material contingent liabilities (including liabilities for taxes). Except as
disclosed in the Company Disclosure Schedule, the Company is not a party to any
contract or agreement for the forward purchase or sale of any foreign currency
and has not invested in any "derivatives."
16
SECTION 4.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Section 4.17 of the Company Disclosure Schedule, since January 31, 2000,
there has not been:
(a) any material adverse change in the financial condition, operations,
properties, assets, liabilities or business of the Company;
(b) any material damage, destruction or loss of any material properties
of the Company considered as one enterprise, whether or not covered by
insurance;
(c) any material change in the manner in which the business of the
Company considered as one enterprise has been conducted; or
(d) any occurrence not included in paragraphs (a) through (c) of this
Section which has resulted, or which the Company has reason to believe, could
reasonably be expected to result, in a Material Adverse Effect on the Company.
SECTION 4.18 BOOKS, RECORDS AND ACCOUNTS. The Company's books, records
and accounts fairly and accurately reflect in all material respects transactions
and dispositions of assets by the Company, and the system of internal accounting
controls of the Company is sufficient to assure that: (a) transactions are
executed in accordance with management's authorization; (b) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP, and to maintain accountability for assets; (c) access to
assets is permitted only in accordance with management's authorization; and (d)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
SECTION 4.19 OTC BULLETIN BOARD. The Company Common Stock, the Class A
Warrants and the Class B Warrants are quoted on the Nasdaq Stock Market Inc. OTC
Bulletin Board under the respective symbols DYNI, DYNIW, DYNIZ, and the Company
is in compliance in all respects with all rules and regulations of the National
Association of Securities Dealers, Inc. applicable to the Company.
SECTION 4.20 BROKERS AND FINDERS. The Company has not employed any
investment banker, broker, finder, consultant or intermediary in connection with
the transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
SECTION 4.21 NO OMISSIONS OR UNTRUE STATEMENTS. No representation or
warranty made to the Managing Member in this Agreement, the Company Disclosure
Schedule or in any certificate of the Xxxxxxxx Parties or a Company officer
required to be delivered to the Managing Member pursuant to the terms of this
17
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein in light of the circumstances in which made not
misleading as of the date hereof and as of the Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE MANAGING MEMBER
The Managing Member hereby represents and warrants to the Company and
to the Xxxxxxxx Parties as follows (subject in each case to such exceptions as
are set forth or cross-referenced in the Managing Member Disclosure Schedule in
the labeled section corresponding to the caption of the representation or
warranty to which such exceptions relate):
SECTION 5.1 ORGANIZATION AND QUALIFICATION. Each of the Managing Member
and Emergent Ventures is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
the Managing Member and Emergent Ventures has all requisite limited liability
company power to carry on its business as it is now being conducted and is duly
qualified to do business as a foreign limited liability company and is in good
standing in all jurisdictions set forth in Section 5.1 of the Managing Member
Disclosure Schedule, and to the knowledge of the Managing Member, such
jurisdictions are the only ones in which the properties owned, leased or
operated by the Managing Member or Emergent Ventures or the nature of the
business conducted by either makes such qualification necessary, except where
the failure to qualify (individually or in the aggregate) will not have any
Material Adverse Effect on Emergent Ventures. The copies of the Certificate of
Formation and the operating agreement of each of the Managing Member and
Emergent Ventures previously delivered to the Company are true and complete
copies of these documents as now in effect.
SECTION 5.2 CAPITALIZATION. Schedule 5.2 sets forth a true, correct and
complete list of the Emergent Members. The membership interests in Emergent
Ventures held by the Emergent Members constitute all of the outstanding equity
interests in Emergent Ventures. All of such membership interests are duly
authorized, validly issued and outstanding, fully paid and nonassessable, and
were not issued in violation of the preemptive rights of any person. There are
no subscriptions, options, warrants, rights or calls or other commitments or
agreements to which Emergent Ventures is a party or by which it is bound,
calling for any issuance, transfer, sale or other disposition of any membership
interests, or any other equity interests, in Emergent Ventures. There are no
outstanding securities convertible or exchangeable, currently or contingently,
into equity interests in Emergent Ventures.
18
SECTION 5.3 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Managing Member has full limited liability company power and
authority to enter into this Agreement. The Managing Member's execution and
delivery of this Agreement has been duly authorized by its members and no other
limited liability proceedings on its part are necessary to authorize its
execution and delivery of this Agreement. This Agreement has been duly and
validly executed and delivered by the Managing Member and constitutes its valid
and binding agreement, enforceable against it in accordance with its terms,
except that such enforcement may be subject to the Bankruptcy Exception.
(b) The Managing Member's execution and delivery of this Agreement does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Managing
Member or Emergent Ventures, under any of the terms, conditions or provisions of
(i) the certificate of formation or operating agreement of the Managing Member
or Emergent Ventures, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to the Managing Member or Emergent Ventures or
any of their properties or assets, or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Managing Member or
Emergent Ventures is now a party or by which they or any of their properties or
assets may be bound, excluding from the foregoing clauses (ii) and (iii), such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests, charges or encumbrances that would not,
in the aggregate, have a Material Adverse Effect on Emergent Ventures.
(c) No declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the Managing Member's execution and delivery of this
Agreement or its consummation of the transactions contemplated hereby, other
than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be, would
not, in the aggregate, have a Material Adverse Effect on Emergent Ventures.
SECTION 5.4 LITIGATION. There is no (i) claim, action, suit or
proceeding pending or, to the knowledge of the Managing Member, threatened
against or directly relating to Emergent Ventures before any court or
governmental or regulatory authority or body or arbitration tribunal, or (ii)
outstanding judgment, order, writ, injunction or decree, or application, request
or motion therefor, of any court, governmental agency or arbitration tribunal in
a proceeding to which Emergent Ventures or any of its assets was or is a party
except, in the case of clauses (i) and (ii) above, such as would not,
individually or in the aggregate, either materially impair or preclude the
ability of the Emergent Members to consummate the Emergent Interest Transfer or
the other transactions contemplated hereby or have a Material Adverse Effect on
Emergent Ventures.
19
SECTION 5.5 NO VIOLATION OF LAW. Emergent Ventures is not in violation
of and has not been given notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance or judgment (including, without
limitation, any applicable environmental law, ordinance or regulation) of any
governmental or regulatory body or authority, except for violations which, in
the aggregate, do not have, and would not reasonably be expected to have, a
Material Adverse Effect on Emergent Ventures. Neither the Managing Member nor
Emergent Ventures has received any written notice that any investigation or
review with respect to Emergent Ventures by any governmental or regulatory body
or authority is pending or threatened, other than, in each case, those the
outcome of which, as far as reasonably can be foreseen, would not reasonably be
expected to have a Material Adverse Effect on Emergent Ventures.
SECTION 5.6 FINANCIAL STATEMENTS. Section 5.6 of the Managing Member
Disclosure Schedule contains an unaudited consolidated balance sheet of Emergent
Ventures as of June 12, 2000 (the "Emergent Ventures Financial Statements"). The
Emergent Ventures Financial Statements present fairly, in all material respects,
the financial position of Emergent Ventures as of June 12, 2000. Without
limiting the generality of the foregoing, (i) except as set forth in Section 5.6
of the Managing Member Disclosure Schedule, as of June 12, 2000, there was no
material debt, liability or obligation of any nature not reflected or reserved
against in the Emergent Ventures Financial Statements required to be so
reflected or reserved in accordance with GAAP; and (ii) there are no assets of
Emergent Ventures, the value of which (in the reasonable judgment of the
Managing Member) is materially overstated in the Emergent Ventures Financial
Statements. Except as disclosed therein or in Section 5.6 of the Managing Member
Disclosure Schedule or as incurred in the ordinary course of business since June
12, 2000, Emergent Ventures has no known material contingent liabilities
(including liabilities for Taxes). Except as disclosed in the Managing Member
Disclosure Schedule, Emergent Ventures is not a party to any contract or
agreement for the forward purchase or sale of any foreign currency and has not
invested in any "derivatives."
SECTION 5.7 ASSETS. Section 5.7 of the Managing Member Disclosure
Schedule sets forth a complete list, as of the date of this Agreement, of all
material assets of Emergent Ventures.
SECTION 5.8 TAXES. Emergent Ventures has duly filed all Returns
required to be filed by it other than Returns which the failure to file would
have no material adverse effect on the business of Emergent Ventures. All such
Returns were, when filed, and to the Managing Member's knowledge are, accurate
and completed in all material respects and were prepared in conformity with
applicable laws and regulations. Emergent Ventures has paid or will pay in full
or has adequately reserved against all Taxes otherwise assessed against it
through the Closing Date. Emergent Ventures is not a party to any pending action
20
or proceeding by any governmental authority for the assessment of any Tax, and,
to the knowledge of the Managing Member, no claim for assessment or collection
of any Tax has been asserted against Emergent Ventures that has not been paid.
There are no Tax liens upon the assets of Emergent Ventures. There is no valid
basis, to the Managing Member's knowledge, for any assessment, deficiency,
notice, 30-day letter or similar intention to assess any Tax to be issued to
Emergent Ventures by any governmental authority.
SECTION 5.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in Section 5.9 of the Managing Member Disclosure Schedule, since June 12, 2000,
there has not been:
(a) any material adverse change in the financial condition, operations,
properties, assets, liabilities or business of Emergent Ventures;
(b) any material damage, destruction or loss of any material properties
of Emergent Ventures considered as one enterprise, whether or not covered by
insurance;
(c) any material change in the manner in which the business of Emergent
Ventures considered as one enterprise has been conducted; and
(d) any occurrence not included in paragraphs (a) through (c) of this
Section which has resulted, or which the Managing Member has reason to believe,
could reasonably be expected to result, in a Material Adverse Effect on Emergent
Ventures.
SECTION 5.10 BUSINESS OF EMERGENT VENTURES. The business of Emergent
Ventures is as described in Emergent Ventures' Confidential Offering Memorandum
dated March 1, 2000, a true and complete copy of which is set forth in Schedule
5.10 of the Managing Member Disclosure Schedule.
SECTION 5.11 BROKERS AND FINDERS. Neither the Managing Member nor
Emergent Ventures has employed any investment banker, broker, finder, consultant
or intermediary in connection with the transactions contemplated by this
Agreement which would be entitled to any investment banking, brokerage, finder's
or similar fee or commission in connection with this Agreement or the
transactions contemplated hereby.
SECTION 5.12 NO OMISSIONS OR UNTRUE STATEMENTS. No representation or
warranty made by the Managing Member to the Company in this Agreement, the
Managing Member Disclosure Schedule or in any certificate of the Managing Member
required to be delivered to the Company pursuant to the terms of this Agreement
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein in light of the circumstances in which made not misleading as
of the date hereof and as of the Closing Date.
21
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE EMERGENT MEMBERS
The Emergent Members hereby jointly, and not severally, represent and
warrant to the Company as follows:
SECTION 6.1 AUTHORITY. Each Emergent Member has full power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by each
Emergent Member, and the consummation by such Emergent Member of the
transactions contemplated hereby, have been duly authorized by each Emergent
Member. This Agreement has been duly and validly executed and delivered by each
Emergent Member, and constitutes a valid and binding agreement of each Emergent
Member enforceable against each Emergent Member in accordance with its terms,
except that such enforcement may be subject to the Bankruptcy Exception.
SECTION 6.2 APPROVALS. No declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of this
Agreement by the Emergent Members or the consummation by the Emergent Members of
the transactions contemplated hereby.
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE CLOSING DATE
SECTION 7.1 CONDUCT OF THE COMPANY'S BUSINESS PRIOR TO CLOSING DATE.
(a) During the period from the date hereof to the Closing Date, except
as otherwise expressly contemplated by this Agreement or as the Managing Member
shall otherwise specifically consent to in writing, the Company covenants and
agrees that it shall, and the Xxxxxxxx Parties covenant and agree that they
shall cause the Company to, conduct the Company's business in the ordinary and
usual course of business and consistent with past practice. By way of
amplification and not limitation, during the period from the date hereof to the
Closing Date, except as otherwise expressly contemplated by this Agreement or as
the Managing Member shall otherwise specifically consent to in writing, the
Company covenants and agrees that it shall (i) use reasonable efforts to
preserve intact its business organization and goodwill, (ii) confer on a regular
basis with one or more representatives of the Managing Member to report on
material operational matters and the general status of ongoing operations; and
(iii) file with the SEC on a timely basis all forms, statements, reports and
documents (including all exhibits, amendments and supplements thereto) required
to be filed by it pursuant to the Exchange Act.
22
(b) During the period from the date hereof to the Closing Date, except
as otherwise expressly contemplated by this Agreement or as the Managing Member
shall otherwise specifically consent to in writing, the Company covenants and
agrees that it shall not do or propose to do, and the Xxxxxxxx Parties covenant
and agree that they will not cause the Company to do or propose to do, any of
the following:
(1) (i) split, combine or reclassify its outstanding capital stock
or declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise, (ii) spin-off,
distribute, sell, transfer or otherwise dispose of any assets
or businesses, (iii) engage in any transaction for the purpose
of effecting a recapitalization, or (iv) engage in any
transaction or series of related transactions which has a
similar effect to any of the foregoing;
(2) issue, sell, pledge or dispose of, or agree to issue, sell
pledge or dispose of, any additional shares of, or any options,
warrants or rights of any kind to acquire any shares of its
capital stock of any class or any debt or equity securities
convertible into or exchangeable for such capital stock or
amend or modify the terms and conditions of any of the
foregoing, except that it may issue shares upon exercise of
outstanding options or warrants; or
(3) (i) redeem, purchase, acquire or offer to purchase or acquire
any shares of its capital stock, other than as required by the
governing terms of such securities, (ii) take or fail to take
any action which action or failure to take action would cause
the Emergent Members to recognize gain or loss for federal
income tax purposes as a result of the issuance of shares of
Company Common Stock thereto; (iii) take or fail to take any
action which action or failure to take action would cause the
Distribution not to qualify for federal income tax purposes as
a reorganization within the meaning of Section 368(a)(1)(D) of
the Code, (iv) make any acquisition of any material assets
(except in the ordinary course of business) or businesses, (v)
sell any material assets (except in the ordinary course of
business) or businesses, or (vi) enter into any contract,
agreement, commitment or arrangement to do any of the
foregoing.
SECTION 7.2 CONDUCT OF EMERGENT VENTURES' BUSINESS PRIOR TO
CLOSING DATE.
(a) During the period from the date hereof to the Closing Date, except
as otherwise expressly contemplated by this Agreement or as the Company shall
otherwise specifically consent to in writing, the Managing Member covenants and
agrees that it shall cause Emergent Ventures to conduct the business of Emergent
Ventures in the ordinary and usual course of business and consistent with past
practice.
23
(b) During the period from the date hereof to the Closing Date, except
as otherwise expressly contemplated by this Agreement or as the Company shall
otherwise specifically consent to in writing, the Managing Member covenants and
agrees that it shall not do or propose to do, and will not cause Emergent
Ventures to do or propose to do, any of the following:
(1) (i) split, combine or reclassify its outstanding membership
interests or declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise,
(ii) spin-off, distribute, sell, transfer or otherwise dispose
of any assets or businesses owned or held by Emergent Ventures,
(iii) engage in any transaction for the purpose of effecting a
recapitalization, or (iv) engage in any transaction or series
of related transactions which has a similar effect to any of
the foregoing; or
(2) issue or sell, or agree to issue or sell, any additional
membership or other equity interests in Emergent Ventures.
SECTION 7.3 NO SOLICITATION BY THE COMPANY OR THE XXXXXXXX PARTIES. (a)
The Company and the Xxxxxxxx Parties agree that, prior to the Closing Date or
the termination or abandonment of this Agreement, the Company shall not give
authorization or permission to any of its directors, officers, employees, agents
or representatives to, and the Company and the Xxxxxxxx Parties shall use all
reasonable efforts to see that such persons do not, directly or indirectly,
solicit, initiate, facilitate or encourage (including by way of furnishing or
disclosing information) any merger, consolidation, other business combination
involving the Company, acquisition of all or any substantial portion of the
assets or capital stock of the Company or of the assets of any division of the
Company, or inquiries or proposals concerning or which may reasonably be
expected to lead to, any of the foregoing (a "Company Acquisition Transaction")
or negotiate, explore or otherwise knowingly communicate in any way with any
third party (other than Emergent Ventures, the Managing Member or any affiliate
thereof) with respect to any Company Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Transactions or any other transactions expressly
contemplated by this Agreement, or contemplated to be a material part thereof;
provided, however, that nothing contained in this Section 7.3(a) shall prevent
the Company or the Board of Directors of the Company from furnishing non-public
information to, or entering into discussions or negotiations with, any third
party in connection with an unsolicited, bona fide written proposal for a
Company Acquisition Transaction by such third party, if and only to the extent
that (1) such third party has made a written proposal to the Company Board of
Directors to consummate a Company Acquisition Transaction, (2) the Company Board
of Directors determines in good faith that such Company Acquisition Transaction
is reasonably capable of being completed on substantially the terms proposed,
and would, if consummated, result in a transaction that would provide greater
value to the holders of the shares of Company Common Stock than the Transactions
contemplated by this Agreement (a "Superior Company Acquisition Transaction"),
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(3) the failure to take such action would, in the reasonable good faith judgment
of the Company Board of Directors, based upon a written opinion of outside legal
counsel, be a violation of its fiduciary duties to the Company stockholders
under applicable law, and (4) prior to furnishing such non-public information
to, or entering into discussions or negotiations with, such third party, the
Company's Board of Directors receives from such third party an executed
confidentiality agreement that provides prior notice of its decision to take
such action to the Company. The Company agrees not to release any third party
from, or waive any provision of, any standstill agreement to which it is a party
or any confidentiality agreement between it and another person who has made, or
who may reasonably be considered likely to make, a proposal with respect to a
Company Acquisition Transaction, unless the failure to take such action would,
in the reasonable good faith judgment of the Company Board of Directors, based
upon a written opinion of outside legal counsel, be a violation of its fiduciary
duties to the Company's stockholders under applicable law. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any representative of the Company shall be deemed to
be a breach of this Section 7.3(a) by the Company and the Xxxxxxxx Parties.
(b) The Company shall notify the Managing Member of any bona fide
inquiries or proposals relating to a Company Acquisition Transaction, within one
business day following the Company's receipt of any such inquiry or proposal.
Such notice shall be made orally and in writing and shall indicate the identity
of the offeror and the terms and conditions of such proposal, inquiry or
contact. The Company shall keep the Managing Member informed of the status
(including any change to the material terms) of any such proposal or request for
non-public information. The Company shall also promptly advise any person
seeking a Company Acquisition Transaction that it is bound by the provisions of
this Section 7.3, but without identifying Emergent Ventures or the Managing
Member.
(c) The Company Board of Directors may not withdraw or modify, or
propose to withdraw or modify, in a manner adverse to the Managing Member or
Emergent Members, the approval by the Company Board of Directors of this
Agreement or the Transactions unless, following the receipt of a Superior
Company Acquisition Transaction proposal, in the reasonable good faith judgment
of the Company Board of Directors, based upon the written opinion of outside
legal counsel, the failure to do so would be a violation of the Company Board of
Directors' fiduciary duties to the Company's stockholders under applicable law.
(d) In the event the Company receives a proposal with respect to a
Superior Company Acquisition Transaction, the Company shall offer to the
Managing Member the right to equal such proposal or make a proposal that is
superior to the Company's stockholders than such proposal. If the Managing
Member wishes to exercise such right, it must give the Company written notice of
its decision to do so within five business days (or such shorter period as may
be required under the terms of the proposal with respect to the Superior Company
Acquisition Proposal) after the Company gives written notice to the Managing
Member of the proposal with respect to the Superior Company Acquisition
Transaction.
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SECTION 7.4 NO SOLICITATION BY THE MANAGING MEMBER. The Managing Member
agrees that, prior to the Closing Date or the termination or abandonment of this
Agreement, the Managing Member shall not, directly or indirectly, solicit,
initiate, facilitate or encourage (including by way of furnishing or disclosing
information) any merger, consolidation, other business combination involving
Emergent Ventures, acquisition of all or any substantial portion of the assets
or membership interests of Emergent Ventures, or inquiries or proposals
concerning or which may reasonably be expected to lead to, any of the foregoing
(an "Emergent Acquisition Transaction") or negotiate, explore or otherwise
knowingly communicate in any way with any third party (other than the Company or
its affiliates) with respect to any Emergent Acquisition Transaction or enter
into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Transactions or any other transactions
expressly contemplated by this Agreement, or contemplated to be a material part
thereof. The Managing Member shall advise the Company in writing of any bona
fide inquiries or proposals relating to an Emergent Acquisition Transaction,
within one business day following the Managing Member's receipt of any such
inquiry or proposal. The Managing Member shall also promptly advise any person
seeking an Emergent Acquisition Transaction that it is bound by the provisions
of this Section, but without identifying the Company.
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1 ACCESS TO INFORMATION. (a) Each of the Managing Member and
the Company shall afford to the other and the other's accountants, counsel,
financial advisors and other representatives full access during normal business
hours throughout the period prior to the Closing Date to all properties, books,
contracts, commitments and records (including, but not limited to, Tax Returns)
of Emergent Ventures and the Company, respectively, and, during such period,
shall furnish promptly (a) a copy of each report, schedule and other document
filed or received by it during such period pursuant to the requirements of
federal or state securities laws or, in the case of the Company, filed by it
during such period with the SEC in connection with the transactions contemplated
by this Agreement or which may have a material effect on the business,
properties or personnel of Emergent Ventures and the Company, respectively, and
(b) such other information concerning the business, properties and personnel of
Emergent Ventures and the Company as the other shall reasonably request;
provided, however, that, no investigation pursuant to this Section 8.1 shall
affect any representation or warranty made herein or the conditions to the
obligations of the respective parties to consummate the transactions
contemplated by this Agreement. All non-public documents and information
furnished to the Managing Member or to the Company, as the case may be, in
connection with the transactions contemplated by this Agreement shall be deemed
26
to have been received in confidence. The Company shall promptly advise the
Managing Member, and the Managing Member shall promptly advise the Company, in
writing, of any change or the occurrence of any event after the date of this
Agreement having, or which, insofar as can reasonably be foreseen, in the future
may have, a Material Adverse Effect on the Company or Emergent Ventures, as the
case may be.
(b) Immediately prior to the Closing, the Company shall cause Newco to
execute an agreement which shall afford to the Company and its accountants,
counsel, financial advisors and other representatives full access from time to
time following the Closing Date (upon reasonable notice and during normal
business hours), to all properties, books, contracts, commitments and records
(including, but not limited to, Tax Returns) of Newco; provided, however, that
Newco shall only be obligated to provide access to such properties, books,
contracts, commitments and records to the extent such access is reasonably
required by the Company for legitimate business purposes.
SECTION 8.2 AGREEMENT TO COOPERATE. Subject to the terms and conditions
herein provided, each of the parties hereto shall cooperate and use their
respective best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its reasonable efforts to obtain
all necessary or appropriate waivers, consents and approvals, to effect all
necessary registrations, filings and submissions and to lift any injunction or
other legal bar to any of the Transactions (and, in such case, to proceed with
the Transactions as expeditiously as possible), provided, that nothing in this
Section 8.2 shall affect any responsibility or obligation specifically allocated
to any party in this Agreement.
SECTION 8.3 PUBLIC STATEMENTS. The Company and the Managing Member
agree that the press release in the form attached hereto as Exhibit 8.3(a) (the
"Initial Release") shall be released by the parties immediately following the
execution of this Agreement, and that the press release in the form attached
hereto as Exhibit 8.3(b) (the "Closing Release" and collectively with the
Initial Release, the "Agreed Releases") shall be released by the parties
immediately following the Closing. With respect to any press release or any
written public statement with respect to this Agreement or the transactions
contemplated hereby other than the Agreed Releases, the parties agree that they
shall consult with each other prior to issuing any such press release or written
public statement and shall not issue any such press release or written public
statement prior to such consultation, except that prior review and approval
shall not be required if, in the reasonable judgment of the party seeking to
issue such release or public statement, prior review and approval would prevent
the timely dissemination of such release or statement in violation of applicable
law, rule, regulation or policy of the Nasdaq Stock Market Inc. OTC Bulletin
Board.
27
SECTION 8.4 DISCLOSURE SUPPLEMENTS. From time to time prior to the
Closing Date, and in any event immediately prior to the Closing Date, each of
the Company and the Managing Member shall promptly supplement or amend its
Disclosure Schedule with respect to any matter hereafter arising that, if
existing, occurring, or known at the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedule or that is
necessary to correct any information in such Disclosure Schedule that is or has
become inaccurate. Notwithstanding the foregoing, if any such supplement or
amendment discloses a Material Adverse Effect, the conditions to the other
party's obligations to consummate the Transactions set forth in Article IX
hereof shall be deemed not to have been satisfied.
SECTION 8.5 RULE 14F-1. As promptly as practicable following the date
of this Agreement, the Company agrees that it shall comply with, and the
Xxxxxxxx Parties agree that they shall cause the Company to comply with, the
requirements of Rule 14f-1 under the Securities Exchange Act of 1934, as
amended.
SECTION 8.6 NET OPERATING LOSSES. The Company agrees that it shall not
claim or deduct on any Tax Return any net operating loss incurred with respect
to any period ending on or prior to the Closing Date.
ARTICLE IX
CONDITIONS
SECTION 9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE EQUITY
TRANSFER TRANSACTIONS. The obligation of the Company to effect the Share
Issuance, on the one hand, and the obligation of the Emergent Members to effect
the Emergent Interest Transfer, on the other hand, shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of
any of the Transactions shall have been issued and remain in effect
(each party agreeing to use its reasonable efforts to have any such
injunction, order or decree lifted); and
(b) No action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government
or governmental agency in the United States which would prevent the
consummation of any of the Transactions.
28
SECTION 9.2 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO EFFECT THE
SHARE ISSUANCE. Unless waived by the Company, the obligation of the Company to
effect the Share Issuance shall be subject to the fulfillment at or prior to the
Closing Date of the following additional conditions:
(a) The Managing Member shall have performed in all material
respects its agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of the Managing Member and the Emergent Members contained in
this Agreement shall be true and correct in all material respects on
and as of (i) the date made and (ii) the Closing Date (except in the
case of representations and warranties expressly made solely with
reference to a particular date); and the Company shall have received a
certificate of the Managing Member to that effect;
(b) The Company shall have received a favorable opinion from
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx, counsel to Emergent Ventures and the
Managing Member, dated the Closing Date, as to such matters as the
Company shall reasonably request (including, without limitation, such
matters as are customary for transactions of the type contemplated by
this Agreement);
(c) The Managing Member shall have furnished to the Company
such additional certificates, opinions and other documents as the
Company may have reasonably requested as to any of the conditions set
forth in this Section 9.2; and
(d) Since the date of this Agreement there shall not have been
any Material Adverse Effect with respect to Emergent Ventures, the
likelihood of which was not previously disclosed to the Company by the
Managing Member in the Managing Member Disclosure Schedule.
SECTION 9.3 CONDITIONS TO THE OBLIGATION OF THE EMERGENT MEMBERS TO
EFFECT THE EMERGENT INTEREST TRANSFER. Unless waived by the Managing Member, the
obligations of Emergent Members to effect the Emergent Interest Transfer shall
be subject to the fulfillment at or prior to the Closing Date of the additional
following conditions:
(a) The Company shall have complied with the requirements of Rule 14f-1
under the Securities Exchange Act of 1934, as amended;
(b) The Asset Transfer Transaction shall have been consummated in a
manner reasonably satisfactory to the Managing Member;
(c) The Distribution shall have been consummated in a manner reasonably
satisfactory to the Managing Member;
29
(d) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on
or prior to the Closing Date and the representations and warranties
of the Company contained in this Agreement shall be true and
correct in all material respects on and as of (i) the date made and
(ii) the Closing Date (except in the case of representations and
warranties expressly made solely with reference to a particular
date); and the Managing Member shall have received a Certificate of
the President and Chief Executive Officer of the Company and from
the Xxxxxxxx Parties to that effect;
(e) The Managing Member shall have received a favorable opinion from
Xxxxxx, Xxxxxxxx & Xxxx, P.C., counsel to the Company, dated the
Closing Date, as to such matters as the Managing Member shall
reasonably request (including, without limitation, such matters as
are customary for transactions of the type contemplated by this
Agreement);
(f) The Company and the Xxxxxxxx Parties shall have furnished to the
Managing Member such additional certificates, opinions and other
documents as the Managing Member may have reasonably requested as
to any of the conditions set forth in this Section 9.3;
(g) Since the date of this Agreement there shall not have been any
Material Adverse Effect with respect to the Company, the likelihood
of which was not previously disclosed to the Managing Member by the
Company in the Company Disclosure Schedule;
(h) Each director of the Company other than X. Xxxxxxxx shall have
resigned on or prior to the Closing Date, and the Managing Member
shall have received copies of such resignations;
(i) X. Xxxxxxxx shall have delivered to the Managing Member a 12-month
lockup agreement in such form as is customary for affiliated
stockholders; and
(j) The Managing Member shall have received (A) UCC-3 Termination
Statements executed by each Lender releasing any and all liens or
encumbrances existing with respect to the Company or any of its
assets, (B) written evidence (in form and substance satisfactory to
the Managing Member) that all debts, liabilities and obligations of
the Company to the Lenders shall have been discharged in full
(other than with respect to the Retained Liability), and (C)
written evidence (in form and substance satisfactory to the
Managing Member) that the Achim Warehousing and Service Agreement
referred to in Section 4.6 of the Company Disclosure Schedule shall
have been terminated and that the Company shall have been released
from any and all obligations and liabilities directly or indirectly
related to or arising out of such agreement.
30
ARTICLE X
NON-SURVIVAL; INDEMNIFICATION
SECTION 10.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements contained in this
Agreement shall terminate on the Closing Date or upon the termination of this
Agreement pursuant to Section 11.1, as the case may be, except that the
agreements set forth in Sections 2.3, 8.1, 8.6, 10.2, 11.2, 11.5 and 12.3 shall
survive termination indefinitely. Notwithstanding the foregoing, the Managing
Member agrees that (i) immediately following the Closing, it shall cause the
Company to deliver to Newco a consent to Newco's use of the corporate name and
trademark "Dynamic", and (ii) as soon as reasonably practicable following the
Closing, it shall cause the Company to (A) cease the use of the name "Dynamic"
in the conduct of the Company's business, (B) effect a change of the Company's
corporate name to eliminate the word "Dynamic" therefrom and (C) effect a change
in the Company's trading symbols.
SECTION 10.2 INDEMNIFICATION. X. Xxxxxxxx agrees to indemnify, defend
and hold harmless the Company, its affiliates and their respective directors,
officers, shareholders, agents and employees, from, against and in respect of
any claims, damages, liabilities or losses (collectively, "Claims") to the
extent such Claims arise solely in connection with royalties (whether currently
accrued and unpaid or becoming due after the date hereof) due from the Company
in connection with or arising out of any of the Company Contracts listed on
Schedule 4.6 of the Company Disclosure Schedule.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
SECTION 11.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual consent of the Managing Member and the Company;
(b) unilaterally by the Managing Member if the Closing shall not have
occurred by August 31, 2000;
(c) unilaterally by the Company in the event that the Company has
received a proposal with respect to a Company Acquisition
Transaction and the provisions and conditions of subsections (a),
(b), (c) and (d) of Section 7.3 have been complied with and
satisfied;
31
(d) unilaterally by the Managing Member upon the occurrence of a
Material Adverse Effect with respect to the Company, the likelihood
of which was not previously disclosed to the Managing Member by the
Company prior to the date of this Agreement (a "Company Adverse
Change");
(e) unilaterally by the Company upon the occurrence of a Material
Adverse Effect with respect to Emergent Ventures, the likelihood of
which was not previously disclosed to the Company by the Managing
Member prior to the date of this Agreement (an "EV Adverse
Change");
(f) unilaterally by the Managing Member in the event of the Company's
material breach when made of any material representation or
warranty of the Company contained in this Agreement, or the
Company's willful failure to comply with or satisfy any material
covenant or condition of Company contained in this Agreement; and
(g) unilaterally by the Company in the event of the Managing Member's
material breach when made of any material representation or
warranty contained in this Agreement, or the Managing Member's
willful failure to comply with or satisfy any material covenant or
condition of the Managing Member contained in this Agreement.
SECTION 11.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Managing Member or the Company, as provided in Section
11.1, this Agreement (other than as set forth in Section 10.1) shall forthwith
become void and there shall be no further obligation on the part of any party
hereto.
SECTION 11.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto and in
compliance with applicable law.
SECTION 11.4 WAIVER. At any time prior to the Closing Date, the parties
hereto may (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 contained herein or in any document delivered
pursuant thereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
SECTION 11.5 EXPENSES. Whether or not the Transactions are consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses.
32
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally (effective
upon delivery), mailed by registered or certified mail (return receipt
requested) (effective three business days after mailing), sent by a reputable
overnight courier service for next business day delivery (effective the next
business day) or sent via facsimile (effective upon receipt of the telecopy in
complete, readable form) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) If to the Managing Member:
Emergent Management LLC
c/o Emergent Capital Investment Management, LLC
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxx
FAX: (000) 000-0000
with a copy to:
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxx, Esq.
FAX: (000) 000-0000
(b) If to the Company xx Xxxxxxxx, to:
Dynamic International, Ltd.
00 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
FAX: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxxxx & Xxxx, P.C.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
FAX: (000) 000-0000
33
SECTION 12.2 INTERPRETATION. 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.
SECTION 12.3 MISCELLANEOUS. (a) This Agreement (including the documents
and instruments referred to herein) (i) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof
(including without limitation that certain non-binding term sheet dated as of
April 11, 2000 between the Managing Member and the Company; (ii) shall not be
assigned by operation of law or otherwise, and any attempt to do so shall be
void; and (iii) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York (without giving
effect to the provisions thereof relating to conflicts of law), and (b) the
parties hereto agree to submit to the exclusive jurisdiction of any New York
state court sitting in New York County and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof,
that it is not subject to such jurisdiction or that such action, suit or
proceeding may not be brought or is not maintainable in said court or that the
venue thereof may not be appropriate or that this Agreement may not be enforced
in or by such court.
SECTION 12.4 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement. In pleading or proving this
Agreement, it shall not be necessary to produce or account for more than one
fully executed original.
SECTION 12.5 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
34
IN WITNESS WHEREOF, the Managing Member, the Emergent Members, the
Company and the Xxxxxxxx Parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized as of the date first written
above.
EMERGENT MANAGEMENT COMPANY, LLC
By:______________________________________
EMERGENT MEMBERS
By:______________________________________
Attorney-in-Fact
DYNAMIC INTERNATIONAL, LTD.
By:______________________________________
_________________________________________
XXXXXX X. XXXXXXXX
_________________________________________
XXXXX XXXXXXXX
35
