Exhibit 10.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
INTRODUCTION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement")
is entered into as of the 27th day of January 1999 by and among InSite Internet,
Inc. (formerly known as InSite Telecom, Inc.), a Delaware corporation (the
"Parent"), InSite Internet I Acquisition Co., Inc., a New York corporation
("Newco"), Global 2000 Communications, Inc., a New York corporation (the
"Company") and Xxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxx
Xxxxxx and Xxxx Xxxxx, the stockholders of the Company (collectively, the
"Stockholders").
BACKGROUND
A. The Parent, Newco and the Company intend to effect a merger of the Company
into Newco in accordance with this Agreement and the New York Business
Corporation Law (the "Merger"). Upon consummation of the Merger, the Company
will cease to exist, and Newco will continue to exist as the surviving
corporation of the Merger.
B. It is intended that the Merger qualify as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and that this Agreement constitute a plan of reorganization for
such purposes.
C. This Agreement has been adopted and approved by the respective boards of
directors of the Parent, Newco and the Company, and the shareholders of Newco
and the Stockholders have each unanimously approved this Agreement by written
consent.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual and dependent promises
and the representations and warranties hereinafter contained, the parties hereto
agree as follows:
SECTION 1. DESCRIPTION OF THE MERGER TRANSACTION.
1.1 MERGER OF THE COMPANY INTO NEWCO. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined in
SECTION 1.2 below), the Company shall be merged with and into Newco, and the
separate existence of the Company shall cease.
1.2 EFFECTIVE TIME. On the Closing Date (as defined in SECTION 1.7
below), a properly executed Certificate of Merger for the merger of the Company
into Newco, conforming to the requirements of the New York Business Corporation
Law (the "Merger Certificate"), shall be
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delivered to the Secretary of State of New York. The Merger shall take effect at
the time the Merger Certificate is filed with the Secretary of State of the
State of New York or at such later date as provided in the Merger Certificate
(the "Effective Time"). At the Effective Time, the Company shall be merged with
and into Newco in accordance with the Merger Certificate and the separate
existence of the Company shall cease and Newco shall continue as the surviving
corporation (the "Surviving Corporation").
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time:
(a) The Certificate of Incorporation of Newco shall become the
Certificate of Incorporation of the Surviving Corporation; and, subsequent to
the Effective Time, such Certificate of Incorporation shall be the Certificate
of Incorporation of the Surviving Corporation until changed as provided by law.
(b) The bylaws of Newco shall become the bylaws of the
Surviving Corporation; and, subsequent to the Effective Time, such bylaws shall
be the bylaws of the Surviving Corporation until they shall thereafter be duly
amended.
(c) The Board of Directors of the Surviving Corporation shall
be set forth on EXHIBIT 1.3 hereto and shall hold office subject to the
provisions of the laws of the Surviving Corporation's state of incorporation and
of the Certificate of Incorporation and bylaws of the Surviving Corporation.
(d) The officers of the Surviving Corporation shall be set
forth on EXHIBIT1.3 hereto, each of such officers to serve, subject to the
provisions of the Certificate of Incorporation and bylaws of the Surviving
Corporation, until his or her successor is elected and qualified.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the New York Business
Corporation Law (the "NYBCL"). Except as herein specifically set forth, the
identity, existence, purposes, powers, objects, franchises, privileges, rights
and immunities of Newco shall continue unaffected and unimpaired by the Merger
and the corporate franchises, existence and rights of the Company shall be
merged with and into Newco, and Newco, as the Surviving Corporation, shall be
fully vested therewith. At the Effective Time, the separate existence of the
Company shall cease and, in accordance with the terms of this Agreement, the
Surviving Corporation shall possess all the rights, privileges, immunities and
franchises, of a public as well as of a private nature, and all property, real,
personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to the Company and Newco shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, powers and
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franchises and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the Company and Newco;
and the title to any real estate, or interest therein, whether by deed or
otherwise, vested in the Company and Newco, shall not revert or be in any way
impaired by reason of the Merger. Except as otherwise provided herein, the
Surviving Corporation shall thenceforth be responsible and liable for all the
liabilities and obligations of the Company and Newco and any claim existing, or
action or proceeding pending, by or against the Company or Newco may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in its place. Neither the rights of creditors nor any liens
upon the property of the Company or Newco shall be impaired by the Merger, and
all debts, liabilities and duties of the Company and Newco shall attach to the
Surviving Corporation, and may be enforced against the Surviving Corporation to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by the Surviving Corporation.
1.5 MERGER CONSIDERATION; CONVERSION OF SHARES.
(a) As of the Effective Time, all of the shares of Common
Stock of the Company, no par value per share ("Company Stock"), issued and
outstanding immediately prior to the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof, shall be automatically
converted to, in the aggregate, shares of Common Stock of the Parent, par value
$.01 per share ("Parent Stock") and promissory notes, as follows (collectively,
the "Merger Consideration"):
(1) 272,000 shares of Parent Stock; provided,
however, that in the event Parent completes an initial public
offering of its common stock within twelve months of the date
of this Agreement (an "IPO"), the number of shares of Parent
Stock to be issued to the Stockholders hereunder shall be
automatically deemed to be adjusted as of the closing date of
such IPO as follows:
(i) in the event the offering price per
share of Parent Stock offered to the public in such
an IPO (the "IPO Price") is less than $10 per share,
the Parent shall issue an additional number of shares
of Parent Stock to the Stockholders as promptly as
practicable after the closing date of the IPO equal
to $2,720,000 divided by the IPO Price, less 272,000.
By way of illustration, if the IPO Price is $8 per
share, the Parent would issue an additional 68,000
shares of Parent Stock to the Stockholders;
(ii) in the event the IPO Price is greater
than $10 per share, the 272,000 shares of Parent
Stock received at the Closing would automatically be
deemed to represent as of the IPO closing date that
lesser number of shares of Parent Stock determined by
dividing $2,720,000 divided by the IPO Price. Upon
surrender of the original stock certificates for
Parent Stock issued to the Stockholders at the
Closing in the aggregate amount of 272,000 shares,
the Parent will stamp "cancelled" on such
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certificates and reissue new certificates in the
proper amounts to the Stockholders. By way of
illustration, if the IPO Price is $12.50 per share,
the shares of Parent Stock issued to the Stockholders
at the Closing would be deemed to represent 217,600
shares of Parent Stock as of the closing date of the
IPO, and upon surrender of the certificates therefor,
the Parent would promptly reissue new certificates to
the Stockholders in accordance with their ownership
interests set forth on SCHEDULE 3.4 hereto.
(iii) notwithstanding anything else in this
Agreement to the contrary, the parties hereto
acknowledge and agree that it is their intent that
the total value of Parent Shares to be issued to the
Stockholders as a result of this Agreement will be
adjusted based on the initial offering price of
Parent Stock offered to the public in the IPO (as
stated in the final prospectus for any such IPO) as
of the IPO closing date, regardless of any stock
splits, stock dividends, mergers, reorganizations,
recapitalizations, issuance of options, or other
major capital event that may take place after the
date of this Agreement and prior to the IPO closing
date such that the Stockholders ultimately receive in
the aggregate a total number of shares of Parent
Stock equal to $2,720,000 divided by the IPO Price.
The "IPO Price" as used in this section means the
initial offering price of Parent Stock offered to the
public in the IPO by the underwriters for the Parent
as stated in the final prospectus for the IPO.
(2) promissory notes of the Parent in the aggregate
principal amount of $580,000, in the form set forth in EXHIBIT
1.5(a) hereto, subject to the post-closing adjustment with
respect to such principal amount as set forth in SECTION 2
below.
(b) Each share of the Company Stock held in the treasury of
the Company immediately prior the Effective Time (if any) shall be canceled
without any conversion thereof and no payment shall be made with respect
thereto.
(c) As of and after the Effective Time, the Surviving
Corporation shall not be bound by any options, warrants, rights or agreements
with respect to the issuance or acquisition of capital stock of the Company
which would entitle any person to own, purchase or receive any capital stock of
the Company. As of the date hereof, there are no options, warrants, rights or
agreements with respect to the issuance or acquisition of the capital stock of
the Company except the Merger transaction contemplated hereby.
1.6 DELIVERY OF MERGER CONSIDERATION/ESCROW OF SHARES/SET-OFF.
(a) At the Closing, the Stockholders shall, upon surrender of
certificates representing all outstanding shares of Company Stock, receive their
pro rata share of the aggregate Merger Consideration set forth in SECTION 1.5
above in accordance with the percentage
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ownership interests of the Stockholders reflected on SCHEDULE 3.4 hereto,
provided, however, that 5,000 shares of Parent Stock included in the aggregate
Merger Consideration (the "Escrow Shares") shall be delivered into escrow at the
Closing pursuant to the Escrow Agreement attached hereto as EXHIBIT 1.6. In
addition to all other rights and remedies of the Parent, Newco and the Surviving
Corporation for breach by the Company or the Stockholders of the representations
and warranties of the Company and Stockholders herein, both at law and in
equity, the Parent shall have the right to set-off against the Escrow Shares and
against the promissory notes delivered to the Stockholders hereunder for any
claims of the Parent or the Surviving Corporation arising the post Closing
adjustment provisions of SECTION 2 below and/or under the indemnity provisions
of SECTION 12 below.
(b) The Stockholders shall deliver to the Parent at the
Closing the certificates representing the Company Stock, duly endorsed in blank
by each Stockholder, or accompanied by duly executed stock powers. The
Stockholders shall cure any deficiencies with respect to the endorsement of the
certificates or other documents of conveyance with respect to the Company Stock
or with respect to the stock powers accompanying any of the Company Stock.
(c) Upon surrender of the certificates representing shares of
Company Stock, such certificates shall be canceled, and as of the Effective
Time, the stock transfer books of the Company shall be closed and there shall be
no further registration of transfers of shares of the Company thereafter.
(d) No certificates representing fractional shares of Parent
Stock shall be issued upon the surrender of certificates which, prior to the
Effective Time, represented shares of Company Stock. In lieu of any such
fractional shares, the Stockholders will be paid an amount in cash based on an
assumed price of $10 per share.
1.7 CLOSING. The transactions contemplated by this Agreement
shall be consummated at a closing (the "Closing") which will take place at the
offices of Xxxxx & Xxxxxxx, LLP, 000 Xxxxx Xxxx Xxxxxxxx, Xxxxxxxxxx, Xxxxx
Xxxxxx 00000, within five (5) business days following the satisfaction or waiver
of the conditions set forth in SECTION 7. Notwithstanding the foregoing, the
Closing may take place at such other place and time or date as may be mutually
agreed upon by the parties hereto. The actual date of the Closing is referred to
herein as the "Closing Date".
SECTION 2. POST CLOSING ADJUSTMENT
2.1 POST-CLOSING ADJUSTMENT. Within one hundred twenty (120) days after
the Closing, the Parent shall engage KPMG Peat Marwick LLP to audit a balance
sheet prepared in accordance with generally accepted accounting principles
("GAAP") of the Company as of 5:00 PM (EST) on the day prior to the Closing Date
(the "Closing Date Balance Sheet"). Such Closing Balance Sheet will utilize the
accrual method of accounting notwithstanding the fact that the Company has
heretofore utilized the cash-basis method of accounting in connection with its
financial statements and taxes. If the aggregate shareholders' equity as shown
on the Closing Date Balance Sheet is less than $270,000 (the amount of such
shortfall being hereafter known as the "Net Worth Deficiency"), the
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Stockholders shall, at the sole discretion of the Parent and the Surviving
Corporation within thirty (30) days of the date of delivery of the Closing Date
Balance Sheet, shall pay within five (5) days of the date of determination of
the Net Worth Deficiency (subject to the dispute resolution procedure set forth
below) (i) 18% of the Net Worth Deficiency to the Parent in cash, by certified
check or by wire transfer of immediately available funds, and (ii) 82% of the
Net Worth Deficiency in Shares of Parent Common Stock which shall be valued at
the "closing sales price" (as defined in SECTION 4(b)(i) of the Escrow Agreement
attached hereto as EXHIBIT 1.6) for the ten (10) business day period immediately
preceding the date the parties reach agreement as to any Net Worth Deficiency.
The Parent shall have the option, at its sole discretion and notwithstanding any
language to the contrary in the Escrow Agreement, to receive the shares of
Parent Stock necessary to satisfy 82% of the Net Worth Deficiency from the
Stockholders directly (i.e. not from the "Escrow Shares") or from the Escrow
Shares. Notwithstanding anything in this SECTION 2 to the contrary, if there is
any Net Worth Deficiency and the Stockholders dispute any item contained on the
Closing Date Balance Sheet, the Stockholders shall notify the Parent in writing
of each disputed item (collectively, the "Disputed Amounts"), and specify the
amount thereof in dispute within thirty (30) business days after the delivery of
the Closing Date Balance Sheet. If the Parent and the Stockholders cannot
resolve any such dispute which would eliminate or reduce the amount of the Net
Worth Deficiency, then such dispute shall be resolved by an independent
nationally recognized accounting firm which is reasonably acceptable to the
Parent and the Stockholders (the "Independent Accounting Firm"). The
determination of the Independent Accounting Firm shall be made as promptly as
practical and shall be final and binding on the parties, absent manifest error
which error may only be corrected by such Independent Accounting Firm. Any
expenses relating to the engagement of the Independent Accounting Firm shall be
allocated between the Parent and the Stockholders so that the Stockholders'
aggregate share of such costs shall bear the same proportion to the total costs
that the Disputed Amounts unsuccessfully contested by the Stockholders (as
finally determined by the Independent Accounting Firm) bear to the total of the
Disputed Amounts so submitted to the Independent Accounting Firm.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.
3.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to the Parent and Newco to enter into this Agreement and consummate the
transactions contemplated hereby, the Company and each of the Stockholders
hereby jointly and severally make to the Parent and Newco the representations
and warranties contained in this SECTION 3.
3.2 ORGANIZATION AND QUALIFICATION OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of New York with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased and where such business is currently
conducted or proposed to be conducted. The copies of the Certificate of
Incorporation of the Company as amended to date, certified by the Secretary of
State of New York and the bylaws certified by the Secretary of the Company and
heretofore delivered to the Parent's
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counsel, are complete and correct, and no amendments thereto are pending. The
stock records and minute books of the Company which have heretofore been
delivered to the Parent's counsel are correct and complete. The Company is duly
qualified to do business as a foreign corporation in each jurisdiction in which
it owns, operates or leases real property and in each other jurisdiction in
which the failure to be so qualified or registered would have a material adverse
effect on the properties, assets, business, financial condition and prospects of
the Company.
3.3 SUBSIDIARIES; INVESTMENTS. Except as set forth in SCHEDULE 3.3, the
Company has no direct or indirect subsidiaries and owns no securities issued by
any other business organization or governmental authority, except U.S.
Government securities, bank certificates of deposit and money market accounts
acquired as short-term investments in the ordinary course of its business.
Except as set forth in SCHEDULE 3.3, the Company neither owns nor has any direct
or indirect interest in or control over any corporation, partnership, joint
venture or entity of any kind. For purposes of this Agreement, the term
"subsidiary" means, with respect to any person, any corporation 20% or more of
the outstanding voting securities of which, or any partnership, joint venture or
other entity 20% or more of the total equity interest of which, is directly or
indirectly owned by such person.
3.4 CAPITAL STOCK. The total authorized capital stock of the Company
consists solely of the shares listed on SCHEDULE 3.4. All of the issued and
outstanding shares of the Company Common Stock are duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by the Stockholders as set forth in SCHEDULE 3.4 free and clear of any liens,
claims, encumbrances, restrictions, security interests, mortgages, pledges or
other demands, and all such shares were offered, issued, sold and delivered by
the Company in compliance with all applicable state and federal laws concerning
the issuance of securities. Further, none of such shares were issued in
violation of the preemptive rights of any past or present stockholder. No shares
of the Company Stock are held in the treasury of the Company. SCHEDULE 3.4
contains a complete and correct listing of the Stockholders of the Company at
the date hereof, together with the number and class of the capital stock of the
Company owned by each such stockholder. There are no outstanding subscriptions,
options, warrants, commitments, preemptive rights, agreements, arrangements or
commitments of any kind for or relating to the issuance, sale, registration or
voting of, or outstanding securities convertible into or exchangeable for, any
shares of capital stock of any class or other equity interests of the Company.
The Company has never acquired any treasury stock.
3.5 AUTHORITY OF THE COMPANY AND THE STOCKHOLDERS
(a) The Company has full right, power and authority to enter
into this Agreement and each agreement, document and instrument to be executed
and delivered by it pursuant to or as contemplated by this Agreement and to
carry out the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Company of this Agreement and each such other
agreement, document and instrument have been duly authorized by the Company's
Board of Directors, and have been approved by the Stockholders by a
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unanimous written consent vote executed by each Stockholder. This Agreement and
each agreement, document and instrument to be executed and delivered by the
Company pursuant to or as contemplated by this Agreement (to the extent it
contains obligations to be performed by the Company) constitutes, or when
executed, delivered and approved by the Company Stockholders will constitute,
valid and binding obligations of the Company, enforceable in accordance with
their respective terms. The execution, delivery and performance by the Company
of this Agreement and each such other agreement, document and instrument:
(i) does not and will not violate any provision of
the Certificate of Incorporation or bylaws of the Company;
(ii) does not and will not violate any laws of the
United States, or any state or other jurisdiction applicable to the
Company or require the Company to obtain any court, regulatory body,
administrative agency or other approval, consent or waiver, or make any
filing with, any federal, state, local or foreign governmental body,
agency or official ("Governmental Entity") that has not been obtained or
made, other than the filing of the Certificate of Merger in accordance
with the NYBCL and except for any other approvals, consents, waivers and
filings that, if not obtained or made, individually or in the aggregate,
would not have a material adverse effect on the properties, assets,
business, financial condition or prospects of the Company; and
(iii) except as otherwise indicated on SCHEDULE 3.15
hereto, do not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination
or arbitration award, whether written or oral, to which the Company is a
party or by which the property of the Company is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the assets of
the Company, except where such breach, default, acceleration or right of
termination would not have a material adverse effect on the properties,
assets, business, financial condition or prospects of the Company, and
would not result in the creation or imposition of any mortgage, pledge,
lien, security interest or other charge or encumbrance on any of the
assets of the Company.
(b) Each Stockholder has full right, authority and power to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by or on behalf of it pursuant to or as contemplated by
this Agreement and to carry out the transactions contemplated hereby and
thereby. This Agreement and each agreement, document and instrument to be
executed and delivered by each Stockholder pursuant to or as contemplated by
this Agreement (to the extent it contains obligations to be performed by such
Stockholder) constitutes, or when executed and delivered will constitute, valid
and binding obligations of such Stockholder enforceable in accordance with their
respective terms, subject to the terms hereof.
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The execution, delivery and performance by each Stockholder of this Agreement
and each such agreement, document and instrument:
(i) do not and will not violate any provision of the
Certificate of Incorporation or bylaws of the Company;
(ii) do not and will not violate any laws of the
United States, or any state or other jurisdiction applicable to such
Stockholder or require such Stockholder to obtain any approval, consent
or waiver of, or make any filing with, any Governmental Entity that has
not been obtained or made; and
(iii) do not and will not result in a breach of,
constitute a default under, accelerate any obligation under or give rise
to a right of termination of any indenture or loan or credit agreement
or any other agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Stockholder is a party
or by which the property of such Stockholder is bound or to which the
property of such Stockholder is subject or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other
charge or encumbrance on any of the assets or properties of the Company.
Except as disclosed on SCHEDULE 3.15, there are no Stockholder
agreements with respect to the ownership or operation of the Company,
and any such agreements shall be terminated prior to the Closing.
3.6 STATUS OF PROPERTY OWNED OR LEASED.
(a) REAL PROPERTY. The real property identified as being owned
or leased by the Company on SCHEDULE 3.6(a) is collectively referred to herein
as the "Real Property". The Real Property constitutes all the real property
owned and leased by the Company.
(i) TITLE. Except as set forth on SCHEDULE 3.6(a),
there are no unrecorded mortgages, deeds of trust, ground leases,
security interests or similar encumbrances, liens, assessments,
licenses, claims, rights of first offer or refusal, options, or options
to purchase, or any covenants, conditions, restrictions, rights of way,
easements, judgments or other encumbrances or matters affecting title
to the Real Property. There are no leases, tenancies or occupancy
rights of any kind affecting any of the Real Property.
(ii) SECURITY INTERESTS. There is not now, nor, as a
result of the consummation of the transactions contemplated hereby,
will there be, any mortgages, deeds of trust, ground leases, security
interests or similar encumbrances on the Real Property, except as set
forth on SCHEDULE 3.6(a) (collectively, the "Encumbrances"). There is
no outstanding principal balance or accrued unpaid interest or other
amount due as of the date hereof under any instrument secured by any of
the Encumbrances and all
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payments required under each Encumbrance to the date hereof have been
made in full. No condition or fact does or will exist, as a result of
the consummation of the transactions contemplated hereby, which, with
the lapse of time or the giving of notice or both, would constitute a
material default thereunder or result in any acceleration of the
indebtedness secured thereby or any increase in the amount of interest,
premiums or penalties payable on such indebtedness.
(iii) COMMISSIONS. There are no brokerage or leasing
fees or commissions or other compensation due or payable on an absolute
or contingent basis to any person, firm, corporation, or other entity
with respect to or on account of any of the Encumbrances or the Real
Property, and no such fees, commissions or other compensation shall, by
reason on any existing agreement, become due after the date hereof.
(iv) PHYSICAL CONDITION. Except as set forth on
SCHEDULE 3.6(a), there is no material defect in the physical condition
of any of the Real Property. Except as set forth on SCHEDULE 3.6(a),
there is no material defect in any material improvements located on or
constituting a part of any of the Real Property, including, without
limitation, the structural elements thereof, the mechanical systems
(including without limitation all heating, ventilating, air
conditioning, plumbing, electrical, elevator, security,
telecommunication, utility, and sprinkler systems) therein, the roofs
or the parking and loading areas (collectively, the "Improvements").
All of the Improvements located on or constituting a part of any of the
Real Property, including, without limitation, the structural elements
thereof, the mechanical systems therein, the roofs and the parking and
loading areas are in generally good operating condition and repair.
(v) UTILITIES. The Company has not received any
written notice of any termination or impairment of the furnishing of,
or any material increase in rates for, services to any of the Real
Property of water, sewer, gas, electric, telecommunication, drainage or
other utility services, except ordinary and usual rate increases
applicable to all customers (or all customers of a certain class) of a
utility provider. The Company has not entered into any agreement
requiring it to pay to any utility provider rates which are less
favorable than rates generally applicable to customers of the same
class as the Company.
(vi) COMPLIANCE. Except as set forth on SCHEDULE
3.6(a), the Company has not received any written notice from any
municipal, state, federal or other governmental authority with respect
to any violation of any zoning, building, fire, water, use, health,
environmental or other statute, ordinance, code or regulation issued in
respect of any of the Real Property that has not been heretofore
corrected, and except in either case as set forth in SCHEDULE 3.6(a)
hereto.
(vii) GOVERNMENT APPROVALS. The Company has not
received any notice of any plan, study or effort by any Governmental
Entity which would adversely affect the
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present use, zoning or value to the Company of any of the Real Property
or which would modify or realign any adjacent street or highway in a
manner materially adverse to the Company.
(viii) ZONING. The Company has not received any
notice of any zoning violations. All buildings and improvements
situated on the Real Property were built pursuant to validly issued
building permits. Certificates of occupancy were issued for all such
structures as built, and all such structures have been maintained as
built since such certificates were issued.
(ix) REAL PROPERTY TAXES. Except as set forth in said
SCHEDULE 3.6(a), no special assessments of any kind (special, bond or
otherwise) are or have been levied against any Real Property, or any
portion thereof, which are outstanding or unpaid. Each property
constituting part of the Real Property is assessed as a separate and
distinct tax lot.
(x) SERVICE CONTRACTS. A complete list of all
material existing service, management, supply or maintenance or
equipment lease contracts and other contractual agreements affecting
the Real Property or any portion thereof (the "Service Contracts") is
set forth on SCHEDULE 3.6(a). All such Service Contracts are terminable
upon no more than thirty (30) days written notice, at no cost, except
as specified in SCHEDULE 3.6(a).
(b) PERSONAL PROPERTY. A list of each item of the machinery,
equipment and other fixed assets owned or leased by the Company having a fair
market value of at least $5,000 (the "Equipment"), is contained in SCHEDULE
3.6(b) hereto. All of the Equipment and other machinery, equipment and personal
property of the Company is located on the Real Property or used in the operation
of the Company. Except as specifically disclosed in SCHEDULE 3.6(b) or in the
Company Financial Statements (as hereinafter defined), the Company has good and
marketable title to all of the personal property owned by it. None of such
personal property or assets is subject to any mortgage, pledge, lien,
conditional sale agreement, security title, encumbrance or other charge except
as specifically disclosed in any Schedule hereto or in the Financial Statements.
The Financial Statements reflect all personal property of the Company, subject
to dispositions and additions in the ordinary course of business consistent with
this Agreement. Except as otherwise specified in SCHEDULE 3.6(b) hereto, all
leasehold improvements, furnishings, machinery and equipment of the Company are
in generally good repair, normal wear and tear excepted, have been well
maintained, and conform in all material respects with all applicable ordinances,
regulations and other laws.
3.7. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The Company has delivered to the Parent the following
financial statements, copies of which are attached hereto as SCHEDULE 3.7:
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(i) Compiled balance sheets of the Company dated as
of December 31, 1995, December 31, 1996, and December 31, 1997, and
compiled statements of income, stockholders' equity and cash flows for
each of the years ended December 31, 1995, December 31, 1996 and
December 31, 1997 (the "Year-End Company Financial Statements");
(ii) Unaudited balance sheets of the Company as of
December 31, 1998 (herein the "Company Balance Sheet Date") and
statements of income, stockholders' equity and cash flows for the year
then ended, certified by the chief financial officer of the Company (the
"Interim Company Financial Statements", together with the Year-End
Company Financial Statements, the "Company Financial Statements");
The Company Financial Statements have been prepared in accordance with GAAP
applied consistently during the periods covered thereby (except that the Interim
Company Financial Statements are subject to normal year-end audit adjustments
and do not include footnotes), and present fairly in all respects the financial
condition of the Company at the dates of said statements and the results of
their operations for the periods covered thereby.
(b) As of the Company Balance Sheet Date, the Company had no
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
(including without limitation liabilities as guarantor or otherwise with respect
to obligations of others or contingent liabilities arising prior to the Company
Balance Sheet Date) except liabilities stated or adequately reserved for on the
Company Financial Statements or reflected in Schedules furnished to Parent
hereunder as of the date hereof.
(c) As of the date hereof, the Company has no liabilities of
any nature, whether accrued, absolute, contingent or otherwise, (including
without limitation liabilities as guarantor or otherwise with respect to
obligations of others, or liabilities for taxes due or then accrued or to become
due or contingent liabilities arising prior to the date hereof or the Closing,
as the case may be) except liabilities (i) stated or adequately reserved for on
the appropriate Company Financial Statement or the notes thereto, (ii) reflected
in Schedules furnished to Parent hereunder on the date hereof or (iii) incurred
in the ordinary course of business of the Company consistent with prior
practices.
(d) The Company's "gross revenues" (which shall mean total
aggregate sales less returns, credits and other adjustments to revenue) as set
forth on the Company Financial Statements for the year ended December 31, 1998
exceed $1,181,000.
(e) The aggregate stockholder's equity as shown on the Company
Financial Statements as of the Company Balance Sheet Date exceeds $270,000.
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3.8 TAXES.
(a) The Company has paid or caused to be paid all federal,
state, local, foreign and other taxes, including without limitation income
taxes, estimated taxes, alternative minimum taxes, excise taxes, sales taxes,
use taxes, value-added taxes, gross receipts taxes, franchise taxes, capital
stock taxes, employment and payroll-related taxes, withholding taxes, stamp
taxes, transfer taxes and property taxes, whether or not measured in whole or in
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties owed by it (collectively, "Taxes"), in the amounts indicated
on tax returns filed by the Company through the date hereof or in correspondence
received from any federal, state, local or foreign government taxing authority,
whether disputed or not (other than current taxes the liability for which is
adequately reserved for on the financial statements provided to the Parent
pursuant to SECTION 3.7 hereof).
(b) The Company has in accordance with applicable law filed
all federal, state, local and foreign tax returns required to be filed by it
through the date hereof and all such returns correctly and accurately set forth
the amount of any Taxes relating to the applicable period. For every taxable
period of the Company, the Company has delivered or made available to Parent
complete and correct copies of all federal, state, local and foreign income tax
returns, examination reports and statements of deficiencies assessed against or
agreed to by the Company. SCHEDULE 3.8 attached hereto sets forth all federal
tax elections under the Internal Revenue Code of 1986, as amended (the "Code"),
that are in effect with respect to the Company or for which an application by
the Company is pending.
(c) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting in writing or threatening to assert
against the Company any deficiency or claim for additional Taxes or a claim that
the Company is or may be subject to taxation by that jurisdiction. There are no
security interests on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax. The Company has not
entered into a closing agreement pursuant to Section 7121 of the Code. The
Stockholders have paid all taxes due and filed all tax returns relating to
distributions from the Company as a "Subchapter S" corporation under the Code.
The Company has at all times maintained its status as a Subchapter S corporation
under the Code.
(d) Except as set forth in SCHEDULE 3.8 attached hereto, there
has not been any audit of any tax return filed by the Company, no audit of any
tax return of the Company is in progress, and the Company has not been notified
by any tax authority that any such audit is contemplated or pending. Except as
set forth in SCHEDULE 3.8, no extension of time with respect to any date on
which a tax return was or is to be filed by the Company is in force, and no
waiver or agreement by the Company is in force for the extension of time for the
assessment or payment of any Taxes.
(e) (i) The Company has not consented to have the provisions
of Section 341(f)(2) of the Code applied to it, (ii) the Company has not agreed
to, and has not been requested by any governmental authority to, make any
adjustments under Section 481(a) of the Code by reason of a change in accounting
method or otherwise and (iii) the Company has never
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made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances would obligate it to make any
payments, that will not be deductible under Section 280G of the Code. The
Company has disclosed on its federal income tax returns all positions taken
therein that could give rise to a penalty for underpayment of federal Tax under
Section 6662 of the Code. The Company has never had any liability for unpaid
Taxes because it is a member of an "affiliated group" (as defined in Section
1504(a) of the Code). The Company has never filed, nor has it ever been required
to file, a consolidated, combined or unitary tax return with any entity. The
Company is not a party to any tax sharing agreement.
(f) The Company computes its federal taxable income under the
cash basis method of accounting.
(g) For purposes of this SECTION 3.8, all references to
Sections of the Code shall include any predecessor provisions to such Sections
and any similar provisions of federal, state, local or foreign law.
3.9 ACCOUNTS RECEIVABLE. All accounts receivable of the Company as of
the respective balance sheet dates in the Company Financial Statements and all
accounts receivable arising thereafter or hereafter to the Closing Date, arose
or will arise from valid sales in the ordinary course of business. Except as set
forth in SCHEDULE 3.9, the Company has no accounts or loans receivable from any
person, firm or corporation which is "affiliated" with the Company. For purposes
hereof, "affiliate" means any Stockholder, or any business entity which
controls, or is controlled by, or is under common control with the Company.
3.10 INVENTORIES. The Company maintains less than $10,000 of inventory,
all saleable in the ordinary course and stated in accordance with GAAP.
3.11 ABSENCE OF CERTAIN CHANGES.
Since December 31, 1997, the Company has conducted its business only in
the ordinary course and consistent with past practices and except as disclosed
in SCHEDULE 3.11 there has not been:
(i) Any change in the properties, assets, liabilities,
business, operations, financial condition or prospects of the Company
which change by itself or in conjunction with all other such changes,
whether or not arising in the ordinary course of business, has been
materially adverse with respect to the Company;
(ii) Except for the endorsement of checks in the ordinary
course of business any material contingent liability incurred by the
Company as guarantor or otherwise with respect to the obligations of
others or any cancellation of any material debt or claim owing to, or
waiver of any material right of, the Company;
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(iii) Any mortgage, encumbrance or lien placed on any of the
properties of the Company which remains in existence on the date hereof
or will remain on the Closing Date except for liens permitted by any
current agreement of the Company with respect to borrowed money;
(iv) Any purchase, sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other
disposition, of any capital assets of the Company costing more than
$10,000;
(v) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting any of the properties,
assets or business of the Company;
(vi) Any declaration, setting aside or payment of any
dividend by the Company, or the making of any other distribution in
respect of the capital stock of the Company, any direct or indirect
redemption, purchase or other acquisition by the Company of its own
capital stock, any issuance or sale of any securities convertible into
or exchangeable for debt or equity securities of the Company or any
grant, issuance or exercise of options, warrants, subscriptions,
preemptive rights, agreements, arrangements or commitments of any kind
for or relating to the issuance, sale, registration or voting of any
shares of capital stock of any class or other equity interests of the
Company;
(vii) Any claim of unfair labor practices asserted against
the Company; any change in the compensation (in the form of salaries,
wages, incentive arrangements or otherwise) payable or to become
payable by the Company to any of its officers, employees, agents or
independent contractors other than customary merit or cost of living
increases in accordance with its usual practices, or any bonus payment
or arrangement made to or with any of such officers, employees, agents
or independent contractors; any entering into any employment, deferred
compensation or other similar agreement (or any amendment to any such
existing agreement) with any officer, director or employee of the
Company except for employment arrangements providing for salary or
wages of less than $20,000 per annum and any oral agreement terminable
at will by the Company;
(viii) Any change with respect to the officers or senior
management of the Company, any grant of any severance or termination
pay to any officer or employee of the Company;
(ix) Any payment or discharge of a material lien or
liability of the Company which was not shown on the Company
Financial Statements or incurred in the ordinary course of business
thereafter;
(x) Any obligation or liability incurred by the Company to
any of its officers, directors or stockholders, or any loans or
advances made by the Company to any
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of its officers, directors, stockholders, except normal compensation
and expense allowances payable to officers or employees;
(xi) Any change in accounting methods or practices other
than to comply with accounting pronouncements, credit practices or
collection policies used by the Company;
(xii) Any other transaction entered into by the Company
other than transactions in the ordinary course of business; or
(xiii) Any agreement or understanding whether in writing or
otherwise, that would result in any of the transactions or events or
require the Company to take any of the actions specified in paragraphs
(i) through (xii) above.
3.12 BANKING RELATIONS. All of the arrangements which the Company has
with any banking institution are described in SCHEDULE 3.12 attached hereto,
indicating with respect to each of such arrangements the type of arrangement
maintained (such as checking account, borrowing arrangements, safe deposit box,
etc.), the names in which the accounts are held, the account number, and the
name of each person, corporation, firm or other entity authorized in respect
thereof.
3.13 PATENTS, TRADE NAMES, TRADEMARKS, COPYRIGHTS AND PROPRIETARY
RIGHTS. All patents, patent applications, trademark registrations, trademark
registration applications, copyright registrations, copyright registration
applications and all material trade names, trademarks, copyrights and other
material proprietary rights owned by or licensed to the Company or used in its
respective business as presently conducted (the "Proprietary Rights") are listed
in SCHEDULE 3.13 attached hereto. All of the material patents, registered
trademarks and copyrights of the Company and all of the material patent
applications, trademark registration applications and copyright registration
applications of the Company have been duly registered in, filed in or issued by
the United States Patent and Trademark Office, the United States Register of
Copyrights or the corresponding offices of other countries identified on said
schedule. Except as set forth in SCHEDULE 3.13: (a) use of said patents, trade
names, trademarks, copyrights or other proprietary rights in the ordinary course
of business as presently conducted does not require the consent of any other
person and (b) the Company has sufficient title or adequate rights or licenses
to use all material patents, trade names, trademarks, copyrights, or other
proprietary rights used by it in its business as presently conducted free and
clear of any attachments, liens, encumbrances or adverse claims. The Company has
not received written notice that its present or contemplated activities or
products infringe any such patents, trade names, trademarks or other proprietary
rights of others. Except as set forth in SCHEDULE 3.13: (i) no other person has
an interest in or right or license to use, or the right to license others to
use, any of said patents, patent applications, trade names, trademarks,
copyrights or other proprietary rights; (ii) there are no written claims or
demands of any other person pertaining thereto and no proceedings have been
instituted, or are pending or threatened, which challenge the rights of the
Company in
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respect thereof; (iii) none of the patents, trade names, trademarks, copyrights
or other proprietary rights listed in said schedule is subject to any
outstanding order, decree, judgment or stipulation, or is being infringed by
others; and (iv) no proceeding charging the Company with infringement of any
adversely held patent, trade name, trademark or copyright has been filed or is
threatened to be filed.
3.14 TRADE SECRETS AND CUSTOMER LISTS. The Company has the right to use
in the ordinary course of its business as presently conducted, free and clear of
any claims or rights of others, all trade secrets, inventions, customer lists
and secret processes required for or incident to the manufacture or marketing of
all products presently sold, manufactured, licensed, under development or
produced by it, including products licensed from others. Any payments required
to be made by the Company for the use of such trade secrets, inventions,
customer lists and secret processes are described in SCHEDULE 3.14. The Company
is not using or in any way making use of any confidential information or trade
secrets of any third party, including without limitation, a former employer of
any present or past employee of the Company or any of the predecessors of the
Company.
3.15 CONTRACTS.
(a) Except for contracts, commitments, plans, agreements and
licenses described in SCHEDULE 3.15 (complete and accurate copies of which have
been delivered to the Parent), the Company is neither a party to nor subject to:
(i) any plan or contract providing for bonuses,
pensions, options, stock purchases, deferred compensation, retirement
payments, profit sharing, severance or termination pay, collective
bargaining or the like, or any contract or agreement with any labor
union;
(ii) any employment contract or contract for services
which requires the payment of $20,000 or more annually or which is not
terminable within thirty (30) days by the Company without liability for
any penalty or severance payment other than pursuant to the Company's
severance policies existing on the date hereof;
(iii) any contract or agreement for the purchase of
any commodity, material or equipment except purchase orders in the
ordinary course for less than $10,000 each;
(iv) any other contracts or agreements creating any
obligation of the Company of $10,000 or more with respect to any such
contract;
(v) any contract or agreement providing for the
purchase of all or substantially all of its requirements of a
particular product from a supplier;
-17-
(vi) any contract or agreement which by its terms
does not terminate or is not terminable by the Company or any successor
or assign within six months after the date hereof without payment of a
penalty;
(vii) any contract or agreement for the sale or lease
of its products or services not made in the ordinary course of
business;
(viii) any contract with any sales agent or
distributor of products of the Company or any subsidiary;
(ix) any contract containing covenants limiting the
freedom of the Company to compete in any line of business or with any
person or entity;
(x) any contract or agreement for the purchase of any
fixed asset for a price in excess of $10,000 whether or not such
purchase is in the ordinary course of business;
(xi) any license agreement (as licensor or licensee);
(xii) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment for the borrowing
of money and any related security agreement;
(xiii) any contract or agreement with any officer,
employee, director or stockholder of the Company or with any persons or
organizations controlled by or affiliated with any of them;
(xiv) any partnership, joint venture, or other
similar contract, arrangement or agreement; or
(xv) any registration rights agreements, warrants,
warrant agreements or other rights to subscribe for securities, any
voting agreements, voting trusts, shareholder agreements or other
similar arrangements or any stock purchase or repurchase agreements or
stock restriction agreements.
(b) All material contracts, agreements, leases and instruments
to which the Company is a party or by which the Company is obligated are valid
and are in full force and effect and constitute legal, valid and binding
obligations of the Company and the other parties thereto, enforceable in
accordance with their respective terms. Neither the Company nor any other party
to any contract, agreement, lease or instrument of the Company is in default in
complying with any provisions thereof, and no condition or event or facts exists
which, with notice, lapse of time or both would constitute a default thereof on
the part of either of the
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Company or on the part of any other party thereto in any such case that could
have a material adverse effect on the properties, assets, financial condition or
prospects of either of the Company. SCHEDULE 3.15 indicates whether any of the
agreements, contracts, commitments or other instruments and documents described
therein requires consent or approval to be transferred to the Surviving
Corporation as a result of the transactions contemplated herein.
3.16 LITIGATION. SCHEDULE 3.16 hereto lists all currently pending and
threatened litigation and governmental or administrative proceedings or
investigations to which the Company is a party. Except for matters described in
SCHEDULE 3.16, there is no litigation or governmental or administrative
proceeding or investigation pending or threatened against the Company which may
have an adverse effect on the properties, assets, business, financial condition
or prospects of the Company or which would prevent or hinder the consummation of
the transactions contemplated by this Agreement.
3.17 COMPLIANCE WITH LAWS. The Company has not received notice of a
violation or alleged violation of applicable statutes, ordinances, orders, rules
and regulations promulgated by any federal, state, municipal or other
governmental authority, which violation or alleged violation would have a
material adverse effect on the business of the Company, and except as set forth
in SCHEDULE 3.17 hereto, the Company is currently in compliance in all material
respects with all such statutes, ordinances, orders, rules or regulations, and
there is no valid basis for any claim that the Company is not in compliance with
any such statute, ordinance, order, rule or regulation.
3.18 INSURANCE. SCHEDULE 3.18 sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, Liability, and workers' compensation coverage and bond and surety
arrangements) to which the Seller has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past five (5)
years: (a) the name, address, and telephone number of the agent; (b) the name of
the insurer, the name of the policyholder, and the name of each covered insured;
(c) the policy number and the period of coverage; (d) the scope (including an
indication of whether the coverage was on a claims made, occurrence, or other
basis) and amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and (e) a description of any retroactive
premium adjustments or other loss-sharing arrangements. With respect to each
such insurance policy: (i) the policy is legal, valid, binding, enforceable, and
in full force and effect; (ii) the policy will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby, (iii) neither the
Seller nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (iv) no party to the policy has repudiated any provision thereof.
The Seller has been covered during the past five (5) years by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during the
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aforementioned period. SCHEDULE 3.18 describes any self-insurance arrangements
affecting the Seller.
3.19 WARRANTY AND RELATED MATTERS. There are no existing or threatened
in writing, product liability, warranty or other similar claims against the
Company alleging that any of its products or services are defective or fail to
meet any product or service warranties except as disclosed in SCHEDULE 3.19
hereto. The Company has not received notice of any statements, citations,
correspondence or decisions by any Governmental Entity stating that any product
manufactured, marketed or distributed at any time by the Company (the "Company
Products") is defective or unsafe or fails to meet any product warranty or any
standards promulgated by any such Governmental Entity. There have been no
recalls ordered by any such Governmental Entity with respect to any Company
Product. There is no (i) fact relating to any Company Product that may impose
upon the Company a duty to recall any Company Product or a duty to warn
customers of a defect in any Company Product, (ii) latent or overt design,
manufacturing or other defect in any Company Product, or (iii) liability for
warranty or other claim or return with respect to any Company Product except in
the ordinary course of business consistent with the past experience of the
Company for such kind of claims and liabilities.
3.20 FINDER'S FEES. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company or the Stockholders.
3.21 PERMITS; BURDENSOME AGREEMENTS. SCHEDULE 3.21 lists all material
permits, registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from Governmental Entities in order for
the Company to conduct its business. The Company has obtained all the Approvals,
which are valid and in full force and effect. Except as disclosed on SCHEDULE
3.21, none of the Approvals is subject to termination by their express terms as
a result of the execution of this Agreement by the Company or the consummation
of the Merger, and no further Approvals will be required in order to continue to
conduct the business currently conducted by the Company subsequent to the
Closing. Except as disclosed in SCHEDULE 3.21 or in any other schedule hereto,
the Company is neither subject to nor bound by any agreement, judgment, decree
or order which may materially and adversely affect its properties, assets,
business, financial condition or prospects.
3.22 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth in
SCHEDULE 3.22 hereto, no Stockholder, officer, employee or director of the
Company and none of their respective parents, grandparents, spouses, children,
siblings or grandchildren owns directly or indirectly on an individual or joint
basis any material interest in, or serves as an officer or director or in
another similar capacity of, any competitor, supplier or customer of the Company
or any organization, person or entity with whom the Company is doing business.
-20-
3.23 EMPLOYEE BENEFIT PROGRAMS.
(a) SCHEDULE 3.23 sets forth a list of every Employee Program
(as defined below) that has been maintained (as such term is further defined
below) by the Company at any time during the three-year period ending on the
date hereof.
(b) Each Employee Program which has been maintained by a
Company and which has at any time been intended to qualify under Section 401(a)
or 501(c)(9) of the Code, has received a favorable determination or approval
letter from the IRS regarding its qualification under such section and has, in
fact, been qualified under the applicable section of the Code from the effective
date of such Employee Program through and including the Closing (or, if earlier,
the date that all of such Employee Program's assets were distributed). No event
or omission has occurred which would cause any such Employee Program to lose
such qualification under the applicable Code section.
(c) Except as otherwise disclosed on SCHEDULE 3.23, there has
not been any failure of any party to comply with any laws applicable to or the
terms of any Employee Programs that have been maintained by the Company, except
for any failures to comply that, individually or in the aggregate, would not
have a material adverse effect on the properties, assets, business, financial
condition or prospects of the Company. With respect to any Employee Program now
or heretofore maintained by the Company, there has occurred no "prohibited
transaction," as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code, or
breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly (including without limitation
through any obligation of indemnification or contribution) in any taxes,
penalties or other liability to the Company or any Affiliate (as defined below).
No litigation, arbitration, or governmental administrative proceeding or
investigation or other proceeding (other than those relating to routine claims
for benefits) is pending or threatened with respect to any such Employee
Program.
(d) Neither the Company nor any Affiliate has ever maintained
any Employee Program subject to Title IV of ERISA.
(e) Except as otherwise disclosed on SCHEDULE 3.23, with
respect to each Employee Program maintained by the Company within the three
years preceding the date hereof, complete and correct copies of the following
documents (if applicable to such Employee Program) have previously been
delivered to the Parent: (i) all documents embodying or governing such Employee
Program, and any funding medium for the Employee Program (including, without
limitation, trust agreements) as they may have been amended to the date hereof;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Section 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS forms 5500, with
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all applicable schedules and accountants' opinions attached thereto; (iv) the
summary plan description for such Employee Program (or other descriptions of
such Employee Program provided to employees) and all modifications thereto; (v)
any insurance policy (including any fiduciary liability insurance policy)
related to such Employee Program; and (vi) any documents evidencing any loan to
an Employee Program that is a leveraged employee stock ownership plan.
(f) Each Employee Program maintained by the Company as of the
date hereof is subject to amendment or termination by the Board of Directors of
the Company without any further liability or obligation on the part of the
Company to make further contributions to any trust maintained under any such
Employee Program following such termination and the Company has not made any
written or oral representations to the contrary to its employees.
(g) For purposes of this SECTION 3.23:
(i) "Employee Program" means (a) all employee benefit
plans within the meaning of ERISA Section 3(3), including, but not
limited to, multiple employer welfare arrangements (within the meaning
of ERISA Section 3(40)), plans to which more than one unaffiliated
employer contributes and employee benefit plans (such as foreign or
excess benefit plans) which are not subject to ERISA; and (b) all stock
option plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in subsection (a) above. In
the case of an Employee Program funded through an organization
described in Code Section 501(c)(9), each reference to such Employee
Program shall include a reference to such organization;
(ii) an entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or
their spouses, dependents, or beneficiaries);
(iii) an entity is an "Affiliate" of a Company for
purposes of this SECTION 3.23 if it would have ever been considered a
single employer with the Company under ERISA Section 4001(b) or part of
the same "controlled group" as the Company for purposes of ERISA
Section 302(d)(8)(c) and
(iv) "Multiemployer Plan" means a (pension or
non-pension) employee benefit plan to which more than one employer
contributes and which is maintained pursuant to one or more collective
bargaining agreements.
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3.24 ENVIRONMENTAL MATTERS.
(a) Except as used in connection with routine maintenance and
as set forth in SCHEDULE 3.24 hereto, (i) the Company has never generated,
transported, used, stored, treated, disposed of, or managed any Hazardous Waste
(as defined below); (ii) no Hazardous Material (as defined below) has ever been
or is threatened to be spilled, released, or disposed of at any site presently
or formerly owned, operated, leased, or used by the Company, or has ever come to
be located in the soil or groundwater at any such site; (iii) no Hazardous
Material has ever been transported from any site presently or formerly owned,
operated, leased, or used by the Company for treatment, storage, or disposal at
any other place; (iv) the Company does not presently own, operate, lease, or
use, nor has it previously owned, operated, leased, or used any site on which
underground storage tanks are or were located; and (v) no lien has ever been
imposed by any Governmental Entity on any property, facility, machinery, or
equipment owned, operated, leased, or used by the Company in connection with the
presence of any Hazardous Material.
(b) Except as set forth in SCHEDULE 3.24 hereto, (i) the
Company has no liability under, nor has the Company ever violated in any
material respect, any Environmental Law (as defined below); (ii) any property
owned, operated, leased, or used by the Company and any facilities and
operations thereon are presently in compliance in all material respects with all
applicable Environmental Laws; (iii) the Company has never entered into or been
subject to any judgment, consent decree, compliance order, or administrative
order with respect to any environmental or health and safety matter or received
any request for information, notice, demand letter, administrative inquiry, or
formal or informal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any Environmental Law (as defined
below); and (iv) the Company nor any Company Stockholder has any reason to
believe that any of the items enumerated in clause (iii) of this paragraph will
be forthcoming.
(c) Except as set forth in SCHEDULE 3.24 hereto, no site
owned, operated, leased, or used by the Company contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls ("pcbs") or
equipment containing pcbs, or any urea formaldehyde foam insulation.
(d) For purposes of this SECTION 3.24, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant, or
contaminant, as defined or regulated under any Environmental Law or any other
substance which may pose a threat to the environment or to human health or
safety; (ii) "Hazardous Waste" shall mean and include any hazardous waste as
defined or regulated under any Environmental Law; (iii) "Environmental Law"
shall mean any environmental laws, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, existing as of the date hereof; and
(iv) the Company shall mean and include the Company, its predecessors and all
other entities for whose conduct the Company is or may be held responsible under
any Environmental Law.
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3.25 LISTS OF CERTAIN EMPLOYEES AND SUPPLIERS.
(a) SCHEDULE 3.25 hereto contains a list of all current
directors and officers of the Company and a list of all managers, employees and
consultants of the Company who, individually, have received or are scheduled to
receive base salary from the Company during the current fiscal year of $20,000
or more. In each case such schedule includes the current job title and current
base salary of each such individual.
(b) SCHEDULE 3.25 sets forth a true and complete list of all
suppliers of the Company to whom the Company made payments aggregating $25,000
or more during the most recent complete fiscal year showing, with respect to
each, the name, address and dollar volume involved.
3.26 EMPLOYEES; LABOR MATTERS. As of the date hereof, the Company
employed the number of full-time employees and part-time employees described on
SCHEDULE 3.26. The Company is not delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Except as set forth in SCHEDULE 3.26, upon
termination of the employment of any of said employees, the Company will not by
reason of the Merger be liable to any of said employees for so-called "severance
pay" or any other payments. Except as set forth in SCHEDULE 3.26 attached
hereto, the Company has no policy, practice, plan or program of paying severance
pay or any form of severance compensation in connection with the termination of
employment. The Company is in compliance with all applicable laws and
regulations respecting labor, employment, fair employment practices, terms and
conditions of employment, and wages and hours. No charges of employment
discrimination or unfair labor practices have been brought against the Company,
nor are there any strikes, slowdowns, stoppages of work, or any other concerted
interference with normal operations existing, pending or threatened against or
involving the Company. There are no grievances, complaints or charges that have
been filed against the Company under any dispute resolution procedure
(including, but not limited to, any proceedings under any dispute resolution
procedure under any collective bargaining agreement). No collective bargaining
agreements are in effect or are currently being or are about to be negotiated by
the Company. The Company has not received written notice of pending or
threatened changes with respect to the senior management or key supervisory
personnel of the Company.
3.27 CUSTOMERS. SCHEDULE 3.27 sets forth any customer who accounted for
more than 5% of the sales of the Company for the most recent complete fiscal
year of the Company (collectively, the "Customers"). No Customer has given
notice to the Company of its intention to terminate, to cancel or otherwise
materially and adversely modify its relationship with the
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Company or to decrease materially or limit its usage or purchase of the services
or products of the Company.
3.28 Y2K. The Company has taken all necessary action to assess,
evaluate and correct all of the hardware, software, embedded microchips and
other processing capabilities of computer and telecommunication systems it uses,
either directly or indirectly, including but not limited to computerized
services provided by third parties such as billing and payroll services, to
ensure that such systems will be able to function accurately and without
interruption or ambiguity using date information before, during and after
January 1, 2000.
3.29 TAX-FREE REORGANIZATION. Neither the Company nor any Stockholders
has taken any action which would violate any requirement, including but not
limited to the continuity-of-business-enterprise requirement of 26 C.F.R.
ss.1.368-1(d), for tax-free reorganization status undeR SECTION 368(a) of the
Code with respect to the Merger.
3.30 DISCLOSURE.
(a) This Agreement, including the Schedules hereto prepared by
the Company, together with the other information furnished to the Parent by the
Company and the Stockholders in connection herewith, does not contain an untrue
statement of material fact or omit to state a material fact necessary to make
the statements herein and therein, in light of the circumstances under which
they were made, not misleading.
(b) The Company and the Stockholders acknowledge and agree (i)
that there exits no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that the
contemplated IPO of the Parent will occur at a particular price or within a
particular range of prices or occur at all; (ii) that neither the Parent, its
subsidiaries or any of their respective officers, directors, agents or
representatives nor any underwriter shall have any liability to the Company or
the Stockholders or any other person affiliated or associated with the Company
for any failure of the contemplated IPO to occur at a particular price or within
a particular range of prices or to occur at all; and (iii) that the decision of
the Stockholders to enter into this Agreement, or to vote in favor of or consent
to the Merger, has been or will be made independent of, and without reliance
upon, any statements, opinions or other communications, or due diligence
investigations which have been or will be made performed by any prospective
underwriter, relative to the Parent or the contemplated IPO.
SECTION 4. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS.
4.1 MAKING OF COVENANTS AND AGREEMENTS. The Company and the
Stockholders covenant and agree as set forth in this SECTION 4.
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4.2 CONDUCT OF BUSINESS. Between the date of this Agreement and the
Merger Effective Date, the Stockholders will cause the Company to do and the
Company will do the following, unless Parent shall otherwise consent in writing:
(a) conduct its business only in the ordinary course
consistent with past practices, refrain from changing or introducing any method
of management or operations except in the ordinary course of business and in a
manner consistent with past practices and maintain levels of working capital
consistent with past practices;
(b) refrain from making any purchase, sale or disposition of
any asset or property other than in the ordinary course of business, from
purchasing or selling any capital asset costing more than $5,000 and from
mortgaging, pledging, subjecting to a lien or otherwise encumbering any of its
properties or assets;
(c) refrain from incurring or modifying any contingent
liability as a guarantor or otherwise with respect to the obligations of others,
and from incurring or modifying any other contingent or fixed obligations or
liabilities except in the ordinary course of business and in a manner consistent
with past practices;
(d) refrain from making any change in its incorporation
documents, by-laws or authorized or issued capital stock or from acquiring any
securities issued by any other business organization other than short-term
investments in the ordinary course of business;
(e) refrain from declaring, setting aside or paying any
dividend, making any other distribution in respect of its capital stock, making
any direct or indirect redemption, purchase or other acquisition of its capital
stock, issuing, granting, awarding, selling, pledging, disposing of or
encumbering or authorizing the issuance, grant, award, sale, pledge, disposition
or encumbrance of any shares of, or securities convertible or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or entering into any
agreement or commitment with respect to any of the foregoing;
(f) refrain from making any change in the compensation payable
or to become payable to any of its officers, employees or agents, except for
scheduled increases in salary or wages in the ordinary course of business that
are consistent with past practices, or granting any severance or termination pay
to, or establishing, adopting or entering into any agreement or arrangement
providing for severance or termination pay to, or entering into or amending any
employment, or other agreement or arrangement with, any director, officer or
other employee of the Company or any Stockholder or establishing, adopting or
entering into or amending any collective bargaining, bonus, incentive, deferred
compensation, profit sharing, stock option or purchase, insurance, pension,
retirement or other employee benefit plan;
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(g) refrain from making any change in its borrowing
arrangements or modifying, amending or terminating any of its contracts except
in the ordinary course of business, or waiving, releasing or assigning any
material rights or claims;
(h) use reasonable efforts to prevent any change with respect
to its management and supervisory personnel or banking arrangements;
(i) use reasonable efforts to keep intact its business
organization and to preserve the goodwill of and business relationships with all
suppliers, customers and others having business relations with it, and to
maintain its properties and facilities, including those held under leases, in as
good a working order and condition as on the date hereof, ordinary wear and tear
excepted;
(j) use reasonable efforts to have in effect and maintain at
all times all insurance of the kind, in the amount and with the insurers set
forth in SCHEDULE 3.18 or equivalent insurance with any substitute insurers
approved by Parent;
(k) refrain from changing accounting policies or procedures
(including, without limitation, procedures with respect to the payment of
accounts payable and collection of accounts receivable) or from making any tax
election or settling or compromising any federal, state, local or foreign income
tax liability;
(l) refrain from entering into any executory agreement,
commitment or undertaking to do any of the activities prohibited by the
foregoing provisions; and
(m) permit Parent and its authorized representatives
(including without limitation Parent's attorneys, accountants, and pension and
environmental consultants) to have full access to all of its properties, assets,
books, records, business files, executive personnel, tax returns, contracts and
documents and furnish to Parent and its authorized representatives such
financial and other information with respect to its business or properties as
Parent may from time to time reasonably request.
4.3 CONSENTS AND APPROVALS. The Company and each of the Stockholders
shall use their best efforts to obtain or cause to be obtained prior to the
Closing Date all necessary consents and approvals to the performance of the
obligations of the Company and the Stockholders under this Agreement, including,
without limitation, the consents and authorizations described in SCHEDULE 3.15
or SCHEDULE 4.3 and such other authorizations, waivers, consents and permits as
may be necessary to transfer to Parent and/or to retain in full force and effect
without penalty subsequent to the Effective Time all contracts, permits,
licenses and franchises of or applicable to the businesses of the Company.
4.4 ACTION BY WRITTEN CONSENT OF STOCKHOLDERS. On the date hereof the
Stockholders will execute and deliver a unanimous written consent in lieu of a
meeting in accordance with
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applicable law for the purpose of authorizing the transactions contemplated
hereby. The recommendation of the Board of Directors will remain in effect at
all times prior to the Effective Time. The Stockholders hereby agree to vote all
shares of capital stock of the Company held of record by them or over which they
exercise voting control in favor of the Merger, this Agreement and the
consummation of the transactions contemplated hereby and shall not demand
appraisal or dissenter's rights in connection with the merger under the NYBCL.
4.5 EXCLUSIVE DEALING. Unless and until the earlier to occur of the
Closing Date or the termination of this Agreement pursuant to SECTION 9, neither
the Company nor any Stockholder shall, nor shall any of them permit any
director, officer, employee or agent of either of the Company to, directly or
indirectly, (i) take any action to solicit, initiate submission of or encourage,
proposals or offers from any person relating to any acquisition or purchase of
all or (other than in the ordinary course of business) a portion of the assets
of, or any equity interest in, the Company or any merger or business combination
with the Company (an "Acquisition Proposal"), (ii) participate in any
discussions or negotiations regarding an Acquisition Proposal with any person or
entity other than Parent and Newco and their representatives, or (iii) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do any of the foregoing.
4.6 NO SALES OF CAPITAL STOCK. Between the date of this Agreement and
the Effective Time, none of the Stockholders shall sell, exchange, deliver,
assign, pledge, encumber or otherwise transfer or dispose of any Company Stock
owned beneficially or of record by such Stockholder, nor grant any right of any
kind to acquire, dispose of, vote or otherwise control in any manner such shares
of Company Stock; provided, however, that notwithstanding anything to the
contrary stated herein, any transferee, executor, heir, legal representative,
successor or assign of any Stockholder shall be bound by this Agreement.
4.7 NOTIFICATION OF CERTAIN MATTERS. The Stockholders and the Company
shall give prompt notice to the Parent of (i) the occurrence or non-occurrence
of any event the occurrence or non-occurrence of which would be likely to cause
any representation or warranty of the Company or the Stockholders contained
herein to be untrue or inaccurate in any material respect at or prior to the
Closing and (ii) any material failure of any Stockholder or the Company to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder. The delivery of any notice pursuant to
this SECTION 4.8 shall not be deemed to (i) modify the representations or
warranties hereunder of the party delivering such notice, (ii) modify the
conditions set forth in SECTION 7 or elsewhere or (iii) limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
4.8 AMENDMENT OF SCHEDULES. The Company and the Stockholders agree
that, with respect to the representations and warranties contained in this
Agreement, the Company and the Stockholders shall have the continuing obligation
until the Closing Date to supplement or amend promptly the Schedules hereto with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
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described on the Schedules. Notwithstanding the foregoing sentence, no amendment
or supplement to a Schedule prepared by the Company or the Company Stockholders
that constitutes or reflects an event or occurrence that would be reasonably
likely to have a material adverse effect may be made unless the Parent consents
to such amendment or supplement.
4.9 FURTHER ASSURANCES. The Company and Stockholders hereto agree to
execute and deliver, or cause to be executed and delivered, such further
instruments or documents or take such other action as may be reasonably
necessary or convenient to carry out the transactions contemplated hereby.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND NEWCO.
5.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As of the date hereof,
the Parent and Newco hereby represent and warrant to the Stockholders and the
Company as set forth in this SECTION 5.
5.2 ORGANIZATION OF THE PARENT AND NEWCO. The Parent and Newco are
corporations duly organized, validly existing and in good standing under the
laws their respective state of incorporation with full corporate power and
authority to conduct their respective businesses in the manner as now conducted.
5.3 AUTHORITY. All necessary corporate action has been taken by the
Parent and Newco to authorize the execution, delivery and performance of this
Agreement and each agreement, document and instrument to be executed and
delivered by the Parent and/or Newco pursuant to this Agreement. This Agreement
and each agreement, document and instrument to be executed and delivered by the
Parent and/or Newco pursuant to this Agreement (to the extent it contains
obligations to be performed by the Parent and/or Newco) constitutes, or when
executed and delivered by the Parent and/or Newco will constitute, valid and
binding obligations of the Parent and/or Newco enforceable in accordance with
their respective terms.
5.4 NO CONFLICTS. The execution, delivery and performance by the Parent
and Newco of this Agreement and each such other agreement, document and
instrument: (i) does not and will not violate any provision of the Certificate
of Incorporation or bylaws of the Parent or Newco; and (ii) will not result in a
breach of, constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture or loan or credit agreement or
any other agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award, whether written or oral, to which the Parent or Newco is a
party or by which the property of the Parent or Newco is bound or affected, or
result in the creation or imposition of any mortgage, pledge, lien, security
interest or other charge or encumbrance on any of the assets of the Parent or
Newco, except where such breach, default, acceleration or right of termination
would not have a material adverse effect on the properties, assets, business,
financial condition or prospects of the Parent or Newco, and
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would not result in the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the assets of the
Parent or Newco.
5.5 PARENT STOCK. The Parent Stock to be delivered to the Stockholders
at the Closing, when delivered in accordance with the terms of this Agreement,
will constitute valid and legally issued shares of the Common Stock of the
Parent, fully paid and non-assessable. Such Parent Stock will constitute
restricted securities and will be subject to the lock-up provisions and other
transfer restrictions imposed under this Agreement and under applicable federal
and state securities laws as described in Section 9 below.
5.6 PARENT PROMISSORY NOTES. The promissory notes of the Parent to be
issued to the Stockholders as part of the Merger Consideration have been duly
authorized and when issued in accordance with this Agreement, will represent
binding obligations of the Parent, subject, however, to the Parent's right to
set off against such promissory notes for breach of any representation or
warranty and to any post-closing adjustments contemplated herein.
5.7 LITIGATION. There is no litigation or governmental or
administrative proceeding or investigation pending or threatened against the
Parent or Newco which may have an adverse effect on the properties, assets,
business, financial condition or prospects of the Parent or Newco or which would
prevent or hinder the consummation of the transactions contemplated by this
Agreement.
5.8 COMPLIANCE WITH LAWS. Neither the Parent nor Newco has received
notice of a violation or alleged violation of applicable statutes, ordinances,
orders, rules and regulations promulgated by any federal, state, municipal or
other governmental authority, which violation or alleged violation would have a
material adverse effect on the business of the Parent or Newco.
SECTION 6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARENT AND NEWCO.
6.1 INTRODUCTION. The obligations of the Parent (and its accountants
KPMG Peat Marwick LLP) and Newco to consummate this Agreement and the
transactions contemplated hereby are subject to the fulfillment, prior to or at
the Closing, of the conditions set forth in this SECTION 6.
6.2 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date, the
Parent shall have had sufficient time to review the unaudited balance sheets of
the Company as of the last day of the month ended immediately prior to the
Closing Date (if December 31, including year-end adjustments) and the unaudited
statements of income, cash flow and stockholder's equity for the period then
ended, disclosing no material change in the financial condition of the Company
or the results of its operations from the financial statements originally
furnished by the Company as set forth in SCHEDULE 3.7.
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6.3 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
results of operations, financial position or business of the Company shall have
occurred and the Company shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, since the
Company Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of the Company to conduct its business; and the Parent shall
have received on the Closing Date a certificate signed by the President of the
Company and each of the Stockholders to such effect.
6.4 DUE DILIGENCE AND REGULATORY REVIEW. The Parent shall have
completed to its satisfaction a due diligence investigation of the Company and
its prospects, business, assets, contracts, rights, liabilities and obligations,
including a review of the practices and procedures of the Company with respect
to compliance with contracts and federal, state and local laws and regulations
governing the operations of the Company. Such review shall be satisfactory in
all respects to the Parent, in its sole discretion.
6.5 OPINION OF COUNSEL. The Parent shall have received an opinion from
Thuillez, Ford, Gold & Xxxxxxx, LLP, counsel to the Company and the
Stockholders, dated the Closing Date, in form and substance satisfactory to the
Parent, to the effect that with respect to the Company:
(a) the Company has been duly organized and is validly
subsisting in good standing under the laws of the State of New York.
(b) the authorized and outstanding capital stock of the
Company is as represented by the Stockholders in this Agreement and each share
of such stock has been duly and validly authorized and issued, is fully paid and
nonassessable and was not issued in violation of the preemptive rights of any
stockholder;
(c) to the knowledge of such counsel, the Company does not
have any outstanding options, warrants, calls, conversion rights or other
commitments of any kind to issue or sell any of its capital stock;
(d) this Agreement has been duly authorized, executed and
delivered by the Company and the Stockholders and constitutes a valid and
binding agreement of the Company and the Stockholders enforceable against them
in accordance with its terms except as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization, arrangement and other
similar laws relating to or affecting the rights of creditors and except (i) as
the same may be subject to the effect of general principles of equity and (ii)
that no opinion need be expressed as to the enforceability of indemnification
provisions included herein;
(e) except to the extent set forth on SCHEDULE 3.16, to the
knowledge of such counsel, there are no claims, actions, suits or proceedings
pending, or threatened against or affecting the Company, at law or in equity, or
before or by any federal, state, municipal or other
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governmental department, commission, board, bureau, agency or instrumentality
wherever located;
(f) no notice to, consent, authorization, approval or order of
any court or governmental agency or body or of any other third party is required
in connection with the execution, delivery or consummation of this Agreement by
any Stockholders or for the transfer to the Parent of the Company Stock;
(g) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Company's Certificate of
Incorporation or the bylaws of the Company or of any lease, instrument, license,
permit or any other agreement to which the Company is a party or by which the
Company or any Stockholder is bound; and
(h) any other matters incident to the matters set forth herein
as reasonably required by the Parent.
6.6 ADDITIONAL LIABILITIES AND OBLIGATIONS. The Stockholders shall have
delivered to the Parent a certificate dated the Closing Date, setting forth (i)
all liabilities and obligations of the Company arising since the Company Balance
Sheet Date and (ii) showing all material contracts and agreements, together with
copies thereof, entered into by the Company since the Company Balance Sheet
Date.
6.7 GOOD STANDING CERTIFICATES; CERTIFIED COPY OF THE CERTIFICATE OF
INCORPORATION. The Company shall have delivered to the Parent certificates,
dated as of a date no earlier than twenty days prior to the Closing Date, duly
issued by the Secretary of State and the Department of Revenue of the state of
New York (and by the Secretary of State and the Department of Revenue of any
other state in which the Company is authorized to do business), showing that the
Company is in good standing and authorized to do business and that all state
franchise and/or income tax returns and taxes for the Company for all periods
prior to the dates of such certificates have been filed and paid. The Company
shall also have delivered to the Parent prior to the Closing a recent copy of
its Certificate of Incorporation and all amendments thereto duly certified by
the Secretary of State of New York.
6.8 REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the representations
and warranties of the Company and the Stockholders contained in SECTION 3 AND
ELSEWHERE IN THIS AGREEMENT shall be true and correct on and as of the Closing
Date, with the same effect as though made on and as of the Closing Date; the
Company and the Stockholders shall, on or before the Closing Date, have
performed and satisfied all agreements and conditions hereunder which by the
terms hereof are to be performed and satisfied by the Company or the
Stockholders on or before the Closing Date; and the Company and the Stockholders
shall have delivered to the Parent a certificate dated the Closing Date signed
by the Company's President and by each of the Stockholders to the foregoing
effect.
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6.9 APPROVALS AND CONSENTS. The Company and the Stockholders shall have
made all filings with and notifications of governmental authorities, regulatory
agencies and other entities required to be made by them in connection with the
execution and delivery of this Agreement, the performance of the transactions
contemplated hereby and the continued operation of the businesses of the Company
subsequent to the Merger Effective Date, and the Company and the Parent shall
have received all required authorizations, waivers, consents and permits to
permit the consummation of the transactions contemplated by this Agreement, in
form and substance reasonably satisfactory to the Parent, from all third
parties, including, without limitation, applicable governmental authorities,
regulatory agencies, lessors, lenders and contract parties, required in
connection with the Merger or the Company's permits, leases, licenses and
franchises, to avoid a breach, default, termination, acceleration or
modification of any material agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award as a result of the execution or performance
of this Agreement, or otherwise in connection with the execution and performance
of this Agreement.
6.10 NO ACTIONS OR PROCEEDINGS. No action or proceeding by any court,
administrative body or governmental agency shall have been instituted or
threatened which would enjoin, restrain or prohibit, or would likely result in
substantial damages in respect of, this Agreement or the complete consummation
of the transactions contemplated by this Agreement, and which would in the
reasonable judgment of the Parent or Newco make it inadvisable to consummate
such transactions, and no law or regulation shall be in effect and no court
order shall have been entered in any action or proceeding instituted by any
party which enjoins, restrains or prohibits this Agreement or the complete
consummation of the transactions as contemplated by this Agreement.
6.11 PROCEEDINGS SATISFACTORY TO NEWCO AND THE PARENT. All proceedings
to be taken by the Company and the Stockholders in connection with the
consummation of the Closing on the Closing Date and the other transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transaction contemplated hereby reasonably
requested by Newco and the Parent shall be reasonably satisfactory in form and
substance to Newco and the Parent and their counsel.
6.12 EMPLOYMENT AGREEMENTS. Each of the Stockholders shall have
executed and delivered an individual employment agreement with Newco in the
forms attached hereto as EXHIBIT 6.12(a) (for Xxxxx Xxxxxx), EXHIBIT 6.12(b)
(for Xxxxx Xxxxxx) and EXHIBIT 6.12(c) (for Xxxx Xxxxx).
6.13 FACILITY LEASE. Xxxxx Xxxxxx and Xxxxx Xxxxxx shall have executed
and delivered a new lease with Newco for the property located at 0000 Xxxxxxx
Xxxxxx, Xxxxxx, Xxx Xxxx which lease shall be a gross lease in the form of
EXHIBIT 6.13 hereto and which shall be for a term
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of five (5) years with gross rent at not more than $14.50 per square foot of
leased space (inclusive of all taxes, insurance, common area maintenance charges
and utilities).
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS.
7.1 INTRODUCTION. The obligations of the Company and the Stockholders
to consummate this Agreement and the transactions contemplated hereby are
subject to the fulfillment, prior to or at the Closing Date, of the following
conditions (any one or more of which may be waived in whole or in part by the
Company and the Stockholders):
7.2 REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the representations
and warranties of the Parent and Newco contained in SECTION 5 shall be true and
correct in all material respects on and as of the Closing Date, with the same
effect as though made on and as of the Closing Date; the Parent and Newco shall,
on or before the Closing Date, have performed and satisfied all agreements and
conditions hereunder which by the terms hereof are to be performed and satisfied
by the Parent and Newco on or before the Closing Date; and the Parent and Newco
shall have delivered to the Company a certificate signed by the President of the
Parent and of Newco and dated as of the Closing Date certifying to the foregoing
effect.
7.3 NO ACTIONS OR PROCEEDINGS. No action or proceeding by any court,
administrative body or governmental agency shall have been instituted or
threatened which would enjoin, restrain or prohibit, or would likely result in
substantial damages in respect of, this Agreement or the complete consummation
of the transactions as contemplated by this Agreement, and which would in the
reasonable judgment of the Company make it inadvisable to consummate such
transactions, and no law or regulation shall be in effect and no court order
shall have been entered in any action or proceeding instituted by any party
which enjoins, restrains or prohibits this Agreement or the complete
consummation of the transactions as contemplated by this Agreement.
7.4 EMPLOYMENT AGREEMENTS. Newco shall have executed and delivered an
individual employment agreement with each of the Stockholders in the forms
attached hereto as EXHIBIT 6.12(a) (for Xxxxx Xxxxxx), EXHIBIT 6.12(b) (for
Xxxxx Xxxxxx) and EXHIBIT 6.12(c) (for Xxxx Xxxxx).
7.5 FACILITY LEASE. Newco shall have executed and delivered a new lease
with Xxxxx Xxxxxx and Xxxxx Xxxxxx for the property located at 0000 Xxxxxxx
Xxxxxx, Xxxxxx, Xxx Xxxx which lease shall be a gross lease in the form of
EXHIBIT 6.13 hereto and which shall be for a term of five (5) years with gross
rent at not more than $14.50 per square foot of leased space (inclusive of all
taxes, insurance, common area maintenance charges and utilities).
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SECTION 8 - PARENT STOCK - TRANSFER RESTRICTIONS.
8.1 50% LOCK-UP. In addition to applicable federal and state securities
laws restricting the public sale of the Parent Stock to be issued to the
Stockholders hereunder as set forth in SECTION 8.2 below, the Stockholders
hereby irrevocably agree that prior to the closing date of the Parent's
contemplated IPO and for a period of two years after the IPO closing date, they
will not to (i) offer, pledge, sell or otherwise transfer (except as
contemplated in Section 1.5(a)(1)(ii) hereof), directly or indirectly, more than
50% of the shares of Parent Stock received hereunder (as adjusted for any stock
splits, recapitalizations, mergers or other similar events post-IPO), or (ii)
enter into agreement that transfers, in whole or in part, any of the economic
consequences of ownership of more than 50% of the shares of Parent Stock
received hereunder (as adjusted for any stock splits, recapitalizations, mergers
or other similar events post-IPO). The Stockholders agree that the foregoing
shall be binding upon the Stockholders' successors, assigns, heirs, and personal
representatives.
8.2 UNREGISTERED STOCK; INVESTMENT INTENT. The Stockholders acknowledge
and agree that the shares of Parent Stock to be delivered to the Stockholders
pursuant to this Agreement have not been and will not be registered under the
Securities Act of 1933, as amended (the "Act") and therefore may not be resold
without compliance with the Act. The Stockholders represent and warrant that the
Parent Stock to be acquired by Stockholders pursuant to this Agreement is being
acquired solely for their own account, for investment purposes only, and with no
present intention of distributing, selling or otherwise disposing of it in
connection with a distribution. The Stockholders covenant, warrant and represent
that none of the shares of Parent Stock issued to such Stockholders will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the Securities and Exchange
Commission and applicable state securities laws.
8.3 ABLE TO BEAR RISK; SOPHISTICATED INVESTORS; INFORMATION. The
Stockholders represent and warrant that they are able to bear the economic risk
of an investment in Parent Stock acquired pursuant to this Agreement and can
afford to sustain a total loss of such investment. They further represent and
warrant that they (i) fully understand the nature, scope and duration of the
limitations on transfer contained in this Agreement and (ii) have such knowledge
and experience in financial and business matters that they are capable of
evaluating the merits and risks of the proposed investment and therefore have
the capacity to protect their own interests in connection with the acquisition
of the Parent Stock. The Stockholders represent and warrant that they have had
an adequate opportunity to ask questions and receive answers from the officers
of the Parent concerning any and all matters relating to the acquisition of
Parent Stock as contemplated by this Agreement including, without limitation,
the background and experience of the officers and directors of the Parent, the
plans for the operations of the business of the Parent, and any plans for
additional acquisitions and the like. The Stockholders have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to their satisfaction.
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8.4 RESTRICTIVE LEGENDS. The certificates evidencing the Parent Stock
to be received by the Stockholders hereunder will bear a legend substantially in
the form set forth below and containing such other information as the Parent may
deem appropriate. References in such legend to "THE COMPANY" shall refer to the
Parent.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR ANY
STATE SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES
UNDER THE 1933 ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS, UNLESS,
IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO
THE COMPANY) OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH REGISTRATION
IS NOT REQUIRED.
In addition, such certificates shall also bear such other legends as
counsel for the Parent reasonably determines are required under the applicable
laws of any state.
SECTION 9. TERMINATION OF AGREEMENT; EFFECT OF TERMINATION.
9.1 TERMINATION. This Agreement may be terminated any time prior to the
Closing Date solely by:
(a) mutual consent of the boards of directors of the Parent
and the Company;
(b) either the Stockholders and the Company , on the one hand,
or by the Parent and Newco, on the other hand, if
(i) the transactions contemplated by this
Agreement to take place at the Closing shall
not have been consummated by January 31,
1999, unless the failure of such
transactions to be consummated is due to the
willful failure of the party seeking to
terminate this Agreement to perform any of
its obligations under this Agreement to the
extent required to be performed by it prior
to or on the Closing Date; or
(ii) if a material breach or default shall be
made by the other party in the observance of
or in the due and timely performance of any
of the covenants or agreements contained
herein, and the curing of such default shall
not have been made on or before the Closing
Date
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9.2 LIABILITIES IN THE EVENT OF TERMINATION. The termination of this
Agreement will in no way limit any obligation or liability of any party based on
or arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements contained in this Agreement
including, but not limited to, legal and audit costs and out of pocket expenses.
SECTION 10. NON-COMPETITION.
For a period of two (2) years from and after the Closing Date, the
Stockholders will not (i) engage directly or indirectly in any business that the
Company conducts as of the Closing Date in the eastern United States; (except
that ownership of less than 2% of the outstanding stock of any competing
publicly traded corporation shall not constitute a violation of this covenant
not to compete) or (ii) solicit, directly or indirectly, any customers, clients,
accounts, officers, employees, agents or representatives of the Company, Newco
or the Parent. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section is invalid or unenforceable,
the parties hereto agree that the court making the determination of invalidity
or unenforceability shall have the power to reduce the scope, duration, or area
of the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
SECTION 11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
11.1 THE STOCKHOLDERS. The Stockholders recognize and acknowledge that
they have had in the past, currently have and in the future may have access to
certain confidential information relating to the Company, the Parent and Newco,
including, but not limited to, operational policies, customer lists, and pricing
and cost policies, that are valuable, special and unique assets of the Company,
the Parent and Newco. The Stockholders agree that they will not use or disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except (a) to authorized
representatives of the Parent and Newco who need to know such information in
connection with the transactions contemplated hereby, who have been informed of
the confidential nature of such information and who have agreed to keep such
information confidential as provided hereby, and (b) following the Closing, such
information may be disclosed by the Stockholders as is required in the course of
performing his or her duties for the Parent or the Surviving Corporation unless
(i) such information becomes known to the public generally through no breach by
the Stockholders of this covenant, (ii) disclosure is required by law or the
order of any governmental authority under color of law or is necessary in order
to secure a consent or approval to consummate the transactions contemplated
hereby, provided, that prior to disclosing any information pursuant to this
clause (ii), the Stockholders shall give prior written notice thereof to the
Parent and provide
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the Parent with the opportunity to contest such disclosure, or (iii) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party and the
same prior disclosure set forth immediately above is given. In the event of a
breach or threatened breach by the Stockholders of the provisions of this
section, the Parent shall be entitled to an injunction restraining the
Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting the Parent from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event that the transactions
contemplated herein are not consummated, the Stockholders shall return to the
Parent within a reasonable time all documents containing confidential
information about the Parent.
11.2 THE PARENT AND NEWCO. The Parent and Newco recognize and
acknowledge that they had in the past and currently have access to certain
confidential information relating to the Company, such as operational policies,
customer lists, and pricing and cost policies, that are valuable, special and
unique assets of the Company. The Parent and Newco agree that, prior to the
Closing, or if the transactions contemplated by this Agreement are not
consummated, they will not use or disclose such confidential information to
their own benefit except in furtherance of the transactions contemplated by this
Agreement or disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to the Stockholders and to authorized representatives of the Company
or the Parent or Newco who need to know such information in connection with the
transactions contemplated hereby, who have been informed of the confidential
nature of such information and who have agreed to keep such information
confidential as provided hereby, unless (i) such information becomes known to
the public generally through no breach by the Parent or Newco of this covenant,
(ii) disclosure is required by law or the order of any governmental authority
under color of law or is necessary in order to secure a consent or approval to
consummate the transactions contemplated hereby, provided, that prior to
disclosing any information pursuant to this clause (ii), the Parent and Newco
shall, if possible, give prior written notice thereof to the Company and the
Stockholders and provide the Company and the Stockholders with the opportunity
to contest such disclosure, or (iii) the disclosing party reasonably believes
that such disclosure is required in connection with the defense of a lawsuit
against the disclosing party and the same prior disclosure set forth immediately
above is given. In the event of a breach or threatened breach by the Parent or
Newco of the provisions of this Section, the Company and the Stockholders shall
be entitled to an injunction restraining the Parent and Newco from disclosing,
in whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting the Company and the Stockholders from pursuing any
other available remedy for such breach or threatened breach, including the
recovery of damages. In the event that the transactions contemplated herein are
not consummated, the Parent and Newco shall return to the Company within a
reasonable time all documents containing confidential information about the
Company.
11.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in SECTIONS 11.1 and 11.2, and
because of the immediate
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and irreparable damage that would be caused for which they would have no other
adequate remedy, the parties hereto agree that, in the event of a breach by any
of them of the foregoing covenants, the covenant may be enforced against the
other parties by injunctions and restraining orders.
11.4 SURVIVAL. The obligations of the parties under this ARTICLE 11
shall survive notwithstanding either the termination of this Agreement or the
consummation of the transactions contemplated herein on the Closing Date.
SECTION 12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders, jointly and
severally on behalf of themselves and their respective successors, executors,
administrators, estates, heirs and permitted assigns, agree subsequent to the
Effective Time to indemnify and hold harmless the Parent, the Surviving
Corporation and their respective officers, directors, employees and agents
(individually, a "Parent Indemnified Party" and collectively, the "Parent
Indemnified Parties") from and against and in respect of all losses,
liabilities, obligations, damages, deficiencies, actions, suits, proceedings,
demands, assessments, orders, judgments, fines, penalties, costs and expenses
(including the reasonable fees, disbursements and expenses of attorneys,
accountants and consultants) of any kind or nature whatsoever (whether or not
arising out of third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing) sustained, suffered or
incurred by or made against any Parent Indemnified Party (a "Loss" or "Losses"),
solely to the extent of the limitations set forth in SECTION 12.2 below, arising
out of, based upon or in connection with:
(a) any breach of any representation or warranty made by the
Company or the Stockholders in this Agreement or in any schedule, exhibit,
certificate, agreement or other instrument delivered under or in connection with
this Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such
representations or warranties (collectively, "Parent Representation and Warranty
Claims");
(b) any breach of any covenant or agreement made by the
Company or any Stockholder in this Agreement or in any schedule, exhibit,
certificate, agreement or other instrument delivered under or in connection with
this Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such covenant or
agreement; or
(c) with respect to taxes of the Company incurred with respect
to any Pre-Closing Tax Period (as defined below) to the extent such liability
exceeds the amounts accrued therefor and disclosed to the Parent in SCHEDULE 3.7
hereto (it being understood that such Schedule shall be updated as of the
Closing to reflect tax accruals as of such date consistent with the Company's
past practices); the term "Pre-Closing Tax Period" shall mean all taxable
periods
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ending on or before the Closing Date and the portion (ending on the Closing
Date) of any taxable period that includes (but does not end on) the Closing
Date.
Claims under clauses (a) through (c) of this SECTION 12.1 are hereinafter
collectively referred to as "Parent Indemnifiable Claims". The rights of Parent
Indemnified Parties to recover indemnification in respect of any occurrence
referred to in clauses (b) and (c) of this SECTION 12.1 shall not be limited by
the fact that such occurrence may not constitute an inaccuracy in or breach of
any representation or warranty referred to in clause (a) of this SECTION 12.1.
12.2 LIMITATIONS ON INDEMNIFICATION BY THE COMPANY STOCKHOLDERS. The
Company Stockholders shall not be obligated to indemnify Parent Indemnified
Parties except to the extent the cumulative amount of Losses to such Parent
Indemnifiable Parties exceeds Five Thousand Dollars ($5,000) (the "Parent
threshold") whereupon the full amount of such Losses shall be recoverable in
accordance with the terms hereof.
12.3 NOTICE; DEFENSE OF CLAIMS.
Promptly after receipt by an indemnified party of notice of any claim,
liability or expense to which the indemnification obligations hereunder would
apply, the indemnified party shall give notice thereof in writing to the
indemnifying party, but the omission to so notify the indemnifying party
promptly will not relieve the indemnifying party from any liability except to
the extent that the indemnifying party shall have been prejudiced as a result of
the failure or delay in giving such notice. Such notice shall state the
information then available regarding the amount and nature of such claim,
liability or expense and shall specify the provision or provisions of this
Agreement under which the liability or obligation is asserted. If within twenty
(20) days after receiving such notice the indemnifying party gives written
notice to the indemnified party stating that (i) it would be liable under the
provisions hereof for indemnity in the amount of such claim if such claim were
successful and (ii) that it disputes and intends to defend against such claim,
liability or expense at its own cost and expense, then counsel for the defense
shall be selected by the indemnifying party (subject to the consent of the
indemnified party which consent shall not be unreasonably withheld) and the
indemnified party shall not be required to make any payment with respect to such
claim, liability or expense as long as the indemnifying party is conducting a
good faith and diligent defense at its own expense; provided, however, that the
assumption of defense of any such matters by the indemnifying party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all Indemnifiable matters related to claims by third parties
which are susceptible to being settled provided its obligation to indemnify the
indemnifying party therefor will be fully satisfied. The indemnifying party
shall keep the indemnified party apprised of the status of the claim, liability
or expense and any resulting suit, proceeding or enforcement action, shall
furnish the indemnified party with all documents and information that the
indemnified party shall reasonably request and shall consult with the
indemnified party prior to acting on major matters, including settlement
discussions.
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Notwithstanding anything herein stated, the indemnified party shall at all times
have the right to fully participate in such defense at its own expense directly
or through counsel; provided, however, if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct the expense of separate counsel for
the indemnified party shall be paid by the indemnifying party. If no such notice
of intent to dispute and defend is given by the indemnifying party, or if such
diligent good faith defense is not being or ceases to be conducted, the"
indemnified party shall, at the expense of the indemnifying party, undertake the
defense of (with counsel selected by the indemnified party), and shall have the
right to compromise or settle (exercising reasonable business judgment), such
claim, liability or expense. If such claim, liability or expense is one that by
its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
SECTION 13. MISCELLANEOUS.
13.1 LAW GOVERNING. This Agreement shall be construed under and
governed by the internal laws of the State of New York without regard to its
conflict of laws provisions.
13.2 NOTICES. Any notice, request, demand other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given (i) if delivered or sent by facsimile transmission, upon receipt, or (ii)
if sent by registered or certified mail upon the sooner of receipt or the
expiration of three days after deposit in United States Post Office facilities
properly addressed with postage prepaid. all notices will be sent to the
addresses set forth below or to such other address as such party may designate
by notice to each other party hereunder:
TO PARENT OR NEWCO:
InSite Internet, Inc.
0000 Xxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
ATTN: Xxxx X. Xxxxx, President and Chief Executive Officer
Phone: 000-000-0000
Fax: 000-000-0000
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with a copy to:
Xxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
ATTN: Xxxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
TO THE COMPANY:
Global 2000 Communications, Inc.
0000 Xxxxxxx Xxx.
Xxxxxx, XX 00000
ATTN: Xxxxx Xxxxxx, Chief Executive Officer
Phone: 000-000-0000
with a copy to:
Thuillez, Ford, Gold & Xxxxxxx, LLP
00 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
ATTN: Xxxx X. Xxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
TO THE STOCKHOLDERS:
Xxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxx Xxxxx
c/o Global 2000 Communications, Inc.
0000 Xxxxxxx Xxx.
Xxxxxx, XX 00000
With a copy to:
Thuillez, Ford, Gold & Xxxxxxx, LLP
00 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
ATTN: Xxxx X. Xxxxxxxx
Phone: (000) 000-0000
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Fax: (000) 000-0000
Any notice given hereunder may be given on behalf of any party by its counsel or
other authorized representative.
13.3 ENTIRE AGREEMENT. This Agreement, including any schedules, annexes
and/or exhibits referred to herein and the other writings specifically
identified herein or contemplated hereby or delivered in connection with the
transactions contemplated hereby, is complete, reflects the entire agreement of
the parties with respect to its subject matter, and supersedes all previous
written or oral negotiations, commitments and writings.
13.4 ASSIGNABILITY. This Agreement may not be assigned or delegated by
any party hereto without the prior written consent of all parties hereto. No
Stockholder may assign his, her or its rights or delegate his, her or its
obligations hereunder without the prior written consent of the Parent. This
Agreement and the obligations of the parties hereunder shall be binding upon and
enforceable by, and shall inure to the benefit of, the parties hereto and their
respective successors, executors, administrators, estates, heirs and permitted
assigns, and no others.
13.5 ARBITRATION; JURISDICTION; VENUE; ATTORNEY'S FEES. Each party
hereto agrees that any dispute regarding this Agreement shall be submitted to
arbitration to and shall be resolved in accordance with the rules of the
JAMS/Endispute for expedited cases then in effect. The arbitrator(s) shall be
mutually selected by the parties or in the event the parties cannot mutually
agree, then appointed by JAMS/Endispute. Any arbitration shall be held within a
thirty (30) mile radius of New York City and the arbitrator(s) shall apply New
York law. Judgment upon any award rendered by the arbitrator(s) shall be final
and may be entered in any court of competent jurisdiction. Notwithstanding the
foregoing, the Parent and Newco shall have the absolute right to obtain
equitable remedies in any state court of competent jurisdiction in the State of
New York or in the United States District Court for the Northern District of New
York. Each party irrevocably submits to and accepts the exclusive jurisdiction
of each of such courts and waives any objection (including any objection to
venue or any objection based upon the grounds of forum non conveniens) which
might be asserted against the bringing of any such action, suit or other legal
proceeding in such courts. The court and/or arbitrator(s) shall award costs and
expenses (including reasonable attorney's fees) to the prevailing party and/or
parties in any litigation or arbitration.
13.6 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
13.7 CERTAIN DEFINITIONS. for purposes of this Agreement, the term:
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(a) "Affiliate" of a person shall mean a person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise; and
(c) "person" means an individual, corporation, partnership,
association, trust or any unincorporated organization.
13.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same document.
13.9 AMENDMENTS; WAIVERS. This Agreement may not be amended or
modified, nor may compliance with any condition or covenant set forth herein be
waived, except by a writing duly and validly executed by the Parent, Newco, the
Company and the Stockholders, or, in the case of a waiver, the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, or any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
13.10 SURVIVAL OF WARRANTIES. All representations, warranties,
agreements, covenants and obligations herein or in any schedule or certificate
delivered by any party incident to the transactions contemplated hereby are
material and may be relied upon by the party receiving the same and shall
survive for a period ending two (2) years after the Closing Date
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date set forth above by their duly authorized representatives.
ATTEST: INSITE INTERNET, INC.
/S/ XXXXXXX X. XXXXXXX By: /S/ XXXX X. XXXXX
---------------------------- ------------------------------------
Xxxxxxx X. Xxxxxxx, Xxxx X. Xxxxx, President
Assistant Secretary and Chief Executive Officer
ATTEST: INSITE INTERNET I ACQUISITION CO., INC.
/S/ XXXXXXX X. XXXXXXX By: /S/ XXXX X. XXXXX
---------------------------- ------------------------------------
Xxxxxxx X. Xxxxxxx, Xxxx X. Xxxxx, President
Assistant Secretary and Chief Executive Officer
ATTEST: GLOBAL 2000 COMMUNICATIONS, INC.
/S/ XXXXX XXXXXX By: /S/ XXXXX XXXXXX
---------------------------- ------------------------------------
Xxxxx Xxxxxx, Secretary Xxxxx Xxxxxx, President
WITNESS:
/S/ XXXX XXX /S/ XXXXX XXXXXX
---------------------------- ---------------------------------------
Xxxxx Xxxxxx
/S/ XXXX XXXXXXX /S/ XXXX XXXXXX
---------------------------- ---------------------------------------
Xxxx Xxxxxx
/S/ XXXX XXXXXXX /S/ XXXXX XXXXXX
---------------------------- ---------------------------------------
Xxxxx Xxxxxx
/S/ XXXX SEONLES /S/ XXXXX XXXXXX
---------------------------- ---------------------------------------
Xxxxx Xxxxxx
/S/ XXXX XXX /S/ XXXXX XXXXXX
---------------------------- ---------------------------------------
Xxxxx Xxxxxx
/S/ XXXX XXX /S/ XXXX XXXXX
---------------------------- ---------------------------------------
Xxxx Xxxxx
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EXHIBIT 1.3
BOARD OF DIRECTORS/OFFICERS
INSITE INTERNET I ACQUISITION CO., INC.
Board of Directors
Xxxx Xxxxx
Xxxxx Xxxxxx
Officers
Xxxx Xxxxx - President, Secretary & Treasurer
S. Xxxxx Xxxxxx - Secretary
Xxxxxxx X. Xxxxxxx - Assistant Secretary
Upon the filing of the Merger Certificate to effect the Merger of the Company
into Newco at the Closing, the Board of Directors of Newco will execute a
consent vote electing Xxxxx Xxxxxx as Chief Executive Officer, Xxxxx Xxxxxx as
President, and Xxxx Xxxxx as Director of Networking of the Surviving
Corporation.
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EXHIBIT 1.5(a)
This promissory note has not been registered under The Securities Act of 1933,
as amended, and may not be sold, offered for sale, assigned, transferred or
otherwise disposed of unless registered pursuant to the provisions of that Act
or an opinion of counsel to the Maker is obtained stating that such disposition
is in compliance with an available exemption from such registration.
INSITE INTERNET, INC.
Unsecured Subordinated Promissory Note
$11,600.00 January 31, 0000
Xxxxxx Xxxx, Xxx Xxxxxx
FOR VALUE RECEIVED, the undersigned, INSITE INTERNET, INC., a Delaware
corporation (the "Maker"), promises to pay to Xxxxx Xxxxxx or permitted assigns
(the "Holder"), the principal sum of Eleven Thousand Six Hundred Dollars and
00/100 ($11,600.00) upon the closing of an initial public offering of the
Maker's common stock which is underwritten on a firm commitment basis (the
"Maturity Date"), together with interest on the outstanding principal balance of
this Note from the date hereof until fully paid at a simple annual interest rate
equal to the "Applicable Federal Rate" for short term debt instruments as
provided under Section 1274(d) of the Internal Revenue Code of 1986, as amended.
Interest shall be calculated on the basis of the actual number of days
elapsed over a year of three hundred and sixty (360) days.
The entire principal amount hereof, together with all interest hereon,
shall be due and payable on the Maturity Date or upon the acceleration of this
Note following the occurrence of an Event of Default, as that term is defined
below, whichever shall first occur. Upon the occurrence of any Event of Default,
the Holder shall have the right to declare the unpaid principal of and interest
on this Note to be forthwith due and payable.
The principal hereof and interest hereon shall be payable on the
Maturity Date in lawful money of the United States of America, at the Maker's
principal office in Spring Lake, New Jersey or at such other place as the Holder
hereof may designate in writing to the Maker. The Maker may prepay this Note in
full or in part at any time without premium or penalty.
The Holder agrees that the Note may not be sold, transferred, pledged,
hypothecated or otherwise disposed of except to a person who, in the opinion of
counsel to the Maker, is a person to whom the Note may legally be transferred
without registration under the Securities Act of
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1933, as amended the (the "1933 Act"), and then only against receipt of an
agreement of such person to comply with the provisions of this paragraph with
respect to any resale or other disposition of the Note.
The Maker covenants and agrees that, so long as this Note shall be
outstanding, it will:
(i) Promptly pay and discharge all lawful taxes, assessments,
and governmental charges or levies imposed upon the Maker or upon its income and
profits, PROVIDED, HOWEVER, that the Maker shall not be required to pay and
discharge any such tax, assessment, charge or levy so long as the validity
thereof shall be contested in good faith by appropriate proceedings and the
Maker shall set aside on its books adequate reserves with respect to any such
tax, assessment, charge, or levy so contested;
(ii) Do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, rights and franchises
and comply with all laws applicable to the Maker as its counsel may advise;
(iii) At all times keep true and correct books, records and
accounts.
This Note shall become and be due and payable upon written demand made
by the Holder hereof if one or more of the following events (each, an "Event of
Default"), shall happen and be continuing: (i) default in the payment of the
principal and interest on this Note when and as the same shall become due and
payable, whether by acceleration or otherwise; (ii) default in the due
observance or performance of any covenant, condition or agreement on the part of
the Maker to be observed or performed pursuant to the terms hereof, if such
default shall continue uncured for 30 days after written notice, specifying such
default, shall have been given to the Maker by the Holder; (iii) application
for, or consent to, the appointment of a receiver, trustee or liquidator of the
Maker or of its property; (iv) admission in writing of the Maker's inability to
pay its debts as they mature; (v) general assignment by the Maker for the
benefit of creditors; (vi) filing by the Maker of a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization, or an arrangement
with creditors; or (vii) entering against the Maker of a court order approving a
petition filed against it under the Federal Bankruptcy laws, which order shall
not have been vacated or set aside or otherwise terminated within 120 days. The
Maker agrees that notice of the occurrence of any Event of Default will be
promptly given to the Holder at his registered address by certified mail. In
case any Event of Default shall happen and be continuing, the Holder may proceed
to protect and enforce his rights by suit in the specific performance of any
covenant or agreement contained in this Note or in aid of the exercise of any
power granted in this Note or may proceed to enforce the payment of this Note or
to enforce any other legal or equitable rights as such Holder may have.
The Maker waives presentment for payment, protest and demand, and
notice of protest, demand and/or dishonor and nonpayment of this Note.
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The Maker may consider and treat the person in whose name this Note
shall be registered as the absolute owner thereof for all purposes whatsoever
(whether or not this Note shall be overdue), and the Maker shall not be affected
by any notice to the contrary. This Note may not be offered, sold, assigned or
otherwise transferred unless registered under the 1933 Act or on opinion of
counsel to the Maker if obtained which states that such transfer is exempt from
registration. In case of transfer by operation of law, the transferee agrees to
notify the Maker of such transfer and of his address and to submit appropriate
evidence regarding the transfer so that this Note may be registered in the name
of the transferee. This Note is transferable only on the books of the Maker by
the Holder hereof, in person or by his attorney, on the surrender hereof, duly
endorsed. Communications sent to any registered owner shall be effective as
against all holders or transferees of the Note not registered at the time of
sending the communication.
Payments of interest and principal shall be made to the Holder of this
Note upon presentation of this Note on or after the Maturity Date. No interest
shall be due on this Note for such period of time as may elapse between the
Maturity Date and the date of presentation.
The Holder shall not, by virtue hereof, be entitled to any rights of a
stockholder in the Maker, either at law or in equity, and the rights of the
Holder are limited to those expressed in this Note.
Upon receipt by the Maker of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Note, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Note, if mutilated, the Maker shall execute
and deliver a new Note of like tenor and date. Any such new Note executed and
delivered shall constitute an additional contractual obligation on the part of
the Maker whether or not this Note so lost, stolen, destroyed or mutilated shall
be at any time enforceable by anyone.
This Note shall be construed and enforced in accordance with the laws
of the State of Delaware.
This note shall be unsecured.
In no event shall the amount due or payable hereunder exceed the
maximum rate of interest allowed by applicable law, and in the event any such
payment is inadvertently paid by the Maker or inadvertently received by the
Holder, then such excess sum shall be credited as a payment of principal, unless
the Maker shall notify the Holder, in writing, that the Maker elects to have
such excess sum refunded to it forthwith. It is the express intent hereof that
the Maker not pay and the Holder to receive, directly or indirectly, in any
manner whatsoever, interest in excess of that which may be lawfully paid by the
Maker under applicable law.
Payment of this Note is subordinate to payment in full of all
"senior indebtedness" of the Maker, now existing or hereafter arising. For
purposes of this Note, "senior indebtedness"
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means all obligations of the Maker for money borrowed to any banks, financing
companies, factors, or other similar lenders.
Maker shall have the right to set off amounts due and owing hereunder
against sums claimed by Maker against Holder pursuant to the post-closing
adjustment provisions of Section 2 and the indemnification provisions of Section
12 of that certain Agreement and Plan of Merger and Reorganization of even date
herewith by and among Maker, Holder and certain other parties thereto.
IN WITNESS WHEREOF, the undersigned Maker has caused this to be
executed by its duly authorized corporate officer as of the day and year first
above written.
MAKER:
INSITE INTERNET, INC.
By:
-----------------------------
Title: PRESIDENT
--------------------------
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EXHIBIT 1.6
ESCROW AGREEMENT
This ESCROW AGREEMENT is entered into as of the ____ day of __________,
1999 by and among: Global 2000 Communications, Inc., a New York corporation (the
"Company"); Xxxxx Xxxxxx, Xxxxx Xxxxxx and Xxxx Xxxxx, stockholders of the
Company (collectively, the "Stockholders"); InSite Internet I Acquisition Co.,
Inc., a New York corporation ("Newco"); InSite Internet, Inc., a Delaware
corporation ("InSite"); and Xxxxx & Xxxxxxx, LLP, a Rhode Island limited
liability partnership, as escrow agent (the "Escrow Agent").
WHEREAS, the Company, the Stockholders, Newco and InSite are parties to
an Agreement and Plan of Merger and Reorganization dated as of _________, 1999
(the "Merger Agreement"), relating to the merger of the Company with and into
Newco; and
WHEREAS, pursuant to the Merger Agreement, the Stockholders will deliver
the number of shares of common stock of InSite, par value $.01 per share,
identified on SCHEDULE 1 hereto (the "Escrow Shares"), into escrow to be held by
an escrow agent on behalf of the Stockholders as provided under the Merger
Agreement; and
WHEREAS, the parties hereto wish to specify the terms and conditions on
which the Escrow Shares, together with all income thereon, will be held,
invested and disbursed; and
WHEREAS, the Escrow Agent has expressed its willingness to act as escrow
agent hereunder.
NOW, THEREFORE, in consideration of the mutual undertakings and
covenants contained in this Escrow Agreement and of the mutual benefits to be
derived therefrom, the parties hereto agree as follows:
1. APPOINTMENT AND OBLIGATION OF ESCROW AGENT. The Stockholders, the
Company, Newco and InSite hereby appoint the Escrow Agent to receive, hold and
dispose of the Escrow Shares pursuant to the terms and conditions of this Escrow
Agreement, and the Escrow Agent hereby accepts such appointment on the terms and
conditions hereto. The use of the term "Escrow Agent" is solely for purposes of
identification and does not indicate or imply that the Escrow Agent has any
agency or other fiduciary obligations to any person or entity except for the
limited obligations of the Escrow Agreement pursuant hereto.
2. DEPOSIT OF ESCROW SHARES.
(a) The Stockholders hereby agree to deliver the Escrow Shares to
the Escrow Agent at the closing of the transactions contemplated by the Merger
Agreement, accompanied by an executed stock power or powers endorsed in blank.
The Escrow Agent hereby agrees to hold
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the Escrow Shares upon receipt in accordance with this Agreement. The Escrow
Shares do not form a part of the capital or debt of Escrow Agent and are not
subject to the claims of its creditors or depositors but are set apart and held
for the exclusive benefit of the parties.
(b) The Escrow Shares shall be used by the Escrow Agent solely for
the purposes of satisfying the indemnity obligations of the Stockholders under
Section 12 of the Merger Agreement. The Escrow Shares shall not be available to,
and shall not be used by, the Escrow Agent to set off any obligations of InSite
or Newco owing to the Escrow Agent in any capacity.
3. CASH DIVIDENDS AND VOTING RIGHTS. Until the Escrow Shares are
delivered by the Escrow Agent in accordance with the terms hereof, the
Stockholders are entitled to exercise all voting rights with respect to the
Escrow Shares and to receive for their own use cash and other dividends and
distributions on the Escrow Shares.
4. RELEASE OF ESCROW SHARES. The Escrow Agent shall release the Escrow
Shares as follows:
(a) If, at any time, InSite or Newco believes it is entitled to
receive a full or partial distribution of the Escrow Shares to satisfy the
indemnity obligations of the Stockholders to InSite and Newco and their
respective officers, directors, employees and agents under Section 12 of the
Merger Agreement, InSite or Newco shall give the Escrow Agent written notice of
the same (the "Claims Notice"), which Claims Notice shall specify the number of
Escrow Shares to be distributed, determined in accordance with SECTION 4(b)
hereof. Upon receipt of any Claims Notice, the Escrow Agent shall promptly
forward a copy of such notice to the Stockholders. If the Stockholders object to
the distribution proposed in the Claims Notice, the Stockholders shall give
written notice of such objection to the Escrow Agent within thirty (30) days
following receipt of the Claims Notice (the "Objection Notice"). If the Escrow
Agent does not receive an Objection Notice within such thirty (30) day period,
the Escrow Agent shall distribute to InSite the Escrow Shares having a value, as
determined in accordance with SECTION 4(c) hereof, equal to the amount specified
in the Claims Notice. If the Escrow Agent receives an Objection Notice within
such thirty (30) day period, the Escrow Agent shall continue to hold the Escrow
Shares pursuant to the terms of this Agreement, subject to the Claims Notice
until the Escrow Agent receives (i) a joint written instruction from the
Stockholders and InSite, Newco regarding disposition of the Escrow Shares
subject to the Claims Notice and Objection Notice, or (ii) a certified copy of a
final, non-appealable decision of a court of competent jurisdiction regarding
disposition of the Escrow Shares subject to the Claims Notice and Objection
Notice. Notwithstanding the foregoing sentence, the Escrow Agent may exercise
its rights under SECTION 9 of this Agreement at any time in the event of a
dispute between the parties regarding release of the Escrow Shares. Upon release
of the Escrow Shares in good faith pursuant to this Agreement, the Escrow Agent
shall be fully released and discharged from all obligations under this
Agreement.
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(b) For purposes of distribution by the Escrow Agent of all or any
portion of the Escrow Shares pursuant to paragraph (a) of this SECTION 4, the
number of Escrow Shares to be delivered shall be determined based on the
"closing sales price" (as hereinafter defined) of InSite Common Stock for the 10
consecutive trading days immediately preceding the "date of distribution" (as
hereinafter defined) of the Escrow Shares by the Escrow Agent.
(i) For purposes hereof, "closing sales
price" shall mean (a) the average of the closing sales price, or, in case no
such reported sale takes place on such day, the average of the reported closing
bid and asked prices, in either case on the principal national securities
exchange on which InSite Common Stock is listed or admitted to trading for such
10 day period, or (b) if not listed or admitted to trading on any national
securities exchange, the closing sales price as reported by The Nasdaq Stock
Market, Inc., or, if such firm at the time is not engaged in the business of
reporting such prices, as furnished by any similar firm then engaged in such
business as selected by InSite's Board of Directors, for such 10 day period, or
(c) if not listed or admitted to trading on any national securities exchange or
reported by Nasdaq or any similar firm, the net book value of the Escrow Shares
as determined by management of InSite as of the end of the most recent fiscal
quarter immediately preceding the last day of such 10 day period.
(ii) For purposes hereof, "date of
distribution" shall be the date specified in the Claims Notice which shall be
(a) the date as of the end of the thirty (30) day period commencing on the date
of the Claims Notice, or (b) in the event of a dispute, the actual date of
notification to the Escrow Agent to release Escrow Shares which shall be
promptly after resolution of any disputes.
(c) On the date which is one (1) year after the closing date of
the transactions contemplated by the Merger Agreement (the "Escrow Termination
Date"), the Escrow Agent shall deliver to the Stockholders the remaining Escrow
Shares, unless the Escrow Agent shall have been notified in writing by InSite,
Newco or the Stockholders that a Claims Notice is pending and has not been
resolved as described in paragraph (b)(i) or (ii) of this SECTION 4. If the
Escrow Agent has been advised that a Claims Notice is pending on the Escrow
Termination Date and has not been resolved as aforesaid, the Escrow Agent shall
deliver the remaining Escrow Shares to the parties in accordance with the
resolution of the Claims Notice, as provided in SECTION 4(b).
5. EXCULPATION OF ESCROW AGENT. The Escrow Agent shall have no duties or
responsibilities except for those set forth herein (and required by applicable
law), which the parties agree are ministerial in nature. If in doubt as to its
duties and responsibilities hereunder, the Escrow Agent may consult with counsel
of its choice and shall be protected in any action taken or omitted in good
faith in connection with the written advice or opinion of such counsel. The
Escrow Agent shall not be deemed to have any knowledge of or responsibility for
the terms of any other agreement or instrument including the Merger Agreement.
The Escrow Agent makes no representation as to the validity, value, genuineness
or collectibility of any security,
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document or instrument held by or delivered to it. Except for the Escrow Agent's
own fraud, bad faith, willful misconduct or gross negligence: (a) the Escrow
Agent shall have no liability of any kind whatsoever for the performance of any
duties imposed upon the Escrow Agent under this Escrow Agreement or for any
action or failure to act taken in good faith by the Escrow Agent hereunder; (b)
the Escrow Agent shall not be responsible for the acts or omissions of any other
parties hereto; (c) the Escrow Agent shall not be liable to anyone for damages,
losses or expenses arising out of this Escrow Agreement; and (d) the Escrow
Agent may rely and/or act upon any instrument or document believed by the Escrow
Agent in good faith to be genuine and to be executed and delivered by the proper
person or party, and may assume in good faith the authenticity, validity and
effectiveness thereof and shall not be obligated to make any investigation or
determination as to the truth and accuracy of any information contained therein.
The Escrow Agent shall not be liable for any error of judgment, or for any act
done or step taken or omitted by it in good faith or for any mistake of fact or
law, or for anything which it may do or refrain from doing in connection
herewith, except its own bad faith, willful misconduct or gross negligence. In
the event of any dispute between InSite, Newco or the Stockholders, InSite and
the Stockholders shall pay, on demand, the reasonable attorneys' fees and other
reasonable costs and expenses incurred by the Escrow Agent in respect thereof;
InSite, Newco and the Stockholders shall be jointly and severally liable for
such fees, costs and expenses but, as between themselves, such fees, costs and
expenses shall be paid by the party losing such dispute or as determined by the
court or other party resolving such dispute.
6. INDEMNIFICATION; EXPENSES. In consideration of its acceptance of the
appointment as the Escrow Agent, InSite, Newco and the Stockholders, jointly and
severally, agree to indemnify and hold the Escrow Agent harmless as to any
liability incurred by it to any person, firm or corporation by reason of its
having accepted the same or in carrying out in good faith any of the terms
hereof, and to reimburse Escrow Agent for all its reasonable expenses,
including, among other things, counsel fees and court costs, incurred by reason
of its position hereunder or actions taken pursuant hereto.
7. SUCCESSOR ESCROW AGENT.
(a) The Escrow Agent (and any successor escrow agent) may at any
time resign as such by delivering the Escrow Shares to any successor escrow
agent jointly designated in writing by InSite, Newco and the Stockholders, or to
any court of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement. The resignation of the Escrow Agent shall take
effect on the earlier of the appointment of a successor escrow agent or the day
which is thirty (30) days after the date of delivery of the Escrow Agent's
written notice of resignation to the other parties hereto. In the event that a
successor escrow agent has not been appointed at the expiration of such thirty
(30) day period, the Escrow Agent's sole responsibility hereunder shall be the
safekeeping of the Escrow Shares and to deliver all or any portion thereof as
may be specified in a written agreement signed by all the other parties to this
Agreement or as any court of competent jurisdiction may order.
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(b) If the Escrow Agent receives a written notice signed by
InSite, Newco and the Stockholders stating that they have selected another
escrow agent, the Escrow Agent shall deliver the Escrow Shares to the successor
escrow agent named in the aforesaid notice within ten (10) days.
8. ENTIRE AGREEMENT; MODIFICATION. With the exception of the Merger
Agreement and agreements, schedules and exhibits thereto, this Escrow Agreement
contains the entire agreement, and supersedes all prior agreements and
undertakings, oral or written, between the parties hereto with respect to the
subject matter hereof. No modification of this Escrow Agreement shall be valid
unless the same is in writing and is signed by InSite, Newco, the Stockholders
and the Escrow Agent.
9. INCONSISTENT CLAIMS. In the event that the Escrow Agent should at any
time be confronted with inconsistent claims or demands by the parties hereto,
the Escrow Agent shall have the right to interplead said parties in any court of
competent jurisdiction in Rhode Island, and request that such court determine
such respective rights of the parties with respect to this Escrow Agreement, and
upon doing so, the Escrow Agent automatically shall be released from any
obligations or liability as consequence of any such claims or demands.
10. STOCKHOLDERS' ACKNOWLEDGMENT OF ATTORNEY/CLIENT RELATIONSHIP BETWEEN
INSITE, NEWCO AND THE ESCROW AGENT. The Stockholders acknowledge and agree that
the Escrow Agent has acted and will continue to act as counsel to InSite and
Newco in connection with the negotiation and execution of the Merger Agreement.
In that connection and as a condition to the Escrow Agent's and InSite's and
Newco's agreement to enter into this Agreement, the Stockholders waive any right
to seek disqualification of the Escrow Agent from serving as counsel to InSite
and Newco by virtue of this Agreement or any dispute hereunder.
11. NOTICES. Any notices to be given hereunder shall be sufficiently
given if in writing and delivered personally, sent by telecopy (answerback
received), sent by recognized overnight courier, or mailed by registered or
certified mail, return receipt requested, postage prepaid, to the following
addresses or to such other address as the parties may from time to time
designate in writing delivered in accordance with this SECTION 11:
(a) To the Stockholders at: with a copy to:
Xxxxx Xxxxxx Thuillez, Ford, Gold & Xxxxxxx, LLP
Xxxxx Xxxxxx 00 Xxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx Xxxxxx, XX 00000-0000
c/o Global 2000 Communications, Inc. Attn: Xxxx X. Xxxxxxxx
0000 Xxxxxxx Xxxxxx Phone: (000) 000-0000
Xxxxxx, XX 00000 Fax: (000) 000-0000
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(b) To InSite and Newco care of:
InSite Internet, Inc.
0000 Xxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxx, President & CEO
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to the Escrow Agent at the address below:
(c) To the Escrow Agent at:
Xxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Partner
Phone: (000) 000-0000
Fax: (000) 000-0000
Any notices to be given hereunder shall be deemed received (a) on the date
delivered, if delivered personally, (b) on the date sent, if sent by telecopy,
(c) on the first business day after the date such notice was sent, if sent by
overnight courier, or (d) on the third business day after the date such notice
was sent, if sent by registered or certified mail, PROVIDED THAT no such notice
or other communication shall be deemed given to the Escrow Agent until the same
is received by the Escrow Agent.
12. BINDING EFFECT. This Escrow Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Stockholders and InSite, Newco may not assign their
respective obligations hereunder without the prior written consent of the other
parties. Any assignment in contravention of this provision shall be void. No
assignment shall release the Stockholders or InSite, Newco from any obligation
or liability under this Escrow Agreement.
13. GOVERNING LAW. This Escrow Agreement shall be construed in accordance
with and governed by the laws of the State of Rhode Island.
14. DEFINED TERMS. Capitalized terms used herein without definition shall
have the meanings assigned to them in the Merger Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the date first above written.
INSITE INTERNET, INC.
ATTEST:
By:
-------------------------------- ---------------------------------
, Assistant Secretary Xxxx X. Xxxxx, President
and Chief Executive Officer
INSITE INTERNET I ACQUISITION CO.,
INC.
ATTEST:
By:
-------------------------------- ---------------------------------
, Assistant Secretary Xxxx X. Xxxxx, President
GLOBAL 2000 COMMUNICATIONS, INC.
ATTEST:
By:
-------------------------------- ---------------------------------
, Secretary ____________, President
WITNESS:
-------------------------------- ------------------------------------
Xxxxx Xxxxxx
WITNESS
-------------------------------- ------------------------------------
Xxxxx Xxxxxx
WITNESS
-------------------------------- ------------------------------------
Xxxx Xxxxx
ATTEST XXXXX & XXXXXXX.XXX
By:
-------------------------------- ---------------------------------
Xxxxxxx X. Xxxxxxx, Partner
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SCHEDULE 1
STOCKHOLDER NUMBER OF ESCROW SHARES
----------- -----------------------
Xxxxx Xxxxxx 2083
Xxxxx Xxxxxx 2083
Xxxx Xxxxx 834
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EXHIBIT 6.12(a)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this
____ day of ________________, 1999, by and between, InSite Internet I
Acquisition Co., Inc., a New York corporation (the "Company") and wholly-owned
subsidiary of InSite Internet, Inc., a Delaware corporation (the "Parent") and
Xxxxx Xxxxxx, an individual with a mailing address at
________________________________ ("Employee").
INTRODUCTION
Employee is a principal and employee of Global 2000 Communications, Inc.
(the "Founding Company") and possesses skills and knowledge advantageous to the
Company.
The Parent, the Company, the Founding Company, and the stockholders of
the Founding Company are parties to that certain Agreement and Plan of Merger
and Reorganization dated as of _____________, 1999 (the "Merger Agreement")
pursuant to which the Parent, the Founding Company and the Company intend to
effect a merger of the Founding Company with and into the Company.
Contemporaneously with and conditioned upon the closing of the transactions
contemplated by the Merger Agreement (the "Effective Date"), effective on the
Effective Date, the Company desires to employ Employee and Employee desires to
accept such employment on the terms and conditions set forth herein.
AGREEMENT
In consideration of the premises and mutual promises hereinbelow set
forth, the parties hereby agree as follows:
1. EMPLOYMENT; DUTIES. Subject to the terms and conditions set
forth herein, the Company hereby employs Employee during the Employment Period
(as defined below), and Employee hereby accepts such employment. Employee agrees
to be a full-time employee of the Company and devote her full and exclusive
time, energy, skill and best efforts to the business of the Company and to the
fulfillment of Employee's duties hereunder. Employee's duties include, but are
not limited to, (i) serving as President of the Company; (ii) sales of the
Company's and its affiliates products and services; (iii) assisting in the
internal growth of the Company's business; and (iv) other duties assigned to
Employee by the Company from time to time consistent with Employee's position.
2. EMPLOYMENT PERIOD. The term of this Agreement (the "Employment
Period") shall commence on the Effective Date and shall terminate three (3)
years thereafter, unless terminated earlier pursuant to SECTION 4 or SECTION 5
below.
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3. COMPENSATION AND BENEFITS.
3.1 SALARY. During the Employment Period, the Company agrees
to pay Employee at the rate of $70,000 per year ("Base Salary"). Employee's
salary shall be subject to customary withholdings and be payable to Employee on
the regularly occurring pay period established by the Company.
3.2 HEALTH BENEFITS. During the Employment Period, the
Company shall provide Employee with individual and/or family health care
coverage, as provided by health care provider(s) selected by the Company from
time to time.
3.3 BONUS. During the Employment Period, Employee shall be
paid a bonus at the end of each fiscal year equal to the sum of (i) 2.5% of the
Company's increase in "annual sales" and (ii) 5% of the Company's increase in
"EBITDA" (i.e., earnings before interest and taxes, less depreciation and
amortization). Such bonus (if any) shall be payable at the discretion of the
Company in either (A) cash or (B) common stock, options or other awards from the
Parent's incentive stock plan, subject to applicable securities law and tax
withholding payments by Employee. The calculation for such bonus shall (x) be
based on the unconsolidated financial statements of the Company as certified by
the Company's certified public accountants; (y) be subject to allocation of
overhead provisions from time to time adopted by the Company, the Parent and its
subsidiaries; and (z) include only "organic" sales and earnings (i.e. only such
earnings and sales generated from the Company's currently existing business) and
shall exclude, without limitation, any earnings or sales generated by way of
merger, acquisition or other similar event.
3.4 RETIREMENT PLAN. During the Employment Period, Employee
shall be entitled to participate in any 401(k) or similar plan adopted by the
Company for the benefit of its employees. The Company reserves the right to
modify, terminate or withdraw any such plan (if so adopted) at any time in its
sole discretion.
3.5 INCENTIVE BONUS. Employee will be paid an incentive
bonus equal to 1.0% of the total purchase price for each company that Employee
introduces to the Parent and is subsequently acquired by the Parent, payable at
the Company's discretion in either (i) cash or (ii) common stock, stock options
or other awards from the Parent's incentive stock option plan, subject to
applicable securities law and tax withholding payments by Employee. Employee
will be required to submit any referral in writing for acknowledgment by the
Parent prior to any negotiations between the Parent and the referral. Employee
acknowledges that other persons or entities, (including other employees,
officers, and directors of the Company and its affiliates), have been or may be
offered a similar "incentive bonus" and that any incentive bonus which Employee
may be entitled to hereunder is subject to a percentage reduction to the extent
that other persons or entities participated in or were responsible for the
referral. Any dispute regarding apportionment of an incentive bonus shall be
resolved by binding arbitration in
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accordance with SECTION 13 hereof. In no event shall the Company or the Parent
pay more than one incentive bonus for any single transaction.
4. TERMINATION BY THE COMPANY FOR CAUSE. Upon written notice to
Employee, the Company may terminate this Agreement for cause if any of the
following events shall occur: (i) any breach of this Agreement by Employee; (ii)
the commission of a felony by Employee; (iii) the commission of an act by
Employee involving fraud, theft or dishonesty; (iv) material breach by the
Founding Company or its stockholders of their representations, warranties and
covenants and/or obligations under the Merger Agreement which breach remains
uncured for a period of thirty (30) days following notice to Employee; or (v)
the Company's bona fide decision to terminate its business and liquidate its
assets. In the event of a termination pursuant to this SECTION 4, all
obligations of the Company under this Agreement shall cease.
5. TERMINATION WITHOUT CAUSE.
5.1 BY EMPLOYER. The Company may terminate this Agreement at
any time without cause upon thirty (30) days written notice to Employee. In such
event, the Company shall pay Employee during regular payroll periods (less
customary withholding taxes) the Base Salary for up to the greater of twelve
(12) months or the remainder of the Employment Period provided however, in
either case, (i) Employee is actively seeking new employment and (ii) the
Company's severance obligations hereunder will end on the date Employee secures
new employment. All other obligations of the Company shall cease on the date of
termination.
5.2 BY EMPLOYEE. Employee may terminate this Agreement at
any time upon ninety (90) days prior written notice to the Company. In such
case, Employee shall not be eligible for any severance payments or other
benefits after the date of termination.
5.3 MERGER AGREEMENT. Absent a breach of the Merger
Agreement, termination by either the Company or Employee pursuant to this
SECTION 5 shall not be deemed a breach of the Merger Agreement, nor will it
affect either party's obligations thereunder.
6. CONFIDENTIALITY AND NON-DISCLOSURE. Employee recognizes and
acknowledges that she has had in the past, currently has and in the future may
have access to certain confidential information relating to the Company and its
affiliates, including, but not limited to, operational policies, financial
information, marketing information, personnel information, trade secrets,
customer information (including customer lists), and pricing and cost policies,
that are valuable, special and unique assets of the Company (collectively,
"Confidential Information"). Employee agrees that she will not use or disclose
such Confidential Information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except as is required in the
course of performing her duties hereunder unless (i) such information becomes
known to the public generally through no breach by Employee of this covenant or
(ii) disclosure is required by law or any governmental authority or is required
in connection with the defense of a lawsuit against the disclosing party,
provided, that prior to disclosing any information pursuant
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to this clause (ii), Employee shall give prior written notice thereof to the
Company and provide the Company with the opportunity to contest such disclosure.
Employee agrees that, both during the Employment Period and after the
termination of this Agreement, Employee will hold in a fiduciary capacity for
the benefit of the Company, and shall not directly or indirectly use or
disclose, except as authorized by the Company in connection with the performance
of Employee's duties, any Confidential Information, that Employee may have or
may acquire (whether or not developed or compiled by Employee and whether or not
Employee has been authorized to have access to such Confidential Information)
during the term of this Agreement. The covenants contained in this SECTION 6
shall survive for the Employment Period and for a period of two (2) years
thereafter; provided, however, that with respect to those items of Confidential
Information which constitute trade secrets under applicable law, Employee's
obligations of confidentiality and non-disclosure as set forth in this SECTION 6
shall continue to survive after the applicable period above to the greatest
extent permitted by applicable law. These rights of the Company are in addition
to those rights the Company has under the common law or applicable statutes for
the protection of trade secrets.
7. NON-COMPETITION. Employee expressly covenants and agrees that
for the Employment Period and for a period of two (2) years thereafter, she
shall not, directly or indirectly, seek, obtain or accept a "Competitive
Position" in the "Restricted Territory" with a "Competitor" of the Company (as
such terms are hereafter defined). For purposes of this Agreement, a
"Competitor" of the Company means any business, individual, partnership, joint
venture, association, firm, corporation or other entity engaged, wholly or
partly, in the business of selling internet access service or in any related
business which the Company and/or its affiliates may engage in from time to time
during the term of this covenant; the "Restricted Territory" means each state of
the United States of America in which the Company and/or its affiliates
transacts business during the term of this covenant; a "Competitive Position"
means any employment with any Competitor of the Company whereby Employee will
use or is likely to use any Confidential Information, or whereby Employee has
duties for such Competitor that are the same or substantially similar to those
actually performed by Employee pursuant to the terms hereof. Nothing contained
in this SECTION 7 is intended to prevent Employee from investing in stock or
other securities listed on a national securities exchange or actively traded on
the over the counter market or any corporation engaged, wholly or partly, in the
sale of telecommunications products or services; provided, however, that
Employee and members of her immediate family shall not, directly or indirectly,
hold more than a total of two percent (2%) of all issued and outstanding stock
or other securities of any such corporation.
8. NON-SOLICITATION.
8.1 NON-SOLICITATION OF CUSTOMERS. Employee agrees that she
will not take any customer lists of the Company after leaving her employ and
that she will, for the Employment Period and for a period of two (2) years
thereafter, refrain from soliciting or attempting to solicit directly or by
assisting others, any business from any of the Company's
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customers, including actively sought prospective customers, with whom Employee
had "material contact" during the employment for purposes of providing products
or services.
8.2 NON-SOLICITATION OF EMPLOYEES. Employee agrees that she
will, for the Employment Period and for a period of two (2) years thereafter,
refrain from recruiting or hiring, or attempting to recruit or hire, directly or
by assisting others, any other employee of the Company who is employed by the
Company or any successor or affiliate of the Company.
9. TOLLING OF PERIOD OF RESTRAINT. Employee hereby expressly
acknowledges and agrees that in the event the enforceability of any of the terms
of this Agreement shall be challenged in court and Employee is not enjoined from
breaching any of the restraints set forth in SECTION 6 through SECTION 9, then
if a court of competent jurisdiction finds that the challenged restraint is
enforceable, the time period of the restraint shall be deemed tolled upon the
filing of the lawsuit challenging the enforceability of the restraint until the
dispute is finally resolved and all periods of appeal have expired.
10. ACKNOWLEDGEMENTS. Employee hereby acknowledges and agrees that
the restrictions contained in SECTION 6 through SECTION 9 are fair and
reasonable and necessary for the protection of the legitimate business interests
of the Company. Employee acknowledges that in the event Employee's employment
with the Company terminates for any reason, Employee will be able to earn a
livelihood without violating the restrictions contained in SECTION 6 through
SECTION 9 and that Employee's ability to earn a livelihood without violating
such restrictions is a material condition to Employee's employment and continued
employment with the Company. Employee expressly agrees that the character,
duration and geographical scope of the covenants contained in this SECTION 6
through SECTION 9 are reasonable in light of the circumstances as they exist at
the date upon which this Agreement has been executed including the substantial
payments made by the Company and Employee in consideration of the Merger
Agreement. However, should a determination nonetheless be made by a court of
competent jurisdiction at a later date that the character, duration or
geographical scope of the covenants contained herein are unreasonable in light
of the circumstances as they then exist, then it is the intention of both
Employee and the Company that these covenants shall be construed by the court in
such a manner as to impose only those restrictions on the conduct of Employee
which are reasonable in light of the circumstances as they then exist and
necessary to assure the Company of the intended benefit of these covenants.
11. RIGHTS TO MATERIALS; WORK FOR HIRE. All records, files,
memoranda, reports, price lists, customer lists, drawings, plans, sketches,
documents and the like (together with all copies thereof) relating to the
business of the Company, which Employee shall use or prepare or come in contact
with in the course of, or as a result of, her employment shall, as between the
parties hereto, remain the sole property of the Company. Upon the termination of
Employment or upon the prior demand of the Company, Employee shall immediately
return all such materials and shall not thereafter cause removal thereof from
the premises of the Company. Employee agrees to disclose and assign to the
Company as its exclusive property, all ideas, writings,
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inventions, discoveries, improvements and technical or business innovations made
or conceived by Employee, whether or not patentable or copyrightable, either
solely or jointly with others during the Employment Period and for a period of
two (2) years thereafter whether or not made or conceived during regular hours
of work or otherwise, which are along the lines of the business, work or
investigations of the Company or its affiliates. Employee agrees to execute any
and all documents hereafter requested by the Company necessary to further
effectuate the foregoing.
12. REMEDIES. Without limiting the Company's right to claim
damages, Employee acknowledges that the Company will be irreparably harmed by a
breach of any provision of this Agreement and Employee agrees that the Company
shall be entitled to injunctive relief in the event of such breach.
13. GOVERNING LAW; ARBITRATION; JURISDICTION; VENUE; ATTORNEY'S
FEES. This Agreement is made and entered into in and shall be governed by and
interpreted in accordance with the laws of, the State of New York. The Company
and Employee agree that any dispute regarding this Agreement shall be submitted
to arbitration to and shall be resolved in accordance with the rules of the
JAMS/Endispute for expedited cases then in effect. The arbitrator(s) shall be
mutually selected by the parties or in the event the parties cannot mutually
agree, then appointed by JAMS/Endispute. Any arbitration shall be held within a
thirty (30) mile radius of New York City and the arbitrator(s) shall apply New
York law. Judgment upon any award rendered by the arbitrator(s) shall be final
and may be entered in any court of competent jurisdiction. Notwithstanding the
foregoing, the Company shall have the absolute right to obtain equitable
remedies in any state court of competent jurisdiction in the State of New York
or in the United States District Court for the Southern District of New York. By
her execution and delivery of this agreement, Employee irrevocably submits to
and accepts the exclusive jurisdiction of each of such courts and waives any
objection (including any objection to venue or any objection based upon the
grounds of forum non conveniens) which might be asserted against the bringing of
any such action, suit or other legal proceeding in such courts. The court and/or
arbitrator(s) shall award costs and expenses (including reasonable attorney's
fees) to the prevailing party in any litigation or arbitration.
14. MISCELLANEOUS.
14.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any and all previous agreements, written and oral, regarding the
subject matter hereof between the parties hereto. This Agreement shall not be
changed, altered, modified or amended, except by a written agreement signed by
both parties hereto.
14.2. NOTICES. All notices, requests, demands and other
communications required or permitted to be given or made under this Agreement
shall be
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in writing and shall be deemed to have been given if delivered by hand,
sent by generally recognized overnight courier service, telex or telecopy, or
mail,
(a) to the Company care of: With a copy to:
InSite Internet., Inc. Xxxxx & Xxxxxxx, LLP
0000 Xxxxx Xxxxxx 000 Xxxxx Xxxx Xxxxxxxx
Xxxxxx Xxxx, XX 00000 Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, CEO Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
(b) to the Employee at: With a copy to:
Xxxxx Xxxxxx Thuillez, Ford, Gold & Xxxxxxx, LLP
_______________ 00 Xxxxx Xxxxxx, Xxxxx 0000
_______________ Xxxxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
14.3 ASSIGNMENT. The Company may assign this Agreement to
(i) any entity controlling, controlled by or under common control with the
Company or (ii) to any purchaser of the Company's assets provided that such
purchaser agrees to assume the Company's obligations hereunder.
14.4. SEVERABILITY. If any term or provision of this
Agreement, or the application thereof to any person or under any circumstance,
shall to any extent be invalid or unenforceable, the remainder of this
Agreement, or the application of such terms to the persons or under
circumstances other than those as to which it is invalid or unenforceable, shall
be considered severable and shall not be affected thereby, and each term of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
The invalid or unenforceable provisions shall, to the extent permitted by law,
be deemed amended and given such interpretation as to achieve the economic
intent of this Agreement.
14.5. WAIVER. The failure of any party to insist in any one
instance or more upon strict performance of any of the terms and conditions
hereof, or to exercise any right or privilege herein conferred, shall not be
construed as a waiver of such terms, conditions, rights or privileges, but same
shall continue to remain in full force and effect. Any waiver by any party of
any violation of, breach of or default under any provision of this Agreement by
the other party shall not be construed as, or constitute, a continuing waiver of
such provision, or waiver of any other violation of, breach of or default under
any other provision of this Agreement.
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14.6. RIGHT OF SETOFF. Notwithstanding anything to the
contrary set forth herein, and in addition to any and all remedies at law or in
equity which the Company may have, the Company shall have the absolute and
unconditional right to setoff its payment obligations hereunder against the
amount of any claims for indemnification it may have against Employee under the
Merger Agreement.
14.7. TITLES; GENDER. Section and subsection titles are for
convenience of reference only and are not to be considered in the interpretation
or construction of any of the provisions hereof. All pronouns or any variations
thereof contained in this Agreement refer to the masculine, feminine or neuter
as the identity of the person may require.
14.8 SURVIVAL. SECTION 6 through SECTION 14 hereof shall
survive any termination of this Agreement.
14.9 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
ATTEST: INSITE INTERNET ACQUISITION I Co., Inc.
By:
------------------------------- ----------------------------------
Xxxx X. Xxxxx, President
WITNESS: EMPLOYEE:
------------------------------- ----------------------------------
Xxxxx Xxxxxx
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EXHIBIT 6.12(b)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this
____ day of ___________, 1999, by and between, InSite Internet I Acquisition
Co., Inc., a New York corporation (the "Company") and wholly-owned subsidiary of
InSite Internet, Inc., a Delaware corporation (the "Parent") and Xxxxx Xxxxxx,
an individual with a mailing address at ________________________________
("Employee").
INTRODUCTION
Employee is a principal and employee of Global 2000 Communications, Inc.
(the "Founding Company") and possesses skills and knowledge advantageous to the
Company.
The Parent, the Company, the Founding Company, and the stockholders of
the Founding Company are parties to that certain Agreement and Plan of Merger
and Reorganization dated as of __________, 1999 (the "Merger Agreement")
pursuant to which the Parent, the Founding Company and the Company intend to
effect a merger of the Founding Company with and into the Company.
Contemporaneously with and conditioned upon the closing of the transactions
contemplated by the Merger Agreement (the "Effective Date"), effective on the
Effective Date, the Company desires to employ Employee and Employee desires to
accept such employment on the terms and conditions set forth herein.
AGREEMENT
In consideration of the premises and mutual promises hereinbelow set
forth, the parties hereby agree as follows:
1. EMPLOYMENT; DUTIES. Subject to the terms and conditions set
forth herein, the Company hereby employs Employee during the Employment Period
(as defined below), and Employee hereby accepts such employment. Employee agrees
to be a full-time employee of the Company and devote his full and exclusive
time, energy, skill and best efforts to the business of the Company and to the
fulfillment of Employee's duties hereunder. Employee's duties include, but are
not limited to, (i) serving as Chief Executive Officer of the Company; (ii)
sales of the Company's and its affiliates products and services; (iii) assisting
in the internal growth of the Company's business; and (iv) other duties assigned
to Employee by the Company from time to time consistent with Employee's
position.
2. EMPLOYMENT PERIOD. The term of this Agreement (the "Employment
Period") shall commence on the Effective Date and shall terminate three (3)
years thereafter, unless terminated earlier pursuant to SECTION 4 or SECTION 5
below.
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3. COMPENSATION AND BENEFITS.
3.1 SALARY. During the Employment Period, the Company agrees
to pay Employee at the rate of $70,000 per year ("Base Salary"). Employee's
salary shall be subject to customary withholdings and be payable to Employee on
the regularly occurring pay period established by the Company.
3.2 HEALTH BENEFITS. During the Employment Period, the
Company shall provide Employee with individual and/or family health care
coverage, as provided by health care provider(s) selected by the Company from
time to time.
3.3 BONUS. During the Employment Period, Employee shall be
paid a bonus at the end of each fiscal year equal to the sum of (i) 2.5% of the
Company's increase in "annual sales" and (ii) 5% of the Company's increase in
"EBITDA" (i.e., earnings before interest and taxes, less depreciation and
amortization). Such bonus (if any) shall be payable at the discretion of the
Company in either (A) cash or (B) common stock, options or other awards from the
Parent's incentive stock plan, subject to applicable securities law and tax
withholding payments by Employee. The calculation for such bonus shall (x) be
based on the unconsolidated financial statements of the Company as certified by
the Company's certified public accountants; (y) be subject to allocation of
overhead provisions from time to time adopted by the Company, the Parent and its
subsidiaries; and (z) include only "organic" sales and earnings (i.e. only such
earnings and sales generated from the Company's currently existing business) and
shall exclude, without limitation, any earnings or sales generated by way of
merger, acquisition or other similar event.
3.4 RETIREMENT PLAN. During the Employment Period, Employee
shall be entitled to participate in any 401(k) or similar plan adopted by the
Company for the benefit of its employees. The Company reserves the right to
modify, terminate or withdraw any such plan (if so adopted) at any time in its
sole discretion.
3.5 INCENTIVE BONUS. Employee will be paid an incentive
bonus equal to 1.0% of the total purchase price for each company that Employee
introduces to the Parent and is subsequently acquired by the Parent, payable at
the Company's discretion in either (i) cash or (ii) common stock, stock options
or other awards from the Parent's incentive stock option plan, subject to
applicable securities law and tax withholding payments by Employee. Employee
will be required to submit any referral in writing for acknowledgment by the
Parent prior to any negotiations between the Parent and the referral. Employee
acknowledges that other persons or entities, (including other employees,
officers, and directors of the Company and its affiliates), have been or may be
offered a similar "incentive bonus" and that any incentive bonus which Employee
may be entitled to hereunder is subject to a percentage reduction to the extent
that other persons or entities participated in or were responsible for the
referral. Any dispute regarding apportionment of an incentive bonus shall be
resolved by binding arbitration in
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accordance with SECTION 13 hereof. In no event shall the Company or the Parent
pay more than one incentive bonus for any single transaction.
4. TERMINATION BY THE COMPANY FOR CAUSE. Upon written notice to
Employee, the Company may terminate this Agreement for cause if any of the
following events shall occur: (i) any breach of this Agreement by Employee; (ii)
the commission of a felony by Employee; (iii) the commission of an act by
Employee involving fraud, theft or dishonesty; (iv) material breach by the
Founding Company or its stockholders of their representations, warranties and
covenants and/or obligations under the Merger Agreement which breach remains
uncured for a period of thirty (30) days following notice to Employee; or (v)
the Company's bona fide decision to terminate its business and liquidate its
assets. In the event of a termination pursuant to this SECTION 4, all
obligations of the Company under this Agreement shall cease.
5. TERMINATION WITHOUT CAUSE.
5.1 BY EMPLOYER. The Company may terminate this Agreement at
any time without cause upon thirty (30) days written notice to Employee. In such
event, the Company shall pay Employee during regular payroll periods (less
customary withholding taxes) the Base Salary for up to the greater of twelve
(12) months or the remainder of the Employment Period provided however, in
either case, (i) Employee is actively seeking new employment and (ii) the
Company's severance obligations hereunder will end on the date Employee secures
new employment. All other obligations of the Company shall cease on the date of
termination.
5.2 BY EMPLOYEE. Employee may terminate this Agreement at
any time upon ninety (90) days prior written notice to the Company. In such
case, Employee shall not be eligible for any severance payments or other
benefits after the date of termination.
5.3 MERGER AGREEMENT. Absent a breach of the Merger
Agreement, termination by either the Company or Employee pursuant to this
SECTION 5 shall not be deemed a breach of the Merger Agreement, nor will it
affect either party's obligations thereunder.
6. CONFIDENTIALITY AND NON-DISCLOSURE. Employee recognizes and
acknowledges that he has had in the past, currently has and in the future may
have access to certain confidential information relating to the Company and its
affiliates, including, but not limited to, operational policies, financial
information, marketing information, personnel information, trade secrets,
customer information (including customer lists), and pricing and cost policies,
that are valuable, special and unique assets of the Company (collectively,
"Confidential Information"). Employee agrees that he will not use or disclose
such Confidential Information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except as is required in the
course of performing his duties hereunder unless (i) such information becomes
known to the public generally through no breach by Employee of this covenant or
(ii) disclosure is required by law or any governmental authority or is required
in connection with the defense of a lawsuit against the disclosing party,
provided, that prior to disclosing any information pursuant
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to this clause (ii), Employee shall give prior written notice thereof to the
Company and provide the Company with the opportunity to contest such disclosure.
Employee agrees that, both during the Employment Period and after the
termination of this Agreement, Employee will hold in a fiduciary capacity for
the benefit of the Company, and shall not directly or indirectly use or
disclose, except as authorized by the Company in connection with the performance
of Employee's duties, any Confidential Information, that Employee may have or
may acquire (whether or not developed or compiled by Employee and whether or not
Employee has been authorized to have access to such Confidential Information)
during the term of this Agreement. The covenants contained in this SECTION 6
shall survive for the Employment Period and for a period of two (2) years
thereafter; provided, however, that with respect to those items of Confidential
Information which constitute trade secrets under applicable law, Employee's
obligations of confidentiality and non-disclosure as set forth in this SECTION 6
shall continue to survive after the applicable period above to the greatest
extent permitted by applicable law. These rights of the Company are in addition
to those rights the Company has under the common law or applicable statutes for
the protection of trade secrets.
7. NON-COMPETITION. Employee expressly covenants and agrees that
for the Employment Period and for a period of two (2) years thereafter, he shall
not, directly or indirectly, seek, obtain or accept a "Competitive Position" in
the "Restricted Territory" with a "Competitor" of the Company (as such terms are
hereafter defined). For purposes of this Agreement, a "Competitor" of the
Company means any business, individual, partnership, joint venture, association,
firm, corporation or other entity engaged, wholly or partly, in the business of
selling internet access service or in any related business which the Company
and/or its affiliates may engage in from time to time during the term of this
covenant; the "Restricted Territory" means each state of the United States of
America in which the Company and/or its affiliates transacts business during the
term of this covenant; a "Competitive Position" means any employment with any
Competitor of the Company whereby Employee will use or is likely to use any
Confidential Information, or whereby Employee has duties for such Competitor
that are the same or substantially similar to those actually performed by
Employee pursuant to the terms hereof. Nothing contained in this SECTION 7 is
intended to prevent Employee from investing in stock or other securities listed
on a national securities exchange or actively traded on the over the counter
market or any corporation engaged, wholly or partly, in the sale of
telecommunications products or services; provided, however, that Employee and
members of his immediate family shall not, directly or indirectly, hold more
than a total of two percent (2%) of all issued and outstanding stock or other
securities of any such corporation.
8. NON-SOLICITATION.
8.1 NON-SOLICITATION OF CUSTOMERS. Employee agrees that he
will not take any customer lists of the Company after leaving his employ and
that he will, for the Employment Period and for a period of two (2) years
thereafter, refrain from soliciting or attempting to solicit directly or by
assisting others, any business from any of the Company's customers, including
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actively sought prospective customers, with whom Employee had "material contact"
during the employment for purposes of providing products or services.
8.2 NON-SOLICITATION OF EMPLOYEES. Employee agrees that he
will, for the Employment Period and for a period of two (2) years thereafter,
refrain from recruiting or hiring, or attempting to recruit or hire, directly or
by assisting others, any other employee of the Company who is employed by the
Company or any successor or affiliate of the Company.
9. TOLLING OF PERIOD OF RESTRAINT. Employee hereby expressly
acknowledges and agrees that in the event the enforceability of any of the terms
of this Agreement shall be challenged in court and Employee is not enjoined from
breaching any of the restraints set forth in SECTION 6 through SECTION 9, then
if a court of competent jurisdiction finds that the challenged restraint is
enforceable, the time period of the restraint shall be deemed tolled upon the
filing of the lawsuit challenging the enforceability of the restraint until the
dispute is finally resolved and all periods of appeal have expired.
10. ACKNOWLEDGEMENTS. Employee hereby acknowledges and agrees that
the restrictions contained in SECTION 6 through SECTION 9 are fair and
reasonable and necessary for the protection of the legitimate business interests
of the Company. Employee acknowledges that in the event Employee's employment
with the Company terminates for any reason, Employee will be able to earn a
livelihood without violating the restrictions contained in SECTION 6 through
SECTION 9 and that Employee's ability to earn a livelihood without violating
such restrictions is a material condition to Employee's employment and continued
employment with the Company. Employee expressly agrees that the character,
duration and geographical scope of the covenants contained in this SECTION 6
through SECTION 9 are reasonable in light of the circumstances as they exist at
the date upon which this Agreement has been executed including the substantial
payments made by the Company and Employee in consideration of the Merger
Agreement. However, should a determination nonetheless be made by a court of
competent jurisdiction at a later date that the character, duration or
geographical scope of the covenants contained herein are unreasonable in light
of the circumstances as they then exist, then it is the intention of both
Employee and the Company that these covenants shall be construed by the court in
such a manner as to impose only those restrictions on the conduct of Employee
which are reasonable in light of the circumstances as they then exist and
necessary to assure the Company of the intended benefit of these covenants.
11. RIGHTS TO MATERIALS; WORK FOR HIRE. All records, files,
memoranda, reports, price lists, customer lists, drawings, plans, sketches,
documents and the like (together with all copies thereof) relating to the
business of the Company, which Employee shall use or prepare or come in contact
with in the course of, or as a result of, his employment shall, as between the
parties hereto, remain the sole property of the Company. Upon the termination of
Employment or upon the prior demand of the Company, Employee shall immediately
return all such materials and shall not thereafter cause removal thereof from
the premises of the Company. Employee agrees to disclose and assign to the
Company as its exclusive property, all ideas, writings,
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inventions, discoveries, improvements and technical or business innovations made
or conceived by Employee, whether or not patentable or copyrightable, either
solely or jointly with others during the Employment Period and for a period of
two (2) years thereafter whether or not made or conceived during regular hours
of work or otherwise, which are along the lines of the business, work or
investigations of the Company or its affiliates. Employee agrees to execute any
and all documents hereafter requested by the Company necessary to further
effectuate the foregoing.
12. REMEDIES. Without limiting the Company's right to claim
damages, Employee acknowledges that the Company will be irreparably harmed by a
breach of any provision of this Agreement and Employee agrees that the Company
shall be entitled to injunctive relief in the event of such breach.
13. GOVERNING LAW; ARBITRATION; JURISDICTION; VENUE; ATTORNEY'S
FEES. This Agreement is made and entered into in and shall be governed by and
interpreted in accordance with the laws of, the State of New York. The Company
and Employee agree that any dispute regarding this Agreement shall be submitted
to arbitration to and shall be resolved in accordance with the rules of the
JAMS/Endispute for expedited cases then in effect. The arbitrator(s) shall be
mutually selected by the parties or in the event the parties cannot mutually
agree, then appointed by JAMS/Endispute. Any arbitration shall be held within a
thirty (30) mile radius of New York City and the arbitrator(s) shall apply New
York law. Judgment upon any award rendered by the arbitrator(s) shall be final
and may be entered in any court of competent jurisdiction. Notwithstanding the
foregoing, the Company shall have the absolute right to obtain equitable
remedies in any state court of competent jurisdiction in the State of New York
or in the United States District Court for the Southern District of New York. By
his execution and delivery of this agreement, Employee irrevocably submits to
and accepts the exclusive jurisdiction of each of such courts and waives any
objection (including any objection to venue or any objection based upon the
grounds of forum non conveniens) which might be asserted against the bringing of
any such action, suit or other legal proceeding in such courts. The court and/or
arbitrator(s) shall award costs and expenses (including reasonable attorney's
fees) to the prevailing party in any litigation or arbitration.
14. MISCELLANEOUS.
14.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any and all previous agreements, written and oral, regarding the
subject matter hereof between the parties hereto. This Agreement shall not be
changed, altered, modified or amended, except by a written agreement signed by
both parties hereto.
14.2. NOTICES. All notices, requests, demands and other
communications required or permitted to be given or made under this Agreement
shall be in writing and shall be
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deemed to have been given if delivered by hand, sent by generally recognized
overnight courier service, telex or telecopy, or mail,
(a) to the Company care of: With a copy to:
InSite Internet., Inc. Xxxxx & Xxxxxxx, LLP
0000 Xxxxx Xxxxxx 000 Xxxxx Xxxx Xxxxxxxx
Xxxxxx Xxxx, XX 00000 Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, CEO Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
(b) to the Employee at: With a copy to:
Xxxxx Xxxxxx Thuillez, Ford, Gold & Xxxxxxx, LLP
_______________ 00 Xxxxx Xxxxxx, Xxxxx 0000
_______________ Xxxxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
14.3 ASSIGNMENT. The Company may assign this Agreement to
(i) any entity controlling, controlled by or under common control with the
Company or (ii) to any purchaser of the Company's assets provided that such
purchaser agrees to assume the Company's obligations hereunder.
14.4. SEVERABILITY. If any term or provision of this
Agreement, or the application thereof to any person or under any circumstance,
shall to any extent be invalid or unenforceable, the remainder of this
Agreement, or the application of such terms to the persons or under
circumstances other than those as to which it is invalid or unenforceable, shall
be considered severable and shall not be affected thereby, and each term of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
The invalid or unenforceable provisions shall, to the extent permitted by law,
be deemed amended and given such interpretation as to achieve the economic
intent of this Agreement.
14.5. WAIVER. The failure of any party to insist in any one
instance or more upon strict performance of any of the terms and conditions
hereof, or to exercise any right or privilege herein conferred, shall not be
construed as a waiver of such terms, conditions, rights or privileges, but same
shall continue to remain in full force and effect. Any waiver by any party of
any violation of, breach of or default under any provision of this Agreement by
the other party shall not be construed as, or constitute, a continuing waiver of
such provision, or waiver of any other violation of, breach of or default under
any other provision of this Agreement.
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14.6. RIGHT OF SETOFF. Notwithstanding anything to the
contrary set forth herein, and in addition to any and all remedies at law or in
equity which the Company may have, the Company shall have the absolute and
unconditional right to setoff its payment obligations hereunder against the
amount of any claims for indemnification it may have against Employee under the
Merger Agreement.
14.7. TITLES; GENDER. Section and subsection titles are for
convenience of reference only and are not to be considered in the interpretation
or construction of any of the provisions hereof. All pronouns or any variations
thereof contained in this Agreement refer to the masculine, feminine or neuter
as the identity of the person may require.
14.8 SURVIVAL. SECTION 6 through SECTION 14 hereof shall
survive any termination of this Agreement.
14.9 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
ATTEST: INSITE INTERNET ACQUISITION I Co., Inc.
By:
------------------------------- ----------------------------------
Xxxx X. Xxxxx, President
WITNESS: EMPLOYEE:
------------------------------- ----------------------------------
Xxxxx Xxxxxx
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EXHIBIT 6.12(c)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this
____ day of __________, 1999, by and between, InSite Internet I Acquisition Co.,
Inc., a New York corporation (the "Company") and wholly-owned subsidiary of
InSite Internet, Inc., a Delaware corporation (the "Parent") and Xxxx Xxxxx, an
individual with a mailing address at ________________________________
("Employee").
INTRODUCTION
Employee is a principal and employee of Global 2000 Communications, Inc.
(the "Founding Company") and possesses skills and knowledge advantageous to the
Company.
The Parent, the Company, the Founding Company, and the stockholders of
the Founding Company are parties to that certain Agreement and Plan of Merger
and Reorganization dated as of ______________, 1999 (the "Merger Agreement")
pursuant to which the Parent, the Founding Company and the Company intend to
effect a merger of the Founding Company with and into the Company.
Contemporaneously with and conditioned upon the closing of the transactions
contemplated by the Merger Agreement (the "Effective Date"), effective on the
Effective Date, the Company desires to employ Employee and Employee desires to
accept such employment on the terms and conditions set forth herein.
AGREEMENT
In consideration of the premises and mutual promises hereinbelow set
forth, the parties hereby agree as follows:
1. EMPLOYMENT; DUTIES. Subject to the terms and conditions set
forth herein, the Company hereby employs Employee during the Employment Period
(as defined below), and Employee hereby accepts such employment. Employee agrees
to be a full-time employee of the Company and devote his full and exclusive
time, energy, skill and best efforts to the business of the Company and to the
fulfillment of Employee's duties hereunder. Employee's duties include, but are
not limited to, (i) serving as Director of Networking of the Company; (ii) sales
of the Company's and its affiliates products and services; (iii) assisting in
the internal growth of the Company's business; and (iv) other duties assigned to
Employee by the Company from time to time consistent with Employee's position.
2. EMPLOYMENT PERIOD. The term of this Agreement (the "Employment
Period") shall commence on the Effective Date and shall terminate three (3)
years thereafter, unless terminated earlier pursuant to SECTION 4 or SECTION 5
below.
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3. COMPENSATION AND BENEFITS.
3.1 SALARY. During the Employment Period, the Company agrees
to pay Employee at the rate of $70,000 per year ("Base Salary"). Employee's
salary shall be subject to customary withholdings and be payable to Employee on
the regularly occurring pay period established by the Company.
3.2 HEALTH BENEFITS. During the Employment Period, the
Company shall provide Employee with individual and/or family health care
coverage, as provided by health care provider(s) selected by the Company from
time to time.
3.3 BONUS. During the Employment Period, Employee shall be
paid a bonus at the end of each fiscal year equal to the sum of (i) 2.5% of the
Company's increase in "annual sales" and (ii) 5.0% of the Company's increase in
"EBITDA" (i.e., earnings before interest and taxes, less depreciation and
amortization). Such bonus (if any) shall be payable at the discretion of the
Company in either (A) cash or (B) common stock, options or other awards from the
Parent's incentive stock plan, subject to applicable securities law and tax
withholding payments by Employee. The calculation for such bonus shall (x) be
based on the unconsolidated financial statements of the Company as certified by
the Company's certified public accountants; (y) be subject to allocation of
overhead provisions from time to time adopted by the Company, the Parent and its
subsidiaries; and (z) include only "organic" sales and earnings (i.e. only such
earnings and sales generated from the Company's currently existing business) and
shall exclude, without limitation, any earnings or sales generated by way of
merger, acquisition or other similar event.
3.4 RETIREMENT PLAN. During the Employment Period, Employee
shall be entitled to participate in any 401(k) or similar plan adopted by the
Company for the benefit of its employees. The Company reserves the right to
modify, terminate or withdraw any such plan (if so adopted) at any time in its
sole discretion.
4. TERMINATION BY THE COMPANY FOR CAUSE. Upon written notice to
Employee, the Company may terminate this Agreement for cause if any of the
following events shall occur: (i) any breach of this Agreement by Employee; (ii)
the commission of a felony by Employee; (iii) the commission of an act by
Employee involving fraud, theft or dishonesty; (iv) material breach by the
Founding Company or its stockholders of their representations, warranties and
covenants and/or obligations under the Merger Agreement which breach remains
uncured for a period of thirty (30) days following notice to Employee; or (v)
the Company's bona fide decision to terminate its business and liquidate its
assets. In the event of a termination pursuant to this SECTION 4, all
obligations of the Company under this Agreement shall cease.
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5. TERMINATION WITHOUT CAUSE.
5.1 BY EMPLOYER. The Company may terminate this Agreement at
any time without cause upon thirty (30) days written notice to Employee. In such
event, the Company shall pay Employee during regular payroll periods (less
customary withholding taxes) the Base Salary for up to the greater of twelve
(12) months or the remainder of the Employment Period provided however, in
either case, (i) Employee is actively seeking new employment and (ii) the
Company's severance obligations hereunder will end on the date Employee secures
new employment. All other obligations of the Company shall cease on the date of
termination.
5.2 BY EMPLOYEE. Employee may terminate this Agreement at
any time upon ninety (90) days prior written notice to the Company. In such
case, Employee shall not be eligible for any severance payments or other
benefits after the date of termination.
5.3 MERGER AGREEMENT. Absent a breach of the Merger
Agreement, termination by either the Company or Employee pursuant to this
SECTION 5 shall not be deemed a breach of the Merger Agreement, nor will it
affect either party's obligations thereunder.
6. CONFIDENTIALITY AND NON-DISCLOSURE. Employee recognizes and
acknowledges that he has had in the past, currently has and in the future may
have access to certain confidential information relating to the Company and its
affiliates, including, but not limited to, operational policies, financial
information, marketing information, personnel information, trade secrets,
customer information (including customer lists), and pricing and cost policies,
that are valuable, special and unique assets of the Company (collectively,
"Confidential Information"). Employee agrees that he will not use or disclose
such Confidential Information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except as is required in the
course of performing his duties hereunder unless (i) such information becomes
known to the public generally through no breach by Employee of this covenant or
(ii) disclosure is required by law or any governmental authority or is required
in connection with the defense of a lawsuit against the disclosing party,
provided, that prior to disclosing any information pursuant to this clause (ii),
Employee shall give prior written notice thereof to the Company and provide the
Company with the opportunity to contest such disclosure. Employee agrees that,
both during the Employment Period and after the termination of this Agreement,
Employee will hold in a fiduciary capacity for the benefit of the Company, and
shall not directly or indirectly use or disclose, except as authorized by the
Company in connection with the performance of Employee's duties, any
Confidential Information, that Employee may have or may acquire (whether or not
developed or compiled by Employee and whether or not Employee has been
authorized to have access to such Confidential Information) during the term of
this Agreement. The covenants contained in this SECTION 6 shall survive for the
Employment Period and for a period of two (2) years thereafter; provided,
however, that with respect to those items of Confidential Information which
constitute trade secrets under applicable law, Employee's obligations of
confidentiality and non-disclosure as set forth in this SECTION 6 shall continue
to survive after the applicable period above to the greatest extent permitted by
applicable law.
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These rights of the Company are in addition to those rights the Company has
under the common law or applicable statutes for the protection of trade secrets.
7. NON-COMPETITION. Employee expressly covenants and agrees that
for the Employment Period and for a period of two (2) years thereafter, he shall
not, directly or indirectly, seek, obtain or accept a "Competitive Position" in
the "Restricted Territory" with a "Competitor" of the Company (as such terms are
hereafter defined). For purposes of this Agreement, a "Competitor" of the
Company means any business, individual, partnership, joint venture, association,
firm, corporation or other entity engaged, wholly or partly, in the business of
selling internet access service or in any related business which the Company
and/or its affiliates may engage in from time to time during the term of this
covenant; the "Restricted Territory" means each state of the United States of
America in which the Company and/or its affiliates transacts business during the
term of this covenant; a "Competitive Position" means any employment with any
Competitor of the Company whereby Employee will use or is likely to use any
Confidential Information, or whereby Employee has duties for such Competitor
that are the same or substantially similar to those actually performed by
Employee pursuant to the terms hereof. Nothing contained in this SECTION 7 is
intended to prevent Employee from investing in stock or other securities listed
on a national securities exchange or actively traded on the over the counter
market or any corporation engaged, wholly or partly, in the sale of
telecommunications products or services; provided, however, that Employee and
members of his immediate family shall not, directly or indirectly, hold more
than a total of two percent (2%) of all issued and outstanding stock or other
securities of any such corporation.
8. NON-SOLICITATION.
8.1 NON-SOLICITATION OF CUSTOMERS. Employee agrees that he
will not take any customer lists of the Company after leaving his employ and
that he will, for the Employment Period and for a period of two (2) years
thereafter, refrain from soliciting or attempting to solicit directly or by
assisting others, any business from any of the Company's customers, including
actively sought prospective customers, with whom Employee had "material contact"
during the employment for purposes of providing products or services.
8.2 NON-SOLICITATION OF EMPLOYEES. Employee agrees that he
will, for the Employment Period and for a period of two (2) years thereafter,
refrain from recruiting or hiring, or attempting to recruit or hire, directly or
by assisting others, any other employee of the Company who is employed by the
Company or any successor or affiliate of the Company.
9. TOLLING OF PERIOD OF RESTRAINT. Employee hereby expressly
acknowledges and agrees that in the event the enforceability of any of the terms
of this Agreement shall be challenged in court and Employee is not enjoined from
breaching any of the restraints set forth in SECTION 6 through SECTION 9, then
if a court of competent jurisdiction finds that the challenged restraint is
enforceable, the time period of the restraint shall be deemed tolled upon the
filing of
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the lawsuit challenging the enforceability of the restraint until the dispute is
finally resolved and all periods of appeal have expired.
10. ACKNOWLEDGEMENTS. Employee hereby acknowledges and agrees that
the restrictions contained in SECTION 6 through SECTION 9 are fair and
reasonable and necessary for the protection of the legitimate business interests
of the Company. Employee acknowledges that in the event Employee's employment
with the Company terminates for any reason, Employee will be able to earn a
livelihood without violating the restrictions contained in SECTION 6 through
SECTION 9 and that Employee's ability to earn a livelihood without violating
such restrictions is a material condition to Employee's employment and continued
employment with the Company. Employee expressly agrees that the character,
duration and geographical scope of the covenants contained in this SECTION 6
through SECTION 9 are reasonable in light of the circumstances as they exist at
the date upon which this Agreement has been executed including the substantial
payments made by the Company and Employee in consideration of the Merger
Agreement. However, should a determination nonetheless be made by a court of
competent jurisdiction at a later date that the character, duration or
geographical scope of the covenants contained herein are unreasonable in light
of the circumstances as they then exist, then it is the intention of both
Employee and the Company that these covenants shall be construed by the court in
such a manner as to impose only those restrictions on the conduct of Employee
which are reasonable in light of the circumstances as they then exist and
necessary to assure the Company of the intended benefit of these covenants.
11. RIGHTS TO MATERIALS; WORK FOR HIRE. All records, files,
memoranda, reports, price lists, customer lists, drawings, plans, sketches,
documents and the like (together with all copies thereof) relating to the
business of the Company, which Employee shall use or prepare or come in contact
with in the course of, or as a result of, his employment shall, as between the
parties hereto, remain the sole property of the Company. Upon the termination of
Employment or upon the prior demand of the Company, Employee shall immediately
return all such materials and shall not thereafter cause removal thereof from
the premises of the Company. Employee agrees to disclose and assign to the
Company as its exclusive property, all ideas, writings, inventions, discoveries,
improvements and technical or business innovations made or conceived by
Employee, whether or not patentable or copyrightable, either solely or jointly
with others during the Employment Period and for a period of two (2) years
thereafter whether or not made or conceived during regular hours of work or
otherwise, which are along the lines of the business, work or investigations of
the Company or its affiliates. Employee agrees to execute any and all documents
hereafter requested by the Company necessary to further effectuate the
foregoing.
12. REMEDIES. Without limiting the Company's right to claim
damages, Employee acknowledges that the Company will be irreparably harmed by a
breach of any provision of this Agreement and Employee agrees that the Company
shall be entitled to injunctive relief in the event of such breach.
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13. GOVERNING LAW; ARBITRATION; JURISDICTION; VENUE; ATTORNEY'S
FEES. This Agreement is made and entered into in and shall be governed by and
interpreted in accordance with the laws of, the State of New York. The Company
and Employee agree that any dispute regarding this Agreement shall be submitted
to arbitration to and shall be resolved in accordance with the rules of the
JAMS/Endispute for expedited cases then in effect. The arbitrator(s) shall be
mutually selected by the parties or in the event the parties cannot mutually
agree, then appointed by JAMS/Endispute. Any arbitration shall be held within a
thirty (30) mile radius of New York City and the arbitrator(s) shall apply New
York law. Judgment upon any award rendered by the arbitrator(s) shall be final
and may be entered in any court of competent jurisdiction. Notwithstanding the
foregoing, the Company shall have the absolute right to obtain equitable
remedies in any state court of competent jurisdiction in the State of New York
or in the United States District Court for the Southern District of New York. By
his execution and delivery of this agreement, Employee irrevocably submits to
and accepts the exclusive jurisdiction of each of such courts and waives any
objection (including any objection to venue or any objection based upon the
grounds of forum non conveniens) which might be asserted against the bringing of
any such action, suit or other legal proceeding in such courts. The court and/or
arbitrator(s) shall award costs and expenses (including reasonable attorney's
fees) to the prevailing party in any litigation or arbitration.
14. MISCELLANEOUS.
14.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any and all previous agreements, written and oral, regarding the
subject matter hereof between the parties hereto. This Agreement shall not be
changed, altered, modified or amended, except by a written agreement signed by
both parties hereto.
14.2. NOTICES. All notices, requests, demands and other
communications required or permitted to be given or made under this Agreement
shall be in writing and shall be deemed to have been given if delivered by hand,
sent by generally recognized overnight courier service, telex or telecopy, or
mail,
(a) to the Company care of: With a copy to:
InSite Internet., Inc. Xxxxx & Xxxxxxx, LLP
0000 Xxxxx Xxxxxx 000 Xxxxx Xxxx Xxxxxxxx
Xxxxxx Xxxx, XX 00000 Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, CEO Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
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(b) to the Employee at: With a copy to:
Xxxx Xxxxx Thuillez, Ford, Gold & Xxxxxxx, LLP
_______________ 00 Xxxxx Xxxxxx, Xxxxx 0000
_______________ Xxxxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
14.3 ASSIGNMENT. The Company may assign this Agreement to
(i) any entity controlling, controlled by or under common control with the
Company or (ii) to any purchaser of the Company's assets provided that such
purchaser agrees to assume the Company's obligations hereunder.
14.4. SEVERABILITY. If any term or provision of this
Agreement, or the application thereof to any person or under any circumstance,
shall to any extent be invalid or unenforceable, the remainder of this
Agreement, or the application of such terms to the persons or under
circumstances other than those as to which it is invalid or unenforceable, shall
be considered severable and shall not be affected thereby, and each term of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
The invalid or unenforceable provisions shall, to the extent permitted by law,
be deemed amended and given such interpretation as to achieve the economic
intent of this Agreement.
14.5. WAIVER. The failure of any party to insist in any one
instance or more upon strict performance of any of the terms and conditions
hereof, or to exercise any right or privilege herein conferred, shall not be
construed as a waiver of such terms, conditions, rights or privileges, but same
shall continue to remain in full force and effect. Any waiver by any party of
any violation of, breach of or default under any provision of this Agreement by
the other party shall not be construed as, or constitute, a continuing waiver of
such provision, or waiver of any other violation of, breach of or default under
any other provision of this Agreement.
14.6. RIGHT OF SETOFF. Notwithstanding anything to the
contrary set forth herein, and in addition to any and all remedies at law or in
equity which the Company may have, the Company shall have the absolute and
unconditional right to setoff its payment obligations hereunder against the
amount of any claims for indemnification it may have against Employee under the
Merger Agreement.
14.7. TITLES; GENDER. Section and subsection titles are for
convenience of reference only and are not to be considered in the interpretation
or construction of any of the provisions hereof. All pronouns or any variations
thereof contained in this Agreement refer to the masculine, feminine or neuter
as the identity of the person may require.
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14.8 SURVIVAL. SECTION 6 through SECTION 14 hereof shall
survive any termination of this Agreement.
14.9 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same document.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
ATTEST: INSITE INTERNET ACQUISITION I Co., Inc.
By:
------------------------------- -----------------------------------------
Xxxx X. Xxxxx, President
WITNESS: EMPLOYEE:
------------------------------- --------------------------------------------
Xxxx Xxxxx
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