1
EXHIBIT 2.2
ASSET CONTRIBUTION AGREEMENT
THIS ASSET CONTRIBUTION AGREEMENT (this "Agreement") is made and entered
into as of the 5th day of May, 2000, by and among xXxxxx.xxx, Inc., a Delaware
corporation (the "Company"), ESRN Acquisition, LLC, a Delaware limited liability
company ("ESRN"), CT Holdings, Inc., a Delaware corporation and the parent of
ESRN ("CT"), and joined in for certain limited purposes by the stockholders of
the Company whose names are set forth on the signature page to this Agreement
(the "Stockholders"). Each of the Company, the Purchaser and the Stockholders
are hereinafter at times referred to as a "Party" and collectively as the
"Parties".
WHEREAS, the asset contribution transaction contemplated by this Agreement
is part of that single tax-free exchange under Section 351 of the Internal
Revenue Code of 1986, as amended ("the Code"), and the Treasury Regulations
promulgated thereunder, comprised of (i) this Agreement, (ii) the merger of
ArtLog, Inc. with and into the Company, and (iii) the merger of COR Decision
Support Systems, L.L.C. with and into the Company.
WHEREAS, ESRN desires to contribute to the Company those certain assets
acquired by ESRN from EBSCO XXXXXX, Inc. ("EBSCO") under that certain Asset
Purchase Agreement by and among ESRN, EBSCO, CT and the Company of even date
herewith (the "Asset Purchase Agreement") and the Company desires to accept such
assets from ESRN.
WHEREAS, in exchange for the contribution of the Assets (as defined
hereinafter), the Company desires to issue and sell to CT 2,631,667 shares of
its Series A Preferred Stock, $0.01 par value per share (the "Preferred Stock")
WHEREAS, the Stockholders are all of the stockholders of the Company and
desire to join with the Company in making the representations and warranties of
the Company to CT and ESRN; and
NOW, THEREFORE, for and in consideration of the mutual representations,
warranties, covenants and agreements hereinafter set forth and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, and upon the terms and subject to the conditions hereinafter set
forth, the Parties do hereby agree as follows:
ARTICLE I
CONTRIBUTION OF ASSETS AND ISSUANCE OF PREFERRED STOCK
1.1 Authorization of the Securities. Prior to the Closing Date, the Company
shall have authorized the issuance and sale to CT of the Preferred Stock, having
such rights, restrictions, privileges and preferences as are set forth in the
Company's Certificate of Incorporation, the form of which is attached hereto as
Exhibit A.
1.2 Issuance and Sale of the Securities. Subject to the terms and
conditions of this Agreement and on the basis of the representations,
warranties, covenants and agreements set forth herein, the Company hereby agrees
to issue and sell to CT, and CT hereby agrees to purchase from the Company
2,631,667 shares of the Preferred Stock. As consideration for the
2
Preferred Stock, at the Closing (as that term is defined hereinbelow), CT will
cause ESRN to grant, convey, transfer, assign and deliver to the Company, and
the Company shall accept from ESRN, all of ESRN's right, title and interest of
any kind or nature whatsoever in and to the assets purchased from EBSCO, as more
fully described in the Asset Purchase Agreement (the "Assets"), free and clear
of any and all options, pledges, mortgages, security interests, liens, charges,
adverse claims, rights, restrictions, burdens and encumbrances whatsoever
("Encumbrances").
1.3 Delivery, Transfer and Conveyance. At the Closing, the Company shall
execute and deliver to CT a certificate or certificates evidencing the shares of
Preferred Stock. At the Closing, ESRN shall execute and deliver to the Company a
Xxxx of Sale and Assignment in substantially the form attached hereto as Exhibit
B and all such other assignments, endorsements and instruments of transfer as
shall be necessary or appropriate to carry out the intent of this Agreement and
as shall be sufficient to vest in the Company title to all of the Assets and all
right, title and interest of ESRN thereto.
1.4 Assumption of Certain Obligations. Effective at the Closing and subject
to the terms set forth herein, at the Closing the Company shall assume and be
liable for all of ESRN's debts, contracts, leases, liabilities, arrangements,
commitments, obligations, restrictions or duties relating to the Assets as set
forth in Schedule 1.4 (collectively, the "Assumed Liabilities"). The Company
shall execute and deliver to ESRN at the Closing an Assumption Agreement in
substantially the form attached hereto as Exhibit C.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS
The Company and the Stockholders, jointly and severally, represent and
warrant to CT and ESRN as follows. Each representation and warranty contained in
Sections 2.7 through 2.22 below as to the operations of the Company shall
encompass the operations of each subsidiary and predecessor of the Company.
2.1 Organization and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to carry on its business as
it is presently being operated and in the places where such businesses are
conducted. The Company has full power, authority and legal right to enter into
this Agreement and all other agreements to which it is a party and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement by the Company, and all other agreements to which
it is a party, and the consummation by it of the transactions contemplated
hereby and thereby, have been or will be duly authorized by all requisite
action. This Agreement constitutes, and all other agreements to which it is a
party when executed and delivered in accordance with the terms thereof, will
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their terms, subject to the Equitable Exceptions (as defined
below). The making and performance of this Agreement and all other agreements to
which it is a party, and the consummation of the transactions contemplated
hereby and thereby in accordance with the terms
-2-
3
hereof and thereof will not (i) conflict with the Certificate of Incorporation,
as amended, or the By-Laws, as amended, of the Company, (ii) result in a
material breach or termination of, or constitute a material default under, or
constitute an event which with notice or lapse of time, or of both, would become
a material default under, or result in the creation of any Encumbrance upon any
asset of the Company under, or create any right of termination, cancellation or
acceleration in any person under, any material contract, lease, arrangement or
commitment, or violate any order, writ, injunction or decree, to which the
Company is a party or by which the Company or its assets, business or operations
may be bound or affected or under which the Company or its respective assets,
business or operations receive benefits, (iii) result in the loss or adverse
modification of any material license, franchise, permit or other authorization
granted to or otherwise held by the Company that is material to the business or
financial condition of the Company or (iv) result in the violation of any
provision of law applicable to the Company, the violation of which could have a
material adverse effect upon the business, operations or assets of the Company,
taken as a whole.
2.2 Binding Obligation. This Agreement and each other agreement required to
be entered into by the Company pursuant to the terms of this Agreement
constitutes the legal, valid and binding obligation of the Company and is
enforceable against the Company in accordance with its terms, except as such
enforcement is limited by applicable equitable principles or by bankruptcy,
insolvency reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by the exercise of judicial discretion in
accordance with the equitable principles.
2.3 Capitalization and Voting Rights.
(a) The authorized capital of the Company consists, or will consist
immediately prior to the Closing, of:
(i) Common Stock. One Hundred Million (100,000,000) shares of common
stock, par value $0.01 per share, are authorized, of which 17,040,688
shares are issued and outstanding immediately prior to the date hereof (the
"Common Stock"). The outstanding shares of Common Stock are all duly and
validly authorized and issued, fully paid and nonassessable.
(ii) Preferred Stock. Fifty Million (50,000,000) shares of Preferred
Stock, par value $0.01 per share (the "Preferred Stock"), are authorized of
which Two Million Six Hundred Thirty-Five Thousand (2,635,000) have been
designated as Series A Convertible Preferred Stock and of which no shares
are issued and outstanding prior to the consummation of the transactions
contemplated by this Agreement.
(b) Except as set forth on Schedule 2.3(b), there are not outstanding any
options, warrants, rights (including conversion or preemptive rights) or
obligations for the purchase or acquisition from the Company of any shares of
its capital stock. The Company is not a party or subject to any agreement or
understanding and, to the best of the Company's knowledge, there is no agreement
or understanding between any other persons or entities which affects or relates
to the voting or giving of written consents with respect to any share of capital
stock of the Company.
-3-
4
(c) Set forth on Schedule 2.3(c) is a true, correct and complete list,
accurate as of the date hereof, of all of the stockholders of the Company,
together with an identification of all of the capital stock of the Company held
by each such stockholder.
2.4 Subsidiaries. The Company does not presently own or control, directly
or indirectly, any interest in any other corporation, association, or other
business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.5 No Brokers or Finders. No person or entity has or will have, as a
result of the transactions contemplated by this Agreement, any right or valid
claim against the Company, any Stockholder, CT or ESRN for any commission, fee
or other compensation as a finder or broker, or in any similar capacity.
2.6 Duly Issued; Reservation for Issuance. Upon issuance and delivery to CT
of the Preferred Stock pursuant to this Agreement, the Preferred Stock shall be
validly issued, fully paid and non-assessable, and will vest in CT legal and
valid title to the Preferred Stock, free and clear of all liens, security
interests, hypothecations, restrictions, options, proxies, voting trusts or
other encumbrances ("Encumbrances"). Upon conversion by CT of the Preferred
Stock, the Common Stock shall, upon the issuance and delivery thereof to CT, be
validly issued, fully paid and non-assessable, and will vest in CT legal and
valid title to the Common Stock issuable to CT, free and clear of any
Encumbrances. The Company has duly and properly reserved for issuance such
number of shares of its Common Stock and Preferred Stock, as the case may be, as
shall be necessary for each of: (i) the issuance of the Preferred Stock pursuant
to this Agreement, and (ii) the issuance of Common Stock upon the conversion of
the Preferred Stock.
2.7 Inventories. The Company does not manufacture, sell, or lease any
goods, merchandise, or products which give rise to implied warranties, or
products liability. All inventory (the "Inventory") of the Company (i) is of a
quantity and quality usable in the regular and ordinary course of the business
of the Company, is located on the Real Property described on Schedule 2.10
consistent with past practices, (ii) has been or will be acquired by the Company
only in bona fide transactions entered into in the ordinary course of business,
(iii) is not valued in excess of the lower of cost or net realizable market
value, and (iv) is owned by the Company free and clear of any consignments,
liens, claims, charges, and encumbrances, other than Permitted Encumbrances.
2.8 Accounts Receivable. All receivables due to the Company (the "Accounts
Receivable") represent sales actually made or services actually performed in the
ordinary course of business in bona fide transactions completed in accordance
with the terms and provisions contained in any documents related thereto, and
are current and collectible. There are no setoffs, counterclaims, or disputes
asserted against, conditions precedent to the payment of, and no discounts
(other than discounts for prompt payment granted in the ordinary course of
business and reflected in the documents evidencing such account) or allowances
from, the Accounts Receivable other than in amounts which, in the aggregate, are
not in excess of the amounts thereof reserved against on the books and records
of the Company. The Company has not granted a security interest in the Accounts
Receivable to any person or entity.
-4-
5
2.9 Personal Property. The Company has good and merchantable title to all
of its furniture, fixtures, equipment, vehicles, and other items of personal
property, free and clear of all liens, claims, charges, security interests, and
other encumbrances of any kind and of any nature, except as disclosed on
Schedule 2.9. All furniture, fixtures, equipment, vehicles, and other items of
personal property are in good operating condition (normal wear and tear
excepted), are reasonably fit for the purposes for which such properties are
presently used, are adequate and usable for the continued operation of the
business of the Company as the same is presently conducted, and none of such
properties are in need of maintenance or repairs except for ordinary, routine
maintenance and repairs, the cost of which will not vary materially from
historic patterns.
2.10 Real Property and Leased Real Property.
(a) Schedule 2.10 contains a true and correct list of each parcel of real
property owned by the Company ("Owned Real Property"). Except as set forth in
Schedule 2.10, the Company has good and marketable fee simple title to the Owned
Real Property, free and clear of all mortgages, liens, charges, encumbrances,
and purchase options and other rights to or against such property, other than
minor imperfections of title, liens, easements, zoning restrictions, or
encumbrances, if any, as are not substantial in character, amount, or extent and
do not, severally or in the aggregate, detract from the value or interfere with
the present uses of the Owned Real Property, or otherwise impair or limit the
business of the Company and operations of the Company.
(b) Schedule 2.10 contains a true and correct list of each parcel of real
property leased by the Company (the "Leased Real Property"). Schedule 2.10 is a
true and correct list of each lease pursuant to which the Company leases the
Leased Real Property and any amendments, extensions, and renewals thereof (the
"Real Property Leases"). Each Real Property Lease is in full force and effect
and there is no existing material default or event of default, real or claimed,
or event which with notice or lapse of time or both would constitute a material
default thereunder. Except as described in Schedule 2.10, the Company's interest
in the Real Property Leases is free and clear of any mortgages and liens and is
not subject to any deeds of trust, assignments, subleases, or rights of any
third parties other than the lessor thereof. Except as described in Schedule
2.10, the continuation, validity, and effectiveness of each Real Property Lease,
will in no way be affected by the consummation of the transactions contemplated
by this Agreement.
(c) All improvements on the Owned Real Property and the Leased Real
Property materially conform to all applicable state and local laws, use
restrictions, building ordinances, and health and safety ordinances, and the
property is zoned for the various purposes for which the Owned Real Property and
the Leased Real Property and improvements thereon are presently being used.
(d) The Company has received no written notice of any pending or threatened
condemnations, planned public improvements, annexation, special assessments,
zoning or subdivision changes, or other material adverse claims affecting the
Owned Real Property or the Leased Real Property.
-5-
6
(e) All licenses, permits, and approvals required for the occupancy and
operation of the Owned Real Property and the Leased Real Property (with
appurtenant parking uses) have been obtained and are in full force and effect
and the Company has received no notices of violations in connection with such
items.
2.11 Contracts.
(a) Except as listed on Schedule 2.11, the Company is not a party to any
written or oral:
(i) agreement, contract, or commitment with any present or former
employee or consultant or for the employment of any person, including any
consultant, contractor, or agent who performs services for the Company;
(ii) agreement, contract, or commitment for the future purchase of, or
payment for, supplies or products, or for the performance of services by a
third party which supplies, products, or services are used by the Company
involving in any one case one-thousand ($1,000) dollars or more;
(iii) lease under which the Company is lessor or lessee;
(iv) note, debenture, bond, equipment trust agreement, letter of
credit agreement, loan agreement, or other contract or commitment for the
borrowing or lending of money, or agreement or arrangement for a line of
credit or guarantee, pledge, or undertaking of the indebtedness of any
other person relating to the business of the Company;
(v) agreement, contract, or commitment for any charitable or political
contribution relating to the business of the Company;
(vi) agreement, contract, commitment, or outstanding proposal pursuant
to which the Company sells, or proposes to sell, products and services to
its customers;
(vii) agreement, contract, or commitment limiting or restraining the
Company or any successor thereto from engaging or competing in any manner
or in any business; or
(viii) material agreement, contract, or commitment relating to the
business of the Company not made in the ordinary course of business.
(b) The Company has provided to CT a true and correct list of all
commitments for capital expenditures that have been approved or made prior to
the date of this Agreement by the Company and that remain outstanding as of the
date hereof.
(c) All contracts of the Company have been entered into in the ordinary
course of business on terms substantially consistent with the Company's practice
prior thereto, are in full force and effect, and there exists no material breach
or violation of or material default by the Company under any of such contracts
nor, to the knowledge of Stockholders, by any other party
-6-
7
to any such contracts or any event which, with notice or the lapse of time, or
both, will create a material breach or violation thereof or material default
thereunder by the Company nor, to the knowledge of Stockholders, by any other
party to any such contracts. There is no contract that contains any contractual
requirement with which there is a reasonable likelihood that the Company or any
other party thereto will be unable to comply with the terms thereof. The
continuation, validity, and effectiveness of each contract of the Company will
in no way be affected by the consummation of the transactions contemplated by
this Agreement.
(d) No contract is for materials, supplies, equipment, or services not in
the ordinary course of the Company's business or as needed for reasonably
anticipated needs of the business of the Company.
(e) There exists no actual or, to the best knowledge of the Company, any
threatened termination, cancellation, or limitation of, or any amendment,
modification, or change to any contract which would have a material adverse
effect on the business of the Company or the condition, financial or otherwise,
of the Company.
(f) The Company has not granted any power of attorney affecting or with
respect to its business, affairs, or assets that remains outstanding.
2.12 Intellectual Property; Computer Software
(a) All trademarks, trade names, service marks, service names, brand names,
copyrights, patents or registrations thereof and applications therefor,
applicable to or used in the business of the Company are owned by, and may be
used by, the Company free and clear of any third party rights, liens, claims,
security interests or encumbrances of any nature whatsoever. None of the Company
or the Stockholders has any knowledge of any violation of, and the Company is
not violating, the rights of others in any trademark, trade name, service xxxx,
service name, copyright, patent, trade secret, know-how or other intangible
asset.
(b) Except as set forth on Schedule 2.12(b), the Company has sole, full and
clear title to the all computer software and all materials related thereto,
which may or may not include, without limitation, databases, documentation, flow
charts, logic diagrams, source code, object code, specifications, technical
information and materials of any type whatsoever (tangible or intangible and
machine or human readable) which incorporate or reflect the design,
specifications or workings of such programs and any derivatives thereof
("Software"), owned by the Company (the "Owned Software"), free of all claims
including claims or rights of employees, independent contractors, agents,
consultants, customers, licensees or other parties involved in the development,
creation, marketing, maintenance, enhancement or licensing of such software.
Except as disclosed in Schedule 2.12(b), the Owned Software is not dependent on
and does not contain any Licensed Software (as defined hereinbelow) or any other
Software, or derivatives of any of the foregoing, in order to fully operate in
the manner in which it is intended. The Company has the right to use, market,
distribute, sublicense, modify, and copy the Owned Software, free and clear of
any limitations or encumbrances (including any obligations to pay royalties).
-7-
8
(c) For all Software of which the Company is a licensee, lessee or
otherwise has obtained from a third party the right to use, market, distribute,
sublicense or otherwise transfer the right to use such software (the "Licensed
Software") or for which the Company is obligated or required to pay license
fees, rents, royalties or other charges, the Company has the right and license
to use, market, distribute, sublicense, modify and copy the Licensed Software,
free and clear of any limitations or encumbrances (including any obligations to
pay royalties), except as may be set forth in any license agreements or, in the
case of licensed "shrink-wrapped" Software, as may be set forth in the
documentation attendant with such software. Except as disclosed on Schedule
2.12(c), the Company is in full compliance with all provisions of any such
license, lease or other similar agreement pursuant to which it has rights to use
the Licensed Software. The Company has not published or disclosed any Licensed
Software to any other party except, in the case of Licensed Software which the
Company leases or markets to others, in accordance with and as permitted by the
agreement relating to the Licensed Software and except pursuant to written
agreements requiring such other parties to keep the Licensed Software
confidential. No party to whom the Company has disclosed the Licensed Software
has breached such obligation of confidentiality.
(d) Except as disclosed on Schedule 2.12(d), the Company has not
incorporated any Software which has been developed by the Company for a third
party where either the right to use or title to such Software is retained or
owned by such third party ("Third Party Software") or parts thereof into any
other Software in any manner which would infringe the rights of any third
parties in such Third Party Software or other Software.
(e) The Owned Software and Licensed Software (the "Company Software")
constitute all Software used in the business of the Company. The transactions
contemplated herein will not cause a breach or default under any contract
relating to the Company Software or the Third Party Software or impair the
Company's ability to use the Company Software in the same manner as such
Software is currently used in the business of the Company. None of the
Stockholders have an interest in any Software that has been used by, or for the
benefit of, the Company.
(f) None of the Licensed Software has been incorporated into or made a part
of any Owned Software or any other Licensed Software.
(g) The Company has taken all steps reasonably necessary to protect its
right, title and interest in and to, and the confidentiality of, all
confidential proprietary software of the Company, any inventions, discoveries,
techniques, know-how, trade secrets, ideas, designs, concepts and other similar
proprietary rights and information, and all confidential business information
concerning the business of the Company.
(h) All personnel, including employees, agents, consultants, and
contractors, who have contributed to or participated in the conception and
development of any software, technical documentation, confidential information
or related intellectual property on behalf of the Company either (i) have been
party to a "work-for-hire" arrangement or agreement with the Company, providing
the Company full, effective, exclusive and original ownership of all tangible
and intangible property thereby arising, or (ii) have executed appropriate
instruments of
-8-
9
assignment in favor of the Company as assignee that have conveyed to the Company
full, effective, and exclusive ownership of all tangible and intangible property
thereby arising.
(i) The Company is not infringing any intellectual property rights of any
other person with respect to the Company Software, and no other person is
infringing any intellectual property rights of the Company with respect to the
Company Software. The Company has not infringed any intellectual property rights
of any other person with respect to any Third Party Software.
2.13 Insurance. All inventories, equipment, supplies, buildings and fixed
assets owned or leased by the Company is, has been and as of the Closing Date
will be, insured against fire and other casualty, including without limitation
insurance against insurable perils as are commonly insured against, and in such
amounts as are reasonable in the case of premises similarly situated, and valid
policies therefor are, and will be, outstanding and in force and any premiums
due thereon paid prior to the Closing Date.
2.14 Environmental Matters and OSHA The Company is and has been in
compliance with Environmental Laws (as hereinafter defined) and (i) the Company
has not received notice of any Environmental Claim (as hereinafter defined)
filed or threatened against any it, or against any person or entity whose
liability for any Environmental Claim the Company has retained or assumed either
contractually or by operation of law; (ii) to the knowledge of the Company and
each of the Stockholders, the Company has not disposed of, emitted, discharged,
handles, stored, transported, used, or released any Hazardous Materials (or
arranged for any of the foregoing), or exposed any employee or other individual
to any Hazardous Materials or condition so as to give rise to any liability or
corrective or remedial obligation under any Environmental Laws; (iii) to the
knowledge of the Company and each of the Stockholders, no Hazardous Materials
are present in, on, or under any properties owned, leased or used at any time
(including both land and improvements thereon) by the Company, and no reasonable
likelihood exists that any Hazardous Materials will come to be present in, on,
or under any properties owned, leased or used at any time (including both land
and improvements thereon) by the Company so as to give rise to any material
liability or corrective or remedial obligation under any Environmental Laws.
"Environmental Claim" means any notice, claim, act, cause of action or
investigation by any person or entity alleging potential liability arising out
of, based on or resulting from the presence, or release into the environment, of
any Hazardous Materials or any violation, or alleged violation, of any
Environmental Law.
"Environmental Laws" means all federal, state, local and foreign laws and
regulations relating to pollution or protection of the environment or the
protection of human health.
"Hazardous Materials" means chemicals, pollutants, contaminants, wastes,
toxic substances, radioactive and biological materials, asbestos-containing
materials (ACM), hazardous substances, petroleum and petroleum products or any
fraction thereof, excluding, however, any chemicals used or waste generated as a
result of typical office and janitorial activities.
The Company is in material compliance with all applicable laws relating to
employee health and safety, and the Company has not received any notice that
past or present conditions of
-9-
10
the assets and properties of the Company violate any applicable legal
requirements or otherwise can be made the basis of any claim, proceeding, or
investigation, based on Occupational Safety and Health Administration ("OSHA")
violations or otherwise related to employee health and safety.
2.15 Litigation. Except as listed and described on Schedule 2.15, there are
no claims, charges, arbitrations, grievances, actions, suits, proceedings, or
investigations pending or to the Company's or any Stockholder's knowledge
threatened against, or affecting the Company at law or in equity or admiralty,
or before or by any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign, nor
is there any basis for the assertion of any such claim, charge, grievance,
action, suit, proceeding, or investigation by or against the Company. Schedule
2.15 discloses, with respect to each pending proceeding, (i) the parties
thereto, (ii) the jurisdiction of court in which such proceeding is pending,
(iii) the name and address of counsel for each party thereto, (iv) a summary
prepared by counsel for the Company of the current status of such proceeding
including the amount of the demand and the amount of the last settlement offer,
(v) the predicted outcome of such proceeding, (vi) the amount of any reserve
established for the payment or settlement of such proceeding, and (vii) if the
defense is by the Company's insurance carrier, whether the defense is with or
without a reservation of rights. True, correct, and complete copies of all
material pleadings, motions, orders, and correspondence with counsel relating to
each proceeding listed on Schedule 2.15 have been delivered to CT. Schedule 2.15
discloses with respect to any threatened claim or threatened proceeding, (a) the
threatening party, (b) the facts known to the Company or any Stockholder
concerning such claim, (c) the details of all settlement communications, and (d)
the amount of any reserve established for the payment or settlement of such
threatened claim or proceeding. The Company is not in default under or in
violation of any order, writ, injunction, or decree of any federal, state,
municipal court, or other governmental department, commission, board, bureau,
agency, or instrumentality, domestic or foreign, affecting the Company.
2.16 Absence of Changes. Except as set forth on Schedule 2.16, at all times
prior to the date hereof, the business of the Company has been conducted in the
ordinary course consistent with past practices and there has not been any
material transaction or occurrence in which the Company has:
(a) suffered any material adverse change in its business, operations,
condition (financial or otherwise), liabilities, assets, earnings, or prospects
of the Business nor, to the Company's or any Stockholder's knowledge, has there
been any event which has had or may reasonably be expected to have a material
adverse effect on any of the foregoing;
(b) canceled any debts or waived any claims or rights;
(c) disposed of or permitted to lapse any right to the use of any patent,
trademark, assumed name, service xxxx, trade name, copyright, license, or
application therefor or disposed of or disclosed to any person not authorized to
have such information any trade secret, proprietary information, formula,
process, or know-how not previously a matter of public knowledge or existing in
the public domain;
-10-
11
(d) made any significant capital expenditure or commitment for additions to
property, plant, equipment, intangible, or capital assets or for any other
purpose, other than for emergency repairs or replacement;
(e) incurred any long term indebtedness;
(f) paid, loaned, distributed (by dividend or otherwise), or advanced any
amounts to, sold, transferred, or leased any properties or assets (real,
personal or mixed, tangible or intangible) to, purchased, leased, licensed, or
otherwise acquired any properties or assets from, or entered into any other
agreement or arrangement with (i) any stockholder, officer, employee, or
director of the Company, (ii) any corporation or partnership in which any person
controlling, controlled by, or under common control with a person (an
"Affiliate") is an officer, director, or holder directly or indirectly of five
percent (5%) or more of the outstanding equity or debt securities, or (iii) any
person controlling, controlled by, or under common control with any such
partner, stockholder, officer, director, or Affiliate except in bona fide
arm's-length transactions and in which the interested person, officer director
or Affiliate abstained from the decision making process with respect to such
transaction or decision;
(g) granted or incurred any obligation for any increase in the compensation
of any officer or employee of the Company (including, without limitation, any
increase pursuant to any bonus, pension, profit-sharing, retirement, or other
plan or commitment);
(h) taken any other action neither in the ordinary course of business and
consistent with past practice nor provided for or contemplated by this
Agreement; or
(i) agreed, so as to legally bind the Company whether in writing or
otherwise, to take any of the actions set forth in this Section 2.16 and not
otherwise permitted by this Agreement.
2.17 Brokers and Finders. Neither the Stockholders, the Company, nor any
Affiliate has incurred any obligation or liability to any investment banker,
broker, finder, intermediary, or other person.
2.18 Labor Matters.
(a) A true and correct list of all present employees ("Employees"),
consultants, and independent contractors employed or engaged by the Company, and
information regarding their current total annual remuneration has been made
available to CT. Such list also provides a general description of all applicable
perquisites and fringe benefits full-time and part-time employees receive or are
eligible to receive.
(b) Since inception, the Company has not experienced any slowdown, work
interruption, strike, or work stoppage by employees of the Company. The Company
is not a party to nor does the Company have any obligation pursuant to any oral
or written agreement, collective bargaining or otherwise, with any party
regarding the rates of pay or working conditions of any of the employees of the
Company, nor is the Company obligated under any agreement to recognize or
bargain with any labor organization or union on behalf of such employees.
Neither the Company nor any of its officers, directors, or employees has been
-11-
12
charged or, to the Company's or any Stockholder's knowledge, threatened with the
charge of any unfair labor practice.
(c) The Company is in material compliance with all applicable federal,
state, and foreign laws and regulations concerning the employer-employee
relationship and with all agreements relating to the employment of the Company's
employees, including applicable wage and hour laws, worker compensation
statutes, unemployment laws, and social security laws.
(d) There are no pending or, to the Company's or any Stockholder's
knowledge, threatened material claims, investigations, charges, citations,
hearings, consent decrees, or litigation concerning: wages, compensation,
bonuses, commissions, awards, or payroll deductions; equal employment or human
rights violations regarding race, color, religion, sex, national origin, age,
handicap, veteran's status, marital status, disability, or any other recognized
class, status, or attribute under any federal, state, or foreign equal
employment law prohibiting discrimination; representation petitions or unfair
labor practices; grievances or arbitrations pursuant to current or expired
collective bargaining agreements; occupational safety and health; workers'
compensation; wrongful termination, negligent hiring, invasion of privacy or
defamation; or immigration (collectively, "Labor Claims").
(e) The Company is not liable for any material unpaid wages, bonuses, or
commissions or any tax, penalty, assessment, or forfeiture for failure to comply
with any of the foregoing.
(f) All officers, employees, and agents of the Company are employees
at-will and for indefinite terms.
(g) After reasonable investigation, neither the Company nor any Stockholder
is aware that any significant employee or consultant of the Company is obligated
under any contract or other agreement, or subject to any judgment, decree, or
order of any court or administrative agency, that would conflict with the
obligation of such employee to use best efforts to promote the interests of the
Company. To the knowledge of the Company and the Stockholders, no third party
has claimed or has reason to claim that any person employed by or affiliated
with the Company has (a) violated or may be violating any of the terms or
conditions of any employment, non-competition, or non-disclosure agreement
between such employee and such third party, (b) disclosed or may be disclosing,
or utilized or may be utilizing, any trade secret or proprietary information or
documentation of such third party, or (c) interfered or may be interfering in
the employment relationship between such third party and any of the Company's
present or former employees. No third party has requested information from the
Company which suggests that such a claim might be contemplated. To the knowledge
of the Company and the Stockholders, no person employed by or affiliated with
the Company has employed or proposes to employ any trade secret or any
information or documentation proprietary to any former employer, and to the
knowledge of the Company and the Stockholders, no person employed by or
affiliated with the Company has violated any confidential relationship which
such person may have had with any third party, in connection with the
development, manufacture, or sale of any product or proposed product, or the
development or sale of any service or proposed service of the Company, and the
Company has no reason to believe there will be any such employment or violation.
To the knowledge of the Company and the Stockholders, none of the execution or
delivery of this
-12-
13
Agreement, or the carrying on of the business of the Company by its officers,
employees, or agents, or the conduct or proposed conduct of the business of the
Company, will conflict with or result in a breach of the terms, conditions, or
provisions of or constitute a default under any contract, covenant, or
instrument under which any such person is obligated.
(h) Neither the Company nor any Stockholder is aware of any former employee
of the Company or its predecessors that is obligated under a contract or
agreement under common law or statutory law to (i) protect the confidentiality
of confidential or proprietary information of the Company or (ii) to refrain
from engaging in activities which are competitive with the business of the
Company, is in violation or breach of such contract, agreement, or law.
(i) All taxes required to be withheld on or prior to the Closing Date from
employees for income taxes, social security taxes, unemployment taxes and other
similar withholding taxes have been properly withheld and, if required on or
prior to the Closing, have been deposited with the appropriate governmental
agency.
2.19 Governmental Approval and Consents. Except as set forth on Schedule
2.19, no authorization, consent, approval, designation, order, declaration by,
or filing with, any public body, governmental authority, bureau, or agency is
necessary or required as a condition to the validity of this Agreement or the
consummation of the transactions contemplated hereby.
2.20 Taxes.
(a) Schedule 2.20 lists the jurisdictions (domestic and foreign) in which
the Company has filed or will be required to file federal, foreign, state and
local income, property, employment, and other tax returns. All such returns have
been correctly and timely filed and there have been no notices of deficiencies
proposed by any federal, foreign, state or local governmental agency or taxing
authority. None of such tax returns or employment tax returns of the Company
have been examined by the Internal Revenue Service or any foreign, state or
local governmental agency or taxing authority, and the Company is not presently
under, nor has it received notice of, any contemplated investigation or audit by
the Internal Revenue Service or any such governmental agency or taxing
authority.
(b) As of the date hereof, the Company and the Stockholders have timely
filed, and as of the Closing Date will have filed, all federal, foreign, state,
and local income, property, employment, and other tax returns in each
jurisdiction where such returns are required to be filed on or prior to the
Closing Date, taking into account any extensions of the filing deadlines which
have been validly granted to the Company.
(c) As of the date hereof, the Company has paid and as of the Closing Date
will have paid all federal, foreign, state and local income, property,
employment and all other taxes and assessments (including penalties, additions
to tax and interest in respect thereof, if any) that have become due.
-13-
14
2.21 Employee Benefit Plans.
(a) Schedule 2.21 contains a true and complete list of all the following
agreements or plans which are presently in effect or which have previously been
in effect and which cover employees of the Company, and indicating with respect
to each, the plans which provide coverage for employees of the Company, together
with a schedule which indicates the aggregate benefits due to each employee of
the Company as of May 1, 2000:
(i) Any employee benefit plan as defined in Section 3(3) of ERISA, and
any trust or other funding agency created thereunder, or under which the
Stockholders or the Company, with respect to employees, have any
outstanding, present, or future obligation or liability, or under which any
employee or former employee has any present or future right to benefits
which are covered by ERISA; or
(ii) Any other pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance, disability, hospitalization, medical, life insurance or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which the Company maintains or to which the
Company has any outstanding, present, or future obligations to contribute
or make payments under, whether voluntary, contingent, or otherwise.
The plans, programs, policies, or arrangements described in subparagraph
(i) or (ii) above are hereinafter collectively referred to as the "Company
Plans." The Company and the Stockholders have delivered to CT true and complete
copies of all written plan documents and contracts evidencing the Company Plans,
as they may have been amended to the date hereof, together with (A) all
documents relating to any tax-qualified retirement plan maintained by the
Company, which documents are required to have been filed prior to the date
hereof with governmental authorities for each of the three most recently
completed plan years; (B) attorney's response to an auditor's request for
information for each of the three most recently completed plan years; and (C)
financial statements for each Company Plan for each of the three (3) most
recently completed plan years.
(b) The Company and any other entities required to be aggregated with the
aforementioned pursuant to Section 414 of the Code are hereinafter collectively
referred to as the "Company Group." Except as to those plans identified on
Schedule 2.21 as tax-qualified Company Plans (the "Company Qualified Plans"), no
member of the Company Group maintains a tax-qualified employee plan which meets
or was intended to meet the requirements of Code Section 401 for the benefit of
present or former Employees. The Internal Revenue Service has issued favorable
determination letters to the effect that each the Company Qualified Plan
qualifies under Code Section 401(a) and that any related trust is exempt from
taxation under Code Section 501(a), and such determination letters are in
effect. Copies of the most recent determination letters and any outstanding
requests for a determination letter with respect to each Company Qualified Plan
have been delivered to CT. The Company Qualified Plans have been administered
according to their terms, except for those terms which are inconsistent with the
changes required by the Tax Reform Act of 1986 and other acts, regulations, and
rulings, in which case the Company Qualified Plans have been administered in
accordance with the provisions of those acts, regulations, and rulings in all
material respects. No member of the
-14-
15
Company Group or any fiduciary of any Company Qualified Plan has done anything
that would adversely affect the qualified status of the Company Qualified Plans
or the related trusts. The Company Qualified Plans currently comply in form with
the requirements under Code Section 401(a), other than changes required by the
Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of 1986 and other
acts, regulations, and rulings for which amendments are not yet required. Any
Company Qualified Plan subject to Code Sections 401(k) or 401(m) has been tested
for compliance with, and has satisfied the requirements of, Code Sections
401(k)(3), 401(m)(2), or both, as application, for each plan year ending prior
to the Closing Date.
(c) Except as expressly identified on Schedule 2.21, no termination or
partial termination of any Company Qualified Plan has occurred nor has a notice
of intent to terminate any Company Qualified Plan been issued by a member of the
Company Group. With respect to any Company Qualified Plan or any member of the
Company Group, no termination liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been or is expected to be incurred or would be incurred
if any Company Qualified Plan were terminated on the Closing Date. If any
Company Qualified Plan were terminated on the Closing Date, the present value of
all benefit liabilities under the Company Qualified Plan would not, as of the
Closing Date, exceed the then current value of the assets of such Company
Qualified Plan. No Company Qualified Plan has suffered any accumulated funding
deficiency within the meaning of ERISA Section 302 and Code Section 412. The
Company has made all quarterly contributions required under Code Section 412(m)
and no conditions exist which would subject the assets of the Company to a lien
under Code Section 412(m) or ERISA Section 4068. No member of the Company Group
has any outstanding liability under Code Section 4971. As of the Closing Date,
all contributions required to have been made on or prior to the Closing Date
under the Company Plans will have been made or have been accrued on the
Financial Statements and all required premium payments for the Company Qualified
Plans have been made, when due, to PBGC. No event or condition exists with
respect to any Company Qualified Plan which could be deemed a "reportable event"
as defined in ERISA Section 4043, with respect to which the 30-day notice
requirement has not been waived and which could result in a liability to the
Company, and no condition exists which would subject the Company to a fine under
ERISA Section 4071. No amendment has occurred to any Company Qualified Plan
which has required or which would require the Company Group to provide security
under Code Section 401(a)(29).
(d) No member of the Company Group has any past, present, or future
obligation to contribute to any multiemployer plan as defined in ERISA Section
3(37).
(e) No member of the Company Group nor any other "disqualified person" or
"party in interest" (as defined in Code Section 4975 and ERISA Section 3(14),
respectively) with respect to the Company Plans, has engaged in any "prohibited
transaction" (as defined in Code Section 4975 or ERISA Section 406). The Company
Group and all other "fiduciaries" (as defined in ERISA Section 3(21)) with
respect to the Company Plans have complied in all respects with the requirements
of ERISA Section 404. Neither the Company Group nor any party in interest or
disqualified person with respect to the Company Plans has taken or omitted any
action which could lead to the imposition of an excise tax under the Code or a
fine under ERISA against the Company Plans.
-15-
16
(f) Each member of the Company Group has complied with the continuation
coverage requirements of Section 1001 of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and ERISA Sections 601 through 608.
(g) Each member of the Company Group is in compliance with the requirements
prescribed by all statutes, orders, governmental rules, and regulations
applicable to the Company Plans and all reports and disclosures relating to the
Company Plans required to be filed with or furnished to governmental agencies,
participants, or beneficiaries prior to the Closing Date have been or will be
filed or furnished in a timely manner and in accordance with applicable law.
(h) Except as disclosed on Schedule 2.21, the Company has not made or is
not obligated to make any nondeductible contributions to any Company Plan.
(i) No member of the Company Group is obligated, contingently or otherwise,
under any agreement to pay any amount which will be treated as an "excess
parachute payment," as defined in Code Section 280G(b), determined without
regard to Code Section 280G(b)(2)(A)(i).
(j) Other than routine claims for benefits, there are no actions, audits,
investigations, suits, or claims pending, or threatened against any of the
Company Plans, against any fiduciary of any of the Company Plans, or against the
assets of any of the Company Plans.
(k) The consummation of the transactions contemplated hereby will not (i)
accelerate or increase any liability under any Company Plan because of an
acceleration or increase of any of the rights or benefits to which employees may
be entitled thereunder or (ii) result in any severance or similar type of
liabilities under any Company Plan.
(l) The Company has no obligation to any retired or former employee, or any
current employee upon retirement, under any Company Plan which is an employee
welfare benefit plan as defined in ERISA Section 3(1). Any Company Plan can be
terminated without resulting in any liability to the Company for any additional
penalties, premiums, fees, or any other charges.
(m) There is no lien upon any property of any member of the Company Group
outstanding pursuant to Code Section 412(n) in favor of any Company Plan. No
assets of the Company Group have been provided as security to any Company Plan
pursuant to Code Section 401(a)(29).
2.22 Compliance with Laws. The Company is not engaging in any activity or
omitting to take any action that is or creates a violation of any law, statute,
ordinance, or regulation applicable to the Company, which violation would have a
material adverse effect on the Company. The Company is not subject to any
judgment, order, writ, injunction, or decree issued by any court or any
governmental or administrative body or agency which materially affects the
Company or any of the assets and properties of the Company. The Company is in
compliance with all applicable laws, regulations, and orders issued by any court
or governmental or administrative body or agency where a failure so to comply
would have a material adverse affect on the Company.
-16-
17
2.23 Compliance with Securities Laws. Upon the filing of the appropriate
notices required under federal and state securities laws, and in reliance upon
certain representations and warranties of CT with respect to their respective
purchases of the Preferred Stock, the issuance by the Company of the Preferred
Stock and the conveyance by the Company to CT of the Preferred Stock pursuant to
the terms of this Agreement are in compliance in all respects with all federal
and state securities laws.
2.24 Correctness of Representations. No representation or warranty of the
Company in this Agreement or in any exhibit, certificate, or schedule attached
hereto or furnished pursuant hereto, contains any untrue statement of fact or
omits, or will omit, to state any material fact necessary in order to make the
statements contained therein not misleading, and all such statements,
representations, warranties, exhibits, certificates, and schedules shall be true
and complete in all material respects on the Closing Date. True copies of all
mortgages, indentures, notes, leases, agreements, plans, contracts, and other
instruments listed on or referred to in the schedules delivered or furnished to
CT pursuant to this Agreement have been delivered to CT.
2.25 Representations Not Waived. The representations and warranties of the
Company contained herein will not be affected or deemed waived by reason of any
investigation made by or on behalf of CT and/or its representatives or agents or
by reason of the fact that CT and/or its representatives or agents knew or
should have known that any such representation or warranty is or might be
inaccurate in any respect; provided, however, that CT hereby agrees to inform
the Company of any and all representations and warranties of which it has actual
knowledge that are untrue or inaccurate in any respect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CT AND ESRN
CT and ESRN represent and warrant to the Company as follows:
3.1 Due Organization and Qualification. CT is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
ESRN is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of CT and ESRN has all
requisite power and authority to own, lease or operate its properties and to
carry on its business as it is presently being operated and in the place where
such properties are owned, leased or operated and such business is conducted.
3.2 Corporate Power and Authority. Each of CT and ESRN has full power,
authority and legal right to enter into this Agreement, and all other agreements
by and among the parties, and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement by each
of CT and ESRN, and all other agreements to which each is a party, and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by all requisite action and no further action or approval is required
in order to permit each of CT and ESRN to consummate the transactions
contemplated hereby and thereby. This Agreement constitutes, and all other
agreements to which each is a party when executed and delivered in accordance
with the terms thereof, will constitute the legal, valid and binding obligations
of CT and ESRN, respectively, enforceable in accordance with their terms,
-17-
18
except that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and (ii) the remedy of specific performance and injunctive relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceedings may be brought (the "Equitable Exceptions"). The making and
performance of this Agreement, and all other agreements to which it is a party,
and the consummation of the transactions contemplated hereby and thereby in
accordance with the terms hereof and thereof will not (a) conflict with the
Articles of Incorporation or By-Laws of CT, (b) conflict with the Certificate of
Formation or Limited Liability Company Agreement of ESRN, (c) result in any
breach or termination of, or constitute a default under, or constitute an event
that with notice or lapse of time, or both, would become a default under, or
result in the creation of any Encumbrance upon any of the Assets, or violate any
order, writ, injunction or decree to which CT or ESRN is a party, by which any
of the Assets or business or operations of CT or ESRN may be bound or affected
or under which any of the Assets or business or operations of CT or ESRN receive
benefits, (d) result in the loss or adverse modification of any license,
certificate, franchise, permit or other authorization granted to or otherwise
held by CT or ESRN and related to their respective business operations or (e)
result in the violation of any provisions of law applicable to CT or ESRN, the
violation of which could have a material and adverse effect upon the Assets.
3.3 Title; Use of Assets. The transactions involving the Assets between
ESRN and EBSCO under the Asset Purchase Agreement, and the transactions
involving the Assets between ESRN and the Company under this Agreement, shall
occur simultaneously. ESRN shall convey to the Company at the Closing any and
all title to the Assets acquired from EBSCO pursuant to the Asset Purchase
Agreement, free and clear of any Encumbrances created by ESRN. NO REPRESENTATION
OR WARRANTY IS BEING MADE WITH REGARD TO THE PHYSICAL CONDITION OF ANY OF THE
ASSETS. THE COMPANY UNDERSTANDS THAT THE COMPANY IS PURCHASING THE ASSETS ON AN
"AS-IS, WHERE IS" BASIS AND IN RELIANCE SOLELY ON THE COMPANY'S OWN INSPECTION
OF THE ASSETS. NEITHER ESRN, CT NOR ANY OF THEIR RESPECTIVE AGENTS, EMPLOYEES OR
AFFILIATES HAVE MADE REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WHICH
CONCERN THE PHYSICAL CONDITION OF THE ASSETS OR WHICH HAVE INDUCED THE COMPANY
TO ENTER INTO OR CONSUMMATE THIS AGREEMENT. ALL REPRESENTATIONS AND WARRANTIES
AS TO THE PHYSICAL CONDITION OF THE ASSETS ARE HEREBY EXPRESSLY DISCLAIMED BY
ESRN AND CT AND WAIVED BY THE COMPANY. NEITHER ESRN NOR CT MAKES ANY EXPRESS OR
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE ASSETS.
3.4 Purchase Entirely for Own Account. This Agreement is made in reliance
upon CT's representations to the Company, which by CT's execution of this
Agreement CT hereby confirms, that the Preferred Stock will be acquired for
investment for CT's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that CT has no present
intention of selling, granting any participation in, or otherwise distributing
any of the Preferred Stock. CT has not obligated under any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
any participation to such person or to any third person, with respect to any of
the Preferred Stock.
-18-
19
3.5 Accredited Investor. CT is an "accredited investor" as defined in Rule
501(a) under the Securities Act of 1933, as amended.
3.6 Investment Experience. CT acknowledges that it is able to protect
itself adequately against the hazards of its investment in the Preferred Stock,
that it can bear the economic risk of such investment, and that it has such
knowledge and experience in financial or business matters that it is capable of
evaluating reasonably the merits and risks of its investment in the Preferred
Stock.
3.7 Restricted Securities. CT understands that the Preferred Stock it is
purchasing is characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In addition, CT represents that it is familiar with Rule 144,
promulgated under the authority of the Act, as presently in effect and
understands the resale limitations imposed thereby and by the Act. CT
understands that no public market presently exists for the Preferred Stock, and
that there are no assurances that any such market will be created.
3.8 Further Limitations on Disposition. Without in any way limiting the
above, CT further agrees not to make any disposition of all or any portion of
the Preferred Stock unless:
(a) There is then in effect a registration statement under the Act covering
such proposed disposition and such disposition is made in accordance with such
registration statement; or
(b) (i) CT shall have notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (ii) if reasonably requested by the
Company, CT shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such shares under the Act.
3.9 Legends. It is understood that the certificate(s) evidencing the
Preferred Stock shall bear a legend substantially similar to the following:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933, as amended. Such shares may not be sold or transferred in the
absence of such registration or unless the Company receives an opinion
of counsel reasonably acceptable to it stating that such sale or
transfer is exempt from the registration and prospectus delivery
requirements of said act. Copies of the agreements covering the
purchase of these shares and restricting their transfer may be
obtained at no cost by written request made by the holder of record of
this certificate to the Secretary of the Company at the principal
executive offices of the Company."
-19-
20
3.10 Access to Information. CT has had an opportunity to review the books
and records of the Company made available to CT, including financial records,
forecasts, organizational documents, agreements with employees, option
agreements, stock records and agreements with prospective customers and
strategic partners, if any. The Company has made available to CT the opportunity
to ask questions of and to receive answers from the Company's officers,
directors and other authorized representatives concerning the Company and its
business and prospects and CT has been permitted to have access to all
information which it has requested in order to evaluate the merits and risks of
the purchase of the Preferred Stock hereunder.
3.11 Brokers and Finders. Neither CT, ESRN nor any affiliate of either CT
or ESRN has incurred any obligation or liability to any party for any brokerage
fees, agent's commissions, or finder's fees in connection with the transactions
contemplated by this Agreement for which the Company or the Stockholders will be
liable.
ARTICLE IV
CONDITIONS PRECEDENT TO OBLIGATIONS OF CT AND ESRN
The obligation of CT and ESRN to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction, on or before the Closing
Date, of each of the following conditions, all or any of which may be waived in
writing, in whole or in part, by CT and ESRN.
4.1 Representations and Warranties. All of the representations and
warranties of each of the Company and the Stockholders contained in this
Agreement and in any schedule or other disclosure in writing from the Company or
the Stockholders, as applicable, shall have been true and correct in all
material respects when made, and shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of the Closing Date.
4.2 Compliance by the Company. The Company and the Stockholders shall have
duly performed all of the covenants, agreements, and conditions contained in
this Agreement to be performed by the Company and the Stockholders on or prior
to the Closing Date, and CT and ESRN shall have received a certificate, dated as
of the Closing Date, executed by any authorized officer of the Company.
4.3 No Injunction, Etc. No action, proceeding, investigation, regulation,
or legislation shall be pending or threatened which seeks to enjoin, restrain,
or prohibit CT or ESRN, or to obtain substantial damages from CT or ESRN, in
respect of the consummation of the transactions contemplated hereby, or which
seeks to enjoin the Company, which, in the reasonable judgment of CT and ESRN,
would make it inadvisable to consummate the transactions contemplated by this
Agreement.
4.4 Consents, Authorizations, Approval of Legal Matters. CT and ESRN shall
have received a true and correct copy of any consent and waiver required for the
execution, delivery, and performance of this Agreement. All authorizations,
orders, or approvals of any governmental commission, board, or other regulatory
body, shall have been obtained, and CT
-20-
21
and ESRN shall have received a certificate dated as of the Closing Date,
executed by an authorized officer of the Company to the foregoing effect, and CT
and ESRN shall be satisfied with the terms, conditions, and restrictions of and
obligations under each such authorization, order, or approval.
4.5 Certified Resolutions. CT and ESRN shall have received a certificate of
the Secretary of the Company containing a true and correct copy of the
resolutions duly adopted by the board of directors of the Company approving and
authorizing the consummation transactions contemplated hereby. The Secretary of
the Company shall also certify that such resolutions have not been rescinded,
revoked, modified, or otherwise affected and remain in full force and effect.
4.6 Litigation. At the Closing, there shall not be pending or threatened
any litigation in any court or any proceeding before any agency in which it is
sought to restrain, invalidate, set aside or obtain damages in respect of the
consummation of the transactions contemplated hereby.
4.7 No Adverse Change. There shall not have been any material adverse
change in the business or condition, financial or otherwise, of the Company, and
CT and ESRN shall have received a certificate dated as of the Closing Date,
executed by an authorized officer of the Company to such effect.
4.8 Proceedings. The form and substance of all opinions, certificates,
assignments, orders, and other documents and instruments, hereunder shall be
satisfactory in all reasonable respects to CT, ESRN and their respective
counsel.
4.9 Certificates. The Company and the Stockholders shall have delivered to
CT and ESRN all such certificates, dated as of the Closing Date, as CT and ESRN
shall reasonably request to evidence the fulfillment by the Company and
Stockholders, or other satisfaction as of the Closing Date, of the terms and
conditions of this Agreement.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF COMPANY AND STOCKHOLDERS
The obligations of the Company and the Stockholders to consummate the
transactions contemplated hereby shall be subject to the satisfaction on or
prior to the Closing Date of all of the following conditions, except such
conditions as the Company and the Stockholders may waive in writing:
5.1 Representations and Warranties. All of the representations and
warranties of CT and ESRN contained in this Agreement and in any schedule or
other disclosure in writing from CT and ESRN, as applicable, shall have been
true and correct in all material respects when made, and shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date.
-21-
22
5.2 Closing of Asset Purchase Agreement. CT and ESRN shall close the
transactions contemplated by the Asset Purchase Agreement simultaneously with
the closing of the transactions contemplated by this Agreement.
5.3 Consents. CT and ESRN shall have obtained all necessary orders,
approvals, estoppel certificates or consents of third parties and agencies,
including, without limitation, any orders, approvals, certificates or consents
deemed necessary by counsel to CT and ESRN that shall be required for CT and
ESRN to consummate the transactions contemplated hereby.
5.4 Litigation. At the Closing, there shall not be pending or threatened
any litigation in any court or any proceeding before any agency in which it is
sought to restrain, invalidate, set aside or obtain damages in respect of the
consummation of the transactions contemplated hereby.
ARTICLE VI
CONFIDENTIALITY
All documents and information (written and oral) furnished to the parties
to this Agreement or to which such parties are given access (the "Information")
shall be treated as the sole property of the party furnishing the information
until consummation of the transactions contemplated by this Agreement and, upon
termination of this Agreement for any reason without completion of the Closing,
the party receiving Information shall return to the party which furnished such
Information all documents or other materials containing, reflecting or referring
to Information, shall keep confidential all Information, and shall not directly
or indirectly use Information for any competitive purpose. The obligations under
this Article VI shall not apply to disclosures required by applicable law, or to
any information which was already in the possession of the party receiving
Information prior to the disclosure thereof by the party furnishing the
Information; was then generally known to the public; became known to the public
through no fault of the party receiving the Information; or was disclosed to the
party receiving the Information by a third party not bound by an obligation of
confidentiality. If the transactions contemplated by this Agreement are not
consummated, then each of the parties to this Agreement agrees to keep
confidential and shall not use for its own benefit any of the Information
(unless in the public domain) obtained from any other party and shall promptly
return to such other parties all schedules, documents or other written
information (without retaining copies thereof) previously obtained from such
other parties.
ARTICLE VII
INDEMNIFICATION
For the purposes of this Article VII, "Losses" shall mean any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs, and expenses, including without limitation, interest,
penalties, and reasonable attorneys' and other professional fees, and expenses
incurred in the investigation, preparation, defense, and settlement of any
claim, loss, damage, or liability.
-22-
23
7.1 Agreement of Company and Stockholders to Indemnify.
(a) Subject to the terms and conditions of this Article VII, the Company
and the Stockholders, jointly and severally, agree to indemnify, defend, and
hold harmless CT, ESRN and their respective officers, directors, employees,
agents and representatives (collectively the "CT Representatives"), from,
against, for, and in respect of any and all Losses asserted against, relating
to, imposed upon, or incurred by CT, ESRN or the CT Representatives by reason
of, resulting from, based upon, or arising out of:
(i) the inaccuracy, untruth, or incompleteness of any representation
or warranty of the Company or the Stockholders contained in or made
pursuant to this Agreement or in any certificate, schedule, or exhibit
furnished by the Company and the Stockholders in connection herewith; and
(ii) a breach or partial breach of any covenant or agreement of the
Company and/or the Stockholders contained in or made pursuant to this
Agreement.
(b) The obligation of the Company and the Stockholders to indemnify CT and
ESRN for any Losses is subject to the condition that the Company and the
Stockholders shall have received notice of the Losses for which indemnity is
sought within ninety (90) days after the Closing Date. Notice of Losses
pertaining to the representations and warranties set forth in Section 2.3 hereof
shall be effective for all purposes hereunder without limitation as to the time
within which such notice may be given.
(c) The indemnification obligations of each Stockholder hereunder shall be
secured by a pledge to CT of certain shares of CT's common stock owned by such
Stockholder as of the Closing Date, in accordance with the terms of that certain
Pledge Agreement between each Stockholder and CT of even date herewith (the
"Pledge"). Each Stockholder's indemnification obligations shall be satisfied
only by the Pledge, and no other assets owned by any Stockholder shall be
available to CT or ESRN to satisfy such obligations.
(d) Subject to the restrictions in Section 7.1(c), the remedies of CT and
ESRN against the Company and the Stockholders for any Losses hereunder shall be
cumulative, and the exercise by CT or ESRN of its right to indemnification
hereunder shall not affect the right of CT or ESRN to exercise any other remedy
at law or in equity, to recover damages, or to obtain equitable or other relief.
-23-
24
7.2 Procedures for Indemnification.
(a) A claim for indemnification hereunder ("Indemnification Claim") shall
be made by CT or ESRN ("Indemnitee") by delivery of a written declaration to the
Company or the applicable Stockholder (the "Indemnitor") requesting
indemnification and specifying the basis on which indemnification is sought and
the amount of asserted Losses and, in the case of a Third Party Claim (as
defined hereinafter), containing (by attachment or otherwise) such other
information as Indemnitee shall have concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in Section 7.3 hereof shall be observed by Indemnitee and
the Indemnitor.
(c) If the Indemnification Claim involves a matter that is not a Third
Party Claim, the Indemnitor shall have ten (10) days to object to such
Indemnification Claim by delivery of a written notice of such objection to
Indemnitee specifying in reasonable detail the basis for such objection. Failure
to timely so object shall constitute a final and binding acceptance of the
Indemnification Claim by the Indemnitor and the Indemnification Claim shall be
paid in accordance with Section 7.2(d) hereof. If an objection is timely
interposed by the Indemnitor and the dispute is not resolved within thirty (30)
days from the date (such period is hereinafter the "Negotiation Period")
Indemnitee receives such objection, such dispute shall be resolved by (i)
arbitration in accordance with the rules of the American Arbitration
Association, if the amount in controversy is less than Fifty Thousand Dollars
($50,000) or (ii) institution of such proceedings as Indemnitee may elect if the
amount in controversy is Fifty Thousand Dollars ($50,000) or more.
(d) Upon a final determination of the amount of an Indemnification Claim
whether by agreement between the Indemnitor and Indemnitee, or by an arbitration
award, or by any other final judgment or another final nonappealable order, the
Indemnitor shall pay the amount of such Indemnification Claim.
7.3 Defense of Third Party Claims. Should any claim be made, or suit or
proceeding (including, without limitation, a binding arbitration or an audit by
any taxing authority) be instituted against Indemnitee by a third party not a
party to this Agreement which, if prosecuted successfully, would be a matter for
which Indemnitee is entitled to indemnification under this Agreement (a "Third
Party Claim"), the obligations and liabilities of the parties hereunder with
respect to such Third Party Claim shall be subject to the following terms and
conditions:
(a) Indemnitee shall give the Indemnitor written notice of any such claim
promptly after receipt by Indemnitee of notice thereof, and the Indemnitor will
undertake the defense thereof by representatives of its own choosing reasonably
acceptable to Indemnitee. The assumption of the defense of any such claim by the
Indemnitor shall be an acknowledgment by the Indemnitor of its obligation to
indemnify Indemnitee with respect to such claim hereunder. If, however, the
Indemnitor fails or refuses to undertake the defense of such claim within ten
(10) days after written notice of such claim has been given to the Indemnitor by
Indemnitee, Indemnitee shall have the right to undertake the defense, compromise
and, subject to Section 7.4, settlement of such claim with counsel of its own
choosing. In the circumstances described in the preceding sentence, Indemnitee
shall, promptly upon its assumption of the defense of such claim,
-24-
25
make an Indemnification Claim as specified in Section 7.2(a) which shall be
deemed an Indemnification Claim that is not a Third Party Claim for the purposes
of the procedures set forth herein.
(b) Indemnitee and the Indemnitor shall cooperate with each other in all
reasonable respects in connection with the defense of any Third Party Claim,
including making available records relating to such claim and furnishing,
without expense to the Indemnitor, management employees of Indemnitee as may be
reasonably necessary for the preparation of the defense of any such claim or for
testimony as witness in any proceeding relating to such claim.
7.4 Settlement of Third Party Claims. No settlement of a Third Party Claim
involving the asserted liability of the Indemnitor under this Article VII shall
be made without the prior written consent by or on behalf of the Indemnitor,
which consent shall not be unreasonably withheld or delayed. Consent shall be
presumed in the case of settlements of twenty-thousand ($20,000) dollars or less
where the Indemnitor has not responded within ten (10) business days of notice
of a proposed settlement. In the event of any dispute regarding the
reasonableness of a proposed settlement, the party that will bear the larger
financial loss resulting from such settlement shall make the final determination
in respect thereto, which determination shall be final and binding on all
involved parties.
ARTICLE VIII
CLOSING
8.1 Date and Place of Closing. Subject to satisfaction or waiver of the
conditions to the obligations of the parties, the transactions contemplated by
this Agreement shall be consummated at a closing (the "Closing") to be held in
the offices of Xxxxx Xxxxxxx & Xxxx LLP, or such other place as mutually agreed
to by the parties, at 10:00 A.M., Eastern Daylight Time on May __, 2000, or such
other time and/or date as agreed to by the Parties hereto (the "Closing Date").
8.2 ESRN's Performance. At the Closing, concurrently with performance by
the Company and the Stockholders of their obligations to be performed at the
Closing:
(a) Conveyances. ESRN shall execute and deliver to the Company, in form and
substance acceptable to the Company, (i) the Xxxx of Sale and Assignment in
substantially the form attached hereto as Exhibit A conveying to the Company all
items of personalty included among the Assets, and (ii) all other assignments,
endorsements and instruments of transfer as shall be necessary or appropriate to
carry out the intent of this Agreement and as shall be sufficient to vest in the
Company title to all of the Assets and all right, title and interest of ESRN
thereto. If requested by the Company, such documents shall be in a form suitable
for recording.
(b) Records. ESRN shall deliver to the Company all documents, agreements,
reports, books, records and accounts pertaining specifically to the Assets that
are in ESRN's possession.
(c) Other Actions. ESRN shall take all such other steps as may be necessary
or appropriate to put the Company in actual and complete ownership and
possession of the Assets.
-25-
26
Additionally, at any time and from time to time, at or after the Closing, upon
request of the Company, ESRN shall do, execute, acknowledge and deliver or shall
cause to be done, executed, acknowledged and delivered all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may reasonably be required in order to evidence, vest in and confirm to the
Company full and complete title to, possession of, and the right to use and
enjoy the Assets and to consummate the transactions contemplated herein.
8.3 Company's Performance. At the Closing, concurrently with the
performance by ESRN of its obligations to be performed at the Closing:
(a) Assumption Agreement. The Company shall execute and deliver to ESRN the
Assumption Agreement in substantially the form attached hereto as Exhibit B.
(b) Issuance of Preferred Stock. The Company shall issue to CT the
Preferred Stock.
(c) Other Actions. At any time and from time to time, at or after the
Closing, upon request of ESRN, the Company shall do, execute, acknowledge and
deliver all such further acts and assurances as may reasonably be required in
order to better assure and confirm to ESRN the assumption by the Company of the
obligations to render performance that are to be assumed by the Company pursuant
to this Agreement and to consummate the transactions contemplated herein.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated and abandoned at any time
on or prior to the Closing Date:
(a) By the consent in writing of the parties hereto;
(b) By the Company, if any of the material conditions to the obligations of
the Company contained herein shall not have been satisfied or, if unsatisfied,
waived by the Company as of the Closing Date;
(c) By CT or ESRN, if any of the material conditions to the obligations of
CT contained herein shall not have been satisfied or, if unsatisfied, waived by
CT as of the Closing Date; or
(d) By any party hereto, in the event of a breach by the other party (i) of
any covenant or agreement contained herein if such breach results in a material
increase in the cost of the non-breaching party's performance of this Agreement
or (ii) of any representation or warranty herein if the facts constituting such
breach reflect a material and adverse change in the financial condition, results
of operations, business, or prospects taken as a whole, of the breaching party,
which in either case cannot be or is not cured within sixty (60) days after
written notice of such breach is given to the party committing such breach.
-26-
27
9.2 No Further Force or Effect. In the event of termination and abandonment
of this Agreement pursuant to the provisions of Section 9.1, this Agreement
shall be of no further force or effect, except for Section 10.1, which shall not
be affected by termination of this Agreement.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Each party hereto shall bear all fees and expenses incurred
by it in connection with this Agreement and the transactions contemplated
hereby, including the fees, disbursements and expenses of its legal counsel and
auditors.
10.2 Entire Agreement. This Agreement (including the exhibits and schedules
hereto) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter hereof, and no party shall be liable or bound to the other
in any manner by any representations or warranties not set forth herein.
10.3 Publicity. No party hereto shall issue any press release or make any
public statement, in either case relating to or in connection with or arising
out of this Agreement or the matters contained herein, without obtaining the
prior written approval of the other parties hereto to the content and manner of
presentation and publication thereof, which consent shall not be unreasonably
withheld or delayed; provided, however, that the parties shall be entitled,
following reasonable prior written notice to the other party, to issue such
press releases and make such public statements as are, in the opinion of its
legal counsel, required by applicable law.
10.4 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned by any party hereto without the prior written
consent of the other parties hereto, which shall be given or withheld in such
party's sole discretion, and the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties and their respective
affiliates and the successors and assigns of the parties and their respective
affiliates, any rights, remedies, obligations or liabilities under or by reason
of such agreements. 10.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument.
10.6 Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience of reference only and shall not be deemed
to constitute part of this Agreement or to affect the construction hereof.
10.7 Use of Certain Terms. As used in this Agreement, the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular paragraph, subparagraph or other
subdivision.
-27-
28
10.8 Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party that is entitled to
the benefits thereof, and this Agreement may be modified or amended by a written
instrument executed by the parties hereto. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by all
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
10.9 Notices. All notices or communication required or permitted hereunder
shall be in writing and may be given by (a) depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (b) delivering the same in person to an
officer or agent of such party, or (c) telecopying the same with electronic
confirmation of receipt.
(i) If to CT or ESRN:
CT Holdings, Inc.
0000 Xxxxxx Xxxxx Xxxx.
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopy Number: (000) 000-0000
With a copy which shall not constitute Notice to:
Xxxxx Liddell & Xxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. XxXxxxxx, Esq.
Telecopy Number: (000) 000-0000
(ii) If to the Company:
xXxxxx.xxx, Inc.
000X Xxxxxxxx Xxxxxx, Xxxx. 000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
With a copy which shall not constitute Notice to:
Hunton & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
0000 Xxxx xx Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
-28-
29
(iii) If to the Stockholders, to the addresses listed on Exhibit C
hereto.
or at such other address or counsel as any party hereto shall specify pursuant
to this Section 10.9 from time to time.
10.10 Governing Law. This agreement shall be construed in accordance with
the laws of the State of Texas (without giving effect to its choice of laws
provisions).
10.11 Reformation and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable, but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
[THE IMMEDIATELY FOLLOWING PAGE CONTAINS THE SIGNATURES OF THE PARTIES.]
-29-
30
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed in counterparts all as of the date first above written.
XXXXXX.XXX, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxx
President
CT HOLDINGS, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxx
President
ESRN ACQUISITION, LLC,
a Delaware limited liability company
By: CT Holdings, Inc., its sole member
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Xxxxxx X. Xxxxxxx
President
/s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxxx, Individually
X. Xxxxxxxx XxXxxx
--------------------------------------
X. Xxxxxxxx XxXxxx, Individually
/s/ Xxx Xxxxxxx
--------------------------------------
Xxx Xxxxxxx, Individually
/s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxx, Individually
-30-
31
ASSET CONTRIBUTION AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
1.4 Assumed Liabilities
2.3(b) Outstanding Obligations for Purchase of Capital Stock
2.3(c) Stockholders of the Company
2.9 Encumbrances on Company Owned Personal Property
2.10 Real Property and Leased Property
2.11 Contracts
2.12 Software
2.15 Litigation
2.16 Absence of Changes
2.18 Labor Matters
2.19 Government Approval and Consents
2.20 Taxes
2.21 Employee Benefit Plans
EXHIBITS
A Xxxx of Sale and Assignment
B Assumption Agreement
C Stockholder Addresses
