AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of July 25, 2001, by and among Informed Care, Inc., a privately owned Florida
corporation ("ICI"), Hometown Info, Inc., a privately owned Minnesota
corporation ("HII"), Xxxxxxx Communications, Corp., a publicly owned and traded
Iowa corporation ("MCC") (collectively referred hereinafter as "Parties").
WHEREAS, the parties intend that, subject to the terms and conditions
of this Agreement, ICI will acquire 43.50% of the issued and outstanding shares
of common stock of MCC in exchange for all the issued and outstanding shares of
ICI common stock, HII will acquire 26.50% of the issued and outstanding shares
of common stock of MCC in exchange for all of the issued and outstaying shares
of HII common stock and MCC will retain 30% of its issued and outstanding shares
of common stock; (the "Exchange Shares"); and
WHEREAS, the parties have negotiated a Letter of Intent containing the
terms and conditions of a plan of exchange and asset disposition ("Term Sheet");
and
WHEREAS, upon the effectiveness of the exchange, as defined below, all
the issued and outstanding shares of ICI and HII will be transferred to MCC in
exchange for the Exchange Shares; and
WHEREAS, a Letter of Intent was executed between the Parties, Peak
Insurance Holdings, Inc., a privately owned Nevada corporation ("PIH"), and
Grocery Shopping Network, Inc., ("GSN") a trade name of HII and PIH and the
Parties have agreed that PIH shall no longer be a party to the exchange of
shares, reorganization and other terms as set forth in this Agreement and plan
of exchange, as defined in Article 1 of this Agreement, and that HII as GSN's
parent is the proper party to this Agreement, but that GSN, through its relation
to HII as a wholly-owned subsidiary intends to be bound to the terms set forth
in this Agreement;
WHEREAS, the mutual representations and warranties of the parties
herein are a material inducement to enter into this Agreement; and
WHEREAS, the parties acknowledge that the exchange is intended to
qualify as a reorganization under Section 368 of the U.S. Internal Revenue Code
of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1 For purposes of this Agreement, the following terms have the meanings
specified or referred to in this section:
1.1 "Best Effort(s)" means the effort(s) that a prudent Person
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desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
1.2 "Breach" means a contradiction, violation or repudiation of a
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representation, warranty, covenant, obligation, or other provision of this
Agreement or any instrument delivered pursuant to this Agreement will be deemed
to have occurred if there is or has been (a) any inaccuracy in or breach of, or
any failure to perform or comply with, such representation, warranty, covenant,
obligation, or other provision, or (b) any claim by any Party or other
occurrence or circumstance that is or was inconsistent with such representation,
warranty, covenant, obligation, or other provision, and the term "Breach" means
any such inaccuracy, breach, failure, claim, occurrence, or circumstance.
1.3 "Closing" is defined in section 2.2 of this Agreement.
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1.4 "Closing Date" is defined in section 2.2 of this Agreement.
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1.5 "Consent" means any approval, consent, ratification, waiver,
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or other authorization (including any governmental authorization).
1.6 "Contract" means any agreement, contract, obligation, promise,
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or undertaking (whether written or oral and whether express or implied) that is
legally binding upon any of the Parties hereto.
1.7 "Encumbrance" means any charge, claim, community property
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interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise, or any
other attribute of ownership.
1.8 "GAAP" refers to "Generally Accepted Accounting Principles" as
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adopted by the Financial Accounting Standards Board in the United States.
1.9 "Governmental Authorization" means any approval, consent,
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license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any governmental body.
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1.11 "Knowledge" an individual will be deemed to have "Knowledge"
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of a particular fact or other matter if: (i) such individual is actually aware
of such fact or other matter; or (ii) a prudent individual could be expected to
discover or otherwise become aware of such act or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter. A Party will be deemed to have "knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Party (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
1.12 "Material Interest" means direct or indirect beneficial
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ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 10% of the
outstanding voting power of Party or equity securities or other equity interests
representing at least 10% of the outstanding equity securities or equity
interests in a Party.
1.13 "Material Transactions" means any transaction by a Party that
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affects in a material way such Party's assets and/or liabilities, involves use
of such Party's intellectual property or resources or may potentially expose
such party to the risk of liability and/or indemnification.
1.15 "Newco" means a corporate successor of MCC subsequent to the
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Exchange and the meeting of directors of the newly elected Board, adopting the
new name for the successor corporation and authorizing re-incorporation in the
State of Delaware.
1.16 "Order" means any award, decision, injunction, judgment,
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order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other governmental body or by any arbitrator.
1.17 "Ordinary Course of Business" an action taken by a Person
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will be deemed to have been taken in the "Ordinary Course of Business" only if:
1.17.1 such action is consistent with the past practices of
such Party and is taken in the ordinary course of the normal day-to-day
operations of such Party;
1.17.2 such action is not required to be authorized by the
board of directors of such Party and is not required to be specifically
authorized by the parent company (if any) of such Party; and
1.17.3 such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of directors
in the ordinary
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course of the normal day-to-day operations of other entities that are in the
same line of business as such Party.
1.18 "PEX" means a definitive Plan of Exchange negotiated by
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parties to this Agreement and filed with the respective state governments of the
Parties.
1.19 "Proceeding" means any action, arbitration, audit, hearing,
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investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any governmental body or arbitrator.
1.20 "Related Party" means, with respect to a particular corporate
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or business entity any business entity that (i) directly or indirectly controls,
is directly or indirectly controlled by, or is directly or indirectly under
common control with such specified Party; or (ii) holds a Material Interest in
such specified Party.
1.21 "Representative" means, with respect to a particular Party,
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any director, officer, employee, agent, consultant, advisor, or other
representative of such Party, including legal counsel, accountants, and
financial advisors.
1.22 "Securities Act" refers to the Securities Act of 1933, as
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amended, or any successor law; and to the regulations and rules promulgated by
the Securities and Exchange Commission pursuant to that Act or any successor
law.
1.23 "Tax Return" any return (including any information return),
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report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
governmental body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any legal requirement relating to any Tax.
1.24 "Threatened" a claim, proceeding, dispute, action, or other
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matter will be deemed to have been "threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances exist,
that would lead a prudent Party to conclude that such a claim, proceeding,
dispute, action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
ARTICLE 2
THE EXCHANGE
2.1 THE EXCHANGE. Subject to the terms and conditions of this
Agreement and in accordance with the General Corporation Law of states of Iowa,
Florida and Minnesota (hereinafter collectively referred to as "GCL"), at the
Effective Time (as defined hereinafter), ICI and HII will become wholly-owned
subsidiaries of MCC after the completion of the exchange.
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2.1.1 This Agreement shall not become effective until three (3)
days after ICI has completed its pending transaction with Accent Health, and
which transaction shall have resulted in revenue to ICI of at least $200,000.
2.2 THE CLOSING. Subject to the terms and conditions of this
Agreement, the consummation of the Exchange and the other transactions
contemplated hereby (the "Closing") shall take place on October 31, 2001, at the
offices of Waterford Financial, Inc., 000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000X,
Xxxxxxxxxxx, XX 00000, or such other place and time as the parties may
otherwise agree, and the date of the Closing is referred to herein as the
"Closing Date."
2.3 FILING OF EXCHANGE DOCUMENTS; EFFECTIVE TIME. At the Closing, the
parties shall cause the Exchange to be consummated by executing and filing a
duly executed Agreement of Exchange and duly executed Certificates of Exchange,
if required (collectively the "Exchange Documents") with respect to the
Exchange, with the Secretaries of State of the States of Florida, Minnesota and
Iowa, in such form as ICI, HII and MCC reasonably determine is required by and
in accordance with the relevant provisions of the GCL. The time upon which such
filing becomes effective in accordance with the GCL is referred to herein as the
"Effective Time."
2.4 EFFECT OF EXCHANGE. At the Effective Time, the effect of the
Exchange shall be as provided in the relevant provisions of the GCL. Without
limiting the generality of the foregoing, at the Effective Time:
2.4.1 Newco will acquire all the issued and outstanding shares of
ICI common stock in exchange for 43.50% shares of newly issued Newco common
stock to ICI shareholders on a pro-rata basis; and
2.4.2 Newco will acquire all the issued and outstanding shares of
HII common stock in exchange for 26.50% shares of newly issued Newco common
stock to ICI shareholders on a pro-rata basis; and
2.4.3 All MCC, ICI and HII Shareholders who own five percent (5%)
or more of the issued and outstanding shares of Newco stock shall be subject to
the provisions of Rule 144 of the Exchange Act of 1934, as amended, as of the
Effective Time, unless and until a registration statement for the registration
of such shares is filed with and approved by the SEC.
2.5. Exchange of Shares.
2.5.1 Exchange of ICI Stock. Subject to surrender and delivery to
MCC by ICI shareholders of all applicable share certificates at the Closing and
the accompanying Share Transfer Form and Form W-8, ICI shareholders shall
receive stock certificates for the Exchange Shares.
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2.5.2 Exchange of HII Stock. Subject to surrender and delivery to
MCC by HII shareholders of all applicable share certificates at the Closing and
the accompanying Share Transfer Form and Form W-8, HII shareholders shall
receive stock certificates for the Exchange Shares.
2.5.3 Fractional Shares. No fractional shares of MCC common stock
shall be issued in connection with the Exchange. Instead, MCC shall issue
common stock in an amount rounded up to the next whole share.
2.5.4 Registration Rights. Effective upon the Closing, ICI and HII
shareholders shall be granted registration rights under the Securities Act of
1933, as amended (the "1933 Act").
2.5.5 Adjustments for Capital Changes. Notwithstanding the
provisions of this Article, if at any time after the date of this Agreement and
prior to the Closing, MCC recapitalizes, either through a subdivision (or stock
split) of any of its issued and outstanding shares into a greater number of
shares, or a combination (or reverse stock split) of any of its issued and
outstanding shares into a lesser number of shares, or reorganizes, reclassifies
or otherwise changes its issued and outstanding shares into the same or a
different number of shares of other classes (other than through a subdivision or
combination of shares provided for in the previous clause), or declares a
dividend on its issued and outstanding shares payable in shares or securities
convertible into shares of MCC common stock (a "Capital Change"), then the
number of shares of MCC common stock for which shares of ICI and HII Capital
Stock are to be exchanged shall be appropriately, equitably and proportionately
adjusted (as agreed to in writing by MCC, ICI and HII if the adjustment for such
Capital Change involves something other than a mathematical adjustment) so as to
maintain the proportionate interests of shareholders of MCC, ICI and HII
contemplated by this Agreement as set forth in Section 2.5.8. The provisions of
this Section shall not apply to any transaction not permitted to be undertaken
by MCC, ICI or HII under the provisions of this Agreement. In the event that a
Capital Change affecting MCC Common Stock occurs prior to the Closing, then all
prices per share and numbers of shares used to compute the Exchange Number shall
be deemed to have been equitably adjusted to reflect such Capital Change as
necessary to effect the purposes and intent of this Section.
2.5.6 Further Assurances. If, at any time after the Closing, the
parties hereto consider or are advised that any further instruments, deeds,
assignments or assurances are reasonably necessary or desirable to consummate
the Exchange or to carry out the purposes of this Agreement at or after the
Closing, then parties to this Agreement shall execute and deliver all such
proper deeds, assignments, instruments and assurances and do all other things
necessary or desirable to consummate the Exchange and to carry out the purposes
and intent of this Agreement.
2.5.7 Securities Laws Issues. MCC shall issue the Exchange Shares
pursuant to an exemption from registration under Section 4(2) and/or Regulation
D promulgated under the 1933 Act. Concurrently with the exchange of shares, ICI
and HII
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will execute and deliver to MCC Investment Representation Letters in the form of
Exhibit A hereto (the "Investment Representation Letter"). For as long as this
Agreement shall remain in full force and effect, MCC shall comply with all
relevant Securities Laws including its requirement to file periodic, quarterly
and annual reports, as well as all reporting requirements required by this
Agreement.
2.5.8 The newly appointed Board shall take such action as is
necessary to implement the amendment of its Articles of Incorporation, the
filing of such amendment, the authorization to increase the capital stock of
Newco to 100,000,000, of which 95,000,000 shall be common stock, $.001 par
value, and 5,000,000 shall be preferred stock, $.001 par value (the "Capital
Amendment"), the authorization for the issuance of stock in Newco, and the
acquisition of all of the outstanding shares of common stock of ICI and HII in
exchange for shares of the common stock of Newco as set forth herein. The
common shares of Newco shall be issued so that ICI shareholders shall own 43.5%
of the issued and outstanding shares of common stock of MCC, HII shareholders
shall own 26.5% of the issued outstanding shares of common stock of MCC and MCC
shareholders shall retain 30.00% of its issued and outstanding shares of common
stock. After such exchanges, the respective interest of the Parties in Newco
shall be as follows:
TABLE 2.5.8
Number of Percentage Interest
Shares of Newco of Newco
Owned by Current
Shareholders of ICI 43.5%
Owned by Current
Shareholders of HII 26.5%
Owned by Current
Shareholders of MCC 30.00%
2.5.9 At the Closing, upon satisfactory proof of compliance with
each of the preconditions to the Closing as set forth herein, MCC shall accept
the resignations of its directors. The Chairman of the Board of MCC,
simultaneously with his resignation, shall appoint a new interim slate of
Directors as provided herein. The allocation of seats on the new Board which
shall be comprised of a total of eleven (11) directors,, of which nine (9)
directors shall be nominated at the Effective Time as follows: two (2) to be
designated by ICI shareholders, two (2) to be designated by HII shareholders,
two (2) to be designated by MCC shareholders, and three (3) shall be selected
"at large". The two (2) board seats that are un-nominated will be filled by the
board from time to time as it sees fit. The new Board will then and there
adopt, by resolution or otherwise, a change of name of MCC to the name selected
and approved by the Board of Directors of Newco and vote of a majority of the
shareholders of the respective Parties.
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2.5.10 MCC warrants and acknowledges that that all of the
obligations of ICI and HII shall be in effect until such time as MCC and its
stockholders approve and effect the Capital Amendment.
2.6 PROXY STATEMENTS. Promptly after execution of this Agreement the
respective Parties shall prepare and, as applicable, file with the SEC as
required by law, Proxy Statements in accordance with the requirements of Rules
14a-3 to 14a-15 promulgated under the Exchange Act and including copies of
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations and the disclosure of such additional
information reasonably necessary to an informed shareholder's decision regarding
the advisability of the adoption of the following matters and such additional
matters as may be deemed necessary by legal counsel or the SEC:
2.6.1 The Exchange, and general terms thereof, including a general
outline of the proposed businesses and industries of Newco and the proposed
ratios of exchange of shares of capital stock of the parties as described in
Section 2.5.8 herein;
2.6.2 The Articles of Incorporation and the Bylaws of Newco as
amended from the Articles of Incorporation and the Bylaws of MCC.
2.6.3 The names and qualifications of a slate of Directors to be
added to the MCC Board and made up of members selected in accordance with Table
2.2;
2.6.4 The authorization of One Hundred Million (100,000,000)
shares of capital stock in Newco and the authority of the Board to designate
such series and classes of stock and the rights and privileges thereof as the
Board may deem advisable;
2.6.5 The authority of the Board to accept surrender of the
outstanding employee stock options of the employees of the Parties as of the
date of Closing and to exchange therefor, in an appropriate ratio to be
determined by the Board, stock options in a duly authorized employee stock
option plan in Newco;
2.6.6 The approval of a change of name of Newco to "Informed Care,
Inc."; and
2.6.7 Such other amendments to the Articles of Incorporation or
Bylaws, and any other matters that the Parties may hereafter determine must, or
should be, submitted to the shareholders for approval.
2.7 PROXY FILINGS: MCC hereby specifically grants to ICI the authority to
prepare and cause to be filed, subject to the approval of MCC and HII, the Proxy
Statements, Joint Prospectus and Form S-4 Registration Statement (the "Proxy
Filings") as set forth in Section 2.6. ICI acknowledges that it shall retain
the professionals of its choice, legal, financial and otherwise, to prepare the
Proxy Filings. If ICI shall bear the costs associated with the preparation and
filing of the Proxy Filings,
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it shall receive, as an adjustment for the payment of such expenses, Convertible
Preferred Stock which shall be convertible into an amount of Newco common stock
equal to the amount expended by ICI for the Proxy Filings in relation to the
average bid price of MCC common stock (OTCBB symbol "MURC") for one week
immediately prior to the Effective Time. Each party shall bear its own expenses
for the preparation of financial statements, audited or otherwise of any party
other than ICI, MCC, HII and Newco shall have the right to review the Proxy
Filings before filing by ICI.
2.8 TAX AND ACCOUNTING TREATMENT. The Parties hereto acknowledge
and agree that the Exchange contemplated hereby is intended to be treated for
accounting purposes as a tax-free reorganization under Section 368(a)(2)(E) of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations. Notwithstanding the foregoing or
anything else to the contrary contained in this Agreement, the Parties
acknowledge and agree that no party is making any representation or warranty as
to the status of the Exchange as a tax-free reorganization under Section 368 of
the Code or as to the effect, if any, that any transaction consummated prior to
the Effective Time has or may have on any such tax-free status.
ARTICLE 3
EXCHANGE OF STOCK
3.1 CONSIDERATION.
3.1.1 For the purposes of the Agreement "Consideration" means the
following:
3.1.1.1 6,320,160 issued and 5,923,820 outstanding shares of
Common Stock $.01 par value per share of ICI ("ICI Common Stock"), subsequent to
the date hereof and prior to the Effective Time, as well as 2,121,000 options
outstanding.
3.1.1.2 33,000 shares of Common Stock no par value per share
of HII ("HII Common Stock"), subsequent to the date hereof and prior to the
Effective Time.
3.1.1.3 12,514,967 shares of Common Stock no par value per
share of MCC ("MCC Common Stock"), subsequent to the date hereof and prior to
the Effective Time, as well as 10,695,712 warrants redeemable for approximately
11,888,000 shares of MCC Common Stock. The Parties specifically acknowledge
that MCC is in negotiations regarding possible transactions involving the
divestiture of MCC's wholly-owned subsidiary Priority International
Communications, Inc. ("PIC"); and the elimination of MCC's outstanding
obligations to: (i) Republic Credit Corporation; (ii) Xxxxxxx Xxxxxx Company;
(iii) MCCIC; (iv) its various trade creditors; (v) and all other creditors set
forth on Schedule B attached hereto and incorporated herein by reference, and
the Parties acknowledge that any one or all of these transactions could require
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MCC to issue a heretofore undetermined amount of securities of MCC to the
respective creditors as consideration for the transactions contemplated therein
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(the "MCC Security Obligations"). The Parties further acknowledge that the MCC
Security Obligations shall cause a Capital Change as set forth in Section 2.5.5
of the issued and outstanding number of MCC at the Effective Time for the
purpose of determining MCC's "Percentage of Interest of Newco" as defined and
set forth in Section 2.5.8. This section is not intended to exclude adjustment
for any other corporate action on the part of MCC or the Parties which would
qualify as a Capital Adjustment under Section 2.5.5.
3.2 EXCHANGE OF STOCK.
3.2.1 The Consideration shall be allocated among the holders of
outstanding shares of ICI, HII and MCC Stock outstanding, immediately prior to
the Effective Time, by allocating among the holders of ICI and HII the number of
shares of MCC Common Stock being transferred to the ICI and HII shareholders on
a pro rata basis as set forth herein, and by the acceptance by MCC of all ICI
and HII shares. To the extent that any ICI, HII or MCC Preferred Stock not
converted into Common Stock prior to the Effective Time and the condition to
Closing set forth in this Agreement shall have been waived by ICI, HII and MCC,
appropriate allocation of the Consideration shall be made, as the Parties shall
designate in writing, to the holders of any such unconverted ICI, HII or MCC
Preferred Stock, except for the MCC Security Obligations, as defined herein and
the Conversion and the remaining Consideration allocable to such stock shall be
adjusted as the Parties shall mutually agree.
3.2.2 All fractional interest in ICI, HII and MCC Stock must be
rounded up to the next whole share prior to the exchange contemplated in this
Agreement.
3.3 PAYMENT OF CONSIDERATION. On the Closing Date:
3.3.1 At the Closing ICI, HII and MCC shall issue and deliver
certificates representing the number of shares of Common Stock comprising the
Consideration allocated to such stockholders in accordance with the Disclosure
Schedule delivered by the Parties concurrent with the execution and delivery of
this Agreement.
3.3.2 The Parties shall authorize one or more persons to act as
Exchange Agent(s) hereunder (the "Exchange Agent"). As soon as practicable
after the Effective Time, ICI, HII and MCC, operating thereafter as Newco, shall
cause the Exchange Agent to mail to all former holders of record instructions
for surrendering their certificates representing ICI, HII and MCC Stock in
exchange for a certificate or certificates representing shares of Newco Common
Stock. Upon surrender of a ICI, HII or MCC Stock certificate for cancellation
to the Exchange Agent or to such other agent or agents as may be appointed by
the respective parties, the holder of such certificate shall be entitled to
receive in exchange therefore (subject to Section 2.4 of this Agreement) a
certificate representing that number of whole shares of ICI, HII and MCC Stock
Common Stock, respectively, into which the shares of Newco Stock theretofore
represented by such certificate so surrendered shall have been converted
pursuant to
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the provisions of this Agreement, and the certificate so surrendered shall
forthwith be canceled.
3.3.3 ICI, HII and MCC Stock shall be exchanged into Newco Common
Stock and shall be deemed to have been issued at the Effective Time. If any of
Newco Common Stock certificates are to be issued in a name other than that in
which the ICI, HII or MCC Stock certificate surrendered is registered, it shall
be a condition of such exchange that the person requesting such exchange shall
deliver to the Exchange Agent any transfer or other taxes required by reason of
the issuance of certificates for such shares of he Newco's Common Stock in a
name other than that of the registered holder of the certificate surrendered or
establish to the reasonable satisfaction of the Exchange Agent that such tax has
been paid or is not applicable.
3.3.4 No certificates representing fractional shares of Newco
Common Stock shall be issued upon the surrender or exchange of ICI, HII and MCC
Stock certificates. No fractional interest shall entitle the owner to vote or
to any rights of a security holder. Newco shall not be liable to any holder of
shares of ICI, HII and/or MCC Stock for any cash in lieu of fractional interests
delivered to a public official pursuant to applicable escheat or abandoned
property laws.
3.4 MCC OPTIONS AND WARRANTS.
3.4.1 The holders of any and all outstanding and unexercised MCC
Options and Warrants (as hereinafter defined) to purchase shares of MCC common
stock ("MCC Options and Warrants") shall exchange the MCC Options and Warrants
for respective options and warrants to purchase shares of Newco common stock
("Newco Options and Warrants"). The exchange shall occur on a basis of one
Newco Option for every MCC Option and one Newco Warrant for every MCC Warrant.
The terms and conditions of the Newco Options and Warrants including vesting
period, duration and exercise price, shall be identical to the terms and
conditions of the MCC Options and Warrants. Holders of the Newco Options shall
automatically, upon the approval and effectiveness of this Agreement, be subject
to the terms and conditions of the Newco Employee Stock Option Plan, the form of
which is attached hereto in the Disclosure Schedule.
3.5 ICI OPTIONS AND WARRANTS
3.5.1. The holders of any and all outstanding and unexercised ICI
Employee Options (as hereinafter defined) to purchase shares of ICI common stock
("ICI Options") shall exchange the ICI Options for respective options to
purchase shares of Newco common stock ("Newco Options"). The exchange shall
occur on a basis of one Newco Option for every ICI Option. The terms and
conditions of the Newco Options, including vesting period, duration and exercise
price, shall be identical to the terms and conditions of the ICI Options.
Holders of the Newco Options shall automatically, upon the approval and
effectiveness of this Agreement, be subject to the
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terms and conditions of the Newco Employee Stock Option Plan, the form of which
is attached hereto in the Disclosure Schedule.
3.5.2 Prior to the Closing Date, ICI shall cause all outstanding
Warrants to be exercised and all shares of ICI Common Stock required to be
issued pursuant to such exercise to be validly and fully issued as fully paid,
non-assessable shares, or terminated, such that, as of the Effective Time, (i)
no warrants or other rights to acquire any shares of the Parties' capital stock
or any securities convertible into shares of ICI's Capital Stock are
outstanding, and (ii) no person or entity other than the holders of ICI's stock
shall have any right, title or interest in or to the ownership of Newco or any
securities issued by ICI, all of which holders shall have no such, right, title
or interest in or to ICI, other than their ownership of ICI Stock.
3.6 HII OPTIONS AND WARRANTS
3.6.1 The holders of any and all outstanding and unexercised HII
Employee Options (as hereinafter defined) to purchase shares of HII common stock
("HII Options") shall exchange the HII Options for respective options to
purchase shares of Newco common stock ("Newco Options"). The exchange shall
occur on a basis of one Newco Option for every HII Option. The terms and
conditions of the Newco Options, including vesting period, duration and exercise
price, shall be identical to the terms and conditions of the HII Options.
Holders of the Newco Options shall automatically, upon the approval and
effectiveness of this Agreement, be subject to the terms and conditions of the
Newco Employee Stock Option Plan, the form of which is attached hereto in the
Disclosure Schedule.
3.6.2 Prior to the Closing Date, HII shall cause all outstanding
Warrants to be exercised and all shares of HII Common Stock required to be
issued pursuant to such exercise to be validly and fully issued as fully paid,
non-assessable shares, or terminated, such that, as of the Effective Time, (i)
no warrants or other rights to acquire any shares of the HII's capital stock or
any securities convertible into shares of Newco's Capital Stock are outstanding,
and (ii) no person or entity other than the holders of Newco stock shall have
any right, title or interest in or to the ownership of Newco or any securities
issued by Newco, all of which holders shall have no such, right, title or
interest in or to Newco, other than their ownership of Newco Stock.
3.7 APPRAISAL RIGHTS.
3.7.1 If holders of any shares of ICI, HII or MCC Stock (i) are
entitled to dissent from the Exchange and demand appraisal of any such stock in
accordance with the provisions of the GCL concerning the right of such holders
to dissent from the Exchange and demand appraisal of their stock or (ii) have
properly exercised dissenters rights with respect to their stock in accordance
with the pertinent provisions of the GCL of the respective company's State of
Incorporation ("Dissenting Holders"), any stock held by a Dissenting Holder as
to which appraisal has been so demanded or for which such dissenter's rights
have been properly exercised ("Excluded Shares") shall not be
12
converted as described in Section 2.5, but shall, from and after the Closing,
represent only the right to receive such consideration as may be determined to
be due to such Dissenting Holder pursuant to the GCL's of the respective
company's State of Incorporation, as applicable; provided, however, that each
share of stock held by a Dissenting Holder who shall, after the Closing,
withdraw his demand for appraisal or lose his right of appraisal with respect to
such shares of stock, in either case pursuant to the relevant provisions of the
GCL, as applicable, shall not be deemed Excluded Shares but shall be deemed to
be converted, as of the Effective Time, into the right to receive Newco Common
Stock in accordance with Section 2.5 hereof.
3.7.2 The Parties shall give Newco (i) prompt notice of any
written demands with respect to any shares of capital stock of ICI, HII or MCC
and any withdrawal of any such demands received by ICI, HII or MCC, and (ii) the
right to participate in all negotiations and proceedings with respect to any
demands with respect to any shares of capital stock of ICI, HII or MCC. The
Parties shall cooperate with Newco and shall not, except with the prior written
consent of Newco, voluntarily make any payments with respect to, or offer to
settle or settle, any such demands.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MCC
MCC hereby represents and warrants to ICI and HII that the following facts
and circumstances are true and correct, as of the date of Closing, subject to
the limitations and exceptions on the Disclosure Schedule as set forth in
Article 14 (the "MCC Disclosure Schedule").
Whenever the term "to MCC's knowledge" or similar expression appears in any
representation or warranty in this Article 4, it means to the actual knowledge
of MCC's directors and executive officers, after reasonable inquiry and
investigation where specified. Whenever the term "MCC has received no notice"
or like expression appears in any representation or warranty in this Article 4,
it means that none of MCC's directors and executive officers has received actual
oral or written notice of the matter to which such term is applied, after having
made reasonable inquiry as to whether notice has been received where specified.
4.1 ORGANIZATION. MCC: (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Iowa; (ii) has all
necessary corporate power to own and lease its properties, to carry on its
business as now being conducted and to enter into and perform this Agreement and
all of the other documents and agreements contemplated hereby; and (iii) is
qualified to do business in all jurisdictions in which the failure to so qualify
would have a material adverse effect on the business, operations or financial
condition of MCC. MCC has no Subsidiaries (as hereinafter defined) and holds no
right, title or interest in or to any other corporation, company, partnership,
trust, limited liability company or other entity.
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4.2 AUTHORITY AND CONSENTS.
4.2.1 The execution and performance of this Agreement and the
other documents to be executed by MCC pursuant to the terms hereof will not
result in a violation of MCC's Certificate of Incorporation or Bylaws. MCC has
full power and authority (corporate and otherwise) to enter into this Agreement
and the other documents to be executed by MCC pursuant to the terms hereof and
to carry out the transactions contemplated by this Agreement and such other
documents. This Agreement and the other documents to be executed by MCC pursuant
to the terms hereof and their execution and delivery to ICI and HII have been
duly authorized by the Board of Directors of MCC, and are subject only to a
majority vote of its shareholders approving the PEX to effect the Exchange.
This Agreement and the other documents to be executed by MCC pursuant to the
terms hereof do and will constitute legal, valid and binding obligations of MCC,
enforceable against MCC in accordance with their respective terms, subject as to
enforcement only: (i) to bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally; and (ii) to general principles of equity.
4.2.2 MCC has delivered to ICI and HII true, complete and correct
copies of (i) its Certificate of Incorporation, as amended to date, certified by
the appropriate official of the jurisdiction of incorporation, (ii) its Bylaws,
as amended to date, and (iii) its stock ledger, in each case, certified by MCC's
corporate secretary. The Certificate of Incorporation and Bylaws of MCC are in
full force and effect and MCC is in material compliance with the provisions
thereof.
4.3 CAPITALIZATION AND TITLE TO SHARES.
4.3.1 MCC is, or at the Closing shall be, authorized to issue One
Hundred Million (100,000,000) shares of MCC Common Stock, of which an aggregate
of 12,514,967 shares of MCC Common Stock, no par value per share, 10,695,712
warrants redeemable for approximately 11,888,000 shares of common stock are
issued and outstanding and any and all MCC Security Obligations, as that term is
defined herein. Such shares are owned of record by the persons and in the
amounts set forth in the MCC Disclosure Schedule. No other class of capital
stock of MCC is authorized or outstanding. Except for those shares representing
Warrants and Options, set forth in Section 3.4 and the MCC Security Obligations,
all of the issued and outstanding shares of MCC's capital stock are duly
authorized and are validly issued, fully paid, nonassessable and free of
pre-emptive rights. None of the issued and outstanding shares of MCC have been
issued in violation of any federal or state law or any preemptive rights or
rights to subscribe for or purchase securities.
4.3.2 The MCC Disclosure Schedule includes a true and complete
list of all outstanding rights, subscriptions, warrants, calls, preemptive
rights, options or other agreements of any kind to purchase or otherwise receive
from MCC any shares of the capital stock or any other security of MCC, and all
outstanding securities of any kind convertible into or exchangeable for such
securities (all such rights, subscriptions,
14
warrants, calls, options, agreements and convertible securities, collectively,
"MCC Warrants and Options"). True and complete copies of all instruments (or
the form of such instruments) referred to in this Section 4.3.2 have been
previously furnished to ICI and HII, except as set forth in the MCC Disclosure
Schedule. There are no stockholder agreements, voting trusts, proxies or other
agreements or understandings with respect to the outstanding shares of capital
stock of MCC to which MCC is a party. Except for MCC Warrants and Options set
forth in the MCC Disclosure Schedule, all outstanding unexercised MCC Warrants
and Options shall terminate at the Effective Time.
4.3.3 Except as set forth in the MCC Disclosure Schedule, MCC does
not own beneficially any shares of capital stock of ICI and HII.
4.4 SEC FILINGS.
4.4.1 MCC has delivered to ICI and HII accurate and complete
copies of any report, registration statement and definitive proxy statement
filed by MCC with the Securities and Exchange Commission (the "SEC") since
December 31, 2000 and will make available to ICI and HII accurate and complete
copies of all such registration statements, proxy statements and other
statements, reports, schedules, forms and other documents filed after the date
of this Agreement and prior to the Effective Time (the "MCC SEC Documents").
All statements, reports, schedules, forms and other documents required to have
been filed with the SEC have been so filed. As of the time it was filed with
the SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) each of the MCC SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act") or the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (as the case may be); and
none of the MCC SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
4.4.2 The obligation of MCC to timely file all statements,
reports, schedules and forms with the SEC shall remain a condition precedent to
the obligations of ICI and HII to complete the Closing.
4.5 FINANCIAL STATEMENTS.
4.5.1 The consolidated financial statements contained in the MCC
SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered (except as may be indicated in the notes to such financial
statements and, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC, and except that unaudited financial statements may not contain
footnotes and are subject to normal and recurring year-end audit adjustments
which will not, individually or in the aggregate, be material in amount); and
(iii) fairly present, in all material respects, the consolidated financial
position of MCC
15
as of the respective dates thereof and the consolidated results of operations of
MCC for the periods covered thereby.
4.5.2 MCC has previously delivered to ICI and HII (i) the audited
consolidated financial statements of MCC at December 31, 2000 (including the
footnotes thereto) (the "MCC Audited Financial Statements"), and (ii) the
unaudited quarterly and monthly balance sheet of MCC (the "MCC Interim Balance
Sheets") and related statement of operations and cash flows for the periods up
to and including the month immediately prior to the Closing (the "MCC Interim
Financial Statements"). Such financial statements referred to in this section
are collectively referred to herein as the "MCC Financial Statements." The MCC
Interim Financial Statements have been prepared from, and are in accordance
with, the books and records of MCC and present fairly, in all material respects,
the financial position and the results of operations of MCC as of the dates and
for the periods indicated, in each case in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the periods
involved except as otherwise stated therein, and subject to normal year end
audit adjustments, which are not, in the aggregate, material.
4.6 ASSETS. Except as set forth in the MCC Disclosure Schedule, MCC
has good and marketable title to all of its tangible and intangible assets and
properties reflected as owned on the MCC Audited Financial Statements and all
such assets and properties are free and clear of all liens.
4.7 PROPERTIES. MCC does not own any real property and does not
have any options or contractual obligations to purchase or acquire any interest
in real property other than leasehold interests. MCC has a valid leasehold
interest in all of the buildings, structures and leasehold improvements, and
owns or has a valid leasehold interest in all equipment and other tangible
property used in the conduct of its business, all of which are in good and
sufficient operating condition and repair, ordinary wear and tear excepted.
There is no equipment located on the premises of MCC that is on loan from
another party.
4.8 CONSENTS AND APPROVALS OF GOVERNMENT AUTHORITIES. Except for the
filing of the Exchange Documents and the consent of MCC's stockholders, no
consent, approval or authorization of, or declaration, filing, notice or
registration with, any governmental agency or regulatory authority is required
in connection with the execution, delivery and performance of this Agreement or
any of the other documents contemplated hereby by MCC or the consummation of the
transactions contemplated herein and therein.
4.9 ACCOUNTS RECEIVABLE. MCC Interim Financial Statement shall show
that at the time of this Agreement, there are no accounts receivables net of
reserves due to MCC by any individual and/or business entity.
16
4.10 CONTRACTS AND OTHER AGREEMENTS. The MCC Disclosure Schedule sets
forth a list of the following contracts and other agreements to which MCC is a
party or by or to which MCC or MCC's assets or properties are bound or subject:
4.10.1 any agreement or series of related agreements requiring
aggregate payments after the date hereof by or to MCC of more than $10,000;
4.10.2 any agreement with or for the benefit of any current or
former officer, director, stockholder, employee or consultant of MCC;
4.10.3 any agreement with any labor union or association
representing any employee of MCC;
4.10.4 any agreement for the purchase or sale of materials,
supplies, equipment, merchandise or services that contain an escalation,
renegotiation or redetermination clause or that obligate MCC to purchase all or
substantially all of its requirements of a particular product from a supplier,
or for periodic minimum purchases of a particular product from a supplier;
4.10.5 any agreement for sale of any of the assets or properties
of MCC other than in the ordinary course of business or for the grant to any
person of any options, rights of first refusal, or preferential or similar
rights to purchase any such assets or properties;
4.10.6 any partnership or joint venture agreement;
4.10.7 any agreement of surety, guarantee or indemnification,
other than agreements in the ordinary course of business with respect to
obligations in an aggregate amount not in excess of $10,000;
4.10.8 any agreement containing covenants of MCC not to compete in
any line of business, in any geographic area or with any person or covenants of
any other person not to compete with MCC or in any line of business of MCC;
4.10.9 any agreement granting or restricting the right of MCC to
use any MCC Intellectual Property (as defined hereinafter), except for any
Intellectual Property that is licensed to MCC under any third party software
license generally available to the public at a cost of less than $10,000;
4.10.10 any agreement with any holder of securities of MCC as such
(including, without limitation, any agreement containing an obligation to
register any of such securities under any federal or state securities laws);
4.10.11 any agreement relating to the acquisition by MCC of any
operating business or the capital stock of any other person;
17
4.10.12 any agreement requiring the payment to any person of a
brokerage or sales commission or a finder's or referral fee in connection with
the transactions contemplated by this Agreement (other than arrangements to pay
commission or fees to employees in the ordinary course of business);
4.10.13 any agreement or note relating to or evidencing
outstanding indebtedness for borrowed money, other than agreements entered into
in the ordinary course of business for amounts not exceeding $10,000;
4.10.14 any lease, sublease or other agreement under which MCC is
lessor or lessee of any real property or equipment or other tangible property
with respect to obligations in excess of $10,000; and
4.10.15 except for agreements to provide maintenance, upgrades,
bug fixes, error corrections or similar work product that are ordinary and
customary for the software industry and that are related to the MCC products
which have been delivered as of the date hereof, any agreement that requires MCC
to deliver, or undertake the development of, any new product, customized
product, substantial upgrade, new version or similar work product where such
delivery or development requires MCC to utilize substantial personnel or
financial resources.
4.10.16 any other material agreement not made in the ordinary course
of business.
True and complete copies of all the contracts and other agreements (and all
amendments, waivers or other modifications thereto) set forth in the MCC
Disclosure Schedule have been made available to ICI and HII. Each of such
contracts is valid, subsisting, in full force and effect, binding upon MCC, and
to the knowledge of MCC, binding upon the other parties thereto in accordance
with their terms, and MCC is not in default under any of them, nor, to the best
knowledge of MCC, is any other party to any such contract or other agreement in
default thereunder, nor does any condition exist that with notice or lapse of
time or both, would constitute a default thereunder, except, in each case, such
defaults as would not, individually or in the aggregate, have a material adverse
effect on the business of MCC.
4.11 COMPLIANCE WITH LAWS.
4.11.1 Except as set forth in the MCC Disclosure Schedule, MCC has
all licenses, permits, franchises, orders or approvals of any federal, state,
local or foreign governmental or regulatory body required for the conduct of the
business of MCC, except where not having such license, permit, franchise, order
or approval would not result in a material adverse effect on business,
operations or financial condition of MCC (collectively, "MCC Permits"); such MCC
Permits are in full force and effect; and no proceeding is pending or, to the
knowledge of MCC, threatened to revoke or limit any MCC Permit.
18
4.11.2 Except where such violation would not have a material
adverse effect on the business, operations or financial condition of MCC, MCC is
not in violation of any applicable law, ordinance or regulation or any order,
judgment, injunction, decree or other requirement of any court, arbitrator or
governmental or regulatory body. MCC has not received notice of, and there has
not been any citation, fine or penalty imposed against MCC for, any such
violation or alleged violation.
4.12 BANK ACCOUNTS AND POWERS OF ATTORNEY. The MCC Disclosure Schedule
identifies all bank and brokerage accounts of MCC, whether or not such accounts
are held in the name of MCC, lists the respective signatories therefor and lists
the names of all persons holding a power of attorney from MCC and a summary of
the terms thereof.
4.13 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. Neither the
execution nor delivery of this Agreement or the other documents contemplated
hereby by MCC, nor performance by MCC of the terms and provisions of this
Agreement or such other documents will (a) conflict with or result in a breach
or violation of any of the terms, conditions or provisions of any MCC Permit or
any judgment, order, injunction, decree, regulation or ruling of any court or
governmental authority to which MCC or any assets of MCC are subject or of any
contract to which MCC is a party or any agreement, contract, or commitment to
which MCC is a party or by which it is bound, except where such conflict, breach
or violation would not have a material adverse effect on the business,
operations or financial condition of MCC, or (b) give any person or entity the
right to terminate or modify any material contract to which MCC is a party, or
accelerate any material obligation or indebtedness of MCC thereunder.
4.14 NO UNDISCLOSED LIABILITIES. MCC has no liabilities or obligations
of any nature required to be disclosed as liabilities on a balance sheet
prepared in accordance with GAAP except (a) liabilities which are fully
reflected or reserved against or disclosed as contingent liabilities in the MCC
Financial Statements, and (b) liabilities disclosed in the MCC Disclosure
Schedule.
4.15 TRANSACTIONS WITH MANAGEMENT. Except as set forth in the MCC
Disclosure Schedule, no officer of MCC has (whether directly or indirectly
through another entity in which such person has an interest, other than as the
holder of less than 1% of a class of securities of a publicly traded company)
any interest in (a) any property or assets of MCC (except as a stockholder) or
(b) to MCC's knowledge, any current competitor, customer or supplier of MCC or
(c) to MCC's knowledge, any person which is currently a party to any contract
with MCC involving any amount in excess of $10,000.
4.16 ABSENCE OF CERTAIN CHANGES. Since May 2, 2001, there have been no
material changes in the condition, financial or otherwise, of any of the assets
or any of the liabilities, business, prospects or operations of MCC or the
business of MCC, other than changes which in the aggregate have not been
materially adverse to the
19
business, finances or operations of MCC. Without limiting the foregoing, since
May 2, 2001 other than in the ordinary course of business:
4.16.1 MCC has not materially altered the nature of the business
of MCC as carried on or made any material change in the products and services it
supplies;
4.16.2 Except as set forth in the MCC disclosure schedule, MCC has
not borrowed or agreed to borrow any funds or incurred, or assumed or become
subject to, whether directly or by way of guarantee or otherwise, any material
obligation or liability for borrowed money, except payables incurred in the
ordinary course of business and consistent with past practice;
4.16.3 MCC has not paid, discharged or satisfied any claim,
liability or obligation other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities or
obligations reflected or reserved against in the MCC Interim Balance Sheet or
trade payables incurred in the ordinary course of business and consistent with
past practice;
4.16.4 MCC has not permitted or allowed any of its property or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
lien of any kind;
4.16.5 MCC has not written down the value of any inventory or
written off as uncollectible any notes or accounts receivable, except for
write-downs and write-offs in the ordinary course of business and consistent
with past practice, none of which is material;
4.16.6 Except as set forth in the MCC disclosure schedule, MCC has not
cancelled any debts or waived any claims or rights of substantial value, waived
any statute of limitation or sold, transferred, or otherwise disposed of any of
its properties or assets (real, personal or mixed, tangible or intangible),
except sales of immaterial assets in the ordinary course of business and
consistent with past practice;
4.16.7 MCC has not licensed or disposed of or permitted to lapse
any rights to the use of any MCC Intellectual Property (as defined hereinafter);
4.16.8 MCC has not granted any increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee;
4.16.9 MCC has not made any capital expenditure or commitment
therefor in excess of $10,000 individually or in the aggregate;
4.16.10 MCC has not paid, loaned or advanced any amount to, or
sold, transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its officers,
20
directors or any Affiliate (as defined hereinafter) or associate of any of its
officers, directors or stockholders;
4.16.11 MCC has not made any change in the accounting policies or
practices of MCC;
4.16.12 MCC has not issued any shares of its capital stock or any
other securities or made any redemption or other acquisition of any capital
stock of MCC or any declaration, setting aside, or payment of any dividend or
distribution of any kind with respect to any shares of capital stock of MCC
except pursuant to the exercise of any outstanding MCC Warrants and Options;
4.16.13 there have been no losses or damage to any of MCC's assets
due to fire or other casualty, whether or not insured, amounting to more than
$10,000, in the aggregate; and
4.16.14 MCC has not agreed, whether in writing or otherwise, to do
any of the foregoing.
4.17 INTELLECTUAL PROPERTY.
4.17.1 The MCC Disclosure Schedule contains a list of all patents,
patent applications, trademarks (whether registered or unregistered), trademark
applications, service marks (whether registered or unregistered), service xxxx
applications, copyrights (whether registered or unregistered) and copyright
applications owned by or filed in the name of the MCC (the "MCC Owned
Intellectual Property"), specifying as to each, as applicable: (i) the nature of
such Intellectual Property; (ii) the other owner(s) of such Intellectual
Property, for any Intellectual Property that is jointly owned by the MCC and any
other Person that is not an Affiliate of the MCC; (iii) the jurisdictions by or
in which such Intellectual Property has been issued or registered or in which an
application for such issuance or registration has been filed, including the
respective registration or application numbers; and (iv) licenses, sublicenses
and other agreements to which the MCC is a party and pursuant to which any
Person is authorized to use such Intellectual Property, including the identity
of all parties thereto, a description of the nature and subject matter thereof,
the applicable royalty and the term thereof.
4.17.2 The MCC owns or licenses all Intellectual Property
necessary to conduct business to the same extent and in substantially the same
manner as presently conducted and as presently proposed by the MCC to be
conducted (the "MCC Intellectual Property"). The MCC Intellectual Property will
be owned by the MCC, or the MCC will have right for use thereof on identical
terms and conditions immediately subsequent to the Closing. No Owned
Intellectual Property is involved in any interference or re-examination or
cancellation or opposition proceeding and the MCC has not been notified or
alerted that any such proceeding will hereafter be commenced. To MCC's
knowledge, after reasonable inquiry, the MCC has no reasonable legal basis for
provoking or initiating an interference or opposition proceeding with respect to
any
21
MCC Intellectual Property held or used by others, and has no reasonable basis
for believing that any of MCC Intellectual Property, owned exclusively or
jointly by MCC, is being infringed by others.
4.17.3 The MCC has not been notified (after having made reasonable
inquiry as to whether notice has been received) that it is a defendant in any
action, suit, investigation or proceeding relating to, any alleged claim of
infringement by the MCC Intellectual Property, and no MCC Intellectual Property
infringes or misappropriates Intellectual Property of any other Person. MCC has
no knowledge, after reasonable inquiry, of any continuing infringement by any
other Person of any MCC Intellectual Property owned, exclusively or jointly, by
MCC. Except as set forth in the MCC Disclosure Schedule, the MCC has not entered
into any agreement to indemnify any other Person against any charge of
infringement, misappropriation or other conflict with respect to any
Intellectual Property.
4.17.4 The MCC has delivered to ICI and HII correct and complete
copies of any MCC patents, registrations, applications, licenses, agreements,
and permissions (as amended to date) relating to MCC Owned Intellectual Property
and has made available to ICI and HII correct and complete copies of all other
written documentation evidencing ownership and prosecution (if applicable) of
each such MCC Owned Intellectual Property. With respect to all MCC Intellectual
Property, to MCC's knowledge, after reasonable inquiry:
4.17.4.1 all patents, copyrights and trademarks included in
the MCC Owned Intellectual Property are valid and in full force and all
applications listed in the MCC Disclosure Schedule as pending have been
prosecuted in good faith as required by law and are in good standing;
4.17.4.2 MCC possesses all right, title and interest in the
MCC Owned Intellectual Property and any other MCC Intellectual Property not
---
jointly owned or licensed from any other Person and, except as set forth in the
MCC Disclosure Schedule, no Person that is not party to a non-disclosure
agreement with MCC, a copy of which has been provided to ICI and HII, has been
provided by MCC access to or has any rights to, contingent or otherwise;
4.17.4.3 the MCC Owned Intellectual Property, and the other
MCC Intellectual Property owned by MCC either exclusively or jointly with
others, or licensed exclusively from any other Person, is not subject to any
outstanding Lien, judgment, order, decree, stipulation, injunction, or charge;
and
4.17.4.4 no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand is pending or to the knowledge of the
MCC (and MCC employees with responsibility for intellectual property matters) is
threatened which challenges the legality, validity, enforceability, use, or
ownership of the Owned Intellectual Property or the other MCC Intellectual
Property owned by MCC, either
22
exclusively or jointly with any other Person, or licensed exclusively from any
other Person.
4.17.5 To the MCC's knowledge, after reasonable inquiry, no
employee of the MCC is subject to any secrecy or non-competition agreement or
any agreement or restriction of any kind that would impede in any material way
the ability of such employee to carry out fully all activities of such employee
in furtherance of the business of the MCC as currently operated and as presently
proposed to be operated by the MCC. To the MCC's knowledge, after reasonable
inquiry, no third party has claimed that any person employed by or affiliated
with the MCC has violated or may be violating any of the terms or conditions of
his past employment, non-competition or nondisclosure agreement with such third
party, or disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information or documentation of such third party or
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. Each current employee,
officer and consultant of the MCC has executed a proprietary information and
inventions agreement substantially in the form provided to ICI and HII. The MCC,
after reasonable investigation, is not aware that any of its employees are in
violation of any such agreement.
4.18 LITIGATION. Except as set forth in the MCC Disclosure
Schedule, MCC is not a party to any pending or, to MCC's knowledge after
reasonable inquiry, threatened action, suit, arbitration, mediation, proceeding
or investigation, at law or in equity or otherwise in, for or by any court or
other governmental body or any arbitration, mediation or similar forum
(collectively, "Litigation"); nor, to MCC's knowledge, does any rational basis
exist for any such Litigation. MCC is not subject to any decree, judgment or
order of any court or other governmental body which could have a material
adverse effect on the condition, financial or otherwise, of any of MCC's assets
or the business of MCC or which could prevent the transactions contemplated by
this Agreement.
4.19 PERSONNEL.
4.19.1 The MCC Disclosure Schedule lists: (i) all MCC Employee
Plans (as defined hereinbelow) and all contracts or agreements with directors,
officers, employees or unions, or consulting agreements, to which MCC is a party
or it or its assets are subject as of the date of this Agreement; (ii) the
names, salary rates, bonuses paid during the last fiscal year, and accrued
vacation and sick leave for all the employees of MCC as of May 2, 2001; and
(iii) all group insurance programs in effect for employees of MCC. MCC is not
in default with respect to any of the obligations so listed, except where such
default would not have a material adverse effect on the business, operations or
financial condition of MCC.
4.19.2 MCC has delivered to ICI and HII true, complete and correct
copies of all MCC Employee Plans. MCC has no union contracts or collective
bargaining agreements with, or any other obligations to, employee organizations
or groups, nor is MCC currently engaged in any labor negotiations except in
minor grievances not
23
involving any employee organization or group, nor, to the knowledge of MCC, is
MCC the subject of any union organization. There is no pending or, to MCC's
knowledge, threatened labor dispute, strike or work stoppage affecting the
business of MCC.
4.19.3 The MCC Disclosure Schedule also lists the amount payable
to employees of MCC under other fringe benefit plans. The term " MCC Employee
Plan" shall mean all present and prior (including terminated and transferred)
plans, programs, agreements, arrangements and methods of contributions or
compensation (including all amendments to and components of the same, such as a
trust with respect to a plan) providing any remuneration or benefits, other than
current cash compensation, to any current or former employee of MCC or to any
other person who provides services to MCC, including, without limitation,
pension, retirement, profit sharing, percentage compensation, stock purchase,
stock option, bonus and non-qualified deferred compensation plans, disability
plans, medical plans, dental plans, workers compensation, health insurance, life
insurance or other death benefits, incentive plans, severance plans, vacation
benefits and fringe benefits.
4.20 TAXES. Except as set forth in the MCC Disclosure: Schedule, all
tax returns required to be filed prior to the date hereof with respect to the
MCC and the business of MCC have been timely filed, each such tax return is
true, accurate and complete in all material respects; MCC has timely paid all
taxes due on such returns and any subsequent assessments with respect thereto;
and all taxes due and payable prior to the Closing Date by or with respect to
MCC or the business of MCC for the periods prior to the Closing Date have been
or will be paid by MCC prior to the Closing or reserves have been established
therefore in the MCC Interim Financial Statements.
With respect to each taxable period of MCC, (i) no deficiency or proposed
adjustment which has not been settled or otherwise resolved for any amount of
taxes has been asserted or assessed by any taxing authority against MCC; (ii)
MCC has filed extensions for 2000 Federal and State Income Tax Returns; (iii)
MCC has requested and has been granted extensions of time for the filing of
state and federal tax returns to a date later than the Closing. MCC anticipates
that such taxes and tax returns will be filed prior to the Closing; (iv) there
is no action, suit, taxing authority proceeding, or audit or claim for refund
now in progress, pending or, to the knowledge of MCC threatened against MCC with
respect to taxes; (v) there are no MCC Liens for taxes (other than for current
taxes not yet due and payable) upon any of MCC's assets; and (vi) true, correct
and complete copies of all income and sales tax returns filed by or with respect
to MCC for the past three years have been furnished or made available to HII.
MCC has not agreed to, or is not required to, make any adjustments under Section
481(a) of the Code by reason of a change in accounting method or otherwise.
4.21 INSURANCE. The MCC Disclosure Schedule constitutes a list of all
insurance policies and bonds in force with respect to MCC or MCC's assets
showing for each such policy or bond: (i) the owner and loss-payee; (ii) the
coverage of such policy or bond; (iii) the amount of premium properly allocable
to such policy or bond; (iv) the name of the insurer; and (v) the termination
date of the policy or bond. Copies of all
24
such insurance policies and bonds have been made available to ICI and HII. All
such insurance policies and bonds are in full force and effect. The insurance
coverage provided by such policies and bonds is of the type and in the amounts
customarily carried by Persons conducting businesses similar to the business of
MCC as presently conducted and in accordance with good business practices.
4.22 REPRESENTATIONS COMPLETE. The representations and warranties of
MCC contained in this Article 4 do not contain any untrue statement of a
material fact and do not omit to state any material fact necessary to make such
representations and warranties, in light of the circumstances under which they
were made, not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ICI
ICI hereby represents and warrants to HII and MCC that the following facts
and circumstances are true and correct, as of the date of Closing, subject to
the limitations and exceptions on the Disclosure Schedule set forth in Article
14 (the "ICI Disclosure Schedule").
Whenever the term "to ICI's knowledge" or similar expression appears in any
representation or warranty in this Article 5, it means to the actual knowledge
of ICI's directors and executive officers, after reasonable inquiry and
investigation where specified. Whenever the term " ICI has received no notice"
or like expression appears in any representation or warranty in this Article 5,
it means that none of ICI 's directors and executive officers has received
actual oral or written notice of the matter to which such term is applied, after
having made reasonable inquiry as to whether notice has been received where
specified.
5.1 ORGANIZATION. ICI: (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida; (ii) has
all necessary corporate power to own and lease its properties, to carry on its
business as now being conducted and to enter into and perform this Agreement and
all of the other documents and agreements contemplated hereby; and (iii) is
qualified to do business in all jurisdictions in which the failure to so qualify
would have a material adverse effect on the business, operations or financial
condition of ICI. ICI has no Subsidiaries (as hereinafter defined) and holds no
right, title or interest in or to any other corporation, company, partnership,
trust, limited liability company or other entity.
5.2 AUTHORITY AND CONSENTS.
5.2.1 The execution and performance of this Agreement and the
other documents to be executed by ICI pursuant to the terms hereof will not
result in a violation of ICI 's Certificate of Incorporation or Bylaws. ICI has
full power and authority (corporate and otherwise) to enter into this Agreement
and the other documents to be executed by ICI pursuant to the terms hereof and
to carry out the transactions contemplated by this Agreement and such other
documents. This Agreement and the
25
other documents to be executed by ICI pursuant to the terms hereof and their
execution and delivery to HII and MCC have been duly authorized by the Board of
Directors of ICI, and no further corporate action prior to the Closing shall be
necessary on the part of ICI or its stockholders to effect the Exchange. This
Agreement and the other documents to be executed by ICI pursuant to the terms
hereof do and will constitute legal, valid and binding obligations of ICI,
enforceable against ICI in accordance with their respective terms, subject as to
enforcement only: (i) to bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally; and (ii) to general principles of equity.
5.2.2 ICI has delivered to HII and MCC true, complete and correct
copies of (i) its Certificate of Incorporation, as amended to date, certified by
the appropriate official of the jurisdiction of incorporation, (ii) its Bylaws,
as amended to date, and (iii) its stock ledger, in each case, certified by ICI's
corporate secretary. The Certificate of Incorporation and Bylaws of ICI are in
full force and effect and ICI is in material compliance with the provisions
thereof.
5.3 CAPITALIZATION AND TITLE TO SHARES.
5.3.1 ICI is authorized to issue 16,000,000 of shares, of which it
is authorized to issue 15,000,000 of ICI Common Stock $0.01 par value per share,
and 1,000,000 of ICI Preferred Stock, of which an aggregate of 6,320,160 shares
of ICI Common Stock are issued and 5,923,820 of ICI Common Stock are
outstanding. No shares of ICI Preferred Stock are issued and outstanding.
Also, 2,121,000 options to purchase ICI Common Stock redeemable for shares of
common stock are outstanding. Such shares are owned of record by the persons
and in the amounts set forth in the ICI Disclosure Schedule. No other class of
capital stock of ICI is authorized or outstanding. All of the issued and
outstanding shares of ICI's capital stock are duly authorized and are validly
issued, fully paid, nonassessable and free of pre-emptive rights. None of the
issued and outstanding shares of ICI have been issued in violation of any
federal or state law or any preemptive rights or rights to subscribe for or
purchase securities.
5.3.2 The ICI Disclosure Schedule includes a true and complete
list of all outstanding rights, subscriptions, warrants, calls, preemptive
rights, options or other agreements of any kind to purchase or otherwise receive
from ICI any shares of the capital stock or any other security of ICI, and all
outstanding securities of any kind convertible into or exchangeable for such
securities (all such rights, subscriptions, warrants, calls, options, agreements
and convertible securities, collectively, "ICI Warrants and Options"). True and
complete copies of all instruments (or the form of such instruments) referred to
in this Section 5.3.2 have been previously furnished to HII and MCC. There are
no stockholder agreements, voting trusts, proxies or other agreements or
understandings with respect to the outstanding shares of capital stock of ICI to
which ICI is a party. Except for ICI Options and Warrants set forth in the ICI
Disclosure Schedule, all outstanding unexercised ICI Warrants and Options shall
terminate at the Effective Time.
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5.3.3 ICI does not own beneficially any shares of capital stock of
HII and MCC.
5.4 FINANCIAL STATEMENTS.
5.4.1 The consolidated financial statements of ICI provided to HII
and MCC pursuant to this Agreement (i) were prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered (except as may be
indicated in the notes to such financial statements and except that unaudited
financial statements may not contain footnotes and are subject to normal and
recurring year-end audit adjustments which will not, individually or in the
aggregate, be material in amount); and (ii) fairly present, in all material
respects, the consolidated financial position of ICI as of the respective dates
thereof and the consolidated results of operations of ICI for the periods
covered thereby.
5.4.2 ICI shall deliver to HII and MCC prior to the Effective
Time (i) the audited consolidated financial statements of ICI at December 31,
2000 (including the footnotes thereto) (the "ICI Audited Financial
Statements"), and (ii) the unaudited balance sheet of ICI (the "ICI Interim
Balance Sheet") and related statement of operations and cash flows for the
period then ended (the "ICI Interim Financial Statements"). Such financial
statements referred to in this section are collectively referred to herein as
the "ICI Financial Statements." The ICI Interim Financial Statements have been
prepared from, and are in accordance with, the books and records of ICI and
present fairly, in all material respects, the financial position and the results
of operations of ICI as of the dates and for the periods indicated, in each case
in accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved except as otherwise stated
therein, and subject, in the case of the ICI Interim Financial Statements, to
normal year end audit adjustments, which are not, in the aggregate, material and
to the absence of notes as may be required by GAAP.
5.5 TITLE TO ASSETS. ICI has good and marketable title to all of
its tangible and intangible assets and properties reflected as owned on the ICI
Audited Financial Statements (as defined hereinafter), except for assets sold in
the ordinary course of business since the date of the ICI Audited Financial
Statements, and all such assets and properties are free and clear of all liens,
charges, encumbrances and security interests, except for any lien for current
taxes not yet due and payable, any statutory liens and minor liens that have
arisen in the ordinary course of business that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto or
materially impair the operations of ICI (collectively, "ICI Liens").
5.6 PROPERTIES. ICI does not own any real property and does not
have any options or contractual obligations to purchase or acquire any interest
in real property other than leasehold interests. ICI has a valid leasehold
interest in all of the buildings, structures and leasehold improvements, and
owns or has a valid leasehold interest in all equipment and other tangible
property used in the conduct of its business,
27
all of which are in good and sufficient operating condition and repair, ordinary
wear and tear excepted. There is no equipment located on the premises of ICI
that is on loan from another party.
5.7 CONSENTS AND APPROVALS OF GOVERNMENT AUTHORITIES. Except for the
filing of the Exchange Documents and the consent of ICI's stockholders, no
consent, approval or authorization of, or declaration, filing, notice or
registration with, any governmental agency, regulatory authority or other Person
(as defined hereinafter) is required in connection with the execution, delivery
and performance of this Agreement or any of the other documents contemplated
hereby by ICI or the consummation of the transactions contemplated herein and
therein.
5.8 ACCOUNTS RECEIVABLE/PREPAYABLE. Subject to the allowances with
respect to accounts receivable included in the ICI Interim Financial Statement,
all accounts receivable reflected on such balance sheet and all accounts
receivable arising subsequent thereto on or prior to the Closing Date and not
yet collected, have arisen in the ordinary course of business of ICI, represent
valid and enforceable obligations due to ICI, have been and are fully
collectible in the ordinary course of business in the aggregate recorded amounts
thereof in accordance with their terms and are, to the knowledge of the ICI,
subject to no set-off, counterclaim or future performance obligation on the part
of ICI.
5.9 CONTRACTS AND OTHER AGREEMENTS. The ICI Disclosure Schedule sets
forth a list of the following contracts and other agreements to which ICI is a
party or by or to which ICI or ICI's assets or properties are bound or subject:
5.9.1 any agreement or series of related agreements requiring
aggregate payments after the date hereof by or to ICI of more than $100,000;
5.9.2 any agreement with or for the benefit of any current or
former officer, director, stockholder, employee or consultant of ICI;
5.9.3 any agreement with any labor union or association
representing any employee of ICI;
5.9.4 any agreement for the purchase or sale of materials,
supplies, equipment, merchandise or services that contain an escalation,
renegotiation or redetermination clause or that obligate ICI to purchase all or
substantially all of its requirements of a particular product from a supplier,
or for periodic minimum purchases of a particular product from a supplier;
5.9.5 any agreement for sale of any of the assets or properties of
ICI other than in the ordinary course of business or for the grant to any person
of any options, rights of first refusal, or preferential or similar rights to
purchase any such assets or properties;
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5.9.6 any partnership or joint venture agreement;
5.9.7 any agreement of surety, guarantee or indemnification, other
than agreements in the ordinary course of business with respect to obligations
in an aggregate amount not in excess of $50,000;
5.9.8 any agreement containing covenants of ICI not to compete in
any line of business, in any geographic area or with any person or covenants of
any other person not to compete with ICI or in any line of business of ICI;
5.9.9 any agreement granting or restricting the right of ICI to
use any Intellectual Property (as defined hereinafter), except for any
Intellectual Property that is licensed to ICI under any third party software
license generally available to the public at a cost of less than $50,000;
5.9.10 any agreement with customers or suppliers for the sharing
of fees, the rebating of charges or other similar arrangements;
5.9.11 any agreement with any holder of securities of ICI as such
(including, without limitation, any agreement containing an obligation to
register any of such securities under any federal or state securities laws);
5.9.12 any agreement relating to the acquisition by ICI of any
operating business or the capital stock of any other person;
5.9.13 any agreement requiring the payment to any person of a
brokerage or sales commission or a finder's or referral fee in connection with
the transactions contemplated by this Agreement (other than arrangements to pay
commission or fees to employees in the ordinary course of business);
5.9.14 any agreement or note relating to or evidencing outstanding
indebtedness for borrowed money, other than agreements entered into in the
ordinary course of business for amounts not exceeding $50,000;
5.9.15 any lease, sublease or other agreement under which ICI is
lessor or lessee of any real property or equipment or other tangible property
with respect to obligations in excess of $50,000; and
5.9.16 Except for agreements to provide maintenance, upgrades, bug
fixes, error corrections or similar work product that are ordinary and customary
for the software industry and that are related to the ICI products which have
been delivered as of the date hereof, any agreement that requires ICI to
deliver, or undertake the development of, any new product, customized product,
substantial upgrade, new version or similar work product where such delivery or
development requires ICI to utilize substantial personnel or financial
resources.
29
5.9.17 any other material agreement not made in the ordinary
course of business.
True and complete copies of all the contracts and other agreements (and all
amendments, waivers or other modifications thereto) set forth in the ICI
Disclosure Schedule have been made available to HII and MCC. Each of such
contracts is valid, subsisting, in full force and effect, binding upon ICI, and
to the knowledge of ICI, binding upon the other parties thereto in accordance
with their terms, and ICI is not in default under any of them, nor, to the best
knowledge of ICI, is any other party to any such contract or other agreement in
default thereunder, nor does any condition exist that with notice or lapse of
time or both, would constitute a default thereunder, except, in each case, such
defaults as would not, individually or in the aggregate, have a material adverse
effect on the business of ICI.
5.10 COMPLIANCE WITH LAWS.
5.10.1 ICI has all licenses, permits, franchises, orders or
approvals of any federal, state, local or foreign governmental or regulatory
body required for the conduct of the business of ICI, except where not having
such license, permit, franchise, order or approval would not result in a
material adverse effect on business, operations or financial condition of ICI
(collectively, "ICI Permits"); such ICI Permits are in full force and effect;
and no proceeding is pending or, to the knowledge of ICI, threatened to revoke
or limit any ICI Permit.
5.10.2 Except where such violation would not have a material
adverse effect on the business, operations or financial condition of ICI, ICI is
not in violation of any applicable law, ordinance or regulation or any order,
judgment, injunction, decree or other requirement of any court, arbitrator or
governmental or regulatory body. ICI has not received notice of, and there has
not been any citation, fine or penalty imposed against ICI for, any such
violation or alleged violation.
5.11 BANK ACCOUNTS AND POWERS OF ATTORNEY. The ICI Disclosure Schedule
identifies all bank and brokerage accounts of ICI, whether or not such accounts
are held in the name of ICI, lists the respective signatories therefor and lists
the names of all persons holding a power of attorney from ICI and a summary of
the terms thereof.
5.12 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. Neither the
execution nor delivery of this Agreement or the other documents contemplated
hereby by ICI, nor performance by ICI of the terms and provisions of this
Agreement or such other documents will (a) conflict with or result in a breach
or violation of any of the terms, conditions or provisions of any Permit or any
judgment, order, injunction, decree, regulation or ruling of any court or
governmental authority to which ICI or any assets of ICI are subject or of any
contract to which ICI is a party or any agreement, contract, or commitment to
which ICI is a party or by which it is bound, except where such conflict, breach
or violation would not have a material adverse effect on the business,
operations
30
or financial condition of ICI, or (b) give any person or entity the right to
terminate or modify any material contract to which ICI is a party, or accelerate
any material obligation or indebtedness of ICI thereunder.
5.13 NO UNDISCLOSED LIABILITIES. ICI has no liabilities or obligations
of any nature required to be disclosed as liabilities on a balance sheet
prepared in accordance with GAAP except (a) liabilities which are fully
reflected or reserved against in the ICI Financial Statements, and (b)
liabilities incurred in the ordinary course of operation of the business of ICI
since the date of the ICI Audited Financial Statements.
5.14 CUSTOMERS. ICI does not know of any plan or intention of any
Customer, and has not received any written threat or notice from any Customer,
to terminate, cancel or otherwise materially and adversely modify its
relationship with ICI or to decrease materially or limit its purchase of the
services or products of ICI.
5.15 TRANSACTIONS WITH MANAGEMENT. No officer of ICI has (whether
directly or indirectly through another entity in which such person has an
interest, other than as the holder of less than 1% of a class of securities of a
publicly traded company) any interest in (a) any property or assets of ICI
(except as a stockholder) or (b) to ICI's knowledge, any current competitor,
customer or supplier of ICI or (c) to ICI's knowledge, any person which is
currently a party to any contract with ICI involving any amount in excess of
$50,000.
5.16 ABSENCE OF CERTAIN CHANGES. Since May 2, 2001, there have been no
material changes in the condition, financial or otherwise, of any of the assets
or any of the liabilities, business, prospects or operations of ICI or the
business of ICI, other than changes which in the aggregate have not been
materially adverse to the business, finances or operations of ICI. Without
limiting the foregoing, since May 2, 2001, other than in the ordinary course of
business:
5.16.1 ICI has not materially altered the nature of the business
of ICI as carried on or made any material change in the products and services it
supplies;
5.16.2 ICI has not borrowed or agreed to borrow any funds or
incurred, or assumed or become subject to, whether directly or by way of
guarantee or otherwise, any material obligation or liability for borrowed money,
except payables incurred in the ordinary course of business and consistent with
past practice;
5.16.3 ICI has not paid, discharged or satisfied any claim,
liability or obligation other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities or
obligations reflected or reserved against in the ICI Interim Balance Sheet or
trade payables incurred in the ordinary course of business and consistent with
past practice;
5.16.3.1 Notwithstanding any other provisions of this
Agreement, ICI acknowledges that it is separately and individually liable for
the
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outstanding obligation to Medvision/City of Minot. To the extent that this
obligation has not been paid or settled by ICI, pursuant to Section 10.18 of
this Agreement, then a proportional adjustment to the percentage distribution
of Newco shares as set forth in Section 2.5.8 shall be made reflecting a
decrease in the percentage of Newco shares received by ICI shareholder for the
amount of debt assumed by Newco. ICI has not paid, discharged or satisfied any
claim, liability or obligation other than the payment, discharge or satisfaction
in the ordinary course of business and consistent with past practice of
liabilities or obligations reflected or reserved against in the ICI Interim
Balance Sheet or trade payables incurred in the ordinary course of business and
consistent with past practice;
5.16.4 ICI has not permitted or allowed any of its property or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
ICI Lien of any kind;
5.16.5 ICI has not written down the value of any inventory or
written off as uncollectible any notes or accounts receivable, except for
write-downs and write-offs in the ordinary course of business and consistent
with past practice, none of which is material;
5.16.6 ICI has not cancelled any debts or waived any claims or
rights of substantial value, waived any statute of limitation or sold,
transferred, or otherwise disposed of any of its properties or assets (real,
personal or mixed, tangible or intangible), except sales of immaterial assets in
the ordinary course of business and consistent with past practice;
5.16.7 ICI has not licensed or disposed of or permitted to lapse
any rights to the use of any ICI Intellectual Property;
5.16.8 ICI has not granted any increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee;
5.16.9 ICI has not made any capital expenditure or commitment
therefor in excess of $50,000 individually or in the aggregate;
5.16.10 ICI has not paid, loaned or advanced any amount to, or
sold, transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its officers, directors or any Affiliate (as defined hereinafter) or
associate of any of its officers, directors or stockholders;
5.16.11 ICI has not made any change in the accounting policies or
practices of ICI;
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5.16.12 ICI has not issued any shares of its capital stock or any
other securities or made any redemption or other acquisition of any capital
stock of ICI or any declaration, setting aside, or payment of any dividend or
distribution of any kind with respect to any shares of capital stock of ICI
except pursuant to the exercise of any outstanding ICI Warrants and Options;
5.16.13 there have been no losses or damage to any of ICI's assets
due to fire or other casualty, whether or not insured, amounting to more than
$50,000, in the aggregate; and
5.16.14 ICI has not agreed, whether in writing or otherwise, to do
any of the foregoing.
5.17 INTELLECTUAL PROPERTY.
5.17.1 The ICI Disclosure Schedule contains a list of all patents,
patent applications, trademarks (whether registered or unregistered), trademark
applications, service marks (whether registered or unregistered), service xxxx
applications, copyrights (whether registered or unregistered) and copyright
applications owned by or filed in the name of ICI (the "ICI Owned Intellectual
Property"), specifying as to each, as applicable: (i) the nature of such
Intellectual Property; (ii) the other owner(s) of such Intellectual Property,
for any Intellectual Property that is jointly owned by ICI and any other Person
that is not an Affiliate of ICI; (iii) the jurisdictions by or in which such
Intellectual Property has been issued or registered or in which an application
for such issuance or registration has been filed, including the respective
registration or application numbers; and (iv) licenses, sublicenses and other
agreements to which ICI is a party and pursuant to which any Person is
authorized to use such Intellectual Property, including the identity of all
parties thereto, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof.
5.17.2 ICI owns or licenses all Intellectual Property necessary to
conduct business to the same extent and in substantially the same manner as
presently conducted and as presently proposed by ICI to be conducted (the "ICI
Intellectual Property"). The ICI Intellectual Property will be owned by ICI, or
ICI will have right for use thereof on identical terms and conditions
immediately subsequent to the Closing. No Owned Intellectual Property is
involved in any interference or re-examination or cancellation or opposition
proceeding and ICI has not been notified or alerted that any such proceeding
will hereafter be commenced. To ICI's knowledge, after reasonable inquiry, ICI
has no reasonable legal basis for provoking or initiating an interference or
opposition proceeding with respect to any Intellectual Property held or used by
others, and has no reasonable basis for believing that any of ICI Intellectual
Property, owned exclusively or jointly by ICI, is being infringed by others.
5.17.3 ICI has not been notified (after having made reasonable
inquiry as to whether notice has been received) that it is a defendant in any
action, suit, investigation or proceeding relating to, any alleged claim of
infringement by the ICI
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Intellectual Property, and no ICI Intellectual Property infringes or
misappropriates Intellectual Property of any other Person. ICI has no
knowledge, after reasonable inquiry, of any continuing infringement by any other
Person of any ICI Intellectual Property owned, exclusively or jointly, by ICI.
Except as set forth in the ICI Disclosure Schedule, ICI has not entered into any
agreement to indemnify any other Person against any charge of infringement,
misappropriation or other conflict with respect to any Intellectual Property.
5.17.4 The ICI has delivered to HII and MCC correct and complete
copies of any ICI patents, registrations, applications, licenses, agreements,
and permissions (as amended to date) relating to ICI Owned Intellectual Property
and has made available to HII and MCC correct and complete copies of all other
written documentation evidencing ownership and prosecution (if applicable) of
each such ICI Owned Intellectual Property. With respect to all ICI Intellectual
Property, to ICI's knowledge, after reasonable inquiry:
5.17.4.1 all patents, copyrights and trademarks included in
the Owned Intellectual Property are valid and in full force and all applications
listed in the ICI Disclosure Schedule as pending have been prosecuted in good
faith as required by law and are in good standing;
5.17.4.2 ICI possesses all right, title and interest in the
Owned Intellectual Property and any other ICI Intellectual Property not jointly
---
owned or licensed from any other Person and, except as set forth in the ICI
Disclosure Schedule, no Person that is not party to a non-disclosure agreement
with ICI, a copy of which has been provided to HII and MCC, has been provided by
ICI access to or has any rights to, contingent or otherwise;
5.17.4.3 the ICI Owned Intellectual Property, and the other
ICI Intellectual Property owned by ICI either exclusively or jointly with
others, or licensed exclusively from any other Person, is not subject to any
outstanding ICI Lien, judgment, order, decree, stipulation, injunction, or
charge; and
5.17.4.4 no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand is pending or to the knowledge of ICI
(and ICI employees with responsibility for intellectual property matters) is
threatened which challenges the legality, validity, enforceability, use, or
ownership of the ICI Owned Intellectual Property or the other ICI Intellectual
Property owned by ICI, either exclusively or jointly with any other Person, or
licensed exclusively from any other Person.
5.17.5 To the ICI's knowledge, after reasonable inquiry, no
employee of ICI is subject to any secrecy or non-competition agreement or any
agreement or restriction of any kind that would impede in any material way the
ability of such employee to carry out fully all activities of such employee in
furtherance of the business of ICI as currently operated and as presently
proposed to be operated by ICI. To the
34
ICI's knowledge, after reasonable inquiry, no third party has claimed that any
person employed by or affiliated with ICI has violated or may be violating any
of the terms or conditions of his past employment, non-competition or
nondisclosure agreement with such third party, or disclosed or may be disclosing
or utilized or may be utilizing any trade secret or proprietary information or
documentation of such third party or interfered or may be interfering in the
employment relationship between such third party and any of its present or
former employees. Each current employee, officer and consultant of the ICI has
executed a proprietary information and inventions agreement substantially in the
form provided to HII and MCC. ICI, after reasonable investigation, is not aware
that any of its employees are in violation of any such agreement.
5.18 PRODUCT WARRANTIES. Except as set forth in the ICI Disclosure
Schedule, ICI has not made any express warranties or guarantees relating to its
products and/or services that will be in effect as of the Closing Date.
5.19 LITIGATION. Except as set forth in the ICI Disclosure Schedule,
ICI is not a party to any pending or, to ICI's knowledge after reasonable
inquiry, threatened action, suit, arbitration, mediation, proceeding or
investigation, at law or in equity or otherwise in, for or by any court or other
governmental body or any arbitration, mediation or similar forum; nor, to ICI's
knowledge, does any basis exist for any such Litigation. ICI is not subject to
any decree, judgment or order of any court or other governmental body which
could have a material adverse effect on the condition, financial or otherwise,
of any of ICI's assets or the business of ICI or which could prevent the
transactions contemplated by this Agreement.
5.20 PERSONNEL.
5.20.1 The ICI Disclosure Schedule lists: (i) all ICI Employee
Plans (as defined hereinbelow) and all contracts or agreements with directors,
officers, employees or unions, or consulting agreements, to which ICI is a party
or it or its assets are subject as of the date of this Agreement; (ii) the
names, salary rates, bonuses paid during the last fiscal year, and accrued
vacation and sick leave for all the employees of ICI as of May 2, 2001; and
(iii) all group insurance programs in effect for employees of ICI. ICI is not
in default with respect to any of the obligations so listed, except where such
default would not have a material adverse effect on the business, operations or
financial condition of ICI.
5.20.2 ICI has delivered to HII and MCC true, complete and correct
copies of all Employee Plans. ICI has no union contracts or collective
bargaining agreements with, or any other obligations to, employee organizations
or groups, nor is ICI currently engaged in any labor negotiations except in
minor grievances not involving any employee organization or group, nor, to the
knowledge of ICI, is ICI the subject of any union organization. There is no
pending or, to ICI's knowledge, threatened labor dispute, strike or work
stoppage affecting the business of ICI.
35
5.20.3 The ICI Disclosure Schedule also lists the amount payable
to employees of ICI under other fringe benefit plans. The term "ICI Employee
Plan" shall mean all present and prior (including terminated and transferred)
plans, programs, agreements, arrangements and methods of contributions or
compensation (including all amendments to and components of the same, such as a
trust with respect to a plan) providing any remuneration or benefits, other than
current cash compensation, to any current or former employee of ICI or to any
other person who provides services to ICI, including, without limitation,
pension, retirement, profit sharing, percentage compensation, stock purchase,
stock option, bonus and non-qualified deferred compensation plans, disability
plans, medical plans, dental plans, workers compensation, health insurance, life
insurance or other death benefits, incentive plans, severance plans, vacation
benefits and fringe benefits.
5.21 TAXES. All tax returns required to be filed prior to the date
hereof with respect to ICI and the business of ICI have been timely filed, each
such tax return is true, accurate and complete in all material respects. ICI
has timely paid all taxes due on such returns and any subsequent assessments
with respect thereto. All taxes due and payable prior to the Closing Date by or
with respect to ICI or the business of ICI for the periods prior to the Closing
Date have been or will be paid by ICI prior to the Closing or reserves have been
established therefore in the Interim Financial Statements.
Except as set forth in the ICI Disclosure Schedule, with respect to each
taxable period of ICI, (i) no deficiency or proposed adjustment which has not
been settled or otherwise resolved for any amount of taxes has been asserted or
assessed by any taxing authority against ICI; (ii) ICI has no pending consent to
extend the time in which any taxes may be assessed or collected by any taxing
authority; (iii) ICI has not requested or been granted an extension of the time
for filing any tax return to a date later than the Closing; (iv) there is no
action, suit, taxing authority proceeding, or audit or claim for refund now in
progress, pending or, to the knowledge of ICI threatened against ICI with
respect to taxes; (v) there are no ICI Liens for taxes (other than for current
taxes not yet due and payable) upon any of ICI's assets; and (vi) true, correct
and complete copies of all income and sales tax returns filed by or with respect
to ICI for the past three years have been furnished or made available to HII and
MCC. ICI has not agreed to, or is not required to, make any adjustments under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise.
5.22 INSURANCE. The ICI Disclosure Schedule constitutes a list of all
insurance policies and bonds in force with respect to ICI or ICI's assets
showing for each such policy or bond: (i) the owner and loss-payee; (ii) the
coverage of such policy or bond; (iii) the amount of premium properly allocable
to such policy or bond; (iv) the name of the insurer; and (v) the termination
date of the policy or bond. Copies of all such insurance policies and bonds have
been made available to HII and MCC. All such insurance policies and bonds are in
full force and effect. The insurance coverage provided by such policies and
bonds is of the type and in the amounts customarily carried by Persons
conducting businesses similar to the business of ICI as presently conducted and
in accordance with good business practices.
36
5.23 REPRESENTATIONS COMPLETE. The representations and warranties of
ICI contained in this Article 5 do not contain any untrue statement of a
material fact and do not omit to state any material fact necessary to make such
representations and warranties, in light of the circumstances under which they
were made, not misleading.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF HII
HII hereby represents and warrants to ICI and MCC that the following facts
and circumstances are true and correct, as of the date of Closing, subject to
the limitations and exceptions on the Disclosure Schedules set forth in Article
14 (the "HII Disclosure Schedule").
Whenever the term "to HII's knowledge" or similar expression appears in any
representation or warranty in this Article 6, it means to the actual knowledge
of HII's directors and executive officers, after reasonable inquiry and
investigation where specified. Whenever the term "HII has received no notice"
or like expression appears in any representation or warranty in this Article 6,
it means that none of HII's directors and executive officers has received actual
oral or written notice of the matter to which such term is applied, after having
made reasonable inquiry as to whether notice has been received where specified.
6.1 ORGANIZATION.HII: (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota; (ii) has
all necessary corporate power to own and lease its properties, to carry on its
business as now being conducted and to enter into and perform this Agreement and
all of the other documents and agreements contemplated hereby; and (iii) is
qualified to do business in all jurisdictions in which the failure to so qualify
would have a material adverse effect on the business, operations or financial
condition of HII.
6.2 AUTHORITY AND CONSENTS.
6.2.1 The execution and performance of this Agreement and the
other documents to be executed by HII pursuant to the terms hereof will not
result in a violation of HII's Certificate of Incorporation or Bylaws. HII has
full power and authority (corporate and otherwise) to enter into this Agreement
and the other documents to be executed by HII pursuant to the terms hereof and
to carry out the transactions contemplated by this Agreement and such other
documents. This Agreement and the other documents to be executed by HII pursuant
to the terms hereof and their execution and delivery to ICI and MCC have been
duly authorized by the Board of Directors of HII, and no further corporate
action prior to the Closing shall be necessary on the part of HII or its
stockholders to effect the Exchange. This Agreement and the other documents to
be executed by HII pursuant to the terms hereof do and will constitute legal,
valid and binding obligations of HII, enforceable against HII in accordance with
their respective terms, subject as to enforcement only: (i) to bankruptcy,
insolvency, reorganization,
37
arrangement, moratorium and other similar laws of general applicability relating
to or affecting creditors' rights generally; and (ii) to general principles of
equity.
6.2.2 HII has delivered to ICI and MCC true, complete and correct
copies of (i) its Certificate of Incorporation, as amended to date, certified by
the appropriate official of the jurisdiction of incorporation, (ii) its Bylaws,
as amended to date, and (iii) its stock ledger, in each case, certified by HII's
corporate secretary. The Certificate of Incorporation and Bylaws of HII are in
full force and effect and HII is in material compliance with the provisions
thereof.
6.3 CAPITALIZATION AND TITLE TO SHARES.
6.3.1 HII is authorized to issue 100,000 shares of HII Common
Stock no par value per share, and no Preferred Stock, of which an aggregate of
33,000 shares of HII Common Stock are issued and outstanding. Such shares are
owned of record by the persons and in the amounts set forth in the HII
Disclosure Schedule. No other class of capital stock of HII is authorized or
outstanding. All of the issued and outstanding shares of HII's capital stock
are duly authorized and are validly issued, fully paid, nonassessable and free
of pre-emptive rights. None of the issued and outstanding shares of HII have
been issued in violation of any federal or state law or any preemptive rights or
rights to subscribe for or purchase securities.
6.3.2 The HII Disclosure Schedule includes a true and complete
list of all outstanding rights, subscriptions, warrants, calls, preemptive
rights, options or other agreements of any kind to purchase or otherwise receive
from HII any shares of the capital stock or any other security of HII, and all
outstanding securities of any kind convertible into or exchangeable for such
securities (all such rights, subscriptions, warrants, calls, options, agreements
and convertible securities, collectively, "HII Warrants and Options"). True and
complete copies of all instruments (or the form of such instruments) referred to
in this Section 6.3.2 have been previously furnished to ICI and MCC. There are
no stockholder agreements, voting trusts, proxies or other agreements or
understandings with respect to the outstanding shares of capital stock of HII to
which HII is a party. Except for HII Warrants and Options set forth in the HII
Disclosure Schedule, all outstanding unexercised HII Warrants, Options, and any
other right to receive HII Capital Stock shall terminate at the Effective Time.
6.3.3 HII does not own beneficially any shares of capital stock of
ICI and MCC.
6.4 GROCERY SHOPPING NETWORK
6.4.1 Grocery Shopping Network. ("GSN"), is the trade name of HII.
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6.5 FINANCIAL STATEMENTS.
6.5.1 The consolidated financial statements of HII provided to ICI
and MCC pursuant to this Agreement (i) were prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered (except as may be
indicated in the notes to such financial statements and except that unaudited
financial statements may not contain footnotes and are subject to normal and
recurring year-end audit adjustments which will not, individually or in the
aggregate, be material in amount); and (ii) fairly present, in all material
respects, the consolidated financial position of HII as of the respective dates
thereof and the consolidated results of operations of HII for the periods
covered thereby.
6.5.2 HII shall deliver to ICI and MCC prior to the Effective Time
(i) the audited consolidated financial statements of HII at December 31, 2000
(including the footnotes thereto) (the "HII Audited Financial Statements"), and
(ii) the unaudited balance sheet of HII (the "HII Interim Balance Sheet") at
June 30, 2001, and related statement of operations and cash flows for the period
then ended (the "HII Interim Financial Statements"). Such financial statements
referred to in this section are collectively referred to herein as the " HII
Financial Statements." The HII Interim Financial Statements have been prepared
from, and are in accordance with, the books and records of HII and present
fairly, in all material respects, the financial position and the results of
operations of HII as of the dates and for the periods indicated, in each case in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods involved except as otherwise stated therein, and
subject, in the case of the HII Interim Financial Statements, to normal year end
audit adjustments, which are not, in the aggregate, material and to the absence
of notes as may be required by GAAP.
6.6 TITLE TO ASSETS. HII has good and marketable title to all of
its tangible and intangible assets and properties reflected as owned on the HII
Audited Financial Statements (as defined hereinafter), except for assets sold in
the ordinary course of business since the date of the HII Audited Financial
Statements, and all such assets and properties are free and clear of all liens,
charges, encumbrances and security interests, except for any lien for current
taxes not yet due and payable, any statutory liens and minor liens that have
arisen in the ordinary course of business that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto or
materially impair the operations of HII (collectively, " HII Liens").
6.7 PROPERTIES. HII does not own any real property and does not
have any options or contractual obligations to purchase or acquire any interest
in real property other than leasehold interests. HII has a valid leasehold
interest in all of the buildings, structures and leasehold improvements, and
owns or has a valid leasehold interest in all equipment and other tangible
property used in the conduct of its business, all of which are in good and
sufficient operating condition and repair, ordinary wear and tear excepted.
There is no equipment located on the premises of HII that is on loan from
another party.
39
6.8 CONSENTS AND APPROVALS OF GOVERNMENT AUTHORITIES. Except for the
filing of the Exchange Documents and the consent of HII's stockholders, no
consent, approval or authorization of, or declaration, filing, notice or
registration with, any governmental agency, regulatory authority or other Person
(as defined hereinafter) is required in connection with the execution, delivery
and performance of this Agreement or any of the other documents contemplated
hereby by HII or the consummation of the transactions contemplated herein and
therein.
6.9 ACCOUNTS RECEIVABLE/PREPAYABLE. Subject to the allowances with
respect to accounts receivable set forth on the balance sheet included in the
HII Interim Financial Statement. All accounts receivable reflected on such
balance sheet and all accounts receivable arising subsequent thereto on or prior
to the Closing Date and not yet collected, have arisen in the ordinary course of
business of HII, represent valid and enforceable obligations due to HII, have
been and are fully collectible in the ordinary course of business in the
aggregate recorded amounts thereof in accordance with their terms and are, to
the knowledge of the HII, subject to no set-off, counterclaim or future
performance obligation on the part of HII.
6.10 CONTRACTS AND OTHER AGREEMENTS. The HII Disclosure Schedule sets
forth a list of the following contracts and other agreements to which HII is a
party or by or to which HII or HII 's assets or properties are bound or subject:
6.10.1 any agreement or series of related agreements requiring
aggregate payments after the date hereof by or to HII of more than $10,000;
6.10.2 any agreement with or for the benefit of any current or
former officer, director, stockholder, employee or consultant of HII;
6.10.3 any agreement with any labor union or association
representing any employee of HII;
6.10.4 any agreement for the purchase or sale of materials,
supplies, equipment, merchandise or services that contain an escalation,
renegotiation or redetermination clause or that obligate HII to purchase all or
substantially all of its requirements of a particular product from a supplier,
or for periodic minimum purchases of a particular product from a supplier;
6.10.5 any agreement for sale of any of the assets or properties
of HII other than in the ordinary course of business or for the grant to any
person of any options, rights of first refusal, or preferential or similar
rights to purchase any such assets or properties;
6.10.6 any partnership or joint venture agreement;
40
6.10.7 any agreement of surety, guarantee or indemnification,
other than agreements in the ordinary course of business with respect to
obligations in an aggregate amount not in excess of $5,000;
6.10.8 any agreement containing covenants of HII not to compete in
any line of business, in any geographic area or with any person or covenants of
any other person not to compete with HII or in any line of business of HII;
6.10.9 any agreement granting or restricting the right of HII to
use any Intellectual Property (as defined hereinafter), except for any
Intellectual Property that is licensed to HII under any third party software
license generally available to the public at a cost of less than $50,000;
6.10.10 any agreement with customers or suppliers for the sharing
of fees, the rebating of charges or other similar arrangements;
6.10.11 any agreement with any holder of securities of HII as such
(including, without limitation, any agreement containing an obligation to
register any of such securities under any federal or state securities laws);
6.10.12 any agreement relating to the acquisition by HII of any
operating business or the capital stock of any other person;
6.10.13 any agreement requiring the payment to any person of a
brokerage or sales commission or a finder's or referral fee in connection with
the transactions contemplated by this Agreement (other than arrangements to pay
commission or fees to employees in the ordinary course of business);
6.10.14 any agreement or note relating to or evidencing
outstanding indebtedness for borrowed money, other than agreements entered into
in the ordinary course of business for amounts not exceeding $50,000;
6.10.15 any lease, sublease or other agreement under which HII is
lessor or lessee of any real property or equipment or other tangible property
with respect to obligations in excess of $50,000; and
6.10.16 Except for agreements to provide maintenance, upgrades,
bug fixes, error corrections or similar work product that are ordinary and
customary for the software industry and that are related to the HII products
which have been delivered as of the date hereof, any agreement that requires HII
to deliver, or undertake the development of, any new product, customized
product, substantial upgrade, new version or similar work product where such
delivery or development requires HII to utilize substantial personnel or
financial resources.
6.10.17 any other material agreement not made in the ordinary
course of business.
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True and complete copies of all the contracts and other agreements (and all
amendments, waivers or other modifications thereto) set forth in the HII
Disclosure Schedule have been made available to ICI and MCC. Each of such
contracts is valid, subsisting, in full force and effect, binding upon HII, and
to the knowledge of HII, binding upon the other parties thereto in accordance
with their terms, and HII is not in default under any of them, nor, to the best
knowledge of HII, is any other party to any such contract or other agreement in
default thereunder, nor does any condition exist that with notice or lapse of
time or both, would constitute a default thereunder, except, in each case, such
defaults as would not, individually or in the aggregate, have a material adverse
effect on the business of HII.
6.11 COMPLIANCE WITH LAWS.
6.11.1 HII has all licenses, permits, franchises, orders or
approvals of any federal, state, local or foreign governmental or regulatory
body required for the conduct of the business of HII, except where not having
such license, permit, franchise, order or approval would not result in a
material adverse effect on business, operations or financial condition of HII
(collectively, "HII Permits"); such HII Permits are in full force and effect;
and no proceeding is pending or, to the knowledge of HII, threatened to revoke
or limit any HII Permit.
6.11.2 Except where such violation would not have a material
adverse effect on the business, operations or financial condition of HII, HII is
not in violation of any applicable law, ordinance or regulation or any order,
judgment, injunction, decree or other requirement of any court, arbitrator or
governmental or regulatory body. HII has not received notice of, and there has
not been any citation, fine or penalty imposed against HII for, any such
violation or alleged violation.
6.12 BANK ACCOUNTS AND POWERS OF ATTORNEY. The HII Disclosure Schedule
identifies all bank and brokerage accounts of HII, whether or not such accounts
are held in the name of HII, lists the respective signatories therefor and lists
the names of all persons holding a power of attorney from HII and a summary of
the terms thereof.
6.13 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. Neither the
execution nor delivery of this Agreement or the other documents contemplated
hereby by HII, nor performance by HII of the terms and provisions of this
Agreement or such other documents will (a) conflict with or result in a breach
or violation of any of the terms, conditions or provisions of any Permit or any
judgment, order, injunction, decree, regulation or ruling of any court or
governmental authority to which HII or any assets of HII are subject or of any
contract to which HII is a party or any agreement, contract, or commitment to
which HII is a party or by which it is bound, except where such conflict, breach
or violation would not have a material adverse effect on the business,
operations or financial condition of HII, or (b) give any person or entity the
right to terminate or modify any material contract to which HII is a party, or
accelerate any material obligation or indebtedness of HII thereunder.
42
6.14 NO UNDISCLOSED LIABILITIES. HII has no liabilities or obligations
of any nature required to be disclosed as liabilities on a balance sheet
prepared in accordance with GAAP except (a) liabilities which are fully
reflected or reserved against in the HII Financial Statements, and (b)
liabilities incurred in the ordinary course of operation of the business of HII
since the date of the HII Audited Financial Statements.
6.15 CUSTOMERS. HII does not know of any plan or intention of any
Customer, and has not received any written threat or notice from any Customer,
to terminate, cancel or otherwise materially and adversely modify its
relationship with HII or to decrease materially or limit its purchase of the
services or products of HII.
6.16 TRANSACTIONS WITH MANAGEMENT. No officer of HII has (whether
directly or indirectly through another entity in which such person has an
interest, other than as the holder of less than 1% of a class of securities of a
publicly traded company) any interest in (a) any property or assets of HII
(except as a stockholder) or (b) to HII's knowledge, any current competitor,
customer or supplier of HII or (c) to HII's knowledge, any person which is
currently a party to any contract with HII involving any amount in excess of
$50,000.
6.17 ABSENCE OF CERTAIN CHANGES. Since May 2, 2001, there have been no
material changes in the condition, financial or otherwise, of any of the assets
or any of the liabilities, business, prospects or operations of HII or the
business of HII, other than changes which in the aggregate have not been
materially adverse to the business, finances or operations of HII. Without
limiting the foregoing, since May 2, 2001, other than in the ordinary course of
business:
6.17.1 HII has not materially altered the nature of the business
of HII as carried on or made any material change in the products and services it
supplies;
6.17.2 HII has not borrowed or agreed to borrow any funds or
incurred, or assumed or become subject to, whether directly or by way of
guarantee or otherwise, any material obligation or liability for borrowed money,
except payables incurred in the ordinary course of business and consistent with
past practice;
6.17.3 HII has not paid, discharged or satisfied any claim,
liability or obligation other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities or
obligations reflected or reserved against in the HII Interim Balance Sheet or
trade payables incurred in the ordinary course of business and consistent with
past practice;
6.17.4 HII has not permitted or allowed any of its property or
assets (real, personal or mixed, tangible or intangible) to be subjected to any
HII Lien of any kind;
6.17.5 HII has not written down the value of any inventory or
written off as uncollectible any notes or accounts receivable, except for
write-downs and write-offs in
43
the ordinary course of business and consistent with past practice, none of which
is material;
6.17.6 HII has not cancelled any debts or waived any claims or
rights of substantial value, waived any statute of limitation or sold,
transferred, or otherwise disposed of any of its properties or assets (real,
personal or mixed, tangible or intangible), except sales of immaterial assets in
the ordinary course of business and consistent with past practice;
6.17.7 HII has not licensed or disposed of or permitted to lapse
any rights to the use of any HII Intellectual Property;
6.17.8 HII has not granted any increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee;
6.17.9 HII has not made any capital expenditure or commitment
therefor in excess of $50,000 individually or in the aggregate;
6.17.10 HII has not paid, loaned or advanced any amount to, or
sold, transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its officers, directors or any Affiliate (as defined hereinafter) or
associate of any of its officers, directors or stockholders;
6.17.11 HII has not made any change in the accounting policies or
practices of HII;
6.17.12 HII has not issued any shares of its capital stock or any
other securities or made any redemption or other acquisition of any capital
stock of HII or any declaration, setting aside, or payment of any dividend or
distribution of any kind with respect to any shares of capital stock of HII
except pursuant to the exercise of any outstanding HII Warrants and Options;
6.17.13 there have been no losses or damage to any of HII s assets
due to fire or other casualty, whether or not insured, amounting to more than
$50,000, in the aggregate; and
6.17.14 HII has not agreed, whether in writing or otherwise, to do
any of the foregoing.
6.18 INTELLECTUAL PROPERTY.
6.18.1 The HII Disclosure Schedule contains a list of all patents,
patent applications, trademarks (whether registered or unregistered), trademark
applications,
44
service marks (whether registered or unregistered), service xxxx applications,
copyrights (whether registered or unregistered) and copyright applications owned
by or filed in the name of HII (the "HII Owned Intellectual Property"),
specifying as to each, as applicable: (i) the nature of such Intellectual
Property; (ii) the other owner(s) of such Intellectual Property, for any
Intellectual Property that is jointly owned by HII and any other Person that is
not an affiliate of HII; (iii) the jurisdictions by or in which such
Intellectual Property has been issued or registered or in which an application
for such issuance or registration has been filed, including the respective
registration or application numbers; and (iv) licenses, sublicenses and other
agreements to which HII is a party and pursuant to which any Person is
authorized to use such Intellectual Property, including the identity of all
parties thereto, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof.
6.18.2 HII owns or licenses all Intellectual Property necessary to
conduct business to the same extent and in substantially the same manner as
presently conducted and as presently proposed by HII to be conducted (the "HII
Intellectual Property"). The HII Intellectual Property will be owned by HII, or
HII will have right for use thereof on identical terms and conditions
immediately subsequent to the Closing. No HII Owned Intellectual Property is
involved in any interference or re-examination or cancellation or opposition
proceeding and HII has not been notified or alerted that any such proceeding
will hereafter be commenced. To the HII's knowledge, after reasonable inquiry,
HII has no reasonable legal basis for provoking or initiating an interference or
opposition proceeding with respect to any HII Intellectual Property held or used
by others, and has no reasonable basis for believing that any of HII
Intellectual Property, owned exclusively or jointly by HII, is being infringed
by others.
6.18.3 HII has not been notified (after having made reasonable
inquiry as to whether notice has been received) that it is a defendant in any
action, suit, investigation or proceeding relating to, any alleged claim of
infringement by the HII Intellectual Property, and no HII Intellectual Property
infringes or misappropriates Intellectual Property of any other Person. HII has
no knowledge, after reasonable inquiry, of any continuing infringement by any
other Person of any HII Intellectual Property owned, exclusively or jointly, by
HII. Except as set forth in the HII Disclosure Schedule, HII has not entered
into any agreement to indemnify any other Person against any charge of
infringement, misappropriation or other conflict with respect to any
Intellectual Property.
6.18.4 HII has delivered to ICI and MCC correct and complete
copies of any HII patents, registrations, applications, licenses, agreements,
and permissions (as amended to date) relating to HII Owned Intellectual Property
and has made available to ICI and MCC correct and complete copies of all other
written documentation evidencing ownership and prosecution (if applicable) of
each such HII Owned Intellectual Property. With respect to all HII Intellectual
Property, to HII's knowledge, after reasonable inquiry:
6.18.4.1 all patents, copyrights and trademarks included in
the Owned Intellectual Property are valid and in full force and all applications
listed in the
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HII Disclosure Schedule as pending have been prosecuted in good faith as
required by law and are in good standing;
6.18.4.2 HII possesses all right, title and interest in the
HII Owned Intellectual Property and any other HII Intellectual Property not
---
jointly owned or licensed from any other Person and, except as set forth in the
HII Disclosure Schedule, no Person that is not party to a non-disclosure
agreement with HII, a copy of which has been provided to ICI and MCC, has been
provided by HII access to or has any rights to, contingent or otherwise;
6.18.4.3 the HII Owned Intellectual Property, and the other
Intellectual Property owned by HII either exclusively or jointly with others, or
licensed exclusively from any other Person, is not subject to any outstanding
HII Lien, judgment, order, decree, stipulation, injunction, or charge; and
6.18.4.4 no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand is pending or to the knowledge of HII
(and HII employees with responsibility for intellectual property matters) is
threatened which challenges the legality, validity, enforceability, use, or
ownership of the HII Owned Intellectual Property or the other HII Intellectual
Property owned by HII, either exclusively or jointly with any other Person, or
licensed exclusively from any other Person.
6.18.5 To the HII's knowledge, after reasonable inquiry, no
employee of HII is subject to any secrecy or non-competition agreement or any
agreement or restriction of any kind that would impede in any material way the
ability of such employee to carry out fully all activities of such employee in
furtherance of the business of HII as currently operated and as presently
proposed to be operated by HII. To the HII's knowledge, after reasonable
inquiry, no third party has claimed that any person employed by or affiliated
with HII has violated or may be violating any of the terms or conditions of his
past employment, non-competition or nondisclosure agreement with such third
party, or disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information or documentation of such third party or
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. Each current employee,
officer and consultant of HII has executed a proprietary information and
inventions agreement substantially in the form provided to ICI and MCC. HII,
after reasonable investigation, is not aware that any of its employees are in
violation of any such agreement.
6.19 PRODUCT WARRANTIES. Except as set forth in the HII Disclosure
Schedule, HII has not made any express warranties or guarantees relating to its
products and/or services that will be in effect as of the Closing Date.
6.20 LITIGATION. HII is not a party to any pending or, to HII's
knowledge after reasonable inquiry, threatened action, suit, arbitration,
mediation, proceeding or investigation, at law or in equity or otherwise in, for
or by any court or other
46
governmental body or any arbitration, mediation or similar forum; nor, to the
HII's knowledge, does any basis exist for any such Litigation. HII is not
subject to any decree, judgment or order of any court or other governmental
body, which could have a material adverse effect on the condition, financial, or
otherwise, of any of HII's assets or the business of HII or which could prevent
the transactions contemplated by this Agreement.
6.21 PERSONNEL.
6.21.1 The HII Disclosure Schedule lists: (i) all HII Employee
Plans (as defined hereinbelow) and all contracts or agreements with directors,
officers, employees or unions, or consulting agreements, to which HII is a party
or it or its assets are subject as of the date of this Agreement; (ii) the
names, salary rates, bonuses paid during the last fiscal year, and accrued
vacation and sick leave for all the employees of HII as of May 2, 2001; and
(iii) all group insurance programs in effect for employees of HII. HII is not
in default with respect to any of the obligations so listed, except where such
default would not have a material adverse effect on the business, operations or
financial condition of HII.
6.21.2 HII has delivered to ICI and MCC true, complete and correct
copies of all HII Employee Plans. HII has no union contracts or collective
bargaining agreements with, or any other obligations to, employee organizations
or groups, nor is HII currently engaged in any labor negotiations except in
minor grievances not involving any employee organization or group, nor, to the
knowledge of HII, is HII the subject of any union organization. There is no
pending or, to HII 's knowledge, threatened labor dispute, strike or work
stoppage affecting the business of HII.
6.21.3 The HII Disclosure Schedule also lists the amount payable
to employees of HII under other fringe benefit plans. The term " HII Employee
Plan" shall mean all present and prior (including terminated and transferred)
plans, programs, agreements, arrangements and methods of contributions or
compensation (including all amendments to and components of the same, such as a
trust with respect to a plan) providing any remuneration or benefits, other than
current cash compensation, to any current or former employee of HII or to any
other person who provides services to HII, including, without limitation,
pension, retirement, profit sharing, percentage compensation, stock purchase,
stock option, bonus and non-qualified deferred compensation plans, disability
plans, medical plans, dental plans, workers compensation, health insurance, life
insurance or other death benefits, incentive plans, severance plans, vacation
benefits and fringe benefits.
6.22 TAXES. All tax returns required to be filed prior to the date
hereof with respect to HII and the business of HII have been timely filed, each
such tax return is true, accurate and complete in all material respects. HII
has timely paid all taxes due on such returns and any subsequent assessments
with respect thereto. All taxes due and payable prior to the Closing Date by or
with respect to HII or the business of HII for the
47
periods prior to the Closing Date have been or will be paid by HII prior to the
Closing or reserves have been established therefore in the HII Interim Financial
Statements.
With respect to each taxable period of HII, (i) no deficiency or proposed
adjustment which has not been settled or otherwise resolved for any amount of
taxes has been asserted or assessed by any taxing authority against HII; (ii)
HII has no pending consent to extend the time in which any taxes may be assessed
or collected by any taxing authority; (iii) HII has not requested or been
granted an extension of the time for filing any tax return to a date later than
the Closing; (iv) there is no action, suit, taxing authority proceeding, or
audit or claim for refund now in progress, pending or, to the knowledge of HII
threatened against HII with respect to taxes; (v) there are no HII Liens for
taxes (other than for current taxes not yet due and payable) upon any of HII's
assets; and (vi) true, correct and complete copies of all income and sales tax
returns filed by or with respect to HII for the past three years have been
furnished or made available to ICI and MCC. HII has not agreed to, or is not
required to, make any adjustments under Section 481(a) of the Code by reason of
a change in accounting method or otherwise.
6.23 INSURANCE. The HII Disclosure Schedule constitutes a list of all
insurance policies and bonds in force with respect to HII or HII's assets
showing for each such policy or bond: (i) the owner and loss-payee; (ii) the
coverage of such policy or bond; (iii) the amount of premium properly allocable
to such policy or bond; (iv) the name of the insurer; and (v) the termination
date of the policy or bond. Copies of all such insurance policies and bonds have
been made available to ICI and MCC. All such insurance policies and bonds are in
full force and effect. The insurance coverage provided by such policies and
bonds is of the type and in the amounts customarily carried by Persons
conducting businesses similar to the business of HII as presently conducted and
in accordance with good business practices.
6.24 REPRESENTATIONS COMPLETE. The representations and warranties of
HII contained in this Article 6 do not contain any untrue statement of a
material fact and do not omit to state any material fact necessary to make such
representations and warranties, in light of the circumstances under which they
were made, not misleading.
ARTICLE 7
MCC's COVENANTS
7.1 ACCESS TO PROPERTIES AND RECORDS. Throughout the period between
the date of this Agreement and the Closing Date, MCC shall give to ICI and HII,
as well as their authorized representatives reasonable access, during business
hours, to its facilities, and shall provide ICI and HII and its representatives
with all records, documents and information reasonably required by ICI and HII
relating to MCC and the business of MCC. Without limiting the foregoing, ICI
and HII shall be permitted to interview during regular business hours such
employees of MCC as ICI and/or HII shall reasonably request of MCC, including
any officers of MCC and any employees with substantial responsibility for any
MCC Intellectual Property material to the business of MCC. ICI and/or HII, as
well as their authorized representatives, shall not without
48
MCC's prior written consent contact any of MCC's customers, which consent shall
not be unreasonably withheld.
7.2 CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. Between the date of
this Agreement and the Closing, and except as otherwise required by this
Agreement:
7.2.1 The business of MCC shall be operated in the ordinary course
consistent with past practices and in a normal businesslike fashion (including,
without limitation, its normal accounts receivable practice), and MCC shall take
such actions as are in its business judgment reasonably necessary to facilitate
a smooth transition of the control of operation of the business of MCC from MCC
to Newco at the Closing. MCC shall use all commercially reasonable efforts to
preserve and maintain the business of MCC and MCC's goodwill, including
relationships with employees, suppliers and customers. In addition, MCC shall
maintain records and books of account for the business of MCC consistent with
past practices and in a normal businesslike fashion, and shall continue to carry
all of the insurance for the business of MCC consistent with past practice.
7.2.2 MCC shall not take (or permit to be taken) any action which
would cause any material change in any of the items and matters covered by the
representations and warranties set forth in Article 3, including, without
limitation:
7.2.2.1 incurring or becoming subject to, or agreeing to
incur or become subject to, any obligation or liability (absolute or
contingent), except current liabilities incurred, and obligations under
contracts entered into, in the ordinary course of business consistent with past
practices;
7.2.2.2 mortgaging, pledging or assuming any lien, or
agreeing to do so, in respect to any of its assets;
7.2.2.3 waiving or compromising any material rights or any
debt owed to MCC;
7.2.2.4 entering into any obligation exceeding Ten Thousand
Dollars ($10,000), other than in the ordinary course of business consistent with
past practices;
7.2.2.5 increasing the rate of compensation payable or to
become payable to any employees;
7.2.2.6 terminating or amending any contract to which it is a
party, unless terminated or amended in the ordinary course of business
consistent with past practices and not material to the business of MCC;
49
7.2.2.7 introducing any new method of accounting with respect
to the business of MCC or any of the assets or liabilities of MCC (assumed or
not assumed) (including, without limitation, any change in depreciation or
amortization policies or rates);
7.2.2.8 making any capital expenditures, not including debt
settlements, or entering into commitments for capital expenditures exceeding, in
the aggregate, Fifty Thousand Dollars ($50,000);
7.2.2.9 without ICI's and HII's prior consent (which consent
shall not unreasonably withhold or delayed), hiring or terminating employees;
7.2.2.10 issuing any shares of its capital stock or other
securities or making any redemption or other acquisition of any capital stock of
MCC or any declaration, setting aside, or payment of any dividend or
distribution of any kind with respect to any shares of capital stock of MCC,
except pursuant to the exercise of any outstanding MCC Warrants and Options; or
7.2.2.11 commencing, settling or compromising any litigation,
except those related to insured claims or arising in the ordinary course of
business consistent with past practices.
7.3 NO SOLICITATION. MCC will not (i) solicit or initiate discussions
with any person, other than HII and ICI, relating to the possible Exchange of
MCC, ICI and HII or any other business combination with HII and/or ICI or (ii)
except to the extent reasonably required by fiduciary obligations under
applicable law as advised in writing by independent legal counsel, participate
in any negotiations regarding, or furnish to any other person information with
respect to, any effort or attempt by any other person to do or to seek any such
transaction. MCC agrees to inform HII and ICI in reasonable detail within one
(1) business day of their receipt of any offer, proposal or inquiry relating to
any such transaction.
7.4 STOCKHOLDER CONSENT. MCC shall, in accordance with applicable law,
file the proxy statement within forty-five (45) days after the date hereof, the
approval of the holders of the requisite number of shares of MCC's capital stock
required to approve this Agreement and the transactions contemplated hereby
under applicable law. Without limiting the generality of the preceding
sentence, the board of directors of MCC will recommend to MCC's stockholders a
vote in favor of the adoption of this Agreement and the Exchange unless the
board of directors shall determine, based on the written opinion of counsel,
that such recommendation will not be consistent with its fiduciary duty.
7.5 SATISFACTION OF CONDITIONS. MCC shall take or cause to be taken all
actions within its power necessary to satisfy all conditions to its obligations
to close and consummate the transactions contemplated by this Agreement.
50
7.6 CONSENTS. On or prior to the Closing Date, except with regard to
any consents, which if not obtained by MCC would not have a material adverse
effect on the business, operations or financial condition of MCC, MCC shall (a)
notify all persons required to be notified pursuant to applicable law or any of
the MCC Permits or contracts to which MCC is a party of the transactions
contemplated hereunder, in the form and manner required thereunder, and (b) use
all commercially reasonable efforts to obtain the consent of all persons whose
consent is required pursuant to applicable law or any of the Permits or
contracts to which MCC is a party in connection with the consummation of the
transactions contemplated hereby, in the form and manner required thereunder.
7.7 NOTIFICATION OF CERTAIN MATTERS. MCC shall give prompt notice to
ICI and HII of the occurrence or non-occurrence of any event which causes or is
likely to cause any representation or warranty made by MCC herein to be untrue
or inaccurate or any covenant, condition or agreement contained herein not to be
complied with or satisfied (provided, however, that if such disclosure is made
and the transactions contemplated hereby shall be consummated, such disclosure
shall be deemed to (a) amend and modify the representations, warranties and
covenants made by the disclosing party in or pursuant to this Agreement and (b)
the recipient party shall be deemed to have waived all rights with respect to
the breach thereof).
7.8 AFFILIATE AGREEMENTS. Disclosure Schedule delivered by MCC to ICI
and HII concurrent with the execution and delivery of the Agreement sets forth
those persons who may be deemed "Affiliates" of MCC within the meaning of Rule
145 promulgated under the Securities Act. MCC shall provide ICI and HII such
information and documents as ICI and/or HII shall reasonably request for
purposes of reviewing such list. MCC shall use its best efforts to deliver or
cause to be delivered to ICI and HII concurrently with the execution of this
Agreement (and in each case prior to the Effective Time) from each of the
Affiliates of MCC, an executed Affiliate Agreement in the form attached in the
Disclosure Schedule and as set forth in the Lock-Up Agreement in Section 2.4.3.
ICI and HII shall be entitled to place appropriate legends on the certificates
evidencing any Common Stock of Newco to be received by such Affiliates of MCC
pursuant to the terms of such Affiliates Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for Newco Common Stock,
consistent with the terms of such Affiliates Agreements.
ARTICLE 8
HII's and ICI's COVENANTS
ICI and HII hereby, jointly and severally, covenant that:
8.1 ACCESS TO PROPERTIES AND RECORDS. Throughout the period between
the date of this Agreement and the Closing Date, HII and ICI shall give to MCC,
as well as its authorized representatives reasonable access, during business
hours, to their facilities, and shall provide MCC and its representatives with
all records, documents and information reasonably required by MCC relating to
HII and/or ICI and
51
their businesses. Without limiting the foregoing, MCC shall be permitted to
interview during regular business hours such employees of HII and/or ICI as it
shall reasonably request of HII and ICI, including any officers of HII and/or
ICI and any employees with substantial responsibility for any HII and/or ICI
Intellectual Property material to the business of those companies. MCC, as well
as its authorized representatives shall not without HII and ICI's prior written
consent contact any of HII and/or ICI's customers, which consent shall not be
unreasonably withheld.
8.2 CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. Between the date of
this Agreement and the Closing, and except as otherwise required by this
Agreement:
8.2.1 The business of HII and ICI shall be operated in the
ordinary course consistent with past practices and in a normal businesslike
fashion (including, without limitation, its normal accounts receivable
practice), and HII and ICI shall take such actions as are in its business
judgment reasonably necessary to facilitate a smooth transition of the control
of operation of the business of HII and ICI, respectively, to Newco at the
Closing. HII and ICI shall use all commercially reasonable efforts to preserve
and maintain their businesses and goodwill, including relationships with
employees, suppliers and customers. In addition, HII and ICI shall maintain
records and books of account for the business consistent with past practices and
in a normal businesslike fashion, and shall continue to carry all of the
insurance for the business consistent with past practice.
8.2.2 HII and/or ICI shall not take (or permit to be taken) any
action which would cause any material change in any of the items and matters
covered by the representations and warranties set forth in Articles 4 and 5 of
this Agreement, including, without limitation :
8.2.2.1 incurring or becoming subject to, or agreeing to
incur or become subject to, any obligation or liability (absolute or
contingent), except current liabilities incurred, and obligations under
contracts entered into, in the ordinary course of business consistent with past
practices;
8.2.2.2 mortgaging, pledging or assuming any lien, or
agreeing to do so, in respect to any of their assets;
8.2.2.3 waiving or compromising any material rights or any
material debt owed to either HII or ICI;
8.2.2.4 entering into any material transactions, other than
in the ordinary course of business consistent with past practices;
8.2.2.5 increasing the rate of compensation payable or to
become payable to any employees;
52
8.2.2.6 terminating or amending any contract to which it is a
party, unless terminated or amended in the ordinary course of business
consistent with past practices and not material to the business of HII and/or
ICI;
8.2.2.7 introducing any new method of accounting with respect
to the business of HII and/or ICI or any of the assets or liabilities of HII
and/or ICI (assumed or not assumed) (including, without limitation, any change
in depreciation or amortization policies or rates);
8.2.2.8 making any capital expenditures or entering into
commitments for capital expenditures exceeding, in the aggregate, Fifty Thousand
Dollars ($50,000);
8.2.2.9 without MCC's prior consent (which consent shall not
unreasonably withhold or delayed), hiring or terminating employees;
8.2.2.10 issuing any shares of its capital stock or other
securities or making any redemption or other acquisition of any capital stock of
HII and/or ICI or any declaration, setting aside, or payment of any dividend or
distribution of any kind with respect to any shares of capital stock of HII
and/or ICI, except pursuant to the exercise of any outstanding Warrants and
Options of HII or ICI; or
8.2.2.11 commencing, settling or compromising any litigation,
except those related to insured claims or arising in the ordinary course of
business consistent with past practices.
8.3 NO SOLICITATION. HII and ICI will not (i) solicit or initiate
discussions with any person, other than MCC, relating to the possible Exchange
of HII, ICI and MCC or other business combination with MCC or (ii) except to the
extent reasonably required by fiduciary obligations under applicable law as
advised in writing by independent legal counsel, participate in any negotiations
regarding, or furnish to any other person information with respect to, any
effort or attempt by any other person to do or to seek any such transaction.
HII and ICI agree to inform MCC in reasonable detail within one (1) business day
of their receipt of any offer, proposal or inquiry relating to any such
transaction.
8.4 STOCKHOLDER CONSENT. Both HII and ICI shall, in accordance with
applicable law, solicit within ten (10) days after the date hereof, the approval
of the holders of the requisite number of shares of capital stock required to
approve this Agreement and the transactions contemplated hereby under applicable
law. Without limiting the generality of the preceding sentence, the corporate
Boards of Directors of HII and ICI will recommend to their stockholders a vote
in favor of the adoption of this Agreement and the Exchange unless members of
such Board(s) shall determine, based on the written opinion of counsel, that
such recommendation will not be consistent with their fiduciary duty.
53
8.5 SATISFACTION OF CONDITIONS. HII and ICI shall take or cause to be
taken all actions within their powers necessary to satisfy all conditions to
their obligations to close and consummate the transactions contemplated by this
Agreement.
8.6 CONSENTS. On or prior to the Closing Date, except with regard to
any consents, which if not obtained by HII and/or ICI would not have a material
adverse effect on the business, operations or financial condition of HII and/or
ICI, HII and ICI shall (a) notify all persons required to be notified pursuant
to applicable law or any of the Permits or contracts to which HII and/or ICI is
a party of the transactions contemplated hereunder, in the form and manner
required thereunder, and (b) use all commercially reasonable efforts to obtain
the consent of all persons whose consent is required pursuant to applicable law
or any of the Permits or contracts to which HII and/or ICI is a party in
connection with the consummation of the transactions contemplated hereby, in the
form and manner required thereunder.
8.7 NOTIFICATION OF CERTAIN MATTERS. ICI and HII shall give prompt
notice to MCC of the occurrence or non-occurrence of any event which causes or
is likely to cause any representation or warranty made by ICI and HII herein to
be untrue or inaccurate or any covenant, condition or agreement contained herein
not to be complied with or satisfied (provided, however, that if such disclosure
is made and the transactions contemplated hereby shall be consummated, such
disclosure shall be deemed to (a) amend and modify the representations,
warranties and covenants made by the disclosing party in or pursuant to this
Agreement and (b) the recipient party shall be deemed to have waived all rights
with respect to the breach thereof).
8.8 EFFECTIVENESS. This Agreement shall not become effective until
three (3) days after ICI has completed its pending transaction with Accent
Health, and which transaction shall have resulted in revenue to ICI of at least
$200,000.
ARTICLE 9
JOINT REPRESENTATIONS BY THE PARTIES
9.1 The Parties shall use their best efforts to file or cause to be
filed with the Commission on or prior to thirty (30) days from the Closing Date,
a registration statement on Form S-4 (the "Registration Statement") to cover
resales of the shares of Newco's Common Stock to be issued to the holders of
MCC, ICI and HII's Stock pursuant hereto (the "Registered Shares"). The Parties
shall use all reasonable efforts to cause such Registration Statement to be
declared effective as soon as practicable thereafter. The Parties shall use all
reasonable efforts to keep such Registration Statement continuously effective,
supplemented and amended to the extent necessary to ensure that it is available
for resales of the Registered Shares for a period ending one year from the
Closing Date.
9.2 Newco will bear the costs of all Registration Expenses. For the
purposes hereof, "Registration Expenses" shall mean all expenses incident to the
preparation and filing of the Registration Statement, including, without
limitation, all registration and filing
54
fees, fees and expenses of compliance with federal securities laws or state blue
sky laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians and fees and disbursements of counsel and all
independent certified public accountants, and other persons retained by Newco.
9.3 In connection with the registration and sale of the Registered
Shares of Newco, the Parties will:
(a) prepare and file with the SEC the Registration Statement as set forth
above;
(b) provide to each holder of Newco Stock a copy of the Registration
Statement and related Prospectus, including each preliminary Prospectus, and
each amendment and supplement thereto and any additional copies as such holder
may reasonably request;
(c) use its best efforts to register or qualify the Registered Shares under
such other securities or blue sky laws of such jurisdictions as each holder
Newco Stock may reasonably request and do any and all other acts and things
which may be reasonably necessary or advisable to enable each holder of Newco
Stock to consummate the disposition in such jurisdictions of the Registered
Shares owned by such holder; provided, however, that Newco will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction, or (iii) consent to general service of
process in any such jurisdiction;
(d) upon the occurrence of any event that would cause the Registration
Statement (i) to contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) to be not effective and useable for
resale of the Registered Shares during the period that such Registration
Statement is required to be effective and useable, Newco upon knowledge of such
an event, shall as promptly as practicable file an amendment to the Registration
Statement, in the case of clause (i), correcting any such misstatement or
omission, and, in the case of either clause (i) or (ii), use its best efforts to
cause such amendment to be declared effective and such Registration Statement to
become useable as soon as practicable thereafter;
(e) notwithstanding anything to the contrary herein, Newco may prohibit
offers and sales of the Registered Shares pursuant to the Registration Statement
at any time if (i) it is in possession of material non-public information, (ii)
the Board of Directors of Newco determines based on advice of counsel that such
prohibition is necessary in order to avoid a requirement to disclose such
material non-public information, (iii) the Board of Directors of Newco
determines in good faith that disclosure of such material non-public information
would not be in the best interests of Newco and its stockholders, and (iv) Newco
imposes similar restrictions on the sale or purchase of its capital stock on any
officer and director of Newco (the period during which any such prohibition of
offers and sales of Registered Shares pursuant to the Registration Statement is
in effect
55
pursuant to this subparagraph (e) is referred to herein as a "Suspension
Period"). A Suspension Period shall commence on and include the date on which
Newco provides written notice to holders of stock covered by the Registration
Statement that offers and sales of Registered Shares cannot be made thereunder
in accordance with this Agreement and shall end two business days after the
earlier to occur of (i) the date on which such material information is disclosed
to the public or ceases to be material or Newco is able to so comply with its
disclosure obligations and SEC requirements, or (ii) ____________ days after
written notice is provided by Newco to the holders of the stock of such
Suspension Period. Each notice shall state to the extent, if any, as is
practicable, an estimate of the expected duration of the Suspension Period;
(f) each holder of ICI, HII or MCC Stock shall furnish to Newco such
information regarding the distribution of its Registered Shares as is required
by law to be disclosed in the Registration Statement (the "Requisite
Information") prior to effecting any sale pursuant to such Registration
Statement. Each holder of ICI, HII or MCC Stock as to which any Registration
Statement is being effected agrees prior to effecting any sale of the Registered
Shares thereunder to furnish promptly to Newco all information required to be
disclosed in order to make any Requisite Information previously furnished to
Newco by such holders of ICI, HII or MCC Stock not materially misleading or
necessary to cause such Registration Statement not to omit a material fact with
respect to such holder of ICI, HII or MCC Stock necessary in order to make the
statements therein not misleading;
(g) the Parties agree to use their best efforts to cause the Registered
Shares covered by the Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to enable
to consummate the disposition of such Registered Shares, subject to the proviso
contained in this Agreement, and cause all Registered Shares to be listed on
each securities exchange or national quotation system on which Newco's Common
Stock is then listed.
9.4 ADVICE OF DEVELOPMENTS. The Parties shall have continuing
obligations after the date of this Agreement through the Closing Date to advise
each other of any event, fact or circumstance, which has a material adverse
effect on the business, operations or financial condition of Newco.
ARTICLE 10
CONDITIONS TO CLOSING
The Parties' obligations to consummate the transactions contemplated by
this Agreement shall be subject to the full satisfaction of the following
conditions, each of which conditions may be waived in writing by the Parties:
10.1 INSTRUMENTS. The Parties and their representatives shall have
executed and delivered to each other the Exchange Documents, the Escrow
Agreement, if applicable, and any and all other documents reasonably required to
effectuate the transactions contemplated hereby.
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10.2 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Parties contained in this Agreement shall be true in all
material respects at the Closing as though made at such time except for any
changes in the ordinary course of business.
10.3 PERFORMANCE OF COVENANTS. The Parties shall have performed all
obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing Date
in all material respects.
10.4 CERTIFICATE. The Parties shall have delivered to each other
certificates executed by their chief executive officers, respectively,
certifying as to (i) satisfaction of the conditions set forth in this Agreement,
and (i) the results of the vote by their company's stockholders to approve the
transactions contemplated in this Agreement.
10.5 NO MATERIAL CHANGES. There shall not have been any material
adverse change in the assets, liabilities, business, operations or financial
condition of the Parties from the date hereof to the Closing Date, nor shall
there exist any condition which could reasonably be expected to result in such a
material adverse change, provided, however, that any material adverse change
that results from general economic, business or industry conditions or the
announcement of the transaction contemplated hereby shall be disregarded for the
purposes of this Section.
10.6 CONSENTS. All consents or approvals required for the consummation
of the transactions contemplated hereby, including any required consents of the
parties to any contract to which either HII, ICI or MCC is a party, shall have
been obtained, except any consents, which if not obtained would not have a
material adverse effect on the business, operations or financial condition of
the Parties.
10.7 OPINION. The Parties shall have delivered to each other opinions
of their counsel.
10.8 STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been duly approved and adopted by the requisite
vote of the stockholders of the Parties pursuant to the GCL.
10.9 FAIRNESS OPINION. MCC shall obtain, at the sole cost and expense
of Newco, a Fairness Opinion from a qualified financial advisor regarding the
fairness of the transactions contemplated within this Agreement to the
shareholders of MCC.
10.10 EFFECTIVE PROXY. The Proxy Statements, as set forth in Section
2.6 herein, shall have been reviewed and declared effective by the Securities
and Exchange Commission.
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10.11 FINANCING. MCC or ICI shall have raised financing in the minimum
aggregate amount of One Million Five Hundred Thousand Dollars ($1,500,000).
10.12 AUDITED FINANCIALS. The Parties shall have delivered to each
other, audited financial statements for the periods set forth in Sections 4.5,
5.4 and 6.5.
10.13 RECEIPT OF DUE DILIGENCE. The Parties shall have delivered to
each other, the due diligence materials set forth in Article 14.
10.14 PIC DIVESTITURE. MCC shall have divested its wholly-owned
subsidiary Priority International Communications, Inc. as set forth in Section
11.2.1.
10.15 REPUBLIC CREDIT CORPORATION. MCC shall have resolved any and all
claims, obligations and the like, to the satisfaction of ICI and HII, involving
Republic Credit Corporation.
10.16 MCC DEBT CONVERSION. MCC shall have converted all outstanding
debt, to the satisfaction of ICI and HII, into equity of MCC.
10.17 DISCLOSURE SCHEDULES. The Parties shall have delivered to each
other, the Disclosure Schedules set forth in Section 14.1 at least three (3)
days prior to the Closing.
10.18 EFFECTIVENESS. ICI shall have fully completed its pending
transaction with Accent Health providing a minimum commitment to ICI from Accent
in the amount of at least $200,000.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 SURVIVAL. The representations and warranties of the Parties hereto
contained in this Agreement or in any document, certificate or schedule or
instrument contemplated hereby or delivered pursuant hereto, shall survive the
Closing Date until the date (the "Expiration Date") that is two (2) years from
the Effective Time. The representations and warranties of the Parties contained
in this Agreement or in any document, certificate or instrument contemplated
hereby or delivered pursuant hereto, shall survive the Closing Date until the
Expiration Date.
11.2 MCC's INDEMNITY. MCC shall indemnify, defend, protect and hold
harmless HII and ICI, as well as their Subsidiaries and Affiliates and their
respective officers, directors, stockholders, employees and agents, from and
against any and all losses, costs, expenses, liabilities, obligations, claims,
demands, causes of action, suits, settlements and judgments of every nature,
including the costs and expenses associated therewith and reasonable attorneys',
consultants' and witness fees incurred in connection therewith ("HII's Damages"
and "ICI's Damages"), which arise out of: (i) the breach by MCC prior to the
Closing Date of any representation or warranty made by
58
MCC under this Agreement or any schedule, exhibit or certificate delivered by
MCC pursuant to this Agreement; (ii) the non-performance by MCC, partial or
total, prior to the Closing Date of any covenant made by MCC pursuant to this
Agreement or schedule, exhibit or certificate delivered by MCC pursuant to this
Agreement; or (iii) the conduct of the business of MCC prior to the Closing Date
in breach of any covenant set forth in this Agreement.
11.2.1 PIC TRANSACTION. MCC shall indemnify, defend, protect and
hold harmless HII and ICI, as well as their Subsidiaries and Affiliates and
their respective officers, directors, stockholders, employees and agents, from
and against any and all losses, costs, expenses, liabilities, obligations,
claims, demands, causes of action, suits, settlements and judgments of every
nature, including the costs and expenses associated therewith and reasonable
attorneys', consultants' and witness fees incurred in connection therewith
("HII's Damages" and "ICI's Damages"), which arise out MCC's ownership and/or
sale of its wholly-owned subsidiary Priority International Communications, Inc.
("PIC") which arise out of any act or failure to act or perform and obligation
on behalf of PIC, of any kind.
11.3 ICI's INDEMNITY. ICI shall, indemnify, defend, protect and hold
harmless MCC and its Affiliates and their respective officers, directors,
stockholders, employees and agents, from and against any and all losses, costs,
expenses, liabilities, obligations, claims, demands, causes of action, suits,
settlements and judgments of every nature, including the costs and expenses
associated therewith and reasonable attorneys', consultants' and witness fees
incurred in connection therewith ("MCC's Damages"; and when used together with
or in the alternative to HII's Damages or ICI's Damages, "Damages"), which arise
out of: (i) the breach by ICI of any certification, representation or warranty
made by ICI pursuant to this Agreement or any schedule, exhibit or certificate
delivered by ICI pursuant to this Agreement; (ii) the non-performance, partial
or total, of any covenant made by ICI pursuant to this Agreement required to be
performed prior to the Closing or any document or certificate delivered by ICI
pursuant to this Agreement; or (iii) the conduct of the business of ICI prior to
the Closing Date in breach of any covenant set forth in this Agreement.
11.4 HII's INDEMNITY. HII shall, defend, protect and hold harmless MCC
and its Affiliates and their respective officers, directors, stockholders,
employees and agents, from and against any and all losses, costs, expenses,
liabilities, obligations, claims, demands, causes of action, suits, settlements
and judgments of every nature, including the costs and expenses associated
therewith and reasonable attorneys', consultants' and witness fees incurred in
connection therewith ("MCC's Damages"; and when used together with or in the
alternative to HII's Damages or ICI's Damages, "Damages"), which arise out of:
(i) the breach by HII of any certification, representation or warranty made by
HII pursuant to this Agreement or any schedule, exhibit or certificate delivered
by HII pursuant to this Agreement or (ii) the non-performance, partial or total,
of any covenant made by HII pursuant to this Agreement required to be performed
prior to the Closing or any document or certificate delivered by HII pursuant
59
to this Agreement; or (iii) the conduct of the business of ICI prior to the
Closing Date in breach of any covenant set forth in this Agreement.
11.5 OTHER REMEDIES. The rights of indemnification of an Indemnities
shall be limited to the provisions of this Article, and the provisions of this
Article shall be exclusive of any other indemnification provided for under this
Agreement and any other rights or remedies at law or in equity, which may accrue
to an Indemnitee.
11.6 INDEMNIFICATION LIMITATIONS. Notwithstanding the foregoing, the
right to indemnification under this Section 11 shall be subject to the following
terms:
11.6.1 No indemnification shall be payable pursuant to Section 11
unless and until the amount of all claims for indemnification pursuant to the
applicable Section exceeds $50,000.
11.6.2 No indemnification shall be payable pursuant to Section
11.2 after the Expiration Date, except with respect to claims made prior to the
Expiration Date, but not resolved by the Expiration Date. Subject to the
foregoing, the representations and warranties contained herein or in any
certificate delivered pursuant hereto shall expire at the close of business on
the Expiration Date.
11.6.3 The limitations of Section 11.6.1 and 11.6.2 shall not apply
in the case of a fraudulent or intentional misrepresentation or breach by any
party, but no person shall be liable for any such misrepresentation or breach by
any other person.
11.6.5 In determining the amount of any indemnity, there shall be
taken into account any tax benefit, insurance proceeds or other similar recovery
or offset realized, directly or indirectly, by the party to be indemnified.
ARTICLE 12
TERMINATION
12.1 GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
12.1.1 by mutual written agreement of the Parties; or
12.1.2 by either Party if the Exchange shall not have been
consummated on or before November 30, 2001 (other than as a result of a failure
by such party to comply with its obligations under this Agreement); or
12.1.3 by HII in the event of the MCC's or ICI's material breach
of any of their covenants, representations or warranties under this Agreement;
or
12.1.4 by ICI in the event of the MCC's or HII's material breach
of any of their covenants, representations or warranties under this Agreement;
or
60
12.1.5 by MCC in the event of HII's or ICI's material breach of
any of their respective covenants, representations or warranties under this
Agreement.
12.2 EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 12.1, except as set forth in the next sentence, the parties
hereto shall have no further obligations to each other, provided that no such
termination shall impair, limit or affect, in any manner, any liability of any
party hereto for any breach of any covenant, representation or warranty set
forth in this Agreement, accrued as of the date of such termination. The
provisions of Article 11, shall survive any termination hereof.
ARTICLE 13
MISCELLANEOUS
13.1 ANNOUNCEMENTS. Each of MCC, HII and ICI agree not to make any
press release or other public announcements regarding this Agreement without the
other party's prior consent, unless reasonably required by applicable law, in
which case prompt written notice of such announcement shall be given to the
other party.
13.2 FINDERS AND BROKERS. The Parties represent that they have
retained the services of Waterford Financial, Inc. and Xxxxxxx Xxxxxx Company
for financial services and consulting, including assistance in the consummation
of the instant transaction. The Parties agree that any and all commissions
and/or fees required to be paid to Waterford Financial, Inc. and Xxxxxxx Xxxxxx
Company at the closing shall be paid by Newco. Copies of the Agreements with
Waterford Financial, Inc. and Xxxxxxx Xxxxxx Company are attached hereto in the
Disclosure Schedules. The Parties shall indemnify and hold each other harmless
from any claim that is asserted by any person for a finder's fee or like payment
with respect to this Agreement arising from any act, representation or promise
of the indemnifying party or its representative.
13.3 AMENDMENT. Subject to applicable law, this Agreement may only be
amended or supplemented by written agreement of MCC, ICI and HII.
13.4 WAIVER OF COMPLIANCE. Except as set forth herein, any failure of
MCC, ICI or HII, to comply with any provision of this Agreement may be expressly
waived in writing by other complying parties, but such waiver or failure to
insist upon strict compliance with such provision shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure. No failure to
exercise and no delay in exercising any right, remedy, or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, or power hereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, or power provided herein or by law
or in equity. The waiver by any party of the time for performance of any act or
condition hereunder does not constitute a waiver of the act or condition itself.
13.5 EXPENSES. At Closing, each of the parties hereto shall pay its
own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others
61
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.
13.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of each party contained herein shall not be
deemed waived or otherwise affected by any investigation made by or on behalf of
the other party and such representations and warranties shall survive the
Closing and the consummation of the Exchange contemplated hereby as provided in
Article 10. All statements contained in this Agreement or in any schedule,
exhibit, certificate, list, or other document delivered pursuant hereto shall be
deemed representations or warranties, as the case may be (as such terms are used
in this Agreement), of the party making such statements.
13.7 NOTICES. All notices, demands, and other communications required
or permitted hereunder shall be made in writing and shall be deemed to have been
duly given if delivered by hand, against receipt, or mailed, postage prepaid,
certified or registered mail, return receipt requested, and addressed as
follows:
To MCC at: XXXXXXX COMMUNICATIONS CORPORATION
0000 Xxxxx Xxxx, XX
Xxxxx Xxxxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxx
With a copy to: XXXXX X. XXXXXXX, ESQ.
The American Building
Xxxxxxx & Xxxxxxxxx, P.L.C.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxx 00000
To ICI at: INFORMED CARE, INC.
000 Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxxx Xxxxxxx, Xxxxxxx 00000
Attn.: Xxxxxxx X. Xxxxxxx
With a copy to: LEVY BOONSHOFT & XXXXXXXX, PC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxxx X. Xxxxxxxx, Esq.
To HII at: HOMETOWN INFO, INC.
000 Xxxxxx Xxxxxx - Xxxxx 0
Post Office Box 1569
Xxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx Xxxxxxxx, President
62
With a copy to: Xxxx XxxXxxxxx, Esq
c/o Waterford Financial Services, Inc.
000 0xx XxxxxxXxxxx,Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Notice of change of address shall be effective only when done in accordance
with this Section. All notices complying with this Section shall be deemed to
have been received on the date of delivery or on the third business day after
mailing.
13.8 ASSIGNMENT; SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, each party agrees that it will not assign, sell, transfer, delegate, or
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any right or obligation under this Agreement. Any purported assignment,
transfer, or delegation in violation of this Section shall be null and void.
Subject to the foregoing limits on assignment and delegation, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns. Except for those enumerated above, this
Agreement does not create, and shall not be construed as creating, any rights or
claims enforceable by any person or entity not a party to this Agreement.
13.9 GOVERNING LAW. The validity, interpretation, enforceability, and
performance of this Agreement shall be governed by and construed in accordance
with the law of the State of Delaware.
13.10 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13.11 HEADINGS. The headings of the Sections and Articles of this
Agreement and Table of Contents are for reference purposes only and shall not
constitute a part hereof or affect the meaning or interpretation of this
Agreement.
13.12 ENTIRE AGREEMENT. The parties intend that the terms of this
Agreement, including Disclosure Schedules of ICI, HII and MCC and other
documents referred to herein, shall be the final expression of their agreement
with respect to the subject matter hereof and may not be contradicted by
evidence of any prior or contemporaneous agreement. The parties further intend
that this Agreement shall constitute the complete and exclusive statement of its
terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, or other legal proceeding involving this Agreement.
13.13 MCC DISCLOSURE SCHEDULE. The MCC Disclosure Schedule, ICI
Disclosure Schedule and HII Disclosure Schedule shall be divided into sections
corresponding to the sections of this Agreement. Disclosure in any section of
those schedules shall constitute disclosure for purposes of all sections of the
Agreement.
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13.14 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any Person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places, and circumstances shall remain in full force and effect.
13.15 RULES OF CONSTRUCTION. The parties acknowledge that each party
has read and negotiated the language used in this Agreement. The parties agree
that, because all parties participated in negotiating and drafting this
Agreement, no rule of construction shall apply to this Agreement, which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting this Agreement.
13.16 ADDITIONAL DOCUMENTS. Each of the parties agree, without further
consideration, to execute and deliver such other documents and take such further
action as may be reasonably required to effectuate the provisions of this
Agreement.
13.17 ATTORNEY'S FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorney's fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
13.18 EXHIBITS. All Exhibits attached hereto shall be deemed to be a
part of this Agreement and are fully incorporated in this Agreement by this
reference.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Reorganization as of the date first written above.
ARTICLE 14
DISCLOSURE SCHEDULE
14.1 CONTENT. Notwithstanding anything to the contrary contained
hereto each party shall provide the other a schedule of items ("Disclosure
Schedule"), not later than three (3) business days before closing which shall
include information concerning any discrepancy between the representations and
warranties of a Party and the actual circumstances in existence at the time of
Closing. Without limiting the foregoing, each Disclosure Schedule shall include
the following information:
14.1.1 A list of all subsidiaries of the disclosing Party and a
description of all right, title or interest of the disclosing Party in or to
any other corporation, company, partnership, joint venture, strategic alliance,
trust, limited liability company or other Person.
14.1.2 A true and current copy of the Stockholder Register of the
disclosing Party, including, for each shareholder, the (i) name and address,
phone
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number and e-mail address; (ii) number of shares owned; (iii) dates of purchase;
(iv) amounts paid for shares; and (v) beneficially owned shares held in another
name. The information required in this Subsection (b) is to be updated as of the
close of business on the last business day prior to the Closing.
14.1.3 A complete list of warrants, rights, subscriptions,
preemptive rights, options or other agreements to purchase stock or any other
security of a Party and all outstanding securities convertible into, or
exchangeable for stock, that are outstanding.
14.1.4 Contracts to which the disclosing company is a party or by
which the disclosing company's assets are encumbered.
14.1.5 All bank and brokerage accounts, whether or not held in the
disclosing company's name.
14.1.6 The identity of all Persons granted a Power of Attorney by
the disclosing company and a summary of the terms thereof.
14.1.7 A list of material changes in condition, financial or
otherwise, of the disclosing company, including any previously undisclosed
liens.
14.1.8 A list of all insurance policies and bonds in force with
respect to the disclosing company or its assets, and providing (i) the name of
the insurer; (ii) the terms and extent of coverage; (iii) the names and
addresses of the owner and the loss payee of each policy; (iv) the annual
premium; and (v) the termination date of the policy or bond.
14.1.9 A description of all liens against the property or assets
of the disclosing company, giving, the name and address of the lien holder, the
reason for the lien, the amount of the lien and the terms and duration of the
lien.
14.1.10 A description of any assets disposed of since the date of
the last audited financial statements and the circumstances of the disposition.
14.1.11 A description of the circumstances of origin and the
present status of any violation of a law, regulation, ordinance, judgment,
injunction, decree or other order of a court, arbitrator, or governmental
authority.
14.1.12 A complete list and description of the intellectual
property owned, licensed to, licensed by, or in which the disclosing company
claims any right, title or interest, providing: (i) the nature of the
intellectual property; (ii) the identity of any other owners or claimants of
any right, title or interest in the intellectual property; (iii) the
jurisdictions by or in which the intellectual property has been registered or in
which an application for registration has been filed; (iv) a list of all
licenses and sublicenses to which the disclosing company is a party, whether as
licensee or licensor and the identity and status or all other parties to each
license or sublicense; and (v) the
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identity and terms of any agreement for indemnification related to an
infringement of intellectual property rights to which the disclosing company is
a party.
14.1.13 A description of any express warranties or guarantees made
by the disclosing company to any party.
14.1.14 The title, docket or case number of any pending or
threatened litigation and a brief description of the issues therein.
14.1.15 A complete list of all outstanding accounts payable and
any other continuing debts.
14.1.16 A complete list of all outstanding accounts receivable.
14.1.17 A list of all claims, debts or other monetary obligations
that have been paid, satisfied or discharged, in whole or in part, other than
payments made in the ordinary course of business.
14.1.18 A complete description of any write-down, discount,
cancellation, write-off or waiver taken or granted on any account receivable or
other obligation of the disclosing company.
14.1.19 A complete list and brief descriptions of each Employee
Plan currently in force.
14.1.20 A complete list and brief descriptions of all agreements
with directors, officers, unions, bargaining units, employees or consultants.
14.1.21 A complete list of current employees including annual
salary, bonuses paid in the past year and accrued vacation or sick days to date.
XXXXXXX COMMUNICATION CORPORATION
By /s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx, CEO
INFORMED CARE, INC.
By /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxx, CEO
66
HOMETOWN INFO, INC.
By /s/ Xxxxxx Xxxxxxxx
--------------------------------
Xxxxxx Xxxxxxxx, CEO
67
