Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXX.XXX, INC.
AG ACQUISITION CORP.
THE ALLEGRO GROUP, INC.
AND
THE SHAREHOLDERS OF
THE ALLEGRO GROUP, INC.
DATED AS OF
AUGUST 20, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
Section 1.1 The Merger.....................................................................................1
Section 1.2 Effective Time.................................................................................2
Section 1.3 Effect of the Merger...........................................................................2
Section 1.4 Directors and Officers.........................................................................2
Section 1.5 Additional Actions.............................................................................3
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES
Section 2.1 Merger Consideration...........................................................................3
Section 2.2 Conversion of Shares...........................................................................3
Section 2.3 Exchange of Certificates.......................................................................5
Section 2.4 No Fractional Securities.......................................................................6
Section 2.5 Stock Transfer Books...........................................................................6
Section 2.6 No Further Ownership Rights in Company Stock...................................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Corporate Organization.........................................................................7
Section 3.2 Authorization..................................................................................7
Section 3.3 Consents and Approvals; No Violations..........................................................7
Section 3.4 Capitalization.................................................................................8
Section 3.5 Financial Statements...........................................................................9
Section 3.6 Absence of Undisclosed Liabilities.............................................................9
Section 3.7 Absence of Certain Changes or Events...........................................................9
Section 3.8 Legal Proceedings, etc........................................................................10
Section 3.9 Taxes.........................................................................................10
Section 3.10 Title to Properties and Related Matters.......................................................12
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Section 3.11 Intellectual Property; Proprietary Rights; Employee Restrictions..............................13
Section 3.12 Contracts.....................................................................................15
Section 3.13 Employees; Employee Benefits..................................................................16
Section 3.14 Compliance with Applicable Law................................................................18
Section 3.15 Ability to Conduct the Business...............................................................18
Section 3.16 Major Customers...............................................................................18
Section 3.17 Consultants, Sales Representatives and Other Agents...........................................19
Section 3.18 Accounts Receivable...........................................................................19
Section 3.19 Insurance.....................................................................................19
Section 3.20 Bank Accounts; Powers of Attorney.............................................................19
Section 3.21 Minute Books, etc.............................................................................19
Section 3.22 Related Person Indebtedness and Contracts.....................................................20
Section 3.23 Brokers; Payments.............................................................................20
Section 3.24 Company Action................................................................................20
Section 3.25 Year 2000 Matters.............................................................................20
Section 3.26 Disclosure....................................................................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Section 4.1 Authorization; etc............................................................................21
Section 4.2 Parent Common Stock...........................................................................22
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION CORP.
Section 5.1 Corporate Organization........................................................................24
Section 5.2 Authorization.................................................................................24
Section 5.3 Consents and Approvals; No Violations.........................................................25
Section 5.4 Capitalization................................................................................25
Section 5.5 SEC Reports...................................................................................26
Section 5.6 Litigation....................................................................................26
Section 5.7 Compliance with Applicable Law................................................................26
Section 5.8 Brokers; Payments.............................................................................26
Section 5.9 Disclosure....................................................................................26
Section 5.10 Validity of Shares............................................................................26
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Section 5.11 No Material Adverse Change....................................................................27
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Transfer of Shares............................................................................27
Section 6.2 Reasonable Efforts; etc.......................................................................27
Section 6.3 Fees and Expenses.............................................................................27
Section 6.4 Nasdaq National Market Listing................................................................27
Section 6.5 Tax Covenants.................................................................................28
Section 6.6 Indemnification...............................................................................29
Section 6.7 Exchange Act Reports..........................................................................30
Section 6.8 Legends.......................................................................................30
Section 6.9 Employee Stock Options........................................................................30
ARTICLE VII
COVEnants of shaREHOLDERS
Section 7.1 Non-competition...............................................................................31
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS
OF THE PARENT AND ACQUISITION CORP.
Section 8.1 Representations and Warranties True...........................................................32
Section 8.2 Performance...................................................................................32
Section 8.3 Absence of Litigation.........................................................................32
Section 8.4 Consents......................................................................................32
Section 8.5 Additional Agreements.........................................................................33
Section 8.6 Delivery of Certificates for Cancellation.....................................................33
Section 8.7 Certificate of Merger.........................................................................33
Section 8.8 Payment of Indebtedness.......................................................................33
Section 8.9 Shareholder Disclosure and Approval...........................................................33
Section 8.10 Opinion of Bird & Associates, P.C.............................................................33
Section 8.11 Supporting Documents..........................................................................33
Section 8.12 Shareholder Disclosure and Approval...........................................................34
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ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
AND SHAREHOLDERS
Section 9.1 Representations and Warranties True...........................................................34
Section 9.2 Performance...................................................................................34
Section 9.3 Absence of Litigation.........................................................................34
Section 9.4 Consents......................................................................................35
Section 9.5 Additional Agreements.........................................................................35
Section 9.6 Certificate of Merger.........................................................................35
Section 9.7 Cash and Shares of Parent Common Stock........................................................35
Section 9.8 Opinion of Winthrop, Stimson, Xxxxxx & Xxxxxxx................................................35
Section 9.9 Supporting Documents..........................................................................35
ARTICLE X
TERMINATION
Section 10.1 Termination...................................................................................36
Section 10.2 Effect of Termination.........................................................................37
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 11.1 Indemnity Obligations.........................................................................37
Section 11.2 Notification of Claims........................................................................38
Section 11.3 Duration......................................................................................39
Section 11.4 No Contribution...............................................................................39
ARTICLE XII
MISCELLANEOUS PROVISION
Section 12.1 Amendment.....................................................................................40
Section 12.2 Waiver of Compliance..........................................................................40
Section 12.3 Notices.......................................................................................40
Section 12.4 Assignment....................................................................................42
Section 12.5 No Third Party Beneficiaries..................................................................42
Section 12.6 Public Announcements..........................................................................42
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Section 12.7 Counterparts..................................................................................43
Section 12.8 Headings......................................................................................43
Section 12.9 Entire Agreement..............................................................................43
Section 12.10 Governing Law.................................................................................43
EXHIBITS
Exhibit A Certificate of Merger (Ohio)
Exhibit B Form of Tax Affidavit
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of August 20, 1999 by and among
Xxxx.xxx, Inc., a corporation organized under the laws of the State of Delaware
(the "PARENT"), AG Acquisition Corp., a corporation organized under the laws of
the State of Ohio and a wholly-owned subsidiary of the Parent ("ACQUISITION
CORP."), The Allegro Group, Inc., a corporation organized under the laws of the
State of Ohio (the "COMPANY"), and the shareholders of the Company (the
"SHAREHOLDERS") identified on the signature pages hereto.
WHEREAS, the respective Boards of Directors of the Parent, Acquisition
Corp. and the Company have approved the merger of the Company with and into
Acquisition Corp. (the "MERGER"), pursuant to which Acquisition Corp. will be
the surviving corporation and the stockholders of the Company immediately prior
to such merger will be entitled to receive the consideration provided for in
this Agreement, all upon the terms and subject to the conditions set forth
herein;
WHEREAS, it is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements set forth herein, and intending to be legally bound
hereby, the parties hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. (a) At the Effective Time (as defined in Section
1.2), and subject to and upon the terms and conditions of this Agreement and the
Ohio Revised Code (the "ORC"), the Company shall be merged with and into
Acquisition Corp., the separate corporate existence of the Company shall cease,
and Acquisition Corp. shall continue as the surviving corporation. Acquisition
Corp. as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "SURVIVING CORPORATION."
(b) CLOSING. Unless this Agreement has been terminated and the transactions
herein contemplated have been abandoned pursuant to Article X and subject to the
satisfaction or waiver of the conditions set forth in Articles VIII and IX, the
consummation of the Merger (the "CLOSING") will take place as promptly as
practicable (and in any event within two (2) business days) after satisfaction
or waiver of the conditions set forth in Articles VIII and IX, at the offices of
Winthrop, Stimson, Xxxxxx & Xxxxxxx, Xxx Xxxxxxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx,
unless another date, time or place is agreed to in writing by the Company and
the Parent. The date of such Closing is referred to herein as the "CLOSING
DATE."
Section 1.2 EFFECTIVE TIME. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Articles VIII and IX, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger as contemplated by the ORC in the
form of Exhibit A hereto (the "CERTIFICATE OF MERGER"), together with any
required related certificates, with the Secretary of State of the State of Ohio,
in such form as required by, and executed in accordance with the relevant
provisions of, the ORC (the time of such filings being the "EFFECTIVE TIME").
Section 1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the ORC. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Acquisition Corp. shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Acquisition Corp. shall become the debts, liabilities and duties of
the Surviving Corporation.
(a) CERTIFICATE OF INCORPORATION. Unless otherwise determined
by the Parent prior to the Effective Time, at the Effective Time, the
Articles of Incorporation of Acquisition Corp., as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended in accordance with the ORC and
such Articles of Incorporation, except that the name of Acquisition Corp.
shall be changed to "THE ALLEGRO GROUP, INC."
(b) BY-LAWS. Unless otherwise determined by the Parent prior
to the Effective Time, the Regulations of Acquisition Corp., as in effect
immediately prior to the Effective Time, shall be the Regulations of the
Surviving Corporation until thereafter amended in accordance with the ORC,
the Articles of Incorporation of the Surviving Corporation and such
Regulations.
Section 1.4 DIRECTORS AND OFFICERS. The directors of Acquisition Corp.
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Regulations of the Surviving Corporation, and the officers of
the Company immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified. As of the Effective
Time, Parent shall cause the election of Xxxxx X. Xxxxxxx as a full voting
member of the Board of Directors of the Surviving Corporation, and the Parent
shall cause his re-election as a full voting member from time to time such that
he shall be entitled to hold such position for so long as he remains employed by
the Surviving Corporation or until the earlier merger of the Surviving
Corporation into another corporation or the earlier consolidation or liquidation
of the Surviving Corporation. From and after the Effective Time, the Parent
shall maintain directors' and officers' insurance covering Xx. Xxxxxxx in his
capacity as an officer and director of the Surviving Corporation on
substantially the same terms and conditions applicable to other officers and
directors of the Parent and the Surviving Corporation.
Section 1.5 ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation considers or is advised that any deeds, bills of sale,
assignments, assurances or any other acts or things are necessary or desirable
to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, its right, title or interest in or to any of the rights, properties
or assets of Acquisition Corp. or the Company acquired or to be acquired by
reason of, or as a result of, the Merger, or otherwise to carry out the purposes
of this Agreement, the Surviving Corporation and its proper officers and
directors shall be authorized to execute and
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deliver, in the name and on behalf of Acquisition Corp. or the Company, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of Acquisition Corp. or the Company, all such other acts and things
necessary or desirable to vest, perfect or confirm any and all right, title or
interest in, to or under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES
Section 2.1 MERGER CONSIDERATION. The consideration payable in the Merger
to holders of shares of the Company's Common Stock, $.01 par value ("COMPANY
COMMON STOCK"), shall consist of (a) shares of the Class A Common Stock, $.01
par value per share, of the Parent or shares, property or other consideration
into which such shares shall have been converted in the event of any merger,
consolidation, reorganization or other event in which the shares of Class A
common stock of Parent are converted into the right to receive other shares,
property or consideration ("PARENT COMMON STOCK"), and (b) cash. Such shares of
Parent Common Stock issuable and cash payable as provided herein shall in the
aggregate be referred to as the "MERGER CONSIDERATION."
Section 2.2 CONVERSION OF SHARES.
(a) CONVERSION OF SHARES. (i) Each share of Company Common
Stock issued and outstanding as of the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically be converted into the right to receive the Closing Payment (as
hereinafter defined) and the Contingent Payment (as hereinafter defined). The
Closing Payment shall be made on the Closing Date. The Contingent Payment
shall be made on the date which is within 5 days after the date of completion
of the audit of Parent's (or any successor's) financial statements for the
year ended December 31, 2000, but in no event later than 5 days after the
filing of Parent's (or any successor's) Annual Report on Form 10-K for such
year with the Securities and Exchange Commission.
(ii) The "Closing Payment" means (A) $7,892.77 in cash
and (B) 2,750.56 shares of Parent Common Stock.
(iii) The "Contingent Payment" means (A) an amount in cash
equal to the amount obtained by dividing (I) 16% of the Contingent
Consideration Amount (as hereinafter defined) by (II) 401 and (B) the
number of shares of Parent Common Stock equal to the number obtained by
dividing (I) the number of shares of Parent Common Stock having an
aggregate Deemed Value (as defined below) equal to 80% of the
Contingent Consideration Amount by (II) 401.
(iv) The "Contingent Consideration Amount" means the product
obtained by multiplying (A) four by (B) the positive excess, if any, of
Calendar Year 2000 Revenues (as defined below) over the Base Revenue
Amount (up to $5,000,000 of such excess). The Contingent Consideration
Amount shall not exceed $20,000,000. If Calendar Year
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2000 Revenues are equal to or less than the Base Revenue Amount, the
Contingent Consideration Amount shall be $0. If Calendar Year 2000
Revenues are equal to or greater than the sum of the Base Revenue
Amount plus $5,000,000, the Contingent Consideration Amount shall be
$20,000,000.
(v) "Calendar Year 2000 Revenues" means Net Revenues (as
defined below) of the Surviving Corporation for the year ended December
31, 2000 as reflected in the Parent's audited financial statements for
such year.
(vi) "Net Revenues" means gross revenues less allowances,
discounts, credits, refunds and bad debt expense and excluding barter
revenues, all as determined in accordance with generally accepted
accounting principles consistently applied ("GAAP"). Net revenues does
not include interest income and other income as determined under GAAP.
(vii) "Deemed Value" means the greater of (I) the Fair Market
Value (as defined below) per share of Parent Common Stock and (II)
$8.00 (such amount to be appropriately adjusted for any stock split,
stock dividend, stock combination or recapitalization having similar
effect).
(viii) "Fair Market Value" means the average of the last
quoted sale prices for one share of Parent Common Stock on The Nasdaq
National Market (or, if the Parent Common Stock is not then quoted on
The Nasdaq National Market but is traded on a national securities
exchange, then such securities exchange) for the ten trading days
ending with the trading day immediately prior to the day on which the
Contingent Payment is payable hereunder or, if the Parent Common Stock
is not then traded on The Nasdaq National Market or a national
securities exchange, the fair market value of one share of Parent
Common Stock as determined (such determination to be made as of the day
by which the Contingent Payment is required to be made hereunder) by an
independent investment bank of national reputation experienced in
valuing securities of corporations in the Parent's industry and which
shall be mutually selected by Xxxxx Xxxxxxx, on behalf of the
Shareholders, and Parent.
(ix) The "Base Revenue Amount" means (i) if Parent is not
required or requested to fund expenditures of the Surviving Corporation
in excess of the $3,000,000 (or, if the conditions for advance of the
additional $1,000,000 or $2,000,000, as applicable, in funding are met
and such amount is funded, $4,000,000 or $5,000,000, as applicable)
aggregate amount committed by Parent pursuant to the budget agreed to
by Parent and Xxxxx Xxxxxxx, on behalf of the Shareholders, $5,000,000
and (ii) if Parent is required or requested to fund (and does in fact
fund) expenditures of the Surviving Corporation in excess of such
amounts so committed, the sum of $5,000,000 plus the result obtained by
multiplying two by such excess amount that Parent is so required to
fund.
(x) The amount of cash (including the cash portion of the
Contingent Payment) and the number of shares of Parent Common Stock
(including the Parent Common Stock portion of the Contingent Payment)
into which each share of Company Stock is convertible are collectively
referred to herein as the "EXCHANGE RATIO." The aggregate
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number of shares of Parent Common Stock issued pursuant to this
Section 2.2(a) shall be referred to in this Agreement as the "MERGER
SHARES." SCHEDULE 2.2 attached hereto sets forth the allocation of the
Merger Consideration among the Shareholders.
(b) TREASURY SHARES. Each share of Company Common Stock held
in the Company's treasury as of the Effective Time, if any, shall, by virtue
of the Merger, be canceled without payment of any consideration therefor.
(c) ACQUISITION CORP. SHARES. Each share of common stock, par
value $0.01 per share, of Acquisition Corp. issued and outstanding at the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, remain outstanding and thereafter represent one
share of common stock of the Surviving Corporation, as such shares of common
stock are constituted immediately following the Effective Time.
Section 2.3 EXCHANGE OF CERTIFICATES. (a) At the Closing, certificates (the
"CERTIFICATES") representing all of the issued and outstanding shares of Company
Common Stock shall be surrendered for cancellation and termination in the
Merger. At the Effective Time, each Certificate shall be canceled in exchange
for the amount in cash and a certificate representing the number of whole shares
of Parent Common Stock into which the Company Common Stock evidenced by the
Certificates so surrendered has been converted pursuant to Section 2.2(a)(ii) of
this Agreement. Such certificates representing shares of Parent Common Stock
shall be delivered to the Shareholders on the Closing Date. The cash component
of the Closing Payment shall, at Closing, be wired to an account designated by
the Shareholders in the amounts set forth on SCHEDULE 2.2 attached hereto. Until
surrendered, each outstanding Certificate which prior to the Effective Time
represented shares of Company Common Stock shall be deemed for all corporate
purposes to evidence ownership of (A) the number of whole shares of Parent
Common Stock into which the shares of Company Common Stock have been converted
and (B) the amount of cash issuable upon conversion of such shares of Company
Common Stock, but shall have no other rights. From and after the Effective Time,
the holders of shares of Company Common Stock shall cease to have any rights in
respect of such shares and their rights shall be solely in respect of the amount
of cash and Parent Common Stock into which such shares of Company Common Stock
have been converted.
(b) In the event any Certificate has been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed, Parent shall issue in exchange for such lost,
stolen or destroyed Certificate the cash and shares of Parent Common Stock
issuable in exchange therefor pursuant to the provisions of Section 2.2(a) of
this Agreement. The Board of Directors of Parent may in its discretion and as a
condition precedent to the issuance thereof require the owner of such lost,
stolen or destroyed Certificate to provide to Parent an indemnity agreement
against any claim that may be made against Parent with respect to the
Certificate alleged to have been lost, stolen or destroyed.
Section 2.4 NO FRACTIONAL SECURITIES. No fractional shares of Parent Common
Stock shall be issuable by the Parent upon the conversion of shares of Company
Common Stock in the Merger pursuant to Section 2.2(a) hereof. In lieu of any
such fractional shares, each holder of Company Common Stock who would otherwise
have been entitled to receive a fraction of a
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share of Parent Common Stock shall be entitled to receive instead an amount in
cash equal to such fraction multiplied by the Closing Market Price.
Section 2.5 STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of Company Common Stock thereafter on the records of the Company.
Section 2.6 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. The amount of
cash and the Merger Shares delivered upon the surrender for exchange of shares
of Company Common Stock in accordance with the terms hereof shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates for shares of Company Common Stock are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY
Each of the Shareholders, jointly and severally, represents and warrants to
the Parent and Acquisition Corp. as set forth below as of the date of this
Agreement and as of the Closing Date, subject to the exceptions set forth in the
disclosure schedules attached hereto (the "DISCLOSURE SCHEDULES"), the section
numbers and letters of which correspond to the section and subsection numbers
and letters of this Agreement.
Section 3.1 CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. The Company has no Subsidiaries (as that term is hereinafter defined)
except for Allegro Group DISC, Inc., which has never held any assets, has never
conducted any activities and which will be dissolved prior to or shortly after
the Closing Date. The Company has all requisite corporate power and authority to
own, operate and lease the properties and assets it now owns, operates and
leases and to carry on its business as presently conducted. The Company is duly
qualified to transact business as a foreign corporation and is in good standing
in the jurisdictions set forth in SCHEDULE 3.1, which are the only jurisdictions
where such qualification is required by reason of the nature of the properties
and assets currently owned, operated or leased by it or the business currently
conducted by it except for those jurisdictions where the failure to be so
qualified would not have a Company Material Adverse Effect (as defined in
Section 3.7). The Company has previously delivered to the Parent complete and
correct copies of its Articles of Incorporation (certified by the Secretary of
State of the State of Ohio as of a recent date) and its By-Laws (certified by
the Secretary of the Company as of a recent date). Except as set forth in
SCHEDULE 3.1, neither the Company's Articles of Incorporation nor its By-Laws
have been amended since the date of certification thereof, nor has any action
been taken for the purpose of effecting any amendment of such instrument.
Section 3.2 AUTHORIZATION. The Company has full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The
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execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the Board of
Directors and shareholders of the Company, and no other corporate action on the
part of the Company is necessary to approve and authorize the execution and
delivery of this Agreement or (subject to the filing of the Certificate of
Merger pursuant to the ORC) the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding agreement of the Company, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in law or in equity, and
requirements of good faith, fair dealing and reasonableness.
Section 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not: (i) violate or conflict with any provision of the Certificate
of Incorporation or By-Laws of the Company, (ii) except for any of the following
that would not have a Company Material Adverse Effect or a material adverse
effect on the transactions contemplated hereby, (A) breach, violate or
constitute an event of default (or an event which with the lapse of time or the
giving of notice or both would constitute an event of default) under, give rise
to any right of termination, cancellation, modification or acceleration under,
or, except as set forth on SCHEDULE 3.3, require any consent or the giving of
any notice under, any note, bond, indenture, mortgage, security agreement,
lease, license, franchise, permit, agreement or other instrument or obligation
to which the Company is a party, or by which the Company or any of its
properties or assets may be bound except as the failure to obtain consent or
give notice under which would not have a Company Material Adverse Effect or a
material adverse effect on the transactions contemplated hereby, or (B) result
in the creation of any lien, claim or encumbrance or other right of any third
party of any kind whatsoever upon the properties or assets of the Company
pursuant to the terms of any such instrument or obligation, (iii) violate or
conflict with any law, statute, ordinance, code, rule, regulation, judgment,
order, writ, injunction, decree or other instrument of any federal, state, local
or foreign court or governmental or regulatory body, agency or authority
applicable to the Company or by which any of its properties or assets may be
bound or (iv) except as disclosed on Schedule 3.3, require, on the part of the
Company, any filing or registration with, or permit, license, exemption,
consent, authorization or approval of, or the giving of any notice to, any
governmental or regulatory body, agency or authority except as the failure to
make such filing or registration or to obtain such permit, license, exemption,
consent, authorization or approval or to give such notice would not have a
Company Material Adverse Effect or a material adverse effect on the transactions
contemplated hereby.
Section 3.4 CAPITALIZATION. (a) The authorized capital stock of the Company
consists of 850 shares of Company Common Stock, of which 450 shares are voting
common stock and 400 shares are nonvoting common stock and of which 401 shares
of voting common stock are issued and outstanding.
SCHEDULE 3.4(A) sets forth a complete and correct list of the record and
beneficial ownership of the issued and outstanding shares of Company Common
Stock. All of the issued and outstanding shares of Company Common Stock were
duly authorized and validly issued and are fully paid and nonassessable, and
were not issued in violation of any preemptive rights or federal or state
securities laws. Except as disclosed in SCHEDULE 3.4(A) hereto, the Company
has never repurchased or redeemed any shares of its capital stock, and there
are no amounts owed or which may be owed to any person by the Company as a
result of any repurchase or redemption of shares of its capital stock. Except
as disclosed in
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SCHEDULE 3.4(A) hereto, there are no agreements, arrangements or understandings
to which the Company is a party or by which it is bound to redeem or repurchase
any shares of its capital stock. There are no outstanding options, warrants or
other rights to purchase, or any securities convertible into or exchangeable for
("Convertible Securities"), Convertible Securities or shares of the capital
stock of the Company, and there are no agreements, arrangements or
understandings to which the Company is a party or by which it is bound pursuant
to which the Company is or may be required to issue additional shares of its
capital stock.
(b) Except for shares of Allegro Group DISC, Inc., as described
in Section 3.1 hereof, the Company does not own, directly or indirectly, any
equity securities, or options, warrants or other rights to acquire equity
securities, or securities convertible into or exchangeable for equity
securities, of any other corporation or any limited liability company, or any
partnership interest in any general or limited partnership or unincorporated
joint venture (a "SUBSIDIARY").
Section 3.5 FINANCIAL STATEMENTS. (a) Attached hereto as SCHEDULE 3.5(A)
are (i) the unaudited balance sheets of the Company as of December 31, 1998 and
1997 and the unaudited statements of income and cash flows for each of the years
ended December 31, 1998, 1997 and 1996 and (ii) the unaudited balance sheets of
the Company as of June 30, 1999 and 1998 and the unaudited statements of income
and cash flows of the Company for the six month periods then ended (hereinafter
collectively referred to as the "FINANCIAL STATEMENTS"). Except as set forth on
Schedule 3.5(a), the Financial Statements (i) have been prepared from the books
and records of the Company, (ii) have been prepared in accordance with GAAP
during the periods covered thereby and (iii) present fairly in all material
respects the financial condition and results of operations and cash flows of the
Company as at the dates, and for the periods, stated therein.
Section 3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except (i) as set forth on
SCHEDULE 3.6, (ii) as set forth or reserved against in the balance sheet of the
Company dated as of June 30, 1999, included in the Financial Statements (the
"BALANCE SHEET") and (iii) for obligations and liabilities incurred since June
30, 1999 in the ordinary course of business, which do not individually or in the
aggregate exceed $25,000, the Company does not have any material liabilities or
obligations of any nature, whether accrued, absolute, contingent or otherwise.
Section 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
SCHEDULE 3.7, since December 31, 1998, the Company has carried on its business
in all material respects in the ordinary course and consistent with past
practice. Except as set forth on SCHEDULE 3.7 hereto, since December 31, 1998,
the Company has not: (i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise) except in the ordinary course of
business and consistent with past practice; (ii) experienced any Company
Material Adverse Effect (as defined below); (iii) made any change in accounting
principle or practice or in its method of applying any such principle or
practice; (iv) suffered any damage, destruction or loss, whether or not covered
by insurance, affecting its properties, assets or business; (v) mortgaged,
pledged or subjected to any lien, charge or other encumbrance, or granted to
third parties any rights in, any of its assets, tangible or intangible; (vi)
sold or transferred any of its
8
assets having a value in excess of $5,000 per individual asset or $50,000 in the
aggregate for all assets sold or transferred, except in the ordinary course of
business and consistent with past practice, or canceled or compromised any debts
or waived any claims or rights except in the ordinary course of business and
consistent with past practice,; (vii) issued any additional shares of capital
stock or any rights, options or warrants to purchase, or securities convertible
into or exchangeable for, Convertible Securities or shares of its capital stock;
(viii) declared or paid any dividends on or made any distributions (however
characterized) in respect of shares of its capital stock; (ix) repurchased or
redeemed any shares of its capital stock; (x) granted any general or specific
increase in the compensation payable or to become payable to any of its
Employees (as that term is hereinafter defined) or any bonus or service award or
other like benefit, or instituted, increased, augmented or improved any Benefit
Plan (as that term is hereinafter defined); or (xi) entered into any agreement
to do any of the foregoing. The term "COMPANY MATERIAL ADVERSE EFFECT" means,
for purposes of this Agreement, any change, event or effect that is, or that is
reasonably likely to be, materially adverse to the business, prospects,
operations, assets, liabilities contingent or otherwise, financial condition or
results of operations of the Company or the Surviving Corporation.
Section 3.8 LEGAL PROCEEDINGS, ETC. Except as set forth in SCHEDULE 3.8,
there are no suits, actions, claims, proceedings (including, without limitation,
arbitral or administrative proceedings) or investigations pending or, to the
best knowledge of the Company (which, for purposes of this Agreement shall mean
the best knowledge of the Shareholders and the Company), threatened against the
Company or its properties, assets or business or, to the best knowledge of the
Company, pending or threatened against any of the Shareholders, officers,
directors, employees, agents or consultants of the Company in connection with
the business of the Company. There are no such suits, actions, claims,
proceedings or investigations pending against the Company, or, to the best
knowledge of the Company, threatened against the Company challenging the
validity or propriety of the transactions contemplated by this Agreement. There
is no judgment, order, injunction, decree or award (whether issued by a court,
an arbitrator or an administrative agency) to which the Company is a party, or
involving the Company's properties, assets or business, which is unsatisfied or
which requires continuing compliance therewith by the Company.
Section 3.9 TAXES. The Company represents and warrants the following:
(a) Except as set forth in SCHEDULE 3.9, all Tax returns,
reports and other filings in respect of Taxes (as that term is hereinafter
defined) required to be filed in respect of the Company have been or will be
duly and timely filed, have been or will be prepared in compliance in all
material respects with all applicable laws, rules and regulations, and (in
the case of all filed returns, reports and other filings) are true, correct
and complete, and all Taxes of the Company, whether or not shown as due on
such returns, reports or other filings, have been or will be fully paid when
due. The Company has established in accordance with GAAP adequate reserves on
the Balance Sheet for Taxes accrued but not yet due or has determined in
accordance with GAAP that such reserves are not necessary.
(b) Except as set forth in SCHEDULE 3.9, there are no actions
or proceedings currently pending or, to the best knowledge of the Company,
threatened against the Company by any governmental authority for the
assessment or collection of Taxes, no claim for the
9
assessment or collection of Taxes has been asserted against the Company, and
there are no matters under discussion between the Company with any governmental
authority regarding claims for the assessment or collection of Taxes. Any unpaid
Taxes that have been claimed or imposed as a result of any examinations of any
Tax return, report or other filing of the Company by any governmental authority
are being contested in good faith and are fully described in SCHEDULE 3.9.
Except as set forth in SCHEDULE 3.9, there are no agreements or applications by
the Company for an extension of time for the assessment or payment of any Taxes
and no waivers of the statute of limitations in respect of Taxes. There are no
Tax liens on any of the assets of the Company, except for liens for Taxes not
yet due. The Company has not received any claim from any taxing authority in a
jurisdiction in which the Company does not file Tax returns that it is or may be
subject to taxation by that jurisdiction.
(c) Except as set forth in SCHEDULE 3.9, there is no
agreement, plan or arrangement covering any employee or independent
contractor or former employee or independent contractor of the Company that,
considered individually or considered collectively with any other such
agreement, plan or arrangement, will, or could reasonably be expected to,
give rise directly or indirectly to the payment of any amount that would not
be deductible pursuant to Section 280G of the Code or that would be subject
to an excise tax under Section 4999 of the Code.
(d) Except as set forth in SCHEDULE 3.9, the Company is not
and has never been a party to or bound by any Tax indemnity agreement, Tax
sharing agreement, Tax allocation agreement or similar agreement or
arrangement and the Company does not have any liability for any Taxes of any
other person under Treasury Regulation 1.1502-6 (or any similar provision of
state, local or foreign law).
(e) Except as set forth in SCHEDULE 3.9, the Company has
withheld or deducted all Taxes or other amounts from payments to employees or
other persons required to be deducted or withheld, and has timely paid over
such Taxes or other amounts to the appropriate governmental authorities to
the extent due and payable.
(f) The Company is not a "consenting corporation" within the
meaning of Section 341(f)(1) of the Code, or comparable provisions of any
state statutes, and none of the assets of the Company is subject to an
election under Section 341(f) of the Code or comparable provisions of any
state statutes.
(g) The Company is not, and has not been, a "United States
real property holding corporation" within the meaning of Section 897(c)(2) of
the Code.
(h) Except as set forth in SCHEDULE 3.9, there are no
accounting method changes or proposed or threatened accounting method changes
with respect to the Company, or any other item, that could give rise to an
adjustment under Section 481 of the Code for periods after the Closing Date,
and the Company will not be required to make any such Section 481 adjustment
as a result of the transactions contemplated by this Agreement.
(i) Except as set forth in SCHEDULE 3.9, no power of attorney
has been granted by the Company and is currently in force with respect to any
matter relating to Taxes.
10
(j) The Company is, and has been at all times since its
incorporation, an "S corporation" within the meaning of Code Section 1361(a).
A valid election under Code Section 1362 (and a comparable election under
Ohio law) has been in effect with respect to the Company at all times since
September 22, 1995. Xxxxx Xxxxxxx, as sole shareholder of the Company at the
time the election was made,filed in a timely fashion with each of the
Internal Revenue Service and the State of Ohio a consent to such S
corporation elections with respect to the Company. The Company has not been,
and will not be, subject to Tax under Code Section 1374 or 1375 (or any
comparable provision of Ohio law) for any period ending on or before the
Closing Date.
(k) For purposes of this Agreement, the terms "TAX" and
"TAXES" shall mean and include any and all United States federal, state,
local, foreign or other taxes (including, without limitation, any and all
income, franchise, sales, use, excise, withholding, employment, payroll,
social security or property taxes) and similar assessments, customs, duties,
charges and fees (including interest, penalties and additions to such taxes,
assessments, customs, duties, charges and fees, penalties for failure to file
or late filing of any return, report or other filing, and any interest in
respect of such penalties and additions).
Section 3.10 TITLE TO PROPERTIES AND RELATED MATTERS. (a) Except as set
forth on SCHEDULE 3.10(A), the Company has good and valid title to all personal
property, tangible or (excluding any Intellectual Property Rights, as defined in
Section 3.11) intangible, which the Company purports to own, including the
properties reflected on the Balance Sheet or acquired after the date thereof
(other than properties and assets sold or otherwise disposed of in the ordinary
course of business and consistent with past practice since June 30, 1999), free
and clear of any claims, liens, pledges, security interests or encumbrances of
any kind whatsoever (other than (i) purchase money security interests and common
law vendor's liens, in each case for goods purchased on open account in the
ordinary course of business and having a fair market value of less than $10,000
in each individual case, (ii) liens for Taxes not yet due and payable, and (iii)
such imperfections of title and encumbrances, if any, that are not material in
character, amount or extent and that do not materially detract from the value,
or materially interfere with the use of, the property subject thereto or
affected thereby or that affect property having a fair market value of less than
$10,000 in each individual case). Collectively, such property, the property
leased by the Company as disclosed on SCHEDULE 3.10(c) and the Intellectual
Property Rights disclosed on SCHEDULE 3.11 constitute all property, tangible or
intangible, used by the Company necessary to conduct the Company's business as
presently conducted.
(b) The Company does not own any real property or any interest
in real property, except as set forth in SCHEDULE 3.10(d).
(c) SCHEDULE 3.10(c) sets forth a list, which is correct and
complete in all material respects, of all equipment, machinery, instruments,
vehicles, furniture, fixtures and other items of personal property currently
owned or leased by the Company with a book value as of June 30, 1999, in each
case of $5,000 or more. Except as set forth in SCHEDULE 3.10(c), all such
personal property that is material to the Company's business is in suitable
operating condition (ordinary and reasonable wear and tear excepted) and is
physically located in or about one of the Company's places of business and is
owned by the Company or is leased by the Company under one of the leases set
forth in SCHEDULE 3.10(d). Except as disclosed in SCHEDULE 3.10(c), none of
such personal property is subject to any agreement or commitment for
11
its use by any person other than the Company. The maintenance and operation of
such personal property has been in conformance in all material respects with all
applicable laws and regulations. Except as set forth on SCHEDULE 3.10(C), there
are no assets leased by the Company that are owned, directly or indirectly, by
any Related Person (as that term is hereinafter defined in Section 3.22).
(d) SCHEDULE 3.10(d) sets forth a complete and correct list of
all real property and personal property leases to which the Company is a
party. The Company has previously delivered to the Parent complete and
correct copies of each lease (and any amendments or supplements thereto)
listed in SCHEDULE 3.10(d). Except as set forth in SCHEDULE 3.10(d), (i) each
such lease is valid and binding, and in full force and effect; (ii) neither
the Company nor (to the best knowledge of the Company) any other party is in
default under any such lease, and no event has occurred which constitutes, or
with the lapse of time or the giving of notice or both would constitute, a
default by the Company or (to the best knowledge of the Company) a default by
any other party under such lease; (iii) there are no disputes or
disagreements between the Company and any other party with respect to any
such lease; and (iv) there is no requirement under any such lease that the
Company either obtain the lessor's consent to, or notify the lessor of, the
consummation of the transactions contemplated by this Agreement.
Section 3.11 INTELLECTUAL PROPERTY; PROPRIETARY RIGHTS; EMPLOYEE
RESTRICTIONS. (a) Set forth on SCHEDULE 3.11 is a list of all copyright
registrations and applications for copyright registrations, trademark
registrations and applications for trademark registrations, patents and
patent applications, trademarks, service marks, trade names and Internet
domain names that are used by the Company in the Company's business as
presently conducted. The items listed on SCHEDULE 3.11, together with all
other intellectual property rights owned by the Company and used in
connection with its business and (i) all licenses, assignments and releases
of intellectual property rights of others in material works embodied in the
Company's products, (ii) any and all intellectual property rights, licenses,
data and databases, computer programs and other computer software user
interfaces, know-how, trade secrets, customer lists, proprietary technology,
processes and formulas, source code, object code, algorithms, architecture,
structure, display screens, layouts, development tools, instructions,
templates and marketing materials created by or on behalf of the Company and
(iii) inventions, trade dress, logos and designs created by or on behalf of
the Company are referred to as "INTELLECTUAL PROPERTY RIGHTS." Except as set
forth on SCHEDULE 3.11 or as the failure to have been validly assigned would
not have a Company Material Adverse Effect, all Intellectual Property Rights
purported to be owned by the Company which were developed, worked on or
otherwise held by any shareholder, employee, officer, consultant or otherwise
are owned free and clear by the Company by operation of law or have been
validly assigned to the Company. Except for the items listed in Exhibit A to
SCHEDULE 3.12(a), true and correct copies of all such licenses, assignments
and releases of Intellectual Property Rights have been provided to Parent
prior to the date hereof, all of which are, to the knowledge of the
Shareholders, valid and binding and in full force and effect. Except as set
forth on SCHEDULE 3.11 or as the failure to have been validly assigned would
not have a Company Material Adverse Effect, all services provided to the
Company by non-employees in respect of the creation, modification or
improvement of any Intellectual Property Rights of the Company (including,
without limitation, software, hardware, copyrightable works and the like)
have been performed pursuant to agreements with the Company that assign to
the Company ownership of such Intellectual Property Rights, each of which is
a valid and binding and in full force and
12
effect. The Intellectual Property Rights (along with other commercially
available intellectual property rights) are sufficient to carry on the business
of the Company as presently conducted. Except as set forth on SCHEDULE 3.11, the
Company has license to use or exclusive ownership of all Intellectual Property
Rights material to the Company's business as presently conducted identified in
SCHEDULE 3.11 as owned or licensed by the Company or has obtained any licenses,
releases or assignments reasonably necessary to use all third parties'
Intellectual Property Rights material to the Company's business as presently
conducted in works embodied in the Company's products. Except as set forth on
Schedule 3.11, the present business activities or products of the Company do not
infringe any Intellectual Property Rights of others. Except as set forth in
SCHEDULE 3.11, the Company has not received any notice or other claim from any
person asserting that any of the Company's present activities infringe or may
infringe any Intellectual Property Rights of such person.
(b) Except as set forth on SCHEDULE 3.11, the Company has the
right to use all trade secrets, data, customer lists, log files, hardware
designs, programming processes, software and other information required for
or incident to its products or its business (including, without limitation,
the operation of its Web sites) as presently conducted and has no reason to
believe that any of such information that is provided to the Company by third
parties will not continue to be provided to the Company on the same terms and
conditions as currently exist. The Company has taken reasonable measures to
protect and preserve the security and confidentiality of its trade secrets
and other confidential information. To the best knowledge of the
Shareholders,all trade secrets and other confidential information of the
Company are not part of the public domain or knowledge, nor have they been
misappropriated by any person having an obligation to maintain such trade
secrets or other confidential information in confidence for the Company. To
the best knowledge of the Company, no employee or consultant of the Company
has used any trade secrets or other confidential information of any other
person in the course of his work for the Company. Except as set forth in
Schedule 3.11, the Company is the exclusive owner of all right, title and
interest in its Intellectual Property Rights as purported to be owned by the
Company and, to the best knowledge of the Company, such Intellectual Property
Rights are valid and in full force and effect. No university, government
agency (whether federal or state) or other organization that sponsored
research and development conducted by the Company has any claim of right to
or ownership of or other encumbrance upon the Intellectual Property Rights of
the Company. Except as set forth in Schedule 3.11,the Company is not aware of
any present infringement by others of the Company's copyrights or other
Intellectual Property Rights in any of its products, technology or services,
or any violation in any material respect of the confidentiality of any of its
proprietary information. To the Company's best knowledge, the Company is not
making unlawful use of any confidential information or trade secrets of any
past or present employees of the Company.
(c) Except as set forth in SCHEDULE 3.11, neither the Company
nor, to the knowledge of the Company, any of the Company's Shareholders or
employees, has any agreements or arrangements with current or former
employers of such Shareholders or employees (which agreements or arrangements
relate to (i) confidential information or trade secrets of such employers, or
(ii) the assignment of rights by such Shareholders or employees to any
inventions, know-how or intellectual property of any kind) that would
interfere with such Shareholder's or employees' ability to develop or assign
to the Company any Intellectual Property Rights developed by such Shareholder
or employee for the Company. The Company
13
and the Shareholders have previously delivered to Parent true and correct copies
of each such agreement listed on SCHEDULE 3.11. To the best knowledge of the
Shareholders, no such Shareholders or employees are bound by any consulting
agreement relating to confidential information or trade secrets of another
entity that are being violated by such persons. The activities of the Company's
employees on behalf of the Company do not violate any agreements or arrangements
known to the Company or any of its Shareholders which any such employees or
consultants have with former employers or any other entity to whom such
employees or consultants may have rendered consulting services.
Section 3.12 CONTRACTS. (a) Except as set forth in SCHEDULE 3.12(a) (or
in SCHEDULE 3.4(a), SCHEDULE 3.10(d), SCHEDULE 3.11 or SCHEDULE 3.13(a)), the
Company is not a party to, or subject to:
(i) any contract, arrangement or understanding, or
series of related contracts, arrangements or understandings, that
involves annual expenditures or receipts by the Company of more than
$10,000;
(ii) any note, indenture, credit facility, mortgage,
security agreement or other contract, arrangement or understanding
relating to or evidencing indebtedness for money borrowed or a security
interest or mortgage in the assets of the Company;
(iii) any guaranty issued by the Company;
(iv) any contract, arrangement or understanding relating
to the acquisition, issuance or transfer of any securities;
(v) any contract, arrangement or understanding relating
to the acquisition, transfer, distribution, use, development, sharing
or license of any technology or Intellectual Property Rights;
(vi) any contract, arrangement or understanding granting
to any person the right to use any property or property right of the
Company other than licenses granted in the ordinary course of business
with a term of less than one year;
(vii) any contract, arrangement or understanding
restricting the Company's or any Subsidiary's right to (A) engage in
any business activity or compete with any business, or (B) develop or
distribute any technology;
(viii) any contract, arrangement or understanding relating
to the employment of, or the performance of services of, any employee,
consultant or independent contractor and pursuant to which the Company
is required to pay more than $10,000 per year;
(ix) any contract, arrangement or understanding with a
Related Person (as that term is hereinafter defined); or
(x) any outstanding offer, commitment or obligation to
enter into any contract or arrangement of the nature described in
subsections (i) through (ix) of this subsection 3.12(a).
14
(b) The Company has previously made available for inspection and copying to
the Parent copies that are complete and correct in all material respects (or, in
the case of oral contracts, a materially complete and correct description) of
each contract (and any amendments or supplements thereto) listed on Schedule
3.12(a). Except as set forth in SCHEDULE 3.12(b), (i) each contract listed in
SCHEDULE 3.12(a) is in full force and effect; (ii) neither the Company nor any
other party is in default under any material contract, and no event has occurred
that constitutes, or with the lapse of time or the giving of notice or both
would constitute, a default by the Company or (to the best knowledge of the
Company) a default by any other party under such contract; (iii) there are no
material disputes or disagreements between the Company and any other party with
respect to any material contract; and (iv) except as mutually agreed by the
parties and set forth on SCHEDULE 3.12(b), Part 2, or where the failure to
obtain consent or give notice would not have a Company Material Adverse Effect
and would not have a material adverse effect on the transactions contemplated
hereby, each other party to each contract has consented or been given notice (or
prior to the Closing shall have consented or been given notice), where such
consent or the giving of such notice is necessary, sufficient that such contract
shall remain in full force and effect following the consummation of the
transactions contemplated by this Agreement without modification in the rights
or obligations of the Company thereunder.
(c) Except as set forth and described in SCHEDULE 3.12(c), the Company has
not issued any warranty or any agreement or commitment to indemnify any person.
Section 3.13 EMPLOYEES; EMPLOYEE BENEFITS. (a) SCHEDULE 3.13(a) sets
forth the names of all current employees of the Company (the "EMPLOYEES") and
such Employee's job title, the location of employment of such Employee, such
Employee's current salary, the amount of any bonuses or other compensation
paid since December 31, 1998 to such Employee, the date of employment of such
Employee and the accrued vacation time of such Employee. SCHEDULE 3.13(a)
hereto sets forth a true and correct (in all material respects) statement of
the liability, if any, of the Company for accrued but unused sick pay. Except
as set forth on SCHEDULE 3.13(a), there are no outstanding loans from the
Company to any officer, director, employee, agent or consultant of the
Company, or to any other Related Person. SCHEDULE 3.13(a) hereto sets forth a
complete and correct description of all severance policies of the Company.
Complete and correct copies of all written agreements with Employees and all
employment policies, and all amendments and supplements thereto, have
previously been delivered or made available to the Parent, and a list of all
such agreements and policies is set forth on SCHEDULE 3.13(a). To the best
knowledge of the Shareholders and except as set forth on SCHEDULE 3.13(a),
none of the Employees has indicated a desire to terminate his or her
employment, or any intention to terminate his or her employment upon a sale
of, or business combination relating to, the Company or in connection with
the transactions contemplated by this Agreement. Except as set forth on
SCHEDULE 3.13(a), since December 31, 1998, the Company has not (i) increased
the salary or other compensation payable or to become payable to or for the
benefit of any of the Employees, (ii) increased the term or tenure of
employment for any Employee, (iii) increased the amounts payable to any of
the Employees upon the termination of any such person's employment or (iv)
adopted, increased, augmented or improved benefits granted to or for the
benefit of any of the Employees under any Benefit Plan.
15
(b) Except as disclosed on SCHEDULE 3.13(b), the Company
has complied in all material respects with Title VII of the Civil Rights Act
of 1964, as amended, the Age Discrimination in Employment Act, as amended,
the Fair Labor Standards Act, as amended, the Immigration Reform and Control
Act of 1986, and all applicable laws, rules and regulations governing payment
of minimum wages and overtime rates, the withholding and payment of taxes
from compensation, discriminatory practices with respect to employment and
discharge, or otherwise relating to the conduct of employers with respect to
Employees or potential employees, and there have been no claims made or to
the best knowledge of the Company, threatened thereunder against the Company
arising out of, relating to or alleging any violation of any of the
foregoing. Except as disclosed in SCHEDULE 3.13(b), there are no material
controversies, strikes, work stoppages, picketing or disputes pending or, to
the best knowledge of the Company, threatened between the Company and any of
the Employees or former Employees; no labor union or other collective
bargaining unit represents or has ever represented any of the Employees,
including any "LEASED EMPLOYEES" (within the meaning of Section 414(n) of the
Code); no organizational effort by any labor union or other collective
bargaining unit currently is under way or, to the best knowledge of the
Company, threatened with respect to any Employees; and the consent of no
labor union or other collective bargaining unit is required to consummate the
transactions contemplated by this Agreement.
(c) SCHEDULE 3.13(c) sets forth a list of each defined
benefit and defined contribution plan, stock ownership plan, employment or
consulting agreement, executive compensation plan, bonus plan, incentive
compensation plan or arrangement, deferred compensation agreement or
arrangement, agreement with respect to temporary employees or "LEASED
EMPLOYEES" (within the meaning of Section 414(n) of the Code), vacation pay,
sickness, disability or death benefit plan (whether provided through
insurance, on a funded or unfunded basis or otherwise), employee stock
option, stock appreciation rights or stock purchase plan, severance pay plan,
cafeteria plan, arrangement or practice, employee relations policy, practice
or arrangement, and each other employee benefit plan, program or arrangement,
including, without limitation, each "EMPLOYEE BENEFIT PLAN" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), which has been maintained by the Company for the
benefit of or relating to any of the Employees or to any former Employees or
their dependents, survivors or beneficiaries, whether or not legally binding,
whether written or oral or whether express or implied, all of which are
hereinafter referred to as the "BENEFIT PLANS."
(d) Except for the Company's 401(k) plan, no Benefit Plan is either an
"EMPLOYEE PENSION BENEFIT PLAN" (as defined in Section 3(2) of ERISA) or other
form of retirement plan intended to meet the requirements of Section 401(a) of
the Code. No Benefit Plan is an "EMPLOYEE WELFARE BENEFIT PLAN" (as defined in
Section 3(1) of ERISA) that at any time prior to the Closing was not exempt from
the annual reporting requirement set forth in Section 104(a) of ERISA, as
provided in 29 CFR Section 2520.104-20. No Benefit Plan is a "VOLUNTARY
EMPLOYEES BENEFICIARY ASSOCIATION" (within the meaning of Section 501(c)(9) of
the Code) and there have been no other "WELFARE BENEFIT FUNDS" (within the
meaning of Section 419 of the Code) relating to Employees or former Employees.
No event or condition exists with respect to any Benefit Plan that could subject
the Company to any Tax under Section 4980B of the Code, or other applicable law.
With respect to each Benefit Plan, the Company has heretofore delivered or made
available to the Parent complete and correct copies of the following
16
documents, where applicable and to the extent available: (i) the most recent
summary plan description and all modifications, as well as all other
descriptions distributed to Employees or set forth in any manuals or other
documents, (ii) the text of the Benefit Plan and of any trust, insurance or
annuity contracts maintained in connection therewith and (iii) the most recent
actuarial report, if any, relating to the Benefit Plan.
Section 3.14 COMPLIANCE WITH APPLICABLE LAW. The Company is not in
violation in any material respect of any applicable safety, health,
environmental or other law, statute, ordinance, code, rule, regulation,
judgment, order, injunction, writ or decree of any federal, state, local or
foreign court or governmental or regulatory body, agency or authority having,
asserting or claiming jurisdiction over it or over any part of its business,
operations, properties or assets, except for any violation that would not have a
Company Material Adverse Effect. The Company has not received any notice
alleging any such violation, nor to the best knowledge of the Company, is there
any inquiry, investigation or proceedings relating thereto.
Section 3.15 ABILITY TO CONDUCT THE BUSINESS. There is no agreement,
arrangement or understanding, nor any judgment, order, writ, injunction or
decree of any court or governmental or regulatory body, agency or authority
applicable to the Company or to which the Company is a party or by which it (or
any of its properties or assets) is bound, that will prevent the use by the
Surviving Corporation, after the Effective Time, of the properties and assets
owned, leased or used by, the business conducted by or the services rendered by
the Company on the date hereof, in each case on substantially the same basis as
the same are used, owned, conducted or rendered on the date hereof. The Company
has in force, and is in compliance with all governmental permits, licenses,
exemptions, consents, authorizations and approvals used in or required for the
conduct of its business as presently conducted, all of which, except as set
forth in SCHEDULE 3.15 or as the failure to so remain in force would not have a
Company Material Adverse Effect, shall continue in full force and effect,
without requirement of any filing or the giving of any notice and without
modification thereof, following the consummation of the transactions
contemplated hereby. The Company has not received any notice of, and to the best
knowledge of the Company, there are no inquiries, proceedings or investigations
relating to or which could result in, the revocation or modification of any such
permit, license, exemption, consent, authorization or approval.
Section 3.16 MAJOR CUSTOMERS. SCHEDULE 3.16 sets forth a complete and
correct list of the 50 largest customers of the Company, in terms of revenue
recognized in respect of such customers during the month ended June 30, 1999,
showing the amount of revenue recognized for each such customer during such
period. Except as set forth and described in SCHEDULE 3.16, the Company has not
received any notice or other communication (written or oral) from any of the
customers listed in SCHEDULE 3.16 hereto terminating or reducing in any material
respect, or setting forth an intention to terminate or reduce in the future, or
otherwise reflecting a material adverse change in, the business relationship
between such customer and the Company.
Section 3.17 CONSULTANTS, SALES REPRESENTATIVES AND OTHER AGENTS. SCHEDULE
3.17 hereto sets forth a complete and correct list of the names and addresses of
each consultant, sales representative or other agent (other than any such person
performing solely clerical functions) currently engaged by the Company who is
not an employee of the Company, the commission rates or other compensation
applicable with respect to each such person and the amount of
17
commissions or other compensation earned by each such person for the six (6)
months ended June 30, 1999. Complete and correct copies of all current
agreements between the Company and any such person have previously been
delivered or made available by the Company to the Parent.
Section 3.18 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
reflected on the balance sheet at June 30, 1999 (i) arose from bona fide
transactions in the ordinary course of business and consistent with past
practice, (ii) except as set forth on SCHEDULE 3.18, are owned by the Company
free and clear of any security interest, lien, encumbrance, claims and (iii) are
accurately and fairly reflected on the balance sheet in accordance with
generally accepted accounting principles consistently applied. The reserves for
bad debts reflected on the balance sheet (including any determination to
establish no reserves) were calculated or such determination was made in
accordance with generally accepted accounting principles consistent with past
practice and are adequate.
Section 3.19 INSURANCE. SCHEDULE 3.19 hereto is a true and complete list of
all insurance policies carried by the Company with respect to its business,
together with, in respect of each such policy, the name of the insurer, the
number of the policy, the annual policy premium payable therefor, the limits of
coverage, the deductible amount (if any), the expiration date thereof and each
pending claim thereunder. Complete and correct copies of each certificate of
insurance have previously been delivered or made available by the Company to the
Parent. All such policies are in full force and effect. All premiums due thereon
have been paid.
Section 3.20 BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 3.20 sets forth a
complete and correct list showing:
(i) all bank accounts of the Company, together with,
with respect to each such account, the account number, the names of all
signatories thereof, the authorized powers of each such signatory and
the approximate balance thereof on the date of this Agreement; and
(ii) the names of all persons holding powers of attorney
from the Company and a summary statement or a copy of the terms
thereof.
Section 3.21 MINUTE BOOKS, ETC. The minute books, stock certificate
book and stock ledger of the Company are complete and correct in all material
respects. The minute books of the Company contain materially accurate and
complete records of all meetings or written consents to action of the Board of
Directors and shareholders of the Company and accurately reflect in all material
respects all corporate actions of the Company which are required by law to be
passed upon by the Board of Directors or shareholders of the Company.
Section 3.22 RELATED PERSON INDEBTEDNESS AND CONTRACTS. SCHEDULE 3.22
sets forth a complete and correct list of (and complete and correct copies have
been provided to Parent of) all contracts, commitments, arrangements and
understandings not described elsewhere in this Agreement between the Company and
any of the following (collectively, "RELATED PERSONS"): (i) the Shareholders;
(ii) the spouses and children of any of the Shareholders (collectively, "NEAR
RELATIVES"); (iii) any trust for the benefit of any of the Shareholders or any
of their respective near relatives; or (iv) any corporation, partnership, joint
venture or other entity or enterprise owned or
18
controlled by any of the Shareholders or by any of their respective near
relatives. All amounts contributed by the Shareholders to the Company have been
treated as contributions to Company equity and have not been treated as, nor do
they constitute, indebtedness of the Company to its Shareholders.
Section 3.23 BROKERS; PAYMENTS. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company or the Shareholders. The Company has suspended or terminated, and
has the legal right to terminate or suspend, all negotiations and discussions of
business combination transactions with parties other than Parent. No valid claim
exists against the Company or, based on any action by the Company, against the
Surviving Corporation or the Parent for payment of any "TOPPING," "BREAK-UP" or
"BUST-UP" fee or any similar compensation or payment arrangement as a result of
the transactions contemplated hereby.
Section 3.24 COMPANY ACTION. The Board of Directors of the Company, by
unanimous written consent or at a meeting duly called and held, has (i)
determined that the Merger is fair and in the best interests of the Company and
its shareholders, (ii) approved the Merger and this Agreement in accordance with
the provisions of the ORC and (iii) directed that this Agreement and the Merger
be submitted to the Company shareholders for the adoption of this Agreement and
adoptionand resolved to recommend that the Company's shareholders vote in favor
of the adoptionof this Agreement and the approval of the Merger. The
shareholders of the Company have approved the Merger and this Agreement in
accordance with the provisions of the ORC.
Section 3.25 YEAR 2000 MATTERS.
(a) The Company has in good faith performed reasonable testing and
examination of all its computer hardware and software owned, licensed or
otherwise used by the Company, other than hardware or software that is not
material to the operation of the Company's business, and the Company will
perform whole-system testing and examination of such software and hardware in
the month of October, 1999 (the "Whole-System Testing"), to determine whether
such hardware and software will perform differently or experience any
malfunctions or usage problems due to the change in the calendar year from 1999
to the year 2000 that would have a Company Material Adverse Effect. Based on the
testing it has completed to the date of this Agreement, and subject to the
results of the Whole-System Testing and the provisions of subparagraph (b)
below, the Company has no reason to believe that such hardware and software will
perform differently or experience any malfunctions or usage problems due to the
change in the calendar year from 1999 to the year 2000 that would have a Company
Material Adverse Effect.
(b) The Company has no reason to believe that, with respect to the
electricity, telephone and Internet services provided to the Company by third
parties, it would experience any malfunctions or service problems due to the
change in the calendar year from 1999 to the year 2000 that would have a Company
Material Adverse Effect.
19
Section 3.26 DISCLOSURE. No representation or warranty by the Company
contained in this Agreement and no statement contained in any of the Disclosure
Schedules delivered or to be delivered pursuant to this Agreement by the Company
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
RELATING TO THE SHAREHOLDERS
Section 4.1 AUTHORIZATION; ETC. Each of the Shareholders severally and not
jointly represents and warrants as of the date hereof and as of the Closing Date
to the Parent and Acquisition Corp. as follows:
(i) Each of the Shareholders is the sole and exclusive
record and beneficial owner of the shares of the Company's capital
stock set forth opposite his or her name in SCHEDULE 3.4 hereto, free
and clear of any claims, liens, pledges, options, rights of first
refusal or other encumbrances or restrictions of any nature whatsoever
(other than restrictions on transfer imposed under applicable
securities laws), and, except as set forth on SCHEDULE 3.4 hereto,
there are no agreements, arrangements or understandings to which such
Shareholder is a party (other than this Agreement) involving the
purchase, sale or other acquisition or disposition of the shares owned
by such Shareholder;
(ii) such Shareholder shall (A) concurrently with such
Shareholder's execution and delivery of this Agreement, execute and
deliver to Parent a written consent in which such Shareholder voted all
shares of capital stock entitled to vote owned by such Shareholder in
favor of the Merger and the adoption of this Agreement by the Company,
(B) at the Effective Time, deliver or cause to be delivered to the
Parent certificates representing all shares of Company Common Stock
owned by such Shareholder, each such certificate to be duly endorsed
for transfer and free and clear of any claims, liens, pledges, options,
rights of first refusal or other encumbrances or restrictions of any
nature whatsoever (other than restrictions imposed under applicable
securities laws);
(iii) such Shareholder has all necessary legal capacity,
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and this Agreement
constitutes a valid and binding obligation of such Shareholder
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of
creditors, rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding
in law or in equity; and
(iv) the execution and delivery of this Agreement by such
Shareholder and the consummation of the transactions contemplated
hereby will not (A) except as disclosed on Schedule 4.1, breach,
violate or constitute an event of default (or an event
20
which with the lapse of time or the giving of notice or both would
constitute an event of default) under, give rise to any right of
termination, cancellation, modification or acceleration under or
require any consent or the giving of any notice under, any note, bond,
indenture, mortgage, security agreement, lease, license, franchise,
permit, agreement or other instrument or obligation to which such
Shareholder is a party, or by which such Shareholder or the shares of
Company Common Stock held by such Shareholder may be bound, or result
in the creation of any material lien, claim or encumbrance or other
right of any third party of any kind whatsoever upon the properties or
assets of such Shareholder pursuant to the terms of any such
instrument or obligation, or (B) violate or conflict with any law,
statute, ordinance, code, rule, regulation, judgment, order, writ,
injunction, decree or other instrument of any court or governmental or
regulatory body, agency or authority applicable to such Shareholder or
by which such the shares of, Company Common Stock held by such
Shareholder may be bound.
Section 4.2 PARENT COMMON STOCK. Each Shareholder, severally and not
jointly, acknowledges, represents and warrants to the Parent and Acquisition
Corp. as follows:
(i) Such Shareholder understands that the shares of
Parent Common Stock to be issued to such Shareholder in the Merger will
not have been registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), or any state securities law by reason of
specific exemptions under the provisions thereof which depend in part
upon the other representations and warranties made by the Shareholder
in this Agreement. Such Shareholder understands that the Parent is
relying, in part, upon the Shareholder's representation and warranties
contained in this Section 4.2 for the purpose of determining whether
this transaction meets the requirements for such exemptions.
(ii) Such Shareholder has such knowledge, skill and
experience in business, financial and investment matters so that the
Shareholder is capable of evaluating the merits and risks of an
investment in the Parent Common Stock pursuant to the transactions
contemplated by this Agreement or to the extent that the Shareholder
has deemed it appropriate to do so, the Shareholder has relied upon
appropriate professional advice regarding the tax, legal and financial
merits and consequences of an investment in Parent Common Stock
pursuant to the transactions contemplated by this Agreement.
(iii) Such Shareholder has made, either alone or together
with the Shareholder's advisors, such independent investigation of the
Parent, its management and related matters as the Shareholder deems to
be, or such advisors have advised to be, necessary or advisable in
connection with an investment in the Parent Common Stock through the
transactions contemplated by this Agreement; and the Shareholder and
advisors have received all information and data that the Shareholder
and such advisors believe to be necessary in order to reach an informed
decision as to the advisability of an investment in the Parent Common
Stock pursuant to the transactions contemplated by this Agreement.
(iv) Such Shareholder has reviewed the Shareholder's
financial condition and commitments, alone and together with the
Shareholder's advisors, and, based on such review, the Shareholder is
satisfied that (A) the Shareholder has adequate means of
21
providing for the Shareholder's financial needs and possible
contingencies and has assets or sources of income which, taken
together, are more than sufficient so that he or she could bear the
risk of loss of his or her entire investment in the Parent Common
Stock, (B) the Shareholder has no present or contemplated future need
to dispose of all or any portion of the Parent Common Stock to satisfy
any existing or contemplated undertaking, need or indebtedness, and
(C) the Shareholder is capable of bearing the economic risk of an
investment in the Parent Common Stock for the indefinite future. Such
Shareholder shall furnish any additional information about the
Shareholder reasonably requested by the Parent to assure the
compliance of this transaction with applicable federal and state
securities laws.
(v) Such Shareholder understands that the shares of the
Parent Common Stock to be received by the Shareholder in the
transactions contemplated hereby will be "RESTRICTED SECURITIES" under
applicable federal securities laws and that the Securities Act and the
rules of the Securities and Exchange Commission (the "SEC") promulgated
thereunder provide in substance that the Shareholder may dispose of
such shares only pursuant to an effective registration statement under
the Securities Act or an exemption from registration if available. Such
Shareholder further understands that, the Parent has no obligation or
intention to register the sale of any of the shares of the Parent
Common stock to be received by the Shareholder in the transactions
contemplated hereby, or take any other action so as to permit sales
pursuant to, the Securities Act. Such Shareholder further understands
that applicable state securities laws may impose additional constraints
upon the sale of securities. As a consequence, the Shareholder
understands that the Shareholder may have to bear the economic risk of
an investment in the Parent Common Stock to be received by the
Shareholder pursuant to the transactions contemplated hereby for an
indefinite period of time.
(vi) Such Shareholder is acquiring shares of the Parent
Common Stock pursuant to the transactions contemplated hereby for
investment only and not with a view to or intention of or in connection
with any resale or distribution of such shares or any interest therein.
(vii) The certificate(s) evidencing the shares of the
Parent Common Stock to be issued pursuant to the transactions
contemplated hereby shall bear the following legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
any state securities laws and may not be sold or transferred
in the absence of such registration or an exemption therefrom
under the Securities Act of 1933, as amended, and applicable
state securities laws."
"The shares represented by this certificate are subject to
certain restrictions on transfer and other dispositions
pursuant to a lock-up letter dated as of August 20, 1999. A
copy of such lock-up letter is maintained at the offices of
the Corporation by the Secretary of the Corporation."
22
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION CORP.
The Parent and Acquisition Corp. jointly and severally represent and
warrant to the Company as of the date hereof and as of the Closing Date that:
Section 5.1 CORPORATE ORGANIZATION. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Acquisition Corp. is a corporation duly organized, validly existing
and in good standing under the laws of the State of Ohio. Each of the Parent and
Acquisition Corp. has all requisite corporate power and authority to own,
operate and lease the properties and assets it now owns, operates and leases and
to carry on its business as presently conducted. The Parent and Acquisition
Corp. are each duly qualified to transact business as a foreign corporation and
are each in good standing in the jurisdictions set forth opposite their
respective names in SCHEDULE 5.1, which are the only jurisdictions where such
qualification is required by reason of the nature of the properties and assets
currently owned, operated or leased by the Parent or Acquisition Corp. or the
business currently conducted by them, except for such jurisdictions where the
failure to be so qualified would not have a Xxxx.xxx Material Adverse Effect (as
defined below). Acquisition Corp. is a corporation newly formed by Parent and
has not conducted any business other than as expressly set forth in or
contemplated by this Agreement. The term "XXXX.XXX MATERIAL ADVERSE Effect"
means for purposes of this Agreement, any change, event or effect that is, or
would be, materially adverse to the business, prospects, operation, assets,
liabilities, financial condition or results of operations of the Parent and
Acquisition Corp., taken as a whole.
Section 5.2 AUTHORIZATION. Each of the Parent and Acquisition Corp. has
full corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly approved by the Boards of Directors of the Parent and Acquisition
Corp. and by the Parent as the sole stockholder of Acquisition Corp., and no
other corporate proceedings on the part of the Parent or Acquisition Corp. are
necessary to approve and authorize the execution and delivery of this Agreement
or (subject to the filing of the Certificates of Merger pursuant to the ORC) the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Parent and Acquisition Corp. and constitutes
the valid and binding agreement of the Parent and Acquisition Corp., enforceable
in accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or in law).
Section 5.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Subject to (a) the
filing of the Certificate of Merger with the Secretary of State of the State of
Ohio and (b) compliance with applicable federal and state securities laws, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not: (i) violate or conflict with any
provisions of the Certificate or Articles of Incorporation or By-Laws or
Regulations of the Parent
23
or Acquisition Corp.; (ii) breach, violate or constitute an event of default (or
an event which with the lapse of time or the giving of notice or both would
constitute an event of default) under, give rise to any right of termination,
cancellation, modification or acceleration under, or require any consent or the
giving of any notice under, any note, bond, indenture, mortgage, security
agreement, lease, license, franchise, permit, agreement or other instrument or
obligation to which the Parent or Acquisition Corp. are parties, or by which any
of them or any of their respective properties or assets may be bound, or result
in the creation of any lien, claim or encumbrance of any kind whatsoever upon
the properties or assets of the Parent or Acquisition Corp. pursuant to the
terms of any such instrument or obligation, other than any breach, violation,
default, termination, cancellation, modification or acceleration which would not
have a Xxxx.xxx Material Adverse Effect; (iii) violate or conflict with any law,
statute, ordinance, code, rule, regulation, judgment, order, writ, injunction or
decree or other instrument of any federal, state, local or foreign court or
governmental or regulatory body, agency or authority applicable to the Parent or
Acquisition Corp. or by which any of their respective properties or assets may
be bound, except for such violations or conflicts which would not have a
Xxxx.xxx Material Adverse Effect; or (iv) require, on the part of the Parent or
Acquisition Corp., any filing or registration with, or permit, license,
exemption, consent, authorization or approval of, or the giving of any notice
to, any governmental or regulatory body, agency or authority other than any
filing, registration, permit, license, exemption, consent, authorization,
approval or notice which if not obtained or made would not have a Xxxx.xxx
Material Adverse Effect.
Section 5.4 CAPITALIZATION. (a) The authorized capital stock of the Parent
consists of 120,000,000 shares of Parent Common Stock, of which approximately
33,255,943 shares are issued and outstanding as of August 13, 1999, 10,000,000
shares of Class B Common Stock, par value $.01 per share, of which 10,000,000
shares are issued and outstanding as of the date hereof, and 60,000,000 shares
of Preferred Stock, of which none are issued and outstanding as of the date
hereof. All of the issued and outstanding shares of Parent Common Stock are duly
authorized, validly issued, fully paid and nonassessable, and none of such
shares has been issued in violation of any applicable preemptive rights. Except
as disclosed in the SEC Filings (as defined below), options to purchase Parent
Common Stock which were granted pursuant to the Parent's 1999 stock option plan
and except as contemplated by this Agreement, there are no outstanding options,
warrants or other rights to purchase, or securities convertible into or
exchangeable for, shares of the capital stock of the Parent, and (except as
disclosed in the SEC Filings or as contemplated by this Agreement) there are no
agreements or commitments to which the Parent is a party or by which it is bound
pursuant to which the Parent is or may become obligated to issue additional
shares of its capital stock.
(b) The authorized capital stock of Acquisition Corp. consists of 1,000
shares of common stock, par value $0.01 per share, of which 100 shares are
issued and outstanding, all of which shares are owned beneficially and of record
by the Parent. There are no outstanding options, warrants or other rights to
purchase, or securities convertible into or exchangeable for, shares of the
capital stock of Acquisition Corp., and there are no agreements or commitments
to which Acquisition Corp. is a party or by which it is bound pursuant to which
Acquisition Corp. is or may become obligated to issue additional shares of its
capital stock.
Section 5.5 SEC REPORTS. Complete and correct copies of all reports and
other filings filed by the Parent with the SEC pursuant to the Securities Act of
1933, as amended (the
24
"SECURITIES ACT"), and the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and the rules and regulations thereunder (the "ACTS") since and
including the filing date of the Registration Statement with respect to the
Parent's initial public offering (such reports and other filings collectively
referred to herein as the "SEC FILINGS") are available on the SEC's Xxxxx Web
site. Attached hereto as Schedule 5.5 is a copy of the SEC's Xxxxx Web site page
listing all such reports and filings filed by Parent. As of their respective
dates, the SEC Filings did not 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, in light of the circumstances under which they were
made, not misleading.
Section 5.6 BROKERS; PAYMENTS. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Parent or Acquisition Corp.
Section 5.7 DISCLOSURE. No representation or warranty by the Parent or
Acquisition Corp. contained in this Agreement and no statement contained in any
of the Disclosure Schedules delivered or to be delivered pursuant to this
Agreement by Parent or Acquisition Corp. contains or will contain, when
considered together as a whole, any untrue statement of a material fact or omits
or will omit to state any material fact necessary to make the statements
contained therein not misleading, in light of the circumstances under which they
were made.
Section 5.8 VALIDITY OF SHARES. Assuming the accuracy of the
representations contained in Section 4.2, the shares of Parent Common Stock to
be issued in connection with the Merger will, when issued in accordance with
this Agreement, be duly authorized, validly issued, fully paid and
nonassessable, will not be subject to any preemptive or other statutory right of
stockholders, will be issued in compliance with applicable U.S. federal and
state securities laws and will be free of any liens or encumbrances.
Section 5.9 NO MATERIAL ADVERSE CHANGE. Since December 31, 1998, there
has been no material adverse change in the business, results of operations or
financial condition of Parent and its subsidiaries, taken as a whole.
Section 5.10 NO LIABILITIES OF ACQUISITION CORP.
Parent and Acquisition Corp. represent and warrant jointly and severally
that as of immediately prior to the Effective Time, the Acquisition Corp. shall
have, and shall have had, no liabilities except as it may have acquired in the
Merger with the Company.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 TRANSFER OF SHARES. The Shareholders agree that they (i)
shall not dispose of or in any way encumber their shares prior to the
consummation of the transactions
25
contemplated hereby, (ii) shall use their best efforts to cause, and take no
action inconsistent with, the approval and consummation of said transactions and
(iii) at the Closing shall surrender the stock certificates representing all
shares of Company Stock owned by them, duly endorsed for transfer.
Section 6.2 REASONABLE EFFORTS; ETC. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including obtaining any consents, authorizations, exemptions and approvals from,
and making all filings with, any governmental or regulatory authority, agency or
body which are necessary in connection with the transactions contemplated by
this Agreement.
Section 6.3 FEES AND EXPENSES. The Parent and the Company shall bear and
pay all of their own fees, costs and expenses relating to the transactions
contemplated by this Agreement, including, without limitation, the fees and
expenses of their respective counsel, accountants, brokers and financial
advisors, except that the Shareholders shall be responsible for all such fees,
costs and expenses incurred by the Company in connection with this Agreement and
the transactions contemplated hereby and such fees, costs and expenses shall be
deemed expenses of the Shareholders and paid by the Shareholders on a pro rata
basis based on their percentage ownership of the Company on the Closing Date.
Section 6.4 NASDAQ NATIONAL MARKET LISTING. Parent shall cause the shares
of Parent Common Stock issuable in the Merger to be authorized for listing on
The Nasdaq National Market prior to the time that such shares are permitted to
be transferred.
Section 6.5 TAX COVENANTS. (a) The parties hereto intend that, for
United States federal income tax purposes, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization." Accordingly, both before
and after the Closing, each of the parties agrees that all of its books and
records shall be maintained, and all United States federal, state and local
income tax returns and schedules thereto shall be filed in a manner, consistent
with the Merger's qualification as a reorganization. Each party shall provide to
each other party such cooperation, information, reports, returns or schedules as
may be reasonably required to assist such other party in accounting for and
reporting the Merger as such. Each of Parent, Acquisition Corp., the Company and
the Shareholders agrees that it and its affiliates shall not take, cause or
permit any action (or fail to take, cause or permit any action) if such action
(or the failure of such action to occur) would cause the Merger not to be
treated as a reorganization within the meaning of Code Section 368(a)(1);
PROVIDED, HOWEVER, that, notwithstanding the foregoing, each party shall be
expressly permitted to take, cause or permit any action (or fail to take, cause
or permit any action) if such action (or the failure of such action to occur) is
contemplated by this Agreement or any document related to the transactions
contemplated by this agreement or otherwise contemplated by the parties and
their respective affiliates.
(b) The transactions contemplated by this Agreement will cause the
Company's status as an S corporation to terminate. Pursuant to Code Section
1362(e)(1), the Company shall have two short taxable years for the year that
includes the Closing Date: an "S short year"
26
beginning January 1 of such year and ending the day before the Closing Date and
a "C short year" beginning on the Closing Date and ending on the next succeeding
close of Parent's consolidated return taxable year. Accordingly, Parent shall
allocate Tax items to the Company's S short year and C short year pursuant to
normal Tax accounting rules (the "closing of the books method") on a basis
consistent with past accounting practice.
(c) The Shareholders shall timely prepare and file or cause to be prepared
and filed all Tax returns, reports or other filings of the Company for all
periods ending on or before the Closing Date. Prior to the filing of any Tax
return, report or other filing of the Company described in the preceding
sentence that was not filed before the Closing Date, the Shareholders shall
provide Parent with a substantially final draft of such return, report or other
filing at least 15 days prior to the due date for such return, report or other
filing. Parent shall notify the Shareholders of any objections that Parent may
have to any items set forth in any such draft return, report or other filing,
and Parent and the Shareholders shall agree to consult and resolve in good faith
any such objection and to mutually consent to the filing of such return, report
or other filing. Such returns, reports and other filings shall be prepared or
completed in a manner consistent with prior practice of the Company with respect
to returns, reports and other filings concerning the income, properties or
operations of the Company, except as otherwise required by law or regulation or
otherwise agreed to by Parent prior to the filing thereof.
(d) Parent shall have the exclusive right to represent the interests of the
Company in any and all Tax audits or administrative or court proceedings
relating to Tax returns, reports or other filings for all periods from and after
the day on which the Effective Time occurs. The Shareholders shall have the
exclusive right to represent the interests of the Company in any and all Tax
audits or administrative court proceedings relating to Tax returns, reports or
other filings of the Company relating to periods ending before the Closing Date.
In the event that the Shareholders compromise or settle any Tax claim, or
consent or agree to any Tax liability, relating to the Company that may affect
the Tax liability of the Surviving Corporation, the Parent shall have the right
to review such compromise, settlement, consent or agreement. Without the prior
written consent of the Parent, which shall not be unreasonably withheld or
delayed, the Shareholders shall not agree or consent to compromise or settle any
issue or claim arising in any such audit or proceeding, or otherwise agree to or
consent to any Tax liability, to the extent that any such compromise,
settlement, consent or agreement may affect the Tax liability of the Surviving
Corporation for any period ending on or after the Closing Date.
(e) Each Shareholder agrees to promptly notify Parent in writing upon
receipt by such Shareholder or any affiliate of such Shareholder of notice of
any pending or threatened Tax audits or assessments relating to the income,
properties or operations of the Company.
(f) After the Closing Date, the Parent, the Surviving Corporation and each
Shareholder agree to provide each other with such cooperation and information
relating to the Company as any other party may reasonably request in (i) filing
any Tax return, report or other filing, amended Tax return, report or other
filing or claim for refund, (ii) determining any Tax liability or right to
refund of Taxes, (iii) conducting or defending any audit or other proceeding in
respect of Taxes, or (iv) effectuating the terms of this Agreement.
Notwithstanding the
27
foregoing, no party shall be unreasonably required to prepare any document, or
determine any information, not then in its possession in response to a request
under this Section 6.5(f).
(g) Each Shareholder shall deliver to Parent on or before the
Closing Date an affidavit in the form of Exhibit B to the effect that such
Shareholder is not a "foreign person" within the meaning of Code Section 1445.
If, on or before the Closing Date, Parent has not received each such affidavit,
Parent may withhold from the Merger Consideration such sums as are required to
be withheld therefrom under Code Section 1445.
(h) The Shareholders shall be liable for, and shall pay when
due, any transfer, gains, documentary, sales, use, registration, stamp,
value-added or other similar Taxes payable by reason of the transactions
contemplated under this Agreement, and shall file all necessary returns, reports
or other filings with respect to all such Taxes.
Section 6.6 INDEMNIFICATION. (a) The Surviving Corporation shall assume
at the Effective Time, and shall be liable for a period of six years commencing
at the Effective Time for, the Company's obligations to indemnify (excluding any
and all claims arising (i) in connection with the transactions contemplated by
this Agreement and (ii) pursuant to Article XI hereof), defend and hold harmless
each person who is or has been at any time prior to the Effective Time, or who
becomes prior to the Effective Time, an officer, director or employee of the
Company (the "COMPANY INDEMNIFIED PARTIES") in respect of acts or omissions
occurring on or prior to the Effective Time to the extent provided in the
Surviving Corporation's Articles of Incorporation and Bylaws in effect on the
date hereof.
(b) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person or entity and is
not the continuing or surviving person of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any persons
or entity, then and in each such case, proper provision shall be made so that
the survivor or transferee shall assume the indemnification obligations provided
for in Section 6.6(a).
Section 6.7 EXCHANGE ACT REPORTS. Parent shall timely file all reports
required to be filed under the Exchange Act, during the period commencing on the
date hereof and ending on June 30, 2002.
Section 6.8 LEGENDS. The Parent shall re-issue a certificate without
the legends described in Section 4.2 to the holder of such certificate, if the
shares represented by such certificate are being transferred pursuant to an
effective registration statement under the Securities Act or if the shares
represented by such certificate may be publicly sold pursuant to Rule 144(k)
under the Securities Act. Subject to compliance with the applicable lockup
restrictions, the Parent shall take all actions reasonably necessary to
facilitate sales by the Shareholders of the Merger Shares pursuant to Rule 144.
Section 6.9 EMPLOYEE STOCK OPTIONS. The Parent agrees to grant options
to purchase the number of shares of Parent Common Stock ("OPTIONS") equal to the
quotient of (A) $10,000,000 divided by (B) the last quoted sale price for a
share of Parent Common Stock on the Nasdaq National Market on the Closing Date.
Options shall be allocated among employees of
28
the Surviving Corporation as set forth on Schedule 6.9. Options shall be issued
pursuant to a new stock option plan established by the Parent which shall
contain terms and conditions substantially the same as those contained in the
Parent's 1999 Employee Stock Option Plan (except that such new plan shall not
contain incentive stock option provisions) and shall provide for (i) an exercise
price equal to the last quoted sale price for a share of Parent Common Stock on
the Nasdaq National Market on the date of grant, (ii) quarterly vesting over
four years subject to continued employment at Parent or a subsidiary thereof and
(iii) a ten year term.
ARTICLE VII
COVENANTS OF SHAREHOLDERS
Section 7.1 NON-COMPETITION. Each of the Shareholders hereby severally
and not jointly agrees that for a period of four (4) years after the date
hereof, he or she will not, directly or indirectly, compete with the business of
the Surviving Corporation or (other than in his capacity as an employee of the
Surviving Corporation) the Parent. Employee acknowledges that money damages may
not be sufficient remedy for any breach of this provision and agrees that
Parent and the Surviving Corporation will be entitled to seek specific
performance and injunctive or other equitable relief for any such breach.
For purposes of this Article VII, the term "not compete" shall mean that:
(a) Shareholder shall not, on Shareholder's behalf or on behalf of any
other party other than Parent or the Surviving Corporation, solicit or seek the
business of any customer or account of the Surviving Corporation or Parent
wherein said solicitation involves a product or service substantially similar to
or competitive with any product or service offered or under development by the
Surviving Corporation or Parent as of the date hereof or during the term of
Shareholder's employment with the Surviving Corporation or the Parent.
(b) Shareholder shall not directly or indirectly own, operate, consult to
or be employed by any firm in a business substantially similar to or competitive
with the present business of the Surviving Corporation or the Parent or such
business activity in which the Surviving Corporation or the Parent may engage
during the term of employment; provided that Shareholder shall not be prohibited
from owning less than 5% of a publicly traded mutual fund or similar publicly
traded investment for investment purposes.
(c) Shareholder shall not directly or indirectly solicit the Surviving
Corporation's customers, vendors, subcontractors, or prospects with services or
products of the nature of those being sold by the Surviving Corporation.
Such Shareholder further agrees that, for a period of four (4) years from
after the date hereof, he or she will not in any capacity (other than as an
employee of and on behalf of the Surviving Corporation), either separately,
jointly or in association with others, directly or indirectly, solicit or
contact in connection with, or in furtherance of, a competitive activity any of
the Surviving Corporation's employees, consultants, agents, suppliers, customers
or prospects that were such with respect to the Surviving Corporation at any
time during the one (1) year immediately preceding the date hereof or that
become such with respect to the Surviving
29
Corporation at any time during the one (1) year immediately following the date
hereof. Such Shareholder's obligations under this Section 7.1 shall survive the
termination or cessation of his employment with the Surviving Corporation and
shall not be limited by Article XI hereof.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS
OF THE PARENT AND ACQUISITION CORP.
The obligation of the Parent and Acquisition Corp. to consummate the
transactions contemplated hereby shall be subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions (any of which may
be waived in writing by the Parent and Acquisition Corp. in their sole
discretion):
Section 8.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Shareholders which are contained in this Agreement, or
contained in any Schedule, certificate or instrument delivered or to be
delivered pursuant to this Agreement, shall be made again on and as of the
Closing Date and shall be true and correct in all material respects on and as of
the Closing Date, and at the Closing the Shareholders shall have delivered to
the Parent and Acquisition Corp. a certificate to that effect with respect to
all such representations and warranties.
Section 8.2 PERFORMANCE. The Company and the Shareholders shall have
performed and complied in all material respects with all of the obligations
under this Agreement that are required to be performed or complied with by them
on or prior to the Closing Date, and at the Closing the Company shall have
delivered to the Parent and Acquisition Corp. a certificate (duly executed on
behalf of the Company by the President and the Chief Financial Officer of the
Company) to that effect with respect to all such obligations required to have
been performed or complied with by the Company on or before the Closing Date,
and the Shareholders shall have executed and delivered to the Parent and
Acquisition Corp. a certificate to that effect with respect to all such
obligations required to have been performed or complied with by the Shareholders
on or before the Closing Date.
Section 8.3 ABSENCE OF LITIGATION. No statute, rule or regulation shall
have been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory body,
agency or authority shall have been instituted by any person (or instituted or
threatened by any governmental or regulatory body, agency or authority), and no
investigation by any governmental or regulatory body, agency or authority shall
have been commenced with respect to the transactions contemplated hereby or with
respect to the Company which would be reasonably likely to have an adverse
effect on the transactions contemplated hereby or have a Company Material
Adverse Effect.
Section 8.4 CONSENTS. All material approvals, consents, waivers and
authorizations required by Parent to be obtained by the Company or any
Shareholder in connection with the
30
Merger and the other transactions contemplated by this Agreement (including
those identified on SCHEDULE 3.3) shall have been obtained and shall be in full
force and effect.
Section 8.5 ADDITIONAL AGREEMENTS. Parent shall have received duly executed
and delivered the following agreements:
(i) Employment Agreements, in the form mutually agreed
by the Parent and each of such employees, executed by each of Xxxxx
Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxxxx Xxxxx and Xxxx Xxxxxx (the "KEY
EMPLOYEES");
(ii) a Lock-up Agreement in the form mutually agreed by
the Parent and each of the Shareholders, duly executed by the
Shareholders; and
(iii) a FIRPTA Certificate, duly executed by the Company.
Section 2.6 DELIVERY OF CERTIFICATES FOR CANCELLATION. The share
certificates representing at least 100% of the issued and outstanding shares of
Company Common Stock as of the Closing Date, duly endorsed in blank, shall have
been surrendered for cancellation.
Section 2.7 CERTIFICATE OF MERGER. The Company shall have executed and
delivered to the Parent counterparts of the Certificate of Merger to be filed
with the Secretary of State of the State of Ohio in connection with the Merger
and the Certificate of Merger shall have been duly filed and become effective.
Section 2.8 OPINION OF BIRD & ASSOCIATES, P.C. The Company shall have
delivered to Parent an opinion of Bird & Associates, P.C., special counsel to
the Company in form and substance reasonably satisfactory to Parent.
Section 2.9 SUPPORTING DOCUMENTS. The Company shall have delivered to
the Parent a certificate of the Secretary of the Company, dated the Closing
Date, certifying on behalf of the Company (i) that attached thereto is a true
and complete copy of the By-Laws of such Company as in effect on the date of
such certification; (ii) that attached thereto is a true and complete copy of
all resolutions adopted by the Board of Directors and Shareholders of such
Company authorizing the execution, delivery and performance of this Agreement
and the consummation of the Merger; and (iii) to the incumbency and specimen
signature of each officer of the Company executing on behalf of such company
this Agreement and the other agreements related hereto.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
AND SHAREHOLDERS
The obligation of the Company and the Shareholders to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or prior to the Closing
31
Date of each of the following conditions (any of which may be waived in writing
by the Company and the Shareholders in their sole discretion):
Section 9.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of each of the Parent and Acquisition Corp. contained in this
Agreement, or contained in any Schedule, certificate or other instrument or
document delivered or to be delivered pursuant to this Agreement, shall be made
again on and as of the Closing Date and shall be true and correct in all
material respects on and as of the Closing Date, and at the Closing each of
Parent and Acquisition Corp. shall have delivered to the Shareholders a
certificate signed on its behalf by its President or Chief Financial Officer, to
that effect with respect to all such representations and warranties.
Section 9.2 PERFORMANCE. Each of the Parent and Acquisition Corp. shall
have performed and complied in all material respects with all of the obligations
under this Agreement which are required to be performed or complied with by them
on or prior to the Closing Date, and at the Closing each of the Parent and
Acquisition Corp. shall have delivered to the Company and the Shareholders a
certificate, signed on its behalf by its President or its Chief Financial
Officer, to that effect with respect to all such obligations required to have
been performed or complied with by such entity on or before the Closing Date.
Section 9.3 ABSENCE OF LITIGATION. No statute, rule or regulation shall
have been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory body,
agency or authority shall have been instituted by any person (or instituted or
threatened by any governmental or regulatory body, agency or authority) and no
investigation by any governmental or regulatory body, agency or authority shall
have been commenced with respect to the transactions contemplated hereby or with
respect to the Parent or Acquisition Corp. which would have a material adverse
effect on the transactions contemplated hereby or on the business of the Parent
and Acquisition Corp. taken as a whole.
Section 9.4 CONSENTS. All material approvals, consents, waivers and
authorizations required to be obtained by Parent or Acquisition Corp. in
connection with the Merger and the other transactions contemplated by this
Agreement (including those identified on SCHEDULE 5.3) shall have been obtained
and shall be in full force and effect.
Section 9.5 ADDITIONAL AGREEMENTS. The Parent shall have executed and
delivered (and shall have agreed to cause the Surviving Corporation to execute
and deliver immediately following the Effective Time, as applicable)
counterparts of the following agreements:
(i) the Employment Agreements referred to in Section 8.5
(i) hereof; and
(ii) the Lock-up Agreement referred to in Section 8.5(ii)
hereof.
Section 9.6 CERTIFICATE OF MERGER. The Parent and Acquisition Corp. shall
have executed and delivered to the Company counterparts of the Certificate of
Merger to be filed with
32
the Secretary of State of the State of Ohio in connection with the Merger and
the Certificate of Merger shall have been duly filed and become effective.
Section 9.7 CASH AND SHARES OF PARENT COMMON STOCK. At the Closing, the
Parent shall deliver to the Shareholders the cash portion of the Merger
Consideration and the shares of Parent Common Stock issuable to the Shareholders
pursuant to Section 2.2(a) hereof, in each case payable on the Closing Date, as
provided in Section 2.3 hereof.
Section 9.8 OPINION OF COUNSEL TO PARENT AND AG ACQUISITION CORP.. Parent
shall have delivered to the Shareholders an opinion of counsel to the Parent and
Acquisition Corp. in form and substance reasonably satisfactory to the
Shareholders.
Section 9.9 SUPPORTING DOCUMENTS. (a) The Parent shall have delivered to
the Company a certificate of the Secretary of the Parent, dated the Closing
Date, certifying on behalf of the Parent (i) that attached thereto is a true and
complete copy of the By-Laws of such Parent as in effect on the date of such
certification; (ii) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors of such Parent authorizing the
execution, delivery and performance of this Agreement and the consummation of
the Merger; and (iii) to the incumbency and specimen signature of each officer
of the Parent executing on behalf of such Parent this Agreement and the other
agreements related hereto.
(b) Acquisition Corp. shall have delivered to the Company a certificate of
the Secretary of Acquisition Corp., dated the Closing Date, certifying on behalf
of Acquisition Corp. (i) that attached thereto is a true and complete copy of
the By-Laws of such Acquisition Corp. as in effect on the date of such
certification; (ii) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors and stockholders of such
Acquisition Corp. authorizing the execution, delivery and performance of this
Agreement and the consummation of the Merger; and (iii) to the incumbency and
specimen signature of each officer of Acquisition Corp. executing on behalf of
such Acquisition Corp. this Agreement and the other agreements related hereto.
ARTICLE X
TERMINATION
Section 10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by the mutual written consent of the Company and the
Parent;
(b) by either the Company or the Parent
(i) if any court or governmental or regulatory agency,
authority or body shall have enacted, promulgated or issued any
statute, rule, regulation, ruling, writ or injunction, or taken any
other action, restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby and all appeals and means of appeal
therefrom have been exhausted; or
33
(ii) if the Effective Time shall not have occurred on or
before August 31, 1999; PROVIDED, HOWEVER, that the right to terminate
this Agreement pursuant to this Section 11.1(b)(ii) shall not be
available to any party whose (or whose affiliate(s)') breach of any
representation or warranty or failure to perform or comply with any
obligation under this Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such date; or
(c) by the Company, if any of the conditions specified in Article IX have
not been met or waived prior to such time as such condition can no longer be
satisfied; or
(d) by the Parent, if any of the conditions specified in Article VIII have
not been met or waived prior to such time as such condition can no longer be
satisfied.
Section 10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement, this Agreement shall forthwith become void and there shall be no
liability on the part of any of the parties hereto or (in the case of the
Company, the Parent and Acquisition Corp.) their respective officers or
directors, except for Sections 6.3 and 12.6, which shall remain in full force
and effect, and except that nothing herein shall relieve any party from
liability for a breach of this Agreement prior to the termination hereof.
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Section 11.1 INDEMNITY OBLIGATIONS. (a) Subject to Section 11.3 hereof,
each of the Shareholders hereby jointly and severally agrees to indemnify and
hold the Parent, the Surviving Corporation and their respective affiliates and
successors (collectively, "Parent Indemnitees") harmless from, and to reimburse
the Parent Indemnitees for, any Losses (as that term is hereinafter defined)
arising out of, based upon or resulting from (i) any inaccuracy in or breach of
any representation or warranty of the Shareholders set forth in Article III of
this Agreement or any Schedule or certificate delivered by the Company or the
Shareholders pursuant hereto; (ii) any breach or nonfulfillment of, or any
failure to perform, any of the covenants, agreements or undertakings of the
Company or the Shareholders (which covenants, agreements or undertakings were to
be performed or complied with on or prior to the consummation of the Merger)
which are contained in this Agreement; (iii) the transactions between the
Company or the Surviving Corporation, on the one hand, and Allegro Argentina
S.A. or The Allegro Group Latin America, on the other hand, including but not
limited to the matters disclosed in item 2 of Schedule 3.6, (iv) the matters
disclosed in item 1 of Schedule 3.6 to the extent arising out of the period
before the Effective Time or (v) any claims to the extent arising out of the
conduct of the business of the Company prior to the Closing that are not
reserved as a liability on the June 30, 1999 balance sheet or incurred in the
ordinary course of business consistent with past practice or disclosed on the
Disclosure Schedule or involving personal injury, death, physical damage to the
tangible or real property of the Company or any other person which otherwise
would have been covered by fire, property, casualty or liability insurance if
the Company had such insurance in place for all periods prior to the Closing.
For purposes of this Agreement, the term "LOSSES" shall mean any and all losses,
damages, deficiencies, liabilities, obligations, actions, claims, suits,
proceedings, demands, assessments, judgments, recoveries, fees, costs and
expenses
34
(including, without limitation, all out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants and
counsel) of any nature whatsoever, net of insurance proceeds actually realized
by the party incurring such Loss. Notwithstanding the foregoing and subject to
the last sentence of this Section 11.1(a), (i) none of the Shareholders shall be
liable for or be obligated to indemnify any party for one or more breaches of
representations, warranties or agreements of the Shareholders hereunder (other
than under Sections 3.4, 3.9, 4.1, 4.2, 6.5 and 7.1) or for indemnification
under Section 11.1(a) (other than to the extent arising out of Sections 3.4,
3.9, 4.1, 4.2, 6.5 or 7.1 or Section 11.1(a)(iii) or (iv)) unless the aggregate
amount of all Losses arising out of such a breach or breaches exceeds $50,000,
(ii) none of the Shareholders shall be obligated to indemnify any party under
Section 11.1(a)(iii) unless the aggregate amount of all Losses for which
indemnification is sought under Section 11.1(a)(iii) exceeds $50,000 and then
the Shareholders shall be liable for 30% of the Losses in excess of such
$50,000, (iii) none of the Shareholders shall be obligated to indemnify any
party under Section 11.1(a)(iv) unless the aggregate amount of all Losses for
which indemnification is sought under Section 11.1(a)(iv) exceeds $10,000 and
then the Shareholders shall be liable for 30% of the Losses in excess of such
$10,000, (iv) the Shareholders collectively shall not be liable for any Losses
arising out of breaches of representations, warranties or agreements hereunder
(other than under Sections 3.4, 3.9, 4.1, 4.2, 6.5 and 7.1) or for
indemnification under Section 11.1(a) (other than to the extent arising out of
Sections 3.4, 3.9, 4.1, 4.2, 6.5 or 7.1 or Section 11.1(a)(iii) or (iv)) in
excess of 30% of the aggregate Merger Consideration actually paid to the
Shareholders (it being understood that Parent may offset against its obligation
to pay the aggregate Contingent Payment the amount of any indemnification
obligations arising before the payment of the Contingent Payment to the extent
not previously paid) , (v) the Parent Indemnitees' recovery in respect of any
Losses for which it is entitled to indemnification under Section 11.1(a) shall
be payable by the Shareholders 20% in cash and 80% in Parent Common Stock and
(vi) the liability of each Shareholder under this Section 11.1(a) shall not
exceed such Shareholder's pro rata share of the Losses based on such
Shareholders allocation of the Merger Consideration. The foregoing limitations
on liability of the Shareholders shall not apply in the event of breaches of
representations, warranties or agreements arising out of fraud or willful
misrepresentation on the part of the Shareholders.
(b) Subject to Section 11.3 hereof, each of the Shareholders hereby
severally and not jointly agrees to indemnify and hold the Parent harmless from,
and to reimburse the Parent for, any losses arising out of, based upon or
resulting from (i) any inaccuracy in or breach of any representation or warranty
of such Shareholder set forth in Article IV of this Agreement, or any Schedule
or certificate delivered by such Shareholder pursuant hereto or thereto; or (ii)
any breach of nonfulfillment of, or any failure to perform, any of the
covenants, agreements or undertakings of such Shareholder under Section 6.5 or
7.1 , or any Schedule or certificate delivered by such Shareholder pursuant
hereto or thereto. Notwithstanding the foregoing, none of the Shareholders shall
be liable for or be obligated to indemnify any party for any Losses arising out
of breaches of representations or warranties under Article IV in excess of the
total Merger Consideration received by such Shareholder.
(c) Subject to Section 11.3 hereof, Parent hereby agrees to indemnify and
hold the Shareholders harmless from, and to reimburse the Shareholders for, any
Losses arising out of, based upon or resulting from (i) any inaccuracy in or
breach of any representation or warranty of the Parent or Acquisition Corp. set
forth in Article V of this Agreement or any Schedule or
35
certificate delivered by the the Parent pursuant hereto; or (ii) any breach or
nonfulfillment of, or any failure to perform, any of the covenants, agreements
or undertakings of the Parent or Acquisition Corp. which are contained in this
Agreement. Notwithstanding the foregoing, (i) neither the Parent nor the
Surviving Corporation shall be liable for or be obligated to indemnify any party
for one or more breaches of representations, warranties or agreements of the
Parent or Acquisition Corp. hereunder (other than under Sections 5.4 and 6.5)
unless the aggregate amount of all Losses arising out of such a breach or
breaches exceeds $50,000 and (ii) the Parent and the Surviving Corp.
collectively shall not be liable for any Losses arising out of breaches of
representations or warranties under Article V in excess of the total Merger
Consideration paid by Parent . The foregoing limitations on liability of Parent
and the Surviving Corporation shall not apply in the event of breaches of
representations, warranties or agreements arising out of fraud or willful
misrepresentation on the part of Parent and the Surviving Corporation.
Section 11.2 NOTIFICATION OF CLAIMS. (a) Subject to the provisions of
Section 11.3 below, in the event of the occurrence of an event pursuant to which
either party (the "Indemnified Party")shall seek indemnity pursuant to Section
11.1, the Indemnified Party shall provide the indemnifying party (the
"Indemnifying Party") against whom indemnification is sought with prompt written
notice (a "CLAIM NOTICE") of such event and shall otherwise promptly make
available to the Indemnifying Party, all relevant information that is material
to the claim and which is in the possession of the Indemnified Party. The
Indemnified Party's failure to give a timely Claims Notice or to promptly
furnish the Indemnifying Party with any relevant data and documents in
connection with any Third-Party Claim (as that term is hereinafter defined)
shall not constitute a defense (in part or in whole) to any claim for
indemnification by such party, except and only to the extent that such failure
shall result in any prejudice to the Indemnifying Party.
(b) After the giving of any Claim Notice pursuant hereto, the amount of
indemnification to which the Indemnified Party shall be entitled under this
Article XI shall be determined by (A) written agreement between the Indemnified
Party and the Indemnifying Party or (B) a final judgment or decree of any court
of competent jurisdiction. The judgment or decree of a court shall be deemed
final when the time for appeal, if any, has expired and no appeal has been taken
or when all appeals taken have been finally determined.
(c) The Indemnifying Party shall have the right to elect to join in, and in
such event to conduct and control, through counsel of its choosing reasonably
acceptable to the Indemnified Party, the defense, settlement, adjustment or
compromise of any claim of any third party (a "THIRD PARTY CLAIM") as to which
indemnification will be sought by the Indemnified Party from the Indemnifying
Party. The expense of any such defense, settlement, adjustment or compromise,
including such counsel, shall be borne by the Shareholders with respect to
indemnification sought pursuant to Section 11.1(a) and by the Shareholders
against whom indemnification is sought with respect to indemnification sought
pursuant to Section 11.1(b), and by the Parent with respect to indemnification
sought pursuant to Section 11.1(c). Unless the Indemnifying Party elects to
assume such defense, settlement, adjustment or compromise, the Indemnified Party
shall have the right to settle any such Third Party Claim; PROVIDED, HOWEVER,
that the Indemnified Party may not effect the settlement, adjustment or
compromise of any such Third Party Claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. In
connection with any Third Party Claim, the Indemnified Party, or
36
the Indemnifying Party if it has assumed the defense of such claim pursuant to
the foregoing, shall diligently pursue the defense of such Third Party Claim.
Section 11.3 DURATION. All representations and warranties set forth in this
Agreement and any Schedules or certificates delivered pursuant hereto or
thereto, and all covenants, agreements and undertakings of the parties contained
in or made pursuant to this Agreement and any Schedules or certificates
delivered pursuant hereto or thereto, and the rights of the parties to seek
indemnification with respect thereto, shall survive the Closing but all
representations and warranties contained in this Agreement or any certificate or
Schedule delivered pursuant hereto or thereto shall expire on the second
anniversary of the Closing Date, at which time the indemnification provided in
Article XI arising out of a breach of the representations or warranties shall
terminate except with respect to any claim for indemnification made prior to the
date of expiration of the survival period for such claim which shall survive
until the resolution of such claim. Notwithstanding the foregoing, obligations
arising from the breaches of the representations and warranties set forth in
Sections 3.4, 3.9 and 4.1(i) (the "COVERED REPRESENTATIONS") and arising from
fraud shall each survive the Closing Date until expiration of the applicable
statute of limitations.
Section 11.4 NO CONTRIBUTION. The Shareholders hereby waive, acknowledge
and agree that the Shareholders shall not have and shall not exercise or assert
(or attempt to exercise or assert), any right of contribution or right of
indemnity against the Company or the Surviving Corporation in connection with
any indemnification payments which the Shareholders are required to make under
this Article XI.
ARTICLE XII
MISCELLANEOUS PROVISION
Section 12.1 AMENDMENT. This Agreement may be amended by written agreement
among the parties hereto prior to the Effective Time.
Section 12.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant or agreement contained herein may be waived only by a written notice
from the party or parties entitled to the benefits thereof. No failure by any
party hereto to exercise, and no delay in exercising, any right hereunder, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or future exercise of that right by that
party.
Section 12.3 NOTICES. All notices and other communications hereunder shall
be deemed given if given in writing and delivered personally, by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier to the party to receive the same at its respective address set forth
below (or at such other address as may from time to time be designated by such
party to the others in accordance with this Section 12.3):
37
(a) if to the Company or the Shareholders, to:
The Allegro Group, Inc.
0000 Xxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
with copies to:
Xxxxx Xxxxxxx
000 Xxxxx Xxxxx Xxxxx
Xxxxx , Xxxx 00000
and
Bird & Associates, P.C.
0000 Xxxxxxx Xxxxx
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
(b) if to the Parent or Acquisition Corp., to:
Xxxx.xxx, Inc.
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
With a copy at the same address to:
Xxxxx X. Xxxxxxxx, Esq.
With a copy at the same address to:
Winthrop, Stimson, Xxxxxx & Xxxxxxx
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Xx., Esq.
All such notices and communications hereunder shall be deemed given when
received, as evidenced by the signed acknowledgment of receipt of the person to
whom such notice or communication shall have been personally delivered, the
acknowledgment of receipt returned to the sender by the applicable postal
authorities or the confirmation of delivery rendered by the applicable overnight
courier service.
Section 12.4 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors (or, in
38
the case of the Shareholders, their respective heirs, administrators, executors
and personal representatives) and permitted assigns. Neither this Agreement nor
any rights, duties or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other parties hereto, except
that vested rights to receive payment or to initiate legal action with respect
to causes of action that have accrued hereunder shall be assignable by devise,
descent or operation of law.
Section 12.5 NO THIRD PARTY BENEFICIARIES. Neither this Agreement or any
provision hereof nor any Schedule, certificate or other instrument delivered
pursuant hereto, nor any agreement to be entered into pursuant hereto or any
provision hereof, is intended to create any right, claim or remedy in favor of
any person or entity, other than the parties hereto and their respective
successors (or, in the case of the Shareholders, their respective heirs,
administrators, executors and personal representatives) and permitted assigns
and any other parties indemnified under Article XI.
Section 12.6 PUBLIC ANNOUNCEMENTS. Promptly after the Effective Time, the
Parent and the Company shall issue a press release in such form as they shall
mutually agree. Other than as provided in the immediately preceding sentence,
none of the parties hereto shall, except as mutually agreed by the Parent and
the Shareholders, or except as may be required by law or applicable regulatory
authority (including, without limitation, the rules applicable to Nasdaq
National Market ), issue any reports, releases, announcements or other
statements to the public relating to the transactions contemplated hereby.
Section 12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12.8 HEADINGS. The article and section headings contained in this
Agreement are solely for convenience of reference, are not part of the agreement
of the parties and shall not be used in construing this Agreement or in any way
affect the meaning or interpretation of this Agreement.
Section 12.9 ENTIRE AGREEMENT. This Agreement, and the Schedules,
certificates and other instruments and documents delivered pursuant hereto,
together with the other agreements referred to herein and to be entered into
pursuant hereto, embody the entire agreement of the parties hereto in respect
of, and there are no other agreements or understandings, written or oral, among
the parties relating to, the subject matter hereof, other than the
Confidentiality Agreements entered into between Parent and the Company (the
"Confidentiality Agreements"). This Agreement supersedes all prior agreements
and understandings, written or oral, between the parties with respect to such
subject matter, other than the Confidentiality Agreements.
Section 12.10 GOVERNING LAW. The parties hereby agree that this Agreement,
and the respective rights, duties and obligations of the parties hereunder,
shall be governed by and construed in accordance with the General Corporation
Law of the State of Ohio as to matters within the scope thereof and, as to all
other matters, shall be governed by and construed with the laws of the State of
New York, without giving effect to principles of conflicts of law thereunder.
Each of the parties hereby (i) irrevocably consents and agrees that any legal or
equitable action
2
or proceeding arising under or in connection with this Agreement shall be
brought exclusively in the federal or state courts sitting in New York, New York
and any court to which an appeal may be taken in any such litigation, and (ii)
by execution and delivery of this Agreement, irrevocably submits to and accepts,
with respect to any such action or proceeding, for itself and in respect of its
properties and assets, generally and unconditionally, the jurisdiction of the
aforesaid courts, and irrevocably waives any and all rights such party may now
or hereafter have to object to such jurisdiction.
3
IN WITNESS WHEREOF, Parent, Acquisition Corp., the Company and the
Shareholders have caused this Agreement to be duly executed and delivered as an
instrument under seal as of the date first above written.
XXXX.XXX, INC.
By: /s/ XXXXXX XXXXXX
-----------------
Name: Xxxxxx Xxxxxx
Title: Chairman of the Board
AG ACQUISITION CORP.
By: /s/ XXXXXX XXXXXX
-----------------
Name: Xxxxxx Xxxxxx
Title: Chairman of the Board
THE ALLEGRO GROUP, INC.
By: /s/ XXXXX XXXXXXX
-----------------
Name: Xxxxx Xxxxxxx
Title: President and Chief Executive Officer
THE SHAREHOLDERS:
/s/ XXXXX XXXXXXX
-----------------
Xxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxx
------------------
Xxxxxx Xxxxxxx
/s/ Xxxxxx Xxxxxxx
------------------
Xxxxxx Xxxxxxx
