AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
AND
AGREEMENT AND PLAN OF MERGER
SALEX HOLDING CORPORATION
AND
SALEX INDUSTRIES, INC.
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
AND
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT AND AGREEMENT
AND PLAN OF MERGER dated as of September ___, 1996 (the "Agreement"), among
Salex Holding Corporation, a Delaware corporation ("Salex"); Salex Industries,
Inc., a Delaware corporation and a wholly-owned subsidiary of Synergistic
Holdings Corp., a Delaware corporation ("Subsidiary"); Synergistic Holdings
Corp., a Delaware corporation ("Synergistic"); Salex Fleet Specialist Corp., a
New York corporation, Salex Fleet Management Corp., a New York corporation,
Salex National Account Corp., a New York corporation, Salex Salvage Disposal
Corp., a New York corporation, and Salex Financial Services Corp., a New York
corporation (collectively, the "Salex Subsidiaries"), ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇"),
the ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Family Limited Partnership ("▇▇▇▇▇ Partnership"), Pershing
Sun ("Pershing"), ▇▇▇▇▇▇▇▇ Sun ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇▇▇ ("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ("▇▇▇▇▇") (collectively the "Salex Stockholders"), and T. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (collectively, the "▇▇▇▇▇▇▇▇▇ Stockholders").
W I T N E S S E T H :
WHEREAS, Salex and the Salex Subsidiaries manage the
maintenance and repair of fleets of automobiles and small trucks
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which are owned, leased, and operated by corporate customers on a nationwide
basis (the "Business"); and
WHEREAS, Synergistic currently owns 1,943,400 shares of Common
Stock of Salex constituting 24.6% of the issued and outstanding shares of Common
Stock of Salex, par value $0.01 per share ("Salex Common Stock"), and now
desires to acquire the entire Business by means of the purchase of 1,453,600
shares of Salex Common Stock from ▇▇▇▇▇ and the immediate merger of Subsidiary
with and into Salex; and
WHEREAS, the Board of Directors of Synergistic, the Board of
Directors of Subsidiary, Synergistic, as the sole stockholder of Subsidiary, and
the Board of Directors of Salex and the Salex Stockholders have (a) determined
that it is in the best interests of their respective companies for Subsidiary to
be merged with and into Salex upon the terms and subject to the conditions set
forth herein; (b) approved the merger of Subsidiary with and into Salex (the
"Merger") in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), and upon the terms and subject to the conditions set
forth herein; (c) executed a Stock Purchase Agreement and Agreement and Plan of
Merger dated as of June 27, 1996 (the "Merger Agreement"); and (d) have
determined that it is in the best interests of their respective companies to
amend and restate the Merger Agreement in its entirety upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements herein contained, and
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intending to be legally bound hereby, the parties hereto do hereby agree as
follows:
1. The Transaction.
1.1. The Stock Purchase.
1.1.1. (a) Agreement of Purchase and Sale of
Certain of ▇▇▇▇▇'▇ Salex Common Stock. Subject to the terms and conditions set
forth in this Agreement and in reliance upon the representations, warranties,
covenants and conditions herein contained, immediately prior to the Effective
Time provided below in Subsection 1.2.2, and subject in all respects to the
consummation of the Merger and the occurrence of the conditions set forth in
Section 6.2 hereof, which the parties acknowledge shall be an express condition
subsequent to the transfer of the ▇▇▇▇▇ Shares (as hereafter defined), ▇▇▇▇▇
shall sell, convey, assign, transfer and deliver to Synergistic, and Synergistic
shall purchase from ▇▇▇▇▇, good and marketable title to 1,453,600 shares of
Salex Common Stock owned by him (the "▇▇▇▇▇ Shares"), which shares, immediately
after the consummation of such sale, shall represent 18.4% of the issued and
outstanding Salex Common Stock, on a fully-diluted basis, free and clear of any
and all liens, claims, charges or encumbrances of any nature whatsoever, subject
to the ▇▇▇▇▇ Obligation to AG, described in paragraph (b) below.
(b) The foregoing representations
are subject to the obligations of ▇▇▇▇▇ to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("AG") pursuant to
that certain Memorandum of Sale dated October 12,
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1989, and related promissory notes, pursuant to which ▇▇▇▇▇ purchased a portion
of ▇▇▇▇▇'▇ Salex Common Stock from AG (the "▇▇▇▇▇ Obligation to AG").
1.1.2. ▇▇▇▇▇ Shares Purchase Price. The purchase
price for the ▇▇▇▇▇ Shares shall be $2,000,000 (the "▇▇▇▇▇ Share Purchase
Price"), represented by two promissory notes of Synergistic in the form of
Exhibits 1.1.2A and 1.1.2B hereto (the "Notes").
1.1.3. Closing. The closing of the sale and
purchase of the ▇▇▇▇▇ Shares provided for herein shall take place on or before
10 A.M. at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP immediately prior to the
Effective Time.
Subject to the terms and conditions herein contained, at the
Closing, Synergistic shall deliver to ▇▇▇▇▇ (in addition to any other documents
and instruments to be delivered by it pursuant to this Agreement), the ▇▇▇▇▇
Share Purchase Price represented by the Notes.
Subject to the terms and conditions herein
contained, ▇▇▇▇▇ shall deliver to Synergistic (in addition to the documents and
instruments to be otherwise delivered pursuant to this Agreement) stock
certificates and stock powers endorsed in blank representing the ▇▇▇▇▇ Shares
free and clear of all liens, claims, charges and encumbrances of any nature
whatsoever (other than the ▇▇▇▇▇ Obligation to AG) and all third party
governmental, administrative and other third party consents and approvals, as
shall be, in the reasonable opinion of Synergistic, necessary or appropriate in
order to convey, transfer and assign
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to and vest in Synergistic good and marketable right, title and interest in and
to the ▇▇▇▇▇ Shares, free and clear of all liens, security interests, claims,
charges and encumbrances of any nature whatsoever, but in the case of ▇▇▇▇▇
personally, subject to the ▇▇▇▇▇ Obligation to AG.
1.2. The Merger of Salex and the Subsidiary.
1.2.1. Merger. At the Effective Time (as
defined in Subsection 1.2.2), and subject to and upon the terms and conditions
of this Agreement and the Delaware Law, Subsidiary shall be merged with and into
Salex, the separate corporate existence of Subsidiary shall cease, and Salex
shall continue as the surviving corporation. Salex, as the surviving corporation
after the Merger, is hereinafter sometimes referred to as the "Surviving
Corporation."
1.2.2. Effective Time. As promptly as
practicable after the satisfaction or waiver of the conditions set forth in
Section 6, Subsidiary and Salex shall cause the Merger to be consummated by
filing a Certificate of Merger (the "Agreement of Merger") with the Secretary of
State of the State of Delaware in the form of Exhibit 1.2.2 hereto and making
such other filings as may be required by Delaware Law, in such form as required
by and executed in accordance with such laws (the time of the last of such
filings to be made being the "Effective Time").
1.2.3. Effect of the Merger. At the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of Delaware Law.
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1.2.4. Certificate of Incorporation; By-
Laws.
(a) The Certificate of
Incorporation of Salex, as in effect immediately prior to the Effective Time
(annexed hereto as Exhibit 1.2.4(a), shall be the Certificate of Incorporation
of the Surviving Corporation until thereafter amended as provided by law or such
Certificate of Incorporation.
(b) The By-Laws of Salex, as in
effect immediately prior to the Effective Time (annexed hereto as Exhibit
1.2.4(b)), shall be the By-Laws of the Surviving Corporation until thereafter
amended as provided by law or the Certificate of Incorporation of the Surviving
Corporation or the By-Laws of the Surviving Corporation.
1.2.5. Directors and Officers of Salex and
Synergistic.
(a) The Board of Directors of
Salex shall become the initial directors of the Surviving Corporation and
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ and four persons designated by ▇▇▇▇▇ shall be additional
directors of Synergistic, each to hold office in accordance with applicable law,
the Certificate of Incorporation and By-Laws of the Surviving Corporation and of
Synergistic, respectively, until resignation, removal or replacement.
Immediately prior to the Merger, and as a condition thereto, Synergistic and the
▇▇▇▇▇▇▇▇▇ Stockholders shall cause the Board of Directors of Synergistic to be
expanded to seven (7) Directors and cause ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ and four persons
designated by ▇▇▇▇▇ to be elected as Directors of Synergistic and
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shall undertake all filings as shall be required in connection with the election
and maintenance of ______________________ in such positions.
1.2.6. Conversion of Securities. At the
Effective Time, by virtue of the Merger:
(a) Any share of Salex Common Stock held in the treasury
of Salex shall be cancelled and extinguished without any conversion thereof and
no payment shall be made with respect thereto.
(b) Any share of Salex Common Stock owned by Synergistic
(including the ▇▇▇▇▇ Shares) shall be cancelled and extinguished without any
conversion thereof and no payment shall be made with respect thereto (except in
connection with the purchase thereof in accordance with the provision of
Subsection 1.1 hereof).
(c) All of the 4,503,000 issued and outstanding shares
(the "Shares") of the Salex Common Stock owned by the Salex Stockholders shall
be converted into the right to receive in the aggregate (i) 4,003,165 shares of
Common Stock, par value $.01 per share, of Synergistic ("Synergistic Common
Stock") and (ii) 1,000 shares of Series B Convertible Preferred Stock (the
"Synergistic Preferred Stock"). Upon the filing by Synergistic of a Certificate
of Amendment increasing the authorized capital stock of the Company, each share
of Synergistic Preferred Stock shall be convertible into 2,059.106 shares of
Synergistic Common Stock. The shares of Synergistic Common Stock delivered at
the Effective Time, together with the
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shares of Synergistic Common Stock into which the Synergistic Preferred Stock is
convertible, represent, in the aggregate, 51% of the fully diluted issued and
outstanding shares of common stock of Synergistic (the "Share Consideration").
Such 51% shall be calculated before the further dilution effect of the
conversion rights of holders of shares of convertible preferred stock and
warrants to purchase shares of Salex Common Stock, which securities shall be
converted into shares of securities of Synergistic in accordance with the terms
of Subsection 1.2.6(d) below.
(d) Each issued and outstanding share of 8.5% Series A
Preferred Convertible Stock, liquidation value $100 per share ("Salex
Preferred"), and each Warrant, each exercisable for one share of Common Stock of
Salex ("Salex Warrants") shall be converted into an identical share of preferred
stock of Synergistic, in the case of the Salex Preferred, and into a warrant of
Synergistic bearing identical terms and conditions as the Salex Warrants.
(e) Shares of the common stock, par value $.01 per share,
of the Subsidiary issued and outstanding at the Effective Time shall remain
outstanding and unchanged and shall constitute all of the issued and outstanding
shares of the capital stock of the Surviving Corporation.
(f) At the Effective Time, the stock transfer books of
Salex shall be closed and there shall be no further registration of transfers of
any shares of Salex Common Stock thereafter on the records of Salex.
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(g) From and after the Effective Time, the holders of
certificates evidencing ownership of shares of Salex Common Stock shall cease to
have any rights with respect to Salex Common Stock, except as otherwise provided
herein or by law.
(h) Notwithstanding anything to the contrary in this
Subsection 1.2.6, no party hereto shall be liable to a holder of a certificate
or certificates formerly representing Shares for any amount properly paid to a
public official pursuant to any applicable property, escheat or similar law.
2. Representations and Warranties as to Salex. Salex and each
of the Salex Subsidiaries, jointly and severally, and each of the Salex
Stockholders (other than ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇), severally only represent
and warrant to Synergistic and Subsidiary as follows:
2.1. Organization, Standing and Power. Salex and
each Salex Subsidiary are corporations duly organized, validly existing and in
good standing under the laws of the state of their incorporation, with full
corporate power and corporate authority to (a) own, lease and operate their
properties, (b) carry on their business as currently conducted by them and (c)
execute and deliver, and perform under this Agreement and each other agreement
and instrument to be executed and delivered by them pursuant hereto. There are
no states or jurisdictions in which the character and location of any of the
properties owned or leased by Salex or any Salex Subsidiary, or the conduct of
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their respective businesses makes it necessary for Salex or any Salex Subsidiary
to qualify to do business as a foreign corporation, where the failure to so
qualify would have a material adverse effect on the business, operations or
financial condition of Salex. True and complete copies of the Certificate of
Incorporation of Salex and of each Salex Subsidiary and all amendments thereto,
and of the By-Laws of Salex and of each Salex Subsidiary, as amended to date,
have heretofore been furnished to Synergistic and Subsidiary. Minute books of
Salex and of each Salex Subsidiary heretofore exhibited to Synergistic contain
complete and accurate records of all meetings and other corporate actions of
each corporation's stockholders and Board of Directors (including committees of
its Boards of Directors).
2.2. Capitalization.
(a) The authorized capital stock of Salex consists of
15,000,000 shares of Salex Common Stock, of which 7,900,000 shares are issued
and outstanding, and 5,000,000 shares of preferred stock, of which no shares are
issued and outstanding. All issued shares of the Salex Common Stock have been
duly and validly issued and are fully paid and nonassessable and are free and
clear of any liens, claims, charges or encumbrances of any nature whatsoever,
except in the case of ▇▇▇▇▇ personally, the ▇▇▇▇▇ Obligation to AG. Except as
set forth in Schedule 2.3, there are no outstanding options, warrants, rights,
puts, calls, commitments, conversion rights, plans or other agreements of any
character to which Salex is a party or otherwise bound which provide for the
acquisition,
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disposition or issuance of any issued but not outstanding, outstanding, or
authorized and unissued shares of Salex Common Stock. There are no preemptive or
similar rights attached to the Salex Common Stock.
(b) The authorized capital stock of the Salex
Subsidiaries and the shares thereof which are issued and outstanding are set
forth on Schedule 2.2 hereof. All issued shares of the Salex Subsidiaries
capital stock have been duly authorized, validly issued and outstanding and are
fully paid and nonassessable and owned of record and beneficially by Salex.
Other than with respect to the Series A Preferred Stock and related warrants
contemplated by the Redstone Private Placement, there are no outstanding
options, warrants, rights, puts, calls, commitments, exchange, conversion
rights, plans or other agreements of any character to which the Salex
Subsidiaries or the Salex Stockholders are a party or otherwise bound which
provide for the acquisition, disposition or issuance of any issued but not
outstanding, or authorized and unissued shares, of the Salex Subsidiaries
capital stock. There is no personal liability, and there are no preemptive or
similar rights, attached to the Salex Subsidiaries capital stock.
2.3. Ownership of Salex Common Stock. The Salex
Stockholders have good and marketable title to all shares of the issued and
outstanding shares of Salex Common Stock, free and clear of any and all liens,
adverse claims, security interests, pledges, mortgages, charges and encumbrances
of any nature whatsoever (except for federal and state securities law
-11-
restrictions of general applicability and the ▇▇▇▇▇ Obligation to AG), and on
the Closing Date will own all of such Salex Common Stock, free and clear of any
and all liens, adverse claims, security interests, pledges, mortgages, charges
and encumbrances of any nature whatsoever (except for federal and state
securities law restrictions of general applicability and the ▇▇▇▇▇ Obligation to
AG), including, but not limited to, any claims by any present or former
stockholders of Salex. Set forth on Schedule 2.3, is a complete and correct list
of the names, addresses and record and beneficial stock ownership of the Salex
Stockholders, all of which shares are owned by the person listed thereon free
and clear of all claims, liens and encumbrances of any nature whatsoever (except
with respect to the ▇▇▇▇▇ Obligation to AG). Other than with respect to the
holders of Series A Preferred Stock and related warrants contemplated by the
Redstone Private Placement, no holders of any of the securities of Salex have
any rights, "demand," "piggy-back" or otherwise, to have such securities
registered under the Securities Act of 1933, as amended, except as otherwise set
forth on Schedule 2.3.
2.4. Interests in Other Entities.
(a) Salex does not (i) own, directly or indirectly, of
record or beneficially, any shares of voting stock or other equity securities of
any other corporation except the Salex Subsidiaries, as set forth on Schedule
2.2(b), (ii) have any ownership interest, direct or indirect, of record or
beneficially, in any unincorporated entity, and (iii) have any obligation,
direct or indirect, present or contingent, (A) to
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purchase or subscribe for any interest in, advance or loan monies to, or in any
way make investments in, any other person or entity, or (B) to share any profits
or capital investments or both.
(b) None of the Salex Stockholders
(i) owns, directly or indirectly, of record or beneficially, any shares of
voting stock or other equity securities of any other corporation engaged in the
same or similar business to that business engaged in by Salex or the Salex
Subsidiaries at the Effective Time (other than not more than one percent (1%) of
the publicly-traded capital stock of corporations engaged in such business,
which stock is held solely for investment purposes); (ii) has any ownership
interest, direct or indirect, of record or beneficially, in any unincorporated
entity engaged in the same or similar business to that business engaged in by
Salex and the Salex Subsidiaries at the Effective Time; and (iii) has any
obligation, direct or indirect, present or contingent, (A) to purchase or
subscribe for any interest in, advance or loan monies to, or in any way make
investments in, any other person or entity engaged in the same or similar
business to that business engaged in by Salex or the Salex Subsidiaries at the
Effective Time, or (B) to share any profits or capital investments or both from
a entity engaged in the same or similar business to that business engaged in by
Salex or the Salex Subsidiaries at the Effective Time.
2.5. Authority. The execution and delivery by
Salex of this Agreement and of all of the agreements to be
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executed and delivered by Salex and the Salex Subsidiaries pursuant hereto
(collectively, the "Salex Documents"), the performance by Salex and the Salex
Subsidiaries of their obligations hereunder and thereunder, and the consummation
of the transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of Salex and the Salex
Subsidiaries. The Salex Stockholders are individuals or entities having all
necessary capacity, power and authority to execute and deliver this Agreement
and such other agreements to be executed and delivered pursuant hereto and to
consummate the transaction consummated hereby and thereby. This Agreement is,
and when executed and delivered by Salex, the Salex Subsidiaries and the Salex
Stockholders, together with each of the other agreements to be delivered by
either or both of them pursuant hereto, will be, the valid and binding
obligations of Salex, the Salex Subsidiaries and the Salex Stockholders, to the
extent they are parties thereto, in accordance with their respective terms,
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the rights of creditors generally and subject
to the rules of law governing (and all limitations on) specific performance,
injunctive relief, and other equitable remedies.
2.6. Noncontravention. Except as set forth on
Schedule 2.6, neither the execution and delivery by Salex, the Salex
Subsidiaries or the Salex Stockholders of this Agreement or of any other Salex
Documents to be executed and delivered by them, nor the consummation of any of
the transactions
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contemplated hereby or thereby, nor the performance by either or both of them of
any of their respective obligations hereunder or thereunder, will (nor with the
giving of notice or the lapse of time or both would) (a) conflict with or result
in a breach of any provision of the Certificate of Incorporation, By-Laws or
other constituent documents of Salex or the Salex Subsidiaries, each as amended
to date, or (b) give rise to a default, or any right of termination,
cancellation or acceleration, or otherwise be in conflict with or result in a
loss of contractual benefits to any of them, under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which any or each of them is a party or by
which any or each of them or any of their respective assets may be bound, or
require any consent, approval or notice under the terms of any such document or
instrument, or (c) violate any order, writ, injunction, decree, law, statute,
rule or regulation of any court or governmental authority which is applicable to
any or each of them, or (d) result in the creation or imposition of any lien,
adverse claim, restriction, charge or encumbrance upon any of the assets of
Salex or the Salex Subsidiaries (the "Assets"), or (e) interfere with or
otherwise adversely affect the ability of Salex to carry on the Business after
the Effective Time on substantially the same basis as is now conducted by Salex
and the Salex Subsidiaries.
2.7. Financial Statements.
(a) Attached as Exhibit 2.7 are (i)
true, correct and complete copies of the Financial Statements of
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Salex and the Salex Subsidiaries and their affiliates as at and for the fiscal
years ended April 30, 1993, 1994 and 1995, and the related statements of
operations, retained earnings and cash flows for the fiscal years then ended, as
reported on by BDO ▇▇▇▇▇▇▇, LLP (the "Audited Financial Statements") and (ii)
true, correct and complete copies of the unaudited balance sheets of Salex and
the Salex Subsidiaries and the related statement of operations, and statement of
retained earnings and cash flows for the eleven (11) month period ended March
31, 1996 (the "Unaudited Interim Financial Statements") which have heretofore
been delivered by Salex to Synergistic. The Audited Financial Statements were
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied, and the Audited Financial Statements and Unaudited
Financial Statements fairly present the consolidated financial position of Salex
and the Salex Subsidiaries as at the dates thereof and its results of operations
for the periods indicated, subject to normal recurring adjustments and, in the
case of the Unaudited Interim Financial Statements, the inclusion of notes which
might be required as a result of year-end audit.
(b) Salex will deliver to
Synergistic and the Subsidiary (a) copies of the unaudited consolidated balance
sheet of Salex and the Salex Subsidiaries at and for the year ended April 30,
1996, together with the related statements of income, stockholders' equity and
cash flows as at and for the year ended on such date. The books and records of
Salex are complete and correct, have been maintained in accordance with
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past practices, and accurately reflect the basis for the financial condition,
results of operations and cash flow of Salex and the Salex Subsidiaries as set
forth in the Unaudited Interim Financial Statements.
2.8. Absence of Undisclosed Liabilities. Since
January 1, 1996, Salex and the Salex Subsidiaries have no liabilities or
obligations of any nature whatsoever, whether accrued, matured, unmatured,
absolute, contingent, direct or indirect or otherwise, which have not been (a)
in the case of liabilities and obligations of a type customarily reflected on a
corporate balance sheet, set forth on the balance sheet of the Unaudited Interim
Financial Statements, or (b) incurred in the ordinary course of business since
the dates of the Unaudited Interim Financial Statements, or (c) in the case of
other types of liabilities and obligations, described in any of the Schedules
delivered pursuant hereto or omitted from said Schedules in accordance with the
terms of this Agreement, or arising under contracts or leases listed in such
Schedules or other contracts or leases which are omitted from such Schedules in
accordance with the terms of this Agreement, or (d) incurred, consistent with
past practice, in the ordinary course of business of Salex.
2.9. Properties. Except as set forth on Schedule
2.9, Salex and the Salex Subsidiaries have marketable title to all of the
properties and assets reflected on the Unaudited Interim Financial Statements
and which, taken as a whole, are material to the conduct of their business,
except properties or assets sold or otherwise disposed of in the ordinary course
of
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business, free and clear of any and all mortgages, liens (including liens for
current Taxes, as defined in Subsection 2.15(c) hereof), pledges, claims,
charges and encumbrances of any nature whatsoever (hereinafter collectively,
"Liens"), other than Liens not yet due and payable or being contested in good
faith by appropriate proceedings, and other than such Liens or imperfections of
title, if any, which are not substantial in character, amount or extent and do
not materially interfere with the present or continued use of such property or
otherwise materially adversely affect the value or transferability thereof or
otherwise materially impair the Business or operations of Salex as conducted on
the date hereof. Listed separately on Schedule 2.9 hereof are all material
plants, structures, and equipment which are in the case of plants and structures
owned by Salex or the Salex Subsidiaries and, in the case of equipment, leased
by Salex or the Salex Subsidiaries. Schedule 2.9 sets forth all (a) real
property which is leased (whether as lessor or lessee) or subject to lease
(whether as lessor or lessee) by Salex or the Salex Subsidiaries, or which is
subject to a title retention or conditional sales agreement or other security
device, and (b) material tangible personal property which is owned, leased
(whether as lessor or lessee) or subject to contract or commitment of purchase
or sale or lease (whether as lessor or lessee) by Salex or the Salex
Subsidiaries.
2.10. Accounts Receivable; Inventories. The accounts
and notes receivable which are reflected on the Unaudited Interim Financial
Statements have arisen in the
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ordinary course of business at the aggregate recorded amounts thereof, less the
respective amount of the allowances for doubtful accounts and notes receivable,
if any, reflected thereon (which allowance was established on a basis by Salex
or the Salex Subsidiaries consistent with prior practices), and are not subject
to offsets other than in the ordinary course of business. The accounts and notes
receivable of Salex and the Salex Subsidiaries which were added after the date
of the Unaudited Interim Balance Sheet, have arisen in the ordinary course of
business and are not subject to offsets other than in the ordinary course of
business. The inventories reflected on the Unaudited Interim Balance Sheet and
thereafter added consist of items of a quality and quantity usable or saleable
in the ordinary course of business, except for obsolete materials, slow-moving
items, materials of below standard quality and not readily marketable items, all
of which have been written down to net realizable value or reserved against on
the books and records of Salex and the Salex Subsidiaries consistent with past
practices.
2.11. Absence of Changes. Except as otherwise
indicated on Schedule 2.11, since the date of the Unaudited Interim Financial
Statements, there have not been (a) any material adverse changes in the
condition (financial or otherwise), assets, liabilities, business, results of
operations or cash flows of Salex and the Salex Subsidiaries (including, without
limitation, any such adverse changes resulting from damage, destruction or other
casualty loss, whether or not covered by insurance), (b) any waivers by Salex
and the Salex
-19-
Subsidiaries of any right, or cancellation of any debt or claim, material to the
Business, (c) any declarations, set asides or payments of any dividend or other
distributions or payments in respect of the Salex Common Stock, or (d) any
changes in the accounting principles or methods which are utilized by Salex.
2.12. Litigation. Except as set forth in Schedule
2.12, there are no suits or actions, or administrative, arbitration or other
proceedings or governmental investigations, pending or, to the best knowledge of
the Salex Stockholders, threatened, against or relating to Salex, the Salex
Subsidiaries, the Salex Stockholders, the transactions contemplated hereby, the
Business, or any of the Assets, which if adversely determined would result in a
liability in excess of $25,000; nor, is there, to the best knowledge of Salex,
the Salex Subsidiaries or the Salex Stockholders, any basis for such claim,
suit, action, arbitration, investigation, inquiry or other proceeding. There are
no judgments, orders, stipulations, injunctions, decrees or awards in effect
which relate to Salex or the Salex Subsidiaries, this Agreement, the
transactions contemplated, the Business or any of the Assets, the effect of
which is (a) to limit, restrict, regulate, enjoin or prohibit in any material
manner any business practice of Salex or the Salex Subsidiaries in any area, or
the acquisition by Salex or the Salex Subsidiaries of any properties, assets or
businesses, or (b) otherwise materially adverse to the Business or any of the
Assets.
2.13. No Violation of Law. Neither Salex nor any of
the Salex Subsidiaries is engaging in any activity or omitting
-20-
to take any action as a result of which both (a) it is in material violation of
any law, rule, regulation, zoning or other ordinance, statute, order, injunction
or decree, or any other requirement of any court or governmental or
administrative body or agency, applicable to them, the Business or any of the
Assets, including, but not limited to, those relating to: occupational safety
and health matters; issues of environmental and ecological protection (e.g., the
use, storage, handling, transport or disposal of pollutants, contaminants or
hazardous or toxic materials or wastes, and the exposure of persons thereto);
business practices and operations; labor practices; employee benefits; and
zoning and other land use, and (b) Salex, the Salex Subsidiaries, the Business
and/or any of the Assets have been, or may be, materially and adversely affected
thereby.
2.14. Intellectual Property. Schedule 2.14 is a
complete and correct list of all (A) United States and foreign patents,
trademark and trade name registrations, trademarks and trade names, servicemarks
and servicemark registrations, assumed names and copyrights and copyright
registrations, owned in whole or in part or used by Salex or any of the Salex
Subsidiaries and is material to the Business, and all applications therefor, (B)
inventions, discoveries, improvements, processes, formulae, proprietary rights
and related trade secrets (including, without limitation, all customer/
subscriber lists and information relating to such customers/subscribers)
material to the Business, (C) licenses, agreements and other rights (including
agreements and arrangements with the Business' network of affiliated service
-21-
stations) to which Salex and the Salex Subsidiaries is a party or otherwise
bound which relate to any of the foregoing (collectively, the "Intellectual
Property Licenses") and (D) all technology, know-how and related trade secrets
material to the Business, including all computer programs and software, together
with the operating codes, source codes, updates, upgrades, modifications,
enhancements and any user and technical documentation or utilities with respect
thereto (the items referred to in (A), (B), (C) and (D) are collectively
referred to as the "Intellectual Property").
Except as set forth on Schedule 2.14, Salex and the Salex
Subsidiaries are not and, to the best of Salex's and the Salex Subsidiaries'
knowledge, no third party is, in default under any of the Intellectual Property
Licenses, and, to the best of Salex's and the Salex Subsidiaries' knowledge,
there exists no event, occurrence, condition or act (including the transactions
contemplated in this Agreement) which, with the giving of notice, the lapse of
time or the happening of any other event or condition, would become a default
thereunder. Except as set forth in Schedule 2.14 (a) all of the Intellectual
Property is free and clear of all liens, security interests, options, rights of
first refusal, mortgages, charges, restrictive agreements, security agreements,
security agreements or other restrictions on the use of or irregularities in the
title thereto; (b) no claim, demand, cause of action, suit or proceeding by any
third party contesting the validity, enforceability, use or ownership of any
Intellectual Property has been made or, to the knowledge of Salex
-22-
and the Salex Subsidiaries, has been threatened, filed, pending, settled,
adjudged, whether at law or in equity, or before any governmental department,
commission, board, agency or instrumentally, or in any arbitration forum, which
involves a demand for any judgement or liability; (c) neither Salex nor any of
the Salex Subsidiaries has received any notice of any infringement or
misappropriation of, or other conflict with any third party with respect to, any
Intellectual Property, nor has Salex or any of the Salex Subsidiaries received
any claims of infringement or misappropriation of, or conflict with, any
Intellectual Property of any third party in connection with its business; (d)
all Intellectual Property will be owned by or available for use by Subsidiary
and the Salex Subsidiaries on identical terms and conditions immediately
subsequent to the Effective Time; and (e) none of the Intellectual Property or
use by Salex and the Salex Subsidiaries in the Business as and where presently
conducted thereof violates in any material manner any laws statutes, ordinances
or regulations or is subject to any outstanding order, decree, stipulation or
change.
2.15. Tax Matters.
(a) Salex and the Salex Subsidiaries
have filed with the appropriate governmental agencies all tax returns and
reports required to be filed by them (after giving effect to applicable
extensions), and have paid in full or contested in good faith or made adequate
provision for the payment of, Taxes (as defined herein) shown to be due or
claimed to be due on such tax returns and reports. The provisions for
-23-
Taxes which are set forth on the Unaudited Interim Financial Statements are
adequate for all accrued and unpaid taxes of Salex for the eleven (11) month
period ended March 31, 1996, whether (i) incurred in respect of or measured by
income of Salex and the Salex Subsidiaries for any periods prior to the close of
business on that date, or (ii) arising out of transactions entered into, or any
state of facts existing, on or prior to such date. Salex and the Salex
Subsidiaries have duly withheld all payroll taxes, FICA and other federal, state
and local taxes and other items requiring to be withheld by it from employer
wages, and have duly deposited the same in trust for or paid over to the proper
taxing authorities. Neither Salex nor any of the Salex Subsidiaries has executed
or filed with any taxing authority any agreement extending the periods for the
assessment or collection of any Taxes, and is not a party to any pending or, to
their knowledge, threatened action or proceeding by any governmental authority
for the assessment or collection of Taxes. Within the past three years, the
United States federal income tax returns of Salex have not been examined by the
Internal Revenue Service ("the IRS"), nor has any state or local taxing
authority thereof examined any merchandise, personal property, sales or use tax
returns of Salex.
(b) Salex (i) has not agreed to or
been required to make any adjustment pursuant to Section 481(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) has no knowledge that the
IRS or any other taxing authority has proposed any such adjustment or change in
accounting method, and
-24-
(iii) has no application pending with any governmental authority requesting
permission for any change in accounting method.
(c) As used herein, the term "Taxes"
means all federal, state, county, local and other taxes and governmental
assessments, including but not limited to income taxes, estimated taxes,
withholding taxes, excise taxes, ad valorem taxes, payroll related taxes
(including but not limited to premiums for worker's compensation insurance and
statutory disability insurance), employment taxes, franchise taxes and import
duties, together with any related liabilities, penalties, fines, additions to
tax or interest.
2.16. Insurance. Schedule 2.16 is a complete and
correct list and summary description of all contracts and policies of insurance
relating to any of the Assets, the Business, in which Salex and/or the Salex
Subsidiaries is an insured party, beneficiary or loss payable payee. Such
policies are in full force and effect, all premiums due and payable with respect
thereto have been paid, and no notice of cancellation or termination has been
received by Salex with respect to any such policy.
2.17. Banks; Powers of Attorney. Schedule 2.17
is a complete and correct list showing (a) the names of each bank in which Salex
has an account or safe deposit box and the names of all persons authorized to
draw thereon or who have access thereto, and (b) the names of all persons, if
any, holding powers of attorney from Salex.
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2.18. Employee Arrangements. Schedule 2.18 is a
complete and correct list and summary description of all (a) material union,
collective bargaining, employment, management, termination and consulting
agreements to which any of Salex or the Salex Subsidiaries (or any affiliate
thereof within the meaning of ERISA) is a party or otherwise bound, and (b)
compensation plans and arrangements; bonus and incentive plans and arrangements;
deferred compensation plans and arrangements; pension and retirement plans and
arrangements; profit-sharing and thrift plans and arrangements; stock purchase
and stock option plans and arrangements; hospitalization and other life, health
or disability insurance or reimbursement programs; holiday, sick leave,
severance, vacation, tuition reimbursement, personal loan and product purchase
discount policies and arrangements; and other plans or arrangements providing
for benefits for employees of Salex or the Salex Subsidiaries (or any affiliate
thereof within the meaning of ERISA). Said Schedule also lists the names and
compensation of the five most highly compensated executives of Salex in 1995 and
their projected compensation for 1996.
2.19. ERISA.
2.19.1. Plans. Schedule 2.19 lists each
Salex and Salex Subsidiaries "employee pension benefit plan" ("Salex Pension
Plan"), as such term is defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and each Salex and the Salex
Subsidiaries "welfare benefit plan" (collectively called "Salex Welfare Plans")
as such term is defined in Section 3(1) of ERISA, which
-26-
is maintained by Salex or the Salex Subsidiaries or to which they contribute or
are obligated or required to contribute. The Salex Pension Plans and Salex
Welfare Plans are hereinafter sometimes collectively referred to as the "Plans"
and severally referred to as a "Plan". Neither Salex nor the Salex Subsidiaries
maintains any defined benefit plan subject to Title IV of ERISA.
2.19.2. Qualification. Each Salex Pension
Plan and the trust (if any) forming a part thereof has submitted to the IRS an
application for determination to be qualified under Section 401(a) of the Code
and to the best knowledge of Salex and the Salex Subsidiaries, each such Plan
meets the requirements for qualification.
2.19.3. Plan Documents. Salex or the Salex
Subsidiaries has heretofore delivered to Synergistic true, complete and correct
copies of (i) the Plans, and all related trust agreements, (ii) all written
interpretations and summary plan descriptions relating thereto, (iii) the two
most recent annual reports (Form 5500 Series) and accompanying schedules which
were prepared in connection with each Plan, (iii) all IRS determination letters
relating to the Plans, and (iv) the two most recent actuarial evaluation reports
which were prepared in connection with any of the Plans.
2.19.4. No Prohibited Transactions.
Neither Salex, nor any Salex Subsidiary, nor any of the Plans, nor any trust
created thereunder, nor any trustee or administrator thereof, has engaged in a
transaction which would subject Salex or any Salex Subsidiary or any of the
Plans to the
-27-
tax on prohibited transactions imposed by Section [4975] of the Code or to a
civil penalty assessed pursuant to Section 502(i) of ERISA.
2.19.5. Termination, etc. Neither Salex
nor any of the Salex Subsidiaries has incurred, and are not expected to incur,
directly or indirectly, any liability to the Pension Benefit Guaranty
Corporation (the "PBGC") with respect to any Salex Pension Plan. The PBGC has
not instituted proceedings to terminate the Salex Pension Plan, nor has it
notified Salex, or any Salex Subsidiary, either formally or informally, of its
intention to institute any such proceedings.
2.19.6. Multiemployer Plans. Neither Salex
nor any of the Salex Subsidiaries has ever maintained or contributed to, or been
obligated or required to contribute to, a "multiemployer plan," as such term is
defined in Section 3(37) of ERISA.
2.19.7. Claims. There is not pending, and
to the best of the knowledge of Salex, the Salex Subsidiaries or the Salex
Stockholders there is not threatened, any claims against any of the Plans or any
fiduciary thereof (other than claims for benefits made in the ordinary course).
2.20. Certain Business Matters. Except as is set
forth in Schedule 2.20, (a) neither Salex nor the Salex Subsidiaries is a party
to or bound by any distributorship, dealership, sales agency, franchise or
similar agreement which relates to the sale or distribution of any of the
products and services of the Business, (b) neither Salex nor the Salex
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Subsidiaries has any sole-source supplier of goods or services (other than
utilities) that are material to the conduct of the Business, (c) there are no
pending or to its knowledge, threatened labor negotiations, work stoppages or
work slowdowns involving or affecting the Business, and to its knowledge, no
union representation questions exist, and to its knowledge there are no
organizing activities, in respect of any of the employees of Salex or Salex
Subsidiaries, (d) complete and correct copies or descriptions of the product and
service warranties given by Salex or Salex Subsidiaries or by which they are
bound have heretofore been delivered by Salex and Salex Subsidiaries to
Synergistic, (e) neither Salex nor the Salex Subsidiaries is a party to or bound
by any agreement which limits its freedom to compete in any line of business or
with any person, or which is otherwise materially burdensome to Salex or the
Salex Subsidiaries, and (f) neither Salex nor the Salex Subsidiaries is a party
to or bound by any agreement in which any officer, director or stockholder of
Salex or Salex Subsidiaries (or any affiliate of any such person) has, or had
when made, a direct or indirect material interest.
2.21. Certain Contracts. Schedule 2.21 is a
complete and correct list of all material contracts, commitments, obligations
and understandings which are not set forth in any other Schedule delivered
hereunder and to which Salex or Salex Subsidiaries is a party or otherwise
bound, except for (a) purchase orders from vendors or customers and (b) each of
those which (i) were made in the ordinary course of business and (ii)
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either (A) are terminable by Salex or Salex Subsidiaries (and will be terminable
by Subsidiary) without liability, expense or other obligation on 30 days' notice
or less, or (B) may be anticipated to involve aggregate payments to or by Salex
or Salex Subsidiaries of $100,000 (or the equivalent) or less calculated over
the full term thereof, and (C) are not otherwise material to the Business or
Salex. Except as expressly stated on any of such Schedules, (1) each of the four
contracts identified under "Agreements" in Schedule 2.20 is in full force and
effect, no person or entity which is a party thereto or otherwise bound thereby
is in material default thereunder, and no event, occurrence, condition or act
exists which does (and to the knowledge of Salex and the Salex Subsidiaries
which with the giving of notice or the lapse of time or both would) give rise to
a material default or right of cancellation, acceleration or loss of contractual
benefits thereunder; and (2) there has been no threatened cancellations thereof,
and there are no outstanding disputes thereunder.
2.22. Customers and Suppliers. Salex has
previously provided to Synergistic a complete and correct list setting forth, as
of April 30, 1996, (a) the 10 largest customers of the Business and the amount
for which each such customer was invoiced, and (b) the 3 largest suppliers of
the Business and the amount of goods and services purchased from each such
supplier. To the knowledge of Salex, and except with respect to the Firestone
account referenced on Schedule 2.20, there are no (i) threatened cancellations
by the aforesaid customers or suppliers
-30-
with respect to the Business, (ii) outstanding material disputes by such
customers or suppliers with Salex or Salex Subsidiaries and the Business, or
(iii) material adverse changes in the business relationship between the Business
and any such customer or supplier.
2.23. Business Practices and Commitments. Set
forth on Schedule 2.23 is a summary description of (a) the material rebate and
volume discount practice and obligations of Salex and the Salex Subsidiaries,
(b) Salex's allowance and customer return practice, (c) Salex's material
promotional literature, and (d) Salex's warranty practices and obligations, as
each of the foregoing relate to Salex's customers and suppliers.
2.24. Approvals/Consents. Except as set forth on
Schedule 2.24, Salex and the Salex Subsidiaries currently hold all governmental
and administrative consents, permits, appointments, approvals, licenses,
certificates and franchises which are necessary for the operation of the
Business, all of which are in full force and effect. Schedule 2.24 is a complete
and correct list of all such governmental and administrative consents, permits,
appointments, approvals, licenses, certificates and franchises. No material
violations of the terms thereof have heretofore occurred or are known to exist
as of the date of this Agreement.
2.25. Information as to Salex and the Salex
Subsidiaries. None of the representations or warranties made by
Salex, the Salex Subsidiaries or the Salex Stockholders in this
-31-
Agreement is, or as contained in any of the Salex Documents to be executed and
delivered hereto will be, false or misleading with respect to any material fact,
or omits to state any material fact necessary in order to make the statements
therein contained not misleading.
2.26. Political Contributions. Neither Salex nor
the Salex Subsidiaries has directly or indirectly, at any time (i) made any
contributions to any candidate for political office, or failed to disclose fully
any such contribution in violation of law or (ii) made any payment to any state,
federal or foreign governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments or contributions
required or allowed by applicable law.
3. Representations and Warranties as to Synergistic and
Subsidiary. Synergistic and Subsidiary, jointly and severally, represent and
warrant to Salex, the Salex Subsidiaries and Salex Stockholders as follows:
3.1. Organization, Standing and Power.
Synergistic and Subsidiary are each a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease and operate its properties and to
carry on its businesses as presently conducted by it. Except as set forth on
Schedule 3.1, there are no states or jurisdictions in which the character and
location of any of the properties owned or leased by Synergistic or the
Subsidiary, or the conduct of its businesses makes it necessary for it to
qualify to do business as a foreign
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corporation, when the failure to so qualify would have a material
adverse effect.
3.2. Interests in Other Entities. Schedule 3.2 sets
forth a true and complete list of all direct or indirect subsidiaries of
Synergistic (including the Subsidiary) that are material to the financial
condition of Synergistic and its subsidiaries, including those which will be
divested as at the Effective Time, together with the jurisdiction of
incorporation of each such subsidiary and the percentage of each such
subsidiary's outstanding capital stock owned by Synergistic or another of
Synergistic's subsidiaries. Each of such subsidiaries are duly organized
corporations, validly existing and in good standing under the laws of the
jurisdiction of its respective incorporation (as well as all applicable foreign
jurisdictions necessary to its business operations) and have the requisite
corporate power and authority and governmental authority to own, operate or
lease the properties that each purports to own, operate or lease and to carry on
its business as it is now being conducted.
3.3. Incorporation Documents and By-Laws. Each of
Synergistic and Subsidiary have heretofore furnished, or will furnish to Salex,
a complete and correct copy of its Certificate of Incorporation, and the
By-Laws, each as amended to date. Such organizational documents are in full
force and effect. Neither Synergistic nor Subsidiary is in violation of any of
the provisions of any of the aforesaid organizational documents.
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3.4. Capitalization. (a) The authorized capital stock
of Synergistic consists of 10,000,000 shares of Synergistic Common Stock and
1,000,000 shares of Preferred Stock, par value $.01 per share (none of which are
outstanding or held in the treasury of Synergistic). As of the date hereof, (i)
5,949,535 shares of Synergistic Common Stock were issued and outstanding, all of
which were duly authorized, validly issued, fully paid and nonassessable, (ii)
172,300 shares of Synergistic Common Stock are issuable or available for
issuance upon exercise of options granted and available for grant under
Synergistic's stock option plan, as amended, and (iii) 625,000 shares of
Synergistic Common Stock are reserved for future issuance upon exercise of
outstanding Common Stock Purchase Warrants of Synergistic. Schedule 3.4 sets
forth a true and complete list of all outstanding options and warrants as of the
date hereof. At the Effective Time, Schedule 3.4, as then amended, shall set
forth all then outstanding shares of Synergistic Common Stock and all then
outstanding options and warrants as of the Closing Date. Except as contemplated
by the Merger and except as set forth on Schedule 3.4, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of Synergistic or any
of its subsidiaries (including the Subsidiary) or obligating Synergistic or any
of its subsidiaries (including the Subsidiary) to issue or sell any shares of
capital stock of or other equity interests in Synergistic or any of its
subsidiaries (including the Subsidiary). All shares of Synergistic Common Stock
issuable
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upon exercise of outstanding options and warrants, or pursuant to the Merger,
will upon payment to Synergistic of the exercise purchase price thereof, or upon
consummation of the Merger, on the terms and conditions specified in the
instruments pursuant to which they are issuable, be duly authorized, validly
issued, fully paid and nonassessable. Except as set forth in Schedule 3.4,
neither Synergistic nor any of its subsidiaries (including the Subsidiary) is a
party to any agreement granting registration rights with respect to any equity
or debt securities of Synergistic or its subsidiaries (including the
Subsidiary). There are no preemptive rights with regard to the capital stock of
Synergistic or its subsidiaries (including the Subsidiary), and no
right-of-first refusal or similar catch-up rights with regard to such capital
stock. Except as set forth in Schedule 3.4 and except for the transactions
contemplated by this Agreement, there are no outstanding contractual obligations
or other commitments or arrangements of Synergistic or any of its subsidiaries
(including the Subsidiary) to (A) repurchase, redeem or otherwise acquire any
shares of Synergistic Common Stock (or any interest therein) or (B) to provide
funds to or make any investment (in the form of a loan, capital contribution or
otherwise) in any such subsidiary or other entity, or (C) issue or distribute to
any person any capital stock of Synergistic or its subsidiaries (including the
Subsidiary), or (D) issue or distribute to holders of any of the capital stock
of Synergistic or its subsidiaries (including the Subsidiary) any evidences of
indebtedness or assets of Synergistic or its subsidiaries. All
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of the outstanding securities of Synergistic and Subsidiary have been, and all
shares of Synergistic Common Stock issuable in connection with the Merger, and
the exercise of the outstanding options and warrants will be, offered, issued
and sold by Synergistic in full compliance with applicable federal and state
securities laws.
(b) The outstanding shares of capital stock
of the Subsidiary are duly authorized, validly issued, fully paid and
nonassessable, and such shares are owned by Synergistic, directly or indirectly,
free and clear of all security interests, liens, adverse claims, pledges,
agreements, limitations on Synergistic's voting rights, charges and other
encumbrances of any nature whatsoever.
3.5. Authority. The execution and delivery by
Synergistic and Subsidiary of this Agreement and of each agreement to be
executed and delivered by either of them pursuant hereto (collectively, the
"Synergistic Documents"), the compliance by each of them with the provisions
hereof and thereof, including the divestiture of Synergistic's interest in
▇▇▇▇▇▇▇▇▇ & Co. and EDIX (as set forth in Section 6.2.11 hereof) and the
consummation of the transactions contemplated hereby and thereby, have been (and
at the Closing will be) duly and validly authorized by all necessary corporate
action on the part of Synergistic and Subsidiary, and Synergistic and Subsidiary
have (and at the Closing will have) all necessary corporate power and corporate
authority with respect thereto. This Agreement is, and when executed and
delivered by Synergistic and Subsidiary each
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other Synergistic Document will be, the valid and binding obligation of
Synergistic or Subsidiary, as the case may be to the extent it is a party
thereto, in accordance with the respective terms, thereof, except as the same
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the rights of creditors generally and subject to the rules of law
governing (and all limitations on) specific performance, injunctive relief, and
other equitable remedies.
3.6. Noncontravention. Except as set forth on
Schedule 3.6, neither the execution and delivery by Synergistic and/or
Subsidiary of any Synergistic Document, nor the consummation of any of the
transactions contemplated hereby or thereby, nor the performance by either of
them of any of its respective obligations hereunder or thereunder, will (nor
with the giving of notice or the lapse of time or both would) (a) conflict with
or result in a breach of any provision of the Articles or Certificates of
Incorporation or By-Laws of either Synergistic or Subsidiary, or (b) give rise
to a default, or any right of termination, cancellation or acceleration, or
otherwise be in conflict with, or result in a loss of contractual benefits to,
either of them, under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other instrument or obligation
to which either of them is a party or by which either of them or their
respective assets may be bound, or require any consent, approval or notice under
the terms of any such document or instrument, or (c) violate any order, writ,
injunction, decree, law, statute, rule
-37-
or regulation of any court or governmental authority which is applicable to
either of them, or (d) result in the creation or imposition of any lien, adverse
claim, restriction, charge or encumbrance upon any of their assets, or (e)
interfere with or otherwise adversely affect the ability of Synergistic or
Subsidiary to carry on its business after the Closing Date on substantially the
same basis as is now conducted by it.
3.7. Absence of Litigation. Except as set forth in
Schedule 3.7, there are no claims, actions, suits, proceedings or investigations
pending or, to the best knowledge of the executive officers of Synergistic and
Subsidiary, threatened against or relating to Synergistic, Subsidiary, this
Agreement, the transactions contemplated hereby, or any properties, assets or
rights of Synergistic or Subsidiary, including but not limited to any such
matters before any court, arbitrator, or administrative, governmental or
regulatory authority or body, domestic or foreign. Neither Synergistic nor any
of its subsidiaries (including Subsidiary), nor any of their respective
properties is subject to any order, writ, judgment, injunction, decree,
determination or award which, if enforced, would have a material adverse effect
on the business, the results of the operations, cash flows or financial
condition of Synergistic separately or of Synergistic and its subsidiaries taken
as a whole.
3.8. Employee Benefit Plans. (a) Schedule 3.8 lists
all material employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Securities Act of 1974, as
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amended ("ERISA")), and all material bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and other
material fringe or employee benefit plans programs or arrangements, and any
material employment or compensation agreements, written or otherwise, for the
benefit of, or relating to, any employee of Synergistic or Subsidiary or any
affiliate thereof within the meaning of ERISA, including any plan, program or
arrangement which is required to be maintained pursuant to local laws or
practices (the "Employee Plans"). Except as otherwise disclosed in Schedule 3.8,
none of the Employee Plans is a multiemployer plan, as defined in Section
4001(a)(3) of ERISA (a "Multiemployer Plan").
(b) There has been no "prohibited
transaction," as such term is defined in Section 406 of ERISA and Section 4975
of the Code, with respect to any Employee Plan, which could result in any
material liability of Synergistic and its subsidiaries, taken as a whole. All
Employee Plans are in compliance in all material respects with the requirements
prescribed by any and all applicable statutes, orders, or governmental rules or
regulations currently in effect with respect thereto, and Synergistic,
Subsidiary and each ERISA affiliate have performed all material obligations
required to be performed by them under, are not in any material respect in
default under or in violation of, and have no knowledge of any material default
or violation by any other party to, any of the Employee Plans. Each Employee
Plan intended to qualify under Section 401(a) of the Code has heretofore been
determined by the
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Internal Revenue Service (the "IRS") to so qualify, and each trust created
thereunder has heretofore been determined by the IRS to be exempt from tax under
the provisions of section 501(a) of the Code, and nothing as since occurred
which may reasonably be expected to cause the loss of such qualification or
exemption. Each Employee Plan with a group health plan has complied in all
material respects with the health care continuation coverage provisions of
ss.4980B of the Code.
(c) No Employee Plan subject to Part 3 of Subtitle I of ERISA
or Section 412 of the Code has incurred any "accumulated funding deficiency" (as
defined in ERISA or the Code), whether or not waived. Except as disclosed in
Schedule 3.8, with respect to each Employee Plans subject to Title IV of ERISA,
no "reportable event" within the meaning of Section 4043 of ERISA nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred which could result
in a material liability. Neither Synergistic, Subsidiary or any ERISA affiliate
has incurred or reasonably expect to incur any material liability under Title IV
of ERISA with respect to any Employee Plan (other than a liability for premiums
pursuant to Section 4007 of ERISA), including any liability arising under
ss.4062 and ss.4063 of ERISA, and there is no basis to expect that any Employee
Plan subject to Title IV of ERISA will be terminated involuntarily pursuant to
ss.4042 of ERISA.
(d) All contributions required to be made to any Employee Plan
have been made on or before their due dates. With respect to any Employee Plan
which is not a Multiemployee
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Plan, but which is covered by Title IV of ERISA, the total present value of
accrued benefits under such plans determined on a plan termination basis, using
the interest rate and other assumptions of the Pension Benefit Guaranty
Corporation, does not exceed the market value of assets of such plans as of the
date hereof by more than $35 million. The aggregate amount of payments by
Synergistic for 1995 in respect of retiree health care or death benefits in the
United States did not exceed $3 million.
Other than routine claims for benefits, there are no
outstanding claims or lawsuits against any Employee Plan or any fiduciary of an
Employee Plan, and no basis to anticipate that any such claims or lawsuits will
be filed.
3.9. Securities and Exchange Commission Filings;
Financial Statements.
(a) Synergistic has filed all forms,
reports, statements and documents required to be filed with the Securities and
Exchange Commission ("SEC") since November 1994 (collectively, the "SEC
Reports"), each of which has complied in all material respects with the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act") or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable, each as in effect on the date so filed.
Synergistic has delivered to Salex, in the form filed with the SEC (including
any amendments thereto), its Annual Report on Form 10-K for its fiscal year
ended December 31, 1995 and its Quarterly Report on Form 10-Q for the quarter
ended ▇▇▇▇▇ ▇▇,
-▇▇-
▇▇▇▇ (▇▇▇ ▇▇▇▇▇ ▇▇▇▇ 10-Q"). None of such reports (including but not limited to
any financial statements or schedules included or incorporated by reference
therein) nor any registration statement of Synergistic or any form, filed by
Synergistic, when filed (except to the extent revised or superseded by a
subsequent filing with the SEC) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial
statements contained in the SEC Reports has been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may otherwise be indicated in the
notes thereto) and each presents fairly, in all material respects, the
consolidated financial position of Synergistic and its subsidiaries as at the
respective dates thereof and the consolidated results of its operations and cash
flow position for the periods indicated.
(c) Except as and to the extent set forth on
the consolidated balance sheet of Synergistic and its subsidiaries as at
December 31, 1995, including the notes thereto, Synergistic and its subsidiaries
taken as a whole, do not have any liabilities or obligations, whether or not
accrued, contingent or otherwise, that would be required to be included on a
balance sheet prepared in accordance with GAAP, except for liabilities or
obligations incurred in the ordinary course of
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business since December 31, 1995, none of which would, individually or in the
aggregate, have a material adverse effect on the financial condition, or results
of the operations or cash flows of Synergistic and its subsidiaries, on a
consolidated basis.
3.10. Synergistic Common Stock and Synergistic
Preferred Stock Issuable in Merger. The Share Consideration, when issued, will
be duly authorized and validly issued, fully paid and non-assessable, will be
delivered hereunder free and clear of any liens, adverse claims, security
interests, pledges, mortgages, charges and encumbrances of any nature
whatsoever, except that the shares of Synergistic Common Stock, the shares of
Synergistic Preferred Stock and the shares of Synergistic Common Stock into
which the shares of Synergistic Preferred Stock are convertible which constitute
the Share Consideration will be "restricted securities" as such term is defined
in the rules and regulations of the SEC promulgated under the Securities Act and
will be subject to restrictions on transfers pursuant to such rules and
regulations and the laws of applicable states.
3.11. Properties. Except as set forth on
Schedule 3.11, Synergistic and Subsidiary have marketable title to all of the
properties and assets, reflected on its balance sheets or thereafter acquired,
except properties or assets sold or otherwise disposed of in the ordinary course
of business, free and clear of any and all Liens, other than Liens not yet due
and payable or being contested in good faith by appropriate proceedings, and
other than such Liens or imperfections of title,
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if any, which are not substantial in character, amount or extent and do not
materially interfere with the present or continued use of such property or
otherwise materially adversely affect the value or transferability thereof or
otherwise materially impair the business operations of Synergistic or Subsidiary
as conducted on the date hereof. All plants, structures and equipment which are
utilized in the business operations of Synergistic or Subsidiary, or are
material to the condition (financial or otherwise) of Synergistic or Subsidiary,
are owned or leased by Synergistic or Subsidiary, are in good operating
condition and repair (ordinary wear and tear excepted) and are adequate and
suitable for the purposes for which they are used. Schedule 3.11 sets forth all
(a) real property which is leased (whether as lessor or lessee) or subject to
lease (whether as lessor or lessee) by Synergistic or Subsidiary, or which is
subject to a title retention or conditional sales agreement or other security
device, and (b) personal property which is owned, leased (whether as lessor or
lessee) or subject to contract or commitment of purchase or sale or lease
(whether as lessor or lessee) by Synergistic or Subsidiary.
3.12. Absence of Changes. Except for any actions
taken or to be taken by Synergistic pursuant to the Divestiture (as set forth in
Section 6.2.1 below), there have not been, since December 31, 1995, (a) any
material adverse change (other than as is normal in the ordinary course of
business, e.g., inventory level changes) in the condition (financial or
otherwise), assets, liabilities, business, prospects, results of operations or
cash
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flows of Synergistic or the Subsidiary (including, without limitation, any such
adverse change resulting from damage, destruction or other casualty loss,
whether or not covered by insurance), (b) any waivers by Synergistic of any
right, or cancellation of any debt or claim, of substantial value, (c) any
declarations, set asides or payments of any dividend or other distributions or
payments in respect of the Synergistic Common Stock, or (d) any changes in the
accounting principles or methods which are utilized by Synergistic or the
Subsidiary.
3.13. No Violation of Law. Neither Synergistic
nor Subsidiary has or is engaging in any activity or omitting to take any action
as a result of which both (a) it is in violation of any law, rule, regulation,
zoning or other ordinance, statute, order, injunction or decree, or any other
requirement of any court or governmental or administrative body or agency,
applicable to either Synergistic or Subsidiary, their respective business
operations or any of their respective assets, including, but not limited to,
those relating to: occupational safety and health matters; issues of
environmental and ecological protection (e.g., the use, storage, handling,
transport or disposal of pollutants, contaminants or hazardous or toxic
materials or wastes, and the exposure of persons thereto); business practices
and operations; labor practices; employee benefits; and zoning and other land
use, and (b) Synergistic or Subsidiary, their business operations and/or any of
their assets have been, or may be, materially and adversely affected thereby.
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3.14. Intangibles/Inventions. Synergistic does
not own any intellectual property other than its tradename. Synergistic has not
granted any license to third parties with regard to any of Synergistic's
intellectual property and (a) no proceedings have been instituted, are pending,
or are threatened which challenge the rights of Synergistic with respect to its
intellectual property, if any, or its use thereof in connection with its
business affairs and/or its assets or the validity thereof and, to the best
knowledge of Synergistic, there is no valid basis for any such proceedings; (b)
neither Synergistic's ownership of any intellectual property nor its use thereof
in connection with its business operations and/or its assets violates any laws,
statutes, ordinances or regulations, or has at any time infringed upon or
violated any rights of others, or is being infringed by others; and (c) neither
the intellectual property of Synergistic nor its use thereof in connection with
its business operations and/or its assets, is subject to any outstanding order,
decree, judgment, stipulation or, except as set forth on Schedule 3.14, any
lien, security interest or other encumbrance.
3.15. Tax Matters.
3.15.1. Synergistic and its subsidiaries
have filed with the appropriate governmental agencies all tax returns and
reports required to be filed by it, and has paid in full or contested in good
faith or made adequate provision for the payment of, Taxes (as defined in
Section 2.15(c) hereof) shown to be due or claimed to be due on such tax returns
and
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reports. The provisions for Taxes which are set forth on its balance sheets are
adequate for all accrued and unpaid taxes of Synergistic and Subsidiary as of
December 31, 1995, whether (i) incurred in respect of or measured by income of
Synergistic and Subsidiary for any periods prior to the close of business on
that date, or (ii) arising out of transactions entered into, or any state of
facts existing, on or prior to such date. Synergistic and Subsidiary have duly
withheld all payroll taxes, FICA and other federal, state and local taxes and
other items requiring to be withheld by it from employer wages, and has duly
deposited the same in trust for or paid over to the proper taxing authorities.
Neither Synergistic nor Subsidiary has not executed or filed with any taxing
authority any agreement extending the periods for the assessment or collection
of any Taxes, and is not a party to any pending or, to the best knowledge of
Synergistic or Subsidiary, threatened, action or proceeding by any governmental
authority for the assessment or collection of Taxes. Within the past three
years, the United States federal income tax returns of neither Synergistic nor
Subsidiary has been examined by the IRS, nor has any taxing authority in any
state examined any merchandize, personal property, sales or use tax returns of
Synergistic or any of its subsidiaries.
3.15.2. Neither Synergistic nor Subsidiary
(i) has agreed to or been required to make any adjustment pursuant to Section
481(a) of the Code, (ii) has any knowledge that the IRS or any other taxing
authority has proposed any such adjustment or change in accounting method, and
(iii) has any
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application pending with any governmental authority requesting permission for
any change in accounting method.
3.16. Insurance. Schedule 3.16 is a complete and
correct list and summary description of all contracts and policies of insurance
relating to any of the assets of either Synergistic or Subsidiary or their
respective business operations in which Synergistic or Subsidiary is an insured
party, beneficiary or loss payable payee. Such policies are in full force and
effect, all premiums due and payable with respect thereto have been paid, and no
notice of cancellation or termination has been received by either Synergistic or
Subsidiary with respect to any such policy.
3.17. Banks; Powers of Attorney. Schedule 3.17
is a complete and correct list showing (a) the names of each bank in which
Synergistic or Subsidiary has an account or safe deposit box and the names of
all persons authorized to draw thereon or who have access thereto, and (b) the
names of all persons, if any, holding powers of attorney from either Synergistic
or Subsidiary.
3.18. Employee Arrangements. Schedule 3.18 is a
complete and correct list and summary description of all (a) union, collective
bargaining, employment, management, termination and consulting agreements to
which Synergistic or the Subsidiary is a party or otherwise bound, and (b)
compensation plans and arrangements; bonus and incentive plans and arrangements;
deferred compensation plans and arrangements; pension and retirement plans and
arrangements; profit-sharing and thrift
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plans and arrangements; stock purchase and stock option plans and arrangements;
hospitalization and other life, health or disability insurance or reimbursement
programs; holiday, sick leave, severance, vacation, tuition reimbursement,
personal loan and product purchase discount policies and arrangements; and other
plans or arrangements providing for benefits for employees of Synergistic or
Subsidiary, other than employee plans listed in Schedule 3.8. Said Schedule also
lists the names and compensation of all employees of Synergistic or Subsidiary
(other than employees of the distributed businesses) whose earnings during the
last fiscal year were $50,000 or more (including bonuses and other incentive
compensation), and all employees who are expected to receive at least said
amount in respect of the current fiscal year.
3.19. Certain Business Matters. Except as is set
forth in Schedule 3.19, and giving pro forma effect to the Divestiture, (a)
neither Synergistic nor the Subsidiary is a party to or bound by any
distributorship, dealership, sales agency, franchise or similar agreement which
relates to the sale or distribution of any of the products and services of the
business operations of Synergistic or Salex, (b) neither Synergistic nor the
Subsidiary has any sole-source supplier of significant goods or services (other
than utilities) with respect to which practical alternative sources are not
available on comparable terms and conditions, (c) there are no pending or, to
the best knowledge of Synergistic or the Subsidiary, threatened labor
negotiations, work stoppages or work slowdowns involving or
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affecting the business operations of Synergistic, and no union representation
questions exist, and there are no organizing activities, in respect of any of
the employees of Synergistic or the Subsidiary, (d) the product and service
warranties given by Synergistic or the Subsidiary or by which it is bound
(complete and correct copies or descriptions of which have heretofore been
delivered by Synergistic to Salex) entail no greater obligations than are
customary in the business operations of Synergistic or the Subsidiary, (e)
neither Synergistic nor the Subsidiary is a party to or bound by any agreement
which limits its freedom to compete in any line of business or with any person,
or which is otherwise materially burdensome to Synergistic or the Subsidiary,
and (f) neither Synergistic nor the Subsidiary is a party to or bound by any
agreement in which any officer, director or stockholder of Synergistic or the
Subsidiary (or any affiliate of any such person) has, or had when made, a direct
or indirect material interest.
3.20. Certain Contracts. Schedule 3.20 is a
complete and correct list of all material contracts, commitments, obligations
and understandings which are not set forth in any other Schedule delivered
hereunder and to which Synergistic or the Subsidiary is a party or otherwise
bound, after giving pro forma effect to the Divestiture, except for each of
those which (i) were made in the ordinary course of business and (ii) are
terminable by Synergistic or the Subsidiary without liability, expense or other
obligation on 30 days' notice or less. Complete and correct copies of all
contracts, commitments, obligations and
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undertakings set forth on any of the Schedules delivered pursuant to this
Agreement have been furnished by Synergistic to Salex. Except as expressly
stated on any of such Schedules, (1) each of them is in full force and effect,
no person or entity which is a party thereto or otherwise bound thereby is in
material default thereunder, and no event, occurrence, condition or act exists
which does (or which with the giving of notice or the lapse of time or both
would) give rise to a material default or right of cancellation, acceleration or
loss of contractual benefits thereunder; (2) there has been no threatened
cancellations thereof, and there are no outstanding disputes thereunder; and (3)
none of them is materially burdensome to Synergistic.
3.21. Approvals/Consents. Except as set forth on
Schedule 3.21, to the best knowledge of Synergistic and the Subsidiary,
Synergistic currently holds all governmental and administrative consents,
permits, appointments, approvals, licenses, certificates and franchises which
are necessary for the operation of its business (collectively "Consents") after
giving pro forma effect to the Divestiture, all of which are in full force and
effect. Schedule 3.21 is a complete and correct list of all such governmental
and administrative consents, permits, appointments, approvals, licenses,
certificates and franchises. No material violations of the terms thereof have
heretofore occurred or are known by Synergistic to exist as of the date of this
Agreement. Except as set forth in Schedule 3.21, no Consents are necessary for
execution, delivery and performance of this Agreement and transactions
contemplated herein.
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3.22. Information as to Synergistic and
Subsidiary. (a) None of the representations or warranties made by Synergistic or
Subsidiary in this Agreement, or contained in any of the Synergistic Documents
to be executed and delivered, if any, or in any Registration Statement or
amendment thereto, is or will be, false or misleading with respect to any
material fact, or omits to state any material fact necessary in order to make
the statements therein contained not misleading.
3.23. Tax Matters. As of the Effective Time
and thereafter to the extent indicated below:
3.23.1. Subsidiary is a corporation newly
formed under the Laws of the State of Delaware for the purpose of the Merger and
has conducted no business and owns no assets, real or personal, except such
assets of which are required to carry out the obligations of the Surviving
Corporation hereunder.
3.23.2. Subsidiary has conducted no business
and owns no assets except assets required to carry out the obligations of
Surviving Corporation hereunder.
3.23.3. As of the date of the Merger,
Synergistic will be in control of Subsidiary within the meaning of section
368(c)(1) of the Code.
3.23.4. Following the Merger, Subsidiary
will not issue additional shares of its stock that would result in Synergistic
losing control of Subsidiary within the meaning of section 368(c)(1) of the
Code.
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3.23.5. Synergistic has no plan or intention
to reacquire any Synergistic Common Stock issued pursuant to this Agreement.
3.23.6. Synergistic has no plan or intention
to liquidate Subsidiary; to merge Subsidiary with and into another corporation;
to sell or otherwise dispose of the stock of Subsidiary; or to cause, permit or
suffer Subsidiary to sell or otherwise dispose of any of the assets of Salex
acquired in the Merger, except for any dispositions (x) made in the ordinary
course of business or transfers described in section 368(a)(2)(C) of the Code or
(y) which do not result in Synergistic losing control of Subsidiary within the
meaning of Section 386(c) of the Code and in any event Synergistic shall not
cause, permit or suffer to occur any of the foregoing at any time during the two
years following the Effective Time, without the prior consent of the Board of
Directors of Synergistic.
3.23.7. Following the Merger, Salex will
continue the Business and, in the course thereof, use substantially all of
Salex's business assets in such Business.
3.23.8. Synergistic and Subsidiary are not
investment companies as defined in section 368(a)(2)(F)(iii) and (iv) of the
Code.
3.23.9. There is no agreement or
understanding on the part of Synergistic or Subsidiary to take any action which
is prohibited by the foregoing provisions of this Section 3.23.
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3.24. Certain Corporate Matters. Since November
1994, the Board of Directors of Synergistic (the "Board") has not undertaken any
action regarding the business and affairs of Synergistic ("Board Action") that
(a) has not otherwise been disclosed accurately in all reports, financial
statements and other filings required to be filed by Synergistic with the SEC or
any other federal, state or regulatory authority, copies of which have been
provided to Salex and the Salex Stockholders ("Disclosed Board Action") (other
than any Board Action that would not be deemed material to a reasonable investor
regarding the business and affairs of Synergistic), or (b) would in any manner
render any Disclosed Board Action misleading or inaccurate in any respect, or
(c) violated Delaware Law or the laws or regulations of any applicable federal,
state or regulatory authority, and (d) has conferred any remuneration or
financial benefit of any sort on any Directors of Synergistic other than as
reflected in Disclosed Board Action.
4. Indemnification.
4.1. Indemnification by Salex and the Salex
Stockholders.
(a) Salex and each of the Salex
Subsidiaries, jointly and severally, and each of the Salex Stockholders (other
than ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇), severally only, hereby indemnify and agree to
hold harmless, each of Synergistic and Subsidiary, from and against any and all
losses, obligations, deficiencies, liabilities, claims, damages, costs and
expenses (including, without limitation, the amount of any
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settlement entered into pursuant hereto, and all reasonable legal and other
expenses incurred in connection with the investigation, prosecution or defense
of any matter indemnified pursuant hereto) which either of them may sustain,
suffer or incur and which arise out of, are caused by, relate to, or result or
occur from or in connection any misrepresentation of a material fact contained
in any representation of Salex, Salex Subsidiaries or the Salex Stockholders
contained in, or breached by Salex, Salex Subsidiaries or Salex Stockholders of
any warranty or covenant made by any of them in any Salex Document. The
foregoing indemnification shall also apply to direct claims by Synergistic
and/or Subsidiary against Salex, Salex Subsidiaries or Salex Stockholders.
4.2. Indemnification by Synergistic and
Subsidiary. Each of Synergistic and Subsidiary, jointly and severally, agrees to
indemnify and hold Salex and the Salex Stockholders harmless from and against
any and all losses, obligations, deficiencies, liabilities, claims, damages,
costs and expenses (including, without limitation, the amount of any settlement
entered into pursuant hereto, and all reasonable legal and other expenses
incurred in connection with the investigation, prosecution defense of any matter
indemnified pursuant hereto), which they may sustain, suffer or incur and which
arise out of, be caused by, relate to, or result or occur from or in connection
with any misrepresentation of a material fact contained in any representation of
Synergistic and/or Subsidiary or any contained in, breach by Synergistic or
Subsidiary of any warranty or
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covenant made by them in, any Synergistic Document. The foregoing
indemnification shall also apply to direct claims by Salex or the Salex
Stockholders against Synergistic and/or Subsidiary.
4.3. Third Party Claims. If a claim by a third
party is made against any party or parties hereto and the party or parties
against whom said claim is made intends to seek indemnification with respect
thereto under Subsections 4.1 or 4.2, the party or parties seeking such
indemnification shall promptly notify the indemnifying party or parties, in
writing, of such claim; provided, however, that the failure to give such notice
shall not affect the rights of the indemnified party or parties hereunder unless
such failure materially and adversely affects the indemnifying party or parties.
The indemnifying party or parties shall have 10 days after said notice is given
to elect, by written notice given to the indemnified party or parties, to
undertake, conduct and control, through counsel of their own choosing (subject
to the consent of the indemnified party or parties, such consent not to be
unreasonably withheld) and at their sole risk and expense, the good faith
settlement or defense of such claim, and the indemnified party or parties shall
cooperate with the indemnifying parties in connection therewith; provided: the
indemnified party or parties shall be entitled to participate in such settlement
or defense through counsel chosen by the indemnified party or parties, provided
that the fees and expenses of such counsel shall be borne by the indemnified
party or parties. So long as the indemnifying party or parties are
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contesting any such claim in good faith, the indemnified party or parties shall
not pay or settle any such claim; provided, however, that notwithstanding the
foregoing, the indemnified party or parties shall have the right to pay or
settle any such claim at any time, provided that in such event they shall waive
any right of indemnification therefor by the indemnifying party or parties. If
the indemnifying parties do not make a timely election to undertake the good
faith defense or settlement of the claim as aforesaid, or if the indemnifying
parties fail to proceed with the good faith defense or settlement of the matter
after making such election, then, in either such event, the indemnified party or
parties shall have the right to contest, settle or compromise the claim at their
exclusive discretion, at the risk and expense of the indemnifying parties.
4.4. Assistance. Regardless of which party is
controlling the defense of any claim, each party shall act in good faith and
shall provide reasonable documents and cooperation to the party handling the
defense, subject to the possible assertion by any party of any legal privilege.
4.5. Limitations.
4.5.1. No party hereto shall be entitled to
any claim for indemnification under this Section 4 until the aggregate amount of
losses, for which indemnity is claimed exceeds $50,000, and once such threshold
amount is met, then the indemnity shall apply to amounts over such threshold.
4.5.2. Anything in this Agreement to the
contrary notwithstanding: (a) the liability of each Salex
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Stockholder under this Section 4 shall in no event exceed the greater of: (i)
the value of the Merger consideration received by such Salex Stockholder at the
Effective Date, or (ii) the Merger consideration received by such Salex
Stockholder valued at the "Breach Determination Date" (as hereinafter defined)
and in the case of ▇▇▇▇▇ the value of any payments actually made under the
Notes, provided that the exclusive remedy against any Salex Stockholder shall in
the first instance be limited to recourse solely against the Synergistic Common
Stock received by such Salex Stockholder pursuant to the Merger (the "Initial
Shares"), and only if such Salex Stockholder has sold all or any portion of such
Initial Shares shall Synergistic have recourse to pursue any remedies hereunder,
and (b) the liability of Synergistic and the Subsidiary shall in the aggregate
in no event exceed the difference between the face or nominal value of the total
Merger consideration paid to ▇▇▇▇▇ in the case of the ▇▇▇▇▇ Shares (including
the face value of the Notes) and to the Salex Stockholders, in the case of the
Merger consideration (in each case valued at the greater of value as of the
Effective Date or Breach Determination Date (as the case may be)), and the
lesser value of such consideration which a court or arbitrator may determine to
be the actual value by reason of the breach of any representation or warranty of
Synergistic or Subsidiary set forth in this Agreement (the "Breach Determination
Date").
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5. Covenants of the Parties.
5.1. Investigation.
(a) Between the date hereof and the
earlier of the Closing Date or the termination date of this Agreement specified
in Section 8 hereof, Synergistic and/or Subsidiary, on the one hand, and Salex,
the Salex Subsidiaries and the Salex Stockholders, on the other hand, may,
directly or through their representatives, make such investigation of the other
corporate parties and their respective businesses and assets as each deems
necessary or advisable (the entity and/or its representatives making such
investigation being the "Investigating Party"), but such investigation shall not
affect any of the representations and warranties contained herein or in any
instrument or document delivered pursuant hereto. In furtherance of the
foregoing, the Investigating Party shall have reasonable access, during normal
business hours, to all properties, books, contracts, commitments and records of
each other, and shall furnish to the other and their representatives such
financial and operating data and other information as may from time to time be
reasonably requested relating to the transactions contemplated by this
Agreement. Each of Synergistic and Subsidiary, on the one hand, and Salex, the
Salex Subsidiaries and the Salex Stockholders, on the other, and the respective
management, employees, accountants and attorneys of the corporate parties shall
cooperate fully with the Investigating Party in connection with such
investigation.
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(b) The parties hereto hereby agree
that all confidential information of a party to which an Investigating Party
obtains access shall be governed by and subject to all of the terms and
conditions of paragraph 11 of the letter agreement dated May 1, 1996
("Confidentiality Agreement") among the parties hereto.
5.2. Consummation of Transaction. Each of the
parties hereto hereby agrees to use all reasonable efforts to cause all
conditions precedent to his or its obligations (and to the obligations of the
other parties hereto to consummate the transactions contemplated hereby) to be
satisfied, including, but not limited to, using all reasonable efforts to obtain
all required (if so required by this Agreement) consents, waivers, amendments,
modifications, approvals, authorizations, novations and licenses; provided,
however, that nothing herein contained shall be deemed to modify any of the
absolute obligations imposed upon any of the parties hereto under this Agreement
or any agreement executed and delivered pursuant hereto.
5.3. Registration of Synergistic Public Warrants.
Synergistic agrees to use its best efforts to effectuate the registration of its
existing public warrants and the underlying shares of common stock and the
reduction of the exercise price to $2.50 per share.
5.4. Cooperation/Further Assurances.
(a) Each of the parties hereto hereby agrees
to cooperate fully with the other parties hereto in preparing and
filing any notices, applications, reports and other instruments and
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documents which are required by, or which are desirable in the reasonable
opinion of any of the parties hereto, or their respective legal counsel, in
respect of, any statute, rule, regulation or order of any governmental or
administrative body in connection with the transactions contemplated by this
Agreement.
(b) Each of the parties hereto hereby
further agrees to execute, acknowledge, deliver, file and/or record, or cause
such other parties to the extent permitted by law to execute, acknowledge,
deliver, file and/or record such other documents as may be required by this
Agreement and as Synergistic and/or Subsidiary, on the one hand, and/or Salex,
the Salex Subsidiaries, or the Salex Stockholders, on the other, or their
respective legal counsel may reasonably require in order to document and carry
out the transactions contemplated by this Agreement.
5.5. Accuracy of Representations. Each party hereto
agrees that prior to the Closing Date he or it will enter into no transaction
and take no action, and will use his or its best efforts to prevent the
occurrence of any event (but excluding events which occur in the ordinary course
of business and events over which such party has no control), which would result
in any of his or its representations, warranties or covenants contained in this
Agreement or in any agreement, document or instrument executed and delivered by
him or it pursuant hereto not to be true and correct, or not to be performed as
contemplated, at and as of the time immediately after the occurrence of such
transaction or event.
5.6. Notification of Certain Matters. Salex, the
Salex Subsidiaries and the Salex Stockholders shall give prompt
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notice to Synergistic and Subsidiary, and Synergistic or Subsidiary shall give
prompt notice to Salex, the Salex Subsidiaries and the Salex Stockholders, as
the case may be, of (a) the occurrence, or nonoccurrence, or any event the
occurrence, or nonoccurrence, of which would be likely to cause any
representation contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time and (b) any material failure
of Salex, the Salex Subsidiaries and the Salex Stockholders, on the one hand,
and of Synergistic and/or Subsidiary, on the other, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by him or
it hereunder; provided, however, that the delivery of any notice pursuant to
this Subsection 5.6 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
5.7. Proxy Statement. Promptly after the Effective
Time, Synergistic shall file with the SEC a proxy statement (the "Proxy
Statement"), or in the case stockholder action is taken without a meeting, an
information statement (the "Information Statement") relating to the approval of
an Amendment to the Certificate of Incorporation increasing the number of
authorized shares of Synergistic Common Stock to allow for the exercise of all
outstanding warrants and the conversion of all outstanding shares of preferred
stock. Salex and the Salex Stockholders shall, within five (5) business days of
receipt of such statement, have the right to conduct a reasonable review, to
request reasonable changes and to approve portions of the Proxy Statement or
Information Statement with respect to the accuracy of information relating to
Salex or
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the Salex Stockholders. Promptly after the Proxy Statement or Information
Statement has cleared the SEC, Synergistic shall thereafter mail the Proxy
Statement to the Synergistic stockholders. The term "Proxy Statement" or
Information Statement shall mean such proxy or information statement at the time
it initially is mailed to the Synergistic stockholders and all amendments and
supplements thereto, if any, similarly filed and mailed.
5.8. Broker. Each of Synergistic, Subsidiary and
Salex, the Salex Subsidiaries and the Salex Stockholders represents and warrants
to the other parties that no broker or finder has been engaged or dealt with in
connection with any of the transactions contemplated by this Agreement, and each
of the parties shall indemnify and hold the other harmless from and against any
and all claims or liabilities asserted by or on behalf of any alleged broker or
finder for broker's fees, finder's fees, commissions or like payments.
5.9. Legal, Accounting or Other Costs. Each party
hereto shall be solely responsible for his or its legal, accounting and other
costs related thereto. The Salex Stockholders shall bear their personal legal,
accounting and similar costs relating to the transactions contemplated by this
Agreement, to the extent such costs were incurred in connection with counsel
other than Seyfarth, Shaw, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇.
5.10. No Solicitation of Transactions.
(a) Prior to the earlier of the Effective
Time or the termination of this Agreement in accordance with its
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terms, none of Salex, the Salex Subsidiaries, or the Salex Stockholders will,
directly or indirectly, through any director, officer, employee, agent or
otherwise, solicit, initiate or encourage the submission of proposals or offers
from any person relating to any acquisition or purchase of all or (other than in
the ordinary course of business) any portion of the Assets or Business of, or
any equity interest in, Salex, or any business combination with Salex or, except
to the extent required by fiduciary obligations under applicable law, as advised
by counsel in writing, and other than with Synergistic and/or Subsidiary,
participate in any negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. Except to the extent required by
fiduciary obligations under applicable law, as advised by counsel in writing,
Salex, the Salex Subsidiaries and the Salex Stockholders shall immediately cease
and cause to be terminated any existing discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing (other than in
respect of the transaction contemplated hereby). Salex, the Salex Subsidiaries
and the Salex Stockholders shall promptly notify Synergistic if any such
proposal or offer, or any inquiry or contact with any person with respect
thereto, is made and shall, in any such notice to Synergistic, indicate in
reasonable detail the identity of the offeror and the terms and conditions of
any proposal or offer.
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(b) Prior to the earlier of the Effective
Time or the termination of this Agreement, Synergistic and the ▇▇▇▇▇▇▇▇▇
Stockholders shall not, directly or indirectly (i) sell a controlling equity
interest in Synergistic or Subsidiary, (ii) sell all or substantially all of the
assets of Synergistic or Subsidiary except as specified in Section 6.2.11
hereof, (iii) merge Synergistic or Subsidiary with or into another entity, other
than pursuant to the Merger, (iv) purchase the assets or equity interest of
another entity, (v) enter into any negotiations or agreements related to any of
the foregoing, or (vi) take any action that would result in a change in
beneficial ownership of the ▇▇▇▇▇▇▇▇▇ Stockholders.
5.11. Management and Administrative Matters
5.11.1. Synergistic shall, effective at the
Closing, take any and all steps or actions reasonably necessary to effect the
following:
(a) amendment of the By-Laws of Synergistic
to provide for an increase in the number of directors on the Board of Directors
of Synergistic to seven (7) and the appointment of ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ and four
persons designated by ▇▇▇▇▇ as the additional members of the Board of Directors.
Such directors shall serve until their successors are duly elected and
qualified, with each to hold office in accordance with the Certificate of
Incorporation and By-Laws of Synergistic;
(b) nomination and appointment of ▇▇▇▇▇ as
Chairman of the Board of Directors of Synergistic;
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(c) provide for the issuance to the Salex
Stockholders, at an exercise price acceptable to the Salex Stockholders, of an
amount of options (the "Equivalent Options") sufficient to balance the effect of
the number of employee stock options granted by Synergistic as of the Effective
Date so as to maintain the 51%/49% split of ownership of Synergistic in favor of
the Salex Stockholders;
(d) provide for the issuance to ▇▇▇▇▇ of an
option to purchase 500,000 shares of Synergistic Common Stock at an exercise
price per share of $1.50 per share, such options to have a three-year term and
exercisable in the event that the net income of Synergistic (before taxes)
equals or exceeds $2.7 million for the year ended April 30, 1997 (the "▇▇▇▇▇
Option"); provided that such option (and the underlying common stock) shall have
unlimited piggy-back registration rights; and
5.11.2. Salex shall, effective at the Closing,
take any or all steps reasonably necessary to terminate the Stockholder
Agreement among the Salex and the Salex Stockholders dated August 4, 1995 at or
prior to the Closing.
5.12. Prohibited Conduct.
5.12.1. Each of Salex, the Salex Subsidiaries
and the Salex Stockholders, jointly and severally, covenants and agrees that,
during the period from the date hereof to the earlier to occur of September 30,
1996 or the Effective Time, except pursuant to the terms hereof or unless
Synergistic shall otherwise agree in writing, the Business shall be conducted
only, and Salex shall not take any action except, in the ordinary course of
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business and in a manner consistent with past practice and in compliance with
applicable laws.
5.12.2. Neither Salex, the Salex Subsidiaries,
nor the Salex Stockholders, nor the Synergistic or the ▇▇▇▇▇▇▇▇▇ Stockholders,
between the date of this Agreement and the earlier to occur of September 30,
1996 or the Effective Time, directly or indirectly do, or propose or commit to
do, any of the following except as specifically provided by this Agreement or,
if not as provided, then not without the prior written consent of Synergistic or
Salex, as the case may be:
(a) (i) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of the Salex or
Synergistic Common Stock, or (ii) split, combine or reclassify any of the Salex
or Synergistic Common Stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of the Salex
Common Stock, or otherwise;
(b) authorize for issuance, issue, deliver,
sell or agree to commit to issue, sell or deliver (whether through the issuance
or granting of options, warrants, commitments, subscriptions, rights to purchase
or otherwise), pledge or otherwise encumber, any shares of Salex Common Stock or
Synergistic Common Stock or shares of common stock of the Salex Subsidiaries,
any other voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities convertible
securities or any other securities or equity
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equivalents (other than the private placement with Redstone Securities, Inc.
under consideration as of the date hereof);
(c) (i) increase the compensation payable or
to become payable to any officer, director, employees or consultant of Salex or
the Salex Subsidiaries or Synergistic, except pursuant to the terms of
contracts, policies or benefit arrangements in effect on the date hereof, or
(ii) grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer, other employee or consultant of
Salex or the Salex Subsidiaries or Synergistic, except pursuant to the terms of
contracts, policies and benefit arrangements in effect on the date hereof, or
(iii) establish, adopt, enter into or amend any collective bargaining (other
than in accordance with past practice), bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors, officers,
employees or consultants of Salex or the Salex Subsidiaries or Synergistic;
(d) amend the Certificate or Articles of
Incorporation, By-Laws or other comparable charter or organizational documents
of Salex or the Salex Subsidiaries or Synergistic or alter through merger,
liquidation, reorganization, restructuring, or in any other fashion, the
corporate structure or ownership of Salex or the Salex Subsidiaries or
Synergistic;
(e) acquire, or agree to acquire, (i) by
merging or consolidating with, or by purchasing a substantial
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portion of the stock or assets of, or by any other manner, any business or
corporation, partnership, joint venture, association or other business
organization or division thereof, or (ii) any assets that are material,
individually or in the aggregate, to Salex and/or the Salex Subsidiaries or
Synergistic, except purchases consistent with past practice;
(f) sell, lease, license, mortgage or
otherwise encumber or subject to any lien, security interest, pledge or
encumbrance or otherwise dispose of any of the Assets or assets of Synergistic,
except sales in the ordinary course of business consistent with past practice;
(g) (i) permit Salex or the Salex
Subsidiaries or Synergistic to incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of Salex
or the Salex Subsidiaries or Synergistic, guarantee any debt securities of
another person, or enter into any arrangement having the economic effect of any
of the foregoing, except for short-term borrowings incurred in the ordinary
course of business consistent with past practice, or (ii) permit Salex or
Synergistic to issue any guaranties of any indebtedness of the Salex
Subsidiaries or any affiliate of Synergistic;
(h) except in the ordinary course of
business, enter into any agreement, contract, commitment, involving a commitment
on the part of Salex or the Salex Subsidiaries or
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Synergistic to purchase, sell, lease or otherwise dispose of assets or require
payment by Salex or Synergistic in excess of $50,000;
(i) adopt a plan of complete or partial
liquidation of Salex or the Salex Subsidiaries or Synergistic or resolutions
providing for or authorizing such a liquidation or the dissolution, merger,
consolidation, restructuring, recapitalization or reorganization of Salex or the
Salex Subsidiaries or Synergistic;
(j) cause Salex or the Salex Subsidiaries or
Synergistic to recognize any labor union (unless legally required to do so) or
enter into or amend any collective bargaining agreement;
(k) change any accounting principles used by
Salex or the Salex Subsidiaries or Synergistic, unless required by the SEC or
the Financial Accounting Standards Board;
(l) make any tax election of, or settle,
compromise any income tax liability of, or prescribed by law, in the case of any
of the foregoing, material to the business, financial condition or results of
the operations of Salex and/or the Salex Subsidiaries or Synergistic, taken as a
whole;
(m) settle or compromise any litigation in
which any of Salex or the Salex Subsidiaries or Synergistic and/or any officer,
director or agent thereof is a defendant (whether or not commenced prior to the
date of this Agreement) or settle, pay or compromise any claims not required to
be paid, which payments are individually in an amount in excess of $5,000 and in
the aggregate in an amount in excess of $50,000; and
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(n) authorize any of, or commit or agree to
take any of, the foregoing actions.
5.13. Payment of Taxes Upon Transfer of the Shares.
Salex or the Salex Stockholders, on the one hand, and Synergistic and
Subsidiary, on the other, as the case may be, shall be responsible for, and
shall pay, their own sales, use, purchase, transfer and similar taxes, and any
and all filing, recording, registration arising out of the transactions
contemplated by this Agreement and imposed by Federal or New York state or local
law, including any income taxes.
5.14. Continued Registration Under the Exchange
Act/Continued Quotation by NASDAQ.
On and after the Effective Date, Synergistic shall
(i) continue to maintain the registration of the Synergistic Common Stock under
the Exchange Act of 1934, (ii) continue to maintain the inclusion of the
Synergistic Common Stock in the NASDAQ National Market System, including,
without limitation, maintenance of required registered market makers for such
shares.
5.15. Post-Closing SEC/NASD Filings.
On and after the Effective Date, Synergistic will
undertake all necessary filings with the SEC, NASD or any other regulatory or
administrative body otherwise required as a result of the transactions provided
for hereunder.
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6. Conditions of Merger.
6.1. Conditions to Obligations of Synergistic and
Subsidiary to Effect the Merger. The respective obligations of Synergistic and
Subsidiary to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following conditions, which if not fulfilled by
Salex, the Salex Subsidiaries or the Salex Stockholders or waived by Synergistic
and Subsidiary shall give Synergistic and Subsidiary the right to terminate this
Agreement:
6.1.1. Accuracy of Representations and
Warranties. The representations and warranties of each of Salex, the Salex
Subsidiaries and/or the Salex Stockholders contained in this Agreement or in any
Salex Document delivered by any of them shall have been true when made, and, in
addition, shall be true in all material respects on and as of the Closing Date
with the same force and effect as though made on and as of the Closing Date.
6.1.2. Performance of Agreements. Each of
Salex, the Salex Subsidiaries and the Salex Stockholders, as the case may be,
shall have performed, observed and complied in all material respects with all of
their obligations, covenants and agreements, and shall have satisfied or
fulfilled in all material respects conditions contained in any Salex Document
and required to be performed, observed or complied with, or to be satisfied or
fulfilled, by Salex, the Salex Subsidiaries and/or the Salex Stockholders at or
prior to the Closing Date.
6.1.3. Opinion of Counsel for Salex.
Synergistic and Subsidiary shall have received an opinion of
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counsel for Salex, the Salex Subsidiaries and the Salex Stockholders, dated the
Closing Date, as reasonably agreed by the parties.
6.1.4. Fairness Opinion. Synergistic shall
have received a fairness opinion from Paragon Securities, satisfactory in all
respects, that the Divestiture is fair to the stockholders of Synergistic.
6.1.5. Litigation. No order of any court or
administrative agency shall be in effect which restrains or prohibits the
transactions contemplated hereby, and no claim, suit, action, inquiry,
investigation or proceeding in which it will be, or it is, sought to restrain,
prohibit or change the terms of or obtain damages or other relief in connection
with this Agreement or any of the transactions contemplated hereby, shall have
been instituted or threatened by any person or entity (other than with respect
to the ▇▇▇▇▇ Obligation to AG), and which, in the reasonable judgment of
Synergistic (based on the likelihood of success and material consequences of
such claim, suit, action, inquiry or proceeding), makes it inadvisable to
proceed with the consummation of such transactions.
6.1.6. Consents and Approvals. All consents,
waivers, approvals, licenses and authorizations by third parties and
governmental and administrative authorities (and all amendments or modifications
to existing agreements with third parties) required as a precondition to the
performance by Salex, the Salex Subsidiaries and the Salex Stockholders, of
their respective obligations hereunder and under any agreement delivered
pursuant
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hereto, or which in Synergistic's reasonable judgment are necessary to continue
unimpaired, subsequent to the Effective Time, any rights in and to the Assets
and/or the Business which could be impaired by the Merger, shall have been duly
obtained and shall be in full force and effect.
6.1.7. Date of Consummation. The Merger
shall have been consummated on or prior to September 30, 1996, or such later
date as the parties shall agree by a written instrument signed by all of them.
6.1.8. Validity of Transactions. The
validity of all transactions contemplated hereby, as well as the form and
substance of all agreements, instruments, opinions, certificates and other
documents delivered by Salex, the Salex Subsidiaries and the Salex Stockholders
pursuant hereto, shall be satisfactory in all material respects to Synergistic
and its counsel.
6.1.9. No Material Adverse Change. There
shall not have occurred after the date hereof, in the reasonable judgment of
Synergistic, a material adverse change in the financial or business condition of
Salex or the Salex Subsidiaries, either individually or taken as a whole.
6.1.10. Closing Certificate. Salex, the
Salex Subsidiaries and the Salex Stockholders shall have furnished Synergistic
and Subsidiary with certificates, executed by them, dated the Closing Date, to
the effect that all the respective representations and warranties are true and
complete in all material respects and all covenants to be performed at or as of
the
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Closing have been performed in all material respects and conditions to be
satisfied at or as of the Closing have been waived or satisfied in all material
respects.
6.2. Conditions to Obligations of Salex, the Salex
Subsidiaries and the Salex Stockholders to Effect the Merger. The obligations of
Salex, the Salex Subsidiaries and the Salex Stockholders to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions, which, if not fulfilled by Synergistic or Subsidiary or
waived by Salex, shall give Salex the right to terminate this Agreement:
6.2.1. Accuracy of Representations and
Warranties. The representations and warranties of Synergistic and Subsidiary
contained in any Synergistic Documents delivered by either Synergistic or
Subsidiary or both of them shall have been true when made, and, in addition,
shall be true in all material respects, on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date.
6.2.2. Performance of Agreements. Each of
Synergistic and Subsidiary shall have performed, observed and complied, in all
material respects, with all obligations, covenants and agreements, and shall
have satisfied or fulfilled in all material respects all conditions contained in
any Synergistic Document and required to be performed, observed or complied
with, or satisfied or fulfilled, by either or both of them at or prior to the
Closing Date.
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6.2.3. Opinion of Counsel for Synergistic
and Subsidiary. Salex, the Salex Subsidiaries and the Salex Stockholders shall
have received an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, counsel for Synergistic and
Subsidiary, dated the Closing Date, as reasonably agreed by the parties.
6.2.4. Litigation. No order of any court or
administrative agency shall be in effect which restrains or prohibits the
transactions contemplated hereby, and no claim, suit, action, inquiry,
investigation or proceeding in which it will be, or it is, sought to restrain,
prohibit or change the terms of or obtain damages or other relief in connection
with this Agreement or any of the transactions contemplated hereby shall have
been instituted or threatened by any person or entity, and which in the
reasonable judgment of the Board of Directors of Salex (based on the likelihood
of success and material consequences of such claim, suit, action, inquiry or
proceeding), makes it inadvisable to proceed with the consummation of such
transactions.
6.2.5. Consents and Approvals. All consents,
waivers, approvals, licenses and authorizations by third parties and
governmental and administrative authorities (including the NASD) (and all
amendments and modifications to existing agreements with third parties) required
as a precondition to the performance by Synergistic and Subsidiary of their
respective obligations hereunder and under any agreement delivered pursuant
hereto, shall have been duly obtained and shall be in full force and effect.
6.2.6. Date of Consummation. The Merger
shall have been consummated on or prior to September 30, 1996, or such
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later date as the parties shall agree by a written instrument signed by all of
them.
6.2.7. Validity of Transactions. The
validity of all transactions contemplated hereby, as well as the form and
substance of all agreements, instruments, opinions, certificates and other
documents delivered by Synergistic and Subsidiary pursuant hereto, shall be
satisfactory in all material respects to the Board of Directors of Salex and its
counsel.
6.2.8. No Material Adverse Change. There
shall not have occurred after the date hereof, in the reasonable judgment of the
Board of Directors of Salex, a material adverse change in the financial or
business condition of Synergistic or Subsidiary, taken as a whole; provided,
however, that the Divestiture shall not be deemed a material adverse change.
6.2.9. Synergistic Management. Synergistic
shall have effected each of the matters set forth in Subsection 5.11, to be
effective on or immediately after the Effective Time.
6.2.10. Stock Options. At the Effective
Time, there shall be issued the Equivalent Options and the ▇▇▇▇▇ Option.
6.2.11. Divestiture. By the Effective Time,
Synergistic shall (i) have divested (the "Divestiture") itself of (a) its
subsidiary ▇▇▇▇▇▇▇▇▇ & Co., a registered broker/dealer and (b) its investment in
Electronic Designs, Inc. ("EDIX") pursuant to the terms and conditions of the
Divestiture Agreement of even date herewith between Synergistic and ▇▇▇▇▇▇▇▇▇
Holding Corp and (ii) the Transferee shall have entered into a tax indemnity
agreement,
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in form and substance satisfactory to counsel to Salex, providing for the
Transferee to indemnify Synergistic for 50% of any tax liability incurred by
Synergistic pursuant to the Divestiture.
6.2.12. Closing Certificate. Each of
Synergistic and Subsidiary shall have furnished Salex, the Salex Subsidiaries
and the Salex Stockholders with certificates, each executed by their respective
presidents, dated the Closing Date, to the effect that all the representations
and warranties of Synergistic or Subsidiary, as the case may be, are true and
complete in all material respects and all covenants to be performed by each of
Synergistic or Subsidiary, as the case may be, at or as of the Closing have been
performed in all material respects and conditions to be satisfied at or as of
the Closing have been waived or satisfied in all material respects.
6.2.13. Consummation of Redstone Private
Placement. Prior to the Closing, ▇▇▇▇▇ shall have (i) received satisfactory
evidence that Redstone Securities, Inc. has successfully placed 8.5% Series A
Convertible Preferred Stock and warrants of Salex for an aggregate offering
price of not less than $630,000, in accordance with Salex's Confidential Private
Offering Memorandum dated June July 9, 1996 (the "Redstone Placement") and that
the proceeds from such placement have been escrowed in a manner satisfactory to
▇▇▇▇▇ for use by Salex or have been released to Salex.
6.2.14. Registration Rights. Synergistic and
the Salex Stockholders shall have entered into a registration rights agreement,
in form satisfactory to the Salex Stockholders,
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providing for one demand registration right and unlimited piggy-back
registration rights (the "Registration Rights Agreement").
6.2.15. Qualification for NASDAQ Quotation.
Synergistic shall continue to qualify for quotation on the NASDAQ National
Market System or shall make such application to NASDAQ for continued listing as
may be necessary and appropriate.
6.2.16. Synergistic Fairness Opinion.
Paragon Securities shall have delivered the fairness opinion set forth in
Section 6.2.11 hereof.
6.2.17. Salex Employment Agreement. The
employment agreements for ▇▇▇▇▇ and Pershing shall have been assumed by
Synergistic.
6.2.18. Assumption of Mortgage. Synergistic
shall have assumed the existing mortgage on Salex's principal executive
headquarters and secured the release in full of ▇▇▇▇▇.
6.2.19. Issuance of Notes. The Notes shall
have been issued and delivered by Synergistic to ▇▇▇▇▇.
6.2.20. Release of Falstaff Loan/All
Indebtedness. Synergistic shall have delivered satisfactory evidence of the
release and satisfaction of all indebtedness and liabilities of Synergistic,
including, without limitation, conversion of the Falstaff debt.
6.2.21. Litigation Matters. Synergistic
shall have delivered satisfactory evidence regarding all litigations involving
the operations of ▇▇▇▇▇▇▇▇▇ & Co. and, to the extent
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requested by Salex, satisfactory indemnification for Synergistic
with respect to any such litigations.
6.2.22. Cancellation of Synergistic Options.
Synergistic shall have delivered satisfactory evidence of the cancellation of
Synergistic options to the extent necessary to reflect the current outstanding
options of 172,300.
7. The Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8, the closing of the Merger (the "Closing") will take place
at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP as promptly as practicable and in any
event within five business days after satisfaction or waiver of the conditions
set forth in Section 6 but in no event later than September 30, 1996 (the
"Closing Date"); or such later date as shall have been fixed by a written
instrument signed by the parties.
7.1. Deliveries by Synergistic and
Subsidiary at the Closing of the Merger. At the Closing, Synergistic and
Subsidiary shall deliver the following:
(a) stock certificate(s), representing the
Share Consideration registered in the names of the Salex Stockholders;
(b) the Notes, the Equivalent Options and
the ▇▇▇▇▇ Option;
(c) copies of (i) (A) resolutions adopted by
the Boards of Directors of Synergistic authorizing Synergistic to execute and
deliver the Synergistic Documents to which it is a party and to perform its
obligations thereunder, upon the terms and
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subject to the conditions set forth therein, (B) resolutions adopted by the
Board of Directors of Synergistic increasing the number of directors
constituting the entire Board to seven (7) members and designating ▇▇▇▇▇ and
four persons designated by ▇▇▇▇▇ as Directors, duly certified by the Secretary
or Assistant Secretary of Synergistic, and (ii) resolutions of the Board of
Directors of Subsidiary authorizing Subsidiary to execute and deliver the
Synergistic Documents to which it is a party, to perform its obligations
thereunder, and to effect the Merger upon the terms and subject to the
conditions set forth therein, duly certified by the Secretary or Assistant
Secretary of Subsidiary.
(d) confirmation, in the form satisfactory
to the parties hereto, from the State of Delaware or a filing service (jointly
chosen by the parties hereto) that the Certificate of Merger of Subsidiary with
and into Salex has been filed with the Secretary of State of Delaware; together
with a copy of the executed form of such agreement.
(e) certificates of the Secretary or
Assistant Secretary of each of Synergistic and Subsidiary certifying as to the
incumbency and specimen signatures of the officers of Synergistic and Subsidiary
executing the Synergistic Documents on behalf of such corporation.
(f) the Registration Rights Agreement.
7.2. Deliveries by Salex at the Closing. At the
Closing, Salex, the Salex Subsidiaries and the Salex Stockholders, as
applicable, shall deliver to Synergistic and/or Subsidiary, as the case may be,
the following:
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(a) stock certificate(s) representing the
Salex Shares, duly endorsed for transfer or with duly executed stock powers
attached; and the ▇▇▇▇▇ Shares also duly endorsed for transfer.
(b) a copy of the resolutions of the Boards
of Directors of Salex and the Salex Subsidiaries, authorizing Salex and the
Salex Subsidiaries, respectively, to execute and deliver the Salex Documents, to
perform their obligations thereunder and to effect the Merger, duly certified by
the Secretary or assistant Secretary of Salex or the Salex Subsidiaries, as the
case may be.
(c) certificates of the Secretary or
Assistant Secretary of Salex certifying as to the incumbency and specimen
signatures of the officers of Salex executing the Salex Documents on behalf of
such corporation.
7.3. Other Deliveries. In addition, the parties shall
execute and deliver such other documents as may be required by this Agreement
and as either of them or their respective counsel may reasonably require in
order to document and carry out the transactions contemplated by this Agreement.
8. Termination, Amendment and Waiver.
8.1. Termination. Subject to the cure period provided
for in Subsection 8.1(d), this Agreement may be terminated at any time prior to
the Effective Time:
(a) By mutual consent of the Boards of
Directors of Synergistic, Subsidiary and Salex; or
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(b) By Synergistic and Subsidiary, on the
one hand, or Salex, on the other hand, if (i) the Merger shall not have been
consummated by September 30, 1996, or such later date as the parties shall have
fixed by written instrument signed by the parties hereto or, at the election of
a party because a condition to the Merger set forth in this Agreement has not
been fulfilled; provided, however, that the right to terminate this Agreement
under this Subsection shall not be available to any party whose failure to
fulfill 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 (ii) a
court of competent jurisdiction or governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling or taken any
other action (which order, decree, ruling or other action the parties hereto
shall use their reasonable efforts to vacate), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement.
(c) By Synergistic and Subsidiary, on the
one hand, or by Salex, on the other hand, if, in the reasonable judgment of
Synergistic and Subsidiary or Salex, as the case may be, (and provided such
parties are not then in material breach of their respective obligations
hereunder), it shall have been determined that the transaction contemplated by
this Agreement has become inadvisable or impracticable by reason of the
institution or threat by state, local or federal governmental authorities or by
any other person of material litigation or proceedings against
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Synergistic or Salex (other than with respect to the ▇▇▇▇▇ Obligation to AG).
(d) In the event Synergistic or Subsidiary,
on the one hand, or Salex and the Salex Subsidiaries, on the other hand,
breaches or otherwise fails to perform any material part of this Agreement, then
the other party (or parties) hereto not in breach shall notify in (writing) the
party in material breach and demand that such material breach or such material
failure to perform be corrected within a stipulated period, which period shall
not be less than ten (10) days following notification. If the party (or parties)
in material breach fails to correct the material breach with the period stated
in the written notice of demand for correction, the other party (or parties)
may, in its (or their) sole discretion, immediately terminate this Agreement by
giving the party (or parties) in material breach written notice of termination.
8.2. Effect of Termination. In the event of the
termination of this Agreement as provided in this Section 8, this Agreement
shall, except with respect to Subsection 8.2, forthwith become null and void and
there shall be no liability on the part of any party hereto except and to the
extent such termination results from the willful breach by a party of any of its
representations, warranties or agreements hereunder, in which case, the
non-breaching party shall be entitled to damages. Any termination shall not,
however, affect the obligations of the parties under the Confidentiality
Agreement.
8.3. Fees and Expenses.
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(a) Each of the parties shall be responsible
for, and shall pay, its or his respective fees and expenses incurred by such
party in connection with the Merger and the transactions contemplated by this
Agreement.
8.4. Amendment. This Agreement may not be amended
except by an instrument in writing signed by each of the parties
hereto.
8.5. Waiver. At any time prior to the Effective
Time, any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
9. Survival of Representations and Warranties.
Each of the parties hereto hereby agrees that all
representations and warranties made by or on behalf of him or it in this
Agreement or in any document or instrument delivered pursuant hereto shall
survive the Closing Date for a period of two (2) years after the Effective Time;
provided, however, the representations and warranties relating to matters which
are subject to statutes of limitations with respect to action by governmental
bodies, such as taxing authorities, shall survive for the duration of the
periods provided by such statute.
10. General Provisions.
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10.1. Notices. All notices and other
communications given or made pursuant hereto shall be in writing and shall be
deemed to have been duly given or made as of the earlier of the date delivered
if delivered personally, by overnight courier or mailed by express mail, or
within 3 business days if sent by registered or certified mail (postage prepaid,
return receipt requested) or on the date sent by facsimile transmittal,
confirmed by express, certified or registered mail, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice, except that notices of changes of address shall be effective
upon receipt):
If to Synergistic or
Subsidiary: Synergistic Holdings Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇▇
If to Salex or Salex Salex Holding Corporation
Subsidiaries: ▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
with a copy to: Seyfarth, Shaw, ▇▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Album, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Salex
Stockholders, to: The name and address set forth
on Schedule 2.3.
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10.2. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the greatest
extent possible.
10.3. Entire Agreement. This Agreement and the
Confidentiality Agreement and the agreements referred to herein constitute the
entire agreement, and supersede all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof.
10.4. No Assignment. This Agreement shall not be
assigned by operation of law or otherwise, and any assignment shall be null and
void.
10.5. Headings. Headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
10.6. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the law of the State of New York without
regard to its choice of law principles. Each
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of Synergistic, Subsidiary, and Salex hereby irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the States of
New York and of the United States located in the County of New York, State of
New York for any litigation arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any litigation
relating thereto except in such courts), waives any objection to the laying of
venue of any such litigation in such courts and agrees not to plead or claim
that such litigation brought in New York, New York has been brought in an
inconvenient forum.
10.7. Attorneys' Fees. In the event of any dispute
arising out of the subject matter of this Agreement, the prevailing party shall
recover, in addition to any other damages assessed, its reasonable attorneys'
fees and costs incurred in litigating, arbitrating, or otherwise settling or
resolving such dispute.
10.8. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
but all of which taken together shall constitute one and the same agreement.
10.9. Effect of Abandonment. In the event that this
Agreement is terminated and the transactions contemplated hereby are abandoned
pursuant to the terms hereof, this Agreement shall forthwith become wholly void
and of no force and effect, except as to 10.1 hereof; provided, however, that
nothing in this Agreement contained shall be deemed to relieve any party hereto
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from liability for any breach of this Agreement prior to termination.
10.10. Amendment. This Agreement may only be amended
by a written instrument executed by each of the parties hereto.
10.11. Binding Effect; Benefits. This Agreement shall
inure to the benefit of, and shall be binding upon, the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
Nothing herein contained, express or implied, is intended to confer upon any
person other than the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns, any rights or remedies under
or by reason of this Agreement.
10.12. Waiver, etc. The failure of any of the parties
hereto to at any time enforce any of the provisions of this Agreement shall not
be deemed or construed to be a waiver of any such provision, nor to in any way
affect the validity of this Agreement or any provision hereof or the right of
any of the parties hereto to thereafter enforce each and every provision of this
Agreement. No waiver of any breach of any of the provisions of this Agreement
shall be effective unless set forth in a written instrument executed by the
party or parties against whom or which enforcement of such waiver is sought; and
no waiver of any such breach shall be construed or deemed to be a waiver of any
other or subsequent breach.
10.13. Announcements. No party hereto shall issue
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any press release or otherwise divulge the existence of this Agreement or the
transactions contemplated hereby without the prior approval of the other parties
hereto, except as may be required by applicable law or the applicable rules or
regulations of any stock exchange.
10.14. Schedules. The Schedules delivered pursuant
to this Agreement are an integral part hereof. Each such Schedule shall be in
writing, shall indicate the subparagraph pursuant to which it is being
delivered, and shall be initialled by the delivering party.
IN WITNESS WHEREOF, each of the Parties have caused this
Agreement to be executed as of the date first written above.
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SIGNATURE PAGES FOR MERGER AGREEMENT by and among
SALEX HOLDING CORPORATION, SALEX INDUSTRIES, INC.
SYNERGISTIC HOLDINGS CORP, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, THE ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ FAMILY LIMITED PARTNERSHIP, PERSHING SUN, ▇▇▇▇▇▇▇▇ SUN,
▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
SALEX HOLDING CORPORATION
By: /s/ ▇▇▇ ▇▇▇▇▇
--------------------------------------
SALEX INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
SYNERGISTIC HOLDINGS CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
SALEX FLEET SPECIALIST CORP.
By: /s/ ▇▇▇ ▇▇▇▇▇
--------------------------------------
SALEX FLEET MANAGEMENT CORP.
By: /s/ ▇▇▇ ▇▇▇▇▇
--------------------------------------
SALEX NATIONAL ACCOUNT CORP.
By: /s/ ▇▇▇ ▇▇▇▇▇
--------------------------------------
SALEX SALVAGE DISPOSAL CORP.
By: /s/ ▇▇▇ ▇▇▇▇▇
--------------------------------------
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SALEX FINANCIAL SERVICES CORP.
By: /s/ ▇▇▇ ▇▇▇▇▇
--------------------------------------
/s/ ▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
THE ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ FAMILY LIMITED
PARTNERSHIP
By: /s/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇, General Partner
/s/ Pershing Sun
-----------------------------------------
PERSHING SUN
/s/ ▇▇▇▇▇▇▇▇ Sun
-----------------------------------------
▇▇▇▇▇▇▇▇ SUN
/s/ ▇▇▇▇▇▇▇ ▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ GIOVINCO
/s/ T. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
T. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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