Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
among
24/7 MEDIA, INC.,
CONTINUUM HOLDING CORP.,
PUBLIGROUPE USA HOLDING, INC.
and
REAL MEDIA, INC.
Dated October 30, 2001
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.............................................................................................1
SECTION 1.01 Certain Defined Terms.........................................................1
ARTICLE II THE MERGER............................................................................................10
SECTION 2.01 The Merger...................................................................10
SECTION 2.02 Closing......................................................................10
SECTION 2.03 Effective Time...............................................................10
SECTION 2.04 Effect of the Merger.........................................................11
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors and Officers of
Surviving Corporation........................................................11
ARTICLE III CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES...................................................11
SECTION 3.01 Conversion of Shares.........................................................11
SECTION 3.02 Exchange of Shares Other than Dissenting Shares and Treasury Shares..........13
SECTION 3.03 Stock Transfer Books.........................................................14
SECTION 3.04 No Fractional Share Certificates.............................................14
SECTION 3.05 Certain Adjustments..........................................................14
SECTION 3.06 Dissenters' Rights...........................................................15
SECTION 3.07 Lost, Stolen or Destroyed Certificates.......................................15
SECTION 3.08 Taking of Necessary Action; Further Action...................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF COMPANY.............................................................16
SECTION 4.01 Organization and Qualification; Subsidiaries.................................16
SECTION 4.02 Certificate of Incorporation and Bylaws......................................16
SECTION 4.03 Capitalization...............................................................16
SECTION 4.04 Authority Relative to This Agreement.........................................17
SECTION 4.05 No Conflict; Required Filings and Consents...................................18
SECTION 4.06 Permits; Compliance with Laws................................................18
SECTION 4.07 Financial Statements.........................................................19
SECTION 4.08 Absence of Certain Changes or Events.........................................20
SECTION 4.09 Employee Benefit Plans; Labor Matters........................................21
SECTION 4.10 Contracts....................................................................23
SECTION 4.11 Litigation...................................................................25
SECTION 4.12 Environmental Matters........................................................25
SECTION 4.13 Intellectual Property........................................................25
SECTION 4.14 Taxes........................................................................27
SECTION 4.15 Insurance....................................................................28
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SECTION 4.16 Properties...................................................................29
SECTION 4.17 Brokers......................................................................29
SECTION 4.18 Business Activity Restriction................................................29
SECTION 4.19 Affiliate Transactions.......................................................30
SECTION 4.20 Certain Business Practices...................................................30
SECTION 4.21 Accredited Investors.........................................................30
SECTION 4.22 Cash Positions...............................................................30
ARTICLE IVA REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDER.............................................30
SECTION 4A.01 Organization and Qualification...............................................30
SECTION 4A.02 Certificate of Incorporation and Bylaws......................................31
SECTION 4A.03 Title to Shares..............................................................31
SECTION 4A.04 Authority Relative to this Agreement.........................................31
SECTION 4A.05 No Conflict; Required Filings and Consents...................................32
SECTION 4A.06 Acquisition of Stock for Investment..........................................32
SECTION 4A.07 Accredited Investor..........................................................32
SECTION 4A.08 Disclosure of Information....................................................32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................................................33
SECTION 5.01 Organization and Qualification; Subsidiaries.................................33
SECTION 5.02 Certificate of Incorporation and Bylaws......................................33
SECTION 5.03 Capitalization...............................................................33
SECTION 5.04 Authority Relative to This Agreement.........................................34
SECTION 5.05 No Conflict; Required Filings and Consents...................................35
SECTION 5.06 Permits; Compliance with Laws................................................36
SECTION 5.07 SEC Filings; Financial Statements............................................36
SECTION 5.08 Absence of Certain Changes or Events.........................................37
SECTION 5.09 Employee Benefit Plans; Labor Matters........................................38
SECTION 5.10 Contracts....................................................................40
SECTION 5.11 Litigation...................................................................41
SECTION 5.12 Environmental Matters........................................................41
SECTION 5.13 Intellectual Property........................................................42
SECTION 5.14 Taxes........................................................................43
SECTION 5.15 Insurance....................................................................45
SECTION 5.16 Properties...................................................................45
SECTION 5.17 Brokers......................................................................45
SECTION 5.18 Business Activity Restriction................................................46
SECTION 5.19 Certain Business Practices...................................................46
SECTION 5.20 No Prior Activities..........................................................46
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SECTION 5.21 Affiliate Transactions.......................................................46
SECTION 5.22 Cash Positions...............................................................47
ARTICLE VI COVENANTS.............................................................................................47
SECTION 6.01 Conduct of Company Pending the Closing.......................................47
SECTION 6.02 Conduct of Parent and Merger Sub Pending the Closing.........................49
SECTION 6.03 Notices of Certain Events....................................................50
SECTION 6.04 Access to Information; Confidentiality.......................................50
SECTION 6.05 No Solicitation of Transactions..............................................51
SECTION 6.06 Control of Operations........................................................51
SECTION 6.07 Further Action; Consents; Filings............................................51
SECTION 6.08 Additional Reports...........................................................52
SECTION 6.09 Noncompetition...............................................................52
SECTION 6.10 Use of First Note Proceeds; Conduct of Business..............................52
SECTION 6.11 Company Intellectual Property; Escrow........................................53
SECTION 6.12 Payments to Fractional Share Holders.........................................53
SECTION 6.13 Tax Nature of Transaction....................................................53
SECTION 6.14 Chain Subsidiaries...........................................................54
SECTION 6.15 Tax Cooperation..............................................................54
ARTICLE VII ADDITIONAL AGREEMENTS................................................................................55
SECTION 7.01 Notes........................................................................55
SECTION 7.02 Directors' and Officers' Indemnification.....................................55
SECTION 7.03 Public Announcements.........................................................55
SECTION 7.04 Listing of Additional Shares.................................................55
SECTION 7.05 Blue Sky.....................................................................56
SECTION 7.06 Employee Matters.............................................................56
SECTION 7.07 Directors of Parent Following the Merger.....................................56
ARTICLE VIII CONDITIONS TO THE MERGER............................................................................57
SECTION 8.01 Conditions to the Obligations of Each Party to Consummate the Merger.........57
SECTION 8.02 Conditions to the Obligations of Company.....................................57
SECTION 8.03 Conditions to the Obligations of Parent......................................58
ARTICLE IX INDEMNIFICATION.......................................................................................59
SECTION 9.01 Indemnification by Principal Stockholder.....................................59
SECTION 9.02 Indemnification by Parent....................................................59
SECTION 9.03 Survival.....................................................................60
SECTION 9.04 Limitations..................................................................60
SECTION 9.05 Delivery of Notice...........................................................61
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ARTICLE X TERMINATION, AMENDMENT AND WAIVER......................................................................62
SECTION 10.01 Termination..................................................................62
SECTION 10.02 Effect of Termination........................................................62
SECTION 10.03 Amendment....................................................................63
SECTION 10.04 Waiver.......................................................................63
SECTION 10.05 Termination Fee; Expenses....................................................63
ARTICLE XI GENERAL PROVISIONS....................................................................................64
SECTION 11.01 Notices......................................................................64
SECTION 11.02 Severability.................................................................65
SECTION 11.03 Assignment; Binding Effect; Benefit..........................................65
SECTION 11.04 Incorporation of Exhibits....................................................65
SECTION 11.05 Governing Law................................................................66
SECTION 11.06 Jurisdiction; Waiver of Jury Trial...........................................66
SECTION 11.07 Headings; Interpretation.....................................................66
SECTION 11.08 Counterparts.................................................................66
SECTION 11.09 Entire Agreement.............................................................67
SECTION 11.10 Swiss Accounting.............................................................67
SCHEDULES
Schedule I Officers of the Surviving Corporation
Schedule II Directors of the Surviving Corporation
Schedule III Directors of Parent
ANNEXES
ANNEX A Form of Lock-Up Agreement
ANNEX B Form of First Note
ANNEX C Form of Second Note and Third Note
ANNEX D Form of Parent Guarantee
ANNEX E Description of Company Restructuring
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 30, 2001 (as
amended, supplemented or otherwise modified from time to time, this
"AGREEMENT"), among 24/7 MEDIA, INC., a Delaware corporation ("PARENT"), REAL
MEDIA, INC., a Delaware corporation ("COMPANY"), PUBLIGROUPE USA HOLDING, INC.,
a Delaware corporation ("PRINCIPAL STOCKHOLDER") and CONTINUUM HOLDING CORP., a
Delaware corporation and an indirect wholly owned subsidiary of Parent ("MERGER
SUB").
W I T N E S S E T H:
WHEREAS, the boards of directors of Parent and Company have
determined that it is advisable and in the best interests of their respective
companies and stockholders to enter into a business combination by means of the
merger of Merger Sub with and into Company (the "MERGER") and have approved and
adopted this Agreement; and
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 CERTAIN DEFINED TERMS. Unless the context
otherwise requires, the following terms, when used in this Agreement, shall have
the respective meanings specified below (such meanings to be equally applicable
to the singular and plural forms of the terms defined):
"AFFILIATE" shall mean, with respect to any Person, any other
Person that controls, is controlled by or is under common control with the first
Person.
"AGGREGATE PARENT DISTRIBUTABLE SHARE NUMBER" shall mean
8,216,868, which constitutes the number of shares of Parent Common Stock equal
to 19.9% of the aggregate of the total number of shares of Parent Common Stock
issued and outstanding immediately prior to the Effective Time.
"ASSUMED OPTIONS" shall have the meaning set forth in Section
3.05(a).
"BLUE SKY LAWS" shall mean United States state securities or
"blue sky" laws.
"BUSINESS" shall mean solely the online advertising
technology, representation, email and promotions businesses of the Company;
PROVIDED, HOWEVER, that this shall not include
(i) any off-line or non-technology business or operations of the Company or any
of its affiliates, (ii) the PPN PrintPlus-business (defined as advertising
packages off/online of represented media) or (iii) any of the Company's business
conducted in Switzerland.
"BUSINESS DAY" shall mean any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or, in the
case of determining a date when any payment is due, any day on which banks are
not required or authorized by law or executive order to close in the City of
New
York.
"CERTIFICATE OF MERGER" shall have the meaning set forth in
Section 2.03.
"CHAIN SUBSIDIARIES" shall have the meaning set forth in
Section 5.01.
"CHARTER AMENDMENT" shall mean the Certificate of Amendment to
the Certificate of Incorporation of Company effecting a one-for-2000 reverse
stock split.
"CLOSING" shall have the meaning set forth in Section 2.02.
"COBRA" shall have the meaning set forth in Section 4.09(g).
"COMMON DISSENTING SHARES" shall have the meaning set forth in
Section 3.01(a).
"COMPANY AGGREGATE SHARE NUMBER" shall mean the total number
of shares of Company Series A Preferred Stock (on an as-converted basis),
Company Series B Preferred Stock (on an as-converted basis) and Company Common
Stock issued and outstanding immediately prior to the Effective Time.
"COMPANY AUDITED FINANCIAL STATEMENTS" shall have the meaning
set forth in Section 4.07(a).
"COMPANY BALANCE SHEET" shall have the meaning set forth in
Section 4.07(b).
"COMPANY BENEFIT PLANS" shall have the meaning set forth in
Section 4.09(a).
"COMPANY CAPITAL STOCK" shall mean the Company Common Stock
and the Company Preferred Stock.
"COMPANY CERTIFICATES" shall have the meaning set forth in
Section 3.02(b).
"COMPANY COMMON STOCK" shall mean the common stock, par value
$.01 per share, of Company.
"COMPANY CONFIDENTIAL INFORMATION" shall have the meaning set
forth in Section 4.13(f).
"COMPANY DISCLOSURE SCHEDULE" shall mean the disclosure
schedule delivered by Company to Parent prior to the execution of this Agreement
and forming a part hereof.
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"COMPANY ERISA AFFILIATE" shall have the meaning set forth in
Section 4.09(a).
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 4.07(a).
"COMPANY INTELLECTUAL PROPERTY" shall mean all Intellectual
Property that is currently used in the Business other than Intellectual Property
that is widely disseminated by a third party owner by way of a non-exclusive
license (for example, commonly used operating system software).
"COMPANY LOSS SUBGROUP" shall have the meaning set forth in
Section 6.13.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean any change in or
effect on the business of Company or the Company Subsidiaries that, individually
or in the aggregate (taking into account all other such changes or effects), is,
or is reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of Company and the
Company Subsidiaries, taken as a whole; PROVIDED, HOWEVER, that neither (x) any
such effect resulting from a change in economic or financial market conditions
generally, (y) any continuing net loss incurred by Company, substantially
consistent with Company's recent past experience nor (z) any act of God, natural
disaster, civil commotion, act of terrorism, war or similar event beyond
Company's reasonable control, shall be deemed, in and of itself, to constitute a
Company Material Adverse Effect.
"COMPANY MATERIAL CONTRACTS" shall have the meaning set forth
in Section 4.10.
"COMPANY OPTION PLAN" shall have the meaning set forth in
Section 8.03(h).
"COMPANY PERMITS" shall have the meaning set forth in Section
4.06.
"COMPANY SERIES A PREFERRED STOCK" shall mean the Series A
Convertible Preferred Stock, par value $.001 per share, of Company.
"COMPANY SERIES B PREFERRED STOCK" shall mean the Series B
Preferred Stock, par value $.001 per share, of Company.
"COMPANY RESTRUCTURING" shall mean the restructuring of
Company as described on ANNEX E.
"COMPANY SUBSIDIARIES" shall mean each of Company's directly
or indirectly owned Subsidiaries.
"COMPANY TERMINATION FEE" shall have the meaning set forth in
Section 10.05(b).
"COMPETING TRANSACTION" shall mean any of the following
involving Company or Parent, as the case may be (other than the Merger):
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(a) any merger, consolidation, share exchange, business
combination or other similar transaction;
(b) any sale, lease, exchange, transfer or other disposition
of 20% or more of the assets of such party and its Subsidiaries, taken
as a whole, in a single transaction or series of related transactions;
(c) any tender offer or exchange offer for 20% or more of the
outstanding voting securities of such party or the filing of a
registration statement under the Securities Act in connection
therewith;
(d) any Person having acquired beneficial ownership or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined under Section 13(d) of the Exchange Act) having been formed
which beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the outstanding voting securities of such
party;
(e) any solicitation in opposition to the approval of this
Agreement by the stockholders of such party; or
(f) any agreement to engage in any of the foregoing.
"COMPANY UNAUDITED FINANCIAL STATEMENTS" shall have the
meaning set forth in Section 4.07(a).
"CONFIDENTIAL MEMORANDUM" shall mean the Confidential Offering
Memorandum of Parent dated October 30, 2001.
"CONFIDENTIALITY AGREEMENT" shall mean the Confidentiality
Agreement dated October 9, 2001 between Parent and Company.
"DELAWARE LAW" shall mean the General Corporation Law of the
State of Delaware.
"DISSENTING SHARES" shall have the meaning set forth in
Section 3.01(c).
"$" shall mean United States Dollars.
"EFFECTIVE TIME" shall have the meaning set forth in Section
2.03.
"ENCUMBRANCES" shall mean any claims, security interests,
liens, pledges, charges, escrows, options, proxies, rights of first refusal,
preemptive rights, mortgages, hypothecations, prior assignments, title retention
agreements, indentures, security agreements or any other encumbrance of any
kind.
"ENVIRONMENTAL LAW" shall mean any Law and any enforceable
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent
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decree or judgment, relating to pollution or protection of the environment or
natural resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Material.
"ENVIRONMENTAL PERMIT" shall mean any permit, approval,
identification number, license or other authorization required under or issued
pursuant to any applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ESCROW AGENT" shall have the meaning set forth in Section
6.11.
"ESCROW AGREEMENT" shall have the meaning set forth in Section
6.11.
"ESCROW MATERIALS" shall have the meaning set forth in Section
6.11.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, together with the rules and regulations promulgated thereunder.
"EXCHANGE RATIO" shall have the meaning set forth in Section
3.01(a).
"EXPENSES" shall mean, with respect to any party hereto, all
reasonable out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, financial advisors,
experts and consultants to a party hereto and its affiliates) incurred by such
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution or performance of its obligations pursuant
to this Agreement or the consummation of the Merger, obtaining relevant
approvals from any Governmental Entity, and all other matters related to the
transactions contemplated hereby and the closing of the Merger.
"FINAL AVERAGE CLOSING PRICE" shall mean the average closing
price of a share of Parent Common Stock on the NNM (or, if applicable, the
Nasdaq Smallcap Market or such other exchange on which the Parent Common Stock
may then be traded) for the ten (10) trading days ending three (3) Business Days
prior to the date of the Closing or, if the Parent Common Stock is then traded
over-the-counter, the average closing bid or sale price (whichever is
applicable) of a share of Parent Common Stock for the ten (10) trading days
ending three (3) Business Days prior to the date of the Closing.
"FIRST NOTE" shall mean that certain unsecured promissory note
in the principal amount of $4,500,000 issued on the date hereof by Company in
favor of Principal Stockholder in the form of ANNEX B attached hereto and
guaranteed by Parent pursuant to the Parent Guarantee.
"FOREIGN PLAN" shall mean any Company Benefit Plan that covers
former or current employees of Company or any Company Subsidiary who are
employed outside of the United States (or any beneficiary thereof) or that is
not subject to the laws of the United States.
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"FRACTIONAL SHARE PAYOUT" shall have the meaning set forth in
Section 6.12.
"GOVERNMENTAL ENTITY" shall mean any United States federal,
state, local or foreign governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or arbitral body.
"GOVERNMENTAL ORDER" shall mean any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Entity.
"HAZARDOUS MATERIAL" shall mean (i) any petroleum, petroleum
products, by-products or breakdown products, radioactive materials, friable
asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any applicable Environmental Law.
"HSR ACT" shall mean Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, together with the rules and regulations promulgated
thereunder.
"INDEBTEDNESS" shall mean, with respect to any Person:
(a) all obligations of such Person for borrowed
money, or with respect to deposits or advances of any kind, including accrued
interest;
(b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments;
(c) all obligations of such Person issued or assumed
as the deferred purchase price of property or services;
(d) all capitalized lease obligations of such Person;
(e) all guarantees of such Person of any of the
foregoing of any other Person; and
(f) all obligations (including reimbursement
obligations) relating to the issuance of letters of credit for the account of
such Person.
"INTELLECTUAL PROPERTY" shall mean all United States, foreign
and international patents; trademarks, service marks and trade names (including
without limitation all goodwill pertaining thereto), designs, trade dress and
Internet domain names; copyrights; sui generis database rights; ideas,
inventions, technology, know-how, show-how, trade secrets, systems, processes,
works of authorship, databases, mask works, content, graphics, statistical
models, algorithms, modules, computer programs, computer software, source and
object code of such software, technical documentation, business methods, work
product, intellectual and industrial property licenses, and all other tangible
or intangible information or materials.
"IRS" shall mean the United States Internal Revenue Service.
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"KNOWLEDGE OF COMPANY" shall mean that any of Xxxxxx X.
Xxxxxxx, Xxxxxxx Xxxxxxxxx, Xxxxxxxx Xxx, Xxxxx Xxxx or any director of Company
is actually aware of a fact or other matter, or should have been aware of a fact
or other matter based upon reasonable inquiry and investigation.
"KNOWLEDGE OF PARENT" shall mean that any of Xxxxx X. Xxxxx,
Xxxx X. Xxxxx, Xxx Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxxx Xxxxx or Xxxxxx X. Xxxx or
any director of Parent is actually aware of a fact or other matter, or should
have been aware of a fact or other matter based upon reasonable inquiry and
investigation.
"LAW" shall mean any federal, state, foreign or local statute,
law, ordinance, regulation, rule, code, order, judgment, decree, other
requirement or rule of law of the United States or any other jurisdiction, and
any other similar act or law.
"LOCK-UP AGREEMENT" shall mean that certain Lock-Up and
Standstill Agreement between Principal Stockholder and Parent in the form of
ANNEX A attached hereto.
"LOSSES" shall have the meaning set forth in Section 9.01.
"NNM" shall mean The Nasdaq National Market.
"NOTIFICATION FORM FOR LISTING OF ADDITIONAL SHARES" shall
mean the Notification Form: Listing of Additional Shares required by NNM for a
listed company in connection with, INTER ALIA, a transaction with the listed
company that may result in the potential issuance of common stock (or securities
convertible into common stock) greater than 10% of either the total shares
outstanding or the voting power outstanding on a pre-transaction basis.
"PARENT BALANCE SHEET" shall have the meaning set forth in
Section 5.07(c).
"PARENT BENEFIT PLANS" shall have the meaning set forth in
Section 5.09(a).
"PARENT CERTIFICATES" shall have the meaning set forth in
Section 3.02(a).
"PARENT COMMON STOCK" shall mean the common stock, par value
$.01 per share, of Parent.
"PARENT CONFIDENTIAL INFORMATION" shall have the meaning set
forth in Section 5.13(f).
"PARENT DISCLOSURE SCHEDULE" shall mean the disclosure
schedule delivered by Parent to Company prior to the execution of this Agreement
and forming a part hereof.
"PARENT ERISA AFFILIATE" shall have the meaning set forth in
Section 5.09(a).
"PARENT GUARANTEE" shall mean that certain guarantee issued on
the date hereof by Parent guaranteeing the obligations of Company under the
First Note in the form of ANNEX D attached hereto.
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"PARENT INTELLECTUAL PROPERTY" shall mean all Intellectual
Property that is currently used in Parent's business or the business of any
Parent Subsidiary other than Intellectual Property that is widely disseminated
by a third party owner by way of a non-exclusive license (for example, commonly
used operating system software).
"PARENT MATERIAL ADVERSE EFFECT" shall mean any change in or
effect on the business of Parent or the Parent Subsidiaries that, individually
or in the aggregate (taking into account all other such changes or effects), is,
or is reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of Parent and the
Parent Subsidiaries, taken as a whole; PROVIDED, HOWEVER, that neither (x) any
such effect resulting from a change in economic or financial market conditions
generally, (y) any continuing net loss incurred by Parent, substantially
consistent with Parent's recent past experience nor (z) any act of God, natural
disaster, civil commotion, act of terrorism, war or similar event beyond
Parent's reasonable control, shall be deemed, in and of itself, to constitute a
Parent Material Adverse Effect.
"PARENT MATERIAL CONTRACTS" shall have the meaning set forth
in Section 5.10.
"PARENT PERMITS" shall have the meaning set forth in Section
5.06.
"PARENT REPORTS" shall have the meaning set forth in Section
5.07(a).
"PARENT STOCK OPTIONS" shall have the meaning set forth in
Section 5.03(a).
"PARENT STOCK PLAN" shall mean Parent's Stock Option Plan.
"PARENT SUBSIDIARIES" shall mean each of Parent's directly or
indirectly owned Subsidiaries.
"PARENT TERMINATION FEE" shall have the meaning set forth in
Section 10.05(c).
"PARENT WARRANT" shall mean a warrant to purchase shares of
Parent Common Stock.
"PERMITTED ENCUMBRANCES" shall mean (i) liens for Taxes,
assessments and other governmental charges not yet due and payable, (ii)
immaterial unfiled mechanics', workmen's, repairmen's, warehousemen's, carriers'
or other like liens arising or incurred in the ordinary course of business which
are not yet due and payable and (iii) equipment leases with third parties
entered into in the ordinary course of business.
"PERSON" shall mean an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange
Act), trust, association, entity or government or political subdivision, agency
or instrumentality of a government.
"PRE-SPLIT COMPANY COMMON STOCK" shall have the meaning set
forth in Section 6.12.
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"REPRESENTATIVES" shall have the meaning set forth in Section
6.04(a).
"REVERSE SPLIT" shall have the meaning set forth in Section
6.12.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SECOND NOTE" shall mean that certain unsecured promissory
note in the principal amount of $1,500,000 to be issued by Parent to Principal
Stockholder in the form of ANNEX C attached hereto.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, together with the rules and regulations promulgated thereunder.
"SERIES A PREFERRED DISSENTING SHARES" shall have the meaning
set forth in Section 3.01(b).
"SERIES B PREFERRED DISSENTING SHARES" shall have the meaning
set forth in Section 3.01(c).
"SUBSIDIARY" shall mean, with respect to any Person, any
corporation, limited liability company, partnership, joint venture or other
legal entity of which such Person (either alone or through or together with any
other subsidiary of such Person) owns, directly or indirectly, a majority of the
stock or other equity interests, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity.
"SURVIVING CORPORATION" shall have the meaning set forth in
Section 2.01.
"TAX" shall mean (i) any and all taxes, fees, levies, duties,
tariffs, imposts, assessments and other charges of any kind (together with any
and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any Governmental Entity or other taxing
authority (each, a "TAXING AUTHORITY"), including, without limitation, taxes or
other charges on or with respect to income, franchises, windfall or other
profits, gross or net receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation or
net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, franchise, business, value-added or gains taxes;
license, registration and documentation fees; and customs duties, tariffs and
similar charges; (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, combined,
consolidated or unitary group for any taxable period; and (iii) any liability
for the payment of amounts of the type described in (i) or (ii) as a result of
being a transferee of, or a successor in interest to, any Person or as a result
of an express or implied obligation to indemnify any Person.
"TAX RETURN" shall mean any return, report, statement, form,
declaration, notice, notification, election, certificate or other document or
information (including, without limitation, any estimated tax reports or
returns, withholding tax reports or returns and information reports or
9
returns) filed with or submitted to, or required to be filed with or submitted
to, any Taxing Authority with respect to any Taxes.
"TECHNOLOGY TRANSFER AGREEMENT" shall have the meaning set
forth in Section 6.11.
"TERMINATING COMPANY BREACH" shall have the meaning set forth
in Section 10.01(d).
"TERMINATING PARENT BREACH" shall have the meaning set forth
in Section 10.01(e).
"THIRD NOTE" shall mean that certain unsecured promissory note
in the principal amount of $1,500,000 to be issued by Parent to Principal
Stockholder under the conditions described in Section 7.01(b) in the form of
ANNEX C attached hereto.
"U.S. GAAP" shall mean United States generally accepted
accounting principles.
ARTICLE II
THE MERGER
SECTION 2.01 THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with Delaware Law, at
the Effective Time (as defined in Section 2.03), Merger Sub shall be merged with
and into Company. As a result of the Merger, the separate corporate existence of
Merger Sub shall cease and Company shall continue as the surviving corporation
of the Merger as a wholly owned Subsidiary of Parent (the "SURVIVING
CORPORATION").
SECTION 2.02 CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall be held at the offices of
Proskauer Rose LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the date hereof,
or another time and date to be specified by the parties, which shall be no later
than the second business day after the satisfaction or waiver of the conditions
set forth in Article VIII, unless another date, time or place is agreed to by
the parties.
SECTION 2.03 EFFECTIVE TIME. At the time of the Closing, the
parties shall cause the Merger to be consummated by filing a certificate of
merger in such form as is required by the applicable provisions of Delaware law
(the "CERTIFICATE OF MERGER") with the Secretary of State of the State of
Delaware, executed in accordance with the relevant provisions of Delaware Law
(the date and time of such filing, or such later date and time as may be set
forth therein, being the "EFFECTIVE TIME").
SECTION 2.04 EFFECT OF THE MERGER. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise
10
provided herein, all the property, rights, privileges, powers and franchises of
Company and Merger Sub shall vest in Company as the Surviving Corporation, and
all debts, liabilities and duties of Company and Merger Sub shall become the
debts, liabilities and duties of Company as the Surviving Corporation.
SECTION 2.05 CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS
AND OFFICERS OF SURVIVING CORPORATION. Unless otherwise agreed by the parties
before the Effective Time, at the Effective Time:
(a) subject to the requirements of Section 7.02, the
Certificate of Incorporation and the Bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and the Bylaws of the Surviving Corporation, until
thereafter amended as provided by Law and such Certificate of
Incorporation or Bylaws;
(b) the officers of the Surviving Corporation shall be those
persons listed on SCHEDULE I hereto, in each case until their
successors are elected or appointed and qualified or until their
resignation or removal; and
(c) the directors of the Surviving Corporation shall be those
persons listed on SCHEDULE II hereto, in each case until their
successors are elected or appointed and qualified or until their
resignation or removal.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01 CONVERSION OF SHARES. At the Effective Time, by
virtue of the Merger, and without any action on the part of Parent, Merger Sub,
Company or the holders of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately before the Effective Time (excluding fractional shares and shares of
Company Common Stock, if any, held (i) by Persons who have not voted such shares
for approval of the Merger and with respect to which such Persons shall have
perfected dissenters' rights in accordance with Delaware Law ("COMMON DISSENTING
SHARES"), (ii) by Parent or any Parent Subsidiary or (iii) in the treasury of
Company) shall be converted into and exchangeable for (subject to the provisions
of Section 3.04) that number of shares of Parent Common Stock equal to (1) the
Aggregate Parent Distributable Share Number divided by (2) the Company Aggregate
Share Number (the "EXCHANGE RATIO").
(b) Each share of Company Series A Preferred Stock issued and
outstanding immediately before the Effective Time (excluding shares of Company
Series A Preferred Stock, if any, held (i) by Persons who have not voted such
shares for approval of the Merger and with respect to which such Persons shall
have perfected dissenters' rights in accordance with Delaware Law ("SERIES A
PREFERRED DISSENTING Shares"), (ii) by Parent or any Parent Subsidiary
11
or (iii) in the treasury of Company) shall be converted into and exchangeable
for (subject to the provisions of Section 3.04) that number of shares of Parent
Common Stock equal to (1) the number of shares of Company Common Stock into
which each share of Company Series A Preferred Stock is convertible immediately
prior to the Effective Time, multiplied by (2) the Exchange Ratio.
(c) Each share of Company Series B Preferred Stock issued and
outstanding immediately before the Effective Time (excluding shares of Company
Series B Preferred Stock, if any, held (i) by Persons who have not voted such
shares for approval of the Merger and with respect to which such Persons shall
have perfected dissenters' rights in accordance with Delaware Law ("SERIES B
PREFERRED DISSENTING SHARES" and, collectively with any Common Dissenting Shares
and Series A Preferred Dissenting Shares, "DISSENTING SHARES"), (ii) by Parent
or any Parent Subsidiary or (iii) in the treasury of Company) shall be converted
into and exchangeable for (subject to the provisions of Section 3.04) that
number of shares of Parent Common Stock equal to (1) the number of shares of
Company Common Stock into which each share of Company Series B Preferred Stock
is convertible immediately prior to the Effective Time, multiplied by (2) the
Exchange Ratio.
(d) Each issued and outstanding share of capital stock of
Merger Sub shall be converted into and become one fully paid and nonassessable
share of common stock of the Surviving Corporation. From and after the Effective
Time, each outstanding certificate theretofore representing shares of Merger Sub
common stock shall be deemed for all purposes to evidence ownership of and to
represent the number of shares of Surviving Corporation common stock into which
such shares of Merger Sub common stock shall have been converted.
(e) Each share of Parent Common Stock issued and outstanding
immediately prior to the Effective Time shall remain an issued and outstanding
share of common stock of Parent and shall not be affected by the Merger.
SECTION 3.02 EXCHANGE OF SHARES OTHER THAN DISSENTING SHARES
AND TREASURY SHARES.
(a) PARENT TO PROVIDE COMMON STOCK. Promptly after the
Effective Time, Parent shall make available to the holders of Company Common
Stock and Company Preferred Stock certificates of shares of Parent Common Stock
("PARENT CERTIFICATES") representing the number of whole shares of Parent Common
Stock issuable pursuant to Sections 3.01(a) and 3.01(b) in exchange for shares
of Company Common Stock and Company Preferred Stock outstanding immediately
prior to the Effective Time.
(b) EXCHANGE PROCEDURES. Parent shall, promptly (and in any
event within ten (10) Business Days) after the date of the Closing, mail to each
holder of record of certificates of Company Common Stock and Company Preferred
Stock ("COMPANY CERTIFICATES") whose shares were converted into the right to
receive shares of Parent Common Stock: (i) a form letter of transmittal in form
and substance reasonably satisfactory to Company and (ii) instructions for use
in effecting the surrender of the Company Certificates in exchange for Parent
Certificates. Upon surrender of a Company Certificate for cancellation to Parent
or to such other agent or
12
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed, and such other documents as may be
reasonably required by Parent, the holder of such Company Certificate shall be
entitled to receive in exchange therefor a Parent Certificate representing the
number of whole shares of Parent Common Stock that such holder has the right to
receive pursuant to this Article III, and the Company Certificate so surrendered
shall forthwith be canceled. Until so surrendered, each outstanding Company
Certificate that, prior to the Effective Time, represented shares of Company
Common Stock or Company Preferred Stock will be deemed from and after the
Effective Time, for all purposes other than the payment of dividends and
distributions, to evidence the ownership of the number of whole shares of Parent
Common Stock into which such shares of Company Common Stock or Company Preferred
Stock, as the case may be, shall have been so converted.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to shares of Parent Common Stock
with a record date after the Effective Time will be paid to the holder of any
unsurrendered Company Certificate with respect to the shares of Parent Common
Stock represented thereby until the holder of record of such Company Certificate
shall surrender such Company Certificate. Subject to the effect of applicable
escheat or similar laws, following surrender of any such Company Certificate,
there shall be paid to the record holder of the Parent Certificates issued in
exchange therefor, without interest, at the time of such surrender, the amount
of any such dividends or other distributions with a record date after the
Effective Time theretofore payable (but for the provisions of this Section
3.02(c)) with respect to such shares of Parent Common Stock.
(d) TRANSFER OF OWNERSHIP. If any Parent Certificate is to be
issued in a name other than that in which the Company Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance and/or
payment thereof that the Company Certificate so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a Parent
Certificate for shares of Parent Common Stock in any name other than that of the
registered holder of the Company Certificate surrendered, or established to the
reasonable satisfaction of Parent or any agent designated by it that such tax
has been paid or is not payable.
(e) UNDELIVERED PARENT CERTIFICATES. Parent Certificates which
have not been delivered to holders of Company Certificates pursuant to this
Article III within six (6) months after the Effective Time shall promptly be
paid or delivered, as appropriate, to Parent, and thereafter holders of Company
Certificates who have not theretofore complied with the exchange procedures set
forth in and contemplated by this Section 3.02 shall thereafter look only to
Parent (subject to abandoned property, escheat and similar laws) only as general
creditors thereof for their claim for shares of Parent Common Stock and any
dividends or distributions (with a record date after the Effective Time) with
respect to shares of Parent Common Stock to which they are entitled.
(f) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 3.02, none of Parent, the Surviving Corporation or any party hereto
shall be liable to any Person in
13
respect of any shares of Parent Common Stock or cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
SECTION 3.03 STOCK TRANSFER BOOKS. As of the Effective Time,
the stock transfer books of Company shall be closed, and there shall be no
further registration of transfers of shares of Company Common Stock or Company
Preferred Stock thereafter on the records of any such stock transfer books. In
the event of a transfer of ownership of shares of Company Common Stock or
Company Preferred Stock that is not registered in the stock transfer records of
Company at the Effective Time, a certificate or certificates representing the
number of whole shares of Parent Common Stock into which such shares of Company
Common Stock or Company Preferred Stock, as the case may be, shall have been
converted shall be issued to the transferee together with a cash payment in the
amount of dividends, if any, in accordance with Section 3.02(c) hereof, if the
certificate or certificates representing such shares of Company Common Stock or
Company Preferred Stock, as the case may be, is or are surrendered as provided
in Section 3.02(b) hereof, accompanied by all documents required to evidence and
effect such transfer and by evidence of payment of any applicable stock transfer
tax.
SECTION 3.04 NO FRACTIONAL SHARE CERTIFICATES. No scrip or
fractional share Parent Certificate shall be issued upon the surrender for
exchange of Company Certificates, but in lieu thereof, the number of shares of
Parent Common Stock to be distributed to each holder of Company Preferred Stock
or, if applicable, Company Common Stock shall be rounded up to the nearest whole
share.
SECTION 3.05 CERTAIN ADJUSTMENTS. If between the date of this
Agreement and the Effective Time, the outstanding shares of Parent Common Stock,
Company Common Stock or Company Preferred Stock shall be changed into a
different number of shares by reason of any reclassification, recapitalization,
split-up, combination or exchange of shares, or any dividend payable in stock or
other securities shall be declared thereon with a record date within such
period, then the Exchange Ratios shall be adjusted accordingly to provide to
Parent and the stockholders of Company the same economic effect as contemplated
by this Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend.
SECTION 3.06 DISSENTERS' RIGHTS. Any Dissenting Shares shall
not be converted into, or be exchangeable for, the right to receive shares of
Parent Common Stock but shall instead be converted into the right to receive
such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to Delaware Law unless and until such holder shall
have failed to perfect or shall have effectively withdrawn or lost his right of
appraisal and payment, as the case may be. Company shall give Parent prompt
notice of any Dissenting Shares (and shall also give Parent prompt notice of any
withdrawals of such demands for appraisal rights) and Parent shall have the
right to direct all negotiations and proceedings with respect to such demands.
Neither Company nor the Surviving Corporation shall, except with the prior
written consent of Parent, voluntarily make any payments with respect to, or
settle or offer to settle, any such demand for appraisal rights. If, after the
Effective Time, any Dissenting Shares shall lose their status as Dissenting
Shares, Parent shall issue and deliver, upon surrender by such stockholder of
certificate or certificates representing shares of Company
14
Capital Stock, the number of shares of Parent Common Stock to which such
stockholder would otherwise be entitled pursuant to this Article III.
SECTION 3.07 LOST, STOLEN OR DESTROYED CERTIFICATES. In the
event any Company Certificates shall have been lost, stolen or destroyed, Parent
shall issue in exchange for such lost, stolen or destroyed Company Certificates,
upon the making of an affidavit of that fact by the holder thereof, such shares
of Parent Common Stock as may be required pursuant to Section 3.01; PROVIDED,
HOWEVER, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed Company
Certificates to indemnify Parent against any claim that may be made against
Parent or the Surviving Corporation with respect to the Company Certificates
alleged to have been lost, stolen or destroyed.
SECTION 3.08 TAKING OF NECESSARY ACTION; FURTHER ACTION. If,
at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of Company, the officers and directors
of Company are fully authorized in the name of Company or otherwise to take, and
will use good faith efforts to take, all such lawful and necessary action, at
Parent's expense, so long as such action is not inconsistent with this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
Each of Company and Principal Stockholder, jointly and
severally, hereby represents and warrants to Parent and Merger Sub, subject to
the exceptions specifically disclosed in writing in the Company Disclosure
Schedule, all such exceptions to be referenced to a specific representation set
forth in this Article IV, that:
SECTION 4.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of Company and each Company Subsidiary has been duly
organized and is validly existing and in good standing (if such a concept exists
in the applicable jurisdiction of organization) under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Company
and each Company Subsidiary is duly qualified or licensed to do business, and is
in good standing (if such a concept exists in the applicable jurisdiction of
organization), in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that could not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
(b) SCHEDULE 4.01 of the Company Disclosure Schedule sets
forth a true and complete list of each Company Subsidiary, together with the
jurisdiction of incorporation or
15
organization of each Company Subsidiary and the percentage of each Company
Subsidiary's outstanding capital stock or other equity interests owned by
Company or another Company Subsidiary. Except as set forth in SCHEDULE 4.01 of
the Company Disclosure Schedule and except for Company's ownership of its
Subsidiaries, neither Company nor any Company Subsidiary owns, directly or
indirectly, an equity interest in any partnership or joint venture arrangement
or other business entity that is material to the business, assets, liabilities,
financial condition or results of operations of Company and the Company
Subsidiaries, taken as a whole, or that exceeds 10% of the equity of such
entity.
SECTION 4.02 CERTIFICATE OF INCORPORATION AND BYLAWS. The
copies of Company's Certificate of Incorporation and bylaws previously provided
to Parent by Company are true, complete and correct copies thereof. Such
Certificate of Incorporation and bylaws are in full force and effect. Company is
not in violation of any of the provisions of its Certificate of Incorporation or
bylaws.
SECTION 4.03 CAPITALIZATION. The authorized capital stock of
Company consists of 120,000,000 shares of Company Common Stock and 9,000,000
shares of Company Preferred Stock. As of the date hereof, before giving effect
to the Reverse Split, (i) 95,743,201 shares of Company Common Stock are issued
and outstanding, all of which are validly issued, fully paid and nonassessable,
(ii) no shares of Company Common Stock are held in the treasury of Company,
(iii) no shares of Company Common Stock are held by Company Subsidiaries and
(iv) 7,700,000 shares of Company Common Stock are reserved for future issuance
pursuant to Company Stock Options, Company Warrants and the conversion
provisions of the Company Preferred Stock. The name of each holder of a Company
Stock Option or Company Warrant and the number of shares of Company Common Stock
for which each Company Stock Option or Company Warrant is exercisable is set
forth in SCHEDULE 4.03 of the Company Disclosure Schedule. Except for shares of
Company Common Stock issuable pursuant to the Company Stock Plan and as
otherwise set forth in SCHEDULE 4.03 of the Company Disclosure Schedule, there
are no options, warrants, debt securities or other rights, agreements,
arrangements or commitments of any character to which Company or any Company
Subsidiary is a party or by which Company or any Company Subsidiary is bound
relating to the issued or unissued capital stock of Company or any Company
Subsidiary or obligating Company or any Company Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, Company or any Company
Subsidiary. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance prior to the Effective Time on the terms and conditions specified
in the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or Company
Preferred Stock or any capital stock of any Company Subsidiary. Each outstanding
share of capital stock of each Company Subsidiary is duly authorized, validly
issued, fully paid and nonassessable and each such share owned by Company or
another Company Subsidiary is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
Company's or such other Company Subsidiary's voting rights, charges and other
encumbrances of any nature whatsoever. There are no material outstanding
contractual obligations of Company or any Company Subsidiary to provide funds
to, or make any material investment (in the form of a loan, capital contribution
or otherwise) in, any
16
Company Subsidiary or any other Person. Except as set forth in SCHEDULE 4.03 of
the Company Disclosure Schedule, there are no agreements or trusts or other
agreements or understandings to which the Company or any Company Subsidiary is a
party with respect to the voting or disposition of the Company Common Stock or
the Company Preferred Stock, and the Company is not aware of any such agreements
among its stockholders. Except as set forth in SCHEDULE 4.03 of the Company
Disclosure Schedule, there are no agreements, undertakings or arrangements
granting any Person the right to require Company or any Company Subsidiary to
register or to allow such person to participate in any registration of any
securities of Company or any Company Subsidiary. The stockholders listed on
SCHEDULE 4.03 of the Company Disclosure Schedule constitute all of the
stockholders of Company.
SECTION 4.04 AUTHORITY RELATIVE TO THIS AGREEMENT. Company has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Company and the consummation by Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
and no other corporate proceedings on the part of Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than the filing and recordation of the Certificate of Merger as required
by Delaware Law). This Agreement has been duly executed and delivered by Company
and, assuming the due authorization, execution and delivery by the other parties
hereto, constitutes the legal, valid and binding obligation of Company,
enforceable against Company in accordance with its terms, except to the extent
that enforceability hereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by principles of equity regarding the availability of
remedies.
SECTION 4.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that the Certificate of Merger is filed and
recorded as required by Delaware Law, the execution and delivery of this
Agreement by Company do not, and the performance by Company of its obligations
hereunder, and the consummation of the Merger will not, (i) conflict with or
violate any provision of the Certificate of Incorporation or bylaws of Company
or any equivalent organizational documents of any Company Subsidiary, (ii)
assuming that all consents, approvals, authorizations and permits described in
Section 4.05(b) have been obtained or waived and all filings and notifications
described in Section 4.05(b) have been made, conflict with or violate any Law
applicable to Company or any Company Subsidiary or by which any property or
asset of Company or any Company Subsidiary is bound or affected or (iii)
assuming that all consents described in SCHEDULE 4.05 of the Company Disclosure
Schedule have been obtained or waived, result in any breach of or constitute a
default (or an event which with the giving of notice or lapse of time or both
could reasonably be expected to become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of Company
or any Company Subsidiary pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Company or any Company Subsidiary is a party
or by which Company or any
17
Company Subsidiary or any of their respective assets are bound (other than
advertising sales contracts constituting less than five percent of Company's
total revenue).
(b) The execution and delivery of this Agreement by Company do
not, and the performance by Company of its obligations hereunder and the
consummation of the Merger will not, require any consent, approval,
authorization or permit of, or filing by Company with or notification by Company
to, any Governmental Entity, except pursuant to applicable requirements of the
Securities Act, Blue Sky Laws, the premerger notification requirements of the
HSR Act, if applicable, and the filing and recordation of the Certificate of
Merger as required by Delaware Law.
SECTION 4.06 PERMITS; COMPLIANCE WITH LAWS. Company and the
Company Subsidiaries are in possession of all franchises, grants,
authorizations, licenses, establishment registrations, product listings,
permits, approvals and orders of any Governmental Entity necessary for Company
or any Company Subsidiary to own, lease and operate its properties and assets or
otherwise to carry on its business as it is now being conducted, other than
those, the failure of which to possess, could not reasonably be expected to
have, individually, or in the aggregate, a Company Material Adverse Effect
(collectively, the "COMPANY PERMITS"), and none of the Company Permits has been
suspended or cancelled nor is any such suspension or cancellation pending or, to
the Knowledge of Company, threatened in writing. Except as set forth on SCHEDULE
4.06 of the Company Disclosure Schedule, neither Company nor any Company
Subsidiary is in conflict with, or in default or violation of, (i) any Law
applicable to Company or any Company Subsidiary or by which any property or
asset of Company or any Company Subsidiary is bound or affected or (ii) any
Company Permits, except for such conflicts, defaults or violations that could
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. SCHEDULE 4.06 of the Company Disclosure Schedule sets
forth all actions, proceedings, investigations or surveys pending or, to the
Knowledge of Company, threatened in writing against Company or any Company
Subsidiary that could reasonably be expected to result in the suspension or
cancellation of any Company Permit. Since January 1, 2000, neither Company nor
any Company Subsidiary has received from any Governmental Entity any written
notification with respect to possible conflicts, defaults or violations of Laws.
SECTION 4.07 FINANCIAL STATEMENTS.
(a) SCHEDULE 4.07(A) of the Company Disclosure Schedule
includes copies of (i) the draft audited consolidated balance sheet of Company
at December 31, 2000, together with the related consolidated statements of
operations, stockholders' equity and cash flows for the year ended December 31,
2000 and the notes thereto, together with the draft opinion of Company's
auditors (the "COMPANY AUDITED FINANCIAL STATEMENTS"), and (ii) the unaudited
consolidated balance sheet of Company at September 30, 2001, together with the
related statements of operations, stockholders' equity and cash flows for the
nine-month period ended September 30, 2001 (the "COMPANY UNAUDITED FINANCIAL
STATEMENTS" and, together with the Company Audited Financial Statements, the
"COMPANY FINANCIAL STATEMENTS"). The Company Financial Statements were prepared
in accordance with U.S. GAAP (except, in the case of the Company Unaudited
Financial Statements, for the absence of footnotes and subject to normal
18
year end adjustments, which adjustments are not material) applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each presented fairly the consolidated financial position
of Company and the Company Subsidiaries as at the respective dates thereof, and
their consolidated results of operations, stockholders' equity and cash flows
for the respective periods indicated therein, except as otherwise noted therein
(subject, in the case of the Company Unaudited Financial Statements, to normal
and recurring immaterial year-end adjustments).
(b) Except as and to the extent set forth or reserved against
on the consolidated balance sheet of Company and the Company Subsidiaries as of
September 30, 2001, which is part of the Company Unaudited Financial Statements
(the "COMPANY BALANCE SHEET"), or as set forth on SCHEDULE 4.07(B) of the
Company Disclosure Schedule, none of Company or any Company Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet or in
notes thereto prepared in accordance with U.S. GAAP, except for (i) liabilities
or obligations which do not in the aggregate exceed $250,000 or (ii) liabilities
or obligations incurred in the ordinary course of business consistent with past
practice since September 30, 2001.
(c) None of Company or any Company Subsidiary has any
outstanding Indebtedness (other than trade payables incurred in the ordinary
course of business consistent with past practice).
SECTION 4.08 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as otherwise set forth on SCHEDULE 4.08 of the
Company Disclosure Schedule, since September 30, 2001 and prior to the date
hereof, there has not been (i) any event that could reasonably be expected to
prevent or materially delay the performance of Company's obligations pursuant to
this Agreement and the consummation of the Merger by Company, (ii) any material
change by Company or any Company Subsidiary in its accounting methods,
principles or practices, (iii) any declaration, setting aside or payment of any
dividend or distribution in respect of the shares of Company Common Stock or
Company Preferred Stock or any redemption, purchase or other acquisition by
Company of any of Company's securities, (iv) except in the ordinary course of
business consistent with past practice, any increase in the compensation or
benefits or establishment of any bonus, insurance, severance, change in control,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of Company
or any Company Subsidiary, (v) any issuance or sale by Company or any Company
Subsidiary of any stock, notes, bonds or other securities other than pursuant to
the exercise of outstanding securities, or entering into any agreement with
respect thereto, (vi) any amendment to Company's Certificate of Incorporation or
bylaws, (vii) other than in the ordinary course of business, any (x) purchase,
sale, assignment or transfer of any material assets by Company or any Company
Subsidiary, (y) mortgage, pledge or the institution of any lien, encumbrance or
charge on any material assets or properties, tangible or intangible, of Company
or any Company Subsidiary, except for liens for Taxes not yet delinquent and
such other liens, encumbrances or
19
charges which do not have, and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, or (z)
waiver by Company or any Company Subsidiary of any rights of material value or
cancellation or any material debts or claims, or (viii) any entering into by
Company or any Company Subsidiary of any transaction of a material nature other
than in the ordinary course of business, consistent with past practices.
(b) Except as otherwise set forth on SCHEDULE 4.08 of the
Company Disclosure Schedule, since September 30, 2001, Company and the Company
Subsidiaries have conducted their businesses only in the ordinary course
consistent with past practice and, since such date, there has not been (i) any
Company Material Adverse Effect, (ii) any incurrence by Company or any Company
Subsidiary of any damage, destruction or similar loss, whether or not covered by
insurance, materially affecting the business or properties of Company or any
Company Subsidiary, (iii) any incurrence by Company or any Company Subsidiary of
any material liability (absolute or contingent), except for current liabilities
and obligations incurred in the ordinary course of business, consistent with
past practice, or (iv) to the Knowledge of Company, any impairment, modification
or event, or notice of any pending or threatened impairment, modification or
event which could be reasonably expected to result in a loss, impairment, or
diminution in value on a going forward basis of the contractual and business
relationships of Company or any Company Subsidiary with any of its material
customers, material vendors or material suppliers, other than any impairment,
modification or event which could not reasonably be expected to result in a loss
of the relationship of Company or any Company Subsidiary with such customer,
vendor or supplier or a loss of a material amount of business or a material
change in profit margins with respect to such customer, vendor or supplier.
SECTION 4.09 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) With respect to each employee benefit fund, plan, program,
arrangement and contract (including, without limitation, any "employee benefit
plan", as defined in Section 3(3) of ERISA) maintained, sponsored or contributed
to or required to be contributed to by Company or any Company Subsidiary or
other trade or business (whether or not incorporated) treated as a single
employer with Company (a "COMPANY ERISA AFFILIATE") pursuant to Code Section
414(b), (c), (m) or (o) that covers or covered former or current employees of
Company or any of its Subsidiaries (or any beneficiary thereof), whether
domestic or foreign, or with respect to which Company or any Company ERISA
Affiliate could incur liability under Section 4069, 4212(c) or 4204 of ERISA or
Section 412 of the Code (the "COMPANY BENEFIT Plans"), other than with respect
to the Foreign Plans, Company has delivered or made available to Parent a true,
complete and correct copy of (i) such Company Benefit Plan and the most recent
summary plan description related to such Company Benefit Plan, if a summary plan
description is required therefor, (ii) each trust agreement or other funding
arrangement relating to such Company Benefit Plan, (iii) the most recent annual
report (Form 5500) filed with the IRS with respect to such Company Benefit Plan,
(iv) the most recent actuarial report or financial statement relating to such
Company Benefit Plan and (v) the most recent determination letter issued by the
IRS with respect to such Company Benefit Plan, if it is intended to be qualified
under Section 401(a) of the Code. None of Company, any Company Subsidiary or any
Company Affiliate has any express or implied commitment, whether legally
enforceable or not, to modify, change or
20
terminate any Company Benefit Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.
(b) Each Company Benefit Plan has been administered in all
material respects in accordance with its terms and all applicable laws,
including, without limitation, ERISA and the Code, and all contributions
required to be made under the terms of any of the Company Benefit Plans as of
the date of this Agreement have been timely made or have been reflected on the
most recent consolidated balance sheet prior to the date of this Agreement. With
respect to the Company Benefit Plans, no event has occurred and, to the
Knowledge of Company, there exists no condition or set of circumstances in
connection with which Company, any Company Subsidiary or any Company ERISA
Affiliate could reasonably be expected to be subject to any material liability
(other than for routine benefit liabilities) under the terms of such Company
Benefit Plans, ERISA, the Code or any other applicable Law.
(c) (i) Each Company Benefit Plan which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS as to its qualified status under the Code and
as to the exempt status under Section 501(a) of the Code of each trust
established thereunder or Company has applied or will apply to the IRS for such
a determination letter prior to the expiration of the requisite period under
applicable Treasury Regulations or IRS pronouncements in which to apply for such
determination letter and to make any amendments necessary to obtain a favorable
determination, and to the Knowledge of Company, no fact or event has occurred
since the date of such determination letter from the IRS to adversely affect the
qualified status of any such Company Benefit Plan or the exempt status of any
such trust; (ii) to the Knowledge of Company, there has been no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any Company Benefit Plan; (iii) each Company Benefit Plan
can be amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability, other than (A) liability for
ordinary administrative expenses typically incurred in a termination event or
(B) if the Company Benefit Plan is a pension benefit plan subject to Part 3 of
Title I of ERISA, liability for the accrued benefits as of the date of such
termination (if and to the extent required by ERISA) to the extent that either
there are sufficient assets set aside in a trust or insurance contract to
satisfy such liability or such liability is reflected on the most recent
consolidated balance sheet prior to the date of this Agreement. No suit,
administrative proceeding, action or other litigation has been brought, or to
the Knowledge of Company is threatened in writing, against or with respect to
any such Company Benefit Plan, including any audit or inquiry by the IRS, United
States Department of Labor or other applicable Governmental Entity (other than
routine benefits claims).
(d) No Company Benefit Plan is a multiemployer pension plan
(as defined in Section 3(37) of ERISA) or other pension plan subject to Title IV
of ERISA or Section 412 of the Code and none of Company, any Company Subsidiary
or any Company ERISA Affiliate has sponsored or contributed to or been required
to contribute to a multiemployer pension plan or other pension plan subject to
Title IV of ERISA. No material liability under Title IV of ERISA has been
incurred by Company, any Company Subsidiary or any Company ERISA Affiliate that
has not been satisfied in full, and no condition exists that presents a
reasonable risk to Company, any Company Subsidiary or any Company ERISA
Affiliate of incurring or being subject
21
(whether primarily, jointly or secondarily) to a material liability thereunder.
None of the assets of Company or any Company ERISA Affiliate is, or may
reasonably be expected to become, the subject of any lien arising under ERISA or
Section 412(n) of the Code.
(e) Company has listed on SCHEDULE 4.09(E) of the Company
Disclosure Schedule and has delivered to Parent true, complete and correct
copies of (i) all employment agreements with officers and all consulting
agreements of Company and each Company Subsidiary, (ii) all severance plans,
agreements, programs and policies of Company and each Company Subsidiary with or
relating to their respective employees, directors or consultants, and (iii) all
plans, programs, agreements and other arrangements of Company and each Company
Subsidiary with or relating to their respective employees, directors or
consultants which contain "change of control" provisions. Except as set forth in
SCHEDULE 4.09(E) of the Company Disclosure Schedule, which discloses the
Company's estimate of excess parachute payments based on assumptions described
therein, no payment or benefit which will be made by Company or any Company
Subsidiary under any Company Benefit Plan or other arrangement will constitute
an excess parachute payment under Code Section 280G(b)(1), and the consummation
of the transactions contemplated by this Agreement will not individually or in
conjunction with any other possible event (including termination of employment)
(i) entitle any current or former employee or other service provider of Company
or any Company Subsidiary to severance benefits or any other payment,
compensation or benefit (including forgiveness of indebtedness), except as
expressly provided by this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation or benefit due any such employee
or service provider.
(f) Except as described in SCHEDULE 4.09(F) of the Company
Disclosure Schedule, neither Company nor any Company Subsidiary is a party to
any collective bargaining or other labor union contract applicable to Persons
employed by Company or any Company Subsidiary and no collective bargaining
agreement is being negotiated by Company or any Company Subsidiary. There is no
labor dispute, strike or work stoppage against Company or any Company Subsidiary
pending or, to the Knowledge of Company, threatened in writing which may
interfere with the respective business activities of Company or any Company
Subsidiary. To the Knowledge of Company, none of Company, any Company
Subsidiary, or any of their respective representatives or employees has
committed any unfair labor practice in connection with the operation of the
respective businesses of Company or any Company Subsidiary, and there is no
charge or complaint against Company or any Company Subsidiary by the National
Labor Relations Board or any comparable Governmental Entity pending or
threatened in writing.
(g) Except as required by Law, no Company Benefit Plan
provides retiree or post-employment medical, disability or life insurance
benefits to any Person. To the Knowledge of Company, Company and the Company
ERISA Affiliates comply in all material respects with (i) the requirements of
the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
regulations (including proposed regulations) thereunder and (ii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996
and the regulations (including the proposed regulations) thereunder.
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(h) With respect to each Foreign Plan, the fair market value
of the assets of each funded Foreign Plan, the liability of each insurer for any
Foreign Plan funded through insurance or the book reserve established for any
Foreign Plan, together with any accrued contributions, is sufficient to procure
or provide for the accrued benefit obligations, as of the date of this
Agreement, with respect to all current and former participants in such Foreign
Plan according to actuarial assumptions and valuations most recently used to
determine employer contributions to such Foreign Plan and no transaction
contemplated by this Agreement shall cause such assets or insurance obligations
to be less than such benefit obligations. Each Foreign Plan which is intended to
offer tax-favored treatment to its participants under applicable laws has
received, to the extent applicable, a favorable ruling or letter from the
applicable Governmental Entity as to its tax-favored status and to the Knowledge
of Company, no fact or event has occurred to adversely affect the tax-favored
status of such Foreign Plan.
SECTION 4.10 CONTRACTS. Except for the contracts and
agreements described in SCHEDULE 4.10 of the Company Disclosure Schedule
(collectively, the "COMPANY MATERIAL CONTRACTS"), neither Company nor the
Company Subsidiaries is a party to or bound by any material contract (it being
agreed that to the extent a contract is not listed on SCHEDULE 4.10 because of
the dollar amount or other qualifications set forth in this Section 4.10, such
contract shall not be deemed to be a material contract), including without
limitation, the following contracts (which for purposes of this Agreement shall
be deemed Company Material Contracts):
(a) any distributor, sales, advertising, agency or
manufacturer's representative contract that constitutes five percent or more of
Company's gross revenues or that contains a revenue guarantee;
(b) any continuing contract for the purchase of materials,
supplies, equipment or services involving in the case of any such contract more
than $50,000 per annum;
(c) any contract that expires or may be renewed at the option
of any Person other than Company so as to expire more than one (1) year after
the date of this Agreement;
(d) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any leasing transaction of the type
required to be capitalized in accordance with U.S. GAAP;
(e) any contract for capital expenditures in excess of $50,000
in the aggregate;
(f) any contract limiting the freedom of Company or any
Company Subsidiary to engage in any line of business or to compete with any
other Person, or any confidentiality, secrecy or non-disclosure contract;
(g) any contract pursuant to which Company or any Company
Subsidiary is a lessor or lessee of any machinery, equipment, motor vehicles,
office furniture, fixtures or other personal property involving in the case of
any such contract more than $50,000 per annum;
23
(h) any contract with any Person with whom Company or any
Company Subsidiary does not deal at arm's length within the meaning of the Code;
(i) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment by Company or any
Company Subsidiary with respect to, the obligations, liabilities (whether
accrued, absolute, contingent or otherwise) or indebtedness of any other Person;
or
(j) any agreement relating to the acquisition or disposition
by Company or any Company Subsidiary of a business, line of business or material
amount of assets.
Company and/or each Company Subsidiary, as applicable, has
performed all of the material obligations required to be performed by it and is
entitled to all benefits under, and to the Knowledge of Company, is not alleged
to be in default in respect of, any Company Material Contract. Each of the
Company Material Contracts is in full force and effect, unamended, and there
exists no material default or event of default or event, occurrence, condition
or act, with respect to Company or any Company Subsidiary or to the Knowledge of
Company with respect to the other contracting party, which, with the giving of
notice, the lapse of the time or the happening of any other event or conditions,
would become a material default or event of default under any Company Material
Contract. True, correct and complete copies of all Company Material Contracts
have been delivered or made available to Parent.
SECTION 4.11 LITIGATION. Except as set forth on SCHEDULE 4.11
of the Company Disclosure Schedule, there is no suit, claim, action, proceeding
or investigation pending or, to the Knowledge of Company, threatened in writing
against Company or any Company Subsidiary that could reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect or
materially interfere with Company's ability to consummate the transactions
contemplated herein and, to the Knowledge of Company, there are no existing
facts or circumstances that could reasonably be expected to result in such a
suit, claim, actions, proceeding or investigation. To the Knowledge of Company,
there are no facts or circumstances that could reasonably be expected to result
in the denial of insurance coverage under policies issued to Company and Company
Subsidiaries in respect of such suits, claims, actions, proceedings and
investigations, except in any case as could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Neither
Company nor any Company Subsidiary is subject to any outstanding order, writ,
injunction or decree which could reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect or materially interfere with
Company's ability to consummate the transactions contemplated herein.
SECTION 4.12 ENVIRONMENTAL MATTERS. Except as could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, (a) Company and the Company Subsidiaries are in
compliance with all applicable Environmental Laws and all Company Permits
required by Environmental Laws, (b) all past noncompliance of Company or any
Company Subsidiary with Environmental Laws or Environmental Permits has been
resolved without any pending, ongoing or future obligation, cost or liability,
and (c) neither Company nor any Company Subsidiary has released, nor to the
Knowledge of Company has any
24
other Person released, a Hazardous Material at, or transported a Hazardous
Material to or from, any real property currently or formerly owned, leased or
occupied by Company or any Company Subsidiary, in violation of, or under
circumstances that could otherwise result in liability under, any Environmental
Law.
SECTION 4.13 INTELLECTUAL PROPERTY.
(a) SCHEDULE 4.13(A) of the Company Disclosure Schedule
contains an accurate and complete list of (i) all patents and patent
applications, trademarks, service marks, Internet domain names and applications
therefor, and copyrights and copyright applications, which are part of the
Company Intellectual Property and which have been issued or registered by, or
filed with, any United States, foreign or international governmental or other
body having authority to issue, register or review the same, and (ii) all
material software licenses and all other licenses, sublicenses and other
agreements to which Company or any Company Subsidiary is a party and pursuant to
which any third party is authorized by Company or any Company Subsidiary to use
any Company Intellectual Property or pursuant to which Company or any Company
Subsidiary is granted rights under any third party Intellectual Property, other
than licenses to use "off the shelf" software.
(b) Except as provided in SCHEDULE 4.13(B) of the Company
Disclosure Schedule, the Company Intellectual Property is: (i) owned solely and
exclusively by Company or a Company Subsidiary, free and clear of any and all
mortgages, pledges, liens, security interests, conditional sale agreements or
encumbrances of any kind or (ii) rightfully used or otherwise enjoyed by Company
or the Company Subsidiaries pursuant to one or more license agreements, each of
which license agreements is, to the Knowledge of Company, valid and enforceable.
(c) Except as set forth on SCHEDULE 4.13(C) of the Company
Disclosure Schedule, no action is currently pending which asserts that Company
or any Company Subsidiary is, and to the Knowledge of Company, neither Company
nor any Company Subsidiary is, infringing on, misappropriating or diluting any
Intellectual Property of any Person. Except as set forth on SCHEDULE 4.13(C) of
the Company Disclosure Schedule, neither Company nor any Company Subsidiary has
received notice from any Person within the past twelve (12) months asserting
that Company or any Company Subsidiary is infringing on, misappropriating or
diluting any Intellectual Property of any such Person. To the Knowledge of
Company, no action is currently pending which asserts that any Person is
infringing on any Company Intellectual Property, and neither Company nor any
Company Subsidiary has asserted any such claims against any Person within the
past twelve (12) months.
(d) Except as set forth on SCHEDULE 4.13(D) of the Company
Disclosure Schedule, all patents and patent applications, trademarks, service
marks, Internet domain names and applications therefor, and copyrights and
copyright applications included in the Company Intellectual Property that are
owned by Company are being and have been duly maintained, are in full force and
effect and have not been cancelled, expired or abandoned.
(e) Except as set forth on SCHEDULE 4.13(E) of the Company
Disclosure Schedule, Company has secured valid written assignments from all
consultants and employees who made
25
material contributions to the creation or development of any Company
Intellectual Property of the rights to such contributions that Company does not
already own by operation of law, and Company has caused such consultants and
employees to comply with the minimum requirements for inventorship of patents
and authorship of copyrights applicable under the federal laws of the United
States.
(f) Company has taken all reasonably necessary and appropriate
steps to protect and preserve the confidentiality of all Company Intellectual
Property not otherwise protected by patents, patent applications or copyright
("COMPANY CONFIDENTIAL INFORMATION"). All use, disclosure or appropriation of
Company Confidential Information owned by Company by or to a third party has
been pursuant to the terms of a written agreement between Company and such third
party. All use, disclosure or appropriation by Company of Company Confidential
Information not owned by Company has been pursuant to the terms of a written
agreement between Company and the owner of such Company Confidential
Information, or is otherwise lawful.
SECTION 4.14 TAXES.
(a) Company and each of the Company Subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which
Company or any Company Subsidiary is or has been a member, have properly
completed and timely filed all Tax Returns required to be filed by them (or have
timely filed requests for extensions of the filing dates and have met all
subsequent filing deadlines with respect to such proceedings) and have paid all
Taxes shown thereon to be due. All Tax Returns filed by Company and each of the
Company Subsidiaries are true, correct and complete in all material respects
(without limitation, indications of asset basis, asset class, and amount (if
any) of net operating losses shall be deemed not to be "material"). Neither
Company nor any Company Subsidiary has any liability for unpaid Taxes (whether
or not shown to be due on any Tax Return) which has not been accrued for or
reserved on the Company Balance Sheet in accordance with U.S. GAAP, whether
asserted or unasserted, contingent or otherwise, other than liabilities for
unpaid Taxes that have accrued since September 30, 2001 in connection with the
operation of the business of Company and each Company Subsidiary consistent with
past practice.
(b) Except as set forth on SCHEDULE 4.14 of the Company
Disclosure Schedule, there is (i) no material claim for Taxes that is a lien
against the property of Company or any Company Subsidiary or is being asserted
against Company or any Company Subsidiary other than liens for Taxes not yet due
and payable, (ii) no audit of any Tax Return of Company or any Company
Subsidiary being conducted by a Taxing Authority or, to the Knowledge of
Company, is pending or threatened, (iii) no extension of the statute of
limitations on the assessment of any Taxes granted by Company or any Company
Subsidiary and currently in effect, and (iv) no agreement, contract or
arrangement to which Company or any Company Subsidiary is a party that may
result in the payment of any amount that would not be deductible by reason of
Section 280G, Section 404 or Section 162(m) of the Code. There is no contract,
agreement, plan or arrangement to which Company or any Company Subsidiary is a
party or by which it is bound to compensate any individual for excise taxes paid
pursuant to Section 4999 of the Code.
26
(c) Company and the Company Subsidiaries have not been and
will not be required to include any material adjustment in taxable income for
any Tax period (or portion thereof) pursuant to Section 481 of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger.
(d) Neither Company nor any Company Subsidiary has filed or
will file any consent to have the provisions of Section 341(f)(2) of the Code
(or comparable provisions of any state Tax laws) apply to Company or any Company
Subsidiary.
(e) Neither Company nor any Company Subsidiary is a party to
any Tax sharing, Tax indemnity or Tax allocation agreement or arrangement nor
does Company or any Company Subsidiary have any liability or potential liability
to another party under any such agreement.
(f) Neither Company nor any Company Subsidiary has filed any
disclosures under Section 6662 of the Code or comparable provisions of state,
local or foreign law to prevent the imposition of penalties with respect to any
Tax reporting position taken on any Tax Return.
(g) Neither Company nor any Company Subsidiary has ever been a
member of a consolidated, combined or unitary group of which Principal
Stockholder was not the ultimate parent corporation or is liable for any Tax
imposed on any other Person, except as the result of the application of Treasury
Regulation Section 1.1502-6 (or any comparable provision of state, local or
foreign law) to the affiliated group of which Principal Stockholder is the
common parent..
(h) Company and each Company Subsidiary has in its possession
receipts for any Taxes paid to foreign Tax authorities. Neither Company nor any
Company Subsidiary has ever been a "personal holding company" within the meaning
of Section 542 of the Code or a "United Sates real property holding corporation"
within the meaning of Section 897 of the Code.
(i) Neither Company nor any Company Subsidiary has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355 of the
Code (x) in the two years prior to the date of this Agreement or (y) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(j) Company and each Company Subsidiary are in full compliance
with all terms and conditions of any Tax exemption, Tax holiday or other Tax
reduction agreement or order of a territorial or foreign government and the
consummation of the Merger will not have any adverse effect on the continued
validity and effectiveness of any such Tax exemption, Tax holiday or other Tax
reduction agreement or order.
(k) No claim has ever been made by any Taxing Authority in a
jurisdiction where Company or any Company Subsidiary does not file Tax Returns
that Company or any Company Subsidiary is or may be subject to taxation by that
jurisdiction.
27
(l) Company and each Company Subsidiary have withheld and paid
over all Taxes required to have been withheld and paid over and complied with
all material information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(m) No items of income attributable to transactions occurring
on or before the close of the last preceding taxable year of Company or any
Company Subsidiary will be required to be included in taxable income by Company
or any Company Subsidiary in a subsequent taxable year by reason of Company or
any Company Subsidiary reporting income on the installment sales method of
accounting, the cash method of accounting, the completed contract method of
accounting or the percentage of completion capitalized cost method of
accounting.
(n) True and complete copies of all Tax Returns filed by
Company and each Company Subsidiary for each of the taxable years ended on or
after December 31, 1997 have been delivered or made available to Parent.
SECTION 4.15 INSURANCE. Company and each Company Subsidiary is
presently insured against such risks as companies engaged in a similar business
would, in accordance with good business practice, customarily be insured. The
policies of fire, theft, liability and other insurance maintained with respect
to the assets or businesses of Company and the Company Subsidiaries provide, in
the good faith judgment of the Company's management, reasonably adequate
coverage against loss. Company has heretofore furnished to Parent a complete and
correct list of all insurance policies maintained by Company or the Company
Subsidiaries as of the date hereof, and has made available to Parent complete
and correct copies of all such policies, together with all riders and amendments
thereto. All such policies are in full force and effect and all premiums due
thereon have been paid to the date hereof. Company and the Company Subsidiaries
have complied in all material respects with the terms of such policies.
SECTION 4.16 PROPERTIES. Except as set forth on SCHEDULE 4.16
of the Company Disclosure Schedule, Company and the Company Subsidiaries have
good and valid title, free and clear of all Encumbrances, except for Permitted
Encumbrances, to all their material properties and assets, whether tangible or
intangible, real, personal or mixed, reflected in the Company Unaudited
Financial Statements as being owned by Company and the Company Subsidiaries as
of the date thereof, other than (i) any properties or assets that have been sold
or otherwise disposed of in the ordinary course of business since the date of
such financial statements, (ii) liens disclosed in the notes to such financial
statements and (iii) liens arising in the ordinary course of business after the
date of such financial statements. All buildings, and all fixtures, equipment
and other property and assets that are material to Company's business on a
consolidated basis, held under leases or sub-leases by Company or any Company
Subsidiary are held under valid instruments enforceable in accordance with their
respective terms, subject to applicable laws of bankruptcy, insolvency or
similar laws relating to creditors' rights generally and to general principles
of equity (whether applied in a proceeding in law or equity). Substantially all
of Company's and the Company Subsidiaries' equipment in regular use has been
reasonably maintained and is in serviceable condition, reasonable wear and tear
excepted.
28
SECTION 4.17 BROKERS. Except as set forth on SCHEDULE 4.17 of
the Company Disclosure Schedule, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Company.
SECTION 4.18 BUSINESS ACTIVITY RESTRICTION. Except as set
forth on SCHEDULE 4.18 of the Company Disclosure Schedule, neither Company nor
any Company Subsidiary has entered into any agreement under which Company or any
Company Subsidiary is restricted from selling, licensing or otherwise
distributing any of its technology or products to, or providing services to,
customers or potential customers or any class of customers, in any geographic
area, during any period of time or in any segment of the market or line of
business.
SECTION 4.19 AFFILIATE TRANSACTIONS. Except as set forth on
SCHEDULE 4.19 of the Company Disclosure Schedule, neither Company nor any
Company Subsidiary is a party to any agreement with or has any interest in any
property (whether real or personal, tangible or intangible) of any of its
affiliates, stockholders, employees, officers, directors or any entities
affiliated with any such persons or any family members of any such persons, nor
are there any agreements or understandings for the provision, directly or
indirectly, of services by and between Company and any Company Subsidiary, on
the one hand, and any of its affiliates, stockholders, employees, associates,
officers, directors or any entities affiliated with any such persons or any
family members of any such persons, on the other hand (other than inter-company
arrangements between Company and Company Subsidiaries and among Company
Subsidiaries and services provided in their capacity as employees, officers and
directors).
SECTION 4.20 CERTAIN BUSINESS PRACTICES. Neither Company nor
any Company Subsidiary nor any directors, officers, agents or employees of
Company or any Company Subsidiary (in their capacities as such) has (a) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity or (b) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
SECTION 4.21 ACCREDITED INVESTORS. To the Knowledge of
Company, following the filing of the Charter Amendment, no more than 35 of the
Rolex Stockholders are not "accredited investors" as that term is defined in
Rule 501 promulgated under the Securities Act.
SECTION 4.22 CASH POSITIONS. As of the Closing, Company shall
have cash on hand in an amount equal to or exceeding $1,500,000.
ARTICLE IVA
REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDER
Principal Stockholder hereby represents and warrants to Parent
and Merger Sub, with respect to itself and the shares of Company set forth
opposite its name on SCHEDULE 4A.03,
29
subject to the exemptions specifically disclosed in writing in the Principal
Stockholder Disclosure Schedule, all such exceptions to be referenced to a
specific representation set forth in this Article IVA, that:
SECTION 4A.01 ORGANIZATION AND QUALIFICATION. Principal
Stockholder has been duly organized and is validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, as the
case may be, and has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted.
SECTION 4A.02 CERTIFICATE OF INCORPORATION AND BYLAWS.
Principal Stockholder is not in violation of any of the provisions of its
Certificate of Incorporation or bylaws.
SECTION 4A.03 TITLE TO SHARES. Principal Stockholder
represents that it owns the number and class and series of shares of Company set
forth opposite its name on SCHEDULE 4A.03 of the Principal Stockholder
Disclosure Schedule, free and clear of all claims, liens, security interests,
pledges, charges, encumbrances, stockholders' agreements and voting trusts.
SECTION 4A.04 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Principal Stockholder has all necessary corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Principal Stockholder and the consummation by
Principal Stockholder of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Principal Stockholder are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Principal Stockholder and, assuming the
due authorization, execution and delivery by the other parties hereto,
constitutes the legal, valid and binding obligation of Principal Stockholder,
enforceable against Principal Stockholder in accordance with its terms, except
to the extent that enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity regarding
the availability of remedies.
(b) Principal Stockholder has all necessary corporate power
and authority to execute and deliver the Lock-Up Agreement and to perform its
obligations thereunder. The execution and delivery of the Lock-Up Agreement by
Principal Stockholder have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Principal
Stockholder are necessary to authorize the Lock-Up Agreement. The Lock-Up
Agreement has been duly executed and delivered by Principal Stockholder and,
assuming the due authorization, execution and delivery by Timex, constitutes the
legal, valid and binding obligation of Principal Stockholder, enforceable
against Principal Stockholder in accordance with its terms, except to the extent
that enforceability hereof may be limited by applicable
30
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity regarding
the availability of remedies.
SECTION 4A.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
Assuming that the Certificate of Merger is filed and recorded as required by
Delaware Law, the execution and delivery of this Agreement and the Lock-Up
Agreement by Principal Stockholder do not, and the performance by Principal
Stockholder of its obligations hereunder and thereunder, and the consummation of
the Merger will not, (i) conflict with or violate any provision of the
Certificate of Incorporation or bylaws of Principal Stockholder, (ii) conflict
with or violate any Law applicable to Principal Stockholder or by which any
property or asset of Principal Stockholder is bound or affected or (iii) result
in any breach of or constitute a default (or an event which with the giving of
notice or lapse of time or both could reasonably be expected to become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Principal Stockholder pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Principal
Stockholder is a party or by which Principal Stockholder or any of its assets
are bound.
SECTION 4A.06 ACQUISITION OF STOCK FOR INVESTMENT. Principal
Stockholder acknowledges that the shares of Parent Common Stock that it receives
hereunder may not be sold, transferred, offered for sale, pledged, hypothecated
or otherwise disposed of by him, her or it without registration under the
Securities Act, except pursuant to an exemption from such registration under the
Securities Act, and in compliance with applicable Blue Sky Laws. Principal
Stockholder represents that it has no current plan or current intention to
dispose of its Parent Common Stock after the Merger.
SECTION 4A.07 ACCREDITED INVESTOR. Except as set forth in
SCHEDULE 4A.07 of the Principal Stockholder Disclosure Schedule, Principal
Stockholder represents that it is an "accredited investor" as that term is
defined in Rule 501 promulgated under the Securities Act.
SECTION 4A.08 DISCLOSURE OF INFORMATION. Principal Stockholder
acknowledges that:
(a) it has had an opportunity to ask questions of and to
receive answers from the officers of Parent with respect to the business,
results of operations, financial conditions and prospects of Parent and has read
the Confidential Memorandum;
(b) it has made its own independent examination,
investigation, analysis and evaluation of Parent, including but not limited to
an evaluation of the value of the Parent Common Stock to be received by it; and
(c) it has not, in connection with this Agreement and the
transactions contemplated hereby, relied in any respect on any information,
analyses or materials (other than the representations and warranties set forth
herein and in the Confidential Memorandum) provided to it by Parent or any
affiliate of Parent or any officer or representative thereof.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Each of Parent and Merger Sub hereby represents and warrants
to Company and to Principal Stockholder, subject to the exceptions specifically
disclosed in the Parent Disclosure Schedule, all such exceptions to be
referenced to a specific representation set forth in this Article V, that:
SECTION 5.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Except as set forth in SCHEDULE 5.01 of the Parent Disclosure
Schedule, Parent and each Parent Subsidiary, including Merger Sub, has been duly
organized and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Parent and
each Parent Subsidiary, including Merger Sub, is duly qualified or licensed to
do business, and is in good standing (if such a concept exists in the applicable
jurisdiction), in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that could not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect. Merger Sub shall be the
wholly owned subsidiary of Neversleepagain Holding Corp., a Delaware
corporation, which in turn shall be the wholly owned Subsidiary of Neversleep
Holding Corp., a Delaware corporation, which shall be the wholly owned
Subsidiary of Parent (the foregoing including Merger Sub but excluding Parent
being the "CHAIN SUBSIDIARIES").
SECTION 5.02 CERTIFICATE OF INCORPORATION AND BYLAWS. The
copies of each of Parent's and Merger Sub's Certificates of Incorporation and
bylaws previously provided to Company by Parent are true, complete and correct
copies thereof. Such Certificates of Incorporation and bylaws are in full force
and effect. Parent is not in violation of any of the provisions of its
Certificate of Incorporation or bylaws.
SECTION 5.03 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of
140,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, par value $.01 per share. As of October 23, 2001, (i) 41,290,794 shares
of Parent Common Stock were issued and outstanding, all of which are validly
issued, fully paid and nonassessable, (ii) no shares of Parent Common Stock were
held in the treasury of Parent, (iii) no shares of Parent Common Stock were held
by the Parent Subsidiaries and (iv) 11,236,173 shares of Parent Common Stock
were reserved for future issuance pursuant to outstanding options ("PARENT STOCK
OPTIONS") and Parent Warrants and Parent Restricted Stock. Between October 23,
2001 and the date of this Agreement, Parent has not issued any shares of Parent
Common Stock, Parent Warrants, options or other securities, other than Parent
Stock Options to new employees and shares of Parent Common Stock issued
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upon exercise of Parent Stock Options which were outstanding as of October 23,
2001. Except for shares of Parent Common Stock issuable pursuant to the Parent
Stock Plan and as otherwise set forth in SCHEDULE 5.03 of the Parent Disclosure
Schedule and 76,500 in Parent Restricted Stock, there are no options, warrants
or other rights, agreements, arrangements or commitments of any character to
which Parent is a party or by which Parent is bound relating to the issued or
unissued capital stock of Parent or any Parent Subsidiary or obligating Parent
or any Parent Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, Parent or any Parent Subsidiary. All shares of Parent
Common Stock subject to issuance as aforesaid, upon issuance prior to the
Effective Time on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. There are no outstanding contractual obligations of Parent or
any Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of
Parent Common Stock or any capital stock of any Parent Subsidiary. Each
outstanding share of capital stock of each Parent Subsidiary is duly authorized,
validly issued, fully paid and nonassessable and each such share owned by Parent
or another Parent Subsidiary is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
Parent's or such other Parent Subsidiary's voting rights, charges and other
encumbrances of any nature whatsoever. There are no material outstanding
contractual obligations of Parent or any Parent Subsidiary to provide funds to,
or make any material investment (in the form of a loan, capital contribution or
otherwise) in, any Parent Subsidiary or any other Person. Except as set forth in
SCHEDULE 5.03 of the Parent Disclosure Schedule, there are no agreements or
trusts or other agreements or understandings to which the Parent or any Parent
Subsidiary is a party with respect to the voting or disposition of the Parent
Common Stock, and Parent is not aware of any such agreements among its
stockholders. Except as set forth in SCHEDULE 5.03 of the Parent Disclosure
Schedule, there are no agreements, undertakings or arrangements granting any
Person the right to require Parent or any Parent Subsidiary to register or to
allow such person to participate in any registration of any securities of Parent
or any Parent Subsidiary.
(b) All of the shares of Parent Common Stock to be issued (i)
in connection with the Merger, when issued in accordance with this Agreement,
and (ii) upon the conversion of any Company Stock Option or Company Warrant into
an option or warrant, as the case may be, to purchase shares of Parent Common
Stock in accordance with Section 3.05, when issued upon exercise thereof
following the Effective Time, will be validly issued, fully paid and
nonassessable and will not be subject to preemptive rights or similar
contractual rights granted by Parent.
SECTION 5.04 AUTHORITY RELATIVE TO THIS AGREEMENT. (a) Each of
Parent and Merger Sub has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Parent and Merger Sub and the consummation by Parent
and Merger Sub of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than the
filing and recordation of the Certificate of Merger as required by Delaware
Law). This Agreement has been duly executed and delivered by each of Parent and
Merger Sub and, assuming the due
33
authorization, execution and delivery hereof by Company, this Agreement
constitutes a legal, valid and binding obligation of Parent and/or Merger Sub,
as the case may be, enforceable against Parent and Merger Sub in accordance with
its terms, except to the extent that enforceability hereof may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by principles of
equity regarding the availability of remedies.
(b) Parent has all necessary corporate power and authority to
execute and deliver the First Note, the Second Note and the note described in
Section 7.01(b) hereof (the "THIRD NOTE"), to perform its obligations thereunder
and to consummate the transactions contemplated thereby. The execution and
delivery of the First Note, the Second Note and the Third Note by Parent and the
consummation by Parent of the transactions contemplated thereby have been duly
and validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of Parent are necessary to authorize the First Note or
to consummate the transactions contemplated thereby. The First Note has been
duly executed and delivered by Parent and constitutes, and, when issued, the
Second Note and the Third Note each will constitute, the legal, valid and
binding obligation of Parent, enforceable against Parent in accordance with its
terms, except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by principles of
equity regarding the availability of remedies.
SECTION 5.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that the Certificate of Merger is filed and
recorded as required by Delaware Law, the execution and delivery of this
Agreement by Parent and Merger Sub do not, and the performance by Parent and
Merger Sub of their obligations hereunder and the consummation of the Merger
will not, (i) conflict with or violate any provision of the Certificate of
Incorporation or bylaws of Parent or any equivalent organizational documents of
any Parent Subsidiary, (ii) assuming that all consents, approvals,
authorizations and permits described in Section 5.05(b) have been obtained or
waived and all filings and notifications described in Section 5.05(b) have been
made, conflict with or violate any Law applicable to Parent or any Parent
Subsidiary or by which any property or asset of Parent or any Parent Subsidiary
is bound or affected or (iii) assuming that all consents described in SCHEDULE
5.05 of the Parent Disclosure Schedule have been obtained or waived, result in
any breach of or constitute a default (or an event which with the giving of
notice or lapse of time or both could reasonably be expected to become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Parent or any Parent Subsidiary pursuant
to, any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
any Parent Subsidiary is a party or by which Parent or any Parent Subsidiary or
any of their respective assets are bound.
(b) The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the performance by Parent and Merger Sub of their
obligations hereunder and the consummation of the Merger will not, require any
consent, approval, authorization or permit of, or filing by Parent with or
notification by Parent to, any Governmental Entity, except pursuant to
34
applicable requirements of the Exchange Act, the Securities Act, Blue Sky Laws,
the premerger notification requirements of the HSR Act, if any, and the filing
and recordation of the Certificate of Merger as required by Delaware Law. In
addition, Parent will be required to make certain filings with the NNM.
SECTION 5.06 PERMITS; COMPLIANCE WITH LAWS. Parent and the
Parent Subsidiaries are in possession of all franchises, grants, authorizations,
licenses, establishment registrations, product listings, permits, approvals and
orders of any Governmental Entity necessary for Parent or any Parent Subsidiary
to own, lease and operate its properties and assets or otherwise to carry on its
business as it is now being conducted, other than those, the failure of which to
possess, could not reasonably be expected to have, individually, or in the
aggregate, a Parent Material Adverse Effect (collectively, the "PARENT
PERMITS"), and none of the Parent Permits has been suspended or cancelled nor is
any such suspension or cancellation pending or, to the Knowledge of Parent,
threatened in writing. Neither Parent nor any Parent Subsidiary is in conflict
with, or in default or violation of, (i) any Law applicable to Parent or any
Parent Subsidiary or by which any property or asset of Parent or any Parent
Subsidiary is bound or affected or (ii) any Parent Permits, except for such
conflicts, defaults or violations that could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. SCHEDULE
5.06 of the Parent Disclosure Schedule sets forth all actions, proceedings,
investigations or surveys pending or, to the Knowledge of Parent, threatened in
writing against Parent or any Parent Subsidiary that could reasonably be
expected to result in the suspension or cancellation of any material Parent
Permit. Since January 1, 2000, neither Parent nor any Parent Subsidiary has
received from any Governmental Entity any written notification with respect to
possible conflicts, defaults or violations of Laws.
SECTION 5.07 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has filed all forms, reports, statements and
documents required to be filed by it (A) with the SEC and the NNM since August
13, 1998 (collectively, together with any such forms, reports, statements and
documents Parent may file subsequent to the date hereof until the Closing, the
"PARENT REPORTS") and (B) with any other Governmental Entities. Each Parent
Report filed prior to the date hereof (i) was prepared in accordance with the
requirements of the Securities Act, the Exchange Act or the NNM, as the case may
be, and (ii) did not at the time it was filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each form, report,
statement and document referred to in clause (B) of this Section 5.07(a) was
prepared in all material respects in accordance with the requirements of
applicable Law. No Parent Subsidiary is subject to the periodic reporting
requirements of the Exchange Act or required to file any form, report or other
document with the SEC, the NNM, any other stock exchange or any other comparable
Governmental Entity.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Parent Reports was prepared in
accordance with U.S. GAAP (except, in the case of unaudited financial
statements, for the absence of footnotes and subject to normal year end
adjustments, which adjustments are not material) applied on a consistent basis
35
throughout the periods indicated (except as may be indicated in the notes
thereto) and each presented fairly the consolidated financial position of Parent
and the Parent Subsidiaries as at the respective dates thereof, and their
consolidated results of operations, stockholders' equity and cash flows for the
respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring
immaterial year-end adjustments).
(c) Except as and to the extent set forth or reserved against
on the consolidated balance sheet of Parent and the Parent Subsidiaries as of
June 30, 2001 as reported in Parent's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001 (the "PARENT BALANCE SHEET"), none of Parent or any
Parent Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet or in notes thereto prepared in accordance with
U.S. GAAP, except for (i) liabilities or obligations which do not in the
aggregate exceed $250,000 or (ii) liabilities or obligations incurred in the
ordinary course of business consistent with past practice since June 30, 2001.
SECTION 5.08 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as otherwise set forth on SCHEDULE 5.08 of the Parent
Disclosure Schedule, since June 30, 2001 and prior to the date hereof, there has
not been (i) any event that could reasonably be expected to prevent or
materially delay the performance of Parent's obligations pursuant to this
Agreement and the consummation of the Merger by Parent, (ii) any material change
by Parent or any Parent Subsidiary in its accounting methods, principles or
practices, (iii) any declaration, setting aside or payment of any dividend or
distribution in respect of the Parent Common Stock or any redemption, purchase
or other acquisition by Parent of any of Parent's securities, (iv) except in the
ordinary course of business consistent with past practice, any increase in the
compensation or benefits or establishment of any bonus, insurance, severance,
change in control, deferred compensation, pension, retirement, profit sharing,
stock option (including, without limitation, the granting of stock options,
stock appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of Parent or
any Parent Subsidiary, (v) any issuance or sale by Parent or any Parent
Subsidiary of any stock, notes, bonds or other securities other than pursuant to
the exercise of outstanding securities, or entering into any agreement with
respect thereto, (vi) any amendment to Parent's Certificate of Incorporation or
bylaws, (vii) other than in the ordinary course of business, any (x) purchase,
sale, assignment or transfer of any material assets by Parent or any Parent
Subsidiary, (y) mortgage, pledge or the institution of any lien, encumbrance or
charge on any material assets or properties, tangible or intangible, of Parent
or any Parent Subsidiary, except for liens for Taxes not yet delinquent and such
other liens, encumbrances or charges which do not have, and could not reasonably
be expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, or (z) waiver by Parent or any Parent Subsidiary of any rights of
material value or cancellation or any material debts or claims, or (viii) any
entering into by Parent or any Parent Subsidiary of any transaction of a
material nature other than in the ordinary course of business, consistent with
past practices.
36
SECTION 5.09 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) With respect to each employee benefit fund, plan, program,
arrangement and contract (including, without limitation, any "employee benefit
plan", as defined in Section 3(3) of ERISA) maintained, sponsored or contributed
to or required to be contributed to by Parent or any Parent Subsidiary or other
trade or business (whether or not incorporated) treated as a single employer
with Parent (a "PARENT ERISA AFFILIATE") pursuant to Code Section 414(b), (c),
(m) or (o), or with respect to which Parent or any Parent ERISA Affiliate could
incur liability under Section 4069, 4212(c) or 4204 of ERISA or Section 412 of
the Code (the "PARENT BENEFIT PLANS"), Parent has delivered or made available to
Company a true, complete and correct copy of (i) such Parent Benefit Plan and
the most recent summary plan description related to such Parent Benefit Plan, if
a summary plan description is required therefor, (ii) each trust agreement or
other funding arrangement relating to such Parent Benefit Plan, (iii) the most
recent annual report (Form 5500) filed with the IRS with respect to such Parent
Benefit Plan, (iv) the most recent actuarial report or financial statement
relating to such Parent Benefit Plan and (v) the most recent determination
letter issued by the IRS with respect to such Parent Benefit Plan, if it is
intended to be qualified under Section 401(a) of the Code. None of Parent, any
Parent Subsidiary or any Parent Affiliate has any express or implied commitment,
whether legally enforceable or not, to modify, change or terminate any Parent
Benefit Plan, other than with respect to a modification, change or termination
required by ERISA or the Code.
(b) Each Parent Benefit Plan has been administered in all
material respects in accordance with its terms and all applicable laws,
including, without limitation, ERISA and the Code, and all contributions
required to be made under the terms of any of the Parent Benefit Plans as of the
date of this Agreement have been timely made or have been reflected on the most
recent consolidated balance sheet filed or incorporated by reference in the
Parent Reports prior to the date of this Agreement. With respect to the Parent
Benefit Plans, no event has occurred and, to the Knowledge of Parent, there
exists no condition or set of circumstances in connection with which Parent, any
Parent Subsidiary or any Parent ERISA Affiliate could reasonably be expected to
be subject to any material liability (other than for routine benefit
liabilities) under the terms of such Parent Benefit Plans, ERISA, the Code or
any other applicable Law.
(c) (i) Each Parent Benefit Plan which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS as to its qualified status under the Code and
as to the exempt status under Section 501(a) of the Code of each trust
established thereunder or Parent will apply to the IRS for such a determination
letter prior to the expiration of the requisite period under applicable Treasury
Regulations or IRS pronouncements in which to apply for such determination
letter and to make any amendments necessary to obtain a favorable determination,
and to the Knowledge of Parent no fact or event has occurred since the date of
such determination letter from the IRS to adversely affect the qualified status
of any such Parent Benefit Plan or the exempt status of any such trust; (ii) to
Knowledge of Parent, there has been no prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any
Parent Benefit Plan; (iii) each Parent Benefit Plan can be amended, terminated
or otherwise discontinued after the Effective Time in accordance with its terms,
without liability, other than (A) liability for ordinary administrative expenses
typically incurred in a termination event or (B) if the Parent Benefit Plan is a
pension benefit plan subject
37
to Part 3 of Title I of ERISA, liability for the accrued benefits as of the date
of such termination (if and to the extent required by ERISA) to the extent that
either there are sufficient assets set aside in a trust or insurance contract to
satisfy such liability or such liability is reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Parent
Reports prior to the date of this Agreement. No suit, administrative proceeding,
action or other litigation has been brought, or to the Knowledge of Parent is
threatened in writing, against or with respect to any such Parent Benefit Plan,
including any audit or inquiry by the IRS or United States Department of Labor
(other than routine benefits claims).
(d) No Parent Benefit Plan is a multiemployer pension plan (as
defined in Section 3(37) of ERISA) or other pension plan subject to Title IV of
ERISA or Section 412 of the Code and none of Parent, any Parent Subsidiary or
any Parent ERISA Affiliate has sponsored or contributed to or been required to
contribute to a multiemployer pension plan or other pension plan subject to
Title IV of ERISA. No material liability under Title IV of ERISA has been
incurred by Parent, any Parent Subsidiary or any Parent ERISA Affiliate that has
not been satisfied in full, and no condition exists that presents a reasonable
risk to Parent, any Parent Subsidiary or any Parent ERISA Affiliate of incurring
or being subject (whether primarily, jointly or secondarily) to a material
liability thereunder. None of the assets of Parent or any Parent ERISA Affiliate
is, or may reasonably be expected to become, the subject of any lien arising
under ERISA or Section 412(n) of the Code.
(e) Parent has listed on SCHEDULE 5.09(E) of the Parent
Disclosure Schedule and has delivered to Company true, complete and correct
copies of (i) all employment agreements with officers and all consulting
agreements of Parent and each Parent Subsidiary, (ii) all severance plans,
agreements, programs and policies of Parent and each Parent Subsidiary with or
relating to their respective employees, directors or consultants, and (iii) all
plans, programs, agreements and other arrangements of Parent and each Parent
Subsidiary with or relating to their respective employees, directors or
consultants which contain "change of control" provisions. Except as set forth in
SCHEDULE 5.09(E) of the Parent Disclosure Schedule, which discloses the Parent's
estimate of excess parachute payments based on assumptions described therein, no
payment or benefit which will be made by Parent or any Parent Subsidiary under
any Parent Benefit Plan or other arrangement will constitute an excess parachute
payment under Code Section 280G(b)(1), and the consummation of the transactions
contemplated by this Agreement will not individually or in conjunction with any
other possible event (including termination of employment) (i) entitle any
current or former employee or other service provider of Parent or any Parent
Subsidiary to severance benefits or any other payment, compensation or benefit
(including forgiveness of indebtedness), except as expressly provided by this
Agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation or benefit due any such employee or service provider.
(f) Neither Parent nor any Parent Subsidiary is a party to any
collective bargaining or other labor union contract applicable to Persons
employed by Parent or any Parent Subsidiary and no collective bargaining
agreement is being negotiated by Parent or any Parent Subsidiary. There is no
labor dispute, strike or work stoppage against Parent or any Parent Subsidiary
pending or, to the Knowledge of Parent, threatened in writing which may
interfere with the respective business activities of Parent or any Parent
Subsidiary. To the Knowledge of
38
Parent, none of Parent, any Parent Subsidiary, or any of their respective
representatives or employees has committed any unfair labor practice in
connection with the operation of the respective businesses of Parent or any
Parent Subsidiary, and there is no charge or complaint against Parent or any
Parent Subsidiary by the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing.
(g) Except as required by Law, no Parent Benefit Plan provides
retiree or post-employment medical, disability or life insurance benefits to any
Person. To the Knowledge of Parent, Parent and the Parent ERISA Affiliates
comply in all material respects with (i) the requirements of the applicable
health care continuation and notice provisions of COBRA and the regulations
(including proposed regulations) thereunder and (ii) the applicable requirements
of the Health Insurance Portability and Accountability Act of 1996 and the
regulations (including the proposed regulations) thereunder.
SECTION 5.10 CONTRACTS. Except for the contracts and
agreements described in SCHEDULE 5.10 of the Parent Disclosure Schedule
(collectively, the "PARENT MATERIAL CONTRACTS"), neither Parent nor the Parent
Subsidiaries is a party to or bound by any material contract, including without
limitation, the following contracts (which for purposes of this Agreement shall
be deemed Parent Material Contracts):
(a) any distributor, sales, advertising, agency or
manufacturer's representative contract;
(b) any continuing contract for the purchase of materials,
supplies, equipment or services involving in the case of any such contract more
than $250,000 per annum;
(c) any contract that expires or may be renewed at the option
of any Person other than Parent so as to expire more than one (1) year after the
date of this Agreement;
(d) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any leasing transaction of the type
required to be capitalized in accordance with U.S. GAAP;
(e) any contract for capital expenditures in excess of
$250,000 in the aggregate;
(f) any contract limiting the freedom of Parent or any Parent
Subsidiary to engage in any line of business or to compete with any other
Person, or any confidentiality, secrecy or non-disclosure contract;
(g) any contract pursuant to which Parent or any Parent
Subsidiary is a lessor or lessee of any machinery, equipment, motor vehicles,
office furniture, fixtures or other personal property involving in the case of
any such contract more than $250,000 per annum;
(h) any contract with any Person with whom Parent or any
Parent Subsidiary does not deal at arm's length within the meaning of the Code;
39
(i) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment by Parent or any Parent
Subsidiary with respect to, the obligations, liabilities (whether accrued,
absolute, contingent or otherwise) or indebtedness of any other Person; or
(j) any agreement relating to the acquisition or disposition
by Parent or any Parent Subsidiary of a business, line of business or material
amount of assets.
Parent and/or each Parent Subsidiary, as applicable, has
performed all of the material obligations required to be performed by it and is
entitled to all benefits under, and to the Knowledge of Parent, is not alleged
to be in default in respect of, any Parent Material Contract. Each of the Parent
Material Contracts is in full force and effect, unamended, and there exists no
material default or event of default or event, occurrence, condition or act,
with respect to Parent or any Parent Subsidiary or to the Knowledge of Parent
with respect to the other contracting party, which, with the giving of notice,
the lapse of the time or the happening of any other event or conditions, would
become a material default or event of default under any Parent Material
Contract. True, correct and complete copies of all Parent Material Contracts
have been delivered or made available to Company.
SECTION 5.11 LITIGATION. Except as set forth on SCHEDULE 5.11
of the Parent Disclosure Schedule, there is no suit, claim, action, proceeding
or investigation pending or, to the Knowledge of Parent, threatened in writing
against Parent or any Parent Subsidiary that could reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect or
materially interfere with Parent's ability to consummate the transactions
contemplated herein, and, to the Knowledge of Parent, there are no existing
facts or circumstances that could reasonably be expected to result in such a
suit, claim, action, proceeding or investigation. To the Knowledge of Parent,
there are no facts or circumstances which could reasonably be expected to result
in the denial of insurance coverage under policies issued to Parent and Parent
Subsidiaries in respect of such suits, claims, actions, proceedings and
investigations, except in any case as could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. Neither
Parent nor any Parent Subsidiary is subject to any outstanding order, writ,
injunction or decree which could reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect or materially interfere with
Parent's ability to consummate the transactions contemplated herein.
SECTION 5.12 ENVIRONMENTAL MATTERS. Except as could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, (a) Parent and the Parent Subsidiaries are in
compliance with all applicable Environmental Laws and all Parent Permits
required by Environmental Laws, (b) all past noncompliance of Parent or any
Parent Subsidiary with Environmental Laws or Environmental Permits has been
resolved without any pending, ongoing or future obligation, cost or liability
and (c) neither Parent nor any Parent Subsidiary has released, nor to the
Knowledge of Parent has any other Person released, a Hazardous Material at, or
transported a Hazardous Material to or from, any real property currently or
formerly owned, leased or occupied by Parent or any Parent Subsidiary, in
violation of, or under circumstances that could otherwise result in liability
under, any Environmental Law.
40
SECTION 5.13 INTELLECTUAL PROPERTY.
(a) SCHEDULE 5.13(A) of the Parent Disclosure Schedule
contains an accurate and complete list of (i) all patents and patent
applications, trademarks, service marks, Internet domain names and applications
therefor, and copyrights and copyright applications, which are part of the
Parent Intellectual Property and which have been issued or registered by, or
filed with, any United States, foreign or international governmental or other
body having authority to issue, register or review the same, and (ii) all
licenses, sublicenses and other agreements to which Parent or any Parent
Subsidiary is a party and pursuant to which Parent or any Parent Subsidiary is
granted rights under any third party Intellectual Property, other than licenses
to use "off the shelf" software, or pursuant to which any third party is
authorized by Parent or any Parent Subsidiary to use any Intellectual Property.
(b) Except as provided in SCHEDULE 5.13(B) of the Parent
Disclosure Schedule, the Parent Intellectual Property is: (i) owned solely and
exclusively by Parent or a Parent Subsidiary, free and clear of any and all
mortgages, pledges, liens, security interests, conditional sale agreements or
encumbrances of any kind or (ii) rightfully used or otherwise enjoyed by Parent
or the Parent Subsidiaries pursuant to one or more license agreements, each of
which license agreements is, to the Knowledge of Parent, valid and enforceable.
(c) To the Knowledge of Parent, neither Parent nor any Parent
Subsidiary is, and no action is currently pending which asserts that Parent or
any Parent Subsidiary is, infringing on any Intellectual Property of any Person.
Neither Parent nor any Parent Subsidiary has received notice from any Person
within the past twelve (12) months asserting that Parent or any Parent
Subsidiary is infringing on any Intellectual Property of any such Person. To the
Knowledge of Parent, no action is currently pending which asserts that any
Person is infringing on any Parent Intellectual Property, and neither Parent nor
any Parent Subsidiary has asserted any claim of such infringement against any
Person within the past twelve (12) months.
(d) All intellectual property registrations included in the
Parent Intellectual Property have been duly maintained, are in full force and
effect and have not been cancelled, expired or abandoned.
(e) Parent has secured valid written assignments from all
consultants and employees who contributed to the creation or development of any
Parent Intellectual Property of the rights to such contributions that Parent
does not already own by operation of law.
(f) Parent has taken all reasonably necessary and appropriate
steps to protect and preserve the confidentiality of all Parent Intellectual
Property not otherwise protected by patents, patent applications or copyright
("PARENT CONFIDENTIAL INFORMATION"). All use, disclosure or appropriation of
Parent Confidential Information owned by Parent by or to a third party has been
pursuant to the terms of a written agreement between Parent and such third
party. All use, disclosure or appropriation by Parent of Parent Confidential
Information not owned by Parent has been pursuant to the terms of a written
agreement between Parent and the owner of such Parent Confidential Information,
or is otherwise lawful.
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SECTION 5.14 TAXES.
(a) Parent and each of the Parent Subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which
Parent or any Parent Subsidiary is or has been a member, have properly completed
and timely filed all Tax Returns required to be filed by them (or have timely
filed requests for extensions of the filing dates and have met all subsequent
filing deadlines with respect to such extensions) and have paid all Taxes shown
thereon to be due. All Tax Returns filed by Parent and each of the Parent
Subsidiaries are true, correct and complete in all material respects. Neither
Parent nor any Parent Subsidiary has any liability for unpaid Taxes (whether or
not shown to be due on any Tax Return) which has not been accrued for or
reserved on the Parent Balance Sheet in accordance with U.S. GAAP, whether
asserted or unasserted, contingent or otherwise, other than liabilities for
unpaid Taxes that have accrued since June 30, 2001 in connection with the
operation of the business of Parent and each Parent Subsidiary consistent with
past practice.
(b) There is (i) no material claim for Taxes that is a lien
against the property of Parent or any Parent Subsidiary or is being asserted
against Parent or any Parent Subsidiary other than liens for Taxes not yet due
and payable, (ii) no audit of any Tax Return of Parent or any Parent Subsidiary
being conducted by a Taxing Authority or, to the Knowledge of Parent, is pending
or threatened, (iii) no extension of the statute of limitations on the
assessment of any Taxes granted by Parent or any Parent Subsidiary and currently
in effect, and (iv) no agreement, contract or arrangement to which Parent or any
Parent Subsidiary is a party that may result in the payment of any amount that
would not be deductible by reason of Section 280G, Section 404 or Section 162(m)
of the Code. There is no contract, agreement, plan or arrangement to which
Parent or any Parent Subsidiary is a party or by which it is bound to compensate
any individual for excise taxes paid pursuant to Section 4999 of the Code.
(c) Parent and the Parent Subsidiaries have not been and will
not be required to include any material adjustment in taxable income for any Tax
period (or portion thereof) pursuant to Section 481 of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger.
(d) Neither Parent nor any Parent Subsidiary has filed or will
file any consent to have the provisions of Section 341(f)(2) of the Code (or
comparable provisions of any state Tax laws) apply to Parent or any Parent
Subsidiary.
(e) Neither Parent nor any Parent Subsidiary is a party to any
Tax sharing, Tax indemnity or Tax allocation agreement or arrangement nor does
Parent or any Parent Subsidiary have any liability or potential liability to
another party under any such agreement.
(f) Neither Parent nor any Parent Subsidiary has filed any
disclosures under Section 6662 or the Code or comparable provisions of state,
local or foreign law to prevent the imposition of penalties with respect to any
Tax reporting position taken on any Tax Return.
(g) Neither Parent nor any Parent Subsidiary has ever been a
member of a consolidated, combined or unitary group of which Parent was not the
ultimate parent corporation
42
or is liable for any Tax imposed on any other Person, except as the result of
the application of Treasury Regulation Section 1.1502-6 (or any comparable
provision of state, local or foreign law) to the affiliated group of which
Parent is the common parent.
(h) Parent and each Parent Subsidiary has in its possession
receipts for any Taxes paid to foreign Tax authorities. Neither Parent nor any
Parent Subsidiary has ever been a "personal holding Parent" within the meaning
of Section 542 of the Code or a "United Sates real property holding corporation"
within the meaning of Section 897 of the Code.
(i) Neither Parent nor any Parent Subsidiary has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355 of the
Code (x) in the two years prior to the date of this Agreement or (y) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(j) Parent and each Parent Subsidiary are in full compliance
with all terms and conditions of any Tax exemption, Tax holiday or other Tax
reduction agreement or order of a territorial or foreign government and the
consummation of the Merger will not have any adverse effect on the continued
validity and effectiveness of any such Tax exemption, Tax holiday or other Tax
reduction agreement or order.
(k) No claim has ever been made by any Taxing Authority in a
jurisdiction where Parent or any Parent Subsidiary does not file Tax Returns
that Parent or any Parent Subsidiary is or may be subject to taxation by that
jurisdiction.
(l) Parent and each Parent Subsidiary have withheld and paid
over all Taxes required to have been withheld and paid over and complied with
all material information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(m) No items of income attributable to transactions occurring
on or before the close of the last preceding taxable year of Parent or any
Parent Subsidiary will be required to be included in taxable income by Parent or
any Parent Subsidiary in a subsequent taxable year by reason of Parent or any
Parent Subsidiary reporting income on the installment sales method of
accounting, the cash method of accounting, the completed contract method of
accounting or the percentage of completion capitalized cost method of
accounting.
(n) True and complete copies of all Tax Returns filed by
Parent and each Parent Subsidiary for each of the taxable years ended on or
after December 31, 1997 have been delivered or made available to Company.
(o) Parent has no present intention to eliminate at any time
any Chain Subsidiary or to cause at any time any transfer of assets referred to
in Section 6.14.
SECTION 5.15 INSURANCE. Parent and each Parent Subsidiary is
presently insured against such risks as companies engaged in a similar business
would, in accordance with
43
good business practice, customarily be insured. The policies of fire, theft,
liability and other insurance maintained with respect to the assets or
businesses of Parent and the Parent Subsidiaries provide, in the good faith
judgment of the Parent's management, reasonably adequate coverage against loss.
Parent has heretofore furnished to Company a complete and correct list of all
insurance policies maintained by Parent or the Parent Subsidiaries as of the
date hereof, and has made available to Company complete and correct copies of
all such policies, together with all riders and amendments thereto. All such
policies are in full force and effect and all premiums due thereon have been
paid to the date hereof. Parent and the Parent Subsidiaries have complied in all
material respects with the terms of such policies.
SECTION 5.16 PROPERTIES. Parent and the Parent Subsidiaries
have good and valid title, free and clear of all Encumbrances, except for
Permitted Encumbrances, to all their material properties and assets, whether
tangible or intangible, real, personal or mixed, reflected in the Parent Balance
Sheet as being owned by Parent and the Parent Subsidiaries as of the date
thereof, other than (i) any properties or assets that have been sold or
otherwise disposed of in the ordinary course of business since June 30, 2001,
(ii) liens disclosed in the notes to the Parent Balance Sheet and (iii) liens
arising in the ordinary course of business after June 30, 2001. All buildings,
and all fixtures, equipment and other property and assets that are material to
Parent business on a consolidated basis, held under leases or sub-leases by
Parent or any Parent Subsidiary are held under valid instruments enforceable in
accordance with their respective terms, subject to applicable laws of
bankruptcy, insolvency or similar laws relating to creditors' rights generally
and to general principles of equity (whether applied in a proceeding in law or
equity). Substantially all of Parent's and the Parent Subsidiaries' equipment in
regular use has been reasonably maintained and is in serviceable condition,
reasonable wear and tear excepted.
SECTION 5.17 BROKERS. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Parent.
SECTION 5.18 BUSINESS ACTIVITY RESTRICTION. Except as
described in SCHEDULE 5.18 of the Parent Disclosure Schedule, neither Parent nor
any Parent Subsidiary has entered into any agreement under which Parent, any
Parent Subsidiary, Company or any Company Subsidiary is restricted from selling,
licensing or otherwise distributing any of its technology or products to, or
providing services to, customers or potential customers or any class of
customers, in any geographic area, during any period of time or in any segment
of the market or line of business.
SECTION 5.19 CERTAIN BUSINESS PRACTICES. Neither Parent nor
any Parent Subsidiary nor any directors, officers, agents or employees of Parent
or any Parent Subsidiary (in their capacities as such) has (a) used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity or (b) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended.
44
SECTION 5.20 NO PRIOR ACTIVITIES. There are not as of the date
hereof and there will not be at the Effective Time, any outstanding or
authorized options, warrants, calls, rights, commitments or any other contracts
or agreements requiring Merger Sub to issue, transfer, sell, purchase, redeem or
acquire any shares of capital stock. Except for liabilities incurred in
connection with its incorporation or organization, and consummation of this
Agreement and the transactions contemplated hereby, Merger Sub has not incurred
any liabilities, and has not engaged in any business or activities of any type
or kind whatsoever or entered into any agreements or arrangements with any
Person. Merger Sub is a wholly owned Subsidiary of Parent.
SECTION 5.21 AFFILIATE TRANSACTIONS. Except as described in
SCHEDULE 5.21 of the Parent Disclosure Schedule or in Parent's Annual Report on
Form 10-K for the year ended December 31, 2000, neither Parent nor any Parent
Subsidiary is a party to any agreement with or has any interest in any property
(whether real or personal, tangible or intangible) of any of its affiliates,
stockholders, employees, officers, directors or any entities affiliated with any
such persons or any family members of any such persons, nor are there any
agreements or understandings for the provision, directly or indirectly, of
services by and between Parent and any Parent Subsidiary, on the one hand, and
any of its affiliates, stockholders, employees, associates, officers, directors
or any entities affiliated with any such persons or any family members of any
such persons, on the other hand (other than inter-company arrangements between
Parent and Parent Subsidiaries and among Parent Subsidiaries and services
provided in their capacity as employees, officers and directors).
SECTION 5.22 CASH POSITIONS. As of the Closing, Parent shall
have cash on hand in an amount equal to or exceeding $7,200,000.
ARTICLE VI
COVENANTS
SECTION 6.01 CONDUCT OF COMPANY PENDING THE CLOSING. Company
agrees that, subject to Section 10.01, between the date of this Agreement and
the Effective Time, unless Parent shall otherwise agree in writing, except as
set forth on SCHEDULE 6.01 of the Company Disclosure Schedule, (x) the
respective businesses of Company and the Company Subsidiaries shall be conducted
only in, and Company and the Company Subsidiaries shall not take any action
except in, the ordinary course of business consistent with past practice and (y)
Company shall use its reasonable efforts to keep available the services of such
of the current officers, significant employees and consultants of Company and
the Company Subsidiaries and to preserve the current relationships of Company
and the Company Subsidiaries with such of the corporate partners, customers,
suppliers and other Persons with which Company or any Company Subsidiary has
significant business relations in order to preserve substantially intact its
business organization. Without limitation, except as set forth on SCHEDULE 6.01
of the Company Disclosure Schedule, neither Company nor any Company Subsidiary
shall, between the date of this Agreement and the Effective Time, directly or
indirectly, do, or agree to do, any of the following without the prior written
consent of Parent:
45
(a) amend or otherwise change its Certificate of Incorporation
or bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber, or authorize the issuance, sale,
pledge, disposition, grant, transfer, lease, license or encumbrance of,
(i) any shares of capital stock of Company or any Company Subsidiary of
any class, or securities convertible into or exchangeable or
exercisable for any shares of such capital stock, or any options,
warrants or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without
limitation, any phantom interest), of Company or any Company
Subsidiary, other than the issuance of shares of Company Common Stock
pursuant to the exercise of stock options, warrants or convertible
securities therefor outstanding as of the date hereof or expressly
permitted by this Agreement or (ii) any material property or assets of
Company or any Company Subsidiary except (A) transactions pursuant to
existing contracts and (B) dispositions, leases or licenses of
inventory in the ordinary course of business consistent with past
practice;
(c) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or Person or any
division thereof, other than the purchase of assets for a price not to
exceed $100,000 in any instance; (ii) incur any indebtedness for
borrowed money (other than indebtedness with respect to working capital
in amounts consistent with past practice) or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any Person (other than a
Company Subsidiary in immaterial amounts and consistent with past
practice) for borrowed money or make any loans or advances material to
the business, assets, liabilities, financial condition or results of
operations of Company and the Company Subsidiaries, taken as a whole;
(iii) terminate, cancel or request any material change in, or agree to
any material change in, any Company Material Contract other than in the
ordinary course of business consistent with past practice; (iv) waive
any rights of material value or cancel any material debts or claims;
(v) make or authorize any capital expenditure, other than capital
expenditures in the ordinary course of business consistent with past
practice that have been budgeted for fiscal year 2001 and disclosed in
writing to Parent and that are not, in the aggregate, in excess of
$250,000 for Company and the Company Subsidiaries taken as a whole; or
(vi) enter into or amend any contract, agreement, commitment or
arrangement that, if fully performed, would not be permitted under this
Section 6.01(c);
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except that any Company Subsidiary
may pay dividends or make other distributions to Company or any other
Company Subsidiary;
(e) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock
except repurchases of unvested
46
shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase
agreements in effect on the date hereof;
(f) amend or change the period (or permit any acceleration,
amendment or change) of exercisability of options granted under the
Company Stock Plan or authorize cash payments in exchange for any
Company Stock Options granted under any of such plans;
(g) amend the terms of, repurchase, redeem or otherwise
acquire, or permit any Company Subsidiary to repurchase, redeem or
otherwise acquire, any of its securities or any securities of any
Company Subsidiary, except repurchases of unvested shares at cost in
connection with the termination of the employment relationship with any
employee pursuant to stock option or purchase agreements in effect on
the date hereof;
(h) increase the compensation payable or to become payable to
its directors, officers, consultants or employees, grant any rights to
severance or termination pay to, or enter into any employment,
severance or other agreement which provides benefits upon a change in
control of Company that would be triggered by the Merger with, any
director, officer, consultant or other employee of Company or any
Company Subsidiary who is not currently entitled to such benefits from
the Merger, establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation,
employment, termination, severance, change in control or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer, consultant or employee of Company or any Company
Subsidiary, except to the extent required by applicable Law, or enter
into or amend any contract, agreement, commitment or arrangement
between Company or any Company Subsidiary and any of Company's
directors, officers, consultants or employees, except, in the ordinary
course of business consistent with past practice, for increases in
compensation paid to Persons who are not directors or officers of the
Company;
(i) except as otherwise permitted or required under this
Agreement, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of
claims, liabilities or obligations in the ordinary course of business
and consistent with past practice;
(j) except as required by any Governmental Entity, make any
material change with respect to Company's accounting policies,
principles, methods or procedures, including, without limitation,
revenue recognition policies, other than as required by U.S. GAAP;
(k) make any material Tax election or settle or compromise any
material Tax liability;
47
(l) enter into any transaction of a material nature other than
in the ordinary course of business, consistent with past practice; or
(m) authorize or enter into any formal or informal agreement
or otherwise make any commitment to do any of the foregoing or to take
any action which would make any of the representations or warranties of
Company contained in this Agreement untrue or incorrect or prevent
Company from performing or cause Company not to perform its covenants
hereunder or result in any of the conditions to the Merger set forth
herein not being satisfied.
SECTION 6.02 CONDUCT OF PARENT AND MERGER SUB PENDING THE
CLOSING. Each of Parent and Merger Sub agrees that, between the date of this
Agreement and the Effective Time, unless Company shall otherwise agree in
writing, (x) the respective businesses of Parent and the Parent Subsidiaries
shall be conducted only in, and Parent and the Parent Subsidiaries shall not
take any action except in, the ordinary course of business consistent with past
practice and (y) Parent shall use its reasonable efforts to keep available the
services of such of the current officers, significant employees and consultants
of Parent and the Parent Subsidiaries and to preserve the current relationships
of Parent and the Parent Subsidiaries with such of the corporate partners,
customers, suppliers and other Persons with which Parent or any Parent
Subsidiary has significant business relations in order to preserve substantially
intact its business organization. Parent shall not, between the date of this
Agreement and the Effective Time, directly or directly, without the prior
written consent of Company, issue, sell, pledge, dispose of, grant, transfer,
lease, license, guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, any shares of
capital stock of Parent of any class, or securities convertible into or
exchangeable or exercisable for any shares of such capital stock, or any
options, warrants or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of Parent, other than the issuance of shares of Parent
Common Stock pursuant to the exercise of stock options, warrants or convertible
securities therefor outstanding as of the date hereof or expressly permitted by
this Agreement.
SECTION 6.03 NOTICES OF CERTAIN EVENTS. Each of Parent and
Company shall give prompt notice to the other of: (a) any notice or other
communication from any Person alleging that the consent of such Person is or may
be required in connection with the Merger; (b) any notice or other communication
from any Governmental Entity in connection with the Merger; (c) any actions,
suits, claims, investigations or proceedings commenced or, to the Knowledge of
Company or the Knowledge of Parent, as the case may be, threatened in writing
against, relating to or involving or otherwise affecting Parent or the Parent
Subsidiaries or Company or the Company Subsidiaries, respectively, which, if
pending on the date hereof, would have been required to have been disclosed in
this Agreement, or that relate to the consummation of the Merger; (d) the
occurrence of a default or event that, with the giving of notice or lapse of
time or both, will become a default under any Company Material Contract or
Parent Material Contract and (e) any change that could reasonably be expected to
have a Parent Material Adverse Effect or a Company Material Adverse Effect,
respectively, or to delay or impede the ability of either Parent or Company,
respectively, to perform their respective obligations pursuant to this Agreement
or to effect the consummation of the Merger.
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SECTION 6.04 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Except as required pursuant to any confidentiality
agreement or similar agreement or arrangement to which Parent or Company or any
of the Parent Subsidiaries or the Company Subsidiaries is a party or pursuant to
applicable Law or the regulations or requirements of any stock exchange or other
regulatory organization with whose rules a party hereto is required to comply,
from the date of this Agreement to the Effective Time, Parent and Company shall
(and shall cause the Parent Subsidiaries and Company Subsidiaries, respectively,
to) (i) provide to the other (and its officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives
(collectively, "REPRESENTATIVES")) access at reasonable times upon prior notice
to its and its subsidiaries' officers, employees, agents, properties, offices
and other facilities and to the books and records thereof, and (ii) furnish
promptly such information concerning its and its subsidiaries' business,
properties, contracts, assets, liabilities and personnel as the other party or
its Representatives may reasonably request. No investigation conducted pursuant
to this Section 6.04 shall affect or be deemed to modify any representation or
warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause
their respective Representatives to comply with, all of their respective
obligations under the Confidentiality Agreement with respect to the information
disclosed pursuant to this Agreement.
SECTION 6.05 NO SOLICITATION OF TRANSACTIONS.
(a) Company shall not, directly or indirectly, and shall not
direct, authorize or permit its Representatives to, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing nonpublic
information) any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) that constitutes,
or may reasonably be expected to lead to, any Competing Transaction, or enter
into or maintain or continue discussions or negotiate with any Person in
furtherance of such inquiries or to obtain a Competing Transaction, or agree to
or endorse any Competing Transaction, or direct, authorize or permit any Company
Subsidiary, or any Representative retained by any Company Subsidiary, to take
any such action.
SECTION 6.06 CONTROL OF OPERATIONS. Nothing contained in this
Agreement shall give Parent, directly or indirectly, the right to control or
direct the operations of Company or the Company Subsidiaries prior to the
Effective Time. Prior to the Effective Time, Company shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over its operations.
SECTION 6.07 FURTHER ACTION; CONSENTS; FILINGS.
(a) Upon the terms and subject to the conditions hereof, each
of the parties hereto shall use all reasonable efforts to (i) take, or cause to
be taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the Merger, (ii) obtain from Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained
49
or made by Parent or Company or any of their respective subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Merger and (iii) make all necessary filings, and
thereafter make any other required or appropriate submissions, with respect to
this Agreement and the Merger required under (A) the rules and regulations of
the NNM, (B) the Securities Act, the Exchange Act and any other applicable
federal or state securities Laws, (C) the HSR Act, if applicable, and (D) any
other applicable Law. The parties hereto shall cooperate and consult with each
other in connection with the making of all such filings, including by providing
copies of all such documents to the nonfiling parties and their advisors prior
to filing, and none of the parties shall file any such document if any of the
other parties shall have reasonably objected to the filing of such document. No
party shall consent to any voluntary extension of any statutory deadline or
waiting period or to any voluntary delay of the consummation of the Merger at
the behest of any Governmental Entity without the consent and agreement of the
other parties hereto, which consent shall not be unreasonably withheld or
delayed.
(b) Each of Company and Parent will give (or will cause their
respective subsidiaries to give) any notices to third Persons, and use, and
cause their respective subsidiaries to use, reasonable efforts to obtain any
consents from third Persons necessary, proper or advisable to consummate the
transactions contemplated by this Agreement.
SECTION 6.08 ADDITIONAL REPORTS(a) . Parent shall furnish to
Company copies of any Parent Reports which it files with the SEC or the NNM on
or after the date hereof, and Parent covenants and warrants that as of the
respective dates thereof, such reports will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Any consolidated interim financial
statements included in such reports (including any related notes and schedules)
will fairly and accurately present the financial position of Parent and its
consolidated subsidiaries as of the dates thereof and the results of operations
and changes in financial position or other information included therein for the
periods or as of the date then ended (subject, in the case of unaudited
statements, to normal year-end adjustments, which adjustments are not material),
in each case in accordance with past practice and U.S. GAAP (except for the
absence of footnotes) consistently applied during the periods involved (except
as otherwise disclosed in the notes thereto).
SECTION 6.09 NONCOMPETITION. For a period of two (2) years
following the date hereof, Principal Stockholder shall not, directly or
indirectly, as principal, investor, or in any similar capacity (i) engage in the
Business anywhere in the world (except Switzerland), (ii) own, manage, operate
or control, or participate in the ownership, management, operation or control
of, any business which directly or indirectly competes with the Business
anywhere in the world (except Switzerland), or (iii) interfere with, disrupt or
attempt to disrupt any present or prospective relationship, contractual or
otherwise, between Parent and any of its licensors, licensees, clients,
customers, suppliers, employees or other related parties, or employ, solicit or
induce for hire any of the employees, agents, consultants or advisors of Parent
or Company or any employee who has left the employment of Parent or Company
within six months of the termination of said employee's employment with Parent
or Company, as applicable, provided
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that nothing herein shall preclude Principal Stockholder from beneficially
owning less than five percent of the stock of any publicly traded company or
merging with any other entity.
SECTION 6.10 USE OF FIRST NOTE PROCEEDS; CONDUCT OF
BUSINESS.
(a) Parent shall cause the Company to apply the principal
amount delivered by Principal Stockholder in connection with the First
Note to the Company Restructuring; PROVIDED, HOWEVER, that to the
extent such principal amount exceeds the costs of the Company
Restructuring, Parent may use such excess in any manner that, in its
sole discretion, it deems advisable or appropriate.
(b) Parent shall use commercially reasonable efforts to
operate the combined Business of Company and Parent as a going concern
and not with a view to dissolution or liquidation.
SECTION 6.11 COMPANY INTELLECTUAL PROPERTY; ESCROW. Parent
will grant to PubliGroupe S.A. and its Affiliates a license to the Company
Intellectual Property covered by the Technology Transfer Agreement dated March
15, 2000 between the Company and Real Media S.A. (the "TECHNOLOGY TRANSFER
AGREEMENT"), substantially on the terms of the Technology Transfer Agreement.
Parent agrees to deposit the source code to all Company Intellectual Property
covered by the Technology Transfer Agreement, including all updates, upgrades,
patches, documentation and other enhancements (collectively, the "ESCROW
MATERIALS") with DSI Technology Escrow Services, Inc. or other mutually
acceptable independent third party escrow agent (the "ESCROW AGENT") pursuant to
an agreement with the Escrow Agent (the "ESCROW AGREEMENT") within thirty (30)
days after the Effective Time. The Escrow Agreement shall provide at a minimum
that, (i) Principal Stockholder will receive semi-annual reports regarding the
status of the Escrow Materials, (ii) the Escrow Agent will immediately release
the Escrow Materials to PubliGroupe S.A., without limitation and for PubliGroupe
S.A.'s present use only, in the event that either (A) Parent ceases to conduct
business in the ordinary course or (B) Parent ceases to maintain or support the
Escrow Materials generally in the normal course of Parent's business and (iii)
the Escrow Agreement may not be amended, assigned, or revoked without the prior
written consent of Principal Stockholder.
SECTION 6.12 PAYMENTS TO FRACTIONAL SHARE HOLDERS. Parent
acknowledges that immediately prior to execution of this Agreement Company has
effected a one-for-2000 reverse stock split (the "REVERSE Split"), and that as a
result thereof certain former stockholders of the Company became entitled to
cash in lieu of fractional shares of Company Common Stock, with the amount of
cash payable to each such former stockholder being equal to the product of (i)
the fair market value of one share of Company Common Stock outstanding after the
Reverse Split (the "PRE-SPLIT COMPANY COMMON STOCK") on the effective date of
the Reverse Split, as determined by the Board of Directors of the Company in its
sole discretion, multiplied by (ii) the number of shares of Pre-Split Company
Common Stock held by such former stockholder that would otherwise have been
exchanged for such fractional share interests (the "FRACTIONAL SHARE PAYOUT").
Parent further agrees that Parent shall, or shall cause Merger Sub to, promptly
upon delivery of any certificate or certificates for Pre-Split Company Common
Stock by the holder or holders thereof to Parent or Merger Sub after the
Effective Time, pay to such holder or holders the Fractional Share Payout.
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SECTION 6.13 TAX NATURE OF TRANSACTION. The parties
acknowledge that the Merger is intended to constitute for tax purposes a fully
taxable exchange of the shares of Company for shares of Parent by and between
Neversleepagain Holding Corp. and the stockholders of Company (including,
without limitation, the Principal Stockholder) (with no election under either or
both of Sections 338(g) or 338(h)(10)). Additionally, it is understood that (i)
Rolex Principal Stockholder will elect under Treasury Regulation Section
1.1502-20(g) to reattribute as much of the Tax net operating losses of Company
and any of Company's Subsidiaries included in the federal Tax consolidated group
of which Rolex Principal Stockholder is a parent (the "COMPANY LOSS SUBGROUP")
as is permissible under the Code and Treasury Regulations (and, if able to
reattribute less than all thereof, shall select such Tax net operating losses as
it chooses pursuant to such Code and Treasury Regulations) and (ii) will, if it
deems necessary, elect to reattribute to itself all of Company Loss Subgroup's
Section 382 limitation applicable to any losses of the Company Loss Subgroup
pursuant to Treasury Regulation Sections 1.1502-91-96, 1.1502-20(g), and any
other relevant provisions of the Code or Treasury Regulations. Parent and Rolex
Principal Stockholder, PROVIDED that Parent is provided with all information
necessary for such filings, shall make or cause any relevant Subsidiary,
including Company, to make all Tax filings consistently with the foregoing
treatment. In no case will Parent or any of its Subsidiaries (including Company)
take the position that it may utilize or deduct against any income any of the
losses of Company with respect to which the elections referred to above have
been made regardless of whether Treasury Regulation Section 1.1502-20 is upheld
by the courts, except to the extent that there has been a final determination
with respect to Principal Stockholder that those elections have not been
effective.
SECTION 6.14 CHAIN SUBSIDIARIES. For the one-year period
following the date of this Agreement, Parent shall take all actions necessary
(i) to maintain in separate existence at all times each of the Chain
Subsidiaries and (ii) prevent any transfer (through a sale, exchange, merger,
consolidation, or otherwise) by any Chain Subsidiary at any time after the date
of the Merger of all or a significant portion of its business assets to any
other Chain Subsidiary or any other member of the Parent Group.
SECTION 6.15 TAX COOPERATION. From and after the Effective
Time, Rolex Principal Stockholder, on the one hand, and Parent, Company, and
each Affiliate of Parent, on the other hand, shall cooperate, to the extent
reasonably requested by the other party, in connection with the filing of Tax
returns or in connection with any audit, litigation, or other proceeding with
respect to Taxes. Such cooperation shall include, without limitation, the
retention (unless otherwise consented to after prior written notice by the other
party) by each party of books, records, and other information of such party
relating to Taxes or separate taxable income and separate tax attributes of
Company or Subsidiaries of the Company, as the case may be and (upon the other
party's request) the provision of such books, records, and other information,
and explanation of any material provided hereunder. The parties further agree,
upon request, to use their best efforts to obtain any certificate or other
document from any governmental authority or any other person as may be necessary
to mitigate, reduce, or eliminate any Tax that could be imposed or with respect
to any refund; provided that such reduction is not inconsistent with the other
provisions of this Article VI and this Agreement, PROVIDED, HOWEVER, that any
expense incurred in that connection shall be borne by the benefited party.
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ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 NOTES.
(a) On January 2, 2002, Parent shall issue the Second Note to
Principal Stockholder and Principal Stockholder shall deliver to Parent
in immediately available funds by wire transfer the principal amount of
the Second Note.
(b) If Parent's net loss from continuing operations before
extraordinary items, excluding interest, taxes, depreciation,
amortization, stock-based compensation, merger-related costs,
restructuring and exit costs, loss on sale of non-core assets,
impairment of intangible assets, minority interest, gain on sale of
investments and impairment of investments for the first fiscal quarter
of 2002, as reported by Parent in its quarterly earnings press release,
does not exceed ($3,531,905), Parent shall issue within five business
days following such earnings press release the Third Note on the same
terms and conditions (including the same principal amount) as the
Second Note and Company shall pay to Parent in immediately available
funds by wire transfer the principal amount of such Third Note.
SECTION 7.02 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
Except as may be required by applicable Law, the provisions
with respect to immunities and indemnification that are set forth in the
Certificate of Incorporation and bylaws of the Surviving Corporation shall not
be amended, repealed or otherwise modified for a period of six (6) years from
the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at or at any time prior to the Effective Time were
directors, officers, employees or agents of Company.
SECTION 7.03 PUBLIC ANNOUNCEMENTS. The initial press release
concerning the Merger to be released in connection with the execution and
delivery of this Agreement shall be a joint press release and, thereafter,
Parent, Company and the Principal Stockholder shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Agreement or the Merger and shall not issue any such press
release or make any such public statement without the prior approval of the
other, except to the extent required by applicable Law or the requirements of
the rules and regulations of the NNM or the SWX Swiss Exchange, in which case
the issuing party shall use all reasonable efforts to consult with the other
party before issuing any such release or making any such public statement.
SECTION 7.04 LISTING OF ADDITIONAL SHARES. Prior to the
Effective Time, Parent shall file with the NNM a Notification Form for Listing
of Additional Shares with respect to the shares of Parent Common Stock issued or
issuable in connection with the Merger and shall use all reasonable efforts to
have such shares of Parent Common Stock approved for quotation on the NNM.
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SECTION 7.05 BLUE SKY. Parent shall use all reasonable efforts
to obtain prior to the Effective Time all necessary permits and approvals
required under Blue Sky Laws to permit the distribution of the shares of Parent
Common Stock to be issued in accordance with the provisions of this Agreement.
SECTION 7.06 EMPLOYEE MATTERS. Simultaneously with the Merger,
the Surviving Corporation shall assume all employment agreements, consulting
agreements and termination benefit agreements which are in effect at Company on
the date hereof. As of the Effective Time, Parent shall cause the Surviving
Corporation to honor and satisfy all obligations and liabilities solely with
respect to the Company Benefit Plans maintained at the Company or Subsidiary
level. Notwithstanding the foregoing, the Surviving Corporation shall not be
required to continue any such particular Company Benefit Plan after the
Effective Time, and any such Company Benefit Plan may be amended or terminated
in accordance with its terms and applicable law. To the extent that any Company
Benefit Plan is terminated or amended after the Effective Time so as to reduce
the benefits that are then being provided with respect to participants
thereunder, Parent shall arrange for each individual who is then a participant
in such terminated or amended plan to participate in a comparable benefit plan
maintained by Parent (solely in the event that Parent maintains a comparable
plan) in accordance with the eligibility criteria thereof, and each individual
shall be given credit, for purposes of any service requirement for participation
or vesting (but not benefit accrual for purposes of any defined benefit pension
plan), for his or her period of service with Company or any Company Subsidiary
credited under a similar plan prior to the Effective Time, subject to
appropriate break in service rules. Subject to the approval of Parent's board of
directors (or a duly authorized committee thereof), following the Effective
Time, Parent shall grant to employees of the Surviving Corporation options to
purchase shares of Parent Common Stock, based on the fair market value of
Parent's Common Stock on the actual date of grant, in amounts which are
comparable to options granted to similarly situated employees of Parent but,
which are not, in the aggregate, less than the aggregate number of options to
purchase shares of Company Common Stock granted to employees of Company prior to
the date hereof (after giving effect to the Reverse Split and the Exchange
Ratio), which amounts shall be determined by Parent's board of directors (or a
duly authorized committee thereof). Parent shall use its reasonable best efforts
to obtain such approval from its board of directors (or a duly authorized
committee thereof).
SECTION 7.07 DIRECTORS OF PARENT FOLLOWING THE MERGER. Parent
shall take all steps as may be necessary to cause the board of directors of
Parent to be reconstituted, as of the Effective Time, to consist of the persons
identified on Schedule III hereto.
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ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO
CONSUMMATE THE MERGER. The obligations of the parties hereto to consummate the
Merger are subject to the satisfaction or, if permitted by applicable Law,
waiver of the following conditions:
(a) no order, statute, rule, regulation, executive order,
stay, decree, judgment or injunction shall have been enacted, entered,
promulgated or enforced by any court or Governmental Entity which
prohibits or prevents the consummation of the Merger which has not been
vacated, dismissed or withdrawn prior to the Effective Time. Company
and Parent shall use their reasonable best efforts to have any of the
foregoing vacated, dismissed or withdrawn by the Effective Time;
(b) any waiting period (and any extension thereof) applicable
to the consummation of the Merger under the HSR Act or any other
applicable competition, merger control or similar Law shall have
expired or been terminated;
(c) all consents, approvals and authorizations legally
required to be obtained to consummate the Merger shall have been
obtained from all Governmental Entities, except where the failure to
obtain any such consent, approval or authorization could not reasonably
be expected to result in a Parent Material Adverse Effect or a Company
Material Adverse Effect; and
(d) all consents, approvals and authorizations from third
parties required to be obtained to consummate the Merger shall have
been obtained or waived, except where the failure to obtain any such
consent, approval or authorization could not reasonably be expected to
result in a Parent Material Adverse Effect or a Company Material
Adverse Effect.
SECTION 8.02 CONDITIONS TO THE OBLIGATIONS OF COMPANY. The
obligations of Company to consummate the Merger, or to permit the consummation
of the Merger are subject to the satisfaction or, if permitted by applicable
Law, waiver of the following further conditions:
(a) each of the representations and warranties of Parent and
Merger Sub contained in this Agreement that are qualified by a
reference to materiality or Parent Material Adverse Effect shall be
true, complete and correct in all respects both when made and on and as
of the Effective Time as if made at and as of the Effective Time (other
than representations and warranties that are so qualified which address
matters only as of a certain date which shall be true, complete and
correct in all respects as of such certain date), and the
representations and warranties of Parent and Merger Sub contained in
this Agreement that are not so qualified shall be true, complete and
correct in all material respects both when made and on and as of the
Effective Time as if made at and as of the Effective Time (except for
those representations and warranties that are not
55
so qualified which address matters only as of a certain date which
shall be true, complete and correct in all material respects as of such
certain date), except for changes contemplated by this Agreement;
(b) Parent and Merger Sub shall have performed or complied in
all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by them on or prior to
the Effective Time;
(c) Company and Principal Stockholder shall have been provided
with a certificate executed on behalf of Parent and Merger Sub by
authorized officers certifying that the conditions set forth in Section
8.02(a) and (b) shall have been fulfilled;
(d) there shall have been no Parent Material Adverse Effect
since the date of this Agreement; and
(e) Parent shall have issued the Parent Guarantee to Principal
Stockholder.
SECTION 8.03 CONDITIONS TO THE OBLIGATIONS OF PARENT. The
obligations of Parent to consummate the Merger are subject to the satisfaction
or waiver of the following further conditions:
(a) each of the representations and warranties of Company and
Principal Stockholder contained in this Agreement that are qualified by
a reference to materiality or Company Material Adverse Effect shall be
true, complete and correct in all respects both when made and on and as
of the Effective Time as if made at and as of the Effective Time (other
than representations and warranties that are so qualified which address
matters only as of a certain date which shall be true, complete and
correct in all respects as of such certain date), and the
representations and warranties of Company and Principal Stockholder
contained in this Agreement that are not so qualified shall be true,
complete and correct in all material respects both when made and on and
as of the Effective Time as if made at and as of the Effective Time
(except for those representations and warranties that are not so
qualified which address matters only as of a certain date which shall
be true, complete and correct in all material respects as of such
certain date), except for changes contemplated by this Agreement;
(b) Company shall have performed or complied in all material
respects with all covenants and agreements required by this Agreement
to be performed or complied with by it on or prior to the Effective
Time;
(c) Parent shall have been provided with a certificate
executed on behalf of Company by an authorized officer certifying that
the conditions set forth in Section 8.03(a) and (b) shall have been
fulfilled;
(d) there shall have been no Company Material Adverse Effect
since the date of this Agreement;
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(e) Company shall have caused the conversion into capital, or
otherwise discharged, the outstanding debt of Company (other than trade
payables incurred in the ordinary course of business consistent with
past practice), including accrued interest;
(f) Company shall have cash on hand in an amount equal to or
exceeding $1,500,000;
(g) Principal Stockholder shall have entered into the Lock-Up
Agreement;
(h) On or prior to the date hereof, the board of directors of
Company shall have taken all action necessary to terminate all
outstanding options to purchase shares of Company Common Stock in
accordance with the terms of Company's 1999 Employee Stock Option Plan
(the "COMPANY OPTION PLAN"), subject to the consummation of the
transactions contemplated hereby and the expiration of the twenty-day
notice period contemplated under the Company Option Plan; and
(i) Principal Stockholder shall have delivered to Company in
immediately available funds by wire transfer the principal amount of
the First Note upon the execution and delivery of the First Note by
Company to Principal Stockholder.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01 INDEMNIFICATION BY PRINCIPAL STOCKHOLDER.
Principal Stockholder shall indemnify, defend and hold harmless Parent and its
affiliates (including the Surviving Corporation), promptly upon demand at any
time and from time to time, against any and all losses, liabilities, claims,
actions, damages and expenses (including without limitation, reasonable
attorneys' fees and disbursements) (collectively, "LOSSES"), arising out of or
in connection with any of the following: (i) any misrepresentation or breach of
any warranty made by the Company and/or Principal Stockholder in this Agreement;
(ii) any breach or non-fulfillment of any covenant or agreement made by the
Company or Principal Stockholder in this Agreement; (iii) any liability arising
at any time by reason of the Company being a member of a consolidated, combined
or unitary group; or (iv) the claims of any broker or finder engaged by the
Company.
SECTION 9.02 INDEMNIFICATION BY PARENT. Parent shall
indemnify, defend and hold harmless Principal Stockholder, promptly upon demand
at any time and from time to time, against any and all Losses arising out of or
in connection with any of the following: (i) any misrepresentation or breach of
any warranty made by Parent or Merger Sub in this Agreement; (ii) any breach or
nonfulfillment of any covenant or agreement made by Parent or Merger Sub in this
Agreement; or (iii) the claims of any broker or finder engaged by Parent or
Merger Sub.
SECTION 9.03 SURVIVAL. The representations and warranties in
this Agreement shall terminate on the first anniversary of the Effective Time or
upon the termination of this Agreement pursuant to Section 10.01, as the case
may be; PROVIDED, HOWEVER, that (a) the
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representations and warranties contained in Sections 4.01, 4.02, 4.03, 4.04,
4.05, 4A.03, 4A.04, 4A.05, 5.01, 5.02, 5.03, 5.04 and 5.05 shall remain in full
force and effect indefinitely, (b) the representations and warranties contained
in Sections 4.09. 4.12, 4.14, 5.09, 5.12 and 5.14 shall remain in full force and
effect until the expiration of the applicable statute of limitations and (c) the
representation contained in Section 5.14(o) shall expire at the Effective Time;
PROVIDED, HOWEVER, that if at the Effective Time a party has knowledge of facts
constituting a breach by another party of any representation or warranty by such
other party, the party having such knowledge shall not be entitled to assert a
claim for Losses under this Agreement arising out of such breach. This Section
9.03 shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.04 LIMITATIONS. Notwithstanding the foregoing,
(a) The indemnification in Sections 9.01 and 9.02, as the case
may be, shall be the exclusive remedy of Principal Stockholder, the
Company, Merger Sub and of Parent and its affiliates with respect to
claims for Losses;
(b) The indemnification provided for in Section 9.01(i) or
(ii) (other than any obligation of Principal Stockholder under Section
7.01(a) or (b)) or Section 9.02(i) or (ii) (other than any obligation
of Parent under Section 7.01(a) or (b)) shall not be required unless
and until, at the time of any such determination, the total amount of
Losses otherwise subject to indemnification under such section exceeds
$500,000, in which event the indemnified party or parties will be
entitled to indemnification for the full amount of their Losses;
(c) The total amount of indemnification pursuant to Section
9.01(i)or (ii) (other than any obligation of Principal Stockholder
under Section 7.01(a) or (b)) or Section 9.02(i) or (ii) (other than
any obligation of Parent under Section 7.01(a) or (b)) shall in no
event exceed an amount equal to $2,000,000, PROVIDED, HOWEVER, that
with respect to any indemnification obligation on behalf of the
Principal Stockholder, Parent does hereby agree that the sole remedy of
Parent and its affiliates under Section 9.01(i) or (ii) (other than any
obligation of Principal Stockholder under Section 7.01(a) or (b)) shall
be the reduction in the principal amount of the First Note issued to
the Principal Stockholder in order to satisfy such indemnification
obligation hereunder;
(d) Neither Principal Stockholder, on the one hand, nor Parent
or any of its affiliates, on the other, shall be entitled to
indemnification for Losses arising out of matters referred to in
Section 9.01(i) or Section 9.02(i), as applicable, unless it shall have
given written notice to the indemnifying party, setting forth its claim
for indemnification in reasonable detail, within the period from the
Closing until the first anniversary of the Effective Time;
(e) An indemnified party shall promptly give written notice to
the indemnifying party after the indemnified party has knowledge that
any legal proceeding has been instituted or any claim has been asserted
in respect of which indemnification may be sought under the provisions
of Sections 9.01 or 9.02. If the indemnifying party,
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within 30 days after the indemnified party has given such notice (or
within such shorter period of time as an answer or other responsive
motion may be required), shall have acknowledged in writing his or its
obligation to indemnify, then the indemnifying party shall have the
right to control the defense of such claim or proceeding, and the
indemnifying party shall not settle or compromise such claim or
proceeding without the written consent of the indemnified party. The
indemnified party may in any event participate in any such defense with
his or its own counsel and at his or its own expense. If the party
requested to indemnify declines to undertake the defense of the matter,
the requesting party shall proceed in a commercially reasonable manner
in the defense thereof and, if such matter is ultimately determined
between the parties hereto to be included in Losses for which indemnity
is appropriate, the requesting party may include as such Losses the
reasonable costs of settlement or payment of any resulting judgment and
the reasonable costs (including court costs and reasonable attorneys'
fees) of defending the claim; and
(f) The indemnified party shall be kept fully informed by the
indemnifying party of such action, suit or proceeding at all stages
thereof, whether or not he or it is represented by counsel. The
indemnifying party shall, at the indemnifying party's expense, make
available to the indemnified party and its attorneys and accountants
all books and records of the indemnifying party relating to such
action, suit or proceeding, and the parties hereto agree to render to
each other such assistance as they may reasonably require of each other
in order to ensure the proper and adequate defense of any such action,
suit or proceeding.
SECTION 9.05 DELIVERY OF NOTICE. Parent and Principal
Stockholder agree to promptly deliver a written notice to the other party upon
any determination that a claim for Losses under Section 9.01 or 9.02 is
reasonably likely to exist. Such notice shall describe with reasonable
specificity the circumstances of the possible Losses as to allow the
indemnifying party to evaluate the alleged claim(s), and the indemnified party
shall provide reasonable responses to information requests that the indemnifying
party may have in evaluating the possible existence of Losses.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01 TERMINATION. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite adoption and approval of this Agreement, as
follows:
(a) by mutual written consent duly authorized by the boards of
directors of each of Parent and Company;
(b) by either Parent or Company, if the Effective Time shall
not have occurred on or before December 31, 2001; PROVIDED, HOWEVER,
that the right to terminate
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this Agreement under this Section 10.01(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement
shall have caused, or resulted in, the failure of the Effective Time to
occur on or before such date;
(c) by either Parent or Company, if any Governmental Order,
writ, injunction or decree preventing the consummation of the Merger
shall have been entered by any court of competent jurisdiction and
shall have become final and nonappealable;
(d) by Parent, twenty (20) days after receipt by Company of a
written notice from Parent of a breach of any representation, warranty,
covenant or agreement on the part of Company set forth in this
Agreement, or if any representation or warranty of Company shall have
become untrue, incomplete or incorrect, in either case such that the
conditions set forth in Section 8.03 would not be satisfied (a
"TERMINATING COMPANY BREACH"); PROVIDED, HOWEVER, that if such
Terminating Company Breach is cured by Company within such twenty (20)
day period, Parent may not terminate this Agreement under this Section
10.01(d); or
(e) by Company, twenty (20) days after receipt by Parent of a
written notice from Company of a breach of any representation,
warranty, covenant or agreement on the part of Parent or Merger Sub set
forth in this Agreement, or if any representation or warranty of Parent
or Merger Sub shall have become untrue, incomplete or incorrect, in
either case such that the conditions set forth in Section 8.02 would
not be satisfied (a "TERMINATING PARENT BREACH"); PROVIDED, HOWEVER,
that if such Terminating Parent Breach is cured by Parent within such
twenty (20) day period, Company may not terminate this Agreement under
this Section 10.01(e).
The right of any party hereto to terminate this Agreement pursuant to this
Section 10.01 will remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any Person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
SECTION 10.02 EFFECT OF TERMINATION. Except as provided in
Section 10.05, in the event of termination of this Agreement pursuant to Section
10.01, this Agreement shall forthwith become void, there shall be no liability
under this Agreement on the part of any party hereto or any of its Affiliates or
any of its or their officers or directors, and all rights and obligations of
each party hereto shall cease; PROVIDED, HOWEVER, that nothing herein shall
relieve any party hereto from liability for the willful or intentional breach of
any of its representations and warranties or the willful or intentional breach
of any of its covenants or agreements set forth in this Agreement.
SECTION 10.03 AMENDMENT. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 10.04 WAIVER. At any time prior to the Effective Time,
any party hereto may (a) extend the time for or waive compliance with the
performance of any obligation or other act of any other party hereto, (b) waive
any inaccuracy in the representations and
60
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance by the other party 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.
SECTION 10.05 TERMINATION FEE; EXPENSES.
(a) Except as set forth in this Section 10.05, all Expenses
incurred in connection with this Agreement and the Merger shall be paid by the
party incurring such Expenses, whether or not the Merger is consummated.
(b) In the event that Parent shall terminate this Agreement
pursuant to Section 10.01(b) or (d) and at any time after the date of this
Agreement there shall have been publicly announced a Competing Transaction with
respect to Company and a binding agreement with respect to a Competing
Transaction is entered into by Company on or before December 17, 2001, then
Company shall pay to Parent an amount equal to $100,000 (the "COMPANY
TERMINATION FEE"). Notwithstanding the foregoing, no fee shall be paid pursuant
to this Section 10.05(b) if Parent shall be in material breach of its
obligations hereunder. Any Company Termination Fee shall be paid in same day
funds within three (3) Business Days of the date of termination or the execution
of a binding agreement with respect to a Competing Transaction, as applicable.
(c) In the event that Company shall terminate this Agreement
pursuant to Section 10.01(b) or (e) and at any time after the date of this
Agreement there shall have been publicly announced a Competing Transaction with
respect to Parent and a binding agreement with respect to a Competing
Transaction is entered into by Parent on or before December 17, 2001, then
Parent shall pay to Company an amount equal to $100,000 (the "PARENT TERMINATION
FEE"). Notwithstanding the foregoing, no fee shall be paid pursuant to this
Section 10.05(c) if Company shall be in material breach of its obligations
hereunder. Any Parent Termination Fee shall be paid in same day funds within
three (3) Business Days of the date of termination or the execution of a binding
agreement with respect to a Competing Transaction, as applicable.
(d) The parties agree that any remedy or amount payable
pursuant to this Section 10.05 shall be an exclusive remedy, except for fraud,
any willful breach of any representation, warranty, covenant or agreement
contained in this Agreement or any action seeking specific performance.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01 NOTICES. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in Person, by
telecopy or facsimile, by registered or certified mail (postage prepaid, return
receipt requested) or by a nationally recognized courier
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service to the respective parties at the following addresses (or at such other
address for a party as shall be specified in a notice given in accordance with
this Section 11.01):
(a) if to Company:
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxxx LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to Parent or Merger Sub:
24/7 Media, Inc.
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: General Counsel
Fax: (000) 000-0000
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxx, Esq.
Facsimile: (000) 000-0000
(c) if to Principal Stockholder:
PubliGroupe USA Holding, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxxx LLP
0000 Xxxxxxxx
00
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
SECTION 11.02 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 Merger is not affected in any manner materially 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 a mutually acceptable manner to
the fullest extent permitted by applicable Law in order that the Merger may be
consummated as originally contemplated to the fullest extent possible.
SECTION 11.03 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of Law or
otherwise) without the prior written consent of the other parties hereto.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Notwithstanding anything contained in this Agreement to
the contrary, other than Section 7.02, nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the parties hereto or
their respective successors and permitted assigns any rights or remedies under
or by reason of this Agreement.
SECTION 11.04 INCORPORATION OF EXHIBITS. The Parent Disclosure
Schedule, the Principal Stockholder Disclosure Schedule, Company Disclosure
Schedule and all Annexes and Schedules attached hereto and referred to herein
are hereby incorporated herein and made a part of this Agreement for all
purposes as if fully set forth herein. Parent, the Rolex Stockholders and
Company acknowledge that the Parent Disclosure Schedule, the Rolex Stockholder
Disclosure Schedule and the Company Disclosure Schedule (i) are qualified in
their entirety by reference to specific provisions of this Agreement and (ii)
are not intended to constitute and shall not be construed as indicating that
such matter is required to be disclosed, nor shall such disclosure be construed
as an admission that such information is material with respect to Parent or
Company, as the case may be, except to the extent required by this Agreement and
by applicable Law.
SECTION 11.05 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW
YORK.
SECTION 11.06 JURISDICTION; WAIVER OF JURY TRIAL. Each party
hereto irrevocably consents to the exclusive jurisdiction of any court located
within the State of
New York in connection with any matter based upon or arising
out of this Agreement or the matters contemplated herein, agrees that process
may be served upon it in any manner authorized by the laws of the State of
New
York and waives and covenants not to assert or plead any objection which it
might otherwise have to such jurisdiction and such process. EACH PARTY HERETO
63
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF
ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
HEREOF.
SECTION 11.07 HEADINGS; INTERPRETATION. The descriptive
headings contained in this Agreement are included for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement. The parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
SECTION 11.08 COUNTERPARTS. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 11.09 ENTIRE AGREEMENT. This Agreement (including the
Schedules and Annexes attached hereto, the Parent Disclosure Schedule, the
Principal Stockholder Disclosure Schedule and the Company Disclosure Schedule)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings among the
parties with respect thereto.
SECTION 11.10 SWISS ACCOUNTING. The parties agree that, solely
for the purposes of Swiss generally accepted accounting principles, the
effective date of this Agreement shall be October 1, 2001.
{SIGNATURE PAGES FOLLOW}
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
24/7 MEDIA, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: President
CONTINUUM HOLDING CORP.
By: /s/ Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: President
REAL MEDIA, INC.
By: /s/ Xxxxxx Annasohn
--------------------------------
Name: Xxxxxx Annasohn
Title: CEO
PUBLIGROUPE USA HOLDING, INC.
By: /s/ Xxxxxx Annasohn
--------------------------------
Name: Xxxxxx Annasohn
Title: Director
65
SCHEDULE I
OFFICERS OF THE SURVIVING CORPORATION
Xxxxx X. Xxxxx President
Xxxx X. Xxxxx Senior Vice President and Secretary
66
SCHEDULE II
DIRECTORS OF THE SURVIVING CORPORATION
Xxxxx X. Xxxxx
Xxxx X. Xxxxx
67
SCHEDULE III
Directors of Parent
Xxxxx X. Xxxxx
Xxxxx Xxxxxx
Xxxx X. Xxxxx
Xxxxxxx Xxxxx
Xxxxxx Xxxxxxx
Two additional persons to be designated by Principal Stockholder, at least one
of whom must be "independent" (as determined in accordance with Nasdaq rules)
Each independent designee shall be subject to the approval of Parent, such
approval not to be unreasonably withheld.
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