EXHIBIT 10.27
MERGER AGREEMENT
THIS MERGER AGREEMENT (together with the Exhibits and Schedules hereto, the
"Agreement"), dated February 2, 2000, is entered into by and among
XxxXxxxx.xxx, Inc., a Delaware corporation ("Parent"), SciCentral Acquisition
Subsidiary, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent
("Mergersub"), XxxXxxxxxx.xxx, Inc., a Delaware corporation (the "Company"), and
Xxxxx X. Xxxxx, Xxxxxx Xxxxx, Guy Orgambide, Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxx
Xxxxxxxx, Xxxxx Xxxxxxxx and Xxxxx Xxxxxxx III (collectively, the
"Stockholders").
RECITALS
A. The Board of Directors of the Company and the Stockholders of the
Company have approved the proposed merger (the "Merger") of Mergersub with and
into the Company in accordance with the Delaware General Corporation Law (the
"DGCL") and on the terms and conditions set forth herein.
B. The Board of Directors of Mergersub and Parent, the sole stockholder of
Mergersub, have approved the Merger in accordance with the DGCL and on the terms
and conditions set forth herein.
C. The parties intend for the Merger, for federal income tax purposes, to
qualify as a "reorganization" within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"); however, nothing in this
Agreement shall be construed as a representation or warranty by Parent, or an
agreement by Parent to indemnify any party, with respect to the tax treatment or
tax effects of the transaction.
NOW, THEREFORE, in consideration of the recitals and the mutual covenants,
representations, warranties, conditions, and agreements hereinafter expressed,
the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time, Mergersub shall merge with and into
----------
the Company through the filing of a Certificate of Merger with the Office of the
Secretary of State of the State of Delaware, in accordance with the applicable
provisions of the Delaware General Corporation Law (the time of such filing (the
"Merger Filing") is hereinafter referred to as the "Effective Time"). From and
after the Effective Time, the separate existence of Mergersub shall cease and
the Company shall continue as the surviving corporation (the "Surviving
Corporation").
1.2 The Closing. The closing of the Merger (the "Closing") shall take
-----------
place at the offices of Xxxxxxxxx & Xxxxx PLLC, in Raleigh, North Carolina,
immediately prior to the filing of the Merger Filing. The Closing shall take
place within five (5) business days after the approval of the Merger by the
stockholders of the Company, or on such other date as the parties
may agree (the "Closing Date"). At the Closing, each party shall execute and
deliver to the other all such agreements, documents, and instruments as may be
required or contemplated by this Agreement or as may be reasonably requested by
any party to effect and evidence the consummation of the Merger, all of which
shall be in a form and substance reasonably satisfactory to the other parties.
1.3 Conversion of the Company Stock.
-------------------------------
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Mergersub, the Company or their respective stockholders,
each share of the capital stock of the Company issued and outstanding
immediately prior to the Effective Time (the "Company Stock") shall be canceled
and converted automatically into the right to receive the types and amounts of
consideration as set forth opposite each Stockholder's name on Schedule 1.3
------------
attached hereto. All undeclared or unpaid dividends on the capital stock of the
Company immediately prior to the Effective Time shall be cancelled at the
Effective Time. All the Company stock held in the treasury of the Company
immediately prior to the Effective Time shall be cancelled and no consideration
of any kind shall be delivered in exchange therefor under this Agreement.
(b) At the Closing, each of the Stockholders of the Company shall
surrender and deliver to Parent the certificates evidencing all of the issued
and outstanding shares of the Company Stock, in accordance with the provisions
of Section 1.7, in exchange for the aggregate consideration payable to the
Stockholders in the Merger, as described below (the "Merger Consideration"). The
Merger Consideration (which shall constitute all of the consideration to be
delivered to the Stockholders or any other person in respect of the shares of
capital stock, or rights to acquire shares of capital stock, of the Company)
shall be subject to adjustment as described in Sections 1.4 (Post-Closing
Adjustment), 1.5 (Escrow Agreement), 1.6 (Holdback) and Article VII
(Indemnification). The Merger Consideration shall consist of 40,000 unregistered
shares of the Common Stock, $0.001 par value, of Parent ("Parent Common Stock"),
as described below (the "Merger Shares"). The Merger Shares shall be divided
into three categories as follows: (i) 32,000 or 80% of the Merger Shares to be
delivered at Closing (the "Initial Shares"); (ii) 4,000 or 10% of the Merger
Shares to be held pursuant to the Post-Closing Adjustment set forth in Section
1.4 (the "Holdback Shares") and (iii) 4,000 or 10% of the Merger Shares to be
held in escrow pursuant to Section 1.5 (the "Escrowed Shares"). The "Average
Stock Price" shall mean the average closing price of the Parent Common Stock as
reported on the Nasdaq Stock Market for the ten (10) trading day period ending
on and including the third trading day prior to the Closing Date. The Merger
Consideration shall be payable as follows:
(i) Each Stockholder shall receive a certificate or certificates
representing a number of Initial Shares, which shall be delivered to such
Stockholder as soon as practicable following the Effective Time (subject to
compliance by the Stockholder with the requirements relating thereto set
forth in Section 1.7) in the amounts set forth opposite such holder's name
on Schedule 1.3 under the heading titled "Closing Payment - Initial
------------
Shares"; and
2
(ii) The Escrowed Shares payable to the Stockholders shall be
withheld by Parent and delivered to Centura Bank (the "Escrow Agent") in
accordance with Section 1.5; and
(iii) The Holdback Shares shall be withheld by Parent as deferred
Merger Consideration and issued to the Stockholders in accordance with the
provisions of Section 1.6 (the "Holdback").
(c) Notwithstanding anything to the contrary herein, no fractional shares
of Parent Common Stock will be issued. Any person who would be entitled to
receive a fractional share of Parent Common Stock but for this Section will, in
lieu of such fractional share and upon surrender of such person's certificate or
certificates of the Company Capital Stock, receive cash (without interest) in an
amount equal to such fractional portion of a full share of Parent Common Stock
multiplied by the Average Stock Price.
(d) Each Stockholder's pro rata portion of the Initial Merger
Consideration, which includes the Escrowed Shares and the Holdback, is set forth
on Schedule 1.3 under the appropriately titled columns. Shares of Parent Common
------------
Stock shall be valued for all purposes at the Average Stock Price.
1.4 Post-Closing Adjustment. Within fifteen (15) business days of the
-----------------------
Closing, the Company shall deliver to Parent, in a form satisfactory to Parent,
financial statements and other documentation necessary to determine the total
amount of liabilities of the Company outstanding as of the Closing Date (the
"Closing Date Liabilities"). Parent shall have such access to the Company'
books and records as it deems necessary to verify the amount of such Closing
Date Liabilities. Based on the Closing Date Liabilities, the Holdback Shares
payable to the Stockholders shall be reduced (the "Holdback Shares Adjustment")
as follows: If the Closing occurs on or before February 4, 2000 (the
"Anticipated Closing Date"), the Holdback Shares payable to the Stockholders
shall be reduced, pro rata among the Stockholders based on their respective
ownership of the Company Stock, on a dollar for dollar basis in an amount equal
to the amount by which the Closing Date Liabilities exceed $15,000 in the
aggregate if such excess has not been paid by the Stockholders personally, at
their sole discretion. If the Closing occurs after the Anticipated Closing Date
(other than due solely to the fault of Parent), the Holdback Shares payable to
the Stockholders shall be reduced on a dollar for dollar basis in an amount
equal to the total amount of the Closing Date Liabilities if the total amount of
the Closing Date Liabilities has not been paid by the Stockholders personally,
at their sole discretion. It shall not be considered the fault of Parent if the
Closing is delayed due to unanticipated issues that arise during Parent's due
diligence review of the Company.
1.5 Escrow Agreement.
----------------
(a) On the Closing Date, Parent, each of the Stockholders and the Escrow
Agent shall execute an escrow agreement in the form of EXHIBIT A (the "Escrow
---------
Agreement"), pursuant to which Parent shall deposit into escrow the Escrowed
Shares in payment of part of the Initial Merger Consideration. The Escrowed
Shares shall be available on the terms and conditions set forth herein and in
the Escrow Agreement to secure the payment of any Indemnified Losses for which
the Stockholders are obligated to indemnify the Indemnified Persons under
Article VII
3
hereof. During the period such Escrowed Shares are held in escrow, all cash
dividends, if any, paid with respect to the Escrowed Shares shall be the
property of, and shall be delivered to, the Stockholders, each in accordance
with their respective ownership interests, and each of the Stockholders shall
have the sole power to exercise all voting rights pertaining to their pro rata
portion of Escrowed Shares. All shares issued in respect of the Escrowed Shares
(including, without limitation, shares issued in connection with stock
dividends, stock splits, recapitalizations, reorganizations or similar
transactions affecting the Parent Common Stock) shall, upon issuance, be
deposited in the escrow, held subject to the terms and conditions of the Escrow
Agreement and treated for all purposes as Escrowed Shares.
(b) The adoption of this Agreement and the approval of the Merger by the
Stockholders shall constitute full approval by the Stockholders of the Escrow
Agreement and the appointment of Centura Bank as the escrow agent under the
Escrow Agreement (the "Escrow Agent") and of all of the arrangements relating
thereto, including, without limitation, the indemnification provisions and
obligations set forth in Article VII of this Agreement, the placement in escrow
of the Escrowed Shares, and the appointment of Xxxxx Xxxxxxx III to serve as the
Stockholders' representative (the "Stockholder Representative") to act as the
representative of the Stockholders for purposes of the Escrow Agreement and this
Agreement.
1.6 Holdback. The Holdback portion of the Merger Consideration payable to
--------
the Stockholders shall be withheld at Closing for satisfaction of any Holdback
Shares Adjustment determined in accordance with Section 1.4. Accordingly, the
parties agree that Parent shall be entitled to withhold at Closing the number of
Holdback Shares set forth opposite each Stockholder's name under the column
titled "Holdback" on Schedule 1.3. Promptly after the Holdback Shares
------------
Adjustment has been finally and conclusively determined, Parent shall (subject
to any reduction of the Holdback pursuant to Section 1.5 hereof) pay to each
Stockholder Holdback Shares equal to such Stockholder's portion of the Holdback
as set forth on Schedule 1.3.
------------
1.7 Surrender and Exchange of Certificates. At the Closing, each of the
--------------------------------------
Stockholders shall surrender and deliver to Parent the certificates evidencing
all of the issued and outstanding shares of the Company Stock, duly endorsed by
such Stockholders, and upon such surrender, each such certificate shall
represent the right to receive such Stockholder's pro rata portion of the Merger
Consideration. As soon as practicable following the Closing, Parent shall
instruct the transfer agent of Parent Common Stock to issue the Merger Shares
and to deliver such Merger Shares to the Stockholders or the Escrow Agent, as
provided in this Agreement.
1.8 Dissenting Shares.
-----------------
(a) For purposes of this Agreement, "Dissenting Shares" means the
Company Shares held as of the Effective Time by a Stockholder who has not voted
such Shares in favor of the adoption of this Agreement and the Merger and with
respect to which appraisal shall have been duly demanded and perfected, and not
effectively withdrawn or forfeited, in accordance with the applicable provisions
of the DGCL. Dissenting Shares shall not be converted into or represent the
right to receive the Merger Consideration, unless the Stockholder holding such
Dissenting Shares shall have forfeited such Stockholder's right to appraisal
under the DGCL or
4
withdrawn such Stockholder's demand for appraisal. If such Stockholder has so
forfeited or withdrawn such Stockholder's right to appraisal of Dissenting
Shares, then, (i) as of the occurrence of such event, such Stockholder's
Dissenting Shares shall cease to be Dissenting Shares and shall be converted
into and represent the right to receive the Merger Consideration payable in
respect of such Company Shares pursuant to Section 1.3 hereof, and (ii) promptly
following the occurrence of such event, the Parent or the Surviving Corporation
shall deliver to such Stockholder shares of Parent Common Stock and cash to
which such Stockholder is entitled pursuant to Section 1.3 hereof and shall
deposit with the Escrow Agent (as defined below) shares of Parent Common Stock
representing the portion of the Merger Consideration to which such Stockholder
is entitled pursuant to Section 1.3 hereof.
(b) The Company shall give the Parent (i) prompt notice of any
written demands for appraisal of any Shares, withdrawals of such demands, and
any other instruments that relate to such demands received by the Company and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of the Parent, make any payment with respect to any
demands for appraisal of Shares or offer to settle or settle any such demands.
1.9 Options and Warrants.
--------------------
(a) Prior to the Effective Time, (i) each outstanding option to
acquire shares of capital stock of the Company (individually, an "Option" and
collectively, the "Options") shall be accelerated and exercised in full or
otherwise cancelled and terminated; (ii) all outstanding warrants to acquire
shares of capital stock of the Company (the "Warrants") shall be accelerated
and exercised in full or otherwise cancelled and terminated; and (iii) all other
rights to acquire shares of capital stock of the Company shall be accelerated
and exercised in full or otherwise terminated.
(b) Prior to the Effective Time, the Company shall terminate all
stock option plans and other stock or equity-related plans of the Company (the
"Stock Plans").
1.10 Legend. The shares of Parent Common Stock issued in connection with
------
the Merger will be issued in a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), by reason of Rule 506
of Regulation D thereof and, as such, will constitute restricted securities
within the meaning of Rule 144 promulgated thereunder. Each certificate of the
Parent Common Stock issued in connection with the Merger will bear appropriate
legends to evidence such privately placed shares as being restricted under the
Securities Act, and any other applicable restrictions upon the transferability
of the shares or otherwise. It is acknowledged and understood that Parent is
relying on certain representations made by the Stockholders in the Stockholder
Investment Representation Letters (as herein defined). The Securities Act
legend shall read substantially as follows:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED,
MORTGAGED, PLEDGED,
5
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ALL APPLICABLE
STATE SECURITIES LAWS COVERING SUCH SHARES, COMPLIANCE WITH AN
EXEMPTION FROM SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
The Parent shall be obligated to reissue promptly unlegended certificates
at the request of any Stockholder if the Stockholder shall have obtained, at
Stockholder's sole expense, an opinion of counsel (which may be counsel to the
Parent) reasonably acceptable to the Parent to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
1.11 Conversion of Subsidiary Stock. At the Effective Time, by virtue of
------------------------------
the Merger and without any action on the part of the Parent, Mergersub, the
Company or their respective stockholders, each share of Common Stock, having a
par value per share of $0.001, of Mergersub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation, and, upon surrender of the certificate(s) representing
such shares of Mergersub Common Stock, the Surviving Corporation shall promptly
issue to the owner thereof a certificate representing the share of Common Stock
of the Surviving Corporation into which it has been converted. Such share shall
be the only issued and outstanding capital stock of the Surviving Corporation
and shall be owned by the Parent.
1.12 Certificate of Incorporation. After the Effective Time, the
----------------------------
Certificate of Incorporation of the Company as in effect immediately prior to
the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until amended in accordance with applicable law.
1.13 Bylaws. After the Effective Time, the Bylaws of Mergersub as in
------
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until amended or repealed in accordance with the
provisions thereof and applicable law.
1.14 Directors and Officers. Immediately after the Effective Time, the
----------------------
directors and officers of Mergersub immediately prior to the Effective Time
shall be the directors and officers of the Surviving Corporation and shall serve
in such capacities until their respective successors are duly elected and
qualified. The Surviving Corporation may designate such other officers as it
determines.
1.15 No Further Rights. As of the Effective Time, the Stockholders shall
-----------------
cease to have any rights as stockholders of the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS
6
The Company and each of the Stockholders, jointly and severally, represent
and warrant to Parent as follows:
2.1 Organization and Good Standing. The Company is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has all requisite power and authority to own, operate
and/or license and lease the Company Assets (as defined below) and the other
properties owned or used in its business license or (including, without
limitation, intangible property) (collectively with the Company Assets, the "the
Company Business Assets") and to conduct the operations of its business as
presently conducted. the Company is duly qualified to do business as a foreign
corporation and is in good standing in the jurisdictions listed on Schedule 2.1,
------------
which are all the jurisdictions in which it is required to be so qualified other
than such jurisdictions where the failure to be so qualified would not have a
Material Adverse Effect (as defined in Section 2.4) on the Company.
2.2 Authority. The Company has all requisite power and authority to
---------
execute and deliver this Agreement and the other documents, certificates and
instruments contemplated hereby (collectively with the Merger Agreement, the
"Transaction Documents") to which it is a party and to perform the transactions
contemplated hereby and thereby. The execution, delivery and performance of the
Transaction Documents to which the Company is a party, and the consummation of
the transactions contemplated thereby, have been duly and validly authorized by
all necessary corporate and stockholder action. Each of the Stockholders has all
requisite power and authority to execute and deliver the Transaction Documents
to which such Stockholder is a party, to perform his obligations thereunder, and
to consummate the transactions contemplated by the Transaction Documents. Each
of the Stockholders has all requisite power and authority to vote the
outstanding shares of the Company Common Stock held by such Stockholder, to
approve this Agreement and the transactions contemplated hereby and in the
Transaction Documents and the transactions contemplated hereby and thereby in
compliance with all applicable laws and the Articles and Bylaws of the Company.
Each of the Transaction Documents to which the Company or the Stockholders is a
party has been duly executed and delivered by the Company and the Stockholders
and constitutes a valid and binding obligation of each of the Company and the
Stockholders, enforceable against them in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in equity
or at law).
2.3 Capitalization. The authorized capital stock of the Company consists
--------------
of (a) 8,000,000 shares of common stock, par value $.001 per share (the "the
Company Common Stock"), of which 900,000 shares are issued and outstanding and
no shares are held in the treasury of the Company, and (b) and 2,000,000 shares
of Preferred Stock, par value $.001 per share (the "the Company Preferred
Stock"), of which no shares are issued and outstanding (the Company Common Stock
and Company Preferred Stock together, the "Company Stock"). No additional
shares of the Company Stock are reserved for issuance. Schedule 2.3 sets forth
------------
a complete and accurate list of (i) all stockholders of the Company, indicating
the number of shares held by each stockholder, (ii) all holders of Options and
Warrants and other rights to
7
acquire shares of capital stock of the Company ("Rights"), including the number
of shares subject to each Option, Warrant and Right, and (iii) all of the Stock
Plans. All of the issued and outstanding shares of the Company Stock are, and
all shares that may be issued prior to the Effective Time upon exercise of
Options, Warrants and Rights will be, duly authorized, validly issued, fully
paid, nonassessable and free of all preemptive rights. There are no outstanding
or authorized options, warrants, rights, agreements or commitments to which the
Company or the Stockholders is a party or which are binding upon the Company or
the Stockholders providing for the issuance, disposition or acquisition of any
of the Company's capital stock, other than as listed in Schedule 2.3. There are
------------
no plans providing for stock options or similar rights other than the Stock
Plans listed in Schedule 2.3. There are no outstanding or authorized stock
------------
appreciation, phantom stock or similar rights with respect to the capital stock
of the Company. There are no agreements, voting trusts, proxies or
understandings with respect to the voting, or registration under the Securities
Act, of any shares of the Company other than as listed in Schedule 2.3. All of
------------
the issued and outstanding Company Stock, and the outstanding Options, Warrants
and Rights were issued in compliance with applicable federal and state
securities laws.
2.4 Effect of Agreement. Except as disclosed on Schedule 2.4, the
------------------- ------------
execution, delivery and performance of the Transaction Documents to which the
Company is a party do not and will not: (a) conflict with the Articles of
Incorporation or Bylaws of the Company; (b) violate any law or any rule or
regulation of any governmental body or administrative agency, or conflict with
any judicial or administrative order or decree relating to the Company or the
Company Business Assets, except for any such violations or conflicts which would
not, individually or in the aggregate, have a material adverse effect on the
business, the Company Business Assets, liabilities, results of operations or
condition (financial or otherwise) (a "Material Adverse Effect") of the Company
or impair the ability of the Company or the Stockholders to consummate the
transactions contemplated by this Agreement; (c) constitute a breach or default
under any of the Company Contracts (as defined below); (d) create any security
interest, mortgage, lien, claim, or encumbrance of any kind on any of the
Company Business Assets; or (e) except for the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware, require any consent,
notice to or filing with any governmental authority or administrative agency or
any third party on behalf of the Company or the Stockholders. The matters
described on Schedule 2.4 are referred to as the "Company Required Consents."
------------
2.5 Financials; Books. Attached hereto as Schedule 2.5 are true and
----------------- ------------
complete copies of the unaudited balance sheet, statements of operations,
changes in stockholders' equity and cash flows for the fiscal years ended
December 31, 1999, December 31, 1998 and December 31, 1997 (collectively, the
"Company Financial Statements"). The Company Financial Statements (a) are true,
complete and correct in all material respects; (b) are in accordance with the
books and records of the Company; and (c) present fairly, in all material
respects, the assets, liabilities and financial condition of the Company as of
the respective dates thereof, and the results of operations for the periods then
ending in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved. The Company has no liability
or obligation that is not reflected or reserved against on the balance sheet for
the twelve months ending December 31, 1999 (the "the Company Balance Sheet"),
except for those that are not required by generally accepted accounting
principles to be included therein or those that have been incurred in the
ordinary course of business since the date of the Company Balance Sheet
8
(none of which may reasonably be expected to have a Material Adverse Effect on
the Company). The books and records of the Company are true, accurate and
complete in all material respects and have been maintained in accordance with
generally accepted accounting principles applied on a consistent basis.
2.6 Title to and Sufficiency of Assets and other Property. Set forth on
-----------------------------------------------------
Schedule 2.6 is a true and complete list of all material inventory, machinery,
------------
equipment, furniture, office equipment, supplies, materials, vehicles and other
material items of tangible personal property of every kind owned by the Company
and used in connection with its business (the "the Company Assets"). the Company
has good and marketable title to all of the Company Business Assets, free and
clear of all security interests, mortgages, liens, claims and encumbrances of
every kind except for liens for current taxes not yet due and payable and as
disclosed on Schedule 2.6. The Company Business Assets constitute all of the
------------
assets of any nature required to operate the Company's business in the manner
presently operated by the Company. The Company Assets (a) are in good operating
order, condition and repair (ordinary wear and tear excepted), (b) are suitable
for use in the ordinary course of business of the Company's business and (c) are
free from material defects.
2.7 Real Property. The Company owns no real property. Schedule 2.7
------------- ------------
contains true and correct descriptions of all real property leased by the
Company (the "Company Leased Real Property") and used in connection with its
business, and all buildings, fixtures and improvements thereon (the
"Improvements"). All Improvements conform in all material respects to all
applicable state and local laws, health and safety ordinances and zoning and
building ordinances. None of the Improvements encroaches on the property of any
third person. The Company Leased Real Property is zoned for the purposes for
which such property is presently being used, or has a valid variance therefrom.
2.8 Contracts and Leases. Schedule 2.8 lists all contracts, commitments,
-------------------- ------------
agreements, understandings, obligations, whether written or oral (including,
without limitation, agreements for the borrowing of money or the extension of
credit that involve a commitment or expenditure by, or revenue to, the Company
in excess of $1,000.00, and agreements with employees, consultants and other
contractors), leases (including, without limitation, leases for the Company
Leased Real Property) and licenses, whether written or oral, to which the
Company or any of the Stockholders (on behalf of the Company) is party or by
which the Company or the Company Business Assets or any of the Stockholders (on
behalf of the Company) is bound (collectively, the "Company Contracts"). Each
of the Company Contracts is valid, binding and enforceable in accordance with
its terms and is in full force and effect, except as such enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law). There are no
existing defaults on the part of the Company or, to the knowledge of the Company
and the Stockholders, any other party to the Company Contracts, and, to the
knowledge of the Company and the Stockholders, no events or circumstances have
occurred which, with or without notice or lapse of time or both, would
constitute material defaults under any of the Company Contracts. The execution,
delivery and performance of the Transaction Documents do not and will not, with
respect to any the Company Contract, (a) constitute a default or accelerate
9
the obligations thereunder, (b) require the consent of any person or party,
except for the Company Required Consents, or (c) affect the enforceability or
validity thereof or the terms thereof.
2.9 Receivables. Attached hereto as Schedule 2.9 hereto is a true,
-----------
complete and accurate detailed listing of all accounts receivable of the Company
(the "Company Receivables"). The Company Receivables are, and will be at the
Effective Time, legal, valid and binding obligations and arose in the ordinary
course of business. The Company Receivables are not subject to any
counterclaim, set off, defense, security interest, claim or encumbrance. the
Company has made available to Parent complete and correct copies of all
instruments, documents and agreements evidencing such the Company Receivables,
including, without limitation, an aging schedule related to the Company
Receivables.
2.10 Intellectual Property.
---------------------
(a) Intellectual Property Rights. Schedule 2.10(a) hereto sets
---------------------------- ----------------
forth a complete and correct list of (i) all patents (the "the Company
Patents"), trademarks, trade names (including all federal and state
registrations pertaining thereto, or applications for such registrations and a
description of the status of such applications), proprietary databases and
registered copyrights owned by the Company (collectively with all unregistered
copyrights, the "Company Proprietary Intellectual Property") and (ii) all
patents, trademarks, trade names, copyrights, technology and processes used by
the Company in its businesses which are material to its business and are used
pursuant to a license or other right granted by a third party, and all
agreements related thereto (collectively, the "Company Licensed Intellectual
Property", and together with the Company Proprietary Intellectual Property
referred to as "the Company Intellectual Property"). Each of the federal, state
and other governmental registrations with any country pertaining to the Company
Proprietary Intellectual Property is valid and in full force and effect. The
Company owns, or has the right to use pursuant to valid and effective
agreements, all the Company Intellectual Property, and the consummation of the
transactions contemplated hereby will not materially adversely alter or impair
any such rights. No claims are pending against the Company by any person with
respect to the use of any the Company Intellectual Property or challenging or
questioning the validity or effectiveness of any license or agreement relating
to the same that would be likely to have a Material Adverse Effect on the
Company, and, to the knowledge of the Company and the Stockholders, the current
use by the Company of the Intellectual Property does not in any material respect
infringe upon the rights of any third party. Schedule 2.10(a) sets forth a list
----------------
of all jurisdictions in which the Company is operating under a trade name, and
each jurisdiction in which any such trade name is registered. No the Company
Patent has been or is now involved in any interference, reissue, reexamination
or opposition proceeding of which the Company has received notice, nor is the
Company aware of any potentially interfering patent or patent application of any
third party. To the knowledge of the Company, no person or entity is presently
selling or marketing a product which is covered by the Patents, and, to the
knowledge of the Company, the Patents have not been challenged or threatened in
any way. No current or former the Company employee is named as an inventor on
any pending patent application. All of the Company Patents are currently in
compliance with formal legal requirements (including payment of filing,
examination and maintenance fees and proofs of working or use) and to the
knowledge of the Company, there is no currently existing circumstance which
would render the
10
Company Patents invalid or unenforceable, and they are not subject to any
maintenance fees or taxes or actions falling due within ninety days after the
date of Closing.
(b) Company Computer Software and Hardware.
--------------------------------------
(i) Schedule 2.10(b) hereto sets forth a true and complete list
----------------
of: (a) all software and associated documentation owned by or developed by or
for the Company material to the business of the Company (such items set forth on
Schedule 2.10(b) are hereinafter referred to as the "the Company Proprietary
----------------
Software"); (b) all software (other than the Company Proprietary Software and
"shrink-wrap" or other "off the shelf" software) used by the Company or its
employees in connection with the business of the Company (the "the Company
Licensed Software" and together with the Company Proprietary Software, the "the
Company Software"). The Company has all rights that are necessary or
appropriate to distribute, license or sublicense the Company Software to third
parties and to appoint others to do any of the foregoing to the extent that
distribution, licensing or sublicensing of such software is necessary to the
conduct of business of the Company. The Company has or has the right to use all
technical and descriptive materials to run its business in accordance with its
historical practices, except as would not have a Material Adverse Effect on the
Company. The Company Proprietary Software consists of: (a) source and object
code embodied in magnetic media; and (b) all development and procedural tools,
documentation and manuals necessary to maintain, enhance, develop derivative
works, support and service the Company Proprietary Software in accordance with
historical practice, including licenses to use compilers, assemblers, libraries
and other aids.
(ii) The Company has sole and exclusive rights, title and
interest in and to all intellectual property rights in the Company Proprietary
Software, including all worldwide copyrights, trade secrets, trademarks, moral
rights and proprietary and confidential information rights therein. The Company
Proprietary Software is free and clear of all liens, claims and encumbrances.
The use by the Company of the Company Licensed Software and the use and
distribution of the Company Proprietary Software in the manner currently used
and distributed by the Company complies with the terms of all contracts and
agreements to which the Company is a party or by which it is bound and is in
compliance with all applicable laws, regulations and codes of any foreign, U.S.,
state or local authority, including without limitation, all U.S. Export
Administration Regulations, except where such failure to comply would not have a
Material Adverse Effect. The Company has been granted under the license
agreements relating to the Company Licensed Software (the "the Company License
Agreements") valid and subsisting license rights with respect to all software
comprising the Company Licensed Software and such rights are sufficient in all
respects to conduct the business of the Company as presently conducted and as
currently proposed to be conducted. The Company is in compliance with each of
the terms and conditions of each of the Company License Agreements except to the
extent failure to so comply, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. In the case of any commercially
available "shrink-wrap" software programs (such as Lotus 1-2-3 or Microsoft
Word), the Company has not made and is not, to the knowledge of the Company and
the Stockholders, using any unauthorized copies of any such software programs
and, to the knowledge of the Company, none of the employees, agents or
representatives of the Company have made or are using any such unauthorized
copies, except as would not have a Material Adverse Effect on the Company.
11
(iii) The Company Proprietary Software and such of the Company
Licensed Software as is bundled with or is otherwise an integral part of the
Company Proprietary Software does not infringe the patent, copyright or trade
secret rights or any other intellectual property right of any third party which
may exist anywhere in the world.
(iv) The Company has not granted rights in the Company Software
to any third party other than as set forth on Schedule 2.10(b).
----------------
(v) There have been no problems experienced by the Company in
the past twelve (12) months with respect to the Company Software, the related
computer hardware used by the Company in its operations or the provision of
services to the Company clients which have arisen outside the ordinary course of
business and would have a Material Adverse Effect on the Company.
(vi) The Company Proprietary Software is, and such of the
Company Licensed Software as is bundled with or is otherwise an integral part of
the Company Proprietary Software (to the knowledge of the Company and the
Stockholders, after due inquiry of the licensors of such the Company Licensed
Software) is, "Millennium Compliant" (defined below). For the purposes of this
Agreement, "Millennium Compliant" means that such software accurately accepts
and processes date/time data (including, but not limited to, calculating,
comparing, sorting and sequencing) ("Processes") and returns and displays
date/time data in a consistent manner and without interruption regardless of
dates used, whether before, on or after January 1, 2000, and regardless of the
date in time which such Processes are performed, and such software accurately
processes all leap year calculations, including without limitation recognizing
the year 2000 as a leap year.
(vii) Prior to any export or re-export either directly or
indirectly by the Company of any software or other technical data, the Company
has first obtained the written approval or required export license for such
export or re-export from the United States Department of Commerce or any other
agency of the U.S. Government having jurisdiction over such export or re-export
unless the export or re-export of software or other technical data is covered by
a license exemption.
2.11 Litigation. Except as disclosed on Schedule 2.11, there are no
----------
claims, actions, suits or investigations pending, or to the knowledge of the
Company and the Stockholders, threatened, against the Company or its business or
affecting the Company Business Assets or against the Stockholders.
2.12 Compliance with Laws; Permits. There is not outstanding or, to the
-----------------------------
knowledge of the Company and the Stockholders, threatened, any order or decree
of any court, governmental agency or arbitration tribunal against or involving
the Company or its business or the Company Business Assets. The Company is
currently, and has been at all times, in full compliance with all laws, rules,
regulations and licensing requirements of all federal, state, local and foreign
authorities applicable to the Company Business Assets and operations of its
business, except for failures to comply which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The Company has
obtained all permits, certificates and licenses required for the conduct of its
business and the ownership of the Company Business Assets, all
12
of which are described on Schedule 2.12 (the "the Company Permits"). The Company
-------------
is not in violation of any of the Company Permits, and no proceedings are
pending or, to the knowledge of the Company and the Stockholders, threatened to
revoke or limit any the Company Permit.
2.13 Taxes.
-----
(a) The Company has properly completed and timely filed all federal,
state, local and foreign tax returns and reports required to be filed by it (the
"Tax Returns"). All Tax Returns are accurate, complete and correct as filed,
and the Company has paid in full or made adequate provision in the Company
Financial Statements for all amounts shown to be due thereon. the Company is
not delinquent in the payment of any tax assessment or other governmental charge
(including, without limitation, withholding taxes).
(b) Except as disclosed on Schedule 2.13, the Company has not been
notified by any governmental authority that an audit or review of any tax matter
is contemplated. The Company knows of no tax deficiency or claim for additional
taxes asserted or threatened to be asserted against it by any taxing authority
and the Company knows of no grounds for any such assessment. No extension of
time with respect to any date on which a tax return was or is to be filed by the
Company is in force, and no waiver or agreement by the Company is in force for
the extension of time for the assessment or payment of any tax. For purposes of
this Agreement, the term "tax" includes all federal, state, local and foreign
taxes or assessments, including income, sales, gross receipts, excise, use,
value added, royalty franchise, payroll, withholding, property and import taxes
and any interest or penalties applicable thereto.
(c) The Company has not agreed to, and is not required to, make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
(d) The Company is not and has never been a member of a consolidated
group or combined group or combined group of corporations.
(e) There has been no change in ownership of the Company that would
limit the Parent's ability to utilize the net operating losses of the Company.
2.14 Insurance. Schedule 2.14 describes all insurance policies maintained
--------- -------------
by the Company with respect to its business and the Company Business Assets.
Such policies are valid, binding and enforceable in accordance with their terms,
are in full force and effect, and all premiums due thereon have been paid.
2.15 Employment and Labor Matters. No employees of the Company have
----------------------------
entered into employment or other agreements regarding compensation, whether
written or oral, with the Company. No employees of the Company have been or are
represented by a union or other labor organization or covered by any collective
bargaining agreement. There is no unfair labor practice complaint, labor
organizational effort, strike, slowdown or similar labor matter pending or, to
the knowledge of the Company and the Stockholders, threatened against the
Company or its business. the Company is in compliance with all federal, state
and local laws and regulations
13
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and there is no unfair labor practice complaint
against the Company pending or, to the knowledge of the Company and the
Stockholders, threatened. Upon termination of the employment of any employees,
neither the Company nor the Parent nor the Surviving Corporation will by reason
of the Merger or anything done prior to the Effective Time be liable to any of
such employees for severance pay or any other payments (other than accrued
salary, vacation or sick pay in accordance with the Company's normal policies).
Set forth on Schedule 2.15 is a true and complete list of all current directors,
-------------
officers, employees or consultants of the Company, including, in each case,
name, current job title, base salary, bonus potential, commissions, and
termination obligations.
2.16 Employee Benefits. Except as set forth on Schedule 2.16, there are no
----------------- -------------
Plans, as defined below, contributed to, maintained or sponsored by the Company,
or to which the Company is obligated to contribute or with respect to which the
Company has any liability or potential liability, whether direct or indirect
(including all Plans contributed to, maintained or sponsored by each member of
the controlled group of companies, within the meaning of Sections 414(b),
414(c), and 414(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), of which the Company is a member, to the extent the Company has any
potential liability with respect to such Plans). For purposes of this
Agreement, the term "Plans" shall mean: (a) employee benefit plans as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not funded and whether or not terminated, (b) employment
agreements, and (c) personnel policies or fringe benefit plans, policies,
programs and arrangements, whether or not subject to ERISA, whether or not
funded, and whether or not terminated, including without limitation, stock
bonus, deferred compensation, pension, severance, bonus, vacation, travel,
incentive, and health, disability and welfare plans.
2.17 Absence of Changes. Except as disclosed on Schedule 2.17, since
------------------ -------------
December 31, 1998, the Company has conducted the operations of its business only
in the ordinary course, and has not:
(a) Suffered any damage to any of the Company Business Asset, whether
or not covered by insurance, except damage that could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect on the Company;
(b) Sold or disposed of any of the Company Business Assets, except
such sales or dispositions made in the ordinary course of business that
would not, either individually or in the aggregate, have a Material Adverse
Effect on the Company;
(c) Made any general wage increase for its employees as a group other
than in the ordinary course of business;
(d) Amended or terminated any Company Contract;
(e) Incurred any obligation or liability, except normal trade or
business obligations incurred in the ordinary course of business;
14
(f) Introduced any new method of management, operations or
accounting;
(g) Suffered any adverse change in the condition (financial or
otherwise), or any other event, that might reasonably be expected to have
a Material Adverse Effect on the Company; or
(h) Agreed, whether in writing or otherwise, to take any action
described in this Section 2.17.
2.18 Environmental Protection. No substances that are defined by laws or
------------------------
regulations concerning the environment as toxic materials, hazardous wastes or
hazardous substances (including without limitation any asbestos, oils,
petroleum-derived compound or pesticides) (collectively, "Hazardous Materials")
are or have been located in, on or about the Company Leased Real Property or the
Improvements. The Company Leased Real Property has not been used for the
storage, manufacture or disposal of Hazardous Materials, and the Company has not
used, or provided permission to others to use, the Company Leased Real Property
for the storage, manufacture or disposal of Hazardous Materials. No Hazardous
Materials have been transported off site from the Company Leased Real Property.
Specifically, but without limitation, there are and have been no storage tanks
located on the Company Leased Real Property. The Company has complied in all
material respects with all federal, state and local environmental laws and
regulations.
2.19 Related Party Transactions. Except as set forth on Schedule 2.18,
-------------------------- -------------
the Company Contracts do not include any agreement with or any other commitment
to (a) any officer or director of the Company; (b) any person related by blood
or marriage to any such officer or director; or (c) any corporation,
partnership, trust or other entity in which the Company or any such officer,
director or related person has an equity or participating interest, and no such
other agreement or commitment exists.
2.20 Disclosure. No representation, warranty or statement made by the
----------
Company or the Stockholders in this Agreement or the exhibits or schedules
hereto, or in any financial statement, other written financial information or
schedules, or any other document, certificate or other instrument furnished or
to be furnished to Parent by or on behalf of the Company at or prior to the
Closing pursuant to this Agreement, contains or will contain any untrue
statement of a material fact, or omits to state any material fact necessary, in
light of the circumstances in which they were made, to make the statements
contained herein or therein not misleading. There is no event, fact or
condition that has had, or that reasonably could be expected to have, a Material
Adverse Effect on the Company, that has not been set forth in this Agreement or
the Schedules hereto.
2.20 Subsidiaries. The Company has no wholly owned or partially owned
------------
subsidiaries.
2.21 Brokers' Fees. Neither the Company nor any of the Stockholders has
-------------
retained any broker, finder or agent, or has any liability or obligation, nor
will either of them, or anyone on their behalf, incur any liability or
obligation, to pay any fees, commissions or similar payments to any broker,
finder or agent with respect to the transactions contemplated by this Agreement.
15
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGERSUB
Parent and Mergersub, jointly and severally, represent and warrant to the
Company as follows:
3.1 Organization and Good Standing. Each of Parent and it subsidiaries,
------------------------------
including Mergersub, is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction and has all
requisite power and authority to own, operate and/or lease its assets and the
other properties owned or used in its business (including, without limitation,
intangible property) and to conduct the operations of its business as presently
conducted.
3.2 Authority. Each of Parent and Mergersub has all requisite power and
---------
authority to execute and deliver the Transaction Documents to which it is a
party and to perform the transactions contemplated thereby. The execution,
delivery and performance of the Transaction Documents, and the consummation of
the transactions contemplated thereby, have been duly and validly authorized by
all necessary corporate and stockholder action on the part of each of Parent and
Mergersub (as applicable). Each of the Transaction Documents to which Parent or
Mergersub is a party has been duly executed and delivered by such party and each
constitutes a valid and binding obligation of Parent and Mergersub, enforceable
against them in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law).
3.3 Capitalization. Immediately prior to the Effective Time, the
--------------
authorized capital stock of Parent consists of (a) 90,000,000 shares of common
stock, $0.001 par value, of which 26,380,673 shares are issued and outstanding,
and 10,000,000 shares of Preferred Stock, $0.001 par value, of which no shares
are designated or issued and outstanding. All of the issued and outstanding
shares of capital stock of Parent were issued in compliance with applicable
federal and state securities laws.
3.4 Effect of Agreement. Except for (i) the filing of the Merger Filing,
-------------------
(ii) such filings, consents, approvals as may be required under federal and
state securities laws, (iii) the filing with the Nasdaq National Market of an
application for listing of the Merger Shares, and (iv) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, could be expected to have a material adverse effect on Parent and its
subsidiaries, taken as a whole, the execution, delivery and performance of the
Transaction Documents to which Parent is a party do not and will not: (a)
conflict with the Certificate of Incorporation or Bylaws of Parent; (b) violate
any law or any rule or regulation of any governmental body or administrative
agency, or conflict with any judicial or administrative order or decree relating
to Parent or the Parent's assets, except for any such violations or conflicts
16
which would not, individually or in the aggregate, have a material adverse
effect on Parent and its subsidiaries, taken as a whole, or impair the ability
of Parent to consummate the transactions contemplated by this Agreement; (c)
constitute a breach or default under any instrument, contract or other agreement
to which the Parent is party to which it or any of its assets or properties is
bound or subject; (d) create any security interest, mortgage, lien, claim, or
encumbrance of any kind on any of the Parent's assets; or (e) require any
consent, notice to or filing with any governmental authority or administrative
agency.
3.5 Litigation. There are no claims, actions, suits or investigations
----------
pending, or to the knowledge of Parent, threatened, against Parent that in the
aggregate could have a material adverse effect upon the transactions
contemplated hereby or Parent and its subsidiaries, taken as a whole.
3.6 Disclosure. No representation, warranty or statement made by Parent
----------
in this Agreement or the exhibits or schedules hereto or other written financial
information or schedule or any other instrument furnished or to be furnished to
the Company by or on behalf of Parent at or prior to Closing, pursuant to this
Agreement, contains or will contain any untrue statement of a material fact, or
omits to state any material fact necessary, in light of the circumstances in
which they were made, to make the statements contained herein or therein not
misleading. There is no event, fact or condition that has had, or that
reasonably could be expected to have, a Material Adverse Effect on the Parent or
its business that has not been disclosed to the Company.
3.7 Brokers' Fees. Parent has not retained any broker, finder or agent,
-------------
nor has any liability or obligation, nor will it, or anyone on its behalf, incur
any liability or obligation, to pay any fees, commissions or similar payments to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
3.8 Merger Shares. The shares of Parent Common Stock to be issued in
-------------
connection with the Merger, when delivered hereunder, will be validly issued,
fully paid and nonassessable, and will be free of any liens or encumbrances.
3.9 Financials; Books. The financial statements of Parent as filed with
-----------------
the Securities and Exchange Commission (a) are true complete and correct in all
material respects; (b) are in accordance with the books and records of the
Parent; and (c) present fairly, in all material respects, the assets,
liabilities and financial condition of the Parent as of the date thereof, and
the results of operations for the period then ending in conformity with
generally accepted accounting principles.
ARTICLE IV
COVENANTS
4.1 Conduct of Business. Between the date of this Agreement and the
-------------------
Effective Time, the Company and the Stockholders shall (other than pursuant to
the written consent of Parent):
17
(a) Conduct the operations of the Company's business in the normal
and customary manner in the ordinary course of business;
(b) Maintain the Company Assets in good operating order, repair and
condition;
(c) Keep in full force and effect the insurance described in Section
2.15;
(d) Perform all of its obligations under all of the Company Contracts
and not amend any provision thereof other than amendments that involve a
commitment or expenditure, or revenue to the Company, of less than $500.00;
(e) Use its best efforts to preserve the Company's organization
intact and maintain its relationships with its employees, suppliers and
customers;
(f) Promptly advise Parent of any adverse change in the condition
(financial or otherwise) of the Company's business or the Company Business
Assets;
(g) Promptly advise Parent of the occurrence of any event or
circumstance which affects the consummation of the transactions
contemplated by this Agreement or which, if in existence on the date of
this Agreement, would have been required to have been disclosed in a
Schedule to this Agreement;
(h) Not create or permit to exist any security interest, mortgage,
lien, claim, or encumbrance of any kind with respect to any of the Company
Business Assets;
(i) Not sell or dispose of any of the Company Business Assets, except
in the ordinary course of business of the Company's business;
(j) Promptly advise Parent of any change in the list of employees
referred to in Section 2.16 or in the compensation payable to any such
employee;
(k) Not make any capital improvement or expenditure without the prior
consent of Parent, other than improvements or expenditures in the ordinary
course of business in amounts of less than $500.00; and
(l) Maintain and collect the Company Receivables and extend credit
terms to its customers in the ordinary course of business consistent with
past practices.
4.2 Access and Information. The Company and the Stockholders shall permit
----------------------
Parent and its counsel, accountants and other representatives full access during
normal business hours to all the properties, assets, books, records, agreements
and other documents of the Company. The Company shall furnish to Parent and its
representatives all information concerning the Company Business Assets or the
Company's business as Parent may request. The Company shall permit and
facilitate communications between Parent and the Company's suppliers, customers,
landlords and other persons having relationships with the Company's business.
18
4.3 No Other Solicitations. Until the earlier of the Effective Time or
----------------------
the termination of this Agreement, the Company and the Stockholders shall not,
and the Company and the Stockholders shall use their best efforts to cause each
of their respective officers, directors, employees, representatives and agents
or affiliates of such officers, directors, employees, representatives and agents
not to, directly or indirectly, solicit, initiate or encourage any offer,
proposal or inquiry from, or engage in any discussions or negotiations with, any
person regarding the sale or lease of the capital stock of the Company, its
business, or any of the Company Business Assets. The Company shall immediately
notify Parent of, and shall disclose to Parent all details of, any inquiries,
discussions or negotiations of the nature described above.
4.4 Stockholders' Consent.
---------------------
(a) The Company shall, acting through its Board of Directors and in
accordance with the DGCL, as soon as practicable, obtain the affirmative vote at
a meeting of the Stockholders duly noticed and held or solicit and obtain
written consents of the required number of the Stockholders for the purpose of
adopting and approving this Agreement (including without limitation the matters
referred to in Section 1.8 and Article VII hereof) and the approval of the
Merger in accordance with the provisions of the Company Certificate of
Incorporation and the DGCL (the "Stockholders' Vote"). In connection with the
Stockholders' Vote, the Company, acting through its Board of Directors, shall
recommend that the Stockholders of the Company consent to the adoption of this
Agreement and the approval of the Merger, shall prepare and send any information
required to be provided to the Stockholders in accordance with applicable law
and not include in the materials sent to the Stockholders any false or
misleading statement or omit to state any fact required to be stated in order to
make the statements therein not false or misleading, and shall otherwise use its
best efforts to obtain the Stockholders' Vote and any other consents or
approvals from the Stockholders necessary to consummate the transactions
contemplated herein.
(b) Each of the Stockholders agrees to (i) vote all shares that are
beneficially owned by him or her, or for which he or she has voting authority,
in favor of the adoption of this Agreement and the approval of the Merger and
(ii) otherwise use his or her best efforts to obtain the Stockholders' Vote.
4.5 Agreements. The Company shall use all reasonable efforts to deliver
----------
to the Parent prior to the Closing Date all agreements of the Stockholders
required to be executed by them under this Agreement.
4.6 Further Assurances. From and after the Closing Date, the parties
------------------
shall take such steps and execute such documents, and instruments as may be
reasonably required to make effective the transactions contemplated hereby.
4.7 Confidentiality. In recognition of the confidential nature of certain
---------------
of the information which will be provided to any party by the other parties,
each of Parent, the Company and the Stockholders agrees to retain in confidence,
and to require its directors, officers, employees, consultants, professional
representatives and agents (collectively, its
19
"Representatives") to retain in confidence all information transmitted or
disclosed to it by any other party, and further agrees that it shall not use for
its own benefit (other than in connection with the transactions contemplated by
this Agreement) and shall not use or disclose to any third party, or permit the
use or disclosure to any third party of, any information obtained from or
revealed by any other party, except that each of Parent, the Company and the
Stockholders may disclose the information to those of its Representatives who
need the information for the proper performance of their assigned duties with
respect to the consummation of the transactions contemplated hereby. In making
such information available to its Representatives, each of Parent, the Company
and the Stockholders shall take all precautions to ensure that its
Representatives use the information only as permitted hereby. Notwithstanding
anything to the contrary in the foregoing provisions, such information may be
disclosed: (a) where it is legally necessary, to any regulatory authorities or
governmental agencies; (b) if it is required by court order or decree or
applicable law; (c) if it is ascertainable or obtained from public or published
information; (d) if it is received from a third party not known to the recipient
to be under an obligation to keep such information confidential; or (e) if the
recipient can demonstrate that such information was in its possession prior to
disclosure thereof in connection with this Agreement. If any party is required
to make disclosure of any such information by operation of law, such disclosing
party will give the other parties prior notice of the making of such disclosure
and will use all reasonable efforts to afford such other parties an opportunity
to contest the making of such disclosure. In the event that the Closing does not
occur, each of Parent, the Company and the Stockholders shall immediately
deliver, or cause to be delivered, to the other (without retaining any copies
thereof) any and all documents, statements or other written information obtained
from the other that contain confidential information.
4.8 FIRPTA. The Company shall, prior to the Closing Date, provide Parent
------
with a properly executed Foreign Investment and Real Property Tax Act of 1980
("FIRPTA") FIRPTA Notification Letter which states that shares of capital stock
of the Company do not constitute "United States real property interests" under
Section 897(c) of the Internal Revenue Code, as amended (the "Code"), for
purposes of satisfying Parent's obligations under Treasury Regulation Section
1.1445-2(c)(3). Further, the Company shall provide Parent a form of notice to
the Internal Revenue Service in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2), along with written authorization for Parent to
deliver such notice form to the Internal Revenue Service on behalf of the
Company upon the Closing of the Merger.
ARTICLE V
CONDITIONS PRECEDENT TO PARENT'S AND
MERGERSUB'S OBLIGATIONS
The obligations of Parent and Mergersub to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of the following
conditions on or before the Effective Time:
5.1 Representations, Warranties and Covenants. The representations and
-----------------------------------------
warranties of the Company and the Stockholders contained in this Agreement shall
have been true and correct on date of this Agreement and shall be true and
correct as of the Effective Time as though made on and as of the Effective Time,
and the Company and the Stockholders shall have duly
20
performed and complied with all covenants and required by this Agreement to be
performed or complied with by it or them on or prior to the Closing.
5.2 Absence of Litigation. As of the Effective Time, no action or
---------------------
proceeding shall be pending or, in the reasonable opinion of the Company or the
Stockholders, threatened by or before any court or other governmental body or
agency seeking to restrain, prohibit or invalidate the transactions contemplated
by this Agreement or which would adversely affect the right of Parent to own,
operate or control the Company Business Assets or the Company's business after
the Effective Time.
5.3 Absence of Change. Between the date of this Agreement and the
-----------------
Effective Time, no adverse change shall have occurred in the business,
operations or financial or other condition of the Company, its business or the
Company Business Assets, nor shall there have occurred any casualty loss or
destruction of, or damage to, any of the Company Assets.
5.4 Consents and Approvals. All (a) the Company Required Consents, (b)
----------------------
licenses, (c) other orders or notifications of, or registrations, declarations
or filings with, or expiration of waiting periods imposed by, any applicable
governmental or judicial authority and (d) consents, approvals, authorizations
or notifications of any other third parties, all as required in connection with
consummation of the transactions contemplated by this Agreement, including the
operation of the Company's business by Parent, shall have been made or obtained
or shall have occurred.
5.5 Stockholders' Vote; Dissenting Shares. This Agreement and the Merger
-------------------------------------
shall have received the Stockholders' Vote and the number of Dissenting Shares
shall not exceed 2% of the number of outstanding shares of the Company Stock as
of the Effective Time.
5.6 Compliance Certificate. Each of the Company and the Stockholders
----------------------
shall have delivered to Parent and Mergersub a certificate (without
qualification as to knowledge or materiality or otherwise except as may be set
forth in the representations and warranties themselves) to the effect that each
of the conditions specified in Sections 5.1 through 5.5 is satisfied in all
respects.
5.7 Secretary's Certificate. The Company shall have delivered to Parent
-----------------------
and Mergersub a certificate of the Secretary of the Company, dated as of the
Effective Time, in form and substance reasonably satisfactory to Parent and
Mergersub, certifying (i) the names of its officers authorized to sign this
Agreement, the certificates and the other documents and instruments delivered
pursuant to this Agreement by the Company or any of its officers, together with
true signatures of such officers; (ii) that the copies of the Articles of
Incorporation and Bylaws of the Company attached thereto are true, correct and
complete; (iii) that the resolutions of the Board of Directors of the Company
attached thereto evidencing the approval of this Agreement and the transactions
contemplated herein were duly adopted, have not been amended or rescinded and
are in full force and effect; and (iv) that the resolutions of the Stockholders
attached thereto evidencing approval of the Agreement and the transactions
contemplated herein were duly adopted, have not been rescinded or amended and
are in full force and effect; (v) that notice of the action of the Stockholders,
if taken by written consent of fewer than all of the Stockholders, has been sent
to the remaining Stockholders in accordance with the applicable
21
provisions of the DGCL; and (vi) that the number of Dissenting Shares does not
exceed two percent (2%) of the number of outstanding shares of the Company as of
the Effective Time.
5.8 Legal Opinion. Parent and Mergersub shall have received an opinion of
-------------
Xxxxxx Godward LLP counsel to the Company, dated as of the Effective Time, in
the form of Exhibit B attached hereto.
---------
5.9 Inventions Agreements. Parent shall have received a Non-Disclosure
---------------------
and Invention Agreement in the form attached to the Employment Agreements, duly
executed by all employees of the Company.
5.10 Stockholder Investment Representation Letter. Parent shall have
--------------------------------------------
received a Stockholder Investment Representation Letter in the form of Exhibit C
---------
attached hereto, duly executed by each of the Stockholders.
5.11 Escrow Agreement. Parent shall have received the Escrow Agreement,
----------------
duly executed by the Stockholder Representative and each of the Stockholders.
5.12 Mergersub Stock Certificate. Parent shall have received a
---------------------------
certificate evidencing one (1) share of the Company Common Stock, dated the
Effective Time and issued in the name of Parent.
5.13 Resignations. The Parent shall have received resignations, duly
------------
executed, by all officers and directors of the Company, of their respective
positions with the Company, effective as of the Effective Time.
5.14 Stock Plans. Parent shall have received written evidence,
-----------
satisfactory to Parent, of the termination of all Stock Plans.
5.15 Employment / Consulting Agreements. Parent shall have received
----------------------------------
employment and/or consulting agreements in forms reasonably satisfactory to the
Parent (the "Employment Agreements"), duly executed by each of the Stockholders
and such other individuals as Parent may request.
5.16 Registration Rights Agreement. Parent shall have received a
-----------------------------
Registration Rights Agreement by and between the Parent and the Stockholders in
the form of Exhibit D attached hereto (the "Registration Rights Agreement"),
---------
duly executed by all of the Stockholders.
5.17 Stock Powers. Parent shall have received executed stock powers from
------------
each of the Stockholders with respect to the Escrowed Shares.
5.18 Surrendered Stock Certificates. Parent shall have received stock
------------------------------
certificates representing all the issued and outstanding Company Stock, duly
endorsed by the Stockholders.
5.19 Listing of Merger Shares. The Merger Shares shall have been approved
------------------------
for listing and quotation on the Nasdaq Stock Market.
22
5.20 Securities Laws. Parent shall have received all federal or state
---------------
securities permits, approvals or other approvals necessary to issue shares of
Parent Common Stock pursuant to the Merger.
5.21 Relocation. Within sixty (60) days following the Closing, all
----------
activities and resources of the Company related to research and development and
technology shall be relocated to the offices of the Parent located in
Morrisville, North Carolina. The business development and other activities of
the Company shall remain in Washington, D.C. office of the Company.
5.22 Intellectual Property Ownership. The Company shall own, to the
-------------------------------
satisfaction of Parent in its sole discretion, of all intellectual property
developed by or for Company or its employees or consultants which is used in and
for the operation of Company's business, including without limitation,
xxx.xxxxxxxxxx.xxx web site (the "SciCentral Site"), the domain name
------------------
"xxxxxxxxxx.xxx" the SciCentral Site content, traffic and usage information, the
trademark "SCICENTRAL," (if applicable) all software necessary to run the
SciCentral Site, and any other proprietary information concerned with the
SciCentral Site or the business of SciCentral, and SciCentral shall acquire, or
shall have acquired, all necessary assignments and agreements in connection with
such ownership.
5.23 Other Documents. Parent shall have received such other agreements,
---------------
documents, and instruments as Parent has reasonably requested to effect and
evidence the consummation of the transactions contemplated by this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO THE COMPANY'S AND
THE STOCKHOLDERS' OBLIGATIONS
The obligations of the Company and the Stockholders to consummate the
transactions contemplated by this Agreement are subject to the satisfaction of
each of the following conditions on or before the Effective Time:
6.1 Representations, Warranties and Covenants. The representations and
-----------------------------------------
warranties of Parent and Mergersub contained in this Agreement shall have been
true and correct on the date of this Agreement, and shall be true and correct as
if the Effective Time as though made on and as of the Effective Time, and Parent
and Mergersub shall have duly performed and complied with all covenants and
obligations required by this Agreement to be performed or complied with by it on
or before the Closing.
6.2 Compliance Certificate. Each of Parent and Mergersub shall have
----------------------
delivered to the Company a certificate (without qualification as to knowledge or
materiality or otherwise except as may be set forth in the representations and
warranties themselves) to the effect that each of the conditions specified in
Section 6.1 is satisfied in all respects.
23
6.3 Absence of Litigation. As of the Effective Time, no action or
---------------------
proceeding shall be pending by or before any court or other governmental body or
agency seeking to restrain, prohibit or invalidate the transactions contemplated
by this Agreement.
6.4 Secretary's Certificates. The Company shall have received a
------------------------
certificate of the Secretary of each of the Parent and Mergersub, dated as of
the Effective Time, in form and substance reasonably satisfactory to the
Company, certifying (i) the names of its officers authorized to sign this
Agreement, the certificates and the other documents and instruments delivered
pursuant to this Agreement by Parent or Mergersub, as the case may be, or any of
its officers, together with true signatures of such officers; (ii) that the
copies of the Certificate of Incorporation and Bylaws attached thereto are true,
correct and complete; and (iii) that the resolutions of the Board of Directors
attached thereto evidencing the approval of this Agreement and the transactions
contemplated herein were duly adopted, have not been amended or rescinded and
are in full force and effect.
6.5 Legal Opinion. The Company shall have received an opinion of
-------------
Xxxxxxxxx & Xxxxx PLLC, counsel to Parent, dated as of the Effective Time, in
the form of EXHIBIT E attached hereto.
---------
6.6 Escrow Agreement. The Company shall have received the Escrow
----------------
Agreement, duly executed by the Parent and the Escrow Agent.
6.7 Employment Agreements. The Company shall have received the
---------------------
Compensation Agreements, duly executed by Parent.
6.8 Stockholder Agreements. The Company shall have received the
----------------------
Stockholder Agreements, duly executed by Parent.
6.9 Registration Rights Agreement. The Company shall have received the
-----------------------------
Registration Rights Agreement, duly executed by Parent.
6.10 Other Documents. The Company shall have received such other
---------------
agreements, documents, and instruments as the Company has reasonably requested
to effect and evidence the consummation of the transactions contemplated by the
Agreement.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification. The Stockholders, jointly and severally, shall, up
---------------
to the number of the Escrowed Shares, indemnify the Surviving Corporation and
the Parent (the "Indemnified Persons") in respect of, and hold the Indemnified
Persons harmless against, any and all debts, obligations and other liabilities,
monetary damages, fines, fees, penalties, interest obligations, deficiencies,
losses and expenses (including without limitation amounts paid in settlement,
interest, court costs, costs of investigators, reasonable fees and expenses of
attorneys, accountants, financial advisors and other experts, and other expenses
of litigation) incurred or
24
suffered by the Indemnified Persons ("Damages"), provided, however, no
indemnification shall be payable by the Stockholders with respect to any claim
for indemnification of Damages pursuant to this Section 7.1 until the cumulative
amount of all such Damages exceeds $10,000 in the aggregate, whereupon the
entire aggregate amount of Damages shall become payable; provided, however, such
threshold shall not apply to any willful or intentional breach or any act of
fraud by a Stockholder:
(i) resulting from, relating to or constituting any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement of the Company or the Stockholders contained in this Agreement or the
certificate delivered pursuant to Section 5.6; or
(ii) resulting from any failure of any of the Stockholders to have
good, valid and marketable title to the issued and outstanding the Company Stock
held by any such Stockholder, free and clear of all liens, claims, pledges,
options, adverse claims or charges of any nature whatsoever; or
(iii) resulting from any claim by a Stockholder or former security
holder of the Company, or any other person, firm, corporation or entity, seeking
to assert, or based upon: (A) ownership or a right to ownership of any shares
of capital stock of the Company which is claimed to have arisen prior to the
Effective Time; (B) any rights of a Stockholder of the Company (other than the
right to receive the Merger Consideration pursuant to this Agreement or
appraisal rights under the applicable provisions of the DGCL), including,
without limitation, rights with respect to any option, preemptive rights or
rights to notice or to vote, in each case with respect to capital stock of the
Company owned or claimed to have been owned prior to the Effective Time; (C) any
rights under the Certificate of Incorporation or Bylaws of the Company as in
effect at any time prior to the Effective Time; or (D) any claim that his, her
or its shares of the Company were wrongfully repurchased by the Company prior to
the Effective Time.
7.2 Method of Asserting Claims.
--------------------------
(a) All claims for indemnification ("Claims") by an Indemnified
Person pursuant to this Article VII shall be made in accordance with the
provisions of this Agreement and the Escrow Agreement.
(b) If a third party asserts that an Indemnified Person is liable to
such third party for a monetary or other obligation which may constitute or
result in Damages for which such Indemnified Person may be entitled to
indemnification pursuant to this Article VII, and such Indemnified Person
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Person shall be entitled to satisfy such
obligation, without prior notice to or consent from the Stockholder
Representative, (ii) such Indemnified Person may make a Claim for
indemnification pursuant to this Article VII in accordance with the provisions
of the Escrow Agreement (if applicable) and this Article VII, and (iii) such
Indemnified Person shall be reimbursed in accordance with the provisions of the
Escrow Agreement (if applicable) and this Article VII, for any such Damages for
which it is entitled to indemnification pursuant to this Article VII (subject to
the right of the Stockholder Representative to dispute the Indemnified
25
Person's entitlement to indemnification under the terms of the Escrow Agreement
(if applicable) and this Article VII.
(c) The Indemnified Person shall give prompt written notification to
the Stockholder Representative of the commencement of any action, suit or
proceeding relating to a third party claim for which indemnification pursuant to
this Article VII may be sought; provided, however, that no delay on the part of
the Indemnified Person in notifying the Stockholder Representative shall relieve
the Stockholders of any liability or obligation hereunder except to the extent
of any damage or liability caused by or arising out of such failure. Within
thirty (30) days after delivery of such notification, the Stockholder
Representative may, upon written notice thereof to the Indemnified Person,
assume control of the defense of such action, suit or proceeding provided the
Stockholder Representative acknowledges in writing to the Indemnified Person
that any damages, fines, costs or other liabilities that may be assessed against
the Indemnified Person in connection with such action, suit or proceeding
constitute Damages for which the Indemnified Person shall be entitled to
indemnification pursuant to this Article VII. If the Stockholder Representative
does not so assume control of such defense, the Indemnified Person shall control
such defense. The party not controlling such defense may participate therein at
its own expense; provided that if the Stockholder Representative assumes control
of such defense and the Indemnified Person reasonably concludes that the
indemnifying parties and the Indemnified Person have conflicting interests or
different defenses available with respect to such action, suit or proceeding,
the reasonable fees and expenses of counsel to the Indemnified Person shall be
considered "Damages" for purposes of this Agreement. The party controlling such
defense shall keep the other party advised of the status of such action, suit or
proceeding and the defense thereof. The Indemnified Person shall not agree to
any settlement of such action, suit or proceeding without the prior written
consent of the Stockholder Representative, which shall not be unreasonably
withheld. The Stockholder Representative shall not agree to any settlement of
such action, suit or proceeding without the prior written consent of the
Indemnified Person, which shall not be unreasonably withheld.
7.3 Satisfaction and Treatment of Indemnity Payments. In the event that
------------------------------------------------
the Stockholders are required to provide indemnification hereunder to the
Indemnified Persons, such indemnification obligations shall be satisfied
initially by the delivery of shares of Parent Common Stock held in the Escrow
(with each share for this purpose valued at the Average Stock Price in
accordance with the terms of this Agreement and the Escrow Agreement. Any
payment so made to an Indemnified Person pursuant to this Article VII or the
Escrow Agreement shall be treated as a reduction in the Merger Consideration.
7.4 Limitation. Notwithstanding anything to the contrary herein, with
----------
respect to Claims other than claims based on fraud or willful misrepresentation,
for which the liability of the Stockholders shall not be limited in amount or to
the Escrow, the sole and exclusive remedy for Indemnification Claims by the
Parent or Mergersub under this Article VII is the number of Escrowed Shares held
pursuant to the Escrow Agreement. No Stockholder shall have any right of
contribution against the Company or the Surviving Corporation with respect to
any breach by the Company of any of the representations, warranties, covenants
or agreements.
26
ARTICLE VIII
COVENANTS OF STOCKHOLDERS
8.1 Covenant Against Competition.
-----------------------------
(a) In order to induce the Parent to enter into this Agreement and
consummate the Merger as provided therein, each of the Stockholders agrees that,
except as otherwise set forth on Schedule 8.1, for a period of two (2) years
beginning on the Closing Date and ending at 12:01 a.m. on the day following the
second anniversary thereof, neither such Stockholder nor any business entity
directly or indirectly owned or controlled by such Stockholder shall, without
the prior written consent of the Parent, for their own account or jointly with
another, directly or indirectly, for or on behalf of any individual,
partnership, corporation or other legal entity, as principal, agent, director,
employee, agent, consultant, member of a partnership, firm, corporation or other
entity, or as a holder of or investor in as much as 5% of any security of any
class of any corporation or other business:
(i) engage in, consult with, assist in the promotion or
development of, or own, control, manage or otherwise participate in the
ownership, control or management of any business other than the business of the
Parent or the Company engaged in (i) the provision of distribution, auction
and/or buyers' guide services or information for the scientific and/or medical
products market through any electric commerce medium, including, without
limitation, the Internet, any private computer network or otherwise (for the
purposes of this Section 8.1, the term "scientific and/or medical products
market" shall mean any and all materials and supplies now and hereafter marketed
by Parent primarily for use in scientific laboratory research or provision of
medical services and shall not include products that are market for other
purposes, solely because they may also be used in scientific laboratory research
or provision of medical services), or (ii) the development, maintenance,
integration and customization of software and World Wide Web sites for the
provision of such services (the "Business"); or
(ii) solicit, call upon, or attempt to solicit, or encourage or
cause others to solicit, call upon or attempt to solicit, the patronage of any
Customers (as defined herein), for the purpose of obtaining the patronage of any
such Customer for the purchase of any products or services comparable to the
products or services of the Business from anyone other than Parent or the
Company; or otherwise interfere, or seek to interfere or encourage or cause
others to interfere or seek to interfere, with the relationship between Parent
or the Company, or any affiliate of Parent or the Company, and any Customer or
supplier of the Company existing at Closing, at any time within the two (2)
years preceding the Closing or the two (2) years following the Closing; or
(iii) solicit or induce, or in any manner attempt to solicit or
induce or encourage or cause others to solicit or induce, any officer or
employee to leave his or her employment with Parent or the Company, or any
affiliate of Parent or the Company, whether or not such employment is pursuant
to a written contract or otherwise, or hire or in any other manner interfere, or
attempt to interfere, with the relationship between Parent or the Company, or
any affiliate of Parent or the Company, and any such officer or employee.
27
(b) For purposes of this Section 8.1, "Customer" shall mean any
individual, partnership, corporation or other entity to whom the Parent or the
Company sold or distributed or attempted to sell or otherwise distribute any
products or services of the Business (as defined herein) during the two (2) year
period immediately preceding the Closing Date, or sells or attempts to sell or
otherwise distributes any products or services of the Business (as defined
herein) during the two (2) year period following the Closing.
(c) Each of the Stockholders agrees that neither such Stockholder nor
any business entity directly or indirectly owned or controlled by such
Stockholder shall, without the prior written consent of the Parent, for such
Stockholder's own account or jointly with another, directly or indirectly, for
or on behalf of any individual, partnership, corporation or other entity, as
principal, agent or otherwise, use or authorize any other person to use the name
"[ABC]" or "SciCentral," or any name similar thereto, in connection with a
business which competes with the Business.
(d) Notwithstanding anything herein to the contrary, it shall not be
a breach of the covenants contained in this Section 8.1 for each of the
Stockholders, or any business entity directly or indirectly owned or controlled
by such Stockholder, to own not more than five percent (5%) of the capital stock
of any corporation whose shares are publicly traded.
8.2 Reasonableness of Restrictions. Each of the Stockholders has
-------------------------------
carefully read and considered the provisions of Section 8.1 and, having done so,
agrees that the restrictions set forth therein are fair and reasonable, do not
unfairly restrict or penalize such Stockholder and are reasonably required for
the protection of the interests of Parent and the Company in consummating the
transactions contemplated in this Agreement. In the event that, notwithstanding
the foregoing, any of the covenants set forth in Section 8.1 hereof shall be
deemed to be too restrictive in any court proceeding, the parties agree that the
court may reduce such restrictions to ones which it deems reasonable under the
circumstances.
8.3 Relocation. The Stockholders agree that within sixty (60) days
----------
following the Closing, all activities and resources of the Company related to
research and development and technology shall be relocated to the offices of the
Parent located in Morrisville, North Carolina. The business development and
other activities of the Company shall remain in Washington, D.C. office of the
Company.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time:
(a) By the mutual written consent of all of the parties to this
Agreement;
28
(b) By Parent (if it is not then in breach of any term of this
Agreement), if the Company or the Stockholders: (i) fail(s) to perform in any
material respect their agreements contained herein required to be performed on
or prior to the Effective Time, or (ii) materially breaches any of their
representations or warranties contained herein, which failure or breach is not
cured within ten (10) days after Parent shall have notified the Company and the
Stockholders of its intent to terminate this Agreement pursuant to this
subparagraph;
(c) By the Company or the Stockholders (if they are not then in
breach of any term of this Agreement), if Parent: (i) fails to perform in any
material respect its agreements contained herein required to be performed on or
prior to the Effective Time, or (ii) materially breaches any of its
representations or warranties contained herein, which failure or breach is not
cured within ten (10) days after the Company and the Stockholders have notified
Parent of their intent to terminate this Agreement pursuant to this
subparagraph;
(d) By any of the parties, if there is any order, writ, injunction or
decree of any court or governmental or regulatory agency binding on such party
which prohibits or restrains such party from consummating the transactions
contemplated hereby; or
(e) By either the Parent or the Company, if the requisite
Stockholders' Vote is not obtained; or
(f) By any of the parties, if the Closing has not occurred by
February 28, 2000, for any reason other than delay or nonperformance of the
party seeking such termination; or
(g) By the Company or the Stockholders, if the value of the Merger
Shares at Closing, based on the Average Stock Price, is less than $2,000,000; or
(h) By the Parent, if the value of the Merger Shares at Closing,
based on the Average Stock Price, is greater than $4,000,000.
9.2 Effect on Obligations. Termination of this Agreement pursuant to this
---------------------
Article VIII shall terminate all obligations of the parties hereunder, except
for the obligations under Sections 10.1 (with respect to expenses), 10.3 (with
respect to publicity), and 4.7 (with respect to confidentiality); provided,
however, that termination pursuant to subparagraphs (b) or (c) of Section 9.1
hereof shall not relieve the defaulting or breaching party from any liability to
the other parties hereto, subject to the limitation in Section 7.4.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. All costs and expenses incurred in connection with this
--------
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, whether or not the Merger is consummated; provided,
--------
however, that if the Merger is consummated, the reasonable legal fees and
-------
expenses incurred by the Company which are solely and directly related to the
Merger, up to a maximum of $17,500, shall be paid by Parent; any additional
legal fees and expenses in excess of $17,500, and any investment banking,
accounting and other out-
29
of-pocket fees and expenses incurred by the Company and all other expenses of
the Company or the Stockholders of any kind shall be paid directly by the
Stockholders, and neither the Parent nor the Surviving Corporation shall have
any liability or obligation therefor.
10.2 Survival of Representations and Covenants. The representations,
-----------------------------------------
warranties and covenants of the Company, the Parent and the Stockholders set
forth in this Agreement (the "Representations") shall survive the Closing and
the consummation of the transactions contemplated by this Agreement and continue
until twenty-four months following the Effective Time (the "Termination Date").
If notice of a Claim is given in accordance with the Escrow Agreement or Article
VII before the Termination Date, then the Representation applicable to such
Claim shall survive until, but only for purposes of, the resolution of such
Claim. Notwithstanding the foregoing, with respect to any Claims for
indemnification based on, arising from, resulting from or related to fraud or
willful misrepresentation, the Representations shall survive the Termination
Date and shall remain in force and effect for the duration of the applicable
statute of limitations. All representations and warranties of Parent or
Mergersub contained in this Agreement shall terminate as of the Effective Time.
All covenants and other agreements of Parent shall survive the Closing until
fulfilled or waived.
10.3 Publicity. No party to this Agreement shall issue any press release
---------
or make any public disclosure relating to the subject matter of this Agreement
or the terms hereof or the existence of this Agreement without the prior written
approval of the Parent. Any press releases or other announcements concerning
the transactions contemplated by this Agreement shall be approved by the Parent
in writing prior to their issuance.
10.4 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two (2)
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, one (1) business day after it is sent via a
reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:
If to the Company: Copy to:
------------------ -------
XxxXxxxxxx.xxx, Inc. Xxxxxx Godward LLP
0000 X. Xxxx Xxxxxx 0000 Xxxxxx Xxxxxx Xx., Xxxxx 000
Xxxxx Xxxxx, XX 00000 Xxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxx III Attn: Xxxxxxx Xxxxxxx, Esq.
If to the Parent: Copy to:
----------------- --------
XxxXxxxx.xxx, Inc. Xxxxxxxxx & Xxxxx PLLC
0000 XxXxxxxxx Xxxxxxx, Xxxxx 000 3110 Xxxxxxx Mill Road, Suite 100
Morrisville, North Carolina 27560 Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx Attn: Xxxxx X. Xxxxxxxx
30
If to Mergersub: Copy to:
--------------- -------
SciCentral Acquisition Subsidiary, Inc. Xxxxxxxxx & Xxxxx PLLC
0000 XxXxxxxxx Xxxxxxx, Xxxxx 000 3110 Xxxxxxx Mill Road, Suite 100
Morrisville, North Carolina 27560 Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx Attn: Xxxxx X. Xxxxxxxx
Any party to this Agreement may give any notice, request, demand, claim, or
other communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail,
or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties notice
in the manner set forth in this Agreement.
10.5 Tax Matters. Although the parties acknowledge and agree that the
-----------
Merger is intended to qualify as a "tax free" exchange under Section 368 of the
Code, all parties to this Agreement acknowledge and agree that no representation
or warranty has been or is being made by Parent to any party or by Parent's
officers, employees, agents, accountants or attorneys, with respect to the
federal income or other tax consequences of the transactions contemplated by
this Agreement and the Merger or that such transactions are or will be "tax
free".
10.6 Governing Law. This Agreement shall be governed by the laws of the
-------------
State of North Carolina applicable to agreements made and to be performed
entirely within such state.
10.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by any of the parties hereto
without the prior written consent of all other parties hereto, and any purported
assignment without such consent shall be void.
10.9 Headings. The Article and Section headings contained in this
--------
Agreement are solely for the purpose of reference, are not part of this
Agreement and shall not in any way affect the meaning or interpretation of this
Agreement.
10.10 Amendments. Any waiver, amendment, modification or supplement of or
----------
to any term or condition of this Agreement shall be effective only if in writing
and signed by a majority in interest of the Stockholders and by all parties
hereto, and the parties hereto waive the right to amend the provisions of this
Section orally. Any amendment effected subsequent to the Stockholders' Consent
shall be subject to the restrictions contained in the Delaware General
Corporation Law. No waiver of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or
31
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
10.11 Severability. In the event that any provision in this Agreement
------------
shall be determined to be invalid, illegal or unenforceable in any respect, the
remaining provisions of this Agreement shall not be in any way impaired, and the
illegal, invalid or unenforceable provision shall be fully severed from this
Agreement and there shall be automatically added in lieu thereof a provision as
similar in terms and intent to such severed provision as may be legal, valid and
enforceable.
10.12 Entire Agreement. This Agreement, and the Schedules and Exhibits
----------------
hereto, constitute the entire Agreement between the parties hereto pertaining to
the subject matter hereof, and supersede all prior and contemporaneous
agreements and understandings between the parties with respect to such subject
matter.
10.12 Risk of Loss. The risk of loss, damage or condemnation of any of the
------------
the Company Business Assets from any cause whatsoever shall be borne by the
Company at all times prior to the Effective Time.
10.13 Best Efforts. Each party agrees to use its best efforts to satisfy
------------
the conditions to the Closing set forth in this Agreement and otherwise to
consummate the transactions contemplated by this Agreement.
10.14 Letter of Intent. This Agreement supersedes and replaces the letter
----------------
agreement between the Parent and the Company dated January 4, 2000, which shall
be of no further force and effect.
10.15 Company Enhancement. Parent agrees to consult with Company regarding
-------------------
the allocation of adequate resources to the continuing development and
enhancement of the community aspects of the SciCentral site with the actual
commitment of resources by Parent to be determined at the sole discretion of
Parent.
[Remainder of this page intentionally left blank]
32
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed by its duly authorized officer as of the date first above written.
PARENT:
XXXXXXXX.XXX, INC.
By:_____________________________
Xxxxxx X. Xxxxxxxx
Vice President
MERGERSUB:
SCICENTRAL ACQUISITION SUBSIDIARY,
INC.
By:_____________________________
__________________
Secretary
33
THE COMPANY:
XXXXXXXXXX.XXX, INC.
By:_________________________________
Xxxxx Xxxxxxx III
President
STOCKHOLDERS:
____________________________________
Xxxxx X. Xxxxx
____________________________________
Xxxxxx Xxxxx
____________________________________
Guy Orgambide
____________________________________
Xxxxxx Xxxxx
____________________________________
Xxxxx Xxxxx
____________________________________
Xxxxx Xxxxxxxx
____________________________________
Xxxxx Xxxxxxxx
____________________________________
Xxxxx Xxxxxxx III
34
SCHEDULE 8.1
Specific Provisions for Employment, Consulting and Non-competition Agreements
I. Statement of Work (SOW)
Guy Orgambide
Director, Scientific Community
1. Continue to operate and manage the SciCentral website, exclusive of the
Travel and Education sections, until these activities are transitioned to
other responsible parties. This includes reviewing scientific articles,
managing site content, developing the weekly newsletter, and performing
link maintenance checking.
2. Provide support in transitioning any or all of the responsibilities listed
in Item 1 above to other responsible parties. This may include documenting
processes, training staff members, responding to questions from staff
regarding site operations, and verifying that the site maintenance
functions are being performed accurately and in a timely manner.
3. Provide support in updating the K-12 and Travel portions of the SciCentral
site, which will include site updates of those sections based on content
received from other SciCentral or Parent staff.
4. Maintain and develop data capture programs to monitor usage statistics and
other community metrics. Assist in producing reports to management that
match usage statistics and metrics against community objectives.
5. Identify, interview, and recruit industry experts to participate in
community programs.
6. Participate in the development of marketing communications and promotions
related to the development of community programs.
7. Assist Parent IT staff in implementing a database structure to replace the
current static HTML-based architecture.
Xx. Xxxxxx Xxxxx
Director, Science Education and Outreach
1. Develop a business plan for an affiliate marketing program for trade
associations representing the scientific community.
2. Develop a business plan for the educational initiative related to the
design of a research oriented intranet for the UMBI program.
35
3. Develop a business plan for the design of an education-based intranet site
connecting teachers, universities, and other organizations related to the
Houston Independent School District.
4. Provide on-going support in the maintenance of the SciCentral site, until
such activities are transferred to other responsible parties.
Xxxxx Xxxxx
Consultant
1. Provide assistance in the development and implementation of a foundation
established to promote educational initiatives related to scientific
endeavors.
2. Continue to operate and manage the Travel and K-12 Educational sections of
the SciCentral website, until these activities are transitioned to other
responsible parties. This includes reviewing articles, developing and
managing site content, and reviewing and verifying content presentation.
Xxxxx Xxxxxxxx
Consultant
1. Provide assistance in the development of business cases and plans for the
UMBI and Houston Independent School District educational initiatives.
Produce a deliverable describing the scope of the business opportunity, the
potential size of the opportunity, the resources and costs required to
achieve success, the revenue and/or other benefit to Parent that would
result from pursuing the opportunity, and the risks associated with the
project.
Xxxxx Xxxxxxx
Consultant
1. Provide assistance in the development of business cases and plans for the
creation of: 1) an affiliate marketing program for trade associations
related to the scientific community, and, 2) for the development of
collaborative web sites for scientific tools. Produce a deliverable
describing the scope of the business opportunities, the potential size of
the opportunity, the resources and costs required to achieve success, the
revenue and/or other benefit to Parent that would result from pursuing the
opportunity, and the risks associated with the projects.
36
II. Non-competition carve-outs
Xxxxx Xxxxxxxx
--------------
1. Activities related to the sale of scholastic textbooks and related
teaching notes through an entity currently called Xxxxxxxx.xxx
2. Activities related to the costing of aircraft carrier technologies for
the US Navy
37
