AGREEMENT AND PLAN OF MERGER
BETWEEN
ACI SYSTEMS, INC.
AND
INTERACTIVE PLANET, INC.
June 21, 1996
TABLE OF CONTENTS
PAGE
----
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) The Merger . . . . . . . . . . . . . . . . . . . . . . . 4
(b) The Closing . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Actions at the Closing . . . . . . . . . . . . . . . . . 4
(d) Effect of Merger . . . . . . . . . . . . . . . . . . . . 4
(e) Procedure for Payment . . . . . . . . . . . . . . . . . . 5
(f) No Fractional Shares . . . . . . . . . . . . . . . . . . 6
(g) Stock Legend . . . . . . . . . . . . . . . . . . . . . . 6
(h) Closing of Transfer Records . . . . . . . . . . . . . . . 6
3. Representations and Warranties Concerning the Target . . . . . . . 6
(a) Organization, Qualification, and Corporate Power . . . . 6
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . 7
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . 7
(d) Title to Assets . . . . . . . . . . . . . . . . . . . . . 7
(e) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 8
(f) Financial Statements . . . . . . . . . . . . . . . . . . 8
(g) Events Subsequent to Target Balance Sheet . . . . . . . . 8
(h) Undisclosed Liabilities . . . . . . . . . . . . . . . . . 8
(i) Legal Compliance . . . . . . . . . . . . . . . . . . . . 8
(j) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 8
(k) Real Property . . . . . . . . . . . . . . . . . . . . . . 9
(l) Intellectual Property . . . . . . . . . . . . . . . . . . 9
(m) Contracts . . . . . . . . . . . . . . . . . . . . . . . . 10
(n) Notes and Accounts Receivable . . . . . . . . . . . . . . 12
(o) Powers of Attorney . . . . . . . . . . . . . . . . . . . 12
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . 12
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . 12
(r) Employees . . . . . . . . . . . . . . . . . . . . . . . . 13
(s) Employee Benefits . . . . . . . . . . . . . . . . . . . . 13
(t) Guaranties . . . . . . . . . . . . . . . . . . . . . . . 13
(u) Environment, Health, and Safety . . . . . . . . . . . . . 13
(v) Disclosure . . . . . . . . . . . . . . . . . . . . . . . 14
(w) Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 14
(x) Broker's Fees . . . . . . . . . . . . . . . . . . . . . . 14
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TABLE OF CONTENTS
PAGE
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4. Representations and Warranties Concerning the Buyer . . . . . . . . 14
(a) Organization, Qualification, and Corporate Power . . . . 14
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . 15
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . 15
(d) Title to Assets . . . . . . . . . . . . . . . . . . . . . 15
(e) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 16
(f) Financial Statements . . . . . . . . . . . . . . . . . . 16
(g) Events Subsequent to Buyer Balance Sheet . . . . . . . . 16
(h) Undisclosed Liabilities . . . . . . . . . . . . . . . . . 16
(i) Legal Compliance . . . . . . . . . . . . . . . . . . . . 16
(j) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 16
(k) Real Property . . . . . . . . . . . . . . . . . . . . . . 17
(l) Intellectual Property . . . . . . . . . . . . . . . . . . 18
(m) Contracts . . . . . . . . . . . . . . . . . . . . . . . . 19
(n) Notes and Accounts Receivable . . . . . . . . . . . . . . 20
(o) Powers of Attorney . . . . . . . . . . . . . . . . . . . 20
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . 20
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . 21
(r) Employees . . . . . . . . . . . . . . . . . . . . . . . . 21
(s) Employee Benefits . . . . . . . . . . . . . . . . . . . . 22
(t) Guaranties . . . . . . . . . . . . . . . . . . . . . . . 22
(u) Environment, Health, and Safety . . . . . . . . . . . . . 22
(v) Disclosure . . . . . . . . . . . . . . . . . . . . . . . 23
(w) Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 23
(x) Broker's Fees . . . . . . . . . . . . . . . . . . . . . . 23
5. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Notices and Consents . . . . . . . . . . . . . . . . . . 23
(c) Regulatory Matters and Approvals . . . . . . . . . . . . 23
(d) Operation of Business . . . . . . . . . . . . . . . . . . 24
(e) Full Access . . . . . . . . . . . . . . . . . . . . . . . 24
(f) Notice of Developments . . . . . . . . . . . . . . . . . 25
6. Conditions to Obligation to Close . . . . . . . . . . . . . . . . . 25
(a) Conditions to Obligation of the Buyer . . . . . . . . . . 25
(b) Conditions to Obligation of the Target . . . . . . . . . 26
7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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TABLE OF CONTENTS
PAGE
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(a) Termination of Agreement . . . . . . . . . . . . . . . . 27
(b) Effect of Termination . . . . . . . . . . . . . . . . . . 27
8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Survival . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Press Releases and Public Announcements . . . . . . . . . 28
(c) No Third Party Beneficiaries . . . . . . . . . . . . . . 28
(d) Entire Agreement . . . . . . . . . . . . . . . . . . . . 28
(e) Succession and Assignment . . . . . . . . . . . . . . . . 28
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . 28
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . 28
(h) Notices . . . . . . . . . . . . . . . . . . . . . . . . . 28
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . 29
(j) Amendments and Waivers . . . . . . . . . . . . . . . . . 29
(k) Severability . . . . . . . . . . . . . . . . . . . . . . 29
(l) Expenses . . . . . . . . . . . . . . . . . . . . . . . . 29
(m) Construction . . . . . . . . . . . . . . . . . . . . . . 29
iii
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is entered into as of June ___, 1996 by
and between ACI Systems, Inc., a Colorado corporation (the "Buyer"), and
Interactive Planet, Inc., a Colorado corporation (the "Target"). The Buyer and
the Target are referred to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of the Target with and into
the Buyer in a reorganization pursuant to Code Section 368(a)(1)(A). The Target
Shareholders will receive capital stock in the Buyer in exchange for their
capital stock in the Target.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Articles of Merger" has the meaning set forth in Section 2(c) below.
"Buyer" has the meaning set forth in the preface above.
"Buyer Balance Sheet" has the meaning set forth in Section 4(f) below.
"Buyer Share" means any share of the Common Stock, no par value per share,
of the Buyer.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b) below.
"Colorado Business Corporation Act" means the Business Corporation Act of
the State of Colorado, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Target that is not already generally available to the public.
"Contract" means any contract, mortgage, deed of trust, bond, indenture,
lease, license, note, franchise, certificate, option, warrant, right, or other
instrument, document, obligation, or agreement.
1
"Effective Time" has the meaning set forth in Section 2(d)(i) below.
"Encumbrance" means any security agreement, financing statement filed with
any governmental authority, conditional sale or other title retention agreement,
any lease, consignment or bailment given for purposes of security, any lien,
mortgage, indenture, pledge, option, encumbrance, adverse interest, constructive
trust or other trust, claim attachment, exception to or defect in title or other
ownership interest (including but not limited to reservations, rights of entry,
possibilities of reverter, encroachments, easements, rights-of-way, restrictive
covenants leases, and licenses) of any kind, which otherwise constitutes an
interest in or claim against property, whether arising pursuant to any law or
regulation, contract or otherwise.
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"Extremely Hazardous Substance" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-
2
how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing
plans and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"IRS" means the Internal Revenue Service.
"Knowledge" or "knowledge" means actual knowledge after reasonable
investigation.
"Merger" has the meaning set forth in Section 2(a) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Requisite Buyer Shareholder Approval" means the affirmative vote of the
holders of 100% of the Buyer Shares in favor of this Agreement and the Merger.
"Requisite Target Shareholder Approval" means the affirmative vote of the
holders of 100% of the Target Shares in favor of this Agreement and the Merger.
"Special Buyer Meeting" has the meaning set forth in Section 5(c)(ii)
below.
"Special Target Meeting" has the meaning set forth in Section 5(c)(ii)
below.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Surviving Corporation" has the meaning set forth in Section 2(a) below,
"Target" has the meaning set forth in the preface above.
"Target Balance Sheet" has the meaning set forth in Section 3(f) below.
"Target Share" means any share of the Common Stock, $1.00 par value per
share, of the
3
Target.
"Target Shareholder" means any Person who holds any Target Shares.
"Taxes" means all levies and assessments of any kind or nature imposed by
any governmental authority, including but not limited to all income, sales, use,
ad valorem, value added, franchise, severance, net or gross proceeds,
withholding, payroll, employment, excise, or property taxes, together with any
interest thereon and any penalties, additions to tax, or additional amounts
applicable thereto.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including without limitation
any schedule or attachment thereto, and any amendment thereof.
2. BASIC TRANSACTION.
(a) THE MERGER. On and subject to the terms and conditions of this
Agreement, the Target will merge with and into the Buyer (the "Merger") at the
Effective Time. The Buyer shall be the corporation surviving the Merger (the
"Surviving Corporation").
(b) THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Parcel, Mauro,
Xxxxxx & Xxxxxxxxx, P.C. in Denver, Colorado, commencing at 9:00 a.m. local time
on the second business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date, time and
place as the Parties may mutually determine (the "Closing Date").
(c) ACTIONS AT THE CLOSING. At the Closing, (i) the Target will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6(a) below, (ii) the Buyer will deliver to the Target the
various certificates, instruments, and documents referred to in Section 6(b)
below, and (iii) the Buyer and the Target will file with the Secretary of State
of the State of Colorado Articles of Merger in the form required by the Colorado
Business Corporation Act (the "Articles of Merger").
(d) EFFECT OF MERGER.
(i) GENERAL. The Merger shall become effective at the time (the
"Effective Time") the Buyer and the Target file the Articles of Merger with the
Secretary of State of the State of Colorado. The Merger shall have the effect
set forth in the Colorado Business Corporation Act. The Surviving Corporation
may, at any time after the Effective Time, take any action (including executing
and delivering any document) in the name and on behalf of either the Buyer or
the Target in order to carry out and effectuate the transactions contemplated by
this
4
Agreement.
(ii) ARTICLES OF INCORPORATION. The Articles of Incorporation of
the Buyer in effect at and as of the Effective Time will remain the Articles of
the Surviving Corporation without any modification or amendment in the Merger;
provided, however, the name of the Surviving Corporation shall be "NAVIDEC,
Inc."
(iii) BYLAWS. The Bylaws of the Buyer in effect at and as of
the Effective Time will remain the Bylaws of the Surviving Corporation without
any modification or amendment in the Merger.
(iv) DIRECTORS AND OFFICERS. At the Effective Time the directors
and officers of the Surviving Corporation shall be as set forth below:
Directors: Xxxxx Xxxxxx
Xxxxxxx Xxxxxxxxx
Officers: Xxxxx Xxxxxx, President
Xxxxxx Xxxxx, Vice President
Xxxxxxx Xxxxxxxxx, Secretary
Xxxxxxx Xxxxxxxxx, Treasurer
(v) CONVERSION OF TARGET SHARES. At and as of the Effective
Time, each Target Share shall be converted into the right to receive one Buyer
Share. No Target Share shall be deemed to be outstanding or to have any rights
other than those set forth above in this Section 2(d)(v) after the Effective
Time.
(vi) BUYER SHARES. Each Buyer Share issued and outstanding at
and as of the Effective Time will remain issued and outstanding immediately
after the Effective Time.
(e) PROCEDURE FOR PAYMENT.
(i) After the Effective Time and subject to the provisions of
Section 2(f) below, the Buyer will issue to each Target Shareholder who (A)
surrenders to the Buyer the certificates which represented his Target Shares and
(B) delivers to Buyer a completed and executed investment letter in the form
attached hereto as Exhibit A, a stock certificate representing that number of
Buyer Shares equal to the number of outstanding Target Shares so surrendered by
such Target Shareholder.
(ii) The Buyer will not pay any dividend or make any distribution
on Buyer Shares (with a record date at or after the Effective Time) to any
record holder of outstanding Target Shares until the holder surrenders for
exchange his certificates which
5
represented Target Shares. The Buyer instead will hold the dividend or the
distribution in trust for the benefit of the holder pending surrender and
exchange. In no event, however, will any holder of outstanding Target Shares
be entitled to any interest or earnings on the dividend or distribution
pending receipt.
(f) NO FRACTIONAL SHARES. Notwithstanding any other provisions of
this Agreement to the contrary, fractional Buyer Shares will not be issued upon
conversion of Target Shares into Buyer Shares. Each Target Shareholder who,
upon conversion of all Target Shares held of record by such Target Shareholder,
would otherwise be entitled to receive a fractional Buyer Share of more than 0.5
shall receive a whole Buyer Share in place of such fractional Buyer Share. Each
Target Shareholder who, upon conversion of all Target Shares held of record by
such Target Shareholder, would otherwise be entitled to receive a fractional
Buyer Share of 0.5 or less shall receive only the whole number of Buyer Shares
to which such Target Shareholder is entitled, and the fractional Buyer Share
shall be eliminated for all purposes and without compensation therefor.
(g) STOCK LEGEND. Certificates representing Buyer Shares issued to
Target Shareholders upon conversion of their Target Shares shall bear the
following legend:
"The securities represented by this certificate
have not been registered under the Securities Act
of 1933, as amended, or any state securities laws.
The securities represented by this certificate may
not be transferred, sold, offered for sale or
otherwise disposed of unless there is an effective
registration statement or other qualification
relating to such securities under the Securities
Act of 1933, as amended, and any applicable state
securities laws or unless the Corporation receives
an opinion of counsel satisfactory to the
Corporation that such registration or other
qualification under the Securities Act of 1933, as
amended, and any applicable state securities laws
is not required in connection with such transfer,
sale, offer or disposition."
(h) CLOSING OF TRANSFER RECORDS. After the close of business on the
Closing Date, transfers of Target Shares outstanding prior to the Effective Time
shall not be made on the stock transfer books of the Surviving Corporation.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TARGET. The Target
represents and warrants to the Buyer that the statements contained in this
Section 3 are correct and complete
6
as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3).
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Target is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Target is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. The Target has full corporate power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. The Target has delivered to the Buyer correct and complete
copies of the charter and bylaws of the Target (as amended to date). The minute
books (containing the records of meetings of the shareholders, the board of
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of the Target are correct and complete. The
Target is not in default under or in violation of any provision of its charter
or bylaws.
(b) CAPITALIZATION. The entire authorized capital stock of the
Target consists of 100,000 Target Shares, of which 100,000 Target Shares are
issued and outstanding and none are held in treasury. All of the issued and
outstanding Target Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the respective Persons set
forth in Exhibit B hereto. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Target to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Target. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Target.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Target is subject or any provision of
the charter or bylaws of the Target or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Target is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Encumbrance
upon any of its assets). Except for the Requisite Target Shareholder Approval,
the Target is not required to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency or any other Person in order for the Parties to consummate the
transactions contemplated by this Agreement.
(d) TITLE TO ASSETS. The Target has good and marketable title to, or
a valid
7
leasehold interest in, the properties and assets used by it, located on its
premises, or shown on the Target Balance Sheet or acquired after the date
thereof, free and clear of all material Encumbrances (except as previously
disclosed to the Buyer), except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Target Balance Sheet. All
tangible personal property held or used by the Target is in good operating
condition and repair, ordinary wear and tear excepted, and is suitable and
adequate for continued use in the manner in which it currently is used.
(e) SUBSIDIARIES. The Target has no Subsidiaries.
(f) FINANCIAL STATEMENTS. The Target has delivered to the Buyer
correct and complete copies of the Target's unaudited balance sheets as of
December 31, 1995 and March 31, 1996 (the "Target Balance Sheets") and unaudited
income statements for the period June 1, 1995 to December 31, 1995 and January
1, 1996 to March 31, 1996. The Target Balance Sheets present fairly the
financial condition of the Target as of the indicated date, are correct and
complete in all respects, and are consistent with the books and records of the
Target.
(g) EVENTS SUBSEQUENT TO TARGET BALANCE SHEET. Except as previously
disclosed to the Buyer, since the date of the Target Balance Sheet, there has
not been any material adverse change in the business, financial condition,
operations, results of operations, or future prospects of the Target.
(h) UNDISCLOSED LIABILITIES. The Target any no liabilities (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for taxes, except for
(i) liabilities set forth on the face of the Target Balance Sheets and (ii)
liabilities which have arisen after the date of the Target Balance Sheets in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
(i) LEGAL COMPLIANCE. The Target has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against the Target alleging any failure so to comply.
(j) TAX MATTERS.
(i) The Target has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects. All
Taxes owed by the Target (whether or not shown on any Tax Return) have been
paid. The Target is not currently the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever
8
been made by an authority in a jurisdiction where any of the Target does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no Encumbrances on any of the assets of any of the Target that arose
in connection with any failure (or alleged failure) to pay any Tax.
(ii) The Target has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder, or other third party.
(iii) Neither the Target nor, to the knowledge of the Target,
any director or officer (or employee responsible for Tax matters) of the Target
expects any authority to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any Tax
Liability of the Target either (A) claimed or raised by any authority in writing
or (B) as to which any of the Target or, to the knowledge of the Target, the
directors and officers (and employees responsible for Tax matters) of the Target
has now ledge based upon personal contact with any agent of such authority. The
Target has delivered to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by any of the Target since inception of the Target.
(iv) The Target has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(k) REAL PROPERTY. The Target does not own or lease any real
property or otherwise hold any interest in real property.
(l) INTELLECTUAL PROPERTY.
(i) The Target owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary for the
operation of the businesses of the Target as presently conducted. Each item of
Intellectual Property owned or used by the Target immediately prior to the
Closing hereunder will be owned or available for use by the Surviving
Corporation on identical terms and conditions immediately subsequent to the
Closing hereunder. The Target has taken all necessary action to maintain and
protect each item of Intellectual Property that it owns or uses.
(ii) The Target has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and the Target has not ever received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Target must license or refrain from using any Intellectual Property rights of
any third party). To the knowledge the Target, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the
9
Target.
(iii) No patents or registrations have been issued to the
Target with respect to any of its Intellectual Property, no patent applications
or applications for registration have been made by the Target with respect to
any of its Intellectual Property, and no licenses, agreements, or other
permissions have been granted by the Target to any third party with respect to
any of its Intellectual Property. Except a previously disclosed to the Buyer,
no trade names or unregistered trademarks are used by the Target in connection
with any of its businesses.
(iv) The Target has delivered to the Buyer correct and complete
copies of all licenses, sublicenses, agreements, and permissions (as amended to
date) with respect to Intellectual Property that any third party owns and the
Target uses. With respect to each such item of Intellectual Property:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force and
effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the Closing;
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the knowledge of the
Target, is threatened which challenges the legality, validity, or enforceability
of the underlying item of Intellectual Property; and
(H) the Target has not granted any sublicense or similar
right
10
with respect to the license, sublicense, agreement, or permission.
(m) CONTRACTS. The Target has delivered to the Buyer a correct and
complete copy of each of the following written agreements and a written summary
setting forth the terms and conditions of each of the following oral agreements:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments in
excess of $5,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a loss to
the Target, or involve consideration in excess of $5,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $5,000 or under which
it has imposed an Encumbrance on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the shareholders of the Target;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $5,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have an adverse effect on the business, financial condition,
operations, results of operations, or future prospects of the Target; or
11
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $5,000.
With respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
(n) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of the Target reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject only
to the reserve for bad debts set forth on the face of the Target Balance Sheet
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Target.
(o) POWERS OF ATTORNEY. Except as previously disclosed to the Buyer,
there are no outstanding powers of attorney executed on behalf of the Target.
(p) INSURANCE. The Target has delivered to the Buyer correct and
complete copies of each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which the Target has been a party, a named insured, or
otherwise the beneficiary of coverage at any time since its inception, including
the following information:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable,
12
and in full force and effect; (B) the policy will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C)
neither the Target nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof.
(q) LITIGATION. The Target is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge and is not a party or, to
the knowledge of the Target, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. The Target has no reason to believe that
any such action, suit, proceeding, hearing, or investigation may be brought or
threatened against the Target.
(r) EMPLOYEES.
(i) The Target has delivered to the Buyer a correct and complete
list setting forth the names and positions of all employees of the Target
employed as of the date of this Agreement, and the current annual salary or wage
payable to each such person. None of such employees has notified the Target,
and the Target has no knowledge, of his or her intention to resign or retire.
(ii) The Target has complied and is in compliance in all material
respects with all laws and regulations relating to the employment of labor,
including without limitation laws and regulations relating to wages, hours,
unemployment compensation, worker's compensation, equal employment opportunity,
age and disability discrimination, immigration control, and the payment and
withholding of Taxes.
(iii) The Target has not violated any law or regulation
prohibiting discrimination in its employment conditions or practices. There are
no unfair labor practices charges and there are no discrimination complaints
pending or, to the knowledge of the Target, threatened against the Target, and
to the knowledge of the Target, no basis therefor exists.
(iv) The Target is not a party to any collective bargaining
agreement or other Contract with any labor organization, has not recognized or
agreed to recognize, and is not required to recognize, any union or other
collective bargaining unit. To the knowledge of the Target, its employees are
not engaged in organizing activity with respect to any labor organization.
(s) EMPLOYEE BENEFITS. The Target does not maintain or contribute
to, it has never maintained or contributed to, and it is not and at no time has
been required to maintain or
13
contribute to, any employee benefit or welfare plan, bonus, deferred
compensation, incentive compensation, retirement, stock purchase, stock
option, severance, hospitalization, medical, life insurance, dental, vision,
disability, salary continuation, unemployment, or fringe benefit plan,
program, or arrangement. The Target has complied in all respects with the
continuation coverage requirements of Section 4980B of the Code with regard
to each group health plan, if any, within the meaning of Section 4980B(g) of
the Code.
(t) GUARANTIES. The Target is not a guarantor or otherwise is liable
for any liability or obligation (including indebtedness) of any other Person.
(u) ENVIRONMENT, HEALTH, AND SAFETY.
(i) The Target has complied with all Environmental, Health, and
Safety Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against it
alleging any failure so to comply. Without limiting the generality of the
preceding sentence, the Target has obtained and been in compliance with all of
the terms and conditions of all permits, licenses, and other authorizations
which are required under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all Environmental, Health, and
Safety Laws.
(ii) The Target has no liability or obligation (and has not
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner that
could form the basis for any present or future liability) for damage to any
site, location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(iii) To the knowledge of the Target, all properties and
equipment used in the business of the Target have been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(v) DISCLOSURE. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
(w) BANK ACCOUNTS. The Target has delivered to the Buyer a correct
and complete list setting forth all bank accounts, brokerage accounts, and safe
deposit boxes of any kind maintained by the Target and, in each case,
identifying the Persons who are authorized signatories for, or who are
authorized to have access to, each of them.
14
(x) BROKER'S FEES. The Target does not have any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE BUYER. The Buyer
represents and warrants to the Target that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4).
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Buyer
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. The Buyer is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. The Buyer has full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it. The Buyer has delivered to the
Target correct and complete copies of the charter and bylaws of the Buyer (as
amended to date). The minute books (containing the records of meetings of
the shareholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Buyer are correct and complete. The Buyer is not in default under or in
violation of any provision of its charter or bylaws.
(b) CAPITALIZATION. The entire authorized capital stock of the
Buyer consists of 20,000,000 Buyer Shares, of which 4,490.138 Buyer Shares
are issued and outstanding and none are held in treasury. All of the issued
and outstanding Buyer Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the respective
Persons set forth in Exhibit C. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
Buyer to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Buyer. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Buyer.
(c) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is subject or
any provision of the charter or bylaws of the Buyer or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which it
is bound or to
15
which any of its assets is subject (or result in the imposition of any
Encumbrance upon any of its assets). Except for the Requisite Buyer
Shareholder Approval, the Buyer is not required to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency or any other Person in order for the
Parties to consummate the transactions contemplated by this Agreement.
(d) TITLE TO ASSETS. The Buyer has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by it,
located on its premises, or shown on the Buyer Balance Sheet or acquired
after the date thereof, free and clear of all material Encumbrances (except
as previously disclosed to the Target), except for properties and assets
disposed of in the Ordinary Course of Business since the date of the Buyer
Balance Sheet. All tangible personal property held or used by the Buyer is
in good operating condition and repair, ordinary wear and tear excepted, and
is suitable and adequate for continued use in the manner in which it
currently is used.
(e) SUBSIDIARIES. The Buyer has no Subsidiaries.
(f) FINANCIAL STATEMENTS. The Buyer has delivered to the Target
correct and complete copies of the Buyer's unaudited balance sheets as of
December 31, 1995 and March 31, 1996 (the "Buyer Balance Sheets") and
unaudited income statements for the fiscal year then ended and the period
January 1, 1996 to March 31, 1996. The Buyer Balance Sheets present fairly
the financial condition of the Buyer as of the indicated date, are correct
and complete in all respects, and are consistent with the books and records
of the Buyer.
(g) EVENTS SUBSEQUENT TO BUYER BALANCE SHEET. Except as
previously disclosed to the Target, since the date of the Buyer Balance
Sheet, there has not been any material adverse change in the business,
financial condition, operations, results of operations, or future prospects
of the Buyer.
(h) UNDISCLOSED LIABILITIES. The Buyer has no liabilities
(whether known or unknown, whether asserted or unasserted, whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
taxes, except for (i) liabilities set forth on the face of the Buyer Balance
Sheets and (ii) liabilities which have arisen after the date of the Buyer
Balance Sheets in the Ordinary Course of Business (none of which results
from, arises out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement, or violation of
law).
(i) LEGAL COMPLIANCE. The Buyer has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local,
and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against the Buyer alleging any failure so
to comply.
16
(j) TAX MATTERS.
(i) The Buyer has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all respects.
All Taxes owed by the Buyer (whether or not shown on any Tax Return) have
been paid. The Buyer is not currently the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where any of the Buyer does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are no
Encumbrances on any of the assets of any of the Buyer that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) The Buyer has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder, or other third party.
(iii) Neither the Buyer nor, to the knowledge of the Buyer,
any director or officer (or employee responsible for Tax matters) of the
Buyer expects any authority to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of the Buyer either (A) claimed or raised by any authority
in writing or (B) as to which any of the Buyer or, to the knowledge of the
Buyer, the directors and officers (and employees responsible for Tax matters)
of the Buyer has now ledge based upon personal contact with any agent of such
authority. The Buyer has delivered to the Target correct and complete copies
of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Buyer since
inception of the Buyer.
(iv) The Buyer has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(k) REAL PROPERTY.
(i) The Buyer does not own any real property.
(ii) The Buyer has delivered to the Target correct and
complete copies of all real property leases of the Buyer. With respect to
each such lease:
(A) the lease is legal, valid, binding, enforceable, and
in full force and effect;
(B) the lease will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
17
(C) no party to the lease is in breach or default, and
no event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(D) no party to the lease has repudiated any provision
thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease;
(F) the Buyer has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold; and
(G) to the knowledge of the Buyer, the owner of the
facility leased has good and marketable title to the parcel of real property,
free and clear of any Encumbrance, easement, covenant, or other restriction,
except for installments of special easements not yet delinquent and recorded
easements, covenants, and other restrictions which do not impair the current
use, occupancy, or value, or the marketability of title, of the property
subject thereto.
(l) INTELLECTUAL PROPERTY.
(i) The Buyer owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the Buyer as presently
conducted. Each item of Intellectual Property owned or used by the Buyer
immediately prior to the Closing hereunder will be owned or available for use
by the Surviving Corporation on identical terms and conditions immediately
subsequent to the Closing hereunder. The Buyer has taken all necessary
action to maintain and protect each item of Intellectual Property that it
owns or uses.
(ii) The Buyer has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Buyer has not ever received any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Buyer must license or refrain from using any Intellectual Property rights of
any third party). To the knowledge the Buyer, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with
any Intellectual Property rights of the Buyer.
(iii) No patents or registrations have been issued to the
Buyer with respect to any of its Intellectual Property, no patent
applications or applications for registration have been made by the Buyer
with respect to any of its Intellectual Property, and no licenses,
18
agreements, or other permissions have been granted by the Buyer to any third
party with respect to any of its Intellectual Property. Except as previously
disclosed to the Target, no trade names or unregistered trademarks are used
by the Buyer in connection with any of its businesses.
(iv) The Buyer has delivered to the Target correct and
complete copies of all licenses, sublicenses, agreements, or permissions (as
amended to date) with respect to Intellectual Property that any third party
owns and the Buyer uses. With respect to each such item of Intellectual
Property:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force
and effect;
(B) the license, sublicense, agreement, or permission
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the Closing;
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the knowledge of the
Buyer, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property; and
(H) the Buyer has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.
(m) CONTRACTS. The Buyer has delivered to the Target a correct
and complete copy of each of the following written agreements and a written
summary setting forth the terms and conditions of each of the following oral
agreements:
19
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments
in excess of $5,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year, result
in a loss to the Buyer, or involve consideration in excess of $5,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $5,000 or
under which it has imposed an Encumbrance on any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of the shareholders of the Buyer;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement
for the benefit of its current or former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $5,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xi) any agreement under which the consequences of a default
or termination could have an adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the
Buyer; or
(xii) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $5,000.
With respect to each such agreement: (A) the agreement is legal, valid,
binding, enforceable, and
20
in full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
(n) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable of the Buyer reflected properly on its books and records, are
valid receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Buyer Balance Sheet adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Buyer.
(o) POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Buyer.
(p) INSURANCE. The Buyer has delivered to the Target correct and
complete copies of each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond
and surety arrangements) to which the Buyer has been a party, a named
insured, or otherwise the beneficiary of coverage at any time since its
inception, including the following information:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated and
operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither the Buyer nor any other party to the policy
is in breach or default (including with respect to the payment of premiums or
the giving of notices), and no
21
event has occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. The Buyer has been covered since its inception by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period.
(q) LITIGATION. The Buyer is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge and or is not a party
or, to the knowledge of the Buyer, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator. The Buyer has no
reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Buyer.
(r) EMPLOYEES.
(i) The Buyer has delivered to the Target a correct and
complete list setting forth the names and positions of all employees of the
Buyer employed as of the date of this Agreement, and the current annual
salary or wage payable to each such person. None of such employees has
notified the Buyer, and the Buyer has no knowledge, of his or her intention
to resign or retire.
(ii) The Buyer has complied and is in compliance in all
material respects with all laws and regulations relating to the employment of
labor, including without limitation laws and regulations relating to wages,
hours, unemployment compensation, worker's compensation, equal employment
opportunity, age and disability discrimination, immigration control, and the
payment and withholding of Taxes.
(iii) The Buyer has not violated any law or regulation
prohibiting discrimination in its employment conditions or practices. There
are no unfair labor practices charges and there are no discrimination
complaints pending or, to the knowledge of the Buyer, threatened against the
Buyer, and to the knowledge of the Buyer, no basis therefor exists.
(iv) The Buyer is not a party to any collective bargaining
agreement or other Contract with any labor organization, has not recognized
or agreed to recognize, and is not required to recognize, any union or other
collective bargaining unit. To the knowledge of the Buyer, its employees are
not engaged in organizing activity with respect to any labor organization.
(s) EMPLOYEE BENEFITS. Except as previously disclosed to the
Target, the Buyer does not maintain or contribute to, it has never maintained
or contributed to, and it is not and at no time has been required to maintain
or contribute to, any employee benefit or welfare plan, bonus, deferred
compensation, incentive compensation, retirement, stock purchase, stock
22
option, severance, hospitalization, medical, life insurance, dental, vision,
disability, salary continuation, unemployment, or fringe benefit plan,
program, or arrangement. The Buyer has complied in all respects with the
continuation coverage requirements of Section 4980B of the Code with regard
to each group health plan, if any, within the meaning of Section 4980B(g) of
the Code.
(t) GUARANTIES. The Buyer is not a guarantor or otherwise is
liable for any liability or obligation (including indebtedness) of any other
Person.
(u) ENVIRONMENT, HEALTH, AND SAFETY.
(i) The Buyer has complied with all Environmental, Health,
and Safety Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced
against it alleging any failure so to comply. Without limiting the
generality of the preceding sentence, the Buyer has obtained and been in
compliance with all of the terms and conditions of all permits, licenses, and
other authorizations which are required under, and has complied with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained in,
all Environmental, Health, and Safety Laws.
(ii) The Buyer has no liability or obligation (and has not
handled or disposed of any substance, arranged for the disposal of any
substance, exposed any employee or other individual to any substance or
condition, or owned or operated any property or facility in any manner that
could form the basis for any present or future liability) for damage to any
site, location, or body of water (surface or subsurface), for any illness of
or personal injury to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
(iii) To the knowledge of the Buyer, all properties and
equipment used in the business of the Buyer have been free of asbestos,
PCB's, methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances.
(v) DISCLOSURE. The representations and warranties contained in
this Section 4 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
(w) BANK ACCOUNTS. The Buyer has delivered to the Target a
correct and complete list setting forth all bank accounts, brokerage
accounts, and safe deposit boxes of any kind maintained by the Buyer and, in
each case, identifying the Persons who are authorized signatories for, or who
are authorized to have access to, each of them.
23
(x) BROKER'S FEES. The Buyer does not have any liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
5. COVENANTS. The Parties agree as follows with respect to the period
from and after the execution of this Agreement.
(a) GENERAL. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth
in Section 6 below).
(b) NOTICES AND CONSENTS. The Target will give any notices to
third parties, and will use its reasonable best efforts to obtain any third
party consents, that the Buyer reasonably may request in connection with the
matters referred to in Section 3(d) above.
(c) REGULATORY MATTERS AND APPROVALS. Each of the Parties will
give any notices to, make any filings with, and use its reasonable best
efforts to obtain any authorizations, consents, and approvals of governments
and governmental agencies in connection with the matters referred to in
Section 3(d) and Section 4(d) above. Without limiting the generality of the
foregoing:
(i) COLORADO BUSINESS CORPORATION ACT. The Target will call
a special meeting of its shareholders or obtain the unanimous written consent
of its shareholders (the "Special Target Meeting") as soon as reasonably
practicable in order that its shareholders may consider and vote upon the
adoption of this Agreement and the approval of the Merger in accordance with
the Colorado Business Corporation Act. The Buyer will call a special meeting
of its shareholders or obtain the unanimous written consent of its
shareholders (the "Special Buyer Meeting") as soon as reasonably practicable
in order that the shareholders may consider and vote upon the adoption of
this Agreement and the approval of the Merger in accordance with the Colorado
Business Corporation Act.
(d) OPERATION OF BUSINESS. The Target will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing:
(i) the Target will not authorize or effect any change in its
charter or bylaws;
(ii) the Target will not grant any options, warrants, or
other rights to purchase or obtain any of its capital stock or issue, sell,
or otherwise dispose of any of its capital stock (except upon the conversion
or exercise of options, warrants, and other rights currently
24
outstanding);
(iii) except as required in Section 6 below, the Target will
not declare, set aside, or pay any dividend or distribution with respect to
its capital stock (whether in cash or in kind), or redeem, repurchase, or
otherwise acquire any of its capital stock;
(iv) the Target will not issue any note, bond, or other debt
security or create, incur, assume, or guarantee any indebtedness for borrowed
money or capitalized lease obligation;
(v) the Target will not impose any Encumbrance upon any of
its assets;
(vi) the Target will not make any capital investment in, make
any loan to, or acquire the securities or assets of any other Person;
(vii) the Target will not make any change in employment terms
for any of its directors, officers, and employees; and
(viii) the Target will not commit to any of the foregoing.
(e) FULL ACCESS. The Target will permit representatives of the
Buyer to have full access to all premises, properties, personnel, books,
records (including tax records), contracts, and documents of or pertaining to
the Target. The Buyer will treat and hold as such any Confidential
Information it receives from any of the Target in the course of the reviews
contemplated by this Section 5(g), will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement
is terminated for any reason whatsoever, agrees to return to the Target all
tangible embodiments (and all copies) thereof which are in its possession.
(f) NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the other of any material adverse development causing a breach of
any of its own representations and warranties in Section 3 and Section 4
above. No disclosure by any Party pursuant to this Section 5(h), however,
shall be deemed to prevent or cure any misrepresentation, breach of warranty,
or breach of covenant.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
25
(i) this Agreement and the Merger shall have received the
Requisite Target Shareholder Approval;
(ii) the Target shall have procured all of the third party
consents specified in Section 5(b) above;
(iii) the representations and warranties set forth in Section
3 above shall be true and correct in all material respects at and as of the
Closing Date;
(iv) the Target shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(v) the Target shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in Section 6(a)(i)-
(iv) is satisfied in all respects;
(vi) this Agreement and the Merger shall have received the
Requisite Buyer Shareholder Approval;
(vii) the Parties shall have received all other
authorizations, consents, and approvals of governments and governmental agencies
referred to in Sections 3(d) and 4(d) above;
(viii) all actions to be taken by the Target in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer;
(ix) the Target Shareholders shall have executed and delivered a
Shareholders Agreement in form and substance acceptable to the Buyer and its
shareholders;
(x) Xxxxx Xxxxxx shall have executed and delivered to the Buyer
an employment agreement in form and substance satisfactory to the Buyer;
(xi) the Buyer shall have effected a one for 510.2041 stock
split of the Buyer Shares, and the Target shall have reallocated the Target
Shares by stock split or otherwise such that the holders of the Target Shares
hold the number of Target Shares set forth in Exhibit B hereto.
The Buyer may waive any condition specified in this Section 6(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE TARGET. The obligation of the
Target to
26
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the
Requisite Buyer Shareholder Approval;
(ii) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of the
Closing Date;
(iii) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iv) the Buyer shall have delivered to the Target a certificate
to the effect that each of the conditions specified above in Section 6(b)(i)-
(iii) is satisfied in all respects;
(v) this Agreement and the Merger shall have received the
Requisite Target Shareholder Approval;
(vi) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Target;
(vii) all of the shareholders of Buyer shall have executed
and delivered a Shareholders Agreement in form and substance acceptable to the
Target Shareholders; and
(viii) the Buyer shall have executed and delivered to Xxxxx
Xxxxxx an employment agreement in form and substance satisfactory to him.
(ix) the Buyer shall have effected a one for 510.2041 stock
split of the Buyer Shares, and the Target shall have reallocated the Target
Shares by stock split or otherwise such that the holders of the Target Shares
hold the number of Target Shares set forth in Exhibit B hereto.
The Target may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
7. TERMINATION.
(a) TERMINATION OF AGREEMENT. Either of the Parties may terminate
this Agreement with the prior authorization of its board of directors (whether
before or after
27
shareholder approval) as provided below:
(i) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Effective Time;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Target at any time prior to the Effective Time (A) in the event
the Target has breached any representation, warranty, or covenant contained in
this Agreement in any material respect, the Buyer has notified the Target of
this breach, and the breach has continued without cure for a period of five days
after the notice of breach or (B) if the Closing shall not have occurred on or
before July 15, 1996, by reason of the failure of any condition precedent under
Section 6(a) hereof (unless the failure results primarily from the Buyer
breaching any representation, warranty, or covenant contained in this
Agreement);
(iii) the Target may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Effective Time (A) in the
event the Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Target has notified the
Buyer of the breach, and the breach has continued without cure for a period of
five after the notice of breach or (B) if the Closing shall not have occurred on
or before July 15, 1996, by reason of the failure of any condition precedent
under Section 6(b) hereof (unless the failure results primarily from the Target
breaching any representation, warranty, or covenant contained in this
Agreement);
(iv) any Party may terminate this Agreement by giving written
notice to the other Party at any time after the Special Buyer Meeting or the
Special Target Meeting in the event this Agreement and the Merger fail to
receive the Requisite Buyer Shareholder Approval or the Requisite Target
Shareholder Approval respectively.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 7(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in Section 5(g) above shall survive any
such termination.
8. MISCELLANEOUS.
(a) SURVIVAL. None of the representations, warranties, and covenants
of the Parties (other than the provisions in Section 2 above concerning issuance
of the Buyer Shares, the provisions in Section 5(j) above concerning insurance
and indemnification) will survive the Effective Time.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue
any press
28
release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of the other Party
(c) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; provided, however, that the
provisions in Section 2 above concerning issuance of the Buyer Shares are
intended for the benefit of the Target Shareholders.
(d) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if sent by
facsimile transmission, or delivered by messenger, or mailed, certified first
class mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
If to the Target: Interactive Planet, Inc.
00 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxxx Xxxxxxxxx
Facsimile no.: (000) 000-0000
If to the Buyer: ACI Systems, Inc.
0000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 00
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxx Xxxxxx
29
Facsimile no.: (000) 000-0000
or to such other address as any Party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective
when received.
(i) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Colorado without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Colorado or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Colorado.
(j) AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; provided, however,
that any amendment effected subsequent to shareholder approval will be subject
to the restrictions contained in the Colorado Business Corporation Act. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by both of the Parties. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach
30
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) EXPENSES. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
ACI SYSTEMS, INC.
By: /s/ XXXXX XXXXXX
---------------------------------
Name: Xxxxx Xxxxxx
Title: President
INTERACTIVE PLANET, INC.
By: /s/ XXXXXXX XXXXXXXXX
---------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: President
31
EXHIBIT A
FORM OF INVESTMENT LETTER
EXHIBIT B
LIST OF SHAREHOLDERS OF THE TARGET
NAME SHARES
---- ------
Xxxxx Xxxxxxx 813,669
Xxxxxxx X. Xxxxxxxxx 314,671
Xxxxx X. Xxxxxxxxxxx 171,393
Xxxxxx Xxxxxxxx II 171,393
Xxx Xxxx 38,087
Xxxxxxx X. Xxxxxxxx 200
Xxx Xxxxxxxx 300
Xxxxxx Xxxxxx 200
Xxxx Xxxx 1,000
Xxxx Xxxxxxxxx 100
Xxxxx Xxx 100
Xxxxx Xxxxxxx Tamundong Xxxxxx 200
Louis Xxxxxx Xxxxx XX 500
LGC Management 10,000
---------
1,521,813
---------
---------
EXHIBIT C
LIST OF SHAREHOLDERS OF THE BUYER
NAME POST-SPLIT SHARES
---- -----------------
Xxxxx Xxxxxx 1,838,687
Xxxxxx Xxxxxx 250,000
Xxxxxx Xxxxxx 50,000
Xxxxxxxxx Xxxxx 50,000
Xxxxxx Xxxxx 50,000
Xxxxxxx Xxxxxxxx 6,000
Xxxxx Xxxxxxx 6,000
Xxxxx Xxxxxxxxx 20,000
Xxx Xxxxxxxxx 4,000
Xxx Xxxx 4,000
Xxxxxxx Xxxxxxx 5,000
Xxxx Xxxxxxx 350
Xxxxxxx Xxxxx 750
Xxxxx Xxxxxxxxx 350
Xxxxx Xxxxxxxxxx 750
Reserved 6,000
---------
2,290,887
---------
---------
34
