AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and entered into
as of January 2, 2002, among eB2B Commerce, Inc., a New Jersey corporation
("Buyer"), and Bac-Tech Systems, Inc., a New York corporation ("Seller"), Xxxxxx
Xxxxxx ("Xxxxxx"), residing at 00-00 Xxxxxxx Xxxxxxx, Xxxxxxxxx, XX 00000,
Xxxxxxx Xxxxxx ("Xxxxxx"), residing at 000 Xxxxxx Xxxxxxx Xxxxx, Xxxxxxxx, Xxxxx
Island (Xxxxxx and Xxxxxx being hereinafter sometimes collectively referred to
as the "Seller Stockholders" and individually as a "Seller Stockholder").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the New Jersey Business Corporation Act ("New Jersey Law") and
the New York Business Corporation Law ("New York Law"), Buyer and Seller will
enter into a business combination transaction pursuant to which Seller will
merge with and into Buyer (the "Merger").
B. The Board of Directors of Buyer (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Buyer
and fair to, and in the best interests of, Buyer and its stockholders and (ii)
has approved this Agreement, the Merger and the other transactions contemplated
by this Agreement.
C. The Board of Directors of Seller (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Seller
and fair to, and in the best interests of, Seller and its stockholders, (ii) has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) has recommended the approval of this Agreement by the
stockholders of Seller.
D. Buyer on the one hand, and Seller and the Seller Stockholders on the
other hand, desire to make certain representations and warranties and other
agreements in connection with the Merger.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, premises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of New Jersey Law and New York Law, Seller shall be merged
with and into Buyer, the separate corporate existence of Seller shall cease and
Buyer shall continue as the surviving corporation. Buyer as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by (a) filing a
Certificate of Merger (the "NJ Certificate of Merger") with the Secretary of
State of the State of New Jersey accordance with the relevant provisions of New
Jersey and (b) filing a Certificate of Merger (the "NY Certificate of Merger")
executed by Seller with the Secretary of State of the State of New York in
accordance with the relevant provisions of New York Law (the time of such
filings, or such later time as may be agreed in writing by the parties and
specified in the Certificates of Merger, being the "Effective Time") as soon as
practicable on or after the Closing Date (as herein defined). Unless the context
otherwise requires, the term "Agreement" as used herein refers collectively to
this Agreement and the Certificates of Merger. The closing of the Merger (the
"Closing") shall take place at the offices of Xxxxxxx & Xxxxxxxx, LLC, 50
Xxxxxxx Xxxxxxxxx Xxxxxxxxx - Xxxxx 000, Xxxxxxx Xxxxx, Xxx Xxxx 00000, at a
time and date to be specified by the parties, which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI, or at such other time, date and location as the parties hereto
agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of New
Jersey Law and New York Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Seller shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Seller shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Buyer,
as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law.
(b) At the Effective Time, the Bylaws of Buyer, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law and such bylaws.
1.5 Directors and Officers. The directors of Buyer immediately prior to
the Effective Time shall be the directors of the Surviving Corporation, to serve
in such capacity until their respective successors are duly elected and
qualified. The officers of Buyer immediately prior to the Effective Time shall
be the officers of the Surviving Corporation, to serve in such capacity at
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the pleasure of the Board of Directors of the Surviving Corporation and
until their successors are duly appointed and qualified.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Buyer, Seller or the holders of any
of the following securities:
(a) Conversion of Seller Capital Stock. Each share of common stock,
no par value, of Seller (the "Seller Capital Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Seller Capital
Stock to be canceled pursuant to Section 1.6(b)) will be canceled and
extinguished and automatically converted (subject to Sections 1.6(d)) into the
right to receive at the closing (i) $1,250.00 (a total of $250,000 for all
shares) in immediately available funds (the "Cash Component"), (ii) 15,000 (the
"CS Exchange Ratio") shares of common stock, par value $.0001 per share, of
Buyer ( "Buyer Common Stock"), (iii) 475 (the "PS Exchange Ratio") shares of
preferred stock, par value $.0001 per share, of Buyer ( "Buyer Preferred
Stock"), and (iv) $3,000.00 in face amount, which is inclusive of principal and
interest (the "Note Component"), of a note of Buyer ("Note") in the form
attached here to as Exhibit A, upon surrender of the certificate representing
such share of Seller Capital Stock in the manner provided in Section 1.7.
(b) Cancellation of Buyer-Owned Stock. Each share of Seller Capital
Stock held in the treasury of Seller or owned by Buyer or any direct or
indirect wholly-owned subsidiary of Seller or Buyer immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Capital Stock of Buyer. Each share of Buyer Common Stock issued
and outstanding immediately prior to the Effective Time shall be one
validly issued, fully paid and nonassessable share of common stock, par value
$.0001 per share, of the Surviving Corporation. Each stock certificate of Buyer
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(d) Adjustments to CS Exchange Ratio and PS Exchange Ratio. The CS
Exchange Ratio and the PS Exchange Ratio shall be proportionately adjusted
to reflect fully the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Buyer Common Stock or Seller Capital Stock), reorganization, recapitalization or
other like change with respect to Buyer Common Stock or Seller Capital Stock
occurring on or after the date hereof and prior to the Effective Time.
1.7 Exchange of Certificates.
(a) Exchange Procedures. At the Closing, (i) each holder of record
(as of the Effective Time) of Seller Capital Stock shall surrender to Buyer
a certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding shares of Seller Capital Stock whose
shares were converted into the right to receive the consideration specified in
Section 1.6, (ii) Seller shall deliver to each such holder of record, (A) a
certificate representing the number of whole shares of Buyer Common Stock
pursuant to Section 1.6, (B) a
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certificate representing the number of whole shares of Buyer Preferred
Stock pursuant to Section 1.6, (C) the Cash Component for each share of Seller
Capital Stock pursuant to Section 1.6, and (D) a Note in the Note Component for
each share of Seller Capital Stock pursuant to Section 1.6. Each Certificate
surrendered pursuant to clause (i) hereof shall be canceled.
(b) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither the Buyer, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Buyer Common Stock or Seller
Capital Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Seller Capital Stock. All shares of
Buyer Common Stock and Buyer Preferred Stock issued upon the surrender for
exchange of Certificates in accordance with the terms hereof (including any cash
paid in respect thereof pursuant to Section 1.6 and 1.7) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Seller Capital Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Seller Capital Stock which
were outstanding immediately prior to the Effective Time.
1.9 Tax and Accounting Consequences. It is intended by the parties hereto
that the Merger shall constitute a reorganization and a statutory merger within
the meaning of Section 368(a)(1)(A) of the Code. The parties hereto adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations. The
Company is not aware of any facts that could cause the Merger to fail to qualify
as a "reorganization" within the meaning of Section 368(a) of the Code and has
no plan or intention to take any action that, to its knowledge, is inconsistent
with such qualifications.
1.10 Additional Payout. Buyer shall make a performance-based payment to
each Seller Stockholder of up to $100,000 (i.e. up to $100,000 each) for Buyer's
year ended December 31, 2002 ("Year 2002"), in the following instances:
(a) In the event gross revenue of Buyer for Year 2002 are at
least $9,249,000, net of Buyer's training center operations (the "2002
Revenue Target"), then each Seller Stockholder shall be entitled to $60,000.
(b) In the event earnings before interest, taxes, depreciation
and amortization for Year 2002 are at least $1,986,000, net of the
contribution of the Buyer's training center operations (the "2002 EBITDA
Target"), then each Seller Stockholder shall be entitled to $40,000.
(c) In the event that at least 70% but less than 100% of the 2002
Revenue Target and/or the 2002 EBITDA Target is achieved, then Seller
Stockholders shall be entitled to a partial payment proportionate to the
percentage of the Target achieved. For example, if 80% of the 2002 Revenue
Target is achieved and 40% of the 2002 EBITDA Target is achieved, then
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each Seller Stockholder shall be entitled to $48,000 (80% of $60,000) with
respect to the 2002 Revenue Target and nothing with respect to the 2002 EBITDA
Target.
(d) In the event of the acquisition of Buyer during 2002, the
determination of the 2002 Revenue Target test and the 2002 EBITDA Target
test shall be made as of the closing date of such acquisition. In this case, the
two Targets shall be proportionately reduced to reflect the portion of the year
that has transpired.
Such amounts shall be as determined, in good faith, by the Buyer and
consistent with the financial information presented in the Buyer's filings with
the Securities and Exchange Commission.
1.11 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Seller, the officers and directors of Seller are fully
authorized in the name of its corporation or otherwise to take, and will take,
all such lawful and necessary action, so long as such action is consistent with
this Agreement.
1.12 In the event of an Event of Default (as defined in the Security
Agreement, dated the date hereof, between Buyer and the Seller Stockholders),
the Intellectual Property Assets shall revert to the Seller Stockholders. In
such event, Buyer and Seller Stockholders shall negotiate in good faith a
non-exclusive license for Buyer to utilize such Intellectual Property Assets as
appropriate for use in its business, and in any case, may utilize such
Intellectual Property Assets for a period of 45 days. Likewise, during such 45
day period, Buyer shall, if requested by Seller Stockholders, negotiate in good
faith a non-exclusive license for the Seller Stockholders to utilize
modifications to the Intellectual Property Assets made subsequent to the Closing
Date and owned by Buyer as appropriate for use by Seller Stockholders, and in
any case, the Seller Stockholders may utilize such modifications for a period of
45 days.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and each Seller Stockholder hereby jointly and severally represent
and warrant to Buyer, subject to the exceptions specifically disclosed in
writing in the Disclosure Schedules supplied by Seller and the Seller
Stockholders to Buyer, as follows:
2.1 Organization; Good Standing; Subsidiaries.
(a) Seller is a corporation duly organized, validly existing, and in
good standing under the laws of the State of New York, with full corporate
power and authority to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or use, and to perform
all its obligations under Applicable Contracts. Part 2.1 of the Disclosure
Schedule contains a complete and accurate list of the jurisdictions in which the
Seller is authorized to do business. Except as set forth in Part 2.1, Seller is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification (except where the failure to be so
qualified will not have a material adverse affect on the business or financial
condition of Seller taken as a whole).
(b) Seller has delivered to Buyer copies of the Organizational
Documents of Seller as currently in effect.
(c) Seller has no Subsidiaries and owns no stock or other interest
in or any securities of any other corporation or entity.
2.2 Authority; No Conflict.
(a) Seller has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller, including requisite approval by the
Board of Directors and stockholders of Seller, subject only to the filing of the
NJ Certificate of Merger pursuant to New Jersey Law and the NY Certificate of
Merger pursuant to New York Law. This Agreement has been duly executed and
delivered by Seller and each Seller Stockholder and, assuming the due
authorization, execution and delivery by Buyer, constitutes the valid and
binding respective obligation of Seller and each Seller Stockholder, enforceable
in accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally or by equitable principles).
(b) Except as set forth in Part 2.2 of the Disclosure Schedule, neither
the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
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(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of Seller, or (B) any
resolution adopted by the board of directors or stockholders of Seller;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge, any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which either Seller or the Seller
Stockholders, as the case may be, or any of the assets owned or used by Seller
or either Seller Stockholders, as the case may be, may be subject;
(iii) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(iv) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by Seller.
Except as set forth in Part 2.2 of the Disclosure Schedule, none of Seller
or either Seller Stockholder is or will be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
2.3 Capitalization. The authorized capital stock of Seller consist of 200
shares of common stock, no par value ("Shares"), all of which shares are issued
and outstanding. No legend or other reference to any purported Encumbrance
appears upon any certificate representing securities of Seller. All of the
outstanding equity securities of Seller have been duly authorized and validly
issued and are fully paid and nonassessable. Except for the Shares, no
outstanding stock or other equity securities of any kind of Seller have been
issued or authorized for issuance, and except for a shareholders agreement which
shall be canceled as of the Closing Date. Seller has no outstanding
subscriptions, options, warrants, rights (preemptive or other), calls or other
agreements, obligations or commitments of any kind to issue, sell or purchase,
or commit any obligations into, nor any restrictions on the transfer or voting
of, any stock or security, of any call or any convertible securities. None of
the outstanding equity securities or other securities of Seller was issued in
violation of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), or any other Legal
Requirement.
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2.4 Financial Statements; Certain Conditions at Closing.
(a) Part 2.4 of the Disclosure Schedule contains (i) the financial
statements of Seller as at and for years ended December 31, 1999 and 2000,
including the Balance Sheet at each such date and the related consolidated
statements of operations and retained earnings and cash flows, and Schedule of
General and Administrative Expenses, for the years then ended, and the
compilation report thereon of Xxxxxx & Kleigman, LLP, independent certified
public accountants, and (ii) the unaudited interim financial statements of
Seller for the eleven months ended November 30, 2001, prepared on a basis
consistent with the financial statements for 1999 and 2000, subject to normal
year-end adjustments and without all footnotes required in audited financial
statements (collectively, the "Prior Financial Statements"). Further, as
provided in Section 7.1(j), at the Closing the Buyer shall receive certain
Closing Financials (as herein defined and described). The Prior Financial
Statements and the Closing Financials are hereinafter sometimes collectively
referred to as the "Financial Statements." The Financial Statements are or, in
the case of the Closing Financials, will be, true, correct and complete in all
material respects and in conformity with the books and records of Seller, have
been and will be prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods covered (except
as otherwise stated therein) and fairly present and will present in all material
respects the financial condition and results of operations and changes in
financial position of Seller as at the respective dates thereof and for the
respective periods covered thereby. The Financial Statements do not or, in the
case of the Closing Financials, will not contain, as of their respective dates,
any untrue statement of material fact necessary to make the statements therein
not misleading. Except as set forth in Part 2.4 of the Disclosure Schedule,
since November 30, 2001, there have been no occurrences or developments which
would require any material adverse change(s) to be made in the Prior Financial
Statements.
(b) At the time of the Closing, (i) Seller shall have a positive tangible
net worth (stockholder's equity less intangible assets) determined in accordance
with GAAP applied on a basis consistent with the Prior Financial Statements of
at least $135,000 (the "Minimum Net Worth") and (ii) bank debt and equipment
lease obligations will not exceed $175,000 (the "Maximum Lease Obligations").
2.5 Books and Records. Except as set forth in Part 2.5 of the Disclosure
Schedule, the books of account, minute books, stock record books, and other
records of Seller, all of which have been made available to Buyer, are complete
and correct in all material respects. Except as set forth in Part 2.5, in all
material respects, the minute books of Seller contain accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors, and committees of the Board of Directors
of Seller, and no meeting of any such stockholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of Seller.
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2.6 Title to Properties; Leases.
(a) Part 2.6 of the Disclosure Schedule contains a complete and accurate
list of all real property, leaseholds, or other interests therein owned by
Seller. Seller has good and marketable title to all of its tangible assets, in
each case free and clear of all liens and Encumbrances except for Permitted
Liens and such minor imperfections in title and other Encumbrances, if any, as
does not materially detract from the value or interfere with the present use
thereof. All of Seller's machinery, equipment, fixtures and other fixed assets,
and the real property leased by it, as referred to in paragraph (b) below, are
in satisfactory operating condition, maintenance and repair and conform in all
material respects to applicable Legal Requirements, which in the case of real
property, shall be tot he Knowledge of either Seller Stockholder.
(b) Seller is not a party to any material lease of real property, whether
as lessor or lessee, other than its lease (the "Lease") of premises on the 3rd
floor of the building located at 000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx. A true and
correct copy of the Lease has been delivered to Buyer. The Lease is in full
force and effect, without material default of Seller and, to the Knowledge of
either Seller Stockholders, of landlord, and is valid, binding and enforceable
in accordance with its provisions (except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, motorium or other
similar laws affecting creditors' rights generally or by equitable principles).
2.7 Condition and Sufficiency of Assets. Except as set forth in Part 2.7
of the Disclosure Schedule, the demised premises and equipment of Seller
are structurally sound, are in good operating condition and repair, and are
adequate for the uses to which they are being put, and none of such demised
premises or equipment is in need of maintenance or repairs except for ordinary,
routine maintenance and repairs that are not material in nature or cost. The
demised premises and equipment of Seller are sufficient for the continued
conduct of Seller's business after the Closing in substantially the same manner
as conducted prior to the Closing with respect to the demised premises, this
representation and warranty shall be to the Knowledge of either Seller
Stockholder.
2.8 Accounts Receivable. All accounts receivable of Seller that are
reflected in the Prior Financial Statements or on the accounting records of
Seller as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent in all material respects valid obligations arising
from sales actually made or services actually performed in the Ordinary Course
of Business. Unless paid prior to the Closing Date, the Accounts Receivable are
or will be as of the Closing Date current and collectible net of the respective
reserves and allowances for bad debts in an aggregate amount not to exceed
$30,000. Subject to such reserves, each of the Accounts Receivable either has
been or will be collected in full, without any set-off, within ninety days after
the day on which it first becomes due and payable. Except as set forth in Part
2.8 of the Disclosure Schedule, there is no written contest, claim, or
contractual right, other than returns in the Ordinary Course of Business, under
any contract with any obligor of an Accounts Receivable relating to the amount
or validity of such Accounts Receivable. Part 2.8 of the
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Disclosure Schedule contains a complete and accurate list of all Accounts
Receivable as of the date of this Agreement, which list sets forth the aging of
such Accounts Receivable.
2.9 No Undisclosed Liabilities. Except as set forth in Part 2.9 of the
Disclosure Schedule, Seller has no liabilities or obligations of any nature
(whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Prior Financial Statements and
current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
2.10 Taxes. Except as set forth in Part 2.10 of the Disclosure Schedule,
Seller (i) has filed or caused to be filed (on a timely basis) all Tax Returns
that are or were required to be filed pursuant to applicable Legal Requirements
and have paid all Taxes required by applicable Legal Requirements (including,
without limitatiOn, withholding, social security, payroll and similar Taxes),
and all interest and penalties, if any thereon, (ii) are not parties to any
pending action or proceeding by any Governmental Body for the assessment or
collection of any Taxes, nor is any claim for any Taxes pending or to their
knowledge Threatened, and (iii) have not executed any outstanding waiver or
consent for the extension of the statute of limitations for, or for any
restrictions on, the assessment or collection of any Taxes.
2.11 No Material Adverse Change. Except as set forth in Part 2.11, since
September 30, 2001, there has not been any material adverse change in the
business, operations, properties, prospects, assets, or condition of Seller as a
whole, and no event has occurred or circumstance exists (other than general
economic or industry conditions) that may reasonably be expected to result in
such a material adverse change.
2.12 Employee Benefits.
(a) As used in this Section 2.12, the following terms have the meanings
set forth below.
"ERISA AFFILIATE" means, with respect to Seller, any other person that, together
with Seller, would be treated as a single employer under IRC ss. 414.
"OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements, or
customary practices to provide benefits, other than salary, as compensation for
services rendered, to present or former directors, employees, or agents, other
than obligations, arrangements, and practices that are Plans. Other Benefit
Obligations include consulting agreements under which the compensation paid does
not depend upon the amount of service rendered, sabbatical policies, severance
payment policies, and significant fringe benefits.
"PENSION PLAN" has the meaning given in ERISA ss. 3(2)(A).
"PLAN" has the meaning given in ERISA ss. 3(3).
"PLAN SPONSOR" has the meaning given in ERISA ss. 3(16)(B).
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"QUALIFIED PLAN" means any Plan that meets or purports to meet the requirements
of IRC ss. 401(a).
"SELLER OTHER BENEFIT OBLIGATION" means an Other Benefit Obligation owed,
adopted, or followed by Seller or an ERISA Affiliate of Seller.
"SELLER PLAN" means all Plans of which Seller or an ERISA Affiliate of
Seller is or was a Plan Sponsor, or to which Seller or an ERISA Affiliate of
Seller otherwise contributes or has contributed, or in which Seller or an ERISA
Affiliate of Seller otherwise participates or has participated. All references
to Plans are to Seller Plans unless the context requires otherwise.
"SELLER VEBA" means a VEBA whose members include employees of Seller or any
ERISA Affiliate of Seller.
"TITLE IV PLANS" means all Pension Plans that are subject to Title IV of
ERISA, 29 U.S.C. ss. 1301 et seq., other than multi-employer plans.
"VEBA" means a voluntary employees' beneficiary association under IRC ss.
501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA ss. 3(1).
(b) (i) Part 2.12(i) of the Disclosure Schedule contains a complete and
accurate list of all Seller Plans, Seller Other Benefit Obligations, and Seller
VEBAs.
(ii) Part 2.12(ii) of the Disclosure Schedule contains a complete
and accurate list of (A) all ERISA Affiliates of Seller, and (B) all Plans
of which any such ERISA Affiliate is or was a Plan Sponsor, in which any such
ERISA Affiliate participates or has participated, or to which any such ERISA
Affiliate contributes or has contributed.
(iii) Part 2.12(iii) of the Disclosure Schedule sets forth a
calculation of the liability of Seller for post-retirement benefits other
than pensions, made in accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether Seller is required
by this Statement to disclose such information.
(c) Except as disclosed in Part 2.12 of the Disclosure Schedule, Seller
has delivered to, or given access to Buyer copies of (except where such is
neither in possession of Seller nor material);
(i) all documents that set forth the terms of each Seller Plan,
Seller Other Benefit Obligation, or Seller VEBA and of any related trust,
including (A) all plan descriptions and summary plan descriptions of Seller
Plans for which Seller is required to prepare, file, and distribute plan
descriptions and summary plan descriptions, and (B) all summaries and
descriptions furnished to participants and beneficiaries regarding Seller Plans,
Seller Other Benefit Obligations, and Seller VEBAs for which a plan description
or summary plan description is not required;
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(ii) all personnel, payroll, and employment manuals and policies;
(iii) a written description of any Seller Plan or Seller Other Benefit
Obligation that is not otherwise in writing;
(iv) all registration statements filed with respect to any Seller
Plan;
(v) all insurance policies purchased by or to provide benefits under
any Seller Plan;
(vi) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors that
relate to any Seller Plan, Seller Other Benefit Obligation, or Seller VEBA;
(vii) all reports submitted within the four years preceding the
date of this Agreement by third party administrators, actuaries, investment
managers, consultants, or other independent contractors with respect to any
Seller Plan, Seller Other Seller Obligation, or Seller VEBA;
(viii) the Form 5500 filed in each of the most recent three plan
years with respect to each Seller Plan, including all schedules thereto and
the opinions of independent accountants;
(d) Except as set forth in Part 2.12(iv) of the Disclosure Schedule:
(i) To the Knowledge of either Seller Stockholder in all material
respects, Seller has performed all of its material obligations under all
Seller Plans, Seller Other Benefit Obligations. Seller has made appropriate
entries in its financial records and statements for all obligations and
liabilities under such Plans, VEBAs, and Obligations that have accrued but are
not due.
(ii) No statement, either written or oral, has been made by Seller
to any Person with regard to any Plan or Other Benefit Obligation that was
not in accordance with the Plan or Other Benefit Obligation and that would more
likely than not have an adverse economic consequence to Seller or to Buyer.
(iii) To the Knowledge of either Seller Stockholder in all
material respects, Seller and its Seller Plans, Seller Other Benefits
Obligations, and Seller VEBAs are in full compliance with ERISA, the IRC
relating to employee benefits, and other applicable Legal Requirements relating
to employee benefits including the provisions of such Legal Requirements
expressly mentioned in this Section 2.12, and with any applicable collective
bargaining agreement, to the extent material.
12
(iv) (Except as set forth in Part 2.12 of the Disclosure Schedule,
there has been no establishment or amendment of any Seller Plan, Seller
VEBA, or Seller Other Benefit Obligation.
(v) No event has occurred or circumstance exists relating
specifically to Seller that is likely to result in a material increase in
premium costs of Seller Plans and Seller Other Benefit Obligations that are
insured, or a material increase in benefit costs of such Plans and Obligations
that are self-insured.
(vi) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any Seller Plan,
Seller Other Benefit Obligation, or Seller VEBA is pending or, to the Knowledge
of Seller or either of the Seller Stockholders, is Threatened.
(vii) The actuarial report for each Pension Plan of Seller and any
ERISA Affiliate of Seller fairly presents the financial condition and the
results of operations of each such Plan in accordance with GAAP.
(viii) The consummation of the Contemplated Transactions will not
result in the payment, vesting, or acceleration of any benefit.
2.13 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 2.13 of the Disclosure Schedule, (i)
Seller is, and at all times has been, in compliance in all material
respects with each material Legal Requirement (not covered within Section 2.12)
that is or was applicable to it or to the conduct or operation of its business
or the ownership or use of any of its assets, (ii) no event has occurred or
circumstance exists that (with or without notice or lapse of time) (A) would be
reasonably expected to constitute or result in a violation by Seller of, or a
failure on the part of Seller to comply with, any material Legal Requirement, or
(B) will be reasonably expected to give rise to any obligation on the part of
Seller to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature, and (iii) Seller has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of,
or failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of Seller or the Seller
Stockholders to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Part 2.13 of the Disclosure Schedule contains a complete and accurate
list of each Governmental Authorization by or from a governmental body that is
held by, or that otherwise relates to the business of, or to any of the assets
owned or used by, Seller. Each Governmental Authorization listed or required to
be listed in Part 2.13 of the Disclosure Schedule is valid and in full force and
effect.
13
2.14 Legal Proceedings; Orders.
(a) Except as set forth in Part 2.14 of the Disclosure Schedule, there
is no pending Proceeding:
(i) that has been commenced by or against any Seller or any of
Seller's stockholders or that otherwise relates to or may adversely affect
the business of, or any of the assets owned or used by, Seller; or
(ii) involving Seller or Seller Stockholders, that challenges, or
that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions.
To the Knowledge of either Seller Stockholder, (1) no such Proceeding has
been Threatened, and (2) no event has occurred or circumstance exists that is
likely to give rise to or serve as a basis for the commencement of any such
Proceeding. Seller has delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
2.14 of the Disclosure Schedule. The Proceedings listed in Part 2.14 of the
Disclosure Schedule will not have a material adverse effect on the business,
operations, assets, condition, or prospects of Seller taken as a whole.
(b) Except as set forth in Part 2.14 of the Disclosure Schedule:
(i) there is no Order to which Seller or either Seller Stockholder,
or any of the assets owned or used by Seller, is subject;
(ii) None of Seller or either Seller Stockholder is not subject to
any Order that relates to the business of, or any of the assets owned or used
by, Seller; and
(iii) no officer, director, agent, or employee of Seller is subject to
any Order that prohibits such officer, director, agent, or employee from
engaging in or continuing any conduct, activity, or practice relating to the
business of Seller.
(iv) Seller is, and at all times has been, in full compliance with
all of the terms and requirements of each Order to which it, or any of the
assets owned or used by it, is or has been subject;
(v) no event has occurred or circumstance exists that may constitute
or result in (with or without notice or lapse of time) a violation of or
failure to comply with any term or requirement of any Order to which Seller or
either Seller Stockholder, or any of the assets owned or used by Seller, is
subject; and
(vi) None of Seller or either Seller Stockholder has received any
notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any
14
term or requirement of any Order to which Seller or either Seller
Stockholder, or any of the assets owned or used by Seller, is or has been
subject.
2.15 Absence of Certain Changes and Events. Except as set forth in Part
2.15 of the Disclosure Schedule, since July 1, 2001, Seller has conducted its
business only in the Ordinary Course of Business and there has not been any:
(a) change in Seller's authorized or issued capital stock; grant of
any stock option or right to purchase shares of capital stock of Seller;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
Seller of any shares of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of Seller;
(c) payment or increase by Seller of any bonuses, salaries, or other
compensation to any stockholder, director, officer, or employee or entry into
any employment, severance, or similar contract with any director, officer, or
employee except as set forth on Part 2.15(c) of the Disclosure Schedule;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of Seller;
(e) damage to or destruction or loss of any asset or property of Seller,
whether or not covered by insurance, materially and adversely affecting the
properties, assets, business, financial condition, or prospects of Seller, taken
as a whole;
(f) entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any contract or transaction involving a
total remaining commitment by or to Seller of at least $10,000 (other than the
entry in agreements in the Ordinary Course of Business on terms consistent with
prior practice);
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of Seller or
mortgage, pledge, or imposition of any lien or other Encumbrance on any asset or
property of Seller, including the sale, lease, or other disposition of any of
the Intellectual Property Assets (as defined in Section 2.21);
(h) cancellation or waiver of any claims or rights with a value to Seller
in excess of $10,000;
(i) material change in the accounting methods used by Seller;
15
(j) borrowing or agreement to borrow any money or loan or agreement to
loan to, or guarantee or agreement to guarantee the obligations of, any
Person except as set forth in Schedule 2.15(j) of the Disclosure Schedule;
(k) cancellation, compromise or waiver of any amounts owing to or any
claims heretofore made by Seller except for normal adjustments in the Ordinary
Course of Business or any other waiver, surrender or release of any rights,
contractual or others, by Seller having a value in the aggregate in excess of
$10,000; or
(l) any distributions to stockholders, except for a distribution of
$25,000 to each Seller Stockholder (i.e. total $50,000) made in December
2001 in conformance with the agreement of the parties hereto; or
(m) agreement, whether oral or written, by Seller to do any of the
foregoing.
2.16 Contracts; No Defaults.
(a) Part 2.16(a) of the Disclosure Schedule contains a complete and
accurate list, and Seller has delivered to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by or to Seller of an amount or value in
excess of $10,000;
(ii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of
Seller in excess of $10,000;
(iii) each lease, rental or occupancy agreement, license, installment
and conditional sale agreement, and other Applicable Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other interest
in, any real or personal property (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $10,000 and with terms of less than one year);
(iv) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(v) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a
group of employees;
(vi) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
Seller with any other Person;
16
(vii) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of Seller or limit the freedom of
Seller to engage in any line of business or to compete with any Person;
(viii) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments for
goods;
(ix) each power of attorney that is currently effective and
outstanding;
(x) each Applicable Contract that contains or provides for an express
undertaking by Seller to be responsible for consequential damages;
(xi) each Applicable Contract for capital expenditures in excess of
$10,000;
(xii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by Seller
other than in the Ordinary Course of Business; and
(xiii) each amendment, supplement, and modification (whether oral
or written) in respect of any of the foregoing.
Part 2.16(a) of the Disclosure Schedule sets forth the title and parties to
such Applicable Contracts.
(b) Except as set forth in Part 2.16(b) of the Disclosure Schedule, each
Applicable Contract identified or required to be identified in Part 2.16(a) of
the Disclosure Schedule is in full force and effect and is valid and enforceable
in accordance with its terms (except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally or by equitable
principals). (c) Except as set forth in Part 2.16(c) of the Disclosure Schedule:
(i) Seller is, and at all times has been, in full compliance with
all applicable terms and requirements of each Applicable Contract under
which Seller has or had any obligation or liability or by which Seller or any of
the assets owned or used by Seller is or was bound, except where such is not
material;
(ii) To the Knowledge of either Seller Stockholder, each other Person
that has or had any obligation or liability under any Applicable Contract
under which Seller has or had any rights is, and at all times has been, in full
compliance with all applicable terms and requirements of such Applicable
Contract, except where such is not material;
(iii) To the Knowledge of either Seller Stockholder, no event has
occurred or circumstance exists that (with or without notice or lapse of
time) may contravene, conflict with, or result in a violation or breach of, or
give Seller or other Person the right to declare a default or
17
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract, except where such
is not material; and
(iv) None of Seller or either Seller Stockholder has given to, or
received from, any other Person any notice or other communication (whether
oral or written) regarding any actual, alleged, possible, or potential violation
or breach of, or default under, any Applicable Contract, except where such would
be immaterial.
(e) The Applicable Contracts relating to the sale, design, manufacture, or
provision of products or services by Seller have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal Requirement
in all material respects.
2.17 Insurance.
(a) Seller and the Seller Stockholders have delivered to Buyer:
(i) true and complete copies of all policies of insurance to which
Seller is a party or under Seller, or any director of Seller, is or has
been covered at any time within the three (3) years preceding the date of this
Agreement;
(ii) true and complete copies of all pending applications for policies
of insurance; and
(iii) any statement by the auditor of Seller's financial statements
with regard to the adequacy of Seller's coverage or of the reserves for claims.
(b) Part 2.17(b) of the Disclosure Schedule describes:
(i) any self-insurance arrangement by or affecting Seller, including
any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by Seller; and
(iii) all obligations of Seller to third parties with respect to
insurance (including such obligations under leases and service agreements).
(c) Part 2.17(c) of the Disclosure Schedule sets forth, by year, for the
current policy year and each of the three preceding policy years:
(i) a summary of the loss experience under each policy;
18
(ii) a statement describing each claim under an insurance policy
for an amount in excess of $5,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of insurance,
and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims that
were self-insured, including the number and aggregate cost of such claims.
(d) Except as set forth on Part 2.17(d) of the Disclosure Schedule:
(i) All policies to which Seller is a party or that provide coverage
to Seller or any director or officer of Seller, including the Seller
Stockholders:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for the
assets and the operations of Seller for all risks normally
insured against by a Person carrying on the same business or
businesses as Seller;
(D) are sufficient for compliance with all Legal Requirements
and contracts to which Seller is a party or by which any of
them is bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of Seller.
(ii) Seller has not received within the past three years (A) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
2.18 Environmental Matters. Except as set forth in Part 2.18 of the
Disclosure Schedule:
19
(a) Seller is, and at all times has been, in full compliance with, and has
not been and is not in violation of or liable under, any Environmental Law.
Seller has no basis to expect, nor has Seller or any other Person for whose
conduct Seller is held to be responsible received, any actual or Threatened
order, notice, or other communication from (i) any Governmental Body or private
citizen acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential violation or failure to
comply with any Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which Seller has had an interest, or with respect
to any property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by Seller, or
any other Person for whose conduct they are or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of either Seller Stockholder,
Threatened claims, Encumbrances, or other restrictions of any nature, resulting
from any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which Seller has or had an interest.
(c) Neither Seller Stockholder has Knowledge of, nor has or any other
Person for whose conduct Seller is or may be held responsible, received, any
citation, directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which Seller had an interest, or with respect to
any property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by Seller, or any other
Person for whose conduct they are or may be held responsible, have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(d) Neither Seller nor any other Person for whose conduct Seller is or may
be held responsible, has any Environmental, Health, and Safety Liabilities with
respect to the demised premises of Seller or, to the Knowledge of either of the
Seller Stockholders, with respect to any other properties and assets (whether
real, personal, or mixed) in which Seller (or any predecessor) has or had an
interest, or at any property geologically or hydrologically adjoining the
demised premises of Seller or any such other property or assets.
(e) To the Knowledge either of the Seller Stockholders, there are no
Hazardous Materials present on or in the Environment at the demised premises of
Seller, including any Hazardous Materials contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, sumps, or any other part of the demised
premises of Seller. Neither Seller nor any other Person for whose conduct Seller
is or may be
20
held responsible or, to the Knowledge of Seller or the Seller Stockholders,
any other Person, has permitted or conducted, or is aware of, any Hazardous
Activity conducted with respect to the demised premises of Seller or any other
properties or assets (whether real, personal, or mixed) in which Seller has or
had an interest except in full compliance with all applicable Environmental
Laws.
(f) Seller and the Seller Stockholders have delivered to Buyer true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Seller pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the demised premises of Seller, or
concerning compliance by Seller or any other Person for whose conduct they are
or may be held responsible, with Environmental Laws.
(g) The foregoing representations and warranties in this Section 2.18 are
all to the Knowledge of either Seller Stockholder and are only breached to the
extent that there is a Material Adverse Effect.
2.19 Employees.
(a) Part 2.19 of the Disclosure Schedule contains a complete and accurate
list of the following information for each employee or director of Seller,
including each employee on leave of absence or layoff status: employer; name;
job title; current compensation paid or payable and any change in compensation
over the last two years; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under Seller's pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any director Plan.
(b) Except as set forth in Part 2.19(b) of the Disclosure Schedule no
employee or director of Seller is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and any other
Person ("Proprietary Rights Agreement") that in any way adversely affects or
will affect (i) the performance of his duties as an employee or director of
Seller, or (ii) the ability of Seller to conduct its business, including any
Proprietary Rights Agreement with Seller by any such employee or director. To
the Knowledge of Seller or the Seller Stockholders, no director, officer, or
other key employee of Seller intends to terminate his employment with Seller.
(c) Part 2.19 of the Disclosure Schedule also contains a complete and
accurate list of the following information for each retired employee or director
of Seller, or its dependents, receiving benefits or scheduled to receive
benefits in the future: name, pension benefit, pension option election, retiree
medical insurance coverage, retiree life insurance coverage, and other benefits.
21
2.20 Labor Relations; Compliance. Seller has not been nor is a party to any
collective bargaining or other labor contract. There has not been, there is not
presently pending or existing, and there is not Threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
Proceeding against Seller relating to the alleged violation of any Legal
Requirement pertaining to labor relations or employment matters, including any
charge or complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission, or any comparable
Governmental Body, organizational activity, or other labor or relations dispute
against Seller or its premises, or (c) any application for certification of a
collective bargaining agent. To the Knowledge of Seller or the Seller
Stockholders, no employee or employees are currently intending to terminate
their employment or enter into a business competitive with Seller immediately or
shortly following the Closing Date.
2.21 Intellectual Property.
(a) Intellectual Property Assets -- The term "Intellectual Property
Assets" includes:
(i) the name "Bac-Tech Systems, Inc.", all fictional business names,
trading names, registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions and discoveries
that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished
works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in Mask Works");
and
(v) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade Secrets") owned, used, or
licensed by Seller as licensee or licensor.
(b) Agreements. Part 2.21(b) of the Disclosure Schedule contains a complete
and accurate list and summary description, including any royalties paid or
received by Seller, of all contracts relating to the Intellectual Property
Assets to which Seller is a party or by which Seller is bound, except for any
license implied by the sale of a product and perpetual, paid-up licenses for
commonly available software programs with a value of less than $5,000 under
which Seller is the licensee. There are no outstanding and, to the Knowledge of
Seller, no Threatened disputes or disagreements with respect to any such
agreement.
(c) Proprietary Information; Know-How Necessary for the Business; Non
Competition Covenants
(i) The Intellectual Property Assets are all those necessary for
the operation of Seller's business as it is currently conducted. Seller is
either the owner of the Intellectual
22
Property Assets free and clear of all liens, security interests, charges,
encumbrances, equities and other adverse claims (except for Permitted Liens and
for such imperfections in title and other Encumbrances, if any, as do not
materially detract from the value or interfere with the present use thereof), or
is licensed or has the right to use the Intellectual Property Assets.
(ii) Except as set forth in Part 2.21(c) of the Disclosure Schedule,
all former and current employees of Seller have executed written contracts
with Seller that assign to Seller all rights to any inventions, improvements,
discoveries, or information relating to the business of Seller. No employee of
Seller has entered into any contract that restricts or limits in any way the
scope or type of work in which the employee may be engaged or requires the
employee to transfer, assign, or disclose information concerning his work to
anyone other than Seller.
(iii) Except as set forth in Part 2.21(c) of the Disclosure Schedule,
each consultant to Seller has executed written contracts with Seller
restricting the disclosure of proprietary information of Seller and assigning to
Seller all inventions, improvements, discoveries, or information relating to the
business of Seller.
(iv) To Knowledge of Seller or the Seller Stockholders, none of
the employees, officers or consultants of Seller, past or present, is in
violation of such agreements, and Seller will use its best commercially
reasonable efforts to prevent any such violation.
(d) Patents
(i) Seller does not own or have any other interest in any patent or
patent application.
(e) Trademarks
(i) Part 2.21(e) of Disclosure Schedule contains a complete and
accurate list and summary description of all Marks used by Seller.
(ii) All Marks that have been registered with the United States Patent
and Trademark Office by Seller are currently in compliance with all formal
legal requirements (including the timely post-registration filing of affidavits
of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the Closing Date.
(iii) No Xxxx of Seller has been or is now involved in any opposition,
invalidation, or cancellation and, to Knowledge of Seller or the Seller
Stockholders, no such action is Threatened with the respect to any of the Marks.
(iv) To Knowledge of either of the Seller Stockholders, there is no
potentially interfering trademark or trademark application of any third party
with respect to any Xxxx used by Seller.
23
(v) To the Knowledge of either Seller Stockholder, no Xxxx is
infringed or, to Knowledge of Seller and the Seller Stockholders, has been
challenged or threatened in any way. None of the Marks used by Seller infringes
or is alleged to infringe any trade name, trademark, or service xxxx of any
third party.
(vi) Except as disclosed in Part 2.21(e) all products and materials
containing a Xxxx xxxx the proper federal registration notice where permitted by
law.
(f) Copyrights
(i) Part 2.21(f) of the Disclosure Schedule contains certain
disclosures regarding the Copyrights of Seller.
(ii) Except as disclosed in Part 2.21(f), all the Copyrights have
been registered and are currently in compliance with formal legal
requirements, are valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after the date of
Closing.
(iii) To the Knowledge of either Seller Stockholder, no Copyright
is infringed or has been challenged or threatened in any way. None of the
subject matter of any of the Copyrights infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on the work of a
third party.
(iv) Except as disclosed in Part 2.21(f), all works encompassed by
the Copyrights have been marked with the proper copyright notice.
(g) Trade Secrets
(i) Except as disclosed in Part 2.21(g), with respect to each Trade
Secret, the documentation relating to such Trade Secret is current,
accurate, and sufficient in detail and content to identify and explain it and to
allow its full and proper use without reliance on the knowledge or memory of any
individual.
(ii) Except as disclosed in Part 2.21(g), Seller has taken all
reasonable precautions to protect the secrecy, confidentiality, and value
of its Trade Secrets.
(iii) Seller has the absolute (but not necessarily exclusive) right
to use the Trade Secrets. The trade secrets of Seller are not part of the
public knowledge or literature, and, to Knowledge of either of the Seller
Stockholders, have not been used, divulged, or appropriated for the benefit of
any Person or to the detriment of Seller. No Trade Secret is subject to any
adverse claim or has been challenged or Threatened in any way.
(h) No Registrations. Seller does not own, or have any other interest in,
any federally registered Xxxx, Patent or Copyrights and there are no pending
applications of Seller with respect to any of the foregoing.
24
2.22 Seller Software.
(a) Part 2.22(a) of the Disclosure Schedule sets forth a complete list of
all software used in connection with the business of Seller other than
off-the-shelf software acquired for less than $5,000 per application (the
"Seller Software"). Except as set forth in Part 2.22(a), Seller has all
technical and descriptive materials for Seller Software as is necessary to run
its business in accordance with its historical practices.
(b) The use of Seller Software by Seller does not breach any terms of any
contract or agreement of Seller. Seller either owns or to the Knowledge of
either Seller Stockholder has been granted under license agreements relating to
Seller Software (the "Seller Software License Agreements") valid and subsisting
rights with respect to all software comprising Seller Software and such rights
may be exercised where Seller does business. Seller is in compliance with each
of the terms and conditions of each of Seller Software License Agreements except
to the extent failure to so comply, individually or in the aggregate, would not
have a material adverse effect on Seller.
(c) Seller Software and the related computer hardware used by Seller in its
operations (the "Seller Hardware") are adequate, when taken together with the
other assets, resources and personnel of Seller, to run the business of Seller
in the same manner as such business has been conducted. Part 2.22(c) of the
Disclosure Schedule contains a summary description of any unusual problems
experienced by Seller in the twelve months prior to the date of this Agreement
with respect to Seller Software or Seller Hardware that would result in an
adverse effect on Seller. 2.23 Customers. Part 2.23 of the Disclosure Schedule
sets forth a complete list of all customers of Seller and a description of any
significant complaints within the past year by any current or former customer
received by Seller.
2.24 Certain Payments. Neither Seller nor any director, officer, agent, or
employee of Seller, or to Knowledge of either Seller Stockholder any other
Person acting for or on behalf of Seller, has directly or indirectly (a) made
any illegal contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public, regardless of form,
whether in money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of Seller, or (iv) in violation of any Legal Requirement, (b)
established or maintained any fund or asset that has not been recorded in the
books and records of Seller.
2.26 Disclosure.
(a) No representation or warranty of Seller or a Seller Stockholder in this
Agreement and no statement in the Disclosure Schedule omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
25
(b) No notice given pursuant to Section 4.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
(c) There is no fact known to Seller or a Seller Stockholder that has
specific application to Seller (other than general economic or industry
conditions) and that materially adversely affects or, as far as Seller and the
Seller Stockholders can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of Seller
that has not been set forth in this Agreement or the Disclosure Schedule.
2.27 Receipt of Disclosures. Seller has received copies of Buyer SEC
Documents (as defined and described in Section 3.6), and Seller and the Seller
Stockholders have read the Buyer SEC Documents and understand the contents
thereof.
2.28 Brokers or Finders. Except for Xxxxxxx Bracket for whose fees the
Selling Stockholders are personally paying, Seller and the Seller Stockholders
and their respective agents have incurred no obligation or liability, contingent
or otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement and will indemnify and hold
Buyer harmless from any such payment alleged to be due by or through Seller or
the Seller Stockholders as a result of the action of Seller or and the Seller
Stockholders or their respective agents.
2.29 Investment Representations.
(a) Investment Intent. Except for intended family distributions and a
distribution to Xxxxxxx Xxxxxxxx in conformance with the Securities Act and any
applicable state securities or blue sky rules, Each Seller Stockholder is
acquiring all of the shares of Buyer Common Stock and Buyer Preferred Stock
described in Section 1.6 (collectively, the "Buyer Securities") for such Seller
Stockholder's own account, for investment only and not with a view to, or for
sale in connection with, a distribution thereof or any part thereof, within the
meaning of the Securities Act or any applicable state securities or blue-sky
laws;
(b) Investor Status. Each Seller Stockholder is an accredited investor as
such term is defined under Rule 501 of Regulation D promulgated pursuant to the
Securities Act ("Regulation D");
(c) Intent to Transfer. Neither of the Seller Stockholders is a party to or
subject to or bound by any contract, undertaking, agreement or arrangement with
any person to sell, transfer or pledge the Buyer Securities or any part thereof
to any person, and has no present intention to enter into such a contract,
undertaking, agreement or arrangement;
26
(d) Offering Exempt from Registration; Buyer's Reliance.
(i) Buyer has advised the Seller Stockholders that the Buyer Securities
have not been registered under the Securities Act or under the laws of any state
on the basis that the issuance thereof is exempt from such registration;
(ii) Buyer's reliance on the availability of such exemption is, in
part, based upon the accuracy and truthfulness of each Seller Stockholder's
representations contained herein;
(iii) As a result of such lack of registration, none of the Buyer
Securities may be resold or otherwise transferred or disposed of without
registration pursuant to or an exemption therefrom available under the
Securities Act and such state securities laws; and
(iv) In furtherance of the provisions of this paragraph (d), all of the
certificate representing the Buyer Securities shall bear a restrictive legend
substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SHARES TO
THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(e) Sophistication of the Seller Stockholders. Each Seller Stockholder has
evaluated the merits and risks of acquiring the Buyer Securities and has such
knowledge and experience in financial and business matters that Seller
Stockholder is capable of evaluating the merits and risks of such purchase, is
aware of and has considered the financial risks and financial hazards of
acquiring Buyer Securities, and is able to bear the economic risk of acquiring
Buyer Securities, including the possibility of a complete loss with respect
thereto;
(f) Access to Information. Each Seller Stockholder has had access to such
information regarding the business and finances of Buyer, the receipt and
careful reading of which is hereby acknowledged by the undersigned, and has been
provided the opportunity to discuss with the Buyer's management the business,
affairs and financial condition of the Buyer and such other matters with respect
to Buyer as would concern a reasonable person considering the transactions
contemplated by the Agreement and/or concerned with the operations of the Buyer
including, without limitation, pursuant to a meeting and/or discussions with
management of the Buyer;
27
(g) No Guarantees. That it never has been represented, guaranteed or
warranted to either Seller Stockholder by Buyer, or any of its officers,
directors, agents, Representatives or employees, or any other Person, expressly
or by implication, that:
(i) Any gain will be realized by Seller Stockholders from their
investment in the Buyer Securities; or
(ii) That the past performance or experience on the part of Buyer, its
predecessors or of any other person, will in any way indicate any future results
of Buyer;
28
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and to the Seller Stockholders,
subject to the exceptions specifically disclosed in the disclosure schedules
supplied by Buyer to Seller (the "Buyer Schedules"), as follows:
3.1 Organization and Good Standing. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New
Jersey.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by equitable principles). Buyer has the absolute and unrestricted
right, power, and authority to execute and deliver this Agreement and to perform
its obligations under this Agreement.
(b) Except as set forth in a separate schedule ("Schedule 3.2") from the
Buyer to Seller, neither the execution and delivery of this Agreement by Buyer
nor the consummation or performance of any of the Contemplated Transactions by
Buyer will give any Person the right to prevent, delay, or otherwise interfere
with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject; or
(iv) any contract to which Buyer is a party or by which Buyer may be
bound.
Except as set forth in Schedule 3.2, Buyer is not and will not be required
to obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
3.3 Certain Proceedings. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To the Knowledge of Buyer, no such Proceeding has
been Threatened.
3.5 Brokers or Finders. Buyer and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or
29
other similar payment in connection with this Agreement and will indemnify
and hold Seller and the Seller Stockholders harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
agents.
3.6 SEC Documents. Except for one Form 8-K which the SEC informed Buyer was
filed late, Buyer has timely filed with the Securities and Exchange Commission
("SEC") all required reports, proxy statements, registration statements, forms
and other documents required to be filed by it with the SEC since May 1, 2000
(the "Buyer SEC Documents"). As of their respective dates, and giving effect to
any amendment thereto, the Buyer SEC Documents, including any financial
statements and schedules included therein, complied in all material respects
with requirements of all applicable federal securities laws, and the applicable
rules and regulations of the SEC, each as in effect on the date so filed, and
none of the Buyer SEC Documents, when filed (or, if amended or superseded by a
filing prior to the date hereof, then on the date of such filing), contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. No forms, reports and documents filed after the date of this
Agreement and prior to the Closing Date by the Buyer will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. As of
December 24, 2001, the issued and outstanding Shares of Buyer Common Stock was
21,185,728.
3.7 Power and Authority. Buyer has all requisite power and authority to
own, lease and operate its properties and to conduct its business as presently
conducted and as proposed to be conducted and is duly qualified or licensed as a
foreign corporation in good standing in each jurisdiction in which the character
of its properties or the nature of its business activities require such
qualification (except where the failure to be so qualified will not have a
Material Adverse Effect).
3.8 Authority for Agreement. The Board of Directors of Buyer has approved
this Agreement and has authorized the execution and delivery thereof.
3.9 No Violation to Result. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby:
(a) are not in violation or breach of, do not conflict with or constitute a
default under, and will not accelerate or permit the acceleration of the
performance required by, any of the terms of the charter documents or by-laws of
Buyer or any note, debt instrument, security agreement, mortgage, lease or
license, or any other contract or agreement (collectively, the "Buyer
Agreement(s)"), written or oral, to which Buyer is a party or by which Buyer or
any of its respective properties or assets are bound;
(b) will not be an event which, after notice or lapse of time or both, will
result in any such violation, breach, conflict, default, or acceleration;
30
(c) assuming the accuracy of Seller's representations and warranties, will
not result in violation under any law, judgment, decree, order, rule, regulation
or other legal requirement of any governmental authority, court or arbitration
tribunal whether federal, state, provincial, municipal or local (within the U.S.
or otherwise) and applicable to Buyer; and
(d) will not result in the creation or imposition of any lien, possibility
of lien, encumbrance, security agreement, equity, option, claim, charge, pledge
or restriction in favor of any third person upon any of the properties or assets
of Buyer.
3.10 No Adverse Change. From September 30, 2001 to the date of this
Agreement, except as disclosed in Buyer's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 2001 (except as otherwise specifically permitted
herein):
(a) Buyer and its subsidiaries have not sustained any damage, destruction
or loss materially adversely affecting the business, properties, financial
condition or operations of Buyer taken as a whole; and
(b) Other than in the usual course of Buyer's business, consistent with the
prior year's operations, and financial results consistent with prior periods,
there have been no changes in the condition (financial or otherwise), business,
net worth, assets, properties, liabilities or obligations (fixed, contingent,
known, unknown or otherwise) of Buyer which in the aggregate have has or may
have a Material Adverse Effect, and there has been no occurrence, circumstance
or combination thereof which might reasonably be expected to result in a
Materially Adverse Effect before or after the Closing Date.
3.11 Taxes. Buyer (i) has paid all Taxes required by applicable Legal
Requirements (including, without limitation, withholding, social security,
payroll and similar Taxes), and all interest and penalties, if any thereon, (ii)
is not party to any pending action or proceeding by any Governmental Body for
the assessment or collection of any Taxes, nor is any claim for any Taxes
pending or to its knowledge Threatened, and (iii) has not executed any
outstanding waiver or consent for the extension of the statute of limitations
for, or for any restrictions on, the assessment or collection of any Taxes.
3.12 Compliance with Laws. Buyer complied in all material respects with all
material Legal Requirements applicable to it, its properties or the operation of
its business or properties. Buyer has not received any notice or citation for
noncompliance with any of the foregoing, and there exists no condition,
situation or circumstance, nor has there existed such a condition, situation or
circumstance, which, after notice or lapse of time, or both, would constitute
noncompliance with or give rise to future liability with regard to any of the
foregoing.
3.13 Litigation. Except as disclosed in Schedule 3.13 and the Buyer SEC
Documents, there is no litigation suit, proceeding, action, claim or
investigation, at law or in equity, pending or threatened against or affecting
Buyer or involving any of its subsidiaries, properties or assets, before any
court, agency, authority or arbitration tribunal, including, without limitation,
any product liability, workers' compensation or wrongful dismissal claims, or
claims, actions, suits
31
or proceedings relating to toxic materials, hazardous substances, pollution
or the environment. To Buyer's Knowledge, there are no facts which, if known to
customers, governmental authorities or other persons, might result in any such
litigation, suit, proceeding, action, claim or investigation. Buyer is not
subject to or in default with respect to any notice, order, writ, injunction or
decree of any court, agency authority or arbitration tribunal.
3.14 No Existing Defaults. Buyer is not in default (except where there
would be no Material Adverse Effect):
(a) under any of the terms of any material Agreement;
(b) under any law, judgment, decree, order, rule regulation or other legal
requirement or any governmental authority, court or arbitration tribunal whether
federal, state, provincial, municipal or local (within the U.S. or otherwise)
and applicable to it or to any of its properties or assets; or
(c) in the payment of any of its monetary obligations or debt.
ARTICLE IV
ADDITIONAL COVENANTS OF SELLER; CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Access and Investigation. Between the date of this Agreement and the
Closing Date, Seller will, and will cause its Representatives to, (a) afford
Buyer and its Representatives (collectively, "Buyer's Advisors") full and free
access to the Seller's personnel, properties, contracts, books and records, and
other documents and data, (b) furnish Buyer and Buyer's Advisors with copies of
all such contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with
such additional financial, operating, and other data and information as Buyer
may reasonably request.
4.2 Operation of the Business of Seller. Seller, without the prior written
approval of Buyer, shall refrain from taking or omitting to take any action or
entering into any transactions, and no event shall have occurred, which, had
such action been taken or omitted or such transaction entered into or such event
occurred immediately prior to the execution of this Agreement, would have caused
any of the representations, warranties or agreements of Seller to be untrue,
incorrect or inaccurate in any respect as of the time of the execution of this
agreement or as of the Closing Date. Seller shall not, for its own account or
whether individually or jointly, alone or with each other or others, enter into
any contract or arrangement with respect to any business of the kind conducted
by Seller. Without limiting the generality of the foregoing, between the date of
this Agreement and the Closing Date, Seller and the Seller Stockholders will:
(a) conduct the business of Seller only in the Ordinary Course of Business;
32
(b) not dispose of any of the assets of Seller as reflected in the
Financial Statements or otherwise other than in the Ordinary Course of Business;
(c) use their respective Best Efforts to preserve intact its current
business organization, keep available the services of its current officers,
employees, and agents, and maintain the relations and good will with suppliers,
customers, landlords, creditors, employees, agents, and others having business
relationships with Seller;
(d) not make any distribution or other payment to Seller or officers,
directors or affiliates of Seller, other than salary or compensation paid in the
Ordinary Course of Business, as reflected in Part 2.19 of the Disclosure
Schedule, and reasonable.
(e) confer with Buyer concerning operational matters of a material nature;
and
(f) otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of Seller.
4.3 Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Seller will
not, without the prior consent of Buyer, take any affirmative action, or fail to
take any reasonable action within their or its control, as a result of which any
of the changes or events listed in Section 2.15 is likely to occur.
4.4 Required Approvals. As promptly as practicable after the date of this
Agreement, Seller will make all filings required by Legal Requirements to be
made by them in order to consummate the Contemplated Transactions. Between the
date of this Agreement and the Closing Date, Seller and the Seller Stockholders
will, (a) cooperate with Buyer with respect to all filings that Buyer elects to
make or is required by Legal Requirements to make in connection with the
Contemplated Transactions, and (b) cooperate with Buyer in obtaining all
consents identified in Schedule 3.2.
4.5 Notification. Between the date of this Agreement and the Closing Date,
Seller and the Seller Stockholders will promptly notify Buyer in writing if any
of the becomes aware of any fact or condition that causes or constitutes a
Breach of any of Seller's representations and warranties as of the date of this
Agreement, or if Seller or either Seller Stockholders becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. During the same period, Seller and the Seller Stockholders will
promptly notify Buyer of the occurrence of any Breach of any covenant of Seller
or either Seller Stockholder in this Section 4 or of the occurrence of any event
that may make the satisfaction of the conditions in Section 6 impossible or
unlikely.
4.6 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Section 8, Seller will not, and will cause each of its
Representatives not to, directly or
33
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Buyer) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of Seller, or any of the
capital stock of Seller, or any merger, consolidation, business combination, or
similar transaction involving Seller.
4.7 Liabilities. Seller has no, and at Closing will not have any, liability
or obligation of any nature, whether absolute, accrued, contingent or otherwise,
arising out of acts or omissions occurring before the date of this Agreement, or
circumstances currently or previously existing, except for (i) indebtedness,
liabilities and obligations arising in the ordinary course of business of Seller
other than liabilities set forth in Part 2.9 of the Disclosure Schedule (which
Seller has undertaken to pay, discharge or provide for hereunder), and (ii) the
contractual indebtedness, liabilities and obligations set forth in Part 2.9 of
the Disclosure Schedule (which shall remain or become, as applicable, the
obligation of Seller after the Closing).
4.8 Best Efforts. Between the date of this Agreement and the Closing Date,
Seller and the Seller Stockholders will use their respective Best Efforts to
cause the conditions in Sections 6.1 and 6.2 to be satisfied.
ARTICLE V
ADDITIONAL COVENANTS OF BUYER
5.1 Approvals of Governmental Bodies. As promptly as practicable after the
date of this Agreement, Buyer will, and will cause each of its Related Persons
to, make all filings required by Legal Requirements to be made by them to
consummate the Contemplated Transactions. Between the date of this Agreement and
the Closing Date, Buyer will, and will cause each Related Person to, cooperate
with Seller and the Seller Stockholders with respect to all filings that Seller
or either Seller Stockholder is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (ii) cooperate with Seller
and the Seller Stockholders in obtaining all consents identified in Part 2.2 of
the Disclosure Schedule; provided that this Agreement will not require Buyer to
dispose of or make any change in any portion of its business or to incur any
other unreasonable burden to obtain a Governmental Authorization.
5.2 Best Efforts. Except as set forth in the proviso to Section 5.1,
between the date of this Agreement and the Closing Date, Buyer will use its Best
Efforts to cause the conditions in Sections 6.1 and 6.3 to be satisfied.
5.3 Operation of the Business of Buyer. Buyer, without the prior written
approval of Seller or the Seller Stockholders, shall refrain from taking or
omitting to take any action or entering into any transactions, and no event
shall have occurred, which, had such action been taken or omitted or such
transaction entered into or such event occurred immediately prior to the
execution of this Agreement, would have caused any of the representations,
warranties or agreements of Buyer to be untrue, incorrect or inaccurate in any
respect as of the time of the execution of this Agreement or as of the Closing
Date.
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5.4 Notification. Between the date of this Agreement and the Closing Date,
Buyer promptly notify Seller and the Seller Stockholders in writing if it
becomes aware of any fact or condition that causes or constitutes a Breach of
any of Buyer representations and warranties as of the date of this Agreement, or
if Buyer becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger . The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted, and the Merger shall have been duly approved, by the requisite vote
under applicable law by the stockholders of Seller.
(b) No Proceedings. Since the date of this Agreement, there must not have
been commenced or Threatened any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
(c) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
6.2 Additional Conditions to Obligations of Buyer. The obligations of Buyer
to consummate and effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Seller:
(a) Accuracy of Representations.
(i) All of Seller's and the Seller Stockholders' representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
35
(ii) No fact not disclosed in this Agreement or the Disclosure Schedule
that results in a Material Adverse Effect since the date of the Prior Financial
Statements shall have occurred.
(b) Seller's Performance.
(i) All of the covenants and obligations that Seller is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
(ii) Each document required to be delivered or executed by Seller or
the Seller Stockholders pursuant to Section 7.1 must have been delivered
or executed.
(c) Consents. Each of the Consents identified in Part 2.2 of the Disclosure
Schedule must have been obtained and must be in full force and effect.
(d) Additional Documents . Each of the documents specified in Section 7.1
must have been delivered to Buyer and Seller and the Seller Stockholders must
have caused the following documents to be delivered to Buyer: such other
documents as Buyer may reasonably request for the purpose of (i) enabling its
counsel to provide the opinion referred to in Section 7.2, (ii) evidencing the
accuracy of any representation or warranty of Seller or the Seller Stockholders,
(iii) evidencing the performance by Seller or the Seller Stockholders of, or the
compliance by Seller or the Seller Stockholders with, any covenant or obligation
required to be performed or complied with by Seller or the Seller Stockholders,
(iv) evidencing the satisfaction of any condition referred to in this Section
6.2, or (v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
(e) No Claim Regarding Stock Ownership or Merger Consideration. There must
not have been made or Threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to acquire
or to obtain beneficial ownership of, any stock of, or any other voting, equity,
or ownership interest in, Seller, or (b) is entitled to all or any portion of
the consideration specified in Section1.6.
(g) No Prohibition. Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
(h) Net Worth and Lease Obligation. At the time of the Closing, Seller
shall have at least the Minimum Net Worth and shall not exceed the Maximum Lease
Obligations.
6.3 Additional Conditions to Obligations of Seller. The obligations of
Seller and the Seller Stockholders to consummate and effect the Merger shall be
subject to the satisfaction at or
36
prior to the Effective Time of each of the following conditions, any of
which may be waived, in writing, exclusively by Seller or the Seller
Stockholders:
(a) Accuracy of Representations. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
(b) Buyer's Performance.
(i) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects.
(ii) Buyer must have delivered or executed each of the documents
required to be delivered or executed by Buyer pursuant to Section 7.2 and
must have made the cash payments required to be made by Buyer pursuant to
Section 1.6.
(c) Consents. Each of the Consents identified in Part 2.2 of the Disclosure
Schedule must have been obtained and must be in full force and effect.
(d) Additional Documents. Buyer must have caused the following documents to
be delivered to Seller: such other documents as Seller may reasonably request
for the purpose of (i) enabling its counsel to provide the opinion referred to
in Section 7.1, (ii) evidencing the accuracy of any representation or warranty
of Buyer, (iii) evidencing the performance by Buyer of, or the compliance by
Buyer with, any covenant or obligation required to be performed or complied with
by Buyer, (iv) evidencing the satisfaction of any condition referred to in this
Section 6.3 or (v) otherwise facilitating the consummation of any of the
Contemplated Transactions.
(e) No Prohibition. Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Seller or any Person affiliated with Seller to
suffer any material adverse consequence under, (i) any applicable Legal
Requirement or Order, or (ii) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
ARTICLE VII
DELIVERIES AT CLOSING
7.1 Deliveries to Buyer. At the Closing Seller and the Seller Stockholders
shall deliver to Buyer:
37
(a) Employment Agreements. An Employment Agreement between Buyer and each
Seller Stockholder in the form set forth as Exhibit B executed by such Seller
Stockholder;
(b) Registration Rights Agreement. A Registration Rights Agreement between
Buyer and each Seller Stockholder in the form set forth as Exhibit C executed by
such Seller Stockholder;
(c) Lock-Up. Lock-Up Agreement between Buyer and each Seller Stockholder in
the form set forth as Exhibit D executed by each Seller Stockholder;
(d) Non-Competition Agreements. A Non-Competition Agreement between Buyer
and each Seller Stockholder in the form set forth as Exhibit E, executed by each
Seller Stockholder;
(e) Legal Opinion. A legal opinion from Kasowitz, Benson, Xxxxxx &
Xxxxxxxx, LLP, counsel for Seller, dated the Closing Date, in the form of
Exhibit F;
(f) Certificates of Good Standing. A Certificate of Good Standing issued by
the Secretary of State of the State of New York and Certificates of Good
Standing from every jurisdiction in which Seller is authorized to do business as
a foreign corporation in each case with respect to Seller;
(g) Certificate of Seller Stockholders. A certificate executed by each
Seller Stockholder representing and warranting, jointly and severally, to Buyer
that the representations and warranties of Seller and the Seller Stockholders in
this Agreement were accurate in all respects as of the date of this Agreement
and are accurate in all respects as of the Closing Date as if made on the
Closing Date;
(h) Resolutions of Board of Directors of Seller. Resolutions of the Board
of Directors of Seller certified by its Secretary or an Assistant Secretary
which authorize the execution, delivery and performance by Seller of the
Contemplated Transaction Documents to which Seller is or is to be a party;
(i) Certificate of Incumbency. A certificate of incumbency certified by the
Secretary or an Assistant Secretary of Seller certifying as to the name of each
officer or other representative of Seller (i) who is authorized to sign the
Contemplated Transaction Documents to which Seller is or is to be a party
(including any certificates contemplated therein), and (ii) who will, until
replaced by other officers or representatives duly authorized for that purpose,
act as its representative for the purposes of signing documents and giving
notices and other communications in connection with the Contemplated Transaction
Documents and the Contemplated Transactions;
(j) Financial Statements. Seller shall deliver the Prior Financial
Statements and, as of a date no less than 10 days prior to the Closing Date, a
management report of the Seller
38
prepared by Seller in accordance with GAAP with respect to the period from
October 31, 2001 through December 18, 2001 (the "Closing Financials"), which
Closing Financials shall be in form and substance acceptable to Buyer; and
(k) By laws. the bylaws and similar Organizational Document of Seller
certified by the Secretary or an Assistant Secretary of Seller;
7.2 Deliveries to Seller and the Seller Stockholders. At the Closing Buyer
shall deliver to Seller and the Seller Stockholders:
(a) Employment Agreements. An Employment Agreement between Buyer and each
Seller Stockholder in the form set forth as Exhibit B, executed by Buyer;
(b) Registration Rights Agreement. A Registration Rights Agreement between
Buyer and each Seller Stockholder in the form set forth as Exhibit C, executed
by Buyer;
(c) Lock-Up Agreement. Lock-Up Agreement between Buyer and the Seller
Stockholders in the form set forth as Exhibit D, executed by the Buyer;
(d) Non-Competition Agreements. A Non-Competition Agreement between Buyer
and each Seller Stockholder in the form set forth as Exhibit E, executed by
Buyer;
(e) Security Agreement. A Security Agreement in the form of Exhibit G,
executed by Buyer;
(f) Legal Opinion. A legal opinion of Xxxxxxx & Xxxxxxxx, LLC, counsel to
Buyer, in the form set forth in Exhibit H;
(g) Notes. Notes in the form set forth as Exhibit A executed by Buyer;
(h) Buyer Common Stock. Certificates evidencing the shares of Buyer Common
Stock issuable pursuant to the Merger;
(i) Buyer Preferred Stock. Certificates evidencing the shares of Buyer
Preferred Stock issuable pursuant to the Merger;
(h) Cash Component. The Cash Component calculated in accordance Section 1.6
in immediately available funds;
(i) Certificate of Good Standing. Certificate of Good Standing with respect
to Buyer issued by the Secretary of State of the State of New Jersey;
(j) Certificate of Officer of Buyer. A certificate executed by Buyer to the
effect that, except as otherwise stated in such certificate, each of Buyer's
representations and warranties in
39
this Agreement was accurate in all respects as of the date of this Agreement
and is accurate in all respects as of the Closing Date as if made on the Closing
Date.
ARTICLE VIII
TERMINATION
8.1 Termination Events. This Agreement may, by notice given prior to or at
the Closing, be terminated:
(a) by either Buyer or Seller if a material Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived following the passage of a reasonable notice and cure period bases on the
character and circumstances of such Breach (if reasonable).
(b) (i) by Buyer if any of the conditions in Sections 6.1 or 6.2 has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by Sellers and the Selling Stockholders, if
any of the conditions in Sections 6.1 or 6.3 has not been satisfied of the
Closing Date or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Seller of the Stockholders to comply with
their obligations under this Agreement) and Seller and the Stockholders have not
waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer, Seller and the Seller Stockholders; or
(d) by either Buyer or Seller or either of the Seller Stockholders if the
Closing has not occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under this
Agreement) on or before March 15, 2002, or such later date as the parties may
agree upon.
8.2 Effect of Termination. Each party's right of termination under Section
8.1 is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 8.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Sections 11.1 and 11.3 will survive; provided, however, that if
this Agreement is terminated by a party because of the Breach of the Agreement
by the other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired..
40
ARTICLE IX
INDEMNIFICATIONS; REMEDIES
9.1 Survival. All representations, warranties, covenants, and obligations
in this Agreement, the Disclosure Schedule and any certificate or document
delivered pursuant to this Agreement will survive the Closing. The right to
indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
9.2 Indemnification and Payment of Damages by Seller Stockholders. The
Seller Stockholders jointly and severally will indemnify and hold harmless
Buyer, and its respective Representatives, stockholders, controlling persons,
and affiliates (collectively, the "Buyer Indemnified Persons") for, and will pay
to the Buyer Indemnified Persons the amount of, any loss, liability, claim,
damage, expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by either the Seller
or either of the Seller Stockholders in this Agreement or any other certificate
or document delivered by the Seller or a Seller Stockholder pursuant to this
Agreement;
(b) any Breach by either Seller or either of the Seller Stockholders of any
covenant, agreement or obligation of the Seller or such Seller Stockholder in
this Agreement;
(c) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such Person with Seller (or any Person acting on behalf) or any
Stockholder in connection with any of the Contemplated Transactions.
The remedies provided in this Section 9.2 will not be exclusive of or limit
any other remedies that may be available to Buyer or the other Buyer Indemnified
Persons.
9.3 Indemnification and Payment of Damages by Buyer. Buyer will indemnify
and hold harmless the Seller Stockholders, and will pay to the Seller
Stockholders and their respective Representatives, controlling persons and
affiliates (the "Seller Indemnified Person") the amount of any Damages arising,
directly or indirectly, from or in connection with (a) any Breach of any
representation or warranty made by Buyer in this Agreement or in any certificate
delivered by Buyer pursuant to this Agreement, (b) any Breach by Buyer of any
covenant, agreement or obligation of Buyer in this Agreement, or (c) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or
41
understanding alleged to have been made by such Person with Buyer (or any
Person acting on its behalf) in connection with any of the Contemplated
Transactions.
9.4 Time Limitations. If the Closing occurs, Seller and the Seller
Stockholders will have no liability (for indemnification or otherwise) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date, other than those in
Sections 2.3, 2.10, 2.12, and 2.18, unless on or before 27 months from the
Closing Date Buyer notifies such Seller Stockholder of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Buyer; a claim with respect to Section 2.3, 2.10, 2.12, or 2.18, or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to the
Closing Date, may be made at any time with respect to Section 2.3, and the
greater of 30 months or the expiration of the applicable statute of limitations
with respect to Sections 2.10, 2.12 and 2.18. If the Closing occurs, Buyer will
have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless on or before 30 months from the
Closing Date either of the Seller Stockholders notifies Buyer of a claim
specifying the factual basis of that claim in reasonable detail to the extent
then known by Seller and the Seller Stockholders.
9.5 Limitations on Amount -- Seller and the Seller Stockholders. Seller and
the Seller Stockholders will have no liability (for indemnification or
otherwise) with respect to the matters described in Section 9.2 until the total
of all Damages with respect to such matters exceeds $20,000, and then only for
the amount by which such Damages exceed $20,000. Notwithstanding the foregoing,
this Section 9.5 will not apply to any Breach of Section 2.4(b) or any of
Seller's or the Seller Stockholders' representations and warranties of which
Seller or any of the Seller Stockholders had Knowledge at any time prior to the
date on which such representation and warranty is made or any intentional Breach
by Seller or any of the Seller Stockholders of any covenant or obligation, and
Seller and the Seller Stockholders will be liable for all Damages with respect
to such Breaches. For purposes of a breach of Section 2.4(b), Seller and the
Seller Stockholders will have liability on a dollar for dollar basis to the
extent of the greater of (i) the amount of the deficiency in the Minimum Net
Worth or (ii) the amount of the excess over the Maximum Lease Obligations.
Notwithstanding anything to the contrary set forth in this Agreement, in no
event shall the Seller Stockholders or the affiliates thereof collectively be
liable for any monetary damages in connection with arising, under or relating to
this Agreement, any ancillary agreement or document or the transactions set
forth herein and therein in an aggregate amount greater than the consideration
payable by Buyer to the Seller Stockholders pursuant to the terms hereof.
9.6 Limitations on Amount -- Buyer. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in Section
9.3 until the total of all Damages with respect to such matters exceeds $20,000,
and then only for the amount by which such Damages exceed $20,000. However, this
Section 9.6 will not apply to any Breach of any of Buyer's representations and
warranties of which Buyer had Knowledge at any time prior to the date on which
such representation and warranty is made or any intentional Breach by
42
Buyer of any covenant or obligation, and Buyer will be liable for all
Damages with respect to such Breaches.
9.7 Procedure for Indemnification -- Third Party Claims.
(a) Promptly after receipt by an indemnified party of notice of the
commencement of any Proceeding against it, such indemnified party will, if a
claim is to be made against an indemnifying party, give notice to the
indemnifying party of the commencement of such claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is prejudiced by
the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 9.7(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party reasonably determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
reasonably satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 9 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within fifteen days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party to which the indemnifying party consents,
which consent may not be unreasonably withheld.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates
43
other than as a result of monetary damages for which it would be entitled
to indemnification under this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
9.8 Procedure for Indemnification -- Other Claims . A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
ARTICLE X
Intentionally left blank.
ARTICLE XI
GENERAL PROVISIONS
11.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. The foregoing combined expenses of
Seller and Seller Stockholders shall be borne $20,000 by Buyer and paid at
closing (but shall be deducted in determining Minimum Net Worth) and the
remainder personally by the Seller Stockholders. In the event of termination of
this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
11.2 Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Buyer determines. Unless consented
to by Buyer in advance or required by Legal Requirements, prior to the Closing
Seller and the Seller Stockholders shall keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
11.3 Confidentiality. Between the date of this Agreement and the Closing
Date, Buyer and Acquired Group will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and Seller and the
Seller Stockholders to maintain in confidence, and not use to the detriment of
another Party any written, oral, or other information obtained in confidence
from another Party in connection with this Agreement or the Contemplated
Transactions, unless (a) such information is already known to such party or to
others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in
44
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by legal proceedings or is required by law to be
disclosed. If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. To the extent not inconsistent with this Section 11.3, the
Mutual Non-Use and Non-Disclosure Agreement, dated June 19, 2001, between Buyer
and the Seller shall remain in effect.
11.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
If to Seller or a Bac-Tech Systems, Inc.
Seller Stockholder: 000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
Facsimile No.: (000) 000-0000
With a copy to: Kasowitz, Benson, Xxxxxx & Xxxxxxxx, LLP
0000 Xxxxxxxx
Xxx Xxxx Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to Buyer: eB2B Commerce, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Facsimile No.: (000) 000-0000
With a copy to: Xxxxxxx & Xxxxxxxx, LLC
00 Xxxxxxx Xxxxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
11.5 Jurisdiction; Service of Process. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of New
York, or, if it has or can acquire jurisdiction, in the
00
Xxxxxx Xxxxxx Xxxxxxxx Xxxxx for the Southern District of New York, and
each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred to
in the preceding sentence may be served on any party anywhere in the world.
11.6 Further Assurances. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.7 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; and (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given.
11.8 Entire Agreement and Modification. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
11.9 Assignments, Successors, and No Third-Party Rights. Neither party may
assign any of its rights under this Agreement without the prior written consent
of the other parties. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
11.10 Special Indemnification. Buyer covenants and agrees that it will take
whatever steps are required to release the personal guaranties of the Seller
Stockholders relating to the Chase Manhattan Line of Credit (maximum line of
$165,000) within sixty (60) days of the Closing Date and, in any event, shall
indemnify Buyer with respect to any liability relating thereto.
46
11.11 Stockholder Meeting. Buyer shall use reasonable efforts to hold its
next stockholders meeting by September 30, 2002 (which shall include a proposal
that will allow the Buyer Preferred Stock to be converted to Buyer Common
Stock), but the parties acknowledge that the date of such meeting may be
effected by such items as the complexity of the proposals to be submitted to
stockholders, whether or not Buyer receives comments on its Proxy Statement from
the Securities and Exchange Commission.
11.12 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.13 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.14 Governing Law. This Agreement will be governed by the laws of the
State of New York without regard to conflicts of laws principles.
11.15 Counterparts . This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
47
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
SELLER STOCKHOLDERS
-------------------
/s/ Xxxxxx Xxxxxx
------------------------------------
Xxxxxx Xxxxxx
/s/ Xxxx Xxxxxx
------------------------------------
Xxxx Xxxxxx
SELLER:
------
BAC-TECH SYSTEMS, INC.
By: /s/ Xxxxxx Xxxxxx
---------------------------------
Name: Xxxxxx Xxxxxx
------------------------------
Title: President
------------------------------
BUYER:
-----
EB2B COMMERCE, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxx
------------------------------
Title: CEO
------------------------------
48
APPENDIX A
TO STOCK PURCHASE AGREEMENT
As used in this Agreement, the following terms have the following meanings:
"APPLICABLE CONTRACT" -- any Contract (a) under which Seller has or may
acquire any rights, (b) under which Seller has or may become subject to any
obligation or liability, or (c) by which Seller or any of the assets owned or
used by it is or may become bound.
"BEST EFFORTS" -- the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
expeditiously; provided, however, that an obligation to use Best Efforts under
this Agreement does not require the Person subject to that obligation to take
actions that would result in a materially adverse change in the benefits to such
Person of this Agreement and the Contemplated Transactions.
"BREACH" -- a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by this
Agreement, including:
(a) the merger of Seller with and into Buyer;
(b) the execution, delivery, and performance of the Contemplated
Transaction Documents; and
(c) the performance by Buyer, Seller and the Seller Stockholders of their
respective covenants and obligations under this Agreement.
"CONTEMPLATED TRANSACTION DOCUMENTS" means this Agreement, the Notes, the
Security Agreement, the Employment Agreements, the Non-Competition Agreements,
the Lockup Agreements, the Registration Rights Agreement and all other
agreements, documents and instruments now or hereafter executed and/or delivered
pursuant to or in connection with any of the foregoing, and any and all
amendments, modifications, supplements, renewals, extensions or restatements
thereof.
"ENCUMBRANCE" -- any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or similar restriction, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other
2
attribute of ownership; provided, however, that a restriction that normally
is related to the item being referenced shall not be an Encumbrance.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational Safety
and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW" -- any applicable Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the public of intended
or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
2
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so
that they do not present unreasonable risks to human health or the Environment
when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
"ERISA" - the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"FACILITIES" -- any real property, leaseholds, or other interests currently
or formerly owned or operated by Seller and any buildings, plants, structures,
or equipment (including motor vehicles) currently or formerly owned or operated
by Seller.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);
(d) multi-national organization or body; or
(e) body entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any nature.
"HAZARDOUS ACTIVITY" -- the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation,
3
treatment, or use (including any withdrawal or other use of groundwater) of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment, and any other act, business, operation, or thing
that increases the danger, or risk of danger, or poses an unreasonable risk of
harm to persons or property on or off the Facilities, or that may affect the
value of the Facilities or Seller.
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"IRC" - the Internal Revenue Code of 1986, as amended, or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter.
"LEGAL REQUIREMENT" -- any applicable federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"MATERIAL ADVERSE EFFECT" -- any event, development or circumstance that
has had or could reasonably be expected to have a material adverse effect on (a)
the business, assets, financial condition, results of operations or prospects of
the Seller or Buyer, as the case may be, taken as a whole or (b) the validity or
enforceability of this Agreement.
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER"-- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
and
(b) such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority) and is not required to be specifically authorized by the parent (if
any) of such Person.
4
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"PERMITTED LIENS" -- shall mean, as applied to the property or assets of
any entity (or any revenues, income or profits of that entity therefrom): (i)
liens for taxes if the same are not at the time due and delinquent; (ii) liens
of carriers, warehousemen, mechanics, laborers and material men for sums not yet
due; (iii) encumbrances incurred in the ordinary course of that entity's
business in connection with worker's compensation, unemployment insurance and
other social security legislation (other than pursuant to ERISA or Section
412(n) of the Code); (iv) liens incurred in the ordinary course of that entity's
business in connection with deposit accounts or to secure the performance of
bids, tenders, trade contracts, statutory obligations, surety and appeal bonds,
performance and return-of-money bonds and other obligations of like nature; (v)
easements, rights-of-way, reservations, restrictions and other similar
encumbrances incurred in the ordinary course of that entity's business or
existing on property and not materially interfering with the ordinary conduct of
that entity's business or the use of that property; (vi) any interest or title
of a lessor of assets that the Seller is leasing pursuant to any capital lease
of the Seller; and (vii) encumbrances securing purchase money indebtedness of
the Seller, so long as those encumbrances do not attach to any property or
assets other than the properties or assets purchased with the proceeds of that
indebtedness.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability Seller, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such individual
or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).
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With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes
(i) the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 35% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 35% of the outstanding equity securities or
equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries.
"TAX OR TAXES" - any applicable (i) federal, state, territorial, local or
foreign income, gross receipts, franchise, estimated, alternative minimum,
add-on minimum, sales, use, transfer, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit, environmental
(including taxes under IRC ss. 59A), customs, duties, real property, personal
property, capital stock, social security, unemployment, disability, payroll,
license, employee or other withholding, or other tax, of any kind whatsoever,
including any interest,
6
penalties or additions to tax or additional amounts in respect of the
foregoing, whether disputed or not; (ii) liability of a Taxpayer for the payment
of any amounts of the type described in clause (i) arising as a result of being
(or ceasing to be) a member of any Affiliated Group (or being included (or
required to be included) in any Tax Return relating thereto); and (iii)
liability of a Taxpayer for the payment of any amounts of the type described in
clause (i) as a result of any express or implied obligation to indemnify or
otherwise assume or succeed to the liability of any other Person.
"TAX RETURN" -- any return (including any information return), report,
statement, claim for refund, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"THREAT OF RELEASE" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED" -- a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), that
would lead a reasonable Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
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EXHIBITS TO AGREEMENT AND PLAN OF MERGER
----------------------------------------
Exhibit A - Note
Exhibit B - Employment Agreement
Exhibit C - Registration Rights Agreement
Exhibit D - Lockup Agreement
Exhibit E - Non-Competition Agreement
Exhibit F - Seller and the Seller Stockholders' Counsel Opinion
Exhibit G - Security Agreement
Exhibit H - Buyer's Counsel Opinion
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DISCLOSURE SCHEDULE
-------------------
2.1 Name, Jurisdiction of Incorporation, Other Jurisdictions Authorized
to do Business, and Capitalization of Seller
2.2 Conflicts, Encumbrances
2.4 Financial Statements
2.6 Real Property Owned and Leased
2.8 Accounts Receivable
2.9 Other Liabilities
2.10 Tax Returns/Taxes - Tax Liabilities
2.12(i) Seller Plans, Seller Benefit Obligations and Seller VEBAS
2.12(ii) ERISA Affiliates, Plans and Plans of ERISA Affiliates
2.12(iii) Liabilities for Post-Retirement Benefits
2.12(iv) Nondisclosed Obligations Under Seller Plans and Seller's Other
Benefit Obligations
2.13 Governmental Authorizations and Compliance With Law
2.14 Legal Proceedings
2.15 Certain Changes and Events
2.16 Contracts
2.16(a) Contract Description
2.16(b) Related Party Contract Rights
2.16(c) Contract Effectiveness
3.16(d) Compliance With Contracts
2.17 Insurance
2.17(b) Insurance Obligations
2.17 (c) Insurance Details
2.17(d) Enforceability of Insurance Policies
2.18 Environmental Matters
2.19 Employees
2.21 Intellectual Property
2.21(b) Description Relating to Intellectual Property Assets
2.21(c) Assignments of Intellectual Property Rights
2.21(d) List of Patents
2.21(e) List of Trademarks
2.21(f) List of Copyrights
2.22 Seller Software
2.22(a) List of Software
2.22(c) Software Problems
2.23 Customers
SCHEDULE 3.2
------------
Stockholder approval of the acquisition of Seller and/or the issuance of Buyer
Common Stock upon conversion of Buyer Preferred Stock is required by the rules
of Nasdaq.]\
Schedule 3.13
-------------
Litigation
----------
In addition to the litigation set forth in the SEC Documents, Buyer
was recently sued by a former employee who claimed that she was owed $10,000 for
a guaranteed bonus, $75,000 for a performance bonus, as well as compensatory
damages and costs.
