AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 7, 1999 (this "Agreement"),
among NETWOLVES CORPORATION, a New York corporation, ("NetWolves"), TSG Global
Education Web, Inc., a Delaware corporation and a direct, wholly-owned
subsidiary of NetWolves ("TSG"), and SALES AND MANAGEMENT CONSULTING, INC.,
d/b/a, THE XXXXXXXX GROUP and XXXXX-XXXXX INSTITUTE, a Connecticut corporation (
"SMCI"), and the persons whose signatures appear at the foot hereof
(individually a "Stockholder" and collectively the "Stockholders".
W I T N E S S E T H:
WHEREAS, the Boards of Directors of NetWolves, and the Board of Directors
and Stockholders of TSG and SMCI have each determined that it is advisable and
in the best interests of their respective shareholders for NetWolves to cause
SMCI to merge with and into TSG upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
NetWolves, and the Board of Directors and Stockholders of SMCI and SMCI have
each approved the merger (the "Merger") of SMCI with and into TSG in accordance
with the applicable provisions of the Delaware General Corporation Law
("Delaware Law"), and upon the terms and subject to the conditions set forth
herein; and
WHEREAS, pursuant to the Merger, each outstanding share (a "Share") of
SMCI's Common Stock, par value $100.00 per share (the "Company Common Stock"),
subject to the provisions of Section 1.7, shall be converted into the right to
receive the Merger Consideration (as defined in Section 1.6(a)), upon the terms
and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
NetWolves, TSG, SMCI and the Stockholders hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger (a) Effective Time. At the Effective Time (as
defined in Section 1.2), and subject to and upon the terms and conditions of
this Agreement and Delaware Law, SMCI shall be merged with and into TSG, the
separate corporate existence of SMCI shall cease, and TSG shall continue as the
Surviving TSG. TSG as the Surviving TSG after the Merger is hereinafter
sometimes referred to as the "Surviving TSG."
(b) Closing. The consummation of the Merger will take place as
promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Article V at the offices
of Blau, Kramer, Wactlar & Xxxxxxxxx, P.C., 100 Jericho Quadrangle, Jericho, New
York, unless another date, time or place is agreed to in writing by the parties
hereto.
SECTION 1.2 Effective Time. The parties hereto shall cause the Merger to be
consummated by filing a certificate of merger as contemplated by Delaware Law
(the "Certificate of Merger"), together with any required related certificates,
with the Secretary of State of the State of Delaware, in such form as required
by, and executed in accordance with the relevant provisions of, Delaware Law
(the time of such filing being the "Effective Time"), attached as Exhibit 1.2.
SECTION 1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time (i) the Surviving TSG
shall possess all the rights, privileges, immunities, powers and purposes of TSG
and SMCI, (ii) all the property, real and personal, including subscriptions to
shares, causes of action and every other asset of TSG and SMCI shall vest in the
Surviving TSG without further act or deed, and (iii) the Surviving TSG shall
assume and be liable for all the liabilities, obligations and penalties of TSG
and SMCI.
SECTION 1.4 Certificate of Incorporation; By-Laws. (a) Certificate of
Incorporation. At the Effective Time, the Certificate of Incorporation of TSG,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving TSG until thereafter amended as provided by
Delaware Law and such Certificate of Incorporation.
(b) By-Laws. The By-Laws of TSG, as in effect immediately prior to the
Effective Time, shall be the By-Laws of the Surviving TSG until thereafter
amended as provided by Delaware Law, the Certificate of Incorporation of the
Surviving TSG and such By-Laws.
SECTION 1.5 Directors and Officers. The directors of TSG immediately prior
to the Effective Time shall be the initial directors of the Surviving TSG, each
to hold office in accordance with the Certificate of Incorporation and By-Laws
of the Surviving TSG, and the officers of TSG immediately prior to the Effective
Time shall be the initial officers of the Surviving TSG, in each case until
their respective successors are duly elected or appointed and qualified.
SECTION 1.6 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of NetWolves, TSG, SMCI or the
holders of any of the following securities:
(a) Conversion of Shares.
(i) NetWolves shall contribute 180,000 shares of its 0.0033 par
value Common Stock ("NetWolves Common Stock") to TSG to be used to
acquire SMCI;
(ii) Each share of SMCI Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the
right to receive 300 validly issued, fully paid and non assessable
shares of NetWolves Common Stock;
(iii) Each share of SMCI Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted to and
exchanged for 300 fully paid and non assessable shares of NetWolves
Common Stock;
(iv) Then the Merger of SMCI into TSG shall occur with TSG
Surviving in accordance with the Certificate of Merger set forth in
Exhibit 1.2; and
(v) The 180,000 shares of NetWolves Common Stock referred to in
(i), (ii) and (iii) above is collectively referred to herein as the
"Merger Consideration".
(b) Cancellation. Each share of SMCI Common Stock held in the treasury
of SMCI shall, by virtue of the Merger and without any action on the part of the
holder thereof, cease to be outstanding, be canceled and retired without payment
of any consideration therefor and cease to exist.
(c) No Liability. Neither NetWolves, TSG nor SMCI shall be liable to
any holder of Company Common Stock for any Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(d) Withholding Rights. NetWolves shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement such amounts as NetWolves is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code") or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by NetWolves, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which such deduction and withholding was made
by NetWolves.
SECTION 1.7 Delivery of Merger Consideration. As soon as practicable after
the Effective Time, the Secretary of the Surviving TSG and the Secretary of
NetWolves shall take such action as may be appropriate in order to deliver the
shares of NetWolves Common Stock, respectively, in accordance with the
provisions of Section 1.6(a).
SECTION 1.8 Taking of Necessary Action; Further Action. Each of NetWolves,
TSG and SMCI will take all such reasonable and lawful action as may be necessary
or appropriate in order to effectuate the Merger in accordance with this
Agreement as promptly as possible. If, at any time after the Effective Time, any
such further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving TSG with all the rights, privileges,
immunities, powers and purposes, and all the property, real and personal,
including subscriptions to shares, causes of action and every other asset of
SMCI and TSG, the officers and directors of SMCI and TSG immediately prior to
the Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
SECTION 1.9 Material Adverse Effect. When used in connection with the
Company, the term "Material Adverse Effect" means any change, effect or
circumstance that, individually or when taken together with all other such
changes, effects or circumstances that have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect, is or is
reasonably likely to be materially adverse to the business, operations, assets
(including intangible assets), condition (financial or otherwise), liabilities,
or results of operations of SMCI. When used in connection with NetWolves, the
term "Material Adverse Effect" means any change, effect or circumstance that,
individually or when taken together with all other such changes, effects or
circumstances that have occurred prior to the date of determination of the
occurrence of the Material Adverse Effect, is or is reasonably likely to be
materially adverse to the business, operations, assets (including intangible
assets), condition (financial or otherwise), liabilities, or results of
operations of NetWolves.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SMCI
The Stockholders and SMCI, jointly and severally, represent and warrant to
NetWolves as of the date hereof and as of the Closing Date as follows:
SECTION 2.1 Organization and Authority.
SMCI is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with all
requisite power and authority (corporate and governmental) to own, operate and
lease its properties and to carry on its business as now being conducted, except
where the failure to have such power and authority would have an adverse effect
of less than $15,000 in the aggregate on SMCI. Except as set forth in Schedule
2.1, SMCI is duly licensed or qualified to do business and is in good standing
in each jurisdiction in which it is required to be so licensed or qualified,
except where the failure to be so licensed or qualified would have an adverse
effect of less than $15,000 in the aggregate on the business of SMCI.
SECTION 2.2. Subsidiary. SMCI has no subsidiaries nor any direct or
indirect interest by stock ownership or otherwise in any firm, association,
corporation or business enterprise, except as set forth on Schedule 2.2.
SECTION 2.3 Authorization of Agreements. The Stockholders have the legal
capacity and SMCI has the power and authority to execute, deliver and perform
their respective obligations under this Agreement. This Agreement has been duly
executed and delivered by SMCI and the Stockholders and constitutes the legal,
valid and binding obligation of SMCI and Stockholders enforceable against them
in accordance with its terms, except as the enforcement thereof may be subject
to or limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the enforcement of creditors' rights generally now or hereafter
in effect and subject to the application of equitable principles and the
availability of equitable remedies.
SECTION 2.4 Capital Stock. The authorized, issued and outstanding capital
stock of all classes of SMCI is set forth on Schedule 2.4. All of the
outstanding capital stock of SMCI has been duly authorized and is validly
issued, fully paid and nonassessable. All outstanding capital stock and any
other outstanding securities of SMCI were issued in compliance with all federal
and state securities laws. The lawful, registered and beneficial owners (and
their addresses) of all shares of the capital stock of SMCI and the number of
shares held by each is as indicated on Schedule 2.4 hereto. There are no rights,
subscriptions, warrants, options, conversion rights, commitments or agreements
of any kind authorized or outstanding to purchase or otherwise acquire from the
Stockholders, SMCI, or any other person, any shares of stock, or securities or
obligations of any kind convertible into or exchangeable for any shares of
stock, of any class of SMCI or any other equity interest in SMCI. There is no
proxy, or any agreement, arrangement or understanding of any kind authorized or
outstanding which restricts, limits or otherwise affects the right to vote any
share of Stock.
SECTION 2.5 . No Conflicts. The execution, delivery and performance of this
Agreement, and any other agreement or document contemplated herein or therein
and the consummation of all of the transactions contemplated hereby and thereby:
(i) do not and will not require the consent, waiver, approval, license,
designation or authorization of, or declaration with, any Person or court to
which SMCI is subject or any governmental authority or agency; and (ii) do not
and will not, with or without the giving of notice or the passage of time or
both, violate or conflict with or result in a breach or termination of any
provision of, or constitute a default under, or accelerate or permit the
acceleration of the performance required by the terms of, or result in the
creation of any mortgage, security interest, claim, lien, charge or other
encumbrance upon any of the assets of SMCI pursuant to, or otherwise give rise
to any liability or obligation under, the certificate of incorporation or bylaws
of SMCI, any agreement, mortgage, deed of trust, indenture, license, permit or
any other agreement or instrument or any order, judgment, decree, statute or
regulation to which the Stockholders or SMCI is a party or by which the
Stockholders, SMCI or any of their assets may be bound, except for any such
violations, conflicts, breaches, defaults or other occurrences which would not
have a material adverse effect on SMCI.
SECTION 2.6 Financial Statements. Schedule 2.6 sets forth the Financial
Statements of SMCI.
(a) For the relevant periods, the Financial Statements: (1) are
complete and correct in all material respects; (2) present fairly the
consolidated financial position of SMCI at such dates and the results of
operations and changes in financial position for the respective periods ended on
such dates; and (3) were prepared in accordance with generally accepted
accounting principles, consistently applied during the periods, and are in
accordance with the books and records maintained by SMCI in all material
respects.
(b) As at April 30, 1999, SMCI had no liabilities, commitments or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
not shown and adequately provided for in the Financial Statements as of such
date or in the Schedules to this Agreement.
SECTION 2.7 Taxes. True and correct copies of SMCI's federal and state
income tax returns for the years ended December 31, 1996, 1997, and 1998 have
been delivered to NetWolves. All tax returns (including information returns)
required by any jurisdiction to have been filed by or with respect to SMCI have
been timely filed, except for returns with respect to which extensions have been
granted, and each such return is true, correct and complete.
Except as set forth in Schedule 2.7, all liabilities of SMCI to any
jurisdiction for taxes of every kind and nature, including interest thereon and
penalties with respect thereto, (collectively "Taxes") relating to any period
ending on or prior to April 30, 1999, have been timely paid by SMCI or are
accrued and provided for in the Financial Statements for the period ended April
30, 1999. Any liability for Taxes incurred by SMCI since April 30, 1999 was
incurred in the ordinary course of business.
Except as set forth in Schedule 2.7, the U.S. federal income tax
returns and state and foreign income tax returns of SMCI have not been audited
by the Internal Revenue Service or other taxing authority within the past five
(5) years. Neither the Internal Revenue Service nor any state, local or other
taxing authority has proposed any additional taxes, interest or penalties with
respect to SMCI or any of its operations or business; there are no pending or,
to the knowledge of SMCI and the Stockholders, threatened tax claims or
assessments; and there are no pending or, to the knowledge of SMCI and the
Stockholders, threatened tax examinations by any taxing authorities.
SMCI has not given any waivers of rights (which are currently in
effect) under applicable statutes of limitations with respect to the federal
income tax returns for any fiscal year. SMCI has not consented to the
application of Section 341(f) of the Code.
SMCI has been a "C" corporation since January 1, 1994.
SECTION 2.8 No Adverse Changes. Since April 30, 1999, (i) the business of
SMCI has been conducted only in the ordinary course, except for the transactions
contemplated by this Agreement; (ii) there has been no change in the condition
(financial or otherwise), assets, liabilities, business, operations or affairs
of SMCI, other than changes in the ordinary course of business, none of which
singly and no combination of which, in the aggregate, has been materially
adverse; and (iii) there has been no damage, destruction or loss or other
occurrence or development, whether or not insured against, which, either singly
or in the aggregate, materially adversely affects, and the Stockholders have no
knowledge of any threatened occurrence or development which would materially
adversely affect, the condition (financial or otherwise), assets, liabilities,
business, operations, affairs or prospects of SMCI.
SECTION 2.9 Conduct of Business. Except as disclosed on Schedule 2.9
hereto, since April 30, 1999, SMCI has not: (i) created or incurred any
liability (absolute, accrued, contingent or otherwise) except unsecured current
liabilities incurred in the ordinary course of business consistent with past
practice for other than money borrowed and disclosed on Schedule 2.9 hereto;
(ii) mortgaged, pledged or subjected to any lien or otherwise encumbered any of
its assets, tangible or intangible; (iii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability (absolute, accrued, contingent
or otherwise) other than current liabilities shown on the Financial Statements
as at April 30, 1999, and taxes and current liabilities incurred since April 30,
1999 in the ordinary course of business for other than money borrowed or under
contracts or agreements entered into in the ordinary course of business (other
than as a result of any default or breach of, or penalty under, any such
contracts of agreements); (iv) waived, released or compromised any claims or
rights of substantial value, or experienced any labor trouble (including without
limitation any actual or threatened strike or lock-out) or lost, or been
threatened with the loss of, any key employees or any substantial number of
employees; (v) entered into any settlement, compromise or consent with respect
to any claim, proceeding or investigation; (vi) made capital expenditures or
capital additions or betterments in excess of $20,000; (vii) sold, assigned,
transferred, leased or otherwise disposed of any of its assets, tangible or
intangible, or canceled any debts or claims except, in each case, for fair
consideration in the ordinary course of business; (viii) declared or paid any
dividends, or made any other distribution on or in respect of, or directly or
indirectly purchased, retired, redeemed or otherwise acquired any shares of its
capital stock, paid any notes or open accounts or paid any amount or transferred
any asset to the Stockholders, any member of their families or any other holder
of any capital stock of SMCI; (ix) made or become a party to, or become bound
by, any contract or commitment or renewed, extended, amended, modified or
terminated any contract or commitment which in any one case involved an amount
in excess of $15,000; (x) issued or sold any shares of its capital stock; (xi)
except in the ordinary course of business, granted any increase in the
compensation of, made any other change in employment terms for, or adopted,
amended, modified or terminated any bonus, profit-sharing, incentive, severance
or other plan, contract or commitment for the benefit of, any of its directors,
officers or employees; (xii) entered into any transaction not in the ordinary
course of business (except for transactions contemplated by this Agreement);
(xiii) changed any of its accounting methods or principles used in preparing the
Financial Statements; or (xiv) entered into any contract or commitment to do any
of the foregoing.
SECTION 2.10 Title to Assets. Except as set forth in Schedule 2.10, SMCI
has valid title to all of its personal property and valid leasehold interests in
all real and personal property leased by it, free and clear of all claims,
liens, charges, mortgages, pledges, security interests, restrictions and other
encumbrances of any kind whatsoever, excluding (i) any such liens relating to
carriers, warehousemen, real property lessors, mechanics, materialmen, and
similar persons, affecting leased real property, or arising as a matter of law,
which, in the aggregate, do not exceed $15,000; (ii) defects, zoning
restrictions, restrictions on use, irregularities, encumbrances or clouds on
title of real property, which do not materially impair the property affected
thereby for the purpose for which it was acquired or leased; and (iii) any
mortgages, pledges, security interests, restrictions and other encumbrances
caused by parties other than SMCI or the Stockholders relating to any leased
real property, which, in the aggregate, do not materially affect the use and
enjoyment of such leased real property. No instrument, easement, license or
grant of record, applicable zoning or building law, ordinance or administrative
regulation or other impediment of any kind prohibits or interferes with, limits
or impairs, or would, if not permitted by any prior nonconforming use, prohibit
or interfere with or limit or impair, the use, operation, maintenance of, or
access to, or the value of, the real or personal property owned or leased by
SMCI as presently used, operated, maintained and accessed by SMCI to carry on
its business as presently conducted. All of the assets and properties owned or
leased by SMCI are (i) sufficient and adequate to carry on their business as
presently conducted; (ii) are in good condition and repair as necessary to carry
on their business as presently conducted, normal wear and tear excepted, and are
in a state of maintenance, repair and operating condition required for the
proper operation and use thereof as necessary to carry on their business as
presently conducted; (iii) comply with all applicable federal, state or local
laws, ordinances, rules and regulations and with the terms and conditions of all
leases and other agreements affecting or relating to any such property, except
where the noncompliance with any of the foregoing does not have a material
adverse affect on the business of SMCI, taken as a whole; and (iv) are adequate
to provide the products and services of SMCI in accordance with the most current
standards established by customers, clients and governmental bodies.
SECTION 2.11 Real Property. SMCI does not own any real property. Schedule
2.11 sets forth a true and complete list of all leases of real property to which
SMCI is a party. Except as set forth in Schedule 2.11, SMCI enjoys quiet
possession under all of their leases of real property, each of which is
enforceable in accordance with its terms against the lessor thereunder and is
not in default under the terms of any of said leases, except for any such
default which does not have an adverse effect of $15,000 or more on SMCI; and no
condition exists and no event has occurred which, with or without the passage of
time or the giving of notice or both, could constitute such a default.
SECTION 2.12 Personal Property. Schedule 2.12 hereto sets forth a true and
complete list of all items of personal property having an original cost of more
than $5,000, owned or leased by SMCI and the location of each such item.
SECTION 2.13 Inventory. SMCI does not have, nor did it have in the past any
material amounts of inventory.
SECTION 2.14 Accounts Receivable. All accounts receivable, net of reserves,
shown on the Financial Statements for the period ending April 30, 1999, or
thereafter acquired by SMCI, have been collected or will be collected and are
subject to no known counterclaims or setoffs. All such accounts receivable have
been generated in the ordinary course of business and reflect a bona fide
obligation for the payment of goods or services provided by SMCI.
SECTION 2.15 Material/Service Agreements; Other Contracts. (a) Schedule
2.15(a) sets forth a complete list with regard to SMCI of (i) all bids,
applications or proposals submitted by it to provide materials or services with
a value of $15,000 or more to any Person and for which the award, approval or
selection is pending, (ii) all contracts or agreements for the provision of
materials or services with a value of $15,000 or more to which SMCI is a party
and which has not yet been performed in full (the items referred to in the
foregoing clauses (i) and (ii) being herein collectively called the
"Material/Service Agreements"). All of such Material/Service Agreements are
fully performable by SMCI in compliance with their terms. To the knowledge of
SMCI and the Stockholders, no grounds exist for the termination or cancellation
of any Material/Service Agreement by the other party thereto. Schedule 2.15(a)
sets forth for each Material/Service Agreement: (i) the branch of SMCI
responsible; (ii) the customer; and (iii) the remaining revenue to be earned.
(b) Except as disclosed in Schedule 2.15(b) hereto, other than as
disclosed on Schedule 2.15(a), neither SMCI is a party to or bound by any oral
or written contracts, obligations or commitments, including without limitation
any:
(i) contract, commitment or arrangement involving, in any one case,
$15,000 or more;
(ii) contract with a term of, or requiring performance, more than six
(6) months from its date;
(iii) lease or lease purchase agreement, mortgage, conditional sale or
title retention agreement, indenture, security agreement, credit agreement,
pledge or option with respect to any property, real or personal (tangible
or intangible), in any capacity;
(iv) commitment, contract or undertaking for the purchase or use of
services, materials, supplies, inventory, machinery or equipment and
involving more than $15,000 in the aggregate;
(v) employment contracts or agreements;
(vi) contract or agreement with any labor union or other collective
bargaining group;
(vii) bonus, pension, savings, welfare, profit sharing, stock option,
retirement, commission, executive compensation, hospitalization, insurance
or similar plan providing for employee benefits or any other arrangement
providing for benefits for any former or current employees or for the
remuneration, direct or indirect, of the directors, officers or employees
of SMCI;
(viii) note, loan, credit or financing agreement or other contract for
money borrowed, and all related security agreements and collateral
documents, including any agreement for any commitment for future loans,
credit or financing;
(ix) guarantee;
(x) contract or understanding regarding any capital expenditures in
excess of $15,000;
(xi) agency (sales or otherwise), distribution, brokerage (including,
without limitation, any brokerage or finder's agreement or arrangement with
respect to any of the transactions contemplated by this Agreement) or
advertising agreement;
(xii) contract with investment bankers, accountants, attorneys,
consultants or other independent contractors;
(xiii) shareholder agreement or contract with any Stockholder (or
family member thereof), director or officer of SMCI or any Affiliate of
such persons, except agreements or contracts referred to herein which
relate to the transactions contemplated by this Agreement;
(xiv) contract, commitment or arrangement which would restrain the
Company from engaging or competing in any business or to maintain the
confidentiality of any matter, except agreements made in the ordinary
course of business to maintain confidentiality of their vendors and
customers;
(xv) contract, commitment or arrangement not made in the ordinary
course of business; and
(xvi) license, permit, franchise or royalty agreement which is
material to the Company's business.
(c) SMCI has made available to NetWolves correct and complete copies
of all of the contracts, agreements and other documents listed in Schedules
2.15(a) and 2.15(b) hereto and all amendments thereto and any waivers granted
thereunder (the "Scheduled Contracts"). Except as specifically set forth on
Schedules 2.15(a) and 2.15(b), the consummation of this Agreement and the other
transactions contemplated by this Agreement are not a violation of or grounds
for the modification or cancellation of any of the Scheduled Contracts or for
the imposition of any penalty or security interests thereunder. SMCI enjoys good
working relationships under all Scheduled Contracts, and no unresolved disputes
are pending or, to the best of the Stockholders' or SMCI's knowledge, threatened
under or in respect of any such Scheduled Contracts. SMCI does not have any
outstanding power of attorney other than routine power of attorney relating to
representation before governmental agencies or given in connection with
qualification to do business in another jurisdiction.
Except as described in Schedule 2.15(a) and (b) hereto, all Scheduled
Contracts described in such Schedule 2.15(a) and (b) are valid and enforceable
in accordance with their respective terms, except as the enforcement thereof may
be subject to or limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights generally now or
hereafter in effect and subject to the application of equitable principles and
the availability of equitable remedies; and there is not, under any of such
documents or agreements or any obligation, or covenant or condition contained
therein, any existing default by SMCI, to the Stockholders's knowledge, by any
other party, or any event which with notice, lapse of time, or both, would
constitute a default and which would have a Material Adverse Effect on the
continued operation of SMCI or its business.
SECTION 2.16 Intellectual Property. Schedule 2.16 hereto sets forth a true
and complete list of all of trademarks, service marks and tradenames, and the
federal, state and foreign registrations and applications thereof, patents and
patent applications and extensions and renewals thereof and copyrights and
copyright applications and renewals thereof (the "Intellectual Property"). All
the Intellectual Property is owned by SMCI free and clear of any and all
licenses, liens, claims, security interests, charges or other encumbrances or
restrictions of any kind, and no licenses for the use of any of such rights or
Trade Secrets have been granted by SMCI to any third parties, except as
reflected in the Schedules attached hereto. All of such rights together with the
Trade Secrets are valid, enforceable and in good standing, and are sufficient
and appropriate for the conduct of business of SMCI as currently conducted. The
sale of the Stock to NetWolves and the consummation of the other transactions
contemplated hereby will not adversely affect any rights in the Intellectual
Property or Trade Secrets of SMCI. To the knowledge of SMCI and the
Stockholders, the operation of the business of SMCI does not infringe in any way
on any registered patent, trademark, trade name, copyright, Trade Secret,
contract, license or other similar right, of any person, and SMCI does not
license any such right from others except as set forth on Schedule 2.16. No
claim is pending or, to the knowledge of SMCI and the Stockholders, threatened,
with respect to such infringement or conflict. To the knowledge of SMCI and the
Stockholders, no other Intellectual Property or Trade Secret other than those
owned or licensed by SMCI are required by them for their business as presently
conducted. The Stockholders have no knowledge of any infringement by any third
parties upon any of the Intellectual Property.
SECTION 2.17 Insurance. Schedule 2.17 hereto contains a complete and
correct list of all insurance policies maintained by SMCI together with a
schedule of required premiums, premium payment dates and any prepaid premiums
under each such policy. SMCI has made available to NetWolves complete and
correct copies of all such policies together with all riders and amendments
thereto. Such policies are in full force and effect, and all premiums due
thereon have been paid. SMCI has complied in all material respects with the
provisions of such policies. No notice has been received canceling or
threatening to cancel or refusing to renew any of such insurance. The rights of
the insured under such policies will not be terminated or adversely affected by
the Closing or the consummation of the other transactions contemplated hereby.
To the knowledge of SMCI and the Stockholders, there is currently no basis for
any insurance claim by SMCI.
SECTION 2.18 Customer and Supplier Relationships. Attached as Schedule 2.18
is a complete and correct list of all current customers of SMCI showing the
sales to each for the year ended December 31, 1998 and of all suppliers whose
sales to SMCI amounted to more than $25,000 during any of such periods showing
the sales of each. With respect to any such customer or supplier or group of
related customers or suppliers listed on Schedule 2.18, the Stockholders have no
knowledge that any such customer, supplier or group of related customers or
suppliers has terminated or expects to terminate a material portion of its
normal business with SMCI. Except as disclosed in Schedule 2.18 hereto, no
Stockholders or director or officer of SMCI or any of their family members or
Affiliates has any direct or indirect interest, either by way of stock ownership
or otherwise, in any firm, corporation, association or business enterprise,
which competes with, is a supplier or customer of, or is a distributor or sales
agent for, or is a party to any contract with SMCI.
SECTION 2.19 Employees. SMCI has furnished to NetWolves a true and complete
list setting forth all of the employees and officers of SMCI with a description
of their job designations, compensation, benefits (including severance pay and
bonuses), outstanding loans to officers or employees and all understandings not
in the ordinary course of business relating to terms and conditions of
employment. Proper and accurate amounts have been withheld by SMCI from their
employees for all periods in full compliance with tax withholding provisions of
applicable federal, state, local or foreign law. Proper and accurate federal,
state, local and foreign returns have been filed by SMCI for all periods for
which returns were due with respect to employee income tax withholding, social
security and unemployment taxes, and the amounts shown thereon to be due and
payable have been paid.
SECTION 2.20 Labor Relations. Except as set forth on Schedule 2.20, there
has been no material violation of any federal, state or local statutes, laws,
ordinances, rules, regulations, orders or directives with respect to the
employment of individuals by, or the employment practices or work conditions of,
SMCI, or their respective terms and conditions of employment, wages and hours.
SMCI is not engaged in any unfair labor practice or other unlawful employment
practice and there are no unfair labor practice charges or other employee
related complaints against SMCI pending or, to the knowledge of SMCI and the
Stockholders, threatened before any other federal, state, or local, or other
governmental authority by or concerning the employees of SMCI.
SECTION 2.21 Benefit Plans. (a) Schedule 2.21 hereto sets forth a true and
complete list of each "employee welfare benefit plan" (as defined in Section
3(1) of ERISA) maintained by SMCI or an Affiliate or to which SMCI or an
Affiliate contributes or is required to contribute, including any multiemployer
employee welfare benefit plan, on behalf of officers and employees of SMCI or an
Affiliate (such multiemployer and other employee welfare benefit plans being
hereinafter collectively referred to as the "Welfare Benefit Plans"). With
respect to each Welfare Benefit Plan, all contributions or premiums due by the
Closing Date have been paid or accrued. All Welfare Benefits Plans are fully
funded, none of which are defined benefit plans.
(b) All Welfare Benefit Plans, and each employee pension benefit plan
(as defined in Section 3(2) ERISA) and all plans, agreements, arrangements and
commitments related thereto ("Pension Benefit Plans") are legal, valid and
binding in full force and effect and in compliance with all applicable rules,
regulations and laws.
(c) Each Pension Benefit Plan, each Welfare Benefit Plan and each
related trust agreement and annuity contract and insurance policy (and any other
funding instruments) complies and has complied, both as to form and operation,
with the provisions of (A) the Code in order to be tax qualified under Section
401(a) or 403(a) of the Code; (B) ERISA; and (C) all other applicable laws,
rules and regulations; all necessary government approvals for the Pension
Benefit Plans have been obtained; and favorable determination letters, copies of
which have been made available to NetWolves, as to the qualification under the
Code of each of the Pension Benefit Plans and each amendment thereto have been
received from the Internal Revenue Service and no event has occurred or
condition exists which would adversely affect such determination.
(d) Each Welfare Benefit Plan and each Pension Benefit Plan has been
administered to date in material compliance with the requirements of the Code,
ERISA and all other applicable laws and all reports required by any government
agency.
(e) Neither SMCI, nor any Affiliate, nor any plan fiduciary of any
Welfare Benefit Plan or Pension Benefit Plan has engaged in any transaction in
violation of Section 406 of ERISA or any "prohibited transaction" (as described
in Section 4975(c) of the Code), except to the extent that such violation would
not result in an aggregate cost, fine or penalty in excess of $1,000.
(f) Schedule 2.21 lists each deferred compensation plan, bonus plan,
stock option plan, employee stock purchase plan and any other employee benefit
plan, agreement, arrangement or commitment not required under a previous
subsection to be listed on Schedule 2.21 maintained by SMCI or an Affiliate with
respect to the compensation of any of their employees.
(g) There are no actions, suits or claims (other than routine claims
for benefits) pending or which could reasonably be expected to be asserted
against any Pension Benefit Plan or Welfare Benefit Plan; there are no civil or
criminal actions pending or threatened against any fiduciary, Pension Benefit
Plan or Welfare Benefit Plan with respect to the plan; and no Pension Benefit
Plan or Welfare Benefit Plan is the direct or indirect subject of any audit,
investigation or examination by any governmental or quasigovernmental agency,
and no such completed audit, investigation or examination, if any, has resulted
in the imposition of any fine or penalty on any person.
(h) All Welfare Benefit Plans, Pension Benefit Plans, related trust
agreements or annuity contracts (or any other funding instruments), and all
plans, agreements, arrangements and commitments referred to in this Section 2.21
are legally valid and binding and in full force and effect and in compliance
with all applicable laws.
SECTION 2.22 Litigation; Compliance; Permits. Except as disclosed in
Schedule 2.22 hereto, there are no actions, suits, proceedings, arbitrations or
governmental investigations pending, or, to the best of Stockholders' knowledge,
threatened against, by or affecting SMCI in which, individually or in the
aggregate, an unfavorable determination could adversely affect by $15,000 or
more the business of SMCI or their earnings or condition (financial or
otherwise) or any of their assets or result in any liability on the part of SMCI
or prevent, hinder or delay the execution and performance of this Agreement or
any of the transactions contemplated hereby, or could declare this Agreement
unlawful or cause the rescission of any of the transactions hereunder, or
require NetWolves or TSG to divest itself of the Stock; nor has any such suit
been pending within the two years prior to the date hereof. SMCI has not been
charged with or received notice of any violation of any applicable federal,
state, local or foreign law, rule, regulation, ordinance, order or decree
relating to it, or the operation of its business, and the Stockholders are not
aware of any threatened claim of such violation (including any investigation) or
any basis therefor.
SMCI has complied and is in compliance with, all laws, rules, regulations,
ordinances, orders, judgments, decrees, writs, injunctions, building codes,
safety, fire and health approvals, certificates of occupancy or other
governmental restrictions applicable to them, their assets, employees and
employment practices, except where the failure to so comply would not have an
adverse effect of $15,000 or more on them, their business, assets, financial
condition, employees and employment practices.
SMCI has all material governmental licenses, permits, approvals or other
authorizations required for the conduct of their business as now conducted, all
of which are in full force and effect and all of which are listed on Schedule
2.22 hereto; there is no action pending or, to the knowledge of SMCI and
Stockholders, threatened, to terminate any rights under any such governmental
licenses, permits or authorizations; and except as disclosed on Schedule 2.22 at
the Closing, none of such licenses, permits, approvals and authorizations will
be adversely affected by this Agreement or the consummation of the other
transactions contemplated by this Agreement.
SECTION 2.23 Environmental Compliance. Except as set forth in Schedule
2.23, (i) all of the assets and properties presently owned, leased or operated
by SMCI is in compliance with all Environmental Laws, except where the
noncompliance with any such Environmental Laws would have an adverse effect of
$15,000 or less in the aggregate on the business, assets and financial condition
of SMCI, and is not subject to any pending or, to the knowledge of the
Stockholders or SMCI, threatened Environmental Actions; (ii) none of the assets
and properties which have been or are now owned, leased or operated by SMCI have
been used by SMCI for the generation, storage, manufacture, use, transportation,
disposal or treatment of Hazardous Substances; (iii) there has been no Hazardous
Discharge by SMCI on or from any of the assets and properties presently or
formerly owned, leased or operated by SMCI; (iv) there are no outstanding, or to
the knowledge of SMCI and the Stockholders, threatened Environmental Actions
against SMCI; and (v) SMCI has not owned, possessed or arranged for the
transportation of Hazardous Substances at any site where any of them have
performed remediation services. No employee or other person has ever made a
claim or demand against SMCI of which SMCI has received written notice based on
alleged damage to health caused by any Hazardous Substance. All services
performed by SMCI, including, without limitation, remediation activities, were
and are in full compliance with all Environmental Laws and applicable industrial
and professional standards, except where the noncompliance with any of the
foregoing would have an adverse effect of $15,000 or less in the aggregate on
the business, assets and financial condition of SMCI.
SECTION 2.24 Corporate Records. The copy of the certificate of
incorporation of SMCI and all amendments thereof to date, certified by the
Secretary of State of their respective jurisdictions of incorporation and of the
by-laws of SMCI, as amended to date, certified by the Secretary or an Assistant
Secretary of SMCI, as applicable, all under a date not more than five (5) days
prior to the Closing Date which have been or will be delivered to NetWolves are
complete and correct, and the minute books of SMCI correctly reflect all
material corporate actions taken at all meetings of directors (including
committees thereof) and Stockholders, and correctly record all resolutions
certified copies of which have been delivered to other parties. The stock
transfer books (with all canceled and unused stock certificates attached) and
stock ledgers are complete and correct and correctly reflect all issuances and
transfers of the capital stock of SMCI.
SECTION 2.25 Disclosure. No representation or warranty by the Stockholders
or SMCI and no statement or certificate furnished or to be furnished by or on
behalf of the Stockholders, SMCI to NetWolves or its agents pursuant to this
Agreement or in connection with the transactions contemplated hereby contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained herein
or therein not misleading.
As used in this Section 2.25 and elsewhere in this Agreement the term
"to the knowledge of the Stockholders" or "to the best of the Stockholders'
knowledge" means the actual knowledge of the Stockholders or any executive
officer or director of SMCI after due inquiry.
SECTION 2.26 Investment Intent. Those Stockholders who are acquiring
NetWolves Common Stock are doing so for investment purposes only and not with a
view to, or for sale in connection with, any distribution thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"); the
holders of NetWolves Common Stock understand that none of NetWolves Stock has
been registered under the Securities Act or qualified under applicable state
securities laws, and all of such NetWolves Common Stock are "restricted
securities" within the meaning of the Securities Act, may not be transferred or
sold without registration under the Securities Act or an exemption therefrom and
further restricted from transfer, gift, hypothecation or sale for eighteen
months without the written consent of NetWolves.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NETWOLVES
NetWolves hereby represents and warrants to SMCI that, except as set forth
in the written disclosure schedule delivered by NetWolves to SMCI (the
"NetWolves Disclosure Schedule"):
SECTION 3.1 Corporate Organization. NetWolves is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and has all requisite corporate
power and authority to own, operate and lease its properties and assets as and
where the same are owned, operated or leased and to conduct its business as it
is now being conducted. NetWolves is in good standing and duly qualified or
licensed as a foreign corporation to do business in those jurisdictions in which
the location of the property and assets owned, operated or leased by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed would not
have a Material Adverse Effect. NetWolves has heretofore delivered to SMCI
complete and correct copies of the Certificate of Incorporation and By-laws, as
amended of TSG to and as in effect on the date hereof.
SECTION 3.2 Capitalization. The authorized capital stock of TSG as of the
date hereof consists of ten million (10,000,000) shares of Common Stock par
value one thousandth of a dollar ($0.001) per share ("TSG Common Stock") and one
million (1,000,000) shares of preferred stock par value of one dollar ($1.00)
per share ("TSG Stock"). All four million one hundred fifty thousand (4,150,000)
shares of TSG Common Stock outstanding and owned beneficially and of record by
NetWolves have been duly issued as of the date hereof. TSG has no subsidiaries,
no material assets or liabilities (except pursuant to this Agreement) and was
formed solely to facilitate the Merger.
SECTION 3.3 Authorization; Execution and Delivery. Each of NetWolves and
TSG has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement by each of NetWolves and TSG and the consummation
by NetWolves or TSG of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of NetWolves and TSG.
This Agreement has been duly executed and delivered by NetWolves and TSG and
constitutes the legal, valid and binding obligation of NetWolves and TSG,
enforceable against NetWolves and TSG in accordance with its terms, except for
the Exceptions.
SECTION 3.4 Shares of NetWolves. NetWolves Common Stock to be issued
hereunder will, when issued, be fully paid and nonassessable, and there will be
no preemptive or similar rights in respect of such common stock.
SECTION 3.5 Governmental Approvals and Filings. No approval, authorization,
consent, license, clearance or order of, declaration or notification to, or
filing or registration with, any governmental or regulatory authority that
currently regulates NetWolves or TSG is required in order to permit NetWolves or
TSG to consummate the Merger or perform its obligations under this Agreement.
SECTION 3.6 No Conflict. Neither the execution, delivery and performance of
this Agreement by NetWolves or TSG, nor the consummation by NetWolves or TSG of
the transactions contemplated hereby, will (i) conflict with, or result in a
breach or violation of, any provision of the certificate of incorporation (or
similar organizational document) or by-laws of NetWolves or TSG; (ii) conflict
with, result in a breach or violation of, give rise to a default, or result in
the acceleration of performance, or permit the acceleration of performance,
under (whether or not after the giving of notice or lapse of time or both) any
Encumbrance, note, bond, indenture, guaranty, lease, license, agreement or other
instrument, writ, injunction, order, judgment, decree, statute, rule or
regulation to which NetWolves or TSG or any of their respective properties or
assets is subject; (iii) give rise to a declaration or imposition of any
Encumbrance upon any of the properties or assets of NetWolves or TSG; or (iv)
impair NetWolves' business or adversely affect any Governmental License
necessary to enable NetWolves and TSG to carry on their business as presently
conducted, except, in the cases of clauses (ii), (iii) or (iv), for any
conflict, breach, violation, default, declaration, imposition or impairment that
would not have a Material Adverse Effect.
SECTION 3.7 No Legal Proceedings. Neither the execution and delivery of
this Agreement by NetWolves or TSG, nor the consummation by NetWolves or TSG of
the transactions contemplated hereby, are being challenged by or are the subject
of any pending or, to the knowledge of NetWolves or TSG, threatened litigation
or governmental investigation or proceeding as of the date of this Agreement.
SECTION 3.8 Finders. No broker, finder or investment advisor acted directly
or indirectly as such for NetWolves, any Subsidiary of NetWolves or any
stockholder of NetWolves in connection with this Agreement or the Merger, and no
broker, finder, investment advisor or other Person is entitled to any fee or
other commission, or other remuneration, in respect thereof based in any way on
any action, agreement, arrangement or understanding taken or made by or on
behalf of NetWolves, any Subsidiary of NetWolves or any stockholder of
NetWolves.
ARTICLE IV
COVENANTS, TRANSACTIONS AND CONDUCT OF
BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business by SMCI Pending the Merger. SMCI covenants
and agrees that during the period from the date of this Agreement until the
earlier of the termination of this Agreement or the Effective Time, unless
NetWolves shall otherwise agree in writing, (i) SMCI shall conduct its business
only in the ordinary course of business consistent with past practice; (ii) that
SMCI shall use reasonable commercial efforts to preserve substantially intact
the business organization of SMCI, to keep available the services of the present
officers, employees, agents and consultants of SMCI and to preserve the present
relationships of SMCI with governmental agencies, insurance brokers, insurance
companies, lenders, customers, suppliers and other Persons with which SMCI has
significant regulatory or business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, SMCI shall not, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, directly or indirectly do,
or propose to do, any of the following:
(a) amend or otherwise change SMCI's Certificate of Incorporation or
By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any shares of capital stock of any
class, or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock, or any other ownership interest
(including, without limitation, any phantom interest) in SMCI or any of its
Affiliates;
(c) sell, pledge, dispose of or encumber any assets of SMCI (except for (i)
sales of assets in the ordinary course of business and in a manner consistent
with past practice, (ii) dispositions of obsolete or worthless assets, and (iii)
sales of immaterial assets not in excess of $15,000);
(d) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock; (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock; or
(iii) amend the terms or change the period of exercisability of, purchase,
repurchase, redeem or otherwise acquire, any of its securities, including,
without limitation, shares of Company Common Stock or any option, warrant or
right, directly or indirectly, to acquire shares of Company Common Stock;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money, except for borrowings
and reborrowing under SMCI's existing credit facilities or issue any debt
securities or assume, guarantee (other than guarantees of bank debt of SMCI's
subsidiaries under existing credit facilities entered into in the ordinary
course of business) or endorse or otherwise as an accommodation become
responsible for, the obligations of any Person, or make any loans or advances,
except in the ordinary course of business consistent with past practice; (iii)
authorize any capital expenditures or purchases of fixed assets which are, in
the aggregate, in excess of $50,000; or (iv) enter into or amend any contract,
agreement, commitment or arrangement to effect any of the matters prohibited by
this Section 4.1(e);
(f) make any material change in the rate of compensation, commission, bonus
or other remuneration payable, or pay or agree or promise to pay, conditionally
or otherwise, any bonus, extra compensation, pension or severance or vacation
pay, to any director, officer, employee, salesman, broker or agent of SMCI
except in the ordinary course of business consistent with prior practice;
(g) take any action to change accounting practices, policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
payments of accounts payable or collection of accounts receivable);
(h) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise) in excess of $15,000 per matter or
$50,000 in the aggregate, other than the payment, discharge or satisfaction in
the ordinary course of business and consistent with past practice of liabilities
reflected or reserved against in SMCI Financial Statements or incurred in the
ordinary course of business and consistent with past practice; or
(i) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (h) above, or any action which would make
any of the representations or warranties of SMCI contained in this Agreement
untrue or incorrect in any material respect or prevent SMCI from performing or
cause SMCI not to perform its covenants herein.
SECTION 4.2 Access to Information. SMCI will give NetWolves and TSG, and
their respective counsel, financial advisors, auditors and other authorized
representatives, full access to the offices (including a work area for the use
of NetWolves and TSG and their authorized representatives), properties,
employees, books and records of SMCI and its subsidiaries at all reasonable
times upon reasonable notice, and will instruct the employees, counsel,
financial advisors and auditors of SMCI and its subsidiaries to cooperate in all
reasonable respects with NetWolves and TSG and each such representative in its
investigation of the business of SMCI and its subsidiaries, provided that no
investigation pursuant to this Section 4.2 shall affect any representation or
warranty given by SMCI to NetWolves or TSG hereunder. SMCI will confer from time
to time with NetWolves at NetWolves' request to discuss the status of the
operations of SMCI and its subsidiaries.
SECTION 4.3 Best Efforts. Subject to the terms and conditions herein
provided, each of SMCI, NetWolves and TSG agrees to use its commercially
reasonable efforts consistent with applicable legal requirements to take, or
cause to be taken, all action, and to do, or cause to be done, all things
reasonably necessary or proper and advisable under applicable laws and
regulations to consummate and make effective, in the most expeditious manner
reasonably practicable, the Merger and the other transactions contemplated by
this Agreement.
SECTION 4.4 Consents. NetWolves and SMCI each shall use their respective
commercially reasonable efforts to obtain all material consents of third parties
and governmental authorities, and to make all governmental filings, necessary
for the consummation of the transactions contemplated by this Agreement.
SECTION 4.5 Public Announcements. Except as hereinafter provided in this
Section 4.5, NetWolves and SMCI will consult with each other before issuing any
press release or otherwise making any public statements prior to the Effective
Time with respect to the Merger or the other transactions contemplated hereby
and shall not issue any such press release or make any such public statement
prior to receiving the consent of the other party, which consent will not be
unreasonably withheld or delayed. Nothing stated herein shall prohibit any party
from making a press release or other statement required by law or by obligations
pursuant to any listing agreement with any automated interdealer quotation
system if the party making the disclosure has first consulted with the other
parties hereto.
SECTION 4.6 Notification of Certain Matters. SMCI will give prompt notice,
as soon as reasonably practicable, to NetWolves and TSG of the occurrence or
non-occurrence of any event (i) which has had or is reasonably likely to have a
Material Adverse Effect, (ii) which has caused any representation or warranty of
SMCI contained in this Agreement to be untrue or inaccurate in any material
respect or (iii) which has caused any failure of SMCI to comply in all material
respects with or satisfy in all material respects any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement; provided,
however, that the delivery of any notice pursuant to this Section 4.6 will not
limit or otherwise affect the remedies available under this Agreement to
NetWolves or limit the rights of SMCI under this Agreement.
SECTION 4.7 Conveyance Taxes. NetWolves and SMCI shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time and the Surviving TSG
shall be responsible for the payment of all such taxes and fees.
ARTICLE V
GENERAL PROVISIONS
SECTION 5.1 Effectiveness of Representations, Warranties and Agreements.
(a) Except as otherwise provided in this Section 5.1, the representations,
warranties, covenants and agreements of each party hereto shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any other party hereto, any Person controlling any such party or any
of their officers, directors or representatives, whether prior to or after the
execution of this Agreement, for a period of three (3) years from the Effective
Time.
(b) Any disclosure made with reference to one or more Sections of SMCI
disclosure schedule or NetWolves disclosure schedule shall be deemed disclosed
with respect to each other section therein as to which such disclosure is
relevant provided that such relevance is reasonably apparent. Disclosure of any
matter in SMCI disclosure schedule or NetWolves disclosure schedule shall not be
deemed an admission that such matter is material.
SECTION 5.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
(A) If to NetWolves or TSG:
NetWolves Corporation
000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: ( 000) 000-0000
With a copy to:
Blau, Kramer, Wactlar & Xxxxxxxxx, P.C.
000 Xxxxxxx Xxxxxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
(B) If to SMCI:
Sales and Management Consulting, Inc.
d/b/a The Xxxxxxxx Group and
Xxxxx-Xxxxx Institute
000 Xxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: ( 000) 000-0000
Attention: Xx. Xxxxxx Xxxxxxxxxx
With a copy to:
Xxxxxxxx and Associates, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
SECTION 5.3 Certain Definitions. For purposes of this Agreement, the term:
(a) "Affiliate" means a Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned Person;
(b) "Business Day" means any day other than a day on which banks in
the State of New York are required or authorized to be closed;
(c) "Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "Person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization other entity
or group (as defined in Section 13(d)(3) of the Securities and Exchange Act of
1934); and
(e) "Subsidiary" or "Subsidiaries" of any Person means any
corporation, partnership, limited liability company, or other legal entity of
which such Person, as the case may be (either alone or through or together with
any other subsidiary), owns, directly or indirectly, more than 50% of the stock
or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
SECTION 5.4 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after approval and
adoption of the Merger and this Agreement by the Stockholders of SMCI, no
amendment may be made which by law requires further approval by such
Stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 5.5 Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 5.6 Headings; Construction. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. In this Agreement (a) words
denoting the singular include the plural and vice versa, (b) "it" or "its" or
words denoting any gender include all genders, (c) the word "including" shall
mean "including without limitation," whether or not expressed, (d) any reference
to a statute shall mean the statute and any regulations thereunder in force as
of the date of this Agreement or the Effective Time, as applicable, unless
otherwise expressly provided, (e) any reference herein to a Section, Article,
Schedule or Exhibit refers to a Section or Article of or a Schedule or Exhibit
to this Agreement, unless otherwise stated, (f) when calculating the period of
time within or following which any act is to be done or steps taken, the date
which is the reference day in calculating such period shall be excluded and if
the last day of such period is not a Business Day, then the period shall end on
the next day which is a Business Day, and (g) any reference to a party's "best
efforts" or "reasonable efforts" shall not include any obligation of such party
to pay, or guarantee the payment of, money or other consideration to any third
party or to agree to the imposition on such party or its Affiliates of any
condition reasonably considered by such party to be materially burdensome to
such party or its Affiliates.
SECTION 5.7 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent reasonably
possible.
SECTION 5.8 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letter), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof, except as otherwise expressly
provided herein.
SECTION 5.9 Assignment; TSG. This Agreement shall not be assigned by
operation of law or otherwise, except that all or any of the rights of TSG
hereunder may be assigned to any direct, wholly-owned Subsidiary of NetWolves
provided that no such assignment shall relieve the assigning party of its
obligations hereunder.
SECTION 5.10 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 5.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
SECTION 5.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
applicable to contracts executed and fully performed within the State of New
York, without regard to conflicts of laws provisions.
SECTION 5.13 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 5.14 WAIVER OF JURY TRIAL. EACH OF NETWOLVES, TSG SMCI AND THE
STOCKHOLDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, NetWolves, TSG and SMCI have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
NETWOLVES CORPORATION
By /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
TSG
By /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: President/CEO
SALES AND MANAGEMENT
CONSULTING, INC., d/b/a,
THE XXXXXXXX GROUP and
XXXXX-XXXXX INSTITUTE
By /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: President/CEO
/s/ Xxxxx Xxxxxxxx
------------------------------------------
Xxxxx Xxxxxxxx, Stockholder
/s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------------
Xxxxxx Xxxxxxxxxx, Stockholder
/s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxx, Stockholder
/s/ Xxxx X. Xxxxxx
------------------------------------------
Xxxx X. Xxxxxx, Stockholder
/s/ Xxxxxx X. Xxxxxx
------------------------------------------
Xxxxxx X. Xxxxxx, Stockholder
