AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September 26,
1997, by and among American Interactive Media, Inc., a Nevada corporation
("Acquiror"), AIM Merger Corp., a Delaware corporation and a wholly-owned
subsidiary of Acquiror ("Merger Sub"), Webfeat Inc., a Delaware corporation
("Target") and Xxxx Xxxxx (the "Shareholder"). Other shareholders of Target are
party to this Agreement only for the purpose of making the representations in
Section 5.28. Each of Target and Merger Sub is collectively referred to herein
as the "Constituent Corporations".
RECITALS
A. The respective Boards of Directors of Acquiror and Target each have
determined that a business combination between Acquiror and Target is in the
best interests of their respective companies and stockholders and presents an
opportunity for their respective companies to achieve long-term strategic and
financial benefits, and accordingly have approved this Agreement and the merger
provided for herein whereupon Merger Sub shall merge with and into Target upon
the terms, and subject to the conditions, set forth herein.
B. Acquiror owns all of the issued and outstanding capital stock of Merger
Sub.
C. The Shareholder owns 524 shares of the issued and outstanding capital
stock of Target.
D. Pursuant to the Merger (as hereinafter defined), among other things, the
outstanding shares of Target Common Stock, $.01 par value ("Target Common
Stock"), shall be converted into shares of Acquiror Common Stock, $.001 par
value ("Acquiror Common Stock"), at the rate set forth herein.
E. For federal income tax purposes, it is intended that the Merger provided
for herein shall qualify as a reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code"), and for financial
accounting purposes shall be accounted for as a "pooling of interests."
F. Each of Acquiror, Merger Sub, Target and the Shareholder desires to make
certain representations, warranties and agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with
and into Target in accordance with this Agreement and the separate corporate
existence of Merger Sub shall thereupon cease (the "Merger"). Target shall be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation") and shall continue to be governed by the laws of
the State of Delaware, and all rights, privileges, powers, immunities, purposes
and franchises of the Constituent Corporations shall continue unaffected by the
Merger. The Merger shall have the effects specified in Section 259 of the
Delaware General Corporation Law (the "DGCL").
1.2 THE CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place at the offices of Xxxxxx,
Xxxxxx-Xxxxxxx, Colt & Mosle, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, (i) at
9:00 a.m., local time, on the first business day immediately following the day
on which the last to be fulfilled or waived of the conditions set forth in
Article 9 shall be fulfilled or waived in accordance herewith or (ii) at such
other time, date or places as
Acquiror and Target may agree. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date."
1.3 EFFECTIVE TIME. If all the conditions to the Merger set forth in
Article 9 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 10, the parties
hereto shall cause a Certificate of Merger meeting the requirements of Section
251 of the DGCL to be properly executed, and filed in accordance with such
Section on the Closing Date. The Merger shall become effective at the time of
the filing of the Certificate of Merger or at such later time which the parties
hereto shall have agreed upon and designated in such filing as the effective
time of the Merger (the "Effective Time").
1.4 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties hereto
that the Merger shall (i) constitute a reorganization within the meaning of
Section 368 of the Code and (ii) qualify for accounting treatment as a "pooling
of interests."
1.5 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 Target and Merger Sub, the officers and directors of Target
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is not inconsistent with this Agreement.
ARTICLE 2
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until duly amended in
accordance with applicable law; provided, however, that Article I of the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read as follows: "The name of the corporation is WebFeat, Inc."
2.2 BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended in accordance with applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 DIRECTORS. The directors of Merger Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation and
shall serve until their successors are duly elected or appointed and qualified.
3.2 OFFICERS. The officers of Merger Sub immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation and shall serve
until their respective successors are duly elected or appointed and qualified.
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ARTICLE 4
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
4.1 EFFECT ON CAPITAL STOCK. By virtue of the Merger and without any action
on the part of Merger Sub, Target or the holders of any of the following
securities:
(a) CONVERSION OF TARGET COMMON STOCK. At the Effective Time, each
share of Target Common Stock issued and outstanding immediately prior to
the Effective Time (other than any shares of Target Common Stock to be
canceled pursuant to Section 4.1(b)) will be canceled and extinguished and
be converted automatically into the right to receive five thousand (5,000)
shares of Acquiror Common Stock (the "Exchange Ratio"), subject to a
maximum of four million (4,000,000) shares to be issued to Target
Shareholders.
(b) CANCELLATION OF TARGET COMMON STOCK OWNED BY ACQUIROR OR TARGET.
At the Effective Time, all shares of Target Common Stock that are owned by
Target as treasury stock and each share of Target Common Stock owned by
Acquiror or any direct or indirect wholly-owned subsidiary of Acquiror or
of Target immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) CAPITAL STOCK OF MERGER SUB. At the Effective Time, each share of
Common Stock, $.01 par value, of Merger Sub ("Merger Sub Common Stock")
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
non-assessable share of Common Stock, $.01 par value, of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership of
any such shares shall continue to evidence ownership of such shares of
capital stock of the Surviving Corporation.
(d) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities
convertible into Acquiror Common Stock or Target Common Stock),
reorganization, recapitalization or other like change with respect to
Acquiror Common Stock or Target Common Stock occurring after the date
hereof and prior to the Effective Time.
4.2 SURRENDER OF CERTIFICATES.
(a) ACQUIROR TO PROVIDE COMMON STOCK. Promptly after the Effective
Time, Acquiror shall make available for exchange in accordance with this
Article 4, through such reasonable procedures as Acquiror may adopt, (i)
the shares of Acquiror Common Stock issuable pursuant to Section 4.1(a) in
exchange for shares of Target Common Stock outstanding immediately prior to
the Effective Time.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed or delivered to each holder
of record of a certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding shares of
Target Common Stock, whose shares were converted into the right to receive
shares of Acquiror Common Stock (and cash in lieu of fractional shares)
pursuant to Section 4.1, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon receipt of the Certificates by Acquiror,
and shall be in such form and have such other provisions as Acquiror may
reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
shares of Acquiror Common Stock (and cash in lieu of fractional shares).
Upon surrender of a Certificate for cancellation to Acquiror or to such
agent or agents as may be appointed by Acquiror, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Acquiror Common Stock and
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payment in lieu of fractional shares which such holder has the right to
receive pursuant to Section 4.1, and the Certificate so surrendered shall
forthwith be canceled. Until so surrendered, each outstanding Certificate
that, prior to the Effective Time, represented shares of Target Common
Stock will be deemed from and after the Effective Time, for all corporate
purposes, other than the payment of dividends, to evidence the ownership of
the number of full shares of Acquiror Common Stock into which such shares
of Target Common Stock shall have been so converted and the right to
receive an amount in cash in lieu of the issuance of any fractional shares
in accordance with Section 4.1.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to Acquiror Common Stock with a record
date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Acquiror Common
Stock represented thereby until the holder of record of such Certificate
shall surrender such Certificate. Subject to applicable law, following
surrender of any such Certificate, there shall be paid to the record holder
of the certificates representing whole shares of Acquiror Common Stock
issued in exchange therefor, without interest, at the time of such
surrender, the amount of any such dividends or other distributions with a
record date after the Effective Time theretofore payable (but for the
provisions of this Section 4.2(c)) with respect to such shares of Acquiror
Common Stock.
(d) TRANSFERS OF OWNERSHIP. If any certificate for shares of Acquiror
Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Acquiror or any agent
designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Acquiror Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Acquiror or any agent designated by it
that such tax has been paid or is not payable.
(e) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 4.2, neither the Surviving Corporation nor any party hereto shall
be liable to any person for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
4.3 NO FURTHER OWNERSHIP RIGHTS IN TARGET COMMON STOCK. All shares of
Acquiror Common Stock issued upon the surrender for exchange of shares of Target
Common Stock in accordance with the terms hereof (including any cash paid in
lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Target Common Stock, and
there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Target Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article 4.
4.4 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, Acquiror shall issue in exchange for
such lost, stolen or destroyed Certificates, upon the making of an affidavit of
that fact by the holder thereof, such shares of Acquiror Common Stock (and cash
in lieu of fractional shares) as may be required pursuant to Section 4.1;
provided, however, that Acquiror may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Acquiror, the Surviving
Corporation or any agent with respect to the Certificates alleged to have been
lost, stolen or destroyed.
4.5 STOCK SUBJECT TO CONDITIONS. All shares of Acquiror Common Stock which
are received in the Merger in exchange for shares of Target Common Stock which,
under agreements with Target, are unvested and which, by its terms, does not
terminate due to the Merger will also be unvested, and the certificates
evidencing such shares will be marked with appropriate legends.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TARGET AND SHAREHOLDER
In this Agreement, any reference to any event, change, condition or effect
being "material" with respect to any entity or group of entities means any
material event, change, condition or effect related to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity or group of
entities. In this Agreement, any reference to a "Material Adverse Effect" with
respect to any entity or group of entities means any event, change or effect
that is materially adverse to the condition (financial or otherwise),
properties, assets, liabilities, business, operations or results of operations
of such entity and its subsidiaries, taken as a whole.
In this Agreement, any reference to an entity's "knowledge" means such
party's actual knowledge after due and diligent inquiry of officers, directors
and other employees of such party reasonably believed to have knowledge of such
matters. In this Agreement, any reference to the Shareholder's knowledge or
knowledge of the Shareholder or words of similar import shall mean the knowledge
of the Shareholder, whether acquired in his capacity as shareholder, director or
officer of Target or in any other manner.
Except as disclosed in a document of even date herewith and delivered by
Target to Acquiror prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Target
Disclosure Schedule"), Target and the Shareholder jointly and severally
represent and warrant to Acquiror and Merger Sub as follows:
5.1 ORGANIZATION, STANDING AND POWER. Target is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Target has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified and in good standing
would have a Material Adverse Effect on Target. Target has delivered a true and
correct copy of the Certificate of Incorporation and Bylaws or other charter
documents, as applicable, of Target, each as amended to date, to Acquiror.
Target is not in violation of any of the provisions of its Certificate of
Incorporation or Bylaws. Target does not directly or indirectly own any equity
or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
5.2 CAPITAL STRUCTURE AND STOCKHOLDER'S EQUITY
(a) The authorized capital stock of Target consists of 1,000 shares of
Common Stock, $.01 par value of which there were issued and outstanding as
of the close of business on the date hereof, 800 shares of Common Stock.
There are no other outstanding shares of capital stock or voting securities
and no outstanding commitments to issue any shares of capital stock or
voting securities after the date hereof. All outstanding shares of Target
Common Stock are duly authorized, validly issued, fully paid and
non-assessable and are free of any liens or encumbrances other than any
liens or encumbrances created by or imposed upon the holders thereof and
are not subject to preemptive rights or rights of first refusal created by
statute, the Certificate of Incorporation, as amended, or Bylaws, as
amended, of Target or any agreement to which Target is a party or by which
it is bound.
(b) There are not outstanding as of the date hereof any options,
warrants or other rights to acquire capital stock from Target.
(c) There are no contracts, commitments or agreements relating to
voting, purchase or sale of Target's capital stock (i) between or among
Target and any of its stockholders and (ii) to the best of Target's and the
Shareholder knowledge, between or among any of Target's stockholders,
except for the stockholders named in Schedule 5.2(c) of the Target
Disclosure Schedule.
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(d) The shareholders listed on Schedule 5.2(d) (such shareholders
excluding Xxxx Xxxxx are hereinafter called the "Other Target
Shareholders") are the sole and exclusive holders and owners of all the
issued and outstanding capital stock of Target indicated beside the name of
such shareholder on Schedule 5.2(d), as of the Closing Date, free and clear
of all liens, pledges, hypothecations, restrictions or encumbrances, and no
other person, firm or corporation will have at Closing any interest
whatsoever in any of such shares. Immediately following the Effective Time
of the Merger, Acquiror will be the sole and exclusive holder and owner of
all of the issued and outstanding capital stock of Target. Since the date
of incorporation of Target, there have been no redemptions by Target of any
shares of its capital stock except for the redemption of one share
belonging to Xxxxxxx Xxxxxxx in August of 1996.
5.3 AUTHORITY AND ENFORCEABILITY
(a) Target 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 Target. This Agreement has been duly
executed and delivered by Target and constitutes the valid and binding
obligation of Target enforceable against Target in accordance with its
terms. The execution and delivery of this Agreement by Target does not, and
the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under
(i) any provision of the Certificate of Incorporation or Bylaws or
equivalent organizational documents of Target, as amended, or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Target or any of its
properties or assets, except where such conflict, violation, default,
termination, cancellation or acceleration with respect to the foregoing
provisions of (ii) would not have and could not reasonably be expected to
have a Material Adverse Effect on Target. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect to
Target in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except for (i)
the filing of the Certificate of Merger as provided in Section 1.3 and (ii)
such other consents, authorizations, filings, approvals and registrations
which, if not obtained or made, would not have a Material Adverse Effect on
Target and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement.
(b) This Agreement has been executed and delivered by the Shareholder
and constitutes the valid and legally binding obligation of the
Shareholder, enforceable against the Shareholder in accordance with its
terms. The Shareholder has the full right, power, legal capacity and
authority to enter into this Agreement, free and clear of any statutory,
contractual or other limitations and to enter into and perform such
Shareholder's obligations under this Agreement.
5.4 FINANCIAL STATEMENTS. The interim financial statement of Target for the
period (such interim financial statement is hereinafter referred to at times as
the "Target Financial Statements"), a copy of which is attached hereto as
Schedule 5.4, is true and correct and has been prepared in accordance with
generally accepted accounting principles ("GAAP"), and the balance sheets in the
Target Financial Statements fairly present the financial position of Target as
of its date and sets forth in full and reflects all liabilities, including
taxes, of Target as of such dates required to be reflected thereon in accordance
with GAAP; the income statements fairly present the results of the operations of
Target for the period indicated and covered thereby; and the Shareholders'
Equity of Target as of such date was as set forth in the Target Financial
Statements, after full provision and reserves for all taxes and other
liabilities for all periods up to the dates thereof. Except for liabilities
incurred after August 31, 1997, in the ordinary course of business and included
on the books and records of Target, neither Target nor the Shareholder knows or
has any reason to know of any liability or any basis for the assertion against
Target of any liability not reflected or reserved against in the balance sheets
required to be included thereon in accordance with GAAP.
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5.5 ABSENCE OF CERTAIN CHANGES. Except as set forth in Schedule 5.5, since
August 31, 1997 (the "Target Balance Sheet Date"), Target has conducted its
business in the ordinary course consistent with past practice, and there has
occurred:
(a) no material adverse change in the business, financial condition or
results of operations (the "Business Condition"), or to the knowledge of
Target or the Shareholder, the ability of Target to function in the future
at least at current business levels of activity ("Target's Prospects");
(b) no fire, explosion, accident, flood, smoke, water damage or other
catastrophe, embargo, lockout, strike, labor trouble, or other emergency,
which adversely affected the business or properties of Target as well as
the buildings occupied or used by Target;
(c) no sales of goods or services or other transactions of Target
other than those occurring in the ordinary course of business, none of
which has had or will have any Material Adverse Effect on Target's Business
Condition, or to the knowledge of Target or the Shareholder, Target's
Prospects;
(d) no material change in the manner of conducting the business of
Target;
(e) no adverse change in the working capital position of Target and no
buildup of its inventories out of the ordinary course of business and no
markup of its fixed assets or inventories;
(f) no financial or other commitments or obligations incurred by
Target, except such as may be incidental to carrying on the ordinary course
of business;
(g) except for trade accounts payable, no borrowing by Target of any
funds and no endorsing or guaranteeing payment by it of any loan or
obligation, contractual or otherwise, of any other individual, firm,
corporation or other entity, and there are no such borrowings, endorsements
or guarantees by Target presently outstanding;
(h) except for trade terms extended to customers in the ordinary
course of business, no loans or advances by Target to any individual, firm,
corporation or other entity at any time;
(i) no capital additions or improvements in excess of Twenty-Five
Thousand Dollars ($25,000) in the aggregate and no contracts or purchase
orders therefor, to the properties of Target;
(j) except for finished products and component parts sold by Target in
the ordinary course of business, no sale, retirement, abandonment or other
disposition of any property of Target, except the disposition of minor
equipment in the ordinary course of business with an aggregate value of
less than Ten Thousand Dollars ($10,000);
(k) no outstanding obligation by Target for money borrowed, other than
as set forth in the Target Financial Statements, except trade accounts
payable and other current expenses and taxes incurred and accrued on its
books and arising in the ordinary course of business, none of which
obligations is in default or arrears of payment;
(l) no dividend on Target's capital stock and no money or other
property set apart for payment in respect of Target's capital stock;
(m) except as contemplated hereby, no acquisition or contract to
acquire in any manner, directly or indirectly, any of the outstanding
capital stock of Target;
(n) no payment of or any obligation to pay any amounts either in cash
or other property to any person for cancellation of any outstanding options
or agreements to acquire shares of Target's capital stock;
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(o) no change in the capital structure or Certificate of Incorporation
or Bylaws of Target;
(p) no change in the accounting methods or practices followed by
Target in connection with the operations of Target;
(q) no payment by Target of any bonus or other distribution to any
officer or employee, sales representative, distributors or other sales
agent of Target;
(r) no notice of any violation by Target of any building, zoning code
or fire code, health code or the Occupational Safety and Health and Safety
Act of 1970, as amended ("OSHA"), Environmental Law (as hereinafter
defined) and no actual or to the knowledge of Target or the Shareholder,
threatened condemnation of the real properties currently owned or used by
the Target (the "Real Properties"); or
(s) any commitment or agreement by Target to do anything which would
make any of Sections 5.5(a) - 5.5(r) untrue (other than negotiations with
Acquiror and its representatives regarding the transactions contemplated by
this Agreement).
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Target has no material obligations
or liabilities of any nature (matured or unmatured, fixed or contingent) other
than (i) those set forth or adequately provided for in Target's unaudited
Balance Sheet for the period ended August 31, 1997, including the Notes thereto
(the "Target Balance Sheet"), (ii) those incurred in the ordinary course of
business and not required to be set forth in the Target Balance Sheet under
generally accepted accounting principles, (iii) those incurred in the ordinary
course of business since the Target Balance Sheet Date and consistent with past
practice and (iv) those incurred in connection with the execution of this
Agreement.
5.7 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Target or the
Shareholder, threatened against Target or any of its respective properties or
any of its respective officers or directors (in their capacities as such) that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Target. There is no judgment, decree or order against
Target, or, to the knowledge of Target or the Shareholder, any of its respective
directors or officers (in their capacities as such), that could prevent, enjoin,
alter or materially delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Target.
5.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material agreement,
judgment, injunction, order or decree binding upon Target which has or
reasonably could be expected to have the effect of prohibiting or materially
impairing any current or future business practice of Target, any acquisition of
property by Target or the conduct of business by Target as currently conducted
or as proposed to be conducted by Target.
5.9 GOVERNMENTAL AUTHORIZATION. Target has obtained each federal, state,
county, local or foreign governmental consent, license, permit, grant, or other
authorization of a Governmental Entity (i) pursuant to which Target currently
operates or holds any interest in any of its properties or (ii) that is required
for the operation of Target's businesses or the holding of any such interest
((i) and (ii) herein collectively called "Target Authorizations"), and all of
such Target Authorizations are in full force and effect, except where the
failure to obtain or have any of such Target Authorizations could not reasonably
be expected to have a Material Adverse Effect on Target.
5.10 CERTAIN CONTRACTS AND ARRANGEMENTS. Except as disclosed in Schedule
5.10, Target is not a party to any material (i) employment agreement, (ii)
collective bargaining agreement, (iii) license agreement or arrangement, (iv)
indenture, mortgage, note, installment obligation,
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agreement or other instrument relating to the borrowing of money in excess of
Ten Thousand Dollars ($10,000) by Target or the guaranty of any obligation for
the borrowing of money by Target in excess of such amount or (v) other agreement
or arrangement.
5.11 TITLE TO PROPERTY. Target has good and valid title to all of its
properties, interests in properties and assets, real and personal, reflected in
the Target Balance Sheet or acquired after the Target Balance Sheet Date (except
properties, interests in properties and assets sold or otherwise disposed of
since the Target Balance Sheet Date in the ordinary course of business), or in
the case of leased properties and assets, valid leasehold interests in such
properties, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (i) the lien of current taxes not
yet due and payable, (ii) such imperfections of title, liens and easements as do
not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing debt
which is reflected on the Target Balance Sheet. The plants, property and
equipment of Target that are used in the operations of its business are in good
operating condition and repair. All properties used in the operations of Target
are reflected in the Target Balance Sheet to the extent generally accepted
accounting principles require the same to be reflected. Schedule 5.11 identifies
each parcel of real property owned or leased by Target.
5.12 INTELLECTUAL PROPERTY.
(a) Target owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, trade secrets, inventory, ideas,
algorithms, processes, computer software programs or applications (in both
source code and object code form) licenses, customer lists, formulae,
inventions, development tools, other proprietary rights, and tangible or
intangible proprietary information or material ("Intellectual Property")
that are used or proposed to be used in the business of Target as currently
conducted or as proposed to be conducted by Target, except to the extent
that the failure to have such rights have not and could not reasonably be
expected to have a Material Adverse Effect on Target. Intellectual Property
shall include all documentation and media constituting, describing or
relating to the above, including, but not limited to, manuals, memoranda,
know-how, notebooks, software, records and disclosures.
(b) Schedule 5.12 lists (i) all patents and patent applications and
all registered and unregistered trademarks, trade names and service marks,
registered and unregistered copyrights, and maskworks, which Target
considers to be material to its business and included in the Intellectual
Property, including the jurisdictions in which each such Intellectual
Property right has been issued or registered or in which any application
for such issuance and registration has been filed, (ii) all material
licenses, sublicenses and other agreements as to which Target is a party
and pursuant to which any person is authorized to use any Intellectual
Property, and (iii) all material licenses, sublicenses and other agreements
as to which Target is a party and pursuant to which Target is authorized to
use any third party patents, trademarks or copyrights, including software
("Third Party Intellectual Property Rights"), in each case which are
incorporated in, are, or form a part of any product or service of Target
that is material to Target.
(c) To the best knowledge of Target and the Shareholder, there is no
material unauthorized use, disclosure, infringement or misappropriation of
any Intellectual Property rights of Target, any trade secret material to
Target, or any Third Party Intellectual Property Right, by any third party,
including any employee or former employee of Target. Target has not entered
into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property, other than indemnification
provisions contained in purchase orders arising in the ordinary course of
business.
(d) Target is not, and Target will not be as a result of the execution
and delivery of this Agreement or the performance of Target's obligations
under this Agreement, in breach of any license, sublicense or other
agreement relating to the Intellectual Property or Third Party Intellectual
Property Rights, the breach of which could have a Material Adverse Effect
on Target.
9
(e) All patents, registered trademarks, service marks and copyrights
held by Target are valid and subsisting. Target (i) has not been sued in
any suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or violation of any
trade secret or other proprietary right of any third party or (ii) has not
brought any action, suit or proceeding for infringement of Intellectual
Property or breach of any license or agreement involving Intellectual
Property against any third party. The manufacture, marketing, licensing or
sale of the products and services of Target do not infringe any patent,
trademark, service xxxx, copyright, trade secret or other proprietary right
of any third party, except where such infringement could not have a
Material Adverse Effect on Target.
(f) Target has secured valid written assignments from all consultants
and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Target does
not already own by operation of law.
(g) Target has taken all reasonable and appropriate steps to protect
and preserve the confidentiality of all Intellectual Property not otherwise
protected by patents, or patent applications or copyright ("Confidential
Information"). All use, disclosure or appropriation of Confidential
Information owned by Target by or to a third party has been pursuant to the
terms of a written agreement with such third party. All use, disclosure or
appropriation of Confidential Information not owned by Target has been
pursuant to the terms of a written agreement with the owner of such
Confidential Information, or is otherwise lawful.
(h) To the best knowledge of Target and the Shareholder, neither
Target's operations nor any of its Intellectual Property infringes or
provides any basis to believe that its operations or any of its
Intellectual Property would infringe upon any validly issued or pending
trademark, trade name, service xxxx, copyright or, to the knowledge of
Target or the Shareholder, any validly issued or pending patent or other
right of any other person.
5.13 ENVIRONMENTAL MATTERS.
(a) The following terms shall be defined as follows:
(i) "Environmental, Health and Safety Laws" shall mean all
federal, state or local laws, ordinances, codes, regulations, rules,
policies and orders regarding the protection of the environment,
requiring pollution control equipment, or that classify, regulate,
call for the remediation of, require reporting with respect to, or
list or define air, water, groundwater, solid waste, hazardous or
toxic substances, materials, wastes, pollutants or contaminants, or
regarding the safety of employees or workers.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without
limitation, petroleum products and those substances, materials and
wastes defined in or regulated under any Environmental, Health and
Safety Law.
(iii) "Property" shall mean all real property leased or owned by
Target either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements on
the Property of Target.
(b) Target and the Shareholder jointly and severally represent and
warrant as follows with respect to the operations of Target: (i) to the
best of Target's and the Shareholder's knowledge, no friable asbestos is
contained in the Facilities; (ii) all Hazardous Materials have been
disposed of in accordance with all Environmental, Health and Safety Laws;
(iii) Target has received no notice (verbal or written) of any
noncompliance of the Facilities or its past or present operations with
Environmental, Health and Safety Laws; (iv) no notices, administrative
actions or suits are pending or, to the best of Target's and the
Shareholder's knowledge, threatened relating to a violation of any
Environmental, Health
10
and Safety Law; (v) to the best of Target's and the Shareholder's
knowledge, Target is not a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA), or any state analog statute, arising out of events occurring
prior to the Closing Date which would have a Material Adverse Effect on
Target; (vi) to the best of Target's and the Shareholder's knowledge, there
have not been in the past, and are not now, any Hazardous Materials under
or migrating to or from the Facilities or Property; (vii) to the best of
Target's and the Shareholder's knowledge, there have not been in the past,
and are not now, any underground tanks or underground improvements at, on
or under the Property including without limitation, treatment or storage
tanks, sumps, or water, gas or oil xxxxx; (viii) Target has not deposited,
stored, or disposed of polychlorinated biphenyls (PCBs) on the Property or
Facilities or any equipment on the Property containing PCBs at levels in
excess of 50 parts per million; (ix) to the best of Target's and the
Shareholder's knowledge, the Facilities and Target's uses and activities
therein have at all times complied with all Environmental, Health and
Safety Laws; and (x) Target has all the permits and licenses required to be
issued and are in full compliance with the terms and conditions of those
permits.
5.14 TAXES. Target, and any consolidated, combined, unitary or aggregate
group for Tax purposes of which Target is or has been a member have timely filed
all Tax Returns required to be filed by it taking into account extensions of due
dates, have paid all Taxes shown thereon to be due and has provided adequate
accruals in accordance with generally accepted accounting principles in its
financial statements for any Taxes that have not been paid, whether or not shown
as being due on any Tax Returns. (a) No material claim for Taxes has become a
lien against the property of Target or is being asserted against Target other
than liens for Taxes not yet due and payable, (b) no audit of any Tax Return of
Target is being conducted by a Tax authority, (c) no Tax authority is now
asserting, or to the best knowledge of Target or the Shareholder, threatening to
assert against Target any deficiency or claim for additional Taxes, and there
are no requests for information from a Tax authority currently outstanding that
could affect the Taxes of Target and (d) no extension of the statute of
limitations on the assessment of any Taxes has been granted by Target and is
currently in effect . Target will not be required to include any material
adjustment in Taxable income for any Tax period (or portion thereof) ending
after the Effective Time attributable to adjustments made prior to the Merger
pursuant to Section 481 or 263A of the Code or any comparable provision of any
state or foreign Tax law. Target is not a party to any tax sharing or tax
allocation agreement, and Target does not owe any amount under any such
agreement. For purposes of this Agreement, the following terms have the
following meanings:
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (i) any
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty, or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Entity (a "Tax authority") responsible for the imposition of any
such tax (domestic or foreign), (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period and
(iii) any liability for the payment of any amounts of the type described in (i)
or (ii) as a result of any express or implied obligation to indemnify any other
person. As used herein, "Tax Return" shall mean any return, statement, report or
form (including, without limitation,) estimated Tax returns and reports,
withholding Tax returns and reports and information reports and returns required
to be filed with respect to Taxes. Target is in full compliance with all terms
and conditions of any Tax exemptions or other Tax-sparing agreement or order of
a foreign government and the consummation of the Merger shall not have any
adverse effect on the continued validity and effectiveness of such Tax
exemptions or other Tax-sparing agreement or order.
5.15 EMPLOYEE BENEFIT PLANS.
(a) Target does not maintain any pension, profit sharing, retirement,
fringe benefit, deferred compensation, stock purchase, stock option,
incentive, bonus, vacation, severance, disability,
11
hospitalization, medical insurance, life insurance or any other type of
employee benefit plan, program or arrangement within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, any defined benefit plan
("Defined Benefit Plan") within the meaning of Section 3(35) of ERISA or
Section 414(j) of the Code or any defined contribution plan ("Defined
Contribution Plan") within the meaning of Section 3(34) of ERISA or Section
414(i) of the Code or any multi-employer plan ("Multi-employer Plan")
within the meaning of Section 3(37) and 4001(a)(3) of ERISA (hereinafter
each individually referred to as a "Plan" and collectively referred to as
the "Plans") on behalf of any current or former officers or employees of
Target or their beneficiaries or dependents (whether on an active or frozen
basis).
(b) Target has not in the past and does not currently sponsor,
maintain, contribute to or otherwise have any obligation with respect to
any Plan.
5.16 CERTAIN AGREEMENTS AFFECTED BY THE MERGER. Neither the execution and
delivery of this Agreement nor the consummation of the transaction contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due to
any director or employee of Target, (ii) materially increase any benefits
otherwise payable by Target or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
5.17 EMPLOYEE MATTERS. Target is in compliance in all respects with all
current applicable laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and is not engaged in any unfair
labor practice, except where the failure to be in compliance or the engagement
in such unfair labor practices would not have a Material Adverse Effect on
Target. There are no pending claims against Target under any workers
compensation plan or policy or for long term disability. Target does not have
any obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") with respect to any former employees or qualifying beneficiaries
thereunder, except for obligations that would not have a Material Adverse Effect
on Target. There are no controversies pending or, to the best knowledge of
Target and the Shareholder, threatened, between Target and any of its employees,
which controversies have or could reasonably be expected to have a Material
Adverse Effect on Target. Target is not a party to any collective bargaining
agreement or other labor union contract. Target does not know of any activities
or proceedings of any labor union to organize any such employees.
Schedule 5.17 contains a list of all current employees of Target as well as
their current salaries, last calendar year bonus or incentive payments, if any,
and starting dates of employment
5.18 INTERESTED PARTY TRANSACTIONS. Except as disclosed in Schedule 5.18,
Target is not indebted to any director, officer, employee or agent of Target
(except for amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses), and no such person is indebted to Target, and there have
been no other transactions between Target and any director, officer or principal
shareholder of Target.
5.19 INSURANCE. Target has policies of insurance and bonds of the type and
in amounts customarily carried by persons conducting businesses or owning assets
similar to those of Target. There is no material claim pending under any of such
policies or bond as to which Target has received a denial, or to the best of
Target's knowledge, which coverage has been questioned, denied or disputed by
the underwriters of such policies or bonds. All premiums due and payable under
all such policies and bonds have been paid and Target is otherwise in compliance
in all material respects with the terms of such policies and bonds. Target has
no knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
5.20 COMPLIANCE WITH LAWS. Target has complied with, is not in violation
of, and has not received any notices of violation with respect to, any federal,
state, local or foreign statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business,
12
except for such violations or failures to comply as, singly or in the aggregate,
could not be reasonably expected to have a Material Adverse Effect on Target.
5.21 [intentionally omitted]
5.22 COMPLETE COPIES OF MATERIALS. Target has delivered or made available
true and complete copies of each document that has been requested by Acquiror or
its counsel in connection with their legal and accounting review of Target.
5.23 POOLING OF INTERESTS. Neither Target nor, to the best knowledge of
Target or the Shareholder, any of Target's directors, officers or stockholders
has taken any action which would interfere with Acquiror's ability to account
for the Merger as a pooling of interests.
5.24 BROKERS' AND FINDERS' FEES. Neither Target nor the Shareholder has
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or investment bankers' fees or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
5.25 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the shares of Target Common Stock outstanding is the only vote of the holders of
any of Target's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
5.26 BOARD APPROVAL. The Board of Directors of Target has (i) approved this
Agreement and the Merger, (ii) determined that the Merger is in the best
interests of the stockholders of Target and is on terms that are fair to such
stockholders and (iii) recommended that the stockholders of Target approve this
Agreement and the Merger.
5.27 CUSTOMERS AND SUPPLIERS. As of the date hereof, no material supplier
of Target has indicated to Target that it will stop, or decrease the rate of,
supplying materials, products or service to Target. Target has not knowingly
breached, so as to provide a benefit to Target that was not intended by the
parties, any agreement with, or engaged in any fraudulent conduct with respect
to, any customer or supplier of Target.
5.28 PRIVATE PLACEMENT; RESTRICTIONS ON ACQUIROR COMMON STOCK
(a) The Shareholder represents and warrants to Acquiror that the
Shareholder has such knowledge and experience in financial and business
matters so that he is capable of evaluating the merits and risks of her or
his prospective investment and that the Acquiror Common Stock to be issued
and delivered to him hereunder are being acquired for his own account for
investment for an indefinite period of time, not as nominee or agent for
any other person, firm or corporation and not for distribution or resale to
others in contravention of the Securities Act of 1933, as amended, (the
"Securities Act") and the rules and regulations promulgated thereunder. The
Shareholder understands that the Acquiror Common Stock received by him has
not been, and will not be upon issuance, registered under the Securities
Act for sale to Shareholder by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of Shareholder's investment intent and
the accuracy of Shareholder's representations in this Section 5.28. The
Shareholder agrees that he will not sell or otherwise transfer the Acquiror
Common Stock unless it is registered under the Securities Act or unless an
exemption from such registration is available.
(b) The Shareholder consents to the placement of a legend on any
certificate or other document evidencing the Acquiror Common Stock stating
that such Acquiror Common Stock has not been registered under the
Securities Act or any state securities or "Blue Sky" laws and setting forth
or referring to the restrictions on transferability and sale thereof,
including the restrictions set forth herein.
13
The Shareholder is aware that Acquiror will make a notation in its
appropriate records with respect to the restrictions on the transferability
of such Acquiror Common Stock. The Shareholder also consents and
acknowledges that "stop transfer" instructions may be noted against the
Acquiror Common Stock received by her or him as consideration hereunder.
Acquiror hereby undertakes to remove any legend described in this Section
5.28 or to rescind any `stop transfer' instructions described in this
Section 5.28 as to any Acquiror Common Stock (i) if the Shareholder
furnishes Acquiror with an opinion of counsel or other written information
satisfactory in form and content to Acquiror that such legend or any such
instructions are no longer required (as applicable) or (ii) with respect to
and at the time of the disposition of any such Acquiror Common Stock
pursuant to an effective registration statement under the Securities Act.
(c) Shareholder has relied solely upon an independent investigation
made by him and his representatives, if any. In making Shareholder's
investment decision to participate in the Merger, the Shareholder is not
relying on any oral or written representations or assurances from the
Acquiror or any other person other than as set forth in this Agreement
5.29 ACTION BY STOCKHOLDERS. Prior to the date hereof Target's shareholders
listed on Schedule 5.2(d) have taken all requisite action to authorize and
approve this Agreement and the Merger.
5.30 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Target or the Shareholder herein or in the Target Disclosure Schedule,
or in any certificate furnished by Target or the Shareholder pursuant to this
Agreement when all such documents are read together in their entirety, contains
or will contain at the Effective Time any untrue statement of a material fact,
or omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Except as disclosed in a document of even date herewith and delivered by
Acquiror to Target prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Acquiror
Disclosure Schedule"), Acquiror and Merger Sub represent and warrant to Target
as follows:
6.1 ORGANIZATION, STANDING AND POWER. Each of Acquiror and its
subsidiaries, including Merger Sub, is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each of Acquiror and its subsidiaries has the corporate power to
own its properties and to carry on its business as now being conducted and as
proposed to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect on Acquiror. Acquiror has
delivered a true and correct copy of the Articles of Incorporation and Bylaws or
other charter documents, as applicable, of Acquiror and each of its
subsidiaries, each as amended to date, to Target. Neither Acquiror nor any of
its subsidiaries is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents. Acquiror is the
owner, directly or indirectly through its subsidiaries, of all outstanding
shares of capital stock of each of its subsidiaries and all such shares are duly
authorized, validly issued, fully paid and nonassessable. Except as disclosed in
Schedule 6.1, all of the outstanding shares of capital stock of each such
subsidiary are owned by Acquiror, directly or indirectly through its
subsidiaries, free and clear of all liens, charges, claims or encumbrances or
rights of others. There are no outstanding subscriptions, options, warrants,
puts, calls, rights, exchangeable or convertible securities or other commitments
or agreements of any character relating to the issued or unissued capital stock
or other securities of any such subsidiary, or otherwise obligating Acquiror or
any such subsidiary to issue, transfer, sell, purchase, redeem or otherwise
acquire any such securities. Except as disclosed in Schedule 6.1, Acquiror does
not directly or indirectly own any
14
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
6.2 CAPITAL STRUCTURE. The authorized capital stock of Acquiror consists of
50,000,000 shares of Common Stock, $.001 par value, and 100,000 shares of
Preferred Stock, $1.00 par value, of which there were issued and outstanding as
of the close of business on September 19, 1997 8,992,435 shares of Common Stock
and no shares of Preferred Stock. There are no other outstanding shares of
capital stock or voting securities of Acquiror other than shares of Acquiror
Common Stock issued after September 19, 1997 upon the exercise options issued
under Acquiror's 1995 Incentive Stock Option Plan ("Acquiror Stock Option
Plan"). The authorized capital stock of Merger Sub consists of 1,000 shares of
Common Stock, $.01 par value, all of which are issued and outstanding and are
held by Acquiror. All outstanding shares of Acquiror and Merger Sub have been
duly authorized, validly issued, fully paid and are non-assessable and free of
any liens or encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof. As of the close of business on September 19,
1997, Acquiror has granted options and warrants for 3,990,250 shares of Common
Stock. Other than this Agreement and as disclosed in the immediately preceding
sentence, there are no other options, warrants, calls, rights, commitments or
agreements of any character to which Acquiror or Merger Sub is a party or by
which either of them is bound obligating Acquiror or Merger Sub to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, or
repurchased, any shares of the capital stock of Acquiror or Merger Sub or
obligating Acquiror or Merger Sub to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. The shares of Acquiror
Common Stock to be issued pursuant to the Merger will, when issued, be duly
authorized, validly issued, fully paid, and non-assessable.
6.3 AUTHORITY. Acquiror and Merger Sub have 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 Acquiror and Merger Sub. This
Agreement has been duly executed and delivered by Acquiror and Merger Sub and
constitutes the valid and binding obligations of Acquiror and Merger Sub. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under (i) any provision of the Articles of
Incorporation or Bylaws or equivalent organizational documents of Acquiror or
any of its subsidiaries, as amended, or (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Acquiror or any of its subsidiaries or their properties or assets,
except where such conflict, violation, default, termination, cancellation or
acceleration with respect to the foregoing provisions of (ii) would not have and
could not reasonably be expected to have a Material Adverse Effect on Acquiror.
No consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required by or with respect to Acquiror
or any of its subsidiaries in connection with the execution and delivery of this
Agreement by Acquiror and Merger Sub or the consummation by Acquiror and Merger
Sub of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger as provided in Section 1.3, and (ii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Acquiror and would not prevent
or materially alter or delay any of the transactions contemplated by this
Agreement.
6.4 FINANCIAL STATEMENTS. The audited financial statements of Acquiror for
the period from January 1, 1995 to and including December 31, 1995, January 1,
1996 to and including December 31, 1996 (the "Audited Financials") and the
interim financial statements of Acquiror for the period from January 1, 1997
through August 31, 1997 (such interim financial statements and the Audited
Financials are hereinafter collectively referred to at times as the "Acquiror
Financial Statements"), copies of which are attached hereto as Schedule 6.4, are
true and correct and have been prepared in accordance with generally accepted
accounting principles ("GAAP"), and except for such changes as may be disclosed
in the notes to the Acquiror Financial Statements, consistently followed for
three (3) years by
15
Acquiror; the balance sheets in the Financial Statements fairly present the
financial position of Acquiror as of their respective dates and set forth in
full and reflect all liabilities, including taxes, of Acquiror as of such dates
required to be reflected thereon in accordance with GAAP; the income statements
fairly present the results of the operations of Acquiror for the periods
indicated and covered thereby; and the Shareholders' Equity of Acquiror as of
such dates was as set forth in the Financial Statements, after full provision
and reserves for all taxes and other liabilities for all periods up to the dates
thereof. Except for liabilities incurred after August 31, 1997, in the ordinary
course of business and included on the books and records of Acquiror, Acquiror
does not know and has no reason to know of any liability or any basis for the
assertion against Acquiror of any liability not reflected or reserved against in
the balance sheets required to be included thereon in accordance with GAAP.
6.5 ABSENCE OF CERTAIN CHANGES. Except as set forth in Schedule 6.5, since
August 31, 1997 (the "Acquiror Balance Sheet Date"), Acquiror has conducted its
business in the ordinary course consistent with past practice, and there has
occurred:
(a) no material adverse change in the business, financial condition or
results of operations (the "Business Condition"), or to the knowledge of
Acquiror, the ability of Acquiror to function in the future at least at
current business levels of activity ("Acquiror's Prospects");
(b) no fire, explosion, accident, flood, smoke, water damage or other
catastrophe, embargo, lockout, strike, labor trouble, or other emergency,
which adversely affected the business or properties of Acquiror as well as
the buildings occupied or used by Acquiror;
(c) no sales of goods or services or other transactions of Acquiror
other than those occurring in the ordinary course of business, none of
which has had or will have any Material Adverse Effect on Acquiror's
Business Condition, or to the knowledge of Acquiror, Acquiror's Prospects;
(d) no material change in the manner of conducting the business of
Acquiror;
(e) no adverse change in the working capital position of Acquiror and
no buildup of its inventories out of the ordinary course of business and no
markup of its fixed assets or inventories;
(f) no financial or other commitments or obligations incurred by
Acquiror, except such as may be incidental to carrying on the ordinary
course of business;
(g) except for trade accounts payable, no borrowing by Acquiror of any
funds and no endorsing or guaranteeing payment by it of any loan or
obligation, contractual or otherwise, of any other individual, firm,
corporation or other entity, and there are no such borrowings, endorsements
or guarantees by Acquiror presently outstanding;
(h) except for trade terms extended to customers in the ordinary
course of business, no loans or advances by Acquiror to any individual,
firm, corporation or other entity at any time;
(i) no capital additions or improvements in excess of Twenty-Five
Thousand Dollars ($25,000) in the aggregate and no contracts or purchase
orders therefor, to the properties of Acquiror;
(j) except for finished products and component parts sold by Acquiror
in the ordinary course of business, no sale, retirement, abandonment or
other disposition of any property of Acquiror, except the disposition of
minor equipment in the ordinary course of business with an aggregate value
of less than Ten Thousand Dollars ($10,000);
(k) no outstanding obligation by Acquiror for money borrowed, other
than as set forth in the Acquiror Financial Statements, except trade
accounts payable and other current expenses and taxes incurred and accrued
on its books and arising in the ordinary course of business, none of which
obligations is in default or arrears of payment;
16
(l) no dividend on Acquiror's capital stock and no money or other
property set apart for payment in respect of Acquiror's capital stock;
(m) except as contemplated hereby, no acquisition or contract to
acquire in any manner, directly or indirectly, any of the outstanding
capital stock of Acquiror;
(n) no payment of or any obligation to pay any amounts either in cash
or other property to any person for cancellation of any outstanding options
or agreements to acquire shares of Acquiror's capital stock;
(o) no change in the capital structure or Articles of Incorporation or
Bylaws of Acquiror;
(p) no change in the accounting methods or practices followed by
Acquiror in connection with the operations of Acquiror;
(q) no payment by Acquiror of any bonus or other distribution to any
officer or employee, sales representative, distributors or other sales
agent of Acquiror;
(r) no notice of any violation by Acquiror of any building, zoning
code or fire code, health code or OSHA, Environmental Law and no actual or
to the knowledge of Acquiror, threatened condemnation of the real
properties currently owned or used by the Acquiror (the "Real Properties");
or
(s) any commitment or agreement by Acquiror to do anything which would
make any of Sections 6.5(a) - 6.5(r) untrue (other than negotiations with
Target and its representatives regarding the transactions contemplated by
this Agreement).
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Acquiror nor any of its
subsidiaries has any material obligations or liabilities of any nature (matured
or unmatured, fixed or contingent) other than (i) those set forth or adequately
provided for in the Acquiror's unaudited Balance Sheet for the period ended
August 31, 1997, including the Notes thereto (the "Acquiror Balance Sheet"),
(ii) those incurred in the ordinary course of business and not required to be
set forth in the Acquiror Balance Sheet under generally accepted accounting
principles, (iii) those incurred in the ordinary course of business since the
Acquiror Balance Sheet Date and consistent with past practice; and (iv) those
incurred in connection with the execution of this Agreement.
6.7 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the best knowledge of Acquiror or any
of its subsidiaries, threatened against Acquiror or any of its subsidiaries or
any of their respective properties or any of their respective officers or
directors (in their capacities as such) that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on Acquiror.
There is no judgment, decree or order against Acquiror or any of its
subsidiaries, or, to the knowledge of Acquiror and its subsidiaries, any of
their respective directors or officers (in their capacities as such), that could
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement, or that could reasonably be expected to have a Material
Adverse Effect on Acquiror.
6.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material agreement,
judgment, injunction, order or decree binding upon Acquiror or any of its
subsidiaries which has or reasonably could be expected to have the effect of
prohibiting or materially impairing any current or future business practice of
Acquiror or any of its subsidiaries, any acquisition of property by Acquiror or
any of its subsidiaries or the conduct of business by Acquiror or any of its
subsidiaries as currently conducted or as proposed to be conducted by Acquiror
or any of its subsidiaries except as previously disclosed to the Shareholder
with respect to the MSU (UK) Limited and Zilog, Inc. agreements.
17
6.9 GOVERNMENTAL AUTHORIZATION. Acquiror and each of its subsidiaries have
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity (i)
pursuant to which Acquiror or any of its subsidiaries currently operates or
holds any interest in any of its properties or (ii) that is required for the
operation of Acquiror's or any of its subsidiaries' businesses or the holding of
any such interest ((i) and (ii) herein collectively called "Acquiror
Authorizations"), and all of such Acquiror Authorizations are in full force and
effect, except where the failure to obtain or have any of such Acquiror
Authorizations could not reasonably be expected to have a Material Adverse
Effect on Acquiror.
6.10 TITLE TO PROPERTY. Acquiror and its subsidiaries have good and valid
title to all of their respective properties, interests in properties and assets,
real and personal, reflected in the Acquiror Balance Sheet or acquired after the
Acquiror Balance Sheet Date (except properties, interests in properties and
assets sold or otherwise disposed of since the Acquiror Balance Sheet Date in
the ordinary course of business), or in the case of leased properties and
assets, valid leasehold interests in such properties, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any kind or character,
except (i) the lien of current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties and (iii) liens securing debt which is reflected on the Acquiror
Balance Sheet. The plants, property and equipment of Acquiror and its
subsidiaries that are used in the operations of their business are in good
operating condition and repair. All properties used in the operations of
Acquiror and its subsidiaries are reflected in the Acquiror Balance Sheet to the
extent generally accepted accounting principles require the same to be
reflected.
6.11 INTELLECTUAL PROPERTY.
(a) Acquiror owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, trade secrets, inventory, ideas,
algorithms, processes, computer software programs or applications (in both
source code and object code form) licenses, customer lists, formulae,
inventions, development tools, other proprietary rights, and tangible or
intangible proprietary information or material ("Intellectual Property")
that are used or proposed to be used in the business of Acquiror as
currently conducted or as proposed to be conducted by Acquiror, except to
the extent that the failure to have such rights have not and could not
reasonably be expected to have a Material Adverse Effect on Acquiror.
Intellectual Property shall include all documentation and media
constituting, describing or relating to the above, including, but not
limited to, manuals, memoranda, know-how, notebooks, software, records and
disclosures.
(b) Schedule 6.11 lists (i) all patents and patent applications and
all registered and unregistered trademarks, trade names and service marks,
registered and unregistered copyrights, and maskworks, which Acquiror
considers to be material to its business and included in the Intellectual
Property, including the jurisdictions in which each such Intellectual
Property right has been issued or registered or in which any application
for such issuance and registration has been filed, (ii) all material
licenses, sublicenses and other agreements as to which Acquiror is a party
and pursuant to which any person is authorized to use any Intellectual
Property, and (iii) all material licenses, sublicenses and other agreements
as to which Acquiror is a party and pursuant to which Acquiror is
authorized to use any third party patents, trademarks or copyrights,
including software ("Third Party Intellectual Property Rights"), in each
case which are incorporated in, are, or form a part of any product or
service of Acquiror that is material to Acquiror.
(c) To the best knowledge of Acquiror, there is no material
unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of Acquiror, any trade secret material to
Acquiror, or any Third Party Intellectual Property Right, by any third
party, including any employee or former employee of Acquiror. Acquiror has
not entered into any agreement to indemnify any other person against any
charge of infringement of any Intellectual Property, other than
indemnification provisions contained in purchase orders arising in the
ordinary course of business.
18
(d) Acquiror is not, and Acquiror will not be as a result of the
execution and delivery of this Agreement or the performance of Acquiror's
obligations under this Agreement, in breach of any license, sublicense or
other agreement relating to the Intellectual Property or Third Party
Intellectual Property Rights, the breach of which could have a Material
Adverse Effect on Acquiror.
(e) All patents, registered trademarks, service marks and copyrights
held by Acquiror are valid and subsisting. Acquiror (i) has not been sued
in any suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or violation of any
trade secret or other proprietary right of any third party or (ii) has not
brought any action, suit or proceeding for infringement of Intellectual
Property or breach of any license or agreement involving Intellectual
Property against any third party. The manufacture, marketing, licensing or
sale of the products and services of Acquiror do not infringe any patent,
trademark, service xxxx, copyright, trade secret or other proprietary right
of any third party, except where such infringement could not have a
Material Adverse Effect on Acquiror.
(f) Acquiror has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Acquiror
does not already own by operation of law.
(g) Acquiror has taken all reasonable and appropriate steps to protect
and preserve the confidentiality of all Intellectual Property not otherwise
protected by patents, or patent applications or copyright ("Confidential
Information"). All use, disclosure or appropriation of Confidential
Information owned by Acquiror by or to a third party has been pursuant to
the terms of a written agreement with such third party. All use, disclosure
or appropriation of Confidential Information not owned by Acquiror has been
pursuant to the terms of a written agreement with the owner of such
Confidential Information, or is otherwise lawful.
(h) To the best knowledge of Acquiror, neither Acquiror's operations
nor any of its Intellectual Property infringes or provides any basis to
believe that its operations or any of its Intellectual Property would
infringe upon any validly issued or pending trademark, trade name, service
xxxx, copyright or, to the knowledge of Acquiror, any validly issued or
pending patent or other right of any other person.
6.12 TAXES. Acquiror and each of its subsidiaries and any consolidated,
combined, unitary or aggregate group for Tax purposes of which Acquiror or any
of its subsidiaries is or has been a member have timely filed all Tax Returns
required to be filed by it taking into account extensions of due dates, have
paid all Taxes shown thereon to be due and has provided adequate accruals in
accordance with generally accepted accounting principles in its financial
statements for any Taxes that have not been paid, whether or not shown as being
due on any Tax returns. Except as disclosed in Schedule 6.12, (i) no material
claim for Taxes has become a lien against the property of Acquiror or any of its
subsidiaries or is being asserted against Acquiror or any of its subsidiaries
other than liens for Taxes not yet due and payable, (ii) no audit of any Tax
Return of Acquiror or any of its subsidiaries is being conducted by a Tax
authority, (iii) no Tax authority is now asserting, or to the best knowledge of
Acquiror, threatening to assert against Acquiror or any of its subsidiaries any
deficiency or claim for additional Taxes, and there are no requests for
information from a Tax authority currently outstanding that could affect the
Taxes of Acquiror or any of its subsidiaries and (iv) no extension of the
statute of limitations on the assessment of any Taxes has been granted by
Acquiror or any of its subsidiaries and is currently in effect.
6.13 EMPLOYEE BENEFIT PLANS.
(a) Other than the Acquiror Stock Option Plan, Acquiror does not
maintain any pension, profit sharing, retirement, fringe benefit, deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance, disability, hospitalization, medical insurance, life insurance
or any other type of employee benefit plan, program or arrangement within
the meaning of Section 3(3) ERISA, including, without limitation, any
Defined Benefit Plan or any Defined Contribution or Multi-Employer Plan
19
on behalf of any current or former officers or employees of Acquiror or
their beneficiaries or dependents (whether on an active or frozen basis).
(b) Acquiror has not in the past and does not currently sponsor,
maintain, contribute to or otherwise have any obligation with respect to
any Plan.
6.14 EMPLOYEE MATTERS. Acquiror and each of its subsidiaries are in
compliance in all respects with all current applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health and employment
practices, and is not engaged in any unfair labor practice, except where the
failure to be in compliance or the engagement in such unfair labor practices
would not have a Material Adverse Effect on Acquiror. There are no pending
claims against Acquiror or any of its subsidiaries under any workers'
compensation plan or policy or for long term disability. Neither Acquiror nor
any of its subsidiaries has any obligations under COBRA with respect to any
former employees or qualifying beneficiaries thereunder except for obligations
that would not have a Material Adverse Effect on Acquiror. There are no
controversies pending or, to the best knowledge of Acquiror and its
subsidiaries, threatened, between Acquiror or any of its subsidiaries and any of
their respective employees, which controversies have or could reasonably be
expected to have a Material Adverse Effect on Acquiror. Neither Acquiror nor any
of its subsidiaries is a party to any collective bargaining agreement or any
labor union contract nor does Acquiror nor any of its subsidiaries know of any
activities or proceedings of any labor union to organize any such employees.
6.15 INTERESTED PARTY TRANSACTIONS. Neither Acquiror nor any of its
subsidiaries is indebted to any director, officer, employer or agent of Acquiror
or any of its subsidiaries (except for amounts due as normal salaries and
bonuses and in reimbursement of ordinary expenses), and no such person is
indebted to Acquiror or any of its subsidiaries, and there have been no other
material transactions between Acquiror and any director, officer or principal
shareholder or Acquiror.
6.16 INSURANCE. Acquiror and each of its subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of Acquiror and its
subsidiaries. There is no material claim pending under any of such policies or
bond as to which Acquiror has received a denial, or to the best of Acquiror's
knowledge, which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and Acquiror and its subsidiaries are
otherwise in compliance in all material respects with the terms of such policies
and bonds. Acquiror has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
6.17 COMPLIANCE WITH LAWS. Each of Acquiror and its subsidiaries has
complied with, is not in violation of and has not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as,
singly or in the aggregate, could not be reasonably expected to have a Material
Adverse Effect on Acquiror.
6.18 [intentionally omitted]
6.19 COMPLETE COPIES OF MATERIALS. Acquiror has delivered or made available
true and complete copies of each document that has been requested by Target or
its counsel in connection with their legal and accounting review of Acquiror and
its subsidiaries.
6.20 POOLING OF INTERESTS. Neither Acquiror nor any of its subsidiaries
nor, to the best knowledge of Acquiror, any of their respective directors,
officers or stockholders has taken any action which would interfere with
Acquiror's ability to account for the Merger as a pooling of interests.
6.21 BROKERS' AND FINDERS' FEES. Acquiror has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment
20
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
6.22 BOARD APPROVAL. The Boards of Directors of Acquiror and Merger Sub
have unanimously (i) approved this Agreement and the Merger, (ii) determined
that the Merger is in the best interests of their respective stockholders and is
on terms that are fair to such stockholders and (iii) recommended that the
stockholders of Merger Sub approve this Agreement and the Merger.
6.23 INTERNAL REVENUE CODE SECTION 368(c). Acquiror does not have any plan
or intention to (i) reaquire any of its stock issued in the transaction, (ii)
cause Target to issue additional shares of its stock that would cause Acquiror
to lose control of Target within the meaning of Section 368(c) of the Code,
(iii) liquidate Target or merge Target with or into another corporation, (iv)
sell or otherwise dispose of any of the stock of Target, (v) cause Target to
sell or otherwise dispose of any of its assets, except for dispositions made in
the ordinary course of business or transfers of assets to a corporation
controlled (within the meaning of Section 368(c)) of the Code by Target or (vi)
cause Target to discontinue its historic business or fail to continue to use a
significant portion of its historic business assets in a business.
6.24 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by Acquiror or Merger Sub herein or the Acquiror Disclosure Schedule, or in
any certificate furnished by Acquiror or Merger Sub pursuant to this Agreement,
when all such documents are read together in their entirety, contains or will
contain at the Effective Time any untrue statement of a material fact, or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE 7
CONDUCT PRIOR TO THE EFFECTIVE TIME
7.1 CONDUCT OF BUSINESS OF TARGET AND ACQUIROR. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, each of Target and Acquiror agrees (except
to the extent expressly contemplated by this Agreement or as consented to in
writing by the other), to carry on its and its subsidiaries' business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay and to cause its subsidiaries to pay debts and
Taxes when due subject (i) to good faith disputes over such debts or taxes, and
(ii) in the case of Taxes of Target or any of its subsidiaries, to Acquiror's
consent to the filing of material Tax Returns if applicable, to pay or perform
other obligations when due, and to use all reasonable efforts consistent with
past practice and policies to preserve intact its and its subsidiaries' present
business organizations, use its best efforts consistent with past practice to
keep available the services of its and its subsidiaries' present officers and
key employees and use its best efforts consistent with past practice to preserve
its and its subsidiaries' relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it or its
subsidiaries, to the end that its and its subsidiaries' goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Each of Target and
Acquiror agrees to notify promptly the other of any event or occurrence not in
the ordinary course of its or its subsidiaries' business, and of any event which
could have a Material Adverse Effect. Without limiting the foregoing, except as
expressly contemplated by this Agreement, neither Target nor Acquiror shall do,
cause or permit any of the following, or allow, cause or permit any of its
subsidiaries to do, cause or permit any of the following, without the prior
written consent of the other:
(a) CHARTER DOCUMENTS. Cause or permit any amendments to its
Certificate of Incorporation or Bylaws or equivalent organizational
documents;
(b) ISSUANCE OF SECURITIES. Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible
into, or subscriptions, rights, warrants or options to acquire, or other
agreements or
21
commitments of any character obligating it to issue any such shares or
other convertible securities, other than (i) the issuance of shares of its
Common Stock pursuant to the exercise of stock options, warrants or other
rights therefor outstanding as of the date of this Agreement (ii) any
issuance of options by Acquiror in the ordinary course of business
consistent with past practice and (iii) the issuance by Acquiror of
securities in capital raising transactions consistent with past practice;
(c) DIVIDENDS; CHANGES IN CAPITAL STOCK. Declare or pay any dividends
on or make any other distributions (whether in cash, stock or property) in
respect of any of its capital stock, or split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly,
any shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of
shares in connection with any termination of service to it or its
subsidiaries;
(d) POOLING. Take any action, which would interfere with Acquiror's
ability to account for the Merger as a pooling of interests; or
(e) OTHER. Take, or agree in writing or otherwise to take, any of the
actions described in Sections 7.1(a) through (d) above, or any action which
would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not
to perform its covenants hereunder.
7.2 CONDUCT OF BUSINESS OF TARGET. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, except as expressly contemplated by this Agreement,
Target shall not do, cause or permit any of the following, without the prior
written consent of Acquiror, which consent shall not be unreasonably withheld:
(a) MATERIAL CONTRACTS. Enter into any material contract or
commitment, or violate, amend or otherwise modify or waive any of the terms
of any of its material contracts;
(b) INTELLECTUAL PROPERTY. Transfer to any person or entity any rights
to its Intellectual Property;
(c) EXCLUSIVE RIGHTS. Enter into or amend any agreements pursuant to
which any other party is granted exclusive marketing or other exclusive
rights of any type or scope with respect to any of its products or
technology;
(d) DISPOSITIONS. Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets which are material, individually
or in the aggregate, to its and its subsidiaries' business, taken as a
whole;
(e) INDEBTEDNESS. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(f) LEASES. Enter into any operating lease providing for payments in
excess of an aggregate of $25,000;
(g) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy in an amount in
excess of $10,000 in any one case or $50,000 in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of
business, other than the payment, discharge or satisfaction of liabilities
reflected or reserved against in the Target Financial Statements and other
than the expenses related to this Agreement or any of the transactions
contemplated hereby;
22
(h) CAPITAL EXPENDITURES Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business
and consistent with past practice;
(i) INSURANCE. Reduce the amount of any insurance coverage provided by
existing insurance policies;
(j) EMPLOYEE BENEFIT PLANS; NEW HIRES; PAY INCREASES. Adopt any
employee benefit or stock purchase or option plan, or hire any new director
level or officer level employee (other than in the ordinary course of
business), pay any special bonus or special remuneration to any employee or
director or increase the salaries or wage rates of its employees;
(k) SEVERANCE ARRANGEMENTS. Grant any severance or termination pay (i)
to any director or officer or (ii) to any other employee except payments
made pursuant to standard written agreements outstanding on the date
hereof;
(l) LAWSUITS. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines
that failure to commence suit would result in the material impairment of a
valuable aspect of its business, provided that it consults with Acquiror
prior to the filing of such a suit or (iii) for a breach of this Agreement;
(m) ACQUISITIONS. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets, other than in the
ordinary course of business consistent with past practice;
(n) TAXES. Other than in the ordinary course of business, make or
change any material election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, file any material Tax Return or any
amendment to a material Tax Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(o) NOTICES. Target shall give all notices and other information
required to be given to the employees of Target, any collective bargaining
unit representing any group of employees of Target, and any applicable
government authority under the Worker Adjustment and Retraining
Notification Act, the National Labor Relations Act, the Code, the
Consolidated Omnibus Budget Reconciliation Act, and other applicable law in
connection with the transactions provided for in this Agreement;
(p) REVALUATION. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business; or
(q) OTHER. Take or agree in writing or otherwise to take, any of the
actions described in Sections 7.2(a) through (p) above, or any action which
would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not
to perform its covenants hereunder.
7.3 NO SOLICITATION. Target and the officers, directors and employees of
Target will not, and Target will use its best efforts to insure that agents of
Target will not, directly or indirectly, (i) take any action to solicit,
initiate or encourage any Takeover Proposal (defined below), or (ii) engage in
negotiations with, or disclose any non-public information relating to Target to,
or afford access to the properties, books or records of Target to, any person
that has advised Target that it may be considering making, or that has made, a
Takeover Proposal. For purposes of this Agreement, "Takeover Proposal" means any
offer or proposal for, or any indication of interest in, a merger or other
business combination
23
involving Target or the acquisition of any significant equity interest in, or a
significant portion of the assets of, Target, other than the transactions
contemplated by this Agreement.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 ACCESS TO INFORMATION.
(a) Target shall afford Acquiror and its accountants, counsel and
other representatives, reasonable access during normal business hours
during the period prior to the Effective Time to (i) all of Target's
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and personnel of Target as
Acquiror may reasonably request. Target agrees to provide to Acquiror and
its accountants, counsel and other representatives copies of internal
financial statements promptly upon request. Acquiror shall afford Target
and its accountants, counsel and other representatives, reasonable access
during normal business hours during the period prior to the Effective Time
to (i) all of Acquiror's and its subsidiaries' properties, books,
contracts, commitments and records, and (ii) all other information
concerning the business, properties and personnel of Acquiror and its
subsidiaries as Target may reasonably request. Acquiror agrees to provide
to Target and its accountants, counsel and other representatives copies of
internal financial statements promptly upon request.
(b) Subject to compliance with applicable law, from the date hereof
until the Effective Time, each of Acquiror and Target shall confer on a
regular and frequent basis with one or more representatives of the other
party to report operational matters of materiality and the general status
of ongoing operations.
(c) No information or knowledge obtained in any investigation pursuant
to this Section 8.1 shall affect or be deemed to modify any representation
or warranty contained herein or the conditions to the obligations of the
parties to consummate the Merger.
8.2 EXCHANGE ACT FILINGS. Acquiror shall use its reasonable business
efforts to become a reporting company under the Securities Exchange Act of 1934,
as amended, within six (6) months of the Effective Time.
8.3 PUBLIC DISCLOSURE. Unless otherwise permitted by this Agreement,
Acquiror and Target shall consult with each other before issuing any press
release or otherwise making any pubic statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or by obligations
pursuant to any listing agreement with the National Association of Securities
Dealers, Inc.
8.4 CONSENTS; COOPERATION.
(a) Each of Acquiror and Target shall promptly apply for or otherwise
seek, and use its best efforts to obtain, all consents and approvals
required to be obtained by it for the consummation of the Merger, and shall
use its best efforts to obtain all necessary consents, waivers and
approvals under any of its material contracts in connection with the Merger
for the assignment thereof or otherwise.
8.5 POOLING ACCOUNTING. Acquiror and Target shall each use their best
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests. Each of Acquiror and Target shall use
its best efforts to cause its "Affiliates" (as defined in Section 8.6) not to
take any action that would adversely affect the ability of Acquiror to account
for the business combination to be effected by the Merger as a pooling of
interests.
24
8.6 AFFILIATE AGREEMENTS.
(a) Schedule 8.6(a) sets forth those persons who may be deemed
"Affiliates" of Target within the meaning of Rule 144 promulgated under the
Securities Act ("Rule 144"). Target shall provide Acquiror such information
and documents as Acquiror shall reasonably request for purposes of
reviewing such list. Target shall use its best efforts to deliver or cause
to be delivered to Acquiror, concurrently with the execution of this
Agreement (and in each case prior to the Effective Time) from each of the
Affiliates of Target, an executed Affiliate Agreement in the form attached
hereto as Exhibit A-1. Acquiror and Merger Sub shall be entitled to place
appropriate legends on the certificates evidencing any Acquiror Common
Stock to be received by such Affiliates of Target pursuant to the terms of
this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for Acquiror Common Stock, consistent with the terms of such
Affiliates Agreements.
(b) Schedule 8.6(b) sets forth those persons who may be deemed
"Affiliates" of Acquiror within the meaning of Rule 144. Acquiror shall
provide Target such information and documents as Target shall reasonably
request for purposes of reviewing such list. Acquiror shall use its best
efforts to deliver or cause to be delivered to Target, concurrently with
the execution of this Agreement (and in each case prior to the Effective
Time) from each of the Affiliates of Acquiror, an executed Affiliate
Agreement in the form attached hereto as Exhibit A-2.
8.7 PIGGYBACK REGISTRATION; DEMAND REGISTRATION
(a) If at any time or times after Acquiror becomes a reporting company
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
Acquiror proposes to make a registered public offering of Common Stock, par
value $0.001, (whether for its own account or for the account of others)
under the Securities Act, other than an offering registered on Form X-0,
Xxxx X-0, or other Securities and Exchange Commission ("SEC") registration
form which does not permit inclusion of shares of selling stockholders for
offer to the public, Acquiror shall promptly give written notice of the
proposed registration to the shareholders listed on Schedule 5.2(d) (the
"5.2 Shareholders") prior to the proposed filing date of the registration
statement, and at the written request of the any of the 5.2 Shareholders,
delivered to Acquiror within 30 days after the receipt of such notice,
Acquiror shall include in such registration and offering all of her or his
Acquiror Common Stock that have been designated for registration in the 5.2
Shareholder's request (a "Piggyback Registration"), provided, however, that
(i) Acquiror will not be required to effect a Piggyback Registration with
respect to Acquiror Common Stock which have already been registered on
another registration statement; and (ii) Acquiror may withdraw any proposed
registration statement or offering of securities that gave rise to the
Piggyback Registration at any time without liability to the 5.2
Shareholder. If, however, after two (2) years or more after Closing, a
majority in interest of the 5.2 Shareholders demands that the Acquiror
register an offering of the Acqiror Common Stock which have not already
been registered on another registration statement held by the 5.2
Shareholders making such demand, Acquiror shall register an offering of
such Acquiror Common Stock (a "Demand Registration", and such Demand
Registration or Piggyback Registration referred to as a "Registration").
(b) If a Piggyback Registration is an underwritten primary
registration on behalf of Acquiror, and the lead underwriter advises
Acquiror in writing that in its opinion the number of securities requested
to be included in such registration exceeds the number that can be sold in
such offering without adversely affecting the marketability of the
offering, Acquiror shall include in such offering first, the securities of
Acquiror proposed to be sold by Acquiror, second, the Acquiror Common Stock
requested to be included in such registration by the 5.2 Shareholder and
third, other securities proposed to be included in such registration. If a
Piggyback Registration is an underwritten secondary registration on behalf
of selling stockholders, and the lead underwriter advises Acquiror in
writing that in its opinion the number of securities requested to be
included in such registration exceeds the number that can be sold in such
offering without adversely affecting the marketability of the offering,
then Acquiror shall include in such offering first, the securities of
Acquiror proposed to be sold by the stockholders requiring or demanding
that Acquiror effect such registration, second, the Acquiror Common Stock
requested to be included in
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such registration by the 5.2 Shareholder and third, other securities (if
any) proposed to be included in such registration. If a Piggyback
Registration is with respect to an underwritten primary registration on
behalf of Acquiror, 5.2(d) Shareholder agrees to sell her or his Acquiror
Common Stock, if Acquiror so requests, on the same basis as the other
securities included in such registration are being sold, and the
underwriter or underwriters for such registration shall be selected by
Acquiror.
(c) Acquiror shall have no obligation to include Acquiror Common Stock
owned by a 5.2(d) Shareholder in a registration statement for a
Registration, unless and until the 5.2(d) Shareholder has furnished to
Acquiror all information and statements about or pertaining to the 5.2(d)
Shareholder in such reasonable detail and on such timely basis as is
reasonably deemed by Acquiror to be necessary or appropriate for the
preparation of the registration statement.
(d) Whenever a request for a Registration is properly made in
accordance with Section 8.7(a), Acquiror shall, as expeditiously as
reasonably possible:
(i) prepare and file with the SEC a registration statement with
respect to such Acquiror Common Stock and use its best efforts
(subject to Section 8.7(a)) to cause such registration statement to
become effective as soon as practicable thereafter and the 5.2(d)
Shareholder shall have the opportunity to object to any information
pertaining solely to such 5.2(d) Shareholder that is contained therein
and Acquiror will make the corrections reasonably requested by the
5.2(d) Shareholder with respect to such information;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and prospectus contained
therein as may be necessary to keep such registration statement
effective for a period of not less than six (6) months and comply with
the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(iii) furnish to the 5.2(d) Shareholder the number of copies of
such registration statement, each amendment and supplement thereto,
the prospectus contained in such registration statement (including
each preliminary prospectus), and such other documents as the 5.2(d)
Shareholder may reasonably request in order to facilitate the
disposition of the Acquiror Common Stock owned by such 5.2(d)
Shareholder;
(iv) use its best efforts to register or qualify such shares
under the state blue sky or securities ("Blue Sky") laws of such
jurisdictions as the 5.2(d) Shareholder reasonably requests, and to do
any and all other acts and things that may be reasonably necessary or
advisable to enable the 5.2(d) Shareholder to consummate the
disposition of such shares in such jurisdictions; provided, however,
that Acquiror will not be required to do any of the following: (i)
qualify generally to do business in any jurisdiction where it would
not be required but for this Section 8.7(d), (ii) subject itself to
taxation in any such jurisdiction or (iii) file any general consent to
service of process in any such jurisdiction; and
(v) notify the 5.2(d) Shareholder, at any time when a prospectus
relating to the Acquiror Common Stock is required to be delivered
under the Securities Act, of the occurrence of any event as a result
of which the prospectus included in any such registration statement
contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein in the light of the
circumstances under which they were made, not misleading, and prepare
a supplement or amendment to the prospectus so that, as thereafter
delivered to the purchasers of such shares, the prospectus will not
contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(e) If, after a registration statement becomes effective, Acquiror
advises the 5.2(d) Shareholder that Acquiror considers it appropriate for
the registration statement to be amended, the 5.2(d) Shareholder shall
suspend any further sales of their registered shares until Acquiror advises
her or him that the registration statement has been amended. The six (6)
month time period referred to herein during which
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the registration statement must be kept current after its effective date
shall be extended for an additional number of business days during which
the rights to sell shares was suspended pursuant to the preceding sentence,
but in no event will Acquiror be required to update the registration
statement after the first anniversary of the date hereof.
(f) With respect to any Registration, the 5.2 Shareholder shall pay
all transfer taxes, if any, relating to the sale of its Acquiror Common
Stock and its pro rata portion of any underwriting discounts or commissions
or the equivalent thereof.
(g) With respect to any Registration, except for the fees and expenses
specified in Section 8.7(f) hereof and except as provided below in this
Section 8.7(g), regardless of whether any registration statement becomes
effective, Acquiror shall pay all expenses incident to a Registration,
including, without limitation, all registration and filing fees, fees and
expenses of compliance with Blue Sky laws, underwriting discounts, fees,
and expenses (other than the 5.2(d) Shareholder's pro rata portion of any
underwriting discounts or commissions or the equivalent thereof), printing
expenses, messenger and delivery expenses, and fees and expenses of counsel
for Acquiror and all independent certified public accountants and other
persons retained by Acquiror.
(h) Acquiror agrees to indemnify, to the extent permitted by law, each
holder of Acquiror Common Stock, against all losses, claims, damages,
liabilities and expenses, joint or several (or actions in respect thereof)
("Losses") arising out of or based upon any untrue or alleged untrue
statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or other document and any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and any violation by the Acquiror of the Securities
Act or any rule or regulation promulgated thereunder, or of any Blue Sky or
other state securities laws or any rule or regulation promulgated
thereunder, except insofar as the same are caused by any untrue or alleged
untrue statement or any omission or alleged omission made in reliance upon
and in conformity with information furnished in writing to the Acquiror by
such holder expressly for use therein or by such holder's failure to
deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Acquiror has furnished such
holder with a sufficient number of copies of the same and except insofar as
the same are caused by or contained in any prospectus if such holder failed
to send or deliver a copy of any subsequent prospectus or prospectus
supplement which would have corrected such untrue or alleged untrue
statement of material fact or such omission or alleged omission of a
material fact with or prior to the delivery of written confirmation of the
sale by such holder after Acquiror has furnished such holder with a
sufficient number of copies of the same.
(i) In connection with any registration statement in which the holder
of Acquiror Common Stock is participating, such holder will furnish to the
Acquiror in writing such information and affidavits as the Acquiror
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, severally and not jointly,
will indemnify the Acquiror, each person, which may be an individual,
partnership, corporation, limited liability company, association, joint
stock company, trust, joint venture, unincorporated organization or
governmental entity or any department, agency or political subdivision
thereof ("Person"), who controls the Acquiror (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and
their respective officers, directors, partners, employees, agents and
representatives against any Losses arising out of or based upon any untrue
or alleged untrue statement of a material fact contained in any
registration statement, prospectus, or form of prospectus, or any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, to the extent, but only to the
extent, that such untrue or alleged untrue statement is contained in, or
such omission or alleged omission is required to be contained in and in
conformity with, any information so furnished in writing by such holder or
its representatives to the Acquiror expressly for use in such registration
statement or prospectus and that such statement or omission was relied upon
by the Acquiror in preparation of such registration statement, prospectus
or form of prospectus; provided, however, that such holder of Acquiror
Common Stock shall not be liable in any such case to the extent that the
holder has furnished in writing to the Acquiror prior to the filing of any
such registration statement
27
or prospectus or amendment or supplement thereto information expressly for
use in such registration statement or prospectus or any amendment or
supplement thereto which corrected or made not misleading, information
previously furnished to the Acquiror, and the Acquiror failed to include
such information therein. In no event shall the liability of the selling
holder of Acquiror Common Stock hereunder be greater in amount than the
dollar amount of the proceeds (net of payment of all expenses) received by
such holder upon the sale of the Acquiror Common Stock giving rise to such
indemnification obligation. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such
indemnified party.
(j) If any Person shall be entitled to indemnity hereunder, such
indemnified party shall give prompt notice to the party or parties from
which such indemnity is sought of the commencement of any action, suit,
proceeding or investigation or written threat thereof ("Proceeding"') with
respect to which such indemnified party seeks indemnification or
contribution pursuant hereto; provided, however, that the failure to so
notify the indemnifying parties shall not relieve the indemnifying parties
from any obligation or liability hereunder except to the extent that the
indemnifying parties have been prejudiced by such failure. The indemnifying
parties shall have the right, exercisable by giving written notice to an
indemnified party promptly after the receipt of written notice from such
indemnified party of such Proceeding, to assume, at the indemnifying
parties' expense, the defense of any such Proceeding, with counsel
reasonably satisfactory to such indemnified party; provided, however, that
an indemnified party or parties (if more than one such indemnified party is
named in any Proceeding) shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such indemnified
party or parties unless the indemnifying party or parties, and there
exists, in the opinion of counsel for the indemnified parties, legal
defenses available to the indemnified parties which are different from or
in addition to those available to the indemnifying party, or a conflict
exists between one or more indemnifying parties and one or more indemnified
parties, in which case the indemnifying parties shall, in connection with
any one such Proceeding or separate but substantially similar or related
Proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of not
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for such indemnified party or parties. If an
indemnifying party assumes the defense of such Proceeding, the indemnifying
parties will not be subject to any liability for any settlement made by the
indemnified party without its or their consent (such consent not to be
unreasonably withheld).
(k) If the indemnification provided for in Sections 8.7(h), (i), (j)
and (k) is unavailable to an indemnified party or is insufficient to hold
such indemnified party harmless for any Losses in respect of which Sections
8.7(h), (i), (j) and (k) would otherwise apply by its terms, then each
applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall have a joint and several obligation to contribute to the
amount paid or payable by such indemnified party as a result of such
Losses, in such proportion as is appropriate to reflect the relative fault
of the indemnifying party, on the one hand, and such indemnified party, on
the other hand, in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one
hand, and indemnified party, on the other hand, shall be determined by
reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, has been taken by, or relates to
information supplied by, such indemnifying party or indemnified party, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent any such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be
deemed to include any legal or other fees or expenses incurred by such
party in connection with any Proceeding, to the extent such party would
have been indemnified for such expenses under Section 8.7(j) if the
indemnification provided for in Section 8.7(h) or 8.7(i) was available to
such party. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8.7(k) were determined
by pro rata allocation or by any other method of allocation that does not
take account of the equitable considerations referred to in this paragraph.
Notwithstanding the provision of this Section 8.7(k), an indemnifying party
that is a selling holder of Acquiror Common Stock shall not be required to
contribute any amount in excess of the amount by which the net proceeds
received by such indemnifying party exceeds the amount of any damages that
such indemnifying party has otherwise been required to
28
pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The provisions of Sections 8.7(h), (i), (j) and (k) shall be in addition to
any other rights to indemnification or contribution which an indemnified party
may have pursuant to law, contract or otherwise and shall remain in full force
and effect and shall survive the transfer of the Acquiror Common Stock.
8.8 LEGAL REQUIREMENTS. Each of Acquiror, Merger Sub and Target will, and
will cause their respective subsidiaries to, take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the consummation of the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to any party
hereto necessary in connection with any such requirements imposed upon such
other party in connection with the consummation of the transactions contemplated
by this Agreement and will take all reasonable actions necessary to obtain (and
will cooperate with the other parties hereto in obtaining) any consent,
approval, order or authorization of, or any registration, declaration or filing
with, any Governmental Entity or other person, required to be obtained or made
in connection with the taking of any action contemplated by this Agreement.
8.9 BLUE SKY LAWS. Acquiror shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Acquiror Common Stock in connection with the
Merger. Target shall use its best efforts to assist Acquiror as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Acquiror Common stock in
connection with the Merger.
8.10 INDEMNIFICATION.
(a) Shareholder's Indemnity. The Shareholder hereby indemnifies and
agrees to defend and hold Acquiror, Merger Sub and their respective
successors and assigns (the "Acquiror Indemnified Parties") harmless from
and against and agrees to pay or cause to be paid to the Acquiror
Indemnified Party all amounts equal to the sum of any and all claims,
demands, costs, expenses or other liabilities of any kind that the Acquiror
Indemnified Party may incur or suffer (including, without limitation, all
professional fees (including attorneys' fees, accountants, consultants and
engineering fees), remediation costs, fines, investigation, clean-up,
restoration or mitigating measures or other expenses), which arise or
result from any breach of or failure by the Shareholders or Target to
perform any of their respective representations, warranties, covenants or
agreements in this Agreement or in any schedule, certificate, exhibit, or
other instrument furnished or to be furnished by it under this Agreement.
Notwithstanding the foregoing, Acquiror and Merger Sub agree that the
personal liability hereunder of the Shareholder shall be limited to the
consideration received by the Shareholder as a result of the transactions
contemplated hereby. In the case of any reference to the Shareholder under
this indemnity, Shareholder shall be referred to at times as the
"Shareholder Indemnifying Party."
(b) Acquiror's Indemnity. Acquiror hereby agrees to defend and hold
the Shareholder (hereinafter referred to as a "Shareholder Indemnified
Party") harmless from and against and agrees to pay or cause to be paid to
the Shareholder Indemnified Parties all amounts equal to the sum of any and
all claims, demands, costs, expenses or other liabilities of any kind that
the Shareholder Indemnified Party may incur or suffer (including, without
limitation, all professional fees) which arise or result from any breach of
or failure by the Acquiror or Merger Sub to perform any of their
representations, warranties, covenants or agreements in this Agreement or
in any schedule, exhibit, or other instrument furnished or to be furnished
by it under this Agreement. In the case of any reference to Acquiror under
this indemnity, Acquiror shall be referred to at times as the "Acquiror
Indemnifying Party."
(c) Procedures; Limitation. In this Paragraph 10 of Article 8,
Acquiror Indemnified Parties and Shareholder Indemnified Parties shall be
referred to at times as the "Indemnified Parties" or "Indemnified Party,"
and the Shareholder Indemnifying Party and the Acquiror Indemnifying Party
shall be referred to at times herein as the "Indemnifying Parties" or
"Indemnifying Party," as the case may be. If a third party
29
shall notify an Indemnified Party with respect to any matter that may give
rise to a claim for indemnification under the indemnity set forth above in
Section 8.10(a), the procedure set forth below shall be followed.
(d) Indemnity Basket. Notwithstanding any other provision of this
Agreement to the contrary, neither of the Indemnifying Parties shall be
liable to any Indemnified Party with respect to any amount arising out any
provision of this Paragraph 10 of Article 8 ("8.10 Losses") unless and
until the aggregate of 8.10 Losses incurred by the Indemnified Party shall
exceed the sum of twenty-five thousand dollars ($25,000) (the "Indemnity
Basket"). In the event and to the extent that any such 8.10 Losses shall be
in excess of the Indemnity Basket, the Shareholder pursuant to 8.10(a) and
Acquiror pursuant to 8.10(b) shall thereafter be liable in full for all
8.10 Losses in excess of such Indemnity Basket.
(e) Notice. Indemnified Party shall give to the Indemnifying Party
written notice of any claim, suit, judgment or matter for which indemnity
may be sought under Sections 8.10(a) or (b), promptly but in any event
within twenty (20) business days after the Indemnified Party receives
notice thereof; provided, however, that failure by Indemnified Party to
give such notice shall not relieve Indemnifying Party from any liability it
shall otherwise have pursuant to this Agreement except to the extent
Indemnifying Party is actually prejudiced by such failure. Such notice
shall set forth in reasonable detail (i) the basis for such potential
claim, (ii) the Sections of the Agreement pursuant to which the claim is
made, and (iii) the dollar amount of such claim, and shall be given in
accordance with Article Eleven below. Indemnifying Party shall have a
period of twenty (20) business days within which to respond thereto. If
Indemnifying Party does not respond within such twenty (20) business day
period, Indemnifying Party shall be deemed to have accepted responsibility
for such indemnity. The indemnification period provided for in Section 11.1
shall be tolled solely with respect to a particular claim for the period
beginning on the date the Indemnifying Party receives written notice of
that claim until the final resolution of such claim so long as such claim
is made within the indemnification period set forth in Section 11.1. The
indemnification provided for herein shall apply to any claim made prior to
the end of the indemnification period set forth in Section 11.1.
(f) Defense of Claim. The Indemnifying Party shall have the right, at
its option, to be represented by counsel of its choice and to assume the
defense or otherwise control the handling of any claim, suit, judgment or
matter for which indemnity is sought, which is set forth in the notice sent
by the Indemnified Party, by notifying the Indemnified Party in writing to
such effect within twenty (20) business days of receipt of such notice. If
the Indemnified Party does not give timely notice in accordance with the
preceding sentence, the Indemnifying Party shall be deemed to have given
notice that it does not wish to control the handling of such claim, suit or
judgment. In the event the Indemnifying Party elects (by notice in writing
within such twenty (20) business day period) to assume the defense of or
otherwise control the handling of any such claim, suit, judgment or matter
for which indemnity is sought, subject to the limitations provided herein,
the Indemnifying Party shall indemnify and hold harmless the Indemnified
Party from and against any and all costs, demands, losses, liabilities,
obligations, claims, causes of action and expenses suffered,
notwithstanding the fact that the Indemnifying Party may not have been so
liable to the Indemnified Party had the Indemnifying Party not elected to
assume the defense of or to otherwise control the handling of such claim,
suit, judgment or other matter. In the event that the Indemnifying Party
does not assume the defense or otherwise control the handling of such
matter, the Indemnified Party may retain counsel, as an indemnification
expense, to defend such claim, suit, judgment or matter.
(g) Final Authority. The parties shall cooperate in the defense of any
such claim or litigation, and each shall make available all books and
records which are relevant in connection with such claim or litigation. The
Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to any matter which does not include a
provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the
written consent of the Indemnified Party.
(h) Claims Between Indemnifying Party and the Indemnified Party. Any
claim for indemnification under this Agreement which does not result from
the assertion of a claim by a third party shall be asserted by written
notice given by the Indemnified Party to the Indemnifying Party. The
Indemnifying
30
Party shall have a period of thirty (30) days within which to respond
thereto. If the Indemnifying Party does not respond within such thirty (30)
day period, the Indemnifying Party shall be deemed to have accepted
responsibility for such indemnity, and shall have no further right to
contest the validity of such claim. If the Indemnifying Party does respond
within such thirty (30) day period and rejects such claim in whole or in
part, the Indemnified Party shall submit the dispute to arbitration in
accordance with clause (i) below.
(i) Arbitration. Either party shall submit a dispute arising under the
indemnification provisions contained herein to a panel of three (3)
arbitrators chosen pursuant to the rules of the American Arbitration
Association. The parties hereto hereby submit and consent to the
jurisdiction of the American Arbitration Association for any dispute
arising pursuant to the indemnification provisions contained herein. Any
arbitration hereunder shall take place in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, such arbitration
to take place in New York City and the award rendered by the arbitrators
shall be final and binding and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
(j) Payment. Any and all amounts determined from time to time to be
paid hereunder (i) by the Shareholder by reason of his indemnity
obligations under Section 8.10(a) of this Agreement shall be paid to
Acquiror in cash, on demand; and (ii) by Acquiror by reason of its
indemnity obligations under Section 8.10 of this Agreement shall be paid to
the Shareholder in cash, on demand.
8.11 DIRECTOR NOMINEE. At the Effective Time, Acquiror shall take such
action as is necessary in order to enable one individual designated by Target to
be elected to Acquiror's Board of Directors (the "Designee"). Target has
selected as the Designee Xxxx Xxxxx. Immediately after the Effective Time,
Acquiror's Board of Directors shall consist of the following four directors:
Xxxxx Xxxxxx, Xxxx Xxxxx, Xxxxxx Xxxxx and Xxxxxxx Xxxxxxx.
8.12 EXECUTIVE MANAGEMENT COMMITTEE. At the Effective Time, Acquiror shall
establish an Executive Management Committee which shall include, but not be
limited to Xxxx Xxxxx and Xxxxx Xxxxxx. The Executive Management Committee shall
direct the business plans of Target.
8.13 BEST EFFORTS AND FURTHER ASSURANCES. Each of the parties to this
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement as promptly as practicable. Each party hereto, at the reasonable
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
ARTICLE 9
CONDITIONS TO THE MERGER
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this agreement to consummate and effect
this Agreement and the transactions contemplated hereby 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, by agreement of all the
parties hereto.
(a) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger, nor any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the
foregoing, shall be pending; nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger
illegal. In the event an injunction or other order shall have been issued,
each party agrees to use its reasonable diligent efforts to have such
injunction or other order lifted.
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(b) GOVERNMENTAL APPROVAL. Acquiror, Target and Merger Sub and their
respective subsidiaries shall have timely obtained from each Governmental
Entity all approvals, waivers and consents, if any, necessary for
consummation of or in connection with the Merger and the several
transactions contemplated hereby.
9.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET. The obligations of
Target to consummate and effect this Agreement and the transactions contemplated
hereby 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, by
Target:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) The representations
and warranties of Acquiror and Merger Sub in this Agreement shall be true
and correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality
which representations and warranties as so qualified shall be true in all
respects) on and as of the Effective Time as though such representations
and warranties were made on and as of such time and (ii) Acquiror and
Merger Sub shall have performed and complied in all material respects with
all covenants, obligations and conditions of this Agreement required to be
performed and complied with by them as of the Effective Time.
(b) CERTIFICATE OF ACQUIROR. Target shall have been provided with a
certificate executed on behalf of Acquiror by its Chairman and its Chief
Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by Acquiror and
Merger Sub under this Agreement are true and complete in all material
respects; and
(ii) all covenants, obligations and conditions of this Agreement
to be performed by Acquiror and Merger Sub on or before such date have
been so performed in all material respects.
(c) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or prospects of Acquiror and its
subsidiaries, taken as a whole.
(d) AFFILIATE AGREEMENTS. Target shall have received from each of the
Affiliates of Acquiror an executed Affiliate Agreement in substantially the
form attached hereto as Exhibit A-2.
(e) THIRD PARTY CONSENTS. Target shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons
whose consent or approval shall be required in connection with the Merger
under any material contract of Acquiror or any of its subsidiaries or
otherwise.
(f) INJUNCTIONS OR RESTRAINTS ON CONDUCT OF BUSINESS. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Acquiror's business following
the Merger shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other Governmental Entity, domestic
or foreign, seeking the foregoing be pending.
(g) OTHER CERTIFICATES. Target shall have received such other
certificates and documents (customary in similar transactions) relating to
the satisfaction of the conditions to the obligations of Target as Target
or its counsel reasonably request.
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9.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ACQUIROR AND MERGER SUB.
The obligations of Acquiror and Merger Sub to consummate and effect this
Agreement and the transactions contemplated hereby 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, by Acquiror:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) The representations
and warranties of Target and the Shareholder in this Agreement shall be
true and correct in all material respects (except for such representations
and warranties that are qualified by their terms by a reference to
materiality, which representations and warranties as so qualified shall be
true in all respects) on and as of the Effective Time as though such
representations and warranties were made on and as of such time and (ii)
Target shall have performed and complied in all material respects with all
covenants, obligations and conditions of this Agreement required to be
performed and complied with by it as of the Effective Time.
(b) CERTIFICATE OF TARGET. Acquiror shall have been provided with a
certificate executed on behalf of Target by its President and Chief
Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made by Target and the
Shareholders under this Agreement are true and complete in all
material respects; and
(ii) all covenants, obligations and conditions of this Agreement
to be performed by Target on or before such date have been so
performed in all material respects.
(c) THIRD PARTY CONSENTS. Acquiror shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons
whose consent or approval shall be required in connection with the Merger
under any material contract of Target or otherwise.
(d) INJUNCTIONS OR RESTRAINTS ON CONDUCT OF BUSINESS. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Acquiror's conduct or operation
of the business of Target, following the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or
other Governmental Entity, domestic or foreign, seeking the foregoing be
pending.
(e) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations or prospects of Target.
(f) AFFILIATE AGREEMENTS. Acquiror shall have received from each of
the Affiliates of Target, an executed Affiliate Agreement in substantially
the form attached hereto as Exhibit A-1.
(g) XXXXX EMPLOYMENT AGREEMENT. Acquiror and Xxxx Xxxxx shall have
entered into an employment agreement the terms of which shall have been
mutually acceptable to both parties.
(h) RESIGNATIONS. Acquiror shall have received letters of resignation,
effective as of the Effective Time, executed and tendered by each of the
then incumbent directors of Target.
(i) OTHER CERTIFICATES. Acquiror shall have received such other
certificates and documents (customary in similar transactions) relating to
the satisfaction of the conditions to the obligations of Acquiror and
Merger Sub as Acquiror or its counsel reasonably request, including without
limitation, agreements of holders of Target Common Stock whereby such
holders waive the applicability of any registration rights in respect of
Acquiror Common Stock to be received in the Merger.
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ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
10.1 TERMINATION. At any time prior to the Effective Time, whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of Target and Acquiror, this Agreement may be terminated:
(a) by mutual consent of Acquiror and Target;
(b) by either Acquiror or Target, if, without fault of the terminating
party, the Closing shall not have occurred on or before December 31, 1997
(or such later date as may be agreed upon in writing by the parties
hereto);
(c) by Acquiror, if Target or the Shareholder shall breach any of its
or his respective representations, warranties or obligations hereunder in
any material respect (except for such representations, warranties and
obligations that are qualified by their terms by a reference to
materiality, which representations, warranties and obligations as so
qualified shall not be breached in any respect) and such breach shall not
have been cured within ten business days of receipt by Target of written
notice of such breach.
(d) by Target, if (i) Acquiror shall breach any of its
representations, warranties or obligations hereunder in any material
respect (except for such representations, warranties and obligations that
are qualified by their terms by a reference to materiality, which
representations, warranties and obligations as so qualified shall not be
breached in any respect) and such breach shall not have been cured within
ten days following receipt by Acquiror of written notice of such breach.
(e) by either Acquiror or Target if (i) any permanent injunction or
other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable.
10.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 10.1, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of Acquiror, Merger Sub or
Target or their respective officers, directors, stockholders or affiliates,
except to the extent that such termination results from the breach by a party
hereto of any of its representations, warranties or covenants set forth in this
Agreement; provided that, the provisions of, Section 10.3 (Expenses and
Termination Fees) and this Section 10.2 shall remain in full force and effect
and survive any termination of this Agreement.
10.3 EXPENSES AND TERMINATION FEES.
(a) Subject to subsections (b) and (c) of this Section 10.3, whether
or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel) shall be paid by the party incurring such
expense provided, however, that if the Closing occurs Acquiror will assume
all costs and expenses of Target incurred in connection with this Agreement
and the transactions contemplated hereby (including without limitation, the
fees and expenses of its advisers, accountants and legal counsel).
(b) In the event that (i) Acquiror shall terminate this Agreement
pursuant to Section 10.1(c) Target shall promptly reimburse Acquiror for
all of the out-of-pocket costs and expenses incurred by Acquiror in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisors,
accountants and legal counsel.)
34
(c) In the event that Target shall terminate this Agreement pursuant
to Section 10.1(d), Acquiror shall promptly reimburse Target for all of the
out-of-pocket costs and expenses incurred by Target in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel).
10.4 AMENDMENT. The respective Boards of Directors of the parties hereto
may cause this Agreement to be amended at any time by execution of an instrument
in writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the stockholders of
Target or Merger Sub shall not (i) alter or change the amount or kind of
consideration to be received on conversion of the Target Common Stock, (ii)
alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (iii) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of Target Common Stock or Merger Sub Common Stock.
10.5 EXTENSION; WAIVER. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 11
GENERAL PROVISIONS
11.1 EFFECT OF CLOSING. All representations, warranties, covenants, and
agreements of the parties contained in this Agreement, or in any instrument,
certificate, opinion, or other writing provided for in it, shall survive Closing
for a period of 3 years except for items covered in Section 5.14 (and 8.10 with
respect thereto) which shall survive until the expiration of the applicable
statute of limitations period, and except for Sections 5.2(d) and 5.3 (and
8.10(a) with respect thereto) and 6.3 (and 8.10(b) with respect thereto), which
shall survive without limitation.
11.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
35
(a) if to Acquiror or Merger Sub, to:
American Interactive Media, Inc.
000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx Hatch
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxx-Xxxxxxx, Colt & Mosle
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
(b) if to Target, to:
WebFeat, Inc.
000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile No.: (000) 000-0000
11.3 INTERPRETATION. When a reference is made in this Agreement to Exhibits
or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
date of this Agreement", "the date hereof", and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to September 26, 1997.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
11.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
11.5 ENTIRE AGREEMENT; NONASSIGNABILITY; PARTIES IN INTEREST. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Target Disclosure Schedule and the Acquiror Disclosure Schedule (a) constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, and shall survive
any termination of this Agreement or
36
the Closing, in accordance with its terms; (b) are not intended to confer upon
any other person any rights or remedies hereunder; and (c) shall not be assigned
by operation of law or otherwise except as otherwise specifically provided.
11.6 SEVERABILITY. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
11.7 REMEDIES CUMULATIVE; NO WAIVER. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy. 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 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.
11.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (without regard to the
principles of conflicts of law thereof).
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11.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, and the Shareholder has duly executed and delivered this
Agreement, all as of the date first written above.
AMERICAN INTERACTIVE MEDIA, INC.
By: ________________________________
Name:
Title:
AIM MERGER CORP.
By: ________________________________
Name:
Title:
WEBFEAT INC.
By: ________________________________
Name:
Title:
XXXX XXXXX
____________________________________
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IN WITNESS WHEREOF, the undersigned join as parties to this Agreement for
the sole purpose of making the representations and warranties in Section 5.28
above.
Dated: September 26, 1997
XXXXXXX X. XXXXXXX
____________________________________
XXXXXXX XXXXX XXXXXX
____________________________________
XXXXXX X. XXXXX
____________________________________
XXXXXX X. XXXXX
____________________________________
XXXXXXX XXXXXX
____________________________________
XXXXX X. XXXXXXX
____________________________________
XXXXXXXXX X. XXXXXXXXX
____________________________________
XXXXXX X. XXXXXXXXX
____________________________________
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