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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
by and among
eRESOURCE CAPITAL GROUP, INC.,
LOGISOFT ACQUISITION CORPORATION,
EACH OF THE
STOCKHOLDERS
LISTED ON EXHIBIT A
and
LOGISOFT COMPUTER PRODUCTS, CORP.
(TO BECOME A PARTY BY JOINDER)
DATED AS OF JUNE ___, 2001
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TABLE OF CONTENTS
ARTICLE I. DEFINITIONS............................................................................................2
1.1 DEFINITIONS.....................................................................................2
1.2 OTHER DEFINITIONS...............................................................................5
ARTICLE II. THE MERGER............................................................................................6
2.1 THE MERGER......................................................................................6
2.2 CLOSING.........................................................................................7
2.3 EFFECTIVE TIME..................................................................................7
2.4 CERTIFICATE OF INCORPORATION....................................................................7
2.5 BYLAWS..........................................................................................7
2.6 DIRECTORS.......................................................................................7
2.7 OFFICERS........................................................................................7
2.8 EFFECT ON COMPANY COMMON STOCK..................................................................7
2.9 EFFECT ON CAPITAL STOCK OF MERGER SUB...........................................................8
2.10 SURRENDER OF SHARES; PAYMENT OF MERGER CONSIDERATION............................................9
ARTICLE III. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY................................................10
3.1 ORGANIZATION AND QUALIFICATION.................................................................10
3.2 AUTHORIZATION..................................................................................10
3.3 NO VIOLATION...................................................................................11
3.4 CAPITALIZATION.................................................................................11
3.5 SUBSIDIARIES...................................................................................12
3.6 CONSENTS AND APPROVALS.........................................................................12
3.7 FINANCIAL STATEMENTS...........................................................................12
3.8 ABSENCE OF UNDISCLOSED LIABILITIES.............................................................13
3.9 ABSENCE OF CERTAIN CHANGES.....................................................................13
3.10 LITIGATION.....................................................................................14
3.11 PROPERTY; LIENS AND ENCUMBRANCES...............................................................14
3.12 CERTAIN AGREEMENTS.............................................................................14
3.13 EMPLOYEE BENEFIT PLANS.........................................................................15
3.14 TAXES..........................................................................................17
3.15 COMPLIANCE WITH APPLICABLE LAW; PERMITS; POLICIES..............................................20
3.16 CONSUMMATION OF SPLIT-OFF......................................................................21
3.17 PROPRIETARY RIGHTS.............................................................................21
3.18 INSURANCE......................................................................................21
3.19 ENVIRONMENTAL MATTERS..........................................................................21
3.20 ALL NECESSARY ASSETS...........................................................................22
3.21 CLAIMS FOR INDEMNIFICATION.....................................................................22
3.22 LABOR MATTERS..................................................................................22
3.23 AFFILIATE TRANSACTIONS.........................................................................23
3.24 BONUSES........................................................................................23
3.25 BROKERS' FEES AND COMMISSIONS..................................................................23
3.26 TAKEOVER STATUTES..............................................................................23
3.27 OTHER INFORMATION..............................................................................24
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ARTICLE IV. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS............................................24
4.1 AUTHORIZATION..................................................................................24
4.2 NO VIOLATION...................................................................................24
4.3 CONSENTS AND APPROVALS.........................................................................25
4.4 BROKERS........................................................................................25
4.5 OWNERSHIP OF COMPANY COMMON STOCK..............................................................25
4.6 INVESTMENT REPRESENTATIONS.....................................................................25
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT..............................................................27
5.1 ORGANIZATION, QUALIFICATIONS AND OPERATIONS....................................................27
5.2 AUTHORIZATION..................................................................................28
5.3 NO VIOLATION...................................................................................28
5.4 CONSENTS AND APPROVALS.........................................................................28
5.5 BROKERS........................................................................................28
5.6 PARENT DISCLOSURE MATERIALS....................................................................28
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS...........................................................29
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF MERGER SUB.........................................................29
6.1 ORGANIZATION, QUALIFICATIONS AND OPERATIONS....................................................29
6.2 CAPITAL STRUCTURE..............................................................................29
6.3 AUTHORIZATION..................................................................................29
6.4 NO VIOLATION...................................................................................30
6.5 CONSENTS AND APPROVALS.........................................................................30
6.6 BROKERS........................................................................................30
6.7 NO PRIOR ACTIVITIES............................................................................30
ARTICLE VII. ADDITIONAL AGREEMENTS...............................................................................30
7.1 VOTING OF SHARES; EXECUTION OF JOINDER.........................................................30
7.2 COMPANY STOCKHOLDER APPROVAL...................................................................31
7.3 ACCESS TO INFORMATION; CONFIDENTIALITY.........................................................31
7.4 PUBLIC ANNOUNCEMENTS...........................................................................32
7.5 TAXES..........................................................................................32
7.6 CONSENTS, APPROVALS AND FILINGS................................................................35
7.7 THIRD PARTY PROPOSALS..........................................................................35
7.8 STOCK OPTIONS..................................................................................36
7.9 POST-SIGNING FINANCIAL INFORMATION.............................................................36
7.10 REGISTRATION STATEMENT; RESALES OF PARENT COMMON STOCK.........................................36
7.11 COMPANY FINANCIAL INFORMATION..................................................................38
7.12 TAKEOVER STATUTES..............................................................................39
7.13 NOTICE, EFFORTS TO REMEDY......................................................................39
7.14 PREPARATION AND DELIVERY OF PRE-CLOSING BALANCE SHEET..........................................39
7.15 EMPLOYEE BENEFITS PLANS........................................................................39
ARTICLE VIII. COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER..........................................40
8.1 CONDUCT OF BUSINESSES OF THE COMPANY...........................................................40
8.2 OTHER ACTIONS..................................................................................42
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ARTICLE IX. CONDITIONS PRECEDENT.................................................................................42
9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.....................................42
ARTICLE X. TERMINATION, AMENDMENT AND WAIVER.....................................................................43
10.1 TERMINATION....................................................................................43
10.2 EFFECT OF TERMINATION..........................................................................43
10.3 AMENDMENT......................................................................................44
10.4 EXTENSION; CONSENT; WAIVER.....................................................................44
10.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION, CONSENT OR WAIVER.............................44
ARTICLE XI. INDEMNIFICATION......................................................................................44
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS..........................................44
11.2 OBLIGATIONS OF STOCKHOLDERS....................................................................44
11.3 OBLIGATIONS OF PARENT..........................................................................45
11.4 NOTICE OF CLAIMS...............................................................................46
11.5 SURVIVAL OF INDEMNITY..........................................................................46
11.6 LIMITATIONS....................................................................................46
11.7 SUBROGATION....................................................................................47
11.8 ADJUSTMENTS TO INDEMNIFICATION OBLIGATIONS.....................................................47
11.9 TRIGGERING CONDITIONS FOR ADDITIONAL INDEMNIFICATION...........................................47
11.10 REMEDIES.......................................................................................48
ARTICLE XII. NOTICES.............................................................................................49
12.1 NOTICES........................................................................................49
ARTICLE XIII. MISCELLANEOUS......................................................................................50
13.1 ENTIRE AGREEMENT...............................................................................50
13.2 EXPENSES.......................................................................................50
13.3 COUNTERPARTS/FACSIMILE SIGNATURES..............................................................50
13.4 NO THIRD PARTY BENEFICIARY.....................................................................50
13.5 GOVERNING LAW..................................................................................50
13.6 ASSIGNMENT; BINDING EFFECT.....................................................................50
13.7 HEADINGS, GENDER, ETC..........................................................................51
13.8 INVALID PROVISIONS.............................................................................51
13.9 NO RECOURSE AGAINST OTHERS.....................................................................51
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into as of May ___, 2001, by and among eResource Capital Group, Inc., a
Delaware corporation ("PARENT"), Logisoft Acquisition Corporation, a New York
corporation and wholly-owned subsidiary of Parent ("MERGER SUB"), and each of
the persons listed on EXHIBIT A attached hereto (the foregoing referred to
herein collectively as the "STOCKHOLDERS"). In addition, if the Split-Off (as
described below) is consummated, the Stockholders will cause Logisoft Computer
Products, Corp., a New York corporation (the "COMPANY") to execute a joinder in
the form of EXHIBIT B hereto (the "JOINDER"), pursuant to which the Company will
become a party to this Agreement and will comply with the terms and conditions
set forth herein.
RECITALS
WHEREAS, Parent owns all the issued and outstanding common stock, par
value $0.01 per share, of Merger Sub;
WHEREAS, Logisoft Corp. ("LOGISOFT") currently owns all the issued and
outstanding common stock, no par value, of each of the Company (the "COMPANY
COMMON STOCK") and xXxxxxxxxxxx.xxx Corp., a New York Corporation
("eSTOREFRONTS");
WHEREAS, the Stockholders have indicated that Logisoft intends to
complete a restructuring transaction pursuant to which eStorefronts will become
a wholly-owned subsidiary of the Company and all of the Company Common Stock
will be distributed to the Stockholders (the "SPLIT-OFF");
WHEREAS, if the Split-Off occurs, the Stockholders would become the
owners of one hundred percent (100%) of the issued and outstanding Company
Common Stock;
WHEREAS, if the Split-Off occurs, the Stockholders desire for Parent to
acquire the Company via a merger of Merger Sub with and into the Company (the
"MERGER"), with the Company as the Surviving Corporation (as defined herein) in
the Merger in accordance with the terms and conditions of this Agreement and the
plan of merger attached hereto as EXHIBIT C (the "PLAN OF MERGER");
WHEREAS, in furtherance of the transactions contemplated by this
Agreement, if the Split-Off occurs, the Stockholders will take all action
necessary to cause the Company to execute the Joinder and become a party to this
Agreement;
WHEREAS, as a result of the Merger, the Company, as the Surviving
Corporation, would become a direct wholly owned subsidiary of Parent, and the
separate corporate existence of Merger Sub would cease;
WHEREAS, as a result of the Merger, the Stockholders would receive
shares of common stock, par value $.04 per share, of Parent (the "PARENT COMMON
STOCK") in exchange for the shares of Company Common Stock held by them;
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WHEREAS, the issuance of Parent Common Stock to the Stockholders will
be made in reliance on an exemption from registration under federal and state
securities laws;
WHEREAS, the parties hereto intend that the Merger qualify as a
tax-free reorganization within the meaning of Section 368(a) of the Code (as
hereinafter defined);
WHEREAS, the boards of directors of Parent and Merger Sub believe the
Merger is in the best interests of their respective stockholders; and
WHEREAS, the Stockholders believe, and the Company's execution of the
Joinder will evidence the belief of the board of directors of the Company (the
"Company Board"), that the Merger is fair to and in the best interests of the
Stockholders;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS.
"ACQUISITION PROPOSAL" means any proposal or offer, other than
a proposal or offer by (i) Parent or any of its Affiliates or (ii) by any
Affiliate of the Company, for (a) any merger, consolidation, share exchange,
business combination or other similar transaction with the Company or any
Subsidiary, (b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 10% or more of the assets or liabilities of the Company or the
Subsidiary, in a single transaction or series of transactions (whether related
or unrelated), (c) any tender offer or exchange offer for 20% or more of the
then-outstanding shares of any class of the Company's Common Stock or any class
of the Company's debt securities or the filing of a registration statement under
the Securities Act of 1933, as amended in connection therewith, (d) the
acquisition by any third party of beneficial ownership or a right to acquire
beneficial ownership of, or the formation of any "group" (as defined under
Section 13(d)(3) of the Exchange Act) which beneficially owns or has the right
to acquire beneficial ownership of 20% or more of the then-outstanding shares of
any class of the Company's Common Stock or any class of the Company's debt
securities or (e) any public announcement of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
"AFFILIATE" means, as to a specified Person, any other Person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the specified Person.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
other day on which banking institutions in the city of New York, New York are
authorized or required by law or executive order to be closed.
"BYLAWS" means, with respect to a Person other than a natural
person, the bylaws or other comparable document adopted by such Person, under
the laws of the jurisdiction in
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which such Person is organized, to govern the operation of such Person with
respect to matters not specifically addressed in such Person's Certificate of
Incorporation, as such documents may be amended from time to time.
"CERTIFICATE OF INCORPORATION" means, with respect to a Person
other than a natural person, the certificate or articles of incorporation or
other comparable document required to establish the existence, and to evidence
the continued existence, of such Person under the laws of the jurisdiction in
which such Person is organized, as such documents may be amended from time to
time.
"CODE" means the Internal Revenue Code of 1986, as amended
(including any successor code), and the rules and regulations promulgated
thereunder.
"COMPANY DISCLOSURE SCHEDULE" means the Company Disclosure
Schedule delivered simultaneously herewith.
"COMPANY MATERIAL ADVERSE EFFECT" means a materially adverse
effect on the business, prospects, results of operations or financial condition
of the Company and the Subsidiary, taken as a whole.
"EMPLOYEES" means those current and former employees of the
Company and the Subsidiaries, in each case as listed on SECTION 1.1 of the
Company Disclosure Schedule, and any other employees of the Company or the
Subsidiary performing services primarily for the Company or the Subsidiary who
are hired between the date hereof and the Closing Date.
"ENVIRONMENTAL LAWS" means all applicable federal, state,
provincial or local laws (including, but not limited to, federal and state
common law), statutes, codes, rules or regulations relating to the environment,
natural resources, and pollution including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., as
amended from time to time (HMTA), the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., as amended from time to time (RCRA), the Federal
Water Pollution Control Act, 33 U.S.C. Section 1251 et seq., as amended from
time to time (FWPCA), the Clean Air Act, 42 U.S.C. Section 7401 et seq., as
amended from time to time (CAA), and/or the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq., as amended from time to time (TSCA).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FINAL ORDER" means an order or judgment the operation or
effect of which is not stayed, and as to which order or judgment (or any
revision, modification or amendment thereof), the time to appeal or seek review
or rehearing has expired and as to which no appeal or petition for review or
rehearing has been taken and is pending.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory, self-regulatory or administrative
functions of or pertaining to government.
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"HAZARDOUS MATERIALS" means (i) any wastes, substances, or
materials which are defined as "hazardous material," "hazardous waste,"
"hazardous substance," "toxic material" or other similar designations in, or
otherwise subject to regulation under, any applicable Environmental Laws; (ii)
petroleum or petroleum byproducts; (iii) friable asbestos and/or any material
which contains friable asbestos; and (iv) electrical equipment containing
polychlorinated biphenyls (PCBs) in excess of 50 parts per million.
"MANAGEMENT STOCKHOLDERS" means Xxxxxx Xxxx, Xxxxxxx Xxxx,
Xxxxxx Xxxxxxx and Xxxxx Xxx.
"MERGER CONSIDERATION" means 6,000,000 shares of Parent Common
Stock, subject to adjustment as set forth in Section 2.8(c) and 2.10(d).
"PARENT DISCLOSURE SCHEDULE" means the Parent Disclosure
Schedule delivered simultaneously herewith.
"PARENT DISCLOSURE MATERIALS" shall mean the following
materials provided by Parent to each of the Stockholders: (i) Parent's Annual
Report on Form 10-K for each of the years 1999 and 2000; (ii) Parent's current
reports on Form 8-K and amended reports on Form 8-K/A, as applicable, filed with
the SEC on April 26, 2001, April 18, 2001, March 28, 2001, February 28, 2001 and
November 13, 2000, March 15, 2000, February 17, 2000, January 28, 2000, and July
15, 1999, (iii) eResource Capital Group Confidential Private Placement
Memorandum, and (iv) Parent's proxy statements for its 1999 and 2000 annual
meetings of stockholders, and (v) Parent's quarterly reports on Form 10-Q filed
with the SEC on November 13, 2000 and February 14, 2001.
"PER SHARE MERGER CONSIDERATION" means the amount calculated
by dividing the Merger Consideration by the number of shares of Company Common
Stock issued and outstanding on the Closing Date.
"PERSON" means an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or, as applicable, any other entity.
"PRE-CLOSING BALANCE SHEET" means an un-audited internally
prepared consolidated balance sheet for the Company and its Subsidiaries to be
dated not more than one week prior to the Closing Date and delivered to Parent
one day prior to the Closing Date pursuant to Section 7.14.
"PRE-CLOSING TAX PERIOD" means any Tax period ending on or
before the Closing Date and any portion of a Straddle Period ending on or before
the Closing Date.
"RELEASE" means any emission, spill, seepage, leak, escape,
leaching, discharge, injection, pumping, pouring, emptying, dumping, disposal,
release, or threatened release of Hazardous Materials into the environment.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"STOCKHOLDER PERCENTAGE" shall mean, with respect to any
Stockholder, the percentage of the Merger Consideration allocable to such
Stockholder, as set forth opposite such Stockholder's name on EXHIBIT D hereto.
"STOCKHOLDERS' REPRESENTATIVE" means Xxxxxx Xxxx or his
designee.
"STRADDLE PERIOD" means any Tax period beginning before and
ending after the Closing Date.
"SUBSIDIARY" means, as to the Company, any Person of which at
least a majority of the outstanding shares or other equity interests having
ordinary voting power for the election of directors or comparable managers of
such Person is owned, directly or indirectly, by the Company.
"TAX RETURNS" means any report, return, declaration, claim for
refund, information report or filing, or any other return or statement required
to be supplied to a taxing authority in connection with Taxes, including any
schedule or attachment thereto or amendment thereof.
"TAXES" means any and all federal, state, provincial, local,
foreign and other taxes, levies, fees, imposts, duties, and similar governmental
charges (including any interest, fines, assessments, penalties or additions to
tax imposed in connection therewith or with respect thereto) including, without
limitation, income, franchise, profits or gross receipts, ad valorem, value
added, capital gains, sales, goods and services, use, real or personal property,
capital stock, license, branch, payroll, estimated, withholding, employment,
social security (or similar), unemployment, compensation, utility, severance,
production, excise, stamp, occupation, premium, windfall profits, transfer, and
gains taxes, and customs duties.
"WARN" means the Worker Adjustment and Retraining Notification
Act of 1988 and any similar state, local or layoff statute.
1.2 OTHER DEFINITIONS. When used in this Agreement, the following terms
shall have the meanings ascribed to them in the Sections noted below:
TERM DEFINED IN
---- ----------
Agreement Preamble
Benefit Plans Section 3.13(a)
Closing Section 2.2
Closing Date Section 2.2
Company Preamble
Company Board Section 3.2
Company Common Stock Recitals
Company Financial Statements Section 3.7
Company Stockholder Approval Section 7.2
Company Stockholder Meeting Section 7.2
Company Stockholders Section 7.1
Dissenting Shares Section 2.8(c)
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Effective Time Section 2.3
ERISA Section 3.13(a)
ERISA Affiliate Section 3.13(f)
GAAP Section 3.7(c)
Indemnified Parties Section 11.4
Intellectual Property Section 3.17
Leased Properties Section 3.11(b)
Liens Section 3.11(b)
Litigation Section 3.10
Losses Section 11.2
Material Breach Section 10.1(b)(iii)
Material Contract Section 3.12(b)
Merger Consideration Section 2.8
Merger Sub Approvals Section 6.5
Multiemployer Plan Section 3.13(a)
NYBCL Section 2.1
New York Department of State Section 2.3
New York Secretary of State Section 2.3
Owned Properties Section 3.11(b)
Parent Preamble
Parent Approvals Section 5.4
Parent Material Adverse Effect Section 5.1
PBGC Section 3.13(f)
Plan of Merger Recitals
Required Permits Section 3.15(b)
Securities Laws Section 7.11
Surviving Corporation Section 2.1
Takeover Statutes Section 3.26
Tax Attributes Section 3.14(r)
Tax Contest Section 7.5(c)(iii)
Tax Losses Section 11.2
Tax Referee Section 7.5(c)(vi)
Transaction Bonus Section 3.23
ARTICLE II.
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 2.3), Merger Sub shall
merge with and into the Company in accordance with the New York Business
Corporation Law (the "NYBCL"). Also at the Effective Time, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as
the surviving corporation in the Merger (the "SURVIVING CORPORATION") in
accordance with the NYBCL and with all the rights, privileges, properties,
franchises, immunities and powers, and subject to all the duties and
liabilities, of a corporation organized under the NYBCL. The Merger shall have
the effects set forth in the NYBCL (including, without limitation, Section 906
of the NYBCL).
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2.2 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
10.1, and subject to the satisfaction or waiver of the conditions set forth in
Article IX, the closing of the Merger (the "CLOSING") will take place at 10:00
a.m., local time, on the second business day following the date on which the
last to be fulfilled or waived of the conditions set forth in Article IX shall
be fulfilled or waived in accordance with this Agreement, unless another date,
time or place is agreed to by the parties hereto (the "CLOSING DATE"), at the
offices of Parent, 0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000.
2.3 EFFECTIVE TIME. The parties hereto shall file with the Department
of State of the State of New York (the "NEW YORK DEPARTMENT OF STATE") on the
Closing Date (or on such other date as the parties may agree) articles and a
certificate of merger or other appropriate documents, executed in accordance
with the relevant provisions of the NYBCL, and make all other filings or
recordings required under the NYBCL in connection with the Merger. The Merger
shall become effective upon the filing of the articles of merger with the New
York Department of State, or at such later time specified in such articles of
merger (the "EFFECTIVE TIME").
2.4 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
the Company in effect immediately prior to the Effective Time shall, from and
after the Effective Time, be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended in accordance with their terms and as
provided by the NYBCL.
2.5 BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall, from and after the Effective Time, be the bylaws of the
Surviving Corporation after the Effective Time until thereafter amended in
accordance with their terms and as provided by the NYBCL.
2.6 DIRECTORS. The directors of Merger Sub immediately prior to the
Effective Time shall, from and after the Effective Time, be the directors of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws, as in effect following the Effective Time.
2.7 OFFICERS. The officers of Merger Sub immediately prior to the
Effective Time shall, from and after the Effective Time, be the officers of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws, as in effect following the Effective Time.
2.8 EFFECT ON COMPANY COMMON STOCK.
(a) OUTSTANDING COMPANY COMMON STOCK. Each share of Company
Common Stock issued (and not cancelled or retired) immediately prior to the
Effective Time (other than the Dissenting Shares or shares of Company Common
Stock cancelled in accordance with Section 2.8(b) below) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive from Parent the Per Share Merger Consideration. The
aggregate amount of the Merger Consideration to which a Stockholder shall be
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entitled will be that number of shares of Parent Common Stock determined by
multiplying the Merger Consideration by the relevant Stockholder's Stockholder
Percentage. The Merger Consideration shall be issued to the Stockholders without
registration under the Securities Act, as amended, or any state securities laws,
in reliance on exemptions from registration for transactions not involving a
public offering or, in the case of certain state securities laws, in reliance on
other exemptions. Company and each Stockholder shall cooperate with Parent in
complying with such exemptions. Holders of certain of the Shares of Parent
Common Stock to be issued as the Merger Consideration shall be entitled to
registration rights, as set forth in Section 7.10 below. No certificates or
scrip representing fractional shares of Parent Common Stock shall be issued upon
the surrender for exchange of certificates representing Company Common Stock,
and the owner of any such fractional share interest shall not be entitled to
vote or to any other rights of a holder of Parent Common Stock. Fractional
shares to which the Company or the former stockholders of the Company would
otherwise be entitled to will be disregarded.
(b) TREASURY SHARES. Each share of Company Common Stock that
is held as a treasury share by the Company at the Effective Time (collectively,
the "TREASURY SHARES"), shall, by virtue of the Merger and without any action on
the part of the Company or Parent, be cancelled and retired and cease to exist,
without any conversion thereof.
(c) DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, each share of Company Common Stock that is issued and
outstanding immediately prior to the Effective Time and that is held by a
stockholder who has properly exercised and perfected appraisal rights under the
provisions of the NYBCL (collectively, "DISSENTING SHARES"), shall not be
converted into or exchangeable for the right to receive the Merger
Consideration, but shall instead entitle the holder thereof to receive payment
therefor as shall be determined pursuant to the provisions of the NYBCL;
PROVIDED, HOWEVER, that if such holder shall have failed to perfect or shall
have effectively withdrawn or lost his, her or its right to appraisal and
payment under the NYBCL, each share of Company Common Stock of such holder shall
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Time, the right to receive the Per Share Merger
Consideration in respect to each such share in accordance with Section 2.8(a),
and such shares shall no longer be Dissenting Shares. The Company shall give
Parent (i) prompt notice of any written objection or election to dissent
received by the Company pursuant to Sections 623 and 910 of the NYBCL, and (ii)
the opportunity to direct all negotiations and proceedings with respect to any
such objections. The Company shall not, without the prior written consent of
Parent, voluntarily make any payment with respect to, or settle, offer to settle
or otherwise negotiate, any such objections.
(d) IMPACT OF STOCK SPLITS, ETC. In the event of any change in
Parent Common Stock between the date of this Agreement and the Effective Time by
reason of any stock split, stock dividend, subdivision, reclassification,
recapitalization, combination, exchange of shares or the like, the aggregate
Merger Consideration, as provided in this Agreement, shall be appropriately
adjusted to take into account such change in Parent Common Stock.
2.9 EFFECT ON CAPITAL STOCK OF MERGER SUB. Each share of common stock,
no par value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by
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virtue of the Merger and without any action on the part of the holder thereof,
be converted into one share of common stock, no par value, of the Surviving
Corporation, and such shares shall, collectively, represent all of the issued
and outstanding capital stock of the Surviving Corporation, following the
Effective Time.
2.10 SURRENDER OF SHARES; PAYMENT OF MERGER CONSIDERATION.
(a) At the Closing, each Stockholder shall surrender to Parent
a certificate or certificates representing the issued and outstanding shares of
Company Common Stock held by such Stockholder duly endorsed to Parent in blank
or together with separate stock transfer powers duly endorsed by such
Stockholder for surrender of such shares of Company Common Stock to Parent
pursuant to the Merger and having the signature of such Stockholder on such
stock transfer power guaranteed by a national bank or member firm of a
registered national securities exchange or with such other guarantee as may be
required by Parent's transfer agent.
(b) At the Closing, and upon surrender of one or more
ertificates representing Company Common Stock in accordance with Section
2.10(a), Parent shall deliver to the relevant Stockholder a certificate
evidencing such Stockholders' Stockholder Percentage. Each certificate delivered
by Parent in accordance with this Section 2.10(b) shall bear the legend set
forth in Section 7.10.
(c) The Merger Consideration paid upon the surrender for
exchange of certificates representing shares of Company Common Stock (other than
Dissenting Shares or Treasury Shares) in accordance with the terms of this
Article II shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock theretofore represented by such
certificates.
(d) Notwithstanding anything in this Article II to the
contrary, the issuance and delivery by Parent to X. Xxxx of Two Hundred
Thirty-Eight Thousand (238,000) shares of Parent Common Stock, to X. Xxxx of One
Hundred Sixty Thousand (160,000) shares of Parent Common Stock, X. Xxx of Fifty
Thousand (50,000) shares of Parent Common Stock, to X. Xxxxxxx Fifty-Two
Thousand (52,000) shares of Parent Common Stock (an aggregate of Five Hundred
Thousand (500,000) shares of Parent Common Stock) that such Management
Stockholders otherwise would be entitled to receive pursuant to Section 2.8(a)
(the "CONTINGENT CONSIDERATION") shall be contingent upon the Company meeting or
exceeding total revenue and EBITDA milestones, as reported on a GAAP basis
applied consistently by Parent at specified milestone dates through June 30,
2002, all as further set forth in EXHIBIT E attached hereto. Provided the
Company meets the performance milestones, the Contingent Consideration shall be
issued in installments as set forth on EXHIBIT E attached hereto that correspond
with each performance milestone within thirty (30) days of Parent's receipt and
confirmation of financial statements and reasonable supporting documentation
from the Company (the "CONTINGENT PAYMENT DATE") associated with such
performance milestone. If the Company does not meet a specified performance
milestone, then Parent shall have no obligation to issue and deliver the
relevant portion of the Contingent Consideration payable to each such Management
Stockholder. If at any time or times prior to the payment of an installment of
Contingent Consideration, Parent shall (a) declare a dividend or make a
distribution with respect to Parent Common Stock in shares of Parent Common
Stock, (b) subdivide or reclassify the outstanding Parent Common
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Stock into a greater number of shares, or (c) combine or reclassify the
outstanding Parent Common Stock into a smaller number of shares, then the number
of shares set forth in EXHIBIT E shall be proportionately adjusted.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
The Company and each of the Stockholders, jointly and severally, hereby
represent and warrant to Parent and Merger Sub as follows (it being understood
that, with respect to the representations and warranties set forth in Sections
3.2 and 3.16 below, the Stockholders shall be deemed to make those
representations and warranties as of the time the Company executes the Joinder
in accordance with Section 7.1(b) below):
3.1 ORGANIZATION AND QUALIFICATION.
(a) The Company and each of the Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation (which as to each such company is set forth
opposite its name in SECTION 3.1(a) of the Company Disclosure Schedule), with
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is now being conducted. The
Company has delivered or made available to Parent a true and complete copy of
the Certificate of Incorporation and Bylaws (or similar organizational
documents) of the Company and each of the Subsidiaries.
(b) The Company and each of the Subsidiaries is qualified or
licensed to do business as a foreign corporation or extra-provincial corporation
and is in good standing in every jurisdiction where the nature of the business
conducted by it or the properties owned or leased by it requires qualification,
except where the failure to be so qualified, licensed or in good standing would
not reasonably be expected to have a Company Material Adverse Effect.
3.2 AUTHORIZATION. The Company has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the performance by the Company of its obligations hereunder and the
consummation by the Company of the transactions contemplated hereby, have been
duly authorized by the board of directors of the Company (the "COMPANY BOARD")
contingent upon closing of the Split-Off and no other corporate action on the
part of the Company, other than matters related to obtaining the Company
Stockholder Approval, is necessary to authorize the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject (a) to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and (b) as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
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3.3 NO VIOLATION. Except as set forth in SECTION 3.3 of the Company
Disclosure Schedule, none of the execution and delivery of this Agreement by the
Company, the performance by the Company of its obligations hereunder, nor the
consummation by the Company of the transactions contemplated hereby will (a)
violate, conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws (or similar organizational documents) of
the Company or any of the Subsidiaries, (b) violate or conflict with or result
in a violation or breach of, or constitute a default or give rise to any right
of termination or acceleration (with or without due notice or lapse of time or
both) or result in the acceleration of any payments under the terms, conditions
or provisions of any Material Contract (as defined in Section 3.12), (c) violate
any order, writ, judgment, injunction, decree, statute, rule or regulation of
any Governmental Authority applicable to the Company or any of the Subsidiaries
or any of their respective assets or (d) result in the creation of any liens,
pledges, claims, security interests, mortgages, assessments, easements, rights
of way, covenants, rights of first refusal, defects in title, encroachments
(collectively, "LIENS") upon any of the assets of the Company or the
Subsidiaries (other than any Liens created by Parent), except in the case of
clause (c) above, for those violations, conflicts, breaches and defaults which
would not be expected to have a Company Material Adverse Effect.
3.4 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
200 shares of common stock, no par value. As of the date hereof, 100 shares of
Company Common Stock are issued and outstanding. All of the issued and
outstanding shares of Company Common Stock have been validly issued, are fully
paid, and non-assessable (except to the extent provided in Section 630 of the
NYBCL) and were not issued in violation of any preemptive rights. All of the
issued and outstanding shares of Company Common Stock were issued in compliance
with all applicable state and federal securities laws and with disclosure of the
transactions contemplated by this Agreement. The transfer of shares of Company
Common Stock to the Stockholders in the Split-Off was made in compliance with
all applicable state and federal securities laws. All shares of Company Common
Stock and other capital stock of the Company will be held of record and
beneficially by the Stockholders immediately prior to the Effective Time.
SECTION 3.4(A) of the Company Disclosure Schedule sets forth a true and complete
description of the number of shares of Company Common Stock and other capital
stock of the Company issued and outstanding, along with the identity of the
owner thereof and the amount and nature of such ownership.
(b) Except as set forth in SECTION 3.4(b) of the Company
Disclosure Schedule or as contemplated by the Split-Off, there are no (i)
options, warrants, calls, subscriptions, conversion or other rights, agreements
or commitments obligating the Company to issue any additional shares of capital
stock or any other securities convertible into, exchangeable for or evidencing
the right to subscribe for any shares of capital stock of the Company, (ii)
agreements or commitments obligating the Company to repurchase, redeem or
otherwise acquire any shares of its capital stock, (iii) restrictions on
transfer of any shares of capital stock of the Company (other than pursuant to
this Agreement) or (iv) voting or similar stockholder agreements relating to any
shares of capital stock of the Company.
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(c) Except as set forth in SECTION 3.4(c) of the Company
Disclosure Schedule, the Company does not own, directly or indirectly, 5% or
more of the outstanding voting securities of, or otherwise possess, directly or
indirectly, the power to direct or cause the direction of the management or
policies, of any Person.
3.5 SUBSIDIARIES.
(a) SECTION 3.5(a) of the Company Disclosure Schedule sets
forth (i) the names of all Subsidiaries and their respective jurisdictions of
incorporation and (ii) the name and number of all authorized, issued and
outstanding shares of capital stock of each Subsidiary.
(b) All of the outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, are fully paid, and
non-assessable (except to the extent provided in Section 630 of the NYBCL), have
not been issued in violation of any preemptive rights, and are owned of record
and beneficially by the entities named in SECTION 3.5(a) of the Company
Disclosure Schedule, free and clear of any Liens except as set forth in SECTION
3.5(a) of the Company Disclosure Schedule.
(c) Except as set forth in SECTION 3.5(c) of the Company
Disclosure Schedule or as contemplated by the Split-Off, there are no (i)
options, warrants, calls, subscriptions, conversion or other rights, agreements
or commitments obligating any of the Subsidiaries to issue any additional shares
of capital stock of such Subsidiary or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of such
capital stock, (ii) agreements or commitments obligating any such Subsidiary to
repurchase, redeem or otherwise acquire any shares of its capital stock, (iii)
restrictions on the transfer of any shares of capital stock of any such
Subsidiary (other than pursuant to this Agreement or applicable laws or
regulations of any Governmental Authority) or (iv) voting or similar stockholder
agreements relating to any shares of capital stock of any such Subsidiary.
3.6 CONSENTS AND APPROVALS. Except as set forth in SECTION 3.6 of the
ompany Disclosure Schedule, no filing or registration with, no notice to and no
permit, authorization, consent or approval of any Governmental Authority or any
other Person is necessary for the consummation by the Company of the
transactions contemplated by this Agreement other than (a) the Company
Stockholder Approval and board approval, and (b) consent of any counterparty to
any agreement or contract that is not a Material Contract.
3.7 FINANCIAL STATEMENTS.
(a) The Company has previously delivered or made available to
Parent true and complete copies of the following (the "COMPANY FINANCIAL
STATEMENTS"):
(b) Audited financial statements for the Company for each of
the years ended December 31, 1999 and 2000; and
(i) Unaudited interim financial statements for
quarter ended March 31, 2001 (the "BALANCE SHEET").
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(c) The Company Financial Statements were, prepared from and
are in accordance with, the books and records of the Company and the
Subsidiaries. The Company Financial Statements were prepared in all material
respects in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP") and fairly present the combined financial position
and the combined results of operations and cash flows of the Company and the
Subsidiaries as of the times and for the periods referred to therein, except
that any such Company Financial Statements are subject to normal and recurring
year-end adjustments.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. There are no liabilities or
obligations of the Company or the Subsidiaries (including without limitation any
Liens) that are required to be reflected or reserved against on a balance sheet
prepared in accordance with GAAP other than (a) liabilities and obligations
reflected or reserved against in the most recent Company Financial Statements
for the quarter ended March 31, 2001 and not heretofore discharged, (b)
liabilities and obligations incurred since March 31, 2001 in the ordinary course
of business as the Logisoft Computer Products and eStorefronts businesses have
been conducted during the previous two years and that are not material (provided
that any liability in excess of $50,000 shall be deemed material for this
purpose), or (c) liabilities and obligations disclosed in SECTION 3.8 of the
Company Disclosure Schedule. It is expressly agreed that liabilities or
obligations assumed from Logisoft are not within the ordinary course of the
business of the Company.
3.9 ABSENCE OF CERTAIN CHANGES. Except as disclosed in SECTION 3.9 of
the Company Disclosure Schedule or as permitted or contemplated by this
Agreement, since December 31, 2000, neither the Company nor any Subsidiary has
(a) experienced any change, event or condition which, individually or in the
aggregate, has had or reasonably would be expected to have a Company Material
Adverse Effect, (b) conducted its business in any material respect other than in
the ordinary course, (c) incurred any indebtedness for borrowed money or issued
any debt securities or assumed, guaranteed or endorsed the obligations of any
other Person, (d) other than immaterial sales or dispositions of assets in the
ordinary course of business (i) sold, transferred or otherwise disposed of any
of its property or assets or (ii) mortgaged or encumbered any of its property or
assets, (e) suffered any material casualty losses not covered by insurance, (f)
repurchased any of its capital stock or any capital stock of any of the
Subsidiaries, (g) declared, set aside or paid any dividend or other distribution
in respect of its capital stock, (h) amended its Certificate of Incorporation or
Bylaws (or similar organizational documents) or merged with or into or
consolidated with any other Person, (i) split, combined or reclassified its
capital stock, (j) issued or sold (or agreed to issue or sell) any of its equity
securities or any options, warrants, conversion or other rights to purchase any
such securities or any securities convertible into or exchangeable for such
securities, or granted, or agreed to grant any such rights, (k) increased the
rates of compensation (including bonuses) payable or to become payable to any of
its officers, employees, agents, independent contractors or consultants other
than increases made in the ordinary course of business, (l) entered into any
new, or amended any existing, employment contracts, severance agreements or
consulting contracts or instituted or agreed to institute any increase in
benefits or altered its employment practices or the terms and conditions of
employment, (m) except as otherwise required by law, changed, in any material
respect its underwriting, actuarial or Tax accounting methods, principles or
practices, (n) entered into any joint ventures or partnerships of any kind, (o)
capital expenditures incurred to date have not, and through the Closing Date
will not, exceed the amount provided for in the budget
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previously delivered to Parent, or (p) entered into any contract or other
agreements to do any of the foregoing.
3.10 LITIGATION. Except as set forth in SECTION 3.10 of the Company
Disclosure Schedule, there are no actions, suits, arbitrations, investigations
or proceedings, including liabilities or obligations under Section 630 of the
NYBCL ("LITIGATION") pending or, to the knowledge of the Company, threatened
against the Company or any of its Affiliates before any Governmental Authority
or arbitrator involving the Company, any of the Subsidiaries, or any of their
respective assets. Except as set forth in SECTION 3.10 of the Company Disclosure
Schedule, neither the Company nor any Subsidiary is in default under any
judgment, decree, injunction or order of any Governmental Authority or
arbitrator outstanding against it.
3.11 PROPERTY; LIENS AND ENCUMBRANCES.
(a) SECTION 3.11(a) of the Company Disclosure Schedule
contains a complete and accurate list of all real property owned or leased by
either the Company or any Subsidiary as of the date hereof.
(b) Except as set forth in SECTION 3.11(b) of the Company
Disclosure Schedule or in the Company Financial Statements, all properties and
assets owned by either the Company or any Subsidiary (the "OWNED PROPERTIES") or
leased by either the Company or any Subsidiary (the "LEASED PROPERTIES") are
free and clear of all Liens except (i) statutory Liens not yet delinquent or the
validity of which are being contested in good faith by appropriate actions, (ii)
purchase money Liens arising in the ordinary course, (iii) Liens for Taxes not
yet delinquent, (iv) Liens reflected in the Company Financial Statements (which
have not been discharged) and (v) Liens which in the aggregate do not materially
detract from the value or, in the case of personal property, materially impair
the use by the Company or any Subsidiary of the property subject thereto or, in
the case of real property, materially impair the present and continued use of
such property in the usual and normal conduct of the business of the Company or
any Subsidiary. The Company and the Subsidiaries have good and indefeasible
title to the Owned Properties and good and valid leasehold interests in the
Leased Properties and there are no pending or, to the knowledge of the Company,
threatened condemnation proceedings affecting any of the Owned Properties or
Leased Properties. To the knowledge of the Company, the use, occupancy and
condition of each parcel of real property that is an Owned Property or a Leased
Property is in compliance in all material respects with all applicable laws.
3.12 CERTAIN AGREEMENTS. Except as disclosed in SECTION 3.12(a) of the
Company Disclosure Schedule or in the Company Financial Statements, neither the
Company nor any Subsidiary is a party to any written (i) agreement, contract,
indenture or other instrument relating to the borrowing of money or the
guarantee of any obligation for the borrowing of money; (ii) employment,
consulting, compensation or severance agreement with any of its directors,
employees or consultants; (iii) agreement, contract or commitment limiting or
restraining it from engaging or competing in any business; (iv) lease pursuant
to which it leases real property; (v) distribution, dealer, representation,
commission or agency agreement; (vi) contract or agreement with any of its
Affiliates that will continue after Closing (other than between the Company and
one or more Subsidiaries); or (vii) any other contract that (A) is material to
the businesses of the Company, or (B) requires annual expenditures of $25,000 or
more and has a remaining term of
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12 months or more (each of the foregoing a "MATERIAL CONTRACT"). Each Material
Contract is in full force and effect and has been complied with in all material
respects by the Company and/or the applicable Subsidiary and, to the knowledge
of the Company, has been complied with in all material respects by all other
parties thereto. Except as set forth in SECTION 3.12(a) of the Company
Disclosure Schedule, no consent is required under any Material Contract in
connection with the consummation of the transactions contemplated by this
Agreement.
3.13 EMPLOYEE BENEFIT PLANS.
(a) Set forth in SECTION 3.13(a) of the Company Disclosure
Schedule is a complete and accurate list of each (i) employee benefit plan, as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"); and (ii) employment contract, bonus, deferred
compensation, incentive compensation, performance compensation, stock purchase,
stock option, stock appreciation, restricted stock, phantom stock, saving and
profit sharing, severance or termination pay other than statutory or the common
law requirements for reasonable notice, health or other medical, salary
continuation, cafeteria, dependent care, vacation, sick leave, holiday pay,
fringe benefit, reimbursement program, life insurance, disability or other
(whether insured or self-insured) insurance, a supplementary unemployment
benefit, pension retirement, supplementary retirement, welfare or other employee
plan, program, policy or arrangement, whether written or unwritten, formal or
informal, for the benefit of the employees, former employees, brokers, agents,
or directors of the Company or the Subsidiaries, or leased employees,
independent contractors or other Persons performing services for or on behalf of
the Company, the Subsidiaries, or any entity required to be aggregated with the
Company or any Subsidiary pursuant to Code Section 414 or ERISA Section 4001(b)
("ERISA AFFILIATE")("BENEFIT PLANS"). None of the Benefit Plans is a
multiemployer plan as defined in Section 3(37) of ERISA, multiple employer plans
as defined in Section 413(c) of the Code, multiple employer welfare arrangement
as defined in Section 3(40) of ERISA, or is subject to Title IV of ERISA.
(b) Except as set forth in SECTION 3.13(b) of the Company
Disclosure Schedule, neither the Company nor any Subsidiary (i) currently
maintains, participates in, administers or contributes to or has any liability
under or with respect to, whether accrued, contingent or otherwise, other than
benefits claims in the ordinary course of business, any Benefit Plans, or (ii)
during the six (6) year period preceding the Closing Date maintained,
participated in, administered or contributed to, any Benefit Plans.
(c) Except as set forth in SECTION 3.13(c) of the Company
Disclosure Schedule, all Benefit Plans comply in all material respects with and
are operated in all material respects in accordance with their terms and
applicable laws, and all such Benefit Plans comply in all material respects
with, and are, and during the six-year period preceding the Closing Date have
been, operated in all material respects in accordance with their terms and in
accordance with all applicable laws, including, but not limited to, the
requirements of ERISA Sections 601 et seq. and 701 et seq. and Sections 4980B,
9801 and 9802 of the Code. None of the Benefit Plans are subject to the law of
any jurisdiction outside the United States, and no Benefit Plan covers any
Person in any jurisdiction outside the United States.
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(d) True and complete copies of each written Benefit Plan and
any related trust, insurance or other related funding contract or agreement or
administrative services contract or agreement, and a description of any
unwritten Benefit Plan, the most recent summary plan descriptions for each
Benefit Plan, the most recent annual reports on Form 5500 for each Benefit Plan,
including schedules, audited financial statements and actuarial valuation
reports, most recent employee manuals, handbooks or personnel policies, sample
copies of the current form of all notices or certifications to individuals under
ERISA Sections 606, 609, 701 and 711 et seq. or Sections 4980B or 9801 of the
Code, any other filings with respect to any Benefit Plan with any government
entity and any opinion or ruling from the IRS or any other government entity
with respect to any Benefit Plan, if any, have been made available to Parent.
(e) Except as set forth in SECTION 3.13(e) of the Company
Disclosure Schedule, each Benefit Plan intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS as
to its qualification under the Code both as to the original plan and as to all
restatements or material amendments and the exempt status of each related trust
under Section 501(a) of the Code, all of which have been delivered or made
available to Parent; has never been subject to any assertion by any Governmental
Authority that it is not so qualified; and nothing has occurred that would
negatively affect such qualification or exemption.
(f) Neither the Company nor any Subsidiary or any entity
required to be aggregated with the Company or any Subsidiary pursuant to Code
Section 414 or ERISA Section 4001(b) ("ERISA AFFILIATE") have incurred or are
reasonably expected to incur, either directly or indirectly, any liability
(other than for premiums) to the Pension Benefit Guaranty Corporation ("PBGC").
(g) Except as disclosed in SECTION 3.13(g) of the Company
Disclosure Schedule, there are no pending or, to the knowledge of the Company,
threatened actions, suits, claims, trials, arbitrations, investigations or other
proceedings by any Person, including any present or former participant or
beneficiary under any Benefit Plan (or any beneficiary of any such participant
or beneficiary) involving any Benefit Plan, any rights or benefits under any
Benefit Plan or any trustee, fiduciary, custodian, administrator or other person
or entity holding or controlling assets of any Benefit Plans, other than
ordinary and usual claims for benefits by participants or beneficiaries
thereunder, and no basis exists to anticipate any such claim or claims. There
has been no action or failure to act on the part of the Company, its Affiliates,
any ERISA Affiliate, the Subsidiaries, any fiduciary, funding agent or
administrator of any of the Benefit Plans that could reasonably be expected to
subject the Company, its Affiliates, any ERISA Affiliate, the Subsidiaries or
the fund of any such Benefit Plan to the imposition of any Tax or penalty with
respect to any Benefit Plans, whether by way of indemnity or otherwise. Except
as set forth in SECTION 3.13(g) of the Company Disclosure Schedule, all
contributions required to have been made or remitted and all expenses required
to have been paid by the Company, its Affiliates, any ERISA Affiliate, or the
Subsidiaries to or under any Benefit Plan under the terms of any such plan, any
agreement or any applicable law have been paid within the time prescribed by any
such plan, agreement or law. All contributions to or under any Benefit Plan have
been currently deductible under the Code when made. No amount, or any asset of
any Benefit Plan, is subject to Tax as unrelated business income. Except as set
forth in SECTION 3.13(g) of the Company Disclosure Schedule, no "reportable
events" (as defined in ERISA
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section 4043), "prohibited transactions" (as defined in ERISA Section 406 or the
Code), breaches of fiduciary responsibility, terminations whether partial or
complete, or "accumulated funding deficiencies" (as defined in ERISA Section
302) have occurred with respect to any Benefit Plan for which liability would be
incurred by the Company, the Subsidiaries, Parent or the Surviving Corporation.
(h) Except as disclosed in SECTION 3.13(h) of the Company
Disclosure Schedule, none of the Company, its Affiliates, any ERISA Affiliate,
or any Subsidiary maintains or contributes to any Benefit Plan which provides,
or has any liability or obligation to provide, retiree life or medical insurance
to Employees or other Persons performing services for or on behalf of the
Company or the Subsidiaries (or their beneficiaries) upon and/or after the last
day of the calendar month in which such Person's termination of employment or
other service occurs, except as may be required by federal, state or local laws,
rules or regulations. With respect to all Benefit Plans disclosed in SECTION
3.13(h) of the Company Disclosure Schedule, the Company has provided or made
available to Parent all information necessary to determine any and all
liabilities of the Company and the Subsidiaries, on a company-by-company basis
as of December 31, 2000 (or such more recent date as is practicable).
(i) Except as disclosed in SECTION 3.13(i) of the Company
Disclosure Schedule, none of the Benefit Plans contains any provision which
would result in any additional benefits, accelerated vesting and/or accelerated
payments or which would subject any employee or other Person to an excise Tax or
would cause any payment made thereunder to be nondeductible for federal income
tax purposes by reason of Code Sections 280G or 4999 of the Code as a result of
the consummation of the transactions contemplated by this Agreement or the
termination of an individual's employment thereafter and for which the Company,
the Subsidiaries, Parent or the Surviving Corporation would be liable.
(j) None of the Company, the Subsidiaries or any organization
with respect to which the Company or a Subsidiary is a successor or parent
corporation (within the meaning of ERISA Section 4069) has engaged in any
transaction described in ERISA Section 4069.
(k) Since the effective date of the documents provided in
accordance with Section 3.13(d) above, no promises or commitments have been made
by the Company, any of its Affiliates, any ERISA Affiliate, the Subsidiaries to
amend any Benefit Plan or to provide increased benefits thereunder.
3.14 TAXES. Except as set forth in SECTION 3.14 of the Company
Disclosure Schedule:
(a) all Tax Returns required to be filed by or with respect to
the Company and each Subsidiary on or before the date hereof have been timely
filed with the appropriate Taxing authorities in all jurisdictions in which such
Tax Returns were required to be filed, the Company and each Subsidiary have
paid, or there have been paid on their behalf, all Taxes that were shown to be
due on such Tax Returns, and all such Tax Returns were complete and accurate in
all material respects;
(b) the Company and each Subsidiary have timely paid or will
timely pay or will properly reserve or accrue on the Pre-Closing Balance Sheet
(or there have been or will be
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timely paid on their behalf) all Taxes owed by the Company and each Subsidiary
(whether or not shown on any Tax Return) for all Pre-Closing Tax Periods;
(c) the Company and each Subsidiary have timely paid (or there
have been timely paid on their behalf) all required current estimated Tax
payments in amounts sufficient to avoid interest charges and underpayment
penalties;
(d) the Company and each Subsidiary have given or otherwise
made available to Parent correct and complete copies of all Tax Returns,
examination reports and statements of deficiencies relating to the Company and
each Subsidiary for periods ending, or transactions consummated, after December
31, 1995;
(e) there are no outstanding agreements extending or waiving
the statutory period of limitation applicable to any claim for, or the period
for the collection or assessment or reassessment of, Taxes due from the Company
or any Subsidiary for any taxable period, and no power of attorney is currently
in force or has been requested with respect to any matter relating to Taxes that
could affect the Company or any Subsidiary;
(f) no claim, action, suit, investigation, audit, or other
proceeding by any Governmental Authority is pending or, to the knowledge of the
Company, threatened with respect to any Taxes due from or with respect to the
Company or any Subsidiary, no claim for Taxes has been proposed, asserted, or
assessed against the Company or any Subsidiary that has not been fully paid or
properly accrued on its books, and no claim has been made by any Governmental
Authority in a jurisdiction where any the Company or any Subsidiary does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction;
(g) there are no Liens for Taxes upon the assets or properties
of the Company or any Subsidiary, except for statutory Liens for current Taxes
not yet due;
(h) neither the Company nor any Subsidiary is or has been a
member of any partnership or joint venture (or entity treated similarly for Tax
purposes) or the holder of a beneficial interest in any trust, in each case for
any taxable period for which the applicable statute of limitations has not
expired;
(i) neither the Company nor any Subsidiary is a party to, or
has any liability or obligation with respect to, any agreement relating to the
sharing or allocation of Taxes, any indemnification agreement with respect to,
Taxes, or any similar contract or arrangement, and neither the Company nor any
Subsidiary has made any payment under or pursuant to any such agreement,
contract, or arrangement since December 31, 1995;
(j) neither the Company nor any Subsidiary (i) has income that
is includable in computing the taxable income of a United States person (as
defined in Section 7701 of the Code) under Section 951 of the Code, (ii) is a
passive foreign investment company within the meaning of Section 1297 of the
Code, (iii) is or has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code, or (iv) is or ever has been a
"taxable mortgage pool" as defined in Section 7701(i) of the Code;
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(k) neither the Company nor any Subsidiary has filed a consent
under Section 341(f) of the Code;
(l) no property owned by the Company or any Subsidiary (i) is
property required to be treated as being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Return Act of 1986,
(ii) constitutes "tax-exempt use property" within the meaning of Section
168(h)(1) of the Code or (iii) is "tax-exempt bond financed property" within the
meaning of Section 168(g) of the Code;
(m) neither the Company nor any Subsidiary is a party to any
contract, agreement or other arrangement which could result in the payment of
amounts that could be nondeductible by reason of Section 162(m) or Section 280G
of the Code (or any similar provision of state, local, or foreign law);
(n) neither the Company nor any Subsidiary has agreed to, or
is required to make, any adjustment under Section 446(e), or Section 481(a) of
the Code or any comparable provision of state, local or foreign law or
regulations, and no Taxing authority has proposed any such adjustment or any
change in Tax accounting method;
(o) the Company and each Subsidiary have withheld from their
respective employees, independent contractors, creditors, stockholders and third
parties and timely paid to the appropriate taxing authority proper and accurate
amounts in all respects through all periods in compliance with all Tax
withholding and remitting provisions of applicable laws and have each complied
in all material respects with all Tax information reporting provisions of all
applicable laws;
(p) none of the Stockholders is subject to withholding under
Section 1445 of the Code;
(q) the Company and each Subsidiary have tax years ending on
June 30 for federal income Tax purposes;
(r) Schedule 3.14 sets forth a description prepared by the
Company of (i) the Tax basis of the assets of the Company and each Subsidiary,
and (ii) the amount of unused net operating losses, net capital losses and Tax
credits of the Company and each Subsidiary, in each case as of December 31, 2000
(the "TAX ATTRIBUTES"). The information on such schedule was accurate in all
material respects of as December 31, 2000. Such bases and Tax Attributes would
be affected by income and deductions and transactions occurring in the ordinary
course of business between December 31, 2000 and the Closing Date;
(s) neither the Company nor any Subsidiary is or has been
doing business in, is or has been engaged in a trade or business in, or has
business in force in any jurisdiction in which it has not filed all required Tax
Returns.
(t) no Stockholder and neither the Company nor any Subsidiary
has received or requested a Tax ruling or entered into a closing or similar
agreement with any Taxing authority
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with respect to the Company or any Subsidiary that would affect the Tax
liabilities of the Company or any Subsidiary for any Tax year ended after the
Closing Date;
(u) no Stockholder and neither the Company nor any Subsidiary
has settled any Tax dispute in a manner that would adversely affect the Company
or any Subsidiary for any Tax year ended after the Closing Date;
(v) following the Closing, neither the Company nor any
Subsidiary will be subject to any limitation under Sections 382, 383, or 384 of
the Code as a result of any pre-Closing ownership changes involving the Company
or any Subsidiary or the Stockholders, except as a result of the Split-Off;
(w) except for the Split-Off, neither the Company nor any
Subsidiary has been a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i) in the
two years prior to the date of this Agreement or (ii) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transaction to be undertaken pursuant to this Agreement; and
(x) neither the Company nor any Subsidiary has ever been a
member of any affiliated, consolidated, combined, or unitary group of
corporations filing Tax Returns, except the Logisoft group of corporations.
3.15 COMPLIANCE WITH APPLICABLE LAW; PERMITS; POLICIES.
(a) The businesses of the Company and the Subsidiaries are
being conducted in compliance with all applicable provisions of any federal,
state, provincial, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to them, except as set
forth in SECTION 3.15(a) of the Company Disclosure Schedule and except for such
noncompliance as has not had and would not reasonably be expected to have a
Company Material Adverse Effect. Without in any way limiting the foregoing, the
Company and the Subsidiaries are in compliance in all material respects with the
Securities Laws and state securities laws to the extent that such Securities
Laws apply to their operations.
(b) The Company and each Subsidiary owns or validly holds all
licenses, franchises, permits, approvals, authorizations, exemptions,
classifications, certificates, registrations and similar documents or
instruments that are required for its business and operations, except for those
the failure of which to have has not had and would not reasonably be expected to
have a Company Material Adverse Effect (the "REQUIRED PERMITS"). The Required
Permits are valid and in full force and effect and, except as disclosed in
SECTION 3.15(b) of the Company Disclosure Schedule, neither the Company nor any
Subsidiary has received any notice of any inquiry or proceeding that could
reasonably be expected to result in the suspension, revocation or material
limitation of any such permit; and to the knowledge of the Company, there is no
reasonable basis for any such suspension, revocation or limitation. Neither the
Company nor any Subsidiary is currently the subject of any supervision,
conservation, rehabilitation, liquidation, receivership, insolvency or other
similar proceeding nor, other than as described in
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SECTION 3.15(b) of the Company Disclosure Schedule, are the Company or any
Subsidiary operating under any formal or informal agreement or understanding
with the licensing authority of any State which restricts its authority to do
business or requires it to take, or refrain from taking, any action.
3.16 CONSUMMATION OF SPLIT-OFF. Logisoft and the Stockholders have
effected the Split-Off including, without limitation, the consummation of all of
the transactions contemplated by that certain Plan of Corporate Separation and
Reorganization (the "SEPARATION PLAN"), in accordance with all applicable laws,
including, without limitation, the Delaware General Corporation Law, the NYBCL,
and the Securities Laws, with the result being the vesting of good and absolute
title to the Company Common Stock in the Stockholders. At and following the
Effective Time, neither Parent nor the Surviving Corporation shall have any
liability whatsoever relating to the Split-Off, other than the liabilities and
obligation addressed in Section 3.8.
3.17 PROPRIETARY RIGHTS. Except as disclosed in SECTION 3.17 of the
Company Disclosure Schedule, the Company and each Subsidiary owns or possesses
the right to use all material trademarks, service marks, patents, patent rights,
assumed names, logos, trade secrets, copyrights and trade names ("INTELLECTUAL
PROPERTY") and all material computer software, programs and similar systems that
are used by it in the conduct of its business. Each agreement pursuant to which
either the Company or any Subsidiary licenses such Intellectual Property or
material computer software, programs or similar systems is in full force and
effect in accordance with its terms. Neither the Company nor any Subsidiary has
received any notice of any conflict with or violation or infringement of or any
claimed conflict with or violation or infringement of (which, in any such case,
remains substantially unresolved), any asserted rights of any other Person with
respect to any such Intellectual Property or computer software, programs, or
similar systems. Neither the Company nor any Subsidiary is in conflict with or
in violation or infringement of any asserted rights of any other Person with
respect to any such Intellectual Property or computer software, programs, or
similar systems, except to the extent that any such conflict, violation or
infringement does not have, or would not be reasonably expected to have, a
Company Material Adverse Effect.
3.18 INSURANCE. SECTION 3.18 of the Company Disclosure Schedule
summarizes the amount and scope of the insurance currently in force insuring the
assets of the Company and the Subsidiaries and their respective operations and
properties against loss or liability. All such policies or contracts of
insurance are in compliance in all material respects with all applicable laws
and all Material Contracts to which the Company or any Subsidiary is a party.
All insurance policies pursuant to which any such insurance is provided are in
full force and effect. No notice of cancellation or termination of any such
insurance policy has been given to the Company or any Subsidiary and all
premiums required to be paid in connection with such insurance policies have
been paid in full.
3.19 ENVIRONMENTAL MATTERS. Except as disclosed on SECTION 3.19 of the
Company Disclosure Schedule:
(a) the operations of the Company and the Subsidiaries and the
real property currently owned, leased or operated by the Company or any
Subsidiary are in compliance and, during the period of the ownership or tenancy
of the Company or Subsidiary have been in
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compliance, with all applicable Environmental Laws, except for such
noncompliance as would not be expected to have a Company Material Adverse
Effect;
(b) no judicial or administrative proceedings or
investigations are pending or, to the knowledge of the Company, threatened
against the Company or any Subsidiary, pursuant to any applicable Environmental
Laws, except for judicial or administrative proceedings or investigations that
would not reasonably be expected to have a Company Material Adverse Effect;
(c) no condition exists on any real property currently (or to
the knowledge of the Company, formerly) owned, operated or leased by the Company
or any Subsidiary arising out of or resulting from any Release of any Hazardous
Material that could reasonably be expected to result in the Company or any
Subsidiary incurring any liability under Environmental Laws that would have a
Company Material Adverse Effect and no such property is listed or has been
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response Compensation and Liability and Information System
(CERCLIS); and
(d) the Company has delivered or made available to Parent
copies of all environmental investigations, audits, assessments or other
analyses conducted by or on behalf of, or which are otherwise in the possession
of, the Company or any Subsidiary relating to any real property currently or
formerly owned or leased by the Company or any Subsidiary.
3.20 ALL NECESSARY ASSETS. Except as disclosed on Schedule 3.20, the
Company and its Subsidiaries have all necessary assets to conduct the Logisoft
Computer Products and eStorefronts businesses as conducted during the previous
two years.
3.21 CLAIMS FOR INDEMNIFICATION. SECTION 3.21 of the Company Disclosure
Schedule contains (a) a description of any claims made by the Company or any
Subsidiary, or contemplated to be made by the Company or an Subsidiary, for
indemnification or reimbursement of amounts with respect to assets or
subsidiaries owned, previously owned or acquired by the Company or any
Subsidiary, and (b) a description of any claims made, or to the knowledge of the
Company contemplated, against the Company or any Subsidiary for indemnification
or reimbursement of amounts with respect to assets or subsidiaries owned,
previously owned or acquired by the Company or any Subsidiary.
3.22 LABOR MATTERS.
(a) Neither the Company nor any Subsidiary is a party to any
labor or collective bargaining agreement.
(b) No Employees are represented by any labor organization
that is certified to represent such employees under the National Labor Relations
Act or other applicable law. No labor organization or group of Employees has
made a pending demand for recognition, certification, successor rights or a
related employer declaration, and there are no representation, certification,
successor rights or related employer proceedings or petitions or applications
for certification seeking a representation proceeding presently pending or to
the knowledge of the Company threatened to be brought before or filed with the
National Labor Relations Board or any other labor relations tribunal or
authority. To the knowledge of the Company, there are no
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organizing activities involving the Company or any Subsidiary pending with any
labor organization or group of Employees.
(c) Except as set forth in SECTION 3.22(c) of the Company
Disclosure Schedule, there are no strikes, work stoppages, slowdowns, lockouts,
material arbitrations or material grievances or other material labor disputes
pending or threatened against or involving the Company or any Subsidiary, to the
extent applicable to the Employees.
(d) Except as set forth in SECTION 3.22(d) of the Company
Disclosure Schedule, each of the Company and the Subsidiaries is in compliance
with all laws, regulations and orders applicable to the Company or Subsidiary or
the Employees or other Persons providing services to or on behalf of the Company
or Subsidiary, as the case may be, relating to the employment of labor,
including all such laws, regulations and orders relating to wages, hours,
employment standards, WARN, collective bargaining, discrimination, civil rights,
safety and health, workers' compensation and the collection and payment of
withholding and/or social security Taxes and any similar Tax, other than such
noncompliance as has not had and would not be reasonably expected to have a
Company Material Adverse Effect.
(e) There is no "mass layoff," "plant closing" or similar
event as defined by WARN with respect to the Company or any Subsidiary;
provided, that no representation is made as to actions taken by Parent in
connection with or after the Closing.
(f) Except as set forth in SECTION 3.22(f) of the Company
Disclosure Schedule, as of the date hereof, there are no pending or, to the
knowledge of the Company, threatened complaints, charges or claims against the
Company or any Subsidiary brought or filed with any Governmental Authority,
arbitrator or court based on, arising out of, in connection with or otherwise
relating to the employment or termination of employment by the Company or any
Subsidiary or, relating to the Employees or other Persons providing services to
or on behalf of the Company or any Subsidiary.
3.23 AFFILIATE TRANSACTIONS. SECTION 3.23 of the Company Disclosure
Schedule sets forth, as of the date hereof, all contracts, agreements,
obligations, commitments and liabilities between the Company or any Subsidiary,
on the one hand, and any of the Company's Affiliates (other than the
Subsidiaries), on the other hand.
3.24 BONUSES. Except as set forth in SECTION 3.24 of the Company
Disclosure Schedule, no current or former officer, director, employee or agent
of the Company or any Subsidiary, or any other Person, is a party to or
beneficiary of any contract or other agreement pursuant to which such Person
shall receive or is entitled to receive any retention or other transaction bonus
or other payment (a "TRANSACTION BONUS") from either the Company or any
Subsidiary in connection with the transactions contemplated hereby.
3.25 BROKERS' FEES AND COMMISSIONS. None of the Company, the
Subsidiaries or their respective directors, officers, employees or agents has
employed any investment banker, brokers or finders in connection with the
transactions contemplated hereby.
3.26 TAKEOVER STATUTES. The Company has taken all action required to be
taken in order to exempt this Agreement and the transactions contemplated hereby
from, and this Agreement and the transactions contemplated hereby are exempt
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from, the requirements of any "moratorium," control share," "fair price,"
"Affiliate transaction," "business combination" or other antitakeover laws and
regulations of any state (collectively, "TAKEOVER STATUTES"), including, without
limitation, Article 16 of the NYBCL, or any antitakeover provision in the
Company's Certificate of Incorporation or Bylaws.
3.27 OTHER INFORMATION. No representation, warranty or statement made
by the Company or any of the Stockholders in this Agreement, the Company
Disclosure Schedule or any other information furnished to Parent in connection
with the Parent's preparation of its private placement memorandum related to the
transactions contemplated by this Agreement contains any untrue statement of
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE IV.
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each Stockholder, severally (but not jointly), represents and warrants
to Parent and Merger Sub as follows (it being understood that, with respect to
the representations and warranties set forth in Section 4.5 below, each
Stockholder shall be deemed to make those representations and warranties as of
the time the Company executes the Joinder in accordance with Section 7.1(b)
below):
4.1 AUTHORIZATION. Stockholder has full power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Stockholder, the
performance by it of its respective obligations hereunder, and the consummation
by Stockholder of the transactions contemplated hereby, have been duly
authorized. No other action on the part of Stockholder is necessary to authorize
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Stockholder and constitutes the valid and binding
obligation of the Stockholder, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
4.2 NO VIOLATION. Except as set forth in SECTION 4.2 of the Company
Disclosure Schedule, neither the execution and delivery by the Stockholder of
this Agreement, the performance by the Stockholder of the obligations hereunder
and thereunder nor the consummation by Stockholder of the transactions
contemplated hereby and thereby will (a) in the case of any Stockholder other
than a natural person, violate, conflict with or result in any breach of any
provision of the Certificate of Incorporation or Bylaws of such Stockholder, (b)
violate or conflict with or result in a violation or breach of, or constitute a
default (with or without due notice or lapse of time or both) under the terms,
conditions or provisions of any note, bond, mortgage, indenture or deed of
trust, or any license, lease or agreement to which such Stockholder is a party
or by which any of its assets is bound or (c) violate any order, writ, judgment,
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injunction, decree, statute, rule or regulation of any Governmental Authority
applicable to any Stockholder or any of such Stockholder's assets, except in
each case as would not have a material adverse effect on the financial condition
or results of operation of the Company or on the transactions contemplated
hereby.
4.3 CONSENTS AND APPROVALS. Except as set forth in SECTION 4.3 of the
Company Disclosure Schedule, no filing or registration with, no notice to and no
permit, authorization, consent or approval of any third party or any
Governmental Authority is necessary for Stockholder to enter into this Agreement
or for the consummation by the Stockholder of the transactions contemplated by
this Agreement (collectively, the "STOCKHOLDER APPROVALS").
4.4 BROKERS. No Stockholder, or any of director, officer, employee or
agent of a Stockholder, has employed any investment banker, broker or finder in
connection with the transactions contemplated hereby.
4.5 OWNERSHIP OF COMPANY COMMON STOCK. The issued and outstanding
shares of Company Common Stock are owned beneficially and of record by the
Stockholder as set forth in SECTION 3.4(a) of the Company Disclosure Schedule.
Stockholder has the full and unrestricted power to sell, assign, transfer and
deliver the shares of Company Common Stock to Parent in accordance with the
terms of this Agreement, free and clear of liens or encumbrances.
4.6 INVESTMENT REPRESENTATIONS. The Stockholder hereby makes the
following representations and warranties to Parent and to each person or entity
assisting it in the transaction, including, but not limited to, the Parent's
counsel, and the Stockholder understands that each such person or entity is
materially relying upon such representations and warranties:
(a) Stockholder is acquiring Parent Common Stock solely for
investment purposes and not with the intention to resell or redistribute the
Parent Common Stock.
(b) Stockholder hereby acknowledges that the issuance of
Parent Common Stock to the Stockholders pursuant to this Agreement is not being
registered under the Securities Act or under the securities laws of the States
of New York, Delaware, or any other state, and that the Parent Common Stock so
issued may not be resold or otherwise transferred unless such transaction is
registered under the Securities Act or an exemption from the registration
requirements of the Securities Act and applicable state securities laws are
available. Furthermore, Stockholder is aware of the restrictions which may be
imposed by the Parent or the federal or state securities laws on the
distribution of the securities, including, but not limited to, restrictive
legends on the stock certificates, required holding periods, and stop transfer
orders. Stockholder understands that these substantial restrictions on
transferability mean that the Stockholder must bear the economic risk of this
investment for an indefinite period of time. The Stockholder understands that
while the Parent's Common Stock is presently listed and trading on the American
Stock Exchange, the Exchange has previously raised the question of whether the
Parent meets the qualifications for continued listing. The Parent believes that
it meets the standards for continued listing but such a determination is
subjective and the Stockholder understands that no assurance can be given that
the American Stock Exchange will agree or that the Parent will be trading on the
American Stock Exchange at the time any registration statement
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with respect to the Securities becomes effective or at the time the Stockholder
is otherwise able to sell the shares under applicable securities laws.
(c) EACH OF THE STOCKHOLDERS ACKNOWLEDGES HAVING RECEIVED AND
REVIEWED THE PARENT DISCLOSURE MATERIALS. The Stockholder acknowledges and
agrees that he/she has been provided with copies of or has access to such
filings and has reviewed such materials as the Stockholder has deemed necessary
or desirable. The Stockholder and his/her/its representatives have been afforded
full and free access to books, records, contracts, documents, and other
information concerning the Parent and the contemplated transaction and further
have been afforded an opportunity to ask such questions of the officers,
employees, agents, accountants and representatives of the Parent concerning the
business, operations, financial condition, assets, liabilities, prospects and
other relevant matters as the Stockholder and his/her/its representatives have
deemed necessary or desirable, and the Stockholder hereby confirms that the
Stockholder or his/her/its agents have been given all such information as has
been requested in order to evaluate the merits and risks of the prospective
investment contemplated hereby and that the Stockholder does not desire any
additional information.
(d) The Stockholder understands and acknowledges that an
investment in the Securities is highly speculative and includes a high degree of
risk including, but not limited to, those risks specifically set forth in the
Parent's Annual Report on Form 10-K for the period ending June 30, 2000, as
supplemented by the other Parent Disclosure Materials, and which the Stockholder
acknowledges he/she has reviewed.
(e) The Stockholder and his/her/its representatives have been
solely responsible for the Stockholder's own "due diligence" investigation of
this investment, for the Stockholder's own analysis of the merits and risks of
this investment and for their own analysis of the fairness and desirability of
the terms of the investment. In taking any action or performing any role
relative to the arranging of the proposed investment, the Stockholder has acted
solely in his/her/its own interest and neither the Stockholder nor any of the
Stockholder's agents or employees have acted as an agent of the Parent.
(f) The Stockholder acknowledges that the Stockholder has
relied solely upon the Stockholder's own tax advisors with respect to all tax
matters related to this investment. The Stockholder further recognizes that
provisions of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder, may be changed by legislative and/or administrative
action or interpreted by courts of law in a manner to deprive the Stockholder of
any contemplated tax benefits of the investment contemplated hereby.
(g) Stockholder has executed and delivered in favor of Parent
an investor questionnaire in such form as Parent shall have reasonably required.
(h) Stockholder understands that the stock certificates which
will be issued will bear a legend as provided in Section 7.10(f).
(i) Stockholder represents and warrants that he/she (i) has
such knowledge and experience in business and financial matters to enable the
Stockholder to utilize the
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information given to the Stockholder in connection with this investment in order
for the Stockholder to evaluate the merits and risks of the investment and to
make an informed investment decision, (ii) has no need for liquidity in this
investment, (iii) is aware of and able to bear the risks of the investment for
an indefinite period of time, and (iv) currently, and based on existing
conditions, is able to afford a complete loss of such investment.
(j) Stockholder acknowledges, represents, agrees and is aware
that:
(i) no federal or state agency has passed upon the
Securities or made any finding or determination as to the fairness of an
investment in the Securities;
(ii) there are significant risks of loss of
investment incidental to the purchase of the Securities including, but not
limited to, those risks specifically set forth in the Parent's Annual Report on
Form 10-K for the period ending June 30, 2000 on file with the Securities and
Exchange Commission and those risks set forth herein;
(iii) there are substantial restrictions on the
transferability of the Securities; and
(iv) the representations, warranties, agreements,
undertakings and acknowledgements made by the Stockholder in this Agreement are
made with the intent that they be relied upon by the Parent and its advisors in
determining the suitability of the Stockholder as a purchaser of the Securities,
and the Stockholder undertakes to immediately notify the Parent of any change in
any representation, warranty or other information relating to the Stockholder
set forth herein.
(k) Any information which the Stockholder has heretofore
furnished to the Parent or its advisors with respect to his/her/its financial
position and business experience, including but not limited responses to
questions in an investor questionnaire distributed by Parent, is correct and
complete as of the date of this Agreement and if there should be any material
change in such information prior to the issuance of the Securities to the
Stockholder, he/she will immediately furnish such revised or corrected
information to the Parent.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Stockholders as follows:
5.1 ORGANIZATION, QUALIFICATIONS AND OPERATIONS. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as it is now
being conducted. Parent is qualified or licensed to do business and is in good
standing in each jurisdiction in which the ownership or leasing of property by
it or the conduct of its business requires such licensing or qualification,
except where the failure to be so qualified or licensed will not have a material
adverse effect on the business, prospects, results of operations, or financial
condition of Parent on a consolidated basis or affect Parent's ability to
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consummate the transactions contemplated by this Agreement (a "PARENT MATERIAL
ADVERSE EFFECT").
5.2 AUTHORIZATION. Parent has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent, the
performance by Parent of its obligations hereunder, and the consummation by
Parent of the transactions contemplated hereby, have been duly authorized by the
board of directors of Parent. No other corporate action on the part of Parent is
necessary to authorize the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. When issued in accordance
with this Agreement, the shares of Parent Common Stock comprising the Merger
Consideration will be duly authorized, validly issued, fully paid and
non-assessable and not issued in violation of any preemptive rights. This
Agreement has been duly and validly executed and delivered by Parent and
constitutes the valid and binding obligation of Parent, enforceable against
Parent in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
5.3 NO VIOLATION. Subject to the receipt by Parent of the Parent
Approvals identified in Section 5.4 below and except as set forth in SECTION 5.3
of the Parent Disclosure Schedule, neither the execution and delivery by Parent
of this Agreement, the performance by Parent of the obligations hereunder and
thereunder nor the consummation by Parent of the transactions contemplated
hereby and thereby will (a) violate, conflict with or result in any breach of
any provision of the Certificate of Incorporation or Bylaws of Parent, (b)
violate or conflict with or result in a violation or breach of, or constitute a
default (with or without due notice or lapse of time or both) under the terms,
conditions or provisions of any note, bond, mortgage, indenture or deed of
trust, or any license, lease or agreement to which Parent is a party or by which
any of its assets is bound or (c) violate any order, writ, judgment, injunction,
decree, statute, rule or regulation of any Governmental Authority applicable to
Parent or any of its assets, except in each case as would not have a Parent
Material Adverse Effect.
5.4 CONSENTS AND APPROVALS. Except as set forth in SECTION 5.4 of the
Parent Disclosure Schedule, no filing or registration with, no notice to and no
permit, authorization, consent or approval of any third party or any
Governmental Authority is necessary for Parent to enter into this Agreement or
for the consummation by Parent of the transactions contemplated by this
Agreement (collectively, the "PARENT APPROVALS").
5.5 BROKERS. Neither Parent nor any of its directors, officers,
employees or agents has employed any investment banker, broker or finder in
connection with the transactions contemplated hereby.
5.6 PARENT DISCLOSURE MATERIALS. Except as disclosed on Schedule 5.6,
as of their respective dates none of the Parent Disclosure Materials together
with the Parent Disclosure Schedule (including all exhibits and schedules
thereto and documents incorporated by reference therein) contained any untrue
statement of a material fact or omit to state a material fact required to be
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stated therein, or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the Parent
Disclosure Materials at the time of filing complied in all material respects
with the Exchange Act. As of the date hereof, there are no claims, actions,
proceedings or investigations pending or, to the best knowledge of Parent,
threatened against Parent or any subsidiary of Parent, or any properties or
rights of Parent or of any of the subsidiaries of Parent, before any court,
administrative, governmental or regulatory authority or body which is or will be
required to be described in any Parent Disclosure Materials that is not so
described.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
Parent Disclosure Materials or the Parent Disclosure Schedule, since December
31, 2000 there has not been any event that has had, or that Parent reasonably
expects to have, a Parent Material Adverse Effect.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Parent and Merger Sub represent and warrant to the Stockholders as
follows:
6.1 ORGANIZATION, QUALIFICATIONS AND OPERATIONS. Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York, with all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as it is now
being conducted. Merger Sub is qualified or licensed to do business and is in
good standing in each jurisdiction in which the ownership or leasing of property
by it or the conduct of its business requires such licensing or qualification,
except where the failure to be so qualified or licensed would not, individually
or in the aggregate, have a Parent Material Adverse Effect.
6.2 CAPITAL STRUCTURE. The authorized capital stock of Merger Sub
consists of 200 shares of common stock, no par value, all of which are issued
and outstanding and owned of record and beneficially by Parent, free and clear
of all Liens. All outstanding shares of capital stock of Merger Sub are duly
authorized, validly issued, fully paid, and non-assessable (except to the extent
provided in Section 630 of the NYBCL) and not subject to preemptive rights.
Merger Sub has no outstanding options, warrants, subscriptions or other rights,
agreements or commitments that obligates it to issue, sell or transfer,
repurchase, redeem or otherwise acquire or vote any shares of the capital stock
of Merger Sub.
6.3 AUTHORIZATION. Merger Sub has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Merger Sub,
the performance by Merger Sub of its respective obligations hereunder, and the
consummation by Merger Sub of the transactions contemplated hereby, have been
duly authorized by the board of directors and sole stockholder of Merger Sub. No
other corporate action on the part of Merger Sub is necessary to authorize the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Merger Sub and constitutes the valid and binding obligation of
Merger Sub, enforceable against Merger Sub in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance,
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reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
6.4 NO VIOLATION. Subject to the receipt by Merger Sub of the Merger
Sub Approvals identified in Section 6.5 below, and except as set forth in
SECTION 6.4 of the Parent Disclosure Schedule, neither the execution and
delivery by Merger Sub of this Agreement, the performance by Merger Sub of the
obligations hereunder and thereunder nor the consummation by Merger Sub of the
transactions contemplated hereby and thereby will (a) violate, conflict with or
result in any breach of any provision of the Certificate of Incorporation or
Bylaws of Merger Sub, (b) violate or conflict with or result in a violation or
breach of, or constitute a default (with or without due notice or lapse of time
or both) under the terms, conditions or provisions of any note, bond, mortgage,
indenture or deed of trust, or any license, lease or agreement to which Merger
Sub is a party or by which any of its assets is bound or (c) violate any order,
writ, judgment, injunction, decree, statute, rule or regulation of any
Governmental Authority applicable to Merger Sub or any of its assets, except in
each case as would not have a Parent Material Adverse Effect.
6.5 CONSENTS AND APPROVALS. Except as set forth in SECTION 6.5 of the
Parent Disclosure Schedule, no filing or registration with, no notice to and no
permit, authorization, consent or approval of any third party or any
Governmental Authority is necessary for Merger Sub to enter into this Agreement
or for the consummation by Merger Sub of the transactions contemplated by this
Agreement (collectively, the "MERGER SUB APPROVALS").
6.6 BROKERS. Neither Merger Sub nor any of its directors, officers,
employees or agents has employed any investment banker, broker or finder in
connection with the transactions contemplated hereby.
6.7 NO PRIOR ACTIVITIES. Except for this Agreement, Merger Sub (i) was
recently formed, (ii) has not entered into any agreements or arrangements with
any person and (iii) is not subject to or bound by any obligation or
undertaking. Except as contemplated by this Agreement, Merger Sub has not
engaged, directly or indirectly, in any business activities of any type or kind.
ARTICLE VII.
ADDITIONAL AGREEMENTS
7.1 VOTING OF SHARES; EXECUTION OF JOINDER.
(a) During the period from the date of this Agreement and
continuing through the Closing Date, and except as otherwise provided herein, no
Stockholder shall, with respect to shares of Company Common Stock that such
Stockholder is or becomes the record or beneficial owner of, (i) deposit such
shares of Company Common Stock into a voting trust or enter into a voting
agreement or arrangement with respect to such shares of Company Common Stock or
grant any proxy with respect thereto or (ii) enter into any contract, option or
other arrangement or undertaking with respect to the direct or indirect
acquisition or sale, assignment, pledge,
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transfer or other disposition of any of its shares of Company Common Stock. Each
Stockholder, by this Agreement, with respect to those shares of Company Common
Stock that it owns presently or may own in the future, does hereby constitute
and appoint Parent, or any nominee of Parent, with full power of substitution,
during and for the period from the date of this Agreement and continuing through
the earlier of the Closing Date or the date of termination of this Agreement
pursuant to Section 10.1, as its true and lawful attorney and proxy, for and in
its name, place and stead, to vote each of such shares of Common Stock as its
proxy, at every annual, special or adjourned meeting of the stockholders of the
Company (including the right to sign its name (as stockholder) to any consent,
certificate or other document relating to the Company that the NYBCL may permit
or require) (i) in favor of the approval of the Merger and approval and adoption
of this Agreement and the transactions contemplated hereby, (ii) against any
Acquisition Proposal or any action or agreement that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
the Company or the Stockholders hereunder or that would result in any of the
conditions set forth in this Agreement not being fulfilled, and (iii) in favor
of any other matter relating to consummation of the transactions contemplated by
this Agreement. Each Stockholder hereby agrees and acknowledges that the proxy
granted pursuant to the preceding sentence shall be irrevocable and that such
proxy is coupled with an interest for all purposes.
(b) Without in any way limiting the foregoing, the
Stockholders shall, as promptly as possible following consummation of the
Split-Off, take all action reasonably necessary to cause the Company to execute
the Joinder; provided, however, that in no event shall the Company execute the
Joinder and become party to this Agreement unless and until all representations
and warranties are true and correct as of the date the Company executes the
Joinder.
7.2 COMPANY STOCKHOLDER APPROVAL.
(a) The Company agrees that it will take all action necessary
in accordance with applicable law and its Certificate of Incorporation and
Bylaws to convene, or seek written consents in lieu of, a meeting of the
Stockholders (the "COMPANY STOCKHOLDER MEETING") to submit to the Stockholders
the Merger and the related Plan of Merger, together with the affirmative
recommendation of the Company Board regarding the Merger and Plan of Merger. The
Company will use its commercially reasonable efforts to hold the Company
Stockholder Meeting and obtain the approval of the Stockholders of the Merger
and related Plan of Merger (the "STOCKHOLDER APPROVAL") as soon as practicable
after the date hereof.
(b) The Company Board shall: (i) express their opinion to the
Stockholders that the Merger and related Plan of Merger are in the best
interests of the Company and the Stockholders and should be implemented; and
(ii) recommend to the Stockholders that they vote in favor of the approval and
adoption of the Merger and related Plan of Merger.
(c) Subject to Section 7.1 above, the Stockholders agree that
they shall vote in favor of the Merger and related Plan of Merger at the Company
Stockholder Meeting.
7.3 ACCESS TO INFORMATION; CONFIDENTIALITY. Between the date hereof and
the Closing Date, the Stockholders shall, and upon execution of the Joinder the
Company shall, and
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shall cause the Subsidiaries to, give to Parent and its counsel, accountants and
other authorized representatives and agents, all reasonable access, during
regular business hours to any and all of the Company's and its Subsidiaries'
respective premises, properties, contracts, books and records, and will cause
their respective officers and employees to furnish to Parent and its
representatives, except where prohibited by law, any and all data and
information pertaining, directly or indirectly, to the Company or the
Subsidiaries that Parent shall from time to time reasonably request, and shall
permit Parent and its representatives to make extracts and copies thereof.
During such period, the Stockholders, and upon execution of the Joinder the
Company, shall furnish promptly to Parent all information and documents
concerning the business, properties and personnel of the Company and the
Subsidiaries as Parent may reasonably request. Except as required by law, each
of Parent, the Stockholders, and upon execution of the Joinder the Company,
agree that, until the earlier of (i) two (2) years from the date of this
Agreement and (ii) the Effective Time, each of Parent, the Company, the
Stockholders and their respective subsidiaries will not, and Parent, the Company
and the Stockholders will cause their respective directors, officers, partners,
employees, agents, accountants, counsel, financial advisors and other
representatives and Affiliates (collectively, "REPRESENTATIVES") not to,
disclose any nonpublic information obtained from Parent, the Company or the
Stockholders, as the case may be, to any other person, in whole or in part,
other than to its Representatives in connection with an evaluation of the
transactions contemplated by this Agreement, and each of Parent, the Company,
the Stockholders and their respective subsidiaries and Affiliates will not, and
Parent and the Company will cause their respective Representatives not to, use
any of such nonpublic information to directly or indirectly divert or attempt to
divert any business, customer, Producer, officer or employee of the other.
7.4 PUBLIC ANNOUNCEMENTS. The parties hereto will consult with each
other and will mutually agree (the agreement of each party not to be
unreasonably withheld or delayed) upon the content and timing of any press
release or other public statements with respect to the transactions contemplated
by this Agreement and shall not issue any such press release or make any such
public statement prior to such consultation and agreement, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any securities exchange or any stock exchange regulations as advised by
counsel; PROVIDED, HOWEVER, that each party will give prior notice to the other
parties of the content and timing of any such press release or other public
statement required by applicable law or by obligations pursuant to any listing
agreement with any securities exchange or any stock exchange regulations.
7.5 TAXES.
(a) Tax Sharing Agreements. Except in connection with the
Split-Off, all Tax sharing agreements or similar agreements (other than this
Agreement) with respect to or involving the Company or any Subsidiary shall be
terminated immediately prior to the time of the Closing and, after the Closing
Date, neither Parent, the Company, nor any Subsidiary shall be bound thereby or
have any liability thereunder.
(b) Certain Taxes. All transfer, documentary, sales, use,
stamp, registration, and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including, but not limited
to, any transfer, documentary, sales, use, stamp, registration, or similar Tax
imposed by any states or subdivisions), shall be paid by the Stockholders when
due, and the Stockholders will, at their own expense, file all necessary Tax
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Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration, and other Taxes and fees, and, if required by
applicable law, Parent will join in the execution of any such Tax Returns and
other documentation.
(c) Tax Return Filing, Etc.
(i) Tax Returns Due on or Before the Closing Date.
The Stockholders shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns for the Company or any Subsidiary due on or before the
Closing Date. The Stockholders shall pay, or cause the Company or any Subsidiary
to pay, all Taxes shown as due on such Tax Returns. All such Tax Returns shall
be prepared and filed in a manner that is consistent with prior practice, except
as required by a change in applicable law.
(ii) Contests. If a notice of deficiency, proposed
adjustment, assessment, audit, examination, or other administrative or court
proceeding, suit, dispute, or other claim (a "TAX CONTEST") shall be delivered,
sent, commenced, or initiated to or against Parent or the Company or any
Subsidiary by any Taxing authority with respect to Taxes that results in or may
result in a Tax Loss (as hereinafter defined in Section 11.2) for which
indemnification may be claimed from the Stockholders under this Agreement,
Parent shall promptly notify Stockholders' Representative in writing of such Tax
Contest; provided that the failure to so notify shall not relieve the
Stockholders of their indemnification obligations hereunder, except to the
extent such failure has actually and materially prejudiced the Stockholders. The
Stockholders shall have the right (subject to Parent's consent, which shall not
be unreasonably withheld) to represent the Company or any Subsidiary's interest
and to employ counsel of their choice at their expense with respect to any such
Tax Contest relating to a period ending on or before the Closing Date; and
Parent shall cause each of the applicable Company or any Subsidiary to execute
any powers of attorney or other documents or forms necessary in order to allow
the Stockholders to control such contest and to settle any such Tax Contest
(subject to Parent's consent, which shall not be unreasonably withheld). Parent
shall have the sole right to represent the Company or any Subsidiary's interests
and to employ counsel of its choice at its own expense with respect to any such
Tax Contest relating to a period ending after the Closing Date (including any
Straddle Period); provided that the Stockholders shall be liable to Parent for a
pro rata share of any expenses (including attorneys' expenses) incurred by
Parent in conducting such Tax Contest relating to a Straddle Period and such
expense shall be considered a Tax Loss for which Parent is entitled to
indemnification pursuant to Section 11.2. Notwithstanding any other provision of
this Section 7.5, Stockholders' Representative may not, without Parent's
consent, settle or otherwise dispose of any Tax Contest if such settlement or
disposition could adversely affect the Tax liability of Parent or the Company or
any Subsidiary for any Tax period or portion thereof beginning on or after the
Closing Date. In the event the Stockholders do not take control of a Tax Contest
that they have the right to control hereunder within 30 days of receiving
notification of the existence of such Tax Contest, Parent may take control, and
the Stockholders shall be liable to Parent for any expenses (including
attorneys' expenses) incurred by Parent in conducting such Tax Contest, and any
such expense shall be considered a Tax Loss for which Parent is entitled to
indemnification pursuant to Section 11.2.
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(iv) Cooperation on Tax Matters.
(A) Parent, the Company and its
Subsidiaries, and Stockholders shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with any Tax Contest or
the filing of Tax Returns pursuant to this Section 7.5. Such cooperation shall
include (i) the retention and (upon the other party's request) the provision of
records and information that are reasonably relevant to any audit, litigation or
other proceeding; and (ii) making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. Parent, the Company and its Subsidiaries, and Stockholders agree (i)
to retain all books and records with respect to Tax matters pertinent to the
Company and the Subsidiaries relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Parent or Stockholders' Representative, any extensions
thereof) for the respective taxable periods, and to abide by all record
retention agreements entered into with any Taxing authority; and (ii) to give
the other party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so requests, the
Company or Stockholders, as the case may be, shall allow the other party to take
possession of such books and records.
(B) Parent and the Stockholders further
agree, upon request, to use their reasonable best efforts to obtain any
certificate or other document from any Governmental Authority or any other
Person as may be necessary to mitigate, reduce, or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby).
(v) Elections. Without the prior written consent of
Parent, from the date hereof, neither any Stockholder nor the Company nor any
Subsidiary shall make or change any election, change an annual accounting
period, adopt or change any accounting method, file any amended Tax Return,
enter into any closing agreement, settle any Tax claim or assessment relating to
the Company or any Subsidiary, surrender any right to claim a refund of Taxes,
consent to any extension or waiver of the limitation period applicable to any
Tax claim or assessment relating to the Company or any Subsidiary, take any
other action or omit to take any action, if such election, adoption, change,
amendment, agreement, settlement, surrender, consent, or other action or
omission would have the effect of materially increasing the Tax liability of
Parent or the Company or any Subsidiary for any Tax period or portion thereof
beginning on or after the Closing Date.
(vi) Disputes. Disputes arising under this Section
7.5 and not resolved by mutual agreement within 60 days shall be resolved by a
nationally recognized law or accounting firm with no material affiliation or
relationship with Parent or the Stockholders (the "TAX REFEREE") chosen (and
mutually acceptable to both Parent and Stockholders' Representative) within 15
business days of the date on which the need to choose the Tax Referee arises.
The Tax Referee shall resolve any disputed items within 30 days of having the
item referred to it pursuant to such procedures as it may require. The costs,
fees and expenses of the Tax Referee shall be borne equally by Parent and the
Stockholders.
(d) Straddle Period Tax Allocation. For purposes of Section
7.5(c), in the case of any Taxes that are imposed on a periodic basis and are
payable for a Straddle Period, the portion of such Tax that relates to the
portion of such Tax period beginning before and ending on the
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Closing Date shall (i) in the case of any Taxes other than income Taxes or Taxes
based on gross receipts or capital, be deemed to be the amount of such Tax for
the entire Tax period multiplied by a fraction, the numerator of which is the
number of days in the Tax period ending on the Closing Date and the denominator
of which is the number of days in the entire Tax period and (ii) in the case of
any income Taxes or Taxes based on gross receipts or capital, be deemed equal to
the amount that would be payable if the relevant Tax period ended on the Closing
Date.
(e) Certification. The Stockholders shall furnish to Parent on
or before the Closing Date, and pursuant to Treas. Reg. section 1.1445-2(c)(3),
a copy of a statement, issued by the Company pursuant to Treas. Reg. section
1.897-2(h), certifying that the interests in the Company being acquired in the
Merger are not U.S. real property interests.
7.6 CONSENTS, APPROVALS AND FILINGS. Parent and the Company will make,
and cause their respective subsidiaries and, to the extent necessary, their
other Affiliates to make, all necessary filings, including, without limitation,
those required under the Securities Laws in order to facilitate the prompt
consummation of the Merger and the other transactions contemplated by this
Agreement. In addition, Parent, Stockholders and the Company will each use their
respective commercially reasonable efforts, and will cooperate fully and in good
faith with each other, (a) to comply as promptly as practicable with all
governmental requirements applicable to the Merger and the other transactions
contemplated by this Agreement, and (b) to obtain as promptly as practicable all
necessary permits, orders or other consents of Governmental Authorities and
consents of all third parties necessary for the consummation of the Merger and
the other transactions contemplated by this Agreement. Each of Parent, the
Stockholders and the Company shall use their respective commercially reasonable
efforts to promptly provide such information and communications to Governmental
Authorities as such Governmental Authorities may reasonably request. Each of the
parties hereto shall provide to the other parties copies of all applications in
advance of filing or submission of such applications to Governmental Authorities
in connection with this Agreement and shall make such revisions thereto as
reasonably requested by each other party hereto. Each of the parties hereto
shall provide to the other parties the opportunity to participate in all
meetings and material conversations with Governmental Authorities with respect
to the matters contemplated by this Agreement.
7.7 THIRD PARTY PROPOSALS. Neither the Company nor any Stockholder nor
any of their respective Affiliates shall directly or indirectly solicit,
encourage or facilitate inquiries or proposals, or enter into any definitive
agreement, with respect to, or initiate or participate in any negotiations or
discussions with any Person concerning, any acquisition or purchase of all or a
substantial portion of the assets of, or of any equity interest in, the Company
or any merger or business combination with the Company other than as
contemplated by this Agreement (each, an "ACQUISITION PROPOSAL") or furnish any
information to any such Person. The Company and the Stockholders and any of
their respective Affiliates and agents shall notify Parent immediately if any
Acquisition Proposal (including the terms thereof) is received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated with, any of the Company, the Stockholders or any of
their respective Affiliates. The Company and each of the Stockholders shall, and
shall cause their respective Affiliates, officers, directors, employees,
representatives and advisors to, immediately cease or cause to be terminated any
existing activities, including discussions or negotiations with any parties,
conducted prior to the date hereof with respect to any Acquisition Proposal and
shall seek to have all materials, if any,
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distributed to such persons by the Company, any Stockholder or any of their
respective Affiliates or advisors promptly returned to the Company. None of the
Company, the Stockholders or any of their respective Affiliates shall amend,
modify, waive or terminate, or otherwise release any person from, any
standstill, confidentiality or similar agreement or arrangement currently in
effect. The Company and the Stockholders shall cause their respective officers,
directors, agents, advisors and Affiliates to comply with the provisions of this
Section 7.7.
7.8 STOCK OPTIONS. Upon consummation of the Merger, Parent and Company
shall negotiate in good faith to enter into employee stock option agreements
with certain of Company's employees who are not significant stockholders of
Company.
7.9 POST-SIGNING FINANCIAL INFORMATION. The Company shall, as promptly
as practicable, provide to Parent all internally prepared management reports and
all other financial data, projections and other information for the period from
March 31, 2001 forward in time relating to the Company and the Subsidiaries.
7.10 REGISTRATION STATEMENT; RESALES OF PARENT COMMON STOCK. Within
ninety (90) days following the Closing Date, Parent shall, and Company shall
cooperate in taking steps to (i) prepare and file with the Securities Exchange
Commission ("SEC") a registration statement on Form S-3 to register resales by
the Stockholders of the Merger Consideration (the "REGISTRATION STATEMENT"),
except for the greater of 2,200,000 shares of Parent Common Stock (the
"RESTRICTED MERGER CONSIDERATION") or fifty percent (50%) of the Merger
Consideration (without regard to any adjustment under Section 2.10(d)) issued or
issuable to Stockholders Xxxxxx Xxxx, Xxxxxxx Xxxx, Xxxxxx Xxxxxxx, and Xxxxx
Xxx (the "RESTRICTED STOCKHOLDERS"), and (ii) use commercially reasonable
efforts to cause such registration statement to be declared effective, and to
maintain its effectiveness until the first (1st) anniversary of the Closing
Date.
(a) All expenses incurred in connection with the registration
pursuant to this Section 7.10 (excluding underwriters' and brokers' discounts
and commissions), including, without limitation all federal and "blue sky"
registration, qualification and filing fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, shall be borne by the Company.
(b) In connection with the registration under this Section
7.10, Parent shall, as expeditiously as commercially reasonable:
(i) Furnish to Stockholders and to the underwriters,
if any, such number of copies of the Registration Statement,
prospectus, and preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they
may reasonably request in writing in order to facilitate the
disposition of the Merger Consideration owned by them that are included
in such Registration Statement.
(ii) Use commercially reasonable efforts to register
and qualify the securities covered by such Registration Statement under
such other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested in writing by the Stockholders, provided that
Parent shall not be required in connection therewith or as a condition
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thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(iii) Notify each Stockholder with securities covered
by such Registration Statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in
such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(iv) Use commercially reasonable efforts to cause all
the securities covered by the Registration Statement to be listed on
(X) the American Stock Exchange, if the listing of such securities is
then permitted under the rules of such exchange, or (Y) authorized for
quotation on a national quotation system.
(c) To the extent permitted by law, Parent will indemnify and
hold harmless each Stockholder, the partners, officers, directors of each
Stockholder, any underwriter (as defined in the Securities Act) for such
Stockholder and each person, if any, who controls such Stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act,
against any expenses, losses, claims, damages, or liabilities (joint or several)
(or actions in respect thereof) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
expenses, losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"):
(i) any untrue statement of a material fact contained
in such Registration Statement, preliminary prospectus, final
prospectus, offering circular or other document contained therein or
any amendments or supplements thereto;
(ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or
(iii) any violation or alleged violation by Parent of
the Securities Act, the Exchange Act, any federal or state securities
law or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any federal or state securities law in connection with
the offering covered by such registration statement;
and Parent will reimburse each such Stockholder, partner, officer, director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating, defending or
settling any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 7.10(d) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of Parent (which
consent shall not be unreasonably withheld), nor shall Parent be liable in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which
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occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Stockholder or
its agent, partner, officer, director, underwriter or controlling person of such
Stockholder.
(d) Each Restricted Stockholder agrees that such Stockholder
will not sell, assign or transfer any of the Parent Common Stock received by
such Stockholder pursuant to the Merger except (i) pursuant to the Registration
Statement or another registration statement that has been declared effective
under the Securities Act, or (ii) in a transaction that is not required to be
registered under the Securities Act; PROVIDED, HOWEVER, that the aggregate
number of shares of Parent Common Stock sold by or on behalf of any particular
Restricted Stockholder on any day after the Closing Date (a "SALES DATE") shall
not exceed ten percent (10%) of the average five (5) day reported volume of
trading of the Parent Common Stock on all national securities exchanges and/or
reported on the automated quotation system of a registered securities
association preceding any Sales Date; and PROVIDED, FURTHER, that all such sales
otherwise comply with restrictions that may be imposed by applicable law. Parent
shall be entitled to condition the registration of transfer of any such Parent
Common Stock not made pursuant to an effective registration statement upon the
receipt of a written opinion of counsel addressed to Parent, which opinion and
counsel shall be reasonably satisfactory to Parent, that such transfer is not
required to be so registered.
(e) Each certificate representing shares of Parent Common
Stock issued to a Stockholder at the Closing shall bear the following legend:
The shares represented by this certificate have not been
registered under the Securities Act of 1933 or any state's
securities laws, and such shares may not be resold or
otherwise transferred unless they are subsequently registered
or an exemption from applicable registration requirements is
available.
The foregoing legend will be removed by delivery of substitute certificates upon
receipt of an opinion in form and substance reasonably satisfactory to Parent
from counsel reasonably satisfactory to Parent to the effect that such legend is
no longer required for purposes of the Securities Act.
7.11 COMPANY FINANCIAL INFORMATION. Stockholders shall furnish or cause
to be furnished to Parent all financial statements pertaining to the business of
the Company and its subsidiaries, together with accompanying reports and related
consents of Logisoft's and the Company's independent accounting firm, as
applicable, which are required in order to satisfy Parent's disclosure
requirements under the United States securities laws as determined by Parent in
its reasonable judgment. Any such information shall be prepared in accordance
with and will present information in a form which will satisfy the requirements
of the securities laws and the rules and regulations of the Securities and
Exchange Commission. Stockholders shall also furnish or cause to be furnished to
Parent any additional financial or other information regarding the Company and
its subsidiaries which is needed, in the reasonable judgment of Parent, to
permit the preparation of any tax returns and support of tax positions or the
compliance with any other regulatory requirements.
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7.12 TAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the Merger, each of Parent and the Company shall take such actions
as are necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of any Takeover Statute on
the Merger.
7.13 NOTICE, EFFORTS TO REMEDY. During the period from the date of this
Agreement to the Effective Time, each party hereto shall promptly give written
notice to the other parties hereto upon becoming aware of the occurrence of any
event which would cause or constitute a breach of any of the representations,
warranties or covenants of such party contained in this Agreement and shall use
commercially reasonable efforts to prevent or promptly remedy the same. During
the period from the date of this Agreement to the Effective Time, the Company,
the Stockholders and Parent each shall cause one or more of its representatives
to confer on a regular and frequent basis with representatives of the other and
to report on the general status of its ongoing operations. The Stockholders and,
upon execution of the Joinder, the Company shall promptly notify Parent of any
change, in each case on a consolidated basis, in the normal course of the
Company's or the Subsidiaries' businesses or in the operation of its or their
properties having a Company Material Adverse Effect and of the receipt by the
Company or any Company Subsidiary of notice of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or the receipt by the Company or any Company Subsidiary of a
notice of the institution or the threat of litigation involving the Company or
any Company Subsidiary which, individually or in the aggregate, would have a
Company Material Adverse Effect. During the period from the date of this
Agreement to the Effective Time, Parent shall promptly notify the Company and
each Stockholder of any change on a consolidated basis in the normal course of
Parent's business or in the operation of its properties having a Parent Material
Adverse Effect, and of the receipt by Parent of any non-confidential notice of
any governmental complaints, investigations or hearings (or communications
indicting that the same may be contemplated) or the receipt by Parent of a
notice of the institution or the threat of litigation involving Parent which,
individually or in the aggregate, would have a Parent Material Adverse Effect.
7.14 PREPARATION AND DELIVERY OF PRE-CLOSING BALANCE SHEET.
Stockholders hereby agree to prepare the Pre-Closing Balance Sheet in accordance
with past practice and GAAP (subject to customary adjustments and accruals) and
deliver it to Parent one day prior to the Closing Date. The Pre-Closing Balance
Sheet must expressly include as a separate item reserves for any unpaid Taxes
attributable to Pre-Closing Tax Periods.
7.15 EMPLOYEE BENEFITS PLANS. The Company will take all actions
necessary to withdraw from participation in the Benefits Plans at or before the
effective time of the Split-Off. Notwithstanding the foregoing, the Company will
maintain the Company's Section 125 Cafeteria Plan.
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ARTICLE VIII.
COVENANTS RELATING TO
CONDUCT OF BUSINESS PRIOR TO MERGER
8.1 CONDUCT OF BUSINESSES OF THE COMPANY. Except as expressly
contemplated by this Agreement, as set forth in SECTION 8.1 of the Company
Disclosure Schedule or with the prior written consent of Parent (not to be
unreasonably withheld or delayed), from the date of this Agreement, the Company
will, and will cause each Subsidiary to, conduct its business and operations
according to its ordinary and usual course of business and will use all
reasonable efforts consistent therewith to preserve intact and, as applicable,
maintain in good repair its properties, assets and business organizations, to
keep available the services of its officers, agents and employees and to
maintain satisfactory relationships with its customers in each case in the
ordinary course of business, consistent with the manner in which the Company and
its subsidiaries have been operated prior to the Split-Off. Without limiting the
generality of the foregoing, and except as otherwise provided in this Agreement
and as set forth in SECTION 8.1 of the Company Disclosure Schedule or with the
prior written consent of Parent (not to be unreasonably withheld or delayed),
prior to the Closing, the Company will not, and will not permit any Subsidiary
to:
(a) propose or adopt any amendment to its Certificate of
Incorporation or Bylaws (or similar organizational documents);
(b) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse the obligations of any other
Person;
(c) (i) adopt any new Benefit Plan (including any stock
option, stock benefit or stock purchase plan) or amend any existing Benefit Plan
in any material respect, (ii) increase in any manner the rate or terms of
compensation of any of its directors, officers, agents or employees or enter
into any employment, severance or collective bargaining agreement other than (A)
normal, annual pay increases of employees or (B) increases in compensation to
agents in connection with new products, (iii) hire any new employee to serve as
an officer or member of senior management of the Company or any Subsidiary, or
(iv) renew or enter into consulting or similar services agreements with a term
that extends beyond the Effective Time;
(d) enter into any agreement with any officer, director,
employee, general agent or sales agent of either the Company or any Subsidiary
pursuant to which such Persons will be entitled to receive from either the
Company or any Subsidiary any Transaction Bonus;
(e) (i) sell, transfer or otherwise dispose of any of its
property or assets other than immaterial sales or other dispositions of assets
or (ii) mortgage or encumber any of its property or assets;
(f) except in the ordinary course consistent with past
practices, sell, transfer or otherwise dispose of any securities;
(g) enter into or terminate any other material agreements,
commitments or contracts;
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(h) (i) split, combine or reclassify the Company Common Stock,
(ii) declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to the Company Common Stock; (iii) issue,
sell or pledge, or authorize or propose the issuance, sale or pledge of any
additional shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, the
Company Common Stock or any of its capital stock, or (iv) redeem, purchase or
otherwise acquire directly or indirectly any of its capital stock;
(i) enter into any agreement or commitment (A) having a
duration of 12 months or more, or (B) involving an aggregate capital expenditure
or commitment exceeding (x) $25,000 individually, or (y) collectively with all
other such agreements, $75,000;
(j) take any action that would intentionally result in a
breach of the representations and warranties contained in Article III of this
Agreement;
(k) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization;
(l) change any of the financial accounting methods or
practices used by it unless required by GAAP or applicable law;
(m) settle or compromise any claim (including arbitration) or
litigation, which after insurance reimbursement involves an amount in excess of
$50,000 or otherwise is material to the Company and its Subsidiaries taken as a
whole;
(n) except in accordance with any arrangement or agreement
described in SECTION 3.23 of the Company Disclosure Schedule, make any payment,
loan or advance of any amount to or in respect of, or engage in the sale,
transfer or lease of any of its property or assets to, or enter into any
contract with, any Affiliate;
(o) amend the terms of or terminate any (i) Material Contracts
(other than an extension of the terms, or termination in accordance with the
scheduled termination, of such Material Contract expressly required by their
terms) or (ii) contracts, agreements or arrangements with any Affiliate to cause
any change in the cost, services being provided, or term of any such agreements,
other than as specifically contemplated by this Agreement;
(p) enter into or renew (other than a renewal of such contract
expressly required by the terms of such contract) any contract that would be
considered a Material Contract (including any contracts, agreements or
arrangements with any Affiliates);
(q) engage in any transaction with any Affiliate, except to
the extent provided in this Agreement; PROVIDED, HOWEVER, that the Company and
the Subsidiaries may perform their obligations under any agreement with any
Affiliate identified in SECTION 3.23 of the Company Disclosure Schedule; or
(r) agree to take any of the foregoing actions.
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8.2 OTHER ACTIONS. None of Parent, the Company, or any Stockholder
shall, and none of them shall permit any of their respective subsidiaries to,
take any action that would, or that could reasonably be expected to, result in
any of the conditions of the Merger set forth in Article IX not being satisfied.
ARTICLE IX.
CONDITIONS PRECEDENT
9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) SPLIT-OFF; COMPANY STOCKHOLDER APPROVAL. The Split-Off
shall have been consummated and Company Stockholder Approval with respect to the
Merger and related Plan of Merger shall have been obtained.
(b) PRIOR RECEIPT OF PARENT DISCLOSURE MATERIALS. Each
Stockholder shall have received the Parent Disclosure Materials and had a
reasonable time to review such materials.
(c) GOVERNMENTAL AND REGULATORY CONSENTS. All required
consents, approvals, permits and authorizations to the consummation of the
Merger shall be obtained from any Governmental Authority whose consent,
approval, permission or authorization is required, whether in accordance with
currently effective law or by reason of a change in law after the date of this
Agreement. No such consent, approval, permission or authorization shall contain
a materially adverse prohibition, limitation, condition or restriction imposed
by the Governmental Authority.
(d) NO INJUNCTIONS OR RESTRAINTS. No action, suit or
proceeding shall have been instituted and be continuing or be threatened by any
Governmental Authority to restrain, modify or prevent the carrying out of the
transactions contemplated hereby; 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 or limiting or restricting Parent's conduct or
operation of the business of the Surviving Corporation after the Merger shall
have been issued; no action, suit or proceeding seeking any of the foregoing
shall have been instituted by any third party that has or is reasonably likely
to materially impair the Company's or Parent's ability to consummate the
transactions contemplated hereby or have a Company Material Adverse Effect or a
Parent Material Adverse Effect.
(e) NO DISSENTING SHARES. No holders of Company Common Stock
shall have perfected dissenters' rights under the NYBCL with respect to the
Merger.
(f) OPINION OF COUNSEL. Parent shall have received an opinion
of counsel to the Company and the Stockholders, dated the Closing Date,
substantially in the form attached hereto as EXHIBIT F.
(g) TAX OPINION OF COUNSEL. Stockholders shall have received
an opinion of counsel to the Stockholders that the Split-off is tax-free to the
Company and Stockholders.
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(h) EMPLOYMENT AGREEMENTS. Each of the following individuals
shall have entered into employment agreements with the Company or Parent
substantially in the form attached as an EXHIBIT G: Xxxxxx Xxxxxxx, Xxxxxxx
Xxxx, Xxxxxx Xxxx, Xxxxx Xxx and Xxxx Van Heel.
ARTICLE X.
TERMINATION, AMENDMENT AND WAIVER
10.1 TERMINATION. This Agreement may be terminated and the Merger
abandoned as follows:
(a) at any time prior to the Effective Time, whether before or
after approval of the Merger and related Plan of Merger by the Company by mutual
written consent of Parent, Merger Sub and the Company; or
(b) at any time prior to the Effective Time:
(i) by Parent or the Company if the Merger shall not
have been consummated on or before June 15, 2001, unless the failure to
consummate the Merger is the result of a willful and Material Breach of
this Agreement by the party seeking to terminate this Agreement;
(ii) by Parent or the Company if any Governmental
Authority shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable;
(iii) by Parent in the event of a breach of Section
3.27 (subject to the limitation in Section 11.6(c)) or intentional
misconduct by Stockholders or the Company; or
(iv) by Parent if the Company shall have breached the
requirements of Section 7.7 hereof.
10.2 EFFECT OF TERMINATION.
(a) In the event that Parent or the Company terminates this
Agreement as provided in Section 10.1(a), 10.1(b)(i), or 10.1(b)(ii), this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent or the Company, other than the last sentence
of Section 7.3 and Sections 3.25, 4.4, 5.5, 6.6, 7.4, 10.2, 12.1 and Article 13.
(b) In the event that this Agreement is terminated by Parent
or the Company pursuant to Section 10.1(b)(iii) or 10.1(b)(iv) any non-breaching
party may seek damages or any other appropriate remedy in law or in equity.
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10.3 AMENDMENT. Subject to the applicable provisions of the NYBCL, at
any time prior to the Effective Time, the parties hereto may modify or amend
this Agreement, by written agreement executed and delivered by duly authorized
officers of the respective parties; PROVIDED, HOWEVER, that after the Company
Stockholder Approval has been obtained, no amendment shall be made which reduces
the consideration payable in the Merger or adversely affects the rights of the
Company Stockholders hereunder without the approval of such stockholders.
10.4 EXTENSION; CONSENT; WAIVER. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to Section 10.3, waive compliance with any of the agreements or conditions of
the other parties contained in this Agreement or consent to any action requiring
consent pursuant to this Agreement. Any agreement on the part of a party to any
such extension, waiver or consent shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
10.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION, CONSENT OR
WAIVER. A termination of this Agreement pursuant to Section 10.1, an amendment
of this Agreement pursuant to Section 10.3 or an extension, consent or waiver
pursuant to Section 10.4 shall, in order to be effective, require in the case of
Parent, Merger Sub or the Company, action by its board of directors or a duly
authorized committee of its board of directors.
ARTICLE XI.
INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties contained in Articles III, IV, V and VI of this
Agreement, including any schedules made part hereof, and any covenants or other
agreements the performance of which is specified to occur on or prior to the
Closing or the Closing Date, shall survive the Merger hereunder for a period of
one (1) year following the Closing Date, except for (i) representations and
warranties set forth in Sections 3.4, 4.5, and 5.2 which shall survive
indefinitely, and (ii) representations and warranties set forth in Sections 3.4,
3.13, 3.14, 3.15, 3.17 and 3.19 which shall survive until 30 days after the
expiration of the applicable statute of limitations for assessment of Taxes
(including any Taxes constituting a Tax Loss), including any extension. Any
covenant or other agreement herein any portion of the performance of which may
or is specified to occur after the Closing shall survive the Merger hereunder
indefinitely or for such lesser period of time as may be specified therein.
11.2 OBLIGATIONS OF STOCKHOLDERS.
(a) From and after the Closing Date, each of the Stockholders
severally and not jointly shall indemnify and hold harmless Parent and its
respective employees, officers, directors, partners and other Affiliates
(including the Company), but excluding any of the other Stockholders, from and
against any and all Taxes or other Losses which any of them may suffer, incur or
sustain arising out of, attributable to, or resulting from any inaccuracy in or
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breach of any of the representations or warranties of that Stockholder made in
Section 3.4, Section 3.16, and Article IV of this Agreement, and the
Stockholders (other than the Management Stockholders, and for them only to the
extent provided in subparagraph
(b) below) shall not have any other liability or obligation to
Parent or its respective employees, officers, directors, partners or other
Affiliates (including Company) in respect of any of the other representations,
warranties, and covenants set forth in this Agreement; and (b) From and after
the Closing Date, and subject to any applicable limitation in Section 11.6, the
Management Stockholders jointly and severally shall indemnify and hold harmless
Parent and its respective employees, officers, directors, partners and other
Affiliates (including the Company), but excluding any of the other Stockholders,
from and against any and all Taxes or other Losses which any of them may suffer,
incur or sustain arising out of, attributable to, or resulting from: (i) any
inaccuracy in or breach of any of the representations or warranties of the
Company made in this Agreement; (ii) any breach or nonperformance of any of the
covenants or other agreements made by the Company or any Stockholder in or
pursuant to this Agreement, (iii) any unpaid Taxes of the Company or any
Subsidiary with respect to any Tax period ending on or before the Closing Date
or with respect to any Straddle Period to the extent allocated to the
Pre-Closing Tax Period, but only to the extent such Taxes exceed the reserve for
such Taxes expressly included as a separate item on the Pre-Closing Balance
Sheet, (iv) the unpaid Taxes of the Company or any Subsidiary under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local, or
foreign law) for or attributable to any Pre-Closing Tax Period or any Straddle
Period to the extent allocable to the Pre-Closing Tax Period, but only to the
extent such Taxes exceed the reserve for such Taxes expressly included as a
separate item on the Pre-Closing Balance Sheet, or under any Tax sharing or
similar agreement, as a transferee or successor, by contract or otherwise, or
(v) any aspect of the Split-Off (any of the foregoing in this section 11.2(b) or
11.2 (a) a "LOSS" and collectively "LOSSES"). (Taxes with respect to which
Parent and its respective employees, officers, directors, partners and other
Affiliates (including the Company) may be entitled to indemnification pursuant
to this Section 11.2 are Losses sometimes referred to herein as "TAX LOSSES").
(c) The Management Stockholders shall satisfy any finally
determined Indemnifiable Claim against them by delivering to the Indemnified
Party, at the option of the Management Stockholders, cash or an election to
set-off such amount against that number of shares of Parent Common Stock having
an aggregate value equal to the amount of such claim, each such share to be
valued for this purpose at the average of the per share closing prices for the
Parent Common Stock on the AMEX for the five (5) trading days immediately prior
to the relevant date of payment or offset, and which shares constitute part of
the Contingent Consideration that Parent is actually obligated to deliver to the
Management Stockholders in accordance with Section 2.10(d) because of the
satisfaction of the contingencies. In the event that any such Stockholder does
not own a sufficient number of shares to satisfy such indemnification
obligation, then such Stockholder shall pay any deficiency with cash.
11.3 OBLIGATIONS OF PARENT. From and after the Closing Date, Parent
shall indemnify, defend and hold harmless the Stockholders and their respective
employees, officers, directors, partners and other Affiliates from and against
any and all Losses which any of them may suffer, incur, or sustain arising out
of, attributable to, or resulting from, directly or indirectly: (a) any
inaccuracy in or breach of any of the representations and warranties of Parent
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made in this Agreement; and (b) any breach or nonperformance of any of the
covenants or other agreements made by Parent in or pursuant to this Agreement.
11.4 NOTICE OF CLAIMS. Any Indemnified Party seeking indemnification
for any Loss or potential Loss arising from a claim asserted by any party to
this Agreement against the Indemnifying Party (a "CLAIM") shall give written
notice to the Indemnifying Party specifying in detail the source of the Loss or
potential Loss under Section 11.2 or 11.3, as the case may be. Written notice to
the Indemnifying Party of the existence of a Claim shall be given by the
Indemnified Party promptly after the Indemnified Party becomes aware of the
potential claim; PROVIDED, HOWEVER, that the Indemnified Party shall not be
foreclosed from seeking indemnification pursuant to this Article XI by any
failure to provide such prompt notice of the existence of a Claim to the
Indemnifying Party except and only to the extent that the Indemnifying Party
actually incurs an incremental out-of-pocket expense or otherwise has been
materially damaged or prejudiced as a result of such delay. Notwithstanding the
foregoing, the procedures set forth in this Section 11.4 shall not apply to Tax
Contests as defined in Section 7.5(c).
11.5 SURVIVAL OF INDEMNITY. Any matter as to which a claim has been
asserted by formal notice pursuant to Section 11.4 and within the time
limitation applicable by reason of Section 11.1 that is pending or unresolved at
the end of any applicable limitation period under thi0s Article XI or Applicable
Law shall continue to be covered by this Article XI notwithstanding any
applicable statute of limitations (which the parties hereby waive) or the
expiration dates set forth in Section 11.1 until such matter is finally
terminated or otherwise resolved by the parties under this Agreement or by a
court of competent jurisdiction and any amounts payable hereunder are finally
determined and paid.
11.6 LIMITATIONS.
(a) Neither any Management Stockholder or Parent shall have
indemnification obligation under this Agreement until aggregate Losses of such
party and its Affiliates and the successors and assigns of such party and its
Affiliates exceed $10,000, after which time such party shall be liable for the
entire amount of Losses in accordance with the terms hereof, subject to the
limitations in Sections 11.6(b) and 11.9 of this Agreement.
(b) The obligations of Parent under Section 11.3 shall be
limited to $100,000 PROVIDED, however that such limitation shall not apply to
any Loss suffered by the Stockholders as a result of a breach of the
representation in Section 5.2. The obligations of the Management Stockholders
under Section 11.2(b) shall be limited to an aggregate of $100,000; PROVIDED,
however that such limitation shall not apply to any Loss suffered by Parent as a
result of the Split-Off or as a result of a breach of the representation in
Section 3.4, Section 4.5, Section 3.27, or intentional misconduct.
(c) Section 3.27 shall not be deemed breached unless and until
bona fide claims arising from breach of such section, individually or in the
aggregate, equal or exceed $300,000.
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11.7 SUBROGATION. Any Indemnifying Party shall be subrogated to any
right of action which the Indemnified Party may have against any other person
with respect to any matter giving rise to a claim for indemnification hereunder.
11.8 ADJUSTMENTS TO INDEMNIFICATION OBLIGATIONS.
(a) All indemnity payments required to made under this Article
XI by Parent shall be treated as adjustments to the Merger Consideration. Parent
shall satisfy any finally determined Indemnifiable Claim against it by
delivering to the Indemnified Party, at Parent's option, cash or that number of
shares of Parent Common Stock having an aggregate value equal to the amount of
such claim, each such share to be valued for this purpose at the average of the
per share closing prices for the Parent Common Stock on the AMEX for the five
(5) trading days immediately prior to the relevant date of payment or offset.
(b) All computations of indemnity payments due under this
Article XI shall reflect the actual present cash cost of the obligation with
respect to which the indemnity payment relates. If any Indemnified Party
receives a Tax deduction, Tax credit or other Tax benefit ("TAX BENEFIT") by
virtue of having paid or accrued an amount for which an indemnity payment is
provided, the amount of such Tax Benefit will be refunded to the Party making
such indemnity payment when, as and if such Indemnified Party realizes a cash
Tax savings from such Tax Benefit. If for any reason an Indemnified Party has
any Tax imposed on it on account of its receipt of an indemnity payment
including payments pursuant to this sentence ("ADDITIONAL INDEMNITY TAXES"),
such indemnity payment shall be "grossed-up" for the Additional Indemnity Taxes
so that the net payments received by the Indemnified Party will be equal to the
amount of the indemnity payment such Indemnified Party would have received had
no such Additional Indemnity Taxes been imposed.
(c) The amount which any Indemnifying Party is or may be
required to pay any Indemnified Party pursuant to this Article XI shall be
reduced (including, without limitation, retroactively) by any insurance proceeds
or other amounts actually recovered by or on behalf of such Indemnified Party in
reduction of the related Loss. If an Indemnified Party shall have received the
payment required by this Agreement from an Indemnifying Party in respect of a
Loss and shall subsequently actually receive insurance proceeds or other amounts
in respect of such Loss, then such Indemnified Party shall pay to such
Indemnifying Party a sum equal to the amount of such insurance proceeds or other
amounts actually received (net of any expenses in obtaining the same).
11.9 TRIGGERING CONDITIONS FOR ADDITIONAL INDEMNIFICATION. In the event
any of the following of conditions are not satisfied at or before Closing, then
the limitation on indemnification to be paid by the Management Stockholders
provided in Section 11.6(b) shall be equitably increased in respect of any claim
or potential claim in respect of such failed condition, up to a maximum
aggregate limit on indemnification of $300,000:
(a) REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. The
representations and warranties of the Stockholders contained in this Agreement
shall have been true and correct on the date of this Agreement (subject to the
qualifiers contained in the lead-in sentences of Article III and Article IV) and
shall be true and correct at and as of the Closing Date as though
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made at and as of such time (except to the extent that any such representations
and warranties expressly relate only to an earlier time, in which case they
shall have been true and correct at such earlier time); PROVIDED, HOWEVER, that
this condition shall be deemed to have been satisfied unless the individual or
aggregate impact of all inaccuracies of such representations and warranties
(without regard to any materiality or Company Material Adverse Effect
qualifier(s) contained in any individual representation or warranty) could
reasonably be expected to have a material adverse effect on the condition or
prospects (financial or otherwise) of the Company (or, following the Effective
Time, the Surviving Corporation) and its subsidiaries, considered as a whole.
The Company shall have delivered to Parent and Merger Sub a certificate dated as
of the Closing Date, signed by a senior executive officer of the Company, to the
effect set forth in this Section 11.9(a).
(b) PERFORMANCE OF OBLIGATIONS OF THE STOCKHOLDERS AND
COMPANY. The Stockholders and the Company shall have performed in all material
respects all obligations required to be performed by it under this Agreement at
or prior to the Closing Date, and Parent and Merger Sub shall have received a
certificate signed on behalf of the Company by a senior executive officer of the
Company to such effect.
(c) CONSENTS UNDER MATERIAL CONTRACTS. The Company shall have
obtained the consent or approval of each person whose consent or approval shall
be required under any Material Contract, Real Property Lease or other obligation
to which the Company or any Subsidiary is a party, except those for which the
failure to obtain such consents or approvals would not, individually or in the
aggregate, have a Material Adverse Effect.
(d) NO MATERIAL ADVERSE CHANGE. There shall not have occurred
any change in the business of the Company and its subsidiaries since the date of
this Agreement or any other event or circumstance that could reasonably be
expected to have a Company Material Adverse Effect.
(e) DUE DILIGENCE. Parent shall have completed its due
diligence investigations of Company and its Subsidiaries with results
satisfactory to Parent in its sole discretion, and Company and the Stockholder
shall cooperate with Parent and negotiate the resolution of such matters in good
faith.
(f) COMPANY CAPITALIZATION. Company shall have, on the Closing
Date, at least $700,000 in cash and short-term liquid investments.
11.10 REMEDIES. The Indemnification provided for in this Article XI
shall be the exclusive remedy of any Indemnified Person for any breach of or
inaccuracy in any of the representations, warranties and covenants made in this
Agreement or in any certificate, document or instrument delivered pursuant
hereto. Notwithstanding the foregoing, this Article XI shall not restrict the
ability of any party to seek specific performance of this Agreement or any
provision hereof.
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ARTICLE XII.
NOTICES
12.1 NOTICES. All notices and other communications under this Agreement
must be in writing and will be deemed to have been duly given if personally
delivered, by confirmed facsimile transmission, by receipted overnight or
express courier (such as Federal Express) or mailed, by certified mail, return
receipt requested, first-class postage prepaid, to the parties at the following
addresses:
If to Parent or Merger Sub, to:
eResource Capital Group, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Chief Executive Officer
Facsimile: (000) 000-0000
with copies to:
Xxxxxx X. Xxxx, Esq.
Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
If to Stockholders, to such address provided on Exhibit A.
If to the Company, to:
Attention:
Facsimile:
with a copy to:
Xxxxxx X. Xxxxx, Esq.
Xxxxxxxxx & Xxxxxxx LLP
0000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
000-000-0000
000-000-0000 - Fax
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this Article XII if delivered personally will
be deemed given upon delivery, if delivered by facsimile transmission will be
deemed delivered when confirmed, if sent via overnight or express courier will
be deemed delivered as of the next succeeding business day after the date
actually and if delivered by certified mail in the manner described above will
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be deemed given on the third (3rd) business day after the day it is deposited in
a regular depository of the United States mail. Any party from time to time may
change its address for the purpose of notices to that party by giving a similar
notice specifying a new address, but no such notice will be deemed to have been
given until it is actually received by the party sought to be charged with the
contents thereof.
ARTICLE XIII.
MISCELLANEOUS
13.1 ENTIRE AGREEMENT. Except for the documents executed by Parent,
Merger Sub and the Company pursuant hereto, this Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter of this Agreement, and this Agreement (including the exhibits hereto and
other documents delivered in connection herewith) contains the sole and entire
agreement between the parties hereto with respect to the subject matter hereof.
13.2 EXPENSES. Except as provided in Section 10.2, whether or not the
Merger is consummated, each of Parent, Merger Sub, and the Company will pay its
own costs and expenses incident to preparing for, entering into and carrying out
this Agreement and the consummation of the transactions contemplated hereby. In
the event of any lawsuit or other judicial proceeding brought by either party to
enforce any of the provisions of this Agreement, the losing party in such
proceeding shall reimburse the prevailing party's fees and expenses incurred in
connection therewith, including the fees and expenses of its attorneys.
13.3 COUNTERPARTS/FACSIMILE SIGNATURES. This Agreement may be executed
in two (2) or more counterparts, each of which will be deemed an original, but
all of which will constitute one and the same instrument and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties. Any party may deliver an executed copy of
this Agreement and any documents contemplated hereby by facsimile transmission
to another party, and such delivery shall have the same force and effect as any
other delivery of a manually signed copy of this Agreement or of such other
documents.
13.4 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of the parties hereto, and their
respective successors or assigns, and it is not the intention of the parties to
confer third-party beneficiary rights upon any other person.
13.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
13.6 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, and any such assignment that is
not consented to shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective successors and assigns.
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13.7 HEADINGS, GENDER, ETC. The headings used in this Agreement have
been inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (a) words of any gender are deemed to include each
other gender; (b) words using the singular or plural number also include the
plural or singular number, respectively; (c) the terms "hereof," "herein,"
"hereby," "hereto," and derivative or similar words refer to this entire
Agreement; (d) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (e) all references to "dollars" or "$" refer to
currency of the United States of America; (f) the term "person" shall include
any natural person, corporation, limited liability company, general partnership,
limited partnership, or other entity, enterprise, authority or business
organization; and (g) the term "or" is not exclusive.
13.8 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any present or future law, and if
the rights or obligations of Parent, Merger Sub or the Company under this
Agreement will not be materially and adversely affected thereby, (a) such
provision will be fully severable; (b) this Agreement will be construed and
enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom.
13.9 NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, stockholder, incorporator or partner, as such, of Parent,
Merger Sub, the Company or the Surviving Corporation shall have any liability
for any obligations of the parties hereto under this Agreement or for any claim
based on, in respect of or by reason of such obligations or their creation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed and deliver
by the duly authorized officers of Parent, Merger Sub and the Company effective
as of the date first written above.
eRESOURCE CAPITAL GROUP, INC.
By: ____________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
LOGISOFT ACQUISITION CORPORATION
By: ____________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
STOCKHOLDERS:
_________________________________
Name:
Number of Shares:
Date:
LOGISOFT COMPUTER PRODUCTS, CORP.
By: ____________________________
Name:
Title:
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