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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SYNERGEX INTERNATIONAL CORPORATION,
CERTAIN SHAREHOLDERS OF SYNERGEX INTERNATIONAL CORPORATION
RMAG ACQUISITION CORP.
AND
REGISTRY MAGIC INCORPORATED
DATED AS OF FEBRUARY 11, 2000
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 11, 2000 (the
"Agreement"), by and among SYNERGEX INTERNATIONAL CORPORATION, a California
corporation ("SIC"), REGISTRY MAGIC INCORPORATED, a Florida corporation
("RMAG"), and RMAG ACQUISITION CORP., a Delaware corporation ("SUB"), which is a
direct wholly-owned subsidiary of RMAG and, for the limited purposes of Sections
4.2, 4.3, 4.4, 4.5, 4.10, 4.13, 4.16, 4.17, 7.1, 7.3 and Article XI, Xxxxxxx
Xxxx and Xxxxxxx Xxxxxxx shareholders of SIC (each a "SIC Shareholder" and
collectively the "SIC Shareholders") SIC and SUB are hereinafter sometimes
collectively referred to as the "Constituent Corporations."
RECITALS
A. The Boards of Directors of SIC, RMAG and SUB deem it advisable and
in the best interests of each corporation and its respective shareholders that
SIC and RMAG combine in order to advance their long-term business interests, all
upon the terms and subject to the conditions of this Agreement.
B. It is intended that the combination be effected by a merger of SIC
with and into SUB with SUB surviving, which for Federal income tax purposes
shall be a tax-free reorganization described in Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. (a) In accordance with the provisions of this
Agreement, the California General Corporation Law ("CGCL") and the Delaware
General Corporation Law ("DGCL"), at the Effective Time, SIC shall be merged
(the "Merger") with and into SUB, and SUB shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of Delaware. The name of the
Surviving Corporation shall be Synergex International Corporation. At the
Effective Time, the separate existence of SIC shall cease.
(b) The Merger shall have the effects on SIC and SUB, as Constituent
Corporations of the Merger, provided for under the CGCL and DGCL.
Section 1.2 Effective Time. The Merger shall become effective at the
time of filing of, or at such later time as specified in, an agreement of
merger, in the form required by and executed in accordance with the CGCL and the
DGCL, with the Secretary of State of the State of California
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in accordance with the provisions of Sections 1101, 1102 and 1103 of the CGCL
and with the Secretary of State of the State of Delaware in accordance with the
provisions of Section 252 of the DGCL (the "Certificate of Merger"). The date
and time when the Merger shall become effective is herein referred to as the
"Effective Time."
Section 1.3 Articles of Incorporation and Bylaws of Surviving
Corporation. The Certificate of Incorporation and Bylaws of SUB as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until thereafter amended
as provided by law.
Section 1.4 Directors and Officers of Surviving Corporation. (a) The
directors of the Surviving Corporation shall be the same as RMAG at the
Effective Time, consistent with this Agreement and will hold office from and
after the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of Incorporation
and Bylaws of the Surviving Corporation or as otherwise provided by law or their
earlier resignation or removal.
(b) The officers of SIC immediately prior to the Effective Time shall
be the officers of the Surviving Corporation and each will hold office from and
after the Effective Time until their respective successors are duly appointed
and qualify in the manner provided in the Bylaws of the Surviving Corporation or
as otherwise provided by law or their earlier resignation or removal.
Section 1.5 Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Constituent Corporations acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Effect on SIC Shares. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holders thereof:
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(a) The shares of SIC's common stock, no par value (the "SIC Shares"),
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive an aggregate of 1,000,000 shares of RMAG
Common Stock, $.001 par value per share (the RMAG "Common Stock") and shares of
RMAG Series A 6% Cumulative Nonvoting Convertible Preferred Stock having an
aggregate face value of $8,000,000 (the "RMAG Preferred Shares"). In the event
any options held by SIC Shareholders are exercised between the date hereof and
the Effective Date, the number of shares of RMAG Common Stock and RMAG Preferred
Shares to be received by each SIC Shareholder shall be proportionately adjusted
downward. The Articles of Amendment to RMAG's Articles of Incorporation setting
forth the terms and conditions of the RMAG Preferred Stock is attached as
Schedule 2.1 (a) hereto.
(b) All SIC Shares shall be canceled and retired, and each certificate
representing any such SIC Shares shall thereafter (i) represent only the right
to receive the RMAG Common Stock and RMAG Preferred Shares issuable in exchange
for such SIC Shares upon the surrender of such certificates in accordance with
Section 2.4 (and any cash payable in respect of fractional shares) and (ii)
entitle the holder thereof to vote with respect to, and receive dividends on,
such number of whole shares of RMAG Common Stock and RMAG Preferred Shares which
such holder is entitled to receive in exchange for such certificates, provided
that dividends shall be paid to such holder, without interest, only upon
surrender of certificates in accordance with Section 2.4.
(c) Notwithstanding anything to the contrary in this Agreement, any
holder of SIC Shares who shall exercise the rights of a dissenting shareholder
pursuant to and strictly in accordance with the provisions of Sections 1300
through 1312 of the CGCL shall be entitled to receive only the payment therein
provided for and shall not be entitled to receive RMAG Common Stock and RMAG
Preferred Shares. Such payment shall be made directly by the Surviving
Corporation.
Section 2.2 Effect on SIC Options. All outstanding SIC options shall at
the Effective Time be canceled and as soon as practicable following the date of
this Agreement, the SIC Board of Directors shall adopt such resolutions or take
such other actions as may be required to terminate any outstanding SIC options
or option plans.
Section 2.3 SUB Common Stock. Each share of common stock, $.0001 par
value, of SUB issued and outstanding immediately prior to the Effective Time
shall remain outstanding.
Section 2.4 Exchange Procedures. (a) RMAG shall authorize its transfer
agent to act as exchange agent hereunder (the "Exchange Agent") for the purposes
of exchanging certificates representing SIC Shares and shares of RMAG Common
Stock and RMAG Preferred Shares. As promptly as practicable after the Effective
Time, RMAG shall deposit with the Exchange Agent, in trust for the holders of
Certificates (as defined in Section 2.4(b) below), certificates representing the
shares of RMAG Common Stock and RMAG Preferred Shares issuable pursuant to
Section 2.1(a) in exchange for SIC Shares (the "SIC Certificates").
(b) Promptly after the Effective Time, the Exchange Agent shall mail or
cause to be mailed to each record holder, as of the Effective Time, of an
outstanding certificate or certificates
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which immediately prior to the Effective Time represented SIC Shares (the
"Certificates"), a letter of transmittal and instructions for use in effecting
the surrender of the Certificates for exchange therefor. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of transmittal duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor that number of shares of RMAG Common Stock and RMAG Preferred
Shares which such holder has the right to receive under Section 2.1(a) (and any
amount of cash payable in lieu of fractional shares) and such Certificate shall
forthwith be canceled. If any such shares are to be issued to a person other
than the person in whose name the Certificate surrendered in exchange therefor
is registered, it shall be a condition of exchange that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such exchange shall pay any transfer or other
taxes required by reason of the exchange to a person other than the registered
holder of the Certificate surrendered or such person shall establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable.
(c) No dividends or other distributions with respect to the RMAG Common
Stock or RMAG Preferred Shares constituting all or a portion of the
consideration payable to the holders of SIC Shares shall be paid to the holder
of any unsurrendered Certificate representing SIC Shares until such Certificate
is surrendered as provided for in this Section 2.4. Subject to the effect of
applicable laws, following such surrender, there shall be paid, without
interest, to the record holder of the certificates representing RMAG Common
Stock and RMAG Preferred Shares (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
payable prior to or on the date of such surrender with respect to such whole
shares of RMAG Common Stock and RMAG Preferred Shares and not paid, and the
amount of cash payable in lieu of any fractional shares, less the amount of any
withholding taxes which may be required thereon under any provision of federal,
state, local or foreign tax law, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time, but prior to the date of surrender and a payment date subsequent
to the date of surrender payable with respect to such whole shares of RMAG
Common Stock or RMAG Preferred Shares, less the amount of any withholding taxes
which may be required thereon under any provision of federal, state, local or
foreign tax Law. RMAG shall make available to the Exchange Agent cash for these
purposes.
(d) Any portion of the RMAG Common Stock and RMAG Preferred Shares made
available to the Exchange Agent pursuant to Section 2.4(a) that remains
unclaimed by the holders of SIC Shares twelve (12) months after the Effective
Date shall be returned to RMAG, upon demand, and any such holder who has not
exchanged his, her or its SIC Shares in accordance with this Section 2.4 prior
to that time shall thereafter look only to RMAG for his, her or its claim for
RMAG Common Stock and RMAG Preferred Shares, (as the case may be), any cash in
lieu of fractional shares and certain dividends or other distributions. Neither
RMAG nor SUB shall be liable to any holder of SIC Shares with respect to any
RMAG Common Stock and RMAG Preferred Shares (or cash in lieu of fractional
shares) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(e) If any Certificate representing SIC Shares shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen
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or destroyed and, if required by RMAG, the posting by such person of a bond in
such reasonable amount as RMAG may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
consideration payable under Section 2.1(a) and, if applicable, any unpaid
dividends and distributions on shares of RMAG Stock deliverable with respect
thereof and any cash in lieu of fractional shares, in each case pursuant to this
Agreement.
Section 2.5 Fractional Shares. Notwithstanding any other provision of
this Agreement, each holder of SIC Shares who upon surrender of Certificates
therefor would be entitled to receive a fraction of a share of RMAG Common Stock
and RMAG Preferred Shares shall receive, in lieu of such fractional share, cash
in an amount equal to such fraction multiplied by the initial fair market value
of RMAG Common Stock and RMAG Preferred Shares. For purposes of this Agreement,
initial market value means the average of the closing bid and ask price of RMAG
Common Stock for the five trading days ending three trading days immediately
preceding the Closing.
Section 2.6 Transfers. From and after the Effective Time, there shall
be no transfers on the stock transfer books of SIC or the Surviving Corporation
of SIC Shares. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged as provided in this
Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RMAG AND SUB
RMAG and SUB jointly and severally represent and warrant to SIC and
each SIC Shareholder as follows:
Section 3.1 Organization. Each of RMAG and SUB is a corporation duly
organized, validly existing and in good standing under the laws of its
respective State of Incorporation. RMAG owns directly all of the outstanding
capital stock of SUB. Each of RMAG and SUB has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Except as set forth in Schedule 3.1, each of RMAG and
SUB is duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualifications or licenses necessary,
as indicated on Schedule 3.1 except in such jurisdictions where the failure to
be so duly qualified or licensed and in good standing would not individually or
in the aggregate have a material adverse effect on the business, operations,
assets, prospects, financial condition or results of operations of RMAG and
would not delay or prevent the consummation of the transactions contemplated
hereby (an "RMAG Material Adverse Effect"). RMAG previously has delivered to SIC
accurate and complete copies of its Articles of Incorporation and Bylaws, and
SUB's Certificate of Incorporation and Bylaws, each as currently in effect.
Section 3.2 Capitalization. (a) The authorized capital stock of RMAG
consists of 30,000,000 shares of RMAG Common Stock and 5,000,000 shares of RMAG
Preferred Shares. As
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of the date hereof, there are 5,355,405 shares of RMAG Common Stock issued and
outstanding and no shares held in treasury; and no shares of RMAG Preferred
Shares outstanding. As of the date hereof, there were outstanding under the RMAG
Stock Option Plans, or otherwise, RMAG Stock Options entitling the holders
thereof to purchase, in the aggregate, up to 854,756 RMAG Shares. Except as set
forth in Schedule 3.2 or in the RMAG SEC Reports, at the Effective Time there
will not be any existing options, warrants, calls, subscriptions, or other
rights or other agreements or commitments obligating RMAG to issue, transfer or
sell any shares of capital stock of RMAG or any other securities convertible
into or evidencing the right to subscribe for any such shares. All shares of
RMAG Common Stock and RMAG Preferred Shares to be issued at the Effective Time
shall be, when issued, duly authorized and validly issued, fully paid, and
nonassessable and subject to the terms of this Agreement free from liens,
charges, claims and encumbrances. All of the shares of RMAG Common Stock shall
be, when issued upon proper conversion of RMAG Preferred Shares, duly authorized
and validly issued, fully paid and nonassessable and subject to the terms of
this Agreement free from liens, charges, claims and encumbrances.
(b) The authorized capital stock of SUB consists of one hundred (100)
shares of common stock, $.0001 par value, of which one hundred (100) are issued
and outstanding and are validly issued, fully paid and nonassessable. As of the
date hereof, there are no outstanding Sub Stock Options entitling the holders
thereof to purchase SUB Shares. At the Effective Time there will not be any
existing options, warrants, calls, subscriptions, or other rights or other
agreements or commitments obligating SUB to issue, transfer or sell any shares
of capital stock of SUB or any other securities convertible into or evidencing
the right to subscribe for any such shares.
(c) Except for the SUB, RMAG has no subsidiaries.
Section 3.3 Authority. Each of RMAG and SUB has full corporate power
and authority to execute and deliver this Agreement and, subject to the
requisite approval of the shareholders of RMAG, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by the Boards of Directors of RMAG and SUB and by RMAG
as the sole shareholder of SUB, and, except for the requisite approval by the
shareholders of RMAG, no other corporate proceedings on the part of RMAG or SUB
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of RMAG and SUB and, assuming this Agreement constitutes a
legal, valid and binding agreement of SIC and the SIC Shareholders, constitutes
a legal, valid and binding agreement of RMAG and SUB, as the case may be,
enforceable against each of them in accordance with its terms, except as the
enforceability may be affected by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and the possible unavailability of certain equitable
remedies, including the remedy of specific performance.
Section 3.4 No Violations: Consents and Approvals. Except as set forth
on Schedule 3.4, (a) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby nor compliance by RMAG
and SUB with any of the provisions hereof conflicts
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with, violates or results in any breach of (i) subject to obtaining the
requisite approval of RMAG's shareholders, any provision of the Articles of
Incorporation or Bylaws of either of RMAG or the Certificate of Incorporation or
Bylaws of SUB, (ii) any contract, agreement, instrument or understanding to
which RMAG or SUB is a party or by which RMAG, SUB or any of their respective
assets or properties is bound, or (iii) subject to the requisite approval of
RMAG's shareholders any law, judgment, decree, order, statute, rule or
regulation of any jurisdiction or governmental authority (a "Law") applicable to
RMAG or SUB or any of their respective assets or properties, excluding from the
foregoing clauses (ii) and (iii) conflicts, violations or breaches which, either
individually or in the aggregate, would not have an RMAG Material Adverse Effect
or materially impair RMAG's or SUB's ability to consummate the transactions
contemplated hereby or for which RMAG or SUB have received or, prior to the
Merger, shall have received appropriate consents or waivers.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any governmental entity is required by RMAG or SUB in
connection with the execution and delivery of the Agreement or the consummation
by RMAG or SUB of the transactions contemplated hereby, except (i) in
connection, or in compliance, with the provisions of the Securities Act of 1933,
as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) the filing of the Certificate of Merger with
the Secretary of State of the States of California and Delaware, (iii) filings
with, and approval of, the NASDAQ in connection with obligations of RMAG
hereunder, and (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings, the failure of which to be obtained or
made would not, individually or in the aggregate, have an RMAG Material Adverse
Effect, or materially impair the ability of RMAG or SUB to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
Section 3.5 SEC Documents: RMAG Financial Statements. (a) RMAG has
filed with the Securities and Exchange Commission ("SEC") all documents required
to be filed under the Securities Act and the Exchange Act since the effective
date of its initial public offering (the "RMAG SEC Documents"). As of their
respective dates, the RMAG SEC Documents complied in all respects with the
requirements of the Securities Act and the Exchange Act, as the case may be, and
none of the RMAG SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) As of their respective dates, the financial statements of RMAG
included in the RMAG SEC Documents were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto) and
present fairly the consolidated financial position of RMAG as at the dates
thereof and the consolidated results of its operations and statements of
cash-flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein). RMAG's balance sheet included in its Form 10-QSB for the
quarter ended October 31, 1999, shall be referred to as the RMAG Interim Balance
Sheet.
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(c) RMAG has no liability or obligation of any kind (whether contingent
or otherwise and whether due or to become due) except (i) as set forth on
Schedule 3.5, (ii) as set forth on the RMAG Interim Balance Sheet, or (iii) as
incurred in the ordinary course of business, consistent with past practice since
the date of the RMAG Interim Balance Sheet.
Section 3.6 Absence of Certain Changes. Since the date of the RMAG
Interim Balance Sheet, RMAG has been operated only in the ordinary course,
consistent with past practice, and there has not been any adverse change, or any
event, fact or circumstance which might reasonably be expected to result in an
adverse change, in either event that would have a RMAG Material Adverse Effect.
Without limiting the generality of the foregoing, except as set forth on
Schedule 3.6, since October 1, 1999, there has not been with respect to RMAG
any:
(a) sale or disposition of any material asset other than inventory in
the ordinary course;
(b) payment of any dividend, distribution or other payment to any
shareholder of RMAG or to any relative of any such shareholder other than
payments of salary and expense reimbursements made in the ordinary course of
business, consistent with past practice, for employment services actually
rendered or expenses actually incurred;
(c) incurrence or commitment to incur any liability individually or in
the aggregate material to RMAG, except such liabilities under RMAG's existing
credit facilities and liabilities incurred in connection with the Merger;
(d) waiver, release, cancellation or compromise of any indebtedness
owed to RMAG or claims or rights against others, exceeding $50,000 in the
aggregate;
(e) any change in any accounting method, principle or practice except
as required or permitted by generally accepted accounting principles; or
(f) unusual or novel method of transacting business engaged in by RMAG
or any change in RMAG's accounting procedures or practices or its financial or
equity structure.
Section 3.7 Proxy Statement/Prospectus Registration Statement. None of
the information regarding RMAG and SUB to be supplied by RMAG and SUB for
inclusion or incorporation by reference in (i) the registration statement on
Form S-4 (as it may be amended or supplemented from time to time, the
"Registration Statement") relating to RMAG Common Stock to be issued in
connection with the Merger and the shares of Common Stock to be issued upon
conversion of the RMAG Preferred Shares or (ii) the proxy statement to be
distributed in connection with the shareholders meeting of RMAG and SIC
contemplated by Section 5.5 (as it may be amended or supplemented from time to
time, the "Proxy Statement" and together with the prospectus to be included in
the Registration Statement, the "Proxy Statement/Prospectus") will, in the case
of the Registration Statement, at the time it becomes effective and at the
Effective Time, and, in the case of the Proxy Statement, at the time of its
mailing to shareholders of RMAG and SIC and at the time of their respective
shareholders' meetings, contain any untrue statement of a material fact or omit
to
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state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading in light of the circumstances when
made. If at any time prior to the Effective Time any event with respect to RMAG
or SUB shall occur which is required to be described in the Proxy Statement or
Registration Statement, such event shall be so described, and an amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the shareholders of RMAG and SIC. The Proxy Statement and the
Registration Statement will (with respect to RMAG) comply as to form in all
material respects with the provisions of the Securities Act and the Exchange
Act.
Section 3.8 Broker's Fees. Except as set forth on Schedule 3.8, neither
RMAG nor SUB nor any of RMAG's affiliates or their respective officers,
directors or agents has employed any broker, finder or financial advisor or
incurred any liability for any broker's fees, commissions, or financial advisory
or finder's fees in connection with any of the transactions contemplated by this
Agreement.
Section 3.9 Environmental Matters. RMAG has complied in all material
respects with, and has not been cited for any violation of, federal, state and
local environmental protection laws and regulations; and no material capital
expenditures will be required for compliance with any federal, state or local
laws or regulations now in force relating to the protection of the environment.
As used in this section, "hazardous material" means any hazardous or toxic
substance, material or waste that is regulated by any federal authority or by
any state or local authority where the substance, material or waste is located.
There are no underground storage tanks located on the real property owned by
RMAG, nor is RMAG aware of any underground storage tanks on the real property
leased by RMAG in which any hazardous material has been or is being stored, nor
has there been any spill, disposal, discharge or release of any hazardous
material into, upon or over that real property or into or upon ground or surface
water on that real property. There are no asbestos-containing materials
incorporated into the buildings or interior improvements that are part of the
real property or into other assets owned by RMAG, nor is there any electrical
transformer, fluorescent light fixture with ballasts or other equipment
containing polychlorinated biphenyls on the real property owned by RMAG. RMAG is
not aware of any asbestos-containing materials incorporated into the buildings
or interior improvements that are part of the real property or into other assets
leased by RMAG, nor is RMAG aware of any electrical transformer, fluorescent
light fixture with ballasts or other equipment containing polychlorinated
biphenyls on the real property leased by RMAG.
Section 3.10 Compliance With Laws. Except as set forth on Schedule
3.10, RMAG is not or has not conducted its business in violation of any Law,
including without limitation, any Law pertaining to environmental protection,
occupational health or safety, or employment practices except the violation of
which would not have an RMAG Material Adverse Effect.
Section 3.11 No Litigation. Except as set forth in the RMAG SEC
Documents or on Schedule 3.11, there is no claim, litigation, investigation or
proceeding by any person or governmental authority pending or, to RMAG's
knowledge threatened, against RMAG. There are no pending or, to RMAG's
knowledge, threatened controversies or disputes with, or grievances or claims
by, any employees or former employees of RMAG or any of its respective
predecessors of
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any nature whatsoever, including, without limitation, any controversies,
disputes, grievances or claims with respect to their employment, compensation,
benefits or working conditions, except for such litigation which would not have
a RMAG Material Adverse Effect.
Section 3.12 Absence of Certain Business Practices. Neither RMAG nor
any director, officer, employee or agent of the foregoing, nor any other person
acting on its behalf, directly or indirectly, has to RMAG's knowledge given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person which (i) might subject RMAG to any damage
or penalty in any civil, criminal or governmental litigation or proceeding, (ii)
if not given in the past, might have had a RMAG Material Adverse Effect, or
(iii) if not continued in the future, might have a RMAG Material Adverse Effect
or which might subject RMAG to suit or penalty in any private or governmental
litigation or proceeding.
Section 3.13 Knowledge. The term "to RMAG's knowledge" shall mean the
actual knowledge of each director and officer of RMAG.
Section 3.14 No Undisclosed Information. No provision of this Article
IV or any Schedule or any document or agreement furnished by RMAG contains any
untrue statement of a material fact, or omits to state a material fact necessary
in order to make the statement contained herein, in light of the circumstances
under which such statements are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SIC AND SIC SHAREHOLDERS
SIC represents and warrants to RMAG and SUB as follows, and for the
limited purposes of Sections 4.2, 4.3, 4.4, 4.5, 4.10, 4.13, 4.15 and 4.17, each
of the SIC Shareholders severally represent and warrant as follows:
Section 4.1 Organization. (a) SIC is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. SIC is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualifications or licenses necessary, as
indicated on Schedule 4.1, except in such jurisdictions where the failure to be
so duly qualified or licensed and in good standing would not individually or in
the aggregate have a material adverse effect on the business, operations,
assets, prospects, financial condition or results of operations of SIC and would
not delay or prevent the consummation of the transactions contemplated hereby (a
"SIC Material Adverse Effect").
(b) SIC previously has delivered to RMAG accurate and complete copies
of SIC's Articles of Incorporation and Bylaws, each as currently in effect.
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Section 4.2 Capitalization. (a) The authorized capital stock of SIC
consists of 1,500,000 SIC Shares. As of the date hereof, there are 779,750 SIC
Shares issued and outstanding. As of the date hereof, there were outstanding
under the SIC Stock Option Plans, all of which are listed on Schedule 4.2, SIC
Stock Options entitling the holders thereof to purchase, in the aggregate, up to
144,417 SIC Shares. Except as set forth on Schedule 4.2, at the Effective Time,
there will not be any existing options, warrants, calls, subscriptions, or other
rights or other agreements or commitments obligating SIC to issue, transfer or
sell any shares of capital stock of SIC or any other securities convertible into
or evidencing the right to subscribe for any such shares. All issued and
outstanding SIC Shares are, and all SIC Shares issued and outstanding at the
Effective Time shall be, duly authorized and validly issued, fully paid and
non-assessable and subject to the terms of this Agreement free from all liens,
charges, claims and encumbrances.
(b) SIC has no subsidiaries.
Section 4.3 Authority. SIC has full corporate power and authority to
execute and deliver this Agreement and, subject to the requisite approval of the
Merger and the adoption of this Agreement by SIC's shareholders, to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by SIC's Board of Directors and, except for the
requisite approval of the Merger and the adoption of this Agreement by SIC's
shareholders, no other corporate proceedings on the part of SIC are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
SIC's Board of Directors has determined that the transactions contemplated by
this Agreement, including the Merger, are in the best interests of SIC and its
shareholders and, except as provided in Section 5.2 below, have determined to
recommend to such shareholders that they vote in favor of this Agreement and the
consummation of the transactions contemplated hereby, including the Merger. This
Agreement has been duly and validly executed and delivered by SIC and the SIC
Shareholders, and assuming this Agreement constitutes a legal, valid and binding
agreement of RMAG and SUB, constitutes a legal, valid and binding agreement of
SIC and the SIC Shareholders, as the case may be, enforceable against each of
them in accordance with its terms, except as the enforceability may be affected
by applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and the
possible unavailability of certain equitable remedies, including the remedy of
specific performance.
Section 4.4 No Violations; Consents and Approvals. Except as set forth
on Schedule 4.4, (a) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby nor compliance by SIC
and the SIC Shareholders with any of the provisions hereof conflicts with,
violates or results in any breach of (i) subject to obtaining the requisite
approval of SIC's shareholders, any provision of the Articles of Incorporation
or Bylaws of SIC, (ii) any contract, agreement, instrument or understanding to
which SIC, or any SIC Shareholder is a party, or by which SIC, any SIC
Shareholder or any of their respective assets or properties is bound, or (iii)
subject to the requisite approval of SIC's shareholders, any Law applicable to
SIC, any SIC Shareholder or any of their respective assets or properties,
excluding from the foregoing clauses (ii) and (iii) conflicts, violations or
breaches which, either individually or in the aggregate, would not
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have a SIC Material Adverse Effect or materially impair SIC's or SIC
Shareholder's ability to consummate the transactions contemplated hereby or for
which SIC or SIC Shareholders have received or, prior to the Merger, shall have
received appropriate consents or waivers.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any governmental entity is required by SIC in connection
with the execution and delivery of the Agreement or the consummation by SIC of
the transactions contemplated hereby, except (i) the filing of the appropriate
merger documents with the Secretary of State of the States of California and
Delaware and (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings, the failure of which to be obtained or
made would not, individually or in the aggregate, have a SIC Material Adverse
Effect, or materially impair the ability of SIC to perform its obligations
hereunder or prevent the consummation of any of the transactions contemplated
hereby.
Section 4.5 Financial Statements. (a) Set forth as Schedule 4.5 are
(a)(i) audited balance sheets, statements of income, changes in shareholders'
equity and cash flows of SIC for the fiscal years ended December 31, 1998 and
(ii) unaudited balance sheet, statements of income, changes in shareholders'
equity and cash flows of SIC for the twelve month period ended December 31,
1999. Schedule 4.5 is accurate and complete, was prepared in accordance with
generally accepted accounting principals applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto) presents fairly the consolidated financial position and results of
operation of SIC as at the dates thereof and for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
The audited balance sheet as of December 31, 1998 is sometimes herein referred
to as the "SIC Balance Sheet." The unaudited balance sheet at December 31, 1999
is sometimes herein referred to as the "SIC Interim Balance Sheet."
(b) SIC has no liability or obligation of any kind (whether contingent
or otherwise and whether due or to become due) except (i) as set forth on
Schedule 4.5, (ii) as set forth on the SIC Interim Balance sheet, or (iii) as
incurred in the ordinary course of business, consistent with past practice since
the date of the SIC Interim Balance Sheet.
Section 4.6 Absence of Certain Changes. Since the date of the SIC
Interim Balance Sheet, SIC has been operated only in the ordinary course,
consistent with past practice, and there has not been any adverse change, or any
event, fact or circumstance which might reasonably be expected to result in an
adverse change, in either event that would have an SIC Material Adverse Effect.
Without limiting the generality of the foregoing, except as set forth on
Schedule 4.6, since January 1, 2000, there has not been with respect to SIC any:
(a) sale or disposition of any material asset other than inventory in
the ordinary course;
(b) payment of any dividend, distribution or other payment to any
Shareholder of SIC or to any relative of any such Shareholder other than
payments of salary and expense
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reimbursements made in the ordinary course of business, consistent with past
practice, for employment services actually rendered or expenses actually
incurred;
(c) incurrence or commitment to incur any liability individually or in
the aggregate material to SIC, except such liabilities under SIC's existing
credit facilities and liabilities incurred in connection with the Merger;
(d) waiver, release, cancellation or compromise of any indebtedness
owed to SIC or claims or rights against others, exceeding $50,000 in the
aggregate;
(e) any change in any accounting method, principle or practice except
as required or permitted by generally accepted accounting principles; or
(f) unusual or novel method of transacting business engaged in by SIC
or any change in SIC's accounting procedures or practices or its financial or
equity structure.
Section 4.7 Proxy Statement Prospectus; Registration Statement. None of
the information regarding SIC to be supplied by SIC for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement
will, in the case of the Registration Statement at the time it becomes effective
and at the Effective Time, and in the case of the Proxy Statement, at the time
it is first mailed to shareholders of RMAG or SIC and at the time of their
respective shareholders meetings, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading in light of the
circumstances when made. If at any time prior to the Effective Time any event
with respect to SIC shall occur which is required to be described in the Proxy
Statement or Registration Statement, such event shall be so described, and an
amendment or supplement shall be promptly filed with the SEC and, as required by
law, disseminated to the shareholders of RMAG and SIC. The Proxy Statement and
the Registration Statement will (with respect to SIC) comply as to form in all
material respects with the provisions of the Securities Act and the Exchange
Act.
Section 4.8 State Antitakeover Statutes. The SIC Board of Directors has
approved this Agreement and the transactions contemplated hereby and such
approval constitutes approval of the Merger and the other transactions
contemplated hereby, including approval of the voting agreement (as defined in
Section 5.13 below) by the SIC Board of Directors as required by the CGCL. No
"business combination," "moratorium," "control share," "fair price," "interested
shareholder," affiliated transactions" or other state antitakeover statute or
regulation (i) prohibits or restricts SIC's ability to perform its obligations
under this Agreement (or any party's ability to perform their obligations under
the voting agreement) or either party's ability to consummate the Merger or to
the other transactions contemplated hereby or thereby, (ii) would have the
effect of invalidating or voiding this Agreement or the voting agreement or any
provision hereof, or (iii) would subject RMAG or SUB to any material impediment
or condition in connection with the exercise of any of their respective rights
under this Agreement.
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Section 4.9 Broker's Fees. Neither SIC nor any of its affiliates or
their respective officers, directors or agents has employed any broker, finder
or financial advisor or incurred any liability for any broker's fees,
commissions, financial advisory or finder's fees in connection with any of the
transactions contemplated by this Agreement.
Section 4.10 Environmental Matters. SIC has complied in all material
respects with, and has not been cited for any violation of, federal, state and
local environmental protection laws and regulations; and no material capital
expenditures will be required for compliance with any federal, state or local
laws or regulations now in force relating to the protection of the environment.
As used in this section, "hazardous material" means any hazardous or toxic
substance, material or waste that is regulated by any federal authority or by
any state or local authority where the substance, material or waste is located.
There are no underground storage tanks located on the real property owned by SIC
nor is SIC aware of any underground storage tanks on the real property leased by
SIC in which any hazardous material has been or is being stored, nor has there
been any spill, disposal, discharge or release of any hazardous material into,
upon or over that real property or into or upon ground or surface water on that
real property. There are no asbestos-containing materials incorporated into the
buildings or interior improvements that are part of the real property or into
other assets owned by SIC, nor is there any electrical transformer, fluorescent
light fixture with ballasts or other equipment containing polychlorinated
biphenyls on the real property owned by SIC. SIC is not aware of any
asbestos-containing materials incorporated into the buildings or interior
improvements that are part of the real property or into other assets leased by
SIC, nor is SIC aware of any electrical transformer, fluorescent light fixture
with ballasts or other equipment containing polychlorinated biphenyls on the
real property leased by SIC.
Section 4.11 Contracts. Schedule 4.11 sets forth a complete and
accurate list or description of:
(a) All contracts to which SIC is a party or by which it is bound which
(i) involve amounts in excess of $100,000 or payments based on profits or sales,
(ii) are not cancelable by SIC upon 30 days' notice or less, or (iii) involve
terms or quantities exceeding normal commitments in the ordinary course of
business.
(b) All contracts with wholesalers, distributors, dealers, sales
representatives, or cooperative associations to which SIC is a party or by which
it is bound and which involve amounts in excess of $100,000.
(c) All contracts with any federal, state or local governmental
authorities, agencies or subdivisions to which SIC is a party or by which it is
bound and which involve amounts in excess of $100,000.
(d) All contracts for the past or present disposal of hazardous or
infectious waste or other materials to which SIC is (or to SIC's knowledge was)
a party or by which it is (or to SIC's knowledge was) bound.
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(e) All employment, consulting, management, or agency contracts to
which SIC is a party or by which it is bound.
(f) All contracts containing an obligation of confidentiality with
respect to information furnished by SIC to a third party, or received by either
from a third party.
(g) All contracts limiting the freedom of SIC to compete in any line of
business, or with any person, or in any geographic area or market.
(h) All contracts providing for the present or future lease (whether as
lessee or lessor), purchase or sale of real property by SIC.
With respect to each contract set forth on Schedule 4.11, except as set
forth on Schedule 4.11: (i) each is legal, valid, binding and enforceable
against SIC, and to SIC's knowledge, against each other party thereto, and is in
full force and effect; (ii) each will continue to be legal, valid, binding and
enforceable against SIC, and to SIC's knowledge, against each other party
thereto, and will continue to be in full force and effect immediately following
the Effective Date in accordance with the terms thereof as in effect prior to
the Effective Date; and (iii) neither SIC nor to SIC's knowledge, any other
party, is in breach or default, and no event has occurred which, with notice or
lapse of time, or both, would constitute a breach or default or permit
termination, modification or acceleration under any such contract. SIC has not
been party to any discussions or received any correspondence concerning breach
or termination of any of the foregoing and, to SIC's knowledge, there is no
default under, or any violation of, any of the foregoing by any other party
thereto. SIC has performed all obligations required to be performed by it to
date and is not in default under any of the contracts, agreements, leases or
other documents to which it is a party. SIC has delivered or caused to be
delivered to, RMAG copies of each such contract listed on Schedule 4.11. Since
the date of the SIC Interim Balance Sheet, there has been no material
modification or termination of any such contract nor, to SIC's knowledge, is any
such modification or termination contemplated.
Section 4.12 Compliance With Laws. SIC is not or has not conducted its
business in violation of any Law, including without limitation, any Law
pertaining to environmental protection, occupational health or safety, or
employment practices except the violation of which would not have an SIC
Material Adverse Effect.
Section 4.13 No Litigation. There is no claim, litigation,
investigation or proceeding by any person or governmental authority pending or,
to SIC's knowledge threatened, against SIC. There are no pending or, to SIC's
knowledge, threatened controversies or disputes with, or grievances or claims
by, any employees or former employees of SIC or any of its respective
predecessors of any nature whatsoever, including, without limitation, any
controversies, disputes, grievances or claims with respect to their employment,
compensation, benefits or working conditions, except for such litigation which
would not have an SIC Material Adverse Effect.
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Section 4.14 Inventories. Except as set forth on Schedule 4.14, the
inventories reflected on the SIC Interim Balance Sheet are sufficient to cover
the immediate needs of SIC in the ordinary course of business as conducted by
SIC prior to the execution hereof.
Section 4.15 Permits and Licenses. Schedule 4.15 lists all permits,
licenses, approvals or authorizations of any government authority required to
conduct the business of SIC as currently conducted (the "Permits"). Except as
set forth on Schedule 4.15, all such Permits have been legally obtained and
maintained by SIC and are in full force and effect.
Section 4.16 Employee Benefits. All employee welfare benefit plans as
defined in Section 3(1) of the Employee Retirement Income Security Act of 1974
("ERISA"), employee pension benefit plans as defined in Section 3(2) of ERISA,
and all other employee benefit programs or arrangements of any type, written or
unwritten (collectively, the "Plans") maintained by SIC or to which SIC
contributes are listed on Schedule 4.16. In addition, Schedule 4.16 separately
sets forth any Plans which SIC, or any affiliate or predecessor of SIC,
maintained or contributed to within the six years preceding the date hereof.
(a) The Plans comply, with all applicable provisions of all Laws,
including, without limitation, the Code and ERISA, and have so complied during
all prior periods during which any such provisions were applicable. Without
limiting the foregoing, all of the Plans, and any related trust, intended to
meet the requirements for tax-favored treatment under the Code (including,
without limitation, Sections 401 and 501 and Subchapter B of the Chapter 1 of
the Code) meets and for all prior periods has met, such requirements in all
material respects.
(b) SIC and any other party involved in the administration of any of
the Plans (i) has complied in all material respects with the provisions of
ERISA, the Code or other Laws, applicable to such party, whether as an employer,
plan sponsor, plan administrator, or fiduciary of any of the Plans or otherwise,
(including without limitation the provisions of ERISA and the Code concerning
prohibited transactions), and (ii) has administered the Plans in accordance with
the terms. SIC has made all contributions required of it by any Law (including,
without limitation, ERISA) or contract under any of the Plans and no unfunded
liability exists with respect to any of the Plans.
(c) SIC has no responsibility or liability, contingent or otherwise,
with respect to any Plans or any employee benefits other than under the Plans
listed on Schedule 4.16. SIC has the right to amend or terminate, without the
consent of any other person, any of the Plans, except as prohibited by law and
any applicable collective bargaining agreement. Neither SIC, nor any affiliate
or predecessor of SIC, maintains or has ever maintained or been obligated to
contribute to (i) any defined benefit pension plan (as such term is defined in
Section 3(35) of ERISA), (ii) any multiemployer plan (as such term is defined in
Section 3(37) of ERISA), (iii) any severance plan or policy, or (iv) any
arrangement providing medical or other welfare benefits to retirees or other
former employees or their beneficiaries, except as required under part 6 of
Subtitle B of Title I of ERISA or Section 4980B(f) of the Code (hereinafter
collectively referred to as "COBRA").
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(d) There are no actions, suits or claims pending (other than routine
claims for benefits) or, to SIC's knowledge, any actions, suits, or claims
(other than routine claims for benefits) which could reasonably be expected to
be asserted, against any of the Plans, or the assets thereof, or against SIC or
any other party with respect to any of the Plans.
Section 4.17 Taxes. (a) SIC has duly filed with the appropriate
federal, state, local and foreign taxing authorities all Tax Returns (as defined
below) required to be filed by or with respect to SIC on or before the date
hereof. SIC has included its federal income Tax Returns for all periods ended on
or before December 31, 1998. All such Tax Returns are true, correct and complete
in all material respects as of the time of filing. SIC, with respect to the
federal income Tax Returns, and, with respect to any other Tax Returns, has paid
in full on a timely basis all Taxes (as defined below) due on such Tax Returns
or such Taxes that are otherwise due, except to the extent such Tax is being
contested in good faith through appropriate proceedings and for contested Taxes
only which adequate reserves have been established on the SIC Interim Balance
Sheet. Except as set forth on Schedule 4.17, the balance for accrued Taxes on
the SIC Interim Balance Sheet for the payment of accrued but unpaid Taxes
through the date thereof is correct and the amount of SIC's liability for unpaid
Taxes shall not exceed such balance for accrued but unpaid Taxes of the Group
and SIC, respectively. The balance of accrued Taxes have been determined in
accordance with generally accepted accounting principles, applied on a
consistent basis. All monies which SIC was required by Law to withhold from
employees have been withheld and either timely paid to the proper governmental
authority or set aside in accounts for such purposes and accrued on the books of
SIC.
(b) SIC has never been a member of an affiliated group filing
consolidated returns.
(c) (i) SIC has not received any notice of a deficiency or assessment
with respect to Taxes of SIC from any taxing authority which has not been fully
paid or finally settled, except to the extent any such deficiency or assessment
is being contested in good faith through appropriate proceedings and for which
adequate reserves have been established on the SIC Interim Balance Sheet; (ii)
there are no ongoing audits or examinations of any Tax Return relating to SIC
and no notice (oral or written) of audit or examination of any such Tax Return
has been received by SIC; (iii) In the last three years, the federal income Tax
Returns of SIC have not been audited by the Internal Revenue Service; and (iv)
To SIC's knowledge, no issue has been raised (either in writing or verbally,
formally or informally) on audit or in any other proceeding (and is currently
pending) with respect to Taxes of SIC by any taxing authority which, if resolved
against SIC, would have a SIC Material Adverse Effect. SIC has disclosed on its
federal income tax returns all positions taken therein that, SIC believes could
give rise to a substantial understatement penalty within the meaning of Code
Section 6662.
(d) SIC is not (nor has it ever been) a party to any tax sharing
agreement and has not assumed the liability for taxes of any other person under
law or contract.
(e) SIC (i) has not filed a consent pursuant to Code Section 341(f) nor
agreed to have Code Section 341(f)(2) apply to any disposition of a subsection
(f) asset (as such term is defined in Code Section 341(f)) owned by SIC; (ii)
has not agreed, or is not required, to make any adjustment
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under Code Section 481(a) by reason of a change in accounting method or
otherwise initiated by SIC that will affect the liability of SIC for Taxes;
(iii) has not made an election, or is required, to treat any asset of SIC as
owned by another person pursuant to the provisions of former Code Section
168(f)(8); (iv) is not now or has ever been a party to any agreement, contract,
arrangement, or plan that would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Code Section
280G; (v) has not participated in an international boycott as defined in Code
Section 999; (vi) is not now or has ever been a "foreign person" within the
meaning of Code Section 1445(b)(2); (vii) is not now or has ever been a United
States real property holding corporation within the meaning of Code Section
897(c)(1)(A)(ii); or (viii) has not made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state or local
tax provision.
(f) SIC is not required to report or pay any additional Taxes from any
joint venture, partnership or other arrangement or contract limited liability
company that could be treated as a partnership for federal income tax purposes.
(g) For purposes of this Section 4.17, the following terms shall have
the meaning given to them below:
(i) "Tax" means any of the Taxes, and "Taxes" means, with respect
to SIC, (i) all income taxes (including any tax on or based upon net income, or
gross income, or income as specially defined, or earnings, or profits, or
selected items of income, earnings or profits) and all gross receipts,
estimated, sales, use, ad valorem, transfer, franchise, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
windfall profits, environmental (including taxes under Code Section 59A),
alternative, add-on minimum, custom duties, capital stock, social security (or
similar), unemployment, disability, or other taxes, fees assessments, or charges
of any kind whatsoever, together with any interest, penalty, or addition
thereto, whether disputed or not, imposed by any taxing authority on the Group,
and (ii) any liability for payment of any amount of the Tax described in the
immediately preceding clause (i) as a result of being a "transferee" (within the
meaning of Code Section 6901 or any other applicable law) of another person or
successor, by contract, or otherwise, or a member of an affiliated,
consolidated, or combined group.
(ii) "Tax Return" means any return, declaration, report, claim or
refund, or information return or statement or other document (including any
related or supporting information) filed or required to be filed with any
appropriate federal, state, local and foreign governmental entity or authority
(individually or collectively, "taxing authority") or other authority in
connection with the determination, assessment or collection of any Tax paid or
payable by the Group or the administration of any Laws, regulations, or
administrative requirements relating to any such Tax.
Section 4.18 Customers. Except as set forth on Schedule 4.8, no
material customer served by SIC has, since December 31, 2000, canceled or
otherwise terminated, or to SIC's knowledge, made any threat to cancel or
otherwise terminate, its relationship with SIC. SIC has no knowledge that any
material customer is dissatisfied in any material respect with the performance
of SIC, or any
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of its employees or that any such customer intends to cancel or otherwise
terminate its relationship or to materially decrease its purchase of products
and/or services.
Section 4.19 Absence of Certain Business Practices. Neither SIC nor any
director, officer, employee or agent of the foregoing, nor any other person
acting on its behalf, directly or indirectly, has to SIC's knowledge given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person which (i) might subject SIC to any damage
or penalty in any civil, criminal or governmental litigation or proceeding, (ii)
if not given in the past, might have had a SIC Material Adverse Effect, or (iii)
if not continued in the future, might have a SIC Material Adverse Effect or
which might subject SIC to suit or penalty in any private or governmental
litigation or proceeding.
Section 4.20 Intellectual Property. (a) Schedule 4.20(a) sets forth a
correct and complete list of (i) all U.S. and foreign trademarks, patents,
service marks, trade names, copyrights, mask works and designs which are
pending, applied for, granted, or registered in any country or jurisdiction of
the world and are owned by SIC and used in connection with its business; (ii)
all unregistered trademarks, patents, service marks, and trade names which are
owned by SIC and used in connection with its business; and (iii) all licenses,
contracts, permissions and other agreements relating to the business to which
SIC is a party relating in any way to rights in any of the foregoing. Except as
set forth on Schedule 4.20(a), title to all registered intellectual property is
recorded on records in the name of SIC and, to the extent applicable, all
affidavits of continued use and incontestability in respect of such registered
intellectual property have been timely filed.
(b) Except as disclosed and set forth on Schedule 4.20(b), (i) SIC owns
or possesses licenses or other valid rights to use, and upon consummation of the
transactions contemplated by this Agreement, the Surviving Corporation shall own
or possess licenses or other valid rights to use (without the making of any
payment to others or the obligation to grant rights to others in exchange), all
intellectual property necessary to the conduct of the business of SIC as
currently conducted, including, without limitation, all releases required in
connection with quotes, testimonials or likenesses utilized in editorial or
promotional material; (ii) SIC's right title and interest in such intellectual
property is not being opposed by any claim or demand or in any proceeding,
action, litigation or order to which SIC or any person or entity who has granted
a license or other right to use intellectual property to SIC or who has been
granted a license or other right to use intellectual property by SIC, is a party
or subject, nor to the knowledge of SIC is any such claim, demand, proceeding,
action, litigation, or court order threatened; and (iii) the conduct of the
business of SIC as currently conducted does not materially infringe or conflict
with any intellectual property of others.
Section 4.21 Insurance. SIC believes, on the basis of advice of
insurance advisors, that SIC carries insurance covering its assets, business,
equipment, properties, operations, employees, officers and directors of the type
and in amounts customarily carried by persons conducting business similar to
that of SIC. All such policies are in full force and effect and all premiums
have been paid to the extent they are due. Schedule 4.21 set forth a schedule of
each policy, the amount of coverage and the nature thereof.
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Section 4.22 Required Vote of SIC Shareholders. The affirmative vote of
the holders of a majority of the outstanding SIC Shares is required to approve
the Merger. No other vote of the shareholders of SIC is required by Law, the
Articles of Incorporation or Bylaws of SIC or otherwise in order for SIC to
consummate the Merger and the transactions contemplated hereby.
Section 4.23 Knowledge. The term "to SIC's knowledge" shall mean the
actual knowledge of each director and officer of SIC and, where applicable, each
SIC Shareholder.
Section 4.24 Labor. SIC has not experienced any strike, collective
labor agreements, or the collective bargaining disputes or claims of unfair
labor practices in the last five years. To SIC's knowledge, there is no
organizational effort presently being made by or on behalf of any labor union
with respect to the employees of SIC.
Section 4.25 No Undisclosed Information. No provision of this Article
IV or any Schedule or any document or agreement furnished by SIC or the SIC
Shareholders contains any untrue statement of a material fact, or omits to state
a material fact necessary in order to make the statement contained herein, in
light of the circumstances under which such statements are made, not misleading.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business of SIC and RMAG. Except as contemplated
by this Agreement or as expressly agreed to in writing by the other party,
during the period from the date of this Agreement to the Effective Time, SIC and
RMAG will each conduct their operations substantially as presently operated and
only in the ordinary course of business, in a normal manner consistent with past
practices and will use commercially reasonable efforts to preserve intact their
business organization, to keep available the services of their officers and
employees and to maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with it and
will take no action which would adversely affect its ability to consummate the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, except as otherwise expressly provided in this Agreement, prior
to the Effective Time neither SIC nor RMAG will, without the prior written
consent of the other:
(a) amend its Articles of Incorporation or Bylaws;
(b) authorize for issuance, issue, sell, deliver, grant any options
for, or otherwise agree or commit to issue, sell or deliver any shares of its
capital stock or any securities convertible into shares of its capital stock,
other than pursuant to and in accordance with the terms of its stock option
plans;
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(c) recapitalize, split, combine or reclassify any shares of its
capital stock; declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock; or purchase, redeem or otherwise acquire any shares of its
own capital stock;
(d) (i) create, incur, assume, maintain or permit to exist any
long-term debt or any short-term debt for borrowed money other than under
existing lines of credit, relating to purchase money security interests or
obligations as a lessee under leases recorded as capital leases, each as
incurred in the ordinary course of business; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practices; or (iii) make any loans,
advances or capital contributions to, or investments in, any other person;
(e) (i) increase in any manner the rate of compensation of any of its
directors, officers or other employees, except in the ordinary course of
business and in accordance with its customary past practices or as otherwise may
be contractually required; or (ii) pay or agree to pay any bonus, pension,
retirement allowance, severance or other employee benefit except as required
under currently existing employee benefit plans or in the RMAG SEC Documents;
(f) except as set forth on Schedule 5.1, sell or otherwise dispose of,
or encumber, or agree to sell or otherwise dispose of or encumber, any assets
other than inventory in the ordinary course of business;
(g) enter into any other agreement, commitment or contract, except
agreements, commitments or contracts for the purchase, sale or lease of goods or
services in the ordinary course of business consistent with past practice;
(h) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle or an
agreement with respect to, any (i) plan of liquidation or dissolution, (ii)
acquisition of a material amount of assets or securities, (iii) disposition of a
material amount of assets or securities or (iv) material change in its
capitalization, or enter into a material contract or any amendment or
modification of any material contract or release or relinquish any material
contract right;
(i) SIC shall not cancel any insurance policy referred to in Section
4.22;
(j) engage in any unusual or novel method of transacting business or
change any accounting procedure or practice or its financial structure; or
(k) take any action the taking of which, or omit to take any action the
omission of which, would cause any of the representations and warranties herein
to fail to be true and correct in all respects as of the date of such action or
omission as though made at and as of the date of such action or omission.
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Section 5.2 No Solicitation. SIC and RMAG each agrees that, prior to
the Effective Time, except as provided below it shall not, and shall not
authorize or permit any of its directors, officers, employees, agents or
representatives to, directly or indirectly, solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing information), or take
any other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to any Transaction Proposal
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Transaction Proposal or agree to or endorse any Transaction Proposal or
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it to take any such action; provided, however, that
nothing contained in this Agreement shall prohibit the SIC or RMAG Boards of
Directors, respectively, from, (i) furnishing information to or entering into
discussions or negotiations with any person or entity that makes an unsolicited
written, bona fide Transaction Proposal which the SIC or RMAG Board of
Directors, as the case may be, determines in good faith that such action is
necessary for the SIC or RMAG Board of Directors to comply with its fiduciary
duties to shareholders under applicable law or (ii) withdrawing, modifying or
changing its recommendation referred to in Section 4.3 if there exists a
Transaction Proposal and the SIC or RMAG Board of Directors, as the case may be,
and based upon the advise of independent legal counsel, determines in good faith
that such action is necessary for the SIC or RMAG Board of Directors to comply
with its fiduciary duties to shareholders under applicable law in connection
with such Transaction Proposal. SIC or RMAG, as the case may be, shall
immediately advise the other parties to this Agreement, orally and in writing,
of any inquiries or proposals relating to an Transaction Proposal known to it,
the material terms and conditions of such inquiry or proposal, and the identity
of the person or entity making such inquiry or proposal. SIC or RMAG, as the
case may be, shall give the other parties to this Agreement at least two (2)
business days advance notice of any information to be supplied to, and at least
three (3) days' advance notice of any agreement to be entered into with any
person or entity making such a proposal for a Transaction Proposal with respect
to SIC or RMAG. For purposes of this Agreement, "Transaction Proposal" shall
mean any of the following (other than the transactions between SIC, RMAG and SUB
contemplated by this Agreement) involving SIC or RMAG: (i) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of twenty percent (20%) or more of the assets of SIC or
RMAG, in a single transaction or series of transactions; (iii) any offer for, or
the acquisition (or right to acquire) of "beneficial ownership" by any person,
"group" or entity (as such terms are defined under Section 13(d) of the
Securities Exchange Act of 1934), of twenty percent (20%) or more of the
outstanding shares of capital stock of SIC or RMAG or the filing of a
registration statement under the Securities Act in connection therewith; or (iv)
any public announcement by SIC of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
Section 5.3 Access to Information. (a) From the date of this Agreement
until the Effective Time, SIC will provide RMAG and RMAG will provide SIC, and
their respective lenders and authorized representatives (including counsel,
environmental and other consultants, accountants and auditors) full access
during normal business hours to all facilities, personnel and operations and to
all books and records of SIC, RMAG and SUB, will permit the other party to make
such inspections
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as it may reasonably require (including without limitation any air, water or
soil testing or sampling deemed necessary) and will cause its officers to
furnish the other party with such financial and operating data and other
information with respect to its business and properties as the other party may
from time to time reasonably request.
(b) RMAG and SIC will hold and will cause their representatives to hold
in confidence, all documents and information furnished in connection with this
Agreement. Other than documents or information (i) available to the public, (ii)
which are or become known by RMAG or SIC from a source other than SIC or RMAG,
as the case may be, other than by a breach of a confidentiality obligation owed
to SIC or RMAG, respectively, or (iii) required by law to be disclosed.
Section 5.4 Registration Statement and Proxy Statement. RMAG shall file
with the SEC as soon as is reasonably practicable after the date hereof the
Proxy Statement/Prospectus and RMAG shall file the Registration Statement in
which the Proxy Statement/Prospectus shall be included. SIC shall cooperate with
RMAG with regard to such filings. RMAG and SIC shall use all commercially
reasonable efforts to have the Registration Statement declared effective by the
SEC as promptly as practicable. RMAG shall also take any action required to be
taken under applicable state blue sky or securities laws in connection with the
issuance of the RMAG Common Stock. RMAG and SIC shall promptly furnish to each
other all information, and take such other actions, as may reasonably be
requested in connection with any action by any of them in connection with the
preceding sentences.
Section 5.5 Shareholders' Meetings. Unless the SIC Board of Directors
shall have taken an action permitted by clause (ii) of Section 5.2 above, SIC
and RMAG each shall call a meeting of its respective shareholders to be held as
promptly as practicable (and in any event within 45 days after the Registration
Statement is declared effective) for the purpose of voting, in the case of SIC,
upon this Agreement and the Merger and, in the case of RMAG, upon the issuance
of the RMAG Common Stock and RMAG Preferred Shares pursuant to the Merger. Each
of SIC and RMAG shall, through their respective Boards of Directors, recommend
to their respective shareholders approval of such matters and will coordinate
and cooperate with respect to the timing of such meetings and shall use all
commercially reasonable efforts to hold such meetings on the same day and as
soon as practicable after the date hereof. Unless the SIC Board of Directors
shall have taken an action permitted by clause (ii) of Section 5.2 above, each
party shall use all commercially reasonable efforts to solicit from shareholders
of such party proxies in favor of such matters.
Section 5.6 Reasonable Efforts; Other Actions. SIC, RMAG and SUB each
shall use all commercially reasonable efforts promptly to take, or cause to be
taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate under applicable Law to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, (i) the taking of any actions required to qualify the Merger
treatment as a tax-free reorganization within the meaning of Code Section
368(a)(2)(D), and (ii) the obtaining of all necessary consents, approvals or
waivers under its material contracts.
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Section 5.7 Public Announcements. Before issuing any press release or
otherwise making any public statements with respect to the Merger, RMAG, SUB and
SIC will consult with each other as to its form and substance and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by Law (it being agreed that the parties
hereto are entitled to disclose all requisite information concerning the
transaction and any filings required with the SEC).
Section 5.8 Notification of Certain Matters. Each of SIC and RMAG shall
give prompt notice to the other party of (i) any notice of, or other
communication relating to, a default or event which, with notice of lapse of
time or both, would become a default, received by it subsequent to the date of
this Agreement and prior to the Effective Time, under any contract material to
the financial condition, properties, businesses or results of operations of SIC
or RMAG, as the case may be, to which it is a party or is subject, (ii) any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement, (iii) any material adverse change in their
respective financial condition, properties, businesses or results of operations
or the occurrence of any event which is reasonably likely to result in any such
change, or (iv) the occurrence or existence of any event which would, or could
with the passage of time or otherwise, make any representation or warranty
contained herein untrue; provided, however, that the delivery of notice pursuant
to this Section 5.8 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice. Each party shall use its best
efforts to prevent or promptly remedy the same.
Section 5.9 Expenses. Except as otherwise provided herein, RMAG and
SUB, on the one hand, and SIC, on the other hand, shall bear their respective
expenses incurred in connection with the Merger, including, without limitation,
the preparation, execution and performance of this Agreement and the
transactions contemplated hereby, including all fees and expenses of its
representatives, counsel and accountants, $25,000 of the expenses incurred in
printing, mailing and filing (including without limitation, SEC filing fees) the
Proxy Statement/Prospectus shall be paid by SIC.
Section 5.10 Affiliates. SIC shall deliver to RMAG a letter identifying
all persons who, as of the date hereof, may be deemed to be "affiliates" thereof
for purposes of Rule 145 under the Securities Act (the "Affiliates") and shall
advise RMAG in writing of any persons who become Affiliates prior to the
Effective Time. SIC shall cause each person who is so identified as an Affiliate
to deliver to RMAG, no later than the earlier of the thirtieth (30th) day prior
to the Effective Time or the date such person becomes an Affiliate, a written
agreement substantially in the form of Exhibit A hereto.
Section 5.11 Stock Exchange Listing. RMAG shall file a listing
application on or before the Closing and thereafter shall use its best efforts
to effect approval to list on the NASDAQ SmallCap Stock Market, the RMAG Common
Stock to be issued pursuant to the Merger and, in connection with any conversion
by a former holder of SIC shares of his, her or its RMAG Preferred Shares issued
pursuant to the Merger, the underlying shares of RMAG Common Stock.
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Section 5.12 State Antitakeover Laws. If any "fair price" or "control
share acquisition" statute or other similar antitakeover regulation shall become
applicable to the transactions contemplated hereby, RMAG and SIC and their
respective Board of Directors shall use their reasonable best efforts to grant
such approvals and to take such other actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and shall otherwise use their reasonable best
efforts to eliminate the effects of any such statute or regulation on the
transactions contemplated hereby.
Section 5.13 Voting Agreement; Election Agreement. Simultaneously, with
execution and delivery of this Agreement, (a) The SIC Shareholders shall deliver
to RMAG a voting agreement in the form attached hereto as Schedule 5.13(a) and
(b) the individuals listed on Schedule 5.13 shall deliver to RMAG the Election
Agreement in the form attached hereto as Schedule 5.13(b).
Section 5.14 Employment Agreement. At the Effective Time RMAG and the
Surviving Corporation shall enter into an employment agreement with each of the
persons listed on Schedule 5.14 in the forms set forth on Schedules 5.14(a)
through 5.14(b) (the "Employment Agreements").
Section 5.15 Post Merger Operations. (a) Throughout the three year
period immediately following the Effective Time, RMAG will operate its business
and the business of the Surviving Corporation headquartered in Gold River,
California. At the Effective Time, the Board of Directors of RMAG ("RMAG Board")
shall increase the size of the RMAG Board to consist of seven (7) members, two
(2) of which shall be initially designated by the SIC Shareholders and the
remaining five (5) shall be designated by RMAG. Such board size and composition
shall continue for a period of not less than three (3) years following the
Effective Time.
(b) For the first audited statements of the Surviving Corporation, such
auditors shall be chosen by the SIC shareholders and shall be either (i) a "big
five" accounting firm, (ii) BDO Xxxxxxx, or (iii) Xxxxx Xxxxxxxx.
Section 5.16 Lockup Agreement. Promptly after the execution and
delivery of this Agreement, but prior to the Effective Time, all SIC
shareholders shall deliver to RMAG lockup agreements by each such SIC
shareholder agreeing not to sell, transfer, encumber, pledge, hypothecate, or
otherwise dispose any shares of RMAG Common Stock received by such shareholder
pursuant to the Merger, in accordance with Section 2.1, for the following
periods:
(a) 25% of such RMAG Common Stock may be sold on or after the 90th day
after the Effective Time;
(b) an additional 25% of such RMAG Common Stock may be sold on or after
the 180th day after the Effective Time;
(c) an additional 25% of such RMAG Common Stock may be sold on or after
the 270th day after the Effective Time; and
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(d) all remaining RMAG Common Stock received by such shareholder may be
sold on or after the 360th day after the Effective Time. Such agreement shall be
substantially in the form attached hereto as Schedule 5.16.
Section 5.17 RMAG Stock Options. Upon execution of this Agreement, RMAG
shall create a pool of 575,000 Vested Stock Options and 575,000 Vesting Stock
Options (as defined below) (the "Merger Option Pool"), and at the Effective Time
will grant options from such Merger Option Pool to Merger Optionees (as defined
below) as follows:
(a) At the Effective Time, RMAG will grant to the persons designated by
SIC and mutually agreed to by SIC and RMAG, which agreement shall not be
unreasonably withheld ("Merger Optionees"), an aggregate of 575,000 incentive
stock options to purchase shares of RMAG's common stock (the "Vested Options").
The Vested Options shall be fully vested at the time of grant and shall be
exercisable for a ten (10) year period following the Effective Time at an
exercise price equal to the Fair Market Value of RMAG's Common Stock at the
Effective Time. If, and to the extent, the Vested Options do not qualify for
incentive stock options, such Vested Options, as to that portion only, will be
issued as non-statutory stock options. Each grantee of the Vested Options will
agree not to exercise the Vested Options prior to the first anniversary of the
Effective Time. The terms and conditions of the Vested Option agreements shall
be substantially in the form attached hereto as Schedule 5.17(a).
(b) In addition to the Vested Options described in Section 5.17 above,
RMAG will grant at the Effective Time to Merger Optionees designated by SIC and
mutually agreed to by SIC and RMAG, which agreement shall not be unreasonably
withheld, an additional 575,000 incentive stock options to purchase shares of
RMAG's common stock ("Vesting Options"). The Vesting Options shall vest over a
three (3) year period at the rate of 33.33% per year and shall be exercisable
for a ten (10) year period at an exercise price equal to the Fair Market Value
of RMAG's Common Stock at the Effective Time. In the event and to the extent,
that any portion of the options are not qualified for incentive stock options,
such Vesting Options, as to that portion only will be issued as non-statutory
options. The form of the Vesting Options shall be substantially in the form
attached hereto as Schedule 5.17(b). The performance criteria shall be
determined by SIC and RMAG prior to the Effective Time.
(c) RMAG shall cause the shares of RMAG's Common Stock issuable upon
exercise of Vested and Vesting Options to be registered on a Registration
Statement on Form S-8 or other appropriate form.
Section 5.18 Satisfaction of Conditions. SIC agrees to use its best
efforts to cause each of the conditions set forth in Article VII to RMAG and SUB
proceeding with the Closing to be satisfied on or before the Closing Date. RMAG
and SUB agree to use their respective best efforts to cause each of the
conditions set forth in Article VIII to SIC proceeding with the Closing to be
satisfied on or before the Closing Date.
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Section 5.19 First Bank of California Loans. SIC and the SIC
Shareholders will use their best efforts to obtain the consent of First Bank of
California ("First Bank"). In the event that SIC and the SIC Shareholders are
not able to cause the release of the guaranty as a condition to First Bank's
consent, the SIC Shareholders agree to remain as guarantors of the First Bank
loans. In such event, RMAG will indemnify the SIC Shareholders under such
guaranty, and furthermore, after the Effective Time, RMAG will use its
reasonable best efforts to cause either the release of such parties as
guarantor, or, alternatively, to cause a new bank to replace First Bank.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF RMAG, SUB AND SIC
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the closing of each of the following
conditions:
Section 6.1 Registration Statement. The Registration Statement shall
have become effective in accordance with the provisions of the Securities Act.
No stop order suspending the effectiveness of the Registration Statement shall
have been issued by the SEC and remain in effect. All necessary state securities
or blue sky authorizations shall have been received.
Section 6.2 Shareholder Approval. The requisite vote of the
shareholders of SIC and RMAG and SUB necessary to consummate the transactions
contemplated by this Agreement shall have been obtained.
Section 6.3 Consents and Approvals. All necessary consents and
approvals of any United States or any other governmental authority required for
the consummation of the transactions contemplated by this Agreement shall have
been obtained.
Section 6.4 Listing. The RMAG Common Stock issued in the Merger shall
have been authorized for listing on the NASDAQ SmallCap Stock Market.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF RMAG AND SUB
The obligation of RMAG and SUB to effect the Merger and to perform
under this Agreement is subject to the fulfillment on or before to the Closing
Date of the following additional conditions, any one or more of which may be
waived, in writing, by RMAG and SUB:
Section 7.1 Representations Accurate. The representations and
warranties of SIC and the SIC Shareholders, as applicable, contained herein
shall be true and correct on the date of this Agreement and at and on the
Closing Date as though such representations and warranties were made at and on
such date.
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Section 7.2 Performance. SIC shall have complied, in all material
respects, with all agreements, obligations and conditions required by this
Agreement to be complied with by it on or prior to the Closing Date.
Section 7.3 Officer's Certificate. RMAG and SUB shall have received a
duly executed certificate signed by the President or Chairman of SIC certifying
as to (i) compliance with the conditions set forth in Sections 7.1 and 7.2; (ii)
the accuracy and completeness of the Bylaws of SIC and the director and
shareholder resolutions of SIC approving this Agreement, the Merger and the
transactions contemplated hereby; and (iii) the identity and authority of the
officers and other persons executing documents on behalf of SIC. RMAG and SUB
shall have received a duly executed certificate signed by an SIC Shareholder
certifying as to the compliance with the condition set forth in Section 7.1.
Section 7.4 Certified Articles of Incorporation. RMAG and SUB shall
have received a certificate of the Secretary of State of the State of California
certifying the Articles of Incorporation of SIC and all amendments thereof,
dated not more than ten (10) days prior to the Closing Date.
Section 7.5 Good Standing. RMAG shall have received a certificate of
good standing, or its equivalent, dated no more than ten (10) days prior to the
Closing Date, from the state of incorporation of SIC and each other state in
which SIC is qualified to do business as set forth on Schedule 4.1.
Section 7.6 Legal Action. There shall be no pending or threatened legal
action or inquiry which challenges the validity or the legality of or seeks or
could reasonably be expected to prevent, delay or impose conditions on the
consummation of the Merger or would otherwise restrict RMAG's or the Surviving
Corporation's exercise of full rights to own and operate the business of SIC
subsequent to the Effective Time.
Section 7.7 Consents. RMAG and SUB shall have received copies of
consents of all third parties necessary for SIC to execute, deliver and perform
this Agreement and consummate the Merger including, but not limited to, the
consent of First Bank of California.
Section 7.8 SIC Documents. RMAG and SUB shall have received executed
copies of the (i) Voting Agreements; (ii) Election Agreements; (iii) Employment
Agreements; (iv) legal opinion of SIC's outside legal counsel, which legal
opinion will be in a form and substance reasonably acceptable to RMAG and its
counsel; and (v) Lockup Agreements.
Section 7.9 Dissenting Shares. On the Closing Date, the aggregate
number of SIC Shares with respect to which the holders shall be dissenting
shareholders entitled to relief under Sections 1301 and 1303 of the CGCL shall
not exceed five percent (5%) of all outstanding SIC Shares.
Section 7.10 Material Adverse Change. There shall have been no material
adverse change in the business, operations, assets, prospects, financial
condition or results of operations of SIC.
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Section 7.11 Agreements with Affiliates. RMAG and SUB shall have
received from each person who is an Affiliate under Section 5.10 an executed
copy of the written agreement referred to in Section 5.10 and such agreements
shall be in full force and effect and there shall be no breach, or in existence
any facts which with passage of time or otherwise could constitute a breach,
thereof.
Section 7.12 Certificate of Merger. SIC shall have delivered to RMAG
the Certificate of Merger as executed by duly authorized officers of SIC.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF SIC AND SIC SHAREHOLDERS
The obligations of SIC and SIC Shareholders to effect the Merger and to
perform under this Agreement is subject to the fulfillment on or before the
Closing Date of the following additional conditions, any one or more of which
may be waived, in writing, by SIC and SIC Shareholders:
Section 8.1 Representations Accurate. The representations and
warranties of RMAG and SUB contained herein shall be true and correct on the
date of this Agreement and at and on the Closing Date as though such
representations and warranties were made at and on such date.
Section 8.2 Performance. RMAG and SUB shall have complied, in all
material respects, with all agreements, obligations and conditions required by
this Agreement to be complied with by them on or prior to the Closing Date.
Section 8.3 Compliance Certificate. SIC and the SIC Shareholders shall
have received a certificate signed by the President or Chairman of each of RMAG
and SUB certifying as to (i) compliance with the conditions set forth in
Sections 8.1 and 8.2; (ii) the accuracy and completeness of the Bylaws of SUB
and, as applicable, the director and shareholder resolutions of RMAG and SUB
approving this Agreement, the Merger and the transactions contemplated hereby;
and (iii) the identity and authority of the officers and other persons executing
documents on behalf of RMAG and SUB.
Section 8.4 Certified Articles of Incorporation. SIC shall have
received a certificate of the Secretary of States of the State of Florida and
Delaware certifying the Articles of Incorporation of RMAG and the Certificate of
Incorporation of SUB and all amendments thereof, dated not more than ten (10)
days prior to the Closing Date.
Section 8.5 Good Standing. SIC shall have received a certificate of
good standing, or its equivalent, dated no more than ten (10) days prior to the
Closing Date, from the state of incorporation of RMAG and SUB and each other
state in which RMAG and SUB are qualified to do business, which states are set
forth on Schedule 8.5.
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Section 8.6 Legal Action. There shall be no pending or threatened legal
action or inquiry which challenges the validity or legality of or seeks or could
reasonably be expected to prevent, delay or impose conditions on the
consummation of the Merger.
Section 8.7 Consents. SIC shall have received copies of consents of all
third parties necessary for RMAG to execute, deliver and perform this Agreement
and consummate the Merger.
Section 8.8 RMAG Documents. SIC shall have received executed copies of
the (i) Election Agreements and (ii) legal opinion of RMAG's legal counsel,
which legal opinion will be a form and substance reasonably acceptably to SIC
and its counsel.
Section 8.9 Material Adverse Change. There shall have been no material
adverse change in the business, operations, assets, prospects, financial
condition or results of operations of RMAG or SUB.
Section 8.10 Certificate of Merger. SUB shall have delivered to SIC the
Certificate of Merger, executed by duly authorized officers of SUB.
ARTICLE IX
CLOSING
Section 9.1 Time and Place. Subject to the provisions of Articles VI,
VII, VIII and X, the closing of the Merger (the "Closing") shall take place at
the offices of Atlas, Xxxxxxxx, Trop & Borkson, P.A., as soon as practicable,
but in no event later than the second business day after the date on which each
of the conditions set forth in Articles VI, VII and VIII (other than those
conditions that by their nature are to be satisfied at the Closing but subject
to such conditions) have been satisfied or waived, in writing, by the party or
parties entitled to the benefit of such conditions; or at such other place, at
such other time, or on such other date as RMAG, SUB and SIC may, in writing,
mutually agree. The date on which the Closing actually occurs is herein referred
to as the "Closing Date."
Section 9.2 Filings at the Closing. Subject to the provisions of
Articles VI, VII, VIII and X hereof, SIC, RMAG and SUB shall cause to be
executed and filed at the Closing the Certificate of Merger and shall cause the
Certificate of Merger to be recorded in accordance with the applicable
provisions of the CGCL and the DGCL and shall take any and all other lawful
actions and do any and all other lawful things necessary to cause the Merger to
become effective.
ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of SIC and RMAG:
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(a) by mutual consent of RMAG and SIC;
(b) by either RMAG or SIC, if any court of competent jurisdiction in
the United States or other governmental body in the United States shall have
issued an order (other than a temporary restraining order), decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Merger, and such order, decree, ruling or other action shall have become final
and nonappealable;
(c) by either RMAG or SIC, if the requisite shareholder approvals of
the shareholders of either RMAG or SIC are not obtained at a meeting of
shareholders duly called and held therefor; or
(d) by either RMAG or SIC if a merger shall not have been consummated
by September 30, 2000, provided that a party in material breach of this
Agreement may not terminate this Agreement.
Section 10.2 Termination by RMAG. This Agreement may be terminated and
the Merger may be abandoned, at any time prior to the Effective Time, before or
after the approval of the shareholders of RMAG or SIC, by RMAG if (a) SIC shall
have failed to comply in any material respect with any of the covenants or
agreements contained in Articles I, II and V of this Agreement to be complied
with by SIC at or prior to such date of termination, (b) there exists a breach
of any representation or warranty of SIC contained in this Agreement such that
the closing conditions set forth in Article VII would not be satisfied,
provided, however, that with respect to either (a) or (b), if such failure or
breach is capable of being cured prior to the Effective Time, such failure or
breach shall not have been cured within fifteen (15) days of delivery to SIC of
written notice of such failure or breach, (c) the Board of Directors of SIC
shall have failed to recommend, or shall have withdrawn, modified or changed its
recommendation of this Agreement or the Merger in a manner adverse to RMAG or
shall have recommended or issued a neutral recommendation with respect to any
proposal in respect of a Transaction Proposal (as defined in Section 5.2 above)
with a person or entity other than RMAG or any Affiliate of RMAG (or the SIC
Board of Directors resolves to do any of the foregoing), or (d) the Board of
Directors of SIC shall furnish or disclose nonpublic information or negotiate,
explore or communicate in any way with a third party with respect to any
Transaction Proposal, or shall have resolved to do any of the foregoing and
publicly disclosed such resolution.
Section 10.3 Termination by SIC. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the shareholders of RMAG or SIC, by SIC, if (a) RMAG or
SUB shall have failed to comply in any material respect with any of the
covenants or agreements contained in Articles I, II and V of this Agreement to
be complied with by RMAG or SUB at or prior to such date of termination, (b)
there exists a breach of any representation or warranty of RMAG or SUB contained
in this Agreement such that the closing conditions set forth in Article VIII
would not be satisfied, provided, however, that, with respect to either (a) or
(b), if such failure or breach is capable of being cured prior to the
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Effective Time, such failure or breach shall not have been cured within fifteen
(15) days of delivery to RMAG or SUB of written notice of such failure or
breach, or (c) the Board of Directors of RMAG or SUB shall have failed to
recommend or shall have withdrawn, modified or changed its recommendation of
this Agreement in a manner adverse to SIC or shall have recommended or issued a
neutral recommendation with respect to any proposal in respect of a Transaction
Proposal with a person or entity other than SIC or any Affiliate of SIC (or the
Board of Directors of RMAG or SUB, respectively, resolves to do any of the
foregoing), in each case in accordance with and solely to the extent permitted
by Section 5.2 above.
Section 10.4 Procedure for Termination. In the event of termination and
abandonment of the Merger by RMAG or SIC pursuant to this Article X, written
notice thereof shall forthwith be given to the other.
Section 10.5 Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article X, no party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement, except as
provided in this Section 10.5 and in Section 5.3(b) hereof. Nothing in this
Section 10.5 shall relieve any party from liability for willful breach of this
Agreement.
ARTICLE XI
SURVIVABILITY; INVESTIGATIONS
Section 11.1 Survival of Representations and Warranties. The
representations and warranties of SIC, the SIC Shareholders (as applicable),
RMAG and SUB contained herein or in any certificate or other documents delivered
prior to the Effective Time shall survive and remain in full force and effect
for a period of forty-five (45) days after completion and delivery to RMAG of
SIC's audited financial statements for the year ended December 31, 2000 ("the
Survival Period"); provided, however, that representations set forth in Sections
3.2, 3.5, 3.9, 3.11, 4.2, 4.10, 4.13 and 4.17 shall survive until the expiration
of the statute of limitations. To the extent that written notice of any
indemnification claim for breach of any representation or warranty (indicating
with reasonable specificity at the basis for such claim, shall be delivered to
the other party within the Survival Period, such representation and warranty
shall survive the termination of Survival Period with respect to the subject
matter of such claim and shall continue until resolution of such claim. The
covenants and agreements contained herein shall survive the Effective Time and
continue in accordance with their respective terms.
Section 11.2 Losses. For purposes of this Agreement, the term "Loss" or
"Losses" shall mean each and all of the following items: claims, losses,
liabilities, obligations, payments, damages, judgments, fines, penalties,
amounts paid in settlement, and any related reasonable costs and expenses
(including, without limitation, interest which may be imposed in connection
therewith, costs and expenses of investigation, actions, suits, proceedings,
demands, assessments and reasonable fees and disbursements of counsel and other
experts) incurred by the person or entity seeking indemnification (the
"Indemnitee") (whether relating to claims asserted by or against third
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parties or to claims asserted against the party providing indemnification (the
"Indemnitor")). In the event there is a determination by any court of competent
jurisdiction, appropriate regulatory body or alternative dispute resolution
entity so authorized to make such determination, which shall make a finding
apportioning liability, each party shall accordingly be liable to the extent of
such finding of apportionment.
Section 11.3 Indemnification by SIC and the SIC Shareholders. Subject
to the provisions of this Article XI, prior to the Effective Time, SIC and the
SIC Shareholders shall indemnify and hold harmless RMAG and SUB and its
Affiliates and their respective officers, directors, employees, agents,
consultants, representatives and successors in accordance with the provisions of
Section 11.1, as to survival after the Effective Time, SIC and the SIC
Shareholders shall indemnify and hold harmless RMAG and the Surviving
Corporation and its Affiliates, and their respective officers, directors,
employees, agents, consultants, representatives and successors from and against
any and all Losses incurred by any of them arising out of or resulting from any
of the following:
(a) any misstatement by SIC or any SIC Shareholder or any inaccuracy in
any of the representations or warranties made by them as applicable in this
Agreement or in any ancillary document; or
(b) any failure by SIC or any SIC Shareholder to perform any of its
covenants or agreements contained in this Agreement or in any ancillary
document;
Section 11.4 Procedure for Indemnification. In the event that any
Indemnitee shall incur or suffer any Losses in respect of which indemnification
may be sought hereunder, the Indemnitee shall assert a claim for indemnification
by written notice (the "Notice") to the Indemnitor stating the nature and basis
of such claim. Promptly after receipt by an Indemnitee of written notice of the
assertion of a claim or the commencement of any action, litigation or proceeding
by any third party (a "Third-Party Claim") with respect to any matter for which
indemnification is or may be owing pursuant to Section 11.3, the Indemnitee
shall give notice to the Indemnitor and shall thereafter keep the Indemnitor
informed of all other information it receives with respect thereto; provided,
that failure of the Indemnitee to give the Indemnitor prompt notice and such
other information as provided herein shall not relieve the Indemnitor of any of
its obligations hereunder unless and then only to the extent that the Indemnitor
shall have been actually prejudiced thereby. The parties each agree to cooperate
and will cause the Indemnitor to cooperate with and render such assistance as
may reasonably be requested in order to insure the proper and adequate defense
of any such Third-Party Claim or proceeding, which assistance shall include,
without limitation, making appropriate personnel reasonably available for any
discovery or trial. If the Indemnitor fails or refuses to undertake the defense
of any such Third-Party Claim within thirty (30) days after delivery of the
notice, the Indemnitee shall have the right to take exclusive control of the
defense, negotiation and/or settlement of such Third-Party Claim at the
Indemnitor's expense. Neither the Indemnitor nor the Indemnitee shall settle or
compromise any Third-Party Claim without the consent of the other, which consent
shall not be unreasonably withheld or delayed; provided, that any settlement or
compromise includes an unconditional release of the Indemnitee from all
liabilities or obligations relating to the Third-Party Claim.
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Section 11.5 Payment. With respect to Third-Party Claims for which
indemnification is payable under this Agreement, such indemnification shall be
paid by the Indemnitor promptly upon (i) the entry of a final judgment against
the Indemnitee and the expiration of any applicable appeal period; (ii) the
entry of a non-appealable judgment or final appellate decision against the
Indemnitee; (iii) the entering into of any settlement agreement in accordance
with the provisions of this Article XI; or (iv) the entry of any consent order
or decree binding upon the Indemnitee. Notwithstanding the foregoing, reasonable
expenses of the Indemnitee which constitute Losses hereunder shall be reimbursed
on a current basis by the Indemnitor.
Section 11.6 Limitation. Notwithstanding anything to the contrary
contained in this Article 11, neither SIC or any SIC Shareholder shall have
liability for any Losses, until such Losses have exceeded $150,000 and the
maximum amount of any liability for Losses shall be limited to (a) $5.3 million
in the case of the SIC Shareholders and (b) $10,000,000 in the case of SIC.
Section 11.7 Investigation. The respective representations and
warranties of RMAG, SUB, SIC and the SIC Shareholders contained herein or in any
certificate or other documents delivered prior to or at the Closing shall not be
deemed waived or otherwise affected by any investigation made by any party
hereto.
Section 11.8 Satisfaction of Claims. Absent any claim for fraud or
other similar claim, RMAG agrees that any claim for Losses shall be satisfied in
the case of the SIC Shareholders from the RMAG Preferred Shares received by such
Shareholders pursuant to this Agreement and shall be satisfied 87% of Lidster
and 13% from Xxxx. For purposes of this Section 11.8, the RMAG Preferred Shares
shall be valued at the value of the shares if such Preferred Shares were
eligible for conversion at the date of any such claim for indemnification.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Notices. All notices shall be in writing delivered as
follows:
If to RMAG or SUB, to:
Registry Magic Incorporated
0000 XXX Xxxxxxxxx, Xxxxx 000-000
Xxxx Xxxxx, XX 00000
Attention: Xxxxxxxx Xxxxx
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With a copy to:
Atlas, Xxxxxxxx, Trop & Borkson, P.A.
000 Xxxx Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
If to SIC, to:
Synergex International Corporation
0000 Xxxx Xxxxxx Xxx
Xxxx Xxxxx, XX 00000
Attention: General Counsel
With a copy to:
XxXxxxxxx, Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxx, Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxx, Esq.
If to SIC Shareholders, to:
Xxxxxxx Xxxx
Xxxxxxx Xxxxxxx
c/o Synergex International Corporation
0000 Xxxx Xxxxxx Xxx
Xxxx Xxxxx, XX 00000
or to such other address as may have been designated in a prior notice pursuant
to this Section. Notices shall be deemed to be effectively served and delivered
(a) when delivered personally; (b) when given by telephone facsimile (with a
copy mailed by first-class U.S. mail); (c) one (1) business day following
deposit with a recognized national air courier service; or (d) three (3)
business days after being deposited in the United States mail in a sealed
envelope, postage prepaid, return receipt requested, to the appropriate party.
Section 12.2 Binding Effect. Except as may be otherwise provided
herein, this Agreement will be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties. Except as otherwise specifically provided in this Agreement,
nothing in this Agreement is intended or will be construed to confer on any
person other than the parties hereto any rights or benefits hereunder.
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Section 12.3 Headings. The headings in this Agreement are intended
solely for convenience of reference and will be given no effect in the
construction or interpretation of this Agreement.
Section 12.4 Exhibits and Schedules. The Exhibits and schedules
referred to in this Agreement will be deemed to be a part of this Agreement.
Section 12.5 Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same document.
Section 12.6 Governing Law. This Agreement will be governed by the laws
of the State of Florida without regard to conflict of laws principles thereof.
Section 12.7 Waivers. Compliance with the provisions of this Agreement
may be waived only a written instrument specifically referring to this Agreement
and signed by the party waiving compliance. No course of dealing, nor any
failure or delay in exercising any right, will be construed as a waiver, and no
single or partial exercise of a right will preclude any other or further
exercise of that or any other right.
Section 12.8 Pronouns. The use of a particular pronoun herein will not
be restrictive as to gender or number but will be interpreted in all cases as
the context may require.
Section 12.9 Time Periods. Any action required hereunder to be taken
within a certain number of days will be taken within that number of calendar
days; provided, however, that if the last day for taking such action falls on a
weekend or a holiday, the period during which such action may be taken will be
automatically extended to the next business day.
Section 12.10 Modification. No supplement, modification or amendment of
this Agreement will be binding unless made in a written instrument that is
signed by all of the parties hereto and that specifically refers to this
Agreement.
Section 12.11 Entire Agreement. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement among the parties concerning the subject matter
hereof. All negotiations among the parties are merged into this Agreement, and
there are no representations, warranties, covenants, understandings, or
agreements, oral or otherwise, in relation thereto among the parties other than
those incorporated herein and to be delivered hereunder.
Section 12.12 Severability. If any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions of this
Agreement shall not be affected thereby. To the extent permitted by applicable
law, each party waives any provision of law which renders any provision of this
Agreement invalid, illegal or unenforceable in any respect.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
REGISTRY MAGIC INCORPORATED
By:
--------------------------------------
Xxxxxxxx Xxxxx, Its Chairman
SYNERGEX INTERNATIONAL CORPORATION
By:
--------------------------------------
Xxxxxxx X. Xxxx
Its President and Chief Executive
Officer
RMAG ACQUISITION CORP.
By:
--------------------------------------
Xxxxxxxx Xxxxx, Its Chairman
SIC SHAREHOLDERS
------------------------------------------
Xxxxxxx X. Xxxx
------------------------------------------
Xxxxxxx Xxxxxxx
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AGREEMENT AND PLAN OF MERGER
SCHEDULES
SCHEDULE 2.1(a) ARTICLES OF AMENDMENT (RMAG)
SCHEDULE 3.1 FOREIGN QUALIFICATIONS (RMAG)
SCHEDULE 3.2 RMAG STOCK OPTION PLANS (RMAG)
SCHEDULE 3.4 NO VIOLATIONS (RMAG)
SCHEDULE 3.5 ABSENCE OF CERTAIN CHANGES (RMAG)
SCHEDULE 3.6 LIABILITIES (RMAG)
SCHEDULE 3.8 BROKER'S FEES (RMAG)
SCHEDULE 3.10 COMPLIANCE WITH LAWS (RMAG)
SCHEDULE 3.11 LITIGATION (RMAG)
SCHEDULE 4.1 FOREIGN QUALIFICATIONS (SIC)
SCHEDULE 4.2 SIC STOCK OPTION PLANS (SIC)
SCHEDULE 4.4 NO VIOLATIONS (SIC)
SCHEDULE 4.5 FINANCIAL STATEMENTS (SIC)
SCHEDULE 4.6 ABSENCE OF CERTAIN CHANGES (SIC)
SCHEDULE 4.11 CONTRACTS (SIC)
SCHEDULE 4.14 INVENTIONS (SIC)
SCHEDULE 4.15 PERMITS AND LICENSES (SIC)
SCHEDULE 4.16 EMPLOYEE BENEFITS (SIC)
SCHEDULE 4.17 EXCEPTION FOR ACCRUED TAXES
SCHEDULE 4.18 CUSTOMERS (SIC)
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SCHEDULE 4.20(a) INTELLECTUAL PROPERTY (SIC)
SCHEDULE 4.20(b) EXCEPTIONS TO LICENSES AND INTELLECTUAL PROPERTY
SCHEDULE 4.21 INSURANCE (SIC)
SCHEDULE 5.1 EXCEPTIONS TO CONDUCT OF BUSINESS (SIC & RMAG)
SCHEDULE 5.13 PARTIES TO ELECTION AGREEMENT
SCHEDULE 5.13(a) FORM OF VOTING AGREEMENTS
SCHEDULE 5.13(b) FORM OF ELECTION AGREEMENT
SCHEDULE 5.14 PARTIES TO EMPLOYMENT AGREEMENTS
SCHEDULE 5.14(a) - 5.14(b) FORMS OF EMPLOYMENT AGREEMENTS
SCHEDULE 5.16 FORM OF LOCKUP AGREEMENT
SCHEDULE 5.17(a) FORM OF VESTED OPTION AGREEMENTS
SCHEDULE 5.17(b) FORM OF VESTING OPTION AGREEMENTS
SCHEDULE 5.17(d) LIST OF MERGER OPTIONEES SUBJECT TO MERGER
OPTION POOL
EXHIBIT A FORM OF AGREEMENT WITH AFFILIATES (SECTION 5.10)
2
