EXHIBIT 10.32
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as
of April 1, 2000, by and among XxxxxxxXxxxxxxxxx.xxx, Inc., a Delaware
corporation ("Genesis"), Genesis-Dyna Acquisition, Inc., a California
corporation and wholly owned subsidiary of Genesis ("Acquisition"), Dynatype
Design and Graphics Centers, Inc., a California corporation ("Company"), and
Xxxxxxx X. Xxxxx ("Stockholder"). Genesis, Acquisition, the Company and the
Stockholder are referred to collectively herein as the "Parties" and each
individually as "Party."
RECITALS:
WHEREAS, the Parties hereto desire to consummate a merger (the
"Merger") whereby Acquisition will be merged with and into the Company and the
Company will be the surviving corporation in the Merger, upon the terms and
subject to the conditions of this Agreement and in accordance with the
California General Corporation Law (the "CGCL");
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties and covenants herein contained, the Parties agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall have the
respective meanings set forth below:
"Accounts Receivable" has the meaning set forth in Section
6.11 below.
"Acquisition" has the meaning set forth in the preamble
hereto.
"Acquisition Proposal" means an inquiry, offer or proposal
regarding any of the following (other than the transactions contemplated by this
Agreement) involving the Company or any of its subsidiaries: (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 all or substantially all the assets of the Company and
its subsidiaries, taken as a whole, in a single transaction or series of related
transactions; (iii) any tender offer or exchange offer for 20 percent or more of
the outstanding Company Shares or the filing of a registration statement under
the Securities Act in connection therewith; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the
meaning of Section 1504 of the Code, or any consolidated, combined, unitary or
similar group defined under a similar provision of state, local or foreign law.
"Agreement" has the meaning set forth in the preamble hereto.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms the basis for any
specified consequence.
"Cal U.C.C." has the meaning set forth in Section 6.21(e)
below.
"Certificates" has the meaning set forth in Section 4.3 below.
"CGCL" has the meaning set forth in the Recitals hereto.
"CIBRA" has the meaning set forth in Section 6.21(e) below.
"Closing" has the meaning set forth in Section 2.3 below.
"Closing Date" has the meaning set forth in Section 2.3 below.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company" has the meaning set forth in the preamble hereto.
"Company Board" shall mean the Board of Directors of the
Company.
"Company Financial Statements" has the meaning set forth in
Section 6.9 below.
"Company Hazardous Materials Activities" has the meaning set
forth in Section 6.27(b) below.
"Company Intellectual Property" shall have the meaning set
forth in Section 6.16(d) below.
"Company Shares" has the meaning set forth in the Recitals
hereto.
"Confidential Information" means any information concerning
the businesses and affairs of the Company, the Surviving Corporation or Genesis
that is not generally available to the public.
"Copyright" has the meaning set forth in Section 6.16(b)
below.
"Damages" has the meaning set forth in Section 10.1(a) below.
"Dissenting Shares" has the meaning set forth in Section 4.1
below.
"Effective Time" has the meaning set forth in Section 2.2
below.
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"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) tax-qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) tax-qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA ss. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA ss. 3(1).
"Environmental Permits" has the meaning set forth in Section
6.27(c) below.
"Equipment" has the meaning set forth in Section 6.32 below.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Agent" has the meaning set forth in Section 4.2
below
"Exchange Fund" has the meaning set forth in Section 4.2
below.
"Fully Diluted Company Shares" means all Company Shares issued
and outstanding, plus all Company Shares subject to issuance upon the exercise
of options, warrants, convertible securities and similar rights.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Genesis" has the meaning set forth in the preamble hereto.
"Genesis Shares" has the meaning set forth in Section 5.2
below.
"Governmental Authority" means any government, court or
tribunal or administrative, governmental or regulatory body, agency or
authority, whether federal, state or local, or domestic or foreign, and any
departmental or political subdivision thereof.
"Hazardous Material" has the meaning set forth in Section
6.27(a) below.
"HSR Act" has the meaning set forth in Section 6.3(d) below.
"Indemnified Party" has the meaning set forth in Section 11.1
below.
"Indemnification Threshold" has the meaning set forth in
Section 10.2(a).
"Intellectual Property" has the meaning set forth in Section
6.16(d) below.
"Inventory" has the meaning set forth in Section 6.32 below.
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"Knowledge" of the Company means matters actually known by any
officer or director of the Company, after due inquiry, and matters that an
individual in such position reasonably would be expected to know after due
inquiry.
"Laws" has the meaning set forth in Section 6.14(c)(iv) below.
"Leases" has the meaning set forth in Section 6.14(c)(x)
below.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Lien" has the meaning set forth in Section 6.4 below.
"Material Adverse Effect" means, as to any Party, any effect,
occurrence or change that has or is reasonably likely to have, individually or
in the aggregate, a material adverse effect on the business, properties, results
of operations, condition (financial or otherwise) or prospects of such Party and
its Subsidiaries, taken as a whole, or is reasonably likely to materially hinder
or impair the consummation of the transactions contemplated hereby.
"Material Contracts" has the meaning set forth in Section
6.17(a) below.
"Merger" has the meaning set forth in the Recitals hereto.
"Merger Agreement" has the meaning set forth in Section 2.2
below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.
3(37).
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Organizational Documents" means the articles or certificate
of incorporation of the Company and each Subsidiary.
"Other Rights" has the meaning set forth in Section 6.16(c)
below.
"Qualified Plans" has the meaning set forth in Section 6.21
below.
"Party" or "Parties" has the meaning set forth in the preamble
hereto.
"Patent" has the meaning set forth in Section 6.16(b) below.
"PBGC" has the meaning set forth in Section 6.21 below.
"Permits" has the meaning set forth in Section 6.13 below.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a Governmental Authority.
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"Plans" has the meaning set forth in Section 6.21 below.
"Pledged Assets" has the meaning set forth in Section 4.13(a)
below.
"Prohibited Transaction" has the meaning set forth in ERISA
ss. 406 and Code ss. 4975.
"Qualified Plans" has the meaning set forth in Section 6.21
below.
"Real Property" has the meaning set forth in Section 6.14(a)
below.
"Related Party Agreements" has the meaning set forth in
Section 6.17(a) below.
"Release Date" has the meaning set forth in Section 4.13(c)
below.
"Reportable Event" has the meaning set forth in ERISA ss.
4043.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"Subsidiary" has the meaning set forth in Section 6.1 below.
"Surviving Corporation" has the meaning set forth in Section
2.1 below.
"Territory" has the meaning set forth in Section 7.11(a)(i)
below.
"Third-Party Intellectual Property" has the meaning set forth
in Section 6.16(d) below.
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ARTICLE 2
MERGER; EFFECTIVE TIME; CLOSING
2.1 Merger. Subject to the terms and conditions of this Agreement and the CGCL,
at the Effective Time, Acquisition and the Company shall consummate the Merger
in which (i) Acquisition shall be merged with and into the Company and the
separate existence of Acquisition shall thereupon cease, (ii) Company shall be
the successor or surviving corporation in the Merger and shall continue to be
governed by the laws of the State of California and (iii) the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The corporation surviving
the Merger is sometimes hereinafter referred to as the "Surviving Corporation."
The Merger shall have the effects set forth in Section 1107 of the CGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the properties, rights, privileges, powers and franchises of the
Company and Acquisition shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Acquisition shall become the debts,
liabilities and duties of the Surviving Corporation.
2.2 Effective Time. On the Closing Date, subject to the terms and conditions of
this Agreement, Acquisition and Company shall (i) cause to be executed an
Agreement of Merger in substantially the form attached hereto as Exhibit A (the
"Merger Agreement") together with the officer's certificates required by Section
1103 of the CGCL (forms of which are attached hereto as part of Exhibit B). The
Merger shall become effective when the Merger Agreement and such officer's
certificates shall have been duly filed with the Secretary of State of the State
of California in accordance with the relevant provisions of the CGCL. Such time
is hereinafter referred to as the "Effective Time."
2.3 The Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Genesis at 0000 Xxxxxxxxx
Xxxx., 0xx Xxxxx, Xxx Xxxx, XX 00000, commencing at 10:00 a.m. local time on May
8, 2000. The date on which the Closing takes place shall be referred to in this
Agreement as the "Closing Date."
ARTICLE 3
ARTICLES OF INCORPORATION; BYLAWS
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
3.1 Articles of Incorporation. The articles of incorporation of the Company, as
in effect immediately prior to the date of this Agreement and as amended as
provided in Exhibit C hereto, shall be the articles of incorporation of the
Surviving Corporation until thereafter amended as provided therein or under the
CGCL.
3.2 Bylaws. The bylaws of the Company, as in effect immediately prior to date of
this Agreement and as amended as provided in Exhibit D hereto, shall be the
bylaws of the Surviving Corporation until thereafter amended as provided therein
or under the CGCL.
3.3 Directors and Officers. The directors and officers of Acquisition
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation from and after the Effective Time, until their
successors have been duly elected, appointed or qualified or until the earlier
of their death, resignation or removal in accordance with the articles of
incorporation and bylaws of the Surviving Corporation.
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ARTICLE 4
CONVERSION OF SHARES; MERGER CONSIDERATION
4.1 Conversion of Shares. At the Effective Time:
(a) Company Shares. Each Company Share issued and outstanding immediately prior
to the Effective Time (other than (i) Company Shares held by the Company, and
(ii) Company Shares held by Genesis, Acquisition or any other subsidiary of
Genesis and (iii) Company Shares as to which dissenter's rights shall have been
perfected and not withdrawn or otherwise forfeited under Chapter 13 of the CGCL
("Dissenting Shares")) shall, by virtue of the Merger and without any action on
the part of Acquisition, the Company or any holder thereof, be converted into
and be exchangeable for the right to receive a number of Genesis Shares equal to
the quotient obtained by dividing (A) 90,000 by (B) the aggregate number of
Company Shares issued and outstanding immediately prior to the Effective Time
and being exchanged pursuant to this Section 4.1(a) (all such Genesis Shares
issued being referred to as the "Merger Consideration").
(b) Cancellation of Treasury Shares and Genesis-owned Shares. Each Share held by
the Company, Genesis, Acquisition, any other subsidiary of Genesis immediately
prior to the Effective Time shall be canceled, retired and cease to exist and no
payment shall be made with respect thereto.
4.2 Exchange Fund. Prior to the Effective Time, Genesis shall appoint U.S. Stock
Transfer Corporation to act as exchange agent hereunder for the purpose of
exchanging Company Shares for the Merger Consideration (the "Exchange Agent").
At or prior to the Effective Time, Genesis shall deposit with the Exchange
Agent, in trust for the benefit of holders of the Company Shares, certificates
representing the Genesis Shares issuable pursuant to Section 4.1 in exchange for
outstanding Company Shares, less the Genesis Shares to be held back as provided
in Section 4.13. Any Genesis Share certificates deposited with the Exchange
Agent shall hereinafter be referred to as the "Exchange Fund."
4.3 Exchange Procedures. As soon as reasonably practicable after the Effective
Time, the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of a certificate or certificates which immediately prior to the Effective
Time represented outstanding Company Shares (the "Certificates") (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent, and which letter shall be in customary form
and have such other provisions as Genesis may reasonably specify; and (ii)
instructions for effecting the surrender of such Certificates in exchange for
the applicable Merger Consideration. Upon surrender of a Certificate to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may reasonably be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor Genesis Shares
representing, in the aggregate, the whole number of shares that such holder has
the right to receive pursuant to Section 4.1(a) (after taking into account all
Company Shares then held by such holder), less the Genesis Shares to be held
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back as provided in Section 4.13. In the event of a transfer of ownership of
Genesis Shares which is not registered in the transfer records of the Company,
Genesis Shares evidencing, in the aggregate, the proper number of Genesis
Shares, may be issued with respect to such Company Shares to such a transferee
if the Certificate representing such Company Shares are presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid.
4.4 Distributions with Respect to Unsurrendered Certificates. No dividends or
other distributions declared or made with respect to Genesis Shares with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the Genesis Shares that such holder
would be entitled to receive upon surrender of such Certificate until such
holder shall surrender such Certificate in accordance with Section 4.3. Subject
to the effect of applicable Laws, following surrender of any such Certificate,
there shall be paid to such holder of Genesis Shares issuable in exchange
therefor, without interest, (a) promptly after the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole Genesis Shares, and
(b) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender payable with respect
to such Genesis Shares.
4.5 No Further Ownership Rights in Company Shares. All Genesis Shares issued and
cash paid upon conversion of the Company Shares in accordance with the terms of
Article II and this Article IV shall be deemed to have been issued or paid in
full satisfaction of all rights pertaining to the Company Shares.
4.6 Fractional Genesis Shares. Certificates for Genesis Shares representing
fractional Genesis Shares or book-entry credit of the same shall be issued upon
the surrender for exchange of Certificates to the extent required. Such
fractional share interests will entitle the owner thereof to vote and to have
the rights of a shareholder of Genesis or a holder of Genesis Shares to the
extent of such fractional interest.
4.7 Termination of Exchange Fund. Any portion of the Exchange Fund which remains
undistributed to the holders of Certificates for six months after the Effective
Time shall be delivered to the Surviving Corporation or otherwise on the
instruction of the Surviving Corporation, and any holders of the Certificates
who have not theretofore complied with this Article 4 shall thereafter look only
to the Surviving Corporation and Genesis for the Merger Consideration with
respect to the Company Shares formerly represented thereby to which such holders
are entitled pursuant to Section 4.1 and Section 4.2, and any dividends or
distributions with respect to Genesis Shares to which such holders are entitled
pursuant to Section 4.3. Any such portion of the Exchange Fund remaining
unclaimed by holders of Company Shares three years after the Effective Time (or
such earlier date immediately prior to such time as such amounts would otherwise
escheat to or become property of any governmental authority) shall, to the
extent permitted by law, become the property of the Surviving Corporation free
and clear of any claims or interest of any person previously entitled thereto.
4.8 No Liability. None of Genesis, Acquisition, the Company, the Surviving
Corporation or the Exchange Agent shall be liable to any person in respect of
any Merger Consideration from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
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4.9 Lost Certificates. If any Certificate 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 or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will deliver in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration with respect to the Company Shares formerly
represented thereby, any cash in lieu of fractional Genesis Shares and unpaid
dividends and distributions on Genesis Shares deliverable in respect thereof,
pursuant to this Agreement.
4.10 Withholding Rights. Each of the Surviving Corporation and Genesis shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any holder of shares of such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code and the rules and regulations promulgated thereunder, or any provision
of a Tax Law. To the extent that amounts are so withheld by the Surviving
Corporation or Genesis, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Shares in respect to which such deduction and withholding was made by the
Surviving Corporation or Genesis, as the case may be.
4.11 Stock Transfer Books. The stock transfer books of the Company shall be
closed immediately upon the Effective Time and there shall be no further
registration of transfers of Company Shares thereafter on the records of the
Company. On or after the Effective Time, any Certificates presented to the
Exchange Agent or Genesis for any reason shall be converted into the Merger
Consideration with respect to Company Shares formerly represented thereby and
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 4.4.
4.12 Affiliates. Notwithstanding anything to the contrary herein, no Genesis
Shares or cash shall be delivered to a person who may be deemed an "affiliate"
of the Company in accordance with Section 6.30 hereof for purposes of Rule 145
under the Securities Act of 1933, as amended (the "Securities Act"), or for
purposes of qualifying the Merger for "pooling of interests" under APB 16 and
the applicable SEC rules and regulations until such person has executed and
delivered to Genesis the written agreement contemplated by Section 6.30.
4.13 Pledged Assets.
(a) As collateral security for the payment of any damages
resulting from a breach of this Agreement or any indemnification obligations of
Stockholder pursuant to Article 10, Stockholder shall, and by execution hereof
does hereby, transfer, pledge and assign to Genesis, for the benefit of Genesis,
a security interest in the following assets (the "Pledged Assets"):
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(i) at the Closing, thirty-three percent (33%) of the initial
Genesis Shares delivered pursuant to Section 4.1 hereof, and the
certificates and instruments, if any, representing or evidencing such
Pledged Assets;
(ii) all securities hereafter delivered to Stockholder with
respect to or in substitution for the Pledged Assets described in
clause (i), all certificates and instruments representing or evidencing
such securities, and all non-cash dividends and other property at any
time received, receivable or otherwise distributed in respect of or in
exchange for any or all thereof; and in the event Stockholder receives
any such property, Stockholder shall hold such property in trust for
Genesis and shall immediately deliver such property to Genesis to be
held hereunder as Pledged Assets; and
(iii) all cash and non-cash proceeds of all of the foregoing
property and all rights, titles, interests, privileges and preferences
appertaining or incident to the foregoing property.
(b) Each certificate, if any, evidencing the Pledged Assets
issued pursuant to this Agreement shall be delivered to Genesis directly by the
transfer agent, such certificate bearing no restrictive or cautionary legend
other than those imprinted by the transfer agent at Genesis' request.
Stockholder shall, at the Closing or at such other date of receipt, deliver to
Genesis, for each such certificate, a stock power duly signed in blank by it.
(c) The Pledged Assets shall be available to satisfy any
damages for breach of this Agreement and any indemnification obligations of
Stockholder pursuant to Article 10 until the date that is one year after the
Effective Time with respect to all of the Pledged Assets and the date that is
two years after the Effective Time with respect to one-half of the Pledged
Assets (each a "Release Date"). Promptly following the first Release Date,
Genesis shall return or cause to be returned to Stockholder one-half of the
Pledged Assets, less Pledged Assets having an aggregate value equal to the
amount of (i) any damages for breach, (ii) any pending claim for indemnification
made by any Indemnified Party (as defined in Article 10) until such claim is
resolved, and (iii) any indemnification obligations of Stockholder pursuant to
Article 10. Promptly following the second Release Date, Genesis shall return or
cause to be returned to Stockholder the balance of the Pledged Assets, less
Pledged Assets having an aggregate value equal to the amount of (i) any damages
for breach, (ii) any pending claim for indemnification made by any Indemnified
Party (as defined in Article 10) until such claim is resolved, and (iii) any
indemnification obligations of Stockholder pursuant to Article 10. For purposes
of this Section 4.13(c) and Article 10, the Genesis Shares held as Pledged
Assets shall be valued at (x) the arithmetic mean of the closing price of the
Genesis Shares for the 20 trading days ending on the day prior to the Closing
reduced by (y) the per share amount of any damages or Claims.
(d) Stockholder shall be entitled to exercise any voting
powers incident to the Pledged Assets and to receive and retain all cash
dividends paid thereon.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF ACQUISITION AND GENESIS
To induce Stockholder and Company to enter into this Agreement
and consummate the transactions contemplated hereby, Genesis represents and
warrants to Stockholder and Company as follows:
5.1 Due Organization. Genesis is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and is duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to own, operate and
lease its properties and to carry on its business in the places and in the
manner as now conducted, except where the failure to be so authorized, qualified
or licensed would not have a material adverse effect on Genesis. Copies of the
certificate of incorporation and the bylaws, each as amended, of Genesis
(collectively, the "Genesis Charter Documents") have been made available to
Company. Genesis is not in violation of any Genesis Charter Document.
5.2 Genesis Shares. The Genesis Shares to be delivered to
Stockholder at the Effective Time, when delivered in accordance with the terms
of this Agreement, will be valid and legally issued Genesis Shares fully paid
and nonassessable.
5.3 Authorization; Validity of Obligations. The
representatives of Genesis executing this Agreement have all requisite corporate
power and authority to enter into and bind Genesis to the terms of this
Agreement. Genesis has the full legal right, power and corporate authority to
enter into this Agreement and the transactions contemplated hereby. The
execution and delivery of this Agreement by Genesis and the performance by
Genesis of the transactions contemplated herein have been duly and validly
authorized by the Board of Directors of Genesis, and this Agreement has been
duly and validly authorized by all necessary corporate action. This Agreement is
a legal, valid and binding obligation of Genesis enforceable in accordance with
its terms.
5.4 No Conflicts. The execution, delivery and performance of
this Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the
Genesis Charter Documents;
(b) subject, until the time of Closing, to compliance with any
agreements between Genesis and its lenders, conflict with, or result in a
default (or would constitute a default but for a requirement of notice or lapse
of time or both) under any document, agreement or other instrument to which
Genesis is a party or by which Genesis is bound, or result in the creation or
imposition of any lien, charge or encumbrance on any of Genesis' properties
pursuant to (i) any law or regulation to which Genesis or any of its property is
subject, or (ii) any judgment, order or decree to which Genesis is bound or any
of its property is subject;
(c) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of Genesis;
or
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(d) violate any law, order, judgment, rule, regulation, decree
or ordinance to which Genesis is subject, or by which Genesis is bound,
(including, without limitation, the HSR Act, together with all rules and
regulations promulgated thereunder).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDER
To induce Genesis to enter into this Agreement and consummate
the transactions contemplated hereby, the Company and Stockholder, jointly and
severally, represents and warrants to Genesis as follows (for purposes of this
Agreement, the phrases "knowledge of Company" or "Company's knowledge," or words
of similar import, mean the knowledge of the Stockholder and the directors and
officers the Company and each of its Subsidiaries (as defined below), including
facts of which the directors and officers, in the reasonably prudent exercise of
their duties, should be aware):
6.1 Due Organization. The Company and each of Company's
subsidiaries (the "Subsidiaries") is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and is duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances and orders of public authorities to
own, operate and lease its properties and to carry on its business in the places
and in the manner as now conducted except where the failure to be so authorized,
qualified or licensed would not have a Material Adverse Effect on the business,
operations, properties, assets or condition, financial or otherwise, of the
Company or any of its Subsidiaries. Schedule 6.1 hereto contains a list of all
jurisdictions in which the Company or any of its Subsidiaries is authorized or
qualified to do business. The Company and each Subsidiary is in good standing in
each such jurisdiction. The Company has made available to Genesis true, complete
and correct copies of the Organizational Documents. The Company or any
Subsidiary is not in violation of any Charter Documents. The minute books of the
Company and each Subsidiary have been made available to Genesis (and as of the
Closing, the minute books of Company and each Subsidiary) will have been
delivered, along with Company's and each Subsidiary's original stock ledger and
corporate seal, to Genesis) and are correct and, except as set forth in Schedule
6.1, complete in all material respects.
6.2 Authorization; Validity. The Company and Stockholder each
has all requisite power and authority to enter into and perform its obligations
pursuant to the terms of this Agreement. The Company and Stockholder each has
the full legal right, corporate power and authority to enter into this Agreement
and the transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and the Stockholder and the performance of the
transactions contemplated herein have been duly and validly authorized by the
Board of Directors of the Company, and this Agreement has been duly and validly
authorized by all necessary corporate action. This Agreement is a legal, valid
and binding obligation of Company and the Stockholder, enforceable in accordance
with its terms.
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6.3 No Conflicts. Except as disclosed in Schedule 6.3, the
execution, delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby, and the fulfillment of the terms hereof will
not:
(a) conflict with, or result in a breach or violation of, any
of the Organizational Documents;
(b) conflict with, or result in a default (or an event that
would constitute a default but for any requirement of notice or lapse of time or
both) under, any document, agreement or other instrument to which Stockholder,
Company or any Subsidiary is a party or by which Stockholder, Company or any
Subsidiary is bound, or result in the creation or imposition of any lien, charge
or encumbrance on any of any Stockholder, Company's or any Subsidiary's
properties pursuant to (i) any law or regulation to which Stockholder, Company
or any Subsidiary or any of their respective property is subject, or (ii) any
judgment, order or decree to which Stockholder, Company or any Subsidiary is
bound or any of their respective property is subject;
(c) result in termination or any impairment of any permit,
license, franchise, contractual right or other authorization of Stockholder,
Company or any Subsidiary; or
(d) violate any law, order, judgment, rule, regulation, decree
or ordinance to which Stockholder, Company or any Subsidiary is subject or by
which Stockholder, Company or any Subsidiary is bound including, without
limitation, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX
Xxx"), together with all rules and regulations promulgated thereunder.
6.4 Capital Stock of the Company. The authorized capital stock
of the Company consists of ______ shares of common stock, $____ par value, of
which _____ shares are issued and outstanding. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and are owned of record and
beneficially by the Stockholder as set forth in Schedule 6.4, free and clear of
all Liens. All of the issued and outstanding shares of the capital stock of the
Company was offered, issued, sold and delivered by the Company in compliance
with all applicable state and federal laws concerning the issuance of
securities. Further, none of such shares was issued in violation of any
preemptive rights. There are no voting agreements or voting trusts with respect
to any of the outstanding shares of the capital stock of the Company. For
purposes of this Agreement, "Lien" means any mortgage, security interest,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge, preference, priority or other security
agreement, option, warrant, attachment, right of first refusal, preemptive,
conversion, put, call or other claim or right, restriction on transfer (other
than restrictions imposed by federal and state securities laws), or preferential
arrangement of any kind or nature whatsoever (including any restriction on the
transfer of any assets, any conditional sale or other title retention agreement,
any financing lease involving substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
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6.5 Transactions in Capital Stock. No option, warrant, call,
subscription right, conversion right or other contract or commitment of any kind
exists of any character, written or oral, which may obligate the Company to
issue, sell or otherwise cause to become outstanding any shares of capital
stock. The Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of their respective equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. As a result of the Merger, Genesis will be the record and beneficial
owner of all outstanding capital stock of the Company and rights to acquire
capital stock of the Company.
6.6 Subsidiaries, Stock and Notes.
(a) Except as set forth on Schedule 6.6, Company has no other
subsidiaries.
(b) Except as set forth on Schedule 6.6(b), Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, nor is Stockholder
or Company, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity.
(c) Except as set forth on Schedule 6.6(c), there are no
promissory notes that have been issued to, or are held by, Company or any
Subsidiary.
6.7 Predecessor Status. Schedule 6.7 sets forth a list of all
names of all predecessor companies of Company and each Subsidiary, including the
names of any entities from which Company or any Subsidiary previously acquired
significant assets. Except as set forth on Schedule 6.7, neither Company nor any
Subsidiary has ever been a subsidiary or division of another corporation, nor
have they been a part of an acquisition that was later rescinded.
6.8 Absence of Claims. Except as set forth on Schedule 6.8,
neither Stockholder nor any of Stockholder's affiliates has any claim against
Company or any Subsidiary, and upon consummation of the Merger and the
distribution of the Merger Consideration, neither Stockholder nor any of
Stockholder's affiliates will have any claim against Company or any Subsidiary
except as expressly provided in this Agreement.
6.9 Financial Statements. Company has delivered to Genesis (a)
true and correct summaries accurately reflecting Company's financial condition
at December 31, 1999 (collectively, the "Year-end Financials") and (b) true and
correct summaries accurately reflecting Company's financial condition as of
March 31, 2000 (the "Balance Sheet Date") (the "Interim Financials," and
together with the Year-end Financials, the "Company Financial Statements"). The
Company Financial Statements present fairly the financial condition of Company
as of the dates indicated thereon and the results of its operations for the
periods indicated thereon.
6.10 Liabilities and Obligations.
(a) The Company is not liable for or subject to any
liabilities except for:
(i) those liabilities reflected on the Interim Balance Sheet
and not previously paid or discharged;
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(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment
or agreement specifically disclosed on any Schedule to this Agreement
or not required to be disclosed thereon because of the term or amount
involved or otherwise;
(iii) those liabilities incurred since the Balance Sheet Date
in the ordinary course of business consistent with past practice, which
liabilities are not, individually or in the aggregate, material; and
(iv) those liabilities disclosed on Schedule 6.10(a).
(b) Set forth on Schedule 6.10(b) is, in the case of those
liabilities which are not fixed or are contested, a reasonable estimate of the
maximum amount which may be payable.
(c) Schedule 6.10(c) also includes a summary description of
all current plans or projects involving the opening of new operations, expansion
of any existing operations or the acquisition of any real property or existing
business, to which management of Company or any Subsidiary has made any material
expenditure in the two-year period prior to the date of this Agreement, which if
pursued by Company would require additional material expenditures of capital.
(d) For purposes of this Section 6.10, the term "liabilities"
shall include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmatured or otherwise and whether known or unknown, fixed or unfixed, xxxxxx or
inchoate, liquidated or unliquidated, secured or unsecured. Schedule 6.10(d)
contains a complete list of all indebtedness of Company (on a consolidated
basis) as of the Effective Time.
6.11 Accounts and Notes Receivable. The Company has delivered
to Genesis a complete and accurate list, as of a date not more than two (2)
business days prior to the Effective Time, of the accounts and notes receivable
of Company and all Subsidiaries (including without limitation receivables from
and advances to employees, Stockholder and affiliates), which includes an aging
of all accounts and notes receivable showing amounts due in 30-day aging
categories (collectively, the "Accounts Receivable"). All Accounts Receivable
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. The Accounts Receivable
are current and collectible net of any respective reserves shown on the
Company's books and records (which reserves are adequate and calculated
consistent with past practice). Subject to such reserves, each of the Accounts
Receivable will be collected in full, without any set-off, within ninety (180)
days after the day on which it first became due and payable. There is no
contest, claim, or right of set-off, other than rebates and returns in the
ordinary course of business, under any contract with any obligor of an Account
Receivable relating to the amount or validity of such Account Receivable.
6.12 Books and Records. The Company has made and kept books
and records and accounts, which, in reasonable detail, accurately and fairly
reflect the activities of Company and its Subsidiaries. Neither Company nor any
Subsidiary has engaged in any transaction, maintained any bank account, or used
any corporate funds except for transactions, bank accounts, and funds which have
been and are reflected in the Company's normally maintained books and records
and which are in compliance with all applicable laws, including laws relating to
the receipt and deposit of funds in trust for third parties.
15
6.13 Permits. Except as disclosed in Schedule 6.13, Company
and each Subsidiary owns or holds all licenses, franchises, permits and other
governmental authorizations, including without limitation permits, titles
(including without limitation motor vehicle titles and current registrations),
licenses and franchises necessary for the continued operation of their
respective business as it is currently being conducted (the "Permits"). The
Permits are valid, and Company has not received any notice that any governmental
authority intends to modify, cancel, terminate or fail to renew any Permit. No
present or former officer, manager, member or employee of Company or any
affiliate thereof, or any other person, firm, corporation or other entity, owns
or has any proprietary, financial or other interest (direct or indirect) in any
Permits. Except as otherwise disclosed in Schedule 6.13, the Company and each
Subsidiary has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in the Permits and
other applicable orders, approvals, variances, rules and regulations and is not
in violation of any of the foregoing. The transactions contemplated by this
Agreement will not result in a default under, or a breach or violation of, or
adversely affect the rights and benefits afforded to Company or any Subsidiary
by, any Permit.
6.14 Real Property.
(a) For purposes of this Agreement, "Real Property" means all
interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses, rights to
access, and rights of way, and all buildings and other improvements thereon,
owned or used by the Company, together with any additions thereto or
replacements thereof.
(b) Schedule 6.14(b) contains a complete and accurate
description of all Real Property (including street address, owner and Company's
use thereof) and, to the Company's knowledge, any Liens on such Real Property.
Schedule 6.14(b) indicates whether the Real Property is owned or leased. The
Real Property listed on Schedule 6.14 includes all interests in real property
necessary to conduct the business and operations of the Company.
(c) Except as set forth in Schedule 6.14(c):
(i) The Company does not own any Real Property.
(ii) The Company has good and valid rights of ingress and
egress to and from all Real Property from and to the public street
systems for all usual street, road and utility purposes.
(iii) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any applicable law or
by the use and operation of the Real Property in the conduct of the
Company's business are installed to the property lines of the Real
Property, are connected pursuant to valid permits to municipal or
public utility services or proper drainage facilities, are fully
operable and are adequate to service the Real Property in the operation
of the Company's business and to permit full compliance with the
requirements of all laws in the operation of such business. No fact or
condition exists which could result in the termination or material
reduction of the current access from the Real Property to existing
roads or to sewer or other utility services presently serving the Real
Property.
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(iv) The Real Property and all present uses and operations of
the Real Property comply with all applicable statutes, rules,
regulations, ordinances, orders, writs, injunctions, judgments,
decrees, awards or restrictions of any government entity having
jurisdiction over any portion of the Real Property (including, without
limitation, applicable statutes, rules, regulations, orders and
restrictions relating to zoning, land use, safety, health, employment
and employment practices and access by the handicapped) (collectively,
"Laws"), covenants, conditions, restrictions, easements, disposition
agreements and similar matters affecting the Real Property. The Company
has obtained all approvals of governmental authorities (including
certificates of use and occupancy, licenses and permits) required in
connection with the use, occupation and operation of the Real Property.
(v) There are no pending or, to the Company's knowledge,
threatened condemnation, fire, health, safety, building, zoning or
other land use regulatory proceedings, lawsuits or administrative
actions relating to any portion of the Real Property or any other
matters which do or may adversely affect the current use, occupancy or
value thereof, nor has the Company or any of the Stockholders received
notice of any pending or threatened special assessment proceedings
affecting any portion of the Real Property.
(vi) No portion of the Real Property has suffered any damage
by fire or other casualty which has not heretofore been completely
repaired and restored to its original condition.
(vii) There are no parties other than the Company in
possession of any of the Real Property or any portion thereof, and
there are no leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any party or parties the right
of use or occupancy of any portion of the Real Property or any portion
thereof.
(viii) There are no service contracts or other agreements
relating to the use or operation of the Real Property.
(ix) No portion of the Real Property is located in a wetlands
area, as defined by Laws, or in a designated or recognized flood plain,
flood plain district, flood hazard area or area of similar
characterization. No commercial use of any portion of the Real Property
will violate any requirement of the United States Corps of Engineers or
Laws relating to wetlands areas.
(x) All written leases, subleases, licenses, concession
agreements or other use or occupancy agreements pursuant to which the
Company leases from any other party any real property, including all
amendments, renewals, extensions, modifications or supplements to any
of the foregoing or substitutions for any of the foregoing
(collectively, the "Leases") are valid and in full force and effect.
The Company has provided Genesis with true and complete copies of all
17
of the Leases, all amendments, renewals, extensions, modifications or
supplements thereto, and all material correspondence related thereto,
including all correspondence pursuant to which any party to any of the
Leases declared a default thereunder or provided notice of the exercise
of any options granted to such party under such Lease. The Company does
not have any oral leases. The Leases and the Company's interests
thereunder are free of all Liens, except as set forth on Schedule 6.15.
(xi) None of the Leases requires the consent or approval of
any party thereto in connection with the consummation of the
transactions contemplated hereby and each will remain in full force and
effect following the Effective Time, without acceleration, default,
penalty or other charge.
6.15 Personal Property.
(a) Schedule 6.15(a) sets forth a complete and accurate list
of all personal property included on the Interim Balance Sheet and all other
personal property owned or leased by Company or any Subsidiary with a current
book value in excess of $5,000 both (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date, including in each case true, complete and
correct copies of leases for material equipment and an indication as to which
assets are currently owned, or were formerly owned, by Stockholder or business
or personal affiliates of Stockholder or Company.
(b) Company and each Subsidiary currently owns or leases all
personal property necessary to conduct the business and operations of Company
and such Subsidiary as they are currently being conducted.
(c) All material machinery and equipment of Company, including
those listed on Schedule 6.15(a), are in good working order and condition,
ordinary wear and tear excepted. All leases set forth on Schedule 6.15(a) are in
full force and effect and constitute valid and binding agreements of Company or
any Subsidiary, and the Stockholder, Company or any Subsidiary are not in breach
of any of their terms. All fixed assets used by the Company that are material to
the operation of its business are either owned by Company or a Subsidiary or
leased under an agreement listed on Schedule 6.15(a).
6.16 Intellectual Property.
(a) Company or the respective Subsidiary is the true and
lawful owner of, or is licensed or otherwise possesses legally enforceable
rights to use, the registered and unregistered Marks listed on Schedule 6.16(a).
Such schedule lists (i) all of the Marks registered in the United States Patent
and Trademark Office ("PTO") or the equivalent thereof in any state of the
United States or in any foreign country, and (ii) all of the unregistered Marks,
that Company and the Subsidiaries now own or use in connection with their
businesses. Except with respect to those Marks shown as licensed on Schedule
6.16(a), Company owns all of the registered and unregistered Marks that Company
and the Subsidiaries use. The Marks listed on Schedule 6.16(a) will not cease to
be valid rights of Company and the Subsidiaries by reason of the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby. For purposes of this Section 4.16, the term
"Xxxx" shall mean all right, title and interest in and to any United States or
foreign trademarks, service marks and trade names now held by Company or any
Subsidiary, including any registration or application for registration of any
trademarks and services marks in the PTO or the equivalent thereof in any state
of the United States or in any foreign country, as well as any unregistered
marks used by Company or any Subsidiary, and any trade dress (including logos,
designs, company names, business names, fictitious names and other business
identifiers) used by Company or any Subsidiary in the United States or any
foreign country.
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(b) Company or the respective Subsidiary is the true and
lawful owner of, or is licensed or otherwise possesses legally enforceable
rights to use, all rights in the Patents listed on Schedule 6.16(b)(i) and in
the Copyright registrations listed on Schedule 6.16(b)(ii). Such Patents and
Copyrights constitute all of the Patents and Copyrights that Company and the
Subsidiaries now own or are licensed to use. The Company or the respective
Subsidiary owns or is licensed to practice under all patents and copyright
registrations that Company or the respective Subsidiary now owns or uses in
connection with its businesses. For purposes of this Section 6.16, the term
"Patent" shall mean any United States or foreign patent to which Company or any
Subsidiary has title as of the date of this Agreement, as well as any
application for a United States or foreign patent made by Company or any
Subsidiary; the term "Copyright" shall mean any United States or foreign
copyright owned by Company or any Subsidiary as of the date of this Agreement,
including any registration of copyrights, in the United States Copyright Office
or the equivalent thereof in any foreign country, as well as any application for
a United States or foreign copyright registration made by Company or any
Subsidiary.
(c) Company or the respective Subsidiary is the true and
lawful owner of, or is licensed or otherwise possess legally enforceable rights
to use, all rights in the trade secrets, franchises, or similar rights
(collectively, "Other Rights"). Those Other Rights constitute all of the Other
Rights that Company and the Subsidiaries now own or are licensed to use. The
Company and the Subsidiaries, respectively, own or are licensed to practice
under all trade secrets, franchises or similar rights that they own, use or
practice under.
(d) The Marks, Patents and Copyrights listed on Schedules
6.16(a), 6.16(b)(i) and 6.16(b)(ii), and the Other Rights are referred to
collectively herein as the "Intellectual Property." The Intellectual Property
owned by Company and its Subsidiaries is referred to herein collectively as the
"Company Intellectual Property." All other Intellectual Property is referred to
herein collectively as the "Third-Party Intellectual Property." Except as
indicated on Schedule 6.16(d), neither Company nor any Subsidiary has any
obligation to compensate any person for the use of any Intellectual Property nor
has Company or any Subsidiary granted to any person any license, option or other
rights to use in any manner any Intellectual Property, whether requiring the
payment of royalties or not.
(e) Neither Company nor any Subsidiary is, nor will any of
them be as a result of the execution and delivery of this Agreement or the
performance of its obligations hereunder, in violation of any Third-Party
Intellectual Property license, sublicense or agreement described in Schedule
6.16(a), (b) or (c). No claims with respect to Company Intellectual Property or
Third-Party Intellectual Property are currently pending or, to the knowledge of
the Company, are threatened by any person, nor, to Company's knowledge, do any
grounds for any claims exist: (i) to the effect that the manufacture, sale,
licensing or use of any product as now used, sold or licensed or proposed for
use, sale or license by Company or any Subsidiary infringe on any copyright,
patent, trademark, service xxxx or trade secret; (ii) against the use by Company
or any Subsidiary of any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how or computer software programs and applications
used in Company's or any Subsidiary's businesses as currently conducted by
Company or any Subsidiary; (iii) challenging the ownership, validity or
effectiveness of any of Company Intellectual Property or other trade secret
material to Company or any Subsidiary; or (iv) challenging Company's or any
Subsidiary's license or legally enforceable right to use of the Third-Party
Intellectual Property. To Company's knowledge, there is no unauthorized use,
infringement or misappropriation of any of Company Intellectual Property by any
third party. Neither Company nor any of Subsidiary (x) has been sued or charged
in writing as a defendant in any claim, suit, action or proceeding which
involves a claim or infringement of trade secrets, patents, trademarks, service
marks, or copyrights and which has not been finally terminated or been informed
or notified by any third party that Company or any Subsidiary may be engaged in
such infringement or (y) has knowledge of any infringement liability with
respect to, or infringement by, Company or any Subsidiary of any trade secret,
patent, trademark, service xxxx, or copyright of another.
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6.17 Material Contracts and Commitments.
(a) Schedule 6.17(a) contains a complete and accurate list of
all contracts, commitments, leases, instruments, agreements, licenses or
permits, written or oral, to which Company or any Subsidiary is a party or by
which they or their properties are bound (including without limitation, joint
venture or partnership agreements, contracts with any labor organizations,
employment agreements, consulting agreements, loan agreements, indemnity or
guaranty agreements, bonds, mortgages, options to purchase land, liens, pledges
or other security agreements) (i) to which Company or any Subsidiary and any
affiliate of Company or any Subsidiary or any officer, director or Stockholder
of Company or any Subsidiary are parties or have any interest ("Related Party
Agreements"); or (ii) that may give rise to obligations or liabilities
exceeding, during the current term thereof, $20,000, or that may generate
revenues or income exceeding, during the current term thereof, $20,000
(collectively with the Related Party Agreements, the "Material Contracts").
Company has delivered to Genesis true, complete and correct copies of the
Material Contracts that are in writing. Company and each Subsidiary has complied
with all of their commitments and obligations and is not in default under any of
the Material Contracts, and no notice of default has been received with respect
to any thereof, and there are no Material Contracts that were not negotiated at
arm's length.
(b) Each Material Contract, except those terminated pursuant
to Section 6.3(b), is valid and binding on Company and each Subsidiary and is in
full force and effect and is not subject to any default thereunder by any party
obligated to Company or any Subsidiary pursuant thereto. Except as disclosed in
Schedule 6.17(b), Company and each Subsidiary has obtained all necessary
consents, waivers and approvals of parties to any Material Contracts that are
required in connection with any of the transactions contemplated hereby, or are
required by any governmental agency or other third party or are advisable in
order that any such Material Contract remain in effect without modification
after the Merger and without giving rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
(c) The outstanding balances on all loans or credit agreements
either (i) between Company or any Subsidiary and any person in which Stockholder
owns a material interest, or (ii) guaranteed by Company or any Subsidiary for
the benefit of any person in which Stockholder owns a material interest, are set
forth in Schedule 6.17(c).
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(d) The pledge, hypothecation or mortgage of all or
substantially all of Company's or any Subsidiary's assets (including, without
limitation, a pledge of Company's or any Subsidiary's contract rights under any
Material Contract) will not, except as set forth on Schedule 6.17(d), (i) result
in the breach or violation of, (ii) constitute a default under, (iii) create a
right of termination under, or (iv) result in the creation or imposition of (or
the obligation to create or impose) any Lien upon any of the assets of Company
or any Subsidiary (other than a Lien created pursuant to the pledge,
hypothecation or mortgage described at the start of this Section 6.17(d))
pursuant to any of the terms and provisions of, any Material Contract to which
Company or any Subsidiary is a party or by which the property of Company or any
Subsidiary is bound.
6.18 Government Contracts.
(a) Except as set forth on Schedule 6.18, neither Company nor
any Subsidiary is a party to any government contracts.
(b) Neither Company nor any Subsidiary has been suspended or
debarred from bidding on contracts or subcontracts for any agency or
instrumentality of the United States Government or any state or local
government, nor, to the knowledge of Company, has any suspension or debarment
action been threatened or commenced. There is no valid basis for Company's or
any Subsidiary's suspension or debarment from bidding on contracts or
subcontracts for any agency of the United States Government or any state or
local government.
(c) Except as set forth in Schedule 618, neither Company nor
any Subsidiary has been, nor is it now being, audited, or investigated by any
government agency, or the inspector general or auditor general or similar
functionary of any government agency or instrumentality, nor, to the knowledge
of Company, has such audit or investigation been threatened.
(d) Neither Company nor any Subsidiary has any dispute pending
before a contracting office of, nor any current claim (other than the Accounts
Receivable) pending against, any agency or instrumentality of the United States
Government or any state or local government, relating to a contract.
(e) Neither Company nor any Subsidiary has, with respect to
any government contract, received a cure notice advising Company or any
Subsidiary that it is or was in default or would, if it failed to take remedial
action, be in default under such contract.
(f) Neither Company nor any Subsidiary has submitted any
inaccurate, untruthful, or misleading cost or pricing data, certification, bid,
proposal, report, claim, or any other information relating to a contract to any
agency or instrumentality of the United States Government or any state or local
government.
(g) No employee, agent, consultant, representative, or
affiliate of Company or any Subsidiary is in receipt or possession of any
competitor or government proprietary or procurement sensitive information
related to Company's or any Subsidiary's business under circumstances where
there is reason to believe that such receipt or possession is unlawful or
unauthorized.
(h) Each of Company's and any Subsidiary's government
contracts has been issued, awarded or nominated to Company or such Subsidiary in
Company's or such Subsidiary's name.
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6.19 Insurance. Schedule 6.19 sets forth a complete and
accurate list of all insurance policies carried by Company and each Subsidiary
and all insurance loss runs or workmen's compensation claims received for the
past two policy years. The Company has made available to Genesis true, complete
and correct copies of all current insurance policies, all of which are in full
force and effect. All premiums payable under all such policies have been paid
and Company and each Subsidiary is otherwise in full compliance with the terms
of such policies. Such policies of insurance are of the type and in amounts
customarily carried by persons conducting businesses similar to that of Company
and its Subsidiaries, as applicable. The insurance carried by Company with
respect to its properties, assets and business is, to the Company's knowledge,
with financially sound insurers. To the knowledge of Company and its
Subsidiaries, there have been no threatened terminations of, or material premium
increases with respect to, any of such policies.
6.20 Labor and Employment Matters. With respect to employees
of and service providers to Company and each Subsidiary, except as set forth in
Schedule 6.20:
(a) Company and each Subsidiary is and has been in compliance
in all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
including without limitation any such laws respecting employment discrimination,
workers' compensation, family and medical leave, the Immigration Reform and
Control Act, and occupational safety and health requirements, and has not and is
not engaged in any unfair labor practice;
(b) there is not now, nor within the past three years has
there been, any unfair labor practice complaint against Company or such
Subsidiary pending or, to Company's knowledge, threatened, before the National
Labor Relations Board or any other comparable authority;
(c) there is not now, nor within the past three years has
there been, any labor strike, slowdown or stoppage actually pending or, to
Company's knowledge, threatened, against or directly affecting Company or such
Subsidiary;
(d) to Company's knowledge, no labor representation
organization effort exists nor has there been any such activity within the past
three years;
(e) no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending and, to Company's knowledge,
no claims therefor exist or have been threatened;
(f) the employees of Company and such Subsidiary are not and
have never been represented by any labor union, and no collective bargaining
agreement is binding and in force against Company or such Subsidiary or
currently being negotiated by Company or such Subsidiary; and
(g) all persons classified by Company and such Subsidiary as
independent contractors do satisfy and have satisfied the requirements of law to
be so classified, and the Company and such Subsidiary have fully and accurately
reported their compensation on IRS Forms 1099 when required to do so.
22
6.21 Employee Benefit Plans. Attached hereto as Schedule 6.21
is a list of all employee benefit plans, all employee welfare benefit plans, all
employee pension benefit plans, all multi-employer plans and all multi-employer
welfare arrangements (as defined in Sections 3(3), (1), (2), (37) and (40),
respectively, of ERISA, copies of which have been made available to Genesis ,
which are currently maintained and/or sponsored by Company or any of its
Subsidiaries, or to which Company or any of its Subsidiaries currently
contribute, or have an obligation to contribute in the future (including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements), together
with copies of any trusts related thereto and a classification of employees
covered thereby (collectively, the "Plans"). Schedule 6.21 sets forth all of the
Plans that have been terminated within the past three years.
All Plans are in compliance in all material respects with all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable laws, and in all material respects have been
administered, operated and managed in accordance with the governing documents.
All Plans that are intended to qualify (the "Qualified Plans") under Section
401(a) of the Code, have been determined by the Internal Revenue Service to be
so qualified, and copies of the current plan determination letters, most recent
actuarial valuation reports, if any, most recent Form 5500, or, as applicable,
Form 5500-C/R filed with respect to each such Qualified Plan or employee welfare
benefit plan and most recent trustee or custodian report, are included as part
of Schedule 4.21. To the extent that any Qualified Plans have not been amended
to comply with applicable law, the remedial amendment period permitting
retroactive amendment of such Qualified Plans has not expired and will not
expire within 120 days after the Effective Time. All reports and other documents
required to be filed with any governmental agency or distributed to plan
participants or beneficiaries (including, but not limited to, annual reports,
summary annual reports, actuarial reports, PBGC-1 Forms, audits or tax returns)
have been timely filed or distributed. None of: (i) any Stockholder; (ii) any
Plan; (iii) Company; or (iv) any Subsidiary have engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No Plan has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(1) of ERISA; and neither Company nor
any Subsidiary currently has (nor at the Effective Time will have) any direct or
indirect liability whatsoever (including being subject to any statutory lien to
secure payment of any such liability), to the Pension Benefit Guaranty
Corporation ("PBGC") with respect to any such Plan under Title IV of ERISA or to
the Internal Revenue Service for any excise tax or penalty; and none of Company,
any Subsidiary or any member of a "controlled group" (as defined in ERISA
Section 4001(a)(14)) currently have (or at the Effective Time will have) any
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14)), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan. Further:
(a) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without notice to and
approval by the Internal Revenue Service;
(b) no Plan which is subject to the provisions of Title IV of
ERISA has been terminated;
23
(c) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(d) the valuation of assets of any Qualified Plan, as of the
Effective Time, shall exceed the actuarial present value of all accrued pension
benefits under any such Qualified Plan in accordance with the assumptions
contained in the Regulations of the PBGC governing the funding of terminated
defined benefit plans;
(e) with respect to Plans which qualify as "group health
plans" under Section 4980B of the Code and Section 607(1) of ERISA and related
regulations (relating to the benefit continuation rights imposed by "COBRA"),
Company, each Subsidiary and the Stockholder has complied (and on the Effective
Time will have complied), in all respects with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and neither Company nor any Subsidiary has
(or will incur) direct or indirect liability or is (or will be) subject to any
loss, assessment, excise tax penalty, loss of federal income tax deduction or
other sanction, arising on account of or in respect of any direct or indirect
failure by the Company, any Subsidiary or the Stockholder, at any time prior to
the Effective Time, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted before
or after the Effective Time directly or indirectly against Stockholder, Company
or any Subsidiary with respect to such group health plans;
(f) neither Company nor any Subsidiary now is nor has it been
within the past five years a member of a "controlled group" as defined in ERISA
Section 4001(a)(14);
(g) there is no pending litigation, arbitration, or disputed
claim, settlement or adjudication proceeding, and to Company's knowledge, there
is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, or any governmental or other proceeding, or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(h) the Company Financial Statements as of the Balance Sheet
Date reflect the approximate total pension, medical and other benefit expense
for all Plans, and no material funding changes or irregularities are reflected
thereon which would cause such Company Financial Statements to be not
representative of most prior periods; and
(i) neither Company nor any Subsidiary has incurred
liability under Section 4062 of ERISA.
6.22 Conformity with Law; Litigation.
(a) Except as set forth on Schedule 6.22(a), neither Company
nor any Subsidiary is in violation of any law or regulation or under any order
of any court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction which
would have a Material Adverse Effect. Company and each Subsidiary has conducted
and are conducting their business in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and is not in violation of any of
the foregoing which might have a Material Adverse Effect.
24
(b) No officer, director or Stockholder of Company has, at any
time: (i) committed any criminal act (except for minor traffic violations); (ii)
engaged in acts of fraud, gross negligence or moral turpitude; (iii) filed for
personal bankruptcy; or (iv) been an officer, director, manager, trustee or
controlling shareholder of a company that filed for bankruptcy or Chapter 11
protection while he held such position or within two years thereafter.
(c) Except as set forth on Schedule 6.22(c), there are no
claims, actions, suits or proceedings, pending or, to the knowledge of Company,
threatened against or affecting Company or any Subsidiary at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over it
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. There are no judgments, orders, injunctions,
decrees, stipulations or awards (whether rendered by a court or administrative
agency or by arbitration) against Company or any Subsidiary or against any of
their respective properties or business.
6.23 Restrictive Covenants. Neither Company nor any
Subsidiary is a party to or bound or affected by any commitment, agreement or
document containing any covenant limiting the freedom of Company or a Subsidiary
to compete in any line of business, transfer or move any of its assets or
operations or which does or would reasonably expected to materially or adversely
affect the business practices, operations or conditions of Company or any
Subsidiary.
6.24 Taxes.
(a)
(i) Company and each Subsidiary timely filed all Tax Returns
due on or before the Effective Time and all such Tax Returns are true,
correct and complete in all respects.
(ii) Company and each Subsidiary has paid in full on a timely
basis all Taxes owed by it, whether or not shown on any Tax Return.
(iii) The amount of Company's and all Subsidiaries' liability
for unpaid Taxes as of the Balance Sheet Date did not exceed the amount
of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) shown on the Interim Balance Sheet, and the amount of
Company's and all Subsidiaries' liability for unpaid Taxes for all
periods or portions thereof ending on or before the Effective Time will
not exceed the amount of the current liability accruals for Taxes
(excluding reserves for Deferred Taxes) as such accruals are reflected
on the books and records of Company as of the Effective Time.
(iv) There are no ongoing examinations or claims against
Company or any Subsidiary for Taxes, and no notice of any audit,
examination or claim for Taxes, whether pending or threatened, has been
received.
(v) Company has had a taxable year ended on December 31, in
each year since its formation.
(vi) Company and each Subsidiary currently utilizes the
accrual method of accounting for income Tax purposes and such method of
accounting has not changed in the past 10 years. Neither Company nor
any Subsidiary has agreed to, and neither is or will be required to,
make any adjustments under Code Section 481(a) as a result of a change
in accounting methods.
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(vii) Company and each Subsidiary has withheld and paid over
to the proper governmental authorities all Taxes required to have been
withheld and paid over, and complied with all information reporting and
backup withholding requirements, including maintenance of required
records with respect thereto, in connection with amounts paid to any
employee, independent contractor, creditor or third party.
(viii) Copies of (A) any Tax examinations, (B) extensions of
statutory limitations for the collection or assessment of Taxes and (C)
the Tax Returns of Company and each Subsidiary for the last five fiscal
years have been made available to Genesis.
(ix) There are (and as of immediately following the
Effective Time there will be) no Liens on the assets of Company or any
Subsidiary relating to or attributable to Taxes.
(x) To Company's knowledge, there is no basis for the
assertion of any claim relating to or attributable to Taxes which, if
adversely determined, would result in any Lien on the assets of Company
or any Subsidiary or otherwise have a Material Adverse Effect.
(xi) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this
Agreement, covering any employee or former employee of Company or any
Subsidiary that, individually or collectively, could give rise to any
payment (or portion thereof) that would not be deductible pursuant to
Sections 280G, 404 or 162 of the Code.
(xii) Except as set forth on Schedule 4.24, neither Company
nor any Subsidiary is or has been at any time, a party to a tax
sharing, tax indemnity or tax allocation agreement, and neither Company
nor any Subsidiary has assumed the tax liability of any other person
under contract.
(xiii) Company's and its Subsidiaries' tax basis in their
assets for purposes of determining future amortization, depreciation
and other federal income tax deductions is accurately reflected on
Company's tax books and records.
(b) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar
governmental charge, impost or levy (including without limitation
income taxes, franchise taxes, transfer taxes or fees, sales taxes, use
taxes, gross receipt taxes, value added taxes, employment taxes, excise
taxes, ad valorem taxes, property taxes, withholding taxes, payroll
taxes, minimum taxes or windfall profit taxes) together with any
related penalties, fines, additions to tax or interest imposed by the
United States or any state, county, local or foreign government or
subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return (including
any information return), report, statement, schedule, notice, form,
estimate or declaration of estimated tax relating to or required to be
filed with any governmental authority in connection with the
determination, assessment, collection or payment of any tax.
26
6.25 Absence of Changes. Since the Balance Sheet Date, Company
and each Subsidiary has conducted its business in the ordinary course and,
except as contemplated herein or as set forth on Schedule 6.25, there has not
been:
(a) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of Company or
any Subsidiary;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of Company or any
Subsidiary;
(c) any change in the authorized capital of Company or any
Subsidiary or in its outstanding securities or any change in its ownership
interests or any grant of any options, warrants, calls, conversion rights or
commitments;
(d) any declaration or payment of any dividend or distribution
in respect of the capital stock, or any direct or indirect redemption, purchase
or other acquisition of any of the capital stock of Company or any Subsidiary
(except for dividends or distributions to Company by a Subsidiary);
(e) any increase in the compensation, bonus, sales commissions
or fee arrangements payable or to become payable by Company or any Subsidiary to
any of its officers, directors, stockholders, employees, consultants or agents,
except for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(f) any work interruptions, labor grievances or claims filed,
or any similar event or condition of any character, which has had a Material
Adverse Effect;
(g) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of Company or any Subsidiary
to any person, including without limitation the Stockholder and her affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to Company or any Subsidiary, including without
limitation any indebtedness or obligation of the Stockholder and her affiliates,
provided that Company or any Subsidiary may negotiate and adjust bills in the
course of good faith disputes with customers in a manner consistent with past
practice;
(i) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the assets,
property or rights of Company or any Subsidiary or requiring consent of any
party to the transfer and assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of business of Company or any Subsidiary;
(k) any waiver of any material rights or claims of
Company or any Subsidiary;
(l) any breach, amendment or termination of any material
contract, agreement, license, permit or other right to which Company or any
Subsidiary is a party;
(m) any transaction by Company or any Subsidiary outside the
ordinary course of business;
27
(n) any capital commitment by Company or any Subsidiary,
either individually or in the aggregate, exceeding $10,000;
(o) any change in accounting methods or practices (including
any change in depreciation or amortization policies or rates) by Company or any
Subsidiary or the revaluation by Company or any Subsidiary of any of its assets;
(p) any creation or assumption by Company of any mortgage,
pledge, security interest or lien or other encumbrance on any asset (other than
liens arising under existing lease financing arrangements which are not material
and liens for Taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination
or non-renewal by Company or any Subsidiary of any contract, lease transaction,
commitment or other right or obligation requiring aggregate payments by Company
and its Subsidiaries in excess of $25,000;
(r) any loan by Company or any Subsidiary to any person or
entity, incurring by Company, of any indebtedness, guaranteeing by Company or
any Subsidiary of any indebtedness, issuance or sale of any debt securities of
Company or any Subsidiary or guaranteeing of any debt securities of others;
(s) the commencement or notice or, to the knowledge of Company
or any Subsidiary, threat of commencement, of any lawsuit or proceeding against,
or investigation of, Company or any Subsidiary or any of their respective
affairs; or
(t) any negotiation or agreement by Company or any Subsidiary
or any officer or employee thereof to do any of the things described in the
preceding clauses (a) through (s) (other than negotiations with Genesis and its
representatives regarding the transactions contemplated by this Agreement).
6.26 Deposit Accounts; Powers of Attorney. Schedule 6.26
sets forth a complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which Company
or any Subsidiary has any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from Company or any Subsidiary
and a description of the terms of such power.
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6.27 Environmental Matters.
(a) Hazardous Material. Other than as set forth on Schedule
6.27(a), to the knowledge of Company, no underground storage tanks and no amount
of any substance that has been designated by any Governmental Entity or by
applicable federal, state, local or other applicable law to be radioactive,
toxic, hazardous or otherwise a danger to health or the environment, including,
without limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United States Resource Conservation
and Recovery Act of 1976, as amended, and the regulations promulgated pursuant
to said laws, but excluding office and janitorial supplies properly and safely
maintained (a "Hazardous Material"), are present in, on or under any property,
including the land and the improvements, ground water and surface water thereof,
that Company or any Subsidiary has at any time owned, operated, occupied or
leased. Schedule 6.27(a) identifies all known underground and aboveground
storage tanks, and the capacity, age, and contents of such tanks, located on
Real Property owned or leased by Company or any Subsidiary.
(b) Hazardous Materials Activities. To the knowledge of the
Company, neither the Company nor any Subsidiary has transported, stored, used,
manufactured, disposed of or released, or exposed their employees or others to,
Hazardous Materials in violation of any law in effect on or before the Effective
Time, nor has Company nor any Subsidiary disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (collectively, "Company
Hazardous Materials Activities") in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity in effect prior to or as of the
date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. The Company and each Subsidiary currently holds
all environmental approvals, permits, licenses, clearances and consents (the
"Environmental Permits") necessary for the conduct of Company Hazardous Material
Activities and other business of Company and its Subsidiaries as such activities
and business are currently being conducted. All Environmental Permits are in
full force and effect. Company and each Subsidiary (A) is in compliance in all
material respects with all terms and conditions of the Environmental Permits and
(B) is in compliance in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the laws of all Governmental Entities
relating to pollution or protection of the environment or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder. To Company's knowledge, there are
no circumstances that may prevent or interfere with such compliance in the
future. Schedule 6.27(c) includes a listing and description of all Environmental
Permits currently held by Company and each Subsidiary.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the knowledge of Company, threatened concerning any Environmental
Permit, Hazardous Material or any Company Hazardous Materials Activity. There
are no past or present actions, activities, circumstances, conditions, events,
or incidents that could involve Company or any Subsidiary (or any person or
entity whose liability Company or any Subsidiary has retained or assumed, either
by contract or operation of law) in any environmental litigation, or impose upon
Company or any Subsidiary (or any person or entity whose liability Company or
any Subsidiary has retained or assumed, either by contract or operation of law)
any environmental liability including, without limitation, common law tort
liability.
6.28 Relations with Governments. Neither Company nor any
Subsidiary has made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office, nor
has it otherwise taken any action that would cause Company to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended, or any law of similar
effect.
29
6.29 Disclosure. The Company has delivered to Genesis true and
complete copies of each agreement, contract, commitment or other document (or
summaries thereof) that is referred to in the Schedules or that has been
requested in writing by Genesis. Without limiting any exclusion, exception or
other limitation contained in any of the representations and warranties made
herein, this Agreement, the Schedules hereto and all other documents and
information furnished to Genesis and its representatives pursuant hereto do not
and will not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading. If
Company or Stockholder becomes aware of any fact or circumstance which would
change a representation or warranty of Company or Stockholder in this Agreement
or any representation made on behalf of Company or Stockholder, Company or
Stockholder shall immediately give notice of such fact or circumstance to
Genesis. However, such notification shall not relieve Company or Stockholder of
their respective obligations under this Agreement, and at the sole option of
Genesis, the truth and accuracy of any and all warranties and representations of
Company and Stockholder, at the date of this Agreement and as of the Effective
Time, shall be a precondition to the consummation of this Agreement.
6.30 Affiliates. The Stockholder is the only person who is, in
the reasonable judgment of Company, an affiliate of Company within the meaning
of Rule 405 promulgated under the Securities Act of 1933, as amended (the "1933
Act") or Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as
amended (each such person an "Affiliate").
6.31 Location of Chief Executive Offices. Schedule 6.31 sets
forth the location of Company's and each Subsidiary's chief executive offices.
6.32 Location of Equipment and Inventory. All Inventory and
Equipment held on the date hereof by Company and each Subsidiary are located at
one of the locations shown on Schedule 6.32. For purposes of this Agreement, (a)
the term "Inventory" shall mean any "inventory" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of
California (the "Cal. U.C.C.") owned by Company or any Subsidiary as of the date
hereof, and, in any event, shall include, but shall not be limited to, all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods, supplies,
incidentals, packaging materials, labels, materials and any other items used or
usable in manufacturing, processing, packaging or shipping same; in all stages
of production, and all proceeds therefrom; and (b) the term "Equipment" shall
mean any "equipment," as such term is defined in the Cal.U.C.C. in effect on the
date hereof, owned by Company or any Subsidiary, and, in any event, shall
include, but shall not be limited to, all machinery, equipment, furnishings,
fixtures and vehicles owned by Company or any Subsidiary, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
30
6.33 Accredited Investors. Each holder of Company Shares is an
"accredited investor" as that term is defined in Rule 501(a) promulgated under
the 1933 Act; is acquiring the Genesis Shares for investment purposes only, for
the account of such holder and not with the view to any resale or distribution
thereof; is not participating, directly or indirectly, in an underwriting of
such Genesis Shares; and will not take, or cause to be taken, any action that
would cause itself or its stockholders to be deemed an "underwriter," as defined
in Section 2(a)(11) of the 1933 Act, of such Genesis Shares.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 Acquisition Proposals. From the date hereof until the termination hereof,
the Company will not, nor will it permit any of its subsidiaries to, nor will it
authorize or permit any officer, director or employee of or any investment
banker, attorney, accountant or other advisor or representative of, Company or
any of its subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage the submission of any Acquisition Proposal or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate, any Acquisition
Proposal or any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal.
7.2 Notification of Certain Matters. The Company shall give prompt notice to
Genesis and Acquisition, and Genesis and Acquisition shall give prompt notice to
the Company, of (i) the occurrence or nonoccurrence of any event the occurrence
or nonoccurrence of which would be likely to cause any representation or
warranty contained in this Agreement, which is qualified as to materiality, to
be untrue or inaccurate, or any representation or warranty not so qualified, to
be untrue or inaccurate in any material respect at or prior to the Effective
Time, (ii) any material failure of the Company, Genesis or Acquisition, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder, (iii) any notice of, or other
communication relating to, a default or event which, with notice or lapse of
time or both, would become a default, received by it or any of its subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time, under
any contract or agreement material to the financial condition, properties,
businesses, results of operations or prospects of it and its subsidiaries taken
as a whole to which it or any of its subsidiaries is a party or is subject, (iv)
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, or (v) any Material Adverse Effect in their
respective financial condition, properties, businesses, results of operations or
prospects, taken as a whole, other than changes resulting from general economic
conditions; provided, however, that the delivery of any notice pursuant to this
Section 7.2 shall not cure such breach or non-compliance or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
7.3 Pooling.
(a) Company shall use its reasonable best efforts to cause to
be delivered to Genesis a letter from Company's accountants dated as of the
Closing Date, stating that the accounting of the Merger as a "pooling of
interests" under Opinion 16 of the Accounting Principles Board ("APB 16") and
the applicable SEC rules and regulations is appropriate if the Merger is
consummated as contemplated by this Agreement.
31
(b) Genesis shall use its reasonable best efforts to cause to be delivered to
the Company a letter from Singer, Lewak, Xxxxxxxxx & Xxxxxxxxx, LLP dated as of
the date the Registration Statement is declared effective and dated as of the
Closing Date, stating that the accounting of the Merger as a "pooling of
interests" under APB 16 and the applicable SEC rules and regulations is
appropriate if the Merger is consummated as contemplated by this Agreement.
7.4 Conduct of Business Pending Effective Time. Between the
date hereof and the Effective Time, Company (which includes each Subsidiary for
purposes of this Section 7.4) will (except as requested or agreed by Genesis):
(a) carry on its business in substantially the same manner as
it has heretofore and not introduce any material new method of management,
operation or accounting;
(b) maintain its properties and facilities, including those
held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(c) perform all of its obligations under agreements relating
to or affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies
or other comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and
preserve its business organization intact, retain its present officers and key
employees and maintain its relationships with suppliers, vendors, customers,
creditors and others having business relations with it;
(f) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter
into new or amended debt or lease instruments; and
(h) maintain present salaries and commission levels for all
officers, directors, employees, agents, representatives and independent
contractors, except for ordinary and customary bonuses and salary increases for
employees.
7.5 Preparation of Audited Financial Statements. The Company
will, as promptly as practicable, prepare financial statements in accordance
with GAAP for the five years (or such shorter period as the Company shall have
been in existence) ending December 31, 1999 (the "GAAP Financial Statements").
The Company will retain Singer, Lewak, Xxxxxxxxx and Xxxxxxxxx, LLP to audit the
GAAP Financial Statements.
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7.6 Sales of Genesis Shares.
(a) Stockholder will not, directly or indirectly, offer, sell,
contract to sell, pledge or otherwise dispose of one-half of the Genesis Shares
to be received by Stockholder in pursuant to this Agreement prior to the date
that is, (i) with respect to one-third of the shares, 24 months from the
Effective Time, (ii) with respect to two-thirds of the shares, 18 months from
the Effective Time and (iii) with respect to all of the shares, 12 months from
the Effective Time.
(b) Stockholder acknowledges and agrees that Genesis will not
provide Stockholder with a prospectus for Stockholder's use in selling the
Genesis Shares to be received by Stockholder pursuant to this Agreement, and
agrees to sell such shares only in accordance with the requirements, if any, of
Rule 144 or Rule 145(d) promulgated under the 1933 Act, as applicable. Genesis
acknowledges that the provisions of this Section 7.6(b) will be satisfied as to
any sale by Stockholder of the Genesis Shares Stockholder may acquire pursuant
to this Agreement pursuant to Rule 144 or Rule 145(d) under the Securities Act,
by a broker's letter and a letter from Stockholder with respect to that sale
stating that the applicable requirements of Rule 144(c), (d), (e), (f) and (h)
or Rule 145(d)(1) have been met or are inapplicable by virtue of Rule 144(k),
Rule 145(d)(2) or Rule 145(d)(3), provided, however, that Genesis has no
reasonable basis to believe that such sales were not made in compliance with
such provisions of Rule 144 or Rule 145(d) and subject to any changes in Rule
144 or Rule 145 after the date of this Agreement.
(c) The certificate or certificates evidencing the Genesis
Shares to be delivered to Stockholder pursuant to this Agreement will bear
restrictive legends substantially in the following forms: THE SHARES REPRESENTED
BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, APPLIES. THESE SHARES MAY ONLY BE
TRANSFERRED PURSUANT TO A REGISTRATION STATEMENT COVERING THE TRANSFER OF SUCH
SHARES OR A VALID EXEMPTION FROM REGISTRATION. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A CONTRACTUAL HOLDING PERIOD EXPIRING ON ***,
PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN OF MERGER, DATED AS OF MAY 8, 2000,
AMONG THE ISSUER, GENESIS-DYNA ACQUISITION, INC., DYNATYPE DESIGN AND GRAPHIC
CENTERS, INC. AND XXXXXXX X. XXXXX. PRIOR TO THE EXPIRATION OF SUCH HOLDING
PERIOD, SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, TRANSFER OR
ASSIGNMENT. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH
THE TRANSFER AGENT) WHEN THE HOLDING PERIOD HAS EXPIRED. *** With respect to the
one-half of Genesis Shares to be received by Stockholder pursuant to this
Agreement, certificates representing one-third of the shares issued will read
"May 8, 2001," one-third will read "November 8, 2001" and one-third will read
"May 8, 2002."
7.7 Tax Matters.
(a) The following provisions shall govern the allocation of
responsibility as between the Stockholder on one part, and the Surviving
Corporation on another part for certain tax matters following the Effective
Time:
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(i) the Surviving Corporation shall prepare or cause to be
prepared and file or cause to be filed, within the time and in the
manner provided by law, all Tax Returns of Company (which for purposes
of this Section 7.7 shall include all Subsidiaries) for all periods
ending on or before the Effective Time that are due after the Effective
Time. Stockholder shall pay to the Surviving Corporation on or before
the due date of such Tax Returns the amount of all Taxes shown as due
on such Tax Returns to the extent that such Taxes are not reflected in
the current liability accruals for Taxes (excluding reserves for
deferred Taxes) shown on Company's books and records as of the
Effective Time. Such Returns shall be prepared and filed in accordance
with applicable law and in a manner consistent with past practices and
shall be subject to the reasonable review and approval by Stockholder.
To the extent reasonably requested by Genesis or required by law,
Stockholder shall participate in the filing of any Tax Returns filed
pursuant to this paragraph.
(ii) The Surviving Corporation shall prepare or cause to be
prepared and file or cause to be filed any Tax Returns for Tax periods
which begin before the Effective Time and end after the Effective Time.
Stockholder shall pay to the Surviving Corporation within fifteen (15)
days after the date on which Taxes are paid with respect to such
periods an amount equal to the portion of such Taxes which relates to
the portion of such taxable period ending at the Effective Time to the
extent such Taxes are not reflected in the current liability accruals
for Taxes (excluding reserves for deferred Taxes) shown on Company's
books and records as of the Effective Time. For purposes of this
Section 7.7, in the case of any Taxes that are imposed on a periodic
basis and are payable for a taxable period that includes (but does not
end at) the Effective Time, the portion of such Tax which relates to
the portion of such taxable period ending at the Effective Time shall
(x) in the case of any Taxes other than Taxes based upon or related to
income or receipts, be deemed to be the amount of such Tax for the
entire taxable period multiplied by a fraction the numerator of which
is the number of days in the taxable period ending at the Effective
Time and the denominator of which is the number of days in the entire
taxable period, and (y) in the case of any Tax based upon or related to
income or receipts be deemed equal to the amount which would be payable
if the relevant taxable period ended at the Effective Time. Any credits
relating to a taxable period that begins before and ends after the
Effective Time shall be taken into account as though the relevant
taxable period ended at the Effective Time. All determinations
necessary to give effect to the foregoing allocations shall be made in
a manner consistent with prior practice of the Surviving Corporation.
(iii) Genesis and the Surviving Corporation on one part and
Stockholder on another part shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns
pursuant to this Section 7.7 and any audit, litigation or other
proceeding with respect to Taxes; (B) make available to the other, as
reasonably requested, all information, records or documents with
respect to Tax matters pertinent to Company for all periods ending
prior to or including the Effective Time; and (C) preserve information,
records or documents relating to tax matters pertinent to Company that
is in their possession or under their control until the expiration of
any applicable statute of limitations or extensions thereof.
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(iv) Stockholder shall timely pay all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees arising from
or relating to the transactions contemplated by this Agreement, and
Stockholder shall, at its own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration, and other Taxes and fees. If required
by applicable law, Genesis and the Surviving Corporation will join in
the execution of any such Tax Returns and other documentation.
7.8 Accounts Receivable. Genesis and the Surviving Corporation
will use their reasonable best efforts to collect the Accounts Receivable. Any
amounts received by the Surviving Corporation for a particular Account
Receivable (i) that was not originally collected within 180 days after the day
on which it became due and payable and (ii) for which Genesis or the Surviving
Corporation has not received indemnification pursuant to Article 10, shall be
applied against amounts due on that particular Account Receivable and such
amount shall be subtracted from the aggregate amount of Damages on the date of
collection of such Account Receivable. Any amounts received by the Surviving
Corporation for a particular Account Receivable (i) that was not originally
collected within 180 days after the day on which it became due and payable and
(ii) for which Genesis or the Surviving Corporation has received indemnification
pursuant to Article 10, shall be remitted to Stockholder within fifteen (15)
days of receipt by the Surviving Corporation.
7.9 Related Party Agreements. Company and/or Stockholder, as
the case may be, shall terminate any Related Party Agreements that Genesis
requests Company or Stockholder to terminate in writing.
7.10 Cooperation; Delayed Deliveries.
(a) Company, Stockholder, and Genesis shall each deliver or
cause to be delivered to the other at the Effective Time, and at such other
times and places as shall be reasonably agreed to, such instruments as the other
may reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, the president or chief financial officer of
Company shall execute any documentation reasonably required by Genesis's
Accountants (in connection with Genesis's Accountants' future audits of
Company).
(b) The Stockholder and Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of
Company and its Subsidiaries cooperate with Genesis at and after the Effective
Time in furnishing information, evidence, testimony and other assistance in
connection with any filing obligations, actions, proceedings, arrangements or
disputes of any nature with respect to matters pertaining to all periods prior
to the Effective Time.
(c) Each party hereto shall cooperate in obtaining all
consents and approvals required under this Agreement to effect the transactions
contemplated hereby.
(d) The Company, Stockholder, and Genesis shall file all
notices and other information and documents required under the HSR Act as
promptly as practicable after the date hereof.
7.11 Noncompetition
(a) Prohibited Activities. Stockholder agrees that for a
period of two years following the Effective Time, neither it nor any of its
affiliates, including its stockholders immediately prior to the Effective Time,
shall:
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(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with the Surviving Corporation or Genesis within the
United States of America, Canada or any other country in which Genesis,
Company or their respective affiliates currently conduct business (the
"Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of Genesis or any subsidiary of Genesis in a
managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of Genesis or such subsidiary;
(iii) call upon any person or entity which is, at that time,
or which has been, within one year prior to that time, a customer of
Genesis or Company or any subsidiaries of Genesis or Company within the
Territory for the purpose of soliciting or selling online information
dissemination, advertising or marketing or web page design or
development related services within the Territory;
(iv) call upon any prospective acquisition candidate, on their
own behalf or on behalf of any competitor, which candidate was either
called upon by any of them or for which any of them made an acquisition
analysis for themselves or Genesis or any subsidiaries of Genesis,
including Company; or
(v) disclose customers, whether in existence or proposed, of
Company to any person, firm, partnership, corporation or business for
any reason or purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Stockholder or any such affiliate from (i) acquiring as an
investment not more than one percent of the capital stock of a competing
business, whose stock is traded on a national securities exchange or in the
over-the-counter market or (ii) engaging in any activity to which Genesis shall
have provided its prior written consent.
(b) Damages. Because of the difficulty of measuring economic
losses to Genesis as a result of the breach of the foregoing covenant, and
because of the immediate and irreparable damage that would be caused to Genesis
for which they would have no other adequate remedy, Stockholder agrees that, in
the event of a breach by it or its affiliates of the foregoing covenant, the
covenant may be enforced by Genesis by, without limitation, injunctions and
restraining orders.
(c) Reasonable Restraint. It is agreed by the parties that the
foregoing covenants in this Section 7.11 impose a reasonable restraint on
Stockholder and any affiliates in light of the activities and business of
Genesis on the date of the execution of this Agreement and the current and
future plans of Genesis (as successors to the businesses of Company).
(d) Severability; Reformation. The covenants in this Section
7.11 are severable and separate, and the unenforceability of any specific
covenant shall not affect the provisions of any other covenant. Moreover, in the
event any court of competent jurisdiction shall determine that the scope, time
or territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall thereby be reformed.
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(e) Independent Covenants. All of the covenants in this
Section 7.11 shall be construed as an agreement independent of any other
provision of this Agreement, and the existence of any claim or cause of action
of Stockholder against Company or Genesis, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement of such
covenants. It is specifically agreed that the period of three years stated
above, shall be computed by excluding from such computation any time during
which Stockholder or any of her affiliates are in violation of any provision of
this Section 7.11 and any time during which there is pending in any court of
competent jurisdiction any action (including any appeal from any judgment)
brought by any person, whether or not a party to this Agreement, in which action
Genesis seeks to enforce the agreements and covenants of Stockholder or in which
any person contests the validity of such agreements and covenants or their
enforceability or seeks to avoid their performance or enforcement; provided,
however, that if Stockholder or any of their affiliates are found not to be in
violation of the agreements or covenants in any such activity the period during
which the action was pending shall not be excluded from such computation.
(f) Materiality. Company and Stockholder hereby agree that the
covenants set forth in this Section 7.11 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
(g) Termination of Stockholder. In the event Stockholders
employment is terminated by the Company without cause or by the employee for
good reason pursuant to Section 4.3 of the employment agreement entered into
between the Company and Stockholder dated May 8, 2000, the covenant not to
complete in this Section 7.11 shall be automatically terminated.
7.12 Nondisclosure of Confidential Information.
(a) Stockholder. Stockholder recognizes and acknowledges that
she has in the past, currently has, and in the future may possibly have, access
to certain confidential information of Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of Company and Company's business. Stockholder agrees that she
will not disclose any confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of Genesis, unless Stockholder can show that such
information has become known to the public generally through no fault of
Stockholder's. In the event of a breach or threatened breach by Stockholder of
the provisions of this Section 7.12, Genesis shall be entitled to an injunction
restraining Stockholder from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Genesis from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
37
(b) Genesis. Genesis recognizes and acknowledges that it has
in the past, currently has, and prior to the Effective Time will have, access to
certain confidential information of Company, such as lists of customers,
operational policies, pricing and cost policies that are valuable, special and
unique assets of Company and Company's business. Genesis agrees that it will not
disclose any confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, prior to the
Effective Time without prior written consent of Stockholder. In the event of a
breach or threatened breach by Genesis of the provisions of this Section 7.12,
Stockholder shall be entitled to an injunction restraining Genesis from
disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting Stockholder from pursuing any
other available remedy for such breach or threatened breach, including the
recovery of damages.
(c) Damages. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which they would have
no other adequate remedy, Genesis and Stockholder agree that, in the event of a
breach by any of them of the foregoing covenant, the covenant may be enforced
against them by injunctions and restraining orders.
ARTICLE 8
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF GENESIS
AND ACQUISITION
The obligations of Genesis and Acquisition to effect the
Merger are subject to the satisfaction or waiver, before the Effective Time, to
the following conditions and deliveries:
8.1 Representations and Warranties; Performance of
Obligations. All of the representations and warranties of Stockholder and
Company contained in this Agreement shall be true, correct and complete on and
as of the Effective Time with the same effect as though such representations and
warranties had been made on and as of such date; all of the terms, covenants,
agreements and conditions of this Agreement to be complied with, performed or
satisfied by Stockholder and Company on or before the Effective Time shall have
been duly complied with, performed or satisfied; and a certificate to the
foregoing effect dated the Closing Date and signed on behalf of Stockholder and
Company shall have been delivered to Genesis.
8.2 No Litigation. No temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging the
transactions contemplated by this Agreement, or limiting or restricting
Genesis's conduct or operation of the business of Company (or its own
businesses) following the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit, claim or proceeding of any nature
pending or threatened against Genesis or Company or any Subsidiary, their
respective properties or any of their officers or directors, that could
materially and adversely affect the business, assets, liabilities, financial
condition, results of operations or prospects of Company or any Subsidiary.
38
8.3 No Material Adverse Change. Except as otherwise disclosed
in this Agreement or the Schedules hereto, there shall have been no material
adverse changes in the business, operations, affairs, prospects, properties,
assets, existing and potential liabilities, obligations, profits or condition
(financial or otherwise) of Company, taken as a whole, since the Balance Sheet
Date; and Genesis shall have received a certificate signed by Stockholder dated
the Closing Date to such effect.
8.4 Consents and Approvals. All necessary consents of, and
filings with, any governmental authority or agency or third party, relating to
the consummation by Stockholder and Company of the transactions contemplated
hereby, shall have been obtained and made and this Agreement shall have been
approved by the requisite holders of outstanding Company Shares.
8.5 Opinion of Counsel. Genesis shall have received an opinion
of legal counsel to Stockholder and Company dated the Closing Date in form and
substance reasonably satisfactory to Genesis and its counsel.
8.6 Charter Documents. Genesis shall have received (a) a copy
of the articles or certificate of incorporation of Company and each Subsidiary
certified by an appropriate authority in their respective state of incorporation
and (b) a copy of the bylaws of Company and each Subsidiary certified by the
Secretary of Company and each Subsidiary, and such documents shall be in form
and substance reasonably acceptable to Genesis.
8.7 Quarterly Financial Statements. Genesis shall have
received from Company completed quarterly financial statements through March 31,
2000 in a form reasonably satisfactory to Genesis.
8.8 Due Diligence Review; Schedules. Stockholder and Company
shall have made such deliveries as are called for by this Agreement. Genesis
shall be fully satisfied in its sole discretion with the results of its review
of all of the Schedules, whether delivered before or after the execution hereof,
and such deliveries, and its review of, and other due diligence investigations
with respect to, the business, operations, affairs, prospects, properties,
assets, existing and potential liabilities, obligations, profits and condition
(financial or otherwise) of the Company and the Subsidiaries. If Genesis shall
not be fully satisfied with the foregoing, Genesis shall be entitled to
terminate this Agreement.
8.9 Employment Agreements. Stockholder shall have entered into
an employment agreement with Company, in form and substance reasonably
satisfactory to Genesis.
8.10 Stockholder's Release. Stockholder shall have delivered
to Genesis an instrument dated the Closing Date releasing Company from any and
all claims of Stockholder against Company.
8.11 No Laws. No laws, rules, regulations, orders or any other
requirements of any Governmental Authority shall have been enacted, introduced
or announced which may materially and adversely affect Company or any Subsidiary
or the business carried on by any of them.
8.12 HSR Act. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and no action by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of the transactions
contemplated hereby shall be pending.
39
8.13 Related Party Agreements. The Company shall have
delivered to Genesis evidence of repayment of all amounts due from, or due to,
Stockholder and all entities in which Stockholder has an interest.
Such amounts shall include all accounts receivable.
8.14 Termination of Employment Agreements. The Company shall
have terminated without liability, expense or obligation to Company or any
Subsidiary (and no payments shall be required to be made by the Surviving
Corporation or any Subsidiary from and after the Effective Time in respect of)
any employment agreements the terms of which are not specifically provided for
in this Agreement, and neither Company nor any subsidiary shall be liable for
any payment in respect of any agreement as a result of a change in control of
Company (whether or not in conjunction with any other event or events).
ARTICLE 9
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF STOCKHOLDER AND COMPANY
The obligation of Stockholder and Company to effect the Merger
are subject to the satisfaction or waiver, at or before the Effective Time, of
the following conditions and deliveries:
9.1 Representations and Warranties; Performance of
Obligations. All of the representations and warranties of Genesis contained in
this Agreement shall be true, correct and complete on and as of the Effective
Time with the same effect as though such representations and warranties had been
made as of such date; all of the terms, covenants, agreements and conditions of
this Agreement to be complied with, performed or satisfied by Genesis on or
before the Effective Time shall have been duly complied with, performed or
satisfied; and a certificate to the foregoing effects dated the Closing Date and
signed by the President or any Vice President of Genesis shall have been
delivered to Stockholder.
9.2 No Litigation. No temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging the
transaction contemplated by this Agreement, or limiting or restricting Genesis'
conduct or operation of the business of the Company or the Subsidiaries (or its
own businesses) following the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit, claim or proceeding of
any nature pending or threatened, against Genesis or Stockholder, Company, any
Subsidiary, their respective properties or any of their officers or directors,
that could materially and adversely affect the business, assets, liabilities,
financial condition, results of operations or prospects of the Genesis and its
subsidiaries taken as a whole.
9.3 Consents and Approvals. All necessary consents of, and
filings with, any governmental authority or agency or third party relating to
the consummation by Genesis of the transactions contemplated herein, shall have
been obtained and made.
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9.4 Employment Agreements. Company shall have afforded
Stockholder an opportunity to enter into an employment agreement with Company in
form and substance reasonably satisfactory to Genesis.
ARTICLE 10
INDEMNIFICATION
10.1 General Indemnification by Stockholder. Stockholder
covenants and agrees to indemnify, defend, protect and hold harmless Genesis and
the Surviving Corporation and their respective officers, directors, employees,
stockholders, assigns, successors and affiliates (individually, an "Indemnified
Party" and collectively, "Indemnified Parties") from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive
damages, causes of action, lawsuits, administrative proceedings (including
informal proceedings), investigations, audits, demands, assessments,
adjustments, judgments, settlement payments, deficiencies, penalties, fines,
interest (including interest from the date of such damages) and costs and
expenses (including without limitation reasonable attorneys' fees and
disbursements of every kind, nature and description) (collectively, "Damages")
suffered, sustained, incurred or paid by the Indemnified Parties in connection
with, resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of
Stockholder or Company set forth in this Agreement or any Schedule or
certificate, delivered by or on behalf of Company or Stockholder in
connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by
Stockholder or, prior to the Effective Time, Company, under this
Agreement;
(iii) the business, operations or assets of Company and its
Subsidiaries prior to the Effective Time or the actions or omissions of
Company's or any Subsidiary's directors, officers, shareholders,
employees or agents prior to the Effective Time, other than Damages
arising from matters expressly disclosed in the Company Financial
Statements, this Agreement or the Schedules to this Agreement; or
(iv) the matters disclosed on Schedules 6.22 (conformity with
law; litigation), 6.24 (taxes) and 6.27 (environmental matters).
(b) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 10.1.
10.2 Limitation and Expiration. Notwithstanding the above:
(a) there shall be no liability for indemnification under
Section 10.1 unless, and solely to the extent that, the aggregate amount of
Damages exceeds $25,000 (the "Indemnification Threshold"); provided, however,
that the Indemnification Threshold shall not apply to (i) Damages arising out of
any breaches of the covenants of the Stockholder set forth in this Agreement or
representations and warranties made in Sections 6.9 (Company financial
conditions), 6.17 (material contracts and commitments), 6.22 (conformity with
law; litigation), 6.24 (taxes) and 6.27 (environmental matters); or (ii) Damages
described in Section 10.1(a)(iv) or (v).
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(b) the aggregate amount of Stockholder's liability under this
Article 10 shall not exceed the Merger Consideration; provided, however, that
Stockholder's liability for Damages arising out of any breaches of the
representations made in Sections 6.24 (taxes) or 6.27 (environmental matters) or
Damages described in Sections 10.1(a)(ii) and 10.1(a)(iv) shall not be subject
to such limitation;
(c) the indemnification obligations under this Article 10, or
under any certificate or writing furnished in connection herewith, shall
terminate at the date that is the later of clause (i) or (ii) of this Section
10.2(c):
(i) (1) except as to representations, warranties, and
covenants specified in clause (i)(2) of this Section 10.2(c), the first
anniversary of the Effective Time, or
(2) with respect to representations and warranties contained
in Sections 6.21 (employee benefit plans), 6.24 (taxes), 6.27
(environmental matters), and the indemnification set forth in Section
10.1(a)(ii), (iii), or (iv), on (A) the date that is six (6) months
after the expiration of the longest applicable federal or state statute
of limitation (including extensions thereof), or (B) if there is no
applicable statute of limitation, (x) ten (10) years after the
Effective Time if the Claim (as defined below) is related to the cost
of investigating, containing, removing, or remediating a release of
Hazardous Material into the environment, or (y) five (5) years after
the Effective Time for any other Claim covered by clause (i)(2)(B) of
this Section 10.2(c); or
(ii) the final resolution of claims or demands pending as of
the relevant dates described in clause (i) of this Section 10.2(c)
(such claims referred to as "Pending Claims").
10.3 Indemnification Procedures. All claims or demands for
indemnification under this Article 10 ("Claims") shall be asserted and resolved
as follows:
(a) In the event that any Indemnified Party has a Claim
against any party obligated to provide indemnification pursuant to Section 10.1
hereof (the "Indemnifying Party") which does not involve a Claim being asserted
against or sought to be collected by a third party, the Indemnified Party shall
with reasonable promptness notify the Indemnifying Party of such Claim,
specifying the nature of such Claim and the amount or the estimated amount
thereof to the extent then feasible (the "Claim Notice"). If Indemnifying Party
does not notify the Indemnified Party within thirty days after the date of
delivery of the Claim Notice that the Indemnifying Party disputes such Claim,
with a detailed statement of the basis of such position, the amount of such
Claim shall be conclusively deemed a liability of the Indemnifying Party
hereunder. In case an objection is made in writing in accordance with this
Section 10.3(a), the Indemnified Party shall respond in a written statement to
the objection within thirty days and, for sixty days thereafter, attempt in good
faith to agree upon the rights of the respective parties with respect to each of
such Claims (and, if the parties should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties).
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(b)
(i) In the event that any Claim for which the Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted
against an Indemnified Party by a third party (a "Third-Party Claim"),
the Indemnified Party shall deliver a Claim Notice to Indemnifying
Party. The Indemnifying Party shall have thirty days from the date of
delivery of the Claim Notice to notify the Indemnified Party (A)
whether the Indemnifying Party disputes liability to the Indemnified
Party hereunder with respect to the Third-Party Claim, and, if so, the
basis for such a dispute, and (B) if such party does not dispute
liability, whether or not the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend against the
Third-Party Claim, provided that the Indemnified Party is hereby
authorized (but not obligated) to file any motion, answer or other
pleading and to take any other action which the Indemnified Party shall
deem necessary or appropriate to protect the Indemnified Party's
interests.
(ii) In the event that the Indemnifying Party timely notifies
the Indemnified Party that the Indemnifying Party does not dispute the
Indemnifying Party's obligation to indemnify with respect to the
Third-Party Claim, the Indemnifying Party shall defend the Indemnified
Party against such Third-Party Claim by appropriate proceedings,
provided that, unless the Indemnified Party otherwise agrees in
writing, the Indemnifying Party may not settle any Third-Party Claim
(in whole or in part) if such settlement does not include a complete
and unconditional release of the Indemnified Party. If the Indemnified
Party desires to participate in, but not control, any such defense or
settlement the Indemnified Party may do so at its sole cost and
expense. If the Indemnifying Party elects not to defend the Indemnified
Party against a Third-Party Claim, whether by failure of such party to
give the Indemnified Party timely notice as provided herein or
otherwise, then the Indemnified Party, without waiving any rights
against such party, may settle or defend against such Third-Party Claim
in the Indemnified Party's sole discretion and the Indemnified Party
shall be entitled to recover from the Indemnifying Party the amount of
any settlement or judgment and, on an ongoing basis, all indemnifiable
costs and expenses of the Indemnified Party with respect thereto,
including interest from the date such costs and expenses were incurred.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the
Indemnifying Party, any Third-Party Claim seeks material prospective
relief which could have an adverse effect on any Indemnified Party or
the Surviving Corporation or any subsidiary, the Indemnified Party
shall have the right to control or assume (as the case may be) the
defense of any such Third-Party Claim and the amount of any judgment or
settlement and the reasonable costs and expenses of defense shall be
included as part of the indemnification obligations of the Indemnifying
Party hereunder. If the Indemnified Party elects to exercise such
right, the Indemnifying Party shall have the right to participate in,
but not control, the defense of such Third-Party Claim at the sole cost
and expense of the Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified
Party from making a Claim, and an Indemnified Party may make a Claim hereunder,
for potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
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(d) Subject to the provisions of Section 8.2, the Indemnified
Party's failure to give reasonably prompt notice as required by this Section 8.3
of any actual, threatened or possible claim or demand which may give rise to a
right of indemnification hereunder shall not relieve the Indemnifying Party of
any liability which the Indemnifying Party may have to the Indemnified Party
unless the failure to give such notice materially and adversely prejudiced the
Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 10, provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy.
10.4 Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by Stockholder, Company and
Genesis in or pursuant to this Agreement or in any document delivered pursuant
hereto shall be deemed to have been made on the date of this Agreement (except
as otherwise provided herein) and, if a Closing occurs, as of the Effective
Time. The representations of Stockholder and Company will survive the Closing
and will remain in effect until, and will expire upon, the termination of the
indemnification obligations as provided in Section 10.2. The representations of
Genesis will survive the Closing and will remain in effect until, and will
expire upon the first anniversary of the Effective Time.
10.5 Remedies Cumulative. The remedies set forth in this
Article 10 are cumulative and shall not be construed to restrict or otherwise
affect any other remedies that may be available to the Indemnified Parties under
any other agreement or pursuant to statutory or common law.
ARTICLE 11
GENERAL
11.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time solely:
(a) by mutual consent of the boards of directors of Genesis
and Company; or
(b) by Stockholder and Company as a group, on one part, or by
Genesis, on another part, if the Closing shall not have occurred on or before
May 31, 2000, provided that the right to terminate this Agreement under this
Section 11.1(b) shall not be available to either party (with Stockholders and
Company deemed to be a single party for this purpose) whose material
misrepresentation, breach of warranty or failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of the Closing
to occur on or before such date; or
(c) by Stockholder and Company as a group, on one part, or by
Genesis, on another part, if there is or has been a material breach, failure to
fulfill or default on the part of the other party (with Stockholder and Company
deemed to be a single party for this purpose) of any of the representations and
warranties contained herein or in the due and timely performance and
satisfaction of any of the covenants, agreements or conditions contained herein,
and the curing of such default shall not have been made or shall not reasonably
be expected to occur before the Effective Time; or
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(d) by Stockholder and Company as a group, on one part, or by
Genesis, on another part, if there shall be a final nonappealable order of a
federal or state court in effect preventing consummation of the Merger; or there
shall be any action taken, or any statute, rule regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any governmental
entity which would make the consummation of the Merger illegal.
11.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 11.1, this Agreement shall forthwith become
ineffective, and there shall be no liability or obligation on the part of any
party hereto or its officers, directors or shareholders. Notwithstanding the
foregoing sentence, (i) the provisions of this Article 11 shall remain in full
force and effect and survive any termination of this Agreement; (ii) each party
shall remain liable for any breach of this Agreement prior to its termination;
and (iii) in the event of termination of this Agreement pursuant to Section
11.1(c) above, then notwithstanding the provisions of Section 11.7 below, the
breaching party (with Stockholder and Company deemed to be a single party for
purposes of this Article 11), shall be liable to the other party to the extent
of the expenses incurred by such other party in connection with this Agreement
and the transactions contemplated hereby, as well as any damages in accordance
with applicable law.
11.3 Successors and Assigns. Except as provided in this
Section 11.3, this Agreement and the rights of the parties hereunder may not be
assigned (except by operation of law) and shall be binding upon and shall inure
to the benefit of the parties hereto, the successors of Genesis and Stockholder.
Genesis may assign this Agreement to any affiliate or associate (as such terms
are defined in Rule 405 under the 0000 Xxx) of Genesis or any entity newly
formed by Genesis or such affiliate or associate for the purpose of consummating
the transactions contemplated by this Agreement.
11.4 Entire Agreement; Amendment; Waiver. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. Each of the Schedules to this Agreement is
incorporated herein by this reference and expressly made a part hereof. Any and
all previous agreements and understandings between or among the parties
regarding the subject matter hereof, whether written or oral, are superseded by
this Agreement. This Agreement shall not be amended or modified except by a
written instrument duly executed by each of the parties hereto, or in accordance
with Section 11.4. Any extension or waiver by any party of any provision hereto
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
11.5 Counterparts. This Agreement may be executed in any
number of counterparts and any party hereto may execute any such counterpart,
including by electronic facsimile, each of which when executed and delivered
shall be deemed to be an original, and all of which counterparts taken together
shall constitute but one and the same instrument.
11.6 Brokers and Agents. Each of Genesis, on one part, and
Stockholder and Company (as a group), on another part, represents and warrants
to the other that it has not employed any broker or agent in connection with the
transactions contemplated by this Agreement and agrees to indemnify the other
against all losses, damages or expenses relating to or arising out of claims for
fees or commission of any broker or agent employed or alleged to have been
employed by such party.
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11.7 Expenses. Genesis has and will pay the fees, expenses and
disbursements of Genesis and its agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement.
Stockholder (and not Company) have and will pay the fees, expenses and
disbursements of Stockholder, Company and their agents, representatives,
financial advisers, accountants and counsel incurred in connection with the
subject matter of this Agreement.
11.8 Specific Performance; Remedies. Each party hereto
acknowledges that the other parties will be irreparably harmed and that there
will be no adequate remedy at law for any violation by any of them of any of the
covenants or agreements contained in this Agreement. It is accordingly agreed
that, in addition to any other remedies which may be available upon the breach
of any such covenants or agreements, each party hereto shall have the right to
obtain injunctive relief to restrain a breach or threatened breach of, or
otherwise to obtain specific performance of, the other parties, covenants and
agreements contained in this Agreement.
11.9 Notices. Any notice, request, claim, demand, waiver,
consent, approval or other communication which is required or permitted
hereunder shall be in writing and shall be deemed given if delivered personally
or sent by telefax (with confirmation of receipt), by registered or certified
mail, postage prepaid, or by recognized courier service, as follows:
If to Stockholder or the Company:
Dynatype Design and Graphics Centers, Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
With copy to:
Xxxxx & Xxxxxxxx
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxx, Esq.
Telecopy: (000) 000-0000
If to Genesis and Acquisition:
XxxxxxxXxxxxxxxxx.xxx, Inc.
0000 Xxxxxxxxx Xxxx., 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Ramy El-Batrawi
Telecopy: (000) 000-0000
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With copy to:
Nida & Xxxxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
11.10 Governing Law. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
California, without giving effect to any of the conflicts of laws provisions
thereof that would require the application of the substantive laws of any other
jurisdiction.
11.11 Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any other jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement shall
be severable.
11.12 Absence of Third-Party Beneficiary Rights. No provision
of this Agreement is intended, nor will any provision be interpreted, to provide
or to create any third-party beneficiary rights or any other rights of any kind
in any client, customer, affiliate, shareholder, employee or partner of any
party hereto or any other person or entity.
11.13 Further Representations. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
11.14 Accounting Terms. Except as otherwise expressly provided
herein or in the Schedules, all accounting terms used in this Agreement shall be
interpreted, and all financial statements, Schedules, certificates and reports
as to financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
[Signature page follows]
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
XXXXXXXXXXXXXXXXX.XXX, INC.
By:
------------------------
Name:
Title:
GENESIS-DYNA ACQUISITION, INC.
By:
------------------------
Name:
Title:
DYNATYPE DESIGN AND GRAPHIC CENTERS, INC.
By:
------------------------
Name:
Title:
XXXXXXX X. XXXXX
------------------------------
