Exhibit 2(b)
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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF
MAY 27, 1999
AMONG
GHS, INC.
CONCEPT ACQUISITION CORPORATION
CONCEPT DEVELOPMENT, INC.
AND
THE SOLE STOCKHOLDER OF CONCEPT DEVELOPMENT, INC.
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SCHEDULES
Schedule 2.2(b) Escrow Shares
Schedule 3.1(ee) Officers and Directors
Schedule 9.5 Stockholder Address
EXHIBITS
Exhibit A Form of Agreement of Merger
Exhibit B Form of Escrow Agreement
Exhibit C Form of Employment Agreement
Exhibit D Form of Repurchase Agreement
AGREEMENT AND PLAN OF REORGANIZATION dated as
of May 27, 1999 among GHS, INC., a Delaware
corporation ("Parent"), CONCEPT ACQUISITION
CORPORATION, a Delaware corporation and a direct,
wholly-owned subsidiary of Parent ("Acquisition
Sub") and CONCEPT DEVELOPMENT, INC., a Delaware
corporation (the "Company"), XXXXXXX XXXXXX and
XXXXXX XXXXXXX (the "Founders") and XXXXXX XXXXXXX
(the "Stockholder").
The Boards of Directors of Parent, Acquisition Sub and the
Company have each duly approved and adopted this Agreement, the Agreement of
Merger in substantially the form of EXHIBIT A attached hereto (the "Agreement
of Merger") and the proposed merger of Acquisition Sub with and into the
Company in accordance with this Agreement, the Agreement of Merger and the
Delaware General Corporation Law (the "Delaware Statute"), whereby, among
other things, the issued and outstanding shares of common stock, no par
value, of the Company (the "Company Common Stock"), will be exchanged and
converted into the right to receive cash and shares of Series C preferred
tock, $.01 par value, of Parent (the "Parent Preferred Stock") in the manner
set forth in Article II hereof and in the Agreement of Merger, upon the terms
and subject to the conditions set forth in this Agreement and the Agreement
of Merger.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the Agreement of Merger and the
representations, warranties, covenants, agreements, conditions and promises
contained herein and therein, the parties hereby agree as follows:
ARTICLE 1
GENERAL{TC}
1.1 THE MERGER{TC}. In accordance with the provisions of this
Agreement, the Agreement of Merger and the Delaware Statute, Acquisition Sub
shall be merged with and into the Company (the "Merger"), which at and after
the Effective Time shall be, and is sometimes herein referred to as, the
"Surviving Corporation". Acquisition Sub and the Company are sometimes
referred to as the "Constituent Corporations".
1.2 THE EFFECTIVE TIME OF THE MERGER{TC}. Subject to the provisions
of this Agreement, the Agreement of Merger shall be executed and delivered to
and filed with the Secretary of State of the State of Delaware by each of the
Constituent Corporations on the Closing Date in the manner provided under
Section 251 of the Delaware Statute. The Merger shall become effective (the
"Effective Time") upon the filing of the Agreement of Merger with the
Secretary of State of the State of Delaware and the issuance of a certificate
of merger by the Secretary of State of the State of Delaware.
1.3 EFFECT OF MERGER{TC}. At the Effective Time the separate
existence of Acquisition Sub shall cease and Acquisition Sub shall be merged
with and into the Surviving Corporation, and the Surviving Corporation shall
possess all of the rights, privileges, powers and franchises of a public as
well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations as provided
in Section 251 of the Delaware Statute.
1.4 CHARTER AND BY-LAWS OF SURVIVING CORPORATION{TC}. From and after
the Effective Time and pursuant to the Agreement of Merger: (i) the Charter
of Acquisition Sub shall be the Charter of the Surviving Corporation, unless
and until altered, amended or repealed as provided in the Delaware Statute or
the Charter, (ii) the by-laws of Acquisition Sub shall be the by-laws of the
Surviving Corporation, unless and until altered, amended or repealed as
provided in the Delaware Statute, the Charter or such by-laws, (iii) the
directors of Acquisition Sub shall be the directors of the Surviving
Corporation, unless and until removed, or until their respective terms of
office shall have expired, in accordance with the Delaware Statute, the
Charter and the by-laws of the Surviving Corporation, as applicable and (iv)
the officers of Acquisition Sub shall be the officers of the Surviving
Corporation, unless and until removed, or until their terms of office shall
have expired, in accordance with the Delaware Statute, the Charter and the
by-laws of the Surviving Corporation, as applicable.
1.5 TAKING OF NECESSARY ACTION{TC}. Prior to the Effective Time, the
parties hereto shall do or cause to be done all such acts and things as may
be necessary or appropriate in order to effectuate the Merger as
expeditiously as reasonably practicable, in accordance with this Agreement,
the Agreement of Merger and the Delaware Statute.
1.6 TAX-FREE REORGANIZATIONS{TC}. For Federal income tax purposes,
the parties intend that the merger be treated as a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (the "Code"), by reason of Section 368(a)(2)(E) of the Code.
1.7 CLOSING{TC}. Unless this Agreement shall have been terminated
and the transactions contemplated by this Agreement abandoned pursuant to the
provisions of Article VIII, and subject to the provisions of Article V, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. (Eastern
Standard Time) on a date (the "Closing Date") to be mutually agreed upon by
the parties, which date shall be not later than the third Business Day after
all the conditions set forth in Article V shall have been satisfied (or
waived in accordance with Section 10.10, to the extent the same may be
waived), unless another date is agreed to in writing by the parties. The
Closing shall take place at the offices of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx
LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless another place is
agreed to in writing by the parties. As used herein, the term "Business Day"
shall mean any day other than a Saturday, Sunday or day on which banks are
permitted to close in the State of New York.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES{TC}
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2.1 TOTAL CONSIDERATION; EFFECT ON CAPITAL STOCK{TC}. The entire
consideration payable by Parent with respect to all outstanding shares of
capital stock of the Company and for all options, warrants, rights, calls,
commitments, agreements or arrangements of any character to which the Company
is a party or by which it is bound calling for the issuance of shares of
capital stock of the Company or any securities convertible into or
exercisable or exchangeable for, or representing the right to purchase or
otherwise receive, directly or indirectly, any such capital stock, or other
arrangement to acquire, at any time or under any circumstance, capital stock
of the Company or any such other securities (hereinafter collectively
referred to as the "Fully Diluted Company Shares,") other than any capital
stock of the Company owned or held by Parent or any Affiliate of Parent,
shall be an aggregate of (A) 50,000 shares of Parent Preferred Stock (the
"Total Parent Share Amount") and (B) $2,000,000 MINUS the $200,000 to be paid
to Swidler, Berlin, Shereff, Friedman, LLP on the date hereof, which
liability of the Company is set forth on Schedule 3.1(f) of the Company
Disclosure Schedule (the "Aggregate Cash Consideration") in cash (the
Aggregate Cash Consideration, together with the Total Parent Share Amount,
being sometimes hereinafter collectively referred to as the "Aggregate
Purchase Price"). For purposes of the calculation of the exchange ratio for
Parent Preferred Stock under Section 2.1(c)(i) hereof, it is assumed that the
number of Fully Diluted Company Shares is one (1) (the "Fully Diluted Company
Share Amount"). At the Effective Time, subject and pursuant to the terms and
conditions of this Agreement and the Agreement of Merger, by virtue of the
Merger and without any action on the part of the Constituent Corporations or
the holders of the capital stock or options to purchase capital stock of the
Constituent Corporations:
(a) CAPITAL STOCK OF ACQUISITION SUB{TC}. Each issued
and outstanding share of common stock, par value $.01 per share, of
Acquisition Sub shall be converted into one share of common stock, par value
$.01 per share, of the Surviving Corporation.
(b) CANCELLATION OF CERTAIN SHARES OF COMPANY COMMON
STOCK{TC}. Each share of capital stock of the Company that is authorized but
unissued shall cease to exist and no Parent Preferred Stock or other
consideration shall be delivered in exchange therefor.
(c) EXCHANGE OF COMPANY COMMON STOCK{TC}. Subject to
Section 2.2, each share of Company Common Stock issued and outstanding at the
Effective Time, including all accrued and unpaid dividends thereon, shall be
exchanged and converted into the right to receive:
(i) 50,000 shares of Parent Preferred Stock
which are deliverable at the Closing and are subject to the repurchase rights
set forth in the Repurchase Agreement; and
(ii) $2,000,000 MINUS the $200,000 to be paid
to Swidler, Berlin, Shereff, Friedman, LLP which shall be payable at the
Closing.
For convenience of reference, the shares of Parent Preferred Stock to be
issued upon the exchange and conversion of Company Common Stock in accordance
with this Section 2.1(c) are
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sometimes hereinafter collectively referred to as the "Merger Shares". All
calculations under Section 2.1 shall be rounded to the nearest one billionth
(.000000001).
(d) SHARES FOR DISSENTING STOCKHOLDERS{TC}. Each issued
and outstanding share of Company Common Stock held by a Dissenting
Stockholder, if any, shall not be exchanged and converted as described in
Section 2.1(c) but shall become the right to receive such consideration as
may be determined to be due to such Dissenting Stockholder pursuant to the
Delaware Statute; PROVIDED, HOWEVER, that each share of Company Common Stock
issued and outstanding at the Effective Time and held by a Dissenting
Stockholder who or which shall, after the Effective Time, withdraw his or its
demand for appraisal or lose or fail to perfect his or its right of appraisal
as provided in the Delaware Statute shall be deemed, as of the Effective
Time, to be exchanged and converted into Parent Preferred Stock as provided
in Section 2.1(c), without interest. After the Effective Time, as provided
in Section 262 of the Delaware Statute, no Dissenting Stockholder will be
entitled to vote the shares of Company Common Stock subject to such
Dissenting Stockholder's demand for appraisal for any purpose or be entitled
to the payment of dividends or other distributions on such shares. The
Company shall give Parent prompt notice of any demands received by the
Company for fair value of such Company Common Stock, and Parent shall have
the right to participate in all the negotiations and proceedings with respect
to such demands. The Company shall not, except with the prior written
consent of Parent, make any payment (except to the extent that any such
payment is pursuant to a court order) with respect to, or settle or offer to
settle, any such demands
2.2 ESCROW DEPOSIT; EXCHANGE OF CERTIFICATES{TC}.
(a) ESCROW AGREEMENT{TC}. Reference is made to the
Escrow Agreement to be dated as of the Effective Time among the Stockholder,
Parent and a mutually agreeable escrow agent (the "Escrow Agent") in the form
of EXHIBIT B hereto (the "Escrow Agreement"). The Escrow Agreement is to be
entered into for the purpose of securing the indemnification obligations of
the Stockholders under Article VII.
(b) ESCROW DEPOSIT{TC}. At the Effective Time, Parent
shall cause to be deposited with the Escrow Agent (i) 5,000 shares of Parent
Preferred Stock ("Escrow Shares"), and (ii) three stock power duly endorsed
in blank for transfer on behalf of the Stockholder, and the Stockholder by
her execution and delivery of this Agreement, hereby authorizes and directs
Parent to make such deposit on her behalf.
(c) PROCEDURE FOR EXCHANGE{TC}. Immediately following
the Effective Time, Parent shall deliver to the Stockholder, other than
Parent or any subsidiary of Parent, of a certificate or certificates which
immediately prior to the Effective Time represented issued and outstanding
shares of Company Common Stock (each, an "Old Certificate") a certificate (a
"New Certificate") representing that number of Merger Shares (other than the
Escrow Shares) which such holder has the right to receive pursuant to Section
2.1(c)(i) with respect to such Old Certificate against receipt by Parent of
(i) such Old Certificate for cancellation and (ii) an executed letter of
transmittal, and the Old Certificate so surrendered shall forthwith be
canceled (the certificates representing the Escrow Shares having therefore
been deposited on behalf of the Stockholder into escrow as contemplated by
Section 2.2(b) hereof). In the event of a transfer of ownership of shares of
Company Common Stock which is not
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registered on the transfer records of the Company, a New Certificate
representing the proper number of shares of Parent Preferred Stock may be
issued to a transferee if the Old Certificate representing such Company
Common Stock is presented to Parent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
or other transfer taxes have been paid. Until surrendered as contemplated by
this Section 2.2, each Old Certificate shall be deemed, on and after the
Effective Time, to represent only the right to receive upon such surrender,
New Certificates representing Merger Shares (other than the Escrow Shares) as
contemplated by Section 2.1(c)(i), without interest. All Escrow Shares shall
be held by, and distributed in accordance with, the terms and provisions of
the Escrow Agreement.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON
STOCK{TC}. All shares of Parent Preferred Stock issued upon the surrender or
exchange of shares of Company Common Stock in accordance with the terms of
this Article II shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Common Stock. If, after the
Effective Time, any Old Certificate is presented to the Surviving Corporation
for any reason, such Old Certificate shall be canceled and exchanged as
provided in this Article II.
(e) NO LIABILITY{TC}. None of Parent, Acquisition Sub or
the Company shall be liable to any holder of shares of Company Common Stock
or Parent Preferred Stock, as the case may be, for shares (or dividends or
distributions with respect thereto) of Parent Preferred Stock to be issued in
exchange for Company Common Stock pursuant to this Section 2.2, if, on or
after the expiration of six months following the Effective Time, such shares
are delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(f) LOST, STOLEN OR DESTROYED COMPANY CERTIFICATES{TC}.
In the event any Old Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit to that effect by the person claiming such
Old Certificate to be lost, stolen or destroyed and, if required by Parent,
the posting by such person of a bond in such amount as Parent may reasonably
direct as indemnity against any claim that may be made against it with
respect to such Old Certificate, Parent will issue in exchange for such lost,
stolen or destroyed Old Certificate the Merger Shares and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
(g) AUTHORIZATION OF THE MERGER, THIS AGREEMENT, THE
AGREEMENT OF MERGER, THE ESCROW AGREEMENT AND THE ESCROW AGENT{TC}. In the event
the Merger shall be approved by the stockholders of the Company, as required
by the Delaware Statute and as contemplated by this Agreement, such approval
shall constitute approval and ratification by the stockholders of the Company
of the (i) Merger, as required by the Delaware Statute, (ii) provisions of
this Agreement and the Agreement of Merger and (iii) designation of the
Escrow Agent and the approval and ratification by the stockholders of the
Company of the terms and provisions of the Escrow Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES{TC}
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.{TC}The Company and
the Stockholder jointly and severally represent and warrant to Parent and
Acquisition Sub that, except as disclosed in the disclosure schedule dated
the date hereof, certified by the Chief Executive Officer of the Company and
delivered by the Company to Parent and Acquisition Sub simultaneously
herewith (which disclosure schedule shall contain specific references to the
representations and warranties to which the disclosures contained therein
relate) (the "Company Disclosure Schedule"{XE "\"Company Disclosure
Schedule\""}):
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND
POWER.{TC}The Company (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, (ii) has all
requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now being conducted,
and as proposed to be conducted, to enter into this Agreement, the Agreement
of Merger and the Related Agreements (as defined below) to which the Company
is a party, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified and in good standing to do business in those jurisdictions listed
in Section 3.1(a) of the Company Disclosure Schedule and in all other
jurisdictions in which the failure to be so qualified and in good standing
could reasonably be expected to have a material adverse effect on the Company
or its business, properties, condition (financial or otherwise), assets,
Liabilities, operations, results of operations, prospects or affairs of the
Company (a "Company Material Adverse Effect"{XE "\"Company Material Adverse
Effect\""}). The Company has delivered to Parent true and complete copies of
the Charter and by-laws of the Company, in each case as amended to the date
hereof. As used herein, "Charter" shall mean, with respect to any
corporation, those instruments that at the time constitute its corporate
charter as filed or recorded under the general corporation law of the
jurisdiction of its incorporation, including the articles or certificate of
incorporation or organization, and any amendments thereto, as the same may
have been restated, and any amendments thereto (including any articles or
certificates of merger or consolidation, certificate of correction or
certificates of designation or similar instruments which effect any such
amendment) which became effective after the most recent such restatement.
(b) EQUITY INVESTMENTS.{TC}The Company has never had,
nor does it currently have, any subsidiaries, nor has it ever owned, nor does
it currently own, any capital stock or other proprietary interest, directly
or indirectly, in any corporation, association, trust, partnership, joint
venture or other entity. There are no options, warrants, rights, calls,
commitments or agreements of any character to which the Company is a party or
by which it is bound calling for the issuance of shares of capital stock of
the Company or any securities convertible into or exercisable or exchangeable
for, or representing the right to purchase or otherwise receive, any such
capital stock, or other arrangement to acquire, at any time or under any
circumstance, capital stock of the Company or any such other securities. As
used herein, a "subsidiary" of any corporation means another corporation an
amount of whose voting securities sufficient to elect at least a majority of
its Board of Directors is owned directly or indirectly by such corporation.
7
(c) CAPITAL STOCK; SECURITIES{ TC }. The authorized
capital stock of the Company consists of (i) 1,500 shares of Company Common
Stock, of which one (1) share is outstanding. The outstanding share of Company
Common Stock is validly issued and outstanding, fully paid and non-assessable
and not subject to preemptive rights. There are no voting trusts, voting
agreements, proxies, first refusal rights, first offer rights, co-sale rights,
options, transfer restrictions or other agreements, instruments or
understandings (whether written or oral, formal or informal) with respect to the
voting, transfer or disposition of Company Common Stock to which the Company is
a party or by which it is bound, or, to the best knowledge of the Company and
the Stockholders, among or between any persons other than the Company.
(d) AUTHORITY; NO CONSENTS{ TC }. The execution,
delivery and performance by the Company of this Agreement, the Agreement of
Merger and the Related Agreements to which it is a party and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Company; and
this Agreement and the Related Agreements to which it is a party have been, and
the Agreement of Merger when executed and delivered by the Company will be, duly
and validly executed and delivered by the Company; and this Agreement and the
Related Agreements to which it is a party are the valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms and the Agreement of Merger when executed and delivered by the
Company will be, enforceable against the Company in accordance with its terms.
Neither the execution, delivery and performance of this Agreement, the Related
Agreements to which it is a party or the Agreement of Merger nor the
consummation by the Company of the transactions contemplated hereby or thereby
nor compliance by the Company with any provision hereof or thereof will in any
material respect (A) conflict with, (B) result in any violations of, (C) cause a
default under (with or without due notice, lapse of time or both), (D) give rise
to any right of termination, amendment, cancellation or acceleration of any
obligation contained in or the loss of any material benefit under or (E) result
in the creation of any Encumbrance on or against any assets, rights or property
of the Company under any term, condition or provision of (x) any instrument,
contract or agreement to which the Company is a party, or by which the Company
or any of its properties, assets or rights may be bound, (y) any law, statute,
rule, regulation, order, writ, injunction, decree, permit, concession, license
or franchise of any Governmental Authority applicable to the Company or any of
its properties, assets or rights or (z) the Company's Charter or by-laws.
Except as set forth on Section 3.1(d) of the Company Disclosure Schedule, no
permit, authorization, consent or approval of or by, or any notification of or
filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by the Company of this
Agreement, the Agreement of Merger or the Related Agreements or the consummation
by the Company of the transactions contemplated hereby or thereby, except for
(i) the distribution of the Stockholders' Materials with respect to the adoption
by the Stockholders of this Agreement, the Merger and the transactions
contemplated hereby, (ii) the filing of the Agreement of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business and (iii) such other consents, waivers, authorizations, filings,
approvals and registrations which if not obtained or made would not have a
Company Material Adverse Effect or materially impair the ability of the Company
and the Stockholders to consummate the transactions contemplated by this
Agreement or the Agreement of Merger, including, without
8
limitation, the Merger (each of which actions reflected in clauses (i) and (ii)
above is to be taken by the Company on a timely basis).
(e) FINANCIAL INFORMATION{ TC }.
(i) The Company has previously delivered to
Parent the Company Returns (as defined below); and
(ii) The Company Returns (A) are in accordance
with the books and records of the Company, (B) fairly present the financial
condition of the Company as at the respective dates indicated and the results of
operations of the Company for the respective periods indicated.
(f) ABSENCE OF UNDISCLOSED LIABILITIES{ TC }. Except as
set forth on Schedule 3.1(f) of the Company Disclosure Schedule, on the date
hereof the Company has no liability or obligation of any nature (whether known
or unknown, matured or unmatured, fixed or contingent, secured or unsecured,
accrued, absolute or otherwise ("Liability")). There were no material loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board in March,
1975 ("FAS No. 5")).
(g) ABSENCE OF CHANGES{ TC }. Since the Company's
inception the Company has been operated in the ordinary course, consistent with
past practice, and there has not been any material adverse change in the
business, assets, properties, Liabilities, operations, results of operations,
condition (financial or otherwise), prospects or affairs (a "Material Adverse
Change") of the Company;
(h) TAX MATTERS{ TC }. The Company and each other
corporation (if any) included in any consolidated or combined tax return in
which the Company has been included (i) have filed and will file, in a timely
and proper manner, consistent with applicable laws, all Federal, state and local
Tax returns and Tax reports required to be filed by them through the Closing
Date (the "Company Returns") with the appropriate governmental agencies in all
jurisdictions in which Company Returns are required to be filed and have timely
paid or will timely pay all amounts shown thereon to be due; (ii) have paid and
shall timely pay all Taxes of the Company (or such other corporation) required
to have been paid by the Company (or such other corporation) on or before the
Closing Date; and (iii) currently are not the beneficiary of an extension of
time within which to file any Tax return or Tax report. All such Company
Returns were and will be correct and complete at the time of filing. All Taxes
of the Company attributable to periods up to and including the Closing Date, to
the extent not required to have been previously paid, have been adequately
provided for on and disclosed on Schedule 3.1(h). The Company has not been
notified by the Internal Revenue Service or any state, local or foreign taxing
authority that any issues have been raised (and are currently pending) in
connection with any Company Return, and no waivers of statutes of limitations
have been given with respect to the Company that are still in effect. Except as
contested in good faith and disclosed in Section 3.1(h) of the Company
Disclosure Schedule, any deficiencies asserted or assessments (including
interest and penalties) made as a result of any examination by the Internal
Revenue Service or by any other taxing authorities of any Company Return have
been
9
fully paid and the Company has received no notification that any proposed
additional Taxes have been asserted. The Company (i) has not made an election
to be treated as a "consenting corporation" under Section 341(f) of the Code and
(ii) is not a "personal holding company" within the meaning of Section 542 of
the Code. The Company has not agreed to, nor is it required to, make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise. The Company will not incur a Tax Liability resulting from
the Company ceasing to be a member of a consolidated or combined group that had
previously filed consolidated, combined or unitary Tax returns. The Company is
not a party to any agreement or contract with any "disqualified individual" (as
defined in Section 280G(c) of the Code) that, by reason of the transactions
contemplated hereby and occurring on or prior to the Closing Date or taking into
account any other agreements or contracts currently in effect between the
Company and such disqualified individual, will result in the disallowance of any
deduction for any payment under such agreement or contract as an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code).
As used in this Agreement, "Tax" means any of the Taxes and "Taxes"
means, with respect to any entity, (A) all income taxes (including any tax on or
based upon net income, gross income, income as specially defined, earnings,
profits or selected items of income, earnings or profits) and all gross
receipts, sales, use, ad valorem, transfer, franchise, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property or
windfall profits taxes, alternative or add-on minimum taxes, customs duties and
other taxes, fees, assessments or charges of any kind whatsoever, together with
all interest and penalties, additions to tax and other additional amounts
imposed by any taxing authority (domestic or foreign) on such entity and (B) any
liability for the payment of any amount of the type described in the immediately
preceding clause (A) as a result of being a "transferee" (within the meaning of
Section 6901 of the Code or any other applicable law) of another entity or a
member of an affiliated or combined group.
(i) TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED
MATTERS{ TC }. Except as set forth on Schedule 3.1(i) of the Company Disclosure
Schedule, the Company has good and valid title to all of its assets, properties
and interests in properties, real, personal or mixed, all of which is described
on Schedule 3.1(i) of the Company Disclosure Schedule (except (A) inventory or
other property sold or otherwise disposed of since the Company Reviewed Balance
Sheet Date in the ordinary course of business and (B) accounts receivable and
notes receivable paid in full subsequent to the Company Reviewed Balance Sheet
Date), or not so reflected therein but used or useful in the conduct or
operation of the Company's business, free and clear of all Encumbrances, of any
kind or character, except for (i) those Encumbrances set forth in Section 3.1(i)
of the Company Disclosure Schedule, (ii) liens for current taxes not yet due and
payable and (iii) statutory mechanics and materialmen's liens. The assets,
properties and interests in properties of the Company are in good operating
condition and repair in all material respects (ordinary wear and tear excepted).
The assets, properties and interests in properties of the Company to be owned,
leased or licensed by the Surviving Corporation at the Effective Time shall
include all assets, properties and interests in properties (real, personal and
mixed, tangible and intangible) and all rights, leases, licenses and other
agreements necessary to enable the Surviving Corporation to carry on the
business of the Company as presently conducted by the Company or as proposed to
be conducted. The Company does not own or lease any personal and/or mixed
property. As used herein, the term "Encumbrances" shall mean and
10
include security interests, mortgages, liens, pledges, guarantees, charges,
easements, reservations, restrictions, clouds, equities, rights of way, options,
rights of first refusal and all other encumbrances, whether or not relating to
the extension of credit or the borrowing of money.
(j) REAL PROPERTY-OWNED OR LEASED{ TC }. The Company
does not currently own or lease, nor has it or any of its predecessors ever
owned or leased, any real property.
(k) INTELLECTUAL PROPERTY{ TC }.
(i) The Company has good and valid title to, and
owns free and clear of all Encumbrances, has the right to use, sell, transfer,
license (or sublicense), transmit, broadcast, deliver (electronically or
otherwise) and dispose of, and has the right to bring actions for the
infringement of, all Intellectual Property Rights necessary or required for the
conduct of its business as currently conducted and as proposed to be conducted
(collectively, the "Company Rights"). The Company has not granted any rights to
third parties with respect to its Intellectual Property Rights and no third
party holds any rights in or to the current business plan of the Company.
(ii) The execution, delivery and performance of
this Agreement and the Related Agreements and the consummation of the Merger and
the consummation of the other transactions contemplated hereby, will not breach,
violate or conflict with any instrument or agreement governing any Company
Rights, will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any Company Right or in any way impair the right of
the Company or the Surviving Corporation to use, sell, license (or sublicense),
transmit, broadcast, deliver (electronically or otherwise) or dispose of, or to
bring any action for the infringement of, any Company Right or portion thereof.
(iii) There are no royalties, honoraria, fees or
other payments payable by the Company to any person by reason of the ownership,
use, license (or sublicense), transmission, broadcast, delivery (electronically
or otherwise), sale, or disposition of the Company Rights, other than sales
commissions paid in the ordinary course of business.
(iv) The Company does not manufacture, market,
license (or sublicense), sell, transmit, deliver (electronically or otherwise),
or use any product or service nor does it have any product or service under
development.
(v) All current and past officers, employees and
consultants of or to the Company have, or will have at Closing, executed and
delivered to and in favor of the Company an agreement regarding the protection
of confidential and proprietary information and the assignment to the Company of
all Intellectual Property Rights arising from the services performed for the
Company by such persons (collectively, the "Confidentiality Agreements", the
form of which is attached to Section 3.1(k)(iv) of the Company Disclosure
Schedule). The Company has taken and will continue through the Effective Time
to take all steps necessary, appropriate or desirable to safeguard and maintain
the secrecy and confidentiality of, and its proprietary rights in, all Company
Rights.
11
(vi) All works that were created, prepared or
delivered by consultants, independent contractors or other third parties for or
on behalf of Company (including any materials and elements created, prepared or
delivered by such parties in connection therewith) (A) are and shall constitute
"works made for hire" specially ordered or commissioned by the Company within
the meaning of United States' copyright law, or (B) all right, title and
interest therein (including any materials and elements created, prepared or
delivered by such parties in connection therewith) have been assigned to the
Company.
(vii) No licenses or rights have been granted by
the Company, or by any employee, consultant, officer, director, agent or
affiliate of the Company or by anyone other than the foregoing, to distribute
the source code of, or to use source code to create Derivative Works, of, any
product currently marketed by, commercially available from or under development
by the Company for which the Company possesses the source code. As used herein,
"Derivative Work" shall mean a work that is based upon one or more preexisting
works, such as a revision, enhancement, modification, abridgment, condensation,
expansion or any other form in which such preexisting works may be recast,
transformed or adapted, and which, if prepared without authorization of the
owner of the copyright in such preexisting work, would constitute a copyright
infringement. For purposes herein, a "Derivative Work" shall also include any
compilation that incorporates such a preexisting work as well as translations
from one type of code to another.
(viii) No person has any marketing rights to any of
the Intellectual Property Rights of the Company (excluding Intellectual Property
Rights licensed to the Company by third parties).
(ix) Section 3.1(k)(ix) of the Company Disclosure
Schedule contains a true and complete list of all (A) of the Company's patents,
patent applications, trademarks, trademark applications, trade names, service
marks, service xxxx applications, copyrights, copyright registrations and
copyright applications and Internet domain names and applications therefor and
(B) other filings and formal actions made or taken pursuant to Federal, state,
local and foreign laws by the Company to perfect or protect its interest
therein.
(x) Section 3.1(k)(x) of the Company Disclosure
Schedule contains a true and complete list of all options, licenses or other
agreements of any kind by which Intellectual Property Rights have been granted
to the Company from, or granted by the Company to, any other person (except for
those licenses identified in Section 3.1(l)(i) of the Company Disclosure
Schedule).
(xi) As used herein, the term "Intellectual
Property Rights" shall mean all industrial and intellectual property rights,
including, without limitation, patents, patent applications, patent rights,
trademarks, trademark applications, trade names, service marks, service xxxx
applications, copyrights, copyright registrations, copyright applications,
franchises, licenses, databases, "URL's" and Internet domain names and
applications therefor (and all interest therein), computer programs and other
computer software (including, but not limited to, the Software), user
interfaces, know-how, trade secrets, customer lists, proprietary technology,
processes and formulae, source code, object code, algorithms, architecture,
structure, display screens, layouts, development tools, instructions, templates,
marketing materials,
12
inventions, trade dress, logos and designs and all documentation and media
constituting, describing or relating to the foregoing.
(l) COMPANY SOFTWARE{ TC }. The Company has not
designed or developed, nor does the Company have under development by employees
of the Company or by consultants on the Company's behalf, any software programs,
systems or applications, nor has the Company licensed any such software from any
third party.
(m) AGREEMENTS, ETC{ TC }. Schedule 3.1(m) to the
Company Disclosure Schedule sets forth a true and complete list of all written
and oral contracts, agreements, instruments, understandings or arrangements to
which the Corporation is a party or by which it is bound.
(n) NO DEFAULTS{ TC }. The Company has in all material
respects performed all the obligations required to be performed by it to date
and is not in default or alleged to be in default under (i) its Charter or
by-laws or (ii) any material agreement, lease, license, contract, commitment,
instrument or obligation to which the Company is a party or by which any of its
properties, assets or rights are or may be bound or affected, and there exists
no event, condition or occurrence which, with or without due notice or lapse of
time, or both, would constitute such a default by it of any of the foregoing.
(o) LITIGATION, ETC{ TC }. Except as set forth on
Schedule 3.1(n) of the Company Disclosure Schedule, there are no (i) actions,
suits, claims, investigations or legal or administrative or arbitration
proceedings (collectively, "Actions") pending, or to the best knowledge of the
Company and the Stockholders, threatened against the Company nor, to the best
knowledge of the Company and the Stockholders , any basis therefor, whether at
law or in equity, or before or by any Federal, state, local, municipal, foreign
or other governmental court, department, commission, board, bureau, agency or
instrumentality ("Governmental Authority"), (ii) judgments, decrees, injunctions
or orders of any Governmental Authority or arbitrator against the Company or
(iii) disputes with customers or vendors. There are no Actions pending or, to
the best knowledge of the Company and the Stockholders, threatened, nor, to the
best knowledge of the Company and the Stockholders, any basis therefor, with
respect to (A) the current employment by, or association with, the Company, or
future employment by, or association with, Parent or the Surviving Corporation,
of any of the present officers or employees of or consultants to the Company
(collectively, the "Designated Persons") or (B) the use, in connection with any
business presently conducted or proposed to be conducted by the Company or the
Surviving Corporation, of any information, techniques or processes presently
utilized or proposed to be utilized by the Company, Parent, the Surviving
Corporation or any of the Designated Persons, that the Company, Parent, the
Surviving Corporation or any of the Designated Persons are or would be
prohibited from using as the result of a violation or breach of, or conflict
with any agreements or arrangements between any Designated Person and any other
person, or any legal considerations applicable to unfair competition, trade
secrets or confidential or proprietary information. The Company has delivered
to Parent all material documents and correspondence relating to such matters
referred to in Section 3.1(o) of the Company Disclosure Schedule (including, in
the case of clause (iii) of the first sentence of this
13
Section 3.1(o), any correspondence evidencing material customer dissatisfaction
with the Company or its products or services).
(p) ACCOUNTS AND NOTES RECEIVABLE{ TC }. There are no
accounts receivable or notes receivable owing to the Company as of the date
hereof.
(q) ACCOUNTS AND NOTES PAYABLE{ TC }. There are no
accounts payable or notes payable by the Company to third parties as of the date
hereof. As of the Closing, all accounts payable and notes payable by the Company
to third parties will have arisen in the ordinary course of business, and,
except as set forth in Section 3.1(q) of the Company Disclosure Schedule, there
is no such account payable or note payable delinquent in its payment, except
those contested in good faith and already disclosed in Section 3.1(q) of the
Company Disclosure Schedule.
(r) COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS{ TC }. The
Company has complied and is presently in compliance in all material respects
with all Federal, state, local or foreign laws, ordinances, regulations and
orders applicable to it or its business (including, without limitation, laws,
ordinances, regulations and orders applicable to labor, employment and
employment practices, terms and conditions of employment and wages and hours).
The Company has all Federal, state, local and foreign governmental
authorizations, consents, approvals, licenses and permits necessary in the
conduct of its business as presently conducted or as proposed to be conducted,
such authorizations, consents, approvals, licenses and permits are in full force
and effect, no violations are or have been recorded in respect of any thereof
and no proceeding is pending or, to the best knowledge of the Company and the
Stockholders, threatened to revoke or limit any thereof. Section 3.1(r) of the
Company Disclosure Schedule contains a true and complete list of all such
governmental licenses, authorizations, consents, approvals, permits, orders,
decrees and other compliance agreements under which the Company is operating or
bound, the Company is not in default or alleged to be in default under any
thereof and the Company has furnished to Parent true and complete copies
thereof. None of such authorizations, consents, approvals, licenses and permits
shall be affected in any material respect by the Merger or the transactions
contemplated hereby.
(s) ENVIRONMENTAL MATTERS{ TC }. The Company currently
is and at all times has been in material compliance with all Federal, state and
local laws, ordinances, regulations and orders relating to the protection of the
environment applicable to its properties, facilities or operations.
(t) LABOR RELATIONS; EMPLOYEES{ TC }.
(i) Except for the Founders, there are currently
no, and since the Company's inception there have not been any, employees of the
Company.
(u) EMPLOYEE BENEFIT PLANS AND CONTRACTS{ TC }.
(i) There are no "employee benefit plans", as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any other written or formal plans or agreements
involving direct or indirect compensation (including any employment agreements
entered into between the
14
Company and any Employee, but excluding workers' compensation, unemployment
compensation, other government-mandated programs and the Company's salary and
wage arrangements) currently or previously maintained, contributed to or
entered into by the Company or any ERISA Affiliate thereof for the benefit of
any Employee or former Employee under which the Company or any ERISA Affiliate
thereof has any present or future material obligation or liability (the
"Employee Plans"). For purposes of the preceding sentence, "ERISA Affiliate"
shall mean any entity which is a member of (A) a "controlled group of
corporations", as defined in Section 414(b) of the Code, (B) a group of entities
under "common control", as defined in Section 414(c) of the Code or (C) an
"affiliated service group", as defined in Section 414(m) of the Code or treasury
regulations promulgated under Section 414(o) of the Code, any of which includes
the Company. For purposes of Section 3.1(u), "Employee" means any common law
employee, consultant or director of the Company.
(ii) There are no employment, severance or other
similar contracts, arrangements or policies or plans or arrangements (written or
oral) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, retirement benefits,
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits entered into, maintained or contributed to,
as the case may be, by the Company on behalf of any Employee or covering any
Employee or former Employee or under which the Company or any ERISA Affiliate
has any present or future obligation or liability.
(v) INSURANCE{ TC }. The Company does not and has not
since its inception maintained or held any policies of liability, theft,
fidelity, fire, product liability, errors and omissions, workmen's compensation,
indemnification of directors and officers or other similar forms of insurance.
(w) BANK ACCOUNTS; POWERS OF ATTORNEY{ TC }. Section
3.1(w) of the Company Disclosure Schedule sets forth a true and complete list of
(i) all bank accounts and safe deposit boxes of the Company and all persons who
are signatories thereunder or who have access thereto and (ii) the names of all
persons, firms, associations, corporations or business organizations holding
general or special powers of attorney from the Company and a summary of the
terms thereof.
(x) BROKERS{ TC }. The Company has not, nor have any of
its officers, directors, securityholders or employees, employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated hereby.
(y) RELATED TRANSACTIONS{ TC }. Except as set forth on
Schedule 3.1(x) of the Company Disclosure Schedule, no current or former
director, officer or securityholder of the Company that is an affiliate of the
Company or any associate (as defined in the rules promulgated under the Exchange
Act) thereof, is now, or has been since the inception of the Company, a party to
any transaction with the Company (including, but not limited to, any contract,
agreement or other arrangement providing for the furnishing of services by, or
rental of real or personal property from, or borrowing money from, or otherwise
requiring payments to, any such director, officer or affiliated stockholder of
the Company or associate thereof), or the
15
direct or indirect owner of an interest in any corporation, firm, association or
business organization which is a present or potential competitor, supplier or
customer of the Company (other than non-affiliated holdings in publicly-held
companies), nor does any such person receive income from any source other than
the Company which relates to the business of, or should properly accrue to, the
Company.
(z) CUSTOMERS{ TC }. Since its inception, the Company
has not had any customers.
(aa) MINUTE BOOKS{ TC }. The minute books of the Company
provided to Parent for review contain a complete summary of all meetings of and
actions by directors and stockholders of the Company from the time of its
incorporation to the date of such review and reflect all actions referred to in
such minutes accurately in all material respects.
(bb) BUSINESS GENERALLY{ TC }. There have been no events
or transactions, or information which has come to the attention of the Company
or any officer, director, incorporator or key employee thereof that could
reasonably be expected to have a Company Material Adverse Effect, and the
Company is not obligated under any contractor agreement or subject to any
Charter or other corporate restriction which could have a Company Material
Adverse Effect.
(cc) BOARD APPROVAL{ TC }. The Board of Directors of the
Company has unanimously (i) approved this Agreement, the Merger and each of the
Related Agreements to which the Company is a party and the transactions
contemplated hereby and thereby, (ii) determined that the Merger is in the best
interests of the stockholders of the Company and is on terms that are fair to
such stockholders of the Company and (iii) recommended that the stockholders of
the Company approve the Merger in accordance with the Agreement of Merger and
the Delaware Statute.
(dd) BUSINESS PLAN{ TC }. Attached hereto as Schedule
3.1(dd) is a copy of the current business plan of the Company (the "Business
Plan").
(ee) VOTE REQUIRED{ TC }. The affirmative vote of at
least a majority of the outstanding shares of Company Common Stock approving
this Agreement, the Merger and the Agreement of Merger is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve this Agreement, the Merger and the Agreement of Merger and the
transactions contemplated hereby and thereby.
(ff) INFORMATION SUPPLIED{ TC }. None of the information
supplied or to be supplied by the Company or the Stockholder for inclusion or
incorporation by reference in the Stockholders' Materials will, at the dates
mailed to the Stockholder and at the effective date of the Stockholder Action,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading. The
Stockholders' Materials will comply as to form in all material respects with the
provisions of all applicable laws, rules and regulations of all Governmental
Authorities.
16
(gg) DISCLOSURE{TC}. Neither Section 3.1 of this
Agreement (including the Company Disclosure Schedule) nor any document,
written information, statement, financial statement, certificate or exhibit
furnished or to be furnished to Parent or Acquisition Sub by or on behalf of
the Company or any securityholder pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements or facts contained herein and
therein not misleading in light of the circumstances under which they were
made.
(hh) KNOWLEDGE DEFINITION{TC}. As used in this
Article III, the term "best knowledge" and like phrases shall mean and
include (i) actual knowledge and (ii) that knowledge which a prudent business
person (including the officers, directors, and key employee) could have
obtained in the management of his or her business affairs after making due
inquiry and exercising due diligence with respect thereto. In connection
therewith, the knowledge (both actual and constructive) of any officer,
director, or key employee of the Company shall be imputed to be the knowledge
of the Company.
3.2 SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS{TC}.
The Stockholder represents and warrants to Parent, Acquisition Sub and the
Company with respect to herself as follows:
(a) TITLE; ABSENCE OF CERTAIN AGREEMENTS{TC}. The
Stockholder is the lawful and record and beneficial owner of, and has good
and marketable title to all of the shares of Company Common Stock, with the
full power and authority to vote such Company Common Stock and transfer and
otherwise dispose of such Company Common Stock, and any and all rights and
benefits incident to the ownership thereof free and clear of all
Encumbrances, and there are no agreements or understandings between the
Stockholder and the Company and/or any other person with respect to the
voting, sale or other disposition of Company Common Stock or any other matter
relating to Company Common Stock.
(b) AUTHORITY - GENERAL{TC}. The Stockholder has
full and absolute power and authority to enter into this Agreement and, if
applicable, each Related Agreement being executed and delivered by the
Stockholder simultaneously herewith and this Agreement and each Related
Agreement to which the Stockholder is a party; and this Agreement and each
Related Agreement to which the Stockholder is a party has been duly executed
and delivered by the Stockholder, and is the valid and binding obligation of
the Stockholder, enforceable against the Stockholder in accordance with its
terms. Neither the execution, delivery and performance of this Agreement and
each Related Agreement to which the Stockholder is a party, nor the
consummation of the transactions contemplated hereby or thereby nor
compliance by the Stockholder with any of the provisions hereof or thereof
will (i) (A) conflict with, (B) result in any violations of, (C) cause a
default under (with or without due notice, lapse of time or both), (D) give
rise to any right of termination, amendment, cancellation or acceleration of
any obligation contained in or the loss of any material benefit under or (E)
result in the creation of any Encumbrance upon or against any assets, rights
or property of the Company (or against any Company Common Stock, Parent
capital stock or common stock of the Surviving Corporation), under any term,
condition or provision of (x) any agreement or instrument to which the
Stockholder is a party, or by which the Stockholder or any of his or its
properties, assets or rights
17
may be bound or (y) any law, statute, rule, regulation, order, writ,
injunction, decree, permit, concession, license or franchise of any
Governmental Authority applicable to the Stockholder or any of his or its
properties, assets or rights, which conflict, breach, default or violation or
other event would prevent the consummation of the transactions contemplated
by this Agreement, the Agreement of Merger or any Related Agreement to which
the Stockholder is a party. Except as set forth in Section 3.2(c) ofthe
Company Disclosure Schedule (which, if so disclosed shall have been
effectively made or obtained (as the case may be) on or prior to the Closing,
unless otherwise waived by Parent) no permit, authorization, consent or
approval of or by, or any notification of or filing with, any Governmental
Authority or other person is required in connection with the execution,
delivery and performance by the Stockholder of this Agreement, each Related
Agreement to which the Stockholder is a party or the consummation by the
Stockholder of the transactions contemplated hereby or thereby.
(c) INVESTMENT REPRESENTATIONS{TC}. The Stockholder:
(i) is acquiring the Merger Shares being
issued to the Stockholder for investment and for the Stockholder's own
account and not as a nominee or agent for any other person and with no
present intention of distributing or reselling such shares or any part
thereof in any transactions that would be in violation of the Securities Act
or any state securities or "blue-sky" laws;
(ii) understands (A) that the Merger Shares to
be issued to her have not been registered for sale under the Securities Act
or any state securities or "blue-sky" laws in reliance upon exemptions
therefrom, which exemptions depend upon, among other things, the bona fide
nature of the investment intent of such Stockholder as expressed herein, (B)
that such Merger Shares must be held indefinitely and not sold until such
shares are registered under the Securities Act and any applicable state
securities or "blue-sky" laws, unless an exemption from such registration is
available, (C) that Parent is under no obligation to so register such Merger
Shares and (D) that the certificates evidencing such Merger Shares will be
imprinted with a legend in the form set forth in Section 7.2(b) that
prohibits the transfer of such shares, except as provided in Section 7.2;
(iii) has been furnished with, and has read and
reviewed, the Parent SEC Documents;
(iv) has had an opportunity to ask questions of
and has received satisfactory answers from the officers of Parent or persons
acting on Parent's behalf concerning Parent and the terms and conditions of
an investment in Parent Preferred Stock or Parent Common Stock issuable upon
conversion thereof;
(v) is aware of Parent's business affairs and
financial condition and has acquired sufficient information about Parent to
reach an informed and knowledgeable decision to acquire the Merger Shares to
be issued to her;
(vi) can afford to suffer a complete loss of
her investment in such Merger Shares;
18
(vii) is familiar with the provisions of Rule
144 promulgated under the Securities Act which, in substance, permits limited
public resale of "restricted securities" acquired, directly or indirectly,
from the issuer thereof, in a non-public offering subject to the satisfaction
of certain circumstances which require among other things: (A) the
availability of certain public information about the issuer, (B) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and,
in the case of an affiliate, or of a non-affiliate who has held the
securities less than two years, the amount of securities being sold during
any three month period not exceeding the specified limitations stated
therein, if applicable and (C) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act);
(viii) understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144
is not exclusive, the staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own
risk;
(ix) has either alone or together with the
Stockholder's "Purchaser Representative" (as such term is defined in Rule
501(h), as promulgated under the Securities Act) as to each such Purchaser, a
"Purchaser Representative"), such knowledge and experience in financial and
business matters that she is capable of evaluating the merits and risks of
acquiring and holding shares of Parent Preferred Stock or Parent Common Stock
issuable upon conversion thereof; and
(x) the Stockholder is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act or if
the Stockholder has identified that such Stockholder is being advised by a
Purchaser Representative in connection with the transactions contemplated
hereby.
(d) BROKERS{TC}. No Stockholder has, nor have any of
their officers, directors, securityholders or employees (if any) employed any
broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
(e) ABSENCE OF CLAIMS{TC}. The Stockholder hereby
represents and warrants that in her capacity as a stockholder she has no
knowledge of any claims that she may have against the Released Parties (as
defined in Section 5.2 hereof).
(f) ACCURACY OF REPRESENTATIONS AND WARRANTIES OF THE
COMPANY{TC}. To the best knowledge of the Stockholder, the representations
and warranties of the Company set forth in Section 3.1 are true, correct and
complete in all material respects and the Company is not in breach or
violation thereof.
19
(g) REPRESENTATION BY LEGAL COUNSEL{TC}. The
Stockholder has been advised by legal counsel in connection with the
negotiation, execution and delivery of this Agreement and the Related
Agreements and the performance of the transactions contemplated hereby an
thereby.
3.3 SEVERAL REPRESENTATIONS AND WARRANTIES OF THE FOUNDERS{TC}.
Each of the Founders severally (and not jointly) represents and warrants to
Parent, Acquisition Sub and the Company, with respect to himself or herself,
as follows:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES OF THE
COMPANY{TC}. Such Founder has carefully read and reviewed this Agreement and
the Schedules and Exhibits hereto and to the best knowledge of such Founder,
all representations and warranties of the Company set forth in Section 3.1
hereof are true, correct and complete in all material respects and the
Company is not in breach or violation thereof.
(b) EMPLOYMENT OF FOUNDERS{TC}. Neither the (i)
current employment by, or association with, the Company, or future employment
by, or association with, Parent or the Surviving Corporation of such Founder,
or (ii) use, in connection with any business presently conducted or proposed
to be conducted by the Company, Parent or the Surviving Corporation, of any
information or techniques presently utilized or proposed to be utilized by
the Company, Parent, the Surviving Corporation or such Founders, violates,
conflicts with, breaches or is prohibited under, or would violate, conflict
with, breach or be prohibited under, any agreements or arrangements between
such Founder and any other person obtained on a confidential basis from third
parties, trade secrets or confidential or proprietary information.
3.4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
SUB{TC}. Parent and Acquisition Sub represent and warrant to the Company as
follows:
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND
POWER{TC}. Each of Parent and Acquisition Sub (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and (ii) has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as
now being conducted, to enter into this Agreement and each of the Related
Agreements to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby. Parent has delivered to the Company true and complete copies of the
Charter and by-laws of each of Parent and Acquisition Sub.
(b) CAPITAL STOCK{TC}. Parent's Quarterly Report on
Form 10-Q filed with the SEC with respect to the fiscal quarter ended March
31, 1999 (the "Form 10-Q"{XE"\"Form 10-Q\""}), sets forth a true and complete
description of the authorized and outstanding shares of capital stock of Parent
as of such date. Parent has duly authorized and reserved for issuance the Merger
Shares, and, when issued in accordance with the terms of Article II, the Merger
Shares will be validly issued, fully paid and nonassessable and free of
preemptive rights (other than any Parent Rights which may be issued). Parent
owns all the outstanding shares of capital stock of Acquisition Sub, and all of
such shares are validly issued, fully paid and nonassessable and not subject to
preemptive rights.
20
(c) AUTHORITY{TC}. The execution, delivery and
performance by Parent of this Agreement and each of the Related Agreements to
which it is a party and the execution, delivery and performance of this
Agreement and the Agreement of Merger by Acquisition Sub and the consummation
of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of Parent and Acquisition Sub,
respectively. This Agreement and each of the Related Agreements to which
Parent is a party are valid and binding obligations of Parent, enforceable
against Parent in accordance with their respective terms; and this Agreement
and the Agreement of Merger are the valid and binding obligations of
Acquisition Sub, enforceable against Acquisition Sub in accordance with their
respective terms. Neither the execution, delivery and performance by Parent
of this Agreement and the Related Agreements to which Parent is a party, the
execution, delivery and performance of this Agreement and the Agreement of
Merger by Acquisition Sub, nor the consummation of the transactions
contemplated hereby or thereby, will in any material respect (A) conflict
with, (B) result in any material violations of, (C) cause a material default
under (with or without due notice, lapse of time or both), (D) give rise to
any material right of termination, amendment, cancellation or acceleration of
any obligation contained in or the loss of any material benefit under, (E)
result in the creation of any material Encumbrance on or against any assets,
rights or property of Parent or Acquisition Sub, as the case may be, under
any term, condition or provision of (x) any material instrument or agreement
to which Parent or Acquisition Sub is a party, or by which Parent or
Acquisition Sub or any of their respective properties, assets or rights may
be bound, (y) any material law, statute, rule, regulation, order, writ,
injunction, decree, permit, concession, license or franchise of any
Governmental Authority applicable to Parent or Acquisition Sub or any o their
respective properties, assets or rights or (z) Parent's or Acquisition Sub's
Charter or by-laws, as amended through the date hereof, respectively, in each
case, which conflict, breach, default or violation or other event would
prevent the consummation of the transactions contemplated by this Agreement,
the Agreement of Merger or any Related Agreement to which Parent or
Acquisition Sub is a party. Except as contemplated by this Agreement, no
permit, authorization, consent or approval of or by, or any notification of
or filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by Parent or
Acquisition Sub of this Agreement, the Agreement of Merger (in the case of
Acquisition Sub) or the Related Agreements to which they are a party or the
consummation of the transactions contemplated hereby or thereby, other than
(i) the filing with the SEC of such reports and information under the
Securities and Exchange Act of 1934, as amended (the "Exchange
Act"{XE"\"Exchange Act\""}), and the rules and regulations promulgated by the
SEC thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby, (ii) the filing of such documents with, and
the obtaining of such orders from, various state securities and blue-sky
authorities as are required in connection with the transactions contemplated
hereby, (iii) the filing of the Agreement of Merger with the Secretary of State
of the State of Delaware and (iv) such other consents, waivers, authorizations,
filings, approvals and registrations which if not obtained or made would
materially impair the ability of Parent or Acquisition Sub to consummate the
transactions contemplated by this Agreement, including, without limitation, the
Merger (each of the actions reflected in clauses (i), (ii) and (iii) to be taken
by Parent).
(d) SEC DOCUMENTS{TC}.
21
(i) Parent has furnished or made available to
the Company a correct and complete copy of the Form 10-Q, Parent's Annual
Report on Form 8-K for the year ended December 31, 1998 and each report,
schedule, registration statement and definitive proxy statement filed by
Parent with the SEC on or after the date of filing of the Form 10-Q which are
all the documents (other than preliminary material) that Parent was required
to file (or otherwise did file) with the SEC in accordance with Sections 13,
14 and 15(d) of the Exchange Act on or after the date of filing with the SEC
of the Form 10-Q (collectively, the "Parent SEC Documents"{XE"\"Parent SEC
Documents\""}). As of their respective filing dates, or in the case of
registration statements, their respective effective dates, none of the Parent
SEC Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and the Parent SEC Documents
complied when filed, or in the case of registration statements, as of their
respective effective dates, in all material respects with the then applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated by the SEC thereunder.
(ii) The financial statements (including the
notes thereto) of Parent included in the Form 10-Q for the fiscal quarter
then ended, complied as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with GAAP during
the periods involved (except as may have been indicated in the notes thereto)
and fairly present the financial position of Parent as at the dates thereof
and the results of their operations, stockholders' equity and cash flows for
the period then ended.
(e) BROKERS{TC}. Neither Parent, Acquisition Sub,
nor any of their respective officers, directors or employees have employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
ARTICLE 4
RELATED AGREEMENTS{TC}
4.1 RELATED AGREEMENTS{TC}. Simultaneously with the execution and
delivery of this Agreement, the following agreements (such agreements, being
herein collectively referred to as the "Related Agreements"{XE"\"Related
Agreements\""}) are being executed and delivered by the respective parties
thereto:
(a) ESCROW AGREEMENT{TC}. Each of Parent, the
Stockholder and the Escrow Agent are entering into the Escrow Agreement.
(b) EMPLOYMENT AGREEMENT{TC}. The Company is
entering into an Employment Agreement with Xxxxxxx Xxxxxx in the form of
EXHIBIT C attached hereto,, pursuant to which, among other things, Xxxxxxx
Xxxxxx will become an employee of Parent or the Surviving Corporation.
22
(c) REPURCHASE AGREEMENT{TC}. The Company is
entering into a Repurchase Agreement with the Stockholder in the form of
EXHIBIT D attached hereto,, pursuant to which, among other things, the
Company will have the option to repurchase the Merger Shares under
circumstances set forth therein.
ARTICLE 5
STOCKHOLDER AND FOUNDER AGREEMENTS{TC}
5.1 AFFILIATE AGREEMENT{TC}.
(a) The Stockholder may be deemed to be an
"affiliate" of the Company within the meaning of Rule 145 promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), and Accounting
Series Release No. 130, as amended, Accounting Series Release No. 135 and
Staff Accounting Bulletin No. 76 of the Securities and Exchange Commission
(the "SEC"), although nothing contained herein should be construed as an
admission thereof. If the Stockholder were to be deemed an "affiliate" of
the Company, the Stockholder's ability to sell, exchange, transfer, pledge or
otherwise dispose of Merger Shares may be restricted unless such transaction
is registered under the Securities Act or an exemption from such registration
is available. The Stockholder understands that such exemptions are limited
and has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the
transfer of such securities of Rules 144 and 145(d) promulgated under the
Securities Act.
(b) The Stockholder hereby covenants and agrees that
the Stockholder shall not offer, sell, exchange, transfer, pledge or
otherwise dispose of any Merger Shares, or any securities that may be paid as
a dividend or otherwise distributed thereon or with respect thereto or issued
or delivered in exchange or substitution therefor (all such shares and other
securities of Parent being herein sometimes collectively referred to as
"RESTRICTED SECURITIES"), or any option, right or other interest with respect
to any Restricted Securities unless at such time either:
(i) such transaction shall be permitted pursuant
to the provisions of Rule 144 or Rule 145, as applicable, promulgated
under the Securities Act;
(ii) counsel representing the Stockholder,
reasonably satisfactory to Parent, shall have advised Parent in a written
opinion letter reasonably satisfactory to Parent, that no registration
under the Securities Act is required in connection with the proposed
transaction;
(iii) a registration statement under the Securities
Act covering the Merger Shares proposed to be sold, exchanged,
transferred or otherwise disposed of, describing the manner and terms of
the proposed sale, transfer, exchange or other disposition, and
containing a current prospectus, shall have been filed with the SEC and
become effective under the Securities Act; or
(iv) an authorized representative of the SEC shall
have rendered written advice to the Stockholder (sought in writing by the
Stockholder or counsel to the Stockholder, with copies thereof and of
all other related communications delivered to
23
Parent) to the effect that the SEC would take no action, or that the
staff of the SEC would not recommend that the SEC take action, with
respect to the proposed sale, transfer or other disposition of such
Merger Shares if consummated.
(c) The Stockholder also understands and agrees that
Parent, at its discretion, may cause stop transfer orders to be placed with its
transfer agent with respect to certificates for Merger Shares owned by the
Stockholder but not as to certificates for such Merger Shares as to which the
legend set forth in Section 7 is no longer required.
(d) The Stockholder shall observe and comply with the
Securities Act and the rules and regulations promulgated by the SEC
thereunder as now in effect or hereafter enacted or promulgated, and as from
time to time amended, in connection with any offer, sale, exchange, transfer,
pledge or other disposition of Merger Shares beneficially owned by the
Stockholder.
(e) From and after the Effective Time and for so long
as necessary in order to permit the Stockholder to sell Merger Shares
pursuant to Rule 145 and, to the extent applicable, Rule 144 under the
Securities Act, Parent shall use reasonable efforts to file on a timely basis
all reports required to be filed by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, referred to in paragraph (c)(1)
of Rule 144 promulgated by the SEC under the Securities Act (or, if
applicable, Parent shall use reasonable efforts to make publicly available
the information regarding itself referred to in paragraph (c)(2) of Rule
144), in order to permit the Stockholder to sell, pursuant to the terms and
conditions of Rule 145 and the applicable provisions of Rule 144, Merger
Shares beneficially owned by the Stockholder.
5.2 STOCKHOLDER RELEASE{TC}. Effective as of the Effective Time
and for good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Stockholder (the "Releasor") on her behalf and on
behalf of her (i) heirs, executors, administrators, agents, successors and
assigns, attorneys, employees, (the "Releasor Persons"), as applicable,
hereby releases, waives and discharges the Company, Parent and Acquisition
Sub and their respective officers, directors, stockholders, agents,
successors and assigns (collectively, the "Released Parties"), from any and
all actions, causes of action, suits, debts, dues, sums of money, accounts,
bonds, bills, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, executions, claims and demands
whatsoever, known or unknown, in law or equity (each a "Claim" and
collectively, the "Claims") arising from the Releasor's relationship with the
Company prior to and including the date hereof or the Releasor's status as a
stockholder, director, officer or employee of the Company prior to and
including the date hereof; PROVIDED, HOWEVER, that the Releasor does not
release the Released Parties from any claims in connection with any breach by
the Released Parties of this Agreement or the Related Agreements.
ARTICLE 6
CLOSING ACTIONS; DELIVERABLES{TC}
6.1 ACTIONS BEING TAKEN AT OR PRIOR TO CLOSING{TC}. The following
actions are being taken at or prior to the Closing:
24
(a) STOCKHOLDER APPROVAL; AGREEMENT OF MERGER{TC}.
This Agreement and the Merger shall have been duly and validly approved and
adopted by the stockholders of the Company in accordance with the Delaware
Statute and the Company's Charter and By-laws, and the Agreement of Merger
shall have been executed and delivered by Acquisition Sub and the Company and
filed with and accepted by the Secretary of State of the State of Delaware.
(b) APPROVALS{TC}. All authorizations, consents,
orders or approvals of, or declarations or filings with or expiration of
waiting periods imposed by any Governmental Authority necessary for the
consummation of the transactions contemplated hereby shall have been obtained
or made or shall have occurred.
(c) LEGAL ACTION{TC}. No temporary restraining
order, preliminary injunction or permanent injunction or other order
preventing the consummation of the Merger shall have been issued by any
Federal or state court or other Governmental Authority and remain in effect.
(d) LEGISLATION{TC}. No Federal, state, local or
foreign statute, rule or regulation shall have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated by this
Agreement.
6.2 DELIVERABLES TO PARENT AND ACQUISITION SUB{TC}. The following
documents and other items are being delivered to Parent and Acquisition Sub
at the Closing:
(a) DELIVERY OF CERTIFICATES{TC}. The Old
Certificates, in the manner and otherwise in accordance with Section 2.2
hereof, are being delivered to Parent.
(b) OPINION OF THE COMPANY'S COUNSEL{TC}. A
favorable opinion dated the Closing Date is being delivered by Swidler,
Berlin, Shereff Xxxxxxxx LLP, counsel to the Company, in favor of Parent and
Acquisition Sub, in form and substance reasonably satisfactory to Parent and
Acquisition Sub.
(c) CONSENTS AND APPROVALS{TC}. Duly executed copies
of all consents and approvals contemplated by this Agreement or the Company
Disclosure Schedule, in form and substance satisfactory to Parent and
Acquisition Sub, are being delivered by the Company.
(d) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC.{TC}.
Copies of all consents, authorizations, orders or approvals of, and filings
or registrations with, any Governmental Authority which are required for or
in connection with the execution and delivery by the Company and the
Stockholders of this Agreement, the Agreement of Merger and the Related
Agreements and the consummation by the Company and the Stockholder of the
transactions contemplated hereby, are being delivered by the Company.
(e) COMPANY EXPENSES{TC}. A true, correct and
complete schedule (the "Schedule of Expenses") of all Company Expenses paid
or incurred by or on behalf of the Company through the Closing Date,
accompanied by a certificate signed by the Chief Financial Officer of the
Company certifying the accuracy and completeness thereof, is being delivered
by
25
the Company; and the Company is furnishing evidence satisfactory to Parent
and Acquisition Sub that the Company has paid the amount of Company Expenses.
(f) COMPANY EXPENSES RELEASE{TC}. A written
instrument in form and substance reasonably satisfactory to Parent and
Acquisition Sub is being delivered by each third party identified on the
Schedule of Expenses (i) acknowledging that upon receipt by each such party
in the ordinary course following the Effective Time after presentation of
detailed statements thereof of the respective amounts set forth therein
(each, a "Stated Amount"), such payment will constitute full payment of all
fees and expenses of such party constituting Company Expenses and (ii)
releasing Parent, Acquisition Sub, the Surviving Corporation and their
Affiliates from any liabilities or obligations in respect of the payment of
any fees and expenses that are or may be characterized as Company Expenses
other than the Stated Amounts (and concurrently with the payment of the
Stated Amounts all liability with respect thereto shall be deemed so
released).
(g) RESIGNATION OF DIRECTORS{TC}. Resignations are
being delivered by each of the directors and officers of the Company
immediately prior to the Effective Time, effective as of the Effective Time.
(h) OFFICER'S CERTIFICATES{TC}. Certain officers'
certificates are being delivered by the Company.
6.3 DELIVERABLES TO COMPANY{TC}. The following documents and other
items are being delivered to the Company at the Closing:
(a) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC.{TC}.
Copies of all consents, authorizations, orders or approvals of, and filings
or registrations with, any Governmental Authority which are required for or
in connection with the execution and delivery by Parent and Acquisition Sub
of this Agreement, the Agreement of Merger and the Related Agreements and the
consummation by Parent and Acquisition Sub of the transactions contemplated
hereby or thereby, are being delivered by Parent.
(b) PURCHASE PRICE{TC}. The delivery of the New
Certificates (representing the Merger Shares (other than the Escrow Shares))
and the cash consideration deliverable at the Effective Time in the manner
and otherwise in accordance with Article II hereof (and concurrent delivery
of Escrow Shares to the Escrow Agent in accordance with Section 2.2 hereof),
are being made by Parent.
(c) RELATED AGREEMENTS{TC}. Each of the Related
Agreements is being delivered by Parent to the extent that it is required or
contemplated by the parties hereto to be a party to any Related Agreement.
ARTICLE 7
ADDITIONAL AGREEMENTS{TC}
7.1 RESTRICTION ON TRANSFER{TC}.
26
(a) The shares of Parent Preferred Stock to be issued to
each Stockholder at the Effective Time pursuant to the Merger and any shares of
capital stock or other securities received with respect thereto (collectively,
the "Restricted Securities") shall not be sold, transferred, assigned, pledged,
encumbered or otherwise disposed of (each, a "Transfer") except upon the
conditions specified in this Section 7.1, which conditions are intended to
insure compliance with the provisions of the Securities Act. Each Stockholder
shall observe and comply with the Securities Act and the rules and regulations
promulgated by the SEC thereunder as now in effect or hereafter enacted or
promulgated, and as from time to time amended, in connection with any Transfer
of Restricted Securities beneficially owned by the Stockholder.
(b) Each certificate representing Restricted Securities
issued to a Stockholder and each certificate for such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions of Sections 7.1(c) and 7.1(d) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES OR
"BLUE-SKY" LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN SECTIONS 5.1 AND 7.2 OF THE AGREEMENT AND
PLAN OF REORGANIZATION AMONG GHS, INC., CONCEPT ACQUISITION
CORPORATION AND CONCEPT DEVELOPMENT, INC. AND THE OTHER
SIGNATORIES THERETO AND NO TRANSFER OF THESE SECURITIES SHALL BE
VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
UPON THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS, GHS HAS AGREED
TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING
THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN
THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF GHS, INC."
(c) Each Stockholder agrees, prior to any Transfer
of Restricted Securities, to give written notice to Parent of such Stockholder's
intention to effect such Transfer and to comply in all other respects with the
provisions of this Section 7.2. Each such notice shall describe the manner and
circumstances of the proposed Transfer and shall be accompanied by the written
opinion, addressed to Parent, of counsel for the holder of such Restricted
Securities, stating that in the opinion of such counsel (which opinion and
counsel (if other than Swidler, Berlin, Shereff Xxxxxxxx LLP) shall be
reasonably satisfactory to Parent) such proposed transfer does not involve a
transaction requiring registration or qualification of such Restricted
Securities under the Securities Act. The holder thereof shall thereupon, with
the written consent of Parent,
27
be entitled to Transfer such Restricted Securities in accordance with the terms
of the notice delivered by it to Parent. Each certificate or other instrument
evidencing the securities issued upon the Transfer of any such Restricted
Securities (and each certificate or other instrument evidencing any
untransferred balance of such Restricted Securities) shall bear the legend set
forth in Section 7.1(b) unless (x) in such opinion of counsel of Parent
registration of any future Transfer is not required by the applicable provisions
of the Securities Act or (y) Parent shall have waived the requirement of such
legends. No Stockholder shall Transfer any Restricted Securities until such
opinion of counsel has been given (unless waived by Parent or unless such
opinion is not required in accordance with the provisions of this Section
7.1(c)).
(d) Notwithstanding the foregoing provisions of this
Section 7.1, the restrictions imposed by this Section 7.1 upon the
transferability of Restricted Securities shall cease and terminate when (i) any
such shares are sold or otherwise disposed of pursuant to an effective
registration statement under the Securities Act or as otherwise contemplated by
Section 7.1(c) and, pursuant to Section 7.1(c), the securities so transferred
are not required to bear the legend set forth in Section 7.1(c) or (ii) the
holder of such Restricted Securities has met the requirements for Transfer of
such Restricted Securities pursuant to Rule 144 or Rule 145, as applicable.
Whenever the restrictions imposed by this Section 7.1 shall terminate, as herein
provided, the holder of Restricted Securities as to which such restrictions have
terminated shall be entitled to receive from Parent, without expense, a new
certificate not bearing the restrictive legend set forth in Section 7.1(b) and
not containing any other reference to the restrictions imposed by this Section
7.1.
(e) Each Stockholder understands and agrees that Parent,
at its discretion, may cause stop transfer orders to be placed with its transfer
agent with respect to certificates for Restricted Securities owned by such
Stockholder but not as to certificates for such shares of Parent Preferred Stock
as to which the legend set forth in paragraph (b) of this Section 7.1 is no
longer required because one or more of the conditions set forth in Section
7.1(d) shall have been satisfied.
7.2 DISCLOSURE OF INFORMATION; NON-COMPETITION{ TC }. Each of the
Founders and the Stockholder acknowledges and recognizes that the Subject
Business has been conducted or is currently planned to be conducted by the
Company throughout the world, and further acknowledges and recognizes the highly
competitive nature of the industry in which the Subject Business is involved and
that, accordingly, in consideration of the premises contained herein, the
consideration to be received hereunder and the direct and indirect benefits to
each of the Founders and the Stockholder of the transactions contemplated
hereby, and in consideration of and as an inducement to Parent and Acquisition
Sub to enter into to this Agreement and to consummate the transactions
contemplated hereby:
(a) From and after the date hereof, no Founder or
Stockholder shall use or disclose to any Person, except as required by law or
judicial process, any Confidential Information (as defined below), for any
reason or purpose whatsoever, nor shall he or she make use of any of the
Confidential Information for his or her own purposes or for the benefit of any
Person except Parent and the Surviving Corporation. For purposes of this
Agreement, "Confidential Information" shall mean Intellectual Property Rights of
the Company, the Surviving Corporation or Parent or its Affiliates or the
Subject Business and the terms and
28
provisions of this Agreement (other than information that is in the public
domain at the time of receipt thereof by such Stockholder, or otherwise becomes
public other than as a result of the breach by such Stockholder of his or her
agreement hereunder or is rightfully received from a third party without any
obligation of confidentiality to Parent or the Company or is independently
developed by such Stockholder). As used herein, the term "Subject Business"
shall mean any business conducted anywhere in the world of the type and
character of business engaged in by Parent or the Surviving Corporation.
(b) Each of the Founders and the Stockholder shall not
during the three-year period commencing at the Effective Time within the United
States or any other country in which Parent or a licensee of Parent is then
operating or preparing to operate, directly or indirectly, own, manage, operate,
join, control, be employed by, perform consulting services for, or participate
in the ownership, management, operation or control of, or be connected in any
manner with, any business or operation (other than by way of working for an
affiliate of any such business or operation which is not itself involved in any
such business or operation) of the type, character and content engaged in by the
Company.
ARTICLE 8
INDEMNIFICATION{ TC }
8.1 DEFINITIONS{ TC }. As used in this Agreement, the following terms
shall have the following meanings:
(a) "AFFILIATE{ TC }" as to any person means any entity,
directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with such person.
(b) "EVENT OF INDEMNIFICATION{ TC }" shall mean the
following:
(i) the untruth, inaccuracy or breach of any
representation or warranty of the Company, the Stockholder or the Founders
(including the fact and circumstances underlying such untruth, inaccuracy or
breach) contained in Sections 3.1, 3.2 and 3.3 of this Agreement, or in the
Company Disclosure Schedule, any Exhibit or Schedule hereto or any document
delivered in connection herewith;
(ii) the breach of any agreement or covenant of
the Company or the Stockholders contained in this Agreement, the Related
Agreements or in the Company Disclosure Schedule, any Exhibit hereto or any
document delivered in connection herewith;
(iii) any claim, demand, liability or obligation of
any nature whatsoever, which arose or was incurred on or before the Closing
Date, or which was based on events occurring on or before the Closing Date, or
which was based on products sold or services performed by the Company or the
Stockholders on or before the Closing Date (in each case, other than claims,
demands, liabilities or obligations approved by Parent in writing prior to the
date hereof), notwithstanding that the date on which the claim, demand,
liability or obligation may arise or become manifest is after the Closing Date,
other than liabilities or obligations of the
29
Company arising after the Closing Date under contracts and agreements entered
into prior to the Closing Date that are disclosed on the Company Disclosure
Schedule; or
(iv) any claim, demand, liability or obligation
sustained or suffered by the Company, Parent or the Surviving Corporation, or
any of them, arising from or in connection with (A) the action of the
Stockholders required to approve the transactions contemplated by this
Agreement, the Agreement and the Related Agreements, or (B) any assertion of
impropriety by any Stockholder against the Company, Parent or the Surviving
Corporation, or any of them, with respect to any actions or transactions of or
involving the Company prior to or at the Effective Time (including, without
limitation, the actions and transactions contemplated by this Agreement, the
Agreement of Merger and the Related Agreements).
(c) "INDEMNIFIED PERSONS{ TC }" shall mean and include
Parent, Acquisition Sub and the Surviving Corporation and their respective
Affiliates, successors and assigns, and the respective officers and directors of
each of the foregoing.
(d) "INDEMNIFYING PERSONS{ TC }" shall mean and include
(A) prior to Closing, the Company and each of the Stockholders and its or his
respective successors, assigns, heirs and legal representatives and estates, as
the case may be and (B) on and after the Closing, each of the Stockholders and
its or his respective successors, assigns, heirs and legal representatives and
estates, as the case may be.
(e) "LOSSES{ TC }" shall mean any and all losses,
claims, shortages, damages, liabilities, expenses (including reasonable
attorneys' and accountants' fees), assessments, Taxes (including interest or
penalties thereon) sustained, suffered or incurred by any Indemnified Person
arising from or in connection with any such matter that is the subject of
indemnification under Section 8.2 hereof.
8.2 INDEMNIFICATION GENERALLY{ TC }. The Indemnifying Persons shall
severally indemnify the Indemnified Persons from and against any and all Losses
arising from or in connection with any Event of Indemnification.
8.3 ASSERTION OF CLAIMS{ TC }. No claim shall be brought under
Section 8.2 hereof unless the Indemnified Persons, or any of them, at any time
prior to the applicable Survival Date, give the Stockholder (a) written notice
of the existence of any such claim, specifying the nature and basis of such
claim and the amount thereof, to the extent known or (b) written notice pursuant
to Section 8.4 of any third party claim, the existence of which might give rise
to such a claim but the failure so to provide such notice to the Stockholder
will not relieve the Indemnifying Persons from any liability which they may have
to the Indemnified Persons under this Agreement or otherwise (unless and only to
the extent that such failure results in the loss or compromise of any rights or
defenses of the Indemnifying Persons and they were not otherwise aware of such
action or claim). Upon the giving of such written notice as aforesaid, the
Indemnified Persons, or any of them, shall have the right to commence legal
proceedings prior or subsequent to the Survival Date for the enforcement of
their rights under Section 8.2 hereof.
30
8.4 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS{ TC }. Losses resulting
from the assertion of liability by third parties (each, a "Third Party
Claim"{ XE"\"Third Party Claim\""}) shall be subject to the following terms and
conditions:
(a) The Indemnified Persons shall promptly give written
notice to the Stockholders' Committee of any Third Party Claim that might give
rise to any Loss by the Indemnified Persons, stating the nature and basis of
such Third Party Claim, and the amount thereof to the extent known. Such notice
shall be accompanied by copies of all relevant documentation with respect to
such Third Party Claim, including, without limitation, any summons, complaint or
other pleading that may have been served, any written demand or any other
document or instrument. Notwithstanding the foregoing, the failure to provide
notice as aforesaid to the Stockholders' Committee will not relieve the
Indemnifying Persons from any liability which they may have to the Indemnified
Persons under this Agreement or otherwise (unless and only to the extent that
such failure results in the loss or compromise of any rights or defenses of the
Indemnifying Person and they were not otherwise aware of such action or claim).
(b) The Indemnified Persons shall defend any Third Party
Claims with counsel of their own choosing, and shall act reasonably and in
accordance with their good faith business judgment in handling such Third Party
Claims. The Stockholders' Committee and the Indemnifying Persons, on the one
hand, and the Indemnified Persons, on the other hand, shall make available to
each other and their counsel and accountants all books and records and
information relating to any Third Party Claims, keep each other fully apprised
as to the details and progress of all proceedings relating thereto and render to
each other such assistance as may be reasonably required to ensure the proper
and adequate defense of any and all Third Party Claims.
8.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES{ TC }. Subject to the
further provisions of this Section 8.5, the representations and warranties of
the Parent and Acquisition Sub shall be deemed to be a condition to the Merger
and shall survive the Effective Time for one year and the representations and
warranties made by the Company in Section 3.1, the Stockholders in Section 3.2
and the Founders in Section 3.3 hereof shall survive the Effective Time for one
year; PROVIDED, HOWEVER, that the representations and warranties set forth in
Section 3.1(h) (Tax Matters) shall survive for period of the applicable statute
of limitations. For convenience of reference, the date upon which any
representation and warranty contained herein shall terminate is referred to
herein as the "Survival Date." Anything contained herein to the contrary
notwithstanding, the representations and warranties of the Company contained in
this Agreement (including, without limitation, the Company Disclosure Schedule)
(i) are being given by the Company on behalf of the Stockholders and for the
purpose of binding the Stockholders to the terms and provisions of this Article
VIII and the Escrow Agreement, and as an inducement to Parent and Acquisition
Sub to enter into this Agreement and to approve the Merger (and the Company
acknowledges that Parent and Acquisition Sub have expressly relied thereon) and
(ii) are solely for the benefit of the Indemnified Persons and each of them.
Accordingly, no third party (including, without limitation, the Stockholders or
anyone acting on behalf of any thereof) other than the Indemnified Persons, and
each of them, shall be a third party or other beneficiary of such
representations and warranties and no such third party shall have any rights of
contribution against the Company or the Surviving Corporation with respect to
such
31
representations or warranties or any matter subject to or resulting in
indemnification under this Article VIII or otherwise.
ARTICLE 9
MISCELLANEOUS{ TC }
9.1 EXPENSES{ TC }. As used in this Agreement, "Transaction Costs"
shall mean, with respect to any party, all actual, out-of-pocket expenses
incurred by such party to third parties, in connection with this Agreement, the
Merger and all other transactions provided for herein and therein; but shall not
in any event include general overhead; the time spent by employees of such party
internally; postage, telephone, telecopy, photocopy and delivery expenses of
such party; permit and filing fees; and other non-material expenses that are
incidental to the ordinary course of business. Each party hereto shall bear its
own fees and expenses in connection with the transactions contemplated hereby;
PROVIDED, HOWEVER, that in the event the Merger shall be consummated, Parent and
Acquisition Sub shall bear all Transaction Costs of Parent and Acquisition Sub
and the Stockholders shall bear all Transaction Costs of the Company, whether or
not such fees and expenses have been paid by the Company on or before the
Closing Date and whether or not such fees and expenses are reflected in the
Company Disclosure Schedule or the Schedule of Expenses (such Transaction Costs
of the Company being herein collectively referred to as the "Company Expenses").
9.2 ENTIRE AGREEMENT{ TC }. This Agreement (including the Company
Disclosure Schedule and the Exhibits attached hereto) and the other writings
referred to herein contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby and supersede all prior
agreements or understandings, written or oral, among the parties with respect
thereto including, but not limited to, the Original Reorganization Agreement.
9.3 DESCRIPTIVE HEADINGS{ TC }. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
9.4 PUBLIC ANNOUNCEMENTS{ TC }. The parties hereto agree that, to the
maximum extent feasible, but subject, in the case of Parent, to its public
disclosure and, as to all parties, other legal and regulatory obligations, they
shall advise and confer with each other prior to the issuance (and provide
copies to the other party prior to issuance) of any public announcements,
reports, statements or releases pertaining to the Merger; PROVIDED that the
parties shall not disclose the purchase price of the Merger in any such public
announcements.
9.5 NOTICES{ TC }.
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
nationally-recognized overnight courier or by registered or certified mail,
postage prepaid, return receipt requested or by telecopier, with confirmation as
provided above addressed as follows:
(a) if to Parent or Acquisition Sub, to:
GHS, Inc.
32
0000 Xxxxxxxx Xxxx.
Xxxxxxxxx, Xxxxxxxx 00000
Attention:
Telecopier: (000) 000-0000
with copies to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Telecopier: (000) 000-0000;
(b) if to the Company, to:
Concept Development, Inc.
00 Xxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx
Telecopier: (000) 000-0000;
with a copy to:
Swidler, Berlin, Shereff Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx Xxxxx, Esq.
Telecopier: (000) 000-0000
(c) if to the Founders, to:
00 Xxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx and Xxxxxx Xxxxxxx
Telecopier: (000) 000-0000;
(d) if to the Stockholder, at her address set forth on
SCHEDULE 10.5 attached hereto;
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such
notices or communications shall be deemed to be received (a) in the case of
personal delivery or telecopy, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent and (c) in the case of mailing, on the third business day following
the date on which the piece of mail containing such communication was posted.
33
9.6 COUNTERPARTS{ TC }. This Agreement may be executed in any number
of counterparts by original or facsimile signature, each such counterpart shall
be an original instrument, and all such counterparts together shall constitute
one and the same agreement.
9.7 GOVERNING LAW{ TC }. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein (without regard to principles
of conflicts of laws) except for those terms and conditions that specifically
relate to Merger as described in Article I hereof, which shall be governed by
and construed in accordance with the General Corporation Law of the State of
Delaware (without regard to principles of conflicts of laws).
9.8 BENEFITS OF AGREEMENT{ TC }. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
9.9 PRONOUNS{ TC }. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural thereof whenever the context
and facts require such construction.
9.10 AMENDMENT, MODIFICATION AND WAIVER{ TC }. This Agreement shall
not be altered or otherwise amended except pursuant to (a) an instrument in
writing signed by Parent and the Company prior to the Effective Date, if Article
VII is not affected by such alteration or amendment and (b) an instrument in
writing signed by (i) Parent, (ii) the Company and (iii) the Stockholders, if
Article VII is affected thereby or the alteration or amendment occurs subsequent
to the Effective Date; PROVIDED, HOWEVER, that after the approval and adoption
of this Agreement and the Merger by the Stockholders, no amendment of this
Agreement shall be made which pursuant to the Delaware Statute or other law
requires the further approval of the Stockholders; PROVIDED FURTHER, HOWEVER,
that any party to this Agreement may waive any obligation owed to it by any
other party under this Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
[Remainder of this page intentionally left blank]
34
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
and Plan of Reorganization to be executed on its behalf as of the day and year
first above written.
GHS, INC.
By: /s/ Xxxx Xxxx
---------------------------------
Name: Xxxx Xxxx
Title: President
CONCEPT ACQUISITION CORPORATION
By: /s/ Xxxx Polish
---------------------------------
Name: Xxxx Polish
Title: President
CONCEPT DEVELOPMENT, INC.
By: /s/ Xxxxxxx Xxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
FOUNDERS:
/s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx
STOCKHOLDER:
/s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx
35
SCHEDULE 2.2(b)
ESCROW SHARES
10,000 SHARES OF PARENT PREFERRED STOCK
SCHEDULE 3.2
STOCKHOLDER SHARES
1 SHARE OF COMPANY COMMON STOCK OWNED BY X. XXXXXXX
SCHEDULE 4.1(a)
COMPANY AFFILIATES
X. XXXXXXX
X. XXXXXX
SCHEDULE 6.2(e)
CONTINUING EMPLOYEES
X. XXXXXX
SCHEDULE 10.5
STOCKHOLDERS' ADDRESSES
00 XXXXXXX XXXX
XXXXXXXX, XXX XXXX 00000
37
EXHIBIT A
FORM OF AGREEMENT OF MERGER
EXHIBIT B
FORM OF ESCROW AGREEMENT
EXHIBIT C
FORM OF EMPLOYMENT AGREEMENT
EXHIBIT D
FORM OF REPURCHASE AGREEMENT
