AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated ___________, 2000 (the
"Effective Date"), by and among PRE-CELL SOLUTIONS, INC., a Colorado corporation
(hereinafter "Pre-Cell"), TRANS NATIONAL COMMUNICATIONS, INC., a Texas
corporation (hereinafter, the "Company"), XXXXX XXXXX, XXXXX XXXXX and XXXXXXX
XXXXXXXXX (collectively, the "Shareholders"), and [TRANSNATIONAL ACQUISITION
CORP.], a Texas corporation ("Merger Sub"), a wholly-owned subsidiary of
Pre-Cell.
WITNESSETH:
WHEREAS, Merger Sub is a wholly-owned subsidiary of Pre-Cell; and
WHEREAS, the Boards of Directors of Pre-Cell, Merger Sub and the
Company have each determined that it is advisable and in the interests of their
respective shareholders to consummate, and have approved, the business
combination transaction provided for herein in which the Company will merge with
and into Merger Sub, so that the separate corporate existence of the Company
shall cease and Merger Sub will be the Surviving Corporation (as defined below)
(the "Merger"), all upon the terms and subject to the conditions of this
Agreement and in accordance with the laws of the State of Florida; and
WHEREAS, the transaction provided for herein is intended to be
consummated in accordance with Article 5.01 of the Texas Business Corporation
Act (the "Texas Business Corporation Act"); and
WHEREAS, in connection with said merger, each Shareholder of the
Company is willing to surrender all of the issued and outstanding common shares
of the Company owned by such shareholder in exchange for the right to receive
certain common shares of Pre-Cell, as detailed herein, and further subject to
the covenants and undertakings of the parties hereto; and
WHEREAS, the terms and conditions of the Merger, the mode of carrying
the same into effect, the manner of converting the capital stock of the Company
into the right to receive common shares of Pre-Cell and such other terms and
conditions as may be required or permitted to be stated in this Agreement are
set forth below; and
WHEREAS, Merger Sub, the Company and their respective shareholders
desire to make certain representations, warranties and agreements in connection
with the Merger and also to prescribe various conditions to the Merger;
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NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2), upon
the terms and subject to the conditions of this Agreement, the Company shall be
merged with and into the Merger Sub in accordance with the Texas Business
Corporation Act. The Merger Sub shall be the surviving corporation in the Merger
(the "Surviving Corporation") and the separate corporate existence of the
Company shall cease. Merger Sub and the Company are sometimes referred to herein
as the "Constituent Corporations." As a result of the Merger, the outstanding
shares of capital stock of the Company shall be converted or cancelled in the
manner provided in Article II.
1.2 Effective Time. At the Closing (as defined in Section 1.3),
Articles of Merger shall be duly prepared and executed by the Company and Merger
Sub and thereafter delivered to the Secretary of State of the State of Texas
(the "Secretary of State") for filing, as provided in Article 5.01 of the Texas
Business Corporation Act, on, or as soon as practicable after, the Closing Date
(as defined in Section 1.3). The Merger shall become effective at the time
[Articles of Merger] are filed with the Texas Secretary of State (the "Effective
Time").
1.3 Closing. The closing of the Merger (the "Closing") will take place
at the offices of Xxxxx & Xxxxx, P.A., 0000 Xxxx Xxxxxxxx Xxxx Xxxxxx, Xxxxx
000, Xxxx Xxxxx, Xxxxxxx 00000, or at such other place as the parties hereto
mutually agree, on May 31, 2000, at 10:00 a.m., local time, provided that the
closing conditions set forth in Article VII and VIII have been satisfied or, if
permissible, waived in accordance with this Agreement, or on such other date as
the parties hereto mutually agree (the "Closing Date"). At the Closing there
shall be delivered to the Company and Pre-Cell the certificates and other
documents and instruments required to be delivered under Articles VII and VIII.
1.4 Articles of Incorporation and Bylaws of the Surviving Corporation.
At the Effective Time, (i) the Articles of Incorporation of the Merger Sub as in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Incorporation, and (ii) the Bylaws of the Merger Sub
as in effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, the Articles
of Incorporation of the Surviving Corporation and such Bylaws.
1.5 Directors and Officers of the Surviving Corporation. The sole
director of the Surviving Corporation shall be Xxxxxx Xxxxxx and the officers of
the Surviving Corporation shall be Xxxxx Xxxxxx, President and
Secretary-Treasurer in each instance until his respective successors shall have
been duly elected or appointed and qualified or until his earlier death,
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resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
1.6 Effects of the Merger. Pursuant to Article 5.01 of the Texas
Business Corporation Act, on the Effective Date, the corporate identity,
property, purposes, powers, franchises, rights and obligations of Merger Sub
shall be transferred to, vest in, and be merged with the Company, without
further act or deed. Merger Sub hereby appoints and designates the President and
the Secretary of the Surviving Corporation as its attorneys-in-fact to execute,
acknowledge and deliver on behalf of Merger Sub any assignments, deeds,
statements, verifications or other instruments that are necessary or appropriate
to effectuate or evidence the transfer or vesting of any property, right,
privilege or franchise of the Company in the Surviving Corporation as a result
of the Merger.
1.7 Further Assurances. Each party hereto will execute such further
documents and instruments and take such further actions as may reasonably be
requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets, properties, rights,
approvals, immunities and franchises of the Company or to effect the other
purposes of this Agreement.
ARTICLE II
CONVERSION OF SHARES
2.1 Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof:
(a) Capital Stock of the Company. Each issued and outstanding
share of the common stock, par value $10.00 per share, of the Company ("Company
Common Stock") shall be converted into and become 100 (1,000,000/10,000) fully
paid and non-assessable shares of common stock, par value $.01 per share, of
Pre-Cell ("Pre-Cell Common Stock"). Each certificate representing outstanding
shares of Company Common Stock shall at the Effective Time represent shares of
Pre-Cell Common Stock determined by multiplying the number of shares of Company
Common Stock represented by such certificate immediately prior to the Effective
Time by 111 (the "Merger Consideration").
(b) Cancellation of Treasury Stock and Stock Owned by the
Company. All shares of common stock, par value $10.00 per share, of the Company
that are owned by the Company as treasury stock shall be cancelled and retired
and shall cease to exist and no Pre-Cell Common Stock or other consideration
shall be delivered in exchange therefor. As used in this Agreement, "Subsidiary"
means, with respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which more than fifty percent (50%) of either
the equity interests in, or the voting control of, such corporation or other
organization is, directly or indirectly through Subsidiaries or otherwise,
beneficially owned by such party.
(c) Exchange Ratio for Company Common Stock. Each issued and
outstanding share of Company Common Stock (other than shares to be canceled in
accordance with Section 2.1(b) and other than Dissenting Shares (as defined in
Section 2.1(d)), shall be
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converted into the right to receive One Hundred (100) (the "Conversion Number")
fully paid and non-assessable shares of Pre-Cell Common Stock, subject to
adjustment as follows: if, prior to the Effective Time, Pre-Cell shall pay a
dividend in, subdivide, combine into a smaller number of shares or issue by
reclassification of its shares, any shares of Pre-Cell Common Stock, the
Conversion Number shall be multiplied by a fraction, the numerator of which
shall be the number of shares of Pre-Cell Common Stock outstanding immediately
after, and the denominator of which shall be the number of such shares
outstanding immediately before, the occurrence of such event, and the resulting
product shall from and after the date of such event be the Conversion Number,
subject to further adjustment in accordance with this sentence. All such shares
of Company Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the shares of Pre-Cell Common Stock
and any cash in lieu of fractional shares of Pre-Cell Common Stock to be issued
or paid in consideration thereof (determined in accordance with Section 2.2(e)),
upon the surrender of such certificate in accordance with Section 2.2, without
interest.
(d) Dissenting Shares.
(i) Notwithstanding any provision of this Agreement
to the contrary, the holder of each outstanding share of Company Common Stock
which has not voted in favor of the Merger, has perfected such holder's right to
an appraisal of such holder's shares in accordance with the applicable
provisions of the Texas Business Corporation Act and has not effectively
withdrawn or lost such right to appraisal (as "Dissenting Share"), shall not be
converted into or represent a right to receive the Merger Consideration pursuant
to Section 2.1(a), but the holder thereof shall be entitled only to such rights
as are granted by the applicable provisions of the Texas Business Corporation
Act; provided, however, that any Dissenting Share held by a person at the
Effective Time who shall, after the Effective Time, withdraw the demand for
appraisal or lose the right of appraisal, in either case pursuant to the Texas
Business Corporation Act, shall be deemed to be converted into, as of the
Effective Time, the right to receive the Merger Consideration pursuant to
Section 2.1(a).
(ii) The Company shall give Pre-Cell (x) prompt
notice of any written demands for appraisal, withdrawals of demands for
appraisal and any other instruments served pursuant to the applicable provisions
of the Texas Business Corporation Act relating to the appraisal process received
by the Company and (y) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under Texas law. The Company
will not voluntarily make any payments with respect to any demands for appraisal
and will not, except with the prior written consent of Pre-Cell, settle or offer
to settle any such demands.
2.2 Exchange of Certificates.
(a) Subject to Sections (b) and (c) below, as soon as
practicable after the Effective Date, each holder of a certificate or
certificates which prior thereto represented validly issued and outstanding
shares of Company Common Stock shall surrender such certificate or certificates
to Pre-Cell or to its designated transfer agent, and shall receive in exchange
therefore a certificate representing his/her pro-rata portion of Seven Hundred
Thousand (700,000) shares
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of Pre-Cell Common Stock into which the shares of the Company's Common Stock
theretofore represented by the surrendered certificate or certificates shall
have been converted pursuant to Section 2.1(a) hereof. Until so surrendered,
each certificate that on the Effective Date represents issued and outstanding
shares of the Company's Common Stock shall be deemed for all corporate purposes
to evidence ownership of the number of shares of Pre-Cell Common Stock into
which the shares of Company Common Stock shall have been converted.
(b) Two Hundred Seventy Thousand (200,000) shares of Pre-Cell
Common Stock shall be retained by Pre-Cell (the "Indemnity Amount"), subject to
adjustment as provided below, and shall be delivered, pro rata, to the
Shareholders within six (6) months after the Closing Date (the period between
the Closing Date and six months after the Closing Date hereof being referred to
as the "Indemnity Period"). Pre-Cell may, subject to the provisions of this
Section 2.2(b), reduce the Indemnity Amount by the amount of any and all claims
made by Pre-Cell under Section 10.2 (the Indemnity Provision). If, at the end of
the Indemnity Period, Pre-Cell has made no claims under Section 10.2 (Indemnity
Provision) hereof, the full Indemnity Amount shall be released to the
Shareholders in accordance with Section 2.2(a) above. If, at the end of the
Indemnity Period, Pre-Cell has made one or more claims under Section 10.2
(Indemnity Provision) hereof, then a portion of the Indemnity Amount equal to
the alleged value of Pre-Cell's claim(s) shall be held by the Pre-Cell pending
the final determination of such claim(s), and the balance of the Indemnity
Amount, if any, shall be delivered by Pre-Cell to the Shareholders within thirty
(30) days after the end of the Indemnity Period. Upon the final determination
of such claim(s), such withheld portion of the Indemnity Amount shall either be
retained by Pre-Cell or delivered to the Shareholders, as applicable. Any
delivery or withholding of the Indemnity Amount pursuant to this Section 2.2(b)
shall not limit or affect any party's rights or remedies (or be such party's
sole or exclusive right or remedy) with respect to this Agreement, the breach of
any representation, warranty or obligation herein, the failure of any condition
to the Pre-Cell's obligations hereunder to be satisfied or the indemnification
obligations of any party hereunder.
(c) One Hundred Thousand (100,000) shares of Pre-Cell Common
Stock (the "Governmental Holdback"), subject to adjustment as provided in this
Section 2.2 (c) below, shall be delivered by Pre-Cell to the Shareholders within
thirty (30) days after the first anniversary of the Closing Date (the period
between the Closing Date and the first anniversary thereof being referred to as
the "Deferral Period"). Pre-Cell may, subject to the provisions of this Section
2.2(c), reduce the Deferral Amount by the amount of any and all claims against
Pre-Cell or the Constituent Corporations in connection with any claims made by
any governmental authorities relating to the Company, including, without
limitation, the Federal Communications Commission, any state public utility
commissions or public service commissions, the United States Internal Revenue
Service or any state or local taxing authorities (collectively, the
"Governmental Authorities"). If, at the end of the Deferral Period, no claims
have been made by any such Governmental Authorities, the full Deferral Amount
shall be released to the Shareholders in accordance with Section 2.2(a) above.
If, at the end of the Indemnity Period, any claims have been made or threatened
by any Governmental Authority, then a portion of the Deferral Amount equal to
the alleged value of any such claim(s) shall be held by Pre-Cell pending the
final determination of such claim(s), and the balance of the Deferral Amount, if
any,
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shall be delivered by Pre-Cell to the Shareholders within thirty (30) days after
the end of the Deferral Period. Upon the final determination of such claim(s),
such withheld portion of the Deferral Amount shall either be retained by
Pre-Cell or delivered to the Shareholders, as applicable. Any delivery or
withholding of the Deferral Amount pursuant to this Section 2.2(c) shall not
limit or affect any party's rights or remedies (or be such party's sole or
exclusive right or remedy) with respect to this Agreement, the breach of any
representation, warranty or obligation herein, the failure of any condition to
the Pre-Cell's obligations hereunder to be satisfied or the indemnification
obligations of any party hereunder.
(d) For purposes of Sections 2.2(b) and 2.2(c), the value of
the Pre-Cell Shares shall be the greater of (i) $2.00 per share, and (ii) the
closing price of one share of Pre-Cell Common Stock on the day immediately prior
to [the satisfaction of any Loss (as defined in Article X hereof] in connection
with the matters described in Section 2.2(b) and (c). Additionally, the
Shareholders shall have the option to deliver the value of any such Loss in cash
or shares of Pre-Cell Common Stock as described in the immediately preceding
sentence.
2.3 Registration Rights; Limitation on Transfer.
(a) As soon as practicable after the Closing Date, but no later than
June 30, 2000 in any event, Pre-Cell shall file a registration statement with
the United States Securities and Exchange Commission ("SEC") to register the
Pre-Cell Shares issued to the Company's Shareholders as the Merger Consideration
hereunder (collectively, the "Holders") under the Securities Act of 1933, as
amended (the "Securities Act"), or shall include all such Pre-Cell Shares in a
registration statement which has been filed but not been declared effective, if
allowable under the Securities Act and the rules promulgated thereunder, so that
they may be sold by the Holders to the extent legally permissible. Pre-Cell
shall use its reasonable efforts to cause such registration statement to be
declared effective by the SEC no later than August 31, 2001, and once such
registration statement is declared effective, to keep it effective until all
securities registered thereby are either sold or can be sold under an exemption
from the registration requirements of the Securities Act. Pre-Cell shall bear
all fees and expenses incurred by it in connection with the preparation and
filing of such registration statement. Each Holder will pay all brokerage
discounts and commissions with respect to the sale of his Pre-Cell Shares and
any fees and expenses of separate counsel and accountants which may be retained
by the Holders. Each person for whom Pre-Cell Shares are to be registered for
resale under such registration statement will be required to execute a lock-up
agreement in the form annexed hereto as Exhibit pursuant to which he shall agree
to (i) not sell any Pre-Cell Shares acquired by him hereunder until the six
month anniversary of the Effective Date; and (ii) only to sell up to that
percentage of the Pre-Cell Shares owned by him as determined by the Pre-Cell
Board of Directors during any three-month period beginning six months after the
Effective Date and ending eighteen months after the closing date.
Notwithstanding the foregoing and subject to Act and any applicable state or
federal regulations, the Shareholders shall have the right to sell One Hundred
Thousand (100,000) shares of the Pre-Cell Common Stock
Notwithstanding any other provision of this Section 2.3, (i) Pre-Cell
shall have no obligation hereunder to register the Pre-Cell Shares on behalf of
a Holder unless (a) such Holder
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executes a lock-up agreement as described above and (b) the Holder provides
Pre-Cell with all of the information and documents with respect to his ownership
of the Pre-Cell Shares, compliance with the law, manner of proposed disposition
and such other matters as Pre-Cell shall reasonably request for disclosure in
the registration statement; (ii) Pre-Cell shall not be obligated to register any
of the Pre-Cell Shares unless such registration is then permitted by law and the
policy of the SEC; and (iii) it is understood and agreed that there may be
periods of up to 90 days in duration in any year during which the registration
statement filed in accordance with this Section lapses into non-effectiveness as
a result of (a) the unavailability of financial statements required to update
such registration statement or (b) the occurrence of material events which
require the filing of an amendment to such registration statement.
(b) Indemnification
(i) Pre-Cell shall indemnify and hold harmless, to the extent
permitted by law, each Holder, its officers and directors and each person who
controls a Holder (within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act) against all losses, claims, damages,
liabilities and expenses (including reasonable attorneys' fees, costs and
expenses) caused by any untrue or alleged untrue statement of material fact
contained in any registration statement filed pursuant to Section 2.3(a),
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in or omitted from any
information furnished in writing to Pre-Cell by such Holder for use therein.
(ii) In connection with any registration statement in which a
Holder is participating, such Holder will furnish to Pre-Cell such information
as Pre-Cell reasonably requests for use in connection with any such registration
statement or prospectus, and to the extent permitted by law, will indemnify
Pre-Cell, its directors and officers and each person who controls Pre-Cell
(within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act) against any losses, claims, damages, liabilities and expenses
(including reasonable attorneys' fees, costs and expenses) resulting from any
untrue statement of material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in or omitted from any
information so furnished by such Holder in writing which states that such
information is for use in such registration statement, prospectus or preliminary
prospectus or any amendment or supplement thereto.
(iii) Any person entitled to indemnification under this
Section 2.3(b) will (i) give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification; provided, that the
failure to give such notice shall not relieve the indemnifying party of its
obligations hereunder; and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party and such indemnifying parties shall
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promptly and vigorously assume such defense at its cost and expense. If such
defense is assumed, the indemnifying party will not be subject to any liability
for any settlement made by the indemnified party without its consent (but such
consent will not be unreasonably withheld). An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim shall promptly pay
all costs and expenses of the indemnified party's defense, but will not be
obligated to pay the fees and expenses of more than one counsel for each party
indemnified by such indemnifying party with respect to such claim.
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Company and the Shareholders, jointly and severally, represent and
warrant to Merger Sub and Pre-Cell that the statements contained in this Article
III are true, correct and complete as of the date of this Agreement and will be
true, correct and complete as of the Effective Time (as though made then and as
though the Effective Time were substituted for the date of this Agreement
throughout this Article III), except as set forth in the schedules hereto.
3.1 Organization and Good Standing.
(a) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of Texas
with full power and authority (corporate and other) to own and lease its
properties and to conduct its business as currently conducted. The Company has
been duly qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each jurisdiction set forth on Schedule
3.1(a), such jurisdictions comprising all jurisdictions in which the Company
owns or leases any property, or conducts any business, so as to require such
qualification.
(b) The Company has no subsidiary nor owns or controls, or has
any other equity investment or other interest in, directly or indirectly, any
corporation, limited liability company, joint venture, partnership, association
or other entity.
3.2 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
(a) conflict with or result in a breach or violation of any material term or
provision of, or constitute a material default under (with or without notice or
passage of time, or both), or otherwise give any person a basis for accelerated
or increased rights or termination or nonperformance under, any indenture,
mortgage, deed of trust, loan or credit agreement, lease, license or other
agreement or instrument to which the Company is a party or by which the Company
is bound or affected or to which any of the property or assets of the Company is
bound or affected including, without limitation, all arrangements in Section
3.19 hereof, (b) result in the violation of the provisions of the Articles of
Incorporation or Bylaws of the Company or any legal requirement applicable to or
binding upon it, (c) result in the creation or imposition of any lien upon any
property or asset of the Company or (d) otherwise adversely affect the
contractual or other legal rights or privileges of the Company. Schedule 3.2
sets forth a list of all agreements requiring the consent of any party thereto
to any of the transactions contemplated hereby.
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3.3 Capitalization. The authorized capital stock of the Company
consists solely of one hundred thousand (100,000) shares of the Company Common
Stock, of which only ten thousand (10,000) shares are, and as the Effective Time
will be, issued and outstanding. All of the shares of the Company Common Stock
have been duly authorized and validly issued and are fully paid, nonassessable
and outstanding. Other than as set forth on Schedule 3.3, (i) there are no
existing options, warrants, right, calls or commitments of any character
relating to the shares of the Company Common Stock or any other capital stock or
securities of the Company, (ii) there are no outstanding securities or other
instruments convertible into or exchangeable for shares of the Company Common
Stock or any other capital stock or securities of the Company and no commitments
to issue such securities or instruments and no person has any right of first
refusal, preemptive right, subscription right or similar right with respect to
any shares of the Company Common Stock or any other capital stock or securities
of the Company.
3.4 Financial Statements.
(a) Schedule 3.4 hereto contains true and complete copies of
(i) the unaudited balance sheet of the Company at September 30, 2000 (the
"Company Balance Sheet Date"), and the related unaudited statement of income for
the four months then ended, and (ii) the [unaudited] balance sheet of the
Company at December 31, 1999, and the related unaudited statement of income for
the fiscal year then ended (the financial statements described in clause (i) and
(ii) above are collectively referred to as the "Company Financial Statements").
(b) The Company Financial Statements present fairly the
financial condition of the Company as of the dates indicated therein and the
results of operations of the Company for the periods specified therein, have
been prepared with principles applied on a consistent basis, have been derived
from the accounting records of the Company, and do not contain any untrue
statement of material fact or omit to state a material fact.
3.5 Title to Property; Encumbrances.
(a) Title to and Condition of Properties. Except as set forth
in Schedule 3.5, the Company has good, valid and indefeasible title to all of
its assets and properties of every kind, nature and description, tangible or
intangible, wherever located, which constitute all of the property (including
without limitation property and assets shown or reflected on the Company's
Financial Statements now used in and necessary for the conduct of its business
as presently conducted and all such properties are owned free and clear of all
mortgages, pledges, liens, security interests, encumbrances, options, rights of
first refusal and restrictions of any nature whatsoever (collectively a "Lien").
All such properties are useable for their current uses without violating any
applicable federal, state or local laws, or any applicable private restriction,
and such uses are legal conforming uses. Except as set forth in Schedule 3.5, no
financing statement under the Uniform Commercial Code or similar law naming the
Company or any of its predecessors has been filed authorizing any party to file
any such financing statement. All tangible personal property owned, leased or
used by the Company is suitable for the purpose or purposes for which it is
being used and has been maintained in accordance with the terms of the lease
applicable
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thereto. Schedule 3.5 lists the names of all secured parties holding any
mortgage, lien, security interest or other encumbrances on any property of the
Company and describes the property that is encumbered, the amount of any loan
relating to such encumbrance and the file number of any file relating to such
encumbrance.
(b) The Company does not own or have the right to acquire any
real property.
(c) Schedule 3.5(c) contains a list of all tangible personal
property having a cost or fair market value in excess of $20,000 owned by the
Company (other than personal property held by the Company as lessee under a
personal property lease).
(d) Schedule 3.5(d) contains a list of all real property
leases, licenses and personal property leases under which the Company is the
lessee or licensee, together with (i) the location and nature of each of the
leased or licensed properties (including a legal description of all leased real
property), (ii) the termination date of each such lease or license, (iii) the
name of the lessor or licenser and (iv) all rental and other payments made or
required to be made for the fiscal years ending December 31, 2001 and December
31, 2002. All leases and licenses pursuant to which the Company leases or
licenses from others real or personal property are valid, subsisting in full
force and effect in accordance with their respective terms, and there is not,
under any real property lease, personal property lease or license, any existing
default (a) by the Company or event of default by the Company (or event that,
with notice or passage of time, or both, would constitute a default, or would
constitute a basis of force majeure or other claim of excusable delay or
nonperformance) or (b) to the best of the Company's knowledge by any other party
or event of default by any other party (or event that, with notice or passage of
time, or both, would constitute a default, or would constitute a basis of force
majeure or other claim of excusable delay or nonperformance). True and complete
copies of all real property leases, licenses and personal property leases listed
on Schedule 3.5(d) have been delivered to Pre-Cell heretofore, as well as copies
of any title reports, surveys or environmental reports or audits relating to any
leased real property. Except as set forth in Schedule 3.5(d), no such lease or
license will require the consent of the lessor or licenser to or as a result of
the consummation of the transactions contemplated by this Agreement. For the
purposes of this Section 3.5(d), a "lease" shall include a sublease.
(e) All personal property owned by the Company and all
personal property held by the Company pursuant to personal property leases is in
good operating condition and repair, subject only to ordinary wear and tear, to
the best of the Company's knowledge, has been operated, serviced and maintained
properly within the recommendations and requirements of the manufacturers
thereof (if any) and is suitable and appropriate for the use thereof made and
proposed to be made by the Company in its business and operations. The real
property and personal property described in Sections 3.5(a), 3.5(b) and 3.5(c)
and the real property and personal property held by the Company pursuant to the
leases and licenses described in Schedule 3.5(d) comprise all of the real
property and personal property used in the conduct of business of the Company.
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(f) Except as set forth in Schedule 3.5(f), the Company is not
in violation of, or default under, any legal requirement pertaining to any of
its owned or leased real or personal property. There has not been any notice of
violation of any legal requirement, or of any covenant, condition, restriction
or easement affecting any real or personal property or with respect to the use
or occupancy thereof, has been given by any person.
3.6 Accounts Receivable. All accounts receivable of the Company
reflected in the Company Balance Sheet (except such accounts receivable as have
been collected since such dates) arose in the ordinary course, are valid and
enforceable claims, and the goods and services sold and delivered that gave rise
to such accounts were sold and delivered in conformity with all applicable
express and implied warranties, purchase orders, agreements and specifications.
Such accounts receivable of the Company are subject to no valid defense, offset
or counterclaim and are fully collectible, except to the extent of the allowance
for doubtful accounts reflected in the Company Balance Sheet. Schedule 3.6
contains a true complete aging of the Company's accounts receivable as of the
Balance Sheet Date.
3.7 Stock Ownership. All of the shares of the Company Common Stock are
owned free and clear of all liens, security interests, encumbrances, pledges,
charges, claims, voting trusts, and restrictions on transfer of any nature
whatsoever, except restrictions on transfer imposed by or pursuant to federal or
state securities laws. Each Shareholder of the Company has the full and
unrestricted right, power and capacity to transfer and deliver the Company
Common Stock the Company Common Stock owned by him as provided herein and to
execute this Agreement and consummate the transactions contemplated by this
Agreement without the consent or approval of any other person.
3.8 Intellectual Property.
(a) As used herein, "Company Intellectual Property" shall mean
(a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(e) all computer software (including source code, data and related
documentation), (f) all other proprietary rights, and (g) all copies and
tangible embodiments thereof (in whatever form or medium) of the Company.
(b) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Company Intellectual Property
necessary or desirable for the operation of the Company as presently conducted.
Each item of Company Intellectual Property
11
owned or used by the Company immediately prior to the Effective Time will be
owned or available for use by the Surviving Corporation on identical terms and
conditions immediately subsequent to the Effective Time.
(c) To the Company's knowledge the Company has not interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
intellectual property rights of any person, and the Company has not received any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Company must license or refrain from using any the Company Intellectual Property
rights of any person). To the knowledge of the Company, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Company Intellectual Property rights of the Company.
(d) Schedule 3.8(d) identifies each patent or registration
(including trademarks, tradenames and service marks) which has been issued to
the Company with respect to any Company Intellectual Property, identifies each
pending patent application or application for registration which the Company has
made with respect to any Company Intellectual Property, and identifies each
license, agreement, or other permission which the Company has granted to any
third party with respect to any Company Intellectual Property (together with any
exceptions). The Company has delivered to Pre-Cell correct and complete copies
of all such patents, registrations, applications, licenses, agreements, and
permissions (as amended to date) and the correct and complete copies of all
other written documentation evidencing ownership and prosecution (if applicable)
of each such item. Schedule 3.8(d) also identifies each trade name or
unregistered trademark and each proprietary design used by the Company. With
respect to each item of Company Intellectual Property required to be identified
in Schedule 3.8(d): (i) the Company possesses all right, title, and interest in
and to the item, free and clear of any lien, license, or other restriction; (ii)
the item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge; (iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the knowledge of the
Company, is threatened which challenges the legality, validity, enforceability,
use, or ownership of the item; and (iv) the Company has not agreed to indemnify
any person for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(e) Schedule 3.8(e) identifies each item of the Company
Intellectual Property that any third party owns and that the Company uses in
connection with its operations and business pursuant to license, sublicense,
agreement, or permission. The Company has delivered to Pre-Cell correct and
complete copies of all such licenses, sublicenses, agreements, and permissions
(as amended to date). With respect to each such item of the Company Intellectual
Property which relates to the operations and business of the Company is required
to be identified in Schedule 3.8(e): (i) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and in full
force and effect; (ii) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (iii) the Company is not, and to the knowledge of the Company, no other
party to the license, sublicense, agreement, or permission is in breach or
default, and no event has occurred
12
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder; (iv) the Company
is not, and to the knowledge of the Company, no other party to the license,
sublicense, agreement, or permission has repudiated any provision thereof; (v)
with respect to each sublicense, the representations and warranties set forth in
subsections 3.8(d) above are true and correct with respect to the underlying
license; (vi) to the knowledge of the Company, the underlying item of the
Company Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge; (vii) no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is pending or , ) to
the knowledge of the Company and the Shareholders, is threatened which
challenges the legality, validity, or enforceability of the underlying item of
Intellectual Property; and (viii) the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, or permission.
3.9 Banking and Insurance.
(a) Schedule 3.9(a) contains a true and complete list of the
names and locations of all financial institutions at which the Company maintains
a checking account, deposit account, securities account, safety deposit box or
other deposit or safekeeping arrangement, the numbers or other identification of
all such accounts and arrangements and the names of all persons authorized to
draw against any funds therein.
(b) Schedule 3.9(b) contains a true and complete list of all
insurance policies and bonds and self insurance arrangements currently in force
that cover or purport to cover risks or losses to or associated with the
Company's business, operations, premises, properties, assets, employees, agents
and directors and sets forth, with respect to each such policy, bond and self
insurance arrangement, a description of the insured loss coverage, the
expiration date and time of coverage, the dollar limitations of coverage, a
general description of each deductible feature and principal exclusion and the
premiums paid and to be paid prior to expiration. The Company has no obligation,
liability or other commitment relating to any contract of insurance containing a
provision for retrospective rating or adjustment of the Company's premium
obligation. To the Company's and the Shareholders' knowledge, no facts or
circumstances exist that would cause the Company to be unable to renew its
existing insurance coverage as and when the same shall expire other than
possible increases in premiums that do not result from any act or omission of
the Company.
3.10 Indebtedness.
(a) As used herein, "Indebtedness" shall mean, when used with
reference to any person, without duplication, (i) any liability of such person
created or assumed by such person, or any subsidiary thereof, (A) for borrowed
money, (B) evidenced by a bond, note, debenture or similar instrument (including
a purchase money obligation, deed of trust or mortgage) given in connection with
the acquisition of, or exchange for, any property or assets (other than
inventory or similar property acquired and consumed in the ordinary course),
including securities and other Indebtedness, (C) in respect of letters of credit
issued for such person's account and "swaps" of interest and currency exchange
rates (and other interest and
13
currency exchange rate hedging agreements) to which such person is a party or
(D) for the payment of money as lessee under leases that should be, in
accordance with generally accepted accounting principles, recorded as capital
leases for financial reporting purposes; (ii) any liability of others described
in the preceding clause (i) guaranteed as to payment of principal or interest by
such person or in effect guaranteed by such person through an agreement,
contingent or otherwise, to purchase, repurchase or pay the related Indebtedness
or to acquire the security therefor; (iii) all liabilities or obligations
secured by a Lien upon property owned by such person and upon which liabilities
or obligations such person customarily pays interest or principal, whether or
not such person has not assumed or become liable for the payment of such
liabilities or obligations; and (iv) any amendment, renewal, extension, revision
or refunding of any such liability or obligation; provided, however, that
Indebtedness shall not include any liability for compensation of such person's
employees or for inventory or similar property acquired and consumed in the
ordinary course or for services.
(b) The Company has no liability or obligation for
Indebtedness other than as set forth on Schedule 3.10(b), and true and complete
copies of all instruments and documents evidencing, creating, securing or
otherwise relating to such Indebtedness have been delivered to Pre-Cell
heretofore. Except as described in Schedule 3.10(b), no event has occurred and
no condition has become known to the Company (including the transactions
contemplated hereby) that constitutes or, with notice or passage of time, or
both, would constitute a default or a basis of force majeure or other claim of
accelerated or increased rights, termination, excusable delay or nonperformance
by the Company or any other person under any instrument or document relating to
or evidencing Indebtedness that would entitle any person to require the Company
to pay any portion of the principal amount of such Indebtedness prior to the
scheduled maturity thereof. Except as set forth in Schedule 3.10(b), no
instrument or document evidencing, creating, securing or otherwise relating to
Indebtedness will require the consent of any person to or as a result of the
consummation of the transactions contemplated by this Agreement.
(c) Schedule 3.10(c) contains a list and brief description of
all agreements or instruments pursuant to which any of the Company's directors,
employees or shareholders have guaranteed any Indebtedness of the Company (the
"the Company Guaranties"). True and complete copies of all the Company
Guaranties have been delivered to Pre-Cell.
3.11 Judgments; Litigation.
(a) There is no (i) outstanding judgment, order, decree,
award, stipulation or injunction of any federal, state or local governmental
entity or arbitrator (a "Governmental Entity") against or affecting the Company
or its properties, assets or business or (ii) action pending against or
affecting the Company or its properties, assets or business.
(b) There is no (i) outstanding judgment, order, decree,
award, stipulation, injunction of any Governmental Entity or arbitrator against
or affecting any officer, director or employee of the Company relating to the
Company or its business, (ii) legal action against or affecting, or to the
knowledge of the Company, threatened against or affecting, the Company or its
properties, assets or business, (iii) legal action pending or, to the knowledge
of the Company,
14
threatened against the Company's officers, directors or employees relating to
the Company or its business or (iv) basis for the institution of any legal
action against the Company or any of its officers, directors, employees,
properties or assets which, if decided adversely, would have a material adverse
effect on business, operations or financial condition of the Company.
3.12 Income and Other Taxes. Except as set forth on Schedule 3.12:
(a) All tax returns required to be filed through and including
the date hereof in connection with the operations of the Company are true,
complete and correct in all respects and have been properly and timely filed.
The Company has not requested any extension of time within which to file any tax
return, which tax return has not since been filed. Pre-Cell has heretofore been
furnished by the Company with true, correct and complete copies of each tax
return of the Company with respect to the past three taxable years, and of all
reports of, and communications from, any Governmental Entities relating to such
period. The Company has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial understatement of
income taxes for federal income tax purposes within the meaning of Code Section
6662.
(b) All taxes required to be paid or withheld and deposited
through and including the date hereof in connection with the operations of the
Company have been duly and timely paid or deposited by the Company. The Company
has properly withheld or collected all amounts required by law for income taxes
and employment taxes relating to its employees, creditors, independent
contractors and other third parties, and for sales taxes on sales, and has
properly and timely remitted such withheld or collected amounts to the
appropriate Governmental Entity. The Company has no liabilities for any taxes
for any taxable period ending prior to or coincident with the Effective Time.
(c) The Company has made adequate provision on its book of
account for all taxes with respect to its business, properties and operations
through the Company Balance Sheet Date, and the accruals for taxes in the
Company Balance Sheet are adequate to cover all liabilities for taxes of the
Company for all periods ending on or before the Effective Time.
(e) The Company has never (i) had a tax deficiency proposed,
asserted or assessed against it (ii) executed any waiver of any statute of
limitations on the assessment or collection of any taxes, or (iii) been
delinquent in the payment of any taxes.
(f) No tax return of the Company has been audited or the
subject of other legal action by any Governmental Entity. The Company has not
received any notice from any Governmental Entity of any pending examination or
any proposed deficiency, addition, assessment, demand for payment or adjustment
relating to or affecting the Company or its assets or properties and has no
reason to believe that any Governmental Entity may assess (or threaten to
assess) any taxes for any periods ending on or prior to the Effective Time.
(g) The Company (i) has not filed any consent or agreement
pursuant to Code Section 341(f), and no such consent or agreement will be filed
at any time on or before the
15
Effective Time; (ii) has not made any payments, is not obligated to make any
payments and is not a party to any agreement that under certain circumstances
could obligate the Company to make any payments that will not be deductible
under Code Section 280G, (iii) is not a United States real property holding
corporation within the meaning of Code Section 897(c)(2); (iv) is not a party to
a tax allocation or sharing agreement; (v) has never been (or does not have any
liability for unpaid taxes because it was) a member of an affiliated group with
the meaning of Code Section 1504(a); (vi) has never applied for a tax ruling
from a Governmental Entity and (vii) has never filed or been the subject of an
election under Code Section 338(g) or Code Section 338(h)(10) or caused or been
the subject of a deemed election under Code Section 338(e).
(h) Set forth on Schedule 3.12 is the amount, as of the most
recent practicable date, of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax or excess charitable
contribution.
3.13 Questionable Payments. Neither the Company nor, to the Company's
and the Shareholders' knowledge, any of its directors, officers, agents,
employees or other person associated with or acting on behalf of the Company has
(a) used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (b) made any direct or
indirect unlawful payments to government officials or employees, or foreign
government officials or employees, from corporate funds, (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets,
(d) made any false or fictitious entries on the books of account of the Company,
(e) made or received any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment, or (f) made any other payment, favor or gift not fully
deductible for federal income tax purposes.
3.14 Employee Benefit Matters.
(a) Schedule 3.14 contains a complete list of all "employee
benefit plans" within the meaning of Section 3(3) of ERISA and any other written
or oral employee benefit plan, arrangement, practice, contract, policy, or
program (other than arrangements merely involving the payment of wages) which
are or at any time have been established, maintained, or contributed to by the
Company or any ERISA affiliate for the benefit of current or former employees,
with respect to which the Company or an ERISA affiliate has or may in the future
have any liability or obligation to contribute or make payments of any kind (the
"Plans"). True and complete copies of each of the following documents (and any
amendments thereto), where applicable, have been delivered previously to
Pre-Cell: (i) each Plan documents; (ii) a written description of any Plan which
is not in writing; (iii) if a Plan is funded through a trust or any third-party
funding vehicle, the trust or other funding agreement; (iv) each Plan's most
recent financial statements; (v) the two most recent annual reports (including
all schedules and attachments thereto) required by ERISA; (vi) the most recent
actuarial report and valuation; (vii) the most recent determination letter
received from the United States Internal Revenue Service with respect to each
Plan that is intended to be qualified under Code Section 401 or to be recognized
as tax-exempt under Code Section 501(c); (viii) the most recent summary plan
description and each summary of material modifications required by ERISA; (ix)
any agreement providing for the provision of administrative or investment
management services with respect to
16
each Plan; and (x) all documents and correspondence received from or provided to
the Department of Labor, the United States Internal Revenue Service, and Pension
Benefit Guaranty Corporation during the past two years.
(b) Each Plan and related trust, annuity, or other funding
agreement complies and has been maintained in compliance with all applicable
legal requirements. No non-exempt prohibited transaction (as defined in Code
Section 4975 and ERISA Sections 406 and 408) has occurred and no "fiduciary" (as
defined in ERISA Section 3(21)) has committed any breach of duty which could
subject the Company, any ERISA Affiliate, or any director, officer, or employee
thereof to liability under Title I of ERISA or to tax under Code Section 4975.
All material obligations required to be performed by the Company and any other
person under the terms of each the Company Plan and applicable legal requirement
have been performed.
(c) All required reports and descriptions, including, without
limitation, annual reports (Form 5500), summary annual reports, and summary plan
descriptions, have been filed and distributed timely. With respect to each Plan
which is a welfare plan (as defined in ERISA Section 3(1)), the requirements of
Part 6 of Subtitle B of Title I of ERISA and of Code Sections 162(k) and 4980B
have been satisfied.
(d) All contributions, premiums, and other payments,
including, without limitation, employer contributions and employee salary
reduction contributions, have been paid when due or accrued in accordance with
the lawful past custom and practice of the Company and any ERISA Affiliate. No
Plan that is subject to Part 3 of Subtitle B of Title I of ERISA or to Code
Section 412 has incurred any accumulated funding deficiency, whether or not
waived, and no other actual or contingent liability for any other expenses or
obligations of any SYLIQN Plan exists.
(e) There are no pending or, to the Company's knowledge,
threatened legal actions (other than routine claims for benefits) asserted or
instituted against any Plan or the assets of any Plan, or against the Company,
or any ERISA Affiliate, trustee, administrator, or fiduciary of such Plan, and
the Company has no knowledge of any facts that could form the basis of any such
legal action. There is no pending or, to the Company's knowledge, threatened or
contemplated legal action by any Governmental Entity with respect to any the
Company Plan, and the Company has no knowledge of any facts that could
reasonably be expected to cause or trigger such a legal action.
(f) The Company (or, if applicable, an ERISA Affiliate,) may
terminate, suspend, or amend each Plan at any time, except to the extent
otherwise required by Code Section 4980B, without the consent of the
participants or employees covered by such the Company Plan. Neither the Company
nor any ERISA Affiliate has announced any intention, made any amendment or
binding commitment, or given any written or oral notice providing that the
Company or an ERISA Affiliate (i) will create additional the Company Plans
covering employees of the Company or any ERISA Affiliate, (ii) will increase
benefits promised or provided pursuant to any the Company Plan, or (iii) will
not exercise after the Effective Time any right or power it may have to
terminate, suspend, or amend any the Company Plan.
17
(g) Neither the Company nor any ERISA Affiliate maintains or
has maintained any time, or contributes to or has contributed to or is or was
required to contribute to, any (i) Plan subject to Title IV of ERISA, including,
without limitation, any multi-employer plan (as defined in ERISA Section 3(37)),
within the past five years, or (ii) funded or unfunded medical, health,
accident, or life insurance plan or arrangement for current or future retirees
or terminated employees or their spouses or dependents (except to the extent
required by Code Sections 162(k) or 4980B).
(h) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will constitute a
termination of employment or other event entitling any person to any additional
or other benefits, or that would otherwise modify benefits or the vesting of
benefits, provided under any the Company Plan.
(i) No event has occurred which could subject the Company or
any ERISA Affiliate to any material liability (i) under any legal requirement
relating to any the Company Plan, or (ii) resulting from any obligation of the
Company or an ERISA Affiliate to indemnify any person against liability incurred
with respect to or in connection with any the Plan.
(j) Each Plan which is intended to be qualified under Code
Section 401 has received, since the inception of the Company, a favorable
determination letter from the IRS. No event has occurred and no facts or
circumstances exist which may cause or result in the loss or revocation of such
determination.
3.15 No Undisclosed Liabilities. Except (i) to the extent set forth or
provided for in the Company Balance Sheet or the notes thereto, or (ii) as set
forth on Schedule 3.15 which shall include all of the Company's accounts payable
and other accrued expenses, as of the date hereof the Company has no
liabilities, whether accrued, absolute, contingent or otherwise, whether due or
to become due and whether the amounts thereof are readily ascertainable or not,
or any unrealized or anticipated losses from any commitments of a contractual
nature, including federal, state or local taxes with respect to or based upon
the transactions or events occurring at or prior to the Effective Time.
3.16 Permits, Licenses, Etc. The Company possesses, and is operating in
compliance with, all franchises, licenses, permits, certificates,
authorizations, rights and other approvals of Governmental Entities necessary to
(i) occupy, maintain, operate and use its real property as it is currently used
and proposed to be used, and (ii) conduct its business as currently conducted
and as proposed to be conducted (the "Permits"). Schedule 3.16 contains a true
and complete list of all the Company Permits. To the best of the Company's
knowledge, each Permit has been lawfully and validly issued, and no proceeding
is pending or, to the Company's and the Shareholders' knowledge, threatened in
connection with the revocation, suspension or limitation of any Permit. The
consummation of the transactions contemplated by this Agreement will not result
in the revocation, suspension or limitation of any Permit and, except as set
forth in Schedule 3.16, no Permit will require the consent of its issuing
authority to or as a result of the consummation of the transactions contemplated
hereby.
18
3.17 Regulatory Filings. The Company has made all required
registrations and filings with and submissions to all applicable Governmental
Entities relating to the operations of the Company as currently conducted and as
proposed to be conducted. All such registrations, filings and submissions were
in compliance with all legal requirements (including all federal and state
telecommunications laws) and other requirements when filed, no material
deficiencies have been asserted by any such applicable Governmental Entities
with respect to such registrations, filings or submissions and, to the Company's
knowledge, no facts or circumstances exist which would indicate that a material
deficiency may be asserted by any such authority with respect to any such
registration, filing or submission.
3.18 Consents. All consents, authorizations and approvals of any person
to or as a result of the consummation of the transactions contemplated hereby,
that are necessary in connection with the operations and business of the Company
as currently conducted and as proposed to be conducted, or for which the failure
to obtain the same might have, individually or in the aggregate, a material
adverse effect on the business, operations or financial condition of the
Company, have been, or as of the Effective Time will be, lawfully and validly
obtained by the Company.
3.19 Material Contracts; No Defaults.
(a) Schedule 3.19(a) contains a true and complete list and
description of each individual outstanding sales order and sales contract of the
Company having an indicated gross value in excess of $10,000 or having a term or
duration in excess of six months. All outstanding sales orders and sales
contracts of the Company have been entered into in the ordinary course. Except
as described in Schedule 3.19(a), the Company has not received any advance,
progress payment or deposit in respect of any sales order or sales contract, and
the Company has no sales order or sales contract that will result, upon
completion or performance thereof, in gross margins materially lower than those
normally experienced by the Company for the services or products covered by such
sales order or sales contract.
(b) Schedule 3.19(b) contains a true and complete list of all
sales agency, sales representative, distributor, wholesaler, broker, dealer and
similar contracts or agreements of the Company, and true and complete copies of
the same have been delivered to Pre-Cell heretofore. Except as described in
Schedule 3.19(b), all of such contracts and agreements are terminable at any
time by the Company without penalty upon not more than 30 days' notice.
(c) Schedule 3.19(c) contains a true and complete list and
description of all noncompetition agreements and covenants under which the
Company or any of its officers, directors or employees or Shareholders is
obligated, and true and complete copies of the same have been delivered to
Pre-Cell heretofore. Except as described in Schedule 3.19(c), the Company is not
restricted by any agreement from carrying on its business or engaging in any
other activity anywhere in the world (including relocating, closing, or
terminating any of its operations or facilities), and no such officer, director,
key employee or shareholder of the Company is a party to or otherwise bound or
affected by any agreement, covenant or other
19
arrangement or understanding that would restrict or impair his ability to
perform diligently his other duties to the Company. Schedule 3.19(c) also
contains a true and complete list and description of all noncompetition
agreements or covenants in favor of the Company, and true and complete copies of
the same have been delivered to Pre-Cell heretofore.
(d) Schedule 3.19(d) contains a true and complete list and
description of all contracts, agreements, understandings, arrangements and
commitments, written or oral, of the Company with any officer, director,
consultant, employee or affiliate of the Company or with any associate,
affiliate or employee of any affiliate of the Company, other than those
disclosed in Schedule 3.21(a) hereto; in each case a true and complete copy of
such written contract, agreement, understanding, arrangement or commitment or a
true and complete summary of such oral contract, agreement, understanding,
arrangement or commitment has been delivered to Pre-Cell heretofore.
(e) Schedule 3.19(e) contains a true and complete list and
description of all other material contracts, agreements, understandings,
arrangements and commitments, written or oral, of the Company by which it or its
properties, rights or assets are bound that are not otherwise disclosed in this
Agreement or the Schedules hereto. True and complete copies of such written
contracts, agreements, understandings, arrangements and commitments and true and
complete summaries of such oral contracts, agreements, understandings,
arrangements and commitments have been delivered to Pre-Cell heretofore. For the
purposes of this subsection (f), "material" means any contract, agreement,
understanding, arrangement or commitment that (i) involves performance by any
party more than 90 days from the date hereof, (ii) involves payments or receipts
by the Company in excess of $5,000, (iii) involves capital expenditures in
excess of $5,000 or (iv) otherwise materially affects the Company.
(f) Except as described in Schedule 3.19(f):
(i) each agreement, contract, arrangement or
commitment described above in this Section 3.19 is, and after the Effective Time
on identical terms will be, legal, valid, binding, enforceable and in full force
and effect;
(ii) no event or condition has occurred or become
known to the Company or to the knowledge of the Company and/or the Shareholders
alleged to have occurred that constitutes or, with notice or the passage of
time, or both, would constitute a default or a basis of force majeure or other
claim of excusable delay, termination, nonperformance or accelerated or
increased rights by the Company or any other person under any contract,
agreement, arrangement, commitment or other understanding, written or oral,
described above in this Section 3.19, or described or otherwise disclosed
pursuant to this Agreement; and
(iii) To the best of the Company's and the
Shareholders' knowledge, no person with whom the Company has such a contract,
agreement, arrangement, commitment or other understanding is in default
thereunder or has failed to perform fully thereunder by reason of force majeure
or other claim of excusable
20
delay, termination or nonperformance thereunder, the delay, termination or
nonperformance of which, or a default under which, has had or may have a
material adverse effect on the business, operations or financial condition of
the Company.
3.20 Absence of Certain Changes. Since September 30, 2000, except as
disclosed in Schedule 3.20, the Company has not: (i) incurred any debts,
obligations or liabilities (absolute, accrued, contingent or otherwise), other
than current liabilities incurred in the ordinary course which, individually or
in the aggregate, are not material; (ii) subjected to or permitted a lien upon
or otherwise encumbered any of its assets, tangible or intangible; (iii) sold,
transferred, licensed or leased any of its assets or properties except in the
ordinary course; (iv) discharged or satisfied any lien other than a lien
securing, or paid any obligation or liability other than, current liabilities
shown on the Company Balance Sheet and current liabilities incurred since the
Company Balance Sheet Date, in each case in the ordinary course; (v) cancelled
or compromised any debt owed to or by or claim of or against it, or waived or
released any right of material value other than in the ordinary course; (vi)
suffered any physical damage, destruction or loss (whether or not covered by
insurance) causing a material adverse effect on the business, operations or
financial condition of the Company; (vii) entered into any material transaction
(other than this Agreement) or otherwise committed or obligated itself to any
capital expenditure other than in the ordinary course; (viii) made or suffered
any change in, or condition affecting, its condition (financial or otherwise),
properties, profitability, prospects or operations other than changes, events or
conditions in the ordinary course, none of which (individually or in the
aggregate) has had or may have a material adverse effect on the Company; (ix)
made any change in the accounting principles, methods, records or practices
followed by it or depreciation or amortization policies or rates theretofore
adopted; (x) other than in the ordinary course, made or suffered any amendment
or termination of any material contract, agreement, lease or license to which it
is a party; (xi) paid, or made any accrual or arrangement for payment of, any
severance or termination pay to, or entered into any employment or loan or loan
guarantee agreement with, any current or former officer, director or employee or
consultant; (xii) except as set forth on Schedule 3.21(a) paid, or made any
accrual or arrangement for payment of, any increase in compensation, bonuses or
special compensation of any kind to any employee other than pursuant to an
agreement disclosed on Schedule 3.21(a) or Schedule 3.21(b) or other than in the
ordinary course, or paid, or made any accrual or arrangement for payment of, any
increase in compensation, bonuses or special compensation of any kind to any
officer or director of the Company or any consultant to the Company; (xiii)
changed or suffered change in any benefit plan or labor agreement affecting any
employee of the Company otherwise than to conform to legal requirements; or
(xiv) entered into any agreement or otherwise obligated itself to do any of the
foregoing.
3.21 Employees and Labor Matters.
(a) Schedule 3.21(a) contains a true and complete list of the
names and current salary rates and bonus commitments to all present employees of
the Company and all contracts, agreements, Plans, arrangements, commitments and
understandings (formal and informal) pertaining to terms of employment,
compensation, bonuses, profit sharing, stock purchases, stock repurchases, stock
options, commissions, incentives, loans or loan guarantees, severance pay or
benefits, change in control payments, use of the Company's property and related
matters of the Company with any current or former officer, director, employee or
consultant, and
21
true and complete copies of all such contracts, agreements, plans, arrangements
and understandings have been delivered to Pre-Cell heretofore.
(b) Schedule 3.21(b) contains a true and complete list of all
labor, collective bargaining, union and similar agreements, arrangements or
understandings under or by which the Company is obligated, and true and complete
copies of all such written agreements, arrangements or understandings, and if
oral, true and complete written summaries thereof, have been delivered to
Pre-Cell heretofore.
(c) Except as set forth on Schedules 3.21(a) and 3.21(b), the
Company will not have any responsibility for continuing any person in the employ
(or retaining any person as a consultant) of the Surviving Corporation from and
after the Effective Time or have any liability for any severance payments to or
similar arrangements with any such person who shall cease to be an employee or
consultant of the Company at or prior to the Effective Time.
(d) There is not occurring or, to the Company's knowledge,
threatened, any strike, slow down, picket, work stoppage or other concerted
action by any union or other group of employees or other persons against either
the Company or its premises or products. No union or other labor organization
has attempted to organize any of the employees of the Company.
(e) The Company has complied with all legal requirements
relating to employment and labor, and, to the Company's knowledge, no facts or
circumstances exist that could provide a reasonable basis for a claim of
wrongful termination or employment discrimination by any current or former
employee of the Company against the Company.
3.22 Affiliations. Except as disclosed on Schedule 3.22, none of the
shareholders of the Company, any officer, director or key employee of the
Company or any associate or affiliate of the Company or any of such persons has,
directly or indirectly, (i) an interest in any person that (A) furnishes or
sells, or proposes to furnish or sell, services or products that are furnished
or sold by the Company or (B) purchases from or sells or furnishes to, or
proposes to purchase from or sell or furnish to, the Company any goods or
services or (ii) a beneficial interest in any contract or agreement to which the
Company is a party or by which the Company or any of the assets of the Company
are bound or affected.
3.23 Principal Customers and Suppliers.
(a) Schedule 3.23(a) contains a true and complete list of the
name and address of each customer that purchased in excess of 5% of the
Company's sales of goods or services during the twelve months ended on the
Company Balance Sheet Date, and since that date no such customer has terminated
its relationship with or adversely curtailed its purchases from the Company or
indicated (for any reason) its intention so to terminate its relationship or
curtail its purchases.
(b) Schedule 3.23(b) contains a true and complete list of each
supplier from whom the Company purchased in excess of 5% of the Company's
purchases of goods or services
22
during the twelve months ended on the Company Balance Sheet Date, and since that
date no such supplier has terminated its relationship with or adversely
curtailed its accommodations, sales or services to the Company or indicated (for
any reason) its intention to terminate such relationship or curtail its
accommodations, sales or services.
3.24 Compliance with Law. Except as set forth on Schedule 3.24, through
and including the date hereof, the Company (i) has not violated or conducted its
business or operations in violation of, and has not used or occupied its
properties or assets in violation of, any legal requirement, (ii) to the
Company's and Shareholders' knowledge, has not been alleged to be in violation
of any legal requirement, and (iii) has not received any notice of any alleged
violation of, or any citation for noncompliance with, any legal requirement.
3.25 Corporate Records. The copies or originals of the Articles of
Incorporation, Bylaws, minute books and stock records of the Company previously
delivered to, or made available for inspection by Pre-Cell are true, complete
and correct.
3.26 Brokers' Fees. Except as set forth in Schedule 3.26, no broker,
finder or similar agent has been employed by or on behalf of the Company in
connection with this Agreement or the transactions contemplated hereby, and the
Company has not entered into any agreement or understanding of any kind with any
person or entity for the payment of any brokerage commission, finder's fee or
any similar compensation in connection with this Agreement or the transactions
contemplated hereby.
3.27 Brokers. Except as set forth in Schedule 3.27, neither the Company
nor any Shareholders has engaged, consented to or authorized any broker, finder,
investment banker or other third party to act on its behalf, directly or
indirectly, as a broker or finder in connection with the transactions
contemplated by this Agreement, and the Company and the Shareholders, jointly
and severally, agree to indemnify Pre-Cell against, and hold it harmless from,
any claim for brokerage or similar commissions or other compensation that may be
made against Pre-Cell by any third party in connection with the transactions
contemplated hereby.
3.28 Disclosure.
(a) No representation or warranty of the Company in this
Agreement and no information contained in any Schedule or other writing
delivered pursuant to this Agreement or at the Closing contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to make the statements herein or therein not misleading.
There is no fact that the Company has not disclosed to Pre-Cell in writing that
has had or, insofar as the Company can now foresee, may have a material adverse
effect on the ability of the Company to perform fully this Agreement.
(b) To the extent that any representation or warranty in this
Article III is qualified to the Company's or to the Shareholders' "knowledge,"
then the Company and/or the Shareholders, as applicable, represents and warrants
that it or he has made a due investigation
23
sufficient to express an informed view concerning the matters to which such
representation or warranty relates, including diligent inquiries of the
Company's officers, directors and employees.
(c) Notwithstanding any provision herein contained to the
contrary, no investigation by Pre-Cell shall affect the representations and
warranties of the Company under this Agreement or contained in any document,
certificate or other writing furnished or to be furnished to Pre-Cell in
connection with the transactions contemplated hereby and such representations
and warranties shall not be affected or deemed waived by reason of the fact that
Pre-Cell knew or should have known that any of the same is or might be
inaccurate in any respect.
(d) No disclosure in any Schedule referred to in this Article
III will be deemed adequate to disclose an exception to a representation or
warranty made in this Agreement unless the applicable disclosure schedule
identifies the exception with particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item will not be deemed
adequate to disclose an exception to a representation or warranty made in this
Agreement (unless the representation or warranty regards the existence of the
document or other item itself).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING
PRE-CELL AND MERGER SUB
In order to induce the Merger, Pre-Cell and Merger Sub hereby jointly
and severally represent and warrant to the Company and to the Shareholders as
follows:
4.1 Due Organization and Good Standing. Each of Pre-Cell and Merger Sub
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and each has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so authorized or
qualified would not have a material adverse effect on its business. Pre-Cell has
delivered to the Company accurate and complete copies of the Articles of
Incorporation and Bylaws, as currently in effect, of Merger Sub.
4.2 Authorization. Each of Pre-Cell and Merger Sub has full legal right
and authority to execute and deliver this Agreement and the other agreements
contemplated in connection with this Agreement to be executed by Pre-Cell and
Merger Sub (collectively, the "Closing Agreements") and to consummate the
transactions contemplated thereby. The execution, delivery and performance of
the Closing Agreements have been approved by the Board of Directors of Pre-Cell
and Merger Sub, and no other corporate proceedings on the part of Pre-Cell or
Merger Sub are necessary to authorize the execution and delivery of the Closing
Agreements or the consummation of the transactions contemplated thereby. The
Closing Agreements have been duly and validly executed and delivered by each of
Pre-Cell and/or Merger Sub, as applicable, and constitute legal, valid and
binding agreements of Pre-Cell and Merger Sub,
24
enforceable against each of them in accordance with their respective terms,
subject to the laws of general application relating to bankruptcy, insolvency
and relief of debtors and rules of law governing specific performance,
injunctive relief or other equitably remedies.
4.3 Pre-Cell Shares. The issuance by Pre-Cell of the Pre-Cell Common
Stock to be delivered hereunder will be duly and validly authorized by all
necessary corporate action on the part of Pre-Cell. At the Effective Time, such
shares shall be validly issued, fully paid and non-assessable.
4.4 Noncontravention; Approvals. The execution and delivery of the
Closing Agreements by Pre-Cell do not, and the consummation of the transactions
contemplated thereby will not, conflict with or result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, or result in the creation of a lien, security interest, charge or
encumbrance upon any of the properties or assets of Pre-Cell under any of the
terms, conditions or provisions of (i) the Restated Articles of Incorporation or
Bylaws of Pre-Cell; (ii) any statute, rule, regulation, order or decree of any
public body or authority by which Pre-Cell or any of its properties or assets
may be bound (except the Regulatory Approvals); (iii) any note, bond, mortgage,
indenture, license, franchise, permit, agreement or other instrument or
obligation to which Pre-Cell is a party, or by which it or its properties or
assets may be bound; excluding from the foregoing clauses (i) and (ii)
violations, breaches and defaults that, and filings, permits, consents and
approvals the absence of which, either individually or in the aggregate, would
not have a material adverse affect on the business, operations, financial
condition, results of operations or prospects of Pre-Cell.
Except for the Merger Filings, the Regulatory Approvals that must be
obtained prior to the Closing and such filings as may be required under federal
or state securities laws, no declaration, filing or registration with, or notice
to, or authorization, consent or approval of, any governmental or regulatory
body or authority is necessary for the execution and delivery of this Agreement
by Pre-Cell or the consummation by Pre-Cell of the transactions contemplated
hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as the
case may be, would not, in the aggregate, have a material adverse effect on the
business, operations, properties, assets, financial condition results of
operation or prospects of Pre-Cell.
4.5 Finders and Investment Bankers. Neither Pre-Cell nor Merger Sub nor
any of their officers or directors 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 V
CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing through
the Effective Time, each Constituent Corporation and Pre-Cell, where indicated
below and applicable,
25
covenants and agrees with the other Constituent Corporation (except as expressly
contemplated by this Agreement or to the extent that the other Constituent
Corporation shall otherwise expressly consent in writing, and then solely to the
extent set forth in such consent) that:
5.1 Qualification. Such Constituent Corporation shall maintain all
qualifications to transact business and remain in good standing in its
jurisdiction of incorporation and in the foreign jurisdictions set forth on
Schedule 3.1(a).
5.2 Ordinary Course. Such Constituent Corporation shall conduct its
business in, and only in, the ordinary course and, to the extent consistent with
such business, shall preserve intact its current business organizations, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and going business value shall be unimpaired at
the Effective Time. Such Constituent Corporation shall maintain its properties
and assets in good condition and repair.
5.3 Corporate Changes. Such Constituent Corporation shall not (a) amend
its Certificate or Articles of Incorporation or Bylaws, (b) acquire by merging
or consolidating with, or agreeing to merge or consolidate with, or purchase
substantially all of the stock or assets of, or otherwise acquire, any business
or any corporation, partnership, association or other business organization or
division thereof, (c) enter into any partnership or joint venture, (d) declare,
set aside, make or pay any dividend or other distribution in respect of its
capital stock or purchase or redeem, directly or indirectly, any shares of its
capital stock, (e) issue or sell any such shares of its capital stock of any
class or any options, warrants, conversion or other rights to purchase any
shares or any securities convertible into or exchange for such shares, or (f)
liquidate or dissolve or obligate itself to do.
5.4 Indebtedness. Such Constituent Corporation shall not incur any
Indebtedness in excess of $1,000, sell any debt securities or lend money to or
guarantee the Indebtedness of any person. Such Constituent Corporation shall not
restructure or refinance its existing Indebtedness.
5.5 Accounting. Such Constituent Corporation and Pre-Cell shall not
make any change in the accounting principles, methods, records or practices
followed by it or depreciation or amortization policies or rates heretofore
adopted by it. Such Constituent Corporation and Pre-Cell shall maintain its
books, records and accounts in accordance with generally accepted accounting
principles applied on a basis consistent with that of prior periods.
5.6 Compliance with Legal Requirements. Such Constituent Corporation
and Pre-Cell shall comply promptly with all requirements that applicable law may
impose upon it and its operations and with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and furnish
information to, the other Constituent Corporation in connection with any such
requirements imposed upon the other Constituent Corporation, or upon any of its
affiliates, in connection therewith or herewith.
5.7 Disposition of Assets. Such Constituent Corporation shall not sell,
transfer, license, lease or otherwise dispose of, or suffer or cause the
encumbrance by any lien upon any of its
26
properties or assets, tangible or intangible, or any interest in, except for
sales of inventory in the ordinary course.
5.8 Compensation. Such Constituent Corporation shall not (a) adopt or
amend in any material respect any Plan, collective bargaining, bonus,
profit-sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other plan, agreement, trust, fund or arrangement
for the benefit of employees (whether or not legally binding) other than to
comply with any legal requirement or (b) pay, or make any accrual or arrangement
for payment of, any increase in compensation, bonuses or special compensation of
any kind, or any severance or termination pay to, or enter into any employment
or loan or loan guarantee agreement with, any current or former officer,
director, employee or consultant of such Constituent Corporation.
5.9 Modification or Breach of Agreements; New Agreements. Such
Constituent Corporation shall not terminate or modify, or commit or cause or
suffer to be committed any act that will result in breach or violation of any
term of or (with or without notice or passage of time, or both) constitute a
default under or otherwise give any person a basis for nonperformance under, any
indenture, mortgage, deed of trust, loan or credit agreement, lease, license or
other agreement, instrument, arrangement or understanding, written or oral,
disclosed in this Agreement or the Schedules hereto. Such Constituent
Corporation shall refrain from becoming a party to any contract or commitment
other than in the ordinary course. Such Constituent Corporation shall meet all
of its contractual obligations in accordance with their respective terms.
5.10 Consents. Such Constituent Corporation and Pre-Cell shall use its
commercially reasonable efforts to obtain any consent, authorization or approval
of, or exemption by, any person required to be obtained or made by any party
hereto in connection with the transactions contemplated hereby or the taking of
any action in connection with the consummation thereof.
5.11 Maintain Insurance. Such Constituent Corporation and Pre-Cell
shall maintain its Policies in full force and effect and shall not do, permit or
willingly allow to be done any act by which any of the Policies may be
suspended, impaired or cancelled.
5.12 Discharge. Such Constituent Corporation shall not cancel,
compromise, release or discharge any claim of such Constituent Corporation upon
or against any Person or waive any right of such Constituent Corporation of
material value, and not discharge any lien upon any asset of such Constituent
Corporation or compromise any debt or other obligation of such Constituent
Corporation to any person other than liens, debts or obligations with respect to
current liabilities of such Constituent Corporation.
5.13 Actions. Such Constituent Corporation shall not institute, settle
or agree to settle any legal action before any Governmental Entity.
5.14 Permits. Such Constituent Corporation shall maintain in full force
and effect, and comply with, all Permits.
5.15 Tax Assessments and Audits. Such Constituent Corporation shall
furnish promptly to the other Constituent Corporation a copy of all notices of
proposed assessment or similar notices
27
or reports that are received from any taxing authority and which relate to such
Constituent Corporation's operations for periods ending on or prior to the
Effective Time.
5.16 Services Agreement. Simultaneous with the execution of this
Agreement, the Company and Pre-Cell or its designee shall enter into a Services
Agreement substantially in the form of Exhibit 5.16 pursuant to which Pre-Cell
or its designees shall provide certain operating services to the Company during
period between the execution of this Agreement and the Closing.
ARTICLE VI
ADDITIONAL COVENANTS
6.1 Covenants of the Constituent Corporations. During the period from
the date hereof through the Effective Time, each Constituent Corporation and
Pre-Cell agrees to:
(a) comply promptly with all requirements that applicable
legal requirements may impose upon it with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and furnish
information to, the other Constituent Corporation in connection with any such
requirements imposed upon the other Constituent Corporation or upon any of its
affiliates in connection therewith or herewith;
(b) use its commercially reasonable efforts to obtain (and to
cooperate with the other Constituent Corporation in obtaining) any consent,
authorization or approval of, or exemption by, any person required to be
obtained or made by such Constituent Corporation in connection with the
transactions contemplated by this Agreement;
(c) use its commercially reasonable efforts to bring about the
satisfaction of the conditions precedent to Closing set forth in Section 7.1 of
this Agreement;
(d) promptly advise the other Constituent Corporation orally
and, within three business days thereafter, in writing of any change in such
Company's business or condition that has had or may have a material adverse
effect on the business, operations or financial condition of such Constituent
Corporation or upon the ability of such Constituent Corporation to consummate
the transactions contemplated herein; and
(e) deliver to the other Constituent Corporation prior to the
Effective Time a written statement disclosing any untrue statement in this
Agreement or any Schedule hereto (or supplement thereto) or document furnished
pursuant hereto, or any omission to state any material fact required to make the
statements herein or therein contained complete and not misleading, promptly
upon the discovery of such untrue statement or omission, accompanied by a
written supplement to any Schedule to this Agreement that may be affected
thereby; provided, however, that the disclosure of such untrue statement or
omission shall not prevent the other Constituent Corporation from terminating
this Agreement pursuant to Section 8.1(c) hereof at any time at or prior to the
Effective Time in respect of any original untrue or misleading statement.
28
6.2 Access and Information.
(a) During the period commencing on the date hereof and
continuing through the Effective Time, each Constituent Corporation shall afford
to the other Constituent Corporation and to the other Constituent Corporation's
accountants, counsel, investment bankers and other representatives, reasonable
access to all of its properties, books, contracts, commitments, records and
personnel and, during such period, to cause such Constituent Corporation to
furnish promptly to the other Constituent Corporation all information concerning
its business, properties and personnel as the other Constituent Corporation may
reasonably request.
(b) Except to the extent permitted by the provisions of
Section 6.6 hereof, each Constituent Corporation shall hold in confidence, and
shall use reasonable efforts to ensure that its employees and representatives
hold in confidence, all such information supplied to it by the other Constituent
Corporation concerning such other Constituent Corporation and shall not disclose
such information to any third party except as may be required by applicable
legal requirement and except for information that (i) is or becomes generally
available to the public other than as a result of disclosure by such other
Constituent Corporation or its representatives, (ii) becomes available to the
other Constituent Corporation or its representatives from a third party other
than such other Constituent Corporation, and the other Constituent Corporation
or its representatives have no reason to believe that such third party is not
entitled to disclose such information, (iii) is known to the other Constituent
Corporation or its representatives on a non-confidential basis prior to its
disclosure by such other Constituent Corporation or (iv) is made available by
such other Constituent Corporation to any other person on a non-restricted
basis. The Constituent Corporation's obligations under the foregoing sentence
shall expire at the Effective Time or, if the Closing does not occur, two years
after the date hereof.
6.3 Expenses. All costs and expenses (including, without limitation,
all legal fees and expenses and fees and expenses of any brokers, finders or
similar agents) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring the same.
6.4 Certain Notifications. At all times from the date hereof to the
Effective Time, each party shall promptly notify the others in writing of the
occurrence of any event that will or may result in the failure to satisfy any of
the conditions specified in Article VII hereof.
6.5 Publicity; Employee Communications. At all times prior to the
Effective Time, each Constituent Corporation and Pre-Cell shall obtain the
consent of the others prior to issuing, or permitting any of its directors,
officers, employees or agents to issue, any press release or other information
to the press, employees of such Constituent Corporation or any third party with
respect to this Agreement or the transactions contemplated hereby; provided,
however, that no party shall be prohibited from supplying any information to any
of its representatives, agents, attorneys, advisors, financing sources and
others to the extent necessary to complete the transactions contemplated hereby
so long as such representatives, agents, attorneys, advisors, financing sources
and others are made aware of the terms of this Section 6.5. Nothing contained in
this Agreement shall prevent any party to this Agreement at any time from
furnishing any required information to
29
any Governmental Entity or authority pursuant to applicable legal requirement or
from complying with its legal or contractual obligations.
6.6 Further Assurances.
(a) Subject to the terms and conditions of this Agreement,
each of the parties hereto agrees to use all reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable legal requirements, to
consummate and make effective the transactions contemplated by this Agreement.
(b) If at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers or directors of the Surviving Corporation shall take or cause to
be taken all such necessary or convenient action and execute, and deliver and
file, or cause to be executed, delivered and filed, all necessary or convenient
documentation.
6.7 Competing Offers. The Company hereby undertakes and agrees that,
for the period from the date hereof until the Effective Time, or if the
transactions contemplated hereby are not consummated on or prior to May 31, 2000
(the "Termination Date"), until the Termination Date, subject to the duties
imposed by applicable law, the Company will not, nor will the Company permit any
of its subsidiaries or any of its affiliate (or authorize or permit any of their
respective representatives) to, take, directly or indirectly, any action to
initiate, assist, solicit, receive, negotiate, encourage or accept any offer or
inquiry from any person (a) to engage in any Business Combination, (b) to reach
any agreement or understanding (whether or not such agreement or understanding
is absolute, revocable, contingent or conditional) for, or otherwise attempt to
consummate, any Business Combination or (c) to furnish or cause to be furnished
any information with respect to the Company or any of its subsidiaries to any
person who the Company or any subsidiary, affiliate or representative knows or
has reason to believe is in the process of considering any Business Combination.
If the Company or any subsidiary, affiliate or representative of the Company
receives from any person any offer, inquiry or informational request referred to
above, the Company will promptly advise such person, by written notice, of the
terms of this paragraph and will promptly, orally and in writing, advise
Pre-Cell of such offer, inquiry or request and deliver a copy of the foregoing
notice to Pre-Cell. For purposes hereof, "Business Combination" means any
merger, consolidation or combination to which such Constituent Corporation or
any of its subsidiaries is a party, any sale, dividend, split or other
disposition of capital stock or other equity interest of such Constituent
Corporation or any of its subsidiaries or any sale, dividend or other
disposition of all or substantially all of the assets and properties of such
Constituent Corporation or any of its subsidiaries.
6.8 Inconsistent Action. The Constituent Corporations shall not take or
suffer to be taken any action that would cause any of the representations or
warranties of any of such Constituent Corporation in this Agreement to be
untrue, incorrect, incomplete or misleading.
6.9 Regulatory Approval. The parties agree to use their commercially
efforts to take, as promptly as possible, or cause to be taken, all action and
do, or cause to be done, all things necessary, proper or advisable to consummate
and make effective the transactions contemplated
30
by this Agreement, and Pre-Cell specifically agrees to use its commercially
reasonable efforts to obtain the authorizations, consents and approvals of and
filings with any governmental or regulatory agency required to be obtained or
made in connection with the consummation of the transactions contemplated by
this Agreement (the "Regulatory Approvals"), and to effect all registrations,
filings and notices with or to third parties or governmental, regulatory or
public bodies or authorities which are in the opinion of the Company or Pre-Cell
necessary or desirable in connection with the transactions contemplated by this
Agreement. The Company and the Shareholders agree to assist Pre-Cell in
obtaining the Regulatory Filings. Until such time as the Regulatory Approvals
have been obtained, (i) there shall be no change in the ownership of the Company
and no transfer of control whatsoever over Company's certificates of public
convenience and necessity, and (ii) the Company, its current shareholders,
officers, directors and employees shall remain directly and solely responsible
for compliance with all applicable provisions of federal telecommunications law,
state public service commission laws and all applicable regulations and policies
thereunder.
ARTICLE VII
CONDITIONS PRECEDENT TO PRe-Cell and Merger Sub CLOSING
7.1 Conditions of Pre-Cell and Merger Sub. Notwithstanding any other
provision of this Agreement, the obligations of Pre-Cell and Merger Sub to
consummate the transactions contemplated hereby shall be subject to the
satisfaction, at or prior to the Effective Time, of the following conditions:
(a) There shall not be instituted and pending or threatened
any legal action before any Governmental Entity (i) challenging the Merger or
otherwise seeking to restrain or prohibit the consummation of the transactions
contemplated hereby or (ii) seeking to prohibit the direct or indirect ownership
or operation by Merger Sub or Pre-Cell of all or a material portion of the
business or assets of the Company, or to compel the Company to dispose of or
hold separate all or a material portion of the business or assets of the
Company;
(b) The representations and warranties of the Company in this
Agreement shall be true and correct in all respects on and as of the Effective
Time with the same effect as if made at the Effective Time and the Company shall
have complied with all covenants and agreements and satisfied all conditions
required to be performed or satisfied on or prior to the Effective Time;
(c) Pre-Cell and Merger Sub shall have received from the
President of the Company a certificate dated the Closing Date in substantially
the form attached as Exhibit B hereto;
(d) Each Shareholder of the Company shall have entered into a
Noncompetition Agreement with Surviving Corporation in substantially the form
attached as Exhibit C hereto, (collectively, the "Noncompetition Agreements");
(e) Pre-Cell and Merger Sub shall have concluded (through its
representatives, accountants, counsel and other experts) an investigation of the
business, condition (financial and
31
other), properties, assets, prospects, operations and affairs of the Company and
shall be satisfied, in its sole discretion, with the results thereof;
(f) All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced herein or
incident to the transactions contemplated hereby shall be in form and substance
satisfactory Pre-Cell, Merger Sub and their counsel;
(g) Pre-Cell or an affiliate, and those employees of the
Company set forth on Exhibit 7.1(g) shall have entered into Employment
Agreements in form and substance satisfactory to Pre-Cell and the employees;
(h) All consents from third parties, including from any
Governmental Entity or other person, necessary for the consummation of the
transactions contemplated hereby as contemplated by Section 6.9 shall have been
obtained;
(i) Pre-Cell shall have received the approval from no less
than a majority of its shareholders to increase the number of authorized shares
at an annual meeting called for that purpose.
(j) Pre-Cell shall have received executed lock-up agreements
from each of the Shareholders as required under Section 2.3(a).
(k) All obligations of the Company to MBM Funding, including
those notes payable listed on the September 2000 Balance Sheet in the total
amount of $___________ shall have been satisfied.
(l) Except as provided in Schedule 3.5, the Company shall have
provided to Pre-Cell a lien/UCC search that shows the existence of no liens,
pending lawsuits, or pending claims, except for those specifically set forth on
Schedule 3.5 or otherwise disclosed in this Agreement or the Schedules to this
Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE COMPANY CLOSING
8.1 Conditions of the Company. Notwithstanding any other provision of
this Agreement, the obligation of the Company to consummate the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Effective Time, of the following conditions:
(a) There shall not be instituted and pending or threatened
any legal action before any Governmental Entity (i) challenging the Merger or
otherwise seeking to restrain or prohibit the consummation of the transactions
contemplated hereby or (ii) seeking to prohibit the direct or indirect ownership
or operation by Merger Sub or Pre-Cell of all or a material portion of the
business or assets of the Company, or to compel the Company to dispose of or
hold separate all or a material portion of the business or assets of the
Company;
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(b) The representations and warranties of Pre-Cell in this
Agreement shall be true and correct in all respects on and as of the Effective
Time with the same effect as if made at the Effective Time and Pre-Cell shall
have complied with all covenants and agreements and satisfied all conditions
required to be performed or satisfied on or prior to the Effective Time;
(c) The Company shall have received from the President of
Pre-Cell and Merger Sub a certificate dated the Closing Date in substantially
the form attached as Exhibit B hereto;
(d) All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced herein or
incident to the transactions contemplated hereby shall be in form and substance
satisfactory the Company and its counsel;
(e) All consents from third parties, including from any
Governmental Entity or other person, necessary for the consummation of the
transactions contemplated hereby as contemplated by Section 6.9 shall have been
obtained; and
(f) Pre-Cell or an affiliate, and those employees of the
Company set forth on Exhibit 7.1(g) shall have entered into Employment
Agreements in form and substance satisfactory to Pre-Cell and the employees.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual consent of the Constituent Corporations;
(b) by either Constituent Corporation, by written notice to
the other Constitutent Corporation if the Merger shall not have been consummated
on or before the Termination Date (or such later date as the Constituent
Corporations may agree), provided that in the case of a termination under this
clause (b), the party or parties terminating this Agreement shall not then be in
material breach of any of its or their obligations under this Agreement; or
(c) by either Constituent Corporation if (i) there has been a
material misrepresentation, breach of warranty or breach of covenant by the
other Constituent Corporation under this Agreement or (ii) any of the conditions
precedent to Closing set forth in Section 6.1 have not been met at or before the
Effective Time, and, in each case, such Constituent Corporation is not then in
material default of its obligations hereunder.
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9.2 Effect of Termination.
(a) In the case of any termination of this Agreement as
provided in 8.1(a), (b) and (c), the provisions of Section 6.2(b) and 6.3 shall
remain in full force and effect.
(b) Upon termination of this Agreement as provided in Section
8.1(a), except as stated in subsection (a) above, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of any
party hereto or their respective directors, officers, employees, agents or other
representatives.
(c) In the event of termination of this Agreement as provided
in Section 8.1(b) or (c) hereof, such termination shall be without prejudice to
any rights that the terminating party or parties may have against the breaching
party or parties or any other person under the terms of this Agreement or
otherwise.
9.3 Amendment. This Agreement may be amended at any time by a written
instrument executed by each Constituent Corporation.
9.4 Waiver. Any term or provision of this Agreement may be waived in
writing at any time by the party or parties entitled to the benefits thereof.
Any waiver effected pursuant to this Section 8.4 shall be binding upon all
parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude the exercise of any
other right, power or privilege. No waiver of any breach of any covenant or
agreement hereunder shall be deemed a waiver of any preceding or subsequent
breach of the same or any other covenant or agreement. The rights and remedies
of each party under this Agreement are in addition to all other rights and
remedies, at law or in equity, that such party may have against the other
parties.
ARTICLE X
INDEMNIFICATION
10.1 Survival of Representations and Warranties. The representations
and warranties of the parties hereto contained in this Agreement or in any
writing delivered pursuant hereto or at the Closing shall survive the Closing
and the consummation of the transactions contemplated hereby (and any
examination or investigation by or on behalf of any party hereto) until the
second anniversary of the Closing Date; provided, that the representations and
warranties contained in Sections 3.12, and 3.14, shall not terminate until the
expiration of any applicable statute of limitations; provided, further, that
representations and warranties contained in Sections 3.1, 3.2, 3.3, 3.5(a),
3.17, 4.1, 4.2, and 4.3 shall not terminate, but shall continue indefinitely.
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10.2 Indemnification by the Company and the Shareholders. The Company
and the Shareholders, jointly and severally, jointly and severally agree to
indemnify, defend and hold harmless Pre-Cell and Merger Sub and their respective
directors, officers, shareholders, employees, agents, attorneys, consultants,
Affiliates, successors, permitted assigns, and legal representatives from and
against all direct and indirect losses, claims, obligations, demands,
assessments, penalties, liabilities, costs, damages, reasonable attorneys' fees
and expenses (including, without limitation, all reasonable costs of experts and
all reasonable costs incidental to or in connection with any appellate process)
(collectively, "Damages") asserted against or incurred by Pre-Cell or Merger Sub
arising out of, in connection with or resulting from:
(a) any inaccuracy in or breach of any representation or warranty made
by the Company and/or the Shareholders in this Agreement or in any writing
delivered pursuant to this Agreement or at the Closing; or
(b) the failure of the Company or the Shareholders to perform or
observe fully any covenant, agreement or provision to be performed or observed
by the Company or the Shareholders pursuant to this Agreement or the
Noncompetition Agreements.
10.3 Indemnification by Pre-Cell and Merger Sub. Pre-Cell and Merger
Sub, jointly and severally, jointly and severally agree to indemnify, defend and
hold harmless, the Company and its officers, Shareholders, employees, agents,
attorneys, consultants, Affiliates, successors, permitted assigns, and legal
representatives from and against all Damages asserted against or incurred by the
Company arising out of, in connection with or resulting from:
(a) any inaccuracy in or breach of any representation or warranty made
by the Pre-Cell and/or Merger Sub in this Agreement or in any writing delivered
pursuant to this Agreement or at the Closing; or
(b) the failure of Pre-Cell or Merger Sub to perform or observe fully
any covenant, agreement or provision to be performed or observed by the Company
or the Shareholders pursuant to this Agreement.
10.4 Third Party Claims.
(a) If any party entitled to be indemnified pursuant to
Section 10.2 or 10.3 (an "Indemnified Party") receives notice of the assertion
by any third party of any claim or of the commencement by any such third person
of any legal action (any such claim or legal action being referred to herein as
an "Indemnifiable Claim") with respect to which another party hereto (an
"Indemnifying Party") is or may be obligated to provide indemnification, the
Indemnified Party shall promptly notify the Indemnifying Party in writing (the
"Claim Notice") of the Indemnifiable Claim; provided, that the failure to
provide such notice shall not relieve or otherwise affect the obligation of the
Indemnifying Party to provide indemnification hereunder, except to the extent
that any Damages directly resulted or were caused by such failure.
(b) The Indemnifying Party shall have thirty days after
receipt of the Claim Notice to undertake, conduct and control, through counsel
of its own choosing, and at its expense,
35
the settlement or defense thereof, and the Indemnified Party shall cooperate
with the Indemnifying Party in connection therewith; provided that (i) the
Indemnifying Party shall permit the Indemnified Party to participate in such
settlement or defense through counsel chosen by the Indemnified Party (subject
to the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld), provided that the fees and expenses of such counsel
shall not be borne by the Indemnifying Party, and (ii) the Indemnifying Party
shall not settle any Indemnifiable Claim without the Indemnified Party's
consent, and then solely to the extent set forth in such consent. So long as the
Indemnifying Party is vigorously contesting any such Indemnifiable Claim in good
faith, the Indemnified Party shall not pay or settle such claim without the
Indemnifying Party's consent, which consent shall not be unreasonably withheld.
(c) If the Indemnifying Party does not notify the Indemnified
Party within thirty days after receipt of the Claim Notice that it elects to
undertake the defense of the Indemnifiable Claim described therein, the
Indemnified Party shall have the right to contest, settle or compromise the
Indemnifiable Claim in the exercise of its reasonable discretion; provided that
the Indemnified Party shall notify the Indemnifying Party of any compromise or
settlement of any such Indemnifiable Claim.
(d) Anything contained in this Section 10.3 to the contrary
notwithstanding, an indemnifying Party shall not be entitled to assume the
defense for any Indemnifiable Claim (and shall be liable for the reasonable fees
and expenses incurred by the Indemnified Party in defending such claim) if the
Indemnifiable Claim seeks an order, injunction or other equitable relief or
relief for other than money damages against the Indemnified Party which the
Indemnified Party reasonably determines, upon advise of counsel, cannot be
separated from any related claim for money damages and which, if successful,
would adversely affect the business, properties or prospects of such Indemnified
Party.
10.5 Indemnification Non-Exclusive. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common-law remedy any party may have for breach of representation,
warranty, covenant or agreement.
10.6 Basket. Pre-Cell and the parties entitled to indemnification under
Section 10.2 shall not be entitled to indemnification until all such Losses
exceed, in the aggregate, $10,000, in which case the indemnified parties shall
be entitled to indemnification for the full amount of any such Damages.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed given (a)
if delivered personally (including by overnight express or messenger), upon
delivery, (b) reputable overnight courier, or (c) if given by telecopy, upon
confirmation of transmission by telecopy, in each case to the parties at the
following addresses:
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If to the Company: If to Pre-Cell:
Trans National Comm. Pre-Cell Solutions, Inc.
0000 Xxxxxxx Xxxxx 000 Xxxx Xxxxx
Xxxxx 000 Xxxxxxxxx, Xxxxxxx 00000
Xxx Xxxxxxx, XX 00000 Attention: Xxxxxx X. Xxxxxx,
Attention: Chief Executive Officer
With a copy to: With a copy to:
Xxxxxx Xxxxxxxx Xxxxxx
& Pulman Tobin & Xxxxx, P.A.
0000 Xxxx Xxx Xxxx 7251 W. Palmetto Park Road
Suite 400 Suite 205
Houston, TX Boca Raton, FL
Attention: Xxxxxxxx X. Fotana, Esq. Attention: Xxxxx Xxxxx, Esq
11.2 Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable such term or provision in any
other jurisdiction, the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to
which it is held invalid or enforceable.
11.3 Entire Agreement. This Agreement, including the annexes and
schedules attached hereto and other documents referred to herein, contains the
entire understanding of the parties hereto in respect of its subject matter and
supersedes all prior and contemporaneous agreements and understandings, oral and
written, between the parties with respect to such subject matter.
11.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Constituent Corporations, Pre-Cell and their
respective successors and assigns; provided, however, that neither Constituent
Corporation shall directly or indirectly transfer or assign any of such
Constituent Corporation's respective rights hereunder in whole or in part
without the prior written consent of the other Constituent Corporation, and then
solely to the extent set forth in such consent, and any such transfer or
assignment without said consent shall be void, ab initio. Subject to the
immediately preceding sentence, and except as set forth in Article VIII, this
Agreement is not intended to benefit, and shall not run to the benefit of or be
enforceable by, any other person or entity other than the parties hereto and
their permitted successors and assigns.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.
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11.6 Recitals; Schedules and Exhibits. The recitals, schedules and
annexes to this Agreement are incorporated herein and, by this reference, made a
part hereof as if fully set forth at length herein.
11.7 Construction. The article, section and subsection headings used
herein are inserted for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement. For the purposes of this
Agreement, unless the context clearly requires, "or" is not exclusive.
11.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Florida, without giving
effect to any choice or conflict of law, rule or regulation (whether of the
State of Florida or other jurisdiction) which would cause the application of any
law, rule or regulation other than of the State of Florida.
02.9 Expenses. Each party shall pay for its own legal, accounting and
other similar expenses incurred in connection with the transactions contemplated
by this Agreement, whether or not such transactions are consummated.
12.10 Taxes. Any income, sales, transfer, use or excise taxes payable
in connection with these transactions shall be paid by the party responsible
therefor under applicable local law.
12.11 Attorneys' Fees. In the event that a suit for the collection of
any damages resulting from, or for the injunction of any action constituting, a
breach of any of the terms or provisions of this Agreement, then the prevailing
party shall pay all reasonable costs, fees (including reasonable attorneys'
fees) and expenses of the non-prevailing party.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or has caused this Agreement to be executed on its behalf by a
representative duly authorized, all as of the date first above set forth.
TRANS NATIONAL COMMUNICATIONS, INC.
By:
----------------------------------------
Printed name:
Title:
PRE-CELL SOLUTIONS, INC.
By:
-----------------------------------------
Printed name:
Title
TRANSNATIONAL ACQUISITION CORP.
By:
-----------------------------------------
Printed name:
Title
THE SHAREHOLDERS:
--------------------------------------------
Xxxxx Xxxxx
--------------------------------------------
Xxxxx Xxxxx
--------------------------------------------
Xxxxxxx Xxxxxxxxx
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