AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of the 26th day of May,
1999 (the "Agreement"), is by and among MCS, INC., a Pennsylvania corporation
(the "Company"), MESTEK, INC., a Pennsylvania corporation ("Parent"), and
XXXXXXX CENTRAL HOLDINGS, INC., a Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Company, Parent and Purchaser
deem it advisable and in the best interests of their respective stockholders
that Purchaser acquire the Company pursuant to a merger of the Company with and
into Purchaser ("Merger"), and, on or prior to the date hereof, such Boards of
Directors have approved the acquisition of the Company upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1. Defined Terms. As used in this Agreement:
"Acquisition Proposal" shall have the meaning ascribed to it in Section
4.16(a) hereof.
"Affiliate" shall have the meaning ascribed to it in Paragraphs (c) and
(d) of Rule 145 under the Securities Act.
"Affiliated Group" means any affiliated group within the meaning of
Section 1504(a) of the Code or any similar group defined under a similar
provision of state, local or foreign law.
"Agreement" means the Agreement and Plan of Merger, and all Schedules
and Exhibits hereto.
"Assets" means all of the assets of the Company (other than those
assets relating to the Company's ProfitWorks applications software system and
related product line, which shall be disposed of by the Company prior to the
Closing Date) or of Purchaser (as the context shall require), of every kind and
nature.
"Certificate" and "Certificates" shall have the meanings set forth in
Section 3.4 hereof.
"Closing" and "Closing Date" shall have the meaning ascribed to such
terms in Section 3.5 hereof.
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"Closing Balance Sheet" shall mean the Company's balance sheet to be
dated as of June 30, 1999.
"Closing Documents" means this Agreement and all other documents to be
executed and delivered either simultaneously herewith or at Closing in
connection with the Transactions.
"COBRA" shall have the meaning ascribed to it in Section 5.18(e) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Capital Stock" shall have the meaning ascribed to it in
Section 3.1 hereof.
"Company Employees" shall have the meaning ascribed to it in
Section 5.18(a) hereof.
"Company Financial Statements" shall have the meaning ascribed to it in
Section 5.8(a) hereof.
"Company Software" shall have the meaning ascribed to it in
Section 5.12(d) hereof.
"Confidentiality Agreement" shall mean that certain Confidentiality and
Nondisclosure Agreement dated as of February 8, 1999 by and among Purchaser,
Parent and the Company.
"Customer Contract" shall have the meaning ascribed to it in Section
5.11 hereof, and shall apply with respect to Purchaser in Section 6.11 hereof.
"Delaware Act" means the General Corporation Law of the State of
Delaware.
"Disqualification" shall have the meaning ascribed to it in
Section 2.5 hereof.
"DOL" shall have the meaning ascribed to it in Section 5.18(b) hereof.
"Effective Time" shall have the meaning ascribed to it in Section 2.2
hereof.
"Employee Benefit Plan" shall have the meaning ascribed to it in
Section 5.18(a) hereof, and shall apply with respect to Purchaser in Section
6.18 hereof.
"Environmental Laws" shall have the meaning ascribed to it in
Section 5.6(c) hereof.
"ERISA" shall have the meaning ascribed to it in Section 5.18(a) hereof.
"ERISA Affiliate" shall have the meaning ascribed to it in Section
5.18(a) hereof, and shall apply with respect to Purchaser in Section 6.18
hereof.
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"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and all regulations promulgated pursuant thereto.
"Exchange Ratio" shall have the meaning ascribed to it in
Section 3.1(a) hereof.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Authority" shall include any and all governmental or
quasi-governmental bodies, agencies, bureaus, departments, boards, commissions,
instrumentalities or other entities having or asserting jurisdiction over
Purchaser, Parent or the Company, as applicable.
"HSR" shall have the meaning ascribed to it in Section 4.15 hereof.
"Immigration Laws" shall have the meaning ascribed to it in
Section 5.13 hereof.
"IRS" shall have the meaning ascribed to it in Section 5.18(b) hereof.
"knowledge" or "known" means or refers to the actual knowledge of the
president, chief financial officer or general counsel as to Purchaser and as to
Parent, and the president or chief financial officer, as to the Company.
"Licensed Software" shall have the meaning ascribed to such term in
Section 5.12(c) hereof, and shall apply with respect to Purchaser in Section
6.12(c) hereof.
"Material Adverse Consequence" means a material adverse effect upon, or
in, or circumstances likely to result in, a material adverse change in the
business, assets, liabilities, operations, results of operations, properties
(including intangible properties), regulatory status or condition (financial or
otherwise) of the Company or Purchaser, as the case may be, taken as a whole,
the effect of which is equal to or greater than $2,000,000.
"Material Adverse Effect" means a material adverse effect upon, or in,
or circumstances likely to result in, a material adverse change in (i) the
business, assets, liabilities, operations, results of operations, properties
(including intangible properties), regulatory status or condition (financial or
otherwise) of the Company or Purchaser, as the case may be, taken as a whole,
the effect of which is equal to or greater than $100,000, (ii) the legality,
validity, binding effect or enforceability of this Agreement, or (iii) the
ability of the Company or Purchaser, as the case may be, to perform its
respective obligations under this Agreement.
"Material Contracts" shall have the meaning ascribed to it in Section
5.10 hereof, and shall apply with respect to Purchaser in Section 6.10 hereof.
"Merger" shall have the meaning ascribed to it in the preamble.
"Merger Option Agreement" shall have the meaning ascribed to it in
Section 3.3(a) hereof.
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"Merger Options" shall have the meaning ascribed to it in
Section 3.3(a) hereof.
"Merger Shares" shall have the meaning ascribed to it in
Section 3.1(a) hereof.
"Options" shall have the meaning ascribed to it in Section 3.3(a)
hereof.
"Owned Software" shall have the meaning ascribed to it in Section 5.11
hereof, and shall apply with respect to Purchaser in Section 6.11 hereof.
"PBGC" shall have the meaning ascribed to it in Section 5.18(b) hereof.
"Parent Affiliated Group" shall have the meaning ascribed to it in
Section 5.9(f) hereof.
"Parent Designee" shall have the meaning ascribed to it in
Section 2.5(c) hereof.
"Parent Plan" shall have the meaning ascribed to it in Section 4.5
hereof.
"Pennsylvania Act" means the Pennsylvania Business Corporation Law.
"Person" means an individual, corporation, limited liability company,
limited liability partnership, limited partnership, trust, joint venture,
association or unincorporated organization or a Governmental Authority.
"Pre-Closing Tax Periods" shall have the meaning ascribed to it in
Section 4.9(a) hereof.
"ProfitWorks Business" shall have the meaning ascribed to it in
Section 4.4 hereof.
"Proxy Statement" shall have the meaning ascribed to it in
Section 5.24 hereof.
"Public Reports" has the meaning set forth in Section 5.6(d) hereof.
"Purchaser Common Stock" shall have the meaning ascribed to it in
Section 3.1 hereof.
"Purchaser Conversion Rights" shall have the meaning ascribed to it in
Section 6.5 hereof.
"Purchaser Employees" shall have the meaning ascribed to it in
Section 6.18 (a) hereof.
"Purchaser Financial Statements" shall have the meaning ascribed to it
in Section 6.8(a) hereof.
"Purchaser Plan" shall have the meaning ascribed to it in Section 4.5
hereof.
"Purchaser Software" shall have the meaning ascribed to it in
Section 6.12(d).
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"Purchaser Stockholder Approval" means with respect to the Purchaser
the requisite approval by holders of Purchaser's capital stock of this
Agreement, the Merger and the Certificates of Merger.
"Registrable Shares" means the Merger Shares, the Option Shares (as
defined in the Merger Option Agreement) and any shares of Purchaser Common Stock
to be issued pursuant to the indemnification provisions of Article 7 hereof.
"Registration Rights Agreements" shall have the meaning ascribed to it
in Section 4.1.
"Revised Schedules" shall have the meaning ascribed to it in
Section 8.7 hereof.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
all regulations promulgated thereunder.
"Securities Filings" shall mean all filings made by Purchaser with the
SEC from and after January 1, 1996 pursuant to the Securities Act and the
Exchange Act.
"Surviving Corporation" shall have the meaning ascribed to it in
Section 2.1 hereof.
"Tax" or "Taxes" means all taxes, charges, fees, interest, fines,
penalties, additions to tax or other assessments imposed by any Tax Authority,
including without limitation, income, excise, environmental, property, sales,
gross receipts, gains, transfer, occupation, privilege, employment (including
social security and unemployment), use, value added, capital stock or surplus,
franchise, advance corporate, withholding, unemployment, estimated and customs
duties taxes.
"Tax Authority" means any United States federal, foreign, national,
state, county or municipal or other local government, any subdivision, agency,
commission or authority thereof, or any quasi-governmental body exercising any
taxing authority or any other authority exercising tax regulatory authority.
"Tax Return" means any return, declaration, report, claim for refund or
information return filed or to be filed with any Tax Authority in connection
with the determination, assessment, collection or administration of any Tax,
including any schedule or attachment thereto and any amendment thereof.
"Termination Date" means the date on which this Agreement may be
terminated pursuant to Section 10.1 hereof.
"Transaction Documents" shall have the meaning ascribed to such term in
Section 7.1 hereof.
"Transactions" means the transactions contemplated by this Agreement.
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"Warrants" shall have the meaning ascribed to it in Section 3.3(a) hereof.
ARTICLE 2.
THE MERGER
2.1. The Merger. At the Effective Time (as defined in Section 2.2) and
subject to and upon the terms and conditions of this Agreement, the Pennsylvania
Act and the Delaware Act, the Company shall be merged into Purchaser, the
separate corporate existence of the Company shall cease, and Purchaser shall
continue as the surviving corporation. Purchaser as the surviving corporation
after the Merger shall be governed by the Delaware Act, and is hereinafter
sometimes referred to as the "Surviving Corporation".
2.2. Effective Time. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in Article 8 and Article 9, the parties
hereto shall cause the Merger to be consummated by filing a Certificate of
Merger with the Secretary of State of each of Pennsylvania and Delaware in such
form as required by, and executed in accordance with, the relevant provisions of
the Pennsylvania Act and the Delaware Act (the effective time of the last such
filing being the "Effective Time"). At the Effective Time, Purchaser will
deliver to Parent in the manner provided in this Article 2 the certificate
evidencing the Merger Shares issued in the Merger.
2.3. Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the Pennsylvania Act and
Delaware Act. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all property, rights, privileges, powers and
franchises of the Company shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company immediately prior to the Effective
Time shall become the debts, liabilities and duties of the Surviving
Corporation.
2.4. Subsequent Actions.
(a) If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurance or any other actions or things are necessary or desirable
to (i) vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or (ii) otherwise
to carry out this Agreement, then the officers and directors of the Surviving
Corporation shall be authorized to (x) execute and deliver, in the name and on
behalf of the Company, all such deeds, bills of sale, assignments and assurances
and (y) to take and do, in the name of and on behalf of each such corporation or
otherwise, all such other actions and things as may be necessary or desirable,
to vest, perfect or confirm any and all right, title and interest in, to and
under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement.
(b) If, at any time after the Effective Time, Parent shall consider or
be advised that any assignments, conveyances, assurance or any other actions or
things are necessary or advisable to (i) vest, perfect or confirm of record or
otherwise in Parent its right, title or interest in
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the Merger Shares, or (ii) otherwise to carry out this Agreement, then the
officers and directors of Parent shall be authorized to (x) execute and deliver,
in the name and on the behalf of the Surviving Corporation, all such
assignments, conveyances and assurances, and (y) to take and do all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest to the Merger Shares in Parent or
otherwise to carry out this Agreement.
2.5. Certificate of Incorporation; Bylaws; Directors and Officers.
(a) Unless otherwise determined by Purchaser, Parent and the Company
before the Effective Time, at the Effective Time the Certificate of
Incorporation of Purchaser, as in effect immediately before the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of Incorporation.
(b) The Bylaws of Purchaser, as in effect immediately before the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law, the Certificate of Incorporation of the
Surviving Corporation and such Bylaws.
(c) The directors of Purchaser in office immediately before the
Effective Time shall, by virtue of the approval of this Agreement by the
stockholders and directors of Purchaser and the Company, be the directors of the
Surviving Corporation, all of whom shall hold their directorships until the
election and qualification of their respective successors or until their tenure
is otherwise terminated by law, or in accordance with the Bylaws of the
Surviving Corporation. Upon consummation of the Merger, the directors of
Purchaser shall appoint five designees of Parent (each, a "Parent Designee,"
which term shall include any successor or replacement designee requested by
Parent), as designated by Parent prior to the Effective Time and named in the
Proxy Statement, to be elected to the Board of Directors of the Surviving
Corporation. For a period of eighteen months after the Effective Time, (a)
Purchaser will use its best efforts to cause the Parent Designees to be named as
nominees for election to the Board of Directors in each proxy statement of the
Surviving Corporation relating to an annual or a special meeting of stockholders
at which Directors will be elected, and (b) Parent will vote its Merger Shares
in favor of all nominees recommended by the Surviving Corporation Board of
Directors in any such proxy statement. Notwithstanding the foregoing, the
Surviving Corporation may decline to name a Parent Designee as a nominee for any
of the following reasons (each a "Disqualification"):
(i) the Parent Designee has been convicted of a felony;
(ii) the Parent Designee has been named as a target in
an SEC investigation due to alleged misconduct in connection with Parent
Designee's service as a director of any publicly held company (including but not
limited to Purchaser);
(iii) the SEC has barred the Parent Designee fromservice
on the Board;
(iv) the presence of the Parent Designee will cause the
Surviving Corporation's Directors and Officers' insurance carrier to decline
to provide coverage at standard rates, unless such coverage may be obtained
from the same carrier and the Company agrees to pay for the additional
premiums related to such Parent Designee's service on the Board; or
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(iv) based on a written opinion from legal counsel, it
cannot nominate Parent Designee without breaching its duties to its
stockholders.
Likewise, Parent may decline to vote for any nominee to the Board of Directors
who is subject to a Disqualification for any of the reasons stated above.
2.6. Approval by Stockholders. This Agreement and Plan of Merger has been
submitted to and approved by the sole stockholder of the Company in the manner
prescribed by the provisions of the Pennsylvania Act. It is a condition to the
consummation of the Merger that Purchaser Stockholder Approval be obtained.
2.7. Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code. The business purpose of the Merger is to combine the business operations
of Purchaser and Company so as to give the Surviving Corporation the xxxxxxxx
xxxx and resources necessary to compete in an ever-changing marketplace and to
deliver software and service solutions that meet customers' requirements.
ARTICLE 3.
MERGER CONSIDERATION
3.1. Conversion of Company Capital Stock. The manner and basis of
converting shares of the capital stock of the Company (the "Company Capital
Stock") into shares of common stock of Purchaser, $0.01 par value ("Purchaser
Common Stock"), shall be as follows:
(a) Except as provided in Section 3.2, each share of Company Capital
Stock which shall be outstanding immediately prior to the Effective Time shall
at the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into only the right to receive a number
of shares of Purchaser Common Stock to be computed as set forth on Schedule
3.1(a) (the "Exchange Ratio"). The shares to be issued with respect to
previously outstanding Company Capital Stock are hereinafter referred to as
"Merger Shares". No Company Capital Stock shall be deemed to be outstanding or
to have any rights other than those set forth above in this Section 3.1 after
the Effective Time.
(b) Each share of Company Capital Stock, if any, held in the treasury
of the Company shall automatically be canceled and extinguished without any
conversion thereof and no payment will be made with respect thereto.
3.2. Fractional Shares. No scrip or fractional shares of Purchaser Common
Stock shall be issued in the Merger, nor will any outstanding fractional share
interest entitle the owner thereof to vote, to receive dividends or to exercise
any other right of a stockholder of Purchaser. All fractional shares of
Purchaser Common Stock to which Parent immediately prior to the Effective Time
would otherwise be entitled at the Effective Time shall be aggregated. If a
fractional share
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results from such aggregation, Parent shall be entitled, at the Effective Time,
to recover cash in lieu of such fractional shares, with the cash amount due to
be computed based on the closing sales prices of the Purchaser Common Stock as
reported on the NASDAQ National Market on the business day next preceding the
day the Merger is consummated.
3.3. Stock Options and Warrants.
(a) All stock options of Purchaser (the "Options") outstanding at the
Effective Time, as identified on Schedule 3.3(a), shall remain outstanding
following the Effective Time. All warrants of Purchaser ("Warrants") outstanding
at the Effective Time, as identified on Schedule 3.3(a), shall remain
outstanding following the Effective Time. As part of the consideration for
entering into the Merger, Parent shall receive options to purchase additional
shares of Purchaser Common Stock (the "Merger Options") equal to .8518518
multiplied by the aggregate number of shares of Purchaser Common Stock issuable
upon exercise of the Options and Warrants and issuable in connection with the
Purchaser Conversion Rights, as set forth in an agreement in the form of Exhibit
3.3(a) attached hereto (the "Merger Option Agreement").
(b) Purchaser shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Purchaser Common Stock for delivery
upon exercise of the Merger Options. In addition, Purchaser will cause such
shares to be listed on the NASDAQ National Market, if not previously listed.
(c) Approval by the stockholders of Purchaser of this Agreement shall
constitute authorization and approval of any and all of the actions described in
this Section 3.3.
3.4. Delivery of Merger Shares. At the Closing (as defined herein),
Parent's certificate or certificates that immediately prior to the Effective
Time represented all of the outstanding shares of Company Capital Stock
("Certificate" or "Certificates") shall be cancelled, and Parent shall be issued
the appropriate number of Merger Shares as set forth in Section 3.1(a) hereof.
3.5. Closing. The closing of the Transactions (the "Closing") shall take
place on or before November 15, 1999, at the offices of Purchaser's counsel in
Atlanta, or another mutually agreed upon location as soon as practicable
following compliance or waiver of the terms, conditions and contingencies
contained herein or such other date as is mutually agreed upon by the parties
hereto (such date to be herein referred to as the "Closing Date"). All
computations, adjustments, and transfers for the purposes hereof shall be
effective as of the close of business on the Closing Date. Each of the parties
will take all lawful actions as may be necessary or appropriate in order to
effectuate the Merger as promptly as possible subject to the satisfaction of the
closing conditions set forth in Articles 8 and 9.
ARTICLE 4.
ADDITIONAL COVENANTS
4.1. Registration Rights.
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(a) Upon request by Parent, Purchaser will use its best efforts to file
within 45 days of a request from Parent a registration statement with the SEC
(utilizing Form S-3 or a successor form thereto and Rule 415 to the extent
available) to register the Registrable Shares owned by Parent. Purchaser shall
not be required to file more than three such registration statements (excluding
any registration statement which is delayed pursuant to clause (e) below and
through which Parent is unable to register eighty percent (80%) or more of the
amount of Registrable Shares that it originally requested to register in such
registration statement), and no such filing shall be made prior to the date
which is six months after the Closing Date.
(b) If Purchaser at any time proposes to register an offering of its
securities under the Securities Act, either for its own account or for the
account of or at the request of one or more Persons holding securities of
Purchaser, Purchaser will:
(i) give written notice thereof to Parent (which shall include
a list of the jurisdictions in which Purchaser intends to attempt to qualify
such securities under the applicable blue sky or other state securities laws)
within 10 days of its receipt of a request from one or more Persons holding
securities of Purchaser to register securities, or from its decision to effect a
registration of securities for its own account, whichever first occurs; and
(ii) use its best efforts to include in such registration and
in any underwriting involved therein, all the Registrable Shares specified in a
written request by Parent made within 30 days after receipt of such written
notice from Purchaser, except as set forth in Section 4.1(e) below and subject
to the currently existing piggyback rights referenced in Section 4.1(g).
(c) Without regard to whether the registration statement relating to
the proposed sale of the Registrable Shares is made effective or the proposed
sale of such shares is carried out, Purchaser shall pay the fees and expenses in
connection with any such registration including, without limitation, legal,
accounting and printing fees and expenses in connection with such registration
statements, the registration filing and examination fees paid under the
Securities Act and state securities laws and the filing fees paid to the
National Association of Securities Dealers, Inc. Notwithstanding the foregoing,
Parent shall be responsible for the payment of underwriting discounts and
commission, if any, applicable transfer taxes and fees and charges of any
attorneys or other advisers retained by Parent.
(d) If and whenever pursuant to the provisions of this Section 4.1
Purchaser effects registration of Registrable Shares under the Securities Act of
1933 and state securities laws, Purchaser shall:
(i) Prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for a period not to exceed
two years after the filing (but which period shall be extended by the duration
of any delay periods under clause (e) below);
(ii) Use its best efforts to register or qualify the
securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as Parent shall
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reasonably request, and do any and all other acts and things which may be
necessary or advisable (in the reasonable opinion of Parent) to enable Parent to
consummate the disposition thereof; provided, however, that in no event shall
Purchaser be obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action which would subject it to the service
of process in suits other than those arising out of the offer or sale of the
securities covered by such registration statement in any jurisdictions where it
is not now so subject.
(e) Anything in this Section 4.1 to the contrary notwithstanding:
(i) Purchaser shall not be obligated pursuant to Section
4.1(a) or Section 4.1(b) to effect any registration with respect to any
Registrable Shares that have been sold by Parent pursuant to Rule 144.
(ii) Purchaser may defer the filing ("Filing") of any
registration statement or suspend the use of a prospectus under a currently
effective registration statement under Section 4.1(a) at its discretion for
"Good Cause." "Good Cause" means either if (1) Purchaser is engaged in active
negotiations with respect to the acquisition of a "significant subsidiary" as
defined in Regulation S-X promulgated by the SEC under the Exchange Act and the
Securities Act which would in the opinion of counsel for Purchaser be required
to be disclosed in the Filing; or (2) in the opinion of counsel for Purchaser,
the Filing would require the inclusion therein of certified financial statements
other than those in respect of Purchaser's most recently ended full fiscal year
and any preceding full fiscal year, and Purchaser may then, at its option, delay
the imposition of its obligations pursuant to Section 4.1(a) hereof until the
earlier of (A) the conclusion or termination of such negotiations, or the date
of availability of such certified financial statements, whichever is applicable,
or (B) 60 days from the date of the registration request.
In the event Purchaser has deferred a requested Filing, pursuant to the
preceding paragraph, such deferral period shall end if Purchaser registers
shares for resale by another stockholder of Purchaser. In the event Purchaser
undertakes an underwritten public offering to issue Purchaser securities for
cash during any period in which a requested Filing has been deferred or if the
registration of which Purchaser gives notice under Section 4.1(b)(i) is for an
underwritten public offering to issue Purchaser securities for cash, Purchaser
shall include the Registrable Securities in such underwritten offering subject
to (A) the right of the managing underwriters to object to including such
shares, (B) any currently existing piggyback rights, and (C) the condition that
Parent shall cooperate in the registration process in all material respects,
including execution by Parent of the underwriting agreement agreed to by
Purchaser and the underwriters.
If the managing underwriter elects to limit the number or amount of
securities to be included in any registration referenced in the preceding
paragraph or in Section 4(b)(ii), all Persons holding securities of the
Purchaser (including Parent) who hold registration rights and who have requested
registration (collectively, the "Security Holders") shall participate in the
underwritten public offering pro rata based upon the ratio of the total number
or amount of securities to be offered by the total number or amount of
securities held by each Security Holder (including the number or amount of
securities which each such Security Holder may then be entitled to receive upon
the exercise of any option or warrant, or the exchange or conversion of any
security, held by such
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Security Holder). If any such Security Holder would thus be entitled to include
more securities than such Security Holder requested to be registered, the excess
shall be allocated among the other Security Holders pro rata in a manner similar
to that described in the previous sentence. Notwithstanding the foregoing, the
holders of registration rights under the Registration Rights Agreements (as
defined in Section 4.1(g)) shall have priority in accordance with the terms of
such agreements, if applicable.
(iii) Purchaser may amend any registration statement to
withdraw registration of Parent's Registrable Shares if Parent shall fail or
refuse to cooperate in full and in a timely manner with all reasonable requests
relating to such registration and the public offering generally made by
Purchaser, the underwriters (if any), their respective counsel and Purchaser's
auditors.
(f) (i) Notwithstanding anything contained to the contrary in, and in
addition to the indemnification provisions of Section 7.1 hereof, with respect
to any registration statement relating to any Registrable Shares sold by Parent,
Parent will indemnify Purchaser and each person, if any, who controls Purchaser
within the meaning of the Securities Act, in writing, in form and substance
acceptable to counsel for Purchaser, against any and all expenses, claims,
damages or liabilities to which Purchaser may become subject under the
Securities Act, Exchange Act, any applicable state securities laws, or
otherwise, insofar as such expenses, claims, damages or liabilities arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any preliminary prospectus, registration statement,
final prospectus or any amendment or supplement thereto, or any filing made
pursuant to the Exchange Act, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make statements contained therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made therein in reliance
upon and in conformity with written information furnished to Purchaser by Parent
expressly for use in the preparation thereof.
(ii) With respect to any registration statement relating to
any Registrable Shares held by Parent, Purchaser will indemnify Parent, each
underwriter of the Registrable Shares, and each person, if any, who controls
Parent or any such underwriter within the meaning of the Securities Act, against
all expenses, claims, damages or liabilities to which Parent, any such
underwriter, or any such controlling person may become subject, under the
Securities Act, the Exchange Act, any applicable state securities law, or
otherwise, insofar as such expenses, claims, damages or liabilities arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any preliminary prospectus, registration statement,
final prospectus or any amendment or supplement thereto, or any filing under the
Exchange Act, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements contained therein not misleading; provided, however, that
(x) Purchaser shall not be liable to Parent or to any controlling person of
Parent in any such case to the extent that such expenses, claims, damages or
liabilities arise out of or are based upon any untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to Purchaser by Parent
expressly for use in the preparation thereof; and (y) Purchaser shall not be
liable to any underwriter or any controlling person of such underwriter in any
such case to the extent that such expenses, claims,
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damages or liabilities arise out of or are based upon any untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to Purchaser
by such underwriter expressly for use in the preparation thereof.
(g) The parties hereto acknowledge that the rights to registration
contained herein shall be subject to the rights of holders under those certain
Registration Rights Agreements ("Registration Rights Agreements") dated October
6, 1996 by and among InfoMed Holdings, Inc. (as predecessor in interest to the
Purchaser) and certain shareholders of Purchaser named therein, copies of which
have been provided to Parent and the Company.
(h) Purchaser shall as promptly as practicable prepare and file with
the SEC such amendments and supplements to any registration statement and
prospectus used pursuant to or in connection with this Section 4.1 as may be
necessary to keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement or for such shorter period as may be required herein.
(i) Purchaser shall furnish to Parent such number of conformed copies
of its registration statement and of each such amendment and supplement thereto
(in each case including all exhibits, such number of copies of the prospectus
comprised in such registration statement (including each preliminary prospectus
and any summary prospectus), in conformity with the requirements of the
Securities Act, and such other related documents) as Parent may reasonably
request in order to facilitate the disposition of the Registrable Shares to be
registered.
(j) For so long as Parent holds twenty percent (20%) or more of the
outstanding Common Stock of Purchaser, and except as expressly set forth in
Section 4(e)(ii) and Section 4(g) hereof, no other Person shall be entitled to
"piggyback" or participate in any of the "demand" registrations that Parent
initiates pursuant to Section 4.1(a), without Parent's prior written consent.
(k) Purchaser will not grant any right of registration under the
Securities Act relating to any of its equity securities to any person or entity
other than pursuant to this Agreement unless Parent shall be entitled to have
included in such registration all Registrable Shares requested by Parent to be
so included prior to the inclusion of any securities requested to be registered
by the persons or entities entitled to any such other registration rights, other
than securities subject to the Registration Rights Agreements, which shall have
priority.
4.2. Stockholders' Meeting. Purchaser, acting through its Board of
Directors, shall duly call, give notice of, convene and hold a meeting of its
stockholders and submit this Agreement and the Merger and any related matters,
as appropriate, to a vote of Purchaser's stockholders as soon as practicable for
the purpose of considering and taking action upon this Agreement and any such
related matters, and shall use its reasonable best efforts to obtain the
necessary approval of the Merger by its stockholders.
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4.3. Best Efforts to List Shares and Maintain S-3 and NASDAQ NMS Status.
Purchaser shall use all of its efforts to ensure that, prior to the Effective
Time, the Registrable Shares will be approved for trading on the NASDAQ National
Market System subject to official notice of issuance. After the Closing,
Purchaser shall use its best efforts to ensure that it shall remain eligible to
(i) register the Registrable Shares on Form S-3 under the Securities Act or any
successor form thereof, and (ii) maintain approval for trading of the
Registrable Shares on the NASDAQ National Market System.
4.4. ProfitWorks Agreement. Prior to the Effective Time, Parent and the
Company shall consummate a transaction pursuant to which Parent shall acquire
from the Company all of the assets, and assume all of the liabilities, of the
Company's ProfitWorks applications software and related product line
("ProfitWorks Business"). Such acquisition by Parent shall expressly provide
that the Company shall have no further obligation to provide service, pay monies
or otherwise have any future obligations (other than obligations in respect of
the Company's warranties to Parent regarding title to its assets transferred to
Parent) with respect to the ProfitWorks Business.
4.5. Parent Plan and Company Plan. Parent agrees that it will cause the
account balance, if any, of each Company Employee (as defined in Section 5.18)
under the Mestek, Inc. Savings & Retirement Plan (the "Parent Plan") to be fully
vested as of the Closing Date. Subject to and in accordance with Code Section
401(k) and other applicable law, Company Employees shall be eligible to receive
a distribution of their vested account balances under the Parent Plan within a
reasonable time period following the Closing Date, and Purchaser and Parent
agree to cooperate with respect to the timing of such distribution, including
distribution of plan loan offset amounts. Purchaser agrees that it will timely
loan funds to Company Employees who have participant loans outstanding under the
Parent Plan as of the Closing Date, who become participants in The Xxxxxxx
Central Holdings, Inc. 401(k) Retirement Plan (the "Purchaser Plan"), and who
elect direct rollovers of their entire remaining account balances under the
Parent Plan (net of outstanding loan balances) to the Purchaser Plan, to permit
such Company Employees to roll over their outstanding participant loan balances
in full to the Purchaser Plan within 60 days of the date the plan loan offset
amount is distributed from the Parent Plan. As of the Closing Date, the Company
shall cease to be an adopting employer under the Parent Plan and under any other
Employee Benefit Plan sponsored by Parent. Parent and the Company agree to take
all actions necessary to terminate the participation of the Company in the
Parent Plan as of the Closing Date. On or prior to the Closing Date, the Company
shall terminate the Employees' Retirement Plan of MCS, Inc., with the manner of
such termination to be conducted in accordance with applicable law.
4.6. Company Financial Statements. As soon as practicable after the date of
this Agreement, and in any event no later than fifty (50) days after the date
hereof, Parent or the Company shall deliver to Purchaser audited Company
financial statements for the Company's fiscal years ended December 31, 1997 and
December 31, 1998 and an unaudited balance sheet for the Company as of March 31,
1999 and the Company's related statement of income, stockholder's equity and
cash flow for the period from January 1, 1999 through March 31, 1999. By no
later than August 15, 1999, Parent or the Company will deliver to Purchaser an
unaudited balance sheet for the Company as of June 30, 1999 and the Company's
related statements of income, stockholder's equity and cash flows for the period
from January 1, 1999 through June 30, 1999.
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4.7. Conduct of Business by Purchaser and the Company Pending Merger.
Except as set forth on Schedule 4.7, each of Purchaser and the Company covenants
and agrees that, unless the other party shall otherwise consent in writing or
except as otherwise set forth herein, between the date hereof and the Closing,
the businesses of the Company and Purchaser shall be conducted only in, and the
Company and Purchaser shall not take any action except in, the ordinary course
of business and in a manner consistent with past practice; and the Company and
Purchaser will use respective best efforts to preserve intact respective
business organizations, to keep available the services of their present
officers, employees and consultants and to preserve respective present
relationships with customers, suppliers and other persons with which they have
significant business relations; provided, however, that nothing herein shall
obligate Purchaser or the Company to pay any additional compensation to any such
persons. Each of the Company and Purchaser covenants that, between the date
hereof and the Closing, it will not, directly or indirectly, do any of the
following without the prior written consent of the other party:
(a) (i) issue, sell (other than upon exercise of outstanding Options
or Warrants, whose terms shall not be changed) pledge, dispose of, encumber,
authorize, or propose the issuance, sale, pledge, disposition, encumbrance or
authorization of any shares of its capital stock of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of its capital stock; (ii) amend or propose to amend its Certificate or
Articles of Incorporation or Bylaws; (iii) split, combine or reclassify any
outstanding share of its capital stock, or declare, set aside or pay any
dividend or distribution payable in cash, stock, property or otherwise with
respect to its capital stock; (iv) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any shares of its capital stock;
or (v) authorize or propose or enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this Section 4.7(a);
(b) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) directly or indirectly, any Person or any business owned by such Person;
(ii) except in the ordinary course of business and in a manner consistent with
past practices, sell, pledge, dispose of, or encumber or authorize or propose
the sale, pledge, disposition or encumbrance of any of its assets; (iii) enter
into any material contract or agreement, except in the ordinary course of
business; (iv) authorize any capital expenditure in excess of $50,000 or outside
the ordinary course of business; or (v) enter into or amend any contract,
agreement, commitment or arrangement with respect to any of the matters
prohibited by this Section 4.7(b);
(c) take any action other than in the ordinary course of business and
in a manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to increasing compensation of any officer,
director, stockholder or employee or with respect to the grant of any severance
or termination pay (otherwise than pursuant to policies in effect on the date
hereof and fully disclosed to the other parties hereto prior to the date hereof)
or with respect to any increase of benefits payable under its severance or
termination pay policies in effect on the date hereof;
(d) make any payments except in the ordinary course of business and in
amounts and in a manner consistent with past practice (none of which payments
shall be unreasonable or unusual), under any employee benefit plan or otherwise
to any of its employees, independent
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contractors or consultants, enter into any employee benefit plan, any employment
or consulting agreement, grant or establish any new awards under any such
existing employee benefit plan or agreement, or adopt or otherwise amend any of
the foregoing, except as otherwise required by applicable law;
(e) except in the ordinary course of business or as permitted herein,
take any action to incur or increase prior to Closing any indebtedness for
borrowed money from banks or other financial institutions or cancel, without
payment in full, any notes, loans or receivables except in the ordinary course
of business;
(f) directly or indirectly loan or advance monies to any Person under
any circumstance whatsoever except for credit transactions with customers on
terms consistent with past practices; or
(g) fail to pay, perform or discharge as they become due any of its
liabilities or obligations, the failure of which to pay, perform or discharge
would have a Material Adverse Effect; or
(h) do any act or omit to do any act which might reasonably be
expected to cause a breach of any contract, commitment or obligation.
4.8. Expenses. All of the expenses incurred by Purchaser in connection with
the authorization, preparation, execution and performance of this Agreement and
other agreements referred to herein, including, without limitation, all fees and
expenses of agents, representatives, brokers, counsel and accountants for
Purchaser, shall be paid by Purchaser. All reasonable expenses incurred by the
Company and/or Parent in connection with the authorization, preparation,
execution and performance of this Agreement on behalf of the Company and/or
Parent and the other agreements referred to herein, including without
limitation, all reasonable fees and expenses of advisors, agents,
representatives, brokers, counsel and accountants, shall be paid by Parent or
the Company if the Merger is not consummated, and shall be paid by Parent if the
Merger is consummated; provided, however, that Parent shall not be required to
pay costs incurred by Company personnel in connection with the Transactions; and
provided, further, that Purchaser shall be responsible for all expenses incurred
by the Company in connection with the preparation of financial statements
described in Section 4.6 hereof and any valuation reports not yet produced that
Purchaser and Parent reasonably determine are necessary in connection with the
Transactions.
4.9. Tax Matters.
(a) Parent shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns for the Company for all periods ending on or prior to
the Closing Date which are filed after the Closing Date ("Pre-Closing Tax
Periods"). Parent shall permit Purchaser to review and comment on each such Tax
Return described in the preceding sentence prior to filing. Parent shall
reimburse Purchaser for Taxes of the Company with respect to such Pre-Closing
Tax Periods within fifteen (15) days after payment by Purchaser of such Taxes to
the extent such Taxes exceed in the aggregate the reserve for Tax liability
(other than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face of the Closing
Balance
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Sheet. Purchaser will remit to Parent within fifteen (15) days of receipt any
refunds it may receive from any Tax Authority with respect to Pre-Closing Tax
Periods.
(b) The parties anticipate that the Merger will terminate all Tax
periods for the Company. With respect, however, to any Tax periods of the
Company which are determined to begin before the Closing Date and end after the
Closing Date, Purchaser shall prepare or cause to be prepared and file or cause
to be filed any Tax Returns of the Company. Parent will remit to Purchaser
within fifteen (15) days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to the
portion of such Taxable period ending on the Closing Date to the extent such
Taxes exceed in the aggregate the reserve for Tax liability (other than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Closing Balance Sheet. Purchaser
shall reimburse Parent for any refund of Taxes of the Company with respect to
such periods within fifteen (15) days after receipt by Purchaser of such refund.
For purposes of this Section, in the case of any Taxes that are imposed on a
periodic basis and are payable for a Tax period that includes (but does not end
on) the Closing Date, the portion of such Tax which relates to the portion of
such Tax period ending on the Closing Date shall (i) in the case of any Taxes
other than Taxes based upon or related to income or receipts, be deemed to be
the amount of such Tax for the entire Tax period multiplied by a fraction the
numerator of which is the number of days in the Tax period ending on the Closing
Date and the denominator of which is the number of days in the entire Tax
period, and (ii) in the case of any Tax based upon or related to income or
receipts be deemed equal to the amount which would be payable if the relevant
Tax period ended on the Closing Date. Any credits relating to a Tax period that
begins before and ends after the Closing Date shall be taken into account as
though the relevant Tax period ended on the Closing Date. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with prior practice of the Company. This Section 4.9(b) shall not
apply to the federal income taxes associated with the Parent Affiliated Group.
(c) With respect to the Parent Affiliated Group:
(i) Parent and the Company have allocated, and will continue to
allocate through the Closing Date, Federal income taxes in accordance with
consolidated return regulations. Such Federal income tax allocations shall be
set forth on the Closing Balance Sheet. Any tax sharing agreement between Parent
and the Company shall be terminated as of the Closing Date and will have no
further effect for any taxable period. Parent will not elect to retain any net
operating loss carryovers or capital loss carryovers of the Company under
Treasury Reg. ss.1.1502-20(g).
(ii) Parent will include the income of the Company (including any
deferred income triggered into income by Treasury Reg. ss.1.1502-13 and Treasury
Reg. ss.1.1502-14 and any excess loss accounts taken into income under Treasury
Reg. ss.1.1502-19) on the Parent's consolidated federal income Tax Returns for
all periods through the Closing Date and pay any federal income Taxes
attributable to such income. Purchaser will furnish Tax information within
ninety (90) days after the Closing Date concerning the Company to Parent for
inclusion in Parent's federal consolidated income Tax Return for the period
which includes the Closing Date in accordance with the Company's past custom and
practice. Parent will allow the Purchaser an opportunity to review and comment
upon such Tax Returns (including any amended returns) to the
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extent that they relate to the Company. Parent will take no position on such Tax
Returns that relate to the Company that would adversely affect the tax liability
of Purchaser after the Closing Date. The income of the Company will be
apportioned to the period up to and including the Closing Date and the period
after the Closing Date by closing the books of the Company as of the end of the
Closing Date.
(iii) Parent will allow Purchaser and its counsel to participate
in any audits of Parent consolidated federal income Tax Returns to the extent
that such returns relate to the Company. Parent will not settle any such audit
in a manner which could adversely affect the tax liability of Purchaser after
the Closing Date without the prior written consent of Purchaser, not to be
unreasonably withheld. Parent will not file an amended consolidated federal
income Tax Return with respect to any income Tax matters of the Company that
could adversely affect the tax liability of Purchaser without the prior written
consent of Purchaser, not to be unreasonably withheld.
(d) Purchaser and Parent shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section and any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention and (upon
the other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Purchaser and
Parent agree (i) to retain all books and records with respect to Tax matters
pertinent to the Company relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Purchaser or Parent, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any Tax Authority, and (ii) to give the other party reasonable
written notice prior to transferring, destroying or discarding any such books
and records and, if the other party so requests, Purchaser or Parent, as the
case may be, shall allow the other party to take possession of such books and
records.
(e) For federal income Tax purposes, the parties intend that the
Merger shall be treated as a reorganization within the meaning of Section
368(a)(1)(A) of the Code. None of the parties hereto shall take a position on
any Tax Return which is inconsistent with such Tax treatment.
4.10. Notification of Certain Matters.
(a) Purchaser shall give prompt notice to Parent and the
Company of the following:
(i) the occurrence or nonoccurrence of any event whose occurrence
or nonoccurrence would be likely to cause either (A) any representation,
warranty or agreement of Purchaser contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing, or (B) directly or indirectly, any Material Adverse Effect; or
(ii) any material failure of Purchaser, any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
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(b) Parent and the Company shall give prompt notice to Purchaser of
the following:
(i) the occurrence or nonoccurrence of any event whose occurrence
or nonoccurrence would be likely to cause either (A) any representation or
warranty of Parent or the Company contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing, or (B) directly or indirectly, any change in or effect on the business
of the Company that is or will be materially adverse to the business,
operations, properties (including intangible properties), condition (financial
or otherwise), assets, liabilities or regulatory status of the Company, or (C) a
material adverse effect upon the legality, validity, binding effect or
enforceability of this Agreement, or the ability of Parent or the Company to
perform its respective obligations hereunder; or
(ii) Any material failure of Parent or the Company, or any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
(c) Notwithstanding the foregoing, the delivery of any notice pursuant
to this Section shall not waive or release Parent, the Company or Purchaser from
its covenants, representations or warranties under this Agreement.
4.11. Public Announcements.
(a) Except for and to the extent of any public announcement or
disclosures relating to the Transactions previously made by any of the parties
hereto, as may be required by law or stock exchange requirements, or as provided
in this Section, each of the Company, Purchaser and Parent agree that until the
consummation of the Transactions, each of such parties will not, and will direct
its directors, officers, employees, representatives and agents who have
knowledge of the Transactions not to, disclose to any Person who is not a
participant in discussions concerning the Transactions (other than Persons whose
consent is required to be obtained hereunder), any of the terms, conditions or
other facts with respect to the Transactions.
(b) The Company and Parent shall obtain the prior oral or written
consent of Purchaser, and Purchaser shall obtain the prior oral or written
consent of the Company and Parent, before issuing any press release or otherwise
making any public statements with respect to the Transactions and shall not
issue any such press release or make any such public statement prior to
receiving such consent, except as may be, in the good faith belief of the party
issuing such press release, required by law or stock exchange requirements. The
parties acknowledge and agree that Purchaser and Parent expect to issue press
releases with respect to the Transactions immediately after execution of this
Agreement, as well as after the Closing.
4.12. Tax Free Reorganization. After the Closing, Parent and Purchaser
shall use their best efforts to protect the parties' intended tax treatment of
the Merger as a tax free reorganization, as provided in Section 2.7 hereof.
Purchaser will continue after the Closing the historical business operation of
the Company pursuant to Regulation 1.368-1(d) of the Code.
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4.13. Access and Inspection. On reasonable notice, each party hereto shall
provide the other party (or parties) full access during normal business hours
from and after the date hereof until the Closing to all of the books and records
of such party as they relate to the business and affairs of Purchaser or the
Company (or, as to Parent only, the business and affairs of the Company) as may
be requested, in each case for the purpose of making such continuing
investigation of such party and its respective predecessors as it may desire.
Each party shall cause appropriate personnel to assist the other party (or
parties) in such continuing investigation and shall cause personnel, counsel,
accountants and other non-employee representatives to be reasonably available to
such party (or parties) in connection with its continuing investigation.
4.14. Ongoing Business. Prior to Closing, neither Purchaser nor the
Company will engage in any activities outside the ordinary course of business,
except as contemplated herein.
4.15. Certain Filings, Consents and Arrangements. Subject to compliance
with applicable law, Purchaser, Parent and the Company will (a) cooperate with
one another (i) in promptly determining whether in connection with this
Agreement any filings, including qualifications to conduct business as a foreign
corporation, are required to be made with, or consents, approvals, permits or
authorizations are required to be obtained from, any Governmental Authority
under any federal, state or foreign law or regulation or from any other third
party under any Material Contract (as defined herein) and (ii) in promptly
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such consents, approvals, permits or
authorizations and (b) provide one another with copies of all filings made by
such party with any Governmental Authority in connection with this Agreement. In
the event that the parties determine that a filing under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended ("HSR") is required to consummate
the Transactions, Purchaser and Parent shall each bear one-half (1/2) of the
cost of the filing fee.
4.16. No Solicitation.
(a) In consideration of the expenses to be incurred by each of
the parties hereto in negotiating toward this Agreement and in conducting its
due diligence investigation, each of the parties hereto shall not, directly or
indirectly, through any officer, director, employee, financial advisor,
representative or agent of such party, (i) solicit, initiate, or encourage any
inquiries or proposals that constitute, or could reasonably be expected to lead
to, a proposal or offer for a merger, consolidation, business combination, sale
or transfer of substantial assets, sale of any shares of capital stock
(including without limitation by way of a tender offer), acquisition of shares
of capital stock or assets, or similar transaction involving it or any of its
subsidiaries, other than the Transactions (any of the foregoing inquiries or
proposals being referred to in this Agreement as an "Acquisition Proposal"), or
(ii) engage in negotiations or discussions concerning, or provide any non-public
information to any person or entity relating to, any Acquisition Proposal, or
agree to or recommend any Acquisition Proposal; PROVIDED, HOWEVER, that nothing
contained in this Section 4.16(a) shall prevent any of the parties hereto or its
respective Board of Directors, from (A) furnishing non-public information, or
entering into discussions or negotiations, with, any person or entity in
connection with an unsolicited bona fide written Acquisition Proposal by such
person or entity or agreeing to or recommending an unsolicited bona fide written
Acquisition Proposal to its stockholders, if and only to the extent that (1) the
Board of Directors of such party believes in good
-23-
faith (after consultation with its advisors) that such Acquisition Proposal is
reasonably capable of being completed on the terms proposed and, after taking
into account the strategic benefits anticipated to be derived from the
Acquisition Proposal, would, if consummated, result in a transaction more
favorable to such party over the long term than the transaction contemplated by
this Agreement, and such Board of Directors determines in good faith after
receipt of an opinion from outside legal counsel to the effect that such action
is likely necessary for such Board of Directors to comply with its fiduciary
duties to stockholders under applicable law and (2) prior to furnishing such
non-public information to, or entering into discussions or negotiations with,
such person or entity, such Board of Directors receives from such person or
entity an executed confidentiality agreement with terms no more favorable to
such party than those contained in the Confidentiality Agreement; or (B)
complying with rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal.
(b) Notwithstanding the foregoing, nothing in this Agreement
shall prohibit Parent from soliciting, negotiating, agreeing to or consummating
any Acquisition Proposals involving subsidiaries or divisions of Parent other
than the Company.
(c) If either Purchaser or the Company enters into a
definitive agreement pursuant to an Acquisition Proposal, such party shall be
deemed to have terminated this Agreement and shall pay the non-terminating party
a termination fee within three business days of its entering into such a
definitive agreement. The termination fee shall be the sum of (i) the
non-terminating party's out-of-pocket costs incurred in connection with the
Transactions through the date of termination, not to exceed $500,000 in the
aggregate, and (ii) $1,200,000. The payment of a termination fee pursuant to
this subsection, which is agreed to be a fair estimate of the expenses and
damages which would be suffered by the non-terminating party in such event,
shall be the sole and exclusive remedy of the non-terminating party against the
terminating party and its respective directors, officers, employees, attorneys,
agents, advisors or other representatives (including its stockholders), with
respect to the occurrences giving rise to such payment. Should any court of
competent jurisdiction determine that, consistent with applicable law, the
termination fee set forth above is unenforceable or otherwise contrary to public
policy, the parties hereto agree to any reformation of this Agreement by a court
that would result in such termination fee being upheld and given effect.
(d) Parent and the Company hereby consent to Purchaser's
negotiation, but not consummation, of potential acquisitions that Purchaser has
disclosed in writing to Parent at or prior to the date hereof.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND PARENT
In order to induce Purchaser to enter into this Agreement and
consummate the Transactions, each of the Company and Parent represents and
warrants to Purchaser as follows, each of which warranties and representations
is material to and relied upon by Purchaser:
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5.1. Organization and Authority. The Company is a corporation duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania. The states in which the Company is qualified to do business are
set forth on Schedule 5.1. The Company has all necessary corporate power and
authority to own, lease and operate its properties and conduct its business as
it is currently being conducted. The Company does not own, directly or
indirectly, any equity interest in any corporation, partnership, joint venture,
or other entity and does not have any subsidiaries, which for purposes of this
Agreement means any corporation or other legal entity of which the Company
(either alone or through or together with any other Affiliate of the Company)
owns, directly or indirectly, more than 20% of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity.
5.2. Corporate Power and Authority; Due Authorization. The Company has full
corporate power and authority to execute and deliver this Agreement and each of
the Closing Documents to which the Company is or will be a party and to
consummate the Transactions. Parent owns all of the issued and outstanding
shares of Company Capital Stock. The Board of Directors of the Company at a
meeting duly called and held has determined that the Merger is advisable and in
the best interest of the Company and has approved it. The directors and sole
stockholder of the Company have also duly approved and authorized the execution
and delivery of this Agreement and each of the Closing Documents to which the
Company is or will be a party and the consummation of the Transactions, and no
other corporate proceeding on the part of the Company is necessary to approve
the Transactions. Assuming that this Agreement and each of the Closing Documents
to which Purchaser is a party constitutes a valid and binding agreement of
Purchaser, this Agreement and each of the Closing Documents to which the Company
or Parent is or will be a party constitutes, or will constitute when executed
and delivered, a valid and binding agreement of the Company or Parent, as the
case may be, in each case enforceable in accordance with its terms, except as
the enforceability thereof may be limited by applicable bankruptcy, insolvency
or other similar laws relating to the enforcement of creditors' rights generally
and by the application of general principles of equity. The duly elected
officers and directors of the Company are set forth on Schedule 5.2 attached
hereto. Copies of the Articles of Incorporation, the Bylaws and all minutes of
the Company are contained in the minute books of the Company. True, correct and
complete copies of the minute books of the Company have been delivered to
Purchaser.
5.3. Ownership of Assets. The Company has title to all of its properties
and assets, other than leased or licensed property, in each case free and clear
of any liens, security interests, claims, charges, options rights of tenants or
other encumbrances, except as disclosed or reserved against in Schedule 5.3 or
reserved against in the Company Financial Statements (as defined in Section
5.8(a) (to the extent and in the amounts so disclosed or reserved against)) and
except for liens arising from current Taxes not yet due and payable and other
liens not having a Material Adverse Effect. All buildings, machinery and
equipment owned or leased by the Company are in good operating condition and
reasonable state of repair, subject only to ordinary wear and tear. The Company
has not received any notice of violation of any applicable zoning regulation,
ordinance or other law, regulation or requirement relating to its operations and
properties, whether owned or leased. All of the accounts receivable of the
Company as of the Effective Time will reflect actual transactions and will have
arisen in the ordinary course of business.
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5.4. No Conflict; Required Consents. Schedule 5.4 lists all third party
consents or approvals required with respect to the Company for consummation of
the Transactions, which consents the Company agrees to use its best reasonable
efforts to obtain. Assuming all such consents, approvals, authorizations and
other actions have been obtained or taken and assuming the appropriate filings
are made by Purchaser, Parent and the Company to effectuate the Merger under the
Pennsylvania Act and the Delaware Act, and under the Securities Act and the
Exchange Act, the execution and delivery by the Company of this Agreement and
the Closing Documents and the consummation by the Company of the Transactions do
not and will not (a) require the consent, approval or action of, or any filing
or notice to, any corporation, firm, Person or other entity or any public,
governmental or judicial authority (except for such consents, approvals,
actions, filings or notices the failure of which to make or obtain will not in
the aggregate have a Material Adverse Effect); (b) violate the terms of any
instrument, document or agreement to which the Company is a party, or by which
the Company or the property of the Company is bound, or be in conflict with,
result in a breach of or constitute (upon the giving of notice or lapse of time
or both) a default under any such instrument, document or agreement, or result
in the creation of any lien upon any of the property or assets of the Company
except for such violations, conflicts, breaches and defaults which, individually
or in the aggregate, would not have a Material Adverse Effect; (c) violate the
Company's Articles of Incorporation or Bylaws; or (d) violate any order, writ,
injunction, decree, judgment, ruling, law, rule or regulation of any federal,
state, county, municipal, or foreign court or Governmental Authority applicable
to the Company, or the business or assets of the Company, except for such
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is not subject to, or a party to, any mortgage,
lien, lease, agreement, contract, instrument, order, judgment or decree or any
other material restriction of any kind or character which would prevent or
hinder the continued operation of the business of the Company after the Closing
on substantially the same basis as theretofore operated.
5.5. Capitalization. The authorized and outstanding capital stock of the
Company is set forth on Schedule 5.5, and no shares of the Company's Capital
Stock are held in the treasury of the Company. All outstanding Company Capital
Stock has been duly authorized, and is validly issued, fully paid and
nonassessable. No party has any preemptive (whether statutory or contractual)
rights in any capital stock of the Company. The Company has no convertible
securities, options, warrants, or other contracts, commitments, agreements,
understandings, arrangements or restrictions by which it is bound to issue any
additional shares of its capital stock or other securities. All securities of
the Company were offered and sold in compliance with applicable Federal and
state securities laws. Each and every dividend of the Company, if any, whether
paid in cash or other property, has been declared and paid in compliance with
applicable law, and the Company has no further obligation with respect to such
payment.
5.6. Compliance with Laws; Filings with the SEC.
(a) The Company is in compliance with, and the Company operated any
businesses previously owned by it in compliance with all applicable laws,
orders, rules and regulations of all Governmental Authorities, including
applicable Environmental Laws, except for such noncompliance as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
has not received notice of any noncompliance with the foregoing.
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(b) Neither the Company nor any other Persons providing
services for the Company have, to the knowledge of the Company or Parent,
engaged in any activities which would be a basis for exclusion from any
otherwise available Medicare, Medicaid or other federally funded programs under
Section 0000x - 0x xx Xxxxx 00 xx xxx Xxxxxx Xxxxxx Code, or prohibited under
any applicable portions of Section 1320a - 7b of such Title 42, or regulations
promulgated thereunder, or related state or local statutes or regulations,
including any "fraud and abuse" provisions, except where such noncompliance has
and will have, individually and in the aggregate, no Material Adverse Effect.
(c) Without limiting the foregoing, the Company and any other
person or entity for whose conduct the Company is legally held responsible are
in compliance with all applicable federal, state, regional, local or provincial
laws, statutes, ordinances, judgments, rulings and regulations relating to any
matters of pollution, protection of the environment, health or safety, or
environmental regulation or control (collectively, "Environmental Laws"), except
where such noncompliance has and will have, individually or in the aggregate, no
Material Adverse Effect. Neither the Company, nor any other person or entity for
whose conduct the Company is legally responsible has received any notice,
demand, request for information, or administrative inquiry relating to any
violation of an Environmental Law or the institution of any suit, action, claim,
or proceedings alleging such violation or investigation by any Governmental
Authority or any third party of any such violation.
(d) Parent has made all filings with the SEC that it has been
required to make under the Securities Act and the Exchange Act since January 1,
1996 (collectively, the "Public Reports"), and has done so in a timely manner.
Each of the Public Reports has complied with the Securities Act and the Exchange
Act in all material respects. None of the Public Reports, as of their respective
dates, to the Parent's knowledge, contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
5.7. Licenses and Permits. The Company holds and is in compliance with all
licenses, permits, concessions, grants, franchises, approvals and authorizations
necessary or required for the use or ownership of its assets and the operation
of its business, except where the failure to hold such license, permit,
concession, grant, franchise, approval or authorization has and will have,
individually or in the aggregate, no Material Adverse Effect. The Company has
not received notice of any violations in respect of any such licenses, permits,
concessions, grants, franchises, approvals or authorizations, which violations,
individually or in the aggregate, would have a Material Adverse Effect. No
proceeding is pending or, to the knowledge of the Company, threatened, which
seeks revocation or limitation of any such licenses, permits, concessions,
grants, franchises, approvals or authorizations, nor is there any basis
therefor, the revocation or limitation of which, individually or in the
aggregate, would have a Material Adverse Effect.
5.8. Liabilities and Obligations of the Company.
(a) Attached hereto as Schedule 5.8 are true, correct and complete
copies of the Company's unaudited balance sheets as of December 31, 1997 and
December 31, 1998, and unaudited balance sheet as of March 31, 1999, and the
related statements of income, stockholders'
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equity and cash flows for the years and three months then ended, together,
except in the case of the financial statements dated March 31, 1999, with the
reports of Xxxxx Xxxxxxxx thereon (collectively, the "Company Financial
Statements"). The Company Financial Statements have been prepared in accordance
with generally accepted accounting principles, consistently applied, fairly
present in all material respects the financial condition of the Company as of
the respective dates thereof, and disclose all liabilities of the Company,
whether absolute, contingent, accrued or otherwise, existing as of the date
thereof that are of a nature required to be reflected in financial statements
prepared in accordance with generally accepted accounting principles, except for
liabilities that, individually or in the aggregate, would not have a Material
Adverse Effect; provided, however, that the interim financial statements are
subject to normal year-end adjustments which are not expected to be material in
amount.
(b) The Company has no liability or obligation (whether accrued,
absolute, contingent or otherwise) including, without limitation, any liability
that might result from an audit of its Tax Returns by any Tax Authority, except
for (i) liabilities that, individually or in the aggregate, would not have a
Material Adverse Effect, (ii) the liabilities and obligations of the Company
that are disclosed or reserved against in the Company Financial Statements or
Schedule 5.8 hereto, to the extent and in the amounts so disclosed or reserved
against, and (iii) liabilities incurred or accrued in the ordinary course of
business since March 31, 1999 and liabilities incurred in connection with the
Transactions.
(c) Except as disclosed in the Company Financial Statements or
Schedule 5.8, the Company is not in default with respect to any liabilities or
obligations, except for defaults that, individually or in the aggregate, would
not have a Material Adverse Effect and all such liabilities or obligations shown
or reflected in the Company Financial Statements or Schedule 5.8 and such
liabilities incurred or accrued subsequent to March 31, 1999 were incurred in
the ordinary course of business except as indicated in Schedule 5.8, except for
liabilities and obligations that, individually or in the aggregate, would not
have a Material Adverse Effect.
5.9. Taxes.
Except as to any noncompliance with any of the following provisions
that would not, individually or in the aggregate, have a Material Adverse
Effect:
(a) The Company has timely filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all respects. Except
as set forth in Schedule 5.9, the Company currently is not the beneficiary of
any extension of time within which to file any Tax Return. There are no liens or
other security interests on any of the assets of any of the Company that arose
in connection with any failure (or alleged failure) to pay any Tax, other than
liens, if any, for Taxes not yet due and payable.
(b) The Company has timely paid, withheld and/or remitted to the
appropriate Tax Authority all Taxes required to be paid, withheld and/or
remitted on or before the Closing Date. The reserves for Taxes to be reflected
on the Closing Balance Sheet (other than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) will be
adequate to cover all Tax liabilities, contingent or otherwise, as of the
Closing Date.
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(c) No employee of the Company or any of its subsidiaries responsible
for Tax matters has received notice that any Tax Authority proposes to assess
any additional Taxes against the Company for any period for which Tax Returns
have been filed. There is no dispute or claim concerning any Tax liability of
the Company either (i) claimed or raised by any Tax Authority in writing, or
(ii) as to which any employee of the Company or the Parent responsible for Tax
matters has knowledge based upon personal contact with any agent of such Tax
Authority.
(d) Except as set forth in Schedule 5.9, the Company has not waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(e) The Company has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations. The Company has not made any payments
which have not yet been reported on any Tax Return, 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 Section 280G of the Code. The Company has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code.
(f) The Company is not a party to any Tax allocation or sharing
agreement other than concerning federal income taxes for an Affiliated Group the
common parent of which is Parent (such group, the "Parent Affiliated Group").
The Company has not been a member of an Affiliated Group or filed or been
included in a combined, consolidated or unitary Tax Return other than a
consolidated federal income Tax Return for the Parent Affiliated Group. The
Company has no contractual obligation to indemnify any other person with respect
to the payment of any Taxes of the other person which could have a Material
Adverse Effect. With respect to the Parent Affiliated Group:
(i) The Parent Affiliated Group has filed all federal income Tax
Returns that it was required to file for each taxable period during which the
Company was a member of the group. All such Tax Returns were correct and
complete in all material respects in so far as they relate to the Company. All
income Taxes owed by such Affiliated Group (whether or not shown on any Tax
Return) have been paid for each taxable period during which the Company was a
member of the group; provided however, that Taxes for the taxable year which
includes the Closing Date shall be paid when due.
(ii) No employee of any of Parent and any of its subsidiaries
responsible for Tax matters expects any authority to assess any additional
income Taxes against the Parent Affiliated Group for any taxable period during
which the Company was a member of the group. There is no dispute or claim
concerning any income Tax liability of the Parent Affiliated Group for any
taxable period during which the Company was a member of the group either (A)
claimed or raised by any authority in writing or (B) as to which any employees
of any of Parent and its subsidiaries responsible for Tax matters has knowledge
based upon personal contact with any agent of such authority. Except as set
forth on Schedule 5.9, the Parent Affiliated Group has not waived any statute of
limitations in respect of any income Taxes or agreed to any extension of time
with
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respect to an income Tax assessment or deficiency for any taxable period during
which the Company was a member of the group.
5.10. Contracts, Agreements and Instruments Generally. Schedule 5.10 hereto
consists of a true and complete list of all contracts, agreements, commitments
and other instruments (identified by title, date and parties) (whether oral or
written) to which the Company is a party that involve a receipt or an
expenditure by the Company or require the performance of services or delivery of
goods to, by, through, on behalf of or for the benefit of the Company, which in
each case relates to a contract, agreement, commitment or instrument that
requires (or is reasonably expected to require) payments or provides (or is
reasonably expected to provide) for receipts in excess of $25,000 from the
Closing Date until the first (1st) anniversary thereof.
The contracts, agreements, commitments and other instruments listed or
required to be listed on Schedule 5.10 or listed on a Schedule referred to in
Section 5.12 hereof are herein referred to as the "Material Contracts". All of
the Material Contracts are in full force and effect.
None of the Company, and, to the knowledge of the Company and Parent,
any other party to any such contract, commitment or arrangement has breached any
provision of, or is in default under, the terms thereof, the breach of or
default under which would, individually or in the aggregate, have a Material
Adverse Effect; and there are no existing facts or circumstances known to the
Company or Parent that would prevent the work in process of the Company or its
contracts and agreements from maturing upon performance by the Company into
collectible accounts receivable in the aggregate in amounts consistent with
historical experience. Except as set forth on Schedule 5.10 or as reserved
against in the Company Financial Statements, there are no contracts or
commitments that require the performance of services or provision of goods by
the Company at a direct cost for each such contract or commitment known by the
Company to be in excess of the revenue to be derived pursuant to the terms of
such contract or commitment, which, individually, or in the aggregate, would
have a Material Adverse Effect. Except for terms specifically described in
Schedule 5.10, the Company has not received any payment from any contracting
party in connection with or as an inducement for entering into any contract,
agreement, policy or instrument except for payment for actual services rendered
or to be rendered by the Company consistent with amounts historically charged
for such services.
5.11. Customer Contracts. With respect to each contract, agreement,
commitment or other instrument in effect to which the Company is a party with
any customer of the Company (each, a "Customer Contract") all performance
warranties with respect to computer software represented in writing as owned by
or proprietary to the Company ("Owned Software") made by the Company in any
Customer Contract, including warranties with respect to capacity, availability,
downtime and response time, and Year 2000 compliance have been satisfied in all
material respects upon the terms and conditions and to the extent provided for
in such Customer Contract, except for failures to satisfy which, individually or
in the aggregate, would not have a Material Adverse Effect.
5.12. Intellectual Property; Computer Software.
(a) Schedule 5.12(A) hereto sets forth (i) a complete and correct list
of all trademarks, trade names, service marks, service names, and brand names
(whether or not any of the
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same are registered), and all patents and registered copyrights and all
applications for the foregoing, if any, (setting forth the registration, issue
or serial number of the patents and registered copyrights and a description of
the same) applicable to or used in the business of the Company; (ii) the owner
of such intellectual property and any registration thereof or application
thereof; and (iii) a complete list of all licenses granted by or to the Company
with respect to any of the above (identified by title, date and parties) (not
inclusive of Customer Contracts). All such trademarks, trade names, service
marks, service names, brand names, copyrights and patents are owned by the
Company free and clear of all liens, claims, security interests and
encumbrances, except for such liens, claims, security interests and encumbrances
as would, individually or in the aggregate, not have a Material Adverse Effect.
Except as set forth on Schedule 5.12(A), the Company is not currently in receipt
of any notice of any violation of, and, to the Company's and Parent's knowledge,
the Company is not violating the rights of others in any trademark, trade name,
service xxxx, copyright, patent, trade secret, know-how or other intangible
asset, except such violations as, individually or in the aggregate, would not
have a Material Adverse Effect.
(b) Schedule 5.12(B) contains a complete and accurate list of all
Owned Software. Except as set forth on Schedule 5.12(B), the Company has title
to the Owned Software, free and clear of all claims, including claims or rights
of employees, agents, consultants, inventors, customers, licensees or other
parties involved in the development, creation, marketing, maintenance,
enhancement or licensing of such computer software. Except as set forth on
Schedule 5.12(B) and except for commercially available, over-the-counter
"shrink-wrap" software, the Owned Software is not dependent on any Licensed
Software (as defined in subsection (c) below) in order to operate fully in the
manner in which it is intended. The source code to the Owned Software has not
been published or disclosed to any other parties, except as set forth in the
Customer Contracts or as set forth on Schedule 5.12(B), and except pursuant to
contracts requiring such other parties to keep the Owned Software confidential.
To the knowledge of the Company and Parent, no such other party has breached any
such obligation of confidentiality.
(c) Schedule 5.12(C) contains a complete and accurate list of all
software (other than commercially available over-the-counter "shrink-wrap"
software) under which the Company is a licensee, lessee or otherwise has
obtained the right to use (the "Licensed Software"). The Company has the right
and license to use, sublicense, modify and copy Licensed Software to the extent
set forth in the respective license, lease or similar agreement pursuant to
which the Licensed Software is licensed to the Company, free of any other
limitations or encumbrances, and the Company is in compliance with all
applicable provisions of such agreements, except for failures to comply which,
individually or in the aggregate, would not have a Material Adverse Effect.
Except as disclosed on Schedule 5.12(C), none of the Licensed Software has been
incorporated into or made a part of any Owned Software or any other Licensed
Software. The Company has not published or disclosed any Licensed Software to
any other party except in accordance with and as permitted by any license, lease
or similar agreement relating to the Licensed Software and except pursuant to
contracts requiring such other parties to keep the Licensed Software
confidential. No party to whom the Company has disclosed Licensed Software has,
to the knowledge of the Company and Parent, breached such obligation of
confidentiality, except for such publications and disclosures that, individually
or in the aggregate, would not have a Material Adverse Effect.
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(d) The Owned Software and Licensed Software and commercially
available over-the-counter "shrink-wrap" software constitute all software used
in the businesses of the Company (collectively, the "Company Software"). The
Transactions will not cause a breach or default under any licenses, leases or
similar agreements relating to the Company Software or impair Purchaser's
ability to use the Company Software in the same manner as such computer software
is currently used by the Company. To the knowledge of the Company and Parent,
(i) the Company is not infringing any intellectual property rights of any other
person or entity with respect to the Company Software, and (ii) no other person
or entity is infringing any intellectual property rights of the Company with
respect to the Company Software, except for infringements that, individually or
in the aggregate, would not have a Material Adverse Effect.
5.13. Labor Matters. Except as set forth on Schedule 5.13, within the last
three (3) years the Company has not been the subject of any known union activity
or labor dispute, nor has there been any strike of any kind called or, to the
knowledge of the Company or Parent, threatened to be called against the Company.
The Company has not violated any applicable federal or state law or regulation
relating to labor or labor practices, except where such violation has and will
have, individually or in the aggregate, no Material Adverse Effect. Schedule
5.13 sets forth a true, correct and complete list of employer loans or advances
from the Company to their respective employees. The Company is in compliance
with all applicable requirements of the Immigration and Nationality Act of 1952,
as amended by the Immigration Reform and Control Act of 1986 and the regulations
promulgated thereunder (hereinafter collectively referred to as the "Immigration
Laws"), except where such noncompliance has and will have, individually or in
the aggregate, no Material Adverse Effect.
5.14. Work-in-Process, Orders and Returns.
(a) Except as set forth on Schedule 5.14(A), as of the date hereof,
except for any claims specifically disclosed on other Schedules hereto, to the
Company's and the Parent's knowledge, there are no claims nor does the Company
reasonably expect to make or receive any claims to terminate Customer
Agreements, or material licenses, services, or other orders, or for refunds
relating to Customer Agreements, licenses, maintenance agreements, or other fees
by reason of alleged dissatisfaction with the Company's capabilities or
performance (including those related to Company Software), or defective or
unsatisfactory services or products, except as would not result in, individually
or in the aggregate, a Material Adverse Effect.
(b) Except as set forth on Schedule 5.14(B), neither the Company nor
Parent has been notified that the consummation of the Transactions will result
in any cancellations or withdrawals of accepted and unfilled orders for services
or Company Software, or maintenance or other services and the Company will
inform Purchaser promptly upon receipt of any notification to that effect
received after the date hereof, except for cancellations or withdrawals that,
individually or in the aggregate, would not have a Material Adverse Effect. To
the knowledge of the Company and Parent, neither the execution of this Agreement
nor the consummation of the Transactions will result in any material
cancellations or withdrawals of accepted and unfilled orders for the license or
sales of Company Software, services or merchandise, except for cancellations or
withdrawals that, individually or in the aggregate, would not have a Material
Adverse Effect.
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5.15. Absence of Certain Changes. Except as reflected on Schedule 5.15, or
elsewhere in this Agreement or specifically identified on any Schedules hereto,
and since March 31, 1999, the Company has not and at the Closing Date will not
have:
(a) Suffered a Material Adverse Effect, or become aware of any
circumstances which might reasonably be expected to result in such a Material
Adverse Effect; or suffered any material casualty loss to the Assets (whether or
not insured), except for losses that, individually or in the aggregate, would
not have a Material Adverse Effect;
(b) Incurred any obligations specifically related to the Assets
(including Customer Agreements), except in the ordinary course of business
consistent with past practices;
(c) Permitted or allowed any of the Assets to be mortgaged, pledged,
or subjected to any lien or encumbrance, except for liens for Taxes not yet due
and payable and liens and encumbrances that, individually or in the aggregate,
would not have a Material Adverse Effect;
(d) Written down the value of any inventory, contract or other
intangible asset, or written off as uncollectible any notes or accounts
receivable or any portion thereof, except for write-downs and write-offs in the
ordinary course of business, consistent with past practice and at a rate no
greater than during the latest complete fiscal year; cancelled any other debts
or claims, or waived any rights of substantial value, or sold or transferred any
of its material properties or assets, real, personal, or mixed, tangible or
intangible, except in the ordinary course of business and consistent with past
practice, and except for those that, individually or in the aggregate, would not
have a Material Adverse Effect;
(e) Sold, licensed or transferred or agreed to sell, license or
transfer, any of the Assets, except in the ordinary course of business and
consistent with past practice;
(f) To the Company's and Parent's knowledge, received notice of any
pending or threatened adverse claim or an alleged infringement of proprietary
material, whether such claim or infringement is based on trademark, copyright,
patent, license, trade secret, contract or other restrictions on the use or
disclosure of proprietary materials;
(g) Incurred obligations to refund money to customers, except in the
ordinary course of business, all of which will have no Material Adverse Effect;
(h) Become aware of any event, condition or other circumstance
relating solely to the Assets (as opposed to any such event, condition, or
circumstance which is, for example, national or industry-wide in nature) which
might reasonably be expected to materially adversely affect the Assets;
(i) Made any capital expenditures or commitments, any one of which is
more than $50,000, for additions to property, plant, or equipment;
(j) Made any material change in any method of accounting
or accounting practice;
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839771v5
(k) Paid, loaned, guaranteed, or advanced any material amount to, or
sold, transferred, or leased any material properties or assets (real, personal,
or mixed, tangible or intangible) to, or entered into any agreement,
arrangement, or transaction with any of the Company's officers or directors, or
any business or entity in which any officer or director of the Company, or any
affiliate or associate of any of such Persons has any direct or indirect
interest; or
(l) Agreed to take any action described in this Section 5.15.
5.16. Leases. Schedule 5.16 contains a list of all leases pursuant to which
the Company leases real or personal property, and copies of all such leases have
been delivered to Purchaser. All such leases are in full force and effect, and
except as set forth on Schedule 5.16, no event has occurred which is a default
or which with the passage of time will constitute a default by the Company
thereunder, nor has any such event occurred to the knowledge of the Company or
Parent which is a default by any other party to such lease. All property leased
by the Company or Parent as lessee is in the possession of the Company. Except
as indicated in Schedule 5.16, no consent of any lessor is required in
connection with the Transactions.
5.17. Litigation. Except as set forth in Schedule 5.17, (i) there are no
actions, proceedings or regulatory agency investigations against the Company or,
to the Company or Parent's knowledge, involving the Assets pending (served) or
threatened against the Company or against Parent, (ii) neither the Company nor
Parent knows of any such action, proceeding or investigation against the
Company, and (iii) no such action, proceeding, or regulatory agency
investigation has been pending (served) during the three-year period preceding
the date of this Agreement.
5.18. Employee Benefit Plans: Employees.
Except as to any noncompliance with any of the following provisions
that would not, individually, or in the aggregate, have a Material Adverse
Effect:
(a) Schedule 5.18 sets forth a list of each "employee benefit plan"
(as defined by Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), and any other bonus, profit sharing, pension,
compensation, deferred compensation, stock option, stock purchase, fringe
benefit, severance, scholarship, disability, sick leave, vacation, bonus,
retention, or other plan, agreement, or arrangement (each such plan, agreement
or arrangement is referred to herein as an "Employee Benefit Plan", and
collectively, the "Employee Benefit Plans") that is currently in effect for the
benefit of (i) directors or employees of the Company, (ii) former directors or
employees of the Company, or (iii) beneficiaries of anyone described in (i) or
(ii) (collectively, "Company Employees") or with respect to which the Company or
any "ERISA Affiliate" (hereby defined to include any trade or business, whether
or not incorporated, other than the Company, which has employees who are treated
pursuant to Section 4001(a)(14) of ERISA and/or Section 414 of the Code as
employees of a single employer which includes the Company) has any obligation on
behalf of any Company Employee. Except as disclosed on Schedule 5.18 attached
hereto, there are no other benefits to which any Company Employee is entitled
for which the Company has any obligation.
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(b) Parent has delivered to Purchaser, with respect to each Employee
Benefit Plan, true and complete copies of (i) the documents embodying the plan,
including, without limitation, the current plan documents and documents creating
any trust maintained pursuant thereto, all amendments, group annuity contracts,
insurance contracts, the most recent summary plan description, if any, and
employee handbooks, (ii) annual reports including but not limited to Forms 5500,
990 and 1041 for the last two (2) years for the plan and any related trust;
(iii) any communication involving the plan or any related trust to or from the
Internal Revenue Service ("IRS"), Department of Labor ("DOL"), Pension Benefit
Guaranty Corporation ("PBGC") or any other governmental authority since January
1, 1998, but excluding any IRS determination letter submission; and (iv) the
most recent determination letter received from the IRS pertaining to any
Employee Benefit Plan intended to qualify under Sections 401(a) or 501(c)(9) of
the Code.
(c) The Company has no obligation to contribute to or provide benefits
pursuant to, and has no other liability of any kind with respect to, (i) a
"multiple employer welfare arrangement" (within the meaning of Section 3(40) of
ERISA), or (ii) a "plan maintained by more than one employer" (within the
meaning of Section 413(c) of the Code).
(d) Except as otherwise set forth on Schedule 5.18 attached hereto,
the Company is not liable for, and neither the Company nor Purchaser will be
liable for, any contribution, tax, lien, penalty, cost, interest, claim, loss,
action, suit, damage, cost assessment or other similar type of liability or
expense of any ERISA Affiliate (including predecessors thereof) with regard to
any Employee Benefit Plan maintained, sponsored or contributed to by an ERISA
Affiliate (if a like definition of Employee Benefit Plan were applicable to the
ERISA Affiliate in the same manner as it applies to the Company), including,
without limitation, withdrawal liability arising under Title IV, Subtitle E,
Part 1 of ERISA, liabilities to the PBGC, or liabilities under Section 412 of
the Code or Section 302(a) of ERISA.
(e) The Company has complied in all respects with the applicable
requirements of Section 4980B of the Code and Section 601 et seq. of ERISA (such
statutory provisions and predecessors thereof are referred to herein
collectively as "COBRA").
(f) With respect to each Employee Benefit Plan and except as otherwise
set forth on Schedule 5.18 attached hereto:
(i) each Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code has received a determination letter from the
IRS to the effect that the Employee Benefit Plan is qualified under Section 401
of the Code and that any trust maintained pursuant thereto is exempt from
federal income taxation under Section 501 of the Code, and nothing has occurred
or, to the knowledge of the Company and Parent, is expected to occur that caused
or could reasonably be expected to cause the loss of such qualification or
exemption or the imposition of any penalty or tax liability;
(ii) all payments required by the Employee Benefit Plan or by law
(including all contributions, insurance premiums, premiums due the PBGC or
intercompany charges) with respect to all periods through the date hereof have
been made;
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(iii) there are no violations of or failures to comply with ERISA
and the Code with respect to the filing of applicable reports, documents, and
notices regarding the Employee Benefit Plan with DOL, the IRS, the PBGC or any
other governmental authority, or any of the assets of the Employee Benefit Plan
or any related trust;
(iv) no claims, lawsuit, arbitration or other action has been
asserted or instituted or, to the knowledge of the Company and Parent,
threatened in writing against the Employee Benefit Plan, any trustee or
fiduciaries thereof, the Company or any ERISA Affiliate, any director, officer
or employee thereof, or any of the assets of the Employee Benefit Plan or any
related trust, except for routine claims for benefits;
(v) any bonding required with respect to the Employee Benefit
Plan in accordance with the applicable provisions of ERISA has been obtained and
is in full force and effect;
(vi) the Employee Benefit Plan complies in all respects with and
has been maintained and operated in all respects in accordance with its
respective terms and the terms and the provisions of applicable law, including,
without limitation, ERISA and the Code (including rules and regulations
thereunder);
(vii) no "prohibited transaction" (within the meaning of Section
4975 of the Code and Section 406 of ERISA) has occurred or is reasonably
expected to occur with respect to the Employee Benefit Plan (and the
transactions contemplated by this Agreement will not constitute or directly or
indirectly result in such a "prohibited transaction") which has subjected or, to
the knowledge of Company and Parent, could reasonably be expected to subject the
Company, any ERISA Affiliate or Purchaser, or any officer, director or employee
of the Company, any ERISA Affiliate or Purchaser, or the Employee Benefit Plan
trustee, administrator or other fiduciary, to a tax or penalty on prohibited
transactions imposed by either Section 502 of ERISA or Section 4975 of the Code
or any other liability with respect thereto, which tax, penalty or liability
could have a Material Adverse Effect;
(viii) to the knowledge of the Company and Parent, the Employee
Benefit Plan is not under audit or investigation by the IRS or the DOL or any
other governmental authority and no such completed audit, if any, has resulted
in the imposition of any tax, interest or penalty.
(g) The Company is not subject to any liens, excise or other taxes
under ERISA, the Code or other applicable law relating to any Employee Benefit
Plan.
(h) None of the Employee Benefit Plans is subject to Title IV of
ERISA.
(i) In the case of any Employee Benefit Plan that is a Multiemployer
Plan, the Company has no withdrawal liability under Part 1 of Subtitle E of
Title IV of ERISA as a result of either a "complete withdrawal" (as defined in
Section 4203 of ERISA) or a "partial withdrawal" (as defined in Section 4205 of
ERISA) by the Company from such Employee Benefit Plan occurring on or prior to
the date hereof.
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(j) The consummation of the Transactions will not give rise to any
liability for any employee benefits, including, without limitation, liability
for severance pay, unemployment compensation, termination pay or withdrawal
liability, or accelerate the time of payment or vesting or increase the amount
of compensation or benefits due to any Company Employee.
(k) No amounts payable under any Employee Benefit Plan will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the Code
as such Section of the Code is currently in effect.
(l) Except as set forth on Schedule 5.18, attached hereto, no Employee
Benefit Plan provides for any health benefits (other than under COBRA, the
Federal Social Security Act or any Employee Benefit Plan qualified under Section
401(a) of the Code) to any Company Employee who, at the time the health benefit
is to be provided, is a former director or former employee of the Company (or a
beneficiary of any such person), nor, to the knowledge of the Company and
Parent, have any representations, agreements, covenants or commitments been made
to provide such health benefits.
(m) Since March 31, 1999 and through the date hereof, except as set
forth on Schedule 5.18 attached hereto or as required by applicable law or
consistent with past practice, neither the Company nor any ERISA Affiliate has,
nor will it, (i) institute or agree to institute any new employee benefit plan
or practice for any Company Employee, (ii) make or agree to make any change in
any Employee Benefit Plan, (iii) make or agree to make any increase in the
compensation payable or to become payable by the Company or any ERISA Affiliate
to any Company Employee, other than regularly scheduled increases, or (iv)
except pursuant to this Agreement and except for contributions required to
provide benefits pursuant to the provisions of the Employee Benefit Plans, pay
or accrue or agree to pay or accrue any bonus, percentage of compensation, or
other like benefit to, or for the credit of, any Company Employee.
(n) Any contribution, insurance premium, excise tax, interest charge
or other liability or charge imposed or required with respect to any Employee
Benefit Plan which is attributable to any period or any portion of any period
prior to the Closing shall, to the extent required by GAAP, be reflected as a
liability on the Closing Balance Sheet, including, without limitation, any
portion of the matching contribution required with respect to the Parent Plan
for the plan year ending after the Closing which is attributable to elective
contributions made by Company Employees in such plan prior to the Closing.
5.19. Accuracy of Representations. No representation or warranty by the
Company or Parent contained in this Agreement and no statement contained in any
certificate or schedule furnished to Purchaser pursuant to the provisions hereof
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein not misleading. To the
knowledge of the Company and Parent, there is no current event or condition of
any kind or character pertaining to the Company that may reasonably be expected
to have a Material Adverse Effect, except as disclosed herein.
5.20. Brokers Fees and Expenses. Neither the Company nor Parent or
any affiliate thereof has retained or utilized the services of any advisor,
broker, finder or intermediary, or paid
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or agreed to pay any fee or commission to any other Person or entity for or on
account of the Transactions, or had any communications with any Person or entity
which would obligate Purchaser to pay any such fees or commissions.
5.21. Bank Accounts. Schedule 5.21 contains a true, complete and correct
list showing the name and location of each bank or other institution in which
the Company has any deposit account or safe deposit box, together with a listing
of account numbers and names of all Persons authorized to draw thereon or have
access thereto.
5.22. Business Practices. Neither the Company nor anyone acting on its
behalf has made any payment of funds of the Company prohibited by law, and no
funds of the Company have been set aside to be used for any payment prohibited
by law.
5.23. Insurance. Schedule 5.23 lists all of the insurance policies
maintained by the Company, which Schedule includes the name of the insurance
company, the policy number, a description of the type of insurance covered by
such policy, the dollar limit of the policy, and the annual premiums for such
policy. The Company shall maintain such insurance policies in full force and
effect at least through the Closing Date.
5.24. Proxy Statement. None of the information supplied or to be supplied
by or on behalf of the Company or Parent for inclusion or incorporation by
reference in Purchaser's proxy statement to be delivered to its stockholders in
connection with obtaining Purchaser Stockholder Approval ("Proxy Statement"), in
definitive form, relating to the special meeting of Purchaser's stockholders
necessary to approve the Merger will, at the date delivered to Purchaser,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading assuming
that the information contained therein is consistent with information provided
by the Company or Parent.
5.25. Tax Free Reorganization. To the knowledge of the Company there is no
fact pertaining to it that would prevent the Merger from qualifying as a
tax-free reorganization under the Code.
5.26. No Existing Discussion. As of the date hereof, the Company is not
engaged directly or indirectly, in any discussion or negotiations with any other
party with respect to an Acquisition Proposal.
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ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
In order to induce the Company and Parent to enter into this Agreement
and consummate the Transactions, Purchaser represents and warrants to the
Company and Parent as follows, each of which representations and warranties is
material to and relied upon by the Company and Parent:
6.1. Organization of Purchaser. Purchaser is a corporation duly organized
and validly existing under the laws of the State of Delaware. The states in
which Purchaser is qualified to do business are set forth on Schedule 6.1.
Purchaser has all necessary corporate power and authority to own, lease and
operate its properties and conduct its business as it is currently being
conducted. Except as set forth on Schedule 6.1, Purchaser does not own, directly
or indirectly, any equity interest in any corporation, partnership, joint
venture, or other entity and does not have any subsidiaries.
6.2. Corporate Power and Authority; Due Authorization. Purchaser has full
corporate power and authority to execute and deliver this Agreement and each of
the Closing Documents to which Purchaser is or will be a party and to consummate
the Transactions. The Board of Directors of Purchaser has duly approved and
authorized the execution and delivery of this Agreement and each of the Closing
Documents to which it is or will be a party and the consummation of the
Transactions and has resolved to submit the Merger to and recommend approval of
the Merger by the stockholders of Purchaser, and, except for shareholder
approval, no other corporate proceedings on the part of Purchaser are necessary
to approve and authorize the execution and delivery of this Agreement and such
Closing Documents and the consummation of the Transactions. Assuming that this
Agreement and each of the Closing Documents to which Purchaser is a party
constitutes a valid and binding agreement of Company and/or Parent, as the case
may be, this Agreement and each of the Closing Documents to which Purchaser is a
party constitutes, or will constitute when executed and delivered, a valid and
binding agreement of Purchaser in each case enforceable against Purchaser in
accordance with its terms, except as the enforceability thereof may be limited
by applicable bankruptcy, insolvency or other similar laws relating to the
enforcement of creditors' rights generally and by the application of general
principles of equity.
6.3. No Conflict; Consents. Except as set forth on Schedule 6.3 hereto, and
except for the applicable requirements of the Securities Act, the Exchange Act,
state blue sky laws and the rules of the NASDAQ Stock Market, Inc., the
execution and delivery by Purchaser of this Agreement, the Closing Documents to
which it is or will be a party and the consummation by Purchaser of the
Transactions do not and will not (a) require the consent, approval or action of,
or any filing or notice to, any corporation, firm, Person or other entity or any
public, governmental or judicial authority; (b) violate the terms of any
instrument, document or agreement to which Purchaser is a party, or by which
Purchaser or the property of Purchaser is bound, or be in conflict with, result
in a breach of or constitute (upon the giving of notice or lapse of time, or
both) a default under any such instrument, document or agreement or result in
the creation of any lien upon any of the property or assets of Purchaser, except
for such violations, conflicts, breaches and defaults which, individually or in
the aggregate, would not have a Material Adverse Effect; (c) violate Purchaser's
Certificate of Incorporation or Bylaws; or (d) violate any order, writ,
injunction, decree,
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judgment, ruling, law, rule or regulation of any federal, state, county,
municipal, or foreign court or Governmental Authority applicable to Purchaser,
the business or assets of Purchaser, or the Merger, except for such violations
which would not, individually or in the aggregate, have a Material Adverse
Effect. Purchaser is not subject to, or a party to, any mortgage, lien, lease,
agreement, contract, instrument, order, judgment or decree or any other material
restriction of any kind or character which would prevent or hinder the continued
operation of the business of Purchaser after the Closing on substantially the
same basis as theretofore operated.
6.4. Ownership of Assets. Purchaser has title to all of its properties and
assets, other than leased or licensed property, in each case free and clear of
any liens, security interests, claims, charges, options rights of tenants or
other encumbrances, except as disclosed or reserved against in Schedule 6.4 or
reserved against in Purchaser's financial statements (as described in Section
6.8(a) (to the extent and in the amounts so disclosed or reserved against)) and
except for liens arising from current Taxes not yet due and payable and other
liens not having a Material Adverse Effect. All buildings, machinery and
equipment owned or leased by Purchaser are in good operating condition and
reasonable state of repair, subject only to ordinary wear and tear. Purchaser
has not received any notice of violation of any applicable zoning regulation,
ordinance or other law, regulation or requirement relating to its operations and
properties, whether owned or leased. All of the accounts receivable of Purchaser
as of the Effective Time will reflect actual transactions and will have arisen
in the ordinary course of business.
6.5. Capitalization. The authorized capital stock of Purchaser consists of
10,000,000 shares of preferred stock, $.001 par value per share) of which no
shares are outstanding, and 20,000,000 shares of common stock, $.001 par value
per share, of which 8,654,673 shares are outstanding as of the date hereof. In
addition, rights to receive 32,392 shares of Purchaser Common Stock, relating to
unconverted shares from Purchaser's 1997 reverse stock split ("Purchaser
Conversion Rights"), are outstanding as of the date hereof. All outstanding
shares of Purchaser Common Stock have been duly authorized, and are validly
issued, fully paid and nonassessable. Except as set forth in Schedule 6.5, no
party has any preemptive (whether statutory or contractual) rights in any
capital stock of Purchaser. Except for the Purchaser Conversion Rights, and the
Options and the Warrants identified on Schedule 3.3(a), Purchaser has no
convertible securities, options, warrants, or other contracts, commitments,
agreements, understandings, arrangements or restrictions by which it is bound to
issue any additional shares of its capital stock or other securities. All
securities of Purchaser were offered and sold in compliance with applicable
Federal and state securities laws. Each and every dividend of the Purchaser, if
any, whether paid in cash or other property, has been declared and paid in
compliance with applicable law, and the Purchaser has no further obligation with
respect to such payment.
6.6. Compliance with Laws.
(a) Purchaser is in compliance with, and Purchaser operated any
businesses previously owned by it in compliance with all applicable laws,
orders, rules and regulations of all Governmental Authorities, including
applicable Environmental Laws, except for such noncompliance as would not,
individually or in the aggregate, have a Material Adverse Effect. Purchaser has
not received notice of any noncompliance with the foregoing.
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(b) Neither Purchaser nor any other Persons providing services for
Purchaser have, to the knowledge of Purchaser, engaged in any activities which
would be a basis for exclusion from any otherwise available Medicare, Medicaid
or other federally funded programs under Section 0000x - 0x xx Xxxxx 00 xx xxx
Xxxxxx Xxxxxx Code, or prohibited under any applicable portions of Section 1320a
- 7b of such Title 42, or regulations promulgated thereunder, or related state
or local statutes or regulations, including any "fraud and abuse" provisions,
except where such noncompliance has and will have, individually and in the
aggregate, no Material Adverse Effect.
(c) Without limiting the foregoing, Purchaser and any other
person or entity for whose conduct Purchaser is legally held responsible are in
compliance with all Environmental Laws, except where such noncompliance has and
will have, individually or in the aggregate, no Material Adverse Effect. Neither
Purchaser, nor any other person or entity for whose conduct Purchaser is legally
responsible has received any notice, demand, request for information, or
administrative inquiry relating to any violation of an Environmental Law or the
institution of any suit, action, claim, or proceedings alleging such violation
or investigation by any Governmental Authority or any third party of any such
violation.
6.7. Licenses and Permits. Purchaser holds and is in compliance with all
licenses, permits, concessions, grants, franchises, approvals and authorizations
necessary or required for the use or ownership of its assets and the operation
of its business, except where the failure to hold such license, permit,
concession, grant, franchise, approval or authorization has and will have,
individually or in the aggregate, no Material Adverse Effect. Purchaser has not
received notice of any violations in respect of any such licenses, permits,
concessions, grants, franchises, approvals or authorizations, which violations,
individually or in the aggregate, would have a Material Adverse Effect. No
proceeding is pending or, to the knowledge of Purchaser, threatened, which seeks
revocation or limitation of any such licenses, permits, concessions, grants,
franchises, approvals or authorizations, nor is there any basis therefor, the
revocation or limitation of which, individually or in the aggregate, would have
a Material Adverse Effect.
6.8. Liabilities and Obligations of Purchaser.
(a) Attached hereto as Schedule 6.8 are true, correct and complete
copies of Purchaser's balance sheets as of December 31, 1997 and December 31,
1998, and unaudited balance sheet as of March 31, 1999, and the related
statements of income, stockholders' equity and cash flows for the years and
three months then ended, together (except in the case of the financial
statements dated March 31, 1999) with the reports of independent public
accountants thereon (collectively, the "Purchaser Financial Statements"). The
Purchaser Financial Statements are complete, have been prepared in accordance
with generally accepted accounting principles, consistently applied, fairly
present in all material respects the financial condition of Purchaser as of the
respective dates thereof, and disclose all liabilities of Purchaser, whether
absolute, contingent, accrued or otherwise, existing as of the date thereof that
are of a nature required to be reflected in financial statements prepared in
accordance with generally accepted accounting principles, and except for
liabilities that, individually or in the aggregate, would not have a Material
Adverse Effect; provided, however, that the interim financial statements are
subject to normal year-end adjustments which are not expected to be material in
amount.
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(b) Purchaser has no liability or obligation (whether accrued,
absolute, contingent or otherwise) including, without limitation, any liability
that might result from an audit of its Tax Returns by any Tax Authority, except
for (i) liabilities that, individually or in the aggregate, would not have a
Material Adverse Effect, (ii) the liabilities and obligations of Purchaser that
are disclosed or reserved against in the Purchaser Financial Statements or
Schedule 6.8 hereto, to the extent and in the amounts so disclosed or reserved
against, and (iii) liabilities incurred or accrued in the ordinary course of
business since March 31, 1999 and liabilities incurred in connection with the
Transactions.
(c) Except as disclosed in the Purchaser Financial Statements or
Schedule 6.8, Purchaser is not in default with respect to any liabilities or
obligations, except for defaults that, individually or in the aggregate would
not have a Material Adverse Effect, and all such liabilities or obligations
shown or reflected in the Purchaser Financial Statements or Schedule 6.8 and
such liabilities incurred or accrued subsequent to March 31, 1999 were incurred
in the ordinary course of business except as indicated in Schedule 6.8, and
except for liabilities and obligations, that, individually or in the aggregate,
would not have a Material Adverse Effect.
6.9. Taxes.
Except as to any noncompliance with any of the following provisions
that would not, individually or in the aggregate, have a Material Adverse
Effect:
(a) All Tax Returns required to be filed by Purchaser and/or its
Affiliated Group on or before the date hereof have been timely filed with the
appropriate Tax Authorities in all jurisdictions in which such Tax Returns are
required to be filed and all amounts shown as owing thereon have been paid. All
Taxes which have become due or payable on or prior to the date hereof, whether
disputed or not, have been paid in full. All Taxes which are required to be
collected or withheld by Purchaser and its Affiliated Group on or prior to the
date hereof have been so collected or withheld. All deposits required by law to
be made by Purchaser and its Affiliated Group on or prior to the date hereof
with respect to employees' withholding Taxes have been duly made. No employee of
Purchaser or any member of its Affiliated Group responsible for Tax matters (i)
has received notice from any Tax Authority of the assessment or proposed
assessment of Tax liabilities, disallowances, or assessments which remain unpaid
and, (ii) has knowledge of any fact or facts which exist(s) or has existed which
would constitute grounds for the assessment of any Tax liability. There is no
examination currently in progress of the Tax Returns of Purchaser or its
Affiliated Group by any Taxing Authority for which any employee of Purchaser or
any of its Affiliated Group has received any notice, and, to the knowledge of
employees of Purchaser or any member of its Affiliated Group responsible for Tax
matters based upon personal contact with any agent of such Tax Authority, no
such examination has been threatened by any Taxing Authority.
(b) Purchaser has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. Purchaser has not made any payments which
have not yet been reported on any Tax Return, is not obligated to make any
payments, and is not a party to any agreement that under certain circumstances
could obligate the Purchaser and its Affiliated Group to make any payments that
will not be deductible under Section 280G of the Code. Purchaser and its
Affiliated Group has disclosed on its federal income Tax Returns all positions
taken therein that could give
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rise to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code.
(c) Neither Purchaser nor its Affiliated Group has any contractual
obligation to indemnify any other person with respect to the payment of any
Taxes of the other person which could have a Material Adverse Effect.
(d) Purchaser and its Affiliated Group's financial statements for the
year ended December 31, 1998 and the unaudited interim quarter ending March 31,
1999 reflect an adequate reserve for deferred taxes established for timing
differences between book and tax accounting income/asset basis. Purchaser and
its Affiliated Group have not recognized a net tax asset for the future benefit
of net operating loss carryovers and research and experimentation tax credit
carryovers.
6.10. Contracts, Agreements and Instruments Generally. Schedule 6.10 hereto
consists of a true and complete list of all contracts, agreements, commitments
and other instruments (identified by title, date and parties) (whether oral or
written) to which Purchaser is a party that involve a receipt or an expenditure
by Purchaser or require the performance of services or delivery of goods to, by,
through, on behalf of or for the benefit of Purchaser, which in each case
relates to a contract, agreement, commitment or instrument that requires (or is
reasonably expected to require) payments or provides (or is reasonably expected
to provide) for receipts in excess of $25,000 from the Closing Date until the
first (lst) anniversary thereof.
The contracts, agreements, commitments and other instruments listed or
required to be listed on Schedule 6.10 or listed on a Schedule referred to in
Section 6.12 hereof are herein referred to as the "Material Contracts". All of
the Material Contracts are in full force and effect.
None of the Company, and, to the knowledge of Purchaser, any other
party to any such contract, commitment or arrangement has breached any provision
of, or is in default under, the terms thereof, the breach of or default under
which would, individually or in the aggregate, have a Material Adverse Effect;
and there are no existing facts or circumstances known to Purchaser that would
prevent the work in process of Purchaser or its contracts and agreements from
maturing upon performance by Purchaser into collectible accounts receivable in
the aggregate in amounts consistent with historical experience. Except as set
forth on Schedule 6.10 or as reserved against in the Purchaser Financial
Statements, there are no contracts or commitments that require the performance
of services or provision of goods by Purchaser at a direct cost for each such
contract or commitment known by Purchaser to be in excess of the revenue to be
derived pursuant to the terms of such contract or commitment, which,
individually or in the aggregate, would have a Material Adverse Effect. Except
for terms specifically described in Schedule 6.10, Purchaser has not received
any payment from any contracting party in connection with or as an inducement
for entering into any contract, agreement, policy or instrument except for
payment for actual services rendered or to be rendered by Purchaser consistent
with amounts historically charged for such services.
6.11. Customer Contracts. With respect to each Customer Contract,
all performance warranties with respect to Owned Software made by Purchaser in
any Customer Contract, including
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warranties with respect to capacity, availability, downtime and response time,
and Year 2000 compliance have been satisfied in all material respects upon the
terms and conditions and to the extent provided for in such Customer Contract,
except for failures to satisfy which, individually or in the aggregate, would
not have a Material Adverse Effect.
6.12. Intellectual Property; Computer Software.
(a) Schedule 6.12(A) hereto sets forth (i) a complete and correct list
of all trademarks, trade names, service marks, service names, and brand names
(whether or not any of the same are registered), and all patents and registered
copyrights and all applications for the foregoing, if any, (setting forth the
registration, issue or serial number of the patents and registered copyrights
and a description of the same) applicable to or used in the business of
Purchaser; (ii) the owner of such intellectual property and any registration
thereof or application thereof; and (iii) a complete list of all licenses
granted by or to Purchaser with respect to any of the above (identified by
title, date and parties) (not inclusive of Customer Contracts). All such
trademarks, trade names, service marks, service names, brand names, copyrights
and patents are owned by Purchaser free and clear of all liens, claims, security
interests and encumbrances, except for such liens, claims, security interests
and encumbrances as would, individually or in the aggregate, not have a Material
Adverse Effect. Except as set forth on Schedule 6.12(A), Purchaser is not
currently in receipt of any notice of any violation of, and, to Purchaser's
knowledge, Purchaser is not violating the rights of others in any trademark,
trade name, service xxxx, copyright, patent, trade secret, know-how or other
intangible asset, except such violations as, individually or in the aggregate,
would not have a Material Adverse Effect.
(b) Schedule 6.12(B) contains a complete and accurate list of all
Owned Software. Except as set forth on Schedule 6.12(B), Purchaser has title to
the Owned Software, free and clear of all claims, including claims or rights of
employees, agents, consultants, inventors, customers, licensees or other parties
involved in the development, creation, marketing, maintenance, enhancement or
licensing of such computer software. Except as set forth on Schedule 6.12(B) and
except for commercially available, over-the-counter "shrink-wrap" software, the
Owned Software is not dependent on any Licensed Software (as defined in
subsection (c) below) in order to operate fully in the manner in which it is
intended. The source code to the Owned Software has not been published or
disclosed to any other parties, except as set forth in the Customer Contracts or
as set forth on Schedule 6.12(B), and except pursuant to contracts requiring
such other parties to keep the Owned Software confidential. To the knowledge of
Purchaser, no such other party has breached any such obligation of
confidentiality.
(c) Schedule 6.12(C) contains a complete and accurate list of all
Licensed Software. Purchaser has the right and license to use, sublicense,
modify and copy Licensed Software to the extent set forth in the respective
license, lease or similar agreement pursuant to which the Licensed Software is
licensed to Purchaser, free of any other limitations or encumbrances, and
Purchaser is in compliance with all applicable provisions of such agreement,
except for failures to comply which, individually or in the aggregate, would not
have a Material Adverse Effect. Except as disclosed on Schedule 6.12(C), none of
the Licensed Software has been incorporated into or made a part of any Owned
Software or any other Licensed Software. Purchaser has not published or
disclosed any Licensed Software to any other party except in accordance with and
as permitted
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by any license, lease or similar agreement relating to the Licensed Software and
except pursuant to contracts requiring such other parties to keep the Licensed
Software confidential. No party to whom Purchaser has disclosed Licensed
Software has, to the knowledge of Purchaser, breached such obligation of
confidentiality, except for such publications and disclosures that, individually
or in the aggregate, would not have a Material Adverse Effect.
(d) The Owned Software and Licensed Software and commercially
available over-the-counter "shrink-wrap" software constitute all software used
in the businesses of Purchaser (collectively, the "Purchaser Software"). The
Transactions will not cause a breach or default under any licenses, leases or
similar agreements relating to Purchaser Software or impair Purchaser's ability
to use Purchaser Software in the same manner as such computer software is
currently used by Purchaser. To the knowledge of Purchaser, (i) Purchaser is not
infringing any intellectual property rights of any other person or entity with
respect to Purchaser Software, and (ii) no other person or entity is infringing
any intellectual property rights of Purchaser with respect to Purchaser
Software, except for infringements that, individually or in the aggregate, would
not have a Material Adverse Effect.
6.13. Labor Matters. Except as set forth on Schedule 6.13, within the last
three (3) years Purchaser has not been the subject of any known union activity
or labor dispute, nor has there been any strike of any kind called or, to the
knowledge of Purchaser, threatened to be called against Purchaser. Purchaser has
not violated any applicable federal or state law or regulation relating to labor
or labor practices, except where such violation has and will have, individually
or in the aggregate, no Material Adverse Effect. Schedule 6.13 sets forth a
true, correct and complete list of employer loans or advances from Purchaser to
its employees. Purchaser is in compliance with all applicable requirements of
the Immigration Laws, except where such noncompliance has and will have,
individually or in the aggregate, no Material Adverse Effect.
6.14. Work-in-Process, Orders and Returns.
(a) Except as set forth on Schedule 6.14(A), as of the date hereof,
except for any claims specifically disclosed on other Schedules hereto, to
Purchaser's knowledge, there are no claims nor does Purchaser reasonably expect
to make or receive any claims to terminate Customer Agreements, or material
licenses, services, or other orders, or for refunds relating to Customer
Agreements, licenses, maintenance agreements, or other fees by reason of alleged
dissatisfaction with Purchaser's capabilities or performance (including those
related to Purchaser Software), or defective or unsatisfactory services or
products, except as would not result in, individually or in the aggregate, a
Material Adverse Effect.
(b) Except as set forth on Schedule 6.14(B), Purchaser has not been
notified that the consummation of the Transactions will result in any material
cancellations or withdrawals of accepted and unfilled orders for services or
Purchaser Software, or maintenance or other services and Purchaser will inform
Purchaser promptly upon receipt of any notification to that effect received
after the date hereof, except for cancellations or withdrawals that,
individually or in the aggregate, would not have a Material Adverse Effect. To
the knowledge of Purchaser, neither the execution of this Agreement nor the
consummation of the Transactions will result in any material cancellations or
withdrawals of accepted and unfilled orders for the license or sales of
Purchaser Software,
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services or merchandise, except for cancellations or withdrawals that,
individually or in the aggregate, would not have a Material Adverse Effect.
6.15. Absence of Certain Changes. Except as reflected on Schedule 6.15, or
elsewhere in this Agreement or specifically identified on any Schedules hereto,
and since March 31, 1999, Purchaser has not and at the Closing Date will not
have:
(a) Suffered a Material Adverse Effect, or become aware of any
circumstances which might reasonably be expected to result in such a Material
Adverse Effect; or suffered any material casualty loss to the Assets (whether or
not insured), except for losses that, individually or in the aggregate, would
not have a Material Adverse Effect;
(b) Incurred any obligations specifically related to the Assets
(including Customer Agreements), except in the ordinary course of business
consistent with past practices;
(c) Permitted or allowed any of the Assets to be mortgaged, pledged,
or subjected to any lien or encumbrance, except for liens for Taxes not yet due
and payable and liens and encumbrances that, individually or in the aggregate,
would not have a Material Adverse Effect;
(d) Written down the value of any inventory, contract or other
intangible asset, or written off as uncollectible any notes or accounts
receivable or any portion thereof, except for write-downs and write-offs in the
ordinary course of business, consistent with past practice and at a rate no
greater than during the latest complete fiscal year; cancelled any other debts
or claims, or waived any rights of substantial value, or sold or transferred any
of its material properties or assets, real, personal, or mixed, tangible or
intangible, except in the ordinary course of business and consistent with past
practice and except for those that, individually or in the aggregate, would not
have a Material Adverse Effect;
(e) Sold, licensed or transferred or agreed to sell, license or
transfer, any of the Assets, except in the ordinary course of business and
consistent with past practice;
(f) To Purchaser's knowledge, received notice of any pending or
threatened adverse claim or an alleged infringement of proprietary material,
whether such claim or infringement is based on trademark, copyright, patent,
license, trade secret, contract or other restrictions on the use or disclosure
of proprietary materials;
(g) Incurred obligations to refund money to customers, except in the
ordinary course of business, all of which will have no Material Adverse Effect;
(h) Become aware of any event, condition or other circumstance
relating solely to the Assets (as opposed to any such event, condition, or
circumstance which is, for example, national or industry-wide in nature) which
might reasonably be expected to materially adversely affect the Assets;
(i) Made any capital expenditures or commitments, any one of which is
more than $50,000, for additions to property, plant, or equipment;
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(j) Made any material change in any method of accounting
or accounting practice;
(k) Paid, loaned, guaranteed, or advanced any material amount to, or
sold, transferred, or leased any material properties or assets (real, personal,
or mixed, tangible or intangible) to, or entered into any agreement,
arrangement, or transaction with any of Purchaser's officers or directors, or
any business or entity in which any officer or director of Purchaser, or any
affiliate or associate of any of such Persons has any direct or indirect
interest; or
(l) Agreed to take any action described in this Section 6.15.
The Company and Parent acknowledge and agree that a decrease in the
market price of Purchaser Common Stock is not a material adverse change.
6.16. Leases. Schedule 6.16 contains a list of all leases pursuant to which
Purchaser leases real or personal property, and copies of all such leases have
been delivered to the Company and Parent. All such leases are in full force and
effect, and except as set forth on Schedule 6.16, no event has occurred which is
a default or which with the passage of time will constitute a default by
Purchaser thereunder, nor has any such event occurred to the knowledge of
Purchaser which is a default by any other party to such lease. All property
leased by Purchaser as lessee is in the possession of Purchaser. Except as
indicated in Schedule 6.16, no consent of any lessor is required in connection
with the Transactions.
6.17. Litigation. Except as set forth in Schedule 6.17, (i) there are no
actions, proceedings or regulatory agency investigations against Purchaser or,
to Purchaser's knowledge, involving the Assets pending (served) or threatened
against Purchaser, (ii) Purchaser does not know of any such action, proceeding
or investigation against Purchaser, and (iii) no such action, proceeding, or
regulatory agency investigation has been pending (served) during the three-year
period preceding the date of this Agreement.
6.18. Employee Benefit Plans: Employees.
Except as to any noncompliance with any of the following provisions
that would not, individually, or in the aggregate, have a Material Adverse
Effect.
(a) Schedule 6.18 sets forth a list of each Employee Benefit Plan that
is currently in effect for the benefit of (i) directors or employees of
Purchaser, (ii) former directors or employees of Purchaser, or (iii)
beneficiaries of anyone described in (i) or (ii) (collectively, "Purchaser
Employees") or with respect to which Purchaser or any ERISA Affiliate has any
obligation on behalf of any Purchaser Employee. Except as disclosed on Schedule
6.18 attached hereto, there are no other benefits to which any Purchaser
Employee is entitled for which Purchaser has any obligation.
(b) Purchaser has delivered to Parent and the Company, with respect to
each Employee Benefit Plan, true and complete copies of (i) the documents
embodying the plan, including, without limitation, the current plan documents
and documents creating any trust
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maintained pursuant thereto, all amendments, group annuity contracts, insurance
contracts, the most recent summary plan description, if any, and employee
handbooks, (ii) annual reports including but not limited to Forms 5500, 990 and
1041 for the last two (2) years for the plan and any related trust; (iii) any
communication involving the plan or any related trust to or from the IRS, DOL,
PBGC or any other governmental authority since January 1, 1998, but excluding
any IRS determination letter submission; and (iv) the most recent determination
letter received from the IRS pertaining to any Employee Benefit Plan intended to
qualify under Sections 401(a) or 501(c)(9) of the Code.
(c) Purchaser has no obligation to contribute to or provide benefits
pursuant to, and has no other liability of any kind with respect to, (i) a
"multiple employer welfare arrangement" (within the meaning of Section 3(40) of
ERISA), or (ii) a "plan maintained by more than one employer" (within the
meaning of Section 413(c) of the Code).
(d) Except as otherwise set forth on Schedule 6.18 attached hereto,
Purchaser is not liable for any contribution, tax, lien, penalty, cost,
interest, claim, loss, action, suit, damage, cost assessment or other similar
type of liability or expense of any ERISA Affiliate (including predecessors
thereof) with regard to any Employee Benefit Plan maintained, sponsored or
contributed to by an ERISA Affiliate (if a like definition of Employee Benefit
Plan were applicable to the ERISA Affiliate in the same manner as it applies to
Purchaser), including, without limitation, withdrawal liability arising under
Title IV, Subtitle E, Part 1 of ERISA, liabilities to the PBGC, or liabilities
under Section 412 of the Code or Section 302(a) of ERISA.
(e) Purchaser has complied in all respects with COBRA.
(f) With respect to each Employee Benefit Plan and except as otherwise
set forth on Schedule 6.18 attached hereto:
(i) each Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code has received a determination letter from the
IRS to the effect that the Employee Benefit Plan is qualified under Section 401
of the Code and that any trust maintained pursuant thereto is exempt from
federal income taxation under Section 501 of the Code, and nothing has occurred
or, to the knowledge of Purchaser, is expected to occur that caused or could
reasonably be expected to cause the loss of such qualification or exemption or
the imposition of any penalty or tax liability;
(ii) all payments required by the Employee Benefit Plan or by law
(including all contributions, insurance premiums, premiums due the PBGC or
intercompany charges) with respect to all periods through the date hereof have
been made;
(iii) there are no violations of or failures to comply with ERISA
and the Code with respect to the filing of applicable reports, documents, and
notices regarding the Employee Benefit Plan with DOL, the IRS, the PBGC or any
other governmental authority, or any of the assets of the Employee Benefit Plan
or any related trust;
(iv) no claims, lawsuit, arbitration or other action has been
asserted or instituted or, to the knowledge of Purchaser, threatened in writing
against the Employee Benefit
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Plan, any trustee or fiduciaries thereof, Purchaser or any ERISA Affiliate, any
director, officer or employee thereof, or any of the assets of the Employee
Benefit Plan or any related trust, except for routine claims for benefits;
(v) any bonding required with respect to the Employee Benefit
Plan in accordance with the applicable provisions of ERISA has been obtained and
is in full force and effect;
(vi) the Employee Benefit Plan complies in all respects with and
has been maintained and operated in all respects in accordance with its
respective terms and the terms and the provisions of applicable law, including,
without limitation, ERISA and the Code (including rules and regulations
thereunder);
(vii) no "prohibited transaction" (within the meaning of Section
4975 of the Code and Section 406 of ERISA) has occurred or is reasonably
expected to occur with respect to the Employee Benefit Plan (and the
transactions contemplated by this Agreement will not constitute or directly or
indirectly result in such a "prohibited transaction") which has subjected or, to
the knowledge of Purchaser, could reasonably be expected to subject Purchaser,
any ERISA Affiliate or the Company, or any officer, director or employee of
Purchaser, any ERISA Affiliate, or the Company, or the Employee Benefit Plan
trustee, administrator or other fiduciary, to a tax or penalty on prohibited
transactions imposed by either Section 502 of ERISA or Section 4975 of the Code
or any other liability with respect thereto, which tax, penalty or liability
could have a Material Adverse Effect;
(viii) to the knowledge of Purchaser, the Employee Benefit Plan
is not under audit or investigation by the IRS or the DOL or any other
governmental authority and no such completed audit, if any, has resulted in the
imposition of any tax, interest or penalty.
(g) Purchaser is not subject to any liens, excise or other taxes under
ERISA, the Code or other applicable law relating to any Employee Benefit Plan.
(h) None of the Employee Benefit Plans is subject to Title IV of
ERISA.
(i) In the case of any Employee Benefit Plan that is a Multiemployer
Plan, Purchaser has no withdrawal liability under Part 1 of Subtitle E of Title
IV of ERISA as a result of either a "complete withdrawal" (as defined in Section
4203 of ERISA) or a "partial withdrawal" (as defined in Section 4205 of ERISA)
by Purchaser from such Employee Benefit Plan occurring on or prior to the date
hereof.
(j) The consummation of the Transactions will not give rise to any
liability for any employee benefits, including, without limitation, liability
for severance pay, unemployment compensation, termination pay or withdrawal
liability, or accelerate the time of payment or vesting or increase the amount
of compensation or benefits due to any Purchaser Employee.
(k) No amounts payable under any Employee Benefit Plan will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code, as such Section of the Code is currently in effect.
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(l) Except as set forth on Schedule 6.18 attached hereto, no Employee
Benefit Plan provides for any health benefits (other than under COBRA, the
Federal Social Security Act or any Employee Benefit Plan qualified under Section
401(a) of the Code) to any Purchaser Employee who, at the time the health
benefit is to be provided, is a former director or former employee of Purchaser
(or a beneficiary of any such person), nor, to the knowledge of Purchaser, have
any representations, agreements, covenants or commitments been made to provide
such health benefits.
(m) Since March 31, 1999 and through the date hereof, except as set
forth on Schedule 6.18 attached hereto or as required by applicable law or
consistent with past practice, neither Purchaser nor any ERISA Affiliate has,
nor will it, (i) institute or agree to institute any new employee benefit plan
or practice for any Purchaser Employee, (ii) make or agree to make any change in
any Employee Benefit Plan, (iii) make or agree to make any increase in the
compensation payable or to become payable by Purchaser or any ERISA Affiliate to
any Purchaser Employee, other than regularly scheduled increases, or (iv) except
pursuant to this Agreement and except for contributions required to provide
benefits pursuant to the provisions of the Employee Benefit Plans, pay or accrue
or agree to pay or accrue any bonus, percentage of compensation, or other like
benefit to, or for the credit of, any Purchaser Employee.
(n) Any contribution, insurance premium, excise tax, interest charge
or other liability or charge imposed or required with respect to any Employee
Benefit Plan which is attributable to any period or any portion of any period
prior to the Closing shall, to the extent required by GAAP, be reflected as a
liability on the Purchaser Financial Statements, including, without limitation,
any portion of the matching contribution required with respect to the Purchaser
Plan for the plan year ending after the Closing which is attributable to
elective contributions made by Purchaser Employees in such plan prior to the
Closing.
6.19. Brokers Fees and Expenses. Neither Purchaser nor any affiliate
thereof has retained or utilized the services of any advisor, broker, finder, or
intermediary, or paid or agreed to pay any fee or commission to any other Person
or entity for or on account of the Transactions, or had any communications with
any Person or entity which would obligate the Company or Parent to pay any such
fees or commissions.
6.20. Bank Accounts. Schedule 6.20 contains a true, complete and correct
list showing the name and location of each bank or other institution in which
Purchaser has any deposit account or safe deposit box, together with a listing
of account numbers and names of all Persons authorized to draw thereon or have
access thereto.
6.21. Business Practices. Neither Purchaser nor anyone acting on its behalf
has made any payment of funds of Purchaser prohibited by law, and no funds of
Purchaser have been set aside to be used for any payment prohibited by law.
6.22. Insurance. Purchaser maintains property, fire, casualty, general
liability insurance and other forms of insurance relating to its assets and the
operation of its business against risks of the kind customarily insured against
and in amounts customarily insured (and, where appropriate, in amounts not less
than the replacement cost of the assets). Purchaser shall maintain such
insurance policies in full force and effect at least through the Closing Date.
Schedule 6.22 lists all of the
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insurance policies maintained by Purchaser, which Schedule includes the name of
the insurance company, the policy number, a description of the type of insurance
covered by such policy, the dollar limit of the policy, and the annual premiums
for such policy.
6.23. Tax Free Reorganization. To the knowledge of Purchaser there is no
fact pertaining to it that would prevent the Merger from qualifying as a
tax-free reorganization under the Code. Purchaser has no present intention to
redeem or reacquire any of its stock to be issued pursuant to the Merger.
Purchaser has no present intention to dispose of any of the assets of the
Company acquired in the Merger, except for dispositions made in the ordinary
course of business or transfers described in Code Section 368(a)(2)(C).
6.24. No Existing Discussion. As of the date hereof, Purchaser is not
engaged directly or indirectly, in any discussion or negotiations with any other
party with respect to an Acquisition Proposal.
6.25. Shares to be Delivered. The Merger Shares to be issued with respect
to previously outstanding Company Capital Stock when issued and delivered to
Parent pursuant to this Agreement will be duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock of Purchaser. Upon delivery of
the Merger Shares after the Closing, Parent will receive good and unencumbered
title to the Merger Shares, free and clear of all liens, restrictions, charges,
encumbrances and other security interests of any kind or nature whatsoever,
except for restrictions existing under applicable securities laws regarding
transferability of the Merger Shares.
6.26. Accuracy of Securities Filings; Financial Statements.
(a) Except as set forth in Schedule 6.26, Purchaser has made all
filings with the SEC that it has been required to make under the Securities and
Exchange Act, and has done so in a timely manner. Purchaser has furnished, or
otherwise made available, the Securities Filings to the Company and Parent. Each
of the Securities Filings has complied with the Securities Act and the Exchange
Act in all material respects. None of the Securities Filings, as of their
respective dates, to Purchaser's knowledge, contain any untrue statement of any
material fact or omit to state a material fact required therein to be stated or
omit to state a material fact in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of Purchaser for
inclusion in the Proxy Statement will, at the date of the filing of the Proxy
Statement with the SEC, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
(b) The financial statements of Purchaser included and/or incorporated
by reference into the Securities Filings (including the related notes and
schedules) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, present fairly the financial
condition of Purchaser as of the indicated dates and the results of operations
of Purchaser for the indicated periods, are consistent with the books and
records of Purchaser and, except as disclosed on Schedule 6.26, do not contain
any material item of special or non-recurring or other income not earned in the
ordinary course of business; provided, however, that
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the interim financial statements are subject to normal year-end adjustments
which are not expected to be material in amount.
(c) Except as and to the extent specifically disclosed in this
Agreement, on the date hereof, there are, and prior to Closing will be, no
liabilities or obligations of Purchaser of any nature, whether liquidated,
accrued, absolute, continued or otherwise except for those (i) that are
specifically reflected or reserved against as to amount in the latest balance
sheet contained in the Securities Filings, or (ii) that arose thereafter in the
ordinary course of business, or (iii) that it specifically set forth on Schedule
6.8 attached hereto; and at the Closing, there will be no liabilities or
obligations of Purchaser of any nature, whether liquidated or unliquidated,
accrued, absolute, contingent or otherwise which are material individually or in
the aggregate, except for those (A) that are specifically reflected or reserved
against as to amount in the latest balance sheet contained in the Securities
Filings, or (B) that arise after the date of such balance sheet in the ordinary
course of business (and are immaterial) or (C) that are specifically set forth
on Schedule 6.26.
6.27. Approvals. The execution and delivery of this Agreement and the
consummation of the Transactions by Purchaser will not require the consent,
approval, order or authorization of any governmental entity or regulatory
authority or any other Person under any statute, law, rule, regulation (other
than applicable federal and state securities laws), permit, license, agreement,
indenture or other instrument to which Purchaser is a party or to which any of
its properties are subject, except for such consents, approvals, actions,
filings or notices the failure of which to make or obtain will not have a
Material Adverse Effect on Purchaser, and except for any federal or state
filings required by applicable securities laws (such as the Proxy Statement),
and the filing of the listing application for the Merger Shares with NASDAQ
National Market, no declaration, filing or registration with any governmental
entity or regulatory authority is required by Purchaser in connection with the
execution and delivery of this Agreement, the consummation of the Transactions,
or the performance by Purchaser of its obligations hereunder.
6.28. Accuracy of Representations. No representation or warranty by
Purchaser contained in this Agreement and no statement contained in any
certificate or schedule furnished to the Company or Parent pursuant to the
provisions hereof contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein not
misleading. To the knowledge of Purchaser, there is no current event or
condition of any kind or character pertaining to Purchaser that may reasonably
be expected to have a Material Adverse Effect, except as disclosed herein.
6.29. NASDAQ Rules. The consummation of the Transactions will not result in
violation by Purchaser of any applicable NASDAQ rules or requirements.
ARTICLE 7.
INDEMNIFICATION
7.1. Indemnification by Parent. Parent hereby indemnifies and holds
harmless Purchaser and each of its affiliates, directors, officers, employees,
advisors and agents from and
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against all claims, liabilities, lawsuits, costs, damages or expenses
(including, without limitation, reasonable attorneys' fees and expenses incurred
in litigation or otherwise) arising out of and sustained by any of them due to
(a) any misrepresentation or breach of any representation, warranty, covenant or
agreement of Company or Parent contained in this Agreement or any document
executed and delivered by Parent or the Company in connection with the
Transactions ("Transaction Documents"); or (b) the ownership or use of the
Assets, including, without limitation, any and all claims, liabilities, Taxes,
debts, contracts, agreements, obligations, damages, costs and expenses, known or
unknown, fixed or contingent, claimed or demanded by third parties against the
Surviving Corporation arising out of the operation of the Company's business
prior to the Closing Date or as a result of the Transactions, which were not
specifically disclosed herein or in the Schedules attached hereto; (collectively
all claims described in this Section 7.1, being "Section 7.1 Indemnified
Claims").
7.2. Indemnification by Surviving Corporation. The Surviving Corporation,
hereby indemnifies and holds harmless Parent and each of its affiliates,
directors, officers, employees, advisors and agents from and against all claims,
liabilities, lawsuits, costs, damages or expenses (including, without
limitation, reasonable attorneys' fees and expenses incurred in litigation or
otherwise) arising out of and sustained by any of them due to (a) any
misrepresentation or breach of any representation, warranty, covenant or
agreement of Purchaser contained in this Agreement or any of the Transaction
Documents; or (b) the ownership or use of the Assets, including, without
limitation, any and all claims, liabilities, Taxes, debts, contracts,
agreements, obligations, damages, costs and expenses, known or unknown, fixed or
contingent, claimed or demanded by third parties against the Parent arising out
of the operation of the Purchaser's business prior to or after the Closing Date
(except as to Purchaser's business previously owned and operated by the Company,
only after the Closing Date) or as a result of the Transactions, which were not
specifically disclosed herein or in the Schedules attached hereto (collectively
all claims described in this Section 7.2, being "Section 7.2 Indemnified
Claims").
7.3. Provisions Regarding Indemnification. The indemnified party (or
parties) shall promptly notify the indemnifying party (or parties) of any claim,
demand, action or proceeding for which indemnification will or may be sought
under Section 7.1 or 7.2 of this Agreement and, if such claim, demand, action or
proceeding is a third party claim, demand, action or proceeding, the
indemnifying party will have the right, at its expense, to assume the defense
thereof using counsel reasonably acceptable to the indemnified party. The
indemnified party shall have the right to participate in at its own expense, but
not control, the defense of any such third party claim, demand, action or
proceeding. In connection with any such third party claim, demand, action or
proceeding, Parent and Purchaser shall cooperate with each other. No such third
party claim, demand, action or proceeding shall be settled without the prior
written consent of the indemnified party provided, however, that if a firm,
written offer is made to settle any such third party claim, demand, action or
proceeding (which offer does not involve the admission of guilt or wrongdoing by
any indemnified party) and the indemnifying party proposes to accept such
settlement and the indemnified party refuses to consent to such settlement,
then: (i) the indemnifying party shall be excused from, and the indemnified
party shall be solely responsible for, all further defense of such third party
claim, demand, action or proceeding; and (ii) the maximum liability of the
indemnifying party relating to such third party claim, demand, action or
proceeding shall be the amount of the proposed settlement
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if the amount thereafter recovered from the indemnified party on such third
party claim, demand, action or proceeding is greater than the amount of the
proposed settlement.
7.4. Survival. The representations and warranties contained in this
Agreement and in the Transaction Documents delivered at the Closing shall
survive the Closing for a period ending on the first (1st) anniversary date of
the Closing and shall thereafter cease to be of any force and effect, except for
(a) claims as to which notice has been given in accordance with Section 7.3
hereof prior to such date and which are pending on such date and (b)
representations and warranties relating to: (i) title to the Assets (Sections
5.3 and 6.4 hereof), (ii) ownership of stock of the Company and Purchaser
(Sections 5.5 and 6.5 hereof), (iii) Taxes (Sections 5.9 and 6.9 hereof) and
(iv) employee benefits (Sections 5.18 and 6.18 hereof), each of which shall
survive until the end of the statute of limitations applicable to the underlying
claim for which indemnification is sought.
7.5. Limitations.
(a) Notwithstanding anything to the contrary contained herein,
Purchaser will not assert a claim against Parent under this Article 7 until the
total of all Section 7.1 Indemnified Claims exceeds in the aggregate $1,000,000
(the "Base Amount"), at which time all Section 7.1 Indemnified Claims in excess
of such Base Amount may be claimed in full and, if indemnifiable under this
Article 7, shall be indemnified in full.
(b) Notwithstanding anything to the contrary contained herein, Parent
will not assert a claim against Purchaser under this Article 7 until the total
of all Section 7.2 Indemnified Claims exceeds the Base Amount, at which time all
Section 7.2 Indemnified Claims in excess of such Base Amount may be claimed in
full and, if indemnifiable under this Article 7, shall be indemnified in full.
(c) All Section 7.1 or Section 7.2 Indemnified Claims shall be
satisfied by delivery from the indemnifying to the indemnified party of a number
of shares of Purchaser Common Stock having a value equal to the amount of the
Section 7.1 or Section 7.2 Indemnified Claims, based on the market price of
Purchaser Common Stock as of the date the indemnified party paid the amount(s)
giving rise to the Section 7.1 Indemnified Claim or Section 7.2 Indemnified
Claim.
(d) Any indemnification claims of Purchaser or Parent pursuant to
Section 4.1 hereof shall not be subject to any of the terms or limitations
described in this Article 7.
(e) The satisfaction of all Section 7.1 Indemnified Claims and Section
7.2 Indemnified Claims shall be deemed to constitute adjustments to the
aggregate consideration paid by Purchaser pursuant to the Merger.
7.6. No Recourse Against the Company. Parent hereby irrevocably waives any
and all right to recourse against the Company with respect to any breach of any
representation, warranty, covenant, or noncompliance with any conditions or
covenants, given or made by Parent or the Company in this Agreement or any
document, certificate or agreement entered into or delivered pursuant hereto.
Parent shall not be entitled to contribution from, subrogation to or recovery
against
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the Company with respect to any liability of Parent or the Company that may
arise under or pursuant to this Agreement or the Transactions.
7.7. Effect of Insurance. With respect to any indemnifiable claim
hereunder, the amount recoverable by the party seeking indemnification shall
take into account any reimbursements realized by such party from insurance
policies or other indemnification sources, arising from the same incident or set
of facts or circumstances giving rise to the claim for indemnification. Upon the
payment of the indemnified claim from the indemnifying party to the indemnified
party, the indemnifying party shall have a right of subrogation with respect to
any insurance proceeds or other rights to third party reimbursement for such
claims held by the indemnified party.
ARTICLE 8.
CONDITIONS TO OBLIGATIONS
OF PURCHASER TO CLOSE
Each and every obligation of Purchaser under this Agreement to be
performed on or prior to the Closing shall be subject to the fulfillment, on or
prior to the Closing, of each of the following conditions, which conditions each
of the Company and Parent agrees to use best efforts to satisfy:
8.1. Representations and Warranties True at Closing. The representations
and warranties made by the Company and Parent in or pursuant to the Agreement or
given on their behalf hereunder shall be true and correct in all respects on and
as of the Closing Date, in each case with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date (except to the extent expressly made as of an earlier date, in which case
such representations and warranties shall be true and correct as of such date),
except where the failure of such representations and warranties to be so true
and correct does not have, and is not likely to have, individually or in the
aggregate, a Material Adverse Consequence.
8.2. Obligations Performed. The Company shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing, except where the failure to
perform or comply does not have, and is not likely to have, individually, or in
the aggregate, a Material Adverse Consequence.
8.3. Consents. Purchaser shall have obtained Purchaser Stockholder
Approval, and any waiting period applicable to this Agreement, the Merger and
the Transactions under HSR shall have expired or early termination thereof shall
have been granted.
8.4. Closing Deliveries. The Company shall have delivered to
Purchaser each of the following:
(a) a certificate of the President of the Company certifying as to the
matters set forth in Sections 8.1, 8.2 and 8.3 hereof and as to the satisfaction
of all other conditions set forth in this Article 8;
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(b) Certificates of Merger duly executed by an officer of the Company
for filing in accordance with the provisions of Section 2.2 hereof;
(c) the corporate minute books, seals and stock transfer books of the
Company certified by the corporate secretary of the Company as true, correct and
complete, including minutes authorizing the Merger and the Transactions;
(d) an executed agreement reasonably satisfactory to Purchaser
pursuant to which the Company has disposed of certain assets of its ProfitWorks
applications software and related product line, consistent with the provisions
of Section 4.4 hereof;
(e) the audited Company financial statements, as more fully described
in Section 4.6 hereof, and an unaudited Closing Balance Sheet;
(f) an opinion of counsel to the Company and Parent reasonably
satisfactory to Purchaser and addressing only the issues of incorporation in
Pennsylvania, qualification in other states, corporate power and authority to
execute this Agreement and the Merger Option Agreement and to consummate the
Transactions, the enforceability of this Agreement and the Merger Option
Agreement, and no conflicts with the Articles of Incorporation or By-Laws of the
Company or Parent; and
(g) the Merger Option Agreement duly executed by an officer of Parent.
8.5. No Challenge. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency or any
pending action by any other Person, challenging or seeking damages in connection
with the Merger and having a Material Adverse Consequence on Purchaser.
8.6. No Material Adverse Consequence. Since the date of execution
of this Agreement, there shall have been no Material Adverse Consequence as to
the Company.
8.7. Revised Schedules. The Company shall have provided Purchaser with
revised Schedules dated as of the Closing Date (the "Revised Schedules"), with
all material changes through such date duly noted thereon, and the Revised
Schedules will not contain any disclosures which (i) should have been but were
not disclosed on the Schedules attached hereto or (ii) set forth material
changes which in the opinion of Purchaser, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Consequence as to the
Company unless such disclosures are approved in writing by Purchaser.
8.8. Repayment of Debts. At the Closing, all officers, directors,
stockholders and employees of the Company shall repay to the Surviving
Corporation in full any outstanding indebtedness, if any, owed to the Company by
them or their families.
8.9. Releases. Each of the officers and directors of the Company
shall have executed releases in favor of the Company in form reasonably
satisfactory to Purchaser and its counsel.
ARTICLE 9.
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CONDITIONS TO OBLIGATIONS
OF THE COMPANY AND PARENT TO CLOSE
Each and every obligation of the Company and Parent under this
Agreement to be performed on or prior to the Closing, shall be subject to the
fulfillment, on or prior to the Closing, of each of the following conditions,
which conditions Purchaser agrees to use best efforts to satisfy:
9.1. Representations and Warranties True at Closing. The representations
and warranties made by Purchaser in or pursuant to the Agreement or given on its
behalf hereunder shall be true and correct in all respects on and as of the
Closing Date, in each case with the same effect as though such representations
and warranties had been made or given on and as of the Closing Date (except to
the extent expressly made as of an earlier date, in which case such
representations and warranties shall be true and correct as of such date),
except where the failure of such representations and warranties to be so true
and correct does not have, and is not likely to have, individually or in the
aggregate, a Material Adverse Consequence.
9.2. Obligations Performed. Purchaser shall have performed and complied
with all of its obligations under this Agreement which are to be performed or
complied with by it prior to or at the Closing, except where the failure to
perform or comply does not have, and is not likely to have, individually, or in
the aggregate, a Material Adverse Consequence.
9.3. Consents. Purchaser shall have obtained Purchaser Stockholder
Approval; any waiting period applicable to this Agreement, the Merger and the
Transactions under HSR shall have expired or early termination thereof shall
have been granted; and the Registrable Shares shall have been listed and
eligible for trading on the NASDAQ National Market System subject only to
official notice of issuance.
9.4. Closing Deliveries. Purchaser shall have delivered to Parent
and the Company each of the following:
(a) delivery of the Merger Shares to Parent;
(b) certified copies of the corporate resolutions of Purchaser
authorizing the execution, delivery and performance of this Agreement by
Purchaser, together with an incumbency certificate with respect to the
respective officers of Purchaser executing documents or instruments on behalf of
Purchaser;
(c) a certificate of the President or any Senior Vice President of
Purchaser certifying as to the matters set forth in Sections 9.1, 9.2 and 9.3
hereof and as to the satisfaction of all other conditions set forth in this
Article 9;
(d) an opinion of counsel to Purchaser reasonably satisfactory to
Parent and the Company and addressing only the issues of incorporation in
Delaware, qualification in other states, corporate power and authority to
execute and deliver this Agreement and consummate the
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Transactions, the enforceability of this Agreement and the Merger Option
Agreement, and no conflicts with the Certificate of Incorporation or By-Laws of
Purchaser;
(e) Certificates of Merger duly executed by an officer of Purchaser
for filing in accordance with Section 2.2, or evidence of such filing; and
(f) the Merger Option Agreement duly executed by an officer of
Purchaser.
9.5. No Challenge. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by any
government agency or any pending action by any other Person, challenging or
seeking damages from Parent or the Company in connection with the Merger and
having a Material Adverse Consequence on the Company or Purchaser.
9.6. Revised Schedules. Purchaser shall have provided the Company and
Parent with Revised Schedules dated as of the Closing Date, with all material
changes through such date duly noted thereon, and the Revised Schedules will not
contain any disclosures which (i) should have been but were not disclosed on the
Schedules attached hereto or (ii) set forth material changes which in the
opinion of the Parent and the Company, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Consequence as to Purchaser,
unless such disclosures are approved in writing by Parent and the Company.
9.7. No Material Adverse Consequence. Since the date of execution
of this Agreement, there shall have been no Material Adverse Consequence as to
Purchaser.
ARTICLE 10.
TERMINATION
10.1. Termination. This Agreement may be terminated at any time (the
"Termination Date") before the Closing Date:
(a) by mutual written consent of Purchaser, Parent and
the Company;
(b) by Purchaser upon the occurrence or upon its discovery of a
Material Adverse Consequence as to the Company;
(c) by Parent or the Company upon the occurrence or upon their
discovery of a Material Adverse Consequence as to Purchaser;
(d) by Purchaser or the Company pursuant to Section 4.16
hereof; or
(e) by Purchaser, Parent or the Company if the Closing is not
consummated on or before November 15, 1999, unless the failure to close by such
date is attributable to actions or omissions of the party seeking to terminate
this Agreement under this subsection.
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10.2. Effect of Termination. In the event this Agreement is terminated
pursuant to Sections 10.1(a), 10.1(b), 10.1(c) or 10.1(e) above, no party shall
have any obligations to the others hereunder except for those obligations with
respect to confidentiality and the return of confidential information set forth
below and in the Confidentiality Agreement. If this Agreement is terminated
pursuant to Section 10.1(d), the remedies available to the non-terminating party
set forth in Section 4.16(c) hereof shall apply. If this Agreement is
terminated, each party shall promptly return to each other all copies of the due
diligence materials previously provided to such party or their representatives,
and the obligations in respect of confidentiality set forth in the
Confidentiality Agreement shall remain in effect.
ARTICLE 11.
MISCELLANEOUS PROVISIONS
11.1. Severability. If any provision of this Agreement is prohibited by the
laws of any jurisdiction as those laws apply to this Agreement, that provision
shall be ineffective to the extent of such prohibition and shall, to the extent
possible, be modified to conform with such laws, without invalidating the
remaining provisions hereto.
11.2. Modification. This Agreement may not be changed or modified
except in writing specifically referring to this Agreement and signed by each of
the parties hereto.
11.3. Assignment, Survival and Binding Agreement. This Agreement and the
Closing Documents may not be assigned by Purchaser and may not be assigned by
the Company or Parent without the prior written consent of Purchaser. The terms
and conditions hereof shall survive the Closing as provided herein and shall
inure to the benefit of and be binding upon the parties hereto and their
respective heirs, personal representatives, successors and assigns.
11.4. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.5. Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below.
If to Company or Parent: Mestek, Inc.
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Chief Executive Officer
Telefax: (000) 000-0000
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with a copy to: Xxxxx & XxXxxxxx
000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attn: Xxxx X. Xxxx, Esq.
Telefax: (000) 000-0000
If to Purchaser: Xxxxxxx Central Holdings, Inc.
0000 Xxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telefax: (000) 000-0000
with a copy to: Arnall Golden & Xxxxxxx, LLP
2800 One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telefax: (000) 000-0000
or at such other address as any party hereto notifies the other parties hereof
in writing.
11.6. Entire Agreement; No Third Party Beneficiaries. Except for the
Confidentiality Agreement, the restrictions and obligations of which shall
survive according to its terms, this Agreement, together with the Exhibits and
Schedules attached hereto, constitutes the entire agreement and supersedes any
and all other prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof and,
except as otherwise expressly provided herein, is not intended to confer upon
any Person other than Purchaser, the Company, and Parent, any rights or remedies
hereunder. No provision of this Agreement shall be construed against any party
on the ground that such party drafted the provision or caused it to be drafted
or the provision contains a covenant of such party.
11.7. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, excluding those
relating to conflicts of laws.
11.8. Arbitration. Any claim arising out of or related to this Agreement or
the alleged breach of a representation, warranty or covenant thereof or arising
out of any of the Transactions, which has not been resolved by mutual agreement
of the parties after a sixty (60) day negotiation period in which the parties
try to resolve the claim, shall be finally settled by arbitration. Such
arbitration shall be conducted in Wilmington, Delaware in accordance with the
Commercial Rules of the American Arbitration Association then in effect, as
modified or supplemented herein, or as the parties mutually agree otherwise.
Notwithstanding the rules of the arbitral body, the parties hereto agree (a)
that any arbitration shall be presided over by a single arbitrator, who shall
have been admitted to the practice of law, and be in good standing or on
retirement status in any of the fifty United States or the District of Columbia,
(b) that the arbitrator shall base his decision on the facts as presented into
evidence, and (c) that the arbitrator shall prepare a written memorandum of
decision setting forth the findings of fact and conclusions of law. The
arbitrator shall be selected
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by Purchaser and Parent. If they cannot agree on such selection within a thirty
(30) day period, they shall ask the American Arbitration Association to appoint
an arbitrator. The decision of the arbitrator shall be final, and judgment may
be entered upon it in accordance with the applicable law in any court having
jurisdiction. Any claim for relief made pursuant to this Agreement shall be made
within one (1) year from the date upon which the party claiming relief knew or
should have known of the cause of action constituting such claim. All costs of
the arbitration shall be borne by the party determined to be the losing party by
the arbitrator. For purposes of determining the prevailing and losing party, the
arbitrator may consider offers of settlement by either Purchaser or Parent, or
both of them.
11.9. Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.10. Incorporation of Exhibit and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
11.11. Waiver. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived by any
other party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
11.12. Time of Essence. Time is of the essence in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
Company:
MCS, INC.
By: /S/ XXXXXXX X. XXXX
Name: Xxxxxxx X. Xxxx
Title: Senior Vice President - Finance
Purchaser:
XXXXXXX CENTRAL HOLDINGS, INC.
By: /S/ XXXXXXX X. X'XXXXXXX
Name: Xxxxxxx X. X'Xxxxxxx
Title: Chairman and CEO
Parent:
MESTEK, INC.
By: /S/ XXXX X. XXXX
Name: Xxxx X. Xxxx
Title: Chairman and CEO
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Agreement and Plan of Merger
LIST OF SCHEDULES AND EXHIBITS
Schedules Description
Schedule 3.1(a) Exchange Ratio
Schedule 3.3(a) Options and Warrants
Schedule 4.7 Exceptions to conduct of Purchaser and Company pending
Merger
Schedule 5.1 States of Qualification - Company
Schedule 5.2 Officers and Directors - Company
Schedule 5.3 Encumbrances - Company
Schedule 5.4 Required Consents and Approvals - Company
Schedule 5.5 Capitalization of the Company
Schedule 5.8 Company Financial Statements; Liabilities not disclosed
on Financials - Company
Schedule 5.9 Taxes
Schedule 5.10 Material Contracts - Company
Schedule 5.12(A) Intellectual Property - Company
Schedule 5.12(B) Owned Software - Company
Schedule 5.12(C) Licensed Software - Company
Schedule 5.13 Labor Matters - Company
Schedule 5.14(A) Work-in-Process, Orders and Returns - Company
Schedule 5.14(B) Cancellations Arising from Transactions - Company
Schedule 5.15 Exceptions to Absence of Certain Changes - Company
Schedule 5.16 Leases - Company
Schedule 5.17 Litigation - Company
Schedule 5.18 Employee Benefit Plans of All Kinds - Company
Schedule 5.21 Bank Accounts - Company
Schedule 5.23 Insurance - Company
Schedule 6.1 States of Qualification - Purchaser
Schedule 6.3 Purchaser Consents
Schedule 6.4 Encumbrances - Purchaser
Schedule 6.5 Capitalization - Purchaser
Schedule 6.8 Purchaser Financial Statements; Liabilities not
disclosed on Financials - Purchaser
Schedule 6.10 Material Contracts - Purchaser
Schedule 6.12(A) Intellectual Property - Purchaser
Schedule 6.12(B) Owned Software - Purchaser
Schedule 6.12(C) Licensed Software - Purchaser
Schedule 6.13 Labor Matters - Purchaser
Schedule 6.14(A) Work-in-Process, Orders and Returns - Purchaser
Schedule 6.14(B) Cancellations Arising from Transactions - Purchaser
Schedule 6.15 Exceptions to Absence of Certain Changes - Purchaser
Schedule 6.16 Leases - Purchaser
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Schedule 6.17 Litigation - Purchaser
Schedule 6.18 Employee Benefit Plans of All Kinds - Purchaser
Schedule 6.20 Bank Accounts - Purchaser
Schedule 6.22 Insurance - Purchaser
Schedule 6.26 Exceptions regarding Securities Filings - Purchaser
Exhibits Descriptions
Exhibit 3.3(a) Merger Option Agreement
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AGREEMENT AND PLAN OF MERGER
Dated as of May 26, 1999
Among
MCS, INC.,
MESTEK, INC.
and
XXXXXXX CENTRAL HOLDINGS, INC.
Agreement and Plan of Merger
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS.......................................................1
1.1. Defined Terms1
ARTICLE 2.....................................................................6
2.1. The Merger6
2.2. Effective Time6
2.3. Effect of the Merger6
2.4. Subsequent Actions6
2.5. Certificate of Incorporation; Bylaws; Directors and Officers.7
2.6. Approval by Stockholders8
2.7. Tax Consequences8
ARTICLE 3. MERGER CONSIDERATION...............................................8
3.1. Conversion of Company Capital Stock8
3.2. Fractional Shares8
3.3. Stock Options and Warrants9
3.4. Delivery of Merger Shares9
3.5. Closing9
ARTICLE 4. ADDITIONAL COVENANTS...............................................9
4.1. Registration Rights9
4.2. Stockholders' Meeting13
4.3. Best Efforts to List Shares and Maintain S-3 and NASDAQ
NMS Status13
4.4. ProfitWorks Agreement13
4.5. Parent Plan and Company Plan14
4.6. Company Financial Statements14
4.7. Conduct of Business by Purchaser and the Company Pending
Merger14
4.8. Expenses16
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Page
4.9. Tax Matters16
4.10. Notification of Certain Matters............................18
4.11. Public Announcements.......................................19
4.12. Tax Free Reorganization....................................19
4.13. Access and Inspection......................................19
4.14. Ongoing Business...........................................19
4.15. Certain Filings, Consents and Arrangements.................20
4.16. No Solicitation............................................20
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND PARENT21
5.1. Organization and Authority21
5.2. Corporate Power and Authority; Due Authorization21
5.3. Ownership of Assets22
5.4. No Conflict; Required Consents22
5.5. Capitalization23
5.6. Compliance with Laws; Filings with the SEC23
5.7. Licenses and Permits24
5.8. Liabilities and Obligations of the Company24
5.9. Taxes25
5.10. Contracts, Agreements and Instruments Generally............26
5.11. Customer Contracts.........................................27
5.12. Intellectual Property; Computer Software...................27
5.13. Labor Matters..............................................28
5.14. Work-in-Process, Orders and Returns........................29
5.15. Absence of Certain Changes.................................29
5.16. Leases.....................................................30
5.17. Litigation.................................................30
5.18. Employee Benefit Plans: Employees..........................31
5.19. Accuracy of Representations................................34
5.20. Brokers Fees and Expenses..................................34
5.21. Bank Accounts..............................................34
5.22. Business Practices.........................................34
5.23. Insurance..................................................34
5.24. Proxy Statement............................................34
5.25. Tax Free Organization......................................35
5.26. No Existing Discussion.....................................35
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................35
6.1. Organization of Purchaser35
6.2. Corporate Power and Authority; Due Authorization35
6.3. No Conflict; Consents35
6.4. Ownership of Assets36
6.5. Capitalization36
6.6. Compliance with Laws37
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Page
6.7. Licenses and Permits37
6.8. Liabilities and Obligations of Purchaser37
6.9. Taxes38
6.10. Contracts, Agreements and Instruments Generally............39
6.11. Customer Contracts.........................................40
6.12. Intellectual Property; Computer Software...................40
6.13. Labor Matters..............................................41
6.14. Work-in-Process, Orders and Returns........................41
6.15. Absence of Certain Changes.................................42
6.16. Leases.....................................................43
6.17. Litigation.................................................43
6.18. Employee Benefit Plans: Employees..........................43
6.19. Brokers Fees and Expenses..................................46
6.20. Bank Accounts..............................................46
6.21. Business Practices.........................................46
6.22. Insurance..................................................46
6.23. Tax Free Organization......................................47
6.24. No Existing Discussion.....................................47
6.25. Shares to be Delivered.....................................47
6.26. Accuracy of Securities Filings; Financial Statements.......47
6.27. Approvals..................................................48
6.28. Accuracy of Representations................................48
6.29. NASDAQ Rules...............................................48
ARTICLE 7. INDEMNIFICATION..................................................48
7.1. Indemnification by Parent48
7.2. Indemnification by Surviving Corporation49
7.3. Provisions Regarding Indemnification49
7.4. Survival49
7.5. Limitations50
7.6. No Recourse Against the Company50
7.7. Effect of Insurance50
ARTICLE 8. CONDITIONS TO OBLIGATIONS OF PURCHASER TO CLOSE..................51
8.1. Representations and Warranties True at Closing51
8.2. Obligations Performed51
8.3. Consents51
8.4. Closing Deliveries51
8.5. No Challenge52
8.6. No Material Adverse Consequence52
8.7. Revised Schedules52
8.8. Repayment of Debts52
8.9. Releases52
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Page
ARTICLE 9. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND PARENT TO
CLOSE.............................................................52
9.1. Representations and Warranties True at Closing52
9.2. Obligations Performed53
9.3. Consents53
9.4. Closing Deliveries53
9.5. No Challenge53
9.6. Revised Schedules54
9.7. No Material Adverse Consequence54
ARTICLE 10. TERMINATION......................................................54
10.1. Termination................................................54
10.2. Effect of Termination......................................54
ARTICLE 11. MISCELLANEOUS PROVISIONS........................................54
11.1. Severability...............................................54
11.2. Modification...............................................55
11.3. Assignment, Survival and Binding Agreement.................55
11.4. Counterparts...............................................55
11.5. Notices....................................................55
11.6. Entire Agreement; No Third Party Beneficiaries.............56
11.7. Governing Law..............................................56
11.8 Arbitration................................................56
11.9. Headings...................................................56
11.10. Incorporation of Exhibit and Schedules.....................56
11.11. Waiver.....................................................56
11.12. Time of Essence............................................57
LIST OF
SCHEDULES AND EXHIBITS58
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