Exhibit 99.2
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and entered into
this 26th day of December, 2003, by and among ON-SITE SOURCING, INC., a Delaware
corporation, (the "COMPANY"); DOCUFORCE, LLC, a Georgia limited liability
company ("ACQUIRER"); and DOCUFORCE ACQUISITION CORP., a Delaware corporation
and a wholly-owned subsidiary of Acquirer ("MERGER SUB"). The Company, Acquirer,
and Merger Sub are referred to individually herein as a "PARTY" and collectively
as the "PARTIES."
RECITALS
WHEREAS, the Company is in the business of providing digital imaging,
reprographics, and color and digital printing to law firms and other
organizations throughout the United States (the "BUSINESS");
WHEREAS, upon the terms and subject to the conditions set forth herein, the
Boards of Directors of the Company, Acquirer and Merger Sub have each determined
that it is in the best interests of their respective stockholders for Merger Sub
to be merged with and into the Company, with the surviving corporation becoming
a wholly-owned subsidiary of Acquirer, which transaction is intended to be
treated for federal income tax purposes as a taxable acquisition of the stock of
the Company by Acquirer; and
WHEREAS, in furtherance of such acquisition, the Board of Directors and
stockholders of each of Merger Sub and the Company have approved the merger of
Merger Sub with and into the Company in accordance with the Delaware General
Corporation Law and 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 hereby agree as follows:
1. DEFINITIONS.
"ACQUIRER" has the meaning set forth in the preface above.
"ALTERNATIVE TRANSACTION" has the meaning set forth in Section 6.4(iv)
below.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"ASSETS" has the meaning set forth in Section 4.4 below.
"BUSINESS" has the meaning set forth in the Recitals above.
"BUSINESS EMPLOYEES" has the meaning set forth in Section 4.16(a) below.
"CAUSE" means, where an employee of the Company (i) is convicted of or
pleads guilty or nolo contendere to any misdemeanor (other than for minor
infractions) involving fraud, breach of trust, misappropriation, or other
similar activity, or any felony, or (ii) willfully commits an act of fraud,
material dishonesty, or gross negligence with respect to the Company, or (iii)
otherwise acts with willful disregard for the Company's best interests, and such
action does or is likely to result in material harm to the Company or its
business prospects.
"CERTIFICATE" and "CERTIFICATES" have the meanings set forth in Section
3.5(a) below.
"CERTIFICATE OF MERGER" has the meaning set forth in Section 2.3 below.
"CFO" has the meaning set forth in Section 7.2(d)(vii) below.
"CLOSING" has the meaning set forth in Section 2.2 below.
"CLOSING DATE" has the meaning set forth in Section 2.2 below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the preface above.
"COMPANY BOARD" has the meaning set forth in Section 2.5 below.
"COMPANY RECOMMENDATIONS" has the meaning set forth in Section 2.5(c)
below.
"COMPANY SHARE" means any share of the Common Stock, $.01 par value per
share, of the Company.
"COMPANY STOCKHOLDER" means any Person who or which holds any Company
Shares.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 6.8 below.
"CONSTITUENT CORPORATIONS" has the meaning set forth in Section 2.7 below.
"CONTRACT" has the meaning set forth in Section 4.18 below.
"DELAWARE GENERAL CORPORATION LAW" means the General Corporation Law of the
State of Delaware, Title 8, Delaware Code 1953, as amended.
"DISSENTING SHARES" has the meaning set forth in Section 3.2 below.
"DOL" has the meaning set forth in Section 4.16(b) below.
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"EFFECTIVE TIME" has the meaning set forth in Section 2.4(a) below.
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 4.17 below.
"EXERCISABLE OPTIONS" has the meaning set forth in Section 3.3 below.
"ERISA AFFILIATE" has the meaning set forth in Section 4.16(a) below.
"EMPLOYEE BENEFIT PLAN" has the meaning set forth in Section 4.16 below.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" means Continental Stock Transfer.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"GOVERNMENTAL AUTHORITY" has the meaning set forth in Section 4.5 below.
"HAZARDOUS MATERIAL" has the meaning set forth in Section 4.17 below.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section 4.19 below.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" means, as to the Company, the actual knowledge after reasonable
inquiry of its CFO or Chief Executive Officer.
"LAWS" has the meaning set forth in Section 4.5 below.
"LICENSES AND PERMITS" has the meaning set forth in Section 4.7 below.
"MATERIAL ADVERSE EFFECT" means any effect that is or may reasonably be
expected to be materially adverse to the business operations, financial
condition, or Assets of the Company, taken as a whole, provided that such term
shall not include effects that are resulting (i) from economic or financial
market conditions generally, or (ii) from any matter or facts previously
disclosed in Public Reports or this Agreement (other than those matters or facts
contained in a Revised Schedule that were not contained in the initial Schedule
to this Agreement that was superceded by such Revised Schedule).
"MERGER" has the meaning set forth in Section 2.1 below.
"MERGER CONSIDERATION" means the amount to be received by Company
Stockholders or the holders of Exercisable Options in exchange for their Company
Shares and Stock Options, as the case may be, pursuant to the provisions of
Sections 3.2 and 3.3 below.
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"MERGER PRICE" has the meaning set forth in Section 3.2 below.
"MERGER SUB" has the meaning set forth in the preface above.
"MOST RECENT 10-Q" means the Company's quarterly report on Form 10-Q for
the fiscal quarter ended September 30, 2003, including all notes and
disclosures.
"OPTION PLANS" has the meaning set forth in Section 3.3 below.
"OPTION PURCHASE PRICE" has the meaning set forth in Section 3.3 below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" or "PARTIES" has the meaning set forth in the preface above.
"PBGC" has the meaning set forth in Section 4.16(b) below.
"PERMITTED LIENS" means (i) liens for Taxes not yet due or payable, or for
Taxes being contested in good faith in appropriate proceedings, (ii) liens that
do not materially detract from or interfere with the use of the assets subject
thereto or affected thereby or otherwise materially impair business operations
involving such assets, (iii) liens securing debt that is reflected in the Public
Reports, and (iv) with respect to Real Property, (A) mechanics and similar
statutory liens, (B) zoning, building, and other land use laws imposed by any
Governmental Authority, and (C) easements, covenants, conditions, restrictions
and other matters of record affecting title to such property.
"PERSON" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or any other business association or entity or a governmental entity (or any
department, agency, or political subdivision thereof).
"PROPERTIES" has the meaning set forth in Section 4.17(i) below.
"PROPERTY TRANSACTION" has the meaning set forth in Section 6.13 below.
"PROXY STATEMENT" has the meaning set forth in Section 2.5(b) below.
"PUBLIC REPORTS" has the meaning set forth in Section 4.8 below.
"REAL PROPERTY" means all real property currently leased by the Company.
"REQUISITE COMPANY STOCKHOLDER APPROVAL" means, with respect to the
Company, the affirmative vote of the holders of a majority of the outstanding
Company Shares in favor of this Agreement and the Merger.
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"REVISED SCHEDULES" has the meaning set forth in Section 7.2(f) below.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL STOCKHOLDER MEETING" has the meaning set forth in Section 2.5(a)
below.
"STOCK OPTIONS" has the meaning set forth in Section 3.3 below.
"SUBSIDIARY" means any corporation or other organization, whether
incorporated or unincorporated, with respect to which a specified Person (or a
Subsidiary thereof) owns a majority of the common stock or has the power to vote
or direct the voting of sufficient securities to elect a majority of the
directors or others performing similar functions.
"SUPERIOR PROPOSAL" has the meaning set forth in Section 6.4(iv) below.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.1 below.
"TAX" or "TAXES" has the meaning set forth in Section 4.14(m)(i).
"TAX RETURN" has the meaning set forth in Section 4.14(m)(ii).
"TAX RULING" has the meaning set forth in Section 4.14(m)(iii).
"THIRD PARTY" means a Person other than a Party hereto.
2. MERGER.
2.1 THE MERGER. At the Effective Time, upon the terms and subject to the
conditions of this Agreement, Merger Sub will merge with and into the Company
(the "MERGER"). Following the Effective Time, the separate existence of Merger
Sub shall cease, and the Company shall be the corporation surviving the Merger
(the "SURVIVING CORPORATION") and shall be governed by the laws of the State of
Delaware.
2.2 CLOSING. The closing of the transactions contemplated by this Agreement
(the "CLOSING") shall take place at the offices of Xxxxxx Xxxxxx & Xxxxxxxxx,
0000 Xxxxxx Xxxxxxxxx, 00xx Xxxxx, XxXxxx, Xxxxxxxx, commencing at 10:00 a.m.
local time on the second business day following the satisfaction or waiver of
the conditions set forth in Article 7 (other than conditions with respect to
actions the respective Parties will take at the Closing itself) or at such
location and on such other date as the Parties may mutually determine (the
"CLOSING DATE").
2.3 ACTIONS AT THE CLOSING. At the Closing, (i) the Company will deliver to
Acquirer and Merger Sub the various certificates, instruments, and documents
referred to in
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Section 7.2 below, (ii) Acquirer and Merger Sub will deliver to the Company the
various certificates, instruments, and documents referred to in Section 7.3
below, (iii) Merger Sub and the Company will file with the Secretary of State of
the State of Delaware a certificate of merger in such form as required by, and
executed and certified in accordance with, the relevant provisions of the
Delaware General Corporation Law (the "CERTIFICATE OF MERGER"), and (iv)
Acquirer will deliver to Exchange Agent, in the manner provided in Section 3.5
below, the aggregate Merger Consideration.
2.4 EFFECT OF MERGER.
(a) GENERAL. The Merger shall become effective at such time as Merger Sub
and the Company file the Certificate of Merger with the Secretary of State of
the State of Delaware, which filing shall be as early as practicable on the
Closing Date, or at such subsequent date or time as Acquirer and the Company
shall agree and specify in the Certificate of Merger (the "EFFECTIVE TIME"). The
Merger shall have the effect set forth in the Delaware General Corporation Law.
The Surviving Corporation may, at any time after the Effective Time, take any
action (including executing and delivering any document) in the name and on
behalf of either Merger Sub or the Company in order to carry out and effectuate
the transactions contemplated by this Agreement.
(b) CERTIFICATE OF INCORPORATION. The certificate of incorporation of
Merger Sub in effect at and as of the Effective Time will be the certificate of
incorporation of the Surviving Corporation upon and following the Merger.
(c) BYLAWS. The bylaws of Merger Sub in effect at and as of the Effective
Time will be the bylaws of the Surviving Corporation upon and following the
Merger.
(d) DIRECTORS AND OFFICERS. The directors and officers of Merger Sub in
office at and as of the Effective Time will be the directors and officers of the
Surviving Corporation upon and following the Merger, in each case until their
respective successors are duly elected or appointed and qualified.
2.5 SPECIAL STOCKHOLDER MEETING. The Company, acting through the board of
directors of the Company (the "COMPANY BOARD"), shall, in accordance with all
applicable Laws:
(a) duly call, give notice of, convene and hold a special meeting of the
Company Stockholders (the "SPECIAL STOCKHOLDER MEETING") as promptly as
practicable for the purpose of considering and taking action upon the approval
of the Merger and the adoption of this Agreement;
(b) (i) as soon as practicable after the date hereof, but in no event later
than twenty (20) days from the date hereof, prepare and file with the SEC a
preliminary proxy statement relating to the Merger and this Agreement (provided,
however, that the Company shall submit a draft of such preliminary proxy
statement to Acquirer for its review and approval as soon as practicable, but in
no event less than five (5) business days, prior to filing such proxy statement
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with the SEC), (ii) obtain and furnish the information required to be included
by the SEC in the Proxy Statement (as hereinafter defined) and, after
consultation with Acquirer, respond promptly to any comments made by the SEC
with respect to the preliminary proxy statement, and (iii) cause a definitive
proxy statement, including any amendment or supplement thereto (the "PROXY
STATEMENT"), to be mailed to the Company Stockholders, provided that no
amendment or supplement to the Proxy Statement will be made by the Company
without consultation with Acquirer and its counsel. The Company will advise
Acquirer, promptly after it receives notice thereof, of any request by the SEC
for the amendment of the Proxy Statement or comments thereon and responses
thereto or requests by the SEC for additional information. If at any time prior
to the Effective Time any information relating to the Company or Acquirer, or
any of their respective Affiliates, officers or directors, should be discovered
by the Parties which should be set forth in an amendment or supplement to the
Proxy Statement, so that such document would not include any misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the Party which discovers such information shall promptly notify
the other Parties and an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and, to the extent required by
law, disseminated to the Company Stockholders;
(c) include in the Proxy Statement the recommendation of the Company Board
that the Company Stockholders vote in favor of the approval of the Merger and
the adoption of this Agreement (the "COMPANY RECOMMENDATIONS") at the Special
Stockholder Meeting; and
(d) use its commercially reasonable efforts to solicit from holders of
Company Shares proxies in favor of the Merger and shall take all other
reasonable and lawful action necessary or, advisable to secure any vote or
consent of the Company Stockholders required by the Delaware General Corporation
Law to effect the Merger.
Acquirer agrees that it will provide the Company with all of the
information concerning Acquirer and Merger Sub required to be included in the
Proxy Statement.
2.6 CLOSING OF TRANSFER RECORDS. As of and after the Effective Time,
transfers of Company Shares outstanding prior to the Effective Time shall not be
made on the stock transfer books of the Surviving Corporation.
2.7 TAKING OF NECESSARY ACTION; FUTURE ACTION. Each of the Parties will
take all such reasonable and lawful action 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 Article 7 hereof. If at any
time after the Effective Time, the Surviving Corporation will consider or be
advised that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or confirm of
record or otherwise in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of either the Company or
Merger Sub (collectively, the "CONSTITUENT CORPORATIONS") acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors
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of the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either of the Constituent Corporations, all such deeds,
bills of sale, instruments of conveyance, assignments and assurances and to take
and do, in the name and on behalf of each of such Constituent Corporation or
otherwise, all such other lawful 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.
3. CONVERSION OF SECURITIES.
3.1 CONVERSION OF MERGER SUB SHARES. At and as of the Effective Time, by
virtue of the Merger and without further action on the part of Merger Sub or
Acquirer (the sole holder of the capital stock of Merger Sub), each share of
capital stock of Merger Sub that is issued and outstanding immediately prior to
the Effective Time shall be cancelled and retired and shall be converted into
and become one fully paid and non-assessable share of Common Stock, $0.001 par
value per share, of the Surviving Corporation.
3.2 CONVERSION OF COMPANY SHARES. Subject any adjustments pursuant to
Section 3.4 below, at and as of the Effective Time, by virtue of the Merger and
without further action on the part of the Company or the holders of Company
Shares, each Company Share that is issued and outstanding immediately prior to
the Effective Time (other than Company Shares if any, held by Persons who have
not voted such shares for approval of the Merger and with respect to which such
Persons shall become entitled to exercise dissenters' rights in accordance with
Section 262 of the Delaware General Corporation Law ("DISSENTING SHARES")) shall
automatically be cancelled and extinguished and converted into the right to
receive cash equal to $2.87 per share (the "MERGER PRICE"). After the Effective
Time, no Company Share shall be deemed to be outstanding or to have any rights
other than those set forth in this Section 3.2 or Section 3.6 hereof.
Immediately prior to the Closing, all Company Shares, if any, that are held by
the Company as treasury stock shall be cancelled and retired and shall cease to
exist and no consideration shall be delivered therefor.
3.3 COMPANY STOCK OPTIONS. Subject to any adjustments pursuant to Section
3.4 below, at and as of the Effective Time, by virtue of the Merger and without
further action on the part of the Company or the holders of Stock Options, all
stock options issued by the Company outstanding on the date thereof to purchase
Company Shares (collectively, "STOCK OPTIONS") pursuant to all Stock Option
Plans (collectively, the "OPTION PLANS") or other contractual rights of the
Company shall be automatically accelerated with respect to vesting and then
cancelled and extinguished. Each holder of those Stock Options listed on
Schedule 3.3 ("Exercisable Options") shall receive, in exchange for such
cancellation, the right to receive an amount equal to (i) the Merger Price minus
the exercise price per share (the "OPTION PURCHASE PRICE"), multiplied by (ii)
the number of Company Shares underlying the Exercisable Options held by such
holder as of the Effective Time. Schedule 3.3 lists all Exercisable Options and
states the holder of such options, the number of Company Shares underlying such
options as of the date hereof, the option grant dates, and the exercise price
per share of such options. For the avoidance of doubt, all Stock Options that
have an exercise price per share that is less than the Merger Price as of the
Effective Time, shall be Exercisable
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Options, whether or not currently exercisable and all Stock Options that have an
exercise price per share that is equal to or greater than the Merger Price shall
not be Exercisable Options. No consideration hereunder or otherwise shall be
payable in respect of Stock Options that are not Exercisable Options as of the
Effective Time, except where any such Exercisable Options are exercised on or
after the date hereof and prior to the Effective Time.
3.4 ADJUSTMENTS. If, between the date of this Agreement and the Effective
Time, (a) the outstanding Company Shares shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares,
or readjustment or a stock dividend thereon shall be declared with a record date
within such period, or (b) the Company shall have issued additional Company
Shares or granted additional options, warrants or convertible rights thereto,
then the Merger Price shall be adjusted accordingly to assure that the aggregate
consideration to be paid by Acquirer hereunder will not change as a result of
such issuances, grants, reclassification, recapitalization, split-up,
combination, exchange or dividend (it being acknowledged that the Company
elsewhere herein covenants not to take any of the actions described in (a) or
(b) above), provided that no adjustment shall be made as a result of an issuance
by the Company of Company Shares upon exercise of outstanding Stock Options.
3.5 PROCEDURE FOR PAYMENT.
(a) MERGER CONSIDERATION. Except as set forth herein, from and after the
Effective Time, each holder of a certificate or certificates that immediately
prior to the Effective Time represented outstanding Company Shares
("CERTIFICATE" or "CERTIFICATES") shall be entitled to receive in exchange
therefor, upon surrender thereof to the Exchange Agent, the Merger Consideration
for each Company Share so represented by the Certificate or Certificates
surrendered by such holder thereof. Each holder of an Exercisable Option shall
be identified by the Company in writing provided to the Exchange Agent prior to
the Effective Time and will not be required to surrender any other evidence of
such interest prior to receiving the Merger Consideration.
(b) EXCHANGE AGENT. At or simultaneous with the Closing:
(i) Subject to Section 3.5(g), Acquirer will furnish the Exchange Agent an
amount equal to the aggregate Merger Consideration, and irrevocable
instructions to deliver to each record holder of outstanding Company Shares
or Exercisable Options an amount equal to (A) with regard to Company Shares
converted pursuant to Section 3.2, the product of (1) the Merger Price
multiplied by (2) the number of outstanding Company Shares held by such
Person, and (B) with regard to Exercisable Options cancelled pursuant to
Section 3.3, the product of (1) the Option Purchase Price multiplied by (2)
the number of Company Shares underlying all Exercisable Options held by
such Person; and
(ii) Acquirer will cause the Exchange Agent to mail a letter of transmittal
(with instructions for its use) to each such record holder of outstanding
Company Shares for the holder to use in surrendering the Certificates that
represented the holder's Company Shares in exchange for the Merger
Consideration to which the holder is entitled. Such letter of transmittal
shall specify that delivery shall be effected, and risk of
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loss and title to the Certificate or Certificates shall pass only upon
proper delivery of the Certificate or Certificates to the Exchange Agent,
and the Exchange Agent shall advise such holder of the effectiveness of the
Merger and the procedures to be used in effecting the surrender of the
Certificate or Certificates in exchange for the appropriate Merger
Consideration. Upon surrender to the Exchange Agent of a Certificate or
Certificate, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereon, and such other
documents as may be reasonably requested, the Exchange Agent shall,
pursuant to the Merger, promptly deliver the appropriate Merger
Consideration to the Person entitled to the Merger Consideration for each
Company Share so represented by the Certificate or Certificates surrendered
by such holder thereof, and such Certificate or Certificates shall
forthwith be cancelled.
(c) TRANSFER OF CERTIFICATES. If delivery of all or part of the Merger
Consideration is to be made to a Person other than the Person in whose name a
surrendered Certificate is registered, it shall be a condition of such delivery
or exchange that the Certificate so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the Person requesting
such delivery or exchange shall have paid any transfer and other taxes required
by reason of such delivery or exchange in a name other than that of the
registered holder of the Certificate surrendered or shall have established to
the reasonable satisfaction of the Exchange Agent that such tax either has been
paid or is not payable.
(d) RIGHT TO MERGER CONSIDERATION. Until surrendered and exchanged in
accordance with this Section 3.5, each Certificate shall, after the Effective
Time, represent solely the right to receive the Merger Consideration for such
Certificate, and any holder thereof shall have no ownership or other rights with
respect to such Company Shares represented by a Certificate. No interest shall
accrue or be payable on any Merger Consideration. None of the Exchange Agent,
Acquirer, or the Company shall be liable to any holder of Company Shares or
Exercisable Options for any Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(e) TERMINATION OF EXCHANGE AGENT. Acquirer may cause the Exchange Agent to
return any Merger Consideration remaining unclaimed 180 days after the Effective
Time to Acquirer, and thereafter each remaining record holder of outstanding
Company Shares or Exercisable Options shall be entitled to look to Acquirer
(subject to abandoned property, escheat, and other similar laws) as a general
creditor thereof with respect to the Merger Consideration to which such Person
is entitled upon surrender of such Person's Certificates or in respect of
Exercisable Options, as the case may be.
(f) FEES OF EXCHANGE AGENT. The Company, or the Surviving Corporation from
and after the Effective Time, shall pay all charges and expenses of the Exchange
Agent.
(g) WITHHOLDING RIGHTS. Each of the Exchange Agent, Acquirer and the
Company shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Company Shares or
Exercisable Options such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign tax law. To the extent that amounts
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are so withheld by the Company or Acquirer, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of Company Shares or Exercisable Options, as the case may be, in
respect of which such deduction and withholding was made by the Company or
Acquirer.
(h) LOST CERTIFICATES. Subject to Section 3.5(e) hereof, if any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by such
Person of a bond in such reasonable amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration deliverable in respect
thereof pursuant to this Agreement.
3.6 DISSENTING SHARES
(a) Notwithstanding any other provisions of this Agreement to the contrary,
any Dissenting Shares shall not be converted into the right to receive the
Merger Consideration but shall instead be converted into the right to receive
such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to Delaware General Corporation Law. The Company
agrees that, except with the prior written consent of Acquirer, or as required
under Delaware General Corporation Law, it will not voluntarily make any payment
with respect to, or settle or offer to settle, any such purchase demand. Each
holder of Dissenting Shares who, pursuant to the provisions of Delaware General
Corporation Law, becomes entitled to payment of the fair value for Company
Shares shall receive payment therefore (but only after such value shall have
been agreed upon or finally determined pursuant to such applicable law
provisions). If, after the Effective Time, any Dissenting Shares shall lose
their status as Dissenting Shares, the Exchange Agent shall issue and deliver
upon surrender by such holder of certificate or certificates representing
Company Shares, the Merger Consideration to which such holder would otherwise be
entitled under this Agreement.
(b) The provisions of this Article 3 shall also apply to Dissenting Shares
that lose their status as such, except that the obligations of Acquirer under
this Article 3 shall commence on the date of loss of such status and the holder
of such shares shall be entitled to receive in exchange for such share the
Merger Consideration to which such holder is entitled pursuant to this Article
3.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY.
In order to induce Acquirer and Merger Sub to enter into this Agreement and
consummate the transactions contemplated hereby, the Company hereby makes the
following representations and warranties to Acquirer and Merger Sub, each of
which representations and warranties is relied upon by Acquirer and Merger Sub:
4.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized to
conduct business and
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is in good standing under the laws of each jurisdiction where such qualification
is required, except for such failures to be so qualified and in good standing
that would not, individually or in the aggregate, have a Material Adverse
Effect. Except as set forth in Schedule 4.1, the Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation, partnership, joint
venture, or other business association or entity. The Company has full corporate
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it. The Company beneficially owns all
of the outstanding capital stock or other form of equity of its Subsidiary.
4.2 CAPITALIZATION. The authorized capital stock of the Company consists of
20,000,000 Company Shares, of which, as of the date hereof, 5,599,225 Company
Shares are issued and outstanding, 113,590 Company Shares are held in the
treasury of the Company and 627,333 Company Shares are issuable in respect of
Exercisable Options. All of the issued and outstanding Company Shares have been
duly authorized and are validly issued, fully paid, and nonassessable. No
material change in such capitalization has occurred between September 30, 2003
and the date of this Agreement. Except as set forth in Schedule 4.2, there are
no outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments of
any kind, character or nature, contingent or otherwise, including, without
limitation, any stockholders' rights plan, that could require the Company to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights of any kind, character or nature, contingent or
otherwise, with respect to the Company.
4.3 AUTHORIZATION OF TRANSACTION. The Company has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder subject to receiving the Requisite Company Stockholder Approval. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the Company Board
and no other corporate proceedings on the part of the Company or its
stockholders are necessary to authorize this Agreement and to consummate the
transactions so contemplated other than the Requisite Company Stockholder
Approval and the filing of the Certificate of Merger. This Agreement has been
duly executed and delivered and, assuming this Agreement constitutes a valid and
binding obligation of Acquirer and Merger Sub, constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its terms and
conditions except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable remedies may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. The duly elected
officers and directors of the Company are set forth on Schedule 4.3. True,
correct and complete copies of the governing documents and all minutes of the
Company are contained in the minute books of the Company, and any stock
certificates not outstanding are contained in the stock book of the Company.
True, correct and complete copies of the minute books and stock books of the
Company have been made available to Acquirer or its representatives.
12
4.4 TITLE TO ASSETS. Other than as set forth on Schedule 4.4 or as
reflected in the Public Reports, the Company has good and valid title to all of
the assets reflected in the Most Recent 10-Q (and valid and enforceable
leasehold interests in the Real Property reflected in such Most Recent 10-Q)
except for assets disposed of since the date of such Most Recent 10-Q in the
Ordinary Course of Business (collectively, the "ASSETS"), free and clear of any
liens, pledges, encumbrances, or similar rights of third parties, except for
Permitted Liens. All of the Assets are in satisfactory operating condition,
normal wear and tear excepted, except where such condition would not result in a
Material Adverse Effect.
4.5 NONCONTRAVENTION. Other than the consents, approvals, authorizations
and other actions listed on Schedule 4.5, the execution and delivery by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby 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 foreign, federal, state, or local government, court,
administrative, regulatory or other governmental agency, commission or
authority, or any non-governmental self-regulatory agency, commission or
authority (collectively, "GOVERNMENTAL AUTHORITY"), (b) violate the terms of any
Contract in a material respect, or be in material conflict with, result in a
material breach of or constitute (upon the giving of notice or lapse of time or
both) a material default under any such Contract, or result in the creation of
any lien upon any of the Assets other than a Permitted Lien, (c) violate any
applicable order, writ, injunction, decree, judgment, restriction, ruling, law,
or regulation (collectively, "LAWS") of any Governmental Authority, or (d)
violate the certificate of incorporation or bylaws of the Company.
4.6 COMPLIANCE WITH LAWS. To the Company's Knowledge, except as set forth
on Schedule 4.6, the Company is in material compliance with all applicable Laws
of all applicable Governmental Authorities. Other than as set forth on Schedule
4.6, since September 30, 2003, the Company has received no written notice of any
noncompliance with the foregoing which has not been cured in all material
respects.
4.7 LICENSES AND PERMITS. Except as set forth on Schedule 4.7, the Company
holds and is in compliance with all material licenses, permits, concessions,
grants, franchises, approvals and authorizations necessary or required for the
use or ownership of the Assets and the operation of the Business ("LICENSES AND
PERMITS"). Except as set forth on Schedule 4.7, the Company has not received
within the preceding twelve (12) months written notice of any material
violations in respect of any such Licenses and Permits. No proceeding is pending
or, to the Company's Knowledge, threatened, which seeks revocation or limitation
of any such Licenses and Permits.
4.8 PUBLIC REPORTS. Since December 31, 2001, the Company has filed all
registration statements, annual and quarterly reports, current reports on Form
8-K, information statements and definitive proxy statements required to be filed
by the Company with the SEC ("PUBLIC REPORTS"). Each of such Public Reports has
complied with the Securities Act and/or the Exchange Act (as in effect at such
times), as applicable, in all material respects. None of such Public Reports, as
of their respective dates, contained any untrue statement of a material
13
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.
4.9 FINANCIAL INFORMATION.
(a) FINANCIAL REPORTS. The financial statements included in or incorporated
by reference into Public Reports (including the related notes and schedules)
since December 31, 2001 were prepared in accordance with GAAP applied on a
consistent basis throughout the period covered thereby, present fairly in all
material respects, the financial condition of the Company as of the indicated
dates and the results of operations and cash flows of the Company for the
indicated periods, and are consistent with the books and records of the Company;
provided, however, that the interim statements are subject to normal year-end
adjustments that are not expected to be material in amount.
(b) UNDISCLOSED LIABILITIES. On the date hereof, there are no material
liabilities or obligations of the Company of any nature, whether liquidated,
unliquidated, accrued, absolute, contingent or otherwise, except for (i) those
that are reflected or reserved against as to amount in the December 31, 2002
audited consolidated balance sheet or in the notes thereto, (ii) those that are
specifically set forth on Schedule 4.9, (iii) those that are reflected in the
Most Recent 10-Q (subject to normal recurring year-end adjustments, the effect
of which will not have a Material Adverse Effect) and/or, (iv) current
liabilities incurred in the Ordinary Course of Business since September 30,
2003. Since September 30, 2003, there has not been any change by the Company in
accounting practices, principles or methods.
4.10 SUFFICIENCY OF ASSETS. Except as set forth on Schedule 4.10, the
Assets constitute all the material assets of any nature with which the Company
has conducted the Business for the preceding twelve (12) month period, subject
only to additions and deletions of inventory and other assets in the Ordinary
Course of Business, and no other material assets are necessary to operate the
Business in the Ordinary Course of Business.
4.11 DEPOSITS. The Company has made available to Acquirer or its
representatives a complete list of all security and other deposits, prepayments
and prepaid expenses of the Company reflected in the Most Recent 10-Q (each a
"DEPOSIT"), setting forth the amount of each Deposit.
4.12 ACCOUNTS RECEIVABLE; OBLIGATIONS.
(a) The Company has made available to Acquirer or its representatives a
complete list of all accounts receivable, notes receivable, and other rights to
receive payments ("ACCOUNTS RECEIVABLE") of the Company as of September 30, 2003
showing the terms and time period for collection thereof, and all such Accounts
Receivable are bona fide and arose in the Ordinary Course of Business.
(b) The Company has made available to Acquirer or its representatives a
complete list as of September 30, 2003 of all material obligations for
indebtedness for borrowed money owed by the Company, including all outstanding
obligations of the Company in respect
14
of the Business incurred other than in the Ordinary Course of Business. No
payment with respect to indebtedness for borrowed money owed by the Company
reflected in the Public Reports is due and unpaid as of the date hereof.
4.13 LITIGATION. Except as set forth in Schedule 4.13, or as disclosed in
the Company's Public Reports, there are no legal actions or proceedings pending
or, to the Company's Knowledge, threatened against the Company or any of the
Assets before any court, tribunal or governmental body that is reasonably likely
to have a Material Adverse Effect. To the Company's Knowledge, there are no
facts, circumstances or conditions concerning the Company's Business that are
reasonably likely to result in any legal action, investigation or claim that is
reasonably likely to have a Material Adverse Effect. There is no legal action or
proceeding pending, or to the Company's Knowledge threatened, against the
Company, nor is there any legal action or proceeding pending, or, to the
Company's Knowledge, threatened, before any court, tribunal or governmental body
seeking to restrain or prohibit or to obtain damages or other relief in
connection with the consummation of transactions contemplated by this Agreement,
or which might adversely affect the Company's ability to consummate the
transactions contemplated by this Agreement. To the Company's Knowledge, the
Company is not subject to any judgment, order or decree entered in any lawsuit
or proceeding relating to the operation of the Business that would result in a
Material Adverse Effect.
4.14 TAX MATTERS. Except for matters set forth in Schedule 4.14:
(a) FILING OF TAX RETURNS. The Company and its Subsidiary have filed (or
there has been filed on their behalf) all material Tax Returns (as hereinafter
defined) required to be filed by each of them under applicable law. All such Tax
Returns are true, correct and complete in all material respects. To the extent
requested in writing by Acquirer, the Company has delivered or made available to
Acquirer correct and complete copies of all material income Tax Returns,
examination reports, statements of deficiencies assessed against or agreed to by
any of the Company and its Subsidiary relating to taxable periods beginning
after December 31, 1999.
(b) PAYMENT OF TAXES. All material Taxes (as hereinafter defined) required
to be paid by or with respect to the Company and its Subsidiary (whether or not
shown on any Tax Return) have been paid.
(c) TAX LIENS. No Tax liens exist upon the Assets or any of the assets of
the Company's Subsidiary, except Permitted Liens.
(d) WITHHOLDING TAXES. The Company and its Subsidiary have complied in all
material respects with the provisions of the Code relating to the withholding of
Taxes, as well as similar provisions under any other laws, and have, within the
time and in the manner prescribed by law, withheld from all employees' wages and
paid over to the proper governmental authorities all material amounts so
required.
15
(e) EXTENSIONS OF TIME FOR FILING TAX RETURNS. Neither the Company nor its
Subsidiary has requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed.
(f) WAIVERS OF STATUTE OF LIMITATIONS. Neither the Company nor its
Subsidiary has executed any outstanding waivers or comparable consents regarding
the application of the statute of limitations with respect to any Taxes or Tax
Returns that remain in effect.
(g) TAX DEFICIENCIES. To the Company's Knowledge, no material deficiency
for any Taxes has been proposed, asserted or assessed in writing against the
Company or its Subsidiary that has not been resolved and paid in full.
(h) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS. No audits or other
administrative proceedings or court proceedings are presently pending or
threatened in writing with regard to any material Taxes or Tax Returns of the
Company or its Subsidiary.
(i) TAX RULINGS. Neither the Company nor its Subsidiary has received a Tax
Ruling (as hereinafter defined) or entered into a Closing Agreement (as
hereinafter defined) with any taxing authority that would have a continuing
Material Adverse Effect after the Closing Date.
(j) TAX SHARING AGREEMENTS. Neither the Company nor its Subsidiary is a
party to any Tax sharing or allocation agreement other than an agreement solely
between the Company and its Subsidiary.
(k) AFFILIATED GROUP. Neither the Company nor its Subsidiary has been a
member of an affiliated group (within the meaning of Section 1504 of the Code)
or an affiliated, combined, consolidated, unitary or similar group for state,
local or foreign tax purposes, except for the group the common parent of which
is the Company.
(l) SECTION 355 TRANSACTIONS. Neither the Company nor its Subsidiary has
constituted either a "distributing corporation" or a "controlled corporation"
within the meaning of Section 355(a)(1)(A) of the Code in a distribution
qualifying for non-recognition treatment under Section 355 of the Code in the
two years prior to the date of this Agreement.
(m) As used in this Agreement:
(i) "TAX" or "TAXES" means any federal, state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including all net
income, gross income, sales and use, ad valorem, transfer, gains, profits,
excise, franchise, real and personal property, gross receipts, capital
stock, production, business and occupation, disability, employment,
payroll, license, estimated, stamp, custom duties, severance or withholding
taxes or charges imposed by any governmental entity, and includes any
interest and penalties (civil or criminal) on or additions to any such
taxes;
16
(ii) "TAX RETURN" means a report, return or other information required to
be supplied to a governmental entity with respect to Taxes including, when
permitted or required, combined or consolidated returns for a group of
entities;
(iii) "TAX RULING" means a written ruling of a taxing authority relating to
Taxes; and
(iv) "CLOSING AGREEMENT" means a written and legally binding agreement with
a taxing authority relating to Taxes.
4.15 LABOR MATTERS. Except as set forth in Schedule 4.15, the Company does
not use the services of independent contractors or consultants in connection
with the Business. The Company is not a party to any collective bargaining
agreement or any other contract with any trade or labor union, employees'
association or similar organization. To the Company's Knowledge, there are no
strikes, slowdowns, picketing, work stoppages or labor disputes pending or
threatened, or any attempts at union organization of the employees of the
Company. All salaries and wages paid and withheld by the Company are in material
compliance with all applicable federal, state and local laws.
4.16 BENEFIT PLANS AND ERISA.
(a) EMPLOYEE BENEFIT PLANS OF THE COMPANY. The Company has made available
to Acquirer or its representatives a complete list of each Company "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, post-retirement, scholarship, disability,
sick leave, vacation, individual employment, commission, bonus, payroll
practice, retention, or other plan, agreement, policy, trust fund or arrangement
(each such plan, agreement, policy, trust fund or arrangement is referred to
herein as an "EMPLOYEE BENEFIT PLAN", and collectively, the "EMPLOYEE BENEFIT
PLANS") that is currently in effect, was maintained since December 31, 1996 (and
under which the Company has current liability), or which has been approved
before the date hereof but is not yet effective, for the benefit of (i)
directors or employees of the Company or any other persons performing services
for the Company, (ii) former directors or former employees of the Company or any
other persons formerly performing services for the Company, and/or (iii)
beneficiaries of anyone described in (i) or (ii) (collectively, "BUSINESS
EMPLOYEES") or with respect to which the Company or any "ERISA AFFILIATE"
(hereby defined to include any other corporation or trade or business controlled
by, controlling or under the common control with the Company (within the meaning
of Section 4001(b) of ERISA, Section 4001(a)(14) of ERISA or Section 414 of the
Code) has or has had any obligation on behalf of any Business Employee. Schedule
4.16 also sets forth a true and complete list of each ERISA Affiliate.
(b) DOCUMENTS. The Company has made available to Acquirer or its
representatives, with respect to each Employee Benefit Plan, true and complete
copies of (i) the documents embodying and relating to the plan, including,
without limitation, the current plan documents and documents creating any trust
maintained pursuant thereto, all amendments,
17
investment management agreements, group annuity contracts, administrative
service contracts, insurance contracts, collective bargaining agreements, the
most recent summary plan description and each summary of material modification,
and employee handbooks, (ii) annual reports, including, but not limited to,
those filed on Forms 5500, 990, or 1041 for the last three (3) years, (iii)
actuarial valuation reports and financial statements for the last three (3)
years for the plan or any related trust, and (iv) each communication involving
the plan or any related trust to or from the IRS, Department of Labor ("DOL"),
Pension Benefit Guaranty Corporation ("PBGC") or any other governmental
authority including, without limitation, 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) COMPLIANCE WITH ERISA AND CODE. Except as set forth in Schedule 4.16,
each Employee Benefit Plan is in material compliance with the provisions of
ERISA and the Code and has been maintained and operated, in all material
respects, in accordance with its terms. Neither the Company nor any ERISA
Affiliate has ever maintained or contributed to any plan subject to the minimum
funding standards of Section 302 of ERISA or Section 412 of the Code. All
Employee Benefit Plans which are "pension plans" as defined in Section 3(2) of
ERISA that are intended to be tax-qualified have received favorable
determination letters from the IRS as to their tax-qualified status and the
tax-exempt status of any related trust under Sections 401(a) and 501 of the
Code, respectively, which determinations, to the Company's Knowledge, have not
been modified, revoked or limited, and address all amendments required to be
made to such plans and trusts pursuant to the applicable provisions of ERISA and
the Code as in effect on the Closing Date, except those for which applicable
remedial amendment periods under Section 401(b) of the Code have not expired.
(d) MULTIPLE EMPLOYER ARRANGEMENTS. 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).
(e) MULTIEMPLOYER PLANS. Neither the Company nor any ERISA Affiliate
maintains or contributes to, is required to maintain or contribute to, or has
ever maintained or contributed to, a "multiemployer plan" (as defined by Section
4001(a)(3) of ERISA).
(f) CERTAIN DISCLOSURES AND STATEMENTS RELATING TO EMPLOYEE BENEFIT PLANS.
With respect to each Employee Benefit Plan and except as otherwise set forth in
Schedule 4.16:
(i) QUALIFIED AND TAX-EXEMPT STATUS OF PLANS AND TRUSTS. To the Company's
Knowledge, no event has occurred or circumstance exists that will or could
give rise to disqualification or loss of tax-exempt status of any such
Employee Benefit Plan or trust, or that will or could give rise to the
imposition of any material penalty or Tax liability with respect to such
Employee Benefit Plan or trust;
18
(ii) REQUIRED PAYMENTS. All material payments required by such Employee
Benefit Plan or any collective bargaining agreement with respect to the
Company (including all contributions, insurance premiums, premiums due the
PBGC or intercompany charges) with respect to all periods through the date
hereof, have been made or properly accrued;
(iii) REPORTS, DOCUMENTS AND NOTICES. There are no material violations of
or failures to comply with ERISA and the Code with respect to the filing of
applicable required reports, documents, and notices regarding such Employee
Benefit Plan with the 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) CLAIMS OR OTHER LEGAL ACTION. To the Company's Knowledge, no claim,
lawsuit, arbitration or other action is pending or threatened in writing
against such 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;
(v) BONDING. Any bonding required with respect to such Employee Benefit
Plan in accordance with the applicable provisions of ERISA has been
obtained and is in full force and effect;
(vi) PROHIBITED TRANSACTIONS. No "prohibited transaction" (within the
meaning of Section 4975 of the Code and Section 406 of ERISA) has occurred
with respect to such Employee Benefit Plan (and the transactions
contemplated by this Agreement will not constitute or indirectly result in
such a prohibited transaction);
(vii) AUDITS. To the Company's Knowledge, no Employee Benefit Plan is
currently under audit or investigation by the IRS or the DOL or any other
Governmental Authority. No such completed audit, if any, has resulted in
the imposition of any material Tax, interest or penalty; and
(viii) VEBAS. The Company does not provide benefits through a voluntary
employee beneficiary association as defined in Section 501(c)(9) of the
Code.
(g) COBRA; FMLA. The Company, each ERISA Affiliate, each Employee Benefit
Plan and each Employee Benefit Plan "sponsor" or "administrator" (within the
meaning of Section 3(16) of ERISA) has complied in all material respects with
the applicable requirements of Part 6 of Subtitle B of Title I of ERISA and
Section 4980B of the Code (such statutory provisions and predecessors thereof
are referred to herein collectively as "COBRA"). Schedule 4.16 lists the name of
each Business Employee who has experienced a "Qualifying Event" (as defined in
COBRA) with respect to an Employee Benefit Plan who is eligible for
"Continuation Coverage" (as defined in COBRA) and whose maximum period for
Continuation Coverage required by COBRA has not expired as of the date hereof.
Schedule 4.16(g) lists the name of each Business Employee who is on a leave of
absence (whether or not pursuant to the Family and Medical Leave Act of 1993, as
amended ("FMLA")) as of the date hereof and is receiving or
19
entitled to receive health coverage under an Employee Benefit Plan, whether
pursuant to FMLA, COBRA or otherwise. Schedule 4.16(g) also lists the name of
each Business Employee who is on a leave of absence (whether or not pursuant to
the Family and Medical Leave Act of 1993, as amended ("FMLA")) as of the date
hereof and whose reemployment is governed by the Uniformed Services Employment
and Reemployment Rights Act of 1994.
(h) SPECIAL PAYMENTS. Except as disclosed on Schedule 4.16 or as otherwise
provided in this Agreement, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) result in
any payment (including, but not limited to, any retention bonuses, parachute
payments, termination or severance payments, or noncompetition payments)
becoming due to any Business Employee; (ii) increase any benefits otherwise
payable under any Employee Benefit Plan; (iii) result in the acceleration of the
time of payment or vesting of any such rights or benefits; (iv) give rise to any
additional liability for any employee benefits, including, without limitation,
withdrawal liability; or (v) otherwise result in the payment to any Business
Employee that will be nondeductible or subject to Tax under Sections 280G or
4999 of the Code, or require the Company, Acquirer or the Surviving Corporation
to "gross up" or otherwise compensate any Business Employee because of the
imposition of any excise tax on a payment to such person (unless provided for
under the agreements described in Sections 7.2(d)(vii), (viii), or (ix)).
(i) RETIREE BENEFITS. No Employee Benefit Plan provides for any benefits to
be paid beyond retirement or termination of employment (other than under COBRA,
FMLA, the Federal Social Security Act, or state law continuation coverage or
conversion rights, or any Employee Benefit Plan qualified under Section 401(a)
of the Code) to any Business Employee who, at the time the benefit is to be
provided, is a former director or former employee of the Company or an ERISA
Affiliate (or a beneficiary of any such person).
(j) CHANGES TO EMPLOYEE BENEFIT PLANS AND COMPENSATION TO BUSINESS
EMPLOYEES. Except as disclosed on Schedule 4.16(j), since September 30, 2003 and
through the Closing Date, neither the Company nor any ERISA Affiliate has, nor
will it, (i) adopt any new employee benefit plan or practice, (ii) amend any
Employee Benefit Plan, (iii) increase compensation payable or to become payable
by the Company or any ERISA Affiliate to any Business Employee.
4.17 ENVIRONMENTAL MATTERS. For purposes of this Agreement: (i)
"ENVIRONMENTAL LAWS" means the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq., and all other applicable federal,
State, county, municipal, administrative or other laws, ordinances, rules,
regulations and requirements or common law doctrines pertaining to
environmental, health, safety or ecological conditions, along with any
regulations or orders promulgated or issued thereunder; and (ii) "HAZARDOUS
MATERIAL" means (A) any "hazardous substance", "hazardous waste" or "hazardous
material" defined as such in (or for purposes of) any Environmental Law; (B) any
petroleum product, asbestos-containing material, urea formaldehyde or PCBs; and
(C) any other substance, regardless of physical form, that is subject to any
Environmental Law regulating, or imposing obligations, liability, or standards
of conduct concerning the protection of human health, plant life, animal
20
life or natural resources. Except as set forth in the Environmental Reports (as
defined below) or on Schedule 4.17:
(i) With respect to the property owned, leased, or occupied or formerly
owned, leased or occupied by the Company (collectively, the "PROPERTIES"),
the Company has not conducted or authorized the treatment or disposal of
any Hazardous Material on the Properties, which, if discovered or reported,
is reasonably likely to give rise to a material liability or material
obligation on the part of the Company, Acquirer or the Surviving
Corporation;
(ii) To the Company's Knowledge, there has been no spill, discharge,
release, emission of, or contamination resulting from, any Hazardous
Material on, at, under or migrating to or from any of the Properties, and
except as set forth in Schedule 4.17(ii), to the Company's Knowledge, no
Hazardous Material currently exists on, at, in, or under any of the
Properties, which, if disclosed or discovered, is reasonably likely to
require remediation by or give rise to a claim or liability against the
Company, Acquirer or the Surviving Corporation;
(iii) Except as set forth in Schedule 4.17(iii), the Company has not
received any written notice of any violation, directive, complaint, suit,
or order with respect to any Environmental Law, the disposal or release of
Hazardous Material from the Properties onto any other property, or the
incurrence by the Company of any liability under any Environmental Law, and
to the Company's Knowledge, no such notice is threatened from any Person,
including, but not limited to, a Governmental Authority;
(iv) To the Company's Knowledge, there is no pending litigation,
investigation or proceeding by any Person, including, but not limited to,
any Governmental Authority, in which it is alleged that there has been a
discharge, spill, disposal or release by the Company of any Hazardous
Material or any violation of Environmental Law with respect to the
Properties, or to the Company's Knowledge are there any facts or
circumstances that would reasonably lead the Company to believe that any
Person would reasonably allege any of the foregoing;
(v) There are no written agreements, including, but not limited to, consent
orders or memoranda of agreement between the Company and any Governmental
Authority relating in any way to the presence, spill, discharge, release,
threat of release, storage, treatment or disposal of any Hazardous
Material;
(vi) To the Company's Knowledge, there are no Environmental Laws applicable
to the Properties currently used or occupied by the Company that would
require the Company to obtain the approval of or provide notice to any
Governmental Authority (which has not been obtained or provided) as a
condition to the consummation of the Merger;
(vii) To the Company's Knowledge, the Company has in full force and effect
all Licenses and Permits required under the Environmental Laws that are
necessary for the operation of the Business;
(viii) The Company has made available to Acquirer true, correct and
complete copies of all reports or tests with respect to the compliance of
the Properties with the Environmental Laws and/or to the presence of any
Hazardous Material on the Properties
21
that are in the possession of the Company (collectively, the "ENVIRONMENTAL
REPORTS") and, to the Company's Knowledge, all such reports and tests
contain no material misstatements or omissions;
(x) The Company has not filed or otherwise provided written notice to any
Governmental Authority under any Environmental Law of any past or present
release or discharge of a Hazardous Material into the environment by the
Company on, at, in or under the Properties;
(xi) The Company has not received any notice, demand, or information
request regarding its alleged disposal of, or arrangement for disposal of,
any Hazardous Materials on any real property not owned by the Company that
is on the USEPA's National Priorities List or the CERCLIS list or any
similar state list, or, to the Company's Knowledge, which is or reasonably
could be the subject of any remedial action by a federal or state agency or
by a third party seeking reimbursement of cleanup expenses from the Company
under federal or state law; and
(xii) During the Company's ownership, leasing and/or occupancy of the
Properties, no construction debris or other debris was buried by the
Company on any of the Properties, which, if disclosed or discovered, is
reasonably likely to require remediation.
4.18 CONTRACTS AND AGREEMENTS.
(a) Schedule 4.18 sets forth a complete list of all written contracts,
agreements, leases and other instruments to which the Company is a party which
involve any of the following (collectively, the "CONTRACTS"):
(i) projected revenue or expense to the Company in excess of $100,000
annually;
(ii) limitations in any respect on the locations in which the Company can
conduct its Business or restrictions on the lines of business in which the
Company can engage, except as imposed by any Governmental Authority or any
Laws;
(iii) loans to or from (in excess of $1,000 per Person) the Company,
including, without limitation, any loan agreements, promissory notes,
indentures;
(iv) the payment of cash or other benefit upon the change in control of the
Company;
(v) any joint venture, partnership or other arrangement which involves the
sharing or profits, losses, costs or liabilities;
(vii) any leases of Real Property; and
22
(viii) any employment agreement between any employee of the Company and the
Company providing for annual base compensation of $100,000 or more.
(b) To the Company's Knowledge, except as disclosed on Schedule 4.18, no
default in performance or failure to perform under, and no anticipatory breach
of, any of the Contracts has occurred or is continuing, and none of the parties
to any such Contract has alleged in writing that the other has defaulted in
performance or failed to perform, other than (i) a default in payment that shall
not have continued more than 30 days from the date on which the payment was
originally due pursuant to the terms of the applicable Contract, or (ii) a
default or failure that would not, individually or in the aggregate, result in a
Material Adverse Effect. To the Company's Knowledge, no legal, administrative or
other proceedings are threatened or pending relating to the performance or
status of any of such Contracts that would result in a Material Adverse Effect.
Since the Most Recent 10-Q and except as disclosed on Schedule 4.18, the Company
has not received written notice of any anticipatory breach, pending dispute or
anticipated litigation arising from or relating to any of such Contracts, or
notice that any of such Contracts has been or will be canceled, revoked or
otherwise terminated, except in each case where such circumstances would not
result in a Material Adverse Effect.
(c) Except as set forth in Schedule 4.18, the Company is not subject to any
agreement that restricts competition with any other Person or provides that the
Company may not engage in any business or sell or distribute any product or
service, except where such restriction would not result in a Material Adverse
Effect.
4.19 INTELLECTUAL PROPERTY. The Company owns, licenses or otherwise has the
right to use, all patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, service marks, service xxxx rights, copyrights and
other proprietary intellectual property rights and computer programs
(collectively, "INTELLECTUAL PROPERTY") currently used in the Company's
Business, except to the extent that such failure would not result in a Material
Adverse Effect. No claims are pending against the Company or, to the Company's
Knowledge, threatened that the Company is infringing or otherwise adversely
affecting the rights of any Person with regard to the use of any such
Intellectual Property. To the Company's Knowledge, (i) the Company's current use
of the Intellectual Property does not infringe the rights of any Person, and
(ii) no Person is infringing the rights of the Company with respect to any
Intellectual Property.
4.20 CERTAIN FEES. The Company has no any liability or obligation to pay
any fees or commissions to any financial advisor, broker, finder, or agent with
respect to the transactions contemplated by this Agreement (except for
attorneys' and accountants' fees and expenses).
4.21 COMPANY BOARD ACTION. The Company Board (at a meeting duly called and
held) has by the requisite vote of all directors present (a) determined that the
Merger is advisable and in the best interests of the Company and its
stockholders, (b) resolved to make the Company Recommendations and directed that
the Merger be submitted for consideration by the holders of Company Shares at
the Special Stockholder Meeting, and (c) adopted a resolution to
23
elect not to be subject, to the extent permitted by applicable law, to any state
takeover law that may purport to be applicable to the Merger and the
transactions contemplated by this Agreement.
4.22 PROXY STATEMENT. None of the information relating to the Company
supplied or to be supplied by or on behalf of the Company for inclusion or
incorporation by reference in the Proxy Statement will, at the date mailed to
the Company Stockholders and at the time of the Special Stockholder Meeting,
contain any misstatement 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 were made, not misleading. The Proxy
Statement will comply as to form in all material respects with the requirements
of all applicable laws, including the Exchange Act and the rules and regulations
thereunder. No representation or warranty is made by the Company with respect to
information provided by Acquirer or Merger Sub or their representatives
specifically for inclusion or incorporation by reference therein and included or
incorporated by reference in the Proxy Statement or in any other document to be
filed in connection with the transactions contemplated hereby.
4.23 INSURANCE. The Company has made available to Acquirer or its
representatives copies of all of the insurance policies maintained by the
Company. Since September 30, 2003, except as set forth in Schedule 4.23, the
Company has received no notice of cancellation with respect to any of its
insurance policies. Except as set forth in Schedule 4.23, there are no pending
or, to the Company's Knowledge, threatened, terminations of, or premium
increases with respect to, any of its insurance policies, and the Company is in
compliance, in all material respects, with all conditions contained therein.
4.24 ABSENCE OF MATERIAL CHANGES. Except as set forth on Schedule 4.24,
since September 30, 2003:
(a) there has not been any Material Adverse Effect with regard to the
Assets or the Business;
(b) the Company has not sold, assigned, or transferred any of its material
Assets, except in the Ordinary Course of Business;
(c) the Company has not mortgaged, pledged or subjected to any lien,
pledge, mortgage, security interest, conditional sales contract, or other
encumbrance of any nature whatsoever, any of its material Assets, except for
Permitted Liens;
(d) there has been no amendment, termination, or waiver of any material
right of the Company under any Contract, License or Permit that reasonably may
be anticipated to result in a Material Adverse Effect;
(e) the Company has not:
(i) paid any judgment or settlement resulting from any suit, proceeding,
arbitration, claim or counterclaim filed before any Governmental Authority
or arbitration
24
panel in excess of $25,000 (provided that all such excluded payments do not
aggregate to more than $100,000);
(ii) written down or written up the value of any inventory or material
Assets;
(iii) incurred any material indebtedness or guaranteed any material
indebtedness, except for borrowings under existing loans or lines of
credit, in respect of ordinary trade payables or otherwise in the Ordinary
Course of Business;
(iv) issued or sold any of its stock, notes, bonds or other securities, or
any option, warrant or other rights to purchase the same, except stock
issuances upon exercise of outstanding Company Stock Options or options
issued pursuant to the Option Plans;
(v) increased the compensation of or granted or increased any severance or
termination pay to any current Company employee, other than in the Ordinary
Course of Business or as otherwise identified in this Agreement;
(vi) declared, set aside or paid any dividend or distribution payable in
cash, stock, property or otherwise with respect to Company Shares; or
(vii) agreed, whether in writing or otherwise, to take any of the actions
specified in this Section 4.24.
4.25 BANK ACCOUNTS; POWERS OF ATTORNEY. The Company has made available to
Acquirer or its representatives: (i) a complete list of each bank or other
financial institution in which the Company has any account or safe deposit box
and, (ii) a complete list of the Persons holding effective general or special
powers of attorney from the Company.
4.26 CERTAIN ARRANGEMENTS. Except as set forth in Schedule 4.26 or as
identified in the Public Reports, the Company has no:
(i) contracts, agreements, understandings, commitments or other
arrangements providing for the furnishing of services, or the rental of
real or personal property from or otherwise requiring payments to any
director or officer (outside of his or her capacity as such) or, to the
Company's Knowledge, to any Company Stockholder; and
(ii) any loans or advances to or from the Company with directors, officers,
or employees (exclusive of travel advances, expense advances, and normal
salary advances in connection with vacation periods, compensation, travel
or expense account reimbursement or other loans or advances in the Ordinary
Course of Business).
4.27 UNLAWFUL PAYMENTS. Neither the Company, nor to the Company's
Knowledge, any of its agents or other Persons acting on behalf of the Company
has, directly or indirectly:
25
(i) made any unlawful payment to domestic government officials or
employees, or to domestic political parties or campaigns, from corporate
funds;
(ii) established or maintained any unlawful or unrecorded fund of Company
monies or other assets;
(iii) made any false or fictitious entry on the books or records of the
Company; or
(iv) made any bribe, kickback or other unlawful payment of a similar or
comparable nature, to any Person, whether in money, property, or services,
to obtain favorable treatment in securing business or to obtain special
concessions.
4.28 INTERNET PRESENCE. The Company's domain name(s), if any, are currently
registered with an authorized Internet domain name registrar and are in good
standing.
4.29 BOOKS AND RECORDS. The Company has maintained all books and records in
the Ordinary Course of Business and such books and records are complete and
accurate in all material respects, except in each case where failure would not
result in a Material Adverse Effect.
4.30 NO EXISTING DISCUSSION. As of the date hereof, the Company is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to an Acquisition Proposal (as defined herein).
4.31 NASDAQ LISTING. The Company is currently listed on the NASDAQ SmallCap
Market.
4.32 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representations or
warranties contained in this Article 4 shall survive the Merger or the
termination of this Agreement pursuant to Section 8.1 (other than by reason of
8.1(c)).
5. REPRESENTATIONS AND WARRANTIES OF ACQUIRER AND MERGER SUB. In order to induce
the Company to enter into this Agreement and consummate the transactions
contemplated hereby, Acquirer and Merger Sub hereby each make the following
representations and warranties to the Company, each of which representations and
warranties is relied upon by the Company:
5.1 ORGANIZATION OF ACQUIRER AND MERGER SUB. Each of Acquirer and Merger
Sub is a corporation or other organization duly organized, validly existing, and
in good standing under the laws of the jurisdiction of its incorporation or
organization. Each of Acquirer and Merger Sub has full corporate or other power
and authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it. Merger Sub is a newly formed
corporation that was created for the sole purpose of facilitating the
acquisition of the Company. Merger Sub has no assets or liabilities, and has not
conducted and is not conducting any business activities.
26
5.2 AUTHORIZATION OF TRANSACTION. Each of Acquirer and Merger Sub has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
approved by the board of directors of each of Acquirer and Merger Sub and no
other corporate proceedings on the part of either Acquirer or Merger Sub or
their respective stockholders or members are necessary to authorize this
Agreement and to consummate the transactions so contemplated other than the
filing of the Certificate of Merger. This Agreement has been duly executed and
delivered and, assuming this Agreement constitutes a valid and binding
obligation of the Company, constitutes the valid and legally binding obligation
of each of Acquirer and Merger Sub, enforceable in accordance with its terms and
conditions except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable remedies may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
5.3 NONCONTRAVENTION. Other than the consents, approvals, authorizations
and other actions listed on Schedule 5.3, the execution and delivery by Acquirer
and Merger Sub of this Agreement and the consummation by Acquirer and Merger Sub
of the transactions contemplated hereby do not and will not (a) require the
consent, approval or action of, or any filing or notice to, any Governmental
Authority, or (b) violate any Laws of any Governmental Authority, or (c) violate
the certificate of incorporation, bylaws or comparable organizational document
of Acquirer or Merger Sub.
5.4 CERTAIN FEES. With the exception of the engagement of The Breckenridge
Group, Inc. and Zygoquest Group, neither Acquirer nor Merger Sub has any
liability or obligation to pay any fees or commissions to any financial advisor,
broker, finder, or agent with respect to the transactions contemplated by this
Agreement.
5.5 NO OWNERSHIP OF COMPANY CAPITAL STOCK. As of the date hereof, neither
Acquirer nor Merger Sub owns any Company Shares or has the right to acquire any
equity interest in the Company other than pursuant to this Agreement.
5.6 DILIGENCE. Acquirer and Merger Sub each acknowledge and agree that it
has been given opportunity to conduct due diligence on the Company, and has been
given the opportunity to obtain and review information from the Company, and ask
questions of, and receive answers from, the Company or its representatives in
connection therewith. Acquirer and Merger Sub each acknowledge and agree that
the due diligence review it conducted is sufficient and adequate for the
purposes of consummating the Merger on a fully informed basis.
5.7 SUFFICIENT FUNDS.
(a) As of the date hereof, Acquirer has secured sufficient sources of
committed funding, in an amount not less than $17,000,000, to pay the amount of
the aggregate Merger
27
Consideration as provided hereunder and to fulfill all of its other obligations
under this Agreement.
(b) Immediately after the payment of the aggregate Merger Consideration and
at all times during a period of one hundred eighty (180) days thereafter: (i)
Acquirer will be able to pay its liabilities as they become due in the Ordinary
Course of Business; and (ii) Acquirer will not have unreasonably small capital
with which to conduct its present or proposed business.
5.8 EMPLOYMENT MATTERS. Acquirer and Merger Sub each acknowledge that the
agreements referenced in Sections 7.2(d)(vii), (viii) and (ix) hereof have been
executed and delivered by the parties thereto and are legally binding
obligations, subject only to the consummation of the Merger.
5.9 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representations or
warranties contained in this Article 5 shall survive the Merger or termination
of this Agreement per Section 8.1 (other than by reason of Section 8.1(d)).
6. OTHER COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS BY THE COMPANY. The Company covenants and agrees
that, except as contemplated by this Agreement, or unless Acquirer shall
otherwise consent in writing, between the date hereof and the Closing, the
Business shall be conducted in, and the Company shall not take any action except
in, the Ordinary Course of Business, and the Company will use its commercially
reasonable efforts consistent with past practices, but recognizing the effects
that the transaction contemplated hereby may have, to preserve substantially
intact the business organization of the Business, to keep available the services
of the present officers, employees and consultants of the Company and to
preserve the present relationships of the Company with customers, suppliers and
other persons with which the Company has significant business relations.
(a) By way of amplification and not limitation, except as expressly
provided for in this Agreement, the Company shall not, between the date hereof
and the earlier of termination pursuant to Article 8 hereof or the Closing,
directly or indirectly, do any of the following, except in the Ordinary Course
of Business (other than with respect to Sections 6(a)(i)(A) and (D) below), in
respect of the Business without the prior written consent of Acquirer:
(i) (A) issue, sell, pledge, dispose of, encumber, authorize, or propose
the issuance, sale, pledge, disposition, encumbrance or authorization of
any shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
capital stock of, or any other ownership interest in, the Company;
provided, however, the Company shall have the right to issue Company Shares
to those Persons who properly exercise or convert a Stock Option, which
Stock Options were issued and outstanding prior to the date of this
Agreement; (B) amend or propose to amend the certificate of incorporation
or bylaws of the Company; (C) permit any "poison pill" or similar rights
plan to apply to or in respect of the Merger (and will take all necessary
action to exempt the Merger from any currently effective "poison pill" or
28
similar rights plan); (D) split, combine or reclassify any outstanding
Company Shares, or declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise with respect to Company
Shares; (E) redeem, purchase or otherwise acquire or offer to redeem,
purchase or otherwise acquire any Company Shares (other than pursuant to
the terms of the Company's Option Plans); or (F) enter into any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this Section 6.1(a)(i);
(ii) (A) acquire (by merger, consolidation, or acquisition of stock or
assets) any material interest in any Person; (B) sell, pledge, dispose of,
or encumber or authorize or propose the sale, pledge, disposition or
encumbrance of any of the Assets used or held for use by the Business; (C)
enter into any material contract or agreement; (D) authorize any single
capital expenditure in excess of $50,000 or capital expenditures in the
aggregate in excess of $200,000; or (E) enter into or amend any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this Section 6.1(a)(ii);
(iii) take any action with respect to increasing compensation (including
bonuses), or other remuneration of any director, officer or employee of the
Company or with respect to the grant of any severance or termination pay
(other than as fully disclosed to Acquirer in writing prior thereto) or
with respect to any increase of benefits payable under its severance or
termination pay policies in effect on the date hereof; provided that such
restriction shall not include any actions taken by the Company pursuant to
the agreements described in Sections 7.2(d)(viii) and (ix) hereof;
(iv) adopt any new Employee Benefit Plan, enter into 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
(except as required by law or contemplated hereby) any of the foregoing;
(v) take any action with respect to, or make any change in, its methods of
management, purchasing, distribution, marketing, or operating (or practices
relating to payment of trade accounts or to other payments or relating to
writing down or failing to write down or writing up the value of any
inventory or other Assets) or make any change in the method of accounting
of the Company;
(vi) take any action to incur or increase prior to the Closing any
indebtedness for borrowed money from banks, financial institutions, or any
other Persons (other than trade payables incurred in the Ordinary Course of
Business and other than borrowings under existing credit facilities) or
cancel without payment in full, any notes, loans or other material
receivables;
(vii) loan or advance monies to any Person except travel advances, advances
in connection with vacations, or other reasonable expense advances to
employees of the Company;
29
(viii) change any existing bank accounts or lock box arrangements of the
Company;
(ix) waive any material rights of the Company or settle any single claim
involving an obligation of the Company of more than $50,000 or in the
aggregate involving more than $200,000;
(x) adopt any new "poison pill," stockholder rights plan or other similar
plan applicable to the transactions contemplated by this Agreement; or
(xi) do any act or omit to do any act which would cause a material breach
of any Contracts.
(b) Notwithstanding anything to the contrary in this Section 6.1, no
actions of the Company shall be restricted in any way by this Section 6.1 if the
Company Board, after consultation with legal counsel, determines in good faith
that such action is necessary for the Company Board to comply with its fiduciary
duties to the Company Stockholders under applicable Law, provided that the
Company Board promptly gives Acquirer written notice of any such actions; except
that notwithstanding the foregoing language in this Section 6.1(b), other than
in the Ordinary Course of Business the Company shall not make any distributions
or dividends or incur any expenses in excess of $15,000 without the prior
written consent of Acquirer, which consent shall not be unreasonably withheld.
6.2 ACCESS AND INFORMATION.
(a) ACCESS TO BOOKS, RECORDS, AND EMPLOYEES. Notwithstanding Section 5.6
hereof, upon reasonable prior notice the Company shall provide Acquirer, its
employees, agents, counsel, accountants and financial consultants reasonable
access during normal business hours, and, with the Company's prior approval,
after normal business hours, to the offices, properties, books, records, files
and other documents and information of or relating to the Business as Acquirer,
its employees, agents, counsel, accountants or financial consultants may
reasonably request, provided that such requests shall not unduly interfere with
the Company's business operations and shall be subject to Section 6.8 hereof,
provided further that no prior notice will be required with respect to the
individual designated by Acquirer to transition with the CFO.
(b) INTERIM FINANCIALS. The Company shall have delivered to Acquirer within
three (3) business days from the date of this Agreement unaudited, consolidated
monthly balance sheets for the Company as of November 30, 2003 and an unaudited,
consolidated income statement for the Company for the two (2) months then ended,
prepared in accordance with GAAP, which fairly present in all material respects
the financial condition of the Company at the date thereof and the results of
the operations for the two (2) months then ended, subject to normal year-end
audit adjustments (together with those additional financial statements to be
delivered after the date hereof pursuant to this Section 6.2(b), collectively,
the "INTERIM FINANCIALS"). Within twenty (20) days after the end of each month
commencing with the month ending December 31, 2003 and continuing for each month
prior to the month in which the
30
Closing occurs, the Company shall prepare and deliver Interim Financials to
Acquirer which will be as of the end of the preceding month. The Interim
Financials shall fairly present in all material respects the financial condition
of the Company at, and as of, the dates thereof and the results of the
operations for the periods then ended, subject to normal year-end adjustments.
(c) NO WAIVER. Unless otherwise provided in this Agreement, Acquirer's due
diligence review and any inspections pursuant hereto shall not waive or release
the Company from any of its representations, warranties or covenants under this
Agreement.
6.3 CONSENTS. Promptly after execution of this Agreement, each of the
Company, Acquirer, and Merger Sub will apply for or otherwise seek, and use its
commercially reasonable efforts to obtain, all consents and approvals required
for consummation of the transactions contemplated hereby, including, without
limitation, those consents listed in Schedule 4.5. Any charges imposed by any
parties for such consents and estoppels shall be paid by the Party seeking such
consent or estoppel.
6.4 NO NEGOTIATIONS. The Company hereby agrees that from and after the date
hereof until the termination of this Agreement and except as expressly permitted
by the following provisions of this Section 6.4, neither the Company nor any of
its officers, directors, employees, investment bankers, representatives or
agents shall, directly or indirectly:
(i) solicit, initiate, entertain, encourage or respond to any inquiries or
proposals that constitute or could reasonably be expected to lead to an
Alternative Transaction, as defined below; or
(ii) negotiate, discuss or provide any non-public information to any third
party in connection with an Alternative Transaction; provided, however,
that nothing contained in Section 6.4(i) or this Section 6.4(ii) shall
prohibit the Company Board from furnishing information to, or entering into
discussions or negotiations with, any Third Party that makes an unsolicited
bona fide written proposal of an Alternative Transaction if, and only to
the extent that (A) the Company Board, after consultation with legal
counsel, determines in good faith that such action is necessary for the
Company Board to comply with its fiduciary duties to the Company
Stockholders under applicable Law, (B) the Company Board determines in good
faith, that such Alternative Transaction would, if consummated, constitute
or be reasonably likely to constitute a Superior Proposal (as hereinafter
defined), and (C) prior to taking such action, the Company provides notice
to Acquirer to the effect that it is taking such action, and receives from
such Third Party an executed confidentiality agreement in reasonably
customary form and in any event containing terms at least as stringent as
those between Acquirer and the Company.
(iii) (x) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Acquirer, the Company Recommendations, or (y) approve or
recommend an Alternative Transaction unless the Company Board, after
consultation with legal counsel, determines in good faith that such action
is necessary for the Company Board to comply with its fiduciary duties to
the Company Stockholders under applicable Law; provided, however, the
Company Board may not approve or recommend (and in connection
31
therewith, withdraw or modify the Company Recommendations) an Alternative
Transaction unless (A) such Alternative Transaction is a Superior Proposal,
(B) the Company Board shall have first consulted with legal counsel and
have determined that such action is necessary for the Company Board to
comply with its fiduciary duties to the Company Stockholders, and (C) the
Company Board has provided written notice to Acquirer (a "NOTICE OF
SUPERIOR PROPOSAL") advising Acquirer that the Company Board has received a
Superior Proposal.
Except as otherwise permitted in this Section 6.4, the Company shall not
withdraw or modify, or propose to withdraw or modify, the Company
Recommendations or approve or recommend, or propose to approve or
recommend, an Alternative Transaction. Notwithstanding anything contained
in this Agreement to the contrary, any action by the Company Board
permitted by, and taken in accordance with, this Section 6.4 shall not
constitute a breach of this Agreement by the Company. Notwithstanding
anything in this Agreement to the contrary, but subject to the proviso to
Sections 6.4(i) and 6.4(ii) hereof, nothing in this Agreement shall (x)
limit the Company Board's ability to make any disclosure to the Company
Stockholders that the Company Board determines in good faith is required to
be made to satisfy its fiduciary duties under applicable Law, or (y) limit
the Company's ability to make any disclosure required by applicable Law,
and such actions shall not be considered a breach of this Agreement.
(iv) For all purposes of this Agreement, "ALTERNATIVE TRANSACTION" means
any of the following: (A) the acquisition of the Company by merger or
otherwise by any Third Party; (B) the acquisition by a Third Party of 20%
or more of the Assets of the Company; (C) the acquisition by a Third Party
of 20% or more of the outstanding Company Shares or the issuance by the
Company of capital stock containing terms which are inconsistent with the
consummation of the transactions contemplated by this Agreement; (D) the
adoption by the Company of a plan of liquidation or the declaration or
payment by the Company of an extraordinary dividend representing 20% or
more of the value of the Company; or (E) the repurchase by the Company of
more than 20% of the outstanding Company Shares.
For all purposes of this Agreement, a "SUPERIOR PROPOSAL" means any bona
fide written unsolicited proposal for an Alternative Transaction (except
that, for purposes of the definition of Superior Proposal, 50% shall be
substituted for 20% wherever it appears in the definition of Alternative
Transaction), accompanied by a commitment letter to finance the transaction
contemplated by such proposal from a reputable source or sources capable of
actually providing such financing, that the Company Board determines in its
good faith judgment (x) would result in a transaction, if consummated, that
would be superior to the Company Stockholders from a financial point of
view as compared to the transactions contemplated hereby and any
alternative proposed by Acquirer or Merger Sub in accordance with Section
6.4(iii), and (y) to be reasonably capable of being consummated in
accordance with its terms, in each case taking into account all factors the
Company Board considers relevant, including all legal, financial,
regulatory and other aspects of the proposal by the Third Party. Any change
in the terms of an Alternative
32
Transaction shall be deemed to constitute a new Alternative Transaction
hereunder, subject to all of the applicable provisions of this Section 6.4.
The Company shall notify Acquirer promptly if it or, to the Company's
Knowledge, any of its officers, directors, employees, investment bankers,
stockholders, representatives, agents, or Affiliates receives any indications of
interest, requests for non-public information or offers in respect of an
Alternative Transaction, and will communicate to Acquirer in reasonable detail
the terms of any such indication, request or proposal.
6.5 EXPENSES.
(a) Except as otherwise specifically provided herein, all of the fees,
expenses and obligations incurred by Acquirer and Merger Sub in connection with
the authorization, negotiation, 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 Acquirer and Merger Sub, shall be paid by Acquirer. Acquirer
shall be solely responsible for paying the fees owed to The Breckenridge Group,
Inc. and Zygoquest Group incurred in connection with this transaction. Acquirer
hereby indemnifies the Company and the Company's stockholders, officers,
directors, employees, representatives and agents from and against any claim,
liabilities or actions in respect of fees or expenses of Acquirer's advisors.
(b) Except as otherwise specifically provided herein, all fees, expenses
and obligations incurred by the Company in connection with the authorization,
negotiation, preparation, execution and performance of this Agreement and the
other agreements referred to herein shall be paid by the Company. Any fees,
expenses and obligations of the Company not paid at or prior to the Closing
shall become obligations of the Surviving Corporation. The Company, or the
Surviving Corporation from and after the Effective Time, shall be responsible
for paying any and all sales, use and transfer taxes incurred as a result of
Acquirer's acquisition of the Company's stock pursuant to the Merger.
(c) Nothing in this Section 6.5 shall be construed as affecting the Merger
Consideration payable to any holder of Company Shares or Exercisable Options.
6.6 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice
to Acquirer of the following:
(a) The occurrence or non-occurrence of any event of which it obtains
Knowledge whose occurrence or non-occurrence would be reasonably likely to cause
either (i) a material breach of any representation or warranty of the Company
contained in this Agreement at any time from the date hereof to the Closing, or
(B) directly or indirectly, any Material Adverse Effect. Acquirer's knowledge of
any facts obtained by Acquirer prior to the date hereof or disclosed herein that
may give rise after the date hereof to a Material Adverse Effect shall not
affect whether or not a Material Adverse Effect shall have occurred.
33
(b) Any material failure by the Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
Notwithstanding the foregoing, the delivery of any notice pursuant to this
Section 6.6 shall not limit or otherwise affect the remedies available hereunder
to Acquirer upon receiving such notice.
6.7 EMPLOYEE MATTERS.
(a) CONDITIONS OF EMPLOYMENT. From and after the Effective Time, the
Surviving Corporation will continue employment of the persons who are current
employees of the Company immediately prior to the Effective Time (the "CURRENT
EMPLOYEES") on substantially the same terms and conditions, including base
salary and benefits in the aggregate, as such Current Employees are employed by
the Company subject to the following conditions: (i) Acquirer and Surviving
Corporation shall not, and shall not be obligated to, continue the employment of
those Current Employees who do not meet Acquirer's then-current employment
standards; and (ii) nothing contained herein shall preclude Acquirer or
Surviving Corporation from revising conditions of employment after the Effective
Time or effecting the termination of any Current Employees after the Effective
Time.
(b) EMPLOYEE BENEFITS. With respect to employee benefits, nothing contained
in this Agreement shall prohibit Acquirer or the Surviving Corporation from
changing or eliminating the benefits of Current Employees or employees of the
Surviving Corporation or eliminating or modifying benefits currently being made
available by the Company to its Current Employees, provided that any such
elimination or reduction of benefits shall occur no earlier than six (6) months
following the Merger.
6.8 CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS.
(a) The Parties agree to announce the execution of this Agreement and the
consummation of the transactions contemplated by this Agreement simultaneously
at mutually agreeable times as promptly as practicable after the execution and
delivery of this Agreement and after the Closing, respectively (except as
required by applicable Law). The content of all announcements and publicity
relating to this Agreement and the transactions contemplated herein will be
subject to the mutual approval of the Company and Acquirer (except as otherwise
required by Law), which approval shall not be unreasonably withheld or delayed.
(b) Without limiting the terms and conditions of the Mutual Non-Disclosure,
Non-Use, Non-Solicitation and Standstill Agreement dated July 24, 2003 between
Acquirer and the Company (the "CONFIDENTIALITY AGREEMENT"), the Company shall,
and shall cause its representatives to, maintain the confidentiality of all
non-public information concerning Acquirer (other than such information which
becomes generally available to the public other than as a result of disclosure
by the Company) which becomes known by the Company or such representatives
solely as a result of the negotiation or consummation of the transactions
contemplated by this Agreement, and shall promptly return and cause its agents
and representatives to return to Acquirer all written materials containing such
information in the
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event that the Closing does not occur within the time limit herein provided for.
Without limiting the terms and conditions of the Confidentiality Agreement,
Acquirer shall, and shall cause its representatives and Affiliates (including
Merger Sub) to, maintain the confidentiality of all non-public information
concerning the Company (other than such information which becomes generally
available to the public other than as a result of disclosure by Acquirer) which
becomes known by Acquirer or such representatives solely as a result of its due
diligence investigations or efforts conducted prior to or after the date hereof
or the negotiation or consummation of the transactions contemplated by this
Agreement, and shall promptly return, and cause its agents and representatives
to return, to the Company all written materials containing such information in
the event that the Closing does not occur within the time limit herein provided
for. Nothing contained herein shall limit the right of any such Persons to
disclose any such information to its subsidiaries, employees, agents,
representatives, counsel, accountants, financial advisors, underwriters and
sources of financing (and their counsel and accountants) for the purpose of
facilitating the consummation of the transactions contemplated hereby or to
disclose any such information as required by applicable Law. In addition,
nothing contained herein shall limit the right of any such Person to disclose to
any and all Persons, without limitation of any kind, the tax treatment and tax
structure of the transactions described in this Agreement and all materials of
any kind (including opinions or other tax analysis) that are provided to it
relating to such tax treatment and tax structure; provided, however, that no
Party may disclose (A) any information that is not relevant to an understanding
of the tax treatment or tax structure of the transactions described in this
Agreement, or (B) any information to the extent such disclosure could result in
a violation of any federal or state securities Laws.
6.9 STATE TAKEOVER STATUTES. The Company will take all reasonable steps to
exempt the Merger from the requirements of Delaware General Corporation Law
Section 203 or any other "fair price," "moratorium" or "control acquisition"
statute or regulation (other than Delaware General Corporation Law Section 262),
by action of the Company's Board of Directors or otherwise.
6.10 TAX RETURNS. After the Closing, Acquirer will cause to be prepared and
timely filed (after giving effect to any valid extensions of time in which to
make such filings) all Tax Returns for the Company for any period ending on or
before the Closing Date that have not been filed as of the Closing Date and for
any period which includes the Closing Date and ends after the Closing Date. Any
obligations arising out of such Tax Returns shall be obligations of the
Surviving Corporation as of the Closing.
6.11 DIRECTOR AND OFFICER LIABILITY.
(a) Acquirer agrees that all rights to indemnification and all limitations
on liability existing in favor of any individual, who on or at any time prior to
the Effective Time was an officer, director, employee, or agent of the Company
(an "Indemnified Person") in respect of acts or omissions of such Indemnified
Person on or prior to the Effective Time, as provided in the Company's
certificate of incorporation or bylaws, shall continue in full force and effect
in accordance with its terms, and shall not be amended, repealed or otherwise
modified after the Effective Time in any manner that would adversely affect the
rights of an Indemnified Person, and the Surviving Corporation shall honor all
such indemnification provisions. Acquirer hereby
35
unconditionally and irrevocably guarantees for the benefit of the Indemnified
Parties the obligations of the Surviving Corporation under the foregoing
indemnification arrangements.
(b) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any Person, then, and in such case, Acquirer shall cause proper provision to
be made so that the successors and assigns of the Surviving Corporation assume
the obligations set forth in this Section 6.11.
(c) The provisions of this Section 6.11 are intended to be for the benefit
of, and will be enforceable by, each Indemnified Person, and such Indemnified
Person's heirs, representatives, and successors and are in addition to, and not
in substitution for, any other rights to indemnification or contribution that
any such Person may have by contract or otherwise.
(d) Acquirer agrees that it shall maintain, and it shall cause the
Surviving Corporation and any of its successors and assigns to maintain, any
directors and officers insurance policies obtained by the Company prior to the
Effective Time in full force and effect. The Parties hereto agree and
acknowledge that Company shall pay for renewal of its existing directors and
officers insurance policies prior to the Effective Time and that nothing
contained in this Agreement to the contrary shall cause such payment to be
deemed a breach of this Agreement or give rise to a termination right in favor
of the Acquirer or Merger Sub hereunder.
6.12 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the Parties agrees to use its commercially reasonable efforts
to take promptly, or cause to be taken, all actions and to do promptly, or cause
to be done, all things necessary, proper or advisable under applicable Law to
consummate and make effective the transactions contemplated by this Agreement,
including using its commercially reasonable efforts to obtain all necessary
actions or non-actions, extensions, waivers, consents and approvals from all
applicable Governmental Authorities, effecting all necessary registrations and
filings and best efforts to obtain any required contractual consents or
assignments of third parties, including but not limited to, those of landlords
of premises leased by the Company. If, at any time after the Effective Time, the
Surviving Corporation considers or is advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with the
Merger or otherwise to carry out the purposes of this Agreement, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of each of the Constituent Corporations or
otherwise, such deeds, bills of sale, assignments and assurances and to take and
do, in the name and on behalf of each of the Constituent Corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out the purposes of this Agreement.
36
6.13 PROPERTY TRANSACTION. Notwithstanding anything in this Agreement to
the contrary, the Company shall not be restricted in any manner, including,
without limitation, being subject to Sections 6.1 and 6.4 herein, with respect
to the previously announced transaction involving the Company's Real Property
located at 000 X. Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx (the "Property
Transaction").
7. CONDITIONS TO OBLIGATION TO CLOSE.
7.1 CONDITIONS TO OBLIGATION OF EACH PARTY. The respective obligations of
each Party to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions, unless
and to the extent any such condition is specifically waived in writing by such
Party:
(a) LEGALITY. No federal or state statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated or
enforced by any court or Governmental Authority which is in effect and has the
effect of making the transactions contemplated hereby illegal or otherwise
prohibiting the consummation of the transactions contemplated hereby;
(b) REGULATORY MATTERS. All filings shall have been made and all approvals
shall have been obtained as may be legally required pursuant to federal and
state laws prior to the consummation of the transactions contemplated by this
Agreement, including, without limitation, clearance of the Proxy Statement by
the staff of the SEC and all other actions by or in respect of, or filings with,
any governmental body, agency or official or any other person required to permit
the consummation of the transactions contemplated by this Agreement so that the
Surviving Corporation is able to continue to carry on the Business substantially
in the manner now conducted by the Company;
(c) NO GOVERNMENT AUTHORITY CHALLENGE. There shall be no pending action or
proceeding before any court or administrative agency by any Government Authority
seeking to restrain or prohibit the transactions contemplated by this Agreement;
(d) NO INVESTIGATION OF THE COMPANY. There shall be no pending
investigation of the Company by any Governmental Authority reasonably likely to
result in a Material Adverse Effect; and
(d) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have received
the Requisite Company Stockholder Approval.
7.2 CONDITIONS TO OBLIGATIONS OF ACQUIRER AND MERGER SUB. The obligation of
Acquirer and Merger Sub to consummate the transactions to be performed by them
in connection with the Closing is subject to satisfaction of the following
conditions, unless and to the extent any such condition is specifically waived
in writing by Acquirer:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations and
warranties set forth in this Agreement that are not qualified as to
37
"materiality", "in all material respects", "Material Adverse Effect" or similar
qualifier or threshold shall be true and correct in all material respects as of
the date of this Agreement and as of the Closing Date (except to the extent
expressly made as of an earlier date, in which case as of such date), and the
representations and warranties made by the Company set forth in this Agreement
that are so qualified shall be true and correct as of the date of this Agreement
on and as of the Closing Date (except to the extent expressly made as of an
earlier date, in which case as of such date); provided that this condition shall
be deemed to have been satisfied unless any such breaches of representation and
warranty (without regard to any "materiality", "in all material respects",
"Material Adverse Effect" or similar qualifier or threshold), individually or in
the aggregate, have had a Material Adverse Effect;
(b) OBLIGATIONS PERFORMED. The Company shall have performed and complied in
all material respects with all agreements, conditions, covenants and obligations
required by this Agreement to be performed or complied with by the Company prior
to or at the Closing, except for any failures to perform or comply which would
not result in a Material Adverse Effect;
(c) CONSENTS. The Company shall have obtained and delivered to Acquirer
written consents of all Persons whose consents are required to consummate the
transactions contemplated herein, if any, including, without limitation, those
listed on Schedule 4.5, and all of such consents shall remain in full force and
effect at and as of the Closing, except for any failures to obtain or deliver
which would not result in a Material Adverse Effect;
(d) CLOSING DELIVERIES. The Company shall have executed, or shall have
caused to be executed (where applicable), and delivered to Acquirer or its
representatives the following:
(i) a certificate of the secretary of the Company which shall attach a
certified copy of the corporate resolutions of the Company Board and the
Company Stockholders authorizing and approving the Merger and the
execution, delivery and performance by the Company of this Agreement and
all other documents, instruments and agreements contemplated by this
Agreement to be executed, delivered or performed by the Company, together
with an incumbency certificate with respect to officers of the Company
executing documents or instruments on behalf of the Company;
(ii) a certificate of the President of the Company certifying as to the
matters set forth in Sections 7.2(a), 7.2(b) and 7.2(c) hereof and as to
the satisfaction in all material respects of all other covenants of the
Company set forth in this Agreement;
(iii) an opinion of counsel to the Company that (A) the Company is duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware, and (B) this Agreement has been duly authorized,
executed and delivered by the Company;
(iv) the Certificate of Merger duly executed by the Company;
38
(v) Good Standing Certificates issued by the Secretary of State for the
states in which the Company is either incorporated or qualified as a
foreign corporation certifying that the Company is in good standing as a
corporation under the laws of said states, such certificates to be in form
and substance acceptable to Acquirer;
(vi) three (3) year noncompetition and nonsolicitation agreements executed
by all key operating executives of the Company who own more than two
percent (2%) of the outstanding shares of the Company, substantially in the
form of Exhibit 7.2(d)(vi) attached hereto;
(vii) executed employment agreements between the Company and Xxxx
Xxxxxxxxxxx, in the form of Exhibit 7.2(d)(vii)(A) attached hereto, and the
Company and Xxxxx Xxxxxx, in the form of Exhibit 7.2(d)(vii)(B) attached
hereto;
(viii) a one(1) year noncompetition and nonsolicitation agreement executed
by Xxxxx Xxxxxx, the Chief Financial Officer of the Company ("CFO"), in the
form of Exhibit 7.2(d)(viii) attached hereto; and
(ix) the retention and employment agreement between the Company and Xxxxx
Xxxxxx, a copy of which is attached as Exhibit 7.2(d)(ix).
(e) PAYMENT OF BONUS AND SEVERANCE OBLIGATIONS. At or immediately prior to
the Closing, the Company shall satisfy all of its bonus and severance
obligations to the officers and employees of the Company, including, without
limitation, payment of its bonus obligations to CFO; and
(f) REVISED SCHEDULES. The Company shall have tendered to Acquirer revised
Schedules dated as of the Closing Date ("REVISED SCHEDULES"), with all changes,
if any, through such date duly noted thereon; provided, however, that in the
event that the Revised Schedules contain any disclosure or change which should
have been but was not shown on the Schedules attached hereto on the date hereof
and such disclosure or change would result in a Material Adverse Effect, the
condition contained in this Section 7.2(f) shall be deemed unsatisfied.
7.3 CONDITIONS TO OBLIGATION OF COMPANY. The obligation of the Company to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions, unless and to the extent
any such condition is specifically waived in writing by the Company:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations and
warranties made by Acquirer and Merger Sub in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made or given on
and as of the Closing Date;
39
(b) OBLIGATIONS PERFORMED. Acquirer and Merger Sub shall have performed and
complied in all material respects with all agreements, conditions, covenants and
obligations required by this Agreement to be performed or complied with by them
prior to or at the Closing;
(c) CONSENTS. Acquirer and Merger Sub shall have obtained and delivered to
the Company written consents of all Persons whose consents are required to
consummate the transactions contemplated herein, if any, including, without
limitation, those listed on Schedule 5.3, and all of such consents shall remain
in full force and effect at and as of the Closing;
(d) CLOSING DELIVERIES. Acquirer and Merger Sub shall have executed, or
shall have caused to be executed (where applicable), and delivered to the
Company or its representatives the following:
(i) certificates of the respective secretaries of Acquirer and Merger Sub
which shall attach certified copies of the resolutions of the
members/managers of Acquirer and the Board of Directors and sole
stockholder of Merger Sub authorizing and approving the Merger and the
execution, delivery and performance by Acquirer and Merger Sub of this
Agreement and all other documents, instruments and agreements contemplated
by this Agreement to be executed, delivered or performed by Acquirer and
Merger Sub, together with incumbency certificates with respect to the
respective officers of Acquirer and Merger Sub executing documents or
instruments on behalf of Acquirer and Merger Sub;
(ii) a certificate of an authorized officer of each of Acquirer and Merger
Sub certifying as to the matters set forth in Sections 7.3(a), 7.3(b) and
7.3(c) hereof and as to the satisfaction in all material respects of all
other covenants of Acquirer and Merger Sub set forth in this Agreement;
(iii) an opinion of counsel to Acquirer and Merger Sub that (A) each of
Acquirer and Merger Sub is duly organized, validly existing and in good
standing under the laws of the State of Delaware, and (B) this Agreement
has been duly authorized, executed and delivered by each of Acquirer and
Merger Sub;
(iv) the Certificate of Merger duly executed by Merger Sub; and
(v) Good Standing Certificates issued by the Secretary of State for the
states in which Acquirer and Merger Sub are incorporated or organized
certifying that Acquirer and Merger Sub are in good standing under the laws
of said states, such certificates to be in form and substance acceptable to
the Company.
8. TERMINATION.
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time (notwithstanding any approval of the Merger and adoption of this
Agreement by the Company Stockholders and/or the Company Board):
(a) by mutual written consent of Acquirer and the Company; or
40
(b) by Acquirer if there has been a Material Adverse Effect with respect to
the Company; or
(c) by Acquirer if there has been a material breach by the Company of any
representation, warranty, covenant or agreement contained in this Agreement that
is not curable and such breach would give rise to a failure of the conditions
set forth in Section 7.2(a) or Section 7.2(b) hereof; provided that each of
Acquirer and Merger Sub is not then in breach in any material respect of any of
its representations, warranties, covenants or agreements under this Agreement;
or
(d) by the Company if there has been a material breach by Acquirer or
Merger Sub of any representation, warranty, covenant or agreement contained in
this Agreement that is not curable and such breach would give rise to a failure
of the conditions set forth in Section 7.3(a) or Section 7.3(b) hereof; provided
that the Company is not then in breach in any material respect of any of its
representations, warranties, covenants or agreements under this Agreement; or
(e) by the Company or Acquirer if the Merger has not been consummated by
February 28, 2004, or, in the event the preliminary proxy statement is reviewed
or monitored by the SEC, by March 26, 2004; provided that the Party seeking to
exercise such right is not then in breach in any material respect of any of its
representations, warranties, covenants or agreements under this Agreement; or
(f) by either Acquirer or the Company if the Merger shall fail to receive
the Requisite Company Stockholder Approval at the Special Stockholder Meeting;
or
(g) by either Acquirer or the Company if a court of competent jurisdiction
or other Governmental Authority with competent jurisdiction shall have issued a
non-appealable final order, decree or ruling or taken any other non-appealable
final action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger; or
(h) by the Company, in order to enter into a definitive written agreement
with respect to an Alternative Transaction with a Third Party; provided that
prior to entering into such definitive agreement, the Company shall have given
Acquirer notice of such Alternative Transaction as required by Section 6.4 and
is otherwise not prohibited by Section 6.4 from entering into such agreement; or
(i) by Acquirer if a Triggering Event shall have occurred.
For purposes of this Agreement, a "TRIGGERING EVENT" shall be deemed to
have occurred if, (i) the Company Board or any committee thereof shall have
approved or recommended to the Company Stockholders any Alternative Transaction,
(ii) the Company Board or any committee thereof shall for any reason have
withdrawn or shall have amended or modified in a manner adverse to Acquirer the
Company Recommendations; (iii) the Company shall have failed to include in the
Proxy Statement the Company Recommendations; or (iv) a tender or exchange offer
relating to 40% or more of the outstanding Company Shares shall have
41
been commenced by a Person unaffiliated with Acquirer, and the Company shall not
have sent to the Company Stockholders pursuant to Rule 14e-2 promulgated under
the Exchange Act, within ten (10) business days after such tender or exchange
offer is first published or received by the Company, a statement disclosing that
the Company recommends rejection of such tender or exchange offer.
8.2 EFFECT OF TERMINATION.
(a) TERMINATION FEE. The Company shall pay to Acquirer in cash $500,000
("TERMINATION FEE"), if:
(i) within four (4) months after the date of this Agreement, the Company
receives a proposal for an Alternative Transaction (including the
commencement of a tender offer made directly to the Company Stockholders)
from any Person (other than Acquirer or its Affiliates) and such
Alternative Transaction (including such tender offer) is consummated within
twelve (12) months after the date of this Agreement (a "COVERED ALTERNATIVE
TRANSACTION"), provided that this Agreement shall not have been earlier
terminated pursuant to Sections 8.1(a),(b),(c), (d), (f), or (g); or
(ii) this Agreement is terminated by the Company pursuant to Section 8.1(h)
or by Acquirer pursuant to Section 8.1(i).
(b) TIMING OF PAYMENT OF TERMINATION FEE. The Termination Fee shall be due
and payable to Acquirer within ten (10) days of the first to occur of (i) the
consummation of a Covered Alternative Transaction, and (ii) an event set forth
in Sections 8.2(a)(ii).
(c) EFFECT OF TERMINATION. Termination of this Agreement pursuant to
Section 8.1 shall terminate all obligations and liabilities of the Parties to
each other hereunder, except for the obligations under Sections 6.5, 6.8(b),
8.2, 9.10 and 9.14 hereof.
(d) SOLE AND EXCLUSIVE REMEDY. Each Party hereto acknowledges and agrees
that such Party's sole and exclusive remedy with respect to any losses,
liabilities, costs, expenses or damages of any kind and all claims for any
breach or liability under this Agreement or otherwise relating to the subject
matter hereof and the transactions contemplated hereby shall be solely in
accordance with, and limited by, Section 8.1, subsections (a), (b), and (c) of
this Section 8.2 and Section 9.14 hereof; provided, however, that if (i) all
conditions to the obligations to the applicable Party hereto at Closing
contained in Article 7 have been satisfied (or waived by the Party or Parties
entitled to waive such conditions) and such Party does not proceed with the
Closing, or (ii) this Agreement is terminated pursuant to Section 8.1(c) or (d),
all remedies available to the other Party, at law or in equity, on account of
such failure to close or termination, shall be preserved including, without
limitation, specific performance. Without limiting the generality of the
foregoing, the Parties hereto agree that the payment provided for in Section
8.2(a) shall be the sole and exclusive remedy of Acquirer and Merger Sub upon
termination of this Agreement under the circumstances set forth in Section
8.2(a) and such remedies shall be limited to the amount stipulated in Section
8.2(a) regardless of the
42
circumstances (including willful or deliberate misconduct) giving rise to such
termination. The provisions of this Section 8.2 shall survive any termination of
this Agreement.
9. MISCELLANEOUS.
9.1 RISK OF LOSS. The risk of loss occurring with respect to the Company
prior to the Closing shall remain the liability of the Company.
9.2 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/or shall be modified
to conform with such laws, without invalidating the remaining provisions hereto.
9.3 MODIFICATION AND WAIVER. This Agreement may not be changed, modified or
amended except in writing specifically referring to this Agreement and signed by
Acquirer, Merger Sub and the Company. No change, amendment or attempted waiver
of any provision hereof shall be binding on the other Parties unless reduced to
writing and signed by Acquirer, Merger Sub and the Company. Unless specifically
provided otherwise herein or agreed to by Acquirer, Merger Sub and the Company
in writing, no modification, waiver, termination, rescission, discharge or
cancellation of this Agreement shall affect the right of the Parties hereto to
enforce any claim, whether or not liquidated, which accrued prior to the date of
such modification, waiver, termination, rescission, discharge, or cancellation
of this Agreement, and no waiver of any provision or of any default under this
Agreement shall affect the right of any Party to enforce such provision or to
exercise any right or remedy in the event of any other default, whether or not
similar.
9.4 ASSIGNMENT, SURVIVAL AND BINDING AGREEMENT. This Agreement may not be
assigned by any Party hereto without the prior written consent of the other
Parties. The terms and conditions hereof shall survive the Closing and shall
inure to the benefit of and be binding upon the Parties hereto and their
respective heirs, personal representatives, successors and assigns.
9.5 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, with the same effect as
if the signatures thereto were in the same instrument. This Agreement shall be
effective and binding on all Parties when all Parties have executed and
delivered a counterpart of this Agreement.
9.6 NOTICES. All notices, requests, demands, claims or other communications
hereunder will be in writing and shall be deemed duly given if personally
delivered, sent by confirmed telefax, or sent by a recognized overnight delivery
service which guarantees next day delivery ("OVERNIGHT DELIVERY") or mailed
registered or certified mail, return receipt requested, postage prepaid,
transmitted or addressed to the intended recipient as set forth below:
43
If to the Company: On-Site Sourcing, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Telefax: (000) 000-0000
with a copy to: Xxxxxx, Xxxxxx & Xxxxxxxxx
0000 Xxxxxx Xxxxxxxxx
00xx Xxxxx
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telefax: (000) 000-0000
If to Acquirer or Merger Sub: DocuForce, LLC
000 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxx
Telefax: (000) 000-0000
with a copy to: Xxxx Xxxxxxx
Xxxxxx Xxxxxx Xxxxxxx LLP
0000 Xxxx Xxxxxxxxx Xxxxxx
2800 One Atlantic Center
Xxxxxxx, Xxxxxxx 00000
Telefax: (000) 000-0000
or at such other address as any Party notifies the other Parties in writing. The
Parties agree that notices or other communications that are sent in accordance
herewith (i) by personal delivery or confirmed telefax, will be deemed received
on the day sent or on the first business day thereafter if not sent on a
business day, (ii) by Overnight Delivery, will be deemed received on the first
business day immediately following the date sent, and (iii) by U.S. mail, will
be deemed received three (3) business days immediately following the date sent.
9.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
together with the Exhibits, Schedules and Revised Schedules referenced herein,
and the Confidentiality Agreement, constitute 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 (including, without
limitation, Section 6.11 hereof), is not intended to confer upon any person
other than Acquirer, Merger Sub, the Company and, after the Closing Date, the
Company Stockholders, any rights or remedies hereunder.
9.8 FURTHER ASSURANCES. The Parties agree to execute and/or deliver, both
before and after Closing, any additional information, documents or agreements
contemplated hereby and/or necessary or appropriate to effect and consummate the
transactions contemplated
44
hereby. Subject to Section 6.8 hereof, the Company agrees to provide to Acquirer
before the Closing such information as Acquirer may reasonably request in order
to consummate the transactions contemplated hereby and to effect an orderly
transition of the Business following Closing.
9.9 CONSTRUCTION. Within this Agreement the singular shall include the
plural and the plural shall include the singular and any gender shall include
all other genders, all as the meaning and context of this Agreement shall
require. In connection with any action or event which by the terms hereof
requires consent of a party hereto, such consent shall not be unreasonably
withheld or delayed. 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. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires.
9.10 CHOICE OF LAW. This Agreement and all documents executed in connection
therewith shall be governed by, and construed in accordance with, the laws of
the State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflict of laws thereof.
9.11 CONSENT TO JURISDICTION. Each of the Parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court located in the
State of Delaware or any Delaware state court in the event any dispute arises
out of this Agreement or any of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court, and (c) agrees that it
will not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court sitting
in the State of Delaware or a Delaware state court.
9.12 SCHEDULES AND EXHIBITS; SECTIONS AND ARTICLES. All Schedules, Revised
Schedules and Exhibits referenced in this Agreement, whether attached hereto or
not, are incorporated by reference herein and made a part hereof, and this
Agreement shall be construed in accordance therewith.
9.13 DEFINITION OF DAYS. For purposes of this Agreement, a "business day"
is a day on which banks in the New York, New York are open for business but
shall not include a Saturday or Sunday or federal holiday. Notwithstanding
anything to the contrary in this Agreement, no action shall be required of the
parties hereto except on a business day and in the event an action is required
on a day which is not a business day, such action shall be required to be
performed on the next succeeding day which is a business day. All references to
"day" or "days" shall mean calendar days unless specified as a "business day."
9.14 INJUNCTIVE RELIEF. In the event of a breach or threatened breach by
any Party hereto of any of its covenants or other obligations hereunder,
including, without limitation, the Parties' respective obligations to close the
transactions contemplated hereby, each of the Parties hereby consents and agrees
that the non-breaching Party shall be entitled to an injunction
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or similar equitable relief restraining the breaching Party(s) from committing
or continuing any such breach or threatened breach or granting specific
performance of any act required to be performed by the breaching Party(s) under
any such provision, without the necessity of showing any actual damage or that
money damages would not afford an adequate remedy and without the necessity of
posting any bond or other security.
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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement as of the date first above written.
COMPANY:
ON-SITE SOURCING, INC.
By: /s/ Xxxxx Xxxxxx
-----------------------------------
Print Name: Xxxxx Xxxxxx
----------------------------
Title: CFO
---------------------------------
ACQUIRER:
DOCUFORCE, LLC:
By: /s/ Xxxx X. Xxxx
-----------------------------------
Xxxx X. Xxxx, President
MERGER SUB:
DOCUFORCE ACQUISITION CORP.
By: /s/ Xxxx X. Xxxx
-----------------------------------
Xxxx X. Xxxx, President
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