AGREEMENT AND PLAN OF MERGER
AGREEMENT, dated as of June 30, 1999, among (i) Xxxxxx Xxxxxx (the
"Shareholder") and Xxxxxxx Analysis, Inc. a New York corporation, located at 000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Company"), and (ii) IBS Interactive,
Inc., a Delaware Corporation, located at 0 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxx
Xxxxxx, XX 00000 (the "Buyer"), and SAI Acquisition Corp., a Delaware
corporation (the "Merger Subsidiary") and a wholly owned subsidiary of the
Buyer. The Company is sometimes referred to herein as the "Surviving
Corporation."
WHEREAS, the Company, was organized under the laws of the State of New
York pursuant to a certificate of incorporation filed on November 17, 1973; and
WHEREAS, the Shareholder is the owner of all of the issued and
outstanding shares (the "Shares") of the capital stock of the Company; and
WHEREAS, the Shareholder and the Buyer desire that the Merger
Subsidiary merge (the "Merger") with and into the Company with the result that
the separate existence of the Merger Subsidiary will cease and the Company will
continue as the Surviving Corporation and a wholly owned subsidiary of the
Buyer; and
WHEREAS, the sole director, and the Shareholder (as sole shareholder
of the Company), have determined that the Merger is in the best interests of the
Company and its sole shareholder and have duly adopted resolutions declaring the
Merger to be advisable and approving this Agreement and the transactions
contemplated thereby.
WHEREAS, the sole director and sole stockholder of the Merger Sub have
determined that the Merger is in the best interests of the Merger Sub and its
sole stockholder and have duly adopted resolutions declaring the Merger to be
advisable and approving this Agreement and the transactions contemplated
thereby.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby and in consideration of the mutual covenants contained herein, agree as
follows:
1. The Merger.
1.1 THE MERGER. Upon the terms and conditions hereinafter set forth and in
accordance with the New York Business Corporation Law (the "NYBCL") and the
Delaware General Corporation Law (the "DGCL"), at the Effective Time (as
hereinafter defined), the Merger Sub shall be merged with and into the Company
and thereupon, pursuant to the DGCL, the separate existence of Merger Sub shall
cease and the Company shall continue to exist as the Surviving Corporation under
and be governed by the NYBCL.
1.2 EFFECT OF THE MERGER. After the Effective Time, pursuant to the NYBCL
and the DGCL, the separate existence of the Merger Sub shall cease and the
Surviving Corporation shall succeed, without other transfer, to all the rights
and property of the Merger Sub and shall be subject to all the debts and
liabilities of the Merger Sub in the same manner as if the Surviving Corporation
had itself incurred them.
1.3 ADOPTION BY SOLE SHAREHOLDER OF THE COMPANY. Prior to the execution of
this Agreement, the sole shareholder of the Company has adopted this Agreement
and approved the transactions contemplated herein by written consent action as
permitted by the NYBCL and the Merger Sub's articles of incorporation and
bylaws.
1.4 ADOPTION BY THE SOLE STOCKHOLDER OF MERGER SUB. Prior to the execution
of this Agreement, the Buyer, as the sole stockholder of the Merger Sub, has
adopted this Agreement and approved the transactions contemplated herein and the
Certificate of Merger by written consent action as permitted by the DGCL and the
Company's Certificate of Incorporation and Bylaws.
1.5 CONSUMMATION OF THE MERGER. The Merger shall become effective upon the
filing with the Secretary of State of the state of Delaware of a duly executed
Certificate of Merger in the form of Exhibit B (the "Delaware Certificate of
Merger") and with the Secretary of State of the state of New York of a duly
executed Certificate of Merger in the form of Exhibit C (the "New York
Certificate of Merger"). The Merger shall be effective when the Certificates of
Merger have been filed. The date and time when the Merger is effective is
referred to as the "Effective Time."
1.6 CHARTER; BYLAWS; DIRECTORS AND OFFICERS. The articles of incorporation
of the Company from and after the Effective Time shall be the articles of
incorporation of the Surviving Corporation as provided by the NYBCL. The Bylaws
of the Company from and after the Effective Time shall be the Bylaws of the
Surviving Corporation. The initial directors and officers of the Surviving
Corporation on and after the Effective Time shall be the directors and officers,
respectively, of the Merger Sub immediately prior to the Effective Time, in each
case until their respective successors are duly elected and qualified.
2. CONVERSION OF SHARES.
2.1 CONVERSION OF SHARES. By virtue of the Merger and without any action on
the part of the holders of capital stock of the Company, at the Effective Time
all outstanding shares of capital stock of the Company shall be converted into
an aggregate purchase price (the "Purchase Price") of six million dollars
($6,000,000), subject to adjustment as set forth in Section 2.4 with respect
only to the Reserved Shares referred to in that Section. The Purchase Price
shall be payable in 260,005 shares (the "Consideration Shares") of the Buyer's
common stock, par value $.01 per share (the "IBS Stock"), at a price per share
(the "IBS Per Share Price") of $23.076444.
2.2 The Consideration Shares shall be paid by the Buyer to the Shareholder
in the following manner:
(i) At the Closing, the Buyer shall deliver to the Shareholder
ninety-two and one-half percent (92.5%), or 240,505, of the
Consideration Shares (the "Closing Shares"). The Buyer shall cause
the Closing Shares to be newly-issued shares of IBS Stock free and
clear of any and all Encumbrances (as defined in Section 4.2),
including but not limited to any Encumbrance that may result in any
adjustment such as that provided in Section 2.4 below with respect
to the Reserved Shares or that may otherwise reduce the Purchase
Price.
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(ii) Within two business days after the date on which the amount
of the Liabilities (as defined in Section 2.4) becomes final and
binding upon the parties, the Buyer shall deliver to the Shareholder
seven and one-half one percent (7.5%), or 19,500 of the
Consideration Shares, or such fewer number of Consideration Shares
as may have been determined pursuant to the adjustment provisions of
Section 2.4 (such adjusted number of Consideration Shares, the
"Reserved Shares"). The Buyer shall cause the shares of IBS Stock
to be delivered pursuant to this provision to be newly-issued shares
of IBS Stock, free and clear of any and all Encumbrances, including
but not limited to any Encumbrance that may result in any further
adjustment such as that provided in Section 2.4 below or that may
otherwise reduce the Purchase Price. At or before the Closing, the
Buyer shall give written instructions to its transfer agent,
Continental Stock Transfer & Trust Company (the "Reserve Agent"), to
hold in reserve for issuance pursuant to this provision an aggregate
of 19,500 shares of IBS Stock.
2.3 The number of Reserved Shares, if any, to be delivered by the Reserve
Agent to the Shareholder shall be determined by dividing (i) the amount, if any
(but not less than zero), determined by subtracting the amount of the
Liabilities (as finally determined pursuant to Section 2.3) from $450,000 (which
amount reflects the value of the Reserved shares as of the Closing Date) by (ii)
the IBS Per Share Price.
2.4 Except as provided in section 2.3(b) below, within five calendar days
after December 31, 1999 (the "Reconciliation Date"), the Buyer and the
Shareholder shall determine the dollar value of "Liabilities." "Liabilities"
shall mean any and all claims, losses, damages, expenses or liabilities,
including, without limitation, reasonable attorneys', accountants' and other
professional fees (collectively, the "Liabilities"), which have been asserted
against, sustained, suffered or incurred by the Buyer, or the Buyer's officers,
directors, shareholders and/or legal representatives, arising from or by reason
of or in connection with: (i) any breach of the respective representations,
warranties and covenants made by Shareholder and/or the Company herein, (ii) the
operation of the Company before the Closing Date, (iii) any taxes owed or
payable by the Company with respect to any taxable year or portion thereof
ending on or before the Closing Date to the extent such taxes are not reflected
in the reserve for taxes (if any) shown on the Balance Sheet (as defined in
Section 4.8(ii)), and (iv) any other Liabilities asserted against, sustained by
or incurred by the Buyer or the Company related to, associated with, or arising
from any and all liabilities and obligations of the Company, but in all cases
Liabilities shall not include: (a) obligations and liabilities to the extent
reserved against on the Balance Sheet, (b) obligations or liabilities of the
Buyer, (c) obligations or liabilities incurred in connection with the operation
of the business of the Company after the Closing Date, (d) obligations or
liabilities relating to or arising from any breach of the Company's real
property lease as a result of any of the transactions contemplated hereby, (e)
any single Liability that the claims, losses, damages, expenses or liabilities
for, including, without limitation, reasonable attorneys', accountants' and
other professional fees, amount to less than $5,000 in the aggregate and (f)
any amount relating to a shortfall as of June 30, 1999 of the assets of the
Company's pension plan compared to such plan's liabilities. Anything to the
contrary contained in this agreement notwithstanding, the Shareholder may reduce
any Liabilities by assuming and directly paying any such Liabilities.
2.5 If the Shareholder and the Buyer are unable to agree on the amount of
the Liabilities within seven days after the Reconciliation Date or, in the case
of the Pension Liability, by February 15, 2000, then upon the request of either
the Shareholder or the Buyer, the parties shall engage in mediation for a period
of 15 days to attempt to resolve the dispute with a mediator mutually acceptable
to the parties.
2.6 If the Shareholder and the Buyer are unable to agree on a mediator or
are unable to resolve the issue within 30 days, then upon the request of either
the Shareholder or the Buyer, the amount of the Liabilities shall be determined
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by a firm of certified public accountants who shall be independent of both the
Buyer and the Shareholder (the Arbiter") and who shall be acceptable to both
parties. If the Buyer and the Shareholder are unable to agree upon an Arbiter,
then at the request of either Party, an Arbiter shall be selected by the
American Arbitration Association. The Arbiter shall be instructed to make a
determination as promptly as possible and the determination of the Arbiter shall
be final and binding upon the parties. The Company shall bear all costs and
expenses incurred by it and by the Buyer and the Shareholder in connection with
any such determination, provided that no amount of such costs and expenses shall
be included within the Liabilities.
2.7 MERGER SUB'S SHARES. Each of the shares of common stock, par value $.01
of the Merger Sub (the "Merger Sub Common Stock"), issued and outstanding
immediately prior to the Effective Time shall, upon surrender of the certificate
formerly representing the Merger Sub's Common Stock, be converted into and
become one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
2.8 CLOSING OF STOCK TRANSFER BOOKS. On and after the date of this
Agreement there shall be no transfers on the stock transfer books of the Company
of shares of capital stock of the Company that were issued and outstanding
immediately prior to the date hereof.
3. CLOSING. The closing of the purchase and sale of the Shares and the
other matters contemplated by this Agreement (the "Closing") shall take place at
10 a.m. on June 30, 1999, at the offices of Xxxxxx Xxxxxx Flattau & Klimpl, LLP,
0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other time and
place as mutually agreed upon by the parties, time being of the essence (the
"Closing Date").
4. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER. Each of the Shareholder
and the Company, severally and jointly, hereby represents and warrants to Buyer
as follows, and acknowledges that the Buyer is relying upon such representations
and warranties, respectively, in connection with the purchase by Buyer of the
Shares:
4.1 LEGAL CAPACITY; NO RESTRICTIONS. The Shareholder has full legal
capacity, power and authority to execute and deliver this Agreement and to
perform his obligations hereunder. All acts required to be taken by the
Shareholder to enter into this Agreement and to carry out the transactions
contemplated hereby have been properly taken; and this Agreement constitutes a
legal, valid and binding obligation of the Shareholder, enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement by the Shareholder in accordance with its terms will not, with or
without the giving of notice or the passage of time, or both, conflict with,
result in a default, right to accelerate or loss of rights under, or result in
the creation of any Encumbrance pursuant to, or require the consent of any third
party or governmental authority pursuant to (a) any provision of the certificate
of incorporation, as now in effect, or by-laws, as now in effect, of the
Company, or (b) any material franchise, mortgage, indenture or deed of trust or
any material lease, license or other agreement or any law, regulation, order,
judgment or decree to which the Shareholder or the Company is a party or by
which either of them (or any of their assets, properties, operations or
businesses) may be bound, subject to or affected.
4.2 OWNERSHIP. The Shareholder owns all of the issued and outstanding
Capital Stock of the Company. Set forth in the Disclosure Letter is the name and
address of, and number, class and percentage interest of the Shares owned by,
the Shareholder, the sole shareholder of the Company. The Shareholder is the
sole registered holder and beneficial owner of the Shares, free and clear of any
and all Encumbrances (the term "Encumbrances" as used herein shall mean a
mortgage, lien, encumbrance, security interest, restriction, pledge, options,
calls, assessments, adverse claims or rights with respect to the property
involved). The Shareholder has all legal right, title and authority to transfer
the Shares to the Buyer as contemplated hereby. The assignment, transfer and
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sale of the Shares to the Buyer in accordance with Section 1 hereof will vest in
Buyer full right, title and interest in and to all of the Capital Stock of the
Company, free and clear of any and all Encumbrances.
4.3 THE SHAREHOLDER'S INTEREST IN SIMILAR BUSINESSES. Except as set forth
in the Disclosure Letter to this Agreement, the Shareholder has no financial
interest in any person, firm or entity (other than the Company) which is, or
since November 17, 1973 was, directly or indirectly, engaged in any business
engaged in by the Company, or which is a party to any material agreement to
which the Company is also a party. Notwithstanding the foregoing, the
Shareholder shall not be in violation of this Section 4.3 solely by owning or
investing in less than 1% of the securities of any publicly traded company.
4.4 OWNERSHIP INTERESTS. The authorized Capital Stock of the Company
consists of two hundred (200) shares of common stock, no par value. The issued
and outstanding Capital Stock of the Company and the respective holders thereof
are as set forth in the Disclosure Letter. All issued Capital Stock of the
Company is duly authorized, validly issued and fully paid and non-assessable. No
options, warrants or other rights for the purchase of any of the Capital Stock
of the Company or any security convertible into such Capital Stock are
authorized and outstanding. There are no voting trusts or other contractual
commitments or understandings with respect to the ownership, transfer and/or
voting of the Capital Stock. There are no contracts, commitments or
understandings to issue any additional Capital Stock and there are no securities
or rights of any kind outstanding that are convertible into or exchangeable for
any Capital Stock or other interests in the Company. The execution and delivery
by the Shareholder of this Agreement and the performance by the Shareholder of
the transactions contemplated hereby to be performed by it have been duly
authorized by all necessary corporate and stockholder actions on the part of the
Shareholder and Company.
4.5 SUBSIDIARY; INVESTMENTS IN OTHERS. The Company has no subsidiaries and
does not: (i) own, directly or indirectly, any capital stock or other securities
of, or any other interest in, another corporation; or (ii) have any interest,
directly or indirectly, in any unincorporated association, partnership, joint
venture or other entity, nor has the Company made any commitment to purchase any
capital stock of, or otherwise made any investment in, any other corporation,
unincorporated association, partnership, joint venture or other entity.
4.6 COMPANY EXISTENCE AND POWER.
(a) The Company is a corporation duly organized and validly existing and in
good standing under the laws of the State of New York. The Company transacts
business only in the state of New York and the other states listed in the
Disclosure Letter. The Company has the power to own, lease or operate its
properties and to carry on its business as now being conducted. The Shareholder
has furnished to the Buyer true and complete copies as the same are currently in
effect of (i) the certificate of incorporation of the Company and all amendments
thereto, certified by the Secretary of State of New York and certified as true
and correct by the Shareholder, and (ii) the by-laws, as currently amended and
in effect, of the Company, certified as true and correct by the secretary of the
Company. The Company has the requisite corporate power to execute and deliver
this Agreement and perform the transactions contemplated hereby to be performed
by it.
(b) The execution and delivery by Company of this Agreement and the
performance by Company of the transactions contemplated hereby to be performed
by it have been duly authorized by all necessary corporate and stockholder
actions on the part of Company. This Agreement has been duly executed and
delivered by a duly authorized officer of Company and, assuming the due
execution and delivery of this Agreement by Purchaser, constitutes a valid and
binding obligation of Company enforceable against the Company in accordance with
its terms.
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4.7 NO CONFLICTS. The execution and delivery of this Agreement by the
Company does not, and the performance by the Company of the transactions
contemplated hereby to performed by it will not (i) conflict with the
certificate of incorporation or by laws of the Company, (ii) conflict with, or
result in any violation of, or constitute a default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under,
any contract, permit, order, judgment or decree to which Company is a party or
to which it is bound, (iii) constitute a violation of any law or regulation
applicable to Company, or (iv) result in the creation of any Encumbrance upon
any of the assets of the Company.
4.8 FINANCIAL STATEMENTS.
(a) The Shareholder has delivered to the Buyer the following financial
statements (collectively, the "Financial Statements"), all of which have been
prepared from the books and records of the Company in accordance with generally
accepted accounting principles consistently applied and maintained throughout
the periods indicated, and fairly present, in all material respects, the
financial condition of the Company as of their respective dates and the results
of the operations of the Company for the periods covered thereby:
(i) the unaudited balance sheets of the Company as of December
31, 1996, 1997 and 1998, and the related unaudited statements of
income and changes in stockholder's equity for the years then ended,
together with compilation reports with respect thereto by Xxxxx
Xxxxxx, certified public accountant;
(ii) the unaudited consolidated balance sheet of the Company (the
"Balance Sheet") as of June 30, 1999 (the "Balance Sheet Date"), and
the related unaudited consolidated statements of income and
stockholder's equity for the six months then ended (the "Interim
Financial Statements").
(b) The Interim Financial Statements reflect all loan agreements,
indentures, mortgages, pledges, conditional sale or title retention agreements,
security agreements, equipment obligations, guaranties and lease purchase
agreements to which the Company is a party or by which any of its properties is
bound.
(c) Without limiting the generality of the foregoing provisions of this
Section 4.8, except as set forth in the Disclosure Letter. the Financial
Statements have been prepared on the following bases:
(i) all fixed assets and equipment have been valued at actual
cost less accumulated depreciation, and no asset has, directly or
indirectly, been written up;
(ii) the statements of income do not contain any items of special
or nonrecurring income or any other income not earned in the
ordinary course of business, except as expressly specified therein;
(iii) pension, benefit and welfare plan payments and severance pay
have been accrued for each affected employee of the Company as of
the Balance Sheet Date, on the basis of benefits customarily
granted. Vacation and sick pay have not been accrued as of the
Balance Sheet Date. The Company's aggregate liability for vacation
and sick pay as of the Balance Sheet Date does not exceed $60,000.
Bonuses are paid on a quarterly basis two weeks following the
quarter end. Bonuses are not accrued by the Company, instead, they
are paid on a cash basis. All bonuses are discretionary and no
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employee of the Company has any contractual rights to a bonus for
any period during the fiscal year ending December 31, 1999;
(iv) transactions between the Company and any affiliate thereof
are fully disclosed;
(v) Except as set forth in the Disclosure Letter, the accounts
receivable of the Company included in the Balance Sheet are
collectible in full, net of the applicable reserve for doubtful
accounts, over the period of usual trade terms (by use of the
Company's normal collection methods), and there do not exist any
defenses, counterclaims and set-offs which would materiall
adversely affect such net receivables, and all such net receivables
are actual and bona fide receivables representing the total net
dollar amount thereof shown on the books of the Company; and
(vi) the Company has no liabilities, whether absolute, accrued,
contingent or otherwise, except (A) as and to the extent reflected
or reserved against on the Balance Sheet, and (B) those incurred in
the ordinary course of business and consistent with prior practices,
not in the aggregate materially adverse, since the Balance Sheet
Date in the Disclosure Letter. To Shareholder's knowledge, there are
no facts or circumstances existing on the date hereof which could be
reasonably likely to result in the occurrence of any such liability.
4.9 TAXES.
(a) All federal, state, local and foreign income, excise, property,
sales and other taxes, assessments, governmental charges, penalties, interest
and fines due and payable by the Company and by any other person, firm or
corporation which will or may be liabilities of the Company, for all periods
ending on or before the Balance Sheet Date, have been paid in full, or have been
fully reserved against on the Balance Sheet.
(b) The Company has filed all federal, state, local and foreign
income, excise, property, sales, withholding, social security, information
returns and other tax returns, reports and related information ("Returns")
required to have been filed by it prior to the date hereof, and no extensions of
the time for filing a Return is presently in effect. The Returns that have been
filed have been accurately prepared and have been duly and timely filed. The
Company is not and has never been a member of any affiliated group filing a
consolidated tax return. None of the Company's Returns have been examined by any
governmental or other authority exercising any taxing or tax regulatory
authority for any fiscal years or periods since it came into business. There are
no agreements, waivers or other arrangements providing for an extension of time
with respect to the filing of any Return, or payment of any tax, governmental
charge, assessment, deficiency, penalties, fines or interest by the Company.
(c) There is no action, suit, proceeding, investigation or claim now
pending or, to the best of the Shareholder's knowledge, threatened against the
Company in respect of taxes, governmental charges or assessments, or any matter
under discussion with any governmental or other taxing authority relating to
taxes, governmental charges or assessments asserted by any such authority.
4.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet Date,
the Company has not:
(1) issued, delivered or agreed to issue or deliver any Capital Stock,
bonds or other Company securities, or granted or agreed to grant any options
(including employee stock options), warrants or other rights for the issue
thereto except as contemplated herein;
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(2) borrowed or agreed to borrow any funds in excess of the amount thereof
shown on the Balance Sheet;
(3) incurred any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, except current liabilities for trade
obligations due to third parties incurred in the ordinary course of business and
consistent with prior practice;
(4) discharged or satisfied any Encumbrance other than those then required
to be discharged or satisfied, or paid any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, other than
current liabilities shown on the Balance Sheet and current liabilities not in
excess of $50,000 incurred since the Balance Sheet Date in the ordinary course
of business and consistent with prior practice;
(5) sold, transferred, leased to others or otherwise disposed of any
material amount of assets, except for inventories sold for fair consideration
in the ordinary course of business and assets no longer used or useful in the
conduct of its business, or canceled or compromised any material debt or claim,
or waived or released any material right of substantial value;
(6) except as set forth in the Disclosure Letter, received any notice of
termination of any contract, lease or other agreement, or suffered any damage,
destruction or loss (whether or not covered by insurance) which, in any case or
in the aggregate, has had or might reasonably be expected to have, a material
adverse effect on its condition (financial or otherwise), properties, assets,
liabilities, operations or prospects;
(7) reduced its inventories or supplies below normal and adequate levels
for the continuation of business in the usual course;
(8) encountered any labor union organizing activity, had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts, or any other
labor trouble other than routine grievance matters none of which is material, or
had any material change in its relations with its employees, agents, customers
or suppliers;
(9) transferred or granted any rights under, or entered into any settlement
regarding the breach or infringement of, any license, patent, copyright,
trademark, trade name, invention or similar rights, or modified any existing
rights with respect thereto;
(10) except in the ordinary course of business consistent in all respects
(including as to amount) with past practice, or as set forth in the Disclosure
Letter, made any accrual or arrangement for any payment or any bonus, or any
severance or termination pay to (a) any present or former officer or employee
who is or was receiving compensation at an annual rate in excess of $10,000; or
(b) any person, firm or corporation which is or was furnishing professional or
consulting services to the Company;
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(11) increased the rate of compensation payable or to become payable by it
to any of its directors, officers or employees who is or was receiving
compensation at an annual rate in excess of $50,000 or whose resulting
compensation will exceed $50,000 annually; entered into an employment agreement
or amended any employment agreement for any such person; or made any material
increase in any insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with any such director, officer or employees;
(12) except as set forth in the Disclosure Letter, declared or made, or
agreed to declare or make, any payment of distributions of any assets of any
kind whatsoever to the Shareholder or any affiliate of the Shareholder, or
purchased or redeemed, or agreed to purchase or redeem, any of the Company's
Capital Stock, or made or agreed to make any payment to the Shareholder or any
affiliate of the Shareholder, whether on account or with respect to long-term
debt, management fees or otherwise;
(13) suffered any other change, event or condition which, in any case or in
the aggregate, has had or is reasonably expected to have a material adverse
effect on its condition (financial or otherwise), properties, assets,
liabilities, operations, business or prospects; or,
(14) entered into any agreement or made any commitment to take any of the
types of action described in any of the foregoing clauses.
4.11 PROPERTIES.
(a) Set forth in the Disclosure Letter is a description of all real
property owned by the Company or in which the Company has a leasehold or other
interest or which is used by the Company in connection with the operation of its
business, together with a description of each lease, sublease, license or any
other instrument under which the Company claims or holds such leasehold or other
interest or right to the use thereof or pursuant to which the Company has
assigned, sublet or granted any rights therein, identifying the parties thereto,
the rental or other payment terms, expiration date and cancellation and renewal
terms thereof.
(b) Except as set forth in the Disclosure Letter, the Company has good and
marketable title to all its properties and assets, including, without
limitation, those reflected in its books and records and in the Balance Sheet
except (i) inventory sold for fair consideration or consumed after the Balance
Sheet Date in the ordinary course of business, and (ii) assets no longer used or
useful in the conduct of its business which in the aggregate do not have a fair
market value in excess of $10,000, the sale of which does not conflict with or
constitute a breach of the representations, warranties or provisions of this
Agreement.
(c) None of the properties and assets of the Company are subject to any
Encumbrance or adverse claim of any nature whatsoever, direct or indirect,
whether accrued, absolute, contingent or otherwise, except for (i) those which
are set forth in the Balance Sheet as securing specific liabilities, or (ii) as
set forth in the Disclosure Letter. All the properties and assets owned, leased
or used by the Company are in good operating condition and repair, are suitable
for the purposes used, and are adequate and sufficient for all current
operations, and meet all applicable laws, rules and regulations relating to such
property. All leases are in full force and effect and true and complete copies
of all leases have been delivered to the Buyer or their representatives.
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4.12 PERMITS AND LICENSES; COMPLIANCE WITH LAW.
(a) Except as set forth in the Disclosure Letter, all licenses, permits,
authorizations, variances, exemptions, orders and approvals (collectively,
"Governmental Authorizations") from federal, state, local and foreign
governmental and regulatory bodies held or required to be held by the Company in
connection with its ownership and lease of real and personal property and the
operation of its business have been obtained, except where the failure to obtain
such Governmental Authorization would not reasonably be expected to have a
material adverse effect upon the Company. The Company is in compliance in all
respects with the material terms of such Governmental Authorizations held by it
or applicable to it and with all material requirements, standards and procedures
of the federal, state, local and foreign governmental or regulatory bodies which
issued them. Except as set forth in the Disclosure Letter, the Company is in
compliance in all material respects with all federal, state, local and foreign
laws, ordinances, codes, regulations, orders, requirements and standards of
procedures which are applicable in any material respect to its business.
(b) The Disclosure Letter includes, to the extent that any of the following
exists: (i) a list of each adjudged violation; and (ii) a list of each asserted
violation, notice of inspection, inspection report or any other written report
(excluding Returns) delivered by any governmental or regulatory agency to the
Company or delivered by the Company to any governmental or regulatory agency
relating to enforcement of or compliance with any of such laws, ordinances,
codes, regulations, orders, requirements, standards and procedures material to
the Company.
(c) Except as set forth in the Disclosure Letter, (i) the Company has
complied with all existing federal, state and local laws, rules, regulations,
ordinances, orders, judgments and decrees now applicable to its business,
properties or operations as presently conducted, except where the failure to so
comply would not have a material adverse effect upon the Company, and neither
the ownership nor use of the Company's properties nor the conduct of its
business conflicts in any material way with the rights of any other person, firm
or corporation or violates, or with or without the giving of notice or the
passage of time, or both, will violate, conflict with or result in a default,
right to accelerate or loss of rights under, any term or provision of (a) the
certificate of incorporation or by-laws of the Company, as presently in effect,
or (b) any material mortgage, indenture, deed of trust or material Encumbrances,
lease, license or agreement or any law, ordinance, rule, regulation, order,
judgment or decree to which the Company is a party or by which it or any of its
properties, assets or operations may be bound or affected or which might
materially adversely affect any such properties, assets or operations and(ii)
Shareholder does not know of any proposed laws, rules, regulations, ordinances,
orders, judgments, decrees, governmental takings, condemnations or other
proceedings which would be applicable to the business, operations or properties
of the Company and which might materially adversely affect its properties,
assets, operations or prospects, either before or after the Closing Date.
(d) Without limiting the generality of the foregoing, to the best knowledge
and belief of Shareholder, neither the Shareholder nor the Company nor any
officer, director, employee or agent of the Company has, directly or indirectly,
made, promised to make, or authorized the making of, an offer, payment or gift
of money or anything of value to any government official, political party or
employee, agent or fiduciary of a customer, to obtain a contract for or to
influence a decision in favor of the Company where such offer, payment or gift
was or would be, if made, in violation of any applicable law, nor have they
maintained cash or anything of value, in an account or otherwise, not properly
and accurately accounted for on the books and records of the Company for this
purpose.
4.13 CONTRACTS WITH CUSTOMERS AND OTHERS. Except as set forth in the
Disclosure Letter, none of the customers or other persons which are parties to
any agreements to which the Company is a party has notified the Company of any
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intention to terminate its contract or arrangement for service as a result of
the transactions consummated hereby or otherwise.
4.14 PRODUCT WARRANTIES AND GUARANTEES. Except with respect to product
warranties or guarantees of any nature described in the Disclosure Letter and
provided by the Company in the ordinary course of business, the Company is not a
party to or bound by any agreement of guarantee, indemnification, assumption or
endorsement or any other like commitment of the obligations, liabilities
(contingent or otherwise) or indebtedness of any other person, firm or
corporation.
4.15 MATERIAL AGREEMENTS; VALIDITY; NO DEFAULT.
(a) The Disclosure Letter sets forth a description of (i) all agreements
pursuant to which the Company has acquired the business or any substantial
portion of the assets of any other person, firm or corporation and pursuant to
which the Company has any continuing obligation, and any claims by parties other
than the Company with respect thereto; (ii) all contracts, agreements,
commitments, purchase orders or other understandings or arrangements to which
the Company is a party relating to the sale or furnishing by it of goods or
services where the consideration for such sale is $50,000 or more, in any single
case, any claims by parties other than the Company with respect thereto, and any
express product guarantees or warranties made by the Company relating to its
goods or services; (iii) all contracts, agreements, commitments, purchase orders
or other understandings or arrangements to which the Company is a party relating
to the purchase by it of goods or services where the consideration for such
purchase is $15,000 or more, in any single case, and any claims by the Company
with respect thereto; and (iv) all contracts, agreements and commitments not yet
fully performed, pursuant to which the Company will acquire the business or any
substantial portion of the assets of any other person, firm or corporation.
(b) All the contracts, agreements, leases, licenses and commitments
required to be listed in the Disclosure Letter are valid and binding,
enforceable in accordance with their respective terms, and are in full force and
effect. Except as set forth in the Disclosure Letter, there is not under any
such contract, agreement, lease, license or commitment (i) any existing material
default by the Company or any event which, after notice or lapse of time, or
both, would constitute a material default by the Company or result in a right to
accelerate by any other person or a loss of any rights of the Company and (ii)
to the best of the Shareholder's knowledge, any default by any other person, or
any event which, after notice or lapse of time, or both, would constitute a
default by any such person or result in a right to accelerate by the Company or
a loss of any rights of any such person. None of such contracts, agreements,
leases, licenses or commitments is, either when considered singly or in the
aggregate with others, unduly burdensome, onerous or materially adverse to the
business, properties, assets, earnings or prospects of the Company, except as
disclosed in the Disclosure Letter.
(c) The Company is not a party to or bound by any contract, agreement,
lease, license or commitment which, upon performance, is reasonably expected to
result in any loss or liability to the Company. True and complete copies of all
contracts, agreements, leases, licenses, commitments and other documents listed
in the Disclosure Letter (together with any and all amendments thereto) have
been delivered to Buyer or its representatives.
4.16 INTELLECTUAL PROPERTY.
(a) Set forth in the Disclosure Letter is a description of all
patents, patent applications, patent licenses, trademarks, trademark
registrations, and applications therefor, service marks, service names, trade
names, domain names, copyrights and copyright registrations, and applications
therefor, computer software and software licenses of the Company (the
"Intellectual Property").
11
(b) Except as set forth in the Disclosure Letter, the Company owns or
possesses the royalty-free license or other right to use all Intellectual
Property which are listed in the Disclosure Letter or which are necessary to
conduct its business as presently operated without conflict with or infringement
upon any valid rights of others. To the Shareholder's knowledge, no person,
firm, corporation or other entity is entitled to restrain the Company from using
any such copyright, trademark, service xxxx, service name, trade name, domain
names or patent. The Company has not received any notice claiming that it is
infringing upon or otherwise acting adversely to any copyrights, trademarks,
trademark rights, service marks, service names, trade names, domain name,
patents, patent rights, licenses or trade secrets owned by any person, firm,
corporation or other entity.
(c) Except as set forth in the Disclosure Letter, there are no outstanding
options, licenses or agreements of any kind with respect to the Intellectual
Property. Neither Shareholder nor the Company's managers or employees or any
affiliate thereof has any interest in any Intellectual Property.
4.17 CONSENTS. Except as set forth in the Disclosure Letter, no consent,
approval, exemption or authorization is required to be obtained from, no notice
is required to be given to and no filing is required to be made with any third
party (including, without limitation, governmental and quasi-governmental
agencies, authorities and instrumentalities of competent jurisdiction) by the
Company or the Shareholder, (i) in order for this Agreement to constitute legal,
valid and binding obligations of the Shareholder and the Company or to authorize
or permit the consummation by the Shareholder and the Company of the
transactions contemplated hereby and thereby or (ii) under or pursuant to any
governmental or quasi-governmental permits, licenses, consents authorizations or
approvals held by or issued to the Company (including, without limitation,
environmental, health, safety and operating permits and licenses) by reason of
this Agreement or the consummation of the transactions contemplated hereby.
4.18 RECEIVABLES. Except as set forth in the Disclosure Letter, all
receivables of the Company (including loans receivable and advances) other than
accounts receivable which are reflected in the Balance Sheet, and all such
receivables which have arisen since the Balance Sheet Date, constituted and will
constitute only valid claims against third parties not affiliated with the
Company, arising only from bona fide transactions in the ordinary course of
business and shall be (or have been) fully collected or collectible when due in
accordance with the usual terms customarily utilized by the Company without
resort to litigation and without defense, offset or counterclaim, in the
aggregate face amounts thereof except to the extent of the normal allowance for
doubtful accounts with respect to accounts receivable as reflected on the
Balance Sheet. The Shareholder has delivered to the Buyer an aging schedule for
the accounts receivable of the Company at the Balance Sheet Date.
4.19 LITIGATION. Except as set forth in the Disclosure Letter, there is no
claim, legal action, arbitration, governmental investigation or other legal or
administrative proceeding, nor any order, decree or judgment in progress,
pending or in effect, or to the best knowledge of the Shareholder threatened,
against or relating to the Company, its properties, assets, business or Capital
Stock or the transactions contemplated by this Agreement, and the Shareholder
does not know of any basis of the same. Except as disclosed in the Disclosure
Letter, there is no continuing order, injunction or decree of any court,
arbitrator or governmental authority to which the Company is a party or by which
the Company or its assets, properties, business or Capital Stock are bound.
4.20 EMPLOYEE PLANS.
(a) The Disclosure Letter sets forth a description of all Employee Plans
(as defined below), the financial and actuarial condition of such plans, the
extent to which they are funded, and the actuarial assumptions utilized in
calculating the financial condition thereof. "Employee Plans" means all pension,
12
retirement, disability, medical, dental or other health insurance plans, life
insurance or other death benefit plans, profit sharing, deferred compensation,
stock options, bonus or other incentive plans, severance plans, or other
employee benefit plans or arrangements, whether or not funded, covering any of
the Company's current or former officers, employees, directors or consultants or
to which the Company is a party or bound or otherwise may have any liability to
any person (including any such plan formerly maintained or in connection with
which the Company may have any liability to any person after the Closing, and
any such plan which is a multi-employer plan.
(b) No Employee Plan fails to comply with applicable provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") and regulations issued
under ERISA, in such a manner as to constitute, in the aggregate, a material
adverse event. Except as shown on Disclosure Letter, each such plan is a
"qualified" plan under section 401(a) of the Internal Revenue Code.
(c) Complete and correct copies of all determination letters issued by the
Internal Revenue Service relating to any qualified plans under Section 401(a) of
the Internal Revenue Code have previously been delivered to Buyer. No facts or
circumstance, including, without limitation, any "reportable events" as defined
in ERISA and the regulations promulgated under ERISA, exist in connection with
such plans which constitute, in the aggregate, a material adverse event, or
which might constitute grounds for the termination of any such plan by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States District Court of a trustee to administer any such plan, nor does
any such plan have any funding deficiency.
(d) The Company has complied with and performed in all material respects
all contractual obligations required by it to be performed with respect to any
Employee Plan or any related trust agreement or insurance contract. All
contributions and other payments required to be made by the Company to any
Employee Plan prior to the date hereof have been made. Except as disclosed in
the Disclosure Letter, the Company has not communicated generally to its
employees regarding any material increases of benefit levels (or creation of
material new benefits) with respect to any Employee Plan beyond those reflected
in the current Employee Plans.
(e) Except as set forth in the Disclosure Letter, the Company has not
participated in or incurred an obligation to contribute to any Multiemployer
Plan (as defined in Section 3(37) of ERISA) or incurred or been notified of any
withdrawal liability in respect of any such plan.
4.21 INSURANCE. Set forth in the Disclosure Letter is a description of all
fire, theft, casualty, liability and other insurance policies insuring the
Company, all performance bonds, customs bonds and the like maintained by, or for
the benefit of, the Company, and all life insurance policies maintained for any
of its employees, specifying with respect to each such policy or bond the name
of the insurer or issuer, the risk insured against or covered thereby, the
limits of coverage, the deductible amount (if any), the premium rate or cost and
the date through which coverage will continue by virtue of premiums already
paid. The Company maintains adequate insurance coverage for all normal risks
incident to the Company's assets, properties and business operations. Such
insurance will continue to be in force as of the Closing Date.
4.22 DISCLOSURE. No representation or warranty by the Shareholder contained
in this Agreement, and no information contained in the Disclosure Letter or any
other instrument furnished or to be furnished to Buyer pursuant to this
Agreement as of the date of this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained therein not misleading.
13
4.23 BANK ACCOUNTS. The Disclosure Letter sets forth the name of each bank
or other financial institution in which the Company has an account or safe
deposit box or vault arrangement and the names of all persons authorized to draw
thereon or to have access thereto; and the names of all persons, if any, holding
tax or other powers of attorney from the Company and a summary of the terms
thereof.
4.24 EMPLOYEE MATTERS. The Disclosure Letter sets forth (i) the name of
each employee of the Company; the amount paid to him for services rendered
during the calendar years 1996, 1997 and 1998; the current annual rate of his
compensation; a list of all written contracts of employment of the Company and
all consulting agreements with the Company and the terms thereof; (ii) a list of
all collective bargaining or other labor agreements, if any, to which the
Company is a party; a list of all affirmative action plans or other such plans
in effect since November 17, 1973; (iii) a list of all union organizing efforts
conducted or being conducted or threatened with respect to employees of the
Company; all labor-related work stoppages experienced by the Company since
November 17, 1973; and (iv) a list of all reports filed since November 17, 1973
with governmental agencies relating to equal employment opportunities and
employment of protected minorities (including women and persons over age 40); a
list of all decisions rendered by governmental agencies (including Courts and
the Equal Employment Opportunity Commission) with respect to claims or
complaints filed alleging unlawful, discriminating employment practices; and all
such claims or complaints now pending; and, (v) the names of the managers of the
Company now in office. Other than as set forth in the Disclosure Letter, the
Company has no employment agreements with any of its employees other than
At-Will employment agreements that give the Company the right to terminate at
any time any such employee without notice or cause.
4.25 FINDERS' AND BROKERS' FEES. Neither Shareholder nor the Company, nor
anyone on behalf of any such persons, has retained any broker, finder or agent
or agreed to pay any brokerage fee, finder's fee or commission with respect to
the transactions contemplated by this Agreement, other than American Benefit
Systems, Inc.
4.26 INVESTMENT INTENT.
(a) The Shareholder understands that each certificate representing the
Shares shall be imprinted with a legend in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND HAVE BEEN SOLD IN
RELIANCE UPON EXEMPTIONS THEREFROM. THESE SECURITIES MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION COVERING THESE SECURITIES UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED THEREUNDER. THE TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE
PURCHASE AGREEMENT, DATED AS OF JUNE 30, 1999 AND AS AMENDED AND MODIFIED FROM
TIME TO TIME BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN INVESTORS, AND THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH
CONDITIONS SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST WITHOUT CHARGE.
(b) Without in any way limiting the Shareholder's right to sell any of the
Shares (for any purpose, including but not limited to for the purpose of
obtaining cash to compensate the Shareholder's financial advisor and finder)
either pursuant to a registration of the Shares (or part thereof) pursuant to
14
the Securities Act of 1933 or pursuant to any applicable exemption from the
registration requirements of the Securities Act of 1933, the Shareholder is
acquiring the Shares for his own account, for investment purposes and not with a
view to, or for sale in connection with, any distribution of such Shares or any
part thereof.
(c) The Shareholder (i) is an "accredited investor" as that term is defined
in Rule 401(a) promulgated under the Securities Act of 1933, as amended, (ii) is
able to fend for himself in the transactions contemplated by this Agreement,
(iii) has such knowledge and experience in financial, business and investment
matters as to be capable of evaluating the merits and risks of this investment,
(iv) has the ability to bear the economic risks of this investment, (v) has had
access to and has received such information regarding Buyer as is specified in
subparagraph (b)(2) of Rule 402 promulgated under the Securities Act of 1933, as
amended, and (vi) without in any way limiting the Buyer's right or ability to
rely on the representations and warranties made by Shareholder in or pursuant to
this Agreement, has been afforded prior to the Closing the opportunity to ask
questions of, and to receive answers from, the Buyer and to obtain any
additional information, to the extent the Buyer has such information or could
have acquired it without unreasonable expense, all as necessary for the
Shareholder to make an informed investment decision with respect to the purchase
of the Consideration Shares.
(d) The Shareholder understands and acknowledges that (a) the Shares to be
sold and issued hereunder are unregistered and may be required to be held
indefinitely unless subsequently registered under the Securities Act of 1933, as
amended, or an exemption from such registration is available; (B) the Buyer is
under no obligation (other than the obligation under the registration rights
Agreement referred to in Section 9) to file a registration statement with the
Securities and Exchange Commission with respect to the Shares, and (c) Rule 144
promulgated under the Securities Act of 1933, as amended ("Rule 144"), which
provides for certain limited sales of unregistered securities, is not presently
available with respect to the Shares.
(e) The Shareholder acknowledges that the representations and warranties of
Buyer in this Agreement or documents provided for herein represent the sole and
exclusive representations and warranties of Buyer to the Shareholder in
connection with the transactions contemplated hereby, and Shareholder
understands, acknowledges and agrees that all other representations and
warranties of any kind or nature expressed or implied (including, but not
limited to, any relating to the future or historical financial condition,
results of operations, assets or liabilities of The Buyer) are specifically
disclaimed by Buyer.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Shareholder as follows:
5.1 ORGANIZATION AND STANDING. The Buyer is a corporation duly organized
and validly existing and in good standing under the law of the State of
Delaware.
5.2 LEGAL CAPACITY; NO RESTRICTIONS. The Buyer has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. All action required to authorize Buyer to enter into this Agreement
and to carry out the transactions contemplated hereby has been properly taken;
and this Agreement constitutes the legal, valid and binding obligation of the
Buyer, enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by Buyer in accordance with its terms will not,
with or without the giving of notice or the passage of time, or both, conflict
with, result in a default, right to accelerate or loss of rights under, or
result in the creation of any Encumbrance pursuant to, or require the consent of
any third party or governmental authority pursuant to (a) any provision of the
Buyer's respective certificate of incorporation or by-laws, as currently amended
and in effect or (b) any franchise, mortgage, indenture or deed of trust or any
material lease, license or other agreement or any law, regulation, order,
15
judgment or decree to which Buyer is a party or by which it (or any of its
assets, properties, operations or business) may be bound, subject to or
affected.
5.3 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. The Buyer has complied
with all existing material federal, state and local laws, rules, regulations,
ordinances, orders, judgments and decrees now or hereafter applicable to its
business, properties or operations as presently conducted, and neither the
ownership nor use of Buyer's properties nor the conduct of their respective
businesses conflicts with the rights of any other person, firm or corporation or
violates, or with or without the giving of notice or the passage of time, or
both, will violate, conflict with or result in a default, right to accelerate or
loss of rights under, any term or provision of their respective (i) certificates
of incorporation or by-laws, as currently amended and in effect, or (ii) any
mortgage, indenture, deed of trust or material Encumbrances, lease, license or
agreement or any law, ordinance, rule, regulation, order, judgment or decree to
which Buyer are a party or by which they or any of their respective properties,
assets or operations may be bound or affected or which might material adversely
affect any such properties, assets or operations. Without limiting the
generality of the foregoing, to the best knowledge and belief of the Buyer,
neither of the Buyer nor any of their respective officers, directors, employees
or agents has, directly or indirectly, made, promised to make, or authorized the
making of, any offer, payment or gift of money or anything of value to any
governmental official, political party or employee, agent or fiduciary of a
customer, to obtain a contract for or to influence a decision in favor of Buyer
where such offer, payment or gift was or would be, if made, in violation of any
applicable law, nor has it maintained cash or anything of value, in an account
or otherwise, not properly or accurately accounted for on the respective books
and records of Buyer for this purpose.
5.4 DISCLOSURE. No representation or warranty by the Buyer contained in
this Agreement, no information contained in the any of the Buyer's SEC Filings
(as defined below), as of the date of such SEC Filing, and no information
contained in any other instrument furnished or to be furnished to Buyer pursuant
to this Agreement as of the date of this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained therein not misleading.
"SEC Filings" means the following: (i) the IBS Interactive, Inc. report on Form
10-Q Report with respect to the quarterly period ended March 31, 1999; (ii) the
IBS Interactive, Inc. report on Form 10-K with respect to the annual period
ended December 31, 1998; (iii) the IBS Interactive, Inc. report on Form 10-Q
with respect to the quarterly period ended September 30, 1998; and (iv) the IBS
Interactive, Inc. report on Form 10-Q with respect to the quarterly period ended
June 30, 1998, all as supplemented by any and all reports on Form 8-K filed with
the SEC by the Buyer.
5.5 INVESTMENT INTENT, ETC.
(a) The Buyer is acquiring the Capital Stock for its own account for
investment, and not with a view to the resale or distribution thereof.
(b) The Buyer (i) is an "accredited investor" as that term is defined in
Rule 401(a) promulgated under the Securities Act of 1933, as amended, (ii) has
the ability to bear the economic risks of this investment, (iii) has had access
to and has received such information regarding Buyer as is specified in
subparagraph (b)(2) of Rule 402 promulgated under the Securities Act of 1933, as
amended, and (iv) without in any way limiting the Shareholder's right or ability
to rely on the representations and warranties made by the Buyer in or pursuant
to this Agreement, has been afforded prior to the Closing the opportunity to ask
questions of, and to receive answers from, the Shareholder and to obtain any
additional information, to the extent the Shareholder has such information or
could have acquired it without unreasonable expense, all as necessary for the
Buyer to make an informed investment decision with respect to the purchase of
the Shares.
16
(c) The Buyer acknowledges that the representations and warranties of the
Shareholder in this Agreement or the other documents to be delivered in
connection herewith represent the sole and exclusive representations and
warranties of the Shareholder to the Buyer in connection with the transactions
contemplated hereby, and the Buyer understands, acknowledges and agrees that all
other representations and warranties of any kind or nature expressed or implied
(including, but not limited to, any relating to the future or historical
financial condition, results of operations, customer relationships, assets or
liabilities of the Company) are specifically disclaimed by the Shareholder.
(d) The Buyer has read carefully and understands the disclosures contained
in the Disclosure Letter, including but not limited to the disclosures
concerning the nature of the risks associated with the Company's short-term
customer relationships (many of which do not have written contracts with the
Company) and the volatile industry in which the Company operates.
5.6 FINDERS' AND BROKERS' FEES. Neither the Buyer nor anyone on behalf of
The Buyer, has retained any broker, finder or agent or agreed to pay any
brokerage fee, finder's fee or commission with respect to the transactions
contemplated by this Agreement.
6. COVENANTS OF SHAREHOLDER AND COMPANY PRIOR TO CLOSING.
6.1 CONDUCT OF BUSINESS PENDING CLOSING. Except as otherwise consented to
in writing by the Buyer, the Shareholder has caused the Company to diligently
conduct its business only in the ordinary course and consistent with prior
practice and has maintained, kept and preserved its assets and properties in
good condition and repair and maintained insurance thereon in accordance with
present practice. The Shareholder has used his best commercially reasonable
efforts to preserve the business and organization of the Company intact to keep
available to the Buyer the services of the present managers and employees of the
Company, and to preserve for the benefit of the Buyer the goodwill of the
suppliers and customers of the Company and others having business relations with
the Company. The Shareholder has given the Buyer prompt written notice of any
material change in or addition to any of the information contained in the
representations and warranties made herein by the Shareholder and/or the Company
or in the Disclosure Letter to this Agreement which has occurred prior to the
Closing Date. Without limiting the generality of the foregoing:
(a) without the Buyer's prior written approval, the Shareholder has not
caused the Company to amend, modify, supplement or otherwise alter its
certificate of incorporation or by-laws, as currently amended and in effect, or
merge or consolidate or obligate itself to do so with or into any other entity;
(b) without the Buyer's prior written approval, the Shareholder has not
caused the Company to enter into any contract, agreement, commitment or other
understanding or arrangement except for those in the ordinary course of business
which do not result in the incidence by the Company of an obligation in excess
of $15,000;
(c) the Shareholder has caused the Company to comply in all material
respects with all existing laws, rules, regulations, ordinances, orders,
judgments and decrees now or hereafter applicable to its business, properties or
operations as presently conducted;
(d) the Shareholder has caused the Company to accurately prepare and duly
and timely file all required federal, state, local and foreign Returns of the
17
Company and pay all federal, state, local and foreign taxes (including, without
limitation, taxes on properties, income, franchises, licenses and payrolls)
shown on such Returns as required to be paid or otherwise payable without the
preparation or filing of any Return; and
(e) the Shareholder has not caused the Company to declare or make any
payment of distributions to its stockholders or upon or in respect of any
Capital Stock, or purchase, retire or redeem, or obligate itself to purchase,
retire or redeem, any Capital Stock or securities.
6.2 ACCESS, INFORMATION AND DOCUMENTS. Prior to the Closing Date, the
Shareholder has given to Buyer and to Buyer's accountants, counsel and other
representatives, full access during normal business hours to all property,
contracts, commitments, books and records of the Company (including minute books
and shareholder lists) and has furnished to Buyer all such documents and copies
of documents (certified by a manager of the Company if requested) and
information with respect to the affairs of the Company that Buyer have from time
to time reasonably requested, and have notified Buyer as to any unusual problems
or developments, if any, with respect to the business of the Company prior to
the Closing.
6.3 TAX FREE NATURE OF TRANSACTION. The Buyer and the Shareholder shall
each treat the transactions contemplated by this Agreement as a reorganization
under Section 368(a)(1)(A) and (a)(2)(E) of the Internal Revenue Code (the
"Code") with respect to which the Shareholder is not required to recognize any
gain or loss and shall use their best efforts not to take any action, whether
before, during or after the Closing, that would be inconsistent with or prevent
the treatment of this transaction as such. The representations, warranties and
covenants set forth in this Section 6.3 shall survive the Closing of the
transaction. Notwithstanding the foregoing, the Buyer may undertake, at its sole
discretion, a secondary public offering, a private placement, or the merger of
the Buyer into or the acquisition of the Buyer by any other entity without
liability to Shareholder.
6.4 TAX RETURNS.
(a) To the extent permitted by law, the Shareholder, the Company and the
Buyer shall cause each tax period of the Company to end on the Closing Date.
(b) The Seller, at the Company's expense, shall prepare or cause to be
prepared all Returns of the Company for taxable periods ending on or prior to
the Closing Date. The Shareholder shall give a copy of each such Return to the
Buyer at least forty-five (45) days prior to the due date of such Return, and,
subject to the Buyer's reasonable review, the Buyer shall cause such Return to
be timely filed and shall cause any taxes shown due and owing on such Return to
be paid.
(c) The Buyer shall prepare all other Returns of the Company on a basis
consistent with the past practice (to the extent that such past practice
constitutes a reasonable reporting position) of the Company and shall not make
any election or take any position on any Return that would have an adverse
effect on the Shareholder with respect to this transaction or any tax period
beginning prior to the Closing Date. The Buyer shall not amend any Return of the
Company relating to a tax period ending on or prior to the Closing Date, unless
such amendment is as a result of an audit, administrative proceeding or court
decision.
(d) In the case of any Return that (i) relates to an income, sales,
value-added, franchise, gross receipts, employment, withholding, gains, or
similar taxes and that (ii) is for a tax period that begins before and ends
18
after the Closing Date, such Return shall be prepared on the basis of an interim
closing of the books as of the Closing Date. In the case of any Return that
(iii) relates to any property or similar tax and that (iv) is for a tax period
that begins before and ends after the Closing Date, such taxes shall be
allocated to period ending on or before the Closing Date on a daily basis.
(e) Any refunds or credits of taxes of the Company for any taxable period
ending on or before the Closing Date shall be for the account of the Shareholder
and shall be paid by Buyer to the Shareholder within ten days after the Buyer or
the Company receives or utilizes such refund.
(f) The Buyer shall cooperate with the Shareholder in preparing the Returns
or in responding to any audit or other judicial or administrative proceeding,
including, but not limited to, making available to the Shareholder any
accounting records of the Company or Buyer and executing such documents as are
necessary for the filing of such Returns.
(g) The Company shall pay all transfer, sales, gains, document recording,
and similar taxes relating to the transactions set forth herein.
6.5 DIVIDEND. Anything to the contrary contained herein notwithstanding,
within a reasonable period of time prior to September 15, 1999, the Company
shall declare and pay a dividend to the Shareholder in an amount equal to the
product of (i) the taxable income of the Company for the period from January 1,
1999 through June 30, 1999 and (ii) the Shareholder's combined state and federal
marginal income tax rates. This obligation shall not be a Liability for purposes
of Section 2.4.
7. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) All statements contained in this Agreement, the Disclosure Letter and
any document, certificate or other instrument delivered by or on behalf of
Shareholder and/or the Company pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed representations, warranties,
covenants and agreements made by Shareholder. Each statement, representation,
warranty, covenant and agreement made or deemed made by Shareholder shall
survive the Closing Date until 18 months from the Closing Date. The statements,
representations, warranties, covenants and agreements made or deemed made by
Shareholder in this Agreement shall not be affected or deemed waived by reason
of the fact that Buyer or their representatives should have known that any such
representation, warranty, covenant or agreement is or might be inaccurate in any
respect unless Shareholder can demonstrate that Buyer or their representatives
had knowledge that any such representations, warranty, covenant or agreement is
inaccurate in such respect. Any furnishing of information to Buyer by
Shareholder pursuant to, or otherwise in connection with, this Agreement,
including, without limitation, any information contained in any document,
contract, book or record of Shareholder or the Company to which Buyer shall have
access or any information obtained by, or made available to, Buyer as a result
of any investigation made by or on behalf of Buyer prior to or after the date of
this Agreement, shall not affect Buyer's right to rely on any statement,
representation, warranty, covenant or agreement made or deemed made by
Shareholder in this Agreement and shall not be deemed a waiver thereof unless
Shareholder can demonstrate that Buyer or its representatives had knowledge that
any such statement, representation, warranty, covenant or agreement is
inaccurate in such respect.
(b) All statements contained in this Agreement and any document,
certificate or other instrument delivered by or on behalf of the Buyer pursuant
hereto or in connection with the transactions contemplated hereby shall be
deemed representations, warranties, covenants and agreements made by the Buyer.
Each statement, representation, warranty, covenant and agreement made or deemed
made by the Buyer shall survive the Closing Date until 18 months from the
Closing Date. The statements, representations, warranties, covenants and
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agreements made or deemed made by the Buyer in this Agreement shall not be
affected or deemed waived by reason of the fact that the Shareholder or his
representatives should have known that any such representation, warranty,
covenant or agreement is or might be inaccurate in any respect unless the Buyer
can demonstrate that Buyer or their representatives had knowledge that any such
representations, warranty, covenant or agreement is inaccurate in such respect.
Any furnishing of information to Buyer by Shareholder pursuant to, or otherwise
in connection with, this Agreement, including, without limitation, any
information contained in any document, contract, book or record of Shareholder
or the Company to which Buyer shall have access or any information obtained by,
or made available to, Buyer as a result of any investigation made by or on
behalf of Buyer prior to or after the date of this Agreement, shall not affect
Buyer's right to rely on any statement, representation, warranty, covenant or
agreement made or deemed made by Shareholder in this Agreement and shall not be
deemed a waiver thereof unless Shareholder can demonstrate that Buyer or its
representatives had knowledge that any such statement, representation, warranty,
covenant or agreement is
inaccurate in such respect.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The Merger is subject
to the conditions set forth in this Section 8 for the exclusive benefit of the
Buyer to be fulfilled on or prior to the Closing Date. The Buyer may, however,
waive the fulfillment of any of these conditions, either before or after the
Closing Date, but any waiver, to be binding upon Buyer, must be by a writing
duly executed by it. The Shareholder shall use commercially reasonable efforts
to cause each condition to be fulfilled.
8.1 REPRESENTATIONS. All representations and warranties of Shareholder and
the Company contained in this Agreement, the Disclosure Letter, and any
document, certificate or other instrument delivered by or on behalf of
Shareholder and/or the Company pursuant to this Agreement or in connection with
the transactions contemplated hereby shall be true and correct in all material
respects when made and such representations and warranties shall be deemed to
be, as of the Closing Date, true and correct in all material respects.
8.2 PERFORMANCE OF AGREEMENTS. All covenants, agreements and obligations
required by the terms of this Agreement to be performed by the Shareholder
and/or the Company at or prior to the Closing Date shall have been duly and
properly performed or fulfilled in all material respects.
8.3 NO ADVERSE CHANGE. On the Closing Date, there shall have been no
material adverse change in the assets, liabilities, financial condition or
business (financial or otherwise) of the Company from that shown or reflected in
the Interim Financial Statements. As of the Closing Date, there shall not have
occurred an event which, in the reasonable opinion of Buyer, materially and
adversely affects or may materially or adversely affect the operations, business
or prospects of the Company.
8.4 DOCUMENTS. All documents required to be delivered to Buyer at or prior
to the Closing Date shall have been duly delivered.
8.5 NO LITIGATION. On the Closing Date, except as set forth in the
Disclosure Letter, no action or proceeding shall be pending or threatened by any
person, firm, corporation, or governmental authority which questions, or seeks
to enjoin or prohibit (a) the purchase and sale of the Capital Stock and the
other transactions contemplated by this Agreement or (b) the right of the
Company to conduct its operations and carry on its business in the normal course
and in accordance with past practice.
8.6 NO LEGISLATION. No legislation (whether by statute, regulation or
otherwise) shall have been enacted or introduced subsequent to the date of this
Agreement which, in the reasonable opinion of Buyer, materially and adversely
affects or may materially and adversely affect the operations, business or
prospects of the Company.
20
8.7 EMPLOYMENT AGREEMENTS. Xxxxxx Xxxxxx shall have entered into a written
employment agreement acceptable to the Buyer.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDER. The Merger is subject
to the conditions set forth in this Section 9 for the exclusive benefit of
Shareholder to be fulfilled on or prior to the Closing Date. Shareholder may,
however, waive the fulfillment of any of these conditions, either before or
after the Closing Date, but any waiver, to be binding upon Shareholder, must be
by a writing executed by, or on behalf of, them. Buyer shall use commercially
reasonable efforts to cause each condition to be fulfilled.
9.1 REPRESENTATIONS. All of the respective representations and warranties
of the Buyer contained in this Agreement shall be true and correct in all
material respects when made and such representations and warranties shall be
deemed to be, as of the Closing Date, true and correct in all material respects.
9.2 PERFORMANCE OF AGREEMENTS. All covenants, agreements and obligations
required by the terms of this Agreement to be performed by Buyer at or prior to
the Closing Date shall have been duly and properly performed or fulfilled in all
material respects.
9.3 DOCUMENTS. All documents required to be delivered to Shareholder at or
prior to the Closing shall have been duly delivered.
9.4 EMPLOYMENT AGREEMENT. The Company and the Shareholder shall have
entered into a written employment agreement acceptable to the Shareholder.
9.5 REGISTRATION RIGHTS AGREEMENT. The Company shall have entered into a
rights agreement with the Shareholder acceptable to the parties.
10. DELIVERY BY SHAREHOLDER AT THE CLOSING. On the Closing Date, and
subject to the terms and conditions set forth herein, Shareholder shall deliver
to Buyer:
(a) Certificates evidencing all of the Shares, together with stock transfer
powers with respect thereto duly executed by the Shareholder.
(b) The books and records of the Company.
(c) Resolutions of the Company's Board of Directors and shareholders
approving the transactions contemplated hereby.
(d) Executed employment agreement, in form satisfactory to The Buyer, for
Xxxxxx Xxxxxx.
(e) The written resignations, effective immediately, of any and all of the
present officers and directors of the Company.
(f) Such additional items as Buyer may reasonably request.
11. DELIVERY BY BUYER ON THE CLOSING DATE. On the Closing Date, and subject to
the terms and conditions set forth herein, Buyer shall deliver to Shareholder:
21
(a) The Closing Shares.
(b) Such additional items as Shareholder may reasonably request.
12. EXPENSES. The Buyer shall bear and pay the legal, accounting and other
expenses of the Buyer associated with the consummation of the transactions
contemplated hereby. The Company shall bear and pay the legal, accounting and
other expenses of the Company associated with the consummation of the
transactions contemplated hereby. The Shareholder shall bear and pay his legal,
accounting and other expenses associated with the consummation of the
transactions contemplated hereby, provided that the Company shall promptly
reimburse the Shareholder for up to $25,000 of his legal fees incurred in
connection with this Agreement and the transactions contemplated hereby.
13. INDEMNIFICATION. The Buyer shall indemnify and hold harmless the Shareholder
and his heirs, executors and legal representatives (the "Shareholder
Indemnitees") from and against any and all claims, losses, damages, expenses or
liabilities, including, without limitation, reasonable attorneys', accountants'
and other professional fees, (collectively, the "Shareholder's Damages") that
may be asserted against, sustained, suffered or incurred by the Shareholder,
arising from or by reason of or in connection with: (i) any breach of the
representations, warranties and covenants made by the Buyer herein, (ii) the
operation of the Company on and after the Closing Date (except with respect to
any such item that is a Liability for purposes of Section 1.5), (iii) any taxes
owed or payable by the Company with respect to any taxable year or portion
thereof ending after the Closing Date, and (iv) any other Liabilities asserted
against, sustained by or incurred by the Shareholder related to, associated
with, or arising from any and all liabilities and obligations of the Company to
the extent reserved against on the Balance Sheet. This indemnity shall survive
the Closing Date; provided, however, that any claim for indemnity hereunder with
respect to Shareholder's Damages arising by virtue of item (i) above must be
presented to the Buyer within twelve (12) months of the Closing Date. No such
time limitation on claims made hereunder shall apply with respect to claims for
Shareholder's Damages arising by virtue of items (ii), (iii) or (iv) above. The
liability of Buyer pursuant to this Section 13 shall be limited to one-half of
the Purchase Price.
14. PUBLICITY. No party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement or otherwise
publicize the execution and delivery of this Agreement, the provisions hereof or
the transactions contemplated hereby without the prior written approval of the
form and content of such press release or publicity by the Buyer or Shareholder,
as applicable; provided, however, that Buyer may make public disclosures that it
believes in good faith are required by applicable law or any listing or trading
agreement concerning its publicly traded securities (in which case the Buyer
will use its best efforts to advise the other parties prior to making such
disclosure).
15. MISCELLANEOUS.
15.1 NOTICES. Any and all notices, requests, demands, consents, approvals
or other communications required or permitted to be given under any provision of
this Agreement shall be in writing and shall be deemed given upon personal
delivery or the mailing thereof by first class certified mail, return receipt
requested, postage pre-paid; or by telecopier or other electronic means, as
follows:
If to Buyer:
IBS Interactive, Inc.
0 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxx Xxxxxxxx, Xx., President & CEO
22
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to Shareholder:
Xxxxxx Xxxxxx
000 Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
with a copy to:
Xxxxx Xxxxxxxxx, Esq.
Xxxxxx Xxxxxx Flattau & Klimpl, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Any party hereto may change its address for the purpose of this
Agreement by notice to the other parties given as aforesaid.
15.2 NOTICES. This Agreement together with the Disclosure Letter constitute
the entire agreement of the parties with respect to the subject matter hereof
and the transactions contemplated hereby and supersedes any prior oral or
written understanding or agreement of the Shareholder and Buyer with respect
thereto. This Agreement may not be modified, amended or terminated except by a
written agreement specifically referring to this Agreement signed by all of the
parties hereto.
15.3 DISCLOSURE LETTER PART OF AGREEMENT. The Disclosure Letters referred
to herein and delivered to Buyer pursuant hereto, including any amendments
thereto or changes therein delivered to Buyer on or prior to the Closing Date,
shall be deemed part of this Agreement as fully and effectively as if set forth
at length herein. The terms used in said Disclosure Letter will have the same
meanings as such terms have in this Agreement unless a contrary intention is
clearly manifested therein.
15.4 SEVERABILITY. In the event that any provision of this Agreement would
be held to be invalid, prohibited or unenforceable in any jurisdiction for any
reason, unless such provision is narrowed by judicial construction, this
Agreement shall, as to such jurisdiction, be construed as if such invalid,
prohibited or unenforceable provision had been more narrowly drawn so as not to
be invalid, prohibited or unenforceable. If, notwithstanding the foregoing, any
provision of this Agreement would be held to be invalid, prohibited or
unenforceable in any jurisdiction for any reason, such provision, as to such
jurisdiction for any reason, shall be ineffective to the extent of such
invalidity, prohibition or unenforceability, without invalidating the remaining
portion of such provision or the other provisions of this Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.
15.5 NO WAIVER. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
15.6 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of each party hereto, and its successors and assigns. Except as
hereafter provided, this Agreement shall not be assigned by either Buyer or
Shareholder and any attempted assignment shall be void.
23
15.7 PERSONS HAVING RIGHTS UNDER THIS AGREEMENT. Nothing in this Agreement
expressed and nothing that may be implied from any of the provisions hereof is
intended, or shall be construed, to confer upon, or give to, any person or
corporation other than the parties hereto, any right, remedy, or claim under or
by reason of this Agreement or of any covenant, condition, stipulation, promise
or agreement contemplated hereby. All covenants, conditions, stipulations,
promises and agreements contained in this Agreement shall be for the sole and
exclusive benefit of the parties hereto and their successors and assigns.
15.8 HEADINGS. The article and section headings contained herein are for
the purpose of convenience only and are not intended to define or limit the
contents of said articles or sections.
15.9 JURISDICTION; GOVERNING LAW. The parties consent to personal
jurisdiction in any action brought in any court, federal or state, within the
state of New Jersey having subject matter jurisdiction in the matter. This
letter agreement will be governed by and construed in accordance with the laws
of the state of New Jersey, without giving effect to the principles of conflict
of laws thereof.
15.10 FURTHER ASSURANCES. Shareholder and Buyer shall cooperate and take
such actions and execute and deliver such other documents, at or prior to the
Closing or subsequent thereto as may be reasonably requested by any other party
hereto in order to carry out this Agreement and the transactions contemplated
thereby.
15.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party but all of which taken together shall constitute one and the same
Agreement.
15.12 RIGHTS AND REMEDIES. All rights, powers and remedies afforded to a
party under this Agreement, by law or otherwise, shall be cumulative (and not
alternative) and shall not preclude assertion or seeking by a party of any other
rights or remedies.
15.13 CERTAIN DEFINITIONS. As used herein, the word "person" shall include
an individual and entity of any kind.
15.14 ENTIRE AGREEMENT. This agreement (together with the Disclosure
Letter) and the agreements and documents delivered pursuant to this Agreement,
constitute the entire agreement of the parties with respect to the subject
matter hereof, and collectively supersede all other prior or contemporaneous
negotiations, commitments, agreements and understandings (whether written or
oral), between the parties with respect to the subject matter hereof.
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed the day and year first above written.
/S/ XXXXXX XXXXXX
----------------------------------------------
XXXXXX XXXXXX
XXXXXXX ANALYSIS, INC.
By:/S/ XXXXXX XXXXXX
-------------------------------------------
XXXXXX XXXXXX, PRESIDENT
IBS INTERACTIVE, INC.
By:/S/ XXXXXXX XXXXXXX
-------------------------------------------
XXXXXXX XXXXXXX, CHIEF OPERATING OFFICER
SAI ACQUISITION CORP.
By:/S/ XXXXXX X. XXXXXXX
--------------------------------------------
XXXXXX X. XXXXXXX, PRESIDENT
25
