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AGREEMENT AND PLAN OF MERGER
AMONG
XXX.XXX, INC.,
GREENS FARM CORPORATION,
VECTOR INTERNET SERVICES, INC.
and
CERTAIN STOCKHOLDERS OF VECTOR INTERNET SERVICES, INC.
Dated as of May 25, 2000
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TABLE OF CONTENTS
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PAGE
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ARTICLE I THE MERGER..................................................1
1.1 The Merger..................................................1
1.2 Effective Time..............................................2
1.3 Closing.....................................................2
1.4 Directors and Officers......................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS................................................2
2.1 Effect on Capital Stock.....................................2
2.2 Vector Stock Options........................................3
ARTICLE III PAYMENT FOR SHARES; DISSENTING SHARES.......................4
3.1 Payment for Shares of Vector Common Stock...................4
3.2 Adjustment to Merger Consideration..........................6
3.3 Appraisal Rights............................................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF DSL AND MERGERCO..........6
4.1 Corporate Organization......................................7
4.2 Authority for Transaction...................................7
4.3 No Consent..................................................7
4.4 Financial Statements........................................7
4.5 Taxes.......................................................8
4.6 Litigation..................................................8
4.7 Employee Benefit Plans......................................8
4.8 Compliance with Laws........................................9
4.9 Brokerage or Finder's Fees..................................9
4.10 DSL Common Stock............................................9
4.11 Material Misstatements or Omissions.........................9
4.12 SEC Documents...............................................9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF VECTOR AND THE MAJORITY
STOCKHOLDERS................................................10
5.1 Corporate Organization......................................10
5.2 Authority for Transaction...................................10
5.3 No Consent..................................................10
5.4 Financial Statements........................................11
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TABLE OF CONTENTS (CONTINUED)
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5.5 Absence of Undisclosed Liabilities..........................11
5.6 Absence of Material Adverse Change..........................11
5.7 Title to Assets; Leases.....................................11
5.8 Accounts Receivable.........................................11
5.9 Contracts and Commitments...................................12
5.10 Indebtedness................................................12
5.11 Intellectual Property.......................................12
5.12 Taxes.......................................................13
5.13 Litigation..................................................13
5.14 Labor and Employee Relations................................14
5.15 Employee Benefit Plans......................................14
5.16 Compliance with Laws........................................14
5.17 Environmental Matters.......................................15
5.18 Land Use....................................................15
5.19 Joint Ventures..............................................16
5.20 Insurance...................................................16
5.21 Books and Records...........................................16
5.22 Powers of Attorney..........................................16
5.23 No Guarantees...............................................16
5.24 Brokerage and Finder's Fees.................................16
5.25 Material Misstatements or Omissions.........................17
5.26 Company Subsidiaries.......................................17
5.27 Capitalization..............................................17
5.28 Net Tangible Assets.........................................17
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER......................18
6.1 Conduct of Business by Vector...............................18
ARTICLE VII ADDITIONAL AGREEMENTS.......................................19
7.1 Stockholder Approval........................................19
7.2 Additional Agreements.......................................20
7.3 Fees and Expenses...........................................20
7.4 No Solicitations............................................20
7.5 Access to Information.......................................21
7.6 Public Announcements........................................21
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TABLE OF CONTENTS (CONTINUED)
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7.7 Employee Benefit Arrangements...............................21
7.8 Notification................................................21
ARTICLE VIII CONDITIONS TO THE MERGER....................................22
8.1 Conditions to the Obligations of Each Party to
Effect the Merger ..........................................22
(a) Stockholder Approval..................................22
(b) Regulatory Approvals..................................22
(c) No Injunctions, Orders or Restraints; Illegality......22
8.2 Conditions to Obligations of DSL and MergerCo...............22
(a) Representations and Warranties........................22
(b) Performance and Obligations of Vector and the
Majority Stockholders.................................22
(c) Consents, Etc.........................................23
(d) No Injunction.........................................23
(e) Material Adverse Change...............................23
(f) Resignations..........................................23
(g) Opinion of Counsel....................................23
8.3 Conditions to Obligations of Vector and the Majority
Stockholders................................................23
(a) Representations and Warranties........................23
(b) Performance of Obligations of DSL and MergerCo........23
(c) Consents, Etc.........................................24
(d) No Injunction.........................................24
(e) Material Adverse Change...............................24
(f) Opinion of Counsel....................................24
ARTICLE IX POST-CLOSING COVENANTS OF THE EXECUTIVE STOCKHOLDERS........24
9.1 Non-Competition; Non-Solicitation...........................24
ARTICLE X RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT..............................25
10.1 Restrictions on Transferability.............................25
10.2 Restrictive Legend..........................................25
10.3 Notice of Proposed Transfers................................26
ARTICLE XI SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.............................................26
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TABLE OF CONTENTS (CONTINUED)
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11.1 Survival of Representations and Warranties..................26
11.2 Indemnification.............................................26
(a) Agreement to Indemnify................................27
(b) Expiration of Indemnification.........................27
(c) Hold Back.............................................27
(d) Claims Upon Hold Back.................................27
(e) Resolution of Conflicts; Arbitration..................27
(f) Distribution of Hold Back Upon Termination of
Hold Back Period......................................28
(g) Agent of the Vector Stockholders; Power of Attorney...28
(h) Indemnification of the Agent..........................28
(i) Third Party Claims....................................29
(j) Threshold Amount; Apportionment of Liability;
Maximum Liability.....................................29
ARTICLE XII TERMINATION, AMENDMENT AND WAIVER...........................30
12.1 Termination.................................................30
12.2 Effect of Termination.......................................30
12.3 Amendment...................................................31
12.4 Extension; Waiver...........................................31
ARTICLE XIII MISCELLANEOUS...............................................31
13.1 Notices.....................................................31
13.2 Entire Agreement; No Third-Party Beneficiaries;
Section Headings............................................32
13.3 Confidentiality.............................................33
13.4 Assignment..................................................33
13.5 Applicable Law..............................................33
13.6 Release of Guarantees.......................................33
13.7 Definitions.................................................33
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LIST OF EXHIBITS
Exhibit A -- Majority Stockholders and Executive
Stockholders
Exhibit B -- Calculation of Per Share Merger
Consideration
Exhibit C -- Estimated Net Tangible Assets
Exhibit D -- Form of Retention Bonus Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made this 25th
day of May, 2000, by and among XXX.XXX, INC., a Delaware corporation having its
principal office at 000 Xxxx Xxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxxx 06511("DSL"),
GREENS FARM CORPORATION, a Delaware corporation and wholly-owned subsidiary of
DSL ("MergerCo"), VECTOR INTERNET SERVICES, INC., a Minnesota corporation having
its principal office at 00 Xxxxx 0xx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx
00000 ("Vector"), the stockholders of Vector listed on Exhibit A hereto under
the caption "Majority Stockholders" (the "Majority Stockholders"), and, with
respect to the covenants set forth in Article IX hereto, the stockholders of
Vector listed on Exhibit A under the caption "Executive Stockholders" (the
"Executive Stockholders").
RECITALS:
WHEREAS, the respective Boards of Directors of DSL, MergerCo and Vector
have approved the merger of MergerCo with and into Vector (the "Merger") in
accordance with the Delaware General Delaware Corporation Law (the "Delaware
Corporation Law"), and the Minnesota Business Corporation Act (the "Minnesota
Corporation Act") upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, the Board of Directors of Vector has, in light of and subject
to the terms and conditions set forth in this Agreement, determined that the
Merger is in the best interests of Vector and its stockholders, and resolved to
approve and adopt this Agreement and the transactions contemplated by this
Agreement, including the Merger (collectively, the "Transactions"), and to
recommend approval and adoption by the stockholders of Vector of this Agreement
and the Transactions; and
WHEREAS, DSL, MergerCo, Vector, the Majority Stockholders and the
Executive Stockholders desire to make certain representations, warranties,
covenants and agreements in connection with the Transactions, and also to
prescribe various conditions to the Transactions.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, DSL, MergerCo, Vector and the Majority Stockholders
and the Executive Stockholders agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as hereinafter defined), Vector and MergerCo shall
consummate the Merger pursuant to which (a) MergerCo shall be merged with and
into Vector, and the separate corporate existence of MergerCo shall thereupon
cease, (b) Vector shall be the surviving corporation in the Merger (sometimes
referred to in this Agreement as the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Minnesota and (c) the separate corporate existence of Vector with all
its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger. The articles of incorporation of Vector (the "Articles
of Incorporation"), as in effect immediately prior to the Effective Time, shall
be the Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Articles of Incorporation, and the bylaws of
Vector (the "Bylaws") as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter amended as
provided by law, by such Articles of Incorporation and such Bylaws. The Merger
shall have the effects specified in the Minnesota Corporation Act.
1.2 Effective Time. As promptly as practicable after all of the
conditions set forth in Article VIII shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of same, MergerCo and
Vector shall duly execute and file a certificate of merger with the Secretary of
State of the State of Delaware in accordance with the Delaware Corporation Law
and articles of merger with the Secretary of State of the State of Minnesota in
accordance with the Minnesota Corporation Act (the "Articles of Merger"). The
Merger shall become effective at such time as the Articles of Merger,
accompanied by payment of the applicable filing fee, has been examined by and
received the endorsed approval of the Secretary of State of the State of
Minnesota (the "Effective Time").
1.3 Closing. The closing of the Merger (the "Closing") shall take place
at such time and on a date to be specified by the parties, which shall be no
later than May 26, 2000 (the "Closing Date"), at the offices of Day, Xxxxx &
Xxxxxx LLP, 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, unless another
date or place is agreed to by the parties.
1.4 Directors and Officers. The directors and officers of MergerCo
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, each to hold office in accordance with
the Articles of Incorporation and Bylaws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of common
stock, par value $.01 per share, of Vector (the "Vector Common Stock") or any
shares of common stock of MergerCo, par value $.01 per share:
(a) Each share of common stock of MergerCo issued and outstanding
immediately prior to the Effective Time shall be converted into one fully paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation following the Merger.
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(b) Each share of Vector Common Stock issued and outstanding
immediately prior to the Effective Time (other than (i) shares owned by Vector
and (ii) Dissenting Shares (as hereinafter defined)) shall be converted into the
right to receive the Per Share Merger Consideration (as hereinafter defined),
calculated in accordance with Exhibit B hereto, in cash (the "Cash
Consideration") or shares of DSL Common Stock (the "Stock Consideration") as
provided below, upon surrender and exchange of the certificate representing such
shares of Vector Common Stock (the "Common Certificate"). The total
consideration for all shares of Vector Common Stock is hereinafter referred to
collectively as the "Merger Consideration".
(c) The total number of outstanding shares of Vector Common Stock that
shall be converted into the right to receive cash (the "Cashed Shares") shall
equal the quotient determined by dividing $11,000,000.00 by the Per Share Merger
Consideration. The number of shares of Vector Common Stock held by each Vector
Stockholder that shall be converted into the right to receive cash shall equal
such Vector Stockholder's pro rata portion of the Cashed Shares. For purposes of
this Section 2.1(c), "pro rata" shall mean a fraction the numerator of which
equals the number of shares of Vector Common Stock held by a particular Vector
Stockholder and the denominator of which equals the total number of issued and
outstanding shares of Vector Common Stock. The remaining outstanding shares of
Vector Common Stock shall be converted into the right to receive the Stock
Consideration. The number of shares of DSL Common Stock issuable upon conversion
of each such remaining share of Vector Common Stock shall equal the quotient
obtained by dividing (i) the Per Share Merger Consideration by (ii) the DSL
Stock Price, as hereinafter defined (the "Exchange Ratio").
(d) All shares of Vector Common Stock, when converted as provided in
this Section 2.1, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each Common Certificate
previously evidencing such shares shall thereafter represent only the right to
receive the applicable Merger Consideration. The holders of Common Certificates
previously evidencing shares of Vector Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to the
Vector Common Stock except as otherwise provided in this Agreement or by law
and, upon the surrender of Common Certificates in accordance with the provisions
of Section 3.1, shall only represent the right to receive for their shares of
Vector Common Stock, the applicable Merger Consideration, without any interest
thereon.
2.2 Vector Stock Options. At or prior to the Effective Time, DSL and
Vector shall take all action necessary to cause the assumption by DSL as of the
Effective Time of the options to purchase Vector Common Stock outstanding as of
the Effective Time (the "Outstanding Vector Options"). Pursuant to the
applicable stock option agreements between Vector and the holders of the
Outstanding Vector Options, each of the Outstanding Vector Options shall become,
without any action on the part of the holder thereof, an option to purchase
shares of DSL Common Stock as of the Effective Time, on the same terms and
conditions as were applicable to the Outstanding Vector Options. The number of
shares of DSL Common Stock that the holder of an assumed Outstanding Vector
Option shall be entitled to receive upon the exercise of such option shall be
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determined by multiplying the number of shares of Vector Common Stock subject to
such option, determined immediately before the Effective Time, by the Exchange
Ratio (rounded up if over 0.5 and down if under 0.5 to the nearest whole share).
The exercise price of each share of DSL Common Stock subject to an assumed
Outstanding Vector Option shall be the amount (rounded up to the nearest whole
cent) equal to (a) the aggregate exercise price for the shares of Vector Common
Stock otherwise purchasable pursuant to the Outstanding Vector Option divided by
(b) the aggregate number of shares of DSL Common Stock deemed purchasable
pursuant to such Outstanding Vector Option. DSL shall (i) reserve out of its
authorized but unissued shares of DSL Common Stock sufficient shares to provide
for the exercise of the Outstanding Vector Options, and (ii) register under the
Securities Act pursuant to a registration statement on Form S-8, as promptly as
practicable after the Effective Time, and in any event no later than 15 days
after the Effective Time, those shares of DSL Common Stock to be issued upon the
exercise of the Outstanding Vector Options. Notwithstanding the foregoing, it
shall be a condition to the obligation of DSL to file such Form S-8 Registration
Statement that each holder of an Outstanding Vector Option enter into a lock-up
agreement with DSL pursuant to which such holder shall agree (i) not to exercise
any Outstanding Vector Option after the Effective Time and prior to the time
that the Form S-8 Registration Statement shall have been filed, and (ii) not to
sell any shares of DSL Common Stock issuable upon exercise of the Outstanding
Vector Option for a period of sixty days following the Effective Time.
ARTICLE III
PAYMENT FOR SHARES; DISSENTING SHARES
3.1 Payment for Shares of Vector Common Stock.
(a) Promptly, and in any event within five business days, after the
Effective Time, DSL shall mail to each record holder of Common Certificates that
immediately prior to the Effective Time represented shares of Vector Common
Stock a form of letter of transmittal which shall specify that delivery shall be
effected, and risk of loss and title to the Common Certificates shall pass, only
upon proper delivery of the Common Certificates to DSL and instructions for use
in surrendering such Common Certificates and receiving the Merger Consideration
in respect of such shares.
(b) In effecting the payment of the Merger Consideration with respect
to shares of Vector Common Stock represented by Common Certificates entitled to
payment of the Merger Consideration pursuant to Section 2.1(b) (the "Vector
Shares"), upon the surrender of each such Common Certificate, DSL shall pay the
holder of such Common Certificate (collectively, the "Vector Stockholders") an
amount equal to (i)(A) the Merger Consideration, minus (B) the Hold Back (as
defined in Section 11.2(c) below), multiplied by (ii) the number of Vector
Shares, in consideration for such Vector Shares. Upon such payment, such Common
Certificate shall forthwith be canceled.
(c) Until surrendered in accordance with paragraph (b) above, each such
Common Certificate (other than Common Certificates representing (i) shares of
Vector
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Common Stock held in the treasury of Vector and (ii) Dissenting Shares) shall
represent solely the right to receive the Merger Consideration relating to such
Common Certificates. No interest or dividends shall be paid or accrued on the
Merger Consideration. If the Merger Consideration (or any portion of the Merger
Consideration) is to be delivered to any person other than the person in whose
name the Common Certificate formerly representing shares of Vector Common Stock
surrendered is registered, it shall be a condition to such right to receive such
Merger Consideration that the Common Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person surrendering such shares of Vector Common Stock shall pay to DSL any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Common
Certificate surrendered, or shall establish to the satisfaction of DSL that such
tax has been paid or is not applicable.
(d) No dividends or other distributions with respect to shares of
Vector Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Common Certificate with respect to the shares of
Vector Common Stock represented by such Common Certificate.
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of Vector Common Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Common Certificates formerly representing the shares of Vector
Common Stock are presented to DSL or the Surviving Corporation, they shall be
surrendered and canceled in return for the payment of the Merger Consideration
relating to such Common Certificates, as provided in this Article III.
(f) Notwithstanding any other provision of this Agreement, neither
certificates nor scrip for fractional shares of DSL Common Stock shall be issued
to any Vector Stockholder in the Merger and the holder thereof shall not be
entitled to any voting or other rights of a holder of shares or a fractional
share interest. Each holder of Vector Shares who otherwise would have been
entitled to receive a fraction of a share of DSL Common Stock shall receive in
lieu thereof cash (rounded to the nearest whole cent), without interest, in an
amount determined by multiplying such holder's fractional interest by the DSL
Stock Price. All amounts of cash in respect of fractional interests which have
not been claimed at the end of three years from the Effective Time by surrender
of certificates for Vector Shares shall be repaid to the Surviving Corporation,
subject to the provisions of applicable escheat or similar laws, for the account
of the holders entitled thereto.
3.2 Adjustment to Merger Consideration. The Per Share Merger
Consideration shall be equal to the quotient obtained by dividing
$22,000,000.00, subject to adjustment by the amount of the Net Tangible Assets
as of the Closing Date, as provided below, by the Net Vector Common Stock
Equivalents, as hereinafter defined. Such adjustment shall be upward if the Net
Tangible Assets is a positive number and downward if the Net Tangible Assets is
a negative number. The estimated Net Tangible Assets as of the date of this
Agreement is set forth on Exhibit C attached hereto. The Per
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Share Merger Consideration payable at the Closing shall be adjusted immediately
prior to the Closing to reflect any change in Net Tangible Assets as of the
Closing from the amounts set forth in Exhibit C.
3.3 Appraisal Rights.
(a) Notwithstanding anything in this Agreement to the contrary, shares
of Vector Common Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by holders of Vector Common Stock who have
demanded and exercised any appraisal rights in the manner provided under the
Minnesota Corporation Act and, as of the Effective Time, have neither
effectively withdrawn nor lost their appraisal rights under the Minnesota
Corporation Act (the "Dissenting Shares"), shall not be converted into or be
exchangeable for the right to receive the Merger Consideration, unless and until
such holder shall have failed to exercise or shall have effectively withdrawn or
lost such holder's appraisal rights under the Minnesota Corporation Law. If such
holder shall have so failed to exercise or shall have effectively withdrawn or
lost such appraisal rights, such holder's shares of Vector Common Stock shall
thereupon be deemed to have been converted into and to have become exchangeable
for, at the Effective Time, the right to receive the Merger Consideration,
without any interest thereon.
(b) Vector shall give DSL prompt notice of any demands received by
Vector for appraisal pursuant to Section 302A.473 of the Minnesota Corporation
Act, withdrawals of such demands, and any other instruments served pursuant to
the Minnesota Corporation Act and received by Vector. Vector shall not, except
with the prior written consent of DSL or as otherwise required by applicable
law, make any payment with respect to any such demands for appraisal or offer to
settle or settle any such demands.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DSL AND MERGERCO
DSL and MergerCo hereby jointly and severally represent and warrant to
Vector and the Vector Stockholders as follows and acknowledge and confirm that
Vector and the Vector Stockholders are relying upon such representations and
warranties in connection with the execution, delivery and performance of this
Agreement, notwithstanding any investigation made by Vector or the Vector
Stockholders or on its or their behalf:
4.1 Corporate Organization. DSL is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and is duly authorized to conduct business as a foreign corporation in the State
of Connecticut. MergerCo is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. DSL has all necessary
corporate power and authority to own and use its properties and assets and to
operate its business as presently conducted, and DSL holds all such permits,
licenses, orders and approvals of all federal, state and local governmental or
regulatory bodies (i) necessary and required therefor and (ii) the failure of
which to so hold would have a Material Adverse Effect.
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4.2 Authority for Transaction. The execution and delivery of this
Agreement by each of DSL and MergerCo, and the consummation of the Transactions,
have been or prior to the Closing will be duly and validly authorized by each of
DSL and MergerCo by all necessary action, corporate or otherwise. This Agreement
is the legal, valid and binding obligation of each of DSL and MergerCo,
enforceable against each of DSL and MergerCo in accordance with its terms.
Neither the execution and delivery of this Agreement by DSL and MergerCo, nor
the performance by DSL and MergerCo of their obligations hereunder, will violate
the certificate of incorporation or bylaws of either DSL or MergerCo or will
result in a violation or breach of, or constitute a default under, any
indenture, mortgage, deed of trust or other contract, license or other agreement
to which DSL or MergerCo is a party or by which either of them or their assets
is bound, or of any provision of any federal or state judgment, writ, decree,
order, statute, rule, or governmental regulation applicable to DSL or MergerCo.
4.3 No Consent. No consent, approval, order, or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local Governmental Authority (as hereinafter defined) is
required on the part of DSL or MergerCo in connection with the execution or
delivery of this Agreement or the consummation of the Transactions other than
(i) routine filings with the Secretary of State of the State of Delaware and the
Secretary of State of the State of Minnesota necessary to consummate the Merger,
(ii) compliance with the applicable requirements of the Securities Act of 1933
(the "Securities Act"), the Securities Exchange Act of 1934 (the "Exchange Act")
and any applicable state securities and blue sky laws in connection with the
offering, sale and delivery of the shares of DSL Common Stock to be issued in
the Merger and the assumption of the Outstanding Vector Options in connection
with the Merger and (iii) where the failure to obtain such consents, approvals,
action, or to make such declaration, filing or registration, would not have a
Material Adverse Effect.
4.4 Financial Statements. DSL has delivered to Vector its financial
statements for the year ended December 31, 1999, and the unaudited financial
statements for the three months ended March 31, 2000 (collectively, the "DSL
Financial Statements"). The DSL Financial Statements have been prepared in
accordance with GAAP (as hereinafter defined) except that the unaudited
financial statements do not contain the footnotes required by GAAP and, with
respect to the interim financial statements, for normal year end adjustments,
and fairly and accurately present the financial condition and results of the
operations of DSL and its business as of the dates and for the periods
indicated.
4.5 Taxes.
(a) All returns, reports and other forms related to Taxes (as
hereinafter defined) required to be filed by DSL on or before the Closing Date
have been filed, in accordance with all applicable laws (after taking into
account extensions duly obtained), and no penalties or other changes are due or
will become due with respect to the late filing of any such return, report or
form, except where the failure to file would not have a Material Adverse Effect.
All Taxes due have been paid, provided for in reserves, or properly protested or
will be so paid, reserved for or protested by DSL. No audit of any such return,
report or form is pending or, to the Knowledge of DSL, threatened. DSL is not a
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party to any pending action or proceeding by any Governmental Authority for
assessment or collection of Taxes, and no claim for assessment or collection of
Taxes has been asserted or, to the Knowledge of DSL, threatened against DSL. All
deposits required by law to be made by DSL with respect to employees'
withholding taxes have been duly made.
(b) As used in this Agreement, "Taxes" (or "Tax" where the context
requires) shall mean all federal, state, county, local, foreign and other taxes
(including, without limitation, income, profits, premium, estimated, excise,
value added, sales, use, occupancy, gross receipts, franchise, ad valorem,
severance, capital levy, production, transfer, withholding, employment,
unemployment compensation, payroll-related and property taxes, imposts, customs
duties and other governmental charges and assessments), whether or not measured
in whole or in part by net income, and including deficiencies, interest,
additions to tax or interest or penalties with respect thereto.
4.6 Litigation. There is no action, suit, grievance or proceeding
pending against DSL required to be disclosed in DSL's periodic reports filed
with the Securities and Exchange Commission under the Exchange Act that has not
been so disclosed.
4.7 Employee Benefit Plans. All of the employee benefit plans (as
defined in Section 3(3) of ERISA (as hereinafter defined)), multi-employer plans
(as defined in Section 4001(a)(3) of ERISA), and compensation programs and
employment arrangements which are maintained, or contributed to, by DSL are
listed in the DSL disclosure letter delivered to Vector contemporaneously
herewith ("Employee Benefit Plans"). All obligations of DSL to contribute to
such Employee Benefit Plans on behalf of employees for the calendar years prior
to 2000 have been satisfied, and all obligations of DSL to contribute to such
plans on behalf of employees for the most recent period ending on the Closing
Date will be satisfied by DSL. Except as set forth on in the DSL disclosure
letter, DSL does not maintain or sponsor, and is not required to make
contributions to, any oral pension, profit sharing, thrift, deferred
compensation, bonus, incentive, stock purchase, severance, hospitalization,
insurance or other similar plan, agreement, or arrangement relating to employee
benefits for any employee or to former employees of DSL. To the Knowledge of
DSL, the Employee Benefit Plans in all material respects conform to and have
been administered in compliance with their terms and applicable laws and
regulations (including, but not limited to, ERISA), and, to the Knowledge of
DSL, no condition exists with respect to any Employee Benefit Plan that could
have a Material Adverse Effect on DSL or its business.
4.8 Compliance with Laws. DSL has in all material respects duly
complied with all applicable laws, rules, regulations and orders of federal,
state, and local governments, including, but not limited to, Environmental Laws
(as hereinafter defined), and DSL is not in default with respect to any order,
judgment, writ, injunction, decree, award, rule or regulation of any court,
governmental or regulatory body or arbitrator, in each case except where the
failure to comply or the default would not have a Material Adverse Effect, and
to the Knowledge of DSL, no event of default or event or condition that, after
notice or lapse of time or both, would constitute a violation, breach or event
of default thereunder has occurred or will occur as a result of the
Transactions.
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4.9 Brokerage or Finder's Fees. Neither DSL nor MergerCo has employed
any broker, finder or agent, or agreed to pay or incurred any brokerage fee,
finder's fee or commission with respect to the Transactions, except for JPS
Capital Corporation. DSL shall indemnify, defend and hold harmless each of
Vector and the Vector Stockholders from any claim for brokers' or finders' fees
from such brokers.
4.10 DSL Common Stock. The shares of DSL Common Stock to be issued and
exchanged for the Vector Shares in the Merger will, at the Effective Time be
duly authorized, validly issued, fully paid and nonassessable and subject to no
preemptive rights.
4.11 Material Misstatements or Omissions. No representation or warranty
by DSL or MergerCo in this Agreement, or any document, statement, certificate or
schedule furnished or to be furnished to Vector or any of the Vector
Stockholders by, or on behalf of, DSL or MergerCo pursuant hereto contains, or
will when furnished contain, any untrue statement of a material fact, or omits,
or will then omit to state, a material fact necessary to make the statement of
facts not materially misleading.
4.12 SEC Documents. DSL has timely filed with the Securities and
Exchange Commission (the "Commission") all forms, reports and documents required
to be filed by it since October 6, 1999 under the Securities Exchange Act of
1934, as amended, and has made available to Vector and the Majority Stockholders
a true and complete copy of the following DSL documents: (i) its annual report
on Form 10-K for the fiscal year ended December 31, 1999; (ii) its quarterly
report on Form 10-Q for the fiscal quarter ended March 31, 2000; and (iii) the
Proxy Statement dated April 26, 2000 (collectively, the "DSL SEC Documents"). As
of their respective dates, the DSL SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the Commission thereunder applicable to such DSL SEC Documents, and none of
the DSL SEC Documents, as of their respective dates, contained any untrue
statement of material fact or omitted to state a 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.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF VECTOR
AND THE MAJORITY STOCKHOLDERS
Vector and each of the Majority Stockholders hereby severally
represents and warrants to each of DSL and MergerCo as follows and acknowledge
and confirm that each of DSL and MergerCo is relying upon such representations
and warranties in connection with the execution, delivery and performance of
this Agreement, notwithstanding any investigation made by DSL or MergerCo or on
either of their behalf:
5.1 Corporate Organization. Vector is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Minnesota
and is not required to be qualified as a foreign corporation in any other
jurisdiction. Vector has all
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necessary corporate power and authority to own and use its properties and assets
and to operate its business as presently conducted, and Vector holds all
permits, licenses, orders and approvals of all federal, state and local
governmental or regulatory bodies necessary and required therefor.
5.2 Authority for Transaction. The execution and delivery of this
Agreement by Vector, and the consummation of the transactions contemplated
hereby, have been or prior to the Closing will be duly and validly authorized by
all necessary action, corporate or otherwise. This Agreement is the legal, valid
and binding obligation of Vector and each of the Vector Stockholders,
enforceable against them in accordance with its terms. Neither the execution and
delivery of this Agreement by Vector, nor the performance by Vector of its
obligations hereunder, will violate Vector's Articles of Incorporation or Bylaws
or will result in a violation or breach of, or, except as set forth in the
Disclosure Letter, constitute a default under, any indenture, mortgage, deed of
trust or other contract, license or other agreement to which Vector is a party
or by which it or any of its assets or properties is bound, or of any provision
of any federal or state judgment, writ, decree, order, statute, rule, or
governmental regulation applicable to Vector.
5.3 No Consent. No consent, approval, order, or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local Governmental Authority is required on the part of Vector
or the Vector Stockholders in connection with the execution or delivery of this
Agreement or the consummation of the Transactions, other than (i) routine
filings with the Secretary of State of the State of Delaware and the Secretary
of State of the State of Minnesota necessary to consummate the Merger, and (ii)
where the failure to obtain such consents, approvals, action or to make such
declaration, filing or registration, would not have a Material Adverse Effect.
5.4 Financial Statements. Vector has delivered to Buyer its unaudited
financial statements for the year ended December 31, 1999, and the unaudited
financial statements for the three months ended March 31, 2000 (collectively,
the "Financial Statements"). Except as set forth in the Disclosure Letter, the
Financial Statements have been prepared in accordance with GAAP (as hereinafter
defined) except that the unaudited financial statements do not contain the
footnotes required by GAAP and, with respect to the interim financial
statements, for normal year end adjustments, and fairly and accurately present
the financial condition and results of the operations of Vector and its business
as of the dates and for the periods indicated.
5.5 Absence of Undisclosed Liabilities. Vector, and to their Knowledge,
the Majority Stockholders, represent and warrant that Vector has no liabilities
or obligations, whether accrued, absolute, contingent or otherwise, and whether
due or to become due, other than those set forth on the Financial Statements or
in the disclosure letter delivered by Vector and the Majority Stockholders to
DSL contemporaneously herewith (the "Disclosure Letter").
5.6 Absence of Material Adverse Change. Since December 31, 1999, there
has not been with respect to the business of Vector, nor have any facts come to
the attention
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of Vector or any of the Majority Stockholders that Vector or its business has
experienced or will experience, any Material Adverse Change.
5.7 Title to Assets; Leases.
(a) Vector has good and valid title to all assets owned by it and a
valid leasehold interest in all assets leased by it, in each case, except as set
forth in the Disclosure Letter, free and clear of all Liens (as hereinafter
defined).
(b) The Disclosure Letter lists all leases and lease purchase
agreements to which Vector is a party. Each such agreement is valid, binding and
in full force and effect; and no event of default or event or condition that,
after notice or lapse of time or both, would constitute a violation, breach or
event of default thereunder on the part of Vector, or to the Knowledge of Vector
or the Majority Stockholders, any other party thereto, has occurred or will
occur upon or in connection with the closing of the Transactions.
5.8 Accounts Receivable. All accounts receivable of Vector arose only
from bona fide transactions in the ordinary course of Vector's business. No
amount included in the accounts receivable of Vector as of the Closing Date has
been released for an amount less than the value at which it was included or is
or will be regarded as unrecoverable in whole or in part, except (i) to the
extent there shall have been an appropriate reserve therefor, or (ii) for
customer credits in the ordinary course of business, the amounts of which are
not material in the aggregate. Such receivables are not subject to any
counterclaim, refusal to pay or setoff.
5.9 Contracts and Commitments. The Disclosure Letter lists all written
and oral agreements, contracts, indebtedness, liabilities and other obligations
to which Vector is a party or to which it is bound which (a) are for a term
longer than twelve (12) months; (b) involve receipts or expenditures by Vector
greater than Five Thousand Dollars ($5,000) in any twelve-month period; (c)
involve the mortgage, pledge, grant or creation of a lien or security interest
or other encumbrance on any of Vector's assets; (d) involve any Vector
Stockholders as a party; (e) require Vector to indemnify any other party for any
liability; (f) was not entered into in the ordinary course of business; or (g)
is otherwise material to Vector. Copies of such written, and summaries of such
oral, agreements, contracts, indebtedness, liabilities and obligations have been
delivered to DSL. Each of the contracts or agreements listed in the Disclosure
Letter is valid, binding and in full force and effect; and no event of default
or event or condition that, after notice or lapse of time or both, would
constitute a violation, breach or event of default thereunder on the part of
Vector, or to the Knowledge of Vector or any of the Majority Stockholders, any
other party thereto, has occurred. Other than as set forth in the Disclosure
Letter, none of such contracts or agreements contain any change-of-control or
other provisions that would be triggered by this Agreement or the consummation
of the Transactions.
5.10 Indebtedness. Except as set forth in the Disclosure Letter, Vector
does not have any obligations for money borrowed or owed or under any guarantees
and does not
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have any agreements or arrangements to borrow money or to enter into any such
guarantee.
5.11 Intellectual Property.
(a) The Disclosure Letter lists all of Vector's intellectual property,
including but not limited to registered and unregistered trademarks, trade
names, service marks, certification marks, domain names, copyrights and
registration applications for the above, patents and patent applications, and
material licenses to and from third parties relating to any of the above (the
"Intellectual Property").
(b) To its Knowledge, Vector owns or has valid and enforceable
license(s) to use all the Intellectual Property and pays no royalty with respect
thereto. Each such license is valid, binding and in full force and effect; and
no event of default or event or condition that, after notice or lapse of time or
both, would constitute a violation, breach or event of default thereunder on the
part of Vector, or to the Knowledge of Vector or any of the Majority
Stockholders, any other party thereto, has occurred. Each material license which
is not a perpetual license is so identified in the Disclosure Letter.
(c) Vector employs commercially reasonable procedures in the daily
operation of its business to maintain the proprietary nature of, and owns or has
the right to use, all material trade secrets, including know-how, inventions,
designs, processes, computer software and documentation for such software and
technical data required for or incident to the development, manufacture,
operation and sale of all products and services sold or proposed to be sold by
Vector in connection with its business, free and clear of any Liens, including
without limitation, all claims of current and former employees, consultants,
officers, directors and stockholders of Vector.
5.12 Taxes.
(a) All returns, reports and other forms related to Taxes (as
hereinafter defined) required to be filed by Vector on or before the Closing
Date have been filed, in accordance with all applicable laws (after taking into
account extensions duly obtained), and no penalties or other charges are due or
will become due with respect to the late filing of any such return, report or
form. All Taxes due have been paid, provided for in reserves, or properly
protested or will be so paid, reserved for or protested by Vector. No audit of
any such return, report or form is pending or, to the Knowledge of Vector or the
Majority Stockholders, threatened. Vector is not a party to any pending action
or proceeding by any Governmental Authority for assessment or collection of
Taxes, and no claim for assessment or collection of Taxes has been asserted or,
to the Knowledge of Vector, threatened against Vector. All deposits required by
law to be made by Vector with respect to employees' withholding taxes have been
duly made.
(b) No Taxes are or will become payable by any of the parties to this
Agreement as a consequence of the execution, delivery or performance of this
Agreement, other than Taxes based upon the net income of the parties. Vector and
the Majority Stockholders
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shall be responsible for and shall promptly pay any such Taxes which become
payable with respect thereto.
(c) As used in this Agreement, "Taxes" (or "Tax" where the context
requires) shall mean all federal, state, county, local, foreign and other taxes
(including, without limitation, income, profits, premium, estimated, excise,
value added, sales, use, occupancy, gross receipts, franchise, ad valorem,
severance, capital levy, production, transfer, withholding, employment,
unemployment compensation, payroll-related and property taxes, imposts, customs
duties and other governmental charges and assessments), whether or not measured
in whole or in part by net income, and including deficiencies, interest,
additions to tax or interest or penalties with respect thereto.
5.13 Litigation. Other than as set forth in the Disclosure Letter,
there is no action, suit, grievance or proceeding pending or, to the Knowledge
of Vector or the Majority Stockholders, threatened against Vector at law, in
equity, by way of arbitration or before any governmental or quasi-governmental
department, commission, board or agency. To the Knowledge of Vector, there are
no existing facts or conditions which are likely to give rise to any charge,
claim, litigation, proceeding, or investigation by any third party that, if
resolved adversely to Vector, would have a Material Adverse Effect on Vector or
its business, nor are there any facts or conditions which are likely to give
rise to any order of condemnation, appropriation or other taking of any of
Vector's material assets.
5.14 Labor and Employee Relations. Other than as set forth in the
Disclosure Letter, no current officer or employee of Vector ("Employee") is a
party to any employment agreement or union or collective bargaining agreement,
and no union has been certified or recognized as the collective bargaining
representative of any of such Employees or has attempted to engage in
negotiations with Vector regarding terms and conditions of employment. No unfair
labor practice charge, work stoppage, picketing or other such activity relating
to labor matters has occurred or is pending. To the Knowledge of Vector or the
Majority Stockholders, there are no current or threatened attempts to organize
or establish any labor union to represent any Employees. Vector is in compliance
in all material respects with all requirements of federal, state and local laws
and regulations governing employee relations, including without limitation
anti-discrimination laws, wage and hour laws, labor relations laws and
occupational safety and health laws, and no suits, charges or administrative
proceedings relating to any such law or regulation are pending or, to the
Knowledge of Vector or the Majority Stockholders, have been threatened. No
Employee has given any notice or, to the Knowledge of Vector or the Majority
Stockholders, made any threat, or otherwise revealed an intent, to cancel or
otherwise terminate his or her relationship with Vector. Prior to the Effective
Time, Vector shall terminate or cause to be terminated all employment agreements
set forth in the Disclosure Letter (the "Employment Agreements") and as of the
Closing Date, subject to the provisions of Section 7.7 below, all Employees
shall be terminable at will by the Surviving Corporation.
5.15 Employee Benefit Plans. All of the employee benefit plans (as
defined in Section 3(3) of ERISA (as hereinafter defined)), multi-employer plans
(as defined in
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Section 4001(a)(3) of ERISA), and compensation programs and employment
arrangements which are maintained, or contributed to, by Vector for the
Employees are listed in the Disclosure Letter ("Employee Benefit Plans"). All
obligations of Vector to contribute to such Employee Benefit Plans on behalf of
Employees for the calendar years prior to 2000 have been satisfied, and all
obligations of Vector to contribute to such plans on behalf of Employees for the
most recent period ending on the Closing Date will be satisfied by Vector.
Vector does not maintain or sponsor, and is not required to make contributions
to, any written or oral pension, profit sharing, thrift, deferred compensation,
bonus, incentive, stock purchase, severance, hospitalization, insurance or other
similar plan, agreement, or arrangement relating to employee benefits for any
Employee or to former employees of Vector. To the Knowledge of Vector or the
Majority Stockholders, the Employee Benefit Plans in all material respects
conform to and have been administered in compliance with their terms and
applicable laws and regulations (including, but not limited to, ERISA), and no
condition exists with respect to any Employee Benefit Plan that could have a
Material Adverse Effect on Vector or its business, DSL or MergerCo.
5.16 Compliance with Laws. Vector has in all material respects duly
complied with all applicable laws, rules, regulations and orders of federal,
state, and local governments, including, but not limited to, Environmental Laws
(as hereinafter defined), and Vector is not in default with respect to any
order, judgment, writ, injunction, decree, award, rule or regulation of any
court, governmental or regulatory body or arbitrator, in each case except where
the failure to comply or the default would not have a Material Adverse Effect,
and to the Knowledge of Vector or the Majority Stockholders, no event of default
or event or condition that, after notice or lapse of time or both, would
constitute a violation, breach or event of default thereunder has occurred or
will occur as a result of the Transactions.
5.17 Environmental Matters.
(a) All facilities and property whether currently or heretofore owned,
operated or leased by Vector (including facilities or properties subleased to a
third party) were, during any period of ownership, operation or leasing
(including subleasing to a third party) by Vector, and, to the extent currently
owned, operated or leased by Vector, continue to be, in compliance in all
material respects with all applicable federal, state or local statutes, laws,
ordinances, codes, rules, regulations, guidelines or any binding determinations
of any federal, state or local governmental agency (including consent decrees
and administrative orders) relating to protection of the environment or public
or worker health and safety except where noncompliance would not have a Material
Adverse Effect on Vector (collectively, "Environmental Laws").
(b) Except as set forth in the Disclosure Letter or where noncompliance
would not have a Material Adverse Effect on Vector, (i) Vector's past and
present operations have complied and are in compliance in all material respects
with all applicable Environmental Laws; (ii) Vector has obtained all
environmental, health and safety governmental permits required for the operation
of its business, and all such governmental permits are in good standing and
Vector is in compliance with all material terms and conditions of such
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permits; (iii) none of Vector, nor any of Vector's properties or its past or
present operations, is subject to any ongoing investigation by, order from or
agreement with any person (including, without limitation, any prior owner or
operator of Vector property) respecting (A) any Environmental Laws, (B) any
remedial action or (C) any claim of losses and expenses arising from the release
or threatened release of a contaminant into the environment; and (iv) Vector is
not subject to any judicial or administrative proceeding, order, judgment,
decree or settlement alleging or addressing a violation of or liability under
any Environmental Laws.
(c) To the Knowledge of Vector or the Majority Stockholders, Vector is
not subject to the environmental liabilities of any third party, whether by
contractual agreement or operation of law.
5.18 Land Use. The past and current use by Vector of 00 Xxxxx 0xx
Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000 and each other location where
Vector maintains an office (the "Premises") complies in all material respects
with and in no material way violates, (a) any applicable statute, law,
regulation, rule, ordinance or order of any kind whatsoever (including, without
being limited to, any building, fire, subdivision and zoning statute, law, code,
ordinance, rule, regulation, approval or order, or urban redevelopment plan or
other governmental or quasi-governmental requirement) affecting the Premises or
any part thereof, (b) any building or occupancy permit, (c) any condition,
easement, right-of-way, covenant, agreement or restriction of record affecting
or otherwise relating to the Premises, or (d) any material term or provision of
any lease. The Disclosure Letter sets forth a complete list of all Premises. No
current use by Vector of the Premises is dependent on a nonconforming use or
other governmental approval, license or permit the absence of which would
materially limit Vector or its business as currently operated. There is no
pending or, to the knowledge of Vector or any of the Stockholders, threatened
condemnation of all or any part of the Premises. There are no occupancy rights
(written or oral), leases or tenancies presently affecting the Premises, other
than as set forth in the Disclosure Letter.
5.19 Joint Ventures. Vector is not a participant, as a partner or
otherwise, in any joint venture or common or pooled risk business enterprises.
5.20 Insurance. Vector and all of its assets and properties are covered
by such fire, casualty, environmental liability and other insurance policies
issued by reputable insurers as are customarily obtained to cover comparable
assets and properties by businesses in the region in which Vector and its assets
and properties are located, in amounts, scope and coverage which are reasonable
in light of existing conditions. There are no outstanding written requirements
or written recommendations by any insurance company that issued a policy to
Vector, by any Board of Fire Underwriters or other body exercising similar
functions or by any Governmental Authority requiring or recommending any repairs
or other work to be done on or with respect to any of Vector's material assets
or requiring or recommending any equipment or facilities to be installed on or
in connection with any of Vector's assets.
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5.21 Books and Records. The books of account and other financial and
corporate records of Vector, as presented to DSL, are complete and correct in
all material respects and are maintained in accordance with good business
practices.
5.22 Powers of Attorney. No person has any power of attorney to act on
behalf of Vector other than such powers to so act as normally pertain to the
officers of Vector.
5.23 No Guarantees. Except as set forth in the Disclosure Letter, none
of the obligations or liabilities of Vector is guaranteed by or subject to a
similar contingent obligation of any other person.
5.24 Brokerage and Finder's Fees. Other than as set forth in the
Disclosure Letter, Vector has not employed any broker, finder or agent, or
agreed to pay or incurred any brokerage fee, finder's fee or commission with
respect to the transactions contemplated by this Agreement. Vector has not dealt
with any other person purporting to act in the capacity of a broker, finder or
agent with respect hereto as a result of which any claim for a fee can be made
against DSL or MergerCo. Vector and each of the Majority Stockholders shall
indemnify, defend and hold harmless each of DSL and MergerCo from any claim for
brokers' or finders' fees from such brokers, and Vector shall pay and fully
discharge all obligations to the broker set forth in the Disclosure Letter at or
prior to the Closing.
5.25 Material Misstatements or Omissions. No representation or warranty
by Vector or any Majority Stockholder in this Agreement, or any document,
statement, certificate or schedule furnished or to be furnished to DSL or
MergerCo by Vector or any Majority Stockholder, or on behalf of Vector or any
Majority Stockholder pursuant hereto contains, or will when furnished contain,
any untrue statement of a material fact, or omits, or will then omit to state, a
material fact necessary to make the statement of facts contained therein not
materially misleading.
5.26 Company Subsidiaries. Vector has no subsidiaries and does not own
of record or beneficially, directly or indirectly, (i) any shares of outstanding
capital stock or securities convertible into capital stock of any other
corporation, and (ii) any participating interest in any partnership, joint
venture or other non-corporate business enterprises.
5.27 Capitalization.
(a) The authorized capital stock of Vector consists of 1,000,000 shares
of Vector Common Stock, of which 432,500 shares are issued and outstanding and
306,800 shares are subject to issuance under the Outstanding Vector Options.
(b) All outstanding shares of capital stock of Vector have been duly
authorized by all necessary corporate action, have been validly issued, and are
fully paid and nonassessable. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class or series
of authorized capital stock of Vector are as set forth in the Articles of
Incorporation. The Disclosure Letter provides an accurate list of all
stockholders owning the issued and outstanding Vector Common Stock, together
with the number held by each, and all of the holders of the Outstanding
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Vector Options together with the number held by each. Except as set forth in the
Disclosure Letter, there are no outstanding (i) shares of capital stock or other
voting securities of Vector, (ii) securities of Vector convertible into or
exchangeable for shares of capital stock or voting securities of Vector, (iii)
options, warrants, exchange rights, subscription rights or other agreements,
commitments or rights to purchase or otherwise acquire from Vector, or
agreements, commitments or obligations of Vector to issue or sell, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of Vector or (iv) any agreement, commitment
or obligation of Vector to grant, or enter into any such option, warrant, call,
right, commitment or agreement (the items in clauses (i), (ii), (iii) and (iv)
being referred to collectively as the "Vector Securities"). Except as set forth
in the Disclosure Letter, there are no outstanding obligations of Vector to
sell, issue or deliver, or to repurchase, redeem or otherwise acquire, any
Vector Securities.
5.28 Net Tangible Assets. As of the Effective Time of the Merger, the
Net Tangible Assets shall be as set forth in a bring down certificate, in form
and substance satisfactory to DSL, to be delivered by Vector to DSL immediately
prior to the Effective Time.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of Business by Vector. During the period from the date of
this Agreement to the Effective Time, except as otherwise contemplated by this
Agreement, Vector shall carry on its business in the usual, regular and ordinary
course, consistent with past practice, and use its best efforts to preserve
intact its present business organization, keep available the services of its
present advisors, managers, officers and employees and preserve its
relationships with customers, suppliers, licensors and others having business
dealings with it and continue existing contracts as in effect on the date of
this Agreement (for the term provided in such contracts), and renew such
contracts that become due for renewal in the ordinary course of business.
Without limiting the generality of the foregoing, Vector will not (except as
expressly permitted by this Agreement or as contemplated by the Transactions or
to the extent that DSL or MergerCo shall otherwise consent in writing):
(a) (i) declare, set aside or pay any dividend or other distribution
(whether in cash, stock, property or any combination of the foregoing) in
respect of any of its capital stock, (ii) split, combine or reclassify any of
its capital stock or (iii) repurchase, redeem or otherwise acquire any of its
securities;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities (including indebtedness having the right to
vote) or equity equivalents (including, without limitation, stock appreciation
rights);
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(c) (i) incur any amount of indebtedness for borrowed money, guarantee
any indebtedness, issue or sell debt securities or warrants or rights to acquire
any debt securities, guarantee (or become liable for) any debt of others, make
any loans, advances or capital contributions, mortgage, pledge or otherwise
encumber any material assets, create or suffer any material Lien thereupon, in
each case other than in the ordinary course of business consistent with prior
practice or (ii) incur any short-term indebtedness for borrowed money, except,
in each such case, pursuant to credit facilities in existence on the date of
this Agreement;
(d) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
any payment, discharge or satisfaction (i) in the ordinary course of business
consistent with past practice, or (ii) in connection with the Transactions;
(e) change any of the accounting principles or practices used by it
(except as required by GAAP, in which case written notice shall be provided to
DSL and MergerCo prior to any such change);
(f) except as required by law or as otherwise required pursuant to this
Agreement, (i) enter into, adopt, amend or terminate any Employee Benefit Plan,
(ii) enter into, adopt, amend or terminate any agreement, arrangement, plan or
policy between Vector and one or more of their directors or officers, or (iii)
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any Employee Benefit Plan
or arrangement as in effect as of the date of this Agreement;
(g) adopt any amendments to the Articles of Incorporation or Bylaws,
except as expressly provided by the terms of this Agreement;
(h) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(i) settle or compromise any litigation (whether or not commenced prior
to the date of this Agreement) other than settlements or compromises or
litigation where the amount paid (after giving effect to insurance proceeds
actually received) in settlement or compromise does not exceed $5,000; or
(j) enter into an agreement to take any of the foregoing actions.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Stockholder Approval. Vector shall take all action necessary in
accordance with applicable law to obtain the approval of this Agreement
(including the transactions contemplated hereby) and the Merger by the Vector
Stockholders owning at least 95% of the Vector Common Stock entitled to vote on
this matter (the "Vector
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Stockholder Approval"). On or before May 25, 2000 or as promptly as practicable
thereafter Vector shall deliver to each Vector Stockholder who was a stockholder
on the record date for determining stockholders entitled to vote, (i) an
information statement (the "Information Statement") with respect to the matters
to be submitted for stockholder approval, and its Board of Directors shall
recommend to its stockholders the approval and adoption of this Agreement
(including the transactions contemplated hereby), and (ii) a notice that
appraisal rights are available for the shares of Vector Common Stock held by
each such Vector Stockholder, together with a copy of Sections 302A.471 and
302A.473 of the Minnesota Corporation Act , in satisfaction of Vector's
obligations under Section 302A.473 of the Minnesota Corporation Act. In
addition, the Information Statement shall be accompanied by such other
information provided by DSL as DSL deems necessary in order to provide for the
offer and sale of the DSL Common Stock to be issued in the Merger to be exempt
from any applicable registration or qualification requirements under either
federal or state securities or "Blue Sky" laws. Vector shall use all reasonable
efforts to obtain all votes and approvals of its stockholders necessary for the
approval and adoption of this Agreement under the Minnesota Corporation Act
(including the transactions contemplated hereby).
7.2 Additional Agreements. Subject to the terms and conditions provided
in this Agreement, each of the parties to this Agreement agrees to use its best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the Transactions and to cooperate with each other in
connection with the foregoing, including the taking of such actions as are
necessary to obtain any necessary consents, approvals, orders, exemptions and
authorizations by or from any public or private third party, including without
limitation any that are required to be obtained under any federal, state or
local law or regulation or any contract, agreement or instrument to which Vector
is a party or by which any of their respective properties or assets are bound.
7.3 Fees and Expenses. Except as set forth in Section 11.2(e) of this
Agreement, whether or not the Merger is consummated, all fees, costs and
expenses incurred in connection with this Agreement and the Transactions shall
be paid by the party incurring such costs or expenses.
7.4 No Solicitations.
(a) From the date of this Agreement, neither Vector nor any of its
directors, stockholders or advisors shall, directly or indirectly, entertain or
solicit any indication of interest in or proposal involving, or agree to
consummate, any sale, transfer, merger or recapitalization of Vector or any
securities of Vector or, in connection with any such indication of interest,
proposal or transaction, consider or respond to any inquiry or cooperate with or
furnish or cause to be furnished to any person any information concerning
Vector. Vector will immediately advise DSL if any such indication or proposal is
received.
(b) In the event that this Agreement is terminated pursuant to Section
12.1(b)(i), (b)(iii) (by Vector), or (d), and Vector agrees to any proposal with
a third party regarding
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a merger, consolidation or other business combination, or the acquisition of all
or substantially all of the capital stock or all or substantially all of the
assets of Vector, within six (6) months of such termination of this Agreement,
Vector shall reimburse DSL for all actual expenses incurred in connection with
the negotiation of the Transactions and the preparation of this Agreement and
the other documents, agreements and instruments in connection therewith,
including but not limited to reasonable attorneys' fees, such reimbursement not
to exceed $125,000.
7.5 Access to Information. From the date of this Agreement until the
Effective Time, Vector shall, and shall cause each of Vector's officers,
employees and agents to, afford to DSL and to the officers, employees and agents
of DSL complete access at all reasonable times to such officers, employees,
agents, properties, books, records and contracts, and shall furnish DSL such
financial, operating and other data and information as DSL may reasonably
request.
7.6 Public Announcements. Any public announcement with respect to this
Agreement, the proposed Merger or the consummation of the Merger shall be made
only with the prior approval of DSL.
7.7 Employee Benefit Arrangements.
(a) DSL shall cause the Surviving Corporation to offer employment to
each of Vector's employees listed in the Disclosure Letter, with appropriate
titles and job descriptions, and at a salary equal to such employee's salary as
of April 15, 2000 as set forth in the Disclosure Letter. Each employee who
accepts employment with the Surviving Corporation shall be eligible to
participate in DSL's standard employee programs and plans, including but not
limited to any employee benefit and welfare plans, insurance and pension plans,
stock option plans and stock purchase plans currently maintained or provided by
DSL, to the extent permitted by such plans.
(b) DSL agrees to pay to all non-executive employees listed in the
Disclosure Letter who accept employment with the Surviving Corporation and
continue in the employ of the Surviving Corporation through the expiration of
the Transition Period, a retention bonus in the amount of twenty-five percent
(25%) of such employee's annual salary as of April 15, 2000 (the "Retention
Bonus"). Any such employee who is (A) terminated without "cause" or (B)
"constructively" terminated prior to the expiration of the Transition Period, in
each case as defined in the Retention Bonus Agreements described in Section
7.7(c) below, shall be entitled to payment of the Retention Bonus.
(c) Upon the Closing Date, DSL shall execute and deliver to each
non-executive employee listed in the Disclosure Letter who accepts employment
with the Surviving Corporation a written agreement, in substantially the form
attached hereto as Exhibit D, conveying to each such employee the rights set
forth above in this Section 7.7 (the "Retention Bonus Agreements").
7.8 Notification. Each of Vector and DSL shall, after obtaining
knowledge of the occurrence, non-occurrence or threatened occurrence or
non-occurrence of any fact or
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event that would cause or constitute a material breach or failure of any of the
representations and warranties, covenants or conditions set forth in this
Agreement, or in the case of Vector that would reasonably be expected to
constitute or result in a Material Adverse Effect to such party, notify the
other parties in writing of such fact or event with reasonable promptness.
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1 Conditions to the Obligations of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver, where permissible, at or prior to the Closing
Date, of each of the following conditions:
(a) Stockholder Approval. This Agreement and the Transactions,
including the Merger, shall have obtained the Vector Stockholder Approval.
(b) Regulatory Approvals. All necessary approvals, authorizations and
consents of any governmental or regulatory entity required to consummate the
Merger shall have been obtained and remain in full force and effect, and all
waiting periods relating to such approvals, authorizations and consents shall
have expired or been terminated.
(c) No Injunctions, Orders or Restraints; Illegality. No preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission (an "Injunction") nor any statute, rule, regulation or executive
order promulgated or enacted by any Governmental Authority shall be in effect
which would (i) make the consummation of the Merger illegal, or (ii) otherwise
restrict, prevent or prohibit the consummation of any of the Transactions,
including the Merger.
8.2 Conditions to Obligations of DSL and MergerCo. The obligations of
DSL and MergerCo to effect the Merger are further subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Vector and the Majority Stockholders set forth in this Agreement shall be
true and correct in all material respects (except to the extent such
representations and warranties expressly relate to a specific date) as of the
Closing Date as though made on and as of the Closing Date, and DSL shall have
received a certificate to such effect signed (i) on behalf of Vector by its
chief executive officer and (ii) by the Majority Stockholders.
(b) Performance and Obligations of Vector and the Majority
Stockholders. Vector and the Majority Stockholders shall have performed all
obligations required to be performed by them under this Agreement, including,
without limitation, the covenants contained in Articles 6 and 7 of this
Agreement and shall have paid the fees and expenses described in Section 7.3.
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(c) Consents, Etc. Any consent, authorization, order or approval of (or
filing or registration with) any governmental commission, board, other
regulatory body or other third party required to be made or obtained by Vector
or the Vector Stockholders or Affiliates in connection with the execution,
delivery and performance of the Agreement shall have been obtained or made,
except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration, would not reasonably be
expected to have a Material Adverse Effect on Vector or its business as
presently conducted.
(d) No Injunction. There shall not have been entered any order in any
action or proceeding by any state or Federal government or by any Governmental
Authority which prohibits or limits the ownership or operation by Vector of any
portion of Vector's business, properties or assets which is material to Vector,
or compels Vector to dispose of or hold separate any portion of Vector's
business, properties or assets which is material to Vector.
(e) Material Adverse Change. There shall not have occurred any Material
Adverse Change concerning Vector.
(f) Resignations. Each of the directors and officers of Vector shall
have delivered his or her resignation to DSL as of the Closing Date.
(g) Opinion of Counsel. Vector shall have delivered an opinion of its
counsel in form and substance reasonably satisfactory to DSL and its counsel.
8.3 Conditions to Obligations of Vector and the Majority Stockholders.
The obligation of Vector and the Majority Stockholders to effect the Merger is
further subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
of DSL and MergerCo set forth in this Agreement shall be true and correct in all
material respects (except to the extent such representations and warranties
expressly relate to a specific date) as of the Closing Date as though made on
and as of the Closing Date, and Vector shall have received a certificate to such
effect signed on behalf of DSL by its chief financial officer and on behalf of
MergerCo by its chief executive officer.
(b) Performance of Obligations of DSL and MergerCo. Each of DSL and
MergerCo shall have performed all obligations required to be performed by it
under this Agreement, including, without limitation, the covenants contained in
Article 7 of this Agreement.
(c) Consents, Etc. Any consent, authorization, order or approval of (or
filing or registration with) any governmental commission, board, other
regulatory body or other third party required to be made or obtained by DSL on
or before the Closing in connection with the execution, delivery and performance
of the Agreement shall have been obtained or made, except where the failure to
have obtained or made any such consent, authorization, order, approval, filing
or registration, would not reasonably be
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expected to have a Material Adverse Effect on DSL or its business as presently
conducted.
(d) No Injunction. There shall not have been entered any order in any
action or proceeding by any state or Federal government or by any Governmental
Authority which prohibits or limits the ownership or operation by DSL of any
portion of DSL's business, properties or assets which is material to DSL and its
subsidiaries as a whole, or compels DSL to dispose of or hold separate any
portion of DSL's business, properties or assets which is material to DSL and its
subsidiaries as a whole.
(e) Material Adverse Change. There shall not have occurred any Material
Adverse Change concerning DSL and its subsidiaries taken as a whole.
(f) Opinion of Counsel. DSL shall have delivered an opinion of its
counsel in form and substance reasonably satisfactory to Vector and its counsel.
ARTICLE IX
POST-CLOSING COVENANTS OF THE EXECUTIVE STOCKHOLDERS
9.1 Non-Competition; Non-Solicitation.
(a) For a period of twenty-four (24) months from the Closing Date, each
of the Executive Stockholders agrees that he will not:
(i) directly or indirectly, whether as an employee, consultant, owner,
partner, shareholder, agent, co-venturer or otherwise (other than as
the holder of not more than one percent of the combined voting power of
the outstanding stock of a publicly held company), engage, participate
or invest in any business activity anywhere in North America which
develops, manufactures or markets products or performs services which
relate to the providing of Internet access, web or application hosting
services, web site development services or line provisioning; or
(ii) entice, induce or encourage any of the present or former employees
of Vector or employees of DSL to engage in any activity which, were it
done by him or her, would violate any provision of this Section 9.1;
(iii) solicit the business of DSL's customers, attempt to influence
such customers to divert their business to any competitor of DSL, or
otherwise attempt to interfere with or disrupt DSL in the operation of
its business or any other activity; or
(iv) directly or indirectly recruit, solicit or hire any employee of
DSL, or induce or attempt to induce any employee of DSL to terminate
his/her employment with, or otherwise cease his/her relationship with
DSL.
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(b) Each of the Executive Stockholders acknowledges that a remedy at
law for any breach or threatened breach of the provisions of this Section 9.1
would be inadequate, and each therefore agrees that DSL shall be entitled to
injunctive relief in case of any such breach or threatened breach.
(c) Each of the Executive Stockholders agrees and acknowledges that the
restrictions contained in this Section 9.1 are reasonable in scope and duration
and are necessary to protect DSL after the closing. If any one or more of the
provisions contained in this Section 9.1 shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, the
parties expressly agree that a court may rewrite and modify such provisions so
as to be enforceable to the fullest extent compatible with the applicable law as
it shall then appear.
ARTICLE X
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT
10.1 Restrictions on Transferability. The DSL Common Stock shall not be
transferable except upon the conditions specified in this Article X, which
conditions are intended to ensure compliance with the provisions of the
Securities Act.
10.2 Restrictive Legend. Each certificate representing the DSL Common
Stock issued in connection with the Merger shall be stamped or otherwise
imprinted with a legend in the following form (in addition to any legend
required under applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED (EXCEPT IF IN COMPLIANCE WITH RULE 144 UNDER SAID
ACT) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
10.3 Notice of Proposed Transfers. The holder of each certificate
representing the DSL Common Stock by acceptance thereof agrees to comply in all
respects with the provisions of this Section 10.3. Prior to any proposed
transfer of any DSL Common Stock, the holder thereof shall give written notice
to DSL of such holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144) by either (i) a written opinion of legal counsel who
shall be reasonably satisfactory to DSL, addressed to DSL and reasonably
satisfactory in form and substance to DSL's counsel, to the effect that the
proposed transfer of the DSL Common Stock may be effected without registration
under the Securities Act, or (ii) a "no action" letter from the Securities and
Exchange Commission (the "Commission") to
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the effect that the distribution of such securities without registration will
not result in a recommendation by the staff of the Commission that action be
taken with respect thereto, whereupon the holder of such DSL Common Stock shall
be entitled to transfer such DSL Common Stock in accordance with the terms of
the notice delivered by the holder to DSL. Each certificate evidencing the DSL
Common Stock transferred as above provided shall bear the appropriate
restrictive legend set forth in Section 10.2 above, except that such certificate
shall not bear such restrictive legend if the opinion of counsel referred to
above is to the further effect that such legend is not required in order to
establish compliance with any provision of the Securities Act.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 Survival of Representations and Warranties. The representations
and warranties set forth in Sections 5.12 and 5.17 herein shall survive the
Merger until the expiration of the applicable statutes of limitation. All other
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger for a period of twelve
months following the Effective Time; provided, however, that the representations
and warranties set forth in Section 5.27 shall survive for a period of five
years following the Effective Time.
11.2 Indemnification.
(a) Agreement to Indemnify. By their approval of this Agreement, the
Vector Stockholders severally but not jointly (subject to the limitations set
forth below), hereby agree to indemnify and hold DSL and its Affiliates harmless
against all claims, losses, liabilities, damages, deficiencies, costs and
expenses, including reasonable attorneys' fees and expenses of investigation
(hereinafter individually a "Loss" and collectively "Losses"), incurred by DSL
or its Affiliates as a result of any inaccuracy or breach of a representation or
warranty contained in Article V herein, or any failure by Vector to perform or
comply with any covenant contained herein.
(b) Expiration of Indemnification. The indemnification obligations of
the Vector Stockholders under paragraph (a) above shall terminate twelve months
following the Effective Time, but shall not terminate as to any Loss (or a
potential claim by an appropriate party) (i) asserted in writing in good faith
prior to such date, (ii) as a result of any inaccuracy or breach of any of the
representations and warranties contained (A) in Sections 5.12 or 5.17 herein,
with respect to which such indemnification obligations shall terminate upon the
expiration of the applicable statute of limitations, or (B) Section 5.27 herein,
with respect to which such indemnification obligations shall survive for a
period of five years following the Effective Time.
(c) Hold Back. As security for the indemnity provided for in paragraph
(a) above, DSL shall transfer to and hold in a segregated trust account
$2,200,000 of the aggregate Cash Consideration (the "Hold Back") for a period of
twelve (12) months following the Effective Time (the "Hold Back Period"), plus
such additional period of
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time that any claim validly delivered to Agent prior to the end of the Hold Back
Period by DSL for indemnity pursuant to this Section 11.2 shall remain
unresolved. Upon compliance with the terms hereof, DSL shall be entitled to
obtain indemnity from the Hold Back for all Losses incurred by DSL or its
Affiliates as a result of any inaccuracy, breach or failure set forth in
paragraph (a) above. Earnings, if any, on the Hold Back shall accrue for the
benefit of the Vector Stockholders.
(d) Claims Upon Hold Back. In the event that DSL wishes to obtain
indemnity from the Hold Back, DSL shall deliver to the Agent designated pursuant
to Section 11.2(g) hereof, on or before the last day of the Hold Back Period, a
certificate signed by an officer of DSL (an "Officer's Certificate") specifying
in reasonable detail the individual items of Loss included in the request for
indemnity and the nature of the misrepresentation, breach of warranty or claim
to which such item is related.
(e) Resolution of Conflicts; Arbitration. At the time of delivery of
any Officer's Certificate to the Agent, and for a period of twenty (20) days
after such delivery, the Agent may object to the claim made in the Officer's
Certificate in a written statement delivered to DSL. If the Agent shall so
object to the claim, the Agent and DSL shall attempt in good faith to agree upon
the rights of the respective parties with respect to such claim. If no such
agreement can be reached after good faith negotiation, either DSL or the Agent
may demand arbitration of the matter, and in such event the matter shall be
settled by arbitration conducted by three arbitrators. DSL and the Agent shall
each select one arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The decision of a majority of the arbitrators so selected as
to the validity and amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement, and DSL shall be
required to act in accordance with such decision and make or withhold payments
out of the Hold Back in accordance therewith. Judgment upon any award rendered
by the arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in Boston, Massachusetts under the rules then in
effect of the American Arbitration Association. In any arbitration hereunder in
which any claims or the amount thereof stated in the Officer's Certificate is at
issue, DSL shall be deemed to be the non-prevailing party in the event that the
arbitrators award DSL one-half (1/2) or less of the disputed amount; otherwise,
the Vector Stockholders shall be deemed to be the non-prevailing party. The
non-prevailing party to an arbitration shall pay its own expenses, the fees of
each arbitrator, the administrative fee of the American Arbitration Association,
and the expenses, including without limitation, attorneys' fees and costs,
incurred by the other party to the arbitration.
(f) Distribution of Hold Back Upon Termination of Hold Back Period.
Promptly following termination of the Hold Back Period, DSL shall deliver to the
Agent the balance of the Hold Back, minus any amount subject to an unresolved
claim pursuant to Section 11.2(e) above, plus all amounts earned, if any, on the
Hold Back. The Agent shall deliver such amount to the Vector Stockholders in
proportion to the Cash Consideration received by each of the Vector
Stockholders.
(g) Agent of the Vector Stockholders; Power of Attorney. In the event
that the Merger receives the Vector Stockholder Approval, effective upon such
approval, and
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without further act of any Vector Stockholder, Xxxxx X. Xxxxx (the "Agent")
shall be constituted and appointed as agent and attorney-in-fact for each Vector
Stockholder, for and on behalf of such Vector Stockholder, to give and receive
notices and communications, to authorize any indemnity of DSL from the Hold Back
in satisfaction of claims by DSL, to object to such indemnity, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Agent for the accomplishment of the foregoing. Such agency may be changed by the
Vector Stockholders from time to time upon not less than ten (10) days prior
written notice to DSL; provided that the Agent may not be removed unless a
majority of the Vector Stockholders agree in writing to such removal and to the
identity of the substituted Agent. No bond shall be required of the Agent, and
the Agent shall receive no compensation for his or her services. Notices or
communications to or from the Agent shall constitute notice to or from each of
the Vector Stockholders.
(h) Indemnification of the Agent. The Agent shall not be liable for any
act done or omitted hereunder as Agent while acting in good faith and in the
exercise of reasonable judgment. The Vector Stockholders shall jointly and
severally indemnify the Agent and hold the Agent harmless against any loss,
liability or expense incurred without negligence or bad faith on the part of the
Agent and arising out of or in connection with the acceptance or administration
of the Agent's duties hereunder, including the reasonable fees and expenses of
any legal counsel retained by the Agent. A decision, act, consent or instruction
of the Agent shall constitute a decision of all the Vector Stockholders, and
shall be final, binding and conclusive upon each of the Vector Stockholders, and
DSL may rely upon any decision, act, consent or instruction of the Agent as
being the decision, act, consent or instruction of each and all of the Vector
Stockholders. DSL is hereby relieved from any liability to any person for any
acts done by it in accordance with such decision, act, consent or instruction of
the Agent.
(i) Third Party Claims. In the event DSL becomes aware of a third-party
claim which DSL believes may result in a demand against the Hold Back, DSL shall
notify the Agent of such claim, and the Agent and the Vector Stockholders shall
be entitled, at their expense, to participate in any defense of such claim. DSL
shall have the right in its sole discretion to settle any such claim; provided,
however, that except with the consent of the Agent, which consent shall not be
unreasonably withheld, no settlement of any such claim with third-party
claimants shall alone be determinative of the amount of liability of the Vector
Stockholders. In the event that the Agent has consented to any such settlement
and the amount of such settlement and acknowledged that the claim is a valid
claim against the Hold Back, the Agent shall have no power or authority to
object to any claim by DSL against the Hold Back for indemnity with respect to
such settlement amount.
(j) Threshold Amount; Apportionment of Liability; Maximum Liability.
DSL shall be entitled to indemnification hereunder only when the aggregate of
all Losses suffered by DSL with respect to which DSL would otherwise be entitled
to indemnification hereunder exceeds $30,000 (the "Threshold Amount"); provided,
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however, that (i) if such Losses exceed the Threshold Amount, DSL shall be
entitled to indemnification hereunder for all such Losses, including the
Threshold Amount, and (ii) the Threshold Amount limitation will not apply to any
Losses resulting from any knowing and intentional breaches by Vector or the
Majority Stockholders of any of the representations and warranties of Vector or
the Majority Stockholders contained herein. The liability of the Vector
Stockholders for any indemnification to which DSL may be entitled shall be
apportioned among the Vector Stockholders in proportion to the amount of Merger
Consideration paid to each of them at the Closing. The total liability of the
Vector Stockholders for Losses shall not exceed the aggregate amount of the Hold
Back; provided, however, that if any Losses shall be the result of any failure
by Vector or the Majority Stockholders to disclose any matter of which Vector or
the Majority Stockholders had Knowledge as of the Effective Time and such
failure to disclose constitutes a breach of a representation or warranty
contained in Article V, then the total liability of the Vector Stockholders for
such Losses shall not exceed the aggregate amount of the Merger Consideration.
ARTICLE XII
TERMINATION, AMENDMENT AND WAIVER
12.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after stockholder approval of this
Agreement:
(a) by the mutual written consent of DSL, MergerCo and Vector;
(b) by either of Vector or DSL and MergerCo:
(i) if the stockholders of Vector shall have failed to give any
required approval by the Closing Date; or
(ii) if any Governmental Authority shall have issued an Injunction or
taken any other action (which Injunction or other action the parties to
this Agreement shall use their best efforts to lift), which permanently
restraints, enjoins or otherwise prohibits the Merger, and such
Injunction or other action shall have become final and non-appealable;
or
(iii) if, without any material breach by the terminating party of its
obligations under this Agreement, the Merger shall not have occurred on
or before June 15, 2000; provided, however, that no party shall
terminate this Agreement prior to June 30, 2000 if the Merger has not
occurred by reason of the pendency of a non-final Injunction, and DSL,
MergerCo, Vector and the Majority Stockholders shall use their best
efforts to have any such Injunction stayed or reversed;
(c) by Vector if DSL or MergerCo shall have breached in any material
respect any of their respective representations, warranties, covenants or other
agreements contained in this Agreement, which breach cannot be or has not been
cured within fifteen (15) calendar days after the giving of written notice to
DSL and MergerCo except, in any
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case, for such breaches which would not adversely affect the rights of Vector or
its stockholders (or any of them) hereunder and are not reasonably likely to
affect adversely DSL's or MergerCo's ability to consummate the Merger.
(d) by DSL and MergerCo if Vector or any Majority Stockholder shall
have breached in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach cannot
be or has not been cured within fifteen (15) calendar days after the giving of
written notice to Vector and the Agent.
12.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 12.1, this Agreement shall forthwith become null
and void, and have no effect, without any liability on the part of any party to
this Agreement or such party's Affiliates, trustees, directors, officers or
stockholders, and all rights and obligations of any party to this Agreement
shall cease except for the agreements contained in Section 7.3 and Articles 12
and 13; provided, however, that nothing contained in this Section 12.2 shall
relieve any party from liability for any fraud or willful breach of this
Agreement.
12.3 Amendment. This Agreement may be amended by DSL, MergerCo, Vector
and the Agent by an instrument in writing signed by DSL, MergerCo and the Agent,
on behalf of each of the Vector Stockholders at any time before or after any
approval of this Agreement by the stockholders of Vector and MergerCo, but in
any event following authorization by MergerCo's Board of Directors and Vector's
Board of Directors; provided, however, that after any such stockholder approval,
no amendment shall be made which by law requires further approval by
stockholders without obtaining such approval.
12.4 Extension; Waiver. At any time prior to the Closing, the parties
to this Agreement may, to the extent legally allowed, (a) mutually agree to
extend the time for the performance of any of the obligations or other acts of
the other parties to this Agreement, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any documents
delivered pursuant to this Agreement and (c) waive compliance with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to this Agreement to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such party.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been received upon the
earlier of actual receipt thereof or, with respect to delivery by facsimile, the
date sent by confirmed facsimile, with respect to delivery by overnight courier
or Express mail, the day following delivery to such overnight courier or the
U.S. Postal Service and, with respect to delivery by registered or certified
mail, the third day following such delivery to the U.S. Postal Service, postage
prepaid, and addressed as follows:
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(a) If to Vector:
------------
Vector Internet Services, Inc.
00 Xxxxx 0xx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
President
With a copy to:
--------------
Xxxxx X. Xxxxxxxx, Esq.
Xxxxxxx, Street and Deinard
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000
(b) If to DSL, MergerCo or the Surviving Corporation:
------------------------------------------------
XXX.xxx, Inc.
000 Xxxx Xxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxx
Manager, Strategic Planning
and
Xxxxxxx Xxxxxxxx, Esq.
Vice President and General Counsel
With a copy to:
--------------
Day, Xxxxx & Xxxxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
(c) If to the Agent or any Majority Stockholder:
-------------------------------------------
Xxxxx X. Xxxxx
00000 Xxxxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
13.2 Entire Agreement; No Third-Party Beneficiaries; Section Headings.
This Agreement and the other agreements, documents and instruments executed and
delivered pursuant hereto constitute the entire agreement between the parties,
and except for that certain non-disclosure agreement between DSL and Vector
dated November 11, 1999 which remains in full force and effect, there are no
agreements or commitments with respect to the transactions contemplated herein
except as set forth in this Agreement; this Agreement supersedes any prior
offer, agreement or understanding between the parties
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with respect to the Transactions contemplated herein. Nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person, firm or corporation other than the parties hereto any rights or
remedies under or by reason of this Agreement. The captions in this Agreement
are for convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.
13.3 Confidentiality. Except as may be required by law, Vector shall
not, and shall not permit its officers, directors, stockholders and agents to,
directly or indirectly, disclose, discuss, announce or otherwise divulge to any
third party, except on a need to know basis and subject to appropriate
nondisclosure obligations, the existence or terms of the negotiations between
the parties, this Agreement or the transactions contemplated herein, without, in
each case, the prior written consent of DSL.
13.4 Assignment. This Agreement shall inure to the benefit of, and be
binding upon, the heirs, successors and permitted assigns of the parties hereto.
This Agreement may not be assigned by any party without the other parties' prior
written consent.
13.5 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware (excluding application of
any choice of law doctrines that would make applicable the law of any other
state) and, where appropriate, applicable federal law.
13.6 Release of Guarantees. Promptly following the Closing, DSL shall
pay all amounts outstanding under Vector's loan with Riverside Bank (the "Bank")
or otherwise take all steps necessary to secure the release by the Bank of the
personal guarantees delivered by the Majority Stockholders to the Bank in
connection with such loan.
13.7 Definitions. In addition to those terms defined elsewhere in this
Agreement, as used in this Agreement, and unless the context requires a
different meaning, the following terms have the meaning indicated below:
"Affiliate" - as to any party, any Person (i) directly or indirectly
controlling, controlled by, or under common control with, such party, (ii)
directly or indirectly owning or holding five percent (5%) or more of any equity
interest in such party or (iii) five percent (5%) or more of whose voting stock
or other equity interest is directly or indirectly owned or held by such party.
For purposes of this definition, "control" (including with correlative meanings,
the terms "controlling," "controlled by," and under "common control with") means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"DSL Common Stock" - the common stock, par value $.0005 per share, of
DSL.
"DSL Stock Price" - the average price of the DSL Common Stock (rounded
to the nearest xxxxx) for the fifteen consecutive trading days ending on and
including the third trading day preceding the Effective Date, calculated on the
basis of the last reported
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sales prices of the DSL Common Stock on the Nasdaq Stock Market on such trading
days.
"ERISA" - the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Ratio" - as defined in Section 2.1(c).
"GAAP" - generally accepted accounting principles in effect from time
to time within the United States.
"Governmental Authority" - the government of any nation, state, city,
locality or other political subdivision of any of the foregoing, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual would be expected to discover or otherwise
become aware of such fact or other matter in the course of diligently performing
his or her duties as an employee of the corporation.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who currently is serving
as a director, officer or other member of management, partner, executor, or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.
"Lien" - any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever including, without limitation, those created by, arising under
or evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, or any financing lease having
substantially the same economic effect as any of the foregoing.
"Material Adverse Effect" - any change or changes, or effect or
effects, that individually or in the aggregate is or is likely to have a
material adverse effect upon the business, operations, properties, assets or
condition (financial or otherwise) of Vector or DSL, as the case may be, or any
of their respective subsidiaries on an individual basis or taken as a whole.
"Net Option Exercise Adjustment" - the quotient obtained by dividing
(a) the Option Exercise Consideration divided by the DSL Stock Price, by (b) the
Exchange Ratio.
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"Net Tangible Assets" - the total assets minus the goodwill and the
total liabilities of Vector as of the Closing Date as determined in accordance
with GAAP, applied on a basis consistent with the most recent regularly prepared
financial statements of Vector (except that the footnotes required by GAAP need
not be provided).
"Net Vector Common Stock Equivalents" - the total number of shares of
Vector Common Stock issued and outstanding immediately prior to the Effective
Time plus the Net Vector Options.
"Net Vector Options" - the total number of shares of Vector Common
Stock issuable upon exercise of the Outstanding Vector Options minus the Net
Option Exercise Adjustment.
"Option Exercise Consideration" - the aggregate consideration payable
upon exercise of all Outstanding Vector Options.
"Outstanding Vector Options" - as defined in Section 2.2
"Per Share Merger Consideration" - as defined in Section 3.2.
"Person" - any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"Transition Period" - the period of time between the Closing Date and
the six (6) month anniversary of the Closing Date.
"Vector Common Stock" - as defined in Section 2.1.
[Signature Page Follows]
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IN WITNESS WHEREOF, each party has caused this Agreement to be
executed by its duly authorized representative as of the date and year first
written above.
VECTOR INTERNET SERVICES, INC.
By: /s/ Xxxxxx Xxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxx
Title: CEO
MAJORITY STOCKHOLDERS:
/s/ Xxxxx X. Xxxxx
----------------------------------
Xxxxx X. Xxxxx
/s/ Xxxxxx Xxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxx
XXX.XXX, INC.
By: /s/ Xxxxxx Xxxxxx
------------------------------
Name: Xxxxxx Xxxxxx
Title: CFO & VP Strategic
GREENS FARM CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Vice President
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Solely as a party to Article IX:
/s/ Bil MacLeslie
------------------------------------------------------
Bil MacLeslie
/s/ Xxxxxxx Xxxxxxx
------------------------------------------------------
Xxxxxxx Xxxxxxx
Solely as a party to Section 11.2:
/s/ Xxxxx X. Xxxxx
------------------------------------------------------
Xxxxx X. Xxxxx, as Agent
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Schedules and Exhibits Omitted In Accordance
With item 601(b)(2) of Regulation S-K
-------------------------------------
XXX.xxx, Inc. will furnish supplementally a copy of any omitted exhibit
or schedule to the Securities and Exchange Commission upon request; provided,
however, that XXX.xxx, Inc. may request confidential treatment pursuant to Rule
24b-2 of the Exchange Act for any schedule or exhibit so furnished.
Exhibit A - Majority Stockholders and Executive Stockholders
Exhibit B - Calculation of Per Share Merger Consideration
Exhibit C - Estimated Net Tangible Assets
Exhibit D - Form of Retention Bonus Agreement