AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT, dated as of February 10, 2000, is made by and
among (i) Xxxx X. Xxxx, Xxx X. Xxxxxxx III, Xxxxxxx X. Xxxxx, Xxx X. Xxxxxx and
Xxxxxx X. Xxxxxxxx (each a "Shareholder," and collectively the "Shareholders"),
and digital fusion, inc., a Florida corporation, located at 000 Xxxxx Xxxxxx,
Xxxxx 0000, Xxxxx, XX 00000 (the "Company"), and (ii) IBS Interactive, Inc., a
Delaware corporation, located at 0 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxxxx, XX
00000 (the "Buyer"), and Digital Fusion Acquisition Corp., a Delaware
corporation (the "Merger Subsidiary") and a wholly owned subsidiary of the
Buyer. The Company is sometimes referred to herein as the "Surviving
Corporation."
WHEREAS, the Company was organized under the laws of the State of
Florida pursuant to articles of incorporation filed on May 5, 1997; and
WHEREAS, the Shareholders are the owners of all of the issued
and outstanding shares (the "Shares") of the capital stock of the Company; and
WHEREAS, the Shareholders and the Buyer desire that the Merger
Subsidiary merge (the "Merger") with and into the Company with the result that
the separate existence of the Merger Subsidiary will cease and the Company will
continue as the Surviving Corporation and a wholly owned subsidiary of the
Buyer; and
WHEREAS, the directors and Shareholders of the Company have
determined that the Merger is in the best interests of the Company and
Shareholders and have duly adopted resolutions declaring the Merger to be
advisable and approving this Agreement and the transactions contemplated hereby;
and
WHEREAS, the directors of the Buyer have determined that the
Merger is in the best interests of the Buyer and have duly adopted resolutions
declaring the Merger to be advisable and approving this Agreement and the
transactions contemplated hereby; and
WHEREAS, the sole director and stockholder of the Merger
Subsidiary have determined that the Merger is in the best interests of the
Merger Subsidiary and its stockholder and have duly adopted resolutions
declaring the Merger to be advisable and approving this Agreement and the
transactions contemplated thereby.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby and in consideration of the mutual covenants contained herein,
agree as follows:
1 THE MERGER.
1.1 THE MERGER. Upon the terms and conditions hereinafter set forth and in
accordance with the Florida Business Corporation Act (the "FBCA") and
the Delaware General Corporation Law (the "DGCL"), at the Effective
Time (as hereinafter defined), the Merger Subsidiary shall be merged
with and into the Company and thereupon, pursuant to the DGCL, the
separate existence of Merger Subsidiary shall cease and the Company
shall continue to exist as the Surviving Corporation under and be
governed by the FBCA.
1.2 EFFECT OF THE MERGER. After the Effective Time, pursuant to the FBCA
and the DGCL, the separate existence of the Merger Subsidiary shall
cease and the Surviving Corporation shall succeed, without other
transfer, to all the rights and property of the Merger Subsidiary and
shall be subject to all the debts and liabilities of the Merger
Subsidiary in the same manner as if the Surviving Corporation had
itself incurred them.
1.3 ADOPTION BY SHAREHOLDERS OF THE COMPANY. Prior to the execution of this
Agreement, the Shareholders of the Company have adopted this Agreement
and approved the transactions contemplated herein as permitted by the
FBCA and the Company's articles of incorporation and bylaws.
1.4 ADOPTION BY THE SOLE STOCKHOLDER OF MERGER SUBSIDIARY. Prior to the
execution of this Agreement, the Buyer, as the sole stockholder of the
Merger Subsidiary, has adopted this Agreement and approved the
transactions contemplated herein and the Certificate of Merger by
written consent action as permitted by the DGCL and the Merger
Subsidiary's Certificate of Incorporation and Bylaws.
1.5 CONSUMMATION OF THE MERGER. The Merger shall become effective upon the
filing with the Secretary of State of the state of Delaware of a duly
executed Certificate of Merger in the form of Exhibit A (the "Delaware
Certificate of Merger") and with the Secretary of State of the state of
Florida of a duly executed Certificate of Merger in the form of Exhibit
B (the "Florida Certificate of Merger"). The Merger shall be effective
when both Certificates of Merger have been filed. The date and time
when the Merger is effective is referred to as the "Effective Time."
1.6 CHARTER; BYLAWS; DIRECTORS AND OFFICERS. The articles of incorporation
of the Company from and after the Effective Time shall be the articles
of incorporation of the Surviving Corporation as provided by the FBCA.
The Bylaws of the Company from and after the Effective Time shall be
the Bylaws of the Surviving Corporation. The initial directors and
officers of the Surviving Corporation on and after the Effective Time
shall be the directors and officers, respectively, of the Merger
Subsidiary immediately prior to the Effective Time, in each case until
their respective successors are duly elected and qualified.
2 CONVERSION OF SHARES.
2.1 CONVERSION OF SHARES. By virtue of the Merger and without any action on the
part of the holders of capital stock of the Company, at the Effective Time all
outstanding shares of capital stock of the Company shall be converted into (i)
975,000 shares of the Buyer's Common Stock, par value $.01 per share (the "IBS
Stock"), subject to adjustment as set forth in Section 2.4 with respect only to
the Reserved Shares referred to in that Section (collectively, the "Stock
Consideration Shares") and (ii) $500, 000 in aggregate principal amount of
unsecured, subordinated promissory notes of Buyer (the "Notes"). The form of
Note is attached as Exhibit C hereto.
2.2 The Stock Consideration Shares and Notes shall be paid by the Buyer to
the Shareholders in the following manner:
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(A) At the Closing, the Buyer shall deliver to the
Shareholders, pro rata as set forth in the Disclosure Letter (a
copy of which is attached hereto as Exhibit E), all of the Notes
and 925,000 of the Stock Consideration Shares (the "Closing
Shares"). The Buyer shall cause the Closing Shares to be
newly-issued shares of IBS Stock free and clear of any and all
Encumbrances (as defined in Section 4.2), including but not
limited to any Encumbrance that may result in any adjustment such
as that provided in Section 2.4 below with respect to the
Reserved Shares.
(B) Within five business days after the date on which the
amount of the Liabilities (as defined in Section 2.4) becomes
final and binding upon the parties (the "Adjustment Date"), the
Buyer shall deliver to the Shareholders, pro rata as set forth in
the Disclosure Letter, 50,000, of the Stock Consideration Shares,
or such fewer number of Stock Consideration Shares as may have
been determined pursuant to the adjustment provisions of Section
2.8(b) (such adjusted number of Stock Consideration Shares, the
"Reserved Shares"). The Buyer shall cause the shares of IBS Stock
to be delivered pursuant to this provision to be newly-issued
shares of IBS Stock, free and clear of any and all Encumbrances,
including but not limited to any Encumbrance that may result in
any further adjustment such as that provided in Section 2.8(b)
below. At or before the Closing, the Buyer shall give written
instructions to its transfer agent, Continental Stock Transfer &
Trust Company (the "Reserve Agent"), to hold in reserve for
issuance pursuant to this provision an aggregate of 50,000 shares
of IBS Stock.
2.3 [INTENTIONALLY LEFT BLANK].
2.4 Except as provided in section 2.4(b) below, within five calendar days
after the date which is 18 months from the date of the Closing Date
(the "Reconciliation Date"), the Buyer and the Shareholders' Agent (as
defined in Section 14.16 below) shall determine the dollar value of
"Liabilities." "Liabilities" shall mean any and all claims, losses,
damages, expenses, impairment of assets requiring a write-down to net
realizable value, or liabilities, including, without limitation,
reasonable attorneys', accountants' and other professional fees
(collectively, the "Liabilities"), which have been asserted against,
sustained, suffered or incurred by the Buyer or the Surviving
Corporation, or their respective officers, directors, and/or legal
representatives, arising from or by reason of or in connection with:
(i) any breach of the respective representations, warranties and
covenants made by Shareholders and/or the Company herein, (ii) the
operation of the Company before the Closing Date, (iii) adjustments
affecting the Company's unaudited 1999 financial statements arising
from an independent audit; (iv) any taxes owed or payable by the
Company with respect to any taxable year or portion thereof ending on
or before the Closing Date to the extent such taxes are not reflected
in the reserve for taxes (if any) shown on the Balance Sheet (as
defined in Section 4.8(ii)), and (v) any other Liabilities asserted
against, sustained by or incurred by the Buyer or the Company related
to, associated with, or arising from any and all liabilities and
obligations of the Company, but in all cases Liabilities shall not
include: (a) obligations and liabilities to the extent reserved against
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on the Balance Sheet, (b) obligations and liabilities incurred in the
ordinary course of business since the date of the Balance Sheet and
consistent with past practice, (c) obligations and liabilities of the
Company for future performance under any contracts, agreements and
instruments to which the Company is a party, which contracts,
agreements and instruments are listed in the Disclosure Letter, (d)
obligations or liabilities of the Buyer, (e) obligations or liabilities
incurred in connection with the operation of the business of the
Company after the Closing Date, (f) obligations and liabilities to the
extent of any recognized tax benefit or collection from insurance
policies prior to the Reconciliation Date, and (g) any single Liability
(which shall include all claims, losses, damages, expenses or
liabilities for, including, without limitation, reasonable attorneys',
accountants' and other professional fees related to such Liability)
which amounts to less than $15,000. Any adjustments made to the number
of Reserved Shares under Section 2.8 shall exclude timing differences
based on period-to-period comparisons. Any adjustments to revenue under
this Section 2.4 shall be multiplied by a factor of 1.5.
Notwithstanding the foregoing (i) no adjustment pursuant to Section 2.8
shall be made until the Liabilities equal at least $100,000 in the
aggregate and (ii) in any event, the Liabilities shall not exceed
$3,500,000. The shareholders may, at their discretion, reduce the value
of any adjustments to be made to the number of Reserved Shares pursuant
to Section 2.8(b) by paying to Buyer any such amounts in cash.
2.5 If the Shareholders' Agent and the Buyer are unable to agree on the
amount of the Liabilities within seven days after the Reconciliation
Date, then upon the request of the Shareholders' Agent or the Buyer,
the parties shall engage in mediation for a period of 15 days to
attempt to resolve the dispute with a mediator mutually acceptable to
the parties.
2.6 If the Shareholders' Agent and the Buyer are unable to agree on a
mediator or are unable to resolve the issue within 30 days, then upon
the request of either the Shareholders' Agent or the Buyer, the amount
of the Liabilities shall be determined by a firm of certified public
accountants who shall be independent of both the Buyer and the
Shareholders (the "Arbiter") and who shall be acceptable to both
parties. If the Buyer and the Shareholders' Agent are unable to agree
upon an Arbiter, then at the request of either Party, an Arbiter shall
be selected by the American Arbitration Association. The Arbiter shall
be instructed to make a determination as promptly as possible and the
determination of the Arbiter shall be final and binding upon the
parties.
2.7 MERGER SUBSIDIARY'S SHARES. Each of the shares of common stock, par
value $.01, of the Merger Subsidiary (the "Merger Subsidiary Common
Stock"), issued and outstanding immediately prior to the Effective Time
shall, upon surrender of the certificate formerly representing the
Merger Subsidiary's Common Stock, be converted into and become one
validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
2.8 ADJUSTMENTS FOR LIABILITIES. (A) On the Adjustment Date, without
further act by any of the parties, the then aggregate principal amount
of the Notes shall be reduced to an amount (no less than 0) equal to
the product of (x) the aggregate principal amount of the Notes
immediately prior to making the reduction and (y) a fraction, the
numerator of which is $500,000 MINUS the amount of Liabilities and the
denominator of which is $500,000 (the "Adjustment Fraction"). On the
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Adjustment Date, the aggregate amount of accrued and unpaid interest on
the Notes shall be reduced to an amount (no less than 0) equal to the
product of (xx) the aggregate amount of accrued and unpaid interest on
the Notes immediately prior to making the adjustment and (yy) the
Adjustment Fraction. The foregoing adjustments shall be made ratably to
each Note based on the outstanding principal amount thereof relative to
the aggregate outstanding principal amount of all of the Notes.
(b) If the Liabilities exceed $500,000 (the amount of such excess is
referred to as the "Excess"), the number of Reserved Shares, if any, to
be delivered by the Reserve Agent to the Shareholders shall be
determined by dividing (i) the amount, if any (but not less than 0)
determined by subtracting the Excess from the amount of the Stock Price
multiplied by the number of Reserved Shares by (ii) the "Stock Price".
Stock Price means the average of the opening and closing prices of IBS
stock for ten (10) consecutive trading days ending three (3) trading
days prior to the Closing Date.
2.9 CLOSING OF STOCK TRANSFER BOOKS. On and after the date of this
Agreement there shall be no transfers on the stock transfer books of
the Company of shares of capital stock of the Company that were issued
and outstanding immediately prior to the date hereof.
2.10 TRANSFER RESTRICTION AGREEMENT. Xxxx X. Xxxx and Xxx X. Xxxxxxx III
shall and the Buyer shall cause Xxxxxxxx X. Xxxxxxxx, Xx., Xxxxx X.
Xxxxxxxxx and Xxxxx Xxxxxxx to enter into, a stock transfer restriction
agreement substantially in the form attached as Exhibit D hereto, to be
effective upon Closing.
3 CLOSING. The closing of the purchase and sale of the Shares and the other
matters contemplated by this Agreement (the "Closing") shall take place at 10
a.m. on March __, 2000, at the offices of the Buyer at its address contained in
the first paragraph of this Agreement or at such other time and place as
mutually agreed upon by the parties, time being of the essence (the "Closing
Date"). The parties shall use good faith efforts to satisfy their respective
conditions to Closing. If for any reason the Closing does not occur on or prior
to April 15, 2000, this Agreement shall terminate with no liability to any party
hereto.
4 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND COMPANY. Except as set
forth below, each of the Shareholders severally and the Company, jointly with
the Shareholders, hereby represents and warrants to Buyer as follows, and
acknowledges that the Buyer is relying upon such representations and warranties,
respectively, in connection with the merger contemplated herein:
4.1 LEGAL CAPACITY; NO RESTRICTIONS. Each Shareholder individually
represents and warrants as to himself that such Shareholder (i) has
full legal capacity, power and authority to execute and deliver this
Agreement and to perform his obligations hereunder; (ii) all acts
required to be taken by such Shareholder to enter into this Agreement
and to carry out the transactions contemplated hereby has been properly
taken; and (iii) this Agreement has been duly and validly executed by
such Shareholder and constitutes a legal, valid and binding obligation
of such Shareholder, enforceable in accordance with its terms. Each
Shareholder individually represents as to himself that the execution,
delivery and performance of this Agreement by such Shareholder in
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accordance with its terms will not, with or without the giving of
notice or the passage of time, or both, conflict with, result in a
default, right to accelerate or loss of rights under, or result in the
creation of any Encumbrance pursuant to, or require the consent of any
third party or governmental authority pursuant to (a) any provision of
the articles of incorporation, as now in effect, or by-laws, as now in
effect, of the Company, or (b) any material franchise, mortgage,
indenture or deed of trust or any material lease, license or other
agreement or any law, regulation, order, judgment or decree to which
such Shareholder or the Company is a party or by which either of them
(or any of their assets, properties, operations or businesses) may be
bound, subject to or affected.
4.2 OWNERSHIP. Each Shareholder individually represents and warrants as to
himself that such Shareholder owns the number of Shares of issued and
outstanding capital stock of the Company as set forth in the Disclosure
Letter. Each Shareholder individually represents and warrants as to
himself that such Shareholder is the registered holder and beneficial
owner of his portion of the Shares, free and clear of any and all
Encumbrances (the term "Encumbrances" as used herein shall mean a
mortgage, lien, encumbrance, security interest, restriction, pledge,
options, calls, assessments, adverse claims or rights with respect to
the property involved). Each Shareholder individually represents and
warrants that (a) such Shareholder has all legal right, title and
authority to transfer the Shares to the Buyer as contemplated hereby
and (b) the assignment, transfer and sale of the Shares to the Buyer in
accordance with Section 1 hereof will vest in Buyer full right, title
and interest in and to all of the Capital Stock (as defined below) of
the Company, free and clear of any and all Encumbrances.
4.3 SHAREHOLDERS INTEREST IN SIMILAR BUSINESSES. Except as set forth in the
Disclosure Letter to this Agreement, each Shareholder individually
represents and warrants that such Shareholder has no financial interest
in any person, firm or entity (other than the Company) which is, or
since May 5, 1997 was, directly or indirectly, engaged in any business
engaged in by the Company, or which is a party to any material
agreement to which the Company is also a party. Notwithstanding the
foregoing, the Shareholders shall not be in violation of this Section
4.3 solely by owning or investing in less than 1% of the securities of
any publicly traded company or less than 5% of the securities of any
publicly traded company as set forth in the Disclosure Letter.
4.4 OWNERSHIP INTERESTS. The authorized capital stock of the Company
consists of 3,500,000 shares of common stock, par value $0.01 per share
(the "Capital Stock"). The issued and outstanding Capital Stock of the
Company and the respective holders thereof are as set forth in the
Disclosure Letter. All issued Capital Stock of the Company is duly
authorized, validly issued and fully paid and non-assessable. Except as
set forth in the Disclosure Letter: (i) no options, warrants or other
rights for the purchase of any of the Capital Stock of the Company or
any security convertible into such Capital Stock are authorized and
outstanding; (ii) there are no voting trusts or other contractual
commitments or understandings with respect to the ownership, transfer
and/or voting of the Capital Stock; and (iii) there are no contracts,
commitments or understandings (oral or written) to issue any additional
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Capital Stock or options, warrants or other rights to acquire Capital
Stock of the Company, and there are no securities or rights of any kind
outstanding that are convertible into or exchangeable for any Capital
Stock or other interests in the Company. The execution and delivery by
the Shareholders of this Agreement and the performance by the
Shareholders of the transactions contemplated hereby to be performed by
it have been duly authorized by all necessary corporate and stockholder
actions on the part of the Shareholders and the Company.
4.5 SUBSIDIARY; INVESTMENTS IN OTHERS. The Company has no subsidiaries and
does not: (i) own, directly or indirectly, any capital stock or other
securities of, or any other interest in, another corporation; or (ii)
have any interest, directly or indirectly, in any unincorporated
association, partnership, joint venture or other entity, nor has the
Company made any commitment to purchase any capital stock of, or
otherwise made any investment in, any other corporation, unincorporated
association, partnership, joint venture or other entity.
4.6 COMPANY EXISTENCE AND POWER. The Company is a corporation duly
organized and validly existing and in good standing under the laws of
the State of Florida. The Company transacts business only in the state
of Florida and the other states listed in the Disclosure Letter. The
Company is duly qualified to transact business in every state in which
it transacts business, except where failure to be so qualified would
not have a material adverse effect on the Company. The Company has the
power to own, lease or operate its properties and to carry on its
business as now being conducted. The Company has furnished to the Buyer
true and complete copies as the same are currently in effect of (i) the
articles of incorporation of the Company and all amendments thereto,
certified by the Secretary of State of Florida and certified as true
and correct by the Shareholders, and (ii) the by-laws, as currently
amended and in effect, of the Company, certified as true and correct by
the secretary of the Company. The Company has the requisite corporate
power to execute and deliver this Agreement and perform the
transactions contemplated hereby to be performed by it. The execution
and delivery by Company of this Agreement and the performance by
Company of the transactions contemplated hereby to be performed by it
have been duly authorized by all necessary corporate and stockholder
actions on the part of Company. This Agreement has been duly executed
and delivered by a duly authorized officer of Company and, assuming the
due execution and delivery of this Agreement by the Buyer, constitutes
a valid and binding obligation of Company enforceable against the
Company in accordance with its terms.
4.7 NO CONFLICTS. The execution and delivery of this Agreement by the
Company does not, and the performance by the Company of the
transactions contemplated hereby to performed by it will not (i)
conflict with the articles of incorporation or by laws of the Company,
(ii) conflict with, or result in any violation of, or constitute a
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a benefit under, any contract, permit,
order, judgment or decree to which Company is a party or to which it is
bound, (iii) constitute a violation of any law or regulation applicable
to Company, or (iv) result in the creation of any Encumbrance upon any
of the assets of the Company.
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4.8 FINANCIAL STATEMENTS.
(A) The Shareholders have delivered to the Buyer the following
financial statements (collectively, the "Financial Statements"),
all of which have been prepared from the books and records of the
Company in accordance with generally accepted accounting
principles consistently applied and maintained throughout the
periods indicated (except, as to the Interim Financial
Statements, subject to normal recurring year end adjustments),
and fairly present, in all material respects, the financial
condition of the Company as of their respective dates and the
results of the operations, and, as to the Audited Financial
Statements, changes in stockholders' equity and cash flows of the
Company for the periods covered thereby:
(I) the audited balance sheets of the Company as of December 31,
1997 and 1998, and the related audited statements of income,
changes in stockholder's equity and cash flows (the "Audited
Financial Statements"), together with audit reports with respect
thereto by Ernst & Young, certified public accountants, as well
as tax returns, for the years then ended;
(II) the unaudited balance sheet of the Company (the "Balance
Sheet") as of December 31, 1999 (the "Balance Sheet Date"), and
the related unaudited income statement for the twelve months then
ended (a copy of which is attached to the Disclosure Letter; the
"Interim Financial Statements"), and audited statements for the
year ended December 31, 1999 by April 15, 2000;
(B) The Interim Financial Statements reflect all loan agreements,
indentures, mortgages, salaries and expenses, pledges,
conditional sale or title retention agreements, security
agreements, equipment obligations, guaranties and lease purchase
agreements to which the Company is a party or by which any of its
properties is bound.
(C) Without limiting the generality of the foregoing provisions of
this Section 4.8, except as set forth in the Disclosure Letter,
the Financial Statements have been prepared on the following
bases:
(I) all fixed assets and equipment have been valued at actual cost
less accumulated depreciation, and no asset has, directly or
indirectly, been written up;
(II) the statements of income do not contain any items of special
or nonrecurring income or any other income not earned in the
ordinary course of business, except as expressly specified
therein;
(III) pension, benefit and welfare plan payments and severance pay
have been accrued for each affected employee of the Company as of
the Balance Sheet Date, on the basis of benefits customarily
granted. The Company's aggregate liability for vacation and sick
pay does not exceed $75,000. The terms and amounts of bonuses
related to the year ended December 31, 1999 are to be consistent
with bonuses paid and earned in previous periods. All future
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bonuses are discretionary and no employee of the Company has any
contractual rights to a bonus for any period during the fiscal
year ending December 31, 2000;
(IV) transactions between the Company's stockholders or related
parties and any affiliate, or transactions the ascribed value of
which was de minimus, thereof are fully disclosed;
(V) Except as set forth in the Disclosure Letter, the accounts
receivable of the Company included in the Balance Sheet are
collectible in full, net of the applicable reserve for doubtful
accounts, over the period of usual trade terms (by use of the
Company's normal collection methods), and there do not exist any
defenses, counterclaims and set-offs which would materially
adversely affect such net receivables, and all such net
receivables are actual and bona fide receivables representing the
total net dollar amount thereof shown on the books of the
Company; and
(VI) the Company has no liabilities, whether absolute, accrued,
contingent or otherwise, except (A) as and to the extent
reflected or reserved against on the Balance Sheet, (B) those
incurred in the ordinary course of business and consistent with
prior practices, not in the aggregate materially adverse, since
the Balance Sheet Date or otherwise disclosed in the Disclosure
Letter, (C) obligations and liabilities of Company for future
performance under contracts, agreements and instruments to which
the Company is a party, which contracts, agreements and
instruments are listed in the Disclosure Letter, or (D) such
liabilities which were not required to have been disclosed on the
Balance Sheet, as of said date, in accordance with generally
accepted accounting principles. To the Shareholders' knowledge,
there are no facts or circumstances existing on the date hereof
that could be reasonably likely to result in the occurrence of
any such Liability.
4.9 TAXES.
(A) All federal, state, local and foreign income, excise,
property, sales and other taxes, assessments, governmental
charges, penalties, interest and fines due and payable by the
Company and by any other person, firm or corporation which will
or may be liabilities of the Company, for all periods ending on
or before the Balance Sheet Date, have been paid in full, or have
been fully reserved against on the Balance Sheet.
(B) The Company has filed all federal, state, local and foreign
income, excise, property, sales, withholding, social security,
information returns and other tax returns, reports and related
information ("Returns") required to have been filed by it prior
to the date hereof, and no extensions of the time for filing a
Return is presently in effect. The Returns that have been filed
have been accurately prepared and have been duly and timely
filed. The Company is not and has never been a member of any
affiliated group filing a consolidated tax return. None of the
Company's Returns have been examined by any governmental or other
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authority exercising any taxing or tax regulatory authority for
any fiscal years or periods since it came into business. There
are no agreements, waivers or other arrangements providing for an
extension of time with respect to the filing of any Return, or
payment of any tax, governmental charge, assessment, deficiency,
penalties, fines or interest by the Company.
(C) There is no action, suit, proceeding, investigation or claim
now pending or, to the best of the Shareholders knowledge,
threatened against the Company in respect of taxes, governmental
charges or assessments, or any matter under discussion with any
governmental or other taxing authority relating to taxes,
governmental charges or assessments asserted by any such
authority.
4.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet Date,
the Company has not:
(A) issued, delivered or agreed to issue or deliver any Capital
Stock, bonds or other Company securities, or granted or agreed to
grant any options (including employee stock options), warrants or
other rights for the issue thereto except as contemplated herein;
(B) borrowed or agreed to borrow any funds in excess of the amount
thereof shown on the Balance Sheet;
(C) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except
obligations and liabilities incurred in the ordinary course of
business and consistent with prior practice;
(D) discharged or satisfied any Encumbrance other than those then
required to be discharged or satisfied, or paid any obligation or
liability, absolute, accrued, contingent or otherwise, whether
due or to become due, other than current liabilities shown on the
Balance Sheet and current liabilities not in excess of $25,000
incurred since the Balance Sheet Date in the ordinary course of
business and consistent with prior practice;
(E) sold, transferred, leased to others or otherwise disposed of
any material amount of assets, except for inventories sold for
fair consideration in the ordinary course of business and assets
no longer used or useful in the conduct of its business, or
canceled or compromised any material debt or claim, or waived or
released any material right of substantial value;
(F) except as set forth in the Disclosure Letter, received any
notice of termination of any contract, lease or other agreement,
lost any significant customer, or suffered any damage,
destruction or loss (whether or not covered by insurance) which,
in any case or in the aggregate, has had or might reasonably be
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expected to have, a material adverse effect on its condition
(financial or otherwise), properties, assets, liabilities,
operations or prospects;
(G) reduced its inventories or supplies below normal and adequate
levels for the continuation of business in the usual course;
(H) encountered any labor union organizing activity, had any
actual or, to the knowledge of the Shareholders, threatened
employee strikes, work stoppages, slowdowns or lockouts, or any
other labor trouble other than routine grievance matters none of
which is material, or had any material adverse change in its
relations with its employees, agents, customers or suppliers;
(I) transferred or granted any rights under, or entered into any
settlement regarding the breach or infringement of, any license,
patent, copyright, trademark, trade name, invention or similar
rights, or modified any existing rights with respect thereto;
(J) except in the ordinary course of business consistent in all
respects (including as to amount) with past practice, or as set
forth in the Disclosure Letter, made any accrual or arrangement
for any payment or any bonus, or any severance or termination pay
to (a) any present or former officer or employee who is or was
receiving compensation at an annual rate in excess of $50,000; or
(b) any person, firm or corporation which is or was furnishing
professional or consulting services to the Company;
(K) increased the rate of compensation payable or to become
payable by it to any of its directors, officers or employees who
is or was receiving compensation at an annual rate in excess of
$50,000 or whose resulting compensation will exceed $55,000
annually; entered into an employment agreement or amended any
employment agreement for any such person; or made any material
increase in any insurance, pension or other employee benefit
plan, payment or arrangement made to, for or with any such
director, officer or employees;
(L) except as set forth in the Disclosure Letter, declared or
made, or agreed to declare or make, any payment of distributions
of any assets of any kind whatsoever to the Shareholders or any
affiliate of the Shareholders, or purchased or redeemed, or
agreed to purchase or redeem, any of the Company's Capital Stock,
or made or agreed to make any payment to the Shareholders or any
affiliate of the Shareholders, whether on account or with respect
to long-term debt, management fees or otherwise;
(M) suffered any other change, event or condition which, in any
case or in the aggregate, has had or is reasonably expected to
have a material adverse effect on its condition (financial or
otherwise), properties, assets, liabilities, operations, business
or, except as set forth in the Disclosure Letter, prospects; or,
11
(N) entered into any agreement or made any commitment to take any
of the types of action described in any of the foregoing clauses.
4.11 PROPERTIES.
(A) Set forth in the Disclosure Letter is a description of all
real property owned by the Company or in which the Company has a
leasehold or other interest or which is used by the Company in
connection with the operation of its business, together with a
description of each lease, sublease, license or any other
instrument under which the Company claims or holds such leasehold
or other interest or right to the use thereof or pursuant to
which the Company has assigned, sublet or granted any rights
therein, identifying the parties thereto, the rental or other
payment terms, expiration date and cancellation and renewal terms
thereof.
(B) Except as set forth in the Disclosure Letter, the Company has
good and marketable title to all its properties and assets,
including, without limitation, those reflected in its books and
records and in the Balance Sheet except (i) inventory sold for
fair consideration or consumed after the Balance Sheet Date in
the ordinary course of business, and (ii) assets no longer used
or useful in the conduct of its business which in the aggregate
do not have a fair market value in excess $25,000, the sale of
which does not conflict with or constitute a breach of the
representations, warranties or provisions of this Agreement.
(C) None of the properties and assets of the Company are subject
to any Encumbrance or adverse claim of any nature whatsoever,
direct or indirect, whether accrued, absolute, contingent or
otherwise, except for (i) those which are set forth in the
Balance Sheet as securing specific liabilities, or (ii) as set
forth in the Disclosure Letter. All the properties and assets
owned, leased or used by the Company are in good operating
condition and repair (ordinary wear and tear excepted), are
suitable for the purposes used, and are adequate and sufficient
for all current operations, and meet all applicable laws, rules
and regulations relating to such property in all material
respects. All leases are in full force and effect and true and
complete copies of all leases have been delivered to the Buyer or
their representatives.
4.12 PERMITS AND LICENSES; COMPLIANCE WITH LAW.
(A) Except as set forth in the Disclosure Letter, all licenses,
permits, authorizations, variances, exemptions, orders and
approvals (collectively, "Governmental Authorizations") from
federal, state, local and foreign governmental and regulatory
bodies held or required to be held by the Company in connection
with its ownership and lease of real and personal property and
the operation of its business have been obtained, except where
the failure to obtain such Governmental Authorization would not
reasonably be expected to have a material adverse effect upon the
Company. The Company is in compliance in all respects with the
material terms of such Governmental Authorizations held by it or
12
applicable to it and with all material requirements, standards
and procedures of the federal, state, local and foreign
governmental or regulatory bodies which issued them. Except as
set forth in the Disclosure Letter, the Company is in compliance
in all material respects with all federal, state, local and
foreign laws, ordinances, codes, regulations, orders,
requirements and standards of procedures which are applicable in
any material respect to its business.
(B) The Disclosure Letter includes, to the extent that any of the
following exists: (i) a list of each adjudged violation; and (ii)
a list of each asserted violation, notice of inspection,
inspection report or any other written report (excluding Returns)
delivered by any governmental or regulatory agency to the Company
or delivered by the Company to any governmental or regulatory
agency relating to enforcement of or compliance with any of such
laws, ordinances, codes, regulations, orders, requirements,
standards and procedures material to the Company.
(C) Except as set forth in the Disclosure Letter, (i) the Company
has complied with all existing federal, state and local laws,
rules, regulations, ordinances, orders, judgments and decrees now
applicable to its business, properties or operations as presently
conducted, except where the failure to so comply would not have a
material adverse effect upon the Company, and neither the
ownership nor use of the Company's properties nor the conduct of
its business conflicts in any material way with the rights of any
other person, firm or corporation or violates, or with or without
the giving of notice or the passage of time, or both, will
violate, conflict with or result in a default, right to
accelerate or loss of rights under, any term or provision of (a)
the certificate of incorporation or by-laws of the Company, as
presently in effect, or (b) any material mortgage, indenture,
deed of trust or material Encumbrances, lease, license or
agreement or any law, ordinance, rule, regulation, order,
judgment or decree to which the Company is a party or by which it
or any of its properties, assets or operations may be bound or
affected or which might materially adversely affect any such
properties, assets or operations and (ii) the Shareholders do not
know of any proposed laws, rules, regulations, ordinances,
orders, judgments, decrees, governmental takings, condemnations
or other proceedings which would be applicable to the business,
operations or properties of the Company and which might
materially adversely affect its properties, assets, operations or
prospects either before or after the Closing Date.
(D) Without limiting the generality of the foregoing, to the
knowledge of Shareholders, neither the Shareholders nor the
Company nor any officer, director, employee or agent of the
Company has, directly or indirectly, made, promised to make, or
authorized the making of, an offer, payment or gift of money or
anything of value to any government official, political party or
employee, agent or fiduciary of a customer, to obtain a contract
for or to influence a decision in favor of the Company where such
offer, payment or gift was or would be, if made, in violation of
any applicable law, nor have they maintained cash or anything of
13
value, in an account or otherwise, not properly and accurately
accounted for on the books and records of the Company for this
purpose.
4.13 CONTRACTS WITH CUSTOMERS AND OTHERS. Except as set forth in the
Disclosure Letter, none of the customers or other persons which are parties to
any agreements to which the Company is a party has notified the Company of any
intention to terminate its contract or arrangement for service as a result of
the transactions consummated hereby or otherwise.
4.14 PRODUCT WARRANTIES AND GUARANTEES. Except with respect to product
warranties or guarantees of any nature described in the Disclosure Letter and
provided by the Company in the ordinary course of business, the Company is not a
party to or bound by any agreement of guarantee, indemnification, assumption or
endorsement or any other like commitment of the obligations, liabilities
(contingent or otherwise) or indebtedness of any other person, firm or
corporation.
4.15 MATERIAL AGREEMENTS; VALIDITY; NO DEFAULT.
(A) The Disclosure Letter sets forth a description of (i) all
agreements pursuant to which the Company has acquired the
business or any substantial portion of the assets of any other
person, firm or corporation and pursuant to which the Company has
any continuing obligation, and any claims by parties other than
the Company with respect thereto; (ii) all contracts, agreements,
commitments, purchase orders or other understandings or
arrangements to which the Company is a party relating to the sale
or furnishing by it of goods or services where the consideration
for such sale is $25,000 or more, in any single case, any claims
by parties other than the Company with respect thereto, and any
express product guarantees or warranties made by the Company
relating to its goods or services; (iii) all contracts,
agreements, commitments, purchase orders or other understandings
or arrangements to which the Company is a party relating to the
purchase by it of goods or services where the consideration for
such purchase is $25,000 or more, in any single case, and any
claims by the Company with respect thereto; and (iv) all
contracts, agreements and commitments not yet fully performed,
pursuant to which the Company will acquire the business or any
substantial portion of the assets of any other person, firm or
corporation.
(B) All the contracts, agreements, leases, licenses and
commitments required to be listed in the Disclosure Letter are
valid and binding, enforceable in accordance with their
respective terms, and are in full force and effect. Except as set
forth in the Disclosure Letter, there is not under any such
contract, agreement, lease, license or commitment (i) any
existing material default by the Company or any event which,
after notice or lapse of time, or both, would constitute a
material default by the Company or result in a right to
accelerate by any other person or a loss of any rights of the
Company and (ii) to the Shareholders' knowledge, any default by
any other person, or any event which, after notice or lapse of
time, or both, would constitute a default by any such person or
result in a right to accelerate by the Company or a loss of any
rights of any such person. None of such contracts, agreements,
leases, licenses or commitments is, either when considered singly
14
or in the aggregate with others, unduly burdensome, onerous or
materially adverse to the business, properties, assets, earnings
or prospects of the Company, except as disclosed in the
Disclosure Letter.
(C) The Company is not a party to or bound by any contract,
agreement, lease, license or commitment which, upon performance,
is reasonably expected to result in any loss or liability to the
Company. True and complete copies of all contracts, agreements,
leases, licenses, commitments and other documents listed in the
Disclosure Letter (together with any and all amendments thereto)
have been delivered to Buyer or its representatives.
4.16 INTELLECTUAL PROPERTY.
(A) Set forth in the Disclosure Letter is a description of all
patents, patent applications, patent licenses, trademarks,
trademark registrations, and applications therefor, service
marks, service names, trade names, domain names, copyrights and
copyright registrations, and applications therefor, computer
software and software licenses of the Company (the "Intellectual
Property").
(B) Except as set forth in the Disclosure Letter, the Company owns
or possesses the royalty-free license or other right to use all
patents, patent applications, patent licenses, trademarks,
trademark registrations and applications therefor, service marks,
service names, trade names, domain names, copyrights, and
copyright registrations, and applications therefor, computer
software and software licenses which are necessary to conduct its
business as presently operated without conflict with or
infringement upon any valid rights of others. To the
Shareholders' knowledge, no person, firm, corporation or other
entity is entitled to restrain the Company from using any such
copyright, trademark, service xxxx, service name, trade name,
domain names or patent. The Company has not received any notice
claiming that it is infringing upon or otherwise acting adversely
to any copyrights, trademarks, trademark rights, service marks,
service names, trade names, domain name, patents, patent rights,
licenses or trade secrets owned by any person, firm, corporation
or other entity.
(C) Except as set forth in the Disclosure Letter, there are no
outstanding options, licenses or agreements of any kind with
respect to the Intellectual Property. Neither Shareholders nor
the Company's managers or employees or any affiliate thereof has
any interest in any Intellectual Property.
4.17 CONSENTS. Except as contemplated in this Agreement or as set forth in
the Disclosure Letter, no consent, approval, exemption or authorization
is required to be obtained from, no notice is required to be given to
and no filing is required to be made with any third party (including,
without limitation, governmental and quasi-governmental agencies,
authorities and instrumentalities of competent jurisdiction) by the
Company or the Shareholders, (i) in order for this Agreement to
constitute legal, valid and binding obligations of the Shareholders and
15
the Company or to authorize or permit the consummation by the
Shareholders and the Company of the transactions contemplated hereby
and thereby or (ii) under or pursuant to any governmental or
quasi-governmental permits, licenses, consents, authorizations or
approvals held by or issued to the Company (including, without
limitation, environmental, health, safety and operating permits and
licenses) by reason of this Agreement or the consummation of the
transactions contemplated hereby.
4.18 OTHER RECEIVABLES. Except as set forth in the Disclosure Letter, all
receivables of the Company (including loans receivable and advances)
other than accounts receivable which are reflected in the Balance Sheet
and are addressed in Section 4.8(v) above, and all such receivables
which have arisen since the Balance Sheet Date, constituted and will
constitute only valid claims against third parties not affiliated with
the Company, arising only from bona fide transactions in the ordinary
course of business and shall be (or have been) fully collected or
collectible when due in accordance with the usual terms customarily
utilized by the Company without resort to litigation and without
defense, offset or counterclaim, in the aggregate face amounts thereof
except to the extent of the normal allowance for doubtful accounts. The
Shareholders have delivered to the Buyer an aging schedule for the
accounts receivable of the Company at the Balance Sheet Date.
4.19 LITIGATION. Except as set forth in the Disclosure Letter, there is no
claim, legal action, arbitration, governmental investigation or other
legal or administrative proceeding, nor any order, decree or judgment
in progress, pending or in effect, or, to the knowledge of the
Shareholders, threatened, against or relating to the Company, its
properties, assets, business or Capital Stock or the transactions
contemplated by this Agreement, and the Shareholders does not know of
any basis of the same. Except as disclosed in the Disclosure Letter,
there is no continuing order, injunction or decree of any court,
arbitrator or governmental authority to which the Company is a party or
by which the Company or its assets, properties, business or Capital
Stock are bound.
4.20 EMPLOYEE PLANS.
(A) The Disclosure Letter sets forth a description of all Employee
Plans (as defined below), the financial and actuarial condition
of such plans, the extent to which they are funded, and the
actuarial assumptions utilized in calculating the financial
condition thereof. "Employee Plans" means all pension,
retirement, disability, medical, dental or other health insurance
plans, life insurance or other death benefit plans, profit
sharing, deferred compensation, stock options, bonus or other
incentive plans, severance plans, or other employee benefit plans
or arrangements, whether or not funded, covering any of the
Company's current or former officers, employees, directors or
consultants or to which the Company is a party or bound or
otherwise may have any liability to any person (including any
such plan formerly maintained or in connection with which the
Company may have any liability to any person after the Closing,
and any such plan which is a multi-employer plan.
16
(B) No Employee Plan fails to comply with applicable
provisions of the Employee Retirement Income Security Act of
1974 ("ERISA") and regulations issued under ERISA, in such a
manner as to constitute, in the aggregate, a material
adverse event. Except as shown on Disclosure Letter, each
such plan is a "qualified" plan under section 401(a) of the
Internal Revenue Code.
(C) Complete and correct copies of all determination letters
issued by the Internal Revenue Service relating to any
qualified plans under Section 401(a) of the Internal Revenue
Code have previously been delivered to Buyer. No facts or
circumstance, including, without limitation, any "reportable
events" as defined in ERISA and the regulations promulgated
under ERISA, exist in connection with such plans which
constitute, in the aggregate, a material adverse event, or
which might constitute grounds for the termination of any
such plan by the Pension Benefit Guaranty Corporation or for
the appointment by the appropriate United States District
Court of a trustee to administer any such plan, nor does any
such plan have any funding deficiency.
(D) The Company has complied with and performed in all
material respects all contractual obligations required by it
to be performed with respect to any Employee Plan or any
related trust agreement or insurance contract. All
contributions and other payments required to be made by the
Company to any Employee Plan prior to the date hereof have
been made. Except as disclosed in the Disclosure Letter, the
Company has not communicated generally to its employees
regarding any material increases of benefit levels (or
creation of material new benefits) with respect to any
Employee Plan beyond those reflected in the current Employee
Plans.
(E) Except as set forth in the Disclosure Letter, the
Company has not participated in or incurred an obligation to
contribute to any Multiemployer Plan (as defined in Section
3(37) of ERISA) or incurred or been notified of any
withdrawal liability in respect of any such plan.
4.21 INSURANCE. Set forth in the Disclosure Letter is a description of all
fire, theft, casualty, liability and other insurance policies insuring
the Company, all performance bonds, customs bonds and the like
maintained by, or for the benefit of, the Company, and all life
insurance policies maintained for any of its employees, specifying with
respect to each such policy or bond the name of the insurer or issuer,
the risk insured against or covered thereby, the limits of coverage,
the deductible amount (if any), the premium rate or cost and the date
through which coverage will continue by virtue of premiums already
paid. The Company maintains adequate insurance coverage for all normal
risks incident to the Company's assets, properties and business
operations. Other than as presented in the Disclosure Letter, there are
no services provided by the Company that are not covered by insurance.
Such insurance will continue to be in force as of the Closing Date.
4.22 DISCLOSURE. No representation or warranty by the Shareholders contained
in this Agreement, and no information contained in the Disclosure
Letter or any other instrument furnished or to be furnished to Buyer
17
pursuant to this Agreement as of the date of this Agreement contains or
will contain any untrue statement of a material fact or omits or will
omit to state a material fact necessary in order to make the statements
contained therein not misleading.
4.23 BANK ACCOUNTS. The Disclosure Letter sets forth the name of each bank
or other financial institution in which the Company has an account or
safe deposit box or vault arrangement and the names of all persons
authorized to draw thereon or to have access thereto; and the names of
all persons, if any, holding tax or other powers of attorney from the
Company and a summary of the terms thereof.
4.24 EMPLOYEE MATTERS. The Disclosure Letter sets forth (i) the name of each
employee of the Company; the amount paid to him or her for services
rendered during the calendar years 1997, 1998 and 1999; the current
annual rate of his compensation; a list of all written contracts of
employment of the Company and all consulting agreements with the
Company and the terms thereof; (ii) a list of all collective bargaining
or other labor agreements, if any, to which the Company is a party;
(iii) a list of all affirmative action plans or other such plans in
effect since May 5, 1997; (iv) a list of all union organizing efforts
conducted or being conducted or threatened with respect to employees of
the Company; all labor-related work stoppages experienced by the
Company since May 5, 1997; (v) a list of all reports filed since May 5,
1997, with governmental agencies relating to equal employment
opportunities and employment of protected minorities (including women
and persons over age 40); (vi) a list of all decisions rendered by
governmental agencies (including Courts and the Equal Employment
Opportunity Commission) with respect to claims or complaints filed
alleging unlawful, discriminating employment practices; and all such
claims or complaints now pending; and (vii) the names of the managers
of the Company now in office. Other than as set forth in the Disclosure
Letter, the Company has no employment agreements with any of its
employees other than At-Will employment agreements that give the
Company the right to terminate at any time any such employee without
notice or cause.
4.25 FINDERS' AND BROKERS' FEES. Neither the Shareholders nor the Company,
nor anyone on behalf of any such persons, has retained any broker,
finder or agent or agreed to pay any brokerage fee, finder's fee or
commission with respect to the transactions contemplated by this
Agreement.
4.26 INVESTMENT INTENT.
(A) The Shareholders understand that each certificate
representing the IBS Stock shall be imprinted with a legend
in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND HAVE BEEN SOLD IN
RELIANCE UPON EXEMPTIONS THEREFROM. THESE SECURITIES MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
18
REGISTRATION COVERING THESE SECURITIES UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED THEREUNDER.
(B) Each Shareholder is acquiring the IBS Stock for his own
account, for investment purposes and not with a view to, or for
sale in connection with, any distribution of such Shares or any
part thereof.
(C) Each Shareholder is (i) either (A) an "accredited investor" as
that term is defined in Rule 501(a) promulgated under the
Securities Act of 1933, as amended, or (B) is able to fend for
himself in the transactions contemplated by this Agreement, (ii)
has such knowledge and experience in financial, business and
investment matters as to be capable of evaluating the merits and
risks of this investment, (iii) has the ability to bear the
economic risks of this investment, (iv) has had access to and has
received such information regarding Buyer as is specified in
subparagraph (b)(2) of Rule 502 promulgated under the Securities
Act of 1933, as amended, and (v) without in any way limiting the
Buyer's right or ability to rely on the representations and
warranties made by the Shareholders in or pursuant to this
Agreement, has been afforded prior to the Closing the opportunity
to ask questions of, and to receive answers from, the Buyer and
to obtain any additional information, to the extent the Buyer has
such information or could have acquired it without unreasonable
expense, all as necessary for the Shareholders to make an
informed investment decision with respect to the purchase of the
IBS Stock.
(D) Each Shareholder understands and acknowledges that (A) the
shares of IBS Stock to be sold and issued hereunder are
unregistered and may be required to be held indefinitely unless
subsequently registered under the Securities Act of 1933, as
amended, or an exemption from such registration is available; (B)
the Buyer is under no obligation to file a registration statement
with the Securities and Exchange Commission with respect to the
Shares, and (c) sales under Rule 144 promulgated under the
Securities Act of 1933, as amended ("Rule 144"), which provides
for certain limited sales of unregistered securities, are not
presently available with respect to the IBS Stock.
(E) Each Shareholder acknowledges that the representations and
warranties of Buyer in this Agreement or documents provided for
herein represent the sole and exclusive representations and
warranties of Buyer to the Shareholders in connection with the
transactions contemplated hereby, and each Shareholder
understands, acknowledges and agrees that all other
representations and warranties of any kind or nature expressed or
implied (including, but not limited to, any relating to the
future or historical financial condition, results of operations,
assets or liabilities of The Buyer) are specifically disclaimed
by Buyer.
5 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants
to the Shareholders as follows and acknowledges that the Shareholders and the
19
Company are relying on such representations and warranties, respectively, in
connection with the merger contemplated herein:
5.1 ORGANIZATION AND STANDING. The Buyer is a corporation duly organized
and validly existing and in good standing under the law of the State of
Delaware. The Buyer has furnished to the Shareholders true and complete
copies as the same are currently in effect of (i) the certificate of
incorporation of the Company and all amendments thereto, certified by
the Secretary of State of Delaware and certified as true and correct by
the secretary of the Buyer, and (ii) the by-laws, as currently amended
and in effect, of the Buyer, certified as true and correct by the
secretary of the Buyer.
5.2 LEGAL CAPACITY; NO RESTRICTIONS. The Buyer has full corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery by the Buyer of this
Agreement and the performance by the Buyer of the transactions
contemplated hereby to be performed by it have been duly authorized by
all necessary corporate and stockholder actions on the part of the
Buyer. This Agreement has been duly executed and delivered by a duly
authorized officer of the Buyer and, assuming the due execution and
delivery of this Agreement by the Shareholders and the Company,
constitutes a valid and binding obligation of the Buyer enforceable
against the Buyer in accordance with its terms. The execution and
delivery of this Agreement by the Buyer does not, and the performance
by the Buyer of the transactions contemplated hereby to be performed by
it will not (i) conflict with the certificate of incorporation or by
laws of the Company, (ii) conflict with, or result in any violation of,
or constitute a default (with or without notice or lapse of time or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under, any
contract, permit, order, judgment or decree to which the Buyer is a
party or to which it is bound, (iii) constitute a violation of any law
or regulation applicable to the Buyer, or (iv) result in the creation
of any Encumbrance upon any of the assets of the Buyer, excluding any
such Encumbrances created by the refinancing of debt of the Company as
more specifically described in Section 8.9 below.
5.3 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. The Buyer has complied with
all existing material federal, state and local laws, rules,
regulations, ordinances, orders, judgments and decrees now or hereafter
applicable to its business, properties or operations as presently
conducted, and neither the ownership nor use of Buyer's properties nor
the conduct of their respective businesses conflicts with the rights of
any other person, firm or corporation or violates, or with or without
the giving of notice or the passage of time, or both, will violate,
conflict with or result in a default, right to accelerate or loss of
rights under, any term or provision of their respective (i)
certificates of incorporation or by-laws, as currently amended and in
effect, or (ii) any mortgage, indenture, deed of trust or material
Encumbrances, lease, license or agreement or any law, ordinance, rule,
regulation, order, judgment or decree to which Buyer are a party or by
which they or any of their respective properties, assets or operations
may be bound or affected or which might material adversely affect any
such properties, assets or operations. Without limiting the generality
of the foregoing, to the knowledge of the Buyer, neither of the Buyer
nor any of their respective officers, directors, employees or agents
20
has, directly or indirectly, made, promised to make, or authorized the
making of, any offer, payment or gift of money or anything of value to
any governmental official, political party or employee, agent or
fiduciary of a customer, to obtain a contract for or to influence a
decision in favor of Buyer where such offer, payment or gift was or
would be, if made, in violation of any applicable law, nor has it
maintained cash or anything of value, in an account or otherwise, not
properly or accurately accounted for on the respective books and
records of Buyer for this purpose.
5.4 DISCLOSURE. No representation or warranty by the Buyer contained in
this Agreement, no information contained in the any of the Buyer's SEC
Filings (as defined below), as of the date of such SEC Filing, and no
information contained in any other instrument furnished or to be
furnished to Buyer pursuant to this Agreement as of the date of this
Agreement contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order
to make the statements contained therein not misleading. "SEC Filings"
means the following: (i) the IBS Interactive, Inc. report on Form 10-Q
Report with respect to the quarterly period ended September 30, 1999;
(ii) the IBS Interactive, Inc. report on Form 10-K with respect to the
annual period ended December 31, 1998; (iii) the IBS Interactive, Inc.
report on Form 10-Q with respect to the quarterly period ended June 30,
1999; and (iv) the IBS Interactive, Inc. report on Form 10-Q with
respect to the quarterly period ended March 31, 1999, all as
supplemented by any and all reports on Form 8-K filed with the SEC by
the Buyer.
5.5 INVESTMENT INTENT, ETC.
(A) The Buyer is acquiring the Shares for its own account for
investment, and not with a view to the resale or
distribution thereof.
(B) The Buyer (i) is an "accredited investor" as that term is
defined in Rule 501(a) promulgated under the Securities Act
of 1933, as amended, (ii) has the ability to bear the
economic risks of this investment, (iii) has had access to
and has received such information regarding the Company as
is specified in subparagraph (b)(2) of Rule 502 promulgated
under the Securities Act of 1933, as amended, and (iv)
without in any way limiting the Shareholders' right or
ability to rely on the representations and warranties made
by the Buyer in or pursuant to this Agreement, has been
afforded prior to the Closing the opportunity to ask
questions of, and to receive answers from, the Shareholders
and to obtain any additional information, to the extent the
Shareholders have such information or could have acquired it
without unreasonable expense, all as necessary for the Buyer
to make an informed investment decision with respect to the
purchase of the Shares.
(C) The Buyer acknowledges that the representations and
warranties of the Shareholders in this Agreement or the
other documents to be delivered in connection herewith
represent the sole and exclusive representations and
warranties of the Shareholders to the Buyer in connection
with the transactions contemplated hereby, and the Buyer
understands, acknowledges and agrees that all other
representations and warranties of any kind or nature
expressed or implied (including, but not limited to, any
21
relating to the future or historical financial condition,
results of operations, customer relationships, assets or
liabilities of the Company) are specifically disclaimed by
the Shareholders.
(D) The Buyer has read carefully and understands the
disclosures contained in the Disclosure Letter.
5.6 FINDERS' AND BROKERS' FEES. Neither the Buyer nor anyone on behalf of
the Buyer, has retained any broker, finder or agent or agreed to pay
any brokerage fee, finder's fee or commission with respect to the
transactions contemplated by this Agreement.
5.7 CONSENTS. Except as contemplated in this Agreement, including obtaining
the approval of Buyer's stockholders, no consent, approval, exemption
or authorization is required to be obtained from, no notice is required
to be given to and no filing is required to be made with any third
party (including, without limitation, governmental and
quasi-governmental agencies, authorities and instrumentalities of
competent jurisdiction) by the Buyer, (i) in order for this Agreement
to constitute legal, valid and binding obligations of the Buyer or to
authorize or permit the consummation by the Buyer of the transactions
contemplated hereby or (ii) under or pursuant to any governmental or
quasi-governmental permits, licenses, consents, authorizations or
approvals held by or issued to the Buyer (including, without
limitation, environmental, health, safety and operating permits and
licenses) by reason of this Agreement or the consummation of the
transactions contemplated hereby.
5.8 CAPITALIZATION. The authorized capital stock of the Buyer consists of
11,000,000 shares of common stock, $0.01 par value per share ("IBS
Stock"), of which 4,961,028 shares were issued and outstanding as of
January 26, 2000 and 1,000,000 shares of preferred stock, $.01 par
value per share, of which none was issued and outstanding as of January
31, 2000. All of the issued and outstanding shares of IBS Stock are,
and all of the IBS Stock to be issued in exchange for shares of Capital
Stock upon consummation of the merger contemplated herein, when issued
in accordance with the terms of this Agreement, will be, duly
authorized and validly issued and outstanding and fully paid and
nonassessable. None of the outstanding shares of IBS Stock has been,
and none of the IBS Stock to be issued upon consummation of the merger
contemplated herein will be, issued in violation of any preemptive
rights of the current or past shareholders of the Buyer.
5.9 AUTHORITY OF THE MERGER SUBSIDIARY. The Merger Subsidiary is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware as a wholly-owned subsidiary of the
Buyer. The authorized capital stock of the Merger Subsidiary consists
of 100 shares of Merger Subsidiary Common Stock, all of which is
validly issued and outstanding, fully paid and nonassessable and is
owned by the Buyer free and clear of any Encumbrances. The Merger
Subsidiary (a) has the corporate power and authority to execute,
deliver and perform this Agreement and the other agreements
contemplated herein and to consummate the transactions contemplated
hereby and thereby and (b) has taken all necessary corporate and
shareholder action to authorize the approve the execution, delivery and
performance of this Agreement and the other agreements contemplated
22
herein and the consummation of the transactions contemplated hereby and
thereby. This Agreement and the other agreements contemplated herein
have been duly and validly executed and delivered by the Merger
Subsidiary and constitute valid and binding obligations of the Merger
Subsidiary, enforceable against the Merger Subsidiary in accordance
with their terms.
5.10 ACCOUNTING, TAX AND REGULATORY MATTERS. Neither the Buyer nor any
affiliate thereof has any knowledge of any material fact or
circumstance that is reasonably likely to (i) prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code, or (ii) materially impede or delay receipt of any consents of
any federal, state, county, local or other governmental or regulatory
agencies having jurisdiction over the parties.
6 COVENANTS OF SHAREHOLDERS AND COMPANY PRIOR TO CLOSING.
6.1 CONDUCT OF BUSINESS PENDING CLOSING. Except as otherwise consented to
in writing by the Buyer, the Shareholders shall cause the Company to
conduct its business diligently only in the ordinary course and
consistent with prior practice and the Company shall maintain, keep and
preserve its assets and properties in good condition and repair and
maintain insurance thereon in accordance with present practice. The
Shareholders shall use their best commercially reasonable efforts to
preserve the business and organization of the Company intact to keep
available to the Buyer the services of the present managers and
employees of the Company, and to preserve for the benefit of the Buyer
the goodwill of the suppliers and customers of the Company and others
having business relations with the Company. The Shareholders shall give
the Buyer prompt written notice of any material change in or addition
to any of the information contained in the representations and
warranties made herein by the Shareholders and/or the Company or in the
Disclosure Letter to this Agreement which occur prior to the Closing
Date. Without limiting the generality of the foregoing:
(A) without the Buyer's prior written approval, the Shareholders
shall not cause the Company to amend, modify, supplement or
otherwise alter its certificate of incorporation or by-laws, as
currently amended and in effect, or merge or consolidate or
obligate itself to do so with or into any other entity;
(B) without the Buyer's prior written approval, the Shareholders
shall not cause the Company to enter into any contract,
agreement, commitment or other understanding or arrangement
except for those in the ordinary course of business which does
not result in the incidence by the Company of an obligation in
excess of $25,000;
(C) the Shareholders shall cause the Company to comply in all
material respects with all existing laws, rules, regulations,
ordinances, orders, judgments and decrees now or hereafter
applicable to its business, properties or operations as presently
conducted;
(D) the Shareholders shall cause the Company to accurately prepare
and duly and timely file all required federal, state, local and
23
foreign Returns of the Company and pay all federal, state, local
and foreign taxes (including, without limitation, taxes on
properties, income, franchises, licenses and payrolls) shown on
such Returns as required to be paid or otherwise payable without
the preparation or filing of any Return; and
(E) the Shareholders shall not cause the Company to declare or
make any payment of distributions to its stockholders or upon or
in respect of any capital stock, or purchase, retire or redeem,
or obligate itself to purchase, retire or redeem, any capital
stock or securities.
(F) the Shareholders shall not cause the Company to provide
services or commit the Company to provide future services which
result in (i) gross margins of less than 0%; (ii) guarantees,
certifications, or warranties on the results of such services,
including but not limited to Y2K and web-site security.
6.2 ACCESS, INFORMATION AND DOCUMENTS. Prior to the Closing Date, the
Shareholders have given to Buyer and to Buyer's accountants, counsel
and other representatives, full access during normal business hours to
all property, contracts, commitments, books and records of the Company
(including minute books and shareholder lists) and have furnished to
Buyer all such documents and copies of documents (certified by a
manager of the Company if requested) and information with respect to
the affairs of the Company that Buyer has from time to time reasonably
requested and has notified Buyer as to any unusual problems or
developments, if any, with respect to the business of the Company prior
to the Closing.
6.3 STOCK SPLITS; STOCK DIVIDENDS. In the event of any stock split or stock
dividend with respect to the common stock of Buyer that becomes
effective either prior to the Closing Date or prior to the delivery of
the Reserved Shares, (i) the additional shares so issued with respect
to the Stock Consideration Shares shall be added to the Stock
Consideration Shares; and (ii) references contained in this Agreement
to a specific number of shares of common stock of the Buyer or
references herein to prices for or the fair market value of the common
stock of the Buyer shall be adjusted accordingly.
6.4 TAX FREE NATURE OF TRANSACTION. The Buyer and the Shareholders shall
each treat the transactions contemplated by this Agreement as a
reorganization under Section 368(a)(1)(A) and (a)(2)(E) of the Internal
Revenue Code (the "Code") with respect to which the Shareholders are
not required to recognize any gain or loss and shall use their best
efforts not to take any action, whether before, during or after the
Closing, that would be inconsistent with or prevent the treatment of
this transaction as such. The representations, warranties and covenants
set forth in this Section 6.4 shall survive the Closing of the
transaction. Notwithstanding the foregoing or any other provision in
this Agreement, Buyer may undertake, in its sole discretion, a
secondary public offering, a private placement, or the merger of Buyer
into or the acquisition of Buyer by any other entity without liability
to the Shareholders. Furthermore, in connection with the Company's
acquisition of Powercerv Technologies Corporation's educational and
consulting divisions, the Shareholders represent that such acquisition
24
qualifies as a taxable transaction for federal income tax purposes, and
covenant that the Shareholders will timely file Form 8594 with the
Internal Revenue Service in connection with such acquisition.
6.5 TAX RETURNS.
(A) To the extent permitted by law, the Shareholders, the Company
and the Buyer shall cause each tax period of the Company to end
on the Closing Date.
(B) The Shareholders, at the Company's expense, shall prepare or
cause to be prepared all Returns of the Company for taxable
periods ending on or prior to the Closing Date. The Shareholders
shall give a copy of each such Return to the Buyer at least
forty-five (45) days prior to the due date of such Return, and,
subject to the Buyer's reasonable review, the Buyer shall cause
such Return to be timely filed and shall cause any taxes shown
due and owing on such Return to be paid.
(C) The Buyer shall prepare all other Returns of the Company on a
basis consistent with the past practice (to the extent that such
past practice constitutes a reasonable reporting position) of the
Company and shall not make any election or take any position on
any Return that would have an adverse effect on the Shareholders
with respect to this transaction or any tax period beginning
prior to the Closing Date. The Buyer shall not amend any Return
of the Company relating to a tax period ending on or prior to the
Closing Date, unless such amendment is as a result of an audit,
administrative proceeding or court decision.
(D) In the case of any Return that (i) relates to an income,
sales, value-added, franchise, gross receipts, employment,
withholding, gains, or similar taxes and that (ii) is for a tax
period that begins before and ends after the Closing Date, such
Return shall be prepared on the basis of an interim closing of
the books as of the Closing Date. In the case of any Return that
(iii) relates to any property or similar tax and that (iv) is for
a tax period that begins before and ends after the Closing Date,
such taxes shall be allocated to period ending on or before the
Closing Date on a daily basis.
(E) Any refunds or credits of taxes of the Company for any taxable
period ending on or before the Closing Date shall be for the
account of the Shareholders and shall be paid by Buyer to the
Shareholders within ten days after the Buyer or the Company
receives or utilizes such refund.
(F) The Buyer shall cooperate with the Shareholders in preparing
the Returns or in responding to any audit or other judicial or
administrative proceeding, including, but not limited to, making
available to the Shareholders any accounting records of the
Company or Buyer and executing such documents as are necessary
for the filing of such Returns.
25
(G) The Company shall pay all transfer, sales, gains, document
recording, and similar taxes relating to the transactions set
forth herein.
7 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH.
(A) Each representation, warranty, and covenant, including items
in the Disclosure Letter referenced therein, made by the
Shareholders and the Company shall survive the Closing Date until
18 months from the Closing Date. The statements, representations,
warranties, covenants and agreements made or deemed made by the
Shareholders and the Company in this Agreement shall not be
affected or deemed waived by reason of the fact that Buyer or
their representatives should have known that any such
representation, warranty, covenant or agreement is or might be
inaccurate in any respect unless the Shareholders can demonstrate
that Buyer or their representatives had actual knowledge that any
such representations, warranty, covenant or agreement is
inaccurate in such respect. Any furnishing of information to
Buyer by the Shareholders pursuant to, or otherwise in connection
with, this Agreement, including, without limitation, any
information contained in any document, contract, book or record
of the Shareholders or the Company to which Buyer shall have
access or any information obtained by, or made available to,
Buyer as a result of any investigation made by or on behalf of
Buyer prior to or after the date of this Agreement, shall not
affect Buyer's right to rely on any statement, representation,
warranty, covenant or agreement made or deemed made by the
Shareholders or the Company in this Agreement and shall not be
deemed a waiver thereof unless the Shareholders can demonstrate
that Buyer or its representatives had actual knowledge that any
such statement, representation, warranty, covenant or agreement
is inaccurate in such respect. Notwithstanding anything contained
herein to the contrary, if the Buyer or any of its affiliates has
actual knowledge on the Closing Date of an existing breach of any
representation, warranty, covenant or agreement of the
Shareholders, then the Shareholders shall not be liable for, nor
in any manner responsible for, any claim, liability, obligation,
loss, damage, assessment, judgment, cost or expense of any kind
or character, including reasonable attorneys' fees ("Damages")
resulting from such breach, and the Buyer shall not be entitled
to indemnification under this Agreement for such Damages. In the
event of a change in control of Buyer in which a person or entity
becomes the beneficial owner as calculated in accordance with
Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended, of at least 50% of the then outstanding shares of IBS
Stock, this Section 7(a) shall become null and void upon the
consummation of such change in control.
(B) Each representation, warranty, and covenant made or deemed
made by the Buyer shall survive the Closing Date until 18 months
from the Closing Date. The statements, representations,
warranties, covenants and agreements made or deemed made by the
Buyer in this Agreement shall not be affected or deemed waived by
reason of the fact that the Shareholders or their representatives
should have known that any such representation, warranty,
covenant or agreement is or might be inaccurate in any respect
26
unless the Buyer can demonstrate that the Shareholders or their
representatives had actual knowledge that any such
representations, warranty, covenant or agreement is inaccurate in
such respect. Any furnishing of information to the Shareholders
by Buyer pursuant to, or otherwise in connection with, this
Agreement, including, without limitation, any information
contained in any document, contract, book or record of Buyer to
which the Shareholders shall have access or any information
obtained by, or made available to, the Shareholders as a result
of any investigation made by or on behalf of the Shareholders
prior to or after the date of this Agreement, shall not affect
the Shareholders' right to rely on any statement, representation,
warranty, covenant or agreement made or deemed made by Buyer in
this Agreement and shall not be deemed a waiver thereof unless
Buyer can demonstrate that the Shareholders or their
representatives had actual knowledge that any such statement,
representation, warranty, covenant or agreement is inaccurate in
such respect.
(C) The Buyer shall indemnify and hold harmless the Shareholders
and their respective heirs, executors and legal representatives
("Shareholders' Indemnitees") from and against any and all
Damages which may be sustained, suffered or incurred by any of
the Shareholders' Indemnitees arising from or by reason of or in
connection with (i) any breach of the representations, warranties
or covenants made by the Buyer herein, (ii) the operation of the
Surviving Company on or after the Closing Date (except with
respect to any such item that is a Liability for purposes of
Section 2.4), (iii) any taxes owed or payable by the Company with
respect to any taxable year or portion thereof ending after the
Closing Date, (iv) any other Liabilities asserted against
sustained by or incurred by the Shareholders related to,
associated with, or arising from any and all liabilities and
obligations of the Company to the extent reserved on the Balance
Sheet, and (v) obligations and liabilities incurred in the
ordinary course of business since the date of the Balance Sheet
and consistent with past practice. This indemnity shall survive
the Closing; provided, however, that any claim for
indemnification hereunder must be presented to the Buyer within
18 months of the Closing Date. Without limiting the generality of
the foregoing, the Buyer agrees to assume any indebtedness for
borrowed money of the Company listed in the Disclosure Letter and
shall obtain a release of each of the Shareholders as a personal
guarantor of any such indebtedness, as applicable. The Buyer
shall indemnify and hold harmless the Shareholders' Indemnitees
from and against any Damages which may be sustained, suffered or
incurred by any of the Shareholders' Indemnitees arising from or
by reason of or in connection with the Buyer's failure to obtain
a release of the Shareholders' personal guaranties. The Buyer
agrees that the release of the Shareholders' personal guaranties
is merely incidental to the Merger and the assumption of the
liabilities by the Buyer is done to continue the financial
strength of the Company and its historic business. All Damages
arising under clause (i) of this Section 7(c) shall not exceed
$3,500,000 in the aggregate.
27
(D) Each of the Shareholders severally and the Company, jointly
with the Shareholders, shall indemnify and hold harmless the
Buyer and the Surviving Corporation and their respective
directors, officers, shareholders (except the Shareholders),
employees, agents and representatives ("Buyer Indemnitees") from
and against any and all Damages which may be sustained, suffered
or incurred by any of the Buyer Indemnitees arising from or by
reason of or in connection with any Liabilities or any other
breach of the representations, warranties or covenants made by
the Shareholders or the Company herein. This indemnity shall
survive the Closing; provided, however, that any claim for
indemnification hereunder must be presented to the Shareholders'
Agent within 18 months of the Closing Date, provided, further
however, from and after the Closing Date the Surviving
Corporation shall have no indemnification liability to the Buyer
Indemnitees pursuant to this Article 7 or otherwise. Each
Shareholder shall only be liable for an amount of such liability
equal to the same percentage thereof as equals his ownership
interest in the Company set forth in the Disclosure Letter
pursuant to Section 4.2. All Damages arising under this Section
7(d) shall not exceed $3,500,000, including any amounts applied
as adjustments for Liabilities pursuant to Section 2.8. After the
Closing Date, for a period of 18 months, Buyer agrees to cause
the Surviving Corporation to either (i) maintain and pay the
premiums for the Company's current errors and omissions liability
insurance policy and during such 18 month period agrees to
increase the coverage thereof by an additional $2,000,000 for a
premium not exceed $10,000 per year, or (ii) terminate the
Company's existing errors and omissions liability insurance
policy, purchase a tail to such policy and amend the Buyer's
policy to include the Surviving Corporation as a named insured.
Any claims arising under this Section 7(d) shall be satisfied,
first, by reimbursement under such errors and omissions insurance
policy, to the extent available, second, by making adjustments
pursuant to Section 2.8 (to the extent the Damages are
Liabilities and are included in the adjustments made pursuant to
Section 2.8) to the extent available, third, by reducing the
principal of and accrued and unpaid interest on the Notes using
the same reduction formulas contained in Section 2.8(a) (except
substituting the amount of Damages for the amount of
Liabilities), and fourth, if the principal of and interest on the
Note are reduced to -0-, the balance shall be paid in cash.
8 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The Merger is subject to the
conditions set forth in this Section 8 for the exclusive benefit of the Buyer to
be fulfilled on or prior to the Closing Date. The Buyer may, however, waive the
fulfillment of any of these conditions, either before or after the Closing Date,
but any waiver, to be binding upon Buyer, must be by a writing duly executed by
it. The Shareholders shall use commercially reasonable efforts to cause each
condition to be fulfilled.
8.1 REPRESENTATIONS. All representations and warranties of Shareholders and
the Company contained in this Agreement and the Disclosure Letter shall
be true and correct in all material respects when made and such
representations and warranties shall be deemed to be, as of the Closing
Date, true and correct in all material respects.
8.2 PERFORMANCE OF AGREEMENTS. All covenants, agreements and obligations
required by the terms of this Agreement to be performed by the
Shareholders and/or the Company at or prior to the Closing Date shall
have been duly and properly performed or fulfilled in all material
respects.
28
8.3 NO ADVERSE CHANGE. On the Closing Date, there shall have been no
material adverse change in the assets, liabilities, financial condition
or business (financial or otherwise) of the Company from that shown or
reflected in the Interim Financial Statements. As of the Closing Date,
there shall not have occurred an event which, in the reasonable opinion
of Buyer, materially and adversely affects or may materially or
adversely affect the operations, business or, except as set forth in
the Disclosure Letter, prospects of the Company.
8.4 DOCUMENTS. All documents required to be delivered to Buyer at or
prior to the Closing Date shall have been duly delivered.
8.5 NO LITIGATION. On the Closing Date, except as set forth in the
Disclosure Letter, no action or proceeding shall be pending or, to the
knowledge of the Shareholders, threatened by any person, firm,
corporation, or governmental authority which questions, or seeks to
enjoin or prohibit (a) the purchase and sale of the capital stock and
the other transactions contemplated by this Agreement or (b) the right
of the Company to conduct its operations and carry on its business in
the normal course and in accordance with past practice.
8.6 EMPLOYMENT AND OTHER AGREEMENTS. Xxxx X. Xxxx and Xxx X. Xxxxxxx III
shall have entered into the employment agreements, stock transfer
restriction and other agreements with Buyer substantially in the forms
as set forth in the Disclosure Letter or as attached as an exhibit
hereto.
8.7 CONVERSION OF CONVERTIBLE DEBT. All convertible debt of the Company as
set forth in the Disclosure Letter shall have been converted into the
common stock of the Company, such shares of common stock shall be
outstanding as of the Closing Date and shall be outstanding for the
purposes of Section 2.1 hereof. In addition, each recipient of Stock
Consideration Shares not a party to this Agreement shall deliver to
Buyer an investment letter containing, in substance, the
representations contained in Section 4.25 hereof in form satisfactory
to Buyer.
8.8 REFINANCING OF DEBT. The Company's debtholders shall have agreed in
writing to the assignment by the Company, and the assumption of the
Buyer, of the Company's long-term notes and long-term line of credit as
set forth in the Disclosure Letter, upon terms and conditions
reasonably satisfactory to the Buyer in its sole discretion. Buyer and
the Company agree to use their best efforts to provide such debtholders
with all information required in connection with obtaining such
agreement.
8.9 CANCELLATION OF OPTIONS. The Company and each holder of, or any person
with whom the Company has any oral or written understanding, commitment
or promise to issue or grant, any option, warrant or other right to
acquire capital stock of the Company shall have entered into a written
agreement reasonably satisfactory in form and substance to the Buyer
canceling said options, warrants, other rights, understandings,
29
commitments or promises, which agreements shall contain releases of the
Company with respect thereto, and copies thereof shall have been
delivered to the Buyer.
9 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDERS. The Merger is subject
to the conditions set forth in this Section 9 for the exclusive benefit of
Shareholders to be fulfilled on or prior to the Closing Date. Shareholders may,
however, waive the fulfillment of any of these conditions, either before or
after the Closing Date, but any waiver, to be binding upon Shareholders, must be
by a writing executed by, or on behalf of, them. Buyer shall use commercially
reasonable efforts to cause each condition to be fulfilled.
9.1 REPRESENTATIONS. All representations and warranties of the Buyer
contained in this Agreement shall be true and correct in all material
respects when made and such representations and warranties shall be
deemed to be, as of the Closing Date, true and correct in all material
respects.
9.2 PERFORMANCE OF AGREEMENTS. All covenants, agreements and obligations
required by the terms of this Agreement to be performed by Buyer at or
prior to the Closing Date shall have been duly and properly performed
or fulfilled in all material respects.
9.3 DOCUMENTS. All documents required to be delivered to Shareholders at
or prior to the Closing shall have been duly delivered.
9.4 EMPLOYMENT AND OTHER AGREEMENTS. Xxxx X. Xxxx and Xxx X. Xxxxxxx III
shall have entered into the employment, stock transfer restriction and
other agreements with Buyer substantially in the forms as set forth in
the Disclosure Letter or as attached as an exhibit hereto.
9.5 TAX MATTERS. The Shareholders shall have received a written opinion of
Xxxxxx & Xxxxxxxx, in form reasonably satisfactory to the Shareholders
(the "Tax Opinion"), to the effect that (i) the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Code, (ii)
the exchange in the Merger of the Company's common stock for the IBS
Stock will not give rise to gain or loss to the Shareholders with
respect to such exchange (except with respect to any cash received),
and (iii) none of the Company, the Merger Subsidiary or the Buyer will
recognize gain or loss as a consequence of the Merger (except for
amounts resulting from any required change in accounting methods). In
rendering such Tax Opinion, such counsel shall be entitled to rely upon
representations of officers of the Company, the Shareholders and the
Buyer reasonably satisfactory in form and substance to such counsel.
9.6 NO ADVERSE CHANGE. On the Closing Date, there shall have been no
material adverse change in the assets, liabilities, financial condition
or business (financial or otherwise) of Buyer from that represented to
the Shareholders as of the date hereof. As of the Closing Date, there
shall not have occurred an event which, in the reasonable opinion of
the Shareholders, materially and adversely affects or may materially or
adversely affect the operations, business or prospects of the Buyer.
30
9.7 BOARD OF DIRECTORS. Buyer shall have caused its Board of Directors to
elect Xxx X. Xxxxxxx III as a director of Buyer effective upon the
Closing.
10 DELIVERIES BY SHAREHOLDERS AT THE CLOSING. On the Closing Date, and subject
to the terms and conditions set forth herein, the Shareholders shall deliver to
Buyer:
(A) Certificates evidencing all of the shares of Capital Stock and
the shares of the Capital Stock issued upon the conversion of the
convertible debt, together with stock transfer powers with
respect thereto duly executed by the Shareholders or other
holders;
(B) The books and records of the Company;
(C) Resolutions of the Company's Board of Directors and
Shareholders approving the transactions contemplated hereby;
(D) Executed employment agreements, referenced in Section 8.6
above;
(E) Executed stock transfer restriction agreement, referenced in
Section 2.10 above;
(F) The written resignations, effective immediately, of any and
all of the present officers and directors of the Company;
(G) Executed assignment(s) of long-term notes and line of credit;
and
(H) Certificate of Officer of the Company and of the
Shareholders that representations and warranties of the Company
are true and correct as of Closing Date
(J) Certificates of Good Standing for the Company in Florida and
any state where it is qualified to do business; and
(K) Such additional items as Buyer may reasonably request.
11 DELIVERIES BY BUYER ON THE CLOSING DATE. On the Closing Date, and subject to
the terms and conditions set forth herein, Buyer shall deliver to the
Shareholders:
(A) The Stock Consideration Shares, excluding the Reserved Shares,
and the Notes;
(B) Executed assumption(s) of long-term notes and line of credit;
(C) Executed employment agreement referenced in Section 9.4 above;
(D) Resolutions of the Buyer's Board of Directors and shareholders
approving the transactions contemplated hereby;
31
(E) Resolutions of the Merger Subsidiary's Board of Directors and
sole shareholder approving the transaction contemplated hereby;
(F) Executed assumptions of the long-term notes and line of credit;
(G) Tax opinion referenced in Section 9.5 above;
(H) Officer's certificate of Buyer that representations and
warranties of the Buyer are true and correct as of Closing Date;
(I) Such additional items as the Shareholders may reasonably
request.
12 EXPENSES. The Buyer shall bear and pay the legal, accounting and other
expenses of the Buyer associated with the consummation of the transactions
contemplated hereby. The Company shall bear and pay the legal, accounting and
other expenses of the Company associated with the consummation of the
transactions contemplated hereby up to $60,000.
13 PUBLICITY. No party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement or otherwise
publicize the execution and delivery of this Agreement, the provisions hereof or
the transactions contemplated hereby without the prior written approval of the
form and content of such press release or publicity by the Buyer or the
Shareholders, as applicable; provided, however, that Buyer may make public
disclosures that it believes in good faith are required by applicable law or any
listing or trading agreement concerning its publicly traded securities (in which
case the Buyer will use its best efforts to advise the other parties prior to
making such disclosure).
14 MISCELLANEOUS.
14.1 NOTICES. Any and all notices, requests, demands, consents, approvals or
other communications required or permitted to be given under any
provision of this Agreement shall be in writing and shall be deemed
given upon personal delivery or the mailing thereof by first class
certified mail, return receipt requested, postage pre-paid; or by
telecopier or other electronic means, as follows:
If to Buyer:
IBS Interactive, Inc.
0 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxx Xxxxxxxx, Xx., President & CEO
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
32
If to Shareholders:
Xxxx X. Xxxx
Shareholders' Agent
00 Xxxxxx Xxxx
Xxxxx Xxxxx Xxxxx, Xxxxxxx 00000
with a copy to:
Xxxxxx & Xxxxxxxx
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Coffee, Esq.
Any party hereto may change its address for the purpose of this
Agreement by notice to the other parties given as aforesaid.
14.2 ENTIRE AGREEMENT. This Agreement, together with the Disclosure Letter
and the agreements and documents delivered pursuant to this Agreement,
constitute the entire agreement of the parties with respect to the
subject matter hereof and the transactions contemplated hereby and
collectively supersede any and all prior oral or written negotiations,
commitments, understandings and agreements between the Shareholders and
the Buyer with respect thereto. This Agreement may not be modified,
amended or terminated except by a written agreement specifically
referring to this Agreement signed by the Buyer and the Shareholders'
Agent.
14.3 DEFINITION OF KNOWLEDGE. "Knowledge" means the actual knowledge of the
person making a representation or warranty under this Agreement. In the
case of the Buyer, "knowledge" means the actual knowledge of the
officers of the Buyer.
14.4 DISCLOSURE LETTER PART OF AGREEMENT. The Disclosure Letter referred to
herein and delivered to Buyer pursuant hereto, including any amendments
thereto or changes therein delivered to Buyer on or prior to the
Closing Date, shall be deemed part of this Agreement as fully and
effectively as if set forth at length herein. The terms used in said
Disclosure Letter will have the same meanings as such terms have in
this Agreement unless a contrary intention is clearly manifested
therein.
14.5 SEVERABILITY. In the event that any provision of this Agreement would
be held to be invalid, prohibited or unenforceable in any jurisdiction
for any reason, unless such provision is narrowed by judicial
construction, this Agreement shall, as to such jurisdiction, be
construed as if such invalid, prohibited or unenforceable provision had
been more narrowly drawn so as not to be invalid, prohibited or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement would be held to be invalid, prohibited or unenforceable in
any jurisdiction for any reason, such provision, as to such
jurisdiction for any reason, shall be ineffective to the extent of such
invalidity, prohibition or unenforceability, without invalidating the
remaining portion of such provision or the other provisions of this
Agreement or affecting the validity or enforceability of such provision
in any other jurisdiction.
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14.6 NO WAIVER. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such
waiver, and no such waiver shall be deemed a waiver of any subsequent
breach or default of the same or similar nature.
14.7 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of each party hereto, and its successors and assigns. Except as
hereafter provided, this Agreement shall not be assigned by either
Buyer, Company or Shareholders and any attempted assignment shall be
void.
14.8 PERSONS HAVING RIGHTS UNDER THIS AGREEMENT. Except as provided in the
Disclosure Letter, nothing in this Agreement expressed and nothing that
may be implied from any of the provisions hereof is intended, or shall
be construed, to confer upon, or give to, any person or corporation
other than the parties hereto, any right, remedy, or claim under or by
reason of this Agreement or of any covenant, condition, stipulation,
promise or agreement contemplated hereby. All covenants, conditions,
stipulations, promises and agreements contained in this Agreement shall
be for the sole and exclusive benefit of the parties hereto and their
successors and assigns.
14.9 HEADINGS. The article and section headings contained herein are for the
purpose of convenience only and are not intended to define or limit the
contents of said articles or sections.
14.10 GOVERNING LAW; JURISDICTION. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY,
WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
ALL ACTIONS BROUGHT WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT SHALL BE BROUGHT IN FEDERAL COURT FOR THE NORTHERN
DISTRICT OF FLORIDA. THE PARTIES CONSENT TO PERSONAL JURISDICTION IN
ANY ACTION BROUGHT IN SUCH FEDERAL COURT.
14.11 FURTHER ASSURANCES. The Shareholders and the Buyer shall cooperate and
take such actions and execute and deliver such other documents, at or
prior to the Closing or subsequent thereto as may be reasonably
requested by any other party hereto in order to carry out this
Agreement and the transactions contemplated thereby.
14.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more
than one party but all of which taken together shall constitute one and
the same Agreement.
14.13 REMEDIES. To the extent permitted by law, Sections 2 and 7 contain the
sole and exclusive remedies for all claims among the parties relating
to this Agreement or any other document executed and delivered by the
parties in connection herewith and the transactions contemplated
hereby, all of which claims shall be made pursuant to, and subject to,
Sections 2 and 7.
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14.14 CERTAIN DEFINITIONS. As used herein, the word "person" shall include
an individual and entity of any kind.
14.15 ENTIRE AGREEMENT. This agreement (together with the Disclosure Letter)
and the agreements and documents delivered pursuant to this Agreement,
constitute the entire agreement of the parties with respect to the
subject matter hereof, and collectively supersede all other prior or
contemporaneous negotiations, commitments, agreements and
understandings (whether written or oral), between the parties with
respect to the subject matter hereof.
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14.16 SHAREHOLDERS' AGENT. Each Shareholder hereby appoints Xxxx X. Xxxx as
such Shareholder's agent, attorney-in-fact and representative
("Shareholders' Agent"), to do any and all things and to execute any
and all documents, in such Seller's name, place and stead, in any way
which such Shareholder could do if personally present, in connection
with this Agreement and the transactions contemplated hereby,
including, but not limited to, amending, canceling, extending or
waiving any term of this Agreement, to bring claims for and defend
claims against liabilities and Additional Liabilities pursuant to the
terms of this Agreement and to enter into settlement negotiations and
to settle claims thereunder, and to accept notices pursuant to of this
Agreement. Each of the other parties hereto shall be entitled to rely,
as being binding upon each Shareholder, upon any document reasonably
believed by it to be genuine and correct and to have been signed by the
Shareholders' Agent, and no other party shall be liable to any
Shareholder for any action taken or omitted to be taken by it on such
reliance.
14.17 ISSUANCE OF CERTAIN OPTIONS. The Buyer agrees to place its 2000 Stock
Option Plan on the agenda for approval at the regular annual meeting of
the Buyer's shareholders, which Buyer shall use its best efforts to
hold on or prior to June 30, 2000. If the Buyer's 2000 Stock Option
Plan is approved by Buyer's Stockholders, as soon as practicable after
the Closing Date the Buyer shall grant to those employees of the
Surviving Company identified in the Disclosure Letter options to
purchase an aggregate 135,000 shares of IBS Stock, in such amounts for
each employee as is set forth in the Disclosure Letter. All such
options shall be granted in accordance with, and shall be subject to,
the terms and provisions of said 2000 Stock Option Plan. The
Shareholders' Representative shall have the right, by written notice to
the Buyer, to make immaterial changes to the allocation of said options
set forth in the Disclosure Letter among the employees listed therein
and/or a reasonable reallocation of the number of options to be so
granted to account for employees no longer in the employ of the
Surviving Corporation or newly hired employees.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed the day and year first above written.
Shareholder Shareholder
/s/ Xxxx X. Xxxx /s/ Xxx X. Xxxxxxx III
------------------------------- ------------------------------
Name: Xxxx X. Xxxx Name: Xxx X. Xxxxxxx III
Shareholder Shareholder
/s/ Xxxxxxx X. Xxxxx /s/ Xxx X. Xxxxxx
------------------------------- ------------------------------
Name: Xxxxxxx X. Xxxxx Name: Xxx X. Xxxxxx
Shareholder
/s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
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digital fusion, inc.
By: /s/ /s/ Xxxx X. Xxxx
Name: Xxxx X. Xxxx
Title: President
IBS INTERACTIVE, INC.
By: /s/ Xxxxxxxx Xxxxxxxx, Xx.
Name: Xxxxxxxx Xxxxxxxx, Xx.
Title: CEO
DIGITAL FUSION ACQUISITION CORP.
By:/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, President
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