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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 15, 1997
DAOU SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-22073 330284454
(Commission File Number) (IRS Employer Identification No.)
5120 Shoreham Place, San Diego, California 92122
(Address of principal executive offices, including zip code)
(619) 452-2221
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 15, 1997, DAOU Systems, Inc., a Delaware corporation (the
"Company"), acquired 100% of the issued and outstanding shares of On-Line
Networking, Inc., a New Jersey corporation ("On-Line"), through the issuance of
150,000 shares of the Company's Common Stock, par value $.001 per share, to the
stockholders of On-Line (the "Stockholders"). The acquisition was accomplished
by means of a merger (the "Merger") of On-Line with and into DAOU On-Line, Inc.,
a Delaware corporation and wholly owned subsidiary of the Company (the
"Subsidiary"), pursuant to the terms of an Agreement and Plan of Merger, dated
as of September 25, 1997 (the "Merger Agreement"), by and among the Company, the
Subsidiary, On-Line and the Stockholders.
As a result of the Merger, all of the shares of On-Line were canceled
and retired, and On-Line was merged into the Subsidiary. Pursuant to the terms
of the Merger Agreement, the Stockholders received 150,000 shares of the
Company's Common Stock, par value $.001 per share, having an aggregate value of
approximately $5 million at the date of the Merger Agreement. The Merger
constituted a nontaxable reorganization under Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, and will be recorded as a pooling of interests
for accounting purposes.
On-Line, a privately held corporation based in Saddle Brook, New
Jersey, is a communications contractor that designs, installs and provides
servicing of local area computer and voice network systems. The company also
provides other telecommunications infrastructure applications, and sells network
services related to these activities.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of business acquired.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Company to provide the financial statements, if any,
required by Item 7(a) of Form 8-K. In accordance with Item 7(a)(4) of Form 8-K,
such financial statements, if any, shall be filed by amendment to this Form 8-K
on or about December 1, 1997.
(b) Pro forma financial information.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Company to provide the pro forma financial information, if
any, required by Item 7(b) of Form 8-K. In accordance with Item 7(b)(2) of Form
8-K, such pro forma financial information, if any, shall be filed by amendment
to this Form 8-K on or about December 1, 1997.
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(c) Exhibits.
The following exhibits are filed herewith or incorporated by reference
as part of this report:
Exhibit
No. Document Description
-------- -------------------------------------------------------
2.1*+ Agreement and Plan of Merger, dated as of September 25,
1997 (the "Merger Agreement"), by and among DAOU
Systems, Inc., a Delaware corporation, DAOU-On-Line,
Inc., a Delaware corporation and wholly owned
subsidiary of DAOU Systems, Inc., On-Line Networking,
Inc., a New Jersey corporation, and the Stockholders of
On-Line Networking, Inc.
99.1** Press release entitled "DAOU Systems Merges with
On-Line Networking, Inc."
* The table of contents to the Merger Agreement lists the exhibits
and schedules to the Merger Agreement. In accordance with Item 601(b)(2) of
Regulation S-K, the exhibits and schedules to the Merger Agreement have been
excluded; such exhibits and/or schedules will be furnished supplementally upon
request by the Securities and Exchange Commission.
** Filed as an exhibit to the Company's Current Report on Form 8-K
which was filed with the Securities and Exchange Commission on September 26,
1997 and incorporated herein by reference.
+ Confidential treatment has been requested for portions of this
exhibit.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 29, 1997 DAOU SYSTEMS, INC.
By: /s/ Fred C. Mcgee
-----------------------------------------
Fred C. McGee, Chief Financial Officer
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EXHIBIT INDEX
Exhibit
No. Document Description
-------- --------------------------------------------------
2.1*+ Agreement and Plan of Merger, dated as of
September 25, 1997(the "Merger Agreement"), by and
among DAOU Systems, Inc., a Delaware corporation,
DAOU On-Line, Inc., a Delaware corporation and
wholly owned subsidiary of DAOU Systems, Inc.,
On-Line Networking, Inc., a New Jersey
corporation, and the Stockholders of On-Line
Networking, Inc.
99.1** Press release entitled "DAOU Systems Merges with
On-Line Networking, Inc.."
* The table of contents to the Merger Agreement lists the exhibits and
schedules to the Merger Agreement. In accordance with Item 601(b)(2) of
Regulation S-K, the exhibits and schedules to the Merger Agreement have been
excluded; such exhibits and/or schedules will be furnished supplementally upon
request by the Securities and Exchange Commission.
** Filed as an exhibit to the Company's Current Report on Form 8-K
which was filed with the Securities and Exchange Commission on September 26,
1997 and incorporated herein by reference.
+ Confidential treatment has been requested for portions of this
exhibit.
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DAOU SYSTEMS, INC.,
DAOU ON-LINE, INC.
AND
ON-LINE NETWORKING, INC.
AND THE
STOCKHOLDERS THEREOF
LISTED ON THE SIGNATURE PAGE HERETO
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
SECTION 1.1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . -2-
SECTION 1.2 EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . -2-
SECTION 1.3 EFFECT OF THE MERGER . . . . . . . . . . . . . . . . . -2-
SECTION 1.4 CERTIFICATE OF INCORPORATION; BY-LAWS. . . . . . . . . -2-
SECTION 1.5 DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . -2-
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES. . . . . . -3-
SECTION 2.1 CONVERSION OF SECURITIES . . . . . . . . . . . . . . . -3-
SECTION 2.2 EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . -3-
SECTION 2.3 STOCK TRANSFER BOOKS . . . . . . . . . . . . . . . . . -5-
SECTION 2.4 DISSENTING SHARES. . . . . . . . . . . . . . . . . . . -5-
ARTICLE IIA VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . -6-
SECTION 2.1A CONSENT AND VOTING AGREEMENT . . . . . . . . . . . . . -6-
SECTION 2.2A [[RESERVED]] . . . . . . . . . . . . . . . . . . . . . -6-
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
SECTION 3.1 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . -6-
SECTION 3.2 CERTIFICATE OF INCORPORATION AND BY-LAWS . . . . . . . -7-
SECTION 3.3 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . -7-
SECTION 3.4 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . -7-
SECTION 3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . . . . -8-
SECTION 3.6 PERMITS; COMPLIANCE. . . . . . . . . . . . . . . . . . -8-
SECTION 3.7 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . -8-
SECTION 3.8 NO UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . -9-
SECTION 3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . -9-
SECTION 3.10 ABSENCE OF LITIGATION. . . . . . . . . . . . . . . . . -11-
SECTION 3.11 VOTE REQUIRED. . . . . . . . . . . . . . . . . . . . . -11-
SECTION 3.12 BROKERS. . . . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 3.13 COMPANY ACTION . . . . . . . . . . . . . . . . . . . . -11-
SECTION 3.14 TAX MATTERS; AND "POOLING OF INTERESTS". . . . . . . . -12-
SECTION 3.15 REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . -13-
SECTION 3.16 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . -13-
SECTION 3.17 TANGIBLE ASSETS. . . . . . . . . . . . . . . . . . . . -15-
SECTION 3.18 INVENTORY. . . . . . . . . . . . . . . . . . . . . . . -15-
SECTION 3.19 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . -15-
SECTION 3.20 NOTES AND ACCOUNTS RECEIVABLE. . . . . . . . . . . . . -17-
SECTION 3.21 POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . . -17-
SECTION 3.22 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . -17-
SECTION 3.23 EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . -17-
SECTION 3.24 EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . -18-
SECTION 3.25 GUARANTIES . . . . . . . . . . . . . . . . . . . . . . -19-
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 3.26 ENVIRONMENT, HEALTH AND SAFETY . . . . . . . . . . . . -19-
SECTION 3.27 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. . . . -20-
SECTION 3.28 DELIVERY OF INFORMATION. . . . . . . . . . . . . . . . -20-
SECTION 3.29 PRODUCT AND SERVICE WARRANTIES . . . . . . . . . . . . -20-
SECTION 3.30 PRODUCT AND SERVICE LIABILITY. . . . . . . . . . . . . -20-
SECTION 3.31 CUSTOMER/SUPPLIER RELATIONSHIPS. . . . . . . . . . . . -20-
SECTION 3.32 CERTAIN BUSINESS PRACTICES . . . . . . . . . . . . . . -21-
SECTION 3.33 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . -21-
SECTION 3.34 LIMITATION ON REPRESENTATIONS AND WARRANTIES . . . . . -21-
ARTICLE IIIA REPRESENTATIONS AND WARRANTIES OF EACH
STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
SECTION 3.1A AUTHORIZATION OF TRANSACTION . . . . . . . . . . . . . -21-
SECTION 3.2A NONCONTRAVENTION . . . . . . . . . . . . . . . . . . . -21-
SECTION 3.3A BROKERS. . . . . . . . . . . . . . . . . . . . . . . . -22-
SECTION 3.4A COMPANY SHARES . . . . . . . . . . . . . . . . . . . . -22-
SECTION 3.5A ACCREDITED INVESTOR. . . . . . . . . . . . . . . . . . -22-
SECTION 3.6A INVESTMENT INTENTION . . . . . . . . . . . . . . . . . -22-
SECTION 3.7A EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . -22-
SECTION 3.8A LIMITATION ON REPRESENTATIONS AND WARRANTIES . . . . . -22-
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
PARENT SUB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
SECTION 4.1 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . -23-
SECTION 4.2 CERTIFICATES OF INCORPORATION AND BY-LAWS. . . . . . . -23-
SECTION 4.3 PARENT COMMON STOCK; CAPITALIZATION. . . . . . . . . . -23-
SECTION 4.4 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . -24-
SECTION 4.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . . . . -24-
SECTION 4.6 REPORTS; FINANCIAL STATEMENTS. . . . . . . . . . . . . -24-
SECTION 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . -25-
SECTION 4.8 OWNERSHIP OF PARENT SUB; NO PRIOR ACTIVITIES . . . . . -25-
SECTION 4.9 BROKERS. . . . . . . . . . . . . . . . . . . . . . . . -25-
SECTION 4.10 TAX MATTERS; "POOLING OF INTERESTS". . . . . . . . . . -25-
SECTION 4.11 LIMITATION ON REPRESENTATIONS AND WARRANTIES . . . . . -26-
ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
SECTION 5.1 AFFIRMATIVE COVENANTS OF THE COMPANY . . . . . . . . . -26-
SECTION 5.2 NEGATIVE COVENANTS OF THE COMPANY. . . . . . . . . . . -26-
SECTION 5.3 NEGATIVE COVENANTS OF PARENT . . . . . . . . . . . . . -28-
SECTION 5.4 ACCESS AND INFORMATION . . . . . . . . . . . . . . . . -28-
SECTION 5.5 ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . -29-
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE VI ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . -29-
SECTION 6.1 APPROPRIATE ACTION; CONSENTS; FILINGS. . . . . . . . . . -29-
SECTION 6.2 TAX TREATMENT; "POOLING OF INTERESTS"; AFFILIATES. . . . -30-
SECTION 6.3 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . -30-
SECTION 6.4 OBLIGATIONS OF PARENT SUB. . . . . . . . . . . . . . . . -31-
SECTION 6.5 RESTRICTIVE LEGEND . . . . . . . . . . . . . . . . . . . -31-
SECTION 6.6 DELIVERY OF SEC FILINGS. . . . . . . . . . . . . . . . . -31-
SECTION 6.7 [[RESERVED.]]. . . . . . . . . . . . . . . . . . . . . . -32-
SECTION 6.8 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . -32-
ARTICLE VIA PIGGYBACK REGISTRATION RIGHTS. . . . . . . . . . . . . . . . -32-
SECTION 6.1A DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . -32-
SECTION 6.2A PARENT REGISTRATION. . . . . . . . . . . . . . . . . . . -32-
SECTION 6.3A FURNISH INFORMATION. . . . . . . . . . . . . . . . . . . -33-
SECTION 6.4A EXPENSES OF PARENT REGISTRATION. . . . . . . . . . . . . -33-
SECTION 6.5A UNDERWRITING REQUIREMENTS. . . . . . . . . . . . . . . . -33-
SECTION 6.6A ASSIGNMENT OF REGISTRATION RIGHTS. . . . . . . . . . . . -33-
SECTION 6.7A "MARKET STAND-OFF" AGREEMENT . . . . . . . . . . . . . . -33-
SECTION 6.8A RULE 144 AVAILABILITY. . . . . . . . . . . . . . . . . . -34-
ARTICLE VII CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . -34-
SECTION 7.1 CONDITIONS TO OBLIGATIONS OF EACH
PARTY UNDER THIS AGREEMENT . . . . . . . . . . . . . . . -34-
SECTION 7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT . . . . . -35-
SECTION 7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. . . -36-
ARTICLE VIII TERMINATION, AMENDMENT, WAIVER AND
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 8.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 8.2 INVESTIGATION. . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 8.3 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 8.4 WAIVER; REMEDIES CUMULATIVE. . . . . . . . . . . . . . . -37-
SECTION 8.5 FEES, EXPENSES AND OTHER PAYMENTS. . . . . . . . . . . . -38-
SECTION 8.6 STOCKHOLDER INDEMNIFICATION, HOLD BACK AND ESCROW. . . . -38-
ARTICLE IX GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . -41-
SECTION 9.1 EFFECTIVENESS OF REPRESENTATIONS,
WARRANTIES AND AGREEMENTS. . . . . . . . . . . . . . . . -41-
SECTION 9.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . -41-
SECTION 9.3 CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . -42-
SECTION 9.4 HEADINGS; CONSTRUCTION . . . . . . . . . . . . . . . . . -48-
SECTION 9.5 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . -48-
SECTION 9.6 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . -48-
SECTION 9.7 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . -49-
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 9.8 PARTIES IN INTEREST. . . . . . . . . . . . . . . . . . . -49-
SECTION 9.9 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . -49-
SECTION 9.10 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . -49-
SECTION 9.11 BINDING ARBITRATION. . . . . . . . . . . . . . . . . . . -49-
SECTION 9.12 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . -50-
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INDEX TO EXHIBITS
Exhibit 2.1A Written Consent of the Stockholders of the Company
Exhibit 5.5 Form of Escrow Agreement
Exhibit 7.2(g) Form of Affiliate Agreement
Exhibit 7.2(h)(i) Form of Dickson Employment Agreement
Exhibit 7.2(h)(ii) Form of Carr Employment Agreement
Exhibit 7.2(h)(iii) Form of DiPalmer Employment Agreement
Exhibit 7.2(i) Form of Non-Competition Agreement
Exhibit 7.2(j) Form of Spousal Consent
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INDEX TO SCHEDULES
SCHEDULE
NUMBER DESCRIPTION
- ------ -----------
3.1 Subsidiaries and Investments in Other Persons
3.2 Officers and Directors, Certificate of Incorporation and
By-Laws of the Company
3.3 Stockholders of the Company
3.5 Filings and Consents of the Company
3.7 Financial Statements of the Company
3.8 Liabilities of the Company
3.9 Certain Changes or Events of the Company
3.10 Litigation Matters of the Company
3.14(c) Tax Returns of the Company
3.14(f) Tax Basis of the Company's Assets
3.15(b) Real Property Leased or Subleased by the Company
3.16(c) Intellectual Property Owned by the Company
3.16(d) Intellectual Property Licenses, Sublicenses, Agreements or
Permission
3.17 Tangible Assets of the Company
3.18 Inventory of the Company
3.19 Contracts of the Company
3.20 Notes and Accounts Receivable of the Company
3.22 Insurance Policies of the Company
3.23 Collective Bargaining Agreements and Strikes of the Company
3.24 Employee Benefit Plans of the Company
3.26 Environmental Matters of the Company
3.27 Certain Business Relationships with the Company
3.29 Standard Sale, Lease and Performance Terms and Conditions of
the Company
3.31 Customer/Supplier Relationships of the Company
3.2A Corporation Agreement
5.2 Negative Covenants of the Company
7.2(d) Contracts or Agreements Requiring Consents or Waivers with
respect to the Company
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THIS AGREEMENT AND PLAN OF MERGER, dated as of September 25, 1997 (this
"AGREEMENT"), by and among DAOU Systems, Inc., a Delaware corporation
("PARENT"), DAOU On-Line, Inc., a Delaware corporation and a wholly-owned
Subsidiary of Parent ("PARENT SUB"), On-Line Networking, Inc., a New Jersey
corporation (the "COMPANY"), and all of the stockholders of the Company listed
on the signature page hereto (the "STOCKHOLDERS"). Certain capitalized terms
used in this Agreement are defined in Section 6.1A and Section 9.3.
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware
("DELAWARE LAW"), the Company will merge with and into Parent Sub (the
"MERGER");
WHEREAS, the Board of Directors of the Company has determined that the
Merger is in the best interests of the Company and the Stockholders, has
approved and adopted this Agreement and the transactions contemplated hereby,
and has recommended that the Stockholders approve and adopt this Agreement and
the transactions contemplated hereby;
WHEREAS, the Stockholders hold one hundred percent (100%) of the
outstanding voting power of the Company, have irrevocably consented to the
execution and delivery of this Agreement and the consummation of the Merger and
have irrevocably agreed to vote in favor of the Merger at a meeting of
Stockholders or by a written consent executed by each Stockholder, and such
consent and agreement is an essential condition and inducement to Parent and
Parent Sub to enter into this Agreement;
WHEREAS, the Boards of Directors of Parent and Parent Sub have determined,
respectively, that the Merger is in the best interests of Parent and Parent Sub
and their respective stockholders, and have approved and adopted this Agreement
and the transactions contemplated hereby;
WHEREAS, the Company, Parent and Parent Sub intend that the Merger shall
constitute a "reorganization" under Section 368(a)(1)(A) of the Code, by
application of Section 368(a)(2)(D) of the Code, and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
-1-
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ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with Delaware Law, at the Effective Time (as
defined in Section 1.2), the Company shall be merged with and into Parent Sub.
As a result of the Merger, the separate corporate existence of the Company shall
cease and Parent Sub shall continue as the surviving corporation in the Merger
(the "SURVIVING CORPORATION"). The name of the Surviving Corporation shall be
DAOU On-Line, Inc.
1.2 EFFECTIVE TIME. As promptly as practicable after the satisfaction or,
if permissible, waiver of the closing conditions set forth in Article VII, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger (the "CERTIFICATE OF MERGER") with the Secretary of State of the State
of Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, Delaware Law (the date and time of such filing, or such
later time as may be agreed to in writing by Parent, Parent Sub and the Company
and specified in the Certificate of Merger, being the "EFFECTIVE TIME").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of Delaware Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise provided herein, all of the property, rights,
privileges, powers and franchises of Parent Sub and the Company shall vest in
the Surviving Corporation, and all debts, Liabilities and duties of Parent Sub
and the Company shall become the debts, Liabilities and duties of the Surviving
Corporation.
1.4 CERTIFICATE OF INCORPORATION; BY-LAWS. At the Effective Time, the
Certificate of Incorporation of Parent Sub as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation, and the By-Laws of Parent Sub shall be the By-Laws of the Surviving
Corporation.
1.5 DIRECTORS AND OFFICERS. The directors of Parent Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Parent Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
2.1 CONVERSION OF SECURITIES.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Parent Sub, the Company or the holders of any of the
following securities, each share of the Company's common stock, no par value per
share ("COMPANY COMMON STOCK"), issued and outstanding immediately prior to the
Effective Time (excluding any Dissenting Shares, if applicable) shall be
converted into the right to receive one hundred (100) (the "EXCHANGE RATIO")
fully paid, nonassessable shares of Parent's common stock, par value $.001 per
share ("PARENT COMMON STOCK"), subject to adjustment as set forth in Sections
2.1(b) and subject to pro rata withholding of shares to be held in escrow
pursuant to Section 5.5.
(b) If between the date of this Agreement and the Effective Time the
outstanding shares of Parent Common Stock or Company Common Stock shall have
been changed into a different number of shares of a different class, by reason
of any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Exchange Ratio shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
(c) At the Effective Time, all of the shares of Company Common Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each Certificate previously evidencing any such
shares shall thereafter represent only the right to receive the Merger
Consideration (as defined in Section 2.2(b)). The holders of such Certificates
previously evidencing such shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock, except as otherwise provided
herein or by Law. Such Certificates previously evidencing shares of Company
Common Stock shall be exchanged for certificates evidencing whole shares of
Parent Common Stock issued in consideration therefor in accordance with the
allocation procedures of this Section 2.1 and upon the surrender of such
Certificates in accordance with the provisions of Section 2.2. No fractional
shares of Parent Common Stock shall be issued, and, in lieu thereof, a cash
payment shall be made pursuant to Section 2.2(e).
2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit,
or shall cause to be deposited, with Baker & McKenzie or such other Person
designated by Parent and reasonably satisfactory to the Company (the "EXCHANGE
AGENT"), for the benefit of the Stockholders and for exchange in accordance with
this Article II through the Exchange Agent: (i) certificates evidencing such
number of whole shares of Parent Common Stock equal to the Exchange Ratio
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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multiplied by the number of shares of Company Common Stock outstanding; and (ii)
cash in consideration of fractional shares as provided in Section 2.2(e) (such
Parent Common Stock and cash being hereinafter referred to as the "EXCHANGE
FUND"). The Exchange Agent shall, pursuant to irrevocable instructions, deliver
the shares of Parent Common Stock (except that *** of such shares of Parent
Common Stock shall be delivered to an escrow agent pursuant to Sections 5.5 and
8.6) and cash out of the Exchange Fund. Except as contemplated by Section
2.2(f), the Exchange Fund shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of Company Common Stock (other than
Dissenting Shares, if applicable) (collectively, the "CERTIFICATES"), (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates evidencing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor (A) certificates evidencing that number
of whole shares of Parent Common Stock which such holder has the right to
receive in respect of the shares of Company Common Stock formerly evidenced by
such Certificate in accordance with Section 2.1, less that holder's pro rata
portion of the shares (rounded to the nearest whole share) to be held in escrow
pursuant to Sections 5.5 and 8.6 and (B) cash in lieu of fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 2.2(e)
(such shares of Parent Common Stock and cash, if any, being collectively, the
"MERGER CONSIDERATION"), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of shares of Company Common
Stock which is not registered in the transfer records of the Company, a
certificate evidencing the proper number of shares of Parent Common Stock may be
issued in accordance with this Article II to a transferee if the Certificate
evidencing such shares of Company Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer Taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each of the
Certificates shall be deemed at any time after the Effective Time to evidence
only the right to receive, upon such surrender, the Merger Consideration.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT COMMON
STOCK. No dividends or other distributions declared or made after the Effective
Time with respect to Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock evidenced thereby, and no other part of the
Merger Consideration shall be paid to any such holder, until the holder of such
Certificate shall surrender such Certificate, at which time, subject to the
effect of Delaware Law, there shall be issued to the holder (i) certificates
evidencing whole shares of Parent Common
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Stock issued in exchange therefor, and the amount of any cash payable with
respect to a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 2.2(e) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions (without interest
thereon), with a record date after the Effective Time but prior to surrender and
a payment date occurring after surrender, payable with respect to such whole
shares of Parent Common Stock. No interest shall be paid on the Merger
Consideration.
(d) NO FURTHER RIGHTS IN COMPANY COMMON STOCK. All shares of Parent
Common Stock issued and cash paid upon exchange of the shares of Company Common
Stock in accordance with the terms hereof shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to such shares of Company
Common Stock.
(e) NO FRACTIONAL SHARES.
(i) No certificates or scrip evidencing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of the
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent.
(ii) Each holder of a Certificate having a fractional interest
arising upon the conversion of such Certificate shall, at the time of surrender
of such Certificate, be paid by the Exchange Agent an amount in cash equal to
the value of such fractional interest based on a price per share equal to the
Market Price.
(f) TERMINATION OF THE EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of Company Common Stock for two
(2) years after the Effective Time shall be delivered to Parent, upon demand,
and any holders of Company Common Stock who have not theretofore complied with
this Article II shall thereafter look only to Parent for the Merger
Consideration to which they are entitled.
(g) NO LIABILITY. Neither Parent nor the Surviving Corporation shall
be liable to any holder of shares of Company Common Stock for any shares of
Parent Common Stock, cash or dividends or distributions with respect thereto
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar Law.
2.3 STOCK TRANSFER BOOKS. On the date hereof, the stock transfer books of
the Company shall be closed and there shall be no further registration of
transfers of shares of Company Common Stock thereafter on the records of the
Company. On or after the Effective Time, any Certificates presented to the
Exchange Agent for any reason shall be converted into the Merger Consideration.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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2.4 DISSENTING SHARES. If required under Delaware Law, notwithstanding any
other provisions of this Agreement to the contrary, shares of Company Common
Stock that are outstanding immediately prior to the Effective Time and which are
held by stockholders who shall have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly, in writing,
appraisal for such shares in accordance with Section 262 of Delaware Law
(collectively, "DISSENTING SHARES") shall not be converted into or represent the
right to receive the Merger Consideration. Such stockholders shall be entitled
to receive payment of the appraised value of such shares of Company Common Stock
held by them in accordance with the provisions of Section 262 of Delaware Law,
except that all Dissenting Shares held by stockholders who have failed to
perfect or who effectively have withdrawn or lost their rights to appraisal of
such shares of Company Common Stock under Section 262 of Delaware Law shall
thereupon be deemed to have been converted into and to have become exchangeable,
as of the Effective Time, for the right to receive, without any interest
thereon, the Merger Consideration, upon surrender, in the manner provided in
Section 2.2, of the Certificate or Certificates that formerly evidenced such
shares of Company Common Stock. Any payments required to be made to the holders
of any Dissenting Shares shall be funded by Parent or the Surviving Corporation.
ARTICLE IIA
VOTING RIGHTS
SECTION 2.1A CONSENT AND VOTING AGREEMENT. Each Stockholder hereby (a)
irrevocably consents to the execution and delivery of this Agreement and to the
consummation of the Merger and shall contemporaneously herewith execute the
written consent attached hereto as EXHIBIT 2.1A (the "CONSENT"), and (b) as long
as this Agreement has not been terminated prior to the date specified in Section
8.1(f), further irrevocably agrees to vote all shares of Company Common Stock as
to which such Stockholder is entitled to vote at a meeting of the stockholders
of the Company if any meeting is so held, or by written consent without a
meeting as follows: (i) in favor of approval and adoption of this Agreement and
the transactions contemplated hereby; (ii) against any action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company or such Stockholder under this
Agreement; and (iii) against any action or agreement (other than this Agreement
or the transactions contemplated by this Agreement or the termination of this
Agreement in accordance with its terms), that would, directly or indirectly,
impede, interfere with, delay, postpone or attempt to discourage the Merger,
including, without limitation: (A) any extraordinary corporate transaction, such
as a merger, consolidation or other business combination involving the Company;
(B) a sale or transfer of a material amount of Assets of the Company or a
reorganization, recapitalization or liquidation of the Company; (C) any change
in the management or board of directors of the Company or any Competing
Transaction, except as otherwise agreed to in writing by Parent; (D) any
material change in the present capitalization or dividend policy of the Company;
or (E) any other material change in the Company's corporate structure or
business.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
SECTION 2.2A [[RESERVED]].
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
Each of the Company and the Stockholders hereby represents and warrants,
jointly and severally, to Parent and Parent Sub as follows:
3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation or organization, has all requisite corporate
or other power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its properties makes
such qualification necessary. Except as set forth in SCHEDULE 3.1, the Company
has no Subsidiaries, and does not, directly or indirectly, own or control any
investment or interest (whether in the form of debt or equity) in any other
Person.
3.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. SCHEDULE 3.2 contains (i) a
list of the officers and directors of the Company and (ii) complete and correct
copies of the Company's Certificate of Incorporation and By-Laws or equivalent
organizational documents, in each case as amended or restated. The Company is
not in violation of any of the provisions of its Certificate of Incorporation or
By-Laws or equivalent organizational documents, in each case as amended or
restated.
3.3 CAPITALIZATION. The authorized capital stock of the Company consists
of Two Thousand Five Hundred (2,500) shares of Company Common Stock. As of
August 31, 1997, (a) One Thousand Five Hundred (1,500) shares of Company Common
Stock were issued and outstanding, all of which are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute, the Company's Certificate of Incorporation or By-Laws or any
agreement to which the Company is a party or bound, (b) no shares of Company
Common Stock were held in treasury of the Company and (c) SCHEDULE 3.3 sets
forth the name and address of each holder of Company Common Stock and the number
of shares of Company Common Stock held by such holder. There are no bonds,
debentures, notes or other indebtedness, issued or outstanding, having the right
to vote on any matters on which the Company's stockholders may vote. There are
no options, warrants, calls or other rights (including registration rights),
agreements, arrangements or commitments of any character, presently outstanding,
which (i) obligate the Company to issue, deliver or sell shares of its capital
stock or debt securities, (ii) obligate the Company to grant, extend or enter
into any such option, warrant, call or other such right, agreement, arrangement
or commitment, (iii) obligate the Company to repurchase, redeem or otherwise
acquire any shares of Company Common Stock, or (iv) relate to the issued or
unissued capital stock of, or other equity interests in, the Company.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
3.4 AUTHORITY. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
(including, with respect to the Merger, the approval and adoption of this
Agreement by the Stockholders who hold one hundred percent (100%) of the
outstanding shares of Company Common Stock) and no other corporate proceeding on
the part of the Company is necessary to authorize the execution and delivery of
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by the Stockholders, Parent
and Parent Sub, constitutes the legal, valid and binding obligation of the
Company enforceable in accordance with its terms.
3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in SCHEDULE 3.5, the execution and delivery
of this Agreement by the Company does not, and the performance of this Agreement
by the Company will not (i) conflict with or violate the Company's Certificate
of Incorporation or By-Laws or equivalent organizational documents, in each case
as amended or restated, (ii) conflict with or violate any federal, state,
foreign or local law, statute, ordinance, rule, regulation, order, judgment or
decree (collectively, "LAWS") in effect as of the date of this Agreement and
applicable to the Company or by which any of its properties is bound or subject
to, or (iii) result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
require payment under, or result in the creation of an Encumbrance on, any of
the properties or Assets of the Company pursuant to, any note, bond, mortgage,
indenture, Contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the Company
or any of its properties is bound or subject.
(b) Except as set forth in SCHEDULE 3.5, the execution and delivery
of this Agreement by the Company does not, and the performance of this Agreement
by the Company will not, require the Company to obtain any consent, approval,
authorization or permit of, or to make any filing with or notification to, any
governmental or regulatory authorities, domestic or foreign ("GOVERNMENTAL
ENTITIES"), based on Laws and other requirements of Governmental Entities in
effect as of the date of this Agreement, except for applicable requirements, if
any, of the state securities or blue sky laws ("BLUE SKY LAWS"), and the filing
and recordation of appropriate merger documents as required by Delaware Law.
3.6 PERMITS; COMPLIANCE. The Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to carry on its business as it is now being conducted
(collectively, the "COMPANY PERMITS"), *** there is no action, proceeding or
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
investigation pending or threatened regarding suspension or cancellation of any
of the Company Permits. The Company is not in conflict with, or in default or
violation of (a) any Law applicable to the Company or which any of its
properties is bound by or subject to or (b) any of the Company Permits. Since
December 31, 1996, the Company has not received from any Governmental Entity any
written notification with respect to possible conflicts, defaults or violations
of Laws.
3.7 FINANCIAL STATEMENTS. SCHEDULE 3.7 contains true, correct and
complete copies of (a) the unaudited Balance Sheets of the Company as of
December 31, 1996 and as of December 31, 1995, and the related Statements of
Operations, Statements of Cash Flows and Statements of Stockholders Equity for
the fiscal years then ended, and the notes and schedules thereto, and (b) the
Balance Sheet of the Company as of August 31, 1997 (the "INTERIM BALANCE SHEET")
and the related Statement of Operations and Statement of Stockholders Equity
((a) an (b) are collectively referred to herein as the "FINANCIAL STATEMENTS").
For purposes of this Agreement and except with respect to the representations
and warranties made in this Section 3.7, references to the Interim Balance Sheet
shall not include any notes and schedules in the Financial Statements. The
Financial Statements are attached hereto as SCHEDULE 3.7 and have been prepared
from books and records of the Company in accordance with accounting principles
applied on a basis consistent with preceding years and throughout the periods
involved (except as otherwise noted therein). The Financial Statements fairly
present the financial condition, results of operations and changes in cash flows
of the Company at the dates thereof and for the periods indicated in the
Statements of Operations, Cash Flows and Stockholders Equity. No financial
statement of any Person is required to be included in the Financial Statements.
3.8 NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE 3.8 ***
the Company has no liabilities or other obligations of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise
("LIABILITIES"), and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in any Liabilities,
other than Liabilities fully reflected or reserved against on the face of the
Interim Balance Sheet (rather than in any notes thereto) as adjusted for
Liabilities incurred in the Ordinary Course of Business since August 31, 1997
through the Effective Time.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996, there
has not been any material adverse change in the business, financial condition,
operations, results of operations or future prospects of the Company. Without
limiting the generality of the foregoing, *** since that date and except as
otherwise disclosed in SCHEDULE 3.9:
(a) the Company has not sold, leased, transferred, or assigned any of
its Assets, tangible or intangible, other than sales to its customers for fair
consideration in the Ordinary Course of Business or other than as fully
reflected on the face of the Interim Balance Sheet (rather than in any notes
thereto);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
(b) the Company has not entered into any agreement, Contract, lease
or license (or series of related agreements, Contracts, leases and licenses)
outside the Ordinary Course of Business;
(c) there is no fact, condition or event relating to (i) the
potential loss of the benefit of, or any material change in, any relationship
with any customers, clients, suppliers, key employees or insurers, or (ii) price
increases for parts, raw materials, supplies, services or equipment purchased
from present suppliers or vendors which is, with the lapse of time or the
occurrence of such event or condition is reasonably likely to be materially
adverse to the financial condition, business, Assets, properties or operations
of the Company;
(d) no party (including the Company) has accelerated, terminated,
modified or canceled any agreement, Contract, lease or license (or series of
related agreements, Contracts, leases and licenses) to which the Company is a
party or by which the Company is bound;
(e) the Company has not imposed any Security Interest upon any of its
Assets, tangible or intangible;
(f) the Company has not made any capital expenditure (or series of
related capital expenditures) either involving more than *** or outside the
Ordinary Course of Business;
(g) the Company has not made any capital investment in, any loan to,
or any acquisition of the securities or Assets of, any other Person (or series
of related capital investments, loans, and acquisitions);
(h) the Company has not issued any note, bond, or other debt security
or created, incurred, assumed or guaranteed any indebtedness for borrowed money
or capitalized lease obligation;
(i) the Company has not delayed or postponed the payment of accounts
payable or other Liabilities outside the Ordinary Course of Business;
(j) the Company has not canceled, compromised, waived or released any
right or claim (or series of related rights and claims);
(k) the Company has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(l) there has been no change made or authorized in the Company's
Certificate of Incorporation or By-Laws or equivalent organizational documents,
in each case as amended or restated;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
(m) the Company has not issued, sold or otherwise disposed of any
of its capital stock, or granted any options, warrants or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(n) the Company has not declared, set aside or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased or otherwise acquired any of its capital stock;
(o) the Company has not experienced any damage, destruction or Loss
(whether or not covered by insurance) to its property;
(p) the Company has not made any loan to, or entered into any other
transaction with, any of its directors, officers and employees;
(q) the Company has not entered into any employment Contract or
collective bargaining agreement, written or oral, or modified the terms of any
such Contract or agreement existing as of the date hereof;
(r) the Company has not granted any increase in the base
compensation of any of its directors, officers or employees;
(s) the Company has not adopted, amended, modified or terminated
any bonus, profit-sharing, incentive, severance or other plan, Contract or
commitment for the benefit of any of its directors, officers or employees (or
taken any such action with respect to any other Employee Benefit Plan);
(t) the Company has not made any other change in employment terms
for any of its directors, officers or employees outside the Ordinary Course of
Business;
(u) the Company has not made or pledged to make any charitable or
other capital contribution;
(v) there has not been any other occurrence, event, incident,
action, failure to act or transaction outside the Ordinary Course of Business
involving the Company; and
(w) the Company has not committed to any of the foregoing.
3.10 ABSENCE OF LITIGATION. Except as set forth on SCHEDULE 3.10, (a)
there is no claim, action, suit, litigation, proceeding, arbitration or
investigation of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or, to the Knowledge of the Stockholders and
the Company, threatened against the Company or any properties or rights of the
Company, and (b) the Company is not subject to any continuing order of, consent
decree, settlement agreement or other similar written agreement with or
continuing investigation by, any Governmental
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
Entity, or any judgment, order, writ, injunction, decree or award of any
Governmental Entity or arbitrator. In respect of the matters relating to or
arising in connection with the actions set forth in SCHEDULE 3.10, there is no
fact, event, condition, circumstance or other matter which either has, or is
reasonably likely to have resulted in, an event or determination having a
Company Material Adverse Effect. The Company has delivered to Parent copies of
all pleadings, correspondence and other documents relating to each matter
disclosed in SCHEDULE 3.10.
3.11 VOTE REQUIRED. The affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock is the only vote of the holders
of any class or series of the Company's capital stock necessary to approve the
Merger. The Stockholders, by executing this Agreement, have irrevocably
consented to the Merger and have irrevocably agreed to vote in favor of the
Merger. Such action by the Stockholders is sufficient to constitute stockholder
approval of the Merger.
3.12 BROKERS. The Company has no Liability or obligation to pay any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement or for which Parent or Parent Sub could become
liable or obligated.
3.13 COMPANY ACTION. The Board of Directors of the Company (at a meeting
duly called and held in compliance with New Jersey Law or by written consent)
has (a) determined that the Merger is in the best interests of the Company and
fair to the Stockholders, (b) approved the Merger in accordance with the
provisions of New Jersey Law, and (c) recommended the approval of this Agreement
and the Merger by the holders of the Company Common Stock.
3.14 TAX MATTERS; AND "POOLING OF INTERESTS".
(a) Neither the Company nor any of its Affiliates has taken or
agreed to take any action that would prevent the Merger from constituting (i) a
"reorganization" under Section 368(a)(1)(A) of the Code, by application of
Section 368(a)(2)(D) of the Code, or (ii) a "pooling of interests" in accordance
with GAAP and applicable SEC rules, including, without limitation, the sale of
any shares of Company Common Stock or Parent Common Stock during the period
commencing on the date which is thirty (30) days prior to the Effective Time and
ending on the Financial Result Date. The Company has timely filed or will
timely file all Tax Returns that it was or is required to file. All such Tax
Returns were correct and complete in all material respects. All Taxes owed by
the Company (whether or not shown on any Tax Return) have been paid. The
Company is not currently the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Security Interests on any
of the Assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Tax.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(b) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
(c) There is no dispute or claim concerning any Tax Liability of
the Company claimed or raised by any Governmental Entity. SCHEDULE 3.14(c)
lists all federal, state, local and foreign income Tax Returns filed with
respect to the Company for taxable periods ended on or after December 31, 1994,
none of which has been audited or currently is the subject of audit by any
Governmental Entity. The Company has delivered to Parent correct and complete
copies of all federal income Tax Returns filed by the Company for taxable
periods ended on or after December 31, 1994.
(d) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The Company has not made any payments, or is not obligated
to make any payments, and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Section 280G of the Code.
(f) SCHEDULE 3.14(f) sets forth, as of the most recent
practicable date, the Tax basis of the Company's Assets.
(g) The unpaid Taxes of the Company (i) do not exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the Interim Balance Sheet (rather than in any notes thereto) and
(ii) will not exceed that reserve as adjusted for the passage of time through
the Effective Time in accordance with the past custom and practice of the
Company in filing its Tax Returns.
3.15 REAL PROPERTY.
(a) The Company does not own any real property.
(b) SCHEDULE 3.15(b) lists and describes briefly all real
property leased or subleased to the Company. The Company has delivered to
Parent correct and complete copies of the leases and subleases listed in
SCHEDULE 3.15(b). With respect to each lease and sublease listed in SCHEDULE
3.15(b):
(i) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect in all material respects;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(iii) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification of a material term or
condition, or acceleration thereunder;
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(vi) The Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(vii) all facilities leased or subleased thereunder have received
all approvals of Governmental Entities (including licenses and permits) required
in connection with the operation thereof and have been operated and maintained
in accordance with applicable Laws; and
(viii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
3.16 INTELLECTUAL PROPERTY.
(a) The Company owns or has the right to use pursuant to
license, sublicense, agreement or permission all Intellectual Property necessary
for the operation of the Company's business as presently conducted. Each item
of Intellectual Property owned or used by the Company is owned or available for
use by the Company on identical terms and conditions immediately subsequent to
the Effective Time. The Company has taken all reasonably necessary and
desirable action to maintain and protect each item of Intellectual Property that
it owns or uses.
(b) To the Knowledge of the Stockholders and the Company, the
Company has not interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of third parties, and
none of the Stockholders and none of the directors and officers (and employees
with responsibility for Intellectual Property matters) of the Company has ever
received any oral or written charge, complaint, claim, demand or notice alleging
any such interference, infringement, misappropriation or violation (including
any claim that the Company must license or refrain from using any Intellectual
Property rights of any third party). To the Company's Knowledge, no third party
has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of the Company.
(c) SCHEDULE 3.16(c) identifies each patent or trademark and
copyright registration which has been issued to the Company or any Affiliate
with respect to any of its Intellectual Property, identifies each pending patent
application or application for registration which
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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the Company or any Affiliate has made with respect to any of its Intellectual
Property, and identifies each license, sublicense agreement, or other permission
which the Company or any Affiliate has granted to any third party with respect
to any of its Intellectual Property (together with any exceptions). The Company
has delivered to Parent correct and complete copies of all such patents,
registrations, applications, licenses, sublicenses, agreements and permissions
(as amended to date). SCHEDULE 3.16(c) also identifies each trade name or
unregistered trademark used by the Company or any Affiliate in connection with
any of its businesses. With respect to each item of Intellectual Property
required to be identified in SCHEDULE 3.16(c):
(i) the Company possesses all right, title, and interest in
and to the item, free and clear of any Security Interest, license or other
restriction;
(ii) such item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or, to the Knowledge of the
Stockholders and the Company, threatened which challenges the legality,
validity, enforceability, use or ownership of such item; and
(iv) the Company has never agreed to indemnify any Person for
or against any interference, infringement, misappropriation or other conflict
with respect to such item.
(d) SCHEDULE 3.16(d) identifies each item of Intellectual Property
that any third party owns and that the Company or any Affiliate uses pursuant to
any license, sublicense, agreement or permission, other than shrink-wrap
licenses for personal computer software. The Company has delivered to Parent
correct and complete copies of all such licenses, sublicenses, agreements and
permissions (as amended to date). With respect to each item of Intellectual
Property required to be identified in SCHEDULE 3.16(d):
(i) the license, sublicense, agreement or permission covering
such item is legal, valid, binding, enforceable and in full force and effect;
(ii) the license, sublicense, agreement or permission will
continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the Effective Time;
(iii) no party to the license, sublicense, agreement or
permission is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification or acceleration thereunder;
(iv) no party to the license, sublicense, agreement or
permission has repudiated any provision thereof;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(v) with respect to each sublicense, the representations and
warranties set forth in items (i) through (iv) above are true and correct with
respect to the underlying license;
(vi) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree, ruling or
charge;
(vii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or threatened which challenges the
legality, validity or enforceability of the underlying item of Intellectual
Property; and
(viii) the Company has not granted any sublicense or similar
right with respect to the license, sublicense, agreement or permission.
(e) None of the Stockholders and the directors and officers (and
employees with responsibility for Intellectual Property matters) of the Company
has any Knowledge of any new products, inventions, procedures or methods of
manufacturing or processing that any competitors or other third parties have
developed which reasonably could be expected to supersede or make obsolete any
product or process of the Company.
3.17 TANGIBLE ASSETS. Except as set forth on SCHEDULE 3.17, the Company
owns and has good and marketable title to the tangible property and Assets
necessary for the conduct of its business as presently conducted and as proposed
to be conducted. Each tangible Asset is free from material defects, has been
maintained in accordance with normal industry practice and is in good operating
condition and repair (subject to normal wear and tear).
3.18 INVENTORY. The Company maintains no inventory of raw materials,
supplies, manufactured or purchased parts, goods in process or finished goods,
whatsoever, except as set forth on SCHEDULE 3.18.
3.19 CONTRACTS. SCHEDULE 3.19 lists the following Contracts and other
agreements to which the Company is a party as of the date hereof:
(a) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments in
excess of *** per annum or a term of more than ***;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products or other
personal property, which involves consideration in excess of ***, or for the
furnishing or receipt of services, the performance of which has a term more than
six months, or involves consideration in excess of ***;
(c) any partnership or joint venture agreement;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(d) any agreement (or group of related agreements) under which
it has created, incurred, assumed or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of ***, or under which it
has imposed a Security Interest on any of its Assets, tangible or intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement with any of the Stockholders and their
respective Affiliates;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other material plan or
arrangement (including any Employee Benefit Plan) for the benefit of its current
or former directors, officers and employees;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis providing annual compensation in
excess of ***, or providing severance benefits;
(j) any agreement under which the consequences of a default or
termination could have a Company Material Adverse Effect; or
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of ***.
The Company has delivered to Parent a correct and complete copy of each
written agreement listed in SCHEDULE 3.19. With respect to each such agreement:
(i) such agreement is legal, valid, binding, enforceable and in full force and
effect in all material respects; (ii) such agreement will continue to be legal,
valid, binding, enforceable and in full force and effect in all material
respects following the consummation of the transactions contemplated hereby;
(iii) no party is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification of any material term or condition or acceleration,
under such agreement; and (iv) no party has repudiated any provision of such
agreement.
3.20 NOTES AND ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE
3.20, all notes and accounts receivable of the Company are reflected properly on
its books and records and are valid receivables subject to no setoffs or
counterclaims, are current and collectible and will be collected in accordance
with their terms at their recorded amounts, subject only to the reserve for bad
debts set forth on the face of the Interim Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the Effective Time in
accordance with the past custom and practice of the Company.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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3.21 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Company.
3.22 INSURANCE. SCHEDULE 3.22 sets forth the following information with
respect to each current insurance policy (including policies providing property,
casualty, liability and workers' compensation coverage and bond and surety
arrangements) to which the Company has been a party, a named insured or
otherwise the beneficiary of coverage:
(a) the name, address and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder and
the name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage
was on a claims made, occurrence or other Basis) and amount (with a summary of
the amount of any deductibles and ceilings) of coverage; and
(e) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (i) such policy is legal, valid,
binding, enforceable and in full force and effect in all material respects; (ii)
such policy will continue to be legal, valid, binding, enforceable and in full
force and effect in all material respects following the consummation of the
transactions contemplated hereby; (iii) neither the Company nor any other party
to the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification or acceleration, under such policy; and (iv) no party
to the policy has repudiated any provision thereof. SCHEDULE 3.22 also
describes any self-insurance arrangements affecting the Company.
3.23 EMPLOYEES. The Company has delivered to Parent a true and complete
list of all employees of the Company, their respective positions, locations,
salaries or hourly wages and severance arrangements, each as of the date hereof.
To the Knowledge of *** the directors and officers (and employees with
responsibility for employment matters) of the Company, no executive, key
employee or group of employees has any plans to terminate employment with the
Company. Each employee of the Company is employed on an "at will" basis and has
no right to any material compensation following termination of employment.
Except as set forth on SCHEDULE 3.23, the Company is not a party to or bound by
any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. To the Knowledge of the Stockholders and the Company, the Company has
not committed any unfair
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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labor practice and there is no additional organizational effort presently being
made or threatened by or on behalf of any labor union with respect to employees
of the Company.
3.24 EMPLOYEE BENEFITS.
(a) Except as set forth on SCHEDULE 3.24, with respect to all
employees, former employees, directors and independent contractors of the
Company and their dependents and beneficiaries, neither the Company nor any
ERISA Affiliate presently maintains, contributes to or has any Liability under
or with respect to any Employee Benefit Plan. The plans, programs and
arrangements set forth on SCHEDULE 3.24 are herein referred to as the "COMPANY
EMPLOYEE BENEFIT PLANS." Each Company Employee Benefit Plan (and each related
trust, insurance Contract or other funding arrangement) complies in form and in
operation in all material respects with the applicable requirements of ERISA,
the Code, other applicable Laws and governing documents and agreements. With
respect to each Company Employee Benefit Plan ***, there has been no act or
omission by the Company or any ERISA Affiliate that would impair the right or
ability of the Company or any ERISA Affiliate to unilaterally amend in whole or
part or terminate such Company Employee Benefit Plan at any time, subject to the
terms of any insurance Contract or other contractual arrangements with third
parties, and the Company has delivered to Parent true and complete copies of:
(i) the plan documents, including any related trust agreements, insurance
Contracts or other funding arrangements and all amendments thereto, or a written
summary of the terms and conditions of the plan if there is no written plan
document; (ii) the IRS Forms 5500 for the past three (3) years; (iii) the most
recent financial statement and, if applicable, actuarial valuation; (iv) all
correspondence with the Internal Revenue Service, the Department of Labor and
other Governmental Entities with respect to the past three (3) plan years other
than IRS Form 5500 filings; and (v) the most recent summary plan description
with a summary of material modifications to such plan.
(b) Neither the Company nor any of its directors, officers or
employees has any Liability with respect to any Company Employee Benefit Plan
for failure to comply with ERISA, the Code, any other applicable Laws or any
governing documents or agreements.
(c) No Company Employee Benefit Plan is an Employee Pension
Benefit Plan, and no Company Employee Benefit Plan has any unfunded Liability.
With respect to the Company Employee Benefit Plans, all applicable contributions
and premium payments for all periods ending prior to the Effective Time
(including periods from the first day of the then current plan year to the
Effective Time) shall be made prior to the Effective Time as expressly agreed to
in advance by Parent.
(d) Except as set forth on SCHEDULE 3.24, neither the Company
nor any ERISA Affiliate maintains, maintained, contributes to, or has any
Liability (including, but not limited to, current or potential withdrawal
Liability) with respect to any Multiemployer Plan or Employee Pension Benefit
Plan.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(e) Except as set forth in SCHEDULE 3.24, with respect to all
employees and former employees of the Company, neither the Company nor any ERISA
Affiliate presently maintains, contributes to or has any Liability under any
funded or unfunded medical, health or life insurance plan or arrangement for
present or future retirees or present or future terminated employees except as
required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, or state continuation coverage Laws. There has been no act or acts or
failure or failures to act which would result in a disallowance of a deduction
or the imposition of a Tax pursuant to Section 4980B, or any predecessor
provision, of the Code or any related regulations. No event has occurred with
respect to which the Company or any of its Affiliates could be liable for a Tax
imposed by any of Sections 4972, 4976, 4977, 4979 or 4980 of the Code, or for a
civil penalty under Section 502(c) of ERISA.
(f) There is no pending or, to the Knowledge of the Company,
threatened legal action, proceeding, audit, examination or investigation against
or involving any Company Employee Benefit Plan maintained by the Company or any
ERISA Affiliate (other than routine claims for benefits). To the Knowledge of
the Company, there is no Basis for, and there are no facts which could give rise
to, any such condition, legal action, proceeding or investigation. Any bonding
required with respect to any Company Employee Benefit Plans in accordance with
applicable provisions of ERISA has been obtained and is in full force and
effect.
3.25 GUARANTIES. The Company is not a guarantor or otherwise liable for
any Liability or obligation (including indebtedness) of any other Person.
3.26 ENVIRONMENT, HEALTH AND SAFETY.
(a) Except as set forth on SCHEDULE 3.26 ***, the Company has
complied with all Environmental, Health and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed or commenced against the Company alleging any failure so to
comply. Without limiting the generality of the preceding sentence, the Company
has obtained and been in compliance with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health and Safety Laws.
(b) Except as set forth on SCHEDULE 3.26 ***, the Company has no
Liability (and the Company has not handled or disposed of any substance,
arranged for the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated any property or
facility in any manner that could form the Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against the Company giving rise to any Liability) for damage to any site,
location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason under any
Environmental, Health and Safety Law.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(c) *** all properties owned or leased and equipment used in the
business of the Company, and its predecessors and Affiliates, have been free of
asbestos, PCB's, methylene chloride, trichloroethylene,
1,2-transdichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances.
3.27 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as
described in SCHEDULE 3.27, none of the Stockholders or their Affiliates has
been involved in any business arrangement or relationship with the Company
(other than in an employment or consulting capacity) within the past twelve (12)
months, and none of the Stockholders or their Affiliates owns any Asset,
tangible or intangible, which is used in the business of the Company.
3.28 DELIVERY OF INFORMATION. Each of the Stockholders has received a
copy of the following documents relating to Parent: (i) the final Prospectus to
the Registration Statement on Form SB-2 dated August 15, 1997; (ii) the
Quarterly Report on Form 10-QSB for the quarter ended June 30, 1997; and (iii)
the Certificates of Incorporation and By-Laws of Parent and Parent Sub,
respectively, as amended and restated. Each of the Stockholders acknowledges
that he has reviewed carefully the risk factors contained in the above
referenced registration statement.
3.29 PRODUCT AND SERVICE WARRANTIES. Each product sold, leased or
delivered, and each service performed, by the Company has been in conformity
with all applicable contractual commitments and all express and implied
warranties, and the Company has no Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against any of them giving rise to any Liability) for
the replacement or repair of any product, the substandard performance of any
service, or other damages in connection with the product sold or services
performed by the Company, subject only to the reserve for product and service
warranty claims set forth on the face of the Interim Balance Sheet (rather than
in any notes thereto) as adjusted for the passage of time through the Effective
Time in accordance with the past custom and practice of the Company. No product
sold, leased or delivered, or service performed, by the Company is subject to
any guaranty, warranty or other indemnity beyond the applicable standard terms
and conditions of sale, lease or performance. SCHEDULE 3.29 includes copies of
the standard terms and conditions of sale, lease or performance for the Company
(containing applicable guaranty, warranty and indemnity provisions).
3.30 PRODUCT AND SERVICE LIABILITY. The Company has no Liability (and
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Company giving
rise to any Liability) arising out of any injury or damages (whether actual or
alleged) to any Person or its property or its business operations or prospects
as a result of the ownership, possession or use of (i) any product sold, leased
or delivered by the Company or (ii) any service performed by the Company.
3.31 CUSTOMER/SUPPLIER RELATIONSHIPS. Except as set forth on SCHEDULE
3.31, the Company enjoys good commercial relationships with each of its
customers and suppliers. Since
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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December 31, 1996, the Company has received no communication from any of its
customers or suppliers expressing significant dissatisfaction with its
commercial relationship with the Company.
3.32 CERTAIN BUSINESS PRACTICES. Neither the Company nor any director,
officer, stockholder, agent or employee of the Company has (i) used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iii) made any other unlawful payment.
3.33 DISCLOSURE. No representation or warranty made by the Company
and/or the Stockholders, nor any document, written information, statement,
financial statement, certificate, schedule or exhibit prepared and furnished or
to be prepared and furnished by the Company or its representatives pursuant
hereto or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements of facts contained herein
or therein not misleading in light of the circumstances under which they were
furnished.
3.34 LIMITATION ON REPRESENTATIONS AND WARRANTIES. The Company makes no
representation or warranty to the Parent regarding the probable success or
profitability of the Surviving Corporation.
ARTICLE IIIA
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder hereby represents and warrants, jointly and severally, to
Parent and Parent Sub as follows:
SECTION 3.1A AUTHORIZATION OF TRANSACTION. Such Stockholder has full
power and authority to execute and deliver this Agreement and the Consent and to
perform his or her obligations hereunder and thereunder. This Agreement
constitutes the valid and legally binding obligation of such Stockholder,
enforceable in accordance with its terms and conditions. Such Stockholder is a
natural person, is over 21 years of age and has not had a legal representative
appointed by a court of law or otherwise act in his or her behalf or with
respect to any of his or her property. Such Stockholder is not required or
obligated, legally or otherwise, to give any notice to, make any filing with, or
obtain any authorization, consent or approval of any Governmental Entity in
order to consummate the transactions contemplated by this Agreement.
SECTION 3.2A NONCONTRAVENTION. Except as set forth in SCHEDULE 3.2A,
neither the execution and the delivery of this Agreement and the Consent, nor
the consummation of the transactions contemplated hereby and thereby, will
(a) violate any constitution, statute, regulation,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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rule, injunction, judgment, order, decree, ruling, charge or other restriction
of any government, Governmental Entity, or court to which such Stockholder is
subject or (b) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice under any agreement,
Contract, lease, license, instrument or other arrangement to which such
Stockholder is a party, by which it is bound or to which any of its Assets is
subject.
SECTION 3.3A BROKERS. Such Stockholder has no Liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement or for which Parent or Parent Sub
could become liable or obligated.
SECTION 3.4A COMPANY SHARES. Except as set forth in SCHEDULE 3.2A, such
Stockholder holds of record and owns beneficially the number of shares of
Company Common Stock set forth next to his name on the signature page hereto,
free and clear of any restrictions on transfer (other than any restrictions
under the Securities Act and state securities laws), Encumbrances, Security
Interests, options, warrants, purchase rights, Contracts, commitments and/or
equities. Except as set forth in SCHEDULE 3.2A, such Stockholder is not a party
to any option, warrant, purchase right or other Contract (including, without
limitation, any stockholder agreement, right of first refusal agreement or
similar agreement) or commitment that could require such Stockholder to sell,
transfer or otherwise dispose of any capital stock of the Company (other than
this Agreement). Such Stockholder is not a party to any voting trust, proxy or
other agreement or understanding with respect to the voting of any capital stock
of the Company (other than this Agreement).
SECTION 3.5A ACCREDITED INVESTOR. Assuming that the Merger Consideration
has an aggregate value greater than or equal to Four Million Five Hundred
Thousand Dollars ($4,500,000) at the Effective Time and that such Stockholder's
proportionate share of the Merger Consideration equals his percentage ownership
of the Company Common Stock prior to the Effective Time, such Stockholder is an
"accredited investor" as that term is defined in Regulation D of the Securities
Act. In addition, such Stockholder has designated Steven C. Dickson as his
purchaser representative and, either alone or together with such purchaser
representative, is sufficiently knowledgeable and experienced in financial and
business matters that he is capable of evaluating the merits and risks of the
transactions contemplated by this Agreement and making an informed business
decision.
SECTION 3.6A INVESTMENT INTENTION. Such Stockholder has no present
intention to dispose of any shares of Parent Common Stock to be issued in the
Merger.
SECTION 3.7A EMPLOYMENT. [[Reserved.]]
SECTION 3.8A ***
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB
Parent and Parent Sub hereby represent and warrant, jointly and severally,
to the Company and each Stockholder that:
4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Parent Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization and has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, and Parent is duly qualified and in good
standing to do business in each jurisdiction in which the nature of the business
conducted by it or the ownership or leasing of its properties makes such
qualification necessary, except for such failures to be so qualified or licensed
and in good standing as would not, individually or in the aggregate, have a
Parent Material Adverse Effect.
4.2 CERTIFICATES OF INCORPORATION AND BY-LAWS. Parent has heretofore
furnished to the Company a complete and correct copy of the Certificates of
Incorporation and the By-Laws, as amended or restated, of each of Parent and
Parent Sub. Neither Parent nor Parent Sub is in violation of any of the
provisions of its Certificate of Incorporation or By-Laws, respectively, in each
case as amended or restated.
4.3 PARENT COMMON STOCK; CAPITALIZATION.
(a) The shares of Parent Common Stock to be issued pursuant to
the Merger will be duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights created by statute, Parent's Certificate of
Incorporation or By-Laws or any agreement to which Parent is a party or is
bound.
(b) The authorized capital stock of Parent consists of Fifty
Million (50,000,000) shares of Parent Common Stock and Five Million (5,000,000)
shares of preferred stock, par value $.001 per share (the "PARENT PREFERRED
STOCK"). As of August 15, 1997, (i) Eleven Million Five Hundred Thirty Three
Thousand Three Hundred Nine (11,533,309) shares of Parent Common Stock were
issued and outstanding, all of which are duly authorized, validly issued, fully
paid and nonassessable, (ii) no shares of the Parent Preferred Stock were
outstanding, (iii) no shares of Parent Common Stock were held in treasury of
Parent and (iv) One Million Four Hundred Forty Five Thousand Four Hundred
(1,445,400) shares of Parent Common Stock were reserved for issuance pursuant to
option and employee benefit plans and in connection with the exercise of
outstanding warrants.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(c) The authorized capital stock of Parent Sub consists of one
thousand (1,000) shares of Parent Sub Common Stock, of which one hundred (100)
shares are issued and outstanding and held by Parent.
4.4 AUTHORITY. Each of Parent and Parent Sub has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action and no other corporate proceeding on the part
of Parent or Parent Sub is necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and Parent Sub and, assuming the due
authorization, execution and delivery thereof by the Stockholders and the
Company, constitutes the legal, valid and binding obligations of Parent and
Parent Sub enforceable in accordance with its terms.
4.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and
Parent Sub do not, and the performance of this Agreement by Parent and Parent
Sub will not, (i) conflict with or violate the Certificate of Incorporation or
By-Laws, as amended or restated, of Parent or Parent Sub, (ii) conflict with or
violate any Laws in effect as of the date of this Agreement applicable to Parent
or Parent Sub or by which any of their respective properties is bound, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or require
payment under, or result in the creation of a Lien or Encumbrance on, any of the
properties or Assets of Parent or Parent Sub pursuant to, any note, bond,
mortgage, indenture, Contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or Parent Sub is a party or by
which Parent or Parent Sub or any of their respective properties is bound by or
subject to, except for breaches, defaults, events, rights of termination,
amendment, acceleration or cancellation, payment obligations or Liens or
Encumbrances that would not have a Parent Material Adverse Effect.
(b) Except as set forth in SCHEDULE 3.5, the execution and
delivery of this Agreement by Parent and Parent Sub do not, and the performance
of this Agreement by Parent and Parent Sub will not, require Parent or Parent
Sub to obtain any consent, approval, authorization or permit of, or to make any
filing with or notification to, any Governmental Entities, except (i) for
applicable requirements, if any, of the Securities Act, the Exchange Act, Blue
Sky Laws, the NASDAQ and the filing and recordation of appropriate merger
documents as required by Delaware Law and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, either individually or in the aggregate, prevent
Parent or Parent Sub from performing its obligations under this Agreement.
4.6 REPORTS; FINANCIAL STATEMENTS.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(a) Since February 12, 1997, Parent has timely filed all forms,
reports, statements and other documents required to be filed by it with the SEC
(collectively, the "PARENT SEC REPORTS"). The Parent SEC Reports, including all
Parent SEC Reports filed after the date of this Agreement and prior to the
Effective Time, were or will be prepared in all material respects in accordance
with the requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Parent SEC Reports). As of their respective dates, the Parent SEC Reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No representation or warranty made by Parent, nor any document,
written information, statement, financial statement, certificate, schedule or
exhibit prepared and furnished or to be prepared and furnished by Parent or the
Parent Representatives pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements of facts contained herein or therein not misleading in light of the
circumstances under which they were furnished.
(b) Each of the financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports filed prior to,
on or after the date of this Agreement (i) have been or will be prepared in
accordance with, and complied or will comply as to form with, the published
rules and regulations of the SEC and GAAP applied on a consistent basis
throughout the periods involved (except as otherwise noted therein) and (ii)
fairly present or will fairly present the financial position of Parent as of the
respective dates thereof and the results of its operations and cash flows for
the periods indicated, except that any unaudited interim financial statements
were or will be subject to normal and recurring year-end adjustments.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as and to the extent
disclosed in the Parent SEC Reports filed prior to the date of this Agreement or
as contemplated in this Agreement, since August 15, 1997, there has not been (a)
a Parent Material Adverse Effect or (b) any significant change by Parent in its
accounting methods, principles or practices.
4.8 OWNERSHIP OF PARENT SUB; NO PRIOR ACTIVITIES.
(a) Parent Sub was formed solely for the purpose of engaging in
the transactions contemplated by this Agreement. All of the outstanding capital
stock of Parent Sub is owned directly by Parent.
(b) Except for obligations or liabilities incurred in connection
with its incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Parent Sub has not and will not have incurred,
directly or indirectly, through any Subsidiary or Affiliate, any obligations or
liabilities or engaged in any business activities or any type or kind whatsoever
or entered into any agreements or arrangements with any Person.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
4.9 BROKERS. Except for Cowen & Company, there is no broker, finder or
investment banker which is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Parent Sub.
Notwithstanding anything herein to the contrary, the Stockholders shall not be
liable or obligated for any such brokerage, finder's or other fee or commission.
4.10 TAX MATTERS; "POOLING OF INTERESTS". Neither Parent nor Parent Sub
nor any of its respective Affiliates has taken or agreed to take any action that
would prevent the Merger from constituting (a) a "reorganization" under Section
368(a)(1)(A) of the Code, by application of Section 368(a)(2)(D) of the Code, or
(b) a "pooling of interests" in accordance with GAAP and applicable SEC rules,
including, without limitation, the sale of any shares of Company Common Stock or
Parent Common Stock during the period commencing on the date which is thirty
(30) days prior to the Effective Time and ending on the Financial Result Date.
4.11 LIMITATION ON REPRESENTATIONS AND WARRANTIES.
(a) Except as and to the extent expressly set forth in this
Article IV, included on any schedule hereto or included in any writing delivered
by Parent to the Company concurrently herewith or subsequent hereto expressly
pursuant to this Agreement, each of Parent and Parent Sub makes no other
representation or warranty and disclaims all Liability and responsibility for
any representation, warranty, statement or information (financial or otherwise)
made or communicated (orally or in writing) to the Company or any of its
stockholders, employees, agents, consultants or representatives.
(b) Parent makes no representation or warranty to the Company or
the Stockholders regarding the probable success or profitability of Parent.
ARTICLE V
COVENANTS
5.1 AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby covenants
and agrees that, prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by Parent, the Company
will: (a) operate only in the Ordinary Course of Business; and (b) use its best
efforts to (i) preserve and/or maintain, in all material respects and consistent
with past custom and practice, its business and properties, including its
present operations, physical facilities, working conditions and relationships
with its present employees and Persons having significant business relations
with it, including, without limitation, suppliers and customers, (ii) maintain
and keep its properties and Assets in as good repair and condition as at
present, ordinary wear and tear excepted, and (iii) keep in full force and
effect insurance and bonds comparable in amount and scope of coverage to that
currently maintained.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
5.2 NEGATIVE COVENANTS OF THE COMPANY. Except as expressly contemplated
by this Agreement or as previously disclosed to Parent in writing on SCHEDULE
5.2, or otherwise consented to in writing by Parent, from the date of this
Agreement until the Effective Time, the Company shall not, directly or
indirectly through any Affiliate or otherwise (and the Stockholders shall not
and shall not cause the Company to), and shall not permit any Affiliate to
directly or indirectly, do any of the following:
(a) (i) increase the compensation payable to, or to become
payable to, any employee, director or executive officer; (ii) grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer or employee; (iii) establish, adopt, enter
into, amend, modify or terminate any Employee Benefit Plan or arrangement except
as may be required by applicable Law; or (iv) hire any salaried person earning
annual compensation, including salary, cash bonuses and commissions, in excess
of ***;
(b) declare or pay any dividend on or make any other
distribution in respect of, outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for any shares of its capital stock, or any options, warrants or conversion or
other rights to acquire any shares of its capital stock or any such securities
or obligations); (ii) effect any reorganization or recapitalization; or (iii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale (including the grant of any
Security Interests, Liens, claims, pledges, limitations in voting rights,
charges or other Encumbrances) of, any shares of any class of its capital stock,
any securities convertible into or exercisable or exchangeable for any other
shares, or any rights, warrants or options to acquire, any such shares; and (ii)
amend or otherwise modify the terms of any such rights, warrants or options the
effect of which shall be to make such terms more favorable to the holders
thereof;
(e) acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in, all or a portion of the Assets of, or
by any other manner, any corporation, partnership, association or other
business, organization or division thereof, or otherwise acquire or agree to
acquire any Assets of any other Person (other than the purchase of Assets from
suppliers or vendors in the Ordinary Course of Business) which are material,
individually or in the aggregate, to the Company;
(f) propose or adopt any amendments to its Certificate of
Incorporation or its By-Laws;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
(g) (i) change any of its methods of accounting in effect at
December 31, 1996, or (ii) make or rescind any material election relating to
Taxes, settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes (except where
the amount of such settlements or controversies, individually or in the
aggregate, does not exceed ***), or change in any material respect any of its
methods of reporting income or deductions for federal income Tax purposes from
those employed in the preparation of the federal income Tax Return for the
taxable year ended December 31, 1996, except, in the case of clause (i) or
clause (ii), as may be required by Law or GAAP;
(h) enter into any Contract outside the Ordinary Course of
Business;
(i) create, or permit the creation of, any Lien upon any Assets
outside the Ordinary Course of Business;
(j) enter into any employment Contract or collective bargaining
agreement, or modify the terms of any existing such Contract or agreement;
(k) sell, lease, exchange, mortgage, pledge, transfer, assign or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer, assign or otherwise dispose of, any Assets with a Fair Market Value of
*** or more, or Assets with an aggregate Fair Market Value of *** or more, in
each case tangible or intangible;
(l) make any capital expenditures other than in the Ordinary
Course of Business, or make any capital expenditures in the aggregate in excess
of ***;
(m) amend or renew, or enter into any Contract involving
operations outside of the United States;
(n) take or agree to take any action that would or is reasonably
likely to result in any of the Company's representations and warranties set
forth in this Agreement being untrue in any material respect or in any of the
conditions to the Merger not being satisfied in any material respect; or
(o) agree in writing or otherwise to do any of the foregoing.
5.3 NEGATIVE COVENANTS OF PARENT. Except as expressly contemplated by
this Agreement or otherwise consented to in writing by the Company, from the
date of this Agreement until the Effective Time, Parent will not do any of the
following:
(a) amend any of the terms or provisions of the Parent Common
Stock which amendment would have a material adverse effect on the Stockholders;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
(b) knowingly take any action which would result in a failure to
maintain the quotation of the Parent Common Stock on NASDAQ;
(c) declare or pay any dividends or other distribution (whether
in cash, stock or other property) on outstanding shares of capital stock;
(d) take or agree to take any action that would or is reasonably
likely to result in any of Parent's representations and warranties set forth in
this Agreement being untrue in any material respect or in any of the conditions
to the Merger not being satisfied in any material respect; or
(e) agree in writing or otherwise to do any of the foregoing.
5.4 ACCESS AND INFORMATION. The Company shall (i) provide Parent and
its officers, directors, employees, agents, counsel, accountants, financial
advisors, consultants and other representatives (collectively, the "PARENT
REPRESENTATIVES"), with full access, upon reasonable prior notice, to all
officers, employees and accountants of the Company and to their Assets,
properties, Contracts, books, records and all such other information and data
concerning the business and operations of the Company as Parent or any of the
Parent Representatives reasonably may request in connection with such
investigation. Such investigation will involve, among other things, Parent's
review and confirmation of the Company's Financial Statements, the legal review
of the Company's Contracts and leases, the review of the Company's client lists
and reference checks of the Company. Parent will provide the Stockholders with
all information reasonably requested by them to enable them to evaluate the
merits of the Merger.
5.5 ESCROW AGREEMENT. At or before the Effective Time, Steven C.
Dickson, as representative and attorney-in-fact for the Stockholders (the
"STOCKHOLDERS' REPRESENTATIVE"), Parent, and a third party acceptable to Parent
and the Stockholders' Representative, as escrow agent, shall execute and deliver
the escrow agreement, substantially in the form of EXHIBIT 5.5 hereof (the
"ESCROW AGREEMENT"). Each Stockholder hereby authorizes and appoints the
Stockholders' Representative to serve as its attorney-in-fact to execute the
Escrow Agreement, and agrees to be bound by the provisions thereof.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) The Company, Parent and Parent Sub shall each use its best
efforts to: (i) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary, proper or advisable under applicable Law
or otherwise to consummate and make effective the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
transactions contemplated by this Agreement; (ii) obtain from any Governmental
Entities any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by Parent, Parent Sub or the Company in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, including, without
limitation, the Merger; (iii) make all necessary filings, and thereafter make
any other required submissions, with respect to this Agreement and the Merger
required under (A) Delaware Law and New Jersey law (including holding a
stockholders meeting and/or sending notice of merger and appraisal rights) and
the federal securities laws and the rules and regulations thereunder, if any,
and any other applicable federal or state securities laws, and (B) any other
applicable Law; provided that Parent, Parent Sub and the Company shall cooperate
with each other in connection with the making of all such filings, including
providing copies of all such documents to the non-filing party and its advisors
prior to filing and, if requested, accepting all reasonable additions, deletions
or changes suggested in connection therewith. The Company, Parent and Parent
Sub shall furnish all information required for any application or other filing
to be made pursuant to the rules and regulations of any applicable Law in
connection with the transactions contemplated by this Agreement.
(b) (i) Each of the Company, Parent and Parent Sub shall give
any notices to third parties, and use its best efforts to obtain any third party
consents (A) necessary, proper or advisable to consummate the transactions
contemplated in this Agreement, (B) disclosed or required to be disclosed in the
schedules contained herein, (C) otherwise required under any Contracts,
licenses, leases or other agreements in connection with the consummation of the
transactions contemplated herein or (D) required to prevent a Company Material
Adverse Effect from occurring prior to or after the Effective Time or a Parent
Material Adverse Effect from occurring prior to or after the Effective Time.
(ii) In the event that any party hereto shall fail to obtain
any third party consent described in subsection (b) (i) above, such party shall
use its best efforts, and shall take any such actions reasonably requested by
the other party hereto, to minimize any adverse effect upon the Company, Parent
and Parent Sub and their respective businesses resulting, or which could
reasonably be expected to result after the Effective Time, from the failure to
obtain such consent.
6.2 TAX TREATMENT; "POOLING OF INTERESTS"; AFFILIATES. The Company,
Parent and Parent Sub shall use their best efforts, and shall cause their
respective Subsidiaries and Affiliates to use their best efforts, to cause the
Merger to qualify, and will not take any actions which would prevent the Merger
from qualifying, as a "reorganization" under Section 368(a)(1)(A) of the Code,
by application of Section 368(a)(2)(D) of the Code. The Company, Parent and the
Stockholders shall, and shall cause each of their respective Subsidiaries and
Affiliates to, use their best efforts not to take any action (regardless of
whether such action would otherwise be permitted or not prohibited hereunder)
that would prevent Parent from accounting for the Merger as a "pooling of
interests." Each Stockholder agrees and undertakes that from the date hereof
until such time as financial results (including combined sales and net income)
covering at least thirty (30) days of post-Merger operations have been published
(the date on which such financial results are published shall be the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
"FINANCIAL RESULT DATE"), such Stockholder shall not sell or in any other way
alter his risk relative to any shares of Parent Common Stock received in the
Merger (within the meaning of the Codification of Financial Reporting Policies
201.01 (reprinted in 7 Fed. Sec. L. Rep. (CCH) 72,951)). Each Stockholder
understands that Parent will advise it when the Financial Result Date shall have
occurred. Each Stockholder undertakes to inform the Company and Parent of any
transactions involving Company Common Stock or Parent Common Stock that he may
wish to consummate during any time prior to the Financial Result Date and will
not consummate such transaction unless Parent shall consent thereto in writing.
6.3 PUBLIC ANNOUNCEMENTS.
(a) Any public announcement or similar publicity with respect to
this Agreement or the transactions contemplated hereby will be issued, if at
all, at such time and in such manner as Parent determines. Subject to Section
6.3(b) below, prior to the Effective Time, each of the Stockholders, the Company
and Parent shall, and the Stockholders shall cause the Company to, keep this
Agreement and the transactions contemplated hereby strictly confidential and
shall not make any disclosure of this Agreement or the transactions contemplated
hereby to any Person. The parties hereto shall consult with each other
concerning the means by which the Company's employees, customers and suppliers
and others having dealings with the Company will be informed of the transactions
contemplated hereby and Parent will have the right to be present for any such
communication.
(b) Each party hereto acknowledges that, as a publicly traded
company, Parent has disclosure obligations under the federal securities laws
and, depending on the facts and circumstances, may be required to announce the
existence of this Agreement and/or the Merger prior to the Effective Time. If
so required, Parent will first consult with the Company regarding the timing and
contents of any such announcement. Each of the parties hereto further
acknowledges that this Agreement and/or the Merger may constitute material,
non-public information and agrees that it or he shall not, and shall cause its
respective representatives or Affiliates to not, engage in or effect any
transaction of Parent's securities until the Effective Time, subject to the
additional restrictions imposed by the federal securities laws concerning the
purchase or sale of securities.
6.4 OBLIGATIONS OF PARENT SUB. Parent shall take all action necessary
to cause Parent Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this Agreement.
6.5 RESTRICTIVE LEGEND. Each of the Stockholders acknowledges and
agrees that the certificates of Parent Common Stock issued to the Stockholders
pursuant to the Merger shall bear a restrictive legend in substantially the
following form and a stop-transfer order may be placed against their transfer:
The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended. The
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under the Securities Act of 1933, as
amended, or an opinion of counsel that registration is not required
under said Act or unless sold pursuant to Rule 144.
The legend set forth above shall be removed and Parent shall issue a
certificate without such legend to the holder of the shares of Parent Common
Stock upon which it is stamped, if, unless otherwise required by applicable
state securities laws, (a) the such shares are included in an effective
registration statement under the Securities Act covering the resale thereof, or
(b) such holder provides Parent with an opinion of legal counsel, in form,
substance and scope reasonably acceptable to Parent and its legal counsel, to
the effect that a public sale or transfer of such shares may be made without
registration under the Securities Act and such shares are being sold or
transferred in accordance with the method described therein, or (c) such holder
provides Parent with reasonable assurances that such shares can be sold pursuant
to Rule 144 under the Securities Act (or a successor rule thereto) without any
restriction as to the number of shares acquired as of a particular date that can
then be immediately sold. Each of the Stockholders agrees to sell all of the
shares of Parent Common Stock acquired pursuant to the Merger, including those
represented by a certificate(s) from which the legend has been removed, in
compliance with the prospectus delivery requirements, if any, under applicable
securities Laws.
6.6 DELIVERY OF SEC FILINGS. Parent shall promptly deliver to the
Company or to the Company's counsel a copy of all filings of the Parent SEC
Reports with the SEC, from the date hereof to the Effective Time, or any other
document which Parent deems to be appropriate for provision to the Stockholders.
Upon delivery of any such document by Parent to the Company, the Company shall
promptly deliver to each holder of capital stock of the Company a copy of such
document, including all exhibits thereto, and an officer of the Company shall
promptly provide to Parent an affidavit of delivery of such copies.
6.7 [[RESERVED.]]
6.8 BEST EFFORTS. The parties hereto shall use their best efforts to
consummate the Merger and the other transactions contemplated hereby as soon as
reasonably practicable after the date of this Agreement. The parties hereto
agree to execute such amendments to this Agreement, the Escrow Agreement and any
other document as may be necessary to enable the Merger to qualify for "pooling
of interests" accounting treatment; provided that such amendments or documents
do not adversely affect such party.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
ARTICLE VIA
PIGGYBACK REGISTRATION RIGHTS
SECTION 6.1A DEFINITIONS. For purposes of this Article VIA:
(a) the term "REGISTER", "REGISTERED," and "REGISTRATION" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document;
(b) the term "REGISTRABLE SECURITIES" means *** of the Parent
Common Stock to be issued to the Stockholders pursuant to Section 2.1;
(c) the number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" will be determined by the number of shares of Parent Common Stock
outstanding which are, and the number of shares of Parent Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities; and
(d) the term "HOLDER" means any person owning Registrable
Securities; and
SECTION 6.2A PARENT REGISTRATION. If (but without any obligation to do
so) Parent proposes to register for its own sale (or, if permitted by the terms
of existing registration rights, a registration effected by Parent for
stockholders other than the Holders) any of its stock or other securities under
the Securities Act in connection with the public offering of such securities
solely for cash (other than a registration relating solely to the sale of
securities to participants in an Employee Benefit Plan of Parent, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), Parent will, at such time,
promptly give to each Holder written notice of such registration. Upon the
written request of each Holder given within ten (10) days after mailing of such
notice by Parent in accordance with Section 9.2, Parent will, subject to the
provisions of Section 6.5A, use reasonable best efforts to cause to be
registered under the Securities Act all of the Registrable Securities that each
such Holder has requested to be registered; PROVIDED, HOWEVER, that Parent will
not be obligated to offer and, if accepted by Holder, effect more than one such
registration of Holders' Registrable Securities.
SECTION 6.3A FURNISH INFORMATION. It will be a condition precedent to
the obligations of Parent to take any action pursuant to this Article VIA with
respect to the Registrable Securities of any selling Holder that such Holder
will furnish to Parent such information regarding himself, the Registrable
Securities held by him, and the intended method of disposition of such
securities as will be required to effect the registration of such Holder's
Registrable Securities.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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SECTION 6.4A EXPENSES OF PARENT REGISTRATION. Subject to restrictions
under applicable state securities laws, Parent will bear and pay all expenses
incurred in connection with any registration, filing or qualification of
Registrable Securities with respect to the registrations pursuant to
Section 6.2A for each Holder (which right may be assigned as provided in
Section 6.6A), including, without limitation, all registration, filing, and
qualification fees, printer and accounting fees relating or apportionable
thereto, but excluding underwriting discounts and commissions relating to
Registrable Securities.
SECTION 6.5A UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of Parent's capital stock, Parent will not
be required under Section 6.2A to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between Parent and the underwriters selected by it (or by other persons entitled
to select the underwriters), and then Parent will have a right to limit the
number of shares to such number as it will determine in good faith will not
jeopardize the success of the offering by Parent. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
Parent that Parent determines in good faith is compatible with the success of
the offering, then Parent will be required to include in the offering only that
number of such securities, including Registrable Securities, which Parent
determines in good faith will not jeopardize the success of the offering (to the
extent permitted by previously existing registration rights, the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as will mutually be agreed to
by such selling stockholder; provided that any Registrable Securities held by
officers and directors of Parent will be excluded from such registration to the
extent required by such limitations). For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder which is a
Holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates and
family members of any such partners, retired partners and stockholders and any
trusts for the benefit of any of the foregoing persons will be deemed to be a
single "SELLING STOCKHOLDER," and any pro-rata reduction with respect to such
selling stockholder will be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
selling stockholder, as defined in this sentence.
SECTION 6.6A ASSIGNMENT OF REGISTRATION RIGHTS. The rights pursuant to
this ARTICLE VIA may not be assigned except to a family trust or to a trustee
upon death.
SECTION 6.7A "MARKET STAND-OFF" AGREEMENT. Notwithstanding the rights
granted pursuant to Section 6.2A, each Holder hereby agrees that, during the
period of duration (not to exceed 180 days) specified by Parent and an
underwriter of Parent Common Stock or other securities of Parent, following the
effective date of a registration statement of Parent filed under the Securities
Act, such Holder will not, in the event that such Holder participates in the
offering related to such registration statement and to the extent requested by
Parent and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of Parent held by it at any time
during such period except Parent Common Stock included in such registration;
PROVIDED, HOWEVER, that:
(a) such agreement will be applicable only to the first such
registration statement of Parent which covers Parent Common Stock (or other
securities of Parent) to be sold on its behalf to the public in an underwritten
offering; and
(b) all officers and directors of Parent and all other persons
with registration rights (whether or not pursuant to this Agreement) will enter
into similar agreements.
In order to enforce the foregoing covenant, Parent may impose appropriate
stop-transfer instructions limited to the agreement contained in this Section
6.7A with respect to the Registrable Securities of each Holder (and the shares
or securities of every other Person subject to the foregoing restriction) until
the end of such period.
SECTION 6.8A RULE 144 AVAILABILITY. Notwithstanding anything to the
contrary above in this Article VIA, prior to exercising any right provided for
in this ARTICLE VIA each Holder will (i) evaluate in good faith whether such
Holder is otherwise permitted to sell the entire amount of Registrable
Securities it is then seeking to register within the time period it desires to
sell pursuant to Rule 144 of the Securities Act, or any successor regulation
thereto, and (ii) exercise such rights only in the case that it determines in
good faith that such rights are necessary to sell such Registerable Securities
in a timely manner.
ARTICLE VII
CLOSING CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS AGREEMENT. The
respective obligations of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable Law:
(a) NO ORDER. No Governmental Entity or federal or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(b) CONSENTS AND APPROVALS. All material consents, approvals
and authorizations legally required to be obtained to consummate the Merger
shall have been obtained from all required Governmental Entities.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT. The obligations of
Parent to effect the Merger and the other transactions contemplated herein are
also subject to the following conditions, each of which may be waived by Parent,
in whole or in part, to the extent permitted by applicable Law.
(a) REPRESENTATIONS AND WARRANTIES.
(i) Notwithstanding any due diligence performed by Parent
and the Parent Representatives, each of the representations and warranties of
the Company contained in this Agreement shall be true and correct when made and
on and as of the Effective Time, as if made on and as of such date, except where
failure to be so true and correct would not have a Company Material Adverse
Effect, individually or in the aggregate, and except that those representations
and warranties which address matters only as of a particular date shall remain
true and correct as of such date, except where the failure to be so true and
correct would not have a Company Material Adverse Effect. Parent shall have
received a certificate of the President of the Company to such effect; and
(ii) Notwithstanding any due diligence performed by Parent
and the Parent Representatives, each of the representations and warranties of
the Stockholders contained in this Agreement shall be true and correct when made
and on and as of the Effective Time, as if made on and as of such date, except
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time. Parent shall have received a certificate of the President or
Chief Financial Officer of the Company to that effect.
(c) "POOLING OF INTERESTS". The Company and the Stockholders
shall have provided to Ernst & Young LLP a representation letter in customary
form to support such firm's concurrence with Parent's conclusion as to the
appropriateness of "pooling of interests" accounting treatment for the Merger
under Accounting Principles Board Opinion No. 16 if the Merger is closed and
consummated in accordance with this Agreement.
(d) THIRD PARTY CONSENTS AND WAIVERS. The Company shall have
obtained consents and waivers, in form and substance reasonably satisfactory to
Parent, in respect of the Contracts or agreements set forth on SCHEDULE 7.2(d).
(e) COMPANY MATERIAL ADVERSE EFFECT. The Company shall not have
become subject to any action or event which resulted in or may likely result in
a Company Material Adverse Effect.
(f) LEGAL OPINION. [[RESERVED.]]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(g) AFFILIATE AGREEMENTS. Parent shall have received from each
Affiliate of the Company and any other Person who may be deemed to have become
an Affiliate of the Company (under Rule 145 under the Securities Act or
otherwise under applicable SEC accounting releases with respect to "pooling of
interests" accounting treatment) after the date of this Agreement and or prior
to the Effective Time a signed Affiliate Agreement in the form of EXHIBIT
7.2(g). Each such Affiliate agrees to execute and deliver similar Affiliate
Agreements upon the reasonable request of Parent (or any of its Subsidiaries or
Affiliates) in connection with future business transactions of Parent (or any of
its Subsidiaries or Affiliates).
(h) EMPLOYMENT AGREEMENTS. Each of Messrs. Steven C. Dickson,
Kevin T. Carr and Clifford DiPalmer shall execute employment agreements
(collectively, the "EMPLOYMENT AGREEMENTS") in the forms attached hereto as
EXHIBITS 7.2(h)(i), (ii) AND (iii), respectively.
(i) NONCOMPETITION AGREEMENTS. Each of Messrs. Steven C.
Dickson, Kevin T. Carr and Clifford DiPalmer shall execute a noncompetition
agreement in the form attached hereto as EXHIBIT 7.2(i).
(j) SPOUSAL CONSENTS. Parent shall have obtained from each of
the spouses of the Stockholders, respectively, the executed consent, in the form
attached hereto as EXHIBIT 7.2(j), in respect of the consummation of the Merger
and the transactions contemplated by this Agreement.
7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to effect the Merger and the other transactions contemplated by
this Agreement is subject to the following conditions, each of which may be
waived, in whole or in part, to the extent permitted by applicable Law, by the
Company:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of Parent and Parent Sub contained in this Agreement shall be
true and correct when made and on and as of the Effective Time as if made on and
as of such date, except where the failure to be so true and correct would not
have a Parent Material Adverse Effect, and except that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date, except where the failure to be so true and correct
would not have a Parent Material Adverse Effect. Solely for purposes of this
section and in determining compliance with the conditions set forth herein, any
representation and warranty made by Parent in this Agreement shall be read and
interpreted as if the qualification stated therein with respect to materiality
or Parent Material Adverse Effect were not contained therein. The Company shall
have received a certificate of the President of Parent to such effect.
(b) AGREEMENTS AND COVENANTS. Parent shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time. The Company shall have received a certificate of the President
of Parent to that effect.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(c) PARENT MATERIAL ADVERSE EFFECT. Parent shall not have become
subject to any action or event which resulted in or may likely result in a
Parent Material Adverse Effect.
(d) LEGAL OPINION. [[RESERVED.]]
ARTICLE VIII
TERMINATION, AMENDMENT, WAIVER AND INDEMNIFICATION
8.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual consent of Parent and the Company;
(b) by Parent, upon a material breach of any covenant or
agreement on the part of the Company set forth in this Agreement;
(c) by the Company, upon a material breach of any covenant or
agreement on the part of Parent or Parent Sub set forth in this Agreement;
(d) by either Parent or Company, if there shall be any order of
a Governmental Entity which is final and nonappealable preventing the
consummation of the Merger;
(e) on or before 5:00 p.m., San Diego time, on September 30,
1997, by Parent, if Parent is not satisfied with the results of its continuing
due diligence review regarding the Company;
(f) by either Parent or the Company, if the Merger shall not
have been consummated before November 20, 1997 (unless the failure to consummate
the Merger by such date shall be due to the action or failure to act of the
party seeking to terminate this Agreement);
(g) by Parent, upon a material breach of a representation and
warranty made by the Company or the Stockholders which has resulted in a Company
Material Adverse Effect, or which constitutes a material breach of any
representation and warranty set forth in Article IIIA;
(h) by the Company, upon a material breach of a representation
and warranty made by Parent which has resulted in a Parent Material Adverse
Effect;
(i) by either Parent or the Company, if they have reasonably
concluded prior to the consummation of the Merger that the Merger would result
in a material adverse effect to any party hereto by virtue of a violation of
I.S.R.A.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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8.2 INVESTIGATION. Notwithstanding any of the foregoing, the right of
any party hereto to terminate this Agreement pursuant to Section 8.1 shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any party hereto, any Person controlling any such party
or any of their respective officers or directors, whether prior to or after the
execution of this Agreement.
8.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto (in the case of the
Stockholders, by a number of Stockholders who are entitled to receive or have
received, in the aggregate, *** of the shares of Parent Common Stock to be
issued hereby at the Effective Time if prior to the Effective Time, or a
majority of the shares of Parent Common Stock issued hereby if subsequent to the
Effective Time).
8.4 WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of any
party hereto in the exercise of any right hereunder shall impair such right or
be construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor shall any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party hereto, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed by the
other party or parties hereto (in the case of the Stockholders, by a number of
Stockholders who are entitled to receive or have received, in the aggregate, ***
of the shares of Parent Common Stock to be issued hereby at the Effective Time
if prior to the Effective Time, or a majority of the shares of Parent Common
Stock issued hereby if subsequent to the Effective Time); (b) no waiver that may
be given by a party hereto will be applicable except in the specific instance
for which it is given; and (c) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement. All rights and remedies existing under this Agreement are in
addition to, and not exclusive of, any rights or remedies otherwise available.
8.5 FEES, EXPENSES AND OTHER PAYMENTS. Except as otherwise expressly
provided in this Agreement, Parent and the Company shall bear, respectively, all
of the costs and expenses related to (a) Parent and Parent Sub, in the case of
Parent, and (b) the Company and the Stockholders, in the case of the Company,
which are incurred in connection with the preparation, negotiation and
performance of this Agreement (including the related letter of intent dated
September 15, 1997) and the transactions contemplated hereby, including all due
diligence expenses and fees and expenses of agents, representatives, counsel and
accountants; ***
8.6 STOCKHOLDER INDEMNIFICATION, HOLD BACK AND ESCROW.
(a) Each of the Stockholders jointly and severally shall
indemnify and defend each of Parent and Parent Sub, and hold it harmless, from
and against any and all losses, damages, Liabilities, claims, demands,
judgments, settlements, costs and expenses of any nature whatsoever
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(including reasonable attorneys' fees) (collectively, "LOSS"), resulting from or
arising out of any: (i) breach of any representation or warranty or agreement of
the Company or any Stockholder contained herein; or (ii) Liability of the
Company, whether or not addressed by a representation or warranty, which was
created, incurred or arose from facts, events, conditions or circumstances
existing on or before the Effective Time, to the extent that, but only to the
extent that, such Liability was not reflected or reserved against on the face of
the Interim Balance Sheet (rather than in any notes thereto) as adjusted for
Liabilities incurred in the Ordinary Course of Business since August 31, 1997
(provided that the items listed on SCHEDULE 3.8 shall be deemed to be incurred
in the Ordinary Course of Business); ***. No claim for indemnification pursuant
to this Section 8.6(a) may be made subsequent to the date which is *** after the
Effective Time or in respect of a Loss in respect of accounts receivable or for
which Parent has otherwise been previously reimbursed by the Stockholders.
(b) (i) If any third party shall notify Parent with respect to any
third party claim (a "THIRD PARTY CLAIM") that may give rise to a Loss, then
Parent shall promptly notify the Stockholders' Representative thereof in
writing; PROVIDED, HOWEVER, that no delay on the part of Parent in notifying the
Stockholders' Representative shall relieve the Stockholders from any obligation
hereunder unless (and then solely to the extent) such Stockholders thereby are
prejudiced.
(ii) The Stockholders will have the right to defend Parent against
the Third Party Claim with counsel of their choice reasonably satisfactory to
Parent, so long as: (A) the Stockholders so notify Parent in writing within
fifteen (15) Business Days, acknowledging that such claim is in respect of a
Loss described in Section 8.6(a); (B) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable relief; (C)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of Parent, likely to establish a precedential
custom or practice materially adverse to the continuing business interests of
Parent; and (D) the Stockholders conduct the defense of the Third Party Claim
actively and diligently.
(iii) So long as the Stockholders are conducting the defense of the
Third Party Claim in accordance with Section 8.6(b)(ii), (A) Parent may retain
separate co-counsel at its sole cost and expense and participate in the defense
of the Third Party Claim, (B) Parent will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Stockholders' Representative; and (C)
the Stockholders will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of Parent.
(iv) In the event that any of the conditions in Section 8.6(b)(ii)
is or becomes unsatisfied, (A) Parent may defend against the Third Party Claim
in any manner it reasonably may deem appropriate; PROVIDED, HOWEVER, that Parent
shall not consent to the entry of any judgment or enter into any settlement or
agreement to settle a Third Party Claim without the prior written consent of the
Stockholders' Representative; (B) Parent shall be reimbursed from the Escrow
Account promptly and periodically for the costs of defending against the Third
Party Claim
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(including reasonable attorneys' fees and expenses only upon the determination
by a finder of fact that the indemnification applies because the Stockholders
have been found liable for breaches of this Agreement in accordance with its
terms); and (C) the Stockholders will remain responsible for any Loss that
Parent actually suffers resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent provided in
this Section 8.6.
(c) (i) Each Stockholder of the Company hereby agrees that,
at the Effective Time, Parent shall hold back and place into escrow pursuant to
the Escrow Agreement (the "ESCROW ACCOUNT"), a number of Parent Shares equal to
***, rounded to the nearest whole share, of the total number of shares of Parent
Common Stock to be received by such Stockholder (the total value of all such
shares as valued at the Market Price to be collectively referred to as the
"INDEMNIFICATION AMOUNT"), as partial security for such Stockholder's indemnity
obligations herein.
(b) (ii) At any time Parent shall have a claim for
indemnification, Parent shall submit such claim to the Stockholders'
Representative and within thirty (30) calendar days thereof the Stockholders'
Representative shall notify Parent, in writing, whether he agrees with such
claim; PROVIDED, HOWEVER, that in the event that the Stockholders'
Representative fails to so notify Parent, the Stockholders' Representative shall
be deemed to have agreed to the release of securities or cash from the Escrow
Account. In the event that the Stockholders' Representative notifies Parent
that he disagrees with such claim, the Stockholders' Representative shall
provide Parent with a written notice specifying the Basis for such disagreement
and, if the Stockholders' Representative and Parent shall be unable to reach
agreement within thirty (30) days, the matter will be submitted to arbitration
pursuant to the terms of Section 9.11.
(iii) For purposes of calculating quantities of shares to
be paid to Parent pursuant to this Section 8.6, each share of Parent Common
Stock shall be valued at ***. Any and all distributions to and from the Escrow
Account shall be allocated among the Stockholders, pro rata, based on each
Stockholder's interest in shares of Parent Common Stock to be issued pursuant to
the Merger, as separate subaccounts for each holder.
(iv) Each of the Stockholders hereby acknowledges and
agrees that the indemnity obligations set forth above shall not be the exclusive
remedy of Parent and Parent Sub with respect to such Stockholder's indemnity
obligations herein and the Indemnification Amount in no way limits the amount or
sources of recovery of Parent and Parent Sub with respect to such indemnity
obligations; ***.
(d) For the purposes of this Section 8.6, holders of a majority of
the shares of Parent Common Stock in the Escrow Account may, by written notice
signed by them and delivered to Parent, appoint any other individual to act in
the place and stead of the Stockholders' Representative. In the event of the
death, incapacity or resignation of the Stockholders' Representative, if no such
replacement is appointed within thirty (30) days, Parent may designate an
interim replacement to serve until such appointment.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(e) In connection with this Agreement and the Escrow Agreement and
the transactions contemplated hereby and thereby, respectively, the Company and
the Stockholders agree that the Stockholders' Representative shall not be liable
for any error of judgment or for any act done or omitted by the Stockholders'
Representative in good faith or for any mistake in fact or law, except its own
willful misconduct or gross negligence.
(f) The right to indemnification, payment of damages or other
remedy based on the representations, warranties, covenants and obligations of
the Company and the Stockholders contained herein will not be affected by any
investigation conducted by Parent or the Parent Representatives with respect to,
or any Knowledge acquired (or capable of being acquired) by Parent or the Parent
Representatives, at any time whether before or after the execution and delivery
of this Agreement or the Effective Time, with respect to the accuracy or
inaccuracy of, or compliance with, any such representation, warranty, covenant
or obligation. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants
and obligations. ***
ARTICLE IX
GENERAL PROVISIONS
9.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except as set forth in Section 9.1(b), the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any Person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement.
(b) The representations, warranties and agreements in this
Agreement shall terminate on the *** of the Effective Time, except that the
representations, warranties and agreements set forth in *** shall not so
terminate.
9.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(a) If to Parent or Parent Sub
DAOU Systems, Inc.:
5120 Shoreham Place
San Diego, CA 92122
ATTENTION: President and Chief Financial Officer
Telecopier No.:(619) 452-2789
with a copy to:
Baker & McKenzie
101 West Broadway, Twelfth Floor
San Diego, California 92101
ATTENTION: John J. Hentrich, Esq.
Telecopier No.: (619) 236-0429
(b) If to the Company:
On-Line Networking, Inc.
433 N. Midland Avenue
Saddle Brook, NJ 07663
ATTENTION: Steven C Dickson
Telecopier No.: (201) 794-4782
with a copy to:
Ellen Kulka, Esq.
89 Headquarters Plaza
14th Floor, North Tower
Morristown, NJ 07960
Telecopier No.: (201) 455-1539
after November 15, 1997 to
Ellen Kulka, Esq.
c/o Kraemer, Burns et al.
675 Morris Avenue
Springfield, New Jersey 07081
(c) If to the Stockholders:
Steven C. Dickson
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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433 N. Midland Avenue
Saddle Brook, NJ 07663
Telecopier No.: (201) 794-4782
after November 15, 1997 to
Ellen Kulka, Esq.
c/o Kraemer, Burns et al.
675 Morris Avenue
Springfield, New Jersey 07081
9.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
"AAA" as defined in Section 9.11.
"AFFILIATE" means a Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first mentioned Person;
"AGREEMENT" as defined in the preamble to this Agreement;
"ASSETS" means any and all properties and assets (real, personal or mixed,
tangible or intangible) of any Person;
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence;
"BLUE SKY LAWS" as defined in Section 3.5(b);
"BUSINESS DAY" means any day other than a day on which banks in the State
of California are authorized or obligated to be closed;
"CERTIFICATE OF MERGER" as defined in Section 1.2;
"CERTIFICATES" as defined in Section 2.2(b);
"CODE" means the Internal Revenue Code of 1986, as amended;
"COMPANY" as defined in the preamble to this Agreement;
"COMPANY COMMON STOCK" as defined in Section 2.1(a);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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"COMPANY EMPLOYEE BENEFIT PLAN" as defined in Section 3.24(a);
"COMPANY MATERIAL ADVERSE EFFECT" means any change or effect that,
individually or when taken together with all other such changes or effects, is
or is reasonably likely to be materially adverse to the business, properties,
Assets, condition (financial or otherwise), Liabilities, operations or prospects
of the Company at the time of such change or effect. A Company Material Adverse
Effect shall be deemed to exist if there shall occur any event which causes or
may reasonably be expected to cause or result in estimable monetary loss which,
individually or when aggregated with all other events, exceeds ***;
"COMPANY PERMITS" as defined in Section 3.6;
"COMPETING TRANSACTION" means any of the following involving the Company or
any Subsidiary or Affiliate of the Company: (i) any merger, consolidation, share
exchange, business combination, or other similar transaction (other than the
transactions contemplated by this Agreement); (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of ten percent (10%) or more of
the Assets of the Company in a single transaction or series of transactions;
(iii) any offer (whether cash or securities) for ten percent (10%) or more of
the outstanding shares of capital stock of the Company; or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing;
"CONSENT" as defined in Section 2.1A;
"CONTRACT" of any Person means any contract, agreement or instrument of any
type whatsoever (i) to which such Person is a party and by which such Person
either has made a binding undertaking to perform an obligation or is entitled to
any property or right, or (ii) by which any of the Assets of such Person is
bound;
"CONTROL" (including the terms "CONTROLLING," "CONTROLLED," "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or as
trustee or executor, by Contract or credit arrangement or otherwise;
"DELAWARE LAW" as defined in the recitals to this Agreement;
"DISSENTING SHARES" as defined in Section 2.4;
"EFFECTIVE TIME" as defined in Section 1.2;
"EMPLOYEE BENEFIT PLAN" means (a) any bonus, incentive compensation, profit
sharing, retirement, pension, group insurance, death benefit, group health,
medical expense reimbursement, workers' compensation, dependent care, flexible
benefits or cafeteria, stock option, stock purchase, stock appreciation rights,
savings, deferred compensation, consulting, severance pay or termination
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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pay, vacation pay, life insurance, disability, welfare or other employee benefit
or fringe benefit plan, program or arrangement; or (b) any plan, program or
arrangement which is an Employee Pension Benefit Plan, Employee Welfare Benefit
Plan or Multiemployer Plan.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Section
3(2);
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Section
3(1);
"EMPLOYMENT AGREEMENTS" as defined in Section 7.2(h);
"ENCUMBRANCES" means any Security Interests, Liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances of any
nature whatsoever;
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other Laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including Laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes;
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended;
"ERISA AFFILIATE" means each person (as defined in Section 3(9) of ERISA)
that together with the Company (or any person whose Liabilities the Company has
assumed or is otherwise subject to) would be considered or has been a single
employer under Section 4001(b) of ERISA or would be considered or has been a
member of the same "controlled group," under common control, a member of the
same affiliated service group or otherwise a single employer within the meaning
of Section 414(b), (c), (m) and (o) of the Code (PROVIDED, HOWEVER, that when
the subject of the provision is a Multiemployer Plan only subsections (b) and
(c) of Section 414 of the Code shall be taken into account).
"ESCROW ACCOUNT" as defined in Section 8.6(c);
"ESCROW AGREEMENT" as defined in Section 5.5;
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended;
"EXCHANGE AGENT" as defined in Section 2.2(a);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
"EXCHANGE FUND" as defined in Section 2.2(a);
"EXCHANGE RATIO" as defined in Section 2.1(a);
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended;
"FAIR MARKET VALUE" of any Asset means the value that would be obtained in
an arm's length transaction between an informed and willing buyer and an
informed and willing seller;
"FINANCIAL RESULT DATE" as defined in Section 6.2;
"FINANCIAL STATEMENTS" as defined in Section 3.7;
"GAAP" means United States generally accepted accounting principles as in
effect from time to time;
"GOVERNMENTAL ENTITIES" as defined in Section 3.5(b);
"INDEMNIFICATION AMOUNT" as defined in Section 8.6(c);
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium);
"INTERIM BALANCE SHEET" as defined in Section 3.7;
"KNOWLEDGE" or "KNOWN" means, with respect to a particular fact or other
matter, that (i) an individual should be aware of such fact or other matter or
(ii) such individual could reasonably be expected to discover or otherwise
become aware of such fact or other matter; a Person (other than an individual)
will be deemed to have "Knowledge" of a particular fact or other matter if any
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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individual who is serving, or who has at any time served, as a director,
officer, partner, executor or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter;
"LAWS" as defined in Section 3.5(a);
"LIABILITIES" as defined in Section 3.8;
"LIEN" means any lien, charge, Encumbrance, mortgage, conditional sale
agreement, title retention agreement, financing lease, pledge or Security
Interest of any kind or type and whether arising by Contract or under Law;
"LOSS" as defined in Section 8.6(a);
"MARKET PRICE" means the average of the bid and ask prices of the Parent
Common Stock as reported on the NASDAQ National Market Quotation System for the
ten (10) trading days prior to the Effective Time.
"MERGER" as defined in the recitals to this Agreement;
"MERGER CONSIDERATION" as defined in Section 2.2(b);
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37);
"NASDAQ" means The NASDAQ Stock Market, Inc.;
"ORDINARY COURSE OF BUSINESS" with respect to any entity, means the
ordinary course of business consistent with past custom and practice (including
with respect to quantity and frequency) of that entity;
"PARENT" as defined in the preamble to this Agreement;
"PARENT COMMON STOCK" as defined in Section 2.1(a);
"PARENT MATERIAL ADVERSE EFFECT" shall mean any change or effect that,
individually or when taken together with all such other changes or effects, is
or is reasonably likely to be materially adverse to the business, properties,
Assets, condition (financial or otherwise), Liabilities, operations or prospects
of Parent and its Subsidiaries, taken as a whole at the time of such change or
effect. A Parent Material Adverse Effect shall be deemed to exist if there shall
occur any event which causes or may reasonably be expected to cause or result in
estimable monetary loss which, individually or when aggregated with all other
events, exceeds $***;
"PARENT PREFERRED STOCK" as defined in Section 4.3(b);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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"PARENT REPRESENTATIVES" as defined in Section 5.4;
"PARENT SEC REPORTS" as defined in Section 4.6(a);
"PARENT SUB" as defined in the preamble to this Agreement;
"PARENT SUB COMMON STOCK" means Parent Sub's common stock, par value $.001
per share;
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a Governmental Entity (or any
department, agency, or political subdivision thereof) or any other entity;
"PROSPECTUS" as defined in Section 6.6(c);
"RULES" as defined in Section 9.11.
"SEC" means the Securities and Exchange Commission;
"SECURITIES ACT" means the Securities Act of 1933, as amended;
"SECURITY INTEREST" means any mortgage, pledge, Lien, Encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar Liens, (b) Liens for Taxes not yet due and payable, (c) purchase money
Liens and Liens securing rental payments under capital lease arrangements, and
(d) other Liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money;
"STOCKHOLDERS" as defined in the preamble to this Agreement;
"STOCKHOLDERS' REPRESENTATIVE" as defined in Section 5.5;
"SUBSIDIARY" or "SUBSIDIARIES" of the Company, Parent, the Surviving
Corporation or any other Person, means any corporation, partnership, joint
venture or other legal entity of which the Company, Parent, the Surviving
Corporation or such other Person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, fifty percent
(50%) or more of the capital stock or other equity interests which the holders
thereof are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity;
"SURVIVING CORPORATION" as defined in Section 1.1;
"TAX" or "TAXES" shall mean any and all taxes, charges, fees or levies,
payable to any federal, state, local or foreign taxing authority or agency,
including, without limitation, (i) income, franchise,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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profits, gross receipts, minimum, alternative minimum, estimated, AD VALOREM,
value added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, disability, employment, social security, workers
compensation, unemployment compensation, utility, severance, excise, stamp,
windfall profits, transfer and capital gains taxes, (ii) custom duties, imposts,
charges, levies or other similar assessments of any kind, and (iii) interest,
penalties and additions to tax imposed with respect thereto;
"TAX RETURN" shall mean any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof; and
"THIRD PARTY CLAIM" as defined in Section 8.6(b).
9.4 HEADINGS; CONSTRUCTION. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
9.5 SEVERABILITY. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties hereto as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
9.6 ENTIRE AGREEMENT. This Agreement (together with the exhibits and
schedules) constitutes the entire agreement of the parties and supersedes all
prior agreements and undertakings, both written and oral, between the parties
hereto, or any of them, with respect to the subject matter hereof, including,
without limitation the related letter of intent dated September 15, 1997.
9.7 ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise except Parent Sub may, without the Company's approval, assign
its interests to a wholly-owned Subsidiary of Parent.
9.8 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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9.9 FURTHER ASSURANCES. The parties hereto agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as another party hereto may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to in this Agreement.
9.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, REGARDLESS OF THE LAWS
THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.
9.11 BINDING ARBITRATION. Subject to the arbitration provisions set forth
below, the parties hereto agree that all disputes arising out of or related to
the terms and conditions of this Agreement or to the performance, breach or
termination thereof, shall be submitted to binding arbitration pursuant to the
Expedited Procedures of the Commercial Arbitration Rules (the "RULES") of the
American Arbitration Association (the "AAA"). The arbitration will take place
in *** San Diego, California at the offices of the AAA ***. The dispute will be
resolved by a single arbitrator appointed by the AAA in accordance with the list
procedure described in Paragraph 13 of the Rules, except that the AAA will
transmit the list within ten (10) Business Days of the filing of the demand for
arbitration, and the parties thereto will have five (5) Business Days to return
the list to the AAA with their objections and preferences. Discovery will be
limited to no more than seven (7) depositions by each side and written document
requests, requesting the production of specific documents. The parties to the
dispute will voluntarily produce any and all documents that they intend to use
at the hearing before the close of discovery, subject to supplementation for
purposes of rebuttal or good cause shown. The period for taking discovery will
be sixty (60) Business Days, commencing upon the day that the answer is due
under the Rules. The arbitrator will hold a pre-hearing conference within three
(3) Business Days of the close of discovery and will schedule the hearing within
thirty (30) Business Days of the close of discovery. After the arbitrator is
selected, the arbitrator will have sole jurisdiction to hear such applications,
except that any measure ordered by the arbitrator may be immediately and
specifically enforced by a court otherwise having jurisdiction over the parties.
All fees and costs will be allocated to the parties to the arbitration as
determined by the arbitrator. Each party will pay its own fees and costs
associated with the arbitration and each party will pay one-half the estimated
arbitrator's fees up front and if either party fails to do so a default will be
entered against such party solely with respect to such fees. Any determination
of the arbitrator shall be final and binding on the parties hereto. Nothing in
this Agreement will prevent a party hereto from applying to a court that would
otherwise have jurisdiction for provisional or interim injunctive or other
equitable measures.
9.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the date first written above by their respective
officer thereunto duly authorized.
DAOU SYSTEMS, INC.
By /s/ Daniel Daou
------------------------------------------
Daniel Daou, President
DAOU ON-LINE, INC.
By /s/ Daniel Daou
------------------------------------------
Daniel Daou, President
ON-LINE NETWORKING, INC.
By /s/ Steven C. Dickson
------------------------------------------
Steven C. Dickson, President
STOCKHOLDERS OF
ON-LINE NETWORKING, INC.
/s/ Steven C. Dickson and /s/ Mary B. Dickson
---------------------------- --------------------------------------------
Steven C. Dickson Mary B. Dickson, 500 shares, JTWROS
/s/ Kevin T. Carr and /s/ Susan K. Carr
---------------------------- --------------------------------------------
Kevin T. Carr Susan K. Carr, 500 shares, JTWROS
/s/ Clifford DiPalmer and /s/ Elizabeth DiPalmer
---------------------------- --------------------------------------------
Clifford DiPalmer Elizabeth DiPalmer, 500 shares, JTWROS
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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