SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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) June 21, 1996
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EAGLE RIVER INTERACTIVE, INC.
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(Exact name of Registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-28004 84-1320277
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(Commission File Number) (I.R.S. Employer
Identification No.)
1060 West Beaver Creek Boulevard, Avon Colorado 81620
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (970) 845-
8300
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(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets
On June 21, 1996, the Registrant completed the merger (the
"Merger") of a wholly owned subsidiary of the Registrant ("Sub")
with and into Graphic Media, Inc., an Oregon corporation
("Graphic Media"). Graphic Media is a multimedia communications
firm that specializes in interactive training and marketing
solutions. The Merger was effected pursuant to an Agreement and
Plan of Merger dated June 21, 1996 between the Registrant, Sub,
Graphic Media and Lee J. Jacobson, E. Michael Loftus, Philip
Meurer and Joseph Parker, stockholders of Graphic Media (the
"Stockholders") (the "Agreement and Plan of Merger"). As a
result of the Merger, Graphic Media became a wholly owned
subsidiary of the Registrant. The Registrant is accounting for
the Merger as a pooling of interests.
The Registrant issued an aggregate of 550,000 shares of
common stock, par value $.001 per share, of the Registrant (the
"Common Stock") to the Stockholders in exchange for their shares
of capital stock of Graphic Media. The Registrant also paid cash
consideration in the amount of $351,931 to a dissenting
stockholder who held approximately 3% of the outstanding capital
stock of Graphic Media. The amount of consideration paid by the
Registrant was determined based on arms-length negotiations and,
with respect to the dissenting stockholder, applicable provisions
of Oregon corporate law. The source of the cash consideration
was the Registrant's initial public offering completed in March
1996.
The Agreement and Plan of Merger contains certain
representations, warranties and indemnification provisions
relating to the Stockholders and the Registrant. In connection
with the Merger, the Registrant and the Stockholders entered into
a Stock Pledge Agreement dated June 21, 1996 (the "Stock Pledge
Agreement") pursuant to which the Stockholders pledged an
aggregate of 55,000 shares of Common Stock to the Registrant as
security for their indemnification obligations under the
Agreement and Plan of Merger. So long as a claim for
indemnification does not arise, the Stockholders shall be
entitled to vote the shares, to receive dividends or other
distributions and to exercise all other rights and powers
relating thereto not inconsistent with the Stock Pledge
Agreement. Certain shares will be released from the Stock Pledge
Agreement on the date of the next auditor's report on the
Registrant's consolidated financial statements that include the
date of the Merger. If not already resolved, the remaining
shares shall be released as the Registrant reasonably determines
that such shares shall not be necessary to satisfy any specific
claims for indemnification that thereafter may be asserted by the
Registrant during the remainder of the indemnification period, as
specified in the Agreement and Plan of Merger.
In addition, the Registrant and the Stockholders entered
into a Stockholder Agreement dated June 21, 1996 pursuant to
which the Stockholders agreed, among other matters, (i) not to
transfer their shares of capital stock of Graphic Media prior to
the Merger and to vote such shares in favor of the Merger, and
(ii) not to transfer the shares of Common Stock received in
connection with the Merger until such time as financial
statements that include at least 30 days of post-merger combined
operations of Graphic Media and the Registrant after the Merger
shall have been publicly reported unless such Stockholder shall
have delivered to the Registrant an opinion of counsel or no-
action letter from the accounting staff of the Securities and
Exchange Commission to the effect that such transfer will not
cause the Merger not to be treated as a pooling of interests for
financial accounting purposes.
The shares of Common Stock issued to the Stockholders in
connection with the Merger were not registered under the
Securities Act of 1933. The Registrant has granted the
Stockholders and permitted successors and assigns certain
registration rights pursuant to a Registration Agreement between
the Registrant and the Stockholders dated June 21, 1996 (the
"Registration Agreement"). Pursuant to the Registration
Agreement, the holders of a majority of the shares of Common
Stock issued in connection with the Merger may request at any
time on or after March 22, 1997 registration of all or part of
the 550,000 issued shares on Form S-3 or any similar short-form
registration, if available. The Registrant has agreed to use its
best efforts to take such steps as are necessary to make a short-
form registration available. If the Registrant is not able to
fulfill such obligation, such holders may request at any time on
or after March 22, 1997 that the Registrant register such shares
on Form S-1 or any similar long-form registration (such short-
form or long-form registrations being referred to herein as a
"Demand Registration"). The holders are entitled to request only
one Demand Registration. The Registration Agreement also grants
the holders of the shares of Common Stock issued in connection
with the Merger the right to include up to 200,000 of such shares
whenever securities of the Registrant are to be registered under
the Securities Act (other than on Form S-8 or Form S-4) (a
"Piggyback Registration"). The holders are entitled to request
only one Piggyback Registration, provided that if the entire
200,000 shares are not included in such Piggyback Registration,
the holders are entitled to additional Piggyback Registrations
until a cumulative total of 200,000 of such shares are
registered. The Registrant has agreed to pay its expenses of
registrations under the Registration Agreement, which exclude
underwriting discounts and commissions and fees and expenses of
counsel retained by such holders.
In connection with the Merger, the Registrant assumed
certain options to purchase capital stock of Graphic Media that
had been granted to certain employees of Graphic Media. Such
options were converted into options to purchase an aggregate of
approximately 141,041 shares of Common Stock under the
Registrant's 1995 Employee Stock Option Plan. In addition, the
Registrant caused Graphic Media to enter into employment and
noncompetition agreements with certain officers and employees of
Graphic Media.
The foregoing is qualified in its entirety by reference to
the Agreement and Plan of Merger, the Stock Pledge Agreement,
the Registration Agreement and the Employment and Noncompetition
Agreement dated June 21, 1996 between Graphic Media and Philip
Meurer, Vice President of Graphic Media, copies of which are
filed herewith as Exhibits 1, 2, 3 and 4, respectively, and are
incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
The financial information required to be filed as a part of
this report is not yet available. Such information will be filed
by amendment as soon as practicable and in any event within 60
days of the date this report is filed.
(c) Exhibits
Exhibit 1 Agreement and Plan of Merger dated June 21,
1996 among Eagle River Interactive, Inc.,
Sushi Acquisition Corp., Graphic Media, Inc.
and Stockholders thereof
Exhibit 2 Stock Pledge Agreement dated June 21, 1996 by
and among Lee Jacobson, Philip Meurer, E.
Michael Loftus and Joseph Parker and Eagle
River Interactive, Inc.
Exhibit 3 Registration Agreement dated June 21, 1996
between Eagle River Interactive, Inc., Philip
Meurer, Joseph Parker, Lee J. Jacobson and E.
Michael Loftus
Exhibit 4 Employment and Noncompetition Agreement dated
June 21, 1996 between Graphic Media, Inc. and
Philip Meurer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Eagle River Interactive, Inc.
Date: July 8, 1996 /s/ Marc Pinto
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Marc Pinto
Executive Vice President, Chief
Financial Officer
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Page
1 Agreement and Plan of Merger dated June 21,
1996 among Eagle River Interactive, Inc.,
Sushi Acquisition Corp., Graphic Media, Inc.
and Stockholders thereof
2 Stock Pledge Agreement dated June 21, 1996
by and among Lee Jacobson, Philip Meurer, E.
Michael Loftus and Joseph Parker and Eagle
River Interactive, Inc.
3 Registration Agreement dated June 21, 1996
between Eagle River Interactive, Inc.,
Philip Meurer, Joseph Parker, Lee J.
Jacobson and E. Michael Loftus
4 Employment and Noncompetition Agreement
dated June 21, 1996 between Graphic Media,
Inc. and Philip Meurer
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of June 21, 1996
(this "Agreement"), by and among Eagle River Interactive, Inc., a
Delaware corporation ("Parent"), Sushi Acquisition Corp., a
Delaware corporation ("Sub"), Graphic Media, Inc., an Oregon
corporation ("Company"), Philip Meurer, Joseph Parker, Lee J.
Jacobson and E. Michael Loftus.
RECITALS
A. The authorized capital stock of Parent consists of 2,000,000
shares of Preferred Stock, $.001 par value, none of which are
issued and outstanding, and 30,000,000 shares of Common Stock,
$.001 par value ("Parent Common Stock"), of which on the close of
business on June 12, 1996, 11,472,448 shares were issued and
outstanding, and no shares were held as treasury stock.
B. The authorized capital stock of Sub consists of 100 shares
of Common Stock, $.001 par value ("Sub Common Stock"), all of
which are issued and outstanding.
C. The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock, without par value ("Company
Common Stock"), of which, at the close of business on June 12,
1996, 2,073,300 shares were issued and outstanding, and 514,600
shares were subject to issuance pursuant to outstanding stock
options or performance awards ("Company Options") outstanding
under the Company's 1995 Employee Stock Incentive Plan, that
certain Employment and Noncompetition Agreement dated May 1, 1995
between the Company and E. Michael Loftus and that certain
Employment and Noncompetition Agreement dated May 1, 1995 between
the Company and Robert Lightman.
D. All of the issued and outstanding shares of Sub Common Stock
are owned by Parent. All of the issued and outstanding shares of
Company Common Stock (the "Shares") are owned by the
Stockholders.
E. The respective Boards of Directors of Parent, Sub and the
Company deem it advisable and in the best interests of their
respective stockholders that Sub shall merge into the Company
pursuant to the articles and certificate of merger attached
hereto as Exhibit A (the "Articles of Merger") and the applicable
provisions of the laws of the States of Oregon and Delaware and
have, by resolutions duly adopted, approved the principal terms
of such merger which are herein set forth, and Sub and the
Company have directed that the principal terms of such merger be
submitted to their respective stockholders for approval.
F. The parties desire to state the terms and conditions of such
merger, the mode of carrying the same into effect, the
consideration which the holders of Company Common Stock, Company
Options and Sub Common Stock are to receive in exchange for such
shares upon the merger and such other details and provisions as
are deemed necessary or desirable.
G. For financial accounting purposes, it is intended that the
merger be accounted for as a "pooling of interests."
H. The parties intend that such merger be treated as a
reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended
(the "Code").
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"Accounts Receivable" -- as defined in Section 3.A.8.
"Agreement" -- as defined in the first paragraph of this
Agreement.
"Aggregate Deductible" -- as defined in Section 11.6.
"Applicable Contract" -- any Contract (a) under which the
Company has or may acquire any rights, (b) under which the
Company has or may become subject to any obligation or liability,
or (c) by which the Company or any of the assets owned or used by
it are or may become bound.
"Articles of Merger" -- as defined in the Recitals of this
Agreement.
"Audit Claims" -- as defined in Section 11.5.
"Audit Report Date" -- as defined in Section 11.5.
"Balance Sheet" -- as defined in Section 3A.4.
"Best Efforts" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure
that such result is achieved as expeditiously as possible;
provided, however, that an obligation to use Best Efforts under
this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially
adverse change in the benefits to such Person of this Agreement
and the Contemplated Transactions.
"Breach" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any
instrument delivered pursuant to this Agreement will be deemed to
have occurred if there is or has been (a) any inaccuracy in or
breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other
provision, or (b) any claim (by any Person) or other occurrence
or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy,
breach, failure, claim, occurrence, or circumstance.
"Certificates" -- as defined in Section 2.6(b).
"Closing" -- as defined in Section 2.3.
"Closing Date" -- as defined in Section 2.3.
"Code" -- as defined in the Recitals of this Agreement.
"Commission" -- the United States Securities and Exchange
Commission.
"Company" -- as defined in the first paragraph of this
Agreement.
"Company Common Stock" -- as defined in the Recitals of this
Agreement.
"Company Options" -- as defined in the Recitals of this
Agreement.
"Competing Business" -- as defined in Section 3A.25.
"Consent" -- any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions
contemplated by this Agreement, including:
(a) the Merger;
(b) the delivery of the Parent Common Stock to the Surviving
Stockholders, and the execution, delivery, and performance of
the Pledge Agreement, the Registration Agreement and the
Employment Agreements; and
(c) payment in full for the Dissenting Shares; and
(d) the performance by Parent, Sub, Company and the Surviving
Stockholders of their respective covenants and obligations
under this Agreement; and
(e) Parent's acquisition and exercise of control over the
Company.
"Contract" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or
implied) that is legally binding.
"Conversion Ratio" -- as defined in Section 2.5(a)(I).
"Copyrights" -- as defined in Section 3A.22(a)(iii).
"Damages" -- as defined in Section 11.2.
"DGCL" -- as defined in Section 2.1.
"Disclosure Letter" -- the disclosure letter delivered by
Surviving Stockholders to Parent concurrently with the execution
of this Agreement.
"Dissenting Share" -- means any share of Company Common Stock
which any Stockholder who has exercised his or her dissenter's
rights under the OBCA holds of record.
"Effective Time" -- as defined in Section 2.2.
"Employee Benefit Plan" -- as defined in Section 3.A.13(b)(I).
"Employment Agreements" -- as defined in Section 7.4(c).
"Encumbrance" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute
of ownership.
"Environment" -- soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air),
plant and animal life, and any other environmental medium or
natural resource.
"Environmental, Health, and Safety Liabilities" -- any cost,
damages, expense, liability, obligation, or other responsibility
arising from or under Environmental Law, Occupational Safety and
Health Law or any other Legal Requirement and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational
safety and health, and regulation of chemical substances or
products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands
and response, investigative, remedial, or inspection costs and
expenses arising under Environmental Law or Occupational Safety
and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or
corrective action, including any investigation, cleanup,
removal, containment, or other remediation or response actions
("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup
has been required or requested by any Governmental Body or any
other Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or
Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include
the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability
Act, 42 U.S.C. ' 9601 et seq., as amended (ACERCLA").
"Environmental Law" -- as defined in Section 3A.19(a).
"ERISA" -- the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant
to that Act or any successor law.
"ERISA Affiliate" -- as defined in Section 3.A.13(b)(I).
"Facilities" -- any real property, leaseholds, or other
interests currently or formerly owned or operated by the Company
and any buildings, plants, or structures currently or formerly
owned or operated by the Company.
"Financial Statements" -- as defined in Section 3A.4.
"GAAP" -- generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in
Section 3A.4 were prepared.
"Governmental Authorization" -- any approval, consent, license,
permit, waiver, or other authorization issued, granted, or given
by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
"Governmental Body" -- any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department,
official, or entity and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation,
treatment, or use (including any withdrawal or other use of
groundwater) of Hazardous Materials in, on, under, about, or from
the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm
to persons or property on or off the Facilities, or that may
affect the value of the Facilities or the Company.
"Hazardous Materials" -- as defined in Section 3A.19(a).
"Indemnified Persons" -- as defined in Section 11.2.
"Intellectual Property Assets" -- as defined in Section
3A.22(a).
"Interim Balance Sheet" -- as defined in Section 3A.4.
"Interim Financial Statements" -- the Interim Balance Sheet and
the related internally prepared statement of operations as at
March 31, 1996.
"IRC" -- the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"IRS" -- the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States
Department of the Treasury.
"Knowledge" -- an individual will be deemed to have "Knowledge"
of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the
course of conducting a reasonable investigation concerning the
existence 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
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.
"Legal Requirement" -- any federal, state, local, or municipal
administrative order, constitution, law, ordinance, principle of
common law, regulation, statute, or treaty.
"Marks" -- as defined in Section 3A.22(a)(I).
"Material Adverse Change" -- a material adverse change in the
business, operations, properties, assets or condition of the
Company.
"Material Adverse Effect" -- something that has caused or would
be likely to cause a Material Adverse Change.
"Merger" -- as defined in Section 2.1.
"Multiemployer Plan" -- as defined in Section 3A.13(b)(I).
"Nasdaq" -- the National Association of Securities Dealers
Automated Quotation System.
"Notice" -- as defined in Section 7.8.
"OBCA" -- as defined in Section 2.1.
"Occupational Safety and Health Law" -- any Legal Requirement
designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program,
whether governmental or private (including those promulgated or
sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions.
"Order" -- any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered
by any court, administrative agency, or other Governmental Body
or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business"
only if:
(a) such action is substantially consistent with the past
practices of such Person and is taken in the ordinary course of
the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of
Persons exercising similar authority) and is not required to be
specifically authorized by the parent company (if any) of such
Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising
similar authority), in the ordinary course of the normal day-to-
day operations of other Persons that are in the same line of
business as such Person.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a
general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership;
(d) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a
Person; and (e) any amendment to any of the foregoing.
"Other General Claims" -- as defined in Section 11.5.
"Parent" -- as defined in the first paragraph of this
Agreement.
"Parent's Advisors" -- as defined in Section 5.1.
"Parent Commission Filings" -- as defined in Section 4.3.
"Parent Common Stock" -- as defined in the Recitals of this
Agreement.
"Parent Disclosure Letter" -- as defined in Section 4.
"Parent Stock Option" -- as defined in Section 2.13(a).
"Patents" -- as defined in Section 3A.22(a)(ii).
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization,
labor union, or other entity or Governmental Body.
"Plan" -- as defined in Section 3A.13(b)(I).
"Pledge Agreement" -- as defined in Section 7.4(h).
"Proceeding" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
"Proprietary Rights Agreement" -- as defined in Section
3A.20(b).
"Registration Agreement" -- as defined in Section 7.4(I).
"Related Person" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's
Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar
capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or
indirectly under common control with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar
capacity); and
(f) any Related Person of any individual described in clause
(b) or (c).
For purposes of this definition, (a) the "Family" of an
individual includes (I) the individual, (ii) the individual's
spouse and former spouses, (iii) any other natural person who is
related to the individual or the individual's spouse within the
second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of voting securities or other
voting interests representing at least 5% of the outstanding
voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity
securities or equity interests in a Person.
"Release" -- any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.
"Representative" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel,
accountants, and financial advisors.
"Rights in Mask Works" -- as defined in Section 3A.22(a)(iv).
"S Distribution" -- the distribution by the Company, prior to the
Closing Date, to Stockholders of $137,860 toward payment of the
Stockholders' estimated 1995 and (in respect of the period from
January 1, 1996 to the Effective Date)1996 federal and state
income taxes, incurred due to the income of the Company
attributable to the Stockholders.
"Securities Act" -- the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any
successor law.
"Shares" -- as defined in the Recitals of this Agreement.
"Stockholder" -- any Person who owns at the relevant time one
or more of the Shares.
"Stockholder Agreement" -- as defined in Section 7.4(g).
"Stock Option Plan" -- as defined in the Recitals of this
Agreement.
"Sub" -- as defined in the first paragraph of this Agreement.
"Sub Common Stock" -- as defined in the Recitals of this
Agreement.
"Subsidiary" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other
interests having the power to elect a majority of that
corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other
than securities or other interests having such power only upon
the happening of a contingency that has not occurred) are held by
the Owner or one or more of its Subsidiaries; when used without
reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"Surviving Corporation" -- as defined in Section 2.1.
"Surviving Stockholder" -- any Stockholder other than a
Stockholder who holds one or more of the Dissenting Shares.
"Tax" -- any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate
tax), levy, assessment, tariff, duty (including any customs
duty), deficiency, or other fee, and any related charge or amount
(including any fine, penalty, interest, or addition to tax),
imposed, assessed, or collected by or under the authority of any
Governmental Body or payable pursuant to any tax-sharing
agreement or any other Contract relating to the sharing or
payment of any such tax, levy, assessment, tariff, duty,
deficiency, or fee.
"Tax Return" -- any return (including any information return),
report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed
with or submitted to, any Governmental Body in connection with
the determination, assessment, collection, or payment of any Tax
or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating
to any Tax.
"Threat of Release" -- a substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"Threatened" -- a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has
been given (orally or in writing), or if any other event has
occurred or any other circumstances exist, that would lead a
prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
"Threshold Amount" -- as defined in Section 11.6.
"Trade Secrets" -- as defined in Section 3A.22(a)(v).
"Welfare Plan" -- as defined in Section 3A.13(b)(I).
2. MERGER AND EFFECTIVE TIME; ARTICLES OF INCORPORATION; BY-
LAWS; DIRECTORS AND OFFICERS; CONVERSION AND EXCHANGE OF SHARES
2.1 THE MERGER
At the Effective Time (as defined in Section 2.2 hereof), Sub
shall be merged (the "Merger") into the Company, which shall be
(and is hereinafter sometimes referred to as) the "Surviving
Corporation." The corporate existence of the Company with all
its rights, privileges, powers and franchises shall continue
unaffected and unimpaired by the Merger, and as the Surviving
Corporation it shall be governed by the laws of the State of
Oregon and succeed to all rights, privileges, powers, franchises,
assets, liabilities and obligations of Sub in accordance with the
Oregon Business Corporation Act (the "OBCA") and the Delaware
General Corporation Law (the "DGCL"). The separate existence and
corporate organization of Sub shall cease at the Effective Time
and thereupon the Company and Sub shall be a single corporation,
the Company. The Merger shall have the effects specified in the
OBCA and the DGCL.
2.2 THE EFFECTIVE TIME OF THE MERGER
The Merger shall become effective at the time (the "Effective
Time") of filing with the Oregon Secretary of State and the
Delaware Secretary of State of Articles of Merger in such form as
is required by, and executed in accordance with, the applicable
provisions of the OBCA and the DGCL or at such later time as may
be agreed to by Parent and the Company and specified in the
Articles of Merger. The parties will cause the Articles of
Merger to be filed with the Oregon Secretary of State and the
Delaware Secretary of State as soon as practicable after the
Closing.
2.3 CLOSING
On the same day as, but immediately prior to the filing of the
Articles of Merger, a closing (the "Closing") will take place for
the purpose of confirming the satisfaction or waiver of the
conditions set forth in Sections 7, 8 and 9 hereof. The Closing
will take place as soon as practicable after the satisfaction or
waiver of the conditions set forth in such Sections (the date and
time of the Closing being hereinafter referred to as the "Closing
Date"), at the offices of Tonkon, Torp, Galen, Marmaduke & Booth,
1600 Pioneer Tower, 888 S.W. Fifth Avenue, Portland, Oregon
97904, unless another place is agreed to by the parties hereto.
2.4 ARTICLES OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS
(a) Articles of Incorporation. The Articles of Incorporation
of the Company, as in effect immediately prior to the Effective
Time, shall be amended at the Effective Time to change
Article III thereof to read in full as follows: "Authorized
Stock. The total number of shares of stock which the corporation
shall have the authority to issue is 100 shares of common stock,
without par value." From and after the Effective Time, such
Articles of Incorporation, as so amended, shall continue as the
Articles of Incorporation of the Surviving Corporation, until
amended as provided by law.
(b) By-laws. The By-laws of the Company, as in effect at the
Effective Time, shall continue to be the By-laws of the Surviving
Corporation, until altered, amended or repealed in accordance
with law, the Articles of Incorporation of the Surviving
Corporation and such By-laws.
(c) Directors and Officers. The directors of the Surviving
Corporation at and immediately following the Effective Time shall
be Terence M. Graunke and Marc Pinto, to serve in accordance with
the By-laws of the Surviving Corporation. The officers of the
Surviving Corporation at and immediately following the Effective
Time shall be Terence M. Graunke, President, and Marc Pinto,
Secretary and Treasurer, to serve in accordance with the By-laws
of the Surviving Corporation.
2.5 CONVERSION AND EXCHANGE OF SHARES
The manner and basis of converting at the Effective Time
Company Common Stock into Parent Common Stock, the exchange of
certificates therefor, and the manner and basis of converting
Company Options outstanding at the Effective Time shall be as set
forth herein.
(a) Conversion of Shares.
(I)(A) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (except
Dissenting Shares) shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into
the right to receive that number of fully paid and
nonassessable shares of Parent Common Stock in a ratio of one
(1) share of Parent Common Stock for each 3.6484 shares of
Company Common Stock, which ratio of shares, expressed as a
decimal, equals 0.274095 (the "Conversion Ratio"); provided,
that such number of shares of Parent Common Stock otherwise
issuable pursuant to this Section 2.5(a)(I)(A) shall be subject
to reduction to the extent provided in Section 12.1.
(B) Each Dissenting Share shall be converted into the right
to receive payment from the Surviving Corporation with respect
thereto in accordance with the provisions of the OBCA.
(ii) Each share of Sub Common Stock issued and outstanding
as of the Effective Time, shall, by virtue of the Merger and
without any action on the part of Parent, the sole stockholder
of Sub, be converted into one share of legally and validly
issued, fully paid and nonassessable Common Stock, without par
value, of the Surviving Corporation. Each stock certificate of
Sub evidencing ownership of Sub Common Stock shall by virtue of
the Merger evidence ownership of Common Stock of the Surviving
Corporation.
(iii) In the event of any stock split, combination,
reclassification, recapitalization, exchange, stock dividend or
other distribution payable in Parent Common Stock with respect
to shares of Parent Common Stock (or if a record date with
respect to any of the foregoing should occur) during the period
between the date of this Agreement and the Effective Time, then
the Conversion Ratio will be appropriately adjusted to reflect
such stock split, combination, reclassification,
recapitalization, exchange, stock dividend or other
distribution.
2.6 EXCHANGE OF CERTIFICATES.
Parent Common Stock into which Company Common Stock shall be
converted pursuant to the Merger shall be deemed to have been
issued at the Effective Time. At the Closing, Parent shall
deliver to each Surviving Stockholder certificates evidencing the
shares of Parent Common Stock to which that Stockholder is
entitled under Section 2.5, together with any dividends and
distributions with respect to such stock, and each Surviving
Stockholder shall deliver to Parent that Stockholder's
certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common
Stock (the "Certificates"), together with a blank stock power and
such other transmittal letters, documents and instruments as
Parent or Parent's transfer agent may reasonably request, each in
form reasonably acceptable to Parent or such transfer agent.
2.7 [RESERVED]
2.8 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK
All shares of Parent Common Stock issued upon the surrender for
exchange of shares of Company Common Stock in accordance with the
terms hereof (including any cash paid pursuant to Section 2.5)
shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock,
subject, however, to the Surviving Corporation's obligation to
pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or
made by the Company on such shares of Company Common Stock in
accordance with the terms of this Agreement or prior to the date
hereof and which remain unpaid at the Effective Time, and, on and
after the Effective Time, there shall be no further registration
of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged
as provided in this Section 2.
2.9 CASH IN LIEU OF FRACTIONAL SHARES
No fractional shares of Parent Common Stock shall be issued in
the Merger but, in lieu of any such fractional shares, each
Stockholder who would otherwise have been entitled to a
fractional share of Parent Common Stock upon surrender of the
Certificates as provided in Section 2.6 of this Agreement, will
upon such surrender be paid an amount of cash (without interest)
determined by multiplying (a) the Parent Common Stock price
determined as of the closing sale price of Parent Common Stock as
quoted on The Nasdaq Stock Market on the day preceding the
Closing Date by (b) the fractional share interest in Parent
Common Stock to which the Stockholder would otherwise be
entitled.
2.10 [RESERVED]
2.11 [RESERVED]
2.12 [RESERVED]
2.13 COMPANY STOCK OPTIONS
(a) All outstanding Company Options listed by holder and
amount on Schedule 2.13 hereto shall remain outstanding following
the Effective Time. At the Effective Time, such Company Options
shall, by virtue of the Merger and without any further action on
the part of the Company or the holder of any such Company
Options, be assumed by Parent in such manner that (I) qualifies
under ' 424 of the Code as "assuming a stock option in a
transaction to which Section 424 of the Code applies," or (ii) to
the extent that ' 424 of the Code does not apply to any such
Company Options, would qualify if ' 424 were applicable to such
Company Option. Each outstanding Company Option assumed by
Parent under any employee stock option plan or arrangement,
whether vested or unvested, shall be converted into a Parent
stock option vested to the same extent as the Company Options
described in Schedule 2.13 (a "Parent Stock Option") under which
the shares subject to the Parent Stock Option shall be the number
of shares of Parent Common Stock determined by multiplying the
number of shares of Company Common Stock covered by such Company
Option immediately prior to the Effective Time by the Conversion
Ratio and rounding down to the nearest whole number, and the
exercise price per share of Parent Common Stock at which the
Parent Stock Option shall be exercisable shall be an amount
determined by dividing the exercise price per share of the
Company Common Stock subject to such Company Option immediately
prior to the Effective Time by the Conversion Ratio and rounding
up to the nearest whole cent. Each such Parent Stock Option
shall be assumed at the Effective Time by Parent on the same
terms and subject to the same conditions as in effect immediately
prior to the Effective Time, subject to such equitable
adjustments as may be necessary to reflect the Merger.
(b)Parent shall ensure that, prior to August 1, 1996, Parent
shall have registered the Parent Common Stock issuable upon such
exercise of any Parent Stock Option on Form S-8 (or successor
form) pursuant to the Securities Act.
(c)Parent and the Company shall take or cause to be taken any
and all action necessary or appropriate to implement the
adjustments contemplated by this Section 2.13.
3A. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each Surviving Stockholder hereby severally represents and
warrants to Parent that, except as provided in the Disclosure
Letter:
3A.1 ORGANIZATION AND GOOD STANDING
(a) Part 3A.1 of the Disclosure Letter contains a complete and
accurate description of the Company name, jurisdiction of
incorporation, other jurisdictions in which it is authorized to
do business, and capitalization (including the identity of each
stockholder and the number of shares held by each). The Company
is a corporation duly organized and validly existing under the
laws of its jurisdiction of incorporation, with full corporate
power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under
Applicable Contracts. The Company is duly qualified to do
business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such
qualification.
(b) The Company has delivered to Parent correct and complete
copies of its Organizational Documents, as currently in effect.
3A.2 AUTHORITY; NO CONFLICT
(a) The Company has the requisite corporate power and
authority to execute and deliver this Agreement and all other
agreements and documents contemplated hereby and to carry out its
obligations hereunder. The execution, delivery and performance
of this Agreement and all other agreements and documents
contemplated hereby and the consummation of the Merger and of the
other transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company and
no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and all other agreements
and documents contemplated hereby or to consummate the
transactions so contemplated (other than, with respect to the
Merger, the approval and adoption of this Agreement by the
Stockholders in accordance with the OBCA and the Company's
Articles of Incorporation). The affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock
in compliance with the OBCA is the only vote of the holders of
any class or series of the Company's capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the
Company and constitutes, and all agreements and documents
contemplated hereby when executed and delivered pursuant hereto
for value received will constitute, the valid and binding
obligations of the Company.
(b) Except as set forth in Part 3A.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement by the
Company and Stockholders nor the consummation or performance of
any of the Contemplated Transactions by the Company or
Stockholders will, directly or indirectly (with or without notice
or lapse of time):
(I) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of the
Company, or (B) any resolution adopted by the board of
directors or the stockholders of the Company;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise
any remedy or obtain any relief under, any Legal Requirement or
any Order to which the Company or any Stockholder, or any of
the assets owned or used by the Company, may be subject that
would be likely to have a Material Adverse Effect;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate,
or modify, any Governmental Authorization that is held by the
Company or that otherwise relates to the business of, or any of
the assets owned or used by, the Company;
(iv) cause Parent, Sub or the Company to become subject to,
or to become liable for the payment of, any material Tax;
(v) cause any of the assets owned by the Company to be
reassessed or revalued in any material way by any taxing
authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract that would have a
Material Adverse Effect; or
(vii) result in the imposition or creation of any charge,
claim, community property interest, condition, equitable
interest, lien, option, pledge, security interest or
encumbrance upon or with respect to any of the assets owned or
used by the Company.
Except as set forth in Part 3A.2 of the Disclosure Letter, none
of the Surviving Stockholders or the Company is or will be
required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the
Contemplated Transactions.
3A.3 CAPITALIZATION
The authorized equity securities of the Company consist of
10,000,000 shares of common stock, without par value, of which
2,073,300 shares are issued and outstanding and constitute the
Shares. Part 3A.3 to the Disclosure Letter sets forth all
outstanding options to acquire any securities of the Company,
together with the exercise prices therefor. Stockholders are the
record and beneficial owners and holders of the Shares, free and
clear of all Encumbrances. The Stockholders own of record the
number of Shares set forth opposite their respective names on
Part 3A.1 to the Disclosure Letter. Except as set forth in Part
3A.3 of the Disclosure Letter, no legend or other reference to
any purported Encumbrance appears upon any certificate
representing equity securities of the Company. All of the
outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and
nonassessable. Except as set forth in Part 3A.3 of the
Disclosure Letter, there are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity
securities or other securities of the Company was issued in
violation of the Securities Act or any other Legal Requirement.
The Company does not own, and does not have any Contract to
acquire, any equity securities or other securities of any Person
(including any Subsidiary) or any direct or indirect equity or
ownership interest in any other business.
3A.4 FINANCIAL STATEMENTS
Company has delivered to Parent: (a) a reviewed balance sheet
of the Company as at December 31, 1994 and the related reviewed
statements of income, stockholders' equity, and cash flow for the
fiscal year then ended, together with the review reports thereon,
(b) a reviewed balance sheet of the Company as at December 31,
1995 (including the notes thereto, the "Balance Sheet"), and the
related reviewed statements of income, stockholders' equity, and
cash flow for the fiscal year then ended, together with the
review report thereon of KPMG Peat Marwick LLP, independent
certified public accountants (the financial statements described
in the foregoing clauses (a) and (b), collectively, the
"Financial Statements"), and (c) unaudited balance sheets of the
Company as at March 31, 1996 (the "Interim Balance Sheet") and
the related unaudited statement of income for the three months
then ended. The Financial Statements fairly present the
financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company as at the
dates of and for the periods referred to therein, all in
accordance with GAAP. The Interim Financial Statements were
prepared by the Company from the Company's books and records
without independent verification for use by the Company's
management. Except as disclosed in Part 3A.4 of the Disclosure
Letter, those Interim Financial Statements fairly present the
financial condition and the results of operations of the Company
as of the date and for the period referred to in such financial
statements, subject to normal recurring adjustments and timing
practices with respect to cut-off, calculation and analysis (the
effect of which will not, individually or in the aggregate, be
materially adverse) and the absence of notes (that, if presented,
would not differ materially from those included in the Balance
Sheet). The financial statements referred to in this Section
3A.4 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed
in the notes to such financial statements. No financial
statements of any Person other than the Company are required by
GAAP to be included in the consolidated financial statements of
the Company.
3A.5 BOOKS AND RECORDS
Except as described in Part 3A.5 to the Disclosure Letter, the
books of account, minute books, stock record books, and other
records of the Company specifically requested by Parent or its
Representatives, all of which have been or prior to the Closing
Date will be made available to Parent, are complete and correct
in all material respects. Except as described in Part 3A.5 to
the Disclosure Letter, the minute books of the Company contain
accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of the
Company, and no meeting of any such stockholders, Board of
Directors, or committee has been held for which minutes have not
been prepared and are not contained in such minute books. At the
Closing Date, all of those books and records will be in the
possession of the Company.
3A.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3A.6 of the Disclosure Letter contains a complete and
accurate list of all real property, leaseholds, or other
interests therein, if any, owned by the Company. Company will
deliver to Parent copies of the deeds and other instruments (as
recorded) by which the Company acquired such real property and
interests, and copies of all title insurance policies, opinions,
abstracts, and surveys in the possession of Stockholders or the
Company and relating to such property or interests. The Company
owns all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) that they purport to
own, including all of the properties and assets reflected in the
Balance Sheet and the Interim Balance Sheet (except for assets
held under capitalized leases disclosed or not required to be
disclosed in Part 3A.17 of the Disclosure Letter and personal
property sold since the date of the Balance Sheet and the Interim
Balance Sheet, as the case may be, in the Ordinary Course of
Business), and all of the properties and assets purchased or
otherwise acquired by the Company since the date of the Balance
Sheet (except for personal property acquired and sold since the
date of the Balance Sheet in the Ordinary Course of Business).
All material properties and assets reflected in the Balance Sheet
and the Interim Balance Sheet are free and clear of all charges,
claims, community property interests, conditions, equitable
interests, liens, options, pledges, security interests and
encumbrances except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Balance
Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or
event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets
after the date of the Interim Balance Sheet (such mortgages and
security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with
notice or lapse of time or both, would constitute a default)
exists and which mortgages or security interests are listed and
described in Part 3A.6 of the Disclosure Letter, and (c) liens
for current taxes not yet due.
3A.7 CONDITION AND SUFFICIENCY OF ASSETS
To the Knowledge of Surviving Stockholders, as of the date of
this Agreement, the buildings, plants, structures, and equipment
of the Company are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they
are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material
in nature or cost. The building, plants, structures, and
equipment of the Company are sufficient for the continued conduct
of the Company's business after the Closing Date in
substantially the same manner as conducted prior to the Closing
Date. SURVIVING STOCKHOLDERS DISCLAIM ALL OTHER WARRANTIES
REGARDING THE CONDITION OF THE BUILDING, PLANT, STRUCTURES,
EQUIPMENT AND OTHER TANGIBLE PROPERTY, EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.
3A.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on
the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the date of this
Agreement (collectively, the "Accounts Receivable") represent or
will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of
Business, except to the extent they represent progress billings
in excess of work actually performed. To Surviving Stockholder's
Knowledge, there is no contest, claim, or right of set-off, other
than returns in the Ordinary Course of Business, under any
Contract with any obligor of an Accounts Receivable relating to
the amount or validity of such Accounts Receivable. Part 3A.8 of
the Disclosure Letter contains a complete and accurate list of
all Accounts Receivable as of the date of the Interim Balance
Sheet, which list sets forth the aging of such Accounts
Receivable.
3A.9 [RESERVED]
3A.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3A.10 of the Disclosure Letter, the
Company has no liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent, or
otherwise) except for liabilities or obligations reflected or
reserved against in the Financial Statements for the year ended
December 31, 1995 or the Interim Financial Statements and current
liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3A.11 TAXES
(a) Except as described in Part 3A.11 of the Disclosure
Letter, the Company has filed or caused to be filed (on a timely
basis since 1989) all Tax Returns that are or were required to be
filed by it pursuant to applicable Legal Requirements.
Part 3A.11 of the Disclosure Letter contains a complete and
accurate list of all such Tax Returns filed since January 1,
1994. The Company has paid, or made sufficient provision for the
full payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by the Stockholders or the Company, except
such Taxes, if any, as are listed in Part 3A.11 of the Disclosure
Letter and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been
provided in the Financial Statements for the year ended December
31, 1995 and the Interim Financial Statements.
(b) All deficiencies which have been or may be proposed as a
result of audits of the United States federal and state income
Tax Returns of the Company have been paid, reserved against,
settled, or, as described in Part 3A.11 of the Disclosure Letter,
are being contested in good faith by appropriate proceedings.
Except as described in Part 3A.11 of the Disclosure Letter,
neither the Company nor, to the Surviving Stockholder's
Knowledge, any Stockholder has given or been requested to give
waivers or extensions (or is or would be subject to a waiver or
extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of the Company or
for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Company are adequate (determined
in accordance with GAAP) and are at least equal to the Company's
actual and potential liability for Taxes for periods prior to the
Effective Time. There exists no proposed or unpaid actual Tax
assessment against the Company except as disclosed in the
Financial Statements for the year ended December 31, 1995, the
Interim Financial Statements or in Part 3A.11 of the Disclosure
Letter. No consent to the application of Section 341(f)(2) of the
IRC has been filed with respect to any property or assets held,
acquired, or to be acquired by the Company. Except as disclosed
in Part 3A.11 to the Disclosure Letter, all Taxes that the
Company is or was required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other
Person.
(d) Except as disclosed in Part 3A.11 to the Disclosure
Letter, all Tax Returns filed by the Company are true, correct,
and complete. There is no tax sharing agreement that will
require any payment by the Company after the date of this
Agreement.
(e) Company is now, and has been at all times since January 1,
1987, an "S corporation" within the meaning of ' 1361(a)(1) of
the Code. Company has no liability (regardless of whether
absolute or contingent, known or unknown) which has been
previously imposed or which in the future may be imposed on
account of any liability for Taxes in respect of any period prior
to the Effective Time, and Company has fully satisfied all
liabilities which have been previously imposed on Company or
which in the future may be imposed on Company for Taxes in
respect of any period prior to the Effective Time. Neither
Company nor any Stockholder has undertaken, intends to undertake,
or is aware of, any action or plan which would cause Company to
cease to qualify as an "S corporation" within the meaning of
' 1361(a)(1) of the Code, prior to the Effective Time.
3A.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any
Material Adverse Change, and to Surviving Stockholder's
Knowledge, no event has occurred or circumstance exists that may
result in a Material Adverse Change.
3A.13 EMPLOYEE BENEFITS
(a) The Company has no ownership interest in, and does not
contribute to, any credit union which has been established by the
Company for any of its employees.
(b)(I) Neither the Company nor any affiliate of the Company as
determined under IRC ' 414(b), (c), (m) or (o) ("ERISA
Affiliate") maintains, administers or contributes to, nor do
the employees of the Company or any ERISA Affiliate receive or
expect to receive as a condition of employment, benefits
pursuant to: any employee pension benefit plan (as defined in
' 3(2) of ERISA) ("Plan"), including, without limitation, any
multiemployer plan as defined in IRC ' 3(37) of ERISA
("Multiemployer Plan"); any employee welfare benefit plan (as
defined in IRC ' 3(1) of ERISA) ("Welfare Plan"); or any bonus,
deferred compensation, stock purchase, stock option, stock
appreciation, severance, salary continuation, vacation, sick
leave, fringe benefit, incentive, insurance, welfare or similar
plan or arrangement ("Employee Benefit Plan") other than those
Plans, Welfare Plans and Employer Benefit Plans described in
Part 3A.13 of the Disclosure Letter. Except as required by IRC
' 4980B or as disclosed in Part 3A.13 of the Disclosure Letter,
neither the Company nor any ERISA Affiliate has promised any
former employee or other individual not employed by the Company
or any ERISA Affiliate medical or other benefit coverage,
maintains or contributes to any plan or arrangement providing
medical benefits to former employees, their spouses or
dependents or any other individual not employed by the Company.
(ii) All Plans, Welfare Plans and Employee Benefit Plans
and any related trust agreements or annuity contracts (or any
related trust instruments) comply with and are and have been
operated in accordance with each applicable provision of ERISA,
the IRC (including, without limitation, the requirements of IRC
' 401(a) to the extent any Plan is intended to conform to that
section), other Federal statutes, state law (including, without
limitation, state insurance law) and the regulations and rules
promulgated pursuant thereto or in connection therewith.
Neither the Company nor any Surviving Stockholder has any
Knowledge of any violation of any of the foregoing by any Plan,
Welfare Plan, or Employee Benefit Plan. Each Welfare Plan
which is a group health plan (within the meaning of
' 5000(b)(1) of the Code) complies with and has been maintained
and operated in accordance with each of the requirements of IRC
' 162(k) as in effect for years beginning prior to 1989, IRC
' 4980B for years beginning after December 31, 1988 and Part 6
of Subtitle B of Title I of ERISA. A favorable determination
as to the qualification under the Code of the Company's Profit
Sharing Plan [401(k)] and each amendment thereto has been made
by the IRS, the Profit Sharing Plan at all times has been and
remains qualified under the IRC, and the related trust at all
times has been and remains tax exempt.
(iii) Neither any Plan or Welfare Plan fiduciary nor any
Plan or Welfare Plan has engaged in any transaction in
violation of ' 406 of ERISA or any "prohibited transaction" (as
defined in ' 4975(c)(1) of the IRC and there has been no
"reportable event" (as defined in ' 4043(b) of ERISA) with
respect to any Plan. Neither the Company nor any ERISA
Affiliate has failed to make any contributions or to pay any
amounts due and owing as required by the terms of any Plan,
Welfare Plan or Employee Benefit Plan, or collective bargaining
agreement or ERISA or any other applicable law.
(iv) True and complete copies of each Plan, Welfare Plan
and Employee Benefit Plan, related trust agreements, annuity
contracts, determination letters, summary plan descriptions,
all communication to employees regarding any Plan, Welfare
Plan, or Employee Benefit Plan, annual reports on Form 5500
for the last three years, and each plan, agreement, instrument
and commitment referred to herein, have been furnished to
Parent; all of the foregoing are legally valid, binding, in
full force and effect, and there are no defaults thereunder,
and none of the rights of the Company thereunder will be
impaired by this Agreement or the consummation of the
transaction contemplated hereby. The annual reports on Form
5500 furnished to Parent fully and accurately set forth the
financial and actuarial condition of each Plan and each trust
funding any Welfare Plan. With respect to each Plan, Welfare
Plan and Employee Benefit Plan, the Disclosure Letter sets
forth the name and address of the administrator and trustees
and the policy number and insurer under all insurance policies.
(v) There are no pending or, to Surviving Stockholder's
Knowledge, threatened claims by or on behalf of any of the
Plans, Welfare Plans, or Employee Benefit Plans by any employee
or beneficiary covered under any Plans, Welfare Plans or
Employee Benefit Plans or otherwise involving any Plan, Welfare
Plan or Employee Benefit Plan (other than routine claims for
benefits).
3A.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3A.14 of the Disclosure
Letter:
(I) the Company is, and at all times has been, in material
compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business
or the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may constitute
or result in a violation by the Company of, or a failure on the
part of the Company to comply with, any Legal Requirement, or
(B) may give rise to any obligation on the part of the Company
to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature, that with respect to either of
the preceding, is likely to have a Material Adverse Effect; and
(iii) since January 1, 1993, the Company has not received
any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any
actual, alleged, possible, or potential obligation on the part
of the Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature, that with
respect to either of the preceding, is likely to have a
Material Adverse Effect.
(b) Part 3A.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by
the Company. Each Governmental Authorization listed or required
to be listed in Part 3A.14 of the Disclosure Letter is valid and
in full force and effect. Except as set forth in Part 3A.14 of
the Disclosure Letter:
(I) the Company is, and at all times has been, in material
compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be
identified in Part 3A.14 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a violation of or a failure to
comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3A.14 of
the Disclosure Letter, or (B) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any Governmental
Authorization listed or required to be listed in Part 3A.14 of
the Disclosure Letter, that with respect to either of the
preceding, is likely to have a Material Adverse Effect;
(iii) since January 1, 1993, the Company has not received,
at any time, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement
of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any
Governmental Authorization, that with respect to either of the
preceding, is likely to have a Material Adverse Effect; and
(iv) all applications required to have been filed for the
renewal of the material Governmental Authorizations listed or
required to be listed in Part 3A.14 of the Disclosure Letter
have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Part 3A.14 of the
Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully
conduct and operate its business in the manner it currently
conducts and operates such business and to permit the Company to
own and use its assets in the manner in which it currently owns
and uses such assets, except where the failure to have such
Governmental Authorizations would not be reasonably likely to
have a Material Adverse Effect.
3A.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3A.15 of the Disclosure Letter,
there is no pending Proceeding:
(I) that has been commenced by or against the Company or
that, to the Surviving Stockholder's Knowledge, otherwise
relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions.
To the Knowledge of Surviving Stockholders and the Company, (1)
no such Proceeding has been Threatened, and (2) no event has
occurred or circumstance exists that may give rise to or serve as
a basis for the commencement of any such material Proceeding.
Company has delivered to Parent copies of all pleadings,
correspondence, and other documents relating to each Proceeding
listed in Part 3A.15 of the Disclosure Letter. The Proceedings
listed in Part 3A.15 of the Disclosure Letter will not have a
material adverse effect on the business, operations, assets,
condition, or prospects of the Company.
(b) (I) there is no Order to which the Company, or any of
the assets owned or used by the Company, is specifically
subject; and
(ii) to the Knowledge of Surviving Stockholders and the
Company, no officer, director, agent, or employee of the
Company is specifically subject to any Order that prohibits
such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the
business of the Company.
3A.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3A.16 of the Disclosure Letter,
since the date of the Balance Sheet, the Company has conducted
its business only in the Ordinary Course of Business and there
has not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of
capital stock of the Company; issuance of any security
convertible into such capital stock; grant of any registration
rights; purchase, redemption, retirement, or other acquisition by
the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or
payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder, director,
officer, or (except in the Ordinary Course of Business) employee
or entry into any employment, severance, or similar Contract with
any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan
for or with any employees of the Company;
(e) damage to or destruction or loss of any asset or property
of the Company, whether or not covered by insurance, materially
and adversely affecting the properties, assets, business,
financial condition, or prospects of the Company, taken as a
whole;
(f) entry into, termination of, or receipt of notice of
termination of (I) any material license, distributorship, dealer,
sales representative, joint venture, credit, or similar
agreement, or (ii) any Contract or transaction involving a total
remaining commitment by or to the Company of at least $5,000
(except for Contracts or transactions entered into in the
Ordinary Course of Business with the Company's customers or
vendors which do not exceed, individually, a commitment of
$25,000);
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or
property of the Company or mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property of
the Company, including the sale, lease, or other disposition of
any of the Intellectual Property Assets in any case greater than
$10,000;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $10,000;
(I) material change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the Company to do
any of the foregoing.
3A.17 CONTRACTS; NO DEFAULTS
(a) Part 3A.17(a) of the Disclosure Letter contains a complete
and accurate list of:
(I) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an
amount or value in excess of $25,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an
amount or value in excess of $25,000;
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures
or receipts of the Company in excess of $5,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real or personal property (except personal property leases and
installment and conditional sales agreements having a value per
item or aggregate payments of less than $15,000 and with terms
of less than one year);
(v) each Contract relating to Intellectual Property Assets
to which the Company is a party or by which the Company is
bound, except for any license implied by the sale of a product
and perpetual, paid-up licenses for commonly available software
programs with a value of less than $500 under which the Company
is the licensee, including agreements with current or former
employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other
employee representative of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits,
losses, costs, or liabilities by the Company with any other
Person;
(viii) each Applicable Contract containing covenants that
in any material way purport to restrict the business activity
of the Company or any Affiliate of the Company or limit the
freedom of the Company or any Affiliate of the Company to
engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than
direct payments for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract for capital expenditures
which, by its terms, provides for an aggregate balance payable
thereunder since December 31, 1995 in excess of $15,000 for any
such Contract;
(xii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by
the Company other than in the Ordinary Course of Business; and
(xiii) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3A.17(b) of the Disclosure
Letter, with respect to each Contract identified or required to
be identified in Part 3A.17(a) of the Disclosure Letter:
(I) the Company is, and at all times has been, in material
compliance with all applicable terms and requirements of each
such Contract under which the Company has or had any obligation
or liability or by which the Company or any of the assets owned
or used by the Company is or was bound; and
(ii) to the Surviving Stockholder's Knowledge, each other
Person that has or had any obligation or liability under any
material Contract under which the Company has or had any rights
is, and at all times has been, in full material compliance with
all applicable terms and requirements of such Contract.
3A.18 INSURANCE
(a) Company has delivered to or made available for inspection
by Parent:
(I) true and complete copies of all policies of insurance
to which the Company is a party or under which the Company, or
any director of the Company, is or has been covered at any time
preceding the date of this Agreement;
(ii) true and complete copies of all pending applications
for policies of insurance; and
(iii) any statement by the accountant of the Company's
financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims.
(b) Part 3A.18(b) of the Disclosure Letter describes:
(I) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the
Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases
and service agreements) and identifies the policy under which
such coverage is provided.
(c) Part 3A.18(c) of the Disclosure Letter sets forth, by
year, for the current policy year and each of the three preceding
policy years:
(I) a summary of the loss experience under each policy in
excess of $5,000; and
(ii) a statement describing the loss experience for all
claims that were self-insured, including the number and
aggregate cost of such claims.
(d) Except as set forth on Part 3A.18(d) of the Disclosure
Letter:
(I) All policies to which the Company is a party or that
provide coverage to any Stockholder, the Company, or any
director or officer of the Company:
(A) to Surviving Stockholder's Knowledge, are valid,
outstanding, and enforceable;
(B) to Surviving Stockholder's Knowledge, are issued by
an insurer that is financially sound and reputable;
(C) taken together, provide adequate insurance coverage
for the assets and the operations of the Company for all risks
to which the Company is normally exposed, based on coverages
maintained by similar businesses in similar geographical areas;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or
by which it is bound;
(E) will continue in full force and effect following
the consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of
the Company.
(ii) To Surviving Stockholder's Knowledge, neither the
Company nor any Stockholder has received (A) any refusal of
coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full
force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations
thereunder in connection with any policy of the Company.
(iii) The Company has paid all premiums due, and has
otherwise performed all of its obligations, under each policy
to which the Company is a party or that provides coverage to
the Company or any director thereof.
(iv) To Surviving Stockholder's Knowledge, the Company has
given notice to the insurer of all claims as to which it has
notice that may be insured thereby.
3A.19 ENVIRONMENTAL MATTERS
Except as set forth in Part 3A.19 of the Disclosure Letter:
(a) The Company is not in violation, or aware, of any imminent
or alleged violation by the Company, of any federal, state or
local law, statute, rule, regulation, judgment, consent decree or
ordinance relating to public health, safety, conservation, waste
management, pollution or the indoor or outdoor environment,
including relating to the release, discharge, emission, storage,
treatment, handling or disposal of Hazardous Materials (defined
below) ("Environmental Law"). The Company is not a party to, or
threatened by, and has not been subject to, any judicial,
administrative or regulatory litigation, claim, notice,
proceeding or investigation arising from the operation or
violation of any applicable Environmental Law, or is aware after
diligent inquiry of any grounds or basis for such a claim. The
Company does not have or currently use, store, treat, dispose or
otherwise handle hazardous, toxic, radioactive, infectious or
harmful substances or materials, including, without limitation,
asbestos and petroleum, including, crude oil or any fraction
thereof and any material prohibited or regulated by any
Environmental Law ("Hazardous Material") except in compliance
with Environmental Law, or knows of any release, threat of
release, disposal, cleanup or presence of any Hazardous Material
at, on or under any real property owned, occupied or operated by
the Company except in compliance with Environmental Law.
3A.20 EMPLOYEES
(a) Part 3A.20 of the Disclosure Letter contains a complete
and accurate list of the following information for each employee
or director of the Company, including each employee on leave of
absence or layoff status: employee name; job title; current
compensation paid or payable; vacation accrued; and vested and
unvested Company Options.
(b) No director or, to Surviving Stockholder's Knowledge,
employee of the Company is a party to, or is otherwise bound by,
any agreement or arrangement, including any confidentiality,
Noncompetition, or proprietary rights agreement, between such
director or employee and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects or will affect (I)
the performance of his duties as an employee or director of the
Company, or (ii) the ability of the Company to conduct its
business, including any Proprietary Rights Agreement with
Stockholders or the Company by any such employee or director. To
Surviving Stockholder's Knowledge, no director, officer, or other
key employee of the Company intends to terminate his employment
with the Company, except as set forth in Part 3A.20 of the
Disclosure Letter.
(c) Part 3A.20 of the Disclosure Letter also contains a
complete and accurate list of the following information for each
retired employee or director of the Company, or their dependents,
receiving benefits or scheduled to receive benefits from the
Company or Company Plans in the future: name, pension benefit,
pension option election, retiree medical insurance coverage,
retiree life insurance coverage, and other benefits.
3A.21 LABOR RELATIONS; COMPLIANCE
The Company has not been, and is not, a party to any collective
bargaining or other labor Contract. There has not been, there is
not presently pending or existing, and to Surviving Stockholder's
Knowledge there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any
Proceeding against or affecting the Company relating to the
alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting the
Company or its premises, or (c) any application for certification
of a collective bargaining agent. To Surviving Stockholder's
Knowledge no event has occurred or circumstance exists that could
provide the basis for any work stoppage or other labor dispute.
There is no lockout of any employees by the Company, and no such
action is contemplated by the Company. Except as disclosed in
Part 3A.21 of the Disclosure Letter, the Company has complied in
all material respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the
payment of social security and similar taxes, occupational safety
and health, and plant closing. The Company is not liable for the
payment of any compensation, damages, taxes, fines, penalties, or
other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
3A.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets. The term "Intellectual
Property Assets" includes:
(I) the Company's name, all fictional business names,
trading names, registered and unregistered trademarks, service
marks, and applications (collectively, "Marks");
(ii) patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights and registrations and applications
therefor in both published works and unpublished works
(collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in
Mask Works"); and
(v) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively,
"Trade Secrets");
owned, used, or licensed by the Company as licensee or
licensor.
(b) Agreements. A complete and accurate list of all Contracts
relating to the Intellectual Property Assets to which the Company
is a party or by which the Company is bound, except for any
license implied by the sale of a product and perpetual, paid-up
licenses for commonly available software programs with a value of
less than $500 under which the Company is the licensee. There
are no outstanding and, to Stockholder's Knowledge, no Threatened
disputes or disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business. Except as described
in Part 3A.22 of the Disclosure Letter:
(I) The Intellectual Property Assets are all those necessary
for the operation of the Company's business as it is currently
conducted. The Company is the owner of all right, title, and
interest in and to each of the material Intellectual Property
Assets, free and clear of all material liens, security
interests, charges, encumbrances, equities, and other adverse
claims, and has the right to use without payment to a third
party all of the Intellectual Property Assets.
(ii) Except as set forth in Part 3A.22 of the Disclosure
Letter, none of the former and current employees of the Company
have executed written Contracts with the Company that assign to
the Company all rights to any inventions, improvements,
discoveries, or information relating to the business of the
Company. To Surviving Stockholder's Knowledge, no employee of
the Company has entered into any Contract that restricts or
limits in any way the scope or type of work in which the
employee may be engaged or requires the employee to transfer,
assign, or disclose information concerning his work to anyone
other than the Company.
(d) Patents. Except as described in Part 3A.22 of the
Disclosure Letter:
(I) Part 3A.22(d) of the Disclosure Letter contains a
complete and accurate list (including identifying numbers and
dates of issuance) and summary description of all Patents,
which consist of a patent application. The Company makes no
other representation with respect to such patent application.
(e) Trademarks. Except as described in Part 3A.22 of the
Disclosure Letter:
(I) Part 3A.22(e) of Disclosure Letter contains a complete
and accurate list (including identifying numbers and dates of
issuance) and summary description of all Marks that have been
registered with the United States Patent and Trademark Office
or that have been submitted to such Office for registration.
The Company is the owner of all right, title, and interest in
and to each of the trademark applications listed thereon, and
the name AGraphic Media," free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse
claims.
(ii) The Company has no Marks that have been registered
with the United States Patent and Trademark Office.
(iii) To Surviving Stockholder's Knowledge, no Mark has
been or is now involved in any opposition and, to Surviving
Stockholder's Knowledge, no such action is Threatened with the
respect to any of the Marks.
(iv) To Surviving Stockholder's Knowledge, there is no
potentially interfering trademark or trademark application of
any third party.
(v) No Mark is infringed or, to Surviving Stockholder's
Knowledge, has been challenged or threatened in any way. To
Surviving Stockholder's Knowledge, none of the Marks used by
the Company infringes or is alleged to infringe any trade name,
trademark, or service mark of any third party.
(vi) All products and materials containing a Mark bear the
proper federal registration notice where permitted by law.
(f) Copyrights.
To Surviving Stockholder's Knowledge, the Company has filed
no copyright applications with the United States Copyright
Office. The Surviving Stockholders make no representations or
warranties with respect to unregistered Copyrights except as
follows: no Copyright is infringed or, to Stockholder's
Knowledge, has been challenged or threatened in any way. To
Surviving Stockholder's Knowledge, none of the subject matter
of any of the Copyrights infringes or is alleged to infringe
any copyright of any third party or is a derivative work based
on the work of a third party.
(g) Trade Secrets.
(I) With respect to each material Trade Secret, the
documentation relating to such Trade Secret is current,
accurate, and sufficient in detail and content to identify and
explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual.
(ii) the Company has taken all reasonable precautions to
protect the secrecy, confidentiality, and value of their Trade
Secrets.
(iii) to Surviving Stockholder's Knowledge, the Company has
good title and an absolute (but not necessarily exclusive)
right to use the Trade Secrets. No Trade Secret is subject to
any adverse claim or has been challenged or threatened in any
way that is likely to have a Material Adverse Effect on the
Company's business, assets or financial condition.
(h) Compliance with Legal and Contractual Requirements.
Except as disclosed on Part 3A.22(h) of the Disclosure
Letter, the Company has all material software and other
Intellectual Property Asset licenses, and has paid all
royalties and fees with respect thereto required to be paid
prior to the date of this Agreement, necessary to operate its
business in compliance with all material contractual
requirements and Legal Requirements to which it may be subject.
(I) Post-Closing Execution of Property Rights Agreements.
Promptly following the Effective Time, the Surviving
Stockholders who are employed by the Parent or the Company
shall exert their best efforts to have all employees of execute
in favor of the Company proprietary rights agreements
substantially similar to Parent's existing proprietary rights
agreement.
3A.23 CERTAIN PAYMENTS
Since January 1, 1990, neither the Company nor any director,
officer, agent, or employee of the Company, or to Stockholder's
Knowledge any other Person associated with or acting for or on
behalf of the Company, has directly or indirectly, in violation
of any Legal Requirement, (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to
any Person, private or public, regardless of form, whether in
money, property, or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for
business secured, or (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of the
Company or any Affiliate of the Company, or (b) established or
maintained any fund or asset that has not been recorded in the
books and records of the Company.
3A.24 DISCLOSURE
(a) No representation or warranty of Stockholders in this
Agreement and no statement in the Disclosure Letter omits to
state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made,
not misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to
make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
3A.25 RELATIONSHIPS WITH RELATED PERSONS
No Stockholder or any Related Person of any Stockholder or of
the Company has, or since January 1, 1994 has had, any interest
in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Company's
business. Except as described in Part 3A.25 to the Disclosure
Letter, no Stockholder or any Related Person of any Stockholder
or of the Company is, or since January 1, 1994 has owned (of
record or as a beneficial owner) an equity interest or any other
financial or profit interest in, a Person that has (I) had
business dealings or a material financial interest in any
transaction with the Company other than business dealings or
transactions conducted in the Ordinary Course of Business with
the Company at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in
competition with the Company with respect to any line of the
products or services of the Company (a "Competing Business") in
any market presently served by the Company. Except as set forth
in Part 3A.25 of the Disclosure Letter, no Stockholder or any
Related Person of any Stockholder or of the Company is a party to
any Contract with, or has any claim or right against, the
Company.
3A.26 POOLING OF INTERESTS
To Surviving Stockholder's Knowledge:
(a)Company is autonomous and has not been a subsidiary or
division of another corporation within two years before the
Merger is expected to be consummated;
(b)Company has not changed the equity interest of its voting
common stock in contemplation of effecting the Merger;
(c)Within the two years immediately preceding the date of this
Agreement, Company has not issued any Company Common Stock,
granted any person the right to acquire Company common Stock, or
made any distributions with respect to Company Common Stock other
than normal distributions of dividends and issuance of stock
options in the normal course of business except as disclosed in
Part 3A.26 of the Disclosure Letter;
(d)Company has not reacquired shares of its voting common stock
for purposes of the Merger;
(e)Within the two years immediately preceding the date of this
Agreement, the Company has not redeemed or otherwise acquired any
of its outstanding Company Common Stock except as disclosed in
Part 3A.26 of the Disclosure Letter;
(f)Company has not disposed of a significant portion of its
assets during the two years prior to the Merger in contemplation
thereof.
3A.27 LINE OF CREDIT AND TERM LOAN
As of the Closing Date, the outstanding balances under the
Company's lines of credit and term loan from Bank of America
Oregon will not exceed the sum of $100,000 for the equipment line
of credit, the sum of $343,000 for the term loan, the sum of
$300,000 for the revolving line of credit, and the sum of $35,000
for its Visa credit card, plus accrued and unpaid interest. Such
dollar amounts include all outstanding principal; fees and
charges which are or have become due and payable; and the face
amount of any outstanding letters of credit and banker's
acceptances. As of the Closing Date, no principal, interest or
other amounts will be past due and the Company is otherwise in
compliance with respect to such loans and credit arrangements.
3A.28 BROKERS OR FINDERS
Surviving Stockholders and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment
in connection with this Agreement.
3A.29 CONTINUITY OF INTEREST
No Surviving Stockholder will sell, exchange or otherwise
dispose of any Company Common Stock before the Effective Time,
and the Surviving Stockholders have no plan or intention,
individually or collectively, to sell, exchange or otherwise
dispose of a number of shares of Parent Common Stock to be
received in the Contemplated Transactions that would reduce the
Surviving Stockholders' ownership of Parent Common Stock to a
number of shares having a value, as of the date of the Merger,
equal to less than 50 percent of the value of all of the formerly
outstanding Company Common Stock as of the same date. For
purposes of this paragraph, shares of Company Common Stock
exchanged for cash or other property in connection with the
Merger, surrendered by dissenters in connection with the Merger,
or exchanged for cash in lieu of fractional shares of Parent
Common Stock in connection with the Merger, as the case may be,
are treated as outstanding Company Common Stock on the date of
the Merger.
3A.30 CERTAIN OTHER REPRESENTATIONS
(a) The Merger will be consummated in compliance with the
material terms of this Agreement and all other agreements
relating to the Contemplated Transactions.
(b) The ratio for the exchange of shares of Company Common
Stock for Parent Common Stock in the Merger was negotiated
through arm's length bargaining. Accordingly, the fair market
value of the Parent Common Stock to be received by Surviving
Stockholders in the Merger will be approximately equal to the
fair market value of the Company Common Stock surrendered by such
Stockholders in the Merger.
(c) The management of Company knows of no plan or intention by
any Surviving Stockholder to sell, exchange, transfer by gift or
otherwise dispose of any of the shares of Parent Common Stock to
be received by them in the Merger. In addition, the management
of Company is unaware of any transfer of Company Common Stock
made before the Effective Time in contemplation of the Merger.
(d) Immediately after the Merger, Company will hold
substantially all of its properties and the properties of Sub,
within the meaning of ' 368(a)(2)(E) of the Code. Company has
not redeemed any Company Common Stock, made any distribution with
respect to any Company Common Stock, or disposed of any of its
assets in anticipation of the Merger.
(e) No liabilities of any person other than Sub will be
assumed by Company in the Merger, and none of the shares of
Company Common Stock to be surrendered in exchange for Parent
Common Stock in the Merger will be subject to any liabilities.
(f) There is no intercorporate indebtedness existing between
Parent and Company or between Sub and Company that was issued,
acquired, or will be settled at a discount.
(g) Company is not an investment company as defined in Section
368(a)(2)(F)(iii) or (iv) of the Code.
(h) Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Sections
368(a)(3)(A) of the Code.
(I) No stock of Sub will be issued in the Merger.
(j) Any payment of cash in lieu of fractional shares of stock
of Company was not separately bargained for consideration and is
being made for the purpose of saving Parent the expense and
inconvenience of issuing fractional shares.
(k) None of the compensation received by any Surviving
Stockholder-employee of Company pursuant to any employment,
consulting or similar arrangement is or will be separate
consideration for, or allocable to, any of such stockholder's
shares of Company Common Stock. None of the shares of Parent
Common Stock received by any Surviving Stockholder-employee of
Company pursuant to the Merger are or will be separate
consideration for, or allocable to, any such employment,
consulting or similar arrangement. The compensation paid to any
Surviving Stockholder-employee of Company pursuant to any such
employment, consulting or similar arrangement will be for
services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's length for similar
services.
3B. REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each of the Surviving Stockholders severally represents,
warrants and agrees as follows:
3B.1 EXECUTION AND VALIDITY OF AGREEMENTS
Such Surviving Stockholder has the full legal right and
capacity to enter into this Agreement and to perform his
obligations hereunder. This Agreement has been duly and validly
executed and delivered by such Stockholder and, assuming due
authorization, execution and delivery by Parent and Sub,
constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance
with its terms.
3B.2 STOCK OWNERSHIP
Such Stockholder is the true and lawful owner of the shares of
capital stock of the Company set forth opposite his name on
Schedule 3A.1 to the Disclosure Letter and all of such shares of
capital stock have been duly and validly authorized and issued
and are fully paid, nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof,
and such ownership is free and clear of all mortgages, liens,
security interests, encumbrances, claims, charges and
restrictions of any kind.
3B.3 NO OPTIONS
Except as described in Part 3B.3 of the Disclosure Letter,
there are no outstanding subscriptions, options, rights,
warrants, calls, commitments or agreements of any kind to acquire
any shares of capital stock owned by such Stockholder and there
are no agreements or understandings with respect to the sale or
transfer of such stock.
3B.4 NO RESTRICTIONS
Such Stockholder is not subject to, or a party to, any
mortgage, lien, lease, license, permit, agreement, contract,
instrument, law, rule, ordinance, regulation, order, judgment or
decree, or any other restriction of any kind or character, and
there is no suit, action, claim, investigation or inquiry by any
administrative agency or governmental body, and no legal,
administrative or arbitration proceeding pending or, to such
Stockholder's best knowledge, information and belief, threatened
against such Stockholder or any of such Stockholder's properties
or assets, which in any case adversely affects the business or
condition of the Company or any Subsidiary or any of their
respective assets or property, or which would prevent
consummation of the transactions contemplated by this Agreement,
compliance by such Stockholder with the terms, conditions and
provisions of this Agreement or any other agreement entered into
by such Stockholder in connection with the transactions
contemplated hereby.
3B.5 NO VIOLATIONS OF LAW
Such Stockholder has not been convicted of any criminal
wrongdoing (other than minor traffic violations) or of violations
of any federal or state securities laws, nor, to such
Stockholder's Knowledge, has any other Stockholder or employee of
the Company been so convicted.
3B.6 CERTAIN CONTRACTS
Except as set forth in Part 3B.6 of the Disclosure Letter:
(a) such Surviving Stockholder (and all Related Persons of such
Surviving Stockholder) does not have, nor may acquire any rights
under, and to such Surviving Stockholder's Knowledge, no other
Stockholder has or may become subject to, any obligation or
liability under, any Contract that relates to the business of, or
any of the assets owned or used by, the Company; and
(b) to the Knowledge of such Surviving Stockholder, no
officer, director, agent, employee, consultant, or contractor of
the Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant,
or contractor to (i) engage in or continue any conduct, activity,
or practice relating to the business of the Company, or (ii)
assign to the Company or to any other Person any rights to any
invention, improvement, or discovery.
4. REPRESENTATIONS AND WARRANTIES OF PARENT
Except as provided in the Parent's Disclosure Letter (the
"Parent Disclosure Letter"), Parent represents and warrants to
the Company and Stockholders as follows:
4.1 ORGANIZATION AND GOOD STANDING
Each of Parent and Sub is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware, with full corporate power and authority to conduct its
business as it is now being conducted and to own or use the
properties and assets that it purports to own or use. Each of
Parent and Sub is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state
or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification. Parent and Sub
have each delivered to the Company correct and complete copies of
their respective Organizational Documents, as currently in
effect.
4.2 AUTHORITY; NO CONFLICT
(a) Each of Parent and Sub has the requisite corporate power
and authority to execute and deliver this Agreement and all other
agreements and documents contemplated hereby and to carry out its
obligations hereunder. The execution, delivery and performance
of this Agreement and all other agreements and documents
contemplated hereby and the consummation of the Merger and of the
other transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of each of Parent
and Sub and no other corporate proceedings on the part of Parent
or Sub are necessary to authorize this Agreement and all other
agreements and documents contemplated hereby or to consummate the
transactions so contemplated. This Agreement has been duly
executed and delivered by each of Parent and Sub and constitutes,
and all agreements and documents contemplated hereby when
executed and delivered pursuant hereto for value received will
constitute, the valid and binding obligations of each of Parent
and Sub.
(b) Neither the execution and delivery of this Agreement by
Parent and Sub, nor the consummation or performance of any of the
Contemplated Transactions by Parent or Sub, will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of either
Parent or Sub, or (B) any resolution adopted by the board of
directors or the stockholders of either Parent or Sub;
(ii) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise
any remedy or obtain any relief under, any Legal Requirement or
any Order to which Parent or Sub, or any of the assets owned or
used by Parent or Sub, may be subject;
(iii) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate,
or modify, any Governmental Authorization that is held by
Parent or Sub or that otherwise relates to the business of, or
any of the assets owned or used by, Parent or Sub;
(iv) cause Parent, Sub or the Company to become subject to,
or to become liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other
Governmental Body;
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel,
terminate, or modify, any contract to which Parent or Sub is a
party; or
(vii) result in the imposition or creation of any charge,
claim, community property interest, condition, equitable
interest, lien, option, pledge, security interest or
encumbrance upon or with respect to any of the assets owned or
used by Parent or Sub.
Except as set forth in Part 4.2 of the Parent Disclosure Letter,
neither Parent nor Sub is or will be required to give any notice
to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
4.3 SEC REPORTS
Parent has heretofore delivered or made available to the
Company true and complete copies of all reports, registration
statements and other documents (in each case together with all
amendments thereto) filed by Parent with the Commission since
January 1, 1996 (such reports, registration statements,
definitive proxy statements and other documents, together with
any amendments thereto, are sometimes collectively referred to as
the "Parent Commission Filings"). The Parent Commission Filings
constitute all of the documents (other than preliminary material)
that Parent was required to file with the Commission since such
date. As of their respective dates, each of the Parent
Commission Filings complied in all material respects with the
applicable requirements of the Securities Act, the Exchange Act
and the rules and regulations under each such Act, and none of
the Parent Commission Filings contained as of such date any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading.
4.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against
Parent or Sub that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions. To Parent's
Knowledge, no such Proceeding has been Threatened.
4.5 BROKERS OR FINDERS
Neither Parent, Sub nor their respective agents have incurred
any obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
4.6 INTERIM OPERATIONS OF SUB
Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby and has not engaged in any
business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
4.7 COMPANY STOCK OWNERSHIP
Neither Parent nor any of its Subsidiaries owns any shares of
Company Common Stock or any securities convertible into Company
Common Stock.
4.8 POOLING OF INTERESTS
To Parent's Knowledge, the accounting for the Merger will be
treated as a pooling of interests in accordance with Accounting
Principles Board Opinion No. 16, the interpretive releases issued
pursuant thereto, and the pronouncements of the Commission.
4.9 CERTAIN OTHER REPRESENTATIONS
(a) The Merger will be consummated in compliance with the
material terms of this Agreement and all other agreements
relating to the Contemplated Transactions.
(b) The ratio for the exchange of shares of stock of Company
Common Stock for Parent Common Stock in the Merger was negotiated
through arm's length bargaining. Accordingly, the fair market
value of the Parent Common Stock to be received by Surviving
Stockholders in the Merger will be approximately equal to the
fair market value of the Company Common Stock surrendered by such
stockholders in the Merger.
(c) The management of Parent knows of no plan or intention by
any Surviving Stockholder to sell, exchange, transfer by gift or
otherwise dispose of any of the shares of Parent Common Stock to
be received by them in the Merger. In addition, the management
of Parent is unaware of any transfers of Company Common Stock
made before the Effective Time in contemplation of the Merger.
(d) Immediately after the Merger, Company will hold
substantially all of the properties of Sub within the meaning of
Section 368(a)(2)(E) of the Code.
(e) Prior to the Merger, Parent will control Sub within the
meaning of Section 368(c) of the Code.
(f) Parent has no plan or intention to cause Company after the
Merger to issue additional shares of stock of Company that would
result in Parent losing control of Company within the meaning of
Section 368(c) of the Code.
(g) Parent has no plan or intention to reacquire any of its
stock issued in the Merger, other than as expressly contemplated
in the Merger Agreement and the Pledge Agreement.
(h) Parent has no current plan or intention after the Merger
to liquidate Company, to merge Company into another corporation;
to make any extraordinary distribution in respect of its stock in
Company; to sell or otherwise dispose of stock of Company or to
cause Company to sell or otherwise dispose of any other asset of
Company held before the Merger or acquired in the Merger, except
for dispositions made in the ordinary course of business or
transfers described in Section 368(a)(2)(C) of the Code.
(i) No liabilities of any person other than Sub will be
assumed by Company in the Merger.
(j) Immediately after the Merger, Parent intends to cause
Company to continue its historic business.
(k) There is no intercorporate indebtedness existing between
Parent and Company or between Sub and Company that was issued,
acquired, or will be settled at a discount.
(l) Parent is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(m) Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(n) No stock of Sub will be issued in the Merger.
(o) Any payment of cash in lieu of fractional shares of stock
of Company was not separately bargained for consideration and is
being made for the purpose of saving Parent the expense and
inconvenience of issuing fractional shares.
(p) None of the compensation received by any Surviving
Stockholder-employee of Company pursuant to any employment,
consulting or similar arrangement, after the Merger, will be
separate consideration for, or allocable to, any of such
Stockholder's shares of Company Common Stock. None of the shares
of Parent Common Stock received by any Surviving Stockholder-
employee of Company pursuant to the Merger will be separate
consideration for, or allocable to, services to be rendered after
the Merger pursuant to any such employment, consulting or similar
arrangement. The compensation paid to any Surviving Stockholder-
employee of Company, after the Merger, pursuant to any such
employment, consulting or similar arrangement will be for
services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's length for similar
services.
5. COVENANTS OF COMPANY AND STOCKHOLDERS PRIOR TO EFFECTIVE TIME
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the earlier to occur of
the Effective Time or termination of this Agreement under
Section 10, Company and Stockholders will, and will cause the
Company and its Representatives to, (a) afford Parent and its
Representatives and prospective lenders and their Representatives
(collectively, "Parent's Advisors") full and free access to the
Company's personnel, properties (including subsurface testing),
contracts, books and records, and other documents and data, (b)
furnish Parent and Parent's Advisors with copies of all such
contracts, books and records, and other existing documents and
data as Parent may reasonably request, and (c) furnish Parent and
Parent's Advisors with such additional financial, operating, and
other data and information as Parent may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY
Between the date of this Agreement and the earlier to occur of
the Effective Time or termination of this Agreement under
Section 10, Company and Stockholders will:
(a) except with respect to matters disclosed in Part 3A.16 of
the Disclosure Letter, conduct the business of the Company only
in the Ordinary Course of Business, except that Company may make
the S Distribution, (i) provided that (A) the S Distribution
shall not exceed $137,860 and (B) the amount payable to the
holders of all Dissenting Shares, shall not exceed $362,000, and
(ii) subject to the limitations set forth in Section 12.1 on
legal and accounting costs;
(b) not grant, nor accelerate the vesting of, any options with
respect to any shares of the capital stock of the Company;
(c) use their Best Efforts to preserve intact the current
business organization of the Company, keep available the services
of the current officers, employees, and agents of the Company,
and maintain the relations and goodwill with suppliers,
customers, landlords, creditors, employees, agents, and others
having business relationships with the Company;
(d) confer with Parent concerning operational matters of a
material nature; and
(e) otherwise report periodically to Parent concerning the
status of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement,
between the date of this Agreement and the earlier to occur of
the Effective Time and termination of this Agreement under
Section 10, Company and Surviving Stockholders will not, without
the prior consent of Parent, take any affirmative action, or fail
to take any reasonable action within their or its control, as a
result of which any of the changes or events listed in Section
3A.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement,
Company and Surviving Stockholders will make all filings required
by Legal Requirements to be made by them in order to consummate
the Contemplated Transactions. Between the date of this
Agreement and the earlier to occur of the Effective Time or
termination of this Agreement under Section 10, Company and the
Surviving Stockholders will, at Parent's expense, (a) cooperate
with Parent with respect to all filings that Parent elects to
make or is required by Legal Requirements to make in connection
with the Contemplated Transactions, and (b) cooperate with Parent
in obtaining all consents identified in Part 4.2 of the Parent
Disclosure Letter; provided that this Agreement will not require
the Company to dispose of or make any change in any portion of
its business or to incur any other burden to obtain a
Governmental Authorization.
5.5 NOTIFICATION
Between the date of this Agreement and the earlier to occur of
the Effective Time or termination of this Agreement under Section
10, Company and Surviving Stockholders will promptly notify
Parent in writing if Company or any Surviving Stockholder becomes
aware of any fact or condition that causes or constitutes a
Breach of any of Company's, or such Surviving Stockholder's joint
and several or several, representations and warranties as of the
date of this Agreement. Should any such fact or condition
require any change in the Disclosure Letter if the Disclosure
Letter were dated the date of the occurrence or discovery of any
such fact or condition, Company and Surviving Stockholders will
promptly deliver to Parent a supplement to the Disclosure Letter
specifying such change. During the same period, Company and
Surviving Stockholders will promptly notify Parent of the
occurrence of any Breach of any covenant of Company or any
Surviving Stockholder in this Section 5 or of the occurrence of
any event that may make the satisfaction of the conditions in
Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Company and the
Stockholders will cause all indebtedness owed to any Stockholder
or any Related Person of Company or any Stockholder to be paid in
full prior to the Closing Date, other than payroll and expense
reimbursements incurred in the Ordinary Course of Business.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated
pursuant to Section 10, Company and each Surviving Stockholder
will not, and will cause each of their Representatives not to,
directly or indirectly solicit, initiate, or encourage any
inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than
Parent) relating to any transaction involving the sale of the
business or assets (other than in the Ordinary Course of
Business) of the Company, or any of the capital stock of the
Company, or any merger, consolidation, business combination, or
similar transaction involving the Company.
5.8 BEST EFFORTS
Except as set forth in the proviso to Section 5.4, between the
date of this Agreement and the earlier to occur of the Effective
Time and termination of this Agreement under Section 10, Company
and each Surviving Stockholder will use their Best Efforts to
cause the conditions in Sections 7 and 8 to be satisfied.
5.9 [RESERVED]
6. COVENANTS OF PARENT AND SUB PRIOR TO EFFECTIVE TIME
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement,
Parent and Sub will, and will cause each of their Related Persons
to, make all filings required by Legal Requirements to be made by
them to consummate the Contemplated Transactions. Between the
date of this Agreement and the earlier to occur of the Effective
Time, Parent will, and will cause each Related Person to, (a)
cooperate with Company and Stockholders with respect to all
filings that Company or Stockholders elect to make or are
required by Legal Requirements to make in connection with the
Contemplated Transactions, and (b) cooperate with Company and
Stockholders in obtaining all consents identified in Part 3A.2 of
the Disclosure Letter; provided that this Agreement will not
require Parent to dispose of or make any change in any portion of
its business or to incur any other burden to obtain a
Governmental Authorization.
6.2 CONDUCT OF BUSINESS OF SUB
During the period from the date of this Agreement to the
earlier to occur of the Effective Time or termination of this
Agreement under Section 10, Sub shall not engage in any
activities of any nature except as provided in or contemplated by
this Agreement.
6.3 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the
date of this Agreement and the earlier to occur of the Effective
Time or termination of this Agreement under Section 10, Parent
and Sub will use their Best Efforts to cause the conditions in
Sections 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO PARENT'S AND SUB'S OBLIGATION TO
CLOSE
The obligation of Parent and the obligation of Sub to effect
the Merger and the other Contemplated Transactions shall be
subject to the fulfillment, at or prior to the Closing Date, of
the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES TRUE AT THE EFFECTIVE TIME
All of the Company's and Surviving Stockholders'
representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties
(considered individually), must have been accurate in all
respects as of the date of this Agreement, and must be accurate
in all respects as of the Closing Date as if made on and as of
the Closing Date, without giving effect to any supplement to the
Disclosure Letter.
7.2 THE COMPANY'S AND STOCKHOLDERS' PERFORMANCE
All of the covenants and obligations of the Company and of
Surviving Stockholders to be performed or complied with pursuant
to the terms of this Agreement on or before the Closing Date
(considered collectively), and each of these covenants and
obligations (considered individually), shall have been fully
performed in all material respects, and at the Closing Date the
Company and Surviving Stockholders shall have delivered to Parent
a certificate to such effect signed by the Chief Executive
Officer of the Company and by the Surviving Stockholders.
7.3 AUTHORITY; DISSENTING SHARES
(a) All action required to be taken by, or on the part of, the
Company and Stockholders to authorize the execution, delivery and
performance of this Agreement and the Articles of Merger and the
consummation of the transactions contemplated hereby and thereby
shall have been duly and validly taken by the board of directors
and stockholders of the Company.
(b) The number of Dissenting Shares shall not exceed five
percent (5%) of the number of outstanding shares of Company
Common Stock.
(c) All holders of Dissenting Shares shall have made demand
for payment therefor, and the sum of such demanded payment
amounts shall not exceed $362,000.
(d) The amount of the S Distribution shall not exceed
$137,860.
7.4 DELIVERIES
Company and Surviving Stockholders shall have delivered to
Parent the following:
(a) The corporate minute book and stock book of Company;
(b) A certificate executed by Surviving Stockholders to the
effect that, except as otherwise stated in such certificate, each
of Surviving Stockholders' and any Surviving Stockholder's
representations and warranties in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing
Date (giving full effect to any supplements to the Disclosure
Letter that were delivered by Company and Surviving Stockholders
to Parent prior to the Closing Date in accordance with Section
5.5, it being acknowledged that Parent's condition to closing in
Section 7.1 requires that such representations and warranties be
accurate in all respects as of the Closing Date without giving
effect to any such supplements);
(c) A duly executed Employment Agreement for each of Philip
Meurer, Michael Loftus and Joseph Parker in the form of Exhibits
C, D and E (the "Employment Agreements"), respectively;
(d) Resignations of the each of the existing directors and
officers of the Company, to be effective upon the Closing Date;
(e) An opinion of Tonkon, Torp, Galen, Marmaduke & Booth,
counsel to the Company, dated the Closing Date, substantially in
the form of Exhibit F hereto;
(f) A certificate of the Secretary of the Company, dated the
Closing Date, in the form of Exhibit G hereto;
(g) A duly executed Stockholder Agreement in the form of
Exhibit H hereto (the "Stockholder Agreement");
(h) A duly executed Stock Pledge Agreement in the form of
Exhibit I hereto (the "Pledge Agreement");
(i) A duly executed Registration Agreement in the form of
Exhibit J hereto (the "Registration Agreement");
(j) To the extent Parent reasonably determines it to be
necessary or appropriate, assignments to the Company of any
Intellectual Property Assets used or intended to be used in the
Company's business and held in the name of any Stockholder; and
(k) Copies of all Consents required to be obtained by the
Company or the Stockholders.
7.5 CERTAIN LITIGATION
There must not be in effect any Legal Requirement or any
injunction or other Order that (a) prohibits the Merger or the
other Contemplated Transactions, and (b) has been adopted or
issued, or has otherwise become effective, since the date of this
Agreement.
7.6 [RESERVED]
7.7 CONSENTS OBTAINED
All consents and approvals of Governmental Entities or third
parties necessary for consummation of the Merger shall have been
obtained.
7.8 SATISFACTORY DUE DILIGENCE
Following the date of this Agreement, Parent shall have the
opportunity to continue a complete due diligence review of the
operations, products, properties, records, contracts, assets,
liabilities (contingent and otherwise), financial condition,
prospects and regulatory compliance of the Company and the
results of such due diligence review shall be satisfactory to
Parent in its sole discretion. In the event that the results of
the due diligence review are unsatisfactory to Parent, Parent
shall have the option to (a) terminate this Agreement by giving
written notice to the Company or (b) deliver a written notice to
the Company (a "Notice") conditioning Parent's obligations to
consummate the Merger upon the Company's resolving, to Parent's
satisfaction prior to the Effective Time, those matters described
in the Notice, including if applicable, amendment or termination
of agreements or arrangements as set forth in the Notice on terms
acceptable to Parent, in which case the conditions outlined in
the Notice shall be deemed additional Closing conditions
hereunder.
7.9 [RESERVED]
7.10 [RESERVED]
8. CONDITIONS PRECEDENT TO COMPANY'S AND SURVIVING STOCKHOLDERS'
OBLIGATION TO CLOSE
The obligation of the Company, and the obligation of each of
the Surviving Stockholders, to effect the Merger and the other
Contemplated Transactions, is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions:
8.1 ACCURACY OF REPRESENTATIONS
All of Parent's representations and warranties in this
Agreement (considered collectively), and each of these
representations and warranties (considered individually), must
have been accurate in all respects as of the date of this
Agreement and must be accurate in all respects as of the Closing
Date as if made at the Closing Date.
8.2 PARENT'S AND SUB'S PERFORMANCE
All of the covenants and obligations of the Parent and of Sub
to be performed or complied with pursuant to the terms of this
Agreement on or before the Closing Date (considered
collectively), and each of these covenants and obligations
(considered individually), shall have been fully performed in all
material respects, and at the Closing Date the Parent and Sub
shall have delivered to Company and the Surviving Stockholders a
certificate to such effect signed by an Executive Vice President
of the Parent and a Vice President of Sub.
8.3 AUTHORITY
All action required to be taken by, or on the part of, the
Parent and Sub to authorize the execution, delivery and
performance of this Agreement and the Articles of Merger and the
consummation of the Contemplated Transactions shall have been
duly and validly taken by the board of directors and stockholders
of each of Parent and Sub.
8.4 DELIVERIES
Parent and Sub shall have delivered to Company and Stockholders
the following:
(a) A certificate executed by Parent to the effect that,
except as otherwise stated in such certificate, each of Parent's
representations and warranties in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing
Date, it being acknowledged that Surviving Stockholders'
condition to closing in Section 8.1 requires that such
representations and warranties be accurate in all respects as of
the Closing Date without giving effect to any such exceptions.
(b) The Employment Agreements, each duly executed by Parent;
(c) The Registration Agreement, duly executed by Parent;
(d) An opinion of Freeborn & Peters, counsel to Parent and
Sub, dated the Closing Date, substantially in the form of Exhibit
K hereto;
(e) A certificate of the Secretary of each of Parent and of
Sub, dated the Closing Date, in the form of Exhibit L hereto;
(f) The Stockholder Agreement, duly executed by Parent;
(g) Payment of the sum of $362,000 in the form of Parent's
company check made payable to the order of Virginia Wright, the
sole holder of Dissenting Shares; and
(h) Copies of all Consents required to be obtained by Parent
or Sub, and such Consents must be in full force and effect.
8.5 CERTAIN LITIGATION
There must not be in effect any Legal Requirement or any
injunction or other Order that (a) prohibits the Merger or the
other Contemplated Transactions, and (b) has been adopted or
issued, or has otherwise become effective, since the date of this
Agreement.
8.6 [RESERVED]
9. CONDITIONS TO OBLIGATIONS OF EACH PARTY
The obligations of each party to effect the Merger and the
other Contemplated Transactions shall be subject to the
fulfillment, at or prior to the Closing Date, of the following
conditions:
9.1 NASDAQ APPROVAL
The shares of Parent Common Stock issuable pursuant to the
Merger or upon exercise of Company Options shall have been
authorized for listing on the Nasdaq Stock Market, upon official
notice of issuance.
9.2 POOLING LETTERS
Parent shall have received from Arthur Andersen LLP an opinion,
reasonably satisfactory to Parent, that the Merger will be
treated as a "pooling of interests" under applicable financial
accounting standards, and subject to the customary practice of
Arthur Andersen LLP, a copy of such opinion shall have been
delivered to the Surviving Stockholders.
9.3 TAX OPINION
The Company shall have received the opinion of Tonkon, Torp,
Galen, Marmaduke & Booth, satisfactory in form and substance to
the Company and dated the Closing Date, to the effect that the
Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code, that Parent, Sub and the Company will
be parties to that reorganization and that no Stockholder of the
Company will recognize gain or loss to the extent that such
Stockholder receives stock of Parent in exchange for his stock of
the Company in the Merger, and a copy of that letter shall have
been delivered to Parent. The Company shall have received such
evidence as it may reasonably require that all assumptions or
conditions to such opinion are valid or have been satisfied.
10. TERMINATION
10.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing,
be terminated:
(a) by Parent if a material Breach of any provision of this
Agreement has been committed by Company or any of the Surviving
Stockholders, or by Company and the Surviving Stockholders if a
material Breach of any provision of this Agreement has been
committed by Parent or Sub, and in any such case such Breach has
not been waived or is not cured within ten days following receipt
of notice of the Breach;
(b)(i) by Parent if any of the conditions in Sections 7 or 9
has not been satisfied as of the Closing Date or if satisfaction
of such a condition is or becomes impossible (other than through
the failure of Parent to comply with its obligations under this
Agreement) and Parent has not waived such condition on or before
the Closing Date; or (ii) by Company and Stockholders, if any of
the conditions in Sections 8 or 9 has not been satisfied as of
the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Company and
the Stockholders to comply with their obligations under this
Agreement) and Company and Stockholders have not waived such
condition on or before the Closing Date;
(c) by mutual consent of Parent, Company and Stockholders; or
(d) by Parent, Company or Surviving Stockholders if the
Closing has not occurred (other than through the failure of any
party seeking to terminate this Agreement to comply fully with
its obligations under this Agreement) on or prior to June 26,
1996, or such later date as the parties may agree upon.
10.2 EFFECT OF TERMINATION
Except as expressly provided otherwise in this Section 10, each
party's right of termination under Section 10.1 is in addition to
any other rights it may have under this Agreement or otherwise,
and the exercise of a right of termination will not be an
election of remedies. If this Agreement is terminated pursuant to
Section 10.1, all further obligations of the parties under this
Agreement will terminate, except that the obligations in Sections
12.1 and 12.3 will survive. If this Agreement is terminated by a
party because the other party failed to satisfy a condition, then
termination of this Agreement shall be deemed to be an election
of remedies, and neither party shall have any further right or
claim with respect to the other party; provided, however, that if
this Agreement is terminated by a party because of the other
party's failure to comply with any of its covenants under this
Agreement, the terminating party's right to pursue all legal
remedies will survive such termination unimpaired.
11. INDEMNIFICATION; REMEDIES
11.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE
All representations, warranties, covenants, and obligations in
this Agreement, the Disclosure Letter, the Parent Disclosure
Letter, the supplements to the Disclosure Letter, and any
certificate or other document delivered pursuant to this
Agreement will survive the Closing. 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.
11.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY STOCKHOLDERS
Surviving Stockholders, severally (and not jointly), will each
indemnify and hold harmless Parent and the Surviving Corporation
(collectively, the "Indemnified Persons") for, and will pay to
the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental and consequential damages),
expense (including costs of investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"),
minus, with respect to each of the foregoing the value of any tax
benefit to Parent or to the Surviving Corporation, arising,
directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by that
Surviving Stockholder in this Agreement (including the Disclosure
Letter), or any other certificate or document required to be
delivered by that Stockholder at the Closing pursuant to this
Agreement;
(b) any Breach by Company or that Surviving Stockholder of any
covenant or obligation of Company or such Stockholder in this
Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with
Company, that Stockholder or the Company (or any Person acting on
their behalf) in connection with any of the Contemplated
Transactions; or
(d) any claim by any Person that the Company, prior to the
Closing Date, (i) violated or failed to comply with federal or
state securities laws in connection with the redemption of the
Company's capital stock effected within two years prior to the
date hereof described in Part 3A.26(b) of the Disclosure Letter,
(ii) violated or failed to comply with the United States Fair
Labor Standards Act or similar applicable state laws described in
Part 3A.21 of the Disclosure Letter.
The term "Damages" as used in this Agreement shall not include
(A) any loss, liability, claim, damage or diminution in value
that results from claims that were or would have been covered by
Company's insurance in effect as of the Closing if Parent causes
the Surviving Corporation to terminate such coverage and fails to
obtain adequate tail coverage; or (B) any loss, liability, claim
damage or diminution in value that is proximately caused by any
action of Surviving Corporation or Parent following the Effective
Time, including the disclosure, directly or indirectly, by
Surviving Corporation or Parent of any confidential or other
information to any potential claimant.
11.3 [RESERVED]
11.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY PARENT
Parent and Surviving Corporation, jointly and severally, will
indemnify and hold harmless Stockholders for, and will pay to
Stockholders the amount of any Damages, minus, the value of any
tax benefit to any Surviving Stockholder, arising, directly or
indirectly, from or in connection with (a) any Breach of any
representation or warranty made by Parent in this Agreement or in
any certificate delivered by Parent pursuant to this Agreement,
(b) any Breach by Parent or Sub of any covenant or obligation of
Parent or Sub in this Agreement.
11.5 TIME LIMITATIONS
If the Closing occurs, Stockholders will have no liability (for
indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless Parent notifies
Stockholders of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Parent by
the corresponding notice date specified below, and such claim is
resolved, by the corresponding resolution date stated below:
(a) General Claims.
Notice and Resolution Date Type/Basis of Claim
Audit Report Date Audit Claims and
Other General Claims
For purposes hereof, "Audit Report Date" means the date of the
independent auditor's report issued with respect to the first
audit of the Parent's consolidated financial statements covering
a period which includes the Closing Date; "Audit Claims" means
claims with respect to those matters which would be expected to
be encountered in such audit; and "Other General Claims" means
claims with respect to matters which would not be expected to be
encountered in such audit.
(b) Specific Claims. Notwithstanding the dates specified in
the foregoing part (a), the following dates shall apply to the
indicated claims:
Resolutions
Notice Date Date Type/Basis of Claim
2nd Anniversary 3rd Anniversary
Redemptions by the Company
of Closing of Closing Date
shares of its capital stock
effected within 2 years
preceding the date hereof as
described in
Section 11.2(d)(i) of this
Agreement
The statute of 4th Anniversary Breach of
Section 3A.11(e)
limitations for the of Closing Date
for the claim, as
it may be extended
The statute of 4th Anniversary Violations of or
noncompliance
limitations for the of Closing Date with the United
States Fair Labor
for the claim, as Standards
Act or similar applicable
it may be extended state laws as described
in
Section 11.2(d)(ii)
The parties agree to act in good faith and to use their best
efforts to resolve any such claims prior to the applicable date
stated above in this Section 11.5.
11.6 LIMITATIONS ON AMOUNT -- STOCKHOLDERS
Stockholders will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a),
clause (c), clause (d), or, to the extent relating to any failure
to perform or comply prior to the Closing Date, clause (b) of
Section 11.2 until the Damages with respect to each Breach
arising thereunder exceed $50,000 (the "Threshold Amount"), and
then only for the amount by which such Damages exceed the
Threshold Amount; provided, that, at such time as the aggregate
of all such deductible Damages ("deductible" including, for
purposes hereof, any and all amounts less than or equal to
$50,000 per claim) equals $115,000 (the "Aggregate Deductible"),
Surviving Stockholders shall thereafter be liable for all Damages
without regard to the Threshold Amount. For purposes of
calculating whether the Aggregate Deductible has been reached, it
is understood that such amount includes Damages for each Breach
up to and including the Threshold Amount, but excludes Damages in
excess of the Threshold Amount for any individual Breach.
However, the foregoing Threshold Amount and Aggregate Deductible
will not apply to any Breach of any of Stockholder's
representations and warranties of which Company or any
Stockholder had actual (as opposed to constructive) knowledge on
the date on which such representation and warranty is made or any
intentional Breach by Company or any Stockholder of any covenant
or obligation, and Stockholders will be severally (and not
jointly) liable for all Damages with respect to such Breaches.
Parent's and Surviving Corporation's sole and exclusive recourse
for any such liability, whether in contract, tort, or otherwise,
shall be limited first to the shares of Parent Common Stock
received by each Stockholder in exchange for the Shares (such
shares of Parent Common Stock to be valued at the closing price
per share of Parent Common Stock on the Closing Date, as reported
by the Nasdaq Stock Market) together with all dividends paid or
declared with respect to such stock; and then, with respect to
any of those shares which Stockholder has sold, the amount of
gross cash proceeds from the sale thereof less any sales
commission, together with all dividends paid with respect to such
stock prior to its sale by Stockholder.
11.7 LIMITATIONS ON AMOUNT -- PARENT
Parent will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a) or
(b) of Section 11.4 until the Damages with respect to each Breach
arising thereunder exceed $50,000, and then only for the amount
by which such Damages exceed $50,000. However, the foregoing
sentence of this Section 11.7 will not apply to any Breach of any
of Parent's representations and warranties of which Parent had
Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by
Parent of any covenant or obligation, and Parent will be liable
for all Damages with respect to such Breaches. Any settlement by
Parent for any such liability described in this Section 11.7
shall be made in shares of Parent Common Stock (valued at the
closing price per share of Parent Common Stock on the Closing
Date, as reported by the Nasdaq Stock Market).
11.8 [RESERVED]
11.9 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Section 11.2 or 11.4 of notice of the commencement of any
Proceeding against it, such indemnified party will, if a claim is
to be made against an indemnifying party under such Section, give
notice to the indemnifying party of the commencement of such
claim, but the failure to notify the indemnifying party will not
relieve the indemnifying party of any liability that it may have
to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action
is prejudiced by the indemnifying party's failure to give such
notice; provided, that such notice is received by the
indemnifying party within the time limitations provided in
Section 11.5.
(b) If any Proceeding referred to in Section 11.9(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will be entitled to participate in such
Proceeding and, unless the claim involves Taxes, to the extent
that it wishes (unless (i) the indemnifying party is also a party
to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii)
the indemnifying party fails to provide reasonable assurance to
the indemnified party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with
counsel satisfactory to the indemnified party and, after notice
from the indemnifying party to the indemnified party of its
election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this
Section 11 for any fees of other counsel or any other expenses
with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with
the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a
Proceeding, (i) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified
party's consent unless (A) there is no finding or admission of
any violation of Legal Requirements or any violation of the
rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief
provided is monetary damages that are paid in full by the
indemnifying party; and (ii) the indemnified party will have no
liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the
indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability
that a Proceeding may adversely affect it or its affiliates other
than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the indemnified
party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such Proceeding,
but the indemnifying party will not be bound by any determination
of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably
withheld).
(d) Parent, Company and Surviving Stockholders each hereby
consent to the non-exclusive jurisdiction of any court in which a
Proceeding is brought against any Indemnified Person for purposes
of any claim that an Indemnified Person may have under this
Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on Parent, Company
or any Surviving Stockholder with respect to such a claim
anywhere in the world.
11.10 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS
A claim for indemnification for any matter not involving a
third-party claim may be asserted by notice to the party from
whom indemnification is sought.
12. GENERAL PROVISIONS
12.1 EXPENSES; OTHER PAYMENTS
Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and
performance of this Agreement and the Contemplated Transactions,
including all fees and expenses of agents, representatives,
counsel, and accountants. In the event that the Merger is
consummated, the Surviving Corporation shall be responsible for
all of Parent's expenses (including fees and expenses of legal
counsel and independent accountants) incurred in connection
herewith and therewith. Surviving Stockholders will cause the
Company not to incur aggregate out-of-pocket expenses payable to
Tonkon, Torp, Galen, Marmaduke & Booth and to KPMG Peat Marwick
LLP in excess of $60,000 in connection with this Agreement.
Subject to the provisions of Section 10.2, the obligation of each
party to pay its own expenses will be subject to any rights of
such party arising from a breach of this Agreement by another
party.
12.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to
this Agreement or the Contemplated Transactions will be issued,
if at all, at such time and in such manner as Parent determines.
Unless consented to by Parent in advance or required by Legal
Requirements, prior to the Closing the Company and Surviving
Stockholders shall keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person. The
Company, Surviving Stockholders and Parent will 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 Contemplated Transactions, and
Parent will have the right to be present for any such
communication.
12.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date,
Parent, Company and Surviving Stockholders will maintain in
confidence, and will cause the directors, officers, employees,
agents, and advisors of Parent, Surviving Stockholders and the
Company to maintain in confidence, and not use to the detriment
of another party or the Company any written, oral, or other
information obtained in confidence from another party or the
Company in connection with this Agreement or the Contemplated
Transactions, unless (a) such information is already known to
such party or to others not bound by a duty of confidentiality or
such information becomes publicly available through no fault of
such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any valuation,
consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such
information is required by or necessary or appropriate in
connection with legal proceedings.
If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information
as the other party may reasonably request.
12.4 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been
duly given when (a) delivered by hand (with written confirmation
of receipt), (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by certified mail,
return receipt requested, (c) received by the addressee, if sent
by certified mail, return receipt requested, or (d) when received
by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or
to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
Stockholders:
Philip Meurer
12021 SW Orchard Hill Way
Lake Oswego, OR 97035
Joseph Parker
11732 SW 28th Place
Portland, OR 97219
E. Michael Loftus
433 NW Sundown Way
Portland, OR 97229
Lee J. Jacobson
Columbia Distributing Company
6840 N. Cutter Circle
P.O. Box 17195
Portland, OR 97217
With a copy to:
Ronald L. Greenman, Esq.
Tonkon, Torp, Galen, Marmaduke & Booth
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204-2099
Facsimile No.: 503-274-8779
Parent:
Eagle River Interactive, Inc.
1060 West Beaver Creek Boulevard
Avon, Colorado 81620
Attention: Marc Pinto and Fred McCallister
Facsimile No.: 970-845-3016
With a copy to:
Kenneth S. Witt, Esq.
Freeborn & Peters
950 Seventeenth Street, Suite 2600
Denver, Colorado 80202
Facsimile No.: 303-628-4240
12.5 [RESERVED]
12.6 FURTHER ASSURANCES; RELEASE OF GUARANTIES
(a) The parties agree (i) to furnish upon request to each
other such further information, (ii) to execute and deliver to
each other such other documents, and (iii) to do such other acts
and things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
(b) In the event that the Merger is consummated, then within
30 days following the Effective Time, Parent shall take all
necessary steps and make all necessary arrangements, to effect
the release of those certain Business Loan Continuing Guaranties,
each dated May 1, 1996, executed by, respectively, Philip Meurer,
Linda L. Meurer, Joseph M. Parker and Sally J. Parker, and
guarantying the Company's obligations under its existing lines of
credit and term loan from Bank of America Oregon.
12.7 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under
this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right,
power, or privilege. 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, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by
the other party; (b) no waiver that may be given by a party 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.
12.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter and constitutes (along
with the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may
not be amended except by a written agreement executed by the
party to be charged with the amendment.
12.9 [RESERVED]
12.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement
without the prior consent of the other parties, which will not be
unreasonably withheld, except that Parent may assign any of its
rights under this Agreement to any present or future Subsidiary
of Parent. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or
with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
12.11 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and
effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
12.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections 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.
12.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred
to in this Agreement, time is of the essence.
12.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Oregon without regard to conflicts of laws principles.
12.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed
to constitute one and the same agreement.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
EAGLE RIVER INTERACTIVE, INC.
By: /s/ Marc Pinto
Title: Executive Vice President,
Chief Financial Officer
SUSHI ACQUISITION CORP.
By: /s/ Marc Pinto
Title: Secretary and Treasurer
GRAPHIC MEDIA, INC.
By: Philip Meurer
Title: Vice President
/s/ Philip Meurer
Philip Meurer
/s/ Joseph M. Parker
Joseph M. Parker
/s/ Lee J. Jacobson
Lee J. Jacobson
/s/ E. Michael Loftus
E. Michael Loftus
Omitted Exhibits and Schedules
The Agreement and Plan of Merger filed herewith does not
contain the exhibits and schedules described below that are part
of such agreement. The Registrant agrees to furnish
supplementally a copy of any omitted exhibit or schedule to the
Securities and Exchange Commission upon request.
Exhibits
Exhibit A Articles of Merger
Exhibit D Employment and Noncompetition Agreement between Graphic
Media, Inc. and E. Michael Loftus
Exhibit E Employment and Noncompetition Agreement between Graphic
Media, Inc. and Joseph M. Parker
Exhibit F Opinion of Tonkon, Torp, Galen, Marmaduke & Booth
Exhibit G Certificate of Secretary of Graphic Media, Inc.
Exhibit H Stockholders Agreement
Exhibit K Opinion of Freeborn & Peters
Exhibit L Certificate of Secretary of Eagle River Interactive,
Inc. and Sushi Acquisition Corp.
Schedules
Schedule 2.13 -- Options
Disclosure Letter
EXHIBIT 2
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement dated as of June 21, 1996 (this
"Agreement") is by and among Lee Jacobson, Philip Meurer, E.
Michael Loftus and Joseph Parker (individually, a "Pledgor" and
collectively, the "Pledgors") and Eagle River Interactive, Inc.,
a Delaware corporation (AERI").
RECITALS
WHEREAS, pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") dated June 21, 1996, by and among ERI,
Graphic Media, Inc., an Oregon corporation ("Graphic Media"), and
the shareholders (the "Shareholders") of Graphic Media, a
subsidiary of ERI will merge with and into Graphic Media and the
Shareholders will exchange all of the outstanding shares of
Graphic Media for shares of the Common Stock of ERI (the "Common
Stock"); and
WHEREAS, the Merger Agreement provides in substance that the
Pledgors, who are Shareholders, shall severally indemnify, defend
and hold harmless ERI against any and all Damages (as defined in
the Merger Agreement) suffered by ERI related to any breaches by
Graphic Media and/or Pledgors of the representations, warranties,
agreements and covenants contained in the Merger Agreement; and
WHEREAS, the Pledgors have agreed to secure a portion of the
foregoing indemnification obligations to ERI in the form of a
pledge to ERI of an aggregate of 55,000 shares (the "Pledged
Stock") of Common Stock, according to the terms and conditions of
this Agreement, which pledge is a condition precedent to the
consummation by ERI of the transactions contemplated by the
Merger Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the Pledgors and ERI, intending to be legally
bound, agree as follows:
1. Definitions. Unless the context otherwise requires, all
capitalized terms used but not expressly defined herein shall
have the meanings, if any, given to them in the Merger Agreement
or, if they are not defined in the Merger Agreement but are
defined in the Uniform Commercial Code, as presently in effect in
the State of Colorado (the "Code"), they shall have the same
meaning herein as in the Code.
2. Pledge of the Pledged Stock; Power of Attorney.
(a)To induce ERI to consummate the transactions contemplated by
the Merger Agreement, and as security for the indemnification
obligations of the Pledgors pursuant to the Merger Agreement
(hereinafter, the "Obligations"), each of the Pledgors hereby
pledges, hypothecates, assigns, transfers and sets over unto ERI,
and grants a lien and security interest to ERI, in the Pledged
Stock set forth opposite such Pledgor's name on Schedule A
attached hereto and incorporated by reference herein. Pledgors
have delivered to ERI, in its capacity as pledgee, original stock
certificates accompanied by guaranteed stock powers duly signed
by Pledgors (the "Stock Certificates") representing all of the
issued and outstanding shares of the Pledged Stock.
(b)ERI shall not have any obligation with respect to the Stock
Certificates (and the Pledged Stock represented thereby) or any
other property held or received by it hereunder except to use
reasonable care in the custody and preservation thereof to the
extent required by law. If ERI for any reason cannot produce the
pledged Stock Certificates representing Pledged Stock that it is
obligated to return to the Pledgors, ERI shall be obligated to
have such certificates reissued and to execute any indemnity or
bond that may be required in connection therewith.
(c)ERI, or its agents, shall hold the Stock Certificates unless
and until the occurrence of a Liquidated Claim for
Indemnification (as defined below), upon which event each of the
Pledgors hereby constitutes and irrevocably appoints ERI (and any
officer or agent of ERI, with full power of substitution and
revocation) as such Pledgor's true and lawful attorneys-in-fact,
which appointment is coupled with an interest, in such Pledgor's
stead and in his or her name or in ERI's name, to (a) transfer
the Required Shares (as defined below) on the books of ERI, in
whole or in part, to the name of ERI or such other person as ERI
may designate; and (b) take possession of and endorse any one or
more checks, drafts, bills of exchange, money orders or any other
documents received on account of such Pledged Stock.
(d)The powers of attorney granted pursuant to this Agreement
and all authority hereby conferred are granted and conferred
solely to protect ERI's interests in the Pledged Stock and shall
not impose any duty upon the attorney-in-fact to exercise such
powers. Such powers of attorney shall be irrevocable prior to
the payment in full and satisfaction of the Obligations relating
to the Claims for Indemnification and shall not be terminated
prior thereto or affected by any act of Pledgors, or by operation
of law, and if any Pledgor should die or become legally
incapacitated, such attorney-in-fact shall nevertheless be fully
authorized to act under such powers of attorney as if such event
had not occurred and regardless of notice thereof.
(e)Each transferee of the beneficial ownership of the Pledged
Stock by the acceptance of such a transfer shall be deemed to
have irrevocably appointed ERI with full power of substitution
and revocation, such transferee's true and lawful attorney-in-
fact in such transferee's name and otherwise to do any and all
acts permitted to, and to exercise any and all powers herein
conferred upon, such attorney-in-fact.
3. Voting Rights, Dividends, Etc..
(a)(i) So long as ERI shall not have notified the Pledgors of
a Claim for Indemnification, the Pledgors shall be entitled to
exercise any and all voting and consensual rights and powers
relating or pertaining to the Pledged Stock or any part thereof
for any purpose not inconsistent with the terms of this
Agreement.
(ii) So long as ERI shall not have notified the Pledgors of
a Claim for Indemnification, the Pledgors shall be entitled to
receive and retain any and all ordinary cash dividends and
interest payable on the Pledged Stock, but any and all stock and
liquidating dividends, distributions in property, returns of
capital or other distributions made on or in respect of the
Pledged Stock, whether resulting from a subdivision, combination
or reclassification of the outstanding capital stock of any
issuer thereof or received in exchange for Pledged Stock or any
part thereof or as a result of any merger, consolidation,
acquisition or other exchange of assets to which any such issuer
may be a party or otherwise, and any and all cash and other
property received in payment of the principal of or in redemption
of or in exchange for any Pledged Stock (either at maturity, upon
call for redemption or otherwise) shall be and become part of the
Pledged Stock and, if received by the Pledgors, shall be held in
trust for the benefit of ERI and shall immediately be delivered
to ERI or its designated agent (accompanied by proper instruments
of assignment and/or stock powers executed by the Pledgors in
accordance with ERI's instructions) to be subject to the terms of
this Agreement.
(iii) ERI shall execute and deliver (or cause to be executed
and delivered) to the Pledgors all such proxies, powers of
attorney, dividend orders, interest coupons and other instruments
as the Pledgors may reasonably request and at the Pledgors'
expense for the purpose of enabling the Pledgors to exercise the
voting and consensual rights and powers which they are entitled
to exercise pursuant to subsection (i) above and to receive the
dividends and interest payments which they are authorized to
receive and retain pursuant to subsection (ii) above.
(b) Upon the giving by ERI of the notice referred to in
Section 3(a)(i), all rights of the Pledgors to exercise the
voting and consensual rights and powers which they are entitled
to exercise pursuant to Section 3(a)(i) shall cease, and upon the
giving by ERI of the notice referred to in Section 3(a)(ii), all
rights of the Pledgors to receive the dividends and interest
payments which it is authorized to receive and retain pursuant to
Section 3(a)(ii) shall cease; but only as to the Required Shares.
4. Covenants of Pledgors. The Pledgors agree that until the
expiration of the Indemnification Period (as defined in Section
7), each of the Pledgors will defend the Pledged Stock against
the claims and demands of all persons other than ERI and promptly
pay all taxes, assessments, and charges upon the Pledged Stock,
and not sign (or permit to be signed) any documents creating or
perfecting a lien upon or security interest in any of the Pledged
Stock except in favor of ERI, or otherwise create, suffer, or
permit to exist any liens or security interests upon any Pledged
Stock other than in favor of ERI.
5. Adjustments of Capital Stock; Application of Dividends. In
the event that during the term of this Agreement any stock
dividend, reclassification, readjustment or other change is
declared or made in the capital structure of ERI or if any shares
of the Pledged Stock are exchanged or converted, or if stock or
liquidating dividends or other distributions of cash or other
assets or properties are made, in respect of, in redemption of,
in exchange for or in payment of principal of the Pledged Stock
(whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock, any merger,
consolidation, acquisition or other exchange of assets or
securities, any conversion, call or redemption, or otherwise),
all new, substituted and additional shares or other securities
issued by reason of any such change or acquisition shall
immediately be delivered by Pledgors to ERI and shall be deemed
to be part of the Pledged Stock under the terms of this Agreement
in the same manner as the shares of the Pledged Stock originally
pledged hereunder. If a Claim for Indemnification has occurred,
all cash dividends or other property received by or payable to
Pledgors by reason of Pledgors' ownership of the Required Shares
shall immediately be delivered by Pledgors to ERI, to be held by
ERI as additional collateral.
6. Return of Pledged Stock. Upon the expiration of the
Indemnification Period, ERI shall cause to be transferred and
delivered to Pledgors all of the remaining shares of Pledged
Stock and any money, property and rights received by Pledgors
pursuant hereto, to the extent ERI has not taken, sold or
otherwise realized upon the same pursuant to its rights
hereunder. In addition, ERI shall, after the Audit Report Date
(as defined in the Merger Agreement), so transfer and deliver an
aggregate of 39,000 shares Pledged Stock and any such money,
property and rights to the Pledgors, it being agreed that ERI has
reasonably determined that such Pledged Stock shall not be
necessary to satisfy any Claims for Indemnification that may be
asserted by ERI during the remainder of the Indemnification
Period. Thereafter, ERI shall release such additional number of
Pledged Stock as it reasonably determines shall not be necessary
to satisfy any claims for Indemnification that may thereafter be
asserted by ERI during the remainder of the Indemnification
Period.
7. Claim for Indemnification. A AClaim for Indemnification"
for purposes of this Agreement shall mean a claim by ERI against
Graphic Media or the Pledgors under the indemnification
provisions or Section 12.1 of the Merger Agreement as to which
ERI has given notice to the Pledgors on or prior to the
termination of the indemnification obligations in Section 11.5 of
the Merger Agreement (the "Indemnification Period"). Promptly
upon ERI's discovery of a Claim for Indemnification, ERI shall
deliver written notice to the Pledgors specifying the known facts
relating to each claim and the amount or estimated amount
thereof. Upon final resolution of a Claim for Indemnification,
either by way of agreement among the parties or a final
adjudication of a court, such claim will become a Liquidated
Claim for Indemnification. Until a Claim for Indemnification has
become a Liquidated Claim for Indemnification pursuant to the
above procedures, ERI shall be entitled to retain so much of the
Pledged Stock as may be necessary to pay the full amount of the
estimated amount of the indemnity claims specified in the notice
of the claim, (based on the closing price of the Common Stock on
the date hereof as reported by The Nasdaq Stock Market), and ERI
shall refrain from exercising or in any way acting on the
authority of the stock powers signed by the Pledgors and
delivered with the Pledged Stock.
8. Remedies on Default.
(a)Upon the occurrence of a Liquidated Claim for
Indemnification, the Pledgors shall, in the aggregate, at the
option of ERI, automatically and without further action by
Pledgors, ERI or any third party, forfeit in favor of ERI all of
its rights, title and interest in and to the number of shares of
Pledged Stock having a fair market value ("FMV") on the date of
this Agreement (based on the closing price of the Common Stock as
reported by The Nasdaq Stock Market, together with any dividends
paid thereon (the "Required Shares"); each Pledgor shall
individually forfeit to ERI the following number of shares of
Pledged Stock: the number of Required Shares multiplied by the
number of shares of Common Stock pledged by such Pledgor as set
forth on Exhibit A divided by 55,000 (the "Pro Rata Required
Shares"). Should all of the Pledged Stock pledged by a Pledgor
have been sold and the proceeds of such sale substituted
therefor, as contemplated by Section 12, such Pledgor shall, upon
the occurrence of a Liquidated Claim for Indemnification forfeit
to ERI the proceeds of sale of the Pro Rata Required Shares,
including, to the extent required by the accounting rules and
interpretations necessary to qualify the Merger transaction for
financial accounting purposes as a pooling of interests, the
amount of any such proceeds that may exceed the Pledgor's pro
rata share of the Liquidated Claim for Indemnification.
(b)In addition, ERI may exercise any and all rights and
remedies afforded to ERI, as a secured party in possession of
collateral or otherwise, under any and all provisions of
applicable law, including, but not limited to, the Code.
(c)The Pledgors expressly waive protest, notice, presentment,
dishonor and demand of any kind.
(d)ERI shall collect the cash proceeds received from any sale
or other disposition and shall apply the full proceeds in
accordance with the provisions of this Agreement.
(e)Notwithstanding the foregoing, none of the provisions of
this Section 8 shall confer on ERI any rights or privileges that
are not permissible under applicable law.
(f)In connection with the provisions of this Agreement, the
Pledgors from time to time promptly shall execute and deliver, or
cause to be executed and delivered, to ERI such reasonable
documents and instruments, shall join in such notices and shall
take, or cause to be taken, such other reasonable and lawful
action as ERI shall deem necessary or desirable to enable it to
exercise any of the rights with respect to the Pledged Stock
granted to it pursuant to this Agreement.
9. Expenses. All expenses (including fees and disbursements of
counsel) incurred by the prevailing party in connection with any
litigation arising out of this Agreement shall be borne by the
non-prevailing party or parties.
10.Further Assurances. The Pledgors agree to do such further
acts and things and to execute and deliver such additional
documents as ERI from time to time may reasonably request in
connection with the administration or enforcement of this
Agreement, whether related to the Pledged Stock or any part
thereof, to evidence, confirm, perfect or protect any security
interest granted or required to have been granted hereunder or in
order to better assure and confirm unto ERI its rights, powers
and remedies hereunder. The Pledgors hereby consent and agree
that the issuers of the Pledged Stock or any registrar or
transfer agent for any of the Pledged Stock shall be entitled to
accept the provisions hereof and determination of any Claim for
Indemnification as provided herein as conclusive evidence of the
right of ERI to effect any transfer pursuant hereto,
notwithstanding any notice or direction to the contrary
heretofore or hereafter given by the Pledgors or any other person
to any of such issuers or to any such registrar or transfer
agent.
11.Representations and Warranties. To induce ERI to enter into
this Agreement, each of the Pledgors represents and warrants to
ERI that:
(a)Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the
compliance with or performance of the terms and conditions of
this Agreement by the Pledgors is prevented by, limited by,
conflicts with or will result in the breach or violation of or a
default under the terms, conditions or provisions of (1) any
mortgage, security agreement, indenture, evidence of
indebtedness, loan or financing agreement, partnership agreement,
or other agreement or instrument to which he is a party or by
which he is bound or (2) any provision of law, any order of any
court or administrative agency or any rule or regulation
applicable to him or his business; and
(b)This Agreement and all documents and instruments executed or
to be executed in connection herewith constitute the legal, valid
and binding obligations of the Pledgors, enforceable in
accordance with their respective terms.
12.Sale of Pledged Stock, Etc.. Each of the Pledgors covenants
and agrees, that, from the date hereof and until the expiration
of the Indemnification Period, he (a) shall not sell, transfer,
exchange or otherwise dispose or agree to dispose of all or any
portion of the Pledged Stock without duly pledging to ERI
substitute collateral acceptable to ERI in its sole discretion
and, without first obtaining the written consent of ERI to such
transfer and substitution, provided that a Pledgor may at any
time, without such prior written consent, direct ERI to sell the
Pledged Stock for cash, and substitute for any Pledged Stock the
gross cash proceeds of the sale thereof; (b) shall not further
pledge, assign or deliver a security interest in the Pledged
Stock, or amend, modify, supplement or waive any provisions of
any portion of the Pledged Stock; and (c) shall not suffer or
permit any lien or encumbrance to be created upon or with respect
to any of the Pledged Stock.
13.Litigation Respecting Pledged Stock. In the event any
action, suit or other proceeding at law, in equity, in
arbitration or before any other authority involving or affecting
the Pledged Stock is contemplated by the Pledgors, the Pledgors
shall give ERI prior notice thereof.
14.Miscellaneous.
(a)Entire Agreement. Except for the Merger Agreement, this
Agreement supersedes all other representations, agreements and
understandings, oral or otherwise, between the parties with
respect to the matters contained herein.
(b)Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement is held invalid or unenforceable, either in its
entirety or by virtue of its scope or application to given
circumstances, such provision shall thereupon be deemed modified
only to the extent necessary to render same valid, or not
applicable to given circumstances, or excised from this
Agreement, as the situation may require, and this Agreement shall
be construed and enforced as if such provision had been included
herein as so modified in scope or application, or had not been
included herein, as the case may be. Should this Agreement, or
any one or more of its provisions hereof, be held to be invalid,
illegal or unenforceable within any governmental jurisdiction or
subdivision thereof, the Agreement or any such provision or
provisions shall not as a consequence thereof be deemed to be
invalid, illegal or unenforceable in any other governmental
jurisdiction or subdivision thereof.
(c)Survival of Representations, etc.. All representations,
warranties, covenants and other agreements made herein shall
survive the execution and delivery of this Agreement and shall
continue in full force and effect until full payment and
satisfaction of all Damages and Obligations. Neither the
exercise nor the failure to exercise any of ERI's rights
hereunder will constitute an election of remedies or limit ERI in
any manner in the enforcement of any other remedies that may be
available to it, under the Merger Agreement or otherwise.
(d)Cumulative Remedies, Waivers and Amendment. The rights and
remedies herein provided to ERI are cumulative and not exclusive
of any rights or remedies provided by law. No action, failure to
act or knowledge of ERI shall be deemed to constitute a waiver of
any power, right or remedy hereunder, nor shall any single or
partial exercise thereof preclude any further exercise thereof or
the exercises of any other power, right or remedy. Any waiver or
consent respecting any covenant, representation, warranty or
other term or provision of this Agreement shall be effective only
in the specified instance and for the specific purpose for which
given and shall not be deemed, regardless of frequency given, to
be a further or continuing waiver or consent. The failure or
delay of ERI at any time or times to require performance of, or
to exercise its rights with respect to, any representation,
warranty, covenant or other term or provision of this Agreement
in no manner shall affect its right at a later time to enforce
any such provision. No notice to or demand on a party in any
case shall entitle such party to any other or further notice or
demand in the same, similar or other circumstances. Any right or
power of ERI hereunder respecting the Pledged Stock and any other
property or money held hereunder may at the option of ERI be
exercised as to all or any part of the same and the term the
"Pledged Stock" wherever used herein, unless the context clearly
requires otherwise, shall be deemed to mean (and shall be read
as) the "Pledged Stock and any other property or money held
hereunder or any part thereof." This Agreement shall not be
amended nor shall any right hereunder be deemed waived except by
a written agreement expressly setting forth the amendment or
waiver and signed by the party against whom or which such
amendment or waiver is sought to be charged.
(e)Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will
be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to
the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
Pledgors:
Philip Meurer
12021 S.W. Orchard Hill Way
Lake Oswego, Oregon 97035
E. Michael Loftus
433 N.W. Sundown Way
Portland, Oregon 97229
Lee Jacobson
13387 S.W. Alpine View
Tigard, Oregon 97224
Joseph Parker
11732 S.W. 28th Place
Portland, Oregon 97219
With a copy to:
Ronald L. Greenman, Esq.
Tonkon, Torp, Galen, Marmaduke & Booth
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204-2099
Facsimile No.: 503-274-8779
ERI:
Eagle River Interactive, Inc.
1060 West Beaver Creek Boulevard
Avon, Colorado 81620
Attention: Marc Pinto and Fred McCallister
Facsimile No.: 970-845-3016
With a copy to:
Kenneth S. Witt, Esq.
Freeborn & Peters
950 Seventeenth Street, Suite 2600
Denver, Colorado 80202
Facsimile No.: 303-628-4240
(f)Successors. This Agreement shall, upon execution and
delivery by the Pledgors, become effective and shall be binding
upon and inure to the benefit of the Pledgors, ERI and their
respective successors, and assigns, except that the Pledgors may
not transfer or assign any of its rights or interests hereunder
without the consent of ERI.
(g)Singular and Plural. Unless the context otherwise requires,
wherever used herein the singular shall include the plural and
the plural shall include the singular, and the use of one gender
shall denote the others where appropriate.
(h)Counterparts. This Agreement may be executed by the parties
on any number of separate counterparts, and by each party on
separate counterparts; each counterpart shall be deemed an
original instrument; and all of the counterparts taken together
shall be deemed to constitute one and the same instrument.
(i)Construction. This Agreement and any document or
instrument executed in connection herewith shall be governed by,
and construed and interpreted in accordance with, the internal
laws of the State of Colorado, and shall be deemed to have been
executed in the State of Colorado.
IN WITNESS WHEREOF, the Pledgors and ERI have caused this
Agreement to be executed as of the day and year first above
written.
PLEDGORS:
/s/ Philip Meurer
Philip Meurer
/s/ E. Michael Loftus
E. Michael Loftus
/s/ Joseph Parker
Joseph Parker
/s/ Lee Jacobson
Lee Jacobson
ERI:
EAGLE RIVER INTERACTIVE, INC.
/s/ Marc Pinto
Marc Pinto
Executive Vice President,
Chief Financial Officer
EXHIBIT 3
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (this "Agreement"), dated as of
June 21, 1996, is between Eagle River Interactive, Inc., a
Delaware corporation (the "Company"), and the other persons on
the signature pages hereto (the "Shareholders").
RECITALS
A. Pursuant to the Agreement and Plan of Merger (the "Merger
Agreement") dated June 21, 1996 by and among the Company, Graphic
Media, Inc., an Oregon corporation ("Graphic Media") and the
Shareholders, a subsidiary of the Company will merge with and
into Graphic Media and the Shareholders will exchange all of the
outstanding shares of Graphic Media, except dissenting shares,
for shares of the Company's Common Stock (the "Merger Shares").
B. It is a condition to the closing of the Merger Agreement
that the Company grant certain securities registration rights to
the Shareholders.
AGREEMENTS
In consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions. In addition to the capitalized terms defined
elsewhere in this Agreement, the following capitalized terms
shall have the following meanings when used in this Agreement:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company.
"Holders" means the holders of Registrable Shares who are
parties to this Agreement or successors or assigns or subsequent
holders contemplated by Section 12 hereof.
"Person" means a natural person, a partnership, a
corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated
organization or other entity, or a governmental entity or any
department, agency or political subdivision thereof.
"Registrable Shares" means, at any time, the Merger Shares
and any shares of Common Stock issued or issuable as a dividend
or other distribution with respect to or in replacement of such
shares; provided, however, that Registrable Shares shall not
include any shares the sale of which has been registered pursuant
to the Securities Act or which have been sold to the public
pursuant to Rule 144 of the Commission under the Securities Act.
For purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Shares whenever such Person has the right
to acquire such Registrable Shares, whether or not such
acquisition has actually been effected.
"Registration Expenses" has the meaning ascribed to it in
Section 5 of this Agreement.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Subsidiary" means any Person of which securities or other
ownership interests representing more than fifty percent (50%) of
the ordinary power are, at the time as of which any determination
is being made, owned or controlled by the Company or one or more
Subsidiaries of the Company or by the Company and one or more
Subsidiaries of the Company.
2. Demand Registration.
(a) Requests for Registration.
(i) The Holder or Holders of a majority of the Registrable
Shares may request at any time on or after March 22, 1997 (the
"Determination Date") registration under the Securities Act of
all or part of their Registrable Shares on Form S-3 or any
similar short-form registration ("Short-Form Registration"), if
available; provided, that, in the event that the Company breaches
its undertaking set forth in paragraph (d) of this Section 2, the
Holder or Holders of a majority of the Registrable Shares may
request at any time on or after the Determination Date that such
registration be made on Form S-1 or any similar long-form
registration.
(ii) Within ten days after receipt of any request pursuant
to this Section 2(a), the Company will give written notice of
such request to all other holders of Registrable Shares and will
include in such registration all Registrable Shares with respect
to which the Company has received written requests for inclusion
therein within 21 days after the Company's notice has been given.
All registrations requested pursuant to this Section 2(a) are
referred to herein as "Demand Registrations."
(b) Demand Registrations. The Holders of Registrable
Shares will be entitled to request only one (1) Demand
Registration. The Company will pay all Registration Expenses,
for such Demand Registration, whether or not such registration
becomes effective. The Company will use its best efforts to make
Demand Registration available for the sale of Registrable Shares.
(c) Restrictions on Registrations. The Company may
postpone for a reasonable period not to exceed 60 days the filing
or the effectiveness of a registration statement for a Demand
Registration if the Board of Directors of the Company determines
reasonably and in good faith that such filing would (i) require a
disclosure of a material fact that would have a material adverse
effect on the Company or any plan by the Company or any of its
Subsidiaries to engage in any acquisition of assets (other than
in the ordinary course of business) or any merger, consolidation,
tender offer or other significant transaction; or (ii) preclude
pooling of interests accounting treatment for a pending or
contemplated acquisition by the Company.
(d) Representation Regarding Timely Filing; Undertaking to
Use Best Efforts. The Company hereby represents that, as of the
date hereof, it has timely filed all reports required to be filed
by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and is otherwise eligible to use Form S-3 but
for the fact that it will not have been subject to the
requirements of Section 12 of the Exchange Act for twelve
calendar months until March 22, 1997. The Company undertakes to
use its best efforts between the date hereof and the
Determination Date to take such steps as are necessary to make
Short-Form Registration available to the Holders of Registrable
Shares as provided in Section 2(a)(i). For purposes of this
Agreement only, any failure to timely file reports with the
Securities Exchange Commission due to inadvertence or because of
internal business reasons shall not be within the scope of this
best efforts commitment.
3. Piggyback Registrations.
(a) Right to Piggyback. Whenever securities of the Company
are to be registered under the Securities Act (other than
pursuant to a Demand Registration and other than pursuant to a
registration statement on Form S-4 or Form S-8) and the
registration form to be used may be used for the registration of
Registrable Shares (a "Piggyback Registration"), the Company will
give prompt written notice (and in any event within three
business days after its receipt of notice of any exercise of
demand registration rights by holders of the Company's securities
other than the Registrable Shares (the "Other Holders")) to all
Holders of Registrable Shares of its intention to effect such a
registration and will include in such registration all
Registrable Shares (up to a maximum of 200,000 Registrable
Shares, pro rata among the Holders of Registrable Shares as set
forth below and subject to the underwriter's cutbacks set forth
below) with respect to which the Company has received written
requests for inclusion therein 21 days after the Company's notice
has been given, subject to obtaining any required consents from
Other Holders. The Holders shall be entitled to request only
one (1) Piggyback Registration, provided that if the entire
200,000 Registrable Shares are not registered in such Piggyback
Registration, the Holders shall be entitled to additional
Piggyback Registrations until a cumulative total of 200,000
Registrable Shares are registered in such Piggyback
Registrations.
(b) Priority on Piggyback Registrations. If the managing
underwriters of a Piggyback Registration advise the Company in
writing that in their opinion the number of securities requested
to be included in such offering in the registration creates a
substantial risk that the price per share of Common Stock will be
reduced, the Company will include in such registration (i) first,
the securities the Company proposes to sell and (ii) second, the
Registrable Shares and other securities requested to be included
in such registration which in the opinion of such underwriters
can be sold in such offering without creating such a risk,
allocated among the Holders of such Registrable Shares as a group
and the holders of such other securities on a pro rata basis.
The shares permitted to be included by the Holders of Registrable
Shares shall be allocated pro rata among the Holders of
Registrable Shares on the basis of the number of Registrable
Shares owned by such holders, with further successive pro rata
allocations among the Holders if any such holder has requested
the registration of less than all of the Registrable Shares such
person is entitled to register.
4. Registration Procedures. Whenever the Holders of
Registrable Shares have requested that any Registrable Shares be
registered pursuant to the terms of this Agreement, the Company
will use its best efforts to effect the registration and the sale
of such Registrable Shares in accordance with the intended method
of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and file with the Commission a registration
statement on the appropriate form with respect to such
Registrable Shares and use its best efforts to cause such
registration statement to become effective as soon as practicable
after such filing;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement until
such time as the Registrable Shares registered thereunder have
been disposed of in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement, but in no event for a period in excess of three
months, unless during such period the average trading volume of
the Common Stock on the Nasdaq Stock Market shall for any week
be less than 100,000 shares, excluding block trades effected
other than in "broker's transactions" within the meaning of Rule
144 (each such week a "Shortfall Week"), in which event such
period shall be extended by an additional week for each Shortfall
Week;
(c) furnish to each seller of such Registrable Shares and
the underwriters of the securities being registered such number
of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus) and such other
documents as such seller or underwriters may reasonably request
in order to facilitate the disposition of the Registrable Shares
owned by such seller or the sale of such securities by such
underwriters;
(d) use its best efforts to register or qualify such
Registrable Shares under the securities laws of states as any
seller reasonably requests and do any and all other acts and
things which may be necessary or desirable to enable such seller
to consummate the public sale or other disposition in such
jurisdictions of the Registrable Shares owned by such seller
(provided, however, that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this
subparagraph or (ii) consent to general service of process in any
such jurisdiction);
(e) cause all such Registrable Shares to be listed on The
Nasdaq Stock Market;
(f) provide a transfer agent or registrar for all such
Registrable Shares not later than the effective date of such
registration statement;
(g) enter into such customary agreements (including
underwriting agreements) and take all such other actions as the
Holder or Holders of a majority of the Registrable Shares being
sold or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable
Shares;
(h) make available for inspection by each seller of such
Registrable Shares, any underwriter participating in any
disposition pursuant to such registration statement, and any
attorney, accountant or other agent designated by any such seller
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
(i) notify each seller of such Registrable Shares, promptly
after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to
any prospectus forming a part of such registration statement has
been filed;
(j) notify each seller of such Registrable Shares of any
request by the Commission for the amending or supplementing of
such registration statement or prospectus or for additional
information;
(k) prepare and promptly file with the Commission and
promptly notify each seller of such Registrable Shares of the
filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of
which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances in which they were
made, not misleading; and
(l) advise each seller of such Registrable Shares, promptly
after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the Commission suspending the
effectiveness of such registration statement or the initiation or
threatening of any proceeding for such purpose and promptly use
all reasonable efforts to prevent the issuance of any stop order
or to obtain its withdrawal if such stop order should be issued;
5. Registration Expenses.
All expenses incident to the Company's performance of or
compliance with this Agreement, including, but not limited to,
all registration and filing fees, fees and expenses and
compliance with federal, state and foreign securities laws,
printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and its independent
certified public accountants, underwriters (excluding discounts
and commissions attributable to the Registrable Shares included
in such registration) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"),
will be borne by the Company. In addition, the Company will pay
its internal expenses (including, but not limited to, all
salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance obtained
by the Company and the expenses and fees for listing the
securities to be registered on each securities exchange. The
Company will not be liable for any fees and expenses of counsel,
if any, retained by the Holders of Registrable Shares in
connection with any registration statement in which Registrable
Shares are included.
6. [Reserved]
7. Compliance with Rule 144. At the request of any holder who
proposes to sell securities in compliance with Rule 144
promulgated by the Commission, the Company will (i) forthwith
furnish to such holder a written statement of compliance with the
filing requirements of the Commission as set forth in Rule 144 as
such rule may be amended from time to time and (ii) make
available to the public and such holders such information as will
enable the Holders to make sales pursuant to Rule 144.
8. Underwritten Registrations. No Person may participate in
any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person
or Persons entitled hereunder to approve such arrangements and
(b) completes and executes all questionnaires, powers of
attorney, indemnities, lock-up agreements, underwriting
agreements and other documents required under the terms of such
underwriting arrangements. The Company will have the right to
select the managing underwriters to administer any offering of
the Company's securities by the Holders of Registrable
Securities.
9. Remedies. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights
specifically, to recover damages caused by reason of any breach
of any provision of this Agreement and to exercise all other
rights granted by law.
10.Amendments and Waivers. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended
or waived at any time only by the written agreement of the
Company and the Holders of a majority of the Registrable Shares.
Any waiver, permit, consent or approval of any kind or character
on the part of any such holders of any provision or condition of
this Agreement must be made in writing and shall be effective
only to the extent specifically set forth in writing. Any
amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder of Registrable Shares and the
Company. Each Holder acknowledges that by operation of this
paragraph the Holders of a majority of the Registrable
Securities, acting in conjunction with the Company, will have the
right and power to diminish or eliminate all rights pursuant to
this Agreement.
12.Successors and Assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto will bind
and inure to the benefit of the respective successors and assigns
of the parties hereto, whether so expressed or not. In addition
and whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Shares are also for the
benefit of, and enforceable by , any subsequent holder of
Registrable Shares who consents in writing to be bound by this
Agreement.
13.Final Agreement. This Agreement constitutes the final
agreement of the parties concerning the matters referred to
herein, and supersedes all prior agreements and understandings.
14.Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable
law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the
remainder of this Agreement.
15.Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience of reference only and do
not constitute a part of and shall not be utilized in
interpreting this Agreement.
16.Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will
be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is
mailed by certified mail, return receipt requested, (c) received
by the addressee, if sent by certified mail, return receipt
requested, or (d) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to the
other parties):
Shareholders:
Mr. Philip Meurer
Mr. Joseph Parker
Mr. E. Michael Loftus
Graphic Media, Inc.
411 SW Second Avenue
Portland, OR 97204
Facsimile: 503/242-3587
Mr. Lee J. Jacobson
13387 SW Alpine View
Tigard, OR 97224
Facsimile: 503/590-4337
With a copy to:
Ronald L. Greenman, Esq.
Tonkon, Torp, Galen, Marmaduke & Booth
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204-2099
Facsimile No.: 503-274-8779
Company:
Eagle River Interactive, Inc.
1060 West Beaver Creek Boulevard
Avon, Colorado 81620
Attention: Marc Pinto and Fred McCallister
Facsimile No.: 970-845-3016
With a copy to:
Kenneth S. Witt, Esq.
Freeborn & Peters
950 Seventeenth Street, Suite 2600
Denver, Colorado 80202
Facsimile No.: 303-628-4240
17.Governing Law. The validity, meaning and effect of this
Agreement shall be determined in accordance with the laws of the
State of Colorado applicable to contracts made and to be
performed in that state.
18.Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered
shall be deemed an original, and such counterparts together shall
constitute one instrument. Each party shall receive a duplicate
original of the counterpart copy or copies executed by it and the
Company.
This Registration Agreement was executed as of the date first
set forth above.
EAGLE RIVER INTERACTIVE, INC.
/s/ Marc Pinto
Marc Pinto,
Executive Vice President,
Chief Financial Officer
SHAREHOLDERS:
/s/ Philip Meurer
Philip Meurer
/s/ Joseph Parker
Joseph Parker
/s/ Lee J. Jacobson
Lee J. Jacobson
/s/ E. Michael Loftus
E. Michael Loftus
EXHIBIT 4
EMPLOYMENT AND NONCOMPETITION AGREEMENT
THIS EMPLOYMENT AGREEMENT is effective as of the 21st day of
June, 1996 (this "Agreement") by and between Graphic Media, Inc.,
an Oregon corporation (the "Company"), and Philip Meurer
("Employee").
RECITALS
WHEREAS, pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") dated June 21, 1996, by and among the
Company, a wholly-owned subsidiary of Company, Graphic Media,
Inc., an Oregon corporation ("Graphic Media"), and shareholders
(the "Shareholders") of Graphic Media, such subsidiary will merge
with and into Graphic Media and the Shareholders will exchange
all of the outstanding shares of Graphic Media for shares of the
Common Stock of the Company (the "Common Stock"); and;
WHEREAS, Employee is a Shareholder and employee of Graphic
Media;
WHEREAS, the Company has agreed to acquire Graphic Media on the
condition that Employee agree to render services to the Company
and agree not to compete with the Company, from and after the
date hereof, on the terms and conditions set forth in this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants contained in this Agreement,
the Company and Employee hereby agree as follows:
1. Employment.
(a)Title and Duties of Employee. Subject to all of the terms
and conditions herein provided, the Company hereby employs
Employee as Vice President. Employee shall report to Melinda
Gladitch, or such other person as may be designated by the
President/CEO of the Company. Employee shall be responsible for
all duties designated by such executive officer(s) of the Company
consistent with his responsibilities with Graphic Media as of the
closing of the Merger Agreement. Employee shall at all times be
subject to and shall observe and carry out such rules,
regulations, policies, directions and restrictions as may be
established from time to time by the Company. Employee's title
and responsibilities shall be subject to change from time to time
at the direction of such executive officer, within the
limitations set forth in this Section 1(a).
(b)Performance. Throughout the period of Employee's employment
hereunder, Employee shall devote Employee's full normal business
time, attention, knowledge and skills, faithfully, diligently and
to the best of Employee's ability, to the active performance of
Employee's duties and responsibilities hereunder, and do such
traveling as may reasonably be required in connection with the
performance of such duties and responsibilities. Employee shall
not be required to relocate outside the Portland metropolitan
area during the first 18 months of the Employment Period (as
defined below).
2. Term of Employment.
Unless terminated as provided in Section 5 hereof, the term of
this Agreement shall be for a period of three years, commencing
on the date hereof and continuing through and including the day
immediately preceding the third anniversary of the date hereof
(the "Employment Period").
3. Compensation and Benefits.
(a)Base Salary. As compensation for the services to be
rendered by Employee hereunder, the Company shall pay to Employee
a base salary of $140,000 per year (the "Base Salary"), payable
in periodic installments (but in no event less frequently than
monthly) in accordance with the standard payroll practices of the
Company in effect from time to time. Employee's Base Salary
shall be reviewed on a merit basis on the first anniversary date
of this Agreement, provided, however, that Employee's annual
salary during the Employment Period shall not be less than the
Base Salary. Employee shall be eligible for receipt of annual
bonuses in the same manner and consistent with the levels of
bonuses paid by the Company to its second tier management level
employees.
(b)Expenses. The Company shall reimburse Employee, upon
presentment by Employee to the Company of appropriate receipts
and vouchers, for any reasonable business expenses incurred by
Employee in connection with the performance of his duties and
responsibilities hereunder. Employee shall be eligible for
receipt of annual bonuses in the same manner and consistent with
the levels of bonuses paid by the Company to its second-tier
management level employees.
(c)Fringe Benefits. The Company shall make available to
Employee, throughout the Employment Period, access to such fringe
benefits and benefit plans as may presently be in effect or which
may hereafter be adopted by the Company for the benefit of its
employees generally or employees in comparable positions in the
Company.
(d)Severance Pay.
i. In the event Employee's employment with the Company is
terminated by the Company without cause pursuant to Section
5(c) herein before the first anniversary of the date hereof,
the Company shall pay to the Employee, in the manner provided
in Section 3(a), severance pay equal to the product of the Base
Salary multiplied by 1.5 without any offset or deduction by
reason of any claims arising under the Merger Agreement.
ii. In the event Employee's employment with the Company is
terminated by the Company without cause pursuant to Section
5(c) herein on or after the first anniversary of the date
hereof but before the third anniversary of the date hereof, the
Company shall pay to the Employee, in the manner provided in
Section 3(a), severance pay equal to the product of the Base
Salary multiplied by 0.5 without any offset or deduction by
reason of any claims arising under the Merger Agreement.
4. Vacation.
Throughout the period of Employee's employment hereunder,
Employee shall be entitled to take vacation in accordance with
the Company's "Paid Time Off" policy as in effect from time to
time, giving full credit for such time as Employee was an
employee of Graphic Media (except for Employee's unused or
carryover vacation time from such prior employment).
5. Termination.
(a)Cause. This Agreement may be terminated at any time at the
option of the Company for cause (as such term is hereinafter
defined), effective immediately upon the giving of written notice
of termination to Employee. As used herein, the term "for cause"
shall mean and be limited to: (i) any criminal conviction other
than for minor traffic violations; (ii) the failure of Employee
to perform the duties provided in Section 1 or comply with the
rules, regulations, policies, directions and restrictions
generally applicable to employees in similar positions as may be
established from time to time by the Company, which failure to so
comply shall continue after written notice from the Company;
(iii) the inability of the Employee to perform the essential
functions of his employment position due to a disability of
Employee that cannot be reasonably accommodated by the Company,
(iv) any illegal use of narcotics or other illegal substances, or
(v) any other material breach of this Agreement which shall
continue after written notice from the Company.
(b)Death of Employee. This Agreement shall terminate
automatically upon the death of Employee.
(c)Termination Without Cause. This Agreement may be terminated
by either party without cause by giving written notice of
termination at least fourteen (14) days prior to the effective
date of such termination.
6. Restrictive Covenant.
As conditions of his employment and in consideration of his
employment and the Company's acquisition of Graphic Media,
Employee covenants and agrees as follows:
(a) that, during his employment with the Company, he
will devote his full normal business time, services and attention
and best efforts to the performance of his duties and to the
promotion of the business and interests of the Company;
(b) that, during his employment with the Company, and
for a period of 18 months after, he shall not, directly or
indirectly, own, manage, control, promote, finance, participate
in, consult with, render services for or on behalf of, or in any
manner engage in a business in the Territory with accounts or
product lines which are competitive with accounts or product
lines that are existing or reasonably contemplated by the Company
or any of its affiliates at the time such employment ends;
provided, that nothing herein shall prohibit Employee from being
a passive owner of not more than 1% of the outstanding stock of
any class of a corporation which is publicly traded, so long as
Employee has no active participation in the business of such
corporation;
(c) that, during the Employment Period and for a
period of 18 months thereafter, he will make full and complete
disclosure of the existence of this Agreement and the content of
this Section 6 to all prospective employers with whom he may
discuss possible employment;
(d) that he will refrain from any disparagement,
direct or indirect, through innuendo or otherwise, of the Company
or any of its employees, agents, officers, directors,
stockholders or affiliates;
(e) that, during the Employment Period, he will not,
without the prior written consent in each case of the
President/CEO and/or Board of Directors of the Company: (i)
participate actively in any other business interests or
investments which would conflict with his responsibilities under
this Agreement or (ii) borrow money from, or lend to, customers
(except those commercial institutions whose business it is to
lend money) or individuals or firms from which the Company, or
any affiliate or subsidiary of the Company, buys services,
materials, equipment or supplies, or with whom the Company, or
any affiliate or subsidiary of the Company, does business;
(f) that, during the Employment Period, he will not,
without the prior written consent in each case of the
President/CEO and/or Board of Directors of the Company: (i)
exchange goods, products or services of the Company in return for
goods, products or services of any individual or firm or (ii)
accept gifts or favors from any outside organization or agency
which, individually or collectively, are not ordinary or
customary and would be likely cause undue influence in his
selection of goods, products or services for the Company; and
(g) that, after the termination of his employment, he
will not secure, or attempt to secure, from any employee or
former employee of the Company or any affiliate or subsidiary of
the Company, any confidential information relating to the Company
or any affiliate or subsidiary of the Company or its business
operations.
Employee represents and warrants to the Company that,
notwithstanding the operation of the covenants contained in this
Section 6, upon the termination of his employment hereunder,
Employee will be able to obtain employment for the purpose of
earning a livelihood. For purposes of this Section 6,
"Territory" means the United States of America, its Territories
and possessions, Canada, and any other country in the world.
7. Employee Proprietary Rights Agreement.
Employee agrees to execute, contemporaneously herewith or at
such later time as Company shall request, Company's standard
"Employee Proprietary Rights Agreement" (the "Proprietary Rights
Agreement").
8. Severability.
If any provision of this Agreement is held invalid or
unenforceable, either in its entirety or by virtue of its scope
or application to given circumstances, such provision shall
thereupon be deemed modified only to the extent necessary to
render the same valid, or not applicable to the given
circumstances, or excised from this Agreement, as the situation
may require, and this Agreement shall be construed and enforced
as if such provision had been included herein as so modified in
scope or application, or had not been included herein, as the
case may be. Should this Agreement, or any one or more of its
provisions hereof, be held to be invalid, illegal or
unenforceable within any governmental jurisdiction or subdivision
thereof, the Agreement or any such provision or provisions shall
not as a consequence thereof be deemed to be invalid, illegal or
unenforceable in any other governmental jurisdiction or
subdivision thereof. The existence of any claim or cause of
action which Employee may have against the Company shall not
constitute a defense or bar to the enforcement of any of the
provisions of this Agreement and shall be pursued through
separate court action by Employee.
9. Remedies.
Employee hereby acknowledges that the Company would suffer
irreparable injury if the provisions of Section 6, above, which
shall survive the termination of the Agreement, were breached and
that the Company's remedies at law would be inadequate in the
event of such breach. Accordingly, Employee hereby agrees that
any such breach or threatened breach may, in addition to any and
all other available remedies, be preliminarily enjoined by the
Company without bond or other security and without having to
prove the inadequacy of the available remedies at law. In the
event of any litigation under this Agreement, the prevailing
party shall be entitled to collect all costs and expenses of any
proceeding, including reasonable attorneys' fees, whether
incurred at the pre-trial, trial or appellate level, as
determined by the court hearing the matter.
10.Non-Assignability.
In light of the unique personal services to be performed by
Employee hereunder, it is acknowledged and agreed that any
purported or attempted assignment or transfer by Employee of this
Agreement or any of Employee's duties, responsibilities or
obligations hereunder shall be void. This Agreement may be
assigned by the Company to any subsidiary or affiliate of the
Company without the prior written consent of Employee.
12.Notices.
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been
duly given when (a) delivered by hand (with written confirmation
of receipt), (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by certified mail,
return receipt requested, (c) received by the addressee, if sent
by certified mail, return receipt requested, or (d) when received
by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or
to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
Employee:
12021 SW Orchard Hill Way
Lake Oswego, Oregon 97035
Attention: Philip Meurer
Facsimile No.: 503-242-3587
With a copy to:
Ronald L. Greenman, Esq.
Tonkon, Torp, Galen, Marmaduke & Booth
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204-2099
Facsimile No.: 503-274-8779
Company:
Graphic Media, Inc.
411 S.W. Second Avenue
Portland, Oregon 97204
Facsimile No.: 503-242-3587
With a copy to:
Eagle River Interactive, Inc.
1060 West Beaver Creek Boulevard
Avon, Colorado 81620
Attention: Marc Pinto and Fred McCallister
Facsimile No.: 970-845-3016
Kenneth S. Witt, Esq.
Freeborn & Peters
950 Seventeenth Street, Suite 2600
Denver, Colorado 80202
Facsimile No.: 303-628-4240
12.General.
(a)Amendments. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by
means of a written instrument duly executed by the party to be
charged therewith.
(b)Captions and Headings. The captions and section headings
used in this Agreement are for convenience of reference only, and
shall not affect the construction or interpretation of this
Agreement or any of the provisions hereof.
(c)Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and
their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns.
(d)Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original
hereof, but all of which together shall constitute one and the
same instrument.
(e)Entire Agreement. Except as otherwise set forth or referred
to in this Agreement, and except for the Employee Proprietary
Rights Agreement, this Agreement constitutes the sole and entire
agreement and understanding between the parties hereto as to the
subject matter hereof, and supersedes all prior discussions,
agreements and understandings of every kind and nature between
them as to such subject matter. Any prior employment agreement
or arrangement between the Employee and Graphic Media is hereby
terminated and of no further force or effect.
(f)Reliance by Third Parties. This Agreement is intended for
the sole and exclusive benefit of the parties hereto and their
respective heirs, executors, administrators, personal
representatives, successors and permitted assigns, and no other
person or entity shall have any right to rely on this Agreement
or to claim or derive any benefit therefrom absent the express
written consent of the party to be charged with such reliance or
benefit.
(g)Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State in which
Employee resides at such time (without giving effect to the
conflicts of laws provisions thereof).
(h)Release. As a condition of the payment of severance
described in paragraph 3(d) together with any other amounts that
may then be due and payable, Employee on behalf of himself, his
agents, attorneys, heirs, executors, assigns and any person
acting by, through or on behalf of him, agrees that he will
execute a release of the Company, as well as its officers,
directors, partners, supervisors, employees, agents,
representatives, assigns and any person acting by, through or on
behalf of any of them, of and from any and all claims, demands,
actions, causes of action and obligations arising out of
Employee's employment and/or termination thereof, whether known
or unknown, fixed or contingent, liquidated or unliquidated, and
whether arising from tort, statute or contract. Employee further
agrees to execute any document and perform all acts which may be
required to make any such release valid.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the date first set forth above.
THE COMPANY:
GRAPHIC MEDIA, INC.
By: /s/ Marc Pinto
Marc Pinto
Secretary and Treasurer
EMPLOYEE:
/s/ Philip Meurer
Philip Meurer
