UNITED STATES
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):
September 14, 1998
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Commission file number 0-28330
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LEGACY SOFTWARE, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-456-1156
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(State of other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
5340 Alla Road, Los Angeles, CA 90066
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (310) 823-2423
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Item No. 5. Other Events
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1. Summary of Merger with Videocall:
On September 14, 1998, Legacy Software, Inc. ("Legacy") entered into an
Agreement and Plan of Merger with Videocall International Corporation
("Videocall"), a Florida corporation. Under the terms of the Agreement and Plan
of Merger, Videocall shall be merged into a transitory subsidiary incorporated
in the State of Florida for the purposes of the merger agreement between
Videocall and Legacy. The shares of the surviving entity, the transitory
subsidiary, then will be converted into Legacy shares. Legacy shall remain the
surviving entity and shall acquire Videocall's business and shareholders through
the merger.
Under the terms of the Agreement and Plan of Merger, Videocall,
through a transitory subsidiary, will merge with Legacy and the shares of
Videocall will be converted into shares of Legacy pursuant to a conversion ratio
as defined in the agreement between the companies. As a result of the merger,
the number of Legacy shares issued and outstanding shall increase and pre-merger
Legacy shareholders will experience a dilution in the per share book value of
their shares. All of the additional new shares shall be issued to shareholders
of Videocall. The issuance of such shares causes a change in control of Legacy.
The number of Legacy shares which will be issued in this regard is subject to
verification and audit.
a. Business of Videocall:
Videocall is engaged in building a global telecommunications
organization that will specialize in the field of video conferencing. Videocall
intends to provide customers and businesses both in the United States and in
other countries throughout the world with a wide range of telecommunications
services, specializing in offering customers the ability to videocall each
other. Videocall intends to establish retail locations throughout the world from
which businesses and general public consumers may participate in videocalls with
others that have access to videocall facilities or equipment. The principals of
Videocall began working on the business concept approximately two years ago.
Most of Videocall's management have spent the past decade in the
telecommunications industry, producing and marketing telecom products and
services. The development of Videocall's business plan is a result of their
telecommunications experience, their research, and their sales, marketing and
telecommunications product development. Videocall intends to set up and operate
a global network of convenient, strategically located retail outlets to offer
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the general public videocalling services in its facilities at a reasonable cost.
Videocall's mission is to bring to the general public in major population
centers the world over high value, cost-effective videocalling services.
Videocall intends to accomplish its goals by establishing retail locations in
major international cities, by its own development of strategic locations
through franchises, or via strategic partnerships. At these conveniently sited
locations worldwide, Videocall expects that customers will readily book calls to
locations in many other countries and cities worldwide.
The Corporate Market: Videocall's founders believe that the global
business community is primed for a surge in videoconferencing facilities and
services. Internet development and its focus on visual imagery reflects the
corporate interest in rapid audio/visual communication worldwide. Videocall is
designed to fill the need for the delivery of economical, efficient and
convenient videocall services to commercial users worldwide.
Ethnic Markets: Ethnic minorities worldwide often comprise substantial
numbers of displaced or otherwise separated families. In many cases, immigrants
into countries the world over make up a significant fraction of local ethnic
communities. These immigrants often have been unable to return to their home
countries to see their distant families. Often for both political and/or
financial reasons they are not able to travel easily, but they are capable of
telephone calls, and are currently a significant purchasing group for prepaid
phone cards. Videocall believes that videocalling will offer them a preferable
and desirable alternative to non-visual telephone calls.
Large segments of the populations in many countries make up such
groups, and these have created what Videocall believes is a ready and willing
market for videocalling services. Based on management's experience and knowledge
of ethnic markets--in terms of locations, resources, consumer responsiveness and
Videocall's market sensitivity--Videocall's business strategy should result in
these ethnic markets visually and aurally reuniting with their families on an
international scale. Videocall believes that once the availability of videocall
service is present to connect a given ethnic group with key global locations,
routine and regular videocalling will become a part of the normal activities for
many members of these communities. Videocall believes that it is the first such
commercial venture to approach this market in a knowledgeable and comprehensive
manner, with a manageable plan for global implementation.
The Technology: The core aspect of Videocall's business is the purchase
and delivery of the videocalling system, with full technical support on an
ongoing basis from the Picturetel Corporation of Andover, Massachusetts.
Videocall may also source equipment from other manufacturers. Picturetel
Corporation is the world leader in videoconferencing technologies, products and
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services. Picturetel Corporation claims over 56% of the world market for
videoconferencing systems.
The equipment that Videocall expects to primarily utilize is
Picturetel's 'SWIFTSITE" system. This simple yet high tech system is compatible
with most current videoconferencing systems (there being an established industry
standard-the H.323/H.320 international standard-in effect).
Global Telecommunication Transmission Standards: The standard
transmission protocol that Videocall will use is ISDN. The difference between
ISDN and a regular phone line is that the ISDN "pipe"--or bandwidth--is
substantially larger and more efficient. Rather than operating in the usual
"analog" manner, an ISDN line transmits digital signals which are not subject to
the normal degradation and operational problems of analog connectivity. ISDN is
therefore able to carry more data and speech, very rapidly and with clearer
connectivity. It provides a clarity of voice transmissions and real time
transmission of simultaneous video picture without the slow "step-by-step"
images of earlier analog line transmissions. Because it is digital, ISDN allows
for direct computer-to-computer communications and facilities high volume data,
video and voice applications such as global videocalling. As of July 1998, there
are over 40 countries worldwide in which ISDN is commercially available.
The Wireline Carriers: Videocall intends to enter into separate
agreements with local PTTs in every target country for the installation of ISDN
circuits at all of its own retail locations and the locations of its strategic
partners. In almost all cases, ISDN installation rates have been reduced to only
a few hundred dollars per location, and the monthly rental rates have been
reduced to as low as $30 per month or less. This should help Videocall to
operate economically and competitively. In addition, Videocall intends to obtain
ISDN long distance service from major international carriers such as AT&T, MCI
and SPRINT. The current global industry trend is towards a general lowering of
calling rates, and Videocall expects that ISDN rates will retain part of this
trend.
Global Siting of Retail Locations: Videocall has organized its
expansion activities toward different targeted locations and toward
business-formation strategies designed to secure locations. Videocall's approach
to establishing its global network of retail locations includes: 1.
Company-owned locations; 2. Travel agency acquisitions; 3. Partnerships; 4.
Franchises; and 5. Strategic commercial arrangements.
While Videocall has developed financial models for various retain
location options, the financial models will vary from country to country, and
indeed even from city to city within a given country. Management will review all
available options on an individual location basis, and intends to obtain such
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locations in a manner consistent with cash flow needs, projected profitability
goals, location desirability, and the marketplace demand for local videocalling
origination and receipt.
b. Newly Elected Directors of the Company
Also, pursuant to the Agreement and Plan of Merger between Legacy and
Videocall, Legacy's board has appointed four (4) new directors to service as
directors of Legacy pending shareholder ratification of this transaction. Those
directors are officers and directors of Videocall and the additional new
directors now constitute a majority of the Board of Directors of Legacy. The new
directors are Michael J. Zwebner, Eugene A. Rosov, Michael Cuzner-Charles and
Alexander H. Walker, Jr.
Michael J. Zwebner is the founder and has served as Chairman of
Videocall since February 1998. From 1974 to 1986, Mr. Zwebner founded and ran a
travel and tourism company as well as a charter airline, specializing in the
areas of air charter travel, wholesale ticketing and general business and
tourist travel. From 1986 to 1990, Mr. Zwebner owned and operation several real
estate companies, as well as managed a chain of five family restaurants and
related catering services in England. From 1991 to 1997, Mr. Zwebner founded and
served as Vide-President of Cardcall International Holdings Inc. (USA) and
Operating Manager of Cardcall (UK) Ltd., for which he designed and developed
telecommunications and marketing concepts and organized the extensive prepaid
phone card operations (Cardcall having been the largest such operation in both
the UK and Canada). Mr. Zwebner also coordinated corporate finance activities of
Cardcall.
In February of 1997, Mr. Zwebner negotiated and secured the sale/merger
of the Cardcall Group to DCI Telecommunications Inc., a publicly-held entity
based in Connecticut, USA, and was subsequently instrumental in the multi
million dollar sale of the UK distribution contract to SmarTalk Teleservices
Inc. In addition, in February of 1998, Mr. Zwebner negotiated the creation of a
multi million dollar joint venture between Cardcaller Canada Inc. with Datawave
Systems Inc. of Vancouver, Canada. Mr. Zwebner resigned from his positions with
the Cardcall Group in February 1998 to actively and exclusively pursue the
Videocall project.
Eugene A. Rosov: Eugene Rosov has served as Director, President and
Chief Executive Officer of Videocall International Corporation since June of
1998. In 1967, Mr. Rosov started a national music educational and touring
company, and in 1978 started the international chamber music association Chamber
Music America. Mr. Rosov served as acting Director of Marketing for the nation's
largest public radio station, WNYC, from 1979 to 1980. In 1980, he was founder,
president and CEO of Water Test Corporation, a national drinking water testing
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laboratory acquired by Household International in 1987. From 1988 to 1995 he was
founder, president, CEO and Chairman of Innovative Telecom Corporation, the
Nashua, New Hampshire telecommunications systems integrator and provider to five
(of six) Regional Bell operating companies of prepaid telephone card
technologies and customer service operations. From 1995-1998, Mr. Rosov acted as
a consultant to various telecom companies. Mr. Rosov graduated from Harvard
College in 1971 with a BA in General Studies.
Michael Cuzner-Charles: Michael Cuzner-Charles has served as a Director
and Advisor to Videocall since July 1998. Mr. Cuzner-Charles serves as a
director of Regal Brook Ltd. In Berkshire (UK - since 1995). He was finance
director of Kingston Coatings, Courtaulds Plc from 1976 to 1979, and became a
Director of the CJ Phoenix Group (Jewelers in Paris, London and Birmingham) in
1979 until 1982. For the international management consulting form of Grant
Thornton, Mr. Cuzner-Charles was senior manager from 1982 to 1984, and became
senior manager of Corporate Finance for Touche Ross from 1984-1992. From
1992-1995, Mr. Cuzner-Charles served as a director of MBS Plc, a computer
distribution company, and was Chief Executive Officer of Trade Intermediary
Group Plc. He is a Fellow of the Institute of Chartered Accountants in England
and Wales.
Alexander H. Walker, Jr.: Mr. Walker has served as a Director and
General Counsel to Videocall since July 1998. Since 1968, Mr. Walker has served
as Chairman of the Board of Nevada Agency and Trust Company in Reno, Nevada, a
licensed and registered trust company and transfer agent in business since 1903.
From 1944 to 1946, Mr. Walker served in the United States Army, rising to the
rank of Captain and served in the infantry in the United States Army Reserve. He
received his B.A. from Waynesburg College (1950) and his J.D. from the
University of Pittsburgh School of Law in 1952. Since 1956, Mr. Walker has been
a practicing attorney with his practice including all phases of trial work with
a particular emphasis on corporate securities matters. From 1954 to 1955, he
served first as Attorney Advisor, and then 1955-1956 as Attorney in Charge of
the Salt Lake (UT) Branch for the United States Securities and Exchange
Commission (SEC). From 1956 to date, he has maintained a private practice as an
attorney
c. Videocall Assets
Videocall has obtained $1,000,000 in cash through a Private Offering
Memorandum made pursuant to Rule 504 of Regulation D as promulgated under the
Securities Act of 1933, as amended. Videocall also has raised an additional
$4,000,000 through an offer pursuant to Regulation S as promulgated under the
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Securities Act of 1933, as amended. Management of Legacy has entered into the
Agreement and Plan of Merger with Videocall in order to bring Videocall's
significant cash assets into Legacy.
The transaction between Legacy and Videocall is subject to shareholder
approval. Pursuant to the Agreement and Plan of Merger, Legacy intends to file
either appropriate proxy materials or an information statement with the
Commission and then obtain shareholder approval of this transaction. Videocall
also shall obtain shareholders approval pursuant to the terms of the Agreement
and Plan of Merger.
2. $2,000,000 Cash Infusion:
On September 8, 1998, Legacy received $200,000 in private placement
funds for 400,000 shares or its common stock. The Company relied upon the
exemption contained in Section 4(2) of the Securities Act of 1933, as amended,
in connection with this transaction. Such shares shall bear restrictive legends.
It is possible, however, that the Company will file a Registration Statement in
the future which covers such shares. Proceeds from this private placement will
be used by the Company to continue the development of its software products and
to facilitate the merger of the Company with Videocall.
3. $2,000,000 Cash Infusion:
Subsequent to entering into the Agreement and Plan of Merger with
Videocall on September 14, 1998, the Company entered into arrangements with
investors for the infusion of $2,000,000 in cash to Legacy. Such arrangements
were made available to the Company through the new directors added to the
Company's Board of Directors in connection with the Videocall merger.
To date, a total of $2,000,000 has been received by Legacy. Such funds
have been forwarded to the Company for its continued operations and to assure
its continued compliance with the NASDAQ listing requirements.
The Company intends to issue 1,960,000 shares of its common stock to
the individuals forwarding the $2,000,000. Such shares shall be issued in
reliance of Section 4(2) of the Securities Act of 1933, as amended. Such shares
shall bear restrictive legends. It is possible, however, that the Company will
file a Registration Statement in the future which covers such shares.
4. Legacy Interactive Transaction:
On September 14, 1998, Ariella Lehrer resigned as an officer and/or
director of the corporation. On the same date, the corporation entered into an
Agreement of Sale with an entity known as Legacy Interactive, Inc. for its
Emergency Room, Best of Emergency Room, Emergency Room Intern, Emergency Room 2
and ER Code Blue software. Ariella Lehrer is the President of Legacy
Interactive, Inc.
In exchange for the transfer of the software, Legacy Interactive, Inc.
assumed the company's indebtedness to David and Ariella Lehrer in the principal
amount of $57,482 and the company's indebtedness to Irving and Trudy Lehrer in
the principal amount of $266,877. Also, the Company entered into an agreement to
pay a total of $108,099 in three (3) installments of $36,033 to Legacy
Interactive, Inc. The first installment was paid at the time the Agreement of
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Sale was entered into between the parties. The second installment is due on or
before September 25, 1998 and the third installment is due on or before November
15, 1998.
Item No. 6. Resignations of Registrant's Directors.
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Ariella Lehrer, who was an officer and director of the Registrant,
resigned on September 14, 1998 in favor of those persons listed in paragraph 1.b
above. Ms. Lehrer did not resign as a result of any dispute with the Company
Item No. 7. Financial Statements and Exhibits.
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1. Agreement and Plan of Merger between Legacy Software, Inc. and
Videocall International Corporation dated September 14, 1998.
SIGNATURES
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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.
LEGACY SOFTWARE, INC.
Date: September 24, 1998. /s/ Eugene A. Rosov
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Eugene A. Rosov, President
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AGREEMENT AND PLAN OF MERGER
AMONG
LEGACY SOFTWARE, INC.,
LEGACY ACQUISITION, INC.
AND
VIDEOCALL INTERNATIONAL CORPORATION
September 14, 1998
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER entered into as of September 14, 1998 by
and among Legacy Software, Inc., a Delaware corporation (the "Buyer"), Legacy
Software Acquisition, Inc., a Florida corporation to be incorporated (the
"Transitory Subsidiary"), and Videocall International Corporation., a Florida
corporation (the "Target"). The Buyer, the Transitory Subsidiary, and the Target
are referred to collectively herein as the "Parties;"
WHEREAS, upon the terms and subject to the conditions of this Agreement
and of a Merger Agreement in the form attached hereto as Exhibit A (the "Merger
Agreement"), in accordance with the Florida General Corporation Law, the Buyer,
the Target, and the Transitory Subsidiary will carry out a business combination
pursuant to which the Target will merge with and into the Transitory Subsidiary,
the stockholders of the Target will convert all of their outstanding Target
Shares into the Buyer Shares;
WHEREAS, the Board of Directors of the Buyer and of the Target
unanimously have determined that the Merger is fair to, and in the best
interests of, their respective companies and stockholders, and have approved and
adopted this Agreement and the Merger, and have recommended approval and
adoption of this Agreement and the Merger by their respective stockholders; and
WHEREAS, the Buyer's Board of Directors has approved and adopted this
Agreement and has approved the Merger as the sole stockholder of the Transitory
Subsidiary.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Definitions.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the
meaning of Code ss.1504(a) or any similar group defined under a similar
provision of state, local, or foreign law.
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"Buyer" has the meaning set forth in the preface above.
"Buyer-owned Share" means any Target Share that the Buyer owns
beneficially or of record.
"Buyer Shares" means the 5 million shares of the Common Stock,
$0.001 par value per share, and the 5 million shares of Series A Preferred
Stock, $0.001par value, of the Buyer. "Buyer's Most Recent Balance Sheet" means
the balance sheet contained within the Buyer's Most Recent Financial Statements.
"Buyer's Most Recent Financial Statements" means the Buyer's
financial statements for the six months ended June 30, 1998.
"Buyer's Most Recent Fiscal Year End" means the year ended
December 31, 1997.
"Certificate of Merger" has the meaning set forth in ss.2(d)
below.
"Closing" has the meaning set forth in ss.2(c) below.
"Closing Date" has the meaning set forth in ss.2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning
the businesses and affairs of any of the Parties and their respective
Subsidiaries that is not already generally available to the public.
"Controlled Group of Corporations" has the meaning set forth
in Code ss.1563.
"Conversion Ratio" has the meaning set forth in ss.2(f)(i)
below.
"Delaware General Corporation Law" means the general
corporation laws of the State of Delaware.
"Disclosure Schedule" has the meaning set forth in ss.3 below.
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"Dissenting Shares" has the meaning set forth in ss.2(i)
below.
"Effective Time" has the meaning set forth in ss.2(e)(i)
below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA ss.3(1).
"Environmental, Health, and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
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"Exchange Agent" has the meaning set forth in ss.2(g) below.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Florida General Corporation Law" means the general
corporation laws of the State of Florida.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time, applied on a consistent basis.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Independent Auditors" has the meaning set forth in
ss.2(f)(iii) below.
"Initial Closing Statement" has the meaning set forth in
ss.2(f)(iii) below.
"Initial Closing Statement Income" has the meaning set forth
in ss.2(f)(iii) below.
"Initial Closing Statement Revenues" has the meaning set forth
in ss.2(f)(iii) below.
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"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"IRS" means the Internal Revenue Service.
"Liability" means any liability (whether absolute, accrued or
contingent), including any liability for Taxes.
"Merger" has the meaning set forth in ss.2(a) below.
"Merger Agreement" has the meaning set forth in the preamble
above.
"Multiemployer Plan" has the meaning set forth in ERISA
ss.3(37).
"NASDAQ" means The NASDAQ SmallCap Market, Inc.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" has the meaning set forth in the preface above.
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"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA
ss.406 and Code ss.4975.
"Prospectus" means the final prospectus relating to the
registration of the Buyer Shares issued in the Merger under the Securities Act.
"Reportable Event" has the meaning set forth in ERISA ss.4043.
"Requisite Buyer Stockholder Approval" means the affirmative
vote of the holders of a majority of the Buyer Shares entitled to vote thereon,
in favor of this Agreement and the Merger.
"Requisite Target Stockholder Approval" means the affirmative
vote of the holders of 100% of the Target Shares entitled to vote thereon, in
favor of this Agreement and the Merger.
"Rights" has the meaning set forth in ss.6(o) below.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for taxes not yet due and payable or
for taxes that the taxpayer is contesting in good faith through appropriate
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proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
"Surviving Corporation" has the meaning set forth in
ss.2(a)(i) below.
"Target" has the meaning set forth in the preface above.
"Target Director Designees" means Michael J. Zwebner, Eugene
A. Rosov, Michael Cuzner-Charles and Alexander H. Walker, Jr.
"Target Options" means the options to acquire Target Shares
issued to the officers, directors, employees and consultants of the Target, and
identified on Schedule 3(c) of the Disclosure Schedule.
"Target Share" means any share of Common Stock, $0.01 par
value per share, of the Target.
"Target Stockholder" means any Person who or which holds any
Target Shares.
"Target's Most Recent Balance Sheet" means the balance sheet
contained within the Target's Most Recent Financial Statements.
"Target's Most Recent Financial Statements" has the meaning
set forth in ss.3(g) below.
"Target's Most Recent Financial Statement Date" has the
meaning set forth in ss.3(g) below.
"Target's Most Recent Fiscal Year End" has the meaning set
forth in ss.3(g) below.
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"Target's Notice" has the meaning set forth in ss.5(q) hereof.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
ss.59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"to the Buyer's Knowledge" or other reference herein to the
Buyer's knowledge or awareness, means the actual knowledge of C. Robert Kline,
Ph.D and William E. Sliney, after due inquiry of the officers and directors of
the Buyer and after reasonable investigation of the books, records and files of
the Buyer.
"to the Target's Knowledge" or other reference herein to the
Target's knowledge or awareness, means the actual knowledge of Michael J.
Zwebner, Eugene A. Rosov and Harold Snyder, after due inquiry of the officers
and directors of the Target and after reasonable investigation of the books,
records and files of the Target.
"Transitory Subsidiary" has the meaning set forth in the
preface above.
2. Basic Transaction.
(a) The Merger.
(i) On and subject to the terms and conditions of
this Agreement and the Merger Agreement, and in accordance with the
Florida General Corporation Law, the Target will merge with and into
the Transitory Subsidiary (the "Merger") at the Effective Time. The
Transitory Subsidiary shall be the corporation surviving the Merger as
a wholly-owned subsidiary of the Buyer (the "Surviving Corporation").
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(ii) The Target hereby represents that its Board of
Directors, at a meeting duly called and held at which a quorum was
present and acting throughout, has unanimously (A) determined that this
Agreement, the Merger Agreement and the Merger are fair to and in the
best interests of, the Target and its stockholders, (B) approved this
Agreement, the Merger Agreement and the Merger, and (C) resolved to
recommend approval and adoption by the stockholders of the Target of
this Agreement, the Merger Agreement and the Merger to the extent
required and in a manner permitted by the Florida General Corporation
Law.
(b) Action by the Buyer. The Buyer, acting through its Board
of Directors, shall, as soon as practicable, take all actions necessary to
obtain stockholder approval in accordance with the Delaware General Corporation
Law and the Securities Exchange Act by: (A) as soon as practicable, duly call,
give notice of, convene and hold the Special Buyer Meeting for the purpose of
adopting and approving this Agreement, the Merger Agreement and the Merger; (B)
include in the Definitive Buyer Proxy Materials the conclusion and
recommendation of the Board of Directors to the effect that the Board of
Directors, having determined that this Agreement, the Merger Agreement and the
Merger are in the best interests of the Buyer and its stockholders, has approved
this Agreement, the Merger Agreement and the Merger and recommends that the
stockholders of the Buyer vote in favor of the approval and adoption of this
Agreement, the Merger Agreement and the Merger; (C) use its reasonable best
efforts to obtain the necessary approval and adoption of this Agreement, the
Merger Agreement and the Merger by the stockholders of the Buyer; and (D) as
sole stockholder of the Transitory Subsidiary, shall adopt and approve this
Agreement, the Merger Agreement and the Merger.
(c) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Troop
Steuber Pasich Reddick & Tobey, LLP in Los Angeles, California, commencing at
9:00 a.m. local time on the second business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
the Parties may mutually determine (the "Closing Date").
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(d) Actions at the Closing. At the Closing, (i) the Target
will deliver to the Buyer the various certificates, instruments, and documents
referred to in ss.6(a) below, (ii) the Buyer and the Transitory Subsidiary will
deliver to the Target the various certificates, instruments, and documents
referred to in ss.6(b) below, (iii) the Transitory Subsidiary and the Target
will file with the Secretary of State of the State of Florida a Certificate of
Merger in the form attached hereto as Exhibits B (the "Certificate of Merger"),
and (iv) the Buyer will deliver to the Exchange Agent in the manner provided
below in this ss.2 the certificates evidencing the Buyer Shares issued in the
Merger.
(e) Effect of Merger.
(i) General. The Merger shall become effective at the
time (the "Effective Time") the Transitory Subsidiary and the Target
file the Certificate of Merger with the Secretary of State of Florida.
The Merger shall have the effect set forth in the Florida General
Corporation Law. The Surviving Corporation may, at any time after the
Effective Time, take any action (including executing and delivering any
document) in the name and on behalf of either the Buyer or the Target
in order to carry out and effectuate the transactions contemplated by
this Agreement.
(ii) Certificate of Incorporation. The Certificate of
Incorporation of the Transitory Subsidiary in effect at and as of the
Effective Time will remain the Certificate of Incorporation of the
Surviving Corporation without any modification or amendment in the
Merger.
(iii) Bylaws. The Bylaws of the Transitory Subsidiary
in effect at and as of the Effective Time will remain the Bylaws of the
Surviving Corporation without any modification or amendment in the
Merger.
(iv) Directors and Officers. The directors and
officers of the Target in office at and as of the Effective Time will
remain the directors and officers of the Surviving Corporation
(retaining their respective positions and terms of office), together
with the Target Director Designees.
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(v) Buyer Shares. Each Buyer Share issued and
outstanding at and as of the Effective Time will remain issued and
outstanding.
(vi) Target Shares. No Target Share shall be deemed
to be outstanding or to have any rights other than those set forth in
ss.2(f) and ss.2(i) below after the Effective Time.
(f) Conversion of Target Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the Buyer, the
Target, the Transitory Subsidiary, or the holders of any of the foregoing
securities:
Every share of Target Stock issued and outstanding and
owned by the Buyer immediately prior to the Effective Time, shall
automatically be canceled and retired and shall cease to exist, and no
cash or Buyer Shares, or other consideration shall be delivered or
deliverable or exchanged therefor. For purposes of this ss.2(f)(i) and
the calculation of the Conversion Ratio, it is assumed that there are
such number of Target Shares outstanding as referenced in the attached
Schedule 2(f)-1. At and as of the Effective Time, (1) each Target Share
(other than any Dissenting Shares or Buyer-owned Shares) shall be
converted into the right to receive such number of Buyer Shares (the
ratio of Buyer Shares to one Target Share is referred to herein as the
"Conversion Ratio" ) as specified in the attached Schedule 2(f)-2, (2)
each Dissenting Share shall be converted into the right to receive
payment from the Buyer with respect thereto in accordance with the
provisions of the Florida General Corporation Law, and (3) each
Buyer-owned Share shall be canceled; provided, however, that the
Conversion Ratio shall be subject to equitable adjustment in the event
of any stock split, stock dividend, reverse stock split, or other
change in the number of Target Shares outstanding; provided further,
however, that the Conversion Ratio shall be subject to adjustments, if
applicable, provided in ss.2(f)(ii), (iii) and (iv) below. No
fractional Buyer Shares shall be issued. Any conversion which would
otherwise result in a fractional share shall be rounded up to the
nearest whole Buyer Share.
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(g) Procedure for Payment.
(i) Immediately after the Effective Time, (A) the
Buyer will furnish to Chase Mellon Shareholder Services (the "Exchange
Agent") instructions directing the Exchange Agent to issue to each
Target Shareholder (other than holders of Dissenting Shares and
Buyer-owned Shares) their pro rata share of Buyer Shares equal to the
product of (I) the Conversion Ratio times (II) the number of Target
Shares such stockholder owns, and (B) the Buyer will cause the Exchange
Agent to mail a letter of transmittal (with instructions for its use)
in the form attached hereto as Exhibit C to each record holder of
outstanding Target Shares for the holder to use in surrendering the
certificates which represented his, her, or its Target Shares in
exchange for a certificate representing the number of Buyer Shares to
which he, she, or it is entitled.
(ii) The Buyer will not pay any dividend or make any
distribution on Buyer Shares (with a record date at or after the
Effective Time) to any record holder of outstanding Target Shares until
the holder surrenders for exchange his, her, or its certificates which
represented Target Shares. The Buyer instead will pay the dividend or
make the distribution to the Exchange Agent in trust for the benefit of
the holder pending surrender and exchange. The Buyer may cause the
Exchange Agent to invest any cash the Exchange Agent receives from the
Buyer as a dividend or distribution in one or more of the permitted
investments set forth on Exhibit D attached hereto; provided, however,
that the terms and conditions of the investments shall be such as to
permit the Exchange Agent to make prompt payments of cash to the
holders of outstanding Target Shares as necessary. The Buyer may cause
the Exchange Agent to pay over to the Buyer any net earnings with
respect to the investments, and the Buyer will replace promptly any
cash which the Exchange Agent loses through investments. In no event,
however, will any holder of outstanding Target Shares be entitled to
any interest or earnings on the dividend or distribution pending
receipt.
(iii) The Buyer may cause the Exchange Agent to
return any Buyer Shares and dividends and distributions thereon
remaining unclaimed 180 days after the Effective Time, and thereafter
each remaining record holder of outstanding Target Shares shall be
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entitled to look to the Buyer (subject to abandoned property, escheat,
and other similar laws) as a general creditor thereof with respect to
the Buyer Shares and dividends and distributions thereon to which he,
she, or it is entitled upon surrender of his, her, or its certificates.
(iv) The Buyer shall pay all charges and expenses of
the Exchange Agent.
(h) Closing of Transfer Records. After the close of business
on the Closing Date, transfers of Target Shares outstanding prior to the
Effective Time shall not be made on the stock transfer books of the Surviving
Corporation. On or after the Closing Date, any Target Share presented to the
Buyer, the Exchange Agent, or the Surviving Corporation, as the case may be,
shall be converted into the applicable number of Buyer Shares.
(i) Dissenting Shares.
(i) Notwithstanding any other provision of this
Agreement to the contrary, shares of Target Stock that are outstanding
immediately prior to the Effective Time and which are held by Target
Stockholders who shall not have voted in favor of the Merger or
consented thereto in writing and who shall be entitled to and shall
have demanded properly in writing appraisal for such shares in
accordance with the Florida General Corporation Law and who shall not
have withdrawn such demand or otherwise have forfeited appraisal rights
(collectively, the "Dissenting Shares") shall not be converted into or
represent the right to receive Buyer Shares. Such stockholders shall be
entitled to receive payment of the appraised value of such Target
Shares held by them in accordance with the provisions of the Florida
General Corporation Law, except that all Dissenting Shares held by such
stockholders, who shall have failed to perfect or who effectively shall
have withdrawn, forfeited, or lost their rights to appraisal of such
Target Shares under the Florida General Corporation Law, shall
thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive, the
Buyer Shares, upon surrender, in the manner provided in ss.2(f) above.
(ii) The Target shall give the Buyer prompt notice of
any demands for appraisal received by it, withdrawals of such demands,
and any other instruments served pursuant to the Florida General
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Corporation Law and received by the Target and relating thereto. The
Target (and after the Closing, the Transitory Subsidiary) shall direct
all negotiations and proceedings with respect to demand for appraisal
rights under the Florida General Corporation Law.
3. Representations and Warranties of the Target. The Target represents
and warrants to the Buyer that the statements contained in this ss.3 are correct
and complete as of the date of this Agreement and, subject to amendment by
Target for events occurring after the date of this Agreement, will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
ss.3), except as set forth in the disclosure schedule accompanying this
Agreement and initialed by the Parties (the "Disclosure Schedule"). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this ss.3. The Disclosure Schedule may be
amended from time to time and such Disclosure Schedule as amended becomes the
Disclosure Schedule of the disclosing party.
(a) Organization, Qualification, and Corporate Power. The
Target is a corporation duly organized, validly existing, and in corporate good
standing under the laws of the State of Florida. The Target is duly qualified as
a foreign corporation in each jurisdiction where its ownership or leasing of
property or where the nature of its activities requires such qualification. The
Target has full corporate power and authority to carry on the businesses in
which it is engaged and to own, lease, and use the properties owned, leased, and
used by it, and has in full force and effect all authorizations and has made all
filings to the extent required for such ownership, lease, and use of its
properties and the conduct of its business.
(b) Capitalization. The entire authorized capital stock of the
Target is set forth in the attached 2(f)-1. All of the issued and outstanding
Target Shares have been duly authorized and are validly issued, fully paid, and
nonassessable. Except for the Target Options, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
the Target to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Target.
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(c) Authorization of Transaction. The Target has the requisite
corporate power and authority to execute and deliver this Agreement and the
Merger Agreement and to perform its obligations hereunder and thereunder;
provided, however, that the Target cannot consummate the Merger unless and until
it receives the Requisite Target Stockholder Approval. This Agreement
constitutes the valid and legally binding obligation of the Target, enforceable
against Target in accordance with its terms and conditions, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratoriums or other similar laws affecting the enforcement of
creditors' rights generally and the availability of equitable remedies
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
(d) Noncontravention. To the Target's Knowledge, neither
Target's execution and the delivery of this Agreement, nor Target's consummation
of the transactions contemplated hereby, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
the Target is subject or any provision of the charter or bylaws of the Target,
which would have a material adverse effect on the Target, or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any material agreement, contract, lease, license,
instrument or other arrangement to which the Target is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). To the Target's Knowledge, and
other than in connection with the Florida General Corporation Law, the Target
does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement, except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation or failure to give notice would not have
a material adverse effect on the ability of Target to consummate the
transactions contemplated by this Agreement or have a material adverse effect on
the Target's business, operations, condition (financial or otherwise), assets or
Liabilities as in existence immediately prior to the Closing.
(e) Title to Assets. The Target has good title to, or a valid
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leasehold interest in, the properties and assets used by the Target, located on
its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet.
(f) Subsidiaries. There are no Subsidiaries of the Target.
(g) Financial Statements Attached hereto as Exhibit E are the
following financial statements (collectively the "Financial Statements"):
unaudited balance sheet and statements of operations and cash flows as of and
for the period ended September 10, 1998 ("Most Recent Financial Statement Date")
for the Target. The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of the Target as
of such dates and the results of operations of the Target for such periods, are
correct and complete in all material respects; and are consistent in all
material respects with the books and records of the Target); provided, however,
that they are subject to normal year-end adjustments and lack footnotes and
other presentation items.
(h) Events Subsequent to Most Recent Financial Statement Date.
Since the Most Recent Financial Statement Date and continuing up to and
including the date of this Agreement, there has not been any material adverse
change in the business, financial condition, operations or results of operations
of the Target.
Without limiting the generality of the foregoing, since that date:
(i) the Target has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than in the
Ordinary Course of Business;
(ii) the Target has not entered into any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either involving more than $50,000 or
outside the Ordinary Course of Business;
(iii) the Target has not and to the Target's
Knowledge, no other party has accelerated, terminated, modified, or
canceled any agreement, contract, lease, or license (or series of
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<PAGE>
related agreements, contracts, leases, and licenses) involving more
than $50,000 to which the Target is a party or by which the Target is
bound;
(iv) the Target has not imposed any Security Interest
upon any of its assets, tangible or intangible, except in favor of
Buyer;
(v) the Target has not made any capital expenditure
(or series of related capital expenditures) either involving more than
$50,000 or outside the Ordinary Course of Business;
(vi) the Target has not made any capital investment
in, any loan to, or any acquisition of the securities or assets of, any
other Person (or series of related capital investments, loans, and
acquisitions) either involving more than $50,000 or outside the
Ordinary Course of Business;
(vii) the Target has not issued any note, bond, or
other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation either
involving more than $50,000 singly or $100,000 in the aggregate, except
with respect to the Buyer;
(viii) the Target has not delayed or postponed the
payment of accounts payable and other Liabilities outside the Ordinary
Course of Business;
(ix) the Target has not canceled, compromised,
waived, or released any right or claim (or series of related rights and
claims) either involving more than $50,000 or outside the Ordinary
Course of Business;
(x) the Target has not granted any license or
sublicense of any rights under or with respect to any Intellectual
Property;
(xi) there has been no change made or authorized in
the charter or bylaws of the Target;
(xii) the Target has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options, warrants,
or other rights to purchase or obtain (including upon conversion,
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<PAGE>
exchange, or exercise) any of its capital stock, except in connection
with the exercise of the Target Options;
(xiii) the Target has not declared, set aside, or
paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiv) the Target has not experienced any material
damage, destruction, or loss (whether or not covered by insurance) to
its property;
(xv) the Target has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xvi) the Target has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(xvii) the Target has not granted any increase in the
base compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xviii) the Target has not adopted, amended, modified
or terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xix) the Target has not made any other change in
employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xx) the Target has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(xxi) there has not been any other material
occurrence, event, incident, action, failure to act, or transaction
outside the Ordinary Course of Business involving the Target; and
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(xxii) the Target has not committed to any of the
foregoing, except in respect to the transactions contemplated by this
Agreement.
(i) Undisclosed Liabilities. The Target has no material
Liability except for (i) Liabilities reflected on the Financial Statements and
(ii) Liabilities which have arisen after the Most Recent Financial Statement
Date in the Ordinary Course of Business, none of which results from, arises out
of, relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law.
(j) Legal Compliance. The Target has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against the Target alleging any failure so to comply
and, to the Target's Knowledge, there is no basis for any such action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
to be filed or to be commenced against any of them alleging any failure so to
comply. This compliance includes compliance with the state, federal and
international securities laws in connection with the offering and or sale of the
Target's Shares.
(k) Tax Matters.
(i) The Target has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(ii) The Target does not expect any authority to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim, and there is no basis for any
such dispute or claim, concerning any Tax Liability of the Target.
ss.3(k) of the Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to the Target for taxable
periods ended on or after December 31, 1997, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
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currently are the subject of audit. The Target has delivered to the
Buyer correct and complete copies of all state, local, and federal
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Target since December 31, 1993.
(iii) The Target has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(iv) The unpaid Taxes of the Target (A) did not, as
of the Most Recent Financial Statement Date, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) reflected in
the Most Recent Balance Sheet (and in any notes thereto) and (B) will
not exceed that reserve as adjusted for the passage of time up to and
including the Closing Date in accordance with the past custom and
practice of the Target in filing its Tax Returns.
(v) The Target has not filed a consent under Code
ss.341(f) concerning collapsible corporations. The Target has not made
any payments, is not obligated to make any payments, nor is the Target
a party to any agreement that under certain circumstances would
obligate it to make any payments that will not be deductible under Code
ss.280G. The Target has not been a United States real property holding
corporation within the meaning of Code ss.897(c)(2) during the
applicable period specified in Code ss.897(c)(1)(A)(ii). The Target has
disclosed on its federal income Tax Returns all positions taken therein
that would give rise to a substantial understatement of federal income
Tax within the meaning of Code ss.6662. The Target is not a party to
any Tax allocation or sharing agreement. The Target (A) has not been a
member of an Affiliated Group filing a consolidated federal income Tax
Return (other than a group the common parent of which was the Target)
nor (B) does the Target have any Liability for the Taxes of any Person
(other than the Target) under Treas. Reg. ss.1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) ss.3(k) of the Disclosure Schedule sets forth
the following information with respect to the Target as of the most
recent practicable date (as well as on an estimated pro forma basis as
of the Closing giving effect to the consummation of the transactions
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contemplated hereby): (A) the basis of the Target in its assets; and
(B) to the extent applicable, the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax, or
excess charitable contribution allocable to the Target.
(l) Real Property.
(i) The Target does not own any real property:
(ii) ss.3(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to the Target.
The Target has delivered to the Buyer correct and complete copies of
the leases and subleases listed in ss.3(l)(ii) of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease
listed in ss.3(l)(ii) of the Disclosure Schedule,
(A) the lease or sublease is in full force
and effect and constitutes a legal, valid and binding
agreement of the Target, enforceable in accordance with its
terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratoriums
or other similar laws affecting the enforcement of creditors'
rights generally and the availability of equitable remedies
(regardless of whether enforceability is considered in a
proceeding at law or in equity);
(B) the Target is not and to the Target's
Knowledge, no other party to the lease or sublease is in
material breach or default, and no event has occurred which,
with notice or lapse of time, would constitute a material
breach or default or permit termination, modification, or
acceleration thereunder;
(C) there are no oral agreements,
forebearance programs in effect or material disputes as to the
lease or sublease;
(D) the Target has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold;
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(E) (i) the Target is not in violation of
any applicable laws or governmental rules and regulations in
regard to the use of the facilities leased or subleased
thereunder, and (ii) the Target has not received any written
notice from any governmental authority of any such violation;
and
(F) all facilities leased or subleased
thereunder are supplied with or have available utilities and
other services suitable for the operation of said facilities.
(m) Intellectual Property.
(i) The Target owns or has the right to use pursuant
to license, sublicense, agreement, or permission all Intellectual
Property sufficient for the operation of the businesses of the Target
as presently conducted and as presently proposed to be conducted. The
Target has taken sufficient protective measures to maintain and protect
each item of Intellectual Property that it owns or uses.
(ii) The Target has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and the Target has not
received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation
(including any claim that the Target must license or refrain from using
any Intellectual Property rights of any third party). To the Target's
Knowledge, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Target.
(iii) The Target does not own any patent or
application therefor. ss.3(m)(iii) of the Disclosure Schedule
identifies each material license, agreement, or other permission which
the Target has granted to any third party with respect to any of its
Intellectual Property. The Target has delivered to the Buyer correct
and complete copies of all material licenses, agreements, and
permissions (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such item.
ss.3(m)(iii) of the Disclosure Schedule also identifies each trade name
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or unregistered trademark used by the Target in connection with any of
its businesses. With respect to each item of Intellectual Property
required to be identified in ss.3(m)(iii) of the Disclosure Schedule,
(A) the Target possesses all right, title,
and interest in and to the item, free and clear of any
Security Interest, license, or other restriction;
(B) the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge; and
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Target's Knowledge, threatened which challenges the
legality, validity, enforceability, use, or ownership of the
item, and there is no basis for any such action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
or demand; and
(D) the Target has never agreed to indemnify
any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item
pursuant to any material agreement relating to the
Intellectual Property.
(iv) ss.3(m)(iv) of the Disclosure Schedule
identifies each material item of Intellectual Property that any third
party owns and that the Target uses pursuant to license, sublicense,
agreement, or permission. The Target has delivered to the Buyer correct
and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in ss.3(m)(iv) of the
Disclosure Schedule,
(A) the license, sublicense, agreement, or
permission covering the item is in full force and effect and
constitutes a legal, valid and binding agreement of the
Target, enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratoriums or other similar laws
affecting the enforcement of creditors' rights generally and
the availability of equitable remedies (regardless of whether
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enforceability is considered in a proceeding at law or in
equity);
(B) (i) the Target is not in material breach
or default, and (ii) no event has occurred which with notice
or lapse of time would constitute a material breach or default
or permit termination, modification, or acceleration
thereunder;
(C) the Target is not a party to any
sublicense material to the business of the Target;
(D) to the Target's Knowledge, the
underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling, or
charge;
(E) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property; and
(F) the Target has not granted any
sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(v) The Target will not interfere with, infringe
upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of the
continued operation of its businesses as presently conducted and as
presently proposed to be conducted.
(n) Tangible Assets. ss.3(n) of the Disclosure Schedule lists
the Target's tangible assets. The Target owns or leases all buildings,
machinery, equipment, and other tangible assets adequate for the conduct of the
business as presently conducted and as presently proposed to be conducted. Each
such tangible asset is free from material defects (patent and latent), has been
maintained in all material respects in accordance with normal industry practice,
is in reasonable operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used and
presently is proposed to be used.
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(o) Inventory. The inventory of the Target consists of
purchased parts and finished goods, all of which is presently usable and salable
for the purpose for which it was procured, except for obsolete items and items
of below standard quality, all of which have been written off or written down to
their net realizable value as reflected in the aggregate on the Most Recent
Balance Sheet, to be adjusted for the passage of time up to and including the
Closing Date in accordance with past custom and practice of the Target.
(p) Contracts. ss.3(p) of the Disclosure Schedule lists the
following contracts and other agreements to which the Target is a party, except
contracts and other agreements involving a potential acquisition of the capital
stock or assets of Target, which by their terms are subject to a non-disclosure
covenant:
(i) any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing for
lease payments in excess of $25,000 per annum;
(ii) any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or receipt
of services, the performance of which will extend over a period of more
than one year, involve consideration in excess of $50,000 per year or
result in a material loss to the Target;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation,
in excess of $25,000 or under which it has imposed a Security Interest
on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
non-competition, except as hereinabove provided;
(vi) any agreement involving any of the Target
Stockholders and their Affiliates (other than the Target);
(vii) any profit sharing, stock option, stock
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purchase, stock appreciation, deferred compensation, severance, or
other material plan or arrangement for the benefit of its current or
former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis, not
cancelable on 30 days or less notice, and which provides for annual
compensation in excess of $25,000 or provides severance benefits;
(x) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xi) except as otherwise listed pursuant to this
ss.3(p), any agreement under which the consequences of a default or
termination could have a material adverse effect on the business,
operations, condition (financial or otherwise), assets or Liabilities
of the Target, other than client or customer sales contracts entered
into in the Ordinary Course of Business of the Target;
(xii) any other agreement (or group of related
agreements) the performance of which involves annual consideration in
excess of $50,000.
The Target has delivered to the Buyer a correct and complete copy of each
written agreement listed in ss.3(p) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the material terms and conditions of
each oral agreement referred to in ss.3(p) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is in full force and effect
and constitutes a legal, valid and binding agreement of the Target, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratoriums or other similar
laws affecting the enforcement of creditors' rights generally and the
availability of equitable remedies (regardless of whether enforceability is
considered in a proceeding at law or inequity); and (B) no party is in material
breach or default, and no event has occurred which with notice or lapse of time
would constitute a material breach or default, or permit termination,
modification, or acceleration, under the agreement.
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(q) Notes and Accounts Receivable. All notes and accounts
receivable of the Target are reflected properly on its books and records, are
valid receivables and are collectible in the aggregate, net of reserves for bad
debts, pending sales, and cancellations, as reflected in the Most Recent Balance
Sheet (or in any notes thereto), to be adjusted for the passage of time up to
and including the Closing Date in accordance with the past custom and practice
of the Target.
(r) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Target.
(s) Insurance. ss.3(s) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which the Target has been a party,
a named insured, or otherwise the beneficiary of coverage at any time within the
past three years:
(i) the name, address, and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is in full force and
effect and constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of the Target, except as such enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratoriums or
other similar laws affecting the enforcement of creditors' rights generally and
the availability of equitable remedies (regardless of whether enforceability is
considered in a proceeding at law or inequity); and (B) neither the Target nor
any other party to the policy is in material breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
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occurred which, with notice or the lapse of time, would constitute such a
material breach or default, or permit termination, modification, or
acceleration, under the policy.
(t) Litigation. ss.3(t) of the Disclosure Schedule sets forth
in each instance in which the Target (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party or, to
the Target's Knowledge, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. There is no basis for any present or
future action, suit, proceeding, hearing and investigation that could result in
any material adverse change in the business, operations, condition (financial or
otherwise), assets or Liabilities of the Target.
(u) Product Warranty. Within the last 48 months, each product
sold, leased, or delivered by the Target has been in conformity with all express
and implied warranties of the Target, and the Target does not have any Liability
(and there is no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability) for replacement or repair thereof or other damages
in connection therewith, subject only to the reserve for product warranty claims
reflected in the Most Recent Balance Sheet to be adjusted for the passage of
time up to and including the Closing Date in accordance with the past custom and
practice of the Target. ss.3(u) of the Disclosure Schedule includes copies of
the standard terms and conditions of sale or lease for the Target (containing
applicable guaranty, warranty, and indemnity provisions).
(v) Employees. No executive, key employee, or group of
employees has tendered resignations or expressed their intentions to terminate
employment with the Target. The Target is not a party to or bound by any
collective bargaining agreement, nor has the Target experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. To the Target's Knowledge, there is no organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Target.
(w) Employee Benefits.
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(i) ss.3(w) of the Disclosure Schedule lists each
Employee Benefit Plan that the Target maintains or as to which the
Target contributes.
(A) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund) complies in
material form and in operation in all material respects with
the applicable requirements of ERISA, the Code, and other
applicable laws.
(B) All reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's,
and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA
and of Code ss.4980B will have been met in all material
respects prior to the Closing Date with respect to each
applicable Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
(C) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit
Plan and any and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid
to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Target.
All premiums or other payments for all periods ending on or
before the Closing Date have been paid or accrued in
accordance with the past custom and practice of the Target
with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan meets the material formal
requirements of a "qualified plan" under Code ss.401(a) and
has received, within the last two years, an updated favorable
determination letter from the Internal Revenue Service.
(E) The Target does not maintain and has not
maintained any Employee Pension Benefit Plan which is a
defined benefit type plan.
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(F) The Target has delivered to the Buyer
correct and complete copies of the plan documents and summary
plan descriptions, the most recent determination letter
received from the IRS, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance contracts,
and other funding agreements which implement each such
Employee Benefit Plan.
(ii) The Target is not a member of a Controlled Group
of Corporations. With respect to each Employee Benefit Plan that the
Target maintains or ever has maintained or to which the Target
contributes, ever has contributed, or ever has been required to
contribute:
(A) No such Employee Benefit Plan which is
an Employee Pension Benefit Plan (other than any Multiemployer
Plan) has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other
than any Multiemployer Plan) has been instituted or, to the
Target's Knowledge, threatened.
(B) There have been no Prohibited
Transactions with respect to any such Employee Benefit Plan.
No Fiduciary has any Liability for breach of fiduciary duty or
any other failure to act or comply in connection with the
administration or investment of the assets of any such
Employee Benefit Plan. No action, suit, proceeding, hearing,
or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or
threatened. There is no basis for any such action, suit,
proceeding, hearing, or investigation.
(C) The Target has not incurred, nor to the
Target's Knowledge, is there any reason to expect that the
Target will incur any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with
respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
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(iii) The Target does not contribute to, never has
contributed to, and never has been required to contribute to any
Multiemployer Plan, nor does it have any Liability (including
withdrawal Liability) under any Multiemployer Plan.
(iv) The Target does not maintain and never has
maintained and does not contribute, never has contributed, and never
has been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with Code
ss.4980B).
(x) Guaranties. The Target is neither a guarantor nor liable
for any Liability or obligation (including indebtedness) of any other Person.
(y) Environmental, Health, and Safety. The Target has complied
in all material respects with all Environmental, Health, and Safety Laws, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against the Target alleging any
failure so to comply. Without limiting the generality of the preceding sentence,
the Target has obtained and been in compliance with all of the terms and
conditions of all material permits, licenses, and other authorizations which are
required under, and has complied with all other material limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all Environmental, Health, and
Safety Laws, except where such non-compliance would not have a material adverse
effect on the operations of the Target.
(z) Certain Business Relationships With the Target.None of the
Target Stockholders and their Affiliates has been involved in any business or
contractual (whether written or oral) arrangement or relationship with the
Target within the past 12 months involving aggregate annual payments in excess
of $50,000, and none of the Target Stockholders and their Affiliates owns any
asset, tangible or intangible, which is used in the business of the Target.
(aa) Brokers' Fees. Except as set forth in Schedule 3(aa) of
the Disclosure Schedule, and as otherwise provided in ss.8(l), the Target has no
liability or obligation to pay any fees or commissions to any broker, finder, or
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agent with respect to the transactions contemplated by this Agreement.
(ab) Continuity of Business Enterprise. The Target operates at
least one significant historic business line, or owns at least a significant
portion of its historic business assets, in each case within the meaning of
Treas. Reg. ss.1.368-1(d).
(ac) Substantial Customers, Brokers and Suppliers
(i) ss.3(ac) of the Disclosure Schedule lists the 10
customers of the Target with the highest volume of purchases from the
Target during the period ending September 10, 1998, and the amount for
which each such customer was invoiced during such period.
(ii) The Target has not been declared ineligible to
bid on a state or federal government contract.
(iii) No customer listed on ss.3(ac) of the
Disclosure Schedule has (A) ceased, or notified the Target in writing
of an intention to cease dealing with or through the Target; (B)
reduced or notified the Target in writing of an intention to reduce,
substantially its dealings with or through the Target; or (C) changed,
or notified the Target in writing of an intention to change,
substantially the terms on which it is prepared to deal with or through
the Target. To the Target's Knowledge all of the customers listed in
ss.3(ac) of the Disclosure Schedule will continue to be a customer of
the Transitory Subsidiary after the Closing.
(ad) Disclosure. None of the information that Target has
provided in connection with the representations and warranties provided for
herein contain or that the Target will supply specifically for use in the
Registration Statement, the Prospectus, or the Definitive Buyer Proxy Materials
will contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they are or will be made, not misleading.
4. Representations and Warranties of the Buyer. In addition to the
transactions with Dr Ariella Lehrer and Legacy Interactive Inc, which have been
disclosed to and approved by the Target, the Buyer represents and warrants to
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the Target that the statements contained in this ss.4 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this ss.4), except as set
forth in the Disclosure Schedule. The Disclosure Schedule will be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this ss.4. The Disclosure Schedule may be amended from time to time and such
Disclosure Schedule as amended becomes the Disclosure Schedule of the disclosing
party.
(a) Organization, Qualification, and Corporate Power. The
Buyer is a corporation duly organized, validly existing, and in corporate good
standing under the laws of the State of Delaware. The Buyer is duly qualified as
a foreign corporation in each jurisdiction where its ownership or leasing of
property or where the nature of its activities requires such qualification,
except to the extent that the failure to so qualify would not have a material
adverse effect on the business, operations, condition (financial or otherwise),
assets or Liabilities of the Buyer. The Buyer has full corporate power and
authority to carry on the businesses in which it is engaged and to own, lease,
and use the properties owned, leased, and used by it, and has in full force and
effect all authorizations and has made all filings to the extent required for
such ownership, lease, and use of its properties and the conduct of its
business, except to the extent that the failure to obtain such authorizations or
to make such filings would not have a material adverse effect on the operations
of the Buyer.
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(b) Capitalization. The entire authorized capital stock of the
Buyer consists of 5,000,000 shares of preferred stock, none of which is
outstanding, and 10,000,000 Buyer Shares,details of which are set forth on
Schedule 4(b) attached hereto. All of the issued and outstanding Buyer Shares
have been duly authorized and are validly issued, fully paid, and nonassessable
(except for the Buyer Shares currently offered, which will be fully paid and
non-assessable when issued). All of the Buyer Shares to be issued in the Merger
have been duly authorized and, upon consummation of the Merger, will be validly
issued, fully paid, and nonassessable. Except for the options and warrants
listed on ss.4(b) to the Disclosure Schedule, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
the Buyer to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Buyer.
(c) Authorization of Transaction. The Buyer has the requisite
corporate power and authority to execute and deliver this Agreement and the
Merger Agreement and to perform its obligations hereunder and thereunder;
provided, however, that the Buyer cannot consummate the Merger unless and until
it receives a Hardship Exemption or the Requisite Buyer Stockholder Approval.
This Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable against the Buyer in accordance with its terms and
conditions, except as such enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratoriums or other similar laws
affecting the enforcement of creditors' rights generally and the availability of
equitable remedies (regardless of whether enforceability is considered in a
proceeding at law or in equity).
(f) Undisclosed Liabilities. The Buyer has no material
Liability except for (i) Liabilities reflected on the Buyer's Most Recent
Balance Sheet (and in any notes thereto) and (ii) Liabilities which have arisen
after the Buyer's Most Recent Fiscal Year End in the Ordinary Course of
Business, none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law.
(g) Legal Compliance. To the Buyer's Knowledge, the Buyer has
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complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof),
except to the extent any such failure would not have a material adverse effect
on the operations of the Buyer, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against the Buyer alleging any failure so to comply and, to the
Buyer's Knowledge, there is no basis for any such action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice to be filed
or to be commenced against any of them alleging any failure so to comply.
(h) Noncontravention. To the Buyer's Knowledge, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the Buyer
is subject or any provision of the charter or bylaws of the Buyer, or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any material agreement, contract, lease,
license, instrument or other arrangement to which the Buyer is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). To the Buyer's
Knowledge, and other than in connection with the Delaware General Corporation
Law, the Securities Exchange Act, the Securities Act, and the state securities
laws, the Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement, except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation or failure to give notice
would not have a material adverse effect on the ability of the Buyer to
consummate the transactions contemplated by this Agreement or have a material
adverse effect on the Buyer's business, operations, condition (financial or
otherwise), assets or Liabilities as in existence immediately prior to the
Closing.
(i) Tax Matters.
(i) The Buyer has filed all Tax Returns required to
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be filed by it. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by the Buyer (whether or not shown on
any Tax Return) have been paid. The Buyer currently is not the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where the Buyer does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction. There are no Security Interests on
any of the assets of the Buyer that arose in connection with any
failure (or alleged failure) to pay any Tax.
(ii) The Buyer has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) The Buyer does not expect any authority to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim, and to the Buyer's Knowledge
there is no basis for any such dispute or claim, concerning any Tax
Liability of the Buyer. ss.4(i) of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with
respect to the Buyer for taxable periods ended on or after December 31,
1995, indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit. The Buyer
has delivered to the Target correct and complete copies of all state,
local, and federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the Buyer
since December 31, 1995.
(iv) The Buyer has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(v) The unpaid Taxes of the Buyer (A) did not, as of
the Buyer's Most Recent Fiscal Year End, exceed the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) expected to be
set forth on the face of the Buyer's Most Recent Balance Sheet (rather
than in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance
with the past custom and practice of the Buyer in filing their Tax
Returns.
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(vi) The Buyer has not filed a consent under Code
ss.341(f) concerning collapsible corporations. The Buyer has not made
any payments, is not obligated to make any payments, nor is the Buyer a
party to any agreement that under certain circumstances would obligate
it to make any payments that will not be deductible under Code ss.280G.
The Buyer has not been a United States real property holding
corporation within the meaning of Code ss.897(c)(2) during the
applicable period specified in Code ss.897(c)(1)(A)(ii). The Buyer has
disclosed on its federal income Tax Returns all positions taken therein
that would give rise to a substantial understatement of federal income
Tax within the meaning of Code ss.6662. The Buyer is not a party to any
Tax allocation or sharing agreement. The Buyer (A) has not been a
member of an Affiliated Group filing a consolidated federal income Tax
Return (other than a group the common parent of which was the Buyer)
nor (B) does the Buyer have any Liability for the Taxes of any Person
(other than the Target) under Treas. Reg. ss.1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vii) ss.4(i) of the Disclosure Schedule sets forth
the following information with respect to the Buyer as of the most
recent practicable date (as well as on an estimated pro forma basis as
of the Closing giving effect to the consummation of the transactions
contemplated hereby): (A) the basis of the Buyer in its assets; (B) to
the extent applicable, the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax, or
excess charitable contribution allocable to the Buyer.
(j) Contracts. ss.4(j) of the Disclosure Schedule lists the
following contracts and other agreements to which the Buyer is a party, except
contracts and other agreements involving a potential acquisition of the capital
stock or assets of the Buyer, which by their terms are subject to a
non-disclosure covenant:
(i) any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing for
lease payments in excess of $25,000 per annum;
(ii) any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities, supplies,
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products, or other personal property, or for the furnishing or receipt
of services, the performance of which will extend over a period of more
than one year, result in a material loss to the Buyer, or involve
consideration in excess of $50,000 per year;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation,
in excess of $25,000 or under which it has imposed a Security Interest
on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
non-competition, except as hereinabove provided;
(vi) any agreement involving any of the Buyer
Management Stockholders and their Affiliates (other than the Target);
(vii) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or
other material plan or arrangement for the benefit of its current or
former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis not
cancelable on 30 days or less notice providing annual compensation in
excess of $25,000 or providing severance benefits;
(x) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xi) except as otherwise listed pursuant to this
ss.4(j), any agreement under which the consequences of a default or
termination could have a material adverse effect on the business,
financial condition, operations, results of operations of the Buyer,
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other than client or customer sales contracts entered into in the
Ordinary Course of Business of the Buyer;
(xii) any other agreement (or group of related
agreements) the performance of which involves annual consideration in
excess of $50,000.
The Buyer has delivered to the Target a correct and complete copy of each
written agreement listed in ss.4(j) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the material terms and conditions of
each oral agreement referred to in ss.4(j) of the Disclosure Schedule. With
respect to each such agreement, to the Buyer's Knowledge: (A) the agreement is
in full force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of the Buyer, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratoriums or other similar laws affecting the enforcement of
creditors' rights generally and the availability of equitable remedies
(regardless of whether enforceability is considered in a proceeding at law or
inequity); (C) no party is in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a material breach
or default, or permit termination, modification, or acceleration, under the
agreement.
(k) Litigation. ss.4(k) of the Disclosure Schedule sets forth
in each instance in which the Buyer (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party or, to
the Buyer's Knowledge, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. To the Buyer's Knowledge, there is no
basis for any present or future action, suit, proceeding, hearing and
investigation that could result in any material adverse change in the business,
condition (financial or otherwise), operations, assets or Liabilities of the
Buyer.
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(l) Product Warranty. Within the last 48 months, each product
sold, leased, or delivered by the Buyer has been in conformity with all express
and implied warranties of the Buyer, and the Buyer does not have any Liability
(and to the Buyer's Knowledge, there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability) for replacement or
repair thereof or other damages in connection therewith, subject only to the
reserve for product warranty claims set forth on the face of the Buyer's Most
Recent Balance Sheet to be adjusted for the passage of time up to and including
the Closing Date in accordance with the past custom and practice of the Buyer.
ss.4(m) of the Disclosure Schedule includes copies of the standard terms and
conditions of sale or lease for the Target (containing applicable guaranty,
warranty, and indemnity provisions).
(m) Continuity of Business Enterprise. It is the present
intention of the Buyer to continue at least one significant historic business
line of the Target, or to use at least a significant portion of the Target's
historic business assets in a business, in each case within the meaning of
Treas. Reg.
ss.1.368-1(d).
(n) Real Property.
(i) The Buyer does not own any real property:
(ii) ss.4(n)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to the Buyer.
The Buyer has delivered to the Target correct and complete copies of
the leases and subleases listed in ss.4(n)(ii) of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease
listed in ss.4(n)(ii) of the Disclosure Schedule,
(A) the lease or sublease is in full force
and effect and constitutes a legal, valid and binding
agreement of the Buyer, enforceable in accordance with its
terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratoriums
or other similar laws affecting the enforcement of creditors'
rights generally and the availability of equitable remedies
(regardless of whether enforceability is considered in a
proceeding at law or in equity);
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(B) the Buyer is not and to the Buyer's
Knowledge, no other party to the lease or sublease is in
material breach or default, and no event has occurred which,
with notice or lapse of time, would constitute a material
breach or default or permit termination, modification, or
acceleration thereunder;
(C) there are no oral agreements,
forebearance programs in effect or material disputes as to the
lease or sublease;
(D) the Buyer has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(E) (i) to the Buyer's Knowledge, the Buyer
is not in violation of any applicable laws or governmental
rules and regulations in regard to the use of the facilities
leased or subleased thereunder, and (ii) the Buyer has not
received any written notice from any governmental authority of
any such violation; and
(F) all facilities leased or subleased
thereunder are supplied with or have available utilities and
other services suitable for the operation of said facilities.
(o) Subsidiaries. The Transitory Subsidiary, when
incorporated, will be the only Subsidiary of the Buyer. ss.4(o) of the
Disclosure Schedule sets forth for the Transitory Subsidiary (i) its name and
expected jurisdiction of incorporation, (ii) the number of shares of authorized
capital stock of each class of its capital stock, (iii) the number of shares of
each class of its capital stock to be issued to the Buyer, and (v) the proposed
directors and officers of the Transitory Subsidiary. As of the Closing, the
Transitory Subsidiary will be a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
The Transitory Subsidiary will be duly authorized to conduct business and will
be in good standing under the laws of each jurisdiction where such qualification
is required. Prior to the Closing, the Transitory Subsidiary will not conduct
any business. At the time of the Closing, the Transitory Subsidiary will have
full corporate power and authority to ratify this Agreement and carry out the
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transactions contemplated herein. As of the Closing, all of the issued and
outstanding shares of capital stock of the Transitory Subsidiary will have been
duly authorized and will be validly issued, fully paid, and nonassessable. The
Buyer will hold of record and own beneficially all of the outstanding shares of
the Transitory Subsidiary, free and clear of any restrictions on transfer (other
than restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Buyer to sell,
transfer, or otherwise dispose of any capital stock of any of the Transitory
Subsidiary. There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Transitory Subsidiary.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of the Transitory Subsidiary. As of
the Closing, the minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Transitory Subsidiary will be correct and complete. As of the Closing, the
Transitory Subsidiary will not be in default under or in violation of any
provision of its charter or bylaws. As of the Closing, the Transitory Subsidiary
will not control directly or indirectly or have any direct or indirect equity
participation in any corporation, partnership, trust, or other business
association.
(u) Filings with the SEC. To the Buyer's Knowledge, the Buyer
has filed with the SEC all reports, registrations, and statements together with
any amendments thereto required to be made thereto, all of which as the
respective dates were in full compliance with the rules and regulations of the
SEC.
(v) Disclosure. None of the information that Buyer has
provided in connection with the representations and warranties provided for
herein contain or that the Buyer will supply specifically for use in the
Definitive Buyer Proxy Materials will contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they are or will be
made, not misleading.
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5. Covenants. The Parties agree as follows with respect to the period
from and after the execution of this Agreement.
(a) Notices and Consents. The Target and the Buyer will give
any notices to third parties, and will use its respective reasonable best
efforts to obtain any third party consents, that the Buyer or the Target
reasonably may request in connection with the matters referred to in ss.3(d) or
ss.4(h) above.
(b) Regulatory Matters and Approvals. Each of the Parties will
give any notices to, make any filings with, and use its reasonable best efforts
to obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in this
agreement.
(c) Listing of Buyer Shares. The Buyer will use its reasonable
best efforts to cause the Buyer Shares that will be issued in the Merger to be
approved for listing on the Nasdaq SmallCap Market, subject to official notice
of issuance, at or prior to the Effective Time.
(d) No Material Changes. Both parties agree that prior to the
Closing Date neither party will make or permit to be made any material change
affecting any bank, trust company, savings and loan association, brokerage firm,
or safe deposit box or in the names of the persons authorized to draw thereon,
to have access thereto or to authorize transactions therein or in any powers of
attorney, or open additional accounts or boxes or grant any additional powers of
attorney, without in each case obtaining the prior written consent of the other
party, such consent not be unreasonably withheld or delayed.
(e) Operation of Business. Neither party will engage in any
practice, take any action, or enter into any transaction, in any material
respect, outside the Ordinary Course of Business, without the prior written
consent of the other party. Without limiting the generality of the foregoing:
(i) Neither party will authorize or effect any change
in its charter or bylaws;
(ii) Neither party will grant any options, warrants,
or other rights to purchase or obtain any of its capital stock or
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issue, sell, or otherwise dispose of any of its capital stock (except
upon the conversion or exercise of options, warrants, and other rights
currently outstanding);
(iii) Neither party will declare, set aside, or pay
any dividend or distribution with respect to its capital stock (whether
in cash or in kind), or redeem, repurchase, or otherwise acquire any of
its capital stock, in either case outside the Ordinary Course of
Business;
(iv) Neither party will issue any note, bond, or
other debt security or create, incur, assume, or guarantee any
indebtedness for borrowed money or capitalized lease obligation outside
the Ordinary Course of Business;
(v) Neither party will impose any Security Interest
upon any of its assets outside the Ordinary Course of Business;
(vi) Neither party will make any capital investment
in, make any loan to, or acquire the securities or assets of any other
Person outside the Ordinary Course of Business;
(vii) Neither party will initiate any changes in
employment terms for any of its directors, officers, and employees
outside the Ordinary Course of Business; and
(viii) Neither party will commit to any of the
foregoing.
(f) Full Access. The Parties will permit representatives of
the other Party to have full access at all reasonable times, and in a manner so
as not to interfere with the normal business operations of the Parties, to all
premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to each of the Parties. The Parties
will treat and hold as such any Confidential Information they receive in the
course of the reviews contemplated by this ss.5(f), will not use any of the
Confidential Information except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, agree to return to the
respective Party all tangible embodiments (and all copies) thereof which are in
their respective possession.
(g) Notice of Developments. Each Party will give prompt
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written notice to the other of the occurrence of any event that would constitute
a breach of any of its own representations and warranties in ss.3 and ss.4
above. No disclosure by any Party pursuant to this ss.5(g), however, shall be
deemed to amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant, except as
otherwise provided in ss.3 above.
(h) Exclusivity. Neither party will solicit, initiate, or
encourage the submission of any proposal or offer, and will not entertain,
pursue, consider or accept any proposal or offer from any Person relating to the
acquisition of all or substantially all of its capital stock or assets
(including any acquisition structured as a merger, consolidation, or share
exchange). Each party shall notify the other party immediately if any Person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing and will provide the other party with a written copy of any such
proposal, offer, inquiry, or contact.
(i) Continuity of Business Enterprise. The Buyer will continue
at least one significant historic business line of the Target, or use or lease a
significant portion of the Target's historic business assets in a business, in
each case within the meaning of Treas. Reg. ss.1.368-1(d).
(j) Directorships. The Buyer will recommend to its
stockholders the Target Director Designees for nomination to positions as
directors of the Buyer at the next annual or special meeting of stockholders of
the Buyer. As the sole stockholder of Transitory Subsidiary, the Buyer shall
elect the Target Director Designees as directors of the Transitory Subsidiary.
The Buyer will also take all actions necessary to amend the Buyer's bylaws and
charter, if necessary or advisable, to provide for staggered terms of Board
members.
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(k) Ancillary Agreements. The Target shall provide each of its
stockholders that acquired common stock in the Target based upon the private
offering memorandum dated July 28, 1998 an opportunity to rescind and shall not
draw upon any subcription payments until such time as the investors have
declined the opportunity to exercise his hers or its rescission rights after a
reasonable period of time (the "Rescission Offer). The Rescission Offer shall be
in compliance with any and all applicable state and federal laws including "blue
sky laws." No Buyer Shareholder approval shall be effective until such time as
the Rescission Offer has been completed. The Rescission Offer must include
disclosure on the risks of the Merger including the lack of liquidity of the
Buyer Shares and the possibility that the Buyer Stockholders may have to pay
taxes in connection with the Merger.
(l) Target Employees. The Buyer shall cause the Transitory
Subsidiary to (i) continue to employ each person employed by Target on the
Closing Date on at least an "employment-at-will" basis as of the first business
day after the Closing Date, (ii) provide such benefits and salary to such person
comparable to the benefits and salary previously provided or paid by Target as
of the Closing Date, and (iii) grant to each such person credit for his/her
years of service with the Target for purposes of calculating such person's right
to participate in applicable benefit plans and programs and the level of such
participation.
(m) Notification of Changes in Representations and Warranties.
The Parties will notify each other of any material changes in the
representations and warranties provided in ss.3 and ss.4 hereof as soon as
reasonably practicable after the respective Party first discovers such changed
circumstances.
(n) Estoppel Certificates. The Target shall use its reasonable
best efforts to obtain Estoppel Certificates (the "Estoppel Certificates") in
the form attached hereto as Exhibit G.
(o) Rights Offering. The Board of Directors of the Buyer shall
authorize a rights offering to their current stockholders that will provide the
issuance of one right for each share of Buyer's Common Stock outstanding or
issuable upon exercise of currently outstanding options or warrants (the
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"Rights"). The Rights will enable each current stockholder to purchase one new
share of the Buyer's Common Stock for $0.50. The Target Stockholders shall agree
to waive their right to participate in this Rights offering. The Rights offering
shall be open and exercisable for a period twenty four months from the
commencement date of such Rights offering. The Rights are not transferrable
except to the immediate family or a trust set up for the benefit of such
stockholder.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of
the Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) this Agreement, the Merger Agreement and the
Merger shall have received the Requisite Buyer Stockholder Approval;
(ii) the Target shall have procured all of the third
party consents specified in ss.5(a) above;
(iii) each representation and warranty set forth in
ss.3 above shall be true and correct in all material respects at and as
of the Closing Date, subject to any amendments thereto as permitted
under ss.3 above;
(iv) the Target shall have fully performed and
complied with all of its covenants contained in ss.5 hereunder through
the Closing;
(v) no action, suit, or proceeding shall be pending
or threatened before any court or quasijudicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before
any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge could (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) materially and adversely affect the right of the
Surviving Corporation to own the former assets and to operate the
former businesses of the Target, and (D) and no such injunction,
judgement, order, decree, ruling or charge shall be in effect;
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(vi) the Target shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above
in ss.6(a)(i)-(v) is satisfied;
(vii) this Agreement, the Merger Agreement and the
Merger shall have received the Requisite Target Stockholder Approval;
(viii) the Buyer Shares that will be issued in the
Merger shall have been approved for listing on the Nasdaq SmallCap
Market, subject to official notice of issuance;
(ix) the Parties shall have received all
authorizations, consents, and approvals of governments and governmental
agencies referred to in ss.3(d) and ss.4(h) above;
(x) the Buyer shall have received from counsel to the
Target an opinion in form and substance as set forth in Exhibit H
attached hereto, addressed to the Buyer, and dated as of the Closing
Date;
(xi) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the
Target;
(xii) the Buyer shall have completed its due
diligence and all outstanding issues relating thereto shall have been
satisfactorily resolved to the satisfaction of the Parties;
(xiii) the Buyer shall be satisfied that the Target's
offering of Target Shares (A) did not violate any state, federal or
international securities laws; (B) that the Buyer's Stockholders were
fully informed of the potential tax consequence of an investment in the
Target; and (C) that the Target will not be subject to any new
regulations;
(xiv) the Target shall have delivered the Estoppel
Certificates executed by the lessors of the properties listed in
Schedule 3(l)(ii) of the Target's Disclosure Schedule;
(xv) the Target shall have canceled all outstanding
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or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments
that could require the Target to issue, sell, or otherwise cause to
become outstanding any of its capital stock;
(xvi) all actions to be taken by the Target in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Buyer;
(xvii) from the date hereof through the Effective
Time, there shall have been no material adverse change (or developments
involving a prospective material adverse change) in the business,
condition (financial or otherwise), operations, properties, or
prospects of the Target; and
(xviii) the Target Stockholders shall have waived
their right to participate in the Rights offering.
The Buyer may waive any condition specified in this ss.6(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Target. The obligation of
the Target to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) this Agreement, the Merger Agreement and the
Merger shall have received the Requisite Buyer Stockholder Approval and
the Buyer's Approval as the sole stockholder of the Transitory
Subsidiary;
(ii) the Buyer Shares that will be issued in the
Merger shall have been approved for listing on the Nasdaq SmallCap
Market, subject to official notice of issuance;
(iii) each representation and warranty set forth in
ss.4 above shall be true and correct in all material respects at and as
of the Closing Date;
(iv) the Buyer shall have performed and complied with
all of its covenants hereunder through the Closing;
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(v) no action, suit, or proceeding shall be pending
or threatened before any court or quasijudicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before
any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge could (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) materially and adversely affect the right of the
Surviving Corporation to own the former assets and to operate the
former businesses of the Target; and (D) no such injunction, judgement,
order, decree, ruling or charge shall be in effect;
(vi) the Buyer shall have delivered to the Target a
certificate to the effect that each of the conditions specified above
in ss.6(b)(i)-(v) and ss.6(b)(vii)-(ix) below, is satisfied;
(vii) this Agreement, the Merger Agreement and the
Merger shall have received the Requisite Target Stockholder Approval;
(viii) the Target Director Designees shall be elected
directors of the Buyer, contingent only upon the Closing;
(ix) the Parties shall have received all
authorizations, consents, and approvals of governments and governmental
agencies referred to in ss.3(d) and ss.4(h) above;
(x) the Target Director Designees shall be elected
directors of the Transitory Subsidiary;
(xi) both parties shall have completed their due
diligence and all outstanding issues relating thereto shall have been
resolved to the satisfaction of the Parties;
(xii) the Buyer shall have procured all of the third
party consents specified in ss.5(a) above;
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(xiii) all actions to be taken by the Buyer in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Target; and
(xiv) from the date hereof through the Effective
Time, there shall have been no material adverse change (or developments
involving a prospective material adverse change) in the business,
condition (financial or otherwise), operations, properties, or
prospects of the Buyer.
The Target may waive any condition specified in this ss.6(b) if it executes a
writing so stating at or prior to the Closing.
7. Termination
(a) Termination of Agreement Either the Buyer or the Target
may terminate this Agreement with the prior authorization of its board of
directors (whether before or after stockholder approval) as provided below:
(i) the Buyer and the Target may terminate this
Agreement by mutual written consent at any time prior to the Effective
Time;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Target at any time prior to the Effective Time
(A) in the event the Target has breached any representation, warranty,
or covenant contained in this Agreement in any material respect, the
Buyer has notified the Target of this breach, in writing, and the
breach has continued without cure for a period of five (5) business
days after the written notice of breach or (B) if the Closing shall not
have occurred on or before December 30, 1998, by reason of the failure
of any condition precedent under ss.6(a) hereof that cannot be
satisfied through the exercise of reasonable best efforts within five
(5) business days following December 30, 1998 (unless the failure
results primarily from the Buyer breaching any representation,
warranty, or covenant contained in this Agreement);
(iii) the Target may terminate this Agreement by
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giving written notice to the Buyer at any time prior to the Effective
Time (A) in the event the Buyer has breached any representation,
warranty, or covenant contained in this Agreement in any material
respect, the Target has notified the Buyer of the breach, in writing,
and the breach has continued without cure for a period of five (5)
business days after the written notice of breach or (B) if the Closing
shall not have occurred on or before December 30, 1998, by reason of
the failure of any condition precedent under ss.6(b) hereof that cannot
be satisfied through the exercise of reasonable best efforts within
five (5) business days following December 30, 1998 (unless the failure
results primarily from the Target breaching any representation,
warranty, or covenant contained in this Agreement);
(iv) any Party may terminate this Agreement by giving
written notice to the other Party at any time in the event this
Agreement and the Merger fail to receive the Requisite Buyer
Stockholder Approval or the Requisite Target Stockholder Approval,
respectively; and
(b) Effect of Termination If any Party terminates this
Agreement pursuant to ss.7(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in ss.5(f) above and the
Confidentiality and the Non-Disclosure Agreement referenced therein shall
survive any such termination; provided further, however, that any such
termination will have no effect on amounts that the Target currently owes or may
owe in the future to the Buyer. Anything herein to the contrary notwithstanding,
termination of this Agreement pursuant to ss.7(a) above shall be the sole and
exclusive remedy for the breach of any representation or warranty by a Party
under ss.3 or ss.4 above.
8. Miscellaneous.
(a) Survival None of the representations, warranties, and
covenants of the Parties (other than the provisions in ss.2 above concerning
issuance of the Buyer Shares), the provisions of ss.5(i) above concerning
continuity of business enterprise, the provisions of ss.5(j) above concerning
the respective employment agreements, the provisions of ss.5(k) above concerning
the Target Designee Directors, the provisions of ss.5(s) above concerning the
Conversion Options, and the provisions of ss.5(t) above concerning registration
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of the Conversion Options) will survive the Effective Time. This ss.8(a) is not
intended to limit, expand, or otherwise affect the rights, remedies, or
obligations that the Buyer, the Target, or any other Person may have pursuant to
other written agreements referred to in this Agreement or otherwise.
(b) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other Party;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its reasonable efforts to advise the other Party prior to making the
disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns. This ss.8(c) is not intended to
limit, expand, or otherwise affect the rights, remedies, or obligations that the
Buyer, the Target, or any other Person may have pursuant to other written
agreements referred to in this Agreement or otherwise.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof.
(e) Succession and Assignmen. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party.
(f) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Target:
Michael J. Zwebner
Videocall International, Inc.
1 Canal Park
Cambridge, MA 02142
Copy to:
Alexander Walker, Jr.
57 West 200 South
Suite 400
Salt Lake City, UT 84101
If to the Buyer:
C. Robert Kline, Ph.D.
Legacy Software, Inc.
5340 Alla Road
Los Angeles, CA 90066
Copy to:
V. Joseph Stubbs, Esq.
Troop Steuber Pasich Reddick & Tobey, LLP.
2029 Century Park East, 24th Floor
Los Angeles, CA 90067
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
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given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with applicable federal laws and the domestic laws of
the State of Delaware without giving effect to any choice or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
(j) Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; provided, however,
that any amendment effected subsequent to stockholder approval will be subject
to the applicable restrictions contained in the Delaware General Corporation Law
and in the Florida General Corporation Law. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
both of the Parties. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(l) Expenses. Except as herein provided, each of the Parties
will bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement. However, the Buyer will pay at the
Closing (i) the fees of Troop Steuber Pasich Reddick & Tobey, LLP.
(m) Construction. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
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regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) Venue; Jurisdiction. All actions with respect to this
Agreement will be instituted in a state court sitting in Wilmington, Delaware or
in a federal court in the State of Delaware, subject to the provisions on
arbitration in ss.8(p) below. By the execution of this Agreement, each Party
irrevocably and unconditionally submits to the jurisdiction (both subject matter
and personal) of each such court and irrevocably and unconditionally waives: (a)
any objection such Party might now or hereafter have to the venue in any such
court; and (b) any claim that any action or proceeding brought in any such court
has been brought in an inconvenient forum.
(p) Arbitration. Any disputes arising out of this Agreement
and the transactions among the Parties contemplated by this Agreement shall be
settled by binding arbitration to be held in Wilmington, Delaware in accordance
with the rules of the American Arbitration Association. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction. The
statute of limitations, estoppel, waiver, laches, and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an arbitration
proceeding shall be deemed the commencement of an action for these purposes.
This ss.8(p) is not intended to limit, expand, or otherwise affect the rights,
remedies, or obligations that the Buyer, the Target, or any other Person may
have pursuant to other written agreements referred to in this Agreement or
otherwise.
(q) Attorneys' Fees. Each Party agrees that the losing party
in any suit or action shall reimburse the prevailing party for its reasonable
costs, expenses, and attorney's fees incurred in any action brought to determine
the rights of the Parties hereunder.
IN WITNESS WHEREOF, the Parties hereto have executed
this Agreement as of the date first above written.
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Legacy Software, Inc.
By: William Sliney
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Title: Vice President/CFO
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Legacy Software Acquisition, Inc.
By:
- ------------------
Title:
- -------------------------
Videocall International Corporation
By: Michael Zwebner
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Title: Chairman
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