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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
CYBERIAN OUTPOST, INC.
SYDNEY ACQUISITION SUB, INC.
CMPEXPRESS.COM, INC. AND
THE STOCKHOLDERS IDENTIFIED ON SCHEDULE I HERETO
DATED AS OF SEPTEMBER 6, 2000
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TABLE OF CONTENTS
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Article I GENERAL.................................................................................. 1
1.1 The Merger................................................................................. 1
1.2 The Effective Time of the Merger........................................................... 2
1.3 Effect of Merger........................................................................... 2
1.4 Charter and By-Laws of Surviving Corporation............................................... 2
1.5 Taking of Necessary Action................................................................. 2
1.6 Tax-Free Reorganization.................................................................... 2
1.7 Closing.................................................................................... 2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES...................................................................................... 3
2.1 Total Consideration; Effect on Capital Stock............................................... 3
2.2 Escrow Deposit; Exchange of Certificates................................................... 5
2.3 Conversion of the Company Employee Options; Other Securities............................... 7
2.4 Authorization of the Merger, this Agreement, the General Indemnity Escrow Agreement,
the Specific Indemnity Escrow Agreement, the Indemnity Escrow Agent, and the
Stockholders' Committee.................................................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES......................................................... 8
3.1 Representations and Warranties of the Company.............................................. 8
3.2 Several Representations and Warranties of the Stockholders................................. 27
3.3 Representations and Warranties of Parent and Acquisition Sub............................... 30
ARTICLE IV RELATED AGREEMENTS...................................................................... 32
4.1 Related Agreements......................................................................... 32
ARTICLE V CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS................. 34
5.1 Access to Records and Properties of Each Party; Confidentiality............................ 34
5.2 Operation of Business of the Company....................................................... 34
5.3 Negotiation With Others.................................................................... 34
5.4 Dissenting Stockholders.................................................................... 35
5.5 Preparation of Filings..................................................................... 35
5.6 Advice of Changes.......................................................................... 35
5.7 Stockholder Approval....................................................................... 36
5.8 Legal Conditions to Merger................................................................. 36
5.9 Efforts to Consummate...................................................................... 36
5.10 Notice of Prospective Breach............................................................... 37
5.11 Public Announcements....................................................................... 37
5.12 Support of Merger by Officers and Directors................................................ 37
5.13 Management and Employees................................................................... 37
5.14 Financial Statements....................................................................... 37
5.15 Guarantees................................................................................. 37
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ARTICLE VI CONDITIONS PRECEDENT.................................................................... 38
6.1 Conditions to Each Party's Obligations..................................................... 38
6.2 Conditions to Obligations of Parent and Acquisition Sub.................................... 38
6.3 Conditions to Obligations of the Company................................................... 40
ARTICLE VII ADDITIONAL AGREEMENTS.................................................................. 41
7.1 Certain Information Required by the Code................................................... 41
7.2 Restriction on Transfer.................................................................... 41
7.3 Confidentiality............................................................................ 42
7.4 Registration Rights........................................................................ 43
7.5 Collection by Parent....................................................................... 43
7.6 Directors and Officers Insurance........................................................... 43
7.7 Fee to Janney Montogomery Scott LLC........................................................ 44
7.8 Manufacturer Consents...................................................................... 44
ARTICLE VIII INDEMNIFICATION....................................................................... 44
8.1 Definitions................................................................................ 44
8.2 Indemnification Generally.................................................................. 45
8.3 Assertion of Claims........................................................................ 46
8.4 Notice and Defense of Third Party Claims................................................... 46
8.5 Survival of Representations and Warranties................................................. 47
8.6 Stockholders' Committee.................................................................... 47
ARTICLE IX TERMINATION; AMENDMENT, MODIFICATION AND WAIVER......................................... 48
9.1 Termination................................................................................ 48
9.2 Effect of Termination...................................................................... 48
9.3 Specific Performance....................................................................... 49
ARTICLE X MISCELLANEOUS............................................................................ 49
10.1 Expenses................................................................................... 49
10.2 Entire Agreement........................................................................... 49
10.3 Descriptive Headings....................................................................... 49
10.4 Notices.................................................................................... 50
10.5 Counterparts............................................................................... 51
10.6 Governing Law.............................................................................. 51
10.7 Benefits of Agreement...................................................................... 51
10.8 Pronouns................................................................................... 51
10.9 Amendment, Modification and Waiver......................................................... 51
10.10 No Third Party Beneficiaries............................................................... 51
10.11 Consents................................................................................... 52
10.12 Interpretation............................................................................. 52
10.13 No Joint Venture........................................................................... 52
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AGREEMENT AND PLAN OF REORGANIZATION dated as of September 6, 2000, among
CYBERIAN OUTPOST, INC., a Delaware corporation ("Parent"), SYDNEY ACQUISITION
SUB, INC., a Delaware corporation and wholly-owned subsidiary of Parent
("Acquisition Sub"), CMPEXPRESS.COM, INC., a Pennsylvania corporation (the
"Company") and the stockholders of the Company identified on Schedule I attached
hereto (collectively, the "Stockholders").
WHEREAS, the Boards of Directors of each of the Parent, Acquisition Sub and
the Company have determined that it is in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein.
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
each of the Parent, Acquisition Sub and the Company have duly approved and
adopted this Agreement and Plan of Reorganization (this "Agreement") and the
proposed merger of Acquisition Sub with and into the Company in accordance with
this Agreement, the Delaware General Corporation Law (the "Delaware Statute")
and the Pennsylvania Business Corporation Law (the "Pennsylvania Statute"),
whereby, among other things, the issued and outstanding shares of (i) Common
Stock, no par value, of the Company (the "Common Stock") and (ii) Series A
Convertible Preferred Stock, $1.00 par value per share, of the Company (the
"Series A Stock" or the "Preferred Stock" and together with the Common Stock,
the "Company Stock" (other than shares held by Dissenting Stockholders (as
defined herein)) will be exchanged and converted into shares of common stock,
$.01 par value, of Parent (the "Parent Common Stock") in the manner set forth in
Article II hereof, upon the terms and subject to the conditions set forth in
this Agreement.
WHEREAS, as a condition to the willingness of, and as an inducement to,
Parent and Acquisition Sub to enter into this Agreement, contemporaneously with
the execution and delivery of this Agreement, the Company, certain stockholders
of the Company and certain other parties are entering into the Related
Agreements.
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a tax-free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual benefits to be derived from
this Agreement and the representations, warranties, covenants, agreements,
conditions and promises contained herein and therein, the parties hereby agree
as follows:
ARTICLE I
GENERAL
1.1 THE MERGER. In accordance with the provisions of this Agreement, the
Delaware Statute and the Pennsylvania Statute, Acquisition Sub shall be merged
with and into the Company (the "Merger"), which at and after the Effective Time
shall be, and is sometimes herein referred to as, the "Surviving Corporation."
Acquisition Sub and the Company are sometimes referred to as the "Constituent
Corporations."
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1.2 THE EFFECTIVE TIME OF THE MERGER. This Agreement shall be executed by
each of the Constituent Corporations and delivered to and filed (or in the
alternative, a certificate or articles of merger may be filed in lieu thereof)
with (i) the Secretary of State of the State of Delaware on the Closing Date (as
defined below) in the manner provided under Section 252 of the Delaware Statute
and (ii) the Secretary of State of the Commonwealth of Pennsylvania in the
manner provided under Section 1927 of the Pennsylvania Statute. The Merger shall
become effective (the "Effective Time") upon the later of (i) the time of
confirmation by the Secretary of State of the State of Delaware of the filing of
this Agreement or a certificate of merger or (ii) the time of confirmation by
the Pennsylvania Corporation Bureau of the filing of this Agreement or articles
of merger.
1.3 EFFECT OF MERGER. At the Effective Time the separate existence of
Acquisition Sub shall cease and Acquisition Sub shall be merged with and into
the Corporation, and the Surviving Corporation shall succeed, without other
transfer, to all rights and property of each of the Constituent Corporations and
shall be subject to all the debts and liabilities of the Constituent
Corporations in the same manner as if the Surviving Corporation had itself
incurred them, and be subject to all the restrictions, disabilities and duties
of each of the Constituent Corporations as provided in (i) Section 252 of the
Delaware Statute and (ii) Section 1929 of the Pennsylvania Statute.
1.4 CHARTER AND BY-LAWS OF SURVIVING CORPORATION. From and after the
Effective Time, (i) the Charter of the Surviving Corporation shall be amended
and restated in the form of the Charter of Acquisition Sub, unless and until
altered, amended or repealed as provided in the Pennsylvania Statute, (ii) the
by-laws of Acquisition Sub shall be the by-laws of the Surviving Corporation,
unless and until altered, amended or repealed as provided in the Pennsylvania
Statute, the Charter or such by-laws, (iii) the directors of Acquisition Sub
shall be the directors of the Surviving Corporation, unless and until removed,
or until their respective terms of office shall have expired, in accordance with
the Pennsylvania Statute, the Charter and the by-laws of the Surviving
Corporation, as applicable and (iv) the officers of Acquisition Sub shall be the
officers of the Surviving Corporation, unless and until removed, or until their
terms of office shall have expired, in accordance with the Pennsylvania Statute,
the Charter and the by-laws of the Surviving Corporation, as applicable.
1.5 TAKING OF NECESSARY ACTION. Prior to the Effective Time, the parties
hereto shall do or cause to be done all such acts and things as may be necessary
or appropriate in order to effectuate the Merger as expeditiously as reasonably
practicable, in accordance with this Agreement, the Delaware Statute and the
Pennsylvania Statute.
1.6 TAX-FREE REORGANIZATION. For Federal income tax purposes, the parties
intend that the Merger be treated as a tax-free reorganization within the
meaning of Section 368(a) of the Code. Except for cash paid in lieu of
fractional shares, no consideration that could constitute "other property"
within the meaning of Section 356 of the Code is being transferred by Parent for
the Company Stock in the Merger. The parties shall not take a position on any
tax return or take any action inconsistent with this Section 1.6 unless
otherwise required by a taxing authority.
1.7 CLOSING. Unless this Agreement shall have been terminated and the
transactions contemplated by this Agreement abandoned pursuant to the provisions
of Article IX, and subject
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to the provisions of Article V, the closing of the Merger (the "Closing") will
take place at 10:00 a.m. (Eastern time) on a date (the "Closing Date") to be
mutually agreed upon by the parties, which date shall be not later than the
third Business Day after all the conditions set forth in Article VI shall have
been satisfied (or waived in accordance with Section 10.9, to the extent the
same may be waived), unless another date is agreed to in writing by the parties.
The Closing shall take place at the offices of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C. 666 Third Avenue, New York, New York, unless another
place is agreed to in writing by the parties. As used herein, the term "Business
Day" shall mean any day other than a Saturday, Sunday or day on which banks are
permitted to close in the City and State of New York.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
2.1 TOTAL CONSIDERATION; EFFECT ON CAPITAL STOCK. The entire consideration
(the "Aggregate Consideration") payable by Parent with respect to all
outstanding shares of capital stock of the Company (the "Outstanding Shares")
and for all options (whether vested or unvested), warrants, rights, calls,
commitments or agreements of any character to which the Company is a party or by
which it is bound calling for the issuance of shares of capital stock of the
Company or any securities convertible into or exercisable or exchangeable for,
or representing the right to purchase or otherwise receive, directly or
indirectly, any such capital stock, or other arrangement to acquire, at any time
or under any circumstance, capital stock of the Company or any such other
securities (the "Convertible Securities") shall be an aggregate of the number of
shares of Parent Common Stock (subject to adjustment as hereinafter provided in
this Section 2.1) (the "Total Parent Share Amount") as is obtained by dividing
(A) the sum of $11,820,000 and $3,600 (representing the aggregate exercise
amount of all Company Options with an exercise price greater than the fair
market value of a share of Company Common Stock) by (B) the average closing
price of a share of Parent Common Stock on The Nasdaq Stock Market as reported
in the Wall Street Journal for the twenty (20) most recent trading days ending
on the day immediately preceding the Closing Date (the "Stipulated Price");
provided, however, that if the average closing price of a share of Parent Common
Stock shall be less than $3.00, the average closing price shall be deemed to be
$3.00 for purposes of the calculation of the Stipulated Price.
For purposes of the calculation of the exchange ratios for Company Stock
under Section 2.1(c) hereof, it is assumed that the number of Fully Diluted
Company Shares is 14,931,178 shares of capital stock of the Company, which
number excludes all Company Options which have an exercise price greater than
the fair market value of a share of Company Common Stock, and which number shall
be confirmed or updated at the Closing and reflected in the certificate of the
Chief Executive Officer or Chief Financial Officer of the Company that is being
provided to Parent and Acquisition Sub pursuant to Section 6.2(a) (the "Fully
Diluted Company Share Amount"). At the Effective Time, subject and pursuant to
the terms and conditions of this Agreement by virtue of the Merger and without
any action on the part of the Constituent Corporations or the holders of the
capital stock of the Constituent Corporations:
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(a) CAPITAL STOCK OF ACQUISITION SUB. Each issued and outstanding share
of common stock, $.01 par value per share, of Acquisition Sub shall be converted
into one share of common stock, no par value per share, of the Surviving
Corporation.
(b) CANCELLATION OF CERTAIN SHARES OF COMPANY STOCK. Each share of
Company Stock that is (A) owned by the Company as treasury stock, (B) authorized
but unissued, (C) owned by any subsidiary of the Company or (D) owned by Parent
or any subsidiary of Parent, shall be canceled and no Parent Common Stock or
other consideration shall be delivered in exchange therefor. As used herein, a
corporation is a "subsidiary" of any corporation if the parent corporation owns
directly or indirectly an amount of voting securities of the other corporation
sufficient to elect at least a majority of its Board of Directors.
(c) CONVERSION AND EXCHANGE RATIOS FOR COMPANY STOCK. Subject to Section
2.2, (A) each share of Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares canceled pursuant to Section 2.1(b) and
shares held by Dissenting Stockholders, if any) shall be converted into a number
of shares of Parent Common Stock equal to the Common Exchange Ratio and (B) each
share of Series A Stock issued and outstanding immediately prior to the
Effective Time (other than shares canceled pursuant to Section 2.1(b) and shares
held by Dissenting Stockholders, if any) shall be converted into a number of
shares of Parent Common Stock equal to the Series A Exchange Ratio.
(i) "Common Exchange Ratio" means the quotient obtained by dividing
(x) the amount by which the Total Parent Share Amount exceeds the
Liquidation Preference Shares by (y) the Fully Diluted Company Share
Amount;
(ii) "Liquidation Preference Amount" means the number of shares of the
Series A Stock outstanding as of the Effective Time multiplied by $1.00.
(iii) "Liquidation Preference Shares" means the quotient obtained by
dividing (i) the Liquidation Preference Amount by (ii) the Stipulated
Price;
(iv) "Series A Exchange Ratio" means the sum of (A) the product of (i)
the number of shares of Common Stock that are issuable upon the conversion
of a share of Series A Stock and (ii) the Common Exchange Ratio, and (B)
the quotient obtained by dividing (i) $1.00 by (ii) the Stipulated Price.
As of the Effective Time, all shares of Common Stock and Series A Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereof, except the right to
receive Parent Common Stock and any cash in lieu of fractional shares of Parent
Common Stock to be issued or paid in consideration therefore upon surrender of
such certificate in accordance with Section 2.2 hereof.
All calculations pursuant to this Agreement shall be rounded to the nearest
one-billionth (.000000001). The shares of Parent Common Stock to be issued upon
the exchange and conversion of Company Stock in accordance with this Section
2.1(c) shall sometimes be hereinafter collectively referred to as the "Merger
Shares."
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(d) SHARES OF DISSENTING STOCKHOLDERS.
(i) If provided for under the Pennsylvania Statute, notwithstanding
any other provision of this Agreement to the contrary, shares of Company
Stock that are outstanding immediately prior to the Effective Time and
which are held by stockholders (each, a "Dissenting Stockholder") who shall
not have voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for such shares in
accordance with the Pennsylvania Statute 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 Parent Common Stock. Such stockholders shall be entitled to receive
payment of the appraised value of such shares of Company Stock held by them
in accordance with the provisions of the Pennsylvania Statute, except that
all Dissenting Shares held by stockholders who shall have failed to perfect
or who effectively shall have withdrawn or lost their rights to appraisal
of such shares of Company Stock under the Pennsylvania Statute shall
thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without
any interest thereon, the Parent Common Stock, upon surrender, in the
manner provided in Section 2.1(c), of the certificate or certificates that
formerly evidenced such shares of Company Stock.
(ii) Company shall give Parent (A) prompt notice of any demands for
appraisal received by Company, withdrawals of such demands, and any other
instruments served pursuant to the Pennsylvania Statute and received by
Company and (B) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the Pennsylvania Statute.
Company shall not, except with the prior written consent of Parent, make
any payment with respect to any demands for appraisal, or offer to settle,
or settle, any such demands.
(e) ADJUSTMENTS FOR CAPITAL CHANGES. If, prior to the Effective Time,
Parent or the Company recapitalizes through a subdivision of its outstanding
shares into a greater number of shares, or a combination of its outstanding
shares into a lesser number of shares, or reorganizes, reclassifies or otherwise
changes its outstanding shares into the same or a different number of shares or
other classes, or declares a dividend on its outstanding shares payable in
shares of its capital stock or securities convertible into shares of its capital
stock, then the Exchange Ratios will be adjusted appropriately so as to maintain
the relative proportionate interests of the holders of shares of Company Stock
and the holders of shares of Parent Common Stock.
2.2 ESCROW DEPOSIT; EXCHANGE OF CERTIFICATES.
(a) GENERAL AND SPECIFIC INDEMNITY ESCROW AGREEMENTS. Reference is made
to the escrow agreements to be dated as of the Effective Date among the
Stockholders' Committee, Parent and State Street Bank and Trust Company (the
"Indemnity Escrow Agent") in the forms of (1) EXHIBIT B-1 hereto (the "General
Indemnity Escrow Agreement"), pursuant to which, among other things, the
Stockholders shall secure the indemnification obligations of the Indemnifying
Persons pursuant to Section 8.2(a) hereof and (2) EXHIBIT B-2 hereto (the
"Specific Indemnity Escrow Agreement"), pursuant to which the Stockholders shall
secure liabilities related to or arising from the case of MicroWarehouse, Inc.
v. CMPExpress.com, Inc.
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(Docket Number OCN-C-210-999 in the Superior Court of New Jersey, Ocean County)
and any additional litigation or liabilities involving MicroWarehouse, Inc. or
its former employees (the "MicroWarehouse Litigation"), pursuant to Section
8.2(b) hereof
(b) DELIVERY OF PARENT COMMON STOCK. As soon as practicable after the
Effective Time, Parent shall instruct its transfer agent, American Stock
Transfer & Trust Co. or its successor, to deliver a certificate for eight-five
(85%) of the Merger Shares issuable to each Stockholder of the Company pursuant
to Section 2.1 and a check for any fractional share amount associated with such
Merger Shares calculated according to Section 2.2(c) below to each such
Stockholder in exchange for such Stockholder's outstanding shares of Company
Stock, provided Parent has received such Stockholder's certificate for Company
Stock prior to such time. As soon as practicable after the Effective Time,
Parent shall cause to be delivered to the Indemnity Escrow Agent, to be held in
the name of the Indemnity Escrow Agent as nominee, (1) ten percent (10%) of the
Merger Shares issuable to each Stockholder of the Company pursuant to Section
2.1 in exchange for outstanding shares of Company Stock (collectively, the
"General Indemnity Escrow Shares") along with cash for fractional shares
associated with the General Indemnity Escrow Shares calculated according to
Section 2.2(c) below and (2) five percent (5%) of the Merger Shares issuable to
each Stockholder of the Company pursuant to Section 2.1 in exchange for
outstanding shares of Company Stock (collectively, the "Specific Indemnity
Escrow Shares") along with cash for fractional shares associated with the
Specific Indemnity Escrow Shares calculated according to Section 2.2(c) below.
Both the General Indemnity Escrow Shares and the Specific Indemnity Escrow
Shares may collectively be referred to as the "Indemnity Escrow Shares." The
Stockholders of the Company, by their execution and delivery of this Agreement
and/or their approval of the Merger, hereby authorize and direct Parent to make
such deposit of the General Indemnity Escrow Shares and the Specific Indemnity
Escrow Shares with the Indemnity Escrow Agent on their behalf. All calculations
to determine the number of Merger Shares to be delivered to the Stockholders and
Indemnity Escrow Agent as aforesaid shall be rounded to the nearest whole share.
All Indemnity Escrow Shares shall be held by, and distributed in accordance
with, the terms and provisions of the General Indemnity Escrow Agreement and the
Specific Indemnity Escrow Agreement, as applicable.
(c) FRACTIONAL SHARES. No fractional shares of Parent Common Stock shall
be issued in connection with the Merger, but in lieu thereof each holder of
Company Stock who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock will receive from Parent, at such time as such holder has
the right to receive a certificate representing Merger Shares as contemplated by
Section 2.2(b) (but for the escrow requirements of Section 2.2(a) and Section
2.2(b) hereof), an amount of cash (without interest), rounded to the nearest
cent, equal to (i) the Stipulated Price multiplied by (ii) the fraction of a
share of Parent Common Stock otherwise issuable to such holder. The fractional
interests of each Stockholder of the Company will be aggregated so that no
Stockholder of the Company will receive cash in an amount equal to or greater
than the Stipulated Price.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. All Merger Shares
issued upon the surrender for exchange of shares of Company Stock in accordance
with the terms of this Article II shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Stock. If, after
the Effective Time, any Company certificate is presented to the Surviving
Corporation, Parent shall instruct its transfer agent to deliver to such
Stockholder a
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certificate representing the number of shares of Parent Common Stock such holder
is entitled to receive pursuant to Section 2.1 above (subject to the escrow
requirements of Section 2.2) together with a check for any fractional share
amount associated with such Merger Shares.
(e) NO LIABILITY. Neither Parent, Acquisition Sub nor the Company shall
be liable to any holder of shares of Company Stock or Parent Common Stock, as
the case may be, for Merger Shares (or dividends or distributions with respect
thereto) to be issued in exchange for Company Stock pursuant to this Section
2.2, if, on or after the expiration of six months following the Effective Date,
such shares are delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) LOST, STOLEN OR DESTROYED COMPANY CERTIFICATES. In the event any
Company certificate shall have been lost, stolen or destroyed, upon the making
of an affidavit to that effect by the person claiming such Company certificate
to be lost, stolen or destroyed and, if required by Parent, the posting by such
person of a bond in such amount as Parent may reasonably direct as indemnity
against any claim that may be made against it with respect to such Company
certificate, Parent will issue in exchange for such lost, stolen or destroyed
Company certificate the Merger Shares and cash in lieu of fractional shares
deliverable in respect thereof pursuant to this Agreement.
2.3 CONVERSION OF THE COMPANY EMPLOYEE OPTIONS; OTHER SECURITIES. At the
Effective Time, each of the Company's then outstanding employee stock options
(collectively the "Company Options") which have not been terminated, exercised
or otherwise converted as of the Effective Time, by virtue of the Merger and
without any further action on the part of any holder thereof, shall be assumed
by Parent and automatically converted into an option to purchase a number of
shares of Parent Common Stock determined by multiplying the number of shares of
Company Stock covered by such Company Option immediately prior to the Effective
Time by the Common Exchange Ratio (rounded down to the nearest whole number of
shares), at an exercise price per share of Parent Common Stock equal to the
exercise price in effect under such Company Option immediately prior to the
Effective Time divided by the Common Exchange Ratio (rounded up to the nearest
cent), which option to purchase Parent Common Stock shall contain the same term,
status as an "incentive stock option" under Section 422 of the Code or status as
a non-qualified stock option, as the case may be (if such Company Option was
theretofore a Company incentive stock option or non-qualified stock option, as
the case may be), vesting schedule and otherwise be on substantially the same
terms and conditions as set forth in the assumed Company Option (any such
assumed Company Option being herein referred to as an "Assumed Option"). The
parties intend that the assumption and conversion of Company Options under this
Section 2.3 shall meet the requirements of Section 424(a) of the Code and this
Section 2.3 shall be interpreted in a manner consistent with such
interpretation. Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of the Assumed Options in accordance with this Section 2.3.
2.4 AUTHORIZATION OF THE MERGER, THIS AGREEMENT, THE GENERAL INDEMNITY
ESCROW AGREEMENT, THE SPECIFIC INDEMNITY ESCROW AGREEMENT, THE INDEMNITY ESCROW
AGENT, AND THE STOCKHOLDERS' COMMITTEE. In the event the Merger shall be
approved by the Stockholders of the Company, as required by the Delaware Statute
and the Pennsylvania Statute and as
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contemplated by this Agreement, such approval shall constitute approval and
ratification by the Stockholders of the Company of the (i) Merger, as required
by the Delaware Statute and the Pennsylvania Statute, (ii) provisions of this
Agreement, (iii) designation of the Indemnity Escrow Agent and the approval and
ratification by the Stockholders of the Company of the terms and provisions of
the General Indemnity Escrow Agreement and the Specific Indemnity Escrow
Agreement and (iv) designation of the Stockholders' Committee.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to Parent and Acquisition Sub that, except as disclosed in the
disclosure schedule dated the date hereof, certified by the Executive Officers
of the Company and delivered by the Company to Parent and Acquisition Sub
simultaneously herewith and except as disclosed in the addendum to the
disclosure schedule dated as of the Closing Date, certified by the Executive
Officers of the Company and delivered by the Company to Parent and Acquisition
Sub on the Closing Date (which disclosure schedules shall contain specific
references to the sections of this Agreement to which the disclosures contained
therein relate) (together, the "Company Disclosure Schedule"):
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. The Company (i)
is a corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania, (ii) has all requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as now being conducted, and as proposed to be conducted, to
enter into this Agreement and the Related Agreements (as defined below) to which
the Company is a party, to perform its obligations hereunder and thereunder, and
to consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified and in good standing to do business in those jurisdictions listed in
Section 3.1(a) of the Company Disclosure Schedule and in all other jurisdictions
where the failure to be so qualified and in good standing would have a material
adverse effect on the Company or its business, results of operations or
financial condition (a "Company Material Adverse Effect"). The Company has
delivered to Parent true and complete copies of the Charter and by-laws of the
Company, in each case as amended to the date hereof. As used herein, "Charter"
shall mean, with respect to any corporation, those instruments that at the time
constitute its corporate charter as filed or recorded under the general
corporation law of the jurisdiction of its incorporation, including the articles
or certificate of incorporation or organization, and any amendments thereto, as
the same may have been restated, and any amendments thereto (including any
articles or certificates of merger or consolidation, certificate of correction
or certificates of designation or similar instruments which effect any such
amendment) which became effective after the most recent such restatement.
(b) SUBSIDIARIES; EQUITY INVESTMENTS. Except for CMPExpress.com Internet
Development Private Limited, incorporated under the Indian Companies Act, the
Company has never had, nor does it currently have, any subsidiaries, nor has it
ever owned, nor does it currently own, any capital stock or other proprietary
interest, directly or indirectly, in any corporation, association, trust,
partnership, joint venture or other entity.
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(c) Capital Stock; Securities.
(i) The authorized capital stock of the Company consists of (A)
20,000,000 shares of Common Stock, no par value per share, of which
13,069,111 shares are issued and outstanding and (B) 10,000,000 shares of
Preferred Stock, of which 4,500,000 shares have been designated Series A
Convertible Preferred Stock, $1.00 par value per share, and of which
4,000,000 are issued and outstanding. The Company has reserved (A) 220,500
shares of Common Stock for issuance upon the exercise of Company Options,
of which 220,500 are currently outstanding and (B) 2,055,000 shares of
Common Stock for issuance upon conversion of the Series A Stock. All
outstanding shares of Company Stock are duly authorized, validly issued and
outstanding, fully paid and non-assessable. Section 3.1(c) of the Company
Disclosure Schedule sets forth a true and complete list of the holders of
record shares of Company Stock, their addresses, and the number of such
shares owned of record and beneficially by each such holder. Schedule
3.1(c) of the Company Disclosure Schedule sets forth a true and complete
list of the Company Options, outstanding as of the date hereof, including
the name and address of each holder thereof, the number of shares of
Company Common Stock subject to each such Company Option, the per share
exercise price for each such Company Option, whether such Company Option is
a Company incentive stock option or a Company non-qualified stock option,
the grant date of each such Company Option, the employee stock plan
pursuant to which such Company Option was granted, if any, and the vesting
schedule and vesting acceleration provisions, if any, applicable thereto.
All outstanding shares of Company Stock and all outstanding Company Options
were issued in compliance with applicable federal and state securities
laws. An updated Schedule 3.1(c) reflecting changes permitted by this
Agreement in the capitalization of Company between the date hereof and the
Effective Time shall be delivered by Company to Parent on the Closing Date.
The holders of the Company Stock and the Company Options have been or will
be properly given, or shall have properly waived, any required notice prior
to the Merger.
(ii) Except as set forth in this Section 3.1(c), there are no equity
securities of any class or series of the Company, or any security
exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except as set forth in this Section
3.1(c), there are no options, warrants, equity securities, calls, rights,
commitments, convertible debt instruments, transfer restrictions or
agreements, instruments or understandings (whether written or oral, formal
or informal) of any character to which the Company is a party or by which
it is bound obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of the
Company or obligating the Company to grant, extend, accelerate the vesting
of or enter into any such option, warrant, equity security, call, right,
commitment, instrument, restriction, understanding or agreement. Except as
provided in this Agreement or any transaction contemplated thereby, there
are no voting trusts, proxies or other agreements or understandings with
respect to the voting, transfer or disposition of the shares of capital
stock of the Company.
(iii) The assumption by Parent of Company Options in accordance with
Section 2.3 hereunder will not constitute a breach of the Company plans or
any agreement entered into with respect to the granting of such options.
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(d) AUTHORITY; NO CONSENTS. The execution, delivery and performance by
the Company of this Agreement and the Related Agreements to which it is a
party and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate
action on the part of the Company; and this Agreement and the Related
Agreements to which it is a party have been duly and validly executed and
delivered by the Company, and this Agreement and the Related Agreements to
which it is a party, assuming the due authorization, execution and delivery
of this Agreement and the Related Agreements by the other parties thereto,
are the valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, reorganization, fraudulent
conveyance, insolvency, moratorium or similar laws affecting the rights and
remedies of creditors generally and by equitable principles of general
application (regardless of whether such enforceability is considered in a
proceeding at law or in equity). Neither the execution, delivery and
performance of this Agreement, the Related Agreements to which it is a
party nor the consummation by the Company of the transactions contemplated
hereby or thereby nor compliance by the Company with any provision hereof
or thereof will in any material respect (A) conflict with, (B) result in
any violations of, (C) cause a default under (with or without due notice,
lapse of time or both), (D) give rise to any right of termination,
amendment, cancellation or acceleration of any obligation contained in or
the loss of any material benefit under or (E) result in the creation of any
Encumbrance on or against any assets, rights or property of the Company
under any term, condition or provision of (x) any instrument or agreement
to which the Company is a party, or by which the Company or any of its
properties, assets or rights may be bound, (y) assuming the accuracy of the
representations and warranties of, and the performance of the covenants by
Parent and Acquisition Sub as set forth in this Agreement, any law,
statute, rule, regulation, order, writ, injunction, decree, permit,
concession, license or franchise of any Governmental Authority applicable
to the Company or any of its properties, assets or rights or (z) the
Company's Charter or by-laws. Assuming the accuracy of the representations
and warranties of, and the performance of the covenants by Parent and
Acquisition Sub as set forth in this Agreement, no permit, authorization,
consent, (except the consent of any manufacturer) or approval of or by, or
any notification of or filing with, any Governmental Authority or other
person including the Federal Trade Commission or the Department of Justice
is required in connection with the execution, delivery and performance by
the Company of this Agreement or the Related Agreements or the consummation
by the Company of the transactions contemplated hereby or thereby, except
for (i) the distribution of the Stockholders' Materials with respect to the
adoption by the stockholders of this Agreement, the Merger and the
transactions contemplated hereby, (ii) the filing of this Agreement or a
certificate or articles of merger with the Secretary of State of the State
of Delaware and the Pennsylvania Corporation Bureau and appropriate
documents with the relevant authorities of other states in which the
Company is qualified to do business and (iii) such other consents, waivers,
authorizations, filings, approvals and registrations which if not obtained
or made would not have a Company Material Adverse Effect or materially
impair the ability of the Company and the stockholders to consummate the
transactions contemplated by this Agreement, including, without limitation,
the Merger.
(e) FINANCIAL INFORMATION. (i) The Company has previously delivered to
Parent the following financial statements (collectively, the "Company
Financial Statements") (A) the audited financial statements of the Company
for the fiscal years ended 1997, 1998 and 1999 (the "Audited Financials"),
(B) the unaudited balance sheet, cash flow and income statements of the
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Company as of March 31, June 30, July 31 and August 31, 2000 (the
"Unaudited Financials") and (C) financial statements for the six-month
period ended June 30, 2000 as reviewed by PricewaterhouseCoopers LLP. The
Company Financial Statements (A) are in accordance with the books and
records of the Company, (B) fairly present, in all material respects, the
financial condition of the Company as at the respective dates indicated and
the results of operations of the Company for the respective periods
indicated and (C) have been prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP"), except as indicated
therein.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. At August 31, 2000 (the
"Balance Sheet Date"), with respect to the Company Balance Sheet, the
Company had no liability or obligation of any nature (whether known or
unknown, matured or unmatured, fixed or contingent, secured or unsecured,
accrued, absolute or otherwise (a "Liability")) required to be set forth on
the Company Financial Statements in order for the Company Balance Sheet to
fairly present the financial condition of the Company at the respective
dates thereof in accordance with GAAP, which was not provided for or
disclosed thereon, and all liability reserves established by the Company
and set forth thereon were adequate for all such Liabilities at the
respective dates thereof. There were no material loss contingencies (as
such term is used in Statement of Financial Accounting Standards No. 5
issued by the Financial Accounting Standards Board in March, 1975 ("FAS No.
5")) which were not adequately provided for on the Company Balance Sheet as
required by FAS No. 5.
(g) ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
been operated in the ordinary course, consistent with past practice, and
there has not been:
(i) any Company Material Adverse Effect;
(ii) any damage, destruction or loss, whether or not covered by
insurance, having or which could have a Company Material Adverse
Effect;
(iii) other than in the ordinary course of business, any
Liability created, assumed, guaranteed or incurred, or any material
transaction, contract or commitment entered into, by the Company;
(iv) Except for payment of legal fees and settlement costs in
connection with the MicroWarehouse Litigation, any payment, discharge
or satisfaction of any material Encumbrance or Liability by the Company
or any cancellation by the Company of any material debts or claims or
any amendment, termination or waiver of any rights of material value to
the Company;
(v) any declaration, setting aside or payment of any dividend
or other distribution of any assets of any kind whatsoever with respect
to any shares of the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition of any such shares
of the capital stock of the Company;
(vi) any stock split, reverse stock split, combination,
reclassification or recapitalization of any Company Stock, or any
issuance of any other security in respect of or in exchange for, any
shares of Company Stock;
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(vii) any issuance by the Company of any shares of its capital
stock or any debt security or securities, rights, options or warrants
convertible into or exercisable or exchangeable for any shares of its
capital stock or debt security (other than Company Options or shares of
Company Common Stock issued upon exercise of Company Options in
accordance with the present terms thereof);
(viii) any license, sale, transfer, pledge, mortgage or other
disposition of any material tangible or intangible asset (including any
Intellectual Property Rights) of the Company, other than in the
ordinary course of business;
(ix) any termination of, or written indication of an intention to
terminate or not renew, any material contract, license, commitment or
other agreement between the Company and any other person;
(x) any material write-down or write-up of the value of any asset
of the Company, or any material write-off of any accounts receivable or
notes receivable of the Company or any portion thereof;
(xi) any increase in or modification of compensation payable or
to become payable to (A) any director or officer of the Company or (B)
any employee of the Company other than in the ordinary course of
business, or the entering into of any employment contract with any
officer or employee;
(xii) any adoption by the Company or any trade or business
(whether or not incorporated) which is a member of a controlled group
or which is under common control with the Company within the meaning of
Section 414 of the Code and the regulations promulgated thereunder or
an affiliated service group (as defined under Section 414(m) of the
Code or the regulations under Section 414(o) of the Code) (an "ERISA
Affiliate") of any Employee Plans (as defined in Section 3.1(u)(ii)) or
any increase in or modification or acceleration, except for such
increases, modifications or accelerations that occur as a direct result
of the transactions contemplated by this Agreement, of any benefits
payable under any Employee Plans made to, for or with any director,
officer, employee, consultant or agent of the Company;
(xiii) any change in the accounting methods or practices followed
by the Company or any change in depreciation or amortization policies
or rates theretofore adopted;
(xiv) any change in the manner in which the Company extends
discounts or credit to customers or otherwise deals with customers;
(xv) any termination of employment of any officer or Key Employee
of the Company or, to the Company's knowledge, any expression of
intention by any officer or Key Employee of the Company to resign from
such office or employment with the Company;
(xvi) any amendments or changes in the Company's Charter or by-
laws;
(xvii) any labor dispute or any union organizing campaign;
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<PAGE>
(xviii) the commencement of any litigation or other action by or
against the Company; or
(xix) any agreement, understanding, authorization or proposal,
whether in writing or otherwise, for the Company to take any of the
actions specified in items (i) through (xix) above.
(h) TAX MATTERS. The Company and each other corporation (if any) included
in any consolidated or combined tax return in which the Company has been
included (i) have filed and will file, in a timely and proper manner, consistent
with applicable laws, all Federal, state and local Tax returns and Tax reports
required to be filed by them through the Closing Date (the "Company Returns")
with the appropriate governmental agencies in all jurisdictions in which Company
Returns are required to be filed and have timely paid or will timely pay all
amounts shown thereon to be due; (ii) have paid and shall timely pay all Taxes
of the Company (or such other corporation) required to have been paid by the
Company (or such other corporation) on or before the Closing Date; and (iii)
currently are not the beneficiary of an extension of time within which to file
any Tax return or Tax report. All such Company Returns were and will be correct
and complete in all material respects at the time of filing. All Taxes of the
Company attributable to all taxable periods ending on or before the Closing
Date, to the extent not required to have been previously paid, have been
adequately provided for on the Company Financial Statements and the Company will
not accrue a Tax Liability from the date of the Company Financial Statements up
to and including the Closing Date, other than a Tax Liability accrued in the
ordinary course of business. The Company has not been notified by the Internal
Revenue Service or any state, local or foreign taxing authority that any issues
have been raised (and are currently pending) in connection with any Company
Return, and no waivers of statutes of limitations have been given with respect
to the Company that are still in effect. Except as contested in good faith, any
deficiencies asserted or assessments (including interest and penalties) made as
a result of any examination by the Internal Revenue Service or by any other
taxing authorities of any Company Return have been fully paid or are adequately
provided for on the Company Financial Statements (as appropriate) and the
Company has received no notification that any proposed additional Taxes have
been asserted. The Company (i) has not made an election to be treated as a
"consenting corporation" under Section 341(f) of the Code and (ii) is not a
"personal holding company" within the meaning of Section 542 of the Code and
(iii) has not been a United States real property holding corporation within the
meaning of Section 897(c) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code. The Company has not agreed to, nor is it
required to, make any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise. The Company will not incur a Tax
Liability resulting from the Company ceasing to be a member of a consolidated or
combined group that had previously filed consolidated, combined or unitary Tax
returns. Each granted option that was designated as an "incentive stock option"
on the applicable books and records of the Company qualified as an "incentive
stock option" within the meaning of the Section 422 of the Code on the date in
which such option was granted. To the knowledge of the Company, neither the
Company nor any of its Affiliates has taken or agreed to take any action, failed
to take any action or is aware of any fact or circumstance that would prevent
the Merger from constituting a reorganization within the meaning of Section
368(a) of the Code or that would prevent the Merger Shares from qualifying as
stock within the meaning of Section 354 of the Code rather than as "other
property" within the meaning of Section 356 of the Code.
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As used in this Agreement, "Tax" means any of the Taxes and "Taxes" means,
with respect to any entity, (A) all income taxes (including any tax on or based
upon net income, gross income, income as specially defined, earnings, profits or
selected items of income, earnings or profits) and all gross receipts, sales,
use, ad valorem, transfer, franchise, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property or windfall profits
taxes, alternative or add-on minimum taxes, customs duties and other taxes,
fees, assessments or charges of any kind whatsoever, together with all interest
and penalties, additions to tax and other additional amounts imposed by any
taxing authority (domestic or foreign) on such entity and (B) any liability for
the payment of any amount of the type described in the immediately preceding
clause (A) as a result of being a "transferee" (within the meaning of Section
6901 of the Code or any other applicable law) of another entity or a member of
an affiliated or combined group.
(i) TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS. The Company
has good and valid title to all assets, personal property and interests in
personal property, reflected, respectively, on the Balance Sheet or acquired
after the Balance Sheet Date (except accounts receivable and notes receivable
paid in full subsequent to the Balance Sheet Date, as the case may be), or not
so reflected therein but necessary for the conduct or operation of the Company's
business and owned by the Company, free and clear of all Encumbrances, of any
kind or character, except for (i) those Encumbrances set forth in Section 3.1(i)
of the Company Disclosure Schedule, (ii) liens for current taxes not yet due and
payable and (iii) statutory mechanics and materialmen's liens. The assets,
properties and interests in properties of the Company are in good operating
condition and repair in all material respects (ordinary wear and tear excepted).
As used herein, the term "Encumbrances" shall mean and include security
interests, mortgages, liens, pledges, guarantees, charges, easements,
reservations, restrictions, equities, rights of way, options and rights of first
refusal and all other encumbrances, whether or not relating to the extension of
credit or the borrowing of money.
(j) REAL PROPERTY-OWNED OR LEASED. The Company does not currently own, nor
has it or any of its predecessors ever owned, any real property. Section 3.1(j)
of the Company Disclosure Schedule contains a list and brief description of all
real property leased by the Company, together with all buildings and other
structures and material improvements located on such real property (the "Leased
Real Property"), and with respect to each lease covering the Leased Real
Property (collectively, the "Leases"), the name of the lessor. The Company is
the owner and holder of all the leasehold estates purported to be granted by
each Lease, and all Leases are in full force and effect and, assuming the due
authorization, execution and delivery of such Leases by the other parties
thereof, constitute valid and binding obligations of the Company. The Company
has made available to Parent true and complete copies of all Leases. Except as
set forth in Section 3.1(j) of the Company Disclosure Schedule, all improvements
included in the Leased Real Property are in good operating condition and repair
in all material respects (ordinary wear and tear excepted) and, to the Company's
knowledge, there does not exist any condition which interferes with the economic
value or use of such property and improvements.
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(k) INTELLECTUAL PROPERTY.
(i) The Company has good and valid title to, and owns free and clear
of all Encumbrances, has the exclusive right to use, sell, transfer,
license (or sublicense), transmit, broadcast, deliver (electronically or
otherwise) and dispose of, and has the right to bring actions for the
infringement of, all Intellectual Property Rights necessary or required for
the conduct of its business as currently conducted (collectively, the
"Company Rights");
(ii) The execution, delivery and performance of this Agreement and the
Related Agreements and the consummation of the Merger and the consummation
of the other transactions contemplated hereby, will not breach, violate or
conflict with any instrument or agreement governing any Company Rights,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any Company Right or in any way impair the
right of the Company or the Surviving Corporation to use, sell, license (or
sublicense), transmit, broadcast, deliver (electronically or otherwise) or
dispose of, or to bring any action for the infringement of, any Company
Right or portion thereof;
(iii) There are no royalties, honoraria, fees or other payments
payable by the Company to any person by reason of the ownership, use,
license (or sublicense), transmission, broadcast, delivery (electronically
or otherwise), sale, or disposition of the Company Rights, other than sales
commissions paid in the ordinary course of business;
(iv) Neither the manufacture, marketing, license (or sublicense),
sale, transmission, delivery (electronically or otherwise), or use of any
product or service currently or proposed to be licensed, sold, marketed,
transmitted, broadcast, delivered (electronically or otherwise) or used by
the Company or currently under development by the Company, violates any
license (or sublicense) or agreement of the Company with any third party or
infringes any common law or statutory rights of any other party, including,
without limitation, rights relating to defamation, contractual rights,
Intellectual Property Rights (other than patent infringement which shall be
to the knowledge of the Company or the Stockholders) and rights of privacy
or publicity; nor, to the knowledge of the Company or the Stockholders, is
any third party materially infringing upon, or violating any license (or
sublicense), transmission, broadcast, delivery, (electronically or
otherwise) or agreement with the Company relating to, any Company Right;
and there is no pending or threatened claim or litigation contesting the
validity, ownership or right to use, manufacture, sell, license (or
sublicense), transmit, broadcast, deliver (electronically or otherwise) or
dispose of any Company Right, nor is there any basis for any such claim,
nor has the Company received any notice asserting that any Company Right or
the proposed use, manufacture, sale, license (or sublicense), transmission,
broadcast, delivery (electronically or otherwise) or disposition thereof
conflicts or will conflict with the rights of any other party nor is there
any basis for any such assertion;
(v) All current and past officers, employees and consultants of or to
the Company have executed and delivered to and in favor of the Company an
agreement regarding the protection of confidential and proprietary
information and the assignment to the Company of all Intellectual Property
Rights arising from the services performed for
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the Company by such persons (collectively, the "Confidentiality
Agreements"). The Company has taken and will continue through the Effective
Time to take all steps necessary, appropriate or desirable to safeguard and
maintain the secrecy and confidentiality of, and its proprietary rights in,
all Company Rights;
(vi) All works that were created, prepared or delivered by
consultants, independent contractors or other third parties for or on
behalf of Company (including any materials and elements created, prepared
or delivered by such parties in connection therewith) (A) are and shall
constitute "works made for hire" specially ordered or commissioned by the
Company within the meaning of United States' copyright law, or (B) all
right, title and interest therein (including any materials and elements
created, prepared or delivered by such parties in connection therewith)
have been assigned to the Company;
(vii) No licenses or rights have been granted by the Company, or by
any employee, consultant, officer, director, agent or affiliate of the
Company or by anyone other than the foregoing, to distribute the source
code of, or to use source code to create Derivative Works, of, any product
currently marketed by, commercially available from or under development by
the Company for which the Company possesses the source code. As used
herein, "Derivative Work" shall mean a work that is based upon one or more
preexisting works, such as a revision, enhancement, modification,
abridgment, condensation, expansion or any other form in which such
preexisting works may be recast, transformed or adapted, and which, if
prepared without authorization of the owner of the copyright in such
preexisting work, would constitute a copyright infringement. For purposes
herein, a "Derivative Work" shall also include any compilation that
incorporates such a preexisting work as well as translations from one type
of code to another;
(viii) No person has any marketing rights to any of the Intellectual
Property Rights of the Company (excluding Intellectual Property Rights
licensed to the Company by third parties);
(ix) For the Intellectual Property Rights owned by the Company,
Section 3.1(k)(ix) of the Company Disclosure Schedule provides a complete
and accurate list of all United States and foreign (a) Patents, (b)
Trademarks (including Internet domain registrations and unregistered
Trademarks) and (c) Copyrights (including unregistered copyrights)
indicating for each, the applicable jurisdiction, registration number (or
application number) and date issued (or date filed);
(x) The Company does not own and has not filed any application for
Patents. All registered Trademarks, and registered Copyrights are currently
in compliance with all legal requirements (including the timely post-
registration filing of affidavits of use and incontestability and renewal
applications with respect to registered Trademarks), are valid and
enforceable, and are not subject to any maintenance fees or actions falling
due within ninety (90) days after the Effective Time. No registered
Trademark has been or is now involved in any cancellation and no such
action is threatened with respect to any of the registered Trademarks. To
the knowledge of the Company, there are no potentially conflicting
Trademarks of any third party;
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(xi) Section 3.1(k)(xi) of the Company Disclosure Schedule sets forth
a complete and accurate list of all license agreements granting any right
to use or practice any rights under any Intellectual Property Rights,
whether the Company is the licensee or licensor thereunder (except for shop
licenses identified in Section 3.1(l)(i) of the Company Disclosure
Schedule) and any assignments, consents, term, forbearances to sue,
judgments, Orders, settlements or similar obligations relating to any
Intellectual Property to which the Company is a party or otherwise bound
(collectively, the "License Agreements"), indicating for each the title,
the parties, date executed, whether or not it is exclusive and the
Intellectual Property covered thereby. The License Agreements are valid and
binding obligations of Company, enforceable in accordance with their terms,
and there exists no event or condition which will result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a default by the Company under any such License Agreement. The
Company has all necessary licenses and/or right to use the information
relating to and/or owned by Tech Data Corporation, Ingram Micro or any
other distributor displayed or linked on its website;
(xii) All Trademarks of the Company have been in continuous use by the
Company. To the Knowledge of the Company, there has been no prior use of
such Trademarks by any third party which would confer upon said third party
superior rights in such Trademarks; the Company has adequately policed the
registered Trademarks against third party infringement; and the registered
Trademarks have been continuously used in the form appearing in, and in
connection with the goods and services listed in, their respective
registration certificates or identified in their respective pending
applications; and
(xiii) As used herein, the term "Intellectual Property Rights" shall
mean all intellectual property rights worldwide, including, without
limitation, trademarks, service marks, trade names, service names, URLs and
Internet domain names and applications therefor (and all interest therein),
designs, slogans and general intangibles of like nature, together with all
goodwill related to the foregoing (including any registrations and
applications for any of the foregoing) (collectively, "Trademarks");
patents (including any registrations, continuations, continuations in part,
renewals and applications for any of the foregoing) (collectively,
"Patents"); copyrights (including any registrations, applications and
renewals for any of the foregoing (collectively, "Copyrights"); computer
programs and other computer software (including, but not limited to the
Software); databases; technology, trade secrets and other confidential
information, know-how, proprietary technology, processes, formulae,
algorithms, models, user interfaces, customer lists, inventions, source
codes and object codes and methodologies, architecture, structure, display
screens, layouts, development tools, instructions, templates, marketing
materials, inventions, trade dress, logos and designs and all documentation
and media constituting, describing or relating to the foregoing
(collectively, "Trade Secrets").
(l) COMPANY SOFTWARE.
(i) Section 3.1(1)(i) of the Company Disclosure Schedule sets forth a
true and complete list of all software programs, systems and applications
(A) designed or
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developed or under development by employees of the Company or by
consultants on the Company's behalf including all documentation therefor
(the "Owned Software") or (B) licensed by the Company from any third party
or constituting "off-the-shelf" software (the "Licensed Software"), in each
case that is manufactured or used by the Company in the operation of its
business or marketed, licensed or sold by the Company to third parties
(collectively, the "Software") and, in the case of Licensed Software,
Section 3.1(l)(i) of the Company Disclosure Schedule identifies each
license agreement with respect thereto;
(ii) All of the Owned Software are original works of authorship and
are protected by the copyright laws of the United States. The Company owns
all right, title and interest in and to the Owned Software, and all
copyrights thereto, free and clear of any Encumbrance and has not sold,
assigned, licensed, distributed or in any other way disposed of or
subjected the Owned Software to any Encumbrance. None of the Owned Software
incorporates, is based on or is a derivative work of any third party code
that is subject to the terms of a public source license or otherwise
imposes conditions on the terms and conditions under which the Owned
Software may be used or distributed;
(iii) The Licensed Software is validly held and used by the Company
and may be used by the Company pursuant to the applicable license agreement
with respect thereto without the consent of or notice to any third party
and is fully and freely utilizable by the Surviving Corporation or Parent
without the consent of or notice to any third party. All of the Company's
computer hardware has validly licensed software installed therein and the
Company's use thereof does not conflict with or violate any such license;
(iv) To the knowledge of the Company, the Software is free from any
significant software defect, is free from any programming, documentation
error or virus ("Bugs") not consistent with commercially reasonable
industry standards acceptable for such Bugs, operates and runs in a
reasonable and efficient business manner, conforms to the specifications
thereof, and, with respect to the Owned Software, the applications can be
compiled from their associated source code without undue burden;
(v) The Company has not altered its data, or any Software or
supporting software that may in turn damage the integrity of the data,
whether stored in electronic, optical or magnetic or other form. The
Company has furnished Parent with all documentation relating to the use,
maintenance and operation of the Software, all of which is true and
accurate in all material respects; and
(vi) The Company's Owned Software and Licensed Software (including
existing products Owned Software and technology and Owned Software and
technology currently under development) used in the operation of the
business as presently conducted have been designed, written and tested to,
and will at all times (i) record, store, process, calculate, manage,
manipulate and present calendar dates falling before, on and after (and if
applicable, spans of time including) December 31, 1999, including, without
limitation, single-century formulas and multi-century formulas and (ii)
create, calculate, recognize, accept, display, store, retrieve, accent,
compare, sort, manipulate, or process any information dependent on or
relating to such dates or otherwise provide use of dates or date-dependent
or date-related data, including, but not limited to, century recognition,
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day-of-the week recognition, leap years, date values and interfaces of date
functionalities, without loss of accuracy, functionality, data integrity
and performance and will provide that all date-related data and user
interface functionalities and data fields include the indication of century
(collectively, "Year 2000 Compliant"). Section 3.1(h)(vi) of the Company
Disclosure Schedule describes all software, hardware, databases or embedded
control systems not owned or developed by the Company that is or are
licensed for or otherwise used by the Company in the operation of its
business as presently conducted and as proposed to be conducted and the
nature and extent of the Company's knowledge and inquiry regarding the
degree to which all such hardware, software, databases or embedded control
systems are Year 2000 Compliant.
(m) AGREEMENTS, ETC. Section 3.1(m) of the Company Disclosure Schedule
sets forth a true and complete list of all written or oral contracts,
agreements and other instruments not made in the ordinary course of
business to which the Company is a party, or made in the ordinary course of
business and referred to in clauses (i) through (xviii) of this Section
3.1(m). The Company is not a party to any agreement, arrangement or
understanding, whether written or oral, formal or informal, relating to:
(i) agreements for the development, modification or enhancement
of computer software or multimedia products;
(ii) any material distributorship, dealer, sales, advertising,
agency, manufacturer's representative, franchise or similar contract
or relationship or any other contract relating to the payment of a
commission or other fee calculated as or by reference to a percentage
of the profits or revenues of the Company or of any business segment
of the Company;
(iii) any joint venture, partnership or other agreement or
arrangement for the sharing of profits;
(iv) any collective bargaining contract or other contract with or
commitment to any labor union;
(v) the future purchase, sale or license of products, material,
supplies, equipment or services requiring payments to or from the
Company in an amount in excess of $25,000 per annum, which agreement,
arrangement or understanding is not terminable on 30 days' notice
without cost or other liability at or at any time after the Effective
Time, or in which the Company has granted or received manufacturing
rights, most favored nations pricing provisions or exclusive marketing
or other rights relating to any product, group of products, services,
technology, assets or territory;
(vi) any license (whether as licensor or licensee), or
sublicense, royalty, permit, or franchise agreement, including,
without limitation, any agreement pursuant to which the Company
licenses any Company Rights to any third party (other than ordinary
course licenses to end-users);
(vii) the content or delivery of its computer software or
multimedia products and services (including the transmission or other
performance (electronically or otherwise));
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(viii) the employment of any officer, employee, consultant or
agent or any other type of contract, commitment or understanding with
any officer, employee, consultant or agent which (except as otherwise
generally provided by applicable law) is not immediately terminable
without cost or other liability at or at any time after the Effective
Time;
(ix) profit-sharing, bonus, stock option, stock appreciation
right, pension, retirement, disability, stock purchase,
hospitalization, insurance or similar plan or agreement, formal or
informal, providing benefits to any current or former director,
officer, employee, agent or consultant;
(x) indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money,
for a line of credit or for a leasing transaction of a type required
to be capitalized in accordance with Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board;
(xi) any agreement, instrument or other arrangement granting or
permitting any Encumbrance on any of the properties, assets or rights
of the Company;
(xii) any lease for real property (whether as lessor or lessee)
or any lease or agreement under which the Company is lessee of or
holds or operates any items of tangible personal property owned by any
third party;
(xiii) contract or commitment for charitable contributions;
(xiv) contract or commitment for capital expenditures
individually or in the aggregate in excess of $10,000;
(xv) any agreement or contract with a "disqualified individual"
(as defined in Section 280G(c) of the Code), which could result in an
"excess parachute payment" (as defined in Section 280G(b)(1) of the
Code) being made under Section 280G of the Code as a result of the
transactions contemplated hereby;
(xvi) agreement or arrangement for the sale of any assets,
properties or rights having a value in excess of $25,000;
(xvii) agreement which restricts the Company from engaging in any
aspect of its business or competing in any line of business in any
geographic area; or
(xviii) any other agreement, contract or commitment which is
material to the Company.
For purposes of this Section 3.1(m), the term "material" shall mean and
refer to those agreements, contracts, instruments or arrangements (as
applicable) that involve payments or expenditures by or to the Company, or
otherwise have an aggregate value, of at least $25,000. The Company has
furnished to Parent true and complete copies of all such agreements listed in
Section 3.1(m) of the Company Disclosure Schedule and each such agreement (A) is
the legal, valid and binding obligation of the Company and, to the knowledge of
the Company, the legal,
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valid and binding obligation of each other party thereto, in each case
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, reorganization, fraudulent conveyance, insolvency,
moratorium or similar laws affecting the rights and remedies of creditors
generally and by equitable principles of general application (regardless of
whether such enforceability is considered in a proceeding at law or in equity),
(B) is in full force and effect and (C) to the knowledge of the Company, the
other party or parties thereto is or are not in material default thereunder.
(n) NO DEFAULTS. The Company has in all material respects performed all
the obligations required to be performed by it to date and is not in default or
alleged to be in default under (i) its Charter or by-laws or (ii) any material
agreement, lease, license, contract, commitment, instrument or obligation to
which the Company is a party or by which any of its properties, assets or rights
are or may be bound or affected, and to the Company's knowledge, except for the
execution of this Agreement and the consummation of the transactions
contemplated herein, there exists no event, condition or occurrence which, with
or without due notice or lapse of time, or both, would constitute such a default
or alleged default by it of any of the foregoing.
(o) LITIGATION, ETC. Except for settlement discussions with MicroWarehouse
regarding the Note and Security Agreement pursuant to the Settlement Agreement
(as defined in Section 8.2(b) below), there are no (i) actions, suits, claims,
investigations or legal or administrative or arbitration proceedings
(collectively, "Actions") pending, or threatened against the Company nor is
there any basis therefor, whether at law or in equity, or before or by any
Federal, state, municipal, foreign or other governmental court, department,
commission, board, bureau, agency or instrumentality ("Governmental Authority"),
(ii) judgments, decrees, injunctions or orders of any Governmental Authority or
arbitrator against the Company or (iii) disputes with customers or vendors,
other than such disputes which typically occur in the ordinary course of
business and which are not likely to have a Company Material Adverse Effect,
either individually or in the aggregate. There are no Actions pending or, to the
Company's knowledge, threatened, nor is there any basis therefor, with respect
to (A) the current employment by, or association with, the Company, or future
employment by, or association with, Parent or the Surviving Corporation, of any
of the present officers or employees of or consultants to the Company
(collectively, the "Designated Persons") or (B) the use, in connection with any
business presently conducted or proposed to be conducted by the Company or the
Surviving Corporation, of any information, techniques or processes presently
utilized or proposed to be utilized by the Company, Parent, the Surviving
Corporation or any of the Designated Persons, that the Company, Parent, the
Surviving Corporation or any of the Designated Persons are or would be
prohibited from using as the result of a violation or breach of, or conflict
with any agreements or arrangements between any Designated Person and any other
person, or any legal considerations applicable to unfair competition, trade
secrets or confidential or proprietary information. The Company has delivered to
Parent all material documents and correspondence relating to such matters
referred to in Section 3.1(o) of the Company Disclosure Schedule (including, in
the case of clause (iii) of the first sentence of this Section 3.1(o), any
correspondence evidencing material customer dissatisfaction with the Company or
its products or services).
(p) ACCOUNTS AND NOTES RECEIVABLE. All the accounts receivable (net of
reserves) and notes receivable owing to the Company as of the date hereof
constitute, and as of the Effective Time will constitute, valid and enforceable
claims arising from bona fide transactions in the
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ordinary course of business. Section 3.1(p) of the Company Disclosure Schedule
provides a schedule of accounts receivable including an aging of such accounts.
There is, to the knowledge of the Company, no account debtor or note debtor that
is insolvent or bankrupt and no account receivable or note receivable which is
pledged to any third party by the Company. Provided that Parent has performed
its obligations under Section 7.5 of this Agreement, ninety percent (90%) of the
account receivables (net of reserves) of the Company existing on the Closing
Date shall have been paid in full by not later than six (6) months after the
Closing Date and all of the notes receivable shall be paid in accordance with
the terms thereof; provided, however, that if the Stockholders of the Company
shall indemnify Parent for breach of the percentage requirement of this Section
3.1(p), the Company shall remit any amounts subsequently collected on any such
accounts receivable to the Stockholders of the Company for their benefit.
(q) ACCOUNTS AND NOTES PAYABLE. All accounts payable and notes payable by
the Company to third parties as of the date hereof arose, and as of the Closing
will have arisen, in the ordinary course of business. Section 3.1(q) of the
Company Disclosure Schedule provides a schedule of accounts payable including an
aging of such accounts.
(r) COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS AND CONSENTS. The Company has
complied and is presently in compliance in all material respects with all
Federal, state, local or foreign laws, ordinances, regulations and orders
applicable to it or its business (including, without limitation, laws,
ordinances, regulations and orders applicable to labor, employment and
employment practices, terms and conditions of employment and wages and hours).
The Company has all Federal, state, local and foreign governmental licenses,
consents, approvals, authorizations, permits, orders, decrees and other
compliance agreements necessary in the conduct of its business as presently
conducted except where the failure to have any one of the foregoing would not
have a Company Material Adverse Effect, such licenses, consents, approvals,
authorizations, permits, orders, decrees and other compliance agreements are in
full force and effect, no violations are or have been recorded in respect of any
thereof except where such violations would not have a Company Material Adverse
Effect and no proceeding is pending or, to the knowledge of the Company,
threatened to revoke or limit any thereof. Section 3.1(r) of the Company
Disclosure Schedule contains a true and complete list of all such governmental
licenses, authorizations, consents, approvals, permits, orders, decrees and
other compliance agreements under which the Company is operating or bound, the
Company is not in default or alleged to be in default under any thereof and the
Company has furnished to Parent true and complete copies thereof. None of such
licenses, consents, approvals, authorizations, permits, orders, decrees and
other compliance agreements shall be affected in any material respect by the
Merger or the transactions contemplated hereby.
(s) ENVIRONMENTAL MATTERS. The Company currently is and at all times has
been in material compliance with all Federal, state and local laws, ordinances,
regulations and orders relating to the protection of the environment applicable
to its properties, facilities or operations.
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(t) LABOR RELATIONS; EMPLOYEES.
(i) The Company employs a total of 108 employees. Section 3.1(t) of
the Company Disclosure Schedule identifies all employees (full-time and
part-time) and consultants employed or engaged by the Company and sets
forth each such individual's payment arrangements or annual compensation,
job title and date of hire. There are no employment, consulting, severance
pay, continuation pay, termination or indemnification agreements or other
similar agreements of any nature (whether in writing or not) between the
Company and any current or former shareholder, officer, director, employee
consultant or volunteer. No such employment agreement disclosed on Section
3.1(t) of the Company Disclosure Schedule will, as a direct or indirect
result of the transaction contemplated herein, either require any payment
by the Company or any consent or waiver from any shareholder, officer,
director, employee or consultant; or result in any change in the nature of
any rights of any shareholder, officer, director, employee or consultant,
including, but not limited to, any accelerated payments, deemed
satisfaction of goals or conditions, new or increased benefits or
additional or accelerated vesting. The Company is not delinquent in
payments to any of its employees for any wages, salaries, commissions,
bonuses or other direct compensation for any services performed by them to
date or amounts required to be reimbursed to such employees; upon
termination of the employment of any such employees, neither the Company,
Parent, Acquisition Sub nor the Surviving Corporation will by reason of
anything done prior to the Closing be liable to any of such employees for
so-called "severance pay" or any other payments; there is no unfair labor
practice complaint against the Company pending before the National Labor
Relations Board or any comparable Governmental Authority, and none of the
Company's employment policies or practices is currently being audited or
investigated by any federal, state or local government agency; there is no
labor strike, dispute, claim, charge, lawsuit, proceeding, labor slowdown
or stoppage pending or, to the knowledge of the Company, threatened against
or involving the Company; no labor union has taken any action with respect
to organizing the employees of the Company; neither any grievance nor any
arbitration proceeding arising out of or under collective bargaining
agreements is pending and no claim therefor has been asserted against the
Company; and no employee has informed any officer of the Company that such
employee will terminate his or her employment or engagement with the
Company, or the Surviving Corporation and the Company has no reason to
believe that the Key Employees that accept employment with the Surviving
Corporation will not remain employees of the Surviving Corporation for at
least 180 days after the Closing. Neither the Company nor any employee of
the Company is to the Company's knowledge in violation of any term of any
employment contract, patent disclosure agreement or any other contract or
agreement relating to the relationship of such employee with the Company or
any other party because of the nature of the business conducted by the
Company or the execution and delivery of the Confidentiality Agreement by
such employee.
(ii) Section 3.1(t) of the Company Disclosure Schedule lists all
current and former officers, employees and consultants of the Company with
which the Company has entered into Confidentiality Agreements in the forms
attached to Section 3.1(t) of the Company Disclosure Schedule.
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(u) EMPLOYEE BENEFIT PLANS AND CONTRACTS.
(i) At no time has the Company or any ERISA Affiliate (A) sponsored,
maintained, contributed to or been required to contribute to any plan
subject to Title IV of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") or the minimum funding requirements of Section 412 of
the Code or Section 302 of ERISA; (B) contributed to or been required to
contribute to any multiemployer plan as defined in Section 3(37) of ERISA;
or (C) incurred any withdrawal liability to any multiemployer plan. The
Company has not incurred and could not reasonably be expected to incur any
material liability under Title IV of ERISA or the minimum funding
requirements of Section 412 of the Code or Section 302 of ERISA.
(ii) Section 3.1(u) of the Company Disclosure Schedule lists all
"employee benefit plans" as defined in Section 3(3) of ERISA, and any
bonus, phantom stock, stock appreciation rights, stock option or other
stock related rights, incentive, deferred compensation, retirement or
supplemental retirement, severance, golden parachute, vacation, cafeteria,
dependent care, health or medical care, employee assistance program,
disability, education or tuition assistance programs, insurance and other
similar compensation, fringe or employee benefit plans, programs or
arrangements, and any current or former employment or executive
compensation or severance agreements, written or otherwise, for the benefit
of, or relating to, any present or former Employee of the Company, any
subsidiary of the Company, or any ERISA Affiliate or any other written or
formal plans or agreements involving direct or indirect compensation
(including any employment agreements entered into between the Company and
any Employee, but excluding workers' compensation, unemployment
compensation, other government-mandated programs and the Company's salary
and wage arrangements) currently or previously maintained, contributed to
or entered into by the Company, any subsidiary of the Company or any ERISA
Affiliate thereof for the benefit of any Employee or former Employee under
which the Company, any subsidiary of the Company or any ERISA Affiliate
thereof has any present or future obligation or liability (the "Employee
Plans"), whether or not such plan or arrangement has been terminated. The
Company has furnished to Parent copies or descriptions of each Employee
Plan (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof.
(iii) Except as set forth on Section 3.1(u) of the Company Disclosure
Schedule, each Employee Plan has been maintained and operated in
substantial compliance with its terms and with the requirements prescribed
by any and all applicable statutes, orders, rules and regulations
including, but not limited to, the Code and ERISA and has been maintained
in good standing with all applicable regulatory authorities including, but
not limited to the Internal Revenue Service and the Department of Labor, so
as not to result in any liability in excess of $5,000 for the Company or
the Acquisition Sub for a failure to so comply or the Parent or the
Surviving Corporation after the Closing Date.
(iv) Except as set forth in Section 3.1(u) of the Company Disclosure
Schedule, the Company has no material current or projected liability in
respect of post-employment
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or post-retirement health or medical or life insurance benefits for
retired, former or current employees of the Company, except those required
by Section 4980B of the Code.
(v) Except as set forth in Section 3.1(u) of the Company Disclosure
Schedule, (A) all benefit obligations under each Employee Plan accrued
prior to the Closing Date, determined in accordance with prior practices,
have been paid, adequately reserved or reflected in the Company's financial
statements as of the Balance Sheet Date in accordance with GAAP, (B) all
monies withheld from the paychecks of Company employees pursuant to
Employee Plans have been transferred to the applicable Employee Plans in a
timely manner in accordance with the Code, ERISA and GAAP, and (C) the
Company has paid all matching contributions under the CMP, Inc. 401(k)
Savings Plan ("401(k) Plan") for all 401(k) Plan years commencing prior to
January 1, 2000. Except as set forth in Section 3.1(u) of the Company
Disclosure Schedule, there has been no amendment to, written interpretation
of or announcement (whether or not written) by the Company of, or change in
employee participation or coverage under, any Employee Plan that would
increase materially the expense to the Company or the Acquisition Sub or
the Parent or the Surviving Corporation or any of the Parent's or the
Surviving Corporation's affiliates of maintaining such Employee Plan above
the level of the expense incurred in respect thereof for the most recent
fiscal year ended prior to the date hereof.
(vi) There has been no failure of any Employee Plan which is a group
health plan (as defined in Section 5000(b)(1) of the Code) maintained by
the Company to meet the requirements of Code Section 4980B(f) with respect
to a qualified beneficiary (as defined in Section 4980B(g)).
(vii) Except as disclosed in Section 3.1(u) of the Company Disclosure
Schedule, no employee of the Company will become entitled to any bonus,
retirement, severance, job security or similar benefit or enhanced such
benefit (including acceleration of vesting or exercise of an incentive
award) as the direct and sole result of the transactions contemplated
hereby and no employee of the company will become entitled to any enhanced
severance protections or benefits as a result of the transactions
contemplated hereby.
(viii) To the extent applicable, the Company has complied with all
requirements under the Workers Adjustment and Retraining Notification Act
of 1988, as amended, and any similar state or local law, rule or
regulation.
(v) INSURANCE. Section 3.1(v) of the Company Disclosure Schedule contains a
list of all policies of liability, theft, fidelity, fire, product liability,
errors and omissions, workmen's compensation, indemnification of directors and
officers and other similar forms of insurance held by the Company (specifying
the insurer, the amount of coverage, the type of insurance, the policy number
and any pending claims thereunder) and a history of all claims over $5,000 made
by the Company thereunder and the status thereof. All such policies of insurance
are in full force and effect and all premiums with respect thereto are currently
paid and, to the Company's knowledge, no basis exists for termination of any
thereof on the part of the insurer. The Company has not, since its inception,
been denied or had revoked or rescinded any policy of insurance.
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(w) BANK ACCOUNTS; POWERS OF ATTORNEY. Section 3.1(w) of the Company
Disclosure Schedule sets forth a true and complete list of (i) all bank accounts
and safe deposit boxes of the Company and all persons who are signatories
thereunder or who have access thereto and (ii) the names of all persons, firms,
associations, corporations or business organizations holding general or special
powers of attorney from the Company and a summary of the terms thereof.
(x) BROKERS. Except for the fee equal to one and one half percent (1.5%) of
the transaction value due to Janney Montgomery Scott LLC pursuant to a letter
agreement dated April 28, 1999 and as listed on Section 3.1(x) of the Company
Disclosure Schedule, the Company has not, nor have any of its officers,
directors, securityholders or employees, employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
(y) RELATED TRANSACTIONS. No current or former director, officer or
securityholder of the Company that is an affiliate of the Company or any
associate (as defined in the rules promulgated under the Exchange Act (as
defined below)) thereof, is now, or has been since the inception of the Company,
a party to any transaction with the Company (including, but not limited to, any
contract, agreement or other arrangement providing for the furnishing of
services by, or rental of real or personal property from, or borrowing money
from, or otherwise requiring payments to, any such director, officer or
affiliated stockholder of the Company or associate thereof), or the direct or
indirect owner of an interest in any corporation, firm, association or business
organization which is a present or potential competitor, supplier or customer of
the Company (other than non-affiliated holdings in publicly-held companies), nor
does any such person receive income from any source other than the Company which
relates to the business of, or should properly accrue to, the Company.
(z) CUSTOMERS. Section 3.1(z) of the Company Disclosure Schedule sets forth
a true and complete list of the Company's top 100 customers, which customers in
the aggregate accounted for in excess of forty percent (40%) of the Company's
revenues during such period, and which such list includes (i) related dollar
amount sales figure for each such customer and (ii) a description of the items
sold. Nothing has come to the attention of the Company that would cause it to
believe that any of the top ten largest customers has materially reduced or has
the intention of reducing, the dollar amount of its business with the Company or
has terminated, or expressed to the Company any intention of terminating, its
business relationship with the Company.
(aa) EXTENSION OF CREDIT FACILITY; CONSENT OF BANK. The Company has secured
its credit facility with its primary lender for the ninety (90) day period
following the Closing Date. The Company has secured any consent required from
such lender to consummate the Merger.
(bb) MINUTE BOOKS. The minute books of the Company provided to Parent for
review are the Company's true and correct minutes. All Company actions that
required Board action have been duly authorized or ratified.
(cc) BOARD APPROVAL. The Board of Directors of the Company has unanimously
(i) approved this Agreement, the Merger and each of the Related Agreements to
which the Company is a party and the transactions contemplated hereby and
thereby, (ii) determined
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that the Merger is in the best interests of the stockholders of the Company and
is on terms that are fair to such stockholders of the Company and (iii)
recommended that the stockholders of the Company approve the Merger in
accordance with the Pennsylvania Statute.
(dd) VOTE REQUIRED. The affirmative vote of at least (i) a majority of the
outstanding shares of Common Stock and a majority of the outstanding shares of
Series A Stock, voting together as a single class and (ii) a majority of the
outstanding shares of Series A Stock, voting as a separate class, approving this
Agreement and Merger is the only vote of the holders of any class or series of
the Company's capital stock necessary to approve this Agreement, the Merger and
the transactions contemplated hereby and thereby.
(ee) INFORMATION SUPPLIED. None of the information supplied, or to be
supplied, by the Company or any Stockholder for inclusion or incorporation by
reference in the Stockholders' Materials will, at the dates mailed to the
Stockholders and at the effective date of the Stockholder Action, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Stockholders'
Materials will comply as to form in all material respects with the provisions of
all applicable laws, rules and regulations of all Governmental Authorities.
(ff) DISCLOSURE. Neither Section 3.1 of this Agreement (including the
Company Disclosure Schedule) nor any document, written information, statement,
financial statement, certificate or exhibit furnished or to be furnished to
Parent or Acquisition Sub by or on behalf of the Company or any securityholder
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements or
facts contained herein and therein not misleading in light of the circumstances
under which they were made.
(gg) KNOWLEDGE DEFINITION. As used in this Article III, the term
"knowledge" and like phrases shall mean and include (i) actual knowledge and
(ii) that knowledge which a prudent business person (including the officers,
directors, and Key Employee) could have obtained in the management of his or her
business affairs after making due inquiry and exercising due diligence with
respect thereto. In connection therewith, the knowledge (both actual and
constructive) of any officer, director, or Key Employee of the Company shall be
imputed to be the knowledge of the Company.
3.2 SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each of the
Stockholders, severally (and not jointly) represents and warrants to Parent,
Acquisition Sub and the Company with respect to himself or itself as follows:
(a) TITLE; ABSENCE OF CERTAIN AGREEMENTS. Such Stockholder is the lawful
and record and beneficial owner of, and has good and marketable title to the
shares of Company Stock set forth opposite the name of such Stockholder in
Section 3.2(a) of the Company Disclosure Schedule, with the full power and
authority to vote such Company Stock and transfer and otherwise dispose of such
Company Stock, and any and all rights and benefits incident to the ownership
thereof free and clear of all Encumbrances, and there are no agreements or
understandings between such Stockholder and the Company and/or any other
Stockholder or any
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other person with respect to the voting, sale or other disposition of Company
Stock or any other matter relating to Company Stock, except for the Stockholder
Agreements.
(b) ORGANIZATION, GOOD STANDING AND POWER. In the case of any Stockholder
that is not a natural person, such Stockholder is duly organized or formed and
validly existing under the laws of the jurisdiction of its incorporation or
formation and has the corporate or other organizational power and authority
under such laws to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
(c) AUTHORITY - GENERAL. Such Stockholder has full and absolute power and
authority to enter into this Agreement and, if applicable, each Related
Agreement being executed and delivered by such Stockholder simultaneously
herewith and this Agreement and each Related Agreement to which such Stockholder
is a party, and has, in the case of a Stockholder that is not a natural person,
been duly authorized by all requisite action on the part of such Stockholder;
and this Agreement and each Related Agreement to which such Stockholder is a
party has been duly executed and delivered by such Stockholder, and is the valid
and binding obligation of such Stockholder, enforceable against such Stockholder
in accordance with its terms. Neither the execution, delivery and performance of
this Agreement and each Related Agreement to which such Stockholder is a party,
nor the consummation of the transactions contemplated hereby or thereby nor
compliance by such Stockholder with any of the provisions hereof or thereof will
(i) (A) conflict with, (B) result in any violations of, (C) cause a default
under (with or without due notice, lapse of time or both), (D) give rise to any
right of termination, amendment, cancellation or acceleration of any obligation
contained in or the loss of any material benefit under or (E) result in the
creation of any Encumbrance upon or against any assets, rights or property of
the Company (or against any Company Stock, Parent capital stock or common stock
of the Surviving Corporation), under any term, condition or provision of (x) any
agreement or instrument to which such Stockholder is a party, or by which such
Stockholder or any of his or its properties, assets or rights may be bound, (y)
any law, statute, rule, regulation, order, writ, injunction, decree, permit,
concession, license or franchise of any Governmental Authority applicable to
such Stockholder or any of his or its properties, assets or rights or (z) in the
case of any Stockholder that is not a natural person, such Stockholder's Charter
or by-laws, as amended through the date hereof, which conflict, breach, default
or violation or other event would prevent the consummation of the transactions
contemplated by this Agreement or any Related Agreement to which such
Stockholder is a party. No permit, authorization, consent or approval of or by,
or any notification of or filing with, any Governmental Authority or other
person is required in connection with the execution, delivery and performance by
such Stockholder of this Agreement, each Related Agreement to which such
Stockholder is a party or the consummation by such Stockholder of the
transactions contemplated hereby or thereby.
(d) INVESTMENT REPRESENTATIONS.
(i) Such Stockholder:
(A) is acquiring the Merger Shares being issued to such
Stockholder for such Stockholder's own account and, except as listed
on Section 3.2(d) of the Company Disclosure Schedule, not as a nominee
or agent for any other person and with no present intention of
distributing or reselling such shares or any part
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thereof in any transactions that would be in violation of the
Securities Act or any state securities or "blue-sky" laws;
(B) understands (1) that the Merger Shares to be issued to him or
it have not been registered for sale under the Securities Act or any
state securities or "blue-sky" laws in reliance upon exemptions
therefrom, (2) that such Merger Shares must be held indefinitely and
not sold until such shares are registered under the Securities Act and
any applicable state securities or "blue-sky" laws, unless an
exemption from such registration is available, (3) that, except as
provided in the Registration Rights Agreement, Parent is under no
obligation to so register such Merger Shares and (4) that the
certificates evidencing such Merger Shares will be imprinted with a
legend in the form set forth in Section 7.2(b) that prohibits the
transfer of such shares, except as provided in Section 7.2;
(C) has been furnished with, and has read and reviewed, the
Parent SEC Documents;
(D) has had an opportunity to ask questions of and has received
satisfactory answers from the officers of Parent or persons acting on
Parent's behalf concerning Parent and the terms and conditions of an
investment in Parent Common Stock;
(E) is aware of Parent's business affairs and financial condition
and has acquired sufficient information about Parent to reach an
informed and knowledgeable decision to acquire the Merger Shares to be
issued to him or it;
(F) can afford to suffer a complete loss of his or its investment
in such Merger Shares;
(G) is familiar with the provisions of Rule 144 promulgated under
the Securities Act which, in substance, permits limited public resale
of "restricted securities" acquired, directly or indirectly, from the
issuer thereof, in a non-public offering subject to the satisfaction
of certain circumstances which require among other things: (1) the
availability of certain public information about the issuer, (2) the
resale occurring not less than one year after the party has purchased,
and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-
affiliate who has held the securities less than two years, the amount
of securities being sold during any three month period not exceeding
the specified limitations stated therein, if applicable and (3) the
sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said
term is defined under the Exchange Act);
(H) understands that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the
fact that Rule 144 is not exclusive, the staff of the SEC has
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expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than
pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers
who participate in such transactions do so at their own risk;
(I) has either alone or, in the case of those Stockholders
identified in Section 3.2 (d) of the Company Disclosure Schedule,
together with such Stockholder's "Purchaser Representative" (as such
term is defined in Rule 501(h), as promulgated under the Securities
Act, as to each such Purchaser, a "Purchaser Representative"), such
knowledge and experience in financial and business matters that he or
it is capable of evaluating the merits and risks of acquiring and
holding shares of Parent Common Stock; and
(ii) Such Stockholder is an "accredited investor" within the meaning
of Rule 501(a) under the Securities Act. If such Stockholder is identified
in Section 3.2 (d) of the Company Disclosure Schedule, such Stockholder is
being advised by a Purchaser Representative in connection with the
transactions contemplated hereby.
(e) BROKERS. Except as set forth in Section 3.2(e) of the Stockholders'
Disclosure Schedule, no Stockholder has, nor have any of their officers,
directors, securityholders or employees (if any) employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby.
3.3 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB. Parent
and Acquisition Sub represent and warrant to the Company as follows:
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Each of Parent
and Acquisition Sub (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and (ii) has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted, to enter into this
Agreement and each of the Related Agreements to which it is a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Parent has delivered to the Company true and
complete copies of the Charter and by-laws of each of Parent and Acquisition
Sub.
(b) CAPITAL STOCK. Parent's Annual Report on Form 10-K filed with the SEC
with respect to the fiscal year ended February 29, 2000 (the "Form 10-K"), sets
forth a true and complete description of the authorized and outstanding shares
of capital stock of Parent as of such date. Parent has duly authorized and
reserved for issuance the Merger Shares, and, when issued in accordance with the
terms of Article II, the Merger Shares will be validly issued, fully paid and
nonassessable and free of preemptive rights. There exist a sufficient number of
authorized but unissued shares of Parent Common Stock to allow for the exercise
in full of the Assumed Options. Parent owns all the outstanding shares of
capital stock of Acquisition Sub, and all of such shares are validly issued,
fully paid and nonassessable and not subject to preemptive rights.
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(c) AUTHORITY. The execution, delivery and performance by Parent of this
Agreement and each of the Related Agreements to which it is a party and the
execution, delivery and performance of this Agreement by Acquisition Sub and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Parent and
Acquisition Sub, respectively. This Agreement and each of the Related Agreements
to which Parent is a party are valid and binding obligations of Parent,
enforceable against Parent in accordance with their respective terms; and this
Agreement is the valid and binding obligations of Acquisition Sub, enforceable
against Acquisition Sub in accordance with its respective terms. Neither the
execution, delivery and performance by Parent of this Agreement and the Related
Agreements to which Parent is a party, the execution, delivery and performance
of this Agreement by Acquisition Sub, nor the consummation of the transactions
contemplated hereby or thereby, will in any material respect (A) conflict with,
(B) result in any material violations of, (C) cause a material default under
(with or without due notice, lapse of time or both), (D) give rise to any
material right of termination, amendment, cancellation or acceleration of any
obligation contained in or the loss of any material benefit under, (E) result in
the creation of any material Encumbrance on or against any assets, rights or
property of Parent or Acquisition Sub, as the case may be, under any term,
condition or provision of (x) any material instrument or agreement to which
Parent or Acquisition Sub is a party, or by which Parent or Acquisition Sub or
any of their respective properties, assets or rights may be bound, (y) any
material law, statute, rule, regulation, order, writ, injunction, decree,
permit, concession, license or franchise of any Governmental Authority
applicable to Parent or Acquisition Sub or any of their respective properties,
assets or rights or (z) Parent's or Acquisition Sub's Charter or by-laws, as
amended through the date hereof, respectively, in each case, which conflict,
breach, default or violation or other event would prevent the consummation of
the transactions contemplated by this Agreement or any Related Agreement to
which Parent or Acquisition Sub is a party. Except as contemplated by this
Agreement, no permit, authorization, consent or approval of or by, or any
notification of or filing with, any Governmental Authority or other person is
required in connection with the execution, delivery and performance by Parent or
Acquisition Sub of this Agreement or the Related Agreements to which they are a
party or the consummation of the transactions contemplated hereby or thereby,
other than (i) the filing with the SEC of such reports and information under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated by the SEC thereunder, as may be required in
connection with this Agreement and the transactions contemplated hereby, (ii)
the filing of such documents with, and the obtaining of such orders from,
various state securities and blue-sky authorities as are required in connection
with the transactions contemplated hereby, (iii) the filing of the this
Agreement or a certificate or articles of merger with the Secretary of State of
the State of Delaware and the Pennsylvania Corporation Commission and (iv) such
other consents, waivers, authorizations, filings, approvals and registrations
which if not obtained or made would materially impair the ability of Parent or
Acquisition Sub to consummate the transactions contemplated by this Agreement,
including, without limitation, the Merger (each of the actions reflected in
clauses (i), (ii) and (iii) to be taken by Parent).
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(d) SEC DOCUMENTS.
(i) As of their respective filing dates, or in the case of
registration statements, their respective effective dates, none of the
documents or reports filed by Parent with the SEC ("Parent SEC Documents")
(including all exhibits and schedules thereto and documents incorporated by
reference therein) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and the Parent SEC Documents
complied when filed, or in the case of registration statements, as of their
respective effective dates, in all material respects with the then
applicable requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations promulgated by the SEC
thereunder.
(ii) All financial statements (including the notes thereto) of Parent
included in Parent SEC Documents complied as to form in all material
respects with the then applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP during the periods involved and fairly present the
financial position of Parent as at the dates thereof and the results of
their operations, stockholders' equity and cash flows for the period then
ended.
(e) TAX MATTERS. To the Knowledge of the Parent, neither the Parent nor
any of its Affiliates has taken or agreed to take any action, failed to take any
action or is aware of any fact or circumstance that would prevent the Merger
from constituting a reorganization within the meaning of Section 368(a) of the
Code or that would prevent the Merger Shares from qualifying as stock within the
meaning of Section 354 of the Code rather than as "other property" within the
meaning of Section 356 of the Code.
ARTICLE IV
RELATED AGREEMENTS
4.1 RELATED AGREEMENTS. In connection with the execution and delivery of
this Agreement, the following agreements (such agreements, together with the
General Indemnity Escrow Agreement and the Specific Indemnity Escrow Agreement
being herein collectively referred to as the "Related Agreements") are being
executed and delivered by the respective parties thereto:
(a) EMPLOYEES. At Closing, each (i) equityholder of the Company who is
expected to be an employee of Parent or the Surviving Corporation upon the
Closing and (ii) employee of the Company who is expected to accept employment
with Parent or the Surviving Corporation subsequent to the Closing, will enter
into an Employee Confidentiality and Inventions Agreement, effective as of the
Effective Time, in the form of EXHIBIT C-1 attached hereto (the "Employee
Confidentiality Agreement"), providing for, among other things, non-disclosure
of confidential information and ownership of proprietary information and
rights. Bryn Kaufman, Sean McGilloway and Eric Lorenzoni will, as of the
Effective Time, enter into employment agreements, in the forms of EXHIBIT C-2,
C-4 AND C-5, respectively ("Employment Agreements"). Jeffrey Harrow will, as of
the Effective Time, enter into a non-competition and non-solicitation
agreement, in the form of EXHIBIT C-6 (the "Non-Compete Agreement"). The
salespersons listed on Schedule 4.1(a) hereto who are expected to be employees
of Parent or the Surviving Corporation upon the Closing will enter into an
Employee Confidentiality, Inventions and Non-Competition Agreement in the form
of EXHIBIT C-7.
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(b) INDEMNITY ESCROW AGREEMENTS. At Closing, each of Parent, the
Stockholders' Committee and the Indemnity Escrow Agent will enter into the
General Indemnity Escrow Agreement in the form of EXHIBIT B-1 and the Specific
Indemnity Escrow Agreement in the form of EXHIBIT B-2.
(c) LOCK UP AGREEMENTS. At Closing, Bryn Kaufman is entering into a lock
up agreement, effective as of the Effective Time, in the form of EXHIBIT D-1,
whereby twenty (20%) of the Merger Shares he will receive at the Closing
(exclusive of the 10% held pursuant to the General Indemnity Escrow Agreement
and 5% held pursuant to the Specific Indemnity Escrow Agreement) will be
released from restrictions on transfer every three (3) months beginning on the
fourth (4th) month anniversary of the Closing Date. At Closing, Jeffrey K.
Harrow, Liberty Ventures I, L.P. and Janney Montgomery Scott LLC, as nominee,
are entering into individual lock up agreements, effective as of the Effective
Time, in the form of EXHIBIT D-2 attached hereto (together with Bryn Kaufman's
agreement, the "Lock Up Agreements"), whereby twenty-five (25%) of the Merger
Shares each will receive at the Closing (exclusive of the 10% held pursuant to
the General Indemnity Escrow Agreement and 5% held pursuant to the Specific
Indemnity Escrow Agreement) will be released from restrictions on transfer every
three (3) months beginning on the fourth (4th) month anniversary the Closing
Date.
(d) REGISTRATION RIGHTS AGREEMENTS. At Closing, each of the stockholders
of the Company and the Parent are entering into a Registration Rights Agreement
effective as of the Effective Time, in the form of EXHIBIT E attached hereto
(collectively, the "Registration Rights Agreements"), providing for registration
rights with respect to the Merger Shares.
(e) RELEASE AGREEMENTS. At Closing, each Stockholder, option holder,
warrant holder, and employee of the Company is entering into a Release
Agreement, effective as of the Effective Time, in the form of EXHIBIT F attached
hereto (the "Release Agreements"), providing for, among other things, release of
the Company, Parent and Parent's affiliates from any and all claims, known and
unknown, that such Stockholder may have against the Company through the
Effective Time.
(f) STOCKHOLDER AGREEMENT. Simultaneous with the execution and delivery
of this Agreement, each of the Stockholders of the Company identified on
Schedule I hereto is entering into a Stockholder Agreement with Parent,
effective as of the date hereof, in the form of EXHIBIT G attached hereto
(collectively, the "Stockholder Agreements"), pursuant to which, among other
things, such Stockholder shall agree to vote in favor of or consent in writing
to the Merger and shall not transfer their shares of Company Common Stock except
in accordance with the Stockholder Agreement.
(g) TERMINATION AGREEMENT. At Closing, each of the Stockholders of the
Company identified on Schedule 4.1(g) attached hereto is entering into a
Termination Agreement, effective as of the Effective Time, with respect to the
agreement(s) to which such Stockholders and the Company are a party, each in the
Form of EXHIBIT H attached hereto (the "Termination Agreement").
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ARTICLE V
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME;
ADDITIONAL AGREEMENTS
5.1 ACCESS TO RECORDS AND PROPERTIES OF EACH PARTY; CONFIDENTIALITY. From
and after the date hereof until the Effective Time or the earlier termination of
this Agreement pursuant to Section 9.1 hereof (the "Executory Period"), the
Company and the Stockholders shall permit Parent and its consultants and
professional advisors to conduct, and assist Parent and its consultants and
professional advisors in the conduct of, a full and complete investigation of
the Company's business and technology including, without limitation, a market
and competitive products and technology analysis and a review of the Company's
books and records, contracts, technology, intellectual property, inventory,
equipment, technical materials, customer records and other assets, reasonable,
non-disruptive access to, and communications with current and former employees
of the Company (the "Investigation"). The Investigation shall be conducted
during normal business hours. Under no circumstances shall any information
disclosed by the Stockholders or the Company to Parent, or otherwise in Parent's
possession, on or before the Effective Time, limit or restrict in any manner any
right of Parent to terminate this Agreement upon the terms and conditions
herein. All such information shall be subject to the confidentiality agreements
currently existing between the parties; the Investigation shall not give Parent
the right to use any disclosed or discovered information beyond the scope of
these provisions or agreements or any applicable license agreement.
5.2 OPERATION OF BUSINESS OF THE COMPANY. During the Executory Period,
the Company shall operate its business as now operated and only in the normal
and ordinary course and, consistent with such operation, will use its best
efforts to preserve intact its business and assets, to keep available the
services of its officers and employees and to maintain satisfactory
relationships with persons having business dealings with it. Without limiting
the generality of the foregoing, during the Executory Period, the Company shall
not, without the prior written consent of Parent, (a) take any action that would
result in any of the representations and warranties of the Company herein
becoming untrue in all material respects (except for any representation or
warranty that by its terms is qualified by materiality, in which case it shall
be true and correct in all respects) or in any of the conditions to the Merger
not being satisfied, or (b) take or cause to occur any of the actions or
transactions described in Section 3.1(g)(iii) through (xix), except as disclosed
in Section 3.1(g) of the Company Disclosure Schedule.
5.3 NEGOTIATION WITH OTHERS. During the Executory Period, the Company
shall not (and the Company shall not permit the Company's employees, directors,
officers, advisors, consultants or agents to), and each of the Stockholders
shall not, directly or indirectly: (i) solicit, initiate or engage in any
discussions or negotiations with, whether or not initiated by the Company or any
such Stockholder, or provide any information to, or take any other action with
the intent to facilitate the efforts of, any third party relating to any
possible agreement (whether binding or in principle) or other arrangement
involving (1) the acquisition of the Company (whether by way of merger, purchase
of capital stock, purchase of assets or otherwise); (2) any financing of, or
investment in, including the purchase of any capital stock in, the Company; (3)
the sale, license, disposition or encumbrance of any Intellectual Property of
the Company; or (4) any action or agreement that would otherwise be inconsistent
with the terms of this Agreement, or the Related
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Agreements or that would prohibit the performance of the Company's or the
Stockholders' obligations under this Agreement or the Related Agreements or that
could reasonably be expected to materially diminish the likelihood of or render
impracticable or undesirable the consummation of the Merger (each, a "Prohibited
Transaction"); or (ii) authorize or consummate a Prohibited Transaction. In
addition, upon execution and delivery of this Agreement, the Company and each
Stockholder shall: (i) terminate any and all discussions, if any, it or he may
be having regarding a Prohibited Transaction; and (ii) promptly notify Parent in
writing if it or he thereafter receives any inquiries or offers from any person
or entity regarding a Prohibited Transaction, which notice shall contain the
identity of such person or entity, the nature of the Prohibited Transaction
proposed and the material terms of the proposal, and the Company and each
Stockholder shall refuse to discuss, and promptly reject such inquiry or offer.
5.4 DISSENTING STOCKHOLDERS. Prior to the Closing, the Company shall give
Parent (a) prompt notice of any demand by stockholders (the "Dissenting
Stockholders") for appraisal of their shares of Company Stock in accordance with
the Pennsylvania Statute and (b) the opportunity to direct all negotiations and
proceedings with respect to any such demands. Prior to the Closing, the Company
shall not, except with the prior written consent of Parent, voluntarily make any
payment with respect to, or settle or offer to settle, any such demands for
payment.
5.5 PREPARATION OF FILINGS. As promptly as practicable after the date of
this Agreement, Parent and the Company shall properly prepare and file any
filings required under the Exchange Act, the Securities Act or any other Federal
or state laws and Parent shall properly prepare and file any filings required
under state securities or "blue sky" laws, in each case relating to the Merger
and the transactions contemplated by this Agreement (collectively, the
"Filings"). The Company shall promptly furnish Parent with all information
concerning the Company and the stockholders of the Company as may be reasonably
requested by Parent in connection with any action contemplated by this Section
5.5. The Parent and the Company will notify the other promptly of the receipt of
any comments from any government officials for amendments or supplements to any
Filing or for additional information and will supply the other with copies of
all correspondence between such party or any of its representatives, on the one
hand, and any government officials, on the other hand, with respect to the
Merger or any Filing. The Parent and the Company shall promptly provide the
other (or its counsel) with copies of all filings made by such party with any
Governmental Authority in connection with this Agreement and the transactions
contemplated hereby and thereby. The Filings shall comply in all material
respects with all applicable requirements of law. Whenever any event occurs
which should be set forth in an amendment or supplement to any Filing, Parent or
the Company, as the case may be, shall promptly inform the other party of such
occurrence and cooperate in filing with any government officials, and/or mailing
to the Stockholders, such amendment or supplement.
5.6 ADVICE OF CHANGES. During the Executory Period, the Company shall
confer with Parent on a regular and frequent basis, report on operational
matters and promptly advise Parent of any change, event or circumstance having,
or which, insofar as can reasonably foreseen, could have a Company Material
Adverse Effect or which could impair (negatively or positively) its financial
projections or forecasts.
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5.7 STOCKHOLDER APPROVAL. The Company shall (a) obtain in compliance with
applicable law and the Company's Charter and By-laws the requisite approval of
the stockholders of the Company after the mailing of the Stockholders' Materials
or by written consent for the purpose of obtaining the approval of the Merger,
this Agreement and the transactions contemplated hereby (in either case, the
"Stockholder Action"), (b) take or cause to be taken all such other action as
may be required by the Pennsylvania Statute and any other applicable law in
connection with the Merger and this Agreement, in each case as promptly as
possible and (c) reasonably cooperate with and assist Parent and its
representatives in taking any such actions as may reasonably be required to
consummate the Merger, including obtaining the consent and approval of any third
parties or governmental agencies. In connection with the Stockholder Action, the
Company's Board of Directors shall unanimously recommend that the Stockholders
of the Company consent in writing to the Merger and the approval and adoption of
this Agreement and shall take all reasonable actions necessary to solicit such
approval. The Company shall prepare and distribute any written notice and other
materials relating to the Stockholders' Action, in accordance with the Charter
and by-laws of the Company, the Pennsylvania Statute and any other Federal and
state laws relating to the Merger or any other transaction relating to or
contemplated by this Agreement (collectively, the "Stockholders' Materials");
provided, however, that all Stockholders' Materials shall be in form and
substance reasonably satisfactory to Parent and its counsel; and provided
further, that if any event occurs that should be set forth in an amendment or
supplement to any Stockholders' Materials, the Company shall promptly inform
Parent thereof (or, if such event relates solely to Parent, Parent shall
promptly inform the Company thereof), and the Company shall promptly prepare an
amendment or supplement in form and substance satisfactory to Parent in
accordance with the Charter and by-laws of the Company, the Pennsylvania Statute
and any other Federal or state laws.
5.8 LEGAL CONDITIONS TO MERGER. Each party hereto shall take all
reasonable actions necessary to comply promptly with all legal requirements that
may be imposed on such party with respect to the Merger and will take all
reasonable actions necessary to cooperate with and furnish information to the
other party or parties, as the case may be, in connection with any such
requirements imposed upon such other party or parties in connection with the
Merger. Each party hereto shall take all reasonable actions necessary (a) to
obtain (and will take all reasonable actions necessary to promptly cooperate
with the other party or parties in obtaining) any consent, authorization, order
or approval of, or any exemption by, any Governmental Authority, or other third
party, required to be obtained or made by such party (or by the other party or
parties) in connection with the Merger or the taking of any action contemplated
by this Agreement, (b) to defend, lift, rescind or mitigate the effect of any
lawsuit, order, injunction or other action adversely affecting the ability of
such party to consummate the transactions contemplated hereby and (c) to fulfill
all conditions precedent applicable to such party pursuant to this Agreement.
5.9 EFFORTS TO CONSUMMATE. Subject to the terms and conditions herein
provided, the parties hereto shall use their respective best efforts to do or
cause to be done all such acts and things as may be necessary, proper or
advisable, consistent with all applicable laws and regulations, to consummate
and make effective the transactions contemplated hereby and to satisfy or cause
to be satisfied all conditions precedent that are set forth in Article VI as
soon as reasonably practicable, provided, however, that neither Parent nor any
of its affiliates shall be under any obligation to (x) make proposals, execute
or carry out agreements or submit to orders providing for the sale or other
disposition or holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets of Parent, any of its
affiliates, the Company or the holding separate of the Company Stock or imposing
or seeking to impose any limitation on the ability of Parent or any of its
subsidiaries or affiliates to conduct their business or own such assets or to
acquire, hold or exercise full rights of ownership of the shares Company Stock.
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5.10 NOTICE OF PROSPECTIVE BREACH. Each party hereto shall immediately
notify the other parties in writing upon the occurrence of any act, event,
circumstance or thing that is reasonably likely to cause or result in a
representation or warranty hereunder to be untrue at the Closing, the failure of
a closing condition to be achieved at the Closing, or any other breach or
violation hereof or default hereunder.
5.11 PUBLIC ANNOUNCEMENTS. The parties hereto agree that, to the maximum
extent feasible, but subject to the public disclosure and other legal
obligations of Parent and regulatory obligations to which each may be subject,
they shall advise and confer prior to the issuance (and provide copies to the
other party prior to issuance) of any public announcement or reports or
statements with respect to the Merger; provided, however, that neither the
Company nor Parent or Acquisition Sub will issue any report, statement or
release pertaining to this Agreement or any transaction contemplated hereby,
without the prior written consent of the other parties.
5.12 SUPPORT OF MERGER BY OFFICERS AND DIRECTORS. The Company shall use
its best efforts to cause all of its officers and directors to support the
Merger and to take all actions and execute all documents reasonably requested by
the other parties hereto to carry out the intent of the parties with respect to
the transactions contemplated hereby.
5.13 MANAGEMENT AND EMPLOYEES. Parent shall have the right to discuss and
secure satisfactory assurances from management and certain other existing key
employees of the Company that they will continue to be employed by the Surviving
Corporation following the consummation of the Merger.
5.14 FINANCIAL STATEMENTS. The Company will provide Parent at or prior to
the Effective Time with an unaudited balance sheet of the Company as of August
31, 2000.
5.15 GUARANTEES. The Company, Parent and Bryn Kaufman will use all
reasonable efforts to obtain promptly the release of the guarantee obligations
of Bryn Kaufman, or Mr. Kaufman's substitution for such guarantor, with respect
to all guaranty, surety and other similar obligations relating to the
obligations of the Company or its business. Parent agrees to indemnify, defend
and hold harmless Bryn Kaufman from and against any and all losses, costs,
damages, obligations, claims, liabilities, expenses (including reasonable
attorneys' fees and expenses) and causes of action relating to, resulting from,
or arising out of, any such guarantee, surety and other similar obligation.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The obligations of each party
to perform this Agreement and to effect the Merger are subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by all parties hereto:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
duly and validly approved and adopted by the directors and stockholders of the
Company in accordance with the Delaware Statute and the Pennsylvania Statute and
the Company's Charter and By-laws, and this Agreement or a certificate/articles
of merger shall have been executed and delivered by Acquisition Sub and the
Company and filed with and accepted by the Secretary of State of the State of
Delaware and the Pennsylvania Corporation Bureau.
(b) APPROVALS. All authorizations, consents, orders or approvals of,
declarations, registrations or filings with or expiration of waiting periods
imposed by any Governmental Authority necessary for the consummation of the
transactions contemplated hereby shall have been obtained or made or shall have
occurred.
(c) LEGAL ACTION. No temporary restraining order, preliminary injunction
or permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any Federal or state court or other Governmental
Authority and remain in effect.
(d) LEGISLATION. No Federal, state, local or foreign statute, rule or
regulation shall have been enacted which prohibits, restricts or delays the
consummation of the transactions contemplated by this Agreement or any of the
conditions to the consummation of such transactions.
(e) TAX OPINIONS. Parent and the Company shall have received written
opinions of Parent's legal counsel and the Company's legal counsel,
respectively, to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, and such opinions shall not
have been withdrawn. In rendering such opinions, counsel shall be entitled to
rely upon, among other things, reasonable assumptions as well as representations
of Parent, Acquisition Sub and the Company, and Parent Acquisition Sub and the
Company agree to provide reasonable and customary representations in connection
with the issuance of such opinions.
6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION SUB. The
obligations of Parent to perform this Agreement and of Acquisition Sub to
perform this Agreement are subject to the satisfaction of the following
conditions unless waived (to the extent such conditions can be waived) by Parent
and Acquisition Sub:
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.
The representations and warranties of the Company and the Stockholders set forth
in Sections 3.1 and 3.2 hereof, respectively, shall be true and correct in all
material respects (except for any representation or warranty that by its terms
is qualified by materiality, in which case it shall be true and correct in all
respects) as of the date of this Agreement, and as of the Closing Date as though
made at and as of such dates, respectively, and Parent and Acquisition Sub shall
have received a certificate signed by the Chief Executive Officer or the Chief
Financial Officer and each Stockholder, respectively, to that effect.
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(b) SECRETARY'S CERTIFICATE. Parent and Acquisition Sub shall have
received a Certificate for the Secretary of the Company certifying the board of
director resolutions and the vote of the stockholders approving the Merger, the
Articles of Incorporation of the Company and the By-laws of the Company.
(c) PERFORMANCE OF OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS. The
Company and the Stockholders shall have performed in all material respects the
obligations required to be performed by it and them, respectively, under this
Agreement prior to or as of the Closing Date, and Parent and Acquisition Sub
shall have received a certificate signed by the Chief Executive Officer or the
Chief Financial Officer on behalf of the Company and each Stockholder,
respectively, to that effect.
(d) AUTHORIZATION OF MERGER. All actions necessary to authorize the
execution, delivery and performance of this Agreement and the Related Agreements
by the Company and the consummation of the Merger and the other transactions
contemplated hereby and thereby shall have been duly and validly taken by the
Board of Directors of the Company, and the Company and the Stockholders shall
have full power and right to effect the Merger on the terms provided herein.
(e) OPINION OF THE COMPANY'S COUNSEL. Parent and Acquisition Sub shall
have received an opinion dated the Closing Date of Morgan, Lewis & Bockius,
counsel to the Company in form and substance reasonably satisfactory to Parent
and Acquisition Sub.
(f) CONSENTS AND APPROVALS. Parent and Acquisition Sub shall have
received duly executed copies of all consents, (except the consent of any
manufacturer) and approvals contemplated by this Agreement or the Company
Disclosure Schedule, in form and substance satisfactory to Parent and
Acquisition Sub.
(g) RELATED AGREEMENTS. Each of the Related Agreements shall be in full
force and effect as of the Effective Time and become effective in accordance
with the respective terms thereof and the actions required to be taken
thereunder by the parties thereto immediately prior to the Effective Time shall
have been taken, and each person or entity who or which is required or
contemplated by the parties hereto to be a party to any Related Agreement who or
which did not theretofore enter into such Related Agreement shall execute and
deliver such Related Agreement.
(h) ABSENCE OF MATERIAL ADVERSE CHANGE. There shall have been no Company
Material Adverse Change prior to the Closing.
(i) RESIGNATION OF DIRECTORS. The directors of the Company immediately
prior to the Effective Time shall have resigned as directors of the Surviving
Corporation effective as of the Effective Time.
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(j) DISSENTERS. All of the stockholders of the Company shall have
consented to the Merger and delivered all of their capital stock to the Parent
in accordance with the terms hereof, and none of the holders of the issued and
outstanding shares of Company Stock shall have exercised, or shall have any
continued right to exercise, appraisal, dissenter's or similar rights of
appraisal under the Pennsylvania Statute.
(k) EMPLOYMENT AGREEMENTS. Each person identified on SCHEDULE 6.2(k)
attached hereto (each a "Key Employee") shall have accepted an offer of
employment with Parent or the Surviving Corporation on terms reasonably
satisfactory to Parent and each such person and executed the applicable form of
Employment Agreement set out in Section 4.1(a).
(l) DEFAULT UNDER AGREEMENTS. The consummation of the transactions
contemplated hereby shall not cause the Company to be in default under any
material agreement or instrument to which it is a party or by which it or any of
its properties are bound, the result of which could have a Company Material
Adverse Effect.
(m) COMPANY EXPENSES. A true, correct and complete schedule (the
"Schedule of Expenses") of all Company Expenses paid or incurred by or on behalf
of the Company through the Closing Date, accompanied by a certificate signed by
the Chief Executive Officer or Chief Financial Officer of the Company certifying
the accuracy and completeness thereof, shall have been delivered by the Company;
and the Company shall have furnished evidence reasonably satisfactory to Parent
that the stockholders of the Company have either paid directly or contributed to
the Company in cash an amount equal, in the aggregate, to the amount of Company
Expenses, subject to the second proviso set forth in Section 10.1 hereof.
(n) SEPTEMBER 30, 2000. The Closing Date shall occur on or before
September 30, 2000.
(o) RELEASE OF NOTEHOLDERS. The Company shall have obtained a signed
release from each of the Noteholders agreeing to forego warrants for Series A
Stock to have been issued in connection with the Bridge Notes.
(p) LICENSE FEES. The Company shall have paid all amounts due under any
license agreement through the Closing Date.
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to perform this Agreement are subject to the satisfaction of the
following conditions unless waived (to the extent such conditions can be waived)
by the Company:
(a) REPRESENTATIONS AND WARRANTIES OF PARENT. The representations and
warranties of Parent and Acquisition Sub set forth in Section 3.3 hereof shall
be true and correct in all material respects (except for any representation or
warranty that by its terms is qualified by materiality, in which case it shall
be true and correct in all respects) as of the date of this Agreement, and as of
the effective date of the Stockholder Action and as of the Closing Date as
though made at and as of such dates, respectively, and the Company shall have
received a certificate signed by Chief Executive Officer or Chief Financial
Officer of Parent and the Chief Executive Officer or Chief Financial Officer of
Acquisition Sub to that effect.
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(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND ACQUISITION SUB. Parent and
Acquisition Sub shall have performed in all material respects their respective
obligations required to be performed by them under this Agreement prior to or as
of the Closing Date and the Company shall have received a certificate signed by
the Chief Executive Officer or Chief Financial Officer of Parent and the Chief
Executive Officer or Chief Financial Officer of Acquisition Sub to that effect.
(c) RELATED AGREEMENTS. Parent shall have executed and delivered the
Related Agreements to which it is a party and all other agreements to which
Parent is to be party pursuant to the terms of Section 4.1.
(d) STOCK CERTIFICATES. Parent shall have delivered a letter to its
transfer agent directing the transfer agent to deliver the Merger Shares.
(e) SECRETARY'S CERTIFICATE. The Company shall have received a
Certificate from the Secretary of Parent and Acquisition Sub certifying the
board of director's resolutions approving the Merger, the stockholder vote on
the Merger, as applicable, the Charters of Parent and Acquisition Sub, and the
By-laws of Parent and Acquisition Sub.
(f) OPINION OF PARENT AND ACQUISITION SUB'S COUNSEL. The Company shall
have received an opinion dated the Closing Date of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., counsel to Parent and Acquisition Sub, in form and
substance reasonably satisfactory to the Company.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 CERTAIN INFORMATION REQUIRED BY THE CODE. Each holder of Company
Stock or Company Options who holds ten percent (10%) or more (by value) of the
interests in the Company immediately prior to the Merger, within the meaning of
Section 1060(e) of the Code, and who, in connection with the Merger, enters into
a Non-Competition Agreement or other agreement with the Company or the Surviving
Corporation (or is related to any person who enters into any such contract or
agreement, within the meaning of Section 267(b) or Section 707(b)(1) of the
Code) shall furnish Parent with any information required pursuant to Section
1060(e) of the Code at such time and in such manner as Parent may request to the
extent necessary to comply with regulations promulgated under Section 1060(e) if
any.
7.2 RESTRICTION ON TRANSFER.
(a) The shares of Parent Common Stock to be issued to each Stockholder of
the Company pursuant to the Merger and any shares of capital stock or other
securities received with respect thereto (collectively, the "Restricted
Securities") shall not be sold, transferred, assigned, pledged, encumbered or
otherwise disposed of (each, a "Transfer") in compliance with the provisions of
the Securities Act. Each Stockholder of the Company shall observe and comply
with the Securities Act and the rules and regulations promulgated by the SEC
thereunder as now in effect or hereafter enacted or promulgated, and as from
time to time amended, in connection with any Transfer of Restricted Securities
beneficially owned by the stockholder.
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(b) Each certificate representing Restricted Securities issued to a
Stockholder of the Company and each certificate for such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions of Sections 7.2(c) and 7.2(d) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES OR "BLUE-SKY" LAWS. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM."
(c) Notwithstanding the foregoing provisions of this Section 7.2, the
restrictions imposed by this Section 7.2 upon the transferability of Restricted
Securities shall cease and terminate when (i) any such shares are sold or
otherwise disposed of pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption therefrom, the securities so
transferred are not required to bear the legend set forth in Section 7.2(b) or
(ii) the holder of such Restricted Securities has met the requirements for
Transfer of such Restricted Securities pursuant to subparagraph (k) of Rule 144.
Whenever the restrictions imposed by this Section 7.2 shall terminate, as herein
provided, the holder of Restricted Securities as to which such restrictions have
terminated shall be entitled to receive from Parent, without expense, a new
certificate not bearing the restrictive legend set forth in Section 7.2(b) and
not containing any other reference to the restrictions imposed by this Section
7.2.
(d) Each Stockholder of the Company understands and agrees that Parent, at
its discretion, may cause stop transfer orders to be placed with its transfer
agent with respect to certificates for Restricted Securities owned by such
Stockholder but not as to certificates for such shares of Parent Common Stock as
to which the legend set forth in paragraph (b) of this Section 7.2 is no longer
required because one or more of the conditions set forth in Section 7.2(c) shall
have been satisfied, in the event of a proposed transfer in violation or breach
of this Section 7.2 or that is or may otherwise be unlawful.
7.3 CONFIDENTIALITY. The Company, and the Stockholders, acknowledge and
recognize that the Subject Business has been conducted or is currently planned
to be conducted by the Company throughout the world, and further acknowledge and
recognize the highly competitive nature of the industry in which the Subject
Business is involved and that, accordingly, in consideration of the premises
contained herein, the consideration to be received hereunder and the direct and
indirect benefits to the Company and the Stockholders of the transactions
contemplated hereby, and in consideration of and as an inducement to Parent and
Acquisition Sub to enter into to this Agreement and to consummate the
transactions contemplated hereby, from and after the Effective Time, the Company
and the Stockholders shall not use or disclose to any Person, any Confidential
Information or the terms and conditions of this Agreement, for any reason or
purpose whatsoever, nor shall it or they make use of any of the Confidential
Information for its own purposes or for the benefit of any Person except (i) in
order to facilitate the fulfillment of such party's obligations hereunder, (ii)
to Parent and the Surviving Corporation, (iii) as required by law or judicial
process, (iv) as required to fulfill legal and regulatory
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obligations, if any or (v) to such party's attorneys, accountants, other
advisors, officers, employees, directors and equityholders, as applicable,
provided that such third party agrees to be bound by the confidentiality
provisions hereof. For purposes of this Agreement, "Confidential Information"
shall mean Intellectual Property Rights of the Company, the Surviving
Corporation or Parent or its affiliates and all information of a proprietary
nature relating to the Company, the Surviving Corporation or Parent or its
affiliates or the Subject Business (other than information that is in the public
domain at the time of receipt thereof by the Company or the Stockholders or
otherwise becomes public other than as a result of the breach by the Company or
the Stockholders of its agreement hereunder or is rightfully received from a
third party without any obligation of confidentiality to Parent or the Company
or is independently developed by the Company or the Shareholders) and the terms
and conditions of this Agreement. As used herein, the term "Subject Business"
shall mean (iv) the business of the Company or such business as is reasonably
related to the business of the Company or is reasonably based on its technology
and (v) the business of Parent or any of its affiliates.
7.4 REGISTRATION RIGHTS. Parent shall use its commercially reasonable
efforts to file, within sixty (60) days following the Closing Date, a
registration statement on Form S-3, as provided in the Registration Rights
Agreement substantially in the form set forth as Exhibit E hereto, with the SEC
covering the resale of the shares of Parent Common Stock issued to holders of
Company Stock pursuant to the Merger. Any such registration shall be subject to
the terms and conditions set forth in the Registration Rights Agreement. Parent
covenants that with respect to information contained in the registration
statement and supplied by Parent in connection therewith, such information will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing covenant of Parent
shall not apply with respect to information contained in the registration
statement and supplied in writing for inclusion in the registration statement by
persons or entities who were Stockholders of the Company immediately prior to
the Effective Time.
7.5 COLLECTION BY PARENT. Parent shall use its commercially reasonable
efforts to collect all of the accounts receivable of the Company existing on the
Closing Date within six (6) months following the Closing Date. In the event
Parent is indemnified by the Stockholders for any accounts receivable (net of
reserves) not collected within such time period, Parent shall continue to use
commercially reasonable efforts to collect such amounts still outstanding for
the benefit of the Stockholders.
7.6 DIRECTORS AND OFFICERS INSURANCE. Parent shall use its commercially
reasonable efforts to obtain directors and officers insurance for the outgoing
directors and officers of the Company for the six-year period after the Closing
Date, provided that the premium paid by Parent for such insurance shall not
exceed $25,000.
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7.7 FEE TO JANNEY MONTOGOMERY SCOTT LLC. Parent shall pay to Janney
Montgomery Scott LLC the amount of Parent Stock equal to $180,000 on the Closing
Date in satisfaction of the Company's obligations to Janney Montgomery pursuant
to a letter agreement dated April 28, 1999.
7.8 MANUFACTURER CONSENTS. The Company shall use its best efforts to
obtain the Microsoft Certified Solution Provider Authorization and Cisco
Systems, Inc authorization, to the extent there is an agreement between the
Company and such party pursuant to which such authorization may be obtained.
ARTICLE VIII
INDEMNIFICATION
8.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "AFFILIATE" as to any person means any entity, directly or indirectly,
through one or more intermediaries, controlling, controlled by or under common
control with such person.
(b) "GENERAL EVENT OF INDEMNIFICATION" shall mean the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty contained in Section 3.1, 3.2 or 3.3 of this Agreement, or in the
Company Disclosure Schedule, any Exhibit or Schedule hereto or any document
delivered in connection herewith; or
(ii) the breach of any agreement or covenant of the Company, or the
Stockholders contained in this Agreement or in the Company Disclosure
Schedule, any Exhibit hereto or any document delivered in connection
herewith.
(iii) Notwithstanding the foregoing, any Losses in connection with
the MicroWarehouse Litigation shall not be considered a General Event of
Indemnification.
(c) "INDEMNIFIED PERSONS" shall mean and include Parent, Acquisition Sub
and the Surviving Corporation and their respective Affiliates, successors and
assigns, and the respective officers and directors of each of the foregoing.
(d) "INDEMNIFYING PERSONS" shall mean and include each of the Stockholders
and its or his respective successors, assigns, heirs and legal representatives
and estate.
(e) "LOSSES" shall mean any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants' fees),
assessments, Taxes (including interest or penalties thereon) sustained, suffered
or incurred by any Indemnified Person arising from or in connection with any
such matter that is the subject of indemnification under Section 8.2 hereof.
(f) "MICROWAREHOUSE LITIGATION" shall have the meaning ascribed to such
term in Section 2.2(a) of this Agreement.
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8.2 INDEMNIFICATION GENERALLY.
(a) The Indemnifying Persons shall indemnify the Indemnified Persons from
and against any and all Losses arising from or in connection with any General
Event of Indemnification, which shall first be paid from the General Indemnity
Escrow Fund (as provided for and defined in the General Indemnity Escrow
Agreement) and then by each Indemnifying Person from amounts not contained in
the General Indemnity Escrow Fund; provided that: (i) the indemnification
obligations of the Stockholders beyond amounts deposited in the Escrow Fund
shall be limited to their pro-rata portion of the Aggregate Consideration; (ii)
the Stockholders shall have no indemnification obligations for Losses resulting
from breaches by other Stockholders of Sections 3.2(a)-(e), except to the extent
of amounts deposited in the Escrow Fund; and (iii) the total amount of Losses
for which the Indemnifying Persons shall indemnify the Indemnified Persons in
connection with any General Event of Indemnification (exclusive of any amount
recovered from the General Indemnity Escrow Fund and exclusive of any amount
recovered pursuant to Section 8.2(b) of this Section) shall be limited to thirty
percent (30%) of the Aggregate Consideration and reasonable attorneys' fees.
(b) The Indemnifying Persons shall indemnify the Indemnified Persons from
and against any and all Losses arising from or in connection with the
MicroWarehouse Litigation, which shall first be paid from the Specific Indemnity
Escrow Fund (as provided for and defined in the Specific Indemnity Escrow
Agreement) and then by each Indemnifying Person from amounts not contained in
the Specific Indemnity Escrow Fund; provided that: (i) the indemnification
obligations of Stockholders beyond amounts deposited in the Escrow Fund shall be
limited to their pro-rata portion of the Aggregate Consideration, (ii) the total
amount of Losses for which the Indemnifying Persons shall indemnify the
Indemnified Persons in connection with the MicroWarehouse Litigation (exclusive
of any amount recovered from the Specific Indemnity Escrow Fund and exclusive of
any amount recovered pursuant to Section 8.1(a) of this Section) shall be
limited to thirty percent (30%) of the Aggregate Consideration and reasonable
attorneys' fees and (iii) if, subsequent to the Effective Time, Parent
intentionally fails to honor, or intentionally causes CMP to fail to honor, the
letter agreement between the Company and MicroWarehouse dated July 7, 1999 (the
"Settlement Agreement"), as such Settlement Agreement now exists, the provisions
of this Section 8.2(b) shall no longer apply and Parent shall instruct the
Indemnity Escrow Agent to release the Specific Indemnity Escrow Fund to the
Stockholders within five (5) business days of such failure and shall indemnify
the parties to the Settlement Agreement for actual losses incurred which are
directly related to Parent's failure to honor such Settlement Agreement.
(c) Notwithstanding the foregoing, the Indemnified Persons shall not be
entitled to indemnification pursuant to this Article VIII with respect to any
Losses until the aggregate amount of such losses under subsections (a) and (b)
exceeds $150,000 (the "Threshold Amount"), whereupon the Indemnified Persons
shall be entitled to indemnification for all Losses, including the Threshold
Amount.
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(d) Notwithstanding any of the foregoing, nothing contained in this
Section 8.2 shall in any way limit, impair, modify or otherwise affect the
rights of the Indemnified Persons (including rights available under the
Securities Act or the Exchange Act) nor shall there be any limitation of
liability of Indemnifying Persons in connection with any of such rights of the
Indemnified Persons (A) to bring any claim, demand, suit or cause of action
otherwise available to the Indemnified Persons based upon an allegation or
allegations that the Company and/or the Indemnifying Persons, or any of them,
had an intent to defraud or made a willful, intentional or reckless
misrepresentation or willful omission of a material fact in connection with this
Agreement or the Related Agreements and the transactions contemplated hereby or
thereby or (B) to enforce any judgment of a court of competent jurisdiction
which finds or determines that the Company and/or the Indemnifying Persons, or
any of them, had an intent to defraud or made a willful misrepresentation or
omission of a material fact in connection with this Agreement and the
transactions contemplated hereby.
8.3 ASSERTION OF CLAIMS. No claim shall be brought under Section 8.2
hereof unless the Indemnified Persons, or any of them, at any time prior to the
applicable Survival Date with respect to a claim under Section 8.2(a), give the
Stockholders' Committee (a) written notice of the existence of any such claim,
specifying the nature and basis of such claim and the amount thereof, to the
extent known or (b) written notice pursuant to Section 8.4 of any third party
claim, the existence of which might give rise to such a claim but the failure so
to provide such notice to the Stockholders' Committee will not relieve the
Indemnifying Persons from any liability which they may have to the Indemnified
Persons under this Agreement or otherwise (unless and only to the extent that
such failure results in the loss or compromise of any rights or defenses of the
Indemnifying Persons and they were not otherwise aware of such action or claim).
Upon the giving of such written notice as aforesaid, the Indemnified Persons, or
any of them, shall have the right to commence legal proceedings prior or
subsequent to the Survival Date for the enforcement of their rights under
Section 8.2 hereof.
8.4 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS. Losses resulting from the
assertion of liability by third parties (each, a "Third Party Claim") shall be
subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice to the
Stockholders' Committee of any Third Party Claim that might give rise to any
Loss by the Indemnified Persons, stating the nature and basis of such Third
Party Claim, and the amount thereof to the extent known. Such notice shall be
accompanied by copies of all relevant documentation with respect to such Third
Party Claim, including, without limitation, any summons, complaint or other
pleading that may have been served, any written demand or any other document or
instrument. Notwithstanding the foregoing, the failure to provide notice as
aforesaid to the Stockholders' Committee will not relieve the Indemnifying
Persons from any liability which they may have to the Indemnified Persons under
this Agreement or otherwise (unless and only to the extent that such failure
directly results in the loss or compromise of any rights or defenses of the
Indemnifying Person and they were not otherwise aware of such action or claim).
(b) The Indemnified Persons shall defend any Third Party Claims with
counsel of their own choosing, and shall act reasonably and in accordance with
their good faith business judgment in handling such Third Party Claims. The
Stockholders' Committee and the Indemnifying Persons, on the one hand, and the
Indemnified Persons, on the other hand, shall make available to each other and
their counsel and accountants all books and records and information relating to
any Third Party Claims, keep each other fully apprised as to the details and
progress of all proceedings relating thereto and render to each other such
assistance as may be reasonably required to ensure the proper and adequate
defense of any and all Third Party Claims.
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8.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the further
provisions of this Section 8.5, the representations and warranties of the Parent
and Acquisition Sub shall be deemed to be a condition to the Merger and shall
not survive beyond the Effective Time. The representations and warranties made
by the Company in Section 3.1 and the Stockholders in Sections 3.2,
respectively, shall survive the Effective Time until the first anniversary of
the Closing Date; provided, however, that Fraud Claims shall survive in
accordance with the applicable statute of limitations related to such
representations and warranties or such Fraud Claims. For convenience of
reference, the date upon which any representation and warranty contained herein
shall terminate is referred to herein as the "Survival Date." Anything contained
herein to the contrary notwithstanding, the representations and warranties of
the Company contained in this Agreement (including, without limitation, the
Company Disclosure Schedule) (i) are being given by the Company on behalf of the
Stockholders and for the purpose of binding the Stockholders to the terms and
provisions of this Article VIII and the Escrow Agreement, and as an inducement
to Parent and Acquisition Sub to enter into this Agreement and to approve the
Merger (and the Company acknowledges that Parent and Acquisition Sub have
expressly relied thereon) and (ii) are solely for the benefit of the Indemnified
Persons and each of them. Accordingly, no third party (including, without
limitation, the Stockholders or anyone acting on behalf of any thereof) other
than the Indemnified Persons, and each of them, shall be a third party or other
beneficiary of such representations and warranties and no such third party shall
have any rights of contribution against the Company or the Surviving Corporation
with respect to such representations or warranties or any matter subject to or
resulting in indemnification under this Article VIII or otherwise.
8.6 STOCKHOLDERS' COMMITTEE.
(a) Upon approval of the Merger and/or upon execution of this Agreement,
the Stockholders shall be deemed, for themselves and their personal
representatives and other successors, to have constituted and appointed,
effective from and after the Effective Time, a committee of three (3) persons
initially to consist of Jeffrey Harrow, Michael Mufson, and David Robkin, as
their agents and attorneys-in-fact (the "Stockholders' Committee") to take all
action required or permitted under this Agreement, the Indemnity Escrow
Agreement and the Registration Rights Agreement (including, without limitation,
the execution and delivery of the General Indemnity Escrow Agreement and the
Specific Indemnity Escrow Agreement on behalf of the Stockholders of the
Company, the giving and receiving of all notices and consents and the execution
and delivery of all documents, including any amendments of any non-material term
or provision hereof or of the General Indemnity Escrow Agreement, the Specific
Indemnity Escrow Agreement or Registration Rights Agreement, and the execution
and delivery of any agreements and releases in connection with the settlement of
any dispute or claim under Article VIII hereof or the Indemnity Escrow Agreement
or Registration Rights Agreement). The vote of a majority of the Stockholders'
Committee shall be required to take any action on behalf of the Stockholders
pursuant to the authority granted to them under this Section 8.7.
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(b) In the event of the death, physical or mental incapacity or
resignation of any of the members of any of the Stockholders' Committee or a
vacancy thereon for any other reason, the remaining members of the Stockholders'
Committee shall promptly appoint a further substitute or substitutes and shall
advise Parent thereof. As between the Stockholders' Committee and the
Stockholders of the Company, the members of the Stockholders' Committee shall
not be liable for, and shall be indemnified by the Stockholders or provided with
insurance against, any good faith error of judgment on their part or any other
act done or omitted by them in good faith in connection with their duties as
members of such Committee, except for gross negligence or willful misconduct.
The Stockholders' Committee may consult with professional advisors of its
choice. The Stockholders' Committee shall not be responsible for the genuineness
or validity of any document and shall have no liability for acting in accordance
with any written instructions given to them and believed by them to be signed by
the proper parties. All expenses incurred by the members of the Stockholders'
Committee in performing their duties (including fees and expenses of
professional advisors) and any indemnification to be provided to the
Stockholders' Committee shall be jointly and severally borne by the
Stockholders.
ARTICLE IX
TERMINATION; AMENDMENT, MODIFICATION AND WAIVER
9.1 TERMINATION. This Agreement may be terminated, and the Merger
abandoned, notwithstanding the approval by Parent, Acquisition Sub and the
Company of this Agreement, at any time prior to the Effective Time, by:
(a) the mutual consent of Parent, Acquisition Sub and the Company; or
(b) either Parent or Company, if the conditions set forth in Section 6.1
hereof shall not have been met by September 30, 2000, except if such conditions
have not been met solely as a result of the action or inaction of the party
seeking to terminate; or
(c) Parent and Acquisition Sub, if the conditions set forth in Section 6.2
hereof shall not have been met, and the Company if the conditions set forth in
Section 6.3 hereof shall not have been met, in either case by September 30,
2000, except if such conditions have not been met solely as a result of the
action or inaction of the party seeking to terminate; or
(d) either Parent or Company, if such party shall have determined in its
sole discretion, exercised in good faith, that the Merger contemplated by this
Agreement has become impracticable by reason of the institution of any
litigation, proceeding or investigation to restrain or prohibit the consummation
of the Merger, or which questions the validity or legality of the transactions
contemplated by this Agreement.
Any termination pursuant to this Section 9.1 (other than a termination
pursuant to Section 9.1(a) hereof) shall be effected by written notice from the
party or parties so terminating to the other parties hereto.
9.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 9.1, this Agreement shall be of no further
force or effect, except for Section 5.1, this Section 9.2, and Article X, each
of which shall survive the termination of this Agreement; provided, however,
that the liability of any party for any breach by such party of the
representations, warranties, covenants or agreements of such party set forth in
this Agreement occurring prior to the termination of this Agreement shall
survive the termination of this Agreement.
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9.3 SPECIFIC PERFORMANCE. The transactions contemplated by this
Agreement, including the Merger, are unique transactions and any failure on the
part of the Company and the Stockholders to complete the transactions
contemplated by this Agreement, including the Merger, on the terms of this
Agreement will not be fully compensable in damages and the breach or threatened
breach of the provisions of this Agreement would cause Parent irreparable harm.
Accordingly, in addition to and not in limitation of any other remedies
available to Parent for a breach or threatened breach of this Agreement, Parent
will be entitled to specific performance of this Agreement upon any breach by
the Company or the Stockholders, and to an injunction restraining any such party
from such breach or threatened breach.
ARTICLE X
MISCELLANEOUS
10.1 EXPENSES. As used in this Agreement, "Transaction Costs" shall mean,
with respect to any party, all actual, out-of-pocket expenses incurred by such
party to third parties, in connection with this Agreement, the Merger and all
other transactions provided for herein and therein; but shall not in any event
include general overhead; the time spent by employees of such party internally;
postage, telephone, telecopy, photocopy and delivery expenses; permit and filing
fees; and other non-material expenses that are incidental to the ordinary course
of business. Each party hereto shall bear its own fees and expenses in
connection with the transactions contemplated hereby; provided, however, that in
the event the Merger shall be consummated, (a) Parent and Acquisition Sub shall
bear all Transaction Costs of Parent and Acquisition Sub and (b) the
Stockholders of the Company shall bear all Transaction Costs of the Company pro
rata among such Stockholders of the Company based on their former relative
ownership of Company Stock, whether or not such fees and expenses have been paid
by the Company or the Stockholders of the Company on or before the Closing Date
and whether or not such fees and expenses are reflected in the Company
Disclosure Schedule or the Schedule of Expenses (such Transaction Costs of the
Company being herein collectively referred to as the "Company Expenses"),
provided further however, that the first $150,000 of Company Expenses set forth
on the Schedule of Expenses shall be paid by the Parent and such amount to
constitute the only Transaction Costs to be paid in cash, the remainder of any
Transaction Costs to be paid in Merger Shares from the Total Parent Share
Amount.
10.2 ENTIRE AGREEMENT. This Agreement (including the Company Disclosure
Schedule and the Exhibits attached hereto) and the other writings referred to
herein contain the entire agreement among the parties hereto with respect to the
transactions contemplated hereby and supersede all prior agreements or
understandings, written or oral, among the parties with respect thereto.
10.3 DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
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10.4 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by nationally-recognized overnight courier or by registered or certified
mail, postage prepaid, return receipt requested[, or by electronic mail with a
copy thereof to be delivered by mail (as aforesaid) within 24 hours of such
electronic mail,] or by telecopier, with confirmation as provided above
addressed as follows:
(i) if to Parent or Acquisition Sub, to:
CYBERIAN OUTPOST, INC.
23 North Main Street, PO Box 636
Kent, Connecticut 06757
Telecopier: (860) 927-8229
E-mail: [email protected]
Attention: Katherine N. Vick
Executive Vice President
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Telecopier: (617) 542-2241
E-mail: [email protected]
Attention: Michael L. Fantozzi, Esq.
(ii) if to the Company, to:
CMPExpress.com, Inc.
5000 Hilltop Drive
Brookhaven, PA 19015
Telecopier: (610) 499-5000
E-mail: [email protected]
Attention: Ted I. Kaminer
Chief Financial Officer
with a copy to:
Morgan Lewis & Bockius
1701 Market Street
Philadelphia, PA 19013-2921
Telecopier: (215) 963-5299
E-Mail: [email protected]
Attention: Richard A. Silfen, Esquire
(iii) if to the Stockholders, at their respective addresses set forth on
SCHEDULE I attached hereto;
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<PAGE>
or to such other address as the party to whom notice is to be given may
have furnished to the other party in writing in accordance herewith. All such
notices or communications shall be deemed to be received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of nationally-
recognized overnight courier, on the next business day after the date when sent,
(c) in the case of facsimile transmission or telecopier or electronic mail, upon
confirmed receipt, and (d) in the case of mailing, on the third business day
following the date on which the piece of mail containing such communication was
posted.
10.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts by original or facsimile signature, each such counterpart shall be
an original instrument, and all such counterparts together shall constitute one
and the same agreement.
10.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed wholly therein.
10.7 BENEFITS OF AGREEMENT. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement shall not be
assignable by any party hereto without the consent of the other parties hereto;
provided, however, that anything contained herein to the contrary
notwithstanding, Acquisition Sub may assign and delegate any or all of its
rights and obligations hereunder to any other direct or indirect wholly-owned
subsidiary of Parent; provided further, however, that any of the rights granted
to and obligations of Parent under this Agreement (other than the payment of the
Aggregate Consideration) may also be exercised or performed by any entity
controlled by or under common control with Parent (each, a "Parent Affiliate");
provided that such Parent Affiliate agrees to be bound by all of the applicable
provisions hereof governing such exercise or performance and that the Company
and Stockholders promptly receive written notice of any such exercise or
performance.
10.8 PRONOUNS. As used herein, all pronouns shall include the masculine,
feminine, neuter, singular and plural thereof whenever the context and facts
require such construction.
10.9 AMENDMENT, MODIFICATION AND WAIVER. This Agreement shall not be
altered or otherwise amended except pursuant to (a) an instrument in writing
signed by Parent and the Company, if Article VIII is not affected by such
alteration or amendment and (b) an instrument in writing signed by (i) Parent,
(ii) the Company and (iii) stockholders of the Company owning a majority (by
voting power) of the outstanding shares of Company Stock held by all
stockholders of the Company, if Article VIII is affected thereby; provided,
however, that after the approval and adoption of this Agreement and the Merger
by the stockholders of the Company, no amendment of this Agreement shall be made
which pursuant to the Pennsylvania Statute or other law requires the further
approval of the stockholders of the Company; provided further, however, that any
party to this Agreement may waive in writing any obligation owed to it by any
other party under this Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
10.10 NO THIRD PARTY BENEFICIARIES. Nothing express or implied in this
Agreement is intended to confer, nor shall anything herein confer, upon any
person other than the parties and
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the respective successors or assigns of the parties, any rights, remedies,
obligations or liabilities whatsoever.
10.11 CONSENTS. Except as otherwise expressly provided in this Agreement,
any consent or approval of Parent requested or permitted hereunder may be given
or withheld in Parent's sole discretion.
10.12 INTERPRETATION. This Agreement has been negotiated between the
parties and will not be deemed to be drafted by, or the product of, any party.
As such, this Agreement will not be interpreted in favor of, or against, any
party.
10.13 NO JOINT VENTURE. No party hereto shall make any warranties or
representations, or assume or create any obligations, on the other party's
behalf except as may be expressly permitted hereunder or in writing by such
other party. Each party hereto shall be solely responsible for the actions of
all its respective employees, agents and representatives.
[Remainder of this page intentionally left blank]
52
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
and Plan of Reorganization to be executed on its behalf as of the day and year
first above written.
CYBERIAN OUTPOST, INC.
By: /s/ Robert A. Bowman
--------------------
Name: Robert A. Bowman
Title: President and Chief Executive Officer
SYDNEY ACQUISITION SUB, INC.
By: /s/ Robert A. Bowman
--------------------
Name: Robert A. Bowman
Title: President
CMPEXPRESS.COM, INC.
By: /s/ Jeffrey K. Harrow
---------------------
Name: Jeffrey K. Harrow
Title: Chief Executive Officer
[COUNTERPART SIGNATURE PAGES OF STOCKHOLDERS
ATTACHED HERETO]
<PAGE>
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF SEPTEMBER 6,
1999 (THE "AGREEMENT"), AMONG CYBERIAN OUTPOST, INC., SYDNEY ACQUISITION SUB,
INC., CMPEXPRESS.COM, INC. AND THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement, authorizes this
signature page to be attached to a counterpart of the Agreement, and agrees to
be bound by the Agreement; and this Signature Page together with the Signature
Pages of Cyberian Outpost, Inc., Sydney Acquisition Sub, Inc., CMPExpress.com,
Inc. and the other parties to the Agreement shall constitute counterpart copies
of the Agreement in accordance with the terms of the Agreement.
NAME OF SIGNATORY:
/s/ Dianne Chewning JANNEY MONTGOMERY SCOTT LLC
--------------------------- as nominee
/s/ Dennis Flanagan By: /s/ Michael Mufson
--------------------------- ------------------------
Michael Mufson
/s/ Jeffrey Harrow
--------------------------- /s/ Thomas Morse
----------------------------
/s/ Ted Kaminer
---------------------------
/s/ Bryn Kaufman
---------------------------
/s/ Bryn Kaufman (as attorney in fact) /s/ Michael Mufson
-------------------------------------- ----------------------------
Walter Kaufman
LIBERTY VENTURES I, L.P. /s/ Brad Oberwager
----------------------------
By: /s/ David Robkin /s/ Bryn Kaufman (as attorney in fact)
----------------------- ------------------------------------
David Robkin Nancy Patterson
/s/ Eric Lorenzoni
---------------------------
/s/ Sean McGilloway /s/ David Robkin
--------------------------- ---------------------------
JANNEY MONTGOMERY SCOTT LLC /s/ Richard Vague
----------------------------
By: /s/ Michael Mufson
---------------------------
Michael Mufson
<PAGE>
INDEX OF DEFINED TERMS
Acquisition Sub ......................................... Preamble
Actions ................................................. 3.1(o)
Affiliate ............................................... 8.1(a)
Aggregate Consideration ................................. 2.1
Agreement ............................................... Preamble
Assumed Option .......................................... 2.3
Audited Financials ...................................... 3.1(e)
Balance Sheet Date ...................................... 3.1(f)
Bugs .................................................... 3.1(l)(iv)
Business Day ............................................ 1.7
Charter ................................................. 3.1(a)
Closing Date ............................................ 1.7
Closing ................................................. 1.7
Code .................................................... Preamble
Common Exchange Ratio ................................... 2.1(c)(i)
Common Stock ............................................ Preamble
Company ................................................. Preamble
Company Common Stock .................................... 2.1
Company Disclosure Schedule ............................. 3.1
Company Expenses ........................................ 6.2(m)
Company Financial Statements ............................ 3.1(e)
Company Material Adverse Effect ......................... 3.1(a)
Company Options ......................................... 2.1
Company Returns ......................................... 3.1(h)
Company Rights .......................................... 3.1(k)(i)
Confidential Information ................................ 7.3
Confidentiality Agreements .............................. 3.1(k)(v)
Constituent Corporations ................................ 1.1
Convertible Securities .................................. 2.1
Copyrights .............................................. 3.1(k)(ix)
Cure Date ............................................... 8.2(b)
Delaware Statute ........................................ Preamble
Derivative Work ......................................... 3.1(k)(vii)
Designated Persons ...................................... 3.1(o)
Dissenting Shares ....................................... 2.1(d)(i)
Dissenting Stockholder .................................. 2.1(d)(i)
Dissenting Stockholders ................................. 5.4
Effective Time .......................................... 1.2
Employee Confidentiality Agreement ...................... 4.1(a)
Employee Plans .......................................... 3.1(u)(ii)
Employment Agreements ................................... 4.1(a)
Encumbrances ............................................ 3.1(i)
ERISA ................................................... 3.1(u)(i)
ERISA Affiliate ......................................... 3.1(u)(xii)
Exchange Act ............................................ 3.1(y)
Executory Period ........................................ 5.1
FAS No. 5 ............................................... 3.1(f)
Filings ................................................. 5.5
Fully Diluted Company Share Amount ...................... 2.1
Fully Diluted Company Shares ............................ 2.1
GAAP .................................................... 3.1(e)(i)
General Event of Indemnification ........................ 8.1(b)
General Indemnity Escrow Agreement ...................... 2.2(a)
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General Indemnity Escrow Shares ......................... 2.2(b)
Governmental Authority .................................. 3.1(o)
Indemnified Persons ..................................... 8.1(c)
Indemnifying Persons .................................... 8.1(d)
Indemnity Escrow Agent .................................. 2.2(a)
Indemnity Escrow Agreement .............................. 2.2(a)
Indemnity Escrow Shares ................................. 2.2(b)
Intellectual Property Rights ............................ 3.1(k)(xiii)
Investigation ........................................... 5.1
Key Employee ............................................ 6.2(k)
Knowledge ............................................... 3.1(ff)
Leased Real Property .................................... 3.1(j)
Leases .................................................. 3.1(j)
Liability ............................................... 3.1(f)
License Agreements ...................................... 3.1(k)(xi)
Licensed Software ....................................... 3.1(l)(i)
Liquidation Preference Amount ........................... 2.1(c)(ii)
Liquidation Preference Shares ........................... 2.1(c)(iii)
Lock Up Agreements ...................................... 4.1(c)
Losses .................................................. 8.1(e)
Merger .................................................. 1.1
Merger Shares ........................................... 2.1(c)
MicroWarehouse Litigation ............................... 2.2(a)
Non-Competition Agreement ............................... 4.1(a)
Outstanding Shares ...................................... 2.1
Owned Software .......................................... 3.1(l)(i)
Parent .................................................. Preamble
Parent Affiliate ........................................ 10.7
Parent Common Stock ..................................... Preamble
Parent SEC Documents .................................... 3.3(d)(i)(C)
Patents ................................................. 3.1(k)(xiii)
Pennsylvania Statute .................................... Preamble
Preferred Stock ......................................... Preamble
Prohibited Transaction .................................. 5.3
Purchaser Representative ................................ 3.2(d)(i)(I)
Registration Rights Agreement ........................... 4.1(d)
Related Agreements ...................................... 4.1
Release Agreements ...................................... 4.1(e)
Restricted Securities ................................... 7.2(a)
Series A Exchange Ratio ................................. 2.1(c)
Series A Stock .......................................... Preamble
Software ................................................ 3.1(l)(i)
Specific Indemnity Escrow Agreement ..................... 2.2(a)
Specific Indemnity Escrow Shares ........................ 2.2(b)
Stipulated Price ........................................ 2.1
Stockholder Action ...................................... 5.7
Stockholder Agreements .................................. 4.1(f)
Stockholders ............................................ Preamble
Stockholders' Committee ................................. 8.6(a)
Stockholders' Materials ................................. 5.7
Subject Business ........................................ 7.3
Survival Date ........................................... 8.5
Surviving Corporation ................................... 1.1
Tax ..................................................... 3.1(h)
Taxes ................................................... 3.1(h)
Third Party Claim ....................................... 8.4
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Threshold Amount ........................................ 8.2(a)
Total Parent Share Amount ............................... 2.1
Trade Secrets ........................................... 3.1(k)(xiii)
Trademarks .............................................. 3.1(k)(xiii)
Transaction Costs ....................................... 10.1
Transfer ................................................ 7.2(a)
Transferee .............................................. 3.1(h)
Year 2000 Compliant ..................................... 3.1(l)(vi)
iii
