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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report Date of Earliest Event Reported: OCTOBER 7, 1999
STUDENT ADVANTAGE, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 0-26173 04-3263743
(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation or Organization) Number) Identification
Number)
280 SUMMER STREET, BOSTON, MA 02210
(Address of Principal Executive Offices) (Zip Code)
(617) 912-2011
(Registrant's Telephone Number, Including Area Code)
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On October 7, 1999, SA Acquisition II, Inc. ("SA"), a wholly owned
subsidiary of Student Advantage, Inc. (the "Company"), merged into Voice FX
Corporation ("FX") pursuant to an Agreement and Plan of Merger by and among the
Company, SA and FX, dated September 27, 1999. At the close of the transaction,
FX became a wholly-owned subsidiary of the Company.
Voice FX provides Internet and telephone ("IVR") services to students,
primarily grade reporting, transcript ordering and financial aid status
reporting.
All of the outstanding capital stock of FX was converted into the right
to receive an aggregate of 430,082 shares of Common Stock, $.01 par value, of
the Company and $1.1 million in cash. Additionally the Company assumed
outstanding FX stock options, which were converted into options to purchase an
aggregate of 59,687 shares of Company Common Stock. The exchange rate used to
convert the capital stock and options of FX into Common Stock and options of the
Company and cash were determined as a result of arms length negotiation.
To the best knowledge of the Company, neither the Company, any
affiliate, director, officer nor associate of any director or officer of the
Company has any material relationship with FX.
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ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
It is impractical to provide the required financial statements
at the time of filing of the Current Report on Form 8-K.
Required financial statements will be filed on a Form 8-K/A as
soon as practicable after the date hereof, but no later than
December 21, 1999.
(b) Pro Forma Financial Information
It is impractical to provide the required financial statements
at the time of filing of the Current Report on Form 8-K.
Required pro forma financial statements will be filed on a
Form 8-K/A as soon as practicable after the date hereof, but
no later than December 21, 1999.
(c) Exhibits: See Exhibit Index attached hereto.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
October 22, 1999 STUDENT ADVANTAGE, INC.
By: /s/ Raymond V. Sozzi, Jr.
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Raymond V. Sozzi, Jr.
President, Chief Executive Officer
and Chairman of the Board of
Directors
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EXHIBIT INDEX
NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger among Student Advantage, Inc., SA
Acquisition II, Inc. and Voice FX Corporation dated September
27, 1999.
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
STUDENT ADVANTAGE, INC.,
SA ACQUISITION II, INC.,
AND
VOICE FX CORPORATION
September 27, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER............................................................1
1.1 THE MERGER...................................................1
1.2 THE CLOSING..................................................1
1.3 ACTIONS AT THE CLOSING.......................................2
1.4 ADDITIONAL ACTION............................................2
1.5 CONVERSION OF SHARES.........................................3
1.6 DISSENTING SHARES............................................4
1.7 FRACTIONAL SHARES............................................5
1.8 OPTIONS......................................................6
1.9 ESCROW.......................................................7
1.10 ARTICLES OF INCORPORATION AND BY-LAWS........................7
1.11 NO FURTHER RIGHTS............................................8
1.12 CLOSING OF TRANSFER BOOKS....................................8
1.13 LOST, STOLEN OR DESTROYED CERTIFICATES. .....................8
1.14 PAYMENT TO COMPANY'S BROKER..................................8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................8
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER..............9
2.2 CAPITALIZATION...............................................9
2.3 AUTHORIZATION OF TRANSACTION................................10
2.4 NONCONTRAVENTION............................................11
2.5 SUBSIDIARIES AND AFFILIATED ENTITIES........................12
2.6 FINANCIAL STATEMENTS........................................12
2.7 ABSENCE OF CERTAIN CHANGES..................................12
2.8 UNDISCLOSED LIABILITIES.....................................13
2.9 TAX MATTERS.................................................13
2.10 ASSETS......................................................15
2.11 REAL PROPERTY...............................................15
2.12 INTELLECTUAL PROPERTY.......................................15
2.13 CONTRACTS...................................................18
2.14 ACCOUNTS RECEIVABLE.........................................19
2.15 POWERS OF ATTORNEY..........................................19
2.16 INSURANCE...................................................19
2.17 LITIGATION..................................................20
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PAGE
2.18 WARRANTIES..................................................20
2.19 EMPLOYEES...................................................20
2.20 EMPLOYEE BENEFITS...........................................21
2.21 LEGAL COMPLIANCE............................................22
2.22 CUSTOMERS AND SUPPLIERS.....................................22
2.23 PERMITS.....................................................23
2.24 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES..............23
2.25 BROKERS' FEES...............................................23
2.26 BOOKS AND RECORDS...........................................23
2.27 TAX-FREE REORGANIZATION.....................................23
2.28 DISCLOSURE..................................................23
2.29 SALE OF ASSETS TO TELESPECTRUM WORLDWIDE, INC...............24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY........................................24
3.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER.............24
3.2 CAPITALIZATION..............................................25
3.3 AUTHORIZATION OF TRANSACTION................................25
3.4 NONCONTRAVENTION............................................25
3.5 REPORTS AND FINANCIAL STATEMENTS............................26
3.6 ABSENCE OF MATERIAL ADVERSE CHANGE..........................26
3.7 LITIGATION..................................................27
3.8 TAX-FREE REORGANIZATION.....................................27
3.9 INTERIM OPERATIONS OF THE TRANSITORY SUBSIDIARY.............27
3.10 BROKERS' FEES...............................................27
3.11 DISCLOSURE..................................................27
ARTICLE IV
COVENANTS............................................................27
4.1 CLOSING EFFORTS.............................................27
4.2 GOVERNMENTAL AND THIRD-PARTY NOTICES AND CONSENTS...........28
4.3 STOCKHOLDER APPROVAL........................................28
4.4 OPERATION OF BUSINESS. .....................................29
4.5 ACCESS TO INFORMATION.......................................31
4.6 EXCLUSIVITY.................................................31
4.7 EXPENSES....................................................31
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PAGE
4.8 TAX FREE REQUIREMENTS.......................................31
4.9 INDEMNIFICATION.............................................32
4.10 CERTAIN BENEFIT PLANS.......................................32
4.11 TERMINATION OF COMPANY'S 401(k) PLAN........................32
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER.................................32
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS......................32
5.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE
TRANSITORY SUBSIDIARY.......................................32
5.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY....................34
ARTICLE VI
INDEMNIFICATION......................................................35
6.1 INDEMNIFICATION BY THE COMPANY STOCKHOLDERS.................35
6.2 INDEMNIFICATION BY THE BUYER................................36
6.3 INDEMNIFICATION CLAIMS......................................36
6.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES..................40
6.5 LIMITATIONS.................................................41
ARTICLE VII
TERMINATION..........................................................43
7.1 TERMINATION OF AGREEMENT....................................43
7.2 EFFECT OF TERMINATION.......................................43
ARTICLE VIII
DEFINITIONS..........................................................44
ARTICLE IX
MISCELLANEOUS........................................................46
9.1 PRESS RELEASES AND ANNOUNCEMENTS............................46
9.2 NO THIRD PARTY BENEFICIARIES................................46
9.3 ENTIRE AGREEMENT............................................46
9.4 SUCCESSION AND ASSIGNMENT...................................46
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9.5 COUNTERPARTS; FACSIMILE SIGNATURE...........................47
9.6 HEADINGS....................................................47
9.7 NOTICES.....................................................47
9.8 GOVERNING LAW...............................................48
9.9 AMENDMENTS AND WAIVERS......................................48
9.10 SEVERABILITY................................................48
9.11 SUBMISSION TO JURISDICTION..................................48
9.12 CONSTRUCTION................................................49
Exhibit A - Escrow Agreement
Exhibit B - Investment Representation Letter
Exhibit C - Opinion of Hogan & Hartson L.L.P.
Exhibit D-1 - Form of Employment Agreement (Marc Cohen)
Exhibit D-2 - Form of Employment Agreement (Jeffrey Cohen)
Exhibit E - Capital One Services, Inc. Agreement
Exhibit F - Opinion of Hale and Dorr LLP
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AGREEMENT AND PLAN OF MERGER
Agreement entered into as of September 27, 1999 by and among Student
Advantage, Inc., a Delaware corporation (the "Buyer"), SA Acquisition II, Inc.,
a Delaware corporation and a wholly-owned subsidiary of the Buyer (the
"Transitory Subsidiary"), and Voice FX Corporation, a Delaware corporation (the
"Company"). The Buyer, the Transitory Subsidiary and the Company are referred to
collectively herein as the "Parties."
This Agreement contemplates a merger of the Transitory Subsidiary into
the Company (the "Merger"). In the Merger, the stockholders of the Company will
receive cash and common stock of the Buyer in exchange for their capital stock
of the Company. It is the intention of the Parties that the Merger qualify as a
reorganization under Section 368(a) of the Internal Revenue Code, as amended
(the "Code").
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into the Company (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation"). The "Effective Time" shall be the time at which the Buyer causes,
on behalf of the Parties, a certificate of merger or other appropriate documents
prepared and executed in accordance with Section 251(c) of the Delaware General
Corporation Law (the "Certificate of Merger") to be filed with the Secretary of
State of the State of Delaware. The Merger shall have the effects set forth in
Section 259 of the Delaware General Corporation Law.
1.2 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hale and Dorr LLP
in Boston, Massachusetts, commencing within two business days after approval of
the Merger and this Agreement by the Company Stockholders, or, if all of the
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby have not been satisfied or waived by such date, on such
mutually agreeable later date as soon as practicable (and in any event not later
than three business days) after the satisfaction or waiver of all conditions
(excluding the delivery of any documents to be delivered at the Closing by any
of the Parties) set forth in Article V hereof (the "Closing
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Date"); PROVIDED that if the closing sales price per share of Buyer Common Stock
(as defined below) on the Nasdaq National Market on the trading day immediately
preceding the Closing Date shall be equal to or less than $10.50, then the
Closing shall be delayed until the earlier of (i) the first business day after
the trading day on which the closing sales price per share of Buyer Common Stock
on the Nasdaq National Market shall be greater than $10.50, and (ii) October 29,
1999.
1.3 ACTIONS AT THE CLOSING. At the Closing:
(a) the Company shall deliver to the Buyer and the Transitory
Subsidiary the various certificates, instruments and documents referred to in
Section 5.2;
(b) the Buyer and the Transitory Subsidiary shall deliver to
the Company the various certificates, instruments and documents referred to in
Section 5.3;
(c) the Buyer, on behalf of the Parties, shall file with the
Secretary of State of the State of Delaware the Certificate of Merger;
(d) each stockholder of record of the Company immediately
prior to the Effective Time (the "Company Stockholders"), other than holders of
Dissenting Shares (as defined in Section 1.6(a) below) shall deliver to the
Buyer for cancellation the certificate(s) representing his, her or its Company
Shares (as defined in Section 1.5(a) below);
(e) the Buyer shall (i) pay (by check or wire transfer) the
Initial Cash Payment (as defined below) and (ii) deliver certificates for the
Initial Shares (as defined below) to each Company Stockholder in accordance with
Section 1.5; and
(f) the Buyer, Marc Cohen and Jeff Cohen (the "Indemnification
Representatives") and United States Trust Company (the "Escrow Agent") shall
execute and deliver the Escrow Agreement attached hereto as EXHIBIT A (the
"Escrow Agreement") and the Buyer shall deliver to the Escrow Agent (i) the
Escrow Cash (as defined below) and (ii) a certificate for the Escrow Shares (as
defined below) being placed in escrow on the Closing Date pursuant to Section
1.9.
1.4 ADDITIONAL ACTION. The Surviving Corporation may, at any time after
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
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1.5 CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of any Party or the holder of any of
the following securities:
(a) Each share of common stock, $.01 par value per share, of
the Company ("Company Shares") issued and outstanding immediately prior to the
Effective Time (other than Company Shares owned beneficially by the Buyer or the
Transitory Subsidiary, Dissenting Shares and Company Shares held in the
Company's treasury) shall be converted into and represent the right to receive
(subject to the provisions of Section 1.9) (i) such number of shares of common
stock, $0.01 par value per share, of the Buyer ("Buyer Common Stock") as is
equal to the Stock Conversion Ratio (as defined below) and (ii) an amount in
cash per Company Share as is equal to the Cash Conversion Ratio (as defined
below), without any interest thereon (the "Cash Consideration").
(b) The "Stock Conversion Ratio" shall be the result obtained
by dividing (i) $5,740,000 by (ii) the sum of (A) the number of outstanding
Company Shares immediately prior to the Effective Time plus (B) the number of
Company Shares issuable upon exercise of all Options (as defined below)
outstanding immediately prior to the Effective Time, and dividing such amount by
(iii) $12.00. The Stock Conversion Ratio shall be subject to equitable
adjustment in the event of any stock split, stock dividend, reverse stock split
or similar event affecting the Buyer Common Stock between the date of this
Agreement and the Effective Time. Subject to Section 1.14, (Payment to Company's
Broker), each Company Stockholder shall be entitled to receive immediately 90%
of the shares of Buyer Common Stock into which such Stockholder's Company Shares
are converted pursuant to this Section 1.5 rounded to the nearest whole number
(with a fractional interest equal to 0.5 rounded to the nearest odd number) (the
"Initial Shares"); the remaining 10% of the shares of Buyer Common Stock into
which such Company Shares are converted pursuant to this Section 1.5, rounded to
the nearest whole number (with a fractional interest equal to 0.5 rounded to the
nearest even number) (the "Escrow Shares"), shall be deposited in escrow
pursuant to Section 1.9 and shall be held and disposed of in accordance with the
terms of the Escrow Agreement. The Initial Shares and the Escrow Shares shall
together be referred to herein as the "Merger Shares."
(c) The "Cash Conversion Ratio" shall be the result obtained
by dividing (i) $1,260,000 by (ii) the sum of (A) the number of outstanding
Company Shares immediately prior to the Effective Time plus (B) the number of
Company Shares issuable upon exercise of all Options (as defined below)
outstanding immediately prior to the Effective Time. Subject to Section 1.14,
(Payment to Company's Broker), each Company Stockholder shall be entitled to
receive immediately 90% (rounded up
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to the nearest whole cent) of the Cash Consideration into which such Company
Stockholders' Company Shares are converted pursuant to this Section 1.5 (the
"Initial Cash Payment"); the remaining 10% (rounded down to the nearest whole
cent) of the Cash Consideration into which such Company Stockholders' Company
shares are converted pursuant to this Section 1.5 (the "Escrow Cash"), shall be
deposited in escrow pursuant to Section 1.9 and shall be held and disposed of in
accordance with the terms of the Escrow Agreement. The Merger Shares and the
Cash Consideration shall together be referred to herein as the "Merger
Consideration."
(d) Each Company Share held in the Company's treasury
immediately prior to the Effective Time and each Company Share owned
beneficially by the Buyer or the Transitory Subsidiary shall be cancelled and
retired without payment of any consideration therefor.
(e) Each share of common stock, $.01 par value per share, of
the Transitory Subsidiary issued and outstanding immediately prior to the
Effective Time shall be converted into and thereafter evidence one share of
common stock, $.01 par value per share, of the Surviving Corporation.
(f) If in the reasonable judgment of the Company, the
aggregate amount of "other property or money" (within the meaning of Section
356(a) of the Code (including, without limitation, cash reasonably expected to
be payable in respect of Dissenting Shares)) ("Boot") payable in the Merger will
exceed 20% of the Merger Consideration taking into account amounts reasonably
expected to be paid to holders of Dissenting Shares (i) because there may be
Boot, other than the Cash Consideration, or (ii) as a result of taking into
account the last reported sale price per share of Buyer Common Stock on the
Nasdaq National Market on the last trading day prior to the Effective Time, then
in either or both cases, the amount of cash which such Company Stockholders
would otherwise receive will be decreased until such amount is equal to 20% of
the Merger Consideration.
1.6 DISSENTING SHARES.
(a) For purposes of this Agreement, "Dissenting Shares" means
Company Shares held as of the Effective Time by a Company Stockholder who has
not voted such Company Shares in favor of the adoption of this Agreement and the
Merger and with respect to which appraisal shall have been duly demanded and
perfected in accordance with Section 262 of the Delaware General Corporation Law
and not effectively withdrawn or forfeited prior to the Effective Time.
Dissenting Shares shall not be converted into or represent the right to receive
the Merger Consideration, unless such Company Stockholder shall have forfeited
his, her or its right to appraisal under
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the Delaware General Corporation Law or properly withdrawn his, her or its
demand for appraisal. If such Company Stockholder has so forfeited or withdrawn
his, her or its right to appraisal of Dissenting Shares, then (i) as of the
occurrence of such event, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the Merger Consideration issuable or payable in respect of such Company Shares
pursuant to Section 1.5, and (ii) promptly following the occurrence of such
event, the Buyer shall deliver to such Company Stockholder a certificate
representing 90% of the Merger Shares to which such holder is entitled pursuant
to Section 1.5 (which shares shall be considered Initial Shares for all purposes
of this Agreement), the Buyer shall pay to such Company Stockholder 90% of the
Cash Consideration to which such holder is entitled pursuant to Section 1.5
(which payment shall be considered an Initial Cash Payment for all purposes of
this Agreement), the Buyer shall deliver to the Escrow Agent a certificate
representing the remaining 10% of the Merger Shares to which such holder is
entitled pursuant to Section 1.5 (which shares shall be considered Escrow Shares
for all purposes of this Agreement) and the Buyer shall pay to the Escrow Agent
the remaining 10% of the Cash Consideration to which such holder is entitled
pursuant to Section 1.5 (which amount shall be considered Escrow Cash for all
purposes of this Agreement)
(b) The Company shall give the Buyer (i) prompt notice of any
written demands for appraisal of any Company Shares, withdrawals of such
demands, and any other instruments that relate to such demands received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the Delaware General Corporation Law. The
Company shall not, except with the prior written consent of the Buyer, make any
payment with respect to any demands for appraisal of Company Shares or offer to
settle or settle any such demands.
1.7 FRACTIONAL SHARES. No certificates or scrip representing fractional
Initial Shares shall be issued to former Company Stockholders upon the surrender
for exchange of certificates that, immediately prior to the Effective Time,
represented Company Shares converted into Merger Shares pursuant to Section 1.5
(including any Company Shares referred to in the last sentence of Section
1.6(a)) ("Certificates"), and such former Company Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or distributions
or other rights as a stockholder of the Buyer with respect to any fractional
Initial Shares that would otherwise be issued to such former Company
Stockholders. In lieu of any fractional Initial Shares that would otherwise be
issued, each former Company Stockholder that would have been entitled to receive
a fractional Initial Share shall, upon proper surrender of such person's
Certificates, receive such whole number of Initial Shares as is equal to the
precise number of Initial Shares to which such person would be entitled, rounded
up or down
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to the nearest whole number (with a fractional interest equal to .5 rounded to
the nearest odd number); provided that each such holder shall receive at least
one Initial Share.
1.8 OPTIONS.
(a) All options to purchase Company Shares issued by the
Company pursuant to its stock option plans or otherwise ("Options"), whether
vested or unvested, and outstanding as of the Effective Time, shall be assumed
by the Buyer. Immediately after the Effective Time, each Option outstanding as
of the Effective Time shall be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under such Option at the Effective
Time, such number of shares of Buyer Common Stock as is equal to the number of
Company Shares subject to the unexercised portion of such Option multiplied by
the Option Conversion Ratio (with any fraction resulting from such
multiplication to be rounded to the nearest whole number, provided that in the
case of options intended to qualify as incentive stock options, if any, such
fraction shall be rounded down to the nearest whole number). The exercise price
per share of each such assumed Option shall be equal to the exercise price of
such Option immediately prior to the Effective Time, divided by the Option
Conversion Ratio (rounded up to the nearest whole cent). It is the intention of
the Parties that the term, exercisability, vesting schedule, status as an
"incentive stock option" under Section 422 of the Code, if applicable, and all
of the other terms of the Options shall otherwise remain unchanged.
(b) The "Option Conversion Ratio" shall be the result obtained
by dividing (i) $7,000,000 by (ii) the sum of (A) the number of outstanding
Company Shares immediately prior to the Effective Time plus (B) the number of
Company Shares issuable upon exercise of all Options outstanding immediately
prior to the Effective Time, and dividing such amount by (iii) $12.00.
(c) As soon as practicable after the Effective Time, the Buyer
or the Surviving Corporation shall deliver to the holders of Options appropriate
notices setting forth such holders' rights pursuant to such Options, as amended
by this Section 1.8, and the agreements evidencing such Options shall continue
in effect on the same terms and conditions (subject to the amendments provided
for in this Section 1.8 and such notice).
(d) The Buyer shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Buyer Common Stock for
delivery upon exercise of the Options assumed in accordance with this Section
1.8.
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(e) The Company shall obtain, prior to the Closing, the
consent from each holder of an Option to the amendment of such Option pursuant
to this Section 1.8 (unless such consent is not required under the terms of the
applicable agreement, instrument or plan).
1.9 ESCROW.
(a) On the Closing Date, the Buyer shall deliver to the Escrow
Agent the Escrow Cash and a certificate (issued in the name of the Escrow Agent
or its nominee) representing the aggregate number of Escrow Shares, as described
in Section 1.5, for the sole purpose of securing the indemnification obligations
of the Indemnifying Stockholders (as defined in Section 6.1) set forth in this
Agreement. The Escrow Cash and the Escrow Shares (the "Escrow Fund") shall be
held by the Escrow Agent under the Escrow Agreement pursuant to the terms
thereof. The Escrow Fund shall be held as a trust fund and shall not be subject
to any lien, attachment, trustee process or any other judicial process of any
creditor of any party, and shall be held and disbursed solely for the purposes
and in accordance with the terms of the Escrow Agreement. Each Company
Stockholder shall, as of the Effective Time, be the owner of the Escrow Shares
allocable to such Company Stockholder in the Merger. The Escrow Agent shall hold
the Escrow Fund in escrow for the benefit of the Buyer, and for the Company
Stockholders in accordance with each Company Stockholder's respective interest
in the Escrow Fund. Subject to the terms of the Escrow Agreement for the
protection of the Escrow Agent, the Escrow Agent shall vote the Escrow Shares in
accordance with the written instructions of the Company Stockholders for whose
benefit such shares are held, and any cash dividends paid with respect to the
Escrow Shares shall be paid to the Company Stockholders in accordance with each
Company Stockholder's respective proportionate interest in the Escrow Shares.
(b) The adoption of this Agreement and the approval of the
Merger by the Company Stockholders shall constitute approval of the Escrow
Agreement and of all of the arrangements relating thereto, including without
limitation the placement of the Escrow Fund in escrow and the appointment of the
Indemnification Representatives.
1.10 ARTICLES OF INCORPORATION AND BY-LAWS.
(a) The Certificate of Incorporation of the Surviving
Corporation immediately following the Effective Time shall be the same as the
Certificate of Incorporation of the Transitory Subsidiary immediately prior to
the Effective Time, except that (1) the name of the corporation set forth
therein shall be changed to the name of the Company and (2) the identity of the
incorporator shall be deleted.
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(b) The By-laws of the Surviving Corporation immediately
following the Effective Time shall be the same as the By-laws of the Transitory
Subsidiary immediately prior to the Effective Time, except that the name of the
corporation set forth therein shall be changed to the name of the Company.
1.11 NO FURTHER RIGHTS. From and after the Effective Time, no Company
Shares shall be deemed to be outstanding, and holders of certificates formerly
representing Company Shares shall cease to have any rights with respect thereto,
except as provided herein or by law.
1.12 CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company Shares
shall thereafter be made. If, after the Effective Time, certificates formerly
representing Company Shares are presented to the Buyer or the Surviving
Corporation, they shall be cancelled and exchanged for the Merger Consideration
in accordance with Section 1.5, subject to Section 1.9 and to applicable law in
the case of Dissenting Shares.
1.13 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate evidencing Company Shares shall have been lost, stolen or destroyed,
upon the making of an affidavit setting forth that fact by the person claiming
such lost, stolen or destroyed Certificate(s) and granting a reasonable
indemnity against any claim that may be made against the Buyer or the Surviving
Corporation with respect to such Certificate(s), the Buyer shall issue and pay
to such person the Merger Consideration with respect to such lost, stolen or
destroyed Certificate(s).
1.14 PAYMENT TO COMPANY'S BROKER. Pursuant to the request of the
Company, Merger Consideration in the amount of $100,000 shall be payable,
subject to the terms and conditions of the Agreement, to J.C. Bradford, Broker
to the Company in connection with the Merger, such Merger Consideration to be
paid or applied in all respects as if J.C. Bradford were a Company Stockholder
at the Effective Time, including allocation to the Escrow Fund, it being
understood however that J.C. Bradford, shall otherwise have no rights or
obligations under this Agreement including rights against the Buyer for
indemnification or otherwise.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and, only to the extent and for the purpose set forth in
Article VI hereof, each of Marc Cohen and Jeff Cohen, jointly and severally,
represents and warrants to the Buyer that the statements contained in this
Article II are true and
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correct, except as set forth in the disclosure schedule provided by the Company
to the Buyer on the date hereof and attached to this Agreement (the "Disclosure
Schedule"). The Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
II, and the disclosures in any paragraph of the Disclosure Schedule shall
qualify other paragraphs in this Article II only to the extent it is clear from
a reading of the disclosure that such disclosure is applicable to such other
paragraphs whether or not an explicit cross reference appears. For purposes of
Article II, the phrase "to the knowledge of the Company" or any phrase of
similar import shall be deemed to refer to the actual knowledge of the directors
and executive officers of the Company, as well as any other knowledge which such
directors or executive officers would have possessed had they made reasonable
inquiry of appropriate employees and agents of the Company with respect to the
matter in question.
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company is duly qualified to conduct business and
is in good standing under the laws of each jurisdiction in which the nature of
its businesses or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect (as defined below). The
Company has all requisite corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Company has furnished to the Buyer complete and accurate copies
of its Certificate of Incorporation and By-laws. The Company is not in default
under or in violation of any provision of the Company's Certificate of
Incorporation or By-laws. For purposes of this Agreement, "Company Material
Adverse Effect" means a material adverse effect on the assets, business,
condition (financial or otherwise), or results of operations of the Company,
except to the extent that any such effect is attributable to or results from (a)
the direct effect of the announcement of pendency of the transactions
contemplated hereby on current or prospective customers or revenues of the
Company, (b) the loss of employees by the Company resulting from the
announcement or pendency of the transactions contemplated hereby or (c) changes
in general economic conditions or changes affecting the industry generally in
which the Company operates.
2.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 4,000,000 Company Shares, of which, as of the date of this
Agreement, 809,211 shares are issued and outstanding and 2,213,384 shares are
held in the treasury of the Company. Section 2.2 of the Disclosure Schedule sets
forth as of the date of this Agreement, a complete and accurate list of (i) all
stockholders of the Company,
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indicating the number of Company Shares held by each stockholder, (ii) all
outstanding Options, indicating (A) the holder thereof, (B) the number of
Company Shares subject to each Option, (C) the exercise price, date of grant,
vesting schedule and expiration date for each Option, and (D) any terms
regarding the acceleration of vesting, and (iii) all stock option plans and
other stock or equity-related plans of the Company. All of the issued and
outstanding Company Shares are, and all Company Shares that may be issued upon
exercise of Options will be duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. Other than the Options listed
in Section 2.2 of the Disclosure Schedule, there are no outstanding or
authorized options, warrants, rights, agreements or commitments to which the
Company is a party or which are binding upon the Company providing for the
issuance or redemption of any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
the Company. Except as set forth in Section 2.2 of the Disclosure Schedule,
there are no agreements to which the Company is a party or by which it is bound
with respect to the voting (including without limitation voting trusts or
proxies), registration under the Securities Act of 1933, as amended (the
"Securities Act"), or sale or transfer (including without limitation agreements
relating to pre-emptive rights, rights of first refusal, co-sale rights or
"drag-along" rights) of any securities of the Company. To the knowledge of the
Company, there are no agreements among other parties, to which the Company is
not a party and by which the Company is not bound, with respect to the voting
(including without limitation voting trusts or proxies) or sale or transfer
(including without limitation agreements relating to rights of first refusal,
co-sale rights or "drag-along" rights) of any securities of the Company. All of
the issued and outstanding Company Shares were issued in compliance with
applicable federal and state securities laws.
2.3 AUTHORIZATION OF TRANSACTION. The Company has all requisite power
and, subject to obtaining the requisite approval of the Merger and this
Agreement by the Company's shareholders, authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
by the Company of this Agreement and, subject to the adoption of this Agreement
and the approval of the Merger by a majority of the votes represented by the
outstanding Company Shares entitled to vote on this Agreement and the Merger
(the "Requisite Stockholder Approval"), the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company. Without limiting the
generality of the foregoing, the Board of Directors of the Company, by the
unanimous written consent of all directors (i) determined that the Merger is
fair and in the best interests of the Company and its stockholders, (ii) adopted
this Agreement in accordance with the provisions of the Delaware General
Corporation Law, and (iii) directed that this Agreement and the Merger be
submitted to the stockholders of the Company for their adoption and
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approval and resolved to recommend that the stockholders of Company vote in
favor of the adoption of this Agreement and the approval of the Merger. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditor's rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
2.4 NONCONTRAVENTION. Subject to compliance with applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the filing of the Certificate of Merger as required by the
Delaware General Corporation Law, neither the execution and delivery by the
Company of this Agreement, and except as set forth in Section 2.4 of the
Disclosure Schedule, nor the consummation by the Company of the transactions
contemplated hereby, will (a) conflict with or violate any provision of the
Certificate of Incorporation or By-laws of the Company, (b) require on the part
of the Company any filing with, or any permit, authorization, consent or
approval of, any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"Governmental Entity"), (c) conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party the right to
terminate, modify or cancel, or require any notice, consent or waiver under, any
contract or instrument to which the Company is a party or by which the Company
is bound or to which any of its assets is subject, except, in the case of
clauses (a), (b) and (c) above, for (i) any conflict, breach, default,
acceleration, termination, modification or cancellation which would not have a
Company Material Adverse Effect and would not adversely affect the consummation
of the transactions contemplated hereby or (ii) any notice, consent or waiver
the absence of which would not have a Company Material Adverse Effect and would
not adversely affect the consummation of the transactions contemplated hereby,
(d) result in the imposition of any Security Interest (as defined below) upon
any assets of the Company or (e) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its properties
or assets. For purposes of this Agreement: "Security Interest" means any
mortgage, pledge, security interest, encumbrance, charge or other lien (whether
arising by contract or by operation of law), other than (i) mechanic's,
materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the Ordinary Course of
Business (as defined below) of the Company and not material to the Company; and
"Ordinary Course of Business" means the ordinary
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course of the Company's business, consistent with past custom and practice
(including with respect to frequency and amount).
2.5 SUBSIDIARIES AND AFFILIATED ENTITIES.
(a) There is no corporation, partnership, joint venture or
other entity in which the Company has, directly or indirectly, capital stock
thereof or other equity interests therein.
(b) Section 2.5 of the Disclosure Schedule attached hereto
sets forth: (i) the name and percentage ownership by any Significant Stockholder
(as defined below) of each corporation, partnership, joint venture or other
entity in which such Significant Stockholder has, directly or indirectly, (A)
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors or (B) an equity interest representing 50% or more of
the capital stock thereof or other equity interests therein (individually, an
"Affiliated Entity" and collectively, the "Affiliated Entities"), which has or
at any time in the past three years has had a relationship with the Company;
(ii) the jurisdiction of incorporation, capitalization and ownership of each
Affiliated Entity; (iii) the names of the officers and directors of each
Affiliated Entity; and (iv) the jurisdictions in which each Affiliated Entity is
qualified or holds licenses to do business as a foreign corporation. A
"Significant Stockholder" means any stockholder of the Company holding more than
five percent (5%) of the outstanding Company Shares as of the date of this
Agreement.
2.6 FINANCIAL STATEMENTS. The Company has provided to the Buyer (a) the
audited balance sheets and statements of income, changes in stockholders' equity
and cash flows of the Company as of and for each of the last three fiscal years;
and (b) the unaudited balance sheet and statement of income and cash flows of
the Company as of and for the eight months ended August 31, 1999 (the "Most
Recent Balance Sheet Date"). Such financial statements (collectively, the
"Financial Statements") have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods covered thereby, fairly present the financial condition,
results of operations and cash flows of the Company as of the respective dates
thereof and for the periods referred to therein and are consistent with the
books and records of the Company; PROVIDED, HOWEVER, that the Financial
Statements referred to in clause (b) above are subject to normal recurring
year-end adjustments (which will not be material) and do not include footnotes.
2.7 ABSENCE OF CERTAIN CHANGES. Since the Most Recent Balance Sheet
Date, (a) there has occurred no event or development which has had, or could
reasonably be expected to have in the future, a Company Material Adverse Effect,
and (b) except as
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set forth in Section 4.4 of the Disclosure Schedule, the Company has not taken
any of the actions set forth in paragraphs (a) through (n) of Section 4.4.
2.8 UNDISCLOSED LIABILITIES. The Company has no liabilities (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a) liabilities shown
on the balance sheet referred to in clause (b) of Section 2.6 (the "Most Recent
Balance Sheet"), (b) liabilities which have arisen since the Most Recent Balance
Sheet Date in the Ordinary Course of Business and which are similar in nature
and amount to the liabilities which arose during the comparable period of time
in the immediately preceding fiscal period and (c) contractual and other
liabilities incurred in the Ordinary Course of Business which are not required
by GAAP to be reflected on a balance sheet.
2.9 TAX MATTERS.
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Taxes" means all taxes, charges, fees, levies or
other similar assessments or liabilities, including without limitation income,
gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, withholding, employment, unemployment
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease, service,
service use, severance, stamp, occupation, windfall profits, customs, duties,
franchise and other taxes imposed by the United States of America or any state,
local or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government, and any interest,
fines, penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any tax or any contest or dispute thereof.
(ii) "Tax Returns" means all reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes.
(b) The Company has filed on a timely basis all Tax Returns
that it was required to file, and all such Tax Returns were complete and
accurate in all material respects. Except as set forth in Section 2.9 of the
Disclosure Schedule, the Company is not and has never been a member of a group
of corporations with which it has filed (or been required to file) consolidated,
combined or unitary Tax Returns. The Company has paid on a timely basis all
Taxes that were due and payable. The Company has no actual or potential
liability for any Tax obligation of any taxpayer
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(including without limitation any affiliated group of corporations or other
entities that included the Company during a prior period) other than the
Company. All Taxes that the Company is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Entity.
(c) The Company has delivered to the Buyer complete and
accurate copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company since
1995. To the knowledge of the Company, no federal income Tax Returns of the
Company have been audited by the Internal Revenue Service. No examination or
audit of any Tax Return of the Company by any Governmental Entity is currently
in progress or, to the knowledge of the Company, threatened or contemplated. The
Company has not been informed by any jurisdiction that the jurisdiction believes
that the Company was required to file any Tax Return that was not filed. The
Company has not waived any statute of limitations with respect to Taxes or
agreed to an extension of time with respect to a Tax assessment or deficiency.
(d) The Company: (i) is not a "consenting corporation" within
the meaning of Section 341(f) of the Code, and none of the assets of the Company
are subject to an election under Section 341(f) of the Code; (ii) has not been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(l)(A)(ii) of the Code; (iii) has not made any payments, is not obligated
to make any payments, and is not a party to any agreement that could obligate it
to make any payments that may be treated as an "excess parachute payment" under
Section 280G of the Code; (iv) has no actual or potential liability for any
Taxes of any person (other than the Company) under Treasury Regulation Section
1.1502-6 (or any similar provision of federal, state, local, or foreign law), or
as a transferee or successor, by contract, or otherwise; and (v) is not and has
not been required to make a basis reduction pursuant to Treasury Regulation
Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(e) None of the assets of the Company: (i) is property that is
required to be treated as being owned by any other person pursuant to the
provisions of former Section 168(f)(8) of the Code; (ii) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code; or (iii) directly or
indirectly secures any debt the interest on which is tax exempt under Section
103(a) of the Code.
(f) Except as set forth in Section 2.9 of the Disclosure
Schedule, the Company has not undergone a change in its method of accounting
resulting in an adjustment to its taxable income pursuant to Section 481 of the
Code.
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(g) Except as set forth in Section 2.9 of the Disclosure
Schedule, no state or federal "net operating loss" of the Company determined as
of the Closing Date is subject to limitation on its use pursuant to Section 382
of the Code or comparable provisions of state law as a result of any "ownership
change" within the meaning of Section 382(g) of the Code or comparable
provisions of any state law occurring prior to the Closing Date.
2.10 ASSETS. The Company owns or leases all tangible assets necessary
for the conduct of its businesses as presently conducted. Each such tangible
asset is free from material defects, has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear) and is suitable for the purposes for which it presently is
used. Except as set forth in Section 2.10 of Disclosure Schedule, no asset of
the Company (tangible or intangible) is subject to any Security Interest, other
than liens for taxes not yet due and payable and Security Interests which do
not, individually or in the aggregate, materially detract from the value of the
assets subject thereto or materially impair the operations of the Company. All
of the tangible assets of the Company are located at the Company's headquarters
in Conshohocken, Pennsylvania.
2.11 REAL PROPERTY. The Company does not own any real property.
2.12 INTELLECTUAL PROPERTY.
(a) The Company owns or has the right to use all Intellectual
Property (as defined below) necessary (i) to use, manufacture, market and
distribute the products manufactured, marketed, sold or licensed, and to provide
the services provided, by the Company to other parties (together, the "Customer
Deliverables") or (ii) to operate the Company's internal systems that are
material to the business or operations of the Company, including, without
limitation, computer hardware systems, software applications and embedded
systems (the "Internal Systems"; the Intellectual Property owned by or licensed
to the Company and incorporated in or underlying the Customer Deliverables or
the Internal Systems is referred to herein as the "Company Intellectual
Property"). Except as set forth in Section 2.12 of the Disclosure Schedule, the
Company has taken all measures to protect the proprietary nature of each item of
Company Intellectual Property, and to maintain in confidence all trade secrets
and confidential information, that it owns or uses to the extent that the
failure to protect or maintain such trade secrets and confidential information
would have a Company Material Adverse Effect. To the knowledge of the Company,
(a) no other person or entity has any rights to any of the Company Intellectual
Property owned by the Company (except pursuant to agreements or licenses
specified in
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Section 2.12(c) of the Disclosure Schedule), and (b) no other person or entity
is infringing, violating or misappropriating any of the Company Intellectual
Property. For purposes of this Agreement, "Intellectual Property" means all (i)
patents and patent applications, (ii) copyrights and registrations thereof,
(iii) mask works and registrations and applications for registration thereof,
(iv) computer software, data and documentation, (v) trade secrets and
confidential business information, whether patentable or unpatentable and
whether or not reduced to practice, know-how, manufacturing and production
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information,
(vi) trademarks, service marks, trade names, domain names and applications and
registrations therefor and (vii) other proprietary rights relating to any of the
foregoing. Section 2.12(a) of the Disclosure Schedule lists each patent, patent
application, copyright registration or application therefor, mask work
registration or application therefor, and trademark, service mark and domain
name registration or application therefor of the Company.
(b) To the Company's knowledge, none of the Customer
Deliverables, or the marketing, distribution, provision or use thereof,
infringes or violates, or constitutes a misappropriation of, any Intellectual
Property rights of any person or entity. To the Company's knowledge, none of the
Internal Systems, or the use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or entity.
Section 2.12(b) of the Disclosure Schedule lists any complaint, claim or notice,
or written threat thereof, received by the Company alleging any such
infringement, violation or misappropriation; and the Company has provided to the
Buyer complete and accurate copies of all written documentation in the
possession of the Company relating to any such complaint, claim, notice or
threat. The Company has provided to the Buyer complete and accurate copies of
all written documentation in the Company's possession relating to claims or
disputes known to the Company concerning any Company Intellectual Property.
(c) Section 2.12(c) of the Disclosure Schedule identifies each
license or other agreement (or type of license or other agreement) pursuant to
which the Company licenses, distributes or otherwise grants any rights to any
third party with respect to, any Customer Deliverable or Company Intellectual
Property.
(d) Section 2.12(d) of the Disclosure Schedule identifies each
item of Company Intellectual Property that is owned by a party other than the
Company, and the license or agreement pursuant to which the Company uses it
(excluding off-the-shelf software programs licensed by the Company pursuant to
"shrink wrap"
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<PAGE> 22
licenses or other widely commercially available software that is not material to
the business of the Company).
(e) The Company has not disclosed the source code for any of
the software owned by the Company (the "Software") or other confidential
information constituting, embodied in or pertaining to the Software to any
person or entity, except pursuant to the agreements listed in Section 2.12(e) of
the Disclosure Schedule, and the Company has taken reasonable measure to prevent
disclosure of such source code.
(f) All of the copyrightable materials (including Software)
incorporated in or bundled with the Customer Deliverables have been created by
employees of the Company within the scope of their employment by the Company or
by independent contractors of the Company who have executed agreements expressly
assigning all right, title and interest in such copyrightable materials to the
Company. No portion of such copyrightable materials was jointly developed with
any third party.
(g) To the knowledge of the Company, the Customer Deliverables
and the Internal Systems (other than beta products and other products still
under development) are free from significant defects or programming errors and
conform in all material respects to the written documentation and specifications
therefor.
(h) All of the Customer Deliverables currently being marketed,
distributed or licensed by the Company or which were marketed, distributed or
licensed by the Company since January 1, 1998, and all Internal Systems, are
Year 2000 Compliant; provided however, that except as set forth in the next
sentence, the Company is not making any representation or warranty concerning
any third-party product. The Company is not aware of any failure to be Year 2000
Compliant of any third-party product that is material to the business or
operations of the Company, including without limitation any system belonging to
any of the Company's suppliers, service providers or customers. For purposes of
this Agreement, "Year 2000 Compliant" means that the applicable system or item,
in each case without human intervention, other than original data entry,
provided, in each case, that all applications, hardware and other systems used
in conjunction with such system or item which are not owned or licensed by the
Company or constitute or are included in Customer Deliverables or Internal
Systems correctly exchange date data with or provide data to such system or
item:
(i) will accurately receive, record, store, provide,
recognize and process all date and time data from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all leap
years;
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(ii) will accurately perform all date-dependent
calculations and operations (including, without limitation, mathematical
operations, sorting, comparing and reporting) from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all leap
years; and
(iii) will not malfunction, cease to function or
provide invalid or incorrect results as a result of (x) the change of years from
1999 to 2000, (y) date data, including date data which represents or references
different centuries, different dates during 1999 and 2000, or more than one
century or (z) the occurrence of any particular date.
2.13 CONTRACTS.
(a) Section 2.13 of the Disclosure Schedule lists the
following agreements (written or oral) to which the Company is a party as of the
date of this Agreement:
(i) any agreement (or group of related agreements)
providing for payments in excess of $10,000 per annum or having a remaining term
longer than three months;
(ii) any agreement (or group of related agreements)
for the purchase or sale of products or for the furnishing or receipt of
services (A) which calls for performance over a period of more than one year,
(B) which involves more than the sum of $10,000 or (C) in which the Company has
granted "most favored nation" pricing provisions or exclusive marketing or
distribution rights relating to any products or territory or has agreed to
purchase a minimum quantity of goods or services or has agreed to purchase goods
or services exclusively from a certain party;
(iii) any agreement establishing a partnership or
joint venture;
(iv) any lease or sublease of real property;
(v) any agreement (or group of related agreements)
under which it has created, incurred, assumed or guaranteed indebtedness or
under which it has imposed (or may impose) a Security Interest on any of the
Company's assets, tangible or intangible;
(vi) any agreement concerning confidentiality or
noncompetition;
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(vii) any employment or consulting agreement;
(viii) any agreement with any officer, director or
stockholder of the Company or any affiliate thereof;
(ix) any agreement under which the consequences of a
default or termination would reasonably be expected to have a Company Material
Adverse Effect;
(x) any agreement which contains any provisions
requiring the Company to indemnify any other party thereto; and
(xi) any other agreement (or group of related
agreements) either involving more than $10,000 or not entered into in the
Ordinary Course of Business.
(b) The Company has delivered to the Buyer a complete and
accurate copy of each agreement (as amended to date) listed in Section 2.12 or
Section 2.13 of the Disclosure Schedule. With respect to each agreement so
listed: (i) the agreement is legal, valid, binding and enforceable and in full
force and effect against the Company and, to the knowledge of the Company,
against any other party; and (ii) neither the Company nor, to the knowledge of
the Company, any other party, is in material breach or violation of, or default
under, any such agreement, and to the knowledge of the Company, no event has
occurred, is pending or is threatened, which, after the giving of notice, with
lapse of time, or otherwise, would constitute a material breach or default by
the Company or, to the knowledge of the Company, any other party under such
contract.
2.14 ACCOUNTS RECEIVABLE. To the knowledge of the Company, the accounts
receivable of the Company shown on the Most Recent Balance Sheet have been
collected or are collectible in amounts not less than the amounts thereof
carried on the books of the Company, in the case of Capital One Bank within 90
days and in all other cases in the Ordinary Course of Business, except to the
extent of the allowance for doubtful accounts shown on the Most Recent Balance
Sheet.
2.15 POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Company.
2.16 INSURANCE. The Company is, and at all times since January 1, 1997
has been, covered by insurance of the type and in amounts set forth on Section
2.16 of the Disclosure Schedule. There is no material claim pending under any
such policy as to which coverage has been questioned, denied or disputed by the
underwriter of such
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policy. All premiums due and payable under all such policies have been paid, the
Company is not liable for retroactive premiums or similar payments and to the
Company's knowledge the Company is otherwise in compliance in all material
respects with the terms of such policies. The Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any
such policy.
2.17 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or to the Company's knowledge investigation before any Governmental
Entity or before any arbitrator (a "Legal Proceeding") which is pending or to
the Company's knowledge threatened against the Company.
2.18 WARRANTIES. No product or service manufactured, sold, leased,
licensed or delivered by the Company is subject to any guaranty, warranty, right
of return, right of credit or other indemnity other than (i) as set forth in the
Company's contracts and agreements, true and correct copies of which have been
provided to the Buyer and identified in the Disclosure Schedule and (ii)
manufacturers' warranties for which the Company has no liability.
2.19 EMPLOYEES.
(a) Section 2.19 of the Disclosure Schedule contains a list of
all employees of the Company as of the date of this Agreement whose annual rate
of compensation exceeds $20,000 per year, along with the position and the annual
rate of compensation of each such person. Except as set forth on Section 2.19 of
the Disclosure Schedule, each such employee has entered into a
Confidentiality/Non-Disclosure Agreement with the Company, a copy of which has
previously been made available to the Buyer. Section 2.19 of the Disclosure
Schedule contains a list of all employees of the Company who are a party to a
non-competition agreement with the Company; copies of such agreements have
previously been made available to the Buyer. To the knowledge of the Company, no
key employee or group of employees has any plans to terminate employment with
the Company.
(b) The Company is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes, grievances, claims of
unfair labor practices or other collective bargaining disputes. The Company has
no knowledge of any organizational effort made or threatened, either currently
or within the past two years, by or on behalf of any labor union with respect to
employees of the Company.
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2.20 EMPLOYEE BENEFITS.
(a) Section 2.20(a) of the Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans (as defined below)
maintained, or contributed to, by the Company. Complete and accurate copies of
all Employee Benefit Plans have been delivered to the Buyer. The Company has
complied in all material respects, in the administration and operation of each
Employee Benefit Plan, with the terms of such Plan and the requirements of
applicable law (including without limitation the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Code and the regulations
thereunder). The Company has no monetary liability under any Employee Benefit
Plan, except for those set forth on the Most Recent Balance Sheet or those that
have arisen since the date of the Most Recent Balance Sheet in the Ordinary
Course of Business. "Employee Benefit Plan" means any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
without limitation insurance coverage, severance benefits, disability benefits,
deferred compensation, bonuses, stock options, stock purchase, phantom stock,
stock appreciation or other forms of incentive compensation or post-retirement
compensation.
(b) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination letters
from the Internal Revenue Service to the effect that such Employee Benefit Plans
are qualified and the plans and the trusts related thereto are exempt from
federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, no such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its
qualification or materially increase its cost. Each Employee Benefit Plan which
is required to satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has
been tested for compliance with, and satisfies the requirements of, Section
401(k)(3) and Section 401(m)(2) of the Code for each plan year ending prior to
the Closing Date.
(c) There are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of employment to any employee
of the Company (or to any beneficiary of any such employee), including but not
limited to retiree health coverage and deferred compensation, but excluding
continuation of health coverage required to be continued under Section 4980B of
the Code or other applicable law and insurance conversion privileges under state
law. The assets of each
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Employee Benefit Plan which is funded are reported at their fair market value on
the books and records of such Employee Benefit Plan.
(d) Each Employee Benefit Plan is amendable and terminable
unilaterally by the Company at any time without liability to the Company as a
result thereof and no Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Employee Benefit Plan.
(e) Section 2.20(e) of the Disclosure Schedule discloses each:
(i) agreement or plan of the Company, the benefits of which are contingent, or
the terms of which have been or will be materially altered, in connection with
the Merger, (ii) agreement, plan or arrangement under which any person may
receive payments from the Company that may be subject to the tax imposed by
Section 4999 of the Code or included in the determination of such person's
"parachute payment" under Section 280G of the Code, and (iii) agreement or plan
binding the Company, including without limitation any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan or Employee Benefit Plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
2.21 LEGAL COMPLIANCE.
(a) The Company, and the conduct and operations of its
business, are in compliance with each law (including rules and regulations
thereunder) of any federal, state, local or foreign government, or any
Governmental Entity which is applicable to the Company or its business,
violation of, default under or noncompliance with which could reasonably be
expected to have a Company Material Adverse Effect.
(b) The Company, has no liability or remediation obligation
under any federal, state or local law, statute, rule or regulation or the common
law relating to the protection or clean-up of the environment.
2.22 CUSTOMERS AND SUPPLIERS. Section 2.22 of the Disclosure Schedule
sets forth a list as of the date of this Agreement of (a) each customer that
accounted for more than 5% of the revenues of the Company during the last full
fiscal year or the interim period through the Most Recent Balance Sheet Date and
(b) each supplier that is the
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sole supplier of any significant product to the Company. No such customer or
supplier has indicated within the past year that it will stop, or decrease the
rate of, buying products or supplying products, as applicable, to the Company.
2.23 PERMITS. The Company has obtained all permits, licenses,
registrations, certificates, orders or approvals from any Governmental Entity
(including without limitation those issued or required under Environmental Laws
and those relating to the occupancy or use of owned or leased real property)
("Permits") that are required for the Company to conduct its business as
presently conducted, except for those the absence of which, individually or in
the aggregate, have not had and would not have a Company Material Adverse
Effect. Each such Permit is in full force and effect and, to the knowledge of
the Company, no suspension or cancellation of such Permit is threatened and
there is no basis for believing that such Permit will not be renewable upon
expiration.
2.24 CERTAIN BUSINESS RELATIONSHIPS WITH AFFILIATES. No affiliate, as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, of the Company
(an "Affiliate"), (a) owns any property or right, tangible or intangible, which
is used in the business of the Company, (b) has any claim or cause of action
against the Company, or (c) owes any money to, or is owed any money by, the
Company.
2.25 BROKERS' FEES. The Company has no liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement, except for the obligation in the
amount of $100,000 to J.C. Bradford referred to in Section 1.14.
2.26 BOOKS AND RECORDS. The books and records of the Company are
accurate and complete in all material respects and have been maintained in
accordance with good business and bookkeeping practices.
2.27 TAX-FREE REORGANIZATION. To the knowledge of the Company, neither
the Company nor any of its Affiliates has through the date of this Agreement
taken or agreed to take any action that would prevent the Merger from
constituting a transaction qualifying as a reorganization under Section 368(a)
of the Code.
2.28 DISCLOSURE. No representation or warranty by the Company contained
in this Agreement, and no statement contained in the Disclosure Schedule or any
certificate delivered or required to be delivered by or on behalf of the Company
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the
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circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
2.29 SALE OF ASSETS TO TELESPECTRUM WORLDWIDE, INC. The Company has
made available to Buyer a true copy of the documents incorporating all of the
material terms of the transactions contemplated by the Asset Purchase Agreement
between the Company and Telespectrum Worldwide, Inc. ("Telespectrum") dated
March 19, 1997 and the Asset Purchase Agreement between the Company,
Telespectrum and FX Direct, Inc. dated May 7, 1997 (the "Telespectrum
Transactions"). The Telespectrum Transactions were consummated in all material
respects in accordance with such documents and the Company has no further
obligations or liabilities thereunder, except non-competition and
indemnification provisions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and warrants
to the Company and to the Company Stockholders as follows. For purposes of this
Article III, the phrase "to the knowledge of the Buyer" or any phrase of similar
import shall be deemed to refer to the actual knowledge of the directors and
executive officers of the Buyer, as well as any other knowledge which such
executive officers would have possessed had they made reasonable inquiry of
appropriate employees and agents of the Buyer with respect to the matter in
question.
3.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Each of the Buyer
and the Transitory Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation. The Buyer
is duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing would not have a Buyer
Material Adverse Effect (as defined below). The Buyer has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Buyer has furnished
or made available to the Company complete and accurate copies of its Certificate
of Incorporation and By-laws. For purposes of this Agreement, "Buyer Material
Adverse Effect" means a material adverse effect on the assets, business,
condition (financial or otherwise), or results of operations of the Buyer and
its
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subsidiaries, taken as a whole, except to the extent that any such effect is
attributable to or results from changes in general economic conditions or
changes affecting the industry generally in which the Buyer operates.
3.2 CAPITALIZATION. The authorized capital stock of the Buyer consists
of (a) 150,000,000 shares of Buyer Common Stock, of which 34,796,742 shares were
issued and outstanding as of September 27, 1999, and (b) 5,000,000 shares of
Preferred Stock, $.01 par value per share, none of which shares were issued or
outstanding. All of the issued and outstanding shares of Buyer Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. All of the Merger Shares will be, when issued in accordance
with this Agreement, duly authorized, validly issued, fully paid, nonassessable
and free of all preemptive rights. All of the shares of Buyer Common Stock
subject to each Option assumed by the Buyer pursuant to Section 1.8 will be,
when issued upon the due exercise of such Option, duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights.
3.3 AUTHORIZATION OF TRANSACTION. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and (in the case of the Buyer) the Escrow Agreement and to perform its
obligations and consummate the transactions contemplated hereunder and
thereunder. The execution and delivery by the Buyer and the Transitory
Subsidiary of this Agreement and (in the case of the Buyer) the Escrow Agreement
and the consummation by the Buyer and the Transitory Subsidiary of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Buyer and
Transitory Subsidiary, respectively. This Agreement has been duly and validly
executed and delivered by the Buyer and the Transitory Subsidiary and
constitutes a valid and binding obligation of the Buyer and the Transitory
Subsidiary, enforceable against them in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditor's rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
3.4 NONCONTRAVENTION. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and the
filing of the Certificate of Merger as required by the Delaware General
Corporation Law, neither the execution and delivery by the Buyer or the
Transitory Subsidiary of this Agreement or (in the case of the Buyer) the Escrow
Agreement, nor the consummation by the Buyer or the Transitory Subsidiary of the
transactions contemplated hereby or thereby, will (a) conflict with or violate
any provision of the charter or By-laws of the
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Buyer or the Transitory Subsidiary, (b) require on the part of the Buyer or the
Transitory Subsidiary any filing with, or permit, authorization, consent or
approval of, any Governmental Entity, (c) conflict with, result in breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of obligations under, create in any party any
right to terminate, modify or cancel, or require any notice, consent or waiver
under, any contract or instrument to which the Buyer or the Transitory
Subsidiary is a party or by which either is bound or to which any of their
assets are subject, except for (i) any conflict, breach, default, acceleration,
termination, modification or cancellation which would not materially adversely
affect the consummation of the transactions contemplated hereby or (ii) any
notice, consent or waiver the absence of which would not materially adversely
affect the consummation of the transactions contemplated hereby, or (d) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Buyer or the Transitory Subsidiary or any of their properties or assets or
(e) result in the imposition of any Security Interest upon any of the Merger
Consideration (including, without limitation, any of the Escrow Fund).
3.5 REPORTS AND FINANCIAL STATEMENTS. The Buyer has previously
furnished or made available to the Company a complete and accurate copy of its
Prospectus (filed pursuant to Rule 424 under the Securities Act) and Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999 filed with the
Securities and Exchange Commission (the "SEC"), in the form so filed (the "Buyer
Reports"). The Buyer Reports complied in all material respects with the
requirements of the Securities Act and the rules and regulations thereunder when
filed. As of its date, the Buyer Reports did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements and
unaudited interim financial statements of the Buyer included in the Buyer
Reports (i) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto when filed, (ii) were prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto), (iii) fairly present the
consolidated financial condition, results of operations and cash flows of the
Buyer as of the respective dates thereof and for the periods referred to
therein, and (iv) are consistent with the books and records of the Buyer.
3.6 ABSENCE OF MATERIAL ADVERSE CHANGE. Since June 30, 1999, there has
occurred no event or development which has had, or could reasonably be expected
to have in the future, a Buyer Material Adverse Effect.
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3.7 LITIGATION. Except as disclosed in the Buyer Reports, there is no
Legal Proceeding which is pending or, to the Buyer's knowledge, threatened
against the Buyer or any subsidiary of the Buyer which, if determined adversely
to the Buyer or such subsidiary, could have, a Buyer Material Adverse Effect or
which in any manner challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.
3.8 TAX-FREE REORGANIZATION. To the knowledge of the Buyer, neither the
Buyer nor any of its Affiliates has through the date of this Agreement taken or
agreed to take any action that would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
3.9 INTERIM OPERATIONS OF THE TRANSITORY SUBSIDIARY. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement.
3.10 BROKERS' FEES. Neither the Buyer nor the Transitory Subsidiary has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement.
3.11 DISCLOSURE. No representation or warranty by the Buyer or
Transitory Subsidiary contained in this Agreement, or any certificate required
to be delivered by or on behalf of the Buyer or Transitory Subsidiary pursuant
to this Agreement, contains or will contain any untrue statement of a material
fact or omit or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
ARTICLE IV
COVENANTS
4.1 CLOSING EFFORTS. Each of the Parties shall use its best efforts, to
the extent commercially reasonable ("Reasonable Best Efforts"), to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including without limitation using
its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to
consummate the Merger are satisfied.
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4.2 GOVERNMENTAL AND THIRD-PARTY NOTICES AND CONSENTS. Each Party shall
use its Reasonable Best Efforts to obtain, at its expense, all waivers, permits,
consents, approvals or other authorizations from Governmental Entities, and to
effect all registrations, filings and notices with or to Governmental Entities,
as may be required for such Party to consummate the transactions contemplated by
this Agreement and to otherwise comply with all applicable laws and regulations
in connection with the consummation of the transactions contemplated by this
Agreement.
4.3 STOCKHOLDER APPROVAL.
(a) The Company shall call and convene a special meeting of
stockholders or solicit a written stockholder consent as promptly as practicable
after the date of this Agreement. The Company shall use its Reasonable Best
Efforts to obtain, as promptly as practicable, the Requisite Stockholder
Approval, either at such special meeting of stockholders or pursuant to such
written stockholder consent, all in accordance with the applicable requirements
of the Delaware General Corporation Law. In connection with such special meeting
of stockholders or written stockholder consent, the Company shall provide to its
stockholders a written proxy or information statement (the "Disclosure
Statement") which includes (A) a summary of the Merger and this Agreement (which
summary shall include a summary of the terms relating to the indemnification
obligations of the Company Stockholders, the escrow arrangements and the
authority of the Indemnification Representatives, and a statement that the
adoption of this Agreement by the stockholders of the Company shall constitute
approval of such terms), (B) all of the information required by Rule 502(b)(2)
of Regulation D under the Securities Act with respect to the Company, (C) a
statement that appraisal rights are available for the Company Shares pursuant to
Section 262 of the Delaware General Corporation Law and a copy of such Section
262 and (D) the unanimous recommendation of the Company's Board of Directors
that the stockholders of the Company vote in favor of the adoption of this
Agreement and the approval of the Merger. The terms of this Agreement shall be
submitted to the stockholders whether or not the Board of Directors of the
Company determines at any time subsequent to declaring its advisability that the
Agreement is no longer advisable and recommends that the stockholders reject it.
The Buyer agrees to cooperate with the Company in the preparation of the
Disclosure Statement. The Company agrees not to distribute the Disclosure
Statement until the Buyer has had a reasonable opportunity to review and comment
on the Disclosure Statement and the Disclosure Statement has been approved by
the Buyer (which approval may not be unreasonably withheld or delayed). If the
Requisite Stockholder Approval is obtained by means of a written consent, the
Company shall send, pursuant to Section 228 and 262(d) of the Delaware General
Corporation Law, a written notice to all stockholders of the Company that did
not execute such written consent informing them that this Agreement and the
Merger were
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adopted and approved by the stockholders of the Company and that appraisal
rights are available for their Company Shares pursuant to Section 262 of the
Delaware General Corporation Law (which notice shall include a copy of such
Section 262), and shall promptly inform the Buyer of the date on which such
notice was sent.
(b) The stockholders of the Company listed on the signature
page hereto each agree (i) to vote all Company Shares that are beneficially
owned by him, her or it in favor of the adoption of this Agreement and the
approval of the Merger, (ii) not to vote any Company Shares in favor of any
other acquisition (whether by way of merger, consolidation, share exchange,
stock purchase or asset purchase) of all or a majority of the outstanding
capital stock or assets of the Company and (iii) otherwise to use his, her or
its Reasonable Best Efforts to obtain the Requisite Stockholder Approval.
4.4 OPERATION OF BUSINESS. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the earlier of the
termination of this Agreement pursuant to Article VII or the Effective Time, the
Company shall conduct its operations in the Ordinary Course of Business and use
Reasonable Best Efforts to conduct its business in compliance with all
applicable laws and regulations and, to the extent consistent therewith, use its
Reasonable Best Efforts to preserve intact its current business organization,
keep its physical assets in good working condition, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
it shall seek to ensure that its goodwill and ongoing business shall not be
impaired in any material respect. Without limiting the generality of the
foregoing, prior to the Effective Time, the Company shall not, without the
written consent of the Buyer:
(a) issue or sell, or redeem or repurchase, any stock or other
securities of the Company or any rights, warrants or options to acquire any such
stock or other securities (except pursuant to the exercise of Options
outstanding on the date hereof), or amend any of the terms of (including without
limitation the vesting of) any Options;
(b) split, combine or reclassify any shares of its capital
stock; declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock;
(c) create, incur or assume any indebtedness; assume,
guarantee, endorse or otherwise become liable or responsible for the obligations
of any other person or entity; or make any loans, advances or capital
contributions to, or investments in, any other person or entity;
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(d) except as set forth in Section 4.4 of the Disclosure
Schedule, enter into, adopt or amend any Employee Benefit Plan or any employment
or severance agreement or arrangement of the type described in Section 2.20(e)
or increase in any manner (except for normal increases in the Ordinary Course of
Business the compensation or fringe benefits of, or materially modify the
employment terms of, its directors, officers or employees, or pay any bonus or
other benefit to its directors, officers or employees;
(e) acquire, sell, lease, license or dispose of any assets or
property, other than purchases and sales of assets in the Ordinary Course of
Business;
(f) mortgage or pledge any of its property or assets or
subject any such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any
obligation or liability other than in the Ordinary Course of Business;
(h) amend its Certificate of Incorporation or By-laws;
(i) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP;
(j) enter into, amend, terminate, take or omit to take any
action that would constitute a violation of or default under, or waive any
rights under, any material contract or agreement;
(k) make or commit to make any capital expenditure in excess
of $10,000 per item or $50,000 in the aggregate;
(l) institute or settle any Legal Proceeding;
(m) take any action or fail to take any action permitted by
this Agreement with the knowledge that such action or failure to take action
would result in (i) any of the representations and warranties of the Company set
forth in this Agreement becoming untrue or (ii) any of the conditions to the
Merger set forth in Article V not being satisfied;
(n) take any action that would prevent the Merger from
constituting a transaction qualifying as a reorganization under Section 368(a)
of the Code; or
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(o) agree in writing or otherwise to take any of the foregoing
actions.
4.5 ACCESS TO INFORMATION. The Company shall permit representatives of
the Buyer to have full access (at all reasonable times, and in a manner so as
not to interfere with the normal business operations of the Company) to all
premises, properties, financial and accounting records, contracts, other records
and documents, and personnel, of or pertaining to the Company.
4.6 EXCLUSIVITY. The Company shall not, and the Company shall direct
each of its officers, directors, employees, representatives and agents not to,
directly or indirectly, (i) initiate, solicit, encourage or otherwise facilitate
any inquiry, proposal, offer or discussion with any party (other than the Buyer)
concerning any merger, reorganization, consolidation, recapitalization, business
combination, liquidation, dissolution, share exchange, sale of stock, sale of
material assets or similar business transaction involving the Company, (ii)
furnish any non-public information concerning the business, properties or assets
of the Company to any party (other than the Buyer) or (iii) engage in
discussions or negotiations with any party (other than the Buyer) concerning any
such transaction. The Company shall immediately notify any party with which
discussions or negotiations of the nature described in the first sentence of
this Section 4.6 were pending that the Company is terminating such discussions
or negotiations. If the Company receives any inquiry, proposal or offer of the
nature described in the first sentence of this Section 4.6, the Company shall,
within one business day after such receipt, notify the Buyer of such inquiry,
proposal or offer, including the identity of the other party and the terms of
such inquiry, proposal or offer.
4.7 EXPENSES. Except as set forth in Article VI and the Escrow
Agreement, each of the Parties shall bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby; provided, HOWEVER, that if the Merger is
consummated, the Company shall not incur more than an aggregate of $70,000 in
financial advisory (other than the fee to be paid to J.C Bradford pursuant to
Section 1.14), legal and accounting fees and expenses in connection with the
Merger. Any expenses (other than the fee to be paid to J.C. Bradford pursuant to
Section 1.14) in excess of $70,000 shall be paid from the Escrow Fund. The
Parties agree to effectuate such payment from the Escrow Fund by giving joint
written instructions to the Escrow Agent in accordance with Section 4 of the
Escrow Agreement.
4.8 TAX FREE REQUIREMENTS. From the date of this Agreement to the
Effective Time, the Buyer shall not, and shall cause each of the Buyer's
affiliates not to, take any
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action that would prevent the Merger from constituting a transaction qualifying
as a reorganization under Section 368(a) of the Code.
4.9 INDEMNIFICATION. The Buyer shall not, for a period of one year
after the Effective Time, take any action to alter or impair any exculpatory or
indemnification provisions now existing in the Certificate of Incorporation or
Bylaws of the Company for the benefit of any individual who served as a director
or officer of the Company at any time prior to the Effective Time, except for
any changes which may be required to conform with changes in applicable law and
any changes which do not affect the application of such provisions to acts or
omissions of such individuals prior to the Effective Time, it being agreed that
all such exculpatory or indemnification provisions will expire at the end of
such one year period.
4.10 CERTAIN BENEFIT PLANS. Buyer shall take reasonable actions as are
necessary to allow eligible employees of the Company to participate in the
benefit programs of the Buyer, or alternative benefit programs substantially
comparable to those applicable to employees of the Buyer, as soon as practicable
after the Effective Time.
4.11 TERMINATION OF COMPANY'S 401(k) PLAN. If requested by the Buyer in
writing at least two (2) days prior to the Closing Date, the Company shall,
effective as of the Effective Time, terminate the Company's 401(k) Plan (the
"Plan") and no further contributions shall be made to the Plan, provided that as
a condition of such termination, the Company's employees shall be eligible to
participate in the Buyer's 401(k) plan immediately following the Closing Date.
If termination of the Plan is so requested by the Buyer, the Company shall
provide to the Buyer executed resolutions by the Board of Directors of the
Company authorizing the termination.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations
of each Party to consummate the Merger are subject to the Company having
obtained the Requisite Stockholder Approval.
5.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE TRANSITORY
SUBSIDIARY. The obligation of each of the Buyer and the Transitory Subsidiary to
consummate the Merger is subject to the satisfaction (or waiver by the Buyer) of
the following additional conditions:
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(a) there shall not be any Dissenting Shares as of the
Effective Time;
(b) the Company shall have obtained (and shall have provided
copies thereof to the Buyer) all of the waivers, permits, consents, approvals or
other authorizations, and effected all of the registrations, filings and
notices, referred to in Section 4.2 which are required on the part of the
Company, except for any the failure of which to obtain or effect would not have
a Company Material Adverse Effect or adversely affect the consummation of the
transactions contemplated by this Agreement;
(c) each of the representations and warranties of the Company
contained in this Agreement shall be true and correct as of the Effective Time
as though made on and as of the Effective Time (except to the extent expressly
made as of an earlier date, in which case as of such date), except (other than
with respect to representations and warranties set forth in Sections 2.1, 2.2,
2.3, 2.24, 2.25 and 2.28) where the failure to be so true and correct would not
have, individually or in the aggregate, a Company Material Adverse Effect;
(d) the Company shall have performed or complied with in all
material respects its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Effective Time;
(e) no Legal Proceeding (other than a Legal Proceeding
instituted by the Buyer or an Affiliate of the Buyer, provided this exception
shall not constitute a waiver of any other condition of Closing) shall be
pending or threatened wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation or (iii)
have a Company Material Adverse Effect, and no such judgment, order, decree,
stipulation or injunction shall be in effect;
(f) the Company shall have delivered to the Buyer and the
Transitory Subsidiary a certificate (the "Company Certificate") to the effect
that each of the conditions specified in Section 5.1 and clauses (a) through (e)
(insofar as clause (e) relates to Legal Proceedings involving the Company) of
this Section 5.2 is satisfied in all respects;
(g) each of the Company Stockholders shall have executed and
delivered to the Buyer an Investment Representation Letter in the form attached
hereto as EXHIBIT B and the Buyer shall have no reason to believe that the
statements set forth therein are not true and shall be reasonably satisfied that
the issuance and sale of the Merger Shares is exempt from the registration
requirements of the Securities Act;
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(h) the Buyer shall have received from counsel to the Company
an opinion with respect to the matters set forth in EXHIBIT C attached hereto,
addressed to the Buyer and dated as of the Closing Date;
(i) the Buyer shall have received copies of the resignations,
effective as of the Effective Time, of each director and officer of the Company
(other than any such resignations which the Buyer designates, by written notice
to the Company, as unnecessary);
(j) Marc Cohen and Jeff Cohen shall each have entered into
employment agreements with the Buyer (such agreements to include
non-competition, invention and non-disclosure provisions) in the forms attached
hereto as Exhibits D-1 and D-2, respectively;
(k) the Buyer shall have received such other certificates and
instruments (including without limitation certificates of good standing of the
Company in its jurisdiction of organization and the various foreign
jurisdictions in which it is qualified, certified charter documents,
certificates as to the incumbency of officers and the adoption of authorizing
resolutions) as it shall reasonably request in connection with the Closing; and
(l) the Company shall have entered into an agreement with
Capital One Services, Inc. substantially in the form attached hereto as EXHIBIT
E.
5.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to consummate the Merger is subject to the satisfaction of the
following additional conditions:
(a) the Buyer shall have effected all of the registrations,
filings and notices referred to in Section 4.2 which are required on the part of
the Buyer;
(b) each of the representations and warranties of the Buyer
and the Transitory Subsidiary contained in this Agreement shall be true and
correct as of the Effective Time as though made on and as of the Effective Time
(except to the extent expressly made as of an earlier date, in which case as of
such date), except (other than with respect to representations and warranties
set forth in Section 3.1, 3.2, 3.3, 3.10 and 3.11) where failure to be so true
and correct would not have, individually or in the aggregate, a Buyer Material
Adverse Effect;
(c) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with in all material respects its agreements and covenants
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required to be performed or complied with under this Agreement as of or prior to
the Effective Time;
(d) no Legal Proceeding shall be pending or threatened wherein
an unfavorable judgment, order, decree, stipulation or injunction would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation or (iii) have a Buyer Material Adverse Effect,
and no such judgment, order, decree, stipulation or injunction shall be in
effect;
(e) the Buyer shall have delivered to the Company a
certificate (the "Buyer Certificate") to the effect that each of the conditions
specified in clauses (a) through (d) (insofar as clause (d) relates to Legal
Proceedings involving the Buyer) of this Section 5.3 is satisfied in all
respects;
(f) the Company shall have received from counsel to the Buyer
and the Transitory Subsidiary an opinion with respect to the matters set forth
in EXHIBIT F attached hereto, addressed to the Company and dated as of the
Closing Date; and
(g) the Buyer shall have entered into employment agreements
with Marc Cohen and Jeff Cohen, in the forms attached hereto as EXHIBITS D-1 and
D-2, respectively; and
(h) the Company shall have received such other certificates
and instruments (including without limitation certificates of good standing of
the Buyer and the Transitory Subsidiary in their jurisdiction of organization,
certified charter documents, certificates as to the incumbency of officers and
the adoption of authorizing resolutions) as it shall reasonably request in
connection with the Closing.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY THE COMPANY STOCKHOLDERS. Subject to the
limitations and qualifications set forth in this Article VI, the Company
Stockholders receiving the Merger Consideration pursuant to Section 1.5 (the
"Indemnifying Stockholders") shall, at or following the Effective Time,
indemnify the Buyer in respect of, and hold it harmless against, any and all
debts, obligations and other liabilities (whether absolute, accrued, contingent,
fixed or otherwise, or whether known or unknown, or due or to become due or
otherwise), monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including without limitation amounts
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paid in settlement, interest, court costs, costs of investigators, fees and
expenses of attorneys, accountants, financial advisors and other experts, and
other expenses of litigation) net of any insurance proceeds or payments from any
responsible party received by the Indemnified Party incurred or suffered by the
Surviving Corporation or the Buyer or any Affiliate thereof, at any time prior
to or after the Effective Time, resulting from, relating to or constituting:
(a) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement of the Company contained in this Agreement or
the Company Certificate;
(b) any failure of any Company Stockholder to have good, valid
and marketable title to the issued and outstanding Company Shares issued in the
name of such Company Stockholder, free and clear of all Security Interests; or
(c) any claim by a stockholder or former stockholder of the
Company, or any other person or entity, seeking to assert, or based upon: (i)
ownership or rights to ownership of any shares of stock of the Company; (ii) any
rights of a stockholder (other than the right to receive the Merger
Consideration pursuant to this Agreement or appraisal rights under the
applicable provisions of the Delaware General Corporation Law), including any
option, preemptive rights or rights to notice or to vote; (iii) any rights under
the Certificate of Incorporation or By-laws of the Company; or (iv) any claim
that his, her or its shares were wrongfully repurchased by the Company;
all of the above, "Damages."
6.2 INDEMNIFICATION BY THE BUYER. Subject to the limitations and
qualifications set forth in this Article VI, the Buyer shall indemnify the
Indemnifying Stockholders in respect of, and hold them harmless against, any and
all Damages incurred or suffered by the Indemnifying Stockholders resulting
from, relating to or constituting any misrepresentation, breach of warranty or
failure to perform any covenant or agreement of the Buyer or the Transitory
Subsidiary contained in this Agreement or the Buyer Certificate.
6.3 INDEMNIFICATION CLAIMS.
(a) A party entitled, or seeking to assert rights, to
indemnification under this Article VI (an "Indemnified Party") shall give
written notification to the party from whom indemnification is sought (an
"Indemnifying Party") of the commencement of any suit or proceeding relating to
a third party claim for which indemnification pursuant to this Article VI may be
sought. Such notification shall be given within the
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earlier of (i) the Claims Deadline (as defined below) or (ii) twenty (20)
business days after receipt by the Indemnified Party of notice of such suit or
proceeding, and shall describe (to the extent known by the Indemnified Party)
the facts constituting the basis for such suit or proceeding and the amount of
the claimed damages; provided, however, that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party of any liability or obligation hereunder except to the extent
of any damage or liability caused by or arising out of such failure. Within 20
days after delivery of such notification, the Indemnifying Party may, upon
written notice thereof to the Indemnified Party, assume control of the defense
of such suit or proceeding with counsel reasonably satisfactory to the
Indemnified Party; provided that (i) the Indemnifying Party may only assume
control of such defense if (A) it acknowledges in writing to the Indemnified
Party that any damages, fines, costs or other liabilities that may be assessed
against the Indemnified Party in connection with such suit or proceeding
constitute Damages for which the Indemnified Party shall be indemnified pursuant
to this Article VI and (B) the ad damnum is less than or equal to the amount of
Damages for which the Indemnifying Party is liable under this Article VI and
(ii) the Indemnifying Party may not assume control of the defense of a suit or
proceeding involving criminal liability or in which equitable relief is sought
against the Indemnified Party. If the Indemnifying Party does not so assume
control of such defense, the Indemnified Party shall control such defense. The
party not controlling such defense (the "Non-controlling Party") may participate
therein at its own expense; provided that if the Indemnifying Party assumes
control of such defense and the Indemnified Party reasonably concludes that the
Indemnifying Party and the Indemnified Party have conflicting interests or
different defenses available with respect to such suit or proceeding, the
reasonable fees and expenses of counsel to the Indemnified Party shall be
considered "Damages" for purposes of this Agreement. The party controlling such
defense (the "Controlling Party") shall keep the Non-controlling Party advised
of the status of such suit or proceeding and the defense thereof and shall
consider in good faith recommendations made by the Non-controlling Party with
respect thereto. The Non-controlling Party shall furnish the Controlling Party
with such information as it may have with respect to such suit or proceeding
(including copies of any summons, complaint or other pleading which may have
been served on such party and any written claim, demand, invoice, billing or
other document evidencing or asserting the same) and shall otherwise cooperate
with and assist the Controlling Party in the defense of such suit or proceeding.
The Indemnifying Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnified Party, which shall not be unreasonably withheld or
delayed; provided that the consent of the Indemnified Party shall not be
required if the Indemnifying Party agrees in writing to pay any amounts payable
pursuant to such settlement or judgment and such settlement or judgment includes
a complete release
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of the Indemnified Party from further liability and has no other adverse effect
on the Indemnified Party. The Indemnified Party shall not agree to any
settlement of, or the entry of any judgment arising from, any such suit or
proceeding without the prior written consent of the Indemnifying Party, which
shall not be unreasonably withheld or delayed.
(b) In order to seek indemnification under this Article VI, an
Indemnified Party shall give written notification (a "Claim Notice") to the
Indemnifying Party prior to the Claims Deadline which contains (i) a description
and the amount (the "Claimed Amount") of any Damages incurred or reasonably
expected to be incurred by the Indemnified Party, (ii) a statement that the
Indemnified Party is entitled to indemnification under this Article VI for such
Damages and a reasonable explanation of the basis therefor, and (iii) a demand
for payment (in the manner provided in paragraph (c) below) in the amount of
such Damages. If the Indemnified Party is the Buyer, the Indemnifying Party
shall deliver a copy of the Claim Notice to the Escrow Agent.
(c) Within 20 days after delivery of a Claim Notice, the
Indemnifying Party shall deliver to the Indemnified Party a written response
(the "Response") in which the Indemnifying Party shall: (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount (in which
case the Response shall be accompanied by a payment by the Indemnifying Party to
the Indemnified Party of the Claimed Amount, by check or by wire transfer;
provided that if the Indemnified Party is the Buyer, the Indemnifying Party and
the Indemnified Party shall deliver to the Escrow Agent, within three days
following the delivery of the Response, a written notice executed by both
parties instructing the Escrow Agent to distribute to the Buyer an amount of the
Escrow Fund, having an aggregate Value (as defined below) equal to the Claimed
Amount (with the proportionate amount of cash and Escrow Shares equal to the
ratio of cash and Initial Shares paid and issued to the Company Stockholders at
the Closing)), (ii) agree that the Indemnified Party is entitled to receive
part, but not all, of the Claimed Amount (the "Agreed Amount") (in which case
the Response shall be accompanied by a payment by the Indemnifying Party to the
Indemnified Party of the Agreed Amount, by check or by wire transfer; provided
that if the Indemnified Party is the Buyer, the Indemnifying Party and the
Indemnified Party shall deliver to the Escrow Agent, within three days following
the delivery of the Response, a written notice executed by both parties
instructing the Escrow Agent to distribute to the Buyer funds and/or such number
of Escrow Shares having an aggregate Value equal to the Agreed Amount (with the
proportionate amount of cash and Escrow Shares equal to the ratio of cash and
Initial Shares paid and issued to the Company Stockholders at the Closing)) or
(iii) dispute that the Indemnified Party is entitled to receive any of the
Claimed Amount. If the Indemnifying Party in the Response disputes its liability
for
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all or part of the Claimed Amount, the Indemnifying Party and the Indemnified
Party shall follow the procedures set forth in Section 6.3(d) for the resolution
of such dispute (a "Dispute"). For purposes of this Article VI, the "Value" of
any Escrow Shares delivered in satisfaction of an indemnity claim shall be
$12.00.
(d) During the 60-day period following the delivery of a
Response that reflects a Dispute, the Indemnifying Party and the Indemnified
Party shall use good faith efforts to resolve the Dispute. If the Dispute is not
resolved within such 60-day period, the Indemnifying Party and the Indemnified
Party shall discuss in good faith the submission of the Dispute to a mutually
acceptable alternative dispute resolution procedure (which may be non-binding or
binding upon the parties, as they agree in advance) (the "ADR Procedure"). In
the event the Indemnifying Party and the Indemnified Party agree upon an ADR
Procedure, such parties shall, in consultation with the chosen dispute
resolution service (the "ADR Service"), promptly agree upon a format and
timetable for the ADR Procedure, agree upon the rules applicable to the ADR
Procedure, and promptly undertake the ADR Procedure. The provisions of this
Section 6.3(d) shall not obligate the Indemnifying Party and the Indemnified
Party to pursue an ADR Procedure or prevent either such party from pursuing the
Dispute in a court of competent jurisdiction; provided that, if the Indemnifying
Party and the Indemnified Party agree to pursue an ADR Procedure, neither the
Indemnifying Party nor the Indemnified Party may commence litigation or seek
other remedies with respect to the Dispute prior to the completion of such ADR
Procedure. Any ADR Procedure undertaken by the Indemnifying Party and the
Indemnified Party shall be considered a compromise negotiation for purposes of
federal and state rules of evidence, and all statements, offers, opinions and
disclosures (whether written or oral) made in the course of the ADR Procedure by
or on behalf of the Indemnifying Party, the Indemnified Party or the ADR Service
shall be treated as confidential and, where appropriate, as privileged work
product. Such statements, offers, opinions and disclosures shall not be
discoverable or admissible for any purposes in any litigation or other
proceeding relating to the Dispute (provided that this sentence shall not be
construed to exclude from discovery or admission any matter that is otherwise
discoverable or admissible). The fees and expenses of any ADR Service used by
the Indemnifying Party and the Indemnified Party shall be shared equally by the
Indemnifying Party and the Indemnified Party. If the Indemnified Party is the
Buyer, the Indemnifying Party and the Indemnified Party shall deliver to the
Escrow Agent, promptly following the resolution of the Dispute (whether by
mutual agreement, pursuant to an ADR Procedure, as a result of a judicial
decision or otherwise), a written notice executed by both parties instructing
the Escrow Agent as to what (if any) portion of the Escrow Fund shall be
distributed to the Buyer and/or the Indemnifying Stockholders (which notice
shall be consistent with the terms of the resolution of the Dispute).
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(e) Notwithstanding the other provisions of this Section 6.3,
if a third party asserts (other than by means of a lawsuit) that an Indemnified
Party is liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which such Indemnified Party may be entitled
to indemnification pursuant to this Article VI, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party, (ii)
such Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article VI as long as such claim is made
prior to the Claims Deadline, and (iii) such Indemnified Party shall be
reimbursed, in accordance with the provisions of this Article VI, for any such
Damages for which it is entitled to indemnification pursuant to this Article VI
(subject to the right of the Indemnifying Party to dispute the Indemnified
Party's entitlement to indemnification, or the amount for which it is entitled
to indemnification, under the terms of this Article VI).
(f) For purposes of this Section 6.3 and the last two
sentences of Section 6.4, (i) if the Indemnifying Stockholders comprise the
Indemnifying Party, any references to the Indemnifying Party (except provisions
relating to an obligation to make or a right to receive any payments provided
for in Section 6.3 or Section 6.4) shall be deemed to refer to the
Indemnification Representatives, and (ii) if the Indemnifying Stockholders
comprise the Indemnified Party, any references to the Indemnified Party (except
provisions relating to an obligation to make or a right to receive any payments
provided for in Section 6.3 or Section 6.4) shall be deemed to refer to the
Indemnification Representatives. The Indemnification Representatives shall have
full power and authority on behalf of each Indemnifying Stockholder to take any
and all actions on behalf of, execute any and all instruments on behalf of, and
execute or waive any and all rights of, the Indemnifying Stockholders under this
Article VI. The Indemnification Representatives shall have no liability to any
Indemnifying Stockholder for any action taken or omitted on behalf of the
Indemnifying Stockholders pursuant to this Article VI.
6.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement, the Company Certificate or the Buyer
Certificate shall (a) survive the Closing and any investigation at any time made
by or on behalf of an Indemnified Party and (b) shall expire one year from the
Closing Date (the "Claims Deadline"). Notwithstanding any other provisions of
this Agreement to the contrary, no claim for indemnification under this Article
VI may be made after the Claims Deadline. If an Indemnified Party delivers to an
Indemnifying Party, before the expiration of the Claims Deadline, a Claim Notice
based upon a breach of a representation or warranty, or a notice that, as a
result a legal proceeding instituted by
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or claim made by a third party, the Indemnified Party reasonably expects to
incur Damages for which such Indemnified Party is entitled to indemnification
under this Article VI (an "Expected Claim Notice"), then the applicable
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice. If the legal proceeding or
written claim with respect to which an Expected Claim Notice has been given is
definitively withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Indemnifying Party; and if the
Indemnified Party has delivered a copy of the Expected Claim Notice to the
Escrow Agent prior to the Claims Deadline and funds and/or Escrow Shares have
been retained in escrow after the Claims Deadline with respect to such Expected
Claim Notice, the Indemnifying Party and the Indemnified Party shall promptly
deliver to the Escrow Agent a written notice executed by both parties
instructing the Escrow Agent to distribute such retained funds and/or Escrow
Shares to the Indemnifying Stockholders in accordance with the terms of the
Escrow Agreement.
6.5 LIMITATIONS.
(a) Notwithstanding anything to the contrary herein, the
aggregate liability of (i) each of Marc Cohen and Jeff Cohen for Damages shall
not exceed the proportionate amount of the Escrow Fund held by the Escrow Agent
for the benefit of such Indemnifying Stockholder, plus, in the event that he had
actual knowledge as of the date of this Agreement of a material breach of any
representation or warranty in Article II of this Agreement, 50% of the remaining
portion of the Merger Consideration received by him (the "Additional
Indemnification"), provided, however, that no claim for Additional
Indemnification shall be made by an Indemnified Party against Marc Cohen or Jeff
Cohen until such time that the Escrow Fund shall equal zero, and (ii) any other
Indemnifying Stockholder for Damages under this Article VI shall not exceed the
proportionate amount of the Escrow Fund held by the Escrow Agent for the benefit
of such Indemnifying Stockholder, and (iii) the Buyer for Damages under this
Article VI to any Indemnifying Stockholder shall not exceed the value at the
Effective Time of the maximum indemnification obligation of such Indemnifying
Stockholder hereunder. The Buyer agrees that Marc Cohen and Jeff Cohen shall
satisfy any Additional Indemnification with shares of Buyer Common Stock and
cash (in the same percentages as the percentages of the Buyer Common Stock and
cash comprising the Merger Consideration) and that the value of any shares of
Buyer Common Stock delivered in satisfaction of such claim shall be $12.00.
Neither the Indemnifying Stockholders nor the Buyer shall be liable under this
Article VI unless and until the aggregate Damages for which they or it would
otherwise be liable exceed $75,000 (or in the case of a breach of Section
2.4(c), $150,000) (at which point the Indemnifying Stockholders and the Buyer
shall become liable for the aggregate Damages up to the maximum amount set forth
in clause (i), (ii) or (iii) above, as the case may be, and not just amounts in
excess of
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$75,000 (or in the case of Section 2.4(c), $150,000); provided that the
limitation set forth in this sentence shall not apply to (A) a claim pursuant to
Section 6.1(a) relating to a breach of the representations and warranties set
forth in Sections 2.1, 2.2 or 2.3 (or the portion of the Company Certificate
relating thereto) or (B) a claim pursuant to Section 6.2 relating to a breach of
the representations and warranties set forth in Sections 3.1, 3.2 or 3.3 (or the
portion of the Buyer Certificate relating thereto). For purposes solely of this
Article VI, all representations and warranties of the Company in Article II
(other than Section 2.28) and all representations and warranties of the Buyer
and the Transitory Subsidiary in Article III (other than Section 3.11) shall be
construed as if the term "material" and any reference to "Company Material
Adverse Effect" and "Buyer Material Adverse Effect" (and variations thereof)
were omitted from such representations and warranties.
(b) Other than with respect to Marc Cohen and Jeff Cohen, to
the extent provided for in Section 6.5(a), the Escrow Agreement shall be the
exclusive means for and the Escrow Fund shall be the exclusive recourse for the
Buyer to collect any Damages for which it is entitled to indemnification under
this Article VI.
(c) Except with respect to claims based on fraud, after the
Closing, the rights of the Indemnified Parties under this Article VI and the
Escrow Agreement shall be the exclusive remedy of the Indemnified Parties with
respect to claims resulting from or relating to (i) any misrepresentation,
breach of warranty or failure to perform any covenant or agreement contained in
this Agreement, and (ii) any breach or violation, or alleged breach or
violation, by any officer or director of the Company of his or her fiduciary
duties as an officer or director of the Company during the period prior to the
Effective time.
(d) No Indemnifying Stockholder shall have any right of
contribution against the Company or the Surviving Corporation with respect to
any breach by the Company of any of its representations, warranties, covenants
or agreements.
(e) Notwithstanding any other provision of this Agreement to
the contrary, in no event shall Damages include a party's incidental,
consequential or punitive damages, or damages based on diminution in value,
regardless of the theory of recovery. Each party hereto agrees to use reasonable
efforts to mitigate any Damages which form the basis for any claim for
indemnification hereunder.
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ARTICLE VII
TERMINATION
7.1 TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
prior to the Effective Time (whether before or after Requisite Shareholder
Approval), as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written
notice to the Company in the event the Company is in breach of any
representation, warranty or covenant contained in this Agreement, and such
breach, individually or in combination with any other such breach, (i) would
cause the conditions set forth in clauses (c) or (d) of Section 5.2 not to be
satisfied and (ii) is not cured within 20 days following delivery by the Buyer
to the Company of written notice of such breach;
(c) the Company may terminate this Agreement by giving written
notice to the Buyer in the event the Buyer or the Transitory Subsidiary is in
breach of any representation, warranty or covenant contained in this Agreement,
and such breach, individually or in combination with any other such breach, (i)
would cause the conditions set forth in clauses (b) or (c) of Section 5.3 not to
be satisfied and (ii) is not cured within 10 days following delivery by the
Company to the Buyer of written notice of such breach;
(d) the Buyer may terminate this Agreement by giving written
notice to the Company if the Closing shall not have occurred on or before
December 31, 1999 by reason of the failure of any condition precedent under
Section 5.1 or 5.2 hereof (unless the failure results primarily from a breach by
the Buyer or the Transitory Subsidiary of any representation, warranty or
covenant contained in this Agreement); or
(e) the Company may terminate this Agreement by giving written
notice to the Buyer and the Transitory Subsidiary if the Closing shall not have
occurred on or before October 31, 1999 (except as the Parties may otherwise
agree) by reason of the failure of any condition precedent under Section 5.1 or
5.3 hereof (unless the failure results primarily from a breach by the Company of
any representation, warranty or covenant contained in this Agreement).
7.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 7.1, all obligations of the Parties hereunder shall
terminate without any liability
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of any Party to any other Party (except for any liability of any Party for
willful breaches of this Agreement).
ARTICLE VIII
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
DEFINED TERM SECTION
ADR Procedure 6.3(d)
ADR Service 6.3(d)
Affiliate 2.24
Affiliated Entity 2.5
Agreed Amount 6.3(c)
Buyer Introduction
Buyer Certificate 5.3(e)
Buyer Common Stock 1.5(a)
Buyer Material Adverse Effect 3.1
Buyer Reports 3.5
Cash Conversion Ratio 1.5(c)
Certificates 1.7
Certificate of Merger 1.1
Claim Notice 6.3(b)
Claimed Amount 6.3(b)
Closing 1.2
Closing Date 1.2
Code Introduction
Company Shares 1.5(a)
Company Introduction
Company Certificate 5.2(f)
Company Intellectual Property 2.12(a)
Company Material Adverse Effect 2.1
Company Shares 1.5(a)
Company Stockholders 1.3(d)
Controlling Party 6.3(a)
Customer Deliverables 2.12(a)
Damages 6.1
Disclosure Schedule Article II
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Disclosure Statement 4.3(a)
Dispute 6.3(c)
Dissenting Shares 1.6(a)
Effective Time 1.1
Employee Benefit Plan 2.20(a)
ERISA 2.20(a)
Escrow Agent 1.3(f)
Escrow Agreement 1.3(f)
Escrow Cash 1.5(c)
Escrow Fund 1.9(a)
Escrow Shares 1.5(b)
Expected Claim Notice 6.4
Exchange Act 3.4
Financial Statements 2.6
GAAP 2.6
Governmental Entity 2.4
Indemnification Representatives 1.3(f)
Indemnified Party 6.3(a)
Indemnifying Party 6.3(a)
Indemnifying Stockholders 6.1
Initial Cash Payment 1.5(c)
Initial Shares 1.5(b)
Intellectual Property 2.12(a)
Legal Proceeding 2.17
Merger 1.1
Merger Shares 1.5(b)
Merger Consideration 1.5(c)
Most Recent Balance Sheet 2.8
Most Recent Balance Sheet Date 2.6
Non-controlling Party 6.3(a)
Options 1.8(a)
Option Conversion Ratio 1.8(b)
Ordinary Course of Business 2.4
Parties Introduction
Permits 2.23
Reasonable Best Efforts 4.1
Response 6.3(c)
Requisite Stockholder Approval 2.3
SEC 3.5
Securities Act 2.2
Security Interest 2.4
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Software 2.12(e)
Stock Conversion Ratio 1.5(b)
Subsidiary 2.5
Surviving Corporation 1.1
Taxes 2.9(a)(i)
Tax Returns 2.9(a)(ii)
Telespectrum Transactions 2.29
Transitory Subsidiary Introduction
Value 6.3(c)
Year 2000 Compliant 2.12(h)
ARTICLE IX
MISCELLANEOUS
9.1 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or public disclosure relating to the subject matter of this Agreement
without the prior written approval of the other Parties; PROVIDED, HOWEVER, that
the Buyer may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market regulation (in which case the
disclosing Party shall use reasonable efforts to advise the Company and provide
the Company with a copy of the proposed disclosure prior to making the
disclosure).
9.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; PROVIDED, HOWEVER, that (a) the provisions in
Article I concerning issuance of the Merger Shares and payment of the Merger
Consideration and Article VI concerning indemnification are intended for the
benefit of the Company Stockholders and (b) the provisions in Section 4.9
concerning indemnification are intended for the benefit of the individuals
specified therein and their successors and assigns.
9.3 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof; provided that the
Mutual Non- Disclosure Agreement dated April 5, 1999 between the Buyer and the
Company shall remain in effect in accordance with its terms.
9.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights,
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interests or obligations hereunder without the prior written approval of the
other Parties; provided that the Transitory Subsidiary may assign its rights,
interests and obligations hereunder to an Affiliate of the Buyer.
9.5 COUNTERPARTS; FACSIMILE SIGNATURE. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
9.6 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next-day delivery via
a reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:
COPY (WHICH SHALL NOT CONSTITUTE
IF TO THE COMPANY: NOTICE) TO:
Voice FX Corporation Hogan & Hartson L.L.P.
1100 E. Hector Street 4th Floor 555 Thirteenth Street, NW
Conshohocken, PA 19428 Washington, DC 20004
Attn: President Attn: Steven M. Kaufman, Esq.
IF TO THE BUYER OR COPY (WHICH SHALL NOT CONSTITUTE
THE TRANSITORY SUBSIDIARY: NOTICE) TO:
Student Advantage, Inc. Hale and Dorr LLP
280 Summer Street 60 State Street
Boston, MA 02210 Boston, MA 02109
Attn: President Attn: Mark G. Borden, Esq.
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and
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other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware.
9.9 AMENDMENTS AND WAIVERS. The Parties (acting with the consent of the
Board of Directors in the case of the Company, and with the consent of the Chief
Executive Officer in the case of the Buyer and the Transitory Subsidiary and
without the necessity of stockholder approval in any case except as required
under the Delaware General Corporation Law) may mutually amend any provision of
this Agreement at any time prior to the Effective Time; provided, however, that
any amendment effected subsequent to the Requisite Stockholder Approval shall be
subject to any restrictions contained in the Delaware General Corporation Law.
No amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the Parties. No waiver of any right or
remedy hereunder shall be valid unless the same shall be in writing and signed
by the Party giving such waiver. No waiver by any Party with respect to any
default, misrepresentation or breach of warranty or covenant hereunder shall be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.
9.10 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforce ability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
9.11 SUBMISSION TO JURISDICTION. Each of the Parties (a) submits to the
jurisdiction of any state or federal court sitting in Boston, Massachusetts in
any action
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or proceeding arising out of or relating to this Agreement, (b) agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court, and (c) agrees not to bring any action or proceeding arising out
of or relating to this Agreement in any other court. Each of the Parties waives
any defense of inconvenient forum to the maintenance of any action or proceeding
so brought and waives any bond, surety or other security that might be required
of any other Party with respect thereto. Any Party may make service on another
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
9.7. Nothing in this Section 9.11, however, shall affect the right of any Party
to serve legal process in any other manner permitted by law.
9.12 CONSTRUCTION.
(a) The language used in this Agreement shall be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
STUDENT ADVANTAGE, INC.
By: /s/ Raymond V. Sozzi, Jr.
---------------------------------------
Raymond V. Sozzi, Jr.
President and Chief Executive Officer
SA ACQUISITION II, INC.
By: /s/ Raymond V. Sozzi, Jr.
---------------------------------------
Raymond V. Sozzi, Jr.
President
VOICE FX CORPORATION
By: /s/ Jeffrey Cohen
---------------------------------------
Jeffrey Cohen
President
The following stockholders of the Company hereby execute this Agreement
for the limited purpose of agreeing to and becoming bound by the provisions of
Section 4.3(c) and Article VI.
/s/ Marc Cohen
-------------------------------------------
Marc Cohen
/s/ Jeffrey Cohen
-------------------------------------------
Jeffrey Cohen
The undersigned, being the duly elected Secretary of the Transitory
Subsidiary, hereby certifies that this Agreement has been adopted by a majority
of the votes represented by the outstanding shares of capital stock of the
Transitory Subsidiary entitled to vote on this Agreement.
/s/ Christopher B. Andrews
-------------------------------------------
Secretary
The undersigned, being the duly elected Secretary of the Company,
hereby certifies that this Agreement has been adopted by a majority of the
votes represented by the outstanding shares of capital stock of the Company
entitled to vote on this Agreement.
/s/ Jeffrey Cohen
-------------------------------------------
Secretary
