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EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ZEBRAMART.COM, INC.,
COACQSUB, INC.
AND
MYFAVORITESHOE.COM, INC.
AND
THE STOCKHOLDERS ON THE SIGNATURE PAGES HERETO
DATED AS OF MAY 15, 2000
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ARTICLE I
MERGER; MERGER CONSIDERATION; CLOSING; AGREEMENTS.................................................................1
1.1 The Merger.............................................................................1
1.2 Consummation of Merger.................................................................1
1.3 Effect of the Merger...................................................................2
1.4 Articles of Incorporation; Bylaws......................................................2
1.5 Directors and Officers.................................................................2
1.6 Merger Consideration...................................................................2
1.7 Parent Common Stock....................................................................3
1.8 Closing................................................................................4
1.9 Closing Obligations....................................................................4
1.10 Finder Shares..........................................................................5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS.........................................................................6
2.1 Organization, Qualification, etc.......................................................6
2.2 Subsidiaries...........................................................................6
2.3 Capitalization.........................................................................6
2.4 Company Record Books...................................................................7
2.5 Title to Stock.........................................................................7
2.6 Options and Rights.....................................................................7
2.7 Authorization, Etc.....................................................................7
2.8 No Violation; Consents and Approvals...................................................8
2.9 Financial Statements; Undisclosed Liabilities..........................................8
2.10 Customer Deposits......................................................................9
2.11 Employees..............................................................................9
2.12 Absence of Changes.....................................................................9
2.13 Contracts.............................................................................10
2.14 Real Estate and Personal Property Matters.............................................13
2.15 Litigation............................................................................14
2.16 Tax Matters...........................................................................14
2.17 Compliance with Regulations and Orders; Permits; Affiliations.........................15
2.18 ERISA and Related Matters.............................................................15
2.19 Intellectual Property.................................................................17
2.20 Year 2000 Compliance..................................................................18
2.21 Environmental Matters.................................................................18
2.22 Banking Arrangements..................................................................19
2.23 Insurance.............................................................................19
2.24 Inventories...........................................................................19
2.25 Brokerage.............................................................................20
2.26 Improper and Other Payments...........................................................20
2.27 Disclosure............................................................................20
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(i)
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2.28 Significant Customers and Suppliers; Material Plans and Commitments...................20
2.29 Investor Representations..............................................................21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS ....................................................................21
3.1 Corporate Organization, Etc...........................................................21
3.2 Authorization, Etc....................................................................21
3.3 No Violation..........................................................................22
3.4 Governmental Authorities..............................................................22
3.5 Disclosure............................................................................22
ARTICLE IV
COVENANTS OF THE SELLERS.........................................................................................23
4.1 Ordinary Course of Business...........................................................23
4.2 Certain Restrictions..................................................................23
4.3 Cash and Cash Equivalents.............................................................23
4.4 Interim Financial Information.........................................................23
4.5 Full Access and Disclosure............................................................24
4.6 Fulfillment of Conditions Precedent...................................................24
4.7 Tax Returns...........................................................................24
4.8 No Solicitation or Negotiation........................................................25
4.9 Public Announcements..................................................................25
4.10 Termination of Agreements.............................................................25
ARTICLE V
COVENANTS OF THE BUYERS..........................................................................................25
5.1 Full Access and Disclosure............................................................25
5.2 Release and Assumption of Guarantees..................................................26
5.3 Rule 145 Best Efforts.................................................................26
5.4 Publicity.............................................................................26
ARTICLE VI
OTHER AGREEMENTS.................................................................................................26
6.1 Further Assurances....................................................................26
6.2 Consents..............................................................................27
6.3 No Termination of the Controlling Persons' Obligations by
Subsequent Incapacity, Etc............................................................27
6.4 Registration..........................................................................27
6.5 Confidentiality.......................................................................28
6.6 Non Competition Covenant..............................................................28
6.7 Non-disclosure; Confidentiality.......................................................30
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(ii)
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE BUYERS......................................................................32
7.1 Representations and Warranties; Covenants and Agreements..............................32
7.2 No Injunction.........................................................................32
7.3 Third Party Consents..................................................................32
7.4 Regulatory Approvals..................................................................33
7.5 No Material Adverse Change............................................................33
7.6 Directors and Officers................................................................33
7.7 Due Diligence.........................................................................33
7.8 FIRPTA Certificate....................................................................33
7.9 Sellers' Closing Documents............................................................33
7.10 Leased Premises.......................................................................33
7.11 Termination of Certain Agreements and Plans...........................................33
7.12 Board Approval........................................................................33
7.13 Hart-Scott-Rodino Act.................................................................33
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS.....................................................................34
8.1 Representations and Warranties; Performance...........................................34
8.2 No Injunction.........................................................................34
8.3 Buyers' Closing Documents.............................................................34
8.4 Appointment to Parent's Board.........................................................34
8.5 Resignation of Will Head..............................................................34
ARTICLE IX
TERMINATION AND ABANDONMENT......................................................................................34
9.1 Methods of Termination................................................................34
9.2 Procedure Upon Termination............................................................35
ARTICLE X
SURVIVAL OF TERMS; INDEMNIFICATION...............................................................................35
10.1 Survival; Knowledge...................................................................35
10.2 Indemnification by the Controlling Persons............................................36
10.3 Indemnification by the Buyers.........................................................37
10.4 Third Party Claims....................................................................37
10.5 Limitation on Indemnification.........................................................39
10.6 Survival of Indemnification...........................................................39
ARTICLE XI
MISCELLANEOUS PROVISIONS.........................................................................................40
11.1 Amendment and Modification............................................................40
11.2 Entire Agreement......................................................................40
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(iii)
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11.3 Certain Definitions...................................................................40
11.4 Notices...............................................................................46
11.5 Exhibits and Schedules................................................................48
11.6 Waiver of Compliance; Consents........................................................48
11.7 Assignment............................................................................48
11.8 Governing Law.........................................................................48
11.9 Consent to Jurisdiction; Service of Process...........................................48
11.10 Injunctive Relief.....................................................................49
11.11 Headings..............................................................................49
11.12 Pronouns and Plurals..................................................................49
11.13 Construction..........................................................................49
11.14 Dealings in Good Faith; Best Efforts..................................................49
11.15 Binding Effect........................................................................49
11.16 Delays or Omissions...................................................................49
11.17 Severability..........................................................................50
11.18 Expenses..............................................................................50
11.19 Attorneys' Fees.......................................................................50
11.20 Counterparts..........................................................................50
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(iv)
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SCHEDULES
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Schedule 2.1 Organization, Qualification, etc.
Schedule 2.2 Subsidiaries
Schedule 2.3 Capitalization
Schedule 2.8 No Violations; Consents and Approvals
Schedule 2.9 Financial Statements; Undisclosed Liabilities
Schedule 2.10 Customer Deposits
Schedule 2.11 Employees
Schedule 2.13 Contracts
Schedule 2.14 Real Estate and Personal Property Matters
Schedule 2.15 Litigation
Schedule 2.16 Taxes
Schedule 2.17 Compliance With Regulations and Orders; Permits; Affiliations
Schedule 2.18 Employee Benefits and Related Matters
Schedule 2.19 Intellectual Property
Schedule 2.21 Environmental Matters
Schedule 2.22 Banking Arrangements
Schedule 2.23 Insurance
Schedule 2.26 Improper and Other Payments
Schedule 2.28 Significant Customers and Suppliers; Material Plans and Commitments
Schedule 4.10 Termination Agreements
Schedule 6.4 List of Shares To Be Registered
Schedule 10.5(a) Exceptions to the Buyer Indemnified Parties Indemnification Limitations
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(v)
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EXHIBITS
EXHIBIT A FORM OF SHAREHOLDER'S CERTIFICATE
EXHIBIT B FORM OF SECRETARY'S CERTIFICATE
EXHIBIT C FORM OF OFFICER'S CERTIFICATE
EXHIBIT D FORM OF GENERAL RELEASE
EXHIBIT E FORM OF ESCROW AGREEMENT
EXHIBIT F FORM OF CERTIFICATE OF MERGER
EXHIBIT G FORM OF WARRANT
(vi)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and entered
into as of May 15, 2000 by and among ZEBRAMART.COM, INC., a Nevada corporation
("Parent"), COACQSUB, INC., a Georgia corporation and a wholly owned subsidiary
of Parent ("Merger Sub"; and together with Parent are sometimes hereinafter
referred to collectively as the "Buyers"), MYFAVORITESHOE.COM, INC, a Delaware
corporation, (the "Company"), and the STOCKHOLDERS on the signature pages hereto
("the Controlling Persons") (Company and Controlling Persons are sometimes
hereinafter referred to collectively as the "Sellers").
WHEREAS, the stockholders set out on SCHEDULE 2.3 hereof
("Stockholders") own all of the issued and outstanding shares of the capital
stock of the Company (the "Company Shares");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have determined that it is advisable and in the best interests of
the companies and their respective stockholders that the Merger Sub merge with
and into the Company pursuant to this Agreement with the Company being the
surviving corporation (the "Merger"); and
WHEREAS, Parent, Merger Sub and the Sellers desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties provisions and covenants herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
MERGER; MERGER CONSIDERATION; CLOSING; AGREEMENTS
1.1 The Merger. At the Effective Time, upon the terms and subject
to the conditions set forth in this Agreement, the Merger Sub shall be merged
with and into the Company in accordance with the General Corporation Law of the
State of Delaware (the "DGCL") and the Georgia Business Corporation Act (the
"GBCA"). As a result of the Merger, the separate existence of the Merger Sub
shall cease and the Company shall continue as the surviving corporation of the
Merger (the "Surviving Corporation").
1.2 Consummation of Merger. As promptly as practicable after the
satisfaction or, if permissible, waiver in writing of the conditions set forth
in ARTICLE 7 and ARTICLE 8 hereof, the parties hereto shall cause the Merger to
be consummated by filing a Delaware Certificate of Merger, substantially in the
form of EXHIBIT F hereto (the "Delaware Certificate of Merger"), with the
Secretary of State of the State of Delaware and articles of merger with the
Secretary of State of the State of Georgia (the "Georgia Articles of Merger";
and together with the Delaware Certificate of
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Merger, the "Certificates of Merger") in such form as required by, and executed
in accordance with, the relevant provisions of the applicable state's law (the
time of such filing being herein referred to as the "Effective Time" and the
date of such filing being herein referred to as the "Merger Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL and the
GBCA. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, except as otherwise provided herein, the identity, all of
the property (whether real, personal or mixed), rights, privileges, powers,
immunities, franchises, debts, liabilities and duties of the Merger Sub shall be
merged with, fully vest in and become the rights, privileges, powers,
immunities, franchises, debts, liabilities and duties of the Surviving
Corporation and the separate existence of the Merger Sub shall cease.
1.4 Articles of Incorporation; Bylaws. At the Effective Time, the
Certificate of Incorporation and the Bylaws of the Surviving Corporation shall
be the Certificate of Incorporation and Bylaws of Company as in effect
immediately prior to the Effective Time, in each case until duly amended in
accordance with applicable law.
1.5 Directors and Officers.
(a) At the Effective Time, the directors of the Surviving
Corporation shall be David Kenner, William G. Head, Roger Haggerty, Sean Daly,
Kevin Schuyler, and one additional member who will be chosen by both David
Kenner and Sean Daly, to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until their successors
are duly elected or appointed and qualified.
(b) At the Effective Time, the officers of the Surviving
Corporation shall be the officers of Merger Sub immediately prior to the
Effective Time, in each case until their respective successors are duly elected
or appointed and qualified.
1.6 Merger Consideration. Subject to the satisfaction of the terms
and conditions of this Agreement, and by virtue of the Merger and without any
action on the part of the Stockholders, each of the Company Shares will be
canceled and converted into the right to receive 2.545118 (the "Conversion
Factor") shares of Parent's (1) common stock ("Parent Stock" or "Merger
Consideration"). Each outstanding employee Option to purchase Company Shares
shall be submitted to Parent for cancellation and exchange for options to
purchase Parent Shares at the afore referenced conversion rate ("New Options").
Each New Option issued in exchange for an outstanding employee Option to
purchase Company Shares shall be subject to the vesting schedule set out in the
outstanding employee Option. The Merger Consideration and the New Options are
collectively valued at $21,000,000 to be paid in Parent Stock valued at $.35 per
share; however, if (i) the average bid and ask price of the Company Shares for
the ten trading days immediately prior to the date of this Agreement ("Signing
Price") is greater than $.42 or (ii) if the Signing Price is less than $.28,
then the Conversion Factor shall be adjusted to equal ($21,000,000 / Adjusted
Signing Price) / 23,574,549. The "Adjusted Signing Price" shall be equal to $.35
(i) minus the amount by
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which the Signing Price is less than $.28 (in the case that the Signing Price is
less than $.28) and (ii) plus the amount by which the Signing Price is greater
than $.42 (in the case that the Signing Price is greater than $.42). For
example, if the Signing Price is $.26, the Conversion Factor is 2.699367, with
total Merger Consideration consisting of 63,636,363.64 Parent Shares.
(a) No Fractional Shares. No certificate representing
fractional shares of Parent Stock will be issued in the Merger and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of Parent. In lieu of any such fractional shares, the
Stockholders will be entitled to receive from Parent (after aggregating all
fractional shares of Parent stock issuable to such Seller) shares of Parent
Stock rounded upward or downward to the nearest whole share with a factor of
one-half or greater rounded up to the nearest whole share.
(b) Effect on the Company Shares. On the Closing Date,
the Company Shares shall be canceled and terminated, shall represent solely the
right to receive the Merger Consideration in respect of the Company Shares, and
shall have no other rights. No interest shall accrue or be payable on any Merger
Consideration.
(c) Shares of Merger Sub. On the Closing Date, the
outstanding shares of Merger Sub shall become the then sole outstanding shares
of the Surviving Corporation, wholly owned by Parent.
(d) Escrow Agreement. Pursuant to such further terms as
set forth in the Escrow Agreement attached in the form of EXHIBIT E (the "Escrow
Agreement"), ten percent (10%) of the Merger Consideration paid to Stockholders
who are not Controlling Persons and 50% of the Merger Consideration paid to
Controlling Persons shall be held in escrow (the "Escrow Shares") until the date
that is six months from the Closing Date, except as provided therein.
(e) Capital Restructuring. The Conversion Factor is
calculated assuming that 187,702,342 shares of Parent Stock are acquired by
Parent from certain founding shareholders and that the number of shares issuable
under Parent's existing stock option plans are reduced to 35,000,000 ("Plan of
Reorganization"). To the extent that the foregoing does not occur within 90
business days of the Closing, a proportional amount of additional shares of
Parent Stock shall be issued as additional Merger Consideration. Notwithstanding
the foregoing, not more than 20% of the Parent's outstanding common stock may be
issued, or be issuable (including upon the exercise of options), as Merger
Consideration. After the Plan of Reorganization has been consummated, the power
of Board of Directors of the Parent to issue additional shares or options,
consonant with its fiduciary duties, shall not be limited by this Agreement and
no such action shall cause an adjustment in the Merger Consideration or
Conversion Factor.
1.7 Parent Common Stock. All Parent Stock received by the
Stockholders pursuant to this Agreement shall have the same rights as all of the
other shares of outstanding Parent Stock by reason of the provisions of the
Certificate of Incorporation of Parent or as otherwise provided under Nevada
corporate law. All voting rights of such Parent Stock received by the
Stockholders shall be
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fully exercisable by the Stockholders, and the Stockholders shall not be
deprived nor restricted in exercising those rights.
1.8 Closing. Unless this Agreement is terminated in accordance
with SECTION 9 hereof, the closing of the Merger transaction provided for in
this Agreement (the "Closing") will take place on May 26, 2000, or at such other
time and manner agreed upon by the respective parties prior to Closing (the
"Closing Date"). Subject to the provisions of SECTION 9, failure to consummate
the transactions provided for in this Agreement on the date and time and at the
place determined pursuant to this SECTION 1.8 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement.
1.9 Closing Obligations. At the Closing:
(a) Controlling Persons will deliver to the Buyers the
following agreements, documents, opinion and certificates (hereinafter referred
to as the "Sellers' Closing Documents"):
(i) a certificate or certificates, in genuine
and unaltered form, representing the Company Shares, free and clear of
all Liens and other encumbrances, duly endorsed in blank or accompanied
by duly executed stock powers endorsed in blank, with requisite stock
transfer tax stamps, if any, for transfer to Parent;
(ii) the Stockholder's certificate, substantially
in the form of EXHIBIT A, executed by Stockholders ("Stockholder's
Certificate");
(iii) a certificate of the Secretary of the
Company, substantially in the form of EXHIBIT B hereto ("Secretary's
Certificate");
(iv) a certificate of an officer of the Company,
substantially in the form of EXHIBIT C hereto ("Officer's
Certificate");
(v) a General Release Agreement, substantially
in the form of EXHIBIT D, executed by the Stockholders who are now or
who have been officers or directors of the Company;
(vi) an Escrow Agreement, substantially in the
form of EXHIBIT E, executed by the Stockholders;
(vii) the Delaware Certificate of Merger, duly
executed by the Company, to be filed with the Secretary of State of the
State of Delaware;
(viii) written consent for this Merger transaction,
in form and substance reasonably acceptable to the Buyers, obtained
from each Stockholder;
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(ix) certificates issued by the appropriate
governmental authorities evidencing the good standing, with respect to
both the conduct of business and the payment of all franchise taxes, of
the Company as of a date not more than thirty (30) days prior to the
Closing Date, as a corporation organized under the laws of the State of
Delaware and as a foreign corporation authorized to do business under
the laws of the various jurisdictions where it is so qualified
(provided, that certificates evidencing the payment of all franchise
taxes need not be delivered until 30 days after Closing); and
(x) such other agreements, instruments and
documents as are necessary and appropriate, in the Buyers' sole
discretion, to satisfy the closing conditions described in SECTION 7.11
of this Agreement; and
(xi) such other certificates, agreements,
instruments and documents as the Buyers may reasonably request.
(b) The Buyers will deliver to the Controlling Persons
the following agreements, documents, and certificates (hereinafter referred to
as the "Buyers' Closing Documents"):
(i) certificates of Parent Stock issued pursuant
to Section 1.6 hereof;
(ii) a Secretary's Certificate for each of Merger
Sub and Parent, executed by the Assistant Secretary's or Secretary's
thereof;
(iii) an Officer's Certificate, for each of Merger
Sub and Parent, executed by the appropriate officers thereof;
(iv) the Escrow Agreement, executed by Parent;
(v) the Certificates of Merger duly executed by
Merger Sub, to be filed with the Secretary of State of the States of
Delaware and Georgia; and
(vi) the Buyer Capitalization Table as of May 8,
2000.
1.10 Finder Shares. Brookwood shall be entitled to a Warrant to
purchase 1,200,000 Parent Shares at .35 per share in form set out as EXHIBIT G;
provided that the number of Parent Shares shall be proportionately adjusted so
as to equal 2% of the value of the transaction if there is an adjustment as in
the Conversion Rate as provided in Section 1.6 hereof. The Warrant will have a
life of five years, from the Effective Time of the Merger and will be
exercisable into shares that have the same registration rights as those received
by the shareholders of the Company in the Merger.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers, jointly and severally, make the following representations
and warranties to the Buyers, each of which shall be deemed material (and the
Buyers, in executing, delivering and consummating this Agreement, have relied
and will rely upon the correctness and completeness of each of such
representations and warranties notwithstanding independent investigation, if
any):
2.1 Organization, Qualification, etc.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation with full corporate power and authority to carry on its business
as it is now being conducted and proposed to be conducted, and to own, operate
and lease its properties and assets.
(b) The Company is duly qualified, licensed or admitted
to do business and is in good standing in the jurisdictions set forth on
SCHEDULE 2.1 attached hereto, which are the only jurisdictions in which the
conduct of its business, the ownership, operation or leasing of its properties
and assets, or the transactions contemplated by this Agreement, require it to be
so qualified, licensed or admitted, except for those jurisdictions in which such
failure to be so qualified, licensed or admitted and in good standing would not
have a Material Adverse Effect. The Company does not conduct, transact or
solicit business in any state or jurisdiction except those listed in SCHEDULE
2.1 hereto.
(c) True, complete and correct copies of the Company's
articles of incorporation and bylaws, including, without limitation, any
amendments thereto (collectively, the "Charter Documents"), as presently in
effect, are attached to SCHEDULE 2.1.
2.2 Subsidiaries. Except as set forth on SCHEDULE 2.2, the Company
has no Subsidiaries or any investment or other interest in, or any outstanding
loan or advance to or from, any Person, including any officer, director,
stockholder or Affiliate thereof.
2.3 Capitalization. SCHEDULE 2.3 sets forth, as of the date
hereof, the authorized capital stock of the Company, the par value and the
number of issued and outstanding shares thereof, the number of shares of capital
stock owned by each shareholder and the number of shares issuable upon exercise
of outstanding securities convertible into capital stock (including options).
The Company Shares constitute all of the issued and outstanding shares of
capital stock of the Company. All of the issued and outstanding Company Shares
have been duly authorized and validly issued, and fully paid and non-assessable,
and were offered, issued, sold and delivered by the Company in compliance with
all applicable state and federal securities laws. The stock record books of the
Company have been delivered to the Buyers for inspection prior to the date
hereof and each is true,
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complete and correct. All amounts payable by the Stockholders with respect to
the Company Shares pursuant to the Charter Documents have been paid in full.
None of the Company Shares have been issued in violation of the preemptive or
other rights of any past or present stockholder of the Company. The Company
Shares are uncertificated. The Company has issued no class or series of capital
stock other than common stock.
2.4 Company Record Books. The record books of the Company
including, without limitation, the minute books have been delivered to the
Buyers for inspection prior to the date hereof and each is true, complete and
correct and contain all of the proceedings of, and material actions taken by,
the Stockholders and directors of the Company.
2.5 Title to Stock. All of the issued and outstanding shares of
the capital stock of the Company are and immediately prior to the Closing will
be owned beneficially and of record by the Stockholders, in the amounts and
percentages set forth on SCHEDULE 2.3 hereto, free and clear of any and all
Liens, contractual restrictions or limitations of any nature whatsoever.
2.6 Options and Rights. Except as set out on SCHEDULE 2.3, there
are no outstanding subscriptions, options, warrants, rights, securities
(including, without limitation, those convertible or exchangeable into the
capital stock or other ownership or equity interests of the Company), contracts,
agreements, commitments, understandings or other arrangements (whether oral or
written) under which the Company is bound or obligated to issue any additional
shares of capital stock or rights to purchase shares of capital stock
(collectively, "Options"). There are no contracts, commitments, agreements,
arrangements or understandings between the Stockholders, the Company and any
other Person regarding the Company Shares (including, without limitation,
regarding the transfer, disposition, holding or voting thereof). No person or
entity has any preemptive or other right to acquire any shares of the Company's
capital stock. Each Controlling Person hereby waives any preemptive or other
right to acquire any shares of capital stock of the Company that such
Controlling Person has or may have had on the date hereof.
2.7 Authorization, Etc. The Company has full corporate power and
authority and each of the Stockholders has full legal right, power and capacity
to enter into this Agreement and the other agreements, documents, instruments
and certificates contemplated herein or related hereto (collectively, the
"Ancillary Documents") to which the Company or such Stockholder is a party and
to perform their respective obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and the Ancillary Documents and the
transactions contemplated hereby and thereby have been, or by the Closing Date
will have been, duly authorized by the board of directors and Stockholders of
the Company and no other or further proceedings or actions on the part of the
Company, the Stockholders or the board of directors are necessary to authorize
this Agreement, the Ancillary Documents and the transactions contemplated hereby
and thereby. Each of the Sellers was represented by and had the benefit of legal
counsel who participated in the preparation and negotiation of this Agreement.
Upon execution and delivery of this Agreement and the Ancillary Documents by the
parties hereto and thereto, this Agreement and each of the Ancillary Documents
shall constitute the legal, valid and binding obligation of the Sellers party
hereto and
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thereto, enforceable against each such party in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditor rights generally and by general equitable principles.
2.8 No Violation; Consents and Approvals. Except as set forth on
SCHEDULE 2.8 hereto, the execution and delivery by the Sellers of this
Agreement, the Ancillary Documents to which each is a party and the fulfillment
of and compliance with the respective terms hereof and thereof by the Sellers do
not and will not: (a) conflict with or result in a breach of the terms,
conditions or provisions of; (b) constitute a default or event of default under
(with due notice, lapse of time or both); (c) result in the creation of any Lien
upon the capital stock or assets of any of the Sellers pursuant to; (d) give any
third party the right to accelerate any obligation under; (e) result in a
violation of; or (f) require any authorization, consent, approval, exemption or
other action by or notice to any Person (including, without limitation, any
creditor, customer or supplier) pursuant to, the Charter Documents of the
Company or any Regulation, Order or Contract to which any of the Sellers is
subject. Each of the Sellers has complied with all applicable Regulations and
Orders in connection with the execution, delivery and performance of this
Agreement, the Ancillary Documents to which each is a party and the transactions
contemplated hereby and thereby. None of the Sellers is required to submit any
notice, report, or other filing with any governmental authority in connection
with its execution or delivery of this Agreement, the Ancillary Documents to
which it is a party or the consummation of the transactions contemplated hereby
and thereby. No authorization, consent, approval, exemption or notice is
required to be obtained by any of the Sellers in connection with the execution,
delivery, and performance of this Agreement, the Ancillary Documents to which it
is a party and the transactions contemplated hereby and thereby.
2.9 Financial Statements; Undisclosed Liabilities.
(a) Financial Statements. Attached as SCHEDULE 2.9 hereto
are the following financial statements of the Company: (i) unaudited balance
sheets as of December 31, 1999 ("Balance Sheet"); (ii) unaudited statements of
income, changes in stockholders' equity and cash flow and related schedules
thereto for the fiscal year ended December 31, 1999 (the "Related Statement");
and (iii) an unaudited balance sheet as of and the statement of revenues and
expenses and the related schedules thereto for the three (3) month period ended
March 31, 2000 (the "Interim Financial Statements" and, collectively with the
Balance Sheets and the Related Statements, the "Financial Statements"). The
Financial Statements (x) were prepared in accordance with GAAP, (y) fairly
present the financial position, condition and results of operations of the
Company at the respective dates thereof (except as stated therein or in the
notes or schedules thereto) applied on a consistent basis, and (z) were compiled
from the books and records of the Company regularly maintained by management and
used to prepare the financial statements thereof.
(b) Undisclosed Liabilities. Except as set forth on
SCHEDULE 2.9 attached hereto, the Company has no liability, whether accrued,
absolute or contingent, except as is described in the Financial Statements or
described in the notes thereto.
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2.10 Customer Deposits. The Deposits are held by the Company in
segregated and separately identified bank accounts as set forth on SCHEDULE
2.10, and are not commingled with other cash, assets or property of the Company.
2.11 Employees.
(a) Attached as SCHEDULE 2.11 hereto is an accurate list
showing all officers, directors and key employees of the Company, listing all
employment agreements with such officers, directors and key employees and the
annual rate of compensation (and the portions thereof attributable to salary,
bonus and other compensation, respectively) of each of such persons (i) as of
the end of the Company's most recent fiscal year (the "Balance Sheet Date") and
(ii) as of the date hereof. Attached to SCHEDULE 2.11 are true, complete and
correct copies of any employment agreements for persons listed on SCHEDULE 2.11.
Since the Balance Sheet Date, there have been no increases in the compensation
or benefits payable to or to become payable to, or any special bonuses, to any
officer, director, key employee or other employee, except ordinary salary
increases implemented on a basis and in amounts consistent with past practices
and amounts. Except as set forth on SCHEDULE 2.11, no Seller is related by blood
or marriage to, or otherwise affiliated with, any person listed on SCHEDULE
2.11.
(b) Set forth on SCHEDULE 2.11 hereto is, as of the date
hereof, the approximate number of employees for the Company. The Company has
been since its date of organization, and currently is, in compliance with all
Federal, State and local Regulations and Orders affecting employment and
employment practices applicable thereto, including, without limitation, those
Regulations promulgated by the Equal Employment Opportunity Commission, and
those relating to terms and conditions of employment and wages and hours. Except
as set forth on SCHEDULE 2.11, (i) the Company is not bound by or subject to
(and none of its assets or properties is bound by or subject to) any arrangement
with any labor union, (ii) no employees of the Company are represented by any
labor or trade union or covered by any collective bargaining agreement with the
Company, (iii) no campaign to establish such representation is in progress, and
(iv) there is no pending or, to the Knowledge of any Seller, threatened labor
dispute involving the Company and any group of its employees, nor has the
Company experienced any labor interruptions over the past three (3) years. The
Company believes its relationship with employees to be good.
(c) SCHEDULE 2.11 hereto sets forth an accurate list of
all of the Permits, including, without limitation, real estate, liquor,
hospitality and other business licenses or permits held by any officer, director
or employee of the Company and required for, or used in, the conduct of the
businesses of the Company.
2.12 Absence of Changes. Since the date of the most recent Balance
Sheet, the Company has conducted its business only in the Ordinary Course of
Business and there has not been: (a) any Material Adverse Change; (b) any
damage, destruction or loss, whether covered by insurance or not, with regard to
the Company's properties and business; (c) any payment by the Company to, or any
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notice to or acknowledgment by the Company of any amount due or owing to, the
Company's self-insured carrier, if any, in connection with any self-insured
amounts or liabilities under health insurance covering employees of the Company,
in each case, in excess of a reserve therefor on the most recent Balance Sheet
and in the Interim Financial Statements; (d) any amendment or change in the
Company's authorized or issued capital stock or Charter Documents; (e) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) in respect of, the capital stock of the Company, or
any purchase, retirement, redemption or other acquisition of, or grant of any
Option with respect to, the capital stock of the Company; (f) any cancellation
of, or agreement to cancel any indebtedness or obligation owing to the Company;
(g) any amendment, modification or termination of any existing Permits or
Contracts, or entering into any new Contract or plan relating to any salary,
bonus, insurance, pension, health or other employee welfare or benefit plan for
or with any directors, officers, employees or consultants of the Company; (h)
any entry into any material Contract not in the Ordinary Course of Business,
including, without limitation, relating to any borrowing, capital expenditure or
the sale or purchase of any property, rights, or assets or any options or
similar agreements with respect to the foregoing; (i) any disposition by the
Company of any material asset; (j) any adverse change in any Contract or
relationship with any customer or supplier, the sales patterns, pricing
policies, accounts receivable or accounts payable relating to the Company; (k)
any write-down of the value of any inventory having an aggregate value in excess
of $5,000, or write-off, as uncollectible, of any notes, trade accounts or other
receivables having an aggregate value in excess of $5,000; (l) any change by the
Company in accounting methods or principles; or (m) any material change in the
cash and cash equivalents of the Company from the amounts shown on the balance
sheet as of the date of the Interim Financial Statements.
2.13 Contracts.
(a) Listed by the Company on SCHEDULE 2.13 are all
written and oral contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound as of the
date hereof and, in each case, has delivered true, complete and correct copies
of the following such agreements, or narrative descriptions or such oral
contracts, to the Buyers including, without limitation, the following such
agreements and contracts:
(i) Contracts relating to any services provided
by the Company including, without limitation, property management, real
property rentals and sales, homeowners association management
representation and any other contracts relating to real property
services;
(ii) Pension, profit sharing, bonus, retirement,
stock or similar ownership, option, purchase, appreciation or other
plan providing for deferred or other compensation to employees or any
other employee benefit plan (other than as set forth in SCHEDULE 2.18
hereto), or any Contract with any labor union;
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(iii) Contracts relating to brokerage, consulting,
independent contractor and other similar agreements for the payment of
compensation, not terminable on notice of thirty (30) days' or less by
the Company without penalty or other financial obligation (and, except
as set forth on SCHEDULE 2.11, no officer or employee of the Company
receives total salary, bonus and other compensation from the Company of
$35,000.00 or more per annum);
(iv) Contracts relating to any joint ventures,
strategic alliances, partnerships and investments;
(v) Contracts containing covenants or agreements
limiting the freedom of the Company or any of its employees to compete
in any line of business presently conducted by the Company with any
Person or to compete in any such line of business in any area;
(vi) Contracts with any Affiliate of the Company,
the Stockholders or with any Affiliate or relative of the Stockholders;
(vii) Contracts relating to or providing for loans
to officers, directors, employees or Affiliates;
(viii) Contracts under which the Company has
advanced or loaned, or is obligated to advance or loan, funds to any
Person;
(ix) Contracts relating to the incurrence,
assumption or guarantee of any indebtedness, obligation or liability
(in respect of money or funds borrowed), including, without limitation,
any loan agreement, indemnity, bonds, mortgages, notes or letters of
credit, or otherwise pledging, granting a security interest in or
placing a Lien on any asset of the Company;
(x) Contracts relating to the guarantee or
endorsement of any obligation;
(xi) Contracts under which the Company is lessee
of or holds or operates any property, real or personal, owned by any
other party;
(xii) Contracts pursuant to which the Company is
lessor of or permits any third party to hold or operate any property,
real or personal, owned or controlled by the Company;
(xiii) Assignments, licenses, indemnifications and
Contracts with respect to any intangible property (including, without
limitation, any Intellectual Property;
(xiv) Warranty Contracts with respect to services
rendered (or to be rendered);
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(xv) Contracts for, or with, any telephone
switch, long distance or toll-free telephone providers;
(xvi) Contracts with central reservation or resort
booking systems;
(xvii) Override agreements with travel agencies,
other customers or suppliers;
(xviii) Contracts which prohibit, restrict or limit
in any way the payment of dividends or distributions by the Company;
(xix) Contracts under which it has granted any
Person any registration rights (including piggyback and demand rights)
with respect to any securities;
(xx) Contracts for the purchase, acquisition or
supply of inventory and other property and assets, whether for resale
or otherwise;
(xxi) Contracts with independent agents, brokers,
dealers or distributors;
(xxii) Sales, commissions, advertising or marketing
Contracts;
(xxiii) Contracts providing for "take or pay" or
similar unconditional purchase or payment obligations;
(xxiv) Contracts with Persons with which, directly
or indirectly, any Stockholder also has a Contract;
(xxv) Governmental Contracts subject to
redetermination or renegotiation; or
(xxvi) Any other Contract which is material to the
Company's operations or business prospects, except those which (A) were
made in the Ordinary Course of Business, and (B) are terminable on
thirty (30) days' or less notice by the Company without penalty or
other financial obligation.
(b) Except as set forth on SCHEDULE 2.8, no consent of
any party to any Contract is required in connection with the execution, delivery
or performance of this Agreement, or the consummation of the transactions
contemplated hereby.
(c) Each Contract identified or required to be identified
in SCHEDULE 2.13 hereof is in full force and effect and is valid and enforceable
in accordance with its terms. The Company has performed in all material respects
all obligations required to be performed by it and is not in
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default in any respect under or in breach of nor in receipt of any claim of
default or breach under any Contract listed on SCHEDULE 2.13. No event has
occurred which with the passage of time or the giving of notice or both would
result in a default, breach or event of non-compliance under any material
Contract to which the Company is subject (including without limitation all
performance bonds, warranty obligations or otherwise). The Company does not have
any present expectation or intention of not fully performing all such
obligations. The Company does not have any Knowledge of any breach or
anticipated breach by the other parties to any such Contract to which it is a
party.
(d) Copies of all Contracts and documents delivered and
to be delivered hereunder by the Controlling Persons or the Company are and will
be true, correct and complete copies of such agreements, contracts and
documents.
2.14 Real Estate and Personal Property Matters.
(a) SCHEDULE 2.14 hereto sets forth a description by the
Company of all real property owned or leased by the Company, including the
location/address of the property, the purpose for which the property is used,
whether it is income generating property, the amount of debt on the owned
property, and the lessor, term and monthly lease payments (including percentage
rent, escalation and other such contingent rental payments) with respect to
leased property.
(b) The Company has good and marketable title to all of
the properties and assets reflected in the balance sheet as of the date of the
Interim Financial Statements or acquired after the date thereof, other than
properties sold or otherwise disposed of since the date thereof in the Ordinary
Course of Business, free and clear of all Liens, except (i) statutory Liens not
yet delinquent, (ii) such imperfections or irregularities of title, Liens,
easements, charges or other encumbrances that do not detract from or interfere
with the present use of the properties or assets subject thereto or affected
thereby, otherwise impair present business operations at such properties; or do
not detract from the value of such properties and assets, taken as a whole, or
(iii) as reflected in the balance sheets included in Financial Statements or the
notes thereto.
(c) The Company owns, and will on the Closing Date and
the Effective Date own, good and marketable title to all the personal property
and assets, tangible or intangible, used in its business except as to those
assets leased, all of which leases are in good standing and no party is in
default thereunder. None of the assets belonging to or held by the Company is or
will be on the Closing Date or the Effective Date subject to any (i) Contracts
of sale or lease, or (ii) Liens. Except for normal breakdowns and servicing
requirements, all machinery and equipment regularly used by the Company in the
conduct of its business is in good operating condition and repair, ordinary wear
and tear excepted.
(d) There has not been since the date of the most recent
Balance Sheet, and will not be prior to the Closing Date or the Effective Date,
any sale, lease, or any other disposition or distribution by the Company of any
of its assets or properties and any other assets now or hereafter owned by it,
except transactions in the Ordinary Course of Business or as otherwise consented
to
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by the Buyers. On and after the Effective Date, the Surviving Corporation, as a
direct wholly-owned subsidiary of Parent, will own, or have the unrestricted
right to use, all of the properties and assets that are currently used by the
Company in connection with the business thereof.
2.15 Litigation. Except as set forth on SCHEDULE 2.15, there is no
Claim pending or, to the Knowledge of any Seller, threatened against, relating
to or affecting any of the Sellers, or any of the assets or properties of the
Company nor is there any Order outstanding against any of the Sellers, or any of
the assets or properties of the Company.
2.16 Tax Matters.
(a) Except as described on SCHEDULE 2.16, the Company has
filed all federal, state, and local tax reports, returns, information returns
and other documents (collectively, the "Tax Returns") required to be filed with
any federal, state, local or other taxing authorities (each a "Taxing
Authority", collectively, the "Taxing Authorities") in respect of all relevant
taxes, including without limitation income, premium, gross receipts, net
proceeds, alternative or add on minimum, ad valorem, value added, turnover,
sales, use, property, personal property (tangible and intangible), stamp,
leasing, lease, user, excise, duty, franchise, transfer, license, withholding,
payroll, employment, fuel, excess profits, occupational and interest
equalization, windfall profits, severance, and other charges (including interest
and penalties) (collectively, the "Taxes") and in accordance with all tax
sharing agreements to which any of the Sellers may be a party. All Taxes
required or anticipated to be paid for all periods prior to and including the
Effective Date have been paid or are adequately provided for in the Financial
Statements, including any of the Company's Taxes that may be due or claimed to
be due as a result of the consummation of the transactions contemplated by this
Agreement. All Taxes which are required to be withheld or collected by the
Company have been duly withheld or collected and, to the extent required, have
been paid to the proper Taxing Authority or properly segregated or deposited as
required by applicable laws. There are no Liens for Taxes upon any property or
assets of the Company except for Liens for Taxes not yet due and payable. No
Seller has executed a waiver of the statute of limitations on the right of the
Internal Revenue Service or any other Taxing Authority to assess additional
Taxes or to contest the income or loss with respect to any Tax Return. The basis
of any depreciable assets, and the methods used in determining allowable
depreciation (including cost recovery), is correct and in compliance with the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"Code").
(b) No audit of the Company or the Company's Tax Returns
by any Taxing Authority is currently pending or threatened, and no issues have
been raised by any Taxing Authority in connection with any Tax Returns. No
material issues have been raised in any examination by any Taxing Authority with
respect to the Company which reasonably could be expected to result in a
proposed deficiency for any other period not so examined, and there are no
unresolved issues or unpaid deficiencies relating to such examinations. The
items relating to the business, properties or operations of the Company on the
Tax Returns filed by or on behalf of the Company for all taxable years
(including the supporting schedules filed therewith), available copies
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<PAGE> 22
of which have been supplied to the Buyers, state accurately the information
requested with respect to the Company and such information was derived from the
books and records of the Company.
(c) The Company has not made nor has become obligated to
make, nor will as a result of any event connected with the Closing become
obligated to make, any "excess parachute payment" as defined in Section 280G of
the Code (without regard to subsection (b)(4) thereof).
2.17 Compliance with Regulations and Orders; Permits; Affiliations.
(a) Compliance. The Company is presently complying with
all applicable Regulations and Orders of Authorities in respect of its
operations, equipment, practices, real property, plants, structures and other
properties, and all other aspects of its business and operations, including,
without limitation, all Regulations and Orders relating to the safe conduct of
business, hazardous waste, environmental protection, handicapped access, fair
housing, quality and labeling, antitrust, Taxes, consumer protection, equal
opportunity, discrimination, health, sanitation, fire, zoning, building and
occupational safety where such failure or failures would individually or in the
aggregate have a Material Adverse Effect. There are no Claims pending, nor to
the Knowledge of any of the Sellers, are there any Claims threatened, nor have
any of the Sellers received any written notice, regarding any violations of, or
defaults under, any Regulations and Orders enforced by any Authority claiming
jurisdiction over the Company, including, without limitation, any requirement of
OSHA, any pollution and environmental control agency (including air and water)
or the agencies having responsibility for the Real Estate Settlement Procedures
Act, the Fair Housing Act, Americans With Disabilities Act, or any similar
regulations.
(b) Permits. SCHEDULE 2.17 hereto sets forth all of the
Company's permits, licenses, provider numbers, orders, franchises, registrations
and approvals (collectively, "Permits") from all Authorities. The Permits listed
on SCHEDULE 2.17 are the only Permits that are required for the Company to
conduct its business as presently conducted. Each such Permit is valid and in
full force and effect and, to the Knowledge of any of the Sellers, no suspension
or cancellation of any such Permit is threatened and there is no basis for
believing that such Permit will not be renewable upon expiration.
(c) Affiliations. SCHEDULE 2.17 attached hereto sets
forth all industry affiliations and memberships of the Sellers in any business
or industry group relating to the operation of the Company (collectively, the
"Business Groups"). None of the Sellers is in violation of any Regulation,
Order, rule or requirement with respect to any such Business Group. Except as
set forth on SCHEDULE 2.17, no consent of any such Business Group is required
for any of the Sellers to consummate the transactions contemplated by this
Agreement.
2.18 ERISA and Related Matters.
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(a) Benefit Plans; Obligations to Employees. Except as
set forth in SCHEDULE 2.18 hereto, neither the Company, nor any ERISA Affiliate
of the Company, is a party to or participates in or has any liability or
contingent liability with respect to:
(i) any "employee welfare benefit plan" or
"employee pension benefit plan" or "multi-employer plan" (as those
terms are respectively defined in Sections 3(1), 3(2) and 3(37) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"));
(ii) any retirement or deferred compensation
plan, incentive compensation plan, stock plan, unemployment
compensation plan, option plan, vacation pay, severance pay, bonus or
benefit arrangement, insurance or hospitalization program or any other
fringe benefit arrangements for any officer, director, employee,
consultant or agent, whether pursuant to contract, arrangement, custom
or informal understanding, which does not constitute an "employee
benefit plan" (as defined in Section 3(3) of ERISA); or
(iii) any employment agreement not terminable on
thirty (30) days' or less written notice, without further liability.
Any plan, arrangement or agreement required to be listed on
SCHEDULE 2.18 for which any Seller or any ERISA Affiliate of any Seller may have
any liability or contingent liability is sometimes hereinafter referred to as a
"Benefit Plan". For purposes of this Section, the term "ERISA Affiliate" shall
mean any trade or business, whether or not incorporated, that together with the
Company would be deemed a "single employer" within the meaning of Section
4001(b)(i) of ERISA.
(b) Plan Documents and Reports. A true, correct and
complete copy of each of the Benefit Plans listed on SCHEDULE 2.18, and all
contracts relating thereto, or to the funding thereof, including, without
limitation, all trust agreements, insurance contracts, investment management
agreements, subscription and participation agreements and record keeping
agreements, each as in effect on the date hereof, is attached to SCHEDULE 2.18.
In the case of any Benefit Plan that is not in written form, the Buyers have
been supplied with an accurate description of such Benefit Plan as in effect on
the date hereof. A true, correct and complete copy of: (i) the three most recent
annual reports and accompanying schedules; (ii) the three most recent actuarial
reports; (iii) the most recent summary plan description and Internal Revenue
Service determination letter with respect to each such Benefit Plan, to the
extent applicable; (iv) a current schedule of assets (and the fair market value
thereof assuming liquidation of any asset which is not readily tradeable) held
with respect to any funded Benefit Plan; (v) all documents establishing,
creating or amending any Benefit Plan; (vi) all trust agreements, funding
agreements, insurance contracts and investment management agreements; (vii) all
financial statements and accounting statements and reports, investment reports
and actuarial reports for each of the last seven (7) years; (viii) any and all
other reports, returns, filings and material correspondence with any
Governmental Authority in the last seven (7) years; (ix) all booklets,
summaries, descriptions or manuals prepared for or circulated to, and written
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communications of a general nature to employees concerning any Benefit Plan; (x)
all professional opinions (whether or not internally prepared) with respect to
each Benefit Plan; and (xi) all material internal memoranda concerning each
Benefit Plan prepared within the last seven (7) years, has been supplied to the
Buyers by the Company, and there have been no material changes in the financial
condition in the respective Benefit Plans from that stated in the annual reports
and actuarial reports supplied.
(c) Compliance with Laws; Liabilities. Except as set
forth on SCHEDULE 2.18, the Company is in compliance in all material respects
with the terms of all of its Benefit Plans and every Benefit Plan is in
compliance with all of the requirements and provisions of ERISA and all other
Regulations and Orders applicable thereto, including without limitation the
timely filing of all annual reports or other filings required with respect to
such Benefit Plans. None of the assets of any Benefit Plan are invested in
employer securities or employer real property, as those terms are defined in
Section 407(d) of ERISA. There have been no "prohibited transactions" (as
described in Section 406 of ERISA or Section 4975 of the Code) with respect to
any Benefit Plan and neither the Company nor any ERISA Affiliate of the Company
has otherwise engaged in any prohibited transaction. There has been no
"accumulated funding deficiency" as defined in Section 302 of ERISA, nor has any
reportable event as defined in Section 4043(b) of ERISA occurred with respect to
any Benefit Plan. Actuarially adequate accruals for all obligations or
contingent obligations under the Benefit Plans are reflected in the most recent
Balance Sheet provided to the Buyers and such obligations include a pro rata
amount of the contributions which would otherwise have been made in accordance
with past practices for the plan years which include the Closing Date.
2.19 Intellectual Property.
(a) Except as set forth on SCHEDULE 2.19, the Company has
no trade name, service mark, patent, copyright, trademark or other Intellectual
Property related to its business.
(b) The Company has the right to use the Intellectual
Property listed in SCHEDULE 2.19, and except as otherwise set forth therein, the
Intellectual Property is, and will be on the Closing Date and the Effective
Date, free and clear of all royalty obligations and Liens. There are no Claims
pending, or to the Knowledge of any of the Sellers, threatened, against any of
the Sellers that the Company's use of any of the Intellectual Property listed on
SCHEDULE 2.19 infringes the rights of any Person. The Sellers have no Knowledge
of any use of any of the Intellectual Property constituting an infringement
thereof and the Stockholders have no right, claim or interest in or to any of
the Intellectual Property.
(c) The Company is not a party in any capacity to any
franchise, license or royalty agreement respecting any of the Intellectual
Property and there is no conflict with the rights of others in respect to any of
the Intellectual Property now used in the conduct of its business.
(d) The current software applications used by the Company
in the operation of its business are set forth and described on SCHEDULE 2.19
hereto (the "Software"). The Software,
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to the extent it is licensed from any third party licensor or it constitutes
"off-the-shelf" software, is held by the Company under valid, binding and
enforceable licenses and is fully transferable to the Buyers without any third
party consent. All of the Company's computer hardware has validly licensed
software installed therein. The Company has not sold, assigned, licensed,
distributed or in any other way disposed of or encumbered the Software.
2.20 Year 2000 Compliance. The Information Technology of the
Company will be Year 2000 Compliant as of the Closing Date. For purposes of this
Section 2.20, (a) "Year 2000 Compliant" means, with respect to the Company's
Information Technology, that such Information Technology is designed to be used
prior to, during and after calendar year 2000 A.D., and such Information
Technology used during each such time period will accurately receive, provide
and process date/time data (including, but not limited to, calculating,
comparing and sequencing) from, into and between the 20th and 21st centuries,
including the years 1999 and 2000 and leap-year calculations, and will not
malfunction, cease to function, or provide invalid or incorrect results as a
result of date/time data, to the extent that other Information Technology, used
in combination with the Information Technology being acquired by the Buyers,
properly exchanges data/time data with it, and (b) "Information Technology"
means Software, computer hardware (whether general or specific purpose), and
other similar or related items of automated, computerized, or software system(s)
that are used or relied on by the Company in the conduct of its business.
2.21 Environmental Matters. Except as disclosed in SCHEDULE 2.21:
(a) neither the Company's business nor the operation thereof violates any
applicable Environmental Law and no condition or occurrence (any accident,
happening or event which occurs or has occurred at any time prior to the Closing
Date, which results in or could result in a claim against the Company or any of
the Buyers or creates or could create a liability or loss for the Company or any
of the Buyers) exists or has occurred which, with notice or the passage of time
or both, would constitute a violation of any Environmental Law; (b) the Company
is in possession of all Environmental Permits required under any applicable
Environmental Law for the conduct or operation of the Company's business (or any
part thereof), and the Company is in full compliance with all of the
requirements and limitations included in such Environmental Permits; (c) the
Company has not stored or used any Hazardous Material on or at any property or
facility now or previously owned, leased or operated by the Company except for
inventories of chemicals which are used or to be used in the Ordinary Course of
Business (which inventories have been sorted or used in accordance with all
applicable Environmental Permits and all Environmental Laws, including all so
called "Right to Know" laws); (d) the Company has not received any notice from
any Authority or other Person that the Company's business or the operation of
any of its facilities is in violation of any Environmental Law or any
Environmental Permit or that it is responsible (or potentially responsible) for
the cleanup of any Hazardous Materials at, on or beneath any property or
facility now or previously owned, leased or operated by the Company, or at, on
or beneath any land adjacent thereto or in connection with any waste or
contamination site; (e) the Company is not the subject of any Claim by any
Authority or other Person involving a demand for damages or other potential
liability with respect to a violation of Environmental Laws or under any common
law theories relating to operations or the condition of any facilities or
property (including underlying groundwater) owned, leased, or operated by the
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Company; (f) the Company has not buried, dumped, disposed, spilled or released
any Hazardous Materials on, beneath or adjacent to any property or facility now
or previously owned, leased or operated by the Company or any property adjacent
thereto; (g) no property or facility now or previously owned, leased or operated
by the Company, is listed or proposed for listing on the National Priorities
List pursuant to CERCLA, on the CERCLIS or on any other federal or state list of
sites requiring investigation or clean-up; (h) there are no underground storage
tanks, active or abandoned, including petroleum storage tanks, on or under any
property or facility now or previously owned, leased or operated by the Company;
(i) the Company has not directly transported or directly arranged for the
transportation of any Hazardous Materials to any location which is listed or
proposed for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any federal or state list or which is the subject of any
enforcement action or other investigation by any Authority which may lead to
material Claims against the Company for any remedial work, damage to natural
resources or personal injury, including Claims under CERCLA; and (j) there are
no polychlorinated biphenyls, radioactive materials or friable asbestos present
at any property or facility now or previously owned or leased by the Company.
The Company has timely filed all reports required to be filed with respect to
all of its property and facilities and has generated and maintained all required
data, documentation and records under all applicable Environmental Laws.
2.22 Banking Arrangements. SCHEDULE 2.22 attached hereto sets forth
the name of each bank in or with which the Company has an account, credit line
or safety deposit box, and a brief description of each such account, credit line
or safety deposit box, including the names of all Persons currently authorized
to draw thereon or having access thereto. Except as may be disclosed in the
Financial Statements or on SCHEDULE 2.22 hereto, the Company has no liability or
obligation relating to funds or money borrowed by or loaned to the Company
(whether under any credit facility, line of credit, loan, indenture, advance,
pledge or otherwise).
2.23 Insurance. SCHEDULE 2.23 attached hereto sets forth a list and
brief description, including dollar amounts of coverage, of all policies of
property, fire, liability, business interruption, workers' compensation and
other forms of insurance held by the Company as of the date hereof, as well as a
schedule of Claims filed with the Company's current insurance carrier, including
a history of such Claims and a description and estimated dollar amount of any
unresolved Claims. Such policies are valid, outstanding and enforceable
policies, as to which premiums have been paid currently. Except as disclosed on
SCHEDULE 2.15, to the Knowledge of each of the Sellers, no state of facts exist
and no events have occurred which might reasonably (a) form the basis for any
claim against the Company not fully covered by insurance for liability on
account of any express or implied warranty or tortious omission or commission,
or (b) result in material increase in insurance premiums of the Company.
2.24 Inventories. The inventories, if any, reflected on the balance
sheets included in the Financial Statements, and the inventories held by the
Company on the date hereof, (a) consist of a quality and quantity usable and
salable in the Ordinary Course of Business of the Company, except as reserved in
the Financial Statements, and (b) have been reflected on such balance sheets at
the lower of cost or market value (taking into account the usability or
solubility thereof). All such
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inventories are owned free and clear and are not subject to any Lien except to
the extent reserved against or reflected in the Financial Statements, in this
Agreement or the Schedules attached hereto. The Company is not aware of any
Material Adverse Changes affecting the supply of inventory available to the
Company, and, to the Knowledge of each of the Sellers, the consummation of the
transactions contemplated hereby will not adversely affect any such supply.
2.25 Brokerage. Except as referenced in SECTION 1.10 hereof, no
Seller has employed any broker, finder, advisor, consultant or other
intermediary in connection with this Agreement or the transactions contemplated
by this Agreement who is or might be entitled to any fee, commission or other
compensation from the Company or the Stockholders, or from the Buyers or any of
their respective Affiliates, upon or as a result of the execution of this
Agreement or the consummation of the transactions contemplated hereby.
2.26 Improper and Other Payments. Except as set forth on SCHEDULE
2.26 hereto: (a) neither the Company, nor any director, officer, employee
thereof, nor, to the Knowledge of any Seller, any agent or representative of the
Company nor any Person acting on behalf of any of them, (i) has made, paid or
received any contribution, gift, bribe, rebate, payoff, influence payment,
kickbacks or other similar payments to or from any Person or Authority, whether
in money, property or services (A) to obtain favorable treatment in securing
business, (B) to pay for favorable treatment for business secured, (C) to obtain
special concessions or for special concessions already obtained or (D) in
violation of any Regulation or Order, or (ii) established or maintained a fund
or asset that has not been recorded on the books and records of the Company; (b)
no contributions have been made, directly or indirectly, to a domestic or
foreign political party or candidate; (c) no improper foreign payment (as
defined in the Foreign Corrupt Practices Act) has been made; and (d) the
internal accounting controls of the Company are believed by the Company's
management to be adequate to detect any of the foregoing under current
circumstances.
2.27 Disclosure. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items prepared
for or supplied to the Buyers by or on behalf of the Sellers with respect to the
transactions contemplated hereby contains any untrue statement of a material
fact or omits a material fact necessary to make each statement contained herein
or therein not misleading.
2.28 Significant Customers and Suppliers; Material Plans and
Commitments. Set forth on SCHEDULE 2.28 hereto is an accurate list of the
customers and suppliers of the Company, representing five percent (5%) or more
of the Company's annual revenues as of the Balance Sheet Date and the date of
the Interim Financial Statements. Except to the extent set forth on SCHEDULE
2.28, none of the Company's significant customers (or persons or entities that
are sources of a significant number of customers) have canceled or substantially
reduced or, to the Knowledge of any of the Sellers, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, nor has any such customer or supplier given
any of the Sellers notice that it is subject to any bankruptcy, insolvency or
similar proceeding and, to any Seller's Knowledge, no such proceeding by any
other party is pending or threatened nor
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has any act or omission occurred that makes such proceeding likely. The Company
has also set forth on SCHEDULE 2.28 a summary description of all plans or
projects involving the opening of new operations, expansion of existing
operations, the acquisition of any personal property, business or assets
requiring, in any event, the payments of more than $25,000 by the Company.
2.29 Investor Representations. Each Controlling Person represents
and warrants to the Buyers as of the Closing Date that he or she:
(a) is an "ACCREDITED INVESTOR" within the meaning of
Rule 501 under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "SECURITIES ACT"), and was not organized
for the specific purpose of acquiring the Parent Stock;
(b) has sufficient knowledge and experience in investing
in companies similar to the Company and Buyers in terms of the their stage of
development so as to be able to evaluate the risks and merits of his or its
investment in the Buyers and he or she is able financially to bear the risks
thereof;
(c) has had an opportunity to discuss the Buyers'
business, management and financial affairs with the Buyers' management;
(d) is acquiring the Parent Stock for his or her own
account for the purpose of investment and not with a view to or for resale in
connection with any unregistered distribution thereof;
(e) understands that (i) the Parent Stock has not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act, (ii) the Parent
Stock must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration, and
(iii) the Parent Stock will bear a legend to such effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
Each of the Buyers represents and warrants to the Sellers as follows:
3.1 Corporate Organization, Etc. Each of the Buyers is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation with full corporate power and authority to
carry on its business as it is now being conducted and to own, operate and lease
its properties and assets.
3.2 Authorization, Etc. Each of the Buyers has full
corporate power and authority to enter into this Agreement and the Ancillary
Documents to which it is a party and to carry out the
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transactions contemplated hereby and thereby. The Board of Directors of each
Buyer or the appropriate Committee thereof has or, prior to Closing will have,
duly authorized the execution, delivery and performance of this Agreement, the
Ancillary Documents to which it is a party and the transactions contemplated
hereby and thereby, and no other corporate proceedings on its part are necessary
to authorize this Agreement, such Ancillary Documents and the transactions
contemplated hereby and thereby. Upon execution and delivery of this Agreement
and the Ancillary Documents by the parties hereto and thereto, this Agreement
and the Ancillary Documents to which each Buyer is a party shall constitute the
legal, valid and binding obligation of such Buyer, enforceable against such
Buyer in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors rights generally and by general
equitable principles.
3.3 No Violation. The execution, delivery and performance by each
of the Buyers of this Agreement and the Ancillary Documents to which each is a
party, and the fulfillment of and compliance with the respective terms hereof
and thereof by each Buyer, do not and will not: (a) conflict with or result in a
breach of the terms, conditions or provisions of; (b) constitute a default or
event of default under (with due notice, lapse of time or both); (c) result in
the creation of any Lien upon the assets or properties of any Buyer pursuant to;
(d) give any third party the right to accelerate any obligation under; (e)
result in a violation of; or (f) require any authorization, consent, approval,
exemption or other action by or notice to any Person (including, without
limitation, any creditor, customer or supplier) pursuant to, the Charter
Documents of such Buyer, or any Regulation, Contract or Order to which such
Buyer or its properties are subject. Each of the Buyers will comply with all
applicable Regulations and Orders in connection with its execution, delivery and
performance of this Agreement, the Ancillary Documents and the transactions
contemplated hereby and thereby.
3.4 Governmental Authorities. Each of the Buyers has complied in
all material respects with all applicable Regulations in connection with its
execution, delivery and performance of this Agreement, the Ancillary Documents
to which it is a party and the transactions contemplated hereby and thereby.
Neither of the Buyers is required to submit any notice, report, or other filing
with any governmental authority in connection with its execution or delivery of
this Agreement, the Ancillary Documents to which it is a party or the
consummation of the transactions contemplated hereby and thereby. No
authorization, consent, approval, exemption or notice is required to be obtained
by either Buyer in connection with the execution, delivery, and performance of
this Agreement, the Ancillary Documents to which it is a party and the
transactions contemplated hereby and thereby.
3.5 Disclosure. Neither this Agreement or any of the Ancillary
Documents to which it is a party nor any exhibits, attachments, written
statements, documents, certificates or other items prepared for or supplied to
the Sellers by the Buyers with respect to the transactions contemplated hereby
contains any untrue statement of a material fact or omits a material fact
necessary to make each statement contained herein or therein not misleading.
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ARTICLE IV
COVENANTS OF THE SELLERS
Until the later of the Effective Date or the Closing Date, except as
otherwise consented to or approved by the Buyers in writing, the Company shall,
and the Controlling Persons shall, and shall cause the Company to:
4.1 Ordinary Course of Business. Operate its business diligently
and in good faith and in the Ordinary Course of Business, including, without
limitation: (a) maintaining all of its respective properties in good order and
condition; (b) maintaining (except for expiration due to lapse of time) all
Contracts in effect without change except as expressly provided herein; (c)
complying with the provisions of all Regulations and Orders applicable to the
Company and the conduct of its respective business; (d) maintaining insurance
and reinsurance coverage as in effect on the date hereof up to the Closing Date;
(e) preserving the business of the Company intact; (f) using its best efforts to
keep available for the Company and the Buyers, the services of the officers and
employees of the Company; and (g) preserving the good will of clients, suppliers
and others having business relations with the Company.
4.2 Certain Restrictions. Refrain from: (a) changing or amending
the Charter Documents of the Company; (b) merging with or into or consolidating
with any other Person; (c) acquiring all or substantially all of the stock or
the assets of any Person or changing the character of its business; (d) issuing
or selling any shares of its capital stock of any class or any Options or
securities convertible into any shares of its capital stock; (e) permitting any
liens upon, pledging or otherwise encumbering any of its capital stock or any of
its assets or properties; (f) declaring, paying or setting aside for payment any
dividend or other distribution to Stockholders of the Company, in respect of its
capital stock or otherwise; (g) directly or indirectly, redeeming, retiring,
purchasing or otherwise acquiring any shares of its capital stock or any of its
indebtedness for money borrowed in advance of any scheduled repayment date; (h)
making any capital expenditures, or commitments with respect thereto in excess
of $5,000; (i) incurring, assuming or guaranteeing any indebtedness, obligations
or liabilities or entering into any transactions or making any commitment to do
any of the foregoing except in the Ordinary Course of Business or for purposes
of consummation of the transactions contemplated by this Agreement and in any
case only after consultation with the Buyers; (j) canceling, releasing, waiving
or compromising any debt, Claim or right in its favor; (k) altering the rate or
basis of compensation of any of its officers, directors, employees or
consultants; and (l) taking any action or failing to take any action as a result
of which any of the other changes or events listed in SECTION 2.12 hereof is
likely to occur.
4.3 Cash and Cash Equivalents. Preserve, and expend solely in the
Ordinary Course of Business, its cash and cash equivalents.
4.4 Interim Financial Information. To the extent prepared in the
Ordinary Course of Business, furnish to the Buyers unaudited financial
statements (including, without limitation,
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balance sheets and statements of income, changes in stockholders' equity and
cash flow) and information for each calendar month, promptly following the
conclusion of such month, and as the Buyers may otherwise reasonably request.
4.5 Full Access and Disclosure.
(a) Afford to the Buyers' and their counsel, accountants
and other authorized representatives reasonable access during business hours to
the Company's facilities, properties, books and records in order that the Buyers
may have full opportunity to make such reasonable investigations as it shall
desire to make of the affairs of the Company, including financial audits; and
the Controlling Persons shall cause the Company's officers, employees and
auditors to furnish on a timely basis such additional financial and operating
data and other information as the Buyers shall from time to time reasonably
request including, without limitation, any internal control recommendations
applicable to the Company made by the Company's independent auditors in
connection with any examination of the Company's Financial Statements and books
and records.
(b) Promptly notify the Buyers in writing if any Seller
becomes aware of any fact or condition that causes or constitutes a breach of
any representation or warranty of any Seller as of the date of this Agreement,
or if such Seller becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as expressly contemplated
by this Agreement) cause or constitute a breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any such fact or
condition require any change in any schedule hereto, Sellers will promptly
deliver to the Buyers a proposed amendment or supplement to such schedule
specifying such change. No such proposed amendment or supplement to a schedule
shall constitute an amendment or supplement to such schedule until the Buyers
shall have consented thereto. Each Seller will promptly notify the Buyers of the
occurrence of any breach of any covenant of Sellers in this ARTICLE 4 or ARTICLE
6 or of the occurrence of any event that may make the satisfaction of the
conditions in ARTICLE 7 impossible or unlikely.
4.6 Fulfillment of Conditions Precedent. Refrain from taking any
action which, if taken on or prior to the Closing Date, would constitute a
breach of this Agreement. The Sellers shall use their best efforts to obtain at
their expense, on or prior to the Closing Date, all such waivers, Permits,
consents, approvals or other authorizations from third parties and Authorities,
and to do all things as may be necessary or desirable in connection with the
transactions contemplated by this Agreement in order to fully and expeditiously
consummate the transactions contemplated by this Agreement.
4.7 Tax Returns. File all Tax Returns and reports with respect to
Taxes which are required to be filed for Tax periods ending on or before the
Effective Date (a "Pre-Closing Tax Return"), and the Company shall pay all Taxes
due in respect of such Pre-Closing Tax Returns to the appropriate Taxing
Authority; and the Company shall pay all costs associated with the preparation
thereof.
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4.8 No Solicitation or Negotiation. Refrain from, and cause its
directors, officers, employees, representatives, agents, advisors, accountants
and attorneys to refrain from, initiating, soliciting or encouraging, directly
or indirectly, any inquiries or the making of any proposal with respect to, or
engage in negotiations concerning, or provide any confidential information or
data to any Person with respect to, or have any discussions with any Persons
relating to, any acquisition, business combination or purchase of all or any
significant asset of, or any equity interest in, the Company, or otherwise
facilitate any effort or attempt to do or seek any of the foregoing, and shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Should any Seller be contacted with respect to any
offer, inquiry or proposal, the Sellers shall immediately advise the Buyers in
writing of the name, address and phone number of the contact and the nature of
the inquiry.
4.9 Public Announcements. Refrain from disclosing any of the terms
of this Agreement to any third party (other than the Buyers' advisors and senior
lending group and the Sellers' advisors) without the other party's prior written
consent unless required by any applicable law. The form, content and timing of
any and all press releases, public announcements or publicity statements (except
for any disclosures under or pursuant to Securities Laws in connection with the
registration of Parent's securities or otherwise) with respect to this Agreement
or the transactions contemplated hereby shall be subject to the prior approval
of the Buyers.
4.10 Termination of Agreements. Terminate or cause to be
terminated, on or prior to the Closing Date, (a) the Agreements set forth in
SECTION 7.12 hereof, and (b) any existing agreement between the Company and
Stockholders of the Company not reflecting fair market terms, except such
existing agreements as are set forth on SCHEDULE 4.10.
ARTICLE V
COVENANTS OF THE BUYERS
Each of the Buyers hereby covenants and agrees with the Sellers that
prior to the Closing or the termination of this Agreement and, with respect to
the covenants contained in SECTION 5.3, thereafter:
5.1 Full Access and Disclosure.
(a) The Buyers shall afford to each Seller, and their
counsel, accountants and other authorized representatives an opportunity to make
such reasonable investigations as they shall desire to make of the business of
the Buyers; and the Buyers shall cause its officers, employees and auditors to
furnish such additional financial and operating data and other information as
the Sellers shall from time to time reasonably request.
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(b) From time to time prior to the Closing Date, the
Buyers shall promptly supplement or amend information previously delivered to
the Sellers with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth herein or disclosed.
5.2 Release and Assumption of Guarantees. The Buyers shall use
commercially reasonable efforts to have the Controlling Persons released, after
the Closing Date, from any and all guarantees on any indebtedness personally
guaranteed by any of them and from any and all pledges of assets pledged by any
of them to secure such indebtedness for the benefit of the Company, with all
such guarantees on indebtedness being assumed by the Buyers. The Buyers shall
indemnify and hold harmless the Controlling Persons from the payment of any
guaranties on any indebtedness or contractual obligations that the Controlling
Persons had incurred prior to the Closing Date, provided that such indebtedness
or obligations are related to the business of the Company as being conducted at
the Closing Date.
5.3 Rule 145 Best Efforts. While Parent is a public company with
its securities registered under the Securities Act, and listed or quoted for
trading by a national securities exchange or inter-dealer quotation system,
Parent will use commercially reasonable efforts to see that it is in compliance
with the requirements of Rule 144 under the Securities Act applicable to the
issuer of securities, so as to facilitate non-registered sales of Parent Stock
by Stockholders consistent with the requirements and limitations of Rule 144 and
145. Nothing in this SECTION 5.3 shall be deemed as either (a) any
representation or warranty that Parent will remain a public company with
securities registered under the Securities Act, or (b) any covenant or agreement
by Parent to register, under the Securities Laws or otherwise, any Parent
securities issued to, or held by, Stockholders.
5.4 Publicity. Prior to the Closing, any written news releases by
either the Buyer or the Company (the "Releasing Party") pertaining to this
Agreement or the Transaction shall be submitted to the other party for review
and approval prior to release by the Releasing Party, and shall be released only
in a form approved by the other party, provided, however, that (a) such approval
shall not be unreasonably withheld and (2) such review and approval shall not be
required of releases by the Releasing Party if prior review and approval would
prevent the timely and accurate dissemination of such press release as required
to comply, in the judgment of counsel, with any applicable law, rule, or policy.
ARTICLE VI
OTHER AGREEMENTS
6.1 Further Assurances. Subject to the terms and conditions of
this Agreement, each of the parties hereto shall use its best efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Regulations to consummate and
make effective the transactions contemplated by this Agreement. If at any time
after the Closing Date the Buyers, on the one hand, or the Controlling Persons,
on the other hand, shall
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consider or be advised that any further agreements, instruments, documents,
deeds, papers, assignments or assurances in law or in any other things are
necessary, desirable or proper to vest, perfect or confirm, of record or
otherwise, in such party, the title to any property or rights of the other
acquired or to be acquired by reason of, or as a result of, this Agreement or
any of the transactions contemplated herein, the other party agrees that it or
they shall execute and deliver all such proper agreements, instruments,
documents, deeds, papers, assignments and assurances in law and do all things
necessary, desirable or proper to vest, perfect or confirm title to such
property or rights in such party and otherwise to carry out the purpose of this
Agreement.
6.2 Consents. Without limiting the generality of SECTION 6.1, each
of the parties hereto shall use their best efforts to obtain all approvals,
consents and Permits of all Persons and Authorities necessary, proper or
advisable in connection with the consummation of the transactions contemplated
by this Agreement prior to the Closing Date.
6.3 No Termination of the Controlling Persons' Obligations by
Subsequent Incapacity, Etc. Each of the Controlling Persons specifically agrees
that their respective obligations hereunder, including, without limitation,
obligations pursuant to ARTICLE 11 and SECTION 6.4 shall not be terminated by
the death or incapacity of such Controlling Person.
6.4 Registration. The Buyer and the Merger Sub agree that promptly
following, and not more than thirty (30) business days from the Closing, the
Buyer will use good faith efforts to commence preparation of a registration
statement on Form S-1 and Form S-8 (or such other form as may be appropriate)
under the Securities Act to register the shares set out on SCHEDULE 6.4, the
shares reserved for issuance under the Parent's stock option plans and such
other shares of Parent selected to be registered by Parent's Board of Directors;
provided, however, that Buyer shall not commence preparation of or file such
registration statement if, in the reasonable and good faith opinion of the
Selected Members of Buyer's board of directors, in their capacity as directors
of Parent, the Buyer (i) does not then have the financial resources to pay the
cost of such registration statement, (ii) it would be imprudent from a financial
standpoint to the Parent, (iii) it would have a material adverse impact upon the
market for Parent's common stock, or (iv) upon the advice of Buyer's financial
advisor(s), filing of the registration statement should be postponed. The
"Selected Members" of Buyer's Board shall consist of Sean Daly, Kevin Schuyler
and the additional Board member (or his or her successor) chosen by Messrs.
Kenner and Daly, as described in SECTION 8.4 hereof, who shall act by majority
vote. The Buyer represents that, insofar as the information contained in the
same relates to the Buyer (including information incorporated therein by
reference), the Prospectus contained in said registration statement will (a)
comply as to form with the relevant requirements of the form on which it is
filed, and (b) not contain, as of the effective date thereof, any untrue
statement of a material fact or any omission to state a material fact necessary
to make the statements contained therein, in light of the circumstances under
which they are made, not misleading. If the parties shall disagree as to the
information to be included in said registration statement, the decision of Buyer
shall control. If the registration statement is with respect to an underwritten
offering, the selling shareholders shall agree to the underwriters customary
terms and conditions. In the event that the shares set out on Schedule 6.4 are
not registered as described
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above, Parent shall permit such shares to be registered on the next registration
statement on Form S-1 or S-3 filed by Parent; subject to contractual limitations
approved by the Selected Members and, in the case of an underwritten offering,
to cut back upon the advice of the underwriter.
6.5 Confidentiality. The Buyers, on the one hand, and each Seller,
on the other hand, shall, and each shall cause its principals, officers and
other personnel and authorized representatives to, hold in confidence, and not
disclose to any other Person without the other party's prior consent, all
written and oral information furnished or disclosed by or received from such
party or its officers, directors, employees, agents, counsel and auditors in
connection with the transactions contemplated hereby except as may be required
by applicable law or as otherwise contemplated herein.
6.6 Non Competition Covenant.
(a) Each of the Controlling Persons acknowledges that (i)
this Agreement includes certain consideration in respect of the goodwill
associated with the operation of the Restricted Businesses by the Sellers, (ii)
the covenants of the Controlling Persons contained in this SECTION 6.5 are a
material inducement to the Buyers to enter into this Agreement, (iii) the Buyers
and each of their respective Affiliates (each a "Buyer Entity" and collectively,
the "Buyer Entities") has expended and will expend considerable time, effort and
capital to develop the Restricted Businesses, and (iv) the Buyers and each of
the other Buyer Entities has a legitimate business interest in protecting its
investment in the Restricted Businesses and would be irreparably damaged if any
Controlling Person were to breach the covenants set forth in this SECTION 6.5.
Accordingly, each of the Controlling Persons agrees that the covenants set forth
in this SECTION 6.5, (w) are separate and independent covenants for which
valuable consideration has been paid, the receipt, adequacy and sufficiency of
which are acknowledged by the Controlling Persons, (x) are cumulative to all
other covenants of the Controlling Persons in favor of the Buyers and the other
Buyer Entities contained in this Agreement and shall survive the termination of
this Agreement for the purposes intended, (y) are reasonable and necessary to
protect and preserve the conduct and operation of the Restricted Businesses by
the Buyers and the other Buyer Entities, and (z) do not impose an undue hardship
upon any of the Controlling Persons, do not unreasonably restrict the
Controlling Persons with respect to or from the performance of services of,
relating to or connected with the Restricted Businesses, the management thereof
or otherwise, and are reasonable with respect to their duration, geographical
area and scope.
(b) Each of the Controlling Persons covenants and agrees
that, during the Restricted Period, he, she or it shall not, directly or
indirectly, either individually, in partnership, jointly or in conjunction with
any other Person, whether as principal, agent, officer, director, shareholder,
owner, partner, joint venturer, member, manager, employee, independent
contractor, consultant, advisor, sales representative or any other capacity
whatsoever:
(i) engage in any Restricted Business within the
Restricted Territory;
(ii) solicit, interfere with, disturb, or seek to
interfere with or disturb the
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relationship with (contractual or otherwise) any Person who is an
employee of, or engaged as an independent contractor, consultant or in
any similar capacity whatsoever with, any Buyer Entity for the purpose
or with the intent of inducing or enticing such Person to terminate
such relationship with such Buyer Entity;
(iii) employ or otherwise engage as an employee,
independent contractor, consultant or any capacity whatsoever, any
Person who is, at that time, or who has been within one (1) year prior
to that time, employed by any Buyer Entity;
(iv) solicit, interfere with, disturb, or seek to
interfere with or disturb the relationship with (contractual or
otherwise) any Person which is, at that time, or which has been within
one (1) year prior to that time, a customer or supplier of any Buyer
Entity for the purpose of soliciting or selling products or services in
competition with any Buyer Entity or inducing such Person to cease
doing business with any Buyer Entity; or
(v) solicit, interfere with, disturb, or seek to
interfere with or disturb the relationship with (contractual or
otherwise) any prospective acquisition candidate, on any Controlling
Person's own behalf or on behalf of any competitor or potential
competitor, which candidate was, to the Controlling Person's Knowledge,
either called upon by any Buyer Entity or for which any Buyer Entity
made an acquisition analysis, for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit the Controlling Persons from acquiring as an investment not
more than five percent (5%) of the capital stock of a competing business, whose
stock is traded on a national securities exchange or over-the-counter.
(c) In recognition of the substantial nature of such
potential damages and the difficulty of measuring economic losses to any Buyer
Entity as a result of a breach of the foregoing covenants, and because of the
immediate and irreparable damage that could be caused to any such Buyer Entity
for which it would have no other adequate remedy, each of the Controlling
Persons agrees that in the event of breach by any Controlling Person of the
foregoing covenant, such Buyer Entity shall be entitled to specific performance
of this provision and co-injunctive and other equitable relief, and that such
Controlling Person will be responsible for the payment of court costs and
reasonable attorneys' fees incurred by such Buyer Entity in seeking enforcement
of the covenants set forth in this SECTION 6.5.
(d) It is the intent of the Buyers and the Controlling
Person that the covenants in this SECTION 6.5 be construed and enforced in
accordance with the changing activities, business and locations of Buyer
Entities, whether before or after the date of termination of the employment of
the Controlling Person. For example, if, during the Restricted Period, a Buyer
Entity engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or its existing activities or business or the locations currently
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established therefor, then the Controlling Person will be precluded from
soliciting the customers or employees of such new activities or business or from
such new location and from directly competing with such new business within a
one hundred (100) mile radius of its then-established operating location(s)
through the Restricted Period.
(e) The covenants in this SECTION 6.5 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall be reformed in accordance therewith.
(f) All of the covenants in this SECTION 6.5 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Controlling Persons
against any Buyer Entity, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by any Buyer Entity of such
covenants. Further, this SECTION 6.5 shall survive the Closing and the
termination of any Controlling Person's employment with a Buyer Entity. It is
specifically agreed that the Restricted Period, during which the agreements and
covenants of the Controlling Persons made in this SECTION 6.5 shall be
effective, shall be computed by excluding from such computation any time during
which any Controlling Person is in violation of any provision of this SECTION
6.5.
6.7 Non-disclosure; Confidentiality.
(a) Confidential Information. By virtue of the
Controlling Persons' employment, association or involvement with the Company and
any due diligence with respect to the Buyer Entities, each Controlling Person
has obtained and may obtain confidential or proprietary information developed,
or to be developed, by the Company and an Buyer Entity. "Confidential
Information" means all proprietary or business sensitive information, whether in
oral, written, graphic, machine-readable or tangible form, and whether or not
registered, and including all notes, plans, records, documents and other
evidence thereof, including but not limited to all: patents, patent
applications, copyrights, trademarks, trade names, service marks, service names,
"know-how," customer lists, details of client or consulting contracts, pricing
policies, operational methods, marketing plans or strategies, product
development techniques or plans, procurement and sales activities, promotion and
pricing techniques, credit and financial data concerning customers, business
acquisition plans or any portion or phase of any scientific or technical
information, discoveries, computer software or programs used or developed in
whole or in part by the Company or any Buyer Entity (including source or object
codes), processes, procedures, formulas or improvements of the Company or any
Buyer Entity; algorithms; computer processing systems and techniques; price
lists; customer lists; procedures; improvements, concepts and ideas; business
plans and proposals; technical plans and proposals; research and development;
budgets and projections; technical memoranda, research reports, designs and
specifications; new product and service developments; comparative analyses of
competitive products, services and operating procedures;
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and other information, data and documents now existing or later acquired by the
Company or any Buyer Entity, regardless of whether any of such information, data
or documents qualify as a "trade secret" under applicable federal or state law.
"Confidential Information" shall not include: (a) any information which becomes
generally available to the public other than as a result of disclosure by the
Controlling Persons or any relative, agent or representative thereof; (b)
becomes available to the Controlling Persons on a non-confidential basis from a
source other than the Company or any Buyer Entity or any of its respective
employees, agents or representatives, provided that such source lawfully
obtained such information and is not bound by a confidentiality agreement with
the Company or any Buyer Entity; or (c) is required to be disclosed by law
provided, that if any Controlling Person is required by law (including, without
limitation, any judicial or administrative proceeding of any governmental or
regulatory authority) to disclose any of the Confidential Information, such
Controlling Person shall provide the Buyers with prompt written notice of any
such requirement and shall cooperate in full with the Buyers to obtain a
protective order or to pursue an action to obtain a waiver from such
requirement. If, in the absence of a protective order or other remedy, such
Controlling Person is nonetheless, in the written opinion of the Controlling
Person's outside counsel, legally compelled to disclose Confidential
Information, such Controlling Person may, without liability hereunder disclose
the Confidential Information, provided that (i) the Controlling Person gives the
Buyers prior written notice of the information to be disclosed, (ii) the
Controlling Person only discloses that portion of the Confidential Information
which the Controlling Person's counsel advises is legally required to be
disclosed, and (iii) the Controlling Person uses his or her best efforts to
preserve the confidentiality thereof by obtaining reasonable assurance that
confidential treatment will be accorded the Confidential Information.
(b) Non-Disclosure. Each of the Controlling Persons
agrees that he will not at any time, without the prior express written
authorization of the Buyers, disclose to any Person or use any Confidential
Information whatsoever for any purpose whatsoever, or permit any Person
whatsoever to examine and/or make copies of any reports or any documents or
software (whether in written form or stored on magnetic, optical or other mass
storage media) which contain or are derived from any Confidential Information.
Each of the Controlling Persons further agrees that no Confidential Information
shall be removed from the premises of the Company or any Buyer Entity, without
the prior express written consent of such entity.
(c) Buyer Group Property. As used in this Agreement, the
term "Buyer Group Property" means all documents, papers, computer printouts and
disks, records, customer or customer lists, files, manuals, supplies, computer
hardware and software, equipment, inventory and other materials that have been
created, used or obtained by the Company or any Buyer Entity, or otherwise
belonging to the Company or any Buyer Entity, as well as any other materials
containing Confidential Information as defined above. The Sellers recognize and
agree that:
(i) All Buyer Group Property shall be and remain
the property of the Buyer Entity to which such property belongs;
(ii) The Sellers will preserve, use and hold
Buyer Group Property only
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for the benefit of the Buyers and each of the Buyer Entities to carry
out the business of the Buyers and each of the Buyer Entities; and
(iii) Except as to those Sellers employed by an
Buyer Entity after the Closing and subject to a confidentiality
agreement with such entity, each Seller will immediately deliver and
surrender to Parent all Buyer Group Property, including all copies,
extracts or any other types of reproductions, which such Seller has in
his possession or control.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE BUYERS
Each and every obligation of the Buyers under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, unless waived in writing by the Buyers:
7.1 Representations and Warranties; Covenants and Agreements. The
representations and warranties of the Sellers contained in ARTICLE 2 and
elsewhere in this Agreement and all information contained in any exhibit,
certificate, schedule or attachment hereto or in any writing delivered by, or on
behalf of, the Sellers to the Buyers, shall be true and correct when made and
shall be true and correct in all material respects on the Closing Date as though
then made, except as expressly provided herein. The Sellers shall have performed
and complied with all agreements, covenants and conditions and shall have made
all deliveries required by this Agreement to be performed, delivered and
complied with by them prior to the Closing Date. Each of the Sellers and the
president of the Company shall have executed and delivered to the Buyers a
certificate, dated the Closing Date, certifying to the foregoing.
7.2 No Injunction. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
7.3 Third Party Consents. The Buyers and the Sellers shall have
obtained all consents, approvals, waivers or other authorizations listed in
SCHEDULE 2.8, with respect to the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, such
that each of the Contracts of the Company remains in effect (without default,
acceleration, termination, assignment, right of termination or assignment,
payment, increase in rates or compensation payable, penalty, interest or other
adverse effect) from and after the Closing Date as such Contracts operated and
were in effect before the Closing Date. With respect to the material Contracts
of the Company for which notice of the transaction had been, or should have
been, delivered to the other party thereto pursuant to SECTION 7.3 hereof, (a)
all such parties to such Contracts shall have been notified of the transactions
contemplated hereby, and (b) neither Parent or Merger Sub nor any Seller shall
have received any notice of terminations or amendments of, or any indication
from such party of their intent to terminate or amend, such contract, unless
such
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amendment shall not adversely affect Merger Sub or the Company.
7.4 Regulatory Approvals. The Authorities listed in SCHEDULE 2.8
hereto shall have approved the applications listed in such Schedule with respect
to the change of control represented by the transactions contemplated by this
Agreement, and such approval shall not impose financial obligations on the
Company or the Buyers that are objectionable to it.
7.5 No Material Adverse Change. There shall have been no Material
Adverse Change since the date of this Agreement. The Buyers shall have received
certificates (which shall be addressed to the Buyers), dated the Closing Date,
of the president or chief financial officer of the Company, certifying to the
foregoing.
7.6 Directors and Officers. The Buyers shall have received the
resignations of the directors and any officers of the Company specified by the
Buyers, which resignations shall be effective as of the Effective Date and those
persons specified by Buyer shall be appointed as directors and/or officers of
the Company (effective at Closing).
7.7 Due Diligence. The Buyers shall have completed their due
diligence investigation with respect to the Company including, but not limited
to, business, financial, legal, operational, customer, worker's compensation,
employee (both internal and external) and real estate due diligence, with
results satisfactory to Buyers in their sole discretion.
7.8 FIRPTA Certificate. The Company shall have delivered to the
Buyers a certificate to the effect that it is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
7.9 Sellers' Closing Documents. The Sellers shall have delivered
to the Buyers executed originals of each of the other Seller's Closing
Documents.
7.10 Leased Premises. [Intentionally Omitted].
7.11 Termination of Certain Agreements and Plans. The Sellers shall
have terminated, and the Company shall have no liability whatsoever (including,
without limitation, the making of any payment in connection with such
termination) with respect to: (a) any Stockholder's employment agreement or
Options agreement with the Company; (b) any qualified "defined benefit plan" (as
defined in Section 3(35) of ERISA) in accordance with applicable laws and
regulations; (c) any life insurance policies on the lives of any of the
Executives and other officers of the Company, together with any agreements to
provide any of such policies at the expense of the Company; and (d) any and all
leases of employee vehicles and any agreements with employees related to the
provision of the Company vehicles, or for the payment of a periodic vehicle
allowance, by the Company.
7.12 Board Approval. Parent's Board of Directors or, if applicable,
the appropriate
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committee thereof, shall have approved this Agreement and the transactions
contemplated herein.
7.13 Hart-Scott-Rodino Act. Any waiting period (and any extension
thereof) applicable to the consummation of the transactions contemplated herein
under the Hart-Scott-Rodino Act shall have expired or been terminated.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Sellers:
8.1 Representations and Warranties; Performance. The
representations and warranties of the Buyers contained in ARTICLE 3 and
elsewhere in this Agreement and all information contained in any exhibit,
schedule or attachment hereto, or in any writing delivered by the Buyers to the
Sellers, shall be true and correct in all material respects when made and shall
be true and correct in all material respects on the Closing Date as though then
made, except as expressly provided herein. The Buyers shall have performed and
complied in all material respects with all agreements, covenants and conditions
required by this Agreement to be performed and complied with by them prior to
the Closing Date. An authorized officer of each of the Buyers shall have
delivered to the Sellers a certificate, dated the Closing Date, certifying to
the foregoing.
8.2 No Injunction. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
8.3 Buyers' Closing Documents. The Buyers shall have delivered to
the Sellers executed originals of each of the other Buyers' Closing Documents.
8.4 Appointments to Parent's Board. At the Effective Time, the
directors of Parent shall be David Kenner, William G. Head, Roger Haggerty, Sean
Daly, Kevin Schuyler, and one additional member who will be chosen by both David
Kenner and Sean Daly, to hold office in accordance with the Certificate of
Incorporation and Bylaws of Parent, until their successors are duly elected or
appointed and qualified.
8.5 Resignation of Will Head. Before the Effective Time, Will Head
shall have resigned as a director of the Parent.
ARTICLE IX
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TERMINATION AND ABANDONMENT
9.1 Methods of Termination. This Agreement may be terminated and
the transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of the Buyers and the Sellers;
(b) by the Buyers or the Sellers if this Agreement is not
consummated on or before June 30, 2000; provided, however, that if any party has
breached or defaulted with respect to its respective obligations under this
Agreement on or before such date, such party may not terminate this Agreement
pursuant to this SECTION 9.1(B), and each other party to this Agreement shall at
its option enforce its rights against such breaching or defaulting party and
seek any remedies against such party, in either case as provided hereunder and
by applicable law;
(c) by the Buyers if as of the Closing Date (including
any extensions) any of the conditions specified in ARTICLE 7 hereof shall not
have been satisfied or if any of the Sellers is otherwise in default under this
Agreement or if the Average Price is less than $.13; or
(d) by the Sellers if, as of the Closing Date (including
any extensions), any of the conditions specified in ARTICLE 8 hereof shall not
have been satisfied, or if the Buyers are in default under this Agreement or if
the Average price is greater than $.63.
9.2 Procedure Upon Termination. In the event of termination and
abandonment pursuant to SECTION 9.1 hereof, and subject to the proviso contained
in SECTION 9.1(B), this Agreement shall terminate and shall be abandoned,
without further action by any of the parties hereto. If this Agreement is
terminated as provided herein:
(a) each party shall redeliver all documents and other
material of any other party relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, to the party furnishing
the same;
(b) all information received by any party hereto with
respect to the business of any other party or the Company (other than
information which is a matter of public knowledge or which has heretofore been
or is hereafter published in any publication for public distribution or filed as
public information with any governmental authority) shall not at any time be
used for the advantage of, or disclosed to third parties by, such party to the
detriment of the party furnishing such information; and
(c) no party hereto shall have any further liability or
obligation to any other party under or in connection with this Agreement;
provided, however, the non-breaching or non-defaulting party shall not be
foreclosed from bringing a Claim or cause of action or otherwise recovering from
the breaching or defaulting party.
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ARTICLE X
SURVIVAL OF TERMS; INDEMNIFICATION
10.1 Survival; Knowledge.
(a) All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that: (i) the agreements and covenants
set forth in this Agreement shall survive and continue until all obligations set
forth therein shall have been performed and satisfied; and (ii) subject to
SECTION 10.6, all representations and warranties shall survive and continue
until one (1) year from the Closing Date (the "Anniversary Date"), except for
(x) those representations and warranties set forth in SCHEDULE 10.5(A) hereto,
which shall survive until expiration of the applicable statute of limitations
with respect thereto, and (y) representations and warranties for which a claim
for indemnification hereunder (an "Indemnification Claim") shall be pending as
of such date of termination, in which event such representations and warranties
shall survive with respect to such Indemnification Claim until the final
disposition thereof.
(b) The right to indemnification, payment of damages or
other remedy based on such representations, warranties, covenants, and
obligations will not be affected by any investigation conducted with respect to,
or any knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 Indemnification by the Controlling Persons. Subject to this
ARTICLE 10, the Controlling Persons shall, jointly and severally, indemnify,
defend and hold harmless each of the Buyers and each of the other Buyer Entities
and each of the officers, directors, employees, stockholders, members,
attorneys, accountants, partners, representatives, agents, successors and
assigns of each of the foregoing (each a "Buyer Indemnified Party" and
collectively, the "Buyer Indemnified Parties"), at all times after the date of
this Agreement, against and in respect of any and all Claims (including, without
limitation, the legal fees and expenses) resulting from, or in respect of, any
of the following:
(a) Any misrepresentation, breach of warranty, or
nonfulfillment of any covenant or other obligation on the part of any Seller
under this Agreement or any of the Ancillary Documents or contained in any
schedule (without giving effect to any amendment or supplement thereto) or
exhibit to this Agreement or from any misrepresentation in or omission from any
certificate, schedule, other agreement or instrument executed and delivered by
any of the Sellers
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hereunder;
(b) Any conduct, action or inaction of any of the Sellers
occurring or arising from or relating to the operation, management or ownership
of the Company on or prior to the Closing Date or any circumstance related to
the operation, management or ownership of the Company on or prior to the Closing
Date, whether known or unknown on the Closing Date;
(c) Any and all liabilities of the Company of any nature
whether accrued, absolute, contingent or otherwise, and whether known or
unknown, existing at the Closing Date to the extent not reflected and reserved
against in the balance sheet included in the Interim Financial Statements or not
otherwise adequately disclosed in this Agreement or the schedules or exhibits
thereto, including, without limitation:
(i) All Tax liabilities of the Company, together
with any interest or penalties thereon or related thereto, through the
Closing Date and any Tax liability of the Company arising in connection
with the transactions contemplated hereby. Any Taxes, penalties or
interest attributable to the operations of the Company payable as a
result of an audit of any tax return shall be deemed to have accrued in
the period to which such Taxes, penalties or interest are attributable;
(ii) All environmental liabilities relating to
any of the Company's properties, including federal, state and local
environmental liability, together with any interest or penalties
thereon or related thereto, through the Closing Date, but excluding any
amount for which there is an adequate accrual and reserve on the
balance sheet included in the Interim Financial Statements; and
(d) All demands, assessments, judgments, costs and
reasonable legal and other expenses arising from, or in connection with any
Claim incident to any of the foregoing.
10.3 Indemnification by the Buyers. Subject to this ARTICLE 10, the
Buyers shall indemnify, defend and hold harmless the Controlling Persons and
each of their heirs, successors, assigns, representatives, attorneys,
accountants, partners and agents (each, a "Seller Indemnified Party" and
collectively, the "Seller Indemnified Parties"), at all times after the date of
this Agreement, against and in respect of any and all Claims (including, without
limitation, the fees and expenses of counsel) resulting from, or in respect of:
(a) any misrepresentation, breach of warranty, or nonfulfillment of any covenant
or other obligation on the part of any of the Buyers under this Agreement, any
of the Ancillary Documents or contained in any schedule or exhibit to this
Agreement; (b) any misrepresentation in or omission from any certificate,
schedule, other agreement or instrument by any of the Buyers hereunder; or (c)
any conduct, action, inaction of the Company or any of the Buyers arising from
or relating to the operation, management or ownership of the Company after the
Closing Date or any circumstance related to the operation, management or
ownership of the Company after the Closing Date.
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10.4 Third Party Claims.
(a) Except as otherwise provided in this Agreement, the
following procedures shall be applicable with respect to indemnification for
third party Claims. Promptly after receipt by the party seeking indemnification
hereunder (hereinafter referred to as the "Indemnitee") of notice of the
commencement of any (i) Tax audit or proceeding for the assessment of Tax by any
taxing authority or any other proceeding likely to result in the imposition of a
Tax liability or obligation, or (ii) any action or the assertion of any Claim,
liability or obligation by a third party (whether by legal process or
otherwise), against which Claim, liability or obligation the other party to this
Agreement (hereinafter the "Indemnitor") is, or may be, required under this
Agreement to indemnify such Indemnitee, the Indemnitee will, if a Claim thereon
is to be, or may be, made against the Indemnitor, notify the Indemnitor in
writing of the commencement or assertion thereof and give the Indemnitor a copy
of such Claim, process and all legal pleadings. The Indemnitor shall have the
right to participate in the defense of such action with counsel of reputable
standing. The Indemnitor shall have the right to assume the defense of such
action unless such action (x) may result in injunctions or other equitable
remedies in respect of the Indemnitee or its business, (y) may result in
liabilities which, taken with other then existing Claims under this ARTICLE 10,
would not be fully indemnified hereunder, or (z) may have an adverse impact on
the business or financial condition of the Indemnitee after the Closing Date
(including an effect on the Tax liabilities, earnings or ongoing business
relationships of the Indemnitee). The Indemnitor and the Indemnitee shall
cooperate in the defense of such Claims. In the event that the Indemnitor shall
assume or participate in the defense of such audit, assessment or other
proceeding as provided herein, the Indemnitee shall make available to the
Indemnitor all relevant records and sign such documents as are necessary to
defend such audit, assessment or other proceeding in a timely manner.
(b) Upon judgment, determination, settlement or
compromise of any third party Claim, the Indemnitor shall pay promptly on behalf
of the Indemnitee, and/or to the Indemnitee in reimbursement of any amount
theretofore required to be paid by it, the amount so determined by judgment,
determination, settlement or compromise, unless in the case of a judgment an
appeal is made from the judgment, plus all other Claims of the Indemnitee with
respect thereto (including, without limitation, legal fees and expenses). If the
Indemnitor desires to appeal from an adverse judgment, then the Indemnitor shall
post and pay the cost of the security or bond to stay execution of the judgment
pending appeal. Upon the payment in full by the Indemnitor of such amounts, the
Indemnitor shall succeed to the rights of such Indemnitee, to the extent not
waived in settlement, against the third party who made such third party Claim.
(c) Prior to paying or settling any Claim against which
an Indemnitor is, or may be, obligated under this Agreement to indemnify an
Indemnitee, the Indemnitee must first supply the Indemnitor with a copy of a
final court judgment or decree holding the Indemnitee liable on such Claim or
absent such judgment or decree, a copy of the terms of the settlement of such
Claim, provided, however, that Indemnitee must first receive the written
approval of the terms and conditions of such settlement from the Indemnitor. An
Indemnitor shall have the right to settle any Claim against it or as to which it
has assumed the defense, subject to the prior written approval of
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the Indemnitee, which approval shall not be unreasonably withheld, provided that
such settlement involves only the payment of a fixed sum which the Indemnitor is
obligated to pay and does not include any admission of liability or other such
similar admissions by or related to Indemnitee with respect to such Claim.
(d) An Indemnitee shall have the right to employ its own
counsel in any case, but the fees and expenses of such counsel shall be at the
expense of the Indemnitee unless (i) the employment of such counsel shall have
been authorized in writing by the Indemnitor in connection with the defense of
such action or Claim, (ii) the Indemnitor shall not have employed, or is
prohibited under this SECTION 10.4 from employing, counsel in the defense of
such action or Claim, or (iii) such Indemnitee shall have reasonably concluded
that there may be defenses available to it which are contrary to, or
inconsistent with, those available to the Indemnitor, in any of which events
such fees and expenses of not more than one additional counsel for the
Indemnitee shall be borne by the Indemnitor.
10.5 Limitation on Indemnification.
(a) None of the Buyer Indemnified Parties shall assert
any Indemnification Claim hereunder against the Controlling Persons until such
time as, and solely to the extent that, the aggregate of all such claims which
such parties may have against the Controlling Persons shall exceed $40,000 (the
"Controlling Persons Indemnification Threshold"); provided, however, the Buyer
Indemnified Parties may assert and shall be indemnified for any claim set forth
in SCHEDULE 10.5(A) at any time, without regard to whether the aggregate of all
Indemnification Claims which such parties may have against the Controlling
Persons exceeds the Controlling Persons Indemnification Threshold, it being
understood that the amount of any such claim set forth in SCHEDULE 10.5(A) shall
not be counted towards the Controlling Persons Indemnification Threshold. Any
claim set forth in SCHEDULE 10.5(A) and any other claim exceeding the
Controlling Person's Threshold shall first be satisfied from the Escrow Shares
(if any are then held under the Escrow Agreement) at the Average Trading Price
on the date of payment. After the complete distribution of Escrow Shares,
Controlling Persons may pay any Indemnification Claim not precluded by SECTION
10.6 in the form of Parent Stock valued at the Average Trading Price on the date
of payment, but shall not be required to pay more than one half of shares to
which they are entitled under SECTION 1.6 hereof.
(b) None of the Seller Indemnified Parties shall assert
any Indemnification Claim hereunder against the Buyers until such time as, and
solely to the extent that, the aggregate of all such claims which the
Controlling Persons and/or Stockholders may have against the Buyers shall exceed
$40,000 (the "Buyer Indemnification Threshold"). Buyer may pay any
Indemnification Claim in Parent Stock valued at the Average Trading Price on the
date of payment.
(c) Notwithstanding any other term of this Agreement, no
Controlling Person shall be liable under this ARTICLE 10 for an amount which
exceeds the Merger Consideration received by such Controlling Person. Each
Controlling Person may pay any liability under SECTION10 with
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Parent Stock valued at the Average Trading Price on the date of payment. The
"Average Trading Price" of a share of Parent Stock on a date shall be equal to
the average of the average closing bid and ask price for each of the ten days
immediately prior to such date.
10.6 Survival of Indemnification. These indemnification provisions
shall survive the consummation or the transactions contemplated in, or the
termination or other expiration of, this Agreement until the Anniversary Date,
except for those Indemnification Claims related to representations and
warranties set forth in SCHEDULE 10.5(A) hereto, which shall survive until
expiration of the applicable statute of limitations with respect thereto;
provided that any such Indemnification Claims which are pending as of any of the
foregoing termination dates shall survive until the final disposition thereof.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by a written agreement
signed by the Buyers and the Sellers.
11.2 Entire Agreement. This Agreement, including the schedules and
exhibits hereto and the documents, annexes, attachments, certificates and
instruments referred to herein and therein, embodies the entire agreement and
understanding of the parties hereto in respect of the agreements and
transactions contemplated by this Agreement and supersedes all prior agreements,
representations, warranties, promises, covenants, arrangements, communications
and understandings, oral or written, express or implied, between the parties
with respect to such transactions. There are no agreements, representations,
warranties, promises, covenants, arrangements or understandings between the
parties with respect to such transactions, other than those expressly set forth
or referred to herein.
11.3 Certain Definitions.
"Affiliate" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or controlling
such Person, (b) any Person, directly or indirectly, in which such Person holds,
of record or beneficially, five percent or more of the equity or voting
securities, (c) any Person that holds, of record or beneficially, five percent
or more of the equity or voting securities of such Person, (d) any Person that,
through Contract, relationship or otherwise, exerts a substantial influence on
the management of such Person's affairs, (e) any Person that, through Contract,
relationship or otherwise, is influenced substantially in the management of
their affairs by such Person, or (f) any director, officer, partner or
individual holding a similar position in respect of such Person.
"Agreement" shall have the meaning assigned to such term in
the Introduction hereto.
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"Ancillary Documents" shall have the meaning assigned to such
term in SECTION 2.7 hereof.
"Articles of Merger" shall have the meaning assigned to such
term in SECTION 1.2 hereof.
"Authority" means any international, federal, state local or
municipal governmental, regulatory or administrative body, agency, department,
division, subdivision, office, arbitrator or other authority, any court or
judicial authority, or any public, private or industry regulatory agency or
authority.
"Average Trading Price" shall have the meaning assigned to
such term in SECTION 10.5(C).
"Balance Sheet Date" shall have the meaning assigned to such
term in SECTION 2.11 hereof.
"Balance Sheets" shall have the meaning assigned to such term
in SECTION 2.9 hereof.
"Benefit Plan" shall have the meaning assigned to such term in
SECTION 2.18 hereof.
"Business Groups" shall have the meaning assigned to such term
in SECTION 2.17(C) hereof.
"Buyers' Closing Documents" shall have the meaning assigned to
such term in SECTION 1.9(B) hereof.
"Buyer Entity" and "Buyer Entities" shall have the meaning
assigned to such terms in SECTION 6.5 hereof.
"Buyer Group Property" shall have the meaning assigned to such
term in SECTION 6.6(C) hereof.
"Buyer Indemnification Threshold" shall have the meaning
assigned to such term in SECTION 10.5 hereof.
"Buyer Indemnified Parties" shall have the meaning assigned to
such term in SECTION 10.2 hereof.
"Certificates of Merger" shall have the meaning assigned to
such term in SECTION 1.2 hereof.
"Charter Documents" shall have the meaning assigned to such
term in SECTION 2.1(C)
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hereof.
"Claim" means any action, claim, obligation, liability,
damage, loss, deficiency, cost, expense, commitment, lawsuit, demand, suit,
inquiry, hearing, investigation, notice of a violation, litigation, proceeding,
arbitration, or other dispute, whether civil, criminal, administrative or
otherwise, whether pursuant to contractual obligations or otherwise.
"Closing" shall have the meaning assigned to such term in
SECTION 1.9 hereof.
"Closing Date" shall have the meaning assigned to such term in
SECTION 1.9 hereof.
"Code" shall have the meaning assigned to such term in SECTION
2.16 hereof.
"Company Shares" shall have the meaning assigned to such term
in the Recitals hereof.
"Confidential Information" shall have the meaning assigned to
such term in SECTION 6.6(A) hereof.
"Contract" means any agreement, contract, commitment,
instrument or other binding arrangement or understanding, whether written or
oral.
"Controlling Persons Indemnification Threshold" shall have the
meaning assigned to such term in SECTION 10.5(A) hereof.
"Current Assets" means, with respect to any Person, the
current assets of such Person, as defined and calculated in accordance with
GAAP.
"Delaware Certificate of Merger" shall have the meaning
assigned to such term in SECTION 1.2 hereof.
"Deposits" shall have the meaning assigned to such term in
SCHEDULE 1.7 hereto.
"Determination Date" shall have the meaning assigned to such
term in SECTION 1.7(B) hereof.
"DGCL" shall have the meaning assigned to such term in SECTION
1.1 hereof.
"Effective Date" shall have the meaning assigned to such term
in SECTION 1.2 hereof..
"Effective Time" shall have the meaning assigned to such term
in SECTION 1.2 hereof.
"Employees" shall have the meaning assigned to such term in
SCHEDULE 6.7 hereto.
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"Environmental Law" means any Regulation, Order, settlement
agreement or governmental requirement, which relates to or otherwise imposes
liability or standards of conduct concerning mining or reclamation of mined
land, discharges, emissions, releases or threatened releases of noises, odors or
any pollutants, contaminants or hazardous or toxic wastes, substances or
materials, whether as matter or energy, into ambient air, water, or land, or
otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous wastes, substances or materials, including (but not
limited to) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Resource Conservation and Recovery Act of 1976, as amended, the
Toxic Substances Control Act of 1976, as amended, the Federal Water Pollution
Control Act Amendments of 1972, the Clean Water Act of 1977, as amended, any so
called "Superlien" law, and any other similar Federal, state or local statutes.
"Environmental Permits" shall mean Permits, certificates,
approvals, licenses and other authorizations relating to or required by
Environmental Law and necessary or desirable for the Company's business.
"ERISA" shall have the meaning assigned to such term in
SECTION 2.18 hereof.
"ERISA Affiliate" shall have the meaning assigned to such term
in SECTION 2.18 hereof.
"Financial Statements" shall have the meaning assigned to such
term in SECTION 2.9 hereof.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis.
"GBCA" shall have the meaning assigned to such term in SECTION
1.1 hereof.
"Hazardous Material" means: (a) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any form that
is or could become friable, urea formaldehyde foam insulation and transformers
or other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental Law; and
(c) any other chemical or other material or substance, exposure to which is now
or hereafter prohibited, limited or regulated by any Authority under any
Environmental Law.
"Indemnification Claim" shall have the meaning assigned to
such term in SECTION 10.1 hereof.
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"Indemnitee" shall have the meaning assigned to such term in
SECTION 10.4 hereof.
"Indemnitor" shall have the meaning assigned to such term in
SECTION 10.4 hereof.
"Intellectual Property" means any patent, patent application,
copyright, trademark, trade name, service mark, service name, trade secret,
know-how, confidential information or other intellectual property or proprietary
rights owned or used by the Company or Stockholders.
"Interim Financial Statements" shall have the meaning assigned
to such term in SECTION 2.9 hereof.
"Knowledge" means, with respect to any Person, (a) if such
Person is an individual, that (i) such Person has actual knowledge or awareness
of a particular fact or matter or (ii) with due diligence and conducting a
reasonably comprehensive investigation concerning the existence of such fact or
matter, such Person could be expected to discover or otherwise become aware of
such fact or matter, or (b) if such Person is other than an individual, that any
individual serving as director, officer, Employee (as that term is defined
herein), partner, executor, trustee or in any similar capacity of such Person,
has, or at any time had, "Knowledge" of such fact or matter as defined in clause
(a) of this definition.
"Lien" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction, option, assessment,
levy, voting trust or agreement, proxy, marital or community property interest
or other claim, charge or interest of another Person of any nature whatsoever.
"Long-Term Liabilities" means, with respect to any Person, the
long term liabilities of such Person as defined and calculated in accordance
with GAAP.
"Material Adverse Change" means any development or change
which has, had or would have a Material Adverse Effect.
"Material Adverse Effect" means, as to any Person, any
circumstances, events, state of facts or matters which has had, or might
reasonably be expected to have, a material adverse effect on (a) such Person's
business, operations, properties, assets, condition (financial or otherwise),
results, plans, strategies or prospects, or (b) the ability of such Person to
consummate any of the transactions contemplated by this Agreement or the
Ancillary Documents, or (c) the benefits contemplated to be conferred on such
Person by this Agreement or any of the Ancillary Documents.
"Merger" shall have the meaning assigned to such term in the
Recitals hereof.
"Merger Agreement" shall have the meaning assigned to such
term in the Recitals hereof.
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"Merger Consideration" shall have the meaning assigned to such
term in SCHEDULE 1.7 hereof.
"Merger Date" shall have the meaning assigned to such term in
SECTION 1.2 hereof.
"Merger Sub" shall have the meaning assigned to such term in
the Introduction hereof.
"Officer's Certificate" shall have the meaning assigned to
such term in SECTION 1.9(A)(IV) hereof.
"Options" shall have the meaning assigned to such term in
SECTION 2.6 hereof.
"Order" means any decree, consent decree, judgment, award,
order, injunction, consent of or by an Authority.
"Ordinary Course of Business" shall mean an action taken by a
Person only if:
(a) such action is consistent with the past
practices of such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person;
(b) such action is not required to be authorized
by the board of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and
magnitude to actions customarily taken, without any authorization by the board
of directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"Parent Stock" means the fully paid and nonassessable shares
of the common stock of Parent, par value $.00001 per share.
"Permits" shall have the meaning assigned to such term in
SECTION 2.17(B) hereof.
"Person" means any individual, corporation, partnership,
limited partnership, limited liability partnership or company, joint venture,
company, syndicate, union, unincorporated organization, association, trust,
entity, Authority or natural person.
"Pre-Closing Tax Return" shall have the meaning assigned to
such term in SECTION 4.7 hereof.
"Regulation" means any law, statute, rule, regulation,
ordinance, requirement, announcement or other binding action of or by an
Authority.
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<PAGE> 53
"Related Statements" shall have the meaning assigned to such
term in SECTION 2.9 hereof.
"Restricted Business" means the business, products, services
and activities of the Buyers, the Buyer Entities and the Company and any of its
Affiliates, including, without limitation, the marketing, sale and distribution
of mens' shoes and footware over the Internet.
"Restricted Period" means a period of three (3) years, from
the Closing Date to the third (3rd) anniversary of the Closing Date.
"Restricted Territory" means (i) the aggregate geographic area
consisting of all those geographic areas within a one hundred (100) mile radius
of any location at which the Buyers, any Buyer Entity, or the Company or any of
its Affiliates presently conducts one or more of the Restricted Businesses and
(ii) the Internet within the United States.
"Secretary's Certificate"shall have the meaning assigned to
such term in SECTION 1.9(A)(III) hereof.
"Securities Laws" shall have the meaning assigned to such term
in SECTION 1.12(B) hereof.
"Seller Indemnified Parties" shall have the meaning assigned
to such term in SECTION 10.3 hereof.
"Sellers' Closing Documents" shall have the meaning assigned
to such term in SECTION 1.9(A) hereof.
"Software" shall have the meaning assigned to such term in
SECTION 2.19(D) hereof.
"Subsidiary" means any Person which any Buyer or the Company,
as the case may be, owns, directly or indirectly, five percent (5%) or more of
the outstanding stock or other ownership or equity interests thereof.
"Surviving Corporation" shall have the meaning assigned to
such term in SECTION 1.1 hereof.
"Tax Authorities" shall have the meaning assigned to such term
in SECTION 2.16 hereof.
"Tax Returns" shall have the meaning assigned to such term in
SECTION 2.16 hereof.
"Taxes" shall have the meaning assigned to such term in
SECTION 2.16 hereof.
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11.4 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand or mailed, first class
certified mail with postage paid or by overnight receipted courier service:
If to the Controlling Persons or the Company, to:
MyFavoriteShoe.com, Inc.
1301 5th Avenue, Suite 3001
Seattle, Washington 98101
Attn: Mr. William B. Stilley, III
Facsimile: ______________________
with a copy to:
Mr. Sean Daly
Windholme Farm
Chicken Mountain Road
Orange County, VA 22960
Facsimile: 540-672-7289
and
Kevin Schuyler
c/o Kilpatrick Stockton, Attn. Neil Falis, Esq.
1100 Peachtree Street
Suite 2800
Atlanta, GA 30309-4530
Facsimile: 404-815-6555
or to such other person or address as the Controlling Persons
or the Company shall furnish by notice to the Buyers in writing.
If to the Buyers to:
zebramart.com, inc..
10 Piedmont Center, Suite 900
Atlanta, Georgia 30309
Attn: David Kenner, CEO
Facsimile: (404) 467-6959
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with a copy to:
Smith, Gambrell & Russell, LLP
1230 Peachtree Street, N.E.
Suite 3100
Atlanta, Georgia 30309
Attn.: M. Timothy Elder, Esq.
Carl L. Sollee, Esq.
Facsimile: (404) 685-6832/7085
or to such other person or address as the Buyers shall furnish
by notice to Sellers in writing.
11.5 Exhibits and Schedules. The Exhibits and Schedules referred to
in this Agreement are attached hereto and incorporated herein by this reference.
Disclosure of a specific item in any one Schedule shall be deemed restricted
only to the Section of this Agreement to which such disclosure relates, except
where, and to the extent that, there is an explicit cross-reference in such
Schedule to another Schedule.
11.6 Waiver of Compliance; Consents. Any failure of any party
hereto to comply with any obligation, covenant, agreement or condition herein
may be waived in writing by the other parties hereto, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
11.7 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, including without limitation the estate of Controlling
Persons, and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties, except
that the Buyers may assign their respective rights, interests and obligations
hereunder to any wholly-owned Subsidiary, and may grant Liens or security
interests in respect of its rights and interests hereunder, without the prior
approval of the Sellers.
11.8 Governing Law. The Agreement shall be governed by the internal
laws of the State of Georgia as to all matters, including but not limited to
matters of validity, construction, effect and, performance and enforcement, but
without regard to principles or rules of conflicts or choice of law thereof,
except as to internal matters of corporate governance which shall be governed by
the law of the jurisdiction in which the corporation is incorporated.
11.9 Consent to Jurisdiction; Service of Process. Each of the
Sellers and each of the Buyers hereby irrevocably submit to the jurisdiction of
any United States District Court in which
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venue is proper in connection with any suit, action or other proceeding arising
out of or relating to this Agreement and the transactions contemplated hereby,
and hereby agree not to assert, by way of motion, as a defense, or otherwise in
any such suit, action or proceeding that the suit, action or proceeding is
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement or the subject matter hereof may
not be enforced by such courts.
11.10 Injunctive Relief. The parties hereto agree that in the event
of a breach of any provision of this Agreement, the aggrieved party or parties
may be without an adequate remedy at law. The parties therefore agree that in
the event of a breach of any provision of this Agreement, the aggrieved party or
parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
11.11 Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement (or any provision hereof).
11.12 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine, or neuter forms, and the singular forms of nouns, pronouns, and verbs
include the plural and vice versa.
11.13 Construction. The parties acknowledge that each party has
reviewed and revised this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement.
11.14 Dealings in Good Faith; Best Efforts. Each party hereto agrees
to act in good faith with respect to the other party in exercising its rights
and discharging its obligations under this Agreement. Each party further agrees
to use its best efforts to ensure that the purposes of this Agreement are
realized and to take all further steps as are reasonably necessary to implement
the provisions of this Agreement. Each party agrees to execute, deliver and file
any document or instrument necessary or advisable to realize the purposes of
this Agreement.
11.15 Binding Effect. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
11.16 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party hereto, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any
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other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party hereto of
any breach or default under this Agreement, or any waiver on the part of any
party of any provisions or conditions of this Agreement must be made in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
11.17 Severability. Unless otherwise provided herein, if any
provision of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
11.18 Expenses. All fees, costs and expenses (including, without
limitation, legal, auditing and accounting fees, costs and expenses) incurred in
connection with considering, pursuing, negotiating, documenting or consummating
this Agreement and the transactions contemplated hereby shall be borne and paid
solely by the party incurring such fees, costs and expenses.
11.19 Attorneys' Fees. If any party to this Agreement seeks to
enforce the terms and provisions of this Agreement, then the prevailing party in
such action shall be entitled to recover from the losing party all costs in
connection with such action, including without limitation reasonable attorneys'
fees, expenses and costs incurred with respect to trials, appeals and
collection.
11.20 Counterparts. 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.
* * * * * * * * * *
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement the date first hereinabove set forth.
ZEBRAMART.COM, INC.
By: /s/ David Kenner
-------------------------------------
David Kenner, CEO
COACQSUB, INC.
By: /s/ David Kenner
-------------------------------------
David Kenner, CEO
MYFAVORITESHOE.COM, INC.
By: /s/ Sean Daly
-------------------------------------
Sean Daly
Chairman of the Board
CONTROLLING PERSONS
TOWER HILL HOLDINGS, INC.
By: /s/ Sean Daly
-------------------------------------
Sean Daly, President
/s/ Kevin Schuyler
----------------------------------------
Kevin Schuyler, individually
/s/ William B. Stilley
----------------------------------------
William B. Stilley, III, individually
51
