EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
AUTOINFO, INC.
SUNTECK TRANSPORT CO., INC.,
AND
TARGET SHAREHOLDER
JUNE 22, 2000
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1. The Merger...............................................................1
1.1 The Merger.............................................................1
1.2 Closing; Effective Time................................................2
1.3 Effect of the Merger...................................................2
1.4 Certificate of Incorporation; Bylaws...................................2
1.5 Directors and Officers.................................................2
1.6 Effect on Capital Stock................................................2
1.7 Payment of Merger Consideration; Holdback..............................3
1.8 No Further Ownership Rights in Target Common Stock.....................4
1.9 Tax and Accounting Consequences........................................4
1.10 Taking of Necessary Action; Further Action...........................4
2. Representations and Warranties of Target and Target Shareholder..........4
2.1 Organization, Standing and Power.......................................4
2.2 Authority..............................................................5
2.3 Governmental Authorization.............................................5
2.4 Financial Statements...................................................6
2.5 Capital Structure......................................................6
2.6 Absence of Certain Changes.............................................6
2.7 Absence of Undisclosed Liabilities.....................................7
2.8 Litigation.............................................................7
2.9 Restrictions on Business Activities....................................7
2.10 INTENTIONALLY OMITTED................................................7
2.11 Proprietary Rights and Warranty Claims...............................7
2.12 Interested Party Transactions........................................9
2.13 Minute Books.........................................................9
2.14 Complete Copies of Materials.........................................9
2.15 Material Contracts...................................................9
2.16 Accounts Receivable.................................................10
2.17 Customers and Suppliers.............................................10
2.18 Employees and Consultants...........................................10
2.19 Title to Property...................................................11
2.20 Environmental Matters...............................................11
2.21 Taxes...............................................................11
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2.22 Employee Benefit Plans..............................................13
2.23 Employee Matters....................................................14
2.24 Insurance...........................................................14
2.25 Compliance With Laws................................................15
2.26 Brokers' and Finders' Fee...........................................15
2.27 Representations Complete............................................15
3. Representations and Warranties of Acquiror and Merger Sub...............15
3.1 Organization, Standing and Power......................................15
3.2 Authority.............................................................16
3.3 SEC Documents: Financial Statements...................................16
3.4 Capital Structure.....................................................17
3.5 Interim Operations of Merger Sub......................................18
3.6 Absence of Certain Changes............................................18
3.7 Absence of Undisclosed Liabilities....................................18
3.8 Litigation............................................................19
3.9 Restrictions on Business Activities...................................19
3.10 Plan of Reorganization..............................................19
3.11 Representations Complete............................................19
4. Conduct Prior To The Effective Time.....................................20
4.1 Conduct of Business...................................................20
4.2 No Solicitation.......................................................23
5. Additional Agreements...................................................23
5.1 Approval of Shareholders..............................................23
5.2 Sale of Shares Pursuant to Regulation D...............................24
5.3 Access to Information.................................................24
5.4 Confidentiality.......................................................24
5.5 Public Disclosure.....................................................24
5.6 Regulatory Approval: Further Assurances...............................24
5.7 Legal Requirements....................................................25
5.8 Blue Sky Laws.........................................................26
5.9 Nonaccredited Stockholders............................................26
5.10 Employees...........................................................26
5.11 Expenses............................................................26
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5.12 Audited Financial Statements........................................26
5.13 Relocation..........................................................26
6. Conditions to the Merger................................................27
6.1 Conditions to Obligations of Each Party to Effect the Merger..........27
6.2 Additional Conditions to the Obligations of Acquiror and Merger Sub...27
6.3 Additional Conditions to Obligations of Target........................29
7. Termination, Amendment and Waiver.......................................31
7.1 Termination...........................................................31
7.2 Effect of Termination.................................................32
7.3 Amendment.............................................................32
7.4 Extension; Waiver.....................................................32
8. Holdback and Indemnification............................................32
8.1 Holdback..............................................................32
8.2 Indemnification.......................................................34
8.3 Claims; Payment Procedures............................................35
8.4 Resolution of Conflicts and Arbitration...............................36
8.5 Third-Party Claims....................................................37
8.6 Limitation of the Holdback Agent's Liability..........................38
9. General Provisions......................................................38
9.1 Notices...............................................................38
9.2 Definitions...........................................................39
9.3 Counterparts..........................................................39
9.4 Entire Agreement; Nonassignability; Parties in Interest...............40
9.5 Severability..........................................................40
9.6 Remedies Cumulative...................................................40
9.7 Governing Law.........................................................40
9.8 Rules of Construction.................................................40
9.9 Expenses..............................................................40
10. Bankruptcy Proceeding and Reorganization Plan...........................41
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of June 22, 2000 by and among AutoInfo, Inc., a Delaware
corporation ("Acquiror"), Sunteck Transport Co., Inc. a Florida corporation
("Target") and its wholly owned subsidiary UbidFreight.com, Inc. a Delaware
corporation ("UbidFreight") and Harry M. Wachtel the sole shareholder of Target
("Target Shareholder"). Target and UbidFreight are sometimes collectively
referred to herein as the "Corporation."
RECITALS
A. The Boards of Directors of Target, Acquiror and the Target Shareholder
believe it is in the best interests of their respective companies and the
shareholders of their respective companies that Target and a wholly owned
subsidiary to be organized by Acquiror prior to the Closing (the "Merger Sub")
combine into a single company through the statutory merger of Merger Sub with
and into Target (the "Merger") and, in furtherance thereof, have approved the
Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
Target Common Stock ("Target Common Stock") shall be converted into the right to
receive the Merger Consideration (as defined in Section 1.6(a)) upon the terms
and subject to the conditions set forth herein.
C. Target, the Target Shareholder and Acquiror desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
1. The Merger.
1.1 The Merger. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement, a
Certificate of Merger to be filed with the Secretary of State of the State of
Delaware pertaining to the Merger (the "Certificate of Merger") and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
Articles of Merger to be filed with the Secretary of State of the State of
Florida pertaining to the Merger ("Articles of Merger") and the applicable
provisions of the Florida Business Corporation Act ("Florida Law"), Merger Sub
shall be merged with and into Target, the separate corporate existence of Merger
Sub shall cease and Target shall continue as the surviving corporation. Target
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "Surviving Corporation."
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1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable, but
no later than two (2) business days after the satisfaction or waiver of each of
the conditions set forth in Section 6 hereof, or at such other time as the
parties hereto agree (the "Closing Date"). The Closing shall take place at the
offices of Morse Zelnick Rose & Lander LLP, or at such other location as the
parties hereto agree. In connection with the Closing, the parties hereto shall
cause the Merger to be consummated by filing the Agreement of Merger, together
with any required certificates, with the Secretaries of State of the States of
Delaware and Florida, in accordance with the relevant provisions of Delaware Law
and Florida Law (the time of such filing being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Florida Law and Delaware Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Target and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Target and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws. At the Effective Time, the
Certificate of Incorporation of Merger Sub as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation and the Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. At the Effective Time, the directors and
officers of Surviving Corporation shall be reasonably satisfactory to Target.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, Target or the holders
of any of the following securities:
(a) Merger Consideration. Each share of Target Common Stock
issued and outstanding immediately prior to the Effective Time shall be
converted and exchanged ("Exchange Ratio"), without any action on the part of
the holders thereof, into the right to receive that number of validly issued,
fully paid and nonassessable shares of the Common Stock of Acquiror ("Acquiror
Common Stock") which equal the amount obtained by dividing ten million
(10,000,000) by the number of shares of Target Common Stock issued and
outstanding immediately prior to the Effective Time (the "Acquiror Shares"). The
Acquiror Shares are sometimes referred to herein as the "Merger Consideration."
(b) Capital Stock of Merger Sub. At the Effective Time, each
share of Common Stock of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of Common Stock of the Surviving Corporation.
Each stock certificate of
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Merger Sub evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(c) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Acquiror Common Stock or Target Common Stock), reorganization, recapitalization
or other like change with respect to Acquiror Common Stock or Target Common
Stock occurring after the date hereof and prior to the Effective Time.
(d) Fractional Shares. The Acquiror Shares to be issued to
Target Shareholder shall be rounded down to the nearest share, and Target
Shareholder waives any rights to receive fractional shares or cash or other
consideration in lieu thereof.
(e) Dissenters' Rights. The Target Shareholder hereby waives
his rights to have his shares of Target Common Stock treated as "Dissenting
Shares" in accordance with Florida Law following the Merger.
(f) Certificate Legends. The Acquiror Shares to be issued
pursuant to this Section 1 shall not have been registered and shall be
characterized as "restricted securities" under the federal securities laws, and
under such laws such shares may be resold without registration under the
Securities Act of 1933, as amended (the "Securities Act"), only in certain
limited circumstances. Each certificate evidencing Acquiror Shares to be issued
pursuant to this Section 1 shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SHARES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION WITHOUT AN
EXEMPTION UNDER THE SECURITIES ACT OR AN OPINION OF LEGAL COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
and any legends required by state securities laws.
1.7 Payment of Merger Consideration; Holdback.
(a) Exchange Procedures. At the Closing, the Target
Shareholder shall deliver to Acquiror certificates (the "Certificates")
representing all outstanding shares of Target Common Stock immediately prior to
the Effective Time, together with such other customary documents as Acquiror may
request, duly completed and validly executed in accordance with the instructions
thereto. Promptly after the Effective Time, Acquiror shall deliver to Target
Shareholder: (A) a certificate representing the number of whole Acquiror
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Shares less the number of Acquiror Shares to be retained in the Holdback Fund
pursuant to Section 1.7(b) hereof.
(b) Holdback Fund. Following the Closing, and subject to and
in accordance with the provisions of Section 8 hereof, Acquiror shall not
distribute to the Target Shareholder but shall retain in the Holdback Fund (as
defined in Section 8.1) one million two hundred fifty thousand (1,250,000)
shares of the Acquiror Shares (the "Holdback Shares").
1.8 No Further Ownership Rights in Target Common Stock. The Merger
Consideration delivered upon the surrender for exchange of shares of Target
Common Stock in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Target
Common Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Target Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section 1.
1.9 Tax and Accounting Consequences. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368(a) of the Code.
1.10 Taking of Necessary Action; Further Action. Each of Acquiror,
Merger Sub, Target and Target Shareholder will take all such reasonable and
lawful action as may be necessary or desirable in order to effectuate the Merger
in accordance with this Agreement as promptly as possible. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Target and Merger Sub, the officers and directors of Target
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is not inconsistent with this Agreement.
2. Representations and Warranties of Target and Target Shareholder. Target
and the Target Shareholder represent and warrant to Acquiror that the statements
contained in this Section 2 are true and correct, except as disclosed in a
document of even date herewith and delivered by Target to Acquiror referring to
the representations and warranties in this Agreement (the "Target Disclosure
Schedule"). The Target Disclosure Schedule will be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Section
2, and the disclosure in any such numbered and lettered section of the Target
Disclosure Schedule shall qualify only the corresponding subsection in this
Section 2 (except to the extent disclosure in any numbered and lettered section
of the Target Disclosure Schedule is specifically cross referenced in another
numbered and lettered section of the Target Disclosure Schedule).
2.1 Organization, Standing and Power. Target and UbidFreight are
corporations duly organized, validly existing and in good standing under the
laws of their
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respective jurisdictions of organization. Target and UbidFreight have the
corporate power to own its properties and to carry on its business as now being
conducted and as proposed to be conducted and are duly qualified to do business
and are in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on Target.
The Companies have delivered a true and correct copy of the Articles of
Incorporation and Bylaws or other charter documents, as applicable, of Target
and UbidFreight, each as amended to date, to Acquiror. Neither Target nor
UbidFreight is in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents. Target is the
owner of all outstanding shares of UbidFreight, its only subsidiary, and all
such shares are duly authorized, validly issued, fully paid and nonassessable.
Neither Target nor UbidFreight directly or indirectly own any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity.
2.2 Authority. Target has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate and shareholder action on the part of Target subject
only to the approval of the Merger by Target's shareholder as contemplated by
Section 6.1(a). This Agreement has been duly executed and delivered by Target
and constitutes the valid and binding obligation of Target enforceable against
Target in accordance with its terms, except that such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to creditors' rights generally, and is subject to general principles of
equity. The execution and delivery of this Agreement by Target does not, and the
consummation of the transactions contemplated hereby will not conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any material obligation or loss of any material benefit under
(i) any provision of the Articles of Incorporation or Bylaws of Target or
UbidFreight, as amended, or (ii) any mortgage, indenture, lease, contract or
other agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Target
or UbidFreight or any of their properties or assets. No consent, approval, order
or authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect to Target
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the Certificate of Merger and Articles of Merger; and (ii) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on Target and would
not prevent, or materially alter or delay any of the transactions contemplated
by this Agreement.
2.3 Governmental Authorization. Target and UbidFreight have obtained
each federal, state, county, local or foreign governmental consent, license,
permit, grant, or other authorization of a Governmental Entity (i) pursuant to
which Target or UbidFreight currently operates or holds any interest in any of
its properties or (ii) that is required for the operation of
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Target's or UbidFreight's business or the holding of any such interest and all
of such authorizations are in full force and effect except where the failure to
obtain or have any such authorizations could not reasonably be expected to have
a Material Adverse Effect on Target.
2.4 Financial Statements. Target has delivered to Acquiror its
unaudited consolidated financial statements (balance sheet, statement of
operations and statement of cash flows) for the period beginning January 1, 1998
and ending December 31, 1999, and for the four-month period ended April 30, 2000
(collectively, the "Financial Statements"). The Financial Statements are
complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles (except for the absence
of footnotes thereto) applied on a consistent basis throughout the periods
indicated and with each other. The Financial Statements fairly present in all
material respects the financial condition and operating results of Target as of
the dates, and for the periods, indicated therein.
2.5 Capital Structure. The authorized capital stock of Target
consists of 1,000 shares of Target Common Stock, of which there were issued and
outstanding as of the date hereof, 100 shares all of which are held of record
and beneficially by Target Shareholder. All outstanding shares of Target Common
Stock are duly authorized, validly issued, fully paid and non-assessable and are
free of any liens or encumbrances other than any liens or encumbrances created
by or imposed upon the holder thereof, and are not subject to preemptive rights
or rights of first refusal created by statute, the Articles of Incorporation or
Bylaws of Target or any agreement to which Target is a party or by which it is
bound. Except for the rights created pursuant to this Agreement, there are no
other options, warrants, calls, rights, commitments or agreements of any
character to which Target is a party or by which it is bound obligating Target
to issue, deliver, sell, repurchase or redeem or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of Target Common Stock or obligating
Target to grant, extend, accelerate the vesting of, change the price of, or
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no other contracts, commitments or agreements relating
to voting, purchase or sale of Target's capital stock between or among Target
and Target Shareholder. All shares of outstanding Target Common Stock and rights
to acquire Target capital stock were issued in compliance with all applicable
federal and state securities laws.
2.6 Absence of Certain Changes. Since April 30, 2000 (the "Target
Balance Sheet Date"), Target has conducted its business in the ordinary course
consistent with past practice and there has not occurred with respect to Target
or its business: (i) any change, event or condition (whether or not covered by
insurance) that has resulted in, or might reasonably be expected to result in, a
Material Adverse Effect to Target; (ii) any acquisition, sale or transfer of any
material asset of Target or UbidFreight other than in the ordinary course of
business and consistent with past practice; (iii) any change in accounting
methods or practices (including any change in depreciation or amortization
policies or rates) by Target or any revaluation by Target of any of its or
UbidFreight's assets; (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of Target or any
direct or indirect redemption, purchase or other acquisition by Target of any of
its shares of capital stock; (v) any material contract entered into by Target or
UbidFreight, other than in the
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ordinary course of business and as provided to Acquiror, or any material
amendment or termination of, or default under, any material contract to which
Target or UbidFreight is a party or by which it is bound; (vi) any amendment or
change to the Articles of Incorporation or Bylaws of Target; (vii) any increase
in or modification of the compensation or benefits payable or to become payable
by Target to any of its or UbidFreight's directors or employees; or (viii) any
negotiation or agreement by Target or UbidFreight to do any of the things
described in the preceding clauses (i) through (vii) (other than negotiations
with Acquiror and its representatives regarding the transactions contemplated by
this Agreement). At the Effective Time, there will be no accrued but unpaid
dividends on shares of Target's capital stock.
2.7 Absence of Undisclosed Liabilities. Target has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
Financial Statements, (ii) those incurred in the ordinary course of business and
not required to be set forth in the Financial Statements under generally
accepted accounting principles, (iii) those incurred in the ordinary course of
business since the Financial Statements date and consistent with past practice;
and (iv) those incurred in connection with the execution of this Agreement.
2.8 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any Governmental
Entity, foreign or domestic, or, to the knowledge of Target or UbidFreight,
threatened in writing against Target or UbidFreight or any of their respective
properties or any of their respective officers or directors (in their capacities
as such). There is no judgment, decree or order against Target or UbidFreight,
or, to the knowledge of Target and UbidFreight, any of their respective
directors or officers (in their capacities as such). All litigation to which
Target is a party (or threatened in writing to become a party) is disclosed in
the Target Disclosure Schedule.
2.9 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Target or UbidFreight which
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any current or future business practice of Target or
UbidFreight, any acquisition of property by Target or any of its subsidiaries or
the conduct of business by Target or UbidFreight as currently conducted or as
proposed to be conducted by Target or UbidFreight.
2.10 [INTENTIONALLY OMITTED].
2.11 Proprietary Rights and Warranty Claims.
(a) "Proprietary Asset" shall mean: (a) any patent, patent
application, trademark (whether registered or unregistered, trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, URL, invention, design, blueprint, engineering
drawing, proprietary product, technology, proprietary right or other
intellectual property right; and (b)
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the right to use or exploit any of the foregoing including rights granted by
third parties under license agreements. Section 2.11(a)(i) of the Disclosure
Schedule sets forth, with respect to each Proprietary Asset owned by the
Corporation (each a "Target Proprietary Asset" and collectively, the "Target
Proprietary Assets"), registered with any governmental body or for which an
application has been filed with any governmental body, (i) a brief description
of such Target Proprietary Asset, and (ii) the names of the jurisdictions
covered by the applicable registration or application. Section 2.11(a)(ii) of
the Target Disclosure Schedule identifies and provides a brief description of
all other Target Proprietary Assets owned by Target. Section 2.11(a)(iii) of the
Target Disclosure Schedule identifies and provides a brief description of each
Proprietary Asset licensed to Target by any Person (except for any Proprietary
Asset that is licensed to Target under any third party software license
generally available to the public at a per unit cost of less than One Thousand
Dollars ($1,000)), and identifies the license agreement under which such
Proprietary Asset is being licensed to Target. Except as set forth in Section
2.11(a)(iv) of the Target Disclosure Schedule, Target has good, valid and
marketable title to all Target Proprietary Assets identified in Sections
2.11(a)(i) and 2.11(a)(ii) of the Target Disclosure Schedule, free and clear of
all liens and other encumbrances, and, except as disclosed in Section 2.11 of
the Target Disclosure Schedule, Target has a valid right to use all Proprietary
Assets identified in Section 2.11(a)(iii) of the Target Disclosure Schedule in
its business as it is currently conducted. Except as set forth in Section
2.11(a)(v) of the Target Disclosure Schedule, Target is not obligated to make
any payment to any person for the use of any Proprietary Asset. Except as set
forth in Section 2.11(a)(vi) of the Target Disclosure Schedule, Target has not
developed jointly with any other person any Target Proprietary Asset with
respect to which such other person has any rights.
(b) Target has taken reasonable and customary measures and
precautions necessary to protect and maintain the confidentiality and secrecy of
all Target Proprietary Assets (except Target Proprietary Assets whose value
would be unimpaired by public disclosure) and otherwise to maintain and protect
the value of all Target Proprietary Assets. Except as set forth in the Target
Disclosure Schedule, Target has not disclosed or delivered to any Person, or
permitted the disclosure or delivery to any person of any of the Target
Proprietary Assets used in or necessary for the conduct of business by Target as
currently conducted by Target (except Target Proprietary Assets whose value
would be unimpaired by public disclosure).
(c) Target, to its knowledge, is not infringing,
misappropriating or making any unlawful use of, and Target has not at any time
infringed, misappropriated or made any unlawful use of, or received any notice
or other communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful use of, any
Proprietary Asset owned or used by any other person ("Third Party Proprietary
Asset"). To Target's knowledge no other person is infringing, misappropriating
or making any unlawful use of, and no Third Party Proprietary Asset owned or
used by any other Person infringes or conflicts with, any Target Proprietary
Asset.
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(d) (i) Each Target Proprietary Asset conforms with any
specification, documentation, performance standard, representation or statement
made or provided with respect thereto by or on behalf of Target; and (ii) there
has not been any claim made against Target by any customer or other person
alleging that any Target Proprietary Asset (including each version thereof that
has ever been licensed or otherwise made available by Target to any person) does
not conform with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of Target, and
there is no basis for any such claim.
Target's Proprietary Assets constitute all the proprietary assets
necessary to enable Target to conduct its business in the manner in which such
business has been and is being conducted. Target has not (i) licensed any of the
Target Proprietary Assets to any Person or (ii) entered into any covenant not to
compete or contract limiting its ability to exploit fully any of the Target
Proprietary Assets or to transact business in any market or geographical area or
with any Person.
2.12 Interested Party Transactions. Except as set forth in Section
2.12 of the Target Disclosure Schedule, neither Target nor UbidFreight is
indebted to any director, officer, employee or agent of Target or UbidFreight
(except for amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses), and no such person is indebted to Target or UbidFreight.
There have been no transactions since Target's inception that would require
disclosure if Target were subject to disclosure under Item 404 of Regulation S-K
under the Securities Act.
2.13 Minute Books. The minute books of Target and UbidFreight
provided to Acquiror contain a complete and accurate summary of all meetings of
directors and shareholders or actions by written consent since the time of
incorporation of Target and UbidFreight through the date of this Agreement, and
reflect all transactions referred to in such minutes accurately in all material
respects.
2.14 Complete Copies of Materials. Target has delivered true and
complete copies of each document which has been requested by Acquiror or its
counsel in connection with their legal and accounting review of Target and
UbidFreight.
2.15 Material Contracts. All the Material Contracts (as hereinafter
defined) and agreements to which the Corporation is a party are listed in
Section 2.15 of the Target Disclosure Schedule. With respect to each agreement
so listed: (i) the agreement is legal, valid, binding and enforceable and in
full force and effect with respect to the Corporation, and to the Corporation's
knowledge is legal, valid, binding, enforceable and in full force and effect
with respect to each other party thereto, in either case subject to the effect
of bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity; (ii) the
agreement will continue to be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect prior to the Closing, subject to the effect of bankruptcy,
insolvency,
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moratorium or other similar laws affecting the enforcement of creditors' rights
generally and except as the availability of equitable remedies may be limited by
general principles of equity; and (iii) neither the Corporation or, to the
Corporation's knowledge, any other party, is in breach or default, and no event
has occurred which with notice or lapse of time would constitute a breach of
default by the Corporation or, to the Corporation's knowledge, by any such other
party, or permit termination, modification or acceleration, under the agreement.
The Corporation is not a party to any oral contract, agreement or other
arrangement. "Material Contract" means any contract, agreement or commitment to
which Target is a party (i) with expected receipts or expenditures in excess of
five thousand dollars ($5,000), (ii) requiring the Corporation to indemnify any
Person, (iv) granting any exclusive rights to any party, (iv) evidencing
indebtedness for borrowed or loaned money of five thousand dollars ($5,000) or
more, including guarantees of such indebtedness, or (v) which, if breached by
the Corporation in such a manner as would (A) permit any other party to cancel
or terminate the same (with or without notice of passage of time) or (B) provide
a basis for any other party to claim money damages (either individually or in
the aggregate with all other such claims under that contract) from the
Corporation or (C) give rise to a right of acceleration of any material
obligation or loss of any material benefit under any such contract, agreement or
commitment, would reasonably be expected to have a Material Adverse Effect on
Target.
2.16 Accounts Receivable. Subject to any reserves set forth in the
Financial Statements, the accounts receivable shown on the Financial Statements
are valid and genuine, have arisen solely out of bona fide sales and deliveries
of goods, performance of services, and other business transactions in the
ordinary course of business consistent with past practices in each case with
persons other than affiliates, are not subject to any prior assignment, lien or
security interest and are not subject to valid defenses, set-offs or counter
claims. The accounts receivable will be collected in accordance with their terms
at their recorded amounts, subject only to the reserve for doubtful accounts on
the Financial Statements.
2.17 Customers and Suppliers. As of the date hereof, no customer and
no supplier of the Corporation, has canceled or otherwise terminated, or made
any written threat to the Corporation to cancel or otherwise terminate its
relationship with Target or has at any time on or after the Target Balance
Sheet, decreased materially its services or supplies to the Corporation in the
case of any such supplier, or its usage of the services or products of the
Corporation in the case of such customer, and to the Corporation's knowledge, no
such supplier or customer has indicated either orally or in writing that it will
cancel or otherwise terminate its relationship with Target or to decrease
materially its services or supplies to the Corporation or its usage of the
services or products of Target, as the case may be. The Corporation has not
knowingly breached, so as to provide a benefit to the Corporation that was not
intended by the parties, any agreement with, or engaged in any fraudulent
conduct with respect to, any customer or supplier of the Corporation.
2.18 Employees and Consultants. Section 2.18 of the Target
Disclosure Schedule contains a list of the names of all employees (including,
without limitation part-time employees and temporary employees), leased
employees, independent contractors and
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consultants of Target and UbidFreight, their respective salaries or wages, other
compensation and dates of employment and positions.
2.19 Title to Property. Target and UbidFreight have good and
marketable title to all of their respective properties, interests in properties
and assets, real and personal, reflected in the Financial Statements or acquired
after the Target Balance Sheet Date (except properties, interests in properties
and assets sold or otherwise disposed of since the Financial Statements date in
the ordinary course of business), or with respect to leased properties and
assets, valid leasehold interests therein, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind or character, except (i) the
lien of current taxes not yet due and payable, (ii) such imperfections of title,
liens and easements as do not and will not materially detract from or interfere
with the use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties and (iii) liens
securing debt which is reflected on the Financial Statements. The plants,
property and equipment of Target and UbidFreight that are used in the operations
of their businesses are in all material respects in good operating condition and
repair, subject to normal wear and tear. All properties used in the operations
of Target and UbidFreight are reflected in the Financial Statements to the
extent generally accepted accounting principles require the same to be
reflected. Except as set forth in Section 2.19 of the Target Disclosure
Schedule, all leases to which the Corporation is a party are in full force and
effect and are valid, binding and enforceable in accordance with their
respective terms, except as such enforceability may be limited by (i) bankruptcy
laws and other similar laws affecting creditors' rights generally and (ii)
general principles of equity, regardless of whether asserted in a proceeding in
equity or at law. True and correct copies of all such leases have been provided
to Acquiror. The Corporation owns no real property.
2.20 Environmental Matters. To the knowledge of Target, each of
Target and UbidFreight is and at all times has been in compliance with all
federal, state and local laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic materials
or waste.
2.21 Taxes. As used in this Agreement, the terms "Tax" and,
collectively, "Taxes" mean any and all federal, state and local taxes of any
country, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, stamp transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(a) Target has prepared and timely filed all returns,
estimates, information statements and reports required to be filed with any
taxing authority ("Returns") relating to any and all Taxes concerning or
attributable to Target or its operations with respect to Taxes for any period
ending on or before the Closing Date and such Returns are true and correct in
all material respects and have been completed in accordance with applicable law.
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(b) Target, as of the Closing Date: (i) will have paid all
Taxes shown to be payable on such Returns covered by Section 2.21(a) and (ii)
will have withheld with respect to its employees all Taxes required to be
withheld.
(c) There is no Tax deficiency outstanding or assessed or, to
Target's knowledge, proposed against Target that is not reflected as a liability
on the Financial Statements nor has Target executed any agreements or waivers
extending any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(d) Target has no liabilities for unpaid Taxes that have not
been accrued for or reserved on the Financial Statements, whether asserted or
unasserted, contingent or otherwise and Target has no knowledge of any basis for
the assertion of any such liability attributable to Target, its assets or
operations.
(e) Target is not a party to any tax-sharing agreement or
similar arrangement with any other party, and Target has not assumed to pay any
Tax obligations of, or with respect to any transaction relating to, any other
person or agreed to indemnify any other person with respect to any Tax.
(f) Target's Returns have never been audited by a government
or taxing authority, nor is any such audit in process or pending, and Target has
not been notified of any request for such an audit or other examination.
(g) Target has never been a member of an affiliated group of
corporations filing a consolidated federal income tax return.
(h) Target has disclosed to Acquiror (i) any Tax exemption,
Tax holiday or other Tax sparing arrangement that Target has in any
jurisdiction, including the nature, amount and lengths of such Tax exemption,
Tax holiday or other Tax-sparing arrangement and (ii) any expatriate tax
programs or policies affecting Target. Target is in compliance with all terms
and conditions required to maintain such Tax exemption, Tax holiday or other
Tax-sparing arrangement or order of any Governmental Entity and the consummation
of the transactions contemplated hereby will not have any adverse effect on the
continuing validity and effectiveness of any such Tax exemption, Tax holiday or
other Tax-sparing arrangement or order.
(i) Target has made available to Acquiror copies of all
Returns filed for the periods ended December 31, 1998 and 1999.
(j) Target has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(4) apply to any disposition
of assets owned by Target.
(k) Target has not been at any time a United States Real
Property Holding Corporation within the meaning of Section 897(c)(2) of the
Code.
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(l) Target is not a party to any contract, agreement, plan or
arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Target that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G, 404 or 162(m) of the Code by Target as an
expense under applicable law.
2.22 Employee Benefit Plans.
(a) Target has no plan, program, policy, practice, contract,
agreement or other arrangement providing for employment, compensation,
retirement, deferred compensation, loans, severance, separation, relocation,
repatriation, expatriation, visas, work permits, termination pay, performance
awards, bonus, incentive, stock option, stock purchase, stock bonus, phantom
stock, stock appreciation right, supplemental retirement, fringe benefits,
cafeteria benefits, or other benefits, whether written or unwritten, including,
without limitation, each "employee benefit plan" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") which is or has been sponsored, maintained, contributed to, or
required to be contributed to by Target, any subsidiary of Target and, with
respect to any such plans which are subject to Code Section 401(a), any trade or
business (whether or not incorporated) which is or, at any relevant time, was
treated as a single employer with Target within the meaning of Section 414(b),
(c),(m) or (o) of the Code, (an "ERISA Affiliate") for the benefit of any person
who performs or who has performed services for Target or with respect to which
Target, any subsidiary, or ERISA Affiliate has or may have any liability
(including, without limitation, contingent liability) or obligation.
(b) No Title IV or Multiemployer Plan None of Target, or
UbidFreight or any ERISA Affiliate has ever maintained, established, sponsored,
participated in, contributed to, or is obligated to contribute to, or otherwise
incurred any obligation or liability (including, without limitation, any
contingent liability) under any "multiemployer plan" (as defined in Section
3(37) of ERISA) or to any "pension plan" (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA or Section 412 of the Code. None of Target, any
subsidiary or any ERISA Affiliate has any actual or potential withdrawal
liability (including, without limitation, any contingent liability) for any
complete or partial withdrawal (as defined in Sections 4203 and 4205 of ERISA)
from any multiemployer plan.
(c) COBRA, FMLA, HIPAA, CANCER RIGHTS To its knowledge, Target
has complied with (i) the applicable health care continuation and notice
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the regulations thereunder or any state law governing health care
coverage extension or continuation; (ii) the applicable requirements of the
Family and Medical Leave Act of 1993 and the regulations thereunder; (iii) the
applicable requirements of the Health Insurance Portability and Accountability
Act of 1996 ("HIPAA"); and (iv) the applicable requirements of the Cancer Rights
Act of 1998, except to the extent that such failure to comply would not in the
aggregate have a Material Adverse Effect. Target has no material unsatisfied
obligations to
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any employees, former employees, or qualified beneficiaries pursuant to COBRA,
HIPAA, or any state law governing health care coverage extension or
continuation.
(d) Effect of Transaction The consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or other service provider of Target, any subsidiary or any ERISA
Affiliate to severance benefits or any other payment (including, without
limitation, unemployment compensation, golden parachute or bonus, except as
expressly provided in this Agreement or (ii) accelerate the time of payment or
vesting of any such benefits or increase the amount of compensation due any such
employee or service provider. No benefit payable or which may become payable by
Target as a result of or arising under this Agreement shall constitute an
"excess parachute payment" (as defined in Section 280G(b)(1) of the Code) which
is subject to the imposition of an excise Tax under Section 4999 of the Code or
the deduction for which would be disallowed by reason of Section 280G of the
Code.
2.23 Employee Matters. To its knowledge, the Corporation is in
compliance with all currently applicable laws and regulations respecting terms
and conditions of employment including, without limitation, applicant and
employee background checking, immigration laws, discrimination laws,
verification of employment eligibility, employee leave laws, classification of
workers as employees and independent contractors, wage and hour laws, and
occupational safety and health laws. There are no proceedings pending or
threatened in writing, between the Corporation, on the one hand, and any or all
of its current or former employees, on the other hand, including, but not
limited to, any claims for actual or alleged harassment or discrimination based
on race, national origin, age, sex, sexual orientation, religion, disability, or
similar tortious conduct, breach of contract, wrongful termination, defamation,
intentional or negligent infliction of emotional distress, interference with
contract or interference with actual or prospective economic disadvantage. There
are no claims pending, or threatened in writing, against Target under any
workers' compensation or long term disability plan or policy. The Corporation
has no material unsatisfied obligations to any employees, former employees, or
qualified beneficiaries pursuant to COBRA, HIPAA, or any state law governing
health care coverage extension or continuation. Target is not a party to any
collective bargaining agreement or other labor union contract, nor does the
Corporation know of any activities or proceedings of any labor union to organize
its employees. The Corporation has provided all employees with all wages,
benefits, relocation benefits, stock options, bonuses and incentives, and all
other compensation which became due and payable through the date of this
Agreement.
2.24 Insurance. Target has policies of insurance and bonds of the
type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of Target. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Target are
otherwise in compliance with the terms of such policies and bonds. Target has no
knowledge of any threatened termination of, or material premium increase with
respect to, any
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of such policies. Section 2.24 of the Target Disclosure Schedule contains a
summary of each such policy or bond.
2.25 Compliance With Laws. To its knowledge, Target has complied
with, is not in violation of and has not received any notices of violation with
respect to, any federal state, local or foreign statute, law or regulation with
respect to the conduct of its business, or the ownership or operation of its
business such that the failure to so comply would have a Material Adverse Effect
on Target.
2.26 Brokers' and Finders' Fee. No broker, finder or investment
banker is entitled to brokerage or finders' fees or agents' commissions or
investment bankers' fees or any similar charges in connection with the Merger,
this Agreement or any transaction contemplated hereby.
2.27 Representations Complete. None of the representations or
warranties made by Target or Shareholder herein or in any Schedule or Exhibit
hereto, including the Target Disclosure Schedule or any certificate furnished by
Target pursuant to this Agreement or any written statement furnished to Acquiror
pursuant hereto or in connection with the transactions contemplated hereby, when
all such documents are read together in their entirety, contain, or will contain
at the Effective Time any untrue statement of a material fact, or omits or will
omit at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading; provided, however, that for purposes of this
representation, any document attached hereto and any document specifically
referenced in the Target Disclosure Schedule as a "Superseding Document" (even
if not attached hereto) that provides information inconsistent with or in
addition to any other written statement furnished to Acquiror in connection with
the transaction contemplated hereby, shall be deemed to supersede any other
document or written statement furnished to Acquiror with respect to such
inconsistent or additional information.
3. Representations and Warranties of Acquiror and Merger Sub. Acquiror
represents and warrants to Target and the Target Shareholder that the statements
contained in this Section 3 are true and correct, except as disclosed in a
document of even date herewith and delivered by Acquiror to Target on the date
hereof referring to the representations and warranties in this Agreement (the
"Acquiror Disclosure Schedule"). The Acquiror Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 3, and the disclosure in any such numbered and
lettered section of the Acquiror Disclosure Schedule shall qualify only the
corresponding subsection in this Section 3 (except to the extend disclosure in
any numbered and lettered section of the Acquiror Disclosure Schedule is
specifically cross-referenced in another numbered and lettered section of the
Acquiror Disclosure Schedule.
3.1 Organization, Standing and Power. Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Acquiror has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted and is duly qualified to do
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business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would have a Material Adverse Effect on
Acquiror. Acquiror has delivered a true and correct copy of the Certificate of
Incorporation and Bylaws or other charter documents, as applicable, of Acquiror
as amended to date, to Target. Acquiror is not in violation of any of the
provisions of its Certificate of Incorporation or Bylaws or equivalent
organizational documents.
3.2 Authority. Acquiror has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been, or will have
been by the Closing, duly authorized by all necessary corporate action on the
part of Acquiror. This Agreement has been duly executed and delivered by
Acquiror and constitutes the valid and binding obligation of Acquiror. The
execution and delivery of this Agreement do not and the consummation of the
transactions contemplated hereby will not conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any material obligation or loss of a material benefit under (i) any provision of
the Certificate of Incorporation or Bylaws of Acquiror or any of its
subsidiaries, as amended, or (ii) any mortgage, indenture, lease, contract or
other agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Acquiror or any of its subsidiaries or their properties or assets. No consent,
approval, order or authorization of or registration, declaration or filing with,
any Governmental Entity, is required by or with respect to Acquiror or any of
its subsidiaries in connection with the execution and delivery of this Agreement
by Acquiror or the consummation by Acquiror of the transactions contemplated
hereby, except for (i) the filing of the Agreement of Merger, together with the
required officers' certificates, as provided in Section 1.2, (ii) the filing of
a Form D with the Securities and Exchange Commission in accordance with
Regulation D following the Effective Time, (iii) the filing of a Form 8-K with
the Securities and Exchange Commission ("SEC") within 15 days after the Closing
Date, (iv) any filings as may be required under applicable state securities laws
and the securities laws of any foreign country, (v) the approval of the
Bankruptcy Court (as herein defined), and (vi) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Acquiror and would not
prevent, materially alter or delay any of the transactions contemplated by this
Agreement.
3.3 SEC Documents: Financial Statements. Acquiror has made available
to Target or its counsel through EDGAR a true and complete copy of each
statement, report, registration statement (with the prospectus in the form filed
pursuant to Rule 424(b) of the Securities Act), definitive proxy statement, and
other filing filed with the SEC by Acquiror since January 1, 1999, and, prior to
the Effective Time, Acquiror will have made available to Target or its counsel
through EDGAR true and complete copies of any additional documents and Exhibits
thereto filed with the SEC by Acquiror prior to the Effective Time
(collectively, the "Acquiror SEC Documents"). All documents required to be filed
as Exhibits to the Acquiror SEC Documents have been so filed, and all material
contracts so filed as exhibits are in full force and effect, except as otherwise
disclosed in or contemplated by the Plan of
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Reorganization and Disclosure Statement (as hereinafter defined) and those that
have expired or been terminated in accordance with their terms and Acquiror is
not in material default under such contracts. As of their respective filing
dates, the Acquiror SEC Documents complied in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the Securities Act and none of the Acquiror SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading, except to
the extent corrected by a subsequently filed Acquiror SEC Document prior to the
date hereof. The financial statements of Acquiror, including the notes thereto,
included in the Acquiror SEC Documents (the "Acquiror Financial Statements")
were complete and correct in all material respects as at their respective dates,
complied in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto as of
their respective dates, and have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent throughout the
periods indicated and consistent with each other (except as may be indicated in
the notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Acquiror
Financial Statements fairly present in all material respects the consolidated
financial condition and operating results of Acquiror and its subsidiaries at
the dates and during the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments). There has been
no change in Acquiror accounting policies except as described in the notes to
the Acquiror Financial Statements.
3.4 Capital Structure. (a) The authorized capital stock of Acquiror
presently consists of 20,000,000 shares of Common Stock, $.01 par value of which
there were issued and outstanding as of the date of this Agreement 7,756,953
shares of Common Stock. Upon the confirmation of the Reorganization Plan, the
authorized capital stock will consist of 100,000,000 shares of Common Stock and
5,000,000 shares of Preferred Stock of which it is currently contemplated,
without giving effect to the transactions contemplated hereby, there will be
issued and outstanding 17,297,923 shares of Common Stock and no shares of
Preferred Stock.
(b) As of May 31, 2000 Acquiror has reserved 1,360,000 shares
of Acquiror Common Stock for issuance to employees, directors and independent
contractors pursuant to the Acquiror's stock option Plans, of which 995,000
shares are subject to outstanding, unexercised options. Since May 31, 2000,
Acquiror has not issued or granted, nor will Acquiror from that date through the
Closing Date, issue or grant, additional options to purchase shares of capital
stock of Acquiror under or outside any Acquiror stock option plan. Except for
the rights created pursuant to this Agreement or disclosed in the SEC Documents
or the Disclosure Statement, there are no other options, warrants, calls,
rights, commitments or agreements or any character to which Acquiror is a party
or by which it is bound obligating Acquiror to issue, deliver, sell, repurchase
or redeem or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of capital stock of Acquiror or obligating Acquiror to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. Except as
disclosed in the
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SEC Documents, there are no contracts, commitments or agreements relating to
voting, registration, purchase or sale of Acquiror's capital stock (i) between
or among Acquiror and any of its stockholders or (ii) to Acquiror's knowledge,
between or among any of Acquiror's stockholders. All outstanding shares of
Acquiror have been duly authorized, validly issued, fully paid and are
nonassessable. The shares of Acquiror Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid, and nonassessable
and not subject to any preemptive rights, lien or encumbrances.
(c) Prior to the Closing, Acquiror will organize Merger Sub, a
wholly-owned subsidiary organized under Delaware Law. The authorized capital
stock of Merger Sub will, as of the Closing Date, consist of 1,000 shares of
Common Stock, all of which will be issued and outstanding and held by Acquiror.
Merger Sub shall be in good standing and shall have all requisite corporate
power and authority to consummate the transactions contemplated hereby.
3.5 Interim Operations of Merger Sub. Merger Sub will be formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, will not have engaged in any other business activities and will only
have conducted its operations only as contemplated by this Agreement.
3.6 Absence of Certain Changes. Since March 31, 2000, except as
contemplated by the Disclosure Schedule, Acquiror has conducted its business in
the ordinary course consistent with past practice and there has not occurred:
(i) any change, event or condition in the business or condition of Acquiror
(whether or not covered by insurance) that has resulted in, or might reasonably
be expected to result in, a Material Adverse Effect to Acquiror; (ii) any
acquisition, sale or transfer of any material asset of Acquiror other than in
the ordinary course of business and consistent with past practice; (iii) any
change in accounting methods or practices (including any change in depreciation
or amortization policies or rates) by Acquiror or any revaluation by Acquiror of
any of its assets; (iv) any declaration, setting aside, or payment of a dividend
or other distribution with respect to the shares of Acquiror or any direct or
indirect redemption, purchase or other acquisition by Acquiror of any of its
shares of capital stock; (v) any material contract entered into by Acquiror or
any of its subsidiaries, or any material amendment or termination of, or default
under, any material contract to which Acquiror or any of its subsidiaries is a
party or by which it is bound; (vi) any amendment or change to the Certificate
of Incorporation or Bylaws of Acquiror; (vii) any increase in or modification of
the compensation or benefits payable or to become payable by Acquiror to any of
its directors or employees; or (viii) any negotiation or agreement by Acquiror
or any of its subsidiaries to do any of the things described in the preceding
clauses (i) through (vii) (other than negotiations with Target and its
representatives regarding the transactions contemplated by this Agreement). At
the Effective Time, there will be no accrued but unpaid dividends on shares of
Acquiror's capital stock.
3.7 Absence of Undisclosed Liabilities. Neither Acquiror nor any of
its subsidiaries has any material obligations or liabilities of any nature
(matured or unmatured, fixed or contingent) other than (i) those set forth or
adequately provided for in Acquiror's SEC
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Documents, the Disclosure Statement and the Plan of Reorganization, (ii) those
incurred in the ordinary course of business and not required to be set forth in
the Acquiror's SEC Documents under generally accepted accounting principles,
(iii) those incurred in the ordinary course of business since March 31, 2000 and
consistent with past practice; and (iv) those incurred in connection with the
execution of this Agreement.
3.8 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any Governmental
Entity, foreign or domestic, or, to the knowledge of Acquiror, threatened in
writing against Acquiror or any of its properties or any of its officers or
directors (in their capacities as such). There is no judgment, decree or order
against Acquiror, or, to the knowledge of Acquiror, any of its directors or
officers (in their capacities as such). All litigation to which Acquiror is a
party (or threatened in writing to become a party) is disclosed in the Acquiror
Disclosure Schedule.
3.9 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Acquiror which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any current or future business practice of Acquiror, any acquisition of property
by Acquiror or any of its subsidiaries or the conduct of business by Acquiror as
currently conducted or as proposed to be conducted by Acquiror.
3.10 Plan of Reorganization. On February 2, 2000, Acquiror filed a
disclosure statement and reorganization plan pursuant to Chapter 11 of Title 11
of the United States Bankruptcy Code. The Plan provides for the issuance of one
share of Acquiror Common Stock and a cash payment of $ 0.03 for each dollar of
approximately $9.5 million of unsecured debt. A Disclosure Statement has been
filed upon which parties in interest and the Bankruptcy Court have commented. In
furtherance thereof and the transactions contemplated by this Agreement, a
revised Reorganization Plan (the "Reorganization Plan") and Disclosure Statement
(the "Disclosure Statement"), copies of which have been provided to Target and
Target Shareholder, have been prepared and circulated for review to the Court
and certain interested parties. A hearing to consider the Disclosure Statement
and compliance with the disclosure requirements is currently scheduled for June
27, 2000. All documents on file in the bankruptcy proceeding, case no. 00-10368,
are posted on the Bankruptcy Court's Internet site at:
http://ecf.nysb.uscourts.gov/index.html
3.11 Representations Complete. None of the representations or
warranties made by Acquiror herein or in any Schedule or Exhibit hereto,
including the Acquiror Disclosure Schedule, or certificate furnished by Acquiror
or Merger Sub pursuant to this Agreement, the Acquiror SEC Documents, the
Reorganization Plan, the Disclosure Statement, or any written statement
furnished to Target pursuant hereto or in connection with the transactions
contemplated hereby, when all such documents are read together in their
entirety, contains or will contain at the Effective Time any untrue statement of
a material fact or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading;
provided, however, that for purposes of this representation, any document
attached hereto and any document specifically referenced in the Acquiror
Disclosure Schedule as a "Superseding Document" (even if not attached hereto)
that provides information inconsistent
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with or in addition to any other written statement furnished to Target in
connection with the transactions contemplated hereby, shall be deemed to
supersede any other document or written statement furnished to Target with
respect to such inconsistent or additional information.
4. Conduct Prior To The Effective Time.
4.1 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, each of Acquiror and Target agree (except to the extent
expressly contemplated by this Agreement, the Reorganization Plan, the
Disclosure Statement or as consented to in writing by the other), to carry on
its and its subsidiaries' business in the usual regular and ordinary course in
substantially the same manner as heretofore conducted; to pay and to cause its
subsidiaries to pay debts and taxes when due subject (i) to good faith disputes
over such debts or taxes, and (ii) to pay or perform other obligations when due,
and to use all reasonable efforts to preserve intact its present business
organizations, keep available the services of its and its subsidiaries' present
officers and key employees and preserve its and its subsidiaries' relationships
with customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it or its subsidiaries, to the end that its and its
subsidiaries' goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Each of Target and Acquiror agrees to promptly notify the other
of (x) any event or occurrence not in the ordinary course of its or its
subsidiaries' business, and of any event which could have a Material Adverse
Effect, and (y) any change in its capitalization as set forth in Sections 2.5
and 3.4, respectively. Without limiting the foregoing, except as expressly
contemplated by this Agreement, the Target Disclosure Schedule, the Acquiror
Disclosure Schedule or Acquiror's Reorganization Plan neither Target nor
Acquiror shall do, cause or permit any of the following, or allow, cause or
permit any of its subsidiaries to do, cause or permit any of the following,
without the prior written consent of the other party, which consent shall not be
unreasonably withheld:
(a) Charter Documents. Cause or permit any amendments to its
Articles or Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it or its subsidiaries;
(c) Stock Option Plans, Etc. Accelerate, amend or change the
period of exercisability or vesting of options or other rights granted under its
stock plans or authorize cash payments in exchange for any options or other
rights granted under any of such plans;
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(d) Material Contracts. Enter into any Material Contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its Material Contracts, other than in the ordinary course of business
consistent with past practice;
(e) Issuance of Securities. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants or other rights therefore
outstanding as of the date of this Agreement;
(f) Proprietary Assets. Transfer to any person or entity any
rights to its Proprietary Assets other than in the ordinary course of business
consistent with past practice;
(g) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of Target products,
services or Target Proprietary Assets;
(h) Dispositions. Sell, lease, license or otherwise dispose of
or encumber any of its properties or assets which are material individually or
in the aggregate, to its and its parent's/subsidiaries' business, taken as a
whole, except in the ordinary course of business, consistent with past practice;
(i) Indebtedness. Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(j) Agreements. Enter into, terminate or amend, in a manner
which will adversely affect the business of Target or Acquiror, as the case may
be, (i) any agreement involving an obligation to pay or the right to receive
$5,000 or more, (ii) any agreement relating to the license, transfer or other
disposition or acquisition of Proprietary Assets or rights to market or sell
Target Products, or (iii) any other agreement which is material to the business
or prospects of such party or which is or would be a Material Contract;
(k) Payment of Obligations. Pay, discharge or satisfy any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of business,
other than the payment, discharge or satisfaction of liabilities reflected or
reserved against in the respective parties financial statements;
(l) Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice;
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(m) Insurance. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(o) Employee Benefit Plans; New Hires; Pay Increases. Amend or
adopt any employee benefit plan or hire any new officer level employee, pay any
special bonus, special remuneration or special noncash benefit (except payments
and benefits made pursuant to written agreements outstanding on the date
hereof), or increase the benefits, salaries or wage rates of its employees
except in the ordinary course of business in accordance with its standard past
practice;
(p) Severance Arrangements. Grant any severance or termination
pay or benefits (i) to any director or officer or (ii) to any other employee
except payments made pursuant to written agreements outstanding on the date
hereof and/or, with respect to Target, disclosed on the Target Disclosure
Schedule;
(q) Lawsuits. Commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of its business, provided that it consults with the other
party prior to the filing of such a suit, or (iii) for a breach of this
Agreement;
(r) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof or otherwise acquire or agree
to acquire any assets which are material individually or in the aggregate, to
its business, taken as a whole;
(s) Taxes. Other than in the ordinary course of business, make
or change any material election in respect of taxes, adopt or change any
accounting method in respect of taxes, file any material tax return or any
amendment to a material tax return, enter into any closing agreement, settle any
material claim or assessment in respect of taxes, or consent to any extension or
waiver of the limitation period applicable to any material claim or assessment
in respect of taxes;
(t) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(u) Tax Free Reorganization. Take or cause to be taken any
action that would disqualify the Merger as a reorganization within the meaning
of Section 368(a) of the Code.
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(v) Net Operating Losses. Take or cause to be taken any action
that would cause the elimination of Acquiror's net operating loss carryforward.
(w) Other. Take or agree in writing or otherwise to take, any
of the actions described in Sections 4.1(a) through (v) above, or any action
which would cause a material breach of its representations or warranties
contained in this Agreement or prevent it from materially performing or cause it
not to materially perform its covenants hereunder.
4.2 No Solicitation.
(a) From and after the date of this Agreement until the
earlier of (i) the Effective Time, (ii) the date that is six months from the
date hereof, or (iii) the date of termination of this Agreement pursuant to
Section 7 hereof, Target shall not, directly or indirectly through any officer,
director, employee, representative or agent of Target or otherwise, (i) solicit,
initiate, or encourage any inquiries or proposals that constitute, or could
reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, share exchange, business combination, sale of all or
substantially all assets, sale of shares of capital stock or similar
transactions involving Target other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being referred to in this
Agreement as an "Acquisition Proposal"), (ii) engage or participate in
negotiations or discussions concerning, or provide any non-public information to
any person or entity relating to, any Acquisition Proposal, or (iii) agree to,
enter into, accept, approve or recommend any Acquisition Proposal. Target
represents and warrants that it has the legal right to terminate any pending
discussions or negotiations relating to an Acquisition Proposal without payment
of any fee or other penalty.
(b) From and after the date of this Agreement until the
earlier of (i) the Effective Time, (ii) the date that is six months from the
date hereof, or (iii) the date of termination of this Agreement pursuant to
Section 7 hereof, Acquiror will not, directly or indirectly, through any
shareholder, officer, director, employee, affiliate or agent of Acquiror, or
otherwise, take an action to solicit, initiate, seek, entertain, encourage or
support any inquiry, proposal or offer from, furnish any information to, or
participate in any discussions or negotiations with, any third party regarding
any acquisition of the assets, businesses, capital stock of a company in a
similar industry to Target or any merger, consolidation or business combination
with or involving a company in a similar industry to Target. Acquiror agrees
that any such discussions or negotiations (other than discussions or
negotiations with Target) in process as of the date of this Agreement will be
suspended during such period and that, in no event, will Acquiror accept or
enter into an agreement concerning any such third-party transaction during such
period.
5. Additional Agreements.
5.1 Approval of Shareholders. Target Shareholder agrees, upon
Target's request, to execute a written consent of shareholders approving the
Merger.
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5.2 Sale of Shares Pursuant to Regulation D. The parties hereto
acknowledge and agree that the shares of Acquiror Common Stock issuable to the
Target Shareholder pursuant to Section 1.6 hereof, shall constitute "restricted
securities" within the Securities Act. The certificates of Acquiror Common Stock
shall bear the legends set forth in Section 1.6(f). It is acknowledged and
understood that Acquiror is relying on certain written representations made by
Target Shareholder.
5.3 Access to Information. Target shall afford Acquiror and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (i) all of
Target's properties, personnel books, contracts, commitments and records, and
(ii) all other information concerning the business, properties and personnel of
Target as Acquiror may reasonably request.
(a) Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Acquiror and Target shall confer on a
regular and frequent basis with one or more representatives of the other party
to report operational matters of materiality and the general status of ongoing
operations.
(b) No information or knowledge obtained in any investigation
pursuant to this Section 5.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.4 Confidentiality. The parties acknowledge that Acquiror and
Target have previously executed a non-disclosure agreement, which is hereby
incorporated herein by reference and shall continue in full force and effect in
accordance with its terms.
5.5 Public Disclosure. Acquiror and Target shall consult with each
other before issuing any press release or otherwise making any public statement
or making any other public (or non-confidential) disclosure (whether or not in
response to an inquiry) regarding the terms of this Agreement and the
transactions contemplated hereby, and neither shall issue any such press release
or make any such statement or disclosure without the prior approval of the other
(which approval shall not be unreasonably withheld), except as may be required
by law.
5.6 Regulatory Approval: Further Assurances.
(a) Each party shall use all reasonable efforts to file, as
promptly as practicable after the date of this Agreement, all notices, reports
and other documents required to be filed by such party with any Governmental
Entity with respect to the Merger and the other transactions contemplated by
this Agreement, and to submit promptly any additional information requested by
any such Governmental Entity. Acquiror and Target shall respond as promptly as
practicable to any inquiries or requests received from any state attorney
general or other Governmental Entity in connection with antitrust or related
matters. Each of Acquiror and Target shall (1) give the other party prompt
notice of the commencement of any legal proceeding by or before any Governmental
Entity with respect to the Merger or any of the other transactions contemplated
by this Agreement, (2) keep the other party informed as to the status of any
such legal proceeding, and (3) promptly inform the other party of any
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communication to or from any Governmental Entity regarding the Merger. Acquiror
and Target will consult and cooperate with one another, and will consider in
good faith the views of one another, in connection with any analysis,
appearance, presentation, memorandum, brief, argument, opinion or proposal made
or submitted in connection with any legal proceeding under any federal or state
antitrust or fair trade law. In addition, except as may be prohibited by any
Governmental Entity, in connection with any legal proceeding under any federal
or state antitrust or fair trade law or any other similar legal proceeding, each
of Acquiror and Target will permit authorized representatives of the other party
to be present at each meeting or conference relating to any such legal
proceeding and to have access to and be consulted in connection with any
document, opinion or proposal made or submitted to any Governmental Entity in
connection with any such legal proceeding.
(b) Subject to Section 5.6(c), Acquiror and Target shall use
all reasonable efforts to take, or cause to be taken, all actions necessary to
effectuate the Merger and make effective the other transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, but subject to
Section 5.6(c), each party to this Agreement (i) shall make all filings (if any)
and give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, (ii) shall use all reasonable efforts to obtain each consent (if any)
required to be obtained (pursuant to any applicable legal requirement or
contract, or otherwise) by such party in connection with the Merger or any of
the other transactions contemplated by this Agreement, and (iii) shall use all
reasonable efforts to lift any restraint, injunction or other legal bar to the
Merger. Target shall promptly deliver to Acquiror a copy of each such filing
made, each such notice given and each such consent obtained by Target during the
period prior to the Effective Time. Each party hereto, at the reasonable request
of another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
(c) Notwithstanding anything to the contrary contained in this
Agreement, Acquiror shall not have any obligation under this Agreement: (i) to
dispose or transfer or cause any of its subsidiaries to dispose of or transfer
any assets, or to commit to cause Target to dispose of any assets; (ii) to
discontinue or cause any of its subsidiaries to discontinue offering any product
or service, or to commit to cause Target to discontinue offering any product or
service; (iii) to license or otherwise make available, or cause any of its
subsidiaries to license or otherwise make available, to any person, any
technology, software or other Proprietary Rights, or to commit to cause Target
to license or otherwise make available to any person any technology, software or
other Proprietary Rights; (iv) to hold separate or cause any of its subsidiaries
to hold separate any assets or operations (either before or after the Closing
Date), or to commit to cause Target to hold separate any assets or operations;
or (v) to make or cause any of its subsidiaries to make any commitment (to any
Governmental Entity or otherwise) regarding its future operations or the future
operations of Target.
5.7 Legal Requirements. Each of Acquiror and Target will, and
Acquiror will cause Merger Sub to, take all reasonable actions necessary to
comply promptly with all
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legal requirements which may be imposed on them with respect to the consummation
of the transactions contemplated by this Agreement and will promptly cooperate
with and furnish information to any party hereto necessary in connection with
any such requirements imposed upon such other party in connection with the
consummation of the transactions contemplated by this Agreement and will take or
cause to be taken all reasonable actions necessary to obtain (and will cooperate
with the other parties hereto in obtaining) any consent, approval, order or
authorization of or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.8 Blue Sky Laws. Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Acquiror Common Stock in connection
with the Merger. Target shall use its commercially reasonable efforts to assist
Acquiror as may be necessary to comply with the securities and blue sky laws of
all jurisdictions which are applicable in connection with the issuance of
Acquiror Common Stock in connection with the Merger.
5.9 Nonaccredited Stockholders. Prior to the Closing, Target shall
not take any action, including the granting of employee stock options, that
would cause the number of Target stockholders who are not "accredited investors"
pursuant to Regulation D promulgated under the Securities Act of 1933, as
amended, to increase to more than 35 during the term of this Agreement.
5.10 Employees. Target will use reasonable commercial efforts in
consultation with Acquiror to retain existing employees of Target through the
Effective Time and following the Merger.
5.11 Expenses. Whether or not the Merger is consummated, except as
provided for in Section 10.3 hereof, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense.
5.12 Audited Financial Statements. Target Financial Statements for
the period from January 31, 1998 through a date no earlier than 45 days prior to
the Effective Time shall be audited and reported on by a reputable independent
public accounting firm with standing to appear before the SEC (the "Certifying
Accountants") and such Target Financial Statements shall be delivered to
Acquiror within 60 days of the Closing. In furtherance thereof Target and Target
Shareholder shall use their respective best efforts from and after the Effective
Time to cause the Target Financial Statements to be audited and Target
Shareholder shall, in additional to complying with any other reasonable
requests, execute and deliver to the Certifying Accountants such management
representation letters, in customary form, as may be requested by the Certifying
Accountants.
5.13 Relocation. Within thirty days of the Effective Time, the
headquarters of the Acquiror and the Surviving Corporation shall be located
within a twenty-five mile radius of Boca Raton, Florida.
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6. Conditions to the Merger.
6.1 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Shareholder Approval. This Agreement and the Merger shall
be approved and adopted by the written consent of the Target Shareholder and
Acquiror as the sole stockholder of Merger Sub.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be and remain in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending, nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, which makes the consummation of the Merger
illegal; and no temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal or
regulatory restraint provision limiting or restricting Acquiror's conduct or
operation of the business of Target and its subsidiary, following the Merger
shall be in effect, nor shall any proceeding brought by an administrative agency
or commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending. In the event of an injunction or other order shall have
been issued, each party agrees to use its reasonable efforts to have such
injunction or other order lifted.
(c) Governmental Approval. Acquiror, Target and Merger Sub and
their respective subsidiaries shall have timely obtained from each Governmental
Entity (as defined below) all approvals, waivers and consents, if any, necessary
for consummation of or in connection with the Merger and the several
transactions contemplated hereby, including such approvals, waivers and consents
as may be required by the United States Bankruptcy Court under the Securities
Act, and under state Blue Sky laws other than filings and approvals relating to
the Merger or affecting Acquiror's ownership of Target or any of its properties
if failure to obtain such approval, waiver or consent would not have a Material
Adverse Effect on the Surviving Corporation and Acquiror after the Effective
Time.
(d) Registration Rights Agreement. Acquiror and Harry M.
Wachtel shall have entered into a registration rights agreement covering the
Acquiror Shares providing for piggy-back registration rights on customary terms
and provisions commencing one year from the Effective Date in form and substance
satisfactory to Acquiror and Harry M. Wachtel.
6.2 Additional Conditions to the Obligations of Acquiror and Merger
Sub. The obligations of Acquiror and Merger Sub to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective
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Time of each of the following conditions, any of which may be waived, in
writing, by Acquiror:
(a) Representations, Warranties and Covenants. The
representations and warranties of Target in this Agreement shall be true and
correct in all material respects (without regard to any qualification as to
materiality contained in such representation or warranty) on and as of the date
of this Agreement and on and as of the Closing as though such representations
and warranties were made on and as of such time (except for such representations
and warranties that speak specifically as of the date hereof or as of another
date, which shall be true and correct as of such date).
(b) Performance of Obligations. Target shall have performed
and complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by it as
of the Closing.
(c) Certificate of Officers. Acquiror and Merger Sub shall
have received a certificate executed on behalf of Target by the President of
Target certifying that the conditions set forth in Section 6.2(a) and Section
6.2(b) have been satisfied.
(d) Third Party Consents. All consents or approvals required
to be obtained in connection with the Merger and the other transactions
contemplated by this Agreement shall have been obtained and shall be in full
force and effect.
(e) No Governmental Litigation. There shall not be pending or
threatened any legal proceeding in which a Governmental Entity is or is
threatened to become a party or is otherwise involved, and neither Acquiror nor
Target shall have received any communication from any Governmental Entity in
which such Governmental Entity indicates the probability of commencing any legal
proceeding or taking any other action: (a) challenging or seeking to restrain or
prohibit the consummation of the Merger; (b) relating to the Merger and seeking
to obtain from Acquiror or any of its subsidiaries, or Target, any damages or
other relief that would be material to Acquiror; (c) seeking to prohibit or
limit in any material respect Acquiror's ability to vote, receive dividends with
respect to or otherwise exercise ownership rights with respect to the stock of
Target; or (d) which would materially and adversely affect the right of Acquiror
or Target to own the assets or operate the business of Target.
(f) No Other Litigation. There shall not be pending any legal
proceeding: (a) challenging or seeking to restrain or prohibit the consummation
of the Merger or any of the other transactions contemplated by this Agreement;
(b) relating to the Merger and seeking to obtain from Acquiror or any of its
subsidiaries, or Target, any damages or other relief that would be material to
Acquiror; (c) seeking to prohibit or limit in any material respect Acquiror's
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of Target; or (d) which would affect
adversely the right of Acquiror or Target to own the assets or operate the
business of Target.
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(g) Employment Agreements. Harry M. Wachtel shall have entered
into the Employment Agreement, substantially in the form attached hereto as
Exhibit A.
(h) No Material Adverse Change. There shall not have occurred
any Material Adverse Effect of Target and its subsidiaries, taken as a whole.
(i) Investor Representation Statement. Target Shareholder
shall have delivered to Acquiror a signed Investor Representation Statement in
form reasonably satisfactory to Acquiror and its counsel.
(j) Opinion. Counsel for Target shall have delivered to
Acquiror an opinion in a form and substance reasonably satisfactory to Acquiror
and its counsel.
(k) Stock Powers. The Target Shareholder shall have executed
and delivered to the Holdback Agent such executed stock powers, powers or
attorney, letters of instruction necessary or appropriate to enable the Holdback
Agent to effect releases, forfeitures, cancellations and any other transfers of
Holdback Shares and Additional Holdback Shares in accordance with the terms of
Section 8.
6.3 Additional Conditions to Obligations of Target. The obligations
of Target to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Target:
(a) Representations, Warranties and Covenants. The
representations and warranties of Acquiror and Merger Sub in this Agreement
shall be true and correct in all material respects on and as of the date of this
Agreement and on and as of the Closing as though such representations and
warranties were made on and as of such time (except for such representations and
warranties that speak specifically as of the date hereof or as of another date,
which shall be true and correct as of such date) and the Target shall have
received a certificate executed on behalf of Acquiror and Merger Sub by the
chief executive officer and chief financial officer of Acquiror and Merger Sub,
respectively.
(b) Performance of Obligations. Acquiror and Merger Sub shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by them as of the Closing and Target.
(c) Certificate of Officers. Target shall have received a
certificate executed on behalf of Acquiror and Merger Sub by the chief executive
officer or chief financial officer of Acquiror and Merger Sub, respectively,
certifying that the conditions set forth in Sections 6.3(a) and 6.3(b) have been
satisfied.
(d) Acquiror Board Recomposition. Appropriate corporate action
shall have been effected such that, immediately upon consummation of the
transactions contemplated by this Agreement, the Board of Directors of Acquiror
shall consist of five
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members comprised of two existing board members, William I. Wunderlich, Harry M.
Wachtel and one appointee of Harry M. Wachtel.
(e) Third Party Consents. All consents or approvals required
to be obtained in connection with the Merger and the other transactions
contemplated by this Agreement shall have been obtained and shall be in full
force and effect.
(f) No Governmental Litigation. There shall not be pending or
threatened any legal proceeding in which a Governmental Entity is or is
threatened to become a party or is otherwise involved, and Acquiror shall not
received any communication from any Governmental Entity in which such
Governmental Entity indicates the probability of commencing any legal proceeding
or taking any other action: (a) challenging or seeking to restrain or prohibit
the consummation of the Merger; (b) relating to the Merger and seeking to obtain
from Acquiror or any of its subsidiaries, or Target, any damages or other relief
that would be material to Acquiror; (c) seeking to prohibit or limit in any
material respect Target Shareholder's ability to vote, receive dividends with
respect to or otherwise exercise ownership rights with respect to the stock of
Acquiror; or (d) which would materially and adversely affect the right of
Acquiror or Target to own the assets or operate the business of Target.
(g) No Other Litigation. There shall not be pending any legal
proceeding: (a) challenging or seeking to restrain or prohibit the consummation
of the Merger or any of the other transactions contemplated by this Agreement;
(b) relating to the Merger and seeking to obtain from Acquiror or any of its
subsidiaries, or Target, any damages or other relief that would be material to
Acquiror; (c) seeking to prohibit or limit in any material respect Target
Shareholder's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of Acquiror; or (d) which
would affect adversely the right of Acquiror or Target to own the assets or
operate the business of Target.
(h) Employment Agreements. Acquiror shall have entered into
the Employment Agreement, substantially in the form attached hereto as Exhibit
A.
(i) No Material Adverse Change. There shall not have occurred
any material adverse change in the financial condition, properties, assets
(including intangible assets), liabilities, business, operations, results of
operations or prospects of Acquiror and its subsidiaries, taken as a whole.
(j) Opinion. Counsel for Acquiror shall have delivered to
Target an opinion in a form and substance reasonably satisfactory to Target and
its counsel.
(k) Approval of Acquiror's Plan of Reorganization. There shall
have been entered in Acquiror's Chapter 11 Reorganization proceeding currently
pending before the United States Bankruptcy Court for the Southern District of
New York (Case No. 00-10368) ("Bankruptcy Proceeding") a final and nonappealable
order confirming Acquiror's Reorganization Plan, which order shall not be
subject to any stay or injunction. The Reorganization Plan and Confirmation
Order shall be in form and substance reasonably acceptable to Target. Target
represents and warrants that the Reorganization Plan delivered to
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Target on the date hereof is acceptable in form and substance to Target. In the
event of confirmation of the Reorganization Plan, Target shall have the right,
in its sole and absolute discretion to waive the requirement that the
Confirmation Order be a final and non-appealable order prior to the to the
Closing. The Debtor shall not amend or modify, or seek to amend or modify, the
Reorganization Plan or Confirmation Order in any material respect without the
prior written consent of the Target, which consent shall not be unreasonably
withheld.
(l) Discharge of Claims Against the Acquiror. The Acquiror
shall have been discharged from any debt that arose before the date of
confirmation of the Reorganization Plan, and any debt of a kind specified in
Section 502(g), 502(h) or 502(i) of the Bankruptcy Code, whether or not: (i) a
proof of the claim based on such debt is filed or deemed filed under Section 501
of the Bankruptcy Code; (ii) such claim is allowed under Section 502 of the
Bankruptcy Code; or (iii) the holder of such claim has accepted the
Reorganization Plan.
(m) Payment of Cash Distributions and Administrative Expenses
Under Reorganization Plan. The Acquiror shall have paid or have adequate funds
to pay the maximum amount of cash distributions to be made to creditors under
the Reorganization Plan, plus all administrative and priority claims against the
Acquiror within the meaning of Section 507 of the Bankruptcy Code, including,
without limitation, claims of professionals.
(n) Acquiror Financing. Acquiror shall have entered into a
definitive agreement or letter of intent, or received a firm commitment for a
financing transaction, the terms of which are reasonably satisfactory to Target,
for a debt or equity financing resulting in gross proceeds to the Acquiror of at
least $2.0 million, such proceeds to be used for the development and
implementation of the business plan of UbidFreight, which financing will result
in the issuance of no more than 7.2 million shares of Acquiror Common Stock.
7. Termination, Amendment and Waiver.
7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time (with respect to Section 7.1(b) through Section 7.1(g), by
written notice by the terminating party to the other party):
(a) by the mutual written consent of Acquiror and Target;
(b) by either Acquiror or Target if the Effective Time shall
not have occurred by October 20, 2000, provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Effective Time to occur on or before
such date;
(c) by either Acquiror or Target if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, except, if the party relying on such order, decree or ruling or other
action has not complied with its obligations under this Agreement;
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(d) by Acquiror or Target, if there has been a material breach
of any representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) causes the conditions set
forth in Section 6.1 or 6.2 (in the case of termination by Acquiror) or Section
6.1 or 6.3 (in the case of termination by Target) not to be satisfied and (ii)
shall not have been cured within ten (10) business days following receipt by the
breaching party of written notice of such breach from the other party.
(e) if an order is entered by a court of competent
jurisdiction (i) dismissing the Acquiror's pending Bankruptcy Proceeding; (ii)
converting the Acquiror's pending bankruptcy case to a case under Chapter 7 of
the Bankruptcy Code, or (iii) appointing a Trustee in the Acquiror's pending
Bankruptcy Proceeding.
(f) if a final order and nonappealable order confirming the
Acquiror's Reorganization Plan is not entered by October 20, 2000.
(g) if the Acquiror defaults on any of its material
obligations under the Reorganization Plan or under the Confirmation Order
entered in the Acquiror's pending bankruptcy case.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, there shall be no liability or obligation
on the part of Acquiror, Target, Target Shareholder or Merger Sub or their
respective officers, directors, or stockholders, except as otherwise provided
for herein or to the extent that such termination results from the willful
breach by a party of any of its representations, warranties or covenants set
forth in this Agreement.
7.3 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
8. Holdback and Indemnification.
8.1 Holdback.
(a) Definitions. For purposes of this Section 8:
(i) "Additional Holdback Shares" means any dividends
paid in stock declared with respect to the Holdback Shares.
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(ii) "Damages" refers to any and all losses, costs,
damages, liabilities and expenses arising from claims, demands, actions, causes
of action, including, without limitation, reasonable legal fees arising out of
any misrepresentation or breach of or default in connection with any of the
representations, warranties, covenants and agreements given or made by this
Agreement or any exhibit or schedule to this Agreement.
(iii) "Holdback Fund" means the Holdback Shares and any
Additional Holdback Shares relating thereto, held by Acquiror and governed by
the terms set forth herein.
(iv) "JAMS" refers to Judicial Arbitration and Mediation
Services.
(v) "Indemnification Certificate" refers to a
certificate signed by any indemnified party, or an officer or agent of such
party, with respect to the indemnification obligations of a party hereto
containing the information described in Section 8.3.
(b) Holdback Shares. The Holdback Shares shall be registered
in the name of the Target Shareholder, and shall be held by the Acquiror, in its
capacity as Holdback Agent, such shares and any Additional Holdback Shares to
constitute the Holdback Fund and to be governed by the terms set forth herein.
In the event Acquiror issues any Additional Holdback Shares, such shares will be
issued in the name of the Target Shareholder and held by the Holdback Agent in
the same manner as the Holdback Shares delivered at the Closing. Once released
from the Holdback Fund, shares of Acquiror Common Stock shall cease to be
Holdback Shares and Additional Holdback Shares.
(c) Payment of Dividends; Voting. Except for Additional
Holdback Shares, which shall be treated as Holdback Shares pursuant to Section
8.1(a) hereof, any cash dividends, dividends payable in securities or other
distributions of any kind made in respect of the Holdback Shares will be
delivered to the Target Shareholder. The Target Shareholder shall be entitled to
designate how all shares in the Holdback Fund will be voted on any matters to
come before the shareholders of Acquiror.
(d) Distribution of Holdback Shares. The Holdback Shares not
used to compensate Acquiror pursuant to the indemnification obligations of the
Target Shareholder shall be released to the Target Shareholder as follows:
(i) All Holdback Shares and Additional Holdback Shares
shall be released and delivered to the Target Shareholder on the first
anniversary of the Closing Date.
(ii) All shares required to be released by Acquiror from
the Holdback Fund and delivered to the Target Shareholder shall be registered in
the name of the Target Shareholder.
(e) Assignability. No Holdback Shares or Additional Holdback
Shares or any beneficial interest therein may be pledged, sold, assigned or
transferred,
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including by operation of law, by Target Shareholder or be taken or reached by
any legal or equitable process in satisfaction of any debt or other liability.
8.2 Indemnification.
(a) Survival of Warranties. All representations and warranties
made by the parties herein, or in any certificate, schedule or exhibit delivered
pursuant hereto, shall survive the Closing and continue in full force and effect
until the first anniversary of the Closing Date (sometimes referred to herein as
the "Termination Date") except that the representations made in Section 2.21
shall survive for the applicable statute of limitations. If a notice of a Claim
is given in accordance with this Agreement before expiration of such period,
then (notwithstanding the expiration of such time period) the representation or
warranty applicable to such claim and the related indemnification obligation in
Section 8.2 shall survive until, but only for purposes of, the resolution of
such claim. The rights to indemnification, reimbursement or other remedy set
forth in this Agreement will not be affected by any investigation conducted by
an Indemnified Person with respect to, or any knowledge acquired (or capable of
being acquired) by an Indemnified Person about, the accuracy or inaccuracy of,
or compliance with, any representation, warranty, covenant or obligation.
(b) Indemnification.
(i) Subject to the limitations set forth in this Section
8, the Target Shareholder will indemnify and hold harmless Acquiror and the
Surviving Corporation and its respective officers, directors, agents, attorneys
and employees, and each person, if any, who controls or may control Acquiror or
the Surviving Corporation within the meaning of the Securities Act (hereinafter
referred to individually as an "Acquiror Indemnified Person" and collectively as
"Acquiror Indemnified Person") from and against any Damages arising out of any
misrepresentation or breach of or default in connection with any of the
representations, warranties, covenants and agreements given or made by Target in
this Agreement, the Target Disclosure Schedules or any exhibit or schedule to
this Agreement. Acquiror Indemnified Persons shall act in good faith and in a
commercially reasonable manner to mitigate any Damages they may suffer.
(ii) Subject to the limitations set forth in this
Section 8, Acquiror will indemnify and hold harmless Target Shareholder and his
executors and estate (a "Target Shareholder Indemnified Person") from and
against any Damages arising out of any misrepresentation or breach of or default
in connection with any of the representations, warranties, covenants and
agreements given or made by Acquiror or Merger Sub in this Agreement, the
Acquiror Disclosure Schedules or any exhibit or schedule to this Agreement.
Target Shareholder Indemnified Person shall act in good faith and in a
commercially reasonable manner to mitigate any Damages he may suffer.
(c) Limitations of Liability. The maximum liability of each of
the Target Shareholder and Acquiror under this Section 8 shall be limited to one
million dollars ($1,000,000) (the "Maximum Indemnification Amount"); provided,
further, that nothing in this Agreement shall limit the liability in amount or
otherwise (a) of either party for any breach of any representation, warranty or
covenant if the Merger does not close, or (b) of Target
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Shareholder in connection with any breach of any representation or covenant in
the Investor Representation Statement, or (c) of either party with respect to
fraud, criminal activity or intentional breach of any covenant contained in this
Agreement.
(d) Basket. Notwithstanding anything to the contrary herein,
each party shall only be liable under the indemnification provisions contained
in Section 8.2 for that portion of aggregate Damages which exceed $25,000 (the
"Basket Amount").
8.3 Claims; Payment Procedures.
(a) Claims Procedure. If either an Acquiror Indemnified Person
or a Target Shareholder Indemnified Person (an "Indemnified Person" as
applicable) asserts a claim for indemnification hereunder, such Indemnified
Person shall deliver to an indemnifying person on or before the Termination Date
an Indemnification Certificate stating that, with respect to the indemnification
obligations of an indemnifying party set forth in Section 8.2, Damages exist or
are expected to exist and specifying in reasonable detail the individual items
of such Damages included in the amount so stated, the date each such item was
paid, or properly accrued or arose, or is reasonably expected to be paid, accrue
or arise, and the nature of the misrepresentation, breach of warranty, covenant
or claim to which such item is related.
(b) Objections to Claims. Unless the indemnifying party shall
notify an Indemnified Person and the Holdback Agent in writing within thirty
(30) days of delivery of an Indemnification Certificate that the indemnifying
party objects to any claim or claims for Damages set forth therein, which notice
shall include a reasonable explanation of the basis for such objection, upon the
expiration of such thirty (30) day period payment for the Damages shall be due
and payable. If the indemnifying party shall timely notify an Indemnified Person
and the Holdback Agent in writing that it objects to any claim or claims for
Damages made in an Indemnification Certificate, the Indemnified Person shall
have thirty (30) days from receipt of such notice to respond in a written
statement to the objection of the indemnifying party. If after such thirty (30)
day period there remains a dispute as to any claims set forth in such
Indemnification Certificate, the indemnifying party and the Indemnified Person
shall attempt in good faith for sixty (60) days to agree upon the rights of the
respective parties with respect to each of such claims. If the indemnifying
party and the Indemnified Person should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties.
(c) Payment of Indemnification Claims. Any Damages in excess
of the Basket Amount determined to be due and owing to an Indemnified Party
hereunder shall be immediately payable in cash. Notwithstanding the foregoing,
the Target Shareholder shall have the right to satisfy his indemnification
obligations by transmittal of Holdback Shares or Acquiror Shares (in each case
owned by him and unencumbered), or a combination of Holdback Shares or Acquiror
Shares and cash. For the purposes of this provisions, the Holdback Shares and/or
Acquiror Shares shall be valued at the average of (a) the average closing price
of Acquiror Common Stock for the five trading day period ending on the trading
day immediately prior to the Effective Time (the "Closing Price"), and (b) the
average closing price of Acquiror Common Stock for the five trading day period
ending on the trading day immediately prior to date that the Damages were paid
or are determined to be due and owing; but in no event shall the Holdback Shares
and/or Acquiror Shares be valued at less than the Closing Price. Notwithstanding
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anything to the contrary contained in this Agreement, Target Shareholder shall
be deemed to have satisfied payment of the Maximum Indemnification Amount upon
delivery to Acquirer of an aggregate of 5,000,000 Holdback Shares or Acquiror
Shares.
(d) Release of Holdback Shares. Within three (3) business days
after the Termination Date (the "Release Date"), Acquiror shall release from the
Holdback Fund a number of Holdback Shares and Additional Holdback Shares
determined as set forth in Section 8.1 above, less the number of Holdback Shares
and Additional Holdback Shares with a value (as determined pursuant to Section
8.3(c)) equal to (A) the Damages determined to be due and owing to Acquiror in
accordance with this Section 8.3 in satisfaction of indemnification claims by an
Indemnified Person (if Holdback Shares or Additional Holdback Shares are used to
satisfy such indemnification obligation), and (B) any Damages with respect to
any pending but unresolved indemnification claims of an Indemnified Person. Any
Holdback Shares and Additional Holdback Shares held as a result of clause (B)
shall be released to the Target Shareholder or released to Acquiror (as
appropriate) promptly upon resolution of each specific indemnification claim
involved.
8.4 Resolution of Conflicts and Arbitration.
(a) If no agreement can be reached after good faith
negotiation between the parties pursuant to Section 8.3, either the indemnifying
party or the Indemnified Person may, by written notice to the other, demand
arbitration of the matter unless the amount of the Damages is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration;
and in either such event the matter shall be settled by arbitration conducted by
one arbitrator. The indemnifying party and the Indemnified Person shall agree on
the arbitrator, provided that if the indemnifying party and the Indemnified
Person cannot agree on such arbitrator, either the indemnifying party or the
Indemnified Person can request that JAMS select the arbitrator. The arbitrator
shall set a limited time period and establish procedures designed to reduce the
cost and time for discovery while allowing the parties an opportunity, adequate
in the sole judgment of the arbitrator, to discover relevant information from
the opposing parties about the subject matter of the dispute. The arbitrator
shall rule upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys' fees and costs, to the same
extent as a court of competent law or equity, should the arbitrator determine
that discovery was sought without substantial justification or that discovery
was refused or objected to without substantial justification. The decision of
the arbitrator shall be written, shall be in accordance with applicable law and
with this Agreement, and shall be supported by written findings of fact and
conclusion of law which shall set forth the basis for the decision of the
arbitrator. The decision of the arbitrator as to the validity and amount of any
claim in such Indemnification Certificate shall be binding and conclusive upon
the parties to this Agreement, and notwithstanding anything in to the contrary
in this Section 8, the Holdback Agent shall be entitled to act in accordance
with such decision and distribute Holdback Shares from the Holdback Fund in
accordance with the terms thereof.
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(b) Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Palm Beach County, Florida under the commercial rules then in effect of the
American Arbitration Association. For purposes of this Section 8.4(b), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Indemnification Certificate is at issue, the party seeking indemnification shall
be deemed to be the Non-Prevailing Party unless the arbitrators award the party
seeking indemnification more than one-half (1/2) of the amount in dispute, plus
any amounts not in dispute; otherwise, the person against whom indemnification
is sought shall be deemed to be the Non-Prevailing Party. The Non-Prevailing
Party to an arbitration shall pay its own expenses, the fees of the arbitrator,
any administrative fee of JAMS, and the expenses, including attorneys' fees and
costs, reasonably incurred by the other party to the arbitration.
(c) Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Palm Beach County, Florida, under the commercial rules then in effect of the
American Arbitration Association. For purposes of this Section 8.4(c), in any
arbitration hereunder in which any claim or the amount thereof stated in the
Indemnification Certificate is at issue, the party seeking indemnification shall
be deemed to be the Non-Prevailing Party unless the arbitrators award the party
seeking indemnification more than one-half (1/2) of the amount in dispute, plus
any amounts not in dispute; otherwise, the person against whom indemnification
is sought shall be deemed to be the Non-Prevailing Party. The Non-Prevailing
Party to an arbitration shall pay its own expenses, the fees of the arbitrator,
any administrative fee of JAMS, and the expenses, including attorneys' fees and
costs, reasonably incurred by the other party to the arbitration.
8.5 Third-Party Claims. An Indemnified Person (a) shall give the
party required to make such payment ("Indemnifying Party") prompt notice of any
claim, demand, suit, proceeding or action ("Claim") by any person against the
Indemnified Person, (b) shall consult with the Indemnifying Party as to the
procedure to be followed in defending, settling, or compromising the Claim, (c)
shall not consent to any settlement or compromise of the Claim without the
written consent of the Indemnifying Party (which consent, unless the
Indemnifying Party has elected to assume the exclusive defense of such Claim,
shall not be unreasonably withheld or delayed), and (d) shall permit the
Indemnifying Party, if he or it so elects, to assume the exclusive defense of
such Claim, all at the cost and expense of the Indemnifying Party. If the
Indemnified Person shall (i) fail to notify or to consult with the Indemnifying
Party with respect to any Claim in accordance with subparagraph (a) or (b) above
or (ii) consent to the settlement or compromise of any Claim without having
received the written consent of the Indemnifying Party (unless, if the
Indemnifying Party has not elected to assume the exclusive defense of such Claim
or the consent of the Indemnifying Party is unreasonably withheld or delayed),
the Indemnifying Party shall be relieved of its indemnification obligation with
respect to such Claim. If the Indemnifying Party shall elect to assume the
exclusive defense of any Claim, it shall notify the Indemnified Person in
writing of such election, and the Indemnifying Party shall not be liable
hereunder for any fees or expenses of the Indemnified Person's counsel relating
to such Claim after the date of delivery to the Indemnified Person of such
notice of election. In the event of such election, the
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Indemnified Person shall cooperate with the Indemnifying Party and provide it
with access to all books and records of the Indemnified Person relevant to the
Claim. The Indemnifying Party will not compromise or settle any Claim without
the written consent of the Indemnified Person (which consent shall not be
unreasonably withheld or delayed) if the relief provided is other than monetary
damages and such relief would materially and adversely affect the Indemnified
Person. Notwithstanding the foregoing, the party which defends any Claim shall,
to the extent required by applicable insurance policies, share or give control
thereof to any insurer with respect to such Claim.
8.6 Limitation of the Holdback Agent's Liability. For purposes of
this Section 8 (the "Holdback Provisions"), references to the Holdback Agent
shall be deemed to apply to it in its capacity as Holdback Agent and not in its
capacity as Acquiror. The parties acknowledge and agree that Acquiror has agreed
to act as the Holdback Agent for the convenience of the parties, and that
Acquiror's liability hereunder shall not be increased by reason of Acquiror
agreeing to so act. Acquiror, when acting as the Holdback Agent pursuant to this
Agreement, will incur no liability with respect to any action taken or suffered
by it pursuant to this Agreement in reliance upon any notice, direction,
instruction, consent, statement or other document believed by it to be genuine
and to have been signed by the proper person other than on its own behalf (and
shall have no responsibility to determine the authenticity or accuracy thereof),
nor for any other action or inaction, except its own willful misconduct, bad
faith or gross negligence. In no event shall the Holdback Agent be liable for
indirect or consequential damages. The Holdback Agent will not be responsible
for the validity or sufficiency of the Holdback Provisions, including the amount
of Holdback Fund. In all questions arising under the Holdback Provisions, the
Holdback Agent may rely on the advice of counsel, and for anything done, omitted
or suffered in good faith by the Holdback Agent based on such advice, the
Holdback Agent will not be liable to anyone.
9. General Provisions.
9.1 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed duly delivered if delivered personally (upon
receipt), or three (3) business days after being mailed by registered or
certified mail, postage prepaid (return receipt requested), or one (1) business
day after it is sent by commercial overnight courier service, or upon
transmission, if sent via facsimile (with confirmation of receipt) to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
(a) if to Acquiror or Merger Sub, to:
AutoInfo, Inc.
Attn: Mr. William Wunderlich
P.O. Box 4383
Stamford, CT 06907
Fax: (203) 322-6761
Tel: (203) 595-0005
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With a copy to:
Morse Zelnick Rose & Lander LLP
450 Park Avenue
New York, New York 10022
Attn: Kenneth S. Rose, Esq.
Fax: (212) 838-9190
Tel: (212) 838-5030
(b) if to Target or Target Shareholder, to:
Sunteck Transport Co., Inc.
2061 N.W. 2nd Avenue
Boca Raton, Florida 33431
Attn: Harry M. Wachtel
Fax: (561) 361-8212
Tel: (561) 361-0073
With a copy to:
Target's and Target Shareholder's Counsel
Meltzer, Lippe, Goldstein & Schlissel, P.C.
1909 Willis Avenue
Mineola, New York 11501
Attn: Michael J. Weiner, Esq.
Fax: (516) 747-0653
Tel: (516) 747-0300
9.2 Definitions. In this Agreement any reference to any event,
change, condition or effect being "material" with respect to any entity or group
of entities means any material event, change, condition or effect related to the
financial condition, properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity or
group of entities. In this Agreement any reference to a "Material Adverse
Effect" with respect to any entity or group of entities means any event, change
or effect that is materially adverse to the financial condition, properties,
assets, liabilities, business, operations, results of operations of such entity
and its subsidiaries, taken as a whole. In this Agreement any reference to a
party's "knowledge" means such party's actual knowledge after reasonable inquiry
of officers, directors and other employees of such party reasonably believed to
have knowledge of such matters.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
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9.4 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Target Disclosure Schedule and the Acquiror Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms; (b) are not intended to confer upon any
other person any rights or remedies hereunder, and shall not be assigned by
operation of law or otherwise without the written consent of the other party.
9.5 Severability. In the event that any provision of this Agreement,
or the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Remedies Cumulative. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of New York applicable to parties residing
in New York, without regard applicable principles of conflicts of law. Each of
the parties hereto irrevocably consents to the exclusive jurisdiction of any
court located within New York in connection with any matter based upon or
arising out of this Agreement or the matters contemplated hereby and it agrees
that process may be served upon it in any manner authorized by the laws of the
State of New York for such persons and waives and covenants not to assert or
plead any objection which it might otherwise have to such jurisdiction and such
process.
9.8 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
9.9 Expenses. Each party shall pay its own costs and expenses
incurred in the negotiation and consummation of the Merger; provided, however,
that any costs and expenses of Target in excess of twenty-five thousand dollars
($25,000) shall be borne by the Target Shareholder.
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10. Bankruptcy Proceeding and Reorganization Plan.
10.1 Acquiror shall use its diligent efforts to comply with all
requirements imposed by the Bankruptcy Code and the Bankruptcy Court in
connection with the approval of the Reorganization Plan and the Disclosure
Statement in connection therewith, including, without limitation, providing such
notice as may be required by order of the Bankruptcy Court. Acquiror shall
oppose any objections to the issuance or entry of, requests for reconsideration
or review of, or appeals from, the Confirmation Order unless and until this
Agreement is terminated in accordance with the terms hereof.
10.2 Acquiror shall immediately provide Target with copies of all
judgments, decisions or orders issued by the Bankruptcy Court after the date
hereof in the Bankruptcy Proceeding and all pleadings or other documents filed
by any party after the date hereof in the Bankruptcy Proceeding which have or
may have any effect upon the Target or this Agreement, or which are reasonably
requested by Target, and shall immediately notify Target in writing of all
material developments in the Bankruptcy Proceeding.
10.3 In the event that (a) the Merger is not consummated as a result
of Acquiror's failure to fulfill a condition to closing set forth in Article 6
hereof, or (b) the Bankruptcy Court shall (i) have granted the Acquiror the
right to merge or consolidate with an entity other than Target, or (ii) permit
the Acquiror to acquire the assets of an entity other than Target, or (iii)
permit the Acquiror to enter into a share exchange or business combination with
an entity other than Target, or (iv) permit the Acquiror to sell capital shares
in the Acquiror, then in any of such events, the Acquiror shall immediately pay
to Target, in consideration of the expenses incurred by Target in pursuing the
transactions contemplated by this Agreement, a topping fee of $15,000 in
immediately available funds. Nothing in this Section 10.3 of the Agreement shall
abrogate the Acquiror's obligations under Section 4.2 of this Agreement.
10.4 This Agreement shall be incorporated into a Reorganization Plan
filed with the Bankruptcy Court in the Acquirer's pending Bankruptcy Proceeding.
10.5 No later than 7 days after execution of this Agreement,
Acquirer shall file an order to show cause and a motion seeking entry of an
order from the Bankruptcy Court approving sections 4.2 and 10.3 of this
Agreement, and shall use its best efforts to (i) obtain an expedited hearing on
such motion; and (ii) obtain entry of such an order from the Bankruptcy Court.
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IN WITNESS WHEREOF, Target, Acquiror and Merger Sub and Target Shareholder
have caused this Agreement to be executed and delivered by each of them or their
respective officers thereunto duly authorized, all as of the date first written
above.
AUTOINFO, INC.
By: /s/ William Wunderlich
----------------------------------
Name: William Wunderlich
Title: President
SUNTECK TRANSPORT CO., INC.
By: /s/ Harry Wachtel
----------------------------------
Name: Harry Wachtel
Title: President
TARGET SHAREHOLDER
/s/ Harry Wachtel
--------------------------------------
Harry Wachtel
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