THIS DOCUMENT IS A CONFIRMING COPY OF THE FORM 8-K PREVIOUSLY FILED ON PAPER
WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 15, 1995
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
July 31, 1995
ARISTO INTERNATIONAL CORPORATION (f/k/a The Astro-Stream Corporation)
----------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 33-1260-NY 11-2706304
- ---------------------------- ------------ --------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File No.) Identification No.)
152 West 57th Street, New York, New York 10019
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 586-2400
---------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
---------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to the Agreement and Plan of Merger, dated July 28, 1995
(the "Merger Agreement"), by and among Aristo International
Corporation, a Delaware corporation (the "Registrant"), BAIC
Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of the Registrant (the "Purchaser"), Borta, Inc., a
Virginia corporation ("Borta"), and the Shareholders of Borta
(the "Sellers"), on July 31, 1995 (the "Closing Date"), Borta was
merged with and into the Purchaser (the "Merger"), with the
Purchaser being the surviving corporation (the "Surviving
Corporation") in the Merger. Pursuant to the Merger, (i) the name
of the Surviving Corporation was changed to "Borta, Inc.", (ii)
each share of the common stock of the Purchaser issued and
outstanding immediately prior to the Merger was converted into
one share of the common stock of the Surviving Corporation, and
(iii) all shares of the common stock of Borta issued and
outstanding immediately prior to the Merger were converted into
the right to receive that number of shares of the common stock of
the Registrant which, on the Closing Date, had an aggregate
market value of $10,000,000 (the "Aggregate Merger
Consideration"); provided, however, that the Agreement provided
that the number of shares of the common stock of the Registrant
which would comprise the Aggregate Merger Consideration would in
no event exceed 2,000,000. On the Closing Date, in payment of the
Aggregate Merger Consideration, the Registrant issued an
aggregate of 1,818,182 shares of its common stock to the former
Shareholders of Borta.
As a result of the Merger, (i) by operation of law, all the
properties, rights, privileges, immunities, powers and franchises
of Borta and the Purchaser vested in the Surviving Corporation,
and all the debts, liabilities and duties of Borta and the
Purchaser became the debts, liabilities and duties of the
Surviving Corporation, and (ii) the Surviving Corporation became
a wholly-owned subsidiary of the Registrant.
Prior to the Merger, Borta was involved in the creation and
development of new multimedia digital entertainment and was
engaged in original game development, cross-platform conversions,
software tools and techniques and enabling technologies for game
platforms including PC, MAC, ATARI, SEGA, NINTENDO, 3DO and SONY.
The Registrant intends for the Surviving Corporation to be
involved in the business engaged in by Borta prior to the Merger.
-2-
<PAGE>
The foregoing description of the Merger and the business of Borta
is subject to (i) the provisions of the Agreement, which is
included herein as set forth in Exhibit 2.01 hereto, and (ii) the
Financial Statements of Borta contained in Item 7(a) below, each
of which is incorporated herein by reference as if set forth in
their entirety herein.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Business Acquired:
Are included in the following fifteen (15) pages:
-3-
<PAGE>
BORTA, INC.
(Formerly operating as Borta and Associates, a Proprietorship)
Sterling, Virginia
FINANCIAL REPORT
MAY 31, 1995
<PAGE>
CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT
ON THE FINANCIAL STATEMENTS 1
FINANCIAL STATEMENTS
Balance sheet 2
Statement of income 3
Statement of stockholders' equity 4
Statement of cash flows 5 and 6
Notes to financial statements 7-11
INDEPENDENT AUDITOR'S REPORT ON
THE SUPPLEMENTARY INFORMATION 12
SUPPLEMENTARY INFORMATION
Operating expenses 13
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Borta, Inc.
Sterling, Virginia
We have audited the accompanying balance sheet of Borta, Inc. as of May
31, 1995, and the related statements of income, stockholders' equity, and cash
flows for the five months ending May 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Borta, Inc. as of
May 31, 1995, and the results of its operations and its cash flows for the five
months then ended, in conformity with generally accepted accounting principles.
Yount, Hyde & Barbour, P.C.
Sterling, Virginia
July 11, 1995
<PAGE>
<TABLE>
<CAPTION>
BORTA, INC.
BALANCE SHEET
May 31, 1995
ASSETS
<S> <C>
Current Assets
Cash (Note 2) $ 49,025
Accounts receivable (Notes 3 and 7) 48,506
Prepaid rent 1,776
----------
Total current assets $ 99,307
==========
Property and Equipment (Notes 2, 4 and 5) $ 48,051
Less accumulated depreciation (7,895)
$ 40,156
Other Assets, deposits $ 2,033
----------
$ 141,496
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 3,757
Payroll tax withholdings payable 11,774
Accrued expenses 3,554
Advances from employees 4,902
Deposit payable (Note 8) 50,000
Current maturities of long-term debt (Note 5) 8,027
----------
Total current liabilities $ 82,014
----------
Long-Term Debt, less current maturities (Note-5) $ 39,418
----------
Commitments (Note 6) $ --
----------
Stockholders' Equity
Common stock, no par value, 25,000 shares
authorized and issued $ 69,208
Retained earnings (deficit) (49,144)
----------
Total stockholders' equity $ 20,064
----------
$ 141,496
==========
</TABLE>
See Notes to Financial Statements.
-2-
<PAGE>
BORTA, INC.
STATEMENT OF INCOME
Five Months Ending May 31, 1995
<TABLE>
<S> <C>
Revenue (Notes 2, 3 and 7) $ 137,745
Operating expenses 184,960
-----------
Operating (loss) (47,215)
Financial income (expense):
Interest income 47
Interest expense (1,976)
-----------
$ (1,929)
-----------
Net (loss) $ (49,144)
===========
</TABLE>
See Notes to Financial Statements.
-3-
<PAGE>
BORTA, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Five Months Ending May 31, 1995
<TABLE>
<CAPTION>
Retained
Common Earnings
Stock (Deficit) Total
-------- --------- -------
<S> <C> <C> <C>
Balance, beginning $ -- $ -- $ --
Issuance of 15,500 shares
of common stock 43,278 -- 43,278
Issuance of 9,500 shares
of common stock 25,930 -- 25,930
Net (loss) -- (49,144) (49,144)
------------ ------------- ------------
Balance, ending $69,208 $(49,144) $20,064
============ ============= =============
See Notes to Financial Statements.
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
BORTA, INC.
STATEMENT OF CASH FLOWS
Five Months Ending May 31, 1995
<S> <C>
Cash Flows from Operating Activities
Net (loss) $(49,144)
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation 4,381
Expenses paid through the issuance of common stock 11,332
Changes in assets and liabilities:
(Increase) in accounts receivable (3,370)
(Increase) in prepaid rent (1,776)
Increase in accounts payable 1,624
(Decrease) in accrued expenses (390)
(Decrease) in payroll taxes payable (1,506)
Increase in deposits payable 50,000
Increase in advances from employees 4,902
-----------
Net cash provided by operating activities $ 16,053
-----------
Cash Flows from Investing Activities, purchase of
property and equipment $(15,716)
Cash Flows from Financing Activities
Issuance of common stock $ 1,243
Principal payments on long-term borrowings (2,555)
Proceeds from long-term borrowings 50,000
---------
Net cash provided by financing activities $ 48,688
--------
Increase in cash and cash equivalents $ 49,025
Cash and Cash Equivalents
Beginning --
Ending $ 49,025
========
Supplemental Disclosure of Cash Flow Information,
cash payments for interest $ 1,976
=========
</TABLE>
See Notes to Financial Statements.
-5-
<PAGE>
BORTA, INC.
STATEMENT OF CASH FLOWS
(Continued)
Five Months Ending May 31, 1995
<TABLE>
<S> <C>
Supplemental Schedule of Noncash Investing and
Financing Activities
Net assets acquired by issuance of common stock,
net of cash of $1,243, 15,500 shares $42,035
=======
Equipment acquired by issuance of common stock,
5,000 shares $14,598
=======
Issuance of common stock in payment of compensation
and other reimbursable expenses to employees,
4,500 shares $11,332
=======
</TABLE>
See Notes to Financial Statements.
-6-
<PAGE>
BORTA, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. FORMATION AND OPERATION
The Company was incorporated under the laws of the Commonwealth
of Virginia on December 19, 1994, and on January 1, 1995, all of
the assets and the business of, and all of the liabilities of the
Proprietorship, Borta and Associates, were received in exchange
for 15,500 shares of the Corporation's stock. The original
husband and wife proprietors, Ronald T. Borta and Leslie A.
Davis, received the initial 15,500 shares.
The acquired assets and assumed liabilities of the
Proprietorship, Borta and Associates, have been recorded on the
Company's financial statements at the same amounts at which they
were reported on the financial statements of the Proprietorship.
In addition, 5,000 shares of the Company's common stock were
exchanged to certain employees contributing assets to the
Corporation. The remaining 4,500 shares were issued to several
other employees, including the mother of Ms. Davis, a related
party, as taxable compensation for services rendered.
The Company creates digital entertainment and software tools.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
For purposes of reporting the statement of cash flows, the
Company includes all cash accounts, which are not subject
to withdrawal restrictions or penalties, as cash and cash
equivalents on the accompanying balance sheet.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost.
Depreciation is computed using 200% declining balance over
the assets' estimated useful life as follows:
Useful Life
-----------
Computer equipment 5 years
Furniture 7 years
-7-
<PAGE>
NOTES TO FINANCIAL STATEMENTS
COMPENSATED ABSENCES
The Company's policy is to compensate employees upon
termination for unused vacation pay if the employee's
length of service is 90 days or more. Management does not
accrue a liability for future compensated absences because
the amount of liability cannot be reasonably estimated.
REVENUE RECOGNITION
The Company utilizes the accrual method of accounting for
financial statement purposes. Revenues from contracts with
customers are recognized over the period in which expenses
are incurred.
Many of the contracts provide for progress billings as
certain "milestones" are achieved and approved by the
customer. For contracts with uncompleted milestones which
were in progress at year end, management has recorded
revenue based upon the percentage-of-completion method
applied to individual contracts, commencing when progress
reaches a point where experience is sufficient to estimate
financial results with reasonable accuracy. That portion
of the billing for the milestone in progress is accrued
which is allocable, on the basis of the Company's
estimates of the percentage of completion, to work
performed. Operating expenses, including direct costs,
indirect costs and administrative expenses, are charged to
income as incurred.
Note 3. ACCOUNTS RECEIVABLE
The components of accounts receivable, are as follows:
Billed $11,025
Unbilled 37,481
--------
$48,506
========
Accounts receivable are stated at full value and management
estimates that no allowance for doubtful accounts is required.
Accounts are charged to expense in the year they become
uncollectible.
Unbilled accounts receivable represent a portion of revenues
recognized on various contracts in progress at year end.
All unbilled accounts receivable are expected to be billed and
collected within the next twelve months.
-8-
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 4. PROPERTY AND EQUIPMENT
The balances of major classes of property and equipment consisted
of the following:
Computer equipment $47,179
Furniture 872
-----------
$48,051
Less accumulated depreciation (7,895)
-----------
$40,156
===========
Depreciation expense for the five months ended May 31, 1995, was
$4,381.
Note 5. LONG-TERM DEBT AND PLEDGED ASSETS
Note payable to bank in monthly installments
including principal and interest at the prime
rate plus three and one quarter percent $47,445
Less current maturities of long-term debt (8,027)
---------
$39,418
Aggregate maturities required on long-term debt were:
Twelve months ending:
1996 $8,027
1997 9,068
1998 10,243
1999 11,571
2000 and thereafter 8,536
---------
$47,445
=========
The above note is secured by substantially all of the Company's
fixed assets, software and professional texts.
Note 6. COMMITMENTS
The Company had a noncancellable office space lease for its
business location that originally expired June 30, 1995, which
provided for monthly payments of $1,776. An addendum dated June
1, 1995 extends the lease until September 30, 1995, with monthly
payments of $1,861.
-9-
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The total future minimum lease payments under the noncancellable
lease as of May 31, 1995 are:
1995 $9,134
======
The Company has a furniture lease agreement on a month-to-month
basis. The lease requires monthly lease payments of $259 and the
lease expired on February 23, 1995.
The Company has a computer lease agreement on a month-to-month
basis. The lease requires monthly lease payments of $284 and the
lease expired in February 1995.
Note 7. SIGNIFICANT CUSTOMERS
Revenues for the five months ending May 31, 1995, include
revenues to the following major customers (which accounted for
10% or more of total revenue of the Proprietorship for this
period):
Amount of Accounts
Revenue Receivable
----------- ----------
Customer A $ 30,000 $16,000
Customer B 27,000 --
Customer C 56,010 20,417
Customer D 24,735 9,735
--------- ---------
Total $137,745 $46,152
========= =========
Note 8. SUBSEQUENT EVENTS
PLANS TO SELL BUSINESS
On May 31, 1995, the newly formed Corporation, Borta,
Inc., received a Letter of Intent dated May 31, 1995 and a
good faith deposit of $50,000 from a potential purchaser
of the Corporation. The good faith deposit is refundable
in the event of termination and the refund is personally
guaranteed by Ronald T. Borta and Leslie A. Davis.
The letter requires the completion of certain agreements
and documents, including employment agreements with Ronald
T. Borta and Leslie A. Davis, prior to acquisition. In
addition, the original proprietor, Ronald T. Borta, would
receive $750,000 in cash in three equal installments of
$250,000 on the date of closing, September 30, 1995 and
February 28, 1996. Borta, Inc. would become a wholly-owned
subsidiary of the proposed acquiring Company.
-10-
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The letter provides for the acquisition of 100% of the
authorized and outstanding shares of Borta, Inc. The
present shareholders would receive the number of shares of
common stock of the proposed acquiring Company which on
the closing date have an aggregate market value of $10
million, provided that in no event shall Borta, Inc.
shareholders receive more than 2 million shares of the
acquiring Company's common stock. Each present Borta, Inc.
shareholder would receive a proportionate share of the
acquiring Company's shares equal to the portion of Borta,
Inc. shares that each now possess.
The original proprietors and present stockholders are
currently negotiating the specific arrangements of the
acquisition. The final arrangements may vary from the
terms proposed in the original letter of intent.
-11-
<PAGE>
YOUNT, HYDE & BARBOUR, P.C.
[Letterhead]
INDEPENDENT AUDITOR'S REPORT
ON THE SUPPLEMENTARY INFORMATION
To the Board of Directors
Borta, Inc.
Sterling, Virginia
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Yount, Hyde & Barbour, P.C.
Sterling, Virginia
July 11, 1995
-12-
<PAGE>
BORTA, INC.
SUPPLEMENTARY INFORMATION
Five Months Ending May 31, 1995
<TABLE>
Operating Expenses
<S> <C>
Advertising $ 220
Bank service charges 88
Books and journals 202
Depreciation (Notes 2 and 4) 4,381
Dues and subscriptions 29
Equipment rental 2,271
Insurance 5,067
Miscellaneous 1,678
Office supplies 2,640
On-line service 73
Wages 112,265
Contracted services 13,222
Payroll taxes 8,584
Postage 586
Printing and reproduction 1,020
Accounting 306
Programming services 13,215
Professional fees 3,400
Rent (Note 6) 8,881
Software expense 1,196
Taxes, other 314
Telephone 1,856
Meals 528
Travel 1,943
Utilities 65
Finance charges 900
Repairs 30
------------
$184,960
============
</TABLE>
-13-
<PAGE>
(b) Pro Forma Financial Information:
It is impracticable to provide the pro forma financial
information required by Item 7(b) relative to the acquired
business described in Item 2 at the time this report on
Form 8-K is filed. The required pro forma financial
information will be filed under cover of Form 8 as soon as
is practicable but not later than September 30, 1995.
(c) Exhibits
Exhibit No. Description
----------- -------------
2.01 Agreement and Plan of Merger, dated July 28, 1995,
among the Registrant, BAIC Acquisition Corp., Borta,
Inc. and the Shareholders of Borta, Inc.
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 14, 1995
ARISTO INTERNATIONAL CORPORATION
By: /s/ Shmuel Cohen
---------------------------
Shmuel Cohen
President
-5-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
2.01 Agreement and Plan of Merger,
dated July 28, 1995, among the
Registrant, BAIC Acquisition Corp.,
Borta, Inc. and the Shareholders
of Borta, Inc.
-6-
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 28, 1995 (this
"Agreement"), by and among Aristo International Corporation, a Delaware
corporation ("Parent"), BAIC Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent (the "Purchaser"), Borta, Inc., a Virginia
corporation (the "Merging Corporation"), Ron Borta ("Borta"), Leslie Davis
("Davis") and each of the shareholders of the Merging Corporation listed on
Schedule 3.02 hereto (Borta, Davis and each such shareholder being referred to
herein individually as a "Seller" and collectively as the "Sellers").
W I T N E S S E T H :
WHEREAS, the Boards of Directors of each of the Parent, the
Purchaser and the Merging Corporation have determined that it is in the best
interests of such respective corporations to cause the Merging Corporation to
merge with and into the Purchaser, upon the terms and provisions and subject to
the conditions hereinafter set forth; and
WHEREAS, the Parent, being the sole stockholder of the
Purchaser, and the Sellers, being the owners of all of the issued and
outstanding shares of capital stock of the Merging Corporation, have agreed to
vote in favor of the Merger.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements herein contained,
the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Subject to the terms and conditions
set forth in this Agreement, and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL") and the Virginia Stock Corporation Act
(the "VSCA"), at the Effective Time (as defined in Section 1.03 below), the
Merging Corporation shall be merged with and into the Purchaser. Upon the
Effective Time, the separate corporate existence of the Merging Corporation
shall cease, and the Purchaser shall continue as the surviving corporation of
the Merger (the "Surviving Corporation") and shall continue under the name
"Borta, Inc.".
SECTION 1.02 TIME AND PLACE OF CLOSING. Unless this Agreement
shall have been terminated pursuant to Section 9.01 below and subject to the
satisfaction or waiver of the conditions set forth set forth in Article VII, the
closing of the Merger (the "Closing") will take place as promptly as practicable
(and in any event within two business days) following satisfaction or waiver of
the conditions set forth in Article VII (the "Closing Date"), at the offices of
Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York, New
York 10036 at 10:00 a.m. local time, or at such other time, place and/or date as
to which the parties shall agree.
<PAGE>
SECTION 1.03 EFFECTIVE TIME OF THE MERGER. As soon as
practicable after the satisfaction or waiver of the conditions set forth in
Article VII, the parties shall cause the Merger to be consummated by filing (i)
a properly executed certificate of merger in the form annexed hereto as Exhibit
1.03(a) with the Secretary of State of the State of Delaware, as provided in the
DGCL, and (ii) a properly executed certificate of merger in the form annexed
hereto as Exhibit 1.03(b) with the State Corporation Commission of the
Commonwealth of Virginia, as provided in the VSCA, as soon as practicable on or
after the Closing Date. The Merger shall become effective upon the later of the
filing of the certificate of merger by the Department of State of the State of
Delaware and the filing of the certificate of merger by the Secretary of State
of the Commonwealth of Virginia or at such later time thereafter as is provided
in such certificates of merger (the "Effective Time")
SECTION 1.04 EFFECTS OF THE MERGER. The Merger shall have the
effects provided by applicable law, including (without limitation) the
provisions of the DGCL and the VSCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the properties,
rights, privileges, immumities, powers and franchises of the Merging Corporation
and the Purchaser shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Merging Corporation and the Purchaser shall become
the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.05 DIRECTORS AND OFFICERS OF THE SURVIVING
CORPORATION. (a) From and after the Effective Time the Board of Directors of the
Surviving Corporation shall (a) be set at five members and (b) consist of the
following individuals:
Shmuel Cohen
Yael Cohen
Joseph Ettinger
Ron Borta
Leslie Davis
Such individuals shall serve as directors until the successors of such directors
shall have been duly elected or appointed or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-laws. In the event of the death, resignation
or removal of any of such individuals, the Parent shall be entitled to designate
the successors for the three directorships held by Shmuel Cohen, Yael Cohen and
Joseph Ettinger and, for so long as Borta and Davis are employed by the
Surviving Corporation, Borta shall be entitled to designate the successor for
the directorship held by him and Davis shall be entitled to designate the
successor for the directorship held by her. In the event that Borta and/or Davis
is no longer employed by the Surviving Corporation, the Parent shall be entitled
to designate the successors to Borta and/or Davis. The directors of the Merging
Corporation immediately preceding the Merger shall be, and hereby are, removed
as directors of the Merging Corporation at the Effective Time.
-2-
<PAGE>
(b) From and after the Effective Time the following persons
shall be, and hereby are, elected as the officers of the Surviving Corporation,
with corresponding positions:
Officer Title
------- -----
Shmuel Cohen Chairman of the Board
Ron Borta President
Leslie Davis Chief Operating Officer
Tony Burger Chief Financial Officer and Secretary
Such individuals shall serve as officers in the capacity as indicated until the
successors of such officers shall have been duly elected or appointed or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-laws. The officers of the
Merging Corporation immediately preceding the Merger shall be, and hereby are,
removed as officers of the Merging Corporation at the Effective Time.
SECTION 1.06 CERTIFICATE OF INCORPORATION AND BY-LAWS. (a) At
the Effective Time, the Certificate of Incorporation of the Purchaser as in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, which shall have been amended and
restated in substantially the same form as set forth in Exhibit 1.06(a) hereto,
and shall continue as such until thereafter duly amended in accordance with
applicable law.
(b) The By-Laws of the Purchaser, as in effect at the
Effective Time, shall by the By-Laws of the Surviving Corporation and shall
continue as such until thereafter duly amended as provided by applicable law,
the Certificate of Incorporation of the Surviving Corporation and such By-Laws.
SECTION 1.07 CONVERSION OF CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of shares of common stock, no par value, of the Merging Corporation (the
"Merging Corporation Common Stock"), or the holders of the shares of the common
stock, par value $.001 per share, of the Purchaser (the "Purchaser Common
Stock"):
(a) Common Stock of Purchaser. Each share of Purchaser Common
Stock issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of common
stock, par value $.001 per share, of the Surviving Corporation, which shall be
all of the issued and outstanding capital stock of the Surviving Corporation.
(b) Conversion of Merging Corporation Common Stock. All shares
of the Merging Corporation Common Stock which are issued and outstanding
immediately prior to the Merger shall be converted into the right to receive
that number of shares of the common stock,
-3-
<PAGE>
par value $.001 per share (the "Parent Common Stock"), of the Parent which, on
the Closing Date, has an aggregate market value of $10,000,000 (the aggregate
number of such shares of Parent Common Stock being referred to herein as the
"Aggregate Merger Consideration"); provided, however, that in no event shall the
number of shares of Parent Common Stock issuable pursuant hereto exceed
2,000,000. The aggregate number of shares of Parent Common Stock that each share
of Merging Corporation Common Stock shall be convertible into the right to
receive pursuant hereto shall be determined by dividing (i) the aggregate number
of shares of Parent Common Stock which comprise the Aggregate Merger
Consideration by (ii) 25,000 (the aggregate number of issued and outstanding
shares of Merging Corporation Common Stock on the Effective Date).
As of the Effective Date, all such shares of Merging
Corporation Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the Aggregate Merger Consideration
upon the surrender of such certificates in accordance with Section 1.08 below.
SECTION 1.08 SURRENDER AND EXCHANGE OF CERTIFICATES. (a) At
the Closing, the Sellers shall surrender to the Parent all certificates and
other instruments evidencing all of the shares of Merging Corporation Common
Stock owned by each such Seller. In exchange therefor, the Parent shall deliver
to such Seller the shares of Parent Common Stock that each such Seller is
entitled to receive pursuant to Section 1.07(b) above.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As an inducement to the Parent and the Purchaser to enter into this
Agreement, the Sellers, jointly and severally, hereby represent and warrant to
the Parent and the Purchaser as follows:
SECTION 2.01. AUTHORITY OF SELLERS. Each of the Sellers has
the full legal right, power, capacity and authority to enter into this Agreement
and to carry out his or her obligations hereunder. This Agreement has been duly
executed and delivered by each Seller, and this Agreement constitutes a legal,
valid and binding obligation of each Seller enforceable against each in
accordance with its terms.
SECTION 2.02. OWNERSHIP OF SHARES. Each Seller owns
beneficially and of record, free and clear of all encumbrances, the number of
shares of Merging Corporation Common Stock set forth opposite each such Seller's
name on Schedule 3.02 hereto.
SECTION 2.03. NO REGISTRATION. Each Seller acknowledges and
understands that the shares of Parent Common Stock to be issued in accordance
with the terms of the Merger will
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not be registered under the Securities Act of 1933, as amended (the "Act") in
reliance upon an exemption therefrom for non-public or limited offerings. The
Sellers acknowledge and understand that the shares of Parent Common Stock to be
received pursuant to the Merger must be held indefinitely unless the sale or
other transfer thereof is subsequently registered under the Act or an exemption
from such registration is available at that time.
SECTION 2.04 TRANSFER RESTRICTIONS. Each Seller acknowledges,
understands and agrees that the following restrictions and limitations are
applicable to the shares of Parent Common Stock: (a) The following legend will
be placed on any certificate(s) or other document(s) evidencing the shares of
Purchaser Common Stock:
"The securities represented by this certificate have not been
registered and may not be transferred unless (A) the stockholder
wishing to transfer such securities provides an opinion of
counsel reasonably concurred in by counsel for Aristo
International Corporation (the "Company") stating that the
proposed transfer of the Company's securities is exempt from the
registration provisions of all applicable federal and state
securities laws; or (B) said securities have been registered
pursuant to the Securities Act of 1933, as amended."
(b) Stop transfer instructions have been or will be
placed on any certificates or other documents evidencing the shares of Parent
Common Stock so as to restrict the resale, pledge, hypothecation or other
transfer thereof in accordance with the provisions hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
MERGING CORPORATION, BORTA AND DAVIS
As an inducement to the Parent and the Purchaser to
enter into this Agreement, the Merging Corporation, Borta and Davis, jointly and
severally, hereby represent and warrant to the Parent and the Purchaser as
follows:
SECTION 3.01. ORGANIZATION, AUTHORITY AND QUALIFICATION OF THE
COMPANY. The Merging Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Virginia and has
all necessary power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby, to
own, operate or lease the properties and assets now owned, operated or leased by
it and to carry on its business as it has been and is currently conducted. The
Merging Corporation is not licensed or qualified to do business in any other
jurisdiction, and the operation of the Merging Corporation's business does not
require that the Merging Corporation
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be licensed or qualified to do business in any other jurisdiction. All corporate
actions taken by the Merging Corporation have been duly authorized and the
Merging Corporation has not taken any action that in any respect conflicts with,
constitutes a default under or results in a violation of any provision of its
Certificate of Incorporation or by-laws. True and correct copies of the
Certificate of Incorporation and by-laws of the Merging Corporation, each as in
effect on the date hereof, have been delivered by the Merging Corporation to the
Parent.
SECTION 3.02. CAPITAL STOCK OF THE MERGING CORPORATION;
OWNERSHIP OF THE SHARES. (a) The authorized capital stock of the Merging
Corporation consists of 25,000 shares of common stock, no par value. As of the
date hereof, 25,000 shares of Merging Corporation Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable. None
of the issued and outstanding shares of Merging Corporation Common Stock was
issued in violation of any preemptive rights. There are no options, warrants,
convertible securities or other rights, agreements, arrangements or commitments
of any character relating to the capital stock of the Merging Corporation or
obligating any of the Sellers or the Merging Corporation to issue or sell any
shares of capital stock of, other interest in, the Merging Corporation. There
are no outstanding contractual obligations of the Merging Corporation to
repurchase, redeem or otherwise acquire any shares of Merging Corporation Common
Stock or to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any other person. There are no voting
trusts, stockholder agreements, proxies or other agreements or understandings in
effect with respect to the voting or transfer of any of the shares of Merging
Corporation Common Stock.
(b) Schedule 3.02 hereto accurately sets forth: (i) the name
and address of each person owning shares of Merging Corporation Common Stock and
(ii) the certificate number of each certificate evidencing shares of Merging
Corporation Common Stock, the number of shares evidenced by each such
certificate, the date of issuance thereof and, in the case of cancellations, the
date of cancellation.
SECTION 3.03. NO SUBSIDIARIES. There are no corporations,
partnerships, joint ventures, associations or other entities in which the
Merging Corporation owns, of record or beneficially, any direct or indirect
equity or other interest or any right (contingent or otherwise) to acquire the
same or which is controlled by the Merging Corporation directly or indirectly
through one or more intermediaries.
SECTION 3.04. CORPORATE BOOKS AND RECORDS. All accounts,
books, ledgers and other records material to the business of the Merging
Corporation of whatsoever kind have been fully, properly and accurately kept and
completed in all material respects, and there are no material inaccuracies or
discrepancies of any kind contained or reflected therein, and they give and
reflect a true and fair view of the financial position of the Merging
Corporation. Complete and accurate copies of the minute books of the Merging
Corporation have been provided by the Merging Corporation to the Parent.
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SECTION 3.05. NO CONFLICT. Except as set forth on Schedule
3.05 hereto, neither the Merging Corporation nor any of the Sellers are subject
to, or a party to, any charter, by-law, mortgage, lien, agreement, contract or
instrument, or to any material lease, permit, law, rule, ordinance, regulation,
order, judgment or decree, or any other material restriction of any kind or
character, which has a material adverse effect on the business of the Merging
Corporation or any of its assets or properties, or which would prevent
consummation of the transactions contemplated by this Agreement, compliance by
the Sellers or the Merging Corporation with the terms, conditions and provisions
of this Agreement or any other agreement entered into by the Sellers or the
Merging Corporation in connection with the transactions contemplated hereby, or
the continued operation of the business of the Merging Corporation after the
date hereof or after the Closing Date on substantially the same basis as
heretofore operated. Except as set forth on Schedule 3.05 hereto, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not (i) violate, conflict with or result
in the breach of any provision of the certificate of incorporation or by-laws of
the Merging Corporation, (ii) violate or result in the breach of any of the
terms of, result in a material modification of, or otherwise give any other
contracting party the right to terminate, or constitute (or with notice or lapse
of time or both constitute) a default under, any material contract or other
agreement to which the Merging Corporation or any of its assets or properties,
or any of the Sellers, may be bound or subject, (iii) to the best knowledge of
the Merging Corporation, Borta or Davis, violate any order, writ, judgment,
injunction, award or decree of any court, arbitrator, or governmental or
regulatory body against, or binding upon, any Seller or the Merging Corporation
or any of its assets; or (iv) to the best knowledge of the Merging Corporation,
Borta or Davis violate any statute, law or regulation of any jurisdiction.
SECTION 3.06. CONSENTS AND APPROVALS. Except for the required
approval of the Merger by the Sellers, as set forth on Schedule 3.06 or as
previously obtained, no consent or approval of, other action by, or notice to,
any governmental body or agency (domestic or foreign), or any third party is
required in connection with the execution and delivery by the Sellers or the
Merging Corporation of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 3.07. FINANCIAL STATEMENTS; CONDUCT IN THE ORDINARY
COURSE AND ABSENCE OF CERTAIN CHANGES, EVENTS AND CONDITIONS. (a) The Merging
Corporation has heretofore furnished the Parent with unaudited balance sheets of
the Merging Corporation and the predecessor of the Merging Corporation, Borta
Associates (the "Predecessor"), for each of the years ended December 31, 1994,
1993 and 1992 and the related unaudited statements of income, retained earnings
and changes in financial position for the years then ended, including notes
thereto, as well as the unaudited balance sheet of the Merging Corporation as at
May 31, 1995 and the related unaudited statement of income, retained earnings
and changes in financial position for the five months then ended, including
notes thereto (collectively, the "Unaudited Financial Statements"). Such
Unaudited Financial Statements, including the footnotes thereto, are true and
correct and have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods indicated. The Unaudited
Financial
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Statements fairly and accurately present the financial condition and results of
operations of the Merging Corporation and the Predecessor as of the respective
dates thereof. The Unaudited Financial Statements reflect all claims against and
all debts and liabilities of the Merging Corporation and the Predecessor, fixed
or contingent, required to be shown thereon under generally accepted accounting
principles. The Merging Corporation has caused the Unaudited Financial
Statements to be audited (as so audited, the "Audited Financial Statements") by
Yount, Hyde & Barbour, P.C. of Sterling, Virginia, independent public accountant
acceptable to the Parent (the "Auditor"), and has delivered such Audited
Financial Statements to the Parent on or prior to the date hereof.
(b) Since May 31, 1995, there have been no material adverse
changes in the assets or liabilities, or in the condition, financial or
otherwise, or in the results of operations, or in the prospects of the Merging
Corporation, whether as a result of any legislative or regulatory change,
revocation of any license or rights to do business, fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm condemnation or act of God
or other public force or otherwise, and, to the best knowledge, information and
belief of the Merging Corporation, Borta and Davis, no fact or condition exists
which might cause such a material adverse change in the future. Since May 31,
1995, the business of the Merging Corporation has been conducted in the ordinary
course and consistent with past practice. As amplification and not limitation of
the foregoing, since May 31, 1995, the Merging Corporation has not:
(i) permitted or allowed any of the assets or properties
(whether tangible or intangible) of the Merging Corporation
to be subject to any lien or encumbrance;
(ii) made any change in any method of accounting or
accounting practice, principle or policy used by the Merging
Corporation, other than such changes required by U.S. GAAP;
(iii) amended, terminated, canceled, or compromised any
material claims of the Merging Corporation or waived any
other rights of substantial value to the Merging
Corporation;
(iv) sold, transferred, leased, subleased, licensed or
otherwise disposed of any properties or assets, real,
personal or mixed, other than in the ordinary course of
business consistent with past practice;
(v) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire
the same, of the Merging Corporation;
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(vi) redeemed any of the capital stock or declared, made
or paid any dividends, distributions, bonuses or fees
(whether in cash, securities or property) to the holders of
shares of Merging Corporation Common Stock;
(vii) made any capital expenditures or commitment for any
capital expenditure in excess of $35,000 in the aggregate;
(viii) made any material changes in the customary methods of
operations of the Merging Corporation; or
(ix) except with respect to clause (vii) above, incurred
any indebtedness in excess of $12,000 in the aggregate.
SECTION 3.08 MATERIAL CONTRACTS. Schedule 3.08 contains a list
and brief description of all Material Contracts (as defined below) to which the
Merging Corporation is a party. True and complete copies of each of the Material
Contracts, with all amendments, modifications and supplements thereto to the
date hereof, have previously been furnished by the Merging Corporation to the
Parent or its representatives. With respect to the Material Contracts: each of
such Material Contracts is valid, subsisting and in full force and effect and
the Merging Corporation is not in breach or violation of any of the terms,
conditions or provisions of any of such Material Contracts, and to the best
knowledge of the Merging Corporation no third party to any of the Material
Contracts is in breach or violation of any of the terms, conditions or
provisions thereof; and the Merging Corporation has not transferred or
subordinated any of its rights or interests in any of the Material Contracts,
and such rights and interests are subject to no liens or other encumbrances.
As used in this Section 3.08, "Material Contracts" means all
material agreements, leases, licenses, contracts or commitments (whether oral or
written) to which the Merging Corporation is a party, including, without
limitation, (1) powers of attorney, (2) credit agreements, loan agreements, note
purchase agreements, security agreements, mortgages, trust deeds, trust
indentures, notes, letters of credit and other agreements and instruments
relating to the borrowing of money or the extension of credit (other than
ordinary course extensions of credit payable within 30 days in connection with
credit cards and arrangements with vendors), (3) bonds, fidelity or surety
contracts, guarantees or similar obligations, (4) consulting agreements and
agreements or contracts for the rendering of professional services with any
officer, employee, director, shareholder, professional person or firm,
independent contractor or advertising firm or agency, (5) secrecy or
non-disclosure agreements, (6) employment, consulting, pension, profit sharing,
retirement, severance, matching gift, bonus, stock option, employee stock
ownership, employee or officer incentive, health or welfare, or other
compensation or employee benefit plans, contracts, agreements or arrangements,
(7) contracts or collective bargaining agreements with any labor union or
representative of employees, (8) leases of real and personal property, (9)
commitments or contracts relating to
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political contributions or donations, (10) agreements restricting dividends or
distributions or the right to conduct business, (11) distribution, sourcing,
marketing, sales representative, agency or territorial agreements, (12) royalty,
franchise or license agreements or other similar agreements pursuant to which,
among other things, another party has the right to manufacture, sell or
distribute products of the Merging Corporation or products that use or
incorporate any item of Intellectual Property (as such term is defined in
Section 3.22) of the Merging Corporation, or pursuant to which the Merging
Corporation has the right to manufacture, sell or distribute products of another
party or products that use or incorporate any item of Intellectual Property of
another party, (13) joint venture and partnership agreements, (14) any contract,
agreement or commitment containing any covenant materially limiting the freedom
of the Merging Corporation to do business or compete in any line of business or
with any person or in any area, (15) agreements or contracts granting or
agreeing to grant any person sourcing, marketing, distribution or similar rights
and (16) all other contracts, agreements, sales orders, purchase orders, supply
contracts, requirements contracts, advertising agreements, customer service
agreements, asset purchase agreements, stock purchase agreements, merger
agreements, acquisition agreements, tax sharing agreements, future purchase
commitments or other obligations which involve an amount in excess of
twenty-five thousand Dollars ($25,000) individually or require performance over
a period in excess of twelve (12) months and either have a remaining term of
more than thirty (30) days from the Closing Date or are not cancelable without
penalty of less than ten thousand Dollars ($10,000).
SECTION 3.09. NO UNDISCLOSED LIABILITIES. There are no
material liabilities of the Merging Corporation other than liabilities (i)
reflected or reserved against in the Financial Statements, (ii) disclosed on
Schedule 3.09 hereto or (iii) incurred since the date of this Agreement in the
ordinary course of business, consistent with past practice, of the Merging
Corporation and which do not and are not reasonably likely to have a material
adverse effect on the Merging Corporation.
SECTION 3.10. INDEBTEDNESS, GUARANTIES, LIABILITIES, ETC.
Schedule 3.10 contains a complete and accurate list of all direct and indirect
(i) indebtedness of the Merging Corporation for borrowed money (including
commitments, lines of credit and other credit availabilities); (ii) guaranties
of the Merging Corporation; and (iii) other material liabilities and obligations
of the Merging Corporation (whether absolute, accrued, contingent or otherwise).
The Merging Corporation is current in its payment of debts and performance of
obligations.
SECTION 3.11. TAXES. The Merging Corporation has filed, within
the times and within the manner prescribed by law, all federal and local tax
returns and material tax reports which are required to be filed by, or with
respect to, the Merging Corporation (including, without limitation, any
corporate income and sales tax filings required to be made and/or paid in any
jurisdiction where the Merging Corporation is qualified to do business or is
otherwise required to make such filings). Such returns reflect accurately all
liability for all federal, state and local income, sales, payroll and
withholding taxes and other material taxes of the
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Merging Corporation for the periods covered thereby, and all amounts shown on
such returns and reports as due and payable have been timely paid.
SECTION 3.12. COMPLIANCE WITH LAWS; LICENSES AND PERMITS.
(a) The Merging Corporation is in material compliance with all applicable
federal, state and other laws, regulations, orders, judgments and decrees
("Requirements of Law"). The Merging Corporation has not been charged with, or
threatened with, nor is it under any investigation with respect to, any charge
concerning any violation of any Requirement of Law. To the best knowledge of the
Merging Corporation, Borta and Davis, neither the ownership nor use by the
Merging Corporation of its properties nor the conduct of its business (i)
conflicts with the rights of any other person, or (ii) violates or will violate,
conflicts or will conflict with, or results or will result in a material breach,
default, right to accelerate or loss of rights under, or termination of, any of
the terms or provisions of the Merging Corporation's certificate of
incorporation or by-laws as presently in effect, or any Material Contract to
which the Merging Corporation is a party or by which it or its properties may be
bound.
(b) The Merging Corporation has all material licenses and permits
and other governmental certificates, authorizations and approvals (collectively,
"Licenses") required by every federal, state and local governmental or
regulatory body for the operation of its business and the use of its properties
as presently operated or used. Schedule 3.12 contains a true and complete list
of the Licenses. All of the licenses are in full force and effect and no action
or claim is pending, nor, to the best knowledge of the Merging Corporation,
Borta and Davis, is threatened, to revoke or terminate any of the Licenses or
declare any License invalid in any material respect.
SECTION 3.13. CUSTOMERS. Listed in Schedule 3.13 are the
names and addresses of all customers of the Merging Corporation, including all
targeted or potential customers which have been the subject of any material
marketing or market research activities of the Merging Corporation. Except as
disclosed in Schedule 3.13, none of Borta, Davis or the Merging Corporation has
received any notice or has any reason to believe that any significant customer
of the Merging Corporation has ceased, or will cease, to use the products,
equipment, goods or services of the Merging Corporation, or has substantially
reduced, or will substantially reduce, the use of such products, equipment,
goods or services at any time.
SECTION 3.14 SUPPLIERS. Except as disclosed in Schedule 3.14,
none of Borta, Davis or the Merging Corporation has received any notice or has
any reason to believe that any significant supplier will not sell raw materials,
supplies, merchandise and other goods to the Merging Corporation at any time
after the Closing Date on terms and conditions similar to those used in its
current sales to the Merging Corporation, subject to general and customer price
increases.
SECTION 3.15. EMPLOYEES. (a) Schedule 3.15 contains a complete
and accurate list of each employee or director of the Merging Corporation,
including
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each employee on leave of absence or layoff status, including each's name,
employer, job title, current compensation and any change in compensation since
January 1, 1993, vacation accrued and service credited for purposes of vesting
and eligibility to participate under each employee benefit plan maintained by
the Merging Corporation. Except for employees who are parties to employment
contracts with the Merging Corporation as set forth in Schedule 3.16, each
employee's employment is at will. A true and accurate copy of each employee
manual or other document setting forth all employment practices, policies and
benefits has been provided to Parent.
(b) To the best of Borta's, Davis' and the Merging Corporation's
knowledge, no employee of the Merging Corporation intends to terminate his
employment with the Merging Corporation.
(c) To the best of Borta's, Davis' and the Merging Corporation's
knowledge, no officer, director, agent, employee, consultant, or contractor of
the Merging Corporation is bound by any contract (including any confidentiality,
non-competition or proprietary rights agreement) that purports to limit the
ability of such officer, director, agent, employee, consultant or contractor to
(A) engage in or continue any conduct, activity or practice relating to the
business of the Merging Corporation, or (B) assign to the Merging Corporation or
to any other person any rights to any invention, improvement or discovery.
(d) There are no retired employees or directors of the Merging
Corporation that are (or whose dependents are) receiving benefits or are
scheduled to receive benefits in the future from the Merging Corporation or
under any employee benefit plan maintained by the Merging Corporation.
SECTION 3.16. EMPLOYEE BENEFITS. Schedule 3.16 contains a true
and complete list of all bonus, deferred compensation, incentive compensation,
stock purchase, stock option, employment, consulting, severance or termination
pay, hospitalization or other medical, life or other insurance, or retirement
plan, program, agreement or arrangement maintained by the Merging Corporation
with respect to its employees.
SECTION 3.17. EMPLOYMENT RELATIONS. The Merging Corporation is
in compliance with all federal, state or other applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including labor, civil rights and occupational health and
safety laws, and is not engaged in any unfair labor practice. No unfair labor
practice complaint against the Merging Corporation is pending before the
National Labor Relations Board. There is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against or involving the Merging
Corporation. No union representation question exists respecting the employees of
the Merging Corporation. No collective bargaining agreement exists or is
currently being negotiated by the Merging Corporation. The Merging Corporation
has not experienced any work stoppage or any other labor difficulty during the
last three years. Except as set forth on Schedule 3.17, no employees or
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former employees of the Merging Corporation are currently receiving benefits
pursuant to Section 601 et.seq. of ERISA (COBRA).
SECTION 3.18. ACCOUNTS RECEIVABLE. Each account receivable of
the Merging Corporation arose from sales made in the ordinary course of business
in a bona fide arm's-length transaction, has been reflected on the Merging
Corporation's books and record, and is represented by a written invoice or other
written document that is legal, valid, binding and enforceable against the
customer in accordance with its terms and provisions, and reflects all material
agreements and understandings with the customer with respect thereto.
SECTION 3.19. PROPERTIES. (a) Schedule 3.19 (a) contains a
complete and accurate list of all items of machinery, equipment, furniture,
fixtures, leasehold improvements and other fixed assets of the Merging
Corporation.
(b) The assets and properties (real and personal) of the
Merging Corporation are in good working order and condition (ordinary wear and
tear and retirement excepted), are used or usable in the current conduct of the
Merging Corporation's business and constitute all fixed assets necessary for the
current conduct of the Merging Corporation's business.
(c) Schedule 3.19(b) contains a complete and accurate list of
all real property owned by the Merging Corporation and all leases for personal
or real property or other interest in real or personal property held by the
Merging Corporation. The Merging Corporation has delivered to the Parent true
and correct copies of all deeds, leases and other instruments by which the
Merging Corporation acquired such real property and interests.
(d) The Merging Corporation owns and has good and marketable
title to all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) that they purport to own on their books and
records. All properties and assets of the Merging Corporation are free and clear
of all encumbrances.
SECTION 3.20. INSURANCE. Schedule 3.20 hereto sets forth a
brief description (showing the policy number, name of carrier, coverage,
deductible amounts, terms, expiration date and premium) of all policies of fire,
casualty, liability and other insurance owned by or for the benefit of the
Merging Corporation (true and complete copies of which have been delivered to
Purchaser) and all self-insurance programs maintained for the business of the
Merging Corporation. All policies are in full force and effect, are adequate in
amount, scope and coverage to protect the Merging Corporation against any
material loss of its assets and properties or any interruption in its operations
and all premiums due thereon have been paid in full.
The Merging Corporation has not received notice of any (or any
proposed or contemplated) (i) refusal of coverage or that a defense will be
afforded with reservations of rights, or (ii) cancellation or other indication
that any insurance policy is no longer
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in full force or effect, that the insurer is not willing, refuses or is unable
to perform its obligations under or does not intend to renew on similar terms
and conditions any insurance policy. There are not claims pending by, or
proposed for assertion by, the Merging Corporation or any of the Merging
Corporation's or a third party's insurance policy.
SECTION 3.21. CERTAIN INTERESTS. Except as disclosed in
Schedule 3.21, no officer or director of the Merging Corporation and no relative
or spouse (or relative of such spouse) who resides with, or is a dependent of,
any such officer or director:
(i) has any direct or indirect financial interest in any compet
itor, supplier or customer of the Merging Corporation, provided,
however, that the ownership of securities representing less than
five percent of the outstanding voting power of any competitor,
supplier customer, and which are listed on any national
securities exchange or traded actively in the national
over-the-counter market, shall not be deemed to a "financial
interest" so long as the person owning such securities has no
other connection or relationship with such competitor, supplier
or customer;
(ii) owns, directly or indirectly, in whole or in part, or has
any other interest in any tangible or intangible property which
the Merging Corporation uses or has used in the conduct of its
business or otherwise; or
(iii) has outstanding any indebtedness to the Merging
Corporation.
Except as disclosed in Schedule 3.21, the Merging Corporation has no material
liability or any other obligation of any nature whatsoever to any officer,
director or shareholder of the Merging Corporation or to any relative or spouse
(or relative of such spouse) who resides with, or is a dependent of, any such
officer, director or shareholder.
SECTION 3.22 INTELLECTUAL PROPERTY. (a) Schedule 3.22 (a)(i)
sets forth a true and complete list and a brief description, including a
complete identification of each patent or patent application and each
registration or application for registration thereof, of all Intellectual
Property (as defined below) in and to which the Merging Corporation holds, or
has a right to hold, right, title and interest ("Owned Intellectual Property"),
and Schedule 3.22 (a)(ii) sets forth a true and complete list and a brief
description of all Intellectual Property licensed or sublicensed to the Merging
Corporation from an affiliate thereof or from a third party ("Licensed
Intellectual Property"). Except as otherwise described in Schedule 3.22 (a)(i)
with respect to each registration or patent or application for registration or
patent listed in Schedule 3.22 (a)(i) which is held by assignment, the
assignment has been duly recorded with the Patent Office or Copyright Office or
the State or International Trademark Office from which the original registration
or
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patent issued or before which the application for registration or patent is
pending. Except as disclosed in Schedule 3.22 (a)(iii), the rights of the
Merging Corporation in or to such Intellectual Property do not conflict with or
infringe on the rights of any other person and none of the Sellers or the
Merging Corporation has received any claim or written notice from any person to
such effect.
As used herein, "Intellectual Property" means (i)
inventions, whether or not patentable, whether or not reduced to practice, or
whether or not yet made the subject of a pending patent application or
applications, (ii) ideas and conceptions of potentially patentable subject
matter, including, without limitation, any patent disclosures, whether or not
reduced to practice and whether or not yet made the subject of a pending patent
application or applications, (iii) all national (including U.S.) and
multinational statutory invention registrations, patents, patent registrations
and patent applications (including reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights therein
provided by multinational treaties or conventions and all improvements to the
inventions disclosed in each such registration, patent or application, (iv)
trademarks, service marks, trade dress, logos, tradenames and corporate names,
including all of the good will associated therewith, whether or not registered,
including all common law rights, and registrations and applications for
registration thereof, including, but not limited to, all marks registered in the
United States Patent and Trademark Office, the Trademark Offices of the States
and Territories of the United States of America, and the Trademark Offices of
other nations throughout the world, and all rights therein provided by
multinational treaties or conventions, (v) copyrights, whether or not
registered, and registrations and applications for registration thereof, and all
rights therein provided by multinational treaties or conventions, (vi) computer
software, including, without limitation, source code, object code, operating
systems and specifications, data, data bases, files, documentation and other
materials related thereto, data and documentation, (vii) trade secrets and
confidential, technical or business information (including ideas, formulas,
compositions, inventions and conceptions of inventions whether patentable or
unpatentable and whether or not reduced to practice), (viii) whether secret or
confidential or not, technology (including know-how and show-how), manufacturing
and production processes or techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, (ix) copies and tangible embodiments of all of the foregoing, in
whatever form or medium, (x) all rights to obtain and rights to apply for
patents, and to register trademarks and copyrights, and (ix) all rights to sue
and recover and retain damages and costs and attorney's fees for present and
past infringement of any of the Intellectual Property rights hereinabove set
out.
(b) Except as disclosed in Schedule 3.22(b): (i) all the
Owned Intellectual Property is or will be owned by the Merging Corporation, free
and clear of any encumbrances and the Merging Corporation has the entire right,
title, and interest in and to same and (ii) no actions have been made or
asserted or are pending (nor has any such action been threatened) against the
Merging Corporation either (A) based upon or challenging or seeking to deny or
restrict the use by the Merging Corporation of any of the Owned Intellectual
Property or (B) alleging that the
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business of the Merging Corporation as conducted in the past or as conducted at
the date of Closing infringes or otherwise violates the Intellectual Property
rights, including patent, trademark, copyright, or trade secret rights, of any
third party. The business of the Merging Corporation as conducted in the past
and as conducted as of the date hereof does not infringe or otherwise violate
the Intellectual Property rights, including patent, trademark, copyright, or
trade secret rights of any third party. To the best knowledge of Borta, Davis
and the Merging Corporation, no third party person is infringing, violating, or
otherwise using, in an unauthorized manner, any Owned Intellectual Property
right. Except as disclosed in Schedule 3.22 (b), the Merging Corporation has not
granted any license or other right to any other person with respect to the Owned
Intellectual Property. The consummation of the transactions contemplated by this
Agreement will not result in the termination of any of the Owned Intellectual
Property or Licensed Intellectual Property.
(c) With respect to all Licensed Intellectual Property and
Owned Intellectual Property, the registered user provisions of all nations
requiring such registrations have been complied with.
(d) The Merging Corporation has, or has caused to be,
delivered to the Parent correct and complete copies of all licenses and
sublicenses for Licensed Intellectual Prop erty set forth in Schedule 3.22
(a)(ii) and any and all ancillary documents pertaining thereto (including, but
not limited to, all amendments, consents and evidence of commencement dates and
expiration dates). With respect to each of such licenses and sublicenses:
(i) such license or sublicense, together with all ancillary
documents delivered pursuant to the first sentence of this
Section 3.22(d), is legal, valid, binding, enforceable and
in full force and effect and represents the entire agreement
between the respective licensor and licensee with respect to
the subject matter of such license or sublicense;
(ii) except as otherwise set forth in Schedule 3.22(a)(ii),
such license or sublicense will not cease to be legal,
valid, binding, enforceable and in full force and effect on
terms identical to those currently in effect as a result of
the consummation of the transactions contemplated by this
Agreement, nor will the consummation of the transactions
contemplated by this Agreement constitute a breach or
default under such license or sublicense or otherwise give
the licensor or sublicensor a right to terminate such
license or sublicense;
(iii) except as otherwise disclosed in Schedule 3.22(a)(ii),
with respect to each such license or sublicense: (A) none of
Borta, Davis or the Merging Corporation has received any
notice of termination or cancellation under such license or
sublicense and no licensor or sublicensor has any right of
termination or cancellation under such license or sublicense
except in connection with the default of the Merging
Corporation thereunder, (B) none of Borta, Davis or the
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Merging Corporation has received any notice of a breach or
default under such license or sublicense, which breach or
default has not been cured, and (C) none of Borta, Davis or
the Merging Corporation has granted to any other person any
right, adverse or otherwise, under such license or
sublicense;
(iv) none of the Merging Corporation nor (to the best
knowledge of Borta and Davis) any other party to such
license or sublicense is in breach or default in any
material respect, and, to the best knowledge of Borta, Davis
and the Merging Corporation, no event has occurred that,
with notice or lapse of time would constitute such a breach
or default or permit termination, modification or acceler
ation under such license or sublicense;
(v) no actions have been made or asserted or are pending
(nor, to the best knowledge of the Borta, Davis or the
Merging Corporation, has any such action been threatened)
against the Merging Corporation either (A) based upon or
challenging or seeking to deny or restrict the use by the
Merging Corporation of any of the Licensed Intellectual
Property or (B) alleging that any Licensed Intellectual
Property is being licensed, sublicensed or used in violation
of any Intellectual Property right, including any patent,
trademark, copyright or trade secret right, or any other
rights of any Person; and
(vi) to the knowledge of the Borta, Davis and the Merging
Corporation, no third party person is infringing, violating,
or otherwise using in an unauthorized manner Licensed
Intellectual Property.
(e) Except as set forth in Schedule 3.22(e), none of Borta,
Davis or the Merging Corporation are aware of any reason that would prevent any
pending applications to register trademarks, service marks or copyrights or any
pending patent applications from being granted.
(f) The Intellectual Property set forth in Schedules
3.22(a)(i) and (ii) constitutes all the material Intellectual Property used or
held or intended to be used by the Merging Corporation in the business of the
Merging Corporation as conducted in the past and at the date of Closing and
constitutes all material Intellectual Property necessary in the conduct of the
business of the Merging Corporation as conducted in the past and at the date of
Closing and there are no other items of Intellectual Property that are material
to the Merging Corporation or the business of the Merging Corporation as
conducted in the past and at the date of Closing.
SECTION 3.23. LITIGATION. Except as set forth on Schedule
3.23, there is no action, suit, proceeding at law or in equity by any person, or
any arbitration or any administrative or other proceeding by or before any
governmental or other instrumentality or agency, pending or, to the best
knowledge of Borta, Davis or the Merging Corporation, threatened against or
affecting the Merging Corporation, the business of the Merging
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Corporation or any of the Merging Corporation's properties, assets or rights and
none of Borta, Davis or the Merging Corporation knows of any facts or
circumstances which would provide a valid basis for any such action or
proceeding. None of Borta, Davis or the Merging Corporation are subject to any
judgments, orders or decrees entered in any lawsuit or proceeding which relate
to the Merging Corporation or the Merging Corporation's business in any way.
SECTION 3.24. BROKERS. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Merging Corporation, Borta or Davis.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PURCHASER
As an inducement to the Merging Corporation and the Sellers to enter
into this Agreement, the Parent and the Purchaser hereby, jointly and severally,
represent and warrant to the Merging Corporation and the Sellers as follows:
SECTION 4.01 ORGANIZATION, POWERS, ETC. Each of the Parent and
the Purchaser is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to conduct their businesses as they are now being conducted, to own or
use the properties and assets that they purport to own or use and to perform all
their obligations under their material contracts.
SECTION 4.02. AUTHORIZATION, CONFLICTS AND VALIDITY. (a) Each
of the Parent and the Purchaser has the full legal right, power and authority to
execute and deliver this Agreement and to perform their obligations hereunder.
The execution and delivery of this Agreement by the Parent and the Purchaser and
the consummation of the transactions contemplated hereby have been duly
authorized by the Parent and the Purchaser. This Agreement has been duly and
validly authorized, executed and delivered by the Parent and the Purchaser and
constitutes the legal, valid, and binding obligation of each of the Parent and
the Purchaser, enforceable against the Parent and the Purchaser in accordance
with its terms.
(b) Neither the execution and delivery of this Agreement nor
the consummation or performance of any of the transactions contemplated hereby
will, directly or indirectly (with or without notice or lapse of time): (i)
contravene, conflict with, or result in a violation of any provision of the
Certificate of Incorporation or by-laws of the Parent or the Purchaser, or any
reso lution adopted by the board of directors or the stockholders, of the Parent
or the Purchaser; (ii) con travene, conflict with, or result in a violation of,
or give any governmental body or other person the right to challenge any of the
transactions contemplated hereby or to exercise any remedy or obtain
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any relief under, any legal requirement or any order to which the Parent or the
Purchaser may be subject; or (iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any governmental body
the right to revoke, withdraw, suspend, cancel, terminate or modify, any
governmental authorization that is held by the Parent or the Purchaser.
SECTION 4.03. CAPITAL STOCK OF THE PARENT. The authorized
capital stock of the Parent consists of 19,000,000 shares of common stock, par
value $0.001 per share, and 1,000,000 shares of preferred stock, par value
$0.001 per share. Upon consummation of the transactions contemplated by this
Agreement and the surrender of the certificates representing the shares of
Merging Corporation Common Stock in accordance with Section 1.08 below, the
Sellers will acquire the shares of Parent Common Stock free and clear of all
encumbrances and the shares of Parent Common Stock will be fully paid and
nonassessable.
SECTION 4.04 LITIGATION. Except as set forth on Schedule 4.04,
there is no action, suit, proceeding at law or in equity by any person, or any
arbitration or any administrative or other proceeding by or before any
governmental or other instrumentality or agency, pending or, to the best
knowledge of the Parent and the Purchaser, threatened against or affecting the
Parent or the Purchaser, the business of the Parent or the Purchaser or any of
the Parent's or the Purchaser's properties, assets or rights and neither the
Parent nor the Purchaser knows of any facts or circumstances which would provide
a valid basis for any such action or proceeding. Neither the Parent nor the
Purchaser is subject to any judgments, orders or decrees entered in any lawsuit
or proceeding which relate to the Parent or the Purchaser or the business of
either in any way.
SECTION 4.05. SEC REPORTS. The Parent has furnished to the
Merging Corporation true and complete copies of (i) the Parent's Current Report
on Form 8-K, filed May 5, 1995, (ii) the Parent's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1995, and (iii) the Parent's Information
Statement, dated March 20, 1995, filed by the Parent with the Securities and
Exchange Commission (the "SEC") (such reports and statements being referred to
as the "SEC Reports"). As of their respective dates, such SEC Reports did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Parent has filed all material documents required to be filed by it with the SEC
and all such documents complied as to form with the applicable requirements of
law.
SECTION 4.06. NO SUBSEQUENT EVENTS. Since the date of the most
recent SEC Report, to the best of the Parent's knowledge, no event has occurred
which would require that the Parent file with the SEC a Current Report on Form
8-K under the Securities Exchange Act of 1934, as amended.
SECTION 4.07. BROKERS. Except for Bob Orbach, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Parent or the Purchaser. The
Parent is solely responsible for the fees and expenses of Mr. Orbach.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. APPROVAL OF MERGER. (a) The Parent, in its
capacity as the sole stockholder of the Purchaser, hereby approves the Merger
and the consummation of all of the transactions contemplated by this Agreement.
(b) The Sellers, as the owners of all of the issued and
outstanding shares of Merging Corporation Common Stock, hereby approve the
Merger and the consummation of all of the transactions contemplated by this
Agreement.
SECTION 5.02. CONDUCT OF BUSINESS PRIOR TO THE CLOSING. (a)
The Merging Corporation and the Sellers covenant and agree that between the date
hereof and the Effective Time, none of the Sellers nor the Merging Corporation
shall conduct the business of the Merging Corporation other than in the ordinary
course and consistent with the Merging Corporation's prior practice. Without
limiting the generality of the foregoing, the Merging Corporation to (i)
continue its advertising and promotional activities, and pricing and purchasing
policies, in accordance with past practice; (ii) not shorten or lengthen the
customary payment cycles for any of its payables or receivables; (iii) use its
reasonable best efforts to (A) continue in full force and effect without
material modification all existing policies or binders of insurance currently
maintained in respect of the Merging Corporation and (B) preserve its current
relationships with its customers, suppliers and other persons with which it has
significant business relationships; and (iv) not engage in any practice, take
any action, fail to take any action or enter into any transaction which could
cause any representation or warranty of Borta, Davis or the Merging Corporation
to be materially untrue or result in a material breach of any covenant made by
Borta, Davis or the Merging Corporation in this Agreement.
(b) The Merging Corporation and the Sellers covenant and agree
that, prior to the Effective Time, without the prior written consent of the
Parent, the Merging Corporation shall not do, and none of the Sellers shall
cause the Merging Corporation to do, any of the things enumerated in the third
sentence of Section 3.07(b) hereof (including, without limitation, clauses (i)
through (ix) thereof).
SECTION 5.03 ACCESS TO INFORMATION. From the date hereof until
the Effective Time, upon reasonable notice, the Merging Corporation shall, and
the Merging Corporation shall cause its officers, directors, employees, agents,
accountants and counsel to: (i) afford the officers, employees and authorized
agents, accountants, counsel and representatives of the Parent reasonable
access, during normal business hours, to the offices, properties, plants, other
facilities, books and records of the Merging Corporation and to those officers,
directors, employees, agents, accountants and counsel of the Merging Corporation
who have any knowledge relating to the Merging
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Corporation and (ii) furnish to the officers, employees and authorized agent,
accountants, counsel and representatives of the Parent such additional financial
and operating data and other information regarding the assets (including,
without limitation, any contracts, licenses and patents in effect as of the date
hereof and any contracts or licenses being negotiated or entered into between
the date hereof and the Closing Date), properties and goodwill of the Merging
Corporation (or legible copies thereof) as the Parent may from time to time
reasonably request. Following the Closing Date, the Sellers agree to use their
best efforts to cause the Auditor to cooperate with the Parent with respect to
the reissuance of any and all reports of the Auditor concerning the Merging
Corporation, including, but not limited to, in connection with a proposed public
offering of securities of the Parent or the Surviving Corporation.
SECTION 5.04. CONFIDENTIALITY. The Sellers agree to, and will
cause their agents, representatives, affiliates and employees to: (i) treat and
hold as confidential (and not disclose or provide access to any person to) all
information relating to trade secrets, processes, patent or trademark
applications, product development, price, customer and supplier lists, pricing
and marketing plans, policies and strategies, details of client or consultant
contracts, operations methods, product development techniques, business
acquisition plans, new personnel acquisition plans and any other confidential
information with respect to the Merging Corporation and the Surviving
Corporation, (ii) in the event that any Seller or any such agent,
representative, affiliate or employee becomes legally compelled to disclose any
such information, provide the Parent with prompt written notice of such
requirement so that the Parent or the Surviving Corporation may seek a
protective order or other remedy or waive compliance with this Section 5.04,
(iii) in the event that such protective order or other remedy is not obtained,
or the Parent waives compliance with this Section 5.04, furnish only that
portion of such confidential information which is legally required to be
provided and exercise its best efforts to obtain assurances that confidential
treatment will be accorded such information, (iv) promptly furnish (prior to,
at, or as soon as practicable following, the Closing) to the Merging
Corporation, the Surviving Corporation or the Parent any and all copies (in
whatever form or medium) of all such confidential information then in the
possession of any Seller or any of their agents, representatives, affiliates or
employees and destroy any and all additional copies then in the possession of
such Seller or any of its agents, representatives, affiliates or employees of
such information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof; provided, however, that
this sentence shall not apply to any information that, at the time of
disclosure, is available publicly and was not disclosed in breach of this
Agreement by the Sellers, their agents, representatives, affiliates or
employees; provided further that specific information shall not be deemed to be
within the foregoing exception merely because it is embraced in general
disclosures in the public domain. In addition, any combination of features shall
not be deemed to be within the foregoing exception merely because the individual
features are in the public domain unless the combination itself and its
principle of operation are in the public domain. The Sellers agree and
acknowledge that remedies at law for any breach of their obligations under this
Section 5.04 are inadequate and that in addition thereto the Parent shall be
entitled to seek equitable relief, including injunction and specific
performance, the event of any such breach.
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SECTION 5.05. NOTICES AND CONSENTS. (a) The Merging
Corporation and the Sellers shall promptly give such notices to third parties
and use its or their reasonable efforts to obtain such third party consents and
estoppel certificates as the Parent may reasonably deem neces sary or desirable
in connection with the transactions contemplated by this Agreement.
(b) The Parent shall cooperate and use all reasonable efforts
to assist the Merging Corporation and the Sellers in giving such notices and
obtaining such consents and estoppel cer tificates; provided, however, that the
Parent shall have no obligation to give any guarantee or other consideration of
any nature in connection with any such notice, consent or estoppel certificate
or to consent to any change in the terms of any agreement or arrangement which
the Parent in its reasonable discretion may deem adverse to the interests of the
Parent or the Merging Corporation.
(c) Neither the Merging Corporation nor any of the Sellers
knows of any reason why all the consents, approvals and authorizations necessary
for the consummation of the transactions contemplated hereby will not be
received.
(d) The Sellers and the Parent agree that, in the event any
consent, approval or authorization necessary or desirable to preserve for the
Surviving Corporation any material right or benefit under any lease, license,
contract, commitment or other agreement or arrangement to which the Merging
Corporation is a party is not obtained prior to the Effective Time, the Sellers
will, subsequent to the Effective Time, cooperate with the Parent and the
Surviving Corporation in attempting to obtain such consent, approval or
authorization as promptly thereafter as practicable. If such consent, approval
or authorization cannot be obtained, the Sellers will use their reasonable best
efforts to provide the Surviving Corporation with the material rights and
benefits of the affected lease, license, contract, commitment or other agreement
or arrangement for the term of such lease, license, contract or other agreement
or arrangement, and, if the Sellers provide such rights and benefits, the
Surviving Corporation shall assume the obligations and burdens thereunder.
SECTION 5.06. NOTICE OF DEVELOPMENTS. Prior to the Effective
Time, the Merging Corporation and the Parent shall promptly notify each other in
writing of (i) all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement which could result in any breach of a
representation or warranty or covenant of Borta, Davis, the Merging Corporation,
the Parent or the Purchaser in this Agreement or which could have the effect of
making any representation or warranty of such parties in this Agreement untrue
or incorrect in any respect and (ii) all other material developments affecting
the assets, liabilities, business, financial condition, operations, results of
operations, customer or supplier relations, employee relations, projections or
prospects of the Merging Corporation or the Parent.
SECTION 5.07. NO SOLICITATION OR NEGOTIATION. The Sellers and
the Merging Corporation agree that between the date of this Agreement and the
earlier of (i) the Effective Time and (ii) the termination of this Agreement,
none of the Sellers nor the Merging Corporation nor any of their respective
affiliates, officers, directors, representatives or agents will (a) solicit,
initiate, con sider, encourage or accept any other proposals or offers from any
person (i) relating to any
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acquisition or purchase of all or any portion of the capital stock of the
Merging Corporation or assets of the Merging Corporation, (ii) to enter into any
business combination with the Merging Corporation or (iii) to enter into any
other extraordinary business transaction involving or otherwise relating to the
Merging Corporation, or (b) participate in any discussions, conversations,
negotiations and other communications regarding, or furnish to any other person
any information with respect to, or otherwise cooperation in any way, assist or
participate in, facilitate or encourage any effort or attempt by any other
person to seek to do any of the foregoing. The Merging Corporation and the
Sellers immediately shall cease and cause to be terminated all existing
discussions, conversations, negotiations and other communications with any
persons conducted heretofore with respect to any of the foregoing. The Merging
Corporation and the Sellers shall notify the Parent promptly if any such
proposal or offer, or any inquiry or other contact with any person with respect
thereto, is made and shall, in any such notice to the Parent, indicate in
reasonable detail the identity of the person making such proposal, offer,
inquiry or contact and the terms and conditions of such proposal, offer, inquiry
or other contact. Except as required pursuant to applicable law, the Merging
Corporation and the Sellers agree not to, without the prior written consent of
the Parent, release any person from, or waive any provision of, any
confidentiality or standstill agreement to which any Seller or the Merging
Corporation is a party.
SECTION 5.08. GOOD FAITH DEPOSIT. Borta acknowledges that
pursuant to the Letter of Intent, dated May 31, 1995, among the Purchaser, the
Merging Corporation and Borta, the Purchaser has delivered to the Merging
Corporation a certified check payable to the Merging Corporation in the amount
of $50,000 (the "Good Faith Deposit"). In the event that the transactions
contemplated by this Agreement are consummated and the Closing occurs on or
prior to August 15, 1995, the Surviving Corporation shall be entitled to retain
the Good Faith Deposit as a credit against the funding by the Parent of the
working budget of the Surviving Corporation. In the event, however, that (i) the
Parent determines in its due diligence review of the Merging Corporation that
there exist material differences between the written representations made to the
Parent concerning the Merging Corporation and the documentation reviewed by the
Parent during such due diligence review, or (ii) the Closing does not occur on
or prior to August 15, 1995, then, upon receipt of Parent's written notice to
each of the Merging Corporation, Borta and Davis requesting the refund of the
Good Faith Deposit, the Merging Corporation shall refund to the Parent, by
certified check or wire transfer, the Good Faith Deposit, within ten days of the
receipt by such parties of such written notice.
SECTION 5.09 "PIGGYBACK" REGISTRATION RIGHTS. If at any time
after the Effective Date the Parent proposes to file a registration statement
under the Act on Form S-1, Form S-2, Form SB-1, Form SB-2 or Form S-3 (or any
successors to those Forms) covering an offering of shares of Parent Common
Stock, the Parent shall (each such time, subject to the limitations below) give
written notice to each of the Sellers of its intention to do so, and, upon the
written request of a Seller given to the Parent within twenty (20) days after
the Parent's notice, the Parent shall, subject to the provisions below, include
in the registration statement such number of such shares of Parent Common Stock
owned by the Seller as such Seller may designate in such Seller's request. If
any registration of which a Seller is given notice pursuant to the immediately
preceding sentence shall
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be, in whole or in part, in connection with an underwritten offering of shares
of Parent Common Stock, if the managing underwriter or underwriters determine
and advise the Parent that the inclusion in the registration statement of all or
a portion of a Seller's shares of Parent Common Stock, as requested, would
interfere with the successful marketing of the other shares of Parent Common
Stock being sold or would adversely affect the pricing for those shares, the
Parent shall not be obligated to include such Seller's shares of Parent Common
Stock to the extent the inclusion of such shares, in the opinion of such
managing underwriter or underwriters, would interfere with the successful
marketing of the other shares of Parent Common Stock being sold or the price for
those shares of Parent Common Stock. If there is an underwritten offering of the
shares of Parent Common Stock, and a Seller has been given the opportunity to
exercise the rights conferred by the first sentence of this Section 5.09 but
such Seller elects not to sell such Seller's shares of Parent Common Stock to
the underwriter or underwriters or is not able to sell all shares as to which
the Seller exercised such rights, such Seller shall not sell those shares of
Parent Common Stock (i) during the period of distribution of the shares of
Parent Common Stock by the underwriter or underwriters and (ii) during any
further period that participants in the offering and/or the Parent agree not to
sell their shares of Parent Common Stock at the request of the underwriter or
underwriters. Notwithstanding the foregoing, the Parent shall not be obligated
to include a Seller's shares of Parent Common Stock in a registration statement
if at the time of the proposed offering the sale of such Seller's shares of
Parent Common Stock could be accomplished pursuant to any exemption from the
registration requirements of the Act.
SECTION 5.10. FURTHER ACTION. Each of the parties hereto shall
use all reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things reasonably necessary, proper or
advisable under applicable laws, and execute and deliver such documents and
other papers, as may be reasonably required to carry out the provisions of this
Agreement and consummate and make effective the transactions contemplated by
this Agreement.
ARTICLE VI
POST-CLOSING COVENANTS
SECTION 6.01. FUNDING OF THE MERGING CORPORATION. (a) The
Parent agrees that it shall fund the ongoing operations of the Surviving
Corporation following the Closing in accordance with the Budget Plan (the
"Budget Plan") which is being delivered to the Merging Corporation at the
Closing, subject to periodic review by the Parent to ensure that the assumptions
and projections used in the preparation thereof remain applicable.
(b) In the event that following the Closing the Purchaser
shall complete a secondary public offering of its capital stock (a "Secondary
Offering"), the Purchaser agrees that it shall allocate no less than $2,000,000
of the proceeds of such Secondary Offering to the working capital of the Merging
Corporation; provided, however, that such allocation of proceeds to the working
capital of the Merging Corporation shall be consistent with the Budget Plan.
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SECTION 6.02. USE OF "BORTA" NAME. The name "Borta, Inc." will
continue to be used by the Surviving Corporation following the Closing. Except
in connection with the conduct of the business of the Surviving Corporation, the
parties hereto agree that none of the parties hereto nor any person, firm or
corporation acting pursuant to its or their authority will, after the Closing,
use the name "Borta", or any name deceptively similar to it, for any pecuniary
gain; provided, however, that the Parent and the Purchaser agree that if both
Borta and Davis cease to be employed by the Parent or the Surviving Corporation,
Borta may thereafter use the name "Borta" in connection with any activity which
is not related to the Worldwide Multimedia Industry. As used herein, the term
"Worldwide Multimedia Industry" means that industry involved in computer
graphics, video, film, graphics and audio (individually and in any combination
thereof), for use in display on computers, and/or film and video mediums or
other distribution mediums now known or hereinafter devised, whether used for
entertainment, information or educational purposes.
SECTION 6.03. INTELLECTUAL PROPERTY UPDATES. The Surviving
Corporation shall deliver to the Parent descriptions and copies of all
amendments and updates to the source codes, object codes and protected processes
delivered by the Merging Corporation to Parent at the Closing pursuant to
Section 3.22 above promptly following the completion of all such amendments and
updates. In addition, the Surviving Corporation shall deliver to the Parent
descriptions and copies of all new source codes, object codes and protected
processes promptly upon the development or creation thereof by the Merging
Corporation or the Sellers, and shall deliver descriptions and copies of any
amendments or updates thereto promptly following the completion of such
amendents or updates.
SECTION 6.04. REPAYMENT OF SBA LOAN. On or prior to October 2,
1995, the Parent shall repay, or shall provide to the Surviving Corporation
sufficient funds to enable the Surviving Corporation to repay, the outstanding
loan of the Merging Corporation from Community Bank of Northern Virginia, as
described on Schedule 3.06 hereto.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.01. CONDITIONS TO OBLIGATION OF THE MERGING
CORPORATION. The obligation of the Merging Corporation to consummate the Merger
contemplated by this Agreement shall be subject to the fulfillment, at or prior
to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Parent and the
Purchaser contained in this Agreement shall have been true
and correct when made and shall be true and correct in all
material respects as of the Closing Date, with the same
force and effect as if made as of the Closing Date, other
than such representations and warranties as are made as of
another date, which shall be true and correct in all
material respects as of such other
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date, the covenants and agreements contained in this
Agreement to be complied with by the Parent and the
Purchaser on or before the Closing shall have been complied
with in all material respects, and the Merging Corporation
shall have received a certificate from the Parent and the
Purchaser to such effect signed by a duly authorized officer
thereof;
(b) Resolutions. The Merging Corporation shall have received
(i) a true and complete copy, certified by the President of
each of the Parent and the Purchaser, of the resolutions
duly and validly adopted by the Board of Directors of each
of the Parent and the Purchaser evidencing each such Board
of Directors' authorization of the execution and delivery of
this Agreement and the consummation of the Merger and the
other transactions contemplated hereby, and (ii) a true and
complete copy, certified by the President of the Parent, of
the resolutions of the Parent, as the sole stockholder of
the Purchaser, approving the Merger and the other
transactions contemplated hereby;
(c) Incumbency Certificate. The Merging Corporation shall
have received a certificate of the Secretary or an Assistant
Secretary of each of the Parent and the Purchaser certifying
the names and signatures of the officers of the Parent and
Purchaser authorized to sign this Agreement and the other
documents to be delivered hereunder; and
(d) Legal Opinion. The Merging Corporation shall have
received from Parker Chapin Flattau & Klimpl, counsel to the
Parent and the Purchaser, a legal opinion addressed to the
Merging Corporation and dated the Closing Date,
substantially in the form of Exhibit 7.01(d).
(e) Stock Option Agreements. The Parent shall have executed
Stock Option Agreements with each Seller (collectively, the
"Stock Option Agreements") in form and substance
satisfactory to each Seller, pursuant to which the Parent
shall grant to each Seller stock options to purchase shares
of Parent Common Stock under the Parent's 1995 Stock Option
Plan, subject to the terms and conditions contained in the
Stock Option Agreements.
(f) Budget Plan. The Parent shall have delivered the Budget
Plan to the Merging Corporation
.
Section 7.02. CONDITIONS TO OBLIGATIONS OF THE PARENT AND THE
PURCHASER. The obligations of the Parent and the Purchaser to consummate the
Merger contemplated by this Agreement shall be subject to the fulfillment, at or
prior to the Closing, of each of the following conditions:
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(a) Representations, Warranties and Covenants. The
representations and warranties of the Merging Corporation,
Borta, Davis and the Sellers contained in this Agreement
shall have been true and correct when made and shall be true
and correct in all material respects as of the Closing Date,
with the same force and effect as if made as of the Closing
Date, other than such representations and warranties as are
made as of another date, which shall be true and correct in
all material respects as of such other date, the covenants
and agreements contained in this Agreement to be complied
with by the Sellers and the Merging Corporation on or before
the Closing shall have been complied with in all material
respects, and the Parent and the Purchaser shall have
received a certificate from the Merging Corporation and the
Sellers to such effect signed by the Merging Corporation and
each of the Sellers;
(b) Resolutions. The Parent and the Purchaser shall have
received (i) a true and complete copy, certified by the
President of the Merging Corporation, of the resolutions
duly and validly adopted by the Board of Directors of the
Merging Corporation evidencing such Board of Directors'
authorization of the execution and delivery of this
Agreement and the consummation of the Merger and the other
transactions contemplated hereby, and (ii) a true and
complete copy of the resolutions of the Sellers, as the
holders of all of the issued and outstanding shares of
Merging Corporation Common Stock, approving the Merger and
the other transactions contemplated hereby;
(c) Legal Opinions. The Purchaser shall have received from
McDermott, Will & Emery, counsel to the Merging Corporation
and the Sellers, a legal opinion, addressed to the Parent
and the Purchaser and dated the Closing Date, substantially
in the form of Exhibit 7.02(c);
(d) Consents and Approvals. Except as set forth on any
Schedule hereto, the Parent and the Merging Corporation
shall have received, each in form and substance reasonably
satisfactory to the Parent, all material authorizations,
consents, orders and approvals and all third party consents
and estoppel certificates listed in Schedule 3.06 hereto;
(e) Organizational Documents. The Parent shall have received
a copy of (i) the Certificate of Incorporation, as amended,
of the Merging Corporation, certified by the Secretary of
State of Virginia as of a date not earlier than five
business days prior to the Closing Date and accompanied by a
certificate of the Secretary or an Assistant Secretary of
the Merging Corporation, dated as of the Closing Date,
stating that no amendments have been made to such
Certificate of Incorporation since such date, and (ii) the
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By-laws of the Merging Corporation, certified by the
Secretary or an Assistant Secretary of the Merging
Corporation;
(f) Minute Books. The Parent shall have received a copy of
the minute books of the Merging Corporation, certified by
its Secretary or an Assistant Secretary as of the Closing
Date;
(g) Good Standing; Qualification to Do Business. The Parent
shall have received a good standing certificate for the
Merging Corporation from the Secretary of State of Virginia
and from the Secretary of State in each other jurisdiction
in which the properties owned or leased by the Merging
Corporation, or the operation of the business of the Merging
Corporation in such jurisdiction, requires the Merging
Corporation to qualify to do business as a foreign
corporation, in each case dated as of a date not earlier
than five business days prior to the Closing Date and
accompanied by bring-down telegrams dated the Closing Date;
(h) Audited Financial Statements; Balance Sheet and
Statement of Income Entries. (i) The Parent shall have
received the Audited Financial Statements, and (ii) the
percentage of variation, if any, between any balance sheet
or statement of income entry set forth in the Audited
Financial Statements as at May 31, 1995 and the
corresponding balance sheet or statement of income entry set
forth in the Unaudited Financial Statements as at May 31,
1995, does not exceed 5%; and
(i) Intellectual Property. The Parent shall have received
copies of all source codes, object codes and protected
processes referred to in Schedules 3.22(a)(i) and
3.22(a)(ii).
(j) No Material Adverse Effect. No event or events shall
have occurred between the date hereof and the Closing Date
which, individually or in the aggregate, have, or are
reasonably likely to have, a material adverse effect on the
Merging Corporation or the Merging Corporation's business.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in this Agreement, and all statements contained
in this Agreement or any Exhibit or Schedule or any certificate, Financial
Statement or report or other document delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby
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(collectively, the "Acquisition Documents"), shall survive the Closing for the
time periods as prescribed by the applicable statute of limitations. Neither the
period of survival nor the liability of any party with respect to such party's
representations and warranties shall be reduced by any investigation made at any
time by or on behalf of any party. If written notice of a claim has been given
prior to the expiration of the applicable statute of limitation by a party in
whose favor such representations and warranties have been made to the party that
made such representations and war ranties, then the relevant representations and
warranties shall survive as to such claim, until the claim has been finally
resolved.
SECTION 8.02 INDEMNIFICATION BY BORTA AND DAVIS. Except as
otherwise limited by this Article, the Parent, the Purchaser and its affiliates,
officers, directors, employees, agents, successors and assigns shall be
indemnified and held harmless by Borta and Davis, jointly and severally, for any
and all liabilities, losses, damages, claims, costs and expenses, interest,
awards, judgments and penalties (including, without limitation, reasonable
attorneys' and consultants' fees and expenses) actually suffered or incurred by
them (hereinafter a "Purchaser's Loss"), arising out of or resulting from:
(i) the breach of any representation or warranty made by the
Merging Corporation, Borta, Davis or the Sellers (jointly or
severally) contained herein or in any document delivered by the
the Merging Corporation, Borta, Davis or the Sellers pursuant to
this Agreement or the transactions contemplated hereby; or
(ii) the breach of any covenant or agreement by the Merging
Corporation or the Sellers (jointly or severally), or the breach
of any covenant or agreement to be performed prior to the Closing
by the Merging Corporation or the Sellers contained herein; or
(iii) liabilities of the Merging Corporation not reflected on the
Financial Statements and not otherwise scheduled, whether arising
before or after the Effective Time, arising from or relating to
the ownership or activities of the Merging Corporation or the
conduct of the business of the Merging Corporation through the
Effective Time; or
(iv) any and all Purchaser's Losses suffered or incurred by the
Parent, the Purchaser or the Surviving Corporation by reason of
or in connection with any claim or cause of action of any third
party to the extent arising out of any action, inaction, event,
condition, liability or obligation occurring or existing on or
prior to the Effective Time.
To the extent that a court of competent jurisdiction may refuse to
enforce all or any part of Borta's or Davis' undertakings set forth in this
Section 8.02, such party shall contribute the maximum amount of that it is
permitted to contribute.
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SECTION 8.03. INDEMNIFICATION BY PARENT. Except as otherwise
limited by this Article, the Merging Corporation, the Sellers and their
respective affiliates, employees, agents, successors and assigns shall be
indemnified and held harmless by the Parent for any and all liabilities, losses,
damages, claims, costs and expenses, interest, awards, judgments, and penalties
(including, without limitation, reasonable attorneys' and consultants' fees and
expenses) actually suffered or incurred by them (hereinafter a "Sellers Loss")
arising out of or resulting from:
(i) the breach of any representation or warranty by the
Parent or the Purchaser contained herein or in any document
delivered by the Parent or the Purchaser pursuant to this
Agreement or the transactions contemplated hereby; or
(ii) the breach of any covenant or agreement by the Parent
or the Purchaser (jointly or severally), or the breach of
any covenant or agreement to be performed by the Parent or
the Purchaser contained herein.
SECTION 8.04. GENERAL INDEMNIFICATION PROVISIONS. (a) For the
purposes of this Agreement, the term "Indemnitee" shall refer to the Person or
Persons indemnified, or entitled, or claiming to be entitled, to be indemnified,
pursuant to the provisions of Section 8.02 or Section 8.03, as the case may be,
the term "Indemnitor" shall refer to the Person or Persons having the obligation
to indemnify pursuant to such provisions and "Losses" shall refer to the
Sellers' Losses or the Purchaser's Losses, as the case may be.
(b) An Indemnitee shall give, within fifteen calendar days,
the Indemnitor notice of any matter which an Indemnitee has determined has given
or could give rise to a right of indemnification under this Agreement, stating
the amount of the Loss, if known, and method of computation thereof, all with
reasonable particularity and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and Liabilities of the Indemnitor under this Article
with respect to Losses arising from claims of any third party that are subject
to the indemnification provided for in this Article ("Third Party Claims") shall
be governed by and contingent upon the following additional terms and
conditions: if an Indemnitee shall receive notice of any Third Party Claim, the
Indemnitee shall give the Indemnitor notice of such Third Party Claim within ten
calendar days (provided, however, that failure to give such notice shall not
preclude indemnification under this Article VII unless there is actual prejudice
to the rights of the Indemnitor) and shall permit the Indemnitor, at its option,
to participate in the defense of such Third Party Claim by counsel of its own
choice and at its expense. If, however, the Indemnitor acknowledges in writing
its obligation to indemnify the Indemnitee hereunder against any Losses that may
result from such Third Party Claims (subject to the limitations set forth
herein), then the Indemnitor shall be entitled, at its option, to assume and
control the defense of such Third Party Claim at its expense and through counsel
of its choice if it gives notice of its intention to do so to the Indemnitee
within five calendar days; provided, however, if the Indemnitee shall determine
that its interests conflict with those of the Indemnitor, the Indemnitee shall
be entitled to be represented at the Indemnitee's expense by separate counsel of
its
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choice and to participate in the defense of any such Third Party Claim. In the
event the Indemnitor exercises the right to undertake any such defense against
any such Third Party Claim as provided above, the Indemnitee shall cooperate
with the Indemnitor in such defense and make available to the Indemnitor, at the
Indemnitor's expense, all witnesses, pertinent records, materials and
information in the Indemnitee's possession or under the Indemnitee's control
relating thereto as is reasonably required by the Indemnitor. Similarly, in the
event the Indemnitee is, directly or indi rectly, conducting the defense against
any such Third Party Claim, the Indemnitor shall cooperate with the Indemnitee
in such defense and make available to the Indemnitee, at the Indemnitor's
expense, all such witnesses, records, materials and information in the
Indemnitor's possession or under the Indemnitor's control relating thereto as is
reasonably required by the Indemnitee. No such Third Party Claim, except the
settlement thereof that involves the payment of money only and for which the
Indemnitee is released by the third party claimant and is totally indemnified by
the Indemnitor, may be settled by the Indemnitor without the written consent of
the Indemnitee, which consent shall not be unreasonably withheld; provided,
however, that if a Third Party Claim is brought that relates in part to matters
for which indemnification pursuant to this Agreement may be available and in
part to matters for which such indemnification may not be available, a party may
settle any segregable portion of such Third Party Claim as to which such
indemnification may not be available. Similarly, no Third Party Claims that is
being defended in good faith by the Indemnitor shall be settled by the
Indemnitee without the written consent of the Indemnitor; provided, however,
that, if a Third Party Claim is brought that relates in part to matters for
which indemnification pursuant to this Agreement may be available and in part to
matters for which such indemnification may not be available, a party may settle
any segregable portion of such Third Party Claim s to which such indemnification
may not be available.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.01 TERMINATION. This Agreement may by terminated at
any time prior to the Closing: (i) by the mutual written consent of each of the
Parent, the Merging Corporation, Borta and Davis or (ii) by the Parent, the
Merging Corporation or any of the Sellers in the event that the Closing does not
occur by September 30, 1995.
SECTION 9.02 EFFECT OF TERMINATION. In the event of termination
of this Agreement as provided in Section 9.01, this Agreement shall forthwith
become void and there shall be no liability on the part of either party hereto
except (i) for the obligation of the Merging Corporation to refund the Good
Faith Deposit as set forth in Section 5.08 and (ii) that nothing herein shall
relieve either party from liability for any breach of this Agreement.
SECTION 9.03. WAIVER. The Parent may (a) extend the time for
the perfor mance of any of the obligations or other acts of the Merging
Corporation or the Sellers, (b) waive
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any inaccuracies in the representations and warranties of the Merging
Corporation or the Sellers contained herein or in any document delivered by the
Merging Corporation or the Sellers pursuant hereto or (c) waive compliance with
any of the agreements or conditions of the Merging Corporation or the Sellers
contained herein. The Merging Corporation or the Sellers may (a) extend the time
for performance of any of the obligations or other acts of the Parent or the
Purchaser, (b) waive any inaccuracies in the representations and warranties of
the Parent or the Purchaser contained herein or in any document delivered by the
Parent or the Purchaser pursuant hereto or (c) waive compliance with any of the
agreements or conditions of the Parent or the Purchaser contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition, of this Agreement. The failure of any party to assert any of its
rights hereunder shall not constitute a waiver of any of such rights.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 EXPENSES. All costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
SECTION 10.02 NOTICES. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 10.02):
if to the Merging Corporation or the Sellers:
Mr. Ron Borta
Borta, Inc.
100 Carpenter Drive
Suite 206
Sterling, Virginia 20164
with a copy to:
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McDermott, Will & Emery
2049 Century Park East
Los Angeles, CA 90067-3208
Attention: Margaret G. Graf, Esq.
if to the Parent or the Purchaser:
Aristo International Corporation
152 West 57th Street
New York, New York
Attention: Mouli Cohen, President
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: Henry Rothman, Esq.
SECTION 10.03. PUBLIC ANNOUNCEMENTS. No party to this Agreement
shall make, or cause to be made, any press release or public announcements in
respect of this Agreement or the transactions contemplated hereby or otherwise
communicate with any news media without the prior written consent of the Parent
and the Purchaser, in the case of the Merging Corporation and the Sellers, or
the Merging Corporation and the Sellers, in the case of the Parent and the
Purchaser. The parties shall cooperate as to the timing and contents of any such
press release or public announcement.
SECTION 10.04. HEADINGS AND INTERPRETATION. The descriptive
headings contained in this Agreement are for convenience of reference only and
shall not affect in any way the meaning or interpretation of this Agreement. As
used herein, unless the context indicates otherwise, the conjunctive includes
the disjunctive, and the disjunctive includes the conjunctive. As used herein,
unless the context indicates otherwise, the singular includes the plural and the
plural includes the singular.
SECTION 10.05. SEVERABILITY. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any Law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
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SECTION 10.06. ENTIRE AGREEMENT. This Agreement constitutes
the entire agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and undertakings, both written and
oral, between the Merging Corporation, the Sellers and the Parent with respect
to the subject matter hereof.
SECTION 10.07. ASSIGNMENT. This Agreement may not be assigned
by operation of law or otherwise without the express written consent of Borta
and the Parent (which consent may be granted or withheld in the sole discretion
of Borta or the Parent); provided, however, that the Parent may assign this
Agreement to an affiliate of the Parent or the Purchaser with the prior written
consent of Borta, which consent shall not be unreasonably withheld.
SECTION 10.08. NO THIRD PARTY BENEFICIARIES. This Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their permitted assigns and nothing herein, express or implied, is intended to
or shall confer upon any other person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 10.09. AMENDMENT. This Agreement may not be amended
or modified except (a) by an instrument in writing signed by, or on behalf of,
each Seller and the Parent or (b) by a waiver in accordance with Section 9.03.
SECTION 10.10. "PERSON" DEFINED. As used herein, "person" shall
mean and include any individual, partnership, joint venture, corporation, trust,
unincorporated organization, and government or other department or agency
thereof.
SECTION 10.11. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
applicable to contracts executed in and to be performed entirely within that
state. All actions and proceedings arising out of or relating to this Agreement
shall be heard and determined in any New York state or federal court sitting in
the City of New York.
SECTION 10.12. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 10.13. SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
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IN WITNESS WHEREOF, each of the Sellers has executed, and each of
the Parent, the Purchaser and the Merging Corporation has caused this Agreement
to be executed, as of the date first written above.
MERGING CORPORATION: PARENT:
BORTA, INC. ARISTO INTERNATIONAL
CORPORATION
By:_________________ By:_________________
Ron Borta Mouli Cohen
President Chairman and Chief Executive Officer
PURCHASER: SELLERS:
BAIC ACQUISITION CORP. /s/ Ron Borta
----------------------
Ron Borta
/s/ Leslie Davis
By: /s/ Mouli Cohen ----------------------
---------------------- Leslie Davis
Mouli Cohen
Chairman and Chief
Executive Officer /s/ David A. Brain, Sr.
----------------------
David A. Brain, Sr.
/s/ Gregory M. Vaitekunas
----------------------
Gregory M. Vaitekunas
/s/ Asher Kaufman
---------------------
Asher Kaufman
/s/ Kimberly Haun
----------------------
Kimberly Haun
/s/ Nolan Bushnell
----------------------
Nolan Bushnell
/s/ Ann Davis
----------------------
Ann Davis
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