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): February 22, 1999
PUBLICARD, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-29794 23-0991870
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Post Road, Fairfield, Connecticut 06430
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 254-3900
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets
On February 22, 1999 (the "Closing Date"), PubliCARD, Inc.
("PubliCARD" or the "Company") completed the acquisition of Greystone
Peripherals, Inc. ("Greystone"), pursuant to an Agreement and Plan of
Merger dated as of February 22, 1999 (the "Merger Agreement") whereby a
wholly-owned subsidiary of the Company merged with and into Greystone.
As a result of this merger, Greystone became a wholly-owned subsidiary
of the Company. As consideration in the merger, holders of Greystone's
common stock received a total of 666,400 shares of common stock of the
Company and $6,000 in exchange for all of the outstanding shares of common
stock of Greystone. Mr. John Usher, President of Greystone, held shares
representing approximately 89.4% of Greystone's outstanding common stock.
Pursuant to the Merger Agreement, 80,000 shares of common stock of the
Company were issued to certain service providers of Greystone.
In addition, pursuant to the Merger Agreement, options to purchase
224,000 shares of Greystone common stock outstanding immediately prior
to the closing of the merger were converted into options to purchase
22,388 shares of PubliCARD common stock with exercise prices ranging
from $2.50 to $5.00 per share. These PubliCARD options vest over
four years and are exercisable for a period of one year after the respective
vesting dates. Furthermore, pursuant to the Merger Agreement, the Company
issued on the Closing Date options to purchase 110,000 shares of PubliCARD
common stock to certain key employees of Greystone. These options have an
exercise price of $10.75 per share, vest over a three year period and will be
exercisable until the fifth anniversary of the Closing Date.
The merger consideration was determined as a result of arms length
negotiations between the Company and Greystone. The merger will be
accounted for under the purchase method of accounting.
Pursuant to the Merger Agreement, the Company is required to
register the shares of PubliCARD common stock issued in connection with
the merger under a shelf registration statement under the Securities Act
of 1933.
Pursuant to the Merger Agreement, the Company satisfied certain
indebtedness of Greystone, including accrued interest, to a bank in the
amount of approximately $604,000. The repayment of such indebtedness
of Greystone by the Company was financed with available cash on hand.
Pursuant to the Merger Agreement, Greystone entered into a
separate employment agreement for a three-year term with Mr. Usher to
serve as President of Greystone.
Other than the Merger Agreement, the employment agreement and
stock option agreements entered into pursuant to the Merger Agreement
and described herein, there are no material relationships between
Greystone or any of Greystone's former shareholders and PubliCARD or any
of PubliCARD's affiliates, directors or officers.
Greystone, located in Los Gatos, California, is a developer of PC
Card (PCMCIA products), digital camera flash film readers and hard disk
duplicators.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired:
Financial statements of Greystone Peripherals, Inc.
prepared pursuant to Regulation S-X are not currently
available but, to the extent required, will be filed not
later than 60 days from the date on which this report
on Form 8-K was required to be filed.
(b) Pro forma financial information:
Pro forma financial statements of the Registrant are not
currently available but, to the extent required, will be
filed not later than 60 days from the date on which this
report on Form 8-K was required to be filed.
(c) Exhibits:
2.1 Agreement and Plan of Merger dated as of February
22, 1999 among PubliCARD, Inc., GPI Acquisition, Inc.,
Greystone Peripherals, Inc. and the Security Holders of
Greystone Peripherals, Inc.
SIGNATURES
Pursuant to the requirement 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.
PUBLICARD, INC.
(Registrant)
March 8, 1999 /s/ Antonio L. DeLise
Antonio L. DeLise, Vice President
Chief Financial Officer and Secretary
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
2.1 Agreement and Plan of Merger dated as of February
22, 1999 among PubliCARD, Inc., GPI Acquisition,
Inc., Greystone Peripherals, Inc. and the
Security Holders of Greystone Peripherals, Inc.
<PAGE>
Exhibit 2.1
Agreement and Plan of Merger
Dated as of February 22, 1999
Among
PubliCARD, Inc.
GPI Acquisition, Inc.
Greystone Peripherals, Inc.
And
the Security Holders of Greystone Peripherals, Inc.
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of February 22, 1999
among PubliCARD, Inc., a Pennsylvania corporation ("PubliCARD"), GPI
Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary
of PubliCARD ("Acquisition Sub"), Greystone Peripherals, Inc., a
California corporation (the "Company"), and each shareholder of the
Company and each holder of options to purchase capital stock of the
Company which has delivered a signature page to this Agreement
(collectively "Sellers").
R E C I T A L S:
The Boards of Directors of the Company, PubliCARD and
Acquisition Sub have determined that it is advisable and in the best
interests of their respective stockholders for Acquisition Sub to merge
with and into the Company with the result that the Company shall be the
surviving corporation and shall become a wholly-owned subsidiary of
PubliCARD (the "Merger"), upon the terms and conditions set forth herein
and in accordance with the provisions of the Delaware General
Corporation Law (the "DGCL") and the California General Corporation Law
("CGCL"). It is the intention of the parties that the Merger be a tax-
free reorganization under Section 368(a)(2)(E) of the Internal Revenue
Code of 1986, as amended.
Accordingly, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set
forth, the parties hereto do hereby agree as follows:
3. CERTAIN DEFINITIONS.
3.1 Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified or referred to below
(terms defined in the singular to have the correlative
meaning in the plural and vice versa):
"Additional Holders" shall have the meaning set forth in
Section 11.2A.
"Affiliate" of any Person shall mean any Person or entity
which, directly or indirectly, controls or is controlled by that Person,
or is under common control with that Person. For the purposes of this
definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities or by
contract or otherwise.
"Business Day" shall mean any day that is not a Saturday or
a Sunday or a day on which banks located in New York City are authorized
or required to be closed.
"Certificates of Merger" shall have the meaning set forth in
Section 3.2.
"Closing" shall have the meaning set forth in Section 3.1.
"Closing Date" shall mean the date and time of the Closing,
as set forth in Section 3.1.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company Documents" shall have the meaning set forth in
Section 6.3(a).
"Company Shares" shall mean shares of common stock, no par
value, of the Company.
"Constituent Corporations" shall have the meaning set forth
in Section 2.1.
"Contamination" shall mean Hazardous Substances which are
present at the Facilities or in soil or groundwater (whether or not at
the Facilities) as a result of a Release.
"Contemplated Transactions" shall mean (i) the Merger and
(ii) the execution, delivery and performance of and compliance with this
Agreement and all other agreements to be executed and delivered pursuant
to this Agreement.
"CGCL" shall have the meaning set forth in the recitals to
this Agreement.
"DGCL" shall have the meaning set forth in the recitals to
this Agreement.
"Effective Time" shall have the meaning set forth in
Section 3.2.
"Encumbrance" shall mean any security interest, mortgage,
lien, charge, encumbrance on real property, adverse claim or restriction
of any kind, including, but not limited to, any restriction on the use,
voting, transfer, receipt of income or other exercise of any attributes
of ownership.
"Environmental Law" shall mean federal, state or local
statutes, rules, regulations, orders, licenses, codes, plans, decrees,
judgments, injunctions, notices, or demand letters relating to pollution
of the environment, including laws relating to noise, or to emissions,
discharges, or releases of pollutants, contaminants, chemicals, or
industrial, toxic, or Hazardous Substances or hazardous wastes into the
workplace, the community, or the environment (including air, surface
water, ground water, land surface or subsurface strata), or otherwise
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or Hazardous Substances or
hazardous wastes.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" as applied to any Person, shall mean (a)
any corporation which is a member of a controlled group of corporations,
within the meaning of Section 414(b) of the Code, of which that Person
is a member, (b) any trade or business (whether or not incorporated)
which is a member of a group of trades or businesses under common
control, within the meaning of Section 414(c) of the Code, of which that
person is a member, and (c) any member of an affiliated service group,
within the meaning of Sections 414(m) and (o) of the Code, of which that
Person or any entity described in clause (a) or (b) is a member.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Facilities" shall mean any real property, leaseholds or
other interests currently or formerly owned or operated by the Company
and any buildings, plants, structures or equipment currently or formerly
owned or operated by the Company.
"Fair Market Value" of a share of a class of stock of any
issuer shall mean the per share value of such class of stock as of a
given date, determined as follows:
(a) If the class of stock is listed or admitted for trading
on the New York Stock Exchange (or if not, on another
national securities exchange), the Fair Market Value of such
class stock is the average of the closing quotations for
such stock based on composite transactions for the New York
Stock Exchange (or if not listed on it, such other national
securities exchange) for the five Trading Days ending at the
close of business on the day prior to such given date.
(b) If the class of stock is not traded on any national
securities exchange, but is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation
System (NASDAQ System) or any similar system of automated
dissemination of quotations of prices in common use, the
Fair Market Value of such class of stock is the average of
the last sales price (if the stock is then listed as a
national market issue under the NASDAQ System) or the mean
between the closing representative bid and asked prices (in
all other cases) for the stock as reported by the NASDAQ
System (or such similar quotation system) for the five
Trading Days ending at the close of business on the day
prior to such given date.
(c) If neither clause (a) nor clause (b) of this definition
is applicable, the Fair Market Value of the class of stock
is the fair market value per share as of such valuation
date, as determined by the Board of Directors of the issuer
of such stock in good faith and in accordance with uniform
principles consistently applied.
"Financial Statements" shall have the meaning set forth in
Section 6.5.
"GAAP" shall mean generally accepted accounting principles
in the United States, consistently applied throughout the relevant
period.
"Governmental Body" shall mean any domestic or foreign na-
tional, state, multi-state or municipal or other local government, any
subdivision, agency, commission or authority thereof, or any
quasi-governmental or private body exercising any regulatory or taxing
authority thereunder.
"Hazardous Substance" shall have the meaning set forth in
section 101(14) of the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") of 1980, as amended, 42 U.S.C.
9601(14) and shall further include any petroleum, including crude oil
or any fraction thereof.
"Holders" shall mean Sellers holding Registrable PubliCARD
Shares and their permitted transferees under Section 11.15.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Intellectual Property" shall have the meaning set forth in
Section 6.9(m).
"Material Adverse Effect" shall mean any effect that is
materially adverse to the business, operations, prospects, results of
operations or financial condition of the Company taken as a whole.
"Material Agreements" shall have the meaning set forth in
Section 6.19(a).
"Merger" shall have the meaning set forth in the recitals to
this Agreement.
"Merger Consideration" shall have the meaning set forth in
Section 2.3(a).
"Person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust,
association, unincorporated organization, other entity or Governmental
Body.
"Proceeding" shall mean an action, suit, or a legal,
administrative, arbitration or other similar proceeding.
"PubliCARD Shares" shall mean shares of common stock, par
value $0.10 per share, of PubliCARD.
"Registrable PubliCARD Shares" shall mean all PubliCARD
Shares issued pursuant to this Agreement and any PubliCARD Shares issued
as a dividend or other distribution on or as a result of a subdivision
or combination of any PubliCARD Shares issued pursuant to this
Agreement.
"Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing of a Hazardous Substance into the environment
(including the abandonment or discarding of barrels, containers, and
other closed receptacles containing any Hazardous Substance).
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Seller Documents" shall have the meaning set forth in
Section 7.2.
"Sellers' Agent" shall have the meaning set forth in
Section 14.1.
"Shelf Registration Statement" shall have the meaning set
forth in Section 11.2A.
"Subsidiary" shall mean with respect to any specified
Person, any other Person (a) whose board of directors or similar
governing body, or a majority thereof, may presently be directly or
indirectly elected or appointed by such specified Person, (b) whose
management decisions and corporate actions are directly or indirectly
subject to the present control of such specified Person, or (c) whose
voting securities are more than 50% owned, directly or indirectly, by
such specified Person.
"Surviving Corporation" shall have the meaning set forth in
Section 2.1.
"Tax" shall mean any tax (including, without limitation, any
income tax, franchise tax, branch profits tax, gross receipts tax,
employment tax, withholding tax, capital gains tax, value-added tax,
sales tax, property tax, gift tax, or estate tax), levy, assessment,
tariff, duty (including any customs duty), deficiency, or other fee, and
any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the
authority of any Governmental Body or payable pursuant to any tax-
sharing agreement or any other contract relating to the sharing or
payment of any such tax, levy, assessment, tariff, duty, deficiency, or
fee.
"Tax Return" shall mean any return (including, without
limitation, any information return), report, statement, schedule,
notice, form, or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body
in connection with the determination, assessment, collection, or payment
of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any legal requirement relating to any
Tax.
"Technology" shall have the meaning set forth in
Section 6.9(m).
"Trading Day" shall mean a day on which the principal
national securities exchange on which a class of stock is listed or
admitted to trading is open for the transaction of business or, if such
class of stock is not listed or admitted to trading on any national
securities exchange, any Business Day.
3.2 References to Dollars. References to dollars or "$" in this
Agreement shall mean United States dollars.
4. THE MERGER.
4.1 The Merger. At the Effective Time of the Merger,
Acquisition Sub shall be merged with and into the Company.
The separate existence of Acquisition Sub shall thereupon
cease and the Company shall continue its corporate existence
as the surviving corporation (the "Surviving Corporation")
under the laws of the State of California under its present
name. The Company and Acquisition Sub are sometimes
referred to collectively herein as the "Constituent
Corporations".
4.2 Effects of the Merger. At the Effective Time of the Merger:
(a) the separate existence of Acquisition Sub shall cease and
Acquisition Sub shall be merged with and into the Company,
which shall be the Surviving Corporation;
(b) the articles of incorporation and by-laws of the Company
as in effect immediately prior to the Effective Time, giving
effect to the amendments set forth in the Certificates of
Merger, shall be the articles of incorporation and by-laws
of the Surviving Corporation until each shall thereafter be
amended in accordance with each of their terms and as
provided by law;
(c) the directors of Acquisition Sub immediately prior to the
Effective Time shall be the initial directors of the
Surviving Corporation, and the officers of Acquisition Sub
immediately prior to the Effective Time (other than the
President) together with John Usher as President, shall be
the initial officers of the Surviving Corporation, each to
hold office in accordance with the articles of incorporation
and by-laws of the Surviving Corporation, in each case until
their respective successors are duly elected and qualified;
(d) the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public as well
as of a private nature, of each of the Constituent
Corporations, and all property, real, personal, and mixed,
and all debts due on whatever account, and all other choses
in action, and all and every other interest of or belonging
to or due to each of the Constituent Corporations shall be
taken and deemed to be transferred to and vested in the
Surviving Corporation without further act or deed; and
(e) the Surviving Corporation shall thenceforth be
responsible and liable for all liabilities and obligations
of each of the Constituent Corporations, and any claim
existing or action or proceeding pending by or against
either of the Constituent Corporations may be prosecuted as
if such Merger had not taken place or the Surviving
Corporation may be substituted in its place. Neither the
rights of creditors nor liens upon the property of either of
the Constituent Corporations shall be impaired by the
Merger.
4.3 Conversion of Shares. As of the Effective Time, by virtue
of the Merger and without any further action on the part of
PubliCARD, Acquisition Sub, the Company, or any holder of
any equity securities of the Constituent Corporations:
(a) each Company Share issued and outstanding immediately
prior to the Effective Time shall be converted into the
right to receive that number of PubliCARD Shares (the
"Merger Consideration") as determined by dividing
(x) 667,000 by (y) the aggregate number of Company Shares
issued and outstanding immediately prior to the Effective
Time, upon surrender of the certificates representing such
Company Shares to PubliCARD; provided, however, that if
PubliCARD determines, based on its review of Investor
Questionnaires in substantially the form of Exhibit G
delivered to PubliCARD by the holders of Company Shares or
the failure of any holder to deliver an Investor
Questionnaire, that the issuance of PubliCARD Shares as the
Merger Consideration to any holder of Company Shares may
cause the Contemplated Transactions to fail to comply with
applicable securities laws, then, at PubliCARD's option,
each outstanding Company Share held by such holder shall be
converted into the right to receive cash in amount equal to
(A) the Fair Market Value at the Effective Time of 667,000
PubliCARD Shares divided by (B) the aggregate number of
Company Shares issued and outstanding immediately prior to
the Effective Time (any such cash payable per Company Share
shall also be referred to herein as the "Merger
Consideration");
(b) no fraction of a PubliCARD Share will be issued, but in
lieu thereof each holder of Company Shares who would
otherwise be entitled to a fraction of a PubliCARD Share
(after aggregating all fractional PubliCARD Shares to be
received by such holder) shall receive from PubliCARD one
additional PubliCARD Share;
(c) each share of common stock, $.01 par value per share, of
Acquisition Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for
one validly issued, fully paid and nonassessable share of
common stock, no par value per share, of the Surviving
Corporation;
(d) all Company Shares by virtue of the Merger and without
any action on the part of the holders thereof, shall no
longer be outstanding and shall be canceled and retired and
shall cease to exist, and each holder of a certificate
representing any Company Shares shall thereafter cease to
have any rights with respect to such Company Shares, except
the right to receive the Merger Consideration for the
Company Shares upon the surrender of such certificate in
accordance with this Section 2.3;
(e) each unexercised option to purchase Company Shares
outstanding under the Company's 1997 Incentive Stock Option
Plan immediately prior to the Effective Time, by virtue of
the Merger and without any action on the part of the holders
thereof, shall be assumed by PubliCARD and shall be
converted into an option to purchase, on the same terms and
conditions as were applicable under the Company's 1997
Incentive Stock Option Plan and the underlying option
agreements (as modified by this Section 2.3(e)), that number
of PubliCARD Shares determined by multiplying the number of
Company Shares subject to such option by the Exchange Ratio,
as defined below (rounded up to the nearest whole share), at
a price per PubliCARD Share equal to the exercise price per
Company Share (rounded down to the nearest whole cent) under
such option divided by the Exchange Ratio, all as more
specifically set forth on Schedule 2.3(e); provided,
however, that in the case of any option to which Section 421
of the Code applies by reason of its qualification under
Section 422 of the Code, the option price, the number of
shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in
order to comply with Section 424(a) of the Code. The term
"Exchange Ratio" means that amount determined by dividing
(i) 667,000 by (ii) the aggregate number of Company Shares
issued and outstanding immediately prior to the Effective
Time;
(f) promptly following the Effective Time, PubliCARD shall
deliver to each shareholder of record of the Company
immediately prior to the Effective Time a letter of
transmittal in substantially the form of Exhibit F (each, a
"Letter of Transmittal") and instructions for use in
surrendering the certificates that formally represented
Company Shares entitled to payment of the Merger
Consideration. Promptly following proper delivery of a
certificate representing Company Shares (accompanied by a
duly executed Letter of Transmittal and the documents
contemplated thereby) by the holder thereof to PubliCARD,
PubliCARD shall deliver to such holder either (i) a
certificate representing (A) the Merger Consideration (in
terms of PubliCARD Shares) times the number of Company
Shares represented by the certificate so delivered by such
holder and (B) any additional PubliCARD Share issuable in
lieu of any fractional PubliCARD Share issuable to such
holder in accordance with Section 2.3(c), or (ii) cash in an
amount equal to the Merger Consideration (in terms of cash)
times the number of Company Shares represented by the
certificate so delivered by such holder, whichever is
applicable pursuant to Section 2.3(a); and
(g) if the Merger Consideration is to be issued or paid (as
the case may be) to a name other than the name in which the
certificate representing the Company Shares surrendered in
exchange therefor is registered, it shall be a condition to
such issuance or payment that the person requesting such
issuance or payment shall pay to PubliCARD any transfer or
other taxes required by reason of the issuance of such
shares or the payment of such cash to a name other than that
of the registered holder of the certificate surrendered, or
such person shall establish to the satisfaction of PubliCARD
that such tax has been paid or is not applicable.
4.4 Subsequent Action. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised
that any deeds, bills of sale, assignments, assurances and
any other actions or things are necessary, desirable or
proper to vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of
the Constituent Corporations as a result of, or in
connection with, the Merger, the officers and directors of
the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of the Constituent
Corporations or otherwise, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name
and on behalf of the Constituent Corporations or otherwise,
all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry
out this Agreement.
5. THE CLOSING.
5.1 Place and Time. The Closing of the Merger (the "Closing")
shall take place immediately upon execution and delivery of
this Agreement at the offices of Kaye, Scholer, Fierman,
Hays & Handler, LLP, 425 Park Avenue, New York, New York at
10:00 a.m. (New York City time), or at such other place,
date and time as the parties may agree in writing.
5.2 Effective Time of the Merger. At the Closing, the parties
hereto shall cause (i) an agreement of merger substantially
in the form of Exhibit A-1 to be executed and filed with the
Secretary of State of the State of California, as provided
in Section 1103 of the CGCL and (ii) a certificate of merger
substantially in the form of Exhibit A-2 to be executed and
filed with the Secretary of State of the State of Delaware,
as provided in Section 252 of the DGCL (collectively, the
"Certificates of Merger"), and shall take all such other and
further actions as may be required by law to make the Merger
effective. The Merger shall become effective in accordance
with the CGCL. The date and time of such effectiveness are
referred to herein as the "Effective Time".
5.3 Certificates of Merger. Prior to the Effective Time, each
of the Certificates of Merger shall be accepted for filing
with the Secretary of State of the State of California and
the Secretary of State of the State of Delaware, as
applicable.
6. CLOSING DELIVERIES OF THE COMPANY AND SELLERS.
At the Closing:
6.1 Opinion of Counsel. The Company and Sellers shall have
delivered to PubliCARD and Acquisition Sub an opinion of
Wilson Sonsini Goodrich & Rosati, P.C., counsel to Sellers
and the Company, dated the Closing Date, in substantially
the form of Exhibit B.
6.2 Employment, Non-competition and Confidentiality Agreements.
The Surviving Corporation and John Usher shall have entered
into an employment agreement substantially in the form of
Exhibit C-1. The Surviving Corporation and each of the
employees of the Company listed on Schedule 4.2 shall have
entered into a non-competition and confidentiality agreement
in substantially the form of Exhibit C-2 or Exhibit C-3.
All agreements referred to in this Section 4.2 shall be in
full force and effect.
6.3 Officer's and Sellers' Certificates. The President of the
Company and Sellers (with respect to the Company) and
Sellers (with respect to themselves) shall have delivered to
PubliCARD separate certificates stating that: (a) the
representations and warranties of the Company and Sellers
set forth in this Agreement are true and correct in all
material respects as of the Closing Date, and (b) each of
the Company and Sellers has performed and complied in all
material respects with the agreements contained in this
Agreement required to be performed and complied with by it
prior to or at the Closing.
6.4 FIRPTA Certificate. The Company shall have delivered to
PubliCARD (a) a properly executed FIRPTA Notification
Letter, substantially in the form of Exhibit H, which states
that shares of capital stock of the Company do not
constitute "United States real property interest" under
Section 897(c) of the Code, for purposes of satisfying
PubliCARD's obligations under Treasury Regulation Section
1.1445-2(c)(3), and (b) as agent for the Company, a form of
notice to the Internal Revenue Service in accordance with
the requirements of Treasury Regulation Section 1.897-
2(h)(2) and substantially in the form of Exhibit H, along
with written authorization for PubliCARD to deliver such
form of notice to the Internal Revenue Service on behalf of
the Company upon the Closing.
7. CLOSING DELIVERIES OF PUBLICARD AND ACQUISITION SUB.
At the Closing:
7.1 Opinion of Counsel. PubliCARD shall have delivered to the
Company an opinion of Kaye, Scholer, Fierman, Hays &
Handler, LLP, counsel to PubliCARD and Acquisition Sub,
dated the Closing Date, in substantially the form of Exhibit D.
7.2 Employment Agreement. The Surviving Corporation and John
Usher shall have entered into an employment agreement
substantially in the form of Exhibit C-1 and such agreement
shall be in full force and effect.
7.3 Option Agreements. PubliCARD shall have delivered to each
of the individuals set forth on Schedule 5.3 an option to
purchase the number of PubliCARD Shares set forth opposite
their name on said schedule pursuant to a stock option
agreement substantially in the form of Exhibit E.
7.4 Officer's Certificates. An authorized officer of each of
PubliCARD and Acquisition Sub shall have delivered to the
Company a certificate stating that: (a) the representations
and warranties of PubliCARD and Acquisition Sub set forth in
this Agreement are true and correct in all material respects
as of the Closing Date, and (b) each of PubliCARD and
Acquisition Sub has performed and complied in all material
respects with the agreements contained in this Agreement
required to be performed and complied with by it prior to or
at the Closing.
8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS.
Except as set forth with respect to a specific
representation or warranty in the Company Disclosure Schedules, the
Company and John Usher hereby jointly and severally represent and
warrant to PubliCARD and Acquisition Sub as follows:
8.1 Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good
standing under the laws of the State of its incorporation.
The Company (a) has all requisite corporate power to own,
operate and lease its properties and carry on its business
as the same is now being conducted and (b) is qualified to
do business as a foreign corporation in each jurisdiction
set forth on Schedule 6.1. Neither the location of its
property nor the conduct of its business requires the
Company to be qualified to do business as a foreign
corporation in any state, other than those in which it is so
qualified, where the failure to so qualify would have a
Material Adverse Effect. The Company has delivered to
PubliCARD true and complete copies of the articles or
certificate of incorporation and bylaws of the Company.
8.2 Capitalization of the Company; Subsidiaries.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of common stock, no par value per share,
of which 6,674,749 shares are issued and outstanding. The
outstanding Company Shares have been duly authorized and
validly issued and are fully paid and nonassessable and are
owned of record and beneficially as shown on
Schedule 6.2(a). The outstanding Company Shares were issued
in conformity with applicable laws and not in violation of
any preemptive rights of any Person.
(b) Except as set forth on Schedule 6.2(b), the Company does
not have and has never had any Subsidiaries. The Company is
the owner of 90% of the membership interests of Menagery,
LLC, and owns such interests free and clear of all
Encumbrances of any kind or rights of others.
(c) Except as set forth on Schedule 6.2(c), there are no
outstanding subscriptions, options, rights, warrants, con-
vertible securities or other agreements (other than this
Agreement) or calls, demands or commitments of any kind
relating to the issuance, sale or transfer of any capital
stock of the Company. None of the items set forth on
Schedule 6.2(c) will survive the Closing
8.3 Authority; Absence of Conflict.
(a) The Company has full corporate authority to execute,
deliver and perform this Agreement and each other agreement,
document or instrument required to be delivered by it hereby
or in connection herewith (collectively, the "Company
Documents") and to consummate the Contemplated Transactions.
The execution, delivery and performance by the Company of
the Company Documents and the consummation of the
Contemplated Transactions has been duly authorized by the
board of directors of the Company and, on the Closing Date,
will be duly authorized by the shareholders of the Company,
and no other corporate proceedings on the part of the
Company are necessary to authorize the Company Documents or
the Contemplated Transactions. This Agreement has been, and
each other Company Document when executed and delivered in
accordance with this Agreement will be, duly executed and
delivered by the Company. This Agreement constitutes, and
each of the other Company Documents when executed and
delivered in accordance with this Agreement will constitute,
a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
(b) Neither the execution and delivery of the Company
Documents, nor the consummation of the Contemplated
Transactions will (i) violate, be in conflict with or
constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or
provide the basis of termination of, or cause the
acceleration of the performance required by, any agreement,
commitment or instrument to which the Company is a party or
by which any of its properties or assets is bound or
(ii) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or other Governmental
Body applicable to the Company, or (iii) result in any
Encumbrance upon any of the properties or assets of the
Company under any agreement, commitment or instrument to
which the Company is a party or by which the Company or any
of its properties or assets may be bound, or (iv) violate or
be in conflict with any provision of the certificate or
articles of incorporation or bylaws of the Company.
8.4 Consents and Approvals. Schedule 6.4 lists (i) all
consents, approvals and authorizations of, and declarations,
filings and registrations with, any Governmental Body and
(ii) all consents of other Persons (including, but not
limited to, any party to a lease or other agreement or
commitment of the Company), which are required by or on
behalf of the Company in connection with the execution,
delivery and performance of the Company Documents or the
consummation of the Contemplated Transactions.
8.5 Financial Statements.
(a) Sellers have delivered to PubliCARD unaudited balance
sheets of the Company as at December 31 in each of the years
1995 through 1998, and the related unaudited statements of
income, changes in stockholders' equity, and cash flow for
each of the fiscal years then ended (with respect to
December 31, 1998 and the fiscal year then ended, the
"Financial Statements"), including the notes thereto. Such
financial statements and notes fairly present the financial
condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP, subject
to the exceptions set forth on Schedule 6.5; the financial
statements referred to in this Section 6.5 reflect the
consistent application of such accounting principles
throughout the periods involved, except as disclosed in the
notes to such financial statements and the accompanying two
letters from the certified public accounting firm which
prepared the financial statements.
(b) Sellers have delivered to PubliCARD unaudited balance
sheets of Menagery, LLC as at December 31, 1997, and the
related statement of income for the fiscal year then ended,
including the notes thereto. Such financial statements and
notes fairly present the financial condition and the results
of operations and cash flow of Menagery, LLC as at December
31, 1997 and for the fiscal year then ended, all in
accordance with GAAP, subject to the exceptions stated in
such financial statements.
8.6 Accounts Receivable. The accounts receivable of the Company
(a) are bona fide accounts receivable created in the
ordinary and usual course of business in connection with
bona fide transactions and consistent with past practice,
(b) except as set forth on Schedule 6.6, are current and
(c) have been properly accrued in accordance with GAAP and
any reserves or allowances for doubtful accounts have been
properly accrued in accordance with GAAP. The Company has
delivered to PubliCARD a schedule of aging of the accounts
receivable of the Company as of February 2, 1999.
8.7 Title to Property; Encumbrances. The Company owns no real
property other than the facilities identified on Schedule
6.7. The Company has good and marketable title to such
facilities, free of any Encumbrances other than Permitted
Encumbrances. The Company has delivered or made available
to PubliCARD true and complete copies of the deeds and other
instruments by which the Company acquired such real property
and all title insurance policies, opinions, abstracts and
surveys which relate to such real property and are in the
possession of the Company. Except for Permitted Encum-
brances, the Company has good title to all of the material
personal property reflected as being owned by it on the
balance sheets included in the Financial Statements (except
for personal property sold or otherwise disposed of since
the dates of such balance sheets (as applicable) in the
ordinary course of business). As used herein, "Permitted
Encumbrances" means (a) those Encumbrances disclosed on the
balance sheets included in the Financial Statements or the
notes thereto; (b) statutory liens for current taxes or
assessments not yet due or delinquent or the validity of
which are being contested in good faith by appropriate
proceedings (a list of all such proceedings as of the date
of this Agreement being included on Schedule 6.7); (c)
mechanics', carriers', workers', repairmen's and other
similar liens arising or incurred in the ordinary course of
business with respect to charges not yet due and payable;
(d) recorded easements for public utilities serving the
Company's real property; and (e) zoning, building and other
similar restrictions.
8.8 Leased Property. Schedule 6.8 sets forth a true and
complete list of, and the Company has delivered or made
available to PubliCARD true and complete copies of, each
lease under which the Company is a lessee or lessor (other
than leases for personal property having a value per item or
aggregate payments of less than $10,000 per annum). There
is not, with respect to any such lease, any existing event
of default, or event which (with notice or lapse of time or
both) would constitute an event of default, on the part of
the Company, and the Company has not received any written
notice of any such event. The Company enjoys peaceful and
undisturbed possession under each such lease. None of the
rights of the Company under any lease set forth on Schedule
6.8 will be subject to termination or modification and no
consent or approval of any third party is required under
such leases as a result of the consummation of the
Contemplated Transactions.
8.9 Intellectual Property Rights.
(a) Schedule 6.9(a) contains a true and complete list of all
Intellectual Property (as defined in clause (m) below),
including without limitation, applications, filings, patents
and registrations with or in any Governmental Body having
jurisdiction over such subject matter. All such
applications, filings, patents and registrations have been
duly filed, and those registrations and patents which have
been issued are validly existing and in full force and
effect and all required maintenance and annuity fees have
been timely paid in full. Except as set forth on Schedule
6.9(a), with respect to all U.S. registered service and
trademarks, Section 8 and 15 declarations, where applicable,
have been timely filed and accepted. No service or
trademarks listed on Schedule 6.9(a) have been abandoned.
(b) Except as specifically set forth on Schedule 6.9(b), the
Company has good and marketable title to all Intellectual
Property and Technology (as defined in clause (m) below),
free and clear of all Encumbrances and without payment of
any royalties, license fees or other amounts.
(c) Except as specifically set forth on Schedule 6.9(c) and
for broadly distributed and generally available commercial
software obtained on standard terms, (i) there are no
licenses, agreements, obligations or other commitments by
which the Company may be bound from or with third parties
under which the Company uses, has the right to use or
exercises any rights with respect to any Intellectual
Property or Technology and (ii) there are no judicial
orders, decrees, judgments or stipulations, or related
settlement agreements restricting or affecting the Company's
use or right to use any Intellectual Property or Technology.
(d) Except as set forth on Schedule 6.9(d), the Company has
not received (and the Company has no knowledge of) any
notice, claim or allegation from any other party challenging
the right of the Company to use, possess, transfer, convey
or otherwise dispose of any Intellectual Property or
Technology. Except as set forth on Schedule 6.9(d), the
Company has never initiated, and has no knowledge of, any
interference, opposition, cancellation, reexamination,
reissue or other contest proceeding, action, claim, dispute
or claim of infringement, misappropriation or other
violation of any intellectual property or other proprietary
rights of any other party. The Company's use of the
Intellectual Property and Technology, past and present, has
not and does not violate or infringe upon the non-patent
rights of any other party (and, to the best of the Company's
knowledge, has not and does not violate the patent rights of
any other party) or constitute a breach of any agreement,
obligation, promise or commitment by which the Company may
be bound or constitute a violation of any laws, regulations,
ordinances, codes or statutes in any jurisdiction.
(e) Except as set forth on Schedule 6.9(e), no licenses or
other rights have been granted and the Company has no
obligation to grant licenses with respect to any
Intellectual Property or Technology. No claims have been
made by the Company of any violation or infringement by
others of any rights with respect to any Intellectual
Property or Technology. No Seller or the Company has
knowledge of any such claim which the Company may have the
right or a reasonable basis to make or assert.
(f) Except as set forth on Schedule 6.9(f), the Intellectual
Property and Technology includes all rights and interests
necessary to conduct the business of the Company as it is
currently conducted (provided that any representation as to
infringement of third party patents is limited to the
statement set forth in paragraph (d) of this Section 6.9),
and such rights will not be adversely affected by the
Company or any other party claiming under or through the
Company or otherwise in connection with or arising from the
execution and delivery of this Agreement or the Contemplated
Transactions.
(g) To the best of the Company's and Sellers' knowledge, all
statements and representations made by the Company in any
pending Intellectual Property applications, filings, patents
and registrations were true in all material respects as of
the time they were made.
(h) Except as set forth on Schedule 6.9(h), the Company has
taken all actions reasonably necessary to ensure that (A)
there are no protections, encryption, security or lock-out
devices, whether triggered by the passage of time, the use
or operation of the Intellectual Property and Technology,
remotely or otherwise which might in any way interrupt,
discontinue or otherwise adversely affect the Intellectual
Property and Technology or the Company's use thereof; and
(B) there are no so-called computer viruses, worms, trap or
back doors, Trojan horses or any other instructions, codes,
programs, data or materials which could improperly,
wrongfully and/or without the authorization of the Company,
interfere with the operation or use of the Intellectual
Property and Technology.
(i) Except as set forth on Schedule 6.9(i), (i) all
authorship in the computer software, documentation, software
design, technical and functional specifications created by
the Company and used in products or services created by the
Company (excluding software owned by others that is part of
hardware purchased by the Company for use in its products or
services) is or has been original and (ii) all computer
software and related documentation manuals contained or used
in products of (including, without limitation, documentation
and product and user manuals) or services provided by the
Company are owned by or licensed to the Company and such
licenses provide the Company with the right to sublicense or
otherwise authorize use of the licensed subject matter to
their customers and authorized third party users.
(j) Except as set forth on Schedule 6.9(j), (i) all computer
software created by employees of the Company within the
scope of their employment by the Company and used in Company
products or services and all original copyrightable
authorship therein is owned by the Company; (ii) all rights
in all inventions and discoveries made, written, developed,
reduced to practice or conceived by current or former
employees, independent contractors or consultants of the
Company during the course of their employment (or other
retention) by the Company and material to the business of
the Company or made, written, developed, reduced to practice
or conceived with the use or assistance of the Company's
facilities or resources and which are the subject of one or
more patents or applications for patents have been assigned
in writing to the Company; (iii) the policy of the Company
requires and has required each employee of the Company to
sign documents confirming that he or she assigns to the
Company all Intellectual Property and Technology rights
made, written, developed, reduced to practice or conceived
by him or her during the course of his or her employment (or
other retention) by the Company and relating to the business
of the Company or made, written, developed, reduced to
practice or conceived with the use or assistance of the
Company's facilities or resources to the extent that
ownership of any such Intellectual Property or Technology
rights does not vest in the Company by operation of law, and
to the extent that any employee of the Company has not
executed such documents, the Company will require such
employee to execute such documents at or before the Closing;
and (iv) all Intellectual Property and Technology rights
made, written, developed, reduced to practice or conceived
by each employee, independent contractor or consultant of
the Company during the course of his or her employment (or
other retention) by the Company and material to the business
of the Company have been assigned or licensed to the
Company.
(k) Except as set forth on Schedule 6.9(k), the Company has
taken all reasonable and practicable steps to protect and
preserve the confidentiality of all Intellectual Property
and Technology not subject to copyright or patent
("Confidential IP Information"). Use by the Company of
Confidential IP Information not owned by the Company has
been and is pursuant to the terms of a written agreement
between the Company and the owner of such Confidential IP
Information, or is otherwise lawful.
(l) "Intellectual Property" shall mean all intellectual
property rights, common law, statutory or otherwise,
domestic and foreign, including, without limitation, patents
(including all utility, designs, provisionals, non-
provisionals, reissues, divisions, continuations,
continuations-in-part, national phases, Patent Co-operation
Treaty ("PCT") and extensions), service marks, trademarks,
trade names, brand, product and service names, and all logos
and distinctive identifications of the Company, its products
and services, copyrights and mask works as well as all
applications for any and all of the foregoing, licenses and
other contractual rights and other such property and
intangible rights owned, used or held for use by the
Company, together with the goodwill of the business of the
Company in connection with all of the foregoing.
"Technology" shall mean all formulae, algorithms, processes,
methods, procedures, designs, ideas, strategic and other
business plans, research records, inventions and all records
of the foregoing, test, engineering and technical data,
know-how, proprietary information and methodologies, trade
secrets, technology, communications and associated
peripheral devices and resources, computer software,
programs and code, both object and source, in whatever form
and media, all databases, specifications and other
information processing tangible and intangible items, owned,
used or held for use by the Company with respect to the
business of the Company.
8.10 Buildings, Plants and Equipment.
(a) The buildings, plants and structures of the Company are
adequate for the uses to which they are being put. The
personal property owned or leased by the Company is adequate
and in a condition sufficient to permit the Company to
conduct its business in the same manner as it is conducted
on or has been conducted prior to the date of this
Agreement.
(b) The Company has not received notification since January
1, 1996 alleging that the Company is in violation of any
applicable building, zoning, health or other law, ordinance
or regulation (other than those covered by Section 6.21) in
respect of its buildings, plants or structures or their
operation, and there exists no such violation which could
reasonably be expected to interfere with the present use of
the buildings, plants or structures.
8.11 Rights and Assets Sufficient. The rights, properties and
assets owned by or leased or licensed to the Company include
all rights, properties and other assets necessary to permit
the Company to conduct its business in the same manner as it
is conducted on, or has been conducted immediately prior to,
the date of this Agreement.
8.12 Books and Records. The books and records of the Company,
all of which have been made available to PubliCARD, set
forth in all material respects transactions affecting the
Company, and such books and records have been properly kept
and maintained and are complete and correct.
8.13 Litigation. There is no investigation by any Governmental
Body of which Sellers are aware or any Proceeding pending
or, to the knowledge of Sellers, threatened by or on behalf
of any Governmental Body or Person against the Company or
its business or assets. To the knowledge of Sellers, no
basis exists for any such Proceeding. There are no existing
judgments, orders, writs, injunctions, awards or decrees of
any court or other Governmental Body against the Company or
its business or assets.
8.14 Tax Matters. Except as otherwise disclosed on Schedule
6.14:
(a) Since 1997, the Company has qualified as an S corporation
(as defined under Section 1361(a)(1) of the Code) for
federal, state and local tax purposes and has timely and
properly made all elections necessary to obtain (or retain)
such S corporation status. The Company has timely filed or
caused to be timely filed all Tax Returns that are or were
required to be filed by or with respect to it pursuant to
applicable legal requirements. All such Tax Returns are
true, correct and complete in all material respects.
Sellers have delivered or made available to PubliCARD copies
of, and Schedule 6.14(a) contains a complete and accurate
list of, all such Tax Returns relating to income or
franchise taxes filed since December 31, 1994. The Company
has paid all material Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to
any assessment received by Sellers or the Company, except
such Taxes, if any, as are listed on Schedule 6.14(a) and
are being contested in good faith and as to which adequate
reserves have been provided in the audited balance sheet
included in the Financial Statements. Since becoming an S
corporation, the Company has not sold any property or other
asset that resulted or will result in the recognition of
"net recognized built-in gain" under Section 1374 of the
Code. The Company has not been a member of a group of
corporations and has not owned 80 percent or more of any
shares of stock of any other corporation.
(b) The Tax Returns of the Company have been audited by the
Internal Revenue Service or other relevant Governmental Body
or are closed by the applicable statute of limitations for
all taxable years through December 31, 1994.
Schedule 6.14(b) contains a complete and accurate list of
all audits of all such Tax Returns, including a reasonably
detailed description of the nature and outcome of each
audit. No adjustments have been proposed with respect to
the Tax Returns filed by the Company for all taxable years
since December 31, 1994. None of Sellers or the Company has
given or been requested to give waivers or extensions (or is
or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the
payment of Taxes by it or for which it may be liable.
(c) To the Company's knowledge, the charges, accruals, and
reserves with respect to Taxes on the books of the Company
are adequate and are at least equal to the Company's
liability for Taxes. There exists no proposed tax
assessment against the Company except as disclosed in the
audited balance sheet included in the Financial Statements.
No consent to the application of Section 341(f)(2) of the
Code has been filed with respect to any property or assets
held, acquired, or to be acquired by the Company. All Taxes
that the Company is or was required by legal requirements to
withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper
Governmental Body.
(d) There is no tax sharing agreement that will require any
payment in respect of the Taxes of any other person or
entity by the Company after the date of this Agreement.
(e) No property of the Company (i) is subject to a tax
benefit transfer lease subject to the provisions of former
Section 168(f)(8) of the Internal Revenue Code of 1954, (ii)
is "tax-exempt use property" within the meaning of
Section 168(h) of the Code, or (iii) secures any debt the
interest on which is exempt from tax under Section 103 of
the Code.
(f) The Company is not and has not been a United States real
property holding corporation within the meaning of
Section 897(c)(2) of the Code.
(g) There is no agreement, plan, arrangement or other
contract covering any employee or independent contractor or
former employee or former independent contractor of the
Company that could give rise to the payment of any amount
that could not be deductible pursuant to Section 280G of the
Code.
(h) The Company (i) has complied with all material applicable
legal requirements relating to information reporting with
respect to payments made to third parties and the
withholding of and payment of withheld Taxes, (ii) has
timely withheld from employee wages and other payments and
paid over to the proper Governmental Bodies all material
amounts required to be so withheld and paid over for all
periods under all applicable legal requirements, and (iii)
has duly collected and remitted any material sales, value-
added and similar Taxes required to be collected and
remitted.
(i) There are no pending, proposed, or, to the knowledge of
Sellers, threatened, audits, judicial proceedings,
assessments or deficiencies with respect to Taxes of the
Company. There is no pending, proposed, or, to the
knowledge of Sellers, threatened, claim by any Governmental
Body in any jurisdiction in which any of the Sellers or the
Company does not pay Taxes or file Tax Returns that any such
Seller or the Company is required to pay Taxes or file Tax
Returns.
(j) The Company has not and is not required to make any
adjustment under Section 481(a) of the Code or any
comparable provision of state, local or foreign law.
(k) No liens for Taxes (other than for Taxes not yet due and
payable) exist with respect to the assets, income or
operations of the Company.
(l) Except as set forth on Schedule 6.14(m), the Company does
not have in effect any tax election for federal income tax
purposes under Section 108, 168, 338, 441, 471, 1017, 1033,
1502 or 4977 of the Code.
8.15 Absence of Certain Changes or Events. Except as
contemplated by this Agreement and except as set forth on
Schedule 6.15, the Company has not, since December 31, 1997
(or since December 24, 1998, in the case of paragraph (m)
below):
(a) declared or paid any dividend or made any other payment
or distribution in respect of its capital stock;
(b) purchased, redeemed, issued, sold or otherwise acquired
or disposed of, either directly or indirectly, any of its
capital stock or reclassified, split up or otherwise changed
any of its capital stock or granted or entered into any
options, warrants or calls or other rights to purchase or
convert any obligation into any of its capital stock;
(c) amended its articles or certificate of incorporation or
bylaws;
(d) borrowed any funds or incurred, assumed or acquired any
obligation or liability (contingent or otherwise) in the
individual amount of more than $10,000 or in the aggregate
amount of more than $10,000;
(e) paid, discharged or satisfied any claim, liability or
obligation in excess of $10,000 (whether fixed or
contingent), other than in the ordinary course of business,
or failed to pay or otherwise satisfy any material claims,
liabilities or obligations on a basis and within the time
consistent with past practice;
(f) made any loans, advances or capital contributions to, or
investments in, any Person in the individual amount of more
than $10,000;
(g) settled any Proceeding against the Company or its
business or assets for an amount in excess of $10,000;
(h) except for adjustments made in the ordinary course of
business, canceled or compromised any debts or claims, or
waived or released any rights which, in the aggregate,
exceed $10,000;
(i) sold, assigned, transferred, conveyed, leased, pledged,
encumbered or otherwise disposed of or agreed to sell,
assign, transfer, convey, lease, pledge or otherwise dispose
of any material portion of its assets or properties, or any
other material right, except for sales of inventory in the
ordinary course of business;
(j) damaged, destroyed or lost any asset or property of the
Company, whether or not covered by insurance, where such
damage, destruction or loss could reasonably be expected to
have a Material Adverse Effect;
(k) transferred or granted any right under any patent,
registered trademark, trade name, copyright (including any
pending application therefor), service mark, trade secret,
license or other intellectual or industrial property right
owned or used by it in its business;
(l) made or granted any increase in the compensation of its
employees or directors, or entered into any employment,
severance or similar agreement with any of its directors or
employees;
(m) paid compensation or other amounts to, or for the benefit
of, John Usher in excess of a rate of $12,500 per month;
(n) purchased or entered into any material transaction,
contract or commitment to purchase raw materials or supplies
other than in the ordinary course of business;
(o) granted or extended any power of attorney or acted as
guarantor, surety, co-signer, endorser, co-maker, indemnitor
or otherwise in respect of the obligation of any Person
other than through endorsements of negotiable instruments in
the ordinary course of business;
(p) written off or been required by GAAP to write off any
accounts receivable in excess of $10,000 in the aggregate;
(q) written down or been required by GAAP to write down
inventory in excess of $10,000 in the aggregate;
(r) merged or consolidated with or into any other Person; or
(s) agreed or otherwise committed, whether in writing or
otherwise, to do any of the foregoing.
8.16 Labor.
(a) Except as set forth on Schedule 6.16(a), the Company is
not conducting its business in violation of any applicable
statute, law, regulation or rule of any Governmental Body
relating to employment or labor, including, without
limitation, those statutes, laws, regulations or rules
relating to wages, hours, labor relations, collective
bargaining, unemployment insurance, workers' compensation,
equal employment opportunity and the payment and withholding
of Taxes. Except as set forth on Schedule 6.16(a), no union
or other collective bargaining unit has been certified as
representing any of the employees of the Company nor has the
Company agreed to recognize any union or other collective
bargaining unit. Except as set forth on Schedule 6.16(a),
there are no labor disputes pending or, to the knowledge of
Sellers, threatened, involving strikes, work stoppages,
slowdowns or lockouts. There are no grievance proceedings,
claims of unfair labor practices or representation election
petitions filed or, to the knowledge of Sellers, threatened
to be filed with the National Labor Relations Board against
the Company. To the knowledge of Sellers, there is no union
representation or organizing effort pending or threatened
against the Company.
(b) Schedule 6.16(b) lists all employees of the Company,
including such employees' names, job title and current
compensation.
8.17 Employee Benefits; ERISA.
(a) Except as set forth on Schedule 6.17(a), the Company
(i) does not maintain or contribute to or have any
obligation with respect to, and none of the employees of the
Company are covered by, any bonus, deferred compensation,
severance pay, pension, profit-sharing, retirement,
insurance, stock purchase, stock option, or other fringe
benefit plan, arrangement or practice, written or otherwise,
or any other "employee benefit plan," as defined in
Section 3(3) of ERISA, whether formal or informal
(collectively, "Plans"), and (ii) is not a party to any
contract for the employment of any employee of the Company
or any other person who renders services to the Company.
None of the Plans is a "multiemployer plan," as defined in
Section 3(37) of ERISA, (a "Multiemployer Plan") or a funded
welfare benefit plan, as defined in Section 419 of the Code.
The Company does not have any agreement or commitment to
create any additional Plan, enter into any additional
employment agreement or to modify or change any existing
Plan or employment agreement.
(b) With respect to each Plan, the Company has heretofore
delivered or made available to PubliCARD true, correct and
complete copies of (i) all documents which comprise the most
current version of each of such Plan, including any related
trust agreements, insurance contracts, or other funding or
investment agreements and any amendments thereto, and
(ii) with respect to each Plan that is an "employee benefit
plan," as defined in Section 3(3) of ERISA, (A) the two most
recent Annual Reports (Form 5500 Series) and accompanying
schedules for each Plan for which such a report is required,
(B) the most current summary plan description (and any
summary of material modifications), (C) the two most recent
certified financial statements for each of the Plans for
which such a statement is required or was prepared, (D) the
Forms PBGC-1 filed in each of the two most recent plan years
for each of the Plans for which such form was required to be
filed, and (E) for each Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code, the
current Internal Revenue Service determination letter issued
with respect to such Plan. Except as set forth in
Schedule 6.17(b), none of the Plans has been or will be
amended prior to the Closing Date.
(c) The Company has performed and complied in all material
respects with all of its obligations under and with respect
to the Plans and each of the Plans has, at all times, in
form, operation and administration complied in all material
respects with its terms, and, where applicable, the
requirements of all applicable laws. Each Plan which is
intended to be "qualified" within the meaning of
Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so qualified and, to the
knowledge of Sellers, nothing has occurred which reasonably
could be expected to adversely affect such qualified status.
(d) There are no unpaid contributions due prior to the date
hereof with respect to any Plan that are required to have
been made under the terms of the Plan or any applicable law.
With respect to each plan subject to Section 412 of the Code
maintained for employees of the Company or any of its ERISA
Affiliates, there has occurred no failure to meet the
minimum funding standards of Section 412 of the Code
(whether or not waived in accordance with Section 412(d) of
the Code) or failure to make by its due date a required
installment under Section 412(m) of the Code.
(e) With respect to each "employee pension benefit plan," as
defined in Section 3(2) of ERISA, in which the Company or
any of its ERISA Affiliates participates or has participated
at any time in the last five years (i) neither the Company
nor any of its ERISA Affiliates has withdrawn from such plan
during a plan year in which it was a "substantial employer,"
as defined in Section 4001(a)(2) of ERISA, where such
withdrawal could result in liability of such substantial
employer pursuant to Section 4062(e) or 4063 of ERISA, (ii)
neither the Company nor any of its ERISA Affiliates has
filed a notice of intent to terminate any such plan or
adopted any amendment to treat any such plan as terminated,
(iii) the Pension Benefit Guaranty Corporation ("PBGC") has
not instituted proceedings to terminate any such plan, (iv)
no other event or condition has occurred which might
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to
administer, any such plan, (v) no accumulated funding
deficiency, whether or not waived, exists with respect to
any such plan, and no condition has occurred or exists which
by the passage of time would be expected to result in an
accumulated funding deficiency as of the last day of the
current plan year of any such plan, (vi) all required
premium payments to the PBGC have been paid when due, (vii)
no reportable event, as described in Section 4043 of ERISA,
has occurred with respect to any such plan, other than
reportable events for which the notice requirements have
been waived by regulation, and (viii) no amendment with
respect to which security is required under Section 307 of
ERISA has been made or is reasonably expected to be made.
(f) With respect to each Plan that is subject to the
provisions of Title I, Subtitle B, Part 3 of ERISA, (i) the
actuarial present value (based on the actuarial assumptions
used in the most recent actuarial valuation) of vested and
nonvested "benefit liabilities," as defined in
Section 4001(a)(16) of ERISA, (calculated on a termination
basis using assumptions promulgated by the PBGC and taking
into account all contingent and subsidized benefits) of each
such Plan, determined as of the most recent valuation date
for each such plan, did not exceed the fair market value of
the assets of such Plan as of such date, and (ii) since the
most recent valuation date for each such Plan, there has
been no amendment or change to such Plan that would increase
the amount of benefit liabilities thereunder and, to the
knowledge of Sellers, there has been no event or occurrence
that would materially increase or decrease the value of such
assets or liabilities.
(g) The Company has no obligation to provide health benefits
or other non-pension benefits to retired or other former
employees, except as specifically required by Section 4980B
of the Code or Part 6 of Title I of ERISA or as set forth on
Schedule 6.17(g).
(h) Neither the Company nor any other "disqualified person"
or "party in interest," as defined in Section 4975 of the
Code and Section 3(14) of ERISA, respectively, has engaged
in any "prohibited transaction," as defined in Section 4975
of the Code or Section 406 of ERISA, with respect to any
Plan, nor have there been any fiduciary violations under
ERISA which could subject the Company (or any officer,
director or employee thereof) to any material penalty or tax
under Section 502(i) of ERISA or Sections 4971 and 4975 of
the Code.
(i) Except as set forth on Schedule 6.17(i), with respect to
any Plan: (i) no filing, application or other matter is
pending with the Internal Revenue Service, the PBGC, the
United States Department of Labor or any other Governmental
Body, (ii) there is no action, suit or claim pending (nor,
to the knowledge of Sellers, any basis for such a claim),
other than routine claims for benefits, and (iii) there are
no outstanding liabilities for taxes, penalties or fees.
(j) The Company has not incurred any liability or taken any
action and none of Sellers has any knowledge of any action
or event that could cause any one of them to incur any
liability (i) under Section 412 of the Code or Title IV of
ERISA with respect to any "single-employer plan" (as defined
in Section 4001(a)(15) of ERISA), (ii) on account of a
partial or complete withdrawal (as defined in Sections 4203
and 4205 of ERISA, respectively) with respect to any
Multiemployer Plan, or (iii) on account of unpaid
contributions to any Multiemployer Plan.
(k) Neither the execution and delivery of this Agreement by
the Company or Sellers nor the consummation of any or all of
the Contemplated Transactions by it will: (i) entitle any
current or former employee of the Company to severance pay,
unemployment compensation or any similar payment, (ii)
accelerate the time of payment or vesting or increase the
amount of any compensation due to any such employee or
former employee, or (iii) directly or indirectly result in
any payment made or to be made to or on behalf of any person
to constitute a "parachute payment" within the meaning of
Section 280G of the Code.
8.18 Insurance. Schedule 6.18 sets forth a true, correct and
complete list of all insurance policies of any kind or
nature currently maintained by or on behalf of the Company
and relating to its business and/or assets, indicating the
type of coverage, name of insured, name of insurance carrier
or underwriter, premium thereon, policy limits and
expiration date of each policy. Sellers have delivered or
made available to PubliCARD true and complete copies of such
insurance policies. Such insurance policies provide, in the
reasonable judgment of Sellers, adequate insurance coverage
for the business and assets of the Company in light of
present insurance market conditions. All such insurance
policies are in full force and effect, and the Company is
not in default with respect to its obligations under any
such insurance policy. There are no retroactive or
retrospective premium adjustments with respect to such
insurance policies. The Company has not had any insurance
coverage canceled or denied by any carrier or received any
written notice of cancellation or nonrenewal by any carrier,
in either case since January 1, 1995.
8.19 Material Agreements.
(a) Schedule 6.19 contains a true and complete list, and the
Company has delivered or made available to PubliCARD true
and complete copies, of the following agreements, contracts
or instruments to which the Company is a party or by which
the Company is bound (collectively, the "Material
Agreements"):
(i) each contract that is executory in whole or in part
and involves performance of services or delivery of
goods or materials (A) by the Company of an amount or
value in excess of $10,000 or (B) to the Company of an
amount or value in excess of $10,000;
(ii) each contract that is executory in whole or in
part and was not entered into in the ordinary course
of business and that involves expenditures or receipts
of the Company in excess of $10,000;
(iii) other than licensing agreements entered into in
connection with product sales in the ordinary course
of the Company's business, each licensing agreement or
any other contract with respect to patents,
trademarks, copyrights, or other Intellectual Property
or Technology, including contracts with current or
former employees, consultants, or contractors
regarding the appropriation or the non-disclosure of
any of the Intellectual Property or Technology;
(iv) each collective bargaining agreement and any other
contract to or with any labor union or other employee
representative of a group of employees;
(v) each joint venture, partnership, and any other
contract (however named) involving a sharing of
profits, losses, costs or liabilities by the Company
with any other Person;
(vi) each contract containing covenants that in any way
purport to restrict the business activity of the
Company or limit the freedom of the Company to engage
in any line of business or to compete with any Person;
(vii) each contract providing for payments to or by any
Person based on sales, purchases, or profits, other
than direct payments for goods;
(viii) each power of attorney that is currently
effective and outstanding granted by and relating to
the Company;
(ix) each contract that is executory in whole or in
part and involves capital expenditures in excess of
$10,000;
(x) each written warranty, guaranty, and/or other
similar undertaking with respect to contractual
performance extended by the Company other than in the
ordinary course of business;
(xi) each contract with any employee, director or
officer; and
(xii) each contract relating to indebtedness of the
Company for borrowed money and each contract relating
to the guarantee by the Company of indebtedness of any
Person for borrowed money.
(b) Each of the Material Agreements is in full force and
effect and constitutes a valid and binding obligation of the
Company and, to the knowledge of Sellers, the other party
thereto. The Company is not in breach or default
thereunder, and no event has occurred and no condition or
state of facts exists which, with the passage of time or the
giving of notice or both, would constitute such a default or
breach by the Company or, to the knowledge of Sellers, by
any such other party. The Company has not received written
notice of such a breach or default or event or condition.
8.20 Compliance with Law; Licenses.
(a) The operation of the business of the Company has been
conducted in all respects in accordance with all applicable
laws, regulations and other requirements of all Governmental
Bodies. The Company has not since January 1, 1995 received
any notification from any Governmental Body of any asserted
present or past failure by it to comply with any such laws,
regulations or other requirements.
(b) The Company has obtained all licenses, permits,
certificates, consents and approvals from Governmental
Bodies (the "Licenses") that are necessary for the business
and operations of the Company. All such Licenses are listed
on Schedule 6.20(b) and are in full force and effect, and no
written notice of any violation of any License has been
received by the Company.
8.21 Environmental Matters.
(a) Except as set forth on Schedule 6.21(a), there is no
civil, criminal, or administrative action, suit, demand,
claim, hearing, notice or demand letter, notice of
violation, investigation, or proceeding pending or, to the
knowledge of Sellers, threatened against the Company
relating in any way to Contamination of, or to any Release
of any Hazardous Substance whether at, on, from or to, the
Facilities or elsewhere, or to any violation of any
Environmental Law.
(b) Except as set forth on Schedule 6.21(b), no underground
or aboveground tank which has been used to store any
Hazardous Substance is, was during the Company's ownership,
operation or possession of any of the Facilities or, to the
knowledge of Sellers, was prior to the Company's ownership,
operation or possession of any of the Facilities, located at
any of the Facilities.
(c) Except as set forth on Schedule 6.21(c), the Company has
not committed any material violation of any requirement of
any Environmental Law with respect to its activities.
(d) Except as set forth on Schedule 6.21(d), there has been
no Release of any Hazardous Substance at, on or to the
Facilities, either by the Company or, to its knowledge, by
others, or Release of any Hazardous Substance by the Company
elsewhere.
(e) Except as set forth on Schedule 6.21(e), no
polychlorinated biphenyls (PCBs) or asbestos or other
Hazardous Substance is present on or at, or is in any
equipment or fixtures located on or at, the Facilities.
(f) Neither the Company nor any Seller possesses or has
initiated any reports, studies, analyses, tests or
monitoring pertaining to Hazardous Substances in or on the
Facilities or concerning compliance by Sellers or the
Company with Environmental Laws.
8.22 Transactions with Related Parties. The Company is not a
party to any contract, lease or commitment which, were the
Company a "Registrant" under the Securities Act, would be
required to be disclosed pursuant to Item 404(a) or (c) of
Regulation S-K as promulgated by the Securities and Exchange
Commission, and there are no loans outstanding to or from
any Person specified in Item 404(a) from or to the Company.
8.23 Bank Accounts. Schedule 6.23 hereto sets forth a true,
correct and complete list of the names and addresses of all
banks and other financial institutions in which the Company
maintains an account, deposit or safe-deposit box, together
with the names of all persons authorized to draw on these
accounts or deposits or to have access to these boxes.
8.24 Brokers or Finders. Sellers and the Company have not, and
their respective officers, directors or employees have not,
employed any broker or finder or incurred any liability for
any brokerage or finder's fee or commissions or similar
payment in connection with any of the Contemplated
Transactions, except as set forth on Schedule 6.24, which
shall be the sole responsibility of the Sellers.
8.25 Year 2000 Compliance. To the best of the Company's
knowledge, the Company's Information Technology (as defined
below) is designed to be used prior to, during, and after
the calendar year 2000, and such Information Technology used
during each such time period will accurately receive,
provide and process date/time data (including calculating,
comparing and sequencing) from, into and between the 20th
and 21st centuries, including the years 1999 and 2000, and
leap year calculations, and will not malfunction, cease to
function, or provide invalid or incorrect results as a
result of date/time data, to the extent that other
Information Technology, used in combination with the
Company's Information Technology, properly exchanges date/
time data with it. For purposes of this Section 6.25,
"Information Technology" shall mean computer software,
computer firmware, computer hardware (whether general or
specific purpose), and other similar or related items of
automated, computerized, and/or software systems.
8.26 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 6.26, the Company does not have any liabilities or
obligations (whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due)
other than those liabilities and obligations (a) set forth
or adequately provided for in the balance sheet included in
the Financial Statements, (b) not required to be set forth
in such balance sheet or disclosed in the notes thereto
under GAAP or (c) incurred since the date of such balance
sheet in the ordinary course of business consistent with
past practice.
8.27 No Material Adverse Change. Since the date of the unaudited
balance sheet included in the Financial Statements, there
has not been any Material Adverse Effect and no event has
occurred and no condition exists which could reasonably be
expected to result in a Material Adverse Effect.
8.28 Disclosure. No representation or warranty of the Company or
Sellers in this Agreement omits to state a material fact
necessary to make the statements herein, in light of the
circumstances in which they were made, not misleading.
8.29 Knowledge. As used in this Section 6, the "Company's
knowledge" means the knowledge of the Company's management,
after reasonable investigation.
9. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Each Seller hereby severally and not jointly represents and
warrants, with respect to only such Seller, to PubliCARD and Acquisition
Sub as follows:
9.1 Organization and Good Standing. With respect to a Seller
that is a corporation, such Seller is a corporation duly
organized, validly existing and in good standing under the
laws of the State of its incorporation. With respect to a
Seller that is a partnership, such Seller is a partnership
duly formed, validly existing and in good standing under the
laws of the State of its formation. Each Seller (other than
a natural person) has delivered to PubliCARD true and
complete copies of its certificate or articles of
incorporation, by-laws, certificate of partnership,
partnership agreement, declaration of trust or other
organizational documents.
9.2 Authority. Each Seller (other than a natural person) has
full corporate, partnership or trust (as the case may be)
authority to execute, deliver and perform this Agreement and
each other agreement, document or instrument required to be
delivered by it hereby or in connection herewith
(collectively, the "Seller Documents") and to consummate the
Contemplated Transactions. Each Seller (including a trustee
of a trust that is a Seller) that is a natural person has
the right, capacity and all requisite authority to execute,
deliver and perform the Seller Documents and to consummate
the Contemplated Transactions. The execution, delivery and
performance by each Seller (other than a natural person or a
trust) of the Seller Documents and the consummation of the
Contemplated Transactions has been duly authorized by all
necessary corporate or partnership (as the case may be)
action of such Seller. This Agreement has been, and each
other Seller Document when executed and delivered in
accordance with this Agreement will be, duly executed and
delivered by each Seller. This Agreement constitutes, and
each of the other Seller Documents when executed and
delivered in accordance with this Agreement will constitute,
a valid and binding obligation of each Seller, enforceable
against such Seller in accordance with its terms.
9.3 Absence of Conflict. Neither the execution, delivery or
performance of the Seller Documents nor the consummation of
the Contemplated Transactions will (a) violate any provision
of the certificate or articles of incorporation, bylaws,
certificate of partnership, partnership agreement,
declaration of trust or other organizational document of
each Seller (other than a natural person) or (b) violate any
statute or law or any judgment, decree, order, regulation or
rule of any court or other Governmental Body applicable to
each Seller.
9.4 Title to Company Shares. All of the Company Shares
beneficially owned by each Seller are set forth opposite
such Seller's name on Schedule 6.2(a). Each Seller has good
and valid title to the Company Shares set forth opposite its
name on Schedule 6.2(a) and owns beneficially and of record
such Company Shares free and clear of all Encumbrances.
9.5 Investment Representations.
(a) Each Seller is an "Accredited Investor" within the
meaning of Rule 501 under the Securities Act.
(b) The Merger Consideration to be received by each Seller
pursuant to this Agreement will be held by such Seller for
its own account for the purpose of investment and not with a
present view to or for sale in connection with any
distribution thereof.
(c) The information furnished by each Seller in the investor
questionnaire delivered to PubliCARD prior to the date of
this Agreement was true and complete as of the date of such
questionnaire and is currently true and complete.
(d) Each Seller's financial position is such that it can
afford to bear the economic risk of holding the Merger
Consideration it receives pursuant to this Agreement for an
indefinite period of time, and each Seller can afford to
suffer the complete loss of its investment in such Merger
Consideration.
(e) Each Seller has been provided an opportunity to ask
questions of, and has received answers thereto satisfactory
to such Seller from, PubliCARD and its representatives
regarding the business and affairs of PubliCARD and such
other information as it desired in order to evaluate an
investment in the Merger Consideration.
(f) Each Seller understands that the shares comprising the
Merger Consideration to be received by it pursuant to this
Agreement have not been registered under the Securities Act
or applicable state securities laws in reliance upon
specific exemptions from registration thereunder. Each
Seller agrees that the Merger Consideration to be received
by it pursuant to this Agreement may not be sold, offered
for sale, exchanged, transferred, pledged or otherwise
disposed of except pursuant to a registration statement
under the Securities Act or pursuant to an exemption from
the registration requirements of the Securities Act and in
compliance with state securities laws, and the shares
comprising the Merger Consideration will bear a legend to
such effect.
(g) For purposes of this Section 7.5, the term "Merger
Consideration" refers only to the Merger Consideration
consisting of PubliCARD Shares and includes any additional
PubliCARD Shares issuable in lieu of any fractional
PubliCARD Shares issuable as part of the Merger
Consideration.
10. REPRESENTATIONS AND WARRANTIES OF PubliCARD.
PubliCARD hereby represents and warrants to the Company and
Sellers as follows:
10.1 Organization and Good Standing. Each of PubliCARD and
Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the state of
its incorporation. Each of PubliCARD and Acquisition Sub
(a) has all requisite corporate power to own, operate and
lease its properties and carry on its business as the same
is now being conducted and (b) is qualified to do business
as a foreign corporation in each jurisdiction set forth in
Schedule 8.1. Neither the location of its property nor the
conduct of its business requires PubliCARD or Acquisition
Sub to be qualified to do business as a foreign corporation
in any state, other than those in which it is so qualified,
where the failure to so qualify would have a materially
adverse effect on the business, operations, results of
operations or financial condition of PubliCARD and its
Subsidiaries taken as a whole.
10.2 Capitalization of the Company.
(a) The authorized capital stock of PubliCARD consists of (i)
40,000,000 shares of common stock, $0.10 par value per
share, of which 16,881,952 shares are issued and outstanding
as of December 31, 1998, (ii) 136,566 shares of preferred
stock, without par value, of which no shares are issued and
outstanding as of December 31, 1998 and (iii) 1,000,000
shares of Class A preferred stock, without par value, of
which no shares are issued and outstanding as of December
31, 1998. The PubliCARD Shares comprising the Merger
Consideration and any additional PubliCARD Shares issuable
in lieu of any fractional PubliCARD Shares issuable pursuant
to this Agreement have been duly authorized and, when issued
and delivered in accordance with this Agreement, will be
validly issued and fully paid and nonassessable and will be
issued in conformity with applicable laws and not in
violation of any preemptive rights of any Person. Upon
delivery to Sellers of the PubliCARD Shares comprising the
Merger Consideration or any additional PubliCARD Shares
issuable in lieu of any fractional PubliCARD Shares issuable
pursuant to this Agreement in accordance with this
Agreement, Sellers will acquire such Merger Consideration or
such additional PubliCARD Shares free and clear of all
Encumbrances.
(b) Except as set forth on Schedule 8.2, as of December 31,
1998 PubliCARD has not issued and is not a party to any
outstanding subscriptions, options, rights, warrants,
convertible securities or other agreements (other than this
Agreement) or any calls, demands or commitments of any kind
relating to the issuance, sale or transfer of any capital
stock of PubliCARD.
10.3 Authority Relative to Agreement; Compliance with Other
Instruments; Absence of Conflict. Each of PubliCARD and
Acquisition Sub has all requisite corporate power and
authority to execute, deliver and perform its obligations
under this Agreement and each agreement, document or
instrument required to be delivered by it hereby or in
connection herewith (collectively, the "PubliCARD
Documents"). The execution, delivery and performance by
PubliCARD and Acquisition Sub of each of the PubliCARD
Documents to which it is a party, and the consummation by
PubliCARD and Acquisition Sub of the Contemplated
Transactions, have been duly authorized by all necessary
corporate action on the part of PubliCARD and Acquisition
Sub and (a) do not require the consent, waiver, approval,
permit, license or authorization of, or any declaration or
filing with, any Person or other Governmental Body, (b) do
not violate any statute or law or any judgment, decree,
order, regulation or rule of any court or other Governmental
Body applicable to PubliCARD or Acquisition Sub, (c) do not
violate, conflict with or constitute a default (or an event
which, with notice or lapse of time or both, would
constitute a default) under, or provide the basis of
termination of, or cause the acceleration of the performance
required by, or result in the creation of any Encumbrance
upon any of the properties or assets of PubliCARD or
Acquisition Sub under, any material agreement, commitment or
instrument to which PubliCARD or Acquisition Sub is a party
or by which any of its assets or properties may be bound and
(d) do not violate or conflict with any provision of the
articles or certificate of incorporation or bylaws of
PubliCARD or Acquisition Sub.
10.4 Binding Agreement. This Agreement has been, and each other
PubliCARD Document (to which it is a party) when executed
and delivered in accordance with this Agreement will be,
duly executed and delivered by PubliCARD and Acquisition
Sub. This Agreement constitutes, and each such other
PubliCARD Document when executed and delivered in accordance
with this Agreement will constitute, legal and valid
obligations of PubliCARD and Acquisition Sub enforceable
against each of them in accordance with their terms.
10.5 Litigation. There is no legal, administrative, arbitral or
other proceeding by or before any Governmental Body pending
or, to the knowledge of PubliCARD, threatened against
PubliCARD or Acquisition Sub, nor to the knowledge of
PubliCARD is there any pending investigation by any
Governmental Body, which would give any third party the
right to enjoin or rescind the Contemplated Transactions or
otherwise prevent PubliCARD or Acquisition Sub from
complying with the terms and provisions of this Agreement.
10.6 No Brokers or Finders. Neither PubliCARD, Acquisition Sub
nor any of their officers, directors or employees have
employed any broker or finder or incurred any liability for
any brokerage or finder's fee or commissions or similar
payment in connection with any of the Contemplated
Transactions.
10.7 Reports. PubliCARD has furnished to the Company a true and
complete copy of each statement, report, registration
statement (with the prospectus in the form filed pursuant to
Rule 424(b) of the Securities Act), definitive proxy
statement, and other filings filed with the Securities and
Exchange Commission by PubliCARD since January 1, 1998, and,
prior to the Closing Date, PubliCARD will have furnished the
Company with true and complete copies of any additional
statements, reports and documents filed with the Securities
and Exchange Commission by PubliCARD prior to the Closing
Date (collectively, the "PubliCARD SEC Documents"). All
documents required to be filed as exhibits to the PubliCARD
SEC Documents have been filed. The PubliCARD SEC Documents
include all statements, reports and documents required to be
filed by PubliCARD pursuant to the Exchange Act and the
Securities Act. As of their respective filing dates, the
PubliCARD SEC Documents complied in all material respects
with the requirements of the Exchange Act and the Securities
Act, as applicable, and none of the PubliCARD SEC Documents
contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading,
except to the extent corrected by a subsequently filed
PubliCARD SEC Document. The financial statements of
PubliCARD and its Subsidiaries, including the notes thereto,
included in the PubliCARD SEC Documents (the "PubliCARD
Financial Statements"), complied as to form in all material
respects with applicable accounting requirements and with
the published rules and regulations of the Securities and
Exchange Commission with respect thereto as of their
respective dates (except as may be indicated in the notes
thereto or, in the case of unaudited statements included in
Quarterly Reports on Form 10-Q, as permitted by Form 10-Q of
the Securities and Exchange Commission). The PubliCARD
Financial Statements fairly present the consolidated
financial condition, operating results and cash flows of
PubliCARD and its Subsidiaries at the dates and during the
periods indicated therein in accordance with GAAP (subject,
in the case of unaudited statements, to normal recurring
year-end adjustments and the absence of notes.
10.8 Disclosure. No representation or warranty of PubliCARD in
this Agreement omits to state a material fact necessary to
make the statements herein, in light of the circumstances in
which they were made, not misleading.
11. FURTHER AGREEMENTS OF THE PARTIES.
11.1 Expenses. PubliCARD, the Company and Sellers shall bear
their own respective expenses incurred in connection with
all obligations required to be performed by each of them
under this Agreement; provided, however, the Surviving
Corporation shall bear the reasonable fees and disbursements of
counsel to the Company and Sellers which shall not exceed in the
aggregate more than $75,000.
11.2 Conduct of Business of the Company. Between the Closing
Date and the Effective Time, the Company shall conduct its
business and affairs in accordance with the directions of
PubliCARD.
11.3 Payment of Certain Indebtedness. At the Closing, PubliCARD
shall pay $602,593.50 by wire transfer of immediately
available funds to an escrow account established pursuant to
an escrow agreement attached as Exhibit I, such funds to be
distributed by the escrow agent in accordance with the
Escrow Agreement (i) as directed by the Company, within one
(1) Business Day after receipt of a written notice from the
Company that the Effective Time has occurred (together with
a copy of the Agreement of Merger certified by the Secretary
of State of Delaware), for purposes of satisfying the
obligations of the Company to Cupertino National Bank &
Trust ("Cupertino") under a certain promissory note dated
May 22, 1998 (the "Cupertino Note") (such advance by
PubliCARD to be deemed to be an intercompany loan from
PubliCARD to the Company), or (ii) to PubliCARD in the event
the Effective Time has not occurred on or prior to 5:00 p.m.
on April 16, 1999. If such funds are distributed to
PubliCARD in accordance with clause (ii) of the preceding
sentence, PubliCARD agrees to pay such funds over to the
Company immediately upon the Effective Time. The parties
agree to give notices to the escrow agent consistent with
this Section 9.3. Any additional accrued but unpaid
interest with respect to the obligations of the Company to
Cupertino under the Cupertino Note shall be paid by
PubliCARD.
11.4 Benefits Matters. After the Closing Date, employees of the
Company shall be eligible to participate in the PubliCARD,
Inc. 1993 Long Term Incentive Plan at the discretion of
PubliCARD's compensation committee. On or around October 1,
1999, employees of the Company shall be eligible to
participate in PubliCARD's 401(k) Plan.
11.5 Technology Committee. Promptly after the Closing Date,
PubliCARD shall appoint John Usher to its Technology
Committee.
11.6 S-8 Registration. Within two (2) Business Days after the
Effective Time, PubliCARD shall file one or more
registration statements on Form S-8 (or any successor form)
under the Securities Act relating to the PubliCARD Shares
issuable upon the exercise of options granted in accordance
with Section 5.6.
11.7 Tax Free Reorganization.
(a) PubliCARD and the Sellers agree to report the Merger as a
tax-free reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code, and
neither PubliCARD nor the Sellers shall take any action
prior to or following the Closing that would cause the
Merger to fail to qualify as a "reorganization" within the
meaning of Section 368(a) of the Code if the Merger would
otherwise so qualify.
(b) Prior to the Merger, PubliCARD will be in "Control" of
Acquisition Sub within the meaning of Section 368(c) of the
Code.
(c) PubliCARD has no plan or intention to cause the Company
to issue additional shares of stock after the Merger, or
take any other action, that would result in PubliCARD losing
Control of the Company;
(d) PubliCARD has no plan or intention to liquidate the
Company, to merge the Company with or into another
corporation including PubliCARD affiliates, to sell,
distribute or otherwise dispose of the capital stock of the
Company except for transfer of stock described in
Section 368(a)(2)(C) or Treas. Reg. Section 1.368-2(k)(2);
or to cause the Company to sell or otherwise dispose of any
of its assets or of any of the assets acquired from
Acquisition Sub except for dispositions made in the ordinary
course of business or transfers described in
Section 368(a)(2)(C) or Treas. Reg. Section 1.368-2(k)(2);
(e) Following the Merger, the historic business of the
Company will be continued or a significant portion of the
Company's historic business assets will be used in a
business; and
(f) Following the Merger, PubliCARD and Acquisition Sub will
comply with the recordkeeping and information filing
requirements of Treas. Reg. Section 1.368-3.
11.8 Issuance of Additional PubliCARD Shares. Within three (3)
Business Days after the Effective Time, PubliCARD shall
deliver to each individual identified on Schedule 9.8 a
certificate representing the number of PubliCARD Shares set
forth opposite their name on said schedule.
12. TRANSFER RESTRICTIONS.
12.1 Transfer Restrictions on PubliCARD Shares.
(a) Transfer Restrictions. The PubliCARD Shares to be
received by Sellers pursuant to this Agreement (such shares
collectively, the "Restricted PubliCARD Securities") shall
be transferable only if sold pursuant to a registration
statement under the Securities Act and any applicable state
securities or blue sky laws, or pursuant to an exemption
from the registration requirements of the Securities Act and
applicable state securities or blue sky laws.
(b) Legend. Each certificate representing the Restricted
PubliCARD Securities shall bear a legend in substantially
the following form:
"The securities represented by this certificate
have not been registered under the Securities
Act of 1933, as amended, or under the securities
or blue sky laws of any state, and may not be
sold, or otherwise transferred, in the absence
of such registration or an exemption therefrom
under such Act and under any such applicable
state laws."
Each certificate representing such Restricted PubliCARD Securities shall
bear this restrictive legend unless the restrictions on transfer
provided for in this Section 10.1 shall have ceased and terminated as to
such Restricted PubliCARD Securities.
(c) Termination of Restrictions. The restrictions imposed by
this Section 10.1 upon the transferability of the Restricted
PubliCARD Securities shall cease and terminate as to any
particular Restricted PubliCARD Securities and any
securities issued in exchange therefor or upon transfer
thereof when, in the opinion of counsel reasonably
acceptable to PubliCARD, such restrictions are no longer
required in order to assure compliance with the Securities
Act, or when such Restricted PubliCARD Securities have been
registered under the Securities Act. Whenever any of such
restrictions shall cease and terminate as to any Restricted
PubliCARD Securities, the holder thereof shall be entitled
to receive from PubliCARD, without expense, new certificates
not bearing the legend set forth in Section 10.1(b).
12.2 Lock-Up on PubliCARD Shares.
(a) Lock-Up. Except as provided in paragraph (b) of this
Section 10.2, during the period commencing on the Effective
Date and ending six months after the Closing Date (the
"Lock-Up Period"), John Usher shall not, directly or
indirectly, sell, exchange, assign, transfer, pledge,
encumber or otherwise dispose of any PubliCARD Shares he
receives pursuant to this Agreement.
(b) Limited Exclusion from Lock-Up. Notwithstanding anything
contained in paragraph (a) of this Section 10.2, at any time
after the Effective Time, John Usher may transfer up to
7,000 of the PubliCARD Shares he receives pursuant to this
Agreement to each of FehzV Consulting, Inc. and Fidela T.
Docena in a private transaction that is exempt from the
registration requirements of the Securities Act and any
applicable state securities or blue sky laws, provided that
PubliCARD has received an opinion from counsel reasonably
acceptable to PubliCARD that such transaction is exempt from
such registration requirements.
(c) Volume Limitations. After the Lock-Up Period until the
first anniversary of the Closing Date ("First Period") and
after the First Period until the third anniversary of the
Closing ("Second Period"), John Usher may sell, exchange,
assign, transfer, pledge, encumber or otherwise dispose of,
from time to time, PubliCARD Shares he receives pursuant to
this Agreement only in an amount no greater than (i) in the
case of the First Period, the higher of (A) 10% of the
PubliCARD Shares he receives in the Merger or (B) the
percentage of the PubliCARD Shares received by Mr. Usher in
the Merger that is equal to the percentage of total common
shares of PubliCARD held by Jay S. Goldsmith and Harry I.
Freund that is sold, transferred or otherwise disposed of by
Mr. Goldsmith and Mr. Freund during the First Period and
(ii) in the case of the Second Period, the higher of (A) the
amount permitted under Rule 144(e)(1) promulgated under the
Securities Act (whether or not the transfer is made pursuant
to Rule 144, Rule 144(e)(1) applies to Mr. Usher or Mr.
Usher is an "affiliate" of PubliCARD within the meaning of
Rule 144) or (B) the percentage of the PubliCARD Shares
received by Mr. Usher in the Merger that is equal to the
percentage of total common shares of PubliCARD held by
Mr. Goldsmith and Mr. Freund that is sold, transferred or
otherwise disposed of by Mr. Goldsmith and Mr. Freund during
the Second Period.
(d) Stop Transfer Orders. John Usher authorizes PubliCARD to
cause the transfer agent for PubliCARD Shares to decline to
transfer and/or to note stop transfer restrictions on the
transfer books and records of PubliCARD with respect to any
PubliCARD Shares for which Mr. Usher is the record holder.
(e) Legend. Each certificate representing the PubliCARD
Shares received by John Usher pursuant to this Agreement
shall, in addition to the legend described in Section
10.1(b), bear a legend in substantially the following form:
"The securities represented by this certificate
are subject to certain transfer restrictions
contained in an Agreement and Plan of Merger,
dated as of February 22, 1999 (the "Merger
Agreement"), among the holder of the securities
represented by this certificate, Greystone
Peripherals, Inc., certain other security-
holders thereof, PubliCARD, Inc. ("PubliCARD")
and GPI Acquisition, Inc. A copy of the Merger
Agreement is on file at the principal office of
PubliCARD. Neither this certificate nor the
securities evidenced by this certificate nor any
portion thereof or interest herein may be sold,
exchanged, assigned, transferred, pledged,
encumbered or otherwise disposed of in violation
of the Merger Agreement, and any such purported
transfer shall be null, void and of no effect."
Each certificate representing the PubliCARD Shares received by John
Usher pursuant to this Agreement shall bear this restrictive legend
unless the restrictions on transfer provided for in this Section 10.2
shall have ceased and terminated as to such PubliCARD Shares. Whenever
any of such restrictions shall cease and terminate as to any such
PubliCARD Shares, Mr. Usher shall be entitled to receive from PubliCARD,
without expense, new certificates not bearing the legend set forth in
Section 10.2(e).
13. REGISTRATION RIGHTS.
13.1 Intentionally omitted.
13.2 Incidental Registration.
(a) If at any time after the Closing Date PubliCARD proposes
to register any equity securities under the Securities Act
for sale to the public (other than pursuant to a
registration statement on Form S-4 or Form S-8 (or any
successor forms) or any other forms not available for
registering Registrable PubliCARD Shares for sale to the
public), either for PubliCARD's account or for the account
of others, PubliCARD shall, not less than 30 nor more than
90 days prior to the proposed date of filing of a
registration statement under the Securities Act, give
written notice to all Holders of its intention to do so.
Upon the written request of any Holder given within 20 days
after transmittal by PubliCARD of such notice, PubliCARD
will use its best efforts to cause the Registrable PubliCARD
Shares requested to be registered to be so registered under
the Securities Act. A request pursuant to this
Section 11.2(a) shall state the number of Registrable
PubliCARD Shares requested to be registered and the intended
method of disposition thereof. The rights granted in this
Section 11.2(a) shall apply in each case where PubliCARD
proposes to register equity securities regardless of whether
such rights may have been exercised previously.
(b) Nothing in this Agreement shall be deemed to require
PubliCARD to proceed with any registration of its securities
pursuant to Section 11.2 after giving the notice provided in
Section 11.2(a).
11.2A Shelf Registration. Subject to Sections 11.3(b) and (c),
not later than July 8, 1999 (the "Registration Date"), PubliCARD shall
prepare and file with the Securities and Exchange Commission a
registration statement for the offering on a continuous or delayed basis
in the future of up to the following percentages of PubliCARD Shares
outstanding as of the date prior to the date of filing with the
Securities and Exchange Commission in accordance with the methods of
distribution in such registration statement and Rule 415 under the
Securities Act (the Shelf Registration Statement") and shall use its
best efforts to have the Registration Statement declared effective as
promptly as practicable:
(i) 100% of the Registrable PubliCARD Shares held by the
Sellers (other than John Usher);
(ii) 50% of the Registrable PubliCARD Shares held by each
person who received PubliCARD Shares pursuant to Section 9.8 or held by
any person who received PubliCARD Shares as transferees of John Usher
pursuant to Section 10.2(b) (collectively, the "Additional Holders"),
provided that such person, within 15 days after the Effective Time,
provided PubliCARD with a written undertaking (in a form satisfactory to
PubliCARD and the Additional Holder) to perform all of the obligations
stated to be obligations of Additional Holders under this Agreement; and
(iii) 10% of the Registrable PubliCARD Shares received by
John Usher pursuant to this Agreement, which Shares may be sold,
transferred or otherwise disposed of by Mr. Usher during the First
Period in accordance with Section 10.2(c).
The Shelf Registration Statement and any form of prospectus included
therein or prospectus supplement relating thereto shall reflect such
plan of distribution or method of sale as Holders and Additional Holders
may from time to time notify PubliCARD. PubliCARD shall use its best
efforts to keep the Shelf Registration Statement continuously effective
for the period beginning on the date on which the Shelf Registration
Statement is declared effective and ending on the first to occur of
(a) the first date that all such Registrable PubliCARD Shares have been
sold (whether pursuant to the Shelf Registration Statement, under
Rule 144 promulgated under the Securities Act or otherwise) or (b) the
delivery to PubliCARD of a written opinion from counsel to PubliCARD
reasonably acceptable to PubliCARD, the Holders and Additional Holders
to the effect that the Registrable PubliCARD Shares covered by the Shelf
Registration Statement may be sold without registration under the
Securities Act or applicable state law and without restriction as to the
volume and timing of such sales. During the period during which the
Shelf Registration Statement must be kept effective, PubliCARD shall
supplement or make amendments to the Shelf Registration Statement, if
required by the Securities Act, or if reasonably requested by a Holder,
an Additional Holder or an underwriter of Registrable PubliCARD Shares,
to reflect any specific plan of distribution or method of sale, and
shall use its best efforts to have such supplements and amendments
declared effective, if required, as soon as practicable after filing
thereof with the Securities and Exchange Commission.
13.3 Limitation on Registration Requirement.
(a) Each Holder and each Additional Holder agrees, if so
requested by PubliCARD, not to effect any sale of PubliCARD
Shares pursuant to the Shelf Registration Statement for any
period deemed necessary (a) by PubliCARD or any underwriter
in connection with the offering of PubliCARD Shares pursuant
to an underwritten offering pursuant to demand registration
rights granted to any Person or the offering of PubliCARD
Shares by PubliCARD for its own account or (b) by PubliCARD
in connection with any proposal or plan by PubliCARD to
engage in any financing or material acquisition or
disposition by PubliCARD or any Subsidiary thereof of the
capital stock or a substantial portion of the assets of any
other Person, any tender offer or any merger, consolidation,
corporate reorganization or restructuring or other similar
transaction material to PubliCARD and its Subsidiaries taken
as a whole. Any period within the effective period of the
Shelf Registration Statement during which PubliCARD fails to
keep the Shelf Registration Statement effective and usable
for resales of Registrable PubliCARD Shares is hereafter
referred to as a "Suspension Period." A Suspension Period
shall commence on and include the date on which PubliCARD
provides notice to the Holders and the Additional Holders
that the Shelf Registration Statement is no longer effective
or that the prospectus included in the Shelf Registration
Statement is no longer usable for resales of PubliCARD
Shares and shall end on the date when each holder of
Registrable PubliCARD Shares covered by the Shelf
Registration Statement either receives the copies of the
supplemented or amended prospectus contemplated by Section
11.4(h) or is advised in writing by PubliCARD that use of
the prospectus may be resumed. Suspension Periods shall not
exceed 90 days in the aggregate within any 12-month period.
(b) Notwithstanding anything contained in Sections 11.2A and
11.3(a), in the event that on or prior to the Registration
Date PubliCARD proposes to effect a public offering pursuant
to a registration to which the provisions of Section 11.2
apply and, in connection with such offering, each Seller
(other than John Usher) is provided the opportunity to sell
in such offering at least 50% of the PubliCARD Shares
received in connection with the Merger, then (i) the
Registration Date for the Sellers (other than John Usher,
with respect to the Registrable PubliCARD Shares required to
be registered pursuant to clause (iii) of Section 11.2A)
shall be postponed until January 8, 2000 and (ii) in
connection with such offering, each Seller (including Mr.
Usher) shall execute an underwriter's lock-up letter in the
same form and for the same period as that executed by
PubliCARD's executive officers in connection with such
offering (provided that in the case of Mr. Usher, such lock-
up shall not extend beyond six months from the Closing
Date); provided, that if such offering is not consummated,
the Registration Date shall revert back to July 8, 1999 (i)
with respect to 100% of the Registrable PubliCARD Shares
held by the Sellers (other than John Usher) and (ii) with
respect to 10% of the Registrable PubliCARD Shares held by
John Usher.
(c) Notwithstanding anything contained in Sections 11.2A and
11.3(a), in the event that on or prior to the Registration
Date PubliCARD proposes to effect a public offering pursuant
to a registration to which the provisions of Section 11.2
apply and, in connection with such offering, each Additional
Holder is provided the opportunity to sell in such offering
at least 50% of the PubliCARD Shares received in connection
with the Merger, then (i) the Registration Date for the
Additional Holders shall be postponed until January 8, 2000
and (ii) in connection with such offering, each Additional
Holder shall execute an underwriter's lock-up letter in the
same form and for the same period as that executed by
PubliCARD's executive officers in connection with such
offering; provided, that if such offering is not
consummated, the Registration Date shall revert back to July
8, 1999 with respect to the registration of up to 50% of the
PubliCARD Shares held by the Additional Holders.
13.4 Registration Procedures. If and whenever PubliCARD is
required by the provisions of this Section 11 to use its
best efforts to effect the registration of any securities
under the Securities Act, PubliCARD will within the time
periods provided herein:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such
securities and use its best efforts to cause such
registration statement to become and remain effective for a
period of time required for the disposition of such
securities by the holders thereof;
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such
registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition
of all securities covered by such registration statement
until the earlier of such time as all of such securities
have been disposed of and the date which is 90 days after
the date of initial effectiveness of such registration
statement (or, with respect to the Shelf Registration
Statement, until such time as specified in Section 11.2A);
(c) furnish to each seller and to each duly authorized
underwriter of each seller such number of authorized copies
of a prospectus, including copies of a preliminary
prospectus, in conformity with the requirements of the
Securities Act, and such other documents as such seller or
underwriter may reasonably request in order to facilitate
the public sale or other disposition of the securities owned
by such seller;
(d) use its best efforts to register or qualify the
securities covered by such registration statement under such
securities or blue sky laws of such jurisdictions as each
seller shall request, and do any and all other acts and
things which may be necessary under such securities or blue
sky laws to enable such seller to consummate the public sale
or other disposition in such jurisdictions of the securities
to be sold by such seller, except that PubliCARD shall not
for any such purpose be required to qualify to do business
in any jurisdiction wherein it is not qualified or to file
any general consent to service of process in any such
jurisdiction;
(e) with respect to any underwritten offering, use reasonable
efforts to furnish, at the request of any seller, to the
underwriters, on the date that such seller's securities are
delivered to the underwriters for sale pursuant to such
registration, (i) an opinion of the independent counsel
representing PubliCARD for the purposes of such registration
addressed to such underwriters, in such form and content as
the underwriters may reasonably request and are customary
for transactions of this type, and (ii) a letter from the
independent certified public accountants of PubliCARD
addressed to the underwriters stating that they are
independent certified public accountants within the meaning
of the Securities Act and that, in the opinion of such
accountants, the financial statements and other financial
data of PubliCARD included in the registration statement or
the prospectus, or any amendment or supplement thereto,
comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and
covering such other matters as are customarily covered in
accountant's "comfort" letters;
(f) with respect to any underwritten offering, enter into an
underwriting agreement in customary form for a transaction
of this type;
(g) provide and cause to be maintained a transfer agent and
registrar for all Registrable PubliCARD Shares covered by
such registration statement from and after a date not later
than the effective date of such registration statement;
(h) notify the Holders of Registrable PubliCARD Shares
included in such registration statement, at any time when a
prospectus relating thereto covered by such registration
statement is required to be delivered under the Securities
Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing
and, at the request of such Holders, properly prepare and
furnish to such Holders a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to purchasers of
such securities, such prospectus shall not include 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 not misleading in light of the
circumstances under which they were made;
(i) use its best efforts to list all Registrable PubliCARD
Shares covered by such registration statement on any
securities exchange on which the PubliCARD Shares are then
listed; and
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and
Exchange Commission, and make available to its security
holders, as soon as reasonably practicable, but not later
than 18 months after the effective date of the registration
statement, an earnings statement covering the period of at
least 12 months beginning with the first full calendar month
after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
13.5 Expenses. All expenses incurred in effecting the
registrations provided for in this Section 11 (excluding
underwriters' discounts and commissions, which shall be
borne pro rata by those Holders for whom Registrable
PubliCARD Shares are being registered, but including the
fees of one special counsel to Holders selected by the
Company, which may also be Company counsel), including
without limitation all registration and filing fees
(including all expenses incident to filing with the Nasdaq
Stock Market or any securities exchange), printing expenses,
fees and disbursements of counsel for PubliCARD, fees of
PubliCARD's independent auditors and accountants, expenses
of any audits incident to or required by any such
registration and expenses of complying with the securities
or blue sky laws of any jurisdictions pursuant to
Section 11.4(d), shall be paid by PubliCARD.
13.6 Marketing Restrictions.
(a) Any offering pursuant to Section 11.2A may be
underwritten if approved by holders of a majority-in-
interest of the securities issued in the Merger. If (i) any
Holder(s) wish(es) to register any Registrable PubliCARD
Shares in a registration made pursuant to Section 11.2A,
(ii) the offering proposed to be made by such Holder or
Holders is to be an underwritten public offering, (iii)
PubliCARD or one or more holders of securities other than
Registrable PubliCARD Shares to whom PubliCARD has granted
registration rights wish to register securities in such
registration and (iv) the managing underwriters of such
public offering furnish a written opinion that the total
amount of securities to be included in such offering would
exceed the maximum amount of securities (as specified in
such opinion) which can be marketed in such offering at a
price which such Holders are prepared to sell and without
materially and adversely affecting such offering, then the
rights of Holders, PubliCARD and the holders of other
securities with registration rights to participate in such
offering shall be in the following order of priority:
First: The Holders having the right to include such
securities in such registration shall be entitled to participate
in proportion to the number of Registrable PubliCARD Shares
requested to be registered by each such Holder; and then
Second: PubliCARD and all holders of securities other
than Registrable PubliCARD Shares having the right to include such
securities in such registration shall be entitled to participate
pro rata among themselves in accordance with the number of
securities requested to be registered by PubliCARD and each such
holder.
(b) If (i) any Holder requests registration of Registrable
PubliCARD Shares under Section 11.2, (ii) the offering
proposed to be made is to be an underwritten public
offering and (iii) the managing underwriters of such
public offering furnish a written opinion that the
total amount of securities to be included in such
offering would exceed the maximum amount of securities
(as specified in such opinion) which can be marketed
at a price reasonably related to the then current
market value of such securities and without materially
and adversely affecting such offering, then the rights
of PubliCARD, Holders and holders of other securities
having the right to include such securities in such
registration to participate in such offering shall be
in the following order of priority:
First: PubliCARD and all holders of securities other
than Registrable PubliCARD Shares having the right to request such
registration pursuant to a demand right (or otherwise initiate
such registration) shall be entitled to participate in accordance
with the number of securities requested to be registered by
PubliCARD and each such holder and in accordance with the
registration rights of each such holder; and then
Second: All other holders of securities, including
Holders of Registrable PubliCARD Shares, having the right to
include such securities in such registration shall be entitled to
participate pro rata among themselves in accordance with the
number of securities requested to be registered by each such
holder;
and no securities (issued or unissued) other than those registered and
included in the underwritten offering shall be offered for sale or other
disposition by Holders in a transaction which would require registration
under the Securities Act until the expiration of 180 days after the
effective date of the registration statement in which Registrable
PubliCARD Shares were included pursuant to Section 11.2 or such shorter
period as may be acceptable to the managing underwriter; provided that
no Holder will be required to accept a longer lock-up restriction than
any executive officer of PubliCARD is required to accept and that no
Holder who is not participating in the offering shall be required to
accept a lock-up (except as provided in Sections 11.3(b) and (c)).
13.7 Time Limitations; Termination of Rights. Notwithstanding
anything contained in this Section 11, the rights to
registration under this Section 11 (i) in the case of John
Usher, shall be subject to the provisions contained in
Section 10.2, and (ii) shall terminate as to any particular
Registrable PubliCARD Shares when (A) such Registrable
PubliCARD Shares shall have been effectively registered
under the Securities Act and sold by the holder thereof in
accordance with such registration, (B) such Registrable
PubliCARD Shares shall have been sold in compliance with
Rule 144 promulgated under the Securities Act or otherwise
in a public transaction or (C) written opinions from counsel
reasonably acceptable to PubliCARD and the holder of such
Registrable PubliCARD Shares, to the effect that such
Registrable PubliCARD Shares may be sold without
registration under the Securities Act or applicable state
law and without restriction as to the volume and timing of
such sales, shall have been received from either counsel to
PubliCARD or counsel to the holders thereof.
13.8 Compliance with Rule 144. At all times during which this
Agreement is effective, PubliCARD shall file with the
Securities and Exchange Commission, in a timely manner, all
reports and other documents required to be filed by
PubliCARD with the Securities and Exchange Commission
pursuant to the Exchange Act.
13.9 Indemnification by PubliCARD. In the event of any
registration under the Securities Act of any Registrable
PubliCARD Shares pursuant to this Section 11, PubliCARD
hereby agrees (i) to execute an agreement with any
underwriter participating in the offering thereof containing
such underwriter's standard representations and
indemnification provisions and (ii) to indemnify and hold
harmless each Holder disposing of Registrable PubliCARD
Shares, each Person, if any, who controls such Holder within
the meaning of the Securities Act and each other Person
(including each underwriter and each Person who controls
such underwriter) who participates in the offering of
Registrable PubliCARD Shares, against any losses, claims,
damages or liabilities, joint or several, to which such
Holder, controlling Person or participating Person may
become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
proceedings in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under
which the Registrable PubliCARD Shares are registered under
the Securities Act, in any preliminary prospectus or final
prospectus contained therein, or in any amendment or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each
such Holder, controlling Person and participating Person for
any legal or other expenses reasonably incurred in
connection with investigating or defending any such loss,
claim, damage, liability or proceeding; provided, however,
that PubliCARD will not be liable in any case to any such
Holder, controlling Person or participating Person to the
extent that any loss, claim, damage or liability results
from any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration
statement, preliminary or final prospectus or amendment or
supplement in reliance upon and in conformity with
information furnished to PubliCARD by any Holder or any
other Person who participates as an underwriter in the
offering or sale of such securities, specifically for use in
the preparation thereof; provided, further, however, that
the indemnity set forth in this Section 11.9 shall not inure
to the benefit of any such Holder, controlling Person or
participating Person on account of any loss, claim, damage
or liability arising from the sale of Registrable PubliCARD
Shares to any Person by a Holder or participating Person if
any Holder or participating Person failed to deliver a copy
of such preliminary prospectus or final prospectus (as then
amended or supplemented) to that person within the time
required by applicable securities laws and the untrue
statement or alleged untrue statement of any material fact
or omission or alleged omission to state a material fact in
a prospectus was corrected in the preliminary or final
prospectus or amended or supplemented prospectus which the
Holder or participating Person failed to deliver, unless
such failure of delivery resulted from PubliCARD's failure
to deliver to the Holders and participating Persons such
corrected prospectus in the requisite quantity and on a
timely basis to permit proper delivery thereof. Such
indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of any Holder
disposing of Registrable PubliCARD Shares or any such
underwriter or controlling Person and shall survive the
transfer of such securities by such Holder and the
expiration or termination of the registration rights granted
under this Section 11 pursuant to Section 11.7.
13.10 Indemnification by Holder.
(a) As a condition of PubliCARD's obligation under this
Section 11 to effect any registration under the Securities
Act, there shall be delivered to PubliCARD an agreement or
agreements duly executed by each Holder for whom Registrable
PubliCARD Shares are to be so registered, whereby such
Holder agrees to indemnify and hold harmless (in the same
manner as set forth in Section 11.9 above) PubliCARD, each
person referred to in clause (1), (2) or (3) of
Section 11(a) of the Securities Act in respect of the
registration statement and each other person, if any, who
controls PubliCARD within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue
statement of any material fact contained in the registration
statement under which the Registrable PubliCARD Shares are
to be registered under the Securities Act, in any
preliminary prospectus or final prospectus contained therein
or in any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
which, in each case, is made in or omitted from the
registration statement, preliminary or final prospectus or
amendment or supplement in reliance upon and in conformity
with information furnished to PubliCARD by such Holder
specifically for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of PubliCARD or
any person indemnified by virtue of this Section 11.10 and
shall survive the transfer of such securities by such Holder
and the expiration or termination of the registration rights
granted under this Section 11 pursuant to Section 11.7.
(b) At the request of the managing underwriter in connection
with any underwritten offering of PubliCARD's securities,
each Holder for whom Registrable PubliCARD Shares are being
registered shall enter into an indemnity agreement in
customary form with such underwriter.
13.11 Contribution. If the indemnification provided for in
Section 11.9 or 11.10 from the indemnifying party is
unavailable to an indemnified party hereunder, or is
insufficient to hold harmless an indemnified party, in
respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party,
in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate
to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which
resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by
reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state
a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties,
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
untrue statement or omission. The amount paid or payable by
an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be
deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 11.11 were determined
by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any indemnifying party who
was not guilty of such fraudulent misrepresentation.
13.12 Notification of and Participation in Actions. The
procedures described in Sections 12.3 and 12.4 shall apply
to any claim covered by this Section 11. All
indemnification obligations of the parties hereto shall
survive any termination of the registration rights granted
under this Section 11 pursuant to Section 11.7.
13.13 Underwriting Requirements.
(a) In the event of an underwritten offering of PubliCARD's
securities, each Holder for whom Registrable PubliCARD
Shares are being registered pursuant to Section 11.2 or
Section 11.2A shall, as a condition to inclusion of such
Registrable PubliCARD Shares in such registration, execute
and deliver to the underwriter(s) an underwriting agreement
in customary form. The underwriter(s) shall be selected (i)
by the Holders requesting registration of Registrable
PubliCARD Shares, in the case of a registration pursuant to
Section 11.2A (which underwriters shall be acceptable to
PubliCARD) or (ii) by PubliCARD, in the case of a
registration pursuant to Section 11.2.
(b) At the request of the managing underwriter in connection
with any underwritten offering of PubliCARD's securities,
the Holders for whom Registrable PubliCARD Shares are being
registered shall enter into customary "lock-up" agreements,
provided that no Holder shall be required to accept lock-up
restrictions not also imposed upon executive officers of
PubliCARD.
13.14 Furnish Information. It shall be a condition precedent to
the obligations of PubliCARD to take any action pursuant to
Section 11 that Holders requesting registration of
Registrable PubliCARD Shares furnish to PubliCARD such
information regarding them, the Registrable PubliCARD Shares
held by them and the intended method of disposition of such
securities as PubliCARD shall reasonably request and as
shall be required in connection with the action to be taken
by PubliCARD.
13.15 Permitted Transfers. The registration rights granted to
Sellers (subject to Section 10.2 in the case of John Usher)
under this Section 11 may only be transferred to a
transferee who acquires Registrable PubliCARD Shares from
any Seller who is a permitted transferee under Section 10
and is either (i) the spouse or member of the immediate
family of a Seller; (ii) a trust for the benefit of a Seller
or any member of such Seller's immediate family; or (iii) a
corporation, partnership or other entity the only owners of
which are one or more Sellers and members of their immediate
families; provided that any transferring Seller gives
written notice at the time of such transfer to PubliCARD
stating the name and address of the transferee and
identifying the Registrable PubliCARD Shares so transferred,
accompanied by a signature page to this Agreement pursuant
to which such transferee agrees to be bound by the terms and
conditions of this Section 11.
14. INDEMNIFICATION AND RELATED MATTERS; SELLERS' RELEASE; TAX
MATTERS.
14.1 Indemnification.
(a) Indemnification by Sellers.
(i) John Usher shall indemnify and hold harmless
PubliCARD and its agents, representatives, employees,
officers, directors, stockholders, controlling persons
and Affiliates (collectively, the "PubliCARD
Indemnitees"), and shall reimburse the PubliCARD
Indemnitees, for any loss, liability, claim, damage or
expense (including, but not limited to, costs of
investigation and defense and reasonable attorneys'
fees), whether or not involving a third-party claim
(collectively, "Damages"), arising from or in
connection with (A) any inaccuracy in any of the
representations and warranties of the Company or any
Seller in this Agreement (other than in Section 7
which is covered in Section 12.1(b)) or in any
certificate or other document required to be delivered
by any Seller or the Company pursuant to this
Agreement or referred to in this Agreement or in any
such other certificate or document, (B) any claim by
any Person for brokerage or finder's fees or similar
payments in connection with any of the Contemplated
Transactions as the result of brokers, finders or
investment bankers retained by any Seller or the
Company, or (C) PubliCARD's enforcement of the
indemnification provisions contained herein.
(ii) John Usher shall indemnify, defend, protect,
reimburse and hold harmless PubliCARD, the other
PubliCARD Indemnitees and the Company for or from any
Damages (including, without limitation, reasonable
contractors' and consultants' fees) relating to any
portion of the Facilities or to any other property
incurred by, imposed upon, or commenced or asserted
against any PubliCARD Indemnitee or the Company at any
time, resulting in whole or in part from, or related
in any way to, (x) the Release on or prior to the
Closing Date of a Hazardous Substance at or on the
Facilities or by the Company elsewhere, (y) any
condition existing at or on the Facilities on or prior
to the Closing Date that at any time gives rise to a
liability under an Environmental Law or (z) a
violation of an Environmental Law by the Company on or
prior to the Closing Date.
(iii) John Usher may satisfy his liability under this
Section 12.1(a) by delivering to PubliCARD that number
of PubliCARD Shares received by Mr. Usher to such
indemnification payment date pursuant to this
Agreement having an aggregate Fair Market Value on the
date of delivery to PubliCARD pursuant to this Sec-
tion 12.1(a)(iii) equal to Mr. Usher's liability.
Notwithstanding the foregoing, the Mr. Usher shall
have no liability to PubliCARD under Sec-
tion 12.1(a)(i)(A) or Section 12.1(a)(ii) until the
aggregate amount of all Damages under such Sections
exceeds $50,000 and then only for all such Damages in
excess of such amount.
(iv) Notwithstanding anything to the contrary in this
Agreement, John Usher's aggregate liability under this
Section 12 shall not exceed the amount equal to 50%
multiplied by the lesser of (A) all of the PubliCARD
Shares received by all of the Sellers pursuant to this
Agreement, if Mr. Usher chooses to deliver shares to
PubliCARD pursuant to Section 12.1(a)(iii) or (B) the
Fair Market Value, on the date on which the shares
were received by the Sellers, of the PubliCARD Shares
received by the Sellers pursuant to this Agreement.
The limitations set forth in this Section 12.1(a)(iv)
shall not apply to Mr. Usher to the extent of
liabilities arising from fraud on the part of any
Seller.
(b) Indemnification by Sellers. Each of the Sellers shall
severally and not jointly indemnify and hold harmless
PubliCARD and the other PubliCARD Indemnitees, and shall
reimburse PubliCARD and the other PubliCARD Indemnitees, for
any Damages arising from or in connection with (i) any
inaccuracy in any of the representations and warranties of
such Seller in Section 7 of this Agreement or in any
certificate or other document required to be delivered by
such Seller pursuant to this Agreement, or (ii) PubliCARD's
enforcement of the indemnification provisions contained
herein. Each Seller may satisfy its liability under this
Section 12.1(b) by delivering to PubliCARD that number of
PubliCARD Shares received by such Seller to such
indemnification payment date pursuant to this Agreement
having an aggregate Fair Market Value on the date of
delivery to PubliCARD pursuant to this Section 12.1(b) equal
to such Seller's liability. Notwithstanding the foregoing,
(A) no indemnifying Seller shall have any liability to
PubliCARD under clause (i) of this Section 12.1(b) until the
aggregate amount of all Damages under such clauses exceeds
$50,000 and then only for all such Damages in excess of such
amount, and (B) the maximum liability of each Seller
pursuant to this Section 12.1(b) shall not exceed in the
aggregate the lesser of (1) all of the PubliCARD Shares
received by such Seller to the indemnification payment date
pursuant to this Agreement, if such Seller chooses to
deliver such shares to PubliCARD pursuant to this Section
12.1(b) and (2) the Fair Market Value, on the date on which
the shares were received by such Seller, of the PubliCARD
Shares received by such Seller to such indemnification
payment date pursuant to this Agreement. The limitations set
forth in this Section 12.1(b) shall not apply to any Seller
to the extent of Damages arising from fraud on the part of
such Seller.
(c) Indemnification by PubliCARD. PubliCARD shall indemnify
and hold harmless the Sellers (the "Seller Indemnitees"),
and shall reimburse the Seller Indemnitees, for any Damages
arising from or in connection with (i) any inaccuracy in any
of the representations and warranties of PubliCARD in this
Agreement or in any certificate or other document required
to be delivered by PubliCARD pursuant to this Agreement or
referred to in this Agreement or in any such other
certificate or document, (ii) any claim by any Person for
brokerage or finder's fees or similar payments in connection
with any of the Contemplated Transactions as the result of
brokers, finders or investment bankers retained by
PubliCARD, or (iii) the Seller Indemnitees' enforcement of
the indemnification provisions contained herein.
Notwithstanding the foregoing, (A) PubliCARD shall have no
liability under clause (i) of this Section 12.1(c) until the
aggregate amount of all Damages under such clauses exceeds
$50,000 and then only for all such Damages in excess of such
amount and (B) the maximum liability of PubliCARD pursuant
to this Section 12.1(c) shall not exceed the Fair Market
Value on the Closing Date of the aggregate Merger
Consideration paid by PubliCARD pursuant to this Agreement.
The limitations set forth in this Section 12.1(c) shall not
apply to PubliCARD to the extent of Damages arising from
fraud on the part of PubliCARD.
14.2 Survival of Representations and Warranties. The
representations and warranties of the Company, Sellers and
PubliCARD contained in this Agreement shall survive the
Closing; provided, that a party shall have no liability (for
indemnification or otherwise) for a breach of any
representation or warranty or breach of covenant or
obligation to be performed and complied with prior to the
Closing Date, unless on or before the date that is the 15-
month anniversary of the Closing Date such party is given
notice asserting a claim with respect thereto and specifying
the factual basis of the claim and extent of the Damages in
reasonable detail. Notwithstanding the foregoing, (a)
indemnification claims under Section 12.1(a)(i) for breach
of the representations in Sections 6.2(a), 6.2(b) and 6.2(c)
may be made by PubliCARD at any time, (b) indemnification
claims under Section 12.1(a)(i) for breach of the
representations in Section 6.17 or 6.21 and indemnification
claims under Section 12.1(a)(ii) shall survive to the extent
that an Indemnification Claim Notice is given on or before
the 7-year anniversary of the Closing Date,
(c) indemnification claims under Section 12.1(a)(i) for
breach of the representations in Section 6.14 and
indemnification claims under Section 12.6(c) shall survive
until the expiration of the statute of limitations, if any,
applicable to the underlying claim for which indemnification
is sought, (d) indemnification claims under Section 12.1(b)
for breach of the representations in Section 7.4 may be made
by PubliCARD at any time, (e) indemnification claims under
Sections 12.1(a)(i)(C) and (D), 12.1(b)(ii) and 12.1(c)(ii)
and (iii) may be made at any time and (d) nothing in this
Section 12.2 shall limit or otherwise affect the rights of
either party under Section 11. No Seller may make any claim
against the Company or the Surviving Corporation based on,
nor assert as a defense, any representation or warranty of
the Company, whether made jointly with such Seller or
otherwise.
14.3 Procedure for Indemnification -- Third Party Claims.
Promptly after receipt by an indemnified party under
Section 12.1(a), 12.1(b) or 12.1(c) or Section 11.9 or 11.10
of oral or written notice of a claim or the commencement of
any proceeding against it, such indemnified party shall, if
a claim in respect thereof is to be made against an
indemnifying party under such Section, give written notice
to the indemnifying party of the commencement thereof, but
the failure so to notify the indemnifying party shall not
relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying
party demonstrates that the defense of such action is
prejudiced thereby. In case any such proceeding shall be
brought against an indemnified party and it shall give
notice to the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish
(unless the indemnifying party is also a party to such
proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate) to
assume the defense thereof with counsel reasonably
satisfactory to such indemnified party and, after notice
from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under
such Section for any fees of other counsel or any other
expenses with respect to the defense of such proceeding, in
each case, subsequently incurred by such indemnified party
in connection with the defense thereof. If an indemnifying
party assumes the defense of such proceeding, (a) no
compromise or settlement thereof may be effected by the
indemnifying party without the indemnified party's
reasonable consent unless (i) there is no finding or
admission of any violation of law or any violation of the
rights of any Person and no effect on any other claims that
may be made against the indemnified party and (ii) the sole
relief provided is monetary damages that are paid in full by
the indemnifying party and (b) the indemnifying party shall
have no liability with respect to any compromise or
settlement thereof effected without its reasonable consent.
If notice is given to an indemnifying party of the
commencement of any proceeding and it does not, within 15
Business Days after the indemnified party's notice is given,
give notice to the indemnified party of its election to
assume the defense thereof, the indemnified party against
which such proceeding has been commenced will (upon
delivering notice to such effect to the indemnifying party)
have the right to undertake the defense of, compromise or
settle such proceeding and the indemnifying party shall,
upon request of the indemnified party, pay to such
indemnified party, in accordance with the terms of this
Section 12, the amount of Damages resulting from such
proceeding; provided, however, that such proceeding shall
not be compromised or settled without the written consent of
the indemnifying party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, the
indemnifying party's right to object to any proposed
compromise or settlement shall be conditioned upon such
indemnifying party acknowledging to the indemnified party
that such indemnifying party shall be solely responsible (as
between the indemnifying party and the indemnified party)
for all liabilities and obligations arising out of such
proceeding. Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a
reasonable probability that a proceeding may adversely
affect it or its Affiliates other than as a result of
monetary damages, such indemnified party may, by notice to
the indemnifying party, assume the exclusive right to
defend, compromise or settle such proceeding, but the
indemnifying party shall not be bound by any determination
of a proceeding so defended or any compromise or settlement
thereof effected without its consent (which shall not be
unreasonably withheld).
14.4 Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom
indemnification is sought.
14.5 Company's and Sellers' Releases.
(a) Each Seller hereby releases and forever discharges
PubliCARD, the Company and each of their respective agents,
representatives, employees, officers, directors,
stockholders, controlling persons and Affiliates
(individually a "Releasee" and collectively, "Releasees")
from any and all claims, demands, Proceedings, causes of
action, orders, obligations, contracts, agreements, debts
and liabilities whatsoever, whether known or unknown,
suspected or unsuspected, both at law and in equity, which
each Seller now has, have ever had or may hereafter have
against the respective Releasees arising contemporaneously
with or prior to the Closing Date or on account of or
arising out of any matter, cause or event occurring
contemporaneously with or prior to the Closing Date;
provided, however, that nothing contained in this
Section 12.5(a) shall operate to release (i) any obligation
of the Company disclosed in this Agreement (on a Schedule or
otherwise), (ii) any obligations of PubliCARD or the Company
arising under this Agreement or under any agreement
contemplated by this Agreement or (iii) any obligation of
the Company to indemnify directors and officers with respect
to any statement or representation made in connection with
the Contemplated Transactions.
(b) Each of the Company and Sellers (as the case may be)
hereby irrevocably covenants to refrain from, directly or
indirectly, asserting any claim or demand, or commencing,
instituting or causing to be commenced, any proceeding of
any kind against any Releasee based upon any matter
purported to be released under Section 12.5(a).
(c) In connection with the foregoing release and discharge,
each Seller and the Company expressly waives and releases
any and all provisions, rights and benefits conferred by
1542 of the California Civil Code, which provides:
Section 1542. Certain Claims Not Affected by General
Release. A general release does not extend to claims which
the creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by him
would have materially affected his settlement with the
debtor.
14.6 Tax Matters.
(a) John Usher shall pay all transfer, documentary, sales,
use, registration, stamp, value-added and other similar
Taxes (including all applicable real estate transfer taxes),
including any penalties, interest and additions to tax,
incurred in connection with the Contemplated Transactions
other than the issuance of PubliCARD Shares hereunder, with
respect to which PubliCARD shall pay such Taxes.
(b) John Usher shall file or cause to be filed when due
(whether prior to or after the Closing Date) all Tax Returns
for the taxable periods of the Company ending on or prior to
the Closing Date. PubliCARD shall cause to be prepared and
filed any other required Tax Returns. Each of Mr. Usher and
PubliCARD shall cause all Tax Returns addressed in this
Section 12.6(b) to be prepared in accordance with the
methodology used in prior taxable years, except as otherwise
required by legal requirements.
(c) John Usher will pay, and will indemnify and hold harmless
PubliCARD, its Affiliates, the Surviving Corporation and the
Company from and against any Taxes imposed upon the Company
or the Surviving Corporation for any taxable period ending
immediately prior to the Closing Date, except to the extent
(A) adequate reserves were made for such tax liabilities on
the financial statements of the Company for the fiscal year
ended December 31, 1998 and all prior fiscal years or (B)
such liabilities are incurred during the interim period
commencing January 1, 1999 and up to the Closing Date in the
ordinary course of business and consistent with past
practice. Unless otherwise provided herein, the day prior
to the Closing Date shall be treated as the last day of a
taxable period of the Company whether or not any taxable
period actually ends on such date. John Usher's obligations
under this Section 12.6(c) shall not be limited in any way
by Section 12.1(a), Section 12.1(b) or Section 12.2.
(d) John Usher and PubliCARD shall each provide the other
with such assistance as may be reasonably requested
(including making employees reasonably available to provide
information or testimony) in connection with the preparation
of any Tax Return, any Seller Tax Controversies (as defined
in Section 12.6(e)), or the determination of liability for
Taxes with respect to the Company or the Surviving
Corporation.
(e)(i) PubliCARD shall, in the event that PubliCARD
receives written notice of any examination, claim, proposed settlement,
proposed adjustment or related matter with respect to any Taxes for
which PubliCARD may be indemnified hereunder (the "Seller Tax
Controversies"), promptly notify John Usher thereof; provided, however,
that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent Mr. Usher shall
have been actually prejudiced as a result of such failure. Mr. Usher
shall be entitled at his sole discretion and expense to handle, control
and compromise or settle the Seller Tax Controversies, and shall
reasonably inform PubliCARD of the progress of the Seller Tax
Controversies; provided, however, that Mr. Usher shall not settle or
compromise any Seller Tax Controversy in a manner that would adversely
affect any unindemnified Tax liability of PubliCARD, any of its
Affiliates, the Surviving Corporation or the Company without the consent
of PubliCARD, such consent not to be withheld unreasonably.
(ii) John Usher shall, in the event any Seller
receives written notice of any examination, claim, proposed settlement,
proposed adjustment or related matter with respect to Taxes attributable
to the Company or the Surviving Corporation, promptly notify PubliCARD
thereof.
15. THE SELLERS' AGENT.
15.1 Authorization of the Sellers' Agent. John Usher hereby is
appointed, authorized and empowered to act, as a
representative, on behalf of Sellers (John Usher, acting in
such representative capacity shall be referred to herein as
the "Sellers' Agent"), in connection with any and all
activities to be performed by or on behalf of Sellers under
this Agreement and each other agreement, document,
instrument or certificate referred to herein or the
Contemplated Transactions (including, without limitation, in
connection with any and all claims for indemnification
brought under Section 12), for the purposes and with the
powers and authority set forth herein or in such other
agreement, document, instrument or certificate, which shall
include, without limitation, the power and authority:
(a) to execute and deliver amendments or modifications to
this Agreement (including, without limitation, the Exhibits
and Schedules) as the Sellers' Agent, in his sole
discretion, may deem necessary or desirable;
(b) to execute and deliver such notices, waivers and consents
in connection with this Agreement and the consummation of
the Contemplated Transactions as the Sellers' Agent, in his
sole discretion, may deem necessary or desirable;
(c) to receive any notices and other documents on behalf of
Sellers pursuant to this Agreement; and
(d) to make, execute, acknowledge and deliver all such other
agreements, notices, requests, instructions, certificates,
stock powers, letters and other writings, and, in general,
to do any and all things and to take any and all action that
the Sellers' Agent, in his sole and absolute discretion, may
consider necessary or proper or convenient in connection
with or to carry out the activities described in this
Section 14.1 and the Contemplated Transactions.
The grant of authority provided for in this
Section 14.1: (i) is coupled with an interest and being granted,
in part, as an inducement to PubliCARD and Acquisition Sub to
enter into this Agreement and the other agreements, documents,
instruments and certificates contemplated hereby and shall be
irrevocable and survive the death, incompetency, bankruptcy or
liquidation of any Seller and shall be binding on any successor
thereto; and (ii) shall survive any permitted assignment by a
Seller of the whole or any fraction of his or her interest
hereunder.
15.2 Compensation; Exculpation; Indemnity.
(a) The Sellers' Agent shall not be entitled to any fee,
commission or other compensation for the performance of its
services as such, but shall be entitled to receive from
Sellers the payment of all of its expenses incurred as
Sellers' Agent.
(b) In dealing with this Agreement and any instruments,
agreements or documents relating hereto, and in exercising
or failing to exercise all or any of the powers conferred
upon the Sellers' Agent hereunder, (i) the Sellers' Agent
assumes and shall incur no responsibility whatsoever to any
Seller by reason of any error in judgment or other act or
omission performed or omitted hereunder or in connection
with this Agreement or any such other agreement, instrument
or document, excepting only responsibility for any act or
failure to act which represents gross negligence or willful
misconduct, and (ii) the Sellers' Agent shall be entitled to
rely on the advice of counsel, public accountants or other
independent experts experienced in the matter at issue, and
any error in judgment or other act or omission of the
Sellers' Agent pursuant to such advice shall in no event
subject the Sellers' Agent to liability to any Seller.
(c) Each Seller, severally, shall indemnify the Sellers'
Agent against all damages, liabilities, claims, obligations,
costs and expenses, including reasonable attorneys',
accountants' and other experts' fees and the amount of any
judgment against them, of any nature whatsoever, arising out
of or in connection with any claim, investigation,
challenge, action or proceeding or in connection with any
appeal thereof, relating to the acts or omissions of the
Sellers' Agent under this Agreement or otherwise. The
foregoing indemnification shall not be deemed exclusive of
any other right to which the Sellers' Agent may be entitled
apart from the provisions hereof. The foregoing
indemnification shall not apply in the event of any action
or proceeding which finally adjudicates the liability of the
Sellers' Agent for its gross negligence or willful
misconduct.
(d) All of the indemnities, immunities and powers granted to
the Sellers' Agent under this Agreement shall survive the
Closing and/or any termination of this Agreement.
15.3 Notices. Any notice given to the Sellers' Agent pursuant to
this Agreement or any other agreement, document, instrument
or certificate contemplated hereby shall constitute
effective notice to all Sellers. PubliCARD, Acquisition
Sub, the Surviving Corporation and any other Person may rely
on any notice, consent, election or other communication
received from the Sellers' Agent as if such notice, consent,
election or other communication had been received from all
Sellers.
15.4 Resignation or Removal; Successor Agent.
(a) The Sellers' Agent may resign upon 20 days' prior written
notice to PubliCARD, the Surviving Corporation and each
Seller, provided, that no such resignation may take effect
unless a successor Sellers' Agent shall have been duly
appointed and shall have accepted such appointment and
notice thereof shall have been given as set forth in Section
14.4(b). Any successor Sellers' Agent shall be a natural
person.
(b) Upon the resignation of the Agent, Sellers shall appoint
a successor Sellers' Agent by written consent of Sellers
holding 51% of the outstanding Company Shares immediately
prior to the Effective Time, and any successor Sellers'
Agent so appointed shall constitute the Sellers' Agent as
provided in this Section 14 to the same effect as if such
successor Sellers' Agent had been named in this Section 14.
Sellers shall give PubliCARD and the Surviving Corporation
written notice of the appointment of and acceptance of
appointment by the successor to such Sellers' Agent,
including a copy of the written consent of Sellers relating
thereto, the executed acceptance of appointment by the
successor to such Sellers' Agent, and the successor Sellers'
Agent's address (including telephone and telecopy numbers)
as soon as practicable after any such appointment. The
Sellers' Agent shall give PubliCARD and the Surviving
Corporation written notice of the resignation of such
Sellers' Agent as well as of the appointment of and
acceptance of appointment by the successor to such Sellers'
Agent, including the executed acceptance of appointment by
the successor to such Sellers' Agent and the successor
Sellers' Agent's address (including telephone and telecopy
numbers) as soon as practicable after any such resignation
and appointment. Any such resignation or appointment shall
not be effective against PubliCARD or the Surviving
Corporation until such notices shall have been given.
16. MISCELLANEOUS.
16.1 Entire Agreement. This Agreement (together with the
certificates, agreements, Exhibits, Schedules, instruments
and other documents required to be delivered hereunder)
contains, and is intended as, a complete statement of all of
the terms and the arrangements between the parties with
respect to the matters provided for, supersedes any previous
agreements and understandings between the parties with
respect to those matters, and cannot be changed or
terminated orally. Neither party makes, and each party
hereby expressly disclaims reliance upon, any representa-
tions or warranties with respect to the Contemplated
Transactions other than those set forth in this Agreement or
in any certificate, agreement, Exhibit, Schedule, instrument
or other document required to be delivered hereunder.
16.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of
Delaware without regard to the conflicts of law provisions
thereof.
16.3 Jurisdiction; Service of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against any of
the parties in the courts of the State of Delaware or, if it
has or can acquire jurisdiction in the United States
District Court for the District of Delaware, and each of the
parties consents to the jurisdiction of such courts (and of
the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in
the world.
16.4 Headings. The Section headings contained in this Agreement
are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement. All references
in this Agreement to Sections, Schedules and Exhibits are to
sections, schedules and exhibits to this Agreement, unless
otherwise indicated.
16.5 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given (a)
when delivered personally, (b) when transmitted by
telecopier (receipt confirmed), provided that a copy is sent
at about the same time by registered mail, return receipt
requested, (c) on the fifth Business Day following mailing
by registered mail, return receipt requested, or (d) on the
next Business Day following deposit with an overnight
delivery service of national reputation, in each case to the
addressee at the following addresses or telecopier numbers
(or to such other addresses, telex number or telecopier
number as a party may specify by notice given to the other
party pursuant to this provision):
If to the Company, to:
Greystone Peripherals, Inc.
130-A Knowles Drive
Los Gatos, California 95030
Attention: Mr. John Usher
Telecopier No.: (408) 866-8328
with copies to:
David M. Alexander, Esq.
2600 El Camino Real
Suite 506
Palo Alto, CA 94306-1705
Telecopier No.: (650)856-7723
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304
Attention: Michael Danaher, Esq.
Telecopier No.: (650) 493-6811
If to Sellers, to:
c/o Mr. John Usher
Greystone Peripherals, Inc.
130-A Knowles Drive
Los Gatos, California 95030
Telecopier No.: (408) 866-8328
with copies to:
David M. Alexander, Esq.
2600 El Camino Real
Suite 506
Palo Alto, CA 94306-1705
Telecopier No.: (650)856-7723
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304
Attention: Michael Danaher, Esq.
Telecopier No.: (650) 493-6811
If to PubliCARD, to:
PubliCARD, Inc.
One Post Road
Fairfield, Connecticut 06430
Attention: President
Telecopier No.: (203) 255-3109
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Joel I. Greenberg, Esq.
Telecopier No.: (212) 836-8689
16.6 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their
respective successors and permitted assigns. Nothing in
this Agreement shall create or be deemed to create any third
party beneficiary rights in any person or entity not party
to this Agreement. No assignment of this Agreement or of
any rights or obligations hereunder may be made by either
party (by operation of law or otherwise) without the prior
written consent of the other (which consent shall not be
unreasonably withheld) and any attempted assignment without
the required consent shall be void.
16.7 Amendment; Waiver. This Agreement may be amended only by a
writing signed by PubliCARD, Acquisition Sub, the Company
and each Seller who has delivered a signature page to this
Agreement prior to such amendment date. Any provision of
this Agreement may be waived at any time by a writing signed
by the party which is entitled to the benefits thereof.
16.8 Further Assurances. Each of the parties hereto agrees that
it will, from time to time after the date of this Agreement,
execute and deliver such other certificates, documents and
instruments and take such other action as may be reasonably
requested by any of the other parties to carry out the
Contemplated Transactions.
16.9 Severability. The invalidity of any provision of this
Agreement shall not affect any other provision of this
Agreement, which shall remain in full force and effect.
16.10 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
[The remainder of this page intentionally has been left blank.]<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
instrument as of the date and year first above written.
PUBLICARD: PUBLICARD, INC.
By: /s/James J. Weis
Name: James J. Weis
Title: President & CEO
ACQUISITION SUB: GPI ACQUISITION, INC.
By: /s/ James J. Weis
Name: James J. Weis
Title: President
COMPANY: GREYSTONE PERIPHERALS, INC.
By: /s/ John A. Usher
Name: John A. Usher
Title: President & CEO
SELLERS: SEE SEPARATE SIGNATURE PAGES WHICH FOLLOW<PAGE>
SELLERS' SIGNATURE PAGE
The undersigned shareholder of Greystone Peripherals, Inc.
or holder of options to purchase capital stock of Greystone Peripherals,
Inc. hereby agrees to be a party to the above Agreement and Plan of
Merger in the capacity of a Seller and, accordingly, hereby makes all of
the representations and warranties of a Seller under said agreement and
agrees to be bound by all of the obligations of a Seller under said
agreement.
Date: February 22, 1999
For a Seller that is a natural person:
/s/Gilbert R. Granado
Signature
Gilbert R. Granado
Print name as signed
SELLERS' SIGNATURE PAGE
The undersigned shareholder of Greystone Peripherals, Inc. or
holder of options to purchase capital stock of Greystone Peripherals, Inc.
hereby agrees to be a party to the above Agreement and Plan of Merger in the
capacity of a Seller and, accordingly, hereby makes all of the representations
and warranties of a Seller under said agreement and agrees to be bound by
all of the obligations of a Seller under said agreement.
Date: February 22, 1999
For a Seller that is a natural person:
/s/ George Robinson
Signature
George Robinson
Print name as signed
SELLERS' SIGNATURE PAGE
The undersigned shareholder of Greystone Peripherals, Inc.
or holder of options to purchase capital stock of Greystone Peripherals, Inc.
hereby agrees to be a party to the above Agreement and Plan of Merger in the
capacity of a Seller and, accordingly, hereby makes all of the representations
and warranties of a Seller under said agreement and agrees to be bound by all
of the obligations of a Seller under said agreement.
Date: February 22, 1999
For a Seller that is a natural person:
/s/ John A. Usher
Signature
John A. Usher
Print name as signed
SELLERS' SIGNATURE PAGE
The undersigned shareholder of Greystone Peripherals, Inc.
or holder of options to purchase capital stock of Greystone Peripherals, Inc.
hereby agrees to be a party to the above Agreement and Plan of Merger in the
capacity of a Seller and, accordingly, hereby makes all of the representations
and warranties of a Seller under said agreement and agrees to be bound by all
of the obligations of a Seller under said agreement.
Date: February 22, 1999
For a Seller that is a natural person:
/s/Robert Martell
Signature
Robert Martell
Print names as signed
