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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 2, 2000
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Wireless Telecom Group Inc.
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(Exact name of Registrant as Specified in Charter)
New Jersey 1-11916 22-2582295
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(State or Other Jurisdiction (Commission) (IRS Employer
of Incorporation) File Number) Identification No.)
East 64 Midland Ave., Paramus, N.J. 07652
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 261-8797
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N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On March 3, 2000, Wireless Telecom Group, Inc., a New Jersey Corporation
(the "Registrant") and Boonton Electronics Corp. ("Boonton") announced that they
had entered into an Agreement and Plan of Reorganization dated March 2, 2000
(the "Merger Agreement"), among the Registrant, WTT Acquisition Corp., a New
Jersey corporation and wholly-owned subsidiary of the Registrant ("Sub"), and
Boonton (the "Merger"). Under the terms of the Merger Agreement, .79 shares of
the Registrant's common stock will be exchanged for each outstanding share of
Boonton common stock on the closing date. The Merger is expected to be completed
before the end of June and is subject to Boonton stockholder approval as well as
other customary requirements.
Exhibit No. Description
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2.1 Agreement and Plan of Reorganization dated March 2, 2000 among
Wireless Telecom Group, Inc., WTT Acquisition Corp., Boonton
Electronics Corp., and the Boonton Shareholders listed on the
signature page to the Merger Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WIRELESS TELECOM GROUP, INC.
Date: March 7, 2000 By: /s/ Edward Garcia
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Edward Garcia
Chief Executive Officer
Exhibit No. Description
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2.1 Agreement and Plan of Reorganization dated March 2, 2000 among
Wireless Telecom Group, Inc., WTT Acquisition Corp., Boonton
Electronics Corp., and the Boonton Shareholders listed on the
signature page to the Merger Agreement.
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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF
March 2, 2000,
AMONG
WIRELESS TELECOM GROUP, INC.
WTT ACQUISITION CORP.
AND
BOONTON ELECTRONICS CORP.
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TABLE OF CONTENTS
SECTION Page
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ARTICLE I GENERAL ..................................................... 1
1.1 THE MERGER ...................................... 1
1.2 THE EFFECTIVE TIME OF THE MERGER ................ 2
1.3 EFFECT OF MERGER ................................ 2
1.4 CERTIFICATE AND BY-LAWS OF
SURVIVING CORPORATION .......................... 2
1.5 TAKING OF NECESSARY ACTION ...................... 2
1.6 TAX-FREE REORGANIZATION ......................... 3
1.7 CLOSING ......................................... 3
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES .......... 3
2.1 EFFECT ON CAPITAL STOCK ......................... 3
2.2 EXCHANGE OF CERTIFICATES ........................ 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
PRINCIPAL SHAREHOLDERS ...................................... 8
3.1 CAPACITY; AUTHORITY; NO CONSENTS. ............... 8
3.2 AGREEMENTS, ETC. ................................ 9
3.3 CERTAIN AGREEMENTS. ............................. 9
3.4 BROKERS ......................................... 9
3.5 RELATED TRANSACTIONS ............................ 9
3.6 AMOUNTS OWED. ................................... 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............... 10
4.1 ORGANIZATION; GOOD STANDING;
QUALIFICATION AND POWER ......................... 10
4.2 EQUITY INVESTMENTS .............................. 11
4.3 MARGIN STOCK .................................... 11
4.4 CAPITAL STOCK; SECURITIES ....................... 12
4.5 AUTHORITY; NO CONSENTS .......................... 12
4.6 SEC DOCUMENTS ................................... 14
4.7 FINANCIAL STATEMENTS ............................ 14
4.8 COLLECTABILITY OF ACCOUNTS RECEIVABLE ........... 15
4.9 ABSENCE OF UNDISCLOSED LIABILITIES .............. 15
4.10 ABSENCE OF CHANGES; CONDUCT OF BUSINESS ......... 15
4.11 TAX MATTERS ..................................... 18
4.12 BOOKS AND RECORDS; AUDITS AND INVESTIGATIONS .... 20
4.13 TITLE TO ASSETS, PROPERTIES AND
RIGHTS AND RELATED MATTERS ...................... 20
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4.14 ENVIRONMENTAL LIABILITY ......................... 22
4.15 ASSESSMENTS ..................................... 23
4.16 INTELLECTUAL PROPERTY ........................... 24
4.17 AGREEMENTS, ETC. ................................ 24
4.18 SUPPLIERS; RAW MATERIALS ........................ 26
4.19 CUSTOMERS; SALES REPRESENTATIVES ................ 26
4.20 NO DEFAULTS, ETC. ............................... 27
4.21 LITIGATION, OBSERVANCE OF STATUES,
REGULATIONS AND ORDERS .......................... 28
4.22 LICENSES, PERMITS, ETC. ......................... 28
4.23 COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS ......... 29
4.24 LABOR RELATIONS; EMPLOYEES ...................... 29
4.25 EMPLOYEE BENEFIT PLANS AND CONTRACTS ............ 31
4.26 CERTAIN AGREEMENTS .............................. 34
4.27 INSURANCE ....................................... 35
4.28 BROKERS ......................................... 35
4.29 RELATED TRANSACTIONS ............................ 35
4.30 BOARD APPROVAL .................................. 36
4.31 VOTE REQUIRED ................................... 36
4.32 OFFICERS AND DIRECTORS .......................... 36
4.33 INFORMATION SUPPLIED ............................ 36
4.34 BANK ACCOUNTS; CREDIT AND CHARGE CARDS .......... 37
4.35 COMPANY NOT AN INTERESTED SHAREHOLDER ........... 37
4.36 INVESTMENT COMPANY ACT; PUBLIC
UTILITY HOLDING COMPANY ACT ..................... 37
4.37 NO RIGHT OF ACTION .............................. 37
4.38 KNOWLEDGE DEFINITION ............................ 38
4.39 YEAR 2000 COMPLIANCE ............................ 38
4.40 DIRECTORS LIABILITIES. .......................... 38
4.41 FULL DISCLOSURE ................................. 39
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION SUB .................................. 39
5.1 ORGANIZATION; GOOD STANDING;
QUALIFICATION AND POWER ......................... 39
5.2 INFORMATION SUPPLIED ............................ 40
5.3 CONTINUITY OF BUSINESS ENTERPRISE ............... 40
5.4 AUTHORITY; NO CONSENTS .......................... 40
5.5 SEC DOCUMENTS ................................... 41
5.6 FINANCIAL STATEMENTS ............................ 42
5.7 ABSENCE OF UNDISCLOSED LIABILITIES .............. 42
5.8 ABSENCE OF CHANGES .............................. 42
5.9 TAX REPRESENTATION LETTER ....................... 43
5.10 FULL DISCLOSURE ................................. 43
5.11 TAX MATTERS. .................................... 43
5.12 NO DEFAULTS, ETC. ............................... 43
5.13 BOARD APPROVAL. ................................. 43
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5.14 PARENT COMMON STOCK. ............................ 44
ARTICLE VI VOTING AGREEMENT ............................................. 44
6.1 AGREEMENT TO VOTE ............................... 44
ARTICLE VII CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; ADDITIONAL AGREEMENTS ....................... 45
7.1 ACCESS TO RECORDS AND PROPERTIES OF
EACH PARTY; CONFIDENTIALITY ..................... 45
7.2 OPERATION OF BUSINESS OF THE COMPANY ............ 46
7.3 NEGOTIATION WITH OTHERS ......................... 46
7.4 PREPARATION OF S-4; OTHER FILINGS ............... 47
7.5 ADVICE OF CHANGES .............................. 48
7.6 LETTER OF THE COMPANY'S ACCOUNTANTS ............. 48
7.7 LETTER OF PARENT'S ACCOUNTANTS .................. 49
7.8 SHAREHOLDERS' APPROVAL .......................... 49
7.9 LEGAL CONDITIONS TO MERGER ...................... 50
7.10 CONSENTS ........................................ 50
7.11 EFFORTS TO CONSUMMATE ........................... 50
7.12 NOTICE OF PROSPECTIVE BREACH .................... 51
7.13 PUBLIC ANNOUNCEMENTS ............................ 51
7.14 NOTICE OF DEVELOPMENTS .......................... 51
7.15 AGREEMENT REGARDING PROCEEDINGS ................. 52
7.16 CERTAIN OBLIGATIONS ............................. 52
7.17 PRINCIPAL SHAREHOLDER AGREEMENTS. ............... 52
ARTICLE VIII CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATIONS ........... 53
8.1 SHAREHOLDER APPROVAL; AGREEMENT OF MERGER ....... 53
8.2 APPROVALS ....................................... 53
8.3 LEGAL ACTION .................................... 53
8.4 S-4 ............................................. 54
8.5 LEGISLATION ..................................... 54
8.6 TAX-FREE REORGANIZATION ......................... 54
ARTICLE IX CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION SUB ..... 54
9.1 REPRESENTATIONS AND WARRANTIES .................. 54
9.2 PERFORMANCE OF OBLIGATIONS OF THE COMPANY ....... 55
9.3 AUTHORIZATION OF MERGER ......................... 55
9.4 MERGER FILING ................................... 55
9.5 CERTIFICATE ..................................... 56
9.6 GOOD STANDING CERTIFICATES ...................... 56
9.7 OPINION OF THE COMPANY'S COUNSEL ................ 56
9.8 ACCEPTANCE BY COUNSEL TO PARENT AND
ACQUISITION SUB ................................ 56
9.9 CONSENTS AND APPROVALS .......................... 56
9.10 GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. ....... 56
9.11 TRANSACTION DOCUMENTS ........................... 56
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9.12 REPAYMENT OF INDEBTEDNESS ....................... 57
9.13 CONFIDENTIALITY, NON-COMPETITION AND
NO SOLICITATION AGREEMENTS ...................... 57
9.14 SCHEDULES ....................................... 57
9.15 SETTLEMENT AGREEMENT ............................ 57
ARTICLE X CONDITIONS TO OBLIGATIONS OF THE COMPANY
AND THE PRINCIPAL SHAREHOLDERS .............................. 58
10.1 REPRESENTATIONS AND WARRANTIES .................. 58
10.2 PERFORMANCE OF OBLIGATIONS OF PARENT
AND ACQUISITION SUB ............................. 58
10.3 AUTHORIZATION OF MERGER ......................... 58
10.4 CERTIFICATE ..................................... 59
10.5 GOOD STANDING CERTIFICATES ...................... 59
10.6 OPINION OF PARENT'S COUNSEL ..................... 59
10.7 ACCEPTANCE BY COUNSEL TO COMPANY ................ 59
10.8 CONSENTS AND APPROVALS .......................... 59
10.9 GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. ....... 59
10.10 TRANSACTION DOCUMENTS ........................... 59
ARTICLE XI CONFIDENTIALITY, NON-COMPETE AND NO SOLICITATION ............ 60
11.1 CONFIDENTIALITY ................................. 60
11.2 NON-COMPETE ..................................... 60
11.3 NO SOLICITATION ................................. 61
ARTICLE XII INDEMNIFICATION ............................................. 61
12.1 INDEMNIFICATION BY THE COMPANY. ................. 61
12.2 INDEMNIFICATION BY PRINCIPAL SHAREHOLDER. ....... 62
12.3 INDEMNIFICATION BY PARENT AND ACQUISITION SUB. .. 63
12.4 LOSS INDEMNITY PROCEDURE ........................ 63
12.5 DURATION OF INDEMNIFICATION ..................... 64
12.6 NO CLAIM AGAINST SURVIVING CORPORATION/COMPANY .. 64
12.7 LIMITATIONS ON INDEMNITY ........................ 64
12.8 OTHER INDEMNIFICATION PROVISIONS ................ 66
ARTICLE XIII PAYMENT OF CERTAIN FEES AND EXPENSES .................. 67
13.1 PAYMENT OF CERTAIN FEES AND EXPENSES ............ 67
ARTICLE XIV TERMINATION; AMENDMENT, MODIFICATION AND WAIVER ............. 68
14.1 TERMINATION ..................................... 68
14.2 EFFECT OF TERMINATION ........................... 69
ARTICLE XV MISCELLANEOUS ............................................... 69
15.1 SURVIVAL; EFFECT OF DISCLOSURE .................. 69
15.2 ENTIRE AGREEMENT ................................ 70
15.3 DESCRIPTIVE HEADINGS ............................ 70
15.4 NOTICES ......................................... 70
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15.5 COUNTERPARTS .................................... 71
15.6 GOVERNING LAW ................................... 71
15.7 BENEFITS OF AGREEMENT ........................... 72
15.8 PRONOUNS ........................................ 72
15.9 WAIVER, AMENDMENT AND MODIFICATION .............. 72
15.10 SPECIFIC PERFORMANCE ............................ 72
15.11 SEVERABILITY .................................... 73
EXHIBITS
1.2 Form Plan of Merger
5.9 Tax Representation Letter
7.18 Parent Promissory Note
9.7 Opinion of Company's Counsel
10.6 Opinion of Parent's Counsel
SCHEDULES
Schedule Section
Schedule 3.2 - Agreements
Schedule 3.3 - Certain Agreement
Schedule 4.5 - Environmental Consents
Schedule 4.6 - 10b-5
Schedule 4.10(d) - Liabilities Not in the Ordinary Course
Schedule 4.10(g) - Current Liabilities
Schedule 4.10(k) - Termination of Material Contracts
Schedule 4.10(s) - Termination of Employment
Schedule 4.10(u) - Litigation
Schedule 4.11(c) - Tax
Schedule 4.12 - Audits and Investigations
Schedule 4.13(a) - Encumbrances
Schedule 4.13(e) - Real Properties
Schedule 4.13(g) - Rights to Assets
Schedule 4.13(i) - Machinery and Equipment
Schedule 4.14 - Environmental Liability
Schedule 4.16 - Intellectual Property
Schedule 4.17 - Agreements
Schedule 4.18 - Suppliers
Schedule 4.19(a) - Customers
Schedule 4.19(b) - Sales Representatives
Schedule 4.20 - No Defaults
Schedule 4.21 - Litigation
Schedule 4.23 - Compliance
Schedule 4.24 - Employees
Schedule 4.24(h) - Labor Relations
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Schedule 4.25(a) - Employee Benefit Plans
Schedule 4.25(d) - Employee Benefit Plans
Schedule 4.25(i) - Employee Benefit Plans Government Approvals
Schedule 4.25(k) - Employee Benefit Plans to Former Employees
Schedule 4.27 - Insurance
Schedule 4.32 - Officers and Directors
Schedule 4.34 - Bank Accounts; Credit and Charge Cards
Schedule 4.39 - Year 2000 Compliance
Schedule 4.40 - Directors Liabilities
Schedule 7.16 - Lafferty Liabilities
Schedule 9.12 - Company EDA Indebtedness
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INDEX OF DEFINED TERMS
Acquisition Sub ........................................................... 1
Acquisition Transaction ................................................... 47
Actions ................................................................... 28
affiliate ................................................................. 35
Agreement ................................................................. 1
Assets .................................................................... 21
associate ................................................................. 35
Assumption Notice ......................................................... 63
Benefit Arrangements ...................................................... 32
Books and Records ......................................................... 18
Break-Up Fee .............................................................. 67
Business Day .............................................................. 3
Certificate ............................................................... 11
Closing ................................................................... 3
Closing Date .............................................................. 3
Code ...................................................................... 3
Collectible Accounts Receivable ........................................... 15
Company ................................................................... 1
Company Common Stock ...................................................... 1
Company EDA Indebtedness .................................................. 57
Company Financial Statements .............................................. 14
Company Options ........................................................... 8
Company Returns ........................................................... 19
Company Sales Representatives ............................................. 27
Company SEC Documents ..................................................... 14
Company Warrants .......................................................... 8
Constituent Corporations .................................................. 1
Covered Action ............................................................ 62
DB&S ...................................................................... 56
EDA Advance ............................................................... 57
Effective Time ............................................................ 2
Employee .................................................................. 31
Employee Plans ............................................................ 31
Encumbrances .............................................................. 20
Environmental Laws ........................................................ 23
ERISA ..................................................................... 31
ERISA Affiliate ........................................................... 31
Exchange Act .............................................................. 13
Exchange Agent ............................................................ 5
Exchange Fund ............................................................. 5
Executory Period .......................................................... 45
FAS No. 5 ................................................................. 15
GAAP ...................................................................... 14
Government Contracts ...................................................... 26
Governmental Authority .................................................... 13
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Hazardous Substance ....................................................... 23
HSR Act ................................................................... 50
Indemnification Notice .................................................... 63
Indemnified Party ......................................................... 63
Indemnifying Party ........................................................ 63
Intellectual Property Rights .............................................. 24
Lafferty Liability ........................................................ 38
Liability ................................................................. 15
Loan Agreement ............................................................ 57
Losses .................................................................... 62
Mailing Date .............................................................. 50
Material Adverse Effect ................................................... 11
Merger .................................................................... 1
Merger Shares ............................................................. 4
Modification .............................................................. 72
Multiemployer Plan ........................................................ 32
New Jersey Statute ........................................................ 1
NJEDA ..................................................................... 57
Old Certificates .......................................................... 5
Order ..................................................................... 22
Ordinary Course ........................................................... 15
Other Filings ............................................................. 48
Parent .................................................................... 1
Parent Common Stock ....................................................... 1
Parent Financial Statements ............................................... 42
Parent Returns ............................................................ 43
Parent SEC Documents ...................................................... 41
Pension Plans ............................................................. 31
Permitted Transaction Costs ............................................... 67
Person .................................................................... 7
Plan of Merger ............................................................ 1
Principal Shareholders .................................................... 1
Purchasing Companies ...................................................... 60
S-4 ....................................................................... 13
SEC ....................................................................... 13
Share Consideration ....................................................... 4
Shareholder Action ........................................................ 49
Shareholder Statement ..................................................... 49
Shareholders .............................................................. 5
Shareholders' Materials ................................................... 49
Shareholders' Meeting ..................................................... 49
Subsidiary ................................................................ 4
Surviving Corporation ..................................................... 1
Tax ....................................................................... 19
Taxes ..................................................................... 19
to the best knowledge of the Company ...................................... 38
Transaction Documents ..................................................... 1
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Uncollectable Accounts Receivable ......................................... 15
Year 2000 Compliant ....................................................... 38
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AGREEMENT AND PLAN OF REORGANIZATION dated as of March 1, 2000,
among Wireless Telecom Group, Inc., a New Jersey corporation ("Parent"), WTT
Acquisition Corp., a New Jersey corporation and wholly-owned subsidiary of
Parent ("Acquisition Sub"), and Boonton Electronics Corp., a New Jersey
corporation (the "Company"), and the Company's shareholders listed on the
signature page to this Agreement (the "Principal Shareholders").
The Boards of Directors of Parent, Acquisition Sub and the Company
have each duly approved and adopted this Agreement and Plan of Reorganization
(this "Agreement"), the plan of merger (the "Plan of Merger") and the proposed
merger of Acquisition Sub with and into the Company in accordance with this
Agreement, the Plan of Merger and the New Jersey Business Corporation Act (the
"New Jersey Statute"), whereby, among other things, the issued and outstanding
shares of common stock, $.10 par value, of the Company (the "Company Common
Stock"), will be exchanged and converted into shares of common stock, $.01 par
value, of Parent (the "Parent Common Stock") in the manner set forth in Article
II hereof and in the Plan of Merger, upon the terms and subject to the
conditions set forth in this Agreement and the Plan of Merger. As used herein,
the term "Transaction Documents" shall mean collectively, this Agreement, the
Plan of Merger, Parent Promissory Note, the Confidentiality Agreement,
Non-competition Agreement, and No Solicitation Agreements, and the other
documents, instruments and agreements contemplated hereby and executed and
delivered in connection herewith.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the Plan of Merger and the representations,
warranties, covenants, agreements, conditions and promises contained herein and
therein, the parties hereby agree as follows:
ARTICLE I
GENERAL
1.1 THE MERGER. In accordance with the provisions of this Agreement,
the Plan of Merger and the New Jersey Statute, Acquisition Sub shall be merged
with and into the Company (the "Merger"), which at and after the Effective Time
shall be, and is sometimes herein referred to as, the "Surviving Corporation."
Acquisition Sub and the Company are sometimes referred to as the "Constituent
Corporations."
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1.2 THE EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, the Plan of Merger in substantially the form set forth in
EXHIBIT 1.2 shall be executed, delivered and filed with the Treasurer of the
State of New Jersey by each of the Constituent Corporations on the Closing Date
in the manner provided under Section 14A:10-4.1 of the New Jersey Statute. The
Merger shall become effective (the "Effective Time") upon the filing of the
Certificate of Merger (to which the Plan of Merger is an exhibit) with the
Treasurer of the State of New Jersey.
1.3 EFFECT OF MERGER. At the Effective Time, the separate existence
of Acquisition Sub shall cease and Acquisition Sub shall be merged with and into
the Company and the Company shall continue as the Surviving Corporation. The
Surviving Corporation shall possess all of the rights, privileges, powers and
franchises as well of a public as of a private nature, and be subject to all the
restrictions, disabilities and duties of each of the Constituent Corporations
and the Merger shall have such other effects as provided by the New Jersey
Statute.
1.4 CERTIFICATE AND BY-LAWS OF SURVIVING CORPORATION. From and after
the Effective Time: (a) the Certificate of the Company shall be amended, and the
Certificate of the Company, as so amended, shall be the Certificate of the
Surviving Corporation, unless and until altered, amended or repealed as provided
in the New Jersey Statute; (b) the by-laws of the Acquisition Sub shall be the
by-laws of the Surviving Corporation; (c) the directors of Acquisition Sub shall
be the directors of the Surviving Corporation, unless and until removed, or
until their respective terms of office shall have expired, in accordance with
the New Jersey Statute, the Certificate or the by-laws of the Surviving
Corporation, as applicable; and (d) the officers of the Acquisition Sub shall be
the officers of the Surviving Corporation, unless and until removed, or until
their terms of office shall have expired, in accordance with the New Jersey
Statute, the Certificate or the by-laws of the Surviving Corporation, as
applicable.
1.5 TAKING OF NECESSARY ACTION. Prior to the Effective Time, the
parties hereto shall do or cause to be done all such acts and things as may be
necessary or appropriate in order to effectuate the Merger as expeditiously as
reasonably practicable, in accordance with this Agreement, the Plan of Merger,
and the New Jersey Statute. In case at any time after the Effective Time, any
further action is necessary or desirable to carry out the purpose of this
Agreement and to vest in the Surviving Corporation full title to all Assets,
privileges, rights and entitlements (as well as the obligations and duties) of
either
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Constituent Corporations, the officers and directors of such corporations shall
take all such lawful and necessary action.
1.6 TAX-FREE REORGANIZATION. For Federal income tax purposes, the
parties intend that the Merger be treated as a tax-free reorganization within
the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"), by reason of Section 368(a)(2)(E) of the Code.
1.7 CLOSING. Unless this Agreement shall have been terminated and
the transactions contemplated by this Agreement abandoned pursuant to the
provisions of Article XIII, and subject to this Agreement, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. (New York City time) on a
date (the "Closing Date") to be mutually agreed upon by the parties, which date
shall be not later than the third (3rd) Business Day after all the conditions
set forth in Articles VIII, IX and X shall have been satisfied (or waived to the
extent the same may be waived), unless another date is agreed to in writing by
the Parent and the Company. The Closing shall take place at the offices of
Morrison Cohen Singer & Weinstein, LLP 750 Lexington Avenue, New York, New York
10022, unless another place is agreed to in writing by the parties. As used
herein, the term "Business Day" shall mean any day other than a Saturday, Sunday
or day on which banks are permitted to close in New Jersey or New York.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, subject and
pursuant to the terms and conditions of this Agreement and the Plan of Merger,
by virtue of the Merger and without any action on the part of the Constituent
Corporations or the holders of the capital stock of the Constituent
Corporations:
(a) CAPITAL STOCK OF ACQUISITION SUB. Each issued and
outstanding share of common stock, par value $.01 per share, of Acquisition Sub
shall immediately prior to the Effective Time be deemed cancelled and converted
into and shall represent the right to receive one share of common stock, par
value $.10 per share, of the Surviving Corporation.
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(b) CANCELLATION OF CERTAIN SHARES OF COMPANY COMMON STOCK.
Each share of Company Common Stock that is immediately prior to the Effective
Time: (i) owned by the Company as treasury stock; (ii) owned by any Subsidiary
of the Company; or (iii) owned by Parent or any subsidiary of Parent, shall be
cancelled and no Parent Common Stock or other consideration shall be delivered
in exchange therefor. As used in this Agreement, a "Subsidiary" means with
respect to any Person (a) any corporation or other entity with respect to which
such Person, directly or indirectly, has the power to vote or direct the voting
of securities sufficient to elect a majority of the directors or other managers
thereof or (b) any corporation or other entity with respect to which another
Person, directly or indirectly, owns fifty percent (50%) or more of the
aggregate equity interests therein.
(c) EXCHANGE RATIO FOR COMPANY COMMON STOCK. Subject to
Section 2.2, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares cancelled pursuant to
Section 2.1(b)) shall be deemed cancelled and converted into and shall represent
the right to receive .79 shares of Parent Common Stock in accordance with
Section 2.2 (the "Share Consideration") For convenience of reference, the shares
of Parent Common Stock to be issued upon the exchange and conversion of Company
Common Stock in accordance with this Section 2.1(c) are sometimes hereinafter
collectively referred to as the "Merger Shares."
(d) ADJUSTMENTS FOR CAPITAL CHANGES. If, prior to the
Effective Time, Parent or the Company recapitalizes through a subdivision of its
outstanding shares into a greater number of shares, or a combination of its
outstanding shares into a lesser number of shares, or reorganizes, reclassifies
or otherwise changes its outstanding shares into the same or a different number
of shares or other classes, or declares a dividend on its outstanding shares
payable in shares of its capital stock or securities convertible into shares of
its capital stock, then the Share Consideration shall be adjusted appropriately
so as to maintain the relative proportionate interests of the holders of shares
of Company Common Stock and the holders of shares of Parent Common Stock.
2.2 EXCHANGE OF CERTIFICATES.
(a) PROCEDURE FOR EXCHANGE. Prior to the Closing Date, Parent
shall select American Stock Transfer & Trust Company as exchange agent (the
"Exchange Agent") to act in such
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capacity in connection with the Merger. As of the Effective Time, Parent shall
deposit with the Exchange Agent, for the benefit of the holders (the
"Shareholders") of shares of Company Common Stock, for exchange in accordance
with this Article II and the Plan of Merger certificates representing the shares
of Parent Common Stock contemplated to be issued as Merger Shares (which shares
of Parent Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter collectively referred to as the "Exchange
Fund"). As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate or certificates which
immediately before the Effective Time represented issued and outstanding shares
of Company Common Stock (collectively, the "Old Certificates"): (i) a letter of
transmittal advising such holders of the terms of the exchange effected by the
Merger (and specifying how delivery shall be effected, and risk of loss and
title to the Old Certificates shall pass, only upon delivery of the Old
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify); and (ii) instructions for use in
effecting the surrender of Old Certificates in exchange for certificates
representing Merger Shares. Upon surrender of an Old Certificate for
cancellation to the Exchange Agent, together with a duly executed letter of
transmittal and such other documents as may be reasonably required by the
Exchange Agent, the holder of such Old Certificate shall be entitled to receive
in exchange therefor a certificate representing that number of whole shares of
Parent Common Stock which such holder has the right to receive pursuant to the
provisions of this Article II and the Plan of Merger, and the Old Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of shares of Company Common Stock which are not registered on the
transfer records of the Company, it shall be a condition of the exchange thereof
that the Old Certificate representing such Company Common Stock is presented to
the Exchange Agent properly endorsed and otherwise in proper form for transfer
and accompanied by all documents required to evidence and affect such transfer
and by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.2(a) and the Plan of Merger, each
Old Certificate shall be deemed, on and after the Effective Time, to represent
only the right to receive upon such surrender (x) the certificate representing
shares of Parent Common Stock and (y) cash in lieu of fractional shares (as
hereinafter provided) of Parent Common Stock as contemplated by this Article II
and the Plan of Merger.
(b) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES.
No dividends or other distributions declared or made after the Effective Time
with respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Old Certificate with respect to
the shares of Parent Common Stock represented thereby and
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no cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.2(d) or the Plan of Merger until the holder of record of
such Old Certificate shall surrender such Old Certificate. Subject to the effect
of applicable laws, following surrender of any such Old Certificate, there shall
be paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest: (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2(d) and the Plan of Merger and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock; and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Parent Common Stock.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
shares of Parent Common Stock issued upon the surrender for exchange of shares
of Company Common Stock in accordance with the terms of this Article II and the
Plan of Merger (including any cash paid pursuant to Section 2.2(b) or 2.2(d))
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock and there shall be no further
registration or transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, any Old
Certificate is presented to the Surviving Corporation for any reason, such Old
Certificate shall be cancelled and exchanged as provided in this Article II and
the Plan of Merger.
(d) NO ISSUANCE OF FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Old Certificates, and such fractional share interests
shall not entitle the owner thereof to vote or to any rights of a shareholder of
Parent such as rights to dividends, stock splits or interest in lieu of issuing
certificates for fractional shares. In lieu of any such fractional shares, each
holder of Company Common Stock who would otherwise have been entitled to receive
a fraction of a share of Parent Common Stock upon surrender of certificates
evidencing Company Common Stock for exchange pursuant to this Section 2.2(d)
shall be entitled to receive from Parent a cash payment equal to the product of
such fraction and the closing price of a share of Parent Common Stock on the
Closing Date.
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(e) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Old Certificates shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the Person claiming such Old Certificate to be
lost, stolen or destroyed, the Exchange Agent shall issue an exchange for such
loss, stolen or destroyed Old Certificate the consideration payable and exchange
therefor pursuant to this Article II. The Exchange Agent or the Surviving
Corporation may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Old Certificate to
give the Exchange Agent a bond in such reasonable sum as it may direct as
indemnity against any claim that may be made against the Surviving Corporation
with respect to the Old Certificate alleged to have been lost, stolen or
destroyed. As used in this Agreement, the term "Person" shall mean any
individual, firm, corporation, limited liability company, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
Governmental Authority or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the shareholders of the Company for eighteen
(18) months after the Effective Time shall be delivered to Parent, and upon
demand from any former Shareholders of the Company who have not theretofore
complied with this Article II, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to Parent Common
Stock shall be distributed, to the former Shareholders of the Company upon the
receipt of proper Certificates and/or evidence reasonably satisfactory in form
and substance to the Parent.
(g) NO LIABILITY. Neither the Exchange Agent, Parent,
Acquisition Sub nor the Company shall be liable to any holder of shares of
Company Common Stock or Parent Common Stock, as the case may be, for either
shares (or dividends or distributions with respect thereto) of Parent Common
Stock to be issued in exchange for Company Common Stock pursuant to this Section
2.2, if, on or after the expiration of eighteen (18) months following the
Effective Date, such shares are delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS
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Each Principal Shareholder represents and warrants to Parent and
Acquisition Sub with respect to himself or itself only that:
3.1 CAPACITY; AUTHORITY; NO CONSENTS. Each such Principal
Shareholder who is a natural Principal Shareholders has the requisite capacity
and authority to execute, deliver and perform the Transaction Documents to which
he is a party and in the case of a non-natural Principal Shareholder, the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all action, hereby necessary corporate action, on the
part of such Principal Shareholder; and this Agreement and the other Transaction
Documents to which he/it is a party have been, and will be, duly and validly
executed and delivered by him/it, and this Agreement and the other Transaction
Documents to which he/it is a party are, and will be, the valid and binding
obligations of such Principal Shareholder, enforceable against him/it in
accordance with their respective terms subject to bankruptcy, fraudulent
conveyance, insolvency, moratorium or similar laws affecting the rights of
creditors generally or general equitable principles.
3.2 AGREEMENTS, ETC. Schedule 3.2 sets forth opposite such
Principal Shareholder's name a true and complete list and accurate description
of the material terms of (i) all the employment and consultancy arrangements
between the Company and such Principal Shareholder and (ii) any other type of
contract, commitment or understanding between the Company and such Principal
Shareholder which (except as otherwise generally provided by applicable law) is
not immediately terminable without cost or other liability at or at any time
after the Effective Time, in each case to which such Principal Shareholder is a
party and not made in the Ordinary Course of business, or made in the Ordinary
Course of business which are currently in effect.
3.3 CERTAIN AGREEMENTS. Except as provided in this Agreement or as
otherwise set forth on Schedule 3.3 attached hereto, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will:
(a) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to such Principal Shareholder, under any Employee Plan, Benefit
Arrangement or otherwise;
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(b) increase any benefits otherwise payable under any Employee
Plan or Benefit Arrangement to such Principal Shareholder; or
(c) result in the acceleration of the time of payment or
vesting of any such benefits to such Principal Shareholder.
3.4 BROKERS. Such Principal Shareholder has not employed any broker
or finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by the
Transaction Documents.
3.5 RELATED TRANSACTIONS. Such Principal Shareholder is not now, and
has not been during the last three (3) fiscal years:
(a) a party to any transaction with the Company which requires
filing of a 10-KSB or definitive proxy statement with the SEC (including, but
not limited to, any contract, agreement or other arrangement providing for the
furnishing of services by, or rental of real or personal property from, or
borrowing money from, or otherwise requiring payments to, such Principal
Shareholder or any of his/its associates or affiliates), other than any
transaction which has been disclosed in a definitive proxy statement or report
filed by the Company in a timely fashion with the SEC;
(b) the direct or indirect owner, including any ownership by a
family member, of a 10% or greater interest in any non-natural Person, which is,
or has been, a supplier, customer, or, within the last 12 months, competitor, of
the Company (other than non-affiliated holdings in publicly-held companies); or
(c) a party to any transaction with the Company whereby such
Principal Shareholder received compensation (other than dividends paid by a
publicly held corporation) from any other Person, which is, or has been, a
supplier, customer, or, within the last 12 months, competitor of the Company.
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3.6 AMOUNTS OWED. Other than the amount owed to each such Principal
Shareholder under the Director Liabilities (as defined in Section 4.40), the
Company owes no other amounts to such Principal Shareholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition
Sub that:
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. The
Company:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey; (b) has all requisite
corporate power and authority to own, lease and operate its properties and
Assets and to carry on its business in the Ordinary Course; and (c) is duly
qualified and in good standing to do business in all jurisdictions in which the
failure to be so qualified and in good standing could be reasonably expected to
have a material adverse effect on such Person's business, Assets, operations,
results of operations, liabilities, properties, condition (financial or
otherwise), affairs or an effect which could materially impair the ability of a
Person to perform any obligation under this Agreement or materially impair the
consummation of the transaction contemplated hereby ("Material Adverse Effect").
The Company has all requisite corporate power and authority to enter into this
Agreement and the Plan of Merger and each of the other Transaction Documents to
which it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The Company has
delivered to Parent true and complete copies of the Charter and by-laws of the
Company as amended to the date hereof, and its minute books. As used in this
Agreement, "Certificate" shall mean, with respect to any corporation, those
instruments that at the time constitute its corporate charter as filed or
recorded under the general corporation law of the jurisdiction of its
incorporation, including the articles or certificate of incorporation or
organization, and any amendments thereto, as the same may have been restated,
and any amendments thereto (including any articles or certificates of merger or
consolidation or certificates of designation or similar instruments which effect
any such amendment) which became effective after the most recent such
restatement.
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4.2 EQUITY INVESTMENTS. The Company does not own any capital stock
or other proprietary interest, directly or indirectly, in any corporation,
association, trust, partnership, limited liability company, joint venture or
other entity. The Company does not have any Subsidiaries. There are no options,
warrants, rights, calls, commitments or agreements of any character to which the
Company is a party or by which the Company is bound calling for the issuance of
shares of capital stock of the Company or any securities convertible into or
exercisable or exchangeable for, or representing the right to purchase or
otherwise receive, any such capital stock, or other arrangement to acquire, at
any time or under any circumstance, capital stock of the Company or any such
other securities of the Company or the Company Sub.
4.3 MARGIN STOCK. The Company owns no "margin stock" as such term is
defined in Regulation U, as amended (12 C.F.R. Part 221) of the Federal Reserve
Board.
4.4 CAPITAL STOCK; SECURITIES. The authorized capital stock of the
Company consists of 5,000,000 shares of Company Common Stock, of which 2,387,332
shares are outstanding as of the Closing Date. As of the Closing Date, the
Company has no outstanding warrants for shares of Company Common Stock (with no
shares of Company Common Stock reserved for such purpose) (collectively, the
"Company Warrants"). The Company does not have outstanding any options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, share of its capital stock or any such options,
rights, convertible securities or obligations. All outstanding shares of Company
Common Stock are validly issued and outstanding, fully paid and non-assessable
and not subject to preemptive rights. There are no voting trusts, voting
agreements (except pursuant to Section 6.1 below), first offer rights, co-sale
rights, transfer restrictions (other than restrictions imposed by federal or
state securities laws) or other agreements, instruments or understandings
(whether written or oral, formal or informal) with respect to the voting,
registration, transfer or disposition of Company Securities to which the Company
is a party or by which it is bound, or to the knowledge of the Company, among or
between any Persons other than the Company.
4.5 AUTHORITY; NO CONSENTS. The execution, delivery and performance
by the Company of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action
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on the part of the Company; and this Agreement and the other Transaction
Documents to which the Company is a party have been, and the Plan of Merger when
executed and delivered by the Company will be, duly and validly executed and
delivered by the Company, and this Agreement and the other Transaction Documents
to which the Company is a party is, and the Plan of Merger when executed and
delivered by the parties thereto will be, the valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms subject to bankruptcy, fraudulent conveyance, insolvency, moratorium or
similar laws affecting the rights of creditors generally or general equitable
principles. Neither the execution, delivery and performance of the Transaction
Documents to which the Company is a party nor the consummation by the Company of
the transactions contemplated hereby or thereby nor compliance by the Company
with any provision hereof or thereof will: (a) conflict with; (b) result in any
violations of (c) cause a default under (with or without due notice, lapse of
time or both); (d) give rise to any right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of any
material benefit under; or (e) result in the creation of any Encumbrance on or
against any Assets, right or property of the Company under any term, condition
or provision of: (x) any instrument or agreement to which the Company is a
party, or, to the knowledge of the Company, by which the Company, its
properties, Assets or rights may be bound (except as shall have been waived or
with respect to which consent shall have been obtained prior to the Closing)
except where the foregoing would not result in a Material Adverse Effect on the
Company; (y) any law, statute, rule, regulation, order, writ, injunction,
decree, permit, concession, license or franchise of any Federal, state,
municipal, foreign or other governmental court, department, commission, board,
bureau, agency or instrumentality ("Governmental Authority") applicable to the
Company or any of its properties, Assets or rights except where the foregoing
would not result in a Material Adverse Effect on the Company; or (z) the
Company's Certificate or by-laws, as amended through the date hereof. Except as
contemplated by this Agreement or the Plan of Merger, no permit, authorization,
consent or approval of or by, or any notification of or filing with, any
Governmental Authority is required in connection with the execution, delivery
and performance by the Company and each Principal Shareholder of this Agreement,
the Plan of Merger or the Transaction Documents to which the Company is a party
or the consummation of the transactions contemplated hereby or thereby, except
for: (i) the filing with the Securities and Exchange Commission (the "SEC")
of(A) Form S-4 with respect to the Merger Shares, the shares of Parent Common
Stock to be issued in exchange for Vested Company Options and the shares of
Parent Common Stock reserved for issuance upon exercise of the assumed Unvested
Company Options and Company Warrants (as to which the option or warrant holder
is, by the terms of the Company option plan or warrant in effect, entitled upon
exercise of the option or warrant, to receive registered stock) (the "S-4")
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and (B) such reports and information under the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations promulgated
by the SEC thereunder, as may be required in connection with this Agreement, the
Plan of Merger and the transactions contemplated hereby and thereby; (ii) such
filings as may be required by the American Stock Exchange with respect to Parent
Common Stock to be issued in connection with the Merger and the Company Warrants
and Company Options to be assumed by Parent in the Merger; (iii) the filing of
such documents with, and the obtaining of such orders from, various state
securities and blue-sky authorities as are required in connection with the
transactions contemplated hereby; (iv) the distribution of the Shareholders'
Materials with respect to the adoption by the Shareholders of this Agreement and
the Plan of Merger; (v) the filing of the Plan of Merger with the Treasurer of
the State of New Jersey and appropriate documents with the relevant authorities
of other states in which the Company is qualified to do business; (vi) the
filings or notices that may be required under Environmental Laws as set forth on
Schedule 4.5; and (vii) such other consents, waivers, authorizations, filings,
approvals and registrations which if not obtained or made would not have a
Material Adverse Effect on the Company or materially impair the ability of the
Company and the Shareholders to consummate the transactions contemplated by this
Agreement or the Plan of Merger, including, without limitation, the Merger.
4.6 SEC DOCUMENTS. The Company has furnished Parent with a correct
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC on or after
September 30, 1998 (the "Company SEC Documents"), which are all the documents
(other than preliminary material) that the Company was required to file (or
otherwise did file) with the SEC on or after September 30, 1998. As of their
respective dates, except as set forth on Schedule 4.6, none of the Company SEC
Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and the Company SEC Documents
complied when filed in all material respects with the then applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated by the SEC thereunder.
4.7 FINANCIAL STATEMENTS. The financial statements of the Company
included in the Company SEC Documents (the "Company Financial Statements"):
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(a) complied as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principals ("GAAP"), consistently applied (except as may
have been indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q promulgated by the SEC);
(b) were in accordance with the books and records of the
Company; and
(c) fairly present (subject, in the case of the unaudited
statements, to normal, nonrecurring audit adjustments) the financial position of
the Company as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
4.8 COLLECTABILITY OF ACCOUNTS RECEIVABLE. All accounts receivable
included in the Company Financial Statements, net of any reserves for losses as
reflected thereon, and net of costs, which costs shall not exceed $15,000 in the
aggregate, are fully collectible in cash within three (3) months from the date
hereof, with the exception of financed accounts receivable which by their terms
are not payable in full within such three-month period ("Collectible Accounts
Receivable"). All accounts receivable which cannot be fully collectable in cash
within three (3) months from the date hereof with the exception of accounts
receivable which by their term are not payable in full within such three month
period are uncollectable accounts receivable ("Uncollectable Accounts
Receivable"). Credits, returns and rebates shall not constitute payment of
accounts receivable. (In determining whether there has been any nonpayment of
any Account Receivable, all payments received from any account debtor shall,
unless otherwise specified by such account debtor, be first applied to the
oldest outstanding account Receivable of such account debtor until all accounts
receivable of such account debtor have been paid in full.)
4.9 ABSENCE OF UNDISCLOSED LIABILITIES. At September 30, 1999: (a)
the Company had no material liability or obligation of any nature (whether known
or unknown, matured or unmatured, fixed or contingent ("Liability")), which was
not provided for or disclosed on the Company SEC Documents for the fiscal year
ended September 30, 1999; and (b) all liability reserves established by the
Company and set forth on the Company Financial Statements were adequate, in the
good faith judgment of the Company, for all such Liabilities at the date
thereof. There were no material loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting
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Standards Board in March 1975 ("FAS No. 5")) which were not adequately provided
for on the Company Financial Statements as required by FAS No. 5.
4.10 ABSENCE OF CHANGES; CONDUCT OF BUSINESS. Since September 30,
1999, the Company has been operated in the ordinary course, consistent with the
Company's past practice ("Ordinary Course") and:
(a) the Company has notified Parent in writing of any Material
Adverse Effect on the Company;
(b) there has not been any damage, destruction or loss,
whether or not covered by insurance, having or which could have a Material
Adverse Effect on the Company;
(c) the Company has kept in a normal state of repair and
operating efficiency all tangible personal property used in the operation of its
business;
(d) except as set forth on Schedule 4.10(d), there has not
been any Liability created, assumed, guaranteed or incurred, or any material
transaction, contract or commitment entered into, by the Company, other than the
license, sale or transfer of the Company's products to customers in the Ordinary
Course except for liabilities to Parent or incurred or to be incurred in
connection with negotiation and execution of this Agreement;
(e) there has not been any declaration, setting aside or
payment of any dividend or other distribution of any Assets of any kind
whatsoever with respect to any shares of the capital stock of the Company, or
any direct or indirect redemption, purchase or other acquisition of any such
shares of the capital stock of the Company;
(f) there has not been any payment, discharge or satisfaction
of any material Encumbrance or Liability or any cancellation by the Company of
any material debts or claims or any amendment, termination or waiver of any
right of material value to the Company;
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(g) except as otherwise provided for in this Agreement the
Company has paid or incurred only those fees and expenses not in the Ordinary
Course of its business approved in writing or ratified in writing by Parent
(including, without limitation, statements of fees for legal and accounting
services, only on a time basis at regular hourly rates). Except as otherwise
provided for in this Agreement, no such fees have been paid or incurred in
respect of services performed in connection with the negotiation, preparation or
execution of any documents, instruments, exhibits, schedules or any other matter
relating to the transactions contemplated hereby. Except as set forth on
Schedule 4.10(g), the Company has paid all of its current liabilities as and
when they became due;
(h) there has not been any stock split, reverse stock split,
combination, reclassification or recapitalization of any Company Common Stock,
or any issuance of any other security in respect of or in exchange for, any
shares of Company Common Stock;
(i) the Company has not redeemed, repurchased, or otherwise
acquired any of its capital stock or securities convertible into or exchangeable
for its capital stock or entered into any agreement to do so;
(j) there has not been any issuance by the Company of any
shares of its capital stock or any debt security or securities, rights, options
or warrants convertible into or exercisable or exchangeable for any shares of
its capital stock or debt security;
(k) except as set forth on Schedule 4.10(k), there has not
been any termination of or indication of an intention to terminate or not renew,
any material contract, license, commitment or other agreement between the
Company and any other Person, or the assignment by the Company of any interest
in any contract to which the Company is a party;
(l) the Company has used commercially reasonable efforts to
maintain the good will associated with its business, and the existing business
relationships with its agents, customers, key employees and consultants,
suppliers and other Persons having relations with it;
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(m) there has not been any material write-down or write-up of
the value of any Asset of the Company, or any material write-off of any accounts
receivable or notes receivable of the Company or any portion thereof.
(n) the Company has not sold, leased, licensed or otherwise
disposed of any Assets or created or permitted to exist any Encumbrance on its
Assets except in the Ordinary Course and which would not have a Material Adverse
Effect on the Company;
(o) there has not been any increase in or modification or
acceleration of compensation or benefits payable or to become payable to any
officer, employee, consultant or agent of the Company, or the entering into of
any employment contract or consulting contract with any such Person;
(p) there has not been any making of any loan, advance or
capital contribution to or investment in any Person or the engagement in any
transaction with any employee, officer, director, consultant or shareholder of
the Company;
(q) there has not been any Encumbrance created, or agreement
to do so, with respect to any Company Assets, tangible, or intangible;
(r) there has not been any change in the accounting methods or
practices followed by the Company, or any change in depreciation or amortization
policies or rates theretofore adopted by the Company;
(s) except as set forth on Schedule 4.10(s) there has not been
any termination of employment or consultancy of any officer or key employee or
key consultant of the Company or, any expression of intention by any officer,
key consultant or key employee of the Company to terminate such office,
employment or consultancy with the Company;
(t) there has not been any amendments or changes in the
Company's Certificate or by-laws;
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(u) except as set forth on Schedule 4.10(u), there has not
been any commencement of any litigation or other action by or against the
Company and, to the Company's knowledge, there has been no occurrence which
could give rise thereto;
(v) the Company has kept in all material respects true,
complete and correct books and records of account ("Books and Records") with
respect to its business, in which entries have made of all transactions up to
the Effective Time in the Company's Ordinary Course; and
(w) there has not been any agreement, understanding,
authorization or proposal, whether in writing or otherwise, for the Company to
take any of the actions specified in items (a) through (v) above.
4.11 TAX MATTERS. The Company and each other corporation included in
any consolidated or combined tax return in which the Company has been included:
(a) have filed and will file, in a timely and proper manner,
consistent with applicable laws, all Federal, state and local Tax returns and
Tax reports required to be filed by them through the Closing Date (the "Company
Returns") with the appropriate governmental agencies in all jurisdictions in
which Company Returns are required to be filed and have paid or will pay all
amounts shown thereon to be due; and (b) have paid and shall timely pay all
Taxes required to have been paid on or before the Closing Date. All Taxes
attributable to all taxable periods ending on or before the Closing Date, to the
extent not required to have been previously paid have been adequately provided
for on the Company Financial Statements and the Company will not incur or accrue
a Tax liability from the date of the Company Financial Statements up to and
including the Closing Date, other than a Tax liability incurred or accrued in
the Ordinary Course of business. The Company has not been notified by the
Internal Revenue Service or any state, local or foreign taxing authority that
any issues have been raised (and are currently pending) in connection with any
Company Return, and no waivers of statutes of limitations have been given or
requested with respect to the Company. Any deficiencies asserted or assessments
(including interest and penalties) made as a result of any examination by the
Internal Revenue Service or by any other taxing authorities of any Company
Return have been fully paid or are adequately provided for on the Company
Financial Statements and no proposed additional Taxes have been asserted. The
Company has not made an election to be treated as a "consenting corporation"
under Section 341(f) of the Code nor is it a "personal holding
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company" within the meaning of Section 542 of the Code. The Company has not
agreed to, nor is required to make any adjustment under Section 481(a) of the
Code by reason of a change in accounting method or otherwise. The Company will
not incur a Tax liability resulting from the Company ceasing to be a member of a
consolidated or combined group that had previously filed consolidated, combined
or unitary Tax returns. As used in this Agreement, "Tax" means any of the Taxes
and "Taxes" means, with respect to any entity: (x) all income taxes (including
any tax on or based upon net income, gross income, income as specially defined,
earnings, profits or selected items of income, earnings or profits) and all
gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, alternative or add-on minimum taxes, customs
duties and other taxes, fees, assessments or charges of any kind whatsoever,
together with all interest and penalties, additions to tax and other additional
amounts imposed by any taxing authority (domestic or foreign) on such entity;
and (y) any liability for the payment of any amount of the type described in the
immediately preceding clause (x) as a result of: (i) being a "transferee"
(within the meaning of Section 6901 of the Code or any other applicable law) of
another entity; (ii) being a member of an affiliated or combined group; or (iii)
any contractual obligations or otherwise.
(b) Prior to the Merger, the Company's shareholders did not
dispose of any Company Stock, or receive any distribution from the Company, in a
manner that would cause the Merger to violate the continuity of shareholder
interest requirement set forth in Treasury Regulation Section 1 .368-1(e).
(c) Schedule 4.11(c) hereto sets forth the following
information with respect to the Company as of the most recent practicable date:
(A) the Tax basis of the Company in its Assets; (B) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign Tax credit, research and development credit, excess charitable
contribution or other carryover allocable to the Company, the years in which
such Tax attributes arose and the years (if any) in which such Tax attributes
are scheduled to expire; and (C) a list of any Tax elections made by the Company
and affecting the Company. The Company has no net operating losses or other Tax
attributes subject to limitation under Code Section 382, 383 or 384, or the
federal consolidated return regulations, or under any similar provision of
state, local or foreign law. The amount of any net operating loss, net capital
loss, unused investment or other credit, unused foreign Tax credit, research and
development credit, excess charitable contribution or other carryover allocable
to the Company is fully utilizable by the Company.
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4.12 BOOKS AND RECORDS; AUDITS AND INVESTIGATIONS. All the books and
records of the Company have been kept and were prepared in accordance with GAAP.
The Company has delivered to Parent all responses to auditors' inquiry letters
received in the past four years and all letters to the Company from the auditors
during such period. Schedule 4.12 hereto identifies all correspondence received
from a Governmental Authority in the past four years relating to tax and
accounting, regulatory compliance reviews, audits or investigations.
4.13 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
(a) The Company has good and marketable title to, or valid
leasehold interests in, all its Assets, subject to no security interests,
mortgages, liens, pledges, guarantees, charges, easements, reservations,
restrictions, clouds, equities, rights of way, options, rights of first refusal
and all other encumbrances, whether or not relating to the extension of credit
or the borrowing of money ("Encumbrances") except: (i) liens for current Taxes
not yet due and payable, (ii) mechanics' and materialmen's liens arising or
incurred in the Ordinary Course of its business, and (iii) as reflected on
Schedule 4.13(a).
(b) The properties, assets, rights, contracts, leases,
easements, permits, licenses and real and personal property (the "Assets")
evidenced on the Company Financial Statements are the sole items of tangible and
intangible personal property heretofore utilized by the Company in the (and
necessary for the Company to) conduct of its operations.
(c) The real and personal property owned or leased by the
Company, including, without limitation, all equipment and machinery of the
Company, are in reasonable working order and have been maintained in accordance
with standard maintenance procedures, and meet all material standards,
clearances and ratings in effect on the date hereof in respect of those rules
and regulations promulgated by any Governmental Authority applicable thereto
except where the failure to meet the above would not have a Material Adverse
Effect.
(d) Except as set forth elsewhere in this Section 4.13, the
Company makes no representations or warranties regarding the real or personal
property owned or leased by the Company,
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specifically excluding any representations or warranties with respect to
merchantibility or fitness for a particular purpose of the Company's products or
services.
(e) Schedule 4.13(e) hereto identifies all real property owned
by the Company and all improvements located thereon, all unexpired options held
by the Company or contractual obligations on its part to purchase or sell any
interest in real property, and all mortgages held by the Company. There exists
no event constituting a default under any such mortgage and no notice of
deficiency has been issued with respect thereto. The real property identified on
such Schedule 4.13(e) as owned by the Company is the same as the real property
owned by the Company on September 30, 1999, and the condition thereof, including
the improvements thereon, has not deteriorated since such date, reasonable wear
and tear excepted.
(f) Each lease or license of an Asset by the Company is a
valid and subsisting obligation enforceable against the lessor or licensor, as
the case may be, in accordance with its terms.
(g) Except as set forth on Schedule 4.13(g), to the knowledge
of the Company, none of the Shareholders nor any third party owns or has any
rights in any Assets or property used to carry on the business or operations of
the Company.
(h) Such of the Assets as constitute inventory on the date
hereof is in good and merchantable condition and usable for its intended
purpose, and, as to finished goods inventory, saleable at its normal gross
profit margins experienced over the last twelve (12) months;
(i) Schedule 4.13(i) hereto is a true and correct list of all
of the machinery and equipment owned or leased by the Company as of the date
hereof having an initial cost exceeding $10,000 or requiring annual lease
payments exceeding $10,000, and, as to each item under lease or license, a brief
description of the material terms of such lease. The Company has good and
marketable title or, if reflected as a leasehold interest in the Company
Financial Statements, a valid and enforceable leasehold interest in and to the
machinery and equipment, merchandise, materials, supplies and other property of
every kind, tangible or intangible, which are shown as or reflected in the
Assets on the most recent Company Financial Statements, or which, whether or not
shown on the Company Financial Statements, were acquired directly or indirectly
by the Company through the purchase of Assets or stock from or through merger,
consolidation or other transaction with, another Person, except for machinery
and equipment and other Assets which have
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been consumed, sold or disposed of in the Ordinary Course since the date of
those Company Financial Statements or such acquisition, free and clear of all
Encumbrances.
(j) The Company has complied with all obligations under all
material leases and licenses to which it is a party or to which it has succeeded
by merger or acquisition of stock or Assets of any other Person and under which
it is in occupancy or license, as the case may be, and all such leases and
licenses are in full force and effect. The Company enjoys peaceful and
undisturbed possession under all real property leases.
4.14 ENVIRONMENTAL LIABILITY. The Company has obtained all permits,
licenses and other authorizations which are required with respect to its
operation under means, any federal, state, local or foreign laws, ordinance,
rule, regulation, order, writ, injunction, decree, judgment, award,
determination, direction, stipulation or demand of a Government Authority
("Order"), demand letter, request for information, or schedule or time table set
forth in any Federal, state, local or foreign law, ordinance, rule, regulation,
Order, demand letter or request for information issued, promulgated, approved or
entered thereunder relating to pollution or protection of the environment or to
occupational health or safety, including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, surface water,
ground water, land, surface or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes ("Environmental Laws"); (b) the Company
is in compliance with the terms and conditions of the required permits, licenses
and authorizations required by the Environmental Laws; (c) except as set forth
on Schedule 4.14 there is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, proceeding, notice or demand letter
pending relating to the Company or threatened against it relating in any way to
any Environmental Laws or any regulation, code, plan or Order issued, entered,
promulgated or approved thereunder; (d) except as set forth on Schedule 4.14
there are no investigations or internal or non-public agency proceedings pending
regarding the Company relating in any way to any Environmental Laws or any
regulation, code, plan or Order issued, entered, promulgated or approved
thereunder; and (e) except as set forth on Schedule 4.14 there has been no
generation, production, refining, processing, manufacturing, use, storage,
disposal, treatment, shipment, emission, receipt or release of a substance or
material regulated by any Environmental Law, and in the regulations adopted and
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publications promulgated pursuant thereto and include, without limitation, any
flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, toxic substances, asbestos or any material containing asbestos or
petroleum or petroleum by-product ("Hazardous Substance") on, in or under such
of the Assets of the Company constituting real property which would subject the
owner or operator of the real property or business, or any past or future owner
or operator of the real property to liability for the removal, remediation or
cleanup of the Hazardous Substance, petroleum or petroleum by-product under the
Environmental Laws or common law. The Company has delivered to Parent true and
complete copies of all environmental studies made in the last ten years relating
to the Company's real property or the business of the Company. Except as set
forth on Schedule 4.14 no Hazardous Substance has ever been spilled, released,
leaked, poured, leached, dumped, discharged, placed or disposed of, or otherwise
caused to be located at any property which has at any time been owned, leased or
used by the Company in violation of any Environmental Law and all Hazardous
Substances have been handled in compliance with Environmental Laws.
4.15 ASSESSMENTS. The Company has not received notice of a special
assessment, or demand for payment of a special assessment or other payment as
contemplated by Section 5 a. of the Lease dated September 26, 1994 between
Eastmans Road Association, Ltd. and the Company.
4.16 INTELLECTUAL PROPERTY. Schedule 4.16 sets forth a list of all
patents, copyrights, trademarks, tradenames and service marks and any licensed
intellectual property rights (other than commercial or "shrink-wrap" licenses
covering software generally available to the public on a retail basis)
(collectively, "Intellectual Property Rights") of the Company. The ownership or
use of such Intellectual Property Rights by the Company does not infringe on the
intellectual property rights of others and the Company has not received notice
alleging any such infringement, and, to the knowledge of the Company, no third
party is infringing on the Intellectual Property Rights of the Company. The
Company is not obligated to pay any third party any royalty or fee for the use
of the Intellectual Property Rights used in its business. The execution and
delivery of this Agreement by the Company and the consummation of the
transactions contemplated hereby, will neither cause the Company to be in
violation or default under any such license, sublicense or agreement, nor
entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement. The Company is the
sole and exclusive owner or licensee of, with all right, title and interest in
and to (free and clear of any Encumbrances), the Company Intellectual Property
Rights, and, to the knowledge of the Company, has sole and exclusive rights to
the use
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thereof or the material covered thereby in connection with the services or
products in respect of which the Company Intellectual Property Rights are being
used. To the knowledge of the Company, there is no unauthorized use,
infringement or misappropriation of any of the Company Intellectual Property
Rights by any third party, including, without limitation, any employees, former
employee, Shareholder or former shareholder of the Company.
4.17 AGREEMENTS, ETC. Schedule 4.17 sets forth a true and complete
list of all written or oral contracts, agreements and other instruments to which
the Company is a party and not made in the Ordinary Course of business, or made
in the Ordinary Course of business which are currently in effect, and referred
to in any of clauses (a) through (k) of this Section 4.17
(a) any joint venture, partnership or other agreement or
arrangement for the sharing of profits;
(b) any collective bargaining contract or other contract with
or commitment to any labor union;
(c) the future purchase, sale or license of products,
material, supplies, equipment or services requiring payments to or from the
Company in an amount in excess of $25,000 per annum, which agreement,
arrangement or understanding is not terminable on thirty (30) days' notice
without cost or other liability at or at any time after the Effective Time, or
in which the Company has granted or received manufacturing rights, most favored
nations pricing provisions or exclusive marketing or other rights relating to
any product, group of products, services, technology, Assets or territory;
(d) the employment or consultancy of any officer, employee,
consultant or agent or any other type of contract, commitment or understanding
with any officer, employee, consultant or agent which (except as otherwise
generally provided by applicable law) is not immediately terminable without cost
or other liability at or at any time after the Effective Time;
(e) an indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money, for a
line of credit or, if involving payments in
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excess of $25,000 per annum, for a leasing transaction of a type required to be
capitalized in accordance with Statement of Financial Accounting Standards No.
13 of the Financial Accounting Standards Board;
(f) a contract or commitment for capital expenditures
individually in excess of $25,000;
(g) any agreement or contract with a "disqualified individual"
(as defined in Section 280G(c) of the Code), which could result in a
disallowance of the deduction for any "excess parachute payment" (as defined in
Section 280G(b)(i) of the Code) under Section 280G of the Code;
(h) an agreement or arrangement for the sale of any Assets,
properties or rights having a value in excess of $25,000;
(i) an agreement which restricts the Company from engaging in
any aspect of its business or competing in any line of business in any
geographic area;
(j) the Company accounts for all of its software, hardware,
consulting, licensing, distribution and other similar agreements and contracts
under which the Company provides services or sells or distributes goods or
equipment in accordance with GAAP; and
(k) a list of all agreements ("Government Contracts") with the
Company's vendors where the Company is an approved vendor with the United States
Department of Defense or other applicable Governmental Authority.
The Company has furnished to Parent true and complete copies of all
such agreements listed in Schedule 4.17 and Schedule 3.2 and each such
agreement:
(i) is the legal, valid and binding obligation of the
Company and, to the best knowledge of the Company, the legal, valid and binding
obligation of each other party thereto, in each case enforceable in accordance
with its terms;
(ii) is in full force and effect; and
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(iii) the other party or parties thereto is or are not,
to the knowledge of the Company, in material default thereunder.
4.18 SUPPLIERS; RAW MATERIALS. Schedule 4.18 sets forth the names
and addresses of the ten largest suppliers of the Company based on the aggregate
value of raw materials, supplies, merchandise and other goods and services
ordered by the Company from such suppliers during the one year period ended
September 30, 1999 and the three month period ended December 31, 1999.
4.19 CUSTOMERS; SALES REPRESENTATIVES.
(a) Schedule 4.19(a) sets forth for the year ended September
30, 1999 and for the three month period ending December 31, 1999 (i) a list of
the top 10 customers (inclusive of distributors) of the Company based on the
aggregate value of goods and services ordered from the Company by such customers
during each such period and (ii) the products purchased by each such customer
and the amount for which each such customer was invoiced during each period. The
Company has not received any notice or has any reason to believe that any
material customer (i) has ceased, or will cease, to use the products, goods or
services, (ii) has materially reduced or will materially reduce, the use of
products, goods or services or (iii) has sought, or is seeking, to materially
reduce the price it will pay for products, goods or services, which cessations
and reductions, either individually or in the aggregate, are reasonably likely
to result in a Material Adverse Effect on the Company.
(b) Schedule 4.19(b) sets forth a complete and correct list of
(a) each sales representative who is individually responsible for the account of
any customer of the Company business that ordered goods and services from the
Company with an aggregate value of $100,000 or more during the year ended
September 30, 1999 and the three month period ended December 31, 1999 and (b)
all sales representatives who collectively are responsible for the account of
any customer of the Company that ordered goods and services from the Company
with an aggregate value of $100,000 or more during the three month period ended
December 31, 1999 (collectively, the "Company Sales Representatives"),
indicating with respect to each such Company Sales Representative the aggregate
value of goods and services ordered from the Company by customers for whose
accounts such Company Sales Representative was responsible. Each of the Company
Sales Representatives is continuing to act as a sales representative on behalf
of the Company
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and the Company has no reason to believe that any such representative has ceased
or will cease to act on behalf of the Company.
4.20 NO DEFAULTS, ETC. Except as set forth on Schedule 4.20 the
Company has in all respects performed all the material obligations required to
be performed by it to date and is not in material default or alleged to be in
material default under: (a) its Certificate or by-laws; or (b) any material
agreement, lease, mortgage, indenture, contract, commitment, instrument or
obligation to which the Company is a party or by which any of its Assets or
rights are or may be bound or affected, and there exists no event, condition or
occurrence which, with or without due notice or lapse of time, or both, would
constitute such a default by it of any of the foregoing. No current customer has
notified, or to the knowledge of the Company expressed an intention to notify,
the Company or its employees, officers or agents, that such customer will
materially reduce the dollar amount of business it will do with the Company or
cease doing business with the Company. Provided that the Company obtain the
consents which may be required to consummate the transaction which are set forth
on the Schedule 4.20, no such mortgage, indenture, lease, contract, agreement,
license, instrument or order limits in any material way the freedom of any
Person acquiring control of the Company, whether directly or indirectly, or from
performing this Agreement in accordance with its terms. The Company has not
received any notice from any party to any such contract with respect to such
party's unwillingness or inability to perform thereunder.
4.21 LITIGATION, OBSERVANCE OF STATUES, REGULATIONS AND ORDERS.
Except as set forth on Schedule 4.21 there are no:
(a) actions, suits, claims, investigations or legal or
administrative or arbitration proceedings (collectively, "Actions") pending, or
to the knowledge of the Company, threatened against the Company, or to the
knowledge of the Company facts which could give rise to any of the foregoing,
whether at law or in equity, or before or by any Governmental Authority;
(b) outstanding judgments, decrees, injunctions or orders of
any Governmental Authority or arbitrator against the Company or disputes with
customers or vendors;
(c) violations of or defaults with respect to any Order of any
arbitrator or Governmental Authority and, there is no basis for there to be
declared any such violation or Default;
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(d) to the knowledge of the Company, Company officers,
directors, employees, agents, shareholders or representatives who have made,
directly or indirectly, with respect to the business of the Company, any illegal
political contributions, payments from corporate funds not recorded in the Books
and Records of the Company, payments from corporate funds that were falsely
recorded on the Books and Records of the Company, payments from corporate funds
to governmental officials in their individual capacities for the purpose of
affecting their action or the action of the government they represent to obtain
special concessions or illegal payments from corporate funds to obtain or retain
business; or
(e) no holder of capital stock of any Person which was, at
any time, directly or indirectly a subsidiary of the Company, or which merged
with or into the Company or any direct or indirect subsidiary of the Company, or
a Person from which the Company, directly or indirectly, acquired substantially
all of such Person's Assets or a shareholder of such Person, has asserted any
claim against the Company arising out of the acquisition of such Assets or of
such holder's capital stock and the Company knows of no basis for any such
claim.
4.22 LICENSES, PERMITS, ETC. The Company possesses adequate
licenses, clearances, ratings, permits and franchises, and all rights with
respect thereto, to conduct its business as now conducted, and without any
conflict with the rights of others in any such license, clearance, rating,
permit or franchise. The Company has no knowledge of, nor has received notice of
termination, revocation or limitation of, or of the pendency or threatened
commencement of any proceeding to terminate, revoke or limit any such licenses,
clearances, ratings, permits or other approvals by the Governmental Authority or
other Person issuing same.
4.23 COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. Except as set forth on
Schedule 4.23, the Company has complied within the last five (5) years and is
presently in compliance in all material respects with all material Federal,
state, local or foreign laws, ordinances, regulations and orders applicable to
it or its business, including, without limitation, the Environmental
Authorities, all Federal and state securities or "blue sky" laws, and all laws
and regulations relating to occupational safety and health and the environment.
Except as set forth on Schedule 4.23, the Company has all material
authorizations, security clearances, consents, approvals, licenses and permits
necessary to be obtained from Governmental Authorities in the conduct of its
business as presently conducted and as currently proposed by the Company
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to be conducted, such authorizations, consents, approvals, licenses and permits
are in full force and effect, no violations are or have been recorded in respect
of any thereof and no proceeding is pending or, to the best knowledge of the
Company, or threatened to revoke or limit any thereof. All of the Company's
full-time and temporary personnel who provide services in a manner or of the
type that require specific certifications or clearances have provided such
services at all times while having such certifications or clearances in full
force and effect. Neither the Company has nor, to the knowledge of the Company,
any of its full-time or part-time personnel have, with respect to each of their
activities, actions, or services for or on behalf of the Company, has been cited
or alleged by the Environmental Authorities or other regulatory authority within
the last five (5) years as failing to comply with regulatory requirements or
guidelines.
4.24 LABOR RELATIONS; EMPLOYEES. Schedule 4.24 sets forth the name
of all full-time and part-time employees of the Company and the primary
locations at which such employees provide their services as of the Closing Date.
In addition, except as set forth on Schedule 4.24,
(a) the Company is not delinquent in payments to any of its
employees or consultants for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed by them to date or amounts
required to be reimbursed to such Persons;
(b) neither Acquisition Sub nor the Surviving Corporation will
by reason of anything done prior to the Closing be liable to any of such
employees or consultants for severance pay or any other payments other than for
ordinary wages and salaries payable through Closing;
(c) the Company is in compliance in all material respects with
all material Federal, state, local and foreign laws and regulations respecting
labor, employment and employment practices, terms and conditions of employment
and wages and hours;
(d) there is neither pending nor, threatened labor dispute,
strike or work stoppage involving employees of the Company (or otherwise) which
affects or which may affect the Company's business or which may interfere with
its continued operations;
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(e) to the knowledge of the Company, there are no union
organization efforts relating to employees of the Company or any representation
question involving recognition as a collective bargaining agent for any
employees of the Company;
(f) there is not pending or, to the knowledge of the Company,
threatened any charge or complaint against the Company by the National Labor
Relations Board or any representative thereof;
(g) there have been no strikes, walkouts or work stoppages
involving employees of the Company in the last five (5) years;
(h) except as set forth on Schedule 4.24(h), there is no
unfair labor practice, sexual harassment or other employment-related complaint
pending or, to the knowledge of the Company, threatened against the Company or
any employee of the Company. Schedule 4.24(h) assesses managements current
belief in connection with the Company's liability with respect to any such
complaint or threat. No employee or consultant of the Company is, to the
knowledge of the Company, in material violation of any term of any employment
contract or consulting contract, confidentiality agreement or any other contract
or agreement relating to the relationship of such employee or consulting
contract with the Company or any other party because of the nature of the
business conducted or proposed to be conducted by the Company or the execution
and delivery of such agreement or contract by such employee or consultant.
4.25 EMPLOYEE BENEFIT PLANS AND CONTRACTS.
(a) Schedule 4.25(a) identifies each "employee benefit plan,"
as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and all other material written or formal plans or
agreements involving direct or indirect compensation (including any employment
agreements entered into between the Company and any Employee of the Company, but
excluding workers' compensation, unemployment compensation, other government-
mandated programs and the Company's salary and wage arrangements) currently or
previously maintained, contributed to or entered into by the Company or any
ERISA Affiliate thereof for the benefit of any Employee or former Employee under
which the Company or any ERISA Affiliate thereof has any present or future
obligation or liability (the "Employee Plans"). The Company has provided to
Parent true and complete copies of all Employee
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Plans (and, if applicable, related trust agreements) and all amendments thereto
and written interpretations thereof. For purposes of the preceding sentence,
"ERISA Affiliate" shall mean any entity which is a member of(A) a "controlled
group of corporations," as defined in Section 414(b) of the Code, (B) a group
of entities under "common control," as defined in Section 414(c) of the Code or
(C) an "affiliated service group," as defined in Section 414(m) of the Code or
treasury regulations promulgated under Section 414(o) of the Code, any of which
includes the Company. Any Employee Plans which individually or collectively
would constitute an "employee pension benefit plan," as defined in Section 3(2)
of ERISA, but which are not Multiemployer Plans (collectively, the "Pension
Plans"), are identified as such in Schedule 4.25(a). For purposes of this
Section 4.25, "Employee" means any common law employee, consultant or director
of the Company.
(b) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to the date hereof, and each trust forming a part
thereof is exempt from tax pursuant to Section 501(a) of the Code. The Company
does not know of any facts or circumstances that would materially adversely
affect such qualification prior to the Closing. The Company has provided Parent
with copies of the most recent Internal Revenue Service determination letters
with respect to any such Employee Plans. Each Employee Plan has been maintained
substantially in compliance with its terms and with the requirements prescribed
by any and all statutes, orders, rules and regulations, including, without
limitation, ERISA and the Code, which are applicable to such Employee Plans.
(c) No Employee Plan constitutes or since the enactment of
ERISA has constituted a "multiemployer plan," as defined in Section 3(37) of
ERISA (a "Multiemployer Plan").
(d) Schedule 4.25(d) lists each employment, severance or other
similar contract, arrangement or policy and each plan or arrangement (written or
oral) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, retirement benefits,
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which:
(i) is not an Employee Plan;
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(ii) is entered into, maintained or contributed to, as
the case may be, by the Company;
(iii) covers any Employee or former Employee; and
(iv) under which the Company has any present or future
obligation or liability (excluding workers' compensation, unemployment
compensation or other government-mandated programs and the Company's salary and
wage arrangements). Such contracts, plans and arrangements as are described
above are hereinafter referred to collectively as the "Benefit Arrangements."
Each Benefit Arrangement has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all material laws,
statutes, rules, regulations, orders and judgments which are applicable to such
Benefit Arrangements. Except as indicated on Schedule 4.25(d), no Benefit
Arrangement or Employee Plan provides benefits including, without limitation,
death or medical benefits (whether or not insured), with respect to any employee
or former employee of the Company beyond such employee's retirement or other
termination of service (other than (i) coverage mandated by applicable law, (ii)
death benefits or retirement benefits under any "employee pension plan", as that
term is defined in Section 3(2) of ERISA, or (iii) benefits the full cost of
which is borne by the current or former employee (or his or her beneficiary)).
(e) The Company has provided, or will have provided, to
individuals entitled thereto who are current or former Employees of the Company
all required notices within the applicable time period and coverage pursuant to
Section 4980B of the Code with respect to any "qualifying event" (as defined in
Section 4980B(f)(3) of the Code) occurring prior to and including the Closing
Date, and no tax payable on account of Section 4980B of the Code has been
incurred with respect to any current or former Employees of the Company.
(f) None of the Employee Plans is subject to Title IV of
ERISA. There are no pending or, to the best knowledge of the Company, threatened
claims (other than routine claims for benefits), actions, suits or proceedings
by, or on behalf of or against any of the Employee Plans or any trusts related
thereto.
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(g) With respect to each Employee Plan, neither the Company
nor any ERISA Affiliate has engaged in a "prohibited transaction" (as such term
is defined in Section 4975 of the Code or Section 406 of ERISA) that would
subject the Company or the Parent to any taxes, penalties or other liabilities
resulting from prohibited transactions under Section 4975 of the Code or Section
409 or 502(i) of ERISA.
(h) Neither the Company nor any ERISA Affiliate is a party to
or obligated under any agreement, plan, contract or other arrangements that will
result, separately or in the aggregate, in the payment of any "excess parachute
payment" within the meaning of Section 280G of the Code.
(i) Except to the extent set forth on Schedule 4.25(i) hereto,
to the extent any Employee Plan is subject to approval by any governmental
agency (or such approval is available under applicable law), such Employee Plan
has received such approval and such approval is current.
(j) The Company is not subject to, and no facts exist which
could subject the Company to, any liability whatsoever which is directly or
indirectly related to any Employee Plan, including, but not limited to,
liability for benefits payments or related claims (other than the ordinary usual
claims by participants or beneficiaries which have been made for benefits called
for under the terms of such Employee Plans), any liability for any Tax or
related penalty under the Code, or liability for any damages or penalties
arising under Title I or Title IV of ERISA.
(k) Except as set forth on Schedule 4.25(k) hereto, no ERISA
Welfare Plan provides benefits to former employees of the Company other than
continuation coverage required by Section 4980B of the Code and Section 601 of
ERISA.
(l) There are no pending or, to the knowledge of the Company,
threatened claims, suits or other proceedings with respect to any Employee Plan
other than the ordinary usual claims by participants or beneficiaries which have
been made for benefits called for under the terms of such Employee Plans and
which will be paid under such Employee Plans in the Ordinary Course.
(m) There is no requirement that Parent, Surviving Corporation
or the Company make any further contributions to any Employee Plan after the
Closing Date, and each Employee Plan which
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provides benefits to or on behalf of employees or former employees of the
Company may be terminated by Parent, Surviving Corporation or the Company in its
sole discretion on or after the Closing Date without liability of any kind or
description whatsoever to Parent, the Company, Surviving Corporation, any of
Parent's ERISA Affiliates, or any other person, entity or governmental agency;
provided, however, that Plan benefits upon such termination are distributed to
Participants in accordance with the Plan terms and consistent with the
requirements of ERISA and the Code.
4.26 CERTAIN AGREEMENTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will:
(a) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any director, Shareholder, or employee of the Company from the
Company, under any Employee Plan, Benefit Arrangement or otherwise;
(b) increase any benefits otherwise payable under any Employee
Plan or the Benefit Arrangement;
(c) result in the acceleration of the time of payment or
vesting of any such benefits; or
(d) violate any no shop, nonsolicitation, noncompetition or
nondisclosure agreement that the Company may be a party to.
4.27 INSURANCE. The Company maintains policies of liability, theft,
fidelity, fire, product liability, workmen's compensation, indemnification of
directors and officers and other similar forms of insurance. Schedule 4.27 sets
forth and accurately describes such policies, and a history of all claims within
the last three (3) years in excess of $50,000 made by the Company thereunder and
the status thereof. All such policies of insurance are in full force and effect
and all premiums with respect thereto are currently paid and, to the knowledge
of the Company, no basis exists for termination or non-renewal of any thereof on
the part of the insurer. The amounts of coverage under such policies conform to
the requirements set forth in the Company's customer contracts. The Company has
not, during the last three fiscal years, been denied or had revoked or rescinded
any policy of insurance.
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4.28 BROKERS. The Company has not, nor have any of its officers,
directors, shareholders or employees, employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by the Transaction Documents.
4.29 RELATED TRANSACTIONS. Except for compensation to regular
employees of the Company, no current or former director, officer or shareholder
that is an affiliate of the Company or any associate (as defined in the rules
promulgated under the Exchange Act) thereof, is now, or has been during the last
three (3) fiscal years:
(a) a party to any transaction with the Company which would be
required to be included in a Form 10K-SB or definitive proxy statement with the
SEC (including, but not limited to, any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or personal
property from, or borrowing money from, or otherwise requiring payments to, any
such director, officer or affiliated shareholder of the Company or associate
thereof), other than any transaction which has been disclosed in a definitive
proxy statement or report filed by the Company in a timely fashion within the
SEC;
(b) the direct or indirect owner, including any ownership by a
family member, of a 10% or greater interest in any non-natural Person, which is,
or has been, a supplier, customer, or, within the last 12 months, competitor, of
the Company (other than non-affiliated holdings in a publicly held companies);
or
(c) a party to any transaction with the Company whereby such
Person received compensation (other than dividends paid by a publicly held
corporation) from any other Person, which is, or has been, a supplier, customer,
or, within the last 12 months, competitor of the Company.
4.30 BOARD APPROVAL. Each of the Board of Directors of the Company
has unanimously:
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(a) approved the Transaction Documents to which the Company is
a party and the transactions contemplated hereby and thereby;
(b) determined that the Merger is in the best interests of
the Shareholders of the Company and is on terms that are fair to such
Shareholders; and
(c) recommended that the Shareholders of the Company approve
the Merger in accordance with the Plan of Merger and the New Jersey Statute. No
other Company approvals are required other than that of the Board of Directors
and Shareholders of the Company.
4.31 VOTE REQUIRED. The affirmative vote of at least a majority of
the outstanding shares voting of the Company Common Stock approving the Merger,
this Agreement, the Plan of Merger, and the transactions contemplated hereby and
thereby are the only votes of the holders of any class or series of the
Company's capital stock necessary to approve the Transaction Documents to which
the Company is a party and the transactions contemplated hereby and thereby.
4.32 OFFICERS AND DIRECTORS. The duly elected, qualified and acting
officers and directors of the Company are as set forth in Schedule 4.32.
4.33 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company for inclusion in:
(a) the S-4 will, at the time that the S-4 is filed with the
SEC and at the time that the S-4 becomes effective under the Securities Act,
contain any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading; and
(b) the Shareholders' Materials will, at the dates mailed to
the Shareholders and at the effective date of the Shareholder Action, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Shareholders' Materials will comply as to form with the provisions of all
applicable laws, rules and regulations of all Governmental Authorities.
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4.34 BANK ACCOUNTS; CREDIT AND CHARGE CARDS. Schedule 4.34 hereto
contains a true and complete list as of the date hereof (i) of all banks, trust
companies and savings and loan associations in which the Company maintains an
account (and the account number thereof) or safe deposit vault and the names of
all Persons authorized to draw thereon and the balances on such accounts on the
date hereof; and (ii) of all credit and charge cards issued in the name of the
Company or any of its employees or officers and for which the Company has any
liability and the outstanding balances on each such card as of January 31, 2000.
4.35 COMPANY NOT AN INTERESTED SHAREHOLDER. As of the date of this
Agreement, neither the Company nor, to the best of the Company's knowledge, any
of its Affiliates is an "Interested Shareholder" of Parent as such term is
defined in Section 14A:10A-3 of the New Jersey Business Corporation Act.
4.36 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. The
Company is not, and is not directly or indirectly controlled by, or acting on
behalf of, any Person which is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. The Company is not a "holding
company" as that term is defined in or is otherwise subject to regulation under,
the Public Utility Holding Company Act of 1935, as amended.
4.37 NO RIGHT OF ACTION. The execution and delivery of this
Agreement and the other agreements, documents and instruments contemplated
hereby and the completion of the transactions contemplated hereby and thereby,
shall not cause Parent, the Surviving Corporation, or any of their respective
affiliates to be liable for damages to any other Person or give such Person any
equitable right against any of them or the Company or any of their respective
Assets.
4.38 KNOWLEDGE DEFINITION. As used in this Agreement, "to the
knowledge of the Company" and like phrases shall mean and include:
(a) actual knowledge; and
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(b) that knowledge which a prudent businessperson (including
the officers, directors and other key employees of the Company) would have
obtained in the management of his or her business affairs after reviewing this
Article IV in detail and making due inquiry and exercising reasonable diligence
with respect thereto. In connection therewith, the knowledge (both actual and
constructive) of Yves Guyomar, Dick Blackwell, and the Company's CFO shall be
imputed to be the knowledge of the Company.
4.39 YEAR 2000 COMPLIANCE. All computer software or hardware owned
or used by the Company or licensed by the Company, as licensor or as licensee,
other than any shrinkwrap software available to retail customers generally, is
"Year 2000 Compliant", except where failure to be so could not have a Material
Adverse Effect on the Company and except as disclosed on Schedule 4.39 attached
hereto. As used herein "Year 2000 Compliant" shall mean (i) all such software or
hardware shall operate in four-digit year format, without errors in the
recognition, calculation and processing of date data relating to century
recognition, leap years, single and multi-century formulae, date values and
interfaces of date-related functionalities; (ii) all date processing shall be
conducted in a four-digit year format and all date sorting that includes a "year
field" or "year category" shall be based upon a four-digit year format; and
(iii) any date arithmetic programs or calculators in the software or hardware
shall operate in accordance with the related user documentation in the Year
2000, and the years following, without degrading functionality or performance.
4.40 DIRECTORS LIABILITIES. The Company has furnished the Parent
Schedule 4.40 setting forth, opposite each respective name, a true correct and
complete list of (a) the amount of accrued fees owed to members of the Company's
board of directors (or their affiliates) as at the date hereof; (b) the
principal amount of the loans to Company directors (or their affiliates) as at
the date hereof plus accrued and unpaid interest through February 29, 2000; and
(c) the amount representing benefit payments owed to members of the Company's
board of directors (or their affiliates) as at February 29, 2000 (together
4.40(a), 4.40(b) and 4.40(c), the "Director Liabilities"). Schedule 4.40 also
sets forth certain liabilities owed to Raymond Lafferty (the "Lafferty
Liabilities") The Director Liabilities are demand obligations, and Schedule 4.40
has been initialed by each of the Principal Shareholders' to whom any such fees,
benefits, salaries or loans are owed directly (or indirectly to his/its
affiliates or associates).
4.41 FULL DISCLOSURE. No financial statement, Exhibit, Schedule or
document required by this Agreement to be prepared or furnished by or on behalf
of the Company or any Principal
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Shareholder to the Parent and/or Acquisition Sub in connection with this
Agreement or any other Transaction Document hereby or delivered pursuant hereto,
contained or contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties set forth in this Article IV do not contain any material
misstatement of fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
Parent and Acquisition Sub, jointly and severally, represent and
warrant to the Company and each of the Principal Shareholders that:
5.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Each of
Parent and Acquisition Sub:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey;
(b) has all requisite corporate power and authority to enter
into the Transaction Documents to which either is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby; and
(c) is duly qualified and in good standing in all
jurisdictions in which the failure to be so qualified and in good standing could
reasonably be expected to have a Material Adverse Effect on the Parent or
Acquisition Sub. Parent has delivered to the Company true and complete copies of
the Certificate and by-laws of each of Parent and Acquisition Sub.
5.2 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Parent or Acquisition Sub for inclusion or incorporation by
reference in the S-4 will, at the time the S-4
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is filed with the SEC and at the time the S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading.
5.3 CONTINUITY OF BUSINESS ENTERPRISE. It is the present intention
of Parent to continue at least one significant historic business line of the
Company or to use at least a significant portion of the Company's historic
business Assets in a business, in each case within the meaning of Treasury
Regulation Section 1.368-1(d).
5.4 AUTHORITY; NO CONSENTS. The execution, delivery and performance
by Parent and Acquisition Sub of the Transaction Documents to which each is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on the
part of Parent and Acquisition Sub, and this Agreement and the other Transaction
Documents to which each is a party have been, and the Plan of Merger when
executed and delivered by Parent and Acquisition Sub will be, duly and validly
executed and delivered by Parent and Acquisition Sub, and this Agreement and the
other Transaction Documents to which each is a party are, and the Plan of Merger
when executed and delivered by the parties thereto will be, the valid and
binding obligations of Parent and Acquisition Sub, enforceable against Parent
and Acquisition Sub in accordance with their respective terms subject to
bankruptcy, fraudulent conveyance, insolvency, moratorium or similar laws
affecting the rights of creditors generally or general equitable principles.
Neither the execution, delivery and performance of the other Transaction
Documents to which each is a party nor the consummation by Parent and
Acquisition Sub of the transactions contemplated hereby or thereby nor
compliance by Parent and Acquisition Sub with any provision hereof or thereof
will: (a) conflict with; (b) result in any violations of; (c) cause a default
under (with or without due notice, lapse of time or both); (d) give rise to any
right of termination, amendment, cancellation or acceleration of any obligation
contained in or the loss of any material benefit under; or (e) result in the
creation of any Encumbrance on or against any assets of Parent or Acquisition
Sub, right or property of Parent or Acquisition Sub under any term, condition or
provision of: (x) any instrument or agreement to which Parent or Acquisition Sub
is a party, or, to the knowledge of Parent and Acquisition Sub, by which Parent
or Acquisition Sub, their respective properties, assets or rights may be bound
(except as shall have been waived or with respect to which consent shall have
been obtained prior to the Closing) except where the foregoing would not result
in a Material Adverse Effect on Parent; (y) any law, statute, rule, regulation,
order, writ, injunction, decree, permit, concession, license or franchise
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of any Governmental Authority applicable to Parent or Acquisition Sub or any of
their respective properties, assets or rights except where the foregoing would
not result in a Material Adverse Effect on Parent; or (z) the Certificate or
by-laws of Parent or Acquisition Sub, respectively, as amended through the date
hereof. Except as contemplated by this Agreement or the Plan of Merger, no
permit, authorization, consent or approval of or by, or any notification of or
filing with, any Governmental Authority is required in connection with the
execution, delivery and performance by Parent and Acquisition Sub of this
Agreement, the Plan of Merger or the Transaction Documents to which Parent and
Acquisition Sub is a party or the consummation of the transactions contemplated
hereby or thereby, except for: (i) the filing with the SEC of (A) the S-4 with
respect to the Merger Shares, the shares of Parent Common Stock to be reserved
for issuance upon exercise of the assumed Company Options and Company Warrants
and (B) such reports and information under the Exchange Act, and the rules and
regulations promulgated by the SEC thereunder, as may be required in connection
with this Agreement, the Plan of Merger and the transactions contemplated hereby
and thereby; (ii) such filings as may be required by the American Stock Exchange
with respect to notification and listing of Parent Common Stock to be issued in
connection with the Merger and the Company Warrants and Company Options to be
assumed by Parent in the Merger; (iii) the filing of such documents with, and
the obtaining of such orders from, various state securities and blue-sky
authorities as are required in connection with the transactions contemplated
hereby; (iv) the distribution of the Shareholders' Materials with respect to the
adoption by the Shareholders of this Agreement and the Plan of Merger; (v) the
filing of the Plan of Merger with the Treasurer of the State of New Jersey and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business; and (vi) such other consents, waivers,
authorizations, filings, approvals and registrations which if not obtained or
made would not have a Material Adverse Effect on the Parent or materially impair
the ability of Parent and Acquisition Sub to consummate the transactions
contemplated by this Agreement or the Plan of Merger, including, without
limitation, the Merger.
5.5 SEC DOCUMENTS. Parent has filed each report, schedule,
registration statement and definitive proxy statement with the SEC on or after
December 31, 1999 (the "Parent SEC Documents"), which are all the documents
(other than preliminary material) that Parent was required to file (or otherwise
did file) with the SEC on or after December 31, 1999. As of their respective
dates, none of the Parent SEC Documents (including all exhibits and schedules
thereto and documents incorporated by reference therein) contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they
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were made, not misleading, and the Parent SEC Documents complied when filed in
all material respects with the then applicable requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations
promulgated by the SEC thereunder.
5.6 FINANCIAL STATEMENTS. The financial statements of the Parent
included in the Parent SEC Documents (the "Parent Financial Statements"):
(a) complied as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with GAAP,
consistently applied (except as may have been indicated in the notes thereto or,
in the case of the unaudited statements, as permitted by Form 10-Q promulgated
by the SEC);
(b) were in accordance with the books and records of the
Parent; and
(c) fairly present (subject, in the case of the unaudited
statements, to normal, nonrecurring audit adjustments) the financial position of
the Parent as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
5.7 ABSENCE OF UNDISCLOSED LIABILITIES. At January 31, 2000(a)
Parent had no Liability which was not provided for or disclosed on the Parent
SEC Documents for the fiscal year ended December 31, 1999; and (b) all liability
reserves established by Parent and set forth on the Parent Financial Statements
were adequate, in the good faith judgment of Parent, for all such Liabilities at
the date thereof. There were no material loss contingencies (as such term is
used in FAS No. 5) which were not adequately provided for on the Parent
Financial Statements as required by FAS No. 5.
5.8 ABSENCE OF CHANGES. Since the filing with the SEC of the
Parent's most recent 10-Q, the Parent has not experienced any Material Adverse
Effect.
5.9 TAX REPRESENTATION LETTER. Set forth on Exhibit 5.9 is a copy of
the tax representation letter to be addressed by the Parent to DB&S in
connection with the issuance of a tax opinion by DB&S.
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5.10 FULL DISCLOSURE. No financial statement, Exhibit, Schedule or
document required by this Agreement to be prepared or furnished by or on behalf
of the Parent or Acquisition Sub to the Company or and/or the Principal
Shareholders in connection with this Agreement or any other Transaction Document
hereby or delivered pursuant hereto, contained or contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The representations and warranties set forth in this
Article V do not contain any material misstatements of fact or omit to state any
material fact necessary to make the statements therein in light of the
circumstances under which they were made, not misleading.
5.11 TAX MATTERS. The Parent:
(a) has filed and will file, in a timely and proper manner,
consistent with applicable laws, all Federal, state and local Tax returns and
Tax reports required to be filed by Parent through the Closing Date (the "Parent
Returns") with the appropriate governmental agencies in all jurisdictions in
which Parent Returns are required to be filed and have paid or will pay all
amounts shown thereon to be due; and (b) have paid and shall timely pay all
Taxes required to have been paid on or before the Closing Date.
5.12 NO DEFAULTS, ETC. The Parent and Acquisition Sub have in all
respects performed all the material obligations required to be performed by it
to date and is not in material default or alleged to be in material default
under: (a) its Certificate or by-laws; or (b) any material agreement, lease,
mortgage, indenture, contract, commitment, instrument or obligation to which the
Parent and Acquisition Sub is a party or by which any of its Assets or rights
are or may be bound or affected.
5.13 BOARD APPROVAL. The Board of Directors of the Parent and
Acquisition Sub have approved the Transaction Documents to which the Parent and
Acquisition Sub are a party and the transactions contemplated hereby and
thereby;
5.14 PARENT COMMON STOCK. The shares of Parent Common Stock issued
in the Merger pursuant to Article II of this Agreement shall at the Effective
Time be duly authorized, validly issued, fully paid, and nonassessable and in
compliance with the listing rules and regulations of the American Stock
Exchange.
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ARTICLE VI
VOTING AGREEMENT
6.1 AGREEMENT TO VOTE.
(a) Each Principal Shareholder hereby agrees that at any
meeting of the Shareholders of the Company, however called, or in any action by
written consent of the Shareholders, such Principal Shareholder shall: (i) vote
all of the Company Common Stock owned or controlled by him in favor of this
Agreement, the Plan of Merger, and the Merger and the other transactions
contemplated hereby and thereby, provided that the Board of Directors of the
Company shall have approved such Merger; and (ii) until the termination of this
Agreement pursuant to Article XIV, vote such Shares against any (A) merger,
consolidation, share exchange, business combination or other similar transaction
pursuant to which control of the Company would be transferred to any Person
other than Parent, or (B) sale, lease, exchange, mortgage, pledge, transfer or
other disposition of twenty percent (20)% or more of the Assets of the Company,
taken as a whole, in a single transaction or in a series of transactions.
Notwithstanding the foregoing, this Section 6.1(a) shall be null and void and
not binding on such Principal Shareholder unless the Principal Shareholder will
receive in the Merger shares of Parent Common Stock in the same proportion or
ratio as all other holders of the Company Common Stock.
(b) The Principal Shareholders hereby constitute, appoint and
instruct Edward Garcia (the "Proxy Holder") as the Principal Shareholders' true
and lawful proxy and attorney-in-fact, with full power of substitution, to: (a)
vote at any meeting of the Shareholders, all Company Common Stock which the
Principal Shareholders owned as of the record date for such meeting (or to
execute any consent of the Principal Shareholders of the Company in lieu of such
meeting for the number of shares of the Company Common Stock that the Principal
Shareholders owned as of the date of or record date for such consent) in favor
of the approval of this Agreement, the Plan of Merger, and the Merger and the
other transactions contemplated hereby and thereby, provided that the Board of
Directors of the Company shall have approved such Merger; and (b) until the
termination of this Agreement pursuant to Article XIV, to vote at any meeting of
the Shareholders of the Company, however called, all Company Common Stock which
the Principal Shareholders owned as of the record date for such meeting (or to
execute any consent of the Shareholders of the Company in lieu of such meeting
for the number of Shares that the Principal
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Shareholders owned as of the date of or record date for such consent) against an
matter referred to in Section 6.1(a)(ii)(A) and/or Section 6.l(a)(ii)(B) hereof.
Such proxy shall be limited strictly to the power to vote Company Common Stock
in the manner set forth in the preceding sentence and shall not extend to any
other matters presented for vote at such meeting, and the Principal Shareholders
shall have the right to vote the Company Common Stock on any other matter
whatsoever in the Principal Shareholders' sole discretion. The Principal
Shareholders acknowledge that the proxy granted hereby is coupled with an
interest and is irrevocable to the full extent permitted by the New Jersey
Statute. In the event that the Principal Shareholders fail for any reason to
vote the Principal Shareholders' Company Common Stock in accordance with the
requirements of this Section 6.1, then the Proxy Holder shall have the right to
vote the Company Common Stock in accordance with the provisions of this Section
6.1. The vote of the Proxy Holder shall control in any conflict between the vote
by the Proxy Holder of Company Common Stock and a vote by the Principal
Shareholders of Company Common Stock. Notwithstanding the foregoing, this
Section 6.1(b) shall be null and void and not binding on the Principal
Shareholders unless the Principal Shareholders will receive in the Merger shares
of Parent Common Stock in the same proportion or ratio as all other holders of
the Company Common Stock.
ARTICLE VII
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; ADDITIONAL AGREEMENTS
7.1 ACCESS TO RECORDS AND PROPERTIES OF EACH PARTY; CONFIDENTIALITY.
From and after the date hereof until the Effective Time or the earlier
termination of this Agreement pursuant to Section 13.1 hereof (the "Executory
Period"), the Company shall afford: (i) representatives of the Parent or
Acquisition Sub, free and full access at all reasonable times upon reasonable
notice to all properties, books and records (including tax returns filed and
those in preparation) of the Company provided that such activities shall not
interfere with the Company's normal operations, in order that the Parent and
Acquisition Sub may have full opportunity to make such investigations as they
shall reasonably desire to make of the business and affairs of the Company.
Additionally, the Company will permit the Parent and Acquisition Sub to make
such reasonable inspections of the Company and its respective operations during
normal business hours, upon reasonable notice, as the Parent and Acquisition Sub
may reasonably require and the Company will cause its officers to furnish to the
Parent and Acquisition
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Sub, such additional financial and operating data and other information as to
the business and properties of the Company as the Parent and Acquisition Sub
shall from time to time reasonably request (it being understood that, subject to
the terms of the Confidentiality Agreement, Parent and Acquisition Sub shall be
entitled to make copies of such information and take notes with respect
thereto). No investigation pursuant to this Section 7.1, or made prior to the
date hereof, shall affect or otherwise diminish or obviate in any respect any of
the representations and warranties made in this Agreement.
7.2 OPERATION OF BUSINESS OF THE COMPANY. During the Executory
Period, the Company will operate its business as now operated and only in the
normal and Ordinary Course and, consistent with such operation, will use its
commercially reasonable efforts to preserve intact its present business
organization, to keep available the services of its officers, consultants and
employees and to maintain satisfactory relationships with licensors,
franchisees, licensees, suppliers, contractors, distributors, customers and
other Persons having business dealings with it. Without limiting the generality
of the foregoing, during the Executory Period, the Company shall not:
(a) take any action that would result in any of the
representations and warranties of the Company herein becoming untrue or in any
of the conditions to the Merger not being satisfied.
(b) take or cause to occur any of the actions or transactions
described in Section 4.10 hereof.
7.3 NEGOTIATION WITH OTHERS.
(a) During the Executory Period, the Company and the Principal
Shareholders shall not, and the Company shall not permit any agent or other
representative of the Company or any Principal Shareholder to, directly or
indirectly:
(i) solicit, initiate or engage in discussions or engage
in negotiations with any Person (whether such negotiations are initiated by the
Company or Principal Shareholder or otherwise) or take any other action to
facilitate the efforts of any Person, relating to the possible acquisition of
the Company (whether by way of merger, purchase of capital stock, purchase or
lease of Assets or otherwise) or any material portion of its capital stock or
Assets (any such acquisition being referred to as an "Acquisition Transaction");
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(ii) provide information to any Person, other than the
Parent or Acquisition Sub, relating to a possible Acquisition Transaction;
(iii) enter into an agreement with any Person, other
than the Parent or Acquisition Sub, relating to or providing for a possible
Acquisition Transaction;
(iv) consummate an Acquisition Transaction with any
Person other than the Parent or Acquisition Sub; or
(v) make or authorize any statement, recommendation or
solicitation in support of any possible Acquisition Transaction, unless the
Parent or Acquisition Sub are a party to such Acquisition Transaction.
7.4 PREPARATION OF S-4; OTHER FILINGS. As promptly as practicable
after the date of this Agreement, Parent and the Company shall properly prepare
and file with the SEC a Registration Statement on Form S-4 with respect to the
Merger Shares in which the Shareholder Statement will be included as a
prospectus. Each of Parent and the Company shall use its best efforts to respond
to any comments of the SEC, to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing and to cause the
Shareholder Statement to be mailed to the Shareholders at the earliest
practicable time, but in any event within ten (10) Business Days (if permitted
under applicable law or regulation without any further requirements to prepare
and/or file any additional filings) after the S-4 has been declared effective by
the SEC. As promptly as practicable after the date of this Agreement, Parent and
the Company shall properly prepare and file any other filings required under the
Exchange Act, the Securities Act or any other Federal or state laws and Parent
shall properly prepare and file any filings required under state securities or
"blue sky" laws, in each case, relating to the Merger and the transactions
contemplated by this Agreement and the Plan of Merger (collectively, the "Other
Filings"). The Company shall promptly furnish Parent with all information
concerning the Company and the Shareholders as may be reasonably required in
connection with any action contemplated by this Section 7.4, including without
limitation a tax opinion as required by Section 10.4 as to "reorganization"
status of the Merger under Code section 368(a)(i) and appropriate language for
inclusion in the Form S-4 with respect to the "reorganization" status of the
Merger. Each Party will notify the other Party promptly of the receipt of any
comments from the SEC or
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its staff and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the S-4 or any Other Filing or for
additional information and will supply the other Party with copies of all
correspondence between such Party or any of its representatives, on the one
hand, and the SEC or its staff or any other government officials, on the other
hand, with respect to the S-4, the Merger or any Other Filing. Each Party shall
promptly provide the other Party (or its counsel) copies of all filings made by
such Party with any Governmental Authority in connection with this Agreement,
the Plan of Merger and the transactions contemplated hereby and thereby. The S-4
and the Other Filings shall comply in all material respects with all applicable
requirements of law. Whenever any event occurs which should be set forth in an
amendment or supplement to the S-4 or any Other Filing, Parent or the Company,
as the case may be, shall promptly inform the other Party of such occurrence and
cooperate in filing with the SEC or its staff or any other government officials,
and/or mailing to Shareholders of the Company, such amendment or supplement.
7.5 ADVICE OF CHANGES. The Company and Parent shall confer on a
regular and frequent basis with the other, report on operational matters and
promptly advise the other orally and in writing of any change, event or
circumstance having, or which, insofar as can reasonably be foreseen, could
have, a Material Adverse Effect on either such Person or which could impair
(negatively or positively) its financial projections or forecasts.
7.6 LETTER OF THE COMPANY'S ACCOUNTANTS. The Company shall use its
best commercial efforts to cause to be delivered to Parent a letter of Polakoff
Weismann Leen, LLC, the Company's independent accountant, dated a date within
two (2) Business Days before the date on which the S-4 shall become effective
and addressed to Parent, in form and substance reasonably satisfactory to Parent
and customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the S-4 (and,
if requested, a bring-down comfort letter at the closing of the Merger).
7.7 LETTER OF PARENT'S ACCOUNTANTS. Parent shall use its best
commercial efforts to cause to be delivered to the Company a letter of Lazar
Levine & Felix, LLP Parent's independent public accountants, dated a date within
two (2) Business Days before the date on which the S-4 shall become effective
and addressed to the Company, in form and substance reasonably satisfactory to
the Company and customary in scope and substance for letters delivered by
independent public accountants in connection with
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registration statements similar to the S-4 (and, if requested, a bring-down
comfort letter at the closing of the Merger).
7.8 SHAREHOLDERS' APPROVAL. The Company shall:
(a) call a special meeting of the Shareholders (the
"Shareholders' Meeting") within 30 days (or such other period as may be required
by applicable law) after the S-4 shall have been declared effective by the SEC
for the purpose of obtaining the approval of the Merger, this Agreement and the
Plan of Merger and the transactions contemplated hereby and thereby (the
"Shareholder Action"); and
(b) recommend that the Shareholders vote in favor of the
Merger and approve this Agreement and the Plan of Merger and take or cause to be
taken all such other action as may be required by the New Jersey Statute and any
other applicable law in connection with the Merger, this Agreement and the Plan
of Merger, in each case as promptly as possible. The Company shall prepare and
distribute any written notice and other materials relating to the Shareholder
Action, including, without limitation, a proxy statement (the "Shareholder
Statement"), in accordance with the Certificate and by-laws of the Company, the
New Jersey Statute and any other Federal and state laws relating to the Merger,
such Shareholders' Meeting or any other transaction relating to or contemplated
by this Agreement (collectively, the "Shareholders' Materials"); PROVIDED,
HOWEVER, that Parent and its counsel shall have the opportunity to review all
Shareholders' Materials prior to delivery to the Shareholders, and all
Shareholders' Materials shall be in form and substance reasonably satisfactory
to Parent and its counsel; PROVIDED, FURTHER, HOWEVER, that if any event occurs
which should be set forth in an amendment or supplement to any Shareholders'
Materials, the Company shall promptly inform Parent thereof (or, if such event
relates solely to Parent, Parent shall promptly inform the Company thereof), and
the Company shall promptly prepare an amendment or supplement in form and
substance satisfactory to Parent in accordance with the Certificate and by-laws
of the Company, the New Jersey Statute and any other Federal or state laws.
7.9 LEGAL CONDITIONS TO MERGER. Each Party shall take all reasonable
actions necessary to comply promptly with all legal requirements which may be
imposed on such Party with respect to the Merger and will take all reasonable
action necessary to cooperate with and furnish information to the other Party in
connection with any such requirements imposed upon such other Party in
connection with the Merger. Each Party shall take all reasonable actions
necessary:
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(a) to obtain (and will take all reasonable actions
necessary to promptly cooperate with the other Party in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Authority, or other third party, required to be obtained or made by such Party
(or by the other Party) in connection with the Merger or the taking of any
action contemplated by this Agreement or the Plan of Merger;
(b) to defend, lift, rescind or mitigate the effect of
any lawsuit, order, injunction or other action adversely affecting the ability
of such Party to consummate the transactions contemplated hereby; and (c) to
fulfill all conditions precedent applicable to such Party pursuant to this
Agreement;
(c) if required, to complete all filings required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act") in
connection with the Merger and the applicable waiting period with respect to
each such filing (including any extension thereof by reason of a request for
additional information) shall have expired by the date the Shareholder Statement
is first sent to the Shareholders of the Company (the "Mailing Date").
7.10 CONSENTS. Each Party shall use its commercially
reasonable efforts, and the other Party shall cooperate with such efforts, to
obtain any consents and approvals of, or effect the notification of or filing
with, each Person or authority, whether private or governmental, whose consent
or approval is required in order to permit the consummation of the Merger and
the transactions contemplated hereby and to enable the Surviving Corporation to
conduct and operate the business of the Company substantially as presently
conducted and as proposed to be conducted.
7.11 EFFORTS TO CONSUMMATE. Subject to the terms and
conditions herein provided, each of the Parties hereto shall, in good faith, use
reasonable effort to do or cause to be done all such acts and things as may be
necessary, proper or advisable, consistent with all applicable laws and
regulations, to consummate and make effective the transactions contemplated
hereby and by the Plan of Merger and to satisfy or cause to be satisfied all
conditions precedent that are applicable to each such Party that are set forth
in this Agreement as soon as reasonably practicable (including, without
limitation, in the case of the Company cooperating with (and executing and
delivering appropriate certifications to) any Person
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who has been requested by a party hereto to analyze (and/or furnish an opinion
with respect to) whether the Merger shall be treated as a tax-free
reorganization under the Code).
7.12 NOTICE OF PROSPECTIVE BREACH. Each Party hereto shall
immediately notify the other Party in writing upon the occurrence of any act,
event, circumstance or thing that is reasonably likely to cause or result in a
representation or warranty hereunder to be untrue at the Closing, the failure of
a closing condition to be achieved at the Closing, or any other breach or
violation hereof or default hereunder.
7.13 PUBLIC ANNOUNCEMENTS. Each of the Company and the Parent
hereto agrees that it shall consult with the other parties before issuing any
press releases or otherwise making any public statements with respect to the
Merger; and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or by
obligations pursuant to any listing agreement with any national securities
exchange or as may be advised by counsel to be desirable or appropriate, without
the prior written consent of the other. Each Party further agrees that no Party
shall unreasonably withhold their written consent to the issuance of a public
disclosure referred to in this Section 7.13.
7.14 NOTICE OF DEVELOPMENTS. Each party hereto will use all
commercially reasonable efforts to ensure that its respective representations
and warranties will be accurate and complete at the time this Agreement is
executed. However, notwithstanding the foregoing, each party shall at any time
from the date of this Agreement throughout the Closing notify the other party if
the notifying party becomes aware of any fact or condition that causes or
constitutes a breach of any of its representations and warranties as of the date
of this Agreement or of any development causing a breach of any of its
representations and warranties.
7.15 AGREEMENT REGARDING PROCEEDINGS. In the event of any
threatened, pending or completed claim, action, suit, investigation or any
legal, administrative or other proceeding (a "Proceeding") by any Governmental
Authority or other Person which questions the validity or legality of the
transactions contemplated by this Agreement or seeks to enjoin, restrain or
prohibit such transactions, or seeks damages in connection therewith, whether
before or after the Effective Time of the
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Merger, Parent, Acquisition Sub, the Company, and the Surviving Corporation
agree, to the fullest extent permissible by law, to cooperate in the defense
thereof.
7.16 CERTAIN OBLIGATIONS. The Parent has reviewed Schedule
4.40 and acknowledges that the Director Liabilities, as set forth on such
Schedule 4.40, are the obligations and liabilities of the Company. Parent agrees
that it shall satisfy the Director Liabilities and Lafferty Liabilities in cash
or by issuing Parent Common Stock, at the Closing as set forth on Schedule 7.16.
The amount of Parent Common Stock to be issued pursuant to this Section 7.16
shall be equivalent to (with respect to each of the members of the Company's
board of director's listed on Schedule 4.40) the quotient of (i) the Director
Liabilities owed as set forth on Schedule 4.40 divided by (ii) the closing price
of a share of Parent Common Stock as reported on the American Stock Exchange on
the date hereof, or, if the date hereof is not a trading day, the first date
prior to the date hereof on which there is a closing price of the Parent Common
Stock reported on the American Stock Exchange. By executing this Agreement, the
members of the Company's board of directors who are owed Director Liabilities
agree to accept Parent Common Stock in lieu of any liabilities owed to them with
respect to the Director Liabilities set forth on Schedule 4.40.
7.17 PRINCIPAL SHAREHOLDER AGREEMENTS. Notwithstanding
anything contained herein to the contrary, the execution of this Agreement by
each of the Principal Shareholders shall terminate, effective as of the date
hereof, any and all oral or written agreement (other than this Agreement),
understanding or similar arrangement (to the extent not set forth on Schedule
3.2 or specifically set forth in this Agreement) to which any such Principal
Shareholder is a direct or indirect party or beneficiary and to which the
Company, its affiliates or agents, is a direct or indirect party or beneficiary
without any further liability or obligations of the Company, its successors,
assigns, affiliates or agents.
7.18 CERTAIN LOAN AND PROMISSORY NOTE. Concurrently with the
execution of this Agreement, the Parent agrees that it will lend to the Company
$250,000 and that the Company shall issue a promissory note in favor of the
Parent (the "Parent Promissory Note"), which note is substantially in the form
attached hereto as Exhibit 7.18. The terms and provisions of the Parent
Promissory Note shall set forth the following: (i) that the note shall be due
and payable only in the event the Closing does not occur by June 16, 2000, (ii)
that if the Closing shall occur, the Parent Promissory Note shall be forgiven,
(iii) the maturity of the Note shall be the 5th business day after the
termination of this Agreement; and (iv) in the event the note is not paid at
maturity, any unpaid amount thereunder shall be
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automatically converted into 225,000 shares of the Company's common stock to be
registered with the Securities and Exchange Commission for resale within 150
days of maturity.
ARTICLE VIII
CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATIONS
The obligations of each Party to perform this Agreement and
the Plan of Merger and to consummate the transactions contemplated hereby and
thereby will be subject to the satisfaction of the following conditions unless
waived (to the extent such conditions can be waived) by each other Party:
8.1 SHAREHOLDER APPROVAL; AGREEMENT OF MERGER. This Agreement, the
Plan of Merger and the Merger shall have been approved and adopted by at least a
majority of the outstanding shares voting of Company Common Stock, and the Plan
of Merger shall have been executed and delivered by Acquisition Sub and the
Company and filed with and accepted by the Treasurer of the State of New Jersey.
8.2 APPROVALS. All authorizations, consents, orders or approvals of,
or declarations or filings with or expiration of waiting periods imposed by any
Governmental Authority necessary for the consummation of the transactions
contemplated hereby shall have been obtained or made or shall have occurred.
8.3 LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any Federal or state court or other
Governmental Authority and remain in effect.
8.4 S-4. The S-4 shall have become effective under the Securities
Act and shall not be the subject of any stop order or proceeding seeking a stop
order.
8.5 LEGISLATION. No Federal, state, local or foreign statute, rule
or regulation shall have been enacted which prohibits, restricts or delays the
consummation of the transactions contemplated by this Agreement or the Plan of
Merger or any of the conditions to the consummation of such transactions.
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8.6 TAX-FREE REORGANIZATION. The Company and Parent shall be
reasonably satisfied that the Merger shall be treated for Federal income Tax
purposes as a tax-free reorganization within the meaning of Section 368(a)(1)(A)
of the Code, by reason of Section 368(a)(2)(E) of the Code.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION SUB
The obligations of Parent to perform this Agreement and to
consummate the transactions contemplated hereby and of Acquisition Sub to
perform this Agreement and the Plan of Merger and to consummate the transactions
contemplated hereby and thereby will be subject to the satisfaction of the
following conditions unless waived (to the extent such conditions can be waived)
by Parent and Acquisition Sub:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Principal Shareholders set forth in Article III and the
representations and warranties of the Company set forth in Article IV hereof
shall in each case be true and correct in all respects as of the date of this
Agreement, and as of the effective date of the Shareholder Action and as of the
Closing Date as though made at and as of such dates, respectively.
9.2 PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall
have performed in all material respects the obligations required to be performed
by it under this Agreement and the Plan of Merger prior to or as of the Closing
Date.
9.3 AUTHORIZATION OF MERGER.
(a) As of the Mailing Date, all action necessary to authorize
the execution, delivery and performance of the Transaction Documents by the
Company and the consummation of the transactions contemplated hereby and thereby
shall have been duly and validly taken by the Board of Directors and the Parent
shall have received copies of all resolutions evidencing same certified by the
Secretary of the Company. The Company shall have full power and right to effect
the Merger on the terms provided herein.
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(b) As of the Mailing Date, all action necessary to authorize
the execution, delivery and performance of the Transaction Documents by each
Principal Shareholder, with respect to himself/itself, and the consummation of
the transactions contemplated hereby and thereby shall have been duly and
validly taken by each of the Principal Shareholders, with respect to
himself/itself, and the Parent shall have received copies of all resolutions
evidencing same certified by the Secretary of the Company. The Principal
Shareholders shall have full power and right to effect the Merger on the terms
provided herein.
(c) As of the Effective Time, all action necessary to
authorize the execution, delivery and performance of the Transaction Documents
by the Shareholders and the consummation of the transactions contemplated hereby
and thereby shall have been duly and validly taken by the Shareholders, and the
Parent shall have received copies of all resolutions evidencing same certified
by the Secretary of the Company. The Shareholders of the Company shall have full
power and right to effect the Merger on the terms provided herein.
9.4 MERGER FILING. The Merger Filing shall be duly executed by the
Company.
9.5 CERTIFICATE. Parent and Acquisition Sub shall have received a
certificate dated the Closing Date, signed by the President of the Company as to
the satisfaction of the conditions contained in Sections 9.1 through 9.3.
9.6 GOOD STANDING CERTIFICATES. A certificate of the appropriate
officials, as of a recent date, of the due organization and good standing to do
business and tax standing of the Company in New Jersey and in each jurisdiction
wherein the conduct of its business or the ownership of operation of Assets
requires the Company to maintain qualification as a foreign corporation.
9.7 OPINION OF THE COMPANY'S COUNSEL. Parent and Acquisition Sub
shall have received an opinion in the form set forth on Exhibit 9.7, dated the
Closing Date, of Drinker Biddle & Shanley, LLP, a Pennsylvania limited liability
partnership ("DB&S"), counsel to the Company.
9.8 ACCEPTANCE BY COUNSEL TO PARENT AND ACQUISITION SUB. The form
and substance of all legal matters contemplated hereby and of all papers
delivered hereunder shall be reasonably acceptable to Morrison Cohen Singer &
Weinstein, LLP, counsel for Parent and Acquisition Sub.
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9.9 CONSENTS AND APPROVALS. Parent and Acquisition Sub shall have
received duly executed copies of all consents set forth on Schedule 4.5, and
other consents and approvals contemplated by this Agreement, in form and
substance satisfactory to Parent and Acquisition Sub.
9.10 GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority which are required for or in connection with the
execution and delivery by the Company of the Transaction Documents and the
consummation by the Company of the transactions contemplated hereby and thereby
shall have been obtained or made.
9.11 TRANSACTION DOCUMENTS. Each of the Transaction Documents shall
be in full force and effect as of the Effective Time in accordance with the
respective terms thereof, and each Person or entity who or which is required or
contemplated by the parties hereto to be a party to any Transaction Documents
who or which did not theretofore enter into such Transaction Documents shall
execute and deliver such Transaction Documents.
9.12 REPAYMENT OF INDEBTEDNESS. The Company shall have repaid in
full any principal and interest outstanding on the Company's indebtedness
("Company EDA Indebtedness") owed to the New Jersey Economic Development
Authority ("NJEDA") pursuant to a Loan Agreement dated July 31, 1996 and/or any
amendment, addition or deletion thereto (the "Loan Agreement"). On the Closing
Date, Parent shall advance (the "EDA Advance") such funds as shall be required
to repay the Company EDA Indebtedness as set forth on Schedule 9.12. The Company
represents and warrants that (i) no payment required by the "Premium upon the
Sale of a Controlling Interest of the Borrower" section of the $500,000 Direct
Loan Promissory Note dated July 31, 1996 between the Company and the NJEDA or
(ii) any other payment, penalty, interest or similar charge or expense to the
Company or any of its successors or assigns shall be due if the Company EDA
Indebtedness is satisfied in the manner contemplated by this Section 9.12. In
addition, the Company shall deliver to Parent and Acquisition Sub such evidence
from the NJEDA, in form and substance acceptable to the Parent and the
Acquisition Sub, that (i) and (ii) of this Section 9.12 shall be satisfied and
that the Company EDA Indebtedness has been repaid in full.
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9.13 CONFIDENTIALITY, NON-COMPETITION AND NO SOLICITATION
AGREEMENTS. Each of the Principal Shareholders, with respect to himself/itself
only, and all the employees of the Company shall have executed and delivered to
the Parent a Confidentiality Agreement, a Non-competition Agreement and a No
Solicitation Agreements in form and substance acceptable to Parent. Such
agreements shall only contain those provisions as are set forth in Article XI
hereof.
9.14 SCHEDULES. Parent and Acquisition Sub shall have determined in
its sole discretion, exercised in good faith, that the respective observations
of Parent and Acquisition Sub made during their review of the schedules to this
Agreement disclosed no material information regarding the Company unsatisfactory
to the Parent or Acquisition Sub.
9.15 SETTLEMENT AGREEMENT. Each and every party to that certain
Stock Purchase and Settlement Agreement (the "Settlement Agreement") dated
January 19, 1998 between Holmes Bailey, Judith Bailey, the Company, G.E.M. USA,
Inc. and Abel Sheng have fully satisfied all of the liabilities and obligations
under the Settlement Agreement, including the full payment, satisfaction and
cancellation of all promissory notes contained therein, and the Parent and
Acquisition Sub shall have received evidence of the foregoing in form and
substance acceptable to it.
9.16 DEMINIMUS QUANTITY EXEMPTION. The Company shall comply with New
Jersey's Industrial Site Recovery Act, N.J.S.A. 13:1K-6 and shall have filed the
Deminimus Quantity Exemption application for the Company's current facility
located in Hanover.
9.17 UCC TERMINATION STATEMENTS. Upon satisfaction of the
obligations set forth in Section 7.16, (i) the Company will provide Parent with
duly executed UCC-3 termination statements in form and content satisfactory to
extinguish all security interests and/or liens created by Directors' Loans
against any and all assets of the Company and (ii) each of the applicable
members of the Company's board of directors shall execute a termination and
satisfaction notice with respect to the Director Liabilities set forth opposite
each of their names on Schedule 4.40.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE COMPANY
AND THE PRINCIPAL SHAREHOLDERS
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The obligations of the Company and the Principal Shareholders to
perform this Agreement and the Plan of Merger, and to consummate the
transactions contemplated hereby and thereby will be subject to the satisfaction
of the following conditions unless waived (to the extent such conditions can be
waived) by the Company and the Principal Shareholders:
10.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Acquisition Sub set forth in Article V hereof shall be
true and correct in all material respects (except for any representation or
warranty that by its terms is qualified by materiality, in which case it shall
be true and correct in all respects) as of the date of this Agreement, and as of
the Closing Date as though made at and as of such dates, respectively.
10.2 PERFORMANCE OF OBLIGATIONS OF PARENT AND ACQUISITION SUB.
Parent and Acquisition Sub shall have performed in all material respects their
respective obligations required to be performed by them under this Agreement and
the Plan of Merger prior to or as of the Closing Date.
10.3 AUTHORIZATION OF MERGER. All action necessary to authorize the
execution, delivery and performance of the Transaction Documents by Parent, the
execution, delivery and performance of this Agreement and the Plan of Merger by
Acquisition Sub, and the consummation of the transactions contemplated hereby
and by the Plan of Merger shall have been duly and validly taken by the board of
directors of Parent and Acquisition Sub and by Parent as the sole shareholder of
Acquisition Sub, and the Company shall have received copies of all such
resolutions certified by the respective Secretary of Parent and Acquisition Sub.
10.4 CERTIFICATE. The Company shall have received a certificate
dated the Closing Date, signed by the President of each of Parent and
Acquisition Sub as to the satisfaction of the conditions contained in Sections
10.1 through 10.3, except to the extent waived by the Company.
10.5 GOOD STANDING CERTIFICATES. A certificate of the appropriate
officials, as of a recent date, of the due organization and good standing to do
business and tax standing of each of the Parent and Acquisition Sub in New
Jersey and in each jurisdiction wherein the conduct of its business or the
ownership of operation of its business requires such Person to maintain
qualification as a foreign corporation.
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10.6 OPINION OF PARENT'S COUNSEL. The Company and the Principal
Shareholders shall have received an opinion dated the Closing Date of Morrison
Cohen Singer & Weinstein, LLP, counsel to Parent and Acquisition Sub in form and
substance reasonably satisfactory to the Company, in the form annexed hereto as
Exhibit 10.6.
10.7 ACCEPTANCE BY COUNSEL TO COMPANY. The form and substance of all
legal matters contemplated hereby and of all papers delivered hereunder shall be
reasonably acceptable to S&F.
10.8 CONSENTS AND APPROVALS. The Company shall have received duly
executed copies of all consents referenced in Section 5.4 and other consents and
approvals contemplated by this Agreement in form and substance reasonably
satisfactory to the Company.
10.9 GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, orders or approvals of, and filings or registrations with, any
Governmental Authority which are required for or in connection with the
execution and delivery by Parent and Acquisition Sub of the Transaction
Documents and the consummation by the Parent and the Acquisition Sub of the
transactions contemplated hereby and thereby shall have been obtained or made.
10.10 TRANSACTION DOCUMENTS. Each of the Transaction Documents shall
be in full force and effect as of the Effective Time in accordance with the
respective terms thereof, and each Person who or which is required or
contemplated by the parties hereto to be a party to any Transaction Documents
who or which did not theretofore enter into such Transaction Documents shall
execute and deliver such Transaction Documents.
ARTICLE XI
CONFIDENTIALITY, NON-COMPETE AND NO SOLICITATION
11.1 CONFIDENTIALITY. From and after the date hereof, the
Principal Shareholders agree not to divulge, communicate, use to the detriment
of the Parent, Acquisition Sub, or the Company or
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for the benefit of any other Person, or misuse in any way, any confidential
information or trade secrets included in or relating to the Company or its
Assets including, without limitation, personnel information, secret processes,
know-how, customer lists or other technical data.
11.2 NON-COMPETE.
(a) Until the first anniversary of the Closing Date, no
Principal Shareholder and no Affiliate of any Principal Shareholder shall,
anywhere in North America or Europe, directly or indirectly, alone or in
association with any other Person, firm corporation or other business
organization (i) acquire or own in any manner, any interest in any Person that
is engaged in any facet of the power measurement and/or noise generation
business (the "Business") of the Parent or Acquisition Sub or its subsidiaries
or affiliates (collectively, the "Purchasing Companies"), (ii) engage in any
facet of the Business of the Company or compete in any way with the Business of
the Purchasing Companies, (iii) be employed in any capacity by, serve as an
employee of, or consultant or be an advisor to, or otherwise participate in the
management or operation of, any Person that (x) engages in any facet of the
Business of the Parent, or (y) competes with the Business of the Parent in any
way.
(b) The parties hereto intend that the covenants contained in
this Section 11.2 shall be construed as a series of separate covenants, one for
each state or country. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in Section
11.2(a) above. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants deemed included in Section 11.2(a), then such
unenforceable covenant shall be deemed reduced in scope or, if necessary,
eliminated from these provisions for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants to be enforced.
(c) The provisions of this Section 11.2 shall not apply to
investments by the Principal Shareholders in shares of stock traded on a
national securities exchange or on the national over-the-counter market which
shall have an aggregate market value, at the time of acquisition, of less than
5% of the outstanding shares of such stock.
Each of the Principal Shareholders acknowledge that the provisions of this
Section 11.2, and the period of time, geographic area and scope and type of
restrictions on its activities set forth herein, are
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reasonable and necessary for the protection of the Parent and the Acquisition
Sub and are an essential inducement to the Parent and the Acquisition Sub
entering into the Transaction Documents to which they are a party and
consummating the transactions contemplated thereby.
11.3 NO SOLICITATION. No Principal Shareholder shall to, from and
after the Closing Date, and for a period of one (1) year thereafter, directly or
indirectly, for itself or on behalf of any other Person, employ, engage or
retain any Person who, at any time during the preceding 12-month period, shall
have been an employee of the Parent, Acquisition Sub, or the Company, or contact
any supplier, customer or employee of the Company for the purpose of soliciting
or diverting any such supplier, customer or employee of the Parent, Acquisition
Sub, or the Company.
ARTICLE XII
INDEMNIFICATION
12.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless the Parent, Acquisition Sub and (after the Merger) Surviving
Corporation from and against, without duplication, all costs, fees, liabilities,
Taxes, charges, claims, expenses, losses and damages, including reasonable legal
expenses and costs of investigation (both of those incurred in connection with
the defense or prosecution of an indemnifiable claim and those incurred in
connection with the enforcement of this provision), as and when actually
incurred or as and when actually paid by the Parent, Acquisition Sub and
Surviving Corporation or any of their respective subsidiaries, successors,
assigners, officers, employees, directors, agents or affiliates, arising out of
or in connection with any action or proceeding (collectively "Losses") as a
result of or arising in connection with:
(a) the breach of any of the Company's or where applicable
Principal Shareholder's representations, warranties or agreements contained in
the Transaction Documents;
(b) the commencement and/or prosecution of any action brought
against Parent or Surviving Corporation by a Principal Shareholder (or equity
interest holder) or former Shareholder (or equity interest holder) of the
Company, or any predecessor thereof or any Person acquired thereby, arising out
of or relating to the purchase of all or a portion of such Person's capital
stock or the acquisition of all or
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substantially all of the Assets of the entity the capital stock of which was
owned by such Person or, in each case, any direct or indirect shareholder of any
of the foregoing;
(c) the actual or threatened commencement of any proceeding,
suit or action against Parent, Surviving Corporation or any direct or indirect
Subsidiary thereof, or any director, officer, agent or employee of any of them,
which, if determined adversely thereto (regardless of the actual determination
thereof) would result in a Loss (any such pending or threatened suit or action
being a "Covered Action"); or
(d) any and all actions, suits or proceedings, claims or
demands incident to any of the foregoing or such indemnities.
12.2 INDEMNIFICATION BY PRINCIPAL SHAREHOLDER. The Principal
Shareholders agree to indemnify and hold harmless the Parent, Acquisition Sub
and Surviving Corporation from and against, without duplication, all costs,
fees, liabilities, Taxes, charges, claims, expenses, losses and damages,
including reasonable legal expenses and costs of investigation (both of those
incurred in connection with the defense or prosecution of an indemnifiable claim
and those incurred in connection with the enforcement of this provision), as and
when actually incurred or as and when actually paid by the Parent, Acquisition
Sub and Surviving Corporation or any of their respective subsidiaries,
successors, assigners, officers, employees, directors, agents or affiliates,
arising out of or in connection with any Losses as a result of or arising in
connection with the breach of any such Principal Shareholder's representations,
warranties, covenants or agreements contained in those sections of the Agreement
set forth above their name on the signature page hereto. Prior to Closing, no
Principal Shareholder shall have any indemnification obligations hereunder.
12.3 INDEMNIFICATION BY PARENT AND ACQUISITION SUB. The Parent and
Acquisition Sub agree to indemnify and hold harmless the Company from and
against, without duplication, all Losses arising out of or in connection with
any action or proceeding as a result of or arising in connection with the breach
of any of the Parent or Acquisition Sub's representations, warranties or
agreements contained in the Transaction Documents.
12.4 LOSS INDEMNITY PROCEDURE. Upon learning of the commencement of
a Covered Action or the actual receipt by the parties claiming a right of
indemnification (the "Indemnified
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Party") of information relating to the purported existence of facts or
circumstances which could result in the commencement of a Covered Action or
other incurrence of Loss, the Indemnified Party shall promptly, but no later
than fifteen (15) days after learning of such commencement or receipt, give
notice ("Indemnification Notice") thereof, with reasonable specificity of the
facts as then known to the party having the indemnification obligation (the
"Indemnifying Party"); provided, however, failure to give timely such notice
shall not release the Indemnifying Party of its obligations hereunder except,
and only, to the extent the Indemnifying Party suffers actual prejudice as a
proximate result of such failure.
(a) The Indemnifying Party shall have the right to assume the
defense of any such Covered Action by giving written notice (the "Assumption
Notice") to the Indemnified Party within 20 days after notice given pursuant to
this Section 12.4 which Assumption Notice shall state that (i) the Indemnifying
Party agrees that the claimant is entitled to indemnification hereunder and that
any resulting Loss for which it is or they are liable; and (ii) it agrees or
they agree to assume the defense thereof in the name and on behalf of the
Indemnified Party with counsel reasonably satisfactory to the Indemnified Party,
in either event at the sole cost and expense of the Indemnifying Party;
provided, however, (x) all such costs and expenses of the foregoing counsel, if
not paid by the Indemnifying Party and instead paid by the Indemnified Party
shall be Losses for which the Indemnified Party is indemnified under this
Section 12.4, (y) the Indemnified Party, notwithstanding the timely delivery of
an Assumption Notice, may participate in such Covered Action through counsel
separately selected and paid for by the Indemnified Party, and (z) if no
Assumption Notice is timely given, or despite the giving of the Assumption
Notice the defendants in any Covered Action include both the Indemnified Party
and the Indemnifying Party, and the Indemnified Party shall have reasonably
concluded that there may be legal defenses available to it which are different
from or additional to those available to the Indemnifying Party, or if there is
a conflict of interest which would prevent counsel for the Indemnifying Party
from also representing the Indemnified Party, the Indemnified Party shall have
the right to select one separate counsel to conduct the defense of such action
on its behalf, and all such costs and expenses shall be paid by the Indemnifying
Party and, if paid by the Indemnified Party, shall be Losses under this Section
12.4. The Indemnified Party may take such action with respect to a Covered
Action as it may deem appropriate to protect against further damage or default,
including obtaining an extension of time to answer the complaint or other
pleading or filing an answer thereto.
(b) In no event shall a Principal Shareholder (where a
Principal Shareholder is the Indemnifying Party or where the Principal
Shareholders are Indemnifying Parties) consent to the entry of any judgment or
enter into any settlement without the written consent of Surviving Corporation,
which
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shall not be unreasonably withheld or delayed. Subject to Section 12.4(a) above,
no Indemnified Party shall consent to the entry of any judgment or enter into
any settlement relating to a Loss without the written consent of the
Indemnifying Party, which shall not be unreasonably withheld or delayed.
12.5 DURATION OF INDEMNIFICATION. Liability for indemnification
under this Article XII shall expire on the second anniversary of the Closing
Date (or, in the case of indemnification arising out of the breach of a
representation or warranty, the survival period of such representation or
warranty under Section 15.1 below).
12.6 NO CLAIM AGAINST SURVIVING CORPORATION/COMPANY. In no event
following Closing may any Principal Shareholder seek or assert any claim
whatsoever, whether for contribution or otherwise, against Surviving Corporation
arising out of any facts or any action or failure to act by the Company or a
Principal Shareholder existing or occurring prior to or as of the Closing,
including, without limitation, based upon any breach of any representation,
warranty, covenant or condition herein by the Company or a Principal
Shareholder, whether by way of contribution based upon the gross negligence or
willful misconduct of the Company or a Principal Shareholder, or otherwise.
12.7 LIMITATIONS ON INDEMNITY.
(a) The parties acknowledge and agree that each Principal
Shareholder shall only have liability hereunder for the Losses incurred by the
Parent or the Acquisition Sub arising directly out of any breach of any
representation, warranty, covenant or other agreement made by such Principal
Shareholder hereunder; provided, however, that (i) notwithstanding anything
herein to the contrary, in no event shall such Principal Shareholder be liable
for any such Loss unless and until the aggregate amount of all Losses suffered
by the Parent and the Acquisition Sub caused by such Principal Shareholder's
breach exceeds the Threshold and then such Principal Shareholder shall only be
liable for the excess thereof and (ii) in no event shall such Principal
Shareholder be liable for any Losses suffered by the Parent and the Acquisition
Sub in excess of the Cap. As used in this Section 12.7(a), with respect to any
Principal Shareholder, the Threshold shall mean, 1% of(i) the product of (A) the
number of shares of Parent Common Stock received by such Principal Shareholder
in the Merger multiplied by (B) the closing price of a share of Parent Common
Stock as reported on the American Stock Exchange on the Closing Date or, if the
Closing Date is not a trading day, the first date prior to the Closing Date on
which there is a closing price of the
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Parent Common Stock reported on the American Stock Exchange (the "AMEX Closing
Price"). As used in this Section 12.7(a), with respect to any Principal
Shareholder, the Cap shall mean, 10% of (i) the product of (A) the number of
shares of Parent Common Stock received by such Principal Shareholder in the
Merger multiplied by (B) the AMEX Closing Price.
(b) The parties acknowledge and agree that Parent and
Acquisition Sub shall only have liability hereunder for the Losses incurred by
the Company and Principal Shareholders arising directly out of any breach of any
representation, warranty, covenant or other agreement made by Parent and
Acquisition Sub hereunder; provided, however, that (i) notwithstanding anything
herein to the contrary, in no event shall the Parent and Acquisition Sub be
liable for any such Losses unless and until the aggregate amount of all Losses
suffered by the Company and Principal Shareholders caused by such Parent and/or
Acquisition Sub's breach exceed the Parent Threshold and then the Parent and
Acquisition Sub shall only be liable for the excess thereof and (ii) in no event
shall the aggregate liability of the Parent and the Acquisition Sub to provide
indemnification for Losses under this Article XII exceed the Parent Cap
(regardless of whether Persons (other than Parent and Acquisition Sub) suffer
aggregate Losses in excess of the Parent Cap). As used in this Section 12.7(b),
with respect to the Parent and Acquisition Sub, the Parent Threshold shall mean
1% of (i) the product of (A) the number of shares of Parent Common Stock
received by such Principal Shareholder in the Merger multiplied by (B) AMEX
Closing Price. As used in this Section 12.7(a), with respect to any Principal
Shareholder, the Cap shall mean, 10% of (i) the product of (A) the number of
shares of Parent Common Stock received by such Principal Shareholder in the
Merger multiplied by (B) the AMEX Closing Price.
12.8 OTHER INDEMNIFICATION PROVISIONS.
(a) Unless otherwise specifically provided herein, the
indemnification provisions of this Article XII shall, absent fraud, be the sole
and exclusive remedy of the parties for any breach of any covenants,
representations or warranties made by any other Party in this Agreement and each
Party hereby waives all statutory, common law and other claims with respect
thereto, other than claims for indemnification pursuant to this Article XII and
claims based on fraud.
(b) Indemnification hereunder shall include liability for any
special, incidental, punitive or consequential damages to the extent the
Indemnified Party is required to pay such amount to a
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third party. Except as expressly provided in the preceding sentence, there shall
be no indemnification by any party for any special, incidental, punitive or
consequential damages.
(c) In calculating amounts payable to an Indemnified Party,
the amount of the indemnified Losses shall be computed net of(i) payments that
the Indemnified Party actually receives under any insurance policy with respect
to such Losses, (ii) the net amount of any prior or subsequent recovery by the
Indemnified Party from any third party with respect to such Losses, and (iii)
any Tax benefit to the Indemnified Party with respect to such Losses.
ARTICLE XIII
PAYMENT OF CERTAIN FEES AND EXPENSES
13.1 PAYMENT OF CERTAIN FEES AND EXPENSES.
(a) Except as set forth below in this Section 13.1, Parent and
the Company shall pay its own expenses that are incidental to negotiation,
preparation, execution, delivery of the Transaction Documents and the Closing
whether or not this Agreement and the transactions contemplated hereby are
actually consummated; it being understood that the Company shall not be
permitted to incur more than $150,000 of legal fees and accounting fees in
connection with the negotiation, preparation, execution and delivery of the
Transaction Documents and the Closing, including any amounts previously paid or
incurred in any proposed transaction with Parent and/or Acquisition Sub
("Permitted Transaction Costs"). Any unpaid Permitted Transaction Costs shall be
paid by the Parent in full at Closing and any transaction costs in excess of the
Permitted Transaction Costs shall be paid on or before closing by Yves Guyomar.
(b) If (i) this Agreement is terminated by Parent or
Acquisition Sub pursuant to Section 14.1(b)(except Section 8.2 through Section
8.6 to the extent the Company uses its reasonable commercial efforts to see the
conditions of Section 8.2 through Section 8.6 fulfilled) or Section 14.1(c)
(except Section 9.8, Section 9.10 and Section 9.15 to the extent the Company
uses its reasonable commercial efforts to see the conditions of Section 9.8,
Section 9.10 and Section 9.15 fulfilled) and (ii) the Company and/or Principal
Shareholders enter into an Acquisition Transaction involving a third party
within one year after such termination, then the Company agrees to pay the
Parent within sixty (60) days following the entering into of such Acquisition
Transaction (A) $100,000 plus (B) up to a maximum amount of $500,000 of all
out-of-pocket expenses (including, without limitation, all attorneys' fees,
investment banking fees,
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printing costs, governmental filing and other governmental fees, and finder's
fees and expenses) incurred by the Parent and Acquisition Sub in connection with
the transactions contemplated by this Agreement (collectively the "Break-Up
Fee") as reimbursement for the lost profit opportunity of Parent and the time
and expense of Parent's executives. Parent and Acquisition Sub hereby waive any
and all right, claim or interest for any fees or expenses incurred by Parent or
Acquisition Sub in any prior proposed transaction between the Company and Parent
and/or Acquisition Sub. Company hereby waives any and all right claim or
interest for any fees or expenses incurred by the Company in any prior proposed
transaction between the Company and Parent and/or Acquisition Sub.
(c) In the event that the Closing occurs, each Principal
Shareholder shall indemnify and hold the Parent and the Surviving Corporation
harmless from all legal and professional fees incurred by such Principal
Shareholder (other than the Permitted Transaction Costs) in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
Transaction Documents and the Closing.
ARTICLE XIV
TERMINATION; AMENDMENT, MODIFICATION AND WAIVER
14.1 TERMINATION. This Agreement may be terminated, and the Merger
abandoned, notwithstanding the approval by Parent, Acquisition Sub and the
Company of this Agreement, at any time prior to the Effective Time, by:
(a) the mutual consent of Parent, Acquisition Sub and the
Company.
(b) Parent, Acquisition Sub or the Company, if:
(i) the conditions set forth in Article VIII hereof
shall not have been met and the Merger has not occurred by June 16, 2000, which
date may be extended at the discretion of the Parent or Acquisition Sub, except
if such conditions have not been met solely as a result of the action or
inaction of the party seeking to terminate; or
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(ii) the other party or parties have materially breached
at the time made a representation and warranty, covenant or agreement set forth
herein and such breach is not cured (if curable) within 15 days following
written notice thereof from the non-breaching party;
(c) Parent and Acquisition Sub if the conditions set forth in
Article IX hereof shall not have been met (or waived by the Person(s) entitled
to satisfaction thereof), and the Company if the conditions set forth in Article
X hereof shall not have been met (or waived by the Person(s) entitled to
satisfaction thereof), in either case by June 16, 2000 which date may be
extended at the discretion of Parent or Acquisition Sub, except if such
conditions have not been met solely as a result of the action or inaction of the
party seeking to terminate. Notwithstanding the provisions of this Section
14.1(c), the Company shall have the right to terminate this Agreement and
abandon the Merger after September 15, 2000, except if the Merger cannot be
completed by such date as a result of the action or inaction of the party
seeking to terminate.
(d) Parent and Acquisition Sub on the one hand, or the Company
on the other hand, if such party or parties shall have determined in its or
their sole discretion, exercised in good faith, that the Merger contemplated by
this Agreement and the Plan of Merger has become impracticable by reason of the
institution of any litigation, proceeding or investigation to restrain or
prohibit the consummation of the Merger, so long as such litigation, proceeding
or investigation has not been instituted, initiated, commenced or undertaken
without the approval of the party or parties seeking to terminate the Agreement
(which in the Company's case would include any actions of the Principal
Shareholders).
(e) Parent or Acquisition Sub if during the sixty (60) day
period after the date of this Agreement, Parent shall have determined in its
sole discretion, exercised in good faith, that the respective observations of
Parent and Acquisition Sub made during their due diligence process disclosed
information regarding the Company unsatisfactory to it and such information is
(i) material and (ii) not adequately disclosed in this Agreement.
Any termination pursuant to this Section 14.1 shall be effected by written
notice from the party or parties so terminating to the other parties hereto.
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14.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 14.1, this Agreement shall be of no further
force or effect and no party hereto, nor its shareholders, directors, officers
or affiliates, shall have any liability in connection herewith; PROVIDED,
HOWEVER, that Article XII, Article XIII, this Section 14.2 and Article XV shall
survive the termination of this Agreement. Notwithstanding the foregoing, except
as set forth in the following sentence, this Section 14.2 shall not relieve any
party from liability in connection with an intentional or willful material
breach of this Agreement prior to its termination. If this Agreement is
terminated by the Company pursuant to Section 14.1(b)(ii), then the Company's
obligation to repay the Parent Promissory Note shall be cancelled ("Parent
Break-up Fee") and the Parent and Acquisition Sub shall be relieved from any
liability in connection with any termination or breach of this Agreement,
whether intended, willful or otherwise.
ARTICLE XV
MISCELLANEOUS
15.1 SURVIVAL; EFFECT OF DISCLOSURE. Except as otherwise
specifically provided herein all statements, representations, warranties and
covenants shall survive the Closing for two (2) years, regardless of any
inspection or discovery whether by reason of due diligence or otherwise, and
shall remain in effect continuously during such period; provided that the
representations, warranties and covenants set forth in (a) Sections 3.4, 4.4 and
4.28 shall survive indefinitely and remain in effect continuously after the
Closing and (b) Sections 4.11, 4.14 and 4.25 shall survive and remain in effect
continuously after the Closing for the lesser of (i) seven (7) years and the (i)
statute of limitations applicable to the subject representation, warranty or
covenant. None of the Company, Parent or Acquisition Sub shall be liable or
bound in any manner by representations, warranties, covenants or agreements
pertaining to the subject matter of this Agreement, whether express or implied,
or any other matter whatsoever, which are made or furnished by any Person
representing or purporting to represent the Company, Parent or Acquisition Sub
unless and only to the extent that such representations, warranties, covenants,
or agreements are expressly and specifically set forth in this Agreement or the
Exhibits or Schedules hereto or in any certificate or other agreement, document
or instrument delivered pursuant to the provisions of this Agreement.
15.2 ENTIRE AGREEMENT. This Agreement and the Plan of Merger
(including the Schedules and the Exhibits attached hereto) and the other
writings referred to herein contain the entire
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agreement among the parties hereto with respect to the transactions contemplated
hereby and supersede all prior agreements or understandings, written or oral,
among the parties with respect thereto.
15.3 DESCRIPTIVE HEADINGS. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.
15.4 NOTICES. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by nationally-recognized overnight courier or by registered
or certified mail, postage prepaid, return receipt requested or by telecopier,
with confirmation as provided above addressed as follows:
if to Parent or Acquisition Sub, to:
Wireless Telecom Group Inc.
East 64 Midland Avenue
Paramus, NJ 07652
Attention: Edward Garcia
Telephone: (201) 261-8797
Telecopier:(201) 261-8339
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington
New York, NY 10022
Attention: Robert H. Cohen, Esq.
Telephone: 212-735-8600
Telecopier:212-735-8708
if to the Company, to:
Boonton Electronics Corp.
25 Eastmans Road
P.O. Box 465
Parsippany, NJ 07054
Attention: President
Telephone: (973) 386-9696
Telecopier: (973) 386-9191
with a copy to:
Drinker, Biddle & Shanley LLP
500 Campus Drive
Florham Park, NJ 07932-1047
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Attention: Michael E. Helmer, Esq.
Telephone: 973-360-1100
Telecopier: 973-360-9831
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such notices
or communications shall be deemed to be received: (a) in the case of personal
delivery or telecopy, on the date of such delivery; (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent; and (c) in the case of mailing, on the third business day following
the date on which the piece of mail containing such communication was posted.
15.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts by original or facsimile signature, each such counterpart shall be
an original instrument, and all such counterparts together shall constitute one
and the same agreement.
15.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the New Jersey Statute and with the laws of the
State of New Jersey applicable to contracts made and to be performed wholly
therein without regard to such state's principles of conflicts of law.
15.7 BENEFITS OF AGREEMENT. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, and shall not confer any
rights or benefits on any other persons or entities. This Agreement shall not be
assignable by any party hereto without the consent of the other parties hereto;
PROVIDED, HOWEVER, that anything contained herein to the contrary
notwithstanding, Acquisition Sub may assign and delegate any or all of its
rights and obligations hereunder to any other direct or indirect wholly-owned
subsidiary of Parent.
15.8 PRONOUNS. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural thereof whenever the context
and facts require such construction.
15.9 WAIVER, AMENDMENT AND MODIFICATION.
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(a) No failure or delay on the part of any of the parties
hereto in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
parties hereto at law, in equity or otherwise.
(b) No amendment, supplement or modification of or to any
provision in this Agreement, or any waiver of any such provision or consent to
any departure by any party from the terms of any such provision may be made
orally. Any (i) amendment, supplement or modification hereto, (ii) consent
hereunder or (iii) waiver of any provision (collectively, "Modification") of
this Agreement or of any of the Notes shall be effective if given pursuant to a
written agreement signed by the parties to this Agreement.
15.10 SPECIFIC PERFORMANCE. The parties hereto agree that if for any
reason any party hereto shall have failed to perform its obligations under this
Agreement, then any other party hereto seeking to enforce this Agreement against
such non-performing party shall be entitled to specific performance and
injunctive and other equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such injunctive or other equitable relief.
15.11 SEVERABILITY. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof. The parties hereto further agree to replace such
invalid, illegal or unenforceable provision of this Agreement with a valid,
legal and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid, illegal or unenforceable
provision.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement and Plan of Reorganization to be executed on its behalf as of the day
and year first above written.
WIRELESS TELECOM GROUP INC.
By: /s/ Edward Garcia
--------------------------------
Name: Edward Garcia
Title: Chief Executive Officer
WTT ACQUISITION CORP.
By: /s/ Edward Garcia
--------------------------------
Name: Edward Garcia
Title: Chief Executive Officer
BOONTON ELECTRONICS CORP.
By: /s/ Yves Guyomar
--------------------------------
Name: Yves Guyomar
Title: President and CEO
<PAGE>
The undersigned shall have no liability under the aforesaid Agreement and Plan
of Reorganization except with respect to Article 3, Article 6, Sections 7.3,
7.17, 9.1 (as to the Principal Shareholders representations only), 9.3(b), 9.13,
Article 11, Article 12, Section 13.1(a) (solely with respect to the liability of
Yves Guyomar in connection with transaction costs in excess of the Permitted
Transaction Costs), Section 13.1(c), Article 14, and Article 15.
PRINCIPAL SHAREHOLDERS
/s/ DANIEL AUZAN
- ----------------------------------
DANIEL AUZAN
/s/ RONALD T. DEBLIS
- ----------------------------------
RONALD T. DEBLIS
/s/ JACK FRUCHT
- ----------------------------------
JACK FRUCHT
/s/ YVES GUYOMAR
- ----------------------------------
YVES GUYOMAR
/s/ ABEL SHENG
- ----------------------------------
ABEL SHENG
/s/ OTTO H. YORK
- ----------------------------------
OTTO H. YORK
/s/ JOHN M. YOUNG
- ----------------------------------
JOHN M. YOUNG
G.E.M. USA, INC.
By: /s/ HENRI TRIEBEL
------------------------------
Name: HENRI TRIEBEL
Title: GENERAL MANAGER
SIDCO INVESTMENT, INC.
By: /s/ ABEL SHENG
------------------------------
Name: ABEL SHENG
Title: PRESIDENT
<PAGE>
With respect to Section 7.16, the undersigned members of the Company's board of
directors agree to accept Parent Common Stock in lieu of any liabilities owed to
them with respect to the Director Liabilities set forth on Schedule 4.40.
DIRECTORS
/s/ DANIEL AUZAN
- ------------------------------
DANIEL AUZAN
/s/ JACK FRUCHT
- ------------------------------
JACK FRUCHT
/s/ YORK RESOURCES
- ------------------------------
YORK RESOURCES
/s/ OTTO YORK
- ------------------------------
OTTO YORK
/s/ JOHN YOUNG
- ------------------------------
JOHN YOUNG
/s/ ABEL SHENG
- ------------------------------
ABEL SHENG
