SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 1, 2000
RIMAGE CORPORATION
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(Exact name of registrant as specified in its charter)
Minnesota (0-20728) 41-1577970
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(State or other jurisdiction of COMMISSION FILE NO. (I.R.S. Employer
incorporation or organization) Identification No.)
7725 Washington Avenue South
Minneapolis, MN 55439
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(Address of principal executive offices) (Zip Code)
(612) 944-8144
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 1, 2000, Rimage Corporation ("Rimage") completed the
acquisition of Cedar Technologies, Inc. ("Cedar"). Pursuant to an Agreement and
Plan of Merger dated as of February 25, 2000 (the "Agreement") between Rimage,
Cedar, CDR Acquisition, Inc. (a wholly owned subsidiary of Rimage) and five of
the shareholders of Cedar, on March 1, 2000, CDR Acquisition, Inc. was merged
("the "Merger") with and into Cedar, Rimage issued 331,664 shares of its common
stock for all of the outstanding common stock of Cedar, and Cedar became a
wholly owned subsidiary of Rimage. Of such shares, 33,661 shares were placed in
an escrow account for one year after the date of the Merger to cover indemnity
obligations. Rimage also agreed to assume the obligation to issue approximately
149,376 shares of its common stock upon exercise of outstanding options of
Cedar, and 118,596 shares of its common stock upon exercise of outstanding
warrants of Cedar. The transaction was intended to qualify as a tax-free
exchange with pooling of interests accounting treatment.
Cedar was founded in 1996 and currently manufactures and markets CDR
publication and duplication equipment designed for sale with a lower price point
than Rimage's products. Rimage intends to continue to use Cedar's name and
distribution channels to sell Cedar's products to this market. Cedar's
manufacturing operations will eventually be consolidated with Rimage's. Cedar
generated approximately $5 million of revenue during the year ended December 31,
1999.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial statements of the business acquired
Financial statements are omitted because none of the
conditions set forth in SX Rule 1.02(w) exceeded 20% with
respect to the business acquired.
b) Pro forma financial information
Pro forma financial information is omitted because the
business acquired did not constitute a "significant business"
within the meaning of SX Rule 11-01(b).
c) Exhibits
Exhibit Number Description
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2.1 Agreement and Plan of Merger
2.2 Escrow Agreement
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
RIMAGE CORPORATION
By /s/ Bernard P. Aldrich
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Bernard P. Aldrich, President
Dated: March 7, 2000
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
by and between
Cedar Technologies, Inc. (the "Company");
John Kubinski; William McMahon; James Lewis; Joseph Novagratz;
Robert Gearou; Bob Inc.; BJB Inc.;
CDR Acquisition, Inc. ("Newco");
and Rimage Corporation ("RIMG")
dated as of February 25, 2000
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TABLE OF CONTENTS
I THE MERGER..................................................................1
1.1 The Merger.........................................................1
1.2 Articles of Merger; Effective Time.................................1
1.3 Effect of Merger...................................................2
1.4 Closing............................................................2
1.5 Articles of Incorporation; Bylaws..................................2
1.6 Directors and Officers.............................................2
II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES........................2
2.1 Conversion of Securities...........................................2
2.2 Dissenting Shares..................................................3
2.3 Rights of Holders of Company Common Stock..........................3
2.4 Adjustments to Exchange Ratio......................................4
2.5 Payment of Consideration for Company Common Stock..................4
2.6 Stock Options......................................................5
2.7 Warrants...........................................................6
2.8 Notices to Option and Warrant Holders..............................6
III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................6
3.1 Company Shareholders...............................................7
3.2 Organization and Standing..........................................7
3.3 Powers.............................................................7
3.4 Execution, Delivery; Valid and Binding Agreement...................7
3.5 Approval of Plan of Merger; Meeting of Stockholders................7
3.6 No Breach..........................................................7
3.7 Capital Stock......................................................7
3.8 Financial Statements...............................................8
3.9 Subsidiaries.......................................................8
3.10 Defaults..........................................................8
3.11 Litigation........................................................8
3.12 Required Consents.................................................9
3.13 Absence of Undisclosed Liabilities................................9
3.14 Certain Developments..............................................9
3.15 Title/Liens......................................................10
3.16 Condition........................................................10
3.17 Y2K Compliance...................................................10
3.18 Real Estate Leases...............................................10
3.19 Receivables......................................................11
3.20 Inventory........................................................11
3.21 Tax Matters......................................................11
3.22 Executory Contracts..............................................13
3.23 Intellectual Property Rights.....................................14
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TABLE OF CONTENTS (CONTINUED)
3.24 Warranties.......................................................14
3.25 Employees........................................................14
3.26 Employee Benefit Plans...........................................15
3.27 Insurance........................................................16
3.28 Affiliate Transactions...........................................16
3.29 Suppliers........................................................16
3.30 Officers and Directors; Bank Accounts............................16
3.31 Compliance with Laws.............................................16
3.32 Permits..........................................................17
3.33 Environmental Matters............................................17
3.34 No Brokers or Finders............................................18
3.35 Disclosure.......................................................18
3.36 Investment Intent................................................18
IV REPRESENTATIONS AND WARRANTIES OF NEWCO...................................19
4.1 Organization and Standing.........................................19
4.2 Execution, Delivery; Valid and Binding Agreement..................19
4.3 No Breach.........................................................19
4.4 Governmental Authorities; Consents................................19
4.5 No Brokers or Finders.............................................19
4.6 Investment Intent.................................................19
4.7 Disclosure........................................................20
V COVENANTS OF THE COMPANY...................................................20
5.1 Approval..........................................................20
5.2 Conduct of the Business...........................................20
5.3 Access to Books and Records.......................................22
5.4 Regulatory Filings................................................22
5.5 Conditions........................................................22
5.6 No Negotiations...................................................22
5.7 Affiliate Agreements..............................................23
VI COVENANTS OF RIMG AND NEWCO...............................................23
6.1 Regulatory Filings................................................23
6.2 Conditions........................................................23
6.3 Registration......................................................23
VII CLOSING..................................................................25
7.1 Conditions to RIMG's and Newco's Obligations......................25
7.2 Conditions to the Company's Obligations...........................27
VIII TERMINATION.............................................................28
8.1 Termination.......................................................28
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TABLE OF CONTENTS (CONTINUED)
8.2 Effect of Termination.............................................28
IX SURVIVAL; INDEMNIFICATION.................................................29
9.1 Survival of Representations and Warranties........................29
9.2 Indemnification by the Representing Parties.......................29
9.3 Indemnification by RIMG...........................................30
9.4 Method of Asserting Claims........................................31
9.5 Shareholder Agent; Power of Attorney..............................32
X DISPUTE RESOLUTION.........................................................32
10.1 Informal Dispute Resolution......................................32
10.2 Arbitration......................................................33
10.3 Litigation.......................................................34
10.4 Costs and Attorneys' Fees........................................34
XI MISCELLANEOUS.............................................................34
11.1 Press Releases and Announcements.................................34
11.2 Expenses.........................................................34
11.3 Further Assurances...............................................34
11.4 Amendment and Waiver.............................................35
11.5 Notices..........................................................35
11.6 Assignment.......................................................35
11.7 Severability.....................................................35
11.8 Complete Agreement...............................................36
11.9 Counterparts.....................................................36
11.10 Governing Law...................................................36
DESCRIBED ON
EXHIBITS: PAGE...
A Company Shareholders.................................................. 7
B Financial Statements.................................................. 8
C Company Shareholders' Certificate.....................................27
2.5 Escrow Agreement...................................................... 4
5.7 Affiliate Agreement...................................................23
DESCRIBED ON
SCHEDULES: PAGE...
3.7 Capital Stock....................................................... 8
3.9 Subsidiaries........................................................ 8
3.10 Defaults............................................................ 8
3.11 Litigation.......................................................... 8
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TABLE OF CONTENTS (CONTINUED)
DESCRIBED ON
SCHEDULES: PAGE...
3.13 Liabilities......................................................... 9
3.14 Certain Developments................................................ 9
3.15 Liens...............................................................10
3.16 Condition of Assets.................................................10
3.18 Leasehold Interests.................................................10
3.21 Tax Matters.........................................................11
3.22 Executory Contracts.................................................13
3.23(a) Intellectual Property...............................................14
3.24 Warranty Claims.....................................................14
3.25(a) Workers Compensation Claims.........................................15
3.25(b) Employees...........................................................15
3.26 Employee Benefit Plans..............................................15
3.27 Insurance Policies..................................................16
3.28 Affiliate Transactions..............................................16
3.29 Largest Customers/Suppliers.........................................16
3.30 Officers; Bank Accounts.............................................16
3.31 Permits/ Compliance.................................................17
3.33 Environmental Matters...............................................17
3.34 Brokers.............................................................18
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of February 25, 2000, by and between Cedar Technologies, Inc., a
corporation formed under the laws of the State of Minnesota with its principal
offices in Edina, Minnesota (the "Company"); each of the shareholders of the
Company identified as Shareholder Indemnitors on the signature page to this
Agreement (the "Shareholder Indemnitors"); CDR Acquisition, Inc., a corporation
formed under the laws of the State of Minnesota with its principal offices in
Minneapolis, Minnesota ("Newco"); and Rimage Corporation, a corporation formed
under the laws of the State of Minnesota with its principal offices in
Minneapolis, Minnesota ("RIMG").
WHEREAS, the boards of directors of the Company, Newco and RIMG have
each determined that it is in the best interests of their respective companies
to merge (the "Merger") Newco with and into the Company, on the terms and
subject to the conditions set forth in this Agreement.
WHEREAS, as a result of the Merger, all of the outstanding common
stock, no par value, of the Company ("Company Common Stock"), will be converted
into the right to receive common stock, $.01 par value, of RIMG ("RIMG Common
Stock");
WHEREAS, RIMG, Newco, and the Company desire to make certain
representations, warranties, covenants, and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger be
accounted for as a "pooling of interests."
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, and agreements, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time, Newco will be merged with
and into the Company in accordance with the Minnesota Business Corporations Act
("MBCA"), whereupon the separate existence of Newco will cease, and the Company
will continue as the surviving corporation (the "Surviving Corporation").
SECTION 1.2 ARTICLES OF MERGER; EFFECTIVE TIME. As soon as practicable
after satisfaction or, to the extent permitted hereunder, waiver of all
conditions to the Merger set forth in Article VII, the parties will cause the
Merger to be consummated by filing articles of merger (the "Articles of Merger")
with the Secretary of State of the State of Minnesota and make all other filings
or recordings required by MBCA in connection with the Merger and the
transactions contemplated by this Agreement. The Merger will become effective at
such time as the Articles of Merger are duly filed with the Secretary of State
of the State
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of Minnesota or at such later time as may be agreed by the parties in writing
and specified in the Articles of Merger (the "Effective Time").
SECTION 1.3 EFFECT OF MERGER. From and after the Effective Time, the
Surviving Corporation will possess all the rights, privileges, powers, and
franchises and be subject to all of the restrictions, disabilities, and duties
of the Company and Newco, all as provided under Minnesota Law.
SECTION 1.4 CLOSING. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties, which will be
no later than the second business day after satisfaction or waiver of the
conditions set forth in Article VII (the "Closing Date"), at a time and place
and by a method as mutually agreed to by the parties.
SECTION 1.5 ARTICLES OF INCORPORATION; BYLAWS. At the Effective Time,
the articles of incorporation and bylaws of Newco, as in effect immediately
prior to the Effective Time, will be the articles of incorporation and bylaws of
the Surviving Corporation.
SECTION 1.6 DIRECTORS AND OFFICERS. The officers and directors of Newco
immediately prior to the Effective Time will be the initial officers and
directors of the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES;
EXCHANGE OF CERTIFICATES
SECTION 2.1 CONVERSION OF SECURITIES.
(a) Company Common Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of RIMG, Newco, the Company, the
Surviving Corporation or the holders of any of the shares of Company Common
Stock, each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time will be converted into and become a right to receive
the number of shares of the common stock, $.01 par value, of RIMG ("RIMG Common
Stock") as is equal to the Consideration per Share divided by the Fair Market
Value of RIMG Common Stock at the Closing Date (such ratio being hereafter
referred to as the "Exchange Ratio"). The holder of any such share of Company
Common Stock shall be entitled to receive, on and after the Effective Time and
upon surrender of such holder's certificate for Company Common Stock in
accordance with Section 2.5 below, a certificate for the number of shares of
RIMG as is equal to 90%, rounded down the nearest whole number, of the shares
otherwise issuable under this Section 2.1(a) to such holder, and the remaining
shares shall be issued and deposited with the Escrow Agent in accordance with
the Escrow Agreement.
(b) Effect on Stock Options and Warrants. Any option (individually, a
"Stock Option" and, collectively, the "Stock Options") issued pursuant to the
Company's 1996 Stock Option Plan (the "Option Plan") and outstanding immediately
prior to the Effective Time (an "Outstanding Stock Option"), and any warrant to
purchase Company Common Stock outstanding immediately prior to the Effective
Time ("Outstanding Warrants") will be converted into, without any further action
on the part of RIMG or the Surviving Corporation, an option to purchase the
number of shares of RIMG as is equal to the number of shares subject to such
Outstanding Stock Options or Outstanding Warrants immediately prior to the
Effective Time multiplied by the Exchange Ratio, and the exercise price of such
Outstanding Stock Options and Outstanding Warrants will be equal to their
exercise price immediately prior to the Effective Time divided by the Exchange
Ratio. RIMG shall notify each holder of Outstanding Stock Options and
Outstanding Warrants,
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as soon as practicable after the Effective Time, of the number of shares of RIMG
Common Stock, and the exercise price per share of RIMG Common Stock, resulting
from conversion.
(c) Certain Definitions. For purposes of this Section 2.1, the
following terms will have the meanings set forth below:
(i) "Consideration per Share" will mean the quotient of (1)
$10,250,000, less the Seller Brokerage Fee (as such term is defined below) to
the extent an obligation of the Company; divided by (2) the sum of the number of
shares of Company Common Stock outstanding, plus the number of shares of Company
Common Stock reserved for issuance pursuant to Outstanding Stock Options or
Outstanding Warrants immediately prior to the Effective Time.
(ii) "Fair Market Value" per share of RIMG Common Stock will be
deemed to be the average of the closing sale price of RIMG Common Stock of the
NASDAQ Stock Market over the ninety (90) trading days ending (and including) the
third trading day immediately preceding the Closing Date.
SECTION 2.2 DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the contrary, shares
of Company Common Stock that are issued and outstanding immediately prior to the
Effective Time and which are held by shareholders who have not voted such shares
in favor of the Merger, who will have delivered, prior to any vote on the
Merger, a written demand for the fair value of such shares in the manner
provided in Section 302A.473 of the MBCA and who, as of the Effective Time, will
not have effectively withdrawn or lost such right to dissenters' rights
("Dissenting Shares") will not be converted into or represent a right to receive
RIMG Common Stock pursuant to Section 2.1 hereof, but the holders thereof will
be entitled only to such rights as are granted by Section 302A.473 of the MBCA.
Each holder of Dissenting Shares who becomes entitled to payment for such shares
pursuant to Section 302A.473 of the MBCA will receive payment therefor from the
Surviving Corporation in accordance with the MBCA; PROVIDED THAT, if any such
holder of Dissenting Shares will have effectively withdrawn such holder's demand
for the fair value of such shares or lost such holder's right to dissent and
payment of such shares under Section 302A.473 of the MBCA, such holder or
holders (as the case may be) will forfeit the right to the fair value of such
shares and each such share will thereupon be deemed to have been canceled,
extinguished and converted, as of the Effective Time, into and represent the
right to receive payment from the Surviving Corporation of the Merger
Consideration, as provided in Section 2.1 hereof.
(b) The Company will give RIMG (1) prompt notice of any written demand
for fair value, any withdrawal of a demand for fair value and any other
instrument served pursuant to Section 302A.473 of the MBCA received by the
Company, and (2) the opportunity to direct all negotiations and proceedings with
respect to demands for fair value under such Section 302A.473 of the MBCA. The
Company will not, except with the prior written consent of RIMG, voluntarily
make any payment with respect to any demand for fair value or offer to settle or
settle any such demand.
SECTION 2.3 RIGHTS OF HOLDERS OF COMPANY COMMON STOCK. On and after the
Effective Time and until surrendered for exchange, each outstanding stock
certificate (a "Certificate") which immediately prior to the Effective Time
represented shares of Company Common Stock (other than Dissenting Shares) will
be deemed for all purposes, except as provided in Section 2.4, to evidence
ownership of and to represent the right to receive the number of whole shares of
RIMG Common Stock into which such shares of Company Common Stock will have been
converted. The record holder of such outstanding certificate will, after the
Effective
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Time, be entitled to vote the shares of RIMG Common Stock into which such shares
of Company Common Stock will have been converted on any matters on which the
holders of record of RIMG Common Stock, as of any date subsequent to the
Effective Time, will be entitled to vote. In any matters relating to such
certificates, RIMG may rely conclusively upon the record of stockholders
maintained by the Company containing the names and addresses of the holders of
record of Company Common Stock at the Effective Time.
SECTION 2.4 ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio set forth
in Section 2.1 will be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution of
securities convertible into Company Common Stock or RIMG Common Stock),
reorganization, recapitalization or other like change with respect to Company
Common Stock or RIMG Common Stock occurring after the Agreement Date and prior
to the Effective Time.
SECTION 2.5 PAYMENT OF CONSIDERATION FOR COMPANY COMMON STOCK.
(a) As of the Effective Time, RIMG will deposit with Norwest Bank
Minnesota, National Association or such other bank or trust company as may be
designated by RIMG and as is reasonably acceptable to the Company (the "Exchange
Agent"), certificates representing the number of shares of RIMG Common Stock as
is equal to the total number of shares of RIMG Common Stock to be issued to
holders of Company Common Stock pursuant to Section 2.1 hereof, less the number
of shares to be delivered to the Exchange Agent in accordance with subsection
2.5(c) (such shares of RIMG Common Stock being hereafter referred to as the
"Exchange Fund"). The Exchange Agent will hold the Exchange Fund for the benefit
of holders of shares of Company Common Stock. As promptly as practicable after
the Effective Time, RIMG will cause the Exchange Agent to mail to each holder of
record of a Certificate whose shares were converted into the right to receive
shares of RIMG Common Stock pursuant to Section 2.1(a), a letter of transmittal
in customary form. The letter of transmittal will specify that delivery of
Certificates will be effected, and risk of loss and title to the Certificates
will pass, only upon delivery of the Certificates to the Exchange Agent. The
Exchange Agent will accompany the letter of transmittal with instructions for
use in effecting the surrender of the Certificates in exchange for certificates
representing shares of RIMG Common Stock. The Exchange Agent will distribute the
Exchange Fund pursuant to Section 2.1 in exchange for outstanding shares of
Company Common Stock (other than Dissenting Shares). The Exchange Fund will not
be used for any other purpose. RIMG will make available to the Exchange Agent
from time to time as needed, cash sufficient to pay cash in lieu of fractional
shares pursuant to Section 2.5(c). Upon surrender for exchange of each
outstanding certificate of Company Common Stock (other than certificates
representing Dissenting Shares), and subject to delivery of certificates to the
Escrow Agent pursuant to Section 2.5(b), the holder of such certificates shall
receive from the Exchange Agent (i) a certificate representing .90 multiplied by
the number of shares of RIMG Common Stock into which such holder's shares of
Company Common Stock have been converted pursuant to Section 2.1, rounded down
the nearest whole number, (ii) a certification from the Exchange Agent that 10%
of such shares into which the holder's shares have been converted have been
delivered to the Escrow Agent, and (iii) the consideration for fractional shares
specified in Section 2.5(c). Such certificates shall be in a form issued by RIMG
for all RIMG Common Stock and without additional legends or restrictions except
those noted in Section 3.36 of this Agreement or as may be provided in an
Affiliate Agreement.
(b) At the Effective Time, certificates issued in the names of the
holders of Company Common Stock representing a number of shares of RIMG Common
Stock as is equal to ten percent (10%) of the shares of such RIMG Common Stock
deemed issued to each of the Company Shareholders, rounded up to the nearest
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whole share (the "Escrowed Shares"), together with stock powers executed by the
Shareholder Agent on behalf of such Company Shareholders, shall be delivered to
the Escrow Agent to comprise the Escrow Fund as such terms are defined in the
Escrow Agreement dated of even date herewith and attached hereto as Exhibit 2.5.
(c) No fractional shares of RIMG Common Stock, and no certificates
representing such fractional shares, shall be issued upon the surrender for
exchange of certificates representing Company Common Stock. In lieu of any
fractional share, RIMG shall pay to each holder of Company Common Stock who
otherwise would be entitled to receive a fractional share of RIMG Common Stock
an amount of cash (without interest) determined by multiplying (a) the closing
price per share of RIMG Common Stock on the Effective Time times (b) the
fractional share interest to which such holder would otherwise be entitled.
(d) RIMG will pay no dividends and make no other distributions with
respect to RIMG Common Stock with a record date after the Effective Time to the
holder of any unsurrendered Certificate with respect to the shares of RIMG
Common Stock represented thereby, and RIMG will make no cash payment in lieu of
fractional shares to any such holder pursuant to Section 2.5(e) until the holder
of record of such Certificate surrenders such Certificate. Following surrender
of any such Certificate, the Exchange Agent, on behalf of RIMG, will pay to the
record holder of the Certificate representing whole shares of RIMG Common Stock
issued in exchange therefor, without interest, (1) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of RIMG
Common Stock to which such holder is entitled pursuant to Section 2.5(e) 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 RIMG Common
Stock; and (2) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender payable with respect
to such whole shares of RIMG Common Stock.
(e) If any Certificate will have been lost, stolen, or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen, or destroyed, and, if required by the Surviving Corporation,
upon the delivery to the Exchange Agent of a bond in such sum as the Surviving
Corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen, or destroyed Certificate the shares of RIMG Common Stock
and any cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of RIMG Common Stock deliverable in respect thereof,
pursuant to this Agreement.
SECTION 2.6 STOCK OPTIONS.
(a) Each Outstanding Stock Option under the Option Plan will remain
outstanding following the Effective Time.
(b) At the Effective Time, RIMG will assume each Outstanding Stock
Option by virtue of the Merger and without any further action on the part of the
Company or the holders thereof. RIMG will assume each such option in such manner
that RIMG (1) is a corporation "assuming a stock option in a transaction to
which Section 424(a) applies" within the meaning of Section 424 of the Code; or
(2) to the extent that Section 424 of the Code does not apply to any such
Outstanding Stock Option, would be such a corporation were Section 424 of the
Code applicable to such Company Option.
(c) From and after the Effective Time, all references to the Company in
the Outstanding Stock Options and the related stock option agreements will be
deemed to refer to RIMG. After the Effective Time, each Outstanding Stock Option
assumed by RIMG will be exercisable upon the same terms and conditions as were
in effect under the Outstanding Stock Options and the related option agreements
immediately prior to the Effective Time, except that (1) each Outstanding Stock
Option will be exercisable for that whole number
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of shares of RIMG Common Stock (rounded down to the nearest whole share) equal
to the number of shares of Company Common Stock subject to such Outstanding
Stock Option immediately prior to the Effective Time multiplied by the Exchange
Ratio; and (2) the option price per share of RIMG Common Stock will be an amount
equal to the option price per share of Company Common stock subject to such
Outstanding Stock Option in effect immediately prior to the Effective Time
divided by the Exchange Ratio (the option price per share, as so determined,
being rounded upward to the nearest full cent).
SECTION 2.7 WARRANTS.
(a) Each Outstanding Warrant will remain outstanding following the
Effective Time. To the extent permitted by the terms of the Outstanding
Warrants, at the Effective Time, RIMG will assume each Outstanding Warrant, by
virtue of the Merger and without any further action on the part of the Company
or the holders thereof.
(b) To the extent permitted by the terms of the Outstanding Warrants,
from and after the Effective Time, all references to the Company in the
Outstanding Warrants and the related warrant agreements will be deemed to refer
to RIMG. After the Effective Time, each Outstanding Warrant assumed by RIMG will
be exercisable upon the same terms and conditions as were in effect under the
Outstanding Warrants and the related warrant agreements immediately prior to the
Effective Time, except that, to the extent permitted by the terms of the
Outstanding Warrants, (1) each Outstanding Warrant will be exercisable for that
whole number of shares of RIMG Common Stock (rounded down to the nearest whole
share) into which the number of shares of Company Common Stock subject to such
Outstanding Warrant immediately prior to the Effective Time would be converted
under Section 2.1; and (2) the warrant price per share of RIMG Common Stock will
be an amount equal to the warrant price per share of Company Common stock
subject to such Outstanding Warrant in effect immediately prior to the Effective
Time divided by the Exchange Ratio (the warrant price per share, as so
determined, being rounded upward to the nearest full cent).
SECTION 2.8 NOTICES TO OPTION AND WARRANT HOLDERS. As soon as
practicable after the Effective Time, RIMG will deliver to each holder of a
Outstanding Stock Option or Outstanding Warrant, an appropriate notice setting
forth such holder's rights pursuant thereto. RIMG will notify such holders that
the Outstanding Stock Option or Outstanding Warrant, as the case may be, will
continue in effect on the same terms and conditions (including anti-dilution
provisions, and subject to the adjustments required by Sections 2.6 and 2.7
after giving effect to the Merger). RIMG will comply with the terms of each
Outstanding Stock Option or Outstanding Warrant. RIMG will use reasonable
efforts to ensure that each Outstanding Stock Option and Outstanding Warrant, to
the extent it qualifies for special tax treatment prior to the Effective Time
(including, without limitation, Section 422 of the Code), will continue so to
qualify after the Effective Time. RIMG will take all corporate action necessary
to reserve for issuance a sufficient number of shares of RIMG Common Stock for
delivery pursuant to the terms set forth in Sections 2.6 and 2.7. After the
Effective Time (but in no event later than 30 days after the Effective Time),
RIMG will file a Registration Statement on Form S-8 with respect to the shares
of RIMG Common Stock subject to Outstanding Stock Options, and will use its
reasonable efforts to maintain the effectiveness of such registration statement
(and maintain the current status of the prospectus contained therein) for so
long as such options remain outstanding.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to RIMG and Newco to enter into this Agreement
and with the understanding that RIMG and Newco will be relying thereon in
consummating the transactions contemplated hereunder, the Company and each of
the Shareholder Indemnitors (the Company and the Shareholder Indemnitors being
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herein collectively referred to as the "Representing Parties") represent and
warrant the following to RIMG and Newco, except as otherwise disclosed to Newco
in the Schedules hereto. As used below, the phrase "to the best knowledge of the
Representing Parties" means (1) any matter of which the Company, any Shareholder
Indemnitor or any executive of the Company has received written notice; and (2)
the recollection of any Shareholder Indemnitor or any executive manager of the
Company after reasonable investigation of their and the Company's records and
after discussions with their and the Company's advisors made for purposes of
providing the following representations and warranties. Any item disclosed by
the Company on any Schedule hereto will be deemed to be disclosed for the
purposes of all Schedules hereto for which such item is applicable, regardless
of whether such item is disclosed on each Schedule to which it is applicable.
SECTION 3.1 COMPANY SHAREHOLDERS. Exhibit A contains a current,
complete and accurate list of the legal name, address(es) for payment and notice
and applicable tax identification numbers of each holder of securities issued by
the Company (collectively, the "Company Shareholders"). There are no
shareholders or owners of any equity interest in the Company other than the
Company Shareholders.
SECTION 3.2 ORGANIZATION AND STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota. The Company is qualified to do business as a foreign
corporation in every jurisdiction in which the nature of its business or its
ownership of property requires it to be so qualified and in which the failure to
be so qualified would, individually or in the aggregate, have a material adverse
effect on its business as now conducted and presently proposed to be conducted
(such business being hereinafter referred to as the "Company's business").
SECTION 3.3 POWERS. The Company has all right power, capacity and
authority to perform its obligations hereunder. The Company has all requisite
corporate power and authority and all authorizations, licenses, permits and
certifications necessary to own and operate the Company's properties and to
carry on the Company's business.
SECTION 3.4 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT. The
execution, delivery and performance of this Agreement by the Company, and the
performance of the obligations of each Shareholder Indemnitor which is a trust
or other entity, and all other agreements or instruments to be executed by the
Company or the Shareholder Indemnitors pursuant to this Agreement, have been
properly, fully and duly authorized. All agreements or instruments to be
executed pursuant to this Agreement by the Company will constitute, the legal,
valid and binding obligations of each person or entity signing same, which are,
or will be, enforceable against each such person or entity in accordance with
their respective terms.
SECTION 3.5 APPROVAL OF THE PLAN OF MERGER; MEETING OF SHAREHOLDERS.
The Company's Board of Directors has, by resolutions duly adopted at a meeting
held on February ___, 2000, approved this Agreement and the Articles of Merger
and the transactions contemplated hereby and thereby, including the Merger, and
resolved to recommend approval of the Plan of Merger by the Company's
shareholders. None of the resolutions described in this Section 3.5 has been
amended or otherwise modified in any respect since the date of adoption thereof
and all such resolutions remain in full force and effect.
SECTION 3.6 NO BREACH. The execution, delivery and performance of this
Agreement and the Articles of Merger by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby do not conflict with
or result in any breach of any of the provisions of, constitute a default under,
result in a violation of, result in the creation of a right of termination or
acceleration or any lien, security interest, charge or encumbrance upon any
assets of the Company, or require any authorization, consent, approval,
exemption or other action by or notice to any court or other governmental body
(except to the extent the Articles of Merger must be filed), under the
provisions of the Articles of Incorporation or Bylaws of the Company or any
indenture, mortgage, lease, loan agreement or other agreement or instrument by
which the
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Company is bound or affected, or any law, statute, rule or regulation or order,
judgment or decree to which the Company is subject.
SECTION 3.7 CAPITAL STOCK. The authorized capital stock of the Company
consists of 10,000,000 shares of common stock without par value. Five hundred
fifty-four thousand three hundred (554,300) shares of such common stock are
issued and outstanding. All such outstanding shares have been duly authorized
and are validly issued, fully paid and nonassessable. Except as shown in
Schedule 3.7, there are no agreements, rights, subscriptions, warrants, options,
conversion rights or other arrangements requiring the sale or issuance by the
Company of, or providing for the purchase or acquisition from the Company of,
any shares of capital stock or other securities of the Company of any kind.
Except as set forth in Schedule 3.7 or in the capital stock provisions of the
Articles of Incorporation of the Company, there are no agreements or other
obligations (contingent or otherwise) which may require the Company to
repurchase or otherwise acquire any shares of its capital stock. The Company
Shareholders own all right, title and interest in and to the Company Shares,
beneficially and of record.
SECTION 3.8 FINANCIAL STATEMENTS. The Company has delivered to RIMG its
balance sheets as of December 31, 1999 (the "Latest Balance Sheet") and December
31, 1998 and statements of earnings and shareholders' equity and cash flows of
the Company for the twelve-month periods then ended (such statements being
herein referred to as the "Financial Information"). The Financial Information is
attached to this Agreement as Exhibit B. The Financial Information, including
any notes thereto, (1) is in accordance with the books and records of the
Company; (2) presents fairly and accurately in all material respects the
financial condition of the Company as of the dates of the balance sheets; (3)
presents fairly and accurately in all material respects the results of
operations of the Company for the periods covered by such information, subject
in the case of current-fiscal-year information to normal year-end adjustments,
which in the aggregate will not be material; (4) have been prepared in all
material respects on a basis consistent with the preparation of the Company's
prior years' financial statements; (5) include all adjustments (consisting only
of normal recurring accruals) which are necessary for a fair presentation of the
financial condition of the Company and of the results of operations of the
Company's business for the periods covered by such statements; and (6) has been
prepared in accordance with generally accepted accounting principles,
consistently applied throughout the periods indicated, except that the notes
thereto and report thereon have been omitted.
SECTION 3.9 SUBSIDIARIES. Except as otherwise set forth in Schedule
3.9, the Company does not own any stock, partnership interest, joint venture
interest or any other security or ownership interest issued by any other
corporation, organization or entity.
SECTION 3.10 DEFAULTS. To the best knowledge of the Representing
Parties, and except as disclosed in Schedule 3.10, the Company is not in
violation of any provision or portion of (1) the formational documents of the
Company; (2) any indenture, mortgage, lease, loan agreement or other agreement
or instrument; (3) any law, statute, regulation, rule or other governmental
edict; or (4) any judgment, writ, injunction or decree of entered by any court
or tribunal or threatened in any proceeding or action in which the Company is,
was or may be subject or bound or to which any of the Company's assets were, are
or may be subject.
SECTION 3.11 LITIGATION. Except as set forth in Schedule 3.11, neither
the Company, nor to the knowledge of the Representing Parties of the Company
Shareholders, is engaged in any legal action or other proceedings before any
court or administrative agency which would or might prohibit the transactions
contemplated hereby or which would or might materially and adversely affect the
Company, its assets or operations taken as a whole. Except as set forth in
Schedule 3.11, the Company is not a party to any action or proceeding, nor has
either been threatened with any such action or proceeding, nor does there exist
any basis therefor, which will or could have a material adverse effect on the
condition, financial or otherwise, of the
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Company, its assets or operations taken as a whole. Except as set forth in
Schedule 3.11, no order, writ, injunction or decree has been issued by, or
requested of, any court or governmental agency which does or may result in any
material adverse change in the condition, financial or otherwise, of the
Company, its assets or operations taken as a whole. Except as set forth in
Schedule 3.11, to the knowledge of the Representing Parties, the Company is not
liable for damages to any employee or former employee of the Company as a result
of violation of any foreign, state or federal laws directly or indirectly
relating to such employee or former employee.
SECTION 3.12 REQUIRED CONSENTS. The execution, delivery and performance
of this Agreement by the Company and the Shareholder Indemnitors, the Merger and
the consummation by the Company and the Shareholder Indemnitors, directly or
indirectly, (1) conflict with; (2) require the authorization, consent, approval,
exemption or other action of any court or other governmental body (other than is
obtained through the filing of the Articles of Merger) or any person or entity
other than a majority-in-interest of the Company Shareholders under; (3) require
notice to any court or other governmental body under (other than as is provided
through the filing of the Articles of Merger); (4) create a right to terminate
or accelerate under (with a material adverse effect to the Company, its
operations and/or assets); (5) breach in any material respect; (6) constitute a
default under; or (7) create any lien, security interest, charge or encumbrance
upon any of the Company's assets under any provision or portion of (a) the
formational documents of the Company; (b) any indenture, mortgage, lease, loan
agreement or other agreement or instrument; (c) any law, statute, regulation,
rule or other governmental edict; or (d) any judgment, writ, injunction or
decree entered by any court or tribunal or threatened in any proceeding or
action in which the Company is or was subject or bound or to which any of the
Company's assets were or are subject.
SECTION 3.13 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, whether known or unknown, and regardless of when
asserted) arising out of transactions or events heretofore entered into, or any
action or inaction, or any state of facts existing, with respect to or based
upon transactions or events heretofore occurring, except (1) as reflected in the
Latest Financial Statement; (2) liabilities which have arisen after the date of
the Latest Financial Statement in the ordinary course of the Company's business
(none of which is a material uninsured liability for breach of contract, breach
of warranty, tort, infringement, claim or lawsuit); or (3) as otherwise set
forth in Schedule 3.13. Schedule 3.13 shows all guaranties by the Company of any
debt, obligation, cash flow or other item, and no such guaranty is secured by
any asset of the Company or contains a restrictive covenant which restricts the
Company's operations or requires that the Company maintain any specified
financial or other condition.
SECTION 3.14 CERTAIN DEVELOPMENTS. Except as set forth in Schedule
3.14, and other than under this Agreement, since the date of the Latest
Financial Statement through the date of this Agreement, the Company has not (1)
incurred any material obligation or liability (absolute or contingent), other
than current liabilities incurred, and obligations under contracts entered into,
in the ordinary course of the Company's business; (2) discharged or satisfied
any lien or encumbrance or paid any obligation or liability (absolute or
contingent), other than liabilities shown in the Latest Financial Statement or
current liabilities incurred in the ordinary course of the Company's business;
(3) mortgaged, pledged or subjected to lien, charge or other encumbrance any
asset, tangible or intangible, other than the lien of current personal or real
property taxes not yet due and payable; (4) waived any rights of substantial
value, whether or not in the ordinary course of the Company's business; (5)
suffered any damage, destruction or loss, whether or not covered by insurance,
adversely affecting its assets or operations; (6) made or suffered any amendment
or termination of any material contract or any agreement which adversely affects
its operations; (7) received notice or had knowledge of any labor trouble other
than routine grievance matters, none of which is material; (8) increased the
salaries or other compensation of any of its directors, officers or employees or
made any increase in other benefits to which such
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directors, officers or employees may be entitled; (9) increased the
consideration paid to any consultant or other contractor of the Company; (10)
sold, assigned, transferred or otherwise disposed of any of its assets or
canceled any debts or claims, other than in the ordinary course of the Company's
business; (11) revalued any of its assets; (12) except as contemplated under
this Agreement, amended or terminated any existing employee benefit plan or
arrangement, adopted any new employee benefit plan or arrangement or made any
commitment or incurred any liability to any labor organization; (13) disclosed
any confidential information possessed by the Company to any person other than
RIMG or Newco, except under a confidentiality agreement prohibiting the use or
further disclosure of such information, which agreement is identified in
Schedule 3.6(d); (14) declared or paid any dividends with respect to any of the
Company's capital stock, or redeemed or purchased, directly or indirectly, any
shares of the Company's capital stock or options to purchase same; (15) except
to the extent required under Company Options or Outstanding Warrants, issued,
sold or transferred any of its equity securities, securities convertible into or
exchangeable for its equity securities or warrants, options or other rights to
acquire its equity securities, or any bonds or debt securities; (16) made any
gifts (other than incidental gifts of articles of nominal value) or charitable
contributions in excess of $1,000 in the aggregate; (17) made any material
change in accounting principles or practices from those utilized in the
preparation of the Latest Financial Statement; (18) entered into any material
transactions not in the ordinary course of the Company's business; or (19)
experienced any other change in the Company's assets, financial condition,
operating results, customer, employee or supplier relations, business condition
or prospects which is materially adverse to the Company.
SECTION 3.15 TITLE/LIENS. The Company does not own, and has never
owned, any real estate. The Company owns good and marketable title to each of
the tangible properties and tangible assets reflected on the Latest Financial
Statement or acquired since the date thereof, free and clear of all liens and
encumbrances, except for (1) liens for current taxes not yet due and payable;
(2) properties subject to the Real Estate Leases (as defined in Section 3.18) or
any personal property leases; (3) assets disposed of since the date of the
Latest Financial Statement in the ordinary course of the Company's business; (4)
liens imposed by law and incurred in the ordinary course of the Company's
business for obligations not yet due to carriers, warehousemen, laborers and
materialmen; (5) liens in respect of pledges or deposits under workers'
compensation laws, which liens aggregate less than $1,000; and (6) those liens
described in Schedule 3.15 (the foregoing items (1) through (6) being
collectively referred to herein as "Permitted Liens").
SECTION 3.16 CONDITION. Except as shown on Schedule 3.16, all of the
Company's buildings, machinery, equipment and other tangible assets are in good
condition and repair, ordinary wear and tear excepted, and are usable in the
ordinary course of the Company's business. There are no defects in such assets
or other conditions relating thereto which, in the aggregate, materially
adversely affect the operation or value of such assets.
SECTION 3.17 Y2K COMPLIANCE. To the extent that such items are part of
the Assets, the Company's computer software, computer hardware, digital
processor-based systems and other, similar or related items of automated,
computerized, digitized or software systems that are developed, sold, used or
relied upon by the Company (collectively, the "Information Technology") are
designed to be used before, on and after January 1, 2000. The Information
Technology used during each such time period will accurately receive, provide
and process date/time data (including without limitation, calculating, comparing
and sequencing such data) from, into and between the 20th and the 21st
centuries, including the years 1999 and 2000 and leap-year calculations, and
will not malfunction, cease to function or provide invalid or incorrect results
as a result of such processing of date/time data.
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SECTION 3.18 REAL ESTATE LEASES.
(a) Leasehold Interest. The real property demised by the leases
described in Schedule 3.18 (the "Real Estate Leases") constitutes all of the
real property used or occupied by the Company (the "Leased Real Estate"). Except
as set forth in Schedule 3.18(a), the Company holds a valid and existing
leasehold interest under each of the Real Estate Leases for the term set forth
therein. To the best knowledge of the Representing Parties, no party to any Real
Estate Lease is in default.
(b) Assessments. The Company has no knowledge of improvements made or
contemplated to be made by any public or private authority, the costs of which
are to be assessed as special taxes or charges against any of the real estate
subject to the Real Estate Leases, and there are no present assessments.
SECTION 3.19 RECEIVABLES. The accounts receivable, notes receivable and
other receivables of the Company reflected in the Financial Information are
valid and enforceable obligations due to the Company and, to the extent they
exceed, in the aggregate, the reserve for bad debts set forth in the Latest
Financial Statement will be collectible after Closing in the ordinary course of
the Company's business. The goods and services sold and delivered by the Company
that gave rise to such accounts and notes receivable were sold and delivered in
material conformity with the applicable purchase orders, agreements and
specifications. Such accounts and notes receivable are subject to no valid
defense or offset except routine customer complaints of an immaterial nature.
SECTION 3.20 INVENTORY. All inventories reflected in the Latest
Financial Statement are stated at the lower of cost or market value and, as so
stated, meet the Company's specifications, are regularly offered from current
price lists and are not custom made, and are usable or salable in the category
in which they are inventoried in the ordinary course of the Company's business,
without discount from the prices generally charged for like inventory other than
normal trade discounts regularly offered by the Company for prompt payment or
quantity purchase. The finished goods and merchandise in such inventory is of
merchantable quality, and the work-in-process in such inventory is capable of
being manufactured into finished goods answering that description. All packaging
inventories are adequate in quantity to enable finished goods inventories to be
packaged and shipped in accordance with the Company's past practices for a
period of at least 45 days subsequent to the Closing Date.
SECTION 3.21 TAX MATTERS.
(a) Compliance. Except as set forth in Schedule 3.21(a), each of the
Company and any subsidiary, any affiliated, combined or unitary group of which
the Company or any subsidiary is or was a member, any Plans (as such term is
defined in Section 3.26), as the case may be (each, a "Tax Affiliate" and,
collectively, the "Tax Affiliates"), has: (1) timely filed (or has had timely
filed on its behalf) all returns, declarations, reports, estimates, information
returns, and statements ("Returns") required to be filed or sent by it in
respect of any Taxes (as such term is defined in Section 3.21(p) below) or
required to be filed or sent by it by any taxing authority having jurisdiction;
(2) timely and properly paid (or has had paid on its behalf) all Taxes shown to
be due and payable on such Returns; (3) established on its Latest Financial
Statement, in accordance with generally accepted accounting principles, reserves
that are adequate for the payment of any Taxes related to periods ending on or
before the Latest Balance Sheet Date that are not yet due and payable; and (4)
complied with all applicable laws, rules, and regulations relating to the
withholding of Taxes and the payment thereof (including without limitation
withholding of Taxes under Sections 1441 and 1442 of the Code, or similar
provisions under any foreign laws), and timely and properly withheld from
individual employee wages and paid over to the proper governmental authorities
all amounts required to be so withheld and paid over under all applicable laws.
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(b) Liens. There are no liens for Taxes upon any assets of the Company
or of any Tax Affiliate, except liens for Taxes not yet due.
(c) Deficiencies. No deficiency for any Taxes has been proposed,
asserted or assessed against the Company or the Tax Affiliates that has not been
resolved and paid in full. No waiver, extension or comparable consent given by
the Company or the Tax Affiliates regarding the application of the statute of
limitations with respect to any Taxes or Returns is outstanding, nor is any
request for any such waiver or consent pending. There has been no Tax audit or
other administrative proceeding or court proceeding with regard to any Taxes or
Returns, nor is any such Tax audit or other proceeding pending, nor has there
been any notice to the Company by any Taxing authority regarding any such Tax,
audit or other proceeding, or, to the best knowledge of the Representing
Parties, is any such Tax audit or other proceeding threatened with regard to any
Taxes or Returns. The Company does not expect the assessment of any additional
Taxes of the Company or the Tax Affiliates and is not aware of any unresolved
questions, claims or disputes concerning the liability for Taxes of the Company
or the Tax Affiliates which would exceed the estimated reserves established on
its books and records.
(d) Excess Parachute Payments. Neither the Company nor any Tax
Affiliate is a party to any agreement, contract or arrangement that would
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code and the consummation of
the transactions contemplated by this Agreement will not be a factor causing
payments to be made by the Company or any Tax Affiliate that are not deductible
(in whole or in part) under Section 280G of the Code.
(e) Extensions. Neither the Company nor any Tax Affiliate has requested
any extension of time within which to file any Return, which Return has not
since been filed.
(f) Tax-Exempt Status. No property of the Company or any Tax Affiliate
is property that the Company or any Tax Affiliates is or will be required to
treat as being owned by another person under the provisions of Section 168(f)(8)
of the Code (as in effect prior to amendment by the Tax Reform Act of 1986) or
is "tax-exempt use property" within the meaning of Section 168 of the Code.
(g) Income Adjustments. Neither the Company nor any Tax Affiliate is
required to include in income any adjustment under Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Company or
any Tax Affiliate as a result of the Tax Reform Act of 1986 and neither the
Company nor any Tax Affiliate has knowledge that the Internal Revenue Service
has proposed any such adjustment or change in accounting method.
(h) Understatements, Overstatements. All transactions that could give
rise to an understatement of federal income tax (within the meaning of Section
6661 of the Code as it applied prior to repeal) or an underpayment of tax
(within the meaning of Section 6662 of the Code) were reported in a manner for
which there is substantial authority or were adequately disclosed (or, with
respect to Returns filed before the Closing Date, will be reported in such a
manner or adequately disclosed) on the Returns required in accordance with
Sections 6661(b)(2)(B) and 6662(d)(2)(B) of the Code.
(i) Consistency Periods. Neither the Company nor any Tax Affiliate has
engaged in any transaction that would result in a deemed election under Section
338(e) of the Code, and neither the Company nor any Tax Affiliate will engage in
any such transaction within any applicable "consistency period" (as such term is
defined in Section 338 of the Code).
(j) Consents. Neither the Company nor any Tax Affiliate has filed any
consent under Section 341(f) of the Code.
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(k) Evidence of Foreign Tax Payments. The Company and the Tax
Affiliates have evidence of payment for any taxes, charges, fees, levies, or
other assessments of a foreign country paid or accrued from the date of the
formation of each of them, respectively.
(l) Subpart F Income. Neither the Company nor any Tax Affiliate, to the
extent they are "controlled foreign corporations" within the meaning of Section
957 of the Code, have now or have had at any time in the past "subpart F income"
within the meaning of Section 952 of the Code.
(m) Corporation Status. The Company and the Tax Affiliates are, and at
all times have been, corporations or associations taxable as corporations for
United States income tax purposes.
(n) FSC. Any "FSC" (within the meaning of Section 922 of the Code) has
been properly operated in accordance with the provisions of Sections 921-927 of
the Code.
(o) Royalty Payments. All deductions claimed or reported on all Returns
of the Company and any Tax Affiliate on account of royalties or similar fees
payable with respect to any intellectual property of the Company or any other
party are allowable in full.
(p) Taxes Defined. For purposes of this Agreement, the term "Taxes"
means all taxes, charges, fees, levies, or other assessments, including without
limitation all net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll, employment, social
security, unemployment, excise, estimated, severance, stamp, occupation,
property, or other taxes, customs duties, fees, assessments, or charges of any
kind whatsoever, including without limitation all interest and penalties
thereon, and additions to tax or additional amounts imposed by any taxing
authority, domestic or foreign, upon the Company or any Tax Affiliate.
SECTION 3.22 EXECUTORY CONTRACTS.
(a) Schedule 3.22 describes the following Executory Contracts, whether
oral or written, to which the Company is a party, to the extent such agreements
are not set forth in other schedules: (1) each contract between the Company and
any dealer, distributor, broker, agent or sales representative; (2) each
executory or partially executory contract, agreement, or commitment by the
Company for delivery of its products or services over a period of more than
thirty (30) days from the date of this Agreement and for aggregate payments to
or by the Company of more than $10,000 in any year; (3) each contract, agreement
or arrangement made in the course of ordinary business by the Company involving
an expenditure of more than $10,000 for the purchase of any services, materials,
supplies or equipment; (4) each contract or commitment for capital expenditures
in excess of $10,000; (5) each contract continuing over a period of more than
twelve (12) months from its date, which is not terminable by the Company without
cause or penalty upon not more than thirty (30) days' notice; (6) each agreement
for the sale of any capital asset other than fully-depreciated, obsolete
equipment or equipment no longer used or useful in the Company's business; (7)
each employment contract or agreement relating thereto between the Company and
any officer, consultant, director or employee, including any bonus, incentive or
deferred compensation plans, any confidentiality or non-compete agreements, and
any arrangements which encourage or compensate the Company's employees to accept
employment or stay with the Company following the Closing Date; (8) each plan or
contract or arrangement of the Company providing for pensions, life insurance,
medical insurance, disability insurance, vacations, and other employees'
benefits or compensation plans, whether formal or informal; (9) each agreement,
if any, with any union covering employees in the bargaining unit represented by
such union; (10) each agreement not made in the ordinary course of the Company's
business; (11) each contract or agreement relating to the Intangible Property,
including without limitation all nondisclosure agreements; (12) each agreement
not otherwise listed on other Schedules to which the Company is a party or which
has, or may have, a material effect on the Company, its operations or assets;
(13) each lease or agreement under which it is lessee of, or holds or operates
any personal property
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owned by any other party; (14) each stock purchase or stock option plan; (15)
each agreement where the Company has agreed to restrict the scope or nature of
its business; (16) each agreement or indenture relating to the borrowing of
money or to mortgaging, pledging or otherwise placing a lien on any of the
assets.
(b) Except as shown on Schedule 3.22, to the best knowledge of the
Representing Parties, the Company has performed in all material respects all
obligations required to be performed by it in connection with the contracts or
commitments required to be disclosed in Schedule 3.22 and is not in receipt of
any claim of default under any contract or commitment required to be disclosed
under such schedule; the Company has no present expectation or intention of not
fully performing any material obligation under any contract or commitment
required to be disclosed under such schedule; and the Company has no knowledge
of any breach or anticipated breach by any other party to any contract or
commitment required to be disclosed under such schedule.
(c) True and correct copies of each executory contract has been
furnished by the Company to RIMG.
SECTION 3.23 INTELLECTUAL PROPERTY RIGHTS.
(a) Schedule 3.23 describes all rights in patents, patent applications,
trademarks, service marks, trade names, corporate names, copyrights, mask works,
trade secrets or other intellectual property rights owned by, licensed to or
otherwise controlled by the Company or used in, developed for use in or
necessary to the conduct of the business of the Company as now conducted or
planned to be conducted (the "Intellectual Property Rights"). The Company owns
and possesses all right, title and interest, or holds a valid license, in and to
the rights set forth in Schedule 3.23. Schedule 3.23 sets forth all products
marketed or that have been marketed by the Company within the past two years and
identifies the method of intellectual property protection utilized by the
Company with respect to each such product. Schedule 3.23 describes all
Intellectual Property Rights which have been licensed to third parties (other
than license to end-users in accordance with a shrink-wrap license in the
ordinary course of business) and those Intellectual Property Rights which are
licensed from third parties. Except as disclosed in Schedule 3.23, the Company
has the right to assign and transfer to the Newco all of the Intellectual
Property Rights in accordance with the transactions contemplated by this
Agreement, without the requirement that any consent to assignment or any
payment.
(b) The Company has taken such action to protect the Intellectual
Property Rights as is necessary for the Company to use such rights in its
business as currently conducted or currently contemplated without the payment of
royalties or penalties (except as set forth in Schedule 3.23). Without limiting
the generality of the foregoing, except as set forth in Schedule 3.23, all
employees, contract workers, consultants and other agents of the Company have
executed agreements sufficient to vest in the Company ownership or the right to
use the Intellectual Property Rights on which they have performed services in
the business of the Company as currently conducted without the payment of
royalties or penalties. Except as set forth in Schedule 3.23, the Company has
not received any notice of, nor are there any facts known to the Company which
indicate a likelihood of, any infringement or misappropriation by, or conflict
from, any third party with respect to the Intellectual Property Rights; no claim
by any third party contesting the validity of any Intellectual Property Rights
has been made, is currently outstanding or, to the best knowledge of the
Representing Parties, is threatened; the Company has not received any notice of
any infringement, misappropriation or violation of any intellectual property
rights of any third parties and, to the best knowledge of the Representing
Parties, the Company has not infringed, misappropriated or otherwise violated
any such intellectual property rights; and, to the best knowledge of the
Representing Parties, no infringement, illicit copying, misappropriation or
violation has occurred or will occur with respect to products currently being
sold by the Company or with respect to the products currently under development
(in their present state of development) or with respect to the conduct of the
business of the Company as now conducted.
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SECTION 3.24 WARRANTIES. Schedule 3.24 summarizes all claims in excess
of $10,000 outstanding, pending or, to the best knowledge of the Representing
Parties, threatened for breach of any warranty relating to any products or
services sold by the Company prior to the date hereof. The description of the
Company's product warranties set forth in Schedule 3.24 is correct and complete.
The reserves for warranty claims on the Latest Financial Statement are
consistent with the Company's prior practices and are fully adequate to cover
all warranty claims made or to be made against any products of the Company sold
prior to the date thereof.
SECTION 3.25 EMPLOYEES. (1) To the best knowledge of the Representing
Parties, and except with respect to the resignation of William MacMahon, no
executive employee of the Company and no group of three or more Company
employees has any plans to terminate his, her or its employment; (2) the Company
has complied in all material respects with all laws relating to the employment
of labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes; (3) the Company has no material labor relations problem pending; (4)
except as shown on Schedule 3.25(a), there are no workers' compensation claims
pending against the Company nor is the Company aware of any facts that would
give rise to such a claim; (5) to the best knowledge of the Representing
Parties, no employee of the Company is subject to any secrecy or noncompetition
agreement or any other agreement or restriction of any kind that would impede in
any way the ability of such employee to carry out fully all activities of such
employee in furtherance of the Company's business; and (6) no employee or former
employee of the Company has any material, valid claim with respect to any
Intangible Property. Schedule 3.25(b) lists each employee of the Company and the
position, title, remuneration (including any scheduled salary or remuneration
increases), date of employment of each such employee, and the amount of annual
paid vacation to which each such employee is entitled.
SECTION 3.26 EMPLOYEE BENEFIT PLANS. Except a set forth in Schedule
3.26, with respect to all employees and former employees of the Company and all
dependents and beneficiaries of such employees and former employees, (1) the
Company does not maintain or contribute to any nonqualified deferred
compensation or retirement plans, contracts or arrangements; (2) the Company
does not maintain or contribute to any qualified defined contribution plans (as
such term is defined in Section 3(34) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or Section 414(i) of the Code; (3) the
Company does not maintain or contribute to any qualified defined benefit plans
(as such term is defined in Section 3(35) of ERISA or Section 414(j) of the
Code); and (4) the Company does not maintain or contribute to any employee
welfare benefit plans as such term is defined in Section 3(1) of ERISA.
(a) Compliance. To the extent required (either as a matter of law or to
obtain the intended tax treatment and tax benefits), all employee benefit plans
(as such term is defined in Section 3(3) of ERISA) which the Company maintains
or to which it contributes (collectively, the "Plans") comply in all material
respects with the requirements of ERISA and the Code. With respect to the Plans,
(1) all required contributions which are due have been made and a proper accrual
has been made for all contributions due in the current fiscal year; (2) there
are no actions, suits or claims pending, other than routine uncontested claims
for benefits; and (3) there have been no prohibited transactions (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code).
(b) Copies to RIMG or Newco. RIMG or Newco has received true and
complete copies of (1) the most recent determination letter, if any, received by
the Company from the Internal Revenue Service regarding the Plans which the
Company maintains or to which it contributes and any amendment to any Plan made
subsequent to any Plan amendments covered by any such determination letter; (2)
the most recent financial statements and annual report or return for the Plans;
and (3) the most recently prepared actuarial valuation reports.
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(c) Multi-Employer Plans. The Company does not contribute (and has not
ever contributed) to any multi-employer plan, as such term is defined in Section
3(37) of ERISA. The Company has no actual or potential liabilities under Section
4201 of ERISA for any complete or partial withdrawal from a multi-employer plan.
The Company has no actual or potential liability for death or medical benefits
after separation from employment, other than (1) death benefits under the
employee benefit plans or programs (whether or not subject to ERISA) set forth
in Schedule 3.26; and (2) health care continuation benefits described in Section
4980B of the Code.
(d) Fiduciary Breach. To the best knowledge of the Representing
Parties, neither the Company nor any of its directors, officers, employees or
other "fiduciaries," as such term is defined in Section 3(21) of ERISA, has
committed any breach of fiduciary responsibility imposed by ERISA or any other
applicable law with respect to the Plans which would subject the Company, RIMG,
RIMG's affiliates or any of their respective directors, officers or employees to
any liability under ERISA or any applicable law.
(e) Disqualification. The Company has not incurred any liability for
any tax or civil penalty or any disqualification of any employee benefit plan
(as such term is defined in Section 3(3) of ERISA) imposed by Sections 4980B,
162(k) and 4975 of the Code and Part 6 of Title I and Section 502(i) of ERISA.
SECTION 3.27 INSURANCE. Schedule 3.27 lists and briefly describes each
insurance policy maintained by the Company with respect to the Company's
properties, assets and operations and sets forth the date of expiration of each
such insurance policy. All of such insurance policies are in full force and
effect and are issued by insurers of recognized responsibility. The Company is
not in default with respect to its obligations under any of such insurance
policies.
SECTION 3.28 AFFILIATE TRANSACTIONS. Other than as provided for or
permitted under this Agreement, and except as shown on Schedule 3.28, no
officer, director or employee of the Company or any member of the immediate
family of any such officer, director or employee, or any entity in which any of
such persons owns any beneficial interest (other than any publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than one percent of the stock of which is
beneficially owned by any of such persons; collectively "insiders"), has any
agreement with the Company (other than normal employment arrangements) or any
interest in any property, real, personal or mixed, tangible or intangible, used
in or pertaining to the Company's business (other than ownership of capital
stock of the Company). Except as set forth on Schedule 3.28, none of the
insiders has any direct or indirect interest in any competitor, supplier or
customer of the Company or in any person, firm or entity from whom or to whom
the Company leases any property, or in any other person, firm or entity with
whom the Company transacts business of any nature. For purposes of this Section
3.28, the members of the immediate family of an officer, director or employee
will consist of the spouse, parents, children, siblings, mothers- and
fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law of
such officer, director or employee.
SECTION 3.29 SUPPLIERS. Schedule 3.29 lists the suppliers of the
Company for the fiscal year ended December 31, 1999 and sets forth opposite the
name of each such supplier the approximate percentage of purchases by the
Company attributable to such supplier for such period. Since December 31, 1999,
to the best knowledge of the Representing Parties, no supplier listed in
Schedule 3.29 has indicated that it will stop or materially decrease the rate of
business done with the Company except for changes in the ordinary course of the
Company's business, unless otherwise indicated on Schedule 3.29.
SECTION 3.30 OFFICERS AND DIRECTORS; BANK ACCOUNTS. Schedule 3.30 lists
all officers and directors of the Company and all of the Company's bank or other
deposit, procurement, brokerage or other accounts (designating each person
authorized to sign checks or authorize transactions, and any applicable limits).
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SECTION 3.31 COMPLIANCE WITH LAWS.
(a) Compliance. Except as set forth in Schedule 3.16, 3.31(a) or 3.32,
to the best knowledge of the Representing Parties, the Company and its officers,
directors and employees have, in conducting the Company's business, complied in
all material respects with all applicable laws, regulations and other
requirements, including without limitation federal, state, local and foreign
laws, ordinances, rules, regulations and other requirements pertaining to
product labeling, consumer products safety, equal employment opportunity,
employee retirement and other hiring practices, occupational safety and health,
workers' compensation, unemployment and building and zoning codes, which
materially affect the Company's business and to which the Company is subject,
and no claims have been filed against the Company alleging a violation of any
such laws, regulations or other requirements. The Company is not relying on any
exemption from or deferral of any such applicable law, regulation or other
requirement that would not be available to the Company after Closing, except if
the unavailability of any such item to the Company is the result of (1) RIMG's
status as a publicly-traded corporation; or (2) RIMG's operations outside of the
United States.
SECTION 3.32 PERMITS. (a) The Company has, in full force and effect,
all authorizations, licenses, permits and certificates, from all governmental
entities necessary to conduct the Business and own and operate its assets
(collectively, the "Permits"). A true, correct and complete list of all the
Permits is set forth in Schedule 3.31. The Company has conducted its Business in
compliance with all material terms and conditions of the Permits.
(b) Gifts. The Company has not made or agreed to make gifts of money,
other property or similar benefits (other than incidental gifts of articles of
nominal value) to any actual or potential customer, supplier, governmental
employee or any other person in a position to assist or hinder the Company in
connection with any actual or proposed transaction.
(c) OSHA. In particular, but without limiting the generality of the
foregoing, the Company is not in material violation of, and to the best
knowledge of the Representing Parties has no liability and has not received a
notice or charge asserting any violation of or liability under, the federal
Occupational Safety and Health Act of 1970 or any other federal or state acts
(including rules and regulations thereunder) regulating or otherwise affecting
employee health and safety.
SECTION 3.33 ENVIRONMENTAL MATTERS.
(a) Definitions. As used in this Section 3.32 the following terms will
have the following meanings:
(i) "Hazardous Materials" means any dangerous, toxic or hazardous
pollutant, contaminant chemical, waste, material or substance as defined in or
governed by any federal, state or local law, statute, code, ordinance,
regulation, rule or other requirement relating to such substance or otherwise
relating to the environment or human health or safety, including without
limitation any waste, material, substance, pollutant or contaminant that might
cause any injury to human health or safety or to the environment or might
subject the Company to any imposition of costs or liability under an
Environmental Law.
(ii) "Environmental Laws" means all applicable federal, state,
local and foreign laws, rules regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments in effect an as adopted as of the
date of this Agreement relating to pollution, contamination or protection of the
environment (including without limitation all applicable federal, state, local
and foreign laws, rules, regulations, codes ordinances, orders, decrees,
directives, permits, licenses and judgments relating to Hazardous Materials in
effect and as adopted as of the date of this Agreement).
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(iii) "Release" means the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any other
release or threatened release, however defined, whether intentional or
unintentional, of any Hazardous Material.
(b) Compliance. Except as shown in Schedule 3.16, 3.31(a) or 3.32, the
Company and the Leased Real Estate are in material compliance with all
applicable Environmental Laws.
(c) Storage, Removal. Except as set forth in Schedule 3.32(c), to the
best knowledge of the Representing Parties: (1) no Hazardous Materials have been
generated, treated, contained, handled, located, used, manufactured, processed,
buried, incinerated, deposited, stored, or released on or under any part of the
Leased Real Estate; (2) the Leased Real Estate and any improvements thereon,
contain no asbestos, formaldehyde, radon at levels above natural background, or
Hazardous Materials outside the ordinary course of the Company's business using
sound environmental practices, or polychlorinated biphenyls (PCB's); and (3) no
storage tanks are located on or under the Leased Real Estate which are required
to be diked under applicable state law. If any such storage tanks exist on or
under the Leased Real Estate, such storage tanks have been duly registered with
all appropriate governmental entities and are otherwise in material compliance
with all applicable Environmental Laws, except where failure to so comply would
not have a material adverse effect on the Company's business.
(d) Notice of Responsibility. Except as set forth in Schedule 3.32(c),
the Company has not received written notice alleging in any manner that the
Company is, or might be potentially responsible for any Release of Hazardous
Materials, or any costs arising under or violation of Environmental Laws.
(e) No Expenditure Required for Compliance. Except as shown in Schedule
3.16, 3.31(a) or 3.32, no material expenditure will be required after Closing to
comply with any Environmental Laws in effect at the time of the Closing in
connection with the operation or continued operation of the business of the
Company or the Real Estate in a manner consistent with the current operation
thereof by the Company.
(f) Uses. No part of the Company's business of the Leased Real Estate
have been used as (1) a landfill or dump; or (2) other disposal, storage,
transfer, handling or treatment area for Hazardous Materials, or as a gasoline
service station or a facility for selling, dispensing, storing, transferring,
disposing or handling petroleum and/or petroleum products.
(g) Waiver. Each of the Representing Parties and their successors and
assigns hereby waive, release and agree not to bring any claim, demand, cause of
action or proceeding, including without limitation any cost recovery action,
against RIMG, RIMG's affiliates or any of their respective directors, officers
or employees under any Environmental Law for any act or omission occurring with
respect to the Leased Real Estate during the time the Company has a possessory
interest in the Leased Real Estate.
SECTION 3.34 NO BROKERS OR FINDERS. Except for a fee due Gerald J.
Shaugnessy in the amount of approximately $260,000 (the "Seller Brokerage Fee")
or as otherwise set forth in Schedule 3.34, no person, firm or corporation has
or will have, as a result of any act or omission of the Company and or any of
the Company Shareholders, any right, interest or valid claim against RIMG or
Newco for any commission, fee or other compensation as a finder or broker in
connection with the transactions contemplated by this Agreement.
SECTION 3.35 DISCLOSURE. Neither this Agreement, any of the exhibits or
schedules hereto, any of the Affiliate Agreements, nor any of the financial
statements referred to in Section 3.7 contains any untrue statement of a
material fact regarding the Company or its business or any of the other matters
dealt with in this Article III relating to the Company or the transactions
contemplated by this Agreement. This Agreement, the exhibits and schedules
hereto, the Affiliate Agreements and the financial statements referred to in
Section 3.7, taken as a whole, do not omit any material fact necessary to make
the statements contained herein or therein,
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in light of the circumstances in which they were made, not misleading, and there
is no fact which has not been disclosed to RIMG or Newco of which any officer or
director of the Company is aware which materially affects adversely or could
reasonably be anticipated to materially affect adversely the business, including
operating results, assets, customer relations, employee relations and business
prospects, of the Company.
SECTION 3.36 INVESTMENT INTENT. Each of the Company Shareholders
receiving RIMG Common Stock is acquiring the RIMG Common Stock for its own
account with the present intention of holding the RIMG Common Stock for
investment purposes and not with a view to or for sale in connection with any
distribution of the RIMG Common Stock in violation of any applicable securities
law. Each such Company Shareholder will refrain from transferring or otherwise
disposing of any of the RIMG Common Stock, or any interest therein, in such
manner as to cause Newco to be in violation of the registration requirements of
the Securities Act of 1933, as amended, or applicable state securities or blue
sky laws. Each Shareholder understands that each certificate representing the
RIMG Common Stock will be "restricted securities" within the meaning of Rule 144
under the Securities Act of 1933 and will be imprinted with the following
legend, restricting the transferability such shares:
"The securities represented by this certificate may not be transferred
without (i) an opinion of counsel satisfactory to the corporation that
such transfer may lawfully be made without registration or
qualification under the Securities Act of 1933 or applicable state
securities laws; or (ii) such registration or qualification."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWCO AND RIMG
RIMG and Newco hereby represent and warrant to the Company Shareholders
that:
SECTION 4.1 ORGANIZATION AND STANDING. RIMG and Newco are corporations
duly organized, validly existing and in good standing under the laws of their
respective states of incorporation, with the requisite corporate power and
authority to enter into this Agreement and perform their obligations hereunder.
SECTION 4.2 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT. The
execution, delivery and performance of this Agreement by RIMG and Newco and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action, and no other corporate proceedings
on its part are necessary to authorize the execution, delivery or performance of
this Agreement. This Agreement has been duly executed and delivered by RIMG and
Newco and constitutes the valid and binding obligation of RIMG and Newco,
enforceable in accordance with its terms.
SECTION 4.3 NO BREACH. The execution, delivery and performance of this
Agreement by RIMG and Newco and the consummation by RIMG and Newco of the
transactions contemplated hereby do not conflict with or result in any breach of
any of the provisions of, constitute a default under, result in a violation of,
result in the creation of a right of termination or acceleration or any lien,
security interest, charge or encumbrance upon any assets of RIMG or Newco, or
require any authorization, consent, approval, exemption or other action by or
notice to any court or other governmental body, under the provisions of RIMG's
or Newco's formational documents or bylaws or any indenture, mortgage, lease,
loan agreement or other agreement or instrument by which either RIMG or Newco is
bound or affected, or any law, statute, rule or regulation or order, judgment or
decree to which either RIMG or Newco is subject.
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SECTION 4.4 GOVERNMENTAL AUTHORITIES; CONSENTS. Neither RIMG nor Newco
is required to submit any notice, report or other filing with any governmental
authority in connection with the execution or delivery by it of this Agreement
or the consummation of the transactions contemplated hereby. No consent,
approval or authorization of any governmental or regulatory authority or any
other party or person is required to be obtained by RIMG or Newco in connection
with its execution, delivery and performance of this Agreement or the
transactions contemplated hereby.
SECTION 4.5 NO BROKERS OR FINDERS. No person, firm or corporation has
or will have, as a result of any act or omission of RIMG or Newco, any right,
interest or valid claim against the Company Shareholders for any commission, fee
or other compensation as a finder or broker in connection with the transactions
contemplated by this Agreement.
SECTION 4.6 INVESTMENT INTENT. RIMG is acquiring the Company Shares for
its own account with the present intention of merging the Company shortly after
Closing into one of its affiliates and to thereafter operate the business and
assets of the Company and not with a view to or for sale in connection with any
distribution of the Company Shares in violation of any applicable securities
law. RIMG, Newco and their affiliates will refrain from transferring or
otherwise disposing of any of the Company Shares, or any interest therein, in
such manner as to cause the Company Shareholders to be in violation of the
registration requirements of the Securities Act of 1933, as amended, or
applicable state securities or blue sky laws.
SECTION 4.7 DISCLOSURE. RIMG has previously provided the Company with
copies of current disclosure reports required to be filed by RIMG with the
Securities and Exchange Commission under the Act or the Securities Exchange Act
of 1934, as amended (collectively, the "RIMG Disclosure Reports"). The RIMG
Disclosure Reports are in material compliance with the law and regulations
pursuant to which they were prepared, and, taken as a whole, do not omit any
material fact necessary to make the statements contained therein, in light of
the circumstances in which they were made, not misleading, and there is no fact
which has not been included in the RIMG Disclosure Reports which materially
affects adversely or could reasonably be anticipated to materially affect
adversely the business, including operating results, assets, customer relations,
employee relations and business prospects, of RIMG, taken as whole except for
economic factors generally pertaining to the regions and industries in which
RIMG and its affiliates operate.
ARTICLE V
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees with RIMG and Newco as follows:
SECTION 5.1 APPROVAL. The Company shall take, in accordance with
applicable law, and its articles of incorporation and by-laws, all action
necessary to convene an appropriate meeting of the Company Shareholders, or
obtain unanimous written consent, to consider and vote upon the approval and
adoption of this Agreement and the Merger (including the issuance of the shares
of RIMG Common Stock to be issued in the Merger pursuant to this Agreement). The
board of directors of the Company shall recommend such approval, and the Company
shall take all reasonable lawful action to solicit such approval by the Company
Shareholders. The Company shall coordinate and cooperate with respect to the
timing of its meetings and shall use its respective best efforts to hold such
meeting as soon as practicable after the date of this Agreement. As soon as
possible after the date of this Agreement, the Company and RIMG shall cooperate
in the preparation of a proxy statement and other proxy solicitation materials
of the Company for such meeting (the "Proxy Statement"). The Company and RIMG
will use reasonable efforts to cause the Proxy Statement to be mailed to the
Company Shareholders as promptly as practicable after date hereof.
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SECTION 5.2 CONDUCT OF THE BUSINESS. The Company will observe each term
set forth in this Section 5.2 and agrees that, from the date hereof until the
Closing Date, unless otherwise required or specifically permitted by this
Agreement or consented to by RIMG or Newco in writing:
(a) Ordinary Course. The Company's business will be conducted only in,
and the Company will not take any action except in, the ordinary course, on an
arm's-length basis and in accordance in all material respects with all
applicable laws, rules and regulations and the Company's past custom and
practice.
(b) Securities. The Company will not, directly or indirectly, do or
permit to occur any of the following: (1) except for the issuance of common
stock upon the exercise of Outstanding Stock Options or Outstanding Warrants,
issue or sell any additional shares of, or any options, warrants, conversion
privileges or rights of any kind to acquire any shares of, any of its capital
stock; (2) sell, pledge, dispose of or encumber any of its assets, except in the
ordinary course of the Company's business; (3) amend or propose to amend its
articles of incorporation or bylaws; (4) split, combine or reclassify any
outstanding shares of Common Stock, or declare, set aside or pay any dividend or
other distribution payable in cash, stock, property or otherwise with respect to
shares of Common Stock or any other securities of the Company; (5) redeem,
purchase or acquire or offer to acquire any shares of Common Stock or other
securities of the Company; (6) acquire (by merger, exchange, consolidation,
acquisition of stock or assets or otherwise) any corporation, partnership, joint
venture or other business organization or division or material assets thereof;
(7) incur any indebtedness for borrowed money or issue any debt securities
except the borrowing of working capital in the ordinary course of the Company's
business and consistent with past practice; (8) permit, in the aggregate, more
than $10,000 in accounts payable owed to trade creditors to remain outstanding
more than 60 days unless and to the extent any such account payable is disputed
by the Company in writing and in good faith; (9) accelerate, beyond the normal
collection cycle, collection of accounts receivable; or (10) enter into or
propose to enter into, or modify or propose to modify, any agreement,
arrangement or understanding with respect to any of the matters set forth in
this Section 5.3(b).
(c) Compensation. Except for transactions contemplated by this
Agreement, the Company will not, directly or indirectly, (1) enter into or
modify any employment, severance or similar agreements or arrangements with, or
grant any (a) salary increases in excess of the lower of 10% for any individual
employee or $50,000 in aggregate annualized increases, (b) severance benefits,
or (c) termination pay to, any officers or directors or consultants; (2) in the
case of employees, officers or consultants who earn in excess of $20,000 per
year, take any action with respect to the grant of any salary increases,
severance or termination pay or with respect to any increase of benefits payable
in effect on the date hereof; or (3) grant any bonuses to any employee or
contractor not reserved for in the Latest Financial Statement.
(d) Benefit Plans. The Company will not adopt or amend any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, trust, fund or group
arrangement for the benefit or welfare of any employees or any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
arrangements for the benefit or welfare of any director.
(e) Insurance. The Company will not cancel or terminate its current
insurance policies or cause any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than the coverage under the
canceled, terminated or lapsed policies for substantially similar premiums are
in full force and effect.
(f) Organization. The Representing Parties will (1) use their best
efforts to preserve intact the Company's business organization and goodwill,
keep available the services of the Company's officers and employees as a group
and maintain satisfactory relationships with suppliers, distributors, customers
and others
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having business relationships with the Company; (2) confer on a regular and
frequent basis with representatives of RIMG and Newco to report operational
matters and the general status of ongoing operations; (3) not intentionally take
any action which would render, or which reasonably may be expected to render,
any representation or warranty made by it in this Agreement untrue at the
Closing; (4) notify RIMG and Newco of any emergency or other change in the
normal course of the Company's business or in the operation of the Company's
properties and of any governmental or third party complaints, investigations or
hearings (or communications indicating that the same may be contemplated) if
such emergency, change, complaint, investigation or hearing would be material,
individually or in the aggregate, to the business, operations or financial
condition of the Company or to the Company's, the Company Shareholders', RIMG's
or Newco's ability to consummate the transactions contemplated by this
Agreement; and (5) promptly notify RIMG and Newco in writing if the Representing
Parties discover that any representation or warranty made by them or the Company
in this Agreement was when made, or has subsequently become, untrue in any
respect.
(g) Taxes. The Company will (1) file any Tax returns, elections or
information statements with respect to any liabilities for Taxes of the Company
or other matters relating to Taxes of the Company which under applicable law
must be filed with respect to periods ending on and before the Closing Date; (2)
promptly upon filing provide copies of any such Tax returns, elections or
information statements to RIMG and Newco; (3) make any such Tax elections or
other discretionary positions with respect to Taxes taken by or affecting the
Company only upon prior consultation with and consent of RIMG and Newco; and (4)
not amend any Return.
(h) Certain Developments. The Company will not perform any act
referenced by (or omit to perform any act which omission is referenced by) the
terms of Section 3.14.
SECTION 5.3 ACCESS TO BOOKS AND RECORDS.
(a) Between the date hereof and the Closing Date, the Company will
afford to RIMG, Newco and their authorized representatives full access at all
reasonable times and upon reasonable notice to the offices, properties, books,
records, officers, employees and other items of the Company, and the work papers
of KPMG Peat Marwick relating to work done by such firm with respect to the
Financial Information, and otherwise provide such assistance as is reasonably
requested by RIMG or Newco in order that RIMG and Newco may have a full
opportunity to make such investigation and evaluation as it will reasonably
desire to make of the business and affairs of the Company.
(b) All information furnished by the Company pursuant hereto shall be
treated as the sole property of the Company until the Effective Time, and, if
the Effective Time shall not occur, RIMG shall return to the Company all
documents or other materials (including copies thereof) containing, reflecting
or referring to such information. In addition, RIMG shall keep confidential all
such information and shall not directly or indirectly use such information for
any competitive or other commercial purpose. The obligation to keep such
information confidential shall not apply to (i) any information which (A) was
already in the RIMG's possession prior to the disclosure thereof to RIMG by the
Company, (B) was then generally known to the public, (C) became known to the
public through no fault of RIMG or its representatives, (D) was disclosed to
RIMG by a third party not bound by an obligation of confidentiality, or (E) is
independently developed by RIMG without access to the Company's information, or
(ii) disclosures required by law, governmental or regulatory authority.
SECTION 5.4 REGULATORY FILINGS. The Company will make or cause to be
made all filings and submissions under any laws or regulations applicable to the
Company for the consummation of the transactions contemplated herein. The
Company will coordinate and cooperate with RIMG in exchanging such information,
will not make any such filing without providing to RIMG a final copy thereof for
its review and consent at least
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two full business days in advance of the proposed filing and will provide such
reasonable assistance as RIMG may request in connection with all of the
foregoing.
SECTION 5.5 CONDITIONS. The Company will take all commercially
reasonable actions necessary or desirable to cause the conditions set forth in
Section 8.1 to be satisfied and to consummate the transactions contemplated
herein as soon as reasonably possible after the satisfaction thereof (but in any
event within three business days of such date).
SECTION 5.6 NO NEGOTIATIONS. Until termination of this Agreement, the
Representing Parties (as such term is defined in Article III) will not, directly
or indirectly, through any officer, director, agent or otherwise, solicit,
initiate or encourage submission of any proposal or offer from any person or
entity (including any of its or their officers or employees) relating to any
liquidation, dissolution, recapitalization, merger, consolidation or acquisition
or purchase of all or a material portion of the assets of, or any equity
interest in, the Company or other similar transaction or business combination
involving the Company, or, unless the Company's board of directors is advised by
the Company's outside counsel in writing to the effect that there would be a
material risk of liability on the part of the Company's board of directors to
the Company Shareholders for failure to do so, participate in any negotiations
regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person or entity to do or seek any
of the foregoing. The Company will promptly notify RIMG and Newco if any such
proposal or offer, or any inquiry from or contact with any person with respect
thereto, is made and will promptly provide RIMG or Newco with such information
regarding such proposal, offer, inquiry or contact as RIMG may request.
SECTION 5.7 AFFILIATE AGREEMENTS. Each of the Shareholder Indemnitors
agree to execute on or before the Closing Date an affiliate agreement
substantially in the form of the attached Exhibit 5.7 (the "Affiliate
Agreements").
ARTICLE VI
COVENANTS OF RIMG AND NEWCO
RIMG and Newco covenant and agree with the Company as follows:
SECTION 6.1 REGULATORY FILINGS. RIMG will make or cause to be made all
filings and submissions under any laws or regulations applicable to RIMG for the
consummation of the transactions contemplated herein. RIMG will coordinate and
cooperate with the Company in exchanging such information, will not make any
such filing without providing to the Company a final copy thereof for its review
and consent at least two full business days in advance of the proposed filing
and will provide such reasonable assistance as the Company may request in
connection with all of the foregoing.
SECTION 6.2 CONDITIONS. RIMG and Newco will take all commercially
reasonable actions necessary or desirable to cause the conditions set forth in
Section 8.2 to be satisfied and to consummate the transactions contemplated
herein as soon as reasonably possible after the satisfaction thereof (but in any
event within three business days of such date).
SECTION 6.3 REGISTRATION.
(a) Shelf Registration.
(i) Best Efforts. RIMG shall use its best efforts to prepare and
file with the Securities and Exchange Commission (the "SEC"), as soon as
practicable after the Effective Time, a shelf registration statement on Form S-3
(or, in RIMG's sole discretion, on any appropriate form under the Securities Act
as may
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then be available to RIMG) relating to the resale of the RIMG Common Stock
acquired by the Company Shareholders and not deposited pursuant to the Escrow
Agreement, or that may be acquired upon exercise of Outstanding Warrants
(collectively, the "Registrable Securities") by the Holders in accordance with
the methods of distribution set forth in such registration statement (which
shall not include, without the consent of RIMG (which may be granted or withheld
in RIMG's sole discretion) an underwritten offering) and Rule 415 under the
Securities Act (hereafter, the "Shelf Registration Statement"), and shall use
its best efforts to cause the Shelf Registration Statement to be declared
effective by the SEC as soon as reasonably practicable thereafter; provided,
however, that RIMG shall not be required to file or cause such Shelf
Registration Statement to become effective prior to the earnings release of RIMG
that contains financial information regarding RIMG for a period ending at least
thirty (30) days after the Effective Time.
(ii) Effective Period. RIMG agrees to use its best efforts to
keep the Shelf Registration Statement continuously effective for a period
commencing on the effective date thereof and terminating on the earlier of
twenty-four months after the Effective Time or twelve months after exercise of
all Outstanding Warrants (the "Effective Period"), or such shorter period that
shall terminate when all the Registrable Securities covered by the Shelf
Registration Statement have been sold, in order to permit the prospectus
included in the Shelf Registration Statement to be usable by the Holders.
(iii) Black-out Period. Without limiting the provisions of
Section 6.3(a)(ii), RIMG may condition the participation of any holder of
Registrable Securities in the Shelf Registration Statement to an agreement not
effect any sale of RIMG Common Stock pursuant to the Shelf Registration
Statement for any period deemed necessary by RIMG in connection with any
proposal or plan by RIMG to engage in any material financing or material
acquisition or disposition by RIMG or any subsidiary thereof of the capital
stock or substantially all the assets of any other person (other than in the
ordinary course of business), any tender offer or any merger, consolidation,
corporate reorganization or restructuring or other similar transaction (each, a
"Business Combination") material to RIMG and its subsidiaries taken as a whole.
Any period within the Effective Period during which RIMG fails to keep the Shelf
Registration Statement effective and usable for resales of RIMG Common Stock, or
requires pursuant to this Section 6.3(a)(iii) that the Holders not effect sales
of RIMG Common Stock pursuant to the Shelf Registration Statement, is hereafter
referred to as a "Suspension Period." A Suspension Period shall commence on the
date set forth in a written notice by RIMG (which RIMG shall use good faith
efforts (consistent with legal and contractual obligations) to deliver to the
Holders not less than five business days in advance of any proposed or
anticipated suspension date) to the Holders that the Shelf Registration
Statement is no longer effective or that the prospectus included in the Shelf
Registration Statement is no longer usable for resales of RIMG Common Stock or,
in the case of a suspension pursuant to this Section 6.3(a)(iii) the date
specified in the notice delivered by RIMG pursuant to this Section 6.3(a)(iii),
and shall end on the date when each Holder of RIMG Common Stock covered by the
Shelf Registration Statement either receives the copies of the supplemented or
amended prospectus contemplated by Section 6.3(b)(v) or is advised in writing by
RIMG that use of the prospectus or sales may be resumed. Rimage shall use its
best efforts to ensure that no Suspension Period lasts longer than 90 days.
(b) Registration Procedures. RIMG shall:
(i) cause the Shelf Registration Statement and the related
prospectus and any amendment or supplement thereto, as of the effective date of
the Shelf Registration Statement, or such amendment or supplement, (A) to comply
in all material respects with the applicable requirements of the Securities Act
of 1933 (the "Securities Act") and the rules and regulations of the SEC
promulgated under the Securities Act and (B) not to contain any untrue statement
of a material fact o omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading;
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(ii) promptly prepare and file with the SEC such amendments and
supplements to the Shelf Registration Statement and the prospectus used in
connection with the Shelf Registration Statement as may be necessary to keep the
Shelf Registration Statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such Shelf Registration Statement until the earlier of such time as
all such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the Holder or Holders thereof set forth in
the Shelf Registration Statement (which shall not include, without the consent
of RIMG (which may be granted or withheld in RIMG's sole discretion) an
underwritten offering) and termination of the Effective Period;
(iii) furnish to each Holder of such Registrable Securities such
number of conformed copies of such Shelf Registration Statement and of each such
amendment and supplement thereto (in each case including all exhibits) such
number of copies of the prospectus included in the Shelf Registration Statement
(including any summary prospectus), in conformity with the requirements of the
Securities Act, such documents, if any, as may be incorporated by reference in
the Shelf Registration Statement or prospectus, and such other documents, as
such Holder may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by the Shelf Registration Statement
under such securities or Blue Sky laws of the states of the United States as
each Holder of such Registrable Securities shall reasonably request, to keep
such registration or qualification in effect for so long as the Shelf
Registration Statement remains in effect (subject to the limitations in Section
6.3(a)), and do any and all other acts and things which may be necessary or
advisable to enable such Holder to consummate the disposition in such
jurisdictions of its Registrable Securities covered by such Shelf Registration
Statement, except that RIMG shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction in
which it is not and would not, but for the requirements of this Section
6.3(b)(iv), be obligated to be so qualified, or to subject itself to taxation in
any such jurisdiction, or to consent to general service of process in any such
jurisdiction;
(v) immediately notify each Holder of Registrable Securities
covered by the Shelf Registration Statement, at any time when a prospectus or
prospectus supplement relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in the Shelf Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing which untrue statement or omission requires amendment of the Shelf
Registration Statement or supplementation of the prospectus, and promptly
thereafter prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; provided, however, that each Holder of Registrable Securities
registered pursuant to the Shelf Registration Statement agrees that such Holder
will not sell any Registrable Securities pursuant to the Shelf Registratio
Statement during the time that RIMG is preparing and filing with the SEC a
supplement to or an amendment of such prospectus or registration statement;
(vi) otherwise use its best effort to comply with all applicable
rules and regulations of the SEC; and
(vii) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the Shelf Registration
Statement from and after a date not later than the effective date of the Shelf
Registration Statement.
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Each Holder of Registrable Securities as to which any registration is being
effected shall furnish to RIMG such information regarding such Holder and the
distribution of such Registrable Securities as RIMG may from time to time
reasonably request and as shall be required by law or by the SEC in connection
therewith.
ARTICLE VII
CLOSING
The Closing will take place at the Minneapolis, Minnesota offices of
Dorsey & Whitney LLP, at 10:00 a.m. on the Closing Date, or at such other place
and on such other date as is mutually agreeable to RIMG and the Company. The
Closing will be effective as of the close of business on the Closing Date.
SECTION 7.1 CONDITIONS TO RIMG'S AND NEWCO'S OBLIGATIONS. The
obligation of RIMG and Newco to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following conditions on or
before the Closing Date:
(a) Shareholder Approval; No Dissenting Shares. The transactions
contemplated by this Agreement will have been approved by the Company
Shareholders, and there shall be no Dissenting Shares.
(b) Representations and Warranties. Except as may be specifically
waived by RIMG in writing, the representations and warranties set forth in
Article III shall be true and correct in all material respects at and as of the
Closing Date as though then made and as though the Closing Date had been
substituted for the date of this Agreement throughout such representations and
warranties (without taking into account any disclosures by the Company of
discoveries, events or occurrences arising on or after the date hereof), except
that any such representation or warranty made as of a specified date (other than
the date hereof) will only need to have been true on and as of such date.
(c) Covenants. The Company shall have performed in all material
respects all of the covenants and agreements required to be performed and
complied with by it under this Agreement prior to the Closing.
(d) Approvals. The Company shall have obtained, or caused to be
obtained, each consent and approval necessary in order that the transactions
contemplated herein not constitute a breach or violation of, or result in a
right of termination or acceleration of, or creation of any encumbrance on any
of the Company's assets under the provisions of, any agreement, license,
franchise or permit, arrangement or undertaking of or affecting the Company or
the Company's business.
(e) Litigation. Except to the extent asserted by Rimage, there will not
be threatened, instituted or pending any action or proceeding, before any court
or governmental authority or agency, domestic or foreign, (1) challenging or
seeking to make illegal, or to delay or otherwise directly or indirectly
restrain or prohibit, the consummation of the transactions contemplated hereby
or seeking to obtain material damages in connection with such transactions; (2)
seeking to prohibit direct or indirect ownership or operation after Closing of
all or a material portion of the business or assets of the Company and its
subsidiaries, or to compel RIMG, Newco or any of their affiliates to dispose of
or to hold separately all or a material portion of the business or assets of the
Company, as a result of the transactions contemplated hereby; (3) seeking to
require direct or indirect transfer or sale by RIMG of any of the Company
Shares; (4) seeking to invalidate or render unenforceable any material provision
of this Agreement or any of the Affiliate Agreements; or (5) otherwise relating
to and materially adversely affecting the transactions contemplated hereby.
(f) Orders. There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated hereby
by any federal, state or foreign court, government or governmental authority or
agency,
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which would reasonably be expected to result, directly or indirectly, in any of
the consequences referred to in Section 7.1(e).
(g) Provision of Schedules. The Company shall have provided to RIMG the
schedules called for by this Agreement, and shall have updated such Schedules
through the Closing Date, and such schedules shall be acceptable in RIMG's sole
discretion.
(h) Material Adverse Discovery. RIMG or Newco shall not have discovered
any fact or circumstance existing as of the date of this Agreement which has not
been disclosed to RIMG or Newco as of the date of this Agreement regarding the
business, assets, properties, condition (financial or otherwise), results of
operations or prospects of the Company which is, individually or in the
aggregate with other such facts and circumstances, materially adverse to the
Company.
(i) Damage. There will have been no damage, destruction or loss of or
to any property or properties owned or used by the Company, whether or not
covered by insurance, which, in the aggregate, has, or would be reasonably
likely to have, a material adverse effect on the Company.
(j) Opinion of the Company's Accountants. RIMG or Newco shall have
received from KPMG Peat Marwick, Rimage's independent certified public
accountants, a written opinion, dated as of the Closing Date, addressed to RIMG
and Newco and satisfactory to RIMG, stating that the transaction will qualify
for the pooling of interest method of accounting on RIMG's consolidated
financial statements.
(k) Documents. On the Closing Date, the Company shall have delivered to
RIMG and Newco all of the following:
(i) Certificates. The certificates of each Shareholder
Indemnitor, substantially in the form set forth in Exhibit C attached hereto,
dated the Closing Date, stating that the conditions precedent set forth in
Sections 7.1(d) and 7.1(c) above have been satisfied.
(ii) Consents. Copies of the third party and governmental
consents and approvals referred to in Section 7.1(d).
(iii) Corporate Records. The Company's minute books, stock
transfer records, corporate seal and other materials related to the Company's
corporate administration.
(iv) Resignations. Resignations (effective as of the Closing
Date) from such of the Company's officers and members of the Company's Board of
Directors as RIMG will have requested prior to the Closing Date.
(v) Good Standing. A copy of the Company's articles of
incorporation of the Company, certified by the secretary of state of the State
of Minnesota.
(vi) Affiliate Agreements. A copy of each of the Affiliate
Agreements executed by each party thereto.
(vii) Articles of Merger. An executed copy of Articles of Merger
executed by each party thereto, other than RIMG and Newco.
(viii) Other Documents. Such other certificates, documents and
instruments as RIMG or Newco reasonably requests related to the transactions
contemplated hereby.
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SECTION 7.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of
the Company Shareholders to consummate the transactions contemplated by this
Agreement are subject to the satisfaction of the following conditions on or
before the Closing Date:
(a) Representations and Warranties. The representations and warranties
of RIMG and Newco set forth in Article IV will be true and correct in all
material respects at and as of the Closing as though then made and as though the
Closing Date had been substituted for the date of this Agreement throughout such
representations and warranties.
(b) Covenants. RIMG and Newco will have performed in all material
respects all the covenants and agreements required to be performed by it under
this Agreement prior to the Closing.
(c) Litigation. There will not be threatened, instituted or pending any
action or proceeding, before any court or governmental authority or agency,
domestic or foreign, (1) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions; (2) seeking to invalidate or render
unenforceable any material provision of this Agreement or any of the Affiliate
Agreements; or (3) otherwise relating to and materially adversely affecting the
transactions contemplated hereby.
(d) Orders. There will not be any action taken or any statute, rule,
regulation, judgment, order or injunction, enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated hereby
by any federal, state or foreign court, government or governmental authority or
agency, which would reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in Section 8.2(c).
(e) Documents. On the Closing Date, RIMG and Newco will have delivered
to the Company:
(i) Resolutions and Bylaws. A copy of each of (1) the text of the
resolutions adopted by the board of directors of RIMG and Newco authorizing the
execution, delivery and performance of this Agreement and the consummation of
all of the transactions contemplated by this Agreement; and (2) the bylaws of
RIMG and Newco, along with certificates executed on behalf of each entity by its
respective corporate secretary certifying to the Company that such copies are
true, correct and complete copies of such resolutions and bylaws, respectively,
and that such resolutions and bylaws were duly adopted and have not been amended
or rescinded.
(ii) Incumbency Certificates. Incumbency certificates executed on
behalf of Newco and RIMG by their respective corporate secretaries certifying
the signature and office of each officer executing this Agreement or any of the
Affiliate Agreements.
(iii) Affiliate Agreements. A copy of each of the Affiliate
Agreements executed by RIMG or Newco, as the case may be.
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ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual consent of (1) RIMG or Newco; and (2) the Company;
(b) by either (1) RIMG or Newco; or (2) the Company if there has been a
material misrepresentation, breach of warranty or breach of covenant on
the part of the other in the representations, warranties and covenants
set forth in this Agreement;
(c) by either (1) RIMG or Newco; or (2) the Company if the transactions
contemplated hereby have not been consummated by March 31, 2000;
PROVIDED THAT, neither RIMG, Newco nor the Company will be entitled to
terminate this Agreement under this Section 8.1(c) if such party's
willful breach of this Agreement has prevented the consummation of the
transactions contemplated hereby;
(d) by RIMG or Newco if after the date hereof there will have been a
material adverse change in the financial condition or business of the
Company or if an event will have occurred which, so far as reasonably
can be foreseen, would result in any such change, except to the extent
such change is directly caused by RIMG and/or Newco;
(e) by the Company in the event the last sale price of RIMG Common
Stock as quoted by the Nasdaq is below $12.00 during any of the three
trading days prior to the Closing Date.
SECTION 8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by RIMG, Newco or the Company as provided in this Article VIII, this
Agreement will become void and there will be no liability on the part of either
RIMG, Newco or the Company, or their respective shareholders, officers, or
directors, except that Sections 5.3(b), 11.1 and 11.2 will survive such
termination, and except with respect to willful breaches of this Agreement prior
to the time of such termination.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
SECTION 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding
any investigation made by or on behalf of any of the parties hereto or the
results of any such investigation and notwithstanding the participation of such
party in the Closing, the representations and warranties contained in Articles
III and IV will survive the Closing for a period of three years following the
Closing Date.
SECTION 9.2 INDEMNIFICATION BY THE COMPANY AND THE REPRESENTING
PARTIES.
(a) Subject to the limitations of Section 9.2(b), the Company and the
Company Shareholders, prior to the Effective Time, jointly and severally agree,
and the Company Shareholders, after the Effective Time, agree, to indemnify in
full RIMG and Newco and their respective officers, directors, employees, agents
and shareholders (collectively, the "RIMG Indemnified Parties") and hold them
harmless against any loss, liability, deficiency, damage, expense or cost
(including reasonable legal expenses), whether or not actually incurred or paid
(collectively, "Losses"), which RIMG Indemnified Parties may suffer, sustain or
become subject to, prior to the third anniversary of the Effective Time, as a
result of (i) any misrepresentation in any of the representations and warranties
of the Company and the Shareholder Indemnitors contained in this Agreement or in
any exhibits, schedules, certificates or other documents delivered or to be
delivered by or on behalf of the
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Company or the Shareholder Indemnitors pursuant to the terms of this Agreement
or in the Affiliate Agreements, (ii) any breach of, or failure to perform, any
agreement of the Company and the Shareholder Indemnitors contained in this
Agreement or any of the Affiliate Agreements, or (iii) any "Claims" (as defined
in Section 9.4(a) hereof) or threatened Claims against RIMG arising out of the
actions or inactions of the Company or the Shareholder Indemnitors with respect
to the Company's business prior to the Effective Time (collectively, "RIMG
Losses"), provided, however, that neither the Company nor the Company
Shareholders shall be in any way obligated to provide indemnity for any breach
of the representation contained in Section 3.23 that arises out of any claim by
RIMG that the Company's products, property, services or rights infringe or
conflict with the products, property, services or rights of RIMG.
(b) The Company and the Company Shareholders will be liable to the RIMG
Indemnified Parties for any RIMG Loss (i) only if RIMG or Newco delivers to the
Company and the Company Shareholders written notice, setting forth in reasonable
detail the identity, nature and amount of RIMG Losses related to such claim or
claims prior to the third anniversary of the Effective Time; and (ii) only if
the aggregate amount of all RIMG Losses exceeds $100,000 ("the Basket Amount"),
in which case the Company and the Company Shareholders shall be obligated to
indemnify the RIMG Indemnified Parties only for the excess of the aggregate
amount of all such RIMG Losses over the Basket Amount. With respect to any
Company Shareholder who is not a Shareholder Indemnitor, RIMG's sole recourse
with respect to any RIMG Loss shall be to the Escrowed Shares and with respect
to any RIMG Loss arising during the term of the Escrow Agreement, RIMG shall
proceed first against the Escrowed Shares before proceeding against any
Shareholder Indemnitor and any indemnity from the Escrow Fund shall be pro rata
among all Company Shareholders based on the number of Escrowed Shares issued in
such Shareholders' names. No individual Shareholder Indemnitor shall be liable
for any RIMG Loss, other than with respect to such portion of such liability as
may be covered by the Escrow Fund, to the extent such liability would exceed (i)
the aggregate value of the RIMG Common Stock issued in the name of the
Shareholder Indemnitor on the Closing Date (based on the last sale price of the
RIMG Common Stock on the Closing Date), (ii) plus the difference between the
aggregate value of the RIMG Common Stock issuable upon exercise of Outstanding
Options and Outstanding Warrants held by such Shareholder Indemnitor on the
Closing Date and the aggregate exercise price of such Outstanding Options and
Outstanding Warrants. In no event will any Shareholder Indemnitor be liable to
any RIMG Indemnified Party, other than with respect to the portion of such
liability as may be covered by the Escrow Fund, with respect to (1) any matter
known to another Shareholder Indemnitor that was not known by and would not
reasonably be expected to be known by such Shareholder Indemnitor; (2) for any
breach of a representation and warranty relating to the capacity or power of any
other Company Shareholder; or (3) for any breach of the representations and
warranties contained in Sections 3.8, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16,
3.17, 3.18, 3.19, 3.20, 3.22, 3.24, 3.25, 3.27, 3.28, 3.29, 3.31, 3.32, 3.33,
and 3.34, for which RIMG or Newco has not delivered notice to the Shareholder
Indemnitors within one year after the Effective Time. RIMG or Newco's failure to
provide the detail required by clause (i) above shall not constitute either a
breach of this Agreement by RIMG or Merger Subsidiary or any basis for the
Company or a Shareholder Indemnitor to assert that RIMG or Merger Subsidiary did
not comply with the terms of this Section 9.2 sufficient to cause either RIMG or
Merger Subsidiary to have waived its rights under this Section 9.2 unless such
failure shall have adversely affected the ability of an Indemnitor to defend a
Claim. Notice to the Company Shareholders shall for all purposes of this Section
9.2 be considered delivered when delivered to the Escrow Agent (if delivered
prior to one year from the Effective Time) or to John Kubinski (if delivered on
or after one year from the Effective Time).
(c) Any Company Shareholder that is liable for a RIMG Loss pursuant to
Section 9.2 shall contribute to any RIMG Indemnified Loss in the same proportion
that the number of shares of RIMG Common Stock received by such Company
Shareholder on the Closing Date bears to the total number of shares of RIMG
Common Stock issued on the Closing Date to all Company Shareholders liable for
such RIMG Loss. To the extent any Company Shareholder contributes in excess of
such amount, such Company Shareholder shall have
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a right of contribution from each other Company Shareholder. No Company
Shareholder, as such, shall have any right of indemnity or contribution from the
Company after the Closing Date with respect to the breach of any representation
or warranty under this Agreement. No Company Shareholder shall be obligated to
contribute to any other Company Shareholder with respect to a Loss to the extent
such Loss shall have been caused by a breach by such other Indemnifying Party.
SECTION 9.3 INDEMNIFICATION BY RIMG.
(a) Subject to the limitations of Section 9.3(b), RIMG agrees to
indemnify in full the Company and the Company's officers, directors, employees,
agents and stockholders (collectively, the "Company Indemnified Parties") and
hold them harmless against any Losses which any of the Company Indemnified
Parties may suffer, sustain or become subject to, prior to the third anniversary
of the Effective Time, as a result of (i) any misrepresentation in any of the
representations and warranties of RIMG and Newco contained in this Agreement or
in any of the Affiliate Agreements, (ii) any breach of, or failure to perform,
any agreement of RIMG or Newco contained in this Agreement or any of the
Affiliate Agreements, or (iii) any Claims or threatened Claims against the
Company or the Shareholder Indemnitors arising out of the actions or inactions
of RIMG or Newco with respect to the Company's business after the Effective Time
(collectively, "Company Losses").
(b) RIMG will be liable to the Company Indemnified Parties for any
Company Loss (i) only if the Company delivers to RIMG and Newco written notice,
setting forth in reasonable detail the identity, nature and amount of Company
Losses related to such claim or claims prior to the third anniversary of the
Effective Time and (ii) only if the aggregate amount of all Company Losses
exceeds the Basket Amount, in which case RIMG shall be obligated to indemnify
the Company Indemnified Parties only for the excess of the aggregate amount of
all such Company Losses over the Basket Amount. The Company's failure to provide
the detail required by clause (i) in the preceding sentence shall not constitute
either a breach of this Agreement by the Company or any basis for RIMG or Newco
to assert that the Company did not comply with the terms of this Section 9.3
sufficient to cause either the Company to have waived its rights under this
Section 9.3
SECTION 9.4 METHOD OF ASSERTING CLAIMS. As used herein, an "Indemnified
Party" shall refer to a "RIMG Indemnified Party" or "Company Indemnified Party,"
as applicable, the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Losses (any such third party action or proceeding being referred to as
a "Claim"), the Notifying Party shall give the Indemnifying Party prompt notice
thereof. The failure to give such notice shall not affect any Indemnified
Party's ability to seek reimbursement unless such failure has materially and
adversely affected the Indemnifying Party's ability to defend successfully a
Claim. The Indemnifying Party shall be entitled to contest and defend such
Claim; provided, that the Indemnifying Party (i) has a reasonable basis for
concluding that such defense may be successful and (ii) diligently contests and
defends such Claim. Notice of the intention so to contest and defend shall be
given by the Indemnifying Party to the Notifying Party within 20 business days
after the Notifying Party's notice of such Claim (but, in all events, at least
five business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the Indemnifying Party. The Notifying Party shall be entitled at any
time, at its own cost and expense (which expense shall not constitute a Loss
unless the Notifying Party reasonably determines that the Indemnifying Party is
not adequately representing or, because of a conflict of interest, may
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<PAGE>
not adequately represent, any interests of the Indemnified Parties, and only to
the extent that such expenses are reasonable), to participate in such contest
and defense and to be represented by attorneys of its or their own choosing. If
the Notifying Party elects to participate in such defense, the Notifying Party
will cooperate with the Indemnifying Party in the conduct of such defense.
Neither the Notifying Party nor the Indemnifying Party may concede, settle or
compromise any Claim without the consent of the other party, which consents will
not be unreasonably withheld. Notwithstanding the foregoing, (i) if a Claim
seeks equitable relief or (ii) if the subject matter of a Claim relates to the
ongoing business of any of the Indemnified Parties, which Claim, if decided
against any of the Indemnified Parties, would materially adversely affect the
ongoing business or reputation of any of the Indemnified Parties, then, in each
such case, the Indemnified Parties alone shall be entitled to contest, defend
and settle such Claim in the first instance and, if the Indemnified Parties do
not contest, defend or settle such Claim, the Indemnifying Party shall then have
the right to contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable promptness to the Indemnifying
Party. If the Indemnifying Party notifies the Notifying Party that it does not
dispute the claim described in such notice or fails to notify the Notifying
Party within 30 days after delivery of such notice by the Notifying Party
whether the Indemnifying Party disputes the claim described in such notice, the
Loss in the amount specified in the Notifying Party's notice will be
conclusively deemed a liability of the Indemnifying Party and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand. If
the Indemnifying Party has timely disputed its Liability with respect to such
claim, the dispute shall be resolved in accordance with Article IX below.
(c) After the Closing, the rights set forth in this Article IX shall be
each party's sole and exclusive remedies against the other party hereto for
misrepresentations or breaches of covenants contained in this Agreement and the
Affiliate Agreements. Notwithstanding the foregoing, nothing herein shall
prevent any of the Indemnified Parties from bringing an action based upon
allegations of fraud or other intentional breach of an obligation of or with
respect to either party in connection with this Agreement and the Affiliate
Agreements. In the event such action is brought, the prevailing party's
attorneys' fees and costs shall be paid by the nonprevailing party.
(d) Any indemnification payable under this Article IX shall be, to the
extent permitted by law, an adjustment to purchase price.
SECTION 9.5 SHAREHOLDER AGENT; POWER OF ATTORNEY.
(a) In the event that the Merger is approved by the Company
Shareholders, effective upon such approval, and without any further act of any
Company Shareholder, John Kubinski (the "Shareholder Agent") shall be, and
hereby is, appointed as agent and attorney-in-fact for each Company Shareholder,
for and on behalf of each such Company Shareholder to give and receive notices
and communications, to authorize delivery to any Indemnified Person of shares
from the Escrow Fund in satisfaction of claims by an Indemnified Person, to
execute stock powers on behalf of such Company Shareholders as required by the
Escrow Agreement, to object to such deliveries, to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of the Shareholder
Agent for the accomplishment of the foregoing. The Shareholder Agent may resign
upon written notice to RIMG and Escrow Agent. The Shareholder Agent may be
changed or replaced by the Company Shareholders from time to time upon not less
than thirty (30) days' prior written notice to RIMG and Escrow Agent; provided
that the Shareholder Agent may not be removed unless holders of a two-thirds
interest of the Escrow Fund agree to such removal and to
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<PAGE>
the identity of the substituted agent. Any vacancy in the position of
Shareholder Agent may be filled by approval of the holders of a majority in
interest of the Escrow Fund. No bond shall be required of the Shareholder Agent,
and the Shareholder Agent shall not receive compensation for his services.
Notices or communications to or from the Shareholder Agent shall constitute
notice to or from each of the Company Shareholders.
(b) The Shareholder Agent shall not be liable for any act done or
omitted hereunder as the Shareholder Agent while acting in good faith and in the
exercise of reasonable judgment.
(c) A decision, act, consent or instruction of the Shareholder Agent
with respect to the matters contemplated by this Section 9 shall constitute a
decision of all the Company Shareholders and shall be final, binding and
conclusive upon each of such Company Shareholders, and the Escrow Agent and RIMG
may rely upon any such decision, act, consent or instruction of the Shareholder
Agent as being the decision, act, consent or instruction of each Company
Shareholder. The Escrow Agent and RIMG are hereby relieved from any liability to
any Person for any acts done by them in accordance with such decision, act,
consent or instruction of the Shareholder Agent.
ARTICLE X
DISPUTE RESOLUTION
Unless specifically otherwise provided in this Agreement this Article X
will control the resolution of any disputes between the parties concerning this
Agreement:
SECTION 10.1 INFORMAL DISPUTE RESOLUTION. In the event of any dispute
between parties (the "Involved Parties") concerning performance under or
interpretation of this Agreement that is not specifically governed by another
provision of this Agreement (a "Dispute"), the Involved Parties will take the
following steps to informally resolve the Dispute prior to and as a condition to
any party's right to initiate any arbitration, administrative proceeding or
litigation, except under Section 10.3(a):
(a) First Meeting. At the written request (the "Initial Dispute
Request") of any Involved Party (the "Requesting Party"), the Shareholder
Indemnitors and RIMG's Chief Executive Officer, or a Vice President of RIMG will
meet in person, and at such meeting the Requesting Party will present to the
representatives of the other Involved Parties (the "Responding Parties") a
written summary which reflects in reasonable detail the nature and extent of the
Dispute (the "Dispute Notice"). This meeting will take place within fifteen (15)
days after the date (the "Dispute Initiation Date") that the Initial Dispute
Request is received by all the Responding Parties.
(b) Resolution without Following Procedures. Notwithstanding the
foregoing, if the parties are able to resolve disputes without arbitration or
litigation and without use of the procedures described in this Article XII, they
will not be obligated to follow such procedures.
SECTION 10.2 ARBITRATION. Each party stipulates and agrees that if any
Dispute is not resolved within twenty (20) days after the applicable Dispute
Initiation Date, then such Dispute and any ancillary claims not so resolved
(whether or not subject to Section 10.1) will be submitted to mandatory and
binding arbitration at the election of any Involved Party (the "Arbitrating
Party") under the following terms and conditions:
(a) Selection of Arbitrator. The Arbitrating Party will notify the
American Arbitration Association (the "AAA") in writing and will request that
the AAA furnish to the Involved Parties a list of five (5) available arbitrators
who, if possible, will have experience in the substantive matters at hand. Each
Involved Party will have fifteen (15) days to reject two (2) of the proposed
arbitrators. If only one possible
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arbitrator remains not rejected by any Involved Party, he or she will serve as
arbitrator; if two or more individuals remain not rejected, the AAA will select
the arbitrator from those individuals.
(b) Conduct of Arbitration. Arbitration will be conducted in
Minneapolis, Minnesota by the arbitrator selected under Section 10.2(a) over the
Dispute as described in the Dispute Notice and any other disputes under this
Agreement between the Involved Parties (1) pending at the inception of such
arbitration and not otherwise being arbitrated under this Section 10.2; or (2)
arising during the pendency of such arbitration, in accordance with the rules of
the AAA, except as specifically provided otherwise in this Section 10.2. The
arbitrator will have no power or authority, under the rules of the AAA or
otherwise, to amend or disregard any provision of this Section 10.2.
(c) Replacement of Arbitrator. Should the arbitrator refuse or be
unable to proceed with arbitration proceedings under this Section 10.2, such
arbitrator will be replaced by an arbitrator selected from the other four
arbitrators originally proposed by the AAA and not rejected by any Involved
Party, if any, or if there is no such arbitrator remaining, by repeating the
process of selection. If an arbitrator is replaced pursuant to this Section
10.2(c), then a rehearing will take place in accordance with the rules of the
AAA.
(d) Findings and Conclusions. The arbitrator rendering judgment upon
under this Section 10.2 will, after reaching judgment and award, if any, prepare
and distribute to the Involved Parties a writing describing the findings of fact
and conclusions of law relevant to such judgment and award and containing an
opinion setting forth the reasons for the giving or denial of any award.
(e) Time is of the Essence. The arbitrator is hereby instructed that
time is of the essence in the arbitration proceeding, and that the arbitrator
will have the right and authority to issue monetary sanctions against any
Involved Party if, upon a showing of good cause therefor, said party is
unreasonably delaying the proceeding.
(f) Finding. The arbitrator will render his or her judgment or award
within twenty (20) days following the conclusion of the arbitration proceeding.
(g) Discovery. Recognizing the express desire of the parties for an
expeditious means of dispute resolution, the arbitrator will limit or allow the
parties to expand the scope of discovery as may be reasonable under the
circumstances. In particular and without limitation, the parties hereto hereby
affirm and agree to comply with those rules of the AAA which limit pre-hearing
discovery.
SECTION 10.3 INJUNCTIVE RELIEF. Each party agrees that the only
circumstance in which Disputes will not be subject to the provisions of this
Article XII is where a party makes a good faith determination that a breach of
the terms of this Agreement by another party is such that the damages to such
party resulting therefrom will be so immediate, so large or severe and so
incapable of adequate redress after the fact that a temporary restraining order
and/or other immediate injunctive relief is the only adequate remedy for such
breach. If a party making such a determination files a pleading with a court
seeking such immediate injunctive relief and this pleading is challenged by
another party to this Agreement and the challenging party succeeds in such
challenge, the party filing such pleading seeking immediate injunctive relief
will pay all of the reasonable costs and attorneys' fees of the party
successfully challenging such pleading.
SECTION 10.4 COSTS AND ATTORNEYS' FEES. Notwithstanding any rule of the
AAA to the contrary, the arbitrator rendering judgment under Section 10.2 will
have the power to award all costs and attorneys' fees between the Involved
Parties. In any litigation of Disputes, if and to the extent such litigation
does not concern the prayer for or challenge to immediate injunctive relief
under Section 10.3(a), the losing party will pay all costs and attorneys' fees
of such litigation accruing to the other party.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1 PRESS RELEASES AND ANNOUNCEMENTS. Prior to the Closing
Date, neither party hereto will issue any press release (or make any other
public announcement) related to this Agreement or the transactions contemplated
hereby or make any announcement to the employees, customers or suppliers of the
Company without prior written approval of the other party hereto, except as may
be necessary, in the opinion of counsel to the party seeking to make disclosure,
to comply with the requirements of this Agreement or applicable law. If any such
press release or public announcement is so required, the party making such
disclosure will consult with the other party prior to making such disclosure,
and the parties will use all reasonable efforts, acting in good faith, to agree
upon a text for such disclosure which is satisfactory to both parties.
SECTION 11.2 EXPENSES. The Company Shareholders, RIMG and Newco will
pay all of their own expenses including attorneys' and accountants' fees in
connection with the negotiation of this Agreement, the performance of their
respective obligations hereunder and the consummation of the transactions
contemplated by this Agreement, whether consummated or not ("Closing Expenses");
PROVIDED THAT, if this Agreement is terminated prior to Closing, RIMG will pay
the fees and expenses of KPMG Peat Marwick related to its procedures on the
Financial Information to the extent the same exceed $12,000 and PROVIDED
FURTHER, that in the event the Closing occurs, all Closing Expenses of the
Company, other than fees and expenses of counsel in excess of $30,000 and other
than any finders, brokers or other investment banking fees incurred by the
Company in connection with the Merger but including any Seller Brokerage Fee
that is an adjustment to the Consideration Per Share in accordance with Section
2.1(c), shall remain with the Company and be discharged by the Successor
Corporation.
SECTION 11.3 FURTHER ASSURANCES. The Representing Parties agree that,
from and after the Closing Date, it will take all appropriate action and execute
any documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the provisions hereof, including
without limitation assigning all Real Estate Leases, Personal Property Leases
and Executory Contracts, and transferring all of the transferable Permits.
SECTION 11.4 AMENDMENT AND WAIVER. This Agreement may not be amended or
waived except in a writing executed by the party against which such amendment or
waiver is sought to be enforced. No course of dealing between or among any
persons having any interest in this Agreement will be deemed effective to modify
or amend any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
SECTION 11.5 NOTICES. All notices, demands and other communications to
be given or delivered under or by reason of the provisions of this Agreement
will be in writing and will be deemed to have been given when personally
delivered or mailed by first class mail, return receipt requested, or when
receipt is acknowledged, if sent by facsimile, telecopy or other electronic
transmission device. Notices, demands and
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<PAGE>
communications to RIMG, Newco, the Company Shareholders and the Company will,
unless another address is specified in writing, be sent to the address indicated
below:
IF TO THE COMPANY: IF TO RIMG OR NEWCO:
Cedar Technologies, Inc. Rimage Corporation
ATTN: William McMahon ATTN: Bernie Aldrich, Chief Executive
7667 Cahill Road Officer
Suite 250 7725 Washington Avenue South
Edina, Minnesota 55439 Minneapolis, Minnesota 55439
Telephone number: (612) 830-1993 Telephone number: (612) 946-4585
Fax number: (612) 830-1039 Fax number: (612) 946-4564
IF TO THE COMPANY SHAREHOLDERS: WITH A COPY TO:
To the name and address of each Company Dorsey & Whitney LLP
Shareholder as listed in Exhibit A ATTN: Thomas O. Martin
220 South Sixth Street
IN EACH CASE, WITH A COPY TO: Minneapolis, Minnesota 55402-1498
Telephone number: (612) 340-8706
Maun & Simon, PLC Fax number: (612) 340-8738
ATTN: J. Patrick Brinkman
2000 Midwest Plaza Building West
801 Nicollet Mall
Minneapolis, Minnesota 55402-2534
Telephone number: (612) 904-7442
Fax number: (612) 904-7424
SECTION 11.6 ASSIGNMENT. This Agreement and all of the provisions
hereof will be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, except that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by either party hereto without the prior written consent of the other
party hereto.
SECTION 11.7 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
SECTION 11.8 COMPLETE AGREEMENT. This Agreement, the exhibits and
schedules hereto, and the Affiliate Agreements and the other documents referred
to herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
SECTION 11.9 COUNTERPARTS/FACSIMILE SIGNATURES. This Agreement may be
executed in one or more counterparts, any one of which need not contain the
signatures of more than one party, but all such counterparts taken together will
constitute one and the same instrument. This Agreement shall be effective with
respect to any party by facsimile signature and may be enforced against any such
party regardless of delivery of any original, provided that any rights under
this Agreement may not be enforced by any party who executes the same by
facsimile unless such party has transmitted at least one original signature page
to the representative of RIMG, in the case of the Company or any Shareholder
Indemnitor, or to the Company in the case of RIMG or Newco, within seven days of
such execution.
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SECTION 11.10 GOVERNING LAW. The internal law, and not the law of
conflicts, of the State of Minnesota will govern all questions concerning the
construction, validity and interpretation of this Agreement and the performance
of the obligations imposed by this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE COMPANY: THE SHAREHOLDER INDEMNITORS.
- ------------ ---------------------------
CEDAR TECHNOLOGIES, INC.
------------------------------------
JOHN KUBINSKI
By
---------------------------------
Its ------------------------------------
------------------------------ WILLIAM MCMAHON
RIMG:
- ----- ------------------------------------
RIMAGE CORPORATION JAMES LEWIS
------------------------------------
By JOSEPH NOVAGRATZ
---------------------------------
Its
------------------------------ ------------------------------------
ROBERT GEAROU
NEWCO:
- ------
CDR ACQUISITION, INC. BOB INC.
By
---------------------------------
By Its
--------------------------------- ------------------------------
Its
------------------------------
BJB INC.
By
---------------------------------
Its
------------------------------
37
Exhibit 2.2
ESCROW AGREEMENT
This ESCROW AGREEMENT is made this March 1, 2000 by and among Rimage
Corporation, a Minnesota corporation ("Rimage"), and John Kubinski as the
Shareholder Agent (the "Shareholder Agent") of all of the shareholders
("Shareholders") of Cedar Technologies, Inc., a Minnesota corporation
("Company") and U.S. Bank Trust National Association, a national banking
association, as the Escrow Agent (the "Escrow Agent").
INTRODUCTION
A. Rimage, the Company and certain of the Shareholders are parties to
and the Shareholders have approved in accordance with Minnesota law, an
Agreement and Plan of Merger dated February 25, 2000 (the "Agreement") under the
terms of which CDR Acquisition Inc. will be merged with and into Company
("Merger Subsidiary") and all of the shares of Common Stock held by Shareholders
will be exchanged for shares of Common Stock, $.01 par value, of Rimage ("Rimage
Common"). The Agreement provides for the execution and delivery at the Effective
Time thereunder of an escrow agreement, to provide security for certain
indemnifications, as specified in the Agreement. Rimage, the Company and the
Shareholder Agent on behalf of the Shareholders have agreed that the execution
and delivery of this Escrow Agreement and the establishment of the Escrow Fund
provided for herein shall satisfy the obligations of the parties to execute and
deliver such escrow agreement. As hereafter provided, the Escrow Fund hereunder
shall initially fund and secure the indemnification obligations of the Company
and the Shareholders contemplated by Section 9.2 of the Agreement (the "Escrow
Fund Indemnities"). All capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Agreement.
B. Pursuant to the Agreement, Rimage and the Shareholders have agreed
that the Shareholders shall transfer to the Escrow Agent 33,661 shares of Rimage
Common (representing 10% (rounded up to the nearest whole share) of the number
of shares of Rimage Common received by each such Shareholders for the common
stock of the Company) to be deposited at the Effective Time in escrow with the
Escrow Agent and held in accordance with the terms of this Escrow Agreement (the
"Rimage Escrowed Stock").
In consideration of the foregoing recitals, the transactions
contemplated by the Agreement, the covenants and agreements herein set forth,
and for other valuable consideration the receipt of which is hereby acknowledged
the parties further agree as follows:
1. APPOINTMENT AND AGREEMENT OF THE ESCROW AGENT. Rimage, the Company
and the Shareholder Agent, on behalf of the Shareholders, hereby appoint U.S.
Bank Trust National Association, as the Escrow Agent, and U.S. Bank Trust
National Association agrees to perform the duties of the Escrow Agent under this
Agreement. This Escrow Agreement shall be administered at and the Rimage
Escrowed Stock held in St. Paul, Minnesota, by the Escrow Agent at the address
set forth in 10.2.
2. AGREEMENT NOT LIMITED BY THIS ESCROW AGREEMENT. This Escrow
Agreement and the deposit of the Rimage Escrowed Stock are without prejudice to
and are not in limitation of (i) any obligations of Shareholders to Rimage in
respect of the indemnity and of any of the covenants, representations or
warranties of the Shareholders and the Company, contained in the Agreement and
(ii) any obligations of Rimage and Merger Subsidiary to Shareholders in respect
of the indemnity and of any of
<PAGE>
the covenants, representations or warranties of Rimage and Merger Subsidiary,
contained in the Agreement.
3. ESTABLISHMENT OF ESCROW.
3.1. DELIVERY OF PROPERTY. (a) Simultaneously with the
execution of this Escrow Agreement, Rimage has deposited with the
Escrow Agent certificates in negotiable form representing the Rimage
Escrowed Stock.
(b) Together with the certificates of Rimage Escrowed Stock
transferred to the Escrow Agent, Shareholder Agent, in accordance with
the power of attorney contained in Section 9.5(a) of the Agreement, has
delivered to the Escrow Agent duly executed stock powers (endorsed in
blank) with respect thereto with signatures medallion guaranteed.
(c) The Escrow Fund shall be held and used only for and in
respect of those purposes specified under the heading "Introduction."
3.2. RECEIPT. The Escrow Agent hereby acknowledges receipt of
the Rimage Escrowed Stock and agrees to hold and disburse the Escrow
Fund in accordance with the terms and conditions of this Escrow
Agreement for the uses and purposes stated herein.
3.3. VOTING RIGHTS OF RIMAGE ESCROWED STOCK. All voting rights
with respect to Rimage Escrowed Stock shall be exercised by the
Shareholders in accordance with their proportionate interests therein,
and the Escrow Agent shall from time to time execute and deliver to
Shareholders such proxies, consents or other documents a may be
necessary to enable the respective Shareholders to exercise such
rights. The Shareholders shall be entitled to any dividends or
distributions paid on the Rimage Escrowed Stock.
4. LIABILITIES ETC. COVERED. This Escrow Agreement has been executed
and the deposit of the Rimage Escrowed Stock hereunder has been made pursuant to
Section 2.5(b) of the Agreement. The deposit of the Rimage Escrowed Stock in the
Escrow Fund has been made for the purpose of funding and securing, to the extent
of the Escrow Fund, the Escrow Fund Indemnities until the first anniversary of
the date hereof.
5. PROCEDURES FOR DISBURSEMENT OF THE ESCROW FUND.
5.1. DISBURSEMENT OF THE ESCROW FUND. The Escrow Agent shall
distribute the Rimage Escrowed Stock whenever there shall be delivered
to the Escrow Agent (a) a certificate signed by Rimage and the
Shareholder Agent certifying, or (b) a certified copy of a judgment of
a court of competent jurisdiction determining, that an amount is due
from Shareholders pursuant to Section 9.2 of the Agreement; provided,
however, that the Escrow Agent shall not be required to make such
distribution more than once per month. The Escrow Agent shall, to the
extent that the amount of Rimage Escrowed Stock then held by it in the
Escrow Fund shall be sufficient for such purpose, cause certificates of
shares of the Rimage Escrowed Stock (in each Shareholders' name in
proportion to their respective holdings) having a value (based upon the
average of the last sale prices of Rimage Common as quoted on the
Nasdaq on the five trading days ending on the date preceding
distribution of the Rimage Escrowed Stock) equal to such amount, and
duly executed stock powers with respect to such certificates, with
signatures guaranteed by a bank or trust
2
<PAGE>
company or by a member firm of the National Association of Securities
Dealers, Inc., to be delivered to Rimage.
5.2. NO FRACTIONAL SHARES. In the event of any disbursement of
Rimage Escrowed Stock pursuant to subparagraph 5.1, no fractional
shares shall be delivered, but rather the Escrow Agent shall adjust the
amount of Rimage Escrowed Stock to be delivered to Rimage by rounding
to the nearest whole share.
6. TERMINATION OF ESCROW. (a) On the first anniversary of the date
hereof (the "Termination Date"), and provided that there are no pending Claims,
or litigation that would give rise to Claims, for Losses (as defined in the
Agreement), the Escrow Agent shall deliver to the Shareholders the Rimage
Escrowed Stock (plus all interest or other income attributable thereto and not
previously distributed) then held hereunder in the Escrow Fund.
(b) This Escrow Agreement shall automatically terminate if and when all
the Rimage Escrowed Stock (plus all interest or other income attributable
thereto and not previously distributed) shall have been distributed by the
Escrow Agent in accordance with the terms of this Escrow Agreement.
7. RETENTION OF RIMAGE ESCROWED STOCK FOLLOWING THE TERMINATION DATE.
In the event that at the Termination Date claims for indemnification shall have
been made pursuant to Section 9.2 of the Agreement, then Rimage may in good
faith, at any time, prior to the Termination Date notify the Escrow Agent to
such effect in writing, which written notice shall describe briefly the nature
of each such claim, the facts and circumstances which give rise to each such
claim, and the estimated amount of each such claim, and the provisions of the
Agreement or this Escrow Agreement on which each such claim is based. Rimage
shall promptly deliver to Shareholder Agent a copy of such written notice. The
Escrow Agent shall have no obligation to verify that delivery of such notice has
been made by Rimage to Shareholder Agent, but agrees to forward to Shareholder
Agent, promptly, by messenger, a copy of the notice received by it. Certificates
representing shares of the Rimage Escrowed Stock having a value (based upon the
average of the last sale prices of Rimage Common Stock as quoted on the Nasdaq
on the five trading days ending on the date preceding the Termination Date)
equal to one hundred and twenty-five percent (125%) of the total of the amounts
set forth in such written notice with respect to the claim or claims described
therein shall be set aside and retained (to the extent available in the then
remaining Escrow Fund) by the Escrow Agent as a reserve to cover such claim or
claims and all dividends, interest and other amounts with respect to such shares
then held in the Escrow Fund shall also be set aside and retained (such
certificates and such other amounts so set aside and reserved being herein
called the "Escrow Fund Reserved Amount").
8. NO TRANSFER OF RIMAGE ESCROWED STOCK. While any Rimage Escrowed
Stock shall continue to be held by the Escrow Agent, no Shareholder will
transfer, sell, pledge, create a security interest in or otherwise dispose of
their rights to any dividends or distributions with respect to the Rimage
Escrowed Stock.
3
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9. THE ESCROW AGENT.
9.1. INDEMNIFICATION OF THE ESCROW AGENT. Rimage and
Shareholders, jointly but not severally, agree to indemnify and hold
the Escrow Agent and its directors, officers and employees harmless
from and against any and all costs, charges, damages, and attorneys'
fees which the Escrow Agent in good faith may incur or suffer in
connection with or arising out of this Escrow Agreement.
9.2. DUTIES OF THE ESCROW AGENT. The Escrow Agent shall have
no duties other than those expressly imposed on it herein and shall not
be liable for any act or omission except for its own negligence or
willful misconduct.
9.3. FEES OF THE ESCROW AGENT. The fees and charges of the
Escrow Agent with respect to this Agreement shall be paid by Rimage in
accordance with the Escrow Agent's fees as set forth on Schedule A
hereto.
9.4. THE ESCROW AGENT TO FOLLOW INSTRUCTION OF RIMAGE AND
SHAREHOLDERS. Any provision herein contained to the contrary
notwithstanding, the Escrow Agent shall at any time and from time to
time take such action hereunder with respect to the Rimage Escrowed
Stock as shall be agreed to in writing by Rimage and Shareholder Agent.
9.5. RESIGNATION OF THE ESCROW AGENT. The Escrow Agent may
resign at any time by providing Rimage and Shareholders with thirty
(30) days' written notice of its intention to do so. Upon receiving
such notice, Rimage and Shareholders shall endeavor to appoint a
mutually agreeable successor the Escrow Agent. If Rimage and
Shareholders are unable to appoint a successor the Escrow Agent within
thirty (30) days of receipt by each of them of the Escrow Agent's
notice of its intention to resign, the Escrow Agent may petition a
court of competent jurisdiction to appoint a successor. The Escrow
Agent's resignation shall be effective upon delivery of the Rimage
Escrowed Stock to the successor Escrow Agent and the successor assuming
the obligations, rights and duties of the Escrow Agent hereunder.
10. OTHER PROVISIONS.
10.1. SECURITY INTEREST. (a) The Shareholder Agent, on behalf
of each of the Shareholders, hereby grants to Rimage a first priority
perfected security interest in the Rimage Escrowed Stock to secure the
performance of the contingent obligations and indemnification
obligations of Shareholders under the Agreement and the performance of
their obligations to Rimage under this Escrow Agreement. This Escrow
Agreement shall constitute a security agreement under applicable law.
(b) The parties agree that this security interest shall attach
as of the execution of this Escrow Agreement. The parties agree that,
for the purpose of perfecting Rimage's security interest in the above
designated Rimage Escrowed Stock held by the Escrow Agent pursuant to
this Escrow Agreement, Rimage designates the Escrow Agent to acquire
and maintain possession of the Rimage Escrowed Stock and act as bailee
for Rimage with notice of Rimage' security interest in said property
under the Uniform Commercial Code and that possession of the Rimage
Escrowed Stock by the Escrow Agent acknowledges that it holds the
Rimage Escrowed Stock for Rimage for purposes of perfecting the
security interest. All bank or deposit accounts holding cash
constituting
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part of the Escrow Fund shall be maintained in the name of the Escrow
Agent as bailee for Rimage, as secured party, under this Escrow
Agreement and the Escrow Agent shall have sole dominion and control
over such accounts. Shareholders and the Escrow Agent shall take all
other actions requested by Rimage to maintain the perfection and
priority of the security interest in the Escrow Fund.
(c) Rimage shall release the security interest herein granted
and the security interest shall be terminated to the extent of any
disbursement of Escrow Fund hereunder by the Escrow Agent in accordance
with the terms of this Escrow Agreement. Upon final disbursement of any
Escrow Fund to Shareholders, Rimage shall do all acts and things
reasonably necessary to release and extinguish such security interest.
Shareholders and Rimage hereby specifically agree and acknowledge that
the grant of this security interest pursuant to this Paragraph 10.1
shall not in any way modify either the procedures Shareholders and/or
Rimage must follow in order to obtain possession of any of the Escrow
Fund from those procedures and rights expressly provided for in this
Escrow Agreement or in the Agreement.
10.2. NOTICES. All notices and other communications hereunder
shall be in writing and shall be sufficiently given if made by hand
delivery, by telex, by telecopier, or by registered or certified mail
(postage prepaid and return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be
specified by it by like notice):
(a) If to Rimage:
Rimage Corporation
ATTN: Bernie Aldrich, Chief Executive Officer
7725 Washington Avenue South
Minneapolis, Minnesota 55439
With a copy to:
Dorsey & Whitney LLP
ATTN: Thomas O. Martin
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
telephone number: (612) 340-8706
Fax number:(612) 340-8738
(b) If to Shareholder Agent (on behalf of the Shareholders):
John Kubinski
2720 Nevada Avenue North
New Hope, Minnesota 55427
(c) If to the Escrow Agent:
U.S. Bank Trust National Association
U.S. Bank Trust Center - SPFT0210
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180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Thomas M. Gronlund
Facsimile: (651) 244-0089
10.3. BENEFIT AND ASSIGNMENT. Except to the extent the
Agreement is freely assignable by Rimage, the rights and obligations of
each party under this Escrow Agreement may not be assigned without the
prior written consent of all other parties. This Escrow Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns. Nothing in this Escrow
Agreement, expressed or implied, is intended to or shall (i) confer on
any person other than the parties hereto, or their respective
successors or assigns, any rights, remedies, obligations or liabilities
under or by reason of this Escrow Agreement, or (ii) constitute the
parties hereto as partners or participants in a joint venture. The
Escrow Agent shall not be obligated to recognize any such succession or
assignment until satisfactory written evidence thereof shall have been
received by it.
10.4. ENTIRE AGREEMENT; AMENDMENT. This Escrow Agreement and
the Agreement contains all the terms agreed upon by the parties with
respect to the subject matter hereof. This Escrow Agreement may be
amended only by a written instrument signed by the party against which
enforcement of any waiver, change, modification, extension or discharge
is sought.
10.5. HEADINGS. The headings of the section and subsections of
this Escrow Agreement are for ease of reference only and shall not be
deemed to evidence or affect the meaning or construction of any of the
provisions hereof.
10.6. GOVERNING LAW. This Escrow Agreement shall be construed,
as to both validity and performance, enforced in accordance with and
interpreted and governed by the laws of the State of Minnesota.
10.7. ATTORNEYS' FEES. Should any litigation be commenced
between Rimage and Shareholders concerning this Escrow Agreement or the
rights and duties of any party in relation thereto, the party
prevailing in such litigation shall be entitled, in addition to such
other relief as may be granted, to a reasonable sum as and for such
party's attorneys' fees in such litigation which, shall be determined
by the court in such litigation or in a separate action brought for
that purpose.
10.8. COUNTERPARTS. This Escrow Agreement may be executed in
multiple counterparts, all of which taken together shall constitute one
instrument.
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IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to be
executed on the date first written above by their respective officers duly
authorized.
SHAREHOLDER AGENT RIMAGE CORPORATION
- --------------------------------- ---------------------------------
John Kubinski Bernard P. Aldrich
Chief Executive Officer
U.S. BANK TRUST NATIONAL
ASSOCIATION
By:
--------------------------------
Its:
----------------------------
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