[DESCRIPTION] FORM 8-K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 15, 1998
MICROS-TO-MAINFRAMES, INC.
(Exact name of registrant as specified in its charter)
New York 022122 13-3354896
(State or Other Jurisdiction (Commission File Number)(IRS Employer Ident. No.)
of Incorporation)
614 Corporate Way, Valley Cottage, New York 10989
(Address of Principal Executive Offices) (Zip Code)
(914) 268-5000
Registrant's telephone number, including area code
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Item 5. Other Events
On May 15, 1998, MICROS-TO-MAINFRAMES, INC., a New York
corporation (the "Registrant"), entered into a Stock Purchase and
Option Agreement (the "Purchase and Option Agreement") with Pivot
Technologies, Inc., a Delaware corporation ("Pivot"), and the
principal shareholders of Pivot ("Pivot Shareholders"). The
Purchase and Option Agreement was consummated on May 18, 1998 (the
"Closing"). Pursuant to the Purchase and Option Agreement, the
Registrant acquired 19.9% of the issued and outstanding stock of
Pivot ("Pivot Shares"), as determined on a fully-diluted basis,
after giving effect to the redemption of certain security interests
of security holders of Pivot simultaneously with the purchase of
the Pivot Shares. The Registrant also received an option (the
"Option") to cause the merger ("Merger") of Pivot into a wholly-
owned subsidiary of Registrant (the "Merger") pursuant to which the
non-Registrant shareholders of Pivot would receive 377,130 shares
of Registrant Common Stock, five (5) year warrants to acquire
100,000 shares of Registrant Common Stock at $2.916767 per share,
with such warrants becoming first exercisable one-third at the end
of each of the first three years after the exercise of the Option,
and $337,600 in cash. In consideration for the Option and the
Pivot Shares, Registrant paid Pivot (exclusive of the merger
consideration payable upon any exercise of the Option) $475,000 at
closing, and agreed to make further payments if Pivot is in
material compliance with its Business Plan, as defined in the
Purchase and Option Agreement, up to an aggregate of $346,000 over
a five month period commencing one month after Closing. Registrant
further agreed to lend Pivot up to an additional $125,000 in six
(6) equal monthly installments commencing shortly after the
Closing. Such loan is payable, without interest, on the first year
anniversary of the Closing or the redemption of all of Registrant's
interest in Pivot in the event Registrant does not exercise the
Option.
The Option expires fifteen (15) days after the end of the six
(6) month anniversary of the Closing ("Initial Option Period"),
subject to extension. The Option period shall be extended for up
to three additional one month terms upon the payment of an
additional $80,000 prior to the expiration of the Initial Option
Period and the commencement of each additional extension period,
respectively. If Registrant elects to exercise its Option during
such extension period, the cash consideration payable in the event
the merger is consummated shall be increased by fifty percent (50%)
of the net profits after taxes generated by Pivot, as determined by
Registrant's certified public accountants, during the period
commencing on the day after the end of the Initial Option Period
and ending at the date the Option is exercised. If Registrant
extends for each of said three periods but elects prior to the 75th
day after the end of the Initial Option Period not to exercise its
Option, Pivot will transfer to Registrant, for no additional
consideration, shares of Pivot Common Stock so that Registrant will
own on an aggregate basis, a 33.4% interest in Pivot on a fully-
diluted basis as determined as at the date Registrant elects not to
exercise its Option.
The shares of Registrant Common Stock which the Pivot
Shareholders shall receive in connection with the Merger in the
event the Registrant exercises its Option shall be subject to a
Lock-up Agreement pursuant to which, except for certain limited
permitted transfers, have a three year restriction on resale
unless sooner registered under the Securities Act of 1933, as
amended . Twenty-five percent of the shares subject to the lock-up
will be released therefrom on the first anniversary of any Merger,
and an additional fifty percent thereof shall be released on the
second anniversary thereof.
In the event Registrant does not exercise its Option, Pivot
shall have the right for one hundred eighty days after the option
lapses to redeem all of its shares owned by Registrant for 115% of
the amount contributed by Registrant as a capital contribution or
to extend the Option period. Registrant will have a right to put
such shares back to Pivot in the event the Option is not exercised
at such time as Pivot receives suitable additional funding. The
put price is the greater of (X) 125% of the amount contributed by
Registrant as a capital contribution or to extend the Option
period, or (Y) in the event the additional financing is equity
financing or the issuance of convertible debt, the then fair market
value thereof.
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Registrant and Pivot have also agreed effective as at the
Closing, that Pivot will provide remote network services to such
clients of Registrant who desire such services. Registrant will
not use any remote network service provider other than Pivot
(unless otherwise specifically requested by a client) for generally
the term of the Option. The fee charged by Pivot for its services
to Registrant clients shall not be greater than that customarily
charged by Pivot to its best customers from time to time.
Pivot was incorporated in July, 1997. The principals of Pivot are
Anthony Travaglini (Pivot's president and chief executive officer),
Robert Cann (director of tactical services) and Alan McCabe
(director of engineering services). Pivot has developed and is
continuing development of certain technology used in providing
remote managed services with respect to Local and Wide Area Networks,
which run the internet protocol. Pivot uses such technology in
order to enable it to monitor, report and notify, as well as log
network connectivity anomalies, on up to a 24 hour,7 day a week basis
for its clients. As Pivot is a start-up company, it has generated
nominal revenues through the date hereof.
(c) Exhibits.
99.1 Stock Purchase and Option Agreement dated May 15,
1998 by and among the Registrant, Pivot and Pivot Shareholders
("Purchase and Option Agreement").
99.2 List of Exhibits and Schedules to Purchase and
Option Agreement Actual exhibits are available upon request.
99.3. Form of Agreement and Plan of Merger by and among
the Registrant, Registrant Mergerco and Pivot Shareholders, to be
entered into if Option is exercised.
99.4 Lock-up Agreement dated May 18, 1998 by and among
the Registrant and the Pivot Shareholders.
99.5 Joint Press Release of Registrant and Pivot dated
May 19, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MICROS-TO-MAINFRAMES,INC.
(Registrant)
Date: May 19, 1998 By:
Steven H. Rothman
CEO and President
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Exhibit 99.1
STOCK PURCHASE AND OPTION AGREEMENT
BY AND AMONG
MICROS-TO-MAINFRAMES, INC.
PIVOT TECHNOLOGIES, INC.
AND
CERTAIN STOCKHOLDERS OF PIVOT TECHNOLOGIES, INC.
Dated May 15, 1998
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TABLE OF CONTENTS
ARTICLE I 2
1.1 Issuance, Sale and Delivery of the Shares 2
1.2 Option to Merge. 3
1.3 Reasonable Efforts. 4
1.4 Pivot Stockholders Meeting. 5
1.5 Non-Transferability. 6
1.6 Closing. 7
ARTICLE II 7
2.1 Organization and Qualification. 8
2.2 Authorization and Validity of Agreement; Valid Issuance
of Shares. 8
2.3 Capitalization; Ownership. 9
2.4 Reports and Financial Statements; No Undisclosed
Liabilities. 9
2.5 No Violation or Breach. 12
2.6 Litigation. 13
2.7 Compliance with Law. 13
2.8 Proprietary Information of Third Parties. 13
2.9 Intellectual Property. 14
2.10 Tangible Property. 18
2.11 Inventories. 18
2.12 Accounts Receivable. 19
2.13 Leases. 19
2.14 Contracts. 20
2.15 Accounts Payable. 20
2.16 Binding Nature of Contracts; No Breach. 21
2.17 Title to Assets; Liens. 21
2.18 Taxes. 22
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2.19 Permits. 23
2.20 Insurance. 23
2.21 Loans and Advances. 23
2.22 Brokers. 24
2.23 Transactions with Affiliates. 24
2.24 Assumptions, Guaranties, etc. of Indebtedness. 25
2.25 Employees. 25
2.26 Customers and Suppliers. 26
2.27 Backlog. 26
2.28 All Documentation has Been Furnished or Made Available
to MTM. 26
2.29 Full Disclosure. 27
2.30 Board Size. 27
ARTICLE III 27
3.1 Binding Obligation. 27
3.2 No Violation. 27
ARTICLE IV 28
4.1 Organization and Standing. 28
4.2 Corporate Power. 28
4.3 Authorization; Binding Effect. 28
4.4 Capitalization. 28
4.5 Authority to Conduct Business. 29
4.6 No Violation. 29
4.7 Litigation. 30
4.8 Full Disclosure. 30
4.9 SEC Filings. 31
4.10 Conduct of Business. 31
4.11 Cash Availability. 31
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ARTICLE V 32
5.1 Third Party Consents. 32
5.2 Access, Inspection and Consultation. 32
5.3 Notice of Events or Changes. 32
5.4 Not Amend Employment Agreements. 33
5.5 Appointment of MTM Designee as a Director. 33
5.6 Conduct of Business. 33
5.7 Redemption of Bessemer Interest. 36
5.8 Update Schedules. 36
5.9 No Solicitation of Competing Offers. 36
5.10 Service Agreement. 37
5.11 Restrictive Agreements Prohibited. 38
5.12 Transactions with Affiliates. 38
5.13 Employee Non-Disclosure, Non-Disclosure and Development
Agreements. 38
5.14 Mergers, Sale of Assets, etc. of Subsidiaries. 38
5.15 Maintenance of Ownership of Subsidiaries. 39
5.16 Lock-up Agreement. 39
5.17 Merger Agreement. 39
5.18 Audited Financial Statements. 39
ARTICLE VI 39
6.1 Service Agreement. 39
6.2 Liquid Reserve. 40
6.3 NASDAQ Listing. 41
6.4 Additional Funding of Pivot 41
ARTICLE VII 41
7.1 Representations and Warranties Correct. 41
7.2 Compliance with Obligations. 42
7.3 Furnishing of Documents. 42
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7.4 No Action or Litigation. 42
7.5 Third Party Consents. 42
7.6 Net Worth. 43
7.7 Employees. 43
7.8 Bessemer Redemption Agreement. 43
7.9 Opinion of Counsel. 43
7.10 Opinion of Accountant. 43
7.11 Lock-up Agreement. 43
ARTICLE VIII 44
8.1 Representations and Warranties Correct. 44
8.2 Compliance with Obligations. 44
8.3 No Action or Litigation. 44
8.4 NASDAQ Listing. 44
8.5 Opinion of Counsel. 44
ARTICLE IX 45
ARTICLE X 46
10.1 In Favor of MTM. 46
10.2 In Favor of Pivot and the Stockholder. 48
10.3 Procedure for Indemnification. 48
ARTICLE XI 49
ARTICLE XII 50
ARTICLE XIII 50
ARTICLE XV 51
ARTICLE XVI 52
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ARTICLE XVII 53
ARTICLE XVIII 53
ARTICLE XIX 53
ARTICLE XX 53
ARTICLE XXI 54
ARTICLE XXII 54
ARTICLE XXIII 54
ARTICLE XXIV 55
ARTICLE XXV 55
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STOCK PURCHASE AND OPTION AGREEMENT
STOCK PURCHASE AND OPTION AGREEMENT, dated May 15, 1998, by and
among MICROS-TO-MAINFRAMES, INC., a New York corporation ("MTM"),
Pivot Technologies, Inc., a Delaware corporation ("Pivot"), and the
persons named on Schedule A hereto, such persons being the
principal stockholders of Pivot Technologies, Inc. (the
"Shareholder").
WHEREAS, Pivot wishes to issue and sell to MTM an aggregate of
34,782 shares ("Shares") of the authorized Common Stock, par value
$.01 per share of Pivot, the Shares representing 19.9% of the
Capital Stock of Pivot on a fully-diluted basis after taking into
account the Bessemer Redemption, as defined below, and grant to MTM
an option (the "Option") to cause the merger of Pivot into a
wholly-owned subsidiary of MTM (the "Merger") upon such terms and
conditions set forth herein, for an aggregate purchase price
(exclusive of the merger consideration payable upon any exercise of
the Option) of $475,000 together with additional payments to be
made if Pivot is in material compliance with its Business Plan, as
defined below, up to an aggregate of $346,000; and
WHEREAS, the Stockholders agree in the event MTM exercises the
Option to vote their Pivot shares in favor of the Merger and to
direct Pivot's directors to implement the Merger; and
WHEREAS, MTM wishes to purchase the Shares and receive the
Option on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants and agreements
set forth herein, the parties hereto agree as follows:
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ARTICLE I
THE PURCHASE
1.1 Issuance, Sale and Delivery of the Shares. (a) At the
Closing, as defined in section 1.6 below, Pivot shall sell to MTM
and MTM shall purchase from Pivot the Shares. The aggregate
purchase price for the Shares and the granting of the Option is
$475,000. Furthermore, MTM agrees, as part of its purchase price,
to contribute the additional sums of $60,000, $68,000, $68,000,
$75,000 and $75,000 respectively on each of the first five monthly
anniversary of the closing of the MTM Acquisition, subject to
Pivot's material compliance at the time such contribution is
required with the business plan attached hereto as Exhibit A, as
amended from time to time by Pivot, which amendment is subject to
MTM's consent, which consent will not be unreasonably withheld,
(the "Business Plan"). The parties hereto acknowledge that Pivot
may increase the amount of expenditures provided in the Business
Plan in a manner that is not inconsistent with one or more
provisions of this Agreement, in the event Pivot's aggregate and
current net cash flow is in excess of the amount previously set
forth in the Business Plan. In the event Pivot is not in material
compliance with the cost of operation portion of its Business Plan
at the time a payment is required hereunder, it shall have fifteen
(15) days after the date the payment is required to be in material
compliance. If Pivot becomes materially compliant within such
fifteen day period, MTM shall be required to immediately make the
additional payment otherwise required at such monthly anniversary.
If Pivot is not in material compliance within such 15 day period,
MTM shall not be required to make such monthly anniversary payment,
provided, however, that all of the remainder of Pivot's and MTM's
rights and obligations hereunder shall be continuing.
(b) Pivot and the Stockholders have represented in Section
2.3 hereof that there are 140,000 shares of Pivot Common Stock
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issued and outstanding, none of which are owned by David Ayers.
Pivot and the Stockholders further disclosed in Section 2.6 that
David Ayers may have a claim for shares of Pivot Common Stock. In
the event David Ayers is adjudged to own shares of Pivot Common
Stock as the Pivot issues shares to him, the Stockholders agree to
contribute and surrender to Pivot a number of shares of Pivot
common Stock equal to the number of shares delivered to David Ayers
based on their respective ownership in Pivot.
1.2 Option to Merge. (a) MTM shall have an option (the
"Option") expiring fifteen (15) days after the end of the six (6)
month anniversary of the Closing ("Initial Option Period"),
subject to extension as provided in (b) below, to give written
notice that MTM has exercised its Option and that Pivot be merged
into a wholly-owned subsidiary of MTM ("Merger Sub"), with Merger
Sub being the survivor, in accordance with the Delaware General
Corporation Law and as provided for and in accordance with the
terms and conditions of the Agreement and Plan of Merger ("Merger
Agreement") attached hereto as Exhibit B. The Merger is intended
to constitute a Reorganization under Section 368 (a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "Code") with Merger
Sub being the surviving corporation. Pursuant to the Merger MTM
will own all the issued and outstanding stock of Pivot. Upon the
effectiveness of the Merger (the "Effective Time"), Pivot's
stockholders, other than MTM and its affiliates, will receive (i)
shares of MTM Common Stock, $.001 par value per share ("MTM Common
Stock") having an aggregate value of $1,100,000 based on the
thirty (30) trading day average closing price of MTM Common Stock
prior to the Closing Date ("MTM Closing Date Price"), provided,
however, that the maximum number of shares of MTM Common Stock
which MTM must deliver in connection with the Merger to all
stockholders of Pivot at such time other than MTM or an affiliate
thereof is 490,000 shares and the minimum number is 275,000 shares
and (ii) a number of five (5) year warrants, in the form attached
to the Merger Agreement, to acquire 100,000 shares of MTM Common
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Stock at 100% of the MTM Closing Date Price, with such warrants
becoming first exercisable one-third at the end of each of the
first three years after the exercise of the Option and (iii)
$337,600 in cash.
(b) The Option period shall be extended for up to three
additional one month terms upon the payment of an additional
$80,000 prior to the expiration of the Initial Option Period and
the commencement of each additional extension period, respectively.
If MTM elects to exercise its Option during such extension period,
MTM agrees that the cash consideration payable pursuant to Section
1.2(a)(iii) above shall be increased by fifty percent (50%) of the
net profits after taxes generated by Pivot, as determined by MTM's
certified public accountants, during the period commencing on the
day after the end of the Initial Option Period and ending at the
date the Option is exercised. If MTM extends for each of said three
periods but elects prior to the 75th day after the end of the
Initial Option Period not to exercise its Option, Pivot will
transfer to MTM, for no additional consideration, shares of Pivot
Common Stock so that MTM will own on an aggregate basis, a 33.4%
interest in Pivot on a fully-diluted basis as determined as at the
date MTM elects not to exercise its Option. For purposes of the
above, shares of Capital Stock underlying any outstanding warrants,
options and convertible securities shall be deemed issued and
outstanding.
(c) MTM and Pivot agree that the warrants were negotiated
through arm's length bargaining as part of the Merger consideration
and not as a form of compensation.
1.3 Reasonable Efforts. In the event MTM exercises its Option
as provided herein, and subject to the terms and conditions of the
Merger Agreement and applicable law, each of the parties hereto
shall use his or its reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things
reasonably necessary, proper or advisable to consummate and make
effective the Merger as soon as reasonably practicable after the
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exercise of the Option, including such actions or things as any
other party hereto may reasonably request in order to cause any of
the conditions to such other party's obligation to consummate such
transactions specified in the Merger Agreement as a condition
precedent or closing condition to be fully satisfied. Without
limiting the generality of the foregoing, the parties shall (and
shall cause their respective subsidiaries, and use their reasonable
efforts to cause their respective affiliates, directors, officers,
employees, agents, attorneys, accountants and representatives, to)
consult and fully cooperate with and provide reasonable assistance
to each other in (i) obtaining all necessary consents, approvals,
waivers, licenses, permits, authorizations, registrations,
qualifications or other permission or action by, and giving all
necessary notices to and making all necessary filings with and
applications and submissions to, any federal, state or local
governmental authority, quasi-governmental authority or regulatory
agency (collectively, the "Governmental Entities"), or other person
or entity, (ii) providing all such information about such party,
its subsidiaries and its officers, directors, partners and
affiliates and making all applications and filings as may be
necessary or reasonably requested in connection with MTM securities
filings (which obligation shall survive the consummation of the
Merger); and (iii) in general, consummating and making effective
the transactions contemplated hereby.
1.4 Pivot Stockholders Meeting. In no manner limiting Section
1.3 above, upon exercise of the Option by MTM, the Stockholders
agree to execute a Consent of Stockholders in Lieu of Meeting
pursuant to Section 228 of the Delaware General Corporation Law,
or, if MTM requests a meeting of Pivot stockholders to vote for the
adoption of the Merger Agreement, the Stockholders agree to vote
their shares of Pivot in favor of the Merger at such meeting or any
adjournment thereof. The Stockholders further agree until the
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earlier of the expiration of the Option in the event the Option is
not exercised, the termination of this Agreement in the event this
Agreement is not consummated, or the termination of the Merger
Agreement if the Option is exercised, to vote against (i) the sale
or transfer of substantially all of the capital stock or common
stock of Pivot, whether by merger, consolidation, or other business
combination, except as to the Merger; (ii) a sale of substantially
all of the assets of Pivot; (iii) a reorganization,
recapitalization, or liquidation of Pivot except in such
circumstances as Pivot is insolvent and its directors determine in
good faith to file for release under the U.S. Bankruptcy Code;
and/or (iv) any charter or bylaw amendment creating any new class
of securities of Pivot or otherwise affecting the rights of any
class of security currently in effect.
1.5 Non-Transferability. (a) Until such time as the Option
lapses if it is not exercised or, if exercised, the termination of
the Merger Agreement, each Stockholder agrees, except as set forth
in (b) below, he will not sell, transfer, pledge, assign or
otherwise encumber or dispose of, enter into any contract, option
or other agreement with respect to, the sale, transfer, pledge,
assignment or other encumbrance or disposition of any shares of
Pivot Common Stock now owned or hereafter acquired beneficially or
of record by such Stockholder.
(b) Notwithstanding anything contained in (a) above, a
Stockholder may transfer shares of Pivot Common Stock to a
Permitted Transferee, as defined below, provided such Permitted
Transferee enters into an agreement with MTM, in form reasonably
acceptable to MTM, providing among other things, that the
Permitted Transferee will (i) comply with the terms of Sections
1.4, Section 1.5 and applicable provisions of Article V; (ii), make
the representations set forth in Article III hereof as at the date
of the transfer; and (iii) acknowledge and agree to MTM's tag along
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rights as set forth in Article IX hereof, and MTM's right to
indemnification hereunder as if the Permitted Transferee was the
Stockholder who was the initial holder of the shares of Pivot
Common Stock transferred to the Permitted Transferee. A Permitted
Transferee is a person receiving shares of Pivot Common Stock as a
direct result of a transfer (w) from a Stockholder or Permitted
Transferee to any member of his Family, as defined below; (x) from
a member of the Family of a Stockholder to another member of the
Family of that Stockholder or to that Stockholder (including but
not limited to transfers among trusts complying herewith); (y) to
the personal representative of a Stockholder or Permitted
Transferee hereunder who is deceased or adjudicated incompetent;
and (z) by the personal representative of a Stockholder or
Permitted Transferee who is deceased or adjudicated incompetent to
any member of said Stockholder's or Permitted Transferee's Family.
Any Shares transferred pursuant to this subparagraph (b) and the
Permitted Transferee shall continue to be subject thereafter to
this Agreement to the extent applicable. Family shall mean a
spouse or descendant, ancestor or sibling (in all cases lineal or
adopted) of a Stockholder, or a spouse of a descendant or ancestor
or sibling of a Stockholder, or a trustee of a trust or custodian
of a custodianship primarily for the benefit of one or more of the
foregoing and/or such Stockholder.
1.6 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
Snow Becker Krauss P.C., 605 Third Avenue, New York, New York, at
10:00 a.m., local time, on a date to be selected by the parties,
which shall be no later than the earlier of May 7, 1998 (unless
extended by the parties hereto) and the second business day after
the day on which the last of the conditions set forth in this
Agreement (other than any such conditions which, by their terms,
are not capable of being satisfied until the Closing Date) is
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satisfied or, where permissible, waived, unless another place, date
or time is agreed to by MTM and Pivot (the date on which the
Closing takes place being referred to herein as the "Closing
Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PIVOT AND STOCKHOLDERS
Pivot and Stockholders jointly and severally, hereby represent
and warrant as follows, provided, however, that all representations
of a Stockholder set forth below are based on the actual knowledge
of such Stockholder, without duty of inquiry, regardless of whether
the specific representation contains such limitation:
2.1 Organization and Qualification. Pivot is a corporation,
duly organized, validly existing and in good standing under the
laws of the state of Delaware; has full corporate power and
authority to carry on its business, and to own or lease its
properties as and in the places where such business is now
conducted and such properties are now owned, leased or operated,
and to enter into this Agreement, consummate the transactions
contemplated by this Agreement and perform its obligations under
this Agreement. Schedule 2.1 sets forth all the jurisdictions in
which Pivot does business. Pivot is qualified or licensed to do
business as a foreign corporation in all jurisdictions where the
failure to so qualify would have a material adverse effect on
Pivot. No proceedings for the bankruptcy or insolvency of Pivot
are pending or, to the best of their knowledge, are contemplated.
2.2 Authorization and Validity of Agreement; Valid Issuance
of Shares.
(a) The execution and delivery by Pivot of this
Agreement, the Option and the consummation of the transactions
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contemplated by this Agreement, as well as the performance of its
obligations under this Agreement, have been duly and validly
authorized by all necessary corporate action on the part of Pivot,
including, but not limited to approval of Pivot's Board of
Directors and stockholders. This Agreement has been duly executed
and delivered by Pivot and constitutes the legal, valid and binding
obligation of Pivot, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights or remedies of creditors. No
consent, approval, or authorization of, notice to, or declaration,
filing or registration with, any governmental body is required in
connection with the execution, delivery and performance of this
Agreement, or the consummation of the transactions contemplated by
this Agreement, the failure of which to obtain would have a
material adverse affect on MTM or Pivot.
(b) The Shares when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration
provided herein, will be duly and validly issued, fully paid and
nonassessable.
2.3 Capitalization; Ownership. The authorized, issued and
outstanding capital stock of Pivot is set forth on Schedule 2.3 and
all of the issued and outstanding stock are owned by the persons
set forth on Schedule 2.3 and except as set forth on said Schedule,
are free and clear of all liens, security interest, pledge, charge,
claim, option, right to acquire, restriction on transfer, voting
restriction or agreement, or any other restriction or encumbrance
of any nature whatsoever except as imposed by law, including the
securities laws of the United States and any individual state, and
no third person holds any proxy or similar right with respect
thereto. Pivot and the Stockholders acknowledge and agree that by
making the aforementioned representation, they jointly and
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severally represent that David Ayers does not own, beneficially or
of record, any shares of Pivot Common Stock or is entitled to be
compensated for foregoing any rights thereto. Except as set forth
on Schedule 2.3, Pivot has no subsidiaries and does not own,
directly or indirectly, shares or other securities in any other
corporation, or any interest in any partnership, joint venture or
other business entity.
2.4 Reports and Financial Statements; No Undisclosed
Liabilities.
(a) The unaudited balance sheet of Pivot as at December
31, 1997 and March 31, 1998 and the applicable unaudited statements
of income and retained earnings, and statements of cash flows of
Pivot for the twelve (12) and three (3) month periods then ended,
respectively, and any statements of operations for such periods and
the related notes thereto, receipt of which is acknowledged by MTM
(collectively, the "Financial Statements"), present fairly in all
material respects the financial position, results of operations and
retained earnings, results of operations and cash flows of Pivot,
as at such date and for such period.
(b) Except as set forth on the Financial Statements, as
of March 31, 1998 (the "Cut-Off Date"), (A) Pivot did not have any
claims, liabilities or obligations of any material nature, known or
unknown, fixed or contingent, matured or unmatured, liquidated or
unliquidated, which were not shown or otherwise provided for in the
Financial Statements and (B) all reserves (if any) established by
Pivot and set forth in the Financial Statements are adequate,
appropriate and reasonable.
(c) Except as described in Schedule 2.4, since the Cut-
Off Date there has been no:
(i) Material and adverse change in the business,
properties, assets or liabilities, operations or financial
condition of Pivot, nor has any event occurred or been threatened,
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which may reasonably be expected to have a material and adverse
effect on the assets or the business of Pivot;
(ii) Sale, transfer or other disposition of any
material assets owned or used by Pivot in the operation of the
business (whether or not capitalized or expensed for tax or
financial statement purposes), except of inventory in the ordinary
course of business;
(iii) Cancellation or notice of cancellation,
or surrender of any policy of insurance (which has not been cured
by payment of premium, procurement of an equivalent policy, or
otherwise) relating to or affecting the assets or the business of
Pivot;
(iv) Waiver of any right of material value or any
cancellation of any indebtedness due to Pivot which may have a
material adverse effect on its assets or business;
(v) Claim, obligation or liability (whether
absolute, accrued, contingent or otherwise and whether due or to
become due, matured or unmatured, liquidated or unliquidated)
incurred by Pivot other than claims, obligations or liabilities (X)
incurred in the ordinary course of business and consistent with
past practice or (Y) not in excess of $7,500 in the aggregate;
(vi) Payment, discharge or satisfaction of any
claim, lien, obligation, encumbrance or liability by Pivot (whether
absolute, accrued, contingent or otherwise and whether due or to
become due, matured or unmatured, liquidated or unliquidated),
other than claims, liens, encumbrances or liabilities (A) which are
reflected or reserved against in the Financial Statements or (B)
which were incurred and paid, discharged or satisfied since such
date, in the ordinary course of business and consistent with past
practice;
(vii) Material default by Pivot on any claim,
liability or obligation;
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(viii) Write-down of the value of any inventory
of Pivot, or write-off as uncollectible of any notes or Accounts
Receivable, as defined in Section 2.13 hereof, or any portion
thereof of Pivot in excess of the amount reserved therefor on
Pivot's books and records;
(ix) Prepayments, advances or other deposits, made
by customers of the business, other than MTM, with respect to
products or services contracted for but not provided as of the
Closing Date or any other unearned income;
(x) Damage, destruction or loss of physical
property (whether or not covered by insurance) which may have a
material and adverse effect on Pivot's assets or business;
(xi) Dividend declared, paid or set aside for
payment or other distribution on Pivot's capital stock;
(xii) Increase in the compensation of any of
Pivot's officers or employees, or loans made by Pivot to any of its
stockholders, directors, officers or employees, provided, however,
the parties hereto acknowledge and agree that Pivot will enter into
the Employment Agreements, as defined in Section 7.7 hereof, the
terms of which may increase the compensation payable prior to the
entering into thereof;
(xiii) Material transaction not in the ordinary
course of business; or
(xiv) Agreement or commitment, whether or not
in writing, to do any of the aforementioned.
(d) At Closing, Pivot's Deficit Net Worth, as determined
in accordance with generally accepted accounting principles
("GAAP"), shall not exceed $484,870.
2.5 No Violation or Breach. The execution and delivery of
this Agreement, the fulfillment of the terms and conditions herein
set forth and the consummation of the transactions herein
contemplated and the Merger (if any), will not (i) violate or
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conflict with any provision of the Certificate of Incorporation or
By-laws of Pivot, as in effect on the date hereof; or (ii) except
as set forth in Schedule 2.5, violate, result in a breach of,
conflict with, or (with or without notice or the lapse of time or
both) entitle any party to terminate, cancel, accelerate or call a
default under the terms, conditions or provisions of any agreement,
contract, instrument, lease, license, note, bond, mortgage,
indenture or other obligation to which Pivot is a party or by which
it or any of its assets may be bound, or (iii) violate, result in
a breach of, or conflict with any statute, rule, regulation, order,
judgment or decree applicable to Pivot or any of its assets.
Except as set forth on Schedule 2.5, no consent of any party to any
agreement, contract, instrument, lease, license, note, bond,
mortgage, indenture or other obligation to which Pivot is a party,
or by which it or any of its assets is subject, is required for the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby and the
continuation thereof after MTM's acquisition of the Shares or the
Merger (if any) without MTM or Merger Sub becoming obligated to
make payments greater than would have been required in the event
the acquisition and/or Merger was not consummated.
2.6 Litigation. Except as set forth in Schedule 2.6 to this
Agreement, there are no actions, suits, claims or legal,
administrative or arbitration proceedings or investigations
pending, or to their knowledge threatened against, involving or
affecting Pivot, its assets or its business, or which relates to
any product alleged to have been assembled, produced, distributed
or sold by Pivot and alleged to have been defective or improperly
designed, assembled or produced, and they do not have knowledge of
any state of facts or of the occurrence of any event which is
likely to form the basis of any thereof. There are no outstanding
orders, writs, injunctions or decrees of any court, governmental
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agency or arbitration tribunal against, involving or affecting
Pivot, its assets or business, other than decrees of general
applicability. Pivot will not expend its funds to bring any action
against or defend any action with David Ayers arising out of the
matter set forth in Section 2.6 hereof ("Ayers Matter"), such
expenses to be borne solely by Stockholders.
2.7 Compliance with Law. Pivot has conducted its business in
material compliance with all applicable Federal, state and local
laws, rules, regulations and orders (collectively, "Laws"),
including without limitation, all Laws relating to (i) the
generation, use, collection, treatment, storage, transportation,
recovery, removal, discharge or disposal of toxic or hazardous
substances and all laws and regulations with regard to record
keeping, notification and reporting requirements with respect
thereto, and (ii) occupational health and safety standards
("OSHA").
2.8 Proprietary Information of Third Parties. To the best of
Pivot's and Stockholders' knowledge, no third party has claimed or
has reason to claim that any person employed by Pivot has (a)
violated or may be violating any of the terms or conditions of his
employment, non-competition or non-disclosure agreement with such
third party, (b) disclosed or may be disclosing or utilized or may
be utilizing any trade secret or proprietary information or
documentation of such third party or (c) interfered or may be
interfering in the employment relationship between such third party
and any of its present or former employees. No third party has
requested information from Pivot which suggests that such a claim
might be contemplated. To the best of Pivot's and Stockholders'
knowledge, no person employed by or retained by Pivot has employed
or proposes to employ any trade secret or any information or
documentation proprietary to any former employer, and to the best
of Pivot's and the Stockholders' knowledge, no person employed or
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retained as a consultant by Pivot has violated any confidential
relationship which such person may have had with any third party,
in connection with the development, manufacture or sale of any
product or proposed product or the development or sale of any
service or proposed service of Pivot, and Pivot has no reason to
believe there will be any such violation.
2.9 Intellectual Property. (a) Pivot owns, or is licensed or
otherwise possesses valid rights to use all patents that are used
in the business of Pivot as currently conducted. Pivot owns or is
licensed or otherwise possesses valid rights to use (i) all
copyrights, and any applications therefor, technology, know-how,
computer software programs, development tools or applications (in
both source code and object code form), and tangible or intangible
proprietary information or material that are used in the business
of Pivot as currently conducted by Pivot and (ii) all trademarks,
trade names and service marks and any applications therefor, in
either case which are material to the business of Pivot as
currently conducted (all of the foregoing, including the patents,
are collectively referred to as the "Pivot Intellectual Property
Rights").
(b) Schedule 2.9(b) sets forth a complete list of all
patents, registered and material unregistered trademarks,
registered copyrights, trade names and service marks, and any
applications therefor, included in the Pivot Intellectual Property
Rights, and specifies, where applicable, the jurisdictions in which
each such Pivot Intellectual Property Right has been issued or
registered or in which an application for such issuance and
registration has been filed, including the respective registration
or application numbers and the names of all registered owners.
Schedule 2.9(b) sets forth a complete list of all material
licenses, sublicenses and other agreements to which Pivot is a
party and pursuant to which Pivot or any other person is authorized
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to use any Pivot Intellectual Property Right (excluding object code
end-user licenses granted to end-users in the ordinary course of
business that permit use of software products without a right to
modify, distribute or sublicense the same ("End-User Licenses")) or
trade secret of Pivot (and, specifically designating the agreements
pursuant to which any party is granted a source code license by
Pivot), and includes the identity of all parties thereto. The
execution and delivery of this Agreement by Pivot, and the
consummation of the transactions contemplated hereby, will neither
cause Pivot to be in violation or default under any such license,
sublicense or agreement, entitle any other party to any such
license, sublicense or agreement to terminate or modify such
license, sublicense or agreement nor cause the release of the
source code form of any item of Pivot Intellectual Property Rights
to any third party.
(c) Except as set forth in Schedule 2.9(c), there are no
outstanding options, licenses or agreements of any kind relating to
any Pivot Intellectual Property Rights held by any third party
(other than End-User Licenses), nor is Pivot bound by or a party to
any options, licenses or agreements of any kind with respect to the
patents, trade secrets, know-how, processes, trademarks, service
marks, trade names, copyrights, licenses, information, proprietary
rights or other rights of any other person or entity.
(d) Except with respect to the persons set forth in
Schedule 2.9(d) to the extent specifically set forth therein, each
item of such Pivot Intellectual Property Rights has been created,
conceived of, reduced to practice or developed by employees or
contractors of Pivot who have assigned their rights in such Pivot
Intellectual Property Rights to Pivot. Pivot owns, leases or
licenses all assets used in connection with its business and none
of its employees or affiliates of employees has any proprietary
right in connection therewith.
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(e) Except with respect to the persons set forth in
Schedule 2.9(e) to the extent specifically set forth therein, Pivot
has taken what it believes to be reasonable actions to protect the
confidentiality of the confidential Pivot Intellectual Property
Rights and the enforceability of any trade secrets with respect
thereto, including without limitation and as appropriate in each
instance, the acquisition of written non disclosure agreements from
Pivot employees and those parties to whom Pivot has made an
authorized disclosure and who would not otherwise have a common law
or other legal duty or obligation of non-disclosure. In addition,
Pivot has taken steps reasonably calculated to protect the
confidentiality of other Pivot Intellectual Property Rights owned
by Pivot which are not generally available to the public or
customers of Pivot. Except as disclosed in Schedule 2.9(e), each
employee of and consultant to Pivot has executed a proprietary
information and inventions agreement and a nondisclosure agreement
substantially in Pivot's standard form. Except as disclosed on
Schedule 2.9(e) to the best of Pivot's and Stockholders' knowledge,
no party that has signed a proprietary information and inventions
agreement or nondisclosure agreement is in violation of the
confidentiality provisions of that agreement.
(f) Schedule 2.9(f) identifies each license, sublicense,
agreement, permission and right to use granted by a third party to
Pivot of any Pivot Intellectual Property Rights, other than end-
user licenses related to "off the shelf" commercial, business or
engineering application software products not incorporated in any
way in any product licensed, sold, developed or being developed by
or for Pivot ("Third Party Licenses"). Pivot has provided MTM
with copies of all Third Party Licenses. Except as disclosed on
Schedule 2.9(f), Pivot is not contractually liable, nor has it made
any contract or arrangement whereby it may become liable, to any
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person for any royalty or other consideration for the use of any
Pivot Intellectual Property Rights.
(g) All computer software included in Pivot Intellectual
Property Rights is year 2000 compliant (that is, (i) it is capable,
to the extent called for, of correctly processing, providing and
receiving data within and between the 20th and 21st centuries
(including accounting for all required leap year calculations) and
(ii) all date fields therein use four (4) digit year fields) to the
extent non-compliance would have a material adverse effect on
Pivot.
(h) No claims with respect to Pivot Intellectual
Property Rights have been asserted to Pivot or are, to Pivot's
knowledge, threatened by any person, nor, to Pivot's knowledge, are
there any valid grounds for any bona fide claims (i) to the effect
that the manufacture, sale, licensing or use of any of the products
of Pivot infringes on any copyright, patent, trademark, service
mark, trade secret or other proprietary right, (ii) against the use
by Pivot of any trademarks, service marks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer
software programs and applications used in Pivot's business as
currently conducted, or (iii) challenging the ownership by Pivot,
validity or effectiveness of any of Pivot Intellectual Property
Rights. All registered trademarks, service marks and copyrights
held by Pivot are valid and subsisting. To Pivot's knowledge, the
business of Pivot as currently conducted has not and does not
infringe on any proprietary right of any third party. To Pivot's
knowledge, there is no unauthorized use, infringement or
misappropriation of any of Pivot Intellectual Property Rights by
any third party, including any employee or former employee of
Pivot. No Pivot Intellectual Property Right or product of Pivot or
any of its subsidiaries is subject to any outstanding decree,
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order, judgment, or stipulation restricting in any manner the
licensing thereof by Pivot.
(i) To the best of Pivot's and Stockholders' knowledge,
except as set forth in Schedule 2.9(i) and except for the
Stockholders, no employee, agent or representative of Pivot have in
his/its possession confidential information of a nature which would
allow such person or persons to duplicate Pivot's products and/or
technology. For purposes of this subsection,"confidential
information" shall mean information generally unavailable to the
public that has been created, discovered, developed or otherwise
become known to Pivot or in which property rights have been
assigned or otherwise conveyed to Pivot, which information has
material economic value or potential material economic value to the
business in which Pivot is or will be engaged.
2.10 Tangible Property. Schedule 2.10 sets forth a true and
complete list of all the tangible personal property of Pivot
("Personal Property"), including a description of each item,
whether it is owned or leased and the serial number, if any. Each
item of Personal Property is in good working condition and repair,
ordinary wear and tear excepted, none of such items has any
material defects or is in need of maintenance or repairs, except
for ordinary, routine maintenance and repairs which are not
material in nature or cost, and all of the items listed are
adequate for the uses to which they are being put. All Personal
Property is located on Pivot's premises.
2.11 Inventories. Schedule 2.11 contains a true and complete
list of all the inventories owned by Pivot at the date first
written above showing Pivot's standard carrying value of each item.
Such inventories consist of items of a quality and quantity which
are usable or saleable, for the purpose acquired, in the ordinary
course of Pivot's business as of the date hereof. Since the date
first written above, the inventories of Pivot have been maintained
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at a level consistent with the operation of the business of Pivot
in its normal course, and no change has occurred in such
inventories which materially and adversely affects or will
materially and adversely affect their usability or saleability.
Orders for inventory items have not been given for amounts
materially in excess of the amounts necessary to maintain the
inventories of Pivot at normal levels based upon past practice.
All inventories are located on Pivot's premises.
2.12 Accounts Receivable. To the best knowledge of Pivot,
accounts receivable and trade receivables (collectively defined as
the "Accounts Receivable") of Pivot reflected in the Financial
Statements as at March 31, 1998, and the Accounts Receivable
created by Pivot since such date are valid, bona-fide subsisting
claims for the aggregate amounts thereof reflected in the Financial
Statements as at March 31, 1998 net of the reserves or allowances
for doubtful receivables reflected in such Financial Statement or
thereafter in Pivot's books and records uniformly maintained in
accordance with the financial statements, accounted for in
accordance with GAAP, and Pivot knows of no reason as of the
Closing Date that would make such Accounts Receivable, taken as a
whole, not collectible, subject to the aforementioned allowance for
doubtful receivables.. This representation is in no manner a
representation as to the amount of Accounts Receivable which will
ultimately be collected.
2.13 Leases. Schedule 2.13 sets forth a true and complete
list of all real property leases and personal property leases
(collectively the "Leases") to which Pivot is a party. Pivot
enjoys peaceful and undisturbed possession under all such Leases.
True and correct copies of the Leases have heretofore been
furnished to MTM. No notice of default or claim under any Lease,
or to the best of Pivot's and Stockholders' knowledge, no
indication of any material default or claim has occurred or desire
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not to renew any Lease, has been received by Pivot, and Pivot has
performed in all material respects, all obligations required to be
performed by it to date under the Leases.
2.14 Contracts. Schedule 2.14 contains a true and complete
list and description of all contracts, agreements, instruments,
commitments, understandings and arrangements to which Pivot is a
party or by which it or its properties or assets were bound, as at
the date hereof (other than contracts, agreements, instruments and
commitments set forth on any other Schedule to this Agreement) and
the terms thereof, including contracts, agreements, instruments,
commitments, understandings and arrangements relating to:
(i) the acquisition of services, materials, equipment,
inventory, supplies or other personal property involving more than
$7,500 over the remaining term, not terminable within thirty days
or less without obligation on the part of Pivot;
(ii) the sale of products or services in excess of $5,000
over the remaining term;
(iii) distribution, dealer, agency, or financing
agreements or arrangements (including without limitation, letters
of credit) not terminable within thirty days or less without
obligation on the part of Pivot;
(iv) employment agreements not terminable within thirty
days or less without the payment of severance;
(v) the sale of personal property (other than in the
ordinary course of business);
(vi) purchase of inventory on consignment;
(vii) non-competition, confidential information or
similar agreements; or
(viii) other contracts, agreements, commitments or
understandings which materially affect the business, properties or
assets of Pivot or which were entered into other than in the
ordinary and usual course of business.
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2.15 Accounts Payable. Schedule 2.15 to this Agreement sets
forth a true, correct and complete list of all accounts payable of
Pivot at the date first written above, including amounts payable to
trade creditors (the "Trade Creditors") and other short-term
liabilities commonly identified as accounts payable, which are, to
the best of their knowledge, bona fide, valid and binding
obligations of Pivot incurred in the ordinary course of business on
an arms-length basis. Schedule 2.15 indicates the dates upon which
payment to each of the items listed therein is due.
2.16 Binding Nature of Contracts; No Breach. Each of the
agreements, contracts, instruments, leases and licenses listed on
any Schedule hereto is in full force and effect and is the legal,
valid and binding obligation of Pivot and to Pivot's knowledge, the
other parties thereto and is enforceable as to them in accordance
with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to or affecting the rights or remedies of
creditors. Pivot has not given or received notice of, and Pivot
and the Stockholders do not know that there exists, any material
default or event of default under any such agreement, contract,
instrument, lease or license, or any event or condition which with
or without notice or lapse of time or both would constitute an
event of default under any such agreement, contract, instrument,
lease or license by Pivot or by any other party thereto. Each
supply, distribution, agency or other arrangement or understanding
of Pivot, all of which are listed on Schedule 2.14 is a valid and
continuing arrangement or understanding and will continue after the
Closing and any Merger. Neither Pivot nor any other party to any
such arrangement or understanding has given notice of termination
or taken any action inconsistent with the continuance of such
arrangement or understanding.
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2.17 Title to Assets; Liens. Pivot has good and marketable
title to all of its assets (except real and other properties and
assets held pursuant to leases or licenses described in the
Schedules to this Agreement), free and clear of all liens, except
such liens as are specified in Schedule 2.17. Following the
Closing, Pivot will continue to have good and marketable title to
all such assets (except real and other properties and assets held
pursuant to leases or licenses described in the Schedules to this
Agreement), free and clear of all Liens, except as provided in
Schedule 2.17. If the Merger was to occur at Closing, Merger Sub
would succeed to Pivot's title free of any additional Liens.
2.18 Taxes. Except as set forth on Schedule 2.18, to the
knowledge of Pivot (i) there has been duly filed by or on behalf of
Pivot and each of its subsidiaries (and each of their respective
predecessors, if any), or filing extensions from the appropriate
Federal, state, foreign and local Governmental Entities have been
obtained with respect to, all material Federal, state, foreign and
local tax returns and reports required to be filed on or prior to
the date hereof, (ii) payment in full or adequate provision for the
payment of all taxes required to be paid in respect of the periods
covered by such tax returns and reports has been made (except in
respect of state, local and foreign taxes which are in the
aggregate immaterial in amount) and (iii) a reserve which Pivot
reasonably believes to be adequate has been set up for the payment
of all such taxes anticipated to be payable in respect of periods
through the date hereof. To Pivot's knowledge, none of the Federal
income tax returns required to be filed by or on behalf of Pivot
are currently under examination by the Internal Revenue Service
("IRS"). There have not been any deficiencies or assessments
asserted in writing by the IRS with respect to any such returns.
Except as set forth on Schedule 2.18, Pivot has not, with regard to
any assets or property held, acquired or to be acquired by Pivot,
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filed a consent pursuant to Section 341 (f) of the Code or any
predecessor statute. For the purpose of this Agreement, the term
"tax" (including, with correlative meaning, the terms "taxes" and
"taxable") shall include all Federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise and other taxes,
duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such
amounts. Without limiting the above portion of this representation,
Pivot has not made any payments and is not required to pay sales
and use taxes in any jurisdiction and it has not received any
claim or notice, and neither Pivot nor the Stockholders have any
knowledge that Pivot has not paid all required sales and use taxes.
2.19 Permits. All of the governmental permits, business
licenses and approvals held by Pivot are listed on Schedule 2.19
and are in full force and effect as of the date hereof, except to
the extent the failure to so maintain such Permits would not have
a material adverse affect on Pivot's business, and constitute all
of the governmental permits, business licenses and approvals
required for the conduct of its business in the manner currently
conducted. No material violations are or have been recorded in
respect of any such existing permits, business licenses or
approvals and remain uncorrected as of the date hereof, no
proceeding is pending or to Pivot's knowledge threatened looking
toward the revocation or limitation of any such existing permits,
business licenses or approvals, and there are no violations of any
laws, rules, regulations, orders or ordinances applicable to the
business conducted by Pivot with respect to its assets or the
assets and properties used in the operation of that business
(including reporting requirement of any Federal or state agency)
which would materially and adversely affect its assets or business.
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2.20 Insurance. The insurance policies listed on Schedule
2.20 constitute all insurance policies currently maintained by
Pivot. Such policies are in full force and effect. Without
limiting the foregoing, Pivot has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in
amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed. Pivot
has previously delivered to MTM true and complete copies of each
insurance policy listed on Schedule 2.20.
2.21 Loans and Advances. Except for amounts due to Bessemer
Venture Partners IV, L.P. and Bessec Ventures IV, L.P., which loans
and advances will be deemed satisfied in full by payment of the
consideration set forth in Section 5.7 hereof in connection with
the Bessemer Redemption, Pivot does not have any outstanding loans
or advances to any person and is not obligated to make any such
loans or advances. Schedule 2.21 sets forth a complete schedule of
all amounts Pivot owes its stockholders in connection with loans
made by such person(s) to Pivot, other than debt to be canceled in
the Bessemer Redemption.
2.22 Brokers. Pivot has no contract, arrangement or
understanding with any broker, finder or similar agent with respect
to the transactions contemplated by this Agreement.
2.23 Transactions with Affiliates. Other than those
transactions and arrangements set forth on Schedule 2.23, no
director, officer, employee or stockholder of Pivot, or member of
the family of any such person, or any corporation, partnership,
trust or other entity in which any such person, or any member of
the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of
the outstanding capital stock thereof, is a party to any
transaction with Pivot, including any contract, agreement, or other
arrangement providing for the employment of, furnishing of services
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by, rental or personal property from or otherwise requiring
payments to any such person or firm. The parties hereto
acknowledge and agree that the Stockholder property listed on
Schedule 2.23 may continue to be used by Pivot, and the surviving
corporation if the Merger is consummated, free of cost, for such
time as Pivot and its successors shall determine in their sole
discretion, subject however to the right of a Shareholder to demand
the return of his property so listed on Schedule 2.23, at his
expense, upon the end of the initial three and one-half (3-1/2)
term of his Employment Agreement. At such time as Pivot or its
successors do not elect to use such property, the respective owner
of such property may either direct Pivot to deliver such property
at Pivot's expense, to the owner, or abandon such property in
which event Pivot or its successor shall be responsible for the
disposal thereof.
2.24 Assumptions, Guaranties, etc. of Indebtedness. Pivot has
not assumed, guaranteed, endorsed or otherwise become directly or
contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in a debtor, or otherwise to
assure a creditor against loss), except for guaranties by
endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.
2.25 Employees. Schedule 2.25 sets forth the names of all
employees of Pivot, their titles, dates of hire, current
compensation and other benefits to which they are entitled. Except
as set forth on Schedule 2.25, since the Cut-Off Date, Pivot has
not granted nor has it become obligated to grant any increases in
the wages or salary or paid or become obligated to pay any bonus or
made or become obligated to make any similar payment to, or granted
any benefit, promotion or change in working conditions to or on
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behalf of, any employee listed on Schedule 2.25 (each, an
"Employee"). Pivot has not directly or indirectly paid or become
obligated to pay any severance or termination pay to any Employee
or any other person. Except as set forth on Schedule 2.25, Pivot
does not have in effect with any Employee or other person an
employment contract or other arrangement relating to the length or
terms and conditions of such Employee's or other person's
employment, and other commitments imposed by applicable law.
Further, except as set forth on Schedule 2.25, Pivot does not have
in effect any agreements, commitments, arrangements, policies or
practices relating to bonuses, vacations, vacation pay, pensions,
profit sharing, retirement, stock options, stock purchases,
employee expense reimbursements, employee discounts or other
benefits affecting any of its employees. Pivot does not maintain
any "employee pension benefit plan" as that term is defined in
Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"); and none of Pivot's employees are
participants in a "multi-employer plan" as defined in Sections
3(37) or 4001(a)(3) of ERISA. Pivot is not a party to any
collective bargaining agreement with any union representing its
employees, and there are no strikes, union representation contests,
National Labor Relations Board proceedings or any labor disputes,
litigation or proceedings of any kind pending, or to their
knowledge, threatened against Pivot. Pivot is not aware that any
officer or employee of Pivot intends to terminate his or her
employment with Pivot, nor does Pivot have any present intention to
terminate the employment of any of its officers or employees.
2.26 Customers and Suppliers. Attached hereto as Schedule
2.26 is a list of Pivot's top 10 suppliers and customers and the
percentage of gross revenues attributable to each with respect to
customers and percentage of goods supplied by vendors with respect
to suppliers. To the best of Pivot's and Stockholders' knowledge,
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the consummation of this Agreement or the Merger, if consummated,
would not have an adverse effect on Pivot/Merger Sub continuing to
do business with such customers and suppliers. Notwithstanding the
foregoing, neither Pivot nor any Stockholder represents or warrants
that any customer or supplier will continue to do business with
Pivot or Merger Sub after the consummation of this Agreement or the
Merger.
2.27 Backlog. Schedule 2.27 sets forth the Seller's backlog
of orders ("Backlog"). As at the date hereof, the Backlog, based
on the amount of the customer orders with respect thereto, total
approximately $0.00. The parties hereto acknowledge that Backlog
does not include ongoing services to be performed under Pivot's
contracts with Hubbell and Duane Reade. As at the Closing, the
amount of the Backlog shall not be substantially below that set
forth above.
2.28 All Documentation has Been Furnished or Made Available to
MTM. Pivot has previously furnished to, or made available for
inspection by, MTM and its representatives, if requested by MTM,
true and complete copies of all contracts, agreements, instruments,
commitments, licenses and leases referred to in this Agreement or
the Schedules hereto. No material documents relating to the
business of Pivot have been removed, destroyed or withheld from
inspection by MTM.
2.29 Full Disclosure. No representation or warranty made by
Pivot in this Agreement or in writing pursuant to this Agreement,
including without limitation, the Schedules or any other documents,
certificates or written statements, delivered or to be delivered to
MTM in connection herewith, contains, or will contain, any untrue
statement of a material fact or omits or will omit to state any
material fact necessary to make the statements contained herein and
therein not misleading, and all copies of the documents delivered
hereunder are true and complete copies. There is no fact known to
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Pivot which materially and adversely affects or may (so far as
Pivot can now foresee) materially and adversely affect the
business, operations or condition (financial or otherwise) of
Pivot, which has not been set forth in this Agreement or in the
Schedules, or the other documents, certificates and statements
furnished to MTM by or on behalf of Pivot prior to or on the date
hereof in connection with the transactions contemplated hereby.
2.30 Board Size. Prior to the Closing, the Board of Directors
of Pivot consists of three (3) members listed on Schedule 2.30.
Pivot's By-Laws provide that the number of Directors may be
increased, from time to time, as provided in such By-Laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.
Each Stockholder represents and warrants to MTM as follows:
3.1 Binding Obligation. This Agreement constitutes his
legal, valid and binding obligation, enforceable against him in
accordance with its terms.
3.2 No Violation. The execution and delivery of this
Agreement, the performance of his obligations hereunder, and the
consummation of the transactions contemplated by this Agreement
will not (a) violate, be in conflict with, or constitute a default
(or an event which, with notice or lapse of time or both, would
constitute a default) under any agreement or commitment to which he
is a party or by which his property is bound or (b) violate any
statute or law or any judgment, decree, order, regulation or rule
of any court or governmental body applicable to him.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MTM
MTM represents and warrants as follows:
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4.1 Organization and Standing. MTM is a corporation duly
organized, validly existing and in good standing under the laws of
the State of New York.
4.2 Corporate Power. MTM has full corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement and to perform its
obligations under this Agreement.
4.3 Authorization; Binding Effect. The execution and
delivery by MTM of this Agreement, and the consummation by MTM of
the transactions contemplated by this Agreement and the performance
by MTM of its obligations under this Agreement have been duly and
validly authorized by all necessary corporate action on the part of
MTM. This Agreement has been duly executed and delivered by MTM and
constitutes a legal, valid and binding obligation of MTM,
enforceable against it in accordance with its terms.
4.4 Capitalization.
(a) The authorized capital stock of MTM consists of
10,000,000 shares of Common Stock, $.001 par value per share and
1,400,000 shares of Preferred Stock, par value $.001 per share (the
"Preferred Stock"), of which 1,400,000 shares of the Preferred
Stock are designated "Convertible Preferred Stock, Series A", all
of which are held as treasury shares (the "Series A Stock"). As of
the date hereof, the issued and outstanding capital stock of MTM
consists of (i) 4,450,374 shares of Common Stock, (ii) 600,000
shares of Common Stock reserved for issuance upon exercise of all
options granted under MTM's stock option plans. All such shares
of MTM are duly authorized, those shares described in clause (i)
above are validly issued, fully paid and non-assessable, and those
shares described in clause (ii) above, when so issued, will be
validly issued, fully paid and non-assessable.
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(b) Except as set forth in Section 4.4(a) and Schedule
4.4, MTM does not have outstanding any capital stock or securities
convertible into or exchangeable for any shares of capital stock,
and there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which MTM is a
party or otherwise obligating MTM to issue or sell, entitling any
person to acquire from MTM, and MTM is not a party to any
agreement, arrangement or commitment obligating it to repurchase,
redeem or otherwise acquire, any shares of its capital stock or
securities convertible into or exchangeable for any of its capital
stock.
(c) Except as contemplated by this Agreement or as set
forth on Schedule 4.4 hereof, MTM has not granted any registration
rights with respect to any shares of its capital stock to any third
party.
4.5 Authority to Conduct Business. MTM has all requisite
corporate power and authority necessary or advisable to own or hold
its properties and conduct its business and holds all material
licenses, permits and other required authorizations and approvals
from governmental authorities and has made all material
registrations and given all notifications required under federal,
state or local law that are necessary or advisable for the conduct
of its business.
4.6 No Violation. The execution, delivery and performance of
this Agreement will not (i) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default or give rise to any right of termination, cancellation or
acceleration under, or result in the creation of any lien or
encumbrance on or against any of the properties of MTM or any of
its subsidiaries pursuant to any of the terms or conditions of any
note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which MTM or any of its subsidiaries is
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a party or by which any of them or any of their properties or
assets may be bound, (ii) violate any statute, law, rule,
regulation, writ, injunction, judgement, order or decree of any
governmental authority, binding on MTM or any of its subsidiaries
or any of their properties or assets, or (iii) result in or give
rise (whether upon demand by the holder of any such securities or
by the terms of any such security) to the issuance of any
additional capital stock of MTM or accelerate or alter the
conversion rights of any holder of any securities exercisable into
or convertible for shares of capital stock of MTM.
4.7 Litigation. Other than as set forth in MTM's Form 10-K
dated March 31,1997, the 8-K's or 10-Q's filed subsequent thereto
and as set forth in Schedule 4.7, there is no pending or threatened
legal or governmental claim, action or proceedings against or
relating to MTM which could, individually or in the aggregate, have
a material adverse effect on MTM.
4.8 Full Disclosure. No representation or warranty made by
MTM in this Agreement or in writing pursuant to this Agreement,
including without limitation, the Schedules or any other documents,
certificates or written statements, delivered or to be delivered by
MTM in connection herewith, contains, or will contain, any untrue
statement of a material fact or omits or will omit to state any
material fact necessary to make the statements contained herein and
therein not misleading, and all copies of the documents delivered
hereunder are true and complete copies. There is no fact known to
MTM which materially and adversely affects or may (so far as MTM
can now foresee) materially and adversely affect the business,
operations or condition (financial or otherwise) of MTM, which has
not been set forth in this Agreement or in the Schedules, or the
other documents, certificates and statements furnished to Pivot by
or on behalf of MTM prior to or on the date hereof in connection
with the transactions contemplated hereby.
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4.9 SEC Filings. MTM has made available to Pivot for
inspection a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by MTM
with the SEC since April 1, 1996 and prior to the date of this
Agreement (the "SEC Documents"), which are all the documents (other
than preliminary material) that MTM was required to file with the
SEC since such date. As of their respective dates, the SEC
Documents complied in all material respects with the requirements
of the Securities Act or the Securities Exchange Act of 1934, as
amended, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such SEC Documents, and
none of the SEC Documents contained as of the date of its filing
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statement therein, in light of the circumstances under which
they were made, not misleading.
4.10 Conduct of Business. Since March 1, 1998, (i) except as
set forth on Schedule 4.10 hereof, MTM and its subsidiaries have
conducted their respective businesses, operations and affairs in
the ordinary course of business consistent with past practice; and
(ii) there have not been changes, conditions or events that, in the
aggregate, have had or could reasonably be expected to have a
material adverse effect.
4.11 Cash Availability. MTM has and will use its best efforts
to maintain sufficient liquid cash reserves in order to make the
deferred purchase price payments referred to in Section 1.1 hereof.
At the date hereof and as at the Closing, MTM has and would have
sufficient liquid cash reserves to pay the entire purchase price
hereunder and the cash portion of the Merger Consideration, as
defined in the Merger Agreement without materially adversely
affecting MTM's ability to conduct its business as presently being
conducted.
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ARTICLE V
COVENANTS OF STOCKHOLDERS AND PIVOT
5.1 Third Party Consents. Pivot will obtain and deliver to
MTM all written consents of third parties as specified on the
Schedules in connection with MTM's purchase of the Shares and
Option, in order to enable MTM to obtain the benefits intended to
be conferred by this Agreement.
5.2 Access, Inspection and Consultation. Pivot will allow
MTM and its representatives full access to the books, records and
properties of Pivot and furnish such information concerning Pivot
as MTM may request from time to time through the earlier of (i) the
termination of this Agreement if the Closing is not consummated and
(ii) the effective date of the Merger or the termination of the
Merger Agreement. MTM and its representatives may take copies and
extracts from Pivot's books and records , discuss the affairs,
finances, and accounts of Pivot with Pivot's officers, employees
and public accountants (and Pivot hereby authorizes said
accountants to discuss with MTM and such designees such affairs,
finances and accounts), and consult with the management of Pivot as
to Pivot's affairs, finances, and accounts, all at reasonable times
and upon reasonable notice, it being agreed that reasonable notice
shall be no less than 48 hours notice. Pivot may condition such
access to those persons who (i) are not affiliated with any person
who competes with any business that Pivot is in or contemplating;
and (ii) execute a reasonable and customary form of non-disclosure
agreement.
5.3 Notice of Events or Changes. Pivot shall promptly notify
MTM of any event, occurrence or transaction which would have been
required to have been disclosed on any Schedule to this Agreement,
had such event, occurrence or transaction existed on the Closing
Date, including, without limitation, any actions, claims, or legal,
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administrative or arbitration proceedings, or investigations,
threatened or commenced, which, if pending on the Closing Date,
would have been required to be described in any Schedule hereto, or
which otherwise relate to or affect its business or assets in any
material respect, if such event, occurrence or transaction may have
a material adverse effect on the assets or business of Pivot. Pivot
shall use its best efforts to defend against any such actions,
claims, proceedings or investigations.
5.4 Not Amend Employment Agreements. Until such time as the
Option lapses or if MTM exercises its Option, until such time, if
ever, as the Merger Agreement is terminated, Pivot will not amend,
modify or otherwise change the terms of any Employment Agreement,
as hereinafter defined, without the consent of MTM, which consent
shall be in the sole discretion of MTM.
5.5 Appointment of MTM Designee as a Director. From the
Closing Date through the date MTM owns less than the number of
shares of Pivot acquired pursuant to Section 1.1 hereof, as
adjusted for any reverse stock split or recapitalization of Pivot,
MTM shall be entitled to designate one (1) individual to sit on
Pivot's Board of Directors and the Stockholders agree to cast their
votes in favor of such designee.
5.6 Conduct of Business.
(a) Pivot agrees that until the Closing, unless it has
received the prior written consent of MTM or except as set forth in
Schedule 5.6 hereof, it will:
(i) Operate its business in the usual, regular and
ordinary course consistent with reasonable business practice;
(ii) Use all reasonable efforts as to events within
Pivot's control to prevent the occurrence of any change or event
which would prevent any of the representations and warranties of
Pivot contained herein from being true at and as of the Closing
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Date with the same effect as though such representations and
warranties had been made at and as of the Closing Date;
(iii) Use its best efforts to preserve its
present relationship with suppliers, customers and others having
business dealings with it;
(iv) To the extent it has sufficient funds, pay and
discharge all costs and expenses of carrying on its business
consistent with past business practices;
(v) Not enter into any purchase order in excess of
$5,000, except in the ordinary course of business consistent with
past practice;
(vi) Not create or suffer any liens upon any of its
assets (other than Liens set forth in the Schedules);
(vii) Maintain books, accounts and records in
the usual, regular, true and ordinary manner;
(viii) Incur any obligation or liability (fixed
or contingent), except in the ordinary course of business
consistent with the past needs of Pivot;
(ix) Not cancel or compromise any material debt or
claim, other than in the ordinary course of business consistent
with past practice;
(x) Not waive or release any rights of material
value with respect to its assets, except in the ordinary course of
business consistent with past practice;
(xi) Not modify or change in any material respect
or terminate any existing license, lease, contract or other
document required to be listed on the Schedules to this Agreement
other than in the ordinary course of business consistent with past
practice;
(xii) Make any loans or extensions of credit,
except to trade purchasers in the ordinary course of business
consistent with past practice;
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(xiii) Not increase the compensation (including
wages and benefits described in Schedule 2.25) of any Employee or
make any representation or commitment to do so, except for the
consummation of the Employment Agreements which become effective
upon the Closing;
(xiv) Not declare, pay or set aside for payment
any dividend or other distribution on Pivot's capital stock; and
(xv) Continue all policies of insurance in full
force and effect up to and including the Closing Date.
(b) Pivot agrees that from the Closing Date until such
time as the Option lapses or if MTM exercises its Option, until
such time, if ever, as the Merger Agreement is terminated, unless
it has received the prior written consent of MTM, it will:
(i) Operate its business in accordance with the
Business Plan in effect from time to time;
(ii) Use its best efforts to preserve its present
relationship with suppliers, customers and others having business
dealings with it;
(iii) To the extent it has sufficient funds,
pay and discharge all costs and expenses of carrying on its
business;
(iv) Not create or suffer any liens upon any of its
assets (other than Liens set forth in the Schedules);
(v) Maintain books, accounts and records in the
usual, regular, true and ordinary manner;
(vi) Incur any obligation or liability (fixed or
contingent), except in the ordinary course of business consistent
with the Business Plan then in effect;
(vii) Not waive or release any rights of
material value with respect to its assets, except in the ordinary
course of business consistent with past practice;
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(viii) Make any loans or extensions of credit,
except to trade purchasers in the ordinary course of business
consistent with past practice;
(ix) Not declare, pay or set aside for payment any
dividend or other distribution on Pivot's capital stock;
(x) Neither issue preferred stock not convertible
into Common Stock of Pivot immediately prior to the Merger nor
issue additional shares of its capital stock without any subscriber
agreeing in advance to vote for the Merger; and
(xi) Continue all policies of insurance in full
force and effect up to and including the Closing Date.
5.7 Redemption of Bessemer Interest. Immediately after the
Closing, Pivot shall redeem pursuant to the Redemption Agreement
attached hereto as Exhibit "c" ("Bessemer Redemption
Agreement"),all shares of capital stock of Pivot owned by Bessemer
Venture Partners IV, L.P. and Bessec Ventures IV, L.P. (
collectively, "Bessemer"), satisfy its full debt to Bessemer and
obtain Bessemer's general release of all claims it may have against
Pivot for an aggregate consideration of $410,000.
5.8 Update Schedules. From the date of this Agreement to the
Closing Date, Pivot will update by amendments or supplements each
of the Schedules and any other written disclosure in writing from
Pivot to reflect any change in the information set forth in said
Schedules or other disclosure. Pivot hereby represents and warrants
that such Schedules and such written disclosures, as so amended or
supplemented, shall be true, correct and complete in all material
respects as of the date or dates thereof.
5.9 No Solicitation of Competing Offers. Prior to the
Closing Date or termination of this Agreement without Closing if
such termination is not a result of Pivot's or a Stockholder's
default hereunder. Pivot will not, directly or indirectly, seek,
solicit, initiate or encourage (including by way of furnishing any
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non-public information concerning the business, properties or
assets of Pivot) or enter into any discussions or negotiations with
any person or group regarding any Acquisition Proposal (as defined
below). Pivot will notify MTM promptly by telephone, and thereafter
confirm in writing, if any Acquisition Proposal is received by
Pivot. As used in this Agreement, "Acquisition Proposal" shall mean
any proposal received by Pivot prior to the Closing Date for a
merger or other business combination involving Pivot or relating to
the disposition of any of the assets except for dispositions of
assets for not less than fair market value which are made in the
ordinary course of business and are consistent with past practice
and with this Agreement.
5.10 Service Agreement. Pivot will provide remote network
services to such clients of MTM who do not object to Pivot
providing such services, where MTM, in good faith reasonably
determines such services are warranted. MTM shall have the ongoing
right in any event to sell network management products to its
clients who avail themselves of Pivot's services. Until such time
as the Option lapses, unless the service arrangement referred to in
this section 5.10 is extended by MTM in its sole discretion from
time to time, but not in excess of the earlier of 10 years and the
date MTM no longer has an equity interest in Pivot (MTM agreeing to
provide Pivot with 30 day cancellation notice), MTM agrees not to
use any remote network service provider other than Pivot. In any
event, for a period of two (2) years after the lapsing of the
Option, MTM will use Pivot's services with respect to (i) all
clients of MTM using such services at the date the Option lapses
who require ongoing remote network services and (ii) all clients
then negotiating with MTM with respect to whom Pivot has met,
demonstrated its product/services and rendered a substantially
complete quotation for said client's needs, provided, however, in
both (i) and (ii) such clients do not insist on using another
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remote network provider. Notwithstanding the above, in the event
MTM is acquired by an entity which provides remote network
services, MTM, in its sole discretion, may terminate the service
relationship set forth in this Section 5.10, provided, however,
that MTM agrees that with respect to clients introduced to it by
Pivot, MTM agrees to use Pivot's services for a period not less
than two (2) from the date of the acquisition of MTM, who do not
insist on using another remote network provider. Furthermore, in
the event Pivot is acquired by an entity which provides systems
integration services, Pivot, in its sole discretion, may terminate
the service relationship set forth in this Section 5.10, provided,
however, that Pivot agrees that it will continue to provide such
services for a period of not less than two (2) years to clients of
MTM who are clients of Pivot as at the date of the acquisition of
Pivot. The fee charged by Pivot for its services thereunder shall
not be greater than that customarily charged by Pivot to its best
customers from time to time.
5.11 Restrictive Agreements Prohibited. Pivot shall not become
a party to any agreement which by its terms restricts Pivot's
performance of this Agreement or the Merger Agreement in the event
MTM exercises its Option.
5.12 Transactions with Affiliates. Except for transactions
contemplated by this Agreement or otherwise approved by MTM, for
the period MTM owns not less than the number of shares of Pivot
Common Stock acquired pursuant to Section 1.1 hereof, as adjusted
for any reverse stock split or recapitalization of Pivot, Pivot
shall not enter into any transaction with any director, officer,
employee or holder of more than 5% of the outstanding capital stock
of any class or series of capital stock of Pivot or with such
persons family members, or any corporation, partnership, trust or
other entity in which any such person or member of his family is a
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director, officer, trustee, partner or holder of more than 5% of
the outstanding capital stock thereof.
5.13 Employee Non-Disclosure, Non-Disclosure and Development
Agreements. For the period MTM owns not less than the number of
shares of Pivot acquired pursuant to Section 1.1 hereof, as
adjusted for any reverse stock split or recapitalization of Pivot,
Pivot shall obtain a Proprietary Information and Non-Disclosure
Agreement, in the form attached hereto as Exhibit "D", from all
future officers, key employees and other employees who will have
access to confidential information of Pivot.
5.14 Mergers, Sale of Assets, etc. of Subsidiaries. Until
such time as the Option lapses without being exercised or this
Agreement is terminated without a Closing, Pivot shall not permit
any subsidiary to consolidate or merge into or with or sell or
transfer all or substantially all its assets, except that any
subsidiary may (i) consolidate or merge into or with or sell or
transfer assets to any other subsidiary, or (ii) merger into or
sell or transfer assets to Pivot.
5.15 Maintenance of Ownership of Subsidiaries. Until such
time as the Option lapses without being exercised or this Agreement
is terminated without a Closing, Pivot shall not sell or otherwise
transfer any shares of capital stock of any subsidiary, except to
Pivot or another subsidiary, or permit any subsidiary to issue,
sell or otherwise transfer any shares of its capital stock or the
capital stock of any subsidiary, except to Pivot or another
subsidiary.
5.16 Lock-up Agreement. The Stockholders will execute the
Lock-Up Agreements, as defined in Section 7.11 below.
5.17 Merger Agreement. Pivot and the Stockholders will
execute the Merger Agreement upon the exercise of the Option.
5.18 Audited Financial Statements. Pivot shall reasonably
cooperate with MTM's accountants, at MTM's cost, in satisfying the
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financial reporting requirements with respect to the Agreement and
the Merger under Rule 3-05 of Regulation S-X and as otherwise may
be required from time to time for a public company to own more than
a 20% interest in another entity.
ARTICLE VI
COVENANTS OF MTM
6.1 Service Agreement. MTM covenants that Pivot will provide
remote network services to such clients of MTM who do not object to
Pivot providing such services, where MTM, in good faith reasonably
determines such services are warranted. MTM shall have the ongoing
right in any event to sell network management products to its
clients who avail themselves of Pivot's services. Until such time
as the Option lapses, unless the service arrangement referred to in
this Section 6.1 is extended by MTM in its sole discretion from
time to time, but not in excess of the earlier of 10 years and the
date MTM no longer has an equity interest in Pivot (MTM agreeing to
provide Pivot with 30 day cancellation notice), MTM agrees not to
use any remote network service provider other than Pivot. In any
event, for a period of two (2) years after the lapsing of the
Option, MTM will use Pivot's services with respect to (i) all
clients of MTM using such services at the date the Option lapses
who require ongoing remote network services and (ii) all clients
then negotiating with MTM to receive such services where the
persons set forth in Schedule 5.10 have been significantly involved
in said negotiations, provided, however, in both (i) and (ii) such
clients do not insist on using another remote network provider.
Notwithstanding the above, in the event MTM is acquired by an
entity which provides remote network services, MTM, in its sole
discretion, may terminate the service relationship set forth in
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this Section 6.1, provided, however, that MTM agrees that with
respect to clients introduced to it by Pivot, MTM agrees to use
Pivot's services for a period not less than two (2) from the date
of the acquisition of MTM, who do not insist on using another
remote network provider. Furthermore, in the event Pivot is
acquired by an entity which provides systems integration services,
Pivot, in its sole discretion, may terminate the service
relationship set forth in this Section 6.1, provided, however, that
Pivot will continue to provide such services for a period of not
less than two (2) years to clients of MTM who are clients of Pivot
as at the date of the acquisition of Pivot. The fee charged by
Pivot for its services thereunder shall not be greater than that
customarily charged by Pivot to its best customers from time to
time.
6.2 Liquid Reserve. MTM covenants that at Closing it will
have and will use its best efforts to maintain sufficient liquid
cash reserves sufficient to make the deferred purchase price
payments referred to in Section 1.1 hereof.
6.3 NASDAQ Listing. MTM shall use its best efforts to
continue the listing of MTM Common Stock on the NASDAQ National
Market during the term of this Agreement and in the event of a
Merger, MTM shall cause the shares to be transferred to the
Stockholders to be listed on NASDAQ.
6.4 Additional Funding of Pivot. MTM agrees to lend Pivot up
to $124,870 in six equal installments commencing ten (10) days
after Closing to be used to satisfy in part the accounts payable
set forth on Schedule 2.15 hereof. Such advances shall be paid in
full, without interest, at the earlier of (i) one (1) year from the
Closing Date or (ii) the dates if any, that either MTM or Pivot
exercise their rights under Article IX hereof. If not paid at such
time, such advances shall be deemed to bear interest from the
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respective funding dates at the lesser of twelve (12%) percent per
annum at the maximum interest rate allowed by law. The
stockholders are not guarantors of such loans.
ARTICLE VII
Conditions Precedent to Obligations of MTM.
The obligations of MTM under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following
conditions (one or more of which may be waived by MTM):
7.1 Representations and Warranties Correct. The represen-
tations and warranties made by Pivot and the Stockholders in this
Agreement or in any writing pursuant to this Agreement, including
without limitation, the Schedules or any other documents,
certificates or written statements delivered or to be delivered to
MTM in connection with the transactions contemplated by this
Agreement, shall be true and correct in all material respects as of
the Closing Date as though such representations and warranties were
restated and made at and as of the Closing Date, and Pivot and the
Stockholders shall have furnished MTM with a certificate to that
effect.
7.2 Compliance with Obligations. All of the terms, covenants
and conditions of this Agreement required to be complied with by
Pivot at or prior to the Closing, including the obtaining of any
required consents, shall have been duly complied with and Pivot
shall have furnished MTM with a certificate executed by its
president to that effect and such other evidence of compliance as
MTM may reasonably request.
7.3 Furnishing of Documents. Pivot shall have furnished MTM
with (i) certificates of the Secretary of State of the State of
Delaware dated not more than ten business days prior to the Closing
Date of all documents on file in the office of the Secretary of
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State relating to Pivot, including its Certificate of Incorporation
and all amendments thereto; (ii) copies, certified by the Secretary
of Pivot as of the Closing Date, of the By-laws of Pivot at the
Closing Date, and of resolutions duly adopted by the Board of
Directors of Pivot and all of the Stockholders, approving and
authorizing the Agreement on the terms hereof; and (iii)
counterpart originals or certified or other copies of all of the
documents, certificates, schedules and other instruments required
to be furnished to MTM by Pivot or requested by MTM.
7.4 No Action or Litigation. There shall be no order of any
court or governmental body restraining or prohibiting the
transactions contemplated by this Agreement, nor shall any
litigation or other proceeding be pending or threatened against
Pivot or MTM seeking to prohibit or otherwise challenge the
consummation of the transactions contemplated by this Agreement or
to obtain substantial damages in respect thereof.
7.5 Third Party Consents. Except as otherwise indicated on
any Schedule to this Agreement, Pivot shall have obtained, at or
prior to the Closing Date, all consents required for the
consummation of the transactions contemplated by this Agreement
without the imposition of conditions unacceptable to MTM.
7.6 Net Worth. Pivot shall have a deficit net worth at
Closing Date of not in excess of $484,870 at the Closing Date.
7.7 Employees. The employees of Pivot designated as key
personnel on Schedule 7.7 hereof shall have entered into Employment
Agreements ("Employment Agreements") with Pivot, effective as of
the Closing, in the form attached hereto as Exhibit "E".
7.8 Bessemer Redemption Agreement. Bessemer and Pivot shall
have entered into the Bessemer Redemption Agreement, the closing of
which will be simultaneous with the Closing.
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7.9 Opinion of Counsel. MTM shall have received an opinion
from Pivot's counsel substantially in the form attached hereto as
Exhibit "F".
7.10 Opinion of Accountant. Delivery of an opinion of MTM's
accountant that any portion of the consideration hereunder or upon
the Merger, allocable to the covenant not to compete referred to in
the Merger Agreement, shall be deemed an acquisition cost.
7.11 Lock-up Agreement. The Stockholders shall have delivered
to MTM's counsel, lock-up agreements ("Lock-up Agreements") in the
form attached hereto as Exhibit "G", which Lock-up Agreements
become effective upon the Merger, if any. Pursuant to the Lock-up
Agreement, the directors, officers and affiliates of Pivot will
agree not to sell or otherwise dispose of their MTM Common Stock
which they would receive as a result of the Merger for three years
following the Merger, with 25% of such shares being released from
the Lock-up Agreement on the first anniversary of the Merger, an
additional 50% of the shares initially locked-up pursuant to the
Lock-up Agreement released on the second anniversary of the Merger
and the balance on the third anniversary of the Merger. The Lock-
up Agreement further provides that in no event will any Stockholder
sell any shares in violation of the registration requirements of
the Securities Act of 1933, as amended. Furthermore, it grants MTM
a right of first offer if a Stockholder elects to sell said MTM
Common Stock.
ARTICLE VIII
Conditions Precedent to Obligations of Pivot.
The obligations of Pivot under this Agreement are subject to
the satisfaction at or prior to the Closing of each of the
following conditions (one or more of which may be waived by Pivot):
8.1 Representations and Warranties Correct. The warranties
and representations made by MTM in this Agreement shall be true and
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correct in all material respects as of the Closing Date, as though
such warranties and representations were restated and made as and
at the Closing Date, and MTM shall have furnished Pivot with a
certificate executed by its respective president or chief executive
officer to that effect.
8.2 Compliance with Obligations. All of the terms, covenants
and conditions of this Agreement required to be complied with by
MTM at or prior to the Closing, including the obtaining of any
required consents, shall have been duly complied with and MTM shall
have furnished Pivot with a certificate executed by its president
to that effect and such other evidence of compliance as Pivot may
reasonably request.
8.3 No Action or Litigation. There shall be no order of any
court or governmental body restraining or prohibiting the
transactions contemplated by this Agreement, nor shall any
litigation or other proceeding be pending or threatened against
Pivot or MTM seeking to prohibit or otherwise challenge the
consummation of the transactions contemplated by this Agreement, or
to obtain substantial damages in respect thereof.
8.4 NASDAQ Listing. MTM's Common Stock shall be listed on
the NASDAQ National Market during the term of this Agreement.
8.5 Opinion of Counsel. Pivot shall have received an opinion
from MTM's counsel substantially in the form attached hereto as
Exhibit "I".
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ARTICLE IX
Put/Call Rights.
(a) Subject to MTM's tag along rights set forth in (b) below,
if MTM does not exercise its Option, for a period of one hundred
eighty (180) days after the lapse of the Option period (including
any extension thereof), Pivot shall have the right to redeem all of
its shares owned by MTM for 115% of the amount paid by MTM pursuant
to section 1.1 above or paid to extend the Option period ("MTM
Funding Amount"), and MTM shall have the right to put such shares
to Pivot at such time as aggregate additional funding is provided
by a third party from time to time to Pivot in excess of 200% of
the amount which would be payable to MTM upon the exercise of the
put, at the greater of (i) 125% of the MTM Funding Amount or (ii)
in the event the additional financing is equity financing or the
issuing of convertible debt, the then fair market value of Pivot.
Pivot shall pay any amounts owing upon the exercise of such put or
call in cash within twenty (20) days of the exercise thereof.
Notwithstanding the above, in the event Pivot has entered into or
is negotiating an agreement to sell substantially all of its assets
to a bona fide third party (and such negotiations or agreement has
not terminated) or entered into or is negotiating an agreement to
merge into another entity where Pivot is not the survivor, or any
of the above have been consummated, Pivot shall not be entitled to
exercise its call rights set forth above until the aforementioned
arrangements have been terminated. In the event Pivot is
negotiating as set forth in the previous sentence at the end of
Pivot's call period or within sixty (60) days of the end of such
period, Pivot's call period shall be extended for sixty (60) days
from the end of such negotiations.
(b) Notwithstanding anything contained in (a) above, if one
or more Stockholders owning fifty percent (50%) or more of the
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shares of capital stock of Pivot ("Pivot Capital Stock") ("Selling
Group") wish to sell, after the Option lapses without being
exercised, 50% or more of the Pivot Capital Stock to a third party
or third party group ("Third Party Acquiror"), the Selling Group
shall promptly forward a copy of the Third Party Acquiror offer to
MTM. MTM may participate in such sale upon substantially the same
terms and conditions as the Selling Group. The portion of the
shares of Pivot Capital Stock which MTM may sell upon the
consummation of any such transaction is a percentage of the Pivot
shares which the Selling Group offered to sell to the Third Party
Acquiror and which the Third Party Acquiror agreed to purchase,
equal to 100% multiplied by a fraction, the numerator of which is
MTM's stock ownership percentage interest in Pivot and the
denominator the sum of MTM's stock ownership percentage interest in
Pivot and the stock ownership percentage of Pivot owned by the
Selling Group in the aggregate. Only shares of Pivot actually
outstanding shall be considered for purposes of the above
calculation. Any such portion of the Third Party Acquiror offer
which MTM agrees to participate shall correspondingly reduce the
percentage offered to be purchased from the Selling Group. MTM
must notify the Selling Group within fourteen days (14) of the
mailing of the Third Party Acquiror Offer (or such greater time as
the Selling Group may determine in their sole discretion) whether
or not to participate in the Third Party Acquiror offer.
Notification of non-participation is irrevocable unless waived by
the Selling Group in their sole discretion.
ARTICLE X
Indemnification.
10.1 In Favor of MTM.
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(a) Pivot agrees to indemnify, defend and hold MTM, its
successors and permitted assigns, free and harmless from and
against all claims, actions, liabilities and damages (including
reasonable attorneys' fees and expenses) as and when incurred
arising out of or based upon the breach by Pivot of any of its
representations, warranties or covenants contained in this
Agreement to the extent of the cost to MTM with respect to the
above in excess of $15,000 in the aggregate. For purposes of this
Section 10.1, wherever a representation or warranty provides for a
"materiality" qualifier, such qualifier shall be deemed omitted.
The aggregate amount of indemnification for which Pivot is liable
in the aggregate shall not exceed the consideration paid hereunder,
except (X) in the event of (i) Pivot's failure to honor its
obligations under the Merger Agreement and Sections 1.2, 1.3., 5.5,
5.7, 5.9, 5.10, 5.11, 5.12, 5.13, 5.14, 5.15, 5.16, 5.17, and 5.18
hereof (ii) Stockholder's failure to honor his obligations under
the Lock-up Agreement and Sections 1.4 and 1.5 hereof and (iii)
Pivot's and/or Stockholder's failure to honor its commitments under
Sections 1.1(b), 2.6 (solely as it relates to the Ayers Matter) and
2.23, where the aggregate amount of indemnification to which MTM
shall be entitled shall not be limited, and (Y) as provided in (c)
below. Any indemnification due as a result of (i) (ii) or (iii)
above shall not reduce the maximum amount of Pivot's
indemnification set forth above.
(b) In the event the Option is exercised and the Merger
Agreement consummated, each Stockholder shall indemnify, defend and
hold MTM, its successors and permitted assigns, free and harmless
from and against all claims, actions, liabilities and damages
(including reasonable attorneys' fees and expenses) as and when
incurred arising out of or based upon the breach by the Stockholder
of any of his representations, warranties or covenants contained in
this Agreement, regardless of whether or not MTM is indemnified
50
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pursuant to (a) above, to the extent the cost to MTM with respect
to the above exceed $25,000 in the aggregate. For purposes of this
Section 10.1, wherever a representation or warranty provides for a
"materiality" qualifier, such qualifier shall be deemed omitted.
The aggregate amount of indemnification for which a Stockholder is
liable is his prorata share of the Merger Consideration, provided
there is no limitation in the event of a breach of the Lock-up
Agreement or Sections 1.1(b), 1.4, 1.5, 2.6 or 2.23. Any
indemnification due as a result of (i) or (ii) above shall not
reduce the maximum amount of Pivot's indemnification set forth
above.
(c) In the event of a breach of Sections 1.4 and 5.9
hereof, Pivot shall pay MTM an amount equal to the sum of (i) all
of the expenses incurred by MTM in connection with the negotiation
and preparation of the letter of intent, this Agreement, and all
related documentation incident thereto and the other transactions
contemplated by this letter, including but not limited to, all fees
and expenses incurred by MTM to attorneys and financial
consultants, accountants and other agents (collectively,
"Transaction Costs") and (ii) a break-up fee equal to the greater
of one-fourth of the amount paid by a third party offeror and
$250,000.
10.2 In Favor of Pivot and the Stockholder. MTM agrees to
indemnify, defend and hold Pivot and the Stockholders free and
harmless from and against all claims, actions, liabilities and
damages (including reasonable attorneys' fees and expenses) as and
when incurred arising out of or based upon the breach by MTM of any
of its representations, warranties or covenants contained in this
Agreement.
10.3 Procedure for Indemnification. If any party seeks
indemnification pursuant to Sections 10.1 or 10.2 it shall notify
the party required to provide indemnification hereunder of any loss
or claim made or action commenced against the party to be
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indemnified, within a reasonable time after such party shall have
been notified of the claim, becomes actually aware that a loss for
which it/he is entitled to indemnification has arisen or shall have
been served with the summons or other first legal process giving
information as to the nature and basis of the claim. The
indemnifying party shall assume the defense of such claim or
action, employ counsel of its choice and bear all expenses relating
to such defense. The indemnified party shall have the right to
participate in the defense of such claim or action and to employ
separate counsel, but the fees and expenses of such counsel shall
be at the expense of the indemnified party unless (a) the
employment thereof shall have been specifically authorized by the
indemnifying party or (b) the indemnifying party shall fail to
assume the defense and employ counsel. Notwithstanding anything to
the contrary in the foregoing, the indemnified party, upon written
notice to the indemnifying party, may at the indemnified party's
expense assume the defense of such claim or action, and employ
counsel of its choice. The parties shall each cooperate in the
defense of any such claim and shall make available to each other
records and other materials required for use in such defense. In no
event shall the indemnifying party be liable for any settlement of
any action or claim made without its written consent.
ARTICLE XI
Use Best Efforts to Satisfy Conditions Precedent.
Each of Pivot and each Stockholder agree to use its or his
best efforts to bring about the satisfaction of the conditions
specified in Article VII hereof, and MTM agrees to use its best
efforts to bring about the satisfaction of the conditions specified
in Article VIII hereof. If any condition specified in any of said
Sections shall not be satisfied by such best efforts and such
52
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condition shall not be waived by the party or parties for the
benefit of which such condition is stated, such party after giving
notice of such non-satisfaction and giving the other parties a
reasonable opportunity to satisfy such condition, may terminate
this Agreement by notice in writing to the other parties. In the
event this Agreement is not consummated by April 30, 1998,
provided, however that the party electing to terminate is not
otherwise in default hereunder and the party not electing to
terminate is ready, willing and able to close hereunder, either
party can elect to terminate this Agreement. Upon such termination,
this Agreement shall cease, other than with respect to Articles
XVI, XVII, XIX, and Sections 5.9 and 5.10 and no party hereto shall
have any liability hereunder of any nature whatsoever, including
liability for damages, except as they relate to the above
referenced articles and sections.
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ARTICLE XII
Designation of Forum in the Event of Litigation.
Pivot, the Stockholders, and MTM agree that any legal action
or proceedings with respect to, or arising out of, the negotiation,
execution, performance or breach of, or the rights and privileges
provided by, or responsibilities and obligations under, this
Agreement must be brought in either the Supreme Court of the State
of New York for the County of New York or the County of
Westchester or the United States District Court for the Southern
District of New York and in no other jurisdiction. By execution and
delivery of this Agreement, Pivot, Stockholders and MTM accept and
submit to the jurisdiction of such courts in any such legal action
or proceeding and irrevocably consent to service of process in any
action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to each of the parties at its
address for notices as specified herein, such service to become
effective five (5) days after such mailing. Nothing herein shall
affect the right to serve process in any other manner permitted by
law.
ARTICLE XIII
Notices.
All notices, requests, demands and other communications which
are required or permitted under this Agreement shall be in writing
and shall be deemed sufficiently given upon receipt if personally
delivered, faxed or mailed by certified mail, return receipt
requested, addressed to the party to be notified at the address
hereafter set forth for such party or to such other address as such
party may hereafter designate in writing:
(a) If to Pivot or Stockholders:
54
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Anthony Travaglini
14 Elliots Way
Valley Cottage, New York 10989
Fax: (914) 267-2638
with a copy to:
Scott Rothstein, Esq.
Shipman & Goodwin LLP
One American Row
Hartford, CT 06103
Fax: (860) 251-5900
(b) If to MTM:
Steven Rothman, President
Micros-To-Mainframes, Inc.
614 Corporate Way
Valley Cottage, New York 10989
Fax: (914) 267-3785
with a copy to:
Jack Becker, Esq.
Snow Becker Krauss P.C.
New York, New York 10158-0125
Fax: (212) 949-7052
ARTICLE XIV
Binding Effect; Benefits.
This Agreement shall inure to the benefit of, and be binding
upon the parties hereto and their respective legal representatives,
successors and permitted assigns, and no other person shall acquire
or have and other rights under this Agreement or by virtue of this
Agreement.
ARTICLE XV
Assignment.
55
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Neither this Agreement nor any right, remedy, obligation or
liability arising hereunder or by reason hereof shall be assignable
by the parties hereto, without the prior written consent of the
other.
ARTICLE XVI
Confidentiality.
Pivot and the Stockholders, on the one hand, and MTM on the
other hand, shall maintain the confidentiality of all confidential
information furnished to it or him by the other concerning the
other's business, assets and financial condition, and shall not
disclose such information to others, or use any such information
for any purpose, except in furtherance of the transactions
contemplated by this Agreement (and except as such information may
be required to be disclosed under applicable law or in connection
with litigation arising out of this Agreement), unless and until
such information is or becomes in the public domain by reason other
than disclosure by it or him. In the event the transactions
contemplated herein are not consummated, (i) MTM and its
principals, shareholders, officers, employees, agents or
representatives shall not disclose to any third party or use in any
manner whatsoever any of the confidential information disclosed to
them by Pivot, its stockholders, officers, employees, agents or
representatives in connection with the negotiations for this
transaction, and (ii) Pivot and its principals, stockholders,
officers, employees, agents or representatives shall not disclose
to any third party or use in any manner whatsoever any of the
confidential information disclosed to them by MTM, its
shareholders, officers, employees, agents or representatives in
connection with the negotiations for this transaction. This
confidential information shall extend, but not be necessarily
limited, to the sales techniques, vendors, independent contractors,
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employees, and customer lists disclosed by one party to the other.
Confidential information as used herein shall not include that
which (i) was in the public domain prior to receipt thereof; (ii)
the receiving party can show it was in possession thereof prior to
receipt; (iii) subsequently becomes known to the receiving party by
third parties as a matter of right and without restriction on
disclosure; or (iv) subsequently comes into the public domain
through no fault of the receiving party. In the event this
Agreement is terminated, upon the written request, the
shareholders, officers, employees, agents or representatives of the
respective parties hereto shall return or destroy the confidential
information previously disclosed to them by the disclosing party.
This provision shall survive the termination of this Agreement.
ARTICLE XVII
Brokerage.
Each of the parties hereto represents and warrants to the
other that it has not dealt with any broker or finder in connection
with the transactions contemplated by this Agreement.
ARTICLE XVIII
Governing Law.
This Agreement shall in all respects be governed by, construed
under and enforced in accordance with the laws of the State of New
York.
ARTICLE XIX
Expenses.
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Each of the parties shall pay its or his own legal, accounting
and other expenses in connection with the negotiation and
preparation of this Agreement and the consummation of the
transactions contemplated hereby, except as otherwise stated in
Section 5.18.
ARTICLE XX
Severability.
If any section, term or provision of this Agreement shall to
any extent be held or determined to be invalid or unenforceable,
the remaining sections, terms and provisions shall nevertheless
remain in full force and effect.
ARTICLE XXI
Survival.
The representations, warranties, covenants and agreements of
the parties set forth in this Agreement (including the Schedules)
and in any other documents, certificates or written statements
delivered by or on behalf of any party to this Agreement shall
survive the Closing for the earlier of (i) a period of two (2)
years, (ii) the consummation of the Merger (after deducting any
amounts for which the Stockholders are required to indemnify MTM
hereunder as at such time from the Merger Consideration) or (iii)
MTM not electing to exercise its Option and all the shares of Pivot
Common Stock owned by it are either redeemed or sold pursuant to
Article IX hereof.
ARTICLE XXII
Waiver.
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Any waiver by any party of a breach of any of the provisions
of this Agreement shall not operate as or be construed to be a
waiver of any other breach of that provision or of any breach of
any other provision of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on one
or more occasions will not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
ARTICLE XXIII
Headings.
The headings in this Agreement are for convenience only and
shall not affect the construction of this Agreement.
ARTICLE XXIV
Entire Agreement; Modification.
This Agreement, together with Schedules and Exhibits, constitutes
the entire understanding between the parties with respect to its
subject matter. It supersedes and cancels all prior agreements and
understandings among the parties relating to its subject matter.
This Agreement may not be amended or supplemented, except by
subsequent written agreement of the parties which specifically
states that it is intended to be an amendment or supplement to this
Agreement, signed by the parties hereto. No course of dealing or
custom shall be referred to as modifying any of the terms and
conditions of this Agreement.
ARTICLE XXV
Counterparts.
59
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This Agreement may be executed in one or more counterparts,
each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall
constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this
Stock Purchase and Option Agreement as of the date first above
written.
MICROS-TO-MAINFRAMES, INC.
By: \s\ STEVEN ROTHMAN
Steven Rothman
President
Pivot Technologies, Inc.,
By: \s\ ANTHONY TRAVAGLINI
Anthony Travaglini
President
<PAGE>
Exhibit 99.2
EXHIBITS
Exhibit A Business Plan
Exhibit B Agreement & Plan of Merger
Exhibit C Redemption Agreement
Exhibit D Proprietary Information & Non-Disclosure Agreement
Exhibit E Employment Agreement
Exhibit F Opinion of Pivot's Counsel
Exhibit G Lock-Up Agreement
Exhibit I Opinion of MTM Counsel
SCHEDULES
Schedule 2.1 Jurisdictions in which Pivot doing business
Schedule 2.3 Capitalization of Pivot
Schedule 2.4 Material adverse change
Schedule 2.5 Violations or Breaches
Schedule 2.6 Litigation
Schedule 2.9(b) Patents & Trademarks
Schedule 2.9(c) Outstanding options, licenses or agreements
Schedule 2.9(d) Intellectual Property Rights
Schedule 2.9(e) Persons with respect to whom confidentiality not reasonably
protected
Schedule 2.9(f) Third Party Grants of Licenses, Sublicenses
Schedule 2.9(i) Confidential Information
Schedule 2.10 List of Personal Property
Schedule 2.11 List of Inventories
Schedule 2.13 List of Real & Personal Property Leases
Schedule 2.14 Description of Contracts
Schedule 2.15 List of all Accounts Payable
Schedule 2.17 Title to Assets, Liens
Schedule 2.18 Taxes
Schedule 2.19 Permits held by Pivot
Schedule 2.20 Insurance Policies
Schedule 2.21 Loans and Advances
Schedule 2.23 Affiliated Transactions and Arrangements
Schedule 2.25 Names of Employees
Schedule 2.26 Top 10 Suppliers and Customers
Schedule 2.27 Seller's Backlog of Orders
Schedule 2.30 Composition of Board Of Directors
Schedule 4.4 MTM Capitalization
Schedule 4.7 Litigation
Schedule 4.10 MTM Conduct of Business not Consistent with Past
Practice
Schedule 5.6 Pivot Conduct of Business after execution of
Contract and prior to Closing
Schedule 7.7 List of Key Personnel
<PAGE>
<PAGE>
Exhibit 99.3
TABLE OF CONTENTS
ARTICLE I .................................................... 2
1.1 The Merger............................................ 2
1.2 Effective Time ...................................... 2
1.3 Effect of the Merger................................. 2
1.4 Certificate of Incorporation and By-laws of the
Surviving Corporation ........................... 4
1.5 Directors and Officers of the Surviving Corporation. 4
1.6 Closing............................................... 4
ARTICLE II .................................................... 5
2.1 Conversion of Securities .............................. 5
(a) Conversion of Pivot Common Stock ................. 5
(b) Treasury Stock ................................... 6
(c) MTM-Owned Stock................................... 6
(d) Dissenter's Stock ................................ 7
2.2 ..................................................... 7
Transfer Books............................................ 7
2.3 Exchange of Stock .................................... 7
(b) No Fractional Shares of MTM Common Stock or
Warrants ........................................ 7
(c) No Dividends Before Surrender of Certificates.... 7
(d) No Further Ownership Rights in Pivot Stock ....... 8
(e) Abandoned Property Laws .......................... 8
ARTICLE III ................................................... 9
3.1 Reasonable Efforts................................ 9
ARTICLE IV ................................................... 10
4.1 Organization and Qualification ........................10
4.2 Ownership .............................................10
4.3 Authorization and Binding Effect; No Governmental
Consents Required .................................... 11
4.4 Financial Statements; No Undisclosed Liabilities...... 11
4.5 No Violation or Breach ............................... 12
4.6 Accounts Receivable .................................. 12
4.7 Contracts............................................. 13
4.8 Accounts Payable...................................... 14
4.9 Binding Nature of Contracts; No Breach ............... 14
4.10 Title to Assets; Liens .............................. 15
4.11 Litigation........................................... 15
4.12 Taxes ............................................... 15
4.13 Permits.............................................. 16
4.14 Compliance with Law................................. 17
4.15 Customers and Suppliers ............................. 17
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4.16 All Documentation has Been Furnished or Made Available to
MTM ................................................. 17
4.17 Full Disclosure....................................... 17
ARTICLE V...................................................... 18
5.1 Organization and Standing............................. 18
5.2 Corporate Power ...................................... 18
5.3 Authorization; Binding Effect ........................ 18
5.4 Capitalization........................................ 19
5.5 No Violation.......................................... 19
5.6 SEC Filings........................................... 20
5.7 Litigation ........................................... 21
ARTICLE VI.................................................... 21
6.1 Conduct of Business Until Closing.................... 21
6.2 No Solicitation of Competing Offers.................. 23
ARTICLE VII................................................... 23
7.1 Non-Competition ..................................... 23
ARTICLE VIII ................................................ 24
8.1 Representations and Warranties Correct .............. 25
8.2 Compliance with Obligations......................... 25
8.3 Furnishing of Documents ............................ 25
8.4 No Action or Litigation ............................ 26
8.5 Third Party Consents................................ 26
8.6 Opinion of Counsel................................... 26
ARTICLE IX ................................................. 26
9.1 Representations and Warranties Correct ............ 26
9.2 No Action or Litigation ............................ 27
9.3 Opinion of Counsel ................................ 27
9.4 Compliance with Obligations........................ 27
9.5 NASDAQ Listing..................................... 27
Article X ................................................. 27
ARTICLE XI ................................................... 34
11.1 In Favor of MTM and MTM Mergerco .................... 34
11.2 In Favor of Stockholders ............................ 35
11.3 Procedure for Indemnification ...................... 35
ARTICLE XII................................................. 36
ARTICLE XIII................................................. 37
ARTICLE XIV................................................. 37
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ARTICLE XV ................................................. 38
ARTICLE XVI ................................................. 38
ARTICLE XVII ................................................. 39
ARTICLE XVIII ................................................. 40
ARTICLE XIX .................................................. 40
ARTICLE XX ................................................. 40
ARTICLE XXI................................................. 40
ARTICLE XXII................................................. 41
ARTICLE XXIII................................................. 41
ARTICLE XXIV................................................. 41
ARTICLE XXV ................................................. 42
ARTICLE XXVI................................................. 42
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<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MICROS-TO-MAINFRAMES, INC.
PIVOT TECHNOLOGIES, INC.
MTM MERGERCO, INC.
AND
CERTAIN STOCKHOLDERS OF PIVOT
AS OF
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of , 1998, by and
among MICROS-TO-MAINFRAMES, INC., a New York corporation ("MTM"),
PIVOT TECHNOLOGIES, INC., a Delaware corporation ("Pivot "), MTM
MERGERCO, INC., a Delaware corporation and a wholly-owned
subsidiary of MTM ("MTM Mergerco") and the principal stockholders
of Pivot Technologies, Inc. set forth on Schedule A hereto (the
"Stockholders").
WHEREAS, the respective Boards of Directors of MTM, Pivot and
MTM Mergerco have approved and deem it in the best interests of
their respective shareholders/stockholders to consummate the
business combination transaction provided for herein, in which
Pivot would merge with and into MTM Mergerco (the "Merger") and MTM
Mergerco will thereafter change its name to Pivot Technologies,
Inc., and the surviving corporation of the Merger would become a
wholly-owned subsidiary of MTM (MTM Mergerco and Pivot hereinafter
referred to as the "Constituent Corporations");
WHEREAS, the stockholders of Pivot have approved the Merger
and the execution of the Certificate of Merger, as defined below;
WHEREAS, the laws of the State of Delaware permit such
mergers, and the Constituent Corporations desire to merge under and
pursuant to the provisions of such laws; and
WHEREAS, for Federal income tax purposes it is intended that
the Merger qualify as a statutory merger under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986,
as amended.
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants and agreements
set forth herein, the parties hereto agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2), (i)
Pivot shall be merged with and into MTM Mergerco in accordance with
the provisions of the General Corporation Law of the State of
Delaware (the "GCL"), and the separate corporate existence of Pivot
shall cease and MTM Mergerco shall continue as the surviving
corporation (hereinafter sometimes referred to as the "Surviving
Corporation") under the laws of the State of Delaware under the
name "Pivot Technologies, Inc."
1.2 Effective Time. Subject to the terms and provisions
of this Agreement, there shall be filed with the Delaware Secretary
of State, as soon as practicable on or after the Closing Date (as
defined in Section l.6), a certificate of merger with respect to
the Merger (the "Certificates of Merger"), in such form as is
required by, and executed in accordance with, the applicable
provisions of the GCL . The Merger shall become effective at the
time of filing by the Secretary of State of the State of Delaware
in accordance with the GCL of the original, properly executed
Certificate of Merger, or at the time specified as the effective
time in the Certificate of Merger. The Certificate of Merger shall
be submitted for filing at the time of the Closing and may be
submitted prior thereto for clearance. The time at which the Merger
shall become effective is referred to herein as the "Effective
Time."
1.3 Effect of the Merger. The Merger shall have the effects
set forth in Section 259 of the GCL. Without limiting the
generality of the foregoing, and subject thereto, from and after
the Effective Time (i) the corporate identity, existence, purposes,
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powers, objects, franchises, rights, immunities, liabilities and
duties of and property (real, personal and mixed) and all debts due
on whatever account, including subscriptions to shares, and all
other choses in action and every other interest of or belonging to
the Surviving Corporation shall continue unaffected and unimpaired
by the Merger; and (ii) and the corporate identity, existence,
purposes, powers, objects, franchises, rights, immunities,
liabilities and duties of and property (real, personal and mixed)
and all debts due on whatever account, including subscriptions to
shares, and all other choses in action and every other interest of
or belonging to Pivot shall be continued in and merged into MTM
Mergerco as of the Effective Time and MTM Mergerco shall be fully
vested therewith as of the Effective Time. From and after the
Effective Time, by virtue of the filing of the Merger Certificate
by the Delaware Secretary of State, all of the above shall be
deemed to be transferred and so vested in the Surviving Corporation
without further act or deed. If, at any time after the Effective
Time, the Surviving Corporation considers or is advised that any
deeds, bills of sale, assignments, assurances or any other actions
or things are necessary or desirable to vest, perfect or confirm of
record or otherwise in the Surviving Corporation its right, title
or interest in, to or under any of the rights, properties or assets
of Pivot, or otherwise to carry out the intent and purposes of this
Agreement, the officers and directors of such Surviving Corporation
will be authorized to execute and deliver, in the name and on
behalf of Pivot, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of Pivot,
all such other actions and things as may be necessary or desirable
to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the intent and purposes of
this Agreement. Furthermore, all debts, liabilities and duties of
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Pivot from and after the Effective Time, including under the
employment agreements with Shareholders of Pivot, shall attach to
MTM Mergerco and may be enforced against it to the same extent as
if said debts, liabilities and duties had been incurred or
contracted by MTM Mergerco. Neither the rights of creditors nor
any liens upon the property of any of the Constituent corporations
shall be impaired by the Merger.
1.4 Certificate of Incorporation and By-laws of the Surviving
Corporation. The Certificate of Incorporation of MTM Mergerco, as
in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with the GCL and the terms of such
Certificate of Incorporation. The By-Laws of MTM Mergerco, as in
effect immediately prior to the Effective Time, shall be the By-
Laws of the Surviving Corporation until thereafter amended in
accordance with the GCL, the Certificate of Incorporation of the
Surviving Corporation and such By-Laws. The Certificate of
Incorporation and By-Laws of MTM Mergerco at the Effective Time
shall read in their entirety as set forth as Exhibits A and B.
1.5 Directors and Officers of the Surviving Corporation. (a)
The initial directors of the Surviving Corporation shall be the
directors of the Surviving Corporation at the Effective Time, and
all such directors will continue to hold office from the Effective
Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of
Incorporation and By-laws of the Surviving Corporation, or as
otherwise provided by applicable law. The initial officers of the
Surviving Corporation shall be the persons that are officers of MTM
Mergerco at the Effective Time and all such officers will continue
to hold office from the Effective Time until their respective
successors are duly appointed and qualify in the manner provided in
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the By-laws of the Surviving Corporation, or as otherwise provided
by applicable law.
1.6 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
Snow Becker Krauss P.C., 605 Third Avenue, New York, New York, at
10:00 a.m., local time, on a date to be selected by the parties,
which shall be no later than thirty days after MTM has exercised
its option granted pursuant to Stock Purchase and Option Agreement
dated May _, 1998 ("Option Agreement") (unless extended by the
parties hereto) and the second business day after the day on which
the last of the conditions set forth in Articles VIII and IX (other
than any such conditions which, by their terms, are not capable of
being satisfied until the Closing Date) is satisfied or, where
permissible, waived, unless another place, date or time is agreed
to by MTM and Pivot (the date on which the Closing takes place
being referred to herein as the "Closing Date").
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES
2.1 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of any party
hereto or the holder of any of the following securities:
(a) Conversion of Pivot Common Stock. Subject to subsection
(d) below, each share of the Common Stock, par value $.01 per
share, of Pivot (the "Pivot Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of Pivot
Common Stock to be canceled pursuant to Section 2.1(b) or 2.1(c) be
converted into the right to receive (X) the number of validly
issued, fully paid and non-assessable shares of Common Stock of
MTM, par value $.001 per share ("MTM Common Stock"), equal to
[$1,100,000 divided by number of Pivot shares outstanding which are
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not owned by MTM] divided by $___ [the average closing price of MTM
Common Stock for the thirty (30) trading days prior to the closing
of the Option Agreement] (the "Average Closing Price"),[provided,
however, that the maximum number of shares of MTM Common Stock
which MTM must deliver under this subpart (i) is 490,000 shares and
the minimum number is 275,000 shares], as adjusted to give effect
to any stock split, stock dividends, merger, consolidation or
recapitalization of MTM after the closing of the Option Agreement
("Reorganization Event"), (Y) __ five (5) year warrants, in
substantially the form attached hereto as Exhibit C, ("Warrant") to
acquire __ shares of MTM Common Stock with an exercise price of
$____; and (Z) cash in the sum of $______[the sum of $337,600 and
in the event MTM exercises its Option during the Extension Period,
as defined in the Option Agreement, 50% of any Pivot net profits
after taxes during the period commencing on the first day of the
Extension Date and ending on the date the Option is exercised],
(the MTM Common Stock, Warrants and cash payable above is
hereinafter collectively referred to as the "Merger
Consideration"). Notwithstanding the above, the Merger
Consideration payable to a stockholder of Pivot shall be reduced to
the extent, if any, such stockholder is required to indemnify MTM
pursuant to Section 10.1(b) of the Option Agreement ("Stockholder
Pre-Existing Indemnification"). All shares of Pivot Common Stock
shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist upon the Effective Date, and
each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to
receive shares of MTM Common Stock, Warrants and cash to be issued
and paid pursuant to this Section 2.1 (a) (and any dividends or
other distributions payable pursuant to Section 2.3(c)) upon the
surrender of such certificate, offset by any applicable Stockholder
Pre-Existing Indemnification and any Stockholder indemnification
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pursuant to Article XI hereof ("Stockholder Article XI
Indemnification" and together with Stockholder Pre-Existing
Indemnification, collectively the "Stockholder Indemnification").
Any Stockholder Indemnification shall first offset the cash
portion of the Merger Consideration payable to such Stockholder.
(b) Treasury Stock. All shares of Pivot Common Stock which
are held immediately prior to the Effective Time by Pivot in its
treasury shall be canceled and retired and shall cease to exist at
the Effective Time, and no capital stock of MTM or other
consideration shall be delivered with respect thereto.
(c) MTM-Owned Stock. All shares of capital stock of Pivot
owned, directly or indirectly, by MTM or MTM Mergerco shall be
canceled and extinguished at the Effective Time without any
conversion thereof and no consideration shall be delivered or
deliverable in exchange therefor.
(d) Dissenter's Stock. Notwithstanding anything contained
herein to the contrary, in the event David Ayers owns or is deemed
to own shares of Pivot Common Stock and exercises his Dissenter's
Rights under the GCL, any amounts to which he is entitled shall
reduce the cash portion of the Merger Consideration payable to the
other Stockholders of Pivot on a pro rata basis.
2.2 Transfer Books. At the Effective Time, the stock transfer
books of Pivot shall be closed and no transfer of shares of capital
stock of Pivot shall thereafter be made.
2.3 Exchange of Stock. (a) On the Closing Date, the
Stockholders shall cause their shares of Pivot Technologies, Inc.
Common Stock to be surrendered for conversion. Each certificate so
surrendered shall forthwith be canceled.
(b) No Fractional Shares of MTM Common Stock or Warrants. No
certificates or scrip representing fractional shares of MTM Common
Stock or Warrants shall be issued upon the surrender for exchange
of certificates which immediately prior to the Effective Time
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represented shares of Pivot Common Stock, no stock split or
dividend with respect to shares of MTM Common Stock shall relate to
any fractional share interest, and no such fractional share
interest will entitle the owner thereof to vote as, or to any other
rights of, a shareholder of MTM. In lieu of such fractional shares,
any holder of Pivot Common Stock who would otherwise be entitled to
a fractional share of MTM Common Stock or fractional share of a
Warrant, will, upon surrender of his certificate, be entitled to
receive an additional amount of cash representing the deemed value
of the MTM Common Stock and Warrant based on the Average Closing
Price.
(c) No Dividends Before Surrender of Certificates. No
dividends or other distributions declared or made with respect to
MTM Common Stock shall be paid to the holder of any unsurrendered
certificate with respect to the shares of MTM Common Stock
represented thereby, until the holder of record of such certificate
shall surrender such certificate. Subject to the effect of
applicable laws, following surrender of any such certificate, there
shall be paid to the record holder of the certificates representing
whole shares of MTM Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of
dividends or other distributions, if any, theretofore payable by
MTM with respect to such whole shares of MTM Common Stock the
payment date for which was on or prior to such surrender, and (ii)
at the appropriate payment date, the amount of dividends or other
distributions, if any, with a record date prior to such surrender
and with a payment date subsequent to such surrender payable with
respect to such whole shares of MTM Common Stock.
(d) No Further Ownership Rights in Pivot Stock. All shares of
MTM Common Stock issued upon the surrender for exchange of shares
of Pivot Common Stock in accordance with the terms hereof shall be
deemed to have been issued and paid in full satisfaction of all
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rights pertaining to such shares of Pivot Common Stock. Subject to
Section 2.3(e), if, after the Effective Time, certificates are
presented to the Surviving Corporation for any reason, they shall
be canceled and exchanged as provided in this Article II.
(e) Abandoned Property Laws. Payment or delivery of any
shares of MTM Common Stock, any cash in lieu of fractional shares
of MTM Common Stock, Warrants, any cash in lieu of fractional
Warrants, and cash, and any dividends or distributions with respect
to MTM Common Stock shall be subject to applicable abandoned
property, escheat and similar laws and neither MTM nor the
Surviving Corporation shall be liable to any holder of shares of
Pivot Common Stock for any such shares, for any dividends or
distributions with respect thereto or for any cash in lieu of
fractional shares which may be delivered to any public official
pursuant to any abandoned property, escheat or similar laws.
ARTICLE III
CERTAIN ACTIONS
3.1 Reasonable Efforts. Subject to the terms and conditions
of this Agreement and applicable law, each of the parties hereto
shall use his/its reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement as soon as reasonably
practicable, including such actions or things as any other party
hereto may reasonably request in order to cause any of the
conditions to such other party's obligation to consummate such
transactions specified in Articles VIII and IX to be fully
satisfied. Without limiting the generality of the foregoing, the
parties shall (and shall cause their respective subsidiaries, and
use their reasonable efforts to cause their respective affiliates,
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directors, officers, employees, agents, attorneys, accountants and
representatives, to) consult and fully cooperate with and provide
reasonable assistance to each other in (i) obtaining all necessary
consents, approvals, waivers, licenses, permits, authorizations,
registrations, qualifications or other permission or action by, and
giving all necessary notices to and making all necessary filings
with and applications and submissions to, any Governmental Entity
or other person or entity, (ii) providing all such information
about such party, its subsidiaries and its officers, directors,
partners and affiliates and making all applications and filings as
may be necessary or reasonably requested in connection with MTM
securities filings (which obligation shall survive the consummation
of the Merger); and (iii) in general, consummating and making
effective the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PIVOT
Pivot hereby represents, warrants and covenants that
immediately prior to the Effective Time, the following are true and
correct:
4.1 Organization and Qualification. Pivot is a corporation,
duly organized, validly existing and in good standing under the
laws of the state of Delaware; has full corporate power and
authority to (i) carry on its business, (ii) own or lease its
properties as and in the places where such business is now
conducted and such properties are now owned, leased or operated,
and (iii) enter into this Agreement, consummate the transactions
contemplated by this Agreement and perform its obligations under
this Agreement. Schedule 4.1 sets forth all the jurisdictions in
which Pivot does business. Pivot is not qualified or licensed to
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do business as a foreign corporation in any jurisdiction other than
as set forth in section 4.1.
4.2 Ownership. The authorized, issued and outstanding capital
stock of Pivot is set forth and owned by the persons set forth on
Schedule 4.2. To the best knowledge of Pivot, the shares of Pivot
Common Stock are owned by the owners thereof, free and clear of all
liens, security interest, pledge, charge, claim, option, right to
acquire, restriction on transfer, voting restriction or agreement,
or any other restriction or encumbrance of any nature whatsoever,
and no third person holds any proxy or similar right with respect
thereto. Except if listed on Schedule 4.2, Pivot and the
Stockholders acknowledge and agree that David Ayers is not the
beneficial owner or owner of record of any shares of capital stock
(including Common Stock) of Pivot and has no contingent or actual
right thereto. Except as set forth on Schedule 4.2, Pivot has no
subsidiaries and does not own, directly or indirectly, shares or
other securities in any other corporation, or any interest in any
partnership, joint venture or other business entity.
4.3 Authorization and Binding Effect; No Governmental Consents
Required. The execution and delivery by Pivot of this Agreement,
the Certificate of Merger and the consummation of the transactions
contemplated by this Agreement, as well as the performance of its
obligations under this Agreement, have been duly and validly
authorized by all necessary corporate action on the part of Pivot,
including, but not limited to approval of Pivot's Board of
Directors and stockholders. This Agreement has been duly executed
and delivered by Pivot and constitutes the legal, valid and binding
obligation of Pivot, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights or remedies of creditors. To
Pivot's knowledge, no consent, approval, or authorization of,
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notice to, or declaration, filing or registration with, any
governmental body is required in connection with the execution,
delivery and performance of this Agreement, or the consummation of
the transactions contemplated by this Agreement.
4.4 Financial Statements; No Undisclosed Liabilities (a) The
unaudited balance sheets of Pivot as at December 31, 1997 and for
any interim period prior to the exercise of the Option (the "Cut-
Off Date"), and the applicable unaudited statements of income and
retained earnings, and statements of cash flows of Pivot for such
periods and the related notes thereto delivered to MTM
(collectively, the "Financial Statements"), present fairly the
financial position, results of operations and retained earnings,
results of operations and cash flows of Pivot, as at such dates
and for such periods.
(b) Except as set forth on the Financial Statements, as
of the Cut-Off Date, (A) Pivot did not have any claims, liabilities
or obligations of any material nature, known or unknown, fixed or
contingent, matured or unmatured, liquidated or unliquidated, which
were not shown or otherwise provided for in the Financial
Statements and (B) all reserves (if any) established by Pivot and
set forth in the Financial Statements are adequate, appropriate and
reasonable.
4.5 No Violation or Breach. The execution and delivery of
this Agreement, and the fulfillment of the terms and conditions
herein set forth and the consummation of the transactions herein
contemplated, will not (i) violate or conflict with any provision
of the Certificate of Incorporation or By-laws of Pivot, as in
effect on the date hereof; or (ii) materially violate, result in a
material breach of, conflict with, or (with or without notice or
the lapse of time or both) entitle any party to terminate, cancel,
accelerate or call a default under the terms, conditions or
provisions of any material agreement, contract, instrument, lease,
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license, note, bond, mortgage, indenture or other obligation to
which Pivot is a party or by which it or any of its assets may be
bound, or (iii) violate, result in a breach of, or conflict with
any statute, rule, regulation, order, judgment or decree applicable
to Pivot or any of its assets. Except as set forth on Schedule
4.5, no consent of any party to any agreement, contract,
instrument, lease, license, note, bond, mortgage, indenture or
other obligation to which Pivot is a party, or by which it or any
of its assets is subject, is required for the execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated hereby and the continuation thereof after
the Merger without the Surviving Corporation becoming obligated to
make payments greater than would have been required in the event
the merger was not consummated.
4.6 Accounts Receivable. To the best knowledge of Pivot,
accounts receivable and trade receivables (collectively defined as
the "Accounts Receivable") of Pivot reflected in the Financial
Statements as at the Cut-Off Date, and the Accounts Receivable
created by Pivot since such date are valid, bona-fide subsisting
claims for the aggregate amounts thereof reflected in the Financial
Statements as at the Cut-Off Date net of the reserves or allowances
for doubtful receivables reflected in such Financial Statement or
thereafter in Pivot's books and records uniformly maintained in
accordance with the financial statements, accounted for in
accordance with GAAP. This representation is in no manner a
representation as to the amount of Accounts Receivable which will
ultimately be collected.
4.7 Contracts. Schedule 4.7 contains a true and complete list
and description of all contracts, agreements, instruments,
commitments, understandings and arrangements to which Pivot is a
party or by which it or its properties or assets were bound, as at
the date hereof (other than contracts, agreements, instruments and
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commitments set forth on any other Schedule to this Agreement) and
the terms thereof, including contracts, agreements, instruments,
commitments, understandings and arrangements relating to:
(i) the acquisition of services, materials, equipment,
inventory, supplies or other personal property involving more than
$15,000 over the remaining term, not terminable within thirty days
or less without obligation on the part of Pivot;
(ii) the sale of products or services in excess of $5,000
over the remaining term;
(iii) the lease of real or personal property as lessor or
lessee or sublessor or sublessee;
(iv) distribution, dealer, agency, or financing
agreements or arrangements (including without limitation, letters
of credit) not terminable within thirty days or less without
obligation on the part of Pivot;
(v) employment agreements not terminable within thirty
days or less;
(vi) the sale of personal property in excess of $5,000 in
the aggregate (other than in the ordinary course of business);
(vii) purchase of inventory on consignment;
(viii) non-competition, confidential information or
similar agreements; or
(ix) other contracts, agreements, commitments or
understandings which materially affect the business, properties or
assets of Pivot or which were entered into other than in the
ordinary and usual course of business and are in excess of $10,000
in the aggregate.
4.8 Accounts Payable. Schedule 4.8 sets forth a true, correct
and complete list of all accounts payable of Pivot at the Cut-Off
Date, including amounts payable to trade creditors (the "Trade
Creditors") and other short-term liabilities commonly identified as
accounts payable, which are, to the best of its knowledge, bona
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fide, valid and binding obligations of Pivot incurred in the
ordinary course of business on an arms-length basis. Schedule 4.8
indicates the dates upon which payment to each of the items listed
thereon is due.
4.9 Binding Nature of Contracts; No Breach. Each of the
agreements, contracts, instruments, leases and licenses listed on
any Schedule hereto is in full force and effect and is the legal,
valid and binding obligation of Pivot, and to Pivot's knowledge,
the other parties thereto and is enforceable as to them in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights or remedies
of creditors. Pivot has not given or received notice of, it does
not know that there exists, any material default or event of
default under any such agreement, contract, instrument, lease or
license, or any event or condition which with or without notice or
lapse of time or both would constitute an event of default under
any such agreement, contract, instrument, lease or license by Pivot
or by any other party thereto. Each supply, distribution, agency
or other arrangement or understanding of Pivot, all of which are
listed on Schedule 4.7 is a valid and continuing arrangement or
understanding and will continue after the Merger. Neither Pivot
nor any other party to any such arrangement or understanding has
given notice of termination or taken any action inconsistent with
the continuance of such arrangement or understanding.
4.10 Title to Assets; Liens. Pivot has good and marketable
title to all of its assets (except real and other properties and
assets held pursuant to leases or licenses described in the
Schedules to this Agreement), free and clear of all Liens, except
such Liens as are specified in Schedule 4.10. Following the Merger
and subject to the representations and warranties of MTM and MTM
Mergerco herein, MTM Mergerco will have good and marketable title
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to all such assets (except real and other properties and assets
held pursuant to leases or licenses described in the Schedules to
this Agreement), free and clear of all Liens, except as provided in
Schedule 4.10.
4.11 Litigation. Except as set forth in Schedule 4.11 to this
Agreement, there are no actions, suits, claims or legal,
administrative or arbitration proceedings or investigations
pending, or to Pivot's knowledge threatened, against, involving or
affecting Pivot, its assets or business, or which relates to any
product alleged to have been assembled, produced, distributed or
sold by Pivot and alleged to have been defective or improperly
designed, assembled or produced, and it does not have knowledge of
any state of facts or of the occurrence of any event which is
likely to form the basis of any thereof. There are no outstanding
orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against, involving or affecting
Pivot, its assets or business, other than decrees of general
applicability.
4.12 Taxes. Except as set forth on Schedule 4.12, to the
knowledge of Pivot (i) there has been duly filed by or on behalf of
Pivot and each of its subsidiaries (and each of their respective
predecessors, if any), or filing extensions from the appropriate
Federal, state, foreign and local governmental and quasi-
governmental entities or agencies have been obtained with respect
to, all material Federal, state, foreign and local tax returns and
reports required to be filed on or prior to the date hereof, (ii)
payment in full or adequate provision for the payment of all taxes
required to be paid in respect of the periods covered by such tax
returns and reports has been made (except in respect of state,
local and foreign taxes which are in the aggregate immaterial in
amount) and (iii) a reserve which Pivot reasonably believes to be
adequate has been set up for the payment of all such taxes
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anticipated to be payable in respect of periods through the date
hereof. To Pivot's knowledge, none of the Federal income tax
returns required to be filed by or on behalf of Pivot are
currently under examination by the Internal Revenue Service
("IRS"). There have not been any deficiencies or assessments
asserted in writing by the IRS with respect to any such returns.
For the purpose of this Agreement, the term "tax" (including, with
correlative meaning, the terms "taxes" and "taxable") shall include
all Federal, state, local and foreign income, profits, franchise,
gross receipts, payroll, sales, employment, use, property,
withholding, excise and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts. Without limiting
the above portion of this representation, Pivot has not made any
payments and is not required to pay sales and use taxes in any
jurisdiction and it has not received any claim or notice, and
Pivot does not have any knowledge that it has not paid all required
sales and use taxes.
4.13 Permits. All of the governmental permits, business
licenses and approvals held by Pivot are in full force and effect
as of the date hereof and constitute all of the governmental
permits, business licenses and approvals required for the conduct
of its business. No violations are or have been recorded in respect
of any such existing permits, business licenses or approvals and
remain uncorrected as of the date hereof, no proceeding is pending
or to Pivot's knowledge, threatened looking toward the revocation
or limitation of any such existing permits, business licenses or
approvals, and there are no violations of any laws, rules,
regulations, orders or ordinances applicable to the business
conducted by Pivot with respect to its assets or the assets and
properties used in the operation of that business (including
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reporting requirement of any Federal or state agency) which would
materially and adversely affect its assets or business.
4.14 Compliance with Law. Pivot has conducted its business
in compliance with all applicable Federal, state and local laws,
rules, regulations and orders (collectively, "Laws"), including
without limitation, all Laws relating to the disposal of toxic or
hazardous substances and occupational health and safety standards.
4.15 Customers and Suppliers. Attached hereto as Schedule
4.15 is a list of Pivot's top 10 suppliers and customers and the
percentage of gross revenues attributable to each with respect to
customers and percentage of goods supplied by vendors with respect
to suppliers. To the best of Pivot's knowledge, the Merger would
not have an adverse effect on Surviving Corporation continuing to
do business with such customers and suppliers. Notwithstanding the
foregoing, Pivot does not represent or warrant that any customer or
supplier will continue to do business with MTM Mergerco after the
Merger.
4.16 All Documentation has Been Furnished or Made Available to
MTM. Pivot has previously furnished to, or made available for
inspection by, MTM and its representatives, if requested by MTM,
true and complete copies of all contracts, agreements, instruments,
commitments, licenses and leases referred to in this Agreement or
the Schedules hereto. No material documents relating to the
business of Pivot have been removed, destroyed or withheld from
inspection by MTM.
4.17 Full Disclosure. No representation or warranty made by
Pivot in this Agreement or in writing pursuant to this Agreement,
including without limitation, the Schedules or any other documents,
certificates or written statements, delivered or to be delivered to
Pivot in connection herewith, contains, or will contain, any untrue
statement of a material fact or omits or will omit to state any
material fact necessary to make the statements contained herein and
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therein not misleading, and all copies of the documents delivered
hereunder are true and complete copies. There is no fact known to
Pivot which materially and adversely affects or may (so far as
Pivot can now foresee) materially and adversely affect the
business, operations or condition (financial or otherwise) of
Pivot, which has not been set forth in this Agreement or in the
Schedules, or the other documents, certificates and statements
furnished to MTM by or on behalf of Pivot prior to or on the date
hereof in connection with the transactions contemplated hereby. To
the extent MTM's designee on Pivot's Board of Directors has actual
knowledge of any breach of the foregoing, other than with respect
to Section 4.2, such breach shall not be deemed a breach of said
representation, warranty and covenant hereunder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MTM AND MTM MERGERCO
MTM and MTM Mergerco, jointly and severally, represent
and warrant as follows:
5.1 Organization and Standing. MTM and MTM Mergerco are
corporations duly organized, validly existing and in good standing
under the laws of the State of New York and Delaware, respectively.
5.2 Corporate Power. MTM and MTM Mergerco have full corporate
power and authority to enter into this Agreement and to consummate
the transactions contemplated by this Agreement and to perform its
obligations under this Agreement.
5.3 Authorization; Binding Effect. The execution and delivery
by MTM and MTM Mergerco of this Agreement, and the consummation by
MTM and MTM Mergerco of the transactions contemplated by this
Agreement and the performance by MTM and MTM Mergerco of their
respective obligations under this Agreement have been duly and
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validly authorized by all necessary corporate action on the part of
MTM and MTM Mergerco, respectively. This Agreement has been duly
executed and delivered by MTM and MTM Mergerco and constitutes a
legal, valid and binding obligation of MTM and MTM Mergerco,
enforceable against them in accordance with its terms.
5.4 Capitalization. (a) The authorized capital stock of MTM
consists of ___________ shares of Common Stock, $.001 par value per
share and 1,400,000 shares of Preferred Stock, par value $.001 per
share (the "Preferred Stock"), of which 1,400,000 shares of the
Preferred Stock are designated "Convertible Preferred Stock, Series
A", all of which are held as treasury shares (the "Series A
Stock"). As of the date hereof, the issued and outstanding capital
stock of MTM consists of (i)________ shares of Common Stock, (ii)
_____ shares of Common Stock reserved for issuance upon exercise
of all options granted under MTM's stock option plans. All such
shares of the Company are duly authorized, those shares described
in clause (i) above are validly issued, fully paid and non-
assessable, and those shares described in clause (ii) above, when
so issued, will be validly issued, fully paid and non-assessable.
(b) Except as set forth in Section 5.4(a) and Schedule
5.4, MTM does not have outstanding any capital stock or
securities convertible into or exchangeable for any shares of
capital stock, and there are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which
MTM is a party or otherwise obligating MTM to issue or sell,
entitling any person to acquire from MTM, and MTM is not a party to
any agreement, arrangement or commitment obligating it to
repurchase, redeem or otherwise acquire, any shares of its capital
stock or securities convertible into or exchangeable for any of its
capital stock.
(c) Except as contemplated by this Agreement or as set
forth on Schedule 5.4 hereof, MTM has not granted any registration
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rights with respect to any shares of its capital stock to any third
party.
5.5 No Violation. The execution, delivery and performance of
this Agreement will not (i) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default or give rise to any right of termination, cancellation or
acceleration under, or result in the creation of any lien or
encumbrance on or against any of the properties of MTM or any of
its subsidiaries pursuant to any of the terms or conditions of any
note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which MTM or any of its subsidiaries is
a party or by which any of them or any of their properties or
assets may be bound, (ii) violate any statute, law, rule,
regulation, writ, injunction, judgement, order or decree of any
governmental authority, binding on MTM or any of its subsidiaries
or any of their properties or assets, or (iii) result in or give
rise (whether upon demand by the holder of any such securities or
by the terms of any such security) to the issuance of any
additional capital stock of MTM or accelerate or alter the
conversion rights of any holder of any securities exercisable into
or convertible for shares of capital stock of MTM.
5.6 SEC Filings. (a) MTM has made available to Pivot for
inspection a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by MTM
with the SEC since January 1, 1997 and prior to the date of this
Agreement (the "SEC Documents"), which are all the documents (other
than preliminary material) that MTM was required to file with the
SEC since such date. As of their respective dates, the SEC
Documents complied in all material respects with the requirements
of the Securities Act or the Securities Exchange Act of 1934, as
amended, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such SEC Documents, and
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none of the SEC Documents contained as of the date of its filing
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statement therein, in light of the circumstances under which
they were made, not misleading.
(b) The financial statements of MTM included in the SEC
Documents (including the information contained in the notes to the
financial statements) comply as to form in all material respects
with the published rules and regulations of the SEC with respect
thereto and were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during
the periods involved (except as may be indicated on the notes
thereto or, in the case of the unaudited statements, as permitted
by Rule 10-01 of Regulation S-X of the SEC). The consolidated
financial statements fairly present, in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments, none of which will be
material), the consolidated financial position of MTM and its
consolidated subsidiaries as of their respective dates and the
consolidated results of operations and the consolidated cash flows
of MTM and its consolidated subsidiaries for the periods presented
therein.
5.7 Litigation. Other than as set forth in MTM's Form 10-K
dated March 31,1997, the 8-K's or 10-Q's filed subsequent thereto
and as set forth in Schedule 5.7, there is no pending or threatened
legal or governmental claim, action or proceedings against or
relating to MTM which could, individually or in the aggregate, have
a material adverse effect on MTM.
ARTICLE VI
COVENANTS OF PIVOT FROM THE DATE OF EXERCISE
OF THE OPTION THROUGH THE EFFECTIVE TIME
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6.1 Conduct of Business Until Closing. Pivot agrees that from
and after MTM's exercise of the Option until the Closing Date,
unless it has received the prior written consent of MTM, it will:
(a) Operate its business only in the usual, regular and
ordinary course consistent with reasonable business practice;
(b) Use all reasonable efforts as to events within
Pivot's control to prevent the occurrence of any change or event
which would prevent any of the representations and warranties of
Pivot contained herein from being true at and as of the Closing
Date with the same effect as though such representations and
warranties had been made at and as of the Closing Date;
(c) Use its best efforts to preserve its present
relationship with suppliers, customers and others having business
dealings with it;
(d) Pay and discharge all costs and expenses of carrying
on its business consistent with past business practices;
(e) Neither enter into any customer order or purchase
order in excess of $50,000 nor enter or make any contract or
commitment and render no bid or quotation, written or oral, except
in the ordinary course of business consistent with past practice;
(f) Create or suffer any Liens upon any of its assets
(other than Liens set forth in the Schedules);
(g) Not acquire or dispose of any assets or enter into
any transaction, except in the ordinary course of business
consistent with past practice;
(h) Maintain books, accounts and records in the usual,
regular, true and ordinary manner;
(i) Incur any obligation or liability (fixed or
contingent), except in the ordinary course of business consistent
with past practice;
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(j) Not cancel or compromise any material debt or claim,
other than in the ordinary course of business consistent with past
practice;
(k) Not waive or release any rights of material value
with respect to its assets, except in the ordinary course of
business consistent with past practice;
(l) Not modify or change in any material respect or
terminate any existing license, lease, contract or other document
required to be listed on the Schedules to this Agreement other than
in the ordinary course of business consistent with past practice,
except that Pivot shall be permitted to modify or change existing
licenses, leases, Contracts and other documents to obtain the
consents required to effectuate the terms of this Agreement if MTM
consents to such modification or change;
(m) Make any loans or extensions of credit, except to
trade purchasers in the ordinary course of business consistent with
past practice;
(n) Not increase the compensation of any employee or make
any representation or commitment to do so;
(o) Maintain its properties, machinery and equipment in
their present condition and repair, normal wear and tear excepted;
and
(p) Continue all policies of insurance in full force and
effect up to and including the Closing Date.
6.2 No Solicitation of Competing Offers. Prior to the Closing
Date, Pivot will not, directly or indirectly, seek, solicit,
initiate or encourage (including by way of furnishing any
non-public information concerning the business, properties or
assets of Pivot) or enter into any discussions or negotiations with
any person or group regarding any Acquisition Proposal (as defined
below). Pivot will notify MTM promptly by telephone, and thereafter
confirm in writing, if any Acquisition Proposal is received by
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Pivot. As used in this Agreement, "Acquisition Proposal" shall mean
any proposal received by Pivot after the exercise of the Option and
prior to the Closing Date for a merger or other business
combination involving Pivot or relating to the disposition of any
of the assets except for dispositions of assets for not less than
fair market value which are made in the ordinary course of business
and are consistent with past practice and with this Agreement.
ARTICLE VII
COVENANTS OF STOCKHOLDERS
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7.1 Non-Competition. The Stockholders acknowledge and agree
that any consideration referred to in Section 2.1 hereof paid by
MTM in connection with the Merger is dependent upon the
Stockholders not competing with MTM or Pivot prior to _______, 2001
[three and one half (3-1/2) years after the consummation of the
MTM Acquisition] ("Non-Competition Term"). The parties hereto
agree that the performance by a Stockholder of network management
services as an employee of a corporation, regardless of whether or
not such corporation directly or indirectly competes with MTM or a
subsidiary thereof, or has become a client of either MTM or Pivot
after ______ [the MTM Acquisition date] and prior to the
Stockholder's termination of employment, constitutes competing. The
Stockholders acknowledge and agree that no separate consideration
is allocated to such covenant not to compete since it is
irrevocably intertwined with the Merger. As such, each Stockholder
agrees not to compete with any business which Pivot is now in or
contemplating, for the remainder of the Non-Competition Term above.
In the event of any breach of said covenant, the Stockholders agree
that MTM and the Surviving Corporation will be irreparably harmed
and that MTM shall be entitled to receive from the breaching party,
as its sole remedy, a liquidated damage payment equal to the amount
of consideration paid such Stockholder in connection with the
Merger if such breach occurs at anytime during the first eighteen
(18) months of such term and thereafter, the amount of stock of MTM
received in connection with the Merger pursuant to Section
2.1(a)(X). The breach by one Stockholder shall not be deemed a
breach of the other Stockholders. The delivery by a breaching
Stockholder of the actual shares he receives in connection with the
Merger pursuant to Section 2.1(a)(X) shall constitute payment of
the stock portion of the Merger Consideration to be delivered to
MTM. In the event the breaching Stockholder has sold the shares
previously delivered in a bona-fide transaction, payment shall be
deemed to occur pursuant to this subsection upon payment to MTM of
an amount equal to the net sale proceeds from such sale.
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ARTICLE VIII
Conditions Precedent to Obligations of MTM and MTM Mergerco.
The obligations of MTM and MTM Mergerco under this Agreement
are subject to the satisfaction at or prior to the Effective Time
of each of the following conditions (one or more of which may be
waived by MTM):
8.1 Representations and Warranties Correct. The
representations, warranties and covenants made by Pivot in this
Agreement or in any writing pursuant to this Agreement, including
without limitation, the Schedules or any other documents,
certificates or written statements delivered or to be delivered to
MTM Mergerco in connection with the transactions contemplated by
this Agreement, shall be true and correct in all material respects
as of the Closing Date as though such representations and
warranties were restated and made at and as of the Closing Date,
and Pivot shall have furnished MTM Mergerco with a certificate to
that effect.
8.2 Compliance with Obligations. All of the terms, covenants
and conditions of this Agreement and the Option Agreement required
to be complied with by Pivot at or prior to the Closing, including
the obtaining of any required consents to the transfer or
assignment of its assets and the Surviving Corporation's continued
rights thereto, shall have been duly complied with and Pivot shall
have furnished MTM Mergerco with a certificate to that effect and
such other evidence of compliance as MTM Mergerco may reasonably
request.
8.3 Furnishing of Documents. Pivot shall have furnished MTM
Mergerco with (i) certificates of the Secretary of State of the
State of Delaware dated not more than ten business days prior to
the Closing Date of all documents on file in the office of the
Secretary of State relating to Pivot, including its Certificate of
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Incorporation and all amendments thereto; (ii) good standing
certificates issued by the Secretary of State of the State of
Delaware certifying that Pivot is in good standing under the laws
thereof and is not delinquent in the payment of its franchise
taxes; (iii) copies, certified by the Secretary of Pivot as of the
Closing Date, of the By-laws of Pivot at the Closing Date, and of
resolutions duly adopted by the Board of Directors of Pivot and all
of its Stockholders, approving and authorizing the Merger on the
terms hereof; and (iv) counterpart originals or certified or other
copies of all of the documents, certificates, schedules and other
instruments required to be furnished to MTM Mergerco by Pivot or
requested by MTM Mergerco or its counsel, pursuant to or consistent
with the terms of this Agreement.
8.4 No Action or Litigation. There shall be no order of any
court or governmental body restraining or prohibiting the
transactions contemplated by this Agreement, nor shall any
litigation or other proceeding be pending or threatened against
Pivot, MTM or MTM Mergerco seeking to prohibit or otherwise
challenge the consummation of the transactions contemplated by this
Agreement or to obtain substantial damages in respect thereof.
8.5 Third Party Consents. Except as otherwise indicated on any
Schedule to this Agreement, Pivot shall have obtained, at or prior
to the Closing Date, all consents required for the consummation of
the transactions contemplated by this Agreement without the
imposition of conditions unacceptable to MTM Mergerco.
8.6 Opinion of Counsel. MTM Mergerco shall have received an
opinion from Pivot 's counsel substantially in the form attached
hereto as Exhibit 8.6.
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ARTICLE IX
Conditions Precedent to Obligations of Pivot .
The obligations of Pivot under this Agreement are subject to
the satisfaction at or prior to the Closing Date of each of the
following conditions (one or more of which may be waived by Pivot):
9.1 Representations and Warranties Correct. The warranties and
representations made by MTM and MTM Mergerco in this Agreement
shall be true and correct in all material respects as of the
Closing Date, as though such warranties and representations were
restated and made as and at the Closing Date, and MTM and MTM
Mergerco shall have furnished Pivot with a certificate executed by
their respective president or chief executive officer to that
effect.
9.2 No Action or Litigation. There shall be no order of any
court or governmental body restraining or prohibiting the
transactions contemplated by this Agreement, nor shall any
litigation or other proceeding be pending or threatened against
Pivot, MTM or MTM Mergerco seeking to prohibit or otherwise
challenge the consummation of the transactions contemplated by this
Agreement, or to obtain substantial damages in respect thereof.
9.3 Opinion of Counsel. Pivot shall have received an opinion
from MTM and MTM Mergerco's counsel substantially in the form
attached hereto as Exhibit 9.3.
9.4 Compliance with Obligations. All of the terms and
conditions of this Agreement required to be complied with by MTM
and MTM Mergerco or prior to the Closing shall have been duly
complied with and MTM and Mergerco shall have furnished Pivot with
a certificate to that effect.
9.5 NASDAQ Listing. MTM Common Stock, or the stock of a
permitted successor, shall be listed on the NASDAQ National Market,
American Stock Exchange or New York Stock Exchange during the term
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of this Agreement and MTM shall simultaneously with the Closing
file such documents as may be required to cause the shares of MTM
Common Stock comprising part of the Merger Consideration to be so
listed.
Article X
Registration Rights.
Except as specifically provided herein, MTM is not required to
seek to have the Registrable Securities, as defined below,
registered with the Securities and Exchange Commission or any other
body.
(a) Commencing on the Effective Time, MTM shall advise
each Stockholder or his respective transferee, provided such
transferee is a Stockholder or Permitted Transferee, as defined in
(j) below (such persons being individually referred to as "Holder"
and collectively referred to herein as "Holders") by written notice
at least 30 days prior to the filing of any registration statement
or post-effective amendment thereto ("Registration Statement")
under the Securities Act of 1933 ("Act"), covering a public
offering of equity securities of MTM solely for cash (other than a
registration on Form S-8 relating solely to the sale of securities
to participants in a stock plan of MTM and/or one or more of its
subsidiaries, or a registration on any form which does not include
substantially the same information as would be required to be
included in a registration statement covering the sale of the
Shares) and shall, except as otherwise provided herein, register in
any such Registration Statement the number of Shares and shares of
Common Stock underlying the Warrants ( the Shares and the shares of
Common Stock underlying the Warrants are hereinafter collectively
referred to as the "Registrable Securities") that the Holder shall
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notify MTM within twenty (20) days after mailing of such notice by
MTM that it desires to register and shall include in any such
Registration Statement such information as may be required to
permit a public offering of such Registrable Securities. MTM shall
supply prospectuses and other documents as the Holder may
reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities. MTM shall bear the
entire cost and expense of a registration of securities initiated
by it under this subsection including the cost of compliance with
Blue Sky Laws. The Holder shall, however, bear any transfer taxes
and underwriting discounts or commissions applicable to the
Registrable Securities sold by him and any legal fees incurred by
him in the event such Holder retains his own counsel. MTM may
include other securities in any such Registration Statement. MTM
shall do any and all other acts and things which may be necessary
or desirable to enable the Holder to consummate the public sale or
other disposition of the Registrable Securities, and furnish
indemnification in the manner as set forth in subsection (e) of
this Section 10, but shall not be required to qualify as a foreign
corporation to qualify the Registrable Securities for sale under
the securities laws of any state (provided, however, that MTM
agrees to consent to service of process as required by any such
state). The Holder shall furnish information and indemnification
as set forth in subsection (f) of this Section 10. All decisions as
to whether and when to proceed with any Registration Statement
shall be made solely by MTM. MTM is not required to keep any such
Registration Statement effective for any specified period of time.
Notwithstanding the above, the aforementioned piggyback
registration rights set forth in this subsection (a) shall
terminate with respect to a Holder on the date such Holder can sell
all his Registrable Securities pursuant to Rule 144 of the Act
without restriction under Rule 144(e) thereof. For purposes of
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determining whether all the Registrable Securities can be sold
pursuant to Rule 144 of the Act without restriction under Rule 144
(e) thereof, the Warrants shall be deemed to have been exercised
pursuant to a cashless exercise, if such cashless exercise would
not be deemed to start a new holding period for Rule 144 purposes.
(b) In connection with any offering involving an
underwriting of shares of MTM's securities, MTM shall not be
required to include any of the Holder's Shares in such underwriting
unless the Holder accepts the terms of the underwriting as agreed
upon between MTM and the underwriters selected by it (or by other
persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by MTM. If the
total amount of securities requested by selling Stockholders to be
included in such offering exceeds the amount of securities to be
sold, other than by MTM, and the underwriters determine in their
sole discretion that such amount will jeopardize the success of the
offering, then MTM shall be required to include in the offering
only that number of such Shares which the underwriters determine in
their sole discretion will not jeopardize the success of the
offering. The securities so included are to be apportioned pro
rata among the selling Stockholders according to the total amount
of securities that each such selling stockholder has requested to
be registered in such registration (or in such other proportions as
shall mutually be agreed to by such selling Stockholders).
(c) Notwithstanding the foregoing subsection (a), in the
event that there is an underwritten offering of MTM's securities
offered pursuant to said Registration Statement, the underwriters
shall have the right to (X) refuse to permit any Registrable
Securities, or to limit the amount of Registrable Securities, to be
sold by the Holder to such underwriters as such underwriter(s) may
determine in its discretion and (Y) to require that the Holder
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refrain from selling such remainder of his Registrable Securities
covered by such Registration Statement for the period of up to 180
days following the effective date, provided, however, that such
period of days shall not be greater than the lock-up period for
directors of MTM or shareholders of MTM who are also employees
thereof and own in excess of 100,000 shares of MTM Common Stock,
whose shares are included within the Registration Statement, and
shall also refrain at any time when notified by MTM that an
amendment or supplement to the prospectus is required.
(d) If there has not been a Registration Statement filed
pursuant to (a) above in which all of the Registrable Securities
are permitted to be included and permitted to be sold by the second
anniversary of the Effective Time, on one occasion after the second
anniversary of the Effective Time, upon the written request of
Holders of a majority in interest of the Registrable Securities,
MTM shall file a registration statement under the Act (a "Demand
Registration Statement") with respect to the resale from time to
time of the Registrable Securities within 60 days after receipt of
such request (the "Filing Deadline"), and MTM shall use its best
efforts to cause such Demand Registration Statement to become
effective under the Act; provided, however, that an Holder may
inform MTM in writing that it wishes to exclude all or a portion of
his Registrable Securities from registration under such Demand
Registration Statement. MTM shall keep such Demand Registration
Statement effective for a period not less than the earlier of 180
days after being declared effective and the date all Registrable
Securities have been sold.
(e) Whenever pursuant to this Section 10 a Registration
Statement relating to the Shares is filed under the Act or amended
or supplemented thereto, MTM will indemnify and hold harmless each
Holder covered by such Registration Statement, amendment or
supplement (such Holder being hereinafter called the "Distributing
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Holder"), and each person, if any, who controls (within the meaning
of the Act) the Distributing Holder, against any losses, claims,
damages or liabilities, joint or several, to which the Distributing
Holder or any such controlling person may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in any such Registration Statement or any
preliminary prospectus or final prospectus constituting a part
thereof or any amendment or supplement thereto or arise out of or
are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading and will reimburse the Distributing Holder
and each such controlling person for any legal or other expenses
reasonably incurred by the Distributing Holder and each such
controlling person for any legal or other expenses reasonably
incurred by the Distributing Holder or such controlling person or
underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action, provided, however, that
MTM will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in said Registration Statement, preliminary
prospectus, final prospectus or amendment or supplement, in
reliance upon and in conformity with written information furnished
by the Distributing Holder or underwriter for use in the
preparation thereof.
(f) To the extent permitted by law, the Distributing
Holder will indemnify and hold harmless MTM, each of its directors,
each of its officers who have signed said Registration Statement
and such amendments and supplements thereto, each person, if any,
who controls MTM (within the meaning of the Act) and MTM's
underwriters) and each person, if any, who controls such
underwriters (within the meaning of the Act) against any losses,
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claims, damages or liabilities to which MTM or any such director,
officer, underwriter or controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities arise out of or are based upon any untrue
or alleged untrue statement of any material fact contained in said
Registration Statement, preliminary prospectus, final prospectus,
or amendment or supplement, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent but only to the
extent that such untrue statement or alleged untrue statement or
omission or alleged omission was made in said Registration
Statement, preliminary prospectus, final prospectus or amendment or
supplement, in reliance upon and in conformity with written
information furnished by such Distributing Holder for use in the
preparation thereof and will reimburse MTM or underwriter or any
such director, officer or controlling person for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability
or action, provided, however, a Holder's indemnification shall be
limited to his net proceeds from the sale of Registrable Securities
pursuant to said Registration Statement.
(g) Promptly after receipt by an indemnified party under
(e) or (f) of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party, give the indemnifying party notice
of the commencement thereof but the omission so to notify the
indemnifying party will not relieve it from any liability which it
may have to any indemnified party if such delay has not prejudiced
the indemnifying party's ability to defend such claim.
(h) In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate in, and to the extent that it may wish, jointly with
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any other indemnifying party similarly notified to assume the
defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party under this Section 10 for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
(i) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration
as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 10.
(j) A Holder who transfers shares of MTM Common Stock
received in connection with the Merger to a transferee who enters
into an agreement with MTM, in form reasonably acceptable to MTM,
providing among other things, that the transferee (A) will abide by
the terms of this Agreement and (B) enter into a Lock-up Agreement
with MTM in the form attached as an Exhibit to the Option Agreement
shall be deemed a Permitted Transferee if he/it is a person
receiving shares of MTM as a direct result of a transfer (w) from
a Stockholder or Permitted Transferee to any member of his Family,
as defined below; (x) from a member of the Family of a Stockholder
to another member of the Family of that Stockholder or to that
Stockholder (including but not limited to transfers among trusts
complying herewith); (y) to the personal representative of a
Stockholder or Permitted Transferee hereunder who is deceased or
adjudicated incompetent; and (z) by the personal representative of
a Stockholder or Permitted Transferee who is deceased or
adjudicated incompetent to any member of said Stockholder's or
Permitted Transferee's Family. Any shares transferred pursuant to
this subparagraph (j) and the Permitted Transferee shall continue
to be subject thereafter to this Agreement to the extent
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applicable. Family shall mean a spouse or descendant, ancestor or
sibling (in all cases lineal or adopted) of a Stockholder, or a
spouse of a descendant or ancestor or sibling of a Stockholder, or
a trustee of a trust or custodian of a custodianship primarily for
the benefit of one or more of the foregoing and/or such
Stockholder.
ARTICLE XI
Indemnities.
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11.1 In Favor of MTM and MTM Mergerco. Pivot and Stockholders
agree, jointly and severally, to indemnify, defend and hold MTM and
MTM Mergerco, its successors and permitted assigns, free and
harmless from and against all claims, actions, liabilities and
damages (including reasonable attorneys' fees and expenses) as and
when incurred ("Claims") arising out of or based upon (i) the
breach by Pivot or Stockholders of any of their representations,
warranties or covenants contained in this Agreement or (ii) the
failure of Pivot to obtain the consent of any person whose consent
is required to effectuate MTM Mergerco's right to any of Pivot's
assets under the terms existing prior to the Merger.
Notwithstanding the above, where such breaches result from
situations where Pivot did not have actual knowledge of such
breach, other than Section 4.2 hereof, such indemnification shall
only be to the extent of such Claims in excess of $37,500 in the
aggregate. For purposes of this Section 11.1, wherever a
representation or warranty provides for a "materiality" qualifier,
such qualifier shall be deemed omitted. The aggregate amount of
indemnification for which Pivot and the Stockholders are liable in
the aggregate shall not exceed the Merger Consideration. In the
event it is determined after the Effective Time that MTM and
Mergerco are entitled to indemnification hereunder, each
Stockholder shall be required to indemnify MTM and Mergerco for an
amount equal to the amount of the Claim multiplied by a fraction
the numerator of which is the number of Shares to which a
Stockholder is entitled, assuming no Claims, and the denominator of
which is the aggregate amount of Shares which the Stockholders
would be entitled, assuming no Claims. In no event will a
Stockholder be entitled to indemnify MTM for an amount greater than
his share of the Merger Consideration. In the event that a
Stockholder is required to indemnify MTM or MTM Mergerco, such
Stockholder may, in such Stockholder's sole discretion, satisfy its
38
<PAGE>
obligations with shares of MTM stock received in the Merger
(including shares otherwise subject to the Lock-up Agreement). For
all purposes hereunder, any shares of MTM Common Stock tendered in
satisfaction of this indemnification shall be valued at $_______,
the Average Closing Price.
11.2 In Favor of Stockholders. MTM and MTM Mergerco agree to
indemnify, defend and hold Stockholders free and harmless from and
against all claims, actions, liabilities and damages (including
reasonable attorneys' fees and expenses) as and when incurred
arising out of or based upon the breach by MTM or MTM Mergerco of
any of its representations, warranties or covenants contained in
this Agreement.
11.3 Procedure for Indemnification. If any party seeks
indemnification pursuant to Sections 11.1 or 11.2 it shall notify
the party required to provide indemnification hereunder of any
claim made or action commenced against the party to be indemnified,
within a reasonable time after such party shall have been notified
of the Claim or shall have been served with the summons or other
first legal process giving information as to the nature and basis
of the Claim. The indemnifying party shall assume the defense of
such Claim or action, employ counsel of its choice and bear all
expenses relating to such defense. The indemnified party shall
have the right to participate in the defense of such claim or
action and to employ separate counsel, but the fees and expenses of
such counsel shall be at the expense of the indemnified party
unless (a) the engagement thereof shall have been specifically
authorized by the indemnifying party or (b) the indemnifying party
shall fail to assume the defense and engage counsel.
Notwithstanding anything to the contrary in the foregoing, the
indemnified party, upon written notice to the indemnifying party,
may at its expense assume the defense of such claim or action, and
employ counsel of its choice. The parties shall each cooperate in
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<PAGE>
the defense of any such claim and shall make available to each
other records and other materials required for use in such defense.
In no event shall the indemnifying party be liable for any
settlement of any action or claim made without its written consent.
Anthony Travaglini shall act on behalf of Pivot if indemnification
is sought pursuant to Section 11.1 above with respect to an act of
Pivot.
ARTICLE XII
Use Best Efforts to Satisfy Conditions Precedent.
Each of Pivot and the Stockholders agree to use its or his
best efforts to bring about the satisfaction of the conditions
specified in Article VIII hereof, and MTM and MTM Mergerco agree to
use their best efforts to bring about the satisfaction of the
conditions specified in Article IX hereof. If any condition
specified in any of said Sections shall not be satisfied by such
best efforts and such condition shall not be waived by the party or
parties for the benefit of which such condition is stated, such
party after giving notice of such non-satisfaction and giving the
other parties a reasonable opportunity to satisfy such condition,
may terminate this Agreement by notice in writing to the other
parties.
ARTICLE XIII
Designation of Forum in the Event of Litigation.
Pivot, the Stockholders, MTM, and MTM Mergerco agree that any
legal action or proceedings with respect to, or arising out of, the
negotiation, execution, performance or breach of, or the rights and
privileges provided by, or responsibilities and obligations under,
this Agreement must be brought in either the Supreme Court of the
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<PAGE>
State of New York for the County of New York or the County of
Westchester or the United States District Court for the Southern
District of New York and in no other jurisdiction. By execution and
delivery of this Agreement, Pivot, Stockholders, MTM and MTM
Mergerco accept and submit to the jurisdiction of such courts in
any such legal action or proceeding and irrevocably consent to
service of process in any action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to
each of the parties at its address for notices as specified herein,
such service to become effective five (5) days after such mailing.
Nothing herein shall affect the right to serve process in any
other manner permitted by law.
ARTICLE XIV
Notices.
All notices, requests, demands and other communications which
are required or permitted under this Agreement shall be in writing
and shall be deemed sufficiently given upon receipt if personally
delivered, faxed or mailed by certified mail, return receipt
requested, addressed to the party to be notified at the address
hereafter set forth for such party or to such other address as such
party may hereafter designate in writing:
(a) If to Pivot or Stockholders:
Anthony Travaglini
14 Elliots Way
Valley Cottage, New York 10989
Fax: (914) 267-2638
41
<PAGE>
with a copy to:
Scott Rothstein, Esq.
Shipman & Goodwin LLP
One American Row
Hartford, CT 06103
Fax: (860) 251-5900
(b) If to MTM or MTM Mergerco:
Steven Rothman, President
Micros-To-Mainframes, Inc.
614 Corporate Way
Valley Cottage, New York 10989
Fax: (914) 267-3785
with a copy to:
Jack Becker, Esq.
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158-0125
Fax: (212) 949-7052
ARTICLE XV
Binding Effect; Benefits.
This Agreement shall inure to the benefit of, and be binding
upon the parties hereto and their respective legal representatives,
successors and permitted assigns, and no other person shall acquire
or have and other rights under this Agreement or by virtue of this
Agreement.
ARTICLE XVI
Assignment.
Neither this Agreement nor any right, remedy, obligation or
liability arising hereunder or by reason hereof shall be assignable
42
<PAGE>
by Pivot, MTM or MTM Mergerco without the prior written consent of
the other.
ARTICLE XVII
Confidentiality.
Pivot and the Stockholders, on the one hand, and MTM and MTM
Mergerco on the other hand, shall maintain the confidentiality of
all confidential information furnished to it or him by the other
concerning the other's business, assets and financial condition,
and shall not disclose such information to others, or use any such
information for any purpose, except in furtherance of the
transactions contemplated by this Agreement (and except as such
information may be required to be disclosed under applicable law or
in connection with litigation arising out of this Agreement),
unless and until such information is or becomes in the public
domain by reason other than disclosure by it or him. In the event
the transactions contemplated herein are not consummated, (i) MTM
and its principals, shareholders, officers, employees, agents or
representatives shall not disclose to any third party or use in any
manner whatsoever any of the confidential information disclosed to
them by Pivot, its Stockholders, officers, employees, agents or
representatives in connection with the negotiations for this
transaction, and (ii) Pivot and its principals, Stockholders,
officers, employees, agents or representatives shall not disclose
to any third party or use in any manner whatsoever any of the
confidential information disclosed to them by MTM, its
shareholders, officers, employees, agents or representatives in
connection with the negotiations for this transaction. This
confidential information shall extend, but not be necessarily
limited, to the technology, sales techniques, vendors, independent
contractors, employees, and customer lists disclosed by one party
43
<PAGE>
to the other. Confidential information as used herein shall not
include that which (i) was in the public domain prior to receipt
thereof; (ii) the receiving party can show it was in possession
thereof; (iii) subsequently becomes known to the receiving party by
third parties as a matter of right and without restriction on
disclosure; or (iv) subsequently comes into the public domain
through no fault of the receiving party. In the event this
Agreement is terminated, upon the written request, the
shareholders, officers, employees, agents or representatives of the
respective parties hereto shall return or destroy the confidential
information previously disclosed to them by the disclosing party.
This provision shall survive the termination of this Agreement.
ARTICLE XVIII
Brokerage.
Each of the parties hereto represents and warrants to the
other that it has not dealt with any broker or finder in connection
with the transactions contemplated by this Agreement.
ARTICLE XIX
Governing Law.
This Agreement shall in all respects be governed by, construed
under and enforced in accordance with the laws of the State of New
York.
44
<PAGE>
ARTICLE XX
Expenses.
Each of the parties shall pay its or his own legal,
accounting and other expenses in connection with the negotiation
and preparation of this Agreement, provided, however, that all
obligations of Pivot shall become the obligation of MTM Mergerco.
ARTICLE XXI
Severability.
If any section, term or provision of this Agreement shall to
any extent be held or determined to be invalid or unenforceable,
the remaining sections, terms and provisions shall nevertheless
remain in full force and effect.
ARTICLE XXII
Survival.
The representations, warranties, covenants and agreements of
the parties set forth in this Agreement (including the Schedules)
and in any other documents, certificates or written statements
delivered by or on behalf of any a party to this Agreement shall
survive the Closing for a period of one (1) year, provided,
however, that the provisions with respect to the Non-Competition
Agreement and the Registration Rights shall survive for the later
of the terms thereof and the applicable statute of limitations.
ARTICLE XXIII
Waiver.
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<PAGE>
Any waiver by any party of a breach of any of the provisions
of this Agreement shall not operate as or be construed to be a
waiver of any other breach of that provision or of any breach of
any other provision of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on one
or more occasions will not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
ARTICLE XXIV
Headings.
The headings in this Agreement are for convenience only and
shall not affect the construction of this Agreement.
ARTICLE XXV
Entire Agreement; Modification.
This Agreement constitutes the entire understanding between
the parties with respect to its subject matter. It supersedes and
cancels all prior agreements and understandings among the parties
relating to its subject matter. This Agreement may not be amended
or supplemented, except by subsequent written agreement of the
parties which specifically states that it is intended to be an
amendment or supplement to this Agreement, signed by the parties
hereto. No course of dealing or custom shall be referred to as
modifying any of the terms and conditions of this Agreement.
46
<PAGE>
ARTICLE XXVI
Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall
constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement and Plan of Merger as of the date first above written.
Attest: MICROS-TO-MAINFRAMES, INC.
______________________ By:____________________________
Steven Rothman
President
Attest: PIVOT TECHNOLOGIES, INC.
_____________________ By:____________________________
Anthony Travaglini
President
Attest: MTM MERGERCO, INC.
______________________ By:_____________________________
Steven Rothman
President
_____________________________________
Anthony Travaglini, Individually
47
<PAGE>
<PAGE>
Exhibit 99.4
LOCK-UP AGREEMENT
LOCK-UP AGREEMENT (the "Lock-Up Agreement") dated May 18, 1998
(the "Closing Date"), by and among the persons named on Schedule A
hereto, such persons being the principal shareholder of Pivot
Technologies, Inc. (individually the "Shareholder" and collectively
the "Shareholders") and Micros-to-Mainframes, Inc., a New York
Corporation ("MTM").
W I T N E S S E T H:
WHEREAS, MTM , Pivot Technologies, Inc. ("Pivot") and the
Shareholders have entered into a Stock Purchase and Option
Agreement ("Option Agreement") dated May 15, 1998 pursuant to
which, among other things, MTM purchased a 19.9% interest in Pivot
and an option to cause Pivot to merge into a wholly-owned
subsidiary of MTM (the "Merger") and the conversion and exchange of
Pivot capital shares into shares of MTM Common Stock, warrants and
cash;
WHEREAS, pursuant to Section 5.16 of the Option Agreement, the
Shareholders have agreed to enter into a Lock-up Agreement
pursuant to which the Shareholders, on behalf of themselves and
their Permitted Transferees, as defined below, assuming the Merger
is consummated, will not sell, transfer or otherwise dispose of
the MTM Common Stock except as set forth in this Lock-Up Agreement;
and
WHEREAS, all capitalized terms used herein and not otherwise
defined herein shall have the meanings given such terms in the
Option Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
terms, conditions and mutual covenants appearing in this Lock-Up
Agreement, the parties hereto hereby agree as follows:
Section 1. (A) (i) Subject to Section 5 below, each
Shareholder hereby agrees that, during the period (the "No-Sale
Period") commencing on the Effective Date of the Merger and ending
three (3) years thereafter, he will not offer, sell, transfer or
otherwise dispose of the MTM Common Stock received in the Merger
(the "Shares") without the prior written consent of MTM, provided,
however, that 25% of such Shares shall, subject to Sections
1(A)(iii) and (iv) below, be released from this Lock-up Agreement
on the first anniversary of the Merger, an additional 50% of the
Shares initially locked-up pursuant to this Lock-up Agreement shall
be released on the second anniversary of the Merger and the
balance shall be received on the third anniversary of the Merger.
<PAGE>
(ii) Notwithstanding anything contained in subsection (A)(i) of
this Section 1, a Shareholder may transfer shares of MTM during the
period such shares are subject to this Lock-up Agreement (a) to any
member of his Family, as defined below; (b) from a member of the
Family of a Shareholder to another member of the Family of that
Shareholder or to that Shareholder (including but not limited to
transfers among trusts complying herewith); (c) to the personal
representative of a Shareholder or Permitted Transferee hereunder
who is deceased or adjudicated incompetent; and (d) by the personal
representative of a Shareholder or Permitted Transferee who is deceased
or adjudicated incompetent to any member of said Shareholder's or
permitted transferee's Family (any such transferee is hereinafter referred
to as a "Permitted Transferee"). Any Shares transferred pursuant to
this subparagraph (ii) shall continue to be subject thereafter to
this Lock-up Agreement. Family shall mean a spouse or descendant,
ancestor or sibling (in all cases lineal or adopted) of a
Shareholder, or a spouse of a descendant, ancestor or sibling of a
Shareholder, or a trustee of a trust or custodian of a
custodianship primarily for the benefit of one or more of the
foregoing and/or such Shareholder.
(iii) Each Shareholder and his Permitted
Transferee, if any, agrees that in the event he wishes to sell,
transfer or otherwise dispose of his Shares released from the
provisions of (i) above to a person who is not a Permitted
Transferee, the Shareholder shall first offer MTM in writing the
right to redeem such shares at the greater of the closing price on
the exchange it is then traded for the MTM Common Stock as at the
date of the notice or the acceptance by MTM. MTM shall have five
(5) business days to accept such offer ("Acceptance Period").
Acceptance of such offer must be delivered to the offering
Shareholder or Permitted Transferee within such time period if such
person is easily accessible or if not, by mailing notice thereof to
such person . If MTM elects to accept such offer, the closing
thereon shall be within (5) business days of such acceptance. If
MTM does not exercise its right of first offer, the Shareholder or
Permitted Transferee making such offer shall have sixty (60) days
after the end of the Acceptance Period to sell same. To the extent
the Shares offered for sale pursuant to the right of first offer
are not sold by the end of the aforementioned sixty (60) day
period, the Shareholder or Permitted Transferee must start the
process again with respect to such unsold Shares.
(iv) In no event will any Shareholder or
Permitted Transferee sell any Shares in violation of Rule 144 or
145 of the securities Act of 1933, as amended.
<PAGE>
(B) The Shareholder acknowledges that the breach
or impending violation of any of the provisions of this Lock-Up
Agreement may cause irreparable damage to MTM for which remedies at
law would be inadequate. The Shareholder further acknowledges that
the provisions set forth herein are essential terms and conditions
of the Option Agreement, the Merger Agreement, and this Lock-Up
Agreement. Each Shareholder therefore agrees that MTM shall be
entitled to a decree or order by any court of competent
jurisdiction enjoining such impending or actual violation of any of
such provisions. Such decree or order, to the extent appropriate,
shall specifically enforce the full performance of any such
provision by the Shareholder, and the Shareholder and MTM hereby
consent to the jurisdiction of any such court of competent
jurisdiction, state or federal, sitting in the State of New York,
and the Shareholder authorizes the entry on its behalf of any
required appearance for such purpose. If any portion of this
Section 1 is adjudicated to be invalid or unenforceable, this
Section 1 shall be deemed amended to delete therefrom the portion
so adjudicated, such deletion to apply only with respect to the
operation of this Section 1 in the jurisdiction in which such
adjudication is made.
Section 2. Subject to Section 5 hereunder, this Lock-Up
Agreement shall inure to the benefit of and be binding upon MTM,
its successors and assigns, and upon the Shareholder, the
Shareholders, the Shareholders' respective heirs, executors,
administrators, legatees and legal representatives and other
Permitted Transferees.
Section 3. Should any part of this Lock-Up Agreement, for
any reason whatsoever, be declared invalid, illegal, or incapable
of being enforced in whole or in part, such decision shall not
affect the validity of any remaining portion, which remaining
portion shall remain in full force and effect as if this Lock-Up
Agreement had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties
hereto that they would have executed the remaining portion of this
Lock-Up Agreement without including therein any portion which may
for any reason be declared invalid.
Section 4. This Lock-Up Agreement shall be construed and
enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed in such State
without application of the principles of conflicts of laws of such
State.
<PAGE>
Section 5. This Lock-Up Agreement and all rights hereunder
are personal to the parties and shall not be assignable by MTM
without the Shareholder's written consent or by the Shareholder,
except as provided in Section 1(A)(ii) with respect to Permitted
Transferees, without MTM's written consent, and any purported
assignment in violation hereof shall be null and void.
Notwithstanding anything contained herein which may be to the
contrary, a transfer to a Permitted Transferee shall only be
permitted if the Permitted Transferee executes a Lock-Up Agreement
in substantially the form of this Lock-Up Agreement.
Section 6. (A) All notices, requests, consents, and
demands by the parties hereunder shall be delivered by fax, by
hand, by recognized national overnight courier or by deposit in the
United States Mail, postage prepaid, by registered or certified
mail, return receipt requested, addressed to the party to be
notified at the address set forth below:
<PAGE>
(i) If to Shareholder:
Fax:
with a copy to:
Frank J. Marco, Esq.
Shipman & Goodwin LLP
One American Row
Hartford, CT 06103
Fax: (860) 251-5900
(ii) If to MTM:
Steven Rothman, President
Micros-To-Mainframes, Inc.
614 Corporate Way
Valley Cottage, New York 10989
Fax: (914) 267-3785
with a copy to:
Jack Becker, Esq.
Snow Becker Krauss P.C.
605 Third Avenue
New York, New York 10158-0125
Fax: (212) 949-7052
<PAGE>
(B) Notices given by mail shall be deemed
effective on the earlier of the date shown on the proof of receipt
of such mail or, unless the recipient proves that the notice was
received later or not received, three (3) days after the date of
mailing thereof. Other notices shall be deemed given on the date
of receipt. Any party hereto may change the address specified
herein by written notice to the other parties hereto.
Section 7. The failure of either party to insist upon the
strict performance of any of the terms, conditions and provisions
of this Agreement shall not be construed as a waiver or
relinquishment of future compliance therewith, and said terms,
conditions and provisions shall remain in full force and effect.
No waiver of any term or any condition of this Lock-Up Agreement
on the part of either party shall be effective for any purpose
whatsoever unless such waiver is in writing and signed by such
party.
IN WITNESS WHEREOF, the parties hereto have executed this
Lock-Up Agreement as of the day and year first written above.
MICROS-TO-MAINFRAMES, INC.
By: \s\ Steven Rothman
SHAREHOLDER:
\s\ Anthony Travaglini
Name
\s\ Alan McCabe
Name
\s\ Robert Cann
Name
<PAGE>
SCHEDULE A
Anthony Travaglini
614 Corporate Way
Valley Cottage, NY 10989
Robert Cann
614 Corporate Way
Valley Cottage, NY 10989
Alan McCabe
614 Corporate Way
Valley Cottage, NY 10989
CONTACT: Steven H. Rothman
Micros-to-Mainframes, Inc.
Phone: (914) 268-5000
Fax: (914) 268-9695
Press Release
FOR IMMEDIATE RELEASE
Micros-To-Mainframes, Inc. has announced the purchase of 19.9% and
obtained an option to acquire 100% of Pivot Technologies, Inc.
MTM & Pivot jointly provide Internet/Intranet enabled Remote Systems
Management Services.
Valley Cottage, N.Y. - May 19, 1998 - Micros-to-Mainframes, Inc.
("MTM") [NASDAQ:MTMC]. A single source provider of advanced
technology solutions, communications products and Internet development
services, today announced that it has purchased 19.9% of Pivot
Technologies, Inc. ("Pivot") and obtained an option to acquire 100%.
Pivot Technologies, Inc. provides "lights-out" remote management of
enterprise corporate networks and systems. Pivot delivers comprehensive,
professional remote management services. These services include
automation and management of diverse, multi-vendor networks and systems,
as well as asset tracking, software metering and reporting. Pivot offers the
reality of providing proactive, as well as, reactive network operations center
services to its clients, 24 hours a day, 365 days per year including pre-
planned actions to be taken, notification to personnel of completed actions
automatically without relying on operator intervention.
Pivot and MTM's service offerings are provided to a client as customized to
each clients' particular system and needs as a complete collection of life
cycle support services. They address all aspects of network support, from
design and configuration to on-going management and reporting.
Steven Rothman, President and CEO stated, "It is obvious that Micros-to-
Mainframes, Inc. has made a commitment to be a 'premier' provider of
network and system services to our clients. The MtM team can now provide
a `complete service and support plan' inclusive of fault management,
configuration recovery and management, performance management, and a
single point of proactive resolution management as an adjunct to consulting,
design, maintenance, installation, integration, and life-cycle management."
<PAGE>
Howard Pavony, Chairman, added "MTM now offers the most complete set
of service offerings with a quality assurance process for implementation and
a team of the most technically capable engineers dedicated to servicing our
clients, unmatched by our competition. In addition, Pivot brings us senior
technical managers, senior engineers and technical personnel, with a wealth
of data networking , network management, programming, UNIX skills, and
the experience of building a world class network management team."
For more information on both companies please see websites
www.pivottech.com and www.mtm.com.
Micros-to-Mainframes, Inc. is a single source provider and integrator of
advanced technology products, including wide and local area networks,
telecommunications solutions, as well as system design consulting,
maintenance and outsourcing services. The Company maintains sales,
technology labs, training and service facilities in Valley Cottage, New York,
New York City, and Connecticut.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995: The statements contained in this
release which are not historical facts are forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements.
These risks and uncertainties include the Company's entry into new
commercial businesses, the risk of obtaining financing, and other risks
described in the Company's Securities and Exchange Commission filings.
