SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 15, 2000
VIZACOM INC.
(Exact name of registrant as specified in its charter)
Delaware 1-14076 22-3270045
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
Glenpointe Center East
300 Frank W. Burr Boulevard
Teaneck, New Jersey 07666
(Address of principal executive offices) (Zip Code)
(201) 928-1001
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On February 15, 2000, we, Vizacom Inc., acquired Renaissance Computer Art
Center, Inc, d/b/a Renaissance Multimedia, a New York City-based digital
communication company focused on designing, implementing and supporting Internet
web sites and digital businesses through the use of new media. We acquired
Renaissance Multimedia through a merger of Renaissance Computer Art Center, Inc.
with and into RCAC Acquisition Corp., a wholly-owned subsidiary which we formed
for this specific transaction. RCAC changed its name to Renaissance Multimedia
Inc. following the merger and we intend to operate it as a wholly-owned
subsidiary.
The merger was completed pursuant to the terms of an Agreement and Plan of
Merger, dated February 15, 2000. Pursuant to the merger agreement, we issued an
aggregate of 449,870 shares of our common stock and paid an aggregate of
$250,000 to the stockholders of Renaissance Multimedia at the effective time of
the merger. We valued the shares of our common stock that we issued at $3.89 and
determined the number of shares based upon the market price of our common stock
for the twenty trading days preceding the fourth day prior to the closing.
One-half of the shares issued are subject to an escrow agreement to protect
against any inaccuracy in any of the representations and warranties of
Renaissance Computer Art Center, Inc. and its stockholders contained in the
Merger Agreement. In addition, under a lock-up agreement entered into at the
time of the merger, each party who received any of the shares of our common
stock we issued in the merger agreed to limit sales of these shares to 10% of
the total shares each received during the period from six to nine months
following the merger, and an additional 10% during the following three months.
These 449,870 shares of our common stock were issued in reliance upon an
exemption from registration under the Securities Act of 1933 pursuant to Section
4(2) thereof. As a result, these shares are subject to restrictions on transfer
under the applicable provisions of the Securities Act. In accordance with the
merger agreement, we entered into a registration rights agreement in which we
granted the parties who received these shares customary piggy back registration
rights in connection with future registration statements which we may file under
the Securities Act.
We also have entered into a three year employment agreement with Andrew
Edwards, the president of Renaissance Computer Art Center, Inc. at the time of
the merger. Under this agreement, Mr. Andrew will serve as one of our vice
presidents and president of Renaissance Multimedia, Inc. This agreement also
contains restrictions on Mr. Edwards engaging in competition with us for the
term of the agreement and for one year thereafter and provisions protecting our
proprietary rights and information.
Item 5. Other Events.
On February 17, 2000, we borrowed $1 million pursuant to a line of credit
facility in the maximum principal amount of $1 million with Churchill Consulting
that was entered into effective January 8, 2000. The interest rate on the line
of credit is 8% per year, compounded monthly, on the outstanding principal
amount. All amounts borrowed under the line of credit
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facility are due upon the earlier of (a) 60 days after the first draw down
on the line of credit facility or (b) our receipt of gross proceeds from any
offering of our equity securities of at least $2 million. We also issued to
Churchill warrants exercisable for seven years to purchase 250,000 shares of our
common stock at $3.00 per share upon our draw down under the line of credit
facility in accordance with the terms of the line of credit facility.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
The required financial statements will be filed by amendment not later
than April 30, 2000.
(b) Pro forma financial information.
The required financial information will be filed by amendment not
later than April 30, 2000.
(c) Exhibits.
Listed below are all exhibits to this Current Report on Form 8-K.
Exhibit
Number Description
10.1 Agreement and Plan of Merger, dated as of February 15, 2000, among
Vizacom Inc., RCAC Acquisition Corp., Renaissance Computer Art
Center, Inc. and the former stockholders of Renaissance Computer Art
Center, Inc.
10.2 Escrow Agreement, dated as of February 15, 2000, among Vizacom Inc.,
Renaissance Computer Art Center Inc., the former stockholders of
Renaissance Computer Art Center, Inc., Andrew Edwards and Kaufman
& Moomjian, LLC, as escrow agent.
10.3 Form of Lock-Up Agreement.
10.4 Registration Rights Agreement, dated as of February 15, 2000,
among Vizacom Inc., and each of the former stockholders of
Renaissance Computer Art Center, Inc.
10.5 Employment Agreement, dated as of February 15, 2000, by and between
Vizacom Inc. and Andrew Edwards.
10.6 Line of Credit Facility Agreement, dated January 8, 2000, between
Vizacom Inc. and Churchill Consulting.
10.7 Line of Credit Note, dated January 8, 2000, in the principal
amount of $1,000,000 and payable to Churchill Consulting.
10.8 Warrant Certificate, dated February 17, 2000, registered in the name
of Churchill Consulting.
99.1 Press Release, dated February 15, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 18, 2000
VIZACOM INC.
By: /s/ Alan W. Schoenbart
Alan W. Schoenbart
Vice President - Finance and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
10.1 Agreement and Plan of Merger, dated as of February 15, 2000, among
Vizacom Inc., RCAC Acquisition Corp., Renaissance Computer Art
Center, Inc. and the former stockholders of Renaissance Computer Art
Center, Inc.
10.2 Escrow Agreement, dated as of February 15, 2000, among Vizacom Inc.,
Renaissance Computer Art Center Inc., the former stockholders of
Renaissance Computer Art Center, Inc., Andrew Edwards and Kaufman
& Moomjian, LLC, as escrow agent.
10.3 Form of Lock-Up Agreement.
10.4 Registration Rights Agreement, dated as of February 15, 2000,
among Vizacom Inc., and each of the former stockholders of
Renaissance Computer Art Center, Inc.
10.5 Employment Agreement, dated as of February 15, 2000, by and between
Vizacom Inc. and Andrew Edwards.
10.6 Line of Credit Facility Agreement, dated January 8, 2000, between
Vizacom Inc. and Churchill Consulting.
10.7 Line of Credit Note, dated January 8, 2000, in the principal
amount of $1,000,000 and payable to Churchill Consulting.
10.8 Warrant Certificate, dated February 17, 2000, registered in the name
of Churchill Consulting.
99.1 Press Release, dated February 15, 2000.
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), made and entered into
as of February 15, 2000, among Vizacom Inc., a Delaware corporation ("Buyer"),
RCAC Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Buyer ("Merger Sub"), Renaissance Computer Art Center, Inc. d/b/a Renaissance
Multimedia, a New York corporation ("Seller") and the stockholders of Seller set
forth on Schedule A hereto (the "Seller Stockholders").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law ("Delaware Law") and the
New York Business Corporation Law ("New York Law"), Buyer and Seller will enter
into a business combination transaction pursuant to which Seller will merge with
and into Merger Sub (the "Merger").
B. The Board of Directors of Buyer (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Buyer
and fair to, and in the best interests of, Buyer and its stockholders and (ii)
has approved this Agreement, the Merger and the other transactions contemplated
by this Agreement.
C. The Board of Directors of Seller (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Seller
and fair to, and in the best interests of, Seller and its stockholders, (ii) has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) has recommended the approval of this Agreement by the
stockholders of Seller.
D. Buyer and Merger Sub, on the one hand, and Seller and the Seller
Stockholders on the other hand, desire to make certain representations and
warranties and other agreements in connection with the Merger.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, premises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law and New York Law, Seller shall be merged
with and into Merger Sub, the separate corporate existence of Seller shall cease
and Merger Sub shall continue as the surviving corporation. Merger Sub as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by (a) filing a
Certificate of Merger (the "Delaware Certificate of Merger") with the Secretary
of State of the State of Delaware in accordance with the relevant provisions of
Delaware Law and (b) delivery of a Certificate of Merger (the "New York
Certificate of Merger") executed by Seller and Merger Sub to the Secretary of
State of the State of New York (the time of such filing and delivery (or such
later time as may be agreed in writing by the parties and specified in the
Delaware Certificate of Merger and New York Certificate of Merger ) being the
"Effective Time") as soon as practicable on or after the Closing Date (as herein
defined). Unless the context otherwise requires, the term "Agreement" as used
herein refers collectively to this Agreement, the Delaware Certificate of Merger
and the New York Certificate of Merger. The closing of the Merger (the
"Closing") shall take place at the offices of Kaufman & Moomjian, LLC, 50
Charles Lindbergh Boulevard - Suite 206, Mitchel Field, New York 11553, at a
time and date to be specified by the parties, which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI, or at such other time, date and location as the parties hereto
agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Delaware
Law and New York law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of Seller and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Seller and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation; provided,
however, that, at the Effective Time, the Certificate of Incorporation of the
Surviving Corporation shall be amended so that the name of the Surviving
Corporation shall be "Renaissance Multimedia, Inc."
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law and such bylaws.
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1.5 Directors and Officers. The directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, to serve in such capacity until their respective successors are
duly elected and qualified. The officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, to
serve in such capacity at the pleasure of the Board of Directors of the
Surviving Corporation and until their successors are duly appointed and
qualified.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, Seller or the holders of any
of the following securities:
(a) Conversion of Seller Capital Stock. Each share of common stock, no
par value, of Seller (the "Seller Capital Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Seller Capital
Stock to be canceled pursuant to Section 1.6(b) and any Dissenting Shares (as
defined in and to the extent provided in Section 1.8(a)) will be canceled and
extinguished and automatically converted (subject to Sections 1.6(d) and (e))
into the right to receive (i) $500 ($250,000 divided by the number of shares of
Seller Capital Stock issued and outstanding) in immediately available funds the
("Cash Component"), and (ii) such number shares (the "Exchange Ratio") of common
stock, par value $.001 per share, of Buyer (the "Buyer Common Stock") as shall
equal (A) 449,870 ($1,750,000, divided by (B) the product of (1) the number of
shares of Seller Capital Stock then issued and outstanding, and (2) the average
closing price of one share of Buyer Common Stock, as reported by Nasdaq, for the
twenty (20) trading day period ending four (4) business days prior to the
Closing Date) (the "Price Per Share"), upon surrender of the certificate
representing such share of Seller Capital Stock in the manner provided in
Section 1.8 (or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (and bond, if required) in the manner provided in
Section 1.10).
(b) Cancellation of Buyer-Owned Stock. Each share of Seller Capital
Stock held in the treasury of Seller or owned by Merger Sub, Buyer or any direct
or indirect wholly-owned subsidiary of Seller or Buyer immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Capital Stock of Merger Sub. Each share of common stock, par value
$.001 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, par value $.001 per share,
of the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities convertible
into Buyer Common Stock or Seller Capital Stock), reorganization,
recapitalization or other like change with respect to Buyer Common Stock or
Seller Capital Stock occurring on or after the date hereof and prior to the
Effective Time.
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(e) Fractional Shares. No fraction of a share of Buyer Common Stock
will be issued by virtue of the Merger, but, in lieu thereof, each holder of
shares of Seller Capital Stock who would otherwise be entitled to a fraction of
a share of Buyer Common Stock (after aggregating all fractional shares of Buyer
Common Stock to be received by such holder) shall receive from Buyer an amount
of cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the Price Per Share.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
the shares of any holder of Seller Capital Stock who has demanded and perfected
appraisal rights for such shares in accordance with New York Law and who, as of
the Effective Time, has not effectively withdrawn or lost such appraisal rights
("Dissenting Shares") shall not be converted into or represent a right to
receive the Cash Component per share of Seller Capital Stock and the Buyer
Common Stock pursuant to Section 1.6, and in lieu thereof, the holder thereof
shall only be entitled to such rights as are granted by New York Law.
(b) Notwithstanding the foregoing, if any holder of shares of Seller
Capital Stock who demands appraisal of such shares under New York Law shall
effectively withdraw the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such effective withdrawal, such holder's
shares shall automatically be converted into and represent only the right to
receive the Cash Component per share of Seller Capital Stock and Buyer Common
Stock at the Exchange Ratio, without interest thereon, upon surrender of the
certificate representing such shares.
(c) Seller shall give Buyer (i) prompt notice of any written demands
for appraisal of any shares of Seller Capital Stock, withdrawals of such
demands, and any other instruments served pursuant to New York Law and received
by Seller which relate to any such demand for appraisal and (ii) the opportunity
to participate in all negotiations and proceedings which take place prior to the
Effective Time with respect to demands for appraisal under New York Law. Seller
shall not, except with the prior written consent of Buyer or as may be required
by applicable law, voluntarily make any payment with respect to any demands for
appraisal of Seller Capital Stock or offer to settle or settle any such demands.
1.8 Exchange of Certificates.
(a) Exchange Procedures. At the Closing, (i) each Seller Stockholder
shall surrender to Buyer a certificate or certificates (the "Certificates")
which immediately prior to the Effective Time represented outstanding shares of
Seller Capital Stock whose shares were converted into the right to receive (A)
shares of Buyer Common Stock pursuant to Section 1.6(a); (B) cash in lieu of any
fractional shares pursuant to Section 1.6(e) and (C) any dividends or other
distributions pursuant to Section 1.8(b) and (D) the Cash Component pursuant to
Section 1.6(a); (ii) Buyer shall deliver to each such Seller Stockholder, (A) a
certificate representing the number of whole shares of Buyer Common Stock
pursuant to Section 1.6(a), (B) payment in lieu of fractional shares pursuant to
Section 1.6(e), (C) any dividends or distributions payable pursuant to Section
1.8(b) and (D) the
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Cash Component pursuant to Section 1.6(a); and (iii) each Certificate
surrendered pursuant to clause (i) hereof shall be canceled.
(b) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Buyer Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Buyer Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder thereof certificates representing whole shares of Buyer Common Stock
issued in exchange therefor, without interest, along with the amount of
dividends or other distributions with a record date after the Effective Time
payable with respect to such whole shares of Buyer Common Stock.
(c) Transfers of Ownership. If any certificate for shares of Buyer
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Buyer or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Buyer Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Buyer or any
agent designated by it that such tax has been paid or is not payable.
(d) No Liability. Notwithstanding anything to the contrary in this
Section 1.8, neither the Buyer, the Surviving Corporation nor any party hereto
shall be liable to a holder of shares of Buyer Common Stock or Seller Capital
Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Seller Capital Stock. All shares of
Buyer Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid in respect thereof
pursuant to Section 1.6(e) and 1.8(b)), together with the Cash Component for
each share of Seller Capital Stock, shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Seller Capital Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Seller Capital Stock which were outstanding
immediately prior to the Effective Time. 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 I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Buyer shall issue in exchange for
such lost, stolen or destroyed Certificates, upon the making of an affidavit of
that fact by the holder thereof, together with an agreement of indemnity, such
whole number of shares of Buyer Common Stock into which the shares of Seller
Capital Stock evidenced thereby shall have been converted, cash for fractional
shares, if any, as may be required pursuant to Section 1.6(e) and any dividends
or distributions payable pursuant to Section 1.8(b), together with the Cash
Component for each share of Seller Capital Stock; provided, however, that Buyer
may, in its discretion and as a condition precedent to
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the issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Buyer with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.11 Tax and Accounting Consequences. It is intended by the parties hereto
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Income Tax Regulations.
1.12 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Seller and Merger Sub, and to vest the Buyer Common Stock
contemplated hereby in the Seller Stockholders, the officers and directors of
Seller and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE SELLER STOCKHOLDERS
Seller and each Seller Stockholder hereby jointly and severally represent
and warrant to Buyer and Merger Sub, subject to the exceptions specifically
disclosed in writing in the disclosure schedules supplied by Seller and the
Seller Stockholders to Buyer, as follows:
2.1 Organization of Seller. Seller and each of its Subsidiaries (as defined
below) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, has the corporate power
to own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have a Material Adverse Effect (as defined
below) on Seller. Set forth in Schedule 2.1 is a true and complete list of all
of Seller's subsidiaries and entities in which the Seller owns any equity
interest (the "Subsidiaries"), together with the jurisdiction of incorporation
of each Subsidiary and Seller's equity interest therein. Seller has delivered or
made available a true and correct copy of the Certificate of Incorporation and
Bylaws of Seller and similar governing instruments of the Subsidiaries, each as
amended to date, in English, to counsel for Buyer. Except as set forth in
Schedule 2.1, Seller does not own, of record or beneficially, any direct or
indirect equity or other interest in any entity or any right (contingent or
otherwise) to acquire any equity interest in any business or entity. When used
in connection with Seller, the term "Material Adverse Effect" means, for
purposes of this Agreement, any change, event or effect that is materially
adverse to the business, assets (including intangible assets), financial
condition or results of operations of Seller and its subsidiaries taken as a
whole, but not general economic or industry-wide events in the Seller's
industry.
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2.2 Seller Capital Structure. The authorized capital stock of Seller
consists of 1,000 shares of common stock no par value, of Seller (constituting
the Seller Capital Stock), of which there were 500 shares issued and outstanding
as of the date of this Agreement as set forth on Schedule A. All outstanding
shares of Seller Capital Stock are duly authorized, validly issued, fully paid
and non-assessable and are not subject to preemptive rights created by statute,
the Certificate of Incorporation or Bylaws of Seller or any agreement or
document to which Seller is a party or by which it is bound. Schedule 2.2 lists
each outstanding option, if any, to acquire shares of the Seller Capital Stock
as of the date of this Agreement, the name of the holder of such option, the
number of shares subject to such option, the exercise price of such option, the
number of shares as to which such option will have vested at such date and
whether the exercisability of such option will be accelerated in any way by the
transactions contemplated by this Agreement or for any other reason, and
indicate the extent of acceleration, if any.
2.3 Obligations With Respect to Seller Capital Stock. Except as set forth
in Section 2.2, there are no equity securities of any class of Seller, or any
securities exchangeable or convertible into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. Except as set forth on
Schedule 2.3 hereto, other than securities Seller owns, there are no equity
securities of any class of any Subsidiary, or any security exchangeable or
convertible into or exercisable for such equity securities, issued, reserved for
issuance or outstanding. Except as set forth in Section 2.2, there are no
options, warrants, equity securities, calls, rights (including preemptive
rights), commitments or agreements of any character to which Seller or any of
the Subsidiaries is a party or by which it is bound obligating Seller or any of
the Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition, of any shares of capital stock of Seller, or any of
the Subsidiaries or obligating Seller or any of the Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. Except as set forth on Schedule
2.3 hereto, there are no registration rights and, to the knowledge of Seller,
there are no voting trusts, proxies or other agreements or understandings with
respect to any equity security of any class of Seller.
2.4 Authority.
(a) Seller has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Seller, subject only to the approval of this
Agreement by Seller's stockholders and the filing of the Delaware Certificate of
Merger pursuant to Delaware Law and the delivery of the New York Certificate of
Merger pursuant to New York Law. A vote of the holders of at least two-thirds of
the outstanding shares of the Seller Capital Stock is required for Seller's
stockholders to approve this Agreement and such stockholders' approval has been
obtained. This Agreement has been duly executed and delivered by Seller and,
assuming the due authorization, execution and delivery by Buyer and Merger Sub,
constitutes the valid and binding obligation of Seller, enforceable in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws and general principles of equity. The execution and
delivery of this Agreement by Seller does not,
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and the performance of this Agreement by Seller will not, (i) conflict with
or violate the Certificate of Incorporation or Bylaws of Seller or the
equivalent organizational documents of any of the Subsidiaries, (ii) subject to
obtaining the approval of Seller's stockholders of the Merger as contemplated in
Section 5.14 and compliance with the requirements set forth in Section 2.4(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Seller or any of the Subsidiaries or by which its or any of
their respective properties is bound or affected, or (iii) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or impair Seller's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Seller
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Seller is
a party or by which Seller properties are bound or affected, except, with
respect to clauses (ii) and (iii), for any such conflicts, violations, defaults
or other occurrences that would not have a Material Adverse Effect on Seller.
Schedule 2.4 lists all material consents, waivers and approvals under any of
Seller's agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to Seller in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby or thereby, except for (i) the filing of the Delaware Certificate of
Merger with the Secretary of State of the State of Delaware and the delivery of
the New York Certificate of Merger with the Secretary of State of New York, (ii)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal and state securities
laws and the laws of any foreign country and (iii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Seller or Buyer or have a
material adverse effect on the ability of the parties to consummate the Merger.
2.5 Section 912 of the New York Business Corporation Law Not Applicable.
The Board of Directors of Seller has taken all actions so that the restrictions
contained in Section 912 of the New York Business Corporation Law applicable to
a "business combination" (as defined in Section 912) will not apply to the
execution, delivery or performance of this Agreement or to the consummation of
the Merger or the other transactions contemplated by this Agreement.
2.6 Seller Financial Statements.
Each of the financial statements of Seller for the fiscal years ended
December 31, 1998 (including, in each case, any related notes thereto, the "1998
Financials"), delivered by Seller to Buyer and attached hereto in Schedule 2.6
(the "Seller Financials"), including any financial statements of Seller prepared
after the date hereof and prior to the Closing, was and shall be prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes
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thereto) and fairly present the consolidated financial position of Seller
as at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated. Except as set forth in
Schedule 2.6, the unaudited Financial Statements of Seller for the nine-month
period ended September 30, 1999 have been prepared on a basis consistent with
the 1998 Financials, except that the unaudited interim financial statements do
not contain all footnotes that would be required, and were or are subject to
normal and recurring year-end adjustments which were not, or are not expected to
be, material in amount. The balance sheet of Seller as of December 31, 1998 is
hereinafter referred to as the "Seller Balance Sheet." Except as disclosed in
the Seller Financials, Seller does not have any liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance sheet
or in the related notes to the consolidated financial statements prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of Seller, except
liabilities (i) provided for in the Seller Balance Sheet or (ii) incurred since
the date of the Seller Balance Sheet in the ordinary course of business
consistent with past practice.
2.7 Absence of Certain Changes or Events.
(a) Except as set forth in the Schedule 2.7, since December 31, 1998,
Seller has carried on its businesses in the ordinary course and in all material
respects consistent with past practice. Except as set forth in the Schedule 2.7,
since December 31, 1998 (or, with respect to clause (xi) below, since September
30, 1999), Seller has not:
(i) incurred any obligation or liability (whether absolute,
accrued, contingent or otherwise), except pursuant to the
terms of this Agreement or except in the ordinary course
of business and consistent with past practice;
(ii) suffered any damage, destruction or loss, whether or not
covered by insurance, affecting its properties, assets
or business, to the extent that the same exceeds $10,000
individually or $25,000 in the aggregate;
(iii) mortgaged, pledged or subjected to any lien, charge or
other Encumbrance any of its assets, tangible or
intangible, except in the ordinary course of business and
consistent with past practice;
(iv) sold or transferred any of its assets, except in the
ordinary course of business and consistent with past
practice, or canceled or compromised any material debts or
waived any claims or rights of a material nature;
(v) leased, licensed or granted to any person or entity any
rights in any of its assets or properties outside the
ordinary course of business and inconsistent with past
practice;
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(vi) experienced any material adverse change in its financial
condition, results of operations, assets, liabilities,
business or operations;
(vii) made any change in any accounting principle or practice or
in its method of applying any such principle or practice;
(viii) issued any additional shares of capital stock or any
options, warrants or other rights to purchase, or any
securities convertible into or exchangeable for, shares
of its capital stock;
(ix) declared or paid any dividends on or made any other
distributions (however characterized) in respect of shares
of its capital stock;
(x) repurchased or redeemed any shares of its capital stock;
(xi) granted any general or specific increase in the salary,
commission rate or other compensation (including,
without limitation, bonuses, profit sharing or deferred
compensation) payable or to become payable to any of its
employees or agents, except as required under
existing contractual obligations of Seller or any of the
Subsidiaries, or adopted any Benefit Plan (as that term is
hereinafter defined), or increased, augmented or improved
the benefits granted to or for the benefit of any Employee
(as that term is hereinafter defined) under any Benefit
Plan; or
(xii) entered into any agreement to do any of the foregoing.
2.8 Taxes.
(a) Except as set forth in the Schedule 2.8, all returns and
reports relating to Taxes (as hereinafter defined) which are required to be
filed with respect to Seller on or before the date hereof or which will be
required to be filed on or before the Closing Date have been, or will be, duly
and timely filed and all such returns and reports are, or will be, complete and
correct in all material respects. Except as set forth in Schedule 2.8, all
Taxes, assessments, fees and other governmental charges imposed on or with
respect to Seller which have become due and payable on or before the Closing
Date have been, or will be prior to the Closing Date, paid in a timely manner by
Seller, or shall be accrued for in Seller Financials or in the books of Seller.
Except as set forth in the Schedule 2.8 hereto, there are no actions or
proceedings currently pending or, to the best knowledge of Seller, threatened
against Seller by any governmental authority for the assessment or collection of
Taxes, no claim for the assessment or collection of Taxes has been asserted or,
to the best knowledge of Seller, threatened, against Seller, and there are no
matters under discussion by Seller with any governmental authority regarding
claims for the assessment or collection of Taxes against Seller. Except as set
forth in Schedule 2.8, there are no agreements, waivers or applications by
Seller for an extension of time for the assessment or payment of any Taxes.
There are no Tax liens on any of the assets of Seller
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(other than any lien for current Taxes not yet due and payable). No claim
has ever been made by an authority in a jurisdiction where Seller does not file
Tax returns or reports that it is or may be subject to taxation by that
jurisdiction. Seller is not a party to any Tax allocation or sharing agreement.
Seller is not and has never been a member of an affiliated group of corporations
(other than the group consisting of Seller and the Subsidiaries) filing a
consolidated U.S. income Tax return and is not liable, as a transferee or
successor (by contract or otherwise), for the Taxes of any corporation that
previously was a member of such an affiliated group.
(b) For purposes of this Agreement, the terms "Tax" and "Taxes" shall
mean and include any and all foreign, national, Federal, state, local or other
income, franchise, sales, gross receipts, use, value added, goods and services,
withholding, employment, payroll, social security, unemployment, real and
personal property, stamp duty, customs duty and intangibles tax and all other
taxes of any nature, deficiencies, fees, assessments, interest, penalties or any
other governmental charges, duties, impositions and liabilities of whatever
nature, including, without limitation, any installment payment for taxes and
contributions or other amounts determined with respect to compensation paid to
directors, officers, employees or independent contractors, from time to time
imposed by or required to be paid to any governmental authority (including
penalties and additions to taxes thereon, penalties for failure to file a return
or report and interest on any of the foregoing).
(c) Seller has not, with regard to any assets or property held,
acquired or to be acquired by Seller, filed a consent to the application of
Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code").
(d) Seller does not conduct any operations or sales which have been or
are required to be reported to the Internal Revenue Service (the "IRS") under
the provisions of Section 999 of the Code.
2.9 Intellectual Property.
(a) To the knowledge of Seller and such Seller Stockholder, Seller
owns, or has the right to use, sell or license all patents, trademarks, trade
names, service marks, copyrights and other intellectual property necessary or
required for the conduct of its businesses as presently conducted (such
intellectual property and the rights thereto are collectively referred to herein
as the "Seller IP Rights"), except for any failure to own or have the right to
use, sell or license that would not have a Material Adverse Effect on Seller.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any Seller IP Rights (the
"Seller IP Rights Agreements"), will not cause the forfeiture or termination or
give rise to a right of forfeiture or termination of any Seller IP Rights or
impair the right of Seller, the Surviving Corporation or Buyer to use, sell or
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license any Seller IP Rights or portion thereof, except for the occurrence of
any such breach, forfeiture, termination or impairment that would not
individually or in the aggregate, result in a Material Adverse Effect on Seller.
(c) To the knowledge of Seller and such Seller Stockholder, (i)
neither the manufacture, marketing, license, sale or intended use of any product
or technology currently licensed or sold or under development by Seller or any
of the Subsidiaries violates any license or agreement between Seller and any
third party or infringes any intellectual property right of any other party; and
(ii) there is no pending or, to the knowledge of Seller, threatened claim,
arbitration or litigation contesting the validity, ownership or right to use,
sell, license or dispose of any Seller IP Rights, nor has Seller received any
written notice asserting that any Seller IP Rights or the proposed use, sale,
license or disposition thereof conflicts or will conflict with the rights of any
other party, except, with respect to clauses (i) and (ii), for any violations,
infringements, claims or litigation that would not have a Material Adverse
Effect on Seller.
(d) Seller has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its proprietary
rights in, all Seller IP Rights.
2.10 Compliance; Permits; Restrictions.
(a) Seller is not in conflict with, or in default or violation of, (i)
any law, rule, regulation, order, judgment or decree applicable to Seller or by
which its properties is bound or affected or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Seller is a party or by which Seller or its
properties is bound or affected, except for any conflicts, defaults or
violations which would not have a Material Adverse Effect on Seller. No
investigation or review by any governmental or regulatory body or authority is
pending or, to the knowledge of Seller, threatened against Seller or such Seller
Stockholder, nor has any governmental or regulatory body or authority indicated
an intention to conduct the same, other than, in each such case, those the
outcome of which would not have a Material Adverse Effect on Seller.
(b) Seller holds all permits, licenses, variances, exemptions, orders
and approvals from governmental authorities which are material to the operation
of the business of Seller (collectively, the Seller Permits"). Seller is in
compliance with the terms of Seller Permits, except where the failure to hold
the same or to so comply would not have a Material Adverse Effect on Seller.
2.11 Litigation. There is no action, suit, proceeding, claim, arbitration
or investigation pending, or as to which Seller has received any notice of
assertion nor, to Seller's or such Seller Stockholder knowledge, is there a
written threat of an action, suit, proceeding, claim, arbitration or
investigation against Seller which would have a Material Adverse Effect on
Seller, or which in any manner challenges or seeks to prevent, enjoin, alter or
delay any of the transactions contemplated by this Agreement.
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2.12 Brokers' and Finders' Fees. Seller has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
2.13. Employees; Employee Benefits.
(a) Schedule 2.13 sets forth the names of all employees of Seller,
other than temporary employees, as of the date of this Agreement (the
"Employees") and, with respect to each Employee, such Employee's job title and
the date of commencement of employment of such Employee. Seller has accrued on
its books and records all obligations for salaries, vacations, benefits and
other compensation with respect to its Employees and any of its Former Employees
(as that term is hereinafter defined), to the extent required by GAAP,
including, but not limited to, severance, bonuses, incentive and deferred
compensation, and all commissions and other fees payable to salespeople, sales
representatives and other agents. Seller does not currently offer, and have
never offered, retiree health and insurance benefits to Employees and Former
Employees, and Seller does not have any liabilities (contingent or otherwise)
with respect thereto. Except as set forth in the Schedule 2.13, there are no
outstanding loans from Seller to any Related Party. Complete and correct copies
of all material written agreements with or concerning Employees, including,
without limitation, union and collective bargaining agreements, and all
employment policies, and all amendments and supplements thereto, have been
delivered to Buyer, and a list of all such agreements and policies is set forth
in the Schedule 2.13. None of the Employees has, to the best knowledge of Seller
such Seller Stockholder, indicated a desire to terminate his or her employment
other than at normal retirement age, or any intention to terminate his or her
employment in connection with the transactions contemplated by this Agreement.
Except as set forth in the Schedule 2.13, since September 30, 1999, Seller has
not (i) except in the ordinary course of business and consistent with past
practice, increased the salary or other compensation payable or to become
payable to or for the benefit of any of the Employees, (ii) provided any of the
Employees with any increased security or tenure of employment, (iii) increased
the amounts payable to any of the Employees upon the termination of any such
person's employment or (iv) adopted, increased, augmented or improved benefits
granted to or for the benefit of any of the Employees under any Benefit Plan.
(b) To the best knowledge of Seller or such Seller Stockholder, Seller
has complied at all times and in all material respects with all laws, statutes,
rules and regulations applicable with respect to employees in each of the
jurisdictions in which it operates and/or does business. Except as disclosed in
the Schedule 2.13, Seller has complied in all material respects with Title VII
of the Civil Rights Act of 1964, as amended, the Age Discrimination in
Employment Act, as amended, the Americans with Disabilities Act, the Family
Medical Leave Act, the Fair Labor Standards Act, as amended, and all applicable
laws, statutes and regulations governing payment of minimum wages and overtime
rates, labor standards, working conditions, the withholding and payment of Taxes
or any other kind of governmental charge from compensation, terms and conditions
of employment, workplace safety, workers' compensation, disability pay, social
benefits whether or not imposed by a governmental program, discriminatory
practices, including, without limitation, with respect to employment and
discharge, or otherwise relating to the conduct of employers with respect to
employees or potential employees
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(collectively, the "Employee Laws"), and there have been no claims made or,
to the knowledge of Seller or such Seller Stockholder, threatened thereunder
against Seller arising out of or relating to or alleging any violation of any of
the foregoing. Seller has complied in all material respects with the employment
eligibility verification form requirements under the Immigration and
Naturalization Act, as amended ("INA"), with respect to Employees, and Seller
has complied with the paperwork provisions and anti-discrimination provisions of
the INA and Seller has obtained and maintained the employee records and I-9
forms with respect to the Employees in proper order as required by law. Seller
is not currently employing any Employees who are not citizens of the United
States and who are not authorized to work in the United States. To the best
knowledge of Seller and such Seller Stockholder, there are no controversies,
strikes, work stoppages, picketing, filed grievances, job actions, unfair labor
practice charges, investigations, complaints, disputes or other proceedings
pending or threatened between Seller and any of the Employees or Former
Employees (as defined below); no labor union or other collective bargaining unit
represents or has ever represented any of the Employees in connection with their
employment with Seller; neither Seller nor such Selling Stockholder has any
knowledge of any organizational effort by any labor union or other collective
bargaining unit currently under way or threatened with respect to any Employees;
no consent of any labor union or other collective bargaining unit representing
Employees is required to consummate the transactions contemplated by this
Agreement; and Seller has not incurred any liability under the Worker Adjustment
Retraining Notification Act ("WARN") or similar state and local laws.
(c) Except for temporary clerical personnel, none of the Employees are
"leased employees" within the meaning of Section 414(h) of the Code. Schedule
2.13 sets forth a list of each defined benefit and defined contribution plan,
stock ownership plan, executive compensation program or arrangement, bonus plan,
incentive compensation plan or arrangement, deferred compensation agreement or
arrangement, supplemental retirement plan or arrangement, vacation pay,
sickness, disability or death benefit plan (whether provided through insurance,
on a funded or unfunded basis or otherwise), medical or life insurance plan,
providing benefits to any Employee, retiree or Former Employee or any of their
dependents, survivors or beneficiaries, employee stock option or stock purchase
plan, severance pay, termination or salary continuation plan, and each other
employee benefit plan, program or arrangement, including, without limitation,
each "employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which is
maintained by Seller for the benefit of or relating to any of the Employees or
to any former employees of Seller (the "Former Employees") or their dependents,
survivors or beneficiaries, whether or not legally binding, and for which Seller
could reasonably have any liabilities, all of which are hereinafter referred to
as the "Benefit Plans." None of Buyer, Merger Sub nor Seller will incur any
liability under any severance agreement, deferred compensation agreement,
employment agreement, similar agreement or Benefit Plan solely as a result of
the consummation of the transactions contemplated by this Agreement.
(d) Each Benefit Plan which is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) meets the requirements of Section 401(a) of
the Code; the trust, if any, forming part of such plan is exempt from U.S.
Federal income Tax under Section 501(a) of the Code; a favorable determination
letter has been issued by the IRS after January 1, 1994 with
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respect to each plan and trust and each amendment thereto; and since the
date of such determination letter there are no circumstances which are likely to
adversely affect the qualification of such plan. No Benefit Plan is a "voluntary
employees beneficiary association" (within the meaning of Section 501(c)(9) of
the Code) and there have been no other "welfare benefit funds" relating to
Employees or Former Employees within the meaning of Section 419 of the Code. No
event or condition exists with respect to any Benefit Plan that could subject
Seller or any of the Subsidiaries to any material Tax under Section 4980B of the
Code or, for plan years beginning before January 1, 1989, Section 162(k) of the
Code. With respect to each Benefit Plan, Seller has heretofore delivered to
Buyer complete and correct copies of the following documents, where applicable:
(i) the most recent annual report (Form 5500 series), together with schedules,
as required, filed with the IRS, and any financial statements and opinions
required by Section 103(a)(3) of ERISA, (ii) the most recent determination
letter issued by the IRS, (iii) the most recent summary plan description and all
modifications, (iv) the text of the Benefit Plan and of any trust, insurance or
annuity contracts maintained in connection therewith, (v) the most recent
actuarial report, if any, relating to the Benefit Plan and (vi) the most recent
actuarial valuation, study or estimate of any retiree medical and life insurance
benefits plan or supplemental retirement benefit plan.
(e) Except as set forth on Schedule 2.13, neither Seller nor any
corporation or other trade or business under common control with Seller (as
determined pursuant to Section 414(b) or (c) of the Code) (a "Common Control
Entity") maintains or contributes to or, to the knowledge of Seller or such
Seller Stockholder, in any way directly or indirectly has any liability (whether
contingent or otherwise) with respect to, any "multiemployer plan," within the
meaning of Section 3(37) or 4001(a)(3) of ERISA, or any other employee pension
benefit plan subject to Title IV of ERISA or Section 412 of the Code; no Benefit
Plan of Seller or of any Common Control Entity is subject to Title IV of ERISA.
No contingent or other liability with respect to which Seller has or could have
any liability exists under Title IV of ERISA to the Pension Benefit Guaranty
Corporation (the "PBGC") or to any Benefit Plan; and no assets of the Seller are
subject to a lien under Sections 4064 or 4068 of ERISA. Except as set forth on
in the Schedule 2.13, all contributions required to be made to or with respect
to each Benefit Plan with respect to the service of Employees or Former
Employees prior to the date hereof have been made or have been accrued for in
the books and records of Seller for all periods through the date hereof. Seller
does not have any obligation to provide post-retirement medical or other
benefits to Employees or Former Employees or their survivors, dependents and
beneficiaries, except as may be required by Section 4980B of the Code or Part 6
of Title I of ERISA or applicable state medical benefits continuation law and
Seller may terminate any such post-retirement medical or other benefits upon
thirty (30) days' notice or less without any liability therefor.
(f) None of the Benefit Plans has been subject to a "reportable
event," within the meaning of Section 4043 of ERISA (whether or not waived),
within the 24-month period ended on the date hereof; there have been no
"prohibited transactions" within the meaning of Section 4975 of the Code or Part
4 of Subtitle B of Title I of ERISA in connection with any of the Benefit Plans
that, assuming the taxable period of such transaction expired as of the date
hereof, could subject Seller to a Tax or penalty imposed by either Section 4975
of the Code or Section 502(i) of ERISA in an amount which would have a Material
Adverse Effect; none of the
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Benefit Plans which are subject to Section 412 of the Code has incurred any
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code and Seller is not subject to a lien under Section 412(n)
of the Code; each Benefit Plan has, in all material respects, been administered
to date in accordance with the applicable provisions of ERISA, the Code and
applicable law and with the terms and provisions of all documents, contracts or
agreements pursuant to which such Benefit Plan is maintained; all reports and
information required to be filed with the Department of Labor, the IRS or the
PBGC with respect to any Benefit Plan have been timely filed or delivered; there
is no arbitration, claim or suit pending or, to the best knowledge of Seller or
such Seller Stockholder, threatened, involving a Benefit Plan (other than
routine claims for benefits), and, to the best knowledge of Seller or such
Seller Stockholder, there is no basis for such a claim; none of the Benefit
Plans nor any fiduciary thereof has been, to the best knowledge of Seller or
such Seller Stockholder, the direct or indirect subject of an order or
investigation or examination by a governmental or quasi-governmental agency and
there are no matters pending before the IRS, the Department of Labor, or any
other governmental agency with respect to a Benefit Plan; and there has not been
and will be no "parachute payment" (as defined in Section 280G(b)(2) of the
Code) to any of the Employees prior to the Closing or as a result of the
transactions contemplated by this Agreement.
2.14 Absence of Liens and Encumbrances. Seller has good and valid title to,
or, in the case of leased properties and assets, valid leasehold interests in,
all of its material tangible properties and assets, real, personal and mixed,
used in its business, free and clear of any liens or encumbrances, except as
reflected in the Seller Financials and except for liens for taxes not yet due
and payable and such imperfections of title and encumbrances, if any, which
would not have a Material Adverse Effect on Seller.
2.15 Environmental Matters.
(a) Hazardous Material. To the best knowledge of Seller and such
Seller Stockholder, except as would not have a Material Adverse Effect on
Seller, no underground storage tanks and no amount of any substance that has
been designated by any Governmental Entity or by applicable federal, state or
local law to be radioactive, toxic, hazardous or otherwise a danger to health or
the environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (each, a "Hazardous Material"), but excluding
office and janitorial supplies, are present in the soil, groundwater, building
materials or ambient air of any real property currently occupied by Seller as a
result of the deliberate actions of Seller, and Seller has not received any
notice that it is allegedly liable for the presence of Hazardous Materials in,
on or under any other property, including the land and the improvements, ground
water and surface water thereof, that Seller has at any time owned, operated,
occupied or leased.
(b) Hazardous Materials Activities. Except as would not have a
Material Adverse Effect on Seller, Seller has not transported, stored, used,
manufactured, disposed of,
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released or exposed its employees or others to Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has Seller
disposed of, transported, sold, or manufactured any product containing a
Hazardous Material (collectively "Hazardous Materials Activities") in violation
of any rule, regulation, treaty or statute promulgated by any Governmental
Entity in effect prior to or as of the date hereof to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. Seller currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Seller Environmental Permits")
necessary for the conduct of Seller's activities and business as such activities
and businesses are currently being conducted, except where the failure to so
hold would not have a Material Adverse Effect on Seller.
(d) Environmental Liabilities. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the best knowledge of Seller or such Seller Stockholder,
threatened concerning any Seller Environmental Permit or any Hazardous Materials
Activity of Seller. Seller is not aware of any fact or circumstance which could
involve Seller in any environmental litigation or impose upon Seller any
environmental liability that would have a Material Adverse Effect on Seller.
2.16 Major Customers. Except as set forth in Schedule 2.16 hereto, Seller
has not received any notice or other written communication from any customer of
Seller terminating or reducing, or setting forth an intention to terminate or
reduce in the future, or otherwise reflecting a material adverse change in, the
business relationship between such customer and Seller or any of the
Subsidiaries and, to the best knowledge of Seller or such Seller Stockholder,
there has not been any material adverse change in the business relationship of
Seller with any such customer since December 31, 1998.
2.17 Agreements, Contracts and Commitments. Except as set forth in
Schedule 2.17, Seller is not a party to or bound by:
(a) any collective bargaining agreements;
(b) any bonus, deferred compensation, incentive compensation, pension,
profit-sharing or retirement plans, or any other employee benefit plans or
arrangements;
(c) any employment or consulting agreement, contract or commitment
with any officer or director level employee, not terminable by Seller on no more
than 30 days' notice without liability, except to the extent general principles
of wrongful termination law may limit Seller's ability to terminate employees at
will;
(d) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the
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transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(e) any agreement of indemnification or guaranty not entered into in
the ordinary course of business other than indemnification agreements between
Seller and any of its officers or directors;
(f) any agreement, contract or commitment containing any covenant
limiting the freedom of Seller to engage in any line of business or compete with
any person;
(g) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $25,000 and not
cancelable without penalty;
(h) any agreement, contract or commitment currently in force relating
to the disposition or acquisition of assets not in the ordinary course of
business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise;
(i) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit;
(j) any joint marketing or development agreement (excluding agreements
with resellers, value added resellers or independent software vendors entered
into in the ordinary course of business that do not permit such resellers or
vendors to modify Seller's products);
(k) any distribution agreement (identifying any that contain
exclusivity provisions); or
(l) any other agreement, contract or commitment (excluding real and
personal property leases) which involve payment by Seller under any such
agreement, contract or commitment of $25,000 or more in the aggregate and is not
cancelable without penalty within 30 days.
Neither Seller, nor to the best knowledge of Seller or such Seller
Stockholder, any other party to a Seller Contract (as defined below), has
breached, violated or defaulted under, or received notice that it has breached
violated or defaulted under, any of the material terms or conditions of any of
the agreements, contracts or commitments to which Seller is a party or by which
it is bound of the type described in clauses (a) through (l) above (any such
agreement, contract or commitment, an "Seller Contract") in such a manner as
would permit any other party to cancel or terminate any such Seller Contract, or
would permit any other party to seek damages, which would have a Material
Adverse Effect on Seller.
2.18 Change of Control Payments. There are no plans or agreements pursuant
to which any amounts may become payable (whether currently or in the future) to
current or former officers or directors of Seller as a result of or in
connection with the Merger.
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2.19. Title to Properties and Related Matters.
(a) Except as set forth in Schedule 2.19 hereto, Seller has good and
marketable title to all real property and tangible personal property and assets
which it owns, including, without limitation, the properties and assets
reflected in the Seller Financials or acquired after the date thereof (other
than properties and assets sold or otherwise disposed of since the date thereof
in the ordinary course of business and consistent with past practice), free and
clear of any mortgages, pledges, security interests, liens, claims, charges,
equities, conditional sales contracts, restrictions, reservations, options,
first refusal rights or encumbrances of any nature whatsoever (collectively,
"Encumbrances"), except for the Encumbrances listed in the Schedule 2.19.
(b) Schedule 2.19 contains a complete and correct list and description
of all real property leased by Seller (the "Leased Real Property"), in each case
indicating the persons or entities from whom such property is being leased.
Seller has good and marketable title to all structures, plants, leasehold
improvements, systems, fixtures and other property located on or about any of
the Leased Real Property which it owns, as reflected in the Seller Financials,
free of any Encumbrances, except for the Encumbrances listed in the Schedule
2.19 which are outstanding as of the date hereof, all of which shall be released
on the Closing Date (but subject to the interests of landlords under any
applicable leases), and none of such material assets is subject to any
agreement, arrangement or understanding for their use by any person other than
Seller. Except as set forth in the Schedule 2.19, no work has been performed on
or with respect to or in connection with any of the Leased Real Property that
would cause such Leased Real Property to become subject to any mechanics',
materialmen's, workmen's, repairmen's, carriers' or similar liens in excess of
$5,000 individually or $25,000 in the aggregate. The structures, plants,
improvements, systems and fixtures (including, without limitation, storage tanks
or other impoundment vessels, whether above or below ground) located on each
such parcel of Leased Real Property conform in all material respects with all
Federal, state and local statutes and laws and, to the best knowledge of Seller
and such Seller Stockholder, all ordinances, rules, regulations and similar
governmental and regulatory requirements (except as set forth in the Schedule
2.19 hereto) and are in reasonable operating condition and repair, ordinary wear
and tear excepted, taking into consideration their respective ages and periods
of use. Each such parcel of Leased Real Property, in view of the purposes for
which it is currently used or for which it is proposed to be used pursuant to
existing plans, conforms in all material respects with all covenants or
restrictions of record and conforms in all material respects with all applicable
building codes and zoning requirements, and current, valid certificates of
occupancy (or equivalent governmental approvals) have been issued for each item
of Leased Real Property; provided that, for purposes of this sentence, a
"material" non-conformity shall be deemed to include, without limitation, any
condition giving rise to liabilities, costs or expenses of $5,000 or more
individually or $25,000 in the aggregate; and Seller and each Seller Stockholder
is not aware of any proposed material change in any such governmental or
regulatory requirements or in any such zoning requirements. To the best
knowledge of Seller and such Seller Stockholder, all existing electrical,
plumbing, fire sprinkler, lighting, air conditioning, heating, ventilation,
elevator and other mechanical systems located in or about the Leased Real
Property are in reasonable operating condition and repair, ordinary wear and
tear excepted, taking into
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consideration their respective ages and periods of use. The maintenance and
operation of such items located in or about Leased Real Property is and has been
conducted in compliance in all material respects with the terms and conditions
of all leases to which Seller is a party and all material maintenance or repair
projects (which, for purposes hereof, shall be deemed to include any one or more
items requiring expenditures by Seller in excess of $5,000 for each item of
Leased Real Property) required to be undertaken by Seller under the terms of
such leases within the first year following the Closing Date have been disclosed
in the Schedule 2.19. To the best knowledge of Seller or such Seller
Stockholder, Seller has the benefit of all material easements, rights-of-way and
similar rights necessary to conduct its businesses as presently conducted and to
use the items of Leased Real Property as currently used, including, without
limitation, easements and licenses for pipelines, power lines, water lines,
roadways and other access. All such easements and rights are valid, binding and
in full force and effect, any amounts due and payable thereon to date have been
paid or have been fully accrued for in the books and records of Seller, as
applicable, neither Seller nor, to the best knowledge of Seller or such Seller
Stockholder, any other party thereto is in default thereunder, and there exists
no event or condition affecting Seller or, to the best knowledge of the Seller
or such Seller Stockholder, any other party thereto, which, with the passage of
time or the giving of notice or both, would constitute a material default
thereunder, which, for purposes hereof, shall be deemed to include, without
limitation, any individual or series of defaults resulting in liabilities, costs
or expenses of $10,000 or more individually or $25,000 in the aggregate. No such
easement or right will be breached by, nor will any party thereto be given a
right of termination as a result of, the transactions contemplated by this
Agreement. Seller does not currently own any real property.
(c) All items of equipment, machinery, vehicles, furniture, fixtures
and other tangible personal property currently owned or used by Seller as of the
date hereof are in reasonable operating condition and repair, ordinary wear and
tear excepted, taking into consideration its age and period of use, are
physically located at or about Seller's place of business or where it otherwise
conducts its business and are owned outright by Seller or validly leased under
one of the leases set forth in Schedule 2.19. No material items of such personal
property are subject to any agreement, arrangement or understanding for its use
by any person other than Seller. To the best knowledge of Seller or such Seller
Stockholder, the maintenance and operation thereof has complied in all material
respects with all applicable laws, regulations, ordinances, contractual
commitments and obligations. Except as set forth in the Schedule 2.19 or as
disclosed in the Seller Financials, no item of tangible personal property owned
or used by Seller is subject to any conditional sale agreement, installment sale
agreement or title retention agreement or arrangement of any kind; as to each
material item of personal property subject to any such agreement or arrangement,
the Schedule 2.19 set forth a brief description of the property in question and
the amount and repayment terms of the underlying obligation.
(d) Schedule 2.19 sets forth a complete and correct list and summary
description of all tangible personal property leases to which Seller is a party
(either as landlord or tenant), together with a brief description of the
property leased and identifying the date and term of the lease, the amount and
timing of lease payments and any renewal or purchase options, provided that,
with respect to personal property leases, only those leases wherein the property
leased has a fair market value exceeding $1,000 or the total annual rental
payments exceed
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$5,000 ("Material Personal Property Leases") shall be required to be
disclosed. Seller has made available to Buyer complete and correct copies of
each lease (and any amendments thereto) listed in Schedule 2.19. Except as set
forth in Schedule 2.19, (i) each such lease is in full force and effect; (ii)
all lease payments due to date on any such lease have been paid, and neither
Seller nor (to the best knowledge of Seller or such Seller Stockholder) any
other party is in default under any such lease, and no event has occurred which
constitutes, or with the lapse of time or the giving of notice or both would
constitute, a default by Seller, or (to the best knowledge of Seller or such
Seller Stockholder) any other party under such lease; (iii) there are no
disputes or disagreements between Seller, on the one hand, and any other party,
on the other hand, with respect to any such lease; and (iv) the lessor under
each such lease has consented or been given notice (where such consent or the
giving of such notice is necessary) sufficient that such lease shall remain in
full force and effect following the consummation of the transactions
contemplated by this Agreement without any modification in the rights or
obligations of the lessee under any such lease.
2.20. Computer Software.
(a) Schedule 2.20 sets forth a complete and correct list of all
computer systems and software which are used by Seller and/or the Subsidiaries
in the administration and/or financial accounting of its business (the
"Proprietary Software"). Except as set forth in the Schedule 2.20, Seller or a
Subsidiary is the owner or licensee of the Proprietary Software, and, to the
best knowledge of Seller or such Seller Stockholder, the Proprietary Software
does not infringe any patent, copyright, trade secret or trademark of any other
person.
(b) Except as set forth on Schedule 2.20, Seller warrants that (i) all
non-Proprietary Software material to the conduct of its business was
commercially available at the time of its acquisition by Seller and was acquired
by Seller though normal business channels and (ii) to the best knowledge of
Seller or such Seller Stockholder, neither Seller, nor any affiliates, agents or
third-party consultants (but only with respect to services rendered to Seller)
are in breach of any licensing arrangements (including, without limitation,
payment of applicable user fees) with respect to any non-Proprietary Software.
2.21 Board of Directors and Stockholder Approval. The Board of Directors of
Seller has, as of the date of this Agreement, determined (i) that the Merger is
fair to and in the best interests of Seller and its stockholders, and (ii) to
recommend that the stockholders of Seller approve this Agreement. The
Stockholders of Seller have, as of the date of this Agreement, approved this
Agreement and the transactions contemplated hereby.
2.22 Minute Books. The minute books of Seller made available to counsel for
Buyer are the only minute books of Seller and contain a reasonably accurate
summary, in all material respects, of all meetings of directors (or committees
thereof) and stockholders or actions by written consent since the time of
incorporation of Seller.
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2.23 Material Suppliers; Inventories.
Seller purchases its supplies and materials from a number of
suppliers, none of which represented in the fiscal year ended December 31, 1998
or the nine-month period ended September 30, 1999, more than five percent (5%)
of aggregate purchases of Seller, except as set forth on Schedule 2.23 hereto.
None of such suppliers has given Seller any notice or other written
communication terminating, suspending or materially reducing, or setting forth
an intention to terminate, suspend or materially reduce in the future, or
otherwise reflecting any change, occurrence or other event that has resulted in
or is reasonably likely to result in, individually or in the aggregate, a
Material Adverse Effect in, the business relationship between such supplier and
Seller and, to the best knowledge of Seller or such Seller Stockholder, there
has not been any adverse change in the business relationship of Seller with any
such supplier since December 31, 1998.
2.24 Compliance with Applicable Law. Seller is not in violation of any
applicable foreign or domestic laws, rules, regulations, ordinances, codes,
judgments, orders, injunctions, writs or decrees of any Federal, state, local or
foreign court or governmental body or agency thereof to which it may be subject
which are applicable to or which could reasonably be expected to affect the
businesses or operations of Seller, except for any violations which would not
have, individually or in the aggregate, a Material Adverse Effect. No claims
have been filed against Seller, and Seller has not received any notice, alleging
any such violation, nor, to the best knowledge of Seller or such Seller
Stockholder, is there any inquiry, investigation or proceeding relating thereto.
2.25 Accounts Receivable. Except as set forth on Schedule 2.25, all
accounts receivable of Seller, all of which are listed on Schedule 2.25 (the
"Receivables") (i) arose from bona fide sales of goods or services in the
ordinary course of business and consistent with past practice; (ii) are owned by
Seller and as of the Closing Date shall be free and clear of any Encumbrances,
except for the Encumbrances listed in the Schedule 2.25 which are outstanding as
of the date hereof, all of which shall be released on the Closing Date; and
(iii) are accurately and fairly reflected on the Seller Financials or, with
respect to Receivables of Seller created after the date thereof and through the
Closing Date, are and will be accurately and fairly reflected in the books and
records of Seller. Not less than ninety percent (90%) of the Receivables in the
aggregate will be collected, without offset, within one hundred fifty (150) days
of the Closing Date.
2.26 Insurance. Schedule 2.26 contains a complete and correct list of all
insurance policies carried by, or covering, Seller with respect to its
businesses, together with, in respect of each such policy, the name of the
insurance carrier, the policy number, the risk insured against, the limits of
coverage, the policy term, and the expiration date thereof. All such policies
are in full force and effect, and no notice of cancellation has been given with
respect to any such policy. All premiums due thereon have been paid in a timely
manner. Seller believes that the policies of insurance identified in the
Schedule 2.26 adequately insure Seller.
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2.27 Bank Accounts; Powers of Attorney. Schedule 2.27 sets forth a complete
and correct list showing: (a) all banks in which Seller maintains a bank account
or safe deposit box (collectively, "Bank Accounts"), together with, as to each
such Bank Account, the account number, the names of all signatories thereof and
the authorized powers of each such signatory and, with respect to each such safe
deposit box, the number thereof and the names of all persons having access
thereto; and (b) the names of all persons holding powers of attorney from Seller
and a summary statement of the terms thereof.
2.28 Transactions with Related Parties. Schedule 2.28 contains an accurate
and complete list and description of all agreements, arrangements and
understandings (including outstanding indebtedness) which are currently in
effect or which occurred at any time after December 31, 1998 between Seller and
any of the following (each, a "Related Party"): (i) each director and officer of
Seller or any Subsidiary; (ii) the spouses, children, grandchildren, siblings,
parents, grandparents, uncles, aunts, nieces, nephews or first cousins of any
such director or officer or their spouses (collectively, "near relatives");
(iii) any trust for the benefit of any such director or officer of Seller or any
of their respective near relatives; and (iv) any corporation, partnership, joint
venture or other entity owned or controlled by any such director or officer or
any of their respective near relatives.
2.29 Warranties. Seller has previously delivered to Buyer copies of all
past and present standard and other express written warranties extended by
Seller with respect to the services now or in the past six years sold by Seller.
Seller does not have, and Seller and such Seller Stockholder knows of no basis
for, any material liability as a result of claims against Seller based on
services rendered by Seller on or prior to the date hereof, nor has Seller
received any notices from any person threatening any such claim.
2.30 Year 2000 Compliance. All functions, including, without limitation,
date-reliant (which includes year-reliant) functions, of the Proprietary
Software are capable of continuing to operate up to, during and after the year
2000. Neither the performance nor functionality of the Proprietary Software will
be affected by any changes to the field configuration which contains the date
information within any part of the Proprietary Software caused by the advent of
the year 2000. The Proprietary Software will perform consistent with past
performance and there shall be no faults in the processing of dates and
date-dependent information or data including, without limitation, in
calculations, comparisons and sequencing of information or data. For the
purposes of this Section 2.30, the term "Proprietary Software" shall not be
deemed to include automated components, automated devices, embedded equipment
and other date sensitive equipment such as security systems, alarms, elevators,
HVAC systems and monitoring equipment used by Seller.
2.31 Disclosure. No representation or warranty by Seller or any Seller
Stockholder contained in this Agreement (including, without limitation, Schedule
2.1 through 2.30, inclusive), nor any other statement, schedule, certificate or
other document delivered or to be delivered by Seller or any Seller Stockholder
to Buyer pursuant hereto or in connection with the transactions contemplated by
this Agreement, contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make the
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statements made herein or therein, in the light of the circumstances in which
they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Buyer and Merger Sub represent and warrant to Seller and the Seller
Stockholders, subject to the exceptions specifically disclosed in the disclosure
schedules supplied by Buyer to Seller and the Seller Stockholders, as follows:
3.1 Organization of Buyer. Buyer and each of its material subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, has the corporate power to own, lease
and operate its property and to carry on its business as now being conducted and
as proposed to be conducted, and is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect (as defined below) on
Buyer. Buyer has delivered to Seller a true and complete list of all of Buyer's
subsidiaries, together with the jurisdiction of incorporation of each subsidiary
and Buyer's equity interest therein. Buyer has delivered or made available a
true and correct copy of the Certificate of Incorporation and Bylaws of Buyer
and similar governing instruments of its subsidiaries, each as amended to date,
to counsel for Seller. When used in connection with Buyer, the term "Material
Adverse Effect" means, for purposes of this Agreement, any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of Buyer and its
subsidiaries taken as a whole.
3.2 Buyer Capital Structure. The authorized capital stock of Buyer consists
of 60,000,000 shares of common stock, par value $.001 per share, of Buyer
(constituting the Buyer Common Stock), of which there were 7,353,283 shares
issued and outstanding as of the date of this Agreement; 60,520 shares of Class
B Voting Preferred Stock, Series A, par value $.001 per share, of which no
shares were issued or outstanding as of the date of this Agreement; and
1,939,480 shares of Serial Preferred Stock, par value $.001 per share, of which
no shares were issued or outstanding as of the date of this Agreement. The
authorized capital stock of Merger Sub consists of 1,000 shares of Common Stock,
par value $.001 per share, 100 shares of which, as of the date of this
Agreement, are issued and outstanding and are held by Buyer. All outstanding
shares of the Buyer Capital Stock are duly authorized, validly issued, fully
paid and non-assessable and are not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of Buyer or any agreement or
document to which Buyer is a party or by which it is bound. As of the date of
this Agreement, Buyer had reserved an aggregate of (i) 4,897,582 shares of
Common Stock, net of exercises, for issuance to employees and consultants
pursuant to Buyer's 1994 Long Term Incentive Plan (the "Buyer Stock Option
Plan"), under which options are outstanding for an aggregate of 2,418,671
shares, (ii) 731,780 shares of Common Stock, net of exercises, for issuances to
non-employee directors under the Buyer's Outside Director and Advisor Stock
Option Plan (the "Outside Director Plan"), under which options and warrants are
outstanding for an aggregate of 165,004 shares, (iii) 80,435 shares of Common
Stock, net of exercises, for issuance to Employees and consultants pursuant to
Buyer's Software Publishing Corporation 1989 Stock Plan (the "SPC 89 Plan"),
under which options are outstanding for an aggregate of 80,435 shares,
(iv) 140,272 shares of
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Common Stock, net of exercises, for issuance to Employees, consultants and
former directors of Software Publishing Corporation pursuant to Buyer's Software
Publishing Corporation 1991 Stock Option Plan (the "SPC 91 Plan"), under which
options are outstanding for an aggregate of 135,384 shares and (v) approximately
2,997,739 shares of Common Stock for issuances of shares of Common Stock
pursuant to options, warrants and other rights to purchase shares of Common
Stock granted or issued other than pursuant to the Buyer Stock Option Plan, the
Outside Direction Plan, the SPC 89 Plan and the SPC 91 Plan. All shares of the
Common Stock of Buyer subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
3.3 Obligations With Respect to Buyer Capital Stock. Except as set forth in
Section 3.2, there are no equity securities of any class of Buyer, or any
securities exchangeable or convertible into or exercisable for such equity
securities, issued, reserved for issuance or outstanding. Except for securities
Buyer owns, directly or indirectly through one or more subsidiaries, there are
no equity securities of any class of any subsidiary of Buyer, or any security
exchangeable or convertible into or exercisable for such equity securities,
issued, reserved for issuance or outstanding. Except as set forth in Section
3.2, there are no options, warrants, equity securities, calls, rights (including
preemptive rights), commitments or agreements of any character to which Buyer or
any of its subsidiaries is a party or by which it is bound obligating Buyer or
any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition, of any shares of capital stock of Buyer
or any of its subsidiaries or obligating Buyer or any of its subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option, warrant,
equity security, call, right, commitment or agreement. There are no registration
rights and, to the knowledge of Buyer there are no voting trusts, proxies or
other agreements or understandings with respect to any equity security of any
class of Buyer or with respect to any equity security of any class of any of its
subsidiaries.
3.4 Authority.
(a) Each of Buyer and Merger Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Buyer and, in the case of this
Agreement, Merger Sub, subject only to the filing of the Delaware Certificate of
Merger pursuant to Delaware Law and the filing of the New York Certificate of
Merger pursuant to New York Law. This Agreement has been duly executed and
delivered by each of Buyer and Merger Sub and, assuming the due authorization,
execution and delivery of this Agreement by Seller and the Seller Stockholders,
this Agreement constitutes the valid and binding obligations of each of Buyer
and Merger Sub, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement by each of
Buyer and Merger
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Sub do not, and the performance of this Agreement by each of Buyer and
Merger Sub will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of Buyer or the Certificate of Incorporation or Bylaws
of Merger Sub or the equivalent organizational documents of any of its other
subsidiaries, (ii) subject to obtaining the approval of the Merger by Buyer's
stockholders as contemplated in Section 5.14 and compliance with the
requirements set forth in Section 3.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Buyer or any of
its subsidiaries (including Merger Sub) or by which its or any of their
respective properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Buyer's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Buyer or
any of its subsidiaries (including Merger Sub) pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Buyer or any of its subsidiaries
(including Merger Sub) is a party or by which Buyer or any of its subsidiaries
(including Merger Sub) or its or any of their respective properties are bound or
affected, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, defaults or other occurrences that would not have a
Material Adverse Effect on Buyer. Schedule 3.4 lists all material consents,
waivers and approvals under any of Buyer's or any of its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Buyer or Merger Sub in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of the Delaware Certificate of Merger with the
Secretary of State of the State of Delaware and the delivery of the New York
Certificate of Merger with the Secretary of State of New York, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and the laws of any foreign country and (iii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Seller or Buyer or have a
material adverse effect on the ability of the parties to consummate the Merger.
3.5 Compliance; Permits; Restrictions.
(a) Neither Buyer nor any of its subsidiaries is in conflict with, or
in default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to Buyer or any of its subsidiaries or by which its or any of
their respective properties is bound or affected or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Buyer or any of its subsidiaries is a
party or by which Buyer or any of its subsidiaries or its or any of their
respective properties is bound or affected, except for any conflicts, defaults
or violations which would not have a Material Adverse Effect on Buyer. No
investigation or review by any governmental or, to the knowledge of Buyer,
regulatory body or authority is pending or threatened against Buyer or its
subsidiaries, nor has any governmental
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or regulatory body or authority indicated an intention to conduct the same,
other than, in each such case, those the outcome of which would not have a
Material Adverse Effect on Buyer.
(b) Buyer and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of Buyer and its subsidiaries taken
as a whole (collectively, the "Buyer Permits"). Buyer and its subsidiaries
are in compliance with the terms of Buyer Permits, except where the failure to
hold the same or to so comply would not have a Material Adverse Effect on Buyer.
3.6 Litigation. Except as set forth in Schedule 3.6, there is no action,
suit, proceeding, claim, arbitration or investigation pending, or as to which
Buyer or any of its subsidiaries has received any notice of assertion nor, to
Buyer's knowledge, is there a written threat of an action, suit, proceeding,
claim, arbitration or investigation against Buyer or any of its subsidiaries
which would have a Material Adverse Effect on Buyer, or which in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement.
3.7 Brokers' and Finders' Fees. Except as set forth on Schedule 3.7 hereto,
Buyer has not incurred, nor will it incur, directly or indirectly, any liability
for brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.8 Board of Directors Approval. The Board of Directors of each of Buyer
and Merger Sub has, as of the date of this Agreement, determined that the Merger
is fair to and in the best interests of Buyer and its stockholders. The Board of
Directors of Merger Sub has recommended that the stockholders of Merger Sub
approve this Agreement. The Buyer, as the sole stockholder of Merger Sub, has,
as of the date of this Agreement, approved this Agreement and the transactions
contemplated hereby.
3.9 Reports. Buyer has delivered to Seller a complete and accurate copy of
each report, schedule, document, statement and proxy statement filed by Buyer
with the SEC on or after December 31, 1998 (the "Buyer SEC Documents"). Each of
the Buyer SEC Documents complied in all material respects with the applicable
requirements of the 1933 Act and the 1934 Act and none of the Buyer SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, Seller agrees, and the Seller Stockholders
agree to cause Seller, except (i) in the case of Seller as provided in Schedule
4.1 or (ii) to the extent that the Buyer shall otherwise consent in writing, to
carry on its business diligently and in accordance with good commercial
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practice and to carry on its business in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted, to pay its
debts and taxes when due subject to good faith disputes over such debts or
taxes, to pay or perform other material obligations when due, and use its
commercially reasonable efforts consistent with past practices and policies to
preserve intact its present business organization, keep available the services
of its present officers and employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others with which
it has business dealings. In furtherance of the foregoing and subject to
applicable law, Seller agrees to confer with Buyer, as promptly as practicable,
prior to taking any material actions or making any material management decisions
with respect to the conduct of business. In addition, except in the case of
Seller as provided in Schedule 4.1, without the prior written consent of Buyer,
not to be unreasonably withheld or delayed, Seller shall not do any of the
following, and no Seller Stockholder shall cause or permit Seller to do any of
the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize cash
payments in exchange for any options granted under any of such plans;
(b) Enter into any material partnership arrangements, joint
development agreements or strategic alliances;
(c) Grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to Buyer, or adopt any new
severance plan;
(d) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Seller IP Rights, or
enter into grants to future patent rights, other than in the ordinary course of
business;
(e) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or split,
combine or reclassify any capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock;
(f) Repurchase or otherwise acquire, directly or indirectly, any
shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan;
(g) Issue, deliver, sell, authorize or propose the issuance, delivery
or sale of, any shares of capital stock or any securities convertible into
shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock, or any securities convertible into shares
of capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than
shares of Buyer Common Stock pursuant to the terms hereof;
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(h) Cause, permit or propose any amendments to any charter document or
Bylaw (or similar governing instruments of any Subsidiaries);
(i) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a material portion of the assets of, or
by any other manner, any business or any corporation, partnership interest,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of Seller, or enter into any joint venture,
strategic partnership or alliance, other than in the ordinary course of business
consistent with past practice;
(j) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Seller, except in the ordinary course of business consistent
with past practice;
(k) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the ordinary
course of business) or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire debt securities of Seller, or
guarantee any debt securities of others;
(l) Adopt or amend any employee benefit or stock purchase or option
plan, or enter into any employment contract, pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its officers or employees other than in the ordinary course of business,
consistent with past practice;
(m) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business;
(n) Make any grant of exclusive rights to any third party;
(o) Make any expenditure equal to or exceeding $10,000; or
(p) Agree in writing or otherwise to take any of the actions described
in Article 4 (a) through (o) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Agreements of Seller Stockholders.
For purposes of this Article V, each of the Seller Stockholders agrees
to cause Seller to engage in any action or refrain from engaging in any action,
as the case may be, that Seller is obligated to engage in or refrain from
engaging in hereunder.
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5.2 Access to Information; Confidentiality.
(a) Each of Buyer and Seller will afford the other party and its
accountants, counsel and other representatives reasonable access during normal
business hours to the properties, books, records and personnel of the other
party during the period prior to the Effective Time to obtain all information
concerning the business, including the status of product development efforts,
properties, results of operations and personnel of such party, as the other
party may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 5.2 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
(b) In connection with the transactions contemplated hereby (the
"Transaction"), the Buyer and Seller will furnish one another with certain
product, financial, marketing, organization, technical and other information
related to each of the Buyer and Seller (such information regarding the Buyer is
referred to as "Buyer Confidential Information" and such information regarding
Seller is referred to as "Seller Confidential Information" and collectively, the
"Confidential Information"). Confidential Information includes not only written
information but also information transferred orally, visually, electronically or
by other means. In consideration of the foregoing, and as a condition to such
disclosure by the Buyer and Seller, each of the Buyer and Seller agree as
follows:
(i) Neither the Buyer nor Seller, as the case may be, nor
their respective directors, officers, employees, representatives, agents
and advisors ("Representatives"), will disclose to any person the fact that
any investigations, discussions or negotiations are taking place between
the parties concerning a possible Transaction or any of the terms,
conditions or other facts with respect to any such possible Transaction,
including the status thereof. The Buyer and Seller agree to be responsible
for any breach of this Agreement by their respective Representatives.
(ii) The Confidential Information will be used by the Buyer
and Seller solely for the purpose of evaluating the desirability of
entering into the Transaction. All Confidential Information shall be kept
secret and confidential and shall not be disclosed to anyone except to a
limited group of employees, directors and officers of the Buyer and Seller
who are actually engaged in the Transaction. Confidential Information may
also be disclosed to outside professional advisors similarly engaged by the
Buyer or Seller. Each person to whom such Confidential Information is
disclosed must be advised of its confidential nature and of the terms of
this Agreement and (unless already bound by obligations of confidentiality)
must agree to abide by such terms.
(iii) Upon any termination of this Agreement, (i) the Buyer
and Seller will either destroy or return to each other the Confidential
Information that is in tangible form, including any copies that may have
been made, and destroy all abstracts, summaries thereof, or references
thereto in documents, and certify to each other in writing that the
foregoing has been completed, and (ii) the Buyer, Seller, and their
respective Representatives, will not use any of the Confidential
Information with respect to, or in
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furtherance of, any of their respective businesses, or in the business
of anyone else, whether or not in competition with the Buyer or Seller,
or for any other purpose whatsoever.
(iv) Confidential Information does not include any
information that was available to the Buyer or Seller, as the case may be,
on a non-confidential basis prior to the receipt of such information or
which thereafter became publicly available not as a result of a breach by
either party of this Agreement. Information shall be deemed "publicly
available" if it becomes a matter of public knowledge or is contained in
materials available to the public or is obtained from any source other than
the Buyer or Seller or their respective Representatives, provided that such
source has not entered into a confidentiality agreement with the Buyer or
Seller, as the case may be, with respect to such information or obtained
the information from an entity or person party to a confidentiality
agreement with the Buyer or Seller.
(v) Seller hereby acknowledges and will advise its
Representatives who receive the Confidential Information, that the United
States securities laws prohibit any person who has material, non-public
information concerning the matters which are the subject of this Agreement
from purchasing or selling securities of the parties hereto (and options,
warrants and rights relating thereto) and from communicating such
information to any other person under circumstances in which it is
reasonably foreseeable that such person (including, without limitation, any
Representatives) is likely to purchase or sell such securities.
(vi) The Buyer and Seller each understand and agree that
money damages would not be a sufficient remedy for any breach of this
Agreement by either party or their Representatives, and that the damaged
party and its Representatives shall be entitled to specific performance
and/or injunctive relief as a remedy for any such breach of this Agreement
and that these shall be in addition to all other remedies available at law
or in equity. This Agreement is made for the benefit of both the Buyer and
Seller, respectively, and no failure or delay by the Buyer, Seller or their
Representatives in exercising any right, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or
the exercise of any right, power or privilege under this Agreement.
5.3 No Solicitation by Seller.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to its terms, Seller
and the Subsidiaries will not, and will instruct their respective directors,
officers, employees, representatives, investment bankers, agents and affiliates
not to, directly or indirectly, (i) solicit or knowingly encourage submission
of, any proposals or offers by any person, entity or group (other than Buyer and
its affiliates, agents and representatives) or (ii) participate in any
discussions or negotiations with, or disclose any non-public information
concerning Seller or any of the Subsidiaries to, or afford any access to the
properties, books or records of Seller or any of the Subsidiaries to, or
otherwise
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assist or facilitate, or enter into any agreement or understanding with,
any person, entity or group (other than Buyer and its affiliates, agents and
representatives), in connection with any potential or actual Acquisition
Proposal (as hereinafter defined) with respect to Seller. For the purposes of
this Agreement, an "Acquisition Proposal" with respect to an entity means any
proposal or offer relating to (i) any merger, consolidation, sale of substantial
assets or similar transactions involving the entity or any subsidiaries of the
entity (other than sales of assets or inventory in the ordinary course of
business or permitted under the terms of this Agreement), (ii) sale of 5% or
more of the outstanding shares of capital stock of the entity (including without
limitation by way of a tender offer or an exchange offer), (iii) the acquisition
by any person of beneficial ownership or a right to acquire beneficial ownership
of, or the formation of any "group" (as defined under Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
and regulations thereunder) which beneficially owns, or has the right to acquire
beneficial ownership of, 5% or more of the then outstanding shares of capital
stock of the entity (except for acquisitions for passive investment purposes
only in circumstances where the person or group qualifies for and files a
Schedule 13G with respect thereto) or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing. Seller will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Seller will (i) notify Buyer as
promptly as practicable if any inquiry or proposal is made or any information or
access is requested in writing in connection with an Acquisition Proposal or
potential Acquisition Proposal and (ii) as promptly as practicable notify Buyer
of the significant terms and conditions of any such Acquisition Proposal. In
addition, subject to the other provisions of this Section 5.3, from and after
the date of this Agreement until the earlier of the Effective Time and
termination of this Agreement pursuant to its terms, Seller and the Subsidiaries
will not, and will instruct their respective directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, directly or
indirectly, make or authorize any public statement, recommendation or
solicitation in support of any Acquisition Proposal made by any person, entity
or group (other than Buyer).
(b) Notwithstanding anything to the contrary in Section 5.3(a), Seller
will not provide any non-public information to a third party unless (a) Seller
provides such non-public information pursuant to a nondisclosure agreement with
terms regarding the protection of confidential information at least as
restrictive as such terms in Section 5.2(b) hereof and (b) such non-public
information is the same information previously delivered to Buyer.
5.4 Public Disclosure. Buyer and Seller will consult with each other before
issuing any press release or otherwise making any public statement with respect
to the Merger, this Agreement or an Alternative Proposal and will not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by law.
5.5 Legal Requirements. Each of Buyer, Merger Sub and Seller will take all
reasonable actions necessary or desirable to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals of or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
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and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement. Buyer will use its commercially
reasonable efforts to take such steps as may be necessary to comply with the
securities and blue sky laws of all jurisdictions which are applicable to the
issuance of Buyer Common Stock pursuant hereto. Seller and the Seller
Stockholders will use their respective commercially reasonable efforts to assist
Buyer as may be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of Buyer
Common Stock pursuant hereto.
5.6 Third Party Consents. As soon as practicable following the date hereof,
Buyer and Seller will each use its commercially reasonable efforts to obtain all
material consents, waivers and approvals under any of its or its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.
5.7 FIRPTA. At or prior to the Closing, Seller, if requested by Buyer,
shall deliver to the IRS a notice that the Seller Capital Stock is not a "U.S.
Real Property Interest" as defined and in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2).
5.8 Notification of Certain Matters. Buyer and Merger Sub will give prompt
notice to Seller, and Seller will give prompt notice to Buyer, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement to the Effective Time or (b) any
material failure of Buyer and Merger Sub or Seller, as the case may be, or of
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement. Notwithstanding the above, the delivery of any notice pursuant
to this section will not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
5.9 Best Efforts and Further Assurances. Subject to the respective rights
and obligations of Buyer and Seller under this Agreement, each of the parties to
this Agreement will use its best efforts to effectuate the Merger and the other
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement. Each party hereto, at the reasonable
request of another party hereto, will execute and deliver such other instruments
and do and perform such other acts and things as may be necessary or desirable
for effecting completely the consummation of the transactions contemplated
hereby.
5.10 Stock Options.
(a) On the Closing Date, Buyer shall grant options to purchase an
aggregate of 600,000 shares of Buyer Common Stock under the Buyer Stock Option
Plan to such employees of the Surviving Corporation and in such amounts as shall
be designated by Seller. Such options
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shall be exercisable at such times as are consistent with Buyer's past practice
at the fair market value of the Buyer Common Stock on the date of grant.
(b) At the Effective Time, each outstanding option to purchase shares
of Seller Capital Stock (each an "Seller Stock Option") under the Seller Stock
Option Plans, whether or not exercisable, will be assumed by Buyer. Each Seller
Stock Option so assumed by Buyer under this Agreement will continue to have, and
be subject to, the same terms and conditions set forth in the applicable Seller
Stock Option Plan immediately prior to the Effective Time (including, without
limitation, any repurchase rights), except that (i) each Seller Stock Option
will be exercisable (or will become exercisable in accordance with its terms)
for that number of whole shares of Buyer Common Stock equal to the product of
the number of shares of Seller Capital Stock that were issuable upon exercise of
such Seller Stock Option immediately prior to the Effective Time multiplied by
the Exchange Ratio, rounded down to the nearest whole number of shares of Buyer
Common Stock, and (ii) the per share exercise price for the shares of Buyer
Common Stock issuable upon exercise of such assumed Seller Stock Option will be
equal to the quotient determined by dividing the exercise price per share of
Seller Capital Stock at which such Seller Stock Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio, rounded up to the
nearest whole cent. After the Effective Time, Buyer will issue to each holder of
an outstanding Seller Stock Option a notice describing the foregoing assumption
of such Seller Stock Option by Buyer.
(c) It is the intention of the parties that Seller Stock Options
assumed by Buyer qualify following the Effective Time as incentive stock options
as defined in Section 422 of the Code to the extent Seller Stock Options
qualified as incentive stock options immediately prior to the Effective Time.
(d) Buyer will reserve sufficient shares of Buyer Common Stock for
issuance under Section 5.10(b) and under Section 1.6(c) hereof.
5.11 Indemnification and Insurance.
(a) From and after the Effective Time, the Surviving Corporation will
fulfill and honor in all respects the obligations of Seller pursuant to any
indemnification agreements, if any, between Seller and its directors and
officers existing prior to the date hereof. The Certificate of Incorporation and
Bylaws of the Surviving Corporation will contain provisions with respect to
indemnification and elimination of liability for monetary damages not less
favorable to officers and directors to those set forth in the Certificate of
Incorporation and Bylaws of Seller, which provisions will not be amended,
repealed or otherwise modified in a manner adverse to officers and directors for
a period of two years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, at the Effective Time, were
directors, officers, employees or agents of Seller, unless such modification is
required by law.
(b) After the Effective Time, the Surviving Corporation will, to the
fullest extent permitted under applicable law or under the Surviving
Corporation's Certificate of Incorporation or Bylaws, indemnify and hold
harmless, each present and former director or
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officer of Seller or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement (collectively, "Liabilities") in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, to the extent arising out of or pertaining to
any action or omission in his or her capacity as a director or officer of Seller
arising out of or pertaining to the transactions contemplated by this Agreement
for a period of two years after the date hereof. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) any counsel retained by the Indemnified Parties for any
period after the Effective Time will be reasonably satisfactory to the Surviving
Corporation and Buyer, (ii) after the Effective Time, the Surviving Corporation
will pay the reasonable fees and expenses of such counsel, promptly after
statements therefor are received and (iii) the Surviving Corporation will
cooperate in the defense of any such matter; provided, however, that the
Surviving Corporation will not be liable for any settlement effected without its
written consent (which consent will not be unreasonably withheld); and provided,
further, that, in the event that any claim or claims for indemnification are
asserted or made within such two-year period, all rights to indemnification in
respect of any such claim or claims will continue until the disposition of any
and all such claims. The Indemnified Parties as a group may retain only one law
firm (in addition to local counsel) to represent them with respect to any single
action unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties.
(c) Promptly after the Effective Time, Buyer shall enter into
indemnification agreements with directors and officers of Seller who become
directors or officers of Buyer or of the Surviving Corporation, which agreements
shall be substantially identical to those which Buyer has entered with its
current officers and directors.
(d) Buyer shall indemnify Andrew Edwards ("Edwards") against any
Liabilities in connection with any claim, action, suit or proceeding arising out
of or pertaining to any personal guaranties of obligations of Seller listed on
Schedule 5.11.
(e) From and after the Effective Time, the Surviving Corporation will
use its best efforts to maintain the "Errors or Omissions" insurance policy
currently maintained by Seller through May 15, 2001. In the event that the
Surviving Corporation is unable to maintain such insurance, the Surviving
Corporation will use its best efforts to procure similar insurance which shall
cover all potential claims against Seller until and including the Effective
Date.
(f) This Section 5.11 (i) will survive any termination of this
Agreement and the consummation of the Merger at the Effective Time, (ii) is
intended to benefit Seller, the Surviving Corporation and the Indemnified
Parties, and (iii) will be binding on all successors and assigns of the
Surviving Corporation. If Buyer or the Surviving Corporation or any of their
respective successors or assigns (x) consolidates with or merges into any other
person or entity and shall not be the continuing or surviving person of such
consolidation or merger or (y) transfers all or substantially all of its
properties and assets to any person or entity, then and in each such case,
proper provision shall be made so that such successors or assigns of Buyer or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.11.
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5.12 Tax-Free Reorganization. Buyer and Seller will each use its
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368 of the Code. Buyer and Seller
will each make available to the other party and their respective legal counsel
copies of all returns requested by the other party.
5.13 Seller Employees; Seller Employee Benefits. Buyer and Seller will each
use their respective best efforts to retain for the benefit of the Surviving
Corporation all employees of Seller determined by both Buyer and Seller to be
necessary to Seller's operations. Subject to being able to do so consistently
with applicable laws, after the Effective Date, Buyer will use its commercially
reasonable efforts to cause the Surviving Corporation to provide to the
employees of Seller employee benefits comparable to those under the existing
Seller plans generally available to Seller employees.
5.14 Reports Under the 1934 Act. With a view to making available to the
Seller Stockholders the benefits of Rule 144 promulgated under the Securities
Act of 1933 (the "Act") and any other rule or regulation of the SEC that may at
any time permit a holder to sell securities of Buyer to the public without
registration, Buyer agrees to use its best efforts to:
(a) make and keep public information regarding Buyer available, within
the meaning of Rule 144, so long as the Seller Stockholders own restricted
securities of Buyer;
(b) file with the SEC in a timely manner all reports and other
documents required of Buyer under the Act and the Securities Exchange Act of
1934 (the "1934 Act") and
(c) furnish to any Selling Stockholder upon request (i) a written
statement by Buyer that it has complied with the reporting requirements of Rule
144, and of the Act and the 1934 Act, and (ii) a copy of the most recent annual
or quarterly report of, and such other reports and documents filed by Buyer with
the SEC as may be reasonably requested in availing any such Selling Stockholder
to take advantage of any rule or regulation of the SEC permitting the selling of
any such securities without registration.
5.15 Nasdaq Listing. Buyer agrees to apply for authorization of listing on
Nasdaq the shares of Buyer Common Stock issuable, and those required to be
reserved for issuance, in connection with this Agreement, upon official notice
of issuance.
5.16 Blue Sky Laws. Buyer shall take such steps as may be reasonably
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of Buyer Common Stock pursuant hereto;
provided, however, that this shall not require Buyer to file a consent to
service of process in any jurisdiction. The Seller Stockholders shall use their
best efforts to assist Buyer to comply with the securities and blue sky laws of
all jurisdictions which are applicable in connection with the issuance of Buyer
Common Stock pursuant hereto.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted, and the Merger shall have been duly approved, by the requisite vote
under applicable law by the Seller Stockholders.
(b) Board of Director Approval. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by the Board
of Directors of Buyer.
(c) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(d) Litigation. The absence of any pending or threatened litigation by
or against Buyer or Seller or other contingent liabilities or obligations, other
than disclosed, which could prevent the closing of the Merger or materially
adversely affect Buyer's or Seller's business.
(e) Employment Agreement. Buyer and Edwards shall have each executed
and delivered an Employment Agreement between such parties, in the form set
forth as Exhibit A hereto.
(f) Third Party Consents. Any necessary consents or waivers by third
parties to the Merger shall have been obtained.
(g) Escrow Agreement. The Seller Stockholders shall have received from
Buyer, and the Buyer shall have received from Selling Stockholders, an executed
copy of the Escrow Agreement among Vizacom, Rennaissance and the Seller
Stockholders, among others, in the form set forth as Exhibit H hereto (the
"Escrow Agreement"), providing for, among other things, the deposit with the
Escrow Agent (as defined in the Escrow Agreement) by the Seller Stockholders of
one-half of the Exchange Stock to be received by the Seller Stockholders
pursuant hereto (the "Escrow Stock").
6.2 Additional Conditions to Obligations of Seller. The obligations of
Seller to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Effective Time of each of the following conditions, any of
which may be waived, in writing, exclusively by Seller:
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(a) Representations and Warranties. The representations and warranties
of Buyer and Merger Sub contained in this Agreement shall be true and correct on
and as of the Effective Time, except for changes contemplated by this Agreement
and except for those representations and warranties which address matters only
as of a particular date (which shall remain true and correct as of such
particular date), with the same force and effect as if made on and as of the
Effective Time, except, in all such cases where the failure to be so true and
correct, would not have a Material Adverse Effect on Buyer; and Seller shall
have received a certificate to such effect signed on behalf of Buyer by the
President of Buyer;
(b) Agreements and Covenants. Buyer and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and Seller shall have received a certificate to such
effect signed on behalf of Buyer by the Chief Financial Officer of Buyer;
(c) Material Adverse Effect. No Material Adverse Effect with respect
to Buyer shall have occurred since the date of this Agreement;
(d) Legal Opinion. Seller shall have received a legal opinion from
Kaufman & Moomjian, LLC, counsel to Buyer, in the form set forth in Exhibit B
hereto.
(e) Registration Rights Agreement. The Buyer shall have executed and
delivered to each of the Seller Stockholders, a Registration Rights Agreement in
the form set forth as Exhibit C hereto.
6.3 Additional Conditions to the Obligations of Buyer and Merger Sub. The
obligations of Buyer and Merger Sub to consummate and effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
Buyer:
(a) Representations and Warranties. The representations and warranties
of Seller and the Seller Stockholders contained in this Agreement shall be true
and correct on and as of the Effective Time, except for changes contemplated by
this Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
the Effective Time, except, in all such cases where the failure to be so true
and correct, would not have a Material Adverse Effect on Seller; and Buyer and
Merger Sub shall have received a certificate to such effect signed on behalf of
Seller by the Chief Financial Officer of Seller;
(b) Agreements and Covenants. Seller and the Seller Stockholders shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the Effective Time, and the Buyer shall have received a certificate
to such effect signed on behalf of Seller by the President of Seller;
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(c) Material Adverse Effect. No Material Adverse Effect with respect
to Seller shall have occurred since the date of this Agreement;
(d) Legal Opinion. Buyer shall have received a legal opinion from
Ellenoff, Grossman, Schole & Cyruli, LLP, counsel to Seller, in the form set
forth in Exhibit D hereto;
(e) Representation Letter. Buyer shall have received from each Seller
Stockholder, a letter of representations in the form set forth in Exhibit E
hereto.
(f) Audited Financials. Buyer shall have received from Seller audited
financial statements of Seller for the fiscal years ended December 31, 1998 and
1997, audited by Richard A. Eisner & Co., LLP and unaudited interim financial
statements for the nine-month period ended September 30, 1999.
(g) Stockholder Releases. Buyer shall have received from each Seller
Stockholder, a release relating to any and all claims of ownership or
distribution of proceeds from the Merger in the form set forth as Exhibit F
hereto.
(h) Lockup Agreements. Buyer shall have received from each Seller
Stockholder, an executed copy of the Lock-up Agreement in the form set forth as
Exhibit G hereto.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of the Merger by
the stockholders of Buyer and Seller:
(a) by mutual written consent duly authorized by the Boards of
Directors of Buyer and Seller;
(b) by either Seller or Buyer, if the Merger shall not have been
consummated by April 30, 2000; provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a breach of this Agreement;
(c) by either Seller or Buyer, if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (an "Order"), in any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree or ruling is final and
nonappealable;
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(d) by either Seller or Buyer, if the required approvals of the
stockholders of Seller and Buyer contemplated by this Agreement shall not have
been obtained by reason of the failure to obtain the required vote upon a vote
taken at a meeting of stockholders duly convened therefor or at any adjournment
thereof; provided, however, that the right to terminate this Agreement under
this Section 7.1(d) shall not be available to any party where the failure to
obtain stockholder approval of such party shall have been caused by the action
or failure to act of such party in breach of this Agreement;
(e) by Seller, upon a material breach of any representation, warranty,
covenant or agreement on the part of Buyer set forth in this Agreement, or if
any representation or warranty of Buyer shall have become untrue in any material
respect, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue; provided, that,
if such inaccuracy in Buyer's representations and warranties or breach by Buyer
is curable by Buyer through the exercise of its commercially reasonable efforts
within fifteen days of the time such representation or warranty shall have
become untrue or such breach, then Seller may not terminate this Agreement under
this Section 7.1(e) during such fifteen-day period if Buyer continues to
exercise such commercially reasonable efforts;
(f) by Buyer, upon a material breach of any representation, warranty,
covenant or agreement on the part of Seller set forth in this Agreement, or if
any representation or warranty of Seller shall have become untrue in any
material respect, in either case such that the conditions set forth in Section
6.3(a) or Section 6.3(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue;
provided, that, if such inaccuracy in the Company's representations and
warranties or breach by Seller is curable by Seller through the exercise of its
commercially reasonable efforts within fifteen days of the time such
representation or warranty shall have become untrue or such breach, then Buyer
may not terminate this Agreement under this Section 7.1(f) during such
fifteen-day period if Seller continues to exercise such commercially reasonable
efforts;
(g) by Seller, if there shall have occurred any Material Adverse
Effect with respect to Buyer since the date of this Agreement;
(h) by Buyer, if there shall have occurred any Material Adverse Effect
with respect to Seller since the date of this Agreement;
7.2 Notice of Termination; Effect of Termination.
Any termination of this Agreement under Section 7.1 above will be
effective immediately upon the delivery of written notice of the terminating
party to the other parties hereto. In the event of the termination of this
Agreement as provided in Section 7.1, this Agreement shall be of no further
force or effect, except (i) as set forth in this Section 7.2, Section 7.3 and
Article 8, each of which shall survive the termination of this Agreement, (ii)
nothing herein shall relieve any party from liability for any willful breach of
this Agreement, and (iii) no termination of this Agreement shall affect the
obligations of the parties contained in
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Section 5.2(b) hereof, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
7.3 Fees and Expenses. All fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, whether or not the Merger is consummated.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification.
(a) From and after the Closing, Buyer will indemnify Seller and the
Seller Stockholders, and their respective officers, directors and stockholders,
against, and hold Seller and the Seller Stockholders, and their respective
officers, directors and stockholders, harmless from, any and all liability,
damage, deficiency, loss, cost or expense (including reasonable attorneys' fees
and expenses) that are based upon or that arise out of, subject to Section 8.2
hereof, any misrepresentation or any breach of any representation or warranty or
any material breach of or default in any covenant made by Buyer herein.
(b) Seller and the Seller Stockholders, jointly and severally, will
indemnify Buyer, its officers, directors and stockholders, against, and hold
Buyer, its officers, directors and stockholders, harmless from, any and all
liability, damage, deficiency, loss, cost or expense (including reasonable
attorneys' fees and expenses) that are based upon or that arise out of, subject
to Section 8.2 hereof, any misrepresentation or any breach of any representation
or warranty or any material breach of or default in any covenant made by Seller
or the Seller Stockholders herein.
(c) Each party entitled to indemnification under this Agreement (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
becomes aware of any claim by a third party for which indemnification is
available hereunder, the delivery of which notice shall require the Indemnifying
Party (at its expense) to assume the defense of any claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be reasonably
satisfactory to the Indemnified Party, and the Indemnified Party may participate
in such defense, but only at such Indemnified Party's expense, and provided
further, that the omission by any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its indemnification
obligations under this Agreement except to the extent that such Indemnifying
Party is irreparably damaged as a result of the failure to give notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to the entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability with respect to such claim or litigation.
Notwithstanding the foregoing, the Indemnified Party shall have the
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right at all times to take over and assume control of the defense,
settlement, negotiations or lawsuit relating to any claim or demand, provided,
however, that if the Indemnified Party does so take over and assume control, the
amount of the indemnity by the Indemnifying Party shall be limited to the amount
which the Indemnifying Party has immediately prior to such time indicated it
would be willing to pay to adjust and settle such claim or demand. In the event
that the Indemnifying Party does not accept the defense of any matter as above
provided, the Indemnified Party shall have the full right to defend against any
such claim or demand, and shall be entitled to settle or agree to pay in full
such claim or demand, in its sole discretion, and all costs and expenses
relating thereto (including without limitation legal fees and expenses) shall be
borne by the Indemnifying Party. In any event, the Buyer, Seller and the Seller
Stockholders shall cooperate in the defense of such action and the records of
each shall be available to the other with respect to such defense.
8.2. Time and Manner of Claims.
Buyer on one hand, Seller and the Seller Stockholders, on the other hand,
shall be liable for damages arising from its or his misrepresentations, breaches
or defaults under Section 8.1 only to the extent that notice of a claim therefor
is asserted by the other in writing and delivered prior to May 15, 2001, except
that the Seller and each Seller Stockholder shall be liable for damages arising
from its or his misrepresentations, breaches or defaults pursuant to (a) Section
2.8 if a notice of claim relating thereto is delivered on or prior to October
31, 2007, and (b) Sections 2.2 or 2.3 at any time whatsoever. Any notice of a
claim by reason of any of the representations and warranties contained in this
Agreement shall state the representation or warranty with respect to which the
claim is asserted. The representations, warranties, covenants, agreements and
indemnities contained in this Agreement shall survive the execution and delivery
of this Agreement, any examination by or on behalf of such parties, and the
completion of the transactions contemplated hereby.
8.3 Limitation on Claims.
(a) Notwithstanding anything contained in this Agreement to the contrary,
(i) neither the Seller and the Seller Stockholders, on one hand, nor Buyer, on
the other hand, shall be entitled to claim for the breach of any representation,
warranty, covenant or agreement set forth herein except to the extent that the
aggregate amount of its present claims in respect of (A) such breaches, and (B)
all prior claims for breaches of representations, warranties, covenants and
agreements hereunder, exceeds an aggregate of $75,000 (other than with respect
to a breach of Section 2.2, 2.3, 2.8, 3.2 or 3.3, the last sentence of Section
2.25, or with respect to any liability in excess of the amounts set forth on
Schedule 4.1, for which there shall be no minimum), at which time the claiming
party shall be entitled to claim the full amount of its damages for all breaches
by the other parties hereto of such representations warranties, covenants and
agreements; (ii) the aggregate liability hereunder of either the Buyer or the
Seller Stockholders shall not exceed the lesser of (A) $1.2 million (other than
for any misrepresentation or breach of Section 2.2, 2.3, 2.8, 3.2 or 3.3 hereof,
the liability for which shall be unlimited) or (B) 75% of the fair market value
of the shares of Buyer Common Stock issued to the Seller Stockholders pursuant
to this Agreement, as of the date of payment of any indemnification claim under
this
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Article VIII (other than for any misrepresentation or breach of Section
2.2, 2.3, 2.8, 3.2 or 3.3 hereof, the liability for which shall be unlimited).
(b) At the Closing, Seller Stockholders shall deposit with the Escrow
Agent, the Escrow Stock. In the event Seller Stockholders are obligated to make
a payment(s) to Buyer pursuant to a claim for indemnification by Buyer pursuant
to this Article VIII, then Seller Stockholders may elect to make such payment
either in cash or by delivery to Buyer of a promissory note ("Note") in the form
set forth as Exhibit I, which Note shall be in the principal amount of such
payment, shall have a 30-day term, bear interest at the prime rate then in
effect for Citibank, N.A. and provide for the makers to be jointly and severally
liable for payment. Upon delivery of such payment (by cash or Note), Seller
Stockholders shall be entitled to have released from escrow, in accordance with
the terms of the Escrow Agreement, such number of shares of Escrow Stock as
equals the quotient of (i) 133% of the amount of such payment, divided by (ii)
the closing price of the Buyer Common Stock on NASDAQ (or such other securities
market which is the principal trading market for the Buyer Common Stock) on the
day preceding the date of the payment.
ARTICLE IX
GENERAL PROVISIONS
9.1 Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented
without the written consent of each of the parties hereto. Any of the Buyer,
Merger Sub, Seller and the Seller Stockholders may, by written notice to the
others, (i) waive any of the conditions to its obligations hereunder or extend
the time for the performance of any of the obligations or actions of the other,
(ii) waive any inaccuracies in the representations of the other contained in
this Agreement or in any documents delivered pursuant to this Agreement, (iii)
waive compliance with any of the covenants of the other contained in this
Agreement and (iv) waive or modify performance of any of the obligations of the
other. No action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action or compliance with any
representation, warranty, condition or agreement contained herein. Waiver of the
breach of any one or more provisions of this Agreement shall not be deemed or
construed to be a waiver of other breaches or subsequent breaches of the same
provisions.
9.2. Notices. All notices, demands, requests, demands and other
communications required or otherwise given under this Agreement shall be in
writing and shall be deemed to have been duly given if: (i) delivered by hand
against written receipt therefor, (ii) forwarded by a third party company or
governmental entity providing delivery services in the ordinary course of
business which guarantees delivery the following business day, (iii) mailed by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
transmitted by facsimile transmission electronically confirmed for receipt, in
full, by the other party no later than 5:00 pm, local time, on the date of
transmission, addressed as follows:
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If to Buyer, to: Vizacom Inc.
Glenpointe Center East
300 Frank W. Burr Boulevard
Box 18, 7th Floor
Teaneck, New Jersey 07666
Attention: President
Facsimile: (201) 928-1003
with a copy to: Kaufman & Moomjian, LLC
50 Charles Lindbergh Boulevard - Suite 206
Mitchel Field, New York 11553
Attention: Neil M. Kaufman, Esq.
Facsimile: (516) 222-5110
If to Merger Sub, to: RCAC Acquisition Corp.
Glenpointe Center East
300 Frank W. Burr Boulevard
Box 18, 7th Floor
Teaneck, New Jersey 07666
Attention: President
Facsimile: (201) 928-1003
with a copy to: Kaufman & Moomjian, LLC
50 Charles Lindbergh Boulevard - Suite 206
Mitchel Field, New York 11553
Attention: Neil M. Kaufman, Esq.
Facsimile: (516) 222-5110
If to Seller, to: Renaissance Multimedia
90 John Street
New York, New York 10038
Attention: President
Facsimile: (212) 619-0054
with a copy to: Ellenoff, Grossman, Schole & Cyruli, LLP
370 Lexington Avenue
19th Floor
New York, New York 10017
Attention: Paul Goodman, Esq.
Facsimile: (212) 697-5808
or, if to the Seller Stockholders, to the respective addresses set forth on
Schedule A hereto, with a copy to Ellenoff, Grossman, Schole & Cyruli, LLP, 370
Lexington Avenue, 19th Floor, New York, New York 10017; Attention: Paul Goodman,
Esq.; Facsimile: (212) 697-5808; or, in the case of any of the parties hereto,
at such other address as such party shall have furnished to each
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of the other parties hereto in accordance with this Section 9.2. Each such
notice, demand, request or other communication shall be deemed given (i) on the
date of such delivery by hand, (ii) on the first business day following the date
of such delivery to the overnight delivery service or facsimile transmission, or
(iii) three business days following such mailing.
9.3 Interpretation; Knowledge.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to "the business of" an entity, such
reference shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. Reference to the subsidiaries of an entity shall be
deemed to include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "knowledge" means, with
respect to any matter in question, that the executive officers of Seller or
Buyer, or the Seller Stockholders, as the case may be, have actual knowledge of
such matter.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.5 Entire Agreement. This Agreement and the documents and instruments and
other agreements among the parties hereto as contemplated by or referred to
herein, including the information set forth in the schedules to this Agreement,
(a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof and (b) are not intended to confer upon any other person any rights or
remedies hereunder, except as set forth herein.
9.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
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9.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or federal court within the State of New York, in connection with any
matter based upon or arising out of this Agreement or the matters contemplated
herein, agrees that process may be served upon them in any manner authorized by
the laws of the State of New York for such persons and waives and covenants not
to assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
9.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties.
9.11 Further Assurances. Each party hereto covenants and agrees with all
other parties hereto to promptly execute, deliver, file and/or record such
agreements, instruments, certificates and other documents and to do and perform
such other and further acts and things as any other party hereto may reasonably
request or as may otherwise be necessary or proper to consummate and perfect the
transactions contemplated hereby.
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IN WITNESS WHEREOF, Buyer, Merger Sub, Seller and each Seller Stockholder
have caused this Agreement to be signed by themselves or their duly authorized
respective officers, all as of the date first written above.
VIZACOM INC.
By: /s/ Mark E. Leininger
Mark E. Leininger
President
RENAISSANCE COMPUTER ART CENTER, INC.
D/B/A RENAISSANCE MULTIMEDIA
By: /s/ Andrew Edwards
Andrew Edwards
President
RCAC ACQUISITION CORP.
By: /s/ Mark E. Leininger
Mark E. Leininger
President
SELLER STOCKHOLDERS
/s/ Andrew Edwards
Andrew Edwards
/s/ Anthony Del Monte
Anthony Del Monte
RIBON, INC.
By: /s/ Amelia Rivera
Name: Amelia Rivera
Title: President
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of February 15, 2000 (the "Escrow Agreement"),
by and among VIZACOM INC., a Delaware corporation ("Vizacom"), RENAISSANCE
COMPUTER ART CENTER INC., a New York corporation doing business as Renaissance
Multimedia ("Renaissance"), THE PERSONS WHOSE SIGNATURES APPEAR ON THE SIGNATURE
PAGE HEREOF (individually, a "Stockholder" and collectively, the
"Stockholders"), being the owners of all the issued and outstanding capital
stock of Renaissance, ANDREW EDWARDS, an individual residing at 355 South End
Avenue, Apt. 23F, New York, New York 10280, (the "Stockholders' Representative),
and KAUFMAN & MOOMJIAN, LLC, as escrow agent (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Vizacom, Renaissance and the Stockholders have entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of February 15,
2000, providing for, among other things, the exchange by the Stockholders and
Vizacom of all the outstanding capital stock of Renaissance for 449,870 shares
of the common stock, par value $.001 per share, of Vizacom (the "Exchange
Stock"); and
WHEREAS, Section 6.3(i) of the Merger Agreement requires that Vizacom,
Renaissance and the Stockholders agree to enter into this Escrow Agreement with
the Escrow Agent for the purpose of securing the indemnity obligations of the
Stockholders under Article VIII of the Merger Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, Vizacom, Renaissance, the Stockholders and the Escrow Agent agree
that all capitalized terms used herein without definition shall have the meaning
ascribed to them in the Merger Agreement and further agree as follows:
ARTICLE I. ESCROWED PROPERTY
1.01 Each of the Stockholders has this day delivered to the Escrow Agent
that number of shares of Exchange Stock set forth next to his signature on the
signature page hereof, which shares of Exchange Stock aggregate 224,935 shares
(hereinafter referred to collectively as the "Escrowed Property"), together with
stock powers duly executed in blank.
1.02 The Escrow Agent acknowledges receipt of negotiable certificates for
the Escrowed Property issued in the names of each of the Stockholders with blank
stock powers attached duly executed by the Stockholders, and the Escrow Agent
agrees to hold or dispose of
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the Escrowed Property and any other collateral in accordance with the terms of
this Escrow Agreement.
1.03 All dividends and other distributions (whether of cash, securities or
other property) upon or in respect of any of the Escrowed Property and all
property receivable in substitution or exchange therefor shall be included with
and constitute part of the Escrowed Property.
1.04 All shares of Exchange Stock included in the Escrowed Property shall
be voted in accordance with the instructions of the Stockholders'
Representative.
ARTICLE II. APPLICATION OF ESCROWED PROPERTY
2.01 The Escrow Agent will hold the Escrowed Property in its possession
under the provisions of this Escrow Agreement until authorized hereunder to
deliver the Escrowed Property or any specified portion thereof as set forth in
Section 2.02 or Section 2.03.
2.02 The Escrow Agent shall distribute the amounts deposited as Escrowed
Property
(i) promptly upon delivery of and in accordance with a joint written notice
of Vizacom and the Stockholders' Representative providing instructions therein,
(ii) if the Escrow Agent receives a written notice (a "Unilateral Notice")
from Vizacom or the Stockholders' Representative providing instructions to
release Escrowed Property, the Escrow Agent shall promptly after receipt of such
Unilateral Notice deliver a copy of such Unilateral Notice to the other party.
If during the five business day period following delivery to the other party of
such copy of the Unilateral Notice, the Escrow Agent has not received from the
other party a written objection to such release, then the Escrow Agent shall
release such Escrowed Property in accordance with the instructions in the
Unilateral Notice to the extent not objected to by the other party. If and to
the extent an objection to such release of Escrowed Property has been received
by the Escrow Agent from the other party within five business days after
delivery of the Unilateral Notice to such other party, distribution of any of
the disputed Escrowed Property shall be made only in accordance with clause (i)
above or clauses (iii) and (iv) below),
(iii) promptly upon delivery of and in accordance with written notice of
Vizacom or the Stockholders' Representative providing instructions therein and
certifying that the dispute with respect to any Escrowed Property has been
determined and resolved by entry of a final non-appealable order, decree or
judgment by a court of competent jurisdiction in the State of New York (the time
for appeal therefrom having expired and no appeal having been perfected), or
consent to entry of any judgment concerning a claim, which notice shall be
accompanied by a copy of any such order, decree or judgment certified by the
clerk of such court, or
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(iv) promptly upon delivery of a joint written notice of Vizacom and the
Stockholders' Representative that the Stockholders have made a payment to
Vizacom (in cash or by promissory note) of a claim for indemnification pursuant
to Article VIII of the Merger Agreement, together with proof of such payment, in
which case the Escrow Agent shall release to the Stockholders in the amounts
directed by the Stockholders' Representative in accordance with the instructions
in such joint notice an aggregate number of shares of Escrow Stock held as
Escrowed Property as equals the quotient of (i)133% of the amount of such
payment, divided by (ii) the closing price of the Buyer Common Stock on NASDAQ
(or such other securities market which is the principal trading market for the
shares of Exchange Stock) on the business day preceding the date of such
payment.
2.03 In the event that the Escrow Agent has not received notice of a claim
for indemnification under Article VIII of the Merger Agreement on or prior to
May 15, 2001 (the "Termination Date"), which remains unresolved on the
Termination Date, the Escrow Agent shall distribute the Escrowed Property to the
Stockholders' Representative or as the Stockholders' Representative otherwise
directs. In the event that on the Termination Date there exists an unresolved
claim, then in such event the Escrow Agent shall reserve from the Escrowed
Property an amount of shares of Exchange Stock held as Escrowed Property equal
to 120% the amount of the claim calculated in accordance with the provisions of
clause (iv) of Section 2.02 above based on May 15, 2001 as the pricing date, and
shall distribute any remaining balance as directed by the Stockholders'
Representative. Upon the resolution of any such unresolved claim pursuant to
Section 2.02 above, the Escrow Agent shall distribute the Escrowed Property
pursuant to the provisions of Section 2.02 above.
ARTICLE III. RELATED PROVISIONS
3.01 Upon the release and delivery of any amount of the Escrowed Property
to any party pursuant to this Escrow Agreement, the Escrow Agent shall also
release and deliver to such party the pro rata portion of the interest, other
income or property so released, up to the date of such release and delivery,
attributable to such amount of the Escrowed Property being so released and
delivered.
3.02 In connection with the delivery of written notices to the Escrow Agent
by Vizacom, the Stockholders' Representative, or both such parties, each such
written notice shall be signed by an officer of Vizacom or the Stockholders'
Representative, or both, as appropriate, and shall accurately set forth in each
case:
(a) the number of Shares that the Escrow Agent is thereby directed to
distribute out of the Escrowed Property;
(b) the party to the Escrow Agent is thereby directed to distribute
such amount; and
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(c) the date upon which the Escrow Agent is directed to distribute
such amount; and such officer of Vizacom or the Stockholders'
Representative, or both, as the case may be, shall certify as to the
compliance with such notice and the contents thereof.
The Escrow Agent may rely fully on the provisions set forth in any such
written notice which on its face complies with the provisions of Article II and
this Section 3.02.
ARTICLE IV. SETTLEMENT OF DISPUTES
4.01 Any dispute which may arise between Vizacom and the Stockholders'
Representative under this Escrow Agreement with respect to (a) the delivery,
ownership and/or right to possession of the Escrowed Property or any portion
thereof, (b) the facts upon which the Escrow Agent's determinations hereunder
are based, (c) the duties of the Escrow Agent hereunder or (d) any other
questions arising under this Escrow Agreement, shall be settled either by (i) a
joint written notice of Vizacom and the Stockholders' Representative providing
instructions to the Escrow Agent therein or (ii) by entry of a final order,
decree or judgment by a court of competent jurisdiction in the State of New York
(the time for appeal therefrom having expired and no appeal having been
perfected).
4.02 The Escrow Agent shall be under no duty to institute or defend any
such proceedings and none of the costs and expenses of any such proceeding shall
be borne by the Escrow Agent. In the event the terms of a settlement of a
dispute hereunder increase the duties or liabilities of the Escrow Agent
hereunder and the Escrow Agent has not participated in such settlement so as to
be bound thereby, then such settlement shall be effective as to the Escrow Agent
in respect of such increase in its duties or liabilities only upon the Escrow
Agent's written assent thereto. Prior to the settlement of any disputes as
provided in this Article IV, the Escrow Agent is authorized and directed to
retain in its possession, without liability to anyone, such portion of the
Escrowed Property which is the subject of or involved in the dispute.
ARTICLE V. CONCERNING THE ESCROW AGENT.
5.01 The Escrow Agent shall be entitled to reasonable compensation for its
services hereunder and shall be reimbursed for all reasonable expenses,
disbursements and advances (including reasonable attorneys' fees and expenses)
incurred or made by it in performance of its duties hereunder. Such reasonable
compensation, disbursement, expenses and advances shall be borne by Vizacom and
shall be paid promptly upon request by the Escrow Agent.
5.02 The Escrow Agent may resign and be discharged from its duties
hereunder at any time by giving notice (a "Resignation Notice") of such
resignation to Vizacom and Stockholders' Representative specifying a date (not
less than 30 days after the giving of such notice) when such resignation shall
take effect. Promptly after such Registration Notice, (a) if as of the date of
the Resignation Notice, Neil M. Kaufman is not a member of the Escrow agent,
then any law firm of which Mr. Kaufman is a member or partner shall serve as
successor Escrow Agent, if such firm is willing to so serve, or (b) in all other
events, Vizacom and the Stockholders' Representative shall appoint a mutually
agreeable successor Escrow
4
<PAGE>
Agent, such successor Escrow Agent to become Escrow Agent hereunder upon
the resignation date specified in such notice. If Vizacom and the Stockholders'
Representative are unable to agree upon a successor Escrow Agent with 30 days
after such notice, the Escrow Agent shall have the right to petition a court of
competent jurisdiction to appoint a successor, and the Escrow Agent shall
continue to serve until its successor accepts the escrow and receives the
Escrowed Property.
5.03 The Escrow Agent undertakes to perform only such duties as are
specifically set forth herein. The Escrow Agent acting or refraining from acting
in good faith shall not be liable for any mistake of fact or error of judgment
by it or for any acts or omissions by it of any kind unless caused by negligence
or willful misconduct, and shall be entitled to rely, and shall be protected in
doing so, upon (a) any written notice, instrument or signature believed by it to
be genuine and to have been signed or presented by the proper party or parties
duly authorized to do so, and (b) the advice of counsel (which may be of the
Escrow Agent's own choosing, so long as such counsel is not counsel to Vizacom
or the Stockholders' Representative). The Escrow Agent shall have no
responsibility for the contents of any writing submitted to it hereunder and
shall be entitled in good faith to rely without any liability upon the contents
thereof. The Escrow Agent has no responsibilities under, and shall be deemed to
have no knowledge of, the provisions of the Merger Agreement.
5.04 The Stockholders and Vizacom, jointly and severally, agree to
indemnify the Escrow Agent and hold it harmless against any and all liabilities
incurred by it hereunder as a consequence of such indemnifying party's action
and and the Stockholders and Vizacom, jointly and severally, further agree to
indemnify the Escrow Agent and hold it harmless against any and all losses,
costs, fees and expenses incurred by the Escrow Agent which are not a
consequence of its actions or failure to act, except, in either case for
liabilities incurred by the Escrow Agent resulting from its own gross negligence
or willful misconduct. The indemnification provided pursuant to this section
shall survive the resignation of the Escrow Agent or the termination of this
Escrow Agreement.
5.05 In the event the Escrow Agent becomes involved in any litigation or
dispute by reason hereof, it is hereby authorized to deposit with the clerk of a
court of competent jurisdiction the Escrowed Property held by it pursuant hereto
and, thereupon, shall stand fully relieved and discharged of any further duties
hereunder. Also, in the event the Escrow Agent is threatened with litigation by
reason hereof, it is hereby authorized to interplead all interested parties in
any court of competent jurisdiction and to deposit with the clerk of such court
the Escrowed Property held by it pursuant hereto and, thereupon, shall stand
fully relieved and discharged of any further duties hereunder.
5.06 In the event of any claim, dispute or litigation concerning the Merger
Agreement or this Escrow Agreement, Kaufman & Moomjian, LLC or any successor
firm or successor Escrow Agreement shall nevertheless have the unqualified right
to represent Vizacom, its
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officers and directors in respect of any such claim, dispute or litigation,
notwithstanding that it is acting as Escrow Agent hereunder.
ARTICLE VI. STOCKHOLDERS' REPRESENTATIVE
6.01 The Stockholders, and each of them, hereby appoint Andrew Edwards (the
"Stockholders' Representative") as their agent to (i) execute and deliver this
Escrow Agreement on behalf of the Stockholders and to represent, act for and on
behalf of, and bind each of the Stockholders in the performance of all of their
obligations arising from or relating to this Escrow Agreement, including,
without limitation (a) the execution and delivery of any document, certificate
or agreement required under this Escrow Agreement to be delivered by the
Stockholders; (b) the negotiation and settlement of claims of Vizacom in respect
of the Escrowed Property and for indemnification pursuant to Article VIII of the
Merger Agreement and the making of any objection to such claims; and (c) the
representation of the Stockholders at any arbitration or litigation in respect
of the foregoing; (ii) give and receive notices and receive service of process
under or pursuant to this Escrow Agreement; and (iii) to represent, act for, and
bind each of the Stockholders in the performance of all of their obligations
arising from or related to this Escrow Agreement and the indemnification
provisions of Article VIII of the Merger Agreement. The Stockholders'
Representative hereby accepts such appointment.
6.02 In the event that the Stockholders' Representative shall die, become
incapacitated, resign or otherwise by unable to fulfill his duties hereunder, a
successor Stockholders' Representative shall be selected by the Stockholders
entitled to a majority of the Escrowed Property (to the extent not subject to
any claim under Article VIII of the Agreement) as Merger soon as reasonably
practicable thereafter. If the Stockholders desire to remove or replace the
Stockholders' Representative for any reason, any such Stockholders'
Representative may be so removed or replaced by the Stockholders entitled to
receive a majority of such Escrowed Property. Any decision, act, consent or
instruction of the Stockholders' Representative shall constitute a decision of
the Stockholders and shall be conclusive and binding upon the Stockholders, and
Vizacom and the Escrow Agent may rely upon any such decision, act, consent or
instruction of the Stockholders' Representative as being the decision, act,
consent or instruction of the Stockholders.
ARTICLE VII. MISCELLANEOUS
7.01 This Escrow Agreement will be binding upon, inure to the benefit of,
and be enforceable by the respective successors and assigns of the parties
hereto, but neither this Escrow Agreement, nor any of the rights, interest or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties, except with respect to the Escrow
Agent as provided in Article V hereof.
7.02 This Escrow Agreement contains the entire understanding of the parties
with respect to this subject matter, and may be amended only by a written
instrument duly executed by Vizacom, Renaissance and the Stockholders'
Representative.
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7.03 All notices, consents, requests, instructions, approvals and other
communications provided for herein and all legal process in regard hereto shall
be validly given, made or served, if in writing and delivered personally or sent
by registered or certified mail (return receipt requested), postage prepaid,
recognized national or international overnight delivery service or by facsimile
transmission electronically confirmed:
if to Vizacom:
Vizacom, Inc.
Glenpointe Center East
300 Frank W. Burr Boulevard
Box 18, 7th Floor
Teaneck, New Jersey 07666
Attn.: President
with a copy to:
Neil M. Kaufman, Esq.
Kaufman & Moomjian, LLC
50 Charles Lindbergh Boulevard
Suite 206
Mitchel Field, New York 11553
Fax: (516) 222-5110
if to Renaissance, the Stockholders, or the Stockholders'
Representative, to the Stockholder's Representative:
Mr. Andrew Edwards
c/o Renaissance Multimedia
90 John Street
New York, New York 10038
with a copy to:
Paul Goodman, Esq.
Ellenoff, Grossman, Schole & Cyruli, LLP
370 Madison Avenue
New York, New York 10017
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if to the Escrow Agent:
Kaufman & Moomjian, LLC
50 Charles Lindbergh Boulevard
Suite 206
Mitchel Field, New York 11553
Fax: (516) 222-5110
Attn.: Neil M. Kaufman, Esq.
or, in each case, at such other address as may be specified in writing to the
other parties. Each such notice, demand, request or other communication shall be
deemed given (i) on the date of such delivery by hand or facsimile transmission
electronically confirmed, (ii) on the first business day following the date of
such delivery to an overnight delivery service, or (iii) three business days
following certified mailing.
7.04 This Escrow Agreement shall be governed by, and construed and enforced
in accordance with the laws of the State of New York, without regard to its
conflicts of law rules.
7.05 This Escrow Agreement may be executed simultaneously in counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
7.06 This Escrow Agreement shall remain in full force and effect until the
later of the Termination Date or the date the Escrow Agent shall have delivered
all of the Escrowed Property in its possession in accordance with the terms
hereof.
7.07 Article headings contained herein are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Escrow
Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Escrow Agreement has been duly executed and
delivered by Vizacom, Renaissance, the Stockholders and the Escrow Agent on the
date first above written.
VIZACOM, INC.
By: /s/ Mark E. Leininger
Mark E. Leininger
President & CEO
RENAISSANCE COMPUTER ART
CENTER INC.
By: /s/ Andrew Edwards
Andrew Edwards
President
STOCKHOLDERS:
Number of Shares of
Escrow Stock
67,480.5 /s/ Andrew Edwards
Andrew Edwards
11,246.5 /s/ Anthony Del Monte
Anthony Del Monte
146,208 RIBON, INC.
By: /s/ Amelia Rivera
Name: Amelia Rivera
Title: President
<PAGE>
STOCKHOLDERS'
REPRESENTATIVE:
/s/ Andrew Edwards
Andrew Edwards
ESCROW AGENT:
KAUFMAN & MOOMJIAN, LLC
By: /s/ Neil M. Kaufman
Neil M. Kaufman
Member
LOCK-UP AGREEMENT
This AGREEMENT (the "Agreement") is made as of the 15th day of February,
2000, between the undersigned former stockholder (the "Undersigned") of
Renaissance Computer Art Center, Inc. d/b/a Renaissance Multimedia, a New York
corporation ("Renaissance") and Vizacom Inc., a Delaware corporation (the
"Company").
NOW, THEREFORE, for good and valuable consideration, including the
agreements by certain other former stockholders of Renaissance to be similarly
bound, the sufficiency and receipt of which consideration are hereby
acknowledged, the Undersigned agrees as follows:
1. Background. The Undersigned acknowledges that the Company has required,
and Renaissance has agreed to assist the Company in obtaining, agreements from
all former stockholders of Renaissance, to refrain from selling certain
quantities of securities of the Company for a period of up to twelve (12) months
following the completion of the merger (the "Merger") of Renaissance with and
into RCAC Acquisition Corp. ("RCAC"), a wholly owned subsidiary of the Company,
pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated
February 15, 2000, among the Company, Renaissance, RCAC and the Renaissance
shareholders set forth therein. In connection with Merger, the Undersigned has
deposited shares ("Escrow Shares") of Common Stock (as defined below) with an
escrow agent pursuant to an Escrow Agreement dated as of the date hereof among
the Undersigned, the Company and Kaufman & Moomjian, LLC, as escrow agent, among
others. To induce the Company to proceed with the Merger and other stockholders
of Renaissance to make similar agreements and as a condition to the closing of
the Merger, the Undersigned has entered into this Agreement.
2. Restriction. The Undersigned hereby agrees that from the closing of the
Merger to and including a date 12 months thereafter (the "Restricted Term"), the
Undersigned will not directly or indirectly, issue, offer to sell, grant an
option for the sale of, assign, transfer, pledge, hypothecate or otherwise
encumber or dispose (collectively, "Transfer") of any shares of common stock,
par value $.001 per share (the "Common Stock") or securities convertible into,
exercisable or exchangeable for or evidencing any right to purchase or subscribe
for any shares of Common Stock (either pursuant to Rule 144 under the Securities
Act of 1933, as amended, or otherwise) or dispose of any beneficial interest
therein without the prior written consent of the President of the Company,
except that the Undersigned may sell in brokerage transactions in the aggregate
(a) up to ten percent (10%) of the shares of Common Stock owned beneficially or
of record (the "Stock") during the period from six (6) months after the date
hereof (the "Closing Date") until nine (9) months thereafter and (b) an
additional ten (10%) percent of the Stock during the period from nine (9) months
after the Closing Date until twelve (12) months thereafter. The Undersigned
further agrees that the Company is authorized to place "stop orders" on its
books to prevent any transfer of securities of the Company by the Undersigned in
violation of this Agreement. Notwithstanding the foregoing, if any Escrow Shares
are released to the Undersigned during the Restricted Term in connection with
the payment of a claim for indemnification by the Company pursuant to Article
VIII of the Merger Agreement, then
<PAGE>
the foregoing limitations on the amount of shares of Common Stock which the
Undersigned may Transfer during the period referred to in clause (a) or (b)
above shall be increased, as applicable, to include the number of Escrow Shares
so released.
3. Reliance by the Company and Other Stockholders. The Undersigned
acknowledges that the Company is relying upon the agreements of the Undersigned
contained herein, and that the failure of the Undersigned to perform the
agreements contained herein could have a detrimental effect upon any proposed
offering. Accordingly, the Undersigned understands and agrees that the
Undersigned's agreements herein are irrevocable.
4. Miscellaneous.
(a) At any time, and from time to time, after the signing of this
Agreement, the Undersigned will execute such additional instruments and take
such action as may be reasonably requested by the Company to carry out the
intent and purposes of this Agreement.
(b) This Agreement shall be governed, construed and enforced in
accordance with the laws of the State of New York, except to the extent that the
securities laws of the State in which the Undersigned resides and federal
securities laws may apply.
(c) This Agreement contains the entire agreement of the Undersigned
with respect to the subject matter hereof.
(d) This Agreement shall be binding upon the Undersigned, his legal
representatives, successors and assigns.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have executed this Agreement as of the day and year first above written.
-----------------------------------
Name:
VIZACOM INC.
By:
-----------------------------------
Name:
Title:
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 15, 2000, between
Vizacom Inc., a Delaware corporation (the "Company") and each of the
stockholders of the Company set forth on the signature page hereto (the
"Stockholders").
WHEREAS, this Agreement has been entered into in connection with an
Agreement and Plan of Merger dated as of February 15, 2000 (the "Merger
Agreement"), among the Company, RCAC Acquisition Corp. and each of the Seller
Stockholders set forth on the signature page thereto and Renaissance Computer
Art Center, Inc. d/b/a Renaissance Multimedia.
NOW, THEREFORE, it is agreed as follows:
1. Defined Terms. Each of the following terms shall have the following
meanings (such definitions to be applicable to both the plural and singular of
the terms defined):
(a) Registerable Securities. The term "Registerable Securities"
shall mean any of the shares of Capital Stock of the Company, including any
shares of Common Stock or other securities received in connection with any
stock split, stock dividend, merger, reorganization, recapitalization,
reclassification or other distribution payable or issuable upon shares of
Common Stock. For the purposes of this Agreement, securities will cease to
be Registerable Securities when (A) a registration statement under the
Securities Act covering such Registerable Securities has been declared
effective and such registration statement has been effective for nine (9)
months after the expiration of the period specified in section 2(b) of the
Lock-up Agreements of even date herewith between the Company and each of
Stockholders, (B) such Registerable Securities are distributed to the
public pursuant to the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act, including, but not limited
to, Rules 144 and 144A promulgated under the Securities Act, or (C) such
Registerable Securities have been otherwise transferred and the Company, in
accordance with applicable law and regulations, has delivered new
certificates or other evidences of ownership for such securities which are
not subject to any stop transfer order or other restriction on transfer.
(b) Rightsholders. The term "Rightsholders" shall include the
undersigned, all successors and assigns of the undersigned, and all
transferees of Registerable Securities where such transfer affirmatively
includes the transfer and assignment of the rights of the transferor
Rightsholder under this Agreement with respect to the transferred
Registerable Securities.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import
<PAGE>
when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement, and
subsection, paragraph, clause, schedule and exhibit references are to this
Agreement unless otherwise specified.
(d) Capitalized terms used herein but not otherwise defined shall
have the meanings given to them in the Merger Agreement.
2. Piggy-Back Registration.
(a) If, at any time on or after the Closing Date and on or prior
to three years from the Closing Date, the Company proposes to file a
registration statement under the Securities Act with respect to an offering
by the Company or any other party of any class of equity security similar
to any Registerable Securities (other than a registration statement on Form
S-4 or S-8 or any successor form or a registration statement filed solely
in connection with an exchange offer, a business combination transaction or
an offering of securities solely to the existing stockholders or employees
of the Company), then the Company, on each such occasion, shall give
written notice (each, a "Company Piggy-Back Notice") of such proposed
filing to all of the Rightsholders owning Registerable Securities at least
20 days before the anticipated filing date of such registration statement,
and such Company Piggy-Back Notice also shall be required to offer to such
Rightsholders the opportunity to register such aggregate number of
Registerable Securities as each such Rightsholder may request. Each such
Rightsholder shall have the right, exercisable for the 10 days immediately
following the giving of the Company Piggy-Back Notice, to request, by
written notice (each, a "Holder Notice") to the Company, the inclusion of
all or any portion of the Registerable Securities of such Rightsholders in
such registration statement. The Company shall use reasonable efforts to
cause the managing underwriter(s) of a proposed underwritten offering to
permit the inclusion of the Registerable Securities which were the subject
of all Holder Notices in such underwritten offering on the same terms and
conditions as any similar securities of the Company included therein.
Notwithstanding anything to the contrary contained in this Paragraph 2(a),
if the managing underwriter(s) of such underwritten offering or any
proposed underwritten offering delivers a written opinion to the
Rightsholders of Registerable Securities which were the subject of all
Holder Notices that the total amount and kind of securities which they, the
Company and any other person intend to include in such offering is such as
to materially and adversely affect the success of such offering, then the
amount of securities to be offered for the accounts of such Rightsholders
and persons other than the Company shall be eliminated or reduced pro rata
(based on the amount of securities owned by such Rightsholders and other
persons which carry registration rights) to the extent necessary to reduce
the total amount of securities to be included in such offering to the
amount recommended by such managing underwriter(s) in its written opinion.
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<PAGE>
(b) Number of Piggy-Back Registrations; Expenses. The obligations
of the Company under this Section 2 shall be unlimited with respect to each
Rightsholder. Subject to the provisions of Section 4 hereof, the Company
will pay all Registration Expenses in connection with any registration of
Registerable Securities effected pursuant to this Section 2, but the
Company shall not be responsible for the payment of any underwriter's
discount, commission or selling concession in connection therewith.
(c) Withdrawal or Suspension of Registration Statement.
Notwithstanding anything contained to the contrary in this Section 2, the
Company shall have the absolute right, whether before or after the giving
of a Company Piggy-Back Notice or Holder Notice, to determine not to file a
registration statement to which the Rightsholders shall have the right to
include their Registerable Securities therein pursuant to this Section 2,
to withdraw such registration statement or to delay or suspend pursuing the
effectiveness of such registration statement. In the event of such a
determination after the giving of a Company Piggy-Back Notice, the Company
shall give notice of such determination to all Rightsholders and,
thereupon, (i) in the case of a determination not to register or to
withdraw such registration statement, the Company shall be relieved of its
obligation under this Section 2 to register any of the Registerable
Securities in connection with such registration and (ii) in the case of a
determination to delay the registration, the Company shall be permitted to
delay or suspend the registration of Registerable Securities pursuant to
this Section 2 for the same period as the delay in the registration of such
other securities. No registration effected under this Section 2 shall
relieve the Company of its obligation to effect any registration upon
demand otherwise granted to a Rightsholder under any other agreement with
the Company.
3. Registration Procedures.
(a) Obligations of the Company. The Company will, in connection
with any registration pursuant to Section 2 hereof, as expeditiously as
possible:
(i) prepare and file with the Commission a registration
statement under the Securities Act on any appropriate form chosen by
the Company, in its sole discretion, which shall be available for the
sale of all Registerable Securities to be included for sale in
accordance with the intended method(s) of distribution thereof set
forth in all applicable Holder Notices, and use its commercially
reasonable best efforts to cause such registration statement to become
effective as soon thereafter as reasonably practicable but in no event
more than 100 days after receipt of such notices or requests;
provided, that, (A) after such filing, the Company shall, as
diligently as practicable, provide to each such Rightsholders such
number of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus), all exhibits
thereto and documents incorporated by reference therein and such other
documents as such Rightsholder
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<PAGE>
may reasonably request in order to facilitate the disposition of the
Registerable Securities owned by such Rightsholder and included in
such registration statement; (B) the Company shall modify or amend the
registration statement as it relates to such Rightsholder as
reasonably requested by such Rightsholder on a timely basis, and shall
reasonably consider other changes to the registration statement (but
not including any exhibit or document incorporated therein by
reference) reasonably requested by such Rightsholder on a timely
basis, in light of the requirements of the Securities Act and any
other applicable laws and regulations; and (C) that the obligation of
the Company to effect such registration and/or cause such registration
statement to become effective, may be postponed for (x) such period of
time when the financial statements of the Company required to be
included in such registration statement are not available (due solely
to the fact that such financial statements have not been prepared in
the regular course of business of the Company) or (y) any other bona
fide corporate purpose, but then only for a period not to exceed 120
days;
(ii) prepare and file with the Commission such
amendments and post-effective amendments to a registration statement
as may be necessary to keep such registration statement effective for
up to nine months; and cause the related prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be
filed to the extent required pursuant to Rule 424 promulgated under
the Securities Act, during such nine-month period; and otherwise
comply with the provisions of the Securities Act with respect to the
disposition of all Registerable Securities covered by such
registration statement during the applicable period in accordance with
the intended method(s) of disposition of such Registerable Securities
set forth in such registration statement, prospectus or supplement to
such prospectus;
(iii) notify the Rightsholders whose Registerable
Securities are included in such registration statement and the
managing underwriter(s), if any, of an underwritten offering of any of
the Registerable Securities included in such registration statement,
and confirm such advice in writing, (A) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and,
with respect to a registration statement or any post-effective
amendment, when the same has become effective, (B) of any request by
the Commission for amendments or supplements to a registration
statement or related prospectus or for additional information, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of a registration statement or the initiation of any
proceedings for that purpose, (D) if at any time the representations
and warranties of the Company contemplated by clause (A) of Paragraph
3(a)(x) hereof cease to be true and correct, (E) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of any of the Registerable Securities for sale in any
jurisdiction or the initiation or threatening
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<PAGE>
of any proceeding for such purpose and (F) of the happening of any
event which makes any statement made in the registration statement,
the prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in the registration
statement or prospectus so that such registration statement,
prospectus or document incorporated by reference will not contain any
untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading;
(iv) make reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of such registration
statement at the earliest possible moment and to prevent the entry of
such an order;
(v) use reasonable efforts to register or qualify the
Registerable Securities included in such registration statement under
such other securities or blue sky laws of such jurisdictions as any
Rightsholder whose Registrable Securities are included in such
registration statement reasonably requests in writing and do any and
all other acts and things which may be necessary or advisable to
enable such Rightsholder to consummate the disposition in such
jurisdictions of such Registerable Securities; provided, that the
Company will not be required to (A) qualify generally to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this Paragraph 3(a)(v), (B) subject itself to taxation
in any such jurisdiction or (C) take any action which would subject it
to general service of process in any such jurisdiction;
(vi) cooperate with the Rightsholder whose Registerable
Securities are included in such registration statement and the
managing underwriter(s), if any, to facilitate the timely preparation
and delivery of certificates representing Registerable Securities to
be sold thereunder, not bearing any restrictive legends, and enable
such Registerable Securities to be in such denominations and
registered in such names as such Rightsholder or any managing
underwriter(s) may reasonably request at least two business days prior
to any sale of Registerable Securities;
(vii) comply with all applicable rules and regulations
of the Commission and promptly make generally available to its
security holders an earnings statement covering a period of twelve
months commencing, (A) in an underwritten offering, at the end of any
fiscal quarter in which Registerable Securities are sold to
underwriter(s), or (B) in a non-underwritten offering, with the first
month of the Company's first fiscal quarter beginning after the
effective date of such registration statement, which earnings
statement in each case shall satisfy the provisions of Section 11(a)
of the Securities Act;
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<PAGE>
(viii) enter into such customary agreements (including
an underwriting agreement in customary form) and take all such other
actions reasonably requested by the Rightsholders holding a majority
of the Registerable Securities included in such registration statement
or the managing underwriter(s) in order to expedite and facilitate the
disposition of such Registerable Securities and in such connection,
whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration, (A) make such
representations and warranties, if any, to any underwriter(s) with
respect to the registration statement, prospectus and documents
incorporated by reference, if any, in form, substance and scope as are
customarily made by issuers to underwriter(s) in underwritten
offerings and confirm the same if and when requested, (B) obtain
opinions of counsel to the Company and updates thereof addressed to
each such underwriter(s), if any, with respect to the registration
statement, prospectus and documents incorporated by reference, if any,
covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by such Rightsholders and underwriter(s), (C) obtain a "cold
comfort" letter and updates thereof from the Company's independent
certified public accountants addressed to the underwriter(s), if any,
which letters shall be in customary form and cover matters of the type
customarily covered in "cold comfort" letters by accountants in
connection with underwritten offerings, and (D) deliver such documents
and certificates as may be reasonably requested by the managing
underwriter(s), if any, to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company; each such action required by this
Paragraph 3(a)(x) shall be done at each closing under such
underwriting or similar agreement or as and to the extent required
thereunder; and
(ix) if requested by the holders of a majority of the
Registerable Securities included in such registration statement, use
its best efforts to cause all Registerable Securities which are
included in such registration statement to be listed, subject to
notice of issuance, by the date of the first sale of such Registerable
Securities pursuant to such registration statement, on each securities
exchange, if any, on which securities similar to the Registered
Securities are listed.
(b) Obligations of Rightsholders. In connection with any
registration of Registerable Securities of a Rightsholder pursuant to
Section 2 hereof:
(i) The Company may require that each Rightsholder
whose Registerable Securities are included in such registration
statement furnish to the Company such information regarding the
distribution of such Registerable
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Securities and such Rightsholder as the Company may from time to time
reasonably request in writing; and
(ii) Each Rightsholder, upon receipt of any notice from
the Company of the happening of any event of the kind described in
clauses (B), (C), (E) and (F) of Paragraph 3(a)(iii) hereof, shall
forthwith discontinue disposition of Registerable Securities pursuant
to the registration statement covering such Registerable Securities
until such Rightsholder's receipt of the copies of the supplemented or
amended prospectus contemplated by clause (A) of Paragraph 3(a)(iii)
hereof, or until such Rightsholder is advised in writing (the
"Advice") by the Company that the use of the applicable prospectus may
be resumed, and until such Rightsholder has received copies of any
additional or supplemental filings which are incorporated by reference
in or to be attached to or included with such prospectus, and, if so
directed by the Company, such Rightsholder will deliver to the Company
(at the expense of the Company) all copies, other than permanent file
copies then in the possession of such Rightsholder, of the current
prospectus covering such Registerable Securities at the time of
receipt of such notice; the Company shall have the right to demand
that such Rightsholder or other holder verify its agreement to the
provisions of this Paragraph 3(b)(ii) in any Holder Notice of the
Rightsholder or in a separate document executed by the Rightsholder.
4. Registration Expenses. All expenses incident to the performance of or
compliance with this Agreement by the Company, including, without imitation, all
registration and filing fees of the Commission, National Association of
Securities Dealers, Inc. and other agencies, fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registerable
Securities), rating agency fees, printing expenses, messenger and delivery
expenses, internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the fees and expenses incurred in connection with the listing, if any, of the
Registerable Securities on any securities exchange and fees and disbursements of
counsel for the Company and the Company's independent certified public
accountants (including the expenses of any special audit or "cold comfort"
letters required by or incidental to such performance), Securities Act or other
liability insurance (if the Company elects to obtain such insurance), the fees
and expenses of any special experts retained by the Company in connection with
such registration and the fees and expenses of any other person retained by the
Company (but not including any underwriting discounts or commissions
attributable to the sale of Registerable Securities or other out-of-pocket
expenses of the Rightsholders, or the agents who act on their behalf, unless
reimbursement is specifically approved by the Company) will be borne by the
Company. All such expenses are herein referred to as "Registration Expenses."
5. Indemnification: Contribution.
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(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, each
Rightsholder, its officers and directors and each person who controls such
Rightsholder (within the meaning of the Securities Act), if any, and any
agent thereof against all losses, claims, damages, liabilities and expenses
incurred by such party pursuant to any actual or threatened suit, action,
proceeding or investigation (including reasonable attorney's fees and
expenses of investigation) arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in
the light of the circumstances under which they were made) not misleading,
except insofar as the same arise out of or are based upon, any such untrue
statement or omission based upon information with respect to such
Rightsholder furnished in writing to the Company by such Rightsholder
expressly for use therein.
(b) Indemnification by Rightsholder. In connection with any
registration statement in which a Rightsholder is participating, each such
Rightsholder will be required to furnish to the Company in writing such
information with respect to such Rightsholder as the Company reasonably
requests for use in connection with any such registration statement or
prospectus, and each Rightsholder agrees to the extent it is such a holder
of Registerable Securities included in such registration statement, and
each other such holder of Registerable Securities included in such
Registration Statement will be required to agree, to indemnify, to the full
extent permitted by law, the Company, the directors and officers of the
Company and each person who controls the Company (within the meaning of the
Securities Act) and any agent thereof, against any losses, claims, damages,
liabilities and expenses (including reasonable attorney's fees and expenses
of investigation incurred by such party pursuant to any actual or
threatened suit, action, proceeding or investigation arising out of or
based upon any untrue or alleged untrue statement of a material fact or any
omission or alleged omission of a material fact necessary, to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they are made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is based upon
information relating to such Rightsholder or other holder furnished in
writing to the Company expressly for use therein.
(c) Conduct of Indemnification Proceedings. Promptly after
receipt by an indemnified party under this Section 5 of written notice of
the commencement of any action, proceeding, suit or investigation or threat
thereof made in writing for which such indemnified party may claim
indemnification or contribution pursuant to this Agreement, such
indemnified party shall notify in writing the indemnifying party of such
commencement or threat; but the omission so to notify the indemnifying
party shall not relieve the indemnifying party from any liability which the
indemnifying party may have to any indemnified party (i) hereunder, unless
the indemnifying party is actually
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prejudiced thereby, or (ii) otherwise than under this Section 5.
In case any such action, suit or proceeding shall be brought against
any indemnified party, and the indemnified party shall notify the
indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and the indemnifying party
shall assume the defense thereof, with counsel reasonably satisfactory to
the indemnified party, and the obligation to pay all expenses relating
thereto. The indemnified party shall have the right to employ separate
counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses, (ii) the
indemnifying party shall have failed to assume the defense of such action,
suit or proceeding or to employ counsel reasonably satisfactory to the
indemnified party therein or to pay all expenses relating thereto or (iii)
the named parties to any such action or proceeding (including any impleaded
parties) include both the indemnified party and the indemnifying party and
the indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to the indemnified party which are
different from or additional to those available to the indemnifying party
and which may result in a conflict between the indemnifying party and such
indemnified party (in which case, if the indemnified party notifies the
indemnifying party in writing that the indemnified party elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action or
proceeding on behalf of the indemnified party; it being understood,
however, that the indemnifying party shall not, in connection with any one
such action, suit or proceeding or separate but substantially similar or
related actions, suits or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees
and expenses of more than one separate firm of attorneys at any time for
the indemnified party, which firm shall be designated in writing by the
indemnified party).
(d) Contribution. If the indemnification provided for in this
Section 5 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses (i) in such proportion as is appropriate
to reflect the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other but also the relative fault of the indemnifying party
and indemnified party, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and the
indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied
by, such indemnifying party or indemnified parties, and
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<PAGE>
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable
by a party as a result of the losses, claims, damages. liabilities and
expenses referred to above shall be deemed to include, subject to the
limitation set forth in Section 5(e), any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Paragraph 5(d) were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in clauses (i) and (ii) of
the immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
(e) Limitation. Anything to the contrary contained in this
Section 5(e) or in Section 6 notwithstanding, no holder of Registerable
Securities shall be liable for indemnification and contribution payments
aggregating an amount in excess of the maximum amount received by such
holder in connection with any sale of Registerable Securities as
contemplated herein.
6. Participation in Underwritten Registration. No Rightsholder may
participate in any underwritten registration hereunder unless such Rightsholder
(i) agrees to sell such Rightsholder's securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and to comply with Regulation M under the Exchange Act and
(ii) completes and executes all questionnaires, appropriate and limited powers
of attorney, escrow agreements, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangement;
provided, that all such documents shall be consistent with the provisions of
Section 4 hereof.
7. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8. Entire Agreement. This Agreement and the documents and instruments and
other agreements among the parties hereto as contemplated by or referred to
herein, (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof and (b) are not intended to confer upon any other person any rights or
remedies hereunder, except as set forth herein.
9. Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or
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unenforceable, the remainder of this Agreement will continue in full force
and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or federal court within the State of New York, in connection with any
matter based upon or arising out of this Agreement or the matters contemplated
herein, agrees that process may be served upon them in any manner authorized by
the laws of the State of New York for such persons and waives and covenants not
to assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
11. Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
12. Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties.
13. Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented
without the written consent of each of the parties hereto. Any of the
Stockholders or the Company may, by written notice to the others, (i) waive any
of the conditions to its obligations hereunder or extend the time for the
performance of any of the obligations or actions of the other, (ii) waive any
inaccuracies in the representations of the other contained in this Agreement or
in any documents delivered pursuant to this Agreement, (iii) waive compliance
with any of the covenants of the other contained in this Agreement and (iv)
waive or modify performance of any of the obligations of the other. No action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action or compliance with any representation,
warranty, condition or agreement contained herein. Waiver of the breach of any
one or more provisions of this Agreement shall not be deemed or construed to be
a waiver of other breaches or subsequent breaches of the same provisions.
14. Notices. All notices, demands, requests, demands and other
communications required or otherwise given under this Agreement shall be in
writing and shall be deemed to have been duly given if: (a) delivered by hand
against written receipt therefor, (b) forwarded by a third
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party company or governmental entity providing delivery services in the
ordinary course of business which guarantees delivery the following business
day, (c) mailed by registered or certified mail, return receipt requested,
postage prepaid, or (d) transmitted by facsimile transmission electronically
confirmed for receipt, in full, by the other party no later than 5:00 pm, local
time, on the date of transmission, addressed as follows (i) If to the Company,
to Vizacom Inc., Glenpointe Center East 300 Frank W. Burr Boulevard, Teaneck,
New Jersey 07666; Attention: President; Facsimile: (201) 928-1003: with a copy
to: Kaufman & Moomjian, LLC; 50 Charles Lindbergh Boulevard - Suite 206; Mitchel
Field, New York 11553; Attention: Neil M. Kaufman, Esq.; Facsimile: (516)
222-5110 and (ii) if to the Stockholders, to the respective address set forth on
the signature pages hereof, with a copy to Ellenoff, Grossman, Schole & Cyruli,
LLP, 370 Lexington Avenue, 19th Floor, New York, New York 10017; Attention: Paul
Goodman, Esq.; Facsimile: (212) 697-5808 or (iii) in the case of any of the
parties hereto, at such other address as such party shall have furnished to each
of the other parties hereto in accordance with this Section 14. Each such
notice, demand, request or other communication shall be deemed given (i) on the
date of such delivery by hand, (ii) on the first business day following the date
of such delivery to the overnight delivery service or facsimile transmission or
(iii) three business days following such mailing.
15. Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
16. Further Assurances. Each party hereto covenants and agrees with all
other parties hereto to promptly execute, deliver, file and/or record such
agreements, instruments, certificates and other documents and to do and perform
such other and further acts and things as any other party hereto may reasonably
request or as may otherwise be necessary or proper to consummate and perfect the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by themselves or their duly authorized respective officers, all as of the
date first written above.
VIZACOM INC.
By: /s/ Mark E. Leininger
Mark E. Leininger
President
STOCKHOLDERS
/s/ Andrew Edwards
Andrew Edwards
Address: 355 South End Avenue
New York, New York 10280
/s/ Anthony Del Monte
Anthony Del Monte
Address: 300 9th Street
Jersey City, New Jersey 07302
RIBON, INC.
By: /s/ Amalia Rivera
Name: Amalia Rivera
Title: President
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 15th day of February, 2000, by and between Vizacom
Inc., a Delaware corporation (the "Company") and Andrew Edwards, an individual
residing at 355 South End Avenue, Apt. 23F, New York, New York 10280
(hereinafter called the "Employee").
W I T N E S S E T H:
WHEREAS, this Agreement is intended to supersede and replace all prior
agreements, understandings and arrangements between or among the Company and the
Employee relating to the employment of the Employee.
NOW, THEREFORE, it is agreed as follows:
1. Retention of Services. The Company hereby retains the services of
Employee, and Employee agrees to furnish such services, upon the terms and
conditions hereinafter set forth.
2. Term. Subject to earlier termination on the terms and conditions
hereinafter provided, and further subject to certain provisions hereof which
survive the term hereof, the term of this Agreement shall be comprised of a
three (3) year period of employment commencing on the date hereof, and shall be
extended thereafter for additional one-year periods unless or until the Company
or the Employee provides sixty (60) days' notice to the other party of the
termination of this Agreement.
3. Duties and Extent of Services During Period of Employment.
(a) During the term of employment, Employee shall be employed as Vice
President of the Company and as President of the Company's wholly owned
subsidiary, Renaissance Computer Art Center, Inc. d/b/a Renaissance Multimedia
("Renaissance") or in such other equivalent executive positions with the
Company, Renaissance and their affiliates, as may be determined by the Board of
Directors of the Company. In such capacity, Employee agrees that he shall devote
his full time business efforts to serving the Company, Renaissance and their
affiliates under the direction of the Board of Directors of the Company shall
perform all duties incident to his position on behalf of the Company to the best
of his ability and shall perform such other duties as may from time to time be
assigned to him by the Board of Directors of the Company.
(b) The Company and Employee agree that Employee shall perform his
basic responsibilities and duties hereunder at the office of Renaissance in the
New York Metropolitan Area; subject, however, to the travel requirements of his
position.
4. Remuneration. During the period of employment, Employee shall be
entitled to receive the following compensation for his services:
<PAGE>
(a) The Company shall pay to Employee a salary at an initial rate of
$175,000 per annum, payable in equal bi-weekly installments, or in such other
manner as shall be consistent with the Company's payroll practices. This salary
shall be increased five percent (5%) annually or in such other increased amounts
as shall be determined by the Board of Directors of the Company or the
Compensation Committee thereof.
(b) (i) In addition to the salary provided in clause (a) above, not
later than one hundred twenty (120) days after the end of each fiscal year of
the Company, the Company shall pay to Employee, as incentive compensation, with
respect to each fiscal year during the Term of this Agreement, a bonus of
$12,500 which shall be payable so long as the Employee remains employed by the
Company. An additional bonus shall be payable as set forth below if the Base
Business (as defined below) has achieved gross profit margins of at least 40%
and, subject to paragraph (iv) below, has achieved the following Net Revenues in
the fiscal years set forth below:
(A) With respect to the fiscal year ended December 31, 2000:
Net Revenues Amount to be Paid
$2,200,000 $7,500
$2,200,001-$2,700,000 1% of such Net Revenues
$2,700,001-$3,200,000 2.5% of such Net Revenues
over $3,200,000 2% of such Net Revenues
(B) With respect to the fiscal year ended December 31, 2001:
Net Revenues Amount to be Paid
$2,970,000 $7,500
$2,970,001-$3,645,000 1% of such Net Revenues
$3,645,001-$4,725,000 2% of such Net Revenues
over $4,725,000 2.5% of such Net Revenues
(C) With respect to the fiscal year ended December 31, 2002:
Net Revenues Amount to be Paid
$4,009,500 $7,500
$4,009,501-$4,920,750 1% of such Net Revenues
$4,920,751-$6,378,750 2% of such Net Revenues
over $6,378,750 2.5% of such Net Revenues
Notwithstanding the forgoing, if during the term of this Agreement the Base
Business has achieved gross profit margins of (y) at least 35% but less than
40%, the Company shall pay to Employee 75% of the amount that it would have paid
to Employee under (A), (B) or (C) above if the Base Business
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had achieved gross profit margins of 40% or (z) at least 30% but less than
35%, the Company shall pay to Employee 50% of the amount that it would have paid
to Employee under (A), (B) or (C) above if the Base Business had achieved gross
profit margins of 40%.
(ii) For purposes of this Paragraph 4(b),
(A) "Base Business" shall mean the business conducted
by Renaissance, including any company, entity or
other business acquired by or merged or combined
with Renaissance;
(B) "Net Revenues" shall mean the net revenues of the
Base Business, net of returns, discounts and
allowances, as computed in accordance with
generally accepted accounting principles in the
United States consistently applied with the
accounting principles of the Company ("GAAP"), but
not including any amortization of goodwill;
(C) gross profit margins shall be computed as follows:
(I) The following items shall be included in the
cost of goods sold or cost of sales:
(1) all salaries, consulting fees and other
compensation paid to website development
and other employees and consultants
which provide the services or produce
the products of the Base Business; and
(2) all direct expenses which are properly
considered part of cost of goods sold or
cost of sales under GAAP.
(II) The following items shall be excluded from
cost of goods sold or cost of sales:
(1) any management fee payable by Renaissance
to the Company;
(2) any allocation of corporate overhead of
the Company to Renaissance;
(3) any extraordinary items.
(D) The Company shall have sole authority and control
over the conduct of the Base Business, including
without limitation, all
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decisions relating to customers and accounts to
be solicited, pricing and marketing programs. In
addition, the Company, in its sole discretion, may
determine:
(1) to merge Renaissance into the Company or
another subsidiary of the Company, to acquire
the stock or assets or any other businesses
or to otherwise enter new businesses or to
consolidate operations with the Company or
other subsidiaries of the Company in common
facilities, or
(2) to terminate or sell the Base Business or any
other business of Renaissance.
(E) The Company shall maintain separate accounting
records for the Base Business sufficient to
compute the bonus set forth above.
(iii) The Company agrees to furnish to Employee a copy of the
Base Business' financial statements not later than one hundred twenty (120) days
after the end of each fiscal year of the Company during the term of this
Agreement, together with a notice containing the computation of the bonus set
forth above (the "Bonus Notice"). If the Employee does not agree in good faith
with the calculation of the bonus set forth in the Bonus Notice, the Employee
shall deliver a notice to the Company setting forth in detail the nature and
extent of such disagreement within 30 days after the date of the Bonus Notice.
If the Company and the Employee fail to agree with respect thereto within 30
days after receipt by the Company of the Bonus Notice, the dispute shall be
referred to a nationally firm of independent certified public accountants to be
designated by the Company (which shall not be the Company's regular certified
public accountant), subject to being reasonably acceptable to the Employee (the
"Independent Accountants"), for resolution within 30 days after the referral of
such dispute to the Independent Accountants. Each of the Company and the
Employee shall bear their own expenses with respect to any such dispute, and
each of the Company and the Employee shall bear one-half of the expenses of the
Independent Accountants in connection therewith.
(iv) In the event that any company, entity or business is
acquired by or merged or combined with Renaissance at any time during the term
of this Agreement, the percentages set forth in paragraph (i) above shall be
reduced by multiplying such percentages by a fraction the numerator of which
shall be the Net Revenues of Renaissance for the fiscal year immediately
preceding such event, and the denominator of which shall be an amount equal to
the sum of the numerator and the net revenues (computed on the same basis as is
set forth in paragraph (ii) above) for any such company, entity or business that
is acquired by or merged or combined with Renaissance.
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In the event that this Agreement is terminated other than
pursuant to Section 9(a), the Employee shall be entitled to receive the amount
which would be payable under this clause (b) for each fiscal quarter of any
fiscal year prior to the date of such termination.
5. Employee Benefits; Expenses.
(a) During the term of this Agreement, the Company shall provide to
the Employee the right to participate in the Company's then existing medical and
dental insurance and other employee benefit plans and policies on the same terms
as are then generally available to the Company's executive and managerial
employees. The Employee generally shall be eligible to be granted stock options
under the Company's 1994 Long Term Incentive Plan.
(b) Employee shall be entitled to paid vacation each year during the
term of this Agreement at the rate of four (4) weeks per annum. Vacation shall
be taken each year and, if not taken, shall be carried over for one (1) year
and, if not taken during such carry-over period, shall be forfeited.
(c) The Corporation shall reimburse Employee, in accordance with the
practice followed from time to time for other executive and managerial officers
of the Company, for all reasonable and necessary business and traveling
expenses, and other disbursements incurred by Employee for or on behalf of the
Corporation in the performance of Employee's duties hereunder, upon presentation
by Employee to the Company of an appropriate accounting or documentation of
such.
6. Disability. If Employee, during the period of employment, becomes unable
for any 90 consecutive days in any twelve-month period due to ill health or
other physical or mental incapacity, to perform his services hereunder, the
Company may thereafter, upon at least 60 days' written notice to Employee, place
Employee on disability status. After such action by the Company, Employee shall
no longer be entitled to receive any compensation hereunder until the Employee
returns to full-time status.
7. Confidential Information.
(a) In the course of Employee's employment by the Company, Employee
will have access to and possession of valuable and important confidential or
proprietary data or information of the Company and its operations. Employee will
not during Employee's employment by the Company or at any time for a period of
five (5) years thereafter divulge or communicate to any person nor shall
Employee direct any employee, representative or agent of the Company or its
affiliates to divulge or communicate to any person or entity (other than to a
person or entity bound by confidentiality obligations similar to those contained
herein and other than as necessary in performing Employee's duties hereunder) or
use to the detriment of the Company or for the benefit of any other person or
entity, including without limitation any competitor, supplier, licensor,
licensee or customer of the Company , any of such confidential or proprietary
data or information or make or remove any copies thereof, whether or not marked
or otherwise identified as "confidential" or
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"secret." Employee shall take all reasonable precautions in handling the
confidential or proprietary data or information within the Company to a strict
need-to-know basis and shall comply with any and all security systems and
measures adopted from time to time by the Company to protect the confidentiality
of confidential or proprietary data or information.
(b) The term "confidential or proprietary data or information" as used
in this Agreement shall mean information not generally available to the public,
including, without limitation, all database information, personnel information,
financial information, customer lists, account lists or other account
information, names, telephone numbers or addresses, supplier lists, trade
secrets, patented or proprietary information, forms, information regarding
products, operations, systems, methods, financing, services, know how, computer
and any other processed or collated data, computer programs, pricing, marketing,
media and advertising data.
(c) Employee will at all times promptly disclose to the Company in
such form and manner as the Company may reasonably require, any inventions,
improvements or procedural or methodological innovations, including without
limitation relating to programs, methods, forms, systems, services, designs,
marketing ideas, products or processes (whether or not capable of being
trademarked, copyrighted or patented) conceived or developed or created by
Employee during or in connection with Employee's employment hereunder and which
relate to the business of the Company ("Intellectual Property"). Employee agrees
that all such Intellectual Property shall be the sole property of the Company.
Employee further agrees that Employee will execute such instruments and perform
such acts as may reasonably be requested by the Company to transfer to and
perfect in the Company all legally protectable rights in such Intellectual
Property.
(d) All written materials, books, records and documents made by
Employee or coming into Employee's possession during Employee's employment by
the Company concerning any products, processes or equipment manufactured, used,
developed, investigated, purchased, sold or considered by the Company or
otherwise concerning the business or affairs of the Company, including without
limitation any files, customer records such as names, telephone numbers and
addresses, lists, firm records, brochures and literature, shall be the sole
property of the Company, shall not be removed from the Company's premises by the
Employee, and upon termination of Employee's employment by the Company, or upon
request of the Company during Employee's employment by the Company, Employee
shall promptly deliver the same to the Company. In addition, upon termination of
Employee's employment by the Company, Employee will deliver to the Company all
other Company property in Employee's possession or under Employee's control,
including, but not limited to, financial statements, marketing and sales data,
customer and supplier lists, account lists and other account information,
database information and other documents, and any Company credit cards.
(e) The Employee acknowledges that the covenants contained in this
Section 7 are fair and reasonable in order to protect the Company's business and
were a material and necessary inducement for the Company to agree to the terms
of this Agreement. The Employee further acknowledges that any remedy at law for
any breach or threatened or attempted breach of the covenants contained in this
Section 7 may be inadequate and that the violation of any of the covenants
contained in this Section 7 will cause irreparable and continuing damage to the
Company.
6
<PAGE>
Accordingly, the Company shall be entitled to specific performance or any
other mode of injunctive and/or other equitable relief to enforce its rights
hereunder, including without limitation an order restraining any further
violation of such covenants, or any other relief a court might award, without
the necessity of showing any actual damage or irreparable harm or the posting of
any bond or furnishing of other security, and that such injunctive relief shall
be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. The covenants in this Section 7 shall run in favor of
the Company and its successors and assigns. In addition, the Employee agrees to
pay the Company the costs it incurs, including reasonable attorneys' fees and
expenses, in bringing and prosecuting any proceeding to enforce the terms of
this Agreement.
(f) The provisions of this Section 7 shall survive the termination of
this Employment Agreement.
8. Non-Competition.
(a) During the term of this Agreement and, other than with respect to
clause (i) below, for one year thereafter (the "Restricted Period"), the
Employee shall not, without the written consent of the Company, directly or
indirectly,
(i) become associated with, render services to, invest in,
represent, advise or otherwise participate in as an officer, employee, director,
stockholder, partner, promoter, agent of, consultant for or otherwise, any
business which is conducted in any of the jurisdictions in which Renaissance or
the Company's other businesses is conducted and which is competitive with the
business conducted by Renaissance or the Company in connection with which
Employee materially participated, including without limitation the design,
development or implementation of Internet web sites, applications, strategies,
integration, intranets, extranets or customer service; provided, that this
Section 8(a)(i) shall not prohibit the Employee from purchasing or owning as a
passive investment up to three percent (3%) of the outstanding capital stock of
a company which is listed or authorized for trading on any national securities
exchange, Nasdaq or the OTC Electronic Bulletin Board or is a company with a
class of securities registered under Section 12 of the Securities Act of 1934,
as amended;
(ii) for the Employee's own account or for the account of any other
person or entity (A) interfere with the Company's relationship with any of its
suppliers, customers, accounts, brokers, representatives or agents or (B)
contact, telephone, meet, solicit or transact any business with any material
customer, account or supplier of the Company who or which transacts or has
transacted business with the Company at any time during the term of this
Agreement; or
(iii) employ or otherwise engage, or solicit, entice or induce on
behalf of the Employee or any other person or entity, the services, retention or
employment of any person who has been an employee, principal, partner,
stockholder, sales representative, trainee, consultant to or agent of the
Company within one year of the date of such offer or solicitation.
7
<PAGE>
(b) Nothing herein contained shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such violation,
including but not limited to any injunctive or other equitable relief or the
recovery of damages from the Employee.
(c) The Employee acknowledges that the covenants contained in this
Section 8 are fair and reasonable in order to protect the Company's business and
were a material and necessary inducement for the Company to agree to the terms
of this Agreement. The Employee further acknowledges that any remedy at law for
any breach or threatened or attempted breach of the covenants contained in this
Section 8 may be inadequate and that the violation of any of the covenants
contained in this Section 8 will cause irreparable and continuing damage to the
Company. Accordingly, the Company shall be entitled to specific performance or
any other mode of injunctive and/or other equitable relief to enforce its rights
hereunder, including without limitation an order restraining any further
violation of such covenants, or any other relief a court might award, without
the necessity of showing any actual damage or irreparable harm or the posting of
any bond or furnishing of other security, and that such injunctive relief shall
be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. The covenants in this Section 8 shall run in favor of
the Company and its successors and assigns. In addition, the Employee agrees to
pay the Company the costs it incurs, including reasonable attorneys' fees and
expenses, in bringing and prosecuting any proceeding to enforce the terms of
this Agreement.
(d) In case any one or more of the terms or provisions contained in
this Section 8 shall for any reason be held invalid, illegal or unenforceable,
such invalidity, illegality or unenforceability shall not affect any other terms
or provisions hereof, but such term or provision shall be deemed modified or
deleted as or to the extent required by applicable law, and such modification or
deletion shall not affect the validity of the other terms or provisions of this
Section 8. In addition, if any one or more of the restrictions contained in this
Section 8 shall for any reason be held to be unreasonable with regard to time,
duration, geographic scope or activity, the parties contemplate and hereby agree
that such restriction shall be modified and shall be enforced to the full extent
compatible with applicable law. The parties hereto intend that the covenants
contained in this Section 8 shall be deemed a series of separate covenants for
each country, state, county and city. If, in any judicial proceeding, a court
shall refuse to enforce all the separate covenants deemed included in this
Section 8 because, taken together, they cover too extensive a geographic area,
the parties intend that those of such covenants (taken in order of the cities,
counties, states and countries therein which are lease populous) which if
eliminated would permit the remaining separate covenants to be enforced in such
proceeding shall, for the purpose of such proceeding, be deemed eliminated from
the provisions of this Section 8.
(e) The provisions of this Section 8 shall survive the termination of
this Employment Agreement.
8
<PAGE>
9. Termination.
(a) The Company may terminate the Employee's services hereunder "for
cause" by delivering to Employee not less than ten (10) days prior to the date
on which the termination is to be effective, a written notice of termination for
cause specifying the act, acts or failure to act that constitute the cause. For
the purposes of this agreement, "for cause" shall mean; (i) any act of
dishonesty, fraud or embezzlement materially adversely affecting the financial,
market, reputation or other interests of the Company, or any affiliate thereof,
(ii) in the event that the Company places Employee on disability status pursuant
to Section 6 hereof more than once during the term hereof, (iii) in the event of
a conviction of the Employee for any felony or other serious crime materially
adversely affecting the Company, or any knowing violation of any federal or
state securities law or regulation, (iv) repeated failure to perform Employee's
duties hereunder after notice and thirty (30) days to cure such failure, (v) any
material breach by the Employee of this Agreement after notice and thirty (30)
days to cure such failure, or (vi) the death of the Employee.
(b) If the Company terminates Employee's employment hereunder for any
reason other than "for cause" as set forth in Section 9(a) hereof, (i) the
Company shall pay to the Employee compensation pursuant to Sections 4(a) and
4(b) (assuming for these purposes that the Net Revenues of the Base Business
with respect to each remaining fiscal year during the term of this Agreement
equals 120% of such Net Revenues for each immediately preceding fiscal year)
hereof at the time and in the manner provided for herein and (ii) the
obligations of the Employee pursuant to Section 8 of this Agreement shall
terminate, and no other compensation payable hereunder shall be payable to the
Employee. If the Company terminates Employee's employment hereunder "for cause"
as set forth in Section 9(a) hereof, Employee shall not be entitled to receive
any further compensation hereunder. Employee and the Company acknowledge that
the foregoing provisions of this paragraph 9(b) are reasonable and are based
upon the facts and circumstances of the parties at the time of entering into
this Agreement, and with due regard to future expectations.
10. Notices. Any notice to be given to the Company hereunder shall be
deemed sufficient if addressed to the Company in writing and delivered or mailed
by certified or registered mail to it at Glenpointe Center East, 300 Frank W.
Burr Boulevard, Box 18, 7th Floor, Teaneck, New Jersey 07666, Attention:
President, or to such other address as the Company may hereafter designate, and
a copy to Neil M. Kaufman, Esq., Kaufman & Moomjian, LLC, 50 Charles Lindbergh
Boulevard, Suite 206, Mitchel Field, New York 11553. Any notice to be given to
Employee hereunder shall be delivered or mailed by certified or registered mail
to Employee at the address set forth at the head of this Agreement or such other
address as he may hereafter designate.
11. Successors and Assigns; Third Party Beneficiaries. This Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company, and unless clearly inapplicable, all references herein to the Company
shall be deemed to include any such successor. In addition, this Agreement shall
be binding upon and inure to the benefit of the Employee and his heirs,
executors, legal representatives and assigns; provided, however, that the
obligations of Employee hereunder may not be delegated without the prior written
approval of the Board of Directors of the Company. In the event of any
consolidation or merger of the Company into or with any other corporation during
the term of this Agreement, or the sale of all or substantially all of the
9
<PAGE>
assets of the Company to another corporation, person or entity during the term
of this Agreement, such successor corporation shall assume this Agreement and
become obligated to perform all of the terms and provisions hereof applicable to
the Company, and Employee's obligations hereunder shall continue in favor of
such successor corporation.
12. Amendments. This Agreement may not be altered, modified, amended or
terminated except by a written instrument signed by each of the parties hereto.
13. Prior Agreements Superseded. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
any other agreements, oral or written, entered into between Employee and the
Company prior to the date of this Agreement relating thereto.
14. Applicable Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New York, without regard to
conflicts of laws.
15. Severability. If any provision of this Agreement shall be held by a
court of competent jurisdiction to be contrary to law or public policy, the
remaining provisions shall remain in full force and effect.
16. Waiver. No term or provision hereof shall be deemed waived and no
breach consented to or excused, unless such waiver, consent or excuse shall be
in writing and signed by the party claimed to have waived, consented or excused.
A consent, waiver or excuse of any breach shall not constitute a consent to,
waiver or, or excuse of any other or subsequent breach whether or not of the
same kind of the original breach.
17. Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one and the same
agreement.
18. Acknowledgment. Employee acknowledges that he has carefully read this
Agreement, has had an opportunity to consult counsel regarding this Agreement
and hereby represents and warrants to the Company that Employee's entering into
this Agreement, and the obligations and duties undertaken by Employee hereunder,
will not conflict with, constitute a breach of or otherwise violate the terms of
any other agreement to which Employee is a party and that Employee is not
required to obtain the consent of any person, firm, corporation or other entity
in order to enter into and perform his obligations under this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VIZACOM INC.
By: /s/ Mark E. Leininger
Name: Mark E. Leininger
Title: President & CEO
/s/ Andrew Edwards
Andrew Edwards
CHURCHILL CONSULTING
Suite One, Henville Building, Main Street, Charleston
Nevis, West Indies
Telephone: 869-469-0200
Facsimile: 869-469-0201
January 8, 2000
Vizacom Inc.
Glenpointe Centre East
300 Frank W. Burr Boulevard - 7th Floor
Teaneck, New Jersey 07666
Re: Loan Facility
-------------
Gentlemen:
This letter confirms our agreement that the undersigned hereby extends
to Vizacom Inc., a Delaware corporation (the "Company"), a loan facility in an
amount up to $1,000,000. The Company may draw down on this loan agreement in
whole or in part from time to time, but this loan facility must be drawn down in
full by the Company no later than March 7, 2000. All amounts drawn down on this
loan facility shall be due and payable upon the earlier of (a) 60 days after the
first draw down on the loan facility, or (b) upon the receipt of gross proceeds
from any offering of equity securities of the Company in an amount equal to
$2,000,000 or more. Amounts borrowed under the loan facility will bear interest
at a rate equal to 8% per annum. All loans thereunder will be evidenced by a
promissory note in the form of Exhibit A hereto.
In connection with the foregoing loan facility, the Company will grant
to the undersigned warrants to purchase an aggregate 250,000 shares of Common
Stock, par value $.001 per share, of the Company exercisable commencing on the
date of issuance for a seven year term at an exercise price of $3.00 per share,
in proportion to the maximum amount of the loan facility which is drawn down.
Such warrants shall be deemed issued as of the date of each draw down on the
loan facility. The shares of Common Stock underlying these warrants will be
registered for resale by the undersigned pursuant to a registration statement to
be filed by the Company not later than the earlier of (a) seven days after the
Company files its annual report on Form 10-KSB for its fiscal year ended
December 31, 1999, or (b) Monday, April 17, 2000. In the event that this
registration statement is not filed by such date, the Company will issue to the
undersigned warrants on the same terms set forth above to purchase 25,000 shares
of Common Stock for each full week after such date that such registration
statement has not been filed. In addition, in the event that the amount due
under the promissory note is not paid in full at maturity, the exercise price of
the warrants shall be reduced by 50% and, if such default in repayment continues
for an additional 60 consecutive days, the exercise price then in effect shall
be reduced again by 50%. The form of warrant certificate, including the
above-described registration rights, shall be in the form attached hereto as
Exhibit B.
<PAGE>
If the foregoing accurately sets forth our agreement, please sign
where indicated below.
CHURCHILL CONSULTING
By: /s/ Paul Stark
Name: Paul Stark
Title: Agent
Accepted and agreed as of the
date first above written:
VIZACOM INC.
By: /s/ Mark E. Leininger
Mark E. Leininger
President and Chief Executive Officer
LINE OF CREDIT NOTE
$1,000,000.00 Teaneck, New Jersey
January 8, 2000
FOR VALUE RECEIVED, the undersigned, Vizacom Inc., a Delaware
corporation (the "Maker"), does hereby unconditionally promise to pay to the
order of Churchill Consulting (the "Payee"), at the principal place of business
of Payee, presently located at Suite One, Henville Building, Main Street,
Charleston, Nevis, West Indies, or at such other place as the Payee or any
holder hereof may from time to time designate in writing to Maker, in lawful
money of the United States and immediately available funds, the principal sum of
ONE MILLION DOLLARS ($1,000,000.00), or such lesser amount as is due hereunder,
with interest on the unpaid balance of said principal amount from the date of
disbursement to and including the date of repayment at the rate of eight percent
(8%) per annum, at maturity. Interest shall be calculated daily, on the basis of
the actual number of days elapsed in a 360 day year of twelve 30-day months, and
capitalized by the addition of such accrued interest to the principal amount
outstanding on the first day of each and every month in which any obligation
under this Line of Credit Note is outstanding. All amounts outstanding under
this note shall be due and payable upon the earlier of (a) sixty days after the
date of the first advance by Payee to Maker under this Line of Credit Note, or
(b) the date of the receipt by the Maker of gross proceeds of $2,000,000.00 or
more from any offering of equity securities of the Maker.
The principal amount of indebtedness evidenced hereby shall equal the
initial advance made by Payee to Maker. Payee shall advance additional monies
pursuant to this Line of Credit Note from time to time, and Maker at its option
may repay from time to time all or any portion of the amounts due and owing
pursuant to this Line of Credit Note. It is therefore contemplated that the
outstanding indebtedness evidenced hereby shall fluctuate accordingly but in no
event shall the maximum amount outstanding at any one time exceed the principal
amount of this Line of Credit Note. Payee is authorized and directed to endorse
on the Schedule to this Line of Credit Note the date and amount of each advance
of funds to Maker, the monthly capitalization of all accrued interest, and any
payments, whether principal or interest, made by Maker under this Line of Credit
Note, and such endorsement shall be prima facie evidence of such advance,
capitalization or payment. Maker's obligation to make advances under this Line
of Credit Note shall terminate 5:00 p.m., New York City time, on March 7, 2000.
1. Events of Default. Upon the occurrence of any of the
following events (each, an "Event of Default" and collectively, the "Events of
Default"):
(a) failure by Maker to pay the principal or interest on
this Line of Credit Note or any installment thereof within ten days after
such payment is due, whether on the date fixed for payment or by
acceleration or otherwise; or
(b) a final judgment for the payment of money in excess of
$100,000 shall be rendered against Maker, and such judgment shall remain
undischarged for a period of
<PAGE>
sixty days from the date of entry thereof unless within such sixty day
period such judgment shall be stayed, and appeal taken therefrom and the
execution thereon stayed during such appeal; or
(c) if Maker shall default in respect of any evidence of
indebtedness or under any agreement under which any notes or other evidence
of indebtedness of Maker are issued, if the effect thereof is to cause, or
permit the holder or holders thereof to cause, such obligation or
obligations in an amount in excess of $100,000 in the aggregate to become
due prior to its or their stated maturity or to permit the acceleration
thereof; or
(d) if Maker or any other authorized person or entity shall
take any action to effect a dissolution, liquidation or winding up of
Maker; or
(e) if Maker shall make a general assignment for the benefit
of creditors or consent to the appointment of a receiver, liquidator,
custodian, or similar official of all or substantially all of its
properties, or any such official is placed in control of such properties,
or Maker admits in writing its inability to pay its debts as they mature,
or Maker shall commence any action or proceeding or take advantage of or
file under any federal or state insolvency statute, including, without
limitation, the United States Bankruptcy Code or any political subdivision
thereof, seeking to have an order for relief entered with respect to it or
seeking adjudication as a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution, administration, a
voluntary arrangement, or other relief with respect to it or its debts; or
(f) there shall be commenced against Maker any action or
proceeding of the nature referred to in paragraph (e) above or seeking
issuance of a warrant of attachment, execution, distraint, or similar
process against all or any substantial part of the property of Maker, which
results in the entry of an order for relief which remains undismissed,
undischarged or unbonded for a period of sixty days;
then, in addition to all rights and remedies of Payee under applicable law or
otherwise, all such rights and remedies being cumulative, not exclusive and
enforceable alternatively, successively and concurrently, at his option, Payee
may declare all amounts owing under this Line of Credit Note, to be due and
payable, whereupon the then unpaid balance hereof together with all interest
accrued thereon, shall forthwith become due and payable, together with interest
accruing thereafter at eleven percent (11%) per annum until the indebtedness
evidenced by this Line of Credit Note is paid in full, plus all costs and
expenses of collection or enforcement hereof, including, but not limited to,
attorneys' fees and expenses.
In addition to the foregoing remedies, upon the occurrence of an Event
of Default under clause (a) of this Section 1, the exercise price in effect at
the time of such Event of Default of the warrants (each, a "Warrant") issued to
Payee at the time of any advance under this Line of Credit Note pursuant to the
terms of the Letter Agreement, dated January 8, 2000, between Payee and Maker,
shall be reduced by fifty percent (50%) and, in the event of the continuation of
such Event
2
<PAGE>
of Default for 60 continuous days following such occurrence of the Event of
Default, such exercise price then in effect shall be reduced again by fifty
percent (50%).
2. Prepayment. Maker may prepay, at any time, the unpaid
principal balance of this Note or any portion thereof, together with all
accrued and unpaid interest on the amount so prepaid. Amounts so prepaid shall
be applied first to Maker's obligations under this Line of Credit Note in
respect of interest, and second, to principal.
3. Miscellaneous.
(a) Maker (i) waives diligence, demand, presentment, protest
and notice of any kind, (ii) agrees that it will not be necessary for any
holder hereof to first institute suit in order to enforce payment of this
Line of Credit Note and (iii) consents to any one or more extensions or
postponements of time of payment, release, surrender or substitution of
collateral security or forbearance or other indulgence, without notice or
consent.
(b) All payments to be made to the Payee under this Line of
Credit Note shall be made into such account or accounts as the Payee may
from time to time specify for that purpose.
(c) The provisions of this Line of Credit Note may not be
changed, modified or terminated orally, but only by an agreement in writing
signed by the party to be charged, nor shall any waiver be applicable
except in the specific instance for which it is given.
(d) The execution and delivery of this Line of Credit Note
has been authorized by the Board of Directors of Maker.
(e) THIS LINE OF CREDIT NOTE SHALL BE GOVERNED BY AND
CONSTRUED, AND ALL RIGHTS AND OBLIGATIONS HEREUNDER AND THEREUNDER
DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF AND SHALL BE BINDING
UPON THE SUCCESSORS AND ASSIGNS OF MAKER AND INURE TO THE BENEFIT OF THE
PAYEE, ITS SUCCESSORS, ENDORSEES AND ASSIGNS.
(f) If any term or provision of this Line of Credit Note
shall be held invalid, illegal or unenforceable, the validity of all other
terms and provisions shall in no way be affected thereby.
(g) Whenever used herein, the terms "Maker" and "Payee"
shall be deemed to include their respective successors and assigns.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Line of Credit
Note on the date first above written.
VIZACOM INC.
By: /s/ Mark E. Leininger
ATTEST: Mark E. Leininger, Presdient
/s/ Marc E. Jaffe
Marc E. Jaffe, Secretary
<PAGE>
Schedule to Line of Credit Note
-------------------------------
Amount of Amount of Amount of
Date Advance Accrued Interest Repayment Balance
---- ------- ---------------- --------- -------
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5
NEITHER THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE NOR THE SHARES OF
COMMON STOCK OR ANY OTHER SECURITIES ISSUABLE UPON EXERCISE OF SUCH WARRANTS
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH WARRANTS
HAVE BEEN ACQUIRED, AND ANY SHARES OF COMMON STOCK OR ANY OTHER SECURITIES
ISSUABLE UPON EXERCISE OF SUCH WARRANTS ARE REQUIRED TO BE ACQUIRED, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT
BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH WARRANTS AND/OR SUCH SHARES OR OTHER
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF SUCH
WARRANTS AND SUCH SHARES OR OTHER SECURITIES TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS.
VOID AFTER 5:00 P.M. ON FEBRUARY 16, 2007
VIZACOM INC.
WARRANT CERTIFICATE
250,000 Common Stock Purchase Warrants
Teaneck, New Jersey
Warrant Certificate No. CC-1 February 17, 2000
THIS IS TO CERTIFY THAT, for value received, Churchill Consulting or
registered assigns (the "Warrantholder") permitted by the terms of this Warrant
Certificate, is the registered owner of the number of Common Stock Purchase
Warrants (each, a "Warrant") set forth above, each Warrant entitling the owner
thereof to purchase from Vizacom Inc., a Delaware Corporation (the "Company"),
at any time on or prior to 5:00 P.M., New York City time, on February 17, 2007
(the "Expiration Time"), one duly authorized, validly issued, fully paid and
nonassessable share (each, a "Warrant Share") of the common stock, par value
$.001 per share ("Common Stock"), of the Company, at a purchase price of $3.00
per share (the "Purchase Price"), all subject to the terms and conditions
contained herein. The number of Warrants evidenced by this Warrant Certificate
(and the number and kind of securities which may be purchased upon exercise
hereof) set forth above, and the Purchase Price per share set forth above, are
as of the date hereof. As provided herein, the Purchase Price and the number of
shares of Common Stock or other securities which may be purchased upon the
exercise of the Warrants evidenced by this Warrant Certificate are, upon the
happening of certain events, subject to modification and adjustment.
This Warrant Certificate, together with any warrant certificate(s)
issued in replacement or substitution hereof (as provided for herein) evidencing
all or part of the Warrants evidenced hereby, are sometimes collectively
referred to herein as the "Warrant Certificates."
<PAGE>
The rights of the registered holder of this Warrant Certificate shall
be subject to the following further terms and conditions:
1. Exercise of Warrants.
(a) The Warrants may be exercised, in whole or in part, on or prior to
the Expiration Time by surrendering this Warrant Certificate, with the purchase
form provided for herein duly executed by the Warrantholder or by the
Warrantholder's duly authorized attorney-in-fact, at the principal office of the
Company, presently located at Glenpointe Centre East, 300 Frank W. Burr
Boulevard - 7th Floor, Teaneck, New Jersey 07666, or at such other office or
agency in the United States as the Company may designate by notice in writing to
the Warrantholder (in either event, the "Company Offices"), accompanied by
payment in full, either in the form of cash, bank cashier's check or certified
check payable to the order of the Company, of the Exercise Price payable in
respect of the Warrants being exercised. If fewer than all of the Warrants are
exercised, the Company shall, upon each exercise prior to the Expiration Time,
execute and deliver to the Warrantholder a new Warrant Certificate (dated as of
the date hereof) evidencing the balance of the Warrants that remain exercisable.
(b) On the date of exercise of the Warrants, the Warrantholder
exercising same shall be deemed to have become the holder of record for all
purposes of the Warrant Shares to which the exercise relates.
(c) As soon as practicable, but not in excess of ten days, after the
exercise of all or part of the Warrants evidenced by this Warrant Certificate,
the Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of and delivered to the
Warrantholder a certificate or certificates evidencing the number of duly
authorized, validly issued, fully paid and nonassessable Warrant Shares to which
the Warrantholder shall be entitled upon such exercise.
(d) No certificates for fractional Warrant Shares shall be issued upon
the exercise of any of the Warrants but, in lieu thereof, the Company shall,
upon exercise of all the Warrants, round up any fractional Warrant Share to the
nearest whole share of Common Stock.
2. Issuance of Common Stock; Reservation of Shares.
(a) The Company covenants and agrees that all Warrant Shares which may
be issued upon the exercise of all or part of the Warrants will, upon issuance
in accordance with the terms hereof, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.
(b) The Company further covenants and agrees that if any shares of
Common Stock to be reserved for the purpose of the issuance of Warrant Shares
upon the exercise of Warrants require registration with, or approval of, any
governmental authority under any federal or state law before such shares may be
validly issued or delivered upon exercise, then the Company will promptly use
its best efforts to effect such registration or obtain such approval, as the
case may be.
-2-
<PAGE>
3. Adjustments of Exercise Price, Number and Character of Warrant Shares, and
Number of Warrants.
The Exercise Price the number and kind of securities purchasable upon
the exercise of each Warrant shall be subject to adjustment from time to time
upon the happening of the events enumerated in this Section 3.
(a) Stock Dividends, Subdivisions and Combinations. In case the
Company shall at any time on or before the Expiration Time:
(i) pay a dividend in shares of Common Stock [or other stock
of the Company] or make a distribution in shares of Common Stock or such
other stock to holders of all its outstanding shares of Common Stock;
(ii) subdivide or reclassify the outstanding shares of Common
Stock into a greater number of shares;
(iii) combine the outstanding shares of Common Stock into a
smaller number of shares of Common Stock; or
(iv) issue by reclassification of its shares of Common Stock
other securities of the Company (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing corporation);
then the number and kind of Warrant Shares purchasable upon exercise of each
Warrant outstanding immediately prior thereto shall be adjusted so that the
Warrantholder shall be entitled to receive the kind and number of shares of
Common Stock or other securities of the Company which the Warrantholder would
have owned or have been entitled to receive after the happening of any of the
events described above had such Warrant been exercised in full immediately prior
to the earlier of the happening of such event or any record date in respect
thereto. In the event of any adjustment of the number of Warrant Shares
purchasable upon the exercise of each then outstanding Warrants pursuant to this
Paragraph 3(a), the Exercise Price shall be adjusted to be the amount resulting
from dividing the number of shares of Common Stock (including fractional shares
of Common Stock) covered by such Warrant immediately after such adjustment into
the total amount payable upon exercise of such Warrant in full immediately prior
to such adjustment. An adjustment made pursuant to this Paragraph 3(a) shall
become effective immediately after the effective date of such event retroactive
to the record date for any such event. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) Extraordinary Dividends. In case the Company shall at any time on
or before the Expiration Time fix a record date for the issuance of rights,
options, or warrants to all holders of its outstanding shares of Common Stock,
entitling them (for a period expiring within 45 days after such record date) to
subscribe for or purchase shares of Common Stock (or securities exchangeable for
or convertible into shares of Common Stock) at a price per share of Common Stock
(or having an exchange or conversion price per share of Common Stock, with
respect to a security exchangeable
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for or convertible into shares of Common Stock) which is lower than the
current Market Price per share of Common Stock (as defined in Paragraph 3(d)
below) on such record date, then the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, of which (i) the numerator shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares of Common
Stock so to be offered (or the aggregate initial exchange or conversion price of
the exchangeable or convertible securities so to be offered) would purchase at
such current Market Price and (ii) the denominator shall be the number of shares
of Common Stock outstanding on such record date plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into which
the exchangeable or convertible securities so to be offered are initially
exchangeable or convertible). Such adjustment shall become effective at the
close of business on such record date; however, to the extent that shares of
Common Stock (or securities exchangeable for or convertible into shares of
Common Stock) are not delivered after the expiration of such rights, options, or
warrants, the Exercise Price shall be readjusted (but only with respect to
Warrants exercised after such expiration) to the Exercise Price which would then
be in effect had the adjustments made upon the issuance of such rights, options,
or warrants been made upon the basis of delivery of only the number of shares of
Common Stock (or securities exchangeable for or convertible into shares of
Common Stock) actually issued. In case any subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company and shall be described in a statement mailed to the
Warrantholder. Shares of Common Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
(c) Extraordinary Distributions. In case the Company shall at any time
after the original date of issuance of the Warrants (the "Date of Issuance")
distribute to all holders of its shares of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the surviving corporation) evidences of its indebtedness or assets
(excluding cash dividends and distributions payable out of consolidated net
income or earned surplus in accordance with Delaware law and dividends or
distributions payable in shares of stock described in Paragraph 3(a) above) or
rights, options, or warrants or exchangeable or convertible securities
containing the right to subscribe for or purchase shares of Common Stock (or
securities exchangeable for or convertible into shares of Common Stock), then
the Exercise Price shall be adjusted by multiplying the Exercise Price in effect
immediately prior to the record date for such distribution by a fraction, of
which (i) the numerator shall be the current Market Price per share of Common
Stock (as defined in Paragraph 3(d)) on such record date, less the fair market
value (as determined by the Board of Directors of the Company, whose
determination shall be conclusive, and described in a notice to the
Warrantholders) of the portion of the evidences of indebtedness or assets so to
be distributed or of such rights, options or warrants applicable to one share of
Common Stock and (ii) the denominator shall be such current Market Price per
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for such transaction.
(d) Current Market Price Defined. For the purpose of any computation
under Paragraphs 3(b) and/or 3(c), the current Market Price per share of Common
Stock at any date shall
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be deemed to be the average daily Closing Price of the shares of Common
Stock for twenty consecutive trading days ending within fifteen days before the
date in question. The term "Closing Price" of the shares of Common Stock for a
day or days shall mean (i) if the shares of Common Stock are listed or admitted
for trading on a national securities exchange, the last reported sales price
regular way, or, in case no such reported sale takes place on such day or days,
the average of the reported closing bid and asked prices regular way, in either
case on the principal national securities exchange on which the shares of the
Common Stock are listed or admitted for trading, or (ii) if the shares of Common
Stock are not listed or admitted for trading on a national securities exchange,
(A) the last transaction price for the Common Stock on The Nasdaq Stock Market
("Nasdaq") or, in the case no such reported transaction takes place on such day
or days, the average of the reported closing bid and asked prices thereof quoted
on Nasdaq, or (B) if the shares of Common Stock are not quoted on Nasdaq, the
average of the closing bid and asked prices of the Common Stock as quoted on the
Over-The-Counter Bulletin Board maintained by the National Association of
Securities Dealers, Inc. (the "Bulletin Board"), or (C) if the shares of Common
Stock are not quoted on Nasdaq nor on the Bulletin Board, the average of the
closing bid and asked prices of the common stock in the over-the-counter market,
as reported by The National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service, or (iii) if on any such trading day or days the
shares of Common Stock are not quoted by any such organization, the fair market
value of the shares of Common Stock on such day or days, as determined in good
faith by the Board of Directors of the Company, shall be used.
(e) Minimum Adjustment. Except as hereinafter provided, no adjustment
of the Exercise Price hereunder shall be made if such adjustment results in a
change of the Exercise Price then in effect of less than five cents ($.05) per
share. Any adjustment of less than five cents ($.05) per share of any Exercise
Price shall be carried forward and shall be made at the time of and together
with any subsequent adjustment which, together with adjustment or adjustments so
carried forward, amounts to five cents ($.05) per share or more. However, upon
exercise of this Warrant Certificate, the Company shall make all necessary
adjustments (to the nearest cent) not theretofore made to the Exercise Price up
to and including the effective date upon which this Warrant Certificate is
exercised.
(f) Notice of Adjustments. Whenever the Exercise Price shall be
adjusted pursuant to this Section 3, the Company shall promptly deliver a
certificate signed by the President or a Vice President and by the Chief
Financial Officer, Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company, setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated (including a description of the basis on
which the Board of Directors of the Company made any determination hereunder),
by first class mail postage prepaid to each Warrantholder.
(g) Capital Reorganizations and Other Reclassifications. In case of
any capital reorganization of the Company, or of any reclassification of the
shares of Common Stock (other than a reclassification, subdivision or
combination of shares of Common Stock referred to in Paragraph 3(a)), or in case
of the consolidation of the Company with, or the merger of the Company with, or
merger of the Company into, any other corporation (other than a reclassification
of the shares of Common Stock referred to in Paragraph 3(a) or a consolidation
or merger which does not result in
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any reclassification or change of the outstanding shares of Common Stock)
or of the sale of the properties and assets of the Company as, or substantially
as, an entirety to any other corporation or entity, each Warrant shall, after
such capital reorganization, reclassification of shares of Common Stock,
consolidation, merger, or sale, be exercisable, upon the terms and conditions
specified in this Warrant Certificate, for the kind, amount and number of shares
or other securities, assets, or cash to which a holder of the number of shares
of Common Stock purchasable (at the time of such capital reorganization,
reclassification of shares of Common Stock, consolidation, merger or sale) upon
exercise of such Warrant would have been entitled to receive upon such capital
reorganization, reclassification of shares of Common Stock, consolidation,
merger, or sale; and in any such case, if necessary, the provisions set forth in
this Section 3 with respect to the rights and interests thereafter of the
Warrantholder shall be appropriately adjusted so as to be applicable, as nearly
equivalent as possible, to any shares or other securities, assets, or cash
thereafter deliverable on the exercise of the Warrants. The Company shall not
effect any such consolidation, merger, or sale, unless prior to or
simultaneously with the consummation thereof the successor corporation or entity
(if other than the Company) resulting from such consolidation or merger or the
corporation or entity purchasing such assets or other appropriate corporation or
entity shall assume, by written instrument, the obligation to deliver to the
Warrantholder such shares, securities, assets, or cash as, in accordance with
the foregoing provisions, such holders may be entitled to purchase and the other
obligations hereunder. The subdivision or combination of shares of Common Stock
at any time outstanding into a greater or lesser number of shares shall not be
deemed to be a reclassification of the shares of Common Stock for purposes of
this Paragraph 3(e).
(h) Adjustments to Other Securities. In the event that at any time, as
a result of an adjustment made pursuant to this Section 3, the Warrantholder
shall become entitled to purchase any shares or securities of the Company other
than the shares of Common Stock, thereafter the number of such other shares or
securities so purchasable upon exercise of each Warrant and the exercise price
for such shares or securities shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as possible to the provisions with
respect to the shares of Common Stock contained in Paragraphs 3(a) through (e),
inclusive.
(i) Deferral of Issuance of Additional Shares in Certain
Circumstances. In any case in which this Section 3 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event issuing to the Warrantholder exercised after such record date the shares
of Common Stock, if any, issuable upon such exercise over and above the Warrant
Shares, if any, issuable upon such exercise on the basis of the Exercise Price
in effect prior to such adjustment; provided, however, that the Company shall
deliver as soon as practicable to such holder a due bill or other appropriate
instrument provided by the Company evidencing such holder's right to receive
such additional shares of Common Stock upon the occurrence of the event
requiring such adjustment.
(j) Default Under Line of Credit Note. Notwithstanding any provision
to the contrary contained in this Warrant Certificate, upon the occurrence of an
Event of Default under clause (a) of Section 1 of the Line of Credit Note of the
Company, dated January 8, 2000, payable to Churchill Consulting and in the
principal amount of $1,000,000.00, the Purchase Price then in effect shall be
reduced by fifty percent (50%). In the event such occurrence of said Event of
Default
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shall then continue for 60 consecutive days, the Purchase Price then in
effect on such 60th day shall be reduced by fifty percent (50%). No adjustment
shall be made under this Paragraph 3(j) to the number of Warrant Shares issuable
upon exercise of a Warrant.
4. Definition of Common Stock.
The Common Stock issuable upon exercise of the Warrants shall be the
Common Stock as constituted on the date hereof except as otherwise provided in
Section 3.
5. Replacement of Securities.
If this Warrant Certificate shall be lost, stolen, mutilated or
destroyed, the Company shall, on such terms as to indemnity or otherwise as the
Company may in its discretion reasonably impose, issue a new certificate of like
tenor or date representing in the aggregate the right to subscribe for and
purchase the number of shares of Common Stock which may be subscribed for and
purchased hereunder. Any such new certificate shall constitute an original
contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant Certificate shall be at any time
enforceable by anyone.
6. Registration.
This Warrant Certificate, as well as all other warrant certificates
representing Warrants shall be numbered and shall be registered in a register
(the "Warrant Register") maintained at the Company Offices as they are issued.
The Warrant Register shall list the name, address and Social Security or other
Federal Identification Number, if any, of all Warrantholders. The Company shall
be entitled to treat the Warrantholder as set forth in the Warrant Register as
the owner in fact of the Warrants as set forth therein for all purposes and
shall not be bound to recognize any equitable or other claim to or interest in
such Warrants on the part of any other person, and shall not be liable for any
registration of transfer of Warrants that are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration of transfer, or with such knowledge of such facts
that its participation therein amounts to bad faith.
7. Transfer.
NEITHER THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE NOR THE SHARES
OF COMMON STOCK OR ANY OTHER SECURITIES ISSUABLE UPON EXERCISE OF SUCH WARRANTS
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH WARRANTS
HAVE BEEN ACQUIRED, AND ANY SHARES OF COMMON STOCK OR ANY OTHER SECURITIES
ISSUABLE UPON EXERCISE OF SUCH WARRANTS ARE REQUIRED TO BE ACQUIRED, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT
BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH WARRANTS AND/OR SUCH
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SHARES OR OTHER SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER OF SUCH WARRANTS AND SUCH SHARES OR OTHER SECURITIES TO THE EFFECT
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS.
8. Exchange of Warrant Certificates.
This Warrant Certificate may be exchanged for another certificate or
certificates entitling the Warrantholder thereof to purchase a like aggregate
number of Warrant Shares as this Warrant Certificate entitles such Warrantholder
to purchase. A Warrantholder desiring to so exchange this Warrant Certificate
shall make such request in writing delivered to the Company, and shall surrender
this Warrant Certificate therewith. Thereupon, the Company shall execute and
deliver to the person entitled thereto a new certificate or certificates, as the
case may be, as so requested.
9. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given when delivered in person, against written receipt
therefor, or two days after being sent, by registered or certified mail, postage
prepaid, return receipt requested, and, if to the Warrantholder, at such address
as is shown on the Warrant Register or as may otherwise may have been furnished
to the Company in writing in accordance with this Section 9 by the Warrantholder
and, if to the Company, at the Company Offices or such other address as the
Company shall give notice thereof to the Warrantholder in accordance with this
Section 9.
10. Registration Rights.
(a) Defined Terms. As used in this Section 10, terms defined elsewhere
herein shall have their assigned meanings and each of the following terms shall
have the following meanings (such definitions to be applicable to both the
plural and singular of the terms defined):
(i) Registerable Securities. The term "Registerable
Securities" shall mean any of the Warrant Shares, including any shares of
Common Stock or other securities received in connection with any stock
split, stock divided, merger, reorganization, recapitalization,
reclassification or other distribution payable or issuable upon shares of
Common Stock. For the purposes of this Agreement, securities will cease to
be Registerable Securities when (A) a registration statement under the
Securities Act covering such Registerable Securities has been declared
effective and either (1) such Registerable Securities have been disposed of
pursuant to such effective registration statement or (2) (I) such
Registerable Securities remain covered by such effective Registration
Statement, (II) such Registerable Securities have been withdrawn from such
Registration Statement at the request or demand of the holder of such
Registerable Securities or (III) such registration statement has been
withdrawn at the request or demand of the holder of such Registerable
Securities, (B) such Registerable Securities are distributed to the public
pursuant to the Securities Act
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<PAGE>
or pursuant to an exemption from the registration requirements of the
Securities Act, including, but not limited to, Rules 144 and 144A
promulgated under the Securities Act, or (C) such Registerable Securities
have been otherwise transferred and the Company, in accordance with
applicable law and regulations, has delivered new certificates or
other evidences of ownership for such securities which are not subject to
any stop transfer order or other restriction on transfer.
(ii) Rightsholders. The term "Rightsholders" shall include
the Warrantholder, all successors and assigns of the Warrantholder, and all
transferees of Registerable Securities where such transfer affirmatively
includes the transfer and assignment of the rights of the transferor
Rightsholder under this Agreement with respect to the transferred
Registerable Securities; provided, however, the term "Rightsholders" shall
not include any person or entity who has sold, transferred or assigned all
of such person's or entity's Registerable Securities.
(iii) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Section 10 shall refer to this Section
10 as a whole and not to any particular provision of this Section 10, and
subsection, paragraph, clause, schedule and exhibit references are to this
Section 10 unless otherwise specified.
(b) Demand Registration.
(i) The Company hereby covenants and agrees to register (the
"Demand Registration"), under the Securities Act, all of the Registerable
Securities.
(ii) Number of Demand Registrations; Expenses. The holders
of Registerable Securities shall be entitled, in the aggregate, to one
Demand Registration, the Registration Expenses (as defined in Paragraph
10(e) hereof) of which, subject to the provisions of Paragraph 10(e), shall
be borne by the Company, but the Company shall not be responsible for the
payment of any underwriter's discount, commission or selling concession in
connection with any of the Registerable Securities. The Company shall not
be deemed to have effected a Demand Registration unless and until such
Demand Registration is declared effective.
(iii) Delay in Effecting Demand Registration. For the
purposes of this Paragraph 10(b), in the event that the Company shall fail
to file with the Securities and Exchange Commission a registration
statement which the Company believes in good faith complies with the
requirements of the form of registration statement in order to effect a
Demand Registration on or prior to the earlier of (A) seven days after the
date on which the Company files its Annual Report on Form 10-KSB for the
year ended December 31, 1999 or (B) April 17, 2000, then, in such an event,
the number of Warrant Shares issuable upon exercise of each warrant shall
be increased by ten percent (10%) for each and every full week in which
such failure to file such registration statement shall continue.
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(v) Approval of Underwriter by the Company and Placement
Agent. If the Demand Registration is to involve an underwritten offering,
the managing underwriter(s) and each selling agent selected by those
Rightsholders participating in each such underwritten offering shall be
subject to the written approval of the Company, which approval may not be
unreasonably withheld.
(vi) "Initiating Holders" Defined. For purposes of this
Agreement, the term "Initiating Holders" shall mean, on any given date,
those Rightsholders holding Registerable Securities which would aggregate
50% or more of the total Registerable Securities that would be outstanding
on such date.
(c) Piggy-Back Registration.
(i) If, at any time on or after July 1, 2000 and on or prior
to two years from the Expiration Time, the Company proposes to file a
registration statement under the Securities Act with respect to an offering
by the Company or any other party of any class of equity security similar
to any Registerable Securities (other than a registration statement on Form
S-4 or S-8 or any successor form or a registration statement filed solely
in connection with an exchange offer, a business combination transaction or
an offering of securities solely to the existing stockholders or employees
of the Company), then the Company, on each such occasion, shall give
written notice (each, a "Company Piggy-Back Notice") of such proposed
filing to all of the Rightsholders owning Registerable Securities at least
30 days before the anticipated filing date of such registration statement,
and such Company Piggy-Back Notice also shall be required to offer to such
Rightsholders the opportunity to register such aggregate number of
Registerable Securities as each such Rightsholder may request. Each such
Rightsholder shall have the right, exercisable for the twenty days
immediately following the giving of the Company Piggy-Back Notice, to
request, by written notice (each, a "Holder Notice") to the Company, the
inclusion of all or any portion of the Registerable Securities of such
Rightsholders in such registration statement. The Company shall use
reasonable efforts to cause the managing underwriter(s) of a proposed
underwritten offering to permit the inclusion of the Registerable
Securities which were the subject of all Holder Notices in such
underwritten offering on the same terms and conditions as any similar
securities of the Company included therein. Notwithstanding anything to the
contrary contained in this Paragraph 10(c)(i), if the managing
underwriter(s) of such underwritten offering (or, in the case of an
offering not being underwritten, the Company) delivers a written opinion
(or, in the case of the Company, a resolution of its Board of Directors
certified by the President or Secretary of the Company) to the
Rightsholders of Registerable Securities which were the subject of all
Holder Notices that the total amount and kind of securities which they, the
Company and any other person intend to include in such offering is such as
to materially and adversely affect the success of such offering, then the
amount of securities to be offered for the accounts of such Rightsholders
and persons other than the Company shall be eliminated or reduced pro rata
(based on the amount of securities owned by such Rightsholders and other
persons which carry registration rights) to the extent necessary to reduce
the total amount of securities to be included in such offering to the
amount recommended by such managing underwriter(s) in its written opinion
(or the Board of Directors in its resolution).
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(ii) Number of Piggy-Back Registrations; Expenses. The
obligations of the Company under this Paragraph 10(c) shall be unlimited
with respect to each Rightsholder. Subject to the provisions of Paragraph
10(e) hereof, the Company will pay all Registration Expenses in connection
with any registration of Registerable Securities effected pursuant to this
Paragraph 10(c), but the Company shall not be responsible for the payment
of any underwriter's discount, commission or selling concession in
connection therewith.
(iii) Withdrawal or Suspension of Registration Statement.
Notwithstanding anything contained to the contrary in this Paragraph 10(c),
the Company shall have the absolute right, whether before or after the
giving of a Company Piggy-Back Notice or Holder Notice, to determine not to
file a registration statement to which the Rightsholders shall have the
right to include their Registerable Securities therein pursuant to this
Paragraph 10(c), to withdraw such registration statement or to delay or
suspend pursuing the effectiveness of such registration statement. In the
event of such a determination after the giving of a Company Piggy-Back
Notice, the Company shall give notice of such determination to all
Rightsholders and, thereupon, (A) in the case of a determination not to
register or to withdraw such registration statement, the Company shall be
relieved of its obligation under this Paragraph 10(c) to register any of
the Registerable Securities in connection with such registration and (B) in
the case of a determination to delay the registration, the Company shall be
permitted to delay or suspend the registration of Registerable Securities
pursuant to this Paragraph 10(c) for the same period as the delay in the
registration of such other securities. No registration effected under this
Paragraph 10(c) shall relieve the Company of its obligation to effect any
registration upon demand otherwise granted to a Rightsholder under
Paragraph 10(b) hereof or any other agreement with the Company.
(d) Registration Procedures.
(i) Obligations of the Company. The Company will, in
connection with any registration pursuant to Paragraph 10(b) or (c) hereof,
as expeditiously as possible:
(A) prepare and file with the Commission a registration
statement under the Securities Act on any appropriate form
chosen by the Company, in its sole discretion, which shall be
available for the sale of all Registerable Securities in accordance
with the intended method(s) of distribution thereof set forth in all
applicable Demand Requests, Tag-Along Requests and Holder Notices, and
use its commercially reasonable best efforts to cause such
registration statement to become effective as soon thereafter as
reasonably practicable; provided, that, at least five business days
before filing with the Commission of such registration statement, the
Company shall furnish to each Rightsholder whose Registerable
Securities are included therein draft copies of such registration
statement, including all exhibits thereto and documents incorporated
by reference therein, and, upon the reasonable request of any such
Rightsholder, shall continue to provide drafts of such registration
statement until filed, and, after such filing, the Company shall, as
diligently as practicable, provide to each such Rightsholders such
number of copies of such
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registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus), all exhibits thereto and documents
incorporated by reference therein and such other documents as such
Rightsholder may reasonably request in order to facilitate the
disposition of the Registerable Securities owned by such Rightsholder
and included in such registration statement; provided, further,
the Company shall modify or amend the registration statement as it
relates to such Rightsholder as reasonably requested by such
Rightsholder on a timely basis, and shall reasonably consider other
changes to the registration statement (but not including any
exhibit or document incorporated therein by reference) reasonably
requested by such Rightsholder on a timely basis, in light of the
requirements of the Securities Act and any other applicable laws and
regulations; and provided, further, that the obligation of the Company
to effect such registration and/or cause such registration statement
to become effective, may be postponed for (1) such period of time when
the financial statements of the Company required to be included in
such registration statement are not available (due solely to the fact
that such financial statements have not been prepared in the regular
course of business of the Company) or (2) any other bona fide
corporate purpose, but then only for a period not to exceed 90 days;
(B) prepare and file with the Commission such amendments
and post-effective amendments to a registration statement as
may be necessary to keep such registration statement effective for
up to nine months; and cause the related prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be
filed to the extent required pursuant to Rule 424 promulgated under
the Securities Act, during such nine-month period; and otherwise
comply with the provisions of the Securities Act with respect to the
disposition of all Registerable Securities covered by such
registration statement during the applicable period in accordance with
the intended method(s) of disposition of such Registerable Securities
set forth in such registration statement, prospectus or supplement to
such prospectus;
(C) notify the Rightsholders whose Registerable Securities
are included in such registration statement and the managing
underwriter(s), if any, of an underwritten offering of any of
the Registerable Securities included in such registration statement,
and confirm such advice in writing, (1) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and,
with respect to a registration statement or any post-effective
amendment, when the same has become effective, (2) of any request by
the Commission for amendments or supplements to a registration
statement or related prospectus or for additional information, (3) of
the issuance by the Commission of any stop order suspending the
effectiveness of a registration statement or the initiation of any
proceedings for that purpose, (4) if at any time the representations
and warranties of the Company contemplated by clause (1) of Paragraph
10(d)(i)(J) hereof cease to be true and correct, (5) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of any of the Registerable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose and
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(6) of the happening of any event which makes any statement made
in the registration statement, the prospectus or any document
incorporated therein by reference untrue or which requires the
making of any changes in the registration statement or prospectus
so that such registration statement, prospectus or document
incorporated by reference will not contain any untrue statement of
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(D) make reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of such registration
statement at the earliest possible moment and to prevent the entry of
such an order;
(E) use reasonable efforts to register or qualify the
Registerable Securities included in such registration statement
under such other securities or blue sky laws of such jurisdictions as
any Rightsholder whose Registerable Securities are included in such
registration statement reasonably requests in writing and do any and
all other acts and things which may be necessary or advisable to
enable such Rightsholder to consummate the disposition in such
jurisdictions of such Registerable Securities; provided, that the
Company will not be required to (1) qualify generally to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this Paragraph 10(d)(i)(E), (2) subject itself to
taxation in any such jurisdiction or (3) take any action which would
subject it to general service of process in any such jurisdiction;
(F) make available for inspection by each Rightsholder
whose Registerable Securities are included in such registration,
any underwriter(s) participating in any disposition pursuant
to such registration statement, and any representative, agent
or employee of or attorney or accountant retained by any such
Rightsholder or underwriter(s) (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility (or establish a due diligence defense), and cause the
officers, directors and employees of the Company to supply all
information reasonably requested by any such Inspector in connection
with such registration statement; provided, that records which the
Company determines, in good faith, to be confidential and which it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors, unless (1) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction or
(2) the disclosure of such Records is required by any applicable law
or regulation or any governmental regulatory body with jurisdiction
over such Rightsholder or underwriter; provided, further, that such
Rightsholder or underwriter(s) agree that such Rightsholder or
underwriter(s) will, upon learning the disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records deemed
confidential;
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<PAGE>
(G) cooperate with the Rightsholder whose Registerable
Securities are included in such registration statement and the
managing underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Registerable
Securities to be sold thereunder, not bearing any restrictive legends,
and enable such Registerable Securities to be in such denominations
and registered in such names as such Rightsholder or any managing
underwriter(s) may reasonably request at least two business days prior
to any sale of Registerable Securities;
(H) comply with all applicable rules and regulations
of the Commission and promptly make generally available to
its security holders an earnings statement covering a period of twelve
months commencing, (1) in an underwritten offering, at the end of any
fiscal quarter in which Registerable Securities are sold to
underwriter(s), or (2) in a non-underwritten offering, with the first
month of the Company's first fiscal quarter beginning after the
effective date of such registration statement, which earnings
statement in each case shall satisfy the provisions of Section 11(a)
of the Securities Act;
(I) provide a CUSIP number for all Registerable Securities
not later than the effective date of the registration statement
relating to the first public offering of Registerable Securities
of the Company pursuant hereto;
(J) enter into such customary agreements (including)
an underwriting agreement in customary form) and take all such other
actions reasonably requested by the Rightsholders holding a
majority of the Registerable Securities included in such registration
statement or the managing underwriter(s) in order to expedite and
facilitate the disposition of such Registerable Securities and in such
connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an underwritten registration,
(1) make such representations and warranties, if any, to the holders
of such Registerable Securities and any underwriter(s) with respect to
the registration statement, prospectus and documents incorporated by
reference, if any, in form, substance and scope as are customarily
made by issuers to underwriter(s) in underwritten offerings and
confirm the same if and when requested, (2) obtain opinions of counsel
to the Company and updates thereof addressed to each such Rightsholder
and the underwriter(s), if any, with respect to the registration
statement, prospectus and documents incorporated by reference, if any,
covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by such Rightsholders and underwriter(s), (3) obtain a "cold
comfort" letter and updates thereof from the Company's independent
certified public accountants addressed to such Rightsholders and to
the underwriter(s), if any, which letters shall be in customary form
and cover matters of the type customarily covered in "cold comfort"
letters by accountants in connection with underwritten offerings, and
(4) deliver such documents and certificates as may be reasonably
requested by the Rightsholders holding a majority of such Registerable
Securities and managing underwriter(s), if any, to evidence compliance
with any customary conditions contained in the
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<PAGE>
underwriting agreement or other agreement entered into by the
Company; each such action required by this Paragraph 10(d)(i)(J)
shall be done at each closing under such underwriting or similar
agreement or as and to the extent required thereunder; and
(K) if requested by the holders of a majority of the
Registerable Securities included in such registration statement,
use its best efforts to cause all Registerable Securities which are
included in such registration statement to be listed, subject to
notice of issuance, by the date of the first sale of such Registerable
Securities pursuant to such registration statement, on each securities
exchange, if any, on which securities similar to the Registered
Securities are listed.
(ii) Obligations of Rightsholders. In connection with any
registration of Registerable Securities of a Rightsholder pursuant to
Paragraph 10(b) or (c) hereof:
(A) The Company may require that each Rightsholder whose
Registerable Securities are included in such registration
statement furnish to the Company such information regarding the
distribution of such Registerable Securities and such Rightsholder as
the Company may from time to time reasonably request in writing; and
(B) Each Rightsholder, upon receipt of any notice from the
Company of the happening of any event of the kind described
in clauses (2), (3), (5) and (6) of Paragraph 10(d)(i)(C) hereof,
shall forthwith discontinue disposition of Registerable Securities
pursuant to the registration statement covering such Registerable
Securities until such Rightsholder's receipt of the copies of the
supplemented or amended prospectus contemplated by clause (1) of
Paragraph 10(d)(i)(C) hereof, or until such Rightsholder is advised in
writing (the "Advice") by the Company that the use of the applicable
prospectus may be resumed, and until such Rightsholder has received
copies of any additional or supplemental filings which are
incorporated by reference in or to be attached to or included with
such prospectus, and, if so directed by the Company, such Rightsholder
will deliver to the Company (at the expense of the Company) all
copies, other than permanent file copies then in the possession of
such Rightsholder, of the current prospectus covering such
Registerable Securities at the time of receipt of such notice; the
Company shall have the right to demand that such Rightsholder or other
holder verify its agreement to the provisions of this Paragraph
10(d)(ii)(B) in any Demand Request, Tag-Along Request or Holder Notice
of the Rightsholder or in a separate document executed by the
Rightsholder.
(e) Registration Expenses. All expenses incident to the performance of
or compliance with this Agreement by the Company, including, without imitation,
all registration and filing fees of the Commission, National Association of
Securities Dealers, Inc. and other agencies, fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registerable
Securities), rating agency fees, printing expenses, messenger and delivery
expenses, internal expenses (including,
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<PAGE>
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the fees and expenses incurred in
connection with the listing, if any, of the Registerable Securities on any
securities exchange and fees and disbursements of counsel for the Company and
the Company's independent certified public accountants (including the expenses
of any special audit or "cold comfort" letters required by or incidental to such
performance), Securities Act or other liability insurance (if the Company elects
to obtain such insurance), the fees and expenses of any special experts retained
by the Company in connection with such registration and the fees and expenses of
any other person retained by the Company (but not including any underwriting
discounts or commissions attributable to the sale of Registerable Securities or
other out-of-pocket expenses of the Rightsholders, or the agents who act on
their behalf, unless reimbursement is specifically approved by the Company) will
be borne by the Company. All such expenses are herein referred to as
"Registration Expenses." Notwithstanding the foregoing, the Company shall not be
required to pay for any Registration Expenses of any Demand Registration if such
Demand Request is subsequently withdrawn at the request of the holders of a
majority of the Registerable Securities included in such Demand Registration (in
which case all Rightsholders which requested the withdrawal of the Demand
Registration shall bear such expenses pro rata); provided that, if, at the time
of such withdrawal, such Rightsholders have learned of a material adverse change
in the condition, business or prospects of the Company from that known to such
Rightsholders at the time of their Demand Request, such Rightsholders shall not
be required to pay any of such expenses. In either event, if such Rightsholders
pay in full the expenses of such withdrawn Demand Registration, such
Rightsholders shall retain the right to one Demand Registration.
(f) Indemnification: Contribution.
(i) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, each
Rightsholder, its officers and directors and each person who controls such
Rightsholder (within the meaning of the Securities Act), if any, and any
agent thereof against all losses, claims, damages, liabilities and expenses
incurred by such party pursuant to any actual or threatened suit, action,
proceeding or investigation (including reasonable attorney's fees and
expenses of investigation) arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in
the light of the circumstances under which they were made) not misleading,
except insofar as the same arise out of or are based upon, any such untrue
statement or omission based upon information with respect to such
Rightsholder furnished in writing to the Company by such Rightsholder
expressly for use therein.
(ii) Indemnification by Rightsholder. In connection with any
registration statement in which a Rightsholder is participating, each such
Rightsholder will be required to furnish to the Company in writing such
information with respect to such Rightsholder as the Company reasonably
requests for use in connection with any such registration statement or
prospectus, and each Rightsholder agrees to the extent it is such a holder
of Registerable Securities included in such registration statement, and
each other such holder of Registerable
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<PAGE>
Securities included in such Registration Statement will be required to
agree, to indemnify, to the full extent permitted by law, the Company, the
directors and officers of the Company and each person who controls the
Company (within the meaning of the Securities Act) and any agent thereof,
against any losses, claims, damages, liabilities and expenses (including
Reasonable attorney's fees and expenses of investigation incurred by such
party pursuant to any actual or threatened suit, action, proceeding
or investigation arising out of or based upon any untrue or alleged untrue
statement of a material fact or any omission or alleged omission of a
material fact necessary, to make the statements therein (in the case of
a prospectus, in the light of the circumstances under which they are
made) not misleading, to the extent, but only to the extent, that such
untrue statement or omission is based upon information relating to such
Rightsholder or other holder furnished in writing to the Company expressly
for use therein.
(iii) Conduct of Indemnification Proceedings. Promptly after
receipt by an indemnified party under this Paragraph 10(f) of written
notice of the commencement of any action, proceeding, suit or investigation
or threat thereof made in writing for which such indemnified party may
claim indemnification or contribution pursuant to this Agreement, such
indemnified party shall notify in writing the indemnifying party of such
commencement or threat; but the omission so to notify the indemnifying
party shall not relieve the indemnifying party from any liability which the
indemnifying party may have to any indemnified party (A) hereunder, unless
the indemnifying party is actually prejudiced thereby, or (B) otherwise
than under this Paragraph 10(f). In case any such action, suit or
proceeding shall be brought against any indemnified party, and the
indemnified party shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein
and the indemnifying party shall assume the defense thereof, with counsel
reasonably satisfactory to the indemnified party, and the obligation to pay
all expenses relating thereto. The indemnified party shall have the right
to employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (A) the
indemnifying party has agreed to pay such fees and expenses, (B) the
indemnifying party shall have failed to assume the defense of such action,
suit or proceeding or to employ counsel reasonably satisfactory to the
indemnified party therein or to pay all expenses relating thereto or (C)
the named parties to any such action or proceeding (including any impleaded
parties) include both the indemnified party and the indemnifying party and
the indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to the indemnified party which are
different from or additional to those available to the indemnifying party
and which may result in a conflict between the indemnifying party and such
indemnified party (in which case, if the indemnified party notifies the
indemnifying party in writing that the indemnified party elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action or
proceeding on behalf of the indemnified party; it being understood,
however, that the indemnifying party shall not, in connection with any one
such action, suit or proceeding or separate but substantially similar or
related actions, suits or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees
and expenses of more than one separate firm of attorneys
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<PAGE>
at any time for the indemnified party, which firm shall be designated in
writing by the Indemnified party).
(iv) Contribution. If the indemnification provided for in
this Paragraph 10(f) from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party,
in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses (A) in such proportion as
is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other
or (B) if the allocation provided by clause (A) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits received by the indemnifying party on the one hand
and the indemnified party on the other but also the relative fault of the
indemnifying party and indemnified party, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
the indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied
by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages. liabilities and expenses referred to
above shall be deemed to include, subject to the limitation set forth in
Paragraph 10(f)(v), any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Paragraph 10(f)(iv) were
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to
in clauses (A) and (B) of the immediately preceding paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(v) Limitation. Anything to the contrary contained in this
Paragraph 10(f) or in Paragraph 10(g) notwithstanding, no holder of
Registerable Securities shall be liable for indemnification and
contribution payments aggregating an amount in excess of the maximum amount
received by such holder in connection with any sale of Registerable
Securities as contemplated herein.
(g) Participation in Underwritten Registration. No Rightsholder may
participate in any underwritten registration hereunder unless such Rightsholder
(i) agrees to sell such holder's securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and to comply with Rules 10b-6 and 10b-7 under the Exchange
Act and (ii) completes and executes all questionnaires, appropriate and limited
powers of attorney, escrow agreements, indemnities, underwriting agreements and
other documents reasonably
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<PAGE>
required under the terms of such underwriting arrangement; provided, that
all such documents shall be consistent with the provisions of Paragraph 10(e)
hereof.
11. Miscellaneous.
This Warrant Certificate and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This certificate is deemed to have been delivered in the State of New
York and shall be construed and enforced in accordance with and governed by the
laws of such State. The headings in this Warrant Certificate are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
12. Expiration.
Unless as hereinafter provided, the right to exercise these Warrants
shall expire at the Expiration Time.
Dated: February 15, 2000
VIZACOM INC.
By: /s/ Mark E. Leininger
Mark E. Leininger, President
ATTEST:
/s/ Marc E. Jaffe
Marc E. Jaffe, Secretary
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EXERCISE FORM
Dated:
--------------, -----
TO: VIZACOM INC.:
The undersigned hereby irrevocably elects to exercise the within
Warrant, to the extent of purchasing _________________ shares of Common Stock,
and hereby makes payment of _____________ in payment of the actual Exercise
Price thereof.
--------------------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
----------------------------------------------------------
(Please type or print in block letters)
Taxpayer
Identification
Number:
----------------------------------------------------------
Address:
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
--------------------
Signature:
----------------------------------------------------------
(Signature must conform in all respects to the name of
the Warrantholder as set forth on the face of this
Warrant Certificate.)
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<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED,
------------------------------------------
(Please type or print in block letters)
hereby sells, assigns and transfers unto:
Name:
----------------------------------------------------------------
(Please type or print in block letters)
Taxpayer
Identification
Number:
----------------------------------------------------------------
Address:
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
this Warrant Certificate and the Warrants represented by this Warrant
Certificate to the extent of ________________ Warrants and does hereby
irrevocably constitute and appoint ___________________________ Attorney-in-Fact,
to transfer the same on the books of the Company with full power of substitution
in the premises.
Dated:
-----------------------------
Signature:
----------------------------------------------------------
(Signature must conform in all respects to the name of
the Warrantholder as set forth on the face of this
Warrant Certificate.)
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VIZACOM
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FOR MORE INFORMATION CONTACT:
WENDY BOST
[email protected]
201-928-1001 x 12
FOR IMMEDIATE RELEASE
VIZACOM INC. ACQUIRES RENAISSANCE MULTIMEDIA TO ADD
INTERNET SITE DEVELOPMENT SERVICES TO E-COMMERCE
SERVICES BUSINESS
CLIENTS INCLUDE ADP BORKERAGE, SOBE BEVERAGE, AND
PHILLIPS-VAN HEUSEN
TEANECK, NEW JERSEY - FEBRUARY 16, 2000 - VIZACOM INC. (NASDAQ: VIZY) today
announced that it has acquired Renaissance Multimedia, a privately-held,
NYC-based digital design and communications company, to add Web site design,
online branding initiatives, and interactive multimedia services as additional
offerings to its business-to-business and business- to-consumer e-commerce
services business. The company was acquired in a common stock and cash
transaction. Andrew Edwards will remain President and Creative Director of
Renaissance Multimedia, and will become a Vice President of Vizacom, under a
long-term employment contract.
"This acquisition completes a very important step in the development of our
e-services business," said Marc E. Jaffe, Chairman of the Board of Vizacom.
"We can now add an exceptional Internet design and development competency to
the range of Web-enabled call center, marketing, warehousing and fulfillment
services we have begun to provide to Internet businesses as a turnkey
solution."
Renaissance Multimedia, whose clients include Phillips-Van Heusen, SoBe
Beverage, ADP Brokerage and First Alert Professional Securities System, has
been cited by industry leaders
<PAGE>
for both its outstanding work and potential for growth. ChannelSeven.com
recently identified the company for its Spotlight Top 100, which is given to
"exceptional interactive ad agencies, Web developers, and Internet PR
agencies". Additionally, Deloitte & Touche named the company one of the top 50
fastest growing technology companies in New York City. Renaissance Multimedia
is the primary sponsor of "Silicon Alley Breakfast Club," a live panel
discussion and networking conference that brings hundreds of technology
industry luminaries together each month in New York City.
"Renaissance Multimedia brings several, competitive advantages to Vizacom's
e-commerce services business," said Mark E. Leininger, President and CEO of
Vizacom Inc. "We believe that the company's exceptional service commitment as
well as the quality of its services-- particularly graphic design and
multimedia development--are highly marketable competencies. Equally important
is the company's list of numerous, long standing corporate clients and
presence in NYC's Silicon Alley, which forms a large pool of established
contacts that we may approach to offer Vizacom's additional, e-commerce
services."
"We look forward to playing our role in Vizacom's unique and innovative vision
to providing e-services," said Andrew Edwards, President and founder of
Renaissance Multimedia. "We are also pleased that the acquisition will allow
our management team to continue to operate independently to provide our stable
of services as standalone offerings. This freedom will permit Renaissance's
unique talents and culture to continue to flourish, while providing us with
new opportunities to add significant value to our existing capabilities."
ABOUT VIZACOM INC.
Traditionally an international direct marketer and publisher of the
award-winning Harvard Graphics(R) and Serif(TM) software product lines,
Vizacom Inc. (www.vizacom.com) has taken several steps in recent months to
become a provider of multi-national, business-to-business and business-to-
consumer e-commerce services. The Company currently provides marketing,
warehousing and fulfillment services, and expects to begin providing
multi-lingual Web-enabled call center services in the near future through its
telemarketing and fulfillment centers in New Hampshire, US, Nottingham, UK,
and Aachen, Germany. The acquisition of Renaissance Multimedia and the
intended acquisition of Junction 15, a London based digital design company,
is intended to add Internet site design and related services as part of
a turnkey e-commerce solution. Vizacom also operates VisualCities.com
(www.visualcities.com), a consumer Internet commerce network that provides a
targeted online resource to the multi-billion dollar visual communications
software and hardware market.
ABOUT RENAISSANCE MULTIMEDIA
Renaissance Multimedia (www.rcac.com) specializes in providing Internet and
multimedia strategy, design and technology e-commerce solutions to leaders of
the financial, consumer, publishing and professional services industries.
Recent projects include the creation and technical development of a robust
branding and community-building site for beverage retailer Sobe Beverage, and
a corporate Web site and two major brand initiatives for Phillips-Van Heusen,
corporate parent of the well-known Izod and Van Heusen apparel brand names. As
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part of a joint venture, Renaissance Multimedia recently opened Tokyo-based
Renaissance Japan, Inc., to enter Japan's burgeoning market for Internet
development services. Founded in 1993, Renaissance Multimedia is headquartered
in NYC's Silicon Alley.
SAFE HARBOR STATEMENT
Except for historical information, the matters set forth herein which are
forward-looking statements involve certain risks and uncertainties that could
cause actual results to differ. Potential risks and uncertainties include, but
are not limited to, the market acceptance and amount of sales of the Company's
products and services, the extent that the Company's direct marketing
operations achieve satisfactory response rates, the ability of the Company to
obtain sufficient supplies of marketable products and services, the
competitive environment within the Company's industries, the Company's ability
to raise additional capital, the Company's ability to develop, acquire or
license marketable products, services and successful businesses, the success
of the Company's expansion into Internet service offerings and other Internet
programs such as Web site design, Web-enabled customer service, systems
integration and other e-commerce services, the extent that the Company is able
to generate e-commerce revenues from, build membership in, and implement
technological enhancements to, its VisualCities.com Internet commerce network,
and the Company's ability to integrate the operations of its businesses.
Investors are directed to consider other risks and uncertainties as discussed
in documents filed by the Company with the SEC.
TRADEMARKS
The Harvard Graphics product line is a group of products having no connection
with Harvard University.
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