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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
STORAGE COMPUTER CORPORATION
CYBER ACQUISITION CORPORATION
AND
CYBERSTORAGE SYSTEMS CORPORATION
DATED AS OF AUGUST 22, 2000
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of August 22, 2000 among Storage Computer Corporation, a
Delaware corporation ("Parent"), Cyber Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and
CyberStorage Systems Corporation, a Delaware corporation (the "Company").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger Sub
and the stockholders of the Company believe it is in the best interests of each
company and their respective stockholders that Parent acquire the Company
through the statutory merger of Merger Sub with and into the Company (the
"Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms and
conditions of this Agreement, all of the issued and outstanding shares of
capital stock of the Company ("Company Capital Stock") shall be converted into
the right to receive shares of voting Common Stock of Parent ("Parent Common
Stock").
C. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in Article VII hereof.
D. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE 1.
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 the
Delaware General Corporation Law ("Delaware Law") Merger Sub shall be merged
with and into the Company, the separate corporate existence of Merger Sub shall
cease, and the Company shall continue as the surviving corporation and as a
wholly-owned subsidiary of Parent. The Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
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1.2 EFFECTIVE TIME.
Unless this Agreement is earlier terminated pursuant to Section 8.1, the
closing of the Merger (the "Closing") will take place as promptly as
practicable, but no later than five (5) business days, following satisfaction or
waiver of the conditions set forth in Article 6, at the offices of Peabody &
Arnold LLP, 50 Rowes Wharf, Boston, Massachusetts 02110, unless another place or
time is agreed to by Parent and the Company. The date upon which the Closing
actually occurs is herein referred to as the "Closing Date." On the Closing
Date, the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware (the
"Merger Agreement"), in accordance with the relevant provisions of applicable
law (the time of confirmation by the Secretary of State of the State of Delaware
of such filing, or such later time as may be set forth in this Agreement, being
referred to herein as the "Effective Time").
1.3 EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as provided in the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Parent prior to the Effective Time,
at the Effective Time, the Certificate of Incorporation of the Company, 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.
(b) Unless otherwise determined by Parent, 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.
1.5 DIRECTORS AND OFFICERS.
The director(s) of Merger Sub immediately prior to the Effective Time shall
be the initial director(s) of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation. The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Bylaws of the Surviving Corporation.
1.6 CONSIDERATION TO BE ISSUED.
The consideration to be issued by Parent in the Merger (the "Merger
Consideration") shall be the number of shares of Parent Common Stock determined
by subtracting from 2,200,000 the number of shares issuable under the Assumed
Warrant and under the Assumed Options which
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Parent shall deliver to the Exchange Agent within ten (10) business days after
the Closing as set forth in Section 1.9(b) below.
1.7 DISTRIBUTION OF MERGER CONSIDERATION.
(a) Ratable Distribution. The Merger Consideration, when distributed
by the Exchange Agent (as defined in Section 1.10(a) below) pursuant to Section
1.10, shall be distributed ratably among the holders of the Company Capital
Stock in proportion to the number of shares of Company Capital Stock held by
each holder.
(b) Certificates of Securityholder Agent: Release.
(i) Certificates. Not later than five (5) days prior to the date that
the Merger Consideration is to be delivered by Parent to the Exchange Agent
pursuant to Section 1.9(b) for distribution to the former Company
stockholders, the Securityholder Agent (as defined in Section 7.2 (e)
below) shall deliver to Parent a certificate (an "Agent Certificate")
identifying each of the former Company stockholders and the portion of such
Merger Consideration that each such former Company stockholder is entitled
to receive pursuant to Section 1.7(a) above. Parent shall be entitled to
rely without investigation on the information set forth in each Agent
Certificate in delivering the Merger Consideration to the Exchange Agent
for distribution pursuant to Section 1.9(b). Notwithstanding anything to
the contrary in this Agreement, Parent shall not be obligated to deliver
any portion of the Merger Consideration to the Exchange Agent unless and
until the Securityholder Agent shall have delivered an Agent Certificate to
Parent with respect to such portion of the Merger Consideration as required
by this Section 1.7(b)(i).
(ii) Release. The Company, for itself and its officers, directors,
stockholders, partners, agents, administrators, representatives,
affiliates, predecessors in interest, successors and assigns, hereby
unconditionally and forever releases and discharges Parent, each of its
subsidiaries (including the Surviving Corporation), and each of their
respective officers, directors, stockholders, partners, agents,
administrators, representatives, affiliates, predecessors in interest,
successors and assigns (the "Released Parties") of and from any and all
claims, causes of action, liabilities, obligations, costs and expenses of
every kind and nature whatsoever, at law or in equity, whether contractual,
common law, statutory, federal, state or otherwise, known or unknown
suspected or unsuspected, direct or derivative, which now exists or may
exist at any time in the future based upon or relating in any manner to the
distribution of the Merger Consideration pursuant to this Section 1.7 or
any dispute with respect to the interpretation of the manner in which the
Merger Consideration is to be distributed pursuant to this Section 1.7.
This release shall not apply to Parent's obligation to deliver the Merger
Consideration to the Exchange Agent pursuant to Section 1.9(b) in
accordance with the information contained in the Agent Certificates.
1.8 EFFECT ON COMPANY CAPITAL STOCK.
(a) Conversion of Company Capital Stock. Each share of Company
Capital Stock issued and outstanding immediately prior to the Effective Time
(other than any shares of
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Company Capital Stock to be canceled pursuant to Section 1.8(b) shall be
canceled and extinguished and be converted automatically into the right to
receive the Merger Consideration set forth in Section 1.7, upon surrender of the
certificate representing such share of Company Capital Stock in the manner
provided in Section 1.9.
(b) Cancellation of Company-Owned Stock. Each share of Company
Capital Stock owned by the Company or any direct or indirect wholly-owned
subsidiary of the Company immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof.
(c) Stock Options and Warrants.
(i) Options Assumed. At the Effective Time, each option to purchase
Company Capital Stock listed on Schedule 2.2(b) of the Disclosure Document
issued under the Company's 2000 Stock Option Plan, as amended through the
date hereof (the "Option Plan"), or otherwise, whose holder executes the
amendment required by Section 6.3(j) below prior to the Effective Time
(each an "Assumed Option"), shall be assumed by Parent in accordance with
the provisions described below.
(A) At the Effective Time, each Assumed Option shall be, in
connection with the Merger, assumed by Parent. Each Assumed Option so
assumed by Parent under this Agreement shall be amended prior to the
Effective Time to provide that from and after the Effective Time such
Assumed Option may be exercised for the purchase (at the exercise
price set forth therein) of the number of shares of Parent Common
Stock which would have been issued in the Merger pursuant to Section
1.6 in respect of the shares of Company Capital Stock for which such
Assumed Option was originally exercisable. Except as so amended, each
Assumed Option shall continue to have, and be subject to, the same
terms and conditions set forth in the Option Plan and/or as provided
in the respective option agreements governing such Assumed Option
immediately prior to the Effective Time.
(B) Within ten (10) business days after the Closing Date, Parent
will issue to each holder of an Assumed Option a document evidencing
the foregoing assumption of such Assumed Option.
(ii) Warrant Assumed. At the Effective Time, the warrant to purchase
Company Capital Stock dated September 16, 1999 held by Green Mountain
Capital, L.P. ("GMC") shall be assumed by Parent in accordance with the
provisions described below, provided GMC executes the amendment required by
Section 6.3(j) below prior to the Effective Time (the "Assumed Warrant").
(A) At the Effective Time, the Assumed Warrant shall be, in
connection with the Merger, assumed by Parent. The Assumed Warrant
shall be amended prior to the Effective Time to provide that from and
after the Effective Time such Assumed Warrant may be exercised for the
purchase (at the exercise price set forth therein) of the number of
shares of Parent Common Stock which would have been issued in the
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Merger pursuant to Section 1.6 in respect of the shares of Company
Capital Stock for which such Assumed Warrant was originally
exercisable. Except as so amended, the Assumed Warrant shall continue
to have, and be subject to, the same terms and conditions set forth in
the First Amended and Restated Warrant Agreement dated as of September
16, 1999 by and between the Company and GMC immediately prior to the
Effective Time.
(B) Within ten (10) business days after the Closing Date, Parent
will issue to the holder of the Assumed Warrant a document evidencing
the foregoing assumption of such Assumed Warrant.
(ii) Options Not Assumed. Prior to the Effective Time, the Company and
its Board of Directors shall take all actions necessary to accelerate and
terminate each option to purchase Company Capital Stock listed on Schedule
2.2(b) of the Disclosure Document, whether issued under the Option Plan or
otherwise, whose holder does not execute the amendment required by Section
6.3(j) below prior to the Effective Time (the "Terminated Options").
(d) Capital Stock of Merger Sub. Each share of Common Stock 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 of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares of Common
Stock of the Merger Sub shall, as of the Effective Time, evidence ownership of
such shares of Common Stock of the Surviving Corporation.
(e) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof, each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall be entitled to receive, without any interest,
from Parent an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) the average of the closing
prices of Parent Common Stock on the American Stock Exchange for the five (5)
consecutive trading days ending five (5) trading days prior to the date the
Parent Common Stock from which the holder would, but for this Section 1.8(e),
otherwise be entitled to a fraction of a share is delivered by Parent to the
Exchange Agent.
1.9 SURRENDER OF CERTIFICATES.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate, subject to the consent of the Company, which will not be unreasonably
withheld or delayed, a bank or trust company to act as exchange agent (the
"Exchange Agent").
(b) Parent to Provide Common Stock. Parent shall make available to
the Exchange Agent the aggregate number of shares of Parent Common Stock
issuable pursuant to Section 1.6 within ten (10) business days after the
Closing. The portion of the Escrow Amount
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deposited on behalf of each holder of Company Capital Stock shall be in
proportion to the aggregate number of shares of Parent Common Stock which such
holder would otherwise be entitled to receive pursuant to Section 1.7 by virtue
of such holder's ownership of outstanding shares of Company Capital Stock.
(c) Exchange Procedures. Promptly after the Effective Time, the
Parent and the Surviving Corporation shall cause to be mailed to each holder of
record of a certificate or certificates (the "Certificates") which immediately
prior to the Effective Time represented outstanding shares of Company Capital
Stock and which shares were converted into the right to receive the portion of
the Merger Consideration issuable with respect to such shares pursuant to
Section 1.7, (i) a letter of transmittal (which shall, specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive in exchange therefor the portion
of the Merger Consideration issuable pursuant to Section 1.7 (less the portion
of the Merger Consideration to be deposited in the Escrow Fund on such holder's
behalf pursuant to Article 7 below) as and when the Exchange Agent receives the
Merger Consideration with respect to the shares of Company Capital Stock
represented by such Certificate, and the Certificate so surrendered shall
forthwith be canceled. Subject to and in accordance with the provisions of
Article 7 hereof, Parent shall cause to be distributed to the Escrow Agent (as
defined in Article 7) a certificate or certificates representing the number of
shares of Parent Common Stock equal to the Escrow Amount, which certificate
shall be registered in the name of the Escrow Agent. Such shares shall be
beneficially owned by the holders on whose behalf such shares were deposited in
the Escrow Fund and shall be available to compensate Parent as provided in
Article 7. Until so surrendered, each outstanding Certificate that, prior to the
Effective Time, represented shares of Company Capital Stock will be deemed from
and after the Effective Time, for all corporate purposes, other than the payment
of dividends, to evidence the right to receive in accordance with Section 1.8(a)
the portion of the Merger Consideration issuable pursuant to Section 1.7 (less
the Escrow Amount to be deposited in the Escrow Fund on such holder's behalf
pursuant to Article 7 below) as and when the Exchange Agent receives the Merger
Consideration with respect to the shares of Company Capital Stock represented by
such Certificate.
(d) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common Stock declared or made after
the date such shares are to be distributed to the holders of the Company Capital
Stock and with a record date after such date will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent 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 of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the date such shares
are to be
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distributed to the holders of the Company Capital Stock theretofore payable with
respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
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 Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.9, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Parent Common Stock or Company
Capital Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.10 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK.
All shares of Parent Common Stock issued upon the surrender for exchange of
shares of Company Capital Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Capital Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
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 1.
1.11 LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event any Certificates evidencing shares of Company Capital Stock
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common
Stock, if any, as may be required to be delivered in exchange therefor pursuant
to Section 1.7; provided, however, that Parent may, in its discretion and as a
condition precedent to 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 Parent
or the Exchange Agent with respect to the Certificates alleged to have been
lost, stolen or destroyed.
1.12 TAX AND ACCOUNTING CONSEQUENCES.
It is intended by the parties hereto that the Merger shall be accounted for
as a purchase, not a pooling of interests. It is also intended by the Company
that the Merger shall constitute a reorganization within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"). Each party
agrees to report the Merger as a reorganization within the meaning of Section
368 of the Code unless (i) there is a final determination following an audit
that the Merger does not qualify for such reporting or (ii) such party's tax
advisors conclude after
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consultation with the other party's tax advisors that there is not substantial
authority for such reporting.
1.13 TAKING OF NECESSARY ACTION; FURTHER ACTION.
If, at any time after the Effective Time, any such 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 the Company and Merger
Sub, the officers and directors of the Company 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.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are specifically disclosed in the disclosure
document (referencing the appropriate schedule or section number) supplied by
the Company to Parent (the "Company Schedules") and dated as of the date hereof
(the "Disclosure Document"), as follows:
2.1 ORGANIZATION OF THE COMPANY.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company has the corporate
power to own, operate and lease its properties and to carry on its business as
now being conducted. The Company is duly qualified or licensed to conduct its
business and is in good standing as a foreign corporation in the State of New
Hampshire, and there is no other jurisdiction within the United States in which
the failure of the Company to be so qualified or licensed would have or would
reasonably be expected to have a material adverse effect on the business, assets
(including intangible assets), financial condition, results of operations,
liabilities or prospects of the Company (hereinafter referred to as a "Material
Adverse Effect"). The Company has delivered a true and correct copy of its
Certificate of Incorporation and Bylaws, each as amended to date, to Parent.
2.2 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital stock of the Company consists of 200,000
shares of Common Stock, $.001 par value per share. As of the date hereof, there
are 100,750 shares of such Common Stock outstanding. The Company Capital Stock
is held of record by the persons, with the addresses of record and in the
amounts set forth on Schedule 2.2(a). All outstanding shares of Company Capital
Stock are duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Company or any agreement to which the Company is
a party or by which it is bound.
(b) The Company has reserved 15,625 shares of Common Stock for
issuance to employees and consultants pursuant to the Option Plan, of which
4,850 shares are subject to outstanding, unexercised options, 10,775 shares
remain available for future grant and no shares
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have been issued pursuant to the exercise of options issued under the Option
Plan. The Company has not granted any options to purchase any capital stock of
the Company outside the Option Plan. Schedule 2.2(b) sets forth for each
outstanding option to purchase any Company Capital Stock, all of which have been
issued pursuant to the Option Plan (collectively, "Options"), the name of the
holder of such Option, the last known domicile address of such holder, the
number of shares of Common Stock subject to such Option, the exercise price of
such Option and the vesting schedule for all such Options. The Company has
reserved 8,562 shares for issuance to GMC under the GMC Warrant. Except for the
Options described in Schedule 2.2(b) and the GMC Warrant, there are no options,
warrants, calls, rights, commitments or agreements of any character, written or
oral, to which the Company is a party or by which it is bound obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of the
Company or obligating the Company to grant, extend, accelerate the vesting of,
change the price of, otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. The holders of all Options have been or
will be given, or shall have properly waived, any required notice prior to the
Merger, and all such rights will be terminated at or prior to the Effective
Time. All Terminated Options will accelerate and terminate immediately prior to
the Effective Time. As a result of the Merger, Parent will be the record and
sole beneficial owner of all capital stock of the Company and rights to acquire
or receive such capital stock.
2.3 SUBSIDIARIES.
The Company has no ownership or ownership interest in any other corporation
or other entity (each, a "Subsidiary").
2.4 AUTHORITY.
Subject only to the requisite approval of the Merger and this Agreement by
the Company's stockholders, the Company 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 the Company, subject only to
the approval of the Merger and this Agreement by the Company's stockholders. The
Company's Board of Directors has unanimously approved the Merger and this
Agreement. This Agreement has been duly executed and delivered by the Company
and constitutes the valid and binding obligation of the Company, enforceable in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies. Except as set forth on Schedule 2.4, subject only to the
approval of the Merger and this Agreement by the Company's stockholders, the
execution and delivery of this Agreement by the Company does not, and, as of the
Effective Time, the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the
Certificate of Incorporation or Bylaws of the Company or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment,
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order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or its properties or assets. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, country, local or
foreign governmental authority, instrumentality, agency or commission
("Governmental Entity") or any third party (so as not to trigger any Conflict)
is required by or with respect to the Company 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 Merger Agreement with the
Delaware Secretary of State, (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and (iii) such other consents,
waivers, authorizations, filings, approvals and registrations which are set
forth on Schedule 2.4.
2.5 COMPANY FINANCIAL STATEMENTS.
(a) Schedule 2.5 sets forth (i) the Company's audited balance sheet
as of September 30, 1999 (the "Balance Sheet"), and the related unaudited
statements of operations and cash flows for the twelve-month period then ended,
and (ii) the Company's unaudited balance sheet as of July 31, 2000 and the
related unaudited statements of operations and cash flows for the ten-month
period then ended (collectively, the "Company Financials"). The Company
Financials are correct in all material respects and have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
basis consistent throughout the periods indicated and consent with each other,
except that the unaudited Company Financials do not contain all footnotes
required by GAAP. The Company Financials present fairly the financial condition
and operating results of the Company as of the dates and during the periods
indicated therein, subject to normal year-end adjustments, which adjustments
will not be material in amount or significance.
2.6 NO UNDISCLOSED LIABILITIES.
Except as set forth in Schedule 2.6, as of July 31, 2000, the Company did
not have, any liability, indebtedness, obligation, expense, claim, deficiency,
guaranty or endorsement of any type, whether accrued, absolute, contingent,
matured, unmatured or other (whether or not required to be reflected in
financial statements in accordance with GAAP), which individually or in the
aggregate, has not been reflected in the unaudited Company Financials as of July
31, 2000.
2.7 NO CHANGES.
Except as set forth in Schedule 2.7, since the date of the Balance Sheet,
there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on the date of the Balance Sheet and consistent with past
practices;
(b) amendments or changes to the Certificate of Incorporation or
Bylaws of the Company;
(c) capital expenditure or unsatisfied commitment by the Company,
either individually exceeding $10,000 or in the aggregate exceeding $25,000;
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(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not by covered by insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(f) resignation or termination of any key officers or employees of
the Company and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer or
employee;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any Company
Capital Stock;
(i) sale, lease, license or other disposition of any of the assets
or properties of the Company, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(j) amendment or termination of any material contract, agreement or
license to which the Company is a party or by which it is bound;
(k) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others, except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices;
(l) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company;
(m) commencement or notice or threat of commencement of any lawsuit
or proceeding against or investigation of the Company or its affairs;
(n) notice of any claim of ownership by a third party of Company
Intellectual Property Rights (as defined in Section 2.11 below) or of
infringement by the Company of any third party's intellectual property rights;
(o) issuance or sale by the Company of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities;
(p) change in pricing or royalties set or charged by the Company to
its customers or licensees or in pricing or royalties set or charged by persons
who have licensed Company Intellectual Property Rights to the Company;
<PAGE> 13
(q) event or condition of any character, of which the Company is
aware (after having made due inquiry), that has had or could be reasonably
expected to have a Material Adverse Effect; or
(r) negotiation or agreement by the Company or by any of its
officers or employees to do any of the things described in the preceding clauses
(a) through (q) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.8 TAX AND OTHER RETURNS AND REPORTS.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or, collectively, "Taxes" means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8:
(i) The Company as of the Effective Time will have prepared and filed
all required federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any and all
Taxes concerning or attributable to the Company or its operations, such
Returns are true and correct as to all material items and have been
completed in accordance with applicable law and no Taxes will be owing
after the Closing for any period covered by any of the Returns.
(ii) The Company as of the Effective Time: (A) will have paid or
accrued all Taxes it is required to pay or accrue and (B) will have
withheld with respect to its employees all federal and state income taxes,
FICA, FUTA and other Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment of any Tax
nor is there any Tax deficiency outstanding, proposed or assessed against
the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of
any Tax.
(iv) No audit or other examination of any Return of the Company is
currently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(v) The Company has no liabilities for unpaid federal, state, local
and foreign Taxes which have not been accrued or reserved against in
accordance with GAAP on the balance sheet, whether asserted or unasserted,
contingent or otherwise, and the Company has no knowledge of any basis of
the assertion of any such liability attributable to the Company, or its
assets or operations.
<PAGE> 14
(vi) The Company has provided to Parent copies of all federal and
state income and all state sales and use Tax Returns for all periods since
the date of the Company's incorporation.
(vii) There are (and as of immediately following the Effective Time
there will be) no liens, pledges, charges, claims, security interests or
other encumbrances of any sort ("Liens") on the assets of the Company
relating to or attributable to Taxes.
(viii) The Company has no knowledge of any basis for the assertion of
any claim relating or attributable to Taxes which, if adversely determined,
would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions
of this Agreement, covering any employee or former employee of the Company
that, individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to Section 280G or 162 of the
Code.
(xi) The Company has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to
any disposition of a subsection (f) asset (as defined in Section 341(f)(4)
of the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or allocation
agreement nor does the Company owe any amount under any such agreement.
(xiii) The Company is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xiv) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income
tax deductions is accurately reflected on the Company's tax books and
records.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES.
There is no agreement (noncompete or otherwise), commitment, judgment,
injunction, order or decree to which the Company is a party or otherwise binding
upon the Company which has or reasonably could be expected to have the effect of
prohibiting or impairing any business practice of the Company, any acquisition
of property (tangible or intangible) by the Company or the conduct of business
by the Company. Without limiting the foregoing, the Company has not entered into
any agreement under which the Company is restricted from selling, licensing or
otherwise distributing any of its products to any class of customers, in any
geographic area, during any period of time or in any segment of the market.
<PAGE> 15
2.10 TITLE TO PROPERTIES: ABSENCE OF LIENS AND ENCUMBRANCES.
(a) The Company does not own and has never owned any real property.
Schedule 2.10(a) sets forth a list of all real property currently, or at any
time in the past, leased by the Company , the name of the lessor, the date of
the lease and each amendment thereto and, with respect to any current lease, the
aggregate annual rental and/or other fees payable under any such lease. All such
current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default) by the Company or, to the
best of the Company's knowledge, by any other party thereto.
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financials or in Schedule 2.10(b) and except
for liens for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
2.11 INTELLECTUAL PROPERTY.
(a) For the purposes of this Agreement, the following terms have
the following definitions:
(i) "Intellectual Property" shall mean any or all of the following and
all rights in, arising out of, or associated therewith: (i) all United
States, international and foreign patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and
all documentation relating to any of the foregoing; (iii) all copyrights,
copyrights registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (iv) all industrial designs and
any registrations and applications therefor throughout the world; (v) all
trade names, logos, common law trademarks and service marks, trademark and
service mark registrations and applications therefor throughout the world;
(vi) all databases and data collections and all rights therein throughout
the world; and (vii) any similar or equivalent rights to any of the
foregoing anywhere in the world.
(ii) "Company Intellectual Property" shall mean any Intellectual
Property that is owned by, or exclusively licensed to, the Company.
(iii) "Registered Intellectual Property" means all United States,
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to
register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and
<PAGE> 16
applications for copyright registration; and (iv) any other Intellectual
Property that is the subject of an application, certificate, filing,
registration or other document issued, filed with, or recorded by any
state, government or other public legal authority.
(b) Schedule 2.11(b) lists all of the Registered Intellectual
Property owned by, or filed in the name of, the Company (the "Company Registered
Intellectual Property").
(c) Schedule 2.11(c) lists all proceedings or actions before any
court, tribunal (including the United States Patent and Trademark Office ("PTO")
or equivalent authority anywhere in the world) related to any Company
Intellectual Property. Except as set forth in Schedule 2.11(c), no Company
Intellectual Property or product or service of the Company is subject to any
proceeding or outstanding decree, order, judgment, agreement, or stipulation
restricting in any manner the use, transfer, or licensing thereof by the
Company, or which may affect the validity, use or enforceability of such Company
Intellectual Property.
(d) Each item of Company Registered Intellectual Property is valid
and subsisting, all necessary registration, maintenance and renewal fees in
connection with such Registered Intellectual Property have been made and all
necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property.
(e) Except as set forth in Schedule 2.11(e): (i) the Company owns
and has good and exclusive title to each item of Intellectual Property used in
connection with the operation or conduct of its business, including all Company
Registered Intellectual Property listed on Schedule 2.11(b), free and clear of
any lien or encumbrance; and (ii) the Company is the exclusive owner of all
trademarks and trade names used in connection with the operation or conduct of
its business, including the sale of any products or the provision of any
services by it.
(f) The Company owns exclusively, and has good title to, all
copyrighted works that are its products or which it otherwise purports to own.
(g) To the extent that any work, invention, or material has been
developed or created by a third party for the Company , the Company has a
written agreement with such third party with respect thereto and the Company
thereby has obtained ownership of, and is the exclusive owner of, or has a valid
license to use, all Intellectual Property in such work, material or invention by
operation of law or by valid assignment.
(h) Except as set forth in Schedule 2.11(h), the Company has not
transferred ownership of, or granted any exclusive license with respect to, any
Intellectual Property that is or was Company Intellectual Property, to any third
party.
(i) Schedule 2.11(i) lists all contracts, licenses and agreements
to which the Company is a party that are currently in effect (i) with respect to
Company Intellectual Property licensed or offered to any third party; or (ii)
pursuant to which a third party has licensed or transferred any Intellectual
Property to the Company.
<PAGE> 17
(j) The contracts, licenses and agreements listed on Schedule
2.11(i) are in full force and effect. The consummation of the transactions
contemplated by this Agreement will neither violate nor result in the breach,
modification, cancellation, termination, or suspension of such contracts,
licenses and agreements. The Company is in compliance with, and has not breached
any term any of such contracts, licenses and agreements and, to the knowledge of
the Company, all other parties to such contracts, licenses and agreements are in
compliance with, and have not breached any term of, such contracts, licenses and
agreements. To the knowledge of the Company, except as set forth in Schedule
2.11(j), following the Closing Date, the Surviving Corporation will be permitted
to exercise all of the Company's rights under the contracts, licenses and
agreements listed on Schedule 2.11(i) to the same extent the Company would have
been able to had the transactions contemplated by this Agreement not occurred
and without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company would otherwise be
required to pay.
(k) Schedule 2.11(k) lists all contracts, licenses and agreements
between the Company and any third party wherein or whereby the Company has
agreed to, or assumed, any obligation or duty to warrant, indemnify, hold
harmless or otherwise assume or incur any obligation or liability with respect
to the infringement or misappropriation by the Company or such third party of
the Intellectual Property of any third party.
(l) The operation of the business of the Company as such businesses
currently are conducted, including the Company's design, development,
manufacture, marketing and sale of the products or services (including products
currently under development), has not, does not and will not infringe or
misappropriate the Intellectual Property of any third party or constitute unfair
competition or trade practices under the laws of any jurisdiction.
(m) The Company (including its officers, directors and, to the best
of the Company's knowledge, employees) has not received notice from any third
party that the operation of its business or any act, product or service of the
Company, infringes or misappropriates the Intellectual Property of any third
party or constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(n) Except as set forth in Schedule 2.11(n), to the knowledge of
the Company: (i) no Person has or is infringing or misappropriating any Company
Intellectual Property; and (ii) there have been, and are, no claims asserted
against the Company or against any customer of the Company , related to any
product or service of the Company .
(o) The Company has taken reasonable steps to protect its rights
in its confidential information and trade secrets or any trade secrets or
confidential information of third parties provided to the Company, and, without
limiting the foregoing, the Company has and enforces a policy requiring each
employee and contractor with access to Company Intellectual Property to execute
a proprietary information/confidentiality agreement substantially in the
Company's standard form and all current and former employees and contractors of
the Company have executed such an agreement. Exhibit 2.11(o) to the Disclosure
Document is the Company's standard form of proprietary information/
confidentiality agreement for employees and contractors.
<PAGE> 18
2.12 AGREEMENTS. CONTRACTS AND COMMITMENTS.
Except as set forth on Schedule 2.12(a), the Company is not a party to or
bound by:
(i) any collective bargaining agreements;
(ii) any agreements or arrangements that contain any severance pay or
post-employment liabilities or obligations;
(iii) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements;
(iv) any employment or consulting agreement, contract or commitment
with an employee or individual consultant or salesperson or any consulting
or sales agreement, contract or commitment under which any firm or other
organization provides services to the Company;
(v) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights 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 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;
(vi) any fidelity or surety bond or completion bond;
(vii) any agreement, contract or commitment under which it has limited
or restricted its right to compete with any person in any respect;
(viii) any agreement of indemnification or guaranty;
(ix) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business or to
compete with any person;
(x) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $10,000;
(xi) any agreement, contract or commitment relating to the disposition
or acquisition of assets or any interest in any business enterprise outside
the ordinary course of the Company's 's business;
(xii) any mortgages, indentures, loans or credit agreements, security
agreements or other arrangements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(viii) hereof;
(xiii) any purchase order or contract for the purchase of raw
materials involving $10,000 or more;
<PAGE> 19
(xiv) any distribution, joint marketing or development agreement;
(xv) any assignment, license or other agreement with respect to any
form of intangible property; or,
(xvi) any other agreement, contract or commitment that involves
$10,000 or more or is not cancelable without penalty within thirty (30)
days.
Except for such alleged breaches, violations and defaults, and events that would
constitute a breach, violation or default with the lapse of time, giving of
notice, or both, which (i) are noted in Schedule 2.12(b) or (ii) would not
individually or in the aggregate have a Material Adverse Effect, the Company has
not breached, violated or defaulted under, or received notice that it has
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract or commitment required to be set forth on Schedule 2.12(a)
or Schedule 2.11(i) (any such agreement, contract or commitment, a "Contract").
Each Contract is in full force and effect and, except as otherwise disclosed in
Schedule 2.12(b), is not subject to any default thereunder of which the Company
has knowledge by any party obligated to the Company pursuant thereto.
2.13 INTERESTED PARTY TRANSACTIONS.
Except as set forth on Schedule 2.13, no officer, director or, to the best
of the Company's knowledge, stockholder of the Company (nor any ancestor,
sibling, descendant or spouse of any of such persons, or any trust, partnership
or corporation in which any of such persons has or has had an interest), has or
has had, directly or indirectly, (i) an economic interest in any entity which
furnished or sold, or furnishes or sells, services or products that the Company
furnishes or sells or proposes to furnish or sell, (ii) an economic interest in
any entity that purchases from or sells or furnishes to, the Company, any goods
or services or (iii) a beneficial interest in any contract or agreement set
forth in Schedule 2.12(a) or Schedule 2.11(i); provided, that ownership of no
more than one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "economic interest in any entity" for
purposes of this Section 2.13.
2.14 COMPLIANCE WITH LAWS.
To the best of its knowledge, the Company has complied in all respects
with, is not in violation of, and has not received any notices of violation with
respect to, any foreign, federal, state or local statute, law or regulation, the
failure to comply with which would have a Material Adverse Effect.
2.15 LITIGATION.
Except as set forth in Schedule 2.15, there is no action, suit or
proceeding of any nature pending or, to the best of the Company's knowledge,
threatened against the Company , its properties or any of its officers or
directors, in their respective capacities as such. Except as set forth in
Schedule 2.15, there is no investigation pending or, to the best of the
Company's knowledge, threatened against the Company, its properties or any of
its officers or directors by or before any governmental entity. Schedule 2.15
sets forth, with respect to any pending or threatened action, suit, proceeding
or investigation, the forum, the parties thereto, the subject matter thereof and
the amount of damages, claims or other remedy requested. To the best of the
<PAGE> 20
Company's knowledge, no governmental entity has at any time challenged or
questioned the legal right of the Company to conduct its business in the present
manner or style thereof.
2.16 INSURANCE.
Schedule 2.16 lists all insurance policies maintained by the Company, which
policies are valid and enforceable, and there is no, claim by the Company
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies have been paid and the
Company is otherwise in material compliance with the terms of such policies (or
other policies and bonds providing substantially similar insurance coverage).
The Company has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.17 MINUTE BOOKS.
The minute books of the Company made available to counsel for Parent are
the only minute books of the Company and contain a reasonably accurate summary
of all meetings of directors (or committees thereof) and stockholders or actions
by written consent since the time of incorporation of the Company. The Company
is in full compliance with all of the terms and provisions of its Certificate of
Incorporation and Bylaws.
2.18 RELATIONSHIPS WITH SUPPLIERS AND LICENSERS.
No current supplier to the Company has notified it of an intention to
terminate or substantially alter its existing business relationship with the
Company nor has any licenser under a license agreement with the Company notified
the Company of an intention to terminate or substantially alter the Company's
rights under such license.
2.19 TRADE SECRETS.
The Company has taken reasonable security measures to protect the
confidentiality of its trade secrets. All current and past employees or
consultants of the Company who, either alone or in concert with others,
developed, invented, discovered, derived, programmed or designed such trade
secrets, or who have or had access to information disclosing such trade secrets,
have entered into confidentiality and non-disclosure agreements with the Company
(the "Trade Secret Agreements"). Any exception which has been taken to the Trade
Secrets Agreements (for example an employee or consultant excluding a prior
invention) is described in Schedule 2.19, including the exception taken and the
employee taking such exception. To the Company's knowledge, neither the Company
nor any employees or consultants of the Company have caused any of the Company's
's trade secrets to become part of the public knowledge or literature, nor has
the Company or any of the employees or consultants of the Company permitted any
such trade secrets to be used, divulged or appropriated for the benefit of
persons to the material detriment of the Company.
<PAGE> 21
2.20 ENVIRONMENTAL MATTERS.
(a) The Company is not in violation of any Federal, state or local
Environmental Law (as defined below), which violation could reasonably be
expected to result in a material liability to the Company or its properties and
assets. Neither the Company nor, to the knowledge of the Company, any third
party has used, released, discharged, generated, manufactured, produced, stored,
or disposed of in, on, under or about its owned or leased property or other
assets, or transported thereto or therefrom, any Hazardous Materials (as defined
below) in a manner that could reasonably be expected to subject the Company to a
material liability under any Environmental Law; there are no underground tanks,
whether operative or temporarily or permanently closed, located on its owned or
leased property or other assets; there are no polychlorinated biphenyls ("PCBs")
or items containing PCBs used, stored or present at, on or, to the knowledge of
the Company, near its owned or leased property or assets; and there is or has
been no condition, circumstance, action, activity or event that could reasonably
be expected to form the basis of any violation of, or material liability to the
Company under, any local, state or Federal Environmental Law.
(b) There is no proceeding, investigation or inquiry by any local,
state or Federal governmental authority or any non-governmental third party with
respect to the presence or release of such Hazardous Materials in, on, from or
to the Company's 's owned or leased property and, to the knowledge of the Comp,
no such proceedings are threatened or contemplated by any such governmental
authorities or non-governmental third parties.
(c) For purposes of this Agreement, (i) "Environmental Law" means
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (42 U. S. C. Sections 9601, et seq.)("CERCLA"); the Federal
Clean Water Act (33 U. S. C. Sections 1251, et seq.); the Federal Clean Air Act
(42 U. S. C. Section 7401); Federal Insecticide, Fungicide, and Rodenticide Act
(7 U. S. C.ss.ss.136 et seq.); Toxic Substances Control Act (15 U. S.
C.ss.ss.2601 et seq.); Resource Conservation and Recovery Act (42 U. S.
C.ss.ss.6901 et seq.)("RCRA"); and Emergency Planning and Community Right to
Know Act (42 U. S. C.ss.ss.11001 et seq.), together with applicable state and
local laws of similar substance, and (ii) "Hazardous Materials" shall mean
substances defined as "hazardous substances," "hazardous materials," or "toxic
substances" in CERCLA, the Hazardous Materials Transportation Act (49 U. S. C.
Section 1801, et seq.) and RCRA; those substances defined as "hazardous waste,"
"hazardous materials" or "regulated substances" by RCRD; those substances
designated as a "hazardous substance" pursuant to Section 311 of the Federal
Water Pollution Control Act (33 U. S. C.ss.1317); those substances regulated as
a hazardous chemical substance or mixture or as an imminently hazardous chemical
substance or mixture pursuant to Section 6 or 7 of the Toxic Substances Control
Act (15 U. S. C.ss.ss.2605, 2606); those substances defined as a pesticide
pursuant to Section 136(u)of the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U. S. C. ss.136(u)); those substances defined as hazardous waste
constituents in 40 CFR 260.10, specifically including Appendix VII and VIII of
Subpart D of 40 CFR 261; and those substances defined by the Atomic Energy Act
of 1954, as amended (42 U. S. C.ss.ss.3011, et seq., as amended)as a source,
special nuclear or by-product material; and in the regulations adopted and
publications promulgated pursuant to said laws.
<PAGE> 22
2.21 BROKERS' AND FINDERS' FEES: THIRD PARTY EXPENSES.
Except as set forth on Schedule 2.21, the Company 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. Schedule 2.21 sets forth the
principal terms and conditions of any agreement, written or oral, with respect
to such fees. Schedule 2.21 sets forth the Company's current reasonable estimate
of all Third Party Expenses (as defined in Section 5.5) expected to be incurred
by the Company in connection with the negotiation and effectuation of the terms
and conditions of this Agreement and the transactions contemplated hereby.
2.22 PERMITS AND LICENSES.
Schedule 2.22 contains a complete and correct copy of each pending
application or registration for governmental approval and each governmental
approval held by the Company to develop, manufacture, test, import, export,
store, market and sell the Company's 's products. Except as set forth in
Schedule 2.22, (i) the Company possesses such governmental approvals from all
governmental bodies necessary to permit the operation of its business in the
manner as the same is currently conducted, and to operate, own or occupy its
properties, (ii) there have been no product recalls, field corrective activity,
warning letters or administrative actions by any governmental body, and (iii) to
the best of the Company's knowledge (aa) there is no administrative action
pending or threatened for the revocation of any such governmental approval and
(bb) assuming the obtaining of the authorizations, consents, approvals and other
actions listed in Schedule 2.22, no governmental approval by any governmental
body having jurisdiction over the operation of the Company's 's businesses,
whether in whole or in part, will be revoked, or become ineffective or subject
to revocation, as a consequence of the transactions contemplated by this
Agreement.
2.23 EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.23(a)(i) below (which definition shall apply
only to this Section 2.23), for purposes of this Agreement; the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
control with the Company within the meaning of Section 414(b), (c), (m) or
(o)of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended;
(iii) "Company Employee Plan" shall refer to any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or unfunded
and whether or not legally binding, including without limitation, each
"employee benefit plan" within the meaning of Section 3(3) of ERISA, which
is or has been maintained, contributed to, or required to be contributed
to, by the Company or any
<PAGE> 23
Affiliate for the benefit of any "Employee" (as defined below), and
pursuant to which the Company or any Affiliate has or may have any material
liability contingent or otherwise;
(iv) "Employee" shall mean any current, former or retired employee,
officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each management, employment,
severance, consulting, relocation, repatriation, expiration, visas, work
permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA; and
(viii) "Pension Plan" shall refer to each Company Employee Plan which
is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Schedule 2.23(b) contains an accurate and complete
list of each Company Employee Plan and each Employee Agreement, together with a
schedule of all liabilities, whether or not accrued, under each such Company
Employee Plan or Employee Agreement. The Company does not have any plan or
commitment, whether legally binding or not, to establish any new Company
Employee Plan or Employee Agreement, to modify any Company Employee Plan or
Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement, nor does it have any intention or commitment to do any of
the foregoing.
(c) Documents. The Company has provided to Parent (i) correct and
complete copies of all documents embodying or relating to each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code in connection with each Company Employee Plan or related trust; (iv) if
the Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each Company Employee Plan; (vi) all
IRS determination letters and rulings relating to Company Employee Plans and
copies of all applications and correspondence to or from the IRS or the
Department of Labor ("DOL") with respect to any Company Employee Plan; (vii) all
communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company;
<PAGE> 24
and (viii) all registration statements and prospectuses prepared in connection
with each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.23(d), (i) the Company has performed in all material respects all obligations
required to be performed by it under each Company Employee Plan, and each
Company Employee Plan has been established and maintained in all materials
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) no "prohibited transaction," within the meaning of
Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to
any Company Employee Plan; (iii) there are no actions, suits or claims pending,
or, to the best of the Company's knowledge, threatened or anticipated (other
than routine claims for benefits) against any Company Employee Plan or against
the assets of any Company Employee Plan; (iv) each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to the Company, Parent or any of
its Affiliates (other than ordinary administration expenses typically incurred
in a termination event); (v) there are no inquiries or proceedings pending or,
to the best of the Company's knowledge, threatened by the IRS or DOL with
respect to any Company Employee Plan; (vi) the Company is not subject to any
penalty or tax with respect to any Company Employee Plan under Section 402(i) of
ERISA or Section 4975 through 4980 of the Code; and (vii) all contributions,
including any top heavy contributions, required to be made by the Company or any
ERISA affiliate to any Company Employee Plan have been made or shall be made on
or before the Closing Date.
(e) Pension Plans. The Company does not currently maintain,
sponsor, participate in or contribute to, nor has it ever maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA
or Section 4.12 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to
or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in
Schedule 2.23(g), no Company Employee Plan provides, or has any liability to
provide, life insurance, medical or other employee benefits to any Employee upon
his or her retirement or termination of employment for any reason, including
continuation health care coverage under Section 4980B of the Code, and the
Company has never represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
that such Employee(s) would be provided with life insurance, medical or other
employee welfare benefits upon their retirement or termination of employment.
(h) Effect of Transaction.
(i) Except as set forth on Schedule 2.23(h)(i), the execution of this
Agreement and the consummation of the transactions contemplated hereby will
not (either alone or upon the occurrence of any additional or subsequent
events) constitute an event under any Company Employee Plan, Employee
Agreement, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of
<PAGE> 25
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.23(h)(ii), no payment or
benefit which will or may be made by the Company, any or Parent or any of
their respective Affiliates with respect to any Employee will be
characterized as an "excess parachute payment" within the meaning of
Section 280G(b)(1) of the Code.
(i) Employment Matters. The Company (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries, and other payments to Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(j) Labor. No work stoppage or labor strike against the Company is
pending or, to the best knowledge of the Company, threatened. Except as set
forth in Schedule 2.23(j), the Company is not involved in or, to the knowledge
of the Company, threatened with, any labor dispute, grievance, or litigation
relating to labor, safety or discrimination matters involving any Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in liability to the Company. The Company has not
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act which would, individually or in the aggregate, directly or
indirectly result in a liability to the Company. Except as set forth in Schedule
2.23(j), the Company is not presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Employees and no collective bargaining agreement is being negotiated by the
Company.
2.24 EMPLOYEES.
To the best of the Company's knowledge, no employees of the Company (i) are
in violation of any term of any employment contract, patent disclosure
agreement, non-competition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by the
Company because of the nature of the business conducted or presently proposed to
be conducted by the Company or to the use of trade secrets or proprietary
information of others and (ii) have given notice to the Company, nor is the
Company otherwise aware, that any such employee intends to terminate his or her
employment with the Company.
2.25 DISTRIBUTION OF MERGER CONSIDERATION.
The Merger Consideration, when distributed in accordance with Sections 1.7,
shall be distributed to the holders of Company Capital Stock in accordance with
the provisions of the Company's Certificate of Incorporation in effect
immediately prior to the Effective Time and any
<PAGE> 26
other document or agreement among the Company and such holders related to the
distribution of the Merger Consideration. No holder of Company Capital Stock
shall have any claims against Parent in connection with the distribution of the
Merger Consideration pursuant to Sections 1.7 and 1.8 (other than for the
failure to distribute the Merger Consideration to the Exchange Agent in
accordance with the information contained in the Agent Certificates). For
purposes of this Section 2.25, the holders of the Company Capital Stock shall
include each holder of an Assumed Option that timely and properly exercises the
Assumed Option after the Closing.
2.26 REPRESENTATION COMPLETE.
None of the representations or warranties made by the Company (as modified
by the Company Schedules), nor any statement made in any schedule or certificate
furnished by the Company pursuant to this Agreement, or furnished in or in
connection with documents mailed or delivered to the stockholders of the Company
in connection with soliciting their consent to this Agreement and the Merger,
contains or will contain at the Effective Time, any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading. The Company has
disclosed to Parent all facts that are known to the Company to be material
(individually or in the aggregate) to the business, assets, liabilities,
financial condition, prospects or operations of the Company.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 ORGANIZATION, STANDING AND POWER.
Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of Parent and Merger Sub has the corporate power to own,
operate and lease its properties and to carry on its business as now being
conducted and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a material adverse effect on Parent and Merger Sub as a whole.
3.2 AUTHORITY.
Parent and Merger Sub have 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 Parent and Merger Sub. This Agreement has been
duly executed and delivered by Parent and Merger Sub and constitutes the valid
and binding obligations of Parent and Merger Sub, enforceable in accordance with
its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable
<PAGE> 27
remedies. The execution and delivery of this Agreement by the Parent does not,
and, as of the Effective Time, the consummation of the transactions contemplated
hereby will not, conflict with, or result in any violation of, or default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the
Certificate of Incorporation or Bylaws of the Parent or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Parent or its properties or assets. No consent,
waiver, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other federal,
state, country, local or foreign governmental authority, instrumentality, agency
or commission or any third party (so as not to trigger any Conflict) is required
by or with respect to the Parent 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 Certificate of Merger with the Delaware
Secretary of State and (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws.
3.3 CAPITAL STRUCTURE.
(a) The authorized stock of Parent consists of 25,000,000 shares
of Parent Common Stock, of which 12,161,810 shares were issued and outstanding
as of August 18, 2000, and 1,000,000 shares of Preferred Stock, of which 90,000
shares have been designated Series A 8% Convertible Preferred Stock ("Series A
Stock") and 910,000 shares remain undesignated; as of August 18, 2000, 60,000
shares of Series A Stock, and no other shares of Preferred Stock were issued and
outstanding. The authorized capital stock of Merger Sub consists of 100 shares
of Common Stock, all of which, as of the date hereof, are issued and outstanding
and are held by Parent. All such shares have been duly authorized, and all such
issued and outstanding shares have been validly issued, are fully paid and
nonassessable and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof.
(b) Except for options granted under the Parent's 1994 and 1999
Stock Incentive Plans or as disclosed to the Company by the Parent in writing,
there are no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Parent is a party or by which it is
bound obligating the Parent to issue, deliver, or sell, or cause to be issued,
delivered, or sold, any shares of the capital stock of the Parent.
(c) The shares of Parent Common Stock to be issued pursuant to the
Merger, when issued, will be duly authorized, validly issued, fully paid and
nonassessable.
3.4 SEC DOCUMENTS: PARENT FINANCIAL STATEMENTS.
Parent has furnished or made available to the Company true and complete
copies of all reports or registration statements filed by it with the U. S.
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") for all periods since January 1, 1998,
all in the form so filed (all the foregoing being collectively referred to as
the "SEC Documents"). As of their respective filing dates, the SEC Documents
<PAGE> 28
complied in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading, except to the extent corrected by a
document subsequently filed with the SEC. The financial statements of Parent,
including the notes thereto, included in the SEC Documents (the "Parent
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and present
fairly the consolidated financial position of Parent at the dates thereof and
the consolidated results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal audit
adjustments). There has been no change in Parent accounting policies except as
described in the notes to the Parent Financial Statements.
3.5 TITLE TO PROPERTIES: ABSENCE OF LIENS AND ENCUMBRANCES.
The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens except as reflected in the financial
statements included in the Parent's most recently filed report on Form 10-Q or
as disclosed in writing by the Parent to the Company and except for liens for
taxes not yet due and payable and such imperfections of title and encumbrances,
if any, which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present use,
of the property subject thereto or affected thereby.
3.6 INTELLECTUAL PROPERTY.
(a) Each item of Registered Intellectual Property owned by the
Parent or any Subsidiary is valid and subsisting, all necessary registration,
maintenance and renewal fees in connection with such Registered Intellectual
Property have been made and all necessary documents and certificates in
connection with such Registered Intellectual Property have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of maintaining
such Registered Intellectual Property.
(b) The Parent owns and has good and exclusive title to, or a
valid license to use, each item of Intellectual Property used in connection with
the operation or conduct of its business, free and clear of any Lien (except as
disclosed in writing by the Parent to the Company) and the Parent is the
exclusive owner of all trademarks and trade names used in connection with the
operation or conduct of its business, including the sale of any products or the
provision of any services by it.
(c) The Parent owns exclusively, and has good title to, all
copyrighted works that are its products or which it otherwise purports to own.
<PAGE> 29
(d) The operation of the business of the Parent and its
Subsidiaries as such businesses currently are conducted, including the Parent's
design, development, manufacture, marketing and sale of its products and
services (including products currently under development), has not, does not and
will not infringe or misappropriate the Intellectual Property of any third party
or constitute unfair competition or trade practices under the laws of any
jurisdiction.
(e) The Parent (including its officers, directors and, to the best
of the Parent's knowledge, employees) has not received notice from any third
party that the operation of the business of the Parent and its Subsidiaries or
any act, product or service of the Parent, infringes or misappropriates the
Intellectual Property of any third party or constitutes unfair competition or
trade practices under the laws of any jurisdiction.
(f) The Parent has taken reasonable steps to protect its rights in
its confidential information and trade secrets or any trade secrets or
confidential information of third parties provided to the Parent or its
Subsidiaries, and, without limiting the foregoing, the Parent has and enforces a
policy requiring each employee and contractor with access to the Intellectual
Property of the Parent or any Subsidiary to execute a proprietary
information/confidentiality agreement substantially in the Parent's standard
form.
3.7 NO MATERIAL ADVERSE CHANGE.
Since the date of the balance sheet included in the Parent's most recently
filed report on Form 10-Q, Parent has conducted its business in the ordinary
course and there has not occurred: (a) any material adverse change in the
financial condition, liabilities, assets (including intellectual property
assets) or business of Parent; (b) any amendment or change in the Certificate of
Incorporation or Bylaws of Parent; or (c) any damage to, destruction or loss of
any assets of Parent (whether or not covered by insurance) that materially and
adversely affects the financial condition or business of Parent.
3.8 RESTRICTIONS ON BUSINESS ACTIVITIES.
There is no agreement (noncompete or otherwise), commitment, judgment,
injunction, order or decree to which the Parent or any Subsidiary is a party or
otherwise binding upon the Parent or any Subsidiary which has or reasonably
could be expected to have the effect of prohibiting or impairing any business
practice of the Parent or any Subsidiary, any acquisition of property (tangible
or intangible) by the Parent or any Subsidiary or the conduct of business by the
Parent or any Subsidiary. Without limiting the foregoing, neither the Parent nor
any Subsidiary has entered into any agreement under which the Parent or
Subsidiary is restricted from selling, licensing or otherwise distributing any
of its products to any class of customers, in any geographic area, during any
period of time or in any segment of the market.
3.9 MINUTE BOOKS.
The minute books of the Parent made available to counsel for the Company
are the only minute books of the Parent and contain a reasonably accurate
summary of all meetings of directors (or committees thereof) and stockholders or
actions by written consent since the time of
<PAGE> 30
incorporation of the Parent. The Parent is in full compliance with all of the
terms and provisions of its Certificate of Incorporation and Bylaws.
3.10 COMPLIANCE WITH LAWS.
To the best of Parent's knowledge, the Parent and each Subsidiary has
complied in all respects with, is not in violation of, and has not received any
notices of violation with respect to, any foreign, federal, state or local
statute, law or regulation, the failure to comply with which would have a
Material Adverse Effect.
3.11 LITIGATION.
There is no action, suit or proceeding of any nature pending or, to the
best of Parent's knowledge, threatened against the Parent or any Subsidiary, its
properties or any of its officers or directors, in their respective capacities
as such, the outcome of which would, or would reasonably be expected to have, a
Material Adverse Effect. There is no investigation pending or, to the best of
Parent's knowledge, threatened against the Parent or any Subsidiary, its
properties or any of its officers or directors by or before any governmental
entity. No governmental entity has at any time challenged or questioned the
legal right of the Parent or any Subsidiary to conduct its business in the
present manner or style thereof.
3.12 EMPLOYEES.
To the best of the Parent's knowledge, no employees of the Parent or any
Subsidiary (i) are in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any restrictive covenant to
a former employer relating to the right of any such employee to be employed by
the Parent because of the nature of the business conducted or presently proposed
to be conducted by the Parent or the Subsidiary or to the use of trade secrets
or proprietary information of others and (ii) have given notice to the Parent or
any Subsidiary, nor is the Parent or any Subsidiary otherwise aware, that any
such employee intends to terminate his or her employment with the Parent or any
Subsidiary.
3.13 REPRESENTATIONS COMPLETE.
None of the representations or warranties made by the Parent (as modified
by the Parent Schedules), nor any statement made in any schedule or certificate
furnished by the Parent pursuant to this Agreement, or furnished in or in
connection with documents mailed or delivered to the stockholders of the Company
in connection with soliciting their consent to this Agreement and the Merger,
contains or will contain at the Effective Time, any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
<PAGE> 31
ARTICLE 4.
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF THE COMPANY.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement and the Effective Time, the Company
agrees (except to the extent that Parent shall otherwise consent in writing) 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, to
pay or perform other obligations when due, and, to the extent consistent with
such business, to use all reasonable efforts consistent with past practice and
policies to preserve intact its present business organization, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensers, and others
having business dealings with it, all with the goal of preserving unimpaired its
goodwill and ongoing businesses at the Effective Time. The Company shall
promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of its business, and any material event involving or adversely
affecting the Company or its business. Except as expressly contemplated by this
Agreement, the Company shall not, without the prior written consent of Parent:
(a) Enter into any commitment, activity or transaction not in the
ordinary course of business;
(b) Transfer to any person or entity any rights to any Company
Intellectual Property Rights;
(c) Enter into or amend any agreements pursuant to which any other
party is granted manufacturing, marketing, distribution or similar rights of any
type or scope with respect to any products of the Company;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Company Schedules;
(e) Amend or otherwise modify (or agree to do so), or violate the
terms of, any of the agreements set forth or described in Schedule 2.11(i);
(f) Commence any litigation or any dispute resolution process;
(g) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any Company
Capital Stock, or split, combine or reclassify any Company Capital Stock or
issue or authorize' the issuance of any other securities in respect of, in lieu
of or in substitution for shares of Company Capital Stock, or repurchase, redeem
or otherwise acquire, directly or indirectly, any shares of Company Capital
Stock (or options, warrants or other rights exercisable therefor);
<PAGE> 32
(h) Except for the issuance of shares of Company Capital Stock upon
exercise or conversion of presently outstanding Options and the GMC Warrant,
issue, grant, deliver or sell or authorize or propose the issuance, grant,
delivery or sale of, or purchase or propose the purchase of, any shares of
Company Capital Stock or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities;
(i) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
(j) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, 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
the Company;
(k) Fail in any material respect to comply with any laws,
ordinances, regulations or other governmental restrictions applicable to the
Company;
(l) Sell, lease, license or otherwise dispose of any of its
properties or assets except in the ordinary course of business and consistent
with past practice;
(m) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of the Company or guarantee
any debt securities of others;
(n) Grant any severance or termination pay to any director,
officer, employee or consultant;
(o) Adopt or amend any employee benefit plan, program, policy or
arrangement, or enter into any employment contract, extend any employment offer,
pay or agree to pay any special bonus or special remuneration to any director,
employee or consultant, or increase the salaries or wage rates of its employees;
(p) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business and consistent with past practice;
(q) Pay, discharge or satisfy, in an amount in excess of $10,000,
in any one case or $25,000, in the aggregate, 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 of
liabilities reflected or reserved against in the Company Financial Statements;
(r) Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
<PAGE> 33
(s) Enter into any strategic alliance, joint development or joint
marketing arrangement or agreement;
(t) Fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith;
(u) Waive or commit to waive any rights with a value in excess of
$10,000, in any one case, or $25,000, in the aggregate;
(v) Cancel, materially amend or renew any insurance policy other
than in the ordinary course of business;
(w) Alter, or enter into any commitment to alter, its interest in
any corporation, association, joint venture, partnership or business entity in
which the Company directly or indirectly holds any interest on the date hereof;
and
(x) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (w) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
4.2 CONDUCT OF BUSINESS OF THE PARENT AND MERGER SUB.
(a) During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement and the
Effective Time, the Parent agrees as to itself and its Subsidiaries (except to
the extent that the Company shall otherwise consent in writing) 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, to pay or
perform other obligations when due, and, to the extent consistent with such
business, to use all reasonable efforts consistent with past practice and
policies to preserve intact its present business organization, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensers, and others
having business dealings with it, all with the goal of preserving unimpaired its
goodwill and ongoing businesses at the Effective Time. The Parent shall promptly
notify the Company of any event or occurrence or emergency not in the ordinary
course of its business, or the business of any of its subsidiaries and any
material event involving or adversely affecting the Parent each or its business.
4.3 NO SOLICITATION.
Until the earlier of the Effective Time and the date of termination of this
Agreement pursuant to the provisions of Section 8.1 hereof, the Company will not
(nor will the Company permit any of the Company's officers, directors,
stockholders, agents, representatives or affiliates to) directly or indirectly,
take any of the following actions with any party other than Parent and its
designees: (a) solicit, initiate, entertain, or encourage any proposals or
offers from, or conduct discussions with or engage in negotiations with, any
person relating to any possible acquisition of the Company (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise), any
material portion of its or their capital stock or assets or any equity interest
in the Company; (b) provide information with respect to it to any person, other
than Parent, relating to, or otherwise cooperate with, facilitate or encourage
any effort or attempt by any such person with
<PAGE> 34
regard to, any possible acquisition of the Company (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise), any material
portion of its or their capital stock or assets or any equity interest in the
Company; (c) enter into an agreement with any person, other than Parent,
providing for the acquisition of the Company (whether by way of merger, purchase
of capital stock, purchase of assets or otherwise), any material portion of its
or their capital stock or assets or any equity interest in the Company; or (d)
make or authorize any statement, recommendation or solicitation in support of
any possible acquisition of the Company (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any material portion of its or
their capital stock or assets or any equity interest in the Company by any
person, other than by Parent. The Company shall immediately cease and cause to
be terminated any such contacts or negotiations with third parties relating to
any such transaction or proposed transaction. Except as contemplated by this
Agreement (including, without limitation, the disclosure to the Company's
stockholders contemplated by Section 5.1(c) below), disclosure by the Company of
the terms hereof (other than the prohibition of this section) shall be deemed to
be a violation of this Section 4.3.
ARTICLE 5.
ADDITIONAL AGREEMENTS
5.1 SALE OF SHARES: STOCKHOLDER MATTERS.
(a) Sale of Shares. The parties hereto acknowledge and agree that
the that shares of Parent Common Stock issuable to the stockholders pursuant to
Sections 1.6 and 1.7 hereof, shall constitute "restricted securities" within the
meaning of the Securities Act. The certificates for shares of Parent Common
Stock to be issued in the Merger shall bear appropriate legends to identify such
privately placed shares as being restricted under the Securities Act and to
comply with applicable state securities laws. It is acknowledged and understood
that Parent is relying upon the written representations made by each stockholder
in the Stockholder Questionnaire in determining the availability of exemptions
from the registration and qualification provisions of applicable securities laws
for the issuance of the Parent Common Stock in the Merger.
(b) Stockholder Questionnaire. The Company will use reasonable
efforts to cause each stockholder of the Company to execute and deliver to
Parent a Stockholder Questionnaire in form reasonably acceptable to the Parent
(the "Stockholder Questionnaire").
(c) Company Stockholder Approval. As promptly as practicable after
the execution of this Agreement, the Company shall submit this Agreement and the
transactions contemplated hereby to its stockholders for approval and adoption
as provided by Delaware Law and the Company's Certificate of Incorporation and
Bylaws. The Company shall use its best efforts to solicit and obtain the written
consent of its stockholders to approve the Merger and this Agreement and to
enable the Closing to occur as promptly as practicable.
(d) Additional Assurances. At the request of Parent, the Company
shall use its best efforts to cause the Company's stockholders to execute and
deliver to Parent such instruments and do and perform such acts and things as
may be necessary or desirable for complying with all applicable securities laws
and state corporate law.
<PAGE> 35
5.2 ACCESS TO INFORMATION.
Each party shall afford the others and their accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (a) all of its properties, books,
contracts, commitments and records, and (b) all other information concerning its
business, properties and personnel (subject to restrictions imposed by
applicable law)as the others may reasonably request, subject, in the case of
Parent, to reasonable limits on access to its technical and other non-public
information. No information or knowledge obtained in any investigation pursuant
to this Section 5.2 shall affect or be deemed to modify any representation or
warranty contained herein or, except as provided by Section 6.3(n), the
conditions of the parties to consummate the Merger.
5.3 CONFIDENTIALITY.
Each of the parties hereto hereby agrees that such information or knowledge
obtained in any investigation pursuant to Section 5.2, or pursuant to the
negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby shall constitute "Confidential Information" as
defined in the Confidentiality Agreement between Parent and the Company dated
July 21, 2000 (the "Confidentiality Agreement"), and shall be subject to all of
the restrictions applicable to Confidential Information, including without
limitation the restrictions on disclosure and use, contained in the
Confidentiality Agreement.
5.4 INTELLECTUAL PROPERTY.
Parent and the Company each agree that prior to the Merger, any and all
intellectual property, including trade secrets, created or developed by either
party shall remain the exclusive property of the party who created or developed
such property, notwithstanding the sharing of information prior to the Merger.
5.5 EXPENSES.
All fees and expenses incurred in connection with the Merger including,
without limitation, all legal, accounting, financial advisory, consulting,
investment banking, broker and finder fees and expenses and all other fees and
expenses of third parties (collectively, "Third Party Expenses") incurred by a
party in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby shall be
the obligation of the respective party incurring such fees and expenses;
provided, however, that if the Closing occurs, the Parent shall cause all such
Third Party Expenses of the Company to be paid in accordance with the Parent's
usual payment practices.
5.6 PUBLIC DISCLOSURE.
Unless otherwise required by law, prior to the Effective Time no disclosure
(whether or not in response to an inquiry) of the subject matter of this
Agreement shall be made by the Company unless approved by the Parent prior to
release, provided that such approval shall not be unreasonably withheld.
<PAGE> 36
5.7 CONSENTS.
The Company shall use its best efforts to obtain the consents, waivers and
approvals under any of the Contracts as may be required in connection with the
Merger (all of such consents, waivers and approvals are set forth in Company
Schedules) so as to preserve all rights of and benefits to the Company
thereunder.
5.8 FIRPTA COMPLIANCE.
On or prior to the Closing Date, the Company shall deliver to Parent a
properly executed statement in a form reasonably acceptable to Parent for
purposes of satisfying Parent's obligations under Treasury Regulation Section
1.1445-2(c)(3).
5.9 REASONABLE EFFORTS.
Subject to the terms and conditions provided in this Agreement, each of the
parties hereto shall use its reasonable efforts to ensure that its
representations and warranties remain true and correct in all material respects,
and to take promptly, or cause to be taken, all actions, and to do promptly, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals, to
effect all necessary registrations and filings, and to remove any injunctions or
other impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement;
provided, however, that Parent shall not be required to agree to any divestiture
by Parent or the Company or any of Parent's subsidiaries or affiliates of shares
of capital stock or any business, assets or property of Parent or its
subsidiaries or affiliates or the Company or its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
5.10 NOTIFICATION OF CERTAIN MATTERS.
The Company shall give prompt notice to Parent of (i) the occurrence or
non-occurrence of any event, the occurrence or nonoccurrence of which is likely
to cause any representation or warranty of the Company contained in this
Agreement to be untrue or inaccurate at or prior to the Effective Time and (ii)
any failure of the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.10 shall not limit or
otherwise affect any remedies available to Parent.
5.11 CERTAIN BENEFIT PLANS.
Parent shall take such reasonable actions as are necessary to allow
eligible employees of the Company as of the Effective Time to participate in the
benefit programs of Parent as soon as practicable after the Effective Time.
<PAGE> 37
5.12 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES.
Each party hereto, at the request of the other party hereto, shall 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
this Agreement and the transactions and contemplated hereby.
5.13 AMERICAN STOCK EXCHANGE LISTING.
Parent shall cause the shares of Parent Common Stock issuable, and those
required to be reserved for issuance, in connection with the Merger, to be
authorized for listing on the American Stock Exchange, subject to official
notice of issuance.
5.14 COMPANY AUDITORS.
The Company will use its commercially reasonable efforts to cause its
management and its independent auditors to facilitate on a timely basis (i) the
preparation of financial statements (including pro forma financial statements if
required) as required by Parent to comply with applicable SEC regulations and
(ii) the review of the Company's audit work papers for up to the past three
years, including the examination of selected interim financial statements and
data.
5.16 EMPLOYEES.
(a) Subject to the provisions of applicable law and the terms of the
Parent's employee benefit plans, the Parent will, or will cause the Surviving
Corporation to, give individuals who are employed by the Company as of the
Effective Time and who remain employees of the Surviving Corporation following
the Effective Time (each such employee, an "Affected Employee") full credit for
purposes of eligibility, vesting, benefit accrual and determination of the level
of benefits under any employee benefit plans or arrangements maintained by the
Parent, the Company or any such Subsidiary for such Affected Employees' service
with the Company or any affiliate thereof to the same extent recognized
immediately prior to the Effective Time.
(b) Subject to the provisions of applicable law and the terms of the
Parent's employee benefit plans, the Parent will, or will cause the Surviving
Corporation to (i) waive all limitations as to pre-existing conditions
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Affected Employees under any welfare benefit
plans that such employees may be eligible to participate in after the Effective
Time, other than limitations or waiting periods that are already in effect with
respect to such employees and that have not been satisfied as of the Effective
Time under any welfare plan maintained for the Affected Employees immediately
prior to the Effective Time, and (ii) provide each Affected Employee with credit
for any co-payments and deductibles paid prior to the Effective Time in
satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time.
(c) As of the Effective Time, the Parent shall expressly assume and agree
to perform in accordance with their terms, all of the Employee Agreements set
forth on Schedule 2.23(b).
<PAGE> 38
(d) Notwithstanding the foregoing, the Parent agrees to provide or to cause
the Surviving Corporation to provide Affected Employees, for a period of one
year following the Effective Time, with employee benefit plans or arrangements
that are, in the aggregate, not less favorable than those provided to Affected
Employees immediately prior to the Effective Time. The Parent agrees to provide
Affected Employees with a written description of such plans and arrangements
promptly following the Effective Time.
(e) No later than the first anniversary of the Effective Time, the Affected
Employees who remain in the employ of the Parent or any of its Subsidiaries
shall be eligible to participate in the Parent's employee benefit plans and
arrangements in which similarly situated employees of the Parent or affiliates
of the Parent participate, to the same extent as such similarly situated
employees of the Parent or affiliates of the Parent.
(f) As soon as practicable after the Effective Time, the Parent shall file
a registration statement on Form S-8 (or any successor or other appropriate
form) with respect to the shares of Company Capital Stock subject to the Assumed
Options and shall use its best efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses contained therein).
ARTICLE 6.
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 Closing of the
following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the stockholders of the Company by the requisite
vote under Delaware Law and the Company's Certificate of Incorporation.
(b) Government Approvals. All approvals of governments and
governmental agencies necessary to consummate the transactions hereunder shall
have been received.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall be in effect.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by the Company.
<PAGE> 39
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, 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 date), with the same force and effect as if
made on and as of the Closing Date, except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties which
have neither had nor reasonably would be expected to have a material adverse
effect on Parent; and the Company shall have received a certificate to such
effect signed on behalf of Parent by the chief executive officer and the chief
financial officer of Parent.
(b) Agreements and Covenants. Parent 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 the Company shall have received a certificate to such
effect signed by the chief executive officer of Parent.
(c) Election of John L. Thonet as a Director and Chief Operating
Officer. John L. Thonet shall have been elected a director and the Chief
Operating Officer of the Parent as of the Closing Date.
(d) Employment of Company Employees. The Parent shall have executed
and delivered to each of John L. Thonet, Ricardo Velez, Patricia Reilly, and
Gustavo Barillas an Executive Employment Agreement in substantially the form of
Exhibit 6.2(d) attached hereto and shall have extended offers of employment to
the other employees of the Company.
(e) Option Grants to Employees of the Company. The Parent shall
have granted options to acquire an aggregate of Five Hundred Thousand (500,000)
shares of Common Stock of the Parent to take effect as of the Effective Time to
such employees of the Surviving Corporation as shall be designated by John L.
Thonet on or prior to the Effective Time. Such options shall be exercisable for
a term of ten (10) years (subject to termination, in accordance with the
provisions of the Storage Computer Corporation 1999 Stock Incentive Plan (the
"Plan"), in the event the employment of the option holder with the Parent or any
Subsidiary is terminated prior to exercise), shall be subject to vesting over a
term of four (4) years, shall be exercisable at an exercise price equal to the
market price of the Parent Common Stock at the Effective Time, and shall be
granted under the Plan using the Parent's standard form of option agreement.
(f) Third Party Consents. The Company shall have been furnished
with evidence satisfactory to it that Parent has obtained the consents,
approvals and waivers set forth in Schedule 6.2(f).
(g) Legal Opinion. The Company shall have received a legal opinion
from Peabody & Arnold LLP, counsel to Parent, in form and substance reasonably
acceptable to counsel for the Company.
<PAGE> 40
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date, 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 date), with the same force and effect as if
made on and as of the Closing Date, except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties which
have neither had nor reasonably would be expected to have a Material Adverse
Effect on the Company or Parent; and Parent and Merger Sub shall have received a
certificate to such effect signed on behalf of the Company by the chief
executive officer and chief financial officer of the Company.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be preformed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate to
such effect signed by the chief executive officer of the Company.
(c) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(c).
(d) Legal Opinion. Parent shall have received a legal opinion from
Lynch, Brewer, Hoffman & Sands LLP, special counsel to the Company, in form and
substance reasonably acceptable to counsel for the Parent.
(e) Stockholder Questionnaire. Each of the Company's stockholders
shall have delivered to Parent an executed Stockholder Questionnaire which shall
be in full force and effect, or the Company shall have provided Parent with
evidence satisfactory to Parent in its sole discretion as to the status of each
of the Company's stockholders that has not delivered to Parent an executed
Stockholder Questionnaire as "accredited" as defined in Regulation D.
(f) Power of Attorney. Each holder of shares of Company Capital
Stock outstanding immediately prior to the Effective Time shall have delivered
to the Securityholder Agent an executed power of attorney in the form approved
by Parent which shall be in full force and effect appointing the Securityholder
Agent as the attorney in fact for such stockholder to take all actions on behalf
of the stockholder that the Securityholder Agent deems necessary or desirable in
connection with the Merger and releasing Parent from all claims related to
actions taken in reliance on certificates or instructions of the Securityholder
Agent, and copies of each executed power of attorney shall have been delivered
to Parent.
<PAGE> 41
(g) Material Adverse Change. There shall not have occurred any
material adverse change in the business, assets (including intangible assets),
liabilities, financial condition or results of operations of the Company since
the date of the Balance Sheet.
(h) Acceleration and Termination of Terminated Options. All of the
Terminated Options shall have been accelerated and terminated.
(i) Amendment of Assumed Options and the GMC Warrant. The Company
and each holder of an Assumed Option shall have executed an amendment modifying
the terms of the Assumed Option and the GMC Warrant in a form acceptable to
Parent.
(j) Resignation of Directors and Officers. The directors and
officers of the Company in office immediately prior to the Effective Time shall
have resigned as directors and officers of the Surviving Corporation effective
immediately following the Effective Time.
(k) Dissenters' Rights. No holder of any outstanding shares of the
Company Capital Stock shall have exercised, nor shall there be any continued
right to exercise, appraisal, dissenters' or similar rights under Delaware Law
with respect to any such shares by virtue of the Merger.
(l) Due Diligence Investigation. Parent shall have completed its
due diligence investigation of the Company's business to Parent's satisfaction,
provided that no information or knowledge obtained in such investigation shall
affect or be deemed to modify any representation or warranty of the Company
contained herein.
(m) Amount of Certain Company Liabilities. The amount of the Third
Party Expenses of the Company shall not exceed in the aggregate $30,000
immediately prior to the Effective Time.
(n) Fairness Opinion. The Board of Directors of Parent shall have
received a written opinion from Parent's investment banker, in form and
substance acceptable to the Board of Directors of the Parent, as to the fairness
to Parent's stockholders, of the Merger.
ARTICLE 7.
ESCROW
7.1 ESCROW PERIOD.
Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Closing Date and terminate at 5:00 p.m.,
Boston time, on the earlier of (a) the first anniversary of the Closing Date or
(b) the date on which there is a Release Event (as defined below) (the "Escrow
Period"), provided that the Escrow Period shall not terminate with respect to
such amount (or some portion thereof), that together with the aggregate amount
remaining in the Escrow Fund is necessary in the reasonable judgment of Parent,
subject to the objection of the Securityholder Agent (as defined in Section
7.2(g) below) and the subsequent arbitration of the matter in the manner
provided in Section 7.2(f) hereof, to satisfy any unsatisfied claims concerning
facts and circumstances existing prior to the termination of such Escrow Period
<PAGE> 42
specified in any Officer's Certificate delivered to the Escrow Agent (as defined
in Section 7.2(a) below) prior to termination of such Escrow Period. As used
herein, the term "Release Event" shall meant: (i) the cessation of the Parent's
operations; (ii) the merger or consolidation of the Parent with another entity
in a transaction in which the Parent is not the surviving entity; (iii) the sale
or other transfer of substantially all of the Parent's operating assets; or (iv)
the transfer in a single transaction or in a series of related transactions
other than a public offering of stock of the Company of more than fifty percent
(50%) of the capital stock of Parent.
7.2 ESCROW ARRANGEMENTS.
Escrow Fund. As of the Effective Time, the Company's stockholders will be
deemed to have received and deposited with the Escrow Agent 200,000 shares of
Parent Common Stock (plus any additional shares as may be issued upon any stock
split, stock dividend or recapitalization effected by Parent after the Effective
Time)(the "Escrow Amount") without any act of any stockholder. Within ten (10)
days after the Closing Date, the Escrow Amount, without any act of any
stockholder, will be deposited with an institution acceptable to Parent and the
Securityholder Agent as escrow agent (the "Escrow Agent"), such deposit to
constitute an escrow fund (the "Escrow Fund") to be governed by the terms set
forth herein and at Parent's cost and expense. The portion of the Escrow Amount
contributed on behalf of each stockholder of the Company shall be in proportion
to the aggregate Parent Common Stock which such holder would otherwise be
entitled to receive under Section 1.7. The Escrow Fund shall be available to
compensate Parent and its affiliates for any claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses, and expenses of investigation and defense (hereinafter
individually a "Loss" and collectively "Losses") incurred by Parent, its
officers, directors, or affiliates (including the Surviving Corporation)
directly or indirectly as a result of (i) any breach of a representation or
warranty of the Company contained in Article II herein (as modified by the
Company Schedules), (ii) any failure by the Company to perform or comply with
any covenant contained herein, (iii) any Taxes owing by the Company, whether
before or after the Closing, as a result of the activities of the Company prior
to the Closing, or (iv) any claim by any holder of Company Capital Stock or by
any holder of any Assumed Option or the holder of the GMC Warrant that it did
not receive the portion of the Merger Consideration to which it was entitled,
(such excluded liabilities and obligations, the "Assumed Liabilities").
Notwithstanding the foregoing (i) the Parent shall not assert a claim for a Loss
hereunder of less than Ten Thousand Dollars ($10,000), individually, and until
the aggregate of such claims exceeds One Hundred Thousand Dollars ($100,000).
Nothing herein shall limit the liability of the Company for any such breach of
any representation, warranty or covenant if the Merger does not close.
As soon as practicable after all claims specified in any officer's
Certificate delivered to the Escrow Agent prior to termination of the Escrow
Period have been resolved and after the termination of the Escrow Period, the
Escrow Agent shall deliver to the stockholders of the Company the remaining
portion of the Escrow Fund not required to satisfy such claims. Deliveries of
Escrow Amounts to the stockholders of the Company pursuant to this Section
7.2(a) shall be made based on their interest in such Escrow Amounts as of the
date of distribution from the Escrow Fund as certified by the Securityholder
Agent in an Agent Certificate delivered to Parent and the Escrow Agent no later
than fifteen (15) days prior to the date of the distribution from the Escrow
Fund. The Escrow Agent shall not be obligated to deliver any Escrow Amounts
<PAGE> 43
to the stockholders of the Company pursuant to this Section 7.2(a) unless and
until the Securityholder Agent shall have delivered an Agent Certificate to
Parent and the Escrow Agent with respect to such Escrow Amounts as required by
this Section 7.2(a).
(a) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund during
the Escrow Period, shall treat such fund as a trust fund in accordance with
the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Parent Common Stock or other equity securities
issued or distributed by Parent (including shares issued upon a stock
split, stock dividend or recapitalization effected by Parent after the
Effective Time)("New Shares") in respect of Parent Common Stock in the
Escrow Fund which have not been released from the Escrow Fund shall be
added to the Escrow Fund and become a part thereof. New Shares issued in
respect of shares of Parent Common Stock which have been released from the
Escrow Fund shall not be added to the Escrow Fund but shall be distributed
to the recordholders thereof. Cash dividends on Parent Common Stock shall
not be added to the Escrow Fund but shall be distributed to the
recordholders thereof.
(iii) Each stockholder shall have voting rights with respect to the
shares of Parent Common Stock contributed to the Escrow Fund by such
stockholder (and any voting securities added to the Escrow Fund in respect
of such shares of Parent Common Stock).
(b) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or before the last
day of the Escrow Period of a certificate signed by any officer of Parent
(an "Officer's Certificate"): (A) stating that Parent has paid or properly
accrued or reasonably anticipates that it will have to pay or accrue
Losses, and (B) specifying in reasonable detail the individual items of
Losses included in the amount so stated, the date each such item was paid
or properly accrued, or the basis for such anticipated liability, and the
nature of the misrepresentation, breach of warranty or covenant to which
such item is related, the Escrow Agent shall, subject to the provisions of
Section 7.2(f) hereof, deliver to Parent out of the Escrow Fund, as
promptly as practicable following expiration of the 30-day period specified
in Section 7.2(e) or after the Escrow Agent shall have received written
authorization from the Securityholder Agent to make such delivery if such
authorization is given prior to the end of the 30-day period, shares of
Parent Common Stock held in the Escrow Fund in an amount equal to such
Losses.
(ii) For purposes of determining the number of shares of Parent Common
Stock to be delivered to Parent out of the Escrow Fund pursuant to Section
7.2(d)(i) hereof, the shares of Parent Common Stock shall be valued at the
average of the closing prices of Parent Common Stock on the American Stock
Exchange for the five (5) consecutive trading days ending five (5) trading
days prior to the date of the Officer's Certificate. Parent and the
Securityholder Agent (as defined below) shall certify such fair market
<PAGE> 44
value in a certificate signed by both Parent and the Securityholder Agent,
and shall deliver such certificate to the Escrow Agent.
(c) Objections of Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Securityholder Agent and Parent shall certify to the Escrow
Agent that such duplicate copy has been so delivered. For a period of thirty
(30) days after such delivery, the Escrow Agent shall make no delivery to Parent
of any shares of Parent Common Stock held in the Escrow Fund pursuant to Section
7.2(d) hereof unless the Escrow Agent shall have received written authorization
from the Securityholder Agent to make such delivery. After the expiration of
such 30-day period, the Escrow Agent shall make delivery of shares of Parent
Common Stock from the Escrow Fund in accordance with Section 7.2(d) hereof,
provided that no such payment or delivery may be made if the Securityholder
Agent shall object in a written statement to the claim made in the Officer's
Certificate, and such statement shall have been delivered to the Escrow Agent
prior to the expiration of such 30-day period.
(d) Resolution of Conflicts: Arbitration.
(i) In case the Securityholder Agent shall so object in writing to any
claim or claims made in any Officer's Certificate, the Securityholder Agent
and Parent shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If the
Securityholder Agent and Parent should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely
on any such memorandum and distribute shares of Parent Common Stock form
the Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith negotiation,
either Parent or the Securityholder Agent may demand arbitration of the
matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by
arbitration conducted by three arbitrators. Parent and the Securityholder
Agent shall each select one arbitrator, and the two arbitrators so selected
shall select a third arbitrator. The arbitrators shall set a limited time
period and establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the sole
judgment of the arbitrators, to discover relevant information from the
opposing parties about the subject matter of the dispute. The arbitrators
shall rule upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys' fees and costs, to the
extent as a court of competent law or equity, should the arbitrators
determine that discovery was sought without substantial justification or
that discovery was refused or objected to without substantial
justification. The decision of a majority of the three arbitrators as to
the validity and amount of any claim in such Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 7.2(f) hereof, the Escrow Agent shall
be entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance therewith. Such decision
shall be written and shall be supported by written findings of
<PAGE> 45
fact and conclusions which shall set forth the award, judgment, decree or
order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be
held in Boston, Massachusetts under the rules then in effect of the
American Arbitration Association.
(e) Security Agent of the Stockholders; Power of Attorney.
(i) In the event that the Merger is approved, effective upon such
vote, and without further act of any stockholder, John L. Thonet shall be
appointed as agent and attorney-in-fact (the "Securityholder Agent") for
each stockholder of the Company (except such stockholders, if any, as shall
have perfected their appraisal or dissenters' rights under Delaware Law),
for and on behalf of stockholders of the Company, to give and receive
notices and communication, to authorize delivery to Parent of shares of
Parent Common Stock from the Escrow Fund in satisfaction of claims by
Parent, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and
to take all actions necessary or appropriate in the judgment of the
Securityholder Agent for the accomplishment of the foregoing. Such agency
may be changed by the stockholders of the Company from time to time upon
not less than thirty (30) days prior written notice to Parent; provided
that none of the Securityholder Agent may be removed unless holders of
two-thirds in interest of the Escrow Fund agree to such removal and to the
identity of the substituted agent. Any vacancy in the position of the
Securityholder Agent may be filled by approval of the holders of a majority
in interest of the Escrow Fund. No bond shall be required of the
Securityholder Agent, and the Securityholder Agent shall not receive
compensation for his or her services. Notice or communications to or from
the Securityholder Agent shall constitute notice to or from each of the
stockholders of the Company. The Securityholder Agent shall, and are hereby
authorized to, act by majority approval as to any matter if there is more
than one individual acting as Securityholder Agent at the time the action
is taken.
(ii) The Securityholder Agent shall not be liable for any act done or
omitted hereunder as Securityholder Agent while acting in good faith and in
the exercise of reasonable judgement. The stockholders of the Company on
whose behalf the Escrow Amount was contributed to the Escrow Fund shall
severally indemnify the Securityholder Agent and hold the Securityholder
Agent harmless against any loss, liability or expense incurred without
negligence or bad faith on the part of the Securityholder Agent and arising
out of or in connection with the acceptance or administration of the
Securityholder Agent's duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Securityholder Agent.
(f) Actions of the Securityholder Agent. A decision, act, consent
or instruction of the Securityholder Agent shall constitute a decision of all
the stockholders for whom a portion of the Escrow Amount otherwise issuable to
them are deposited in the Escrow Fund and shall be final, binding and conclusive
upon each of such stockholders, and the Escrow Agent and Parent may rely upon
any such decision, act, consent or instruction of the Securityholder Agent as
being
<PAGE> 46
the decision, act, consent or instruction of each and every such stockholder of
the Company. The Escrow Agent and Parent are hereby relieved from any liability
to any person for any acts done by them in accordance with such decision, act,
consent or instruction of the Securityholder Agent.
(g) Third-Party Claims. In the event Parent becomes aware of a
third party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify the Securityholder Agent of such claim, and the
Securityholder Agent, as representative for the stockholders of the Company,
shall be entitled, at the stockholders' expense, to participate in any defense
of such claim. Parent shall have the right in its sole discretion to settle any
such claim; provided, however, that except with the consent of the
Securityholder Agent, no settlement of any such claim with third-party claimants
shall alone be determinative of the amount of any claims against the Escrow
Fund. In the event that the Securityholder Agent has consented to any such
settlement, the Securityholder Agent shall have no power or authority to object
under any provision of this Article 7 to the amount of any claim by Parent
against the Escrow Fund with respect to such settlement.
(h) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive
after the date of this Agreement which are signed by an officer of Parent
and the Securityholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instruction reasonably believed to
be genuine and to have been signed or presented by the proper party or
parties. The Escrow Agent shall not be liable for any act done or omitted
hereunder as Escrow Agent while acting in good faith and in the exercise of
reasonable judgment, and any act done or omitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to comply with
and obey orders, judgments or decrees of any court of law, notwithstanding
any notices, warning or other communications form any party or any other
person to the contrary. In case the Escrow Agent obeys or complies with any
such order, judgment or decree of any court, the Escrow Agent shall not be
liable to any of the parties hereto or to any other person by reason of
such compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without justification.
(iii) The Escrow Agent shall not be liable in any respect on account
of the identity, authority or rights of the parties executing or delivering
or purporting to execute or deliver this Agreement or any documents or
papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
<PAGE> 47
(v) In performing any duties under the Agreement, the Escrow Agent
shall not be liable to any party for damages, losses, or expenses, except
for gross negligence or willful misconduct on the part of the Escrow Agent.
The Escrow Agent shall not incur any such liability for (A) any act or
failure to act made or omitted in good faith, or (B) any action taken or
omitted in reliance upon any instrument, including any written statement or
affidavit provided for in this Agreement that the Escrow Agent shall in
good faith believe to be genuine, nor will the Escrow Agent be liable or
responsible for forgeries, fraud, impersonations, or determining the scope
of any representative authority. In addition, the Escrow Agent may consult
with legal counsel in connection with Escrow Agent's duties under this
Agreement and shall be fully protected in any act taken, suffered, or
permitted by it in good faith in accordance with the advice of counsel. The
Escrow Agent is not responsible for determining and verifying the authority
of any person acting or purporting to act on behalf of any party to this
Agreement.
(vi) If any controversy arises between the parties to this Agreement,
or with any other party, concerning the subject matter of this Agreement,
its terms or conditions, the Escrow Agent will not be required to determine
the controversy or to take any action regarding it. The Escrow Agent may
hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings
or other means as, in the Escrow Agent's discretion, the Escrow Agent may
be required, despite what may be set forth elsewhere in this Agreement. In
such event, the Escrow Agent will not be liable for damage. Furthermore,
the Escrow Agent may at its option, file an action of inter-pleader
requiring the parties to answer and litigate any claims and rights among
themselves. The Escrow Agent is authorized to deposit with the clerk of the
court all documents and shares of Parent Common Stock held in the Escrow
Fund except all cost, expenses, charges and reasonable attorneys' fees
incurred by the Escrow Agent due to the inter-pleader action and which the
parties jointly and severally agree to pay. Upon initiating such action,
the Escrow Agent shall be fully released and discharged of and from all
obligations and liability imposed by the terms of this Agreement.
(vii) The parties and their respective successors and assigns agree
jointly and severally to indemnify and hold the Escrow Agent harmless
against all losses, claims, damages, liabilities, and expenses, including
reasonable costs of investigation, counsel fees, and disbursements that may
be imposed on Escrow Agent or incurred by Escrow Agent in connection with
the performance of his or her duties under this Agreement, including but
not limited to any litigation arising from this Agreement or involving its
subject matter.
(viii) The Escrow Agent may resign at any time upon giving at least
thirty (30) days written notice to the parties; provided, however, that no
such resignation shall become effective until the appointment of a
successor escrow agent which shall be accomplished as follows: the parties
shall use their best efforts to mutually agree on a successor escrow agent
within thirty (30) days after receiving such notice. If the parties fail to
agree upon a successor escrow agent within such time, the Escrow Agent
shall have the right to appoint a successor escrow agent authorized to do
business in the Commonwealth of Massachusetts. The successor escrow agent
shall execute and deliver an instrument
<PAGE> 48
accepting such appointment and it shall, without further acts, be vested
with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as escrow agent. The Escrow
Agent shall be discharged from any further duties and liability under this
Agreement.
(i) Fees. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or litigation. Parent promises to pay these sums upon demand.
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION.
Except as provided in Section 8.2 below, this Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred before 5:00 p. m. (Eastern Daylight Savings Time) on September 30, 2000
(provided that the right to terminate this Agreement under this clause 8.1(b)(i)
shall not be available to any party whose willful failure to fulfill any
obligation hereunder has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date); (ii) there-shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any governmental entity that would make consummation of the Merger
illegal;
(c) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a material breach of representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and (i) such breach has not been cured within five (5) business days
after written notice to the Company (provided that, no cure period shall be
required for a breach which by its nature cannot be cured), and (ii) as a result
of such breach the conditions set forth in Section 6.3(a) or 6.3(b), as the case
may be, would not then be satisfied;
<PAGE> 49
(d) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Parent or Merger Sub and (i) such breach has not been cured
within. five (5) business days after written notice to Parent (provided that, no
cure period shall be required for a breach which by its nature cannot be cured),
and (ii) as a result of such breach the conditions set forth in Section 6.2(a)
or 6.2(b), as the case may be, would not then be satisfied;
(e) by the Company if the average of the closing prices of Parent
Common Stock on the American Stock Exchange for the five (5) consecutive trading
days ending five (5) trading days prior to the Closing Date is less than $5.00
per share.
When action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 EFFECT OF TERMINATION.
In the event of termination of this Agreement as provided in Section 8.1,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Merger Sub or the Company, or their respective
officer, directors or stockholders, provided that each party shall remain liable
for any breaches of this Agreement prior to its termination; and provided
further, that provisions of Sections 5.3 and 5.4 and Article 7 of this Agreement
shall remain in full force and effect and survive any termination of this
Agreement.
8.3 AMENDMENT.
Except as is otherwise required by applicable law after the stockholders of
the Company approve this Agreement, this Agreement may be amended by the parties
hereto at any time by execution of an instrument in writing signed on behalf of
each of the parties hereto.
8.4 EXTENSION: WAIVER.
At any time prior to the Effective Time, Parent and Merger Sub, on the one
hand, and the Company, on the other, may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations of the other party
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto, and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
<PAGE> 50
ARTICLE 9.
GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
All representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
consummation of the Merger and shall (except to the extent that survival is
necessary to effectuate the intent of such provisions) terminate on the first
anniversary of the Closing Date.
9.2 NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or mailed by registered or certified mail (return receipt requested)or sent via
facsimile (with acknowledgement of complete transmission)to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Parent or Merger Sub, to:
Storage Computer Corporation
Attention: Edward A. Gardner, President
11 Riverside Street
Nashua, NH 03062-1373
Telephone: (603) 880-3005
Facsimile: (603) 889-7232
With a copy to:
Peabody & Arnold LLP
Attention: William E. Kelly, Esq.
50 Rowes Wharf
Boston, MA 02110
Telephone: (617-951-2100)
Facsimile: (617-951-2125)
(b) If to the Company, to
CyberStorage Systems Corporation
Millyard Technology Park
75 Pine Street Extension
Nashua, NH 03060
Attention: John Thonet, President
Telephone: (603) 598-0005
Facsimile: (603) 598-0066
<PAGE> 51
With a copy to:
Lynch, Brewer, Hoffman & Sands LLP
101 Federal Street
Boston, MA 02110
Attention: Owen B. Lynch, Esq.
Telephone: (617) 951-0800
Facsimile: (617) 951-0811
(c) If to the Securityholder Agent:
John L. Thonet
c/o CyberStorage Systems Corporation
Millyard Technology Park
75 Pine Street Extension
Nashua, NH 03060
Telephone: (603) 598-0005
Facsimile: (603) 598-0066
with a copy to:
Lynch, Brewer, Hoffman & Sands LLP
101 Federal Street
Boston, MA 02110
Attention: Owen B. Lynch, Esq.
Telephone: (617) 951-0800
Facsimile: (617) 951-0811
9.3 INTERPRETATION.
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.
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. Executed counterparts delivered by facsimile transmission shall
have the same force and effect as originally executed counterparts delivered
personally.
9.5 ENTIRE AGREEMENT: ASSIGNMENT.
This Agreement, the Disclosure Document (with the Schedules and Exhibits
attached thereto) and the documents and instruments and other agreements among
the parties hereto
<PAGE> 52
referenced 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; (b) are not intended to confer upon any other person any
rights or remedies hereunder; and (c) shall not be assigned by operation of law
or otherwise except as otherwise specifically provided, except that Parent and
Merger Sub may assign their respective rights and delegate their respective
obligations hereunder to their respective affiliates.
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 reasonable 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.
9.7 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 any party of any one remedy will not preclude the exercise of any
other remedy.
9.8 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof. Each of the parties
hereto agrees that process may be served upon them in any manner authorized by
the laws of the State of Delaware 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 SPECIFIC PERFORMANCE.
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
<PAGE> 53
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.
9.11 CORPORATE TRANSACTION INVOLVING PARENT.
If after the Effective Time Parent is acquired by merger (including by
reverse triangular merger), or is a party to a consolidation, or liquidates, all
references to "Parent Common Stock in this Agreement shall thereafter mean, on a
per-share basis, the amount of cash, securities and/or other property received
by Parent stockholders for their (pre-transaction) Parent Common Stock in such
transaction.
[Remainder of This Page Intentionally Left Blank]
<PAGE> 54
In witness whereof, the parties, by their duly authorized officers, have
executed this Agreement and Plan of Reorganization as of the date first above
written.
STORAGE COMPUTER CORPORATION
By: /s/ Theodore J. Goodlander
---------------------------
Name: Theodore J. Goodlander
Title: Chief Executive Officer
CYBER ACQUISITION CORPORATION
By: /s/ Edward A. Gardner
--------------------------
Name: Edward A. Gardner
Title: President
CYBERSTORAGE SYSTEMS CORPORATION
By:/s/ John L. Thonet
----------------------------
Name: John L. Thonet
Title: President
