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AGREEMENT AND PLAN OF MERGER
among
24/7 MEDIA, INC.,
CONTINUUM HOLDING CORP.,
PUBLIGROUPE USA HOLDING, INC.
and
REAL MEDIA, INC.
Dated October 30, 2001
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS.............................................................................................1
SECTION 1.01 Certain Defined Terms.........................................................1
ARTICLE II THE MERGER............................................................................................10
SECTION 2.01 The Merger...................................................................10
SECTION 2.02 Closing......................................................................10
SECTION 2.03 Effective Time...............................................................10
SECTION 2.04 Effect of the Merger.........................................................11
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors and Officers of
Surviving Corporation........................................................11
ARTICLE III CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES...................................................11
SECTION 3.01 Conversion of Shares.........................................................11
SECTION 3.02 Exchange of Shares Other than Dissenting Shares and Treasury Shares..........13
SECTION 3.03 Stock Transfer Books.........................................................14
SECTION 3.04 No Fractional Share Certificates.............................................14
SECTION 3.05 Certain Adjustments..........................................................14
SECTION 3.06 Dissenters' Rights...........................................................15
SECTION 3.07 Lost, Stolen or Destroyed Certificates.......................................15
SECTION 3.08 Taking of Necessary Action; Further Action...................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF COMPANY.............................................................16
SECTION 4.01 Organization and Qualification; Subsidiaries.................................16
SECTION 4.02 Certificate of Incorporation and Bylaws......................................16
SECTION 4.03 Capitalization...............................................................16
SECTION 4.04 Authority Relative to This Agreement.........................................17
SECTION 4.05 No Conflict; Required Filings and Consents...................................18
SECTION 4.06 Permits; Compliance with Laws................................................18
SECTION 4.07 Financial Statements.........................................................19
SECTION 4.08 Absence of Certain Changes or Events.........................................20
SECTION 4.09 Employee Benefit Plans; Labor Matters........................................21
SECTION 4.10 Contracts....................................................................23
SECTION 4.11 Litigation...................................................................25
SECTION 4.12 Environmental Matters........................................................25
SECTION 4.13 Intellectual Property........................................................25
SECTION 4.14 Taxes........................................................................27
SECTION 4.15 Insurance....................................................................28
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SECTION 4.16 Properties...................................................................29
SECTION 4.17 Brokers......................................................................29
SECTION 4.18 Business Activity Restriction................................................29
SECTION 4.19 Affiliate Transactions.......................................................30
SECTION 4.20 Certain Business Practices...................................................30
SECTION 4.21 Accredited Investors.........................................................30
SECTION 4.22 Cash Positions...............................................................30
ARTICLE IVA REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDER.............................................30
SECTION 4A.01 Organization and Qualification...............................................30
SECTION 4A.02 Certificate of Incorporation and Bylaws......................................31
SECTION 4A.03 Title to Shares..............................................................31
SECTION 4A.04 Authority Relative to this Agreement.........................................31
SECTION 4A.05 No Conflict; Required Filings and Consents...................................32
SECTION 4A.06 Acquisition of Stock for Investment..........................................32
SECTION 4A.07 Accredited Investor..........................................................32
SECTION 4A.08 Disclosure of Information....................................................32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................................................33
SECTION 5.01 Organization and Qualification; Subsidiaries.................................33
SECTION 5.02 Certificate of Incorporation and Bylaws......................................33
SECTION 5.03 Capitalization...............................................................33
SECTION 5.04 Authority Relative to This Agreement.........................................34
SECTION 5.05 No Conflict; Required Filings and Consents...................................35
SECTION 5.06 Permits; Compliance with Laws................................................36
SECTION 5.07 SEC Filings; Financial Statements............................................36
SECTION 5.08 Absence of Certain Changes or Events.........................................37
SECTION 5.09 Employee Benefit Plans; Labor Matters........................................38
SECTION 5.10 Contracts....................................................................40
SECTION 5.11 Litigation...................................................................41
SECTION 5.12 Environmental Matters........................................................41
SECTION 5.13 Intellectual Property........................................................42
SECTION 5.14 Taxes........................................................................43
SECTION 5.15 Insurance....................................................................45
SECTION 5.16 Properties...................................................................45
SECTION 5.17 Brokers......................................................................45
SECTION 5.18 Business Activity Restriction................................................46
SECTION 5.19 Certain Business Practices...................................................46
SECTION 5.20 No Prior Activities..........................................................46
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SECTION 5.21 Affiliate Transactions.......................................................46
SECTION 5.22 Cash Positions...............................................................47
ARTICLE VI COVENANTS.............................................................................................47
SECTION 6.01 Conduct of Company Pending the Closing.......................................47
SECTION 6.02 Conduct of Parent and Merger Sub Pending the Closing.........................49
SECTION 6.03 Notices of Certain Events....................................................50
SECTION 6.04 Access to Information; Confidentiality.......................................50
SECTION 6.05 No Solicitation of Transactions..............................................51
SECTION 6.06 Control of Operations........................................................51
SECTION 6.07 Further Action; Consents; Filings............................................51
SECTION 6.08 Additional Reports...........................................................52
SECTION 6.09 Noncompetition...............................................................52
SECTION 6.10 Use of First Note Proceeds; Conduct of Business..............................52
SECTION 6.11 Company Intellectual Property; Escrow........................................53
SECTION 6.12 Payments to Fractional Share Holders.........................................53
SECTION 6.13 Tax Nature of Transaction....................................................53
SECTION 6.14 Chain Subsidiaries...........................................................54
SECTION 6.15 Tax Cooperation..............................................................54
ARTICLE VII ADDITIONAL AGREEMENTS................................................................................55
SECTION 7.01 Notes........................................................................55
SECTION 7.02 Directors' and Officers' Indemnification.....................................55
SECTION 7.03 Public Announcements.........................................................55
SECTION 7.04 Listing of Additional Shares.................................................55
SECTION 7.05 Blue Sky.....................................................................56
SECTION 7.06 Employee Matters.............................................................56
SECTION 7.07 Directors of Parent Following the Merger.....................................56
ARTICLE VIII CONDITIONS TO THE MERGER............................................................................57
SECTION 8.01 Conditions to the Obligations of Each Party to Consummate the Merger.........57
SECTION 8.02 Conditions to the Obligations of Company.....................................57
SECTION 8.03 Conditions to the Obligations of Parent......................................58
ARTICLE IX INDEMNIFICATION.......................................................................................59
SECTION 9.01 Indemnification by Principal Stockholder.....................................59
SECTION 9.02 Indemnification by Parent....................................................59
SECTION 9.03 Survival.....................................................................60
SECTION 9.04 Limitations..................................................................60
SECTION 9.05 Delivery of Notice...........................................................61
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ARTICLE X TERMINATION, AMENDMENT AND WAIVER......................................................................62
SECTION 10.01 Termination..................................................................62
SECTION 10.02 Effect of Termination........................................................62
SECTION 10.03 Amendment....................................................................63
SECTION 10.04 Waiver.......................................................................63
SECTION 10.05 Termination Fee; Expenses....................................................63
ARTICLE XI GENERAL PROVISIONS....................................................................................64
SECTION 11.01 Notices......................................................................64
SECTION 11.02 Severability.................................................................65
SECTION 11.03 Assignment; Binding Effect; Benefit..........................................65
SECTION 11.04 Incorporation of Exhibits....................................................65
SECTION 11.05 Governing Law................................................................66
SECTION 11.06 Jurisdiction; Waiver of Jury Trial...........................................66
SECTION 11.07 Headings; Interpretation.....................................................66
SECTION 11.08 Counterparts.................................................................66
SECTION 11.09 Entire Agreement.............................................................67
SECTION 11.10 Swiss Accounting.............................................................67
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SCHEDULES
Schedule I Officers of the Surviving Corporation
Schedule II Directors of the Surviving Corporation
Schedule III Directors of Parent
ANNEXES
ANNEX A Form of Lock-Up Agreement
ANNEX B Form of First Note
ANNEX C Form of Second Note and Third Note
ANNEX D Form of Parent Guarantee
ANNEX E Description of Company Restructuring
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 30, 2001 (as
amended, supplemented or otherwise modified from time to time, this
"AGREEMENT"), among 24/7 MEDIA, INC., a Delaware corporation ("PARENT"), REAL
MEDIA, INC., a Delaware corporation ("COMPANY"), PUBLIGROUPE USA HOLDING, INC.,
a Delaware corporation ("PRINCIPAL STOCKHOLDER") and CONTINUUM HOLDING CORP., a
Delaware corporation and an indirect wholly owned subsidiary of Parent ("MERGER
SUB").
W I T N E S S E T H:
WHEREAS, the boards of directors of Parent and Company have
determined that it is advisable and in the best interests of their respective
companies and stockholders to enter into a business combination by means of the
merger of Merger Sub with and into Company (the "MERGER") and have approved and
adopted this Agreement; and
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 CERTAIN DEFINED TERMS. Unless the context
otherwise requires, the following terms, when used in this Agreement, shall have
the respective meanings specified below (such meanings to be equally applicable
to the singular and plural forms of the terms defined):
"AFFILIATE" shall mean, with respect to any Person, any other
Person that controls, is controlled by or is under common control with the first
Person.
"AGGREGATE PARENT DISTRIBUTABLE SHARE NUMBER" shall mean
8,216,868, which constitutes the number of shares of Parent Common Stock equal
to 19.9% of the aggregate of the total number of shares of Parent Common Stock
issued and outstanding immediately prior to the Effective Time.
"ASSUMED OPTIONS" shall have the meaning set forth in Section
3.05(a).
"BLUE SKY LAWS" shall mean United States state securities or
"blue sky" laws.
"BUSINESS" shall mean solely the online advertising
technology, representation, email and promotions businesses of the Company;
PROVIDED, HOWEVER, that this shall not include
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(i) any off-line or non-technology business or operations of the Company or any
of its affiliates, (ii) the PPN PrintPlus-business (defined as advertising
packages off/online of represented media) or (iii) any of the Company's business
conducted in Switzerland.
"BUSINESS DAY" shall mean any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or, in the
case of determining a date when any payment is due, any day on which banks are
not required or authorized by law or executive order to close in the City of New
York.
"CERTIFICATE OF MERGER" shall have the meaning set forth in
Section 2.03.
"CHAIN SUBSIDIARIES" shall have the meaning set forth in
Section 5.01.
"CHARTER AMENDMENT" shall mean the Certificate of Amendment to
the Certificate of Incorporation of Company effecting a one-for-2000 reverse
stock split.
"CLOSING" shall have the meaning set forth in Section 2.02.
"COBRA" shall have the meaning set forth in Section 4.09(g).
"COMMON DISSENTING SHARES" shall have the meaning set forth in
Section 3.01(a).
"COMPANY AGGREGATE SHARE NUMBER" shall mean the total number
of shares of Company Series A Preferred Stock (on an as-converted basis),
Company Series B Preferred Stock (on an as-converted basis) and Company Common
Stock issued and outstanding immediately prior to the Effective Time.
"COMPANY AUDITED FINANCIAL STATEMENTS" shall have the meaning
set forth in Section 4.07(a).
"COMPANY BALANCE SHEET" shall have the meaning set forth in
Section 4.07(b).
"COMPANY BENEFIT PLANS" shall have the meaning set forth in
Section 4.09(a).
"COMPANY CAPITAL STOCK" shall mean the Company Common Stock
and the Company Preferred Stock.
"COMPANY CERTIFICATES" shall have the meaning set forth in
Section 3.02(b).
"COMPANY COMMON STOCK" shall mean the common stock, par value
$.01 per share, of Company.
"COMPANY CONFIDENTIAL INFORMATION" shall have the meaning set
forth in Section 4.13(f).
"COMPANY DISCLOSURE SCHEDULE" shall mean the disclosure
schedule delivered by Company to Parent prior to the execution of this Agreement
and forming a part hereof.
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"COMPANY ERISA AFFILIATE" shall have the meaning set forth in
Section 4.09(a).
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 4.07(a).
"COMPANY INTELLECTUAL PROPERTY" shall mean all Intellectual
Property that is currently used in the Business other than Intellectual Property
that is widely disseminated by a third party owner by way of a non-exclusive
license (for example, commonly used operating system software).
"COMPANY LOSS SUBGROUP" shall have the meaning set forth in
Section 6.13.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean any change in or
effect on the business of Company or the Company Subsidiaries that, individually
or in the aggregate (taking into account all other such changes or effects), is,
or is reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of Company and the
Company Subsidiaries, taken as a whole; PROVIDED, HOWEVER, that neither (x) any
such effect resulting from a change in economic or financial market conditions
generally, (y) any continuing net loss incurred by Company, substantially
consistent with Company's recent past experience nor (z) any act of God, natural
disaster, civil commotion, act of terrorism, war or similar event beyond
Company's reasonable control, shall be deemed, in and of itself, to constitute a
Company Material Adverse Effect.
"COMPANY MATERIAL CONTRACTS" shall have the meaning set forth
in Section 4.10.
"COMPANY OPTION PLAN" shall have the meaning set forth in
Section 8.03(h).
"COMPANY PERMITS" shall have the meaning set forth in Section
4.06.
"COMPANY SERIES A PREFERRED STOCK" shall mean the Series A
Convertible Preferred Stock, par value $.001 per share, of Company.
"COMPANY SERIES B PREFERRED STOCK" shall mean the Series B
Preferred Stock, par value $.001 per share, of Company.
"COMPANY RESTRUCTURING" shall mean the restructuring of
Company as described on ANNEX E.
"COMPANY SUBSIDIARIES" shall mean each of Company's directly
or indirectly owned Subsidiaries.
"COMPANY TERMINATION FEE" shall have the meaning set forth in
Section 10.05(b).
"COMPETING TRANSACTION" shall mean any of the following
involving Company or Parent, as the case may be (other than the Merger):
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(a) any merger, consolidation, share exchange, business
combination or other similar transaction;
(b) any sale, lease, exchange, transfer or other disposition
of 20% or more of the assets of such party and its Subsidiaries, taken
as a whole, in a single transaction or series of related transactions;
(c) any tender offer or exchange offer for 20% or more of the
outstanding voting securities of such party or the filing of a
registration statement under the Securities Act in connection
therewith;
(d) any Person having acquired beneficial ownership or the
right to acquire beneficial ownership of, or any "group" (as such term
is defined under Section 13(d) of the Exchange Act) having been formed
which beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the outstanding voting securities of such
party;
(e) any solicitation in opposition to the approval of this
Agreement by the stockholders of such party; or
(f) any agreement to engage in any of the foregoing.
"COMPANY UNAUDITED FINANCIAL STATEMENTS" shall have the
meaning set forth in Section 4.07(a).
"CONFIDENTIAL MEMORANDUM" shall mean the Confidential Offering
Memorandum of Parent dated October 30, 2001.
"CONFIDENTIALITY AGREEMENT" shall mean the Confidentiality
Agreement dated October 9, 2001 between Parent and Company.
"DELAWARE LAW" shall mean the General Corporation Law of the
State of Delaware.
"DISSENTING SHARES" shall have the meaning set forth in
Section 3.01(c).
"$" shall mean United States Dollars.
"EFFECTIVE TIME" shall have the meaning set forth in Section
2.03.
"ENCUMBRANCES" shall mean any claims, security interests,
liens, pledges, charges, escrows, options, proxies, rights of first refusal,
preemptive rights, mortgages, hypothecations, prior assignments, title retention
agreements, indentures, security agreements or any other encumbrance of any
kind.
"ENVIRONMENTAL LAW" shall mean any Law and any enforceable
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent
4
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decree or judgment, relating to pollution or protection of the environment or
natural resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Material.
"ENVIRONMENTAL PERMIT" shall mean any permit, approval,
identification number, license or other authorization required under or issued
pursuant to any applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ESCROW AGENT" shall have the meaning set forth in Section
6.11.
"ESCROW AGREEMENT" shall have the meaning set forth in Section
6.11.
"ESCROW MATERIALS" shall have the meaning set forth in Section
6.11.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, together with the rules and regulations promulgated thereunder.
"EXCHANGE RATIO" shall have the meaning set forth in Section
3.01(a).
"EXPENSES" shall mean, with respect to any party hereto, all
reasonable out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, financial advisors,
experts and consultants to a party hereto and its affiliates) incurred by such
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution or performance of its obligations pursuant
to this Agreement or the consummation of the Merger, obtaining relevant
approvals from any Governmental Entity, and all other matters related to the
transactions contemplated hereby and the closing of the Merger.
"FINAL AVERAGE CLOSING PRICE" shall mean the average closing
price of a share of Parent Common Stock on the NNM (or, if applicable, the
Nasdaq Smallcap Market or such other exchange on which the Parent Common Stock
may then be traded) for the ten (10) trading days ending three (3) Business Days
prior to the date of the Closing or, if the Parent Common Stock is then traded
over-the-counter, the average closing bid or sale price (whichever is
applicable) of a share of Parent Common Stock for the ten (10) trading days
ending three (3) Business Days prior to the date of the Closing.
"FIRST NOTE" shall mean that certain unsecured promissory note
in the principal amount of $4,500,000 issued on the date hereof by Company in
favor of Principal Stockholder in the form of ANNEX B attached hereto and
guaranteed by Parent pursuant to the Parent Guarantee.
"FOREIGN PLAN" shall mean any Company Benefit Plan that covers
former or current employees of Company or any Company Subsidiary who are
employed outside of the United States (or any beneficiary thereof) or that is
not subject to the laws of the United States.
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"FRACTIONAL SHARE PAYOUT" shall have the meaning set forth in
Section 6.12.
"GOVERNMENTAL ENTITY" shall mean any United States federal,
state, local or foreign governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or arbitral body.
"GOVERNMENTAL ORDER" shall mean any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Entity.
"HAZARDOUS MATERIAL" shall mean (i) any petroleum, petroleum
products, by-products or breakdown products, radioactive materials, friable
asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any applicable Environmental Law.
"HSR ACT" shall mean Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, together with the rules and regulations promulgated
thereunder.
"INDEBTEDNESS" shall mean, with respect to any Person:
(a) all obligations of such Person for borrowed
money, or with respect to deposits or advances of any kind, including accrued
interest;
(b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments;
(c) all obligations of such Person issued or assumed
as the deferred purchase price of property or services;
(d) all capitalized lease obligations of such Person;
(e) all guarantees of such Person of any of the
foregoing of any other Person; and
(f) all obligations (including reimbursement
obligations) relating to the issuance of letters of credit for the account of
such Person.
"INTELLECTUAL PROPERTY" shall mean all United States, foreign
and international patents; trademarks, service marks and trade names (including
without limitation all goodwill pertaining thereto), designs, trade dress and
Internet domain names; copyrights; sui generis database rights; ideas,
inventions, technology, know-how, show-how, trade secrets, systems, processes,
works of authorship, databases, mask works, content, graphics, statistical
models, algorithms, modules, computer programs, computer software, source and
object code of such software, technical documentation, business methods, work
product, intellectual and industrial property licenses, and all other tangible
or intangible information or materials.
"IRS" shall mean the United States Internal Revenue Service.
6
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"KNOWLEDGE OF COMPANY" shall mean that any of Norman M.
Blashka, Silvana Imperiali, Jonathan Hsu, Jason Wang or any director of Company
is actually aware of a fact or other matter, or should have been aware of a fact
or other matter based upon reasonable inquiry and investigation.
"KNOWLEDGE OF PARENT" shall mean that any of David J. Moore,
Mark E. Moran, Ken Leidner, Anthony Plesner, William Tifft or Stuart D. Shaw or
any director of Parent is actually aware of a fact or other matter, or should
have been aware of a fact or other matter based upon reasonable inquiry and
investigation.
"LAW" shall mean any federal, state, foreign or local statute,
law, ordinance, regulation, rule, code, order, judgment, decree, other
requirement or rule of law of the United States or any other jurisdiction, and
any other similar act or law.
"LOCK-UP AGREEMENT" shall mean that certain Lock-Up and
Standstill Agreement between Principal Stockholder and Parent in the form of
ANNEX A attached hereto.
"LOSSES" shall have the meaning set forth in Section 9.01.
"NNM" shall mean The Nasdaq National Market.
"NOTIFICATION FORM FOR LISTING OF ADDITIONAL SHARES" shall
mean the Notification Form: Listing of Additional Shares required by NNM for a
listed company in connection with, INTER ALIA, a transaction with the listed
company that may result in the potential issuance of common stock (or securities
convertible into common stock) greater than 10% of either the total shares
outstanding or the voting power outstanding on a pre-transaction basis.
"PARENT BALANCE SHEET" shall have the meaning set forth in
Section 5.07(c).
"PARENT BENEFIT PLANS" shall have the meaning set forth in
Section 5.09(a).
"PARENT CERTIFICATES" shall have the meaning set forth in
Section 3.02(a).
"PARENT COMMON STOCK" shall mean the common stock, par value
$.01 per share, of Parent.
"PARENT CONFIDENTIAL INFORMATION" shall have the meaning set
forth in Section 5.13(f).
"PARENT DISCLOSURE SCHEDULE" shall mean the disclosure
schedule delivered by Parent to Company prior to the execution of this Agreement
and forming a part hereof.
"PARENT ERISA AFFILIATE" shall have the meaning set forth in
Section 5.09(a).
"PARENT GUARANTEE" shall mean that certain guarantee issued on
the date hereof by Parent guaranteeing the obligations of Company under the
First Note in the form of ANNEX D attached hereto.
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"PARENT INTELLECTUAL PROPERTY" shall mean all Intellectual
Property that is currently used in Parent's business or the business of any
Parent Subsidiary other than Intellectual Property that is widely disseminated
by a third party owner by way of a non-exclusive license (for example, commonly
used operating system software).
"PARENT MATERIAL ADVERSE EFFECT" shall mean any change in or
effect on the business of Parent or the Parent Subsidiaries that, individually
or in the aggregate (taking into account all other such changes or effects), is,
or is reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of Parent and the
Parent Subsidiaries, taken as a whole; PROVIDED, HOWEVER, that neither (x) any
such effect resulting from a change in economic or financial market conditions
generally, (y) any continuing net loss incurred by Parent, substantially
consistent with Parent's recent past experience nor (z) any act of God, natural
disaster, civil commotion, act of terrorism, war or similar event beyond
Parent's reasonable control, shall be deemed, in and of itself, to constitute a
Parent Material Adverse Effect.
"PARENT MATERIAL CONTRACTS" shall have the meaning set forth
in Section 5.10.
"PARENT PERMITS" shall have the meaning set forth in Section
5.06.
"PARENT REPORTS" shall have the meaning set forth in Section
5.07(a).
"PARENT STOCK OPTIONS" shall have the meaning set forth in
Section 5.03(a).
"PARENT STOCK PLAN" shall mean Parent's Stock Option Plan.
"PARENT SUBSIDIARIES" shall mean each of Parent's directly or
indirectly owned Subsidiaries.
"PARENT TERMINATION FEE" shall have the meaning set forth in
Section 10.05(c).
"PARENT WARRANT" shall mean a warrant to purchase shares of
Parent Common Stock.
"PERMITTED ENCUMBRANCES" shall mean (i) liens for Taxes,
assessments and other governmental charges not yet due and payable, (ii)
immaterial unfiled mechanics', workmen's, repairmen's, warehousemen's, carriers'
or other like liens arising or incurred in the ordinary course of business which
are not yet due and payable and (iii) equipment leases with third parties
entered into in the ordinary course of business.
"PERSON" shall mean an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange
Act), trust, association, entity or government or political subdivision, agency
or instrumentality of a government.
"PRE-SPLIT COMPANY COMMON STOCK" shall have the meaning set
forth in Section 6.12.
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"REPRESENTATIVES" shall have the meaning set forth in Section
6.04(a).
"REVERSE SPLIT" shall have the meaning set forth in Section
6.12.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SECOND NOTE" shall mean that certain unsecured promissory
note in the principal amount of $1,500,000 to be issued by Parent to Principal
Stockholder in the form of ANNEX C attached hereto.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, together with the rules and regulations promulgated thereunder.
"SERIES A PREFERRED DISSENTING SHARES" shall have the meaning
set forth in Section 3.01(b).
"SERIES B PREFERRED DISSENTING SHARES" shall have the meaning
set forth in Section 3.01(c).
"SUBSIDIARY" shall mean, with respect to any Person, any
corporation, limited liability company, partnership, joint venture or other
legal entity of which such Person (either alone or through or together with any
other subsidiary of such Person) owns, directly or indirectly, a majority of the
stock or other equity interests, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity.
"SURVIVING CORPORATION" shall have the meaning set forth in
Section 2.01.
"TAX" shall mean (i) any and all taxes, fees, levies, duties,
tariffs, imposts, assessments and other charges of any kind (together with any
and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any Governmental Entity or other taxing
authority (each, a "TAXING AUTHORITY"), including, without limitation, taxes or
other charges on or with respect to income, franchises, windfall or other
profits, gross or net receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation or
net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, franchise, business, value-added or gains taxes;
license, registration and documentation fees; and customs duties, tariffs and
similar charges; (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, combined,
consolidated or unitary group for any taxable period; and (iii) any liability
for the payment of amounts of the type described in (i) or (ii) as a result of
being a transferee of, or a successor in interest to, any Person or as a result
of an express or implied obligation to indemnify any Person.
"TAX RETURN" shall mean any return, report, statement, form,
declaration, notice, notification, election, certificate or other document or
information (including, without limitation, any estimated tax reports or
returns, withholding tax reports or returns and information reports or
9
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returns) filed with or submitted to, or required to be filed with or submitted
to, any Taxing Authority with respect to any Taxes.
"TECHNOLOGY TRANSFER AGREEMENT" shall have the meaning set
forth in Section 6.11.
"TERMINATING COMPANY BREACH" shall have the meaning set forth
in Section 10.01(d).
"TERMINATING PARENT BREACH" shall have the meaning set forth
in Section 10.01(e).
"THIRD NOTE" shall mean that certain unsecured promissory note
in the principal amount of $1,500,000 to be issued by Parent to Principal
Stockholder under the conditions described in Section 7.01(b) in the form of
ANNEX C attached hereto.
"U.S. GAAP" shall mean United States generally accepted
accounting principles.
ARTICLE II
THE MERGER
SECTION 2.01 THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with Delaware Law, at
the Effective Time (as defined in Section 2.03), Merger Sub shall be merged with
and into Company. As a result of the Merger, the separate corporate existence of
Merger Sub shall cease and Company shall continue as the surviving corporation
of the Merger as a wholly owned Subsidiary of Parent (the "SURVIVING
CORPORATION").
SECTION 2.02 CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall be held at the offices of
Proskauer Rose LLP, 1585 Broadway, New York, New York 10036, on the date hereof,
or another time and date to be specified by the parties, which shall be no later
than the second business day after the satisfaction or waiver of the conditions
set forth in Article VIII, unless another date, time or place is agreed to by
the parties.
SECTION 2.03 EFFECTIVE TIME. At the time of the Closing, the
parties shall cause the Merger to be consummated by filing a certificate of
merger in such form as is required by the applicable provisions of Delaware law
(the "CERTIFICATE OF MERGER") with the Secretary of State of the State of
Delaware, executed in accordance with the relevant provisions of Delaware Law
(the date and time of such filing, or such later date and time as may be set
forth therein, being the "EFFECTIVE TIME").
SECTION 2.04 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, except as otherwise
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provided herein, all the property, rights, privileges, powers and franchises of
Company and Merger Sub shall vest in Company as the Surviving Corporation, and
all debts, liabilities and duties of Company and Merger Sub shall become the
debts, liabilities and duties of Company as the Surviving Corporation.
SECTION 2.05 CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS
AND OFFICERS OF SURVIVING CORPORATION. Unless otherwise agreed by the parties
before the Effective Time, at the Effective Time:
(a) subject to the requirements of Section 7.02, the
Certificate of Incorporation and the Bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and the Bylaws of the Surviving Corporation, until
thereafter amended as provided by Law and such Certificate of
Incorporation or Bylaws;
(b) the officers of the Surviving Corporation shall be those
persons listed on SCHEDULE I hereto, in each case until their
successors are elected or appointed and qualified or until their
resignation or removal; and
(c) the directors of the Surviving Corporation shall be those
persons listed on SCHEDULE II hereto, in each case until their
successors are elected or appointed and qualified or until their
resignation or removal.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01 CONVERSION OF SHARES. At the Effective Time, by
virtue of the Merger, and without any action on the part of Parent, Merger Sub,
Company or the holders of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately before the Effective Time (excluding fractional shares and shares of
Company Common Stock, if any, held (i) by Persons who have not voted such shares
for approval of the Merger and with respect to which such Persons shall have
perfected dissenters' rights in accordance with Delaware Law ("COMMON DISSENTING
SHARES"), (ii) by Parent or any Parent Subsidiary or (iii) in the treasury of
Company) shall be converted into and exchangeable for (subject to the provisions
of Section 3.04) that number of shares of Parent Common Stock equal to (1) the
Aggregate Parent Distributable Share Number divided by (2) the Company Aggregate
Share Number (the "EXCHANGE RATIO").
(b) Each share of Company Series A Preferred Stock issued and
outstanding immediately before the Effective Time (excluding shares of Company
Series A Preferred Stock, if any, held (i) by Persons who have not voted such
shares for approval of the Merger and with respect to which such Persons shall
have perfected dissenters' rights in accordance with Delaware Law ("SERIES A
PREFERRED DISSENTING Shares"), (ii) by Parent or any Parent Subsidiary
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or (iii) in the treasury of Company) shall be converted into and exchangeable
for (subject to the provisions of Section 3.04) that number of shares of Parent
Common Stock equal to (1) the number of shares of Company Common Stock into
which each share of Company Series A Preferred Stock is convertible immediately
prior to the Effective Time, multiplied by (2) the Exchange Ratio.
(c) Each share of Company Series B Preferred Stock issued and
outstanding immediately before the Effective Time (excluding shares of Company
Series B Preferred Stock, if any, held (i) by Persons who have not voted such
shares for approval of the Merger and with respect to which such Persons shall
have perfected dissenters' rights in accordance with Delaware Law ("SERIES B
PREFERRED DISSENTING SHARES" and, collectively with any Common Dissenting Shares
and Series A Preferred Dissenting Shares, "DISSENTING SHARES"), (ii) by Parent
or any Parent Subsidiary or (iii) in the treasury of Company) shall be converted
into and exchangeable for (subject to the provisions of Section 3.04) that
number of shares of Parent Common Stock equal to (1) the number of shares of
Company Common Stock into which each share of Company Series B Preferred Stock
is convertible immediately prior to the Effective Time, multiplied by (2) the
Exchange Ratio.
(d) Each issued and outstanding share of capital stock of
Merger Sub shall be converted into and become one fully paid and nonassessable
share of common stock of the Surviving Corporation. From and after the Effective
Time, each outstanding certificate theretofore representing shares of Merger Sub
common stock shall be deemed for all purposes to evidence ownership of and to
represent the number of shares of Surviving Corporation common stock into which
such shares of Merger Sub common stock shall have been converted.
(e) Each share of Parent Common Stock issued and outstanding
immediately prior to the Effective Time shall remain an issued and outstanding
share of common stock of Parent and shall not be affected by the Merger.
SECTION 3.02 EXCHANGE OF SHARES OTHER THAN DISSENTING SHARES
AND TREASURY SHARES.
(a) PARENT TO PROVIDE COMMON STOCK. Promptly after the
Effective Time, Parent shall make available to the holders of Company Common
Stock and Company Preferred Stock certificates of shares of Parent Common Stock
("PARENT CERTIFICATES") representing the number of whole shares of Parent Common
Stock issuable pursuant to Sections 3.01(a) and 3.01(b) in exchange for shares
of Company Common Stock and Company Preferred Stock outstanding immediately
prior to the Effective Time.
(b) EXCHANGE PROCEDURES. Parent shall, promptly (and in any
event within ten (10) Business Days) after the date of the Closing, mail to each
holder of record of certificates of Company Common Stock and Company Preferred
Stock ("COMPANY CERTIFICATES") whose shares were converted into the right to
receive shares of Parent Common Stock: (i) a form letter of transmittal in form
and substance reasonably satisfactory to Company and (ii) instructions for use
in effecting the surrender of the Company Certificates in exchange for Parent
Certificates. Upon surrender of a Company Certificate for cancellation to Parent
or to such other agent or
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agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed, and such other documents as may be
reasonably required by Parent, the holder of such Company Certificate shall be
entitled to receive in exchange therefor a Parent Certificate representing the
number of whole shares of Parent Common Stock that such holder has the right to
receive pursuant to this Article III, and the Company Certificate so surrendered
shall forthwith be canceled. Until so surrendered, each outstanding Company
Certificate that, prior to the Effective Time, represented shares of Company
Common Stock or Company Preferred Stock will be deemed from and after the
Effective Time, for all purposes other than the payment of dividends and
distributions, to evidence the ownership of the number of whole shares of Parent
Common Stock into which such shares of Company Common Stock or Company Preferred
Stock, as the case may be, shall have been so converted.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to shares of Parent Common Stock
with a record date after the Effective Time will be paid to the holder of any
unsurrendered Company Certificate with respect to the shares of Parent Common
Stock represented thereby until the holder of record of such Company Certificate
shall surrender such Company Certificate. Subject to the effect of applicable
escheat or similar laws, following surrender of any such Company Certificate,
there shall be paid to the record holder of the Parent Certificates issued in
exchange therefor, without interest, at the time of such surrender, the amount
of any such dividends or other distributions with a record date after the
Effective Time theretofore payable (but for the provisions of this Section
3.02(c)) with respect to such shares of Parent Common Stock.
(d) TRANSFER OF OWNERSHIP. If any Parent Certificate is to be
issued in a name other than that in which the Company Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance and/or
payment thereof that the Company 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 Parent
Certificate for shares of Parent Common Stock in any name other than that of the
registered holder of the Company Certificate surrendered, or established to the
reasonable satisfaction of Parent or any agent designated by it that such tax
has been paid or is not payable.
(e) UNDELIVERED PARENT CERTIFICATES. Parent Certificates which
have not been delivered to holders of Company Certificates pursuant to this
Article III within six (6) months after the Effective Time shall promptly be
paid or delivered, as appropriate, to Parent, and thereafter holders of Company
Certificates who have not theretofore complied with the exchange procedures set
forth in and contemplated by this Section 3.02 shall thereafter look only to
Parent (subject to abandoned property, escheat and similar laws) only as general
creditors thereof for their claim for shares of Parent Common Stock and any
dividends or distributions (with a record date after the Effective Time) with
respect to shares of Parent Common Stock to which they are entitled.
(f) NO LIABILITY. Notwithstanding anything to the contrary in
this Section 3.02, none of Parent, the Surviving Corporation or any party hereto
shall be liable to any Person in
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respect of any shares of Parent Common Stock or cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
SECTION 3.03 STOCK TRANSFER BOOKS. As of the Effective Time,
the stock transfer books of Company shall be closed, and there shall be no
further registration of transfers of shares of Company Common Stock or Company
Preferred Stock thereafter on the records of any such stock transfer books. In
the event of a transfer of ownership of shares of Company Common Stock or
Company Preferred Stock that is not registered in the stock transfer records of
Company at the Effective Time, a certificate or certificates representing the
number of whole shares of Parent Common Stock into which such shares of Company
Common Stock or Company Preferred Stock, as the case may be, shall have been
converted shall be issued to the transferee together with a cash payment in the
amount of dividends, if any, in accordance with Section 3.02(c) hereof, if the
certificate or certificates representing such shares of Company Common Stock or
Company Preferred Stock, as the case may be, is or are surrendered as provided
in Section 3.02(b) hereof, accompanied by all documents required to evidence and
effect such transfer and by evidence of payment of any applicable stock transfer
tax.
SECTION 3.04 NO FRACTIONAL SHARE CERTIFICATES. No scrip or
fractional share Parent Certificate shall be issued upon the surrender for
exchange of Company Certificates, but in lieu thereof, the number of shares of
Parent Common Stock to be distributed to each holder of Company Preferred Stock
or, if applicable, Company Common Stock shall be rounded up to the nearest whole
share.
SECTION 3.05 CERTAIN ADJUSTMENTS. If between the date of this
Agreement and the Effective Time, the outstanding shares of Parent Common Stock,
Company Common Stock or Company Preferred Stock shall be changed into a
different number of shares by reason of any reclassification, recapitalization,
split-up, combination or exchange of shares, or any dividend payable in stock or
other securities shall be declared thereon with a record date within such
period, then the Exchange Ratios shall be adjusted accordingly to provide to
Parent and the stockholders of Company the same economic effect as contemplated
by this Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend.
SECTION 3.06 DISSENTERS' RIGHTS. Any Dissenting Shares shall
not be converted into, or be exchangeable for, the right to receive shares of
Parent Common Stock but shall instead be converted into the right to receive
such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to Delaware Law unless and until such holder shall
have failed to perfect or shall have effectively withdrawn or lost his right of
appraisal and payment, as the case may be. Company shall give Parent prompt
notice of any Dissenting Shares (and shall also give Parent prompt notice of any
withdrawals of such demands for appraisal rights) and Parent shall have the
right to direct all negotiations and proceedings with respect to such demands.
Neither Company nor the Surviving Corporation shall, except with the prior
written consent of Parent, voluntarily make any payments with respect to, or
settle or offer to settle, any such demand for appraisal rights. If, after the
Effective Time, any Dissenting Shares shall lose their status as Dissenting
Shares, Parent shall issue and deliver, upon surrender by such stockholder of
certificate or certificates representing shares of Company
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Capital Stock, the number of shares of Parent Common Stock to which such
stockholder would otherwise be entitled pursuant to this Article III.
SECTION 3.07 LOST, STOLEN OR DESTROYED CERTIFICATES. In the
event any Company Certificates shall have been lost, stolen or destroyed, Parent
shall issue in exchange for such lost, stolen or destroyed Company Certificates,
upon the making of an affidavit of that fact by the holder thereof, such shares
of Parent Common Stock as may be required pursuant to Section 3.01; 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 Company
Certificates to indemnify Parent against any claim that may be made against
Parent or the Surviving Corporation with respect to the Company Certificates
alleged to have been lost, stolen or destroyed.
SECTION 3.08 TAKING OF NECESSARY ACTION; FURTHER ACTION. If,
at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of Company, the officers and directors
of Company are fully authorized in the name of Company or otherwise to take, and
will use good faith efforts to take, all such lawful and necessary action, at
Parent's expense, so long as such action is not inconsistent with this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
Each of Company and Principal Stockholder, jointly and
severally, hereby represents and warrants to Parent and Merger Sub, subject to
the exceptions specifically disclosed in writing in the Company Disclosure
Schedule, all such exceptions to be referenced to a specific representation set
forth in this Article IV, that:
SECTION 4.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of Company and each Company Subsidiary has been duly
organized and is validly existing and in good standing (if such a concept exists
in the applicable jurisdiction of organization) under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Company
and each Company Subsidiary is duly qualified or licensed to do business, and is
in good standing (if such a concept exists in the applicable jurisdiction of
organization), in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that could not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
(b) SCHEDULE 4.01 of the Company Disclosure Schedule sets
forth a true and complete list of each Company Subsidiary, together with the
jurisdiction of incorporation or
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organization of each Company Subsidiary and the percentage of each Company
Subsidiary's outstanding capital stock or other equity interests owned by
Company or another Company Subsidiary. Except as set forth in SCHEDULE 4.01 of
the Company Disclosure Schedule and except for Company's ownership of its
Subsidiaries, neither Company nor any Company Subsidiary owns, directly or
indirectly, an equity interest in any partnership or joint venture arrangement
or other business entity that is material to the business, assets, liabilities,
financial condition or results of operations of Company and the Company
Subsidiaries, taken as a whole, or that exceeds 10% of the equity of such
entity.
SECTION 4.02 CERTIFICATE OF INCORPORATION AND BYLAWS. The
copies of Company's Certificate of Incorporation and bylaws previously provided
to Parent by Company are true, complete and correct copies thereof. Such
Certificate of Incorporation and bylaws are in full force and effect. Company is
not in violation of any of the provisions of its Certificate of Incorporation or
bylaws.
SECTION 4.03 CAPITALIZATION. The authorized capital stock of
Company consists of 120,000,000 shares of Company Common Stock and 9,000,000
shares of Company Preferred Stock. As of the date hereof, before giving effect
to the Reverse Split, (i) 95,743,201 shares of Company Common Stock are issued
and outstanding, all of which are validly issued, fully paid and nonassessable,
(ii) no shares of Company Common Stock are held in the treasury of Company,
(iii) no shares of Company Common Stock are held by Company Subsidiaries and
(iv) 7,700,000 shares of Company Common Stock are reserved for future issuance
pursuant to Company Stock Options, Company Warrants and the conversion
provisions of the Company Preferred Stock. The name of each holder of a Company
Stock Option or Company Warrant and the number of shares of Company Common Stock
for which each Company Stock Option or Company Warrant is exercisable is set
forth in SCHEDULE 4.03 of the Company Disclosure Schedule. Except for shares of
Company Common Stock issuable pursuant to the Company Stock Plan and as
otherwise set forth in SCHEDULE 4.03 of the Company Disclosure Schedule, there
are no options, warrants, debt securities or other rights, agreements,
arrangements or commitments of any character to which Company or any Company
Subsidiary is a party or by which Company or any Company Subsidiary is bound
relating to the issued or unissued capital stock of Company or any Company
Subsidiary or obligating Company or any Company Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, Company or any Company
Subsidiary. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance prior to the Effective Time on the terms and conditions specified
in the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or Company
Preferred Stock or any capital stock of any Company Subsidiary. Each outstanding
share of capital stock of each Company Subsidiary is duly authorized, validly
issued, fully paid and nonassessable and each such share owned by Company or
another Company Subsidiary is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
Company's or such other Company Subsidiary's voting rights, charges and other
encumbrances of any nature whatsoever. There are no material outstanding
contractual obligations of Company or any Company Subsidiary to provide funds
to, or make any material investment (in the form of a loan, capital contribution
or otherwise) in, any
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Company Subsidiary or any other Person. Except as set forth in SCHEDULE 4.03 of
the Company Disclosure Schedule, there are no agreements or trusts or other
agreements or understandings to which the Company or any Company Subsidiary is a
party with respect to the voting or disposition of the Company Common Stock or
the Company Preferred Stock, and the Company is not aware of any such agreements
among its stockholders. Except as set forth in SCHEDULE 4.03 of the Company
Disclosure Schedule, there are no agreements, undertakings or arrangements
granting any Person the right to require Company or any Company Subsidiary to
register or to allow such person to participate in any registration of any
securities of Company or any Company Subsidiary. The stockholders listed on
SCHEDULE 4.03 of the Company Disclosure Schedule constitute all of the
stockholders of Company.
SECTION 4.04 AUTHORITY RELATIVE TO THIS AGREEMENT. Company has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Company and the consummation by Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
and no other corporate proceedings on the part of Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than the filing and recordation of the Certificate of Merger as required
by Delaware Law). This Agreement has been duly executed and delivered by Company
and, assuming the due authorization, execution and delivery by the other parties
hereto, constitutes the legal, valid and binding obligation of Company,
enforceable against Company in accordance with its terms, except to the extent
that enforceability hereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by principles of equity regarding the availability of
remedies.
SECTION 4.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming that the Certificate of Merger is filed and
recorded as required by Delaware Law, the execution and delivery of this
Agreement by Company do not, and the performance by Company of its obligations
hereunder, and the consummation of the Merger will not, (i) conflict with or
violate any provision of the Certificate of Incorporation or bylaws of Company
or any equivalent organizational documents of any Company Subsidiary, (ii)
assuming that all consents, approvals, authorizations and permits described in
Section 4.05(b) have been obtained or waived and all filings and notifications
described in Section 4.05(b) have been made, conflict with or violate any Law
applicable to Company or any Company Subsidiary or by which any property or
asset of Company or any Company Subsidiary is bound or affected or (iii)
assuming that all consents described in SCHEDULE 4.05 of the Company Disclosure
Schedule have been obtained or waived, result in any breach of or constitute a
default (or an event which with the giving of notice or lapse of time or both
could reasonably be expected to become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or other encumbrance on any property or asset of Company
or any Company Subsidiary pursuant to, any material note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Company or any Company Subsidiary is a party
or by which Company or any
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Company Subsidiary or any of their respective assets are bound (other than
advertising sales contracts constituting less than five percent of Company's
total revenue).
(b) The execution and delivery of this Agreement by Company do
not, and the performance by Company of its obligations hereunder and the
consummation of the Merger will not, require any consent, approval,
authorization or permit of, or filing by Company with or notification by Company
to, any Governmental Entity, except pursuant to applicable requirements of the
Securities Act, Blue Sky Laws, the premerger notification requirements of the
HSR Act, if applicable, and the filing and recordation of the Certificate of
Merger as required by Delaware Law.
SECTION 4.06 PERMITS; COMPLIANCE WITH LAWS. Company and the
Company Subsidiaries are in possession of all franchises, grants,
authorizations, licenses, establishment registrations, product listings,
permits, approvals and orders of any Governmental Entity necessary for Company
or any Company Subsidiary to own, lease and operate its properties and assets or
otherwise to carry on its business as it is now being conducted, other than
those, the failure of which to possess, could not reasonably be expected to
have, individually, or in the aggregate, a Company Material Adverse Effect
(collectively, the "COMPANY PERMITS"), and none of the Company Permits has been
suspended or cancelled nor is any such suspension or cancellation pending or, to
the Knowledge of Company, threatened in writing. Except as set forth on SCHEDULE
4.06 of the Company Disclosure Schedule, neither Company nor any Company
Subsidiary is in conflict with, or in default or violation of, (i) any Law
applicable to Company or any Company Subsidiary or by which any property or
asset of Company or any Company Subsidiary is bound or affected or (ii) any
Company Permits, except for such conflicts, defaults or violations that could
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. SCHEDULE 4.06 of the Company Disclosure Schedule sets
forth all actions, proceedings, investigations or surveys pending or, to the
Knowledge of Company, threatened in writing against Company or any Company
Subsidiary that could reasonably be expected to result in the suspension or
cancellation of any Company Permit. Since January 1, 2000, neither Company nor
any Company Subsidiary has received from any Governmental Entity any written
notification with respect to possible conflicts, defaults or violations of Laws.
SECTION 4.07 FINANCIAL STATEMENTS.
(a) SCHEDULE 4.07(A) of the Company Disclosure Schedule
includes copies of (i) the draft audited consolidated balance sheet of Company
at December 31, 2000, together with the related consolidated statements of
operations, stockholders' equity and cash flows for the year ended December 31,
2000 and the notes thereto, together with the draft opinion of Company's
auditors (the "COMPANY AUDITED FINANCIAL STATEMENTS"), and (ii) the unaudited
consolidated balance sheet of Company at September 30, 2001, together with the
related statements of operations, stockholders' equity and cash flows for the
nine-month period ended September 30, 2001 (the "COMPANY UNAUDITED FINANCIAL
STATEMENTS" and, together with the Company Audited Financial Statements, the
"COMPANY FINANCIAL STATEMENTS"). The Company Financial Statements were prepared
in accordance with U.S. GAAP (except, in the case of the Company Unaudited
Financial Statements, for the absence of footnotes and subject to normal
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year end adjustments, which adjustments are not material) applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each presented fairly the consolidated financial position
of Company and the Company Subsidiaries as at the respective dates thereof, and
their consolidated results of operations, stockholders' equity and cash flows
for the respective periods indicated therein, except as otherwise noted therein
(subject, in the case of the Company Unaudited Financial Statements, to normal
and recurring immaterial year-end adjustments).
(b) Except as and to the extent set forth or reserved against
on the consolidated balance sheet of Company and the Company Subsidiaries as of
September 30, 2001, which is part of the Company Unaudited Financial Statements
(the "COMPANY BALANCE SHEET"), or as set forth on SCHEDULE 4.07(B) of the
Company Disclosure Schedule, none of Company or any Company Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet or in
notes thereto prepared in accordance with U.S. GAAP, except for (i) liabilities
or obligations which do not in the aggregate exceed $250,000 or (ii) liabilities
or obligations incurred in the ordinary course of business consistent with past
practice since September 30, 2001.
(c) None of Company or any Company Subsidiary has any
outstanding Indebtedness (other than trade payables incurred in the ordinary
course of business consistent with past practice).
SECTION 4.08 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as otherwise set forth on SCHEDULE 4.08 of the
Company Disclosure Schedule, since September 30, 2001 and prior to the date
hereof, there has not been (i) any event that could reasonably be expected to
prevent or materially delay the performance of Company's obligations pursuant to
this Agreement and the consummation of the Merger by Company, (ii) any material
change by Company or any Company Subsidiary in its accounting methods,
principles or practices, (iii) any declaration, setting aside or payment of any
dividend or distribution in respect of the shares of Company Common Stock or
Company Preferred Stock or any redemption, purchase or other acquisition by
Company of any of Company's securities, (iv) except in the ordinary course of
business consistent with past practice, any increase in the compensation or
benefits or establishment of any bonus, insurance, severance, change in control,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of Company
or any Company Subsidiary, (v) any issuance or sale by Company or any Company
Subsidiary of any stock, notes, bonds or other securities other than pursuant to
the exercise of outstanding securities, or entering into any agreement with
respect thereto, (vi) any amendment to Company's Certificate of Incorporation or
bylaws, (vii) other than in the ordinary course of business, any (x) purchase,
sale, assignment or transfer of any material assets by Company or any Company
Subsidiary, (y) mortgage, pledge or the institution of any lien, encumbrance or
charge on any material assets or properties, tangible or intangible, of Company
or any Company Subsidiary, except for liens for Taxes not yet delinquent and
such other liens, encumbrances or
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charges which do not have, and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, or (z)
waiver by Company or any Company Subsidiary of any rights of material value or
cancellation or any material debts or claims, or (viii) any entering into by
Company or any Company Subsidiary of any transaction of a material nature other
than in the ordinary course of business, consistent with past practices.
(b) Except as otherwise set forth on SCHEDULE 4.08 of the
Company Disclosure Schedule, since September 30, 2001, Company and the Company
Subsidiaries have conducted their businesses only in the ordinary course
consistent with past practice and, since such date, there has not been (i) any
Company Material Adverse Effect, (ii) any incurrence by Company or any Company
Subsidiary of any damage, destruction or similar loss, whether or not covered by
insurance, materially affecting the business or properties of Company or any
Company Subsidiary, (iii) any incurrence by Company or any Company Subsidiary of
any material liability (absolute or contingent), except for current liabilities
and obligations incurred in the ordinary course of business, consistent with
past practice, or (iv) to the Knowledge of Company, any impairment, modification
or event, or notice of any pending or threatened impairment, modification or
event which could be reasonably expected to result in a loss, impairment, or
diminution in value on a going forward basis of the contractual and business
relationships of Company or any Company Subsidiary with any of its material
customers, material vendors or material suppliers, other than any impairment,
modification or event which could not reasonably be expected to result in a loss
of the relationship of Company or any Company Subsidiary with such customer,
vendor or supplier or a loss of a material amount of business or a material
change in profit margins with respect to such customer, vendor or supplier.
SECTION 4.09 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) With respect to each employee benefit fund, plan, program,
arrangement and contract (including, without limitation, any "employee benefit
plan", as defined in Section 3(3) of ERISA) maintained, sponsored or contributed
to or required to be contributed to by Company or any Company Subsidiary or
other trade or business (whether or not incorporated) treated as a single
employer with Company (a "COMPANY ERISA AFFILIATE") pursuant to Code Section
414(b), (c), (m) or (o) that covers or covered former or current employees of
Company or any of its Subsidiaries (or any beneficiary thereof), whether
domestic or foreign, or with respect to which Company or any Company ERISA
Affiliate could incur liability under Section 4069, 4212(c) or 4204 of ERISA or
Section 412 of the Code (the "COMPANY BENEFIT Plans"), other than with respect
to the Foreign Plans, Company has delivered or made available to Parent a true,
complete and correct copy of (i) such Company Benefit Plan and the most recent
summary plan description related to such Company Benefit Plan, if a summary plan
description is required therefor, (ii) each trust agreement or other funding
arrangement relating to such Company Benefit Plan, (iii) the most recent annual
report (Form 5500) filed with the IRS with respect to such Company Benefit Plan,
(iv) the most recent actuarial report or financial statement relating to such
Company Benefit Plan and (v) the most recent determination letter issued by the
IRS with respect to such Company Benefit Plan, if it is intended to be qualified
under Section 401(a) of the Code. None of Company, any Company Subsidiary or any
Company Affiliate has any express or implied commitment, whether legally
enforceable or not, to modify, change or
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terminate any Company Benefit Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.
(b) Each Company Benefit Plan has been administered in all
material respects in accordance with its terms and all applicable laws,
including, without limitation, ERISA and the Code, and all contributions
required to be made under the terms of any of the Company Benefit Plans as of
the date of this Agreement have been timely made or have been reflected on the
most recent consolidated balance sheet prior to the date of this Agreement. With
respect to the Company Benefit Plans, no event has occurred and, to the
Knowledge of Company, there exists no condition or set of circumstances in
connection with which Company, any Company Subsidiary or any Company ERISA
Affiliate could reasonably be expected to be subject to any material liability
(other than for routine benefit liabilities) under the terms of such Company
Benefit Plans, ERISA, the Code or any other applicable Law.
(c) (i) Each Company Benefit Plan which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS as to its qualified status under the Code and
as to the exempt status under Section 501(a) of the Code of each trust
established thereunder or Company has applied or will apply to the IRS for such
a determination letter prior to the expiration of the requisite period under
applicable Treasury Regulations or IRS pronouncements in which to apply for such
determination letter and to make any amendments necessary to obtain a favorable
determination, and to the Knowledge of Company, no fact or event has occurred
since the date of such determination letter from the IRS to adversely affect the
qualified status of any such Company Benefit Plan or the exempt status of any
such trust; (ii) to the Knowledge of Company, there has been no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any Company Benefit Plan; (iii) each Company Benefit Plan
can be amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability, other than (A) liability for
ordinary administrative expenses typically incurred in a termination event or
(B) if the Company Benefit Plan is a pension benefit plan subject to Part 3 of
Title I of ERISA, liability for the accrued benefits as of the date of such
termination (if and to the extent required by ERISA) to the extent that either
there are sufficient assets set aside in a trust or insurance contract to
satisfy such liability or such liability is reflected on the most recent
consolidated balance sheet prior to the date of this Agreement. No suit,
administrative proceeding, action or other litigation has been brought, or to
the Knowledge of Company is threatened in writing, against or with respect to
any such Company Benefit Plan, including any audit or inquiry by the IRS, United
States Department of Labor or other applicable Governmental Entity (other than
routine benefits claims).
(d) No Company Benefit Plan is a multiemployer pension plan
(as defined in Section 3(37) of ERISA) or other pension plan subject to Title IV
of ERISA or Section 412 of the Code and none of Company, any Company Subsidiary
or any Company ERISA Affiliate has sponsored or contributed to or been required
to contribute to a multiemployer pension plan or other pension plan subject to
Title IV of ERISA. No material liability under Title IV of ERISA has been
incurred by Company, any Company Subsidiary or any Company ERISA Affiliate that
has not been satisfied in full, and no condition exists that presents a
reasonable risk to Company, any Company Subsidiary or any Company ERISA
Affiliate of incurring or being subject
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(whether primarily, jointly or secondarily) to a material liability thereunder.
None of the assets of Company or any Company ERISA Affiliate is, or may
reasonably be expected to become, the subject of any lien arising under ERISA or
Section 412(n) of the Code.
(e) Company has listed on SCHEDULE 4.09(E) of the Company
Disclosure Schedule and has delivered to Parent true, complete and correct
copies of (i) all employment agreements with officers and all consulting
agreements of Company and each Company Subsidiary, (ii) all severance plans,
agreements, programs and policies of Company and each Company Subsidiary with or
relating to their respective employees, directors or consultants, and (iii) all
plans, programs, agreements and other arrangements of Company and each Company
Subsidiary with or relating to their respective employees, directors or
consultants which contain "change of control" provisions. Except as set forth in
SCHEDULE 4.09(E) of the Company Disclosure Schedule, which discloses the
Company's estimate of excess parachute payments based on assumptions described
therein, no payment or benefit which will be made by Company or any Company
Subsidiary under any Company Benefit Plan or other arrangement will constitute
an excess parachute payment under Code Section 280G(b)(1), and the consummation
of the transactions contemplated by this Agreement will not individually or in
conjunction with any other possible event (including termination of employment)
(i) entitle any current or former employee or other service provider of Company
or any Company Subsidiary to severance benefits or any other payment,
compensation or benefit (including forgiveness of indebtedness), except as
expressly provided by this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation or benefit due any such employee
or service provider.
(f) Except as described in SCHEDULE 4.09(F) of the Company
Disclosure Schedule, neither Company nor any Company Subsidiary is a party to
any collective bargaining or other labor union contract applicable to Persons
employed by Company or any Company Subsidiary and no collective bargaining
agreement is being negotiated by Company or any Company Subsidiary. There is no
labor dispute, strike or work stoppage against Company or any Company Subsidiary
pending or, to the Knowledge of Company, threatened in writing which may
interfere with the respective business activities of Company or any Company
Subsidiary. To the Knowledge of Company, none of Company, any Company
Subsidiary, or any of their respective representatives or employees has
committed any unfair labor practice in connection with the operation of the
respective businesses of Company or any Company Subsidiary, and there is no
charge or complaint against Company or any Company Subsidiary by the National
Labor Relations Board or any comparable Governmental Entity pending or
threatened in writing.
(g) Except as required by Law, no Company Benefit Plan
provides retiree or post-employment medical, disability or life insurance
benefits to any Person. To the Knowledge of Company, Company and the Company
ERISA Affiliates comply in all material respects with (i) the requirements of
the applicable health care continuation and notice provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the
regulations (including proposed regulations) thereunder and (ii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996
and the regulations (including the proposed regulations) thereunder.
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(h) With respect to each Foreign Plan, the fair market value
of the assets of each funded Foreign Plan, the liability of each insurer for any
Foreign Plan funded through insurance or the book reserve established for any
Foreign Plan, together with any accrued contributions, is sufficient to procure
or provide for the accrued benefit obligations, as of the date of this
Agreement, with respect to all current and former participants in such Foreign
Plan according to actuarial assumptions and valuations most recently used to
determine employer contributions to such Foreign Plan and no transaction
contemplated by this Agreement shall cause such assets or insurance obligations
to be less than such benefit obligations. Each Foreign Plan which is intended to
offer tax-favored treatment to its participants under applicable laws has
received, to the extent applicable, a favorable ruling or letter from the
applicable Governmental Entity as to its tax-favored status and to the Knowledge
of Company, no fact or event has occurred to adversely affect the tax-favored
status of such Foreign Plan.
SECTION 4.10 CONTRACTS. Except for the contracts and
agreements described in SCHEDULE 4.10 of the Company Disclosure Schedule
(collectively, the "COMPANY MATERIAL CONTRACTS"), neither Company nor the
Company Subsidiaries is a party to or bound by any material contract (it being
agreed that to the extent a contract is not listed on SCHEDULE 4.10 because of
the dollar amount or other qualifications set forth in this Section 4.10, such
contract shall not be deemed to be a material contract), including without
limitation, the following contracts (which for purposes of this Agreement shall
be deemed Company Material Contracts):
(a) any distributor, sales, advertising, agency or
manufacturer's representative contract that constitutes five percent or more of
Company's gross revenues or that contains a revenue guarantee;
(b) any continuing contract for the purchase of materials,
supplies, equipment or services involving in the case of any such contract more
than $50,000 per annum;
(c) any contract that expires or may be renewed at the option
of any Person other than Company so as to expire more than one (1) year after
the date of this Agreement;
(d) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any leasing transaction of the type
required to be capitalized in accordance with U.S. GAAP;
(e) any contract for capital expenditures in excess of $50,000
in the aggregate;
(f) any contract limiting the freedom of Company or any
Company Subsidiary to engage in any line of business or to compete with any
other Person, or any confidentiality, secrecy or non-disclosure contract;
(g) any contract pursuant to which Company or any Company
Subsidiary is a lessor or lessee of any machinery, equipment, motor vehicles,
office furniture, fixtures or other personal property involving in the case of
any such contract more than $50,000 per annum;
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(h) any contract with any Person with whom Company or any
Company Subsidiary does not deal at arm's length within the meaning of the Code;
(i) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment by Company or any
Company Subsidiary with respect to, the obligations, liabilities (whether
accrued, absolute, contingent or otherwise) or indebtedness of any other Person;
or
(j) any agreement relating to the acquisition or disposition
by Company or any Company Subsidiary of a business, line of business or material
amount of assets.
Company and/or each Company Subsidiary, as applicable, has
performed all of the material obligations required to be performed by it and is
entitled to all benefits under, and to the Knowledge of Company, is not alleged
to be in default in respect of, any Company Material Contract. Each of the
Company Material Contracts is in full force and effect, unamended, and there
exists no material default or event of default or event, occurrence, condition
or act, with respect to Company or any Company Subsidiary or to the Knowledge of
Company with respect to the other contracting party, which, with the giving of
notice, the lapse of the time or the happening of any other event or conditions,
would become a material default or event of default under any Company Material
Contract. True, correct and complete copies of all Company Material Contracts
have been delivered or made available to Parent.
SECTION 4.11 LITIGATION. Except as set forth on SCHEDULE 4.11
of the Company Disclosure Schedule, there is no suit, claim, action, proceeding
or investigation pending or, to the Knowledge of Company, threatened in writing
against Company or any Company Subsidiary that could reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect or
materially interfere with Company's ability to consummate the transactions
contemplated herein and, to the Knowledge of Company, there are no existing
facts or circumstances that could reasonably be expected to result in such a
suit, claim, actions, proceeding or investigation. To the Knowledge of Company,
there are no facts or circumstances that could reasonably be expected to result
in the denial of insurance coverage under policies issued to Company and Company
Subsidiaries in respect of such suits, claims, actions, proceedings and
investigations, except in any case as could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Neither
Company nor any Company Subsidiary is subject to any outstanding order, writ,
injunction or decree which could reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect or materially interfere with
Company's ability to consummate the transactions contemplated herein.
SECTION 4.12 ENVIRONMENTAL MATTERS. Except as could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, (a) Company and the Company Subsidiaries are in
compliance with all applicable Environmental Laws and all Company Permits
required by Environmental Laws, (b) all past noncompliance of Company or any
Company Subsidiary with Environmental Laws or Environmental Permits has been
resolved without any pending, ongoing or future obligation, cost or liability,
and (c) neither Company nor any Company Subsidiary has released, nor to the
Knowledge of Company has any
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other Person released, a Hazardous Material at, or transported a Hazardous
Material to or from, any real property currently or formerly owned, leased or
occupied by Company or any Company Subsidiary, in violation of, or under
circumstances that could otherwise result in liability under, any Environmental
Law.
SECTION 4.13 INTELLECTUAL PROPERTY.
(a) SCHEDULE 4.13(A) of the Company Disclosure Schedule
contains an accurate and complete list of (i) all patents and patent
applications, trademarks, service marks, Internet domain names and applications
therefor, and copyrights and copyright applications, which are part of the
Company Intellectual Property and which have been issued or registered by, or
filed with, any United States, foreign or international governmental or other
body having authority to issue, register or review the same, and (ii) all
material software licenses and all other licenses, sublicenses and other
agreements to which Company or any Company Subsidiary is a party and pursuant to
which any third party is authorized by Company or any Company Subsidiary to use
any Company Intellectual Property or pursuant to which Company or any Company
Subsidiary is granted rights under any third party Intellectual Property, other
than licenses to use "off the shelf" software.
(b) Except as provided in SCHEDULE 4.13(B) of the Company
Disclosure Schedule, the Company Intellectual Property is: (i) owned solely and
exclusively by Company or a Company Subsidiary, free and clear of any and all
mortgages, pledges, liens, security interests, conditional sale agreements or
encumbrances of any kind or (ii) rightfully used or otherwise enjoyed by Company
or the Company Subsidiaries pursuant to one or more license agreements, each of
which license agreements is, to the Knowledge of Company, valid and enforceable.
(c) Except as set forth on SCHEDULE 4.13(C) of the Company
Disclosure Schedule, no action is currently pending which asserts that Company
or any Company Subsidiary is, and to the Knowledge of Company, neither Company
nor any Company Subsidiary is, infringing on, misappropriating or diluting any
Intellectual Property of any Person. Except as set forth on SCHEDULE 4.13(C) of
the Company Disclosure Schedule, neither Company nor any Company Subsidiary has
received notice from any Person within the past twelve (12) months asserting
that Company or any Company Subsidiary is infringing on, misappropriating or
diluting any Intellectual Property of any such Person. To the Knowledge of
Company, no action is currently pending which asserts that any Person is
infringing on any Company Intellectual Property, and neither Company nor any
Company Subsidiary has asserted any such claims against any Person within the
past twelve (12) months.
(d) Except as set forth on SCHEDULE 4.13(D) of the Company
Disclosure Schedule, all patents and patent applications, trademarks, service
marks, Internet domain names and applications therefor, and copyrights and
copyright applications included in the Company Intellectual Property that are
owned by Company are being and have been duly maintained, are in full force and
effect and have not been cancelled, expired or abandoned.
(e) Except as set forth on SCHEDULE 4.13(E) of the Company
Disclosure Schedule, Company has secured valid written assignments from all
consultants and employees who made
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material contributions to the creation or development of any Company
Intellectual Property of the rights to such contributions that Company does not
already own by operation of law, and Company has caused such consultants and
employees to comply with the minimum requirements for inventorship of patents
and authorship of copyrights applicable under the federal laws of the United
States.
(f) Company has taken all reasonably necessary and appropriate
steps to protect and preserve the confidentiality of all Company Intellectual
Property not otherwise protected by patents, patent applications or copyright
("COMPANY CONFIDENTIAL INFORMATION"). All use, disclosure or appropriation of
Company Confidential Information owned by Company by or to a third party has
been pursuant to the terms of a written agreement between Company and such third
party. All use, disclosure or appropriation by Company of Company Confidential
Information not owned by Company has been pursuant to the terms of a written
agreement between Company and the owner of such Company Confidential
Information, or is otherwise lawful.
SECTION 4.14 TAXES.
(a) Company and each of the Company Subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which
Company or any Company Subsidiary is or has been a member, have properly
completed and timely filed all Tax Returns required to be filed by them (or have
timely filed requests for extensions of the filing dates and have met all
subsequent filing deadlines with respect to such proceedings) and have paid all
Taxes shown thereon to be due. All Tax Returns filed by Company and each of the
Company Subsidiaries are true, correct and complete in all material respects
(without limitation, indications of asset basis, asset class, and amount (if
any) of net operating losses shall be deemed not to be "material"). Neither
Company nor any Company Subsidiary has any liability for unpaid Taxes (whether
or not shown to be due on any Tax Return) which has not been accrued for or
reserved on the Company Balance Sheet in accordance with U.S. GAAP, whether
asserted or unasserted, contingent or otherwise, other than liabilities for
unpaid Taxes that have accrued since September 30, 2001 in connection with the
operation of the business of Company and each Company Subsidiary consistent with
past practice.
(b) Except as set forth on SCHEDULE 4.14 of the Company
Disclosure Schedule, there is (i) no material claim for Taxes that is a lien
against the property of Company or any Company Subsidiary or is being asserted
against Company or any Company Subsidiary other than liens for Taxes not yet due
and payable, (ii) no audit of any Tax Return of Company or any Company
Subsidiary being conducted by a Taxing Authority or, to the Knowledge of
Company, is pending or threatened, (iii) no extension of the statute of
limitations on the assessment of any Taxes granted by Company or any Company
Subsidiary and currently in effect, and (iv) no agreement, contract or
arrangement to which Company or any Company Subsidiary is a party that may
result in the payment of any amount that would not be deductible by reason of
Section 280G, Section 404 or Section 162(m) of the Code. There is no contract,
agreement, plan or arrangement to which Company or any Company Subsidiary is a
party or by which it is bound to compensate any individual for excise taxes paid
pursuant to Section 4999 of the Code.
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(c) Company and the Company Subsidiaries have not been and
will not be required to include any material adjustment in taxable income for
any Tax period (or portion thereof) pursuant to Section 481 of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger.
(d) Neither Company nor any Company Subsidiary has filed or
will file any consent to have the provisions of Section 341(f)(2) of the Code
(or comparable provisions of any state Tax laws) apply to Company or any Company
Subsidiary.
(e) Neither Company nor any Company Subsidiary is a party to
any Tax sharing, Tax indemnity or Tax allocation agreement or arrangement nor
does Company or any Company Subsidiary have any liability or potential liability
to another party under any such agreement.
(f) Neither Company nor any Company Subsidiary has filed any
disclosures under Section 6662 of the Code or comparable provisions of state,
local or foreign law to prevent the imposition of penalties with respect to any
Tax reporting position taken on any Tax Return.
(g) Neither Company nor any Company Subsidiary has ever been a
member of a consolidated, combined or unitary group of which Principal
Stockholder was not the ultimate parent corporation or is liable for any Tax
imposed on any other Person, except as the result of the application of Treasury
Regulation Section 1.1502-6 (or any comparable provision of state, local or
foreign law) to the affiliated group of which Principal Stockholder is the
common parent..
(h) Company and each Company Subsidiary has in its possession
receipts for any Taxes paid to foreign Tax authorities. Neither Company nor any
Company Subsidiary has ever been a "personal holding company" within the meaning
of Section 542 of the Code or a "United Sates real property holding corporation"
within the meaning of Section 897 of the Code.
(i) Neither Company nor any Company Subsidiary has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355 of the
Code (x) in the two years prior to the date of this Agreement or (y) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(j) Company and each Company Subsidiary are in full compliance
with all terms and conditions of any Tax exemption, Tax holiday or other Tax
reduction agreement or order of a territorial or foreign government and the
consummation of the Merger will not have any adverse effect on the continued
validity and effectiveness of any such Tax exemption, Tax holiday or other Tax
reduction agreement or order.
(k) No claim has ever been made by any Taxing Authority in a
jurisdiction where Company or any Company Subsidiary does not file Tax Returns
that Company or any Company Subsidiary is or may be subject to taxation by that
jurisdiction.
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(l) Company and each Company Subsidiary have withheld and paid
over all Taxes required to have been withheld and paid over and complied with
all material information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(m) No items of income attributable to transactions occurring
on or before the close of the last preceding taxable year of Company or any
Company Subsidiary will be required to be included in taxable income by Company
or any Company Subsidiary in a subsequent taxable year by reason of Company or
any Company Subsidiary reporting income on the installment sales method of
accounting, the cash method of accounting, the completed contract method of
accounting or the percentage of completion capitalized cost method of
accounting.
(n) True and complete copies of all Tax Returns filed by
Company and each Company Subsidiary for each of the taxable years ended on or
after December 31, 1997 have been delivered or made available to Parent.
SECTION 4.15 INSURANCE. Company and each Company Subsidiary is
presently insured against such risks as companies engaged in a similar business
would, in accordance with good business practice, customarily be insured. The
policies of fire, theft, liability and other insurance maintained with respect
to the assets or businesses of Company and the Company Subsidiaries provide, in
the good faith judgment of the Company's management, reasonably adequate
coverage against loss. Company has heretofore furnished to Parent a complete and
correct list of all insurance policies maintained by Company or the Company
Subsidiaries as of the date hereof, and has made available to Parent complete
and correct copies of all such policies, together with all riders and amendments
thereto. All such policies are in full force and effect and all premiums due
thereon have been paid to the date hereof. Company and the Company Subsidiaries
have complied in all material respects with the terms of such policies.
SECTION 4.16 PROPERTIES. Except as set forth on SCHEDULE 4.16
of the Company Disclosure Schedule, Company and the Company Subsidiaries have
good and valid title, free and clear of all Encumbrances, except for Permitted
Encumbrances, to all their material properties and assets, whether tangible or
intangible, real, personal or mixed, reflected in the Company Unaudited
Financial Statements as being owned by Company and the Company Subsidiaries as
of the date thereof, other than (i) any properties or assets that have been sold
or otherwise disposed of in the ordinary course of business since the date of
such financial statements, (ii) liens disclosed in the notes to such financial
statements and (iii) liens arising in the ordinary course of business after the
date of such financial statements. All buildings, and all fixtures, equipment
and other property and assets that are material to Company's business on a
consolidated basis, held under leases or sub-leases by Company or any Company
Subsidiary are held under valid instruments enforceable in accordance with their
respective terms, subject to applicable laws of bankruptcy, insolvency or
similar laws relating to creditors' rights generally and to general principles
of equity (whether applied in a proceeding in law or equity). Substantially all
of Company's and the Company Subsidiaries' equipment in regular use has been
reasonably maintained and is in serviceable condition, reasonable wear and tear
excepted.
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SECTION 4.17 BROKERS. Except as set forth on SCHEDULE 4.17 of
the Company Disclosure Schedule, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Company.
SECTION 4.18 BUSINESS ACTIVITY RESTRICTION. Except as set
forth on SCHEDULE 4.18 of the Company Disclosure Schedule, neither Company nor
any Company Subsidiary has entered into any agreement under which Company or any
Company Subsidiary is restricted from selling, licensing or otherwise
distributing any of its technology or products to, or providing services to,
customers or potential customers or any class of customers, in any geographic
area, during any period of time or in any segment of the market or line of
business.
SECTION 4.19 AFFILIATE TRANSACTIONS. Except as set forth on
SCHEDULE 4.19 of the Company Disclosure Schedule, neither Company nor any
Company Subsidiary is a party to any agreement with or has any interest in any
property (whether real or personal, tangible or intangible) of any of its
affiliates, stockholders, employees, officers, directors or any entities
affiliated with any such persons or any family members of any such persons, nor
are there any agreements or understandings for the provision, directly or
indirectly, of services by and between Company and any Company Subsidiary, on
the one hand, and any of its affiliates, stockholders, employees, associates,
officers, directors or any entities affiliated with any such persons or any
family members of any such persons, on the other hand (other than inter-company
arrangements between Company and Company Subsidiaries and among Company
Subsidiaries and services provided in their capacity as employees, officers and
directors).
SECTION 4.20 CERTAIN BUSINESS PRACTICES. Neither Company nor
any Company Subsidiary nor any directors, officers, agents or employees of
Company or any Company Subsidiary (in their capacities as such) has (a) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity or (b) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
SECTION 4.21 ACCREDITED INVESTORS. To the Knowledge of
Company, following the filing of the Charter Amendment, no more than 35 of the
Rolex Stockholders are not "accredited investors" as that term is defined in
Rule 501 promulgated under the Securities Act.
SECTION 4.22 CASH POSITIONS. As of the Closing, Company shall
have cash on hand in an amount equal to or exceeding $1,500,000.
ARTICLE IVA
REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDER
Principal Stockholder hereby represents and warrants to Parent
and Merger Sub, with respect to itself and the shares of Company set forth
opposite its name on SCHEDULE 4A.03,
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subject to the exemptions specifically disclosed in writing in the Principal
Stockholder Disclosure Schedule, all such exceptions to be referenced to a
specific representation set forth in this Article IVA, that:
SECTION 4A.01 ORGANIZATION AND QUALIFICATION. Principal
Stockholder has been duly organized and is validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, as the
case may be, and has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted.
SECTION 4A.02 CERTIFICATE OF INCORPORATION AND BYLAWS.
Principal Stockholder is not in violation of any of the provisions of its
Certificate of Incorporation or bylaws.
SECTION 4A.03 TITLE TO SHARES. Principal Stockholder
represents that it owns the number and class and series of shares of Company set
forth opposite its name on SCHEDULE 4A.03 of the Principal Stockholder
Disclosure Schedule, free and clear of all claims, liens, security interests,
pledges, charges, encumbrances, stockholders' agreements and voting trusts.
SECTION 4A.04 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Principal Stockholder has all necessary corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Principal Stockholder and the consummation by
Principal Stockholder of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Principal Stockholder are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Principal Stockholder and, assuming the
due authorization, execution and delivery by the other parties hereto,
constitutes the legal, valid and binding obligation of Principal Stockholder,
enforceable against Principal Stockholder in accordance with its terms, except
to the extent that enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity regarding
the availability of remedies.
(b) Principal Stockholder has all necessary corporate power
and authority to execute and deliver the Lock-Up Agreement and to perform its
obligations thereunder. The execution and delivery of the Lock-Up Agreement by
Principal Stockholder have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Principal
Stockholder are necessary to authorize the Lock-Up Agreement. The Lock-Up
Agreement has been duly executed and delivered by Principal Stockholder and,
assuming the due authorization, execution and delivery by Timex, constitutes the
legal, valid and binding obligation of Principal Stockholder, enforceable
against Principal Stockholder in accordance with its terms, except to the extent
that enforceability hereof may be limited by applicable
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bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity regarding
the availability of remedies.
SECTION 4A.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
Assuming that the Certificate of Merger is filed and recorded as required by
Delaware Law, the execution and delivery of this Agreement and the Lock-Up
Agreement by Principal Stockholder do not, and the performance by Principal
Stockholder of its obligations hereunder and thereunder, and the consummation of
the Merger will not, (i) conflict with or violate any provision of the
Certificate of Incorporation or bylaws of Principal Stockholder, (ii) conflict
with or violate any Law applicable to Principal Stockholder or by which any
property or asset of Principal Stockholder is bound or affected or (iii) result
in any breach of or constitute a default (or an event which with the giving of
notice or lapse of time or both could reasonably be expected to become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Principal Stockholder pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Principal
Stockholder is a party or by which Principal Stockholder or any of its assets
are bound.
SECTION 4A.06 ACQUISITION OF STOCK FOR INVESTMENT. Principal
Stockholder acknowledges that the shares of Parent Common Stock that it receives
hereunder may not be sold, transferred, offered for sale, pledged, hypothecated
or otherwise disposed of by him, her or it without registration under the
Securities Act, except pursuant to an exemption from such registration under the
Securities Act, and in compliance with applicable Blue Sky Laws. Principal
Stockholder represents that it has no current plan or current intention to
dispose of its Parent Common Stock after the Merger.
SECTION 4A.07 ACCREDITED INVESTOR. Except as set forth in
SCHEDULE 4A.07 of the Principal Stockholder Disclosure Schedule, Principal
Stockholder represents that it is an "accredited investor" as that term is
defined in Rule 501 promulgated under the Securities Act.
SECTION 4A.08 DISCLOSURE OF INFORMATION. Principal Stockholder
acknowledges that:
(a) it has had an opportunity to ask questions of and to
receive answers from the officers of Parent with respect to the business,
results of operations, financial conditions and prospects of Parent and has read
the Confidential Memorandum;
(b) it has made its own independent examination,
investigation, analysis and evaluation of Parent, including but not limited to
an evaluation of the value of the Parent Common Stock to be received by it; and
(c) it has not, in connection with this Agreement and the
transactions contemplated hereby, relied in any respect on any information,
analyses or materials (other than the representations and warranties set forth
herein and in the Confidential Memorandum) provided to it by Parent or any
affiliate of Parent or any officer or representative thereof.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Each of Parent and Merger Sub hereby represents and warrants
to Company and to Principal Stockholder, subject to the exceptions specifically
disclosed in the Parent Disclosure Schedule, all such exceptions to be
referenced to a specific representation set forth in this Article V, that:
SECTION 5.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Except as set forth in SCHEDULE 5.01 of the Parent Disclosure
Schedule, Parent and each Parent Subsidiary, including Merger Sub, has been duly
organized and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Parent and
each Parent Subsidiary, including Merger Sub, is duly qualified or licensed to
do business, and is in good standing (if such a concept exists in the applicable
jurisdiction), in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that could not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect. Merger Sub shall be the
wholly owned subsidiary of Neversleepagain Holding Corp., a Delaware
corporation, which in turn shall be the wholly owned Subsidiary of Neversleep
Holding Corp., a Delaware corporation, which shall be the wholly owned
Subsidiary of Parent (the foregoing including Merger Sub but excluding Parent
being the "CHAIN SUBSIDIARIES").
SECTION 5.02 CERTIFICATE OF INCORPORATION AND BYLAWS. The
copies of each of Parent's and Merger Sub's Certificates of Incorporation and
bylaws previously provided to Company by Parent are true, complete and correct
copies thereof. Such Certificates of Incorporation and bylaws are in full force
and effect. Parent is not in violation of any of the provisions of its
Certificate of Incorporation or bylaws.
SECTION 5.03 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of
140,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
stock, par value $.01 per share. As of October 23, 2001, (i) 41,290,794 shares
of Parent Common Stock were issued and outstanding, all of which are validly
issued, fully paid and nonassessable, (ii) no shares of Parent Common Stock were
held in the treasury of Parent, (iii) no shares of Parent Common Stock were held
by the Parent Subsidiaries and (iv) 11,236,173 shares of Parent Common Stock
were reserved for future issuance pursuant to outstanding options ("PARENT STOCK
OPTIONS") and Parent Warrants and Parent Restricted Stock. Between October 23,
2001 and the date of this Agreement, Parent has not issued any shares of Parent
Common Stock, Parent Warrants, options or other securities, other than Parent
Stock Options to new employees and shares of Parent Common Stock issued
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upon exercise of Parent Stock Options which were outstanding as of October 23,
2001. Except for shares of Parent Common Stock issuable pursuant to the Parent
Stock Plan and as otherwise set forth in SCHEDULE 5.03 of the Parent Disclosure
Schedule and 76,500 in Parent Restricted Stock, there are no options, warrants
or other rights, agreements, arrangements or commitments of any character to
which Parent is a party or by which Parent is bound relating to the issued or
unissued capital stock of Parent or any Parent Subsidiary or obligating Parent
or any Parent Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, Parent or any Parent Subsidiary. All shares of Parent
Common Stock subject to issuance as aforesaid, upon issuance prior to the
Effective Time on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. There are no outstanding contractual obligations of Parent or
any Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of
Parent Common Stock or any capital stock of any Parent Subsidiary. Each
outstanding share of capital stock of each Parent Subsidiary is duly authorized,
validly issued, fully paid and nonassessable and each such share owned by Parent
or another Parent Subsidiary is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
Parent's or such other Parent Subsidiary's voting rights, charges and other
encumbrances of any nature whatsoever. There are no material outstanding
contractual obligations of Parent or any Parent Subsidiary to provide funds to,
or make any material investment (in the form of a loan, capital contribution or
otherwise) in, any Parent Subsidiary or any other Person. Except as set forth in
SCHEDULE 5.03 of the Parent Disclosure Schedule, there are no agreements or
trusts or other agreements or understandings to which the Parent or