EXHIBIT 10.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
▇▇▇▇▇ BAY INTERNATIONAL, INC.,
SSS ACQUISITION COMPANY,
AND
SPECTRUM SCIENCES & SOFTWARE, INC.
MARCH 24, 2003
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TABLE OF CONTENTS
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ARTICLE I. - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 4
1.01 Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.02 Collateral Agreements. . . . . . . . . . . . . . . . . . . . . . . . 4
1.03 Confidential Information . . . . . . . . . . . . . . . . . . . . . . 4
1.04 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.05 Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.06 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.07 ▇▇▇▇▇ BAY Shareholder. . . . . . . . . . . . . . . . . . . . . . . . 5
1.08 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 5
1.09 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10 Governmental Authorities . . . . . . . . . . . . . . . . . . . . . . 5
1.11 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.12 Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.13 Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.14 Spectrum Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 5
1.15 Spectrum Stockholders. . . . . . . . . . . . . . . . . . . . . . . . 5
1.16 Material Adverse Change (or Effect). . . . . . . . . . . . . . . . . 5
1.17 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.18 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.19 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.20 Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . 6
1.21 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.22 Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.23 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.24 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.25 Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.26 Trade Secrets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.27 Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.28 Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II. - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . 7
2.01 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.02 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.03 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . . . 7
2.04 Certificate of Incorporation and Bylaws. . . . . . . . . . . . . . . 7
2.05 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.06 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.07 Effect on Capital Stock. . . . . . . . . . . . . . . . . . . . . . . 7
2.08 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . 8
2.09 Record Date for Stockholder Action . . . . . . . . . . . . . . . . . 9
ARTICLE III. - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 9
3.01 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.02 Deliveries by Spectrum . . . . . . . . . . . . . . . . . . . . . . . 9
3.03 Deliveries by ▇▇▇▇▇ BAY. . . . . . . . . . . . . . . . . . . . . . . 10
3.04 Termination in Absence of Closing. . . . . . . . . . . . . . . . . . 10
ARTICLE IV. - SPECTRUM'S REPRESENTATIONS AND WARRANTIES. . . . . . . . 11
4.01 Corporate Existence and Qualification. . . . . . . . . . . . . . . . 11
4.02 Authority, Approval and Enforceability . . . . . . . . . . . . . . . 11
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4.03 Capitalization and Corporate Records . . . . . . . . . . . . . . . . 11
4.04 Equity Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.05 No Spectrum Defaults or Consents . . . . . . . . . . . . . . . . . . 12
4.06 No Governmental Proceedings. . . . . . . . . . . . . . . . . . . . . 12
4.07 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.08 Financial Statements; Liabilities; Accounts Receivable; Inventories. 12
4.09 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . 13
4.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . 14
4.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.12 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.13 Assets other than Real Property. . . . . . . . . . . . . . . . . . . 15
4.14 Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.15 Intangible Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.16 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.17 Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.18 Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.19 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . 16
4.20 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.21 Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.22 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V. - ▇▇▇▇▇ BAY'S REPRESENTATIONS AND WARRANTIES. . . . . . . . 17
5.01 ▇▇▇▇▇ BAY: Corporate Existence and Qualification . . . . . . . . . . 17
5.02 SSS: Corporate Existence and Qualification . . . . . . . . . . . . . 17
5.03 ▇▇▇▇▇ BAY: Authority, Approval and Enforceability. . . . . . . . . . 17
5.04 SSS: Authority, Approval and Enforceability. . . . . . . . . . . . . 17
5.05 No Default or Consents . . . . . . . . . . . . . . . . . . . . . . . 18
5.06 No Governmental Proceedings. . . . . . . . . . . . . . . . . . . . . 18
5.07 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.08 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . 18
5.09 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.10 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.11 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . 19
5.12 Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI. - OBLIGATIONS PRIOR TO CLOSING
6.01 ▇▇▇▇▇ BAY's Access to Information. . . . . . . . . . . . . . . . . . 19
6.02 Spectrum's Conduct of Business and Operations. . . . . . . . . . . . 19
6.03 General Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 20
6.04 Notice Regarding Changes . . . . . . . . . . . . . . . . . . . . . . 21
6.05 Ensure Conditions Met. . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII. - CONDITIONS TO SPECTRUM'S AND ▇▇▇▇▇ BAY'S OBLIGATIONS. . 21
7.01 Conditions to Obligations of Spectrum. . . . . . . . . . . . . . . . 21
7.02 Conditions to ▇▇▇▇▇ BAY's Obligations. . . . . . . . . . . . . . . . 22
ARTICLE VIII. - POST-CLOSING OBLIGATIONS. . . . . . . . . . . . . . . 23
8.01 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.02 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.03 Name Change and Reincorporation. . . . . . . . . . . . . . . . . . . 23
8.04 ▇▇▇▇▇ Bay Director and Officers after Closing. . . . . . . . . . . . 23
8.05 Capital for the Surviving Corporation's Business . . . . . . . . . . 24
ARTICLE IX. - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 24
9.01 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.02 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.03 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.04 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.05 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.06 Governing Law and Waiver of Jury Trial . . . . . . . . . . . . . . . 25
9.07 Representations and Warranties . . . . . . . . . . . . . . . . . . . 26
9.08 Agreement; No Third-Party Beneficiaries. . . . . . . . . . . . . . . 26
9.09 Binding Effect; Assignment . . . . . . . . . . . . . . . . . . . . . 26
9.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.12 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.13 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . 27
9.14 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.15 Rules of Interpretation. . . . . . . . . . . . . . . . . . . . . . . 27
9.16 Amendment; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 27
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LIST OF SCHEDULES
SCHEDULE 2.08. . Spectrum - Shares Issuable to Spectrum Stockholders
SCHEDULE 4.01. . Spectrum - Jurisdictions and Good Standings
SCHEDULE 4.03. . Spectrum - Capital Structure Prior to Closing the Merger
SCHEDULE 4.05. . Spectrum - Consents and Defaults
SCHEDULE 4.07. . Spectrum - Number of Employees and Employment Classification
SCHEDULE 4.08(A) Spectrum - Financial Statement
SCHEDULE 4.08(B) Spectrum - Liabilities
SCHEDULE 4.08(C) Spectrum - Accounts Receivable
SCHEDULE 4.08(D) Spectrum - Inventory
SCHEDULE 4.09. . Spectrum - Certain Changes Since Last Balance Sheet
SCHEDULE 4.10. . Spectrum - Compliance with Laws
SCHEDULE 4.11. . Spectrum - Litigation
SCHEDULE 4.12. . Spectrum - Real Property
SCHEDULE 4.14. . Spectrum - Contracts and Commitments
SCHEDULE 4.15. . Spectrum - Intangible Rights
SCHEDULE 4.16. . Spectrum - Permits
SCHEDULE 4.17. . Spectrum - Financial Institutions and Authorized Personnel
SCHEDULE 4.18. . Spectrum - Principal Suppliers
SCHEDULE 4.19. . Spectrum - Transactions with Affiliates
SCHEDULE 4.20. . Spectrum - Tax Matters
SCHEDULE 7.02(C) ▇▇▇▇▇ BAY - Certain Changes Since Last Balance Sheet
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AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the "AGREEMENT")
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made and entered into as of the 24th day of March 2003, is by and among (i)
▇▇▇▇▇ BAY INTERNATIONAL, INC., a Delaware corporation ("▇▇▇▇▇ BAY"), (ii) SSS
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ACQUISITION COMPANY, a Delaware corporation and wholly owned subsidiary of ▇▇▇▇▇
BAY ("SSS"), and (iii) SPECTRUM SCIENCES & SOFTWARE, INC. , a Florida
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corporation ("SPECTRUM").
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RECITALS
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WHEREAS, ▇▇▇▇▇ BAY, SSS and Spectrum executed an Agreement and Plan of
Merger dated on or about July 2002 (the "Original Agreement") wherein SSS will
merge with and into Spectrum, such that as of the closing of the transaction
Spectrum shall be the surviving entity, wholly owned by ▇▇▇▇▇ BAY.
WHEREAS, ▇▇▇▇▇ BAY, SSS and Spectrum mutually desire to amend and restate
the Original Agreement in accordance with the terms and conditions of this
Agreement.
AGREEMENT
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NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree as follows:
ARTICLE I.
DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this
Article I or elsewhere in this Agreement.
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1.01 AFFILIATE. The term "AFFILIATE" shall mean, with respect to any
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person, any other person controlling, controlled by or under common control with
such person. The term "CONTROL" as used in the preceding sentence means, with
-------
respect to a corporation, the right to exercise, directly or indirectly, more
than 50% of the voting rights attributable to the shares of the controlled
corporation and, with respect to any person other than a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person.
1.02 COLLATERAL AGREEMENTS. The term "COLLATERAL AGREEMENTS" shall
---------------------- ----------------------
mean any or all of the exhibits to this Agreement and any and all other
agreements, instruments or documents required or expressly provided for under
this Agreement to be executed and delivered in connection with the transactions
contemplated by this Agreement.
1.03 CONFIDENTIAL INFORMATION. The term "CONFIDENTIAL INFORMATION"
------------------------- -------------------------
shall mean confidential data and confidential information relating to the
business of Spectrum (which does not rise to the status of a Trade Secret under
applicable law) which has value to Spectrum and is not generally known to the
competitors of Spectrum. Confidential Information shall not include any data or
information that (i) has been voluntarily disclosed to the general public by
Spectrum or its Affiliates, (ii) has been independently developed and disclosed
to the general public by others, or (iii) otherwise enters the public domain
through lawful means.
1.04 CONTRACTS. The term "CONTRACTS," when described as being those of
--------- ---------
or applicable to any person, shall mean any and all contracts, agreements,
franchises, understandings, arrangements, leases, licenses, registrations,
authorizations, easements, servitudes, rights of way, mortgages, bonds, notes,
guaranties, liens, indebtedness, approvals or other instruments or undertakings
to which such person is a party or to which or by which such person or the
property of such person is subject or bound, excluding any Permits.
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1.05 DAMAGES. The term "DAMAGES" shall mean any and all damages,
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liabilities, obligations, penalties, fines, judgments, claims, deficiencies,
losses, costs, expenses and assessments (including without limitation income and
other taxes, interest, penalties and attorneys' and accountants' fees and
disbursements).
1.06 ENVIRONMENTAL LAWS. The term "ENVIRONMENTAL LAWS" shall mean any
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applicable federal, state, local or foreign law, statute, ordinance, rule,
regulation, code, order, judgment, decree or injunction relating to (x) the
protection of the environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface or subsurface land)
or (y) the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, protection, release or disposal
of, Hazardous Substances.
1.07 ▇▇▇▇▇ BAY SHAREHOLDER. The term "▇▇▇▇▇ BAY SHAREHOLDER" shall
----------------------- ---------------------
mean any Person who holds shares of ▇▇▇▇▇ Bay International, Inc. common stock
prior to the Closing of the Merger.
1.08 FINANCIAL STATEMENTS. The term "FINANCIAL STATEMENTS" shall mean
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any or all of the financial statements, including balance sheets and related
statements of income and statements of changes in financial position and the
accompanying notes thereto, of the Spectrum's business prepared in accordance
with generally accepted accounting principles consistently applied, except as
may be otherwise provided herein.
1.09 GAAP. "GAAP" means generally accepted accounting principles in the
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United States.
1.10 GOVERNMENTAL AUTHORITIES. The term "GOVERNMENTAL AUTHORITIES"
------------------------- ------------ -----------
shall mean any nation or country (including but not limited to the United
States) and any commonwealth, territory or possession thereof and any political
subdivision of any of the foregoing, including but not limited to courts,
departments, commissions, boards, bureaus, agencies, ministries or other
instrumentalities.
1.11 INVENTORY. The term "INVENTORY" shall mean all goods, merchandise
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and other personal property owned and held for sale, and all raw materials,
works-in-process, materials and supplies of every nature which contribute to the
finished products of Spectrum in the ordinary course of its business,
specifically excluding, however, damaged, defective or otherwise unsaleable
items.
1.12 KNOWLEDGE. The term "KNOWLEDGE" shall mean, as to Spectrum, the
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actual knowledge of ▇▇▇▇▇ ▇▇▇▇▇▇ or any of the other directors, or officers of
Spectrum with respect to the matter in question, and such knowledge as ▇▇▇▇▇
▇▇▇▇▇▇ or any of the other directors or officers of Spectrum reasonably should
have obtained upon diligent investigation and inquiry into the matter in
question. The term "KNOWLEDGE" shall mean, as to ▇▇▇▇▇ BAY, the actual
---------
knowledge of ▇▇▇▇▇ ▇▇▇▇▇▇▇ or any of the other directors, or officers of ▇▇▇▇▇
BAY with respect to the matter in question, and such knowledge as ▇▇▇▇▇ ▇▇▇▇▇▇▇
or any of the other directors or officers of ▇▇▇▇▇ BAY reasonably should have
obtained upon diligent investigation and inquiry into the matter in question.
1.13 LEGAL REQUIREMENTS. The term "LEGAL REQUIREMENTS," when described
------------------ ----- ------------
as being applicable to any person, shall mean any and all laws (statutory,
judicial or otherwise), ordinances, regulations, judgments, orders, directives,
injunctions, writs, decrees or awards of, and any Contracts with, any
Governmental Authority, in each case as and to the extent applicable to such
person or such person's business, operations or properties.
1.14 SPECTRUM CAPITAL STOCK. The term "SPECTRUM CAPITAL STOCK" shall
------------------------ ----------------------
mean Spectrum's common stock.
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1.15 SPECTRUM STOCKHOLDERS. The term "SPECTRUM STOCKHOLDERS" shall
---------------------- ----------------------
mean any Person that holds shares of Spectrum's Capital Stock prior to the
Closing of the Merger.
1.16 MATERIAL ADVERSE CHANGE (OR EFFECT). The term "MATERIAL ADVERSE
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CHANGE (OR EFFECT)" shall mean a change (or effect), in the condition (financial
-----------------
or otherwise), properties, assets, liabilities, rights, obligations, operations,
business or prospects of a Person which change (or effect), individually or in
the aggregate, is materially adverse to such condition, properties, assets,
liabilities, rights, obligations, operations, business or prospects.
1.17 PERMITS. The term "PERMITS" shall mean any and all permits,
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rights, approvals, licenses, authorizations, legal status, orders or Contracts
under any Legal Requirement or otherwise granted by any Governmental Authority.
1.18 PERSON. The term "PERSON" shall mean any individual, partnership,
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joint venture, firm, corporation, association, limited liability company, trust
or other enterprise or any governmental or political subdivision or any agency,
department or instrumentality thereof.
1.19 PROPERTIES. The term "PROPERTIES" shall mean any and all
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properties and assets (real, personal or mixed, tangible or intangible) owned or
used by Spectrum or ▇▇▇▇▇ BAY, as the case may be.
1.20 PERMITTED ENCUMBRANCES. As to Real Property, the term "PERMITTED
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ENCUMBRANCES" shall mean (A) any liens disclosed in the Financial Statements;
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(B) liens for Taxes, assessments and other governmental charges not yet due and
--
payable or due but being contested in good faith by appropriate proceedings or
not delinquent; (C) mechanics', workmen's, repairmen's, warehousemen's,
Carriers', or other like liens arising or incurred in the ordinary course of
business, original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business; (D)
with respect to real property, (i) easements, quasi-easements, licenses,
covenants, rights-of-way and other similar restrictions, including, without
limitation, any other agreements, conditions or restrictions which would be
shown by a current title report or other similar report or listing which in any
event do not unreasonably interfere with the present use of such property, (ii)
any conditions that may be shown by a current survey, title report or physical
inspection which in any event do not unreasonably interfere with the present use
of such property and (iii) zoning, building and other similar restrictions which
in any event do not unreasonably interfere with the present use of such
property; (E) liens securing liabilities (with respect to such liens, no
default exists); and (F) liens which, individually or in the aggregate, would
not have a Material Adverse Effect.
1.21 REAL PROPERTY. The term "REAL PROPERTY" shall mean the real
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property used by either ▇▇▇▇▇ BAY or Spectrum, as the case may be, in the
conduct of their respective businesses.
1.22 REGULATIONS. The term "REGULATIONS" shall mean any and all
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regulations promulgated by the Department of the Treasury pursuant to the
Internal Revenue Code.
1.23 SUBSIDIARY. The term "SUBSIDIARY" shall mean SSS Acquisition Company.
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1.24 TAXES. The term "TAXES" shall mean all federal, state, local or
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foreign taxes, including but not limited to income, gross receipts, windfall
profits, goods and services, value added, severance, property, production,
sales, use, license, excise, franchise, employment, withholding or similar
taxes, together with any interest, additions or penalties with respect thereto
and any interest in respect of such additions or penalties.
1.25 TAX RETURN. The term "TAX RETURN" shall mean any tax return,
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filing or information statement required to be filed in connection with or with
respect to any Taxes.
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1.26 TRADE SECRETS. The term "TRADE SECRETS" shall mean information of
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Spectrum including, but not limited to, technical or non-technical data,
formulas, patterns, compilations, programs, financial data, financial plans,
product or service plans or lists of actual or potential customers or suppliers
which (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use, and (ii) is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy.
1.27 USED. The term "USED" shall mean, with respect to Spectrum's
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Properties, Contracts or Permits, those owned, leased, licensed or otherwise
held by Spectrum which were acquired for use or held for use by Spectrum in
connection with its business and operations, whether or not reflected on the its
books of account.
1.28 WORKING CAPITAL. The term "WORKING CAPITAL" shall mean the
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difference between (i) Spectrum's current assets, including accounts receivable,
inventory, prepaid expenses and deposits, but excluding Available Cash, and (ii)
Spectrum's current liabilities, including accounts payable and accrued expenses,
but excluding Funded Indebtedness, in each case calculated in accordance with
GAAP.
ARTICLE II.
THE MERGER
2.01 THE MERGER. Upon the terms and subject to the conditions set
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forth in this Agreement, and in accordance with the Delaware General Corporation
Law ("DELAWARE LAW"), and the Florida Business Corporation Act ("FLORIDA LAW")
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SSS shall be merged with and into Spectrum at the Effective Time (as hereinafter
defined) (the "MERGER"). Following the Effective Time, the separate corporate
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existence of SSS shall cease and Spectrum shall continue as the surviving
corporation (the "SURVIVING CORPORATION") and shall succeed to and assume all
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the rights and obligations of SSS in accordance with Florida Law. At the
election of ▇▇▇▇▇ BAY, any direct or indirect wholly owned subsidiary of ▇▇▇▇▇
BAY may be substituted for SSS as a constituent corporation in the Merger. In
such event, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect the foregoing.
2.02 EFFECTIVE TIME. Subject to the provisions of this Agreement, as
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soon as practicable on or after the Closing Date (as hereinafter defined), the
parties shall file a certificate of merger or other appropriate documents (in
any such case, the "CERTIFICATE OF MERGER") executed in accordance with the
----------------------
relevant provisions of Delaware Law and Florida Law and shall make all other
filings or recordings required under Delaware Law and Florida Law. The Merger
shall become effective at such time as the Certificates of Merger are duly filed
with the Secretaries of State of Delaware and Florida, or at such other time as
SSS and Spectrum shall agree and specify in the Certificates of Merger (the time
the Merger becomes effective being referred to herein as the "EFFECTIVE TIME").
--------------
2.03 EFFECTS OF THE MERGER. Upon the effectiveness of the Merger, (a)
----------------------
the Surviving Corporation shall own and possess all assets and property of every
kind and description, and every interest therein, wherever located, and all
rights, privileges, immunities, powers, franchises and authority of a public as
well as of a private nature, of SSS and Spectrum (the "CONSTITUENT
-----------
CORPORATION"), and all obligations owed to, belonging to or due to each of the
Constituent Corporations, all of which shall be vested in the Surviving
Corporation pursuant to Florida Law without further act or deed, and (b) the
Surviving Corporation shall be liable for all claims, liabilities and
obligations of the Constituent Corporations, all of which shall become and
remain the obligations of the Surviving Corporation pursuant to Florida Law
without further act or deed.
2.04 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
-------------------------------------------
Incorporation of Spectrum as in effect immediately prior to the Effective Time
shall be the certificate of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by Florida Law. The
corporate name of the Surviving Corporation shall be "SPECTRUM SCIENCES &
-------------------
SOFTWARE, INC.." The bylaws of Spectrum as in effect immediately prior to the
---------
Effective Time shall be the bylaws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
35
2.05 DIRECTORS. The directors of the Surviving Corporation shall be
---------
▇▇▇▇▇ ▇▇▇▇▇▇ as Chairman and ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be. ▇▇. ▇▇▇▇▇▇ shall
also be appointed to serve as a member of the board of directors of ▇▇▇▇▇ BAY
upon the Closing of the Merger.
2.06 OFFICERS. The officers of Spectrum immediately prior to the
--------
Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be. Notwithstanding the foregoing,
▇▇. ▇▇▇▇▇▇ shall remain the President and Chief Executive Officer of the
Surviving Corporation upon consummation of the Merger.
2.07 EFFECT ON CAPITAL STOCK. Notwithstanding any other provision in
-------------------------
this Agreement, ▇▇▇▇▇ BAY shall issue no more than 2,500,000 shares of its
common stock to the Spectrum Stockholders. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
the outstanding capital of the Spectrum or SSS:
(a) Each issued and outstanding share of common stock of SSS shall be
converted into and become one fully paid and nonassessable share of common stock
of the Surviving Corporation.
(b) Each share of Spectrum's common stock ("SPECTRUMCOMMONSTOCK") that
-------------------
is held in the treasury of Spectrum or by any wholly owned subsidiary of
Spectrum shall automatically be canceled and returned and shall cease to exist
and no consideration shall be delivered in exchange therefor.
(c) Each share of Spectrum Common Stock that is owned by ▇▇▇▇▇ BAY, SSS
or any other subsidiary of ▇▇▇▇▇ BAY shall automatically be canceled and retired
and shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(d) Subject to Section2.07(h) hereof, each 600 shares of Spectrum
--------------
Common Stock issued and outstanding (other than shares of Spectrum Common Stock
to be canceled in accordance with Sections2.07(b) and 2.07(c) hereof) shall be
--------------- -------
canceled and extinguished and converted into the right to receive one million
two hundred fifty thousand (1,250,000) shares of ▇▇▇▇▇ BAY common stock ("▇▇▇▇▇
-----
BAY COMMON"). As of the Effective Time, all such shares of Spectrum Common Stock
----------
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares of Spectrum Common Stock shall cease to have any rights with respect
thereto.
(e) This left intentionally blank.
(f) This left intentionally blank.
(g) This left intentionally blank.
(h) Notwithstanding anything in this Agreement to the contrary, any
issued and outstanding shares held by a person (a "DISSENTING STOCKHOLDER") who
----------------------
objects to the Merger and complies with all the relavant provisions of Florida
Law concerning the right of holders of Spectrum Capital Stock to dissent from
the Merger and require appraisal of their Shares ("DISSENTING SHARES") shall not
-----------------
be converted as described in Section2.07(d) but shall become the right to
--------------
receive such consideration as may be determined to be due to such Dissenting
Stockholder pursuant to Florida Law. If, after the Effective Time, such
Dissenting Stockholder withdraws his demand for appraisal or fails to perfect or
otherwise loses his right of appraisal, in any case pursuant to Florida Law, his
Shares shall be deemed to be converted as of the Effective Time into the right
to receive the ▇▇▇▇▇ BAY Common. Spectrum shall give ▇▇▇▇▇ BAY (i) prompt
notice of any demands for appraisal of Dissenting Shares received by Spectrum,
and (ii) the opportunity to participate in all negotiations and proceedings with
respect to any such demands. Spectrum shall not voluntarily make any payment
with respect to any demands for appraisal and shall not, except with the prior
written consent of ▇▇▇▇▇ BAY, settle or offer to settle any such demands.
36
(i) Spectrum shall cancel its employee stock option plan on or before
the Closing. Subsequent to the Closing, ▇▇▇▇▇ BAY will adopt and implement a
new employee stock plan and grant such stock options to Spectrum employees as
the board of directors of ▇▇▇▇▇ BAY deems appropriate.
2.08 EXCHANGE OF CERTIFICATES. ▇▇▇▇▇ BAY designates ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------
& ▇▇▇▇▇▇▇▇, LLP or any other Person reasonably acceptable to Spectrum to act as
the exchange agent for the Merger (the "EXCHANGE AGENT"). The ▇▇▇▇▇ BAY Common
--------------
shall be delivered to the Exchange Agent immediately upon Closing. Spectrum
shall send notice to each Spectrum Stockholder advising them on the procedure
for exchanging their share certificates. SCHEDULE 2.08 sets forth the number of
-------------
shares of ▇▇▇▇▇ BAY Common issuable to each Spectrum Stockholder upon Closing of
the Merger. The Exchange Agent shall deliver to the Spectrum Stockholders their
pro rata share of the ▇▇▇▇▇ BAY Common (the "CONVERTED SHARES"), upon surrender
----------------
of their Spectrum share certificates to the Exchange Agent. No fractional
shares shall be issued in connection with the exchange of Spectrum Capital Stock
for ▇▇▇▇▇ BAY Common contemplated hereby.
2.09 RESTRICTION ON THE SALE OR OTHER TRANSFER TO THE CONVERTED SHARED.
-----------------------------------------------------------------
None of the Converted Shares will be registered under the Securities Act of
1933, as amended (the "SECURITIES ACT"), or the securities laws of any state.
--------------
The Spectrum Stockholders are acquiring the Converted Shares for investment
purposes only and not with a view towards distribution or resale, nor with the
intention of selling, transferring or otherwise disposing of all or any part of
such Converted Shares for any particular price, or at any particular time, or
upon the happening of any particular event or circumstances, except selling,
transferring, or disposing of the Converted Shares made in full compliance with
all applicable provisions of the Securities Act, the rules and regulations
promulgated by the Securities and Exchange Commission thereunder, and applicable
state securities laws. The Converted Shares must be held indefinitely unless
they are subsequently registered under the Securities Act, or an exemption from
such registration is available, which will require an opinion of counsel
acceptable to ▇▇▇▇▇ BAY that registration is not required under the Securities
Act or such state securities laws. The Converted Shares will be subject to the
lock provisions set forth in this Section 2.09 and shares certificates
-------------
representing the Converted Shares will each bear a legend indicating that
transfer of such Converted Shares has not been so registered and the legend may
bear the following or similar words:
the securities represented hereby have not been registered under the securities
act of 1933, as amended (the "act"), or any applicable state securities laws.
---
these securities have been acquired for investment purposes only and not with a
view to distribution or resale, and may not be sold, offered for sale, pledged
or hypothecated in the absence of a registration statement in effect with
respect to the securities under such act and applicable laws or some other
exemption from the registration requirements of such act and applicable laws or
an opinion of counsel satisfactory to the ▇▇▇▇▇ Bay group inc. and its counsel
that such registration is not required.
the securities represented by this certificate are subject to certain lock-up
restrictions which are set forth in more particularity in that certain amended
and restated agreement and plan of merger dated as of March 24, 2003 (the
"merger agreement") pursuant to which the holder is prohibited from selling or
transferring the shares represented hereby for a period of twelve months
following the effective date of the merger.
The Converted Shares may not be sold, pledged, hypothecated, or transferred
in any manner or for any reason for a period of 12 months following the
Effective Date.
2.10 RECORD DATE FOR STOCKHOLDER ACTION. Spectrum's board of directors
----------------------------------
shall cause March 24, 2003 to be the record date for any Spectrum Stockholder
action necessary to approve this Agreement, the Merger or any of the
transactions contemplated hereby and thereby.
37
ARTICLE III.
CLOSING
3.01 CLOSING. Immediately upon the execution of this Agreement,
-------
Spectrum shall (a) solicit the consent of and approval by its Stockholders of
the Merger and this Agreement and (b) obtain evidence that the requisite number
of Spectrum Stockholders are "accredited investors" (as such term is defined in
the Securities Act of 1933, as amended, hereinafter referred to as the
"SECURITIES ACT") for purposes of qualifying the share exchange under this
-------
Merger for an exemption from the registration requirements of the Securities Act
pursuant to Section 506 thereunder (the foregoing shall be collective referred
to as the "PRE-CLOSING EVENTS"). Subject to the conditions stated in Article
------------------ -------
VIIof this Agreement, the closing of the transactions contemplated hereby (the
--
"CLOSING") shall be held at 9:00 a.m., New York time, two business days after
-------
the completion of the Pre-Closing Events, or, if the conditions set forth in
-
Sections 7.01 and 7.02have not been satisfied or waived on such date, on the
-
fifth (5th) business day after all such conditions shall have been satisfied or
-
waived, at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. The date upon which the Closing occurs is hereinafter
referred to as the "CLOSING DATE." The Closing shall be deemed completed as of
------------
12:01 a.m. New York time on the morning of the Closing Date.
3.02 DELIVERIES BY SPECTRUM. At or prior to the Closing, Spectrum shall
------------------------
deliver to ▇▇▇▇▇ BAY:
(a) the Certificate of Merger, duly executed by Spectrum;
(b) Spectrum's stock book, stock ledger and minute books;
(c) an officer's certificate stating that the conditions set forth in
Sections 7.02(a) and 7.02(c) have been satisfied;
------------------------------
(d) possession of all originals and copies of agreements, instruments,
documents, deeds, books, records, files and other data and information within
the possession of Spectrum or any Affiliate of Spectrum (collectively, the
"RECORDS"); provided, however, that Spectrum may retain (1) copies of any tax
--------
returns and copies of Records relating thereto; (2) copies of any Records that
Spectrum may reasonably need for complying with requirements of law; and (3)
copies of any Records that in the reasonable opinion of the Chief Executive
Officer of Spectrum shall be required in connection with the performance of
Spectrum's obligations under Article IX hereof; and
-----------
(e) evidence satisfactory to ▇▇▇▇▇ BAY that ▇▇▇▇▇ BAY designees (which
shall include ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ Gonteric and ▇▇▇ ▇▇▇▇▇▇▇) shall be the only
authorized signatories with respect to Spectrum's accounts set forth in SCHEDULE
--------
4.17.
----
3.03 DELIVERIES BY ▇▇▇▇▇ BAY. At or prior to the Closing, ▇▇▇▇▇ BAY
--------------------------
shall deliver to Spectrum a certificate executed by an authorized officer of
▇▇▇▇▇ BAY, on behalf of ▇▇▇▇▇ BAY, to the effect that the conditions set forth
in Section 7.0(c) and Section 7.01(h) have been satisfied.
--------------- ----------------
3.04 TERMINATION IN ABSENCE OF CLOSING.
-------------------------------------
(a) Subject to the provisions of Section 3.04(b), if by the close of
---------------
business on April 5, 2003, the Closing has not occurred, then either ▇▇▇▇▇ BAY
or Spectrum may thereafter terminate this Agreement after two business days by
giving written notice to such effect, to the other parties hereto, without
liability of or to any party to this Agreement or any stockholder, director,
officer, employee or representative of such party unless the reason for the
Closing having not occurred is (i) such party's willful breach of the provisions
of this Agreement, or (ii) if all of the conditions to such party's obligations
set forth in Article VII have been satisfied or waived in writing by the date
------------
scheduled for the Closing pursuant to Section 2.01, the failure of such party to
------------
perform its obligations under this Article IIIon such date; provided, however,
----------- -----------------
that the provisions of Sections 9.01 through 9.06 shall survive any such
-----------------------------
38
termination; and provided further, however, that any termination pursuant to
---------------------------
this Section 3.04 shall not relieve any party hereto who was responsible for
-------------
Closing having not occurred as described in clauses (i) or (ii) above of any
liability for (x) such party's willful breach of the provisions of this
Agreement, or (y) if all of the conditions to such party's obligations set forth
in Article VIIhave been satisfied or waived in writing by the date scheduled for
-----------
the Closing pursuant to Section 2.01, the failure of such party to perform its
------------
obligations under this Article IIIon such date.
------------
(b) Spectrum shall also have the right to terminate this Agreement
without liability to any party by so notifying ▇▇▇▇▇ BAY at any time within
fifteen (15) days after the date of this Agreement if, in Spectrum's sole
discretion, any Schedule (or any instrument referred to therein) or requested
information that was not furnished to Spectrum at least ten (10) business days
prior to the date of this Agreement contains or refers to any matter that, or
may cause or lead to any result that, in Spectrum's sole discretion and
judgment, is adverse to Spectrum in any way; provided, however, that the
-------- -------
provisions of Sections 9.01 through 9.06shall survive any such termination. In
--------------------------
addition, notwithstanding the approval of Spectrum Stockholders or it's board of
directors, this Agreement and the transactions contemplated herein may be
terminated and abandoned at any time on or prior to the Closing Date by Spectrum
if:
(i) any representation or warranty made herein for the benefit of
Spectrum, or any certificate, schedule or document furnished to Spectrum
pursuant to this Agreement is untrue in any material respect; or
(ii) ▇▇▇▇▇ BAY defaults in any material respect in the performance of
any material obligation under this Agreement.
(c) Notwithstanding the approval of ▇▇▇▇▇ BAY shareholders or it's
board of directors, this Agreement and the transactions contemplated herein may
be terminated and abandoned at any time on or prior to the Closing Date by ▇▇▇▇▇
BAY if:
(i) any representation or warranty made herein for the benefit of ▇▇▇▇▇
BAY, or any certificate, schedule or document furnished to ▇▇▇▇▇ BAY pursuant to
this Agreement is untrue in any material respect; or
(ii) Spectrum defaults in any material respect in the performance of
any material obligation under this Agreement; or
(iii) Spectrum fails to demonstrate, to the satisfaction of ▇▇▇▇▇ BAY,
that the requisite number of Spectrum stockholders are "accredited investors"
(as such term is defined in the Securities Act) for purposes of qualifying the
share exchange under this Merger for an exemption from the registration
requirements of the Securities Act pursuant to Section 506 thereunder; or
(iv) More than 35 Spectrum Stockholders timely and properly exercise
their right to dissent to the Merger.
ARTICLE IV.
SPECTRUM'S REPRESENTATIONS AND WARRANTIES
Spectrum hereby represents and warrants to ▇▇▇▇▇ Bay that to its Knowledge:
4.01 CORPORATE EXISTENCE AND QUALIFICATION. Spectrum (i) is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida; and (ii) has the corporate power to own, manage, lease
and hold its Properties and to carry on its business as and where such
Properties are presently located and such business is presently conducted.
Neither the character of Spectrum's Properties nor the nature of Spectrum's
business requires Spectrum to be duly qualified to do business as a foreign
corporation in any jurisdiction outside those identified in SCHEDULE 4.01
-------------
39
attached hereto, and Spectrum is qualified as a foreign corporation and in
good standing in each listed jurisdiction where the character of its properties
or the nature of its business requires it to be so qualified.
4.02 AUTHORITY, APPROVAL AND ENFORCEABILITY. Subject to the approval
----------------------------------------
of Spectrum's stockholders, this Agreement has been duly executed and delivered
by Spectrum, and Spectrum has all requisite power and legal capacity to execute
and deliver this Agreement and all Collateral Agreements executed and delivered
or to be executed and delivered in connection with the transactions provided for
hereby, to consummate the transactions contemplated hereby and by the Collateral
Agreements, and to perform its obligations hereunder and under the Collateral
Agreements. The execution, delivery and performance of this Agreement and the
consummation by Spectrum of the Merger and of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Spectrum (subject to the approval of Spectrum's stockholders
which requires the affirmative vote of the holders of a majority of all shares
outstanding of Spectrum Capital Stock voting together as a single class) and no
other corporate proceedings on the part of Spectrum are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement and each Collateral Agreement to which Spectrum is a party
constitutes, or upon execution and delivery shall constitute, the legal, valid
and binding obligation of such party, enforceable in accordance with its terms,
except as such enforcement may be limited by general equitable principles or by
applicable bankruptcy, insolvency, moratorium, or similar laws and judicial
decisions from time to time in effect which affect creditors' rights generally.
4.03 CAPITALIZATION AND CORPORATE RECORDS.
---------------------------------------
(a) SCHEDULE 4.03 sets forth Spectrum's capital stock structure prior
--------------
to Closing. Except as otherwise set forth in SCHEDULE 4.03, all of the
--------------
outstanding shares of Spectrum Capital Stock are duly authorized, validly
issued, fully paid and non-assessable and were not issued in violation of (i)
any preemptive or other rights of any Person to acquire securities of Spectrum,
or (ii) any applicable federal or state securities laws, and the rules and
regulations promulgated thereunder. Except as set forth on SCHEDULE 4.03, there
-------------
are no outstanding subscriptions, options, convertible securities, rights
(preemptive or otherwise), warrants, calls or agreements relating to any shares
of capital stock of Spectrum.
(b) The copies of Spectrum's certificate of incorporation and bylaws
provided to ▇▇▇▇▇ BAY are true, accurate, and complete and reflect all
amendments made through the date of this Agreement. Spectrum's stock and minute
books made available to ▇▇▇▇▇ BAY for review were correct and complete as of the
date of such review, no further entries have been made through the date of this
Agreement, and such minute books contain an accurate record of all stockholder
and corporate actions of the stockholders and directors (and any committees
thereof) of Spectrum taken by written consent or at a meeting since March 21,
2003. All corporate actions taken by Spectrum have been duly authorized or
ratified. All accounts, books, ledgers and official and other records of
Spectrum fairly and accurately reflect all of Spectrum's transactions,
properties, assets and liabilities.
4.04 EQUITY INTERESTS. Spectrum does not have any subsidiaries and
-----------------
does not directly or indirectly own any capital stock of or other equity
interests in any corporation, partnership or other entity, and Spectrum is not a
member of or participant in any partnership, joint venture or similar entity and
is not obligated to become such a member or participant.
4.05 NO SPECTRUM DEFAULTS OR CONSENTS. Except as otherwise set forth
----------------------------------
in SCHEDULE 4.05attached hereto, neither the execution nor delivery of this
--------------
Agreement nor the carrying out of any of the transactions contemplated hereby
shall:
(a) violate or conflict with any of the terms, conditions or provisions
of the Spectrum's charter or bylaws;
(b) violate any Legal Requirements applicable to Spectrum;
40
(c) violate, conflict with, result in a breach of, constitute a default
under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or give
any other party the right to terminate, any Contract or Permit binding upon or
applicable to Spectrum;
(d) result in the creation of any lien, charge or other encumbrance on
any Spectrum's Properties; or
(e) require Spectrum to obtain or make any waiver, consent, action,
approval or authorization of, or registration, declaration, notice or filing
with, any private non-governmental third party or any Governmental Authority.
4.06 NO GOVERNMENTAL PROCEEDINGS. No suit, action or other proceeding
----------------------------
is pending or, to the best of Spectrum's Knowledge, threatened before any
Governmental Authority seeking to restrain Spectrum or the Subsidiary, or
prohibit Spectrum's entry into this Agreement or prohibit the Closing, or
seeking damages against Spectrum, the Subsidiary or Spectrum's Properties as a
result of the consummation of this Agreement.
4.07 EMPLOYEE MATTERS. SCHEDULE 4.07 sets forth by number and
----------------- --------------
employment classification of Spectrum employees employed as of the date of this
Agreement, and, except as set forth therein, none of said employees are subject
to union or collective bargaining agreements with Spectrum. In addition,
SCHEDULE 4.07sets forth each employees salary and benefits to which such
--------
employee is entitled.
-
4.08 FINANCIAL STATEMENTS; LIABILITIES; ACCOUNTS RECEIVABLE; INVENTORIES.
----------------------------------------------------------------------
(a) SCHEDULE 4.08(A) contains true and complete copies of unaudited
-----------------
Financial Statements with respect to Spectrum and its business as of and for the
year ended December 31, 2002. All of such Financial Statements present fairly
the financial condition and results of operations of Spectrum for the dates or
periods indicated thereon. All of such Financial Statements have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
indicated. Within 60 days of the Closing, Spectrum shall provide ▇▇▇▇▇ BAY with
audited Financial Statements as of and for the years ended December 31, 2001 and
2002 (the "POST-CLOSING AUDIT") and such other financial information requested
------------------
by ▇▇▇▇▇ BAY to enable ▇▇▇▇▇ BAY to file a Form 10-SB with the Securities and
Exchange Commission with respect to the Merger.
(b) Except for (i) the liabilities reflected on Spectrum's December 31,
2002 balance sheet included with the Financial Statements attached as SCHEDULE
--------
4.08(A), (ii) trade payables and accrued expenses incurred since December 31,
------
2002 in the ordinary course of business, none of which are material, (iii)
executory contract obligations under (x) Contracts listed on SCHEDULE 4.14,
-------------
and/or (y) Contracts not required to be listed on SCHEDULE 4.14, and (iv) the
-------------
liabilities set forth in SCHEDULE 4.08(B) attached hereto, Spectrum does not
---------------
have any material liabilities or obligations (whether accrued, absolute,
contingent, known or unknown).
(c) Except as otherwise set forth in SCHEDULE 4.08(C), the accounts
----------------
receivable reflected on the December 31, 2002 balance sheet included in the
Financial Statements referenced in Section 4.08(a) and all of Spectrum's
accounts receivable arising since December 31, 2002 (the "BALANCE SHEET DATE")
------------------
arose from bona fide transactions in the ordinary course of business, and the
goods and services involved have been sold, delivered and performed to the
account obligors, and no further filings (with governmental agencies, insurers
or others) are required to be made, no further goods are required to be provided
and no further services are required to be rendered in order to complete the
sales and fully render the services and to entitle Spectrum to collect the
accounts receivable in full. Except as set forth in SCHEDULE 4.08(C), no such
----------------
account has been assigned or pledged to any other person, firm or corporation,
and, except only to the extent fully reserved against, as set forth in the
December 31, 2002 balance sheet included in such Financial Statements, no
defense or set-off to any such account has been asserted by the account obligor
or exists.
41
(d) Except as otherwise set forth in SCHEDULE 4.08(D), Spectrum's
----------------
Inventory as of the Closing Date shall consist of items of quality, condition
and quantity consistent with normal seasonally-adjusted Inventory levels of
Spectrum and be usable and saleable in the ordinary and usual course of business
for the purposes for which intended, except to the extent written down or
reserved against on the Closing Date Balance Sheet. Except as otherwise set
forth in SCHEDULE 4.08(D), Spectrum's Inventory is valued on Spectrum's books of
----------------
account in accordance with GAAP (on an average cost basis) at the lower of cost
or market.
4.09 ABSENCE OF CERTAIN CHANGES.
-----------------------------
(a) Except as otherwise set forth in SCHEDULE 4.09 attached hereto,
-------------
since the Balance Sheet Date, there has not been:
(i) any event, circumstance or change that had or might have a
material adverse effect on the business, operations, prospects, Properties,
financial condition or working capital of Spectrum;
(ii) any damage, destruction or loss (whether or not covered by
insurance) that had or might have a material adverse effect on the business,
operations, prospects, Properties or financial condition of Spectrum; or
(iii) any material adverse change in Spectrum's sales patterns,
pricing policies, accounts receivable or accounts payable.
(b) Except as otherwise set forth in SCHEDULE 4.09 attached hereto,
-------------
since the Balance Sheet Date, Spectrum has not done any of the following:
(i) merged into or with or consolidated with, any other corporation or
acquired the business or assets of any Person;
(ii) created, incurred, assumed, guaranteed or otherwise become liable
or obligated with respect to any indebtedness, or made any loan or advance to,
or any investment in, any Person, except in each case in the ordinary course of
business;
(iii) entered into, amended or terminated any material agreement;
(iv) sold, transferred, leased, mortgaged, encumbered or otherwise
disposed of, or agreed to sell, transfer, lease, mortgage, encumber or otherwise
dispose of, any Properties except (i) in the ordinary course of business, or
(ii) pursuant to any agreement specified in SCHEDULE 4.14;
--------------
(v) incurred or approved, or entered into any agreement or commitment
to make, any expenditures in excess of $25,000 (other than those arising in the
ordinary course of business or those required pursuant to any agreement
specified in SCHEDULE 4.14);
--------------
(vi) maintained its books of account other than in the usual, regular
and ordinary manner in accordance with generally accepted accounting principles
and on a basis consistent with prior periods or made any change in any of its
accounting methods or practices that would be required to be disclosed under
generally accepted accounting principles;
(vii) made any payment to any Affiliate or forgiven any indebtedness
due or owing from any Affiliate to Spectrum;
(viii) (A) liquidated Inventory or accepted product returns other than
in the ordinary course, (B) accelerated receivables, (C) delayed payables, or
(D) changed in any material respect Spectrum's practices in connection with the
payment of payables and/or the collection of receivables;
42
(ix) engaged in any one or more activities or transactions with an
Affiliate or outside the ordinary course of business;
(x) issued any capital stock or other securities, or granted, or
entered into any agreement to grant, any options, convertible rights, other
rights, warrants, calls or agreements relating to its capital stock; or
(xi) committed to do any of the foregoing.
4.10 COMPLIANCE WITH LAWS. Except as otherwise set forth in SCHEDULE
---------------------- --------
4.10, Spectrum is and has been in compliance in all respects with any and all
---
material Legal Requirements applicable to Spectrum, other than failures to so
-
comply that would not have a material adverse effect on the business,
-
operations, prospects, Properties or financial condition of Spectrum. Except as
-
otherwise set forth in SCHEDULE 4.10, Spectrum (x) has not received or entered
-------------
into any citations, complaints, consent orders, compliance schedules, or other
similar enforcement orders or received any written notice from any Governmental
Authority or any other written notice that would indicate that there is not
currently compliance with all such material Legal Requirements, except for
failures to so comply that would not have an adverse effect on the business,
operations, prospects, Properties or financial condition of Spectrum, and (y) is
not in default under, and no condition exists (whether covered by insurance or
not) that with or without notice or lapse of time or both would constitute a
default under, or breach or violation of, any material Legal Requirement or
Permit applicable to Spectrum. Without limiting the generality of the
foregoing, Spectrum has not received notice of and there is no basis for, any
claim, action, suit, investigation or proceeding that might result in a finding
that Spectrum is not or has not been in compliance with material Legal
Requirements relating to (a) the development, testing, manufacture, packaging,
distribution and marketing of products, (b) employment, safety and health, (c)
environmental protection, building, zoning and land use and/or (d) the Foreign
Corrupt Practices Act and the rules and regulations promulgated thereunder.
4.11 LITIGATION. Except as otherwise set forth in SCHEDULE 4.11, there
---------- -------------
are no claims, actions, suits, investigations or proceedings against Spectrum
pending or, to the best of Spectrum's Knowledge, threatened in any court or
before or by any Governmental Authority, or before any arbitrator, that might
have a material adverse effect (whether covered by insurance or not) on the
business, operations, prospects, Properties or financial condition of Spectrum
and there is no basis for any such claim, action, suit, investigation or
proceeding. SCHEDULE 4.11 also includes a true and correct listing of all
--------------
material actions, suits, investigations, claims or proceedings that were
pending, settled or adjudicated since January 1, 1992.
4.12 REAL PROPERTY. Except for Permitted Encumbrances, SCHEDULE
-------------- --------
4.12sets forth a list of all leases, licenses or similar agreements relating to
Spectrum's use or occupancy of real estate owned by a third party ("LEASES"),
------
true and correct copies of which have previously been furnished to ▇▇▇▇▇ BAY, in
each case setting forth (i) the lessor and lessee thereof and the commencement
date, term and renewal rights under each of the Leases, and (ii) the street
address and legal description of each property covered thereby (the "LEASED
------
PREMISES"). The Leases and all guaranties with respect thereto, are in full
--------
force and effect and have not been amended in writing or otherwise, and no party
thereto is in default or breach under any such Lease. No event has occurred
which, with the passage of time or the giving of notice or both, would cause a
material breach of or default under any of such Leases. Neither the Spectrum
nor its agents or employees have received written notice of any claimed
abatements, offsets, defenses or other bases for relief or adjustment.
4.13 ASSETS OTHER THAN REAL PROPERTY. Spectrum has good and marketable
-------------------------------
title to all tangible assets reflected on the Financial Statement or acquired
after the date thereof, except those since sold or otherwise disposed of for
fair value in the ordinary course of business, in each case free and clear of
all liens. All the tangible personal property owned by Spectrum is in all
material respects in good operating condition and repair, ordinary wear and tear
excepted, and all personal property leased by Spectrum is in all material
respects in the condition required of such property by the terms of the lease
applicable thereto during the term of such lease and upon expiration thereof.
43
4.14 COMMITMENTS.
-----------
(a) Except as otherwise set forth in SCHEDULE 4.14, Spectrum is not a
-------------
party to or bound by any of the following, whether written or oral:
(i) contract or commitment for capital expenditures by Spectrum in
excess of $50,000 per calendar quarter in the aggregate;
(ii) lease or license with respect to any Properties, real or
personal, whether as landlord, tenant, licensor or licensee;
(iii) agreement, contract, indenture or other instrument relating to
the borrowing of money or the guarantee of any obligation or the deferred
payment of the purchase price of any Properties;
(iv) contract with any Affiliate of Spectrum relating to the provision
of goods or services by or to Spectrum;
(v) agreement for the sale of any assets that in the aggregate have a
net book value on Spectrum's books of greater than $50,000;
(vi) agreement that purports to limit Spectrum's freedom to compete
freely in any line of business or in any geographic area; or
(vii) other Contract that is material to Spectrum's business.
(b) All of the Contracts listed or required to be listed in SCHEDULE
--------
4.14 are valid, binding and in full force and effect, and Spectrum has not been
----
notified or advised by any party thereto of such party's intention or desire to
terminate or modify any such Contract in any respect, except as disclosed in
SCHEDULE 4.14. Neither Spectrum nor, to the best of Spectrum's Knowledge, any
--------------
other party is in breach of any of the terms or covenants of any Contract listed
or required to be listed in SCHEDULE 4.14. Following the Closing, Spectrum
-------------
shall continue to be entitled to all of the benefits currently held by Spectrum
under each Contract listed or required to be listed in SCHEDULE 4.14.
--------------
4.15 INTANGIBLE RIGHTS. Set forth on SCHEDULE 4.15is a list and
------------------ --------------
description of all material foreign and domestic patents, patent rights,
trademarks, service marks, trade names, brands and copyrights (whether or not
registered and, if applicable, including pending applications for registration)
owned, Used, licensed or controlled by Spectrum and all goodwill associated
therewith. Except as otherwise set forth in SCHEDULE 4.15, Spectrum owns or has
-------------
the right to use and shall as of the Closing Date own or have the right to use
any and all information, know-how, trade secrets, patents, copyrights,
trademarks, tradenames, software, formulae, methods, processes and other
intangible properties that are necessary or customarily Used by Spectrum for the
ownership, management or operation of its Properties ("INTANGIBLE RIGHTS")
-----------------
including, but not limited to, the Intangible Rights listed on SCHEDULE 4.15.
-------------
4.16 PERMITS. Except as otherwise set forth in SCHEDULE 4.16, Spectrum
------- -------------
has all Permits necessary for Spectrum to own, operate, use and/or maintain its
Properties and to conduct its business and operations as presently conducted and
as expected to be conducted in the future. Except as otherwise set forth in
SCHEDULE 4.16, all such Permits are in effect, no proceeding is pending or, to
--------------
the best of Spectrum's Knowledge, threatened to modify, suspend or revoke,
withdraw, terminate, or otherwise limit any such Permits, and no administrative
or governmental actions have been taken or, to the best of Spectrum's Knowledge,
threatened in connection with the expiration or renewal of such Permits which
could adversely affect Spectrum's ability to conduct its business and operations
as presently conducted and as expected to be conducted in the future.
4.17 BANKS. SCHEDULE 4.17sets forth (i) the name of each bank, trust
----- --------------
company or other financial institution and stock or other broker with which
Spectrum has an account, credit line or safe deposit box or vault, (ii) the
names of all persons authorized to draw thereon or to have access to any safe
deposit box or vault, (iii) the purpose of each such account, safe deposit box
44
or vault, and (iv) the names of all persons authorized by proxies, powers of
attorney or other like instrument to act on Spectrum's behalf in matters
concerning any of its business or affairs. Except as otherwise set forth in
SCHEDULE 4.17, no such proxies, powers of attorney or other like instruments are
-------------
irrevocable.
4.18 SUPPLIERS. SCHEDULE 4.18sets forth the ten principal suppliers of
--------- -------------
Spectrum during fiscal year 2002. Except as otherwise set forth in SCHEDULE
--------
4.18, Spectrum maintains good relations with all suppliers and customers listed
----
or required to be listed in SCHEDULE 4.18 as well as with governments, partners,
-------------
financing sources and other parties with whom Spectrum has significant
relations, and no such party has canceled, terminated or made any threat to
Spectrum to cancel or otherwise terminate its relationship with Spectrum or to
materially decrease its services or supplies to Spectrum or its direct or
indirect purchase or usage of Spectrum's products or services.
4.19 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE
------------------------------ --------
4.19 and except for normal advances to employees consistent with past practices,
----
payment of compensation for employment to employees consistent with past
practices, and participation in scheduled plans or benefit programs and
agreements by employees, Spectrum has not purchased, acquired or leased any
property or services from, or sold, transferred or leased any property or
services to, or loaned or advanced any money to, or borrowed any money from, or
entered into or been subject to any management, consulting or similar agreement
with, or engaged in any other significant transaction with ▇▇. ▇▇▇▇▇▇ or any
other of Spectrum officer, director or stockholder or any of their respective
Affiliates. Except as set forth on SCHEDULE 4.19 no Affiliate of Spectrum is
-------------
indebted to Spectrum for money borrowed or other loans or advances, and Spectrum
is not indebted to any such Affiliate.
4.20 TAXES. Except as set forth on SCHEDULE 4.20, all Tax Returns
----- -------------
required to be filed prior to the date hereof with respect to Spectrum for its
respective income, properties, franchises or operations have been timely filed,
each such Tax Return has been prepared in compliance with all applicable laws
and regulations, and all such Tax Returns are true and accurate in all material
respects. All Taxes due and payable by or with respect to Spectrum have been
paid or are accrued on its Balance Sheet. Spectrum has withheld and paid all
Taxes to the appropriate Governmental Authority required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party. With respect to each
taxable period of Spectrum: (i) no deficiency or proposed adjustment which has
not been settled or otherwise resolved for any amount of Taxes has been asserted
or assessed by any taxing authority against Spectrum; (ii) Spectrum has not
consented to extend the time in which any Taxes may be assessed or collected by
any taxing authority; (iii) there is no action, suit, taxing authority
proceeding, or audit or claim for refund now in progress, pending or, to the
Knowledge of Spectrum, threatened against or with respect to Spectrum regarding
Taxes; and (iv) there are no Liens for Taxes (other than for current Taxes not
yet due and payable) upon Spectrum's assets.
4.21 OTHER INFORMATION. The information furnished by Spectrum to ▇▇▇▇▇
-----------------
BAY pursuant to this Agreement (including, without limitation, information
contained in the Exhibits hereto, the Schedules identified herein, the
instruments referred to in such Schedules and the certificates and other
documents to be executed or delivered pursuant hereto by Spectrum at or prior to
the Closing) is not, nor at the Closing shall be, false or misleading in any
material respect, or contains, or at the Closing shall contain, any misstatement
of material fact, or omits, or at the Closing shall omit, to state any material
fact required to be stated in order to make the statements therein not
misleading.
4.22 NO BROKERS. Spectrum has not incurred any obligation for any
-----------
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
45
ARTICLE ▇.
▇▇▇▇▇ BAY'S REPRESENTATIONS AND WARRANTIES
▇▇▇▇▇ BAY and the SSS each hereby represents and warrants to Spectrum that
to their Knowledge:
5.01 ▇▇▇▇▇ BAY: CORPORATE EXISTENCE AND QUALIFICATION. ▇▇▇▇▇ BAY is a
-------------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware; has the corporate power to own, manage, lease and hold
its properties and to carry on its business as and where such properties are
presently located and such business is presently conducted; and is duly
qualified to do business and is in good standing as a foreign corporation in
each of the jurisdictions where the character of its properties or the nature of
its business requires it to be so qualified.
5.02 SSS: CORPORATE EXISTENCE AND QUALIFICATION. SSS is a corporation
-------------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware; has the corporate power to own, manage, lease and hold its
properties and to carry on its business as and where such properties are
presently located and such business is presently conducted; and is duly
qualified to do business and is in good standing as a foreign corporation in
each of the jurisdictions where the character of its properties or the nature of
its business requires it to be so qualified.
5.03 ▇▇▇▇▇ BAY: AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement
-------------------------------------------------
has been duly executed and delivered by ▇▇▇▇▇ BAY and ▇▇▇▇▇ BAY has all
requisite corporate power and legal capacity to execute and deliver this
Agreement and all Collateral Agreements executed and delivered or to be executed
and delivered by ▇▇▇▇▇ BAY in connection with the transactions provided for
hereby, to consummate the transactions contemplated hereby and by the Collateral
Agreements, and to perform its obligations hereunder and under the Collateral
Agreements. Upon the approval of this Agreement by ▇▇▇▇▇ BAY's Board of
Directors, the execution and delivery of this Agreement and the Collateral
Agreements and the performance of the transactions contemplated hereby and
thereby shall be duly and validly authorized and approved by all corporate
action necessary on ▇▇▇▇▇ BAY's behalf. Subject to such Board approval, this
Agreement and each Collateral Agreement to which ▇▇▇▇▇ BAY is a party
constitutes, or upon execution and delivery shall constitute, the legal, valid
and binding obligation of ▇▇▇▇▇ BAY, enforceable in accordance with its terms,
except as such enforcement may be limited by general equitable principles or by
applicable bankruptcy, insolvency, moratorium, or similar laws and judicial
decisions from time to time in effect which affect creditors' rights generally.
5.04 SSS: AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has
---------------------------------------------
been duly executed and delivered by SSS and SSS has all requisite corporate
power and legal capacity to execute and deliver this Agreement and all
Collateral Agreements executed and delivered or to be executed and delivered by
SSS in connection with the transactions provided for hereby, to consummate the
transactions contemplated hereby and by the Collateral Agreements, and to
perform its obligations hereunder and under the Collateral Agreements. Upon the
approval of this Agreement by SSS's Board of Directors, the execution and
delivery of this Agreement and the Collateral Agreements and the performance of
the transactions contemplated hereby and thereby shall be duly and validly
authorized and approved by all corporate action necessary on SSS's behalf.
Subject to such Board approval, this Agreement and each Collateral Agreement to
which SSS is a party constitutes, or upon execution and delivery shall
constitute, the legal, valid and binding obligation of SSS, enforceable in
accordance with its terms, except as such enforcement may be limited by general
equitable principles or by applicable bankruptcy, insolvency, moratorium, or
similar laws and judicial decisions from time to time in effect which affect
creditors' rights generally.
5.05 NO DEFAULT OR CONSENTS. Neither the execution and delivery of
-------------------------
this Agreement nor the carrying out of the transactions contemplated hereby
shall:
(i) violate or conflict with any of the terms, conditions or
provisions of ▇▇▇▇▇ BAY's Articles of Incorporation or bylaws;
46
(ii) violate any Legal Requirements applicable to ▇▇▇▇▇ BAY;
(iii) violate, conflict with, result in a breach of, constitute a
default under (whether with or without notice or the lapse of time or both), or
accelerate or permit the acceleration of the performance required by, or give
any other party the right to terminate, any contract or Permit applicable to
▇▇▇▇▇ BAY;
(iv) result in the creation of any lien, charge or other encumbrance
on
any of ▇▇▇▇▇ BAY's property; or
(v) require ▇▇▇▇▇ BAY to obtain or make any waiver, consent, action,
approval or authorization of, or registration, declaration, notice or filing
with, any private non-governmental third party or any Governmental Authority.
5.06 NO GOVERNMENTAL PROCEEDINGS. No suit, action or other proceeding
----------------------------
is pending or, to ▇▇▇▇▇ BAY's Knowledge, threatened before any Governmental
Authority seeking to restrain ▇▇▇▇▇ BAY or prohibit its entry into this
Agreement or prohibit the Closing, or seeking Damages against ▇▇▇▇▇ BAY or its
properties as a result of the consummation of this Agreement.
5.07 LITIGATION. There are no claims, actions, suits, investigations
----------
or proceedings against ▇▇▇▇▇ BAY pending or, to the best of ▇▇▇▇▇ BAY's
Knowledge, threatened in any court or before or by any Governmental Authority,
or before any arbitrator, that might have a material adverse effect (whether
covered by insurance or not) on the business, operations, prospects, Properties
or financial condition of ▇▇▇▇▇ BAY and there is no basis for any such claim,
action, suit, investigation or proceeding.
5.08 COMPLIANCE WITH LAWS. ▇▇▇▇▇ BAY is and has been in compliance in
---------------------
all respects with any and all material Legal Requirements applicable to ▇▇▇▇▇
BAY, other than failures to so comply that would not have a material adverse
effect on the business, operations, prospects, Properties or financial condition
of ▇▇▇▇▇ BAY. ▇▇▇▇▇ BAY (x) has not received or entered into any citations,
complaints, consent orders, compliance schedules, or other similar enforcement
orders or received any written notice from any Governmental Authority or any
other written notice that would indicate that there is not currently compliance
with all such material Legal Requirements, except for failures to so comply that
would not have an adverse effect on the business, operations, prospects,
Properties or financial condition of ▇▇▇▇▇ BAY, and (y) is not in default under,
and no condition exists (whether covered by insurance or not) that with or
without notice or lapse of time or both would constitute a default under, or
breach or violation of, any material Legal Requirement or Permit applicable to
▇▇▇▇▇ BAY. Without limiting the generality of the foregoing, ▇▇▇▇▇ BAY has not
received notice of and there is no basis for, any claim, action, suit,
investigation or proceeding that might result in a finding that ▇▇▇▇▇ BAY is not
or has not been in compliance with material Legal Requirements relating to (a)
the development, testing, manufacture, packaging, distribution and marketing of
products, (b) employment, safety and health, (c) environmental protection,
building, zoning and land use and/or (d) the Foreign Corrupt Practices Act and
the rules and regulations promulgated thereunder.
5.09 TAX MATTERS. All Tax Returns required to be filed prior to the
------------
date hereof with respect to ▇▇▇▇▇ BAY for its respective income, properties,
franchises or operations have been timely filed, each such Tax Return has been
prepared in compliance with all applicable laws and regulations, and all such
Tax Returns are true and accurate in all material respects. All Taxes due and
payable by or with respect to ▇▇▇▇▇ BAY have been paid or are accrued on its
Balance Sheet. ▇▇▇▇▇ BAY have withheld and paid all Taxes to the appropriate
Governmental Authority required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party. With respect to each taxable period of ▇▇▇▇▇
BAY: (i) no deficiency or proposed adjustment which has not been settled or
otherwise resolved for any amount of Taxes has been asserted or assessed by any
taxing authority against ▇▇▇▇▇ BAY; (ii) ▇▇▇▇▇ BAY has not consented to extend
the time in which any Taxes may be assessed or collected by any taxing
authority; (iii) there is no action, suit, taxing authority proceeding, or audit
or claim for refund now in progress, pending or, to the Knowledge of ▇▇▇▇▇ BAY,
threatened against or with respect to ▇▇▇▇▇ BAY regarding Taxes; and (iv) there
are no liens for Taxes (other than for current Taxes not yet due and payable)
upon ▇▇▇▇▇ BAY's assets.
47
5.10 PERMITS. ▇▇▇▇▇ BAY has all Permits necessary for ▇▇▇▇▇ BAY to
-------
own, operate, use and/or maintain its Properties and to conduct its business and
operations as presently conducted and as expected to be conducted in the future.
All such Permits are in effect, no proceeding is pending or, to the best of
▇▇▇▇▇ BAY's Knowledge, threatened to modify, suspend or revoke, withdraw,
terminate, or otherwise limit any such Permits, and no administrative or
governmental actions have been taken or, to the best of ▇▇▇▇▇ BAY's Knowledge,
threatened in connection with the expiration or renewal of such Permits which
could adversely affect ▇▇▇▇▇ BAY's ability to conduct its business and
operations as presently conducted and as expected to be conducted in the future.
5.11 ENVIRONMENTAL MATTERS. Since its inception, ▇▇▇▇▇ BAY has not
----------------------
owned, leased or otherwise occupied any Real Property and therefore, neither
▇▇▇▇▇ BAY nor any of its Affiliates has any liability under, and each are
presently in compliance in all material respects with all Environmental Laws.
5.12 OTHER INFORMATION. The information furnished by ▇▇▇▇▇ BAY to
------------------
Spectrum pursuant to this Agreement (including, without limitation, information
contained in the Exhibits hereto, the Schedules identified herein, the
instruments referred to in such Schedules and the certificates and other
documents to be executed or delivered pursuant hereto by ▇▇▇▇▇ BAY at or prior
to the Closing) is not, nor at the Closing shall be, false or misleading in any
material respect, or contains, or at the Closing shall contain, any misstatement
of material fact, or omits, or at the Closing shall omit, to state any material
fact required to be stated in order to make the statements therein not
misleading. In addition, ▇▇▇▇▇ BAY represents and warrants that, prior to the
Effective Time, it did not have any business operations.
ARTICLE VI.
OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
6.01 ▇▇▇▇▇ BAY'S ACCESS TO INFORMATION. Spectrum shall permit ▇▇▇▇▇
------------------------------------
BAY and its authorized employees, agents, accountants, legal counsel and other
representatives to have access to the books, records, employees, counsel,
accountants, engineers and other representatives of Spectrum at all times
reasonably requested by ▇▇▇▇▇ BAY for the purpose of conducting an investigation
of Spectrum's financial condition, corporate status, operations, prospects and
business. Spectrum shall make available to ▇▇▇▇▇ BAY for examination and
reproduction all documents and data of every kind and character relating to
Spectrum in possession or control of, or subject to reasonable access by,
Spectrum, including, without limitation, all files, records, data and
information relating to the Properties (whether stored in paper, magnetic or
other storage media) and all agreements, instruments, contracts, assignments,
certificates, orders, and amendments thereto. Also, Spectrum shall allow ▇▇▇▇▇
BAY access to, and the right to inspect, the Properties, except to the extent
that such Properties are operated by a third-party operator, in which case
Spectrum shall use its best efforts to cause the operator of such Properties to
allow ▇▇▇▇▇ BAY access to, and the right to inspect, such Properties.
6.02 SPECTRUM'S CONDUCT OF BUSINESS AND OPERATIONS. Spectrum shall
-------------------------------------------------
keep ▇▇▇▇▇ BAY advised as to all material operations and proposed material
operations relating to Spectrum. Spectrum shall (a) conduct its business in the
ordinary course, (b) keep available the services of present employees, (c)
maintain and operate its Properties in a good and workmanlike manner, (d) pay or
cause to be paid all costs and expenses (including but not limited to insurance
premiums) incurred in connection therewith in a timely manner, (e) use
reasonable efforts to keep all Contracts listed or required to be listed on
SCHEDULE 4.14in full force and effect, (f) comply with all of the covenants
----------
contained in all such material Contracts, (g) maintain in force until the
Closing Date insurance policies equivalent to those in effect on the date
hereof, and (h) comply in all material respects with all applicable Legal
Requirements. Except as otherwise contemplated in this Agreement, Spectrum
shall use its best efforts to preserve the present relationships of Spectrum
with persons having significant business relations therewith.
48
6.03 GENERAL RESTRICTIONS.
---------------------
A. PROHIBITED TRANSACTIONS. Except as otherwise expressly permitted in
-----------------------
this Agreement, Spectrum shall not:
(i) declare, set aside or pay any dividends, or make any distributions
or other payments in respect of its equity securities, or repurchase, redeem or
otherwise acquire any such securities;
(ii) merge into or with or consolidate with, any other corporation or
acquire the business or assets of any person;
(iii) purchase any securities of any person;
(iv) amend its charter or bylaws;
(v) issue any capital stock or other securities, or grant, or enter
into any agreement to grant, any options, convertibility rights, other rights,
warrants, calls or agreements relating to its securities, except in furtherance
with this Agreement; or
(vi) create, incur, assume, guarantee or otherwise become liable or
obligated with respect to any indebtedness, or make any loan or advance to, or
any investment in, any person, except in each case in the ordinary course of
business;
B. TRANSACTIONS REQUIRING CONSENT. Except as otherwise expressly
--------------------------------
permitted in this Agreement, without ▇▇▇▇▇ BAY's prior written consent, which
consent shall not be unreasonably withheld, Spectrum shall not:
(i) make any change in any existing election, or make any new
election, with respect to any tax law in any jurisdiction which election could
have an effect on the tax treatment of Spectrum or Spectrum's business
operations;
(ii) enter into, amend or terminate any material agreement;
(iii) sell, transfer, lease, mortgage, encumber or otherwise dispose
of, or agree to sell, transfer, lease, mortgage, encumber or otherwise dispose
of, any Properties except (i) in the ordinary course of business, or (ii)
pursuant to any agreement specified in SCHEDULE 4.14;
--------------
(iv) other than in the ordinary course of business consistent with
past practices, incur or approve, or enter into any agreement or commitment to
make, any expenditures in excess of $25,000 (other than those required pursuant
to any agreement specified in SCHEDULE 4.14);
--------------
(v) maintain its books of account other than in the usual, regular and
ordinary manner in accordance with generally accepted accounting principles and
on a basis consistent with prior periods or make any change in any of its
accounting methods or practices;
(vi) make any change, whether written or oral, to any agreement or
understanding with any of the suppliers listed or required to be listed on
SCHEDULE 4.18;
---------
(vii) accelerate or delay collection of any notes or accounts
receivable in advance of or beyond their regular due dates or the dates when
they would have been collected in the ordinary course of business consistent
with past practices;
49
(viii) delay or accelerate payment of any accrued expense, trade
payable or other liability beyond or in advance of its due date or the date when
such liability would have been paid in the ordinary course of business
consistent with past practices;
(ix) allow its levels of inventory to vary in any material respect
from the levels customarily maintained;
(x) become a party to or bound by any of the arrangements described in
SECTION 4.14, whether written or oral;
-------------
(xi) enter into any transaction or make any commitment which could
result in any of the representations, warranties or covenants of Spectrum
contained in this Agreement not being true and correct after the occurrence of
such transaction or event; or
(xii) commit to do any of the foregoing.
6.04 NOTICE REGARDING CHANGES. Spectrum shall promptly inform ▇▇▇▇▇
--------------------------
BAY in writing of any change in facts and circumstances that could render any of
the representations and warranties made herein by Spectrum inaccurate or
misleading if such representations and warranties had been made upon the
occurrence of the fact or circumstance in question. ▇▇▇▇▇ BAY shall promptly
inform Spectrum in writing of any change in facts and circumstances that could
render any of the representations and warranties made herein by it inaccurate or
misleading if such representations and warranties had been made upon the
occurrence of the fact or circumstance in question.
6.05 ENSURE CONDITIONS MET. Subject to the terms and conditions of
-----------------------
this Agreement, each party hereto shall use all reasonable commercial efforts to
take or cause to be taken all actions and do or cause to be done all things
required under applicable Legal Requirements in order to consummate the
transactions contemplated hereby, including, without limitation, (i) obtaining
all Permits, authorizations, consents and approvals of any Governmental
Authority or other Person which are required for or in connection with the
consummation of the transactions contemplated hereby and by the Collateral
Agreements, (ii) taking any and all reasonable actions necessary to satisfy all
of the conditions to each party's obligations hereunder as set forth in Article
-------
VII, and (iii) executing and delivering all agreements and documents required by
---
the terms hereof to be executed and delivered by such party on or prior to the
Closing.
ARTICLE VII.
CONDITIONS TO SPECTRUM'S AND ▇▇▇▇▇ BAY'S OBLIGATIONS
7.01 CONDITIONS TO OBLIGATIONS OF SPECTRUM. Spectrum's obligations to
--------------------------------------
carry out the transactions contemplated by this Agreement are subject, at
Spectrum's option, to the satisfaction or waiver of the following conditions:
(a) ▇▇▇▇▇ BAY's board of directors and SSS's board of directors and
stockholders shall have approved this Agreement and the Merger contemplated
hereby.
(b) At Closing, ▇▇▇▇▇ BAY shall deliver an officer's certificate
certifying and attaching: (1) a true and correct copy of all necessary corporate
action on its behalf approving this Agreement; (2) a true and correct copy of
▇▇▇▇▇ BAY's Certificate of Incorporation and all designations and amendments
thereto; (3) a true and correct copy of ▇▇▇▇▇ BAY's By-laws; and (4) a
certificate of good standing from the Delaware Secretary of State.
(c) All representations and warranties of ▇▇▇▇▇ BAY contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing, and ▇▇▇▇▇ BAY shall have performed and satisfied in all material
respects all covenants and agreements required by this Agreement to be performed
and satisfied by ▇▇▇▇▇ BAY at or prior to the Closing.
50
(d) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by or on Spectrum's behalf or any of the
stockholders) shall be pending or threatened before any Governmental Authority
seeking to restrain ▇▇▇▇▇ BAY or prohibit the Closing or seeking Damages against
▇▇▇▇▇ BAY as a result of the consummation of this Agreement.
(e) At Closing, ▇▇▇▇▇ BAY shall cause the Funding Requirement to be
delivered pursuant to the provisions of Section 8.05 if such Funding
-------------
Requirements have not yet been delivered pursuant to the Original Agreement.
(f) ▇▇▇▇▇ BAY shall have entered into the employment contract with ▇▇.
▇▇▇▇▇▇ in form and substance substantially similar to the agreement attached
hereto as EXHIBIT A.
----------
(g) This intentionally left blank.
(h) Prior to the Closing Date, ▇▇▇▇▇ BAY shall have amended its bylaws,
and adopted the appropriate board resolutions, for a period of three years, to
grant unanimity to ▇▇▇▇▇ BAY's board of directors to permit ▇▇▇▇▇ BAY to pursue
financing plans for debt in excess of $100,000, and which allows ▇▇▇▇▇ BAY to
grant stock options in excess of 50,000 shares at the board's sole discretion.
(i) At Closing, ▇▇▇▇▇ BAY shall deliver an opinion of its counsel,
customary for transactions as contemplated in this Agreement, in form and
substance reasonably satisfactory to Spectrum's counsel.
7.02 CONDITIONS TO ▇▇▇▇▇ BAY'S OBLIGATIONS. ▇▇▇▇▇ BAY's obligation to
--------------------------------------
carry out the transactions contemplated by this Agreement are subject, at ▇▇▇▇▇
BAY's option, to the satisfaction, or waiver by ▇▇▇▇▇ BAY, of the following
conditions:
(a) All representations and warranties of Spectrum contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing, and Spectrum shall have performed and satisfied in all material
respects all agreements and covenants required by this Agreement to be performed
and satisfied by them at or prior to the Closing.
(b) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by or on ▇▇▇▇▇ BAY's behalf or any of the
stockholders) shall be pending or threatened before any court or governmental
agency seeking to restrain Spectrum or prohibit the Closing or seeking Damages
against Spectrum as a result of the consummation of this Agreement.
(c) Except for matters disclosed in SCHEDULE 7.02(C) attached hereto,
----------------
since the Balance Sheet Date and up to and including the Closing, there shall
not have been any event, circumstance, change or effect that, individually or in
the aggregate, had or might have a material adverse effect on Spectrum's
business, operations, prospects, Properties or financial condition.
(d) At Closing, Spectrum shall deliver an officer's certificate
certifying and attaching (1) a true and correct copy of all necessary corporate
action on its behalf approving this Agreement; and (2) a certificate of good
standing from the Florida Secretary of State.
(e) All agreements, commitments and understandings between Spectrum and
any Spectrum Stockholder (or any other Affiliate of Spectrum or any Spectrum
Stockholder) shall have been terminated in all respects on terms satisfactory to
▇▇▇▇▇ BAY, and all obligations, claims or entitlements thereunder shall be
unconditionally waived and released and written evidence thereof satisfactory in
form and substance to ▇▇▇▇▇ BAY shall have been delivered to ▇▇▇▇▇ BAY.
51
(f) Spectrum's board of directors and stockholders shall have approved
this Agreement and the Merger contemplated hereby.
(g) No proceeding in which Spectrum shall be a debtor, defendant or
party seeking an order for its own relief or reorganization shall have been
brought or be pending by or against such person under any United States or state
bankruptcy or insolvency law.
(h) ▇▇▇▇▇ BAY shall be satisfied that it shall be able to obtain, not
later than 60 days after the Closing Date, the Post-Closing Audit and unaudited
pro forma Financial Statements with respect to Spectrum, if any, together with
any required consent of Spectrum's independent public accountants.
(i) This intentionally left blank.
(j) At Closing, Spectrum shall deliver a detailed budget that is
satisfactory to ▇▇▇▇▇ BAY which sets out Spectrum's intended use of the Funding
Requirement described in Section 8.05, if not already provided pursuant to the
------------
Original Agreement.
(k) At Closing, Spectrum shall have disposed of any and all obligations
to preferred stockholders, option holders and warrant holders.
(l) Spectrum shall have provided to ▇▇▇▇▇ BAY an unaudited balance
sheet and the related unaudited statements of income, stockholders' equity and
cash flows for the period from the date of the Financial Statements through the
end of the most recent month ending at least 30 days prior to the Closing Date
(the "CLOSING FINANCIAL STATEMENTS"), accompanied by the unqualified
------------------------------
certification of the Chief Executive Officer of Spectrum and the Chief Financial
-----
Officer of Spectrum to the effect that the Closing Financial Statements have
been prepared from and in accordance with the books and records of Spectrum,
have been prepared in conformity with GAAP (subject to normal, recurring
year-end adjustments and the lack of required footnotes) and fairly present in
all material respects the financial condition of Spectrum as of the date thereof
and the results of its operations for the period then ended, and there shall
have been no material adverse change in the financial condition of Spectrum form
the date of the Financial Statements to the date of the Closing Financial
Statement which would have a material adverse effect on the financial condition
of Spectrum.
(m) At Closing, Spectrum shall deliver an opinion of its counsel
customary for transactions as contemplated in this Agreement in form and
substance reasonably satisfactory to ▇▇▇▇▇ BAY's counsel.
ARTICLE VIII.
POST-CLOSING OBLIGATIONS
8.01 FURTHER ASSURANCES. Following the Closing, Spectrum and ▇▇▇▇▇ BAY
------------------
shall execute and deliver such documents, and take such other action, as shall
be reasonably requested by any other party hereto to carry out the transactions
contemplated by this Agreement.
8.02 PUBLICITY. None of the parties hereto shall issue or make, or
---------
cause to have issued or made, any public release or announcement concerning this
Agreement or the transactions contemplated hereby, without the advance approval
in writing of the form and substance thereof by each of the other parties,
except as required by law (in which case, so ▇▇▇▇▇ Bay as possible, there shall
be consultation among the parties prior to such announcement), and the parties
shall endeavor jointly to agree on the text of any announcement or circular so
approved or required.
8.03 NAME CHANGE AND REINCOPORATION. After Closing, ▇▇▇▇▇ BAY shall
---------------------------------
take the necessary board of directors action and use its best efforts to obtain
the necessary shareholder approval to change its corporate name from ▇▇▇▇▇ Bay
International, Inc. to "SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP.".
------------------------------------------------
52
8.04 ▇▇▇▇▇ BAY DIRECTORS AND OFFICERS AFTER CLOSING. ▇▇▇▇▇ BAY shall
------------------------------------------------
use its best efforts to have the securities of ▇▇▇▇▇ BAY trade on the Over The
Counter Bulletin Board (OTC BB) or equivalent within 150 days from Closing.
8.05 CAPITAL FOR THE SURVIVING CORPORATION'S BUSINESS. ▇▇▇▇▇ BAY shall
------------------------------------------------
provide the Surviving Corporation, if not already provided pursuant to the
Original Agreement, without restriction and in immediately available funds, the
following amounts to be used to conduct its business according to the following
schedule (the "FUNDING REQUIREMENT"): (i) $200,000 on June 24, 2003; (ii)
--------------------
$150,000 on June 28, 2003; and (iii) $150,000 on or before August 1, 2003. This
funding will be in the form of a loan to Spectrum.
ARTICLE IX.
MISCELLANEOUS
9.01 INDEMNIFICATION. ▇▇▇▇▇ BAY shall defend, indemnify and hold
---------------
harmless the Surviving Corporation and the Spectrum Stockholders from, against
and in respect of any and all claims, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest,
penalties, fines and reasonable attorneys' fees, that the Surviving Corporation
and/or the Spectrum Stockholders may incur, sustain or suffer including without
limitation any audit costs incurred by an Internal Revenue Service audit of the
Company and/or any of the Target Companies which results in a tax deficiency for
the tax year(s) audited ("LOSSES") as a result of any breach of, or failure by
------
the ▇▇▇▇▇ BAY to perform, any of the representations, warranties, covenants or
agreements of ▇▇▇▇▇ BAY contained in this Agreement or in any Schedule(s)
furnished by or on behalf of ▇▇▇▇▇ BAY under this Agreement.
9.02 CONFIDENTIALITY.
---------------
(a) Prior to the Closing, ▇▇▇▇▇ BAY shall, and shall cause its
Affiliates and its and their employees, agents, accountants, legal counsel and
other representatives and advisers to, hold in strict confidence all, and not
divulge or disclose any, information of any kind concerning Spectrum and its
business; provided, however, that the foregoing obligation of confidence shall
not apply to (i) information that is or becomes generally available to the
public other than as a result of a disclosure by ▇▇▇▇▇ BAY or its Affiliates or
any of its or their employees, agents, accountants, legal counsel or other
representatives or advisers, (ii) information that is or becomes available to
▇▇▇▇▇ BAY or its Affiliates or any of its or their employees, agents,
accountants, legal counsel or other representatives or advisers on a
non-confidential basis prior to its disclosure by ▇▇▇▇▇ BAY or its Affiliates or
any of its or their employees, agents, accountants, legal counsel or other
representatives or advisers and (iii) information that is required to be
disclosed by ▇▇▇▇▇ BAY or its Affiliates or any of its or their employees,
agents, accountants, legal counsel or other representatives or advisers as a
result of any applicable law, rule or regulation of any Governmental Authority;
and provided further that ▇▇▇▇▇ BAY promptly shall notify Spectrum of any
disclosure pursuant to clause (iii) of this Section 9.01(a); and, provided,
---------------
further, that the foregoing obligation of confidence shall not apply to the
furnishing of information by ▇▇▇▇▇ BAY in bona fide discussions or negotiations
with prospective lenders.
(b) Spectrum shall cause its Affiliates, employees, agents,
accountants, legal counsel and other representatives and advisers to, hold in
strict confidence all, and not divulge or disclose any, information of any kind
concerning the transactions contemplated by this Agreement, Spectrum, ▇▇▇▇▇ BAY
or their respective businesses; provided, however, that the foregoing obligation
of confidence shall not apply to (i) information that is or becomes generally
available to the public other than as a result of a disclosure by Spectrum or
any of its Affiliates, employees, agents, accountants, legal counsel or other
representatives or advisers, (ii) information that is or becomes available to
Spectrum or any of its Affiliates, employees, agents, accountants, legal counsel
or other representatives or advisers after the Closing on a non-confidential
basis prior to its disclosure by Spectrum or any of its Affiliates, employees,
agents, accountants, legal counsel or other representatives or advisers and
(iii) information that is required to be disclosed by Spectrum or any of its
Affiliates, employees, agents, accountants, legal counsel or other
representatives or advisers as a result of any applicable law, rule or
regulation of any Governmental Authority; and provided further that Spectrum
shall promptly notify ▇▇▇▇▇ BAY of any disclosure pursuant to clause (iii) of
this Section 9.01(b).
----------------
53
9.03 BROKERS. Regardless of whether the Closing shall occur, ▇▇▇▇▇ BAY
-------
shall indemnify and hold Spectrum harmless from and against any and all
liability for any brokers' or finders' fees arising in respect to brokers or
finders retained or engaged by ▇▇▇▇▇ BAY with respect of the transactions
contemplated by this Agreement.
9.04 COSTS AND EXPENSES. Each of the parties to this Agreement shall
--------------------
bear its own expenses incurred in connection with the negotiation, preparation,
execution and closing of this Agreement and the transactions contemplated hereby
(the "TRANSACTION EXPENSES").
---------------------
9.05 NOTICES. Any notice, demand, request, offer, consent, approval or
-------
communications (collectively, a "NOTICE") to be provided under this Agreement
------
shall be in writing and sent by one of the following methods: (i) postage
prepaid, United States certified or registered mail with a return receipt
requested, addressed to ▇▇▇▇▇ BAY or Spectrum, as appropriate, at the addresses
set forth below; (ii) overnight delivery with a nationally recognized and
reputable air courier (with electronic tracking requested) addressed to ▇▇▇▇▇
BAY or Spectrum, as appropriate, at the addresses set forth below; (iii)
personal delivery to ▇▇▇▇▇ BAY or Spectrum, as appropriate, at the addresses set
forth below; or (iv) by confirmed facsimile or telecopier transmission to ▇▇▇▇▇
BAY or Spectrum, as appropriate, at the facsimile numbers set forth below and in
such case of facsimile transmission, a copy must also be contemporaneously sent
by one of the methods described in the preceding clause (i), (ii) or (iii) of
this Section 9.05 (it being understood and agreed, however, that such Notice
-------------
shall be deemed received upon receipt of electronic transmission). Any such
Notice shall be deemed given upon receipt thereof, or, in case of any Notice
sent pursuant to clause (i), (ii) or (iii) above, the refusal thereof by the
intended recipient. Notwithstanding the foregoing, in the event any Notice is
sent by overnight delivery or personal delivery and it is received (or delivery
is attempted) during non-business hours (i.e., other than during 8:30 a.m. to
5:30 p.m. [EST/EDT] Monday through Friday, excluding holidays), then such Notice
shall not be deemed to have been received until the next business day. Either
party may designate a different address for receiving Notices hereunder by
notice to the other party in accordance with the provisions of this Section
-------
9.05. Further notwithstanding the foregoing, if any Notice is sent by either
party hereto to the other and such Notice has not been sent in compliance with
this Section 9.05 but has in fact actually been received by the other party,
-------------
then such Notice shall be deemed to have been duly given by the sending party
and received by the recipient party effective as of such date of actual receipt.
IF TO ▇▇▇▇▇ BAY OR SSS:
▇▇▇▇▇▇ GOTTBETTER & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO SPECTRUM:
SPECTRUM SCIENCES & SOFTWARE, INC.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Notwithstanding anything in this Section to the contrary, any Notice delivered
in accordance herewith to the last designated address of any person or party to
which a Notice may be or is required to be delivered pursuant to this Agreement
shall not be deemed ineffective if actual delivery cannot be made due to a
change of address of the person or party to which the Notice is directed or the
failure or refusal of such person or party to accept delivery of the Notice.
54
9.06 GOVERNING LAW AND WAIVER OF JURY TRIAL. this agreement is made in
--------------------------------------
and shall be governed by the laws of the state of new york, and any legal action
relating to or arising out of this agreement shall be resolved only in federal
or state court located in new york county. the parties hereto expressly waive
any claim or defense therein that such courts constitute an inconvenient forum.
the parties hereto expressly waive all rights to trial by jury regarding all
matters or disputes arising out of or related to this agreement. in no event
shall any party be liable for any indirect, special, exemplary, punitive or
consequential damages arising out of or relating to this agreement.
9.07 REPRESENTATIONS AND WARRANTIES. Each of the representations and
--------------------------------
warranties of each of the parties to this Agreement shall be deemed to have been
made and shall be deemed to constitute the making of such representations and
warranties, again at and as of the Closing by and on behalf of the party on
behalf of whom such certificates are delivered.
9.08 AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
------------------------------------------
(including the exhibits and schedules attached hereto) and such other documents
expressly intended by the terms hereof to be delivered subsequent to the
execution of this Agreement, contains the entire understanding of the parties in
respect of its subject matter and supersedes all prior agreements and
understandings (oral or written) between or among the parties with respect to
such subject matter. The parties agree that prior drafts of this Agreement
shall not be deemed to provide any evidence as to the meaning of any provision
hereof or the intent of the parties with respect thereto. The exhibits and
schedules constitute a part hereof as though set forth in full above. This
Agreement is not intended to confer upon any person, other than the parties
hereto, any rights or remedies hereunder.
9.09 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
----------------------------
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder. The
rights and obligations of this Agreement may not be assigned except by mutual
written consent of the parties hereto.
9.10 SEVERABILITY. If any clause or provision of this Agreement is
------------
illegal, invalid or unenforceable under applicable present or future Laws
effective during the Term, the remainder of this Agreement shall not be
affected. In lieu of each clause or provision of this Agreement that is
illegal, invalid or unenforceable, there shall be added as a part of this
Agreement a clause or provision as nearly identical as may be possible and as
may be legal, valid and enforceable. In the event any clause or provision of
this Agreement is illegal, invalid or unenforceable as aforesaid and the effect
of such illegality, invalidity or unenforceability is that either party no
longer has the substantial benefit of its bargain under this Agreement and a
clause or provision as nearly identical as may be possible cannot be added,
then, in such event, such party may in its discretion cancel and terminate this
Agreement provided such party exercises such right within a reasonable time
after such occurrence. The amendment or modification to this Agreement pursuant
to this Section 9.10 shall require the consent of all parties hereto prior to
-------------
the effectiveness of any such amendment or modification.
9.11 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument. A telecopy signature of any party shall
be considered to have the same binding legal effect as an original signature.
9.12 ATTORNEYS' FEES. Notwithstanding the foregoing, in the event
----------------
either party employs an attorney or brings an action against the other arising
out of the terms of this Agreement, the prevailing party (whether such
prevailing party has been awarded a money judgment or not) shall receive from
the other party (and the other party shall be obligated to pay) the prevailing
party's reasonable legal fees and expenses (including the fees and expenses of
55
experts and para-professionals), whether such fees and expenses are incurred
before, during or after any trial, re-trial, re-hearing, mediation or
arbitration, administrative proceedings, appeals or bankruptcy or insolvency
proceedings, and irrespective of whether the prevailing party would have been
entitled to such fees and expenses under applicable law in the absence of this
Section. Without limiting the generality of the foregoing, the term "EXPENSES"
--------
shall include expert witness fees, bonds, filing fees, administrative fees,
transcriptions, depositions or proceedings, costs of discovery and travel costs.
The term "PREVAILING PARTY" as used in this Section shall mean that party whose
----------------
positions substantially prevail in such action or proceeding, and any action or
proceeding brought by either party against the other as contemplated in this
Section may include a plea or request for judicial determination of the
"prevailing party" within the meaning of this Section. In the event neither
party substantially prevails in its positions in such action or proceeding, the
court may rule that neither party has so substantially prevailed, in which event
each party shall be responsible for its own fees and expenses in connection
therewith. In addition, the fees and expenses for the services of "in-house"
counsel (if any) shall be included within the prevailing party's fees and
expenses as fully as if such in-house legal services were provided by an
"outside" attorney or law firm as contemplated within this Section, irrespective
of whether "outside" legal services are obtained in connection with such matter.
The fees and expenses on the part of in-house counsel as aforesaid shall be
determined based upon the prevailing hourly rates, fees and expenses for an
attorney(s) of comparable experience in the central, Florida area.
9.13 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to
------------------------
herein are attached hereto and incorporated herein by this reference.
Disclosure of a specific item in any one Schedule shall be deemed restricted
only to the Section to which such disclosure specifically relates except where
(i) there is an explicit cross-reference to another Schedule, and (ii) ▇▇▇▇▇ BAY
could reasonably be expected to ascertain the scope of the modification to a
representation intended by such cross-reference.
9.14 CONSTRUCTION. The parties agree and acknowledge that they have
------------
jointly participated in the negotiation and drafting of this Agreement and that
this Agreement has been fully reviewed and negotiated by the parties and their
respective counsel. In the event of an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumptions or burdens of proof shall arise favoring any
party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
9.15 RULES OF INTERPRETATION. Except as otherwise expressly provided
-------------------------
in this Agreement, the following rules shall apply hereto: (i) the singular
includes the plural and plural includes the singular; (ii) "or" is not exclusive
and "include" and "including" are not limiting; (iii) a reference to any
agreement or other contract includes any permitted supplements and amendments;
(iv) a reference in this Agreement to a section or exhibit is a reference to a
section or exhibit within or attached to this Agreement unless otherwise
expressly provided; (v) a reference to a section or paragraph in this Agreement
shall, unless the context clearly indicates to the contrary, refer to all
sub-parts or sub-components of any said section or paragraph; (vi) words such as
"hereunder", "hereto", "hereof", and "herein", and other words of like import
shall, unless the context clearly indicates to the contrary, refer to the whole
of this Agreement and not to any particular clause hereof; (vii) the headings of
the articles or sections and the ordering or position thereof are for
convenience only and shall not in any way be deemed to affect the meaning of
this Agreement; (viii) a reference in this Agreement to a "person" or "party"
(whether in the singular or the plural) shall (unless otherwise indicated
herein) include both natural persons and unnatural persons (including, but not
limited to, corporations, partnerships, limited liability companies or
partnerships, trusts, etc.); (ix) all accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with GAAP; and (x)
any reference in this Agreement to a "BUSINESS DAY" shall include each Monday,
------------
Tuesday, Wednesday, Thursday and Friday that is not a day on which national
banks in Orlando, Florida are closed.
9.16 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
------------------
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other except as may be specifically limited herein.
56
EXECUTED as of the date first written above.
▇▇▇▇▇ BAY INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, PRESIDENT
SSS ACQUISITION CO.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, PRESIDENT
SPECTRUM SCIENCES & SOFTWARE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, PRESIDENT
AND CHIEF EXECUTIVE
OFFICER
57
Schedule 2.08 Spectrum - Shares Issuable to Spectrum Stockholders
58
Schedule 4.01 Spectrum - Jurisdictions and Good Standings
59
Schedule 4.03 Spectrum Capital Structure Prior to Closing the Merger
60
Schedule 4.05 Spectrum - Consents and Defaults
61
Schedule 4.07 Spectrum - Number of Employees and Employment
Classification
62
Schedule 4.08(a) Spectrum - Financial Statement
63
Schedule 4.08(b) Spectrum - Liabilities
64
Schedule 4.08(c) Spectrum - Accounts Receivable
65
Schedule 4.08(d) Spectrum - Inventory
66
Schedule 4.09 Spectrum - Certain Changes Since Last Balance Sheet
67
Schedule 4.10 Spectrum - Compliance with Laws
68
Schedule 4.11 Spectrum Litigation
69
Schedule 4.12 Spectrum - Real Property
70
Schedule 4.14 Spectrum - Contracts and Commitments
71
Schedule 4.15 Spectrum Intangible Rights
72
Schedule 4.16 Spectrum - Permits
73
Schedule 4.17 Spectrum - Financial Institutions and Authorized
Personnel
74
Schedule 4.18 Spectrum - Principal Suppliers
75
Schedule 4.19 Spectrum - Transactions with Affiliates
76
Schedule 4.20 Spectrum - Tax Matters
77
SCHEDULE 7.02(C) ▇▇▇▇▇ BAY - CERTAIN CHANGES SINCE LAST BALANCE SHEET
78