EXHIBIT NUMBER 2
EXECUTION COPY
MERGER AGREEMENT
AND
PLAN OF REORGANIZATION
by and among
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.,
▇▇▇▇▇▇▇▇▇▇.▇▇▇ ACQUISITION CORP.,
WIZARDWORLD, INC.
and
THE PREFERRED STOCKHOLDERS OF WIZARDWORLD, INC.
Dated as of December 3, 2001
TABLE OF CONTENTS
ARTICLE I THE MERGER...................................................................................2
1.1. The Merger; Closing.....................................................................2
1.2. Effective Time..........................................................................2
1.3. Effect of the Merger....................................................................2
1.4. Certificate of Incorporation and Bylaws.................................................2
1.5. Directors and Officers..................................................................2
1.6. Conversion of Securities; Merger Consideration..........................................3
1.7. Lost, Stolen, or Destroyed Certificates.................................................4
1.8. Dissenting Shares.......................................................................4
1.9. Stock Transfer Books....................................................................4
1.10. Put Right...............................................................................4
1.11. Options; Warrants.......................................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PREFERRED STOCKHOLDERS................5
2.1. Organization, Charter Documents, Etc. of the Company....................................5
2.2. Ownership Interests.....................................................................5
2.3. Corporate Power.........................................................................5
2.4. Authorization...........................................................................6
2.5. Capitalization..........................................................................6
2.6. Financial Statements....................................................................7
2.7. Absence of Undisclosed Liabilities......................................................7
2.8. Absence of Adverse Changes..............................................................7
2.9. Title to and Sufficiency of Assets......................................................9
2.10. Taxes...................................................................................9
2.11. Contracts..............................................................................10
2.12. Accounts...............................................................................12
2.13. Real Property..........................................................................12
2.14. Personal Property......................................................................12
2.15. Intellectual Property..................................................................12
2.16. Insurance..............................................................................15
2.17. Accounts Payable.......................................................................15
2.18. Bank Accounts..........................................................................15
2.19. Legal Proceedings......................................................................15
2.20. Permits................................................................................16
2.21. Compliance with Laws...................................................................16
2.22. Preferred Stockholder Authority........................................................16
2.23. Illegal Discrimination.................................................................16
2.24. Labor..................................................................................16
2.25. Employment Contracts...................................................................17
2.26. Gifts..................................................................................17
2.27. Related Parties........................................................................18
2.28. Environmental Matters..................................................................18
2.29. Disclosure.............................................................................18
2.30. Brokers' Fees and Commissions..........................................................19
2.31. Investor Representations and Warranties................................................19
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...................................20
3.1. Organization and Qualification; Subsidiaries...........................................20
3.2. Authority Relative to this Agreement...................................................20
3.3. No Violation...........................................................................20
3.4. Consents and Approvals.................................................................21
3.5. Parent Reports.........................................................................21
3.6. Brokers' Fees and Commissions..........................................................21
3.7. Disclosure.............................................................................21
3.8. Put Shares.............................................................................21
3.9. Parent Actions.........................................................................22
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER.....................................................22
4.1. Conduct of Business by the Company Pending the Merger..................................22
4.2. No Solicitation........................................................................24
ARTICLE V ADDITIONAL AGREEMENTS.......................................................................25
5.1. Access; Confidentiality................................................................25
5.2. Consents, Approvals....................................................................26
5.3. Notification of Certain Matters........................................................26
5.4. Further Assurances.....................................................................26
5.5. Public Announcements...................................................................27
5.6. Conveyance Taxes.......................................................................27
5.7. Actions by Parent and Merger Sub.......................................................27
5.8. Stockholder Approvals..................................................................27
5.9. Piggyback Registration Rights..........................................................28
5.10. [Omitted]..............................................................................28
5.11. Legends................................................................................28
ARTICLE VI CONDITIONS TO THE MERGER...................................................................29
6.1. Conditions to Obligation of Each Party to Effect the Merger............................29
6.2. Additional Conditions to Obligations of Parent and Merger Sub..........................29
6.3. Additional Conditions to Obligation of the Company.....................................31
ARTICLE VII TERMINATION...............................................................................32
7.1. Abandonment............................................................................32
7.2. Termination............................................................................32
7.3. Effect of Termination..................................................................33
ARTICLE VIII INDEMNIFICATION..........................................................................33
8.1. Survival...............................................................................33
8.2. Indemnification of Parent..............................................................33
8.3. Indemnification of Company Stockholders................................................34
8.4. Indemnification Cap....................................................................34
8.5. Indemnification Procedure for Third-Party Claims Against Indemnified Parties...........34
8.6. Notice of Indemnified Party Claims.....................................................36
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ARTICLE IX GENERAL PROVISIONS.........................................................................36
9.1. Notices................................................................................36
9.2. Certain Definitions....................................................................38
9.3. Amendment..............................................................................39
9.4. Waiver.................................................................................39
9.5. Headings, Terminology..................................................................40
9.6. Severability...........................................................................40
9.7. Entire Agreement.......................................................................40
9.8. Assignment.............................................................................40
9.9. Parties in Interest....................................................................40
9.10. Governing Law..........................................................................40
9.11. Counterparts...........................................................................40
9.12. Fees and Expenses......................................................................41
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COMPANY DISCLOSURE SCHEDULES
Schedule 2.1 (b) Qualification
Schedule 2.2 Ownership Interests
Schedule 2.3 Corporate Power
Schedule 2.5(b) Capitalization-Options
Schedule 2.5(c) Capitalization-Warrants
Schedule 2.5(d) Capitalization-Stock Rights
Schedule 2.6 October 31, 2001 Financial Statements
Schedule 2.7 Absence of Undisclosed Liabilities
Schedule 2.8 Absence of Adverse Changes
Schedule 2.9 Liens
Schedule 2.10 Tax Returns
Schedule 2.11 Material Contracts
Schedule 2.12 Accounts Receivable
Schedule 2.13 Real Property
Schedule 2.14 Personal Property
Schedule 2.15(a) Intellectual Property
Schedule 2.15(b) Patents
Schedule 2.15(c) License Agreements
Schedule 2.15(e) Nondisclosure Agreements
Schedule 2.15(g) Software Programs
Schedule 2.16 Insurance
Schedule 2.17 Accounts Payable
Schedule 2.18 Bank Accounts
Schedule 2.19 Litigation
Schedule 2.23 Illegal Discrimination
Schedule 2.24 Labor
Schedule 2.25 Employment Contracts
Schedule 2.27 Related Parties
Schedule 2.30 Brokers' Fees
Schedule 3.4 Consents and Approvals
Schedule 4.1(d) Dividends
Schedule 6.2(h) Allocation Schedule
EXHIBITS
Exhibit A - Certificate of Merger
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MERGER AGREEMENT
AND
PLAN OF REORGANIZATION
This MERGER AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement") is made as of December 3, 2001, by and among ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.,
a Nevada corporation ("Parent"), ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Acquisition Corp., a newly
formed Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), WizardWorld, Inc., a Delaware corporation (the "Company") and the holders
of the Company Preferred Stock (as hereinafter defined) signatory hereto (the
"Preferred Stockholders").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Merger Sub, and
the Company have each determined that it is advisable and in the best interests
of their respective shareholders for Parent to enter into a strategic business
combination with the Company by effecting the merger of Merger Sub with and into
the Company (the "Merger") in accordance with the applicable provisions of the
Delaware General Corporation Law (the "Delaware GCL") and upon the terms and
subject to the conditions set forth herein; and
WHEREAS, pursuant to the Merger, each issued and outstanding
share of common stock of the Company, par value $0.001 per share ("Company
Common Stock") shall be cancelled, and each share of Series A Convertible
Preferred Stock, par value $0.01 per share ("Company Preferred Stock") shall be
converted into the right to receive a portion of the Merger Consideration (as
defined in Section 1.6), and each issued and outstanding share of common stock
of Merger Sub shall be converted into one share of common stock of the
corporation surviving the Merger, all upon the terms and subject to the
conditions set forth herein;
WHEREAS, the parties hereto desire to accomplish the Merger in
a manner that will cause it to qualify as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and intend that this Merger Agreement and Plan of Reorganization shall
constitute a "plan of reorganization" within the meaning of Section 354 of the
Code.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger; Closing.(a) The Merger. At the Effective Time (as
defined in Section 1.2), and subject to and upon the terms and conditions of
this Agreement and in accordance with the Delaware GCL, Merger Sub shall be
merged with and into the Company, the separate corporate existence of Merger Sub
shall cease upon the filing of a Certificate of Merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware pursuant to the
Delaware GCL, and the Company shall continue as the surviving corporation, being
the successor to all the property, rights, powers, privileges, liabilities, and
obligations of both Merger Sub and the Company. The Company as the surviving
corporation after the Merger is hereinafter referred to as the "Surviving
Company."
(b) The Closing. The closing of the Merger (the "Closing") shall take
place at a time and on a date to be specified by the parties, which shall be no
later than three (3) days after satisfaction or waiver of each of the conditions
set forth in Article VI, unless another time or date is agreed to in writing by
the parties hereto (the "Closing Date"). The Closing will be held at the offices
of [to be inserted], unless another place is agreed to in writing by the parties
hereto.
1.2. Effective Time. Simultaneous with the Closing, the parties hereto
shall cause the Merger to be consummated by filing all necessary documentation,
including a Certificate of Merger, with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with, the
relevant provisions of the Delaware GCL (the time of such filing, or such later
date as may be set forth in the Certificate of Merger, being the "Effective
Time").
1.3. Effect of the Merger. The Merger shall have the effects set forth
in Section 259 of the Delaware GCL.
1.4. Certificate of Incorporation and Bylaws. At the Effective Time,
the certificate of incorporation and bylaws of the Company as in effect
immediately prior to the Effective Time shall be the certificate of
incorporation and bylaws of the Surviving Company (the "Certificate of
Incorporation" and "Bylaws") until thereafter changed or amended as provided
therein or in the Delaware GCL.
1.5. Directors and Officers. At the Effective Time:
(a) Directors. Each director of Merger Sub immediately prior to the
Effective Time shall be an initial director of the Surviving Company, to hold
office in accordance with the Certificate of Incorporation and Bylaws, until his
or her successor shall have been duly elected and shall have qualified or until
his or her earlier death or resignation or removal in accordance with the
Certificate of Incorporation and Bylaws.
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(b) Officers. Each officer of Merger Sub immediately prior to the
Effective Time shall hold the identical office in the Surviving Company until
his or her successor shall have been duly elected or appointed and shall have
qualified or until his or her earlier death or resignation or removal in
accordance with the Certificate of Incorporation and Bylaws.
1.6. Conversion of Securities; Merger Consideration. As of the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any share of capital stock of the Company:
(a) Cancellation of Certain Shares. Each share of capital stock of the
Company held in treasury of the Company shall automatically be cancelled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(b) Conversion of Company Preferred Stock. Each issued and outstanding
share of Company Preferred Stock, other than Dissenting Shares (as defined in
Section 1.8), if any, shall be converted into the right to receive .08121 shares
of restricted common stock, par value $.001 of Parent (the "Parent Common
Stock") including the Put Right defined in Section 1.10 below (the "Put
Shares"). Each of the Preferred Stockholders hereby waives their right to any
and all accrued dividends.
(c) Cancellation of Company Common Stock. Each issued and outstanding
share of Company Common Stock, shall be cancelled.
(d) Common Stock of Merger Sub. Each issued and outstanding share of
common stock of Merger Sub shall be converted into and exchanged for one validly
issued, fully paid and nonassessable share of common stock of the Surviving
Company. Each certificate of Merger Sub evidencing ownership of any common stock
of Merger Sub shall evidence, from and after the Effective Time, ownership of
such shares of the Surviving Company.
(e) Surrender of Certificates. Each holder of an outstanding
certificate representing Company Preferred Stock ("Certificate") immediately
prior to the Effective Time shall have the right to surrender each Certificate
to Parent (or at Parent's option, an exchange agent to be appointed by Parent),
and receive at the Closing -*-in exchange for all Certificates held by such
holder certificates evidencing the Put Shares, if any, representing such
holder's Merger Consideration.
(f) No Fractional Shares. Notwithstanding anything herein to the
contrary, no certificate evidencing fractional Put Shares shall be issued to any
Company shareholder or refunded to Parent, and such fractional share interests
will not entitle the owner thereof to vote or to have any other rights as a
stockholder of Parent. In the event that the number of shares represented by any
certificate for Put Shares to be issued hereunder would include a fraction of a
share, such certificate shall be issued for that number of shares rounded up to
the nearest whole share.
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1.7. Lost, Stolen, or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen, or destroyed, upon the making of an
affidavit of that fact and customary indemnification against loss by the
stockholder of the Company claiming such Certificate to be lost, stolen, or
destroyed, Parent will deliver in exchange for such lost, stolen, or destroyed
Certificate Put Shares in respect thereof pursuant to, and in compliance with,
Section 1.6.
1.8. Dissenting Shares. If appraisal rights are available under the
Delaware GCL to holders of shares of capital stock of the Company in connection
with the Merger, any issued and outstanding share of capital stock of the
Company which has not been voted upon for approval of the Merger and with
respect to which appraisal rights shall have been properly demanded in
accordance with Section 262 of the Delaware GCL (the "Dissenting Shares") shall
not be converted into the right to receive the Put Shares and the holders
thereof shall have only such rights as are provided in Subchapter IX of the
Delaware GCL unless and until the holder of such shares of capital stock of the
Company withdraws his or her demand for such appraisal rights or otherwise loses
his or her appraisal rights. If a holder of Dissenting Shares shall properly
withdraw his or her demand for appraisal rights or shall otherwise lose his or
her appraisal rights, then, as of the Effective Time or the occurrence of such
event, whichever last occurs, such Dissenting Shares shall cease to be
Dissenting Shares and shall be cancelled and retired and shall cease to exist.
The Company shall give Parent (i) prompt written notice of any dissenter's
demands for appraisal or payment, attempted withdrawals of such demands and any
other instruments served pursuant to applicable law received by the Company
relating to dissenter's rights; and (ii) the opportunity to direct all
negotiations with respect to dissenters under the Delaware GCL. The Company
shall not, without the prior written consent of the Parent, voluntarily make any
payment with respect to any demands for payment by any holder of Dissenting
Shares, offer to settle or settle any such demands or approve any withdrawal of
such demands.
1.9. Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, the Put Shares delivered in accordance
with the terms hereof shall be deemed to have been paid in full satisfaction of
all rights pertaining to the capital stock of the Company and there shall be no
further registration of transfers on the records of the Company or the Surviving
Company of any such capital stock.
1.10. Put Right. Subject to the limitations hereinafter set forth, each
holder of Put Shares shall have the right (the "Put Right"), at such holder's
sole option, exercisable one time by such holder upon written notice from such
holder given no more than twenty (20) business days following one year from the
Effective Date, (the "Put Event"), to put all or any portion of such holder's
Put Shares to Parent and Parent shall be obligated to re-purchase such shares at
$2.60 per Put Share within twenty (20) business days of such notice. The Put
Right is solely transferable to each holder's respective affiliates, limited
partners or by will or the laws of descent, as applicable. The Put Right under
this Section 1.10 will expire twenty (20) business days following the Put Event.
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1.11. Options; Warrants. At the Effective Time, each option, warrant or
other right granted by the Company to purchase capital stock of the Company
which is outstanding and unexercised immediately prior thereto shall cease to
represent the right to acquire capital stock of the Company and shall be
cancelled.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE PREFERRED STOCKHOLDERS
The Company hereby represents and warrants to Parent and
Merger Sub, as of the date hereof (except as to any representation or warranty
which specifically relates to another date), as follows: Each Preferred
Stockholder, severally and solely as to such Preferred Stockholders actual
knowledge and solely with respect to Sections 2.22 and 2.31 hereby represents
and warrants to Parent and Merger Sub as of the date hereof except as to any
representations or warranty which specifically relates to another date, the
following except that the Company shall not make any representations regarding
Sections 2.22 and 2.31 hereof.
2.1. Organization, Charter Documents, Etc. of the Company. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as and in the places where such properties are now owned, leased or operated or
such business is now being conducted. The Company is duly qualified to do
business and is in good standing in the jurisdictions set forth on Schedule
2.1(b) of the disclosure schedule attached hereto and made a part hereof (the
"Disclosure Schedule"), which are the only jurisdictions in which the failure to
so qualify would have a Company Material Adverse Effect. To the knowledge of the
Company, it has taken no action and has not failed to take any action, which
action or failure would have a material adverse effect on Parent's ability to
conduct the Company's business in the manner heretofore conducted.
2.2. Ownership Interests. Except as set forth on Schedule 2.2 of the
Disclosure Schedule, the Company does not own any Securities in any Person.
2.3. Corporate Power. The Company has all requisite power and authority
to enter into this Agreement and to assume and perform its obligations
hereunder. The execution and delivery by the Company of this Agreement and the
performance by the Company of its obligations hereunder have been or will prior
to the Effective Time have been duly and validly authorized by all necessary
corporate action of the Company and this Agreement constitutes the valid and
legally binding obligation of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' and contracting parties' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained herein may be limited by applicable federal or state
securities laws and principles of public policy. The execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby, the
fulfillment of the terms, conditions or provisions hereof and the compliance
with the terms, conditions or provisions hereof (i) do not and will not conflict
with, or violate any provision of the Certificate of Incorporation or By-laws of
the Company, and (ii) except as set forth in Schedule 2.3 of the Disclosure
Schedule, do not and will not conflict with, or result in any material breach
of, any material term, condition or provision of, or constitute a default under,
or give rise to any right of termination, modification, cancellation or
acceleration under (whether after the giving of notice or lapse of time or
both), any Material Agreement (as defined in Section 2.11), and (iii) to the
Company's knowledge, will not put the Company in violation of any material
statute, law, rule or regulation applicable to the Company, and (iv) will not
result in the creation or imposition of any Lien upon any material assets of the
Company.
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2.4. Authorization. To the Company's knowledge, no action, approval,
consent or authorization, including, but not limited to, any action, approval,
consent or authorization by, or filing with, any governmental or
quasi-governmental agency, commission, board, bureau or instrumentality or any
Person is necessary or required in connection with the execution and delivery of
this Agreement by the Company, the consummation of the transactions contemplated
hereby or in order to constitute this Agreement as a valid, binding and
enforceable obligation of the Company in accordance with its terms.
2.5. Capitalization. (a) The authorized capital stock of the Company
consists of (A) 35,000,000 shares of Company Common Stock, of which 11,300,000
shares are issued and outstanding, and no shares are held in the treasury of the
Company; (B) 8,126,334 shares of preferred stock, par value $0.001 per share, of
which 8,126,334 shares have been designated as "Series A Convertible Preferred
Stock", of which 8,126,333 shares are issued and outstanding, and no shares are
held in the treasury of the Company. Such issued and outstanding shares
constitute all of the issued and outstanding shares of capital stock of the
Company. All outstanding capital stock of the Company was issued in compliance
with the registration or qualification provisions of the Securities Act, and all
applicable state securities laws or pursuant to valid exemptions therefrom.
(b) There are issued and outstanding options (vested and nonvested) to
purchase and acquire, in the aggregate, 470,000 shares of Company Common Stock
pursuant to the WizardWorld, Inc. 2,000 Stock Incentive Plan (collectively, the
"Company Options"). Schedule 2.5(b) of the Disclosure Schedule sets forth a list
of (i) all holders of Company Options; and (ii) the corresponding number of
shares of Company Common Stock underlying the Company Options held by each.
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(c) There are issued and outstanding warrants (vested and nonvested) to
purchase and acquire, in the aggregate, 180,000 shares of Company Common Stock
(the "Company Warrants"). Schedule 2.5(c) of the Disclosure Schedule sets forth
a list of (i) all holders of Company Warrants; and (ii) the corresponding number
of shares of Company Common Stock underlying the Company Warrants.
(d) Except for (i) the conversion privileges of the Company Preferred
Stock, (ii) the Company Options and (iii) the Company Warrants, or as otherwise
set forth in Schedule 2.5(d) of the Disclosure Schedule, there are no
outstanding Stock Rights.
(e) All of the issued and outstanding shares of Company Common Stock
and Company Preferred Stock are validly issued, fully paid and nonassessable.
There are no dividends declared or accrued, but not paid, in respect of any of
the Company's capital stock.
2.6. Financial Statements. Attached as Schedule 2.6 to the Disclosure
Schedule is the balance sheet of the Company as of October 31, 2001 and the
profit and loss statement of the Company as of October 31, 2001 (collectively,
the "October 31, 2001 Financial Statements"), which have not been audited and
have been prepared in accordance with GAAP consistently applied throughout the
periods indicated, except that the October 31, 2001 Financial Statements may not
contain all or any footnotes required by GAAP. The October 31, 2001 Financial
Statements fairly, completely and accurately present in all material respects
the financial condition of the Company at the dates specified or the results of
its operations for the periods covered, subject to in the case of unaudited
financial statements to normal year-end audit adjustments. The Company has not
made any material changes in its accounting policies used to prepare its
financial statements since October 31, 2001.
2.7. Absence of Undisclosed Liabilities. The Company has no
indebtedness, liabilities or obligations whether accrued, absolute, contingent,
liquidated or unliquidated, and whether due or to become due, which are required
to be reflected on its financial statements under GAAP and which (i) are not
reflected in or reserved against on the October 31, 2001 Financial Statements,
or (ii) did not arise in the ordinary course of business after the date of the
October 31, 2001 Financial Statements, or (iii) are not otherwise disclosed on
Schedule 2.7 of the Disclosure Schedule.
2.8. Absence of Adverse Changes. Except as reflected in Schedule 2.8 of
the Disclosure Schedule, since October 31, 2001 there has been no Company
Material Adverse Effect, and the Company has not:
(a) authorized, issued, sold or converted any Securities of the
Company, or entered into any agreement with respect thereto;
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(b) incurred any damage, destruction or similar loss, whether or not
covered by insurance;
(c) other than in the ordinary course of business, sold, assigned,
transferred or otherwise disposed of any of the Company's tangible or intangible
assets or intellectual properties, including, without limitation, any patent,
trademark, trade name, copyright, license, franchise, design or other intangible
asset or intellectual property right except, pursuant to the Assignment and
License of Rights dated as of the date of this Agreement;
(d) other than in the ordinary course of business, mortgaged, pledged,
granted or suffered to exist any Lien on any of its assets or properties,
tangible or intangible;
(e) other than in the ordinary course of business, waived any rights of
material value or cancelled, discharged, satisfied or paid any Lien, whether
absolute, accrued, contingent or otherwise and whether due or to become due;
(f) incurred any material obligation or liability (absolute or
contingent, liquidated or unliquidated, ▇▇▇▇▇▇ or inchoate), except current
obligations and liabilities incurred in the ordinary course of its business;
(g) other than in the ordinary course of business, leased or effected
any transfer of any of its assets, properties or rights;
(h) other than in the ordinary course of business and consistent with
past practices, entered into, made any amendment of, or terminated any lease,
contract, license or other agreement to which it is a party except, pursuant to
the Assignment and License of Rights dated as of the date of this Agreement;
(i) amended its Certificate of Incorporation or By-laws;
(j) paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement, arrangement or transaction of any
nature with, any of its stockholders, officers or directors or any business or
Person in which any of its stockholders, officers or directors or any affiliate
or "associate" (as such term is defined in the Rules and Regulations of the SEC
promulgated under the Securities Act) of any such Person has any direct or
indirect interest, except for regular compensation paid to the stockholders or
any affiliates of the stockholders who are also employees of the Company;
(k) paid any bonus or similar payment or increased the compensation
payable to any of its directors, officers or employees or became obligated to
increase any such compensation;
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(l) received the resignation of any director, officer or employee;
(m) received notice of any termination of any consulting contract or
similar agreement;
(n) entered into any other material transaction other than in the
ordinary course of business and consistent with past practices, or changed in
any material way its business policies or practices; or
(o) obtained knowledge of any event or circumstance reasonably likely
to result in a Company Material Adverse Effect.
2.9. Title to and Sufficiency of Assets. Except as set forth on
Schedule 2.9 of the Disclosure Schedule, the Company owns outright, and has good
and marketable title to, all of its assets, free and clear of any Lien of any
sort except for such encumbrances and Liens that arise in the ordinary course of
business and do not materially impair its ownership or use of such property or
assets, or as shown on or reserved against on the October 31, 2001 Financial
Statements.
2.10. Taxes. The Company has duly filed all required national, state,
county, local and foreign income, excise, sales, property, withholding, social
security, franchise, license, information returns and other tax returns and
reports required by law to have been filed by the Company, to the date hereof.
Each such return is true, correct and complete in all material respects and the
Company has paid all taxes (including without limitation any customs duties or
related charges) which it is required by law to pay taxing authorities with
respect to all periods prior to the date of the October 31, 2001 Financial
Statements, except those contested in good faith that are listed on Schedule
2.10 of the Disclosure Schedule. The Company has created sufficient reserves or
made provision for all amounts contested in good faith and accrued but not yet
due and payable by it. The Company has no liability for any taxes, assessments,
amounts, interest or penalties of any fiscal nature whatsoever except as
reserved against in the October 31, 2001 Financial Statements and, to the
knowledge of the Company, there is no basis for any additional claim or
assessment other than with respect to liabilities for taxes which may have
accrued in the ordinary course of business since the date of the October 31,
2001 Financial Statements. No government or governmental authority is now
asserting or, to the knowledge of the Company, threatening to assert any
deficiency or assessment for additional taxes or any interest, penalties or
fines with respect to the Company. The Company has not been informed by any
government or governmental authority that it is subject to an audit. Complete
and correct copies of the U.S. federal income tax returns of the Company for the
years ended December 31, 1999 and 2000 have been heretofore delivered to Parent
or its accountants. The Company has no liability for, and to the Company's
knowledge there is no basis for any claim or assessment for, any taxes,
assessments, amounts, interest or penalties arising out of or relating to any
determination that any consultant to the Company should be deemed an employee of
the Company.
9
2.11. Contracts. Except as set forth on Schedule 2.11 of the Disclosure
Schedule (the "Material Agreements"), complete and correct copies of each of
which have been heretofore delivered to Parent), the Company is not a party to,
and has no:
(a) sales, advertising, license (other than licenses for
"off-the-shelf" software licensed to the Company), franchise, distribution,
dealer, agency, manufacturer's representative, or similar agreement, or any
other contract that involves the payment of a commission;
(b) pension, profit-sharing, bonus, stock purchase, stock option,
retirement, severance, hospitalization, accident, insurance or other similar
plan, arrangement or agreement involving benefits to current or former
employees;
(c) contract or commitment for the employment of any employee or
consultant or any commitment for the payment of any severance or termination pay
(including, without limitation, change of control or "golden parachute"
provisions);
(d) collective bargaining agreement or other contract with any labor
union;
(e) material contract or commitment for the purchase by the Company of
services, materials, supplies, merchandise, inventory or equipment from any
other Person;
(f) material contract or commitment for the sale by the Company of any
of its services, products or assets to any other Person;
(g) mortgage, indenture, promissory note, loan agreement, guaranty or
other contract or commitment for the borrowing of money or for a line or letter
of credit;
(h) contract or commitment with any stockholder or any current or
former director, officer or employee of the Company which will be in effect on
the Effective Date;
(i) material contract or commitment with any government or governmental
department, agency, bureau or instrumentality thereof;
(j) contract pursuant to which the right of the Company to compete with
any other Person in the conduct of business anywhere in the world is restrained
or restricted for any reason or in any way;
(k) material contract or commitment guaranteeing the performance,
liabilities or obligations of any Person;
10
(l) contract which provides for the indemnification of any officer,
director, employee or agent of the Company or by the Company;
(m) material contract or commitment for capital improvements or
expenditures or with any contractor or subcontractor;
(n) contract creating or relating to any partnership or joint venture
or any sharing of revenues, profits, losses, costs or liabilities with any
Person other than the Company;
(o) material contract or commitment for charitable contributions;
(p) lease or other agreement or commitment pursuant to which the
Company is a lessee of, or holds or operates, any real property, machinery,
equipment, motor vehicles, office furniture, fixtures or similar personal
property owned by any third party;
(q) contract relating to the Intellectual Property or Licensed
Intellectual Property (as those terms are defined below) (except for licenses
for "off-the-shelf" software licensed to the Company); or
(r) other material contract or commitment, whether or not in the
ordinary course of business.
For purposes of this Section 2.11, Material Agreements shall
include agreements requiring payments over the term thereof aggregating in
excess of $15,000, or performance of services or sale of products for more than
one year (including any periods covered by any options to renew by any other
Person) unless such agreement can be terminated without liability to the Company
on not more than ninety days written notice.
Except as set forth in Schedule 2.11 of the Disclosure
Schedule, (i) each of the Material Agreements is in full force and effect and,
to the knowledge of the Company, is enforceable against the other parties
thereto in accordance with its terms, (ii) to the knowledge of the Company,
neither the Company nor any other party thereto is in default thereunder and no
claim of default by any party has been made or is now pending, and (iii) to the
knowledge of the Company, no event exists which, with or without the lapse of
time or the giving of notice, or both, would constitute a breach or default,
cause acceleration of any obligation, would permit the termination or excuse the
performance by any party thereto.
The Company possesses or has adequate contractual arrangements
required to secure all Intellectual Property, personnel and other resources
necessary to perform fully each Material Agreement in accordance with its terms,
without incurring costs materially in excess of the compensation to be received
by the Company for such performance.
11
2.12. Accounts. Except as set forth in Schedule 2.12 of the Disclosure
Schedule, each account receivable reflected on the October 31, 2001 Financial
Statements constitutes a bona fide receivable resulting from a bona fide sale to
a customer in the ordinary course of business. The books and records of the
Company state correctly each account receivable of the Company and the balance
due thereon. To the knowledge of the Company, no defenses, counterclaims,
offsets, refusals to pay or other rights of setoff against any such accounts
receivable have been asserted or threatened. Except as set forth on Schedule
2.12 of the Disclosure Schedule or to the extent of appropriate reserves and
allowances which the Company has established specifically for doubtful accounts
(which reserves and allowances are as set forth on the October 31, 2001
Financial Statements), each account receivable existing on the Effective Date
will be paid in full by no later than the 90th day thereafter. Such reserves and
allowances have been established on the basis of historical experience in
accordance with GAAP consistently applied.
2.13. Real Property. The Company owns no real property. Schedule 2.13
of the Disclosure Schedule lists all premises leased in whole or in part by the
Company and all guarantees of any leases given by the Company for any other
Person. Complete and correct copies of all such leases, guarantees of leases and
other documents concerning such agreements and the interests of the Company
therein have been heretofore delivered to Parent. Schedule 2.13 of the
Disclosure Schedule also contains a brief description of all alterations made or
which are planned in any premises of the Company, together with the amounts
budgeted for such alterations. To the knowledge of the Company, no improvement,
fixture or equipment of the Company in or on any such premises, nor the
occupation or leasehold of the Company with respect thereto, is in violation of
any law, including, without limitation, any zoning, building, safety, health or
environmental law, and each of such premises or properties is currently being
used.
2.14. Personal Property. Schedule 2.14 of the Disclosure Schedule lists
(i) all tangible personal property owned by the Company having a book value at
the date hereof in excess of $5,000 per item and (ii) all personal property
having a value in excess of $5,000 owned by a third party which is leased to, or
otherwise used by, the Company, together with a description of the lease or
other agreement relating to the lease, use or operation thereof, including,
without limitation, leases or other agreements relating to the use or operation
of any machinery, equipment, motor vehicles, office furniture or fixtures owned
by any third party (complete and correct copies of which leases or other
agreements have been heretofore delivered to Parent).
2.15. Intellectual Property. (a) Except as set forth on Schedule
2.15(a) of the Disclosure Schedule, the Company has sufficient title and
ownership of all patents, trademarks, trade names, service marks, Internet
domain names, copyrights and any renewal rights therefor, technology, supplier
lists, trade secrets, know-how, computer software programs or applications in
both source and object code form, technical documentation of such software
programs, registrations and applications for any of the foregoing and all other
tangible or intangible proprietary information or materials ("Intellectual
Property") necessary for the Company's business as now conducted.
12
(b) Schedule 2.15(b) of the Disclosure Schedule lists the Company's
patents, patent applications, trademarks, trademark applications, trade names,
service marks, service ▇▇▇▇ applications, Internet domain names, Internet domain
name applications, copyrights and copyright registrations and applications and
other filings and formal actions made or taken pursuant to national, state,
provincial, county, local and foreign laws by the Company to protect its
respective interests in the Intellectual Property.
(c) The Intellectual Property consists solely of items and rights which
are: (i) owned by the Company; (ii) in the public domain; or (iii) rightfully
used by the Company pursuant to a valid license (the "Licensed Intellectual
Property"), the parties, date, term and subject matter of each such license
agreement (each, a "License Agreement") being set forth on Schedule 2.15(c) of
the Disclosure Schedule, except for desk-top office software generally available
at retail.
(d) To the Company's knowledge, the reproduction, manufacturing,
distribution, licensing, sublicensing, sale or any other exercise of rights in
the Intellectual Property, as now used or proposed for use, licensing or sale by
the Company does not infringe any patent, copyright, trade secret, trademark,
service ▇▇▇▇, trade name, firm name, Internet domain name, logo or other
intellectual property or proprietary right of any Person, except where such
infringement would not have a Company Material Adverse Effect. No claims (i)
challenging the validity, effectiveness or, other than with respect to the
Licensed Intellectual Property, ownership by the Company of any of the
Intellectual Property, or (ii) to the effect that the use, distribution,
licensing, sublicensing, sale or any other exercise of rights in any of the
Intellectual Property as now used or proposed for use, licensing, sublicensing
or sale by the Company infringes or will infringe on any intellectual property
or other proprietary right of any Person have been asserted or, to the knowledge
of the Company, are threatened by any Person, nor are there, to the knowledge of
the Company, any valid grounds for any bona fide claim of any such kind. To the
knowledge of the Company, all registered, granted or issued patents, trademarks,
Internet domain names and copyrights held by the Company are enforceable and
subsisting. To the knowledge of the Company, there is no unauthorized use,
infringement or misappropriation of any of the Intellectual Property by any
third party, employee or former employee.
(e) Except as set forth on Schedule 2.15(e) of the Disclosure Schedule,
all personnel, including employees, agents, consultants and contractors, who
have contributed to or participated in the conception and development of the
Intellectual Property on behalf of the Company, have executed nondisclosure
agreements in the form delivered to Purchaser and either (i) have been a party
to an arrangement or agreements with the Company in accordance with applicable
national, state and/or foreign law that has accorded the Company full,
effective, exclusive and original ownership of all tangible and intangible
property thereby arising, or (ii) have executed appropriate instruments of
assignment in favor of the Company as assignee that have conveyed to the Company
effective and exclusive ownership of all tangible and intangible property
thereby arising.
13
(f) Neither the execution nor delivery of this Agreement, or the
performance of the Company's obligations hereunder, will, to the Company's
knowledge, conflict with or result in a breach of any license, sublicense,
agreement or instrument to which the Company is a party or otherwise bound,
except as would not have a Company Material Adverse Effect. Neither the
execution and delivery of this Agreement, nor the performance of the Company's
obligations hereunder, will, to the Company's knowledge, cause the diminution,
termination or forfeiture of any of the Intellectual Property.
(g) Schedule 2.15(g) of the Disclosure Schedule contains a true and
complete list of all software programs comprising Intellectual Property of the
Company (the "Software Programs"). The Company has the right to license or owns
full and unencumbered right and good, valid and marketable title to the Software
Programs free and clear of all Liens. All unexpired representations and
warranties made or given by the Company to any of its respective customers
respecting any of the Software Programs or its respective Intellectual Property
are true and correct in all material respects.
(h) The source code and system documentation relating to the Software
Programs (i) have at all times been maintained in strict confidence, (ii) have
been disclosed by the Company only to employees who have a "need to know" the
contents thereof in connection with the performance of their duties to the
Company and who have executed nondisclosure agreements, (iii) have not been
disclosed to any third Person not bound by duty to keep the disclosed
information confidential, and (iv) no copies of the Software Programs have been
made and given to any Third Party.
(i) All license agreements permit the Company or a third Person to make
all modifications, bypasses, de-bugging, work-arounds, repairs, replacements,
conversions or corrections necessary to permit the components of all Software
Programs to operate compatibly and reliably, in conformance with their
respective specifications.
(j) To the Company's knowledge, no Software Program contains any
"backdoor" or concealed access or any "software locks" or similar undocumented
devices which, upon the occurrence of a certain event, the passage of a certain
amount of time or the taking of any action (or the failure to take any such
action) by or on behalf of the Company or any third Person, will cause any
software, database, or information in any database to be destroyed, erased,
damaged or otherwise rendered inoperable or inaccessible.
14
(k) To the Company's knowledge, no component of any Software Program is
subject to any national, state, provincial, county, local or foreign export
control laws or regulations.
2.16. Insurance. Schedule 2.16 of the Disclosure Schedule lists all
insurance policies of the Company, together with a brief description (including
name of insurer, agent, type of coverage, policy number, annual premium, amount
of coverage, expiration date and any pending claims thereunder) (the "Insurance
Policies"). Each Insurance Policy is valid and enforceable, outstanding and in
full force and effect, and the Company is the sole beneficiary. No Insurance
Policy, or the future proceeds thereof, has been assigned to any other Person.
All premiums and other payments due from the Company under, or on account of,
any such Insurance Policy have been paid. The Company has no knowledge of any
act or fact or failure to act which has or might cause any such Insurance Policy
to be cancelled or terminated. The Company has given notice and presented each
claim under each Insurance Policy and, to its knowledge, taken any other
required or appropriate action with respect thereto in due and timely fashion.
To the Company's knowledge, the coverages and amounts of the Insurance Policies
are consistent with advice obtained from insurance brokers as to the coverages
and amounts of insurance maintained by businesses similar to the business in
which the Company is engaged. Complete and correct copies of each Insurance
Policy have been heretofore delivered to Parent.
2.17. Accounts Payable. All material accounts payable of the Company
are currently within their respective terms, or if not within terms, are not
past due by more than ninety (90) days, except as set forth in Schedule 2.17 of
the Disclosure Schedule.
2.18. Bank Accounts. Schedule 2.18 of the Disclosure Schedule lists the
names and locations of all (i) banks at which the Company has an account or safe
deposit box and (ii) corporate credit cards of the Company, the number of the
accounts and the names of all persons authorized to draw thereon or to have
access thereto.
2.19. Legal Proceedings. Except as set forth in Schedule 2.19 of the
Disclosure Schedule, no action, suit, claim, arbitration, governmental
investigation or proceeding, whether legal or administrative or in mediation or
arbitration, is pending or, to the knowledge of Company, threatened, at law or
in equity, before or by any court or national, state, provincial, county, local,
foreign or other governmental department, commission, board, bureau, agency or
instrumentality, (i) against or directly affecting the Company or any of its
assets or its business, operations, financial condition or prospects or (ii) in
which an unfavorable judgment, decree or order would restrain, prohibit,
invalidate, set aside, rescind, prevent or make unlawful this Agreement or the
carrying out of this Agreement or the transactions contemplated hereby; nor does
the Company have knowledge of any basis for any such action, suit, claim,
investigation or proceeding. There is no pending action, suit or proceeding
which has been brought by or on behalf of the Company in any court, before any
governmental agency or arbitration tribunal. The Company is not in default with
respect to any order, writ, information or decree of any court or any national
state, provincial, county, local, foreign or other governmental department,
bureau, agency or instrumentality.
15
2.20. Permits. The Company has all permits, licenses, orders and
approvals of all national, state, provincial, county, local or foreign
governmental regulatory bodies required for it to conduct its business as
presently conducted, the lack of which would cause a Company Material Adverse
Effect. All such permits, licenses, orders and approvals are in full force and
effect and no suspension or cancellation of any of them is, to the knowledge of
the Company, pending or threatened. None of such permits, licenses, orders or
approvals will be materially and adversely affected by the consummation of the
transactions contemplated by this Agreement.
2.21. Compliance with Laws. To the Company's knowledge, the Company is
in compliance in all material respects with each law, rule and regulation
applicable to its business including, without limitation, laws, rules and
regulations respecting occupational safety, environmental protection and
employment practices.
2.22. Preferred Stockholder Authority. Each of the Preferred
Stockholders has full capacity, right, power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
2.23. Illegal Discrimination. Except as set forth in Schedule 2.23 of
the Disclosure Schedule, no final non-appealable decision has been rendered by
any court or governmental department, commission, board, agency or
instrumentality finding the Company liable in connection with any claim of
sexual, religious, age or racial discrimination or any claim of sexual
harassment which violates any national, state, provincial, county, local or
foreign law or regulation and there is not pending or, to the Company's
knowledge, threatened, any claim with respect to the foregoing in any court or
before any governmental department, commission, board, agency or
instrumentality.
2.24. Labor. The Company is not a party to any representation or labor
contract with any trade union or employee representatives. The Company has not
received any notice from any labor union or group of employees that such union
or group represents or believes or claims it represents or intends to represent
any of the employees of the Company. The Company has not received any notice or
threat of any strike or work interruption by any of its employees. At no time
during the past three (3) years has the Company experienced any threats of
strikes, work stoppages or demands for collective bargaining by any union or
labor organization or any other group or other organization of employees, and
grievances, disputes or controversies with any union or any other group or any
other organization of employees or any pending or threatened court or
arbitration proceedings involving an employment grievance, dispute or
controversy. Except as set forth in Schedule 2.24 of the Disclosure Schedule:
(i) the Company is not delinquent in payments to any of its employees for any
wages, salaries, commissions, bonuses or other direct compensation for any
services performed by them to the date hereof or amounts required to be
reimbursed to such employees; (ii) in the event of termination of the employment
of any said employees, the Company will not, under any employment contract or
other agreement, be liable to any of said employees for so-called "severance
pay" or any other payments; (iii) to the Company's knowledge, the Company is in
compliance with all national, state, county, local and foreign laws and
regulations respecting labor, employment and wages and hours; and (iv) there is
no unfair labor practice complaint against the Company pending before the
National Labor Relations Board or any comparable state, local or foreign agency.
16
2.25. Employment Contracts. Schedule 2.25 of the Disclosure Schedule
lists the names and current annual salary, bonus, commission and perquisite
arrangements, written or unwritten, for each director, officer and employee of
the Company. Except as set forth in Schedule 2.25 of the Disclosure Schedule, no
current or former director, officer or employee of the Company or any relative,
associate or agent of such director, officer or employee has any interest in any
property of the Company except as a stockholder, or is a party, directly or
indirectly, to any contract for employment or otherwise or any lease or has
entered into any transaction with the Company, including, without limitation,
any contract for the furnishing of services by, or rental of real or personal
property from or to, or requiring payments to, any such director, officer,
employee, relative, associate or agent. Complete and correct copies of any such
contracts have been heretofore delivered to Parent. Except as set forth in
Schedule 2.25 of the Disclosure Schedule and except with regard to an employment
agreement between the Company and ▇▇▇▇▇ ▇▇▇▇▇▇ as more fully described below,
the Company has not been notified or advised (orally or in writing) that any
employee listed therein intends to terminate his or her employment relationship
with the Company and the Company does not have any contract for the future
employment of any officer or employee not listed in Schedule 2.25 of the
Disclosure Schedule. Upon the Effective Time of the Merger, the employment
agreement by and among the Company and Mr. ▇▇▇▇▇ ▇▇▇▇▇▇ shall be terminated and
any and all accrued compensation and any all benefits as may be provided for
under the employment agreement are hereby cancelled and terminated and Sections
2.06 and 2.07 of said employment agreement shall have no further force or
effect. The transactions contemplated by this Agreement will not result in any
liability for severance pay, termination pay or any "golden parachute" to any
director, officer or employee of the Company, nor will any current or former
directors, officers or employees of the Company be entitled to any payment
solely by reason of such transactions. The Company is not under any obligation
to pay any bonus or similar payment except as described in Schedule 2.11(b) of
the Disclosure Schedule.
2.26. Gifts. Neither the Company, nor any officer, employee or agent of
the Company (nor any Person acting on behalf of any of the foregoing) has since
January 1, 1999, directly or indirectly, given or agreed to give any gift or
similar benefit in any material amount to any customer, supplier, governmental
employee or other Person who is or may be in a position to help or hinder the
Company or assist the Company in connection with any actual or proposed
transaction, which, if not given in the past, might have had an adverse effect
on the business or prospects of the Company, or which, if not continued in the
future, might adversely affect the business or prospects, of the Company, or
which might subject the Company to suit or penalty in any private or
governmental litigation or proceeding.
17
2.27. Related Parties. Except as described in Schedule 2.27 of the
Disclosure Schedule or elsewhere in this Agreement, the Company is not a party
to any contract with or for the benefit of (i) any Person (other than the
Company) owning, beneficially or of record, directly or indirectly, any shares
of or other equity interest in the Company, (ii) any natural Person related by
blood, adoption or marriage to any such party, (iii) any director, officer, or
employee of the Company, or (iv) any Person in which any of the foregoing
parties has, directly or indirectly, at least a ten percent (10%) beneficial
interest (each, a "Related Party"). Without limiting the generality of the
foregoing, no Related Party, directly or indirectly, owns or controls any assets
or properties which are used in the business of the Company and no Related Party
directly or indirectly engages in or has any significant interest in or
connection with any business which is, or has been within the past two years, a
competitor, customer or supplier of the Company or which currently sells or
provides products or services which are similar or related to the products or
services sold or provided in connection with the business of the Company.
2.28. Environmental Matters. To the Company's knowledge, the Company is
in compliance in all material respects with all applicable Environmental Laws
(as defined below), which compliance includes the possession by the Company of
all permits and other governmental authorizations required under applicable
Environmental Laws and the compliance with the terms and conditions thereof. The
Company has not received any written notice or written communication from any
governmental agency, citizens group or Person, that alleges that the Company is
not in compliance with any Environmental Law. To the knowledge of the Company,
no current or prior owner of any property leased or controlled by the Company
has received any written notice or written communication from any governmental
agency, citizens group or Person, that alleges that such current or prior owner,
or the Company, is not in compliance with any Environmental Law. For purposes of
this Agreement, "Environmental Law" means any national, state, provincial,
county, local or foreign legal requirement (whether by statute, law, rule,
executive order, or otherwise) (each, a "Legal Requirement") relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata), including
any Legal Requirement relating to emissions, discharges, releases or threatened
releases, manufacture, storage, processing, distribution, use, treatment,
disposal, transport or handling of chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum or petroleum products, or other substances now or
hereafter regulated by an Environmental Law or otherwise a danger to health or
the environment
2.29. Disclosure. No representation or warranty of the Company or any
Preferred Stockholder contained in this Agreement, and no statement contained in
any document, certificate or schedule furnished or to be furnished by or on
behalf of the Company or any Preferred Stockholder to Parent pursuant to this
Agreement contains or will contain any untrue statement of a fact, or omits or
will omit to state any fact necessary, in light of the circumstances under which
it was or will be made, in order to make the statements herein or therein not
misleading or necessary in order to fully and fairly provide the information
required to be provided in any such document, certificate or schedule.
18
2.30. Brokers' Fees and Commissions. Except as set forth on Schedule
2.30 of the Disclosure Schedule, neither Company nor, to the best knowledge of
Company, any of its shareholders, directors, officers, employees or agents has
employed any investment banker, broker, finder or intermediary, and no fee or
other commission is owed to any such third party in connection with the
transactions contemplated hereby.
2.31. Investor Representations and Warranties. Each of the Preferred
Stockholders, severally and not jointly, hereby further represents and warrants
to Parent and Merger Sub, as of the date hereof, as follows:
(a) Purchase Entirely for Own Account. The Put Shares to be received by
such Preferred Stockholder will be acquired for investment for the Preferred
Stockholder's own account without a view to distribution.
(b) Investment Experience. The Preferred Stockholder is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Put Shares.
The Preferred Stockholder also represents it has not been organized for the
purpose of acquiring the Put Shares.
(c) Accredited Investor. The Preferred Stockholder is an "accredited
investor" within the meaning of SEC Rule 501 of Regulation D, as presently in
effect.
(d) Restricted Securities. The Preferred Stockholder understands that
the Put Shares it is receiving are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from
Parent in a transaction not involving a public offering and that under such laws
and applicable regulations such securities may be resold without registration
under the Securities Act, only in certain limited circumstances. In this
connection, the Preferred Stockholder represents that it is familiar with SEC
Rule 144, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.
(e) Put Right. Until exercise or expiration of the Put Right, no
Preferred Stockholder or will take a short or offsetting position in, or
otherwise engage in hedging activities involving the Common Stock of the Parent.
19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally hereby represent
and warrant to the Company and the Preferred Stockholders as follows:
3.1. Organization and Qualification; Subsidiaries. Each of Parent and
Merger Sub is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its formation and has the
requisite corporate power and authority to carry on its business as it is now
being conducted. Each of Parent and Merger Sub is duly qualified to do business
and is in good standing in the jurisdiction(s) it does business
3.2. Authority Relative to this Agreement. Each of Parent and Merger
Sub has the full corporate power and authority to execute and deliver this
Agreement and to consummate the Merger and the other transactions contemplated
hereby. Other than the consent of the Board of Directors of Parent and of the
Board of Directors and sole shareholder of Merger Sub, no corporate proceeding
on the part of Parent or Merger Sub is necessary to authorize the execution and
delivery of this Agreement or to consummate the Merger and the other
transactions contemplated hereby, which consents have heretofore been obtained.
This Agreement has been duly and validly executed and delivered by each of
Parent and Merger Sub and constitutes the legal, valid and binding obligation of
each of Parent and Merger Sub, enforceable against such respective parties in
accordance with its terms, except to the extent that such enforcement may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights and
remedies generally.
3.3. No Violation. The execution and delivery of this Agreement by
Parent and Merger Sub does not, and the performance of this Agreement and the
consummation of the transactions contemplated hereby by Parent and Merger Sub
will not, (a) conflict with or violate the certificate of incorporation or
bylaws of Parent or Merger Sub, (b) conflict with or violate any laws applicable
to Parent or any subsidiary of Parent or by which any of their respective
properties are bound or affected, or (c) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or impair Parent's or any such subsidiary's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material contract,
or (d) result in the creation of a Lien on any of the properties or assets of
Parent or any subsidiary of Parent pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or any subsidiary of Parent is a party
or by which Parent or any subsidiary of Parent or any of their respective
properties are bound or affected, except in the case of clause (c) for any such
breaches, defaults or other occurrences that could not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
20
3.4. Consents and Approvals. Other than as set forth in Schedule 3.4 of
the Disclosure Schedule, to the best knowledge of Parent, no filing or
registration with, no notice to and no permit, authorization, consent or
approval of any third party or any public or Governmental Authority is necessary
for the consummation by Parent and Merger Sub, as the case may be, of the Merger
and the other transactions contemplated hereby.
3.5. Parent Reports. Parent has timely filed a copy of its Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2000 ("Parent
Report"). The Parent Report, as of its respective date of filing, complied as to
form in all material respects with the published rules and regulations of the
SEC with respect thereto. The Parent Report does not contain any untrue
statement of fact or omit to state any fact necessary, in light of the
circumstances under which it was made, in order to make the statements therein
not misleading. The consolidated financial statements (including, in each case,
any notes thereto) of Parent included in the Parent Report complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto) and fairly
presented in all material respects the consolidated financial position of Parent
and its consolidated subsidiaries as of it date of filing and the consolidated
results of their operations and their consolidated cash flows for the period
then ended.
3.6. Brokers' Fees and Commissions. Neither Parent nor, to the best
knowledge of Parent, any of its shareholders, directors, officers, employees or
agents has employed any investment banker, broker, finder or intermediary, and
no fee or other commission is owed to any such third party in connection with
the transactions contemplated hereby.
3.7. Disclosure. No representation or warranty of Parent or Merger Sub
contained in this Agreement, and no statement contained in any document,
certificate or schedule furnished or to be furnished by or on behalf of Parent
or Merger Sub to the Company and the Preferred Stockholders pursuant to this
Agreement contains or will contain any untrue statement of a fact, or omits or
will omit to state any fact necessary, in light of the circumstances under which
it was or will be made, in order to make the statements herein or therein not
misleading or necessary in order to fully and fairly provide the information
required to be provided in any such document, certificate or schedule.
3.8. Put Shares. All of the Put Shares issuable in exchange for Company
Preferred Stock at the Effective Time in accordance with this Agreement will be
certificated and will be, when so issued, duly authorized, validly issued, fully
paid and nonassessable and free of preemptive rights created by statute,
Parent's certificate of incorporation or bylaws or any agreement to which Parent
is a party or by which Parent is bound and will, when issued, be registered
under the Securities Act and the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and registered or exempt from registration under applicable
Blue Sky laws.
21
3.9. Parent Actions. Neither Parent, Merger Sub, nor any entity
controlled by Parent or Merger Sub, has taken, has agreed to take, or has failed
to take any action within the sole control of Parent, Merger Sub or any entity
controlled by Parent or Merger Sub, or has actual knowledge of any agreement,
plan or other circumstance within the sole control of Parent, Merger Sub, or any
entity controlled by Parent or Merger Sub, that would disqualify the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code. For purposes
hereof, "sole control" means any action, plan, agreement, or circumstance
undertaken by Parent, Merger Sub, or any entity controlled by Parent or Merger
Sub, other than in conjunction with the Company or the Preferred Stockholders.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1. Conduct of Business by the Company Pending the Merger. During the
period between the execution of this Agreement and the earlier of the
termination of this Agreement and the Closing, the Company covenants and agrees
that, unless Parent shall otherwise agree in writing, the Company will conduct
its operations only in the ordinary course of business consistent with past
practice and will use its best efforts to preserve intact the business
organization of the Company, to keep available the services of the present
officers and key employees of the Company, to preserve the goodwill of
customers, suppliers, and all other Persons having business relationships with
the Company, and to pay its obligations to its creditors in the ordinary course
of business consistent with its past practices. Without limiting the generality
of the foregoing, the Company also covenants and agrees that during the same
time period, unless Parent shall otherwise agree in writing, the Company shall
not, directly or indirectly, do any of the following without the prior consent
of Parent:
(a) amend or otherwise change its Certificate of Incorporation or
Bylaws;
(b) issue, sell, pledge, dispose of, or encumber, or authorize the
issuance, sale, pledge, disposition, or encumbrance of, any capital stock of any
class, or any options, warrants, convertible securities, or other rights of any
kind to acquire any capital stock;
(c) sell, pledge, transfer, lease, license, grant, dispose of, or
encumber any assets (except for (i) sale of assets in the ordinary course of
business and in a manner consistent with past practice, (ii) disposition of
obsolete or worthless assets, and (iii) sales of immaterial assets not in excess
of $10,000 in the aggregate);
22
(d) (i) except as set forth in Schedule 4.1(d) of the Disclosure
Schedule, declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock, property, or any combination thereof) in respect of the
Company Common Stock or Company Preferred Stock (or other equity interest); (ii)
split, combine, or reclassify the Company Common Stock or Company Preferred
Stock (or other equity interest), or issue or authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution for shares
any equity securities of the Company; or (iii) amend the terms of, repurchase,
redeem, or otherwise acquire any equity securities of the Company;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any company, corporation, partnership, association, trust,
unincorporated organization, other entity or group or other business
organization or division thereof, (ii) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee, or endorse or otherwise as an
accommodation become responsible for, the obligations of any Person, or make any
loans or advances, except in the ordinary course of business consistent with
past practice; (iii) enter into or amend any material contract or agreement
other than in the ordinary course of business involving an amount equal to or in
excess of $10,000; (iv) authorize any new capital expenditures or purchase of
fixed assets which are, in the aggregate, in excess of $25,000 per month; or (v)
enter into or amend any contract, agreement, commitment, or arrangement to
effect any of the matters prohibited by this Section 4.1(e);
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in salary or wages of employees of
the Company who are not officers of the Company in accordance with past
practices, or grant any severance or termination pay to, or enter into any
employment or severance agreement with any director, officer or other employee
of the Company, or establish, adopt, enter into, or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance, or other plan, agreement, trust, fund, policy, or
arrangement for the benefit of any current or former directors, officers, or
employees, except, in each case, as may be required by law;
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
payments of accounts payable, and collection of accounts receivable) except for
changes which may be required under GAAP;
(h) make any material tax election inconsistent with past practices or
settle or compromise any material federal, state, local, or foreign tax
liability or agree to an extension of a statute of limitations;
23
(i) pay, discharge, or satisfy any claims, liabilities, or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge, or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
the financial statements of the Company or incurred in the ordinary course of
business and consistent with past practice;
(j) waive, release, assign, settle, or compromise any material rights,
claims, or litigation; or.
(k) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (j) above, or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect in any material respect or prevent the Company
from performing or cause the Company not to perform its covenants under this
Agreement in any material respect.
4.2. No Solicitation. The Company shall not, and shall cause the
Company's officers, directors, or employees or any investment banker, financial
advisor, representative, advisor, attorney, or accountant retained by or on
behalf of it to not, initiate, solicit, or encourage (including by way of
furnishing non-public information), or take any other action to facilitate, any
inquiries or the making of any proposal to effect an Alternative Transaction (as
defined below), or enter into discussions, negotiate, or enter into any
agreement with any Person regarding an Alternative Transaction. For purposes of
this Agreement, "Alternative Transaction" means any (i) direct or indirect
acquisition or purchase of any assets of the Company other than in the ordinary
course of business, (ii) direct or indirect acquisition or purchase of any
equity securities of the Company; or (iii) merger, consolidation, business
combination, capitalization, liquidation, dissolution or similar transaction
involving the Company, other than the transactions contemplated by this
Agreement.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Access; Confidentiality. (a) Upon reasonable notice and subject to
applicable laws and to restrictions contained in confidentiality agreements to
which it is subject, the Company shall afford to the officers, employees,
accountants, counsel, and other representatives of Parent reasonable access,
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments, and records; shall during such period furnish promptly
to such Persons all information concerning its business, properties, and
personnel as Parent may reasonably request; and shall make available to such
Persons the appropriate individuals (including attorneys, accountants, and other
professionals) for discussion of the Company's properties and personnel as
Parent may reasonably request.
(b) Each Preferred Stockholder recognizes that by reason of such
Preferred Stockholder's having designated a director of the Company, such
Preferred Stockholder has acquired confidential information and trade secrets
concerning the operation of the Company, the use or disclosure of which could
cause the Company substantial loss and damages that could not be readily
calculated and for which no remedy at law would be adequate. Accordingly, in
consideration for the payment of the Put Shares, which is recognized as adequate
by each Preferred Stockholder, each Preferred Stockholder covenants and agrees
with the Company and Parent that such Preferred Stockholder will not at any
time, except in performance of such Preferred Stockholder's obligations, if any,
to the Company as an officer or employee thereof or with the prior written
consent of the Company as evidenced by a resolution of the Board of Directors of
the Company, directly or indirectly, disclose any confidential information that
such Preferred Stockholder has acquired or may acquire, or use such information
in a manner detrimental to the interests of the Company or Parent, unless (i)
such information becomes known to the public generally through no fault of such
Preferred Stockholder, (ii) disclosure of such information is required by law,
or (iii) the Preferred Stockholder reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the Preferred
Stockholder; provided, however, that prior to disclosing any information
pursuant to this Section, the Preferred Stockholder shall give prior written
notice of such proposed disclosure to Parent, provide Parent with the
opportunity to contest such disclosure, and shall cooperate with all efforts to
prevent such disclosure. The term "confidential information" includes, without
limitation, information not previously disclosed to the public by the management
of the Company or of Parent with respect to the products, facilities,
intellectual property (including, without limitation, methods and trade
secrets), software, source code, systems, procedures, manuals, reports, price
lists, customer lists, financial information, business plans, prospects, or
opportunities of the Company, Parent, or any of their affiliates. Because of the
difficulty of measuring economic losses to the Company and Parent as a result of
a breach of this Section, and because of the immediate and irreparable damage
that could be caused for which there would be no other adequate remedy, each
Preferred Stockholder agrees that the foregoing covenant may be enforced by the
Company and/or Parent in the event of breach by such Preferred Stockholder
through injunctions or restraining orders.
25
5.2. Consents, Approvals. The Company and Parent shall each use their
reasonable efforts to obtain all consents, waivers, approvals, authorizations,
or orders, and the Company and Parent shall make all filings (including, without
limitation, all filings pursuant to the federal and state securities laws) and
give all notices required in connection with the authorization, execution, and
delivery of this Agreement by the Company and Parent and the consummation by
them of the transactions contemplated hereby. Each party hereto will keep the
other parties hereto apprised of the status of any inquiries made of such party
by any Governmental Authority or members of their respective staffs with respect
to this Agreement or the transactions contemplated hereby or thereby. Except
where prohibited by applicable statutes and regulations, each party shall
promptly provide the other (or its counsel) with copies of all filings made by
such party with any state or federal government entity in connection with this
Agreement or the transactions contemplated hereby. 5.3. Notification of Certain
Matters. The Company shall give prompt notice to Parent, and Parent shall give
prompt notice to the Company, of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which could reasonably be expected to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate and (ii) any failure of the Company, Parent, or Merger Sub, as the
case may be, to comply with or satisfy any covenant, condition, or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice, and,
provided further, that failure to give such notice on a timely basis shall not
be treated as a breach of covenant for the purposes of Sections 6.2(a) or 6.3(a)
unless the failure to give such notice results in material prejudice to the
other party.
5.4. Further Assurances. (a) Upon the terms and subject to the
conditions hereof, each of the parties hereto shall use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper, or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement; to
obtain in a timely manner all necessary waivers, consents, and approvals; to
effect all necessary registrations and filings; and to otherwise satisfy or
cause to be satisfied all conditions precedent to its obligations under this
Agreement. The foregoing covenant shall not include any obligation by Parent to
agree to divest, abandon, license, or take similar action with respect to any
assets (tangible or intangible) of Parent or the Company.
(b) If, following the Effective Time, the Surviving Company shall
determine or be advised that any deeds, bills of sale, assignments, assurances,
or any other actions or things are necessary or desirable to vest, perfect, or
confirm of record or otherwise in the Surviving Company the right, title, or
interest in, to, or under any of the rights, properties, or assets of the
Company acquired or to be acquired by the Surviving Company as a result of, or
in connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Company shall be authorized to execute
and deliver, in the name and on behalf of the Company or otherwise, all such
deeds, bills of sale, assignments, and assurances and to take and do, in the
name and on behalf of the Company or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect, or confirm any and all
right, title, and interest in, to and under such rights, properties, or assets
in the Surviving Company or otherwise to carry out this Agreement.
26
5.5. Public Announcements. Parent and the Company shall consult with
each other before issuing any press release with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which consent shall not
be unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may upon the advice of counsel be required by law or the rules of
the Nasdaq OTC if the disclosing party has used all reasonable efforts to
consult with the other party.
5.6. Conveyance Taxes. Parent and the Company shall cooperate in the
preparation, execution, and filing of all returns, questionnaires, applications,
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes that become payable by, and
are imposed on, the Company in connection with the transactions contemplated
hereby that are required or permitted to be filed on or before the Effective
Time.
5.7. Actions by Parent and Merger Sub. Parent and Merger Sub shall not,
and shall not permit any entity controlled by Parent or Merger Sub to, take any
action within the sole control of Parent, Merger Sub, or any entity controlled
by Parent or Merger Sub, that would disqualify the Merger as a "reorganization"
under Section 368(a) of the Code or that would require for tax-free
qualification action to be taken by the Company or the Preferred Stockholders
that is not otherwise required by this Agreement. For purposes hereof, "sole
control" means any action undertaken by Parent, Merger Sub, or any entity
controlled by Parent or Merger Sub, other than in conjunction with the Company
or the Preferred Stockholders.
5.8. Stockholder Approvals. As soon as reasonably practicable after the
date hereof, the Company shall, in accordance with the Delaware GCL and the
certificate of incorporation and bylaws of the Company, take all action
necessary to consider and vote upon the approval and adoption of this Agreement
and the Merger and for such other purposes as may be necessary or desirable.
27
5.9. Piggyback Registration Rights. (a)Excluding the proposed
registration currently being prepared by Parent, if Parent proposes to register
(including for this purpose a registration effected by Parent for stockholders
other than the holders of Put Shares) any of its stock under the Securities Act
in connection with the public offering of such stock solely for cash (other than
a registration on Form S-4 (including registrations relating solely to a Rule
145 transaction) or Form S-8 or any other Form relating solely to the sale of
securities to participants in a Parent stock plan, a registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Parent
Common Stock or a registration in which the only Parent Common Stock being
registered is Parent Common Stock issuable upon conversion of debt securities
which are also being registered), Parent shall, at such time, promptly give each
holder of Put Shares written notice of such registration. Upon the written
request of each holder given within twenty (20) days after holder's receipt of
such notice from Parent, Parent shall cause to be registered under the
Securities Act all of the Put Shares that each such holder has requested to be
registered.
(b) Parent shall bear and pay all expenses incurred in connection with
any registration, filing or qualification of Put Shares with respect to the
registrations pursuant to this Section 5.9 for each holder, including, without
limitation, all registration, filing, and qualification fees, printers and
accounting fees relating or apportionable thereto and the fees and disbursements
of one counsel for the selling holders, but excluding underwriting discounts and
commissions relating to the Put Shares.
(c) In connection with any offering involving an underwriting of shares
of Parent's capital stock, if the total amount of securities, including Put
Shares, requested by stockholders to be included in such offering exceeds the
amount of securities that the underwriters determine in their sole discretion is
compatible with the success of the offering, then Parent shall be required to
include in the offering only that number of such securities, including Put
Shares, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders).
5.10. [Omitted]
5.11. Legends. Each certificate evidencing Put Shares delivered
pursuant to the terms of this Agreement shall bear the following legends or, in
the case of (a) below, a substantially similar legend:
28
(a) "These securities have not been registered under the Securities Act
of 1933, as amended. They 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 or an opinion of counsel satisfactory to
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. and its counsel that such registration is not required or
unless sold pursuant to Rule 144 of such Act."
(b) In addition, certificates evidencing the Put Shares shall bear the
following additional legend: "These securities are also subject to put rights as
set forth in the Merger Agreement and Plan of Reorganization dated as of
December 3, 2001, a copy of which is on file in the offices of ▇▇▇▇▇▇▇▇▇▇.▇▇▇,
Inc. and may be obtained at no cost by written request made by the holder of
record of this certificate to the secretary of ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. at its
principal executive offices."
ARTICLE VI
CONDITIONS TO THE MERGER
6.1. Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction, or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, and no litigation by any
governmental entity seeking any of the foregoing shall have been commenced.
There shall not be any action taken, or any statute, rule, regulation, or order
enacted, entered, enforced, or deemed applicable to the Merger that makes the
consummation of the Merger illegal.
(b) Certificate of Merger. Certificate of Merger, substantially in form
attached hereto as Exhibit A shall have been duly executed by the Company and
filed with the Secretary of State of the State of Delaware.
6.2. Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are also subject to
the following conditions:
(a) Representations and Warranties; Performance of Obligations. All of
the representations and warranties of the Company and the Preferred Stockholders
contained in this Agreement shall be true, correct and complete on and as of the
Effective Time (except for those representations and warranties made as of a
particular date, which shall be true and correct as of such date); all of the
terms, covenants, agreements and conditions of this Agreement to be performed,
complied with or satisfied by the Company and the Preferred Stockholders, as the
case maybe, on or prior to the Effective Time shall have been duly performed,
complied with or satisfied; and a certificate to the foregoing effects dated the
Effective Date and signed by the President of the Company and by each of the
Preferred Stockholders, as the case may be, shall have been delivered to Parent.
29
(b) Consents Obtained. All consents, waivers, approvals,
authorizations, or orders required to be obtained, and all filings required to
be made, by the Company for the authorization, execution, and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by the Company. The parties to any agreement
to which the Company is a party and the holder of any franchise, license,
permit, easement or other right granted to the Company, to the extent their
consent or approval of the Merger is required under the pertinent agreement or
instrument or law, shall have granted such consent or approval.
(c) Material Adverse Effect. Since the date of this Agreement, there
shall not have been a Company Material Adverse Effect.
(d) Secretary's Certificate. Parent and Merger Sub shall have received
a certificate signed by the Secretary of the Company which shall (i) certify the
names of the officers of the Company authorized to sign this Agreement and the
other documents, instruments or certificates to be delivered pursuant to this
Agreement by the Company or any of its officers, together with the true
signatures of such officers, (ii) attach a copy of the Certificate of
Incorporation of the Company certified by the Secretary of State of the State of
Delaware, (iii) certify a copy of the resolutions of the Board of Directors and
the shareholders of the Company evidencing the adoption of the approval of this
Agreement and the other matters contemplated hereby, (iv) attach a copy of the
Bylaws of the Company, (v) attach good standing certificates for the Company
from each jurisdiction where the Company has been formed or is doing business,
certified by the respective state authorities from such jurisdictions and (vi)
attach certified copies of all documents evidencing other necessary corporate or
other action and governmental approvals, if any, with respect to this Agreement
and the transactions contemplated hereby.
(e) Due Diligence. Parent shall have completed a satisfactory due
diligence review of the Company's operations, financial conditions, and its
environmental, health and safety and employee benefit matters.
(f) Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Parent and Merger Sub,
and Parent and Merger Sub shall have received copies of all such documents and
other evidence as it may reasonably request to establish the consummation of
such transactions and the taking of all proceedings in connection therewith.
30
(g) Releases. Parent and Merger Sub shall have received a release in
favor of the Company executed by ▇▇▇▇▇ ▇▇▇▇▇▇.
(h) Share Allocation. Parent and Merger Sub shall have received
Schedule 6.2(h) from the Company which shall include, for each holder of Company
Preferred Stock and their designees (and assuming unanimous participation of
holder's of WizardWorld capital stock in the Merger), such holder's (i) legal
name, (ii) mailing address, (iii) social security number or employer
identification number, as applicable, (iv) number of shares of Company Preferred
Stock and stock certificate number(s), and (v) number of Put Shares to be
received.
6.3. Additional Conditions to Obligation of the Company. The obligation
of the Company to effect the Merger is also subject to the following conditions:
(a) Representations and Warranties; Performance of Obligations. All of
the representations and warranties of Parent and Merger Sub contained in this
Agreement shall be true, correct and complete on and as of the Effective Time
(except for those representations and warranties made as of a particular date,
which shall be true and correct as of such date); all of the terms, covenants,
agreements and conditions of this Agreement to be performed, complied with or
satisfied by Parent and Merger Sub on or prior to the Effective Time shall have
been duly performed, complied with or satisfied; and a certificate to the
foregoing effects dated the Effective Date and signed by an officer of the
Parent and Merger Sub shall have been delivered to the Company.
(b) Consents Obtained. All material consents required to be obtained or
made by Parent and Merger Sub for the authorization, execution, and delivery of
this Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by Parent and Merger Sub.
(c) Secretary's Certificate. Company shall have received a certificate
signed by the Secretary of each of Parent and Merger Sub which shall (i) certify
the names of the officers of Parent and Merger Sub authorized to sign this
Agreement and the other documents, instruments or certificates to be delivered
pursuant to this Agreement by Parent and Merger Sub or any of their respective
officers, together with the true signatures of such officers, (ii) attach a copy
of the Certificate of Incorporation of each of Parent and Merger Sub certified
by the Secretary of State of the State of Nevada, in the case of Parent, and
Delaware, in the case of Merger Sub, (iii) certify a copy of the resolutions of
the Board of Directors of Parent and Merger Sub, and the shareholders of Merger
Sub evidencing the adoption of the approval of this Agreement and the other
matters contemplated hereby, (iv) attach a copy of the Bylaws of each of Parent
and Merger Sub, (v) attach good standing certificates for each of Parent and
Merger Sub from each jurisdiction where Parent or Merger Sub has been formed or
is doing business, certified by the respective state authorities from such
jurisdictions and (vi) attach certified copies of all documents evidencing other
necessary corporate or other action and governmental approvals, if any, with
respect to this Agreement and the transactions contemplated hereby.
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ARTICLE VII
TERMINATION
7.1. Abandonment. In the event that the Company or the Preferred
Stockholders, on the one hand, or Parent and Merger Sub, on the other hand,
fails to consummate the Merger following satisfaction of all of the applicable
conditions set forth in Article VI hereof, the other party shall have the right
to pursue all available remedies at law or in equity, including, without
limitation, instituting legal proceedings to obtain damages for any such breach,
enforcing the specific performance of this Agreement or enjoining any further
breach of this Agreement. Such remedies may be exercised cumulatively or in
conjunction with all other rights and remedies provided by law.
7.2. Termination. This Agreement may be terminated at any time prior to
the Effective Time, notwithstanding approval hereof by the stockholders of the
Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by December 6, 2001 (provided that the right to terminate this
Agreement under this Section 7.2(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date); (c) by
either Parent or the Company if a court of competent jurisdiction or
governmental, regulatory, or administrative agency or commission shall have
issued a non-appealable final order, decree, or ruling or taken any other
action, in each case having the effect of permanently restraining, enjoining, or
otherwise prohibiting the Merger;
(d) by Parent or the Company, upon a material breach of any
representation, warranty, covenant, or agreement on the part of the Company or
Parent, respectively, set forth in this Agreement and, in the case of a breach
by the Company or a Preferred Stockholder, such breach constitutes a Company
Material Adverse Effect (a "Terminating Breach"); provided, however, that if
such Terminating Breach is curable within thirty days of such breach by Parent
or the Company, as the case may be, through the exercise of its reasonable best
efforts, and Parent or the Company, as the case may be, continues during such
thirty-day period to exercise such reasonable best efforts, neither the Company
nor Parent, respectively, may terminate this Agreement under this Section
7.2(d);
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7.3. Effect of Termination. (a) In the event of the termination of this
Agreement pursuant to Section 7.2(a) or 7.2(c), this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto or
any of its affiliates, directors, officers, or shareholders.
(b) Termination of this Agreement pursuant to Section 7.2(b) or (d)
shall not in any way terminate, limit or restrict the rights and remedies of any
party hereto against any other party for a breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1. Survival. All representations, warranties, covenants, and
agreements contained in this Agreement, and in any certificate, schedule,
document, or other writing delivered pursuant hereto or in connection with the
transactions contemplated hereby in all cases shall be deemed to have been
relied upon by the parties hereto, and shall survive the Closing; provided that
any such representations, warranties, covenants, and agreements shall be fully
effective and enforceable only for a period of one (1) year after the Closing,
and shall thereafter be of no further force or effect, except that any
misrepresentation or related warranty of which the party making such
representation had knowledge prior to the Closing shall survive indefinitely.
Additionally, the parties agree that the indemnification obligations set forth
in this Article VIII shall survive with respect to claims made within the
applicable survival period until finally determined in accordance with the terms
hereof. The representations, warranties, covenants, and agreements contained in
this Agreement or any certificate, schedule, document, or other writing
delivered pursuant hereto shall not be affected by any investigation,
verification, or examination by any party hereto or by any Person acting on
behalf of any such party.
8.2. Indemnification of Parent. Except as set forth below in this
Section 8.2, each Preferred Stockholder, severally but not jointly, agrees to
indemnify, defend, and save Parent and its directors, officers, employees,
owners, agents, affiliates, and their respective successors and assigns or heirs
and personal representatives, as the case may be (each a "Parent Indemnified
Party"), forever harmless from and against, and to promptly pay to a Parent
Indemnified Party or reimburse a Parent Indemnified Party for any and all
losses, damages, expenses (including, without limitation, court costs, amounts
paid in settlement, judgments, reasonable attorneys' fees, or other expenses,
including, without limitation, those arising out of the enforcement of this
Agreement), suits, actions, claims, deficiencies, liabilities, or obligations,
subject to the limitations of Section 8.4 (collectively, the "Losses"; for
purposes hereof, any Losses incurred by the Company shall be considered as
Losses to a Parent Indemnified Party), sustained or incurred by such Parent
Indemnified Party relating to, caused by or resulting from:
(a) any misrepresentation or breach of warranty of such Preferred
Stockholder contained in this Agreement, or any material failure of such
Preferred Stockholder to fulfill or satisfy any covenant or agreement contained
herein or in any certificate, schedule, document, or other writing delivered by
the Preferred Stockholder pursuant to this Agreement; or
33
(b) any liability of such Preferred Stockholder incurred prior to the
Closing which was not disclosed to Parent pursuant to Article II hereof if such
disclosure was required to be disclosed pursuant thereto.
8.3. Indemnification of Company Stockholders. Parent agrees to
indemnify, defend, and save the Company Preferred Stockholders and their
respective legal representatives, heirs, successors, assigns, agents, and
affiliates, as applicable (each, a "Company Indemnified Party"), forever
harmless from and against, and to promptly pay to such Company Indemnified Party
or reimburse such Company Indemnified Party for, any and all Losses sustained or
incurred by such Company Indemnified Party relating to, caused by, or resulting
from any misrepresentation or breach of warranty of Parent contained in this
Agreement, or material failure to fulfill or satisfy any covenant or agreement
contained herein or in any certificate, schedule, document, or other writing
delivered by Parent pursuant to this Agreement, as the case may be.
8.4. Indemnification Cap.
The maximum liability of any Preferred Stockholder under this Agreement
for all Losses shall be the value of such Preferred Stockholder's Put Shares as
of the Effective Date.
8.5. Indemnification Procedure for Third-Party Claims Against
Indemnified Parties. (a) In the event that subsequent to the Closing any Parent
Indemnified Party or Company Indemnified Party (each, an "Indemnified Party")
receives notice of the assertion of any claim or of the commencement of any
action, suit, or proceeding by any Person who is not a party to this Agreement
(including, without limitation, any Governmental Authority) (a "Third-Party
Claim") against such Indemnified Party, with respect to which Parent or the
Preferred Stockholders, as the case may be (the "Indemnifying Party"), may be
required to provide indemnification under this Agreement, the Indemnified Party
shall promptly give written notice, together with a statement of any available
information regarding such claim (collectively, the "Third-Party Indemnification
Notice"), to the Indemnifying Party within thirty days after learning of such
claim (or within such shorter time as may be necessary to give the Indemnifying
Party a reasonable opportunity to respond to such claim). The Indemnifying Party
shall have the right, upon delivering written notice to the Indemnified Party
(the "Defense Notice") within thirty days after receipt from an Indemnified
Party of a Third-Party Indemnification Notice, to conduct, at the Indemnifying
Party's sole cost and expense, the defense against such Third-Party Claim in the
Indemnifying Party's own name, or, if necessary, in the name of the Indemnified
Party; provided, however, that the Indemnified Party shall have the right to
approve the defense counsel representing the Indemnifying Party, which approval
shall not be unreasonably withheld or delayed, and in the event that the
Indemnified Party withholds its approval of such counsel on a reasonable basis,
then within ten days after the Defense Notice is provided, the Indemnifying
Party shall propose an alternate defense counsel, which shall be subject again
to the Indemnified Party's reasonable approval in accordance with the terms
hereof.
34
(b) In the event that the Indemnifying Party shall fail to give the
Defense Notice within the time and as prescribed by Section 8.5(a), then in any
such event the Indemnified Party shall have the right to conduct such defense in
good faith with counsel reasonably acceptable to the Indemnifying Party, but the
Indemnified Party shall be prohibited from compromising or settling any such
claim without the prior written consent of the Indemnifying Party. In addition,
if either the Indemnified Party or the Indemnifying Party reasonably determines
that there may be a conflict between the Indemnifying Party and the Indemnified
Party in conducting the defense of such Third Party Claim, then the Indemnified
Party shall have the right to conduct such defense in good faith with counsel
reasonably acceptable to the Indemnifying Party, but the Indemnified Party shall
be prohibited from compromising or settling any such claim without the prior
written consent of the Indemnifying Party.
(c) In the event that the Indemnifying Party does deliver a Defense
Notice and thereby elects to conduct the defense of the subject Third-Party
Claim, the Indemnified Party will cooperate with and make available to the
Indemnifying Party such assistance and materials as the Indemnifying Party may
reasonably request, all at the sole cost and expense of the Indemnifying Party.
Regardless of which party defends such claim, the other party hereto shall have
the right at its own cost and expense to participate in the defense of any
Third-Party Claim assisted by counsel of its own choosing. Without the prior
written consent of the Indemnified Party, the Indemnifying Party will not enter
into any settlement of any Third-Party Claim if pursuant to or as a result of
such settlement, such settlement would lead to liability or create any financial
or other obligation on the part of the Indemnified Party for which the
Indemnified Party is not entitled to indemnification hereunder. If a firm
decision is made to settle a Third-Party Claim, which offer the Indemnifying
Party is permitted to settle under this Section 8.5(c), and the Indemnifying
Party desires to accept and agree to such offer, the Indemnifying Party will
give at least five days' prior written notice to the Indemnified Party to that
effect, setting forth in reasonable detail the terms and conditions of any such
settlement (the "Settlement Notice"). If the Indemnified Party objects to such
firm offer within ten calendar days after its receipt of such Settlement Notice,
the Indemnified Party may continue to contest or defend such Third-Party Claim
and, in such event, the maximum liability of the Indemnifying Party as to such
Third-Party Claim will not exceed the amount of such settlement offer described
in the Settlement Notice, plus costs and expenses paid or incurred by the
Indemnified Party up to the point such Settlement Notice had been delivered. If
an Indemnified Party settles any Third-Party Claim without the prior written
consent of the Indemnifying Party, the Indemnifying Party shall have no
obligation to indemnify the Indemnified Party under this Article VIII with
respect to such Third-Party Claim.
35
(d) Any judgment entered or settlement agreed upon in the manner
provided herein shall be binding upon the Indemnifying Party, and shall be
conclusively deemed to be an obligation with respect to which the Indemnified
Party is entitled to prompt indemnification hereunder, subject to the
Indemnifying Party's right to appeal an appealable judgment or order. To the
extent that the consent or approval of either the Indemnifying Party or the
Indemnified Party is required in this Section 8.5, any such consent or approval
shall not be unreasonably withheld and will be deemed given in the absence of a
written response within ten days of any request therefor.
(e) Any failure by an Indemnified Party to give a timely, complete, or
accurate Third-Party Indemnification Notice as provided in this Section 8.5 will
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
Third-Party Indemnification Notice was deprived of its right to recover any
payment under its applicable insurance coverage or was otherwise materially
adversely affected or damaged as a result of such failure to give a timely,
complete, and accurate Third-Party Indemnification Notice.
8.6. Notice of Indemnified Party Claims. In the case of a claim for
indemnification under either Section 8.2 or 8.3, upon determination by a Parent
Indemnified Party or a Company Indemnified Party, as the case may be, that it
has a claim for indemnification, the Indemnified Party shall deliver notice of
such claim to the Indemnifying Party, setting forth in reasonable detail the
basis and amount of such claim for indemnification (each, an "Indemnification
Notice"). Upon the Indemnification Notice having been given to the Indemnifying
Party, the Indemnifying Party shall have thirty days in which to notify the
Indemnified Party in writing (the "Indemnification Dispute Notice") that the
basis of or the amount of the claim for indemnification is in dispute, setting
forth in reasonable detail the grounds of such dispute. In the event that an
Indemnification Dispute Notice is not given to the Indemnified Party within the
required thirty-day period, the Indemnifying Party shall be obligated to pay to
the Indemnified Party the amount set forth in the Indemnification Notice within
sixty days after the date that the Indemnification Notice had been given to the
Indemnifying Party.
36
ARTICLE IX
GENERAL PROVISIONS
9.1. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made on the earlier to occur of delivery thereof, if by hand; upon receipt,
if sent by mail (registered or certified mail, postage prepaid, return receipt
requested); on the second business day following deposit, if sent by a
recognized overnight delivery service; or upon transmission, if sent by
facsimile transmission (in each case with receipt verified) as follows:
If to Parent or Merger Sub:
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
WizardWorld, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile:
With copies to:
Kaufman, Feiner, Yamin,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to a Preferred Stockholder:
To such address set forth under such Preferred
Stockholder's name on the signature page hereto;
With copies to::
▇▇▇▇▇▇▇, Dunaud, Mercadier &
Carreras LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
37
provided that each party hereto shall promptly notify the other parties hereto
of any change in its contact information, which revised contact information
shall thereafter be used for the purposes of this Section 9.1 until further
revised.
9.2. Certain Definitions. For purposes of this Agreement, the term:
(a) "actual knowledge" means an individual will be deemed to have
"actual knowledge" of particular fact or other matter if such individual is
actually aware of such fact or other matter. A Person (other than an individual)
will be deemed to have "actual knowledge" of a particular fact or other matter
if any individual who is serving, or who has at any time served, as a director,
officer or employee of such person (or in any similar capacity) has, or at any
time had, actual knowledge of such fact or other matter.
(b) "affiliate" means a Person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned Person;
(c) "business day" means any day other than a Saturday, a Sunday, or a
U.S. federal holiday;
(d) "Company Material Adverse Effect" means any change or effect that,
individually or in the aggregate, is or could be reasonably expected to be
materially adverse to the business, assets (including intangible assets),
financial condition, prospects, or results of operations of the Company;
(e) "control" (including the terms "controlled_ by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement, or otherwise;
(f) "GAAP" means United States generally accepted accounting principles
consistently applied.
(g) "knowledge" means an individual will be deemed to have "knowledge"
of particular fact or other matter if: (i) such individual is actually aware of
such fact or other matter; or (ii) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter. A Person (other than an individual) will be deemed to
have "knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer or employee of
such person (or in any similar capacity) has, or at any time had, knowledge of
such fact or other matter.
38
(h) "Liens" means any mortgage, pledge, claims, security interest,
covenant, easement, encumbrance, lien, lease, sublease, option, or charge of any
kind (including, without limitation, any conditional sale or other title
retention agreement or lease in the nature thereof), limitations on transfer or
any subordination arrangement in favor of another Person.
(i) "Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(j) "SEC" means the Securities and Exchange Commission;
(k) "Securities" means capital stock, warrants, options, equity
interests, rights to participate in profits, notes, debentures, bonds, rights,
options, calls or any guarantees thereof or any obligations or instruments
evidencing the rights to purchase or effect a conversion into any contract,
commitment, instrument, understanding or obligation, whether written, oral,
express or implied, relating to the issuance or transfer of any thereof whether
or not such may be authorized, issued or outstanding;
(l) "Securities Act" means the Securities Act of 1933, as amended;
(m) "Stock Rights" means subscription rights, convertible securities,
stock options, warrants, equity interests, stock appreciation rights, phantom
stock rights, profit participation rights or similar rights with respect to any
class or series of the capital stock of an entity; and
(n) "subsidiary" or "subsidiaries" of any Person means any corporation,
limited liability company, partnership, joint venture, or other legal entity of
which such Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, such amount of equity interests as
provide such Person the power to elect a majority of the members of the
governing body of such legal entity.
9.3. Amendment. This Agreement may be amended by the parties hereto, in
the case of the Company, the Parent and the Merger Sub, by action taken by or on
behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of this Agreement by the
shareholders of the Company, no amendment may be made which by law requires
further approval by such shareholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
9.4. Waiver. At any time prior to the Effective Time, any party hereto
may with respect to any other party hereto (a) extend the time for the
performance of any obligations or other acts hereunder, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
39
9.5. Headings, Terminology. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Unless the context of this Agreement otherwise
requires, the terms "Article" and "Section" refer, respectively, to the
specified Article or Section of this Agreement.
9.6. Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any rule of law or public
policy, all other conditions and Provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon determination that any term or other provision is invalid,
illegal, or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
9.7. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other Person any rights or remedies hereunder.
9.8. Assignment. This Agreement shall not be assigned by operation of
law or otherwise, except that Parent and Merger Sub may assign all or any of
their rights hereunder to any affiliate, provided that no such assignment shall
relieve the assigning party of its obligations hereunder.
9.9. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except as otherwise
expressly provided herein, nothing contained in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit, or remedy of any nature whatsoever under or by reason of this
Agreement.
9.10. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Delaware applicable to
contracts executed and fully performed within the State of Delaware, without
regard to the conflicts of laws provisions thereof.
9.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
40
9.12. Fees and Expenses. Except as expressly provided herein to the
contrary, all fees and expenses incurred by the parties in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses.
[Signature pages follow]
41
IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the
Preferred Stockholders have caused this Agreement to be executed as of the date
first written above by their respective officers thereunto duly authorized.
PARENT:
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
MERGERSUB:
▇▇▇▇▇▇▇▇▇▇.▇▇▇ ACQUISITION
CORP.
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
COMPANY:
WIZARDWORLD, INC.
By:
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
By:
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇, individually
as to Section 2.25 as it relates to
the termination of his employment
agreement
42
PREFERRED STOCKHOLDERS
(solely with respect to Article IX, and Sections
2.22, 2.31, 5.1, 5.9 and Schedule 6.2(h)
PORTAGE VENTURES PARTNERS, LLC PORTAGE FOUNDERS, L.P.
By Portage Venture Partners, LLC, By Portage Venture Partners, LLC,
its general partner its general partner
By: By:
---------------------------------------- --------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, Managing Director ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, Managing Director
LAZARD FRERES & CO, LLC
By:
---------------------------------------- ------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Managing Director ▇▇▇▇ ▇▇▇▇▇
43
PREFERRED STOCKHOLDER ADDRESSES FOR NOTICE
Name Address For Notice
---- ------------------
Portage Founders, L.P. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
Portage Venture Fund, L.P. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
Lazard Freres & Co. LLC ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
44
STATE OF DELAWARE CERTIFICATION
It is hereby certified that the foregoing Merger Agreement and Plan of
Reorganization of ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Acquisition Corp. and
WizardWorld, Inc. as authorized by at least a majority of the directors of
▇▇▇▇▇▇▇▇▇▇.▇▇▇ Acquisition Corp. and by at least a majority of the directors of
WizardWorld, Inc. was adopted and approved by the requisite proportion of the
stockholders of WizardWorld, Inc.
Date: ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Acquisition Corp.
----------------------------------
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Secretary
Date: WizardWorld, Inc.
----------------------------------
------------------------------
Name:
Title: Secretary
Schedule 6.2(h)
Allocation Schedule
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
SS or Empl.
I.D. #
Holder Name and ----------- Stock Certificate/ Put Shares Put Shares
Mailing Address WizardWorld capital stock ---------- ----------
--------------- ------------------------- (before giving effect to (after giving effect to
distribution to Wizard- distribution to Wizard-
World Management World Management)
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
Portage Founders, L.P. ▇▇-▇▇▇▇▇▇▇ PA-6 for 761,844 shares of preferred
stock and PA-3 for 761,844 shares of 123,750 105,000
preferred stock
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
Portage Venture Fund, L.P. ▇▇-▇▇▇▇▇▇▇ PA-2 for 761,844 shares of preferred
stock and PA-7 for 761,844 shares of 123,750 105,000
preferred stock
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
Lazard Freres & Co., L.L.C. ▇▇-▇▇▇▇▇▇▇ PA-2 for 2,519,163 shares of preferred
stock and PA-8 for 2,539,479 shares of 410,850 348,600
preferred stock
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
▇▇▇▇ ▇▇▇▇▇ ###-##-#### PA-3 for 20,316 shares of preferred
stock 1,650 1,400
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
65,000
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
▇▇▇▇ ▇▇▇▇▇▇
14,500
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
▇▇ ▇▇▇▇▇
10,500
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
3,800
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
3,100
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
▇▇▇▇ ▇▇▇▇▇▇
3,100
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------
TOTALS 660,000 660,000
---------------------------- -------------- -------------------------------------- ------------------------ ------------------------