Execution Copy
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AGREEMENT AND PLAN OF MERGER
AMONG
ADVANCED VISUAL SYSTEMS INC.,
MUSE MERGER SUB, INC.
AND
MUSE TECHNOLOGIES, INC.
Dated as of July 18, 2000
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TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER.................................................................2
Section 1.1 The Merger...................................................2
Section 1.2 Closing Date/Effective Time of the Merger....................2
Section 1.3 Certificate of Incorporation.................................2
Section 1.4 Bylaws.......................................................3
Section 1.5 Directors of Surviving Corporation. ........................3
Section 1.6 Effect on Capital Stock......................................3
Section 1.7 Exchange of AVS Stock........................................4
Section 1.8 No Fractional Securities.....................................5
Section 1.9 Stock Options; Stock Purchase Plan...........................5
Section 1.10 Dissenting Shares............................................6
Section 1.11 Reorganization...............................................6
Section 1.12 Pooling of Interests.........................................6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF AVS......................................7
Section 2.1 Organization, Standing and Qualification; Subsidiaries.......7
Section 2.2 Authority....................................................7
Section 2.3 Capitalization; Equity Interest..............................8
Section 2.4 Consents and Approvals; No Violation.........................9
Section 2.5 Books and Records............................................9
Section 2.6 Financial Statements; Certain Financial Information; EBIT...10
Section 2.7 Absence of Undisclosed Liabilities..........................11
Section 2.8 Absence of Certain Changes or Events. .....................12
Section 2.9 Real Property...............................................13
Section 2.10 Leases......................................................13
Section 2.11 Title to Assets.............................................14
Section 2.12 Intellectual Property Rights................................14
Section 2.13 Contracts...................................................17
Section 2.14 Litigation..................................................17
Section 2.15 Plants, Buildings, Structures, Facilities and Equipment.....18
Section 2.16 Insurance...................................................18
Section 2.17 Employee Benefit Plans......................................18
Section 2.18 Tax Matters.................................................20
Section 2.19 Environmental Matters.......................................23
Section 2.20 Labor Relations; Employees..................................24
Section 2.21 Compliance with Law.........................................25
Section 2.22 Government Permits..........................................26
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Section 2.23 Bank Accounts; Powers-of-Attorney...........................26
Section 2.24 Brokers or Finders..........................................26
Section 2.25 Transactions with Affiliates................................26
Section 2.26 Customers and Suppliers.....................................27
Section 2.27 Accounts Receivable and Payables............................27
Section 2.28 Guarantees..................................................28
Section 2.29 Common Activities...........................................28
Section 2.30 Disclosure..................................................28
Section 2.31 Information Supplied........................................28
Section 2.32 Vote Required...............................................29
Section 2.33 No Stockholder Agreements...................................29
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MUSE AND SUB............................29
Section 3.1 Organization, Standing and Qualification....................29
Section 3.2 Authority...................................................29
Section 3.3 Capitalization..............................................30
Section 3.4 Validity; Issuance of Shares................................30
Section 3.5 Consents and Approvals; No Violation........................30
Section 3.6 Brokers or Finders..........................................31
Section 3.7 Information Supplied........................................31
Section 3.8 Public Reports..............................................32
Section 3.9 Operation of the Surviving Corporation......................32
Section 3.10 Disclosure..................................................32
ARTICLE IV
COVENANTS.................................................................33
Section 4.1 Conduct of Business.........................................33
Section 4.2 Access to AVS Information...................................33
Section 4.3 Best Efforts................................................34
Section 4.4 No Solicitation by AVS......................................34
Section 4.5 Fees and Expenses...........................................35
Section 4.6 Public Announcements........................................35
Section 4.7 Books and Records...........................................35
Section 4.8 Compliance with Laws, Orders and Contracts.................35
Section 4.9 Certain Activities between Signing and Closing..............35
Section 4.10 Tax Matters.................................................36
Section 4.11 AVS Employee and Affiliate Non-Disclosure...................37
Section 4.13 Closing Financial Statements................................38
Section 4.14 Employee Benefits Matters...................................38
Section 4.15 Preparation of Proxy Statement; Stockholders Meeting........38
Section 4.16 Pooling.....................................................41
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Section 4.17 NASDAQ Listing..............................................41
Section 4.18 AVS Affiliates..............................................41
Section 4.19 Notification of Certain Matters.............................41
Section 4.20 Insurance...................................................42
ARTICLE V
CONDITIONS................................................................42
Section 5.1 Conditions to Obligations of MUSE...........................42
Section 5.2 Conditions to Obligations of AVS............................44
ARTICLE VI
INDEMNIFICATION AND SURVIVAL..............................................45
Section 6.1 Indemnification.............................................45
Section 6.2 Survival Periods............................................48
Section 6.3 Escrow Agreement............................................48
Section 6.4 Limitation of Liability.....................................49
ARTICLE VII
TERMINATION...............................................................49
Section 7.1 Termination.................................................49
Section 7.2 Effect of Termination.......................................50
ARTICLE VIII
MISCELLANEOUS.............................................................50
Section 8.1 Notices.....................................................50
Section 8.2 Descriptive Headings; Definitions; Certain Interpretation...51
Section 8.3 Counterparts; Effectiveness.................................52
Section 8.4 Entire Agreement; Assignment................................52
Section 8.5 Amendment...................................................52
Section 8.6 Extensions; Waiver..........................................53
Section 8.7 Governing Law...............................................53
Section 8.8 Specific Performance........................................53
Section 8.9 Parties in Interest.........................................53
Section 8.10 Severability................................................53
Section 8.11 Consent to Service of Process...............................53
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LIST OF DEFINED TERMS
PAGE
Acquisition Proposal..........................................................35
Affiliate.....................................................................51
Affiliate Agreement...........................................................41
Agreement......................................................................1
Audited Financials............................................................10
Authorization Termination Date.................................................5
Authorizations................................................................42
AVS............................................................................1
AVS Affiliate.................................................................41
AVS Capital Stock..............................................................3
AVS Common Stock...............................................................3
AVS Disclosure Schedule........................................................7
AVS Parties...................................................................45
AVS Recommendation............................................................40
AVS Stockholder Meeting.......................................................39
AVS Stockholders...............................................................1
Books and Records.............................................................10
Business.......................................................................1
Business Combination..........................................................35
Certificate....................................................................3
Certificate of Merger..........................................................2
Change........................................................................40
Change in the AVS Recommendation..............................................40
Claim Notice..................................................................46
Closing........................................................................2
Closing Balance Sheet.........................................................38
Closing Date...................................................................2
Closing Financial Statements..................................................38
Code...........................................................................6
Contaminant...................................................................23
Contracts.....................................................................17
Core Software Products........................................................16
Determination Date............................................................38
DGCL...........................................................................2
Dispute Period................................................................46
Dissenting Stock...............................................................6
DOL...........................................................................19
EBIT..........................................................................11
Effective Time.................................................................2
Environmental Laws............................................................23
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ERISA.........................................................................19
ERISA Affiliate...............................................................18
Escrow Agent...................................................................4
Escrow Agreement...............................................................1
Escrow Amount..................................................................4
Escrow Consent................................................................40
Exchange Act..................................................................29
Exchange Agent.................................................................4
Exchange Ratio.................................................................3
Expiration Date...............................................................48
Financial Statements..........................................................10
Form S-4......................................................................38
GAAP...........................................................................1
Governmental Permits..........................................................26
income taxes..................................................................22
Indebtedness..................................................................11
Indemnified Party.............................................................46
Indemnifying Party............................................................46
Indemnity Notice..............................................................47
Intellectual Property Rights..................................................15
Interim Balance Sheet.........................................................10
IRS...........................................................................19
Laws..........................................................................25
Leased Real Property..........................................................13
Lien..........................................................................52
Liquidation Preference Waiver.................................................43
Loss..........................................................................24
Material Adverse Effect.......................................................12
Merger.........................................................................1
Merger Consideration...........................................................3
MUSE...........................................................................1
MUSE Common Stock..............................................................1
MUSE Disclosure Schedule......................................................31
MUSE Material Adverse Effect..................................................40
MUSE Option....................................................................5
MUSE Parties..................................................................45
MUSE SEC Reports..............................................................32
Option Plan....................................................................5
Order..........................................................................9
Person........................................................................52
Plan..........................................................................18
Proceeding....................................................................17
Proxy Statement/Prospectus....................................................38
Qualifying Amendment..........................................................39
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Release.......................................................................23
Representatives...............................................................33
Required AVS Vote.............................................................29
Resolution Period.............................................................47
return........................................................................22
SEC...........................................................................28
Securities Act................................................................28
Series A Preferred Stock.......................................................3
Series B Preferred Stock.......................................................3
Series C Preferred Stock.......................................................3
Share Issuance................................................................38
Stock Option...................................................................5
Stock Purchase Plan............................................................6
Stockholder Representatives....................................................1
Sub............................................................................1
Sub Common Stock...............................................................4
Surviving Corporation..........................................................2
tax...........................................................................22
Third Party Claim.............................................................46
Threshold Amount..............................................................11
WARN Act......................................................................25
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ANNEXES
Annex A Closing Deliveries
Annex B Stockholders' Ownership
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Officer's Certificate of AVS
Exhibit C Form of Secretary's Certificate of AVS
Exhibit D Form of Opinion of Counsel to AVS
Exhibit E Form of Officer's Certificate of MUSE
Exhibit F Form of Secretary's Certificate of MUSE
Exhibit G Form of Opinion of Counsel to MUSE
Exhibit H Form of Officer's Certificate of Sub
Exhibit I Form of Secretary's Certificate of Sub
Exhibit J1 Form of MUSE's Standard Non-Compete/Confidentiality and Trade
Secrets/Invention Agreement
Exhibit J2 Form of Agreement Regarding Proprietary Information and
Inventions, Non-Competition, Arbitration, At-Will Employment and
Other Matters
Exhibit K Form of Affiliate Agreement
SCHEDULES
Schedule A Intentionally Omitted
Schedule B AVS Employees to Execute Confidentiality Agreements
Schedule C Terms of Convertible Note Exchange
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of July 18,
2000, among MUSE Technologies, Inc., a Delaware corporation ("MUSE"),
MUSE Merger Sub, Inc., a Delaware corporation ("Sub") organized solely
for the purpose of consummating the transactions contemplated hereby
and a wholly-owned subsidiary of MUSE, and Advanced Visual Systems
Inc., a Delaware corporation ("AVS").
WHEREAS, AVS, together with its subsidiaries, is engaged in the
business of developing and delivering visual information solutions (the
"Business");
WHEREAS, the Boards of Directors of MUSE and AVS deem it advisable and
in the best interests of each corporation and its respective stockholders that
MUSE and AVS engage in a business combination in order to advance the long-term
strategic business interests of MUSE and AVS;
WHEREAS, the combination of MUSE and AVS shall be effected by the terms
of this Agreement through a merger as outlined below (the "Merger");
WHEREAS, in furtherance thereof, the respective Boards of Directors of
MUSE and AVS have approved the Merger, upon the terms and subject to the
conditions set forth in this Agreement, pursuant to which all shares of capital
stock of AVS issued and outstanding immediately prior to the Effective Time (as
defined in Section 1.2) will be converted into the right to receive shares of
common stock, par value $.015 per share, of MUSE (the "MUSE Common Stock") as
set forth in Section 1.6;
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling-of-interests transaction under United States
generally accepted accounting principles ("GAAP");
WHEREAS, as a condition to the consummation of the Merger, the
stockholders of AVS who voted in favor of the Merger and who own no fewer than
500 shares of AVS Capital Stock or who are AVS Affiliates (as hereafter defined)
(the "AVS Stockholders") will consent to the escrow of a pro rata portion of the
MUSE Common Stock to be received in the Merger as set forth in Section 1.6 (d)
and shall appoint and authorize one or more stockholder representatives (the
"Stockholder Representatives"), to enter into an escrow agreement on behalf of
each of the AVS Stockholders in the form of Exhibit A hereto (the "Escrow
Agreement");
NOW, THEREFORE, in consideration of the mutual benefits to be derived
from this Agreement and of the representations, warranties, conditions,
agreements and promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement and the provisions of the Delaware General Corporations Law (the
"DGCL"), Sub shall be merged with and into AVS at the Effective Time. Following
the Merger, the separate corporate existence of Sub shall cease and AVS shall
continue as the surviving corporation (the "Surviving Corporation") under the
name "MUSE Advanced Visual Systems Inc." and shall continue to be governed by
the laws of the State of Delaware. At and after the Effective Time, the Merger
will have the effects set forth in the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, immunities, powers and franchises of AVS and Sub, including
but not limited to the Distributor Agreement dated April 1, 1998 between AVS and
Kubota Graphics Technology, Incorporated, as subsequently amended by Amendment
Number 1 dated as of September 30, 1999, shall be vested in the Surviving
Corporation, and all debts, liabilities and duties of AVS and Sub shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 1.2 Closing Date/Effective Time of the Merger.
(a) Subject to the terms and conditions set forth in Article V and the
termination rights set forth in Article VII, the closing of the transactions
contemplated by this Agreement (the "Closing") will take place at 10:00 a.m. at
the offices of Proskauer Rose LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on a
date to be specified by the parties, which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in Article
V or on such other date and location as agreed to in writing by the parties (the
"Closing Date"). At the Closing, AVS, Sub and MUSE shall deliver or cause to be
delivered the items set forth in Annex A.
(b) At the Closing the parties shall (i) file a certificate of merger
(the "Certificate of Merger") in such form as is required by and executed in
accordance with the relevant provisions of the DGCL and (ii) make all other
filings or recordings required under the DGCL. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the Delaware
Secretary of State or such subsequent time as is agreed upon by MUSE and AVS and
specified in the Certificate of Merger (the date and time the Merger become
effective being the "Effective Time").
Section 1.3 Certificate of Incorporation. Pursuant to the Merger, the
certificate of incorporation of AVS, as in effect immediately prior to the
Effective Time, shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law; provided that Section 1 of the certificate of incorporation
2
of the Surviving Corporation shall be amended to read in its entirety as
follows: "The name of the Corporation is MUSE Advanced Visual Systems Inc."
Section 1.4 Bylaws. Pursuant to the Merger, the bylaws of AVS, as in
effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation until thereafter changed or amended as provided therein,
by the certificate of incorporation or by applicable law.
Section 1.5 Directors of Surviving Corporation. The directors of Sub in
office immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation, and shall hold office from the Effective Time until
their respective successors are duly elected or appointed and qualified in the
manner provided in the certificate of incorporation or bylaws of the Surviving
Corporation, or as otherwise provided by law or their earlier death, resignation
or removal.
Section 1.6 Effect on Capital Stock. Subject to the terms and
conditions of this Agreement, as of the Effective Time, by reason of the Merger
and without any action on the part of the holder of any shares of the capital
stock of AVS or the holder of any shares of capital stock of Sub:
(a) Capital Stock of AVS. Each 3.286 shares of (a) common stock, $.01
par value, of AVS (the "AVS Common Stock"), (b) Series B Preferred Stock, $.10
par value, of AVS ("Series B Preferred Stock"), and (c) Series C Preferred
Stock, $.10 par value, of AVS ("Series C Preferred Stock") issued and
outstanding immediately prior to the Effective Time (other than shares of
capital stock of AVS to be canceled in accordance with Section 1.6 (b) hereof
and any shares of Dissenting Stock (as defined in Section 1.10 hereof)) shall be
converted into the right to receive one validly issued, fully paid and
non-assessable share of MUSE Common Stock (the "Exchange Ratio"). Each 0.649646
shares of Series A Preferred Stock, $.10 par value, of AVS ("Series A Preferred
Stock") issued and outstanding immediately prior to the Effective Time (other
than any Shares of Dissenting Stock) shall be converted into the right to
receive one validly issued, fully paid and non-assessable shares of Muse Common
Stock. All shares of AVS Common Stock, Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock (collectively, the "AVS Capital
Stock") shall no longer be outstanding, shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate which
immediately prior to the Effective Time represented any such shares of AVS
Capital Stock (a "Certificate") shall thereafter cease to have any rights with
respect to such shares of AVS Capital Stock, except as provided herein or by
law. The maximum number of shares of MUSE Common Stock to be issued in exchange
for the outstanding shares of AVS Capital Stock (inclusive of shares underlying
director options and outstanding warrants) shall be an aggregate of 2,095,000
shares of MUSE Common Stock(1) (the "Merger Consideration").
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(1) May be adjusted as a result of the exercise of non-director options of AVS.
3
(b) Cancellation of Treasury Stock. All AVS Capital Stock, if any, that
are held by AVS as treasury shares shall be canceled and retired and cease to
exist, and no securities of MUSE or other consideration shall be delivered or
deliverable in exchange therefor.
(c) Common Stock of Sub. Each share of common stock, par value $.01, of
Sub ("Sub Common Stock") issued and outstanding immediately prior to the
Effective Time, shall be converted into and become one validly issued, fully
paid and nonassessable share of the common stock, no par value, of the Surviving
Corporation.
(d) Escrow Amount. Notwithstanding anything to the contrary contained
herein, MUSE shall withhold from the Merger Consideration according to each AVS
Stockholder's pro rata portion of the shares of MUSE Common Stock otherwise
deliverable at the Closing to the AVS Stockholders and place into escrow an
aggregate of 160,000 shares of MUSE Common Stock (such shares are hereinafter
collectively referred to as the "Escrow Amount") in connection with the
indemnification obligations of the AVS Stockholders under this Agreement and
related documents and the transactions contemplated hereby and thereby. The
terms and conditions of such escrow are more fully set forth in the Escrow
Agreement. MUSE shall deliver to the Bank of Albuquerque, N.A., as Escrow Agent
(the "Escrow Agent"), pursuant to the terms of the Escrow Agreement,
certificates of shares of MUSE Common Stock representing the Escrow Amount.
(e) Delivery of Merger Consideration. At the Effective Time, delivery
of the Merger Consideration (less the Escrow Amount) shall be made to the
Exchange Agent (as defined in Section 1.7), in trust for the benefit of each
holder of shares of AVS Capital Stock in proportion to its ownership of AVS
Capital Stock as set forth on Annex B hereto (less any MUSE Common Shares
included in the Escrow Amount).
Section 1.7 Exchange of AVS Stock.
(a) Prior to the Effective Time, MUSE shall appoint American Stock
Transfer & Trust Company to act as exchange agent hereunder for the purpose of
exchanging Certificates for the Merger Consideration (the "Exchange Agent"). At
or prior to the Effective Time, MUSE shall deposit with the Exchange Agent, in
trust for the benefit of holders of shares of AVS Capital Stock, certificates
representing MUSE Common Stock issuable pursuant to Section 1.6 in exchange for
outstanding shares of AVS Capital Stock.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause the Exchange Agent to mail to each holder of a Certificate (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent, and which letter shall be in customary form
and have such other provisions as MUSE may reasonably specify and (ii)
instructions for effecting the surrender of such Certificates in exchange for
the applicable Merger Consideration. Upon surrender of a Certificate to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such
4
other documents as may reasonably be required by the Exchange Agent, the holder
of such Certificate shall be entitled to receive in exchange therefor one or
more shares of MUSE Common Stock representing, in the aggregate, the whole
number of shares that such holder has the right to receive pursuant to Section
1.6 (after taking into account all shares of AVS Capital Stock then held by such
holder) after giving effect to the Escrow Amount. In the event of a transfer of
ownership of AVS Capital Stock which is not registered in the transfer records
of AVS, one or more shares of MUSE Common Stock evidencing, in the aggregate,
the proper number of shares of MUSE Common Stock may be issued with respect to
such AVS Capital Stock to such transferee if the Certificate representing such
shares of AVS Capital Stock is presented to the Exchange Agent, accompanied by
all documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer taxes have been paid.
Section 1.8 No Fractional Securities. No certificates or scrip
representing fractional shares of MUSE Common Stock shall be issued upon the
surrender for exchange of Certificates and such fractional share interests shall
not entitle the owner thereof to vote or to have any rights of a stockholder of
MUSE or a holder of shares of MUSE Common Stock. Notwithstanding any other
provisions of this Agreement, each holder of shares of AVS Capital Stock
exchanged pursuant to the Merger who would otherwise have been entitled to a
fraction of a share of MUSE Common Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu of thereof, one
whole share of MUSE Common Stock.
Section 1.9 Stock Options; Stock Purchase Plan. (a) (i) Each option to
purchase AVS Common Stock or Series C Preferred Stock (incentive stock option or
nonqualified stock option, as the case may be) (a "Stock Option") granted under
The AVS 1992 Stock Option Plan (the "Option Plan") prior to the Effective Time
and which remains outstanding immediately prior to the Effective Time, whether
vested or unvested, shall cease to represent a right to acquire shares of AVS
Common Stock or Series C Preferred Stock and shall be converted, at the
Effective Time, into a fully vested, immediately exercisable option to acquire,
on substantially the same terms and conditions as were applicable under the
Option Plan (but taking into account any changes thereto provided for in the
Option Plan or in such option by reason of this Agreement or the transactions
contemplated hereby), that number of shares of MUSE Common Stock determined by
dividing the number of shares of AVS Common Stock or Series C Preferred Stock
subject to such Stock Option by the Exchange Ratio, rounded, if necessary, to
the nearest whole share of MUSE Common Stock, at a price per share (rounded to
the nearest whole cent) equal to the per share exercise price specified in such
Stock Option multiplied by the Exchange Ratio (a "MUSE Option"); provided,
however, the MUSE Options will be governed by the MUSE 1996 Stock Incentive Plan
and the stock option agreements granted thereunder. Prior to the Effective Time,
the MUSE Board of Directors shall have taken all action necessary under the MUSE
1996 Stock Incentive Plan to permit the grant of the MUSE Options on the terms
set forth herein. The maximum number of shares of MUSE Common Stock to be issued
upon exercise of all outstanding Stock Options subsequent to the Merger shall be
5
1,313,000.(2) (ii) All Purchase Authorizations under the Advanced Visual Systems
Inc. 1992 Stock Purchase Plan (the "Stock Purchase Plan") not exercised at least
30 days prior to the Closing Date (the "Authorization Termination Date") shall
terminate as of the Authorization Termination Date. (iii) The Board of Directors
of AVS shall take all necessary actions to effect the cancellation and
substitution of Stock Options and the termination of the Purchase Authorization
as set forth above, including but not limited to adopting resolutions
terminating the Option Plan and the Stock Purchase Plan effective no later than
one day prior to the Closing Date.
(b) As soon as reasonably practicable following the Closing Date, MUSE
shall use all reasonable efforts to file a registration statement on Form S-8
covering the shares of MUSE Common Stock issuable under the MUSE 1996 Stock
Incentive Plan.
Section 1.10 Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, if and to the extent required by the DGCL, shares of
AVS Capital Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by holders of such shares of AVS Capital Stock
who have properly exercised appraisal rights with respect thereto (the
"Dissenting Stock") in accordance with Section 262 of the DGCL, shall not be
exchangeable for the right to receive the Merger Consideration, and holders of
such shares of Dissenting Stock shall be entitled to receive payment of the
appraised value of such shares of Dissenting Stock in accordance with the
provisions of Section 262 of the DGCL unless and until such holders fail to
perfect or effectively withdraw or otherwise lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails to
perfect or effectively withdraws or loses such right, such shares of Dissenting
Stock shall thereupon be treated as if they had been converted into and to have
become exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. Notwithstanding anything to the
contrary contained in this Section 1.10, if (i) the Merger is rescinded or
abandoned or (ii) the stockholders of AVS revoke the authority to effect the
Merger, then the right of any stockholder to be paid the fair value of such
stockholder's Dissenting Stock pursuant to Section 262 of the DGCL shall cease.
AVS shall give MUSE prompt notice of any demands received by AVS for appraisals
of shares of Dissenting Stock and MUSE shall have the right to participate in
all negotiations and proceedings with respect to such demands. AVS shall not,
except as required by applicable law or with the prior written consent of MUSE,
make any payment with respect to any demands for appraisals or offer to settle
or settle any such demands.
Section 1.11 Reorganization. The parties intend that the Merger
constitutes a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and to report the Merger
for federal and state income tax purposes in a manner consistent with such
characterization. The parties agree to take no position at any time which is
inconsistent with such intention, except as otherwise required by law.
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(2) May be adjusted as a result of pre-closing exercise of non-director options.
6
Section 1.12 Pooling of Interests. The parties acknowledge that it is a
condition of AVS's and MUSE's obligations hereunder that the Merger qualify for
pooling of interests accounting treatment (a "Pooling") under Opinion No. 16 of
the Accounting Principles Board ("APB 16"). Each of the AVS Affiliates (as
defined below) shall execute and deliver to MUSE Affiliate Agreements (as
defined below) as contemplated by Section 4.18 below, to ensure compliance by
each AVS Affiliate with the restrictions required to allow such accounting
treatment to be utilized.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF AVS
Except as otherwise set forth in the AVS disclosure schedule delivered
to MUSE and Sub concurrently with the parties' execution of this Agreement (the
"AVS Disclosure Schedule"), which statements contained in the AVS Disclosure
Schedule shall also be deemed to be representations and warranties made and
given by AVS and each of its subsidiaries under this Article II of this
Agreement, AVS hereby represents and warrants to each of MUSE and Sub as
follows:
Section 2.1 Organization, Standing and Qualification; Subsidiaries.
(a) AVS and each of its subsidiaries is a corporation or other entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite
corporate or other power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted. AVS and each of its
subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which its property is owned, leased or operated or the
nature of the Business conducted by it makes such qualification or licensing
necessary. Section 2.1 of the AVS Disclosure Schedule lists all lines of
business constituting the Business, the names (registered or otherwise) in which
AVS does business, the complete and correct list of all AVS's subsidiaries and
their respective jurisdictions of incorporation or organization (such list to
include the ownership structure of each subsidiary and the jurisdictions in
which each AVS subsidiary is doing business and whether each subsidiary is
qualified or licensed to do business in such jurisdictions) and the names and
titles of all officers and directors of AVS. AVS has not engaged in lines of
business other than the Business in the past. AVS has delivered to MUSE or its
counsel complete and correct copies of its certificate of incorporation and
bylaws, as currently in effect, and has heretofore made available to MUSE a
complete and correct copy of the charter and bylaws of each of its subsidiaries,
as currently in effect.
(b) All the outstanding shares of capital stock of, or other equity
interests in, each of AVS's subsidiaries have been validly issued and are fully
paid and non-assessable and are owned directly or indirectly by AVS, free and
clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever and free of any other
7
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests), except for
restrictions imposed by applicable securities laws, and no other person or
entity has any rights of any nature to acquire any securities of any of such
subsidiaries. Neither AVS nor any of its subsidiaries directly or indirectly
owns any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any corporation, partnership, joint venture or
other business association or entity (other than AVS' subsidiaries).
Section 2.2 Authority. AVS has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject in the case of the Merger to the adoption of this
Agreement by the Required AVS Vote (as defined in Section 2.32). AVS has all
requisite corporate power and authority to enter into the Escrow Agreement, and
to consummate the transactions contemplated thereby. The execution and delivery
of this Agreement and the Escrow Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of AVS, subject in the case of the Merger
to the adoption of this Agreement by the Required AVS Vote. This Agreement has
been duly executed and delivered by AVS and the Escrow Agreement, when executed
and delivered by AVS, will constitute legal, valid and binding obligations of
AVS, enforceable against AVS in accordance with its respective terms, except to
the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforceability of
creditors' rights in general and subject to general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
Section 2.3 Capitalization; Equity Interest.
(a) The authorized capital stock of AVS as of the date hereof consists,
and as of the Closing Date will consist, of (i) 12,000,000 shares of AVS Common
Stock, and (ii) 5,000,000 shares of Preferred Stock, $.10 par value. As of the
date hereof, 3,730,112 shares of AVS Common Stock are issued and outstanding,
187,266 shares of Series A Preferred Stock are issued and outstanding, 1,641,765
shares of Series B Preferred Stock are issued and outstanding, no shares of
Series C Preferred Stock are issued and outstanding, 3,236,530 shares of AVS
Common Stock and 1,920,000 shares of Series C Preferred Stock are reserved for
issuance pursuant to options and warrants granted on or prior to the date
hereof, no shares of AVS Common Stock are held in AVS's treasury and there are
no other shares of capital stock of AVS authorized, issued or outstanding. All
outstanding shares of AVS Capital Stock are, and all shares which may be issued
pursuant to the exercise of outstanding options and warrants when issued in
accordance with the respective terms thereof shall be, duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights. The Stock
Options have been duly authorized, have been validly executed, issued and
delivered by AVS, constitute the legal, valid and binding obligations of AVS,
and are enforceable as to AVS in accordance with their terms and the assumption
of the Stock Options as provided for in this Agreement is not prohibited by the
terms of the Stock Options or the Option Plan.
8
(b) Except as set forth in Section 2.3(a), there are no: (i) shares of
capital stock of AVS authorized, issued or outstanding, (ii) securities
convertible into or exchangeable or exercisable for, or any options, warrants,
calls, puts, subscriptions or other rights (preemptive or otherwise) to acquire,
directly or indirectly, any shares of capital stock of AVS or its subsidiaries,
(iii) agreements or contractual commitments, whether written or oral, relating
to the capital stock of AVS or any of its subsidiaries or obligating AVS or any
of its subsidiaries to issue, sell, repurchase, redeem or otherwise acquire any
shares of capital stock of AVS or any of its subsidiaries or any such
securities, options, warrants, calls, puts, subscriptions or other rights, (iv)
liens relating to any of capital stock of AVS or any of its subsidiaries, (v)
rights or contractual commitments of AVS or any of its subsidiaries (whether
written or oral) that give any Person (as defined in Section 8.2(b)) other than
AVS any right to reserve or exercise any benefits or rights similar to any
rights enjoyed by or accruing to the holder of shares of capital stock of AVS or
(vi) rights or contractual commitments of AVS or any of its subsidiaries
(whether written or oral) to provide funds to or make any investment in any
other Person. AVS has provided MUSE and Sub with a true and complete list, as of
the date hereof, of (i) all Stock Options to purchase AVS Common Stock and/or
Series C Preferred Stock that have been granted by AVS, (ii) the holder of each
of the Stock Options, (iii) the Option Plan under which each Stock Option was
issued, (iv) the number of Stock Options held by each such holder, (v) the
exercise prices of each such Stock Option, (vi) the date of grant of such Stock
Option, (vii) the expiration date of such Stock Option, (viii) whether such
Stock Option has vested as of the date hereof, and (ix) whether such Stock
Option is a non-qualified stock option or an incentive stock option within the
meaning of 422(b) of the Code. Except as set forth in Section 2.3(a) of the AVS
Disclosure Schedule, no shares of restricted stock or other equity-based awards
have been granted under the Option Plan or otherwise.
Section 2.4 Consents and Approvals; No Violation. Neither the execution
and delivery of this Agreement or the Escrow Agreement, nor the consummation of
the transactions contemplated hereby or thereby nor compliance by AVS with any
of the provisions hereof or thereof will (i) conflict with or result in a breach
of the certificate of incorporation, bylaws or other constitutive documents of
AVS or any of its subsidiaries, (ii) conflict with or result (with or without
notice or lapse of time or both) in a default (or give rise to any right of
reimbursement, termination, cancellation, modification or acceleration) under
any of the provisions of any note, bond, lease, mortgage, indenture, license,
franchise, permit agreement or other instrument or obligation to which AVS or
any of its subsidiaries is a party, or by which AVS or any of its subsidiaries
or their respective properties or assets may be bound or affected, except for
such conflict, breach or default as to which requisite waivers or consents are
described in Section 2.4 of the AVS Disclosure Schedule and are required to be
obtained prior to Closing, (iii) violate any Law, statute, rule or regulation or
order, writ, injunction, judgment or decree (each, an "Order") applicable to AVS
or any of its subsidiaries or their respective properties or assets or (iv)
result in the creation or imposition of any Lien upon any property or assets
used or held in connection with the Business. Except as set forth in Section 2.4
of the AVS Disclosure Schedule, no consent or approval by, or any notification
of or filing with, or other action of any Person (governmental or private) is
required in connection with the execution, delivery and performance by AVS of
this Agreement or any Transaction Agreement. There is no Proceeding (as defined
9
in Section 2.14) pending or, to the knowledge of AVS, threatened against AVS or
any of its assets or properties that seeks to prevent the consummation of the
transactions contemplated herein or in any Transaction Agreement.
Section 2.5 Books and Records. The minute books and other similar
records of AVS and each of its subsidiaries made available to MUSE prior to the
execution of this Agreement contain a true, correct and complete record of all
actions taken at all meetings and by all written consents in lieu of meetings of
the shareholders, the board of directors and committees of the board of
directors of AVS and each of its subsidiaries. The stock transfer ledger and
other similar records of AVS and each of its subsidiaries made available to MUSE
prior to the execution of this Agreement accurately reflect all record transfers
prior to the execution of this Agreement in the capital stock of AVS and each of
its subsidiaries. No Books and Records (as defined below) of AVS and each of its
subsidiaries have been recorded, stored, maintained, operated or are otherwise
wholly or partly dependent upon or held by any means (including any electronic,
mechanical or photographic process, whether computerized or not) which
(including all means or access thereto and therefrom) are not under the
exclusive ownership and direct control of AVS and each of its subsidiaries.
"Books and Records" means, collectively, all files, documents, instruments,
papers, books and records relating to the business or the condition of a
company, including financial statements, tax returns and related work papers and
letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds,
title policies, minute books, stock certificates and books, corporate seals,
stock transfer ledgers, contracts, licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental studies
and plans.
Section 2.6 Financial Statements; Certain Financial Information; EBIT.
(a) AVS has previously delivered to MUSE true and complete copies of
the following financial statements: (i) the unaudited balance sheet of AVS as of
March 31, 2000 and the related unaudited statements of operations and cash flows
of AVS for the three months then ended (such balance sheet as of March 31, 2000
is referred to herein as the "Interim Balance Sheet" and all of the financial
statement described in this clause (i) are referred to as the "Interim Financial
Statements"); and (ii) the audited balance sheets of AVS for the fiscal years
ended December 31, 1997, December 31, 1998 and December 31, 1999 and the related
audited statements of operations and cash flows of AVS for the fiscal years then
ended, certified by AVS's independent certified public accountants (the "Audited
Financials") (such financial statements described in clauses (i) and (ii) and
any notes thereto are hereinafter collectively referred to as the "Financial
Statements"). Each of the balance sheets included in the Financial Statements
is, and the Closing Balance Sheet (as
10
defined in Section 4.14) will be, true, complete and correct, and each of the
balance sheets included in the Financial Statements presents, and the Closing
Balance Sheet will present, fairly the financial position of AVS as of the
respective date of such balance sheet, in each case in accordance with GAAP,
subject, in the case of the Interim Balance Sheet and the Closing Balance Sheet,
to year-end adjustments and the absence of notes. Each of the statements of
operations and cash flows included in the Financial Statements is, and the
statements of operations and cash flows included in the Closing Financial
Statements (as defined in Section 4.14) will be, true, complete and correct, and
each of the statements of operations and cash flows included in the Financial
Statements presents, and the statements of operations and cash flows included in
the Closing Financial Statements will present, fairly the results of operations
of AVS for the periods set forth therein, in each case in accordance with GAAP,
subject, in the case of the Interim Balance Sheet and the Closing Balance Sheet,
to year-end adjustments and the absence of notes. The Financial Statements were,
and the Closing Financial Statements will be, compiled from the Books and
Records regularly maintained by management and used to prepare financial
statements of AVS in accordance with the principles stated therein. AVS has
maintained the Books and Records in a manner sufficient to permit the
preparation of the Financial Statements and the Closing Financial Statements in
accordance with GAAP. The Books and Records fairly reflect the income, expenses,
assets and liabilities of AVS and provide a fair and accurate basis for the
preparation of the Financial Statements and the Closing Financial Statements.
(b) All reserves established by AVS are reflected on the Interim
Balance Sheet and are adequate and are stated in accordance with GAAP, including
reserves for bad debt, vacation, sick leave and similar paid leave. There are no
loss contingencies that are required to be accrued by Statement of Financial
Accounting Standard No. 5 of the Financial Accounting Standards Board which are
not provided for on such Interim Balance Sheet.
(c) AVS generated at least $667,000 of EBIT (defined below) for the
twelve month period ended December 31, 1999. "EBIT" for any period for any
Person means such Person's net earnings before net interest expense and
provision for income taxes for such period, each as determined in accordance
with GAAP.
Section 2.7 Absence of Undisclosed Liabilities. Except as set forth on
Section 2.7 of the AVS Disclosure Schedule, AVS and each of its subsidiaries do
not have, and as a result of the transactions contemplated herein will not have,
any Indebtedness (as defined below), liabilities or obligations of any nature
(whether known or unknown, absolute, accrued, fixed, contingent, liquidated,
unliquidated or otherwise, and whether due or to become due), except for the
Indebtedness, liabilities and obligations (i) reflected on the Interim Balance
Sheet (including the notes thereto); (ii) incurred in the ordinary course of
business consistent with past practice since the date of the Interim Balance
Sheet and which do not exceed $25,000 individually or $100,000 in the aggregate
(the "Threshold Amount"); provided that, upon reaching the Threshold Amount, AVS
will not be required to set forth on Section 2.7 of the AVS Disclosure Schedule
each additional item of Indebtedness, liability or obligation which do not
exceed $10,000 individually; or (iii) pursuant to any Contract (as defined in
Section 2.13) set forth in Section 2.13 of the AVS Disclosure Schedule or not
required to be set forth therein due to dollar threshold or other parameter.
Notwithstanding the foregoing, on the Closing Date, (i) AVS and each of its
subsidiaries will have no pension liabilities and no contingent liabilities
required to be reported in accordance with GAAP, including as a result of the
transactions contemplated herein; (ii) any related party receivables of AVS and
each of its subsidiaries will have been collected; and (iii) AVS and each of its
subsidiaries will have no related party payables (accrued or unaccrued,
contingent or fixed), except as set forth in Section 2.7 of the AVS Disclosure
11
Schedule. "Indebtedness" means all obligations of AVS or any of its subsidiaries
as of any date, (i) for borrowed money, including such indebtedness payable to
any stockholder, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for which interest charges are customarily paid, (iv) under
conditional sale or other title retention agreements relating to property or
assets purchased by AVS or any of its subsidiaries, (v) issued or assumed as the
deferred purchase price of property or services (other than trade accounts
payable and accrued obligations incurred in the ordinary course of business
consistent with past practice), (vi) under capital leases, (vii) in respect of
interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements, (viii) as an account party
in respect of letters of credit and bankers' acceptances, (ix) with respect to
the issuance of preferred stock, (x) with respect to Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by AVS or any of its subsidiaries, (xi) in the nature of guarantees of
Indebtedness of others, (xii) with respect to any warrants and (xiii) with
respect to any negative cash balances, and other such similar amounts in each
case, as of such date, including accrued interest, premiums and penalties upon
prepayment as of such date provided, however, that Indebtedness does not include
accounts payable of AVS or any of its subsidiaries and other operating expenses
(such as payroll) incurred by AVS or any of its subsidiaries in the ordinary
course of business consistent with past practice.
Section 2.8 Absence of Certain Changes or Events. Except as set forth
in Section 2.8 of the AVS Disclosure Schedule, since December 31, 1999, neither
AVS nor any of its subsidiaries has:
(a) made any material change in its business or operations or in the
manner of conducting its business;
(b) suffered any event, violation or other matter that would have a
material adverse effect on the Business, condition (financial or otherwise),
assets, liabilities, operations, properties or prospects of AVS (a "Material
Adverse Effect"), and no fact or condition exists that would reasonably be
expected to cause a Material Adverse Effect in the future;
(c) suffered any material casualty loss (whether or not insured) or
condemnation or other taking;
(d) other than in the ordinary course of business, entered into any
employment or consulting contract or commitment (whether oral or written) or
compensation arrangement or employee benefit plan, or changed or committed to
change (including any change pursuant to any bonus, pension, profit-sharing or
other plan, commitment, policy or arrangement) the compensation payable or to
become payable to any of its officers, directors, employees, agents or
consultants, or made any pension, retirement, profit-sharing, bonus or other
employee welfare or benefit payment or contribution;
12
(e) declared, paid or made, or set aside for payment or making, any
dividend or other distribution in respect of its common stock or other capital
stock or securities, or directly or indirectly redeemed, purchased or otherwise
acquired any of its common stock or other capital stock or securities, or
combined or subdivided or in any way changed any of the terms or provisions of
its common stock or other capital stock or securities;
(f) paid (except for business payables incurred and paid in the
ordinary course of business consistent with past practice), loaned or advanced
any amount to or in respect of, or sold, transferred or leased any property or
assets (real, personal or mixed, tangible or intangible) to, or entered into,
amended or waived any rights under any transactions, agreements or arrangements
with or for the benefit of, any of its stockholders or any of their respective
Affiliates (as defined in Section 8.2(b)), associates or family members or any
of its officers or directors or any Affiliate or associate of its officers or
directors;
(g) made or proposed any change in any accounting or tax principles,
practices or methods, including its accounts payable or accounts receivable
practices and terms (including reserves), except for such changes which are both
(x) required by GAAP or by Law and (y) set forth in Section 2.8(g) of the AVS
Disclosure Schedule;
(h) incurred any liability (whether known or unknown, absolute,
accrued, fixed, contingent, liquidated, unliquidated or otherwise, and whether
due or to become due), except for current liabilities reflected on the Interim
Balance Sheet or incurred after the date of the Interim Balance Sheet in the
ordinary course of business consistent with past practice and not exceeding
$25,000 individually or $100,000 in the aggregate;
(i) canceled or waived rights with respect to any debts or other
obligations owed to or claims held by AVS (including the settlement of any
claims or litigation or other Proceeding);
(j) accelerated or delayed collection of notes or accounts receivable
generated by the Business in advance of or beyond their regular due dates or the
dates when the same otherwise would have been collected;
(k) terminated or amended or suffered the termination or amendment of
any Contract (as defined in Section 2.13) pursuant to which AVS or any of its
subsidiaries would receive from any Person or pay to any Person more than
$50,000 in any calendar year or disposed of or permitted to lapse any item of
Intellectual Property Rights (as defined in Section 2.12);
(l) made any capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets in excess of $50,000
(or $100,000 in the aggregate);
(m) incurred any Indebtedness; and
13
(n) agreed, whether in writing or otherwise, to take any action
described in this Section 2.8 or any action which, if taken after the date of
this Agreement without MUSE's consent, would constitute a breach under
Section 4.1.
Section 2.9 Real Property. Neither AVS nor any of its subsidiaries have
ever owned, nor will own as of the Closing Date, any real property or any option
to acquire any real property.
Section 2.10 Leases.
(a) All leases of real property as to which AVS or any of its
subsidiaries is the lessee or sublessee (the "Leased Real Property"), or
personal property as to which AVS or any of its subsidiaries is the lessee or
sublessee, are listed in Section 2.10 of the AVS Disclosure Schedule (true,
correct and complete copies of which have been delivered to MUSE). All such
leases are in full force and effect, are enforceable against AVS or its
subsidiaries and the other parties thereto and have not been modified or
amended, except as set forth in Section 2.10 of the AVS Disclosure Schedule.
There exists no default by AVS or any of its subsidiaries under any of such
leases or, to the knowledge of AVS, by any other party thereto, nor any event
which, with the giving of notice or the passage of time or both, would
constitute an event of default by AVS or any of its subsidiaries or any other
party thereunder.
(b) There are no leases of real or personal property leased or
subleased for the use or benefit of any Person other than AVS or any of its
subsidiaries to which AVS or any of is subsidiaries is a party.
Section 2.11 Title to Assets. AVS and each of its subsidiaries have
good, valid and marketable title to all of the assets shown on the Interim
Balance Sheet or acquired since the date of the Interim Balance Sheet, except
for assets sold in the ordinary course of business consistent with past practice
since the date of the Interim Balance Sheet not exceeding $25,000 individually
or $100,000 in the aggregate. Except as set forth in Section 2.11 of the AVS
Disclosure Schedule, such assets are free and clear of any Lien. Such assets are
in good operating condition, subject to ordinary wear and tear, and constitute
all of the assets, interests and rights held for use or used in connection with
the Business and constitute all those necessary to operate the Business as it is
currently conducted and in accordance with recent historical practice. All items
of personal property with a book value in excess of $5,000 are listed in Section
2.11 of the AVS Disclosure Schedule.
Section 2.12 Intellectual Property Rights.
(a) AVS and each of its subsidiaries is the exclusive owner of all
right, title and interest in and to each of the following that are used or
licensed in the Business as currently conducted:
14
(i) except as set forth in Section 2.12(a)(i) of the AVS Disclosure
Schedule, and except for commercially available computer software programs, all
computer programs, databases and associated system and user documentation (the
"Software Products");
(ii) all copyrights and copyright registrations owned by AVS or any of
its subsidiaries, including, without limitation, all copyrights and copyright
registrations owned by AVS or any of its subsidiaries listed in Section
2.12(a)(ii) of the AVS Disclosure Schedule and all copyrights and copyright
registrations in and to the Software Products;
(iii) all patentable inventions, patents and patent applications owned
by AVS or any of its subsidiaries, including, without limitation, all
inventions, patents and patent applications owned by AVS or any of its
subsidiaries listed in Section 2.12(a)(iii) of the AVS Disclosure Schedule and
all patentable inventions, patents and patent applications relating to or
embodied in the Software Products;
(iv) all Internet domain names and registrations, trademarks, service
marks and trade names, and the applications to register any of them in federal,
state or foreign jurisdictions, including, without limitation, all Internet
domain names and registrations, trademarks, service marks and trade names, and
the applications to register any of them in federal, state or foreign
jurisdictions owned by AVS or any of its subsidiaries listed in Section
2.12(a)(iv) of the AVS Disclosure Schedule and all Internet domain names and
registrations, trademarks, service marks and trade names, and the applications
to register any of them in federal, state or foreign jurisdictions now used or
contemplated to be used in connection with the Software Products; and
(v) except for such trade secrets as may be contained in the
third-party software programs listed in Section 2.12(a)(i) of the AVS Disclosure
Schedule, all trade secrets and other proprietary rights, including those
applicable to any of the Software Products, necessary or useful for the
operation of the business of AVS and each of its subsidiaries as currently
conducted.
These items referred to in subparagraphs (i) through (v) of this Section 2.12(a)
are herein referred to collectively as the "Intellectual Property Rights."
(b) Section 2.12(b) of the AVS Disclosure Schedule sets forth a list of
all licenses and similar agreements between AVS or any of its subsidiaries, on
the one hand, and third parties, on the other hand, under which AVS or any of
its subsidiaries is granted rights to make, use, sell, reproduce, distribute,
manufacture, prepare derivative works based upon, perform or display publicly,
or license items embodying the patent, copyright, trade secret, trademark or
other proprietary rights of such third parties. AVS is not, nor as a result of
the execution and delivery of this Agreement or any Transaction Agreement or the
performance of its obligations hereunder or thereunder will be, in violation of
or lose any rights pursuant to any license or similar agreement described in
Section 2.12(b) of the AVS Disclosure Schedule. Except as set forth in Section
2.12(b) of the AVS Disclosure Schedule, no Person is entitled to
15
any royalty, fee or other payment with respect to any such agreement or any
Intellectual Property Rights.
(c) Section 2.12(c) of the AVS Disclosure Schedule sets forth a list of
all agreements under which AVS or any of its subsidiaries has granted rights to
third parties under the Intellectual Property Rights other than in the ordinary
course of the business of AVS and its subsidiaries. Except as set forth in
Section 2.12(c) of the AVS Disclosure Schedule, all such rights granted have
been and are non-exclusive. True, correct and complete copies of all such
agreements have been delivered to MUSE.
(d) No claims with respect to any Intellectual Property Right have been
asserted or, to the knowledge of AVS, are threatened by any Person, nor does AVS
know of any valid grounds for any bona fide claims against the use by AVS or any
of its subsidiaries of any Intellectual Property Rights. All Internet domain
names granted and issued patents listed in Section 2.12(a)(iii) of the AVS
Disclosure Schedule, all trademarks, trade names and service marks and all
applications to register the same listed in Section 2.12(a)(iv) of the AVS
Disclosure Schedule, and all copyrights and copyrights registrations listed in
Section 2.12(a)(ii) of the AVS Disclosure Schedule are valid, enforceable and
subsisting. As of the date hereof, there has not been and there is not any
unauthorized use, infringement or misappropriation of any of the Intellectual
Property Rights by any third party, employee, consultant or former employee or
consultant of AVS or any of its subsidiaries.
(e) No Intellectual Property Rights are subject to any Order
restricting in any manner the use or licensing thereof by AVS or any of its
subsidiaries. Neither AVS nor any of its subsidiaries have entered into any
agreement to indemnify any other Person against any charge of infringement of
any third party intellectual property rights. Neither AVS nor any of its
subsidiaries have entered into any agreement granting any third party the right
to bring infringement actions or otherwise to enforce rights with respect to any
Intellectual Property Rights. Each of AVS and its subsidiaries has the exclusive
right to file, prosecute and maintain all applications and registrations with
respect to the Intellectual Property Rights.
(f) Each of the Software Products set forth in Section 2.12(a)(i) of
the AVS Disclosure Schedule is the most recent version of such Software Product.
Except as set forth in Section 2.12(f) of the AVS Disclosure Schedule, each of
the Software Products set forth in Section 2.12(f) of the AVS Disclosure
Schedule (the "Core Software Products") conforms substantially to the functional
and operational specifications set forth in the respective user manuals and
other documentation for such Core Software Product. Each of AVS and its
subsidiaries owns and has possession of all such technical documentation and
software tools (including, by way of example and not limitation, all source
code, compilers, system documentation, statements of principles of operation and
schematics, as applicable) for each of such Core Software Products as are
necessary and sufficient for the continued effective use, further development
and maintenance of the latest version of each such Core Software Product. The
current status of such conformity is set forth in brackets immediately following
the name
16
and version number of each such Core Software Product in Section 2.12(f) of the
AVS Disclosure Schedule.
(g) Except as set forth in Section 2.12(g) of the AVS Disclosure
Schedule, there are no restrictions on the direct or indirect transfer of any
Contract, or any interest therein, held by AVS or any of its subsidiaries in
respect of the Intellectual Property Rights or the Software Products. AVS has
delivered to MUSE prior to the date hereof documentation with respect to any
invention, process, design, computer program or other know-how or trade secret
included in the Intellectual Property Rights, which documentation is accurate in
all material respects and reasonably sufficient in detail and content to
identify and explain such invention, process, design, computer program or other
know-how or trade secret and to facilitate its full and proper use without
reliance on the special knowledge of any Person. Each of AVS and its
subsidiaries has taken the necessary security and other measures to protect the
secrecy, confidentiality and value of its trade secrets and other Intellectual
Property Rights.
(h) No former or present employee, consultant, officer or director of
AVS or any of its subsidiaries holds any right, title or interest, directly or
indirectly, in whole or in part, in or to any Intellectual Property Rights.
(i) The Intellectual Property Rights are sufficient and adequate for
AVS and each of its subsidiaries to carry on the Business as presently
constituted.
Section 2.13 Contracts. Section 2.13 of the AVS Disclosure Schedule
contains a true and complete list of all written and oral (and a brief
description of such oral agreements) material contracts, agreements and other
instruments (collectively, "Contracts") to which AVS is a party (i) relating to
Indebtedness or guaranty of performance or warranty of products or services,
(ii) of duration of six months or more from the date hereof and not cancelable
by AVS without material penalty on 30 days' or less notice, (iii) relating to
commitments in excess of $10,000, (iv) relating to the employment or
compensation of any director, officer, employee, consultant or other agent of
AVS, (v) relating to the sale or other disposition of any assets, properties or
rights, (vi) relating to the lease or similar arrangement of any machinery,
equipment, motor vehicles, furniture, fixture or similar property, (vii) to
which any federal, state or local governmental agency or authority is a party,
(viii) between AVS and any AVS stockholder or Affiliate of any AVS stockholder,
(ix) that restricts the operation of AVS anywhere in the world, (x) pursuant to
which AVS is or may be obligated to make payments, contingent or otherwise, on
account of or arising out of prior acquisitions or sales of businesses, assets
or stock of other Persons, (xi) providing for the license to AVS by third
parties of rights to use software or other technology or providing for the
performance of development services by or for any third party; or (xii) that is
otherwise material to AVS or entered into other than in the ordinary course of
business consistent with past practice. AVS is not in default under any such
Contract, and there has been no event that with the giving of notice or the
passage of time, or both, would constitute such a default or, to the knowledge
of AVS, any default, or event that with the giving of notice or the passage of
time, or both, would constitute such a default, by any other party thereto,
existing with respect to any such Contract except for such defaults which, in
the
17
aggregate, would result in loss or liability to AVS of no more than $15,000, and
AVS does not intend, and has not received notice that any party to any such
Contract intends, to terminate, amend, not renew or cancel any such Contract.
Each of the Contracts listed in Section 2.13 of the AVS Disclosure Schedule is
in full force and effect and constitutes a legal, valid and binding obligation
of AVS and, to AVS's knowledge, the other parties thereto, enforceable in
accordance with its terms. AVS has delivered to MUSE true and complete copies of
all written Contracts described in Section 2.13 of the AVS Disclosure Schedule.
AVS is not currently obligated to pay or liable for any amounts under any of the
Contracts, nor is AVS aware of any facts or circumstances that could result in
any claim under any Contract with respect to periods ending on or before the
date of this Agreement, in each instance, for which an accrual on the AVS
Financial Statements is or would have been required under GAAP and has not been
made.
Section 2.14 Litigation. Except as set forth in Section 2.14 of the AVS
Disclosure Schedule, there are no, nor have there been for the five years prior
to the date of this Agreement any, (i) investigations pending or, to the
knowledge of AVS, threatened affecting or potentially affecting AVS or any of
its subsidiaries or the Business, (ii) actions, causes of action, claims, suits,
proceedings, arbitrations, mediations or other alternative dispute resolution
procedures, orders, writs, injunctions or decrees (each, a "Proceeding") entered
against, involving, pending or, to the knowledge of AVS, threatened against AVS
or any of its subsidiaries, in each case affecting or potentially affecting the
operations of AVS or any of its subsidiaries, the Business, assets, properties
or prospects of AVS or any of its subsidiaries, at law or in equity, or before
or by any governmental entity, and (iii) existing or prior facts, circumstances
or conditions that could reasonably form the basis for a Proceeding against AVS
or any of its subsidiaries that would affect or potentially affect the
operations of AVS or any of its subsidiaries, the Business, assets, properties
or prospects of AVS or any of its subsidiaries. Each of AVS and its subsidiaries
is not in default with respect to any Order of any governmental entity. AVS has
delivered to MUSE accurate and complete copies of all documentation relating to
each Proceeding.
Section 2.15 Plants, Buildings, Structures, Facilities and Equipment.
No notice from any governmental entity has been received by AVS or any of its
subsidiaries requiring or calling attention to the need for any work, repair,
construction, alteration or installation on, or in connection with, any real
property or any of the plants, building, structures, facilities or equipment
located thereon. Neither AVS nor any of its subsidiaries has received
notification of any alleged violation of any applicable deed restrictions or
covenants or any building, zoning, subdivision, health, safety and other laws,
including the Americans with Disabilities Act and the Occupational Safety and
Health Act. No existing or prior facts or circumstances exist that could
reasonably form the basis of any such notification.
Section 2.16 Insurance. Set forth in Section 2.16 of the AVS Disclosure
Schedule is a complete and accurate list of all primary, excess and umbrella
policies, bonds and other forms of insurance currently owned or held by or on
behalf of or providing insurance coverage to AVS or the Business or maintained
by AVS for any officer, director or employee of AVS. All policies set forth in
Section 2.16 of the AVS Disclosure Schedule are in full force and
18
effect and shall remain in full force and effect through the Closing Date and
thereafter (until the scheduled expiration date or earlier termination caused by
MUSE), notwithstanding the Merger and without any consent of the insurer or
other action by AVS, MUSE or the insurer. With respect to all policies, all
premiums currently payable or previously due have been paid, and no notice of
cancellation or termination has been received by AVS with respect to any such
policy. All such policies are sufficient for compliance with all requirements of
law and of all Contracts to which AVS is a party or otherwise bound and are
valid, outstanding, enforceable and, to the knowledge of AVS, collectible
policies and provide insurance coverage that is adequate and customary for
businesses of similar size and type. Complete and accurate copies of all such
policies and related documentation have previously been delivered to MUSE.
Section 2.17 Employee Benefit Plans.
(a) Except as set forth in Section 2.17 of the AVS Disclosure Schedule,
neither AVS nor any ERISA Affiliate (as defined below) maintains or contributes
to, has ever maintained or contributed to, or has or has ever incurred any
liability (whether or not contingent) with respect to any employee benefit plan
or any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, stock appreciation right, retirement, vacation,
severance, disability, death benefit, hospitalization, medical, worker's
compensation, disability, supplementary unemployment benefits, or other plan,
arrangement or understanding (whether or not legally binding), or any
employment, severance, termination or any similar agreement (each, a "Plan").
"ERISA Affiliate" means (i) any corporation which at any time on or before the
Closing Date is or was a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as AVS; (ii) any partnership,
trade or business (whether or not incorporated) which at any time on or before
the Closing Date is or was under common control (within the meaning of Section
414(c) of the Code) with AVS; and (iii) any entity which at any time on or
before the Closing Date is or was a member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as either AVS, any
corporation described in clause (i) or any partnership, trade or business
described in clause (ii).
(b) Section 2.17 of the AVS Disclosure Schedule contains a list and a
brief, general description of each Plan. AVS has delivered to MUSE true and
complete copies of (A) each Plan, (B) the summary plan description, if any, for
each Plan, (C) the latest annual report, if any, which has been filed with the
Internal Revenue Service (the "IRS") for each Plan, (D) the most recent IRS
determination letter for each Plan that is a pension plan (as defined in Section
3(2) of ERISA) intended to be qualified under Code Section 401(a) and (E) copies
of reports for the three most recent Plan years showing compliance with
discrimination rules under those of Code Sections 401(a), 401(k), 401(m), 419,
419A, 505, 501(c)(9), 105(h), 125 or 129 applicable to such Plan. Each Plan
intended to be tax qualified under Sections 401(a) and 501(a) of the Code has
been determined by the IRS to be tax qualified under Sections 401(a) and 501(a)
of the Code, and, no amendment to or failure to amend any such Plan and, no
other circumstance or event has occurred that adversely affects its tax
qualified status. There has been no prohibited transaction within the meaning of
Section 4975 of the Code and Section 406 of Title I of the
19
Employee Retirement Income Retirement Security Act of 1974, as amended
("ERISA"), with respect to any Plan. AVS has no commitment, whether or not
legally binding, to create any additional employee benefit plan (as defined in
Section 3(3) of ERISA) or to change the terms of any existing Plan.
(c) Neither AVS nor any ERISA Affiliate has ever maintained an employee
benefit plan (as defined in Section 3(3) of ERISA) subject to the provisions of
Section 412 of the Code, Part 3 of Subtitle B of Title I of ERISA or Title IV of
ERISA.
(d) There are no Proceedings (as defined in Section 2.14) by any Plan
participant, Plan beneficiary or any representative thereof, (other than routine
claims for benefits) pending, or, to the knowledge of AVS, threatened, and no
facts or circumstances exist which could give rise to any Proceeding. AVS has
timely satisfied all funding, compliance and reporting requirements for all
Plans. No event or condition exists or is reasonably expected to occur in
connection with the administration of any Plan that would either (i) subject
MUSE or any of its Affiliates to any liability, contingent or otherwise to the
IRS, the Department of Labor ("DOL") or the Pension Benefit Guarantee
Corporation (other than any liability for premiums payments to the Pension
Benefit Guarantee Corporation) or (ii) cause the imposition of any lien on the
assets of MUSE or any of its Affiliates under the Code or ERISA. No Plan is the
subject of any pending application for administrative relief under any voluntary
compliance program or closing agreement program of the IRS or the DOL. With
respect to each Plan, AVS has timely paid all contributions (including employee
salary reduction contributions) and all insurance premiums that have become due,
and any such expense accrued but not yet due has been properly reflected in the
Financial Statements. Each Plan has been operated in accordance with its terms
and complies in all material respects with all applicable Laws.
(e) No Plan provides or is required to provide, now or in the future,
health, medical, dental, accident, disability, death or survivor benefits to or
in respect of any individual beyond termination of employment except to the
extent required under any state insurance Law or under Part 6 of Subtitle B of
Title I of ERISA and under Section 4980(B) of the Code (COBRA benefits). Except
to the extent of such COBRA benefits, no Plan covers any individual other than
an employee of AVS or dependents of employees under health and child care Plans
disclosed to MUSE.
(f) Except as set forth in Section 2.17 of the AVS Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement will not (A)
entitle any Person providing or that has provided services at anytime to AVS to
severance pay or termination benefits for which MUSE or any of its Affiliates
may become liable, (B) except as provided in Section 1.9, solely as a result of
their consummation, increase or accelerate any amount due under any Plan,
require assets to be set aside or other forms of security to be provided with
respect to any liability under any Plan, or result in any "parachute payment"
(within the meaning of Code Section 280G) under any Plan or (C) except as and to
the extent accrued or reserved for on the Interim Balance Sheet, obligate AVS or
any of its Affiliates to pay or otherwise be liable for any compensation
(including options, warrants, rights and similar
20
instruments), vacation days, pension contribution or other benefits to any such
Person for periods before the Closing Date or for personnel whom AVS does not
actually employ.
Section 2.18 Tax Matters.
(a) All federal, state, local and foreign tax returns and tax reports
required to be filed by AVS and its subsidiaries on or prior to the Closing Date
(giving effect to any valid requests for extension that have been, or will be,
validly filed and granted) have been or will be filed on a timely basis with the
appropriate governmental agencies in all jurisdictions in which such returns and
reports are required to be filed. All such returns and reports are and will be
true, correct and complete in all material respects and disclose all taxes
required to be paid by AVS and its subsidiaries. All federal, state, local and
foreign income, profits, franchise, sales, use, occupation, property, excise,
employment and other taxes (including interest, penalties and withholdings of
tax) due from and payable by AVS and its subsidiaries with respect to periods
through the Closing Date have been or will be fully paid on a timely basis or
will be adequately reserved for on the Interim Balance Sheet. Each of AVS and
its subsidiaries is not currently the beneficiary of any extension of time
within which to file any tax return, except that the periods for filing tax
returns for the year ending December 31, 1999 are currently on such extensions.
There are no Liens for taxes upon the assets of AVS and its subsidiaries except
for statutory liens for current taxes not yet due.
(b) No claim has ever been made by an authority in a jurisdiction where
each of AVS and its subsidiaries does not file tax returns that it is or may be
subject to taxation by that jurisdiction, and each of AVS and its subsidiaries
has not received any notice or request for information from any such authority.
(c) No issues have been raised with AVS or any of its subsidiaries by
the IRS or any other taxing authority in connection with any tax return or
report filed by AVS or any of its subsidiaries relating to AVS or its
subsidiaries, and there are no issues which, either individually or in the
aggregate, could reasonably result in any liability for tax obligations of AVS
or any of its subsidiaries relating to periods ending on or before the Closing
Date in excess of the accrued liability for taxes shown on the Interim Balance
Sheet. No waivers or extensions of statutes of limitations have been given or
requested with respect to AVS or any of its subsidiaries. Except as set forth in
Section 2.18(c) of the AVS Disclosure Schedule, neither AVS nor any of its
subsidiaries have been, or have received notice that AVS or any of its
subsidiaries may be, subject to an audit by any federal, state, local or foreign
tax authority.
(d) No material differences exist between the amounts of the book basis
and tax basis of assets that are not accounted for by an accrual on the books of
AVS and its subsidiaries for income tax purposes. AVS and its subsidiaries will
not be required to recognize for income tax purposes in a taxable year beginning
on or after the Closing Date any amount of income or gain which it would have
been required to recognize under the accrual method of accounting for tax
purposes in a tax period ending on or before the Closing Date as a result of the
21
installment method of accounting, the completed contract method of accounting,
the cash method of accounting or a change in method of accounting.
(e) All transactions or methods of accounting that could give rise to
an understatement of federal income tax (within the meaning of Section 6661 of
the Code for tax returns filed on or before December 31, 1990, and within the
meaning of Section 6662 of the Code for tax returns filed after December 31,
1990) have been adequately disclosed on the tax return in accordance with
Section 6661(b)(2)(B) of the Code for tax returns filed on or prior to December
31, 1990, and in accordance with Section 6662(d)(2)(B) of the Code for tax
returns filed after December 31, 1990.
(f) Each of AVS and its subsidiaries is not and has not been a United
States real property holding company (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(11) of the
Code.
(g) AVS and its subsidiaries have complied (and until the Closing will
comply) with all applicable Laws relating to the payment and withholding of
taxes (including withholding and reporting requirements under Section 1441
through 1464, 3401 through 3406, 6041 and 6049 of the Code and similar
provisions under any other Laws) and, within the time and in the manner
prescribed by Law, has withheld from wages, fees and other payments and paid
over to the proper governmental or regulatory authorities all amounts required.
(h) Each of AVS and its subsidiaries is not a party to any tax-sharing
or tax indemnity agreement or any other agreement of a similar nature that
remains in effect on the Closing Date.
(i) Each of AVS and its subsidiaries is not subject to any liability
under Treasury Regulations 1.1502-6 or any comparable provision of state, local
or foreign tax law or regulation.
(j) There are no tax rulings, requests for rulings, closing agreements
or changes of accounting method relating to AVS and any of its subsidiaries that
could affect their liability for Taxes for any period after the Closing. No
power of attorney with respect to any matter relating to Taxes of AVS and any of
its subsidiaries is currently in force. No excess loss account (as referred to
in Treasury Regulations Section 1.1502-19) exists with respect to any subsidiary
of AVS. AVS and its subsidiaries do not have any deferred gain or loss (i)
arising from deferred intercompany transactions (as referred to in Treasury
Regulations Section 1.1502-13), or (ii) with respect to the stock or
obligations of any other member of AVS's affiliated group (as described in
Treasury Regulations Section 1.1502-14). Neither AVS nor any of its subsidiaries
has filed a consent under Section 341(f) of the Code or any comparable provision
of state revenue statutes. No property of AVS or any of its subsidiaries is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
Neither AVS or any of its subsidiaries is a party to any lease made pursuant to
Section 168(f) of the Code. Any amount or other entitlement that could be
received (whether in cash or property or the vesting of property)
22
as a result of any of the transactions contemplated by this Agreement by any
employee, officer or director of AVS or any of its subsidiaries who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulations Section 1.280G-1) under any AVS Employee Plans or other compensation
arrangement entered into or in effect prior to the Closing would not be
characterized as an "excess parachute payment" or a "parachute payment" (as such
terms are defined in Section 280G(b)(1) of the Code).
(k) AVS does not file, and has never filed or been included in, a
consolidated Return for federal Income Tax purposes; provided that AVS was
included in a consolidated Return for federal Income Tax purposes with Stardent
Computer Inc. for the period November 15, 1991 (inception) through December 31,
1991.
(l) For purposes of this Agreement, except as otherwise expressly
provided, unless the context otherwise requires:
"income taxes" means any federal, state, local, or foreign income, or
franchise Tax and in each instance any interest, penalties, or additions to tax
attributable to such Tax;
"return" means any report, return, statement, estimate, declaration,
form, or other information required to be supplied to a taxing authority in
connection with Taxes; and
"tax" or "taxes" means taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or, including, without
limitation, income, gross receipts, ad valorem, value added, excise, real or
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes, estimated taxes, withholding, employment, social
security, workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer and gains taxes or
other governmental taxes imposed or payable to the United States, or any state,
county, local, or foreign government or subdivision or agency thereof, and in
each instance such term shall include any interest, penalties, or additions to
tax attributable to any such Tax.
Section 2.19 Environmental Matters.
(a) The operations of AVS and its subsidiaries comply with all
applicable federal, state, local, and foreign laws, codes, regulations,
requirements, directives, Orders and common law, and all administrative or
judicial interpretations thereof that may be enforced by any governmental
entity, other Person or court, relating to pollution, the protection of human
health, the protection of the environment or the emission, discharge, disposal,
storage, transportation, Release (as defined below) or threatened Release of
materials in or into the environment, including the Occupational Safety and
Health Act (collectively, "Environmental Laws"). "Release" means release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the environment or into or out of any property,
including the movement of Contaminants through or in the air, soil, surface
water, groundwater
23
or Leased Real Property or other property. "Contaminant" means any pollutant
contaminant, chemical or industrial, hazardous or toxic material or waste for
which liability or standards of conduct are imposed under Environmental Laws,
and includes asbestos or asbestos-containing materials, PCBs, and petroleum, oil
or petroleum or oil products or derivatives.
(b) Each of AVS and its subsidiaries has obtained all environmental,
health and safety Governmental Permits (as defined in Section 2.22) necessary
for the operation of the Business, and all such Governmental Permits are in full
force and effect and will not be revoked, suspended or otherwise adversely
affected by the consummation of the transactions contemplated hereby. Each of
AVS and its subsidiaries is in compliance with all terms and conditions of such
Governmental Permits.
(c) Neither AVS nor its subsidiaries is subject to any judicial,
administrative or other Proceeding, Order or settlement alleging or addressing a
violation of or liability or Indebtedness under any Environmental Law.
(d) Neither AVS nor its subsidiaries has received any notice or claim
(whether written or oral) to the effect that it is or may be liable to any
governmental entity or any other Person as a result of the Release or threatened
Release of a Contaminant, and, to the knowledge of AVS, there are no existing or
prior facts, circumstances or conditions that could reasonably form the basis
for such a notice or claim against AVS or any of its subsidiaries. Neither AVS
nor its subsidiaries has sent or arranged for the disposal of any Contaminant
generated by AVS or any of its subsidiaries or their respective operations to or
at any disposal site that (i) is undergoing, or, to the knowledge of AVS, could
reasonably be expected to undergo, remedial action; (ii) is listed or proposed
for listing on the National Priorities List pursuant to Comprehensive
Environmental Response, Compensation and Liability Act 42 U.S.C. ▇▇.▇▇. 9601 et
seq., any amendments thereto, any successor statutes, and any regulations or
guidance promulgated thereunder; or (iii) could give rise to any claim of
damages, fines, fees, penalties, deficiencies, losses or expenses (including
without limitation interest, court costs, fees of attorneys, accountants,
consultants and other experts or other expenses of litigation or other
Proceedings) or of any claim, default or assessment without regard to any
reserves therefor (collectively, a "Loss") on the part of AVS.
(e) Except as set forth in Section 2.19(e) of the AVS Disclosure
Schedule, there have been no environmental investigations, studies, audits,
tests, reviews or other analysis conducted by or on behalf of, or which are in
the possession of, AVS or any of its subsidiaries in relation to any site or
facility now or previously owned, operated or leased by AVS or any of its
subsidiaries which have not been delivered to MUSE prior to the execution of
this Agreement.
Section 2.20 Labor Relations; Employees.
(a) There is no labor strike, dispute, slowdown, stoppage or lockout
pending, affecting, or, to the knowledge of AVS, threatened against AVS or any
of its subsidiaries, and during the last five years there has not been any such
action, and there are no existing or prior
24
facts, circumstances or conditions that are reasonably likely to lead to such an
action. There are no union claims to represent the employees of AVS or any of
its subsidiaries, nor have there been any such claims within the last five
years. There is no written or oral contract, commitment, agreement,
understanding or other arrangement with any labor organization or multi-employer
or union benefit or pension fund, or work rules or practices agreed to with any
labor organization or employee association, applicable to employees of AVS or
any of its subsidiaries, nor is AVS or any of its subsidiaries a party to or
bound by any collective bargaining or similar agreement. There is, and within
the last five years has been, no representation of the employees of AVS or any
of its subsidiaries by any labor organization and, to the knowledge of AVS,
there are no union organizing activities among the employees of AVS or any of
its subsidiaries, nor does any question concerning representation exist
concerning such employees.
(b) Section 2.20(b) of the AVS Disclosure Schedule sets forth all
personnel policies, rules or procedures (whether written or oral) applicable to
employees of AVS and its subsidiaries, and AVS has delivered to MUSE complete
and accurate copies of all such written policies, rules or procedures plus
summaries of all oral policies, rules or procedures. Neither AVS nor any of its
subsidiaries have engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable Law, ordinance or regulation,
and each of AVS and it subsidiaries is and has for the past five years been in
compliance in all material respects with all applicable Laws respecting
employment and employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health. There is no unfair labor
practice charge or complaint against AVS pending or, to the knowledge of AVS,
threatened before the National Labor Relations Board or any similar state or
foreign agency, and there are no existing or prior facts, circumstances or
conditions that could reasonably be expected to form the basis therefor. There
is no grievance pending or, to the knowledge of AVS, threatened against AVS or
any of its subsidiaries arising out of any collective bargaining agreement or
other grievance procedure, and there are no existing or prior facts,
circumstances or conditions that could reasonably be expected to form the basis
therefor. There are no charges with respect to or relating to AVS or any of its
subsidiaries pending or, to the knowledge of AVS, threatened before the Equal
Employment Opportunity Commission or any other governmental entity responsible
for the prevention of unlawful employment practices, and there are no existing
or prior facts, circumstances or conditions that could reasonably be expected to
form the basis therefor. There are no workers compensation claims pending, and
AVS has no knowledge of any such potential claim. AVS has not received notice of
the intent of any government entity responsible for the enforcement of labor or
employment Laws to conduct an investigation with respect to or relating to AVS
or any of its subsidiaries and, to the knowledge of AVS, no such investigation
is in progress. No complaints, lawsuits or other Proceedings are pending or, to
the knowledge of AVS, threatened in any forum by or on behalf of any present or
former employee of AVS or any of its subsidiaries, any applicant for employment
or classes of the foregoing alleging breach of any express or implied Contract
for employment, any Law governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with any employment
relationship.
25
(c) Since the enactment of the Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN Act"), AVS and each of its subsidiaries have
not effectuated or experienced (i) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility used by AVS or any of its
subsidiaries; or (ii) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or facility used by AVS or any of its subsidiaries, nor has
AVS or any of its subsidiaries been affected by any transaction or engaged in
layoffs or employment terminations sufficient in number to trigger application
of any similar state or local Law. None of AVS's employees has suffered an
"employment loss" (as defined in the WARN Act) at any time prior to the Closing
Date.
(d) Each of AVS and its subsidiaries has complied with all employment
verification procedures including proper completion of Forms I-9 as it relates
to all of its current and former employees. Each of AVS and its subsidiaries has
complied with all applicable immigration, visa and work-related laws, codes and
regulations of the United States in general.
Section 2.21 Compliance with Law. Each of AVS and its subsidiaries has
complied for the past five years and is presently complying with all applicable
laws (whether statutory or otherwise), rules, regulations, orders, ordinances,
judgments, decrees or other pronouncements having the effect of any of the
foregoing, of all governmental entities having jurisdiction (collectively,
"Laws"), including the Federal Occupational Safety and Health Act and all Laws
relating to the safe conduct of business and environmental protection and
conservation, the Civil Rights Act of 1964 and Executive Order 11246 concerning
equal employment opportunity obligations of federal contractors and any
applicable health, sanitation, fire, safety, labor, zoning and building laws.
AVS has not received written notification of any asserted present or past
failure by AVS or any of its subsidiaries to so comply with the Laws and there
are no existing or prior facts, circumstances or conditions that could
reasonably be expected to form the basis for such notification or assertion. The
representations of this Section 2.21 are intended to be in addition to and not
as a qualification of Section 2.19 or any other Section in this Article II.
Section 2.22 Government Permits. Each of AVS and its subsidiaries owns,
holds or possesses all licenses, franchises, permits, privileges, immunities,
approvals and other authorizations from all governmental entities that are
necessary to entitle it to own or lease, operate and use its assets and to carry
on and conduct the Business substantially as currently conducted (herein
collectively called "Governmental Permits"). Such Governmental Permits are in
full force and effect, no violations are or have been recorded in respect
thereof, no Proceeding is pending, or, to the knowledge of AVS, threatened, to
revoke or limit any thereof or to affect the rights of AVS or any of its
subsidiaries under any thereof. AVS does not know of any basis for any such
Proceeding, and none of such Governmental Permits will be revoked, suspended or
otherwise adversely affected by the consummation of the transactions
contemplated hereby. Section 2.22 of the AVS Disclosure Schedule sets forth a
list and brief description of each Governmental Permit. Complete and correct
copies of all Governmental Permits have been delivered to MUSE.
26
Section 2.23 Bank Accounts; Powers-of-Attorney. Section 2.23 of the AVS
Disclosure Schedule contains a true and complete list of (i) all bank accounts
and safe deposit boxes of AVS and all Persons who are signatories thereunder or
who have access thereto and (ii) the names of all Persons holding general or
special powers-of-attorney from AVS and a summary of the terms thereof, true
copies of all such powers-of-attorney have been previously delivered to MUSE.
Section 2.24 Brokers or Finders. Except as set forth in Section 2.24 of
the AVS Disclosure Schedule, neither MUSE nor any of its Affiliates will have
any obligation to pay any broker's, finder's, investment banker's,
intermediary's, financial advisor's or similar fee in connection with this
Agreement or the transactions contemplated herein by reason of any action taken
by or on behalf of AVS or any of their respective Affiliates.
Section 2.25 Transactions with Affiliates.
(a) Except as set forth in Section 2.25(a) of the AVS Disclosure
Schedule, each of AVS and its subsidiaries has no outstanding Indebtedness,
liabilities or obligations of any nature (accrued or unaccrued, contingent or
fixed) for amounts owing to, or notes or accounts receivable from, or leases,
Contracts or other commitments or arrangements with or for the benefit of, any
of the AVS stockholders, or any of their respective Affiliates, associates or
family members, or any of AVS's directors, officers or employees or Affiliates
of any of the foregoing.
(b) As of the Closing Date, (i) all Indebtedness, liabilities and
obligations set forth in Section 2.25(a) of the AVS Disclosure Schedule shall
have been repaid in cash and in full, (ii) all amounts owing on notes and all
accounts receivable set forth in Section 2.25(a) of the AVS Disclosure Schedule
shall have been collected by AVS in cash and in full and (iii) all leases,
Contracts and other commitments and arrangements set forth in Section 2.25(a) of
the AVS Disclosure Schedule shall have been irrevocably terminated without
continuing liability on the part of MUSE or AVS.
(c) Since December 31, 1999, AVS has not made any payments, loans or
advances of any kind or paid any dividends or distributions of any kind to or
for the benefit of the AVS stockholders or any of their respective Affiliates,
associates or family members, other than as set forth in Section 2.8 of the AVS
Disclosure Schedule.
Section 2.26 Customers and Suppliers. Section 2.26 of the AVS
Disclosure Schedule sets forth a true and complete list of the names and
addresses of the ten largest suppliers (and for each such supplier the dollar
volume and percentage of total purchases of similar items from all suppliers of
such item) of products and services to AVS and the ten largest customers (and
for each such customer the dollar volume and percentage of total sales of AVS to
all customers) of products and services of AVS during the 12 months ended
December 31, 1998 and December 31, 1999, indicating any existing contractual
arrangements for continued supply from or to each such firm. Except as set forth
in Section 2.26 of the AVS Disclosure Schedule, there exists no actual or, to
the knowledge of AVS, threatened termination, cancellation or
27
limitation of, or any modification or change in, the business relationship of
AVS with any customer or group of customers which are listed in Section 2.26 of
the AVS Disclosure Schedule or which are otherwise material to the operations of
the Business, or with any supplier or group of suppliers which are listed in
Section 2.26 of the AVS Disclosure Schedule or which are otherwise material to
the operations of the Business, and AVS has not received any report or other
information from any employee, sales representative or other Person who reports
to AVS on such matters in the ordinary course of business regarding the
existence of any present or future condition or state of facts or circumstances
involving customers, suppliers or sales representatives (including the
consummation of the transactions contemplated in this Agreement) that would
materially adversely affect the Business or the prospects of AVS or the Business
or prevent the conduct of the Business after the consummation of the
transactions contemplated in this Agreement on substantially the same terms as
the Business has been conducted. AVS has delivered to MUSE copies of all written
Contracts or other arrangements and written summaries of any oral arrangements
with the customers and suppliers listed in Section 2.26 of the AVS Disclosure
Schedule.
Section 2.27 Accounts Receivable and Payables. The accounts and notes
receivable and all other receivables shown on the Interim Balance Sheet (subject
to reserves for non-collectibility as reflected therein), and all receivables
acquired or generated by AVS since March 31, 2000, are bona fide receivables and
represent amounts due with respect to actual, arm's-length transactions entered
into in the ordinary course of business consistent with past practice and AVS is
not aware of any facts or circumstances that would render such amounts
uncollectable in excess of the reserves for such recorded on the Interim Balance
Sheet. Such reserves for non-collectibility have been reflected on the Interim
Balance Sheet in accordance with GAAP and are adequate. No such account has been
assigned or pledged to any other Person, and no defense or set-off or similar
right to any such account has been asserted by the account obligor.
Section 2.28 Guarantees.
(a) Except as set forth in Section 2.28(a) of the AVS Disclosure
Schedule, none of the Indebtedness, liabilities or obligations of AVS is
guaranteed by AVS stockholders or their respective Affiliates, associates or
family members or by any of AVS's officers, directors or employees or Affiliates
of any of the foregoing.
(b) Except as set forth on Section 2.28(b) of the AVS Disclosure
Schedule, AVS is not a guarantor or co-obligor of any Indebtedness, liability or
obligation of any AVS stockholder or any AVS stockholder's Affiliates,
associates or family members or of AVS's officers, directors or employees or
Affiliates of any of the foregoing.
Section 2.29 Common Activities. In the conduct of the Business, the
assets of AVS have not been commingled with those of any Affiliate or associate
of AVS, and AVS has not engaged in any joint activities with regard to the
purchase or sale of products or services, failed to maintain appropriate
distinction between the Business and assets and property of AVS
28
and those of any other Person or engaged in any other acts or omitted to take
any other action which could reasonably be expected to form the basis for any
claim or assertion that AVS or its property or assets were responsible for any
Indebtedness, liability or obligation of any other Person.
Section 2.30 Disclosure. The representations and warranties by AVS in
this Agreement and the Escrow Agreement and the statements contained in the AVS
Disclosure Schedule or any other schedules, certificates, documents, exhibits
and agreements referred to herein or otherwise furnished or to be furnished by
AVS to MUSE pursuant to this Agreement or in connection with the transactions
contemplated hereby do not and will not contain any untrue statement of a
material fact and do not and will not omit to state any material fact necessary
to make the statements herein or therein not misleading. AVS has delivered to
MUSE or its counsel true and complete copies of all material certificates,
exhibits, schedules, agreements or documents and has notified MUSE or its
counsel of all events, facts, circumstances, violations or other matters that to
the best of its knowledge after due inquiry may have a Material Adverse Effect
on the Business, transactions contemplated in this Agreement or the Escrow
Agreement, or the business or operations of MUSE subsequent to the Merger.
Section 2.31 Information Supplied.
(a) None of the information supplied or to be supplied by AVS for
inclusion or incorporation by reference in (i) the Form S-4 (as defined in
Section 4.16) will, at the time the Form S-4 is filed with the Securities and
Exchange Commission (the "SEC"), at any time it is amended or supplemented or at
the time it becomes effective under the Securities Exchange Act of 1933, as
amended (the "Securities Act"), contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ii) the Proxy
Statement/Prospectus (as defined in Section 4.16) will, on the date it is first
mailed to AVS stockholders or MUSE stockholders or at the time of the AVS and
MUSE stockholders' meetings, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Form S-4 and the Proxy Statement/Prospectus
will comply as to form in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
Securities Act and the rules and regulations of the SEC thereunder.
(b) Notwithstanding the foregoing provision of this Section 2.31, no
representation or warranty is made by AVS with respect to statements made or
incorporated by reference in the Form S-4 or the Proxy Statement/Prospectus
based on information supplied by MUSE or Sub for inclusion or incorporation by
reference therein.
Section 2.32 Vote Required. Other than the Liquidation Preference
Waiver (as defined in Section 5.1(l)), the affirmative vote of the holders of a
majority of the AVS Common Stock, the Series A Preferred Stock and the Series B
Preferred Stock, each voting separately as a class, in accordance with
applicable law to adopt this Agreement and approve the Merger (the
29
"Required AVS Vote") is the only vote of the holders of any class or series of
AVS capital stock necessary to adopt this Agreement and approve the Merger and
the other transactions contemplated thereby. In addition, upon obtaining the
Required AVS Vote, the AVS Stockholders also shall have approved the appointment
of the Stockholder Representatives as their attorneys-in-fact and agents in
connection with this Agreement, the Escrow Amount and the Escrow Agreement as
further described in Section 4.15 (b).
Section 2.33 No Stockholder Agreements. Neither AVS nor, to its
knowledge, any stockholder of AVS has entered into any agreements, arrangements
or understandings with respect to the capital stock or voting of the capital
stock of AVS, except for any voting agreements as contemplated in the Letter of
Intent, dated May 4, 2000, between MUSE and AVS.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MUSE AND SUB
MUSE and Sub represent and warrant to AVS as follows:
Section 3.1 Organization, Standing and Qualification. MUSE is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
MUSE is duly qualified or licensed to do business and in good standing in each
jurisdiction in which its property is owned, leased or operated or the nature of
its business makes such qualification or licensing necessary, except where the
failure to be so duly qualified or licensed and in good standing would not in
the aggregate have a material adverse effect on MUSE. Sub is a corporation duly
organized, validly existing and in good standing under the laws of Delaware. Sub
has not engaged in any business (other than in connection with this Agreement
and the transactions contemplated hereby) since the date of its incorporation.
Section 3.2 Authority.
(a) MUSE has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. MUSE has
all requisite corporate power and authority to enter into the Escrow Agreement,
and to consummate the transactions contemplated thereby. The execution and
delivery of this Agreement and the Escrow Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of MUSE. This Agreement has been duly
executed and delivered by MUSE. This Agreement does, and, when executed and
delivered by MUSE, the Escrow Agreement will, constitute legal, valid and
binding obligations of MUSE, enforceable against MUSE in accordance with its
respective terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights in general and
30
subject to general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(b) Sub has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Sub. This Agreement has been duly executed and
delivered by Sub and constitutes legal, valid and binding obligations of Sub,
enforceable against Sub in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforceability of creditors'
rights in general and subject to general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).
Section 3.3 Capitalization. The authorized capital stock of MUSE
consists of 50,000,000 shares of MUSE Common Stock. As of the date hereof,
10,808,882 shares of MUSE Common Stock are issued and outstanding, 5,231,250
shares of MUSE Common Stock are reserved for issuance pursuant to options
granted or to be granted under the MUSE 1995 Stock Option Plan and the MUSE 1996
Stock Option Plan, 155,263 shares of MUSE Common Stock are held in MUSE's
treasury, and 2,810,033 shares are reserved for issuance pursuant to outstanding
warrants to purchase MUSE Common Stock, and there are no other shares of capital
stock of MUSE authorized, issued or outstanding, except as otherwise set forth
in this Agreement and the transactions contemplated hereby or as otherwise set
forth in the MUSE SEC Reports (as hereinafter defined).
Section 3.4 Validity; Issuance of Shares. The shares of MUSE Common
Stock being issued as Merger Consideration have been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
non-assessable. The shares of MUSE Common Stock when issued upon the exercise of
the MUSE Options and in accordance with the MUSE Stock Incentive Plan and Stock
Option Agreements will be duly authorized, validly issued, fully paid and
non-assessable. The MUSE Options have been duly authorized, and when executed
and delivered in accordance with this Agreement, will constitute the legal,
valid and binding obligations of MUSE, enforceable against MUSE in accordance
with their terms.
Section 3.5 Consents and Approvals; No Violation.
(a) Neither the execution and delivery of this Agreement or the Escrow
Agreement, nor the consummation of the transactions contemplated hereby or
thereby, nor compliance by MUSE with any of the provisions hereof or thereof
will (i) conflict with or result in a breach of the certificate of incorporation
or by-laws or other constitutive documents of MUSE, (ii) conflict with or result
(with or without notice or lapse of time or both) in a default (or give rise to
any right of reimbursement, termination, cancellation, modification or
acceleration) under any of the provisions of any note, bond, lease, mortgage,
indenture, license, franchise, permit agreement or other instrument or
obligation to which MUSE is a party, or by which MUSE or its properties or
assets may be bound or affected, except for such conflict, breach or
31
default as to which requisite waivers or consents are described in Section 3.5
of the disclosure schedule delivered to AVS prior to the date of this Agreement
(the "MUSE Disclosure Schedule") and are required to be obtained prior to
Closing, or (iii) violate any Law or Order applicable to MUSE or its properties
or assets; or (iv) result in the creation or imposition of any Lien upon any
property or assets used in MUSE's business. Except as set forth in Section 3.5
of the MUSE Disclosure Schedule, no consent or approval by, or any notification
of or filing with, or other action of any Person (governmental or private) that
has not been obtained is required in connection with the execution, delivery and
performance by MUSE of this Agreement or the Escrow Agreement. There is no
Proceeding pending or, to the knowledge of MUSE, threatened against MUSE or Sub
that seeks to prevent the consummation of the transactions contemplated herein
or in any Transaction Agreement to which MUSE is a party.
(b) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby or thereby nor compliance
by Sub with any of the provisions hereof will (i) conflict with or result in a
breach of the certificate of incorporation or by-laws or other constitutive
documents of Sub or (ii) violate any Law or Order applicable to Sub or the
properties or assets of Sub that would prevent or materially impair the
consummation of the transactions contemplated hereby.
Section 3.6 Brokers or Finders. Neither MUSE nor Sub will have any
obligation to pay any broker's, finder's, investment banker's, intermediary's,
financial advisor's or similar fee in connection with this Agreement or the
transactions contemplated herein by reason of any action taken by or on behalf
of MUSE or Sub.
Section 3.7 Information Supplied.
(a) None of the information supplied or to be supplied by MUSE for
inclusion or incorporation by reference in (i) the Form S-4 will, at the time
the Form S-4 is filed with the SEC, at any time it is amended or supplemented or
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) the Proxy Statement/Prospectus will, on the date it is first mailed to AVS
stockholders or at the time of the AVS stockholders' meetings, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The Form
S-4 and the Proxy Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act and
the rules and regulations of the SEC thereunder.
(b) Notwithstanding the foregoing provision of this Section 3.7, no
representation or warranty is made by MUSE with respect to statements made or
incorporated by reference in the Form S-4 or the Proxy Statement/Prospectus
based on information supplied by AVS for inclusion or incorporation by reference
therein.
32
Section 3.8 Public Reports. MUSE has and, at the Effective Time will
have, filed all required forms, reports and documents with the SEC since
November 16, 1998, (collectively, the "MUSE SEC Reports") all of which have and
shall have complied in all material respects with all applicable requirements of
the Securities Act and the Exchange Act, and MUSE is current in all of its
required filings under the Exchange Act. As of their respective dates of filing
in final or definitive form (or, if amended or superseded by a subsequent
filing, then on the date of such subsequent filing), none of the MUSE SEC
Reports, including, without limitation, any financial statements or schedules
included therein, contained or shall have contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Each of the balance
sheets (including the related notes) included in the MUSE SEC Reports fairly
presents the consolidated financial position of MUSE and its subsidiaries as of
the respective dates thereof, and the other related financial statements
(including the related notes) included therein fairly presented the consolidated
results of operations and changes in financial position of MUSE and its
subsidiaries for the respective periods indicated, except, in the case of
interim financial statements, for year-end audit adjustments, consisting only of
normal recurring accruals. Each of the financial statements (including the
related notes) included in the MUSE SEC Reports has been prepared in accordance
with GAAP consistently applied during the periods involved, except as otherwise
noted therein.
Section 3.9 Operation of the Surviving Corporation. Immediately
following the Effective Time, the Surviving Corporation will continue to operate
the prior AVS business as a separate subsidiary of MUSE. MUSE represents that it
has no current plans or intentions following the Effective Time to (i)
materially change the operations or location of operations of AVS as conducted
immediately prior to the Effective Time, (ii) cause the Surviving Corporation to
sell, transfer or otherwise dispose of any of its assets, except for
dispositions made in the ordinary course of business or for the payment of
expenses incurred by the Surviving Corporation in the Merger, (iii) liquidate
the Surviving Corporation, (iv) merge the Surviving Corporation with or into
another corporation, including MUSE or its Affiliates, (v) sell, distribute or
otherwise dispose of the common stock of the Surviving Corporation, (vi) issue
additional shares of stock (or rights to acquire shares of stock) of the
Surviving Corporation that would result in MUSE losing control of the Surviving
Corporation within the meaning of Section 368(c) of the Code, or (vii) reacquire
any of the MUSE Common Stock issued in the Merger.
Section 3.10 Disclosure. The representations and warranties by MUSE in
this Agreement and the Escrow Agreement and the statements contained in the MUSE
Disclosure Schedule or any other schedules, certificates, documents, exhibits
and agreements referred to herein or otherwise furnished or to be furnished by
MUSE to AVS pursuant to this Agreement or in connection with the transactions
contemplated hereby do not and will not contain any untrue statement of a
material fact and do not and will not omit to state any material fact necessary
to make the statements herein or therein not misleading.
33
ARTICLE IV
COVENANTS
Section 4.1 Conduct of Business.
(a) From the date hereof until the Closing Date, except as otherwise
consented to by MUSE in writing, AVS shall operate the Business only in the
ordinary course of business consistent with past practice.
(b) Without limiting the generality of the foregoing, (i) AVS shall use
all reasonable efforts to preserve intact in all material respects AVS's present
business organization and reputation and to preserve its relationships with
employees, creditors, customers and suppliers and others having significant
business relationships with AVS, (ii) AVS shall not, without the prior written
consent of MUSE, directly or indirectly, cause or permit any state of affairs,
action or omission described in clauses (a) through (n) of Section 2.8, and
(iii) AVS shall not take, or agree to commit to take, any action that would make
any representation or warranty of AVS contained herein inaccurate in any
material respect at, or as of any time prior to, the Closing Date.
Section 4.2 Access to AVS Information.
(a) AVS shall (i) give MUSE and its officers, directors, employees,
agents, counsel, accountants, financial advisors, existing lenders, consultants
and other representatives (collectively, "Representatives") reasonable access,
upon reasonable prior notice, to all officers and accountants of AVS and to all
Books and Records, offices and other facilities and properties utilized by AVS
in connection with the Business and all information relating to AVS, the
Business and the properties, assets, Contracts, financial condition, results of
operations and prospects of AVS as MUSE or its Representatives may reasonably
request, (ii) permit MUSE and its Representatives to make such inspections
thereof and, with the prior consent of AVS (which shall not be unreasonably
withheld), interview such personnel, customers and vendors of AVS during normal
business hours as MUSE or its Representatives may reasonably request, (iii)
cause AVS's officers and auditors to furnish MUSE and its Representatives with
such financial and operating data and other information with respect to the
items set forth in clause (i) as MUSE or its Representatives may from time to
time reasonably request, and cause the auditors to deliver their work papers
related to such information if MUSE or its Representatives shall so request, and
(iv) at MUSE's or its Representatives' reasonable request, cause AVS's officers
to compile information that has not been compiled for another purpose.
(b) MUSE shall hold any such information which is nonpublic in
confidence in accordance with the provisions of the confidentiality agreements,
dated April 7, 2000 and April 17, 2000 between AVS and MUSE.
34
Section 4.3 Best Efforts.
(a) Upon the terms and subject to the conditions of this Agreement,
each of the parties hereto agrees to use its best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws and regulations to consummate and make
effective the transactions contemplated in this Agreement as promptly as
practicable, including (i) the preparation and filing of any forms,
registrations and notices required to be filed to consummate the transactions
contemplated in this Agreement and the taking of such actions as are necessary
to obtain any requisite approvals, consents, Orders, exemptions or waivers by
any third party or governmental entity and (ii) the satisfaction of all
conditions to Closing. Each party shall promptly consult with the other with
respect to, provide any necessary information not subject to legal privilege
with respect to and, except as otherwise not permitted by Law, provide the other
(or its Representatives) copies of, all filings made by such party with any
governmental entity or any other information supplied by such party to a
governmental entity in connection with this Agreement and the transactions
contemplated by this Agreement or as otherwise reasonably requested.
(b) Each party hereto shall promptly inform the other of any
communication from any governmental entity regarding any of the transactions
contemplated by this Agreement. If any party or Affiliate thereof receives a
request for additional information or documentary material from any such
governmental entity with respect to the transactions contemplated by this
Agreement, then such party will endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation with the other
party(ies), an appropriate response in compliance with such request.
(c) Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to require MUSE or any of its Affiliates to enter into any agreement with
any governmental entity or to consent to any Order requiring any of them to
hold, separate or divest, or to restrict the dominion or control of any of them
over, any of their respective assets, properties or businesses or to submit to
the laws and regulations of such governmental entity or qualify to do business
or submit to process in any other jurisdiction.
Section 4.4 No Solicitation by AVS. AVS shall immediately cease any
existing discussions or negotiations with any third parties conducted prior to
the date hereof with respect to any Business Combination (as defined below). For
a period from the date hereof to the Closing Date, AVS shall not, and AVS shall
cause its respective Affiliates and Representatives not to, directly or
indirectly, take any action to (i) initiate, assist, solicit, receive,
negotiate, encourage or accept any offer or inquiry from any Person with respect
to a Business Combination or engage in any Business Combination, (ii) reach any
agreement or understanding (whether or not such agreement or understanding is
absolute, revocable, contingent or conditional) for, or otherwise attempt to
consummate, any Business Combination or (iii) furnish or cause to be furnished
any information with respect to AVS to any Person (other than as expressly
provided in Section 4.2 of this Agreement) who AVS or any of its respective
Affiliates or Representatives knows or has reason to believe is in the process
of considering any Business
35
Combination. If AVS or any of its respective Affiliates or Representatives
receives from any Person any offer, inquiry or informational request referred to
above (an "Acquisition Proposal"), AVS will, or will cause such Affiliate or
Representative to, promptly advise such Person, by written notice, of the terms
of this Section 4.4 and promptly, orally and in writing, advise MUSE of such
offer, inquiry or informational request. "Business Combination" means any
merger, consolidation or combination to which AVS is a party, any sale,
dividend, split or other disposition of the capital stock of or other equity
interest in AVS or any sale, dividend or other disposition of any of the assets
and properties of AVS, other than in the ordinary course of business and the
transactions contemplated herein.
Section 4.5 Fees and Expenses. MUSE and Sub, on the one hand, and AVS,
on the other hand, shall pay their own fees, costs and expenses incurred in
connection with the preparation and negotiation of this Agreement and the
transactions contemplated herein, including the performance of such party's
obligations hereunder (including, but not limited to, the fees and disbursements
of counsel and advisors).
Section 4.6 Public Announcements. None of MUSE, Sub or AVS will, and
each will cause its respective Affiliates and Representatives not to, issue or
cause the publication of any press release or otherwise make any public
statement with respect to the transactions contemplated herein without the prior
written consent of the parties hereto, provided that any party hereto may make a
public announcement to the extent required by any applicable Law or Order
(including the rules, regulations or interpretations of the Securities and
Exchange Commission or any national securities exchange), which required public
disclosure shall be submitted to the non-disclosing party sufficiently in
advance to afford such non-disclosing party an opportunity to comment on such
disclosure.
Section 4.7 Books and Records. AVS shall maintain all Books and Records
in the regular and customary manner as such Books and Records have been
maintained consistent with past practices.
Section 4.8 Compliance with Laws, Orders and Contracts. AVS shall
comply in all material respects with all Laws, Orders and Contracts applicable
to the Business or to AVS and, promptly following receipt thereof, give MUSE
copies of any notice received from any governmental entity or other Person
alleging any violation of any such Law, Order or Contract.
Section 4.9 Certain Activities between Signing and Closing.
(a) From the date hereof until the Closing, except as required by Law,
without the prior written consent of MUSE, AVS shall not make or change any tax
election, change any annual tax accounting period, adopt or change any method of
tax accounting, file any amended tax return, enter into any closing agreement,
settle any material tax claim or assessment, surrender any right to claim a tax
refund, consent to any extension or waiver of the limitations period applicable
to any tax claim or assessment or take or omit to take any other action, if any
such other action or omission would have the effect of increasing the tax
liability or decreasing
36
any tax benefit or tax refund or similar matter of AVS or MUSE as a result of
the transactions contemplated herein.
(b) All tax returns with respect to AVS (i) shall, to the extent
required to be filed on or before the Closing Date (taking into account any
valid extensions), be filed by AVS when due in accordance with all applicable
Laws and (ii) shall, as of the time of filing, correctly reflect in all material
respects the facts regarding the income, business, assets, operations,
activities and status of AVS and any other information required to be shown
therein.
(c) From the date hereof until the Closing, without the prior written
consent of MUSE, AVS shall not amend or adopt any Plan, except as required by
Law.
Section 4.10 Tax Matters.
(a) MUSE shall file with the appropriate tax authorities all federal,
state, local and foreign tax returns and tax reports required to be filed on
behalf of AVS or Sub for any taxable period (or portion thereof) ending after
the Closing Date. With respect to any return or report that may affect the
liability of the AVS Stockholders under Article VI, MUSE will allow the
Stockholder Representatives on behalf of the AVS Stockholders an opportunity to
review and comment upon any such report or return at least thirty (30) days
prior to its filing. MUSE will take no position on any such returns or reports
that is inconsistent with AVS's past custom and practice and that would
adversely affect the AVS Stockholders, except to the extent that such position
is either required by law or a taxing authority. MUSE also shall not make any
amendment to any report or return that may affect the liability of the AVS
Stockholders under Article VI, without the Stockholder Representatives' (on
behalf of the AVS Stockholders) prior written consent. In the event that the
parties cannot agree as to any disputed item on any return or report within ten
(10) business days after the Stockholder Representatives' notice of objections,
the parties shall jointly select a firm of nationally recognized independent
accountants (or, if they cannot agree on the selection of such a firm within 5
business days, then MUSE and the Stockholder Representatives shall, within an
additional 3 business days, each select its own nationally recognized
independent accounting firm, which two firms shall select a third nationally
recognized accounting firm) to resolve the dispute within an additional 5
business days. Such firm's determination shall be final and binding on the
parties, and any expenses relating to the engagement of such firm shall be split
by the parties.
(b) The Stockholder Representatives shall have the right to control any
audits of or administrative or court proceedings to the extent they relate to
taxable periods of AVS that affect the liability of the AVS Stockholders under
Article VI. In such matters, the Stockholder Representatives shall have the
right to employ counsel of their own choice, but reasonably satisfactory to
MUSE, and at its own expense, MUSE (and its counsel) shall have the right to
participate in any audits or other proceedings, and the Stockholder
Representatives shall have the right to settle the issues as to which they are
obligated to make full indemnification. Notwithstanding the foregoing, neither
the Stockholder Representatives nor the AVS Stockholders shall be entitled to
settle, either administratively or after the commencement of
37
litigation, any claim for taxes of AVS, or otherwise bind AVS, if such
settlement would adversely affect MUSE (including, without limitation, the
imposition of income tax deficiencies, a change of accounting method, the
reduction of asset basis or cost adjustments, the lengthening of any
amortization or depreciation periods, the denial of amortization or depreciation
deductions or the reduction of loss or credit carry forwards), without the prior
written consent of MUSE, which consent shall not be unreasonably withheld.
(c) After the Closing Date, MUSE and the former officers and directors
of AVS shall:
(i) assist in all reasonable respects (and cause their respective
Affiliates to assist) the other party in preparing any tax returns or reports
which such other party is responsible for preparing and filing in accordance
with this Section 4.10;
(ii) cooperate in all reasonable respects with each other in
preparing for any audits of, or disputes with taxing authorities regarding, the
tax returns of AVS including providing powers of attorney to authorized
representatives of the AVS Stockholders;
(iii) make available to the other and to any taxing authority, as
reasonably requested, all information, records and documents relating to taxes
of AVS and in connection therewith, AVS shall retain all such records until the
expiration of the applicable period for the assessment of tax including
extensions thereof;
(iv) provide timely notice to the other in writing of any pending
or threatened tax audit or assessments of AVS for taxable periods for which the
other may have a liability under this Section 4.10; and
(v) furnish the other with copies of all correspondence received
from any taxing authority in connection with any tax audit or information
request with respect to any such taxable period.
(d) All taxes that are not due and payable on or prior to the Closing
Date but which relate to a tax period ending on or prior to the Closing Date
shall be paid from the Escrow Amount when due but only to the extent such taxes
exceed the amount accrued (to the extent such accruals are consistent with past
practice) on the Interim Balance Sheet and amounts arising in the ordinary
course of business between the Interim Balance Sheet date and the Closing.
Section 4.11 AVS Employee and Affiliate Non-Disclosure. AVS shall
require each of the AVS employees listed on Schedule B to enter into MUSE's
standard confidentiality and trade secrets/invention agreements, each in the
form of Exhibit J1; provided, however, that such employees shall not be required
to enter into MUSE's standard confidentiality and trade secrets/invention
agreement if a substantially similar agreement is currently in effect between
such employees and AVS; and provided, further, that (i) the form of agreement
regarding proprietary information and inventions, non-competition, arbitration,
at-will employment and
38
other matters attached as Exhibit J2 shall be deemed so to be substantially
similar and (ii) there shall be appropriate modifications in such forms of
agreements with respect to employees listed on Schedule B who are not based in
the United States to reflect customary business practices in the software
industry in the country in which the employee is based.
Section 4.12 Expenditures. AVS agrees that it will not make any capital
expenditure in excess of $50,000 (or $100,000 in the aggregate) or engage in any
extraordinary corporate or business transactions, including, but not limited to,
stock splits, dividends, repurchases or recapitalizations, without the express
written approval of MUSE.
Section 4.13 Closing Financial Statements. On the business day prior to
the Closing Date, AVS shall deliver to MUSE an unaudited balance sheet (the
"Closing Balance Sheet") as of the end of the month immediately preceding the
Closing Date (the "Determination Date") and the related unaudited statements of
operations and cash flows for the period from January 1, 2000 through the
Determination Date, each prepared in accordance with GAAP subject to year-end
adjustments and the absence of notes (together with the Closing Balance Sheet,
the "Closing Financial Statements").
Section 4.14 Employee Benefits Matters. All AVS employees shall
continue on their existing benefit plans until such time after the Closing, in
MUSE's sole and absolute discretion, as MUSE decides to convert to employee
benefit plans and programs maintained by MUSE at that time.
Section 4.15 Preparation of Proxy Statement; Stockholders Meeting.
(a) As promptly as reasonably practicable following the date hereof,
MUSE and AVS shall prepare and file with the SEC mutually acceptable proxy
materials which shall constitute the Proxy Statement/ Prospectus (such proxy
statement/prospectus, and any amendments or supplements thereto, the "Proxy
Statement/Prospectus") and MUSE shall prepare and file a registration statement
on Form S-4 (the "Form S-4") with respect to the issuance of MUSE Common Stock
in the Merger (the "Share Issuance"). The Proxy Statement/Prospectus will be
included in and will constitute a part of the Form S-4 as MUSE's prospectus. The
Form S-4 and the Proxy Statement/Prospectus shall comply as to form in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act and the rules and regulations thereunder. Each of MUSE and AVS
shall use reasonable best efforts to have the Form S-4 declared effective by the
SEC and to keep the Form S-4 effective as long as is necessary to consummate the
Merger and the transactions contemplated thereby. MUSE and AVS shall, as
promptly as practicable after receipt thereof, provide the other party copies of
any written comments and advise the other party of any oral comments, with
respect to the Proxy Statement/Prospectus received from the SEC. MUSE will
provide AVS with a reasonable opportunity to review and comment on any amendment
or supplement to the Form S-4 prior to filing such with the SEC, and will
provide AVS with a copy of all such filings made with the SEC. Notwithstanding
any other provision herein to the contrary, no amendment or supplement
(including by incorporation by reference) to the Proxy Statement/Prospectus or
the Form S-4
39
shall be made without the approval of both parties, which approval shall not be
unreasonably withheld or delayed; provided, that with respect to documents filed
by a party which are incorporated by reference in the Form S-4 or Proxy
Statement/Prospectus, this right of approval shall apply only with respect to
information relating to the other party or its business, financial condition or
results of operations; and provided, further, that AVS, in connection with a
Change in the AVS Recommendation (as defined below), may amend or supplement the
Proxy Statement/Prospectus or Form S-4 (including by incorporation by reference)
pursuant to a Qualifying Amendment (as defined below) to effect such a Change,
and in such event, this right of approval shall apply only with respect to
information relating to the other party or its business, financial condition or
results of operations, and shall be subject to the right of each party to have
its Board of Directors' deliberations and conclusions to be accurately
described. A "Qualifying Amendment" means an amendment or supplement to the
Proxy Statement/Prospectus or Form S-4 (including by incorporation by reference)
to the extent it contains (i) a Change in the AVS Recommendation, (ii) a
statement of the reasons of the Board of Directors of AVS for making such Change
in the AVS Recommendation and (iii) additional information reasonably related to
the foregoing. AVS will use reasonable best efforts to cause the Proxy
Statement/Prospectus to be mailed to AVS's stockholders, in each case after the
Form S-4 is declared effective under the Securities Act. MUSE shall also take
any action (other than qualifying to do business in any jurisdiction in which it
is not now so qualified or to file a general consent to service of process)
required to be taken under any applicable state securities laws in connection
with the Share Issuance and AVS shall furnish all information concerning AVS and
the holders of AVS Capital Stock as may be reasonably requested in connection
with any such action. Each party will advise the other party, promptly after it
receives notice thereof, of the time when the Form S-4 has become effective, the
issuance of any stop order, the suspension of the qualification of the MUSE
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4. If at any time prior to the Effective Time
any information relating to MUSE or AVS, or any of their respective affiliates,
officers or directors, should be discovered by MUSE or AVS which should be set
forth in an amendment or supplement to any of the Form S-4 or the Proxy
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other party hereto and, to the extent required by law, rules or
regulations, an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and disseminated to the stockholders of
AVS.
(b) AVS shall duly take (subject to compliance with the provisions of
Section 2.31 (provided that AVS shall have used reasonable best efforts to
ensure that such representations are true and correct)) all lawful action to
call, give notice of, convene and hold a meeting of its stockholders on a date
as soon as reasonably practicable in accordance with the DGCL (the "AVS
Stockholder Meeting") or solicit its stockholders by written consent for the
purpose of obtaining the Required AVS Vote with respect to the transactions
contemplated by this Agreement, which vote shall constitute the consent of the
AVS Stockholders to the provisions of this Agreement applicable to the AVS
Stockholders and the irrevocable
40
appointment of the Stockholder Representatives, and each of them, as their true
and lawful attorneys-in-fact and agents, with full power of substitution, to act
solely and exclusively on behalf of, and in the name of, the AVS Stockholders
with respect to any matters relating to this Agreement, the Escrow Amount, the
Escrow Agreement or any agreement, instrument, document or certificate to be
executed and delivered by or on behalf of the AVS Stockholders pursuant hereto
and thereto, with the full power, without the further consent of the AVS
Stockholders, to exercise as the Stockholder Representatives in their sole
discretion deem appropriate, all of the powers which the AVS Stockholders could
exercise under the provisions of this Agreement and the Escrow Agreement or any
document or certificate to be executed and delivered by or on behalf of the AVS
Stockholders pursuant thereto, including, without limitation, to (i) accept and
give notices on behalf of any or all of the AVS Stockholders, (ii) consent to
any modifications or amendments, (iii) give any waiver or consents, (iv) execute
stock powers pursuant to the Escrow Agreement, and (v) take any and all other
actions required or permitted to be taken by the AVS Stockholders or any one or
more of them, in connection with this Agreement, the Escrow Agreement and all
other agreements, instruments, certificates or other documents delivered in
connection therewith, provided that the Stockholder Representatives shall not be
obligated to take any action under this Agreement or the Escrow Agreement
without the receipt by them of agreements, reasonably satisfactory to the
Stockholder Representatives, of one or more of the AVS Stockholders to indemnify
the Stockholder Representatives for all losses, liability, cost or expense
associated with service as a Stockholder Representative pursuant to this
Agreement or the Escrow Agreement, provided further that the Stockholder
Representatives shall have no liability to any AVS Stockholder for their actions
taken in good faith in connection with their services as Stockholder
Representatives (collectively, the "Escrow Consent"); and shall take all lawful
action to solicit the adoption of this Agreement by the Required AVS Vote; and
the Board of Directors of AVS shall recommend adoption of this Agreement by the
stockholders of AVS (the "AVS Recommendation"), and shall not withdraw, modify
or qualify (or propose to withdraw, modify or qualify) (a "Change") in any
manner adverse to MUSE such recommendation or take any action or make any
statement in connection with the AVS Stockholders Meeting inconsistent with such
recommendation (collectively, a "Change in the AVS Recommendation"); provided
the foregoing shall not prohibit accurate disclosure (and such disclosure shall
not be deemed to be a Change in the AVS Recommendation) of factual information
regarding the business, financial condition or results of operations of MUSE or
AVS or the fact that an Acquisition Proposal has been made, the identity of the
party making such proposal or the material terms of such proposal (provided,
that the Board of Directors of AVS does not withdraw, modify or qualify (or
propose to withdraw, modify or qualify) in any manner adverse to MUSE its
recommendation) in the Form S-4 or the Proxy Statement/Prospectus or otherwise,
to the extent such information, facts, identity or terms is required to be
disclosed under applicable law; and provided further, that the Board of
Directors of AVS may make a Change in the AVS Recommendation prior to the AVS
Stockholders Meeting or the conclusion of the consent solicitation if (i) the
Board of Directors of AVS determines in good faith that an event, violation or
other matter that would have a material adverse effect on the business,
condition (financial or otherwise), assets, liabilities or operations has
occurred with respect to MUSE (a "MUSE Material Adverse Effect") and (ii) the
Board of Directors of AVS determines in good faith that, by reason of its
determination in clause (i) the failure to effect such Change in
41
the AVS Recommendation would create a substantial probability of violating the
fiduciary duties of the AVS Board of Directors under applicable law.
Notwithstanding any Change in the AVS Recommendation, this Agreement shall be
submitted to the stockholders of AVS at the AVS Stockholders Meeting for the
purpose of adopting the Agreement and approving the Merger; provided that this
Agreement shall not be required to be submitted to the stockholders of AVS at
the AVS Stockholders Meeting if this Agreement has been terminated pursuant to
Article VII hereof.
Section 4.16 Pooling. Each of AVS and MUSE agree not to take any action
that would adversely affect the ability of MUSE to treat the Merger as a pooling
of interests and each of AVS and MUSE agree to take such action as may be
reasonably required to negate the impact of any past or future actions that
would adversely impact the ability of MUSE to treat the Merger as a pooling of
interests. MUSE shall obtain a letter from ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., P.C.,
MUSE's independent public accountants, with respect to MUSE, and from ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, LLP, AVS's independent public accountants, with respect to AVS, dated
the date of the Proxy Statement/Prospectus, and confirmed in writing at the
Effective Date, to the effect that each of AVS and MUSE, as applicable, may
participate in a transaction such as the Merger in a manner so as to permit the
Merger to qualify as a pooling of interest.
Section 4.17 NASDAQ Listing. As soon as practicable after the Effective
Time, MUSE will use its best efforts (i) to cause the MUSE Common Stock to be
issued in the Merger to be quoted on the Nasdaq Stock Market or listed on such
securities exchange as MUSE Common Stock is then listed and (ii) to cause shares
of MUSE Common Stock issued upon exercise of MUSE Options on the Nasdaq Stock
Market or listed on such securities exchange as MUSE Common Stock is then
listed.
Section 4.18 AVS Affiliates. Not less than 45 days prior to the
Effective Time, AVS shall deliver to MUSE a letter identifying all persons who,
in the judgment of AVS, may be deemed at the time this Agreement is submitted
for adoption by the stockholders of AVS, "affiliates" of AVS for purposes of
Rule 145 under the Securities Act or for purposes of qualifying the Merger for
Pooling accounting treatment under APB 16 and applicable SEC rules and
regulations (each an "AVS Affiliate"), and such list shall be updated as
necessary to reflect changes from the date thereof. AVS shall use its best
efforts to cause each AVS Affiliate identified on such list to deliver to MUSE
not less than 30 days prior to the Effective Time, a written agreement
substantially in the form attached as Exhibit K hereto (an "Affiliate
Agreement"). MUSE shall impose restrictions substantially similar to those
contained in the Affiliate Agreement on all persons who, in the judgment of
MUSE, may be deemed at the time this Agreement is submitted for adoption by the
stockholders of AVS, "affiliates" of MUSE for purposes of qualifying the Merger
for Pooling accounting treatment under APB 16 and applicable SEC rules and
regulations.
Section 4.19 Notification of Certain Matters. AVS agrees that it will
not take any action which would cause or constitute a material breach, or would,
if it had been taken prior to the date hereof, have caused or constituted a
material breach, of any of the representations and
42
warranties set forth in Article II hereof. From the date hereof until the
Closing Date, AVS shall have a continuing obligation to give detailed notice
thereof to MUSE and to update or supplement any information provided herein in
the event of, or promptly after the occurrence of, or promptly after obtaining
knowledge of the occurrence of or the impending or threatened occurrence of, any
fact, circumstance or event which would cause or constitute or be reasonably
likely to cause or constitute a Material Adverse Effect with regard to AVS or a
breach of any of the representations and warranties set forth in Article II
hereof. AVS shall use its best efforts to prevent or promptly remedy such
breach. AVS' compliance with this Section 4.19 shall not limit or otherwise
affect the remedies available hereunder to MUSE, including, but not limited to
MUSE's right to terminate this Agreement pursuant to Section 7.1 notwithstanding
any remedy of any breach hereunder and MUSE's rights under Article VI hereunder.
Section 4.20 Insurance. Notwithstanding anything to the contrary
contained herein, MUSE, in its sole discretion, shall determine the necessity
and the timing of obtaining an insurance policy for such duration and in such
amounts as it reasonably determines covering breaches of AVS' representations
and warranties contained herein and for excess liability coverage for such
breaches and other matters, including, but not limited to, environmental related
liabilities, and AVS will fully cooperate with MUSE and any insurance agent or
carrier in obtaining such insurance policy and AVS will pay all fees, premiums
and costs incurred in connection with obtaining such insurance policy provided
that no such fees, premiums or costs shall be payable prior to the Closing.
ARTICLE V
CONDITIONS
Section 5.1 Conditions to Obligations of MUSE. The obligations of MUSE
and Sub to effect the transactions contemplated by this Agreement are subject to
the satisfaction or waiver by MUSE and Sub at or prior to the Closing of the
following conditions:
(a) the representations and warranties of AVS shall be true and correct
in all material respects as of the date hereof and as of the Closing with the
same effect as though such representations and warranties had been made at and
as of such time, other than representations and warranties that speak as of a
specific date or time (which need only be true and correct in all material
respects as of such date or time);
(b) AVS shall have performed and complied with each agreement, covenant
and obligation required to be performed or complied with by AVS under this
Agreement at or prior to the Closing;
(c) since December 31, 1999, AVS shall not have suffered a Material
Adverse Effect;
43
(d) all authorizations, permits, consents, Orders or approvals of, or
declarations or filings with, any governmental entity or other Person
(collectively, the "Authorizations") necessary to effect the transactions
contemplated by this Agreement shall have occurred, been filed or been obtained,
as the case may be;
(e) AVS shall have obtained all Governmental Permits (whether by
transfer, reissuance, modification or otherwise) required to be obtained by it
in connection with or for the operation of the Business as presently conducted
and contemplated in this Agreement;
(f) there shall not be in effect on the Closing Date any Order or Law
restraining, enjoining or otherwise prohibiting or making illegal, or
diminishing the economic benefits derived from, the consummation of any of the
transactions contemplated in this Agreement, and there shall not be pending or
threatened on the Closing Date any Proceeding or any other action in, before or
by any governmental entity which could reasonably be expected to result in the
issuance of any such Order or the enactment, promulgation or deemed
applicability to MUSE, Sub, AVS or any transaction contemplated in this
Agreement of any such Law or that otherwise relates to this Agreement or the
transactions contemplated hereby;
(g) the Required AVS Vote and the Escrow Consent shall have been
obtained and the Dissenting Stock and/or shares of AVS Capital Stock capable of
becoming Dissenting Stock after the Closing shall not constitute in excess of
10% of the shares eligible to vote for such approval and adoption;
(h) AVS shall have delivered or caused to be delivered to MUSE each of
the items required to be delivered by AVS as specified in Annex A hereto;
(i) AVS shall have terminated its Executive Bonus Program with no
Material Adverse Effect to AVS;
(j) AVS shall have obtained Kubota Corporation's agreement with AVS to
the effect that the Merger shall not trigger the conversion feature of the
convertible promissory note and that such convertible promissory note shall be
exchanged for convertible debt of MUSE following the Merger on terms set forth
in Schedule C;
(k) AVS shall have obtained the requisite vote of the holders of the
Series A Preferred Stock and Series B Preferred Stock that the Merger shall not
be deemed to be a liquidation, dissolution or winding up of AVS for purposes of
the liquidation preference provisions of such stocks (the "Liquidation
Preference Waiver");
(l) the Form S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceeding seeking a stop
order;
(m) each of the AVS employees listed on Schedule B shall have entered
into MUSE's standard confidentiality and trade secrets/invention agreements in
the form of Exhibit J;
44
(n) MUSE shall have received a letter from ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
Co., P.C., MUSE's independent public accountants, with respect to MUSE, and from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, AVS's independent public accountants, with respect to AVS,
dated the date of the Proxy Statement/Prospectus, and confirmed in writing at
the Effective Date, to the effect that each of AVS and MUSE, as applicable, may
participate in a transaction such as the Merger in a manner so as to permit the
Merger to qualify as a Pooling; and
(o) Each AVS Affiliate shall have entered into an Affiliate Agreement,
which Affiliate Agreements, as of the Closing Date, (i) shall be in full force
and effect, (ii) shall be the legal, valid and binding obligation of the
signatory thereto, enforceable in accordance with its terms and not conflict
with any other agreement to which such person is a party and (iii) the
provisions of which shall not have been challenged or modified by any legal
proceeding or otherwise changed or amended without the prior written consent of
MUSE.
Section 5.2 Conditions to Obligations of AVS. The obligations of AVS to
effect the transactions contemplated by this Agreement are subject to the
satisfaction or waiver by AVS at or prior to the Closing of the following
conditions:
(a) the respective representations and warranties of MUSE and Sub in
this Agreement shall be true and correct in all material respects as of the date
hereof and at and as of the Closing with the same effect as though such
representations and warranties had been made at and as of such time, other than
representations and warranties that speak as of a specific date or time (which
need only be true and correct in all material respects as of such date or time);
(b) Each of MUSE and Sub shall have performed and complied with each
agreement, covenant and obligation required to be performed or complied with by
them under this Agreement at or prior to the Closing;
(c) since March 31, 2000, MUSE shall not have suffered a MUSE Material
Adverse Effect;
(d) all Authorizations necessary for MUSE or Sub to effect the
transactions contemplated in this Agreement shall have occurred, been filed or
been obtained, as the case may be;
(e) there shall not be in effect on the Closing Date any Order or Law
restraining, enjoining or otherwise prohibiting or making illegal, or
diminishing the economic benefits derived from, the consummation of any of the
transactions contemplated in this Agreement, and there shall not be pending or
threatened on the Closing Date any Proceeding or any other action in, before or
by any governmental entity which could reasonably be expected to result in the
issuance of any such Order or the enactment, promulgation or deemed
applicability to MUSE, Sub, AVS or any transaction contemplated in this
Agreement of any such Law;
45
(f) Each of MUSE and Sub shall have delivered or caused to be delivered
to AVS each of the items required to be delivered by them as specified in Annex
A hereto; and
(g) the Form S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceeding seeking a stop
order.
ARTICLE VI
INDEMNIFICATION AND SURVIVAL
Section 6.1 Indemnification.
(a) The AVS Stockholders shall jointly and severally indemnify MUSE,
Sub and their respective officers, directors, stockholders, employees, agents
and Affiliates (the "MUSE Parties") and hold each of them harmless from and
against any Loss suffered, incurred or sustained by any of them or to which any
of them becomes subject, resulting from, arising out of or relating to (i) any
inaccuracy in or breach of, or any alleged inaccuracy in or alleged breach of,
any representation or warranty or failure to perform any covenant or agreement
to be performed on or before the Closing Date on the part of AVS contained in
this Agreement or the Escrow Agreement; (ii) any intentional tort, including
without limitation, fraud (including fraud in the inducement), willful
misconduct or bad faith by AVS or any executive officer, director, stockholder
or employee of AVS in connection with this Agreement, the Escrow Agreement or
the transactions contemplated hereby or thereby; and (iii) any and all actions,
suits, Proceedings, demands, judgments, costs and legal and reasonable other
expenses incident to any of the matters referred to in clauses (i), and (ii) of
this Section 6.l (a). Once it is determined there is such an indemnifiable
event, the amount of the Loss shall be determined without giving effect to any
"Material Adverse Effect" qualification or any other materiality, dollar limit
or similar qualification contained in the representation, warranty, covenant or
agreement.
(b) MUSE hereby indemnifies and holds harmless AVS and its officers,
directors, stockholders, agents and Affiliates (the "AVS Parties") from and
against any Loss suffered, incurred or sustained by any of them or to which any
of them becomes subject, resulting from, arising out of or relating to (i) any
inaccuracy in or breach of, or any alleged inaccuracy or alleged breach of any
representation or warranty or failure to perform any covenant or agreement to be
performed on or before the Closing Date on the part of MUSE or Sub contained in
this Agreement or the Escrow Agreement to which MUSE or Sub is a party; (ii) any
intentional tort, including without limitation, fraud (including fraud in the
inducement), willful misconduct or bad faith by any of the MUSE Parties or any
executive officer, director, stockholder or employee of MUSE in connection with
this Agreement, the Escrow Agreement or the transactions contemplated hereby or
thereby; and (iii) any and all actions, suits, Proceedings, demands, judgments,
costs and legal and reasonable other expenses incident to any of the matters
referred to in clauses (i) and (ii) of this Section 6.1(b). Once it is
determined there is such an indemnifiable event, the amount of the Loss shall be
determined without giving effect to any
46
"Material Adverse Effect" qualification or any other materiality, dollar limit
or similar qualification contained in the representation, warranty, covenant or
agreement.
(c) All claims for indemnification by any party seeking indemnity under
this Agreement (an "Indemnified Party") will be asserted and resolved as
follows:
(i) In the event any claim or demand, in respect of which an
Indemnified Party might seek indemnity under this Agreement, is asserted against
or sought to be collected from such Indemnified Party by a Person other than an
MUSE Party or AVS Party or any of their respective Affiliates (a "Third Party
Claim"), the Indemnified Party shall deliver a notice (a "Claim Notice") with
reasonable promptness to the party from whom the Indemnified Party is seeking
indemnification (the "Indemnifying Party"), which Claim Notice shall provide
reasonable detail relating to such Third Party Claim, including the amount of
Loss claimed, to the extent known. If the Indemnified Party fails to provide the
Claim Notice with reasonable promptness after the Indemnified Party receives
notice of such Third Party Claim, the Indemnifying Party shall not be obligated
to indemnify the Indemnified Party with respect to such Third Party Claim only
to the extent that the Indemnifying Party demonstrates that its ability to
defend such Third Party Claim has been irreparably prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the Dispute Period (defined below) whether the
Indemnifying Party disputes its liability to the Indemnified Party, and whether
the Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim. "Dispute Period" means the
period ending 30 days following receipt by an Indemnifying Party of either a
Claim Notice or an Indemnity Notice (as hereinafter defined).
(ii) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this Section
6.1, then the Indemnifying Party shall have the right to defend, with counsel
reasonably satisfactory to the Indemnified Party, at the sole cost and expense
of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings must be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or may be settled at the discretion
of the Indemnifying Party; provided, however, that the Indemnifying Party shall
not be permitted to effect any settlement without the written consent (which
shall not be unreasonably withheld) of the Indemnified Party unless (A) the sole
relief provided in connection with such settlement is monetary damages that are
paid in full by the Indemnifying Party, (B) such settlement involves no finding
or admission of any wrongdoing, violation or breach by any Indemnified Party of
any right of any other Person or any Laws, Contracts or Governmental Permits,
and (C) such settlement has no effect on any other claims that may be made
against or liabilities of any Indemnified Party. The Indemnifying Party shall
have full control of such defense and proceedings, including any compromise or
settlement thereof (except as provided in the preceding sentence); provided,
however, that the Indemnified Party may, at its sole cost and expense, at any
time prior to the Indemnifying Party's delivery of the notice referred to in the
first sentence of this clause (ii), file any motion, answer or other pleadings
or take any other action that the Indemnified Party reasonably believes to be
necessary
47
or appropriate to protect its interests; and provided further, that if requested
by the Indemnifying Party, the Indemnified Party shall, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnifying Party in contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause (ii) and, except as provided in the
first sentence of this clause (ii) and the preceding sentence, the Indemnified
Party will bear its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Indemnified Party may take over the control
of the defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity with respect to such Third Party
Claim.
(iii) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to Section 6.1(d)(ii) or if the Indemnifying
Party gives such notice but fails to prosecute vigorously and diligently or
settle the Third Party Claim (in each case in accordance with Section 6.1(d)(ii)
above), or if the Indemnifying Party fails to give any notice whatsoever within
the Dispute Period, then the Indemnified Party will have the right to defend, at
the sole cost and expense of the Indemnifying Party, the Third Party Claim by
all appropriate proceedings, which proceedings will be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or will be settled at
the discretion of the Indemnified Party (with the consent of the Indemnifying
Party, which consent will not be unreasonably withheld). Subject to the
immediately preceding sentence, the Indemnified Party will have full control of
such defense and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its counsel in contesting
any Third Party Claim which the Indemnified Party is contesting. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this clause (iii),
and the Indemnifying Party will bear its own costs and expenses with respect to
such participation.
(iv) If the Indemnifying Party notifies the Indemnified Party that
it does not dispute its liability to the Indemnified Party with respect to a
Third Party Claim or fails to notify the Indemnified Party within the Dispute
Period whether the Indemnifying Party disputes its liability to the Indemnified
Party with respect to such Third Party Claim, the Loss in the amount specified
in the Claim Notice will be conclusively deemed a liability of the Indemnifying
Party, and the Indemnifying Party shall pay the amount of such Loss to the
Indemnified Party on demand, subject to the limitation on liability set forth in
Section 6.4. If the Indemnifying Party has timely disputed its liability with
respect to such claim, the Indemnifying Party and Indemnified Party will proceed
in good faith to negotiate a resolution of such dispute, and if not resolved
through negotiations within the Resolution Period, such dispute shall be
resolved by litigation in a court of competent jurisdiction. "Resolution Period"
means the period ending 30 days following expiration of the Dispute Period.
48
(v) In the event any Indemnified Party should have a claim under
this Agreement against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a notice (an "Indemnity
Notice") with reasonable promptness to the Indemnifying Party, which Indemnity
Notice shall provide reasonable detail relating to such claim, including the
amount of Loss claimed, to the extent known. If the Indemnified Party fails to
provide the Indemnity Notice with reasonable promptness, the Indemnifying Party
shall not be obligated to indemnify the Indemnified Party with respect to such
claim only to the extent that an Indemnifying Party demonstrates that it has
been irreparably prejudiced by such failure of the Indemnified Party. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim described in such Indemnity Notice or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
claim described in such Indemnity Notice, the Loss in the amount specified in
the Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party, and the Indemnifying Party shall pay the amount of such Loss to the
Indemnified Party on demand. If the Indemnifying Party has timely disputed its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of such dispute, and
if not resolved through negotiations within the Resolution Period, such dispute
shall be resolved by litigation in a court of competent jurisdiction.
(d) Any indemnity payment, including any payments made out of the
Escrow Amount, under this Agreement will be treated for tax purposes as an
adjustment to the Merger Consideration.
Section 6.2 Survival Periods. (a) All representations and warranties of
AVS contained in this Agreement, the AVS Disclosure Schedule, the Escrow
Agreement or any certificate or document delivered in connection herewith or
therewith shall survive the Closing and shall remain in full force and effect
for 12 months after the Closing Date (such 12-month anniversary to the Closing
Date being referred to as the "Expiration Date") and shall apply beyond such 12
month period with respect to claims asserted in writing within such 12 month
period, provided, however, that those representations and warranties which are
specifically confirmed by the first audit of the consolidated financial
statements of MUSE and AVS following the Merger shall survive only until the
earlier of the end of such twelve month period or completion of such audit;
provided further, however, that in the event of an adjustment, modification or
restatement of such audited consolidated financial statements, such
representations and warranties shall survive for the period through and
including such adjustment, modification or restatement and any claims with
respect to prior periods may be made within 30 days thereafter. Except as
otherwise provided, the covenants and agreements of the parties hereto shall
survive the Closing. Rights of an Indemnified Party to indemnification shall not
be limited or affected in any way by any pre-Closing investigation by such
Indemnified Party or by such Indemnified Party's actual knowledge of any
inaccuracy of the representations and warranties.
(b) All representations and warranties of MUSE contained in this
Agreement, the MUSE Disclosure Schedule, the Escrow Agreement or any certificate
or document delivered in
49
connection herewith or therewith shall survive the Closing and shall remain in
full force and effect for a period of twelve months after the Closing Date and
any claims in respect thereof, whether made by AVS or any current or former
holder of AVS Capital Stock, shall be limited to an amount in the aggregate not
in excess of $250,000.
Section 6.3 Escrow Agreement. The parties hereto acknowledge that
shares of MUSE Common Stock representing the Escrow Amount, together with stock
powers with respect thereto, are being deposited on the Closing Date into an
escrow account established pursuant to the Escrow Agreement. Subject to Section
6.4, all claims by any MUSE Party with respect to the indemnification
obligations of the AVS Stockholders shall be made in accordance herewith and
with said Escrow Agreement and shall be satisfied solely from said Escrow
Amount. The AVS Stockholders may pay any claims required to be paid by them in
cash or the shares representing the Escrow Amount based on the value of such
shares as of the date of consummation of the Merger.
Section 6.4 Limitation of Liability. (a) Notwithstanding anything to
the contrary contained herein, the AVS Stockholders shall not be subject to
payment, with respect to Losses, in excess of the Escrow Amount. MUSE and AVS
agree and acknowledge that the indemnification provisions of this Article VI
shall be the exclusive remedy of MUSE and AVS with respect to the
indemnification obligations set forth in Sections 6.1(a) and (b) of this Article
VI, provided, however, nothing contained herein shall in any way limit the
ability of AVS or MUSE, as the case may be, from seeking or recovering damages
(including no limitation on the amount of such damages) or any other legal
remedy in connection with any intentional torts, including but not limited to
fraud, willful misconduct or bad faith (collectively, "fraud claims") by AVS or
MUSE or any of their officers, directors or employees, it being agreed that (i)
the damages associated with any such fraud claim by MUSE may be satisfied from
the Escrow Amount to the extent that the Escrow Amount (giving effect to claims
thereunder which are not fraud claims) is adequate; and (ii) any such fraud
claim by MUSE or AVS may be brought only against the entity or entities or
person or persons which or who have actually committed, or may otherwise be
deemed liable or responsible for such fraud claim because they knew or should
have known of such act or omission which is the basis for the fraud claim and
that the other persons or entities referred to in this Section 6.4(a) shall have
no liability, joint or otherwise, therefor, it being understood that a person's
position as an officer, director or stockholder will not solely by virtue of
such position result in such liability.
(b) Notwithstanding anything to the contrary in this Article VI, no
party shall make any Claim unless and until the aggregate indemnified Losses
under this Agreement exceed $50,000, in which event recovery for such Losses
shall be available as if this limitation were not applicable.
50
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated, and the
transactions contemplated herein may be abandoned:
(a) any time before the Closing, by mutual written agreement of AVS, on
the one hand, and MUSE and Sub, on the other hand;
(b) any time before the Closing, by AVS, on the one hand, or MUSE and
Sub, on the other hand, (i) in the event of a material breach hereof by any
non-terminating party or (ii) upon notification to the non-terminating party by
the terminating party that the non-terminating party has failed to satisfy a
condition set forth herein or in any Transaction Agreement required to be
satisfied by such non-terminating party prior to or at the Closing.
(c) any time after October 31, 2000, by AVS, on the one hand, or MUSE
and Sub, on the other hand, upon notification to the non-terminating party by
the terminating party if the Closing shall not have occurred on or before such
date and such failure to consummate is not caused by a breach of this Agreement
by any terminating party.
Section 7.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 7.1, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of any party
(or any of their respective officers, directors, employees, partners, agents or
other representatives or Affiliates), except as provided in the next succeeding
sentence and except that the provisions with respect to public announcements in
Section 4.6 will continue to apply following any such termination.
Notwithstanding any other provision in this Agreement to the contrary, upon
termination of this Agreement pursuant to Section 7.1(b), AVS will remain liable
to the MUSE Parties for any misrepresentation or breach of this Agreement by AVS
existing at the time of such termination, and MUSE will remain liable to the AVS
Parties for any misrepresentation or breach of this Agreement by MUSE existing
at the time of such termination, and AVS, on the one hand, or MUSE, on the other
hand, may seek such remedies, including damages and fees of attorneys, against
the other with respect to any such misrepresentation or breach as are provided
in this Agreement or as are otherwise available at law or in equity.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices. All notices and other communications hereunder to
any party shall be deemed to be sufficient if contained in a written instrument
delivered in person or by a nationally recognized courier service or duly sent
by facsimile or first class, registered or certified mail, postage prepaid,
addressed to:
51
(a) if to MUSE or Sub, to:
MUSE Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) if to AVS, to:
Advanced Visual Systems Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President, Finance and Administration
with a copy to:
Hill & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
All such notices and communications shall be deemed to have been received (i) in
the case of personal or courier delivery, on the date of such delivery, (ii) in
the case of facsimile transmission, on the date on which the sender receives
confirmation that such was received by the addressee and (iii) in the case of
mailing, on the fifth business day following the date of such mailing.
52
Section 8.2 Descriptive Headings; Definitions; Certain Interpretation.
(a) The descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.
(b) The following terms shall have the following meanings:
"Affiliate" means any Person that directly, or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of
management and policies of such Person whether by contract or otherwise and, in
any event and without limitation of the previous sentence, any Person owning 10
percent or more of the voting securities of another Person shall be deemed to
control that Person.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind, including any agreement to give any of the following: any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or any agreement to file any financing statement
under the Uniform Commercial Code of any jurisdiction, or the recordation of any
such interest with the U.S. Copyright Office or the U.S. Patent and Trademark
Office.
"Person" means any person, corporation, limited liability company,
limited liability partnership, partnership, joint venture or other entity.
(c) Except as otherwise expressly provided in this Agreement, the
following rules of interpretation apply to this Agreement: (i) the singular
includes the plural and the plural includes the singular; (ii) "or" and "either"
are not exclusive and "include" and "including" are not limiting; (iii) a
reference to any agreement or other contract includes permitted supplements and
amendments; (iv) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (v) a reference in this
Agreement to an Article, Section, Annex, Exhibit or Schedule is to the Article,
Section, Annex, Exhibit or Schedule of this Agreement; and (vi) capitalized
terms used and not defined in the Annexes, Exhibits or Schedules attached to
this Agreement shall have the meanings set forth in this Agreement.
(d) Whenever any party makes any representation, warranty or other
statement to such party's knowledge, such party will be deemed to have made due
inquiry, including due inquiry by any officer or director of such party or any
other Person who has responsibility with respect to the relevant subject matter,
into the subject matter of such representation, warranty or other statement.
Section 8.3 Counterparts; Effectiveness. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement. This Agreement shall not be effective against any party until signed
by all parties hereto.
53
Section 8.4 Entire Agreement; Assignment. This Agreement, including the
appendices, annexes and exhibits hereto and the documents, schedules (including
the AVS Disclosure Schedule and the MUSE Disclosure Schedule), certificates and
instruments referred to herein, constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, with respect to
the subject matter hereof. This Agreement shall not be assigned by operation of
law or otherwise, provided that MUSE and Sub may assign all of their respective
rights and obligations under this Agreement to any subsidiary or Affiliate of
MUSE.
Section 8.5 Amendment. This Agreement may be amended at any time by the
parties hereto, but only by an instrument in writing signed by each of the
parties hereto.
Section 8.6 Extensions; Waiver. At any time prior to the Closing, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the parties hereto, (ii) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the covenants, agreements
or conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed by such party.
SECTION 8.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD
TO ANY APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.
Section 8.8 Specific Performance. The parties hereto agree that if any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
Section 8.9 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its permitted assigns,
and nothing in this Agreement express or implied, is intended to or shall confer
upon any other Person or Persons any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement, except as otherwise specified
herein.
Section 8.10 Severability. This Agreement shall be deemed severable,
and the invalidity or unenforceability of any term or provision of this
Agreement shall not affect the validity or enforceability of this Agreement or
of any other term hereof, which shall remain in full force and effect.
SECTION 8.11 CONSENT TO SERVICE OF PROCESS. EACH OF AVS, MUSE AND SUB
HEREBY IRREVOCABLY SUBMITS, ON A NON-EXCLUSIVE BASIS, TO THE JURISDICTION OF ANY
DELAWARE STATE OR FEDERAL
54
COURT SITTING IN THE CITY AND COUNTY OF WILMINGTON IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
IRREVOCABLY ACCEPT FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. AVS AND MUSE HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT SUCH PARTY MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT SUCH PARTY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE OTHER PARTY IN ANY OTHER JURISDICTION.
55
The parties have signed or caused this Agreement to be signed by their
respective duty authorized officers, all as of the date first written above.
MUSE TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
MUSE MERGER SUB, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
ADVANCED VISUAL SYSTEMS INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
56
ANNEX A
TO AGREEMENT AND PLAN OF MERGER
CLOSING DELIVERIES
Deliveries by AVS.
------------------
(1) A certificate, dated the Closing Date and executed by the Chief
Executive Officer of AVS, substantially in the form and to the effect of Exhibit
B hereto and a certificate, dated the Closing Date and executed by the Secretary
of AVS, substantially in the form and to the effect of Exhibit C hereto;
(2) (a) Certificates from the Secretary of State or other appropriate
official of the State of Delaware to the effect that AVS is in good standing or
subsisting in such jurisdiction, and attesting to its payment of all franchise
or similar taxes, and (b) a certificate from the Secretary of State or other
appropriate official in each jurisdiction in which AVS is qualified or admitted
to do business to the effect that AVS is duly qualified or admitted and in good
standing in such jurisdiction;
(3) The Books and Records of AVS, including the stock ledger minute
books and corporate seal of AVS;
(4) An opinion of Hill & ▇▇▇▇▇▇, a Professional Corporation, counsel to
AVS, substantially in the form attached as Exhibit D;
(5) All necessary waivers and consents as described in Section 2.4;
(6) The Escrow Agreement, duly executed by the Stockholder
Representatives on behalf of the AVS Stockholders;
(7) Such other documents and certificates duly executed as may be
required to be delivered by AVS pursuant to the terms of this Agreement or as
may be reasonably requested by MUSE or Sub prior to the Closing Date;
(8) Resignations of such of the directors and officers of AVS as may be
requested by MUSE effective as of the Closing Date ; and
(9) The Certificate of Merger, duly executed by AVS.
Deliveries by MUSE.
-------------------
(1) The Merger Consideration (less the Escrow Amount) to the Exchange
Agent;
(2) The Escrow Amount, delivered to the Escrow Agent;
A-1
(3) A certificate, dated the Closing Date, substantially in the form
and to the effect of Exhibit E, duly executed by an authorized officer of MUSE,
and a certificate, dated the Closing Date, substantially in the form and to the
effect of Exhibit F hereto, duly executed by the Secretary of MUSE;
(4) An opinion of Proskauer Rose LLP, counsel to MUSE and Sub,
substantially in the form attached as Exhibit G;
(5) Such other documents and certificates duly executed as may be
required to be delivered by MUSE pursuant to the terms of this Agreement or as
may be reasonably requested by AVS prior to the Closing Date;
(6) Certificates from the Secretary of State or other appropriate
official of the State of Delaware to the effect that each of MUSE and Sub is in
good standing or subsisting in such jurisdiction, and attesting to its payment
of all franchise or similar taxes, and (b) a certificate from the Secretary of
State or other appropriate official in each jurisdiction in which MUSE is
qualified or admitted to do business to the effect that MUSE is duly qualified
or admitted and in good standing in such jurisdiction.
Deliveries by Sub.
------------------
(1) A certificate, dated the Closing Date and executed by an authorized
officer of Sub, substantially in the form and to the effect of Exhibit H hereto,
and a certificate, dated the Closing Date and executed by the Assistant
Secretary of Sub, substantially in the form and to the effect of Exhibit I
hereto; and
(2) (a) Certificates from the Secretary of State or other appropriate
official of the State of Delaware to the effect that Sub is in good standing or
subsisting in such jurisdiction and (b) the Certificate of Merger duly executed
by Sub.
A-2
ANNEX B
TO AGREEMENT AND PLAN OF MERGER
STOCKHOLDERS' OWNERSHIP
See Section 2.3(a) of the AVS Disclosure Schedule for a list of AVS
stockholders, the number of shares of capital stock owned by each AVS
stockholder and the percentage ownership of each AVS stockholder.
B-1