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EXHIBIT 10.4
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and among
TECHNICAL SOFTWARE, INC.,
THE UNDERSIGNED STOCKHOLDERS THEREOF,
and
UNIVERSAL DOCUMENT MANAGEMENT SYSTEMS, INC.
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TABLE OF CONTENTS
ARTICLE I
Definitions............................................................. 1
Section 1.1 Certain General Definitions................................ 1
ARTICLE II
The Merger.............................................................. 4
Section 2.1 The Merger................................................. 4
Section 2.2 The Closing................................................ 4
Section 2.3 Effective Time............................................. 4
Section 2.4 Articles of Incorporation of Surviving Corporation......... 5
Section 2.5 Code of Regulations of Surviving Corporation............... 5
Section 2.6 Directors of the Surviving Corporation..................... 5
Section 2.7 Officers of the Surviving Corporation...................... 5
Section 2.8 Conversion of Company Capital Stock........................ 5
Section 2.9 Exchange of Certificates Representing Shares of Company
Common Stock .............................................. 5
Section 2.10 Fractional Shares.......................................... 6
Section 2.11 Subsequent Actions......................................... 6
ARTICLE III
Representations and Warranties of the Company and the Stockholder....... 7
Section 3.1 Organization and Good Standing; Qualification.............. 7
Section 3.2 Capitalization............................................. 7
Section 3.3 Transactions in Capital Stock.............................. 7
Section 3.4 Continuity of Business Enterprise.......................... 7
Section 3.5 Corporate Records.......................................... 7
Section 3.6 Authorization and Validity................................. 8
Section 3.7 No Violation............................................... 8
Section 3.8 Consents................................................... 8
Section 3.9 Financial Statements....................................... 8
Section 3.10 Liabilities and Obligations................................ 9
Section 3.11 Employee Matters........................................... 9
3.11.1 Cash Compensation................................... 9
3.11.2 Compensation Plans.................................. 9
3.11.3 Employment Agreements............................... 9
3.11.4 Employee Policies and Procedures.................... 10
3.11.5 Unwritten Amendments................................ 10
3.11.6 Labor Compliance.................................... 10
3.11.7 Unions.............................................. 10
3.11.8 Aliens.............................................. 10
Section 3.12 Employee Benefit Plans..................................... 10
3.12.1 Identification...................................... 10
3.12.2 Administration...................................... 11
3.12.3 Examinations........................................ 11
3.12.4 Prohibited Transactions............................. 11
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3.12.5 Claims and Litigation................................ 11
3.12.6 Qualification........................................ 11
3.12.7 Funding Status....................................... 11
3.12.8 Excise Taxes......................................... 12
3.12.9 Multiemployer Plans.................................. 12
3.12.10 PBGC................................................. 12
3.12.11 Retirees............................................. 12
Section 3.13 Absence of Certain Changes................................... 12
Section 3.14 Title; Leased Assets......................................... 14
3.14.1 Real Property........................................ 14
3.14.2 Personal Property.................................... 14
3.14.3 Leases............................................... 14
Section 3.15 Commitments.................................................. 14
3.15.1 Commitments; Defaults................................ 14
3.15.2 No Cancellation or Termination of Commitment......... 15
Section 3.16 Insurance.................................................... 16
Section 3.17 Proprietary Rights and Information........................... 16
Section 3.18 Taxes........................................................ 16
3.18.1 Filing of Tax Returns................................ 17
3.18.2 Payment of Taxes..................................... 17
3.18.3 No Pending Deficiencies, Delinquencies, Assessments
or Audits............................................ 17
3.18.4 No Extension of Limitation Period.................... 17
3.18.5 Withholding Requirements Satisfied................... 17
3.18.6 Foreign Person....................................... 17
3.18.7 Safe Harbor Lease.................................... 17
3.18.8 Tax Exempt Entity.................................... 17
3.18.9 Collapsible Corporation.............................. 18
3.18.10 Boycotts............................................. 18
3.18.11 Parachute Payments................................... 18
3.18.12 S Corporation........................................ 18
3.18.13 Personal Service Corporation......................... 18
3.18.14 Personal Holding Company............................. 18
Section 3.19 Compliance with Laws......................................... 18
Section 3.20 Finder's Fee................................................. 18
Section 3.21 Litigation................................................... 19
Section 3.22 Condition of Fixed Assets.................................... 19
Section 3.23 Distributions and Repurchases................................ 19
Section 3.24 Banking Relations............................................ 19
Section 3.25 Ownership Interests of Interested Persons; Affiliations...... 19
Section 3.26 Investments in Competitors................................... 19
Section 3.27 Environmental Matters........................................ 19
Section 3.28 Certain Payments............................................. 20
Section 3.29 No affiliation with NASD Member.............................. 20
ARTICLE IV
Representations and Warranties of the Stockholder......................... 20
Section 4.1 Validity; Stockholder Capacity............................... 20
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Section 4.2 No Violation................................................. 20
Section 4.3 Personal Holding Company; Control of Related Businesses...... 21
Section 4.4 Transfers of the Company Capital Stock....................... 21
Section 4.5 Consents..................................................... 21
Section 4.6 Certain Payments............................................. 21
Section 4.7 Finder's Fee................................................. 21
Section 4.8 Ownership of Interested Persons; Affiliations................ 21
Section 4.9 Investments in Competitors................................... 21
Section 4.10 Disposition of Acquiror Shares............................... 22
ARTICLE V
Representations and Warranties of Acquiror................................ 22
Section 5.1 Organization and Good Standing............................... 22
Section 5.2 Capitalization............................................... 22
Section 5.3 Corporate Records............................................ 22
Section 5.4 Authorization and Validity................................... 22
Section 5.5 No Violation................................................. 23
Section 5.6 Finder's Fee................................................. 23
Section 5.7 Capital Stock................................................ 23
Section 5.8 Continuity of Business Enterprise............................ 23
Section 5.9 Consents..................................................... 23
Section 5.10 Proprietary Rights and Information........................... 24
Section 5.11 Taxes........................................................ 24
5.11.1 Filing of Tax Returns................................ 24
5.11.2 Payment of Taxes..................................... 24
5.11.3 No Pending Deficiencies, Delinquencies, Assessments
or Audits............................................ 24
5.11.4 No Extension of Limitation Period.................... 24
5.11.5 All Withholding Requirements Satisfied............... 24
5.11.6 Foreign Person....................................... 24
5.11.7 Safe Harbor Lease.................................... 24
5.11.8 Tax Exempt Entity.................................... 25
5.11.9 Collapsible Corporation.............................. 25
5.11.10 Boycotts............................................. 25
5.11.11 Parachute Payments................................... 25
5.11.12 S Corporation........................................ 25
Section 5.12 Compliance with Laws................................. 25
Section 5.13 Litigation................................................... 25
Section 5.14 Ownership Interests of Interested Persons; Affiliations...... 26
Section 5.15 Investments in Competitors................................... 26
Section 5.16 Certain Payments............................................. 26
Section 5.17 Commitments.................................................. 26
5.17.1 Commitments; Defaults................................ 26
5.17.2 No Cancellation or Termination of Acquiror Commitment 27
Section 5.18 Acquiror Financial Statements................................ 27
Section 5.19 Liabilities and Obligations.................................. 28
Section 5.20 Employee Matters............................................. 28
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ARTICLE VI
Covenants of the Company and the Stockholder........................... 28
Section 6.1 Consummation of Agreement................................. 28
Section 6.2 Business Operations....................................... 28
Section 6.3 Access.................................................... 29
Section 6.4 Notification of Certain Matters........................... 29
Section 6.5 Approvals of Third Parties................................ 29
Section 6.6 Employee Matters.......................................... 29
Section 6.7 Contracts................................................. 30
Section 6.8 Capital Assets; Payments of Liabilities................... 30
Section 6.9 Mortgages, Liens and Guaranties........................... 30
Section 6.10 Acquisition Proposals..................................... 31
Section 6.11 Distributions and Repurchases............................. 31
Section 6.12 Requirements to Effect the Merger......................... 31
Section 6.13 Lockup Agreements......................................... 31
ARTICLE VII Covenants of Acquiror............................................ 32
Section 7.1 Consummation of Agreement................................. 32
Section 7.2 Requirements to Effect Merger............................. 32
Section 7.3 Access.................................................... 32
Section 7.4 Notification of Certain Matters........................... 32
Section 7.5 Approvals of Third Parties................................ 32
ARTICLE VIII
Covenants of all Parties............................................... 32
Section 8.1 Filings; Other Action..................................... 33
Section 8.2 Amendment of Schedules.................................... 33
Section 8.3 Stockholder Employment Agreements......................... 34
ARTICLE IX
Conditions Precedent of Acquiror....................................... 34
Section 9.1 Due Diligence............................................. 34
Section 9.2 Representations and Warranties............................ 34
Section 9.3 Covenants................................................. 34
Section 9.4 Legal Opinion............................................. 34
Section 9.5 Proceedings............................................... 34
Section 9.6 No Material Adverse Change................................ 35
Section 9.7 Securities Approvals...................................... 35
Section 9.8 Simultaneous Closings..................................... 35
Section 9.9 Closing Deliveries........................................ 35
ARTICLE X
Conditions Precedent of the Company and the Stockholder................ 35
Section 10.1 Representations and Warranties............................ 35
Section 10.2 Covenants................................................. 35
Section 10.3 Legal Opinions............................................ 36
Section 10.4 Proceedings............................................... 36
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Section 10.5 Government Approvals and Required Consents................ 36
Section 10.6 Securities Approvals...................................... 36
Section 10.7 Closing Deliveries........................................ 36
ARTICLE XI
Closing Deliveries...................................................... 36
Section 11.1 Deliveries of the Company and the Stockholder............. 36
Section 11.2 Deliveries of Acquiror.................................... 38
ARTICLE XII
Post Closing Matters.................................................... 39
Section 12.1 Further Instruments of Transfer........................... 39
Section 12.2 Preservation of Tax and Accounting Treatment.............. 39
Section 12.3 Merger Tax Covenants...................................... 40
ARTICLE XIII
Remedies................................................................ 41
Section 13.1 Indemnification by the Stockholder........................ 41
Section 13.2 Indemnification by Acquiror............................... 42
Section 13.3 Conditions of Indemnification............................. 43
Section 13.4 Remedies Not Exclusive.................................... 45
Section 13.5 Indemnification Limitations............................... 45
Section 13.6 Tax Benefits; Insurance Proceeds.......................... 45
Section 13.7 Payment of Indemnification Obligation..................... 45
ARTICLE XIV
Termination............................................................. 46
Section 14.1 Termination............................................... 46
Section 14.2 Effect of Termination..................................... 47
ARTICLE XV
Nondisclosure of Confidential Information............................... 47
Section 15.1 Nondisclosure............................................. 47
Section 15.2 Damages................................................... 47
Section 15.3 Survival.................................................. 48
ARTICLE XVI
Transfer Restrictions................................................... 48
Section 16.1 Transfer Restrictions..................................... 48
ARTICLE XVII
Federal Securities Law
Restrictions on Acquiror Common Stock................................... 48
Section 17.1 Investment Representation................................. 49
Section 17.2 Compliance with Law....................................... 49
Section 17.3 Economic Risk; Sophistication............................. 49
Section 17.4 Accredited Investor Status................................ 49
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ARTICLE XVIII
Miscellaneous .......................................................... 50
Section 18.1 Amendment; Waivers........................................ 50
Section 18.2 Assignment................................................ 50
Section 18.3 Parties In Interest; No Third Party Beneficiaries......... 50
Section 18.4 Entire Agreement.......................................... 50
Section 18.5 Severability.............................................. 50
Section 18.6 Survival of Representations, Warranties and Covenants..... 50
Section 18.7 Governing Law............................................. 51
Section 18.8 Captions.................................................. 51
Section 18.9 Gender and Number......................................... 51
Section 18.10 Reference to Agreement.................................... 51
Section 18.11 Confidentiality; Publicity and Disclosures................ 51
Section 18.12 Notice.................................................... 51
Section 18.13 Choice of Forum........................................... 52
Section 18.14 No Waiver; Remedies....................................... 52
Section 18.15 Counterparts.............................................. 52
Section 18.16 Costs, Expenses and Legal Fees............................ 53
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (this "Agreement"),
dated as of ________, 1997, is by and among Technical Software, Inc., an Ohio
corporation (the "Company"), ▇▇▇▇ ▇▇▇▇▇▇, sole stockholder of the Company (the
"Stockholder"), and Universal Document Management Systems, Inc., an Ohio
corporation ("Acquiror").
WITNESSETH:
WHEREAS, the Boards of Directors of each of the Company and Acquiror have
determined that a business combination between the Company and Acquiror is in
the best interests of their respective companies and Stockholder and presents an
opportunity for their respective companies to achieve long-term strategic
objectives and, accordingly, have agreed to effect the Merger (as hereinafter
defined) upon the terms and subject to the conditions set forth herein; and
WHEREAS, it is intended that for federal income tax purposes the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code; and
WHEREAS, Acquiror has entered or intends to enter into merger or other
acquisition agreements (collectively, the "Other Agreements") pursuant to which
it intends to acquire a number of other companies whose businesses are similar
to that of the Company, the "Target Companies," as such term is defined herein;
and
WHEREAS, to provide Acquiror with necessary working capital and funds
required to consummate the transactions contemplated hereby, Acquiror will,
subject to the terms and conditions of this Agreement, enter into an
underwriting agreement with the Underwriter Representative (as defined herein)
in connection with the Initial Public Offering (as defined herein); and
WHEREAS, prior to the Closing Date (defined below), Acquiror intends to
change its name to Synergis Technologies, Inc.;
NOW, THEREFORE, and in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 CERTAIN GENERAL DEFINITIONS. As used in this Agreement, the
following terms shall have the meanings set forth below:
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1.1.1 "actual knowledge", "have no actual knowledge of", "do not
actually know of" and similar phrases shall mean (i) in the case of a natural
person, the actual conscious awareness, or not, as the context requires, of the
particular fact by such person, and (ii) in the case of an entity, the actual
conscious awareness, or not, as the context requires, of the particular fact by
any stockholder, director or executive officer of such entity.
1.1.2 "Affiliate" with respect to any person shall mean a person
that directly or indirectly through one or more intermediaries, controls, or is
controlled by or is under common control with, such person.
1.1.3 "best knowledge", "have knowledge of", "have no knowledge of",
"do not know of" or "to the knowledge of" and similar phrases shall mean (i) in
the case of a natural person, the particular fact was known, or not known, as
the context requires, to such person after diligent investigation and inquiry by
such person, and (ii) in the case of an entity, the particular fact was known,
or not known, as the context requires, to any stockholder, director or executive
officer of such entity after diligent investigation and inquiry.
1.1.4 "Company Capital Stock" shall mean the shares of capital stock
of the Company, as set forth in the Company Disclosure Schedules, which are
authorized, issued and outstanding as of the Effective Time.
1.1.5 "Company Disclosure Schedules" shall mean the schedules of
exceptions and other disclosures attached hereto as of the date hereof or
otherwise delivered by the Company and the Stockholder to Acquiror, as such may
be amended or supplemented from time to time pursuant to the provisions hereof.
The information contained in the Company Disclosure Schedules is labeled to
correspond with the Section numbers of this Agreement to which the disclosure
relates.
1.1.6 "Confidential Information" shall mean all trade secrets and
other confidential and/or proprietary information of the particular person,
including information derived from reports, investigations, research, work in
progress, codes, marketing and sales programs, financial projections, cost
summaries, pricing formulae, contract analyses, financial information,
projections, confidential filings with any state or federal agency, and all
other confidential concepts, methods of doing business, ideas, materials or
information prepared or performed for, by or on behalf of such person by its
employees, officers, directors, agents, representatives, or consultants.
1.1.7 "Environmental Laws" shall mean any laws or regulations
pertaining to health or the environment, as in effect on the date hereof and the
Closing Date, including without limitation (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. Sections 9601
et seq.), as amended (including without limitation as amended pursuant to the
Superfund Amendments and Reauthorization Act of 1986), and regulations
promulgated thereunder, (ii) the Resource Conservation and Recovery Act of 1976
(42 U.S.C. Sections 6901 et seq., as amended), and regulations promulgated
thereunder, (iii) statutes, rules or regulations, whether federal, state or
local, applicable to the Company's assets or operations that relate to asbestos
or polychlorinated
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biphenyls, and (iv) the provisions contained in any similar state statutes or
regulations relating to environmental matters applicable to the Company's assets
or operations.
1.1.8 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
1.1.9 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.1.10 "Initial Public Offering" shall mean the initial underwritten
public offering of Acquiror Common Stock contemplated by the Registration
Statement.
1.1.11 "Initial Public Offering Price" shall mean the price per
share at which Acquiror Common Stock is offered for sale to the public in the
Initial Public Offering.
1.1.12 "Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended.
1.1.13 "IRS" shall mean the Internal Revenue Service of the United
States Department of the Treasury.
1.1.14 "Material Adverse Effect" shall mean a material adverse
effect on the Company's or Acquiror's, as applicable, business, operations,
condition (financial or otherwise) or results of operations, taken as a whole,
in consideration of all relevant facts and circumstances.
1.1.15 "ordinary course of business" shall mean the usual and
customary way in which the Company has conducted its business in the past.
1.1.16 "person" shall mean any natural person, corporation,
partnership, joint venture, limited liability company, association, group,
organization or other entity.
1.1.17 "Related Acquisitions" shall mean, collectively, the Merger,
and the mergers and acquisitions of entities and assets contemplated by the
Other Agreements.
1.1.18 "Schedules" shall mean the Company Disclosure Schedules and
the Acquiror Disclosure Schedules.
1.1.19 "SEC" shall mean the United States Securities and
Exchange Commission.
1.1.20 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.1.21 "Target Companies" shall mean the companies listed on Exhibit
1.1.21 which Acquiror intends to acquire simultaneously with its acquisition of
the Company.
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1.1.22 "Tax Returns" shall include all federal, state, local or
foreign income, excise, corporate, franchise, property, sales, use, payroll,
withholding, provider, environmental, duties, value added and other tax returns
(including information returns).
1.1.23 "Underwriter Representative" shall mean any underwriter in
the Initial Public Offering who acts as a managing underwriter in the Initial
Public Offering.
1.1.24 "Acquiror Common Stock" shall mean the Common Stock, par
value $0.01 per share, of Acquiror.
1.1.25 "Acquiror Disclosure Schedules" shall mean the schedules of
exceptions and other disclosures attached hereto or otherwise delivered by
Acquiror to the Company and/or the Stockholder, as such may be amended or
supplemented from time to time pursuant to the provisions hereof. The
information contained in the Acquiror Disclosure Schedules is labeled to
correspond with the Section numbers of this Agreement to which the disclosure
relates, if applicable.
ARTICLE II
THE MERGER
SECTION 2.1 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Company shall be merged with and into
Acquiror in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease (the "Merger"). Acquiror shall be the
surviving corporation in the Merger (in such capacity, hereinafter referred to
as the "Surviving Corporation") and shall continue to be governed by the laws of
the State of Ohio, and the separate corporate existence of Acquiror with all its
rights, privileges, powers, immunities, purposes and franchises shall continue
unaffected by the Merger, except as set forth herein. The Merger shall have the
effects specified in the Ohio General Corporation Law.
SECTION 2.2 THE CLOSING. The Closing shall take place at 10:00 a.m.,
Cincinnati time, at the offices of ▇▇▇▇▇▇▇▇ & Shohl LLP simultaneously with the
closings of the Initial Public Offering and Acquiror's acquisitions of the
Target Companies. The date on which the Closing occurs is hereinafter referred
to as the "Closing Date."
SECTION 2.3 EFFECTIVE TIME. If all the conditions to the Merger set forth
in Articles IX and X shall have been fulfilled or waived in accordance herewith
and this Agreement shall not have been terminated in accordance with Article
XIV, the parties hereto shall cause to be properly executed and filed on the
Closing Date a Certificate of Merger meeting the requirements of Section 1701.79
of the Ohio Revised Code. The Merger shall become effective at the time of the
filing of such document with the Secretary of State of Ohio, in accordance with
such laws or at such later time which the parties hereto have theretofore agreed
upon and designated in such filings as the effective time of the Merger (the
"Effective Time").
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SECTION 2.4 ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. The
Articles of Incorporation of Acquiror in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until duly amended in accordance with their terms.
SECTION 2.5 CODE OF REGULATIONS OF SURVIVING CORPORATION. The Code of
Regulations of Acquiror in effect immediately prior to the Effective Time shall
be the Code of Regulations of the Surviving Corporation until duly amended in
accordance with its terms.
SECTION 2.6 DIRECTORS OF THE SURVIVING CORPORATION. The persons who are
directors of Acquiror immediately prior to the Effective Time shall, from and
after the Effective Time, be the directors of the Surviving Corporation until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Code of Regulations.
SECTION 2.7 OFFICERS OF THE SURVIVING CORPORATION. The persons who are
officers of Acquiror immediately prior to the Effective Time shall, from and
after the Effective Time, be the officers of the Surviving Corporation and shall
hold their same respective office(s) until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal.
SECTION 2.8 CONVERSION OF COMPANY CAPITAL STOCK. The manner of converting
shares of the Company in the Merger shall be as follows:
2.8.1 As a result of the Merger and without any action on the part
of the holder thereof, all shares of Company Capital Stock issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Capital Stock shall thereafter cease to
have any rights with respect to such shares of Company Capital Stock, except the
right to receive, without interest, validly issued, fully paid and nonassessable
shares of Acquiror Common Stock and other consideration, if any, determined in
accordance with the provisions of Exhibit 2.8.1 attached hereto (collectively,
the "Merger Consideration") upon the surrender of such certificate.
2.8.2 Each share of Company Capital Stock held in the Company's
treasury at the Effective Time, by virtue of the Merger, shall cease to be
outstanding and shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
SECTION 2.9 EXCHANGE OF CERTIFICATES REPRESENTING SHARES OF COMPANY COMMON
STOCK.
2.9.1 At or after the Effective Time and at Closing (i) the
Stockholder, as the holder of a certificate or certificates representing shares
of Company Capital Stock, shall, upon surrender of such certificate or
certificates, receive the number of shares of Acquiror Common Stock
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determined in accordance with the provisions of Exhibit 2.8.1 attached hereto;
and (ii) until the certificate or certificates representing Company Capital
Stock have been surrendered by a Stockholder and replaced by a certificate or
certificates representing Acquiror Common Stock, the certificate or certificates
for Company Capital Stock shall, for all purposes be deemed to evidence
ownership of the number of shares of Acquiror Common Stock determined in
accordance with the provisions of Exhibit 2.8.1 attached hereto. All shares of
Acquiror Common Stock issuable to the Stockholder in the Merger shall be deemed
for all purposes to have been issued by Acquiror at the Effective Time.
2.9.2 The Stockholder shall deliver to Acquiror at Closing the
certificate or certificates representing Company Capital Stock owned by him,
duly endorsed in blank by the Stockholder, or accompanied by duly endorsed stock
powers in blank, and with all necessary transfer tax and other revenue stamps,
acquired at the Stockholder's expense, affixed and canceled. The Stockholder
agrees to cure any deficiencies with respect to the endorsement of the
certificates or other documents of conveyance with respect to such Company
Capital Stock or with respect to the stock powers accompanying any Company
Capital Stock. Upon such delivery, the Stockholder shall receive in exchange
therefor a certificate representing that number of shares of Acquiror Common
Stock and the amount of cash, if any, such Stockholder is entitled to receive
pursuant hereto.
SECTION 2.10 FRACTIONAL SHARES. Notwithstanding any other provision
herein, no fractional shares of Acquiror Common Stock will be issued and if the
Stockholder is entitled hereunder to receive a fractional share of Acquiror
Common Stock but for this Section 2.10, he will be entitled to receive a cash
payment in lieu thereof reflecting the Stockholder's proportionate interest in a
share of Acquiror Common Stock multiplied by the Initial Public Offering Price.
SECTION 2.11 SUBSEQUENT ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of any of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, and to effect the cancellation of all
outstanding shares of Company Capital Stock in return for the consideration set
forth in this Agreement, the officers and directors of the Surviving Corporation
shall, at the sole cost and expense of the Surviving Corporation, be authorized
to execute and deliver, in the name and on behalf of the Company, to carry out
all such deeds, bills of sale, assignments and assurances and to take and do, in
the name and on behalf of the Company, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER
The Company and the Stockholder, jointly and severally, represent and
warrant to Acquiror that except as may be set forth in the Company Disclosure
Schedules the following are true and correct as of the date hereof:
SECTION 3.1 ORGANIZATION AND GOOD STANDING; QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of its state of organization, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own the properties
it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Company is not duly qualified and licensed
to do business in any other jurisdiction. The Company does not have any assets,
employees or offices in any state other than the state of its organization.
SECTION 3.2 CAPITALIZATION. The authorized, issued and outstanding capital
stock of the Company is set forth in the Company Disclosure Schedules. The
Stockholder owns all of the issued and outstanding Company Capital Stock, free
and clear of all security interests, liens, adverse claims, encumbrances,
equities, proxies and shareholders' agreements. Each outstanding share of
Company Capital Stock has been legally and validly issued and is fully paid and
nonassessable. No shares of Company Capital Stock are owned by the Company in
treasury. No shares of Company Capital Stock have been issued or disposed of in
violation of the preemptive rights, rights of first refusal or similar rights of
any of the Company's Stockholder. The Company has no bonds, debentures, notes or
other obligations the holders of which have the right to vote (or are
convertible into or exercisable for securities having the right to vote) with
the Stockholder on any matter.
SECTION 3.3 TRANSACTIONS IN CAPITAL STOCK. The Company has not acquired
any Company Capital Stock since January 1, 1993. There exist no options,
warrants, subscriptions or other rights to purchase, or securities convertible
into or exchangeable for, any of the authorized or outstanding securities of the
Company, and no option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company to issue any of its authorized but
unissued capital stock. The Company has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. Neither the equity structure of the Company nor the relative ownership
of shares among any of its Stockholder has been altered or changed in
contemplation of the Merger within the two years preceding the date of this
Agreement.
SECTION 3.4 CONTINUITY OF BUSINESS ENTERPRISE. There has not been any
sale, distribution or spin-off of significant assets of the Company or any of
its Affiliates other than in the ordinary course of business within the two
years preceding the date of this Agreement.
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SECTION 3.5 CORPORATE RECORDS. The copies of the Articles of Incorporation
and Code of Regulations, and all amendments thereto, of the Company that have
been delivered or made available to Acquiror are true, correct and complete
copies thereof, as in effect on the date hereof. The minute books of the
Company, copies of which have been delivered or made available to Acquiror,
contain accurate minutes of all meetings of, and accurate consents to all
actions taken without meetings by, the Board of Directors (and any committees
thereof) and such Stockholder of the Company since its formation.
SECTION 3.6 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Company of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by the Company. This Agreement has
been duly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies. The Company has obtained, in accordance with
applicable law and its Articles of Incorporation and Code of Regulations, the
approval of its Stockholder necessary to the consummation of the transactions
contemplated hereby.
SECTION 3.7 NO VIOLATION. Neither the execution, delivery or performance
of this Agreement or the other agreements contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will (a)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, the Articles of Incorporation or
Code of Regulations of the Company, (b) except as would not, individually or in
the aggregate, result in a Material Adverse Effect, conflict with, or result in
a violation or breach of the terms, conditions or provisions of, or constitute a
default under, any agreement, indenture or other instrument under which the
Company is bound or to which any of the assets of the Company are subject, or
result in the creation or imposition of any security interest, lien, charge or
encumbrance upon any of the assets of the Company or (c) to the knowledge of the
Company, except as would not, individually or in the aggregate, result in a
Material Adverse Effect, violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body.
SECTION 3.8 CONSENTS. Except as may have been obtained or as may be
required under the Exchange Act, the Securities Act, the Ohio General
Corporation Law and state securities laws, no consent, authorization, approval,
permit or license of, or filing with, any governmental or public body or
authority, any lender or lessor or any other person or entity is required to
authorize, or is required in connection with, the execution, delivery and
performance of this Agreement or the agreements contemplated hereby on the part
of the Company, other than such consents as to which the failure to obtain would
not, individually or in the aggregate, result in a Material Adverse Effect.
SECTION 3.9 FINANCIAL STATEMENTS. The Company has furnished to Acquiror
its: (i) audited balance sheet (the "Company Balance Sheet") as of December 31,
1996 (the "Company
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Balance Sheet Date") and 1995, and the related audited statements of operations,
stockholders' equity and cash flows for its three full fiscal years ended
December 31, 1996; and (ii) unaudited balance sheet as of June 30, 1997 and
related unaudited statements of operations, stockholders' equity and cash flows
for the six months ended June 30, 1997 and 1996 (collectively, with the related
notes thereto, the "Financial Statements"), copies of all of which are included
in the Company Disclosure Schedules. The Financial Statements fairly present the
financial condition and results of operations of the Company as of the dates and
for the periods indicated and have been prepared in conformity with generally
accepted accounting principles (subject to normal year-end adjustments and the
absence of notes for any unaudited interim financial statement for any interim
periods presented) applied on a consistent basis with prior periods, except as
otherwise indicated in the Financial Statements.
SECTION 3.10 LIABILITIES AND OBLIGATIONS. The Financial Statements reflect
all liabilities of the Company, accrued, contingent or otherwise that would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with generally accepted accounting principles (subject to normal
year-end adjustments and the absence of notes for any unaudited interim
financial statement for any interim periods presented). Except as set forth in
the Financial Statements, the Company is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity, and
the Company does not know of any valid basis for the assertion of any other
claims or liabilities of any nature or in any amount.
SECTION 3.11 EMPLOYEE MATTERS.
3.11.1 CASH COMPENSATION. The Company Disclosure Schedules contain a
complete and accurate list of the names, titles and annual cash compensation as
of December 31, 1996, including without limitation wages, salaries, bonuses
(discretionary and formula) and other cash compensation (the "Cash
Compensation") of all employees of the Company. In addition, the Company
Disclosure Schedules contain a complete and accurate description of (i) all
increases in Cash Compensation of employees of the Company during the current
fiscal year and the immediately preceding fiscal year and (ii) any promised
increases in Cash Compensation of employees of the Company that have not yet
been effected.
3.11.2 COMPENSATION PLANS. The Company Disclosure Schedules contain
a complete and accurate list of all compensation plans, arrangements or
practices (the "Compensation Plans") sponsored by the Company or to which the
Company contributes on behalf of its employees. The Compensation Plans include
without limitation plans, arrangements or practices that provide for severance
pay, deferred compensation, incentive, bonus or performance awards, and stock
ownership or stock options. The Company has provided or made available to
Acquiror a copy of each written Compensation Plan and a written description of
each unwritten Compensation Plan. Each of the Compensation Plans can be
terminated or amended at will by the Company.
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3.11.3 EMPLOYMENT AGREEMENTS. The Company is not a party to any
employment agreement ("Employment Agreements") with respect to any of its
employees. Employment Agreements include without limitation employee leasing
agreements, employee services agreements and noncompetition agreements.
3.11.4 EMPLOYEE POLICIES AND PROCEDURES. The Company Disclosure
Schedules contain a complete and accurate list of all employee manuals and all
material policies, procedures and work-related rules (the "Employee Policies and
Procedures") that apply to employees of the Company. The Company has provided or
made available to Acquiror a copy of all written Employee Policies and
Procedures and a written description of all material unwritten Employee Policies
and Procedures.
3.11.5 UNWRITTEN AMENDMENTS. No material unwritten amendments have
been made, whether by oral communication, pattern of conduct or otherwise, with
respect to any Compensation Plans or Employee Policies and Procedures.
3.11.6 LABOR COMPLIANCE. To the knowledge of the Company, the
Company has been and is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices, terms
and conditions of employment and wages and hours, except for any such failures
to be in compliance that, individually or in the aggregate, would not result in
a Material Adverse Effect, and the Company is not liable for any arrears of
wages or penalties for failure to comply with any of the foregoing. To the
knowledge of the Company, the Company has not engaged in any unfair labor
practice or discriminated on the basis of race, color, religion, sex, national
origin, age, disability or handicap in its employment conditions or practices
that would, individually or in the aggregate, result in a Material Adverse
Effect. There are no (i) unfair labor practice charges or complaints or racial,
color, religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the actual knowledge of the
Company, threatened against the Company before any federal, state or local
court, board, department, commission or agency (nor, to the knowledge of the
Company, does any valid basis therefor exist) or (ii) existing or, to the actual
knowledge of the Company, threatened labor strikes, disputes, grievances,
controversies or other labor troubles affecting the Company (nor, to the
knowledge of the Company, does any valid basis therefor exist).
3.11.7 UNIONS. The Company has never been a party to any agreement
with any union, labor organization or collective bargaining unit. The Company
has not been advised by any employee that he or she is represented by any union,
labor organization or collective bargaining unit. To the actual knowledge of the
Company, none of the employees of the Company has threatened to organize or join
a union, labor organization or collective bargaining unit.
3.11.8 ALIENS. To the best knowledge of the Company, all employees
of the Company are citizens of, or are authorized in accordance with federal
immigration laws to be employed in, the United States.
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SECTION 3.12 EMPLOYEE BENEFIT PLANS.
3.12.1 IDENTIFICATION. The Company Disclosure Schedules contain a
complete and accurate list of all employee benefit plans (within the meaning of
Section 3(3) of ERISA) sponsored by the Company or to which the Company
contributes on behalf of its employees and all employee benefit plans previously
sponsored or contributed to on behalf of its employees within the three years
preceding the date hereof (the "Employee Benefit Plans"). The Company has
provided or made available to Acquiror copies of all plan documents,
determination letters, pending determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans. In
addition, the Company has provided or made available to Acquiror a written
description of all existing practices engaged in by the Company that constitute
Employee Benefit Plans. Subject to the requirements of the Internal Revenue Code
and ERISA, each of the Employee Benefit Plans can be terminated or amended at
will by the Company. No unwritten amendment exists with respect to any Employee
Benefit Plan.
3.12.2 ADMINISTRATION. To the knowledge of the Company, each
Employee Benefit Plan has been administered and maintained in compliance with
all applicable laws, rules and regulations, except where the failure to be in
compliance would not, individually or in the aggregate, result in a Material
Adverse Effect. To the knowledge of the Company, The Company and the Stockholder
have made all necessary filings, reports and disclosures with respect to all
applicable Employee Benefit Plans.
3.12.3 EXAMINATIONS. The Company has not received any notice that
any Employee Benefit Plan is currently the subject of an audit, investigation,
enforcement action or other similar proceeding conducted by any state or federal
agency.
3.12.4 PROHIBITED TRANSACTIONS. To the knowledge of the Company, no
prohibited transactions (within the meaning of Section 4975 of the Internal
Revenue Code or Sections 406 and 407 of ERISA) have occurred with respect to any
Employee Benefit Plan.
3.12.5 CLAIMS AND LITIGATION. No pending or, to the actual knowledge
of the Company, threatened, claims, suits or other proceedings exist with
respect to any Employee Benefit Plan other than normal benefit claims filed by
participants or beneficiaries.
3.12.6 QUALIFICATION. The Company has received a favorable
determination letter or ruling from the IRS for each of the Employee Benefit
Plans intended to be qualified within the meaning of Section 401(a) of the
Internal Revenue Code and/or tax-exempt within the meaning of Section 501 (a) of
the Internal Revenue Code. No proceedings exist or, to the actual knowledge of
the Company, have been threatened that could result in the revocation of any
such favorable determination letter or ruling.
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3.12.7 FUNDING STATUS. No accumulated funding deficiency (within the
meaning of Section 412 of the Internal Revenue Code), whether or not waived,
exists with respect to any Employee Benefit Plan or any plan sponsored by any
member of a controlled group (within the meaning of Section 412(n)(6)(B) of the
Internal Revenue Code) in which the Company is a member (a "Controlled Group").
With respect to each Employee Benefit Plan subject to Title IV of ERISA, the
assets of each such plan are at least equal in value to the present value of
accrued benefits determined on an ongoing basis as of the date hereof. The
Company does not sponsor any Employee Benefit Plan described in Section
501(c)(9) of the Internal Revenue Code. None of the Employee Benefit Plans are
subject to actuarial assumptions.
3.12.8 EXCISE TAXES. Neither the Company nor any member of a
Controlled Group has any liability to pay excise taxes with respect to any
Employee Benefit Plan under applicable provisions of the Code or ERISA.
3.12.9 MULTIEMPLOYER PLANS. Neither the Company nor any member of a
Controlled Group is or ever has been obligated to contribute to a multiemployer
plan within the meaning of Section 3(37) of ERISA.
3.12.10 PBGC. To the knowledge of the Company, none of the Employee
Benefit Plans is subject to the requirements of Title IV of ERISA.
3.12.11 RETIREES. The Company has no obligation or commitment to
provide medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired except
as may be required pursuant to the continuation of coverage provisions of
Section 4980B of the Internal Revenue Code and Sections 601 through 608 of
ERISA.
SECTION 3.13 ABSENCE OF CERTAIN CHANGES. Since the Company Balance Sheet
Date, the Company has not
3.13.1 suffered a Material Adverse Effect, whether or not caused by
any deliberate act or omission of the Company or a Stockholder;
3.13.2 contracted for the purchase of any capital asset having a
cost in excess of $25,000 or made any single capital expenditure in excess of
$25,000;
3.13.3 incurred any indebtedness for borrowed money (other than
short-term borrowing in the ordinary course of business), or issued or sold any
debt securities;
3.13.4 incurred or discharged any material liabilities or
obligations except in the ordinary course of business;
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3.13.5 paid any amount on any indebtedness prior to the due date,
forgiven or cancelled any claims or any debt in excess of $5,000, or released or
waived any rights or claims except in the ordinary course of business;
3.13.6 mortgaged, pledged or subjected to any security interest,
lien, lease or other charge or encumbrance any of its properties or assets
(other than statutory liens arising in the ordinary course of business or other
liens that do not materially detract from the value or interfere with the use of
such properties or assets);
3.13.7 suffered any damage or destruction to or loss of any assets
(whether or not covered by insurance) that has, individually or in the
aggregate, resulted in a Material Adverse Effect;
3.13.8 acquired or disposed of any assets having an aggregate value
in excess of $25,000, except in the ordinary course of business;
3.13.9 written up or written down the carrying value of any of its
assets, other than accounts receivable or inventories in the ordinary course of
business;
3.13.10 changed the costing system or depreciation methods of
accounting for its assets in any material respect;
3.13.11 lost or terminated any employee, customer or supplier that
has, individually or in the aggregate, resulted in a Material Adverse Effect;
3.13.12 except in the ordinary course of business consistent with
past practice, increased the compensation of any director, officer, key employee
or consultant;
3.13.13 increased the compensation of any employee (except for
increases in the ordinary course of business consistent with past practice) or
hired any new employee who is expected to receive annualized compensation of at
least $50,000;
3.13.14 except in the ordinary course of business consistent with
past practice, made any payments to or loaned any money to any employee,
officer, director or stockholder;
3.13.15 formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
3.13.16 redeemed, purchased or otherwise acquired, or sold, granted
or otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to acquire such capital stock or securities, or agreed
to change the terms and conditions of any such capital stock, securities or
rights;
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3.13.17 entered into any agreement providing for total payments in
excess of $5,000 in any 12 month period with any person or group, or modified or
amended in any material respect the terms of any such existing agreement, except
in the ordinary course of business;
3.13.18 entered into, adopted or amended any Employee Benefit Plan,
except as contemplated hereby or the other agreements contemplated hereby; or
3.13.19 entered into any other commitment or transaction or
experienced any other event that would materially interfere with its performance
under this Agreement or any other agreements or document executed or to be
executed pursuant to this Agreement, or otherwise has, individually or in the
aggregate, resulted in a Material Adverse Effect.
SECTION 3.14 TITLE; LEASED ASSETS.
3.14.1 REAL PROPERTY. The Company does not own any interest (other
than leasehold interests described in the Company Disclosure Schedules) in real
property. The leased real property described in the Company Disclosure Schedules
constitutes the only real property necessary for the conduct of the Company's
business.
3.14.2 PERSONAL PROPERTY. The Company has good, valid and marketable
title to all the personal property owned by the Company, all of which is
reflected in the Financial Statements (collectively, the "Personal Property").
The Personal Property and the leased personal property referred to in Section
3.14.3 constitute the only personal property necessary for the conduct of the
Company's business. Upon consummation of the transactions contemplated hereby,
such interest in the Personal Property shall be free and clear of all security
interests, liens, claims and encumbrances, other than statutory liens arising in
the ordinary course of business or other liens that do not materially detract
from the value or interfere with the use of such properties or assets.
3.14.3 LEASES. A list and brief description of (i) all leases of
real property and (ii) leases of personal property involving rental payments
within any 12 month period in excess of $5,000, in either case to which the
Company is a party, either as lessor or lessee, are set forth in the Company
Disclosure Schedules. All such leases are valid and, to the knowledge of the
Company, enforceable in accordance with their respective terms except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
SECTION 3.15 COMMITMENTS.
3.15.1 COMMITMENTS; DEFAULTS. Any of the following as to which the
Company is a party or is bound by, or which any of the shares of Company Capital
Stock are subject to, or which the assets or the business of the Company are
bound by, whether or not in writing, are listed in the Company Disclosure
Schedules (collectively "Commitments"):
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3.15.1.1 any partnership or joint venture agreement;
3.15.1.2 any guaranty or suretyship, indemnification or
contribution agreement or performance bond;
3.15.1.3 any debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent or to be
lent to another;
3.15.1.4 any contract to purchase real property;
3.15.1.5 any agreement with dealers or sales or commission
agents, public relations or advertising agencies, accountants or attorneys
(other than in connection with this Agreement and the transactions contemplated
hereby) involving total payments within any 12 month period in excess of $5,000
and which is not terminable on 30 days' notice or without penalty;
3.15.1.6 any agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of the Company or any Stockholder;
3.15.1.7 any agreement for the acquisition of services,
supplies, equipment, inventory, fixtures or other property involving more than
$5,000 in the aggregate;
3.15.1.8 any powers of attorney;
3.15.1.9 any contracts containing noncompetition covenants;
3.15.1.10 any agreement providing for the purchase from a
supplier of all or substantially all of the requirements of the Company of a
particular product or service; or
3.15.1.11 any other agreement or commitment not made in the
ordinary course of business or that is material to the business, operations,
condition (financial or otherwise) or results of operations of the Company.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have heretofore been
delivered or made available to Acquiror. There are no existing or asserted
defaults, events of default or events, occurrences, acts or omissions that, with
the giving of notice or lapse of time or both, would constitute defaults by the
Company or, to the best knowledge of the Company, any other party to a material
Commitment, and no penalties have been incurred nor are amendments pending, with
respect to the material Commitments. The Commitments are in full force and
effect and are valid and enforceable obligations of the Company and, to the best
knowledge of the Company, the other parties thereto in accordance with their
respective terms, in each case as may be limited any applicable bankruptcy,
insolvency, or similar laws affecting creditors' rights generally or the
availability of equitable
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remedies, and no defenses, off-sets or counterclaims have been asserted or, to
the best knowledge of the Company, may be made by any party thereto (other than
the Company), nor has the Company waived any rights thereunder.
3.15.2 NO CANCELLATION OR TERMINATION OF COMMITMENT. Neither the
Company nor any Stockholder has received notice of any plan or intention of any
other party to any Commitment to exercise any right to cancel or terminate any
Commitment, and the Company does not know of any fact that would justify the
exercise of such a right; and neither the Company nor any Stockholder currently
contemplates, or has knowledge that any other person currently contemplates, any
amendment or change to any Commitment.
SECTION 3.16 INSURANCE. The Company carries property, liability, workers'
compensation and such other types of insurance pursuant to the insurance
policies listed and briefly described in the Company Disclosure Schedules (the
"Insurance Policies"). The Insurance Policies are all of insurance polices
relating to the business of the Company. All of the Insurance Policies are
issued by insurers of recognized responsibility, and, to the best knowledge of
the Company, are valid and enforceable policies, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. All Insurance Policies
shall be maintained in force without interruption up to and including the
Closing Date. True, complete and correct copies of all Insurance Policies have
been provided or made available to Acquiror. Neither the Company nor any
Stockholder has received any notice or other communication from any issuer of
any Insurance Policy canceling such policy, materially increasing any
deductibles or retained amounts thereunder, or materially increasing the annual
or other premiums payable thereunder, and to the actual knowledge of the
Company, no such cancellation or increase of deductibles, retainages or premiums
is threatened. There are no outstanding claims, settlements or premiums owed
against any Insurance Policy, or the Company has given all notices or has
presented all potential or actual claims under any Insurance Policy in due and
timely fashion. The Company Disclosure Schedules also set forth a list of all
claims under any Insurance Policy in excess of $10,000 per occurrence filed by
the Company during the immediately preceding three-year period.
SECTION 3.17 PROPRIETARY RIGHTS AND INFORMATION. Set forth in the Company
Disclosure Schedules is a true and correct description of the following
("Proprietary Rights"):
3.17.1 all trademarks, trade-names, service marks and other trade
designations, including common law rights, registrations and applications
therefor, and all patents and applications therefor currently owned, in whole or
in part, by the Company, and all licenses, royalties, assignments and other
similar agreements relating to the foregoing to which the Company is a party
(including expiration date if applicable); and
3.17.2 all agreements relating to technology, know-how or processes
that the Company is licensed or authorized to use by others, or which it
licenses or authorizes others to use.
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The Company owns or has the legal right to use the Proprietary Rights, and to
the knowledge of the Company, without conflicting, infringing or violating the
rights of any other person. No consent of any person will be required for the
use thereof by Acquiror upon consummation of the transactions contemplated
hereby and the Proprietary Rights are freely transferable. No claim has been
asserted by any person to the ownership of or for infringement by the Company of
the proprietary right of any other person, and the Company does not know of any
valid basis for any such claim. The Company has the right to use, free and clear
of any adverse claims or rights of others all trade secrets, customer lists and
proprietary information required for the marketing of all merchandise and
services formerly or presently sold or marketed by it.
SECTION 3.18 TAXES.
3.18.1 FILING OF TAX RETURNS. The Company has duly and timely filed
(in accordance with any extensions duly granted by the appropriate governmental
agency, if applicable) with the appropriate governmental agencies all Tax
Returns and reports required to be filed by the United States or any state or
any political subdivision thereof or any foreign jurisdiction. All such Tax
Returns or reports are complete and accurate in all material respects and
properly reflect the taxes of the Company for the periods covered thereby. True
and correct copies of such Tax Returns for the past five taxable years have
heretofore been delivered to Acquiror.
3.18.2 PAYMENT OF TAXES. Except for such items as the Company may be
disputing in good faith by proceedings in compliance with applicable law, which
are described in the Company Disclosure Schedules, (i) the Company has paid all
taxes, penalties, assessments and interest that have become due with respect to
any Tax Returns that it has filed and has properly accrued on its books and
records for all of the same that have not yet become due and (ii) the Company is
not delinquent in the payment of any tax, assessment or governmental charge.
3.18.3 NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR
AUDITS. The Company has not received any notice that any tax deficiency or
delinquency has been asserted against the Company. There is no unpaid
assessment, proposal for additional taxes, deficiency or delinquency in the
payment of any of the taxes of the Company that could be asserted by any taxing
authority. There is no taxing authority audit of the Company pending, or to the
actual knowledge of the Company, threatened, and the results of any completed
audits are properly reflected in the Financial Statements. To the knowledge of
the Company, the Company has not violated any federal, state, local or foreign
tax law.
3.18.4 NO EXTENSION OF LIMITATION PERIOD. The Company has not
granted an extension to any taxing authority of the limitation period during
which any tax liability may be assessed or collected.
3.18.5 WITHHOLDING REQUIREMENTS SATISFIED. All monies required to be
withheld by the Company and paid to governmental agencies for all income, social
security, unemployment
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insurance, sales, excise, use, and other taxes have been collected or withheld
and paid to the respective governmental agencies.
3.18.6 FOREIGN PERSON. Neither the Company nor any Stockholder is a
foreign person, as such term is referred to in Section 1445(f)(3) of the
Internal Revenue Code.
3.18.7 SAFE HARBOR LEASE. None of the assets of the Company
constitutes property that the Company, Acquiror, or any Affiliate of Acquiror,
will be required to treat as being owned by another person pursuant to the "Safe
Harbor Lease" provisions of Section 168(f)(8) of the Internal Revenue Code prior
to repeal by the Tax Equity and Fiscal Responsibility Act of 1982.
3.18.8 TAX EXEMPT ENTITY. None of the assets of the Company and none
of the Assets are subject to a lease to a "tax exempt entity" as such term is
defined in Section 168(h)(2) of the Internal Revenue Code.
3.18.9 COLLAPSIBLE CORPORATION. The Company has not at any time
consented, and the Stockholder will not permit the Company to elect, to have the
provisions of Section 341(f)(2) of the Internal Revenue Code apply to it.
3.18.10 BOYCOTTS. The Company has not at any time participated in or
cooperated with any international boycott as defined in Section 999 of the
Internal Revenue Code.
3.18.11 PARACHUTE PAYMENTS. To the knowledge of the Company, no
payment required or contemplated to be made by the Company will be characterized
as an "excess parachute payment" within the meaning of Section 280G(b)(1) of the
Internal Revenue Code.
3.18.12 S CORPORATION. The Company has made an election to be taxed
as an "S" corporation under Section 1362(a) of the Internal Revenue Code.
3.18.13 PERSONAL SERVICE CORPORATION. The Company is not a personal
service corporation subject to the provisions of Section 269A of the Internal
Revenue Code.
3.18.14 PERSONAL HOLDING COMPANY. The Company is not or has not been
a personal holding company within the meaning of Section 542 of the Internal
Revenue Code.
SECTION 3.19 COMPLIANCE WITH LAWS. To the knowledge of the Company, the
Company has complied with all applicable laws, and regulations and has filed
with the proper authorities all necessary statements and reports except where
the failure to so comply or file would not, individually or in the aggregate,
result in a Material Adverse Effect. To the knowledge of the Company, there are
no existing violations by the Company of any federal, state or local law or
regulation that could, individually or in the aggregate, result in a Material
Adverse Effect. The Company possesses all necessary licenses, franchises,
permits and governmental authorizations for the conduct of the Company's
business as now conducted, all of which are listed (with expiration
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dates, if applicable) in the Company Disclosure Schedules. The transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded by any such
licenses, franchises, permits or government authorizations, except for any such
default, breach or violation that would not, individually or in the aggregate,
have a Material Adverse Effect. Since January 1, 1992, the Company has not
received any notice from any federal, state or other governmental authority or
agency having jurisdiction over its properties or activities, or any insurance
or inspection body, that its operations or any of its properties, facilities,
equipment, or business practices fail to comply with any applicable law,
ordinance, regulation, building or zoning law, or requirement of any public or
quasi-public authority or body, except where failure to so comply would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.20 FINDER'S FEE. The Company has not incurred any obligation for
any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
SECTION 3.21 LITIGATION. There are no legal actions or administrative
proceedings or investigations instituted, or to the actual knowledge of the
Company threatened, against the Company, affecting or that could materially
affect the outstanding shares of Company Capital Stock, any of the assets of the
Company, or the operation, business, condition (financial or otherwise), or
results of operations of the Company which (i) if, successful, could,
individually or in the aggregate, have a Material Adverse Effect or (ii) could
adversely affect the ability of the Company or any Stockholder to effect the
transactions contemplated hereby. Neither the Company nor any Stockholder is (a)
subject to any continuing court or administrative order, judgment, writ,
injunction or decree applicable specifically to the Company or to its business,
assets, operations or employees or (b) in default with respect to any such
order, judgment, writ, injunction or decree. The Company has no knowledge of any
valid basis for any such action, proceeding or investigation. All claims made
or, to the actual knowledge of the Company, threatened against the Company in
excess of its deductible are covered under its Insurance Policies.
SECTION 3.22 CONDITION OF FIXED ASSETS. All of the structures and
equipment reflected in the Financial Statements and used by the Company in its
business are in good condition and repair, subject to normal wear and tear, and
conform in all material respects with all applicable ordinances, regulations and
other laws, and the Company has no actual knowledge of any latent defects
therein.
SECTION 3.23 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind has been declared or paid by the Company on any of its
capital stock since the Company Balance Sheet Date. No repurchase of any of the
Company's capital stock has been approved, effected or is pending, or is
contemplated by the Board of Directors of the Company.
SECTION 3.24 BANKING RELATIONS. Set forth in the Company Disclosure
Schedules is a complete and accurate list of all borrowing and investing
arrangements that the Company has with any bank or other financial institution,
indicating with respect to each relationship the type of
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arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
SECTION 3.25 OWNERSHIP INTERESTS OF INTERESTED PERSONS; AFFILIATIONS. No
officer, supervisory employee or director of the Company, or their respective
spouses, children or Affiliates, owns directly or indirectly, on an individual
or joint basis, any interest in, has a compensation or other financial
arrangement with, or serves as an officer or director of, any customer or
supplier of the Company or any organization that has a material contract or
arrangement with the Company.
SECTION 3.26 INVESTMENTS IN COMPETITORS. Neither the Company nor any
Stockholder owns directly or indirectly any interests or has any investment in
any person that is a competitor of the Company.
SECTION 3.27 ENVIRONMENTAL MATTERS. Neither the Company nor any of its
assets are currently in violation of, or subject to any existing, pending or, to
the actual knowledge of the Company threatened, investigation or inquiry by any
governmental authority or to any remedial obligations under, any Environmental
Laws, except for any such violations, investigations or inquiries that would
not, individually or in the aggregate, result in a Material Adverse Effect.
SECTION 3.28 CERTAIN PAYMENTS. Neither the Company nor any director,
officer or employee of the Company acting for or on behalf of the Company, has
paid or caused to be paid, directly or indirectly, in connection with the
business of the Company:
3.28.1 to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or
3.28.2 any contribution to any political party or candidate (other
than from personal funds of directors, officers or employees not reimbursed by
their respective employers or as otherwise permitted by applicable law).
SECTION 3.29 NO AFFILIATION WITH NASD MEMBER. None of the Stockholder or
officers or directors of the Company has any affiliation or association with a
member of the National Association of Securities Dealers, Inc.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to Acquiror that the following,
except as set forth in the Company Disclosure Schedules, are true and correct as
of the date hereof and agrees as follows:
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SECTION 4.1 VALIDITY; STOCKHOLDER CAPACITY. This Agreement, the
Stockholder Employment Agreement (as defined in Section 8.3, if applicable), and
each other agreement contemplated hereby or thereby have been or will be as of
the Closing Date duly executed and delivered by the Stockholder and constitutes
or will constitute legal, valid and binding obligations of the Stockholder,
enforceable against the Stockholder in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable remedies.
The Stockholder has legal capacity to enter into and perform this Agreement and
his Stockholder Employment Agreement.
SECTION 4.2 NO VIOLATION. Neither the execution, delivery or performance
of this Agreement, the Stockholder Employment Agreement or the other agreements
of the Stockholder contemplated hereby or thereby, nor the consummation of the
transactions contemplated hereby or thereby, will (a) conflict with, or result
in a violation or breach of the terms, conditions or provisions of, or
constitute a default under, any agreement, indenture or other instrument under
which the Stockholder is bound or to which any of his, her or its shares of
Company Capital Stock are subject, or result in the creation or imposition of
any security interest, lien, charge or encumbrance upon any of his shares of
Company Capital Stock or (b) to the actual knowledge of the Stockholder, violate
or conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body.
SECTION 4.3 PERSONAL HOLDING COMPANY; CONTROL OF RELATED BUSINESSES. The
Stockholder does not own the shares of Company Capital Stock, directly or
indirectly, beneficially or of record, through a personal holding company. The
Stockholder does not control another business that is in the same or similar
line of business as the Company or that has or is engaged in transactions with
the Company except transactions in the ordinary course of business.
SECTION 4.4 TRANSFERS OF THE COMPANY CAPITAL STOCK. Set forth in the
Company Disclosure Schedules is a list of all transfers or other transactions
involving capital stock of the Company since January 1, 1993. All transfers of
Company Capital Stock by the Stockholder have been made for valid business
reasons and not in anticipation or contemplation of the consummation of the
transactions contemplated by this Agreement.
SECTION 4.5 CONSENTS. Except as may be required under the Exchange Act,
the Securities Act, the Ohio General Corporation Law and state securities laws,
or otherwise disclosed pursuant to this Agreement, no consent, authorization,
approval, permit or license of, or filing with, any governmental or public body
or authority, or any other person is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of the Stockholder.
SECTION 4.6 CERTAIN PAYMENTS. The Stockholder has not paid or caused to be
paid, directly or indirectly, in connection with the business of the Company:
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4.6.1 to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or
4.6.2 any contribution to any political party or candidate (other
than from personal funds not reimbursed by the Company or as otherwise permitted
by applicable law).
SECTION 4.7 FINDER'S FEE. The Stockholder has not incurred any obligation
for any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
SECTION 4.8 OWNERSHIP OF INTERESTED PERSONS; AFFILIATIONS. Neither the
Stockholder nor his spouse, children or Affiliates, owns directly or indirectly,
on an individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director of, any customer
or supplier of the Company or any organization that has a material contract or
arrangement with the Company.
SECTION 4.9 INVESTMENTS IN COMPETITORS. The Stockholder does not own
directly or indirectly any interests or have any investment in any person that
is a competitor of the Company.
SECTION 4.10 DISPOSITION OF ACQUIROR SHARES. The Stockholder does not
presently intend to dispose of any shares of Acquiror Common Stock received as
Merger Consideration and is not a party to any plan, arrangement or agreement
for the disposition of such shares of Acquiror Common Stock, except this
Agreement and the Registration Rights Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company and to each Stockholder
that, except as set forth in the Acquiror Disclosure Schedules, the following
are true and correct as of the date hereof:
SECTION 5.1 ORGANIZATION AND GOOD STANDING. Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio, with all requisite corporate power and authority to carry on the business
in which it is engaged, to own the properties it owns, to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
SECTION 5.2 CAPITALIZATION. The authorized, issued and outstanding capital
stock of Acquiror is set forth in the Acquiror Disclosure Schedules. No shares
of capital stock are owned by Acquiror in treasury. Acquiror does not have any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or are convertible into or exercisable for securities having the
right to vote) with the shareholders of Acquiror on any matter. There exist no
options, warrants, subscriptions or other rights to purchase, or securities
convertible into or exchangeable for, any of
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the authorized or outstanding securities of Acquiror, and no option, warrant,
call, conversion right or commitment of any kind exists which obligates Acquiror
to issue any of its authorized but unissued capital stock, except this Agreement
and the Other Agreements. Acquiror has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay a dividend or make any distribution in respect
thereof. To the best knowledge of Acquiror, no shareholder of Acquiror has
granted options or other rights to purchase any shares of Acquiror Common Stock
from such shareholder.
SECTION 5.3 CORPORATE RECORDS. The copies of the Articles of Incorporation
and Code of Regulations, and all amendments thereto, of Acquiror that have been
delivered or made available to the Company and the Stockholder are true, correct
and complete copies thereof, as in effect on the date hereof. The minute books
of Acquiror, copies of which have been delivered or made available to the
Company and the Stockholder, contain accurate minutes of all meetings of, and
accurate consents to all actions taken without meetings by, the Board of
Directors (and any committees thereof) and the shareholders of Acquiror, since
its formation.
SECTION 5.4 AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by Acquiror of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by the Board of Directors and shareholders of
Acquiror. This Agreement and each other agreement contemplated hereby to be
executed by Acquiror have been or will be as of the Closing Date duly executed
and delivered by Acquiror and constitute or will as of the Closing Date
constitute legal, valid and binding obligations of Acquiror, enforceable against
Acquiror in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
SECTION 5.5 NO VIOLATION. Neither the execution, delivery or performance
of this Agreement or the other agreements contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will (a)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the Articles of Incorporation or
Code of Regulations of Acquiror or any agreement, indenture or other instrument
under which Acquiror is bound or (b) to the knowledge of Acquiror, except as
would not, individually or in the aggregate, have a Material Adverse Effect on
the business, operations, condition (financial or otherwise) or results of
operations of Acquiror, violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Acquiror or the properties or
assets of Acquiror.
SECTION 5.6 FINDER'S FEE. Acquiror has not incurred any obligation for any
finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
SECTION 5.7 CAPITAL STOCK. The issuance and delivery by Acquiror of shares
of Acquiror Common Stock in connection with the Merger have been duly and
validly authorized by all necessary corporate action on the part of Acquiror.
The shares of Acquiror Common Stock to
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be issued in connection with the Merger, when issued in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable
and will not have been issued in violation of any preemptive rights, rights of
first refusal or similar rights of any of Acquiror's shareholders, or any
federal or state law, including, without limitation, the registration
requirements of applicable federal and state securities laws.
SECTION 5.8 CONTINUITY OF BUSINESS ENTERPRISE. It is the present intention
of Acquiror to continue at least one significant historic business line of the
Company, or to use at least a significant portion of the Company's historic
business assets in a business, in each case within the meaning of Treasury
Regulation Section 1.368-1(d).
SECTION 5.9 CONSENTS. Except as have been obtained or as may be required
by or under the Exchange Act, the Ohio General Corporation Law, the Securities
Act and state securities laws, no consent, authorization, approval, permit or
license of, or filing with, any governmental or public body or authority, any
lender or lessor or any other person is required to authorize, or is required in
connection with, the execution, delivery and performance of this Agreement or
the agreements contemplated hereby on the part of Acquiror.
SECTION 5.10 PROPRIETARY RIGHTS AND INFORMATION. Acquiror does not own or
use any trademarks, trade-names, service marks or other trade designations or
patents in the conduct of its business. Acquiror is not a party to any agreement
relating to the use of technology or know-how. Acquiror has the right to use,
free and clear of any claims or rights of others, all trade secrets, customer
lists and proprietary information required for the marketing of all merchandise
and services formerly or presently sold or marketed by it.
SECTION 5.11 TAXES.
5.11.1 FILING OF TAX RETURNS. Acquiror has duly and timely filed (in
accordance with any extensions duly granted by the appropriate governmental
agency, if applicable) with the appropriate governmental agencies all Tax
Returns and reports required to be filed by the United States or any state or
any political subdivision thereof or any foreign jurisdiction. All such tax
returns or reports are complete and accurate and properly reflect the taxes of
Acquiror, as the case may be, for the periods covered thereby.
5.11.2 PAYMENT OF TAXES. Acquiror has paid all taxes, penalties,
assessments and interest that have become due with respect to any Tax Returns
that it has filed and has properly accrued on its books and records for all of
the same that have not yet become due. Acquiror is not delinquent in the payment
of any tax, assessment or governmental charge.
5.11.3 NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR
AUDITS. Acquiror has not received any notice that any tax deficiency or
delinquency has been asserted against it. There is no unpaid assessment,
proposal for additional taxes, deficiency or delinquency in the payment of any
of the taxes of Acquiror that could be asserted by any taxing authority. There
is no taxing
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authority audit of Acquiror pending, or to the actual knowledge of Acquiror,
threatened. Acquiror has not violated any federal, state, local or foreign tax
law.
5.11.4 NO EXTENSION OF LIMITATION PERIOD. Acquiror has not granted
an extension to any taxing authority of the limitation period during which any
tax liability may be assessed or collected.
5.11.5 ALL WITHHOLDING REQUIREMENTS SATISFIED. All monies required
to be withheld by Acquiror and paid to governmental agencies for all income,
social security, unemployment insurance, sales, excise, use, and other taxes
have been collected or withheld and paid to the respective governmental
agencies.
5.11.6 FOREIGN PERSON. Neither Acquiror nor any shareholder thereof
is a foreign person, as such term is referred to in Section 1445(f)(3) of the
Internal Revenue Code.
5.11.7 SAFE HARBOR LEASE. None of the assets of Acquiror constitute
property that the Company, Acquiror, or any Affiliate of Acquiror, will be
required to treat as being owned by another person pursuant to the "Safe Harbor
Lease" provisions of Section 168(f)(8) of the Internal Revenue Code prior to
repeal by the Tax Equity and Fiscal Responsibility Act of 1982.
5.11.8 TAX EXEMPT ENTITY. None of the assets of Acquiror are subject
to a lease to a "tax exempt entity" as such term is defined in Section 168(h)(2)
of the Internal Revenue Code.
5.11.9 COLLAPSIBLE CORPORATION. Acquiror has not at any time
consented, and the Stockholder thereof will not permit Acquiror to elect, to
have the provisions of Section 341(f)(2) of the Internal Revenue Code apply to
it.
5.11.10 BOYCOTTS. Acquiror has not at any time participated in or
cooperated with any international boycott as defined in Section 999 of the
Internal Revenue Code.
5.11.11 PARACHUTE PAYMENTS. No payment required or contemplated to
be made by Acquiror will be characterized as an "excess parachute payment"
within the meaning of Section 28OG(b)(1) of the Internal Revenue Code.
5.11.12 S CORPORATION. Acquiror has not made an election to be taxed
as an "S" corporation under Section 1362(a) of the Internal Revenue Code.
SECTION 5.12 COMPLIANCE WITH LAWS. Acquiror has complied with all
applicable laws, regulations and licensing requirements and has filed with the
proper authorities all necessary statements and reports, except where the
failure to so comply or file would not, individually or in the aggregate, result
in a Material Adverse Effect. There are no existing violations by Acquiror of
any federal, state or local law or regulation that could materially adversely
affect its property or business. Acquiror possesses all necessary licenses,
franchises, permits and governmental
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authorizations for the conduct of its business as now conducted. The
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded by any such licenses, franchises, permits or government authorizations
except for any default, breach or violation that would not, individually or in
the aggregate, have a Material Adverse Effect. Acquiror has not received any
notice from any federal, state or other governmental authority or agency having
jurisdiction over its properties or activities, or any insurance or inspection
body, that its operations or any of its properties, facilities, equipment, or
business practices fail to comply with any applicable law, ordinance,
regulation, building or zoning law, or requirement of any public or quasi-public
authority or body.
SECTION 5.13 LITIGATION. There are no legal actions or administrative
proceedings or investigations instituted, or to the actual knowledge of Acquiror
threatened against affecting Acquiror or which could affect the outstanding
shares of Acquiror Common Stock, any of the assets of Acquiror, or the
operations, business, condition (financial or otherwise) or results of
operations of Acquiror. Acquiror is not (a) subject to any continuing court or
administrative order, writ, injunction or decree applicable specifically to it
or to its business, assets, operations or employees or (b) in default with
respect to any such order, writ, injunction or decree. Acquiror has no knowledge
of any valid basis for any such action, proceeding or investigation.
SECTION 5.14 OWNERSHIP INTERESTS OF INTERESTED PERSONS; AFFILIATIONS. No
officer, supervisory employee, director or shareholder of Acquiror, or their
respective spouses, children or Affiliates, owns directly or indirectly, on an
individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director of, any customer
or supplier of Acquiror or any organization that has a material contract or
arrangement with Acquiror, except Acquiror's corporate parent, MedPlus, Inc.
SECTION 5.15 INVESTMENTS IN COMPETITORS. Neither Acquiror nor any
shareholder thereof owns directly or indirectly any interests or has any
investment in any person that is a competitor of Acquiror or one of the Target
Companies.
SECTION 5.16 CERTAIN PAYMENTS. Neither Acquiror, nor any shareholder,
director, officer or employee of Acquiror, has paid or caused to be paid,
directly or indirectly, in connection with the business of Acquiror:
5.16.1 to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or
5.16.2 any contribution to any political party or candidate (other
than from personal funds of directors, officers or employees not reimbursed by
their respective employers or as otherwise permitted by applicable law).
SECTION 5.17 COMMITMENTS.
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5.17.1 COMMITMENTS; DEFAULTS. Any of the following as to which
Acquiror is a party or is bound by, or which any of the shares of Acquiror
Common Stock subject to, or which the assets or the business of Acquiror are
bound by, whether or not in writing, are listed in the Acquiror Disclosure
Schedules (collectively "Acquiror Commitments"):
5.17.1.1 partnership or joint venture agreement;
5.17.1.2 guaranty or suretyship, indemnification or
contribution agreement or performance bond;
5.17.1.3 debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent or to be lent to
another;
5.17.1.4 contract to purchase real property;
5.17.1.5 agreement with dealers or sales or commission
agents, public relations or advertising agencies, accountants or attorneys
(other than in connection with this Agreement and the transactions contemplated
hereby) involving total payments within any 12 month period in excess of $5,000
and which is not terminable on 30 day's notice or without penalty;
5.17.1.6 agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of Acquiror or any shareholder of Acquiror;
5.17.1.7 any agreement for the acquisition of services,
supplies, equipment, inventory, fixtures or other property involving more than
$5,000 in the aggregate;
5.17.1.8 powers of attorney;
5.17.1.9 contracts containing noncompetition covenants;
5.17.1.10 agreement providing for the purchase from a
supplier of all or substantially all of the requirements of Acquiror of a
particular product or service; or
5.17.1.11 any other agreement or commitment not made in the
ordinary course of business or that is material to the business, operations,
condition (financial or otherwise) or results of operations of Acquiror.
True, correct and complete copies of the written Acquiror Commitments, and true,
correct and complete written descriptions of the oral Acquiror Commitments, have
heretofore been delivered or made available to the Company and the Stockholder.
There are no existing or asserted defaults, events of default or events,
occurrences, acts or omissions that, with the giving of notice or lapse of time
or both, would constitute defaults by Acquiror or, to the best knowledge of
Acquiror, any other
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party to a material Acquiror Commitment, and no penalties have been incurred nor
are amendments pending, with respect to the material Acquiror Commitments. The
Acquiror Commitments are in full force and effect and are valid and enforceable
obligations of Acquiror and, to the best knowledge of Acquiror, the other
parties thereto in accordance with their respective terms, in each case as may
be limited by applicable bankruptcy, insolvency, or similar laws affecting
creditors' rights generally or the availability of equitable remedies, and no
defenses, off-sets or counterclaims have been asserted or, to the best knowledge
of Acquiror, may be made by any party thereto (other than Acquiror), nor has
Acquiror waived any rights thereunder.
5.17.2 NO CANCELLATION OR TERMINATION OF ACQUIROR COMMITMENT. Except
as contemplated hereby, (i) Acquiror has not received notice of any plan or
intention of any other party to any Acquiror Commitment to exercise any right to
cancel or terminate any Acquiror Commitment, and Acquiror does not know of any
fact that would justify the exercise of such a right; and (ii) Acquiror does not
currently contemplate, or have knowledge any other person currently
contemplates, any amendment or change to any Acquiror Commitment.
SECTION 5.18 ACQUIROR FINANCIAL STATEMENTS. The audited balance sheet as
of December 31, 1996 and 1995, and related statements of operations,
shareholder's net investment and cash flows for each of the years in the
three-year period ended December 31, 1996, along with the unaudited interim
balance sheet as of June 30, 1997 and related statements of operations,
shareholder's net investment and cash flows for the six months ended June 30,
1997 and 1996 are contained in the Acquiror Disclosure Schedules (collectively,
with the related notes thereto, the "Acquiror Financial Statements"). The
Acquiror Financial Statements fairly present the financial condition and results
of operations of Acquiror as of the dates and for the periods indicated and have
been prepared in conformity with generally accepted accounting principles
(subject to normal year-end adjustments) applied on a consistent basis with
prior periods, except as otherwise indicated in the Acquiror Financial
Statements.
SECTION 5.19 LIABILITIES AND OBLIGATIONS. The Acquiror Financial
Statements reflect all liabilities of Acquiror, accrued, contingent or
otherwise, that would be required to be reflected on a balance sheet, or in the
notes thereto, prepared in accordance with generally accepted accounting
principles, except for liabilities and obligations incurred in the ordinary
course of business since December 31, 1996. Acquiror is not liable upon or with
respect to, or obligated in any other way to provide funds in respect of or to
guarantee or assume in any manner, any debt, obligation or dividend of any
person, corporation, association, partnership, joint venture, trust or other
entity, and Acquiror does not know of any valid basis for the assertion of any
other claims or liabilities of any nature or in any amount.
SECTION 5.20 EMPLOYEE MATTERS. Acquiror does not have any material
arrangements, agreements or plans with any person with respect to the employment
by Acquiror of such person or whereby such person is to serve as an officer or
director of Acquiror.
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ARTICLE VI
COVENANTS OF THE COMPANY AND THE STOCKHOLDER
The Company and the Stockholder, jointly and severally, agree that between
the date hereof and the Closing or the date on which this Agreement is
terminated in accordance with Article XIV hereof (with respect to the Company's
covenants, the Stockholder agrees to use their best efforts to cause the Company
to perform):
SECTION 6.1 CONSUMMATION OF AGREEMENT. Subject to the rights of
termination set forth in Article XIV hereof, the Company and the Stockholder
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions; provided,
however, that this covenant shall not require the Company or a Stockholder to
make any expenditures that are not expressly set forth in this Agreement or
otherwise contemplated herein.
SECTION 6.2 BUSINESS OPERATIONS. The Company shall operate its business in
the ordinary course. The Company and the Stockholder shall use his best efforts
to preserve the business of the Company intact. Neither the Company nor any
Stockholder shall take any action that would, individually or in the aggregate,
result in a Material Adverse Effect. The Company shall use its best efforts to
preserve intact its relationships with customers, suppliers, employees and
others having significant business relations with it, unless doing so would
impair its goodwill or result, individually or in the aggregate, in a Material
Adverse Effect. The Company shall collect its receivables and pay its trade
payables in the ordinary course of business consistent with past practice.
SECTION 6.3 ACCESS. The Company and the Stockholder shall, at reasonable
times during normal business hours and on reasonable notice, permit Acquiror and
its authorized representatives reasonable access to, and make available for
inspection, all of the assets and business of the Company, including its
employees, customers and suppliers, and permit Acquiror and its authorized
representatives to inspect and, at Acquiror's sole cost and expense, make copies
of all documents, records and information with respect to the affairs of the
Company as Acquiror and its representatives may request, all for the sole
purpose of permitting Acquiror to become familiar with the business and assets
and liabilities of the Company.
SECTION 6.4 NOTIFICATION OF CERTAIN MATTERS. The Company and the
Stockholder shall promptly inform Acquiror in writing of (a) any notice of or
other communication relating to, a default or event that, with notice or lapse
of time or both, would become a default, received by the Company or any
Stockholder subsequent to the date of this Agreement and prior to the Effective
Time under any Commitment material to the Company's condition (financial or
otherwise), operations, assets, liabilities or business and to which it is
subject; or (b) any material adverse change in the Company's condition
(financial or otherwise), operations, assets, liabilities or business.
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SECTION 6.5 APPROVALS OF THIRD PARTIES. The Company and the Stockholder
shall use their best efforts to secure, as soon as practicable after the date
hereof, all necessary approvals and consents of third parties to the
consummation of the transactions contemplated hereby, including, without
limitation, all necessary approvals and consents required under any real
property and personal property leases; provided, however, that this covenant
shall not require the Company or the Stockholder to make any material
expenditures that are not expressly set forth in this Agreement or otherwise
contemplated herein.
SECTION 6.6 EMPLOYEE MATTERS. The Company shall not, without the prior
written approval of Acquiror, other than in the ordinary course of business and
consistent with past practice or except as required by law:
6.6.1 increase the Cash Compensation of any Stockholder or other
employee of the Company;
6.6.2 adopt, amend or terminate any Compensation Plan;
6.6.3 adopt, amend or terminate any Employment Agreement;
6.6.4 adopt, amend or terminate any Employee Policies and
Procedures;
6.6.5 adopt, amend or terminate any Employee Benefit Plan;
6.6.6 take any action that could deplete the assets of any Employee
Benefit Plan, other than payment of benefits in the ordinary course to
participants and beneficiaries;
6.6.7 fail to pay any premium or contribution due or with respect to
any Employee Benefit Plan;
6.6.8 fail to file any return or report with respect to any Employee
Benefit Plan;
6.6.9 institute, settle or dismiss any employment litigation except
as could not, individually or in the aggregate, result in a Material Adverse
Effect;
6.6.10 enter into, modify, amend or terminate any agreement with any
union, labor organization or collective bargaining unit; or
6.6.11 take or fail to take any action with respect to any past or
present employee of the Company that would, individually or in the aggregate,
result in a Material Adverse Effect.
SECTION 6.7 CONTRACTS. Except with Acquiror's prior written consent, the
Company shall not assume or enter into any contract, lease, license, obligation,
indebtedness, commitment,
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purchase or sale except in the ordinary course of business that is material to
the Company's business, nor will it waive any material right or cancel any
material contract, debt or claim.
SECTION 6.8 CAPITAL ASSETS; PAYMENTS OF LIABILITIES. The Company shall
not, without the prior written approval of Acquiror (a) acquire or dispose of
any capital asset having a fair market value of $25,000 or more, or acquire or
dispose of any capital asset outside of the ordinary course of business or (b)
discharge or satisfy any lien or encumbrance or pay or perform any obligation or
liability other than (i) liabilities and obligations reflected in the Financial
Statements or (ii) current liabilities and obligations incurred in the usual and
ordinary course of business since the Company Balance Sheet Date and, in either
case (i) or (ii) above, only as required by the express terms of the agreement
or other instrument pursuant to which the liability or obligation was incurred.
SECTION 6.9 MORTGAGES, LIENS AND GUARANTIES. The Company shall not,
without the prior written approval of Acquiror, enter into or assume any
mortgage, pledge, conditional sale or other title retention agreement, permit
any security interest, lien, encumbrance or claim of any kind to attach to any
of its assets (other than statutory liens arising in the ordinary course of
business, other liens that do not materially detract from the value or interfere
with the use of such assets, and liens, guarantees and encumbrances that are
granted or created in the ordinary course of business), whether now owned or
hereafter acquired, or guarantee or otherwise become contingently liable for any
obligation of another, except obligations arising by reason of endorsement for
collection and other similar transactions in the ordinary course of business, or
make any capital contribution or investment in any person.
SECTION 6.10 ACQUISITION PROPOSALS. The Company and the Stockholder agrees
that from and after the date of this Agreement (a) neither any Stockholder nor
the Company, nor any of its officers and directors shall, and the Stockholder
and the Company shall direct and use their best efforts to cause the Company's
employees, agents and representatives not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to its
Stockholder) with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, the Company (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; (b) that the Stockholder and the Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing and each
will take the necessary steps to inform the individuals or entities referred to
in the first sentence hereof of the obligations undertaken in this Section 6.10;
and (c) that the Stockholder and the Company will notify Acquiror immediately if
any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, the Company or the Stockholder.
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SECTION 6.11 DISTRIBUTIONS AND REPURCHASES. Except as provided in Section
6.14, no distribution, payment or dividend of any kind will be declared or paid
by the Company in respect of Company Capital Stock, nor will any repurchase of
any Company Capital Stock be approved or effected.
SECTION 6.12 REQUIREMENTS TO EFFECT THE MERGER. The Company and the
Stockholder shall use their best efforts to take, or cause to be taken, all
actions necessary to effect the Merger under applicable law, including without
limitation the filing with the appropriate government officials of all necessary
documents in form approved by counsel for the parties to this Agreement.
SECTION 6.13 LOCKUP AGREEMENTS. Each of the Stockholder shall, upon
request of the Underwriter Representative, execute a customary "lockup"
agreement in connection with the Initial Public Offering, pursuant to which the
Stockholder will be prohibited from selling any Acquiror Common Stock owned by
them for up to 180 days from the closing of the Initial Public Offering.
SECTION 6.14 S CORPORATION DISTRIBUTION; "AAA" NOTES. The Company shall,
upon request of the Stockholder, distribute to the Stockholder on the Closing
Date immediately prior to the Closing an amount equal to the amount of the
Company's Accumulated Adjustment Account as of the Closing Date, in either (a)
cash or (b) cash plus a promissory note of the Company payable to the order of
the Stockholder in form and substance satisfactory to the Stockholder.
ARTICLE VII
COVENANTS OF ACQUIROR
Acquiror agrees that between the date hereof and the Closing:
SECTION 7.1 CONSUMMATION OF AGREEMENT. Acquiror shall use its best efforts
to cause the consummation of the transactions contemplated hereby in accordance
with their terms and conditions and take all corporate and other action
necessary to approve the Merger; provided, however, that this covenant shall not
require Acquiror to make any expenditures that are not expressly set forth in
this Agreement or otherwise contemplated herein.
SECTION 7.2 REQUIREMENTS TO EFFECT MERGER. Acquiror will use its best
efforts to take, or cause to be taken, all actions necessary to effect the
Merger under applicable law, including without limitation the filing with the
appropriate government officials all necessary documents in form approved by
counsel for the parties to this Agreement.
SECTION 7.3 ACCESS. Acquiror shall, at reasonable times during normal
business hours and on reasonable notice, permit the Company, the Stockholder and
his authorized representatives reasonable access to, and make available for
inspection, all of the assets and business of Acquiror,
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including its employees, and permit the Company, the Stockholder, and his
authorized representatives to inspect and, at the Company's and the
Stockholder's sole expense, make copies of all documents, records and
information with respect to the affairs of Acquiror as the Company, the
Stockholder and his representatives may request (including documents, records
and information pertaining to or generated in connection with any Target
Company, except as may be prohibited by confidentiality agreements to which
Acquiror is a party), all for the sole purpose of permitting the Company and the
Stockholder to become familiar with the business and assets and liabilities of
Acquiror.
SECTION 7.4 NOTIFICATION OF CERTAIN MATTERS. Acquiror shall promptly
inform the Company and the Stockholder in writing of (a) any notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by Acquiror subsequent to the date of
this Agreement and prior to the Effective Time under any Acquiror Commitment
material to Acquiror's condition (financial or otherwise), operations, assets,
liabilities or business and to which it is subject; or (b) any material adverse
change in Acquiror's condition (financial or otherwise), operations, assets,
liabilities or business.
SECTION 7.5 APPROVALS OF THIRD PARTIES. Acquiror shall use its best
efforts to secure, as soon as practicable after the date hereof, all necessary
approvals and consents of third parties to the consummation of the transactions
contemplated hereby.
ARTICLE VIII
COVENANTS OF ALL PARTIES
Acquiror, the Company and the Stockholder agrees as follows (with respect
to the Company's covenants, the Stockholder agrees to use their best efforts to
cause the Company to perform):
SECTION 8.1 FILINGS; OTHER ACTION.
8.1.1 Acquiror, the Company and the Stockholder shall cooperate to
promptly prepare and file with the SEC the Registration Statement on Form S-1
(or other appropriate Form) to be filed by Acquiror in connection with its
Initial Public Offering (including the prospectus constituting a part thereof,
the "Registration Statement"). Acquiror shall obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement, and the Company and the Stockholder
shall furnish all information concerning the Company and the Stockholder as may
be reasonably requested in connection with any such action.
8.1.2 None of the information or documents supplied or to be
supplied by each of the Company, the Stockholder and Acquiror specifically for
inclusion in the Registration
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Statement, by exhibit or otherwise, will, at the time the Registration Statement
and each amendment and supplement thereto, if any, 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, in the light of the circumstances under which they were
made, not misleading. The Company, the Stockholder and Acquiror shall agree as
to the information and documents supplied by the Company and the Stockholder for
inclusion in the Registration Statement, including all exhibits and schedules
thereto, and shall indicate such information and documents in a letter to be
delivered at Closing (the "Information Letter"). The Company and the Stockholder
shall be entitled to review the Registration Statement, including all exhibits
and schedules thereto, and each amendment thereto, if any, prior to the time
each becomes effective under the Securities Act.
8.1.3 The Stockholder and the Company shall, upon request, furnish
Acquiror with all information concerning the Company, its subsidiaries,
directors, officers, partners and Stockholder and such other matters as may be
reasonably requested by Acquiror in connection with the preparation of the
Registration Statement and each amendment or supplement thereto, or any other
statement, filing, notice or application made by or on behalf of each such party
or any of its subsidiaries to any governmental entity in connection with the
Merger, and the other transactions contemplated by this Agreement.
SECTION 8.2 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing to
supplement or amend promptly (i) in the case of Acquiror, the Acquiror
Disclosure Schedules and (ii) in the case of the Company or the Stockholder, the
Company Disclosure Schedules with respect to any matter that would have been or
would be required to be set forth or described in the Schedules in order to not
materially breach any representation, warranty or covenant of such party
contained herein; provided that, no amendment or supplement to a Schedule that
constitutes or reflects a material adverse change to the Company may be made
unless Acquiror consents to such amendment or supplement, and no amendment or
supplement to a Schedule that constitutes or reflects a material adverse change
to Acquiror may be made unless the Company and the Stockholder consent to such
amendment or supplement. For all purposes of this Agreement, the Schedules
hereto shall be deemed to be the Schedules as amended or supplemented pursuant
to this Section 8.2. In the event that the Company seeks to amend or supplement
a Schedule pursuant to this Section 8.2 and Acquiror does not consent to such
amendment or supplement, or Acquiror seeks to amend or supplement a Schedule
pursuant to this Section 8.2 and the Company and the Stockholder does not
consent, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 14.1.1 hereof.
SECTION 8.3 STOCKHOLDER EMPLOYMENT AGREEMENTS. At or immediately prior to
Closing, each Stockholder who is an employee of the Company shall terminate his
employment agreement, if any, with the Company by mutual consent without any
liability on the part of the Company therefor, and shall enter into a
Stockholder Employment Agreement in the form appended hereto as Exhibit 8.3 with
Acquiror (the "Stockholder Employment Agreements").
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ARTICLE IX
CONDITIONS PRECEDENT OF ACQUIROR
Except as may be waived in writing by Acquiror, the obligations of
Acquiror hereunder are subject to the fulfillment at or prior to the Closing
Date of each of the following conditions:
SECTION 9.1 DUE DILIGENCE. Acquiror shall have completed its due diligence
review of the Company and shall be reasonably satisfied with the results
thereof.
SECTION 9.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and the Stockholder contained herein shall have been
true and correct in all material respects when initially made and shall be true
and correct in all respects as of the Closing Date.
SECTION 9.3 COVENANTS. The Company and the Stockholder shall have
performed and complied in all material respects with all covenants required by
this Agreement to be performed and complied with by the Company or the
Stockholder prior to the Closing Date.
SECTION 9.4 LEGAL OPINION. Counsel to the Company and the Stockholder
shall have delivered to Acquiror their opinions, dated as of the Closing Date,
in form and substance reasonably satisfactory to Acquiror, to the effect set
forth in Exhibit 9.4.
SECTION 9.5 PROCEEDINGS. No action, proceeding or order by any court or
governmental body or agency shall have been threatened orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
SECTION 9.6 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities or business
of the Company shall have occurred since the Company Balance Sheet Date, whether
or not such change shall have been caused by the deliberate act or omission of
the Company or the Stockholder.
SECTION 9.7 SECURITIES APPROVALS. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
At or prior to the Closing Date, Acquiror shall have received all state
securities and "Blue Sky" permits necessary to consummate the transactions
contemplated hereby. The Acquiror Common Stock shall have been approved for
listing on the Nasdaq National Market, subject only to official notification of
issuance.
SECTION 9.8 SIMULTANEOUS CLOSINGS. The Initial Public Offering and
Acquiror's acquisition of all of the Target Companies (or such Target Companies
if less than all of them as
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Acquiror and the Underwriter Representative shall agree will be sufficient for
purposes of the Initial Public Offering) shall all be closed and consummated
simultaneously with the closing of the Merger.
SECTION 9.9 CLOSING DELIVERIES. Acquiror shall have received all documents
and agreements, duly executed and delivered in form satisfactory to Acquiror,
referred to in Section 11.1.
ARTICLE X
CONDITIONS PRECEDENT OF THE COMPANY AND THE STOCKHOLDER
Except as may be waived in writing by the Company and the Stockholder, the
obligations of the Company and the Stockholder hereunder are subject to
fulfillment at or prior to the Closing Date of each of the following conditions:
SECTION 10.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Acquiror contained herein shall be true and correct in all
material respects when initially made and shall be true and correct in all
respects as of the Closing Date.
SECTION 10.2 COVENANTS. Acquiror shall have performed and complied in all
material respects with all covenants and conditions required by this Agreement
to be performed and complied with by it prior to the Closing Date.
SECTION 10.3 LEGAL OPINIONS.
10.3.1 Counsel to Acquiror shall have delivered to the Company and
the Stockholder their opinion, dated as of the Closing Date, in form and
substance reasonably satisfactory to the Company and the Stockholder, to the
effect set forth in Exhibit 10.3.1.
10.3.2 Counsel to Acquiror shall have delivered to Company and the
Stockholder their opinion, dated as of the Closing Date, to the effect set forth
in Exhibit 10.3.2 (the "Tax Opinion").
SECTION 10.4 PROCEEDINGS. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
SECTION 10.5 GOVERNMENT APPROVALS AND REQUIRED CONSENTS. The Company,
Stockholder and Acquiror shall have obtained all necessary government and other
third party approvals and consents.
SECTION 10.6 SECURITIES APPROVALS. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration
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Statement shall have been issued and no proceedings for that purpose shall have
been initiated or threatened by the SEC. At or prior to the Closing Date,
Acquiror shall have received all state securities and "Blue Sky" permits
necessary to consummate the transactions contemplated hereby. At or prior to the
Closing Date, the Acquiror Common Stock shall have been approved for listing on
The Nasdaq National Market, subject only to official notification of issuance.
SECTION 10.7 CLOSING DELIVERIES. The Company shall have received all
documents and agreements, duly executed and delivered in form satisfactory to
the Company, referred to in Section 11.2.
SECTION 10.8 SIMULTANEOUS CLOSINGS. The Initial Public Offering and
Acquiror's acquisition of all of the Target Companies (or such Target Companies
if less than all of them as Acquiror and the Underwriter Representative shall
agree will be sufficient for purposes of the Initial Public Offering) shall all
be closed and consummated simultaneously with the closing of the Merger.
ARTICLE XI
CLOSING DELIVERIES
SECTION 11.1 DELIVERIES OF THE COMPANY AND THE STOCKHOLDER. At or prior to
the Closing Date, the Company and the Stockholder shall deliver to Acquiror c/o
Dinsmore & Shohl LLP, counsel to Acquiror, the following, all of which shall be
in a form satisfactory to Acquiror:
11.1.1 a copy of resolutions of the Board of Directors and the
Stockholder of the Company authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements and consummation of
the Merger, each certified by the Secretary of the Company as being true and
correct copies of the originals thereof subject to no modifications or
amendments;
11.1.2 a certificate of the President of the Company, and the
Stockholder, dated the Closing Date, as to the truth and correctness of the
representations and warranties of the Company and the Stockholder contained
herein on and as of the Closing Date;
11.1.3 a certificate of the President of the Company, and the
Stockholder, dated the Closing Date, (i) as to the performance of and compliance
in all material respects by the Company and the Stockholder with all covenants
contained herein on and as of the Closing Date and (ii) certifying that all
conditions precedent of the Company and the Stockholder to the Closing have been
satisfied;
11.1.4 a certificate of the Secretary of the Company certifying as
to the incumbency of the directors and officers of such corporation and as to
the signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of that corporation;
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11.1.5 a certificate, dated within ten days prior to the Closing
Date, of the Secretary of State of the state of incorporation of the Company
establishing that such corporation is in existence, has paid all franchise or
similar taxes, if any, and, if applicable, otherwise is in good standing to
transact business in its state of organization;
11.1.6 an opinion of ▇▇▇▇▇ & Berne LLP, counsel to the Company and
the Stockholder dated as of the Closing Date, pursuant to Section 9.4;
11.1.7 all necessary authorizations, consents, approvals, permits
and licenses;
11.1.8 the resignations of the directors and officers of the Company
as requested by Acquiror;
11.1.9 an executed Stockholder Employment Agreement between Acquiror
and each Stockholder in substantially the form attached hereto as Exhibit 8.3;
11.1.10 an executed Registration Rights Agreement between Acquiror
and the Stockholder in substantially the form attached hereto as Exhibit 11.1.11
(the "Registration Rights Agreement");
11.1.11 an executed Certificate of Merger necessary to effect the
Merger referred to in Section 2.4;
11.1.12 a nonforeign affidavit, as such affidavit is referred to in
Section 1445(b)(2) of the Internal Revenue Code, of each Stockholder, signed
under a penalty of perjury and dated as of the Closing Date, to the effect that
each Stockholder is a United States citizen or a resident alien (and thus not a
foreign person) and providing such Stockholder United States taxpayer
identification number;
11.1.13 the Information Letter required by Section 8.1.2
11.1.14 a copy of the ▇▇▇▇ from ▇▇▇▇▇ & Berne LLP, the Company's
legal counsel, setting forth the aggregate legal fees incurred by the Company
for services rendered to the Company in connection with the Merger; and
11.1.15 such other instrument or instruments of transfer prepared by
Acquiror as shall be necessary or appropriate, as Acquiror or its counsel shall
reasonably request, to carry out and effect the purpose and intent of this
Agreement.
SECTION 11.2 DELIVERIES OF ACQUIROR. At or prior to the Closing Date,
Acquiror shall deliver to the Company and the Stockholder c/o Dinsmore & Shohl
LLP, counsel to Acquiror, the following, all of which shall be in a form
satisfactory to the Company and the Stockholder:
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11.2.1 a copy of the resolutions of the Board of Directors and
shareholders of Acquiror authorizing the execution, delivery and performance of
this Agreement, and all related documents and agreements, and consummation of
the Merger, each certified by Acquiror's Secretary as being true and correct
copies of the originals thereof subject to no modifications or amendments;
11.2.2 a certificate of an officer of Acquiror dated the Closing
Date as to the truth and correctness of the representations and warranties of
Acquiror contained herein on and as of the Closing Date;
11.2.3 a certificate of an officer of Acquiror dated the Closing
Date, (i) as to the performance and compliance by Acquiror with all covenants
contained herein on and as of the Closing Date and (ii) certifying that all
conditions precedent of Acquiror to the Closing have been satisfied or waived;
11.2.4 a certificate of the Secretary of Acquiror certifying as to
the incumbency of the directors and officers of Acquiror and as to the
signatures of such officers and directors who have executed documents delivered
at the Closing on behalf of Acquiror;
11.2.5 a certificate, dated within ten days prior to the Closing
Date, of the Secretary of State of Ohio establishing that Acquiror is in
existence, has paid all franchise or similar taxes, if any, and, if applicable,
otherwise is in good standing to transact business in its state of
incorporation;
11.2.6 certificates (or photocopies thereof), dated within ten days
prior to the Closing Date, of the Secretaries of State of the states in which
Acquiror is qualified to do business, to the effect that Acquiror is qualified
to do business and, if applicable, is in good standing as a foreign corporation
in each of such states;
11.2.7 an opinion of ▇▇▇▇▇▇▇▇ & Shohl LLP, counsel to Acquiror,
dated as of the Closing Date, pursuant to Section 10.3.1;
11.2.8 the Tax Opinion, dated as of the Closing Date;
11.2.9 the executed Registration Rights Agreement;
11.2.10 an executed Certificate of Merger necessary to effect the
Merger referred to in Section 2.4;
11.2.11 an executed Stockholder Employment Agreement in
substantially the form attached hereto as Exhibit 8.3;
11.2.12 the Merger Consideration; and
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11.2.13 such other instrument or instruments of transfer, prepared
by the Company or the Stockholder as shall be necessary or appropriate, as the
Company, the Stockholder or their counsel shall reasonably request, to carry out
and effect the purpose and intent of this Agreement.
ARTICLE XII
POST CLOSING MATTERS
SECTION 12.1 FURTHER INSTRUMENTS OF TRANSFER. Following the Closing, at
the request of Acquiror and at Acquiror's sole cost and expense, the Stockholder
and the Company shall deliver any further instruments of transfer and take all
reasonable action as may be necessary or appropriate to carry out the purpose
and intent of this Agreement.
SECTION 12.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. After the
Closing Date, Acquiror shall not and shall not permit any of its subsidiaries
to:
12.2.1 retire or reacquire, directly or indirectly, all or part of
the Acquiror Common Stock issued in connection with the transactions
contemplated hereby within the two years following the Closing Date;
12.2.2 enter into financial arrangements for the benefit of the
Stockholder; or
12.2.3 dispose of a significant part of the assets of the Company
within the two years following the Closing Date except in the ordinary course of
business, to Affiliates of Acquiror or to eliminate duplicate services or excess
capacity.
SECTION 12.3 MERGER TAX COVENANTS.
12.3.1 The parties intend that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
in which the Company will not recognize gain or loss, and pursuant to which any
gain recognized by the Stockholders as a result of the Merger will not exceed
the amount of any cash received by the Stockholders in the Merger (a
"Reorganization").
12.3.2 Both prior to and after the Effective Time, all books and
records shall be maintained, and all Tax Returns and schedules thereto shall be
filed in a manner consistent with the Merger being treated as a Reorganization.
These obligations are excused as to a party required to maintain the books or
file a Tax Return if such party has provided to the other parties a written
opinion of competent tax counsel to the effect that there is not substantial
authority, within the meaning of Section 6662(d)(2)(B)(i) of the Internal
Revenue Code, to report the Merger as a Reorganization and such opinion either
is furnished prior to the Effective Time or is based on facts or events not
known at the Effective Time. Each party shall provide to each other party such
tax
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information, reports, returns, or schedules as may be reasonably required to
assist such party in accounting for and reporting the Merger as a
Reorganization.
SECTION 12.4 OTHER TAX COVENANTS.
12.4.1 The Company will include the income of the Company for
taxable periods ending on and prior to the Closing Date in the Company's federal
income tax returns for such periods in accordance with the provisions of the
Code and the regulations promulgated thereunder and in its state and local
income tax returns. The parties agree that Stockholder shall have the final
authority for determining the taxable income of the Company for all taxable
periods ending on and prior to the Closing Date, as well as other information to
be reported or elections to be made for said periods in the income tax returns
of the Company; provided, however, Stockholder shall be responsible for any tax
liability of the Company for taxable periods ending on and prior to the Closing
Date, including any income tax liability which may be assessed as a result of an
audit for such taxable periods by any taxing authorities.
12.4.2 After the Closing Date, Stockholder and Acquiror will
cooperate with each other as to any tax matters involving the operations of the
Company prior to and after the Closing Date. In the event of an audit by or a
contest with taxing authorities relating to the operations of the Company for
any period prior to the Closing Date, Stockholder shall have the right, after
consultation with Acquiror, to control and make all decisions regarding the
audit or any contest of the issues involved, including the selection of legal
counsel and the forum for such contests. In the event of an audit by or contest
with taxing authorities relating to periods subsequent to the Closing Date,
Acquiror shall have the right, after consultation with Stockholder, to control
and make all decisions regarding the audit or any contest of the issues
involved, including the selection of legal counsel and the forum for such
contest. Stockholder and Acquiror agree that, with ten (10) business days
following a request by a party hereto, they will: (a) furnish such data as each
may reasonably require to determine the tax liability of the Company for the
relevant period; (b) make available to each other, as reasonably requested,
personnel responsible for preparing or maintaining information, records and
documents concerning tax matters involving the Company which are required by the
requesting party in preparing any tax returns involving the Company; (c) assist
each other, as reasonably requested, in preparing any necessary tax forms and
schedules relating the Company; and (d) cooperate with any reasonable request of
a requesting party in connection with its preparation for an audit of any tax
return involving the operation of the Company, including providing all
documents, correspondence, reports and other materials bearing on such audit,
and the execution of such powers of attorney as either party may reasonably
require. The requesting party agrees to reimburse the other party for all
reasonable out-of-pocket expenses sustained by the other party in supplying
information or assistance to the requesting party.
12.4.3 Acquiror will not make any changes in methods or conventions
used by the Company, or report or treat any specific item of the Company for any
taxable period ending after the Closing Date in a manner inconsistent with the
manner in which such specific item was reported or treated by the Company on any
such tax return for a taxable period ending prior to the Closing
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Date, if such action would have the legal effect of increasing the tax liability
or reducing the tax benefits of Stockholder for any taxable period ending prior
to the Closing Date; provided, however, nothing herein shall restrict Acquiror
from treating any item for tax purposes in a manner which is inconsistent with
the practices of the Company prior to the Closing Date, if in the opinion of
Acquiror or its independent certified public accountants, such inconsistency is
necessary or appropriate under the Code or regulations thereunder.
12.4.4 Stockholder shall be entitled to recover from Acquiror any
refunds or credits (when received) attributable to taxes paid by Stockholder or
the Company for periods prior to the Closing Date. Acquiror agrees to promptly,
after receipt of such refunds or credits, pay to Stockholder the amount of such
refunds or credits attributable to the tax periods prior to the Closing Date.
With respect to such credits or refunds, Acquiror agrees to cause or permit the
Company to file all necessary forms and applications (with any such forms and
applications to be prepared at Stockholder's expense) required in order to
obtain such credits or refunds, including, but not limited to, any application
for a tentative carryback adjustment for periods prior to the Closing Date as
may be required under Section 6411 of the Code or the regulations thereunder.
ARTICLE XIII
REMEDIES
SECTION 13.1 INDEMNIFICATION BY THE STOCKHOLDER. Subject to the terms and
conditions of this Article XIII, the Stockholder agrees to indemnify, defend and
hold Acquiror, the Company, the Surviving Corporation and their respective
directors, officers, members, managers, employees, agents, attorneys and
affiliates harmless from and against all losses, claims, obligations, demands,
assessments, penalties, liabilities, costs, damages, reasonable attorneys' fees
and expenses (collectively, "Damages") asserted against or incurred by such
indemnities arising out of or resulting from:
13.1.1 a material breach of the Company or the Stockholder of any
representation, warranty or covenant of the Company or the Stockholder contained
herein or in any Schedule or certificate delivered by them hereunder;
13.1.2 any violation by the Stockholder, the Company and/or any of
their past or present directors, officers, members, managers, shareholders,
employees, agents, consultants and affiliates of state or federal laws occurring
on or before the Closing Date;
13.1.3 any liability under the Securities Act, the Exchange Act or
any other federal or state "Blue Sky" or securities law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to the Stockholder or the Company,
and provided in writing to Acquiror or its counsel by the Company or the
Stockholder, specifically for inclusion in any preliminary prospectus, the
Registration Statement
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or any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, arising out of or based upon any omission or alleged omission to state
therein a material fact relating to the Stockholder and/or the Company required
to be stated therein or necessary to make the statements therein not misleading,
and not provided to Acquiror or its counsel by the Company or the Stockholder,
provided, however, that such indemnity shall not inure to the benefit of
Acquiror and the Company to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and Stockholder provided, in writing, corrected
information to Acquiror's counsel and to Acquiror for inclusion in the final
prospectus, and such information was not so included; and
13.1.4 any filings, reports or disclosures made by the Company or
the Stockholder, as the case may be, pursuant to the IRS Voluntary Compliance
Resolution Program.
SECTION 13.2 INDEMNIFICATION BY ACQUIROR. Subject to the terms and
conditions of this Article XIII, Acquiror shall indemnify, defend and hold the
Stockholder harmless from and against all Damages asserted against or incurred
by him arising out of or resulting from:
13.2.1 a material breach by Acquiror of any representation, warranty
or covenant of Acquiror contained herein or in any Schedule or certificate
delivered by it hereunder; and
13.2.2 any liability under the Securities Act, the Exchange Act or
any other federal or state "Blue Sky" or securities law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to Acquiror or any other Target
Company, contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, arising out of or based upon any omission or alleged omission to state
therein a material fact relating to Acquiror, required to be stated therein or
necessary to make the statements therein not misleading.
SECTION 13.3 CONDITIONS OF INDEMNIFICATION. All claims for indemnification
under this Agreement shall be asserted and resolved as follows:
13.3.1 A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (and, in any event, at least ten days prior
to the due date for any responsive pleadings, filings or other documents) (i)
notify the party from whom indemnification is sought (the "Indemnifying Party")
of any third-party claim or claims asserted against the Indemnified Party
("Third Party Claim") that could give rise to a right of indemnification under
this Agreement and (ii) transmit to the Indemnifying Party a written notice
("Claim Notice") describing in reasonable detail the nature of the Third Party
Claim, a copy of all papers served with respect to such claim (if any), an
estimate of the amount of damages attributable to the Third Party Claim and the
basis of the Indemnified Party's request for indemnification under this
Agreement. The failure to promptly deliver a Claim Notice shall not relieve the
Indemnifying Party of its obligations to the Indemnified Party with respect to
the related Third Party Claim except to the extent that the resulting delay is
materially prejudicial to the defense of such claim. Within 30 days after
receipt of any Claim Notice
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(the "Election Period"), the Indemnifying Party shall notify the Indemnified
Party (i) whether the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article XIII with respect to such Third Party Claim
and (ii) whether the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such Third Party
claim.
13.3.2 If the Indemnifying Party notifies the Indemnified Party
within the Election Period that the Indemnifying Party elects to assume the
defense of the Third Party Claim, then the Indemnifying Party shall have the
right to defend, at its sole cost and expense, such Third Party Claim by all
appropriate proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 13.3.2. The Indemnifying
Party shall have full control of such defense and proceedings, including any
compromise or settlement thereof. The Indemnified Party is hereby authorized, at
the sole cost and expense of the Indemnifying Party (but only if the Indemnified
Party is entitled to indemnification hereunder), to file, during the Election
Period, any motion, answer or other pleadings that the Indemnified Party shall
deem necessary or appropriate to protect its interests or those of the
Indemnifying Party and not prejudicial to the Indemnifying Party (it being
understood and agreed that if an Indemnified Party takes any such action that is
prejudicial and causes a final adjudication that is adverse to the Indemnifying
Party, the Indemnifying Party shall be relieved of its obligations hereunder
with respect to such Third Party Claim). If requested by the Indemnifying Party,
the Indemnified Party agrees, at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnifying Party and its counsel in contesting
any Third Party Claim that the Indemnifying Party elects to contest, including,
without limitation, the making of any related counterclaim against the person
asserting the Third Party Claim or any cross-complaint against any person. 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
Section 13.3.2 and shall bear its own costs and expenses with respect to such
participation; provided, however, that if the named parties to any such action
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party, and the Indemnified Party has been advised by counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the Indemnifying Party, then the Indemnified
Party may employ separate counsel at the expense of the Indemnifying Party, and
upon written notification thereof, the Indemnifying Party shall not have the
right to assume the defense of such action on behalf of the Indemnified Party;
provided further that the Indemnifying Party shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Indemnified Party, which firm shall be designated
in writing by the Indemnified Party.
13.3.3 If the Indemnifying Party fails to notify the Indemnified
Party within the Election Period that the Indemnifying Party elects to defend
the Indemnified Party pursuant to Section 13.3.2, or if the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 13.3.2 but fails
diligently and promptly to prosecute or settle the Third Party Claim, then the
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Indemnified Party shall have the right to defend, at the sole cost and expense
of the Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings, provided, however, that
the Indemnified Party may not enter into, without the Indemnifying Party's
consent, which shall not be unreasonably withheld, any compromise or settlement
of such Third Party Claim. Notwithstanding the foregoing, if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect that
the Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article XIII and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this Section
or of the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all costs and expenses of such litigation. The Indemnifying Party may
participate in, but not control any defense or settlement controlled by the
Indemnified Party pursuant to this Section 13.3.3, and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation;
provided, however, that if the named parties to any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party, and the Indemnifying Party has been advised by counsel that there may be
one or more legal defenses available to it that are different from or additional
to those available to the Indemnified Party, then the Indemnifying Party may
employ separate counsel and upon written notification thereof, the Indemnified
Party shall not have the right to assume the defense of such action on behalf of
the Indemnifying Party.
13.3.4 In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to such claim and
the basis of the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified Party
within 60 days from its receipt of the Indemnity Notice that the Indemnifying
Party disputes such claim, the claim specified by the Indemnified Party in the
Indemnity Notice shall be deemed a liability of the Indemnifying Party
hereunder. If the Indemnifying Party has timely disputed such claim, as provided
above, such dispute shall be resolved by litigation in an appropriate court of
competent jurisdiction if the parties do not reach a settlement of such dispute
within 30 days after notice of a dispute is given.
13.3.5 Payments of all amounts owing by an Indemnifying Party
pursuant to this Article XIII relating to a Third Party Claim shall be made
within 30 days after the latest of (i) the settlement of such Third Party Claim,
(ii) the expiration of the period for appeal of a final adjudication of such
Third Party Claim or (iii) the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement. Payments of all amounts owing by an Indemnifying Party
shall be made within 30 days after the later of (i) the expiration of the 60-day
Indemnity Notice period or (ii) the expiration of the period
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for appeal of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement.
SECTION 13.4 REMEDIES NOT EXCLUSIVE. The remedies provided in this
Agreement shall not be exclusive of any other rights or remedies available to
one party against the other, either at law or in equity.
SECTION 13.5 INDEMNIFICATION LIMITATIONS. Notwithstanding the provisions
of Sections 13.1 and 13.2, (a) no party shall be required to indemnify another
party with respect to a breach of a representation, warranty or covenant unless
the claim for indemnification is brought within the time limit set forth in
Section 18.6, (b) no claim may be brought by any party entitled to
indemnification under this Article XIII unless and until the aggregate
cumulative amount to which such party is entitled equals or exceeds $50,000, and
(c) no party shall be obligated to make any indemnification in excess of 50% of
the value of the Merger Consideration.
SECTION 13.6 TAX BENEFITS; INSURANCE PROCEEDS. The total amount of any
indemnity payments owed by one party to another party to this Agreement shall be
reduced by any correlative tax benefit received by the party to be indemnified
or the net proceeds received by the party to be indemnified with respect to
recovery from third parties or insurance proceeds, and such correlative
insurance benefit shall be net of the insurance premium, if any, that becomes
due as a result of such claim.
SECTION 13.7 PAYMENT OF INDEMNIFICATION OBLIGATION. In the event that the
Stockholder has an indemnification obligation to Acquiror hereunder, subject to
Acquiror's approval as set forth below, the Stockholder may satisfy such
obligation by transferring to Acquiror such number of shares of Acquiror Common
Stock owned by the Stockholder having an aggregate fair market value (based on
the last reported sale price of Acquiror Common Stock on the Nasdaq National
Market or other exchange on which the Acquiror Common Stock is then listed or
the last quoted ask price on any over-the-counter market through which the
Acquiror Common Stock is then quoted on the last trading day immediately
preceding the day on which the Stockholder transfers shares of Acquiror Common
Stock to Acquiror hereunder) equal to the indemnification obligation; provided
that each of the following conditions are satisfied:
13.7.1 The Stockholder shall transfer to Acquiror good, valid and
marketable title to the shares of Acquiror Common Stock, free and clear of all
adverse claims, security interests, liens, claims, proxies, options, Stockholder
agreements and encumbrances;
13.7.2 The Stockholder shall make such representations and
warranties as to title to the stock, absences of security interests, liens,
claims, proxies, options, Stockholder agreements and other encumbrances and
other matters as reasonably requested by Acquiror; and
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13.7.3 The other terms and conditions of any transaction
contemplated pursuant to this Section 13.7.3 and the effects thereof, including
any legal or tax consequences, shall be reasonably satisfactory to Acquiror.
ARTICLE XIV
TERMINATION
SECTION 14.1 TERMINATION. This Agreement may be terminated and the Merger
and the Acquisition may be abandoned:
14.1.1 at any time prior to the Closing Date by mutual agreement of
all parties;
14.1.2 at any time prior to the Closing Date by Acquiror if any
material representation or warranty of the Company or the Stockholder contained
in this Agreement or in any certificate or other document executed and delivered
by the Company or the Stockholder pursuant to this Agreement is or becomes
untrue or breached in any material respect or if the Company or the Stockholder
fails to comply in any material respect with any covenant or agreement contained
herein, and any such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within 20 days after receipt by the Company of written
notice thereof; or
14.1.3 at any time prior to the Closing Date by the Company if any
material representation or warranty of Acquiror contained in this Agreement or
in any certificate or other document executed and delivered by Acquiror pursuant
to this Agreement is or becomes untrue or breached in any material respect or if
Acquiror fails to comply in any material respect with any covenant or agreement
contained herein, and any such misrepresentation, noncompliance or breach is not
cured, waived or eliminated within 20 days after receipt by Acquiror of written
notice thereof; or
14.1.4 by Acquiror or the Company if the Merger shall not have been
consummated by March 31, 1998.
SECTION 14.2 EFFECT OF TERMINATION. In the event this Agreement is
terminated pursuant to Sections 14.1.2 or 14.1.3 above, Acquiror, and the
Company and the Stockholder, shall each be entitled to pursue, exercise and
enforce any and all remedies, rights, powers and privileges available at law or
in equity. In the event of a termination of this Agreement under the provisions
of this Article, a party not then in material breach of this Agreement shall
stand fully released and discharged of any and all obligations under this
Agreement; provided, however, that if a termination of this Agreement occurs
pursuant to the last sentence of Section 8.2, the parties hereto shall stand
fully released and discharged of any and all obligations under this Agreement.
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ARTICLE XV
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 15.1 NONDISCLOSURE. The Stockholder recognizes and acknowledges
that he had in the past, currently has, and in the future may possibly have,
access to certain Confidential Information of the Company and Acquiror that is
valuable, special and unique assets of the Company's and Acquiror's respective
businesses. Acquiror acknowledges that it has had in the past, currently has,
and in the future may possible have, access to certain Confidential Information
of the Company that is valuable, special and unique assets of the Company's
business. The Stockholder, the Company, and Acquiror agree that they will not
disclose such Confidential Information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except (a) to
authorized representatives of Acquiror, the Company and the Stockholder and (b)
to their counsel and other advisers provided that such advisers (other than
counsel) agree to the confidentiality provisions of this Section 15.1, unless
(i) such information becomes available to or known by the public generally
through no fault of the Stockholder, the Company, or Acquiror, as the case may
be, (ii) disclosure is required by law or the order of any governmental
authority under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), the Stockholder, the Company, or Acquiror, as the
case may be, shall, if possible, give prior written notice thereof to the
Stockholder, the Company, and Acquiror and provide the Stockholder, the Company,
Acquiror with the opportunity to contest such disclosure, (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party, or (iv) the disclosing
party is the sole and exclusive owner of such Confidential Information as a
result of the Merger or otherwise. In the event of a breach or threatened breach
by a Stockholder of the provisions of this Section 15.1, Acquiror and the
Company shall be entitled to an injunction restraining the Stockholder from
disclosing, in whole or in part, such Confidential Information. Nothing herein
shall be construed as prohibiting Acquiror, the Stockholder and the Company from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
SECTION 15.2 DAMAGES. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which they would have
no other adequate remedy, Acquiror, the Company, and the Stockholder agree that,
in the event of a breach by any of them of the foregoing covenant, the covenant
may be enforced against them by injunctions and restraining orders.
SECTION 15.3 SURVIVAL. The obligations of the parties under this Article
XV shall survive the termination of this Agreement.
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ARTICLE XVI
TRANSFER RESTRICTIONS
SECTION 16.1 TRANSFER RESTRICTIONS. Until the expiration of the later of
one year from the Closing or such other holding period as may be required under
applicable federal or state securities laws, except pursuant to the Registration
Rights Agreement and Section 13.7 hereof, no Stockholder shall voluntarily (a)
sell, assign, exchange, transfer, encumber, pledge, distribute, appoint, or
otherwise dispose of (i) any shares of Acquiror Common Stock received by such
Stockholder in the Merger, or (ii) any interest (including, without limitation,
an option to buy or sell) in any such shares of Acquiror Common Stock, in whole
or in part, and no such attempted transfer shall be treated as effective for any
purpose or (b) engage in any transaction, whether or not with respect to any
shares of Acquiror Common Stock or any interest therein, the intent or effect of
which is to reduce the risk of owning shares of Acquiror Common Stock. The
certificates evidencing the Acquiror Common Stock delivered to the Stockholder
pursuant to this Agreement will bear a legend substantially in the form set
forth below and containing such other information as Acquiror may reasonably
deem necessary or appropriate:
Except pursuant to the terms of the Registration Rights Agreement and the
Agreement and Plan of Merger and Reorganization ("Merger Agreement")
between the issuer, the holder of this certificate and the other parties
thereto, the shares represented by this certificate may not be voluntarily
sold, assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required
to give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to [date that is one year after the Closing Date.] Upon
the written request of the holder of this certificate, the issuer agrees
to remove this restrictive legend (and any stop order placed with the
transfer agent) after the expiration of the period specified in the Merger
Agreement.
ARTICLE XVII
FEDERAL SECURITIES LAW
RESTRICTIONS ON ACQUIROR COMMON STOCK
SECTION 17.1 INVESTMENT REPRESENTATION. Each Stockholder acknowledges that
the shares of Acquiror Common Stock to be delivered to such Stockholder pursuant
to this Agreement have not been and will not be registered under the Securities
Act and may not be resold without compliance with the Securities Act. The
Acquiror Common Stock to be acquired by such Stockholder pursuant to this
Agreement is being acquired solely for his, her or its own account, for
investment purposes only and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
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SECTION 17.2 COMPLIANCE WITH LAW. Each Stockholder covenants, warrants and
represents that none of the shares of Acquiror Common Stock issued to such
Stockholder will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act and the rules and regulations of the SEC and
applicable state securities laws and regulations. All certificates evidencing
shares of Acquiror Common Stock shall bear the following legend in addition to
the legends under Article XVI.
The shares represented hereby have not been registered under the
Securities Act of 1933 (the "Act") and may only be sold or otherwise
transferred if the holder hereof complies with the Act and applicable
securities law.
In addition, certificates evidencing shares of Acquiror Common Stock shall bear
any legend required by the securities or blue sky laws of any state where the
Stockholder resides.
SECTION 17.3 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to
bear the economic risk of an investment in Acquiror Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and has such knowledge and experience in financial and business
matters that he, she or it is capable of evaluating the merits and risks of the
proposed investment and therefore have the capacity to protect his, her or its
own interests in connection with the acquisition of the Acquiror Common Stock.
Each Stockholder or its purchaser representatives have had an adequate
opportunity to ask questions and receive answers from the officers of Acquiror
concerning any and all matters relating to the transactions described in the
Registration Statement including, without limitation, the background and
experience of the officers and directors of Acquiror, the plans for the
operations of the business of Acquiror, and any plans for additional
acquisitions and the like. Each Stockholder or its purchaser representatives
have asked any and all questions in the nature described in the preceding
sentence and all questions have been answered to their satisfaction.
SECTION 17.4 ACCREDITED INVESTOR STATUS. Each Stockholder is an
"accredited investor" as defined in Rule 501(a) under the Securities Act. The
Stockholder recognizes that, as an accredited investor, Acquiror is not required
to provide the Stockholder with any particular information or disclosures as a
condition to relying upon the Rule 506 exemption from registration under the
Securities Act with respect to the issuance of Acquiror Common Stock in the
Merger. However, the Stockholder acknowledges that he, she or it has received
and had the opportunity to review the information about Acquiror contained in
the Acquiror Disclosure Schedules.
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ARTICLE XVIII
MISCELLANEOUS
SECTION 18.1 AMENDMENT; WAIVERS. This Agreement may be amended, modified
or supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of any terms and conditions hereof must be in writing, and
signed by the parties hereto. The waiver of any of the terms and conditions of
this Agreement shall not be construed as a waiver of any other terms and
conditions hereof.
SECTION 18.2 ASSIGNMENT. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto, except by Acquiror
to a wholly owned subsidiary of Acquiror; provided that any such assignment
shall not relieve Acquiror of its obligations hereunder.
SECTION 18.3 PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
SECTION 18.4 ENTIRE AGREEMENT. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding the
subject matter hereof, and supersede all prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof.
SECTION 18.5 SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
SECTION 18.6 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.The
representations, warranties and covenants contained herein, including all
statements contained in any certificate, exhibit or other instrument delivered
pursuant to this Agreement by or on behalf of the Company, the Stockholder, or
Acquiror, as the case may be, shall survive the Closing until the first
anniversary of the Closing Date.
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SECTION 18.7 GOVERNING LAW. This agreement and the rights and obligations
of the parties hereto shall be governed by and construed and enforced in
accordance with the substantive laws (but not the rules governing conflicts of
laws) of the State of Ohio.
SECTION 18.8 CAPTIONS. The captions in this Agreement are for convenience
of reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
SECTION 18.9 GENDER AND NUMBER. When the context requires, the gender of
all words used herein shall include the masculine, feminine and neuter and the
number of all words shall include the singular and plural.
SECTION 18.10 REFERENCE TO AGREEMENT. Use of the words "herein", "hereof",
"hereto" and the like in this Agreement shall be construed as references to this
Agreement as a whole and not to any particular Article, Section or provision of
this Agreement, unless otherwise noted.
SECTION 18.11 CONFIDENTIALITY; PUBLICITY AND DISCLOSURES. Each party shall
keep this Agreement and its terms confidential, and shall make no press release
or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (a) by press release, filing or otherwise that Acquiror has
determined in its good faith judgment to be required by federal securities laws
or the rules of the National Association of Securities Dealers, (b) to
attorneys, accountants, investment bankers or other agents of the parties
assisting the parties in connection with the transactions contemplated by this
Agreement and (c) by Acquiror in connection with the conduct of its Initial
Public Offering and conducting an examination of the operations and assets of
the Company; provided that Acquiror shall promptly provide notice to the Company
of any release made under this Section 18.11. In the event that the transactions
contemplated hereby are not consummated for any reason whatsoever, the parties
hereto agree not to disclose or use any Confidential Information they may have
concerning the affairs of the other parties, except for information that is
required by law to be disclosed; provided that should the transactions
contemplated hereby not be consummated, nothing contained in this Section shall
be construed to prohibit the parties hereto from operating businesses in
competition with each other so long as no party discloses or uses any such
Confidential Information in connection therewith.
SECTION 18.12 NOTICE. Whenever this Agreement requires or permits any
notice, request, or demand from one party to another, the notice, request, or
demand must be in writing to be effective and shall be deemed to be delivered
and received (i) if personally delivered or if delivered by telex, telegram,
facsimile or courier service, when actually received by the party to whom notice
is sent or (ii) if delivered by mail (whether actually received or not), at the
close of business on the third business day next following the day when placed
in the mail, postage prepaid, certified or registered, addressed to the
appropriate party or parties, at the address of such party set forth below (or
at such other address as such party may designate by written notice to all other
parties in accordance herewith):
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If to Acquiror: Universal Document Management Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ & Shohl LLP
1900 Chemed Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
If to the Company
or the Stockholder: Technical Software, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇ & Berne LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
SECTION 18.13 CHOICE OF FORUM. Each of the parties hereto shall be subject
to the in personam jurisdiction of any state or federal court located in
▇▇▇▇▇▇▇▇ County, State of Ohio.
SECTION 18.14 NO WAIVER; REMEDIES. No party hereto shall by any act
(except by written instrument pursuant to Section 18.1 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default in or breach of any of the terms
and conditions hereof. No failure to exercise, nor any delay in exercising, on
the part of any party hereto, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. No remedy set forth in this
Agreement or otherwise conferred upon or reserved to any party shall be
considered exclusive of any other remedy available to any party, but the same
shall be distinct, separate and cumulative and may be exercised from time to
time as often as occasion may arise or as may be deemed expedient.
SECTION 18.15 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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SECTION 18.16 COSTS, EXPENSES AND LEGAL FEES. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees) incurred in connection
with the transactions contemplated herein.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
ACQUIROR:
UNIVERSAL DOCUMENT MANAGEMENT
SYSTEMS, INC.
By:
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, President
COMPANY:
TECHNICAL SOFTWARE, INC.
By:
-----------------------------------
Its:
----------------------------------
STOCKHOLDER:
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
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ATTACHMENTS
Exhibit 1.1.21 List of Target Companies
Exhibit 2.8.1 Merger Consideration
Exhibit 8.3 Stockholder Employment Agreement(s)
Exhibit 9.4 Form of Opinion of Company Counsel
Exhibit 10.3.1 Form of Opinion of Acquiror Counsel
Exhibit 10.3.2 Form of Tax Opinion
Exhibit 11.1.11 Registration Rights Agreement
***
Company Disclosure Schedules:
Schedule 3.1 Organization and Good Standing
Schedule 3.2 Capitalization
Schedule 3.3 Transactions in Capital Stock
Schedule 3.4 Continuity of Business Enterprise
Schedule 3.5 Corporate Records
Schedule 3.6 Authorization and Validity
Schedule 3.7 No Violation
Schedule 3.8 Consents
Schedule 3.9 Financial Statements
Schedule 3.10 Liabilities and Obligations
Schedule 3.11 Employee Matters
Schedule 3.12 Employee Benefit Plans
Schedule 3.13 Absence of Certain Changes
Schedule 3.14 Title; Leased Assets
Schedule 3.15 Commitments
Schedule 3.16 Insurance
Schedule 3.17 Proprietary Rights and Information
Schedule 3.18 Taxes
Schedule 3.19 Compliance with Laws
Schedule 3.20 Finder's Fee
Schedule 3.21 Litigation
Schedule 3.22 Condition of Fixed Assets
Schedule 3.23 Distributions and Repurchases
Schedule 3.24 Banking Relations
Schedule 3.25 Ownership Interests of Interested Persons; Affiliations
Schedule 3.26 Investments in Competitors
Schedule 3.27 Environmental Matters
Schedule 3.28 Certain Payments
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Schedule 3.29 No Affiliation with NASD Member
Schedule 4.1 Validity; Stockholder Capacity
Schedule 4.2 No Violation
Schedule 4.3 Personal Holding Company; Control of Related Businesses
Schedule 4.4 Transfers of the Company Capital Stock
Schedule 4.5 Consents
Schedule 4.6 Certain Payments
Schedule 4.7 Finder's Fee
Schedule 4.8 Ownership of Interested Persons; Affiliations
Schedule 4.9 Investments in Competitors
Schedule 4.10 Disposition of Acquiror Shares
Acquiror Disclosure Schedules:
Schedule 5.1 Organization and Good Standing
Schedule 5.2 Capitalization
Schedule 5.3 Corporate Records
Schedule 5.4 Authorization and Validity
Schedule 5.5 No Violation
Schedule 5.6 Finder's Fee
Schedule 5.7 Capital Stock
Schedule 5.8 Continuity of Business Enterprise
Schedule 5.9 Consents
Schedule 5.10 Proprietary Rights and Information
Schedule 5.11 Taxes
Schedule 5.12 Litigation
Schedule 5.13 Ownership Interests of Interested Persons; Affiliations
Schedule 5.14 Investments in Competitors
Schedule 5.15 Certain Payments
Schedule 5.16 Commitments; Defaults
Schedule 5.17 Acquiror Financial Statements
Schedule 5.18 Liabilities and Obligations
Schedule 5.19 Employee Matters
Schedule 5.20 Absence of Certain Changes
Business Plan
Acquiror Financial Statements
Proforma Financial Statements
Risk Factors
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