EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
DATED AUGUST 9, 2004
BY AND AMONG
CAPITAL GROWTH SYSTEMS, INC.
FRONTRUNNER ACQUISITION, INC.
AND
FRONTRUNNER NETWORK SYSTEMS, CORP.
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is entered into this
9th day of August, 2004, by and among Capital Growth Systems, Inc., a Florida
corporation ("Parent"); Frontrunner Acquisition, Inc., a Delaware corporation,
and a wholly owned subsidiary of Parent ("Mergeco"), and Frontrunner Network
Systems, Corp., a Delaware corporation ("Target" or "Company"). Certain other
capitalized terms used herein are defined in Article XI or elsewhere throughout
this Agreement.
RECITALS
A. Upon the terms and subject to the conditions set forth herein,
Parent desires to acquire all of the shares of capital stock of the Company (the
"Target Shares"), consisting of Target Preferred Shares and Target Common Shares
(each as defined in Article XI), in exchange for shares of common stock, $0.0001
par value per share, of Parent (the "Parent Common Stock");
B. Parent and the Company have agreed to accomplish this transaction
through a reverse triangular merger whereby Mergeco will merge with and into
Target, and Target will be the surviving corporation (the "Merger");
C. The parties hereto intend that the merger qualify as a
"reorganization" within the meaning of Section 368(a)(1) of the Code; and
D. Each of the Boards of Directors of Target, Parent and Mergeco has
approved this Agreement, and prior to the Closing Date, the Stockholders of the
Company will have approved this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
1.1 Merger. Upon and subject to the terms and conditions set forth in
this Agreement and in accordance with Delaware General Corporation Law, as
amended ("DGCL"), Mergeco shall be merged with and into Target. Following the
Merger, Target shall continue to exist as the surviving corporation (sometimes
referred to as the "Surviving Corporation") and the separate corporate existence
of Mergeco shall cease.
1.2 Filing and Effective Time. At the Closing, Mergeco and Target shall
file with the Secretary of State of the State of Delaware, a Certificate of
Merger, appropriately completed and executed in accordance with the relevant
provisions of the DGCL. The Merger shall become effective upon filing of the
Certificate of Merger, in accordance with the relevant provisions of the DGCL
(the "Effective Time," and the date thereof hereinafter referred to as the
"Effective Date").
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1.3 Effects of the Merger. The Merger shall have the effects set forth
in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the rights and property of the Target and
Mergeco shall vest in the Surviving Corporation, and all debts and liabilities
of the Target and Mergeco shall become the debts, liabilities and duties of the
Surviving Corporation. In addition:
(a) The Certificate of Incorporation of Target as in effect at
the Effective Time shall be amended and restated in the form of Exhibit A
attached hereto, and shall thereafter remain in effect until duly amended as
provided therein or by applicable law;
(b) The By-Laws of Target as in effect at the Effective Time
shall be amended and restated in the form of Exhibit B attached hereto, and
shall thereafter remain in effect until duly amended as provided therein or by
applicable law;
(c) The officers of Target immediately prior to the Merger
shall continue to serve as the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be; and
(d) The directors of Mergeco shall become the directors of the
Surviving Corporation until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
1.4 Merger Consideration.
(a) In consideration for the Target Shares, the Parent shall (i)
pay in the aggregate $222.18 in exchange for all of shares of 8% Preferred Stock
of the Company ("Senior Preferred") and (ii) all of the shares of (A) Series A
Junior Convertible Preferred Stock of the Company ("Series A Preferred"), (B)
Preferred Stock of the Company (the "Junior Preferred"), (C) the Target Common
Shares and (D) all outstanding unexpired and unexercised options and warrants to
acquire Target Common Shares shall be cancelled and extinguished without
consideration therefore. Subject to the terms and conditions of this Agreement,
as of the Effective Time, by virtue of the Merger and without any action on the
part of Mergeco, the Company or the holder of the Target Shares, the holder of
any options, warrants or other rights to acquire or receive Target Shares, the
following shall occur:
(i) Conversion of 8% Senior Preferred Stock. Each share of
Senior Preferred issued and outstanding immediately prior to the Effective Time
will be canceled and extinguished and be converted automatically into the right
to receive $1.00 per share.
(ii) Series A Junior Convertible Preferred Stock and Preferred
Stock. Each share of Series A Preferred and Junior Preferred issued and
outstanding immediately prior to the Effective Time will be canceled and
extinguished and be entitled to no payment of any kind.
(iii) Cancellation of Company Common Stock. Each Target Common
Share issued and outstanding immediately prior to the Effective Time (other than
any Target Common Shares to be canceled pursuant to Section 1.4(a)(v) and any
Dissenting Target Shares
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(to the extent provided in Section 1.9 of this Agreement)) will be canceled and
entitled to no payment of any kind.
(iv) Cancellation of Options and Warrants. Any outstanding
options, warrants, convertible notes or other convertible securities, or other
right to acquire shares of capital stock of the Company shall be extinguished
and cancelled without conversion or exercise, and shall thereafter be void and
of no further force and effect and shall not represent any right to acquire
shares in the Surviving Corporation or Parent.
(v) Cancellation of Company-Owned Stock. Each share of Target
Shares owned by the Company or any direct or indirect wholly-owned subsidiary of
the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(b) The parties hereto further acknowledge that as additional
consideration for the benefit of Target prior to the Effective Time, Parent is
obligated to issue up to 1,000,000 of its shares of Parent Common Stock to
certain creditors of Company to be exchanged for cancellation of indebtedness of
Company to such creditors in an amount in excess of $1,000,000.
1.5 Mergeco Shares. Each share of $0.00001 par value common stock of
Mergeco issued and outstanding to Parent immediately prior to the Effective Time
shall by virtue of the Merger be converted into one share of common stock of the
Surviving Corporation.
1.6 Payment of Merger Consideration.
(a) At the Closing, the Stockholders who own shares of Senior
Preferred shall surrender to Parent their stock certificate(s)
representing their shares of Senior Preferred, accompanied by the
properly completed and duly executed transmittal materials delivered by
Parent. Upon receipt of the stock certificates and transmittal
materials, Parent shall cancel such stock certificates and Parent shall
thereupon issue to the holders of the shares Senior Preferred the sum
of $1.00 per share.
(b) From and after the Effective Time, until so surrendered, the
stock certificates representing shares of Senior Preferred shall be deemed for
all purposes to represent and evidence only the right to receive the per share
consideration set forth in Section 1.4, for each share represented by such
certificates, and no interest shall be paid or accrued on such amount and the
holders of such stock certificates shall cease to have any rights as
stockholders of the Target.
(c) From and after the Effective Time, the stock certificates
representing the Target Shares other than the Senior Preferred shall be deemed
cancelled and retired, and of no further force and effect, and there shall be no
obligation or requirement for the holders of such Target Shares to surrender
such certificates.
1.7 No Liability. Neither the Parent, nor the Surviving Corporation
shall be liable to any holder of Target Shares who fails to duly tender his, her
or its certificate and transmittal materials for shares or cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
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1.8 Lost, Stolen or Destroyed Certificates. In the event any
certificates for Target Shares shall have been lost, stolen or destroyed, Parent
shall issue in exchange for such lost, stolen or destroyed certificates, upon
the making of an affidavit of that fact by the holder thereof, such cash as may
be required pursuant to this Agreement; provided, however, that Parent may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Parent, the Company, the Surviving Corporation or the transfer agent
with respect to the certificates alleged to have been lost, stolen or destroyed.
1.9 Appraisal Rights.
(a) Notwithstanding anything herein to the contrary, any Target
Common Shares, Target Junior Preferred Shares and Target Series A Junior Shares
owned by a Dissenting Stockholder ("Dissenting Target Shares") shall not be
converted into the right to receive the consideration hereunder, but such
Dissenting Stockholder shall be entitled to only such payments as are provided
for by the DGCL, which shall be paid by the Surviving Corporation.
(b) Notwithstanding the provisions of this Section 1.9, if any
Dissenting Stockholder shall effectively withdraw or lose (through failure to
perfect or otherwise) his appraisal rights provided for by the DGCL for his
Target Shares, then, as of the Effective Time, such Dissenting Stockholder's
Target Shares shall automatically be converted into the right to receive only
the merger consideration as provided herein, without interest thereon.
(c) Prior to the Closing Date, the Company shall give Parent (i)
prompt notice of any written demands by Dissenting Stockholders, withdrawals of
such demands and any other similar instruments served pursuant to the DGCL and
received by the Company and (ii) the opportunity to discuss with the Company any
negotiations and proceedings with respect to such demands and to participate
with the Company in such negotiations and proceedings. Prior to the Closing
Date, the Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands by Dissenting
Stockholders or settle or offer to settle any such demands.
1.10 The Closing. The Closing of the Merger (the "Closing") shall take
place as soon as the conditions set forth in Articles VII and VIII are satisfied
or at such later date as the parties may agree (the "Closing Date"), at such
place as the parties may agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT
As a material inducement to the Company to enter into this Agreement
and to consummate the transactions contemplated hereby, Parent makes the
following representations and warranties to the Company, the Stockholders and
Principals:
2.1 Corporate Status. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida and has
full corporate power and authority to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted.
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2.2 Corporate Power and Authority. Parent has the corporate power and
authority to execute and deliver this Agreement and the Parent Ancillary
Documents, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. Parent has taken all corporate
action necessary to authorize its execution and delivery of this Agreement and
the Parent Ancillary Documents, the performance of its obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby and
thereby. No approval of the stockholders of Parent is required to authorize the
transactions contemplated hereby.
2.3 Enforceability. This Agreement has been duly executed and delivered
by Parent and constitutes a legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms and each of the Parent
Ancillary Documents, upon execution and delivery by Parent, will be a legal,
valid and binding obligation of Parent enforceable in accordance with its terms.
2.4 No Violation. The execution and delivery of this Agreement and the
Parent Ancillary Documents by Parent, the performance by it of its obligations
hereunder and thereunder and the consummation by it of the transactions
contemplated by this Agreement and the Parent Ancillary Documents will not (i)
contravene any provision of its Certificate of Incorporation or By-Laws, (ii)
violate or conflict with any law, statute, ordinance, rule, regulation, decree,
writ, injunction, judgment or order of any Governmental Authority or of any
arbitration award which is either applicable to, binding upon or enforceable
against Parent, (iii) conflict with, result in any breach of, or constitute a
default (or an event which would, with the passage of time or the giving of
notice or both, constitute a default) under, or give rise to a right to
terminate, amend, modify, abandon or accelerate, any Contract which is
applicable to, binding upon or enforceable against Parent, (iv) result in or
require the creation or imposition of any Lien upon or with respect to any of
the property or assets of Parent, or (v) require the consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, any court or tribunal or any other Person, except the Secretary of
State of the State of Illinois, or the SEC or other filings required to be made
by Parent.
2.5 No Commissions. Parent has incurred no obligation for any finder's
or broker's or agent's fees or commissions or similar compensation in connection
with the transactions contemplated hereby.
2.6 Capitalization. Schedule 2.6 sets forth, with respect to the
Parent, as of the date hereof and as of the Closing Date: (i) the number of
authorized shares of each class and series of its capital stock; (ii) the number
of issued and outstanding shares of each class and series of its capital stock;
and (iii) the number of shares of each class of its capital stock which are held
in treasury. All of the issued and outstanding shares of capital stock of the
Parent (i) have been and will be duly authorized and validly issued and are
fully paid and non assessable, (ii) were and will be issued in compliance with
all applicable state and federal securities laws, and (iii) were not, and will
not be, issued in violation of any preemptive rights or rights of first refusal.
No preemptive rights or rights of first refusal exist or will exist with respect
to the outstanding shares of capital stock of the Parent and no such rights
arise by virtue of or in connection with the transactions contemplated hereby.
Except as set forth on Schedule 2.6, there are no outstanding or authorized
rights, options, warrants, convertible securities, subscription rights,
conversion
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rights, exchange rights or other agreements or commitments of any kind that
could require the Parent to issue or sell any shares of its capital stock (or
securities convertible into or exchangeable for shares of its capital stock).
Except as disclosed or specifically referred to on Schedule 2.6, there are no
outstanding stock appreciation, phantom stock, profit participation or other
similar rights with respect to the Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MERGECO
As a material inducement to the Company to enter into this Agreement
and to consummate the transactions contemplated hereby, Parent and Mergeco
jointly and severally make the following representations and warranties to the
Company:
3.1 Corporate Status. Mergeco is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted.
3.2 Corporate Power and Authority. Mergeco has the corporate power and
authority to execute and deliver this Agreement and the Mergeco Ancillary
Agreements, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. Mergeco has taken
all action necessary to authorize its execution and delivery of this Agreement,
the performance of its obligations hereunder and thereunder and the consummation
of the transactions contemplated hereby and thereby.
3.3 Enforceability. This Agreement has been duly executed and delivered
by Mergeco and constitutes a legal, valid and binding obligation of Mergeco,
enforceable against Mergeco in accordance with its terms and each of the Mergeco
Ancillary Agreements, upon execution and delivery by Mergeco, will be a legal,
valid and binding obligation of Mergeco enforceable in accordance with its
terms.
3.4 No Violation. The execution and delivery of this Agreement and the
Mergeco Ancillary Agreements by Mergeco, the performance by it of its
obligations hereunder and thereunder and the consummation by it of the
transactions contemplated by this Agreement and the Mergeco Ancillary Agreements
will not (i) contravene any provision of the Articles of Incorporation or
By-Laws of Mergeco, (ii) violate or conflict with any law, statute, ordinance,
rule, regulation, decree, writ, injunction, judgment or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against Mergeco, (iii) conflict with, result in
any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) under, or
give rise to a right to terminate, amend, modify, abandon or accelerate, any
Contract which is applicable to, binding upon or enforceable against Mergeco,
(iv) result in or require the creation or imposition of any Lien upon or with
respect to any of the property or assets of Mergeco, or (v) require the consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, any court or tribunal or any other Person, except the
Secretary of State of the State of Illinois, the SEC or other filings required
to be made by Parent.
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3.5 No Commissions. Mergeco has incurred no obligation for any finder's
or broker's or agent's fees or commissions or similar compensation in connection
with the transactions contemplated hereby.
3.6 Mergeco Capitalization. Mergeco's authorized capital stock consists
of one million (1,000,000) shares of common stock, $0.00001 par value, of which
one thousand (1000) shares are issued and outstanding all of which are validly
issued, fully paid and non assessable, and 1,000,000 shares of blank check
preferred stock, $0.00001 par value per share, none of which is authorized or
outstanding. There are no options, warrants, preemptive rights, conversion
privileges or other contracts which give any Person the right to acquire any
capital stock of Mergeco or any interest therein. Parent is the beneficial and
record owner of all of the outstanding shares of common stock of Mergeco, free
and clear of all Liens.
3.7 Business Activity. Mergeco has not engaged in any business activity
of any nature prior to the date of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
As a material inducement to Parent and Mergeco to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
makes the following representations and warranties to Parent and Mergeco:
4.1 Corporate Status. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has the corporate power and authority to own or lease its property
and to carry on its business as now being conducted. The Company is legally
qualified to transact business and is in good standing as a foreign corporation
in each foreign jurisdiction where the nature of its property and the conduct of
its business requires such qualification, except for such jurisdictions where
the failure to so qualify would not have a material adverse effect on the
financial condition or results of operation of the Company (a "Material Adverse
Effect"). There is no pending or threatened proceeding for the dissolution,
liquidation, insolvency or rehabilitation of the Company.
4.2 Corporate Power and Authority. The Company has full corporate power
and authority to execute and deliver this Agreement and the Company Ancillary
Documents, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The Company has taken all
corporate action necessary to authorize its execution and delivery of this
Agreement and the Company Ancillary Documents, the performance of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby.
4.3 Enforceability. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms and each of the
Company Ancillary Documents, upon execution and delivery by the Company, will be
a legal, valid and binding obligation of the Company enforceable in accordance
with its terms.
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4.4 No Violation. Except as set forth on Schedule 4.4, the execution
and delivery of this Agreement and the Company Ancillary Documents by the
Company, the performance by it of its obligations hereunder and thereunder and
the consummation by it of the transactions contemplated by this Agreement and
the Company Ancillary Documents will not (i) contravene any provision of the
Articles of Incorporation or By-Laws of the Company, (ii) violate or conflict
with any law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment or order of any Governmental Authority or of any arbitration award
which is either applicable to, binding upon or enforceable against the Company;
(iii) conflict with, result in any breach of, or constitute a default (or an
event which would, with the passage of time or the giving of notice or both,
constitute a default) under, or give rise to a right to terminate, amend,
modify, abandon or accelerate, any Contract which is applicable to, binding upon
or enforceable against the Company, (iv) result in or require the creation or
imposition of any Lien upon or with respect to any of the property or assets of
the Company, or (v) require the consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Authority, any court or
tribunal or any other Person, except the Secretary of State of the State of
Delaware.
4.5 Capitalization. Schedule 4.5 sets forth, with respect to the
Company, (i) the number of authorized shares of each class of its capital stock,
(ii) the number of issued and outstanding shares of each class of its capital
stock, and (iii) the number of shares of each class of its capital stock which
are held in treasury. All of the issued and outstanding shares of capital stock
of the Company (i) are legally and beneficially owned by the Person in such
amounts as set forth each Person's name on Schedule 4.5, (ii) have been duly
authorized and validly issued and are fully paid and non assessable, (iii) were
issued in compliance with all applicable state and federal securities laws, and
(iv) were not issued in violation of any preemptive rights or rights of first
refusal. No preemptive rights or rights of first refusal exist with respect to
the outstanding shares of capital stock of the Company, and no such rights arise
by virtue of or in connection with the transactions contemplated hereby. Except
as disclosed or specifically referred to on Schedule 4.5 there are no
outstanding or authorized rights, options, warrants, convertible securities,
subscription rights, conversion rights, exchange rights or other agreements or
commitments of any kind that could require the Company to issue or sell any
shares of its capital stock (or securities convertible into or exchangeable for
shares of its capital stock). There are no outstanding stock appreciation,
phantom stock, profit participation or other similar rights with respect to the
Company. There are no proxies, voting rights or other agreements or
understandings with respect to the voting or transfer of the outstanding capital
stock of the Company. The Company is not obligated to redeem or otherwise
acquire any of its outstanding shares of capital stock.
4.6 Subsidiaries. The Company does not own, directly or indirectly, any
outstanding voting securities of or other interests in, or control, any other
corporation, partnership, joint venture or other business entity.
4.7 Financial Statements. The Company has delivered to Parent (i) the
unaudited financial statements of the Company for the fiscal year ended March
31, 2004 and (ii) the unaudited financial statements of the Company as of June
30, 2004 for the three months then ended (collectively, the "Financial
Statements"), copies of which are attached as Schedule 4.7 hereto. The balance
sheet dated as of March 31, 2004 included in the Financial Statements is
referred to herein as the "Current Balance Sheet." The Financial Statements have
been prepared
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from the books and records of the Company in accordance with GAAP, except as set
forth on Schedule 4.7. The Financial Statements, fairly present the financial
position of the Company as of the dates of the balance sheets included in the
Financial Statements and the results of the Company's operations for the periods
covered by the statements of operations included in the Financial Statements.
4.8 Changes Since January 1, 2004. Except as disclosed in Schedule 4.8
or as contemplated herein, since March 31, 2004, the Company has not:
(i) issued any capital stock or other securities;
(ii) made any dividends or distribution of or with
respect to its capital stock or other securities or purchased or redeemed any of
its securities;
(iii) paid any bonus to or increased the rate of
compensation of any of its officers or salaried employees or amended any other
terms of employment of such persons;
(iv) sold, leased or transferred any of its properties
or assets other than in the ordinary course of business consistent with past
practice;
(v) made or obligated itself to make capital
expenditures in excess of $5,000 in any one case or $20,000 in the aggregate;
(vi) made any payment in respect of its liabilities
other than in the ordinary course of business consistent with past practice;
(vii) incurred any obligations or liabilities (including
any indebtedness) or entered into any transaction or series of transactions
involving in excess of $50,000 in the aggregate out of the ordinary course of
business, except for this Agreement and the transactions contemplated hereby;
(viii) suffered any theft, damage, destruction or
casualty loss;
(ix) made or adopted any change in its accounting
practice or policies;
(x) waived, canceled, compromised or released any rights
having a value in excess of $10,000 in the aggregate
(xi) terminated, amended or modified any contract,
except in the ordinary course of business or in connection with adoption of
payment programs to Creditors for past due accounts payable;
(xii) made any adjustment to its books and records other
than in respect of the conduct of its business activities in the ordinary course
consistent with past practice;
(xiii) entered into any transaction with any Affiliate
other than intercompany transactions in the ordinary course of business
consistent with past practice;
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(xiv) entered into any employment agreement;
(xv) imposed any security interest or other Lien on any
of its assets;
(xvi) delayed paying any accounts payable, not being
contested in good faith, otherwise than in the ordinary course of business
consistent with past practice; or
(xvii) agreed to do or authorized any of the foregoing.
4.9 Liabilities. Except as set forth on Schedule 4.9, the Company does
not have any liabilities or obligations, whether accrued, absolute, contingent
or otherwise, except (i) to the extent reflected or taken into account in the
Current Balance Sheet and heretofore not paid or discharged, (ii) to the extent
specifically set forth in or incorporated by express reference in any of the
Schedules attached hereto, and (iii) liabilities incurred in the ordinary course
of business consistent with past practice since the date of the Current Balance
Sheet, none of which are past due or arose from a breach of a contract, a
lawsuit, claim or violation of law.
4.10 Litigation. Except for potential creditor claims for past due
accounts payable, there is no action, suit, or other legal or administrative
proceeding or governmental investigation, pending or, to the Company's
Knowledge, threatened, anticipated or contemplated against, by or affecting the
Company or any of its properties or assets, or which question the validity or
enforceability of this Agreement or the transactions contemplated hereby, and to
the Company's knowledge, there is no basis for any of the foregoing. There are
no outstanding orders, decrees or stipulations issued by any Governmental
Authority in any proceeding to which the Company is or was a party which have
not been complied with in full or which continue to impose any material
obligations on the Company.
4.11 Real Estate.
(a) There is no real property legally or beneficially owned by the
Company (the "Owned Real Properties").
(b) Schedule 4.11(b) sets forth a list of all leases, licenses or
similar agreements (the "Leases") relating to the real property (the "Leased
Real Properties") to which the Company is a party (copies of which have
previously been furnished to Parent). The Leases are in full force and effect
and have not been amended. The Company is not in default or breach of any Lease,
and to the Company's Knowledge, no other party is in default or breach of any
Lease. No event has occurred which, with the passage of time or the giving of
notice or both, would cause a material breach of or default by the Company under
any of such Leases.
(c) With respect to each parcel constituting the Owned Real
Properties and the Leased Real Properties (collectively, the "Real Properties"):
(i) The Company has not received written notice of any
pending or threatened condemnation, eminent domain or similar proceedings with
respect to the Real Properties and have no knowledge that any such proceedings
are threatened or contemplated.
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(ii) Except for Permitted Liens, there are no Contracts
granting to any party or parties (other than the Company) the right of use or
occupancy of any portion of the Real Properties. There are no outstanding
options or rights of first refusal to purchase any parcel of the Real
Properties.
(iii) All improvements and buildings on the Owned Real
Properties are in good repair, ordinary wear and tear excepted; and the
structural components and systems (including plumbing, electrical, air
conditioning/heating and sprinklers) are in good working order in all material
respects, ordinary wear and tear and ordinary course maintenance and replacement
excepted.
(iv) The Company has title to the Owned Real Properties,
free and clear of all Liens, and adverse claims of any kind or character, other
than the Permitted Liens.
(v) The Company has not requested, and, to the knowledge
of the Company, there is no pending request for, rezoning of the Owned Real
Properties or any other zoning variance for the Owned Real Properties.
(vi) There are no material pending tax certiorari
proceedings with respect to the Real Properties, or any tax abatements or
exemptions affecting the Real Properties. The Company has received in the twelve
months prior to the Closing Date any notice of, or has any knowledge of, any
proposed increase in the assessed valuation of the Real Properties or of any
proposed public improvement assessment.
(vii) Within the past two years, no casualty has
occurred at the Real Properties.
4.12 Good Title to and Condition of Personal Property Assets. The
Company has good and valid title to all of its Assets, free and clear of any
Liens or restrictions on use. The tangible personal property owned by the
Company and currently in use by the business and operations of the Company is in
good operating condition, normal wear and tear excepted, and has been maintained
in accordance with sound industry practices.
4.13 Personal Property Leases. Schedule 4.13 contains a brief
description of each lease or other Contract with an annual rent exceeding
$20,000 under which the Company is lessee of, or holds or operates, any
machinery, equipment, vehicle or other tangible personal property owned by a
third Person and used in or relating to the Company's business (an "Equipment
Lease"). The assets being leased pursuant to Equipment Leases are is in good
operating condition, normal wear and tear excepted, and has been maintained in
accordance with sound industry practices. The Company has complied in all
material respects with the terms and conditions of each Equipment Lease and, to
the Company's knowledge, all of the covenants to be performed by any other party
thereto have been fully performed and there are no claims for breach or
indemnification or notice of default or termination under any Equipment Lease.
The Company is not, nor will it be, as a result of the execution and delivery of
this Agreement or the performance of its obligations under this Agreement, in
breach of any Equipment Lease.
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4.14 Intellectual Property.
(a) The Company owns all right, title, and interest in (free and
clear of all Liens) all of the Intellectual Property described on Schedule 4.14
("Owned Intellectual Property").
(b) Schedule 4.14 lists (i) all patents and patent applications
and all registered and unregistered trademarks, trade names and service marks,
registered and material unregistered copyrights, and mask works included in the
Owned Intellectual Property, including the jurisdictions in which each such
Owned Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed; (ii) all
licenses, sublicenses and other agreements to which the Company is a party
pursuant to which any Person is authorized to use any Owned Intellectual
Property; and (iii) all licenses, sublicenses and other agreements to which the
Company is a party pursuant to which the Company is authorized to use any
third-party (including without limitation for the purposes of this Section 4.14
any employees of the Company) Intellectual Property which is not Owned
Intellectual Property, or which is incorporated in, is, or forms a part of, any
Owned Intellectual Property (the "Third Party Intellectual Property"). Except as
set forth in Schedule 4.14, no royalties or other continuing payment obligations
are due in respect of the Owned Intellectual Property. Except as set forth in
Schedule 4.14, all patents and registrations or applications therefore included
in Owned Intellectual Property are valid and subsisting and in full force and
effect and are applied for and owned in the name of the Company.
(c) The Company is not, nor will it be, as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to Owned Intellectual Property.
(d) The Owned Intellectual Property does not dilute, misuse,
infringe, misappropriate or otherwise come into conflict with any Intellectual
Property of any other Person (including without limitation any Employee). No
charge, complaint, demand, notice or claim is pending or has been made to such
effect and the Company has not received written notice so alleging (including
any claim that the Company must license or refrain from using any Intellectual
Property of any other such Person). No action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
Company's Knowledge, threatened, that challenges the legality, validity,
enforceability, use or ownership of any item of Owned Intellectual Property, nor
is any Owned Intellectual Property subject to any outstanding injunction,
judgment, order, decree, ruling or charge.
(e) Except for the Third Party Intellectual Property, all
Intellectual Property used in or necessary to the conduct of the Company's
business as presently conducted or currently contemplated to be conducted by the
Company is Owned Intellectual Property and was written and created solely by
either (i) employees of the Company acting within the scope of their employment
or (ii) by third parties who have validly and irrevocably assigned all of their
rights therein to the Company, and no third party owns or has any right to any
of the Owned Intellectual Property. Except as described in Schedule 4.14, no
person who has licensed Intellectual Property to the Company has ownership
rights or license rights to improvements made by the Company in such
Intellectual Property.
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(f) To the Company's knowledge, no third party has interfered
with, infringed upon, misappropriated, misused, diluted or otherwise come into
conflict with any Owned Intellectual Property.
4.15 Adequacy of the Assets. The Assets, the Leased Assets, and any
Third Party Intellectual Property licensed by the Company, constitutes, in the
aggregate, all of the assets, rights and properties necessary for the conduct by
the Company of its business in the manner in which and to the extent to which
such business is currently being conducted.
4.16 Licenses and Permits. The Company possesses all licenses and
required governmental or official approvals, permits or authorizations
(collectively, the "Permits") necessary to lawfully conduct its business and
operations which Permits are listed on Schedule 4.16. All such Permits are valid
and in full force and effect, the Company is in material compliance with the
requirements thereof, and no proceeding is pending or threatened to revoke or
amend any of them.
4.17 Compliance with Laws.
(a) The Company has complied in all material respects with all
laws, regulations and orders applicable to it, its business, operations, Assets
and Leased Assets. The Company has not been cited, fined or otherwise notified
of any asserted past or present failure to comply with any laws, regulations or
orders and no proceeding with respect to any such violation is pending or
threatened.
(b) The Company has not made any payment of funds in connection
with its business which is prohibited by law, and no funds have been set aside
to be used in connection with its business for any payment prohibited by law.
4.18 Environmental Matters.
(a) The operations of the Company are and have at all times been
in compliance in all material respects with all applicable Environmental Laws.
The Company has not received written notice of any violation of any
Environmental Laws applicable to the Real Properties, Assets, Leased Assets or
the Company's operations;
(b) The Company has in all material respects obtained, maintained
and complied with all Permits required by Environmental Laws and necessary for
the operation of its business;
(c) No Hazardous Substances have been generated, transported,
stored, treated, recycled or otherwise handled in any way in the operation of
the Company's business, except for inventories of raw materials and supplies
used or to be used in the ordinary and normal course of operating the business
(all of which were or are stored in all material respects in accordance with
applicable Environmental Laws);
(d) There are no locations not owned or operated by the Company
where Hazardous Substances generated by the Company have been stored, treated,
recycled or disposed of;
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(e) No Hazardous Substances generated by the Company are located
on, contained in or otherwise form a part of the Property of the Company, except
for inventories of raw materials and supplies used or to be used in the ordinary
and normal course of operating the Company's business (all of which were or are
stored in all material respects in accordance with applicable Environmental
Laws);
(f) To the Company's Knowledge, there is no past or ongoing
Release from Properties associated with the operation of the Company's business
or from other locations where Hazardous Substances associated with the operation
of the Company's business have been or are located, except for federally
permitted Releases;
(g) The Company has not received any written notice indicating
that any Person may have impaired health as a result of the operation of the
Company's business or the ownership or use of any Property associated with the
operation of the Company's business or as the result of the Release from such
Properties;
(h) The Company has not treated, stored for more than ninety (90)
days, or disposed of any hazardous waste (as such term is used within the
meaning of the RCRA or similar applicable state or municipal law) associated
with the operation of the Company's business, except in compliance in all
material respects with applicable Environmental Laws;
(i) The Company has not received any written notice from any
Governmental Authority or other Person advising that any of them is potentially
responsible for Remedial Action with respect to a Release or threatened Release;
(j) No underground storage tanks are or, to the Company's
Knowledge, ever were located on any properties owned or leased by the Company;
(k) No court order, litigation, settlement or citation in an
action to which the Company is a party with respect to Hazardous Substances
exists with respect to or in connection with the operation of the Company's
business;
(l) To the Company's Knowledge, there has been no environmental
investigation conducted by any Governmental Authority with respect to the
operation of the Company's business; and
(m) To the Company's Knowledge, there are no PCBs which are
located on, contained in or otherwise form a part of any of the Property.
4.19 Tax Matters. Except as set forth in Schedule 4.19 hereto, all Tax
Returns required to be filed prior to the date hereof with respect to the
Company, or any of its income, properties, franchises or operations have been
filed, each such Tax Return has been prepared in compliance with the Internal
Revenue Code of 1986, as amended (the "Code") or other foreign, federal, state
or local applicable laws and regulations, and all such Tax Returns are true,
complete and accurate in all respects. All Taxes due and payable by or with
respect to the Company have been paid or accrued on the Current Balance Sheet or
will be accrued on its books and records as of the Closing. Except as set forth
in Schedule 4.19 hereto: (i) with respect to each taxable period of the Company,
no taxable period has been audited by the relevant taxing authority; (ii) no
15
deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Taxes has been asserted or assessed by any taxing
authority; (iii) the Company has not consented to extend the time in which any
Taxes may be assessed or collected by any taxing authority; (iv) the Company has
not requested or been granted an extension of the time for filing any Tax Return
to a date later than the Closing Date; (v) there is no action, suit, taxing
authority proceeding, or audit or claim for refund now in progress, pending or
threatened against or with respect to the Company regarding Taxes; (vi) the
Company has not made an election or filed a consent under Section 341(f) of the
Code (or any corresponding provision of state, local or foreign law) on or prior
to the Closing Date; (vii) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Company; (viii) the
Company will not be required (A) as a result of a change in method of accounting
for a taxable period ending on or prior to the Closing Date, to include any
adjustment under Section 481(c) of the Code (or any corresponding provision of
state, local or foreign law) in taxable income for any taxable period (or
portion thereof) beginning after the Closing Date or (B) as a result of any
"closing agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign law), to include any item of
income or exclude any item of deduction from any taxable period (or portion
thereof) beginning after the Closing Date; (ix) the Company is not a party to or
bound by any tax allocation or tax sharing agreement or has any current or
potential contractual obligation to indemnify any other Person with respect to
Taxes; (x) there is no basis for any assessment, deficiency notice, 30-day
letter or similar notice with respect to any Tax to be issued to the Company
with respect to any period on or before the Closing Date; (xi) the Company has
not made any payments, and is or will not become obligated (under any contract
entered into on or before the Closing Date) to make any payments, that will be
non deductible under Section 280G of the Code (or any corresponding provision of
state, local or foreign law); (xii) the Company has not been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code (or any corresponding provision of state, local or foreign law) during the
applicable period specified in Section 897(c)(1)(a)(ii) of the Code (or any
corresponding provision of state, local or foreign law); (xiii) no claim has
ever been made by a taxing authority in a jurisdiction where the Company does
not file Tax Returns that is or may be subject to Taxes assessed by such
jurisdiction; (xiv) the Company does not have any permanent establishment in any
foreign country, as defined in the relevant tax treaty between the United States
of America and such foreign country; (xv) true, correct and complete copies of
all income and sales Tax Returns filed by or with respect to the Company for the
past two years has been furnished or made available to Parent; (xvi) the Company
will not be subject to any Taxes for the period ending at or before the Closing
Date for which period a Tax Return has not then or theretofore been filed
imposed pursuant to Section 1374 or Section 1375 of the Code (or any
corresponding provision of state, local or foreign law); and (xvii) no sales or
use tax or property transfer tax (other than sales tax on aircraft, boats,
mobile homes and motor vehicles), non recurring intangibles tax, documentary
stamp tax or other excise tax (or comparable tax imposed by any Governmental
Authority) will be payable by the Company or Parent by virtue of the
transactions completed in this Agreement.
4.20 Labor and Employment Matters. The Company is not a party to or
bound by any collective bargaining agreement or any other agreement with a labor
union, and there have been no efforts by any labor union during the 24 months
prior to the date hereof to organize any employees of the Company into one or
more collective bargaining units. There is no pending or threatened labor
dispute, strike or work stoppage which affects or which may affect the business
16
of the Company which may interfere with its continued operations. The Company is
not aware that any executive or key employee or group of employees has any plans
to terminate his, her or their employment with the Company as a result of this
Agreement or otherwise. To the Company's Knowledge, the Company has complied
with applicable laws, rules and regulations relating to employment, civil
rights, immigration and equal employment opportunities, including but not
limited to, the Civil Rights Act of 1964, the Fair Labor Standards Act, the
Worker Adjustment and Retraining Notification Act of 1988 and the Immigration
Reform and Control Act of 1986, as amended..
4.21 Employee Benefit Plans.
(a) Employee Benefit Plans. Schedule 4.21 contains a list
setting forth each employee benefit plan or arrangement of the Company,
including but not limited to employee pension benefit plans, as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), multiemployer plans, as defined in Section 3(37) of ERISA, employee
welfare benefit plans, as defined in Section 3(1) of ERISA, deferred
compensation plans, stock option plans, bonus plans, stock purchase plans,
hospitalization, disability and other insurance plans, severance or termination
pay plans and policies, whether or not described in Section 3(3) of ERISA, in
which employees, their spouses or dependents, of the Company participate
("Employee Benefit Plans").
(b) Compliance with Law. With respect to each Employee Benefit
Plan (i) each has been administered in all material respects in compliance with
its terms and with all applicable laws, including, but not limited to, ERISA and
the Code; (ii) no actions, suits, claims or disputes are pending, or threatened;
(iii) no audits, inquiries, reviews, proceedings, claims, or demands are pending
with any governmental or regulatory agency; (iv) there are no facts which could
give rise to any material liability in the event of any such investigation,
claim, action, suit, audit, review, or other proceeding; (v) all material
reports, returns, and similar documents required to be filed with any
governmental agency or distributed to any plan participant have been duly or
timely filed or distributed; and (vi) no "prohibited transaction" has occurred
within the meaning of the applicable provisions of ERISA or the Code.
(c) Qualified Plans. With respect to each Employee Benefit
Plan intended to qualify under Code Section 401(a) or 403(a): (i) the Internal
Revenue Service has issued a favorable determination letter that such plans are
qualified and exempt from federal income taxes; (ii) no such determination
letter has been revoked nor has revocation been threatened, nor has any
amendment or other action or omission occurred with respect to any such plan
since the date of its most recent determination letter or application therefore
in any respect which would adversely affect its qualification or materially
increase its costs; (iii) no such plan has been amended in a manner that would
require security to be provided in accordance with Section 401(a)(29) of the
Code; (iv) no reportable event (within the meaning of Section 4043 of ERISA) has
occurred, other than one for which the 30 day notice requirement has been
waived; (v) as of the Effective Date, the present value of all liabilities that
would be "benefit liabilities" under Section 4001(a)(16) of ERISA if benefits
described in Code Section 411(d)(6)(B) were included will not exceed the then
current fair market value of the assets of such plan (determined using the
actuarial assumptions used for the most recent actuarial valuation for such
plan); (vi) except as
17
disclosed on Schedule 4.21, all contributions to, and payments from and with
respect to such plans, which may have been required to be made in accordance
with such plans and, when applicable, Section 302 of ERISA or Section 412 of
the Code, have been timely made; and (vii) all such contributions to the
plans, and all payments under the plans (except those to be made from a trust
qualified under Section 401(a) of the Code) and all payments with respect
to the plans (including, without limitation, PBGC and insurance premiums) for
any period ending before the Closing Date that are not yet, but will be,
required to be made are properly accrued and reflected on the Current Balance
Sheet or are disclosed on Schedule 4.21.
(d) Multiemployer Plans. The Company is not subject to any
multiemployer plan, as described in Section 4001(a)(3) of ERISA ("MPPA Plan").
(e) Welfare Plans. The Company represents that: (i) the
Company is not obligated under any employee welfare benefit plan as described in
Section 3(1) of ERISA ("Welfare Plan"), whether or not disclosed in Schedule
4.21, to provide medical or death benefits with respect to any employee or
former employee of the Company, or its predecessors after termination of
employment; (ii) the Company has complied with the notice and continuation
coverage requirements of Section 4980B of the Code and the regulations
thereunder with respect to each Welfare Plan that is, or was during any taxable
year for which the statute of limitations on the assessment of federal income
taxes remains, open, by consent or otherwise, a group health plan within the
meaning of Section 5000(b)(1) of the Code, and (iii) there are no reserves,
assets, surplus or prepaid premiums under any Welfare Plan which is an Employee
Benefit Plan. The consummation of the transactions contemplated by this
Agreement will not entitle any individual to severance pay, and, will not
accelerate the time of payment or vesting, or increase the amount of
compensation, due to any individual.
(f) Controlled Group Liability. Neither the Company nor any
entity that would be aggregated with them under Code Section 414(b), (c), (m) or
(o): (i) has ever terminated or withdrawn from an employee benefit plan under
circumstances resulting (or expected to result) in liability to the Pension
Benefit Guaranty Corporation ("PBGC"), the fund by which the employee benefit
plan is funded, or any employee or beneficiary for whose benefit the plan is or
was maintained (other than routine claims for benefits); (ii) has any assets
subject to (or expected to be subject to) a lien for unpaid contributions to any
employee benefit plan; (iii) has failed to pay premiums to the PBGC when due;
(iv) is subject to (or expected to be subject to) an excise tax under Code
Section 4971; (v) has engaged in any transaction which would give rise to
liability under Section 4069 or Section 4212(c) of ERISA; or (vi) has violated
Code Section 4980B or Section 601 through 608 of ERISA.
(g) Other Liabilities. Except as set forth on Schedule 4.21,
(i) none of the Employee Benefit Plans obligates the Company to pay separation,
severance, termination or similar benefits solely as a result of any transaction
contemplated by this Agreement or solely as a result of a "change of control"
(as such term is defined in Section 280G of the Code), (ii) all required or
discretionary (in accordance with historical practices) payments, premiums,
contributions, reimbursements, or accruals for all periods ending prior to or as
of the Effective Date shall have been made or properly accrued on the Current
Balance Sheet or will be properly accrued on the books and records of the
Company as of the Effective Date, and (iii) none of the
18
Employee Benefit Plans has any unfunded liabilities which are not reflected on
the Current Balance Sheet or the books and records of the Company
4.22 Contracts. Schedule 4.22 sets forth a list of each Designated
Contract to which the Company is a party or by which its properties and assets
are bound, true and correct copies of which have been provided to Parent. Except
as noted in Schedule 4.22, the Company has not violated any of the terms or
conditions of any Designated Contract or any term or condition which would
permit termination or material modification of any Designated Contract, and the
Company has not received any claim for breach or indemnification or notice of
default or termination under any Designated Contract. No event has occurred
which constitutes, or after notice or the passage of time, or both, would
constitute, a default by the Company under any Designated Contract, and to the
Company's Knowledge, no such event has occurred which constitutes or would
constitute a material default by any other party. As used in this Section,
"Designated Contracts" shall include, without limitation, (a) loan agreements,
indentures, mortgages, pledges, hypothecations, deeds of trust, conditional sale
or title retention agreements, security agreements, equipment financing
obligations or guaranties, or other sources of contingent liability in respect
of any indebtedness or obligations to any other Person, or letters of intent or
commitment letters with respect to same; (b) contracts obligating the Company to
purchase or sell products or services; (c) leases of real property, and leases
of personal property not cancelable without penalty on notice of 30 days or less
or calling for payment of an annual gross rental exceeding $10,000.00 in any one
case; (d) distribution, sales agency or franchise or similar agreements, or
agreements providing for an independent contractor's services, or letters of
intent with respect to same; (e) employment agreements, management service
agreements, consulting agreements, confidentiality agreements, noncompetition
agreements and any other agreements relating to any employee, officer or
director of the Company; (f) licenses, assignments or transfers of Intellectual
Property, or other agreements regarding proprietary rights or intellectual
property; (g) any Contract relating to pending capital expenditures by the
Company; and (h) other material Contracts or understandings, irrespective of
subject matter and whether or not in writing, not entered into in the ordinary
course of business by the Company and not otherwise disclosed on the Schedules
attached hereto.
4.23 Restrictions. Schedule 4.23 sets forth a list of all
non-competition, non-solicitation, confidentiality and other restrictive
covenants to which the Company, its officers, directors, employees or managers
is a party or otherwise bound. Except as set forth on Schedule 4.23, neither the
Company nor any of its officers, directors, managers is a party to any Contract
which would in any way limit or restrict the rights of Parent, Parent's
Affiliates or the Surviving Corporation from engaging in any business anywhere
in the world.
4.24 Accuracy of Information Furnished by the Company. No
representation contained in this Article IV contains, and the certificate
referred to in Section 7.1 when delivered will not contain, any untrue statement
of a material fact or omits (or in the case of such certificate, will omit) to
state a material fact necessary to make the statements contained therein not
misleading.
4.25 No Commissions. None of the Company or its Affiliates has
incurred any obligation for any finder's or broker's or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby.
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE CLOSING
5.1 Conduct of Business Pending the Closing. Except pursuant to
commitments disclosed in, or permitted or contemplated by this Agreement, the
Company covenants and agrees that, between the date of this Agreement and the
Closing Date, the business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of business,
consistent with past practice and in compliance with all Laws. By way of
amplification and not limitation, except pursuant to commitments disclosed in,
or permitted or contemplated by this Agreement, the Company shall not, between
the date of this Agreement and the Closing Date, directly or indirectly, do or
propose or agree to do any of the following without the prior written consent of
Parent:
(a) amend or otherwise change its Certificate of
Incorporation or By-Laws;
(b) issue, sell, pledge, dispose of, encumber, or, authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares
of its capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such capital
stock, or any other ownership interest, thereof, or (ii) any of its assets,
tangible or intangible, except in the ordinary course of business consistent
with past practice;
(c) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, for cash or
shares of stock, by merger, consolidation, or acquisition of stock or assets)
any interest in any corporation, partnership or other business organization or
division thereof or any assets, or make any investment either by purchase of
stock or securities, contributions of capital or property transfer, or, except
in the ordinary course of business, consistent with past practice, purchase any
property or assets of any other Person, (ii) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse or otherwise
as an accommodation become responsible for, the obligations of any Person, or
make any loans or advances, or (iii) enter into any Contract other than in the
ordinary course of business, consistent with past practice;
(f) make any capital expenditure in excess of $10,000 or
enter into any contract or commitment therefore;
(g) amend, terminate or extend any Contract;
(h) sell, lease (as lessor), transfer or otherwise dispose of,
or mortgage or pledge, or impose or suffer to be imposed any Lien on, any of the
Company's Assets, other than inventory and minor amounts of personal property
sold or otherwise disposed of for fair value in the ordinary course of business
consistent with past practice;
20
(i) delay or accelerate payment of any account payable or
other liability of the Company beyond or in advance of its due date or the date
when such liability would have been paid in the ordinary course of business
consistent with past practice;
(j) increase the compensation payable or to become payable to
its respective officers or directors, or, except as presently bound to do, grant
any severance or termination pay to, or enter into any employment or severance
agreement with, any of its respective directors or officers, or establish,
adopt, enter into or amend or take any action to accelerate any rights or
benefits under any collective bargaining, bonus, profit sharing, trust,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors, officers or
employees;
(k) sell, lease (as lessor), transfer or otherwise dispose of,
or mortgage or pledge, or impose or suffer to be imposed any Lien on any of the
Company's Assets, other than inventory and minor amounts of personal property
sold or otherwise disposed of for fair value in the ordinary course of business
consistent with past practice;
(l) increase or decrease prices charged to its
respective customers, except for previously announced price changes or except in
the ordinary course of business; or
(m) agree, in writing or otherwise, to take or authorize any
of the foregoing actions or any action which would make any representation or
warranty contained in Article IV untrue or incorrect.
5.2 Investigation of the Company by Parent. The Company shall afford to
the officers, employees and authorized representatives of Parent (including,
without limitation, independent public accountants and attorneys) complete
access during normal business hours to the offices, properties, employees and
business and financial records (including computer files, retrieval programs and
similar documentation) of the Company prior to the Closing Date to the extent
Parent shall deem necessary or desirable and shall furnish to Parent or its
authorized representatives such additional information concerning the Company as
shall be reasonably requested. Parent agrees that such investigation shall be
conducted in such a manner as not to interfere unreasonably with the operations
of the Company. No investigation made by Parent or its representatives hereunder
shall affect the representations and warranties of the Company hereunder.
5.3 Cancellation and Termination of Obligations. Prior to the
Closing Date, the Company shall take the following actions:
(a) Stockholder Obligations. The Company shall cause
each of the entities listed in Schedule 5.3 to enter into a form of Creditor
Waiver and Consent Agreement in form and substance satisfactory to Parent.
(b) Employment Agreements. ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall enter
into an employment agreement with Company in form and substance satisfactory to
Parent.
21
(c) Creditor Agreements. Entry by the Company into payment
agreements calling for amortization of outstanding past due obligations to the
Company, plus a market rate of interest (without equity participation) on the
following period (or longer) for each of the following creditors:
(i) Nortel Networks - 5 years; and
(ii) Video At Home - 3 years.
(d) ▇▇▇▇▇▇ Bank Loan. The Company shall have obtained from
▇▇▇▇▇▇ Trust and Savings Bank at its office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, a consent to the Merger and a commitment that it will extend and
maintain a loan to the Company with a principal amount of not less than the
principal balance outstanding as of the date of this Agreement (subject to
Company's maintaining on a current basis all interest obligations from time to
time) for an additional twelve months following the Closing Date.
5.4 Pre-Clear Merger. Parent, Mergeco and the Company shall take all
necessary steps to pre clear the Merger with the Secretary of State of the State
of Delaware, in order that on the Closing Date, the Certificate of Merger may be
filed with the Secretary of State of the State of Delaware and become effective
upon filing.
5.5 Notification of Certain Matters. The Company, on the one hand, and
Parent, on the other, shall give prompt notice to the other of the occurrence or
non occurrence of any event which would likely cause any representation or
warranty contained herein to be untrue or inaccurate, or any covenant,
condition, or agreement contained herein not to be complied with or satisfied.
5.6 Approval of Merger. The Company shall take all actions necessary,
in accordance with the DGCL and its Certificate of Incorporation and By-Laws, to
duly call, give notice of, convene, and hold a meeting of its Stockholders as
promptly as practicable, or obtain the necessary written shareholder consent (to
be followed by the necessary form of information statement) to consider and vote
upon the adoption and approval of the Merger and this Agreement, to the extent
approval is required by the Stockholders. The Company shall recommend to the
Stockholders that they vote their Target Shares in favor of the Merger and
approval of the Agreement. The Company shall obtain the prior approval of Parent
as to the form and content of the notice and any additional material to be
provided to the holders of the Target Shares in connection with such meeting or
solicitations of written consents.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
6.2 Confidentiality; Publicity. Except as may be required by law
or as otherwise permitted or expressly contemplated herein, prior to the
Closing, no party hereto or their
22
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement or the subject matter or terms hereof without the
prior consent of the other parties hereto. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by any party hereto without the prior approval of the other
parties, except that Parent may make such public disclosure which Parent
believes in good faith is required by law or by the terms of any listing
agreement with or requirements of a securities exchange.
6.3 No Other Discussions. None of the Company, its directors, officers,
principal stockholders, and their respective Affiliates, employees, agents or
representatives shall (i) initiate or encourage the initiation by others of
discussions or negotiations with third parties or respond to solicitations by
third persons relating to any merger, sale or other disposition of any
substantial part of the assets, business or properties of the Company (whether
by merger, consolidation, sale of stock or otherwise) or (ii) enter into any
agreement or commitment (whether or not binding) with respect to any of the
foregoing transactions. The Company will immediately notify Parent if any third
party attempts to initiate any solicitation, discussion or negotiation with
respect to any of the foregoing transactions.
6.4 Transfer Taxes. Any Taxes solely relating to the transfer and
conveyance of the Target Shares from the Stockholders to Parent pursuant to the
Merger (including documentary stamps or transfer taxes) shall be paid by the
Stockholders.
6.5 Tax-Free Reorganization. The parties to this Agreement intend the
Merger to qualify as a tax-free organization pursuant to Section 368(a) of the
Code and shall not take any positions inconsistent therewith unless required to
do so by law.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGECO
The obligations of Parent and Mergeco to effect the Merger and the
other transaction contemplated hereby shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions, any or all of which may
be waived in whole or in part by Parent:
7.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the Company contained in
Article IV of this Agreement shall be true and correct at and as of the Closing
Date with the same force and effect as though made at and as of that time except
(i) for changes specifically permitted by or disclosed in this Agreement, and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date. The Company
shall have performed and complied with all of its obligations required by this
Agreement to be performed or complied with at or prior to the Closing Date. The
Company shall have delivered to Parent a certificate, dated as of the Closing
Date, duly signed (in the case of the Company by its chief executive officer),
stating that such representations and warranties are true and correct and that
all such obligations have been performed and complied with.
23
7.2 Consents. The Company shall have received the consents and
approvals, in form and substance reasonably satisfactory to Parent, to the
transactions contemplated hereby from the Persons specified in Schedule 4.4.
7.3 Secretary's Certificate. The Company shall have delivered to Parent
(i) copies of the Certificate of Incorporation and By-Laws of the Company since
a specified date; (ii) copies of resolutions adopted by the Board of Directors
of the Company and the Stockholders authorizing the transactions contemplated by
this Agreement, and (iii) certificates of good standing of the Company issued by
the State of Delaware, certified in each case as of the Closing Date by the
Secretary as being true, correct and complete.
7.4 No Adverse Litigation. There shall not be pending or threatened any
action or proceeding by or before any court or other Governmental Authority
which shall seek to restrain, prohibit, invalidate or collect damages arising
out of the Agreement or any other transaction contemplated hereby, and which, in
the judgment of Parent, makes it inadvisable to proceed with the Agreement and
other transactions contemplated hereby, including any action pending or
threatened by any Stockholder or creditor of the Company seeking to block the
Merger.
7.5 No Material Adverse Change. At any time after the date of this
Agreement, there must not have occurred any Material Adverse Change (as
hereafter defined) relating to the Company. "Material Adverse Change" shall mean
any change, effect, event, occurrence or state of facts that is, or would
reasonably be expected to be, materially adverse to the business, financial
condition or results of operations of the Company other than any change, effect,
event or occurrence relating to the economy or securities markets of the United
States.
7.6 Other Closing Deliveries. At Closing, Parent shall have
received:
(a) Each of the Persons listed on Schedule 7.6 shall have
executed and delivered an Employment Agreement and/or non-compete and
confidentiality agreement in form and substance reasonably satisfactory to the
Company;
(b) resignations effective as of the Closing Date from
such officers and directors of the Company as Parent shall have requested in
writing; and
(c) the stock books, stock ledgers, minute books,
corporate seal and other books and records of the Company.
7.7 Appraisal Rights. There shall not be any existing Stockholder or
holder of any option, warrant or other security of the Company exercising
appraisal rights or claiming entitlement to equity in the Surviving Corporation
or Parent greater than that contemplated by this Agreement.
7.8 Due Diligence. Parent shall have completed its due diligence
investigation and the results of such investigation shall be satisfactory to
Parent, in its sole discretion.
24
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY
The obligations of the Company to effect the Merger and the other
transaction contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions, any or all of which may be
waived in whole or in part by the Company:
8.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of Parent and Mergeco contained
in this Agreement shall be true and correct at and as of the Closing Date with
the same force and effect as though made at and as of that time except (i) for
changes specifically permitted by or disclosed pursuant to this Agreement, and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date. Parent and
Mergeco shall have performed and complied with all of their respective
obligations required by this Agreement to be performed or complied with at or
prior to the Closing Date. Parent and Mergeco shall have delivered to the
Stockholder a certificate, dated as of the Closing Date, and signed by an
executive officer, certifying that such representations and warranties are true
and correct and that all such obligations have been performed and complied with.
8.2 No Adverse Litigation. There shall not be pending or threatened any
action or proceeding by or before any court or other Governmental Authority
which shall seek to restrain, prohibit, invalidate or collect damages arising
out of the Agreement or any of the transactions contemplated hereby, and which
in the judgment of the Stockholder makes it inadvisable to proceed with the
Agreement or any other transaction contemplated hereby.
8.3 Secretary's Certificate. The Parent shall have delivered to the
Stockholders (i) copies of the Articles of Incorporation and By-Laws of Parent
and Mergeco since a specified date, (ii) copies of resolutions adopted by the
Board of Directors of the Parent and Mergeco authorizing the transactions
contemplated by this Agreement, and (iii) certificate of good standing of the
Parent and Mergeco issued by the States of Florida and Delaware, respectively,
certified in each case as of the Closing Date by the Secretary as being true,
correct and complete.
8.4 Other Closing Deliveries. At Closing, the Company shall have
received each Parent Ancillary Document and Mergeco Ancillary Agreement, duly
executed by Parent, Mergeco and/or its Affiliates, as the case may be.
ARTICLE IX
DEFINITIONS
9.1 Defined Terms. As used herein, the following terms shall
have the following meanings:
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under control with such
Person.
25
"Assets" means all of machinery, equipment, inventory, supplies,
property and other assets of the Company, except the Leased Assets, whether
real, personal or mixed, tangible or intangible, and wherever located, including
the Owned Real Property.
"Closing" shall have the meaning as set forth in Section 1.10.
"Closing Date" shall have the meaning as set forth in Section 1.10.
"Code" shall have the meaning as set forth in Section 4.19.
"Company Ancillary Documents" all agreements, instruments and
documents, being or to be executed and delivered by the Company under this
Agreement or in connection herewith.
"Company's Knowledge," or words to that effect as used herein refer to
the personal actual knowledge of the Stockholders and Principals, and to the
knowledge which they should have had after a reasonable investigation.
"Contract" means any indenture, lease, sublease, license, loan
agreement, mortgage, note, indenture, restriction, will, trust, commitment,
obligation or other contract, agreement or instrument, whether written or oral.
"Current Balance Sheet" shall have the meaning as set forth in Section
4.7.
"Designated Contracts" shall have the meaning as set forth in Section
4.22.
"DGCL" shall have the meaning as set forth in Section 1.1.
"Dissenting Stockholder" means any holder of capital stock of the
Company who, as a result of the transaction contemplated hereby, perfects his,
her or its demand for appraisal rights in accordance with Section 262(a) and (d)
of the DGCL.
"Dissenting Target Shares" shall have the meaning as set forth in
Section 1.9(a).
"Effective Date" shall have the meaning as set forth in Section 1.2.
"Effective Time" shall have the meaning as set forth in Section 1.2.
"Employee Benefit Plans" shall have the meaning as set forth in Section
4.21(a).
"Environmental Law" means all laws, statutes, regulations, rules, codes
or ordinances derived from or relating to all federal, state and local laws or
regulations relating to or addressing the environmental, health or safety,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et seq. (hereinafter
collectively "CERCLA"); the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and subsequent Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. Section 6901 et seq. ("▇▇▇▇") (hereinafter,
collectively "RCRA"), the Hazardous Materials Transportation Act, as amended, 49
U.S.C. Section 1801, et seq.; the Clean
26
Water Act, as amended, 33 U.S.C. Section 1311, et seq.; the Clean Air Act, as
amended (42 U.S.C. Section 7401-7642); Toxic Substances Control Act, as amended,
15 U.S. C. Section 2601 et seq.; the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended, 7 U.S.C. Section 136-136y ("FIFRA"); the Emergency
Planning and Community Right-to-Know Act of 1986, as amended, 42 U.S.C. Section
11001, et seq. (Title III of ▇▇▇▇) ("EPCRA"); the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. Section 651, et seq. ("OSHA").
"Environmental Lien" means a Lien in favor of any Governmental
Authority for (i) any liability under any Environmental Law, or (ii) damages
arising from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Hazardous Substance into the environment.
"Equipment Lease" shall have the meaning as set forth in Section 4.13.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expenses" means any and all expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including, without
limitation, court filing fees, court costs, arbitration fees or costs, witness
fees, and reasonable fees and disbursements of legal counsel, investigators,
expert witnesses, consultants, accountants and other professionals).
"Financial Statements" shall have the meaning as set forth in Section
4.7.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substances" means any substance, chemical or waste that is
listed, or contains material amounts of one or more components that are defined,
designated, classified, considered or listed, as hazardous, toxic or radioactive
under any Environmental Law; as well as any asbestos or asbestos-containing
material, petroleum, petroleum product or by-product, crude oil or any fraction
thereof, natural gas, natural gas liquids, liquefied natural gas, synthetic gas
usable as fuel, or polychlorinated biphenyls ("PCBs").
"Intellectual Property" means (i) all names, brands, logos and slogans
embodying business or product goodwill or indications of origin, and all
trademarks, corporate names, trade names, service marks, trade dress, domain
names and universal resource locators, together with all translations,
adaptations, derivations and combinations thereof and all applications,
registrations and renewals in connection therewith, and all of the goodwill
associated therewith; (ii) all patents, patent applications, patent disclosures,
inventions (whether patentable or unpatentable and whether or not reduced to
practice) and all improvements thereof, including, but not limited to, any
provisional, utility, continuation, continuation-in-part or divisional
27
applications filed in the U.S. or other jurisdictions and all reissues,
revisions and extensions thereof and all reexamination certificates issuing
therefrom; (iii) all websites, copyrights, and copyrightable works both
published and unpublished, including all registrations, applications and
renewals in connection therewith; (iv) all computer and electronic data
processing programs and software programs (in both source code and object code
form), data, databases and related documentation; (v) all inventions,
improvements, developments, modifications, derivative works, know-how, trade
secrets, and confidential information (including research and development,
know-how formulas, compositions, manufacturing and production processes and
techniques, methods, schematics, technology, technical data, designs, drawings,
flowcharts, block diagrams, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals); (vi) all
licenses, sublicenses, permissions and other agreements relating to any of the
foregoing; and (vii) all other intellectual property rights (in whatever form or
medium) relating to any of the foregoing (including remedies and recoveries
against infringement hereof and rights of protection of interest therein under
the laws of all jurisdictions).
"Junior Preferred" shall have the meaning as set forth in Section 1.4.
"Leased Assets" collectively refers to the machinery, equipment and
other personal property the Company leases to carry on its operations as set
forth on Schedule 4.13, and the Leased Real Properties.
"Leased Real Properties" shall have the meaning as set forth in Section
4.11(b).
"Leases" shall have the meaning as set forth in Section 4.11(b).
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, but not limited to, any conditional sale or
other title retention agreement, any lease in the nature thereof, and the filing
of or agreement to give any financing statement under the Uniform Commercial
Code or comparable law or any jurisdiction in connection with such mortgage,
pledge, security interest, encumbrance, lien or charge).
"Losses" means any loss, cost, obligation, liability, settlement
payment, award, judgment, fine, penalty, damage, expense, deficiency or other
charge, but not including Expenses.
"Material Adverse Effect" shall have the meaning as set forth in
Section 4.1.
"Mergeco Ancillary Agreements" means all agreements, instruments and
documents being or to be executed and delivered by Mergeco under this Agreement
or in connection herewith.
"Merger" shall have the meaning as set forth in the Recitals.
"MPPA Plan" shall have the meaning as set forth in Section 4.21(d).
"Owned Intellectual Property" shall have the meaning as set forth in
Section 4.14(a).
"Owned Real Properties" shall have the meaning as set forth in Section
4.11(a).
28
"Parent Ancillary Documents" means all agreements, instruments and
documents being or to be executed and delivered by Parent under this Agreement
or in connection herewith.
"Parent Common Stock" shall have the meaning as set forth in Paragraph
A of the Recitals.
"PBGC" shall have the meaning as set forth in Section 4.21(f).
"Permitted Lien" means (i) liens for taxes and other governmental
charges and assessments which are not yet due and payable, (ii) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and
other like liens arising in the ordinary course of business for sums not yet due
and payable and (iii) other liens or imperfections on property which are not
material in amount and do not materially detract from the value of or materially
impair the existing use of the property affected by such lien or imperfection.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, estate, trust, unincorporated association, joint venture,
Governmental Authority or other entity, of whatever nature.
"Property" means any real or personal property, plant, building,
facility, structure, underground storage tank, equipment or unit, or other asset
owned, leased or operated by the Company prior to the Closing Date (including
any surface water thereon or adjacent thereto, and soil or groundwater
thereunder).
"Real Properties" shall have the meaning as set forth in Section
4.11(c).
"Release" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of a Hazardous
Substance into the indoor or outdoor environment or into or out of any Property,
including the movement of Hazardous Substances through or in the air, soil,
surface water, groundwater or Property.
"Remedial Action" means actions required to (i) clean up, remove, treat
or in any other way address Hazardous Substances in the indoor or outdoor
environment; (ii) prevent the Release or threatened Release or minimize the
further Release of Hazardous Substances; or (iii) investigate and determine if a
remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Preferred" shall have the meaning as set forth in Section 1.4.
"Series A Preferred" shall have the meaning as set forth in Section
1.4.
"Stockholders" collectively refers to all of the holders of the Target
Shares.
"Surviving Corporation" shall have the meaning as set forth in Section
1.1.
29
"Target Common Shares" means the issued and outstanding shares of the
Company's common stock, par value $.001 per share.
"Target Preferred Shares" collectively refers to the issued and
outstanding shares of Senior Preferred, Junior Preferred, and Series A
Preferred.
"Target Shares" shall have the meaning as set forth in Paragraph A of
the Recitals.
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes.
"Taxes" means all taxes, fees or other assessments, including, but not
limited to, income, excise, property, sales, franchise, intangible, withholding,
social security and unemployment taxes imposed by any federal, state, local or
foreign governmental agency, and any interest or penalties related thereto.
"Third Party Intellectual Property" shall have the meaning as set forth
in Section 4.14(b).
"Welfare Plan" shall have the meaning as set forth in Section 4.21(e).
9.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificates, reports or other documents made or
delivered pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with
this Agreement and the transactions contemplated hereby shall be determined in
accordance with GAAP applied on a basis consistent with prior periods, where
applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the neuter
and feminine, where the context so permits.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. Notwithstanding any approval of the Merger or this
Agreement by the Stockholders and/or directors of the Company or Parent, this
Agreement may be terminated as follows:
(a) at any time prior to the Closing Date, by mutual written
consent of Parent and the Company at any time prior to the Closing;
30
(b) at any time prior to the Closing Date, by Parent in the
event of a material breach by the Company of any provision of this Agreement, by
giving notice thereof to the Company specifying in reasonable detail the
material breach;
(c) at any time prior to the Closing Date, by the Company in
the event of a material breach by Parent or Mergeco of any provision of this
Agreement, by giving notice thereof to Parent specifying in reasonable detail
the material breach; or
(d) at any time prior to the Closing Date, by any of Parent or
the Company if the Closing shall not have occurred by November 30, 2004;
provided, however, that neither Parent, nor the Company shall be entitled to
terminate this Agreement pursuant to this Section 12.1(d), if such party's
knowing or willful breach of this Agreement has prevented the consummation of
the transactions contemplated hereby.
10.2 Effect of Termination. Except as a party may otherwise agree in
writing, the termination of this Agreement by a party pursuant to this Section
will not be deemed to be a waiver of any rights of such party or its Affiliates
who are parties to this Agreement arising from any default thereunder by another
party.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered (which
delivery may be by contract carrier, receipt acknowledged, or by telecopy or
other electronic transmission) to a party at the following address or telecopy
number for such party (or to such other address or telecopy number which such
party shall designate in writing to the other party):
(a) if to Parent to:
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company prior to the Effective Date:
31
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Law Offices ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Company after the Effective Date:
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ -- ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Law Offices ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11.2 Counsel. No inference shall be drawn in favor or against any party
by virtue of who has served as principal draftsman of this document. The parties
acknowledge and agree that ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Ltd. ("S&F") has served as counsel
for Parent and Mergeco in connection with matters related to the drafting of
this Agreement, including the formation of Mergeco. The parties further
acknowledge that S&F has not provided legal advice to or acted as counsel for
the Company, which has relied upon the advice of independent counsel. All
parties consent to S&F's further representation of Parent following the Closing
of the Merger.
11.3 Entire Agreement. This Agreement (including the Exhibits and
Schedules attached hereto) contains the entire understanding of the parties in
respect of its subject matter and supersedes all prior agreements and
understandings (oral or written) between or among the parties with respect to
such subject matter. The Exhibits and Schedules constitute a part hereof as
though set forth in full above.
32
11.4 Expenses. Except as otherwise provided herein, the parties shall
pay their own fees and expenses, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby.
11.5 Amendment; Waiver. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts.
11.6 Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors, heirs and assigns. Nothing expressed or implied herein
shall be construed to give any other person any legal or equitable rights
hereunder.
11.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
11.8 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." Time shall be of the
essence in this Agreement.
11.9 Governing Law; Interpretation. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of
Illinois applicable to contracts executed and to be wholly performed within such
State, except that with respect to the effects of the Merger, the applicable
provisions of the DGCL shall also apply.
11.10 Arm's Length Negotiations. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
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11.11 Survival of Obligations; No Stockholder Liability. All
representations and warranties contained in this Agreement shall terminate as of
the Closing Date and not survive the Closing. All covenants and obligations
contained in this Agreement to be fully performed or complied with at or prior
to Closing shall not survive Closing. All covenants and obligations contained in
this Agreement to be performed or complied with after shall survive for the
periods specified therein, or if no such period is specified, indefinitely. The
Stockholders shall not have any liability for any breach or inaccuracy of any
representations or warranties set forth herein or the breach by the Company of
any of its covenants and obligations contained in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
CAPITAL GROWTH SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Secretary, Treasurer and Chief Technology
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Officer
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FRONTRUNNER ACQUISITION, INC.
By: /s/ D. Skip ▇▇▇▇
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Name: D. Skip ▇▇▇▇
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Title: Secretary and Treasurer
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FRONTRUNNER NETWORK SYSTEMS, CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: President
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35