INDEX TO EXHIBITS
Exhibit Number
2.1
AGREEMENT AND PLAN OF MERGER
among:
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
a Delaware corporation;
▇▇▇▇▇▇▇▇▇▇.▇▇▇ MERGER THREE CORP.,
a Delaware corporation;
PINNACLE MEDSOURCE, INC.,
a Georgia corporation;
and
the Selling Stockholders of Pinnacle MedSource, Inc.
listed on Exhibit A hereto
Dated as of May 3, 2000
TABLE OF CONTENTS
Page
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SECTION 1 - DESCRIPTION OF TRANSACTION 1
1.1 Merger of Pinnacle into Merger Sub 1
1.2 Effect of the Merger 1
1.3 Closing; Effective Time 1
1.4 Certificate of Incorporation, Bylaws and Directors and Officers 2
1.5 Conversion of Pinnacle Stock 2
1.6 Additional Consideration 3
1.7 Closing of Pinnacle's Transfer Books 3
1.8 Exchange of Certificates 3
1.9 Dissenting Shares 4
1.10 Tax Consequences 5
1.11 Accounting Treatment 5
1.12 Further Action 5
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF
PINNACLE AND THE SELLING STOCKHOLDERS 5
2.1 Organization, Good Standing and Qualification 5
2.2 Subsidiaries 6
2.3 Capitalization; Voting Rights 6
2.4 Authorization; Binding Obligations 6
2.5 Financial Statements 6
2.6 Liabilities 6
2.7 Agreements; Action 7
2.8 Obligations to Related Parties 7
2.9 Absence of Changes 7
2.10 Title to Properties and Assets; Liens, Etc. 8
2.11 Patents and Trademarks 9
2.12 Compliance with Other Instruments 9
2.13 Litigation 10
2.14 Tax Returns and Payments 10
2.15 Employees 11
2.16 Registration Rights 11
2.17 Compliance with Legal Requirements; Consents 11
2.18 Selling Stockholders 12
2.19 Full Disclosure 12
2.20 Securities Laws Matters 13
2.21 Brokers 13
2.22 Debt 14
2.23 Hazardous Substances 14
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF NETIVATION 14
3.1 Organization, Good Standing and Qualification 14
3.2 Subsidiaries 14
3.3 Capitalization; Voting Rights 15
3.4 Authorization; Binding Obligations 15
3.5 Full Disclosure 15
3.6 Litigation 16
3.7 Compliance with other Instruments 16
3.8 Consents 16
3.9 Brokers 16
SECTION 4 - CERTAIN COVENANTS OF PINNACLE AND THE SELLING STOCKHOLDERS 17
4.1 Access and Investigation 17
4.2 Operation of Business 17
4.3 No Negotiation 19
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SECTION 5 - ADDITIONAL COVENANTS OF THE PARTIES 19
5.1 Notification; Opportunity to Cure 19
5.2 Filings and Consents 20
5.3 Public Announcements 21
5.4 Best Efforts 21
5.5 Tax Matters 21
5.6 No Solicitation 21
5.7 Fairness Hearing 21
SECTION 6 - CONDITIONS PRECEDENT TO OBLIGATIONS
OF NETIVATION AND MERGER SUB 22
6.1 Accuracy of Representations 22
6.2 Performance of Covenants 22
6.3 Consents 22
6.4 No Material Adverse Change 22
6.5 Agreements and Documents 22
6.6 No Restraints 23
6.7 Securities Law Compliance 23
6.8 Unaccredited Investors 23
6.9 Corporate Approvals 23
6.10 Lock-Up Agreements 23
SECTION 7 - CONDITIONS PRECEDENT TO OBLIGATIONS
OF PINNACLE AND THE SELLING STOCKHOLDERS 24
7.1 Accuracy of Representations 24
7.2 Performance of Covenants 24
7.3 Consents 24
7.4 Agreements and Documents 24
7.5 No Restraints 25
7.6 Corporate Approvals 25
7.7 No Material Adverse Change 25
SECTION 8 - TERMINATION 25
8.1 Termination Events 25
8.2 Termination Procedures 26
8.3 Effect of Termination 26
SECTION 9 - INDEMNIFICATION, ETC. 27
9.1 Survival of Representations, Warranties and Covenants 27
9.2 Indemnification by the Selling Stockholders 28
9.3 Indemnification by Netivation 28
9.4 Minimum Claim Against the Selling Stockholders 29
9.5 Minimum Claim Against Netivation 29
9.6 Defense of Third Party Claims 29
9.7 Indemnity Reserve 30
9.8 Exclusive Remedy 30
SECTION 10 - MISCELLANEOUS PROVISIONS 30
10.1 Selling Stockholders' Agent 30
10.2 Further Assurances 32
10.3 Fees and Expenses 32
10.4 Attorneys' Fees 32
10.5 Notices 33
10.6 Headings 33
10.7 Counterparts 34
10.8 Governing Law 34
10.9 Successors and Assigns 34
10.10 Remedies Cumulative; Specific Performance 34
10.11 Waiver 34
ii
10.12 Amendments 35
10.13 Time of the Essence 35
10.14 Severability 35
10.15 Parties in Interest 35
10.16 Entire Agreement 35
10.17 Construction 35
iii
EXHIBITS
Exhibit A - Selling Stockholders
Exhibit B - Certain Definitions
Exhibit C - Director and Officer of Surviving Corporation
Exhibit D - Allocation of Merger Consideration
Exhibit E - Form of Legal Opinion
Exhibit F - Form of Employment and Noncompetition Agreement
Exhibit G - Form of Escrow Agreement
Exhibit H - Form of Prospective Offeree Questionnaire
Exhibit I - Form of Lock-Up Agreement
iv
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and entered
into as of May 3, 2000, by and among: ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., a Delaware
corporation ("Netivation"), ▇▇▇▇▇▇▇▇▇▇.▇▇▇ MERGER THREE CORP., a Delaware
corporation and a wholly-owned subsidiary of Netivation ("Merger Sub"), PINNACLE
MEDSOURCE, INC., a Georgia corporation ("Pinnacle"), and the stockholders of
Pinnacle set forth on Exhibit A hereto (the "Selling Stockholders"). Certain
capitalized terms used in this Agreement are defined in Exhibit B.
RECITALS
A. The parties intend to effect a merger of Pinnacle into Merger Sub
in accordance with this Agreement and the Delaware General Corporation Law
("Delaware Law") and the Georgia Business Corporation Code ("Georgia Law") (the
"Merger"). Upon consummation of the Merger, Pinnacle will cease to exist, and
Merger Sub will remain a wholly-owned subsidiary of Netivation.
B. The Selling Stockholders own an aggregate of 857 shares of
capital stock of Pinnacle (the "Pinnacle Stock"), constituting 100% of the
Pinnacle capital stock on a fully-diluted basis.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1 - DESCRIPTION OF TRANSACTION
1.1 Merger of Pinnacle into Merger Sub . Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as defined
in Section 1.3), Pinnacle shall be merged with and into Merger Sub, and the
separate existence of Pinnacle shall cease. Merger Sub will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 Effect of the Merger . The Merger shall have the effects set
forth in this Agreement and in the applicable provisions of Delaware Law and
Georgia Law.
1.3 Closing; Effective Time . The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, Rock & Fields, Chartered, ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ within two (2) business days following the
fulfillment of the covenants set forth in Section 5.7, or at such other time as
the parties may agree (the "Scheduled Closing Time"). (The date on which the
Closing actually takes place is referred to in this Agreement as the "Closing
Date.") Contemporaneously with or as promptly as practicable after the Closing,
a properly executed certificate of merger (the "Certificate of Merger"),
conforming to the requirements of Delaware Law, and properly executed articles
of merger (the "Articles of Merger"), conforming to the requirements of Georgia
Law, shall be filed with the Secretary of State of the State of Delaware and the
State of Georgia, respectively. The Merger shall become effective at the time
such Certificate of Merger and Articles of Merger are filed with and accepted by
the Secretary of State of the State of Delaware and the State of Georgia,
respectively, (the "Effective Time").
1.4 Certificate of Incorporation, Bylaws and Directors and Officers.
(a) The certificate of incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended as provided
by law; provided, however, that Article I of the certificate of incorporation of
the Surviving Corporation shall be amended to read as follows: "The name of this
corporation is "Pinnacle MedSource, Inc."
(b) The bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended.
(c) The directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
Exhibit C.
1.5 Conversion of Pinnacle Stock .
(a) Subject to Sections 1.8(c) and 1.9, at the Effective Time,
by virtue of the Merger and without any further action on the part of
Netivation, Merger Sub, Pinnacle or any stockholder of Pinnacle, each share of
Common Stock of Pinnacle issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive Four Hundred
Seventy-One and 41/100 (471.41) fully paid and nonassessable shares of Common
Stock of Netivation (the "Netivation Stock"). All outstanding shares of Pinnacle
capital stock shall be exchanged for no more than Four Hundred Four Thousand
(404,000) shares of Netivation Stock. The number of shares of the Netivation
Stock to be received by each Selling Stockholder is set forth on Exhibit D.
If, between the date of this Agreement and the Closing Date, the shares of
capital stock of Pinnacle or the Netivation Stock are changed into a different
number or class of shares by reason of any stock dividend, subdivision,
reclassification, recapitalization, split-up, combination or similar
transaction, the number of shares of the Netivation Stock pursuant to this
Section 1.5(a) shall be appropriately adjusted.
(b) If any shares of capital stock of Pinnacle outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with Pinnacle, then the
shares of Netivation Stock issued in exchange for such shares of capital stock
of Pinnacle will also be unvested and subject to the same repurchase option,
risk of forfeiture or other condition, and the certificates representing such
shares of Netivation Stock may be accordingly marked with appropriate legends.
1.6 Additional Consideration . At Closing, Netivation shall pay
Three Hundred Thousand Dollars ($300,000) cash to the Selling Stockholders in
proportion to each Selling Stockholder's interest in Pinnacle immediately prior
to Closing. Such amount shall be made when due by wire transfer of immediately
available funds to such bank account(s) as shall be designated by the Selling
Stockholders at least three (3) business days prior to the date of such payment.
1.7 Closing of Pinnacle's Transfer Books . At the Effective Time,
holders of certificates representing Pinnacle capital stock that were
outstanding immediately prior to the Effective Time shall cease to have any
rights as stockholders of Pinnacle, and the stock transfer books of Pinnacle
shall be closed with respect to all shares of such capital stock outstanding
immediately prior to the Effective Time. No further transfer of any such capital
stock of Pinnacle shall be made on such stock transfer books after the Effective
Time. If, after the Effective Time, a valid certificate previously representing
any of such capital stock of Pinnacle (a "Pinnacle Stock Certificate") is
presented to the Surviving Corporation or Netivation, such Pinnacle Stock
Certificate shall be canceled and shall be exchanged as provided in Section 1.8.
1.8 Exchange of Certificates .
(a) At or as soon as practicable after the Effective Time,
Netivation will send to each holder of a Pinnacle Stock Certificate a letter of
transmittal and instructions for use in customary form and containing such
provisions as may reasonably be required for use in effecting the surrender of
such Pinnacle Stock Certificate for payment therefor and conversion thereof.
Upon surrender of a Pinnacle Stock Certificate to Netivation for exchange,
together with a duly executed letter of transmittal and such other documents as
may be reasonably required by Netivation, the holder of such Pinnacle Stock
Certificate shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Netivation Stock that such holder has
the right to receive pursuant to the provisions of this Section 1 and the
Pinnacle Stock Certificate so surrendered shall be canceled. Until surrendered
as contemplated by this Section 1.8, each Pinnacle Stock Certificate shall be
deemed, from and after the Effective Time, to represent only the right to
receive upon such surrender a certificate representing shares of Netivation
Stock (and cash in lieu of any fractional share of Netivation Stock) as
contemplated by this Section 1. If any Pinnacle Stock Certificate shall have
been lost, stolen or destroyed, Netivation may, in its discretion and as a
condition precedent to the issuance of any certificates representing Netivation
Stock, require the owner of such lost, stolen or destroyed Pinnacle Stock
Certificate to provide an appropriate affidavit.
(b) No dividends or other distributions declared or made with
respect to Netivation Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Pinnacle Stock Certificate with respect
to the shares of Netivation Stock represented thereby, and no cash payment in
lieu of any fractional share shall be paid to any such holder, until such holder
surrenders such Pinnacle Stock Certificate in accordance with this Section 1.8
(at which time such holder shall be entitled to receive all such dividends and
distributions and such cash payment).
(c) No fractional shares of Netivation Stock shall be issued
in connection with the Merger. In lieu of such fractional shares, any holder of
capital stock of Pinnacle who would otherwise be entitled to receive a fraction
of a share of Netivation Stock shall, upon surrender of such holder's Pinnacle
Stock Certificate(s), be
paid in cash the dollar amount (rounded to the nearest whole cent), without
interest, determined by multiplying such fraction by the closing price of one
share of Netivation Stock as reported by the NASDAQ consolidated reporting
system on the Closing Date.
(d) Each certificate representing any of the shares of
Netivation Stock to be issued in the Merger shall bear a legend identical or
similar in effect to the following legend (together with any other legend or
legends required by applicable state securities laws or otherwise):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE."
(e) Netivation and the Surviving Corporation shall be entitled
to deduct and withhold from any consideration payable or otherwise deliverable
to any holder or former holder of capital stock of Pinnacle pursuant to this
Agreement such amounts as Netivation or the Surviving Corporation may be
required to deduct or withhold therefrom under the Code or under any provision
of state, local or foreign tax law. To the extent such amounts are so deducted
or withheld, such amounts shall be treated for all purposes under this Agreement
as having been paid to the Person to whom such amounts would otherwise have been
paid.
1.9 Dissenting Shares . Notwithstanding anything in this Agreement
to the contrary, shares of capital stock of Pinnacle that are issued and
outstanding immediately prior to the Effective Time and that are held by
stockholders who have not voted such shares in favor of the Merger and who have
delivered a written demand for appraisal of such shares in the manner provided
under Georgia Law ("Dissenting Shares") shall not be canceled and converted in
accordance with Section 1.5 unless and until such holder shall have failed to
perfect, or shall have effectively withdrawn or lost, such holder's right to
appraisal and payment under Georgia Law. If such holder shall have so failed to
perfect, or shall have effectively withdrawn or lost such right, such holder's
capital stock of Pinnacle shall thereupon be deemed to have been canceled and
converted as described in Section 1.5 at the Effective Time, and each such share
shall represent solely the right to receive the merger consideration described
in Section 1.5. Pinnacle shall give prompt notice of any demands received by
Pinnacle for appraisal of its shares, and, prior to the Effective Time,
Netivation shall have the right to participate in all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, Pinnacle
shall not, except with the prior written consent of Netivation, make any payment
with respect to, or settle or offer to settle, any such demands. From and after
the Effective Time, no stockholder of Pinnacle who has demanded appraisal rights
as provided under Georgia Law shall be entitled to vote such holder's shares of
Netivation Stock or capital stock of Pinnacle for any purpose or to receive
payment of dividends or other distributions with respect to such holder's shares
(except dividends and other distributions payable to stockholders of record of
Pinnacle at a date which is prior to the Effective Time).
1.10 Tax Consequences. For federal income tax purposes, the Merger
is intended to constitute a reorganization within the meaning of Section 368 of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.
1.11 Accounting Treatment. For accounting purposes, the Merger is
intended to be treated as a "purchase."
1.12 Further Action. If, at any time after the Effective Time, any
further action is determined by Netivation to be necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation or
Netivation with full right, title and possession of and to all rights and
property of Pinnacle, the officers and directors of the Surviving Corporation
and Netivation shall be fully authorized (in the name of Pinnacle and otherwise)
to take such action.
SECTION 2 - REPRESENTATIONS AND WARRANTIES OF
PINNACLE AND THE SELLING STOCKHOLDERS
Except as set forth in Schedule 2 (the "Schedule of Exceptions"),
Pinnacle and each of the Selling Stockholders jointly and severally represent
and warrant, to and for the benefit of the Netivation Indemnitees, as follows:
2.1 Organization, Good Standing and Qualification . Pinnacle is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia. Pinnacle has all requisite
corporate power and authority to own, lease and operate its properties and
assets, to execute and deliver the Transactional Agreements to which it is or
may become a party, to carry out the provisions of such Transactional Agreements
and to carry on its business as presently conducted. Pinnacle is duly qualified
and authorized to do business and is in good standing as foreign entities in all
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) make such qualifications necessary, except for those
jurisdictions in which failure to do so would not have a Material Adverse Effect
on Pinnacle. Pinnacle has made available to Netivation true, correct and
complete copies of Pinnacle's articles of incorporation and bylaws, each as
amended to date.
2.2 Subsidiaries . Pinnacle owns no equity securities of any other
corporation, limited partnership or similar entity. Pinnacle is not a
participant in any joint venture, partnership or similar arrangement.
2.3 Capitalization; Voting Rights . The authorized capital stock of
Pinnacle consists of 1,000,000 shares of Common Stock (of which 0 shares are
non-voting and 1,000,000 shares are voting), of which 857 shares are issued and
outstanding. Exhibit A sets forth the names of the stockholders of Pinnacle and
the number of shares of capital stock owned of record by each such stockholder.
The Selling Stockholders together own all of the outstanding shares of capital
stock of Pinnacle. All issued and outstanding shares of Pinnacle's Common Stock
(i) have been duly authorized and validly issued, (ii) are fully paid and
nonassessable and (iii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. There are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal), proxy or stockholder agreements, or agreements of any kind
for the purchase or acquisition from Pinnacle of any of its securities.
2.4 Authorization; Binding Obligations . Pinnacle has all requisite
right, power and authority to enter into and to perform its obligations under
the Transactional Agreements to which Pinnacle is or may become a party. This
Agreement constitutes the legal, valid and binding obligation of Pinnacle,
enforceable against Pinnacle in accordance with its terms, subject to (i) laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies. Upon the execution of each of the other
Transactional Agreements at the Closing, each of such other Transactional
Agreements will constitute the legal, valid and binding obligation of Pinnacle,
enforceable against Pinnacle in accordance with its terms, subject to (i) laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
2.5 Financial Statements . Pinnacle has delivered to Netivation its
unaudited balance sheet as of December 31, 1999 (the "Statement Date") and its
unaudited income statement for the two (2) months ended February 29, 2000
(collectively, the "Pinnacle Financial Statements"). The Pinnacle Financial
Statements present fairly in all material respects, on an income tax basis
(except as may be indicated in the notes thereto), the financial condition of
Pinnacle for the periods covered thereby.
2.6 Liabilities . Pinnacle has no material liabilities and, to the
Knowledge of Pinnacle, has no material contingent liabilities not otherwise
disclosed in the Pinnacle Financial Statements, except (i) current liabilities
incurred in the Ordinary Course of Business subsequent to the Statement Date and
(ii) liabilities incurred pursuant to this Agreement.
2.7 Agreements; Action.
(a) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
Pinnacle is a party or is bound which may involve (i) obligations (contingent or
otherwise) of, or payments to, Pinnacle in excess of $10,000, or (ii) the
license of any patent, copyright, trade secret or other proprietary right to or
from Pinnacle (other than licenses arising from the purchase of "off the shelf"
or other standard products), or (iii) provisions materially restricting the
development, manufacture or distribution of Pinnacle's products or services or
(iv) indemnification by Pinnacle with respect to infringements of proprietary
rights.
(b) Pinnacle has not (i) incurred any indebtedness for money
borrowed or any other liabilities (other than with respect to dividend
obligations, distributions, indebtedness and other obligations incurred in the
Ordinary Course of Business or as disclosed in the Pinnacle Financial
Statements) individually in excess of $10,000 or, in excess of $15,000 in the
aggregate, (ii) made any loans or advances to any person, other than ordinary
advances for travel expenses or (iii) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
Ordinary Course of Business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity
(including persons or entities Pinnacle has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.
2.8 Obligations to Related Parties . There are no obligations of
Pinnacle to officers, directors, stockholders or employees other than (a) for
payment of salary for services rendered, (b) reimbursement for reasonable
expenses incurred on behalf of Pinnacle and (c) for other standard employee
benefits made generally available to all employees. No such officer, director or
stockholder, or any member of their immediate families is, directly or
indirectly, interested in any material contract with Pinnacle (other than such
contracts as relate to any such person's ownership of capital stock or other
securities of Pinnacle). Pinnacle is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
2.9 Absence of Changes. Since the Statement Date, there has not
been:
(a) Any change in the assets, liabilities, financial condition
or results of operations of Pinnacle from that reflected in the Pinnacle
Financial Statements, other than changes in the Ordinary Course of Business,
which individually or in the aggregate has had or would have a Material Adverse
Effect on Pinnacle;
(b) Any resignation or termination of any key officers of
Pinnacle; and Pinnacle, to its Knowledge, does not know of the impending
resignation or termination of employment of any such officer;
(c) Any material change, except in the Ordinary Course of
Business, in the contingent obligations of Pinnacle by way of guaranty,
endorsement, indemnity, warranty or otherwise except pursuant to this Agreement;
(d) Any damage, destruction or loss, whether or not covered by
insurance, which has had or would have a Material Adverse Effect on Pinnacle;
(e) Any waiver by Pinnacle of a material right or of a
material debt owed to it;
(f) Any direct or indirect loans made by Pinnacle to any
stockholder, employee, officer or director of Pinnacle, other than advances made
in the Ordinary Course of Business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of Pinnacle in respect of its capital stock;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by Pinnacle, except those incurred under this Agreement, for
immaterial amounts and for current liabilities incurred in the Ordinary Course
of Business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which Pinnacle is
a party or by which it is bound which has had or would have a Material Adverse
Effect on Pinnacle; or
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition or results of operations of
Pinnacle. For purposes of this subsection (m), a material and adverse effect
shall only be deemed to occur if its monetary impact to Pinnacle exceeds, or
with the passage of time, will exceed, individually, $10,000 or, in the
aggregate, $30,000.
2.10 Title to Properties and Assets; Liens, Etc. Schedule 2.10 is a
complete and accurate list of all material assets (whether leased or owned),
including intellectual property, of Pinnacle. Pinnacle has good and marketable
title to all of its properties and assets, including those listed on Schedule
2.10, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (i) those
resulting from taxes which have not yet become due and payable, (ii) minor liens
and encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of Pinnacle and (iii) those
that have arisen from purchase money security interests in an amount not to
exceed $10,000. None of the Selling
Stockholders has any right in or claim to any of the intellectual property
utilized by Pinnacle. All facilities, machinery, equipment, fixtures, vehicles
and other properties owned, leased or used by Pinnacle are in good operating
condition and repair (ordinary wear and tear excepted) and are reasonably fit
and usable for the purposes for which they are being used. Pinnacle is in
compliance with all material terms of each lease to which it is a party or is
otherwise bound.
2.11 Patents and Trademarks . Pinnacle owns or possesses sufficient
legal rights to all trademarks, service marks, trade names, copyrights, trade
secrets and licenses, and, to the Knowledge of Pinnacle, to all patents,
information and other proprietary rights and processes necessary for its
business as now conducted, without any known infringement of the rights of
others. There are no outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is Pinnacle bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and
other proprietary rights and processes of any other person or entity other than
such licenses or agreements arising from the purchase of "off the shelf" or
standard products. Pinnacle has not received any written communications alleging
that it either has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity. To
Pinnacle's Knowledge, none of Pinnacle's employees is obligated under any
contract (including licenses, covenants or commitments or any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to Pinnacle's
business by the employees of Pinnacle. The current conduct of Pinnacle's
business does not, to the Knowledge of Pinnacle, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any contract, covenant or instrument under which any employee is now obligated.
To the Knowledge of Pinnacle, Pinnacle does not utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by Pinnacle, except for inventions, trade secrets or proprietary
information that have been assigned to Pinnacle.
2.12 Compliance with Other Instruments. Pinnacle is not in violation
or default of any term of its charter documents, or of any provision of any
mortgage, indenture or material contract, agreement or instrument to which it is
party or by which it is bound or of any judgment, decree, order, writ or, to
Pinnacle's Knowledge, any statute, rule or regulation applicable to Pinnacle
which would have a Material Adverse Effect on Pinnacle. The execution, delivery,
and performance of and compliance with the Transactional Agreements will not,
with or without the passage of time or giving of notice, result in any such
material violation, or be in conflict with or constitute a default under any
such term, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of Pinnacle or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization or approval applicable to Pinnacle or any of its assets
or properties.
2.13 Litigation. There is no action, suit, proceeding or
investigation pending, or to the Knowledge of Pinnacle, currently threatened
against Pinnacle that questions the validity of this Agreement or Transactional
Agreements or the right of Pinnacle to enter into any of such agreements, or to
consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in a Material Adverse Effect on
Pinnacle or any change in the current equity ownership of Pinnacle, nor, to the
Knowledge of Pinnacle , is there any basis for the foregoing. The foregoing
includes, without limitation, actions pending or threatened (or any basis
therefor known to Pinnacle) involving the prior employment of any of Pinnacle's
employees, their use in connection with Pinnacle's business of any information
or techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. Pinnacle is not a party
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by Pinnacle currently pending or which Pinnacle
intends to initiate.
2.14 Tax Returns and Payments.
(a) Each tax required to have been paid, or claimed by any
Governmental Body to be payable, by Pinnacle (whether pursuant to any tax return
or otherwise) has been duly paid in full and on a timely basis. Any tax required
to have been withheld or collected by Pinnacle, including with respect to
employees, has been duly withheld and collected; and (to the extent required)
each such tax has been paid to the appropriate Governmental Body.
(b) All tax returns required to be filed by or on behalf of
Pinnacle with any Governmental Body have been timely filed (collectively, the
"Pinnacle Returns"). All taxes required to be paid by Pinnacle for the fiscal
year 1999 have either been paid in full or shall not result in any liability to
Pinnacle. All Pinnacle Returns (i) have been filed when due and (ii) have been
accurately and completely prepared in full compliance with all applicable legal
requirements, in all material respects. Pinnacle has delivered to Netivation
accurate and complete copies of the 1999 Pinnacle Returns.
(c) There have been no examinations or audits of any Pinnacle
Return, and, to the Knowledge of Pinnacle, no such examination or audit has been
proposed or scheduled by any Governmental Body.
Pinnacle has delivered to Netivation accurate and complete copies of all audit
reports and similar documents (to which Pinnacle has access) relating to the
Pinnacle Returns.
(d) No claim or proceeding is pending or, to the Knowledge of
Pinnacle, has been threatened against Pinnacle in respect of any tax. There are
no unsatisfied Liabilities for taxes (including Liabilities for interest,
additions to tax and penalties thereon and related expenses) with respect to any
notice of deficiency or similar document received by Pinnacle. There are no
liens for taxes upon any of the assets of Pinnacle, except liens for current
taxes not yet due and payable. Pinnacle has not entered into or become bound by
any agreement or consent pursuant to Section 341(f) of the Code.
(e) To the Knowledge of Pinnacle, there is no agreement, plan,
arrangement or other contract covering any employee or independent contractor or
former employee or independent contractor of Pinnacle that, individually or
collectively, could give rise, directly or indirectly, to the payment of any
amount that would not be deductible pursuant to Section 280G or Section 162 of
the Code. Pinnacle is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
contract.
2.15 Employees. Pinnacle is not a party to or bound by any currently
effective employment contract, deferred compensation arrangement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation plan or agreement. To the Knowledge of Pinnacle, no employee of
Pinnacle, nor any consultant with whom Pinnacle has contracted, is in violation
of any term of any employment contract, proprietary information agreement or any
other agreement relating to the right of any such individual to be employed by,
or to contract with, Pinnacle because of the nature of the business currently
conducted by Pinnacle; and to the Knowledge of Pinnacle the continued employment
by Pinnacle of its present employees, and the performance of Pinnacle's
contracts with its independent contractors, will not result in any such
violation. Pinnacle has not received any written notice alleging that any such
violation has occurred. No employee of Pinnacle has been granted the right to
continued employment by Pinnacle or to any material compensation following
termination of employment with Pinnacle. To the Knowledge of Pinnacle, no
officer or key employee, or any group of key employees, intends to terminate
their employment with Pinnacle, nor does Pinnacle have a present intention to
terminate the employment of any officer, key employee or group of key employees.
2.16 Registration Rights. Pinnacle is not presently under any
obligation, and has not granted any rights, to register any of its presently
outstanding securities or any of its securities that may hereafter be issued.
2.17 Compliance with Legal Requirements; Consents .
(a) Pinnacle is, and has at all times since inception been, in
material compliance with each legal requirement that is or was applicable to it
or to the conduct of its business or the ownership or use of any of its assets,
except where the failure to comply with each such legal requirement has not had
and will not have a Material Adverse Effect on Pinnacle.
(b) Neither the execution and delivery of any of the
Transactional Agreements to which Pinnacle or the Selling Stockholders are or
will become a party, nor the consummation or performance of any of the
Transactions, will directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with or result in a violation
of (i) any of the provisions of Pinnacle's articles of incorporation or bylaws,
or (ii) any resolution adopted by Pinnacle's stockholders or Pinnacle's board of
directors;
(ii) contravene, conflict with or result in a violation
of, or give any Governmental Body or other Person the right to exercise any
remedy or obtain any relief under, any legal requirement or any order to which
Pinnacle, or any of the assets owned or used by Pinnacle, is subject;
(iii) contravene, conflict with or result in a violation
or Breach of, or result in a default under, any provision of any material
contract to which Pinnacle is a party; or
(iv) give any Person the right to (A) declare a default
or exercise any remedy under any material contract to which Pinnacle is a party,
(B) accelerate the maturity or performance of any material contract to which
Pinnacle is a party or (C) cancel, terminate or modify any material contract to
which Pinnacle is a party.
Other than the filing of the Articles of Merger in accordance with
Georgia Law, neither Pinnacle nor any of the Selling Stockholders was, is or
will be required to make any filing with or give any notice to, or to obtain
any consent from, any Person in connection with the execution and delivery of
any of the Transactional Agreements or the consummation or performance of any of
the Transactions.
2.18 Selling Stockholders . Each Selling Stockholder represents that
(i) he, she or it has the absolute and unrestricted right, power and authority
to enter into and to perform his, her or its obligations under each of the
Transactional Agreements to which such Selling Stockholder is or may become a
party, (b) this Agreement constitutes his, her or its legal, valid and binding
obligation, enforceable against such Selling Stockholder in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies and (c) upon the
execution of each of the other Transactional Agreements to which such Selling
Stockholder will become a party at the Closing, each of such other Transactional
Agreements will constitute the legal, valid and binding obligation of such
Selling Stockholder, enforceable against such Selling Stockholder in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors and (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies.
2.19 Full Disclosure . This Agreement does not (i) contain any
representation, warranty or information that is false or misleading in any
material respect with respect to any material fact or (ii) omit to state any
material fact necessary in order to make the representations, warranties and
information of or with respect to Pinnacle and the Selling Stockholders
contained and to be contained herein (in light of the circumstances under which
such representations, warranties and information were or will be made or
provided) not false or misleading in any material respect. Pinnacle has provided
Netivation and Netivation's Representatives with full and complete access to all
of Pinnacle's records and other documents and data.
2.20 Securities Laws Matters . Each Selling Stockholder understands
that the Netivation Stock has not been registered under the Securities Act and
that the Netivation Stock being issued in the Transaction is being issued
pursuant to an exemption from registration contained in the Securities Act,
based in part upon the Selling Stockholders' representations contained in this
Agreement. Each Selling Stockholder hereby severally, but not jointly,
represents and warrants as follows:
(a) Knowledge and Experience. Each Selling Stockholder is
knowledgeable and has substantial experience in evaluating and investing in
transactions in companies similar to Netivation so that such Selling Stockholder
is capable of evaluating the merits and risks of such Selling Stockholder's
investment in Netivation, or has appointed a person to act as "purchaser
representative" as that term is defined in Rule 501 under the Securities Act.
Each Selling Stockholder has by reason of such Selling Stockholder's business or
financial knowledge and experience, the capacity to protect such Selling
Stockholder's own interests in connection with the Transaction, or has appointed
a person to act as "purchaser representative" as that term is defined in Rule
501 under the Securities Act. Further, each Selling Stockholder is aware of no
publication of any advertisement in connection with the Transaction. Each
Selling Stockholder can bear the economic risk of the Transaction. Each Selling
Stockholder has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act, which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions. Each Selling Stockholder acknowledges that he or she will be
required to hold Netivation Stock for a period of one year prior to resale in a
public market transaction involving a broker or dealer, consistent with Rule
144, unless a favorable outcome results in the fairness hearing referred to in
Section 5.7. Each Selling Stockholder also acknowledges that he or she could be
deemed an affiliate of Netivation as defined pursuant to Rule 144 such that he
or she or it would be required to hold Netivation Stock for two (2) years from
the Closing Date before reselling those shares in reliance upon Rule 144.
(b) Netivation Information. Each Selling Stockholder has had
an opportunity to discuss Netivation's business, management and financial
affairs, both as currently conducted and as proposed to be conducted following
the Merger, with directors, officers and management of Netivation and has had
the opportunity to review Netivation's operations and facilities. Each Selling
Stockholder has also had the opportunity to ask questions of, and receive
answers from, Netivation and its management regarding the terms and conditions
of the Transaction and the receipt of Netivation Stock.
(c) Acquisition for Own Account. Each Selling Stockholder is
acquiring the Netivation Stock for such Selling Stockholder's own account for
investment only, and not with a view towards distribution.
2.21 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by and on behalf of Pinnacle.
2.22 Debt. Schedule 2.22 is a complete and accurate list of all
outstanding debt for borrowed money of Pinnacle, including the individual
amounts owed and the parties to whom such amounts are owed.
2.23 Hazardous Substances. To the Knowledge of Pinnacle and the
Selling Stockholders, there are no hazardous materials currently located on the
property(ies), at which Pinnacle conducts its business, in violation of any
governmental regulation, and Pinnacle has not received any administrative order
or written notice with respect to any contemplated hazardous-materials
investigation concerning such property(ies). (As used herein, the term
"hazardous materials" means any hazardous substance or hazardous waste as may
have been defined under the Resource Conservation Recovery Act of 1976, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, and
materials that have been designated as hazardous or toxic in any federal
regulation or regulation of the State of Georgia.)
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF NETIVATION
Netivation represents and warrants to Pinnacle and the Selling
Stockholders as follows:
3.1 Organization, Good Standing and Qualification.
(a) Netivation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Netivation has all requisite corporate power and authority to own and operate
its properties and assets, to execute and deliver this Agreement and the
Transactional Agreements, to issue and sell the Netivation Stock, to carry out
the provisions of this Agreement and the Transactional Agreements and to carry
on its business as presently conducted and as presently proposed to be
conducted. Netivation is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) make such
qualifications necessary, except for those jurisdictions in which failure to do
so would not have a Material Adverse Effect on Netivation or its business.
Netivation has made available to Pinnacle true, correct and complete copies of
Netivation's certificate of incorporation and bylaws, each as amended to date.
(b) Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Merger
Sub has all requisite corporate power and authority to own and operate its
properties and assets, to execute and deliver the Transactional Agreements, to
carry out the provisions of the Transactional Agreements and to carry on its
business as presently conducted and as presently proposed to be conducted.
3.2 Subsidiaries. Except for Merger Sub, ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Merger Eight
Corp., InterLink Services, Inc., The Online Medical Bookstore, Inc., MEDMarket,
Inc., Raintree Communications Corporation, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.,
Net.Capitol, Inc., U.S. Congress Handbook, Inc., and Public Disclosure, Inc. all
of which are wholly-owned subsidiaries of Netivation, and ▇▇▇▇▇▇▇▇▇.▇▇▇,
Netivation owns no equity securities of any other corporation, limited
partnership or similar entity. Netivation is not a participant in any joint
venture, partnership or similar arrangement.
3.3 Capitalization; Voting Rights.
(a) The authorized capital stock of Netivation, as of April
20, 2000, consists of (a) 30,000,000 shares of Common Stock, of which
approximately 10,869,516 shares are issued and outstanding, and (b) 2,000,000
shares of Preferred Stock, of which zero shares are issued and outstanding. All
issued and outstanding shares of Netivation's Common Stock and Preferred Stock
(i) have been duly authorized and validly issued, (ii) are fully paid and
nonassessable and (iii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. The Netivation Stock has
been duly authorized and, when issued in compliance with the provisions of this
Agreement and its certificate of incorporation, will be validly issued, fully
paid and nonassessable, with no personal liability attaching to the ownership
thereof, other than liabilities imposed upon stockholders generally by the
provisions of Delaware Law, and will not be subject to any other restrictions,
except as set forth in or provided by this Agreement and as may be imposed by
applicable law.
(b) The authorized capital stock of Merger Sub consists of one
thousand (1,000) shares of Common Stock, one hundred (100) shares of which have
been issued to Netivation. All of the issued and outstanding shares of Common
Stock of Merger Sub (i) have been duly authorized and validly issued, (ii) are
fully paid and nonassessable and (iii) were issued in compliance with all
applicable state and federal laws concerning the issuance of securities.
3.4 Authorization; Binding Obligations. Each of Netivation and
Merger Sub has all requisite right, power and authority to enter into and to
perform its obligations under the Transactional Agreements to which Netivation
and Merger Sub, as the case may be, is or may become a party. This Agreement
constitutes the legal, valid and binding obligation of each of Netivation and
Merger Sub, enforceable against them in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. Upon the execution of each of
the other Transactional Agreements at the Closing, each of such other
Transactional Agreements will constitute the legal, valid and binding obligation
of Netivation, enforceable against Netivation in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.5 Full Disclosure. Except as set forth on Schedule 3.5, Netivation
has, to the best of its Knowledge, filed all forms, reports and documents with
the Securities and Exchange Commission (the "SEC") since June 22, 1999, each of
which has complied in all material respects with all applicable rules of the
Securities Act, and the Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, each as in effect on the dates such forms,
reports and documents were filed. Netivation has delivered to Pinnacle an
accurate and complete copy of its Registration Statement on Form SB-2 No.
333-74569 filed with the SEC on June 22, 1999 (the "Registration Statement"),
and its 10KSB for the period ending December 31, 1999 (the "10K"). The
Registration Statement and the 10K (including any financial statements or
schedules therein) do not contain any untrue statements of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
3.6 Litigation. There is no material action, suit, proceeding or
investigation pending, or to the Knowledge of Netivation, currently threatened
against Netivation that questions the validity of this Agreement or
Transactional Agreements or the right of Netivation to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in a Material
Adverse Effect on Netivation or any material change in the current equity
ownership of Netivation, nor, to the Knowledge of Netivation, is there any basis
for the foregoing.
3.7 Compliance with other Instruments. Neither the execution and
delivery of any of the Transactional Agreements, nor the consummation or
performance of any of the Transactions, will materially, directly or indirectly,
(with or without notice or lapse of time):
(i) contravene, conflict with or result in a violation
of (A) any of the provisions of Netivation's certificate of incorporation or
bylaws, or (B) any resolution adopted by Netivation's stockholders or
Netivation's board of directors;
(ii) contravene, conflict with or result in a violation
of, or give any Governmental Body or other Person the right to exercise any
remedy or obtain any relief under, any legal requirement or any order to which
Netivation, or any of the assets owned or used by Netivation, is subject;
(iii) contravene, conflict with or result in a violation
or Breach of, or result in a default under, any provision of any contract to
which Netivation is a party; or
(iv) give any Person the right to (A) declare a default
or exercise any remedy under any contract to which Netivation is a party, (B)
accelerate the maturity or performance of any contract to which Netivation is a
party or (C) cancel, terminate or modify any contract to which Netivation is a
party.
3.8 Consents. Other than filings to be made in accordance with the
Delaware Law, neither Netivation nor Merger Sub was, is or will be required to
make any filing with or give any notice to, or to obtain any consent from, any
Person in connection with the execution and delivery of any of the Transactional
Agreements or the consummation or performance of any of the Transactions.
3.9 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by and on behalf of Netivation or any
of its subsidiaries.
SECTION 4 - CERTAIN COVENANTS OF PINNACLE
AND THE SELLING STOCKHOLDERS
4.1 Access and Investigation . Pinnacle and the Selling Stockholders
shall ensure that, at all times during the Pre-Closing Period:
(a) Pinnacle and its Representatives provide Netivation and
its Representatives with reasonable access, during normal business hours upon
reasonable notice, to Pinnacle's Representatives, personnel and assets and to
all existing books, records, tax returns, work papers and other documents and
information relating to Pinnacle;
(b) Pinnacle and its Representatives provide Netivation and
its Representatives with such copies of existing books, records, tax returns,
work papers and other documents and information relating to Pinnacle as
Netivation may reasonably request in good faith; and
(c) Pinnacle and its Representatives compile and provide
Netivation and its Representatives with such additional financial, operating and
other data and information regarding Pinnacle as Netivation may reasonably
request in good faith. Without limiting the generality of the foregoing, during
the Pre-Closing Period, Pinnacle shall promptly provide Netivation with copies
of:
(i) all material operating and financial reports
prepared by Pinnacle for its senior management, including copies of the
unaudited monthly balance sheets of Pinnacle and the related unaudited monthly
statements of operations, statements of stockholders' equity and statements of
cash flows;
(ii) any written materials or communications sent by or
on behalf of Pinnacle to its stockholders generally;
(iii) any material notice, document or other
communication sent by or on behalf of Pinnacle to any party to any Pinnacle
contract or sent to Pinnacle by any party to any Pinnacle contract (other than
any communication that relates solely to commercial transactions of the type
sent in the Ordinary Course of Business);
(iv) any written notice, report or other document filed
with or sent to any Governmental Body in connection with the Merger or any of
the other Transactions; and
(v) any material written notice, report or other
document received by Pinnacle from any Governmental Body.
4.2 Operation of Business. Pinnacle and the Selling Stockholders
shall ensure that, during the Pre-Closing Period:
(a) Pinnacle conducts its operations exclusively in the
Ordinary Course of Business and in the same manner as such operations have been
conducted prior to the date of this Agreement;
(b) Pinnacle uses its commercially reasonable efforts to
preserve intact its current business organization, keep available the services
of its current officers and employees and maintain its relations and good will
with suppliers, customers, landlords, creditors, licensors, licensees, employees
and other Persons having business relationships with Pinnacle;
(c) Pinnacle keeps in full force all existing insurance
policies;
(d) Pinnacle's officers confer regularly, upon request, with
Netivation concerning operational matters and otherwise report regularly, upon
request, to Netivation concerning the status of Pinnacle's business, condition,
assets, liabilities, operations, financial performance and prospects;
(e) Pinnacle immediately notifies Netivation of any inquiry,
proposal or offer from any Person relating to any Acquisition Transaction;
(f) Pinnacle does not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock or other securities, and does not repurchase, redeem or otherwise
reacquire any shares of capital stock or other securities;
(g) Pinnacle does not sell or otherwise issue any shares of
capital stock or any other securities;
(h) Pinnacle does not amend its articles of incorporation or
bylaws, and does not effect or become a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(i) Pinnacle does not form any subsidiary or acquires any
equity interest or other interest in any other entity;
(j) Pinnacle does not make any capital expenditure, except for
capital expenditures that are made in the Ordinary Course of Business and that,
individually, do not exceed $5,000, or in the aggregate, $15,000;
(k) Except for outstanding interest and principal up to an
amount of $125,000, incurred pursuant to the loan agreements referred to in
Items 1 and 2 of Section 2.7 of the Schedule of Exceptions, Pinnacle does not
(i) lend money to any Person (other than reimbursable advances made to employees
in the Ordinary Course of Business) or (ii) incur, assume or otherwise become
subject to any Liability, except for current liabilities incurred in the
Ordinary Course of Business and liabilities incurred pursuant to this Agreement;
(l) Pinnacle does not establish or adopt any employee benefit
plan, nor pay or agree to pay any bonus nor make any profit-sharing or similar
payment to, nor increase the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees (except for regularly scheduled salary increases in the
Ordinary Course of Business) or as required under existing agreements;
(m) Pinnacle does not change any of its methods of accounting
or accounting practices in any respect, except as may be required as a result of
change in law;
(n) Pinnacle does not commence any Proceeding, except in the
Ordinary Course of Business;
(o) Pinnacle does not enter into any transaction or take any
other action of the type referred to in Section 2.9;
(p) Pinnacle does not enter into any transaction or take any
other action outside the Ordinary Course of Business except pursuant to this
Agreement;
(q) Pinnacle does not enter into any transaction or take any
other action that is reasonably likely to cause or constitute a Breach of any
representation or warranty made by Pinnacle or the Selling Stockholders; and
(r) Pinnacle does not agree, commit or offer (in writing or
otherwise), or attempt, to take any of the actions described in clauses "(f)"
through "(q)" of this Section 4.2.
4.3 No Negotiation. Pinnacle shall ensure that, during the
Pre-Closing Period, neither Pinnacle nor any of Pinnacle's Representatives
directly or indirectly:
(a) solicits or encourages the initiation of any inquiry,
proposal or offer from any Person (other than Netivation) relating to any
Acquisition Transaction;
(b) participates in any discussions or negotiations with, or
provides any non-public information to, any Person (other than Netivation)
relating to any Acquisition Transaction; or
(c) considers the merits of any unsolicited inquiry, proposal
or offer from any Person (other than Netivation) relating to any Acquisition
Transaction.
SECTION 5 - ADDITIONAL COVENANTS OF THE PARTIES
5.1 Notification; Opportunity to Cure.
(a) During the Pre-Closing Period, each party shall promptly
notify the other party in writing of:
(i) the discovery by that party of any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this
Agreement that caused or constitutes a material Breach of any representation or
warranty made by that party in this Agreement;
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that would cause
or constitute a material Breach of any representation or warranty
made by that party in this Agreement if (A) such representation or warranty had
been made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any material Breach of any covenant or obligation
contained in this Agreement of that party; and
(iv) any event, condition, fact or circumstance that may
make the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) During the Pre-Closing Period, each party shall promptly
notify the other party, as appropriate, in writing of the awareness by that
party or its representatives of any event, condition, fact or circumstance that
occurred or existed on or prior to the date of this Agreement or thereafter that
caused or constitutes or will cause or constitute a Breach of any representation
or warranty made by the other party in this Agreement.
(c) Neither party shall have the right to ▇▇▇ for indemnity
for any defect that the party seeking indemnification was aware of prior to or
during the Pre-Closing Period for which no notification pursuant to this Section
5.1 was given to the other party, as appropriate.
(d) If any event, condition, fact or circumstance that is
required to be disclosed by Pinnacle pursuant to Section 5.1(a) or of which
Pinnacle is notified pursuant to Section 5.1(b) requires any change in the
Schedule of Exceptions, or if any such event, condition, fact or circumstance
would require such a change assuming the Schedule of Exceptions were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then Pinnacle shall promptly deliver to Netivation an
update to the Schedule of Exceptions specifying such change. No such update
shall be deemed to supplement or amend the Schedule of Exceptions for the
purpose of (i) determining the accuracy of any of the representations and
warranties made by Pinnacle in this Agreement for purposes of Section 6.1, but
shall be deemed to supplement or amend the Schedule of Exceptions for purposes
of Section 9 or (ii) determining whether any of the other conditions set forth
in Section 6 have been satisfied.
5.2 Filings and Consents. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (i) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the Transactions and (ii) shall use all
commercially reasonable efforts to obtain all consents (if any) required to be
obtained (pursuant to any applicable legal requirement or contract, or
otherwise) by such party in connection with the Transactions. Each of the
parties shall (upon request) promptly deliver to the other a copy of each such
filing made, each such notice given and each such consent obtained by Pinnacle
or Netivation, as the case may be, during the Pre-Closing Period.
5.3 Public Announcements. During the Pre-Closing Period, (i)
neither Pinnacle nor Netivation shall (and neither Pinnacle nor Netivation shall
permit any of its respective Representatives to) issue any press release or make
any public statement regarding this Agreement or the Transactions, without the
other party's prior written consent, and (ii) each party will use reasonable
efforts to consult with the other party prior to issuing any press release or
making any public statement regarding the Merger; provided that Netivation shall
be free to make any disclosure regarding the Merger that it deems necessary in
connection with filings with the SEC made in connection with the Registration
Statement.
5.4 Best Efforts. During the Pre-Closing Period, (i) Pinnacle shall
use commercially reasonable efforts to cause the conditions set forth in Section
6 to be satisfied on a timely basis and (ii) Netivation and Merger Sub shall use
their commercially reasonable efforts to cause the conditions set forth in
Section 7 to be satisfied on a timely basis and Netivation will take all actions
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
5.5 Tax Matters. At or prior to the Closing, (a) Pinnacle shall
execute and deliver to Netivation a customary tax representation letter, in a
form reasonably acceptable to Netivation, and (b) Netivation shall execute and
deliver to Pinnacle a customary tax representation letter, in a form reasonably
acceptable to Pinnacle. Pinnacle and the Selling Stockholders will use all of
their respective reasonable efforts to cause the transactions contemplated
hereby to qualify as a reorganization under the provisions of Section 368(a) of
the Code and will not take any action after the Acquisition is effected that
could reasonably be expected to cause the Acquisition to lose its status as a
reorganization. All parties hereto agree to file this Agreement with their
respective federal income tax returns for the year in which the Acquisition
closes and to comply with the reporting requirements of United States Treasury
Regulations Section 1.368-3, if applicable.
5.6 No Solicitation. If this Agreement is terminated pursuant to
Section 8.1, for a period of one (1) year following the date of termination,
neither Netivation nor any of its Affiliates will, directly or indirectly,
solicit or induce any individual leased to or employed by Pinnacle to leave such
employment and become an employee of Netivation or any of its Affiliates,
without the prior written consent of Pinnacle.
5.7 Fairness Hearing. During the Pre-Closing Period, Netivation,
Pinnacle, and the Selling Stockholders shall use reasonable best efforts to
facilitate a fairness hearing conducted pursuant to Section 3(a)(10) of the
Securities Act regarding the issuance of the Netivation Stock pursuant to this
Agreement. The parties acknowledge that time is of the essence in respect to the
consummation of the fairness hearing described above.
SECTION 6 - CONDITIONS PRECEDENT TO OBLIGATIONS
OF NETIVATION AND MERGER SUB
The obligations of Netivation and Merger Sub to effect the
Transactions are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by Netivation, in
whole or in part, in accordance with Section 10.11):
6.1 Accuracy of Representations. Each of the representations and
warranties made by Pinnacle and the Selling Stockholders in this Agreement shall
have been accurate in all material respects as of the date of this Agreement and
shall be accurate in all material respects as of the Scheduled Closing Time as
if made at the Scheduled Closing Time.
6.2 Performance of Covenants. Each covenant and obligation that
Pinnacle or any of the Selling Stockholders is required to comply with or to
perform pursuant to this Agreement at or prior to the Closing shall have been
duly complied with and performed in all material respects.
6.3 Consents. All material consents set forth on Schedule 6.3
required to be obtained by Pinnacle in connection with the Transactions shall
have been obtained and shall be in full force and effect.
6.4 No Material Adverse Change. There shall have been no Material
Adverse Effect on Pinnacle since the date of this Agreement.
6.5 Agreements and Documents. Netivation shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) legal opinions from counsel for Pinnacle and the Selling
Stockholders, substantially in the form of Exhibit E1 & E2;
(b) Employment and Noncompetition Agreements, substantially in
the form of Exhibit F1, F2, & F3, executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, and
▇▇▇▇▇▇ ▇▇▇▇ III;
(c) the Escrow Agreement, substantially in the form of Exhibit
G;
(d) a tax representation letter (as described in Section 5.5)
executed by Pinnacle;
(e) a Prospective Offeree Questionnaire substantially in the
form of Exhibit H executed by each Selling Stockholder;
(f) a certificate executed by each of the Selling Stockholders
containing the representation and warranty of each such Selling Stockholder that
each of the representations and warranties made by Pinnacle and the Selling
Stockholders in this Agreement is accurate in all material respects as of the
Closing Date as if made on the Closing Date(except for representations and
warranties made as of a specified date, which need to be accurate in all
material respects only as of the specified date);
(g) a certificate executed by Pinnacle containing the
representation and warranty of Pinnacle that each of the representations and
warranties made by Pinnacle in this Agreement is accurate in all material
respects as of the Closing Date as if made on the Closing Date (except for
representations and warranties made as of a specified date, which need to be
accurate in all material respects only as of the specified date);
(h) such other documents as Netivation may reasonably request
in good faith for the purpose of (i) evidencing the accuracy of any
representation or warranty made by Pinnacle or the Selling Stockholders, (ii)
evidencing the compliance by Pinnacle or the Selling Stockholders with, or the
performance by
Pinnacle or the Selling Stockholders of, any covenant or obligation set forth in
this Agreement, (iii) evidencing the compliance with any applicable federal or
state securities law, (iv) evidencing the satisfaction of any condition set
forth in this Section 6 or (v) otherwise facilitating the consummation or
performance of any of the Transactions.
6.6 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any legal requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.7 Securities Law Compliance. All applicable requirements of the
Securities Act and any applicable state securities laws shall have been
satisfied.
6.8 Unaccredited Investors. The Prospective Offeree Questionnaires
delivered pursuant to Section 6.5 shall indicate that no more than 35 of the
stockholders of Pinnacle are "unaccredited investors," as defined by Rule 501
under the Securities Act.
6.9 Corporate Approvals. This Agreement and the consummation of the
Transactions shall have been approved by all necessary corporate action on the
part of Pinnacle and the Selling Stockholders.
6.10 Lock-Up Agreements. If Netivation shall have received a
favorable outcome with respect to the fairness hearing described in Section 5.7,
then each Selling Stockholder shall have delivered to Netivation a Lock-Up
Agreement, substantially in the form of Exhibit I.
SECTION 7 - CONDITIONS PRECEDENT TO OBLIGATIONS
OF PINNACLE AND THE SELLING STOCKHOLDERS
The obligations of Pinnacle and the Selling Stockholders to effect
the Transactions are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived solely by Pinnacle,
in whole or in part, in accordance with Section 10.11):
7.1 Accuracy of Representations. Each of the representations and
warranties made by Netivation in this Agreement shall have been accurate in all
material respects as of the date of this Agreement and shall be accurate in all
material respects as of the Scheduled Closing Time as if made at the Scheduled
Closing Time.
7.2 Performance of Covenants. Each covenant and obligation that
Netivation and Merger Sub are required to comply with or to perform pursuant to
this Agreement at or prior to the Closing shall have been duly complied with and
performed in all material respects.
7.3 Consents. All material consents required to be obtained by
Netivation in connection with the Transactions shall have been obtained and
shall be in full force and effect.
7.4 Agreements and Documents. Pinnacle shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) the Escrow Agreement, substantially in the form of Exhibit
G;
(b) Employment and Noncompetition Agreements, substantially in
the form of Exhibit F1, F2, & F3, executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, and
▇▇▇▇▇▇ ▇▇▇▇ III;
(c) a tax representation letter (as described in Section 5.5)
executed by Netivation;
(d) a certificate executed by Netivation containing the
representation and warranty of Netivation that each of the representations and
warranties made by Netivation in this Agreement is accurate in all material
respects as of the Closing Date as if made on the Closing Date (except for
representations and warranties made as of a specified date, which need to be
accurate in all material respects only as of the specified date);
(e) such other documents as Pinnacle may reasonably request in
good faith for the purpose of (i) evidencing the accuracy of any representation
or warranty made by Netivation, (ii) evidencing the compliance by Netivation
with, or the performance by Netivation of, any covenant or obligation set forth
in this Agreement, (iii) evidencing the compliance with any applicable federal
or state securities law, (iv) evidencing the satisfaction of any condition set
forth in this Section 7 or (v) otherwise facilitating the consummation or
performance of any of the Transactions;
(f) the cash representing the additional consideration in
accordance with Section 1.6.
(g) a legal opinion from counsel for Netivation and Merger
Sub, substantially in the form of Exhibit E3;
(h) a lease guarantee from Netivation regarding the real
property currently occupied by Pinnacle, which replaces the current lease
guarantee made by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇; and
(i) verification that the outstanding debt, up to an amount of
$125,000, incurred pursuant to the loan agreements referred to in Items 1 and 2
of Section 2.7 of the Schedule of Exceptions, owed by Pinnacle to First Colony
Bank, has been, or will promptly be, payed off by Netivation.
7.5 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any legal requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.6 Corporate Approvals. This Agreement and the consummation of the
Transactions shall have been approved by all necessary corporate action on the
part of Netivation and Merger Sub.
7.7 No Material Adverse Change. There shall be no Material Adverse
Effect on Netivation since the date of this Agreement.
SECTION 8 - TERMINATION
8.1 Termination Events. This Agreement may be terminated prior to
the Closing:
(a) by Netivation if (i) there is a material Breach of any
representation, warranty, covenant or obligation of Pinnacle or any of the
Selling Stockholders contained in this Agreement and within twenty (20) days
after written notice of such Breach to or from Pinnacle, such Breach shall not
have been cured in all material respects or waived by Netivation and Merger Sub
or Pinnacle shall not have provided reasonable assurance to Netivation that such
Breach will be cured in all material respects on or before the Closing, or (ii)
Netivation reasonably determines that the timely satisfaction of any condition
set forth in Section 6 has become impossible (other than as a result of any
failure on the part of Netivation or Merger Sub to comply with or perform any
covenant or obligation of Netivation or Merger Sub set forth in this Agreement)
and such condition shall not have been waived by Netivation and Merger Sub;
(b) by the Agent (as defined in Section 10.1) if (i) there is
a material Breach of any representation, warranty, covenant or obligation of
Netivation contained in this Agreement and within twenty (20) days after written
notice of such Breach to or from Netivation, such Breach shall not have been
cured in all material respects or waived by Pinnacle or Netivation shall not
have provided reasonable assurance to Pinnacle that such Breach will be cured in
all material respects on or before the Closing, or (ii) the Agent reasonably
determines that the timely satisfaction of any condition set forth in Section 7
has become impossible (other than as a result of any failure on the part of
Pinnacle or any of the Selling Stockholders to comply with or perform any
covenant or obligation of Pinnacle or the Selling Stockholders set forth in this
Agreement) and such condition shall not have been waived by Pinnacle;
(c) by Netivation at the Closing if any condition set forth in
Section 6 has not been satisfied by the Closing and such condition shall not
have been waived by Netivation;
(d) by the Agent at the Closing if any condition set forth in
Section 7 has not been satisfied by the Closing and such condition shall not
have been waived by Pinnacle;
(e) by Netivation if the Closing has not taken place by July
15, 2000 (other than as a result of any failure on the part of Netivation or
Merger Sub to comply with or perform any covenant or obligation of Netivation or
Merger Sub set forth in this Agreement);
(f) by the Agent if the Closing has not taken place by July
15, 2000 (other than as a result of the failure on the part of Pinnacle or any
of the Selling Stockholders to comply with or perform any covenant or obligation
of Pinnacle or the Selling Stockholders set forth in this Agreement); or
(g) by the mutual consent of Netivation, Pinnacle and the
Agent.
8.2 Termination Procedures. If Netivation wishes to terminate this
Agreement pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e),
Netivation shall deliver to the Agent a written notice stating that Netivation
is terminating this Agreement and setting forth a brief description of the basis
on which Netivation is terminating this Agreement. If the Agent wishes to
terminate this Agreement pursuant to Section 8.1(b), Section 8.1(d) or Section
8.1(f), the Agent shall deliver to Netivation a written notice terminating this
Agreement and setting forth a brief description of the basis on which this
Agreement is terminated.
8.3 Effect of Termination. If this Agreement is terminated pursuant
to Section 8.1,
(a) all liabilities and obligations of the parties under this
Agreement shall automatically terminate; provided, however, that: (i) neither
Pinnacle nor the Selling Stockholders nor Netivation shall be relieved of any
obligation or liability if the basis of termination is a willful, material
Breach by such party of any provision of this Agreement; (ii) the parties shall,
in all events, remain bound by and continue to be subject to the provisions set
forth in this Section, Section 10.3 and the Mutual Nondisclosure Agreement,
effective March 6, 2000, by and between Netivation and Pinnacle (the
"Confidentiality Agreement"); and (iii) Pinnacle and Netivation shall, in all
events, remain bound by and continue to be subject to Section 5.3; and
(b) each party shall redeliver all documents, work papers and
other materials of the other parties relating to the Transactions whether so
obtained before or after the execution hereof, to the party furnishing the same
or, upon prior written notice to such party, shall destroy all such documents,
work papers and other materials and deliver notice to the parties seeking
destruction of such documents that such destruction has been completed, and all
Confidential Information (as defined in the Confidentiality Agreement) received
by any party hereto with respect to the other party shall be treated in
accordance with the Confidentiality Agreement.
SECTION 9 - INDEMNIFICATION, ETC.
9.1 Survival of Representations, Warranties and Covenants.
(a) The representations, warranties and covenants of each
party pursuant to this Agreement shall survive the Closing and shall expire on
the first anniversary of the Closing Date; provided, however, (i) that fraud
claims and claims under Section 2.14 shall survive for the statute of
limitations applicable to claims based on such matters and (ii) that if, at any
time prior to the first anniversary of the Closing Date, any Netivation
Indemnitees or Pinnacle Indemnitees seeking indemnification under this Section 9
(acting in good faith) delivers to the Agent or Netivation, as the case may be,
a written notice alleging the existence of a Breach of any of the
representations and warranties made by the other party or parties or a Breach of
any covenant contained herein made by the other party or parties (and setting
forth in reasonable detail the basis for such Netivation Indemnitees's or
Agent's belief that such a Breach may exist) and asserting a claim for recovery
under Section 9.2 or 9.3 based on such alleged Breach, then the claim asserted
in such notice shall survive the first anniversary of the Closing Date until
such time as such claim is fully and finally resolved.
(b) The representations, warranties, covenants and obligations
of Netivation, Pinnacle and the Selling Stockholders, and the rights and
remedies that may be exercised by the Netivation Indemnitees and the Pinnacle
Indemnitees, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or Knowledge of, any of
the Netivation Indemnitees, the Pinnacle Indemnitees or their respective
Representatives.
(c) For purposes of this Agreement, each statement or other
item of information set forth in the Schedule of Exceptions or in any update to
the Schedule of Exceptions shall be deemed to be a representation and warranty
made in this Agreement.
9.2 Indemnification by the Selling Stockholders.
(a) Subject to the provisions of this Section 9, the Selling
Stockholders, jointly and severally, shall indemnify and hold harmless each of
the Netivation Indemnitees from and against the amount of any Damages incurred
by any of the Netivation Indemnitees directly or indirectly as a result of (i)
any Breach of a representation or warranty of Pinnacle or any of the Selling
Stockholders contained in Section 2 hereof or in any instrument delivered
pursuant to this Agreement (each as modified by the Schedule of Exceptions
delivered by Pinnacle and the Selling Stockholders on the date of this Agreement
and not as modified by any revisions to such Schedule of Exceptions after such
date), (ii) any Breach of any covenant or obligation of Pinnacle or the Selling
Stockholders contained herein, or (iii) any Breach of any representation or
warranty made in the Selling Stockholders' Closing Certificate.
(b) In no event shall Netivation Indemnitees seek
consequential damages or damages for lost profits (except with respect to claims
arising out of the willful misconduct of the other party or parties, including
willful breaches of this Agreement) against the Selling Stockholders in any
claim for indemnification under this Section 9 or for any other matter relating
to this Agreement or the Transactions, nor shall seek or accept payment of any
award or judgment to the extent that such award or judgment against the Pinnacle
Indemnitees includes such consequential damages or damages for lost profits.
(c) Each Selling Stockholder waives and acknowledges and
agrees that such Selling Stockholder shall not have and shall not exercise or
assert (or attempt to exercise or assert), any right of contribution, right of
indemnity or other similar right or remedy against the Surviving Corporation in
connection with any indemnification obligation or any other Liability to which
such Selling Stockholder may become subject under the Transactional Agreements
or otherwise in connection with any of the Transactions.
(d) Claims for Damages made by the Netivation Indemnitees
pursuant to the provisions of Sections 9.2(a) or 9.6 shall be limited to an
amount equal to (i) 404,000 shares multiplied by the closing price per share of
Netivation common stock on the Closing Date, plus (ii) $300,000. The provisions
of this Section 9.2 shall not apply to claims for fraud on the part of Pinnacle
or any Selling Stockholder.
9.3 Indemnification by Netivation.
(a) Subject to the provisions of this Section 9, Netivation
shall indemnify and hold harmless each of the Selling Stockholders from and
against the amount of any Damages incurred by any of the Selling Stockholders
directly or indirectly as a result of (i) any Breach of a representation or
warranty of Netivation contained in Section 3 hereof or in any instrument
delivered pursuant to this Agreement or (ii) any Breach of any covenant or
obligation contained herein or (iii) any Breach of any representation or
warranty made in the certificate of representations and warranties delivered by
Netivation pursuant to Section 7.4.
(b) In no event shall Pinnacle Indemnitees seek consequential
damages or damages for lost profits (except with respect to claims arising out
of the willful misconduct of the other party or parties, including willful
breaches of this Agreement) against Netivation in any claim for indemnification
under this Section 9 or for any other matter relating to this Agreement or the
transactions, nor shall seek or accept payment of any award or judgment to the
extent that such award or judgment against the Netivation Indemnitees includes
such consequential damages or damages for lost profits..
(c) Netivation waives and acknowledges and agrees that
Netivation shall not have and shall not exercise or assert (or attempt to
exercise or assert), any right of contribution, right of indemnity or other
similar right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other Liability to which Netivation may become
subject under the Transactional Agreements or otherwise in connection with any
of the Transactions.
(d) Claims for Damages made by the Selling Stockholders
pursuant to the provisions of Sections 9.3(a) shall be limited to (i) 404,000
shares multiplied by the closing price per share of Netivation common stock on
the Closing Date, plus (ii) $300,000. The provisions of this Section 9.3 shall
not apply to claims for fraud on the part of Netivation.
9.4 Minimum Claim Against the Selling Stockholders. The Selling
Stockholders shall have no liability nor be subject to any claim for Damages
made by Netivation Indemnities pursuant to the provisions of Section 9.2(a)
unless and until the aggregate amount of Damages exceeds the sum of $50,000.
After the aggregate amount of damages exceeds the sum of $50,000, the Selling
Stockholders shall be jointly and severally liable for the full amount of
Damages.
9.5 Minimum Claim Against Netivation. Netivation shall have no
liability nor be subject to any claim for Damages made by the Selling
Stockholders pursuant to the provisions of Section 9.3(a) unless and until the
aggregate amount of Damages exceeds the sum of $50,000. If the aggregate amount
of Damages exceeds the sum of $50,000, then Netivation may be subject to the
full amount of any such claim.
9.6 Defense of Third Party Claims. Within twenty (20) days after
receipt of notice of the assertion or commencement by any Person not a party to
this Agreement (a "Third Party")of any claim or Proceeding (whether against any
Pinnacle Indemnitee, against any Netivation Indemnitee or any other Person) with
respect to which any of the parties to this Agreement (the "Indemnifying Party")
may become obligated to indemnify, hold harmless, compensate or reimburse any
other party to this Agreement (the "Indemnitee") pursuant to this Section 9, the
Indemnitee shall provide written notice to the Indemnifying Party of such claim.
The Indemnifying Party shall have the right, at its election, to proceed with
the defense of such claim or Proceeding, provided however; (i) that the
Indemnifying Party must conduct the defense of the Third Party's claim actively
and diligently thereafter in order to preserve its rights in this regard; (ii)
that the failure of the Indemnitee to provide timely notice to the Indemnifying
Party will not relieve the Indemnifying Party from liability for such claim
except to the extent that such failure to notify the Indemnifying Party results
in the forfeiture by the Indemnifying Party of rights and defenses otherwise
available to the Indemnifying Party with respect to such claim; and (iii)
provided further that the Indemnitee may retain separate co-counsel at its sole
cost and expense. If the Indemnifying Party so proceeds with the defense of any
such claim or Proceeding:
(a) all expenses relating to the defense of such claim or
Proceeding (whether or not incurred by the Indemnitee) shall be borne and paid
exclusively by the Indemnifying Party;
(b) the Indemnifying Party shall make available to the
Indemnitee any documents and materials in the possession or control of any
Indemnifying Party that may be reasonably necessary to the defense of such claim
or Proceeding;
(c) the Indemnifying Party shall keep the Indemnitee informed
of all material developments and events relating to such claim or Proceeding;
(d) the Indemnifying Party may not settle or compromise any
claim with respect to which indemnification is being sought without the prior
written consent of the Indemnitee; and
(e) the Indemnitee may not settle or compromise any claim with
respect to which indemnification is being sought without the prior written
consent of the Indemnifying Party.
9.7 Indemnity Reserve. In order to secure Netivation's and each
Netivation Indemnitee's rights of indemnity, the Selling Stockholders shall
place Eighty Thousand Eight Hundred (80,800) shares of Netivation Stock in
escrow in accordance with the terms of the Escrow Agreement, substantially in
the form attached hereto as Exhibit G.
9.8 Exclusive Remedy. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to Section
10.3 and this Section 9 shall be the sole and exclusive right and remedy
exercisable by such breach by the other party of any representation or warranty
or covenant in this Agreement or any Schedule, except for the right to seek
specific performance of any of the agreements contained herein pursuant to
Section 10.10. The provisions of this Section 9.8 shall not apply to claims for
fraud by any of the parties.
SECTION 10 - MISCELLANEOUS PROVISIONS
10.1 Selling Stockholders' Agent.
(a) The Selling Stockholders hereby irrevocably nominate,
constitute and appoint ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ as the agent and true and lawful
attorney-in-fact of the Selling Stockholders (the "Agent"), with full power of
substitution, to act in the name, place and stead of the Selling Stockholders
for purposes of executing any documents and taking any actions that the Agent
may, in his sole discretion, determine to be necessary, desirable or appropriate
in connection with any of the Transactional Agreements or any of the
Transactions on behalf of the Selling Stockholders. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ hereby
accepts his appointment as Agent.
(b) The Selling Stockholders hereby grant to the Agent full
authority to execute, deliver, acknowledge, certify and file on behalf of the
Selling Stockholders (in the name of any or all of the Selling Stockholders or
otherwise) any and all documents that the Agent may, in his sole discretion,
determine to be necessary, desirable or appropriate, in such forms and
containing such provisions as the Agent may, in his sole discretion, determine
to be appropriate (including the Selling Stockholders' Closing Certificate and
any amendment to or waiver of rights under any of the Transactional Agreements).
Notwithstanding anything to the contrary contained in the Transactional
Agreements:
(i) Netivation shall be entitled to deal exclusively
with the Agent, acting on behalf of the Selling Stockholders, on all matters
relating to the Transactional Agreements and the respective Transactions
(including all matters relating to any notice to, or any consent to be given or
action to be taken by, any Selling Stockholder, including any matters set forth
in Section 9); and
(ii) each Netivation Indemnitee shall be entitled to
rely conclusively (without further evidence of any kind whatsoever) on any
document executed or purported to be executed on behalf of any Selling
Stockholder by the Agent, and on any other action taken or purported to be taken
on behalf of any Selling Stockholder by the Agent, as fully binding upon such
Selling Stockholder.
(c) The Selling Stockholders recognize and intend that the
power of attorney granted herein (i) is coupled with an interest and is
irrevocable, (ii) may be delegated by the Agent and (iii) shall survive the
death or incapacity of each of the Selling Stockholders.
(d) The Agent shall be entitled to treat as genuine, and as
the document it purports to be, any letter, facsimile, telex or other document
that is believed by him/her to be genuine and to have been telexed, telegraphed,
faxed or cabled by any Selling Stockholder or to have been signed and presented
by an Selling Stockholder.
(e) If the Agent shall resign, die, become disabled or
otherwise be unable to fulfill his responsibilities hereunder, then the Selling
Stockholders by a majority vote of the voting capital stock of Pinnacle on the
date hereof shall, within thirty (30) days after such resignation, death or
disability, appoint a successor agent and, immediately thereafter, shall notify
Netivation of the identity of such successor; provided, however, that if for any
reason no successor has been appointed within thirty (30) days, then any Selling
Stockholder shall have the right to petition a court of competent jurisdiction
for appointment of a successor. Any such successor shall succeed the Agent as
Agent hereunder. If for any reason there is no Agent at any time, all references
herein to the Agent shall be deemed to refer to the Selling Stockholders.
(f) All expenses incurred by the Agent in connection with the
performance of his duties as Agent shall be borne and paid by the Selling
Stockholders.
(g) Each Selling Stockholder hereby ratifies and confirms all
that the Agent shall do or cause to be done by virtue of his appointment as
Agent of such Selling Stockholder. The Agent shall act for the Selling
Stockholders on all matters set forth in this Agreement in the manner the Agent
believes to be in the best interest of the Selling Stockholders, but the Agent
shall not be responsible to any Selling Stockholder for any loss or damage that
any Selling Stockholder may suffer by reason of the performance by the Agent of
his duties under this Agreement, other than loss or damage arising from the
willful misconduct in the performance of his duties under this Agreement.
(h) The Selling Stockholders do hereby jointly and severally
agree to indemnify and hold harmless the Agent from and against any and all
liability, loss, cost, damage or expense (including without limitation
attorneys' fees) reasonably incurred or suffered as a result of the performance
of his duties under this Agreement except for willful misconduct.
10.2 Further Assurances. Each party hereto shall execute and cause
to be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the Transactions.
10.3 Fees and Expenses. Subject to Section 9, each party to this
Agreement shall bear and pay all fees, costs and expenses (including legal fees
and accounting fees) that have been incurred or that are incurred in the future
by such party in connection with the Transactions, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Netivation and its Representatives with
respect to Pinnacle's business (and the furnishing of information to Netivation
and its Representatives in connection with such investigation and review), (ii)
the negotiation, preparation and review of this Agreement (including the
Schedule of Exceptions) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
Transactions, (iii) the preparation and submission of any filing or notice
required to be made or given in connection with any of the Transactions and the
obtaining of any consent required to be obtained in connection with any of such
Transactions and (iv) the consummation of the Merger.
10.4 Attorneys' Fees. If any action or Proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 Notices. Any notice or other communication required or
permitted to be delivered to any party under this Agreement shall be in writing
and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or overnight delivery service
or by facsimile) to the address or facsimile telephone number set forth beneath
the name of such party below (or to such other address or facsimile telephone
number as such party shall have specified in a written notice given to the other
parties hereto):
if to Netivation: ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and
Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Rock & Fields, Chtd.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Agent Pinnacle MedSource, Inc.
or any of the ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Selling Stockholders: ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any of the above addresses may be changed at any time by notice
given as provided above; provided, however, that any such notice of change of
address shall be effective only upon receipt. All notices, requests or
instructions given in accordance herewith shall be deemed received on the date
of delivery, if hand delivered, telecopied or by overnight courier, and three
(3) business days after the date of mailing, if mailed by certified mail, return
receipt requested.
10.6 Headings. The boldface headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.7 Counterparts. This Agreement may be executed in several
counterparts and transmitted by facsimile, each of which shall constitute an
original and all of which, when taken together, shall constitute one agreement.
10.8 Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the internal laws of the State of
Delaware.
10.9 Successors and Assigns. This Agreement shall be binding upon:
Pinnacle and its successors and assigns (if any); the Selling Stockholders and
their respective personal representatives, executors, administrators, estates,
heirs, successors and assigns (if any); Netivation and its successors and
assigns (if any); and Merger Sub and its successors and assigns (if any). This
Agreement shall inure to the benefit of: Pinnacle; the Selling Stockholders;
Netivation; Merger Sub; the Netivation Indemnitees; and the respective
successors and assigns (if any) of the foregoing. Neither this agreement nor any
of the rights, interests or obligations hereunder shall be assigned, directly or
indirectly, including, without limitation, by operation of law, by any party
hereto without the prior written consent of the other parties hereto; provided
that Netivation may assign any of its rights and interests, but not its
obligations, hereunder to an Affiliate without any such written consent.
10.10 Remedies Cumulative; Specific Performance. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any Breach or threatened
Breach by any party to this Agreement of any covenant, obligation or other
provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy
that may be available to it) to (i) a decree or order of specific performance or
mandamus to enforce the
observance and performance of such covenant, obligation or other provision, and
(ii) an injunction restraining such Breach or threatened Breach.
10.11 Waiver.
(a) No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
10.12 Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of all of the parties hereto.
10.13 Time of the Essence. Time is of the essence of this Agreement.
10.14 Severability. In the event that any provision of this
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
10.15 Parties in Interest. Except for the provisions of Section 9,
none of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties hereto and their respective
successors and assigns (if any).
10.16 Entire Agreement. This Agreement, the other agreements
referred to herein, the Schedule of Exceptions and the Confidentiality Agreement
set forth the entire understanding of the parties hereto relating to the subject
matter hereof and thereof and supersede all prior agreements and understandings
among or between any of the parties relating to the subject matter hereof and
thereof.
10.17 Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
[Remainder of Page Intentionally Left Blank]
The parties hereto have caused this Agreement to be executed and delivered
as of the date first set forth above.
NETIVATION:
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.,
a Delaware corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
MERGER SUB:
▇▇▇▇▇▇▇▇▇▇.▇▇▇ MERGER THREE CORP.,
a Delaware corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
PINNACLE:
PINNACLE MEDSOURCE, INC.,
a Georgia corporation
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
SELLING STOCKHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇ III
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▇▇▇▇▇▇ ▇▇▇▇ III
AGENT:
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇
SECRETARY'S CERTIFICATE
I, ▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary of ▇▇▇▇▇▇▇▇▇▇.▇▇▇ Merger Three Corp., hereby
certify that this Agreement has been adopted pursuant to the first sentence of
Title 8, Section 251(f) of the Delaware Corporations Laws, and that the
conditions specified in that sentence have been satisfied.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary