Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), entered into this 23rd
day of October, 1998, by and among ▇▇▇▇▇ HOLDINGS, INC., a Delaware
corporation ("▇▇▇▇▇"), having its principal offices at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ASTRATEK ACQUISITION CORP., a New
York corporation ("Mergerco"), having its principal offices at c/o Nixon,
Hargrave, Devans & ▇▇▇▇▇ llp, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
("▇▇▇▇▇ ▇▇▇▇▇▇▇▇"); ASTRATEK, INC., a New York corporation, having its
principal offices at ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the
"Company"); and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("Kalpaxis"), ▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇") and
THE ▇▇▇▇▇ FAMILY IRREVOCABLE STOCK TRUST U/A DATED April 30, 1997 (the
"Trust"). ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ and the Trust are hereinafter individually
referred to as a "Principal Stockholder" and collectively as the "Principal
Stockholders".
W I T N E S S E T H:
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WHEREAS, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ and the Trust are the record and beneficial
owners of 100% of the issued and outstanding shares of the common stock of
the Company, $.001 par value (the "Common Stock") and there are (a) no
outstanding options and warrants to purchase Common Stock, (b) no convertible
notes, convertible debentures, shares of convertible preferred stock or other
securities convertible into shares of Common Stock, and (c) no other rights
and privileges to receive or acquire shares of Common Stock (collectively,
the "Fully Diluted Equity");
WHEREAS, Mergerco is a direct wholly-owned subsidiary of ▇▇▇▇▇, which
has been formed for the purpose of merging with and into the Company, and
thereby enabling ▇▇▇▇▇ to acquire all of the shares of capital stock of the
Company as shall represent the Fully Diluted Equity of the Company as at the
effective date of the Merger (hereinafter, referred to as the "Stock")
pursuant to the Merger hereinafter provided for; and
WHEREAS, the Principal Stockholders, the Board of Directors of the
Company, the Board of Directors of Mergerco and ▇▇▇▇▇, as the sole
stockholder of Mergerco, have all authorized and approved the Merger and the
consummation of the other transactions contemplated by this Agreement, all on
the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereby covenant and
agree as follows:
1. THE MERGER.
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1.1 The Merger. At the time of the Closing on the Closing Date
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(as such terms are hereinafter defined) and in accordance with the provisions
of this Agreement and the
applicable provisions of the New York Business Corporation Law Act ("New York
Law"), Mergerco shall be merged with and into the Company (the "Merger") in
accordance with the terms and conditions of this Agreement and a certificate of
merger in substantially the form of Exhibit A annexed hereto (the "Articles of
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Merger"), with the Company as the surviving corporation of such Merger (the
Company being hereinafter sometimes referred to as the "Surviving Corporation").
Thereupon, the separate existence of Mergerco shall cease, and the Company, as
the Surviving Corporation, shall continue its corporate existence under New York
Law under its current name, Astratek, Inc.
1.2 Effectiveness of the Merger. As soon as practicable upon
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or after the satisfaction or waiver of the conditions precedent set forth in
Sections 8 and 9 below, Mergerco and the Company will execute the Articles of
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Merger (subject to such revisions as to form (but not substance) as may be
required by the relevant provisions of New York Law), and shall file or cause
to be filed such Articles of Merger with the Secretary of State of New York;
and the Merger shall become effective as of the date of the filing of such
Certificate of Merger, which shall occur on the "Closing Date" (as
hereinafter defined), and the Closing shall be deemed to occur as of such
Closing Date in accordance with Section 9 hereof.
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1.3 Effect of the Merger. Upon the effectiveness of the
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Merger: (a) the Surviving Corporation shall own and possess all assets and
property of every kind and description, and every interest therein, wherever
located, and all rights, privileges, immunities, powers, franchises and
authority of a public as well as of a private nature, of each of Mergerco and
the Company (the "Constituent Corporations"), and all obligations owed to,
belonging to or due to each of the Constituent Corporations, all of which
shall be vested in the Surviving Corporation pursuant to New York Law without
further act or deed, and (b) the Surviving Corporation shall be liable for
all claims, liabilities and obligations of the Constituent Corporations, all
of which shall become and remain the obligations of the Surviving Corporation
pursuant to New York Law without further act or deed.
1.4 Surviving Corporation. Upon the effectiveness of the
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Merger, the Articles of Incorporation, By-Laws, directors and officers of the
Surviving Corporation shall be identical to those of Mergerco as in effect
immediately prior to the effectiveness of the Merger.
1.5 Status and Conversion of Securities. At the Closing Date
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and upon the effectiveness of the Merger:
(a) Mergerco Stock. Each share of capital stock of
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Mergerco outstanding immediately prior to the effectiveness of the Merger
shall be converted into and shall become one (1) share of common stock of the
Surviving Corporation; and
(b) Treatment of Fully Diluted Equity. Each share of
---------------------------------
the Stock outstanding immediately prior to the effectiveness of the Merger,
representing the Fully Diluted Equity of the Company, shall be canceled and
extinguished and converted into the right to receive a proportionate amount
of the Merger Consideration payable pursuant to Section 2 below.
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Such Merger Consideration shall be paid and delivered to the holders of the
outstanding Stock upon:
(A) surrender to the Surviving Corporation of the
certificates representing such shares of outstanding Stock
(all of which shall be delivered free and clear of any and
all pledges, liens, claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever,
except any restrictions which may be created by operation
of state or federal securities laws) at the time and place
of the Closing as provided in Section 9 below; and
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(B) delivery to the Surviving Corporation and ▇▇▇▇▇ by the
subject holder of Stock of an appropriate letter confirming
(w) such holder's ownership of his or her Stock free and
clear as aforesaid (which representation and warranty shall
survive the Closing), (x) such information regarding such
holder and his background and financial status as may
reasonably be requested by ▇▇▇▇▇, (y) such holder's
investment intent with respect to the ▇▇▇▇▇ Securities
being received by such holder pursuant to Section 2 below
and (z) such other representations with respect to the
holder's status as an affiliate of ▇▇▇▇▇ post-closing and
the transfer restrictions applicable to such ▇▇▇▇▇
Securities under Rule 144 and 145 as promulgated by the
Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act").
1.6 Books and Records. On the Closing Date, the Company shall
deliver to ▇▇▇▇▇ all of the stock books, records and minute books of the
Company, all financial and accounting books and records of the Company, and
all referral, client, customer and sales records of the Company.
2. MERGER CONSIDERATION.
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On consummation of the Merger, the record owners of all outstanding
Fully Diluted Equity of the Company shall receive an aggregate of Two Million
Two Hundred Ninety-Four Thousand Nine Hundred (2,294,900) shares of Common
Stock, $.001 per value, of ▇▇▇▇▇ (the "▇▇▇▇▇ Securities"), in such
allocations as are set forth on Attachment I hereto [absent any action to
perfect dissenter's rights, in which case the allocation of Merger
Consideration (as hereinafter defined) shall be in compliance with New York
law]. The ▇▇▇▇▇ Securities is hereinafter sometimes referred to as the
"Merger Consideration."
3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE PRINCIPAL STOCKHOLDERS.
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The Company and the Principal Stockholders hereby represent and
warrant to Mergerco and ▇▇▇▇▇ as follows; provided, that ▇▇▇▇▇ and Mergerco
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acknowledge that: (i) the representations and warranties of the Company and
Kalpaxis are joint and several; (ii) the
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representations and warranties of each Principal Stockholder, other than
Kalpaxis, are limited to those specific representations and warranties set forth
in Section 3.1, Section 3.2(b), and Section 3.27 below, with respect to the
Stock ownership, ownership of ▇▇▇▇▇ Common Stock and knowledge of each such
Principal Stockholder; (iii) the representations and warranties of ▇▇▇▇▇ and the
Trust are made severally and not jointly and severally with Kalpaxis, but the
representations and warranties of ▇▇▇▇▇ and the Trust are made jointly and
severally; and (iv) while the Principal Stockholders, other than Kalpaxis, are
not liable, joint and several, for the representations and warranties of the
Company, the Company itself is liable, jointly and severally, for the
representations and warranties of the Principal Stockholders; provided, that the
Company shall not be liable for any representations made by ▇▇▇▇▇ and the Trust
under Section 3.27.
3.1 Ownership of the Stock.
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(a) The number of shares of outstanding Stock, the record
owners thereof, and the record addresses and social security number or tax
identification number of each of the Principal Stockholders, are as set forth
on Schedule 3.1 annexed hereto. Each Principal Stockholder is the legal and
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beneficial owner of his or its shares of the Stock, free and clear of all
pledges, liens, claims, charges, options, calls, encumbrances, restrictions
and assessments whatsoever, except any restrictions which may be created by
operation of state or federal securities laws.
(b) Schedule 3.1 accurately sets forth the number of
shares of Stock owned of record and beneficially by each Principal
Stockholder, and all of the Stock of each Principal Stockholder has been duly
authorized and validly issued, and is fully paid and non-assessable.
3.2 Valid and Binding Agreement.
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(a) The execution, delivery and performance of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby by the Company have been duly and validly authorized by
the Board of Directors of the Company and the Principal Stockholders. The
Company has the full legal right, power and authority to execute and deliver
this Agreement and, upon obtaining necessary shareholder approval, will have
the full power and authority to perform its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement constitutes
the legal, valid and binding obligation of the Company, enforceable against
the Company and the Principal Stockholders in accordance with its terms,
except to the extent limited by bankruptcy, insolvency, reorganization and
other laws affecting creditors' rights generally, and except that the remedy
of specific performance or similar equitable relief is available only at the
discretion of the court before which enforcement is sought.
(b) Each Principal Stockholder has full legal right,
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement and, when executed and
delivered by such Principal
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Stockholder, the Confidentiality Agreement, Employment Agreement, and the
Stockholder Agreement (as such terms are hereinafter defined), constitutes and
will constitute the legal, valid and binding obligations of such Principal
Stockholder, enforceable against such Principal Stockholder in accordance with
their respective terms, except to the extent limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, and except
that the remedy of specific performance or similar equitable relief is available
only at the discretion of the court before which enforcement is sought.
3.3 Organization, Good Standing and Qualification.
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(a) The Company: (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of New
York; (ii) has all necessary corporate power and authority to carry on its
business and to own, lease and operate its properties; and (iii) is not
required, by the nature of its properties or business, to be qualified to do
business as a foreign corporation in any other foreign jurisdiction in which
the failure to be so qualified would have a material adverse effect on the
Company or its business or financial condition.
(b) The Company has no subsidiary corporations.
(c) True and complete copies of the Articles of
Incorporation and By-Laws of the Company (including all amendments thereto),
and a correct and complete list of the officers and directors of the Company,
are annexed hereto as Schedule 3.3.
3.4 Capital Structure; Stock Ownership.
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(a) The authorized and outstanding shares of capital
stock of the Company, and the record owners of such shares of capital stock,
and all outstanding options, warrants and other securities convertible,
exchangeable or exercisable for shares of common stock of the Company are as
set forth on Schedule 3.4 annexed hereto. Other than as set forth on
Schedule 3.4, no other shares of capital stock of the Company are issued or
outstanding.
(b) Except as set forth in Schedule 3.4 annexed hereto
(all of which agreements and commitments will be terminated and canceled as
of the Closing Date, without any payment by the Company), there are no
outstanding subscriptions, options, rights, warrants, convertible securities
or other agreements or calls, demands or commitments: (i) obligating the
Company to issue, transfer or purchase any shares of its capital stock, or
(ii) obligating the Principal Stockholders or, to the best of the knowledge
of the Company and Kalpaxis, any other stockholder of the Company to transfer
any shares of the Stock owned by such stockholder. Other than in respect of
the stock purchase rights described in Schedule 3.4 (all of which shall be
terminated and canceled as of the Closing Date, without any payment by the
Company), no shares of capital stock of the Company are reserved for issuance
pursuant to stock options, warrants, agreements or other rights to purchase
capital stock.
3.5 Investments. Except as set forth on Schedule 3.5, the
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Company does not own, directly or indirectly, any stock or other equity
securities of any corporation or entity, or
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have any direct or indirect equity or ownership interest in any person, firm,
partnership, corporation, venture or business other than the business conducted
by the Company.
3.6 Financial Information.
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(a) The Company has furnished to ▇▇▇▇▇ the audited
financial statements of the Company as at April 30, 1998 and for the fiscal
year then ended, including balance sheets, statements of operations,
statements of stockholders' equity, and statements of cash flow, as reported
on by ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ (the "Audited Financial Statements"). The
Company has also furnished to ▇▇▇▇▇ the unaudited financial statements of the
Company as at August 31, 1998 consisting of balance sheets at August 31,
1998, and a statement of operations and a statement of cash flow for the five
months ended August 31, 1998 (the "Unaudited Financial Statements"). Such
Audited Financial Statements and Unaudited Financial Statements are herein
collectively referred to as the "Financial Statements".
(b) Except as provided in Schedule 3.6(b), the Financial
Statements: (i) are complete and correct in all material respects and
present fairly the financial position of the Company as of the dates thereof
and for the periods reflected therein, and (except as indicated in the
financial statements or notes thereto) all in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis; (ii)
make full and adequate provision, in accordance with generally accepted
accounting principles, for the various assets and liabilities of the Company
and provide the results of its operations and transactions in its accounts,
as of the dates and for the periods referred to therein; (iii) reflect only
assets and liabilities and results of operations and transactions of the
Company, and do not include or reflect any assets, liabilities or
transactions of any corporation or entity except the Company; and (iv) were
prepared from the books and records of the Company which accurately and
consistently reflect all transactions to which the Company was and is a
party; provided, that the Unaudited Financial Statements omit footnote
disclosures required under GAAP and are subject to fiscal year end audit
adjustments which would not, individually or in the aggregate, be material.
(c) Except as expressly set forth in the Financial
Statements and/or in the Schedules to this Agreement, or arising in the
normal course of the Company's business since April 30, 1998, to the best
knowledge of the Company and Kalpaxis there are, as at the date hereof, no
liabilities or obligations (including, without limitation, any tax
liabilities or accruals) of the Company, including any contingent
liabilities, that are, in the aggregate, material.
(d) The Company has furnished to ▇▇▇▇▇: (i) an aging
schedule of accounts receivable and accounts payable of the Company as at
August 31, 1998; (ii) a list of the outstanding principal balance of and
approximate accrued interest on all indebtedness (other than accounts
payable), loans and/or notes payable of the Company as of August 31, 1998;
(iii) a list of any leasehold or other contractual obligations of the Company
to the Principal Stockholders, any other stockholder of the Company, and/or
any of their respective Affiliates on the date hereof; (iv) a list of all
obligations of the Company guaranteed by the Principal Stockholders, any
other stockholder of the Company and/or any of their respective Affiliates on
the date hereof, and the terms of such guarantees; (v) a list reflecting the
nature and amount of all obligations
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owed to the Company on the date hereof by the Principal Stockholders, any other
stockholder of the Company, and/or any of their respective Affiliates; and (vi)
a list reflecting the nature and amount of all obligations owed by the Company
on the date hereof to the Principal Stockholders, any other stockholder of the
Company, and/or any of their respective Affiliates. Wherever used in this
Agreement, the term "Affiliate" means, as respects any person or entity, any
other person or entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with the
first person or entity.
3.7 Certain Adverse Changes. The parties hereto acknowledge
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that, since April 30, 1998, there has been material and adverse changes in
the financial condition, operations or business of the Company from that
shown in the Financial Statements. Except as and to the extent described in
Schedule 3.7 annexed hereto (which Schedule may make reference to any other
Schedule hereto or to any other document(s) referred to in this Agreement
which has heretofore been delivered to Mergerco), since April 30, 1998, the
business of the Company has continued to be operated only in the ordinary
course, and there has not been:
(a) Any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the business,
operations, assets, properties, financial condition or prospects of the
Company; or
(b) Any declaration, setting aside or payment of any
dividend or other distribution with respect to the Stock, any other payment
of any kind by the Company to any of its stockholders or any of their
respective Affiliates outside of the ordinary course of business, any
forgiveness of any debt or obligation owed to the Company by any of its
stockholders or any of their respective Affiliates, or any direct or indirect
redemption, purchase or other acquisition by the Company of any capital stock
of the Company.
3.8 Tax Returns and Tax Audits.
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(a) Except as and to the extent disclosed in Schedule 3.8
annexed hereto: (i) on the date hereof and on the Closing Date, all federal,
state and local tax returns and tax reports required to be filed by the
Company on or before the date of this Agreement or the Closing Date, as the
case may be, have been and will have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports
are required to be filed; (ii) all federal, state and local income,
franchise, sales, use, property, excise and other taxes (including interest
and penalties and including estimated tax installments where required to be
filed and paid) due from or with respect to the Company as of the date hereof
and as of the Closing Date have been and will have been fully paid, and
appropriate accruals shall have been made on the Company's books for taxes
not yet due and payable; (iii) as of the Closing Date, all taxes and other
assessments and levies which the Company is required by law to withhold or to
collect on or before the Closing Date will have been duly withheld and
collected, and will have been paid over to the proper governmental
authorities to the extent due and payable on or before the Closing Date; and
(iv) there are no outstanding or pending claims, deficiencies or assessments
for taxes, interest or penalties with respect to any taxable period of the
Company. At and after the Closing Date, the Company will have no liability
for any federal, state or local
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income tax with respect to any taxable period ending on or before the Closing
Date, except as and to the extent disclosed in Schedule 3.8.
(b) There are no audits pending with respect to any
federal, state or local tax returns of the Company, and no waivers of
statutes of limitations have been given or requested with respect to any tax
years or tax filings of the Company.
3.9 Personal Property; Liens. Except as provided in Schedule
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3.9 annexed hereto, the Company has and owns good and marketable title to all
of its tangible personal property, including therein all software, software
developments and related technology, free and clear of all liens, pledges,
claims, security interests and encumbrances whatsoever, except for:
(a) liens securing the Company's indebtedness for money borrowed as reflected
in the Financial Statements, pursuant to the security agreements listed in
Schedule 3.9 annexed hereto; (b) liens securing the deferred purchase price
of machinery, equipment, vehicles and/or other personal property, as
indicated on Schedule 3.9; and (c) liens for current taxes not yet due and
payable or which are being contested in good faith by appropriate
proceedings. All material items of machinery, equipment, vehicles and other
personal property owned or leased by the Company are listed in Schedule 3.9
annexed hereto, and, except as and to the extent disclosed in Schedule 3.9,
all of such personal property are in good operating condition and repair
(reasonable wear and tear excepted) and are adequate for their use in the
Company's business as presently conducted.
3.10 Real Property.
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(a) The Company neither owns nor has any interest of any
kind (whether ownership, lease or otherwise) in any real property except to
the extent of the Company's leasehold interests under the leases for its
business premises, true and complete copies of which leases (including all
amendments thereto) are annexed hereto as Schedule 3.10 (the "Leases").
(b) The Company is presently in compliance with all of
its obligations under the Leases, and the premises leased thereunder are in
good condition (reasonable wear and tear excepted) and are adequate for the
operation of the Company's business as presently conducted.
3.11 Accounts Receivable. All accounts receivable shown
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on the balance sheet as of April 30, 1998 included in the Financial
Statements (the "Balance Sheet"), and all accounts receivable thereafter
created or acquired by the Company prior to the Closing Date, (a) have arisen
or will arise in the ordinary course of the Company's business, (b) are and
will be subject to no counterclaims, set-offs, allowances or discounts of any
kind, except to the extent of the allowance for doubtful accounts as of April
30, 1998 reflected in the Balance Sheet, and (c) have been, are and will be
valid and collectible in the ordinary course of business within six (6)
months after the Closing Date (subject to the aforesaid allowance for
doubtful accounts), without necessity of instituting any legal proceedings
for collection.
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3.12 Inventories. Except as set forth on Schedule 3.12,
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all supplies and other inventories shown on the Balance Sheet, and all
inventories thereafter acquired by the Company prior to the Closing Date,
have been and will be valued at the lower of cost or market, and consisted
and will consist of items which are of a quality and quantity which are
useable in the ordinary course of the Company's business.
3.13 Insurance Policies. Schedule 3.13 annexed hereto
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contains a true and correct schedule of all insurance coverage's held by the
Company concerning its business and properties (including but not limited to
professional liability insurance).
3.14 Permits and Licenses. The Company possesses all
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permits, licenses and/or franchises, from whatever governmental authorities
or agencies (domestic and/or foreign) requiring the same and having
jurisdiction over the Company, which are necessary in order to operate its
business in the manner presently conducted, all of which permits, licenses
and/or franchises are valid, current and in full force and effect; and none
of such permits, licenses or franchises will be voided, revoked or
terminated, or voidable, revocable or terminable, upon and by reason of the
Merger and the change of ownership of the Company pursuant to this Agreement.
3.15 Contracts and Commitments.
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(a) Schedule 3.15 annexed hereto lists all material
contracts, leases, commitments, technology agreements, software development
agreements, software licenses, indentures and other agreements to which the
Company is a party (collectively, "Material Contracts"), except that Schedule
3.15 need not list any such agreement that is listed on any other Schedule
hereto, or was entered into in the ordinary course of the business of the
Company and that, in any case: (i) is for the purchase of supplies or other
inventory items in the ordinary course of business; (ii) is related to the
purchase or lease of any capital asset involving aggregate payments of less
than $5,000 per annum; or (iii) may be terminated without penalty, premium or
liability by the Company on not more than thirty (30) days' prior written
notice; provided, however, that Schedule 3.15 shall list all technology
agreements, software development agreements and software licenses involving
the Company or any Affiliate, regardless of the duration thereof or the
amount of payments called for or required thereunder.
(b) Except as set forth in Schedule 3.15: (i) all
Material Contracts are in full force and effect; (ii) the Company is in
compliance with all of its obligations under the Material Contracts, and has
not received any written notice that any Material Contract is in breach or
default or is now subject to any condition or event which has occurred and
which, after notice or lapse of time or both, would constitute a default by
any party under any such contract, lease, agreement or commitment; and
(iii) none of the Material Contracts will be voided, revoked or terminated,
or voidable, revocable or terminable, upon and by reason of the Merger and
the change of ownership of the Company pursuant to this Agreement.
(c) No purchase commitment by the Company is in excess of
the normal, ordinary and usual requirements of the business of the Company.
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(d) Except as set forth in Schedule 3.15, the Company
does not have any outstanding contracts with or commitments to officers,
employees, technicians, agents, consultants or advisors that are not
cancelable by the Company without penalty, premium or liability (for
severance or otherwise) on less than thirty (30) days' prior written notice.
(e) There is no outstanding power of attorney granted by
the Company to any person, firm or corporation for any purpose whatsoever.
3.16 Customers and Suppliers. None of the Principal
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Stockholders has any knowledge of, and the Company does not have any
knowledge of, nor has it received any written notice of, any existing,
announced or anticipated changes in the policies of any material clients,
customers or suppliers of the Company which will materially adversely affect
the business presently being conducted by the Company.
3.17 Labor, Benefit and Employment Agreements.
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(a) Except as set forth in Schedule 3.17 annexed hereto,
the Company is not a party to (i) any collective bargaining agreement or
other labor agreement, or (ii) any agreement with respect to the employment
or compensation of any non-hourly and/or non-union employee(s). Schedule
3.17 sets forth the amount of all compensation or remuneration (including any
discretionary bonuses) paid or to be paid by the Company during the fiscal
year ended April 30, 1998 and during the two months ended June 30, 1998 to
employees or consultants who presently receive aggregate compensation or
remuneration at an annual rate in excess of $25,000.
No union is now certified or, to the best of the knowledge
of the Company and Kalpaxis, claims to be certified as a collective
bargaining agent to represent any employees of the Company, and there are no
labor disputes existing or, to the best of the knowledge of the Company or
Kalpaxis, threatened, involving strikes, slowdowns, work stoppages, job
actions or lockouts of any employees of the Company.
(b) Except as set forth on Schedule 3.17, there are no
unfair labor practice charges or petitions for election pending or being
litigated before the National Labor Relations Board or any other federal or
state labor commission relating to any employees of the Company. The Company
has not received any written notice of any actual or alleged violation of any
law, regulation, order or contract term affecting the collective bargaining
rights of employees, equal opportunity in employment, or employee health,
safety, welfare, or wages and hours.
(c) With respect to any "multiemployer plan" (as defined
in Section 3(37) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) to which the Company has at any time been required to make
contributions, the Company has not, at any time, suffered or caused any
"complete withdrawal" or "partial withdrawal" (as such terms are respectively
defined in Sections 4203 and 4205 of ERISA) therefrom on its part.
- 10 -
(d) Except as disclosed on Schedule 3.17, the Company
does not maintain, or have any liabilities or obligations of any kind with
respect to, any bonus, deferred compensation, pension, profit sharing,
retirement or other such benefit plan, and does not have any potential or
contingent liability in respect of any actions or transactions relating to
any such plan other than to make contributions thereto if, as and when due in
respect of periods subsequent to the date hereof. Without limitation of the
foregoing, (i) the Company has made all required contributions to or in
respect of any and all such benefit plans, (ii) no "accumulated funding
deficiency" (as defined in Section 412 of the Internal Revenue Code of 1986,
as amended (the "Code")) has been incurred in respect of any of such benefit
plans, and the present value of all vested accrued benefits thereunder does
not, on the date hereof, exceed the assets of any such plan allocable to the
vested accrued benefits thereunder, (iii) there has been no "prohibited
transaction" (as defined in Section 4975 of the Code) with respect to any
such plan, and no transaction which could give rise to any tax or penalty
under Section 4975 of the Code or Section 502 of ERISA, and (iv) there has
been no "reportable event" (within the meaning of Section 4043(b) of ERISA)
with respect to any such plan. All of such plans which constitute, are
intended to constitute, or have been treated by the Company as "employee
pension benefit plans" or other plans within Section 3 of ERISA have been
determined by the Internal Revenue Service to be "qualified" under Section
401(a) of the Code, and have been administered and are in compliance with
ERISA and the Code; and the Principal Stockholders have no knowledge of any
state of facts, conditions or occurrences such as would impair the
"qualified" status of any of such plans.
(e) Except for the group insurance programs listed in
Schedule 3.17, the Company does not maintain any medical, health, life or
other employee benefit insurance programs or any welfare plans (within the
meaning of Section 3(1) of ERISA) for the benefit of any current of former
employees, and, except as required by law, the Company has no liability,
fixed or contingent, for health or medical benefits to any former employee.
3.18 No Breach of Statute, Decree or Other Instrument.
------------------------------------------------
(a) Except as set forth in Schedule 3.18 annexed hereto:
(i) neither the execution and delivery of this Agreement by the Company
and/or the Principal Stockholders, nor the performance of or compliance with
the terms and provisions of this Agreement on the part of the Company and/or
the Principal Stockholders, will violate or conflict with any term of the
Articles of Incorporation or By-Laws of the Company or any statute, law, rule
or regulation of any governmental authority affecting the existing business
of the Company, or will at the Closing Date conflict with, result in a breach
of, or constitute a default under, any of the terms, conditions or provisions
of any judgment, order, award, injunction, decree, contract, lease,
agreement, indenture or other instrument to which the Company or the
Principal Stockholders is a party or by which the Company or the Principal
Stockholders is bound; (ii) no consent, authorization or approval of or
filing with any governmental authority or agency, or any third party, will be
required on the part of the Company or the Principal Stockholders in
connection with the consummation of the transactions contemplated hereby; and
(iii) the Company will not be required, whether by law, regulation or
administrative practice, to reapply for or refile to obtain
- 11 -
any of the licenses, permits or other authorizations presently held by the
Company and required for the operation of its business as conducted on the date
hereof.
(b) In connection with and as respects the Merger, the
Company and each Principal Stockholder of the Company has waived any and all
rights which it, he or she may have (by way of right of first refusal, right
of first offer, or otherwise) to purchase any of the Stock by reason of the
proposed disposition thereof by any Principal Stockholder pursuant to the
Merger.
3.19 Compliance with Laws.
--------------------
(a) Except as set forth on Schedule 3.19, to the best
knowledge of the Company and Kalpaxis, the Company has not, at any time since
inception of the Company, (i) handled, stored, generated, processed or
disposed of any hazardous substances in violation of any federal, state or
local environmental laws or regulations, (ii) otherwise committed any
material violation of any federal, state or local environmental laws or
regulations (including, without limitation, the provisions of the
Environmental Protection Act and other applicable environmental statutes and
regulations) or any material violation of the Occupational Safety and Health
Act, or (iii) been in material violation of any requirements of its insurance
carriers from time to time.
(b) Except as set forth on Schedule 3.19, neither the
Company nor any of its current officers has received any written notice of
default or violation, nor, to the best knowledge of the Company and Kalpaxis,
is the Company in default or violation, with respect to any judgment, order,
writ, injunction, decree, demand or assessment issued by any court or any
federal, state, local, municipal or other governmental agency, board,
commission, bureau, instrumentality or department, domestic or foreign,
relating to any aspect of the Company's business, affairs, properties or
assets. Neither the Company nor any of its current officers has received
written notice of, been charged with, or is under investigation with respect
to, any violation of any provision of any federal, state, local, municipal or
other law or administrative rule or regulation, domestic or foreign, relating
to any aspect of the Company's business, affairs, properties or assets, which
violation would have a material adverse effect on the Company, its business
or any material portion of its assets.
(c) Schedule 3.19 sets forth the date(s) of the last
known audits or inspections (if any) of the Company conducted by or on behalf
of the Environmental Protection Agency, the Occupational Safety and Health
Administration, and any other governmental and/or quasi-governmental agency
(federal, state and/or local).
3.20 Litigation. Except as disclosed in Schedule 3.20
----------
annexed hereto, there is no suit, action, arbitration, or legal,
administrative or other proceeding, or governmental investigation (including,
without limitation, any claim alleging the invalidity, infringement or
interference of any patent, patent application, or rights thereunder owned or
licensed by the Company) pending, or to the best knowledge of the Company and
Kalpaxis, threatened, by or against the Company or any of its assets or
properties. Except as disclosed in Schedule 3.20
- 12 -
annexed hereto, the Company and Kalpaxis are not aware of any state of facts,
events, conditions or occurrences which might properly constitute grounds for or
the basis of any meritorious suit, action, arbitration, proceeding or
investigation against or with respect to the Company.
3.21 Patents, Licenses and Trademarks. Schedule 3.21
------------------------------------
annexed hereto correctly sets forth a list and brief description of the
nature and ownership of: (a) all patents, patent applications, copyright
registrations and applications, registered trade names, and trademark
registrations and applications, both domestic and foreign, which are
presently owned, filed or held by the Company and/or any of its directors,
officers, stockholders, employees, or independent contractors and which in
any way relate to or are used in the business of the Company; (b) all
licenses, both domestic and foreign, which are owned or controlled by the
Company and/or any of its directors, officers, stockholders, employees, or
independent contractors and which in any way relate to or are used in the
business of the Company; and (c) all franchises, licenses and/or similar
arrangements granted to the Company by others and/or to others by the
Company. None of the patents, patent applications, copyright registrations
or applications, registered trade names, trademark registrations or
applications, franchises, licenses or other arrangements set forth or
required to be set forth in Schedule 3.21 is subject to any pending
challenge, or threatened challenge known to the Company or Kalpaxis.
3.22 Transactions with Affiliates. Except as disclosed on
-----------------------------
Schedule 3.22, no material asset employed in the business of the Company is
owned by, leased from or leased to any of the stockholders of the Company,
any of their respective Affiliates, members of their families or any
partnership, corporation or trust for their benefit, or any other officer,
director, employee, or independent contractors of the Company or any
Affiliate of the Company.
3.23 Bank Accounts. Annexed hereto as Schedule 3.23 is a
--------------
correct and complete list of all bank accounts and safe deposit boxes
maintained by or on behalf of the Company, with indication of all persons
having signatory, access or other authority with respect thereto.
3.24 Schedules Incorporated by Reference. The making of
--------------------------------------
any recitation in any Schedule hereto shall be deemed to constitute a
representation and warranty that such recitation is an accurate statement and
disclosure of the information required by the corresponding Section(s) of
this Agreement, as, to the extent, and subject to the qualifications and
limitations, set forth in such corresponding Section(s).
3.25 Disclosure to Stockholders. The Company has, or
----------------------------
prior to the Closing Date will have, provided to all holders of shares of
capital stock of the Company a full and fair description of all material
terms and conditions of the Merger and all other material transactions
contemplated by this Agreement, and have made available to all holders of
Company capital stock (a) the reports of ▇▇▇▇▇ described in Section 4.5
below, (b) true and complete copies of this Agreement and all of the Exhibits
hereto, and (c) a true and complete copy of Section 910 of the New York Law
(relating to rights of dissenters in a Merger under New York Law); and each
holder of capital stock has had a full and fair opportunity to keep a copy of
such reports and documents and review same to his or her satisfaction.
- 13 -
3.26 Disclosure and Duty of Inquiry. Neither ▇▇▇▇▇ nor
--------------------------------
Mergerco is or will be required to undertake any independent investigation to
determine the truth, accuracy and completeness of the representations and
warranties made by the Company and the Principal Stockholders in this
Agreement.
3.27 Ownership of ▇▇▇▇▇ Common Stock or Other Securities. None
-----------------------------------------------------
of (i) the Company, (ii) any individual Principal Stockholder, (iii) the
Principal Stockholders taken together, or (iv) the Company and the Principal
Stockholders, taken together, either individually or in the aggregate own of
record or beneficially (as determined in accordance with the definitions
provided under Regulation 13d-3 promulgated under the Exchange Act) five (5%)
percent or more of the outstanding Common Stock of ▇▇▇▇▇ (the "Percentage")
on the date hereof, and such ownership by any of such persons and groups will
not equal or exceed the Percentage on the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF MERGERCO AND ▇▇▇▇▇.
----------------------------------------------------
Mergerco and ▇▇▇▇▇ hereby jointly and severally represent and
warrant to the Company and the Principal Stockholders, as follows:
4.1 Organization, Good Standing and Qualification. Each of
-------------------------------------------------
Mergerco and ▇▇▇▇▇ is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation, with all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder, and to consummate the transactions
contemplated hereby.
4.2 Authorization of Agreement. The execution, delivery and
----------------------------
performance of this Agreement and the consummation of the Merger and the
other transactions contemplated hereby by Mergerco and ▇▇▇▇▇ have been duly
and validly authorized by the Board of Directors and sole stockholder of
Mergerco, and by the Board of Directors of ▇▇▇▇▇; and Mergerco and ▇▇▇▇▇ have
the full legal right, power and authority to execute and deliver this
Agreement, to perform their respective obligations hereunder, and to
consummate the transactions contemplated hereby. No further corporate
authorization is necessary on the part of Mergerco or ▇▇▇▇▇ to consummate the
transactions contemplated hereby.
4.3 Valid and Binding Agreement. This Agreement constitutes
-----------------------------
the legal, valid and binding obligation of Mergerco and ▇▇▇▇▇, enforceable
against Mergerco and ▇▇▇▇▇ in accordance with its terms, and this Agreement,
constitutes and will constitute the legal, valid and binding obligations of
the Surviving Corporation and ▇▇▇▇▇ (as the case may be), enforceable against
the Surviving Corporation and ▇▇▇▇▇ in accordance with their respective
terms, except, in each case, to the extent limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, and
except that the remedy of specific performance or similar equitable relief is
available only at the discretion of the court before which enforcement is
sought.
- 14 -
4.4 No Breach of Statute or Contract. Neither the execution
----------------------------------
and delivery of this Agreement by Mergerco or ▇▇▇▇▇, nor compliance with the
terms and provisions of this Agreement on the part of Mergerco or ▇▇▇▇▇,
will: (a) violate any statute or regulation of any governmental authority,
domestic or foreign, affecting Mergerco or ▇▇▇▇▇; (b) require the issuance of
any authorization, license, consent or approval of any federal or state
governmental agency; or (c) conflict with or result in a breach of any of the
terms, conditions or provisions of any judgment, order, injunction, decree,
note, indenture, loan agreement or other agreement or instrument to which
Mergerco or ▇▇▇▇▇ is a party, or by which Mergerco or ▇▇▇▇▇ is bound, or
constitute a default thereunder.
4.5 Capitalization of ▇▇▇▇▇.
-----------------------
▇▇▇▇▇ is (i) authorized to issue 100,000,000 shares of
Common Stock, $.0001 par value per share ("▇▇▇▇▇ Common Stock") and
10,000,000 shares of Preferred Stock (the "Preferred Stock"), of which no
shares of Series A preferred stock, $.01 par value per share ("Series A
Preferred Stock") are outstanding and 1,000,000 shares of Series B Preferred
Stock, $.01 par value per share ("Series B Preferred Stock") are outstanding;
(ii) 11,507,603 shares of ▇▇▇▇▇ Common Stock were issued and outstanding at
October 1, 1998; (iii) 500,000 shares of ▇▇▇▇▇ Common Stock are reserved for
issuance pursuant to ▇▇▇▇▇'▇ Employee Incentive Stock Option Plan, of which
approximately 225,833 options are available for grant; (iv) 300,000 stock
options were reserved for non-employee directors under the Non-employee
Director Stock Option Plan, of which 60,000 options are outstanding; (v)
additional options and warrants to purchase no more than an aggregate of
3,229,867 shares of ▇▇▇▇▇ Common Stock were issued and outstanding at October
1, 1998. Except as described above, there are no outstanding options,
warrants, shares of capital stock or debentures, rights or subscriptions
which are exercisable or convertible into shares of Common Stock of ▇▇▇▇▇, or
otherwise entitling the holders to purchase shares of ▇▇▇▇▇ Common Stock.
4.6 ▇▇▇▇▇ Common Stock. When issued and delivered pursuant to
------------------
Section 2.3 above all of the ▇▇▇▇▇ Securities shall have been duly authorized
and validly issued, and shall be fully paid and non-assessable, and shall be
free of any pre-emptive rights or other limitations.
4.7 Investment. ▇▇▇▇▇ will be acquiring ownership of the
----------
outstanding capital stock of the Surviving Corporation for its own account,
for investment purposes only, and not with a view to the resale or
distribution thereof.
4.8 Business of Mergerco. Mergerco has been formed solely for
--------------------
the purposes of consummating the transactions contemplated by this Merger
Agreement, has not conducted and will not conduct any independent business
operations until the Closing Date of the Merger, and at the Closing Date will
have no liabilities (or obligations to assume any liabilities), except those
acquired from the Company.
4.9 Disclosure and Duty of Inquiry. The Company and the
----------------------------------
Principal Stockholders are not and will not be required to undertake any
independent investigation to
- 15 -
determine the truth, accuracy and completeness of the representations and
warranties made by Mergerco and ▇▇▇▇▇ in this Agreement.
4.10 No Breach of Statute, Decree or Other Instrument.
------------------------------------------------
Neither the execution and delivery of this Agreement by
▇▇▇▇▇ or Mergerco, nor the performance of or compliance with the terms and
provisions of this Agreement on the part of ▇▇▇▇▇ or Mergerco, will violate
or conflict with any term of the Articles of Incorporation or By-Laws of the
▇▇▇▇▇ or Mergerco or any statute, law, rule or regulation of any governmental
authority affecting the existing business of ▇▇▇▇▇ or Mergerco, or will at
the Closing Date conflict with, result in a breach of, or constitute a
default under, any of the terms, conditions or provisions of any judgment,
order, award, injunction, decree, contract, lease, agreement, indenture or
other instrument to which ▇▇▇▇▇ or Mergerco is a party or by which ▇▇▇▇▇ or
Mergerco is bound. No consent, authorization or approval of or filing with
any governmental authority or agency, or any third party, will be required on
the part of ▇▇▇▇▇ or Mergerco in connection with the consummation of the
transactions contemplated hereby; and (iii) neither ▇▇▇▇▇ nor Mergerco will
be required, whether by law, regulation or administrative practice, to
reapply for or refile to obtain any of the licenses, permits or other
authorizations presently held by ▇▇▇▇▇ or Mergerco and required for the
operation of its business as conducted on the date hereof.
4.11 Disclosure Documents. ▇▇▇▇▇ has delivered to the Company
---------------------
and the Principal Stockholders ▇▇▇▇▇'▇ Annual Report on Form 10-K for the
year ended June 30, 1997, and all other reports filed by ▇▇▇▇▇ with the
Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since June 30, 1997 (including the ▇▇▇▇▇ Reports on Form
10-K and Form 10-K/A for the fiscal year ended June 30, 1998), all of which
reports are in proper form and are in compliance with Commission rules and
regulations, and none of which contain material misstatements of material
facts or omit such information as would be necessary to make the information
contained therein not materially misleading (except as otherwise corrected by
a subsequent filing delivered to the Company and the Principal Stockholders).
5. THE COMPANY'S OBLIGATIONS BEFORE THE CLOSING DATE.
-------------------------------------------------
The Company covenants and agrees that, from the date hereof until
the Closing Date:
5.1 Access to Information. The Company shall permit ▇▇▇▇▇ and
----------------------
its counsel, accountants and other representatives, upon reasonable advance
notice to the Company, during normal business hours and without undue
disruption of the business of the Company, to have reasonable access to all
properties, books, accounts, records, contracts, documents and information
relating to the Company. ▇▇▇▇▇ and its representatives shall also be
permitted to freely consult with the Company's counsel concerning the
business of the Company.
5.2 Maintenance of Insurance. The Company shall continue to
--------------------------
carry its existing insurance, to the extent obtainable upon reasonable terms.
- 16 -
5.3 Corporate Matters. The Company shall not, without the
------------------
prior written consent of ▇▇▇▇▇:
(a) amend its Articles of Incorporation or By-Laws;
(b) issue any shares of the Company's capital stock;
(c) except as contemplated pursuant to Section 2.3 above,
issue or create any warrants, obligations, subscriptions, options,
convertible securities or other commitments under which any additional shares
of the Company's capital stock might be directly or indirectly issued;
(d) amend, cancel or modify any existing Material
Contract or enter into any new agreement, commitment or transaction, whether
or not such revision is material;
(e) pay, grant or authorize any salary increases or
bonuses or enter into any employment, consulting or management agreements;
(f) modify any agreement other than a material contract
to which the Company is a party or by which it may be bound, or modify any
payment terms with any creditor, other than in the ordinary course of
business;
(g) make any change in the Company's management personnel;
(h) except pursuant to commitments in effect on the date
hereof (to the extent disclosed in this Agreement or in any Schedule hereto),
make any capital expenditure(s) or commitment(s), whether by means of
purchase, lease or otherwise, or any operating lease commitment(s), in excess
of $5,000 in the aggregate;
(i) sell, assign or dispose of any capital asset(s) with
a net book value in excess of $5,000 as to any one item;
(j) change its method of collection of accounts or notes
receivable, accelerate or slow its payment of accounts payable, or prepay any
of its obligations or liabilities, other than prepayments to take advantage
of trade discounts not otherwise inconsistent with or in excess of historical
prepayment practices;
(k) declare, pay, set aside or make any dividend(s) or
other distribution(s) of cash or other property, or redeem any outstanding
shares of the Company's capital stock;
(l) incur any liability or indebtedness in excess of
$5,000 as to any one item or $25,000 in the aggregate;
- 17 -
(m) voluntarily subject any of the assets or properties
of the Company to any further liens or encumbrances;
(n) forgive any liability or indebtedness owed to the
Company by any of its stockholders or any of their respective Affiliates; or
(o) agree to do, or take any action in furtherance of,
any of the foregoing.
6. ADDITIONAL AGREEMENTS OF THE PARTIES.
------------------------------------
6.1 Confidentiality. Notwithstanding anything to the contrary
---------------
contained in this Agreement, and subject only to any disclosure requirements
which may be imposed upon Mergerco or ▇▇▇▇▇ under applicable state or federal
securities or antitrust laws, as to which the Company shall be given
reasonable advance notice, it is expressly understood and agreed by Mergerco
and ▇▇▇▇▇ that (i) this Agreement, the Schedules hereto, and the
conversations, negotiations and transactions relating hereto and/or
contemplated hereby, and (ii) all financial information, business records and
other non-public information concerning the Company which Mergerco, ▇▇▇▇▇ or
their representatives has received or may hereafter receive, shall be
maintained in the strictest confidence by Mergerco, ▇▇▇▇▇ and their
representatives, and shall not be disclosed to any person that is not
associated or affiliated with Mergerco or ▇▇▇▇▇ and involved in the
transactions contemplated hereby or used for any purpose other than the
transaction contemplated hereby, without the prior written approval of the
Company. The parties hereto shall use their best efforts to avoid disclosure
of any of the foregoing or undue disruption of any of the business operations
or personnel of the Company. In the event that the transactions contemplated
hereby shall not be consummated for any reason, Mergerco and ▇▇▇▇▇ covenant
and agree that neither they nor their representatives shall retain any
computer files and other electronic media, documents, lists or other writings
of the Company which they may have received or obtained in connection
herewith or any documents incorporating any of the information contained in
any of the same (all of which, and all copies thereof in the possession or
control of Mergerco, ▇▇▇▇▇ or their representatives, shall be returned to the
Company).
6.2 Exclusivity. From the date hereof through any termination
-----------
of this Agreement by the Company in accordance with Section 10 below, the
Company shall not (and shall not permit authorize or approve any of its
stockholders, officers or affiliates to) negotiate with or enter into any
other commitments, agreements or understandings with any person, firm or
corporation (other than ▇▇▇▇▇ and its Affiliates) in respect of any sale of
capital stock or assets of the Company, any merger, consolidation or
corporate reorganization, or any other such transaction relating to the
Company or any portion of its business.
6.3 Non-Competition, Confidentiality and Intellectual Property
-----------------------------------------------------------
Agreement; Employment Agreement. On the Closing Date, those key employees of
--------------------------------
the Company who are listed on Schedule 6.3 annexed hereto and made a part
-------------
hereof, shall execute and deliver to ▇▇▇▇▇ and the Surviving Corporation a
non-competition, confidentiality and intellectual property agreement in
substantially the form of Exhibit B-1 annexed hereto (the "Non-Competition
------------
- 18 -
Agreement"), and ▇▇▇▇▇ shall execute and deliver to ▇▇▇▇▇ and the Surviving
Corporation a confidentiality agreement in substantially the form of Exhibit
-------
B-2 annexed hereto (the "Confidentiality Agreement"). On the Closing Date,
---
the Surviving Corporation, ▇▇▇▇▇ and Kalpaxis shall execute and deliver to
▇▇▇▇▇ an employment agreement in substantially the form of Exhibit C annexed
---------
hereto (the "Employment Agreement").
6.4 [Intentionally Left Blank.]
6.5 Additional Agreements and Instruments. On or before the
----------------------------------------
Closing Date, the Company, Mergerco and ▇▇▇▇▇ shall execute, deliver and file
the Certificate of Merger and all exhibits, agreements, certificates,
instruments and other documents, not inconsistent with the provisions of this
Agreement, which, in the opinion of counsel to the parties hereto, shall
reasonably be required to be executed, delivered and filed in order to
consummate the Merger and the other transactions contemplated by this
Agreement.
6.6 Non-Interference. Neither Mergerco, ▇▇▇▇▇, the Company nor
----------------
the Principal Stockholders shall cause to occur any act, event or condition
which would cause any of their respective representations and warranties made
in this Agreement to be or become untrue or incorrect in any material respect
as of the Closing Date, or would interfere with, frustrate or render
unreasonably expensive the satisfaction by the other party or parties of any
of the conditions precedent set forth in Sections 7 and 8 below.
6.7 Corporate Structure of the Surviving Corporation.
------------------------------------------------
(i) The Surviving Corporation. Under the terms of
---------------------------
the Employment Agreement, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall be Chairman and Chief
Executive Officer of the Surviving Corporation. A full-time Chief Operating
Officer and a full time Chief Financial Officer of the Surviving Corporation
will be recruited by ▇▇▇▇▇ and shall be hired upon such terms and conditions
as shall be determined by ▇▇▇▇▇ and the Board of Directors of the Surviving
Corporation, and which first such candidate(s) that accept(s) being
reasonably acceptable to Kalpaxis. On an interim basis, ▇▇▇▇▇▇▇ ▇▇▇▇▇ will
serve as Chief Financial Officer of the Surviving Corporation. The Chief
Operating Officer and Chief Financial Officer of the Surviving Corporation
may hold the same positions at ▇▇▇▇▇. The Board of Directors of the
Surviving Corporation shall initially consist of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇. ▇▇▇▇▇ shall, at all times, designate a
majority of the Board of Directors of the Company, but senior executive
officers of the Surviving Corporation shall at all times be at least one of
the members of such Board of Directors.
(ii) ▇▇▇▇▇. Following the Closing, under the
-----
terms of the Employment Agreement, Kalpaxis shall be elected to serve as
Executive Vice President and Chief of Engineering and Technology of ▇▇▇▇▇.
Immediately following the Closing, ▇▇▇▇▇ will commence a search for a Chief
Financial Officer of ▇▇▇▇▇ ("CFO"), which person(s) may also serve as the
Chief Operating Officer of ▇▇▇▇▇ ("COO"), who may also serve as the CFO and
COO of the Surviving Corporation. Following selection of a CFO and a COO,
and when the results of ▇▇▇▇▇'▇ operations, in the judgment of ▇▇▇▇▇'▇ Board
of Directors, both warrant and
- 19 -
will permit ▇▇▇▇▇ to attract the caliber of person that the ▇▇▇▇▇ Board of
Directors deems desirable to refill the position of President and Chief
Executive Officer of ▇▇▇▇▇ (the "CEO"), ▇▇▇▇▇ will commence a search for a new
CEO; provided, the person(s) selected for the CFO, COO and CEO positions all
--------
shall have experience in the computer software industry and in public companies,
with the new person selected for the CEO position being highly regarded in the
computer software industry. The first persons selected, who accept the positions
of CFO, COO and CEO, will be reasonably acceptable to both the Board of
Directors of ▇▇▇▇▇ and to Kalpaxis. Following the Closing, Kalpaxis shall be
appointed to the Board of Directors of ▇▇▇▇▇, and one additional person who has
a background in the computer software industry shall be appointed to the Board
of Directors of ▇▇▇▇▇, which person shall be reasonably acceptable to Kalpaxis.
6.8 Employee Cash Bonuses. In connection with their employment
---------------------
by the Surviving Corporation, ▇▇▇▇▇ shall provide to those employees of the
Surviving Corporation such dollar amounts, up to an aggregate $150,000, as
are set forth on Schedule 6.8 as cash bonuses in consideration for their
-------------
continuing employment by the Surviving Corporation and their execution of the
Non-Competition Agreement.
7. CONDITIONS PRECEDENT TO MERGERCO AND
------------------------------------
▇▇▇▇▇'▇ PERFORMANCES.
--------------------
In addition to the fulfillment of the parties' agreements in
Section 6 above, the obligations of Mergerco to consummate the Merger and of
Mergerco and ▇▇▇▇▇ to consummate the transactions contemplated by this
Agreement are further subject to the satisfaction, at or before the Closing
Date, of all the following conditions, any one or more of which may be waived
in writing by Mergerco and ▇▇▇▇▇:
7.1 Accuracy of Representations and Warranties. All
----------------------------------------------------
representations and warranties made by the Company and/or the Principal
Stockholders in this Agreement, in any Schedule(s) hereto, and/or in any
written statement delivered to Mergerco or ▇▇▇▇▇ under this Agreement shall
be true and correct in all material respects on and as of the Closing Date as
though such representations and warranties were made on and as of that date.
7.2 Performance. The Company and the Principal Stockholders
-----------
shall have performed, satisfied and complied with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by them on or before the Closing Date.
7.3 Certification. Mergerco and ▇▇▇▇▇ shall have received a
-------------
certificate, dated the Closing Date, signed by the Principal Stockholders,
certifying, in such detail as Mergerco and ▇▇▇▇▇ and their counsel may
reasonably request, that, the conditions specified in Sections 7.1, 7.2 and
7.8 above and below have been fulfilled.
7.4 Resolutions. Mergerco and ▇▇▇▇▇ shall have received
-----------
certified resolutions of the Board of Directors and the stockholders of the
Company, in form reasonably satisfactory to counsel for Mergerco, authorizing
the Company's execution, delivery and performance of this
- 20 -
Agreement and the Merger, and all actions to be taken by the Company hereunder,
and shall have received certified copies of the Certificate of Incorporation as
amended, and By-laws of the Company.
7.5 Termination of Employment Agreements. The Company shall
---------------------------------------
have delivered to Mergerco evidence, reasonably satisfactory to Mergerco, of
the termination and cancellation of any existing employment agreements
between the Company and Kalpaxis or any other employees of the Company on or
prior to the Closing Date.
7.6 Absence of Litigation. No action, suit or proceeding by or
---------------------
before any court or any governmental body or authority, against the Company
or pertaining to the transactions contemplated by this Agreement or their
consummation, shall have been instituted on or before the Closing Date, which
action, suit or proceeding would, if determined adversely, have a material
adverse effect on the Company, its business or any material portion of its
assets, or impair the ability of any of the stockholders of the Company to
deliver in the Merger all of his/her or its Stock free and clear of all
pledges, liens, claims, charges, options, calls, encumbrances, restrictions
and assessments whatsoever (except any restrictions which may be created by
operation of state or federal securities laws).
7.7 Consents. All necessary disclosures to and agreements and
--------
consents of (a) any parties to any Material Contracts and/or any licensing
authorities which are material to the Company's business, and (b) any
governmental authorities or agencies to the extent required in connection
with the transactions contemplated by this Agreement, shall have been
obtained in such form as is reasonably satisfactory to counsel to ▇▇▇▇▇, and
true and complete copies thereof delivered to ▇▇▇▇▇ and Mergerco, including
but not limited to, a waiver of outstanding defaults under obligations of the
Company to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and Galaxy..
7.8 Settlement of Accounts. All debts, liabilities and other
-----------------------
monetary obligations (if any) owed to the Company by any of the Principal
Stockholders of the Company and/or any of their respective Affiliates shall
have been fully paid to the Company, such that no such debts, liabilities or
obligations shall be outstanding on the Closing Date, except the Promissory
Notes of the Company made in favor of Kalpaxis and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, copies of
which are annexed hereto as Exhibits D-1 and D-2.
--------------------
7.9 Condition of Property. Between the date of this Agreement
----------------------
and the Closing Date, assets of the Company having an aggregate fair market
value of $10,000 or more shall not have been lost, destroyed or irreparably
damaged by fire, flood, explosion, theft or any other cause, if not fully
covered by insurance.
7.10 No Material Adverse Change. On the Closing Date,
-----------------------------
there shall not have occurred any event or condition (including, without
limitation, third party claims) not disclosed on Schedules to this Agreement
which, in the reasonable opinion of ▇▇▇▇▇ and its counsel, would materially
and adversely affecting the value of the technologies, software and other
assets owned or used by the Company.
- 21 -
7.11 Execution and Delivery of Exhibits. On or before the
-----------------------------------
Closing Date: (a) the Company shall have executed and delivered to Mergerco
the Certificate of Merger; (b) each of the Principal Stockholders shall have
executed and delivered to all other parties thereto the Confidentiality
Agreement (to which it is a party), the Subscription Agreement substantially
in the form annexed hereto as Exhibit E (as hereinafter defined) and the
---------
Stockholder Agreement substantially in the form annexed hereto as Exhibit F;
---------
and (c) Kalpaxis shall have executed and delivered the Employment Agreement.
7.12 Company Shareholders' Approval. The requisite
-----------------------------------
percentage of holders of all shares of capital stock of the Company entitled
to vote shall have, in their capacities as shareholders of the Company,
approved or ratified this Agreement, the consummation of the Merger and all
other transactions contemplated by this Agreement, all in accordance with the
applicable provisions of New York Law, and on or prior to the Closing Date
each of the Principal Stockholders shall execute and deliver on or prior to
the Closing Date the Subscription Agreement (the "Subscription Agreement").
7.13 Dissenters' Rights. On or before the Closing Date,
-------------------
no holders of the outstanding capital stock of the Company shall have timely
elected to exercise their dissenters' rights pursuant to the applicable
provisions of New York Law.
7.14 Proceedings and Instruments Satisfactory. All
----------------------------------------------
proceedings, corporate or other, to be taken in connection with the
transactions contemplated by this Agreement, and all documents incidental
thereto, shall be reasonably satisfactory in form and substance to Mergerco,
▇▇▇▇▇ and their counsel. The Company shall have submitted to ▇▇▇▇▇ or its
representatives for examination the originals or true and correct copies of
all records and documents relating to the business and affairs of the Company
which ▇▇▇▇▇ may have requested in connection with said transactions.
7.15 Due Diligence. Mergerco and ▇▇▇▇▇ shall be
---------------
satisfied, in their sole discretion, with the results of their due diligence
investigation of the Company and its business including, but not limited to,
investigation of its technologies (both proprietary and those licensed from
third parties), its existing computer software products currently marketed
and its proposed computer software products, and the marketability and size
of the markets for all such products.
7.16 Opinion of Counsel. Mergerco and ▇▇▇▇▇ shall receive
------------------
opinions of counsel from counsel to the Company and counsel to the Principal
Stockholders, which counsel shall be reasonably satisfactory to Mergerco and
▇▇▇▇▇, substantially in such form as set forth on Exhibit G annexed hereto.
---------
7.17 Evidence of Compliance with Section 3.27. Each of
--------------------------------------------
Mergerco and ▇▇▇▇▇ shall receive evidence satisfactory to it and its counsel
that none of (i) the Company, (ii) any individual Principal Stockholder,
(iii) the Principal Stockholders taken together, or (iv) the Company and the
Principal Stockholders, taken together, either individually or in the
aggregate own of record or beneficially (as determined in accordance with the
definitions provided under
- 22 -
Regulation 13d-3 promulgated under the Exchange Act) an amount equal to or
greater than the Percentage of the outstanding Common Stock of ▇▇▇▇▇ on the date
of this Agreement and on the Closing Date.
8. CONDITIONS PRECEDENT TO THE COMPANY AND THE
PRINCIPAL STOCKHOLDERS' PERFORMANCES.
-------------------------------------------
In addition to the fulfillment of the parties' agreements in
Section 6 above, the obligations of the Company to consummate the Merger and
of the Principal Stockholders to consummate the transactions contemplated by
this Agreement are further subject to the satisfaction, at or before the
Closing Date, of all of the following conditions, any one or more of which
may be waived in writing by the Company and the Principal Stockholders:
8.1 Accuracy of Representations and Warranties. All
----------------------------------------------------
representations and warranties made by Mergerco and ▇▇▇▇▇ in this Agreement
and/or in any written statement delivered by Mergerco or ▇▇▇▇▇ under this
Agreement shall be true and correct in all material respects on and as of the
Closing Date as though such representations and warranties were made on and
as of that date.
8.2 Performance. Mergerco and ▇▇▇▇▇ shall have performed,
-----------
satisfied and complied with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by Mergerco and
▇▇▇▇▇ on or before the Closing Date.
8.3 Certification. The Principal Stockholders and the Company
-------------
shall have received a certificate, dated the Closing Date, signed by Mergerco
and ▇▇▇▇▇, certifying, in such detail as the Principal Stockholders and his
counsel may reasonably request, that the conditions specified in Sections 8.1
and 8.2 above have been fulfilled.
8.4 Resolutions. The Principal Stockholders and the Company
-----------
shall have received certified resolutions of the Board of Directors and sole
stockholder of Mergerco and of the Board of Directors of ▇▇▇▇▇, in form
reasonably satisfactory to counsel for the Principal Stockholders and the
Company, authorizing the Merger and Mergerco and ▇▇▇▇▇'▇ execution, delivery
and performance of this Agreement and all actions to be taken by Mergerco and
▇▇▇▇▇ hereunder, and shall have received certified copies of the Certificate
of Incorporation, as amended, and By-laws of each of ▇▇▇▇▇ and Mergerco.
8.5 Approval of Company Stockholders. The holders of the
-----------------------------------
requisite percentage of the outstanding shares of capital stock of the
Company entitled to vote shall have approved, adopted and ratified this
Agreement and the transactions contemplated hereby.
8.6 Execution and Delivery of Exhibits. Mergerco shall have
-------------------------------------
executed and delivered to the Company the Certificate of Merger, and ▇▇▇▇▇
and/or the Surviving Corporation (as applicable) shall have executed and
delivered to each of the Principal Stockholders duly executed counterparts of
the Non-Competition Agreement, the Confidentiality Agreement, the
Subscription Agreement, the Stockholder Agreement and the Employment
Agreement.
- 23 -
8.7 Delivery of Merger Consideration. ▇▇▇▇▇ and Mergerco shall
---------------------------------
have delivered to the Principal Stockholders stock certificates evidencing
the ▇▇▇▇▇ Securities, in amounts representing their allocable shares of the
Merger Consideration described in Section 2 of this Agreement.
8.8 Proceedings and Instruments Satisfactory. All proceedings
------------------------------------------
to be taken in connection with the transactions contemplated by this
Agreement, and all documents incidental thereto, shall be reasonably
satisfactory in form and substance to the Company, the Principal Stockholders
and their respective counsel.
8.9 Opinion of Counsel. The Company and the Principal
--------------------
Stockholders shall receive an opinion of counsel from counsel to Mergerco and
▇▇▇▇▇ substantially in such form as set forth on Exhibit H annexed hereto.
---------
9. CLOSING.
-------
9.1 Place and Date of Closing. Unless this Agreement shall be
-------------------------
terminated pursuant to Section 10 below, the consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place in New York,
New York at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, counsel to Mergerco and ▇▇▇▇▇,
located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such
other location as is agreed to between the parties, at 9:30 a.m. local time
on a date which shall be not more than five business days following notice by
▇▇▇▇▇ that it is ready to close (the "Closing Date"); provided, that in no
--------
event shall such Closing Date, the Closing and consummation of the Merger,
occur later than October 31, 1998, unless approved in writing by ▇▇▇▇▇ and
Mergerco. The effectiveness of the Merger shall occur on the Closing Date
simultaneous with the Closing.
9.2 Actions at Closing. On the Closing Date, simultaneous with
------------------
the Closing, Mergerco and the Company shall file or cause to be filed the
Certificate of Merger with the Secretary of State of New York. At such
Closing, there shall be made, by all necessary and appropriate persons, all
payments and deliveries stated in this Agreement to be made at the Closing
and/or on or prior to the Closing Date.
10. TERMINATION OF AGREEMENT.
------------------------
10.1 General. This Agreement may be terminated and the
-------
transactions contemplated hereby may be abandoned at any time prior to the
Closing: (a) by the mutual written consent of the Company, the Principal
Stockholders, Mergerco and ▇▇▇▇▇; (b) by Mergerco and ▇▇▇▇▇, on one hand, or
by the Company and the Principal Stockholders, on the other hand, if: (i) a
material breach shall exist with respect to the written representations and
warranties made by the other party or parties, as the case may be, (ii) the
other party or parties, as the case may be, shall take any action prohibited
by this Agreement, if such actions shall or may have a material adverse
effect on the Company and/or the transactions contemplated hereby, (iii) the
other party or parties, as the case may be, shall not have furnished, upon
reasonable
- 24 -
notice therefor, such certificates and documents required in connection with the
transactions contemplated hereby and matters incidental thereto as it or they
shall have agreed to furnish, and it is reasonably unlikely that the other party
or parties will be able to furnish such item(s) prior to the Outside Closing
Date specified below, or (iv) any consent of any third party to the transactions
contemplated hereby (whether or not the necessity of which is disclosed herein
or in any Schedule hereto) is reasonably necessary to prevent a default under
any outstanding material obligation of Mergerco or ▇▇▇▇▇, on one hand, and the
Principal Stockholders or the Company, on the other hand, and such consent is
not obtainable without material cost or penalty (unless the party or parties not
seeking to terminate this Agreement agrees or agree to pay such cost or
penalty); or (c) by Mergerco and ▇▇▇▇▇, at any time on or after September 15,
1998 (the "Outside Closing Date"), if the transactions contemplated hereby shall
not have been consummated prior thereto, and the party directing termination
shall not then be in breach or default of any obligations imposed upon such
party by this Agreement.
10.2 Notice of Termination.
---------------------
In the event of termination of this Agreement pursuant to
this Section 11, prompt written notice shall be given by the terminating
party or parties to the other party or parties.
11. INDEMNIFICATION.
---------------
11.1 General.
-------
(a) By the Company and the Principal Stockholders.
-----------------------------------------------------
Without prejudice to any rights of contribution as between the Principal
Stockholders and any other stockholder(s) of the Company, from and after the
Closing Date: (i) the Company and Kalpaxis shall jointly and severally; and
(ii) the other Principal Stockholders, to the extent set forth in Section 3
of this Agreement, defend, indemnify and hold harmless the Surviving
Corporation and ▇▇▇▇▇ from, against and in respect of any and all claims,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' fees,
that the Surviving Corporation or ▇▇▇▇▇ (collectively, the "▇▇▇▇▇ Group") may
incur, sustain or suffer ("Losses") as a result of any breach of, or failure
by the Company or such Principal Stockholder(s) to perform, any of the
representations, warranties, covenants or agreements of the Company or such
Principal Stockholder(s) contained in this Agreement or in any Exhibit or any
Schedule(s) furnished by or on behalf of the Company or such Principal
Stockholder(s) under this Agreement.
(b) By the ▇▇▇▇▇ Group. From and after the Closing Date,
------------------
the ▇▇▇▇▇ Group shall jointly and severally indemnify, defend and hold
harmless the Principal Stockholders and each other shareholder of the Company
from, against and in respect of any and all claims, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies, including
interest, penalties and reasonable attorneys' fees, that such person may
incur, sustain or suffer as a result of any breach of, or failure by Mergerco
or ▇▇▇▇▇ to perform, any of the representations, warranties, covenants or
agreements of Mergerco or ▇▇▇▇▇ contained in this Agreement.
- 25 -
11.2 Limitations on Certain Indemnities.
----------------------------------
(a) The Basket. Notwithstanding any other provision of
----------
this Agreement to the contrary, except for Losses arising out of claims for
breach of any of the warranties made under Sections 3.1, 3.2, 3.4, 3.8, 3.11,
3.15, 3.16 and/or 3.22 above, neither the Company nor any Principal
Stockholder shall be liable to the ▇▇▇▇▇ Group with respect to Losses unless
and until the aggregate amount of all Losses incurred by the Surviving
Corporation or ▇▇▇▇▇ shall exceed the sum of $60,000 (the "Basket"). The
applicable Principal Stockholder(s) shall thereafter be liable for all Losses
in excess of the Basket.
11.3 Limitation on Indemnity.
-----------------------
(a) Time Limitation on Indemnity for Breach of
-----------------------------------------------------
Representation and Warranty. The ▇▇▇▇▇ Group shall be entitled to
-------------------------------
indemnification by a Principal Stockholder and/or the Company for Losses
relating to: (i) breach of any representation or warranty hereunder only in
respect of claims for which notice of claim shall have been given to the
Principal Stockholder on or before the second anniversary of the Closing
Date, or (ii) with respect to Losses relating to a breach of any
representations or warranties under Section 3.8 above, the expiration of the
final statute of limitations for those tax returns covered by the warranties
under Section 3.8 above; provided, however, that there shall be no time
limitation on the ▇▇▇▇▇ Group's right to indemnification in respect of any
violation of any covenant or agreement on the part of such Principal
Stockholder contained in any Exhibit hereto, including the Subscription
Agreement, the Affiliate Letter, the Non-Competition Agreement, the Proxy or
the Employment Agreement.
(b) Prejudice of Rights to Defend. No member of the
---------------------------------
▇▇▇▇▇ Group shall be entitled to indemnification in the event that the
subject claim for indemnification relates to a third-party claim and the
▇▇▇▇▇ Group delayed giving notice thereof to the Company and/or the Principal
Stockholder to such an extent as to cause material prejudice to the defense
of such third-party claim.
11.4 Claims for Indemnity. Whenever a claim shall arise
---------------------
for which any party shall be entitled to indemnification hereunder, the
indemnified party shall notify the indemnifying party in writing within sixty
(60) days of the indemnified party's first receipt of notice of, or the
indemnified party's obtaining actual knowledge of, such claim, and in any
event within such shorter period as may be necessary for the indemnifying
party or parties to take appropriate action to resist such claim. Such
notice shall specify all facts known to the indemnified party giving rise to
such indemnity rights and shall estimate (to the extent reasonably possible)
the amount of potential liability arising therefrom. If the indemnifying
party shall be duly notified of such dispute, the parties shall attempt to
settle and compromise the same or may agree to submit the same to arbitration
or, if unable or unwilling to do any of the foregoing, such dispute shall be
settled by appropriate litigation, and any rights of indemnification
established by reason of such settlement, compromise, arbitration or
litigation
- 26 -
shall promptly thereafter be paid and satisfied by those indemnifying parties
obligated to make indemnification hereunder.
11.5 Right to Defend. If the facts giving rise to any
-----------------
claim for indemnification shall involve any actual or threatened action or
demand by any third party against the indemnified party or any of its
Affiliates, the indemnifying party or parties shall be entitled (without
prejudice to the indemnified party's right to participate at its own expense
through counsel of its own choosing), at their expense and through a single
counsel of their own choosing, to defend or prosecute such claim in the name
of the indemnifying party or parties, or any of them, or if necessary, in the
name of the indemnified party. In any event, the indemnified party shall
give the indemnifying party advance written notice of any proposed compromise
or settlement of any such claim. If the remedy sought in any such action or
demand is solely money damages, the indemnifying party shall have fifteen
(15) days after receipt of such notice of settlement to object to the
proposed compromise or settlement, and if it does so object, the indemnifying
party shall be required to undertake, conduct and control, though counsel of
its own choosing and at its sole expense, the settlement or defense thereof,
and the indemnified party shall cooperate with the indemnifying party in
connection therewith; if the remedy sought is other than one for solely money
damages, the indemnifying party shall not resolve such claim on behalf of
itself and the indemnified party over the reasonable objection of the
indemnified party.
12. COSTS.
-----
12.1 Finder's or Broker's Fees. Except as set forth
----------------------------
herein, each of Mergerco and ▇▇▇▇▇ (on the one hand) and the Company and the
Principal Stockholders (on the other hand) represents and warrants that
neither they nor any of their respective Affiliates have dealt with any
broker or finder in connection with any of the transactions contemplated by
this Agreement, and no broker or other person is entitled to any commission
or finder's fee in connection with any of these transactions.
12.2 Expenses. Mergerco, ▇▇▇▇▇, the Company and the
--------
Principal Stockholders shall each pay all of their own respective costs and
expenses incurred or to be incurred by them, respectively, in negotiating and
preparing this Agreement and in closing and carrying out the transactions
contemplated by this Agreement. Notwithstanding the foregoing, it is agreed
by and among the parties hereto that a maximum of $30,000 shall be paid by
▇▇▇▇▇ for the legal fees and disbursements of the Company and the Principal
Stockholders incurred in connection with the negotiation, preparation and
investigation of this Agreement and the other Exhibits, documents and
schedules as are prepared and delivered in connection with the consummation
of the transactions contemplated by this Agreement, to Messrs. ▇▇▇▇▇▇▇ ▇▇▇
and Blinkoff LLP, counsel to the Company and the Principal Stockholders, with
any fees and disbursements of such legal counsel in addition to such amounts
in the aggregate to be borne solely by persons or entities other than ▇▇▇▇▇
or the Company; provided, that if the Company or any of the Principal
Stockholders elect not to consummate the Merger for any reason other than
▇▇▇▇▇'▇: (i) termination of good faith negotiations or other refusal to
proceed to close the Merger based on other than the results of ▇▇▇▇▇'▇ due
diligence investigation, (ii) failure to execute agreements
- 27 -
substantially in accordance with the business and other terms contained in this
Agreement, without being based upon the results of its due diligence
investigation, or (iii) failure or refusal to comply with its contractual
obligations, covenants and agreements to be performed as conditions of the
Company and the Principal Stockholders to closing of the transactions
contemplated by this Agreement, without being based upon the results of its due
diligence investigation, then ▇▇▇▇▇ shall not be obligated to pay any of such
fees or expenses of counsel to the Company and the Principal Stockholders.
13. FORM OF AGREEMENT.
-----------------
13.1 Effect of Headings. The Section headings used in
--------------------
this Agreement and the titles of the Schedules hereto are included for
purposes of convenience only, and shall not affect the construction or
interpretation of any of the provisions hereof or of the information set
forth in such Schedules.
13.2 Entire Agreement; Waivers. This Agreement constitutes
--------------------------
the entire agreement between the parties pertaining to the subject matter
hereof, and supersedes all prior agreements or understandings as to such
subject matter. No party hereto has made any representation or warranty or
given any covenant to the other except as set forth in this Agreement and the
Schedules and Exhibits hereto. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by
the party making the waiver.
13.3 Counterparts. This Agreement may be executed
------------
simultaneously in any number of counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
13.4 Confidentiality. ▇▇▇▇▇, the Company and each of the
---------------
Principal Stockholders agree and acknowledge that in connection with ▇▇▇▇▇'▇
due diligence investigation of the Company, and the further negotiations to
be conducted between the parties regarding the terms of the proposed Merger,
each of the parties will receive confidential information of the other
party. ▇▇▇▇▇, each of the Principal Stockholders and the Company do hereby
agree to maintain, and to cause their representatives to maintain, such
information as confidential; and except as may be necessary to protect the
legal rights of a party in litigation if the proposed Merger is not
consummated, each party shall not divulge the confidential information of the
other party. In the event that the Merger is not consummated, each of the
parties agrees to return to the other party all confidential information of
the other party then in the receiving party's possession. The obligation of
confidentiality created herein shall not apply to information which was known
to a party prior to its disclosure hereunder, or which is, or falls into the
public domain (provided such did not fall into the public domain through the
unauthorized acts of a receiving party), or which a party is required to
disclose by law.
14. PARTIES.
-------
- 28 -
14.1 Parties in Interest. Nothing in this Agreement,
---------------------
whether expressed or implied, is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than the parties to
it and their respective heirs, executors, administrators, personal
representatives, successors and permitted assigns, nor is anything in this
Agreement intended to relieve or discharge the obligations or liability of
any third persons to any party to this Agreement, nor shall any provision
give any third persons any right of subrogation or action over or against any
party to this Agreement.
14.2 Notices. All notices, requests, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
to have been duly given on the date of service if served personally on the
party to whom notice is to be given, or on the third day after mailing if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, and properly addressed as follows:
(a) If to the Company and to Kalpaxis:
Astratek, Inc.
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(b) If to ▇▇▇▇▇ and the Trust:
c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy sent concurrently to:
▇▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(c) If to Mergerco, the Surviving Corporation
or ▇▇▇▇▇:
▇▇▇▇▇ Holdings, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
- 29 -
with a copy sent concurrently to:
Nixon, Hargrave, Devans & ▇▇▇▇▇ llp
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
or to such other address as any party shall have specified by notice in
writing given to all other parties.
15. MISCELLANEOUS.
-------------
15.1 Amendments and Modifications. No amendment or
--------------------------------
modification of this Agreement or any Exhibit or Schedule hereto shall be
valid unless made in writing and signed by the party to be charged therewith.
15.2 Non-Assignability; Binding Effect. Neither this
-----------------
Agreement, nor any of the rights or obligations of the parties hereunder,
shall be assignable by any party hereto without the prior written consent of
all other parties hereto. Otherwise, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, personal representatives, successors and
permitted assigns.
15.3 Governing Law; Jurisdiction. This Agreement shall be
----------------------------
construed and interpreted and the rights granted herein governed in
accordance with the laws of the State of New York applicable to contracts
made and to be performed wholly within such state.
15.4 Definition. Whenever in this Agreement the phrase
----------
"to the knowledge of" or "to the best knowledge of" is used, such person
shall be held to have made such investigation of the facts and circumstances,
including but not limited to communications with relevant employees,
consultants or other representatives as a reasonable person, given his/her
position with the Company or ▇▇▇▇▇, as applicable, would be expected to make
in order to be able to make the representations, warranties or other
statements made by such persons in this Agreement.
- 30 -
IN WITNESS WHEREOF, the parties have executed this Agreement on and as
of the date first set forth above.
▇▇▇▇▇ HOLDINGS, INC.
By:--------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
ASTRATEK ACQUISITION CORP.
By:---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
ASTRATEK, INC.
By:----------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
THE PRINCIPAL STOCKHOLDERS:
------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
THE ▇▇▇▇▇ FAMILY IRREVOCABLE
STOCK TRUST U/A DATED April 30, 1997
By:----------------------------------
, Trustee
By:----------------------------------
, Trustee
- 31 -
EXHIBITS
A - Certificate of Merger
B-1 - Form of Non-Competition Agreement
B-2 - Form of Confidentiality Agreement
C - Form of Employment Agreement
D-1 - Promissory Note of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
D-2 - Promissory Note of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
E - Form of Subscription Agreement
F - Form of Stockholder Agreement
G - Opinion of Counsel to the
Company and the Principal
Stockholders
H - Opinion of Counsel to
Mergerco and ▇▇▇▇▇
- 32 -
Exhibit 2.1
Exhibits and Schedules to the Agreement and Plan of Merger have been
omitted. The following is a list of the omitted Exhibits and Schedules which
▇▇▇▇▇ agrees to furnish supplementally to the Commission upon request:
Exhibits:
Exhibit A Certificate of Merger
Exhibit B-1 Form of Non-Competition Agreement
Exhibit B-2 Form of Confidentiality Agreement
Exhibit C Form of Employment Agreement
Exhibit D-1 Promissory Note of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Exhibit D-2 Promissory Note of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Exhibit E Form of Subscription Agreement
Exhibit F Form of Stockholder Agreement
Exhibit G Opinion of Counsel to the Company
and the Principal Stockholders
Exhibit H Opinion of Counsel to Mergerco and ▇▇▇▇▇
Schedules:
Schedule 3.1 Ownership of the Stock
Schedule 3.4 Capital Structure; Stock Ownership
Schedule 3.5 Investments
Schedule 3.6(b) Financial Information
Schedule 3.7 Certain Adverse Changes
Schedule 3.8 Tax Returns and Tax Audits
Schedule 3.9 Personal Property; Liens
Schedule 3.10 Real Property
Schedule 3.12 Inventories
Schedule 3.13 Insurance Policies
Schedule 3.15 Contracts and Commitments
Schedule 3.17 Labor, Benefit and Employment Agreements
Schedule 3.18 No Breach of Statute, Decree or Other Instrument
Schedule 3.19 Compliance with Laws
Schedule 3.20 Litigation
Schedule 3.21 Patents, Licenses and Trademarks
Schedule 3.22 Transactions with Affiliates
Schedule 3.23 Bank Accounts
Schedule 6.3 Key Employees
Schedule 6.8 Employee Cash Bonuses
EXHIBIT D
---------
STOCKHOLDER AGREEMENT
This Stockholder Agreement (this "Agreement"), entered into this 23rd
day of October, 1998, among ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇
("▇▇▇▇▇") and THE ▇▇▇▇▇ FAMILY IRREVOCABLE STOCK TRUST U/A DATED April 30,
1997 (the "Trust"), ▇▇▇▇▇ HOLDINGS, INC., a Delaware corporation ("▇▇▇▇▇"),
having its principal offices at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇, ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ASTRATEK ACQUISITION CORP., a New York corporation
("Mergerco"), having its principal executive offices at c/o Nixon, Hargrave,
Devans & ▇▇▇▇▇ llp, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇;. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ and the Trust are hereinafter individually referred to as the
"Stockholders."
W I T N E S S E T H:
WHEREAS, ▇▇▇▇▇ and Mergerco have entered into that certain Agreement
and Plan of Merger, dated October 23, 1998 (the "Merger Agreement") with
ASTRATEK, INC., a New York corporation (the "Company"), having its principal
offices at ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; and ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
and THE TRUST; and
WHEREAS, as an inducement to cause ▇▇▇▇▇ and Mergerco to enter into the
Merger Agreement with the Company, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ and the Trust have agreed
to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto intending to be bound hereby, it is
hereby agreed as follows:
1. Representations and Warranties of the Stockholders. Each of the
-------------------------------------------------------
Stockholders who has executed this Agreement does hereby severally and
individually (and not jointly and severally) represent and warrant to ▇▇▇▇▇
and Mergerco, as follows:
(a) The number of shares of common stock of the Company (the
"Stock") owned beneficially by such Stockholder is as set forth on Schedule A
annexed hereto. Such Stockholder is the legal and beneficial owner of his or
her shares of the Stock, free and clear of all pledges, liens, claims,
charges, options, calls, encumbrances, restrictions and assessments
whatsoever, except any restrictions which may be created by operation of
state or federal securities laws.
(b) The execution, delivery and performance of this Agreement,
the Merger Agreement and the consummation of the Merger and the other
transactions contemplated by the Merger Agreement has been duly and validly
authorized by such Stockholder in his or her capacity as a stockholder of the
Company, and, with respect to Kalpaxis and ▇▇▇▇▇ , in his capacity as a
member of the Board of Directors of the Company. Such Stockholder has full
legal right, power and authority to execute and deliver this Agreement and to
consummate the
transactions contemplated hereby. This Agreement and, when executed and
delivered by such Stockholder, the Subscription Agreement to be executed by each
Stockholder in favor of ▇▇▇▇▇, constitutes and will constitute the legal, valid
and binding obligations of such Stockholder, enforceable against such
Stockholder in accordance with their respective terms, except to the extent
limited by bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally, and except that the remedy of specific performance
or similar equitable relief is available only at the discretion of the court
before which enforcement is sought.
2. Representations With Respect to the Percentage. ▇▇▇▇▇ and the Trust do
-----------------------------------------------
hereby represent that ▇▇▇▇▇ and the Trust, along with any affiliates of
either, do not have, in the aggregate, record or beneficial ownership of more
than 613,798 shares of ▇▇▇▇▇ Common Stock (which includes ▇▇▇▇▇'▇ ownership
of warrants to acquire 100,000 shares of ▇▇▇▇▇ Common Stock exercisable at
$1.00 per share).
3. Binding Effect; Definitions. This Agreement shall be valid and binding
----------------------------
upon each Stockholder executing this Agreement even if all of the persons
named as Stockholders herein do not so execute such Agreement. All
capitalized terms used herein and not otherwise defined shall have the same
definitions as are contained in the Merger Agreement.
IN WITNESS WHEREOF, each of the undersigned have executed this
Agreement, the date and year first above written.
▇▇▇▇▇ HOLDINGS, INC.
By:_____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
ASTRATEK ACQUISITION CORP.
By:_____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
THE STOCKHOLDERS:
_______________________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
- 2 -
THE ▇▇▇▇▇ FAMILY IRREVOCABLE
STOCK TRUST U/A DATED April 30, 1997
By:_______________________________________
, Trustee
By:_______________________________________
, Trustee
- 3 -
SCHEDULE A
----------
Number of Astratek, Inc.
Name Common Shares Owned
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,410,350
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 261,710
THE ▇▇▇▇▇ FAMILY IRREVOCABLE STOCK 811,769
TRUST U/A DATED April 30, 1997