EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INTERNATIONAL MANUFACTURERS GATEWAY, INC.,
DTOMI ACQUISITION CORP.
AND
COPPER VALLEY MINERALS LTD.
DATED AS OF OCTOBER 24, 2001
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER is made and entered into as of
October 24, 2001 by and among Copper Valley Minerals Ltd., a Nevada corporation
("PARENT"), Dtomi Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of the Parent ("MERGER SUB"), and International Manufacturers
Gateway, Inc., a Delaware corporation (the "COMPANY"), (collectively the
"Parties").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2) and in accordance with the Nevada Revised Statutes and
the Delaware General Corporation Law ("DELAWARE LAW"), the Parent, the Merger
Sub and the Company intend to enter into a business combination transaction.
B. The Parties wish to provide for the terms and conditions of a merger
of the Merger Sub with and into the Company, in a transaction that is intended
to qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and as a reverse
triangular under Code Sections 368(a)(1)(A) and Section 368(a)(2)(E) and provide
for the representations, warranties. Agreements and conditions applicable to the
merger.
C. The Parties intend that this Agreement constitutes a "plan of
reorganization" for the purposes of Section 368 of the Code.
D. Immediately upon the Effective Time (as defined in Section 1.2) of
the Merger (as defined herein), the Board of Directors of the Parent (as the
combined company resulting from such business combination transaction) will
consist of at least one (1) member, with designees of the Company, as set forth
herein, to hold up to five (5) of such seats. It is also contemplated that the
senior management of the combined company will, as set forth herein, consist of
senior management from the Company.
E. The Board of Directors of the Company (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and fair to, and in the best interests of, the Company and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has recommended that the
stockholders of the Company adopt and approve this Agreement and approve the
Merger.
F. The Board of Directors of the Parent (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Parent and fair to, and in the best interests of, the Parent and its
shareholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has recommended that the
shareholders of the Parent vote to approve the issuance of shares of Parent
Common Stock (as defined herein) to the stockholders of the Company pursuant to
the terms of the Merger.
NOW, THEREFORE, in consideration of the covenants, promises and representations
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
the Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation. The Company
as the surviving corporation after the Merger is hereinafter sometimes referred
to as the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger, substantially in the form of Exhibit A hereto (the
"CERTIFICATE OF MERGER"), with the Secretary of State of the State of Delaware
and the Secretary of State of the State of Nevada, in accordance with the
relevant provisions of Delaware and Nevada Law (the time of such filing (or such
later time as may be agreed in writing by the parties and specified in the
Certificate of Merger) being the "EFFECTIVE TIME") as soon as practicable on or
after the Closing Date (as defined herein). Unless the context otherwise
requires, the term "AGREEMENT" as used herein refers collectively to this
Agreement and Plan of Reorganization and the Certificate of Merger. The closing
of the Merger (the "CLOSING") shall take place at the offices of The ▇▇▇▇ Law
Group, PLLC, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at a time
and date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set forth in
Article VI, or at such other time, date and location as the parties hereto agree
in writing (the "CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law.
(b) The Bylaws of the Company, as in effect immediately prior to
the Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Conversion of Company Common Stock. Each 2 shares of Common
Stock, $.0001 par value per share of the Company (the "COMPANY COMMON STOCK")
issued and outstanding immediately prior to the Effective Time, (other than any
shares of the Company Common Stock to be canceled pursuant to Section 1.6(c))
will be canceled and extinguished and automatically converted (subject to
Sections 1.5(e) and (f)) into the right to receive 1 (the "EXCHANGE RATIO")
share of Common Stock, $.001 par value, of the Parent (the "PARENT COMMON
STOCK") upon surrender of the certificate representing such share of the Company
Common Stock in the manner provided in Section 1.6 (or in the case of a lost,
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stolen or destroyed certificate, upon delivery of an affidavit (and bond, if
required) in the manner provided in Section 1.9). If any shares of the Company
Common Stock outstanding immediately prior to the Effective Time are unvested or
are subject to a repurchase option, risk of forfeiture or other condition under
any applicable restricted stock purchase agreement or other agreement with the
Company, then the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. The Company shall take all action that may be necessary to
ensure that, from and after the Effective Time, the Parent is entitled to
exercise any such repurchase option or other right set forth in any such
restricted stock purchase agreement or other agreement.
(b) Percentage Ownership. It is understood and agreed by the
Parties that the aggregate number of shares of Parent Common Stock issuable to
the Company shareholders by virtue of the Merger as of the date hereof shall
equal approximately sixty one percent (61%) (which, for the avoidance of doubt,
assumes that all outstanding securities exercisable for, or convertible into,
shares of Company Common Stock have not been so exercised or converted, and that
all of the Company Stock Options have not been exercised), as adjusted to
appropriately reflect the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Common Stock), reorganization, recapitalization
or other like change with respect to Parent Common Stock or Company Common Stock
occurring on or after the date hereof and prior to the Effective Time. All
options, warrants or other securities of the Company convertible into Company
Common Stock, whether authorized and unissued or issued and outstanding, upon
issuance and/or conversion, represent approximately twenty percent (20%) of the
shares of Parent Common Stock outstanding on a fully-diluted basis, assuming
consummation of the Merger (which, for the avoidance of doubt, assumes that all
the Parent outstanding securities exercisable for, or convertible into, shares
of Parent Common Stock have been so exercised or converted, and that all of the
Parent Stock Options have been exercised as of the Effective Date).
(c) Cancellation of Parent-Owned Stock. Each share of the Company
Common Stock held by the Company or owned by the Merger Sub, the Parent or any
direct or indirect wholly-owned subsidiary of the Company or of the Parent
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(d) Stock Options; Employee Stock Purchase Plans. At the Effective
Time, all options to purchase the Company Common Stock then outstanding under
the Company's 2000 Stock Option Plan, the ("COMPANY STOCK OPTION PLAN") shall be
assumed by the Parent in accordance with Section 4.6 hereof. The Parent shall
also assume the Company's 2001 Stock Option Plan, under which no options have
been issued.
(e) Capital Stock of Merger Sub. Each share of Common Stock, $.0001
par value per share, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock, $.0001 par
value, of the Surviving Corporation. Each certificate evidencing ownership of
shares of Merger Sub Common Stock shall continue to evidence ownership of such
shares of capital stock of the Surviving Corporation. Any shares of Merger Sub
Common Stock that are (i) converted into shares of Surviving Corporation Common
Stock and (ii) owned by the Parent will be cancelled at the Effective Time.
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(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted (such adjustment to be subject to the consent of the Company, which
shall not be unreasonably withheld) to reflect appropriately the effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Common Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock occurring on or after the
date hereof and prior to the Effective Time.
(g) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such holder) shall receive from Parent one
full share of Parent Common Stock (i.e. rounded up to the nearest whole share).
1.6 Surrender of Certificates.
(a) Exchange Agent. Parent shall select Pacific Stock Transfer to
act as the exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) The Parent to Provide Common Stock. Promptly after the
Effective Time, the Parent shall make available to the Exchange Agent, for
exchange in accordance with this Article I, certificates representing the shares
of Parent Common Stock issuable pursuant to Section 1.5 in exchange for
outstanding shares of Company Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time, the
Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.5, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as the Parent may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common. Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by the Parent, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, the
holders of such Certificates shall be entitled to receive in exchange therefor
certificates representing the number of whole shares of Parent Common Stock
which such holders have the right to receive and the Certificates so surrendered
shall forthwith be canceled. Until so surrendered, outstanding Certificates will
be deemed from and after the Effective Time, for all corporate purposes to
evidence only the ownership of the number of full shares of Parent Common Stock
into which such shares of Company Common Stock shall be exchanged.
(d) Distributions With Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the holders of record of
such Certificates shall surrender such Certificates. Following surrender of any
such Certificates, the Exchange Agent shall deliver to the record holders
thereof, without interest, certificates representing whole shares of Parent
Common Stock issued in exchange hereof and, subject to applicable law, the
amount of any such dividends or other distributions with a record date after the
Effective Time payable with respect to such whole shares of Parent Common Stock.
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(e) Transfers of Ownership. If certificates for shares of Parent
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to the Parent or any agent designated by
it any transfer or other taxes required by reason of the issuance of
certificates for shares of Parent Common Stock in any name other than that of
the registered holder of the Certificates surrendered, or established to the
satisfaction of the Parent or any agent designated by it that such tax has been
paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.6, neither the Exchange Agent, the Parent, the Surviving Corporation
nor any party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.7 No Further Ownership Rights in the Company Common Stock. All shares
of Parent Common Stock issued upon the surrender for exchange of shares of the
Company Common Stock in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If after the Effective
Time Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.8 Appraisal Rights.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of capital stock of the Company held by a holder who has
exercised and perfected appraisal rights for such shares in accordance with
Delaware Law and who, as of the Effective Time, has not effectively withdrawn or
lost such appraisal rights ("DISSENTING SHARES"), shall not be converted into or
represent a right to receive that number of shares of Parent Common Stock
(including any cash in lieu of fractional shares) that such holder is entitled
to receive in the Merger, but the holder thereof shall only be entitled to such
rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of subsection (a), if any holder
of Dissenting Shares shall effectively withdraw or lose (through failure to
perfect or otherwise) such holder's appraisal rights, then, as of the later of
the Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive that
number of shares of Parent Common Stock, plus any cash in lieu of fractional
shares, upon surrender of the certificate representing such shares.
(c) The Company shall give the Parent (i) prompt notice of any
written demand for appraisal received by the Company pursuant to the applicable
provisions of Delaware Law and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of the Parent, voluntarily make any
payment or offer to make any payment with respect to any such demands or offer
to settle or settle any such demands. Any payments relating to Dissenting Shares
shall be made solely by the Surviving Corporation, and no funds or other
property will be provided by Merger Sub.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
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making of an affidavit of that fact by the holder thereof, such shares of Parent
Common Stock; provided, however, that the Parent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against the
Parent, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.10 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code. The
parties hereto adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
1.11 Taking of Necessary Action, Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub will take all such lawful and necessary action, so long
as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and the Merger Sub,
subject to the exceptions specifically disclosed in writing and referencing a
specific representation in the disclosure letter supplied by the Company to the
Parent dated as of the date hereof and certified by a duly authorized officer of
the Company (the "COMPANY DISCLOSURE LETTER"), as follows:
2.1 Organization of the Company.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation;
has the corporate power and authority to own, lease and operate its assets and
property and to carry on its business as now being conducted and as proposed to
be conducted; and is duly qualified or licensed to do business and is in good
standing in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified would not have a Material Adverse Effect (as defined herein) on the
Company.
(b) The Company has no subsidiaries.
(c) The Company has delivered or made available to the Parent a
true and correct copy of the Certificate of Incorporation and Bylaws of the
Company, as amended to date, and each such instrument is in full force and
effect. The Company is not in violation of any of the provisions of its
Certificate of Incorporation or Bylaws or equivalent governing instruments.
(d) When used in connection with the Company, the term "MATERIAL
ADVERSE EFFECT" means, for purposes of this Agreement, any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of the Company taken as a
whole except for those changes, events and effects that are directly caused by
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(i) conditions affecting the United States economy as a whole, or (ii)
conditions affecting the internet industry as a whole, which conditions (in the
case of clause (i) or (ii)) do not affect the Company in a disproportionate
manner) or (iii) conditions that in the good faith judgment of the Company's
Board of Directors result principally from the execution or delivery of this
Agreement or the announcement of the pendency of the Merger.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
140,000,000 shares of Common Stock, $.0001 par value per share, of which there
were approximately 13,521,762shares issued and outstanding as of the date of
this Agreement and 60,000,000 shares of Series A Preferred Stock, $.0001 par
value per share, of which there were 5,425,826 shares issued and outstanding as
of the date of this Agreement. All outstanding shares of Company Common Stock
are duly authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Company or any agreement or document to which the
Company is a party or by which it is bound.
(b) As of the date of this Agreement, 4,000,000 (2,000,000 and
2,000,000, respectively) shares of Company Common Stock are reserved for future
issuance under the Company's 2000 and 2001 Stock Option Plans (Stock options
granted by the Company pursuant to the Company Stock Option Plans are referred
to in this Agreement as "COMPANY STOCK OPTIONS").
Section 2.2(b) of the Company Disclosure Letter sets forth the
following information with respect to each Company Stock Option outstanding as
of the date of this Agreement: (i) the name of the optionee; (ii) the particular
plan pursuant to which such Company Stock Option was granted; (iii) the number
of shares of Company Common Stock subject to such Company Stock Option; (iv) the
exercise price of such Company Stock Option; (v) the date on which such Company
Stock Option was granted; and (vi) the date on which such Company Stock Option
expires. The Company has made available to the Parent accurate and complete
copies of the Company Stock Option Plans and the forms of all agreements
evidencing the Company Stock Options. All shares of Company Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in Section
2.2(b)(i) of the Company Disclosure Letter, there are no commitments or
agreements of any character to which the Company is bound obligating the Company
to accelerate the vesting of any Company Stock Option as a result of the Merger.
2.3 Obligations With Respect to Capital Stock. Except as set forth
in Section 2.2 of the Company Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of the
Company, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. There are no equity securities,
partnership interests or similar ownership interests of the Company, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Section 2.2, there
are no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which the Company is a party or by which it is
bound obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition, of any shares of capital stock,
partnership interests or similar ownership interests of the Company or
obligating the Company to grant, extend, accelerate the vesting of or enter into
any such option, warrant, equity security, call, right, commitment or agreement.
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There are no registration rights and, to the knowledge of the Company, as of the
date of this Agreement, there are no voting trusts, proxies or other agreements
or understandings (except for the Company Voting Agreements) with respect to any
equity security of any class of the Company.
2.4 Authority.
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by the Company's
stockholders and the filing of the Certificate of Merger pursuant to Delaware
Law. A vote of the holders of a majority of the outstanding shares of Company
Common Stock is required for the Company's stockholders to approve and adopt
this Agreement and approve the Merger. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by the Parent and, if applicable, Merger Sub, constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement by
the Company does not, and the performance of this Agreement by the Company will
not, (i) conflict with or violate the Certificate of Incorporation or Bylaws of
the Company, (ii) subject to obtaining the approval and adoption of this
Agreement and the approval of the Merger by the Company's stockholders as
contemplated in Section 5.1 and compliance with the requirements set forth in
Section 2.4(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or by which its or any of their
respective properties is bound or affected, or (iii) assuming the receipt of all
material consents, waivers and approvals referred to in the last sentence of
this Section 2.4(a), result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or impair the Company's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company is a
party or by which the Company or its or any of their respective properties are
bound or affected. The Company Schedules list all material consents, waivers and
approvals under any of the Company's agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic ("GOVERNMENTAL ENTITY"), is required by or with respect to the Company
in connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (ii) such consents,
approvals, orders, authorizations, registrations, declarations and filings (if
any) as may be required under applicable federal and state securities laws and
the securities or antitrust laws of any foreign country, and (iii) such other
consents, authorizations, filings, approvals and registrations (if any) which if
not obtained or made would not be material to the Company or the Parent or have
a material adverse effect on the ability of the parties to consummate the
Merger.
2.5 Company Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) of the Company
(the "THE COMPANY FINANCIALS"), (x) was prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
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the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, and (y) fairly presented the
consolidated financial position of the Company and its subsidiaries as of and at
the respective dates thereof and the consolidated results of the Company's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of the Company
as of May 31, 2001 is hereinafter referred to as the "THE COMPANY BALANCE
SHEET." Except as disclosed in the Company Financials, since the date of the
Company Balance Sheet the Company has no liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance sheet
or in the related notes to the consolidated financial statements prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of the Company taken
as a whole, except liabilities (i) provided for in the Company Balance Sheet, or
(ii) incurred since the date of the Company Balance Sheet in the ordinary course
of business consistent with past practices.
2.6 Absence of Certain Changes or Events. Since the date of the Company
Balance Sheet there has not been: (i) any Material Adverse Effect on the
Company, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
the Company's capital stock, or any purchase, redemption or other acquisition by
the Company of any of the Company's capital stock or any other securities of the
Company or any options, warrants, calls or rights to acquire any such shares or
other securities except for repurchases from employees following their
termination pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of the
Company's capital stock, (iv) any granting by the Company of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by the Company of any bonus, except for bonuses made in the
ordinary course of business consistent with past practice, or any granting by
the Company of any increase in severance or termination pay or any entry by the
Company into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving the Company of the nature contemplated hereby, (v) entry
by the Company into any licensing or other agreement with regard to the
acquisition or disposition of any material Company IP Rights (as defined in
Section 2.8) other than licenses in the ordinary course of business consistent
with past practice, (vi) any material change by the Company in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP, or (vii) any revaluation by the Company of any of its assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of business.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or "Taxes" refers to any and all (i) federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, (ii) all interest, penalties and additions imposed with respect
to such amounts, and (iii) any obligations to any tax authority under Treasury
Regulation 1.1502-6 or any similar provision of state, local or foreign law.
10
(b) Tax Returns and Audits.
(i) The Company has timely filed all federal, state, local and
foreign returns, estimates, information statements and reports ("RETURNS")
relating to Taxes required to be filed by the Company, except such Returns which
are not material to the Company, and have paid all Taxes shown to be due on such
Returns. All such Returns are true, correct and complete in all material
respects.
(ii) The Company as of the Effective Time will have withheld
and paid over, as appropriate, with respect to its employees all federal and
state, local and/or foreign income taxes, Taxes pursuant to the Federal
Insurance Contribution Act ("FICA"), Taxes pursuant to the Federal Unemployment
Tax Act ("FUTA") and other Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, proposed or assessed against
the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of the Company
is presently in progress, nor has the Company been notified of any request for
such an audit or other examination. The Company has not received a request for
or an inquiry regarding a Return from any jurisdiction where it does not
currently file a Return.
(v) No adjustment relating to any Returns filed by the Company
has been proposed formally or informally by any Tax authority to the Company or
any representative thereof and, to the knowledge of the Company, no basis exists
for any such adjustment which would be material to the Company.
(vi) The Company does not have any liability for unpaid Taxes
which has not been accrued for or reserved on the Company Balance Sheet, whether
asserted or unasserted, contingent or otherwise, which is material to the
Company, and the Company has not incurred any liability for Taxes other than in
the ordinary course of business since the date of the Company Balance Sheet.
There is no lien for Taxes on the assets of the Company other than inchoate
liens for Taxes not yet due.
(vii) None of the Company's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(viii) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to Sections 162, 280G or 404 of the Code.
(ix) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(x) The Company is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xi) No power of attorney that is currently in force has been
granted with respect to any matter relating to Taxes payable by the Company.
11
(xii) The Company has never been a member of a consolidated,
combined or affiliated group or is a party to or affected by any tax-sharing or
allocation agreement or arrangement.
(xiii) The Company Schedules list (A) any Tax exemption, Tax
holiday or other Tax-sparing arrangement that the Company has in any
jurisdiction, including the nature, amount and lengths of such Tax exemption,
Tax holiday or other Tax-sparing arrangement and (B) any expatriate tax programs
or policies affecting the Company. The Company is in full compliance with all
terms and conditions of any Tax exemption, Tax holiday or other Tax-sparing
arrangement or order of any Governmental Entity and the consummation of the
transactions contemplated hereby will not have any adverse effect on the
continued validity and effectiveness of any such Tax exemption, Tax holiday or
other Tax-sparing arrangement or order.
(xiv) The Company is not a party to or otherwise subject to any
arrangement entered into in anticipation of the Closing, not in accordance with
past practice and not required by this Agreement, that could reasonably be
expected to have the effect of (i) the recognition of a deduction or loss before
the Closing Date and a corresponding recognition of taxable income or gain by
the Company after the Closing Date or (ii) the recognition of taxable income or
gain by the Company after the Closing Date without the receipt of or entitlement
to a corresponding amount of cash.
(xv) Except as set forth in Schedule 2.7(b)(xv), no closing
agreement, written ruling, or determination letter with respect to Taxes, or any
equivalent written decision from a foreign jurisdiction, has been received from,
and no closing or other similar agreement has been executed with, any Tax or
other governmental authority that will be binding upon the Company after the
Closing.
(xvi) The Company has properly withheld on all amounts paid to
Persons located or incorporated outside of the United States and have paid the
appropriate amounts withheld to the proper governmental authorities.
(xvii) The Company has not been a party to a transaction
intended to qualify under Section 355 of the Code (whether as distributing or
distributed company) within the last five years.
2.8 Intellectual Property.
(a) To the knowledge of the Company, the Company owns, or has the
right to use, sell or license all intellectual property necessary or required
for the conduct of its respective businesses as presently conducted (such
intellectual property and the rights thereto are collectively referred to herein
as the "COMPANY IP Rights").
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any of the Company IP Rights to
which the Company is a party or by which, to its knowledge, it is bound or
affected, will not cause the forfeiture or termination or give rise to a right
of forfeiture or termination of any the Company IP Rights or materially impair
the right of the Company, the Surviving Corporation or the Parent to use, sell
or license any the Company IP Rights or portion thereof.
(c) To the knowledge of the Company, the manufacture, marketing,
license, sale or intended use of any product or technology currently licensed or
sold or under development by the Company does not violate any license or
agreement between the Company and any third party nor infringe any intellectual
property right of any other party.
12
(d) There is no pending or, to the knowledge of the Company,
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any the Company IP Rights, nor has the Company
received any written notice asserting that any the Company IP Rights or the
proposed use, sale, license or disposition thereof conflicts or will conflict
with the rights of any other party. Schedule 2.8 of the Company Disclosure
Letter lists each patent held by the Company and the expiration date of each
such patent.
(e) The Company has taken commercially reasonable steps designed to
safeguard and maintain the confidentiality of, and its proprietary rights in,
all the Company IP Rights.
2.9 Compliance; Permits; Restrictions.
(a) The Company is not in any material respect, in conflict with,
or in default or violation of (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or by which the Company or any of its
respective properties is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the Company
or its properties is bound or affected. No investigation or review by any
Governmental Entity is pending or, to the Company's knowledge, threatened
against the Company, nor has any Governmental Entity indicated an intention to
conduct the same. There is no agreement, judgment, injunction, order or decree
binding upon the Company which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of the
Company, any acquisition of material property by the Company or the conduct of
business by the Company as currently conducted.
(b) The Company holds all permits, licenses, variances, exemptions,
orders and approvals from governmental authorities which are material to the
operation of the business of the Company (collectively, the "COMPANY PERMITS").
The Company is in compliance in all material respects with the terms of the
Company Permits.
(c) Except as disclosed in Section 2.9(c) of the Company Disclosure
Letter, the Company has no knowledge of any pending regulatory action of any
sort against the Company, or the Company's products by any regulatory agency or
any other duly authorized governmental authority which could have a Material
Adverse Effect on the Company or in any material way limit or restrict the
ability of the Company to market its existing products. Except as set forth on
Section 2.9(c) of the Company Disclosure Letter, the Company, has not knowingly
committed or permitted to exist any violation of the rules and regulations of
any regulatory agency or any other duly authorized governmental authority.
2.10 Litigation. Except as disclosed in Section 2.10 of the Company
Disclosure Letter, there is no action, suit, proceeding, claim, arbitration or
investigation pending, or as to which the Company has received any notice of
assertion nor, to the Company's knowledge, is there a threatened action, suit,
proceeding, claim, arbitration or investigation against the Company which
reasonably would be likely to be material to the Company, or which in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement.
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2.11 Employee Benefit Plans and Employment Matters.
(a) The Company has no employee benefit plans, pension plans or
multi-employee Plans
(b) Employment Matters. To the Company's knowledge, the Company (i)
is in compliance in all material respects with all applicable foreign, federal,
state and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Company Employees; (ii) has withheld all amounts required by law
or by agreement to be withheld from the wages, salaries and other payments to
Company Employees; (iii) is not liable for any arrears of wages or any taxes or
any penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any material payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Company Employees (other than routine payments to be made in the normal course
of business and consistent with past practice). There are no pending, threatened
or reasonably anticipated claims or actions against the Company under any
worker's compensation policy or long-term disability policy. To the Company's
knowledge, no employee of the Company has violated any employment contract,
nondisclosure agreement or noncompetition agreement by which such employee is
bound due to such employee being employed by the Company and disclosing to the
Company or using trade secrets or proprietary information of any other person or
entity.
2.12 Absence of Liens and Encumbrances. Except as set forth in Schedule
2.13, the Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its material
tangible properties and assets, real, personal and mixed, used in its business,
free and clear of any liens or encumbrances except as reflected in the Company
Financials and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which would not be material to
the Company.
2.13 Environmental Matters.
(a) The Company has complied and is in compliance with all
Environmental, Health and Safety Requirements.
(b) Without limiting the generality of the foregoing, the Company
has obtained and complied with, and is in compliance with, all permits, licenses
and other authorizations that are required pursuant to Environmental, Health and
Safety Requirements for the occupation of its facilities and the operation of
its business.
(c) The Company has not received any written or oral notice, report
or other information regarding any actual or alleged violation of Environmental,
Health and Safety Requirements, or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise), including
any investigatory, remedial or corrective obligations, relating to it or its
facilities arising under Environmental, Health, and Safety Requirements.
2.14 Labor Matters. No work stoppage or labor strike against the
Company is pending, threatened or reasonably anticipated. The Company does not
have knowledge of any activities or proceedings of any labor union to organize
any Company Employees. There are no actions, suits, claims, labor disputes or
grievances pending, or, to the knowledge of the Company, threatened or
reasonably anticipated relating to any labor, safety or discrimination matters
involving any Company Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
14
would, individually or in the aggregate, result in any material liability to the
Company. The Company has not engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. The Company is not presently, nor
has it been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to Company Employees and no collective
bargaining agreement is being negotiated by the Company. The Company is and has
been in compliance in all material respects with all applicable laws regarding
employment practices, terms and conditions of employment, and wages and hours
(including, without limitation, WARN or any similar state or local law).
2.15 Agreements, Contracts and Commitments. Except as set forth in
Section 2.16 and Section 2.2(b) of the Company Disclosure Letter, the Company is
not a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment
with any officer or director level employee or member of the Company's Board of
Directors, other than those that are terminable by the Company on no more than
thirty (30) days notice without liability or financial obligation;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or guaranty not entered into
in the ordinary course of business other than indemnification agreements between
the Company and any of its officers or directors;
(d) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business or compete
with any person or granting any exclusive distribution rights;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise; or
(f) any material joint marketing or development agreement.
The Company, or to the Company's knowledge any other party to a Company
Contract (as defined herein), has breached, violated or defaulted under, or
received notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which the Company is a party or by which it is bound of the type described in
clauses (a) through (f) above (any such agreement, contract or commitment, a
"COMPANY CONTRACT") in such a manner as would permit any other party to cancel
or terminate any such Company Contract, or would permit any other party to seek
damages, which would be reasonably likely to be material to the Company.
2.16 Change of Control Payments. The Company Schedules set forth each
plan or agreement pursuant to which any amounts may become payable (whether
currently or in the future) to current or former officers or directors of the
Company as a result of or in connection with the Merger.
15
2.17 Board Approval. The Board of Directors of the Company has, as of
the date of this Agreement, determined (i) that the Merger is fair to, and in
the best interests of the Company and its stockholders, (ii) to propose this
Agreement for approval and adoption by a majority of the Company's stockholders
and to declare the advisability of this Agreement, and (iii) to recommend that
the stockholders of the Company approve and adopt this Agreement and approve the
Merger.
2.18 Company Stockholders. The stockholders of the Company represent or
acknowledge the following:
(a) They are either accredited investors as such term is defined in
the Securities Act of 1933, as amended, or are foreign investors who have
acquired their shares in a transaction pursuant to Regulation S.
(b) Any exchange of Parent Common Stock will be made in
transactions exempt from applicable state or federal securities laws.
(c) The Parent Common Stock will be acquired for investment
purposes and not with a view to the public resale or distribution thereof.
(d) Each certificate representing Parent Common Stock pursuant to
Section 1.5 shall contain the following legend:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any state securities laws. The
shares may not be transferred, signed, sold or offered for sale except pursuant
to an effective registration statement under such Act or any applicable state
securities law or any opinion of counsel, in the form and substance acceptable
to the Parent, that registration is not required because of an applicable
exemption from such registration requirements. The sale or transfer of shares
evidenced by this certificate are subject to the terms and conditions of an
agreement and plan of merger dated as of October 24, 2001, and effective no
later than November 15, 2001. Any transfer in violation of such Agreement is
invalid. A copy of the Agreement is on file at the office of the Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE MERGER SUB
The Parent and the Merger Sub represent and warrant to the Company,
subject to the exceptions specifically disclosed in writing in the disclosure
letter supplied by the Parent to the Company dated as of the date hereof and
certified by a duly authorized officer of the Parent (the "PARENT DISCLOSURE
LETTER"), as follows:
3.1 Organization of the Parent.
(a) The Parent its sole subsidiary (which as of the Effective Time
shall include Merger Sub) are corporations duly organized, validly existing and
in good standing under the laws of the jurisdiction of their incorporation; have
the corporate power and authority to own, lease and operate its assets and
property and to carry on its business as now being conducted and as proposed to
be conducted; and is duly qualified or licensed to do business and is in good
standing in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified would not have a Material Adverse Effect (as defined herein) on the
Parent.
16
(b) The Parent has delivered to the Company a true and complete
list of all of the Parent's subsidiaries, indicating the jurisdiction of
incorporation of each subsidiary and listing the shareholders of each such
subsidiary and the number of shares held by each such shareholder.
(c) The Parent has delivered or made available to the Company a
true and correct copy of the Certificate of Incorporation and Bylaws of the
Parent and similar governing instruments of each of its subsidiaries, each as
amended to date, and each such instrument is in full force and effect. The
Parent is not in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent governing instruments.
(d) When used in connection with the Parent, the term "MATERIAL
ADVERSE EFFECT" means, for purposes of this Agreement, any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of the Parent and its
subsidiaries taken as a whole except for those changes, events and effects that
are directly caused by (i) conditions affecting the United States economy as a
whole, or (ii) conditions affecting the internet industry as a whole, which
conditions (in the case of clause (i) or (ii)) do not affect the Parent in a
disproportionate manner), or (iii) conditions that in the good faith judgment of
the Parent's Board of Directors result principally from the execution or
delivery of this Agreement or the announcement of the pendency of the Merger.
3.2 The Parent and the Merger Sub Capital Structure.
(a) The authorized capital stock of the Parent consists of
100,000,000 shares of Common Stock, $.001 par value per share, of which as of
October 24, 2001 there were 6,099,000 shares issued and outstanding (assuming
consummation of the Parent's contemplated "2 for 1" stock dividend) and
25,000,000 shares of Preferred Stock, $.001 par value per share, of which no
shares are issued or outstanding as of the date of this Agreement. All
outstanding shares of Parent Common Stock are duly authorized, validly issued,
fully paid and nonassessable and are not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of the Parent or any
agreement or document to which the Parent is a party or by which it is bound.
The authorized capital stock of the Merger Sub consists of 1,000,000 shares of
Common Stock, $.0001 par value per share, all of which, as of the date hereof,
are issued and outstanding and are held by the Parent. The Merger Sub was formed
on October 24, 2001, for the purpose of consummating the Merger, has no material
assets or liabilities except as necessary for such purpose and has not, and
prior to the Effective Time will not have, conducted any business except as
necessary for such purpose.
3.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 3.2 or in the Parent Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of Parent, or
any securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except for securities the Parent owns,
directly or indirectly through one or more subsidiaries, there are no equity
securities, partnership interests or similar ownership interests of any class of
any subsidiary of the Parent, or any security exchangeable or convertible into
or exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as set
forth in Section 3.2, there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Parent is a party or by which it is bound obligating Parent to issue, deliver or
sell, or cause to be issued, delivered or sold, or repurchase, redeem or
17
otherwise acquire, or cause the repurchase, redemption or acquisition, of any
shares of capital stock, partnership interests or similar ownership interests of
the Parent or obligating the Parent to grant, extend, accelerate the vesting of
or enter into any such option, warrant, equity security, call, right, commitment
or agreement. There are no registration rights and, to the knowledge of the
Parent, as of the date of this Agreement, there are no voting trusts, proxies or
other agreements or understandings with respect to any equity security of any
class of the Parent or with respect to any equity security, partnership interest
or similar ownership interest of any class of any of its subsidiaries.
3.4 Authority.
(a) Each of the Parent and the Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Parent and the
Merger Sub, subject only to the filing of the Certificate of Merger pursuant to
Delaware Law and the approval by the Parent's shareholders of the issuance of
shares of Parent Common Stock issuable under the terms of the Merger. A vote of
the holders of a majority of the outstanding shares of Parent Common Stock is
required for the Parent's shareholders to approve the issuance of shares of
Parent Common Stock by virtue of the Merger. This Agreement has been duly
executed and delivered by each of the Parent and the Merger Sub and, assuming
the due authorization, execution and delivery by the Company, constitutes the
valid and binding obligation of each of the Parent and the Merger Sub,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws and general principles of equity.
The execution and delivery of this Agreement by each of the Parent and the
Merger Sub do not, and the performance of this Agreement by each of the Parent
and the Merger Sub will not (i) conflict with or violate the Certificate of
Incorporation or Bylaws of the Parent or the Certificate of Incorporation or
Bylaws of the Merger Sub, (ii) subject to obtaining the approval of the Parent's
shareholders of the issuance of shares of Parent Common Stock by virtue of the
Merger as contemplated in Section 5.2 and compliance with the requirements set
forth in Section 3.4(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Parent (or the Merger
Sub) or by which its or any of their respective properties is bound or affected,
or (iii) assuming the receipt of all material consents, waivers and approvals
referred to in the last sentence of this Section 3.4(a), result in any breach of
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Parent's rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Parent (including the Merger Sub) pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Parent (including the Merger Sub) is
a party or by which the Parent or its or any of its respective properties are
bound or affected. The Parent Schedules list all material consents, waivers and
approvals under any of the Parent's agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to the Parent or the Merger Sub in connection with the execution
and delivery of this Agreement or the consummation of the Merger, except for (i)
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware, (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings (if any) as may be required under
applicable federal and state securities laws and the securities or antitrust
laws of any foreign country, and (iii) such other consents, authorizations,
filings, approvals and registrations (if any) which if not obtained or made
18
would not be material to the Parent or the Company or have a material adverse
effect on the ability of the parties to consummate the Merger.
3.5 Parent SEC Filings; Parent Financial Statements.
(a) The Parent has filed all forms, reports and documents required
to be filed with the SEC since the date of this Agreement, and has made
available to the Company such forms, reports and documents in the form filed
with the SEC. All such required forms, reports and documents (including those
that the Parent may file subsequent to the date hereof) are referred to herein
as the "PARENT SEC REPORTS." As of their respective dates, the Parent SEC
Reports (i) were prepared in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Parent SEC Reports, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The Merger Sub is not required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in Parent SEC Reports (the
"PARENT FINANCIALS"), including any Parent SEC Reports filed after the date
hereof until the Closing, (x) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (y) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-QSB under the Exchange Act) and (z) fairly presented the financial
position of the Parent as at the respective dates thereof and the results of the
Parent's operations and cash flows for the periods indicated, except that the
unaudited interim financial statements may not contain footnotes and were or are
subject to normal and recurring year-end adjustments. The balance sheet of the
Parent contained in Parent SEC Reports as of June 30, 2001 is hereinafter
referred to as the "PARENT BALANCE SHEET." Except as disclosed in the Parent
Financials, since the date of the Parent Balance Sheet, the Parent has no
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of the Parent and its subsidiaries taken as a whole, except
liabilities (i) provided for in the Parent Balance Sheet, or (ii) incurred since
the date of the Parent Balance Sheet in the ordinary course of business
consistent with past practices.
3.6 Absence of Certain Changes or Events. Since the date of Parent
Balance Sheet there has not been: (i) any Material Adverse Effect on Parent,
(ii) any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of the
Parent's capital stock, or any purchase, redemption or other acquisition by the
Parent of any of the Parent's capital stock or any other securities of the
Parent or its subsidiaries or any options, warrants, calls or rights to acquire
any such shares or other securities except for repurchases from employees
following their termination pursuant to the terms of their pre-existing stock
option or purchase agreements, (iii) any split, combination or reclassification
of any of the Parent's capital stock, (iv) any granting by the Parent of any
increase in compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Parent of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by Parent of
any increase in severance or termination pay or any entry by the Parent into any
currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms of
19
which are materially altered upon the occurrence of a transaction involving the
Parent of the nature contemplated hereby, (v) entry by the Parent into any
licensing or other agreement with regard to the acquisition or disposition of
any material Parent IP Rights (as defined in Section 3.8) other than licenses in
the ordinary course of business consistent with past practice, (vi) any material
change by the Parent in its accounting methods, principles or practices, except
as required by concurrent changes in GAAP, or (vii) any revaluation by the
Parent of any of its assets, including, without limitation, writing down the
value of capitalized inventory or writing off notes or accounts receivable other
than in the ordinary course of business.
3.7 Tax.
(a) Tax Returns and Audits.
(i) The Parent and each of its subsidiaries have timely filed
all Returns relating to Taxes required to be filed by the Parent and each of its
subsidiaries, except such Returns which are not material to the Parent, and have
paid all Taxes shown to be due on such Returns.
(ii) The Parent and each of its subsidiaries as of the
Effective Time will have withheld and paid over, as appropriate, with respect to
its employees all federal and state, local and/or foreign income taxes, FICA,
FUTA and other Taxes required to be withheld.
(iii) The Parent has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, proposed or assessed against
the Parent, nor has the Parent executed any waiver of any statute of limitations
on or extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of the Parent
is presently in progress, nor has Parent been notified of any request for such
an audit or other examination.
(v) No adjustment relating to any Returns filed by the Parent
has been proposed formally or informally by any Tax authority to the Parent or
any representative thereof and, to the knowledge of the Parent, no basis exists
for any such adjustment which would be material to the Parent.
(vi) The Parent has no liability for unpaid Taxes which has not
been accrued for or reserved on the Parent Balance Sheet, whether asserted or
unasserted, contingent or otherwise, which is material to the Parent, and the
Company has not incurred any liability for Taxes other than in the ordinary
course of business since the date of the Company Balance Sheet.
(vii) None of the Parent's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(viii) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Parent that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to Sections 280G or 404 of the Code.
(ix) The Parent has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Parent.
20
(x) The Parent is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xi) No power of attorney that is currently in force has been
granted with respect to any matter relating to Taxes payable by the Parent .
(xii) The Parent is not, nor has it been, a member of a
consolidated, combined or affiliated group or is a party to or affected by any
tax-sharing or allocation agreement or arrangement.
(xiii) The Parent Schedules list (y) any Tax exemption, Tax
holiday or other Tax-sparing arrangement that the Parent has in any
jurisdiction, including the nature, amount and lengths of such Tax exemption,
Tax holiday or other Tax-sparing arrangement and (z) any expatriate tax programs
or policies affecting the Parent. Each of the Parent and its subsidiaries is in
full compliance with all terms and conditions of any Tax exemption, Tax holiday
or other Tax-sparing arrangement or order of any Governmental Entity and the
consummation of the transactions contemplated hereby will not have any adverse
effect on the continued validity and effectiveness of any such Tax exemption,
Tax holiday or other Tax-sparing arrangement or order.
3.8 Intellectual Property. Except as set forth on Schedule 3.8, the
Parent does not own or have the right to use, pursuant to a license, sublicense,
agreement or permission, any intellectual property.
3.9 Compliance; Permits; Restrictions.
(a) The Parent is not, in any material respect, in conflict with,
or in default or violation of (i) any law, rule, regulation, order, judgment or
decree applicable to the Parent or by which the Parent or any of its is bound or
affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Parent is a party or by which the Parent or its properties is bound or affected.
No investigation or review by any Governmental Entity is pending or, to the
Parent's knowledge, threatened against the Parent, nor has any Governmental
Entity indicated an intention to conduct the same. There is no agreement,
judgment, injunction, order or decree binding upon the Parent which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of the Parent, any acquisition of material property by the
Parent or the conduct of business by the Parent as currently conducted.
(b) The Parent and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to the operation of the business of the Parent (collectively, the
"PARENT PERMITS"). The Parent and its subsidiaries are in compliance in all
material respects with the terms of the Parent Permits.
(c) Related Matters. Except as disclosed in Section 3.9(c) of the
Parent Disclosure Letter, the Parent has no knowledge of any pending regulatory
action of any sort against the Parent by any regulatory agency or any other duly
authorized governmental authority in any jurisdiction which could have a
Material Adverse Effect on the Parent. Except as set forth on Section 3.9(c) of
the Parent Disclosure Letter, the Parent has not knowingly committed or
permitted to exist any violation of the rules and regulations of any regulatory
agency or any other duly authorized governmental authority.
3.10 Litigation. Except as disclosed in Section 3.10 of the Parent
Disclosure Letter, there is no action, suit, proceeding, claim, arbitration or
investigation pending, or as to which the Parent has received any notice of
assertion nor, to Parent's knowledge, is there a threatened action, suit,
proceeding, claim, arbitration or investigation against the Parent which
reasonably would be likely to be material to the Parent, or which in any manner
21
challenges or seeks to prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement.
3.11 Employee Benefit Plans and Employment Matters.
(a) The Parent has no employee benefit plans, pension plans or
multi-employee Plans.
(b) Employment Matters. To the Parent's knowledge, the Parent (i)
is in compliance in all material respects with all applicable foreign, federal,
state and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Parent Employees; (ii) has withheld all amounts required by law
or by agreement to be withheld from the wages, salaries and other payments to
Parent Employees; (iii) is not liable for any arrears of wages or any taxes or
any penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any material payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, threatened or
reasonably anticipated claims or actions against the Parent under any worker's
compensation policy or long-term disability policy. To the Parent's knowledge,
no Parent Employee has violated any employment contract, nondisclosure agreement
or noncompetition agreement by which such employee is bound due to such employee
being employed by the Parent and disclosing to the Parent or using trade secrets
or proprietary information of any other person or entity.
3.12 Absence of Liens and Encumbrances. The Parent and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the Parent Financials
and except for liens for taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which would not be material to Parent.
3.13 Environmental Matters.
(a) The Parent has complied and is in compliance with all
Environmental, Health and Safety Requirements.
(b) Without limiting the generality of the foregoing, the Parent
has obtained and complied with, and are in compliance with, all permits,
licenses and other authorizations that are required pursuant to Environmental,
Health and Safety Requirements for the occupation of its facilities and the
operation of its business.
(c) The Parent has not received any written or oral notice, report
or other information regarding any actual or alleged violation of Environmental,
Health and Safety Requirements, or any liabilities or potential liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise), including
any investigatory, remedial or corrective obligations, relating to it or its
facilities arising under Environmental, Health, and Safety Requirements.
22
3.14 Labor Matters. The Parent has no employees.
3.15 Agreements, Contracts and Commitments. Except as set forth in
Section 3.15 and Section 3.2(b) of the Parent Disclosure Letter, the Parent is
neither a party to nor is bound by:
(a) any employment or consulting agreement, contract or commitment
with any officer or director level employee or member of Parent's Board of
Directors, other than those that are terminable by the Parent on no more than
thirty days notice without liability or financial obligation;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or guaranty not entered into
in the ordinary course of business other than indemnification agreements between
the Parent and any of its officers or directors;
(d) any agreement, contract or commitment containing any covenant
limiting the freedom of the Parent to engage in any line of business or compete
with any person or granting any exclusive distribution rights;
(e) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise; or
(f) any material joint marketing or development agreement. The
Parent, nor to the Parent's knowledge any other party to a Parent Contract (as
defined below), has breached, violated or defaulted under, or received notice
that it has breached violated or defaulted under, any of the material terms or
conditions of any of the agreements, contracts or commitments to which the
Parent is a party or by which it is bound of the type described in clauses (a)
through (f) above (any such agreement, contract or commitment, a "PARENT
CONTRACT") in such a manner as would permit any other party to cancel or
terminate any such Parent Contract, or would permit any other party to seek
damages, which would be reasonably likely to be material to the Parent.
3.16 Change of Control Payments. There is no plan or agreement pursuant
to which any amounts may become payable (whether currently or in the future) to
current or former officers or directors of the Parent as a result of or in
connection with the Merger.
3.17 Board Approval. The Board of Directors of the Parent has, as of
the date of this Agreement, determined (i) that the Merger is fair to, and in
the best interests of the Parent and its shareholders, and (ii) to recommend
that the shareholders of the Parent approve the issuance of shares of Parent
Common Stock by virtue of the Merger.
3.18 Over the Counter Bulletin Board Listing. Parent's Common Stock is
listed on the Over the Counter Bulletin Board.
23
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Public Disclosure. The Parent and the Company will consult with
each other before issuing any press release or otherwise making any public
statement with respect to the Merger, this Agreement or an Acquisition Proposal
and will not issue any such press release or make any such public statement
prior to such consultation, except as may be required by law or any listing
agreement with a national securities exchange or the Over the Counter Bulletin
Board.
4.2 Legal Requirements. Each of the Parent, the Merger Sub and the
Company will use its respective reasonable commercial efforts to take all
actions necessary or desirable to comply promptly with all legal requirements
which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals by or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such filings with or investigations by any
Governmental Entity, and any other such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement. The Parent will use its
commercially reasonable efforts to take such steps as may be necessary to comply
with the securities and blue sky laws of all jurisdictions which are applicable
to the issuance of Parent Common Stock pursuant hereto. The Company will use its
commercially reasonable efforts to assist the Parent as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Parent Common Stock pursuant
hereto.
4.3 Third Party Consents. As soon as practicable following the date
hereof, the Parent and the Company will each use its commercially reasonable
efforts to obtain all material consents, waivers and approvals under any of its
or its subsidiaries' agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions contemplated
hereby.
4.4 Notification of Certain Matters. The Parent and the Merger Sub will
give prompt notice to the Company, and the Company will give prompt notice to
the Parent, of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be reasonably likely to cause (a) any
representation or warranty contained in this Agreement and made by it to be
untrue or inaccurate in any material respect at any time from the date of this
Agreement to the Effective Time such that the conditions set forth in Section
5.2 or 5.3, as the case may be, would not be satisfied as a result thereof or
(b) any material failure of the Parent and the Merger Sub or the Company, as the
case may be, or of any officer, director, employee or agent thereof, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement. Notwithstanding the above, the delivery of
any notice pursuant to this section will not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
4.5 Reasonably Commercial Efforts and Further Assurances. Subject to
the respective rights and obligations of the Parent and the Company under this
Agreement, each of the parties to this Agreement will use its reasonably
commercial efforts to effectuate the Merger and the other transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement; provided that neither the Parent nor the Company
nor any subsidiary or affiliate thereof will be required to agree to any
divestiture by itself or any of its affiliates of shares of capital stock or of
any business, assets or property, or the imposition of any material limitation
on the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and stock. Subject to the foregoing, each
party hereto, at the reasonable request of another party hereto, will execute
and deliver such other instruments and do and perform such other acts and things
24
as may be necessary or desirable for effecting completely the consummation of
the transactions contemplated hereby.
4.6 Stock Options and Employee Benefits.
(a) At the Effective Time, the Company's 2000 and 2001 Stock Option
Plans and each outstanding Company Stock Option under the Company's 2000 and
2001 Stock Option Plan, whether or not exercisable, will be assumed by the
Parent. Each Company Stock Option so assumed by the Parent under this Agreement
will continue to have, and be subject to, the same terms and conditions set
forth in the applicable Company Stock Option Plan immediately prior to the
Effective Time (including, without limitation, any repurchase rights), except
that (i) each Company Stock Option will be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such the Company Stock Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Stock Option will be equal to the quotient
determined by dividing the exercise price per share of the Company Common Stock
at which the Company Stock Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
After the Effective Time, the Parent will issue to each holder of an outstanding
Company Stock Option a notice describing the foregoing assumption of such
Company Stock Option by the Parent.
(b) The Parent has reserved sufficient shares of Parent Common
Stock for issuance under Section 1.5(d) hereof.
4.7 Form S-8. The Parent agrees to file a registration statement on
Form S-8 for the shares of Parent Common Stock issuable with respect to assumed
Company Stock Options as soon as is reasonably practicable after the Effective
Time.
4.8 Indemnification and Insurance.
(a) The Bylaws of the Surviving Corporation will honor, and the
Parent will cause the Surviving Corporation to honor, the provisions with
respect to indemnification set forth in the Bylaws of the Company immediately
prior to the Effective Time, which provisions will not be amended, repealed or
otherwise modified for a period of six (6) years after the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers, employees or agents of the Company,
unless such modification is required by law.
(b) The Parent will and will cause the Surviving Corporation to
honor and fulfill the obligations of the Company pursuant to indemnification
agreements with the Company's directors and officers existing at or before the
Effective Time.
For a period of six (6) years after the Effective Time, the Parent will or will
cause the Surviving Corporation to maintain in effect, if available, directors'
and officers' liability insurance covering those persons who are currently
covered by the Company's directors' and officers' liability insurance policy (a
copy of which has been made available to the Parent) on terms comparable to
those now applicable to directors and officers of the Company; provided,
however, that in no event will the Parent or the Surviving Corporation be
required to expend in excess of 125% of the annual premium currently paid by the
Company for such coverage; and provided further, that if the premium for such
coverage exceeds such amount, the Parent or the Surviving Corporation will
25
purchase a policy with the greatest coverage available for such 125% of the
annual premium.
4.9 Board of Directors and Certain Officers of the Combined Company.
(a) The Board of Directors of the Parent will take all actions
necessary to cause the Board of Directors of the Parent and the Surviving
Corporation, immediately after the Effective Time, to consist of up to five (5)
persons, none of whom were directors of the Parent immediately prior to the
Effective Time, and all of whom will be Company designees prior to the Effective
Time (the "COMPANY DESIGNEES"). If, prior to the Effective Time, any of the
Company Designees or the Parent's designees shall decline or be unable to serve
as a director of the Parent or the Surviving Corporation, the Company (if such
person was designated by the Company) or the Parent (if such person was
designated by Parent) shall designate another person to serve in such person's
stead, which person shall be reasonably acceptable to the other party.
4.10 Audited Financials of Company/Surviving Corporation. As soon as
practicable after the Effective Time, but in no event later that 75 days from
such date, the Company/Surviving Corporation shall cause Company audited
financial statements in accordance with GAAP for the period of September 30,
2001 to be provided to the Parent.
ARTICLE V
CONDITIONS TO THE MERGER
5.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder and Shareholder Approval. This Agreement shall have
been approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the stockholders of the Company; and the
issuance of shares of Parent Common Stock by virtue of the Merger shall have
been duly approved by the requisite vote under applicable law. by the
shareholders of Parent.
(b) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
5.2 Additional Conditions to Obligations of the Company. The obligation
of the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of the Parent and the Merger Sub contained in this Agreement shall
have been true and correct in all material respects as of the date of this
Agreement. In addition, the representations and warranties of the Parent and the
Merger Sub contained in this Agreement shall be true and correct in all material
respects on and as of the Effective Time except for changes contemplated by this
Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
the Effective Time, except in such cases (other than the representations in
Sections 3.2 and 3.3) where the failure to be so true and correct would not have
26
a Material Adverse Effect on Parent. The Company shall have received a
certificate with respect to the foregoing signed on behalf of the Parent by the
President of the Parent.
(b) Agreements and Covenants. The Parent and the Merger Sub shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them on
or prior to the Effective Time, and the Company shall have received a
certificate to such effect signed on behalf of the Parent by the President of
the Parent.
(c) Filing of Schedule 14(c). The Parent shall have timely filed a
Schedule 14(c) with the SEC and the Parent's shareholders and shall otherwise
have complied with all applicable rules and regulations in connection with the
filing and distribution of the Schedule 14(c).
5.3 Additional Conditions to the Obligations of the Parent and the
Merger Sub. The obligations of the Parent and the Merger Sub to consummate and
effect the Merger shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by the Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall have been true and
correct in all material respects as of the date of this Agreement. In addition,
the representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects on and as of the Effective
Time except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such particular date), with the
same force and effect as if made on and as of the Effective Time, except in such
cases (other than the representations in Sections 2.2 and 2.3) where the failure
to be so true and correct would not have a Material Adverse Effect on the
Company. Parent shall have received a certificate with respect to the foregoing
signed on behalf of the Company by the Chief Executive Officer of the Company.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and the Parent shall have received a certificate to such effect
signed on behalf of the Company by the Chief Executive Officer of the Company.
(c) Material Adverse Effect. No Material Adverse Effect with
respect to the Company shall have occurred since the date of this Agreement.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval of the Merger
by the stockholders of the Company or the approval of the issuance of Parent
Common Stock in connection with the Merger by the shareholders of the Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Parent and the Company;
27
(b) by either the Company or the Parent if the Merger shall not
have been consummated by November 15, 2001, provided, however, that the right to
terminate this Agreement under this Section 6.1(b) shall not be available to any
party whose action or failure to act has been a principal cause of or resulted
in the failure of the Merger to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement;
(c) by either the Company or the Parent if a Governmental Entity
shall have issued an order, decree or ruling or taken any other action (an
"ORDER"), in any case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger, which order, decree or ruling is final and
nonappealable;
(d) by either the Company or the Parent if the required approvals
of the stockholders of the Company or the shareholders of the Parent
contemplated by this Agreement shall not have been obtained by reason of the
failure to obtain the required vote upon a vote taken at a meeting of
stockholders or shareholders, as the case may be, duly convened therefor or at
any adjournment thereof (provided that the right to terminate this Agreement
under this Section 6.1(d) shall not be available to any party where the failure
to obtain shareholder or stockholder approval of such party shall have been
caused by the action or failure to act of such party in breach of this
Agreement);
(e) by the Parent, if the Board of Directors of the Company
recommends another proposal to the stockholders of the Company, or if the Board
of Directors of the Company shall have withheld, withdrawn or modified in a
manner adverse to the Parent its recommendation in favor of adoption and
approval of this Agreement and approval of the Merger;
(f) by the Company, if the Board of Directors of the Parent
recommends a superior proposal to the shareholders of the Parent, or if the
Board of Directors of the Parent shall have withheld, withdrawn or modified in a
manner adverse to the Company its recommendation in favor of approving the
issuance of the shares of Parent Common Stock by virtue of the Merger;
(g) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of the Parent set forth in this Agreement, or
if any representation or warranty of the Parent shall have become untrue, in
either case such that the conditions set forth in Section 5.2(a) or Section
5.2(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, provided that if such
inaccuracy in the Parent's representations and warranties or breach by the
Parent is curable prior to November 15, 2001 by the Parent through the exercise
of its commercially reasonable efforts, then the Company may not terminate this
Agreement under this Section 6.1(g) provided the Parent continues to exercise
such commercially reasonable efforts to cure such breach; or
(h) by the Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 5.3(a) or Section
5.3(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, provided that if such
inaccuracy in the Company's representations and warranties or breach by the
Company is curable prior to November 15, 2001 by the Company through the
exercise of its commercially reasonable efforts, then the Parent may not
terminate this Agreement under this Section 6.1(h) provided the Company
continues to exercise such commercially reasonable efforts to cure such breach.
28
(i) by the Company if at any time prior to the Effective Time
(including any extension of the Effective Time) the Parent's Over the Counter
Bulletin Board listing of its Common Stock is terminated.
6.2 Notice of Termination; Effect of Termination. Any termination of
this Agreement under Section 6.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 6.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 6.2, Section 6.3 and Article 7 (miscellaneous), each of which
shall survive the termination of this Agreement, and (ii) nothing herein shall
relieve any party from liability for any breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
6.3 Fees and Expenses. All fees and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses whether or not the Merger is consummated;
provided, however, that the Parent and the Company shall share equally all fees
and expenses, other than attorneys' and accountants' fees and expenses, incurred
in relation to the printing and filing of the Schedule 14(c) (including any
preliminary materials related thereto) and the Registration Statement (including
financial statements and exhibits) and any amendments or supplements thereto.
6.4 Appraisal or Dissenters' Rights. In the event any shareholder of
either the Company or the Parent exercises appraisal or dissenters' rights in
connection with the transactions contemplated herein, then either the Company or
the Parent (regardless of whether the shareholder seeking either appraisal or
dissenters' rights is a shareholder of either the Company or the Parent) shall
be entitled to terminate this Agreement and the transactions contemplated
hereunder.
ARTICLE VII
GENERAL PROVISIONS
7.1 Non-Survival of Representations, Warranties and Covenants. The
representations and warranties of the Company, the Parent and the Merger Sub
contained in this Agreement shall terminate at the Effective Time, and only the
covenants that by their terms survive the Effective Time shall survive the
Effective Time.
7.2 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally or by commercial delivery
service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to the Parent or the Merger Sub, to:
Copper Valley Minerals Ltd.
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
29
(b) if to the Company, to:
International Manufacturers Gateway
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) with copy to:
The ▇▇▇▇ Law Group, PLLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
7.3 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "INCLUDE," "INCLUDES" and "INCLUDING" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "THE BUSINESS
OF" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be "deemed to include" all direct and indirect subsidiaries
of such entity. References herein to "Sections" are references to Sections
hereof unless otherwise stated herein.
7.4 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other party, it being understood that all parties need not
sign the same counterpart.
7.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Letter
and the Parent Disclosure Letter (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder.
7.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
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7.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
7.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
the State of Delaware and the federal district courts sitting in the State of
Delaware, in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, agrees that process may be served
upon them in any manner authorized by the laws of the State of Delaware for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
7.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
7.10 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the parties. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
7.11 Definition of "Knowledge". Wherever used in this Agreement, the
term "KNOWLEDGE" shall mean the actual knowledge of: (a) in the case of the
Company, its (i) Chief Executive Officer; and (b) in the case of the Parent and
the Merger Sub, the Parent's President.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
COPPER VALLEY MINERALS LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
DTOMI ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
INTERNATIONAL MANUFACTURERS
GATEWAY, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
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