EXHIBIT 10.15
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of September 19, 2001, by and among USA DIGITAL, INC., a Nevada
corporation ("USA DIGITAL"), USA DIGITAL ACQUISITION, INC., a Florida
corporation (the "COMPANY"), AVIX TELECOM SOLUTIONS, INC., a Florida corporation
("AVIX"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇"). USA Digital, the
Company, AVIX and ▇▇▇▇▇▇ are collectively referred to herein as the "PARTIES."
W I T N E S S E T H:
WHEREAS, AVIX is engaged in the telecommunications business;
WHEREAS, ▇▇▇▇▇▇ is the owner of sixty percent (60%) of the issued and
outstanding shares of capital stock of AVIX, and holds voting rights to all of
the issued and outstanding capital stock of AVIX;
WHEREAS, USA Digital is engaged in the telecommunications business and
through its newly-formed wholly-owned subsidiary, the Company, desires to effect
a business combination and merger of AVIX with and into the Company upon the
terms and subject to the satisfaction of the conditions precedent contained
herein (the "MERGER"); and
WHEREAS, it is intended that for federal income tax purposes the Merger
shall qualify as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Code.
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound hereby, the Parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
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"AVIX SHARE" means a share of the common stock of AVIX.
"BALANCE SHEET" means the most recent balance sheet contained within
the Financial Statements.
"BALANCE SHEET DATE" means the effective date of the Balance Sheet.
"CHANGE IN CORPORATE CONTROL" For purposes of this Agreement, a Change
in Corporate Control shall include any of the following events:
(i) The acquisition in one or more transactions of
more than fifty percent (50%) of the Company's or USA Digital's
outstanding common stock by any corporation, or other person or group
(within the meaning of Section 14(d)(3) of the Securities Exchange Act
of 1934, as amended);
(ii) Any merger or consolidation of the Company into
or with another corporation in which the Company is not the surviving
entity, or any transfer or sale of substantially all of the assets of
the Company or any merger or consolidation of the Company into or with
another corporation in which the Company is the surviving entity and,
in connection with such merger or consolidation, all or part of the
outstanding shares of the Company's common stock shall be changed into
or exchanged for other stock or securities of any other person, or
cash, or any other property;
(iii) Any merger or consolidation of USA Digital into
or with another corporation in which USA Digital is not the surviving
entity, or any transfer or sale of substantially all of the assets of
USA Digital or any merger or consolidation of USA Digital into or with
another corporation in which USA Digital is the surviving entity and,
in connection with such merger or consolidation, all or part of the
outstanding shares of USA Digital's common stock shall be changed into
or exchanged for other stock or securities of any other person, or
cash, or any other property; or
(iv) Any election of persons to the Board of
Directors of the Company or USA Digital which causes a majority of the
Board of Directors to consist of persons other than (1) persons who
were members of the Board of Directors on October 15, 2001, and (2)
persons who were nominated for election as members of the Board by the
Board of Directors (or a Committee of the Board) at a time when the
majority of the Board (or of such Committee) consisted of persons who
were members of the Board of Directors on October 15, 2001; provided,
that any person nominated for election by the Board of Directors
composed entirely of persons described in (1) or (2), or of persons who
were themselves nominated by such Board, shall for this purpose be
deemed to have been nominated by a Board composed of persons described
in (1).
"CLOSING" has the meaning set forth in SECTION 2.2 below.
"CLOSING DATE" has the meaning set forth in SECTION 2.2 below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CORPORATION LAW" means the statutes, regulations and laws governing
business corporations in the State of Florida.
"EFFECTIVE TIME" means the time as of which the Merger of AVIX with and
into the Company is effective, which for purposes of this Agreement is intended
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to be and may be used interchangeably with the Closing Date on which the Parties
will file the Articles of Merger and Plan of Merger as defined herein.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan (as defined in Section 3(2) of ERISA), (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan as defined in Section 3(37) of ERISA), or (d)
Employee Welfare Benefit Plan (as defined in Section 3(37) of ERISA) or material
fringe benefit or other retirement, bonus, or incentive plan or program.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3.1(g).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"KNOWLEDGE" means the actual knowledge of ▇▇▇▇▇▇ as the majority
shareholder of AVIX and the President of AVIX (or such other individual(s)
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indicated herein) after having made such due and diligent inquiry and
investigation as a reasonable person would deem necessary and appropriate as to
the subject matter.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"RELATED COMPANIES" means ▇▇▇▇▇▇'▇ wholly-owned Florida corporation
▇▇▇▇▇▇ Technologies, Inc. and ▇▇▇▇▇▇'▇ wholly-owned Nevada corporation Universal
Cash Management, Inc.
"RELATED COMPANIES ACQUISITION" means the acquisition by AVIX of the
Related Companies prior to the Effective Time as described in Section 4(d) of
this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest.
"SHAREHOLDERS" means ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ who
are the owners of all of the issued and outstanding capital stock of AVIX.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"USA DIGITAL SHARE" means a share of unregistered common stock of USA
Digital.
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ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
-----------------------------------
2.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time AVIX will merge with and into the Company. The Company
shall be the corporation surviving the Merger (the "SURVIVING CORPORATION") and
shall continue to be governed by the laws of the State of Florida and the
separate corporate existence of the Company with all its rights, privileges,
powers, immunities, purposes and franchises shall continue unaffected by the
Merger except as set forth herein and in the Articles of Merger and Plan of
Merger (the "ARTICLES OF MERGER") in the forms attached hereto as EXHIBIT A.
2.2 THE CLOSING. The Closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of ▇▇▇▇▇▇▇▇, Loop &
▇▇▇▇▇▇▇▇, LLP following the satisfaction or waiver of all other conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby. The date of the Closing (the "CLOSING DATE") shall be a date mutually
agreed to by the parties hereto. All of the parties hereto expressly acknowledge
and agree that time is of the essence in closing the transactions contemplated
herein.
2.3 ACTIONS AT THE CLOSING. At the Closing, (i) ▇▇▇▇▇▇ and AVIX will
deliver to USA Digital the various certificates, instruments, and documents
referred to in Section 6.1 below; (ii) USA Digital and the Company will deliver
to ▇▇▇▇▇▇ the various certificates, instruments and documents referred to in
Section 6.2 below; and (iii) AVIX and USA Digital will file Articles of Merger
with the Florida Secretary of the State.
2.4 EFFECT OF MERGER. The Merger shall become effective at the time the
appropriate Articles of Merger are filed with the Florida Secretary of State.
The Merger shall have the effect set forth in ss.607.1106 of the Florida
Statutes. The Surviving Corporation may, at any time after the Effective Time,
take any action (including executing and delivering any document) in the name
and on behalf of the Company and AVIX in order to carry out and effectuate the
transactions contemplated by this Agreement.
2.5 EFFECTIVE TIME. The Merger shall become effective on the Closing
Date, to be designated as the Effective Time of the Merger.
2.6 ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. Effective at
the Effective Time, the Articles of Incorporation of the Company shall be the
Articles of Incorporation of the Surviving Corporation unless and until duly
amended in accordance with their terms.
2.7 BYLAWS OF SURVIVING CORPORATION. The Bylaws of the Company in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation, unless and until duly amended in accordance with their
terms.
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2.8 DIRECTORS OF THE SURVIVING CORPORATION. The persons who are
directors of the Company immediately prior to the Effective Time shall, from and
after the Effective Time, be the directors of the Surviving Corporation until
their successors have been elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws, except that ▇▇▇▇▇▇ shall be
appointed as an additional member of the Board of Directors at the Effective
Time, and ▇▇▇▇▇▇ shall hold such office until his successor has been duly
elected or appointed and qualified or until his earlier death, resignation or
removal.
2.9 OFFICERS OF THE SURVIVING CORPORATION. The persons who are officers
of the Company immediately prior to the Effective Time shall, from and after the
Effective Time, be the officers of the Surviving Corporation and shall hold
their same respective offices until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal,
except that the President of the Company shall be replaced with ▇▇▇▇▇▇ at the
Effective Time, who shall hold such office until his successor has been duly
elected or appointed and qualified or until his earlier death, resignation or
removal.
2.10 CONVERSION OF AVIX SHARES. The manner of converting AVIX Shares in
the Merger shall be as follows:
(a) As a result of the Merger and without any action on the
part of the holder thereof, all shares of AVIX common stock issued and
outstanding at the Effective Time shall cease to exist, and the Shareholders
shall thereafter cease to have any rights with respect to such AVIX Shares,
except the right to receive upon the surrender of their stock certificates, on
the Closing Date their pro rata share (based upon their respective ownership
percentage of the AVIX Shares) of the following: (A) an aggregate of One Million
(1,000,000) USA Digital Shares (the "VESTED STOCK CONSIDERATION"), and (B) cash
in the aggregate amount of Five Hundred Thousand Dollars ($500,000) (the "CASH
CONSIDERATION") payable as follows: Ten Thousand Dollars ($10,000) to each of
the Shareholders at Closing and the balance to be paid out in accordance with
the Promissory Notes described in SECTION 6.2 of this Agreement; (C) an
aggregate of Three Million (3,000,000) USA Digital Shares (the "CONTINGENT STOCK
CONSIDERATION"), which shall be held in escrow by USA Digital and shall be
payable to the Shareholders only if and to the extent that the conditions set
forth in EXHIBIT B attached hereto and made a part hereof are satisfied; (D)
fully vested options to acquire up to an aggregate of One Hundred Thousand
(100,000) USA Digital Shares at a strike price of One Dollar ($1.00) per share,
exercisable in full or in part during the period from the Effective Time until
the fourth anniversary date of the Effective Time (the "VESTED OPTIONS"); and
(F) options to acquire up to an aggregate of Three Hundred Thousand (300,000)
USA Digital Shares at a strike price of One Dollar ($1.00) per share,
exercisable in full or in part during the period from the Effective Time until
the fourth anniversary date of the Effective Time (the "CONTINGENT OPTIONS")
which shall vest only if and to the extent that the conditions set forth in
EXHIBIT B are satisfied. The Vested Options and the Contingent Options are not
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intended to qualify as incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended. The Vested Stock
Consideration, Cash Consideration, Contingent Stock Consideration, Vested
Options and Contingent Options are collectively referred to herein as the
"MERGER CONSIDERATION." The Vested Stock Consideration and any USA Digital
Shares delivered upon exercise of the Vested Options and the Contingent Options
shall be delivered to the Shareholders in certificate form bearing a restrictive
legend. The Contingent Stock Consideration shall be held in escrow in
certificate form bearing a restrictive legend. Except for the right to receive
the Merger Consideration, after the Effective Time no AVIX Shares shall be
deemed to be outstanding or to have any rights whatsoever.
(b) Each AVIX Share held in AVIX' treasury at the Effective
Time, by virtue of the Merger, shall cease to be outstanding and shall be
canceled and retired without payment of any consideration therefor and shall
cease to exist.
(c) At the Effective Time, each share of the Company common
stock issued and outstanding as of the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereto, continue
unchanged and remain outstanding as a validly issued, fully paid, nonassessable
share of the Company common stock.
(d) All options granted pursuant to this section 2.10 shall
expire four (4) years after their respective vesting date.
2.11 EXCHANGE OF CERTIFICATES REPRESENTING AVIX SHARES. ▇▇▇▇▇▇ shall
(and ▇▇▇▇▇▇ shall cause the other Shareholders to) deliver to USA Digital at
Closing the certificate or certificates representing AVIX Shares owned by them,
duly endorsed in blank by the Shareholders, or accompanied by duly endorsed
stock powers in blank, and with all necessary transfer tax and other revenue
stamps, acquired at the Shareholders' expense, affixed and canceled. ▇▇▇▇▇▇
agrees (and ▇▇▇▇▇▇ shall cause the other Shareholders) to cure any deficiencies
with respect to the endorsement of the certificates or other documents of
conveyance with respect to such AVIX Shares or with respect to the stock powers
accompanying any AVIX Shares. Upon such a delivery, each Shareholder shall
receive in exchange therefor, a certificate representing that number of USA
Digital Shares that the Shareholder is entitled to receive as the Vested Stock
Consideration pursuant to SECTION 2.10(a) hereof, and the Contingent Stock
Consideration that each Shareholder is entitled to receive pursuant to SECTION
2.10(a) hereof shall be issued and held in escrow by USA Digital. Until the
certificate or certificates representing AVIX Shares have been surrendered by
the Shareholders and replaced by the certificates representing USA Digital
Shares, the certificates representing AVIX Shares shall for all purposes be
deemed to evidence ownership of the number of USA Digital Shares determined in
accordance with the provisions of SCHEDULE 2.10(a). All USA Digital Shares
issuable to the Shareholders in the Merger shall be deemed for all purposes to
have been issued by USA Digital at the Effective Time.
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2.12 FRACTIONAL SHARES. Notwithstanding any other provision
herein, no fractional USA Digital Shares will be issued. Fractional shares
shall be rounded down to the nearest whole number of shares.
2.13 NAME CHANGE. Following the consummation of the Merger, the
Surviving Corporation shall change its name to AVIX Technologies, Inc.
▇▇▇▇▇▇ hereby acknowledges and agrees to such name change following the
consummation of the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇. ▇▇▇▇▇▇ represents and
warrants to USA Digital and the Company that the statements contained in this
SECTION 3.1 pertaining to: (i) AVIX or the Shareholders are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date; and (ii) the Related Companies are correct and complete as of the
date of this Agreement and will be correct and complete at the effective time of
the Related Companies Acquisition. Nothing in the Schedules attached hereto
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable detail.
Without limiting the generality of the foregoing, the mere listing (or inclusion
of a copy) of a document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). Any scheduled exception to the following statements shall identify
either AVIX or the specific Related Company to which such exception relates.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of
AVIX and ▇▇▇▇▇▇ Technologies, Inc. is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. Universal
Cash Management, Inc. is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada. Each of AVIX and the
Related Companies is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction where such qualification is required. Each
of AVIX and the Related Companies has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on the business in
which it is engaged and to own and use the properties owned and used by it. None
of AVIX or the Related Companies is in default under or in violation of any
provision of its articles of incorporation or bylaws.
(b) CAPITALIZATION. The entire authorized capital stock of
AVIX consists of Seven Thousand Five Hundred (7,500) shares of common stock, of
which One Hundred (100) shares of common stock are issued and outstanding, and
which shares constitute the AVIX Shares. All of the issued and outstanding AVIX
Shares and all of the shares of capital stock of the Related Companies have been
duly authorized, are validly issued, fully paid, and nonassessable, and are held
of record by the Shareholders. The Shareholders are the lawful owners of 100% of
the issued and outstanding capital stock of AVIX, free and clear of all liens,
encumbrances, restrictions and claims of every kind. AVIX is the lawful owner of
100% of the issued and outstanding capital stock of the Related Companies, free
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and clear of all liens, encumbrances, restrictions and claims of every kind.
▇▇▇▇▇▇ has the legal right, power and capacity to enter into this Agreement and
to consummate the transactions contemplated hereby. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
any of AVIX or the Related Companies to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to AVIX or the Related Companies. The Shareholders hold of
record and own beneficially all of the issued and outstanding AVIX Shares free
and clear of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. AVIX holds of record and owns beneficially each share of issued and
outstanding capital stock of the Related Companies free and clear of any
restrictions on transfer (other than any restrictions under the Securities Act
and state securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. None of
the Shareholders is a party to any option, warrant, purchase right, or other
contract or commitment that could require a Shareholder to sell, transfer, or
otherwise dispose of any capital stock of any of AVIX or the Related Companies
(other than this Agreement). Except for the agreement among the Shareholders
granting ▇▇▇▇▇▇ the right to vote all of the AVIX Shares in connection with the
transactions contemplated by this Agreement, the Shareholders are not a party to
any voting trust, proxy, or other agreement or understanding with respect to the
voting of the AVIX Shares or any shares of capital stock of the Related
Companies, and there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of AVIX or the
Related Companies.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will: (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of AVIX or the Related Companies are
subject or any provision of the articles of incorporation or bylaws of any of
AVIX or the Related Companies or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which any of AVIX or the Related Companies are parties or by which they are
bound or to which any of their respective assets are subject (or result in the
imposition of any Security Interest upon any of their respective assets). Except
for the filing of appropriate certificates to effect the Merger and to carry out
the transactions contemplated in the Related Companies Acquisition, each of AVIX
and the Related Companies does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this
Agreement.
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(d) BROKERS' FEES. None of the Shareholders, AVIX or the
Related Companies have any Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
(e) TITLE TO ASSETS. Each of AVIX and the Related Companies
has good and marketable title to, or a valid leasehold interest in, the
properties and assets used by it, located on its premises, or shown on the
Balance Sheet or acquired after the date thereof, free and clear of all Security
Interests, except for properties and assets disposed of in the ordinary course
of business since the Balance Sheet Date.
(f) SUBSIDIARIES AND INVESTMENTS. AVIX and the Related
Companies do not have any subsidiaries. None of AVIX, the Related Companies or
the Shareholders, own, directly or indirectly, any capital stock or other equity
or ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity which is engaged in a business
similar to or in competition with the business of AVIX and/or the Related
Companies.
(g) FINANCIAL STATEMENTS. ▇▇▇▇▇▇, AVIX and the Related
Companies have provided to USA Digital the following financial statements
(collectively the "Financial Statements"): (i) each of AVIX' and the Related
Companies' unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended
December 31, 1998, 1999 and 2000; and (ii) each of AVIX' and the Related
Companies' unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the nine (9) month period
ended September 30, 2001. The Financial Statements (including the notes thereto)
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, present fairly the financial condition
of AVIX and the Related Companies as of such dates and the results of operations
of AVIX and the Related Companies for such periods, are correct and complete,
and are consistent with the books and records of AVIX and the Related Companies
(which books and records are correct and complete).
(h) EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE. Since the
Balance Sheet Date, there has not been any adverse change in the business,
financial condition, operations, results of operations, future prospects or
anticipated profitability of any of AVIX or the Related Companies. Without
limiting the generality of the foregoing, since that date:
(i) none of AVIX or the Related Companies has
sold, leased, transferred, or assigned any of their respective assets,
tangible or intangible, other than in the ordinary course of business;
(ii) none of AVIX or the Related Companies have
entered into any agreement, contract, loan, lease, or license (or series of
related agreements, contracts, leases, and licenses) either involving more than
Two Thousand Dollars ($2,000) or other than in the ordinary course of business;
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(iii) No party (including AVIX and the Related
Companies) has accelerated, terminated, modified, or canceled any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) involving more than Two Thousand Dollars ($2,000) to which any of
AVIX or the Related Companies are a party or by which they are bound;
(iv) No Security Interest has been imposed upon any
of AVIX' or the Related Companies' assets, tangible or intangible;
(v) none of AVIX or the Related Companies have made
any capital expenditure (or series of related capital expenditures) either
involving more than Two Thousand Dollars ($2,000) or other than in the ordinary
course of business;
(vi) none of AVIX or the Related Companies have
issued any note, bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease obligation
involving more than Two Thousand Dollars ($2,000) in the aggregate;
(vii) none of AVIX or the Related Companies have
delayed or postponed the payment of accounts payable and other Liabilities other
than in the ordinary course of business;
(viii) none of AVIX or the Related Companies have
canceled, compromised, waived, or released any right or claim (or series of
related rights and claims) either involving more than Two Thousand Dollars
($2,000) or other than in the ordinary course of business;
(ix) none of AVIX or the Related Companies have
issued, sold, or otherwise disposed of any of their capital stock, or granted
any options, warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of their capital stock;
(x) none of AVIX or the Related Companies have
declared, set aside, or paid any dividend or made any distribution with respect
to their capital stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of their capital stock;
(xi) none of AVIX or the Related Companies have
experienced any damage, destruction, or loss (whether or not covered by
insurance) to their respective properties;
(xii) none of AVIX or the Related Companies have made
any loan to, or entered into any other transaction with, any of their respective
directors, officers or employees, except as disclosed in the respective
corporate financials;
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(xiii) none of AVIX or the Related Companies have
granted any increase in the base compensation of any of their respective
directors, officers or employees other than in the ordinary course of business;
(xiv) none of AVIX or the Related Companies have
adopted, amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of
their respective directors, officers or employees (or taken any such action with
respect to any other Employee Benefit Plan); and
(xv) There has not been any other occurrence, event,
incident, action, failure to act, or transaction other than in the ordinary
course of business involving AVIX and/or the Related Companies and none of AVIX
or the Related Companies have committed to any of the foregoing.
(i) UNDISCLOSED LIABILITIES. None of AVIX or the Related
Companies have any Liability (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of AVIX or the Related Companies giving rise to any
Liability), except for (i) Liabilities set forth in each such company's Balance
Sheet, and (ii) Liabilities which have arisen after the Balance Sheet Date in
the ordinary course of business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement, or violation of law).
(j) LEGAL COMPLIANCE. Each of AVIX, the Related Companies and
their respective predecessors and affiliates have complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply.
(k) TAX MATTERS.
(i) Each of AVIX and the Related Companies has filed all
Tax Returns that it was required to file through the date hereof. All such Tax
Returns were correct and complete in all respects. All Taxes owed by AVIX or the
Related Companies through the date hereof (whether or not shown on any Tax
Return) have been paid. None of AVIX or the Related Companies currently are the
beneficiaries of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where AVIX and the
Related Companies do not file Tax Returns that they are or may be subject to
taxation by that jurisdiction. There are no Security Interests on any of the
assets of AVIX or the Related Companies that arose in connection with any
failure (or alleged failure) to pay any Tax.
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(ii) Each of AVIX and the Related Companies has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) No stockholder, director or officer (or employee
responsible for Tax matters) of AVIX or the Related Companies expects any
authority to assess any additional Taxes for any period for which Tax Returns
have been filed. There is no dispute or claim concerning any Tax Liability of
any of AVIX or the Related Companies either (A) claimed or raised by any
authority in writing or (B) as to which any of ▇▇▇▇▇▇ and the directors and
officers (and employees responsible for Tax matters) of AVIX and the Related
Companies has Knowledge based upon personal contact with any agent of such
authority. SCHEDULE 3.1(K)(III) lists all federal, state, local and foreign
income Tax Returns filed with respect to each of AVIX and the Related Companies
for taxable periods ending on or after January 1, 1998, indicates those Tax
Returns that have been audited, and lists those Tax Returns that currently are
the subject of an audit. ▇▇▇▇▇▇ has delivered to USA Digital and the Company
correct and complete copies of all federal, state, local and foreign income Tax
Returns, examination reports, and statements of deficiencies assessed against or
agreed to by AVIX and the Related Companies since January 1, 1998.
(iv) None of AVIX or the Related Companies have waived any
statute of limitations with respect to Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(v) None of AVIX or the Related Companies have filed a
consent under Code Section 341(f) concerning collapsible corporations. None of
AVIX or the Related Companies have made any payments, are obligated to make any
payments or are a party to any agreement that under certain circumstances could
obligate them to make any payments that will not be deductible under Code
Section 280G. None of AVIX or the Related Companies have been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii). Each of
AVIX and the Related Companies has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Code Section 6662. None of AVIX or
the Related Companies is a party to any Tax allocation or sharing agreement.
None of AVIX or the Related Companies: (A) have been a member of an affiliated
group filing a consolidated federal income Tax Return (other than a group the
common parent of which was AVIX and/or the Related Companies) and (B) have
Liability for the Taxes of any Person (other than AVIX and/or the Related
Companies) under Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
(vi) Any unpaid Taxes of AVIX and the Related Companies:
(A) did not, as of the Balance Sheet Date, exceed the reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth in the Balance Sheet for such
company and (B) do not exceed that reserve as adjusted for the passage of time
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through the Closing Date in accordance with the past custom and practice of AVIX
and the Related Companies in filing their respective Tax Returns.
(vii) SCHEDULE 3.1(K)(VII) sets forth the federal income
Tax basis of AVIX and the Related Companies in their respective assets.
(viii) Each of AVIX and the Related Companies operates at
least one significant historic business line, or owns at least a significant
portion of its historic business assets, in each case within the meaning of
Treasury Regulation Section 1.368-1(d) promulgated under the Code.
(ix) Prior to the Merger, no shareholder of AVIX or the
Related Companies had a portion of such shareholder's stock interest redeemed by
any of AVIX or the Related Companies, or received an extraordinary distribution
with respect to such shareholder's stock interest, and no corporation "related
to AVIX or the Related Companies" (within the meaning of Treasury Regulation
Section 1.368-1(e)(3)(i)(B) promulgated under the Code) has acquired any stock
of any of AVIX or the Related Companies held by such shareholder, where such
disposition or acquisition would reduce the aggregate fair market value of the
USA Digital Shares to be received by the Shareholders (with such fair market
value measured as of the Effective Time of the Merger) to an amount less than
fifty-one percent (51%) of the fair market value of AVIX' and the Related
Companies' respective outstanding shares of capital stock held by all of AVIX'
and the Related Companies' shareholders immediately before any such
distribution, disposition or acquisition.
(l) REAL PROPERTY. SCHEDULE 3.1(1) lists and describes briefly
all real property leased or subleased to each of AVIX and the Related Companies.
None of AVIX or the Related Companies owns any real property. ▇▇▇▇▇▇ has
delivered to USA Digital and the Company correct and complete copies of any
leases and subleases listed in SCHEDULE 3.1(1). With respect to each lease and
sublease listed in SCHEDULE 3.1(1):
(i) The lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) The lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
(iii) No party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
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(iv) none of AVIX or the Related Companies have assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in
the leasehold or subleasehold; and
(v) All facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules, and
regulations.
(m) INTELLECTUAL PROPERTY.
----------------------
(i) Each of AVIX and the Related Companies owns or has the
right to use pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary or desirable for the operation of its businesses
as presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by AVIX and the Related Companies
immediately prior to the Closing hereunder will be owned or available for use by
the Surviving Corporation on identical terms and conditions immediately
subsequent to the Closing hereunder. Each of AVIX and the Related Companies has
taken all necessary and desirable action to maintain and protect each item of
Intellectual Property that it owns or uses.
(ii) None of AVIX or the Related Companies have interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of the Shareholders or
the directors and officers (and employees with responsibility for Intellectual
Property matters) of any of AVIX or the Related Companies have ever received any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that AVIX or
the Related Companies must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of ▇▇▇▇▇▇ and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of each of AVIX and the Related Companies, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of AVIX or the Related Companies.
(iii) SCHEDULE 3.1(M)(III) identifies each patent or
registration which has been issued to any of AVIX, the Related Companies or the
Shareholders with respect to any of their respective Intellectual Properties,
identifies each pending patent application or application for registration which
any of AVIX, the Related Companies or the Shareholders has made with respect to
any of their Intellectual Properties, and identifies each license, agreement, or
other permission which each of AVIX, the Related Companies and the Shareholders
has granted to any third party with respect to any of its or his Intellectual
Property (together with any exceptions). ▇▇▇▇▇▇ has delivered to USA Digital and
the Company correct and complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions (as amended to date) and has
made available to USA Digital and the Company correct and complete copies of all
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other written documentation evidencing ownership and prosecution (if applicable)
of each such item. SCHEDULE 3.1(M)(III) also identifies each trade name or
unregistered trademark used by AVIX and/or the Related Companies in connection
with any of their respective businesses. With respect to each item of
Intellectual Property required to be identified in SCHEDULE 3.1(M)(III):
(A) each of AVIX, the Related Companies and the
Shareholders possesses all right, title, and interest in and to the item, free
and clear of any Security Interest, license, or other restriction;
(B) The item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Knowledge of ▇▇▇▇▇▇ and the directors and officers (and employees with
responsibility for Intellectual Property matters) of each of AVIX and the
Related Companies, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D) None of AVIX, the Related Companies or the
Shareholders have ever agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict with respect to
the item.
(iv) SCHEDULE 3.1(M)(IV) identifies each item of
Intellectual Property that any third party owns and that any of AVIX or the
Related Companies uses pursuant to license, sublicense, agreement, or
permission. ▇▇▇▇▇▇ has delivered to USA Digital and the Company correct and
complete copies of all such licenses, sublicenses, agreements, and permissions
(as amended to date). With respect to each item of Intellectual Property
required to be identified in SCHEDULE 3.1(M)(IV):
(A) The license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and in full
force and effect;
(B) The license, sublicense, agreement, or
permission will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(C) No party to the license, sublicense, agreement,
or permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) The underlying item of Intellectual Property is
not subject to any outstanding injunction, judgment, order, decree, ruling, or
charge;
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(E) No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Knowledge of ▇▇▇▇▇▇ and the directors and officers (and employees with
responsibility for Intellectual Property matters) of each of AVIX and the
Related Companies, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property; and
(F) None of AVIX or the Related Companies have
granted any sublicense or similar right with respect to the license, sublicense,
agreement, or permission.
(n) TANGIBLE ASSETS. Each of AVIX and the Related Companies
owns or leases all buildings, machinery, equipment, and other tangible assets
necessary for the conduct of its business as presently conducted and as
presently proposed to be conducted. Each such tangible asset is free from
defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently is used
and presently is proposed to be used.
(o) INVENTORY. The inventory of AVIX and the Related Companies
consists of raw materials and supplies, manufactured and purchased parts, goods
in process, and finished goods, all of which are merchantable and fit for the
purposes for which they were procured or manufactured, and none of which are
slow-moving, obsolete, damaged, or defective, subject only to any reserve for
inventory writedown set forth in such companies' respective Balance Sheets as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of AVIX and the Related Companies.
(p) CONTRACTS. Schedule 3.1(p) lists the following contracts
and other agreements to which any of AVIX or the Related Companies are parties:
(i) Any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of Two Thousand Dollars ($2,000) per annum;
(ii) Any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one (1) year, result in a
material loss to AVIX or the Related Companies, or involve consideration in
excess of Two Thousand Dollars ($2,000);
(iii) Any agreement concerning a partnership or joint
venture;
(iv) Any agreement (or group of related agreements) under
which AVIX or the Related Companies has created, incurred, assumed, or
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guaranteed any indebtedness for borrowed money, or any capitalized lease
obligation, in excess of Two Thousand Dollars ($2,000) or under which AVIX or
the Related Companies have imposed a Security Interest on any of their
respective assets, tangible or intangible;
(v) Any agreement concerning confidentiality or
noncompetition;
(vi) Any agreement with any Shareholder or any of their
affiliates (other than AVIX and the Related Companies);
(vii) Any employee benefit plan, profit sharing, stock
option, stock purchase, stock appreciation, deferred compensation, severance, or
other material plan or arrangement for the benefit of AVIX' or the Related
Companies' current or former directors, officers, and employees;
(viii) Any collective bargaining agreement;
(ix) Any agreement under which AVIX or the Related
Companies have advanced or loaned any amount to any of their respective
directors, officers, and employees other than in the ordinary course of
business;
(x) Any agreement under which the consequences of a
default or termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future prospects of
any of AVIX or the Related Companies; and
(xi) Any other agreement (or group of related agreements)
the performance of which involves consideration in excess of Two Thousand
Dollars ($2,000).
▇▇▇▇▇▇ has delivered to USA Digital and the Company a correct and complete copy
of each written agreement listed in SCHEDULE 3.1(P) and a written summary
setting forth the terms and conditions of each oral agreement referred to in
SCHEDULE 3.1(P). With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; and (C) no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the agreement.
(q) ACCOUNTS RECEIVABLE. All accounts receivable of AVIX and
the Related Companies are reflected properly on their books and records, are
valid receivables for goods actually sold and services actually provided subject
to no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject only
to the reserve for bad debts set forth in the Balance Sheet as adjusted for the
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passage of time through the Closing Date in accordance with the past custom and
practice of AVIX and the Related Companies.
(r) POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of any of AVIX or the Related Companies.
(s) INSURANCE. SCHEDULE 3.1(S) sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) to which any of AVIX or the Related Companies have been
parties, named insureds, or otherwise the beneficiaries of coverage at any time
within the past five (5) years:
(i) The name, address, and telephone number of the agent;
(ii) The name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) The policy number and the period of coverage;
(iv) The scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) A description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) none of AVIX, the Related Companies or any other party to the policy
is in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. Each of AVIX and the Related Companies has
been covered during the past five (5) years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. SCHEDULE 3.1(S) describes any self-insurance arrangements
affecting any of AVIX or the Related Companies.
(t) LITIGATION. SCHEDULE 3.1(T) sets forth each instance in
which each of AVIX or the Related Companies (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party or, to
the Knowledge of ▇▇▇▇▇▇ and the directors and officers (and employees with
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responsibility for litigation matters) of each of AVIX and the Related
Companies, is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in SCHEDULE 3.1(T) could result in any material adverse
change in the business, financial condition, operations, results of operations,
or future prospects of each of AVIX and the Related Companies. ▇▇▇▇▇▇ and the
directors and officers (and employees with responsibility for litigation
matters) of each of AVIX and the Related Companies do not have any reason to
believe that any such action, suit, proceeding, hearing, or investigation may be
brought or threatened against each of AVIX and the Related Companies.
(u) EMPLOYEES. To the Knowledge of ▇▇▇▇▇▇ and the directors
and officers (and employees with responsibility for employment matters) of each
of AVIX and the Related Companies, no executive, key employee, or group of
employees has any plans to terminate employment with any of AVIX or the Related
Companies. None of AVIX or the Related Companies are parties to or bound by any
collective bargaining agreement, nor have any of AVIX or the Related Companies
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. None of AVIX or the Related Companies have
committed any unfair labor practice. ▇▇▇▇▇▇ and the directors and officers (and
employees with responsibility for employment matters) of each of AVIX and the
Related Companies do not have any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of AVIX and the Related Companies. Each of AVIX and the
Related Companies has either paid (or reserved for amounts accruing but not yet
due and payable with respect to) its employees all wages, commissions and
accruals for vacation, personal days and sick leave owing through the Closing
Date. The consummation of the transactions contemplated hereby will not cause
any of AVIX or the Related Companies to incur or suffer any liability relating
to, or obligation to pay, any severance, termination or other payment to any
person or entity, and any such claim made against AVIX, the Related Companies,
USA Digital and/or the Company for reason of any termination or separation of
any employee of AVIX or the Related Companies on or before Closing, or otherwise
resulting from the Merger, shall be the sole responsibility of ▇▇▇▇▇▇. Except as
set forth in SCHEDULE 3.1(U), no employee of AVIX or the Related Companies has
any contractual right to continued employment by AVIX or the Related Companies
following the consummation of the Merger, and USA Digital and the Company shall
be free to terminate or continue the employment of such employees of AVIX and
the Related Companies as USA Digital and the Company may determine and on such
terms and conditions as USA Digital and the Company may determine. Set forth in
SCHEDULE 3.1(U) is an accurate and complete list of all employees employed by
AVIX and the Related Companies showing as to each the nature of the employee's
job, years of service, the amount or rate of compensation, any earned vacation,
any defined contribution employee benefit plan, pension plan, 401(k) plan, and
medical or dental insurance benefits due the employee and other matters which
may be reasonably required by USA Digital and the Company
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(v) Employee Benefits.
------------------
(i) LIST AND STATUS OF PLANS. Set forth on SCHEDULE 3.1(V)
is an accurate and complete list of all Employee Benefit Plans currently
maintained or contributed to by AVIX and the Related Companies. None of AVIX or
the Related Companies maintain or contribute to any Employee Benefit Plan
subject to ERISA which is not in substantial compliance with ERISA and the Code,
or which has incurred any accumulated funding deficiency within the meaning of
Section 412 or 418B of the Code, or which has applied for or obtained a waiver
from the Internal Revenue Service of any minimum funding requirement under
Section 412 of the Code. None of AVIX or the Related Companies have incurred any
liability to the Pension Benefit Guaranty Corporation ("PBGC") in connection
with any Employee Benefit Plan covering any employees of AVIX or the Related
Companies or of any entity treated as a single employer with AVIX and/or the
Related Companies under Section 414 of the Code or ceased operations at any
facility or withdrawn from any such Employee Benefit Plan in a manner which
could subject AVIX or the Related Companies to liability under Sections 4062(f),
4063 of 4064 of ERISA. None of AVIX or the Related Companies know of any facts
or circumstances which could reasonably be expected to give rise to any
liability of AVIX or the Related Companies to the PBGC under Title IV of ERISA.
None of AVIX or the Related Companies are parties to any pension plan that is a
"multi-employer plan" (within the meaning of Section 4001(a)(3) of ERISA) or
have incurred any withdrawal liability (including any contingent or secondary
withdrawal liability), within the meaning of Sections 4201 and 4202 of ERISA, to
any Employee Benefit Plan which is a multi-employer plan. No event has occurred,
and, to the best knowledge of AVIX and the Related Companies, there exists no
condition or set of circumstances, which presents a material risk of the
occurrence of any withdrawal from or the partition, termination, reorganization
or insolvency of any multi-employer plan which could result in any liability to
a multi-employer plan.
(ii) CONTRIBUTIONS. Each of AVIX and the Related Companies
has made on a timely basis all payments and contributions which AVIX and the
Related Companies are required to make and which are currently due with respect
to all Employee Benefit Plans in accordance with applicable law, the terms of
the Employee Benefit Plans and any agreement relating to any Employee Benefit
Plan to which any of AVIX and/or the Related Companies are parties. Each of AVIX
and the Related Companies has made adequate provisions for reserves required to
be reflected in accordance with GAAP consistently applied in the Balance Sheet
to meet contributions that have not been made because they are not yet due under
the terms of any Employee Benefit Plan or related agreements. Benefits under all
Employee Benefit Plans are as set forth in the documents evidencing such Plans
and have not been materially increased subsequent to the date as of which
documents have been provided. No contributions have been made, nor are any
contributions contemplated to be made, to any Employee Benefit Plan for the
period subsequent to the Balance Sheet Date except for regular premiums paid and
payable on group life, health and disability plans.
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(iii) TAX QUALIFICATION. Each Employee Benefit Plan
required to be qualified under Section 401(a) of the Code has been determined to
be so qualified by the Internal Revenue Service and none of AVIX or the Related
Companies are aware of any facts or circumstances that have occurred since the
date of the last such determination which resulted or is likely to result in the
revocation of such determination. None of AVIX or the Related Companies have
sought relief with respect to the continued qualification of any Employee
Benefit Plan from the Internal Revenue Service under the Internal Revenue
Service's Closing Agreement Program or Voluntary Compliance Resolution Program.
(iv) TRANSACTIONS. No "prohibited transaction" (as defined
in Section 406 of ERISA and Section 4975 of the Code) and no "reportable event"
(as defined in Section 4043 of ERISA) for which the 30-day notice requirement
has not been waived by the PBGC has occurred with respect to any Employee
Benefit Plan. None of AVIX or the Related Companies have engaged in any
transaction with respect to the Employee Benefit Plans which would subject them
to a tax, penalty or liability for prohibited transactions under ERISA or the
Code, nor have any of their respective directors, officers or employees to the
extent they or any of them are fiduciaries with respect to such plans,
materially breached any of their responsibilities or obligations imposed upon
fiduciaries under Title I of ERISA or which would result in any claim being made
under or by or on behalf of any such plans by any party with standing to make
such claim.
(v) DOCUMENTS. Each of AVIX and the Related Companies has
delivered or caused to be delivered to USA Digital and the Company and their
counsel true and complete copies of: (A) all Employee Benefit Plans as in
effect, together with all amendments thereto which will become effective at a
later date, as well as the latest Internal Revenue Service determination letter
obtained with respect to any such Employee Benefit Plan intended to be qualified
under Section 401 or 501 of the Code and (B) completed Form 5500s for each of
the last two (2) fiscal years for each Employee Benefit Plan with respect to
which such Forms were required to be filed and will provide when completed a
Form 5500 for the most recently completed fiscal year for each Employee Benefit
Plan required to file such form. All annual reports on Form 5500 required by
ERISA with respect to any Employee Benefit Plan have been filed in a timely
manner and are complete and accurate in all material aspects.
(vi) NO SELF-INSURED MEDICAL BENEFITS. Except as disclosed
on SCHEDULE 3.1(V), none of AVIX or the Related Companies have any material
monetary obligation, contingent or otherwise, under any Employee Benefit Plan
providing hospitalization, major medical or other medical coverage, other than
the payment of premiums to insurance carriers, health maintenance organizations
or preferred provider organizations, which is not fully insured or substantially
covered by adequate stop loss policies currently in force.
(vii) RETIREE BENEFITS. None of AVIX or the Related
Companies have any obligations under any Employee Benefit Plan, or under any
oral or written agreement with any present or former employees, to provide: (A)
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ongoing medical or life insurance coverage or similar post-termination benefits
to any former employee (other than COBRA continuation coverage required by law),
or (B) severance payments (other than accrued salary and vacation pay) to any
employee upon retirement or other termination of employment.
(w) GUARANTIES. None of AVIX or the Related Companies are
guarantors or otherwise liable for any Liability or obligation (including
indebtedness) of any other Person.
(x) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) To ▇▇▇▇▇▇'▇ knowledge, each of AVIX, the Related
Companies and their respective predecessors has complied and each of AVIX and
the Related Companies is in compliance with all Environmental, Health, and
Safety Requirements.
(ii) Without limiting the generality of the foregoing,
each of AVIX, the Related Companies and their respective predecessors has
obtained and complied with, and each of AVIX and the Related Companies is in
compliance with, all permits, licenses and other authorizations that are
required pursuant to Environmental, Health, and Safety Requirements for the
occupation of AVIX' and the Related Companies' facilities and the operation of
AVIX' and the Related Companies' respective businesses; a list of all such
permits, licenses and other authorizations is set forth in SCHEDULE 3.1(X).
(iii) None of AVIX, the Related Companies or their
respective predecessors have 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 any of them
or AVIX' or the Related Companies' facilities arising under Environmental,
Health, and Safety Requirements.
(iv) None of the following exists at any property or
facility owned or operated by any of AVIX or the Related Companies: (A)
underground storage tanks, (B) asbestos-containing material in any form or
condition, (C) materials or equipment containing polychlorinated biphenyls, or
(D) landfills, surface impoundments, or disposal areas.
(v) None of AVIX, the Related Companies or their
respective predecessors have treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any substance,
including without limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by any
such substance) in a manner that has given or would give rise to liabilities,
including any liability for response costs, corrective action costs, personal
injury, property damage, natural resources damages or attorney fees, pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Solid Waste Disposal Act, as amended, or any other
Environmental, Health, and Safety Requirements.
-23-
(vi) Neither this Agreement, nor the consummation of the
transactions contemplated in this Agreement, will result in any obligations for
site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
(vii) None of AVIX, the Related Companies or any of their
respective predecessors have, either expressly or by operation of law, assumed
or undertaken any liability, including without limitation any obligation for
corrective or remedial action, of any other Person relating to Environmental,
Health, and Safety Requirements.
(viii) No facts, events or conditions relating to the past
or present facilities, properties or operations of AVIX, the Related Companies
or any of their respective predecessors will prevent, hinder or limit continued
compliance with Environmental, Health, and Safety Requirements, give rise to any
investigatory, remedial or corrective obligations pursuant to Environmental,
Health, and Safety Requirements, or give rise to any other liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental, Health, and Safety Requirements, including without limitation any
relating to onsite or offsite releases or threatened releases of hazardous
materials, substances or wastes, personal injury, property damage or natural
resources damage.
(y) INVESTMENT REPRESENTATIONS AND COVENANTS. ▇▇▇▇▇▇
acknowledges the following:
(i) ▇▇▇▇▇▇ understands that the USA Digital Shares which
shall comprise a portion of the Merger Consideration have not been and shall not
be registered under the Securities Act, or any state securities laws on the
grounds that the issuance of the USA Digital Shares is exempt from registration
pursuant to Section 4(2) of the Securities Act and applicable state securities
laws, and that the reliance of USA Digital and the Company on such exemptions is
predicated in part on ▇▇▇▇▇▇'▇ representations, warranties, covenants and
acknowledgments set forth in this Section. ▇▇▇▇▇▇ acknowledges that: (A) the USA
Digital Shares are a highly speculative investment involving a high degree of
risk, and (B) ▇▇▇▇▇▇ is able, without impairing his financial condition, to hold
the USA Digital Shares for an indefinite period of time and suffer the complete
loss thereof.
(ii) ▇▇▇▇▇▇ represents and warrants that: (A) he is an
"accredited investor" or "sophisticated investor" as defined under the
Securities Act and state "Blue Sky" laws, or that he has utilized, to the extent
necessary to be deemed a sophisticated investor under the Securities Act and
State "Blue Sky" laws, the assistance of a professional advisor, and (B) he,
either alone or together with the assistance of his own professional advisor,
has such knowledge and experience in financial and business matters such that he
is capable of evaluating the merits and risks of his investment in the USA
-24-
Digital Shares to be acquired by him upon consummation of the transactions
described in this Agreement.
(iii) ▇▇▇▇▇▇ represents and warrants that the USA Digital
Shares to be acquired by him upon consummation of the transactions described in
this Agreement will be acquired by him for his own account, not as a nominee or
agent, and without a view to resale or other distribution within the meaning of
the Securities Act and the rules and regulations thereunder, except as
contemplated in this Agreement, and that he will not distribute any of the USA
Digital Shares in violation of the Securities Act. All certificates representing
the USA Digital Shares shall bear a restrictive legend in substantially the
following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended and may not be
sold, transferred, pledged, hypothecated or otherwise disposed of in
the absence of (i) an effective registration statement for such
securities under said act or (ii) an opinion of company counsel that
such registration is not required."
In addition, the USA Digital Shares shall bear any legend required by
the securities or "Blue Sky" laws of the State of Florida as well as any other
legend deemed appropriate by USA Digital and the Company or their counsel.
(iv) ▇▇▇▇▇▇ represents and warrants that his principal
residence is within the State of Florida.
(v) ▇▇▇▇▇▇: (A) acknowledges that the USA Digital Shares
to be issued to him at the Closing must be held at least one (1) year plus one
(1) day after the Effective Time of the Merger by him unless subsequently
registered under the Securities Act or an exemption from registration is
available, (B) is aware that any routine sales of USA Digital Shares made
pursuant to Rule 144 under the Securities Act may be made only in limited
amounts and in accordance with the terms and conditions of that Rule and that in
such cases where the Rule is not applicable, compliance with some other
registration exemption will be required, and (C) is aware that Rule 144 is not
currently available for use by him for resale of any of the USA Digital Shares
to be acquired by him upon consummation of the transactions described in this
Agreement.
(vi) ▇▇▇▇▇▇ confirms that he has had the opportunity to
ask questions of and receive answers from USA Digital's and the Company's
management concerning the terms and conditions of his investment in the USA
Digital Shares, and has received to his satisfaction, such additional
information, in addition to that set forth herein, about USA Digital and the
Company's operations as he has requested.
(vii) In order to ensure compliance with the provisions of
paragraph (iii) hereof, ▇▇▇▇▇▇ agrees that after the Closing he will not sell or
-25-
otherwise transfer or dispose of any of the USA Digital Shares or any interest
therein (unless such shares have been registered under the Securities Act)
without first complying with either of the following conditions, the expenses
and costs of satisfaction of which shall be fully borne and paid for by ▇▇▇▇▇▇:
(A) USA Digital and the Company shall have received
a written legal opinion from ▇▇▇▇▇▇'▇ legal counsel, which opinion and counsel
shall be satisfactory to USA Digital and the Company in the exercise of their
reasonable judgment, or a copy of a "no-action" or interpretive letter of the
Securities and Exchange Commission specifying the nature and circumstances of
the proposed transfer and indicating that the proposed transfer will not be in
violation of any of the registration provisions of the Securities Act and the
rules and regulations promulgated thereunder; or
(B) USA Digital and the Company shall have received
an opinion from their own counsel to the effect that the proposed transfer will
not be in violation of any of the registration provisions of the Securities Act
and the rules and regulations promulgated thereunder.
▇▇▇▇▇▇ also agrees that appropriate "stop-transfer" instructions will be given
to USA Digital's transfer agent, if any, provided that this SECTION 3.1(Y)(VII)
shall no longer be applicable to any of the USA Digital Shares following their
transfer pursuant to a registration statement effective under the Securities Act
or in compliance with Rule 144 or if the opinion of counsel referred to above is
to the further effect that transfer restrictions and the legend referred to
herein are no longer required in order to establish compliance with any
provisions of the Securities Act.
(z) INTERESTS IN CLIENTS, SUPPLIERS, ETC. Except as set forth
in SCHEDULE 3.1(Z) attached hereto and made a part hereof, as of the Closing
Date, none of the Shareholders or any officer or director of AVIX or the Related
Companies own or possess, directly or indirectly, any financial interest in, or
are a director, officer or employee of, any corporation, firm, association or
business organization which is engaged in the same or similar business as AVIX
or the Related Companies, or are a competitor or potential competitor of AVIX or
the Related Companies. Ownership of securities of a company whose securities are
registered under the Securities Exchange Act of 1934, not in excess of 1% of any
class of such securities, shall not be deemed to be a financial interest for
purposes of this SECTION 3.1(Z). None of the Shareholders or any of their
affiliates have been involved in any business arrangement or relationship with
AVIX or the Related Companies within the past twelve (12) months, and none of
the Shareholders or any of their affiliates own any asset, tangible or
intangible, which is used in the business of AVIX or the Related Companies.
(aa) BANK ACCOUNTS. Set forth in SCHEDULE 3.1(AA) attached
hereto and made a part hereof is an accurate and complete list showing the name
and address of each bank in which each of AVIX and the Related Companies and any
subsidiary has an account or safe deposit box, the number of any such account or
-26-
any such box, the names of all persons authorized to draw thereon or to have
access thereto and the current balances maintained in all such accounts.
(bb) DISCLOSURE. The representations and warranties contained
in this SECTION 3.1 do not contain any untrue statement of fact or omit to state
any fact necessary in order to make the statements and information contained in
this SECTION 3.1 not misleading. There is no fact to the Knowledge of ▇▇▇▇▇▇
which materially and adversely affects the businesses, prospects or financial
condition of any of AVIX or the Related Companies, or their respective
properties or assets, which has not been disclosed and set forth in this
Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF USA DIGITAL AND THE COMPANY. USA
Digital and the Company represent and warrant to ▇▇▇▇▇▇ that the statements
contained in this Section 3.2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date:
(a) ORGANIZATION OF USA DIGITAL AND THE COMPANY. USA Digital
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Nevada and is qualified to do business in the State of
Florida. The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Florida.
(b) AUTHORIZATION OF MERGER TRANSACTION. USA Digital and the
Company each have full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform their
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of USA Digital and the Company, enforceable in accordance with its
terms and conditions. Except for the filing of appropriate certificates to
effect the Merger, USA Digital and the Company need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which USA Digital or the Company are subject or
any provision of their respective articles of incorporation or bylaws.
ARTICLE IV
PRE-CLOSING COVENANTS
---------------------
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
(a) GENERAL. The Parties will use their reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
-27-
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in ARTICLE VI below).
(b) NOTICES AND CONSENTS. ▇▇▇▇▇▇ will cause AVIX and the
Related Companies to give any notices to third parties, and will cause AVIX and
the Related Companies to use their best efforts to obtain any third party
consents that USA Digital and the Company reasonably may request in connection
with any matters referred to in SECTION 3.1(C).
(c) OPERATION OF BUSINESS. Except as otherwise specifically
contemplated in Section 4(d) of this Agreement, ▇▇▇▇▇▇ will not cause or permit
AVIX or the Related Companies to engage in any practice, take any action, or
enter into any transaction outside the ordinary course of business. Without
limiting the generality of the foregoing, ▇▇▇▇▇▇ will not cause or permit AVIX
or the Related Companies to engage in any practice, take any action, or enter
into any transaction of the sort described in SECTION 3.1(H).
(d) RELATED COMPANIES ACQUISITION; PRESERVATION OF BUSINESS.
Prior to the Closing, ▇▇▇▇▇▇ shall cause AVIX and the Related Companies to
consummate the Related Companies Acquisition. The structure of the Related
Companies Acquisition and the documentation setting forth the terms and
conditions of the Related Companies Acquisition shall be subject to USA
Digital's prior written approval. Except as otherwise set forth in this Section,
▇▇▇▇▇▇ will cause AVIX and the Related Companies to keep their respective
businesses and properties substantially intact, including their present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(e) FULL ACCESS. ▇▇▇▇▇▇ will permit, and ▇▇▇▇▇▇ will cause
AVIX and the Related Companies to permit, representatives of USA Digital and the
Company to have full access at all times to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to each of AVIX and the Related Companies. In connection with the
foregoing due diligence review, USA Digital may cause a limited examination of
the Financial Statements to be conducted by Aidman ▇▇▇▇▇ & Company, P.A. or such
other auditor of USA Digital's selection, the cost of which shall be borne by
USA Digital. Except as otherwise provided in this Section, all items prepared by
Aidman ▇▇▇▇▇ & Company, P.A. in connection with such examination (the "PREPARED
EXAMINATION MATERIALS") shall be for use solely by USA Digital. The Prepared
Examination Materials shall not be deemed to include those items that
customarily remain the property of the accounting firm such as the firm's
accountants' working papers and internal memos. Each of AVIX and ▇▇▇▇▇▇ agree
(and ▇▇▇▇▇▇ will cause the Related Companies to agree) to fully cooperate with
any such examination and provide any documentation reasonably requested by the
accounting firm in order to complete such examination. If AVIX and the Related
Companies reimburse USA Digital for all of the expenses set forth herein with
respect to the examination and pays any remaining balance owed to Aidman ▇▇▇▇▇ &
Company, P.A., if any, AVIX and the Related Companies shall be entitled to
copies of the Prepared Examination Materials.
-28-
(f) NOTICE OF DEVELOPMENTS. ▇▇▇▇▇▇ will give prompt written
notice to USA Digital and the Company of any material adverse development
causing a breach of any of the representations and warranties in SECTION 3.1.
USA Digital and the Company will give prompt written notice to ▇▇▇▇▇▇ of any
material adverse development causing a breach of any of their respective
representations and warranties in SECTION 3.2. No disclosure by any Party
pursuant to this Section, however, shall be deemed to amend or supplement the
Schedules attached hereto or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
(g) EXCLUSIVITY. Except with respect to the Related Companies
Acquisition, ▇▇▇▇▇▇ will not (and ▇▇▇▇▇▇ will not cause or permit AVIX or the
Related Companies to): (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the assets, of
any of AVIX or the Related Companies (including any acquisition structured as a
merger, consolidation, or share exchange) or (ii) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. ▇▇▇▇▇▇ will not vote his AVIX Shares,
any other Shareholder's AVIX Shares or ▇▇▇▇▇▇'▇ shares of capital stock of
either of the Related Companies in favor of any such acquisition structured as a
merger, consolidation, or share exchange other than as set forth herein and as
contemplated hereby. ▇▇▇▇▇▇ will notify USA Digital and the Company immediately
if any Person makes any proposal, offer, inquiry, or contact with respect to any
of the foregoing.
(h) PAY-OFF OF ACCRUED STOCKHOLDER EXPENSES. Prior to the
Closing, ▇▇▇▇▇▇ shall either cause each of AVIX and the Related Companies to pay
off or waive, cancel or release all accrued expenses or liabilities owed to any
of the Shareholders by any of AVIX or the Related Companies. For purposes of
this Section, such expenses and liabilities shall include stockholder salaries,
benefits, payroll taxes, income taxes and franchise taxes incurred through the
Closing Date.
ARTICLE V
POST-CLOSING COVENANTS
----------------------
The Parties agree as follows with respect to the period following the
Closing:
(a) GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
ARTICLE VII). ▇▇▇▇▇▇ acknowledges and agrees that from and after the Closing USA
Digital and the Company will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to AVIX and the Related Companies.
-29-
(b) LITIGATION SUPPORT. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with:
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving AVIX or the Related Companies, each of the other
Parties will cooperate with him, or it and his, or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor pursuant to ARTICLE VII).
(c) TRANSITION. ▇▇▇▇▇▇ will not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of AVIX or the Related Companies
from maintaining the same business relationships with AVIX or the Related
Companies after the Closing as it maintained with AVIX and the Related Companies
prior to the Closing.
(d) CONFIDENTIALITY. ▇▇▇▇▇▇ shall: (i) treat and hold as such
all of the Intellectual Property of AVIX, the Related Companies, USA Digital and
the Company, (ii) refrain from using any of the Intellectual Property of AVIX,
Related Companies, USA Digital and the Company except in connection with this
Agreement, and (iii) deliver promptly to USA Digital and the Company or destroy,
at the request and option of USA Digital and the Company, all tangible
embodiments (and all copies) of the Intellectual Property of AVIX, the Related
Companies, USA Digital and/or the Company which are in his possession. In the
event that ▇▇▇▇▇▇ is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Intellectual Property
of AVIX, the Related Companies, USA Digital and/or the Company, ▇▇▇▇▇▇ will
notify USA Digital and the Company promptly of the request or requirement so
that USA Digital and the Company may seek an appropriate protective order or
waive compliance with the provisions of this SECTION 5(D). If, in the absence of
a protective order or the receipt of a waiver hereunder, ▇▇▇▇▇▇ is, on the
advice of counsel, compelled to disclose any Intellectual Property of AVIX, the
Related Companies, USA Digital and/or the Company to any tribunal or else stand
liable for contempt, ▇▇▇▇▇▇ may disclose the Intellectual Property to the
tribunal; provided, however, that ▇▇▇▇▇▇ shall use his reasonable best efforts
to obtain, at the reasonable request and expense of USA Digital and the Company,
an order or other assurance that confidential treatment will be accorded to such
portion of the confidential information required to be disclosed as USA Digital
and the Company shall designate. The foregoing provisions shall not apply to any
Intellectual Property of AVIX, the Related Companies, USA Digital or the Company
which is generally available to the public immediately prior to the time of
disclosure.
-30-
(e) COVENANT NOT TO COMPETE. For a period of three (3) years
from and after the Closing Date (as such period may be extended in accordance
with any employment agreement in effect between the Company, USA Digital and
▇▇▇▇▇▇), ▇▇▇▇▇▇ will not engage directly or indirectly in any commercial
telecommunications business in the areas described in SCHEDULE 5(E); provided,
however, that ▇▇▇▇▇▇ may own less than 1% of the outstanding stock of any
publicly-traded corporation engaged in part or in whole in the commercial
telecommunications business. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section or SCHEDULE
5(E) is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified.
(f) POST CLOSING AUDIT. In the event that the Financial
Statements are audited after the Closing Date at the direction of USA Digital or
the Company, ▇▇▇▇▇▇ represents and warrants to USA Digital and the Company that
the preparation of audited financial statements will not take an unreasonable
amount of time or be of unreasonable cost and that the audited financial
statements will not materially differ from the Financial Statements. ▇▇▇▇▇▇,
recognizing the need for USA Digital to secure audited historical financial
statements for AVIX, agrees to fully cooperate with any such audit and will
provide or cause to be provided to USA Digital any and all normal support and
oral and written representations normally required in an audit of AVIX'
historical financial statements performed in accordance with generally accepted
auditing standards.
ARTICLE VI
CONDITIONS TO OBLIGATION TO CLOSE
---------------------------------
6.1 CONDITIONS TO OBLIGATIONS OF USA DIGITAL AND THE COMPANY The
obligations of USA Digital and the Company to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
(a) The representations and warranties set forth in Section
3.1 above shall be true and correct in all material respects at and as of the
Closing Date;
(b) ▇▇▇▇▇▇, AVIX and the Related Companies shall have each
performed and complied with all of his or its covenants hereunder in all
material respects through the Closing;
(c) Each of AVIX and the Related Companies shall have procured
all necessary third party consents;
(d) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
-▇▇-
▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would: (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect adversely the right of USA
Digital and the Company to own the AVIX Shares and to control AVIX or the
Related Companies, or (iv) affect adversely the right of any of AVIX or the
Related Companies to own their respective assets and to operate their respective
businesses (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(e) The Parties shall have received any and all other
necessary authorizations, consents, and approvals of governments and
governmental agencies;
(f) USA Digital and the Company shall have received the
resignations, effective as of the Closing, of each director and officer of AVIX
and the Related Companies;
(g) USA Digital and the Company shall have obtained on terms
and conditions satisfactory to them financing (and approvals and consents
related thereto) in the minimum amount of One Million Five Hundred Thousand
Dollars ($1,500,000);
(h) USA Digital and the Company shall have completed to their
sole satisfaction a due diligence review of AVIX and the Related Companies,
which shall include verification that each of AVIX and the Related Companies has
been run in the ordinary course since September 1, 1999, and that the assets,
Liabilities, obligations, revenues, vendor relations and customer relations of
AVIX and the Related Companies are as represented to and anticipated by USA
Digital and the Company; USA Digital and the Company may conduct their due
diligence investigations from the date first above written to, and including,
the Closing Date;
(i) Each of the Shareholders shall have entered into their
respective stock pledge agreements in the forms of EXHIBITS C, D and E (the
"STOCK PLEDGE AGREEMENTS");
(j) The Shareholders, AVIX and ▇▇▇▇▇▇▇▇, Loop & ▇▇▇▇▇▇▇▇, LLP,
as Escrow Agent, shall have entered into an escrow agreement in the form of
EXHIBIT F (the "ESCROW AGREEMENT");
(k) ▇▇▇▇▇▇ shall have entered into an employment agreement
with the Company in substantially the form of EXHIBIT G which shall contain a
confidentiality agreement and covenant not to compete (the "▇▇▇▇▇▇ EMPLOYMENT
AGREEMENT");
(l) ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have entered into an employment
agreement with the Company in substantially the form of EXHIBIT H which shall
contain a confidentiality agreement and covenant not to compete (the "MARINO
EMPLOYMENT AGREEMENT");
-32-
(m) ▇▇▇▇▇ ▇. ▇▇▇▇▇ shall have entered into an employment
agreement with the Company in substantially the form of EXHIBIT I which shall
contain a confidentiality agreement and covenant not to compete (the "▇▇▇▇▇
EMPLOYMENT AGREEMENT");
(n) ▇▇▇▇▇▇ shall have delivered to USA Digital: (i) copies of
each of AVIX' and the Related Companies' articles of incorporation, including
all amendments thereto, certified by the Secretary of State or other appropriate
official of the State of Florida, (ii) certificates from the Secretary of State
or other appropriate official of the State of Florida to the effect that each of
AVIX and the Related Companies is in good standing or existing in such
jurisdiction and listing all charter documents of AVIX and the Related Companies
on file, and (iii) a certificate from the Secretary of State or other
appropriate official in each state in which AVIX and the Related Companies are
qualified to do business to the effect that each of AVIX and the Related
Companies is in good standing in such state;
(o) AVIX and CMB Capital, LLC shall have performed all of
their respective obligations under that certain Settlement Agreement dated as of
August 16, 2001, a copy of which is attached hereto as EXHIBIT J (the
"SETTLEMENT AGREEMENT"), to be performed by them on or prior to the Closing
Date;
(p) The Shareholders and AVIX shall have entered into the
Minority Shareholders Agreement in substantially the form of EXHIBIT K;
(q) ▇▇▇▇▇▇ shall have assigned, and shall have caused the
other Shareholders to assign, to the Surviving Corporation all patents,
registrations, applications, licenses, agreements, and permissions owned or
licensed by them which are described in SCHEDULE 3.1(M)(III) of this Agreement
to the Surviving Corporation, forms of which assignments shall be reasonably
acceptable to the parties; and
(r) All actions to be taken by the Shareholders in connection
with consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to USA
Digital and the Company.
6.2 CONDITIONS TO OBLIGATION OF ▇▇▇▇▇▇, AVIX AND THE RELATED COMPANIES.
The obligations of ▇▇▇▇▇▇ (on his behalf and on behalf of the other
Shareholders), AVIX and the Related Companies to consummate the transactions to
be performed by them in connection with the Closing are subject to satisfaction
of the following conditions:
(a) The representations and warranties set forth in SECTION
3.2 above shall be true and correct in all material respects at and as of the
Closing Date;
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(b) USA Digital and the Company shall have performed and
complied with all of their covenants hereunder in all material respects through
the Closing;
(c) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(d) The Parties shall have received any and all necessary
authorizations, consents, and approvals of governments and governmental
agencies;
(e) The Company shall have delivered its Promissory Notes to
each of the Shareholders contemplated in SECTION 2.10(A) of this Agreement in
substantially the forms of EXHIBITS L, M and N;
(f) USA Digital shall have entered into the Stock Pledge
Agreements;
(g) USA Digital, the Company and ▇▇▇▇▇▇▇▇, Loop & ▇▇▇▇▇▇▇▇,
LLP, as Escrow Agent, shall have entered into the Escrow Agreement;
(h) The Company shall have entered into the ▇▇▇▇▇▇ Employment
Agreement;
(i) The Company shall have entered into the Marino Employment
Agreement;
(j) The Company shall have entered into the ▇▇▇▇▇ Employment
Agreement;
(k) USA Digital and CMB Capital, LLC shall have performed all
of their respective obligations under the Settlement Agreement to be performed
by them on or prior to the Closing Date; and
(l) All actions to be taken by USA Digital and the Company in
connection with the consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to ▇▇▇▇▇▇.
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ARTICLE VII
REMEDIES FOR BREACHES OF THIS AGREEMENT
---------------------------------------
7.1 INDEMNIFICATION OBLIGATION OF ▇▇▇▇▇▇. From and after the Closing,
▇▇▇▇▇▇ shall reimburse, indemnify and hold harmless USA Digital and the Company
and their respective successors and assigns (an "INDEMNIFIED USA DIGITAL PARTY")
against and in respect of:
(a) Any and all damages, losses, deficiencies, liabilities,
costs and expenses incurred or suffered by any Indemnified USA Digital Party
that result from, relate to or arise out of:
(i) Any and all liabilities and obligations of AVIX or the
Related Companies of any nature whatsoever not disclosed to USA Digital and the
Company;
(ii) Any and all actions, suits, claims, or legal,
administrative, arbitration, governmental or other proceedings or investigations
against any Indemnified USA Digital Party that relate to the Shareholders, AVIX
or the Related Companies in which the principal event giving rise thereto
occurred prior to the Closing Date or which result from or arise out of any
action or inaction of a Shareholder, AVIX or the Related Companies or any
employee, agent, representative or subcontractor of AVIX or the Related
Companies prior to the Closing Date; or
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(iii) Any misrepresentation, breach of warranty or
nonfulfillment of any agreement or covenant on the part of the Shareholders,
AVIX or the Related Companies under this Agreement or from any misrepresentation
in or omission from any certificate, schedule, exhibit, statement, document or
instrument furnished to USA Digital and the Company pursuant hereto or in
connection with the negotiation, execution or performance hereof; and
(b) Any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and other
expenses (including, without limitation, reasonable legal fees and expenses and
court costs) incident to any of the foregoing or to the enforcement of this
SECTION 7.1.
7.2 INDEMNIFICATION OBLIGATIONS OF USA DIGITAL AND THE COMPANY From and
after the Closing, USA Digital and the Company shall reimburse, indemnify and
hold harmless the Shareholders and their successors and assigns (an "INDEMNIFIED
STOCKHOLDER PARTY") against and in respect of:
(a) any and all damages, losses, deficiencies, liabilities,
costs and expenses incurred or suffered by any Indemnified Stockholder Party
that result from, relate to or arise out of any misrepresentation, breach of
warranty or non-fulfillment of any agreement or covenant on the part of USA
Digital and the Company under this Agreement or from any misrepresentation in or
omission from any certificate, schedule, exhibit, statement, document or
instrument furnished to the Shareholders pursuant hereto or in connection with
the negotiation, execution or performance hereof; and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and other
expenses (including, without limitation, reasonable legal fees and expenses and
court costs) incident to any of the foregoing or to the enforcement of this
SECTION 7.2.
7.3 PROCEDURE FOR INDEMNIFICATION CLAIMS. If at any time a claim shall
be made or threatened, or an action or proceeding shall be commenced or
threatened, against a party hereto (the "AGGRIEVED PARTY") which could result in
liability of the other party (the "INDEMNIFYING PARTY") under its
indemnification obligations hereunder, the Aggrieved Party shall give to the
Indemnifying Party prompt notice of such claim, action or proceeding. Such
notice shall state the basis for the claim, action or proceeding and the amount
thereof (to the extent such amount is determinable at the time when such notice
is given) and shall permit the Indemnifying Party to assume the defense of any
such claim, action or proceeding (including any action or proceeding resulting
from any such claim). Failure by the Indemnifying Party to notify the Aggrieved
Party of its election to defend any such claim, action or proceeding within a
reasonable time shall be deemed a waiver by the Indemnifying Party of its right
to defend such claim, action or proceeding; provided, however, that the
Indemnifying Party shall not be deemed to have waived its right to contest and
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defend against any claim of the Aggrieved Party for indemnification hereunder
based upon or arising out of such claim, action or proceeding.
If the Indemnifying Party assumes the defense of any such claim, action
or proceeding, the obligation of the Indemnifying Party as to such claim, action
or proceeding shall be limited to taking all steps necessary in the defense or
settlement thereof and, to the extent the Indemnifying Party is liable for
indemnification hereunder, to holding the Aggrieved Party harmless from and
against any and all losses, damages and liabilities caused by or arising out of
any settlement approved by the Indemnifying Party or any judgment or award
rendered in connection with such claim, action or proceeding. The Aggrieved
Party agrees to cooperate and make available to the Indemnifying Party all books
and records and such officers, employees and agents as are reasonably necessary
and useful in connection with the defense. The Aggrieved Party may participate,
at its expense, in the defense of such claim, action or proceeding, but the
Indemnifying Party shall direct and control the defense of such claim, action or
proceeding; provided, however, if in the reasonable opinion of the Aggrieved
Party any such claim, action or proceeding involves an issue or matter which, if
adversely determined, would have a materially adverse effect on the Aggrieved
Party, then the Aggrieved Party shall have the right to control the defense or
settlement of any such claim, action or proceeding and its reasonable costs and
expenses shall be included as a part of the indemnification obligation of the
Indemnifying Party. The Indemnifying Party shall not, with respect to any such
claim, action or proceeding, consent to the entry of any judgment or award, or
enter into any settlement, except with the prior written consent of the
Aggrieved Party, which consent shall not be unreasonably withheld; provided,
however, in the case of any such judgment, award or settlement for money, it
shall be a condition thereto that the Indemnifying Party shall acknowledge its
obligation to indemnify the Aggrieved Party pursuant to this ARTICLE VII; and
provided, further, that any such judgment, award or settlement include, as an
unconditional term thereof, the release of the Aggrieved Party from all
liability by the third party claimant or plaintiff.
7.4 INDEMNIFICATION LIMITATIONS. Notwithstanding the provisions of
SECTIONS 7.1 and 7.2, no party shall be required to indemnify another party with
respect to a breach of a representation, warranty or covenant unless the claim
for indemnification is brought within one (1) year after the Closing Date,
except that: (a) a claim for indemnification for a breach of the representations
and warranties contained in SECTIONS 3.1(A), 3.1(B), 3.1(E), 3.1(F), 3.2(A) and
3.2(B) may be made at any time, and (b) a claim for indemnification based upon
an intentional breach or fraud by the Shareholders may be made at any time
within the applicable statute of limitations.
7.5 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification rights
of the parties under this ARTICLE VII are independent of and in addition to such
rights and remedies as the parties may have at law or in equity or otherwise for
any misrepresentation, breach of warranty or failure to fulfill any agreement or
covenant hereunder on the part of any party hereto, including, without
limitation the right to seek an injunction against a violation of any of the
terms hereof or in aid of the exercise of any power granted hereby or by law,
the right to seek specific performance, rescission or restitution, none of which
rights or remedies shall be affected or diminished hereby. All rights, powers,
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options or remedies afforded to the parties either hereunder or by law shall be
cumulative and not alternative and the exercise of a party's right, power,
option or remedy shall not bar other rights, powers, options or remedies allowed
herein or by law. The indemnification obligations hereunder shall survive the
consummation of the transactions described herein. Should any party hereto
employ an attorney or attorneys to enforce any of the provisions hereof, or to
protect its interest in any matter arising hereunder, or to recover damages for
the breach hereof, the party prevailing shall be entitled to recover from the
other party all reasonable costs, charges and expenses, including attorney's
fees, the value of time charged by paralegals and/or other staff members
operating under the supervision of an attorney, and other legal costs, expended
or incurred in connection therewith, before, during and subsequent to any
litigation, including arbitration and appellate proceedings, bankruptcy or
similar debtor/creditor proceedings, and proceedings to enforce any indemnity
agreement herein contained.
ARTICLE VIII
TAX MATTERS
-----------
The following provisions shall govern the allocation of responsibility
as between USA Digital, the Company and the Shareholders for certain tax matters
following the Closing Date:
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. USA
Digital and the Company shall prepare or cause to be prepared and file or cause
to be filed all Tax Returns for AVIX and the Related Companies for all periods
ending on or prior to the Closing Date which are filed after the Closing Date.
USA Digital and the Company shall permit ▇▇▇▇▇▇ to review and comment on each
such Tax Return described in the preceding sentence prior to filing. ▇▇▇▇▇▇
shall reimburse USA Digital and/or the Company for Taxes of each of AVIX and the
Related Companies with respect to such periods within fifteen (15) days after
payment by USA Digital and/or the Company of such Taxes to the extent such Taxes
are not reflected in the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) shown on the Balance Sheet. Notwithstanding the foregoing, the Parties
acknowledge that none of AVIX or the Related Companies has paid or reserved for
Federal income taxes arising with respect to AVIX' or the Related Companies'
operations in the calendar year 2001, which liability will be assumed by the
Company pursuant to the Merger and not paid by ▇▇▇▇▇▇.
(b) Tax Periods Beginning Before and Ending After the Closing
Date. USA Digital and the Company shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns of each of AVIX and the Related Companies
for Tax periods which begin before the Closing Date and end after the Closing
Date. ▇▇▇▇▇▇ shall pay to USA Digital and the Company within fifteen (15) days
after the date on which Taxes are paid with respect to such periods an amount
equal to the portion of such Taxes which relates to the portion of such taxable
period ending on the Closing Date to the extent such Taxes are not reflected in
the reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the Balance Sheet. For purposes of this Section, in the case of any Taxes that
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are imposed on a periodic basis and are payable for a taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such taxable period ending on the Closing Date shall
(i) in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire taxable period, and (ii) in the case of any Tax
based upon or related to income or receipts be deemed equal to the amount which
would be payable if the relevant taxable period ended on the Closing Date. Any
credits relating to a taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant taxable period
ended on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior practice
of AVIX and the Related Companies.
(c) Cooperation on Tax Matters.
(i) USA Digital, the Company, AVIX, the Related Companies
and ▇▇▇▇▇▇ shall cooperate fully, as and to the extent reasonably requested by
the other Parties, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other Parties'
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. Each of USA Digital, the Company and ▇▇▇▇▇▇
agree: (A) to retain all books and records with respect to Tax matters pertinent
to AVIX and/or the Related Companies relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by USA Digital, the Company or ▇▇▇▇▇▇, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
Parties reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other Parties so requests,
each of USA Digital, the Company or ▇▇▇▇▇▇, as the case may be, shall allow the
other Parties to take possession of such books and records.
(ii) USA Digital, the Company and ▇▇▇▇▇▇ further agree,
upon request, to use their best efforts to obtain any certificate or other
document from any governmental authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions contemplated hereby).
(iii) USA Digital, the Company and ▇▇▇▇▇▇ further agree,
upon request, to provide the other Parties with all information that any of the
other Parties hereto may be required to report pursuant to Section 6043 of the
Code and all Treasury Department Regulations promulgated thereunder.
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(d) CERTAIN TAXES. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by the
Shareholders when due, and the Shareholders will, at their own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, USA Digital and the Company will, and will cause
their affiliates to, join in the execution of any such Tax Returns and other
documentation.
ARTICLE IX
TERMINATION
-----------
9.1 TERMINATION OF AGREEMENT. This Agreement may be terminated as
provided below:
(a) USA Digital, the Company, AVIX and ▇▇▇▇▇▇ may terminate
this Agreement by mutual written consent at any time prior to the Closing;
(b) USA Digital and the Company may terminate this Agreement
by giving written notice to ▇▇▇▇▇▇ prior to the Closing if USA Digital and the
Company are not satisfied in their sole discretion, with the results of their
continuing business, legal, environmental, and accounting due diligence
regarding AVIX and the Related Companies;
(c) USA Digital and the Company may terminate this Agreement
by giving written notice to ▇▇▇▇▇▇ at any time prior to the Closing: (i) in the
event ▇▇▇▇▇▇, AVIX and/or the Related Companies have breached in any material
respect, any representation, warranty, or covenant contained in this Agreement,
USA Digital and the Company have notified ▇▇▇▇▇▇ and AVIX of the breach, and the
breach has continued without cure for a period of ten (10) days after the notice
of breach, or (ii) if the Closing shall not have occurred on or before October
31, 2001, by reason of the failure of any condition precedent under Section 6.1
hereof (unless the failure results primarily from USA Digital and the Company
themselves breaching any representation, warranty, or covenant contained in this
Agreement); and
(d) ▇▇▇▇▇▇ and AVIX may terminate this Agreement by giving
written notice to USA Digital and the Company at any time prior to the Closing:
(i) in the event USA Digital and/or the Company have breached in any material
respect, any material representation, warranty, or covenant contained in this
Agreement, ▇▇▇▇▇▇ and AVIX have notified USA Digital and the Company of the
breach, and the breach has continued without cure for a period of ten (10) days
after the notice of breach, or (ii) if the Closing shall not have occurred on or
before October 15, 2001, by reason of the failure of any condition precedent
under Section 6.2 hereof (unless the failure results primarily from ▇▇▇▇▇▇, AVIX
or the Related Companies themselves breaching any representation, warranty, or
covenant contained in this Agreement).
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9.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to SECTION 9.1, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach and the provisions with respect to
confidentiality which shall remain in full force and effect).
ARTICLE X
MISCELLANEOUS
-------------
10.1 NATURE OF CERTAIN OBLIGATIONS. The representations, warranties,
and covenants of ▇▇▇▇▇▇ in this Agreement are made by ▇▇▇▇▇▇ and as such he is
solely responsible to the extent provided in Article VII above for the entirety
of any adverse consequences USA Digital and the Company may suffer as a result
of any breach thereof.
10.2 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of USA
Digital, the Company, AVIX and ▇▇▇▇▇▇; provided, however, that any Party may
make any public disclosure it believes in good faith is required by applicable
law (in which case the disclosing Party will use its reasonable best efforts to
advise the other Parties prior to making the disclosure).
10.3 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties (and other than the
Shareholders other than ▇▇▇▇▇▇) and their respective successors and permitted
assigns.
10.4 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
10.5 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of USA Digital, the Company, AVIX and ▇▇▇▇▇▇.
10.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.7 HEADINGS. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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10.8 NOTICES. Any notice or other communications required or permitted
hereunder shall be sufficiently given if delivered in person or sent by
overnight mail or by registered or certified mail, postage prepaid, addressed as
follows:
If to each of AVIX and the Related Companies (prior to the Merger) or
to ▇▇▇▇▇▇ (at any time):
AVIX Telecom Solutions, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Copy to:
▇▇▇▇▇▇▇ ▇. Fee, Esq.
▇▇▇▇▇▇▇ & Fee, P.A.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to USA Digital or the Company:
USA Digital, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇, President
Copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇, Loop & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
or such other address as shall be furnished in writing by any such Party in
accordance with this SECTION 10.8, and such notice or communication shall be
deemed to have been given on the date personally delivered, one (1) business day
after delivered by overnight mail or three (3) business days after deposited in
the U.S. Mail.
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10.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Florida without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of Florida. The
exclusive venue for any proceeding hereunder shall be Hillsborough County,
Florida.
10.10 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by USA
Digital, the Company, AVIX and ▇▇▇▇▇▇. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
10.11 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.12 EXPENSES. Each of the Parties will bear his or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby; provided, however that
▇▇▇▇▇▇ agrees that he shall be solely responsible for AVIX' and the Related
Companies' costs and expenses (including any of their legal fees and expenses).
▇▇▇▇▇▇ warrants, represents and covenants that AVIX and the Related Companies
have not borne and will not bear any of ▇▇▇▇▇▇'▇, AVIX' or the Related
Companies' costs and expenses (including any of his or its legal fees and
expenses) incurred in connection with this Agreement or any of the transactions
contemplated hereby.
10.13 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean "including without limitation." The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
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10.14 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
10.15 SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter in addition to any other remedy to which they may be
entitled, at law or in equity.
INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, each of the Parties hereto has executed this
Agreement as of the date and year first above written.
"USA DIGITAL"
USA DIGITAL, INC.
Witnesses:
By /s/ ▇▇▇▇ ▇. ▇▇▇▇
_________________________ _________________________________
▇▇▇▇ ▇. ▇▇▇▇
_________________________ Its: President
"THE COMPANY"
USA DIGITAL ACQUISITION, INC.
Witnesses:
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
_________________________ ________________________________
▇▇▇▇ ▇. ▇▇▇▇
_________________________ Its: President
"AVIX"
AVIX TELECOM SOLUTIONS, INC.
Witnesses:
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_________________________ ________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
_________________________
"▇▇▇▇▇▇"
Witnesses:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_________________________ ____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_________________________
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