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Exhibit 10.2
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and between
DTI TECHNOLOGIES, INC.,
THE UNDERSIGNED STOCKHOLDER THEREOF,
and
UNIVERSAL DOCUMENT MANAGEMENT SYSTEMS, INC.
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TABLE OF CONTENTS
ARTICLE I
Definitions................................................................................................ 1
Section 1.1 Certain General Definitions........................................................... 1
ARTICLE II
The Merger................................................................................................. 4
Section 2.1 The Merger............................................................................ 4
Section 2.2 The Closing........................................................................... 4
Section 2.3 Effective Time........................................................................ 4
Section 2.4 Articles of Incorporation of Surviving Corporation.................................... 5
Section 2.5 Code of Regulations of Surviving Corporation.......................................... 5
Section 2.6 Directors of the Surviving Corporation................................................ 5
Section 2.7 Officers of the Surviving Corporation................................................. 5
Section 2.8 Conversion of Company Capital Stock................................................... 5
Section 2.9 Exchange of Certificates Representing Shares of Company Common Stock.................. 5
Section 2.10 Fractional Shares..................................................................... 6
Section 2.11 Subsequent Actions.................................................................... 6
ARTICLE III
Representations and Warranties of the Company and the Stockholder.......................................... 7
Section 3.1 Organization and Good Standing; Qualification......................................... 7
Section 3.2 Capitalization........................................................................ 7
Section 3.3 Transactions in Capital Stock......................................................... 7
Section 3.4 Continuity of Business Enterprise..................................................... 7
Section 3.5 Corporate Records..................................................................... 7
Section 3.6 Authorization and Validity............................................................ 8
Section 3.7 No Violation.......................................................................... 8
Section 3.8 Consents.............................................................................. 8
Section 3.9 Financial Statements.................................................................. 8
Section 3.10 Liabilities and Obligations........................................................... 9
Section 3.11 Employee Matters...................................................................... 9
3.11.1 Cash Compensation............................................................ 9
3.11.2 Compensation Plans........................................................... 9
3.11.3 Employment Agreements........................................................ 9
3.11.4 Employee Policies and Procedures............................................. 10
3.11.5 Unwritten Amendments......................................................... 10
3.11.6 Labor Compliance............................................................. 10
3.11.7 Unions....................................................................... 10
3.11.8 Aliens....................................................................... 10
Section 3.12 Employee Benefit Plans................................................................ 10
3.12.1 Identification............................................................... 10
3.12.2 Administration............................................................... 11
3.12.3 Examinations................................................................. 11
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3.12.4 Prohibited Transactions...................................................... 11
3.12.5 Claims and Litigation........................................................ 11
3.12.6 Qualification................................................................ 11
3.12.7 Funding Status............................................................... 11
3.12.8 Excise Taxes................................................................. 12
3.12.9 Multiemployer Plans.......................................................... 12
3.12.10 PBGC......................................................................... 12
3.12.11 Retirees..................................................................... 12
Section 3.13 Absence of Certain Changes............................................................ 12
Section 3.14 Title; Leased Assets.................................................................. 14
3.14.1 Real Property................................................................ 14
3.14.2 Personal Property............................................................ 14
3.14.3 Leases....................................................................... 14
Section 3.15 Commitments........................................................................... 14
3.15.1 Commitments; Defaults........................................................ 14
3.15.2 No Cancellation or Termination of Commitment................................. 15
Section 3.16 Insurance............................................................................. 16
Section 3.17 Proprietary Rights and Information.................................................... 16
Section 3.18 Taxes................................................................................. 17
3.18.1 Filing of Tax Returns........................................................ 17
3.18.2 Payment of Taxes............................................................. 17
3.18.3 No Pending Deficiencies, Delinquencies, Assessments or Audits................ 17
3.18.4 No Extension of Limitation Period............................................ 17
3.18.5 Withholding Requirements Satisfied........................................... 17
3.18.6 Foreign Person............................................................... 17
3.18.7 Safe Harbor Lease............................................................ 17
3.18.8 Tax Exempt Entity............................................................ 18
3.18.9 Collapsible Corporation...................................................... 18
3.18.10 Boycotts..................................................................... 18
3.18.11 Parachute Payments........................................................... 18
3.18.12 S Corporation................................................................ 18
3.18.13 Personal Service Corporation................................................. 18
3.18.14 Personal Holding Company..................................................... 18
Section 3.19 Compliance with Laws.................................................................. 18
Section 3.20 Finder's Fee.......................................................................... 19
Section 3.21 Litigation............................................................................ 19
Section 3.22 Condition of Fixed Assets............................................................. 19
Section 3.23 Distributions and Repurchases......................................................... 19
Section 3.24 Banking Relations..................................................................... 19
Section 3.25 Ownership Interests of Interested Persons; Affiliations............................... 19
Section 3.26 Investments in Competitors............................................................ 19
Section 3.27 Environmental Matters................................................................. 20
Section 3.28 Certain Payments...................................................................... 20
Section 3.29 No affiliation with NASD Member....................................................... 20
ARTICLE IV
Representations and Warranties of the Stockholder.......................................................... 20
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Section 4.1 Validity; Stockholder Capacity........................................................ 20
Section 4.2 No Violation.......................................................................... 20
Section 4.3 Personal Holding Company; Control of Related Businesses............................... 21
Section 4.4 Transfers of the Company Capital Stock................................................ 21
Section 4.5 Consents.............................................................................. 21
Section 4.6 Certain Payments...................................................................... 21
Section 4.7 Finder's Fee.......................................................................... 21
Section 4.8 Ownership of Interested Persons; Affiliations......................................... 21
Section 4.9 Investments in Competitors............................................................ 22
Section 4.10 Disposition of Acquiror Shares........................................................ 22
ARTICLE V
Representations and Warranties of Acquiror................................................................. 22
Section 5.1 Organization and Good Standing........................................................ 22
Section 5.2 Capitalization........................................................................ 22
Section 5.3 Corporate Records..................................................................... 22
Section 5.4 Authorization and Validity............................................................ 23
Section 5.5 No Violation.......................................................................... 23
Section 5.6 Finder's Fee.......................................................................... 23
Section 5.7 Capital Stock......................................................................... 23
Section 5.8 Continuity of Business Enterprise..................................................... 23
Section 5.9 Consents.............................................................................. 23
Section 5.10 Proprietary Rights and Information.................................................... 24
Section 5.11 Taxes................................................................................. 24
5.11.1 Filing of Tax Returns........................................................ 24
5.11.2 Payment of Taxes............................................................. 24
5.11.3 No Pending Deficiencies, Delinquencies, Assessments or Audits................ 24
5.11.4 No Extension of Limitation Period............................................ 24
5.11.5 All Withholding Requirements Satisfied....................................... 24
5.11.6 Foreign Person............................................................... 24
5.11.7 Safe Harbor Lease............................................................ 25
5.11.8 Tax Exempt Entity............................................................ 25
5.11.9 Collapsible Corporation...................................................... 25
5.11.10 Boycotts..................................................................... 25
5.11.11 Parachute Payments........................................................... 25
5.11.12 S Corporation................................................................ 25
Section 5.12 Compliance with Laws......................................................... 25
Section 5.13 Litigation............................................................................ 25
Section 5.14 Ownership Interests of Interested Persons; Affiliations............................... 26
Section 5.15 Investments in Competitors............................................................ 26
Section 5.16 Certain Payments...................................................................... 26
Section 5.17 Commitments........................................................................... 26
5.17.1 Commitments; Defaults........................................................ 26
5.17.2 No Cancellation or Termination of Acquiror Commitment........................ 27
Section 5.18 Acquiror Financial Statements......................................................... 28
Section 5.19 Liabilities and Obligations........................................................... 28
Section 5.20 Employee Matters...................................................................... 28
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ARTICLE VI
Covenants of the Company and the Stockholder............................................................... 28
Section 6.1 Consummation of Agreement............................................................. 28
Section 6.2 Business Operations................................................................... 28
Section 6.3 Access................................................................................ 29
Section 6.4 Notification of Certain Matters....................................................... 29
Section 6.5 Approvals of Third Parties............................................................ 29
Section 6.6 Employee Matters...................................................................... 29
Section 6.7 Contracts............................................................................. 30
Section 6.8 Capital Assets; Payments of Liabilities............................................... 30
Section 6.9 Mortgages, Liens and Guaranties....................................................... 30
Section 6.10 Acquisition Proposals................................................................. 31
Section 6.11 Distributions and Repurchases......................................................... 31
Section 6.12 Requirements to Effect the Merger..................................................... 31
Section 6.13 Lockup Agreements..................................................................... 31
ARTICLE VII
Covenants of Acquiror...................................................................................... 31
Section 7.1 Consummation of Agreement............................................................. 32
Section 7.2 Requirements to Effect Merger......................................................... 32
Section 7.3 Access................................................................................ 32
Section 7.4 Notification of Certain Matters....................................................... 32
Section 7.5 Approvals of Third Parties............................................................ 32
ARTICLE VIII
Covenants of all Parties................................................................................... 32
Section 8.1 Filings; Other Action................................................................. 32
Section 8.2 Amendment of Schedules................................................................ 33
Section 8.3 Stockholder Employment Agreements..................................................... 34
ARTICLE IX
Conditions Precedent of Acquiror........................................................................... 34
Section 9.1 Due Diligence......................................................................... 34
Section 9.2 Representations and Warranties........................................................ 34
Section 9.3 Covenants............................................................................. 34
Section 9.4 Legal Opinion......................................................................... 34
Section 9.5 Proceedings........................................................................... 34
Section 9.6 No Material Adverse Change............................................................ 34
Section 9.7 Securities Approvals.................................................................. 35
Section 9.8 Simultaneous Closings................................................................. 35
Section 9.9 Closing Deliveries.................................................................... 35
ARTICLE X
Conditions Precedent of the Company and the Stockholder.................................................... 35
Section 10.1 Representations and Warranties........................................................ 35
Section 10.2 Covenants............................................................................. 35
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Section 10.3 Legal Opinions........................................................................ 35
Section 10.4 Proceedings........................................................................... 36
Section 10.5 Government Approvals and Required Consents............................................ 36
Section 10.6 Securities Approvals.................................................................. 36
Section 10.7 Closing Deliveries.................................................................... 36
Section 10.8 No Material Adverse Change............................................................ 36
ARTICLE XI
Closing Deliveries......................................................................................... 36
Section 11.1 Deliveries of the Company and the Stockholder......................................... 36
Section 11.2 Deliveries of Acquiror................................................................ 38
ARTICLE XII
Post Closing Matters....................................................................................... 39
Section 12.1 Further Instruments of Transfer....................................................... 39
Section 12.2 Preservation of Tax and Accounting Treatment.......................................... 39
Section 12.3 Merger Tax Covenants.................................................................. 40
ARTICLE XIII
Remedies................................................................................................... 41
Section 13.1 Indemnification by the Stockholder.................................................... 41
Section 13.2 Indemnification by Acquiror........................................................... 42
Section 13.3 Conditions of Indemnification......................................................... 42
Section 13.4 Remedies Not Exclusive................................................................ 44
Section 13.5 Indemnification Limitations........................................................... 45
Section 13.6 Tax Benefits; Insurance Proceeds...................................................... 45
Section 13.7 Payment of Indemnification Obligation................................................. 45
ARTICLE XIV
Termination................................................................................................ 45
Section 14.1 Termination........................................................................... 45
Section 14.2 Effect of Termination................................................................. 46
ARTICLE XV
Nondisclosure of Confidential Information.................................................................. 46
Section 15.1 Nondisclosure......................................................................... 47
Section 15.2 Damages............................................................................... 47
Section 15.3 Survival.............................................................................. 47
ARTICLE XVI
Transfer Restrictions...................................................................................... 47
Section 16.1 Transfer Restrictions................................................................. 47
ARTICLE XVII
Federal Securities Law
Restrictions on Acquiror Common Stock...................................................................... 48
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Section 17.1 Investment Representation............................................................. 48
Section 17.2 Compliance with Law................................................................... 48
Section 17.3 Economic Risk; Sophistication......................................................... 48
Section 17.4 Accredited Investor Status............................................................ 49
ARTICLE XVIII
Miscellaneous............................................................................................. 49
Section 18.1 Amendment; Waivers.................................................................... 49
Section 18.2 Assignment............................................................................ 49
Section 18.3 Parties In Interest; No Third Party Beneficiaries..................................... 49
Section 18.4 Entire Agreement...................................................................... 49
Section 18.5 Severability.......................................................................... 50
Section 18.6 Survival of Representations, Warranties and Covenants................................. 50
Section 18.7 Governing Law......................................................................... 50
Section 18.8 Captions.............................................................................. 50
Section 18.9 Gender and Number..................................................................... 50
Section 18.10 Reference to Agreement................................................................ 50
Section 18.11 Confidentiality; Publicity and Disclosures............................................ 50
Section 18.12 Notice................................................................................ 51
Section 18.13 Choice of Forum....................................................................... 52
Section 18.14 No Waiver; Remedies................................................................... 52
Section 18.15 Counterparts.......................................................................... 52
Section 18.16 Costs, Expenses and Legal Fees........................................................ 52
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (this
"Agreement"), dated as of ________, 1997, is by and among DTI Technologies,
Inc., a New Hampshire corporation (the "Company"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the sole
stockholder of the Company (the "Stockholder"), and Universal Document
Management Systems, Inc., an Ohio corporation ("Acquiror").
WITNESSETH:
WHEREAS, the Boards of Directors of each of the Company and Acquiror
have determined that a business combination between the Company and Acquiror is
in the best interests of their respective companies and stockholders and
presents an opportunity for their respective companies to achieve long-term
strategic objectives and, accordingly, have agreed to effect the Merger (as
hereinafter defined) upon the terms and subject to the conditions set forth
herein; and
WHEREAS, it is intended that for federal income tax purposes the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code; and
WHEREAS, Acquiror has entered or intends to enter into merger or other
acquisition agreements (collectively, the "Other Agreements") pursuant to which
it intends to acquire a number of other companies whose businesses are similar
to that of the Company, the "Target Companies," as such term is defined herein;
and
WHEREAS, to provide Acquiror with necessary working capital and funds
required to consummate the transactions contemplated hereby, Acquiror will,
subject to the terms and conditions of this Agreement, enter into an
underwriting agreement with the Underwriter Representative (as defined herein)
in connection with the Initial Public Offering (as defined herein); and
WHEREAS, prior to the Closing Date (defined below), Acquiror intends to
change its name to Synergis Technologies, Inc.;
NOW, THEREFORE, and in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN GENERAL DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below:
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1.1.1 "actual knowledge", "have no actual knowledge of", "do
not actually know of" and similar phrases shall mean (i) in the case of a
natural person, the actual conscious awareness, or not, as the context requires,
of the particular fact by such person, and (ii) in the case of an entity, the
actual conscious awareness, or not, as the context requires, of the particular
fact by any stockholder, director or executive officer of such entity.
1.1.2 "Affiliate" with respect to any person shall mean a
person that directly or indirectly through one or more intermediaries, controls,
or is controlled by or is under common control with, such person.
1.1.3 "best knowledge", "have knowledge of", "have no
knowledge of", "do not know of" or "to the knowledge of" and similar phrases
shall mean (i) in the case of a natural person, the particular fact was known,
or not known, as the context requires, to such person after diligent
investigation and inquiry by such person, and (ii) in the case of an entity, the
particular fact was known, or not known, as the context requires, to any
stockholder, director or executive officer of such entity after diligent
investigation and inquiry.
1.1.4 "Company Capital Stock" shall mean the shares of capital
stock of the Company, as set forth in the Company Disclosure Schedules, which
are authorized, issued and outstanding as of the Effective Time.
1.1.5 "Company Disclosure Schedules" shall mean the schedules
of exceptions and other disclosures attached hereto as of the date hereof or
otherwise delivered by the Company and the Stockholder to Acquiror, as such may
be amended or supplemented from time to time pursuant to the provisions hereof.
The information contained in the Company Disclosure Schedules is labeled to
correspond with the Section numbers of this Agreement to which the disclosure
relates.
1.1.6 "Confidential Information" shall mean all trade secrets
and other confidential and/or proprietary information of the particular person,
including information derived from reports, investigations, research, work in
progress, codes, marketing and sales programs, financial projections, cost
summaries, pricing formulae, contract analyses, financial information,
projections, confidential filings with any state or federal agency, and all
other confidential concepts, methods of doing business, ideas, materials or
information prepared or performed for, by or on behalf of such person by its
employees, officers, directors, agents, representatives, or consultants.
1.1.7 "Environmental Laws" shall mean any laws or regulations
pertaining to health or the environment, as in effect on the date hereof and the
Closing Date, including without limitation (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. SectionSection9601
et seq.), as amended (including without limitation as amended pursuant to the
Superfund Amendments and Reauthorization Act of 1986), and regulations
promulgated thereunder, (ii) the Resource Conservation and Recovery Act of 1976
(42 U.S.C. SectionSection6901 et seq., as amended), and regulations promulgated
thereunder, (iii) statutes, rules or regulations, whether federal, state or
local, applicable to the Company's assets or operations that relate to asbestos
or polychlorinated
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biphenyls, and (iv) the provisions contained in any similar state statutes or
regulations relating to environmental matters applicable to the Company's assets
or operations.
1.1.8 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.1.9 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
1.1.10 "Initial Public Offering" shall mean the initial
underwritten public offering of Acquiror Common Stock contemplated by the
Registration Statement.
1.1.11 "Initial Public Offering Price" shall mean the price
per share at which Acquiror Common Stock is offered for sale to the public in
the Initial Public Offering.
1.1.12 "Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended.
1.1.13 "IRS" shall mean the Internal Revenue Service of the
United States Department of the Treasury.
1.1.14 "Material Adverse Effect" shall mean a material adverse
effect on the Company's or Acquiror's, as applicable, business, operations,
condition (financial or otherwise) or results of operations, taken as a whole,
in consideration of all relevant facts and circumstances.
1.1.15 "ordinary course of business" shall mean the usual and
customary way in which the Company has conducted its business in the past.
1.1.16 "person" shall mean any natural person, corporation,
partnership, joint venture, limited liability company, association, group,
organization or other entity.
1.1.17 "Related Acquisitions" shall mean, collectively, the
Merger, and the mergers and acquisitions of entities and assets contemplated by
the Other Agreements.
1.1.18 "Schedules" shall mean the Company Disclosure Schedules
and the Acquiror Disclosure Schedules.
1.1.19 "SEC" shall mean the United States Securities and
Exchange Commission.
1.1.20 "Securities Act" shall mean the Securities Act of 1933,
as amended.
1.1.21 "Target Companies" shall mean the companies listed on
Exhibit 1.1.21 which Acquiror intends to acquire simultaneously with its
acquisition of the Company.
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1.1.22 "Tax Returns" shall include all federal, state, local
or foreign income, excise, corporate, franchise, property, sales, use, payroll,
withholding, provider, environmental, duties, value added and other tax returns
(including information returns).
1.1.23 "Underwriter Representative" shall mean any underwriter
in the Initial Public Offering who acts as a managing underwriter in the Initial
Public Offering.
1.1.24 "Acquiror Common Stock" shall mean the Common Stock,
without par value, of Acquiror.
1.1.25 "Acquiror Disclosure Schedules" shall mean the
schedules of exceptions and other disclosures attached hereto or otherwise
delivered by Acquiror to the Company and/or the Stockholder, as such may be
amended or supplemented from time to time pursuant to the provisions hereof. The
information contained in the Acquiror Disclosure Schedules is labeled to
correspond with the Section numbers of this Agreement to which the disclosure
relates, if applicable.
ARTICLE II
THE MERGER
2.1 THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time, the Company shall be merged with and into Acquiror
in accordance with this Agreement and the separate corporate existence
of the Company shall thereupon cease (the "Merger"). Acquiror shall be
the surviving corporation in the Merger (in such capacity, hereinafter
referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Ohio, and the separate corporate
existence of Acquiror with all its rights, privileges, powers,
immunities, purposes and franchises shall continue unaffected by the
Merger, except as set forth herein. The Merger shall have the effects
specified in the Ohio General Corporation Law and the New Hampshire
Business Corporation Act.
2.2 THE CLOSING. The Closing shall take place at 10:00 a.m., Cincinnati
time, at the offices of ▇▇▇▇▇▇▇▇ & Shohl LLP simultaneously with the
closings of the Initial Public Offering and Acquiror's acquisitions of
the Target Companies. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date."
2.3 EFFECTIVE TIME. If all the conditions to the Merger set forth in
Articles IX and X shall have been fulfilled or waived in accordance
herewith and this Agreement shall not have been terminated in
accordance with Article XIV, the parties hereto shall cause to be
properly executed and filed on the Closing Date Articles of Merger
meeting the requirements of Section 11.05 of the New Hampshire Business
Corporation Act and a Certificate of Merger meeting the requirements of
Section 1701.79 of the Ohio Revised Code. The Merger shall become
effective at the time of the filing of such document with the
Secretaries of State of
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New Hampshire and Ohio, in accordance with such laws or at such later
time which the parties hereto have theretofore agreed upon and
designated in such filings as the effective time of the Merger (the
"Effective Time").
2.4 ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. The Articles of
Incorporation of Acquiror in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving
Corporation until duly amended in accordance with their terms.
2.5 CODE OF REGULATIONS OF SURVIVING CORPORATION. The Code of Regulations
of Acquiror in effect immediately prior to the Effective Time shall be
the Code of Regulations of the Surviving Corporation until duly amended
in accordance with its terms.
2.6 DIRECTORS OF THE SURVIVING CORPORATION. The persons who are directors
of Acquiror 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 duly elected or appointed and
qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation
and Code of Regulations.
2.7 OFFICERS OF THE SURVIVING CORPORATION. The persons who are officers of
Acquiror 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 office(s) until their successors have
been duly elected or appointed and qualified or until their earlier
death, resignation or removal.
2.8 CONVERSION OF COMPANY CAPITAL STOCK. The manner of converting shares of
the Company in the Merger shall be as follows:
2.8.1 As a result of the Merger and without any action on the
part of the holder thereof, all shares of Company Capital Stock issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Capital Stock shall thereafter cease to
have any rights with respect to such shares of Company Capital Stock, except the
right to receive, without interest, validly issued, fully paid and nonassessable
shares of Acquiror Common Stock and other consideration, if any, determined in
accordance with the provisions of Exhibit 2.8.1 attached hereto (collectively,
the "Merger Consideration") upon the surrender of such certificate.
2.8.2 Each share of Company Capital Stock held in the
Company's 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.
2.9 EXCHANGE OF CERTIFICATES REPRESENTING SHARES OF COMPANY COMMON STOCK.
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2.9.1 At or after the Effective Time and at Closing (i) the
Stockholder, as the holder of a certificate or certificates representing shares
of Company Capital Stock, shall, upon surrender of such certificate or
certificates, receive the number of shares of Acquiror Common Stock determined
in accordance with the provisions of Exhibit 2.8.1 attached hereto; and (ii)
until the certificate or certificates representing Company Capital Stock have
been surrendered by the Stockholder and replaced by a certificate or
certificates representing Acquiror Common Stock, the certificate or certificates
for Company Capital Stock shall, for all purposes be deemed to evidence
ownership of the number of shares of Acquiror Common Stock determined in
accordance with the provisions of Exhibit 2.8.1 attached hereto. All shares of
Acquiror Common Stock issuable to the Stockholder in the Merger shall be deemed
for all purposes to have been issued by Acquiror at the Effective Time.
2.9.2 The Stockholder shall deliver to Acquiror at Closing the
certificate or certificates representing Company Capital Stock owned by him,
duly endorsed in blank by such Stockholder, or accompanied by duly endorsed
stock powers in blank, and with all necessary transfer tax and other revenue
stamps, acquired at such Stockholder's expense, affixed and canceled. The
Stockholder agrees to cure any deficiencies with respect to the endorsement of
the certificates or other documents of conveyance with respect to such Company
Capital Stock or with respect to the stock powers accompanying any Company
Capital Stock. Upon such delivery, The Stockholder shall receive in exchange
therefor a certificate representing that number of shares of Acquiror Common
Stock and the amount of cash or other immediately available funds, if any, such
Stockholder is entitled to receive pursuant hereto.
2.10 FRACTIONAL SHARES. Notwithstanding any other provision herein, no
fractional shares of Acquiror Common Stock will be issued and any
Stockholder entitled hereunder to receive a fractional share of
Acquiror Common Stock but for this Section 2.10 will be entitled to
receive a cash payment in lieu thereof reflecting such Stockholder's
proportionate interest in a share of Acquiror Common Stock multiplied
by the Initial Public Offering Price.
2.11 SUBSEQUENT ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things
are necessary or desirable to vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or interest in,
to or under any of the rights, properties or assets of any of the
Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger or otherwise to carry out
this Agreement, and to effect the cancellation of all outstanding
shares of Company Capital Stock in return for the consideration set
forth in this Agreement, the officers and directors of the Surviving
Corporation shall, at the sole cost and expense of the Surviving
Corporation, be authorized to execute and deliver, in the name and on
behalf of the Company, to carry out all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on
behalf of the Company, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER
The Company and the Stockholder, jointly and severally, represent and
warrant to Acquiror that except as may be set forth in the Company Disclosure
Schedules the following are true and correct as of the date hereof:
3.1 ORGANIZATION AND GOOD STANDING; QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of its state of organization, with all requisite corporate
power and authority to carry on the business in which it is engaged, to
own the properties it owns, to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The Company is not
duly qualified and licensed to do business in any other jurisdiction.
The Company does not have any assets, employees or offices in any state
other than the state of its organization.
3.2 CAPITALIZATION. The authorized, issued and outstanding capital stock of
the Company is set forth in the Company Disclosure Schedules. The
Stockholder owns all of the issued and outstanding Company Capital
Stock, free and clear of all security interests, liens, adverse claims,
encumbrances, equities, proxies and shareholders' agreements. Each
outstanding share of Company Capital Stock has been legally and validly
issued and is fully paid and nonassessable. No shares of Company
Capital Stock are owned by the Company in treasury. No shares of
Company Capital Stock have been issued or disposed of in violation of
the preemptive rights, rights of first refusal or similar rights of any
of the Company's stockholders. The Company has no bonds, debentures,
notes or other obligations the holders of which have the right to vote
(or are convertible into or exercisable for securities having the right
to vote) with the Stockholder on any matter.
3.3 TRANSACTIONS IN CAPITAL STOCK. The Company has not acquired any Company
Capital Stock since January 1, 1993. There exist no options, warrants,
subscriptions or other rights to purchase, or securities convertible
into or exchangeable for, any of the authorized or outstanding
securities of the Company, and no option, warrant, call, conversion
right or commitment of any kind exists which obligates the Company to
issue any of its authorized but unissued capital stock. The Company has
no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein
or to pay any dividend or make any distribution in respect thereof.
Neither the equity structure of the Company nor the relative ownership
of shares among any of its stockholders has been altered or changed in
contemplation of the Merger within the two years preceding the date of
this Agreement.
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3.4 CONTINUITY OF BUSINESS ENTERPRISE. There has not been any sale,
distribution or spin-off of significant assets of the Company or any of
its Affiliates other than in the ordinary course of business within the
two years preceding the date of this Agreement.
3.5 CORPORATE RECORDS. The copies of the Articles of Incorporation and
Bylaws, and all amendments thereto, of the Company that have been
delivered or made available to Acquiror are true, correct and complete
copies thereof, as in effect on the date hereof. The minute books of
the Company, copies of which have been delivered or made available to
Acquiror, contain accurate minutes of all meetings of, and accurate
consents to all actions taken without meetings by, the Board of
Directors (and any committees thereof) and the stockholders of the
Company since its formation.
3.6 AUTHORIZATION AND VALIDITY. The execution, delivery and performance by
the Company of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby
and thereby, have been duly authorized by the Company. This Agreement
has been duly executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors'
rights generally or the availability of equitable remedies. The Company
has obtained, in accordance with applicable law and its Articles of
Incorporation and Bylaws, the approval of its stockholders necessary to
the consummation of the transactions contemplated hereby.
3.7 NO VIOLATION. Neither the execution, delivery or performance of this
Agreement or the other agreements contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will
(a) conflict with, or result in a violation or breach of the terms,
conditions or provisions of, or constitute a default under, the
Articles of Incorporation or Bylaws of the Company, (b) except as would
not, individually or in the aggregate, result in a Material Adverse
Effect, conflict with, or result in a violation or breach of the terms,
conditions or provisions of, or constitute a default under, any
agreement, indenture or other instrument under which the Company is
bound or to which any of the assets of the Company are subject, or
result in the creation or imposition of any security interest, lien,
charge or encumbrance upon any of the assets of the Company or (c) to
the knowledge of the Company, except as would not, individually or in
the aggregate, result in a Material Adverse Effect, violate or conflict
with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body.
3.8 CONSENTS. Except as may have been obtained or as may be required under
the Exchange Act, the Securities Act, the New Hampshire Business
Corporation Act and state securities laws, no consent, authorization,
approval, permit or license of, or filing with, any governmental or
public body or authority, any lender or lessor or any other person or
entity is required to authorize, or is required in connection with, the
execution, delivery and performance of this Agreement or the agreements
contemplated hereby on the part of the
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Company, other than such consents as to which the failure to obtain
would not, individually or in the aggregate, result in a Material
Adverse Effect.
3.9 FINANCIAL STATEMENTS. The Company has furnished to Acquiror its: (i)
audited balance sheet (the "Company Balance Sheet") as of December 31,
1996 (the "Company Balance Sheet Date") and 1995, and the related
audited statements of operations, stockholders' equity and cash flows
for its three full fiscal years ended December 31, 1996; and (ii)
unaudited balance sheet as of June 30, 1997 and related unaudited
statements of operations, stockholders' equity and cash flows for the
six months ended June 30, 1997 and 1996 (collectively, with the related
notes thereto, the "Financial Statements"), copies of all of which are
included in the Company Disclosure Schedules. The Financial Statements
fairly present the financial condition and results of operations of the
Company as of the dates and for the periods indicated and have been
prepared in conformity with generally accepted accounting principles
(subject to normal year-end adjustments and the absence of notes for
any unaudited interim financial statement for any interim periods
presented) applied on a consistent basis with prior periods, except as
otherwise indicated in the Financial Statements.
3.10 LIABILITIES AND OBLIGATIONS. The Financial Statements reflect all
liabilities of the Company, accrued, contingent or otherwise that would
be required to be reflected on a balance sheet, or in the notes
thereto, prepared in accordance with generally accepted accounting
principles. Except as set forth in the Financial Statements, the
Company is not liable upon or with respect to, or obligated in any
other way to provide funds in respect of or to guarantee or assume in
any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other
entity, and the Company does not know of any valid basis for the
assertion of any other claims or liabilities of any nature or in any
amount.
3.11 EMPLOYEE MATTERS.
3.11.1 CASH COMPENSATION. The Company Disclosure Schedules
contain a complete and accurate list of the names, titles and annual cash
compensation as of December 31, 1996, including without limitation wages,
salaries, bonuses (discretionary and formula) and other cash compensation (the
"Cash Compensation") of all employees of the Company. In addition, the Company
Disclosure Schedules contain a complete and accurate description of (i) all
increases in Cash Compensation of employees of the Company during the current
fiscal year and the immediately preceding fiscal year and (ii) any promised
increases in Cash Compensation of employees of the Company that have not yet
been effected.
3.11.2 COMPENSATION PLANS. The Company Disclosure Schedules
contain a complete and accurate list of all compensation plans, arrangements or
practices (the "Compensation Plans") sponsored by the Company or to which the
Company contributes on behalf of its employees. The Compensation Plans include
without limitation plans, arrangements or practices that provide for severance
pay, deferred compensation, incentive, bonus or performance awards, and stock
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ownership or stock options. The Company has provided or made available to
Acquiror a copy of each written Compensation Plan and a written description of
each unwritten Compensation Plan. Each of the Compensation Plans can be
terminated or amended at will by the Company.
3.11.3 EMPLOYMENT AGREEMENTS. The Company is not a party to
any employment agreement ("Employment Agreements") with respect to any of its
employees. Employment Agreements include without limitation employee leasing
agreements, employee services agreements and noncompetition agreements.
3.11.4 EMPLOYEE POLICIES AND PROCEDURES. The Company
Disclosure Schedules contain a complete and accurate list of all employee
manuals and all material policies, procedures and work-related rules (the
"Employee Policies and Procedures") that apply to employees of the Company. The
Company has provided or made available to Acquiror a copy of all written
Employee Policies and Procedures and a written description of all material
unwritten Employee Policies and Procedures.
3.11.5 UNWRITTEN AMENDMENTS. No material unwritten amendments
have been made, whether by oral communication, pattern of conduct or otherwise,
with respect to any Compensation Plans or Employee Policies and Procedures.
3.11.6 LABOR COMPLIANCE. To the knowledge of the Company, the
Company has been and is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices, terms
and conditions of employment and wages and hours, except for any such failures
to be in compliance that, individually or in the aggregate, would not result in
a Material Adverse Effect, and the Company is not liable for any arrears of
wages or penalties for failure to comply with any of the foregoing. To the
knowledge of the Company, the Company has not engaged in any unfair labor
practice or discriminated on the basis of race, color, religion, sex, national
origin, age, disability or handicap in its employment conditions or practices
that would, individually or in the aggregate, result in a Material Adverse
Effect. There are no (i) unfair labor practice charges or complaints or racial,
color, religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the actual knowledge of the
Company, threatened against the Company before any federal, state or local
court, board, department, commission or agency (nor, to the knowledge of the
Company, does any valid basis therefor exist) or (ii) existing or, to the actual
knowledge of the Company, threatened labor strikes, disputes, grievances,
controversies or other labor troubles affecting the Company (nor, to the
knowledge of the Company, does any valid basis therefor exist).
3.11.7 UNIONS. The Company has never been a party to any
agreement with any union, labor organization or collective bargaining unit. The
Company has not been advised by any employee that he or she is represented by
any union, labor organization or collective bargaining unit. To the actual
knowledge of the Company, none of the employees of the Company has threatened to
organize or join a union, labor organization or collective bargaining unit.
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3.11.8 ALIENS. To the best knowledge of the Company, all
employees of the Company are citizens of, or are authorized in accordance with
federal immigration laws to be employed in, the United States.
3.12 EMPLOYEE BENEFIT PLANS.
3.12.1 IDENTIFICATION. The Company Disclosure Schedules
contain a complete and accurate list of all employee benefit plans (within the
meaning of Section 3(3) of ERISA) sponsored by the Company or to which the
Company contributes on behalf of its employees and all employee benefit plans
previously sponsored or contributed to on behalf of its employees within the
three years preceding the date hereof (the "Employee Benefit Plans"). The
Company has provided or made available to Acquiror copies of all plan documents,
determination letters, pending determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans. In
addition, the Company has provided or made available to Acquiror a written
description of all existing practices engaged in by the Company that to the
knowledge of the Company constitute Employee Benefit Plans. Subject to the
requirements of the Internal Revenue Code and ERISA, each of the Employee
Benefit Plans can be terminated or amended at will by the Company. No unwritten
amendment exists with respect to any Employee Benefit Plan.
3.12.2 ADMINISTRATION. To the knowledge of the Company, each
Employee Benefit Plan has been administered and maintained in compliance with
all applicable laws, rules and regulations, except where the failure to be in
compliance would not, individually or in the aggregate, result in a Material
Adverse Effect. The Company and the Stockholder have made all necessary filings,
reports and disclosures pursuant to and have complied with all requirements of
the IRS Voluntary Compliance Resolution Program with respect to all applicable
Employee Benefit Plans.
3.12.3 EXAMINATIONS. The Company has not received any notice
that any Employee Benefit Plan is currently the subject of an audit,
investigation, enforcement action or other similar proceeding conducted by any
state or federal agency.
3.12.4 PROHIBITED TRANSACTIONS. To the knowledge of the
Company, no prohibited transactions (within the meaning of Section 4975 of the
Internal Revenue Code or Sections 406 and 407 of ERISA) have occurred with
respect to any Employee Benefit Plan.
3.12.5 CLAIMS AND LITIGATION. No pending or, to the actual
knowledge of the Company, threatened, claims, suits or other proceedings exist
with respect to any Employee Benefit Plan other than normal benefit claims filed
by participants or beneficiaries.
3.12.6 QUALIFICATION. The Company has received a favorable
determination letter or ruling from the IRS for each of the Employee Benefit
Plans intended to be qualified within the
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meaning of Section 401(a) of the Internal Revenue Code and/or tax-exempt within
the meaning of Section 501 (a) of the Internal Revenue Code. No proceedings
exist or, to the actual knowledge of the Company, have been threatened that
could result in the revocation of any such favorable determination letter or
ruling.
3.12.7 FUNDING STATUS. No accumulated funding deficiency
(within the meaning of Section 412 of the Internal Revenue Code), whether or not
waived, exists with respect to any Employee Benefit Plan or any plan sponsored
by any member of a controlled group (within the meaning of Section 412(n)(6)(B)
of the Internal Revenue Code) in which the Company is a member (a "Controlled
Group"). With respect to each Employee Benefit Plan subject to Title IV of
ERISA, the assets of each such plan are at least equal in value to the present
value of accrued benefits determined on an ongoing basis as of the date hereof.
The Company does not sponsor any Employee Benefit Plan described in Section
501(c)(9) of the Internal Revenue Code. None of the Employee Benefit Plans are
subject to actuarial assumptions.
3.12.8 EXCISE TAXES. Neither the Company nor any member of a
Controlled Group has any liability to pay excise taxes with respect to any
Employee Benefit Plan under applicable provisions of the Code or ERISA.
3.12.9 MULTIEMPLOYER PLANS. Neither the Company nor any member
of a Controlled Group is or ever has been obligated to contribute to a
multiemployer plan within the meaning of Section 3(37) of ERISA.
3.12.10 PBGC. To the knowledge of the Company, none of the
Employee Benefit Plans is subject to the requirements of Title IV of ERISA.
3.12.11 RETIREES. The Company has no obligation or commitment
to provide medical, dental or life insurance benefits to or on behalf of any of
its employees who may retire or any of its former employees who have retired
except as may be required pursuant to the continuation of coverage provisions of
Section 4980B of the Internal Revenue Code and Sections 601 through 608 of
ERISA.
3.13 ABSENCE OF CERTAIN CHANGES. Since June 30, 1997, the Company has not
3.13.1 suffered a Material Adverse Effect, whether or not
caused by any deliberate act or omission of the Company or a Stockholder;
3.13.2 contracted for the purchase of any single capital asset
having a cost in excess of $25,000 or made any single capital expenditure in
excess of $25,000;
3.13.3 incurred any indebtedness for borrowed money (other
than short-term borrowing in the ordinary course of business), or issued or sold
any debt securities;
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3.13.4 incurred or discharged any material liabilities or
obligations except in the ordinary course of business;
3.13.5 paid any amount on any indebtedness prior to the due
date except for the purpose of taking advantage of prepayment discounts,
forgiven or cancelled any claims or any debt in excess of $5,000, or released or
waived any rights or claims except in the ordinary course of business;
3.13.6 mortgaged, pledged or subjected to any security
interest, lien, lease or other charge or encumbrance any of its properties or
assets (other than statutory liens arising in the ordinary course of business or
other liens that do not materially detract from the value or interfere with the
use of such properties or assets);
3.13.7 suffered any damage or destruction to or loss of any
assets (whether or not covered by insurance) that has, individually or in the
aggregate, resulted in a Material Adverse Effect;
3.13.8 acquired or disposed of any assets having an aggregate
value in excess of $5,000, except in the ordinary course of business;
3.13.9 written up or written down the carrying value of any of
its assets, other than accounts receivable in the ordinary course of business;
3.13.10 changed the costing system or depreciation methods of
accounting for its assets in any material respect;
3.13.11 lost or terminated any employee, customer or supplier
that has, individually or in the aggregate, resulted in a Material Adverse
Effect;
3.13.12 except in the ordinary course of business consistent
with past practice, increased the compensation of any director, officer, key
employee or consultant;
3.13.13 increased the compensation of any employee (except for
increases in the ordinary course of business consistent with past practice) or
hired any new employee who is expected to receive annualized compensation,
exclusive of commissions, of at least $50,000;
3.13.14 except in the ordinary course of business consistent
with past practice, made any payments to or loaned any money to any employee,
officer, director or stockholder;
3.13.15 formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
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3.13.16 redeemed, purchased or otherwise acquired, or sold,
granted or otherwise disposed of, directly or indirectly, any of its capital
stock or securities or any rights to acquire such capital stock or securities,
or agreed to change the terms and conditions of any such capital stock,
securities or rights;
3.13.17 entered into any agreement providing for total
payments in excess of $5,000 in any 12 month period with any person or group, or
modified or amended in any material respect the terms of any such existing
agreement, except in the ordinary course of business;
3.13.18 entered into, adopted or amended any Employee Benefit
Plan, except as contemplated hereby or the other agreements contemplated hereby;
or
3.13.19 entered into any other commitment or transaction or
experienced any other event that would materially interfere with its performance
under this Agreement or any other agreements or document executed or to be
executed pursuant to this Agreement, or otherwise has, individually or in the
aggregate, resulted in a Material Adverse Effect.
3.14 TITLE; LEASED ASSETS.
3.14.1 REAL PROPERTY. The Company does not own any interest
(other than leasehold interests described in the Company Disclosure Schedules)
in real property. The leased real property described in the Company Disclosure
Schedules constitutes the only real property necessary for the conduct of the
Company's business.
3.14.2 PERSONAL PROPERTY. The Company has good, valid and
marketable title to all the personal property owned by the Company, all of which
is reflected in the Financial Statements (collectively, the "Personal
Property"). The Personal Property and the leased personal property referred to
in Section 3.14.3 constitute the only personal property necessary for the
conduct of the Company's business. Upon consummation of the transactions
contemplated hereby, such interest in the Personal Property shall be free and
clear of all security interests, liens, claims and encumbrances, other than
statutory liens arising in the ordinary course of business or other liens that
do not materially detract from the value or interfere with the use of such
properties or assets.
3.14.3 LEASES. A list and brief description of (i) all leases
of real property and (ii) leases of personal property involving rental payments
within any 12 month period in excess of $5,000, in either case to which the
Company is a party, either as lessor or lessee, are set forth in the Company
Disclosure Schedules. All such leases are valid and, to the knowledge of the
Company, enforceable in accordance with their respective terms except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
3.15 COMMITMENTS.
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3.15.1 COMMITMENTS; DEFAULTS. Any of the following as to
which the Company is a party or is bound by, or which any of the shares of
Company Capital Stock are subject to, or which the assets or the business of the
Company are bound by, whether or not in writing, are listed in the Company
Disclosure Schedules (collectively "Commitments"):
3.15.1.1 any partnership or joint venture agreement;
3.15.1.2 any guaranty or suretyship, indemnification
or contribution agreement or performance bond;
3.15.1.3 any debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent or to be
lent to another;
3.15.1.4 any contract to purchase real property;
3.15.1.5 any agreement with dealers or sales or
commission agents, public relations or advertising agencies, accountants or
attorneys (other than in connection with this Agreement and the transactions
contemplated hereby) involving total payments within any 12 month period in
excess of $5,000 and which is not terminable on 30 days' notice or without
penalty;
3.15.1.6 any agreement relating to any material
matter or transaction in which an interest is held by a person or entity that is
an Affiliate of the Company or any Stockholder;
3.15.1.7 any agreement for the acquisition of
services, supplies, equipment, inventory, fixtures or other property involving
more than $5,000 in the aggregate;
3.15.1.8 any powers of attorney;
3.15.1.9 any contracts containing noncompetition
covenants;
3.15.1.10 any agreement providing for the purchase
from a supplier of all or substantially all of the requirements of the Company
of a particular product or service; or
3.15.1.11 any other agreement or commitment not made
in the ordinary course of business or that is material to the business,
operations, condition (financial or otherwise) or results of operations of the
Company.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have heretofore been
delivered or made available to Acquiror. There are no existing or asserted
defaults, events of default or events, occurrences, acts or omissions that, with
the giving of notice or lapse of time or both, would constitute defaults by the
Company or, to the best knowledge of the Company, any other party to a material
Commitment, and
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no penalties have been incurred nor are amendments pending, with respect to the
material Commitments. The Commitments are in full force and effect and are valid
and enforceable obligations of the Company and, to the best knowledge of the
Company, the other parties thereto in accordance with their respective terms, in
each case as may be limited by applicable bankruptcy, insolvency, or similar
laws affecting creditors' rights generally or the availability of equitable
remedies, and no defenses, off-sets or counterclaims have been asserted or, to
the best knowledge of the Company, may be made by any party thereto (other than
the Company), nor has the Company waived any rights thereunder.
3.15.2 NO CANCELLATION OR TERMINATION OF COMMITMENT. Neither
the Company nor any Stockholder has received notice of any plan or intention of
any other party to any Commitment to exercise any right to cancel or terminate
any Commitment, and the Company does not know of any fact that would justify the
exercise of such a right; and neither the Company nor any Stockholder currently
contemplates, or has knowledge that any other person currently contemplates, any
amendment or change to any Commitment.
3.16 INSURANCE. The Company carries property, liability, workers'
compensation and such other types of insurance pursuant to the
insurance policies listed and briefly described in the Company
Disclosure Schedules (the "Insurance Policies"). The Insurance Policies
are all of insurance polices relating to the business of the Company.
All of the Insurance Policies are issued by insurers of recognized
responsibility, and, to the best knowledge of the Company, are valid
and enforceable policies, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. All Insurance
Policies, or replacement policies providing at least equivalent
coverage, shall be maintained in force without interruption up to and
including the Closing Date. True, complete and correct copies of all
Insurance Policies have been provided or made available to Acquiror.
Neither the Company nor the Stockholder has received any notice or
other communication from any issuer of any Insurance Policy canceling
such policy, materially increasing any deductibles or retained amounts
thereunder, or materially increasing the annual or other premiums
payable thereunder, and to the actual knowledge of the Company, no such
cancellation or increase of deductibles, retainages or premiums is
threatened. There are no outstanding claims, settlements or premiums
owed against any Insurance Policy, or the Company has given all notices
or has presented all potential or actual claims under any Insurance
Policy in due and timely fashion. The Company Disclosure Schedules also
set forth a list of all claims under any Insurance Policy in excess of
$10,000 per occurrence filed by the Company during the immediately
preceding three-year period.
3.17 PROPRIETARY RIGHTS AND INFORMATION. Set forth in the Company Disclosure
Schedules is a true and correct description of the following
("Proprietary Rights"):
3.17.1 all trademarks, trade-names, service marks and other
trade designations, including common law rights, registrations and applications
therefor, and all patents and applications
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therefor currently owned, in whole or in part, by the Company, and all licenses,
royalties, assignments and other similar agreements relating to the foregoing to
which the Company is a party (including expiration date if applicable); and
3.17.2 all agreements relating to technology, know-how or
processes that the Company is licensed or authorized to use or sell by others,
or which it licenses or authorizes others to use or sell.
The Company owns or has the legal right to use the Proprietary Rights, and to
the knowledge of the Company, without conflicting, infringing or violating the
rights of any other person. No consent of any person will be required for the
use thereof by Acquiror upon consummation of the transactions contemplated
hereby and the Proprietary Rights are freely transferable. No claim has been
asserted by any person to the ownership of or for infringement by the Company of
the proprietary right of any other person, and the Company does not know of any
valid basis for any such claim. The Company has the right to use, free and clear
of any adverse claims or rights of others all trade secrets, customer lists and
proprietary information required for the marketing of all merchandise and
services formerly or presently sold or marketed by it.
3.18 TAXES.
3.18.1 FILING OF TAX RETURNS. The Company has duly and timely
filed (in accordance with any extensions duly granted by the appropriate
governmental agency, if applicable) with the appropriate governmental agencies
all Tax Returns and reports required to be filed by the United States or any
state or any political subdivision thereof or any foreign jurisdiction. All such
Tax Returns or reports are complete and accurate in all material respects and
properly reflect the taxes of the Company for the periods covered thereby. True
and correct copies of such Tax Returns for the past three taxable years have
heretofore been delivered to Acquiror.
3.18.2 PAYMENT OF TAXES. Except for such items as the Company
may be disputing in good faith by proceedings in compliance with applicable law,
which are described in the Company Disclosure Schedules, (i) the Company has
paid all taxes, penalties, assessments and interest that have become due with
respect to any Tax Returns that it has filed and has properly accrued on its
books and records for all of the same that have not yet become due and (ii) the
Company is not delinquent in the payment of any tax, assessment or governmental
charge.
3.18.3 NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR
AUDITS. The Company has not received any notice that any tax deficiency or
delinquency has been asserted against the Company. There is no unpaid
assessment, proposal for additional taxes, deficiency or delinquency in the
payment of any of the taxes of the Company that could be asserted by any taxing
authority. There is no taxing authority audit of the Company pending, or to the
actual knowledge of the Company, threatened, and the results of any completed
audits are properly reflected in the Financial Statements. To the knowledge of
the Company, the Company has not violated any federal, state, local or foreign
tax law.
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3.18.4 NO EXTENSION OF LIMITATION PERIOD. The Company has not
granted an extension to any taxing authority of the limitation period during
which any tax liability may be assessed or collected.
3.18.5 WITHHOLDING REQUIREMENTS SATISFIED. All monies required
to be withheld by the Company and paid to governmental agencies for all income,
social security, unemployment insurance, sales, excise, use, and other taxes
have been collected or withheld and paid to the respective governmental
agencies.
3.18.6 FOREIGN PERSON. Neither the Company nor any Stockholder
is a foreign person, as such term is referred to in Section 1445(f)(3) of the
Internal Revenue Code.
3.18.7 SAFE HARBOR LEASE. None of the assets of the Company
constitutes property that the Company, Acquiror, or any Affiliate of Acquiror,
will be required to treat as being owned by another person pursuant to the "Safe
Harbor Lease" provisions of Section 168(f)(8) of the Internal Revenue Code prior
to repeal by the Tax Equity and Fiscal Responsibility Act of 1982.
3.18.8 TAX EXEMPT ENTITY. None of the assets of the Company
are subject to a lease to a "tax exempt entity" as such term is defined in
Section 168(h)(2) of the Internal Revenue Code.
3.18.9 COLLAPSIBLE CORPORATION. The Company has not at any
time consented, and the Stockholder will not permit the Company to elect, to
have the provisions of Section 341(f)(2) of the Internal Revenue Code apply to
it.
3.18.10 BOYCOTTS. The Company has not at any time participated
in or cooperated with any international boycott as defined in Section 999 of the
Internal Revenue Code.
3.18.11 PARACHUTE PAYMENTS. To the knowledge of the Company,
no payment required or contemplated to be made by the Company will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Internal Revenue Code.
3.18.12 S CORPORATION. The Company has not made an election to
be taxed as an "S" corporation under Section 1362(a) of the Internal Revenue
Code.
3.18.13 PERSONAL SERVICE CORPORATION. To the knowledge of the
Company, the Company is not a personal service corporation subject to the
provisions of Section 269A of the Internal Revenue Code.
3.18.14 PERSONAL HOLDING COMPANY. To the knowledge of the
Company, the Company is not or has not been a personal holding company within
the meaning of Section 542 of the Internal Revenue Code.
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3.19 COMPLIANCE WITH LAWS. To the knowledge of the Company, the Company has
complied with all applicable laws, and regulations and has filed with
the proper authorities all necessary statements and reports except
where the failure to so comply or file would not, individually or in
the aggregate, result in a Material Adverse Effect. To the knowledge of
the Company, there are no existing violations by the Company of any
federal, state or local law or regulation that could, individually or
in the aggregate, result in a Material Adverse Effect. The Company
possesses all necessary licenses, franchises, permits and governmental
authorizations for the conduct of the Company's business as now
conducted, all of which are listed (with expiration dates, if
applicable) in the Company Disclosure Schedules. The transactions
contemplated by this Agreement will not result in a default under or a
breach or violation of, or adversely affect the rights and benefits
afforded by any such licenses, franchises, permits or government
authorizations, except for any such default, breach or violation that
would not, individually or in the aggregate, have a Material Adverse
Effect. Since January 1, 1992, the Company has not received any notice
from any federal, state or other governmental authority or agency
having jurisdiction over its properties or activities, or any insurance
or inspection body, that its operations or any of its properties,
facilities, equipment, or business practices fail to comply with any
applicable law, ordinance, regulation, building or zoning law, or
requirement of any public or quasi-public authority or body, except
where failure to so comply would not, individually or in the aggregate,
have a Material Adverse Effect.
3.20 FINDER'S FEE. The Company has not incurred any obligation for any
finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
3.21 LITIGATION. There are no legal actions or administrative proceedings or
investigations instituted, or to the actual knowledge of the Company
threatened, against the Company, affecting or that could materially
affect the outstanding shares of Company Capital Stock, any of the
assets of the Company, or the operation, business, condition (financial
or otherwise), or results of operations of the Company which (i) if,
successful, could, individually or in the aggregate, have a Material
Adverse Effect or (ii) could adversely affect the ability of the
Company or the Stockholder to effect the transactions contemplated
hereby. Neither the Company nor the Stockholder is (a) subject to any
continuing court or administrative order, judgment, writ, injunction or
decree applicable specifically to the Company or to its business,
assets, operations or employees or (b) in default with respect to any
such order, judgment, writ, injunction or decree. The Company has no
knowledge of any valid basis for any such action, proceeding or
investigation. All claims made or, to the actual knowledge of the
Company, threatened against the Company in excess of its deductible are
covered under its Insurance Policies.
3.22 CONDITION OF FIXED ASSETS. All of the structures and equipment
reflected in the Financial Statements and used by the Company in its
business are in good condition and repair, subject to normal wear and
tear, and conform in all material respects with all applicable
ordinances,
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regulations and other laws, and the Company has no actual knowledge of
any latent defects therein.
3.23 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of
any kind has been declared or paid by the Company on any of its capital
stock since June 30, 1997. No repurchase of any of the Company's
capital stock has been approved, effected or is pending, or is
contemplated by the Board of Directors of the Company.
3.24 BANKING RELATIONS. Set forth in the Company Disclosure Schedules is a
complete and accurate list of all borrowing and investing arrangements
that the Company has with any bank or other financial institution,
indicating with respect to each relationship the type of arrangement
maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect
thereof.
3.25 OWNERSHIP INTERESTS OF INTERESTED PERSONS; AFFILIATIONS. No officer,
supervisory employee or director of the Company, or their respective
spouses, children or Affiliates, owns directly or indirectly, on an
individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director of, any
customer or supplier of the Company or any organization that has a
material contract or arrangement with the Company.
3.26 INVESTMENTS IN COMPETITORS. Neither the Company nor any Stockholder
owns directly or indirectly any interests or has any investment in any
person that is a competitor of the Company.
3.27 ENVIRONMENTAL MATTERS. Neither the Company nor any of its assets are
currently in violation of, or subject to any existing, pending or, to
the actual knowledge of the Company threatened, investigation or
inquiry by any governmental authority or to any remedial obligations
under, any Environmental Laws as a result of any act or omission of the
Company or the Stockholder, except for any such violations,
investigations or inquiries that would not, individually or in the
aggregate, result in a Material Adverse Effect.
3.28 CERTAIN PAYMENTS. Neither the Company nor any director, officer or
employee of the Company acting for or on behalf of the Company, has
paid or caused to be paid, directly or indirectly, in connection with
the business of the Company:
3.28.1 to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or
3.28.2 any contribution to any political party or candidate
(other than from personal funds of directors, officers or employees not
reimbursed by their respective employers or as otherwise permitted by applicable
law).
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3.29 NO AFFILIATION WITH NASD MEMBER. Neither the Stockholder nor any of the
executive officers or directors of the Company has any affiliation or
association with a member of the National Association of Securities
Dealers, Inc.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder represents and warrants to Acquiror that the following,
except as set forth in the Company Disclosure Schedules are true and correct as
of the date hereof and agrees as follows:
4.1 VALIDITY; STOCKHOLDER CAPACITY. This Agreement, the Stockholder
Employment Agreement (as defined in Section 8.3, if applicable), and
each other agreement contemplated hereby or thereby have been or will
be as of the Closing Date duly executed and delivered by the
Stockholder and constitute or will constitute legal, valid and binding
obligations of the Stockholder, enforceable against the Stockholder in
accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors'
rights generally or the availability of equitable remedies. The
Stockholder has legal capacity to enter into and perform this Agreement
and his Stockholder Employment Agreement.
4.2 NO VIOLATION. Neither the execution, delivery or performance of this
Agreement, the Stockholder Employment Agreement or the other agreements
of the Stockholder contemplated hereby or thereby, nor the consummation
of the transactions contemplated hereby or thereby, will (a) conflict
with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, any agreement, indenture
or other instrument under which the Stockholder is bound or to which
any of his, her or its shares of Company Capital Stock are subject, or
result in the creation or imposition of any security interest, lien,
charge or encumbrance upon any of his shares of Company Capital Stock
or (b) to the actual knowledge of the Stockholder, violate or conflict
with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body.
4.3 PERSONAL HOLDING COMPANY; CONTROL OF RELATED BUSINESSES. The
Stockholder does not own the shares of Company Capital Stock, directly
or indirectly, beneficially or of record, through a personal holding
company. The Stockholder does not control another business that is in
the same or similar line of business as the Company or that has or is
engaged in transactions with the Company except transactions in the
ordinary course of business.
4.4 TRANSFERS OF THE COMPANY CAPITAL STOCK. Set forth in the Company
Disclosure Schedules is a list of all transfers or other transactions
involving capital stock of the Company since
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January 1, 1993. All transfers of Company Capital Stock by the
Stockholder have been made for valid business reasons and not in
anticipation or contemplation of the consummation of the transactions
contemplated by this Agreement.
4.5 CONSENTS. Except as may be required under the Exchange Act, the
Securities Act, the New Hampshire Business Corporation Act and state
securities laws, or otherwise disclosed pursuant to this Agreement, no
consent, authorization, approval, permit or license of, or filing with,
any governmental or public body or authority, or any other person is
required to authorize, or is required in connection with, the
execution, delivery and performance of this Agreement or the agreements
contemplated hereby on the part of the Stockholder.
4.6 CERTAIN PAYMENTS. The Stockholder has not paid or caused to be paid,
directly or indirectly, in connection with the business of the Company:
4.6.1 to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or
4.6.2 any contribution to any political party or candidate
(other than from personal funds not reimbursed by the Company or as otherwise
permitted by applicable law).
4.7 FINDER'S FEE. The Stockholder has not incurred any obligation for any
finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
4.8 OWNERSHIP OF INTERESTED PERSONS; AFFILIATIONS. Neither the Stockholder
nor his spouse, children or Affiliates, owns directly or indirectly, on
an individual or joint basis, any interest in, has a compensation or
other financial arrangement with, or serves as an officer or director
of, any customer or supplier of the Company or any organization that
has a material contract or arrangement with the Company.
4.9 INVESTMENTS IN COMPETITORS. The Stockholder does not own directly or
indirectly any interests or have any investment in any person that is a
competitor of the Company.
4.10 DISPOSITION OF ACQUIROR SHARES. The Stockholder does not presently
intend to dispose of any shares of Acquiror Common Stock received as
Merger Consideration and is not a party to any plan, arrangement or
agreement for the disposition of such shares of Acquiror Common Stock,
except this Agreement and the Registration Rights Agreement.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company and to each Stockholder
that, except as set forth in the Acquiror Disclosure Schedules, the following
are true and correct as of the date hereof:
5.1 ORGANIZATION AND GOOD STANDING. Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Ohio, with all requisite corporate power and authority to
carry on the business in which it is engaged, to own the properties it
owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Acquiror is or shall be as of the
Closing duly qualified and licensed to do business in each jurisdiction
where the conduct of its business or the Target Companies' business and
assets may require qualification and/or licensing.
5.2 CAPITALIZATION. The authorized, issued and outstanding capital stock of
Acquiror is set forth in the Acquiror Disclosure Schedules. No shares
of capital stock are owned by Acquiror in treasury. Acquiror does not
have any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or are convertible into or exercisable
for securities having the right to vote) with the shareholders of
Acquiror on any matter. There exist no options, warrants, subscriptions
or other rights to purchase, or securities convertible into or
exchangeable for, any of the authorized or outstanding securities of
Acquiror, and no option, warrant, call, conversion right or commitment
of any kind exists which obligates Acquiror to issue any of its
authorized but unissued capital stock, except this Agreement and the
Other Agreements. Acquiror has no obligation (contingent or otherwise)
to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay a dividend or make any distribution
in respect thereof. To the best knowledge of Acquiror, no shareholder
of Acquiror has granted options or other rights to purchase any shares
of Acquiror Common Stock from such shareholder.
5.3 CORPORATE RECORDS. The copies of the Articles of Incorporation and Code
of Regulations, and all amendments thereto, of Acquiror that have been
delivered or made available to the Company and the Stockholder are
true, correct and complete copies thereof, as in effect on the date
hereof. The minute books of Acquiror, copies of which have been
delivered or made available to the Company and the Stockholder, contain
accurate minutes of all meetings of, and accurate consents to all
actions taken without meetings by, the Board of Directors (and any
committees thereof) and the shareholders of Acquiror, since its
formation.
5.4 AUTHORIZATION AND VALIDITY. The execution, delivery and performance by
Acquiror of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby
and thereby, have been duly authorized by the Board of Directors and
shareholders of Acquiror. This Agreement and each other agreement
contemplated hereby to be executed by Acquiror have been or will be as
of the Closing Date
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duly executed and delivered by Acquiror and constitute or will
constitute as of the Closing Date legal, valid and binding obligations
of Acquiror, enforceable against Acquiror in accordance with their
respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
5.5 NO VIOLATION. Neither the execution, delivery or performance of this
Agreement or the other agreements contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will
(a) conflict with, or result in a violation or breach of the terms,
conditions and provisions of, or constitute a default under, the
Articles of Incorporation or Code of Regulations of Acquiror or any
agreement, indenture or other instrument under which Acquiror is bound
or (b) to the knowledge of Acquiror, except as would not, individually
or in the aggregate, have a Material Adverse Effect on the business,
operations, condition (financial or otherwise) or results of operations
of Acquiror, violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Acquiror or the
properties or assets of Acquiror.
5.6 FINDER'S FEE. Acquiror has not incurred any obligation for any
finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
5.7 CAPITAL STOCK. The issuance and delivery by Acquiror of shares of
Acquiror Common Stock in connection with the Merger have been duly and
validly authorized by all necessary corporate action on the part of
Acquiror. The shares of Acquiror Common Stock to be issued in
connection with the Merger, when issued in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable
and will not have been issued in violation of any preemptive rights,
rights of first refusal or similar rights of any of Acquiror's
shareholders, or any federal or state law, including, without
limitation, the registration requirements of applicable federal and
state securities laws.
5.8 CONTINUITY OF BUSINESS ENTERPRISE. It is the present intention of
Acquiror to continue at least one significant historic business line of
the Company, or to use at least a significant portion of the Company's
historic business assets in a business, in each case within the meaning
of Treasury Regulation Section 1.368-1(d).
5.9 CONSENTS. Except as have been obtained or as may be required by or
under the Exchange Act, the Ohio General Corporation Law, the
Securities Act and state securities laws, no consent, authorization,
approval, permit or license of, or filing with, any governmental or
public body or authority, any lender or lessor or any other person is
required to authorize, or is required in connection with, the
execution, delivery and performance of this Agreement or the agreements
contemplated hereby on the part of Acquiror.
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5.10 PROPRIETARY RIGHTS AND INFORMATION. Acquiror does not own or use any
trademarks, trade-names, service marks or other trade designations or
patents in the conduct of its business. Acquiror is not a party to any
agreement relating to the use of technology or know-how. Acquiror has
the right to use, free and clear of any claims or rights of others, all
trade secrets, customer lists and proprietary information required for
the marketing of all merchandise and services formerly or presently
sold or marketed by it.
5.11 TAXES.
5.11.1 FILING OF TAX RETURNS. Acquiror has duly and timely
filed (in accordance with any extensions duly granted by the appropriate
governmental agency, if applicable) with the appropriate governmental agencies
all Tax Returns and reports required to be filed by the United States or any
state or any political subdivision thereof or any foreign jurisdiction. All such
tax returns or reports are complete and accurate and properly reflect the taxes
of Acquiror, as the case may be, for the periods covered thereby.
5.11.2 PAYMENT OF TAXES. Acquiror has paid all taxes,
penalties, assessments and interest that have become due with respect to any Tax
Returns that it has filed and has properly accrued on its books and records for
all of the same that have not yet become due. Acquiror is not delinquent in the
payment of any tax, assessment or governmental charge.
5.11.3 NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR
AUDITS. Acquiror has not received any notice that any tax deficiency or
delinquency has been asserted against it. There is no unpaid assessment,
proposal for additional taxes, deficiency or delinquency in the payment of any
of the taxes of Acquiror that could be asserted by any taxing authority. There
is no taxing authority audit of Acquiror pending, or to the actual knowledge of
Acquiror, threatened. Acquiror has not violated any federal, state, local or
foreign tax law.
5.11.4 NO EXTENSION OF LIMITATION PERIOD. Acquiror has not
granted an extension to any taxing authority of the limitation period during
which any tax liability may be assessed or collected.
5.11.5 ALL WITHHOLDING REQUIREMENTS SATISFIED. All monies
required to be withheld by Acquiror and paid to governmental agencies for all
income, social security, unemployment insurance, sales, excise, use, and other
taxes have been collected or withheld and paid to the respective governmental
agencies.
5.11.6 FOREIGN PERSON. Neither Acquiror nor any shareholder
thereof is a foreign person, as such term is referred to in Section 1445(f)(3)
of the Internal Revenue Code.
5.11.7 SAFE HARBOR LEASE. None of the assets of Acquiror
constitute property that the Company, Acquiror, or any Affiliate of Acquiror,
will be required to treat as being owned by
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another person pursuant to the "Safe Harbor Lease" provisions of Section
168(f)(8) of the Internal Revenue Code prior to repeal by the Tax Equity and
Fiscal Responsibility Act of 1982.
5.11.8 TAX EXEMPT ENTITY. None of the assets of Acquiror are
subject to a lease to a "tax exempt entity" as such term is defined in Section
168(h)(2) of the Internal Revenue Code.
5.11.9 COLLAPSIBLE CORPORATION. Acquiror has not at any time
consented, and the stockholders thereof will not permit Acquiror to elect, to
have the provisions of Section 341(f)(2) of the Internal Revenue Code apply to
it.
5.11.10 BOYCOTTS. Acquiror has not at any time participated in
or cooperated with any international boycott as defined in Section 999 of the
Internal Revenue Code.
5.11.11 PARACHUTE PAYMENTS. No payment required or
contemplated to be made by Acquiror will be characterized as an "excess
parachute payment" within the meaning of Section 28OG(b)(1) of the Internal
Revenue Code.
5.11.12 S CORPORATION. Acquiror has not made an election to be
taxed as an "S" corporation under Section 1362(a) of the Internal Revenue Code.
5.12 COMPLIANCE WITH LAWS. Acquiror has complied with all applicable laws,
regulations and licensing requirements and has filed with the proper
authorities all necessary statements and reports, except where the
failure to so comply or file would not, individually or in the
aggregate, result in a Material Adverse Effect. There are no existing
violations by Acquiror of any federal, state or local law or regulation
that could, individually or in the aggregate, result in a Material
Adverse Effect. Acquiror possesses all necessary licenses, franchises,
permits and governmental authorizations for the conduct of its business
as now conducted. The transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely
affect the rights and benefits afforded by any such licenses,
franchises, permits or government authorizations except for any
default, breach or violation that would not, individually or in the
aggregate, have a Material Adverse Effect. Acquiror has not received
any notice from any federal, state or other governmental authority or
agency having jurisdiction over its properties or activities, or any
insurance or inspection body, that its operations or any of its
properties, facilities, equipment, or business practices fail to comply
with any applicable law, ordinance, regulation, building or zoning law,
or requirement of any public or quasi-public authority or body.
5.13 LITIGATION. There are no legal actions or administrative proceedings or
investigations instituted, or to the actual knowledge of Acquiror
threatened against or affecting Acquiror or which could affect the
outstanding shares of Acquiror Common Stock, any of the assets of
Acquiror, or the operations, business, condition (financial or
otherwise) or results of operations of Acquiror. Acquiror is not (a)
subject to any continuing court or administrative order, writ,
injunction or decree applicable specifically to it or to its business,
assets,
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operations or employees or (b) in default with respect to any such
order, writ, injunction or decree. Acquiror has no knowledge of any
valid basis for any such action, proceeding or investigation.
5.14 OWNERSHIP INTERESTS OF INTERESTED PERSONS; AFFILIATIONS. No officer,
supervisory employee, director or shareholder of Acquiror, or their
respective spouses, children or Affiliates, owns directly or
indirectly, on an individual or joint basis, any interest in, has a
compensation or other financial arrangement with, or serves as an
officer or director of, any customer or supplier of Acquiror, any
organization or person which is directly or indirectly in competition
with Acquiror, or any organization that has a material contract or
arrangement with Acquiror, except Acquiror's corporate parent, MedPlus,
Inc.
5.15 INVESTMENTS IN COMPETITORS. Neither Acquiror nor any shareholder
thereof owns directly or indirectly any interests or has any investment
in any person that is a competitor of Acquiror or one of the Target
Companies.
5.16 CERTAIN PAYMENTS. Neither Acquiror, nor any shareholder, director,
officer or employee of Acquiror, has paid or caused to be paid,
directly or indirectly, in connection with the business of Acquiror:
5.16.1 to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or
5.16.2 any contribution to any political party or candidate
(other than from personal funds of directors, officers or employees not
reimbursed by their respective employers or as otherwise permitted by applicable
law).
5.17 COMMITMENTS.
5.17.1 COMMITMENTS; DEFAULTS. Any of the following as to which
Acquiror is a party or is bound by, or which any of the shares of Acquiror
Common Stock subject to, or which the assets or the business of Acquiror are
bound by, whether or not in writing, are listed in the Acquiror Disclosure
Schedules (collectively "Acquiror Commitments"):
5.17.1.1 partnership or joint venture agreement;
5.17.1.2 guaranty or suretyship, indemnification or
contribution agreement or performance bond;
5.17.1.3 debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent or to be
lent to another;
5.17.1.4 contract to purchase real property;
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5.17.1.5 agreement with dealers or sales or commission
agents, public relations or advertising agencies, accountants or attorneys
(other than in connection with this Agreement and the transactions contemplated
hereby) involving total payments within any 12 month period in excess of $5,000
and which is not terminable on 30 day's notice or without penalty;
5.17.1.6 agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of Acquiror or any shareholder of Acquiror;
5.17.1.7 any agreement for the acquisition of
services, supplies, equipment, inventory, fixtures or other property involving
more than $5,000 in the aggregate;
5.17.1.8 powers of attorney;
5.17.1.9 contracts containing noncompetition
covenants;
5.17.1.10 agreement providing for the purchase from a
supplier of all or substantially all of the requirements of Acquiror of a
particular product or service; or
5.17.1.11 any other agreement or commitment not made
in the ordinary course of business or that is material to the business,
operations, condition (financial or otherwise) or results of operations of
Acquiror.
True, correct and complete copies of the written Acquiror Commitments, and true,
correct and complete written descriptions of the oral Acquiror Commitments, have
heretofore been delivered or made available to the Company and the Stockholder.
There are no existing or asserted defaults, events of default or events,
occurrences, acts or omissions that, with the giving of notice or lapse of time
or both, would constitute defaults by Acquiror or, to the best knowledge of
Acquiror, any other party to a material Acquiror Commitment, and no penalties
have been incurred nor are amendments pending, with respect to the material
Acquiror Commitments. The Acquiror Commitments are in full force and effect and
are valid and enforceable obligations of Acquiror and, to the best knowledge of
Acquiror, the other parties thereto in accordance with their respective terms,
in each case as may be limited by applicable bankruptcy, insolvency, or similar
laws affecting creditors' rights generally or the availability of equitable
remedies, and no defenses, off-sets or counterclaims have been asserted or, to
the best knowledge of Acquiror, may be made by any party thereto (other than
Acquiror), nor has Acquiror waived any rights thereunder.
5.17.2 NO CANCELLATION OR TERMINATION OF ACQUIROR COMMITMENT.
Except as contemplated hereby, (i) Acquiror has not received notice of any plan
or intention of any other party to any Acquiror Commitment to exercise any right
to cancel or terminate any Acquiror Commitment, and Acquiror does not know of
any fact that would justify the exercise of such a right; and (ii)
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Acquiror does not currently contemplate, or have knowledge that any other person
currently contemplates, any amendment or change to any Acquiror Commitment.
5.18 ACQUIROR FINANCIAL STATEMENTS. The audited year end financial
statements for Acquiror for the two most recent fiscal years and
interim unaudited statements for the month ending prior to the date of
this Agreement are contained in the Acquiror Disclosure Schedules
(collectively, with the related notes thereto, the "Acquiror Financial
Statements"). The Acquiror Financial Statements fairly present the
financial condition and results of operations of Acquiror as of the
dates and for the periods indicated and have been prepared in
conformity with generally accepted accounting principles (subject to
normal year-end adjustments) applied on a consistent basis with prior
periods, except as otherwise indicated in the Acquiror Financial
Statements.
5.19 LIABILITIES AND OBLIGATIONS. The Acquiror Financial Statements reflect
all liabilities of Acquiror, accrued, contingent or otherwise, that
would be required to be reflected on a balance sheet, or in the notes
thereto, prepared in accordance with generally accepted accounting
principles, except for liabilities and obligations incurred in the
ordinary course of business since December 31, 1996. Acquiror is not
liable upon or with respect to, or obligated in any other way to
provide funds in respect of or to guarantee or assume in any manner,
any debt, obligation or dividend of any person, corporation,
association, partnership, joint venture, trust or other entity, and
Acquiror does not know of any valid basis for the assertion of any
other claims or liabilities of any nature or in any amount.
5.20 EMPLOYEE MATTERS. Acquiror does not have any material arrangements,
agreements or plans with any person with respect to the employment by
Acquiror of such person or whereby such person is to serve as an
officer or director of Acquiror.
ARTICLE VI
COVENANTS OF THE COMPANY AND THE STOCKHOLDER
The Company and the Stockholder, jointly and severally, agree that
between the date hereof and the Closing (with respect to the Company's
covenants, the Stockholder agrees to use his best efforts to cause the Company
to perform):
6.1 CONSUMMATION OF AGREEMENT. The Company and the Stockholder shall use
their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions;
provided, however, that this covenant shall not require the Company or
a Stockholder to make any expenditures that are not expressly set forth
in this Agreement or otherwise contemplated herein.
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6.2 BUSINESS OPERATIONS. The Company shall operate its business in the
ordinary course. The Company and the Stockholder shall use their best
efforts to preserve the business of the Company intact. Neither the
Company nor any Stockholder shall take any action that would,
individually or in the aggregate, result in a Material Adverse Effect.
The Company shall use its best efforts to preserve intact its
relationships with customers, suppliers, employees and others having
significant business relations with it, unless doing so would impair
its goodwill or result, individually or in the aggregate, in a Material
Adverse Effect. The Company shall collect its receivables and pay its
trade payables in the ordinary course of business consistent with past
practice.
6.3 ACCESS. The Company and the Stockholder shall, at reasonable times
during normal business hours and on reasonable notice, permit Acquiror
and its authorized representatives reasonable access to, and make
available for inspection, all of the assets and business of the
Company, including its employees, and permit Acquiror and its
authorized representatives to inspect and, at Acquiror's sole cost and
expense, make copies of all documents, records and information with
respect to the affairs of the Company as Acquiror and its
representatives may request, all for the sole purpose of permitting
Acquiror to become familiar with the business and assets and
liabilities of the Company.
6.4 NOTIFICATION OF CERTAIN MATTERS. The Company and the Stockholder shall
promptly inform Acquiror in writing of (a) any notice of or other
communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by the Company
or any Stockholder subsequent to the date of this Agreement and prior
to the Effective Time under any Commitment material to the Company's
condition (financial or otherwise), operations, assets, liabilities or
business and to which it is subject; or (b) any material adverse change
in the Company's condition (financial or otherwise), operations,
assets, liabilities or business.
6.5 APPROVALS OF THIRD PARTIES. The Company and the Stockholder shall use
their best efforts to secure, as soon as practicable after the date
hereof, all necessary approvals and consents of third parties to the
consummation of the transactions contemplated hereby, including,
without limitation, all necessary approvals and consents required under
any real property and personal property leases; provided, however, that
this covenant shall not require the Company or the Stockholder to make
any material expenditures that are not expressly set forth in this
Agreement or otherwise contemplated herein.
6.6 EMPLOYEE MATTERS. The Company shall not, without the prior written
approval of Acquiror, which approval shall not be unreasonably
withheld, other than in the ordinary course of business and consistent
with past practice or except as required by law:
6.6.1 increase the Cash Compensation of any Stockholder
or other employee of the Company;
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6.6.2 adopt, amend or terminate any Compensation Plan;
6.6.3 adopt, amend or terminate any Employment Agreement;
6.6.4 adopt, amend or terminate any Employee Policies and
Procedures;
6.6.5 adopt, amend or terminate any Employee Benefit Plan;
6.6.6 take any action that could deplete the assets of any Employee
Benefit Plan, other than payment of benefits in the ordinary course to
participants and beneficiaries;
6.6.7 fail to pay any premium or contribution due or with respect to
any Employee Benefit Plan;
6.6.8 fail to file any return or report with respect to any Employee
Benefit Plan;
6.6.9 institute, settle or dismiss any employment litigation except
as could not, individually or in the aggregate, result in a Material Adverse
Effect;
6.6.10 enter into, modify, amend or terminate any agreement with any
union, labor organization or collective bargaining unit; or
6.6.11 take or fail to take any action with respect to any past or
present employee of the Company that would, individually or in the aggregate,
result in a Material Adverse Effect.
6.7 CONTRACTS. Except with Acquiror's prior written consent, the Company shall
not assume or enter into any contract, lease, license, obligation,
indebtedness, commitment, purchase or sale except in the ordinary course
of business that is material to the Company's business, nor will it waive
any material right or cancel any material contract, debt or claim.
6.8 CAPITAL ASSETS; PAYMENTS OF LIABILITIES. The Company shall not, without
the prior written approval of Acquiror (a) acquire or dispose of any
capital asset having a fair market value of $25,000 or more, or acquire or
dispose of any capital asset outside of the ordinary course of business or
(b) discharge or satisfy any lien or encumbrance or pay or perform any
obligation or liability other than (i) liabilities and obligations
reflected in the Financial Statements or (ii) current liabilities and
obligations incurred in the usual and ordinary course of business since
the Company Balance Sheet Date and, in either case (i) or (ii) above, only
as required by the express terms of the agreement or other instrument
pursuant to which the liability or obligation was incurred, provided,
however, nothing herein shall prohibit the Company from obtaining early
payment discounts or settling, resolving or terminating any litigation
(whether now or hereafter pending) as is reasonable and in the best
interests of the Company.
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6.9 MORTGAGES, LIENS AND GUARANTIES. The Company shall not, without the prior
written approval of Acquiror, enter into or assume any mortgage, pledge,
conditional sale or other title retention agreement, permit any security
interest, lien, encumbrance or claim of any kind to attach to any of its
assets (other than statutory liens arising in the ordinary course of
business, other liens that do not materially detract from the value or
interfere with the use of such assets, and liens, guarantees and
encumbrances that are granted or created in the ordinary course of
business), whether now owned or hereafter acquired, or guarantee or
otherwise become contingently liable for any obligation of another, except
obligations arising by reason of endorsement for collection and other
similar transactions in the ordinary course of business, or make any
capital contribution or investment in any person.
6.10 ACQUISITION PROPOSALS. The Company and the Stockholder agree that from and
after the date of this Agreement (a) neither the Stockholder nor the
Company, nor any of its officers and directors shall, and the Stockholder
and the Company shall direct and use their best efforts to cause the
Company's employees, agents and representatives not to, initiate, solicit
or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer with respect to a merger,
acquisition, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, the Company (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal") or engage in any negotiations
concerning, or provide any confidential information or data to, or have
any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; (b) that the Stockholder and the Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing and each will take the necessary steps to
inform the individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 6.10; and (c) that
the Stockholder and the Company will notify Acquiror immediately if any
such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, the Company or the Stockholder.
6.11 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or dividend of any
kind will be declared or paid by the Company in respect of Company Capital
Stock, nor will any repurchase of any Company Capital Stock be approved or
effected.
6.12 REQUIREMENTS TO EFFECT THE MERGER. The Company and the Stockholder shall
use their best efforts to take, or cause to be taken, all actions
necessary to effect the Merger under applicable law, including without
limitation the filing with the appropriate government officials of all
necessary documents in form approved by counsel for the parties to this
Agreement.
6.13 LOCKUP AGREEMENTS. The Stockholder shall, upon request of the Underwriter
Representative, execute a customary "lockup" agreement in connection with
the Initial
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Public Offering, pursuant to which the Stockholder will be prohibited from
selling any Acquiror Common Stock owned by him for up to 180 days from the
closing of the Initial Public Offering.
ARTICLE VII
COVENANTS OF ACQUIROR
Acquiror agrees that between the date hereof and the Closing:
7.1 CONSUMMATION OF AGREEMENT. Acquiror shall use its best efforts to cause
the consummation of the transactions contemplated hereby in accordance
with their terms and conditions and take all corporate and other action
necessary to approve the Merger; provided, however, that this covenant
shall not require Acquiror to make any expenditures that are not expressly
set forth in this Agreement or otherwise contemplated herein.
7.2 REQUIREMENTS TO EFFECT MERGER. Acquiror will use its best efforts to take,
or cause to be taken, all actions necessary to effect the Merger under
applicable law, including without limitation the filing with the
appropriate government officials all necessary documents in form approved
by counsel for the parties to this Agreement.
7.3 ACCESS. Acquiror shall, at reasonable times during normal business hours
and on reasonable notice, permit the Company, the Stockholder and their
authorized representatives reasonable access to, and make available for
inspection, all of the assets and business of Acquiror, including its
employees, and permit the Company, the Stockholder, and their authorized
representatives to inspect and, at the Company's and the Stockholder's
sole expense, make copies of all documents, records and information with
respect to the affairs of Acquiror as the Company, the Stockholder and
their representatives may request (including documents, records and
information pertaining to or generated in connection with any Target
Company, except as may be prohibited by confidentiality agreements to
which Acquiror is a party), all for the sole purpose of permitting the
Company and the Stockholder to become familiar with the business and
assets and liabilities of Acquiror.
7.4 NOTIFICATION OF CERTAIN MATTERS. Acquiror shall promptly inform the
Company and the Stockholder in writing of (a) any notice of, or other
communication relating to, a default or event that, with notice or lapse
of time or both, would become a default, received by Acquiror subsequent
to the date of this Agreement and prior to the Effective Time under any
Acquiror Commitment material to Acquiror's condition (financial or
otherwise), operations, assets, liabilities or business and to which it is
subject; or (b) any material adverse change in Acquiror's condition
(financial or otherwise), operations, assets, liabilities or business.
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7.5 APPROVALS OF THIRD PARTIES. Acquiror shall use its best efforts to secure,
as soon as practicable after the date hereof, all necessary approvals and
consents of third parties to the consummation of the transactions
contemplated hereby.
ARTICLE VIII
COVENANTS OF ALL PARTIES
Acquiror, the Company and the Stockholder agree as follows (with respect
to the Company's covenants, the Stockholder agrees to use his best efforts to
cause the Company to perform):
8.1 FILINGS; OTHER ACTION.
8.1.1 Acquiror, the Company and the Stockholder shall cooperate, at
Acquiror's sole expense, to promptly prepare and file with the SEC the
Registration Statement on Form S-1 (or other appropriate Form) to be filed by
Acquiror in connection with its Initial Public Offering (including the
prospectus constituting a part thereof, the "Registration Statement"). Acquiror
shall obtain all necessary state securities law or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this Agreement,
and the Company and the Stockholder shall furnish all information concerning the
Company and the Stockholder as may be reasonably requested in connection with
any such action.
8.1.2 None of the information or documents supplied or to be
supplied by each of the Company, the Stockholder and Acquiror specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at the
time the Registration Statement and each amendment and supplement thereto, if
any, becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company, the Stockholder and
Acquiror shall agree as to the information and documents supplied by the Company
and the Stockholder for inclusion in the Registration Statement and shall
indicate such information and documents in a letter to be delivered at Closing
(the "Information Letter"). The Company and the Stockholder shall be entitled to
review the Registration Statement and each amendment thereto, if any, prior to
the time each becomes effective under the Securities Act.
8.1.3 The Stockholder and the Company shall, upon request, furnish
Acquiror with all information concerning the Company, its subsidiaries,
directors, officers, partners and stockholders and such other matters as may be
reasonably requested by Acquiror in connection with the preparation of the
Registration Statement and each amendment or supplement thereto, or any other
statement, filing, notice or application made by or on behalf of each such party
or any of its subsidiaries to any governmental entity in connection with the
Merger, and the other transactions contemplated by this Agreement.
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8.2 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to the
representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing to
supplement or amend promptly (i) in the case of Acquiror, the Acquiror
Disclosure Schedules and (ii) in the case of the Company or the
Stockholder, the Company Disclosure Schedules with respect to any matter
that would have been or would be required to be set forth or described in
the Schedules in order to not materially breach any representation,
warranty or covenant of such party contained herein; provided that, no
amendment or supplement to a Schedule that constitutes or reflects a
material adverse change to the Company may be made unless Acquiror
consents to such amendment or supplement, and no amendment or supplement
to a Schedule that constitutes or reflects a material adverse change to
Acquiror may be made unless the Company and the Stockholder consent to
such amendment or supplement. For all purposes of this Agreement, the
Schedules hereto shall be deemed to be the Schedules as amended or
supplemented pursuant to this Section 8.2. In the event that the Company
seeks to amend or supplement a Schedule pursuant to this Section 8.2 and
Acquiror does not consent to such amendment or supplement, or Acquiror
seeks to amend or supplement a Schedule pursuant to this Section 11.2 and
the Company and the Stockholder do not consent, this Agreement shall be
deemed terminated by mutual consent as set forth in Section 14.1.1 hereof.
8.3 STOCKHOLDER EMPLOYMENT AGREEMENTS. At or immediately prior to Closing, the
Stockholder shall terminate his employment agreement, if any, with the
Company by mutual consent without any liability on the part of the Company
therefor, and shall enter into a Stockholder Employment Agreement in the
form appended hereto as Exhibit 8.3 with Acquiror (the "Stockholder
Employment Agreement").
ARTICLE IX
CONDITIONS PRECEDENT OF ACQUIROR
Except as may be waived in writing by Acquiror, the obligations of
Acquiror hereunder are subject to the fulfillment at or prior to the Closing
Date of each of the following conditions:
9.1 DUE DILIGENCE. Acquiror shall have completed its due diligence review of
the Company and shall be reasonably satisfied with the results thereof.
9.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the
Company and the Stockholder contained herein shall have been true and
correct in all material respects when initially made and shall be true and
correct in all respects as of the Closing Date.
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9.3 COVENANTS. The Company and the Stockholder shall have performed and
complied in all material respects with all covenants required by this
Agreement to be performed and complied with by the Company or the
Stockholder prior to the Closing Date.
9.4 LEGAL OPINION. Counsel to the Company and the Stockholder shall have
delivered to Acquiror their opinions, dated as of the Closing Date, in
form and substance reasonably satisfactory to Acquiror, to the effect set
forth in Exhibit 9.4.
9.5 PROCEEDINGS. No action, proceeding or order by any court or governmental
body or agency shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
9.6 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition
(financial or otherwise), operations, assets, liabilities or business of
the Company shall have occurred since June 30, 1997, whether or not such
change shall have been caused by the deliberate act or omission of the
Company or the Stockholder.
9.7 SECURITIES APPROVALS. The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by
the SEC. At or prior to the Closing Date, Acquiror shall have received all
state securities and "Blue Sky" permits necessary to consummate the
transactions contemplated hereby. The Acquiror Common Stock shall have
been approved for listing on the Nasdaq National Market, subject only to
official notification of issuance.
9.8 SIMULTANEOUS CLOSINGS. The Initial Public Offering and Acquiror's
acquisition of all of the Target Companies (or such Target Companies if
less than all of them as Acquiror and the Underwriter Representative shall
agree will be sufficient for purposes of the Initial Public Offering)
shall all be closed and consummated simultaneously with the closing of the
Merger.
9.9 CLOSING DELIVERIES. Acquiror shall have received all documents and
agreements, duly executed and delivered in form satisfactory to Acquiror,
referred to in Section 11.1.
ARTICLE X
CONDITIONS PRECEDENT OF THE COMPANY AND THE STOCKHOLDER
Except as may be waived in writing by the Company and the Stockholder, the
obligations of the Company and the Stockholder hereunder are subject to
fulfillment at or prior to the Closing Date of each of the following conditions:
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10.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Acquiror contained herein shall be true and correct in all material
respects when initially made and shall be true and correct in all respects
as of the Closing Date.
10.2 COVENANTS. Acquiror shall have performed and complied in all material
respects with all covenants and conditions required by this Agreement to
be performed and complied with by it prior to the Closing Date.
10.3 LEGAL OPINIONS.
10.3.1 Counsel to Acquiror shall have delivered to the Company and
the Stockholder their opinion, dated as of the Closing Date, in form and
substance reasonably satisfactory to the Company and the Stockholder, to the
effect set forth in Exhibit 10.3.1.
10.3.2 Counsel to Acquiror shall have delivered to Acquiror their
opinion, dated as of the Closing Date, to the effect set forth in Exhibit 10.3.2
(the "Tax Opinion").
10.4 PROCEEDINGS. No action, proceeding or order by any court or governmental
body or agency shall have been threatened in writing, asserted, instituted
or entered to restrain or prohibit the carrying out of the transactions
contemplated hereby.
10.5 GOVERNMENT APPROVALS AND REQUIRED CONSENTS. The Company, the Stockholder
and Acquiror shall have obtained all necessary government and other third
party approvals and consents.
10.6 SECURITIES APPROVALS. The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by
the SEC. At or prior to the Closing Date, Acquiror shall have received all
state securities and "Blue Sky" permits necessary to consummate the
transactions contemplated hereby. At or prior to the Closing Date, the
Acquiror Common Stock shall have been approved for listing on The Nasdaq
National Market, subject only to official notification of issuance.
10.7 CLOSING DELIVERIES. The Company shall have received all documents and
agreements, duly executed and delivered in form satisfactory to the
Company, referred to in Section 11.2.
10.8 NO MATERIAL ADVERSE CHANGE. No material adverse change in the condition
(financial or otherwise), operations, assets, liabilities or business of
Acquiror shall have occurred since December 31, 1996.
10.9 SIMULTANEOUS CLOSINGS. The Initial Public Offering and Acquiror's
acquisition of all of the Target Companies (or such Target Companies if
less than all of them as Acquiror and the
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Underwriter Representative shall agree will be sufficient for purposes of
the Initial Public Offering) shall all be closed and consummated
simultaneously with the closing of the Merger.
10.10 RELEASE OF PERSONAL GUARANTEES. The Company shall have provided evidence
to the Stockholder to the effect that all personal guarantees given by the
Stockholder guaranteeing debt of the Company have been released by the
appropriate lending institution and the Stockholder is no longer
personally liable for any of the debts of the Company.
ARTICLE XI
CLOSING DELIVERIES
11.1 DELIVERIES OF THE COMPANY AND THE STOCKHOLDER. At or prior to the Closing
Date, the Company and the Stockholder shall deliver to Acquiror c/o
Dinsmore & Shohl LLP, counsel to Acquiror, the following, all of which
shall be in a form reasonably satisfactory to Acquiror:
11.1.1 a copy of resolutions of the Board of Directors and the
stockholders of the Company authorizing the execution, delivery and performance
of this Agreement and all related documents and agreements and consummation of
the Merger, each certified by the Secretary of the Company as being true and
correct copies of the originals thereof subject to no modifications or
amendments;
11.1.2 a certificate of the President of the Company, and the
Stockholder, dated the Closing Date, as to the truth and correctness of the
representations and warranties of the Company and the Stockholder contained
herein on and as of the Closing Date;
11.1.3 a certificate of the President of the Company, and the
Stockholder, dated the Closing Date, (i) as to the performance of and compliance
in all material respects by the Company and the Stockholder with all covenants
contained herein on and as of the Closing Date and (ii) certifying that all
conditions precedent of the Company and the Stockholder to the Closing have been
satisfied or waived;
11.1.4 a certificate of the Secretary of the Company certifying as
to the incumbency of the directors and officers of such corporation and as to
the signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of that corporation;
11.1.5 a certificate, dated within ten days prior to the Closing
Date, of the Secretary of State of the state of incorporation of the Company
establishing that such corporation is in
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existence, has paid all franchise or similar taxes, if any, and, if applicable,
otherwise is in good corporate standing to transact business in its state of
organization;
11.1.6 certificates, dated within ten days prior to the Closing
Date, of the Secretaries of State of the states in which the Company is
qualified to do business, to the effect that such corporation is qualified to do
business and, if applicable, is in corporate good standing as a foreign
corporation in each of such states;
11.1.7 an opinion of Peabody & ▇▇▇▇▇, counsel to the Company and the
Stockholder dated as of the Closing Date, pursuant to Section 9.4;
11.1.8 all necessary authorizations, consents, approvals, permits
and licenses;
11.1.9 the resignations of the directors and officers of the Company
as requested by Acquiror;
11.1.10 an executed Stockholder Employment Agreement between
Acquiror and each Stockholder in substantially the form attached hereto as
Exhibit 8.3;
11.1.11 an executed Registration Rights Agreement between Acquiror
and the Stockholder in substantially the form attached hereto as Exhibit 11.1.11
(the "Registration Rights Agreement");
11.1.12 executed Articles of Merger and a Certificate of Merger
necessary to effect the Merger referred to in Section 2.1;
11.1.13 a nonforeign affidavit, as such affidavit is referred to in
Section 1445(b)(2) of the Internal Revenue Code, of the Stockholder, signed
under a penalty of perjury and dated as of the Closing Date, to the effect that
the Stockholder is a United States citizen or a resident alien (and thus not a
foreign person) and providing the Stockholder's United States taxpayer
identification number;
11.1.14 the Information Letter required by Section 8.1.2;
11.1.15 a copy of the ▇▇▇▇ from Peabody & ▇▇▇▇▇, the Company's legal
counsel, setting forth the aggregate legal fees incurred by the Company for
services rendered to the Company in connection with the Merger; and
11.1.16 such other instrument or instruments of transfer prepared by
Acquiror as shall be necessary or appropriate, as Acquiror or its counsel shall
reasonably request, to carry out and effect the purpose and intent of this
Agreement.
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11.2 DELIVERIES OF ACQUIROR. At or prior to the Closing Date, Acquiror shall
deliver to the Company and the Stockholder, the following, all of which
shall be in a form satisfactory to the Company, the Stockholder and their
counsel:
11.2.1 a copy of the resolutions of the Board of Directors and
shareholders of Acquiror authorizing the execution, delivery and performance of
this Agreement, and all related documents and agreements and consummation of the
Merger, each certified by Acquiror's Secretary as being true and correct copies
of the originals thereof subject to no modifications or amendments;
11.2.2 a certificate of an officer of Acquiror dated the Closing
Date as to the truth and correctness of the representations and warranties of
Acquiror contained herein on and as of the Closing Date;
11.2.3 a certificate of an officer of Acquiror dated the Closing
Date, (i) as to the performance and compliance by Acquiror with all covenants
contained herein on and as of the Closing Date and (ii) certifying that all
conditions precedent of Acquiror to the Closing have been satisfied or waived;
11.2.4 a certificate of the Secretary of Acquiror certifying as to
the incumbency of the directors and officers of Acquiror and as to the
signatures of such officers and directors who have executed documents delivered
at the Closing on behalf of Acquiror;
11.2.5 a certificate, dated within ten days prior to the Closing
Date, of the Secretary of State of Ohio establishing that Acquiror is in
existence, has paid all franchise or similar taxes, if any, and, if applicable,
otherwise is in good standing to transact business in its state of
incorporation;
11.2.6 certificates (or photocopies thereof), dated within ten days
prior to the Closing Date, of the Secretaries of State of the states in which
Acquiror is qualified to do business, to the effect that Acquiror is qualified
to do business and, if applicable, is in good standing as a foreign corporation
in each of such states;
11.2.7 an opinion of ▇▇▇▇▇▇▇▇ & Shohl LLP, counsel to Acquiror,
dated as of the Closing Date, pursuant to Section 10.3.1;
11.2.8 the Tax Opinion, dated as of the Closing Date;
11.2.9 the executed Registration Rights Agreement;
11.2.10 executed Articles of Merger and a Certificate of Merger
necessary to effect the Merger referred to in Section 2.1;
11.2.11 an executed Stockholder Employment Agreement between
Acquiror and the Stockholder in substantially the form attached hereto as
Exhibit 8.3;
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11.2.12 the Merger Consideration; and
11.2.13 such other instrument or instruments of transfer, prepared
by the Company or the Stockholder as shall be necessary or appropriate, as the
Company, the Stockholder or their counsel shall reasonably request, to carry out
and effect the purpose and intent of this Agreement.
ARTICLE XII
POST CLOSING MATTERS
12.1 FURTHER INSTRUMENTS OF TRANSFER. Following the Closing, at the request of
Acquiror and at Acquiror's sole cost and expense, the Stockholder and the
Company shall deliver any further instruments of transfer and take all
reasonable action as may be necessary or appropriate to carry out the
purpose and intent of this Agreement.
12.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. After the Closing Date,
Acquiror shall not and shall not permit any of its subsidiaries to:
12.2.1 retire or reacquire, directly or indirectly, all or part of
the Acquiror Common Stock issued in connection with the transactions
contemplated hereby within the two years following the Closing Date;
12.2.2 enter into financial arrangements for the benefit of the
Stockholder; or
12.2.3 dispose of a significant part of the assets of the Company
within the two years following the Closing Date except in the ordinary course of
business, to Affiliates of Acquiror or to eliminate duplicate services or excess
capacity.
12.3 MERGER TAX COVENANTS.
12.3.1 The parties intend that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
in which the Company will not recognize gain or loss, and pursuant to which any
gain recognized by the Stockholder as a result of the Merger will not exceed the
amount of any cash received by the Stockholder in the Merger (a
"Reorganization").
12.3.2 Both prior to and after the Closing Time, all books and
records shall be maintained, and all Tax Returns and schedules thereto shall be
filed in a manner consistent with the Merger being treated as a Reorganization.
These obligations are excused as to a party required to maintain the books or
file a Tax Return if such party has provided to the other parties a written
opinion of competent tax counsel to the effect that there is not substantial
authority, within the
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meaning of Section 6662(d)(2)(B)(i) of the Internal Revenue Code, to report the
Merger as a Reorganization and such opinion either is furnished prior to the
Effective Time or is based on facts or events not known at the Effective Time.
Each party shall provide to each other party such tax information, reports,
returns, or schedules as may be reasonably required to assist such party in
accounting for and reporting the Merger as a Reorganization.
12.4 SKYLARK CONSULTING AGREEMENT. Acquiror hereby acknowledges the Company is
party to that certain Consulting Agreement, dated August 27, 1996, by and
between the Company, Skylark Enterprises, Inc., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "Consulting Agreement"). Acquiror further
acknowledges that pursuant to the Merger, it shall assume all obligations
of the Company pursuant the Consulting Agreement.
12.5 COOPERATION UNDER RULE 144. Subject to any provisions of this Agreement,
the Registration Rights Agreement, or any other contractual limitation to
which the Stockholder or the Company is a party, Acquiror agrees that
following the Closing, Acquiror shall take all action required as a
condition to the availability of Rule 144 under the Securities Act of 1933
or any successor exemptive rule hereafter in effect ("Rule 144") with
respect to all shares of Acquiror Common Stock issued to the Stockholder
hereunder. Acquiror shall furnish to the Stockholder upon request a copy
of the most recent annual or quarterly report of Acquiror filed with the
Securities and Exchange Commission ("Commission") and such other reports
and documents as the Stockholder may reasonably request in availing
himself of any rule or regulation of the Commission allowing the
Stockholder to sell any such shares of acquiror Common Stock without
registration. Acquiror shall take all further reasonable action to
facilitate and expedite transfers of shares of Acquiror Common Stock
issued to the Stockholder hereunder pursuant to Rule 144, including
without limitation, timely notice to Acquiror's transfer agent to expedite
transfers of such stock.
ARTICLE XIII
REMEDIES
13.1 INDEMNIFICATION BY THE STOCKHOLDER. Subject to the terms and conditions of
this Article XIII, the Stockholder agrees to indemnify, defend and hold
Acquiror, the Company, and their respective directors, officers, members,
managers, employees, agents, attorneys and affiliates harmless from and
against all losses, claims, obligations, demands, assessments, penalties,
liabilities, costs, damages, reasonable attorneys' fees and expenses
(collectively, "Damages") asserted against or incurred by such indemnities
arising out of or resulting from:
13.1.1 a material breach of the Company or the Stockholder of any
representation, warranty or covenant of the Company or the Stockholder contained
herein or in any Schedule or certificate delivered by them hereunder;
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13.1.2 any violation by the Stockholder, the Company and/or any of
their past or present directors, officers, members, managers, shareholders,
employees, agents, consultants and affiliates of state or federal laws occurring
on or before the Closing Date;
13.1.3 any liability under the Securities Act, the Exchange Act or
any other federal or state "Blue Sky" or securities law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement of a
material fact relating to the Stockholder or the Company and provided in writing
to Acquiror or its counsel by the Company or the Stockholder, specifically for
inclusion in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, arising out of or based upon any omission to state therein a material
fact relating to the Stockholder and/or the Company required to be stated
therein or necessary to make the statements therein not misleading, and not
provided to Acquiror or its counsel by the Company or the Stockholder, provided,
however, that the Company, the Stockholder and their counsel are afforded a
reasonable opportunity to review and comment upon any preliminary prospectus,
the Registration Statement, or any part thereof, or any amendment thereof or
supplement thereto, and provided further that such indemnity shall not apply if
the Company or the Stockholder provides to Vision 21 or its counsel a written
request that any omission or untrue statement occurring in any preliminary
prospectus, registration statement or any prospectus forming a part thereof, or
any amendment thereof or supplement thereto be corrected and such requested
correction is not made; or
13.1.4 any filings, reports or disclosures made by the Company or
the Stockholder, as the case may be, pursuant to the IRS Voluntary Compliance
Resolution Program.
13.2 INDEMNIFICATION BY ACQUIROR. Subject to the terms and conditions of this
Article XIII, Acquiror shall indemnify, defend and hold the Stockholder
harmless from and against all Damages asserted against or incurred by him
arising out of or resulting from:
13.2.1 a material breach by Acquiror of any representation, warranty
or covenant of Acquiror contained herein or in any Schedule or certificate
delivered by it hereunder; and
13.2.2 any liability under the Securities Act, the Exchange Act or
any other federal or state "Blue Sky" or securities law or regulation, at common
law or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to Acquiror, contained in any
preliminary prospectus, the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or supplement thereto, arising out of or
based upon any omission or alleged omission to state therein a material fact
relating to Acquiror, required to be stated therein or necessary to make the
statements therein not misleading.
13.2.3 unless subject to indemnification under Section 13.1, any and
all liabilities or obligations of the Company (except liabilities or obligations
arising in connection with this Agreement and the transactions contemplated
hereby) known and unknown, fixed and contingent, whether now in existence or
incurred after the Closing Date.
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13.3 CONDITIONS OF INDEMNIFICATION. All claims for indemnification under this
Agreement shall be asserted and resolved as follows:
13.3.1 A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (and, in any event, at least ten days prior
to the due date for any responsive pleadings, filings or other documents) (i)
notify the party from whom indemnification is sought (the "Indemnifying Party")
of any third-party claim or claims asserted against the Indemnified Party
("Third Party Claim") that could give rise to a right of indemnification under
this Agreement and (ii) transmit to the Indemnifying Party a written notice
("Claim Notice") describing in reasonable detail the nature of the Third Party
Claim, a copy of all papers served with respect to such claim (if any), an
estimate of the amount of damages attributable to the Third Party Claim and the
basis of the Indemnified Party's request for indemnification under this
Agreement. The failure to promptly deliver a Claim Notice shall not relieve the
Indemnifying Party of its obligations to the Indemnified Party with respect to
the related Third Party Claim except to the extent that the resulting delay is
materially prejudicial to the defense of such claim. Within 30 days after
receipt of any Claim Notice (the "Election Period"), the Indemnifying Party
shall notify the Indemnified Party (i) whether the Indemnifying Party disputes
its potential liability to the Indemnified Party under this Article XIII with
respect to such Third Party Claim and (ii) whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Third Party claim.
13.3.2 If the Indemnifying Party notifies the Indemnified Party
within the Election Period that the Indemnifying Party elects to assume the
defense of the Third Party Claim, then the Indemnifying Party shall have the
right to defend, at its sole cost and expense, such Third Party Claim by all
appropriate proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 13.3.2. The Indemnifying
Party shall have full control of such defense and proceedings, including any
compromise or settlement thereof. The Indemnified Party is hereby authorized, at
the sole cost and expense of the Indemnifying Party (but only if the Indemnified
Party is entitled to indemnification hereunder), to file, during the Election
Period, any motion, answer or other pleadings that the Indemnified Party shall
deem necessary or appropriate to protect its interests or those of the
Indemnifying Party and not prejudicial to the Indemnifying Party (it being
understood and agreed that if an Indemnified Party takes any such action that is
prejudicial and causes a final adjudication that is adverse to the Indemnifying
Party, the Indemnifying Party shall be relieved of its obligations hereunder
with respect to such Third Party Claim). If requested by the Indemnifying Party,
the Indemnified Party agrees, at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnifying Party and its counsel in contesting
any Third Party Claim that the Indemnifying Party elects to contest, including,
without limitation, the making of any related counterclaim against the person
asserting the Third Party Claim or any cross-complaint against any person. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to this
Section 13.3.2 and shall bear its own costs and expenses with respect to such
participation; provided, however, that if the
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named parties to any such action (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party, and the Indemnified Party has
been advised by counsel that there may be one or more legal defenses available
to it that are different from or additional to those available to the
Indemnifying Party, then the Indemnified Party may employ separate counsel at
the expense of the Indemnifying Party, and upon written notification thereof,
the Indemnifying Party shall not have the right to assume the defense of such
action on behalf of the Indemnified Party; provided further that the
Indemnifying Party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for the Indemnified Party, which firm shall be designated in writing by the
Indemnified Party.
13.3.3 If the Indemnifying Party fails to notify the Indemnified
Party within the Election Period that the Indemnifying Party elects to defend
the Indemnified Party pursuant to Section 13.3.2, or if the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 13.3.2 but fails
diligently and promptly to prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right to defend, at the sole cost and expense
of the Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings, provided, however, that
the Indemnified Party may not enter into, without the Indemnifying Party's
consent, which shall not be unreasonably withheld, any compromise or settlement
of such Third Party Claim. Notwithstanding the foregoing, if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect that
the Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article XIII and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this Section
or of the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all costs and expenses of such litigation. The Indemnifying Party may
participate in, but not control any defense or settlement controlled by the
Indemnified Party pursuant to this Section 13.3.3, and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation;
provided, however, that if the named parties to any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party, and the Indemnifying Party has been advised by counsel that there may be
one or more legal defenses available to it that are different from or additional
to those available to the Indemnified Party, then the Indemnifying Party may
employ separate counsel and upon written notification thereof, the Indemnified
Party shall not have the right to assume the defense of such action on behalf of
the Indemnifying Party.
13.3.4 In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to such claim and
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the basis of the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified Party
within 60 days from its receipt of the Indemnity Notice that the Indemnifying
Party disputes such claim, the claim specified by the Indemnified Party in the
Indemnity Notice shall be deemed a liability of the Indemnifying Party
hereunder. If the Indemnifying Party has timely disputed such claim, as provided
above, such dispute shall be resolved by litigation in an appropriate court of
competent jurisdiction if the parties do not reach a settlement of such dispute
within 30 days after notice of a dispute is given.
13.3.5 Payments of all amounts owing by an Indemnifying Party
pursuant to this Article XIII relating to a Third Party Claim shall be made
within 30 days after the latest of (i) the settlement of such Third Party Claim,
(ii) the expiration of the period for appeal of a final adjudication of such
Third Party Claim or (iii) the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement. Payments of all amounts owing by an Indemnifying Party
shall be made within 30 days after the later of (i) the expiration of the 60-day
Indemnity Notice period or (ii) the expiration of the period for appeal of a
final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement.
13.4 REMEDIES NOT EXCLUSIVE. The remedies provided in this Agreement shall not
be exclusive of any other rights or remedies available to one party
against the other, either at law or in equity.
13.5 INDEMNIFICATION LIMITATIONS. Notwithstanding the provisions of Sections
13.1 and 13.2, (a) 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 the time limit set forth
in Section 18.6, (b) no claim may be brought by any party entitled to
indemnification under this Article XIII unless and until the aggregate
cumulative amount to which such party is entitled equals or exceeds
$50,000, and (c) no party shall be obligated to make any indemnification
in excess of 50% of the value of the Merger Consideration.
13.6 TAX BENEFITS; INSURANCE PROCEEDS. The total amount of any indemnity
payments owed by one party to another party to this Agreement shall be
reduced by any correlative tax benefit received by the party to be
indemnified or the net proceeds received by the party to be indemnified
with respect to recovery from third parties or insurance proceeds, and
such correlative insurance benefit shall be net of the insurance premium,
if any, that becomes due as a result of such claim.
13.7 PAYMENT OF INDEMNIFICATION OBLIGATION. In the event that the Stockholder
has an indemnification obligation to Acquiror hereunder, subject to
Acquiror's approval as set forth below, the Stockholder may satisfy such
obligation by transferring to Acquiror such number of shares of Acquiror
Common Stock owned by the Stockholder having an aggregate fair market
value (based on the last reported sale price of Acquiror Common Stock on
the Nasdaq National Market or other exchange on which the Acquiror Common
Stock is then listed or
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the last quoted ask price on any over-the-counter market through which the
Acquiror Common Stock is then quoted on the last trading day immediately
preceding the day on which the Stockholder transfers shares of Acquiror
Common Stock to Acquiror hereunder) equal to the indemnification
obligation; provided that each of the following conditions are satisfied:
13.7.1 The Stockholder shall transfer to Acquiror good, valid and
marketable title to the shares of Acquiror Common Stock, free and clear of all
adverse claims, security interests, liens, claims, proxies, options,
stockholders' agreements and encumbrances;
13.7.2 The Stockholder shall make such representations and
warranties as to title to the stock, absences of security interests, liens,
claims, proxies, options, stockholders' agreements and other encumbrances and
other matters as reasonably requested by Acquiror; and
13.7.3 The other terms and conditions of any transaction
contemplated pursuant to this Section and the effects thereof, including any
legal or tax consequences, shall be reasonably satisfactory to Acquiror.
ARTICLE XIV
TERMINATION
14.1 TERMINATION. This Agreement may be terminated and the Merger and the
Acquisition may be abandoned:
14.1.1 at any time prior to the Closing Date by mutual agreement of
all parties;
14.1.2 at any time prior to the Closing Date by Acquiror if any
material representation or warranty of the Company or the Stockholder contained
in this Agreement or in any certificate or other document executed and delivered
by the Company or the Stockholder pursuant to this Agreement is or becomes
untrue or breached in any material respect or if the Company or the Stockholder
fails to comply in any material respect with any covenant or agreement contained
herein, and any such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within 20 days after receipt by the Company and the
Stockholder of written notice thereof;
14.1.3 at any time prior to the Closing Date by the Company if any
material representation or warranty of Acquiror contained in this Agreement or
in any certificate or other document executed and delivered by Acquiror pursuant
to this Agreement is or becomes untrue or breached in any material respect or if
Acquiror fails to comply in any material respect with any covenant or agreement
contained herein, and any such misrepresentation, noncompliance or breach is not
cured, waived or eliminated within 20 days after receipt by Acquiror of written
notice thereof; or
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14.1.4 by Acquiror or the Company if the Merger shall not have been
consummated by March 31, 1998.
14.2 EFFECT OF TERMINATION. In the event this Agreement is terminated pursuant
to Sections 14.1.2 or 14.1.3 above, Acquiror, and the Company and the
Stockholder, shall each be entitled to pursue, exercise and enforce any
and all remedies, rights, powers and privileges available at law or in
equity. In the event of a termination of this Agreement under the
provisions of this Article, a party not then in material breach of this
Agreement shall stand fully released and discharged of any and all
obligations under this Agreement; provided, however, that if a termination
of this Agreement occurs pursuant to the last sentence of Section 8.2, the
parties hereto shall stand fully released and discharged of any and all
obligations under this Agreement.
ARTICLE XV
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 NONDISCLOSURE. The Stockholder recognizes and acknowledges that he had in
the past, currently has, and in the future may possibly have, access to
certain Confidential Information of the Company and Acquiror that is
valuable, special and unique assets of the Company's and Acquiror's
respective businesses. Acquiror acknowledges that it has had in the past,
currently has, and in the future may possible have, access to certain
Confidential Information of the Company that is valuable, special and
unique assets of the Company's business. The Stockholder, the Company, and
Acquiror agree that they will not disclose such Confidential Information
to any person, firm, corporation, association or other entity for any
purpose or reason whatsoever, except (a) to authorized representatives of
Acquiror and the Company, respectively, and (b) to counsel and other
advisers to Acquiror, the Company and the Stockholder, respectively,
provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 15.1, unless (i) such
information becomes available to or known by the public generally through
no fault of the Stockholder, the Company, or Acquiror, as the case may be,
(ii) disclosure is required by law or the order of any governmental
authority under color of law, provided, that prior to disclosing any
information pursuant to this clause (ii), the Stockholder, the Company, or
Acquiror, as the case may be, shall, if possible, give prior written
notice thereof to the Stockholder, the Company, and Acquiror and provide
the Stockholder, the Company and Acquiror with the opportunity to contest
such disclosure, (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against
the disclosing party, or (iv) the disclosing party is the sole and
exclusive owner of such Confidential Information as a result of the Merger
or otherwise. In the event of a breach or threatened breach by Acquiror,
the Company or the Stockholder of the provisions of this Section 15.1,
Acquiror, the Company or the Stockholder, as the case may be, shall be
entitled to an injunction restraining the
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disclosing party from disclosing, in whole or in part, such Confidential
Information. Nothing herein shall be construed as prohibiting Acquiror,
the Stockholder and the Company from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
15.2 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which they would
have no other adequate remedy, Acquiror, the Company, and the Stockholder
agree that, in the event of a breach by any of them of the foregoing
covenant, the covenant may be enforced against them by injunctions and
restraining orders.
15.3 SURVIVAL. The obligations of the parties under this Article XV shall
survive the termination of this Agreement.
ARTICLE XVI
TRANSFER RESTRICTIONS
16.1 TRANSFER RESTRICTIONS. Until the expiration of the later of one year from
the Closing or such other holding period as may be required under
applicable federal or state securities laws, the Stockholder shall not,
except pursuant to the Registration Rights Agreement and Section 13.7
hereof, voluntarily (a) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint, or otherwise dispose of (i) any shares of
Acquiror Common Stock received by such Stockholder in the Merger, or (ii)
any interest (including, without limitation, an option to buy or sell) in
any such shares of Acquiror Common Stock, in whole or in part, and no such
attempted transfer shall be treated as effective for any purpose or (b)
engage in any transaction, whether or not with respect to any shares of
Acquiror Common Stock or any interest therein, the intent or effect of
which is to reduce the risk of owning shares of Acquiror Common Stock. The
certificates evidencing the Acquiror Common Stock delivered to the
Stockholder pursuant to this Agreement will bear a legend substantially in
the form set forth below and containing such other information as Acquiror
may reasonably deem necessary or appropriate:
Except pursuant to the terms of the Registration Rights Agreement and the
Agreement and Plan of Merger and Reorganization ("Merger Agreement")
between the issuer, the holder of this certificate and the other parties
thereto, the shares represented by this certificate may not be voluntarily
sold, assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required
to give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to [date that is one year after the Closing Date.] Upon
the written request of the holder of this certificate, the issuer agrees
to remove this
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restrictive legend (and any stop order placed with the transfer agent) after the
expiration of the period specified in the Merger Agreement.
ARTICLE XVII
FEDERAL SECURITIES LAW
RESTRICTIONS ON ACQUIROR COMMON STOCK
17.1 INVESTMENT REPRESENTATION. Each Stockholder acknowledges that the shares
of Acquiror Common Stock to be delivered to such Stockholder pursuant to
this Agreement have not been and will not be registered under the
Securities Act and may not be resold without compliance with the
Securities Act. The Acquiror Common Stock to be acquired by such
Stockholder pursuant to this Agreement is being acquired solely for his,
her or its own account, for investment purposes only and with no present
intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
17.2 COMPLIANCE WITH LAW. Each Stockholder covenants, warrants and represents
that none of the shares of Acquiror Common Stock issued to such
Stockholder will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all
of the applicable provisions of the Securities Act and the rules and
regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of Acquiror Common Stock
shall bear the following legend in addition to the legends under Article
XVI.
The shares represented hereby have not been registered under the
Securities Act of 1933 (the "Act") and may only be sold or otherwise
transferred if the holder hereof complies with the Act and applicable
securities law.
In addition, certificates evidencing shares of Acquiror Common Stock shall bear
any legend required by the securities or blue sky laws of any state where the
Stockholder resides.
17.3 ECONOMIC RISK; SOPHISTICATION. Each Stockholder is able to bear the
economic risk of an investment in Acquiror Common Stock acquired pursuant
to this Agreement and can afford to sustain a total loss of such
investment and has such knowledge and experience in financial and business
matters that he, she or it is capable of evaluating the merits and risks
of the proposed investment and therefore have the capacity to protect his,
her or its own interests in connection with the acquisition of the
Acquiror Common Stock. Each Stockholder or its purchaser representatives
have had an adequate opportunity to ask questions and receive answers from
the officers of Acquiror concerning any and all matters relating to the
transactions described in the Registration Statement including, without
limitation, the background and experience of the officers and directors of
Acquiror, the plans for the operations of the business of Acquiror, and
any plans for additional acquisitions and the like.
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Each Stockholder or its purchaser representatives have asked any and all
questions in the nature described in the preceding sentence and all
questions have been answered to their satisfaction.
17.4 ACCREDITED INVESTOR STATUS. Each Stockholder is an "accredited investor"
as defined in Rule 501(a) under the Securities Act. The Stockholder
recognizes that, as an accredited investor, Acquiror is not required to
provide the Stockholder with any particular information or disclosures as
a condition to relying upon the Rule 506 exemption from registration under
the Securities Act with respect to the issuance of Acquiror Common Stock
in the Merger. However, the Stockholder acknowledges that he, she or it
has received and had the opportunity to review the information about
Acquiror contained in the Acquiror Disclosure Schedules.
ARTICLE XVIII
MISCELLANEOUS
18.1 AMENDMENT; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of any terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any
other terms and conditions hereof.
18.2 ASSIGNMENT. Neither this Agreement nor any right created hereby or in any
agreement entered into in connection with the transactions contemplated
hereby shall be assignable by any party hereto, except by Acquiror to a
wholly owned subsidiary of Acquiror; provided that any such assignment
shall not relieve Acquiror of its obligations hereunder.
18.3 PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither
this Agreement nor any other agreement contemplated hereby shall be deemed
to confer upon any person not a party hereto or thereto any rights or
remedies hereunder or thereunder.
18.4 ENTIRE AGREEMENT. This Agreement and the agreements contemplated hereby
constitute the entire agreement of the parties regarding the subject
matter hereof, and supersede all prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof.
18.5 SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the
term hereof, such provision
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shall be fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision never
comprised a part hereof; and the remaining provisions hereof shall remain
in full force and effect and shall not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be
added automatically as part of this Agreement a provision as similar in
its terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.
18.6 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants contained herein, including all
statements contained in any certificate, exhibit or other instrument
delivered pursuant to this Agreement by or on behalf of the Company, the
Stockholder, or Acquiror, as the case may be, shall survive the Closing
until the first anniversary of the Closing Date.
18.7 GOVERNING LAW. This agreement and the rights and obligations of the
parties hereto shall be governed by and construed and enforced in
accordance with the substantive laws (but not the rules governing
conflicts of laws) of the State of Ohio.
18.8 CAPTIONS. The captions in this Agreement are for convenience of reference
only and shall not limit or otherwise affect any of the terms or
provisions hereof.
18.9 GENDER AND NUMBER. When the context requires, the gender of all words used
herein shall include the masculine, feminine and neuter and the number of
all words shall include the singular and plural.
18.10 REFERENCE TO AGREEMENT. Use of the words "herein", "hereof", "hereto" and
the like in this Agreement shall be construed as references to this
Agreement as a whole and not to any particular Article, Section or
provision of this Agreement, unless otherwise noted.
18.11 CONFIDENTIALITY; PUBLICITY AND DISCLOSURES. Each party shall keep this
Agreement and its terms confidential, and shall make no press release or
public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of
the other parties hereto; provided that the foregoing shall not prohibit
any disclosure (a) by press release, filing or otherwise that Acquiror has
determined in its good faith judgment to be required by federal securities
laws or the rules of the National Association of Securities Dealers, (b)
to attorneys, accountants, investment bankers or other agents of the
parties assisting the parties in connection with the transactions
contemplated by this Agreement and (c) by Acquiror in connection with the
conduct of its Initial Public Offering and conducting an examination of
the operations and assets of the Company; provided that Acquiror shall
promptly provide prior written notice to the Company of any release made
under this Section 18.11. In the event that the transactions contemplated
hereby are not consummated for any reason whatsoever, the parties hereto
agree not to disclose or use any Confidential Information they may have
concerning the affairs of the
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other parties, except for information that is required by law to be
disclosed; provided that should the transactions contemplated hereby not
be consummated, nothing contained in this Section shall be construed to
prohibit the parties hereto from operating businesses in competition with
each other so long as no party discloses or uses any such Confidential
Information in connection therewith.
18.12 NOTICE. Whenever this Agreement requires or permits any notice, request,
or demand from one party to another, the notice, request, or demand must
be in writing to be effective and shall be deemed to be delivered and
received (i) if personally delivered or if delivered by telex, telegram,
facsimile or courier service, when actually received by the party to whom
notice is sent or (ii) if delivered by mail (whether actually received or
not), at the close of business on the third business day next following
the day when placed in the mail, postage prepaid, certified or registered,
addressed to the appropriate party or parties, at the address of such
party set forth below (or at such other address as such party may
designate by written notice to all other parties in accordance herewith):
If to Acquiror: Universal Document Management Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ & Shohl LLP
1900 Chemed Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
If to the Company
or the Stockholder: DTI Technologies, Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to: Peabody & ▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
18.13 CHOICE OF FORUM. Each of the parties hereto shall be subject to the in
personam jurisdiction of any state or federal court located in ▇▇▇▇▇▇▇▇
County, State of Ohio.
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18.14 NO WAIVER; REMEDIES. No party hereto shall by any act (except by written
instrument pursuant to Section 18.1 hereof), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to
have acquiesced in any default in or breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising, on
the part of any party hereto, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any
right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
No remedy set forth in this Agreement or otherwise conferred upon or
reserved to any party shall be considered exclusive of any other remedy
available to any party, but the same shall be distinct, separate and
cumulative and may be exercised from time to time as often as occasion may
arise or as may be deemed expedient.
18.15 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
18.16 COSTS, EXPENSES AND LEGAL FEES. Whether or not the transactions
contemplated hereby are consummated, each party hereto shall bear its own
costs and expenses (including attorneys' fees) incurred in connection with
the transactions contemplated herein.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
ACQUIROR:
UNIVERSAL DOCUMENT MANAGEMENT
SYSTEMS, INC.
By___________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇, President
COMPANY:
DTI TECHNOLOGIES, INC.
By___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
STOCKHOLDER:
_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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ATTACHMENTS
Exhibit 1.1.21 List of Target Companies
Exhibit 2.8.1 Merger Consideration
Exhibit 8.3 Stockholder Employment Agreement(s)
Exhibit 9.4 Form of Opinion of Company Counsel
Exhibit 10.3.1 Form of Opinion of Acquiror Counsel
Exhibit 10.3.2 Form of Tax Opinion
Exhibit 11.1.11 Registration Rights Agreement
***
Company Disclosure Schedules:
Schedule 3.1 Organization and Good Standing
Schedule 3.2 Capitalization
Schedule 3.3 Transactions in Capital Stock
Schedule 3.4 Continuity of Business Enterprise
Schedule 3.5 Corporate Records
Schedule 3.6 Authorization and Validity
Schedule 3.7 No Violation
Schedule 3.8 Consents
Schedule 3.9 Financial Statements
Schedule 3.10 Liabilities and Obligations
Schedule 3.11 Employee Matters
Schedule 3.12 Employee Benefit Plans
Schedule 3.13 Absence of Certain Changes
Schedule 3.14 Title; Leased Assets
Schedule 3.15 Commitments
Schedule 3.16 Insurance
Schedule 3.17 Proprietary Rights and Information
Schedule 3.18 Taxes
Schedule 3.19 Compliance with Laws
Schedule 3.20 Finder's Fee
Schedule 3.21 Litigation
Schedule 3.22 Condition of Fixed Assets
Schedule 3.23 Distributions and Repurchases
Schedule 3.24 Banking Relations
Schedule 3.25 Ownership Interests of Interested Persons; Affiliations
Schedule 3.26 Investments in Competitors
Schedule 3.27 Environmental Matters
Schedule 3.28 Certain Payments
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Schedule 3.29 No Affiliation with NASD Member
Schedule 4.1 Validity; Stockholder Capacity
Schedule 4.2 No Violation
Schedule 4.3 Personal Holding Company; Control of Related Businesses
Schedule 4.4 Transfers of the Company Capital Stock
Schedule 4.5 Consents
Schedule 4.6 Certain Payments
Schedule 4.7 Finder's Fee
Schedule 4.8 Ownership of Interested Persons; Affiliations
Schedule 4.9 Investments in Competitors
Schedule 4.10 Disposition of Acquiror Shares
Acquiror Disclosure Schedules:
Schedule 5.1 Organization and Good Standing
Schedule 5.2 Capitalization
Schedule 5.3 Corporate Records
Schedule 5.4 Authorization and Validity
Schedule 5.5 No Violation
Schedule 5.6 Finder's Fee
Schedule 5.7 Capital Stock
Schedule 5.8 Continuity of Business Enterprise
Schedule 5.9 Consents
Schedule 5.10 Proprietary Rights and Information
Schedule 5.11 Taxes
Schedule 5.12 Litigation
Schedule 5.13 Ownership Interests of Interested Persons; Affiliations
Schedule 5.14 Investments in Competitors
Schedule 5.15 Certain Payments
Schedule 5.16 Commitments; Defaults
Schedule 5.17 Acquiror Financial Statements
Schedule 5.18 Liabilities and Obligations
Schedule 5.19 Employee Matters
Schedule 5.20 Absence of Certain Changes
Business Plan
Acquiror Financial Statements
Proforma Financial Statements
Risk Factors
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