\nARTICLE I DEFINITIONS…………………………………………………………………………………1
\n SECTION 1.01 Certain Defined Terms…………………………………………………1<\/p>\nARTICLE II THE MERGER………………………………………………………………………………..10
\n SECTION 2.01 The Merger………………………………………………………….10
\n SECTION 2.02 Closing…………………………………………………………….10
\n SECTION 2.03 Effective Time………………………………………………………10
\n SECTION 2.04 Effect of the Merger…………………………………………………11
\n SECTION 2.05 Certificate of Incorporation; Bylaws; Directors and Officers of
\n Surviving Corporation………………………………………………..11<\/p>\n
ARTICLE III CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES……………………………………………11
\n SECTION 3.01 Conversion of Shares…………………………………………………11
\n SECTION 3.02 Exchange of Shares Other than Dissenting Shares and Treasury Shares……….13
\n SECTION 3.03 Stock Transfer Books…………………………………………………14
\n SECTION 3.04 No Fractional Share Certificates………………………………………14
\n SECTION 3.05 Certain Adjustments………………………………………………….14
\n SECTION 3.06 Dissenters’ Rights…………………………………………………..15
\n SECTION 3.07 Lost, Stolen or Destroyed Certificates…………………………………15
\n SECTION 3.08 Taking of Necessary Action; Further Action……………………………..15<\/p>\n
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF COMPANY…………………………………………………….16
\n SECTION 4.01 Organization and Qualification; Subsidiaries……………………………16
\n SECTION 4.02 Certificate of Incorporation and Bylaws………………………………..16
\n SECTION 4.03 Capitalization………………………………………………………16
\n SECTION 4.04 Authority Relative to This Agreement…………………………………..17
\n SECTION 4.05 No Conflict; Required Filings and Consents……………………………..18
\n SECTION 4.06 Permits; Compliance with Laws…………………………………………18
\n SECTION 4.07 Financial Statements…………………………………………………19
\n SECTION 4.08 Absence of Certain Changes or Events…………………………………..20
\n SECTION 4.09 Employee Benefit Plans; Labor Matters………………………………….21
\n SECTION 4.10 Contracts…………………………………………………………..23
\n SECTION 4.11 Litigation………………………………………………………….25
\n SECTION 4.12 Environmental Matters………………………………………………..25
\n SECTION 4.13 Intellectual Property………………………………………………..25
\n SECTION 4.14 Taxes………………………………………………………………27
\n SECTION 4.15 Insurance…………………………………………………………..28<\/p>\n
i<\/p>\n
SECTION 4.16 Properties………………………………………………………….29
\n SECTION 4.17 Brokers…………………………………………………………….29
\n SECTION 4.18 Business Activity Restriction…………………………………………29
\n SECTION 4.19 Affiliate Transactions……………………………………………….30
\n SECTION 4.20 Certain Business Practices……………………………………………30
\n SECTION 4.21 Accredited Investors…………………………………………………30
\n SECTION 4.22 Cash Positions………………………………………………………30<\/p>\n
ARTICLE IVA REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDER………………………………………30
\n SECTION 4A.01 Organization and Qualification………………………………………..30
\n SECTION 4A.02 Certificate of Incorporation and Bylaws………………………………..31
\n SECTION 4A.03 Title to Shares……………………………………………………..31
\n SECTION 4A.04 Authority Relative to this Agreement…………………………………..31
\n SECTION 4A.05 No Conflict; Required Filings and Consents……………………………..32
\n SECTION 4A.06 Acquisition of Stock for Investment……………………………………32
\n SECTION 4A.07 Accredited Investor………………………………………………….32
\n SECTION 4A.08 Disclosure of Information…………………………………………….32<\/p>\n
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB…………………………………………33
\n SECTION 5.01 Organization and Qualification; Subsidiaries……………………………33
\n SECTION 5.02 Certificate of Incorporation and Bylaws………………………………..33
\n SECTION 5.03 Capitalization………………………………………………………33
\n SECTION 5.04 Authority Relative to This Agreement…………………………………..34
\n SECTION 5.05 No Conflict; Required Filings and Consents……………………………..35
\n SECTION 5.06 Permits; Compliance with Laws…………………………………………36
\n SECTION 5.07 SEC Filings; Financial Statements……………………………………..36
\n SECTION 5.08 Absence of Certain Changes or Events…………………………………..37
\n SECTION 5.09 Employee Benefit Plans; Labor Matters………………………………….38
\n SECTION 5.10 Contracts…………………………………………………………..40
\n SECTION 5.11 Litigation………………………………………………………….41
\n SECTION 5.12 Environmental Matters………………………………………………..41
\n SECTION 5.13 Intellectual Property………………………………………………..42
\n SECTION 5.14 Taxes………………………………………………………………43
\n SECTION 5.15 Insurance…………………………………………………………..45
\n SECTION 5.16 Properties………………………………………………………….45
\n SECTION 5.17 Brokers…………………………………………………………….45
\n SECTION 5.18 Business Activity Restriction…………………………………………46
\n SECTION 5.19 Certain Business Practices……………………………………………46
\n SECTION 5.20 No Prior Activities………………………………………………….46<\/p>\n
ii<\/p>\n
SECTION 5.21 Affiliate Transactions……………………………………………….46
\n SECTION 5.22 Cash Positions………………………………………………………47<\/p>\n
ARTICLE VI COVENANTS…………………………………………………………………………………47
\n SECTION 6.01 Conduct of Company Pending the Closing…………………………………47
\n SECTION 6.02 Conduct of Parent and Merger Sub Pending the Closing…………………….49
\n SECTION 6.03 Notices of Certain Events…………………………………………….50
\n SECTION 6.04 Access to Information; Confidentiality…………………………………50
\n SECTION 6.05 No Solicitation of Transactions……………………………………….51
\n SECTION 6.06 Control of Operations………………………………………………..51
\n SECTION 6.07 Further Action; Consents; Filings……………………………………..51
\n SECTION 6.08 Additional Reports…………………………………………………..52
\n SECTION 6.09 Noncompetition………………………………………………………52
\n SECTION 6.10 Use of First Note Proceeds; Conduct of Business…………………………52
\n SECTION 6.11 Company Intellectual Property; Escrow………………………………….53
\n SECTION 6.12 Payments to Fractional Share Holders…………………………………..53
\n SECTION 6.13 Tax Nature of Transaction…………………………………………….53
\n SECTION 6.14 Chain Subsidiaries…………………………………………………..54
\n SECTION 6.15 Tax Cooperation……………………………………………………..54<\/p>\n
ARTICLE VII ADDITIONAL AGREEMENTS……………………………………………………………………..55
\n SECTION 7.01 Notes………………………………………………………………55
\n SECTION 7.02 Directors’ and Officers’ Indemnification……………………………….55
\n SECTION 7.03 Public Announcements…………………………………………………55
\n SECTION 7.04 Listing of Additional Shares………………………………………….55
\n SECTION 7.05 Blue Sky……………………………………………………………56
\n SECTION 7.06 Employee Matters…………………………………………………….56
\n SECTION 7.07 Directors of Parent Following the Merger……………………………….56<\/p>\n
ARTICLE VIII CONDITIONS TO THE MERGER………………………………………………………………….57
\n SECTION 8.01 Conditions to the Obligations of Each Party to Consummate the Merger………57
\n SECTION 8.02 Conditions to the Obligations of Company……………………………….57
\n SECTION 8.03 Conditions to the Obligations of Parent………………………………..58<\/p>\n
ARTICLE IX INDEMNIFICATION……………………………………………………………………………59
\n SECTION 9.01 Indemnification by Principal Stockholder……………………………….59
\n SECTION 9.02 Indemnification by Parent…………………………………………….59
\n SECTION 9.03 Survival……………………………………………………………60
\n SECTION 9.04 Limitations…………………………………………………………60
\n SECTION 9.05 Delivery of Notice…………………………………………………..61<\/p>\n
iii<\/p>\n
ARTICLE X TERMINATION, AMENDMENT AND WAIVER…………………………………………………………….62
\n SECTION 10.01 Termination…………………………………………………………62
\n SECTION 10.02 Effect of Termination………………………………………………..62
\n SECTION 10.03 Amendment…………………………………………………………..63
\n SECTION 10.04 Waiver……………………………………………………………..63
\n SECTION 10.05 Termination Fee; Expenses…………………………………………….63<\/p>\n
ARTICLE XI GENERAL PROVISIONS…………………………………………………………………………64
\n SECTION 11.01 Notices…………………………………………………………….64
\n SECTION 11.02 Severability………………………………………………………..65
\n SECTION 11.03 Assignment; Binding Effect; Benefit……………………………………65
\n SECTION 11.04 Incorporation of Exhibits…………………………………………….65
\n SECTION 11.05 Governing Law……………………………………………………….66
\n SECTION 11.06 Jurisdiction; Waiver of Jury Trial…………………………………….66
\n SECTION 11.07 Headings; Interpretation……………………………………………..66
\n SECTION 11.08 Counterparts………………………………………………………..66
\n SECTION 11.09 Entire Agreement…………………………………………………….67
\n SECTION 11.10 Swiss Accounting…………………………………………………….67
\n<\/c><\/s><\/caption>\n<\/table>\n
SCHEDULES<\/p>\n
Schedule I Officers of the Surviving Corporation
\nSchedule II Directors of the Surviving Corporation
\nSchedule III Directors of Parent<\/p>\n
ANNEXES<\/p>\n
ANNEX A Form of Lock-Up Agreement
\nANNEX B Form of First Note
\nANNEX C Form of Second Note and Third Note
\nANNEX D Form of Parent Guarantee
\nANNEX E Description of Company Restructuring<\/p>\n
iv<\/p>\n
AGREEMENT AND PLAN OF MERGER<\/p>\n
AGREEMENT AND PLAN OF MERGER, dated as of October 30, 2001 (as
\namended, supplemented or otherwise modified from time to time, this
\n“AGREEMENT”), among 24\/7 MEDIA, INC., a Delaware corporation (“PARENT”), REAL
\nMEDIA, INC., a Delaware corporation (“COMPANY”), PUBLIGROUPE USA HOLDING, INC.,
\na Delaware corporation (“PRINCIPAL STOCKHOLDER”) and CONTINUUM HOLDING CORP., a
\nDelaware corporation and an indirect wholly owned subsidiary of Parent (“MERGER
\nSUB”).<\/p>\n
W I T N E S S E T H:<\/p>\n
WHEREAS, the boards of directors of Parent and Company have
\ndetermined that it is advisable and in the best interests of their respective
\ncompanies and stockholders to enter into a business combination by means of the
\nmerger of Merger Sub with and into Company (the “MERGER”) and have approved and
\nadopted this Agreement; and<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the
\nrepresentations, warranties, covenants and agreements set forth herein, and
\nother good and valuable consideration, the receipt and adequacy of which are
\nhereby acknowledged, and intending to be legally bound hereby, the parties
\nhereto hereby agree as follows:<\/p>\n
ARTICLE I<\/p>\n
DEFINITIONS<\/p>\n
SECTION 1.01 CERTAIN DEFINED TERMS. Unless the context
\notherwise requires, the following terms, when used in this Agreement, shall have
\nthe respective meanings specified below (such meanings to be equally applicable
\nto the singular and plural forms of the terms defined):<\/p>\n
“AFFILIATE” shall mean, with respect to any Person, any other
\nPerson that controls, is controlled by or is under common control with the first
\nPerson.<\/p>\n
“AGGREGATE PARENT DISTRIBUTABLE SHARE NUMBER” shall mean
\n8,216,868, which constitutes the number of shares of Parent Common Stock equal
\nto 19.9% of the aggregate of the total number of shares of Parent Common Stock
\nissued and outstanding immediately prior to the Effective Time.<\/p>\n
“ASSUMED OPTIONS” shall have the meaning set forth in Section
\n3.05(a).<\/p>\n
“BLUE SKY LAWS” shall mean United States state securities or
\n“blue sky” laws.<\/p>\n
“BUSINESS” shall mean solely the online advertising
\ntechnology, representation, email and promotions businesses of the Company;
\nPROVIDED, HOWEVER, that this shall not include <\/p>\n
(i) any off-line or non-technology business or operations of the Company or any
\nof its affiliates, (ii) the PPN PrintPlus-business (defined as advertising
\npackages off\/online of represented media) or (iii) any of the Company’s business
\nconducted in Switzerland.<\/p>\n
“BUSINESS DAY” shall mean any day on which the principal
\noffices of the SEC in Washington, D.C. are open to accept filings, or, in the
\ncase of determining a date when any payment is due, any day on which banks are
\nnot required or authorized by law or executive order to close in the City of New
\nYork.<\/p>\n
“CERTIFICATE OF MERGER” shall have the meaning set forth in
\nSection 2.03.<\/p>\n
“CHAIN SUBSIDIARIES” shall have the meaning set forth in
\nSection 5.01.<\/p>\n
“CHARTER AMENDMENT” shall mean the Certificate of Amendment to
\nthe Certificate of Incorporation of Company effecting a one-for-2000 reverse
\nstock split.<\/p>\n
“CLOSING” shall have the meaning set forth in Section 2.02.<\/p>\n
“COBRA” shall have the meaning set forth in Section 4.09(g).<\/p>\n
“COMMON DISSENTING SHARES” shall have the meaning set forth in
\nSection 3.01(a).<\/p>\n
“COMPANY AGGREGATE SHARE NUMBER” shall mean the total number
\nof shares of Company Series A Preferred Stock (on an as-converted basis),
\nCompany Series B Preferred Stock (on an as-converted basis) and Company Common
\nStock issued and outstanding immediately prior to the Effective Time.<\/p>\n
“COMPANY AUDITED FINANCIAL STATEMENTS” shall have the meaning
\nset forth in Section 4.07(a).<\/p>\n
“COMPANY BALANCE SHEET” shall have the meaning set forth in
\nSection 4.07(b).<\/p>\n
“COMPANY BENEFIT PLANS” shall have the meaning set forth in
\nSection 4.09(a).<\/p>\n
“COMPANY CAPITAL STOCK” shall mean the Company Common Stock
\nand the Company Preferred Stock.<\/p>\n
“COMPANY CERTIFICATES” shall have the meaning set forth in
\nSection 3.02(b).<\/p>\n
“COMPANY COMMON STOCK” shall mean the common stock, par value
\n$.01 per share, of Company.<\/p>\n
“COMPANY CONFIDENTIAL INFORMATION” shall have the meaning set
\nforth in Section 4.13(f).<\/p>\n
“COMPANY DISCLOSURE SCHEDULE” shall mean the disclosure
\nschedule delivered by Company to Parent prior to the execution of this Agreement
\nand forming a part hereof.<\/p>\n
2<\/p>\n
“COMPANY ERISA AFFILIATE” shall have the meaning set forth in
\nSection 4.09(a).<\/p>\n
“COMPANY FINANCIAL STATEMENTS” shall have the meaning set
\nforth in Section 4.07(a).<\/p>\n
“COMPANY INTELLECTUAL PROPERTY” shall mean all Intellectual
\nProperty that is currently used in the Business other than Intellectual Property
\nthat is widely disseminated by a third party owner by way of a non-exclusive
\nlicense (for example, commonly used operating system software).<\/p>\n
“COMPANY LOSS SUBGROUP” shall have the meaning set forth in
\nSection 6.13.<\/p>\n
“COMPANY MATERIAL ADVERSE EFFECT” shall mean any change in or
\neffect on the business of Company or the Company Subsidiaries that, individually
\nor in the aggregate (taking into account all other such changes or effects), is,
\nor is reasonably likely to be, materially adverse to the business, assets,
\nliabilities, financial condition or results of operations of Company and the
\nCompany Subsidiaries, taken as a whole; PROVIDED, HOWEVER, that neither (x) any
\nsuch effect resulting from a change in economic or financial market conditions
\ngenerally, (y) any continuing net loss incurred by Company, substantially
\nconsistent with Company’s recent past experience nor (z) any act of God, natural
\ndisaster, civil commotion, act of terrorism, war or similar event beyond
\nCompany’s reasonable control, shall be deemed, in and of itself, to constitute a
\nCompany Material Adverse Effect.<\/p>\n
“COMPANY MATERIAL CONTRACTS” shall have the meaning set forth
\nin Section 4.10.<\/p>\n
“COMPANY OPTION PLAN” shall have the meaning set forth in
\nSection 8.03(h).<\/p>\n
“COMPANY PERMITS” shall have the meaning set forth in Section
\n4.06.<\/p>\n
“COMPANY SERIES A PREFERRED STOCK” shall mean the Series A
\nConvertible Preferred Stock, par value $.001 per share, of Company.<\/p>\n
“COMPANY SERIES B PREFERRED STOCK” shall mean the Series B
\nPreferred Stock, par value $.001 per share, of Company.<\/p>\n
“COMPANY RESTRUCTURING” shall mean the restructuring of
\nCompany as described on ANNEX E.<\/p>\n
“COMPANY SUBSIDIARIES” shall mean each of Company’s directly
\nor indirectly owned Subsidiaries.<\/p>\n
“COMPANY TERMINATION FEE” shall have the meaning set forth in
\nSection 10.05(b).<\/p>\n
“COMPETING TRANSACTION” shall mean any of the following
\ninvolving Company or Parent, as the case may be (other than the Merger):<\/p>\n
3<\/p>\n
(a) any merger, consolidation, share exchange, business
\n combination or other similar transaction;<\/p>\n
(b) any sale, lease, exchange, transfer or other disposition
\n of 20% or more of the assets of such party and its Subsidiaries, taken
\n as a whole, in a single transaction or series of related transactions;<\/p>\n
(c) any tender offer or exchange offer for 20% or more of the
\n outstanding voting securities of such party or the filing of a
\n registration statement under the Securities Act in connection
\n therewith;<\/p>\n
(d) any Person having acquired beneficial ownership or the
\n right to acquire beneficial ownership of, or any “group” (as such term
\n is defined under Section 13(d) of the Exchange Act) having been formed
\n which beneficially owns or has the right to acquire beneficial
\n ownership of, 20% or more of the outstanding voting securities of such
\n party;<\/p>\n
(e) any solicitation in opposition to the approval of this
\n Agreement by the stockholders of such party; or<\/p>\n
(f) any agreement to engage in any of the foregoing.<\/p>\n
“COMPANY UNAUDITED FINANCIAL STATEMENTS” shall have the
\nmeaning set forth in Section 4.07(a).<\/p>\n
“CONFIDENTIAL MEMORANDUM” shall mean the Confidential Offering
\nMemorandum of Parent dated October 30, 2001.<\/p>\n
“CONFIDENTIALITY AGREEMENT” shall mean the Confidentiality
\nAgreement dated October 9, 2001 between Parent and Company.<\/p>\n
“DELAWARE LAW” shall mean the General Corporation Law of the
\nState of Delaware.<\/p>\n
“DISSENTING SHARES” shall have the meaning set forth in
\nSection 3.01(c).<\/p>\n
“$” shall mean United States Dollars.<\/p>\n
“EFFECTIVE TIME” shall have the meaning set forth in Section
\n2.03.<\/p>\n
“ENCUMBRANCES” shall mean any claims, security interests,
\nliens, pledges, charges, escrows, options, proxies, rights of first refusal,
\npreemptive rights, mortgages, hypothecations, prior assignments, title retention
\nagreements, indentures, security agreements or any other encumbrance of any
\nkind.<\/p>\n
“ENVIRONMENTAL LAW” shall mean any Law and any enforceable
\njudicial or administrative interpretation thereof, including any judicial or
\nadministrative order, consent <\/p>\n
4<\/p>\n
decree or judgment, relating to pollution or protection of the environment or
\nnatural resources, including, without limitation, those relating to the use,
\nhandling, transportation, treatment, storage, disposal, release or discharge of
\nHazardous Material.<\/p>\n
“ENVIRONMENTAL PERMIT” shall mean any permit, approval,
\nidentification number, license or other authorization required under or issued
\npursuant to any applicable Environmental Law.<\/p>\n
“ERISA” shall mean the Employee Retirement Income Security Act
\nof 1974, as amended.<\/p>\n
“ESCROW AGENT” shall have the meaning set forth in Section
\n6.11.<\/p>\n
“ESCROW AGREEMENT” shall have the meaning set forth in Section
\n6.11.<\/p>\n
“ESCROW MATERIALS” shall have the meaning set forth in Section
\n6.11.<\/p>\n
“EXCHANGE ACT” shall mean the Securities Exchange Act of 1934,
\nas amended, together with the rules and regulations promulgated thereunder.<\/p>\n
“EXCHANGE RATIO” shall have the meaning set forth in Section
\n3.01(a).<\/p>\n
“EXPENSES” shall mean, with respect to any party hereto, all
\nreasonable out-of-pocket expenses (including, without limitation, all fees and
\nexpenses of counsel, accountants, investment bankers, financial advisors,
\nexperts and consultants to a party hereto and its affiliates) incurred by such
\nparty or on its behalf in connection with or related to the authorization,
\npreparation, negotiation, execution or performance of its obligations pursuant
\nto this Agreement or the consummation of the Merger, obtaining relevant
\napprovals from any Governmental Entity, and all other matters related to the
\ntransactions contemplated hereby and the closing of the Merger.<\/p>\n
“FINAL AVERAGE CLOSING PRICE” shall mean the average closing
\nprice of a share of Parent Common Stock on the NNM (or, if applicable, the
\nNasdaq Smallcap Market or such other exchange on which the Parent Common Stock
\nmay then be traded) for the ten (10) trading days ending three (3) Business Days
\nprior to the date of the Closing or, if the Parent Common Stock is then traded
\nover-the-counter, the average closing bid or sale price (whichever is
\napplicable) of a share of Parent Common Stock for the ten (10) trading days
\nending three (3) Business Days prior to the date of the Closing.<\/p>\n
“FIRST NOTE” shall mean that certain unsecured promissory note
\nin the principal amount of $4,500,000 issued on the date hereof by Company in
\nfavor of Principal Stockholder in the form of ANNEX B attached hereto and
\nguaranteed by Parent pursuant to the Parent Guarantee.<\/p>\n
“FOREIGN PLAN” shall mean any Company Benefit Plan that covers
\nformer or current employees of Company or any Company Subsidiary who are
\nemployed outside of the United States (or any beneficiary thereof) or that is
\nnot subject to the laws of the United States.<\/p>\n
5<\/p>\n
“FRACTIONAL SHARE PAYOUT” shall have the meaning set forth in
\nSection 6.12.<\/p>\n
“GOVERNMENTAL ENTITY” shall mean any United States federal,
\nstate, local or foreign governmental, regulatory or administrative authority,
\nagency or commission or any court, tribunal or arbitral body.<\/p>\n
“GOVERNMENTAL ORDER” shall mean any order, writ, judgment,
\ninjunction, decree, stipulation, determination or award entered by or with any
\nGovernmental Entity.<\/p>\n
“HAZARDOUS MATERIAL” shall mean (i) any petroleum, petroleum
\nproducts, by-products or breakdown products, radioactive materials, friable
\nasbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
\nmaterial or substance defined or regulated as toxic or hazardous or as a
\npollutant or contaminant or waste under any applicable Environmental Law.<\/p>\n
“HSR ACT” shall mean Hart-Scott-Rodino Antitrust Improvements
\nAct of 1976, as amended, together with the rules and regulations promulgated
\nthereunder.<\/p>\n
“INDEBTEDNESS” shall mean, with respect to any Person:<\/p>\n
(a) all obligations of such Person for borrowed
\nmoney, or with respect to deposits or advances of any kind, including accrued
\ninterest;<\/p>\n
(b) all obligations of such Person evidenced by
\nbonds, debentures, notes or similar instruments;<\/p>\n
(c) all obligations of such Person issued or assumed
\nas the deferred purchase price of property or services;<\/p>\n
(d) all capitalized lease obligations of such Person;<\/p>\n
(e) all guarantees of such Person of any of the
\nforegoing of any other Person; and<\/p>\n
(f) all obligations (including reimbursement
\nobligations) relating to the issuance of letters of credit for the account of
\nsuch Person.<\/p>\n
“INTELLECTUAL PROPERTY” shall mean all United States, foreign
\nand international patents; trademarks, service marks and trade names (including
\nwithout limitation all goodwill pertaining thereto), designs, trade dress and
\nInternet domain names; copyrights; sui generis database rights; ideas,
\ninventions, technology, know-how, show-how, trade secrets, systems, processes,
\nworks of authorship, databases, mask works, content, graphics, statistical
\nmodels, algorithms, modules, computer programs, computer software, source and
\nobject code of such software, technical documentation, business methods, work
\nproduct, intellectual and industrial property licenses, and all other tangible
\nor intangible information or materials.<\/p>\n
“IRS” shall mean the United States Internal Revenue Service.<\/p>\n
6<\/p>\n
“KNOWLEDGE OF COMPANY” shall mean that any of Norman M.
\nBlashka, Silvana Imperiali, Jonathan Hsu, Jason Wang or any director of Company
\nis actually aware of a fact or other matter, or should have been aware of a fact
\nor other matter based upon reasonable inquiry and investigation.<\/p>\n
“KNOWLEDGE OF PARENT” shall mean that any of David J. Moore,
\nMark E. Moran, Ken Leidner, Anthony Plesner, William Tifft or Stuart D. Shaw or
\nany director of Parent is actually aware of a fact or other matter, or should
\nhave been aware of a fact or other matter based upon reasonable inquiry and
\ninvestigation.<\/p>\n
“LAW” shall mean any federal, state, foreign or local statute,
\nlaw, ordinance, regulation, rule, code, order, judgment, decree, other
\nrequirement or rule of law of the United States or any other jurisdiction, and
\nany other similar act or law.<\/p>\n
“LOCK-UP AGREEMENT” shall mean that certain Lock-Up and
\nStandstill Agreement between Principal Stockholder and Parent in the form of
\nANNEX A attached hereto.<\/p>\n
“LOSSES” shall have the meaning set forth in Section 9.01.<\/p>\n
“NNM” shall mean The Nasdaq National Market.<\/p>\n
“NOTIFICATION FORM FOR LISTING OF ADDITIONAL SHARES” shall
\nmean the Notification Form: Listing of Additional Shares required by NNM for a
\nlisted company in connection with, INTER ALIA, a transaction with the listed
\ncompany that may result in the potential issuance of common stock (or securities
\nconvertible into common stock) greater than 10% of either the total shares
\noutstanding or the voting power outstanding on a pre-transaction basis.<\/p>\n
“PARENT BALANCE SHEET” shall have the meaning set forth in
\nSection 5.07(c).<\/p>\n
“PARENT BENEFIT PLANS” shall have the meaning set forth in
\nSection 5.09(a).<\/p>\n
“PARENT CERTIFICATES” shall have the meaning set forth in
\nSection 3.02(a).<\/p>\n
“PARENT COMMON STOCK” shall mean the common stock, par value
\n$.01 per share, of Parent.<\/p>\n
“PARENT CONFIDENTIAL INFORMATION” shall have the meaning set
\nforth in Section 5.13(f).<\/p>\n
“PARENT DISCLOSURE SCHEDULE” shall mean the disclosure
\nschedule delivered by Parent to Company prior to the execution of this Agreement
\nand forming a part hereof.<\/p>\n
“PARENT ERISA AFFILIATE” shall have the meaning set forth in
\nSection 5.09(a).<\/p>\n
“PARENT GUARANTEE” shall mean that certain guarantee issued on
\nthe date hereof by Parent guaranteeing the obligations of Company under the
\nFirst Note in the form of ANNEX D attached hereto.<\/p>\n
7<\/p>\n
“PARENT INTELLECTUAL PROPERTY” shall mean all Intellectual
\nProperty that is currently used in Parent’s business or the business of any
\nParent Subsidiary other than Intellectual Property that is widely disseminated
\nby a third party owner by way of a non-exclusive license (for example, commonly
\nused operating system software).<\/p>\n
“PARENT MATERIAL ADVERSE EFFECT” shall mean any change in or
\neffect on the business of Parent or the Parent Subsidiaries that, individually
\nor in the aggregate (taking into account all other such changes or effects), is,
\nor is reasonably likely to be, materially adverse to the business, assets,
\nliabilities, financial condition or results of operations of Parent and the
\nParent Subsidiaries, taken as a whole; PROVIDED, HOWEVER, that neither (x) any
\nsuch effect resulting from a change in economic or financial market conditions
\ngenerally, (y) any continuing net loss incurred by Parent, substantially
\nconsistent with Parent’s recent past experience nor (z) any act of God, natural
\ndisaster, civil commotion, act of terrorism, war or similar event beyond
\nParent’s reasonable control, shall be deemed, in and of itself, to constitute a
\nParent Material Adverse Effect.<\/p>\n
“PARENT MATERIAL CONTRACTS” shall have the meaning set forth
\nin Section 5.10.<\/p>\n
“PARENT PERMITS” shall have the meaning set forth in Section
\n5.06.<\/p>\n
“PARENT REPORTS” shall have the meaning set forth in Section
\n5.07(a).<\/p>\n
“PARENT STOCK OPTIONS” shall have the meaning set forth in
\nSection 5.03(a).<\/p>\n
“PARENT STOCK PLAN” shall mean Parent’s Stock Option Plan.<\/p>\n
“PARENT SUBSIDIARIES” shall mean each of Parent’s directly or
\nindirectly owned Subsidiaries.<\/p>\n
“PARENT TERMINATION FEE” shall have the meaning set forth in
\nSection 10.05(c).<\/p>\n
“PARENT WARRANT” shall mean a warrant to purchase shares of
\nParent Common Stock.<\/p>\n
“PERMITTED ENCUMBRANCES” shall mean (i) liens for Taxes,
\nassessments and other governmental charges not yet due and payable, (ii)
\nimmaterial unfiled mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’
\nor other like liens arising or incurred in the ordinary course of business which
\nare not yet due and payable and (iii) equipment leases with third parties
\nentered into in the ordinary course of business.<\/p>\n
“PERSON” shall mean an individual, corporation, partnership,
\nlimited partnership, limited liability company, syndicate, person (including,
\nwithout limitation, a “person” as defined in Section 13(d)(3) of the Exchange
\nAct), trust, association, entity or government or political subdivision, agency
\nor instrumentality of a government.<\/p>\n
“PRE-SPLIT COMPANY COMMON STOCK” shall have the meaning set
\nforth in Section 6.12.<\/p>\n
8<\/p>\n
“REPRESENTATIVES” shall have the meaning set forth in Section
\n6.04(a).<\/p>\n
“REVERSE SPLIT” shall have the meaning set forth in Section
\n6.12.<\/p>\n
“SEC” shall mean the United States Securities and Exchange
\nCommission.<\/p>\n
“SECOND NOTE” shall mean that certain unsecured promissory
\nnote in the principal amount of $1,500,000 to be issued by Parent to Principal
\nStockholder in the form of ANNEX C attached hereto.<\/p>\n
“SECURITIES ACT” shall mean the Securities Act of 1933, as
\namended, together with the rules and regulations promulgated thereunder.<\/p>\n
“SERIES A PREFERRED DISSENTING SHARES” shall have the meaning
\nset forth in Section 3.01(b).<\/p>\n
“SERIES B PREFERRED DISSENTING SHARES” shall have the meaning
\nset forth in Section 3.01(c).<\/p>\n
“SUBSIDIARY” shall mean, with respect to any Person, any
\ncorporation, limited liability company, partnership, joint venture or other
\nlegal entity of which such Person (either alone or through or together with any
\nother subsidiary of such Person) owns, directly or indirectly, a majority of the
\nstock or other equity interests, the holders of which are generally entitled to
\nvote for the election of the board of directors or other governing body of such
\ncorporation or other legal entity.<\/p>\n
“SURVIVING CORPORATION” shall have the meaning set forth in
\nSection 2.01.<\/p>\n
“TAX” shall mean (i) any and all taxes, fees, levies, duties,
\ntariffs, imposts, assessments and other charges of any kind (together with any
\nand all interest, penalties, additions to tax and additional amounts imposed
\nwith respect thereto) imposed by any Governmental Entity or other taxing
\nauthority (each, a “TAXING AUTHORITY”), including, without limitation, taxes or
\nother charges on or with respect to income, franchises, windfall or other
\nprofits, gross or net receipts, property, sales, use, capital stock, payroll,
\nemployment, social security, workers’ compensation, unemployment compensation or
\nnet worth; taxes or other charges in the nature of excise, withholding, ad
\nvalorem, stamp, transfer, franchise, business, value-added or gains taxes;
\nlicense, registration and documentation fees; and customs duties, tariffs and
\nsimilar charges; (ii) any liability for the payment of any amounts of the type
\ndescribed in (i) as a result of being a member of an affiliated, combined,
\nconsolidated or unitary group for any taxable period; and (iii) any liability
\nfor the payment of amounts of the type described in (i) or (ii) as a result of
\nbeing a transferee of, or a successor in interest to, any Person or as a result
\nof an express or implied obligation to indemnify any Person.<\/p>\n
“TAX RETURN” shall mean any return, report, statement, form,
\ndeclaration, notice, notification, election, certificate or other document or
\ninformation (including, without limitation, any estimated tax reports or
\nreturns, withholding tax reports or returns and information reports or <\/p>\n
9<\/p>\n
returns) filed with or submitted to, or required to be filed with or submitted
\nto, any Taxing Authority with respect to any Taxes.<\/p>\n
“TECHNOLOGY TRANSFER AGREEMENT” shall have the meaning set
\nforth in Section 6.11.<\/p>\n
“TERMINATING COMPANY BREACH” shall have the meaning set forth
\nin Section 10.01(d).<\/p>\n
“TERMINATING PARENT BREACH” shall have the meaning set forth
\nin Section 10.01(e).<\/p>\n
“THIRD NOTE” shall mean that certain unsecured promissory note
\nin the principal amount of $1,500,000 to be issued by Parent to Principal
\nStockholder under the conditions described in Section 7.01(b) in the form of
\nANNEX C attached hereto.<\/p>\n
“U.S. GAAP” shall mean United States generally accepted
\naccounting principles.<\/p>\n
ARTICLE II<\/p>\n
THE MERGER<\/p>\n
SECTION 2.01 THE MERGER. Upon the terms and subject to the
\nconditions set forth in this Agreement, and in accordance with Delaware Law, at
\nthe Effective Time (as defined in Section 2.03), Merger Sub shall be merged with
\nand into Company. As a result of the Merger, the separate corporate existence of
\nMerger Sub shall cease and Company shall continue as the surviving corporation
\nof the Merger as a wholly owned Subsidiary of Parent (the “SURVIVING
\nCORPORATION”).<\/p>\n
SECTION 2.02 CLOSING. The closing of the transactions
\ncontemplated by this Agreement (the “CLOSING”) shall be held at the offices of
\nProskauer Rose LLP, 1585 Broadway, New York, New York 10036, on the date hereof,
\nor another time and date to be specified by the parties, which shall be no later
\nthan the second business day after the satisfaction or waiver of the conditions
\nset forth in Article VIII, unless another date, time or place is agreed to by
\nthe parties.<\/p>\n
SECTION 2.03 EFFECTIVE TIME. At the time of the Closing, the
\nparties shall cause the Merger to be consummated by filing a certificate of
\nmerger in such form as is required by the applicable provisions of Delaware law
\n(the “CERTIFICATE OF MERGER”) with the Secretary of State of the State of
\nDelaware, executed in accordance with the relevant provisions of Delaware Law
\n(the date and time of such filing, or such later date and time as may be set
\nforth therein, being the “EFFECTIVE TIME”).<\/p>\n
SECTION 2.04 EFFECT OF THE MERGER. At the Effective Time, the
\neffect of the Merger shall be as provided in the applicable provisions of
\nDelaware Law. Without limiting the generality of the foregoing, and subject
\nthereto, at the Effective Time, except as otherwise <\/p>\n
10<\/p>\n
provided herein, all the property, rights, privileges, powers and franchises of
\nCompany and Merger Sub shall vest in Company as the Surviving Corporation, and
\nall debts, liabilities and duties of Company and Merger Sub shall become the
\ndebts, liabilities and duties of Company as the Surviving Corporation.<\/p>\n
SECTION 2.05 CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS
\nAND OFFICERS OF SURVIVING CORPORATION. Unless otherwise agreed by the parties
\nbefore the Effective Time, at the Effective Time:<\/p>\n
(a) subject to the requirements of Section 7.02, the
\n Certificate of Incorporation and the Bylaws of Merger Sub as in effect
\n immediately prior to the Effective Time shall be the Certificate of
\n Incorporation and the Bylaws of the Surviving Corporation, until
\n thereafter amended as provided by Law and such Certificate of
\n Incorporation or Bylaws;<\/p>\n
(b) the officers of the Surviving Corporation shall be those
\n persons listed on SCHEDULE I hereto, in each case until their
\n successors are elected or appointed and qualified or until their
\n resignation or removal; and<\/p>\n
(c) the directors of the Surviving Corporation shall be those
\n persons listed on SCHEDULE II hereto, in each case until their
\n successors are elected or appointed and qualified or until their
\n resignation or removal.<\/p>\n
ARTICLE III<\/p>\n
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES<\/p>\n
SECTION 3.01 CONVERSION OF SHARES. At the Effective Time, by
\nvirtue of the Merger, and without any action on the part of Parent, Merger Sub,
\nCompany or the holders of any of the following securities:<\/p>\n
(a) Each share of Company Common Stock issued and outstanding
\nimmediately before the Effective Time (excluding fractional shares and shares of
\nCompany Common Stock, if any, held (i) by Persons who have not voted such shares
\nfor approval of the Merger and with respect to which such Persons shall have
\nperfected dissenters’ rights in accordance with Delaware Law (“COMMON DISSENTING
\nSHARES”), (ii) by Parent or any Parent Subsidiary or (iii) in the treasury of
\nCompany) shall be converted into and exchangeable for (subject to the provisions
\nof Section 3.04) that number of shares of Parent Common Stock equal to (1) the
\nAggregate Parent Distributable Share Number divided by (2) the Company Aggregate
\nShare Number (the “EXCHANGE RATIO”).<\/p>\n
(b) Each share of Company Series A Preferred Stock issued and
\noutstanding immediately before the Effective Time (excluding shares of Company
\nSeries A Preferred Stock, if any, held (i) by Persons who have not voted such
\nshares for approval of the Merger and with respect to which such Persons shall
\nhave perfected dissenters’ rights in accordance with Delaware Law (“SERIES A
\nPREFERRED DISSENTING Shares”), (ii) by Parent or any Parent Subsidiary <\/p>\n
11<\/p>\n
or (iii) in the treasury of Company) shall be converted into and exchangeable
\nfor (subject to the provisions of Section 3.04) that number of shares of Parent
\nCommon Stock equal to (1) the number of shares of Company Common Stock into
\nwhich each share of Company Series A Preferred Stock is convertible immediately
\nprior to the Effective Time, multiplied by (2) the Exchange Ratio.<\/p>\n
(c) Each share of Company Series B Preferred Stock issued and
\noutstanding immediately before the Effective Time (excluding shares of Company
\nSeries B Preferred Stock, if any, held (i) by Persons who have not voted such
\nshares for approval of the Merger and with respect to which such Persons shall
\nhave perfected dissenters’ rights in accordance with Delaware Law (“SERIES B
\nPREFERRED DISSENTING SHARES” and, collectively with any Common Dissenting Shares
\nand Series A Preferred Dissenting Shares, “DISSENTING SHARES”), (ii) by Parent
\nor any Parent Subsidiary or (iii) in the treasury of Company) shall be converted
\ninto and exchangeable for (subject to the provisions of Section 3.04) that
\nnumber of shares of Parent Common Stock equal to (1) the number of shares of
\nCompany Common Stock into which each share of Company Series B Preferred Stock
\nis convertible immediately prior to the Effective Time, multiplied by (2) the
\nExchange Ratio.<\/p>\n
(d) Each issued and outstanding share of capital stock of
\nMerger Sub shall be converted into and become one fully paid and nonassessable
\nshare of common stock of the Surviving Corporation. From and after the Effective
\nTime, each outstanding certificate theretofore representing shares of Merger Sub
\ncommon stock shall be deemed for all purposes to evidence ownership of and to
\nrepresent the number of shares of Surviving Corporation common stock into which
\nsuch shares of Merger Sub common stock shall have been converted.<\/p>\n
(e) Each share of Parent Common Stock issued and outstanding
\nimmediately prior to the Effective Time shall remain an issued and outstanding
\nshare of common stock of Parent and shall not be affected by the Merger.<\/p>\n
SECTION 3.02 EXCHANGE OF SHARES OTHER THAN DISSENTING SHARES
\nAND TREASURY SHARES.<\/p>\n
(a) PARENT TO PROVIDE COMMON STOCK. Promptly after the
\nEffective Time, Parent shall make available to the holders of Company Common
\nStock and Company Preferred Stock certificates of shares of Parent Common Stock
\n(“PARENT CERTIFICATES”) representing the number of whole shares of Parent Common
\nStock issuable pursuant to Sections 3.01(a) and 3.01(b) in exchange for shares
\nof Company Common Stock and Company Preferred Stock outstanding immediately
\nprior to the Effective Time.<\/p>\n
(b) EXCHANGE PROCEDURES. Parent shall, promptly (and in any
\nevent within ten (10) Business Days) after the date of the Closing, mail to each
\nholder of record of certificates of Company Common Stock and Company Preferred
\nStock (“COMPANY CERTIFICATES”) whose shares were converted into the right to
\nreceive shares of Parent Common Stock: (i) a form letter of transmittal in form
\nand substance reasonably satisfactory to Company and (ii) instructions for use
\nin effecting the surrender of the Company Certificates in exchange for Parent
\nCertificates. Upon surrender of a Company Certificate for cancellation to Parent
\nor to such other agent or <\/p>\n
12<\/p>\n
agents as may be appointed by Parent, together with such letter of transmittal,
\nduly completed and validly executed, and such other documents as may be
\nreasonably required by Parent, the holder of such Company Certificate shall be
\nentitled to receive in exchange therefor a Parent Certificate representing the
\nnumber of whole shares of Parent Common Stock that such holder has the right to
\nreceive pursuant to this Article III, and the Company Certificate so surrendered
\nshall forthwith be canceled. Until so surrendered, each outstanding Company
\nCertificate that, prior to the Effective Time, represented shares of Company
\nCommon Stock or Company Preferred Stock will be deemed from and after the
\nEffective Time, for all purposes other than the payment of dividends and
\ndistributions, to evidence the ownership of the number of whole shares of Parent
\nCommon Stock into which such shares of Company Common Stock or Company Preferred
\nStock, as the case may be, shall have been so converted.<\/p>\n
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
\ndividends or other distributions with respect to shares of Parent Common Stock
\nwith a record date after the Effective Time will be paid to the holder of any
\nunsurrendered Company Certificate with respect to the shares of Parent Common
\nStock represented thereby until the holder of record of such Company Certificate
\nshall surrender such Company Certificate. Subject to the effect of applicable
\nescheat or similar laws, following surrender of any such Company Certificate,
\nthere shall be paid to the record holder of the Parent Certificates issued in
\nexchange therefor, without interest, at the time of such surrender, the amount
\nof any such dividends or other distributions with a record date after the
\nEffective Time theretofore payable (but for the provisions of this Section
\n3.02(c)) with respect to such shares of Parent Common Stock.<\/p>\n
(d) TRANSFER OF OWNERSHIP. If any Parent Certificate is to be
\nissued in a name other than that in which the Company Certificate surrendered in
\nexchange therefor is registered, it will be a condition of the issuance and\/or
\npayment thereof that the Company Certificate so surrendered will be properly
\nendorsed and otherwise in proper form for transfer and that the Person
\nrequesting such exchange will have paid to Parent or any agent designated by it
\nany transfer or other taxes required by reason of the issuance of a Parent
\nCertificate for shares of Parent Common Stock in any name other than that of the
\nregistered holder of the Company Certificate surrendered, or established to the
\nreasonable satisfaction of Parent or any agent designated by it that such tax
\nhas been paid or is not payable.<\/p>\n
(e) UNDELIVERED PARENT CERTIFICATES. Parent Certificates which
\nhave not been delivered to holders of Company Certificates pursuant to this
\nArticle III within six (6) months after the Effective Time shall promptly be
\npaid or delivered, as appropriate, to Parent, and thereafter holders of Company
\nCertificates who have not theretofore complied with the exchange procedures set
\nforth in and contemplated by this Section 3.02 shall thereafter look only to
\nParent (subject to abandoned property, escheat and similar laws) only as general
\ncreditors thereof for their claim for shares of Parent Common Stock and any
\ndividends or distributions (with a record date after the Effective Time) with
\nrespect to shares of Parent Common Stock to which they are entitled.<\/p>\n
(f) NO LIABILITY. Notwithstanding anything to the contrary in
\nthis Section 3.02, none of Parent, the Surviving Corporation or any party hereto
\nshall be liable to any Person in <\/p>\n
13<\/p>\n
respect of any shares of Parent Common Stock or cash delivered to a public
\nofficial pursuant to any applicable abandoned property, escheat or similar law.<\/p>\n
SECTION 3.03 STOCK TRANSFER BOOKS. As of the Effective Time,
\nthe stock transfer books of Company shall be closed, and there shall be no
\nfurther registration of transfers of shares of Company Common Stock or Company
\nPreferred Stock thereafter on the records of any such stock transfer books. In
\nthe event of a transfer of ownership of shares of Company Common Stock or
\nCompany Preferred Stock that is not registered in the stock transfer records of
\nCompany at the Effective Time, a certificate or certificates representing the
\nnumber of whole shares of Parent Common Stock into which such shares of Company
\nCommon Stock or Company Preferred Stock, as the case may be, shall have been
\nconverted shall be issued to the transferee together with a cash payment in the
\namount of dividends, if any, in accordance with Section 3.02(c) hereof, if the
\ncertificate or certificates representing such shares of Company Common Stock or
\nCompany Preferred Stock, as the case may be, is or are surrendered as provided
\nin Section 3.02(b) hereof, accompanied by all documents required to evidence and
\neffect such transfer and by evidence of payment of any applicable stock transfer
\ntax.<\/p>\n
SECTION 3.04 NO FRACTIONAL SHARE CERTIFICATES. No scrip or
\nfractional share Parent Certificate shall be issued upon the surrender for
\nexchange of Company Certificates, but in lieu thereof, the number of shares of
\nParent Common Stock to be distributed to each holder of Company Preferred Stock
\nor, if applicable, Company Common Stock shall be rounded up to the nearest whole
\nshare.<\/p>\n
SECTION 3.05 CERTAIN ADJUSTMENTS. If between the date of this
\nAgreement and the Effective Time, the outstanding shares of Parent Common Stock,
\nCompany Common Stock or Company Preferred Stock shall be changed into a
\ndifferent number of shares by reason of any reclassification, recapitalization,
\nsplit-up, combination or exchange of shares, or any dividend payable in stock or
\nother securities shall be declared thereon with a record date within such
\nperiod, then the Exchange Ratios shall be adjusted accordingly to provide to
\nParent and the stockholders of Company the same economic effect as contemplated
\nby this Agreement prior to such reclassification, recapitalization, split-up,
\ncombination, exchange or dividend.<\/p>\n
SECTION 3.06 DISSENTERS’ RIGHTS. Any Dissenting Shares shall
\nnot be converted into, or be exchangeable for, the right to receive shares of
\nParent Common Stock but shall instead be converted into the right to receive
\nsuch consideration as may be determined to be due with respect to such
\nDissenting Shares pursuant to Delaware Law unless and until such holder shall
\nhave failed to perfect or shall have effectively withdrawn or lost his right of
\nappraisal and payment, as the case may be. Company shall give Parent prompt
\nnotice of any Dissenting Shares (and shall also give Parent prompt notice of any
\nwithdrawals of such demands for appraisal rights) and Parent shall have the
\nright to direct all negotiations and proceedings with respect to such demands.
\nNeither Company nor the Surviving Corporation shall, except with the prior
\nwritten consent of Parent, voluntarily make any payments with respect to, or
\nsettle or offer to settle, any such demand for appraisal rights. If, after the
\nEffective Time, any Dissenting Shares shall lose their status as Dissenting
\nShares, Parent shall issue and deliver, upon surrender by such stockholder of
\ncertificate or certificates representing shares of Company <\/p>\n
14<\/p>\n
Capital Stock, the number of shares of Parent Common Stock to which such
\nstockholder would otherwise be entitled pursuant to this Article III.<\/p>\n
SECTION 3.07 LOST, STOLEN OR DESTROYED CERTIFICATES. In the
\nevent any Company Certificates shall have been lost, stolen or destroyed, Parent
\nshall issue in exchange for such lost, stolen or destroyed Company Certificates,
\nupon the making of an affidavit of that fact by the holder thereof, such shares
\nof Parent Common Stock as may be required pursuant to Section 3.01; PROVIDED,
\nHOWEVER, that Parent may, in its discretion and as a condition precedent to the
\nissuance thereof, require the owner of such lost, stolen or destroyed Company
\nCertificates to indemnify Parent against any claim that may be made against
\nParent or the Surviving Corporation with respect to the Company Certificates
\nalleged to have been lost, stolen or destroyed.<\/p>\n
SECTION 3.08 TAKING OF NECESSARY ACTION; FURTHER ACTION. If,
\nat any time after the Effective Time, any further action is necessary or
\ndesirable to carry out the purposes of this Agreement and to vest the Surviving
\nCorporation with full right, title and possession to all assets, property,
\nrights, privileges, powers and franchises of Company, the officers and directors
\nof Company are fully authorized in the name of Company or otherwise to take, and
\nwill use good faith efforts to take, all such lawful and necessary action, at
\nParent’s expense, so long as such action is not inconsistent with this
\nAgreement.<\/p>\n
ARTICLE IV<\/p>\n
REPRESENTATIONS AND WARRANTIES OF COMPANY<\/p>\n
Each of Company and Principal Stockholder, jointly and
\nseverally, hereby represents and warrants to Parent and Merger Sub, subject to
\nthe exceptions specifically disclosed in writing in the Company Disclosure
\nSchedule, all such exceptions to be referenced to a specific representation set
\nforth in this Article IV, that:<\/p>\n
SECTION 4.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.<\/p>\n
(a) Each of Company and each Company Subsidiary has been duly
\norganized and is validly existing and in good standing (if such a concept exists
\nin the applicable jurisdiction of organization) under the laws of the
\njurisdiction of its incorporation or organization, as the case may be, and has
\nthe requisite corporate power and authority to own, lease and operate its
\nproperties and to carry on its business as it is now being conducted. Company
\nand each Company Subsidiary is duly qualified or licensed to do business, and is
\nin good standing (if such a concept exists in the applicable jurisdiction of
\norganization), in each jurisdiction where the character of the properties owned,
\nleased or operated by it or the nature of its business makes such qualification
\nor licensing necessary, except for such failures to be so qualified or licensed
\nand in good standing that could not reasonably be expected to have, individually
\nor in the aggregate, a Company Material Adverse Effect.<\/p>\n
(b) SCHEDULE 4.01 of the Company Disclosure Schedule sets
\nforth a true and complete list of each Company Subsidiary, together with the
\njurisdiction of incorporation or <\/p>\n
15<\/p>\n
organization of each Company Subsidiary and the percentage of each Company
\nSubsidiary’s outstanding capital stock or other equity interests owned by
\nCompany or another Company Subsidiary. Except as set forth in SCHEDULE 4.01 of
\nthe Company Disclosure Schedule and except for Company’s ownership of its
\nSubsidiaries, neither Company nor any Company Subsidiary owns, directly or
\nindirectly, an equity interest in any partnership or joint venture arrangement
\nor other business entity that is material to the business, assets, liabilities,
\nfinancial condition or results of operations of Company and the Company
\nSubsidiaries, taken as a whole, or that exceeds 10% of the equity of such
\nentity.<\/p>\n
SECTION 4.02 CERTIFICATE OF INCORPORATION AND BYLAWS. The
\ncopies of Company’s Certificate of Incorporation and bylaws previously provided
\nto Parent by Company are true, complete and correct copies thereof. Such
\nCertificate of Incorporation and bylaws are in full force and effect. Company is
\nnot in violation of any of the provisions of its Certificate of Incorporation or
\nbylaws.<\/p>\n
SECTION 4.03 CAPITALIZATION. The authorized capital stock of
\nCompany consists of 120,000,000 shares of Company Common Stock and 9,000,000
\nshares of Company Preferred Stock. As of the date hereof, before giving effect
\nto the Reverse Split, (i) 95,743,201 shares of Company Common Stock are issued
\nand outstanding, all of which are validly issued, fully paid and nonassessable,
\n(ii) no shares of Company Common Stock are held in the treasury of Company,
\n(iii) no shares of Company Common Stock are held by Company Subsidiaries and
\n(iv) 7,700,000 shares of Company Common Stock are reserved for future issuance
\npursuant to Company Stock Options, Company Warrants and the conversion
\nprovisions of the Company Preferred Stock. The name of each holder of a Company
\nStock Option or Company Warrant and the number of shares of Company Common Stock
\nfor which each Company Stock Option or Company Warrant is exercisable is set
\nforth in SCHEDULE 4.03 of the Company Disclosure Schedule. Except for shares of
\nCompany Common Stock issuable pursuant to the Company Stock Plan and as
\notherwise set forth in SCHEDULE 4.03 of the Company Disclosure Schedule, there
\nare no options, warrants, debt securities or other rights, agreements,
\narrangements or commitments of any character to which Company or any Company
\nSubsidiary is a party or by which Company or any Company Subsidiary is bound
\nrelating to the issued or unissued capital stock of Company or any Company
\nSubsidiary or obligating Company or any Company Subsidiary to issue or sell any
\nshares of capital stock of, or other equity interests in, Company or any Company
\nSubsidiary. All shares of Company Common Stock subject to issuance as aforesaid,
\nupon issuance prior to the Effective Time on the terms and conditions specified
\nin the instruments pursuant to which they are issuable, will be duly authorized,
\nvalidly issued, fully paid and nonassessable. There are no outstanding
\ncontractual obligations of Company or any Company Subsidiary to repurchase,
\nredeem or otherwise acquire any shares of Company Common Stock or Company
\nPreferred Stock or any capital stock of any Company Subsidiary. Each outstanding
\nshare of capital stock of each Company Subsidiary is duly authorized, validly
\nissued, fully paid and nonassessable and each such share owned by Company or
\nanother Company Subsidiary is free and clear of all security interests, liens,
\nclaims, pledges, options, rights of first refusal, agreements, limitations on
\nCompany’s or such other Company Subsidiary’s voting rights, charges and other
\nencumbrances of any nature whatsoever. There are no material outstanding
\ncontractual obligations of Company or any Company Subsidiary to provide funds
\nto, or make any material investment (in the form of a loan, capital contribution
\nor otherwise) in, any <\/p>\n
16<\/p>\n
Company Subsidiary or any other Person. Except as set forth in SCHEDULE 4.03 of
\nthe Company Disclosure Schedule, there are no agreements or trusts or other
\nagreements or understandings to which the Company or any Company Subsidiary is a
\nparty with respect to the voting or disposition of the Company Common Stock or
\nthe Company Preferred Stock, and the Company is not aware of any such agreements
\namong its stockholders. Except as set forth in SCHEDULE 4.03 of the Company
\nDisclosure Schedule, there are no agreements, undertakings or arrangements
\ngranting any Person the right to require Company or any Company Subsidiary to
\nregister or to allow such person to participate in any registration of any
\nsecurities of Company or any Company Subsidiary. The stockholders listed on
\nSCHEDULE 4.03 of the Company Disclosure Schedule constitute all of the
\nstockholders of Company.<\/p>\n
SECTION 4.04 AUTHORITY RELATIVE TO THIS AGREEMENT. Company has
\nall necessary corporate power and authority to execute and deliver this
\nAgreement, to perform its obligations hereunder and to consummate the
\ntransactions contemplated hereby. The execution and delivery of this Agreement
\nby Company and the consummation by Company of the transactions contemplated
\nhereby have been duly and validly authorized by all necessary corporate action
\nand no other corporate proceedings on the part of Company are necessary to
\nauthorize this Agreement or to consummate the transactions contemplated hereby
\n(other than the filing and recordation of the Certificate of Merger as required
\nby Delaware Law). This Agreement has been duly executed and delivered by Company
\nand, assuming the due authorization, execution and delivery by the other parties
\nhereto, constitutes the legal, valid and binding obligation of Company,
\nenforceable against Company in accordance with its terms, except to the extent
\nthat enforceability hereof may be limited by applicable bankruptcy, insolvency,
\nreorganization or other similar laws affecting the enforcement of creditors’
\nrights generally and by principles of equity regarding the availability of
\nremedies.<\/p>\n
SECTION 4.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.<\/p>\n
(a) Assuming that the Certificate of Merger is filed and
\nrecorded as required by Delaware Law, the execution and delivery of this
\nAgreement by Company do not, and the performance by Company of its obligations
\nhereunder, and the consummation of the Merger will not, (i) conflict with or
\nviolate any provision of the Certificate of Incorporation or bylaws of Company
\nor any equivalent organizational documents of any Company Subsidiary, (ii)
\nassuming that all consents, approvals, authorizations and permits described in
\nSection 4.05(b) have been obtained or waived and all filings and notifications
\ndescribed in Section 4.05(b) have been made, conflict with or violate any Law
\napplicable to Company or any Company Subsidiary or by which any property or
\nasset of Company or any Company Subsidiary is bound or affected or (iii)
\nassuming that all consents described in SCHEDULE 4.05 of the Company Disclosure
\nSchedule have been obtained or waived, result in any breach of or constitute a
\ndefault (or an event which with the giving of notice or lapse of time or both
\ncould reasonably be expected to become a default) under, or give to others any
\nright of termination, amendment, acceleration or cancellation of, or result in
\nthe creation of a lien or other encumbrance on any property or asset of Company
\nor any Company Subsidiary pursuant to, any material note, bond, mortgage,
\nindenture, contract, agreement, lease, license, permit, franchise or other
\ninstrument or obligation to which Company or any Company Subsidiary is a party
\nor by which Company or any <\/p>\n
17<\/p>\n
Company Subsidiary or any of their respective assets are bound (other than
\nadvertising sales contracts constituting less than five percent of Company’s
\ntotal revenue).<\/p>\n
(b) The execution and delivery of this Agreement by Company do
\nnot, and the performance by Company of its obligations hereunder and the
\nconsummation of the Merger will not, require any consent, approval,
\nauthorization or permit of, or filing by Company with or notification by Company
\nto, any Governmental Entity, except pursuant to applicable requirements of the
\nSecurities Act, Blue Sky Laws, the premerger notification requirements of the
\nHSR Act, if applicable, and the filing and recordation of the Certificate of
\nMerger as required by Delaware Law.<\/p>\n
SECTION 4.06 PERMITS; COMPLIANCE WITH LAWS. Company and the
\nCompany Subsidiaries are in possession of all franchises, grants,
\nauthorizations, licenses, establishment registrations, product listings,
\npermits, approvals and orders of any Governmental Entity necessary for Company
\nor any Company Subsidiary to own, lease and operate its properties and assets or
\notherwise to carry on its business as it is now being conducted, other than
\nthose, the failure of which to possess, could not reasonably be expected to
\nhave, individually, or in the aggregate, a Company Material Adverse Effect
\n(collectively, the “COMPANY PERMITS”), and none of the Company Permits has been
\nsuspended or cancelled nor is any such suspension or cancellation pending or, to
\nthe Knowledge of Company, threatened in writing. Except as set forth on SCHEDULE
\n4.06 of the Company Disclosure Schedule, neither Company nor any Company
\nSubsidiary is in conflict with, or in default or violation of, (i) any Law
\napplicable to Company or any Company Subsidiary or by which any property or
\nasset of Company or any Company Subsidiary is bound or affected or (ii) any
\nCompany Permits, except for such conflicts, defaults or violations that could
\nnot reasonably be expected to have, individually or in the aggregate, a Company
\nMaterial Adverse Effect. SCHEDULE 4.06 of the Company Disclosure Schedule sets
\nforth all actions, proceedings, investigations or surveys pending or, to the
\nKnowledge of Company, threatened in writing against Company or any Company
\nSubsidiary that could reasonably be expected to result in the suspension or
\ncancellation of any Company Permit. Since January 1, 2000, neither Company nor
\nany Company Subsidiary has received from any Governmental Entity any written
\nnotification with respect to possible conflicts, defaults or violations of Laws.<\/p>\n
SECTION 4.07 FINANCIAL STATEMENTS.<\/p>\n
(a) SCHEDULE 4.07(A) of the Company Disclosure Schedule
\nincludes copies of (i) the draft audited consolidated balance sheet of Company
\nat December 31, 2000, together with the related consolidated statements of
\noperations, stockholders’ equity and cash flows for the year ended December 31,
\n2000 and the notes thereto, together with the draft opinion of Company’s
\nauditors (the “COMPANY AUDITED FINANCIAL STATEMENTS”), and (ii) the unaudited
\nconsolidated balance sheet of Company at September 30, 2001, together with the
\nrelated statements of operations, stockholders’ equity and cash flows for the
\nnine-month period ended September 30, 2001 (the “COMPANY UNAUDITED FINANCIAL
\nSTATEMENTS” and, together with the Company Audited Financial Statements, the
\n“COMPANY FINANCIAL STATEMENTS”). The Company Financial Statements were prepared
\nin accordance with U.S. GAAP (except, in the case of the Company Unaudited
\nFinancial Statements, for the absence of footnotes and subject to normal <\/p>\n
18<\/p>\n
year end adjustments, which adjustments are not material) applied on a
\nconsistent basis throughout the periods indicated (except as may be indicated in
\nthe notes thereto) and each presented fairly the consolidated financial position
\nof Company and the Company Subsidiaries as at the respective dates thereof, and
\ntheir consolidated results of operations, stockholders’ equity and cash flows
\nfor the respective periods indicated therein, except as otherwise noted therein
\n(subject, in the case of the Company Unaudited Financial Statements, to normal
\nand recurring immaterial year-end adjustments).<\/p>\n
(b) Except as and to the extent set forth or reserved against
\non the consolidated balance sheet of Company and the Company Subsidiaries as of
\nSeptember 30, 2001, which is part of the Company Unaudited Financial Statements
\n(the “COMPANY BALANCE SHEET”), or as set forth on SCHEDULE 4.07(B) of the
\nCompany Disclosure Schedule, none of Company or any Company Subsidiary has any
\nliabilities or obligations of any nature (whether accrued, absolute, contingent
\nor otherwise) that would be required to be reflected on a balance sheet or in
\nnotes thereto prepared in accordance with U.S. GAAP, except for (i) liabilities
\nor obligations which do not in the aggregate exceed $250,000 or (ii) liabilities
\nor obligations incurred in the ordinary course of business consistent with past
\npractice since September 30, 2001.<\/p>\n
(c) None of Company or any Company Subsidiary has any
\noutstanding Indebtedness (other than trade payables incurred in the ordinary
\ncourse of business consistent with past practice).<\/p>\n
SECTION 4.08 ABSENCE OF CERTAIN CHANGES OR EVENTS.<\/p>\n
(a) Except as otherwise set forth on SCHEDULE 4.08 of the
\nCompany Disclosure Schedule, since September 30, 2001 and prior to the date
\nhereof, there has not been (i) any event that could reasonably be expected to
\nprevent or materially delay the performance of Company’s obligations pursuant to
\nthis Agreement and the consummation of the Merger by Company, (ii) any material
\nchange by Company or any Company Subsidiary in its accounting methods,
\nprinciples or practices, (iii) any declaration, setting aside or payment of any
\ndividend or distribution in respect of the shares of Company Common Stock or
\nCompany Preferred Stock or any redemption, purchase or other acquisition by
\nCompany of any of Company’s securities, (iv) except in the ordinary course of
\nbusiness consistent with past practice, any increase in the compensation or
\nbenefits or establishment of any bonus, insurance, severance, change in control,
\ndeferred compensation, pension, retirement, profit sharing, stock option
\n(including, without limitation, the granting of stock options, stock
\nappreciation rights, performance awards or restricted stock awards), stock
\npurchase or other employee benefit plan, or any other increase in the
\ncompensation payable or to become payable to any executive officers of Company
\nor any Company Subsidiary, (v) any issuance or sale by Company or any Company
\nSubsidiary of any stock, notes, bonds or other securities other than pursuant to
\nthe exercise of outstanding securities, or entering into any agreement with
\nrespect thereto, (vi) any amendment to Company’s Certificate of Incorporation or
\nbylaws, (vii) other than in the ordinary course of business, any (x) purchase,
\nsale, assignment or transfer of any material assets by Company or any Company
\nSubsidiary, (y) mortgage, pledge or the institution of any lien, encumbrance or
\ncharge on any material assets or properties, tangible or intangible, of Company
\nor any Company Subsidiary, except for liens for Taxes not yet delinquent and
\nsuch other liens, encumbrances or <\/p>\n
19<\/p>\n
charges which do not have, and could not reasonably be expected to have,
\nindividually or in the aggregate, a Company Material Adverse Effect, or (z)
\nwaiver by Company or any Company Subsidiary of any rights of material value or
\ncancellation or any material debts or claims, or (viii) any entering into by
\nCompany or any Company Subsidiary of any transaction of a material nature other
\nthan in the ordinary course of business, consistent with past practices.<\/p>\n
(b) Except as otherwise set forth on SCHEDULE 4.08 of the
\nCompany Disclosure Schedule, since September 30, 2001, Company and the Company
\nSubsidiaries have conducted their businesses only in the ordinary course
\nconsistent with past practice and, since such date, there has not been (i) any
\nCompany Material Adverse Effect, (ii) any incurrence by Company or any Company
\nSubsidiary of any damage, destruction or similar loss, whether or not covered by
\ninsurance, materially affecting the business or properties of Company or any
\nCompany Subsidiary, (iii) any incurrence by Company or any Company Subsidiary of
\nany material liability (absolute or contingent), except for current liabilities
\nand obligations incurred in the ordinary course of business, consistent with
\npast practice, or (iv) to the Knowledge of Company, any impairment, modification
\nor event, or notice of any pending or threatened impairment, modification or
\nevent which could be reasonably expected to result in a loss, impairment, or
\ndiminution in value on a going forward basis of the contractual and business
\nrelationships of Company or any Company Subsidiary with any of its material
\ncustomers, material vendors or material suppliers, other than any impairment,
\nmodification or event which could not reasonably be expected to result in a loss
\nof the relationship of Company or any Company Subsidiary with such customer,
\nvendor or supplier or a loss of a material amount of business or a material
\nchange in profit margins with respect to such customer, vendor or supplier.<\/p>\n
SECTION 4.09 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.<\/p>\n
(a) With respect to each employee benefit fund, plan, program,
\narrangement and contract (including, without limitation, any “employee benefit
\nplan”, as defined in Section 3(3) of ERISA) maintained, sponsored or contributed
\nto or required to be contributed to by Company or any Company Subsidiary or
\nother trade or business (whether or not incorporated) treated as a single
\nemployer with Company (a “COMPANY ERISA AFFILIATE”) pursuant to Code Section
\n414(b), (c), (m) or (o) that covers or covered former or current employees of
\nCompany or any of its Subsidiaries (or any beneficiary thereof), whether
\ndomestic or foreign, or with respect to which Company or any Company ERISA
\nAffiliate could incur liability under Section 4069, 4212(c) or 4204 of ERISA or
\nSection 412 of the Code (the “COMPANY BENEFIT Plans”), other than with respect
\nto the Foreign Plans, Company has delivered or made available to Parent a true,
\ncomplete and correct copy of (i) such Company Benefit Plan and the most recent
\nsummary plan description related to such Company Benefit Plan, if a summary plan
\ndescription is required therefor, (ii) each trust agreement or other funding
\narrangement relating to such Company Benefit Plan, (iii) the most recent annual
\nreport (Form 5500) filed with the IRS with respect to such Company Benefit Plan,
\n(iv) the most recent actuarial report or financial statement relating to such
\nCompany Benefit Plan and (v) the most recent determination letter issued by the
\nIRS with respect to such Company Benefit Plan, if it is intended to be qualified
\nunder Section 401(a) of the Code. None of Company, any Company Subsidiary or any
\nCompany Affiliate has any express or implied commitment, whether legally
\nenforceable or not, to modify, change or <\/p>\n
20<\/p>\n
terminate any Company Benefit Plan, other than with respect to a modification,
\nchange or termination required by ERISA or the Code.<\/p>\n
(b) Each Company Benefit Plan has been administered in all
\nmaterial respects in accordance with its terms and all applicable laws,
\nincluding, without limitation, ERISA and the Code, and all contributions
\nrequired to be made under the terms of any of the Company Benefit Plans as of
\nthe date of this Agreement have been timely made or have been reflected on the
\nmost recent consolidated balance sheet prior to the date of this Agreement. With
\nrespect to the Company Benefit Plans, no event has occurred and, to the
\nKnowledge of Company, there exists no condition or set of circumstances in
\nconnection with which Company, any Company Subsidiary or any Company ERISA
\nAffiliate could reasonably be expected to be subject to any material liability
\n(other than for routine benefit liabilities) under the terms of such Company
\nBenefit Plans, ERISA, the Code or any other applicable Law.<\/p>\n
(c) (i) Each Company Benefit Plan which is intended to be
\nqualified under Section 401(a) of the Code has received a favorable
\ndetermination letter from the IRS as to its qualified status under the Code and
\nas to the exempt status under Section 501(a) of the Code of each trust
\nestablished thereunder or Company has applied or will apply to the IRS for such
\na determination letter prior to the expiration of the requisite period under
\napplicable Treasury Regulations or IRS pronouncements in which to apply for such
\ndetermination letter and to make any amendments necessary to obtain a favorable
\ndetermination, and to the Knowledge of Company, no fact or event has occurred
\nsince the date of such determination letter from the IRS to adversely affect the
\nqualified status of any such Company Benefit Plan or the exempt status of any
\nsuch trust; (ii) to the Knowledge of Company, there has been no prohibited
\ntransaction (within the meaning of Section 406 of ERISA or Section 4975 of the
\nCode) with respect to any Company Benefit Plan; (iii) each Company Benefit Plan
\ncan be amended, terminated or otherwise discontinued after the Effective Time in
\naccordance with its terms, without liability, other than (A) liability for
\nordinary administrative expenses typically incurred in a termination event or
\n(B) if the Company Benefit Plan is a pension benefit plan subject to Part 3 of
\nTitle I of ERISA, liability for the accrued benefits as of the date of such
\ntermination (if and to the extent required by ERISA) to the extent that either
\nthere are sufficient assets set aside in a trust or insurance contract to
\nsatisfy such liability or such liability is reflected on the most recent
\nconsolidated balance sheet prior to the date of this Agreement. No suit,
\nadministrative proceeding, action or other litigation has been brought, or to
\nthe Knowledge of Company is threatened in writing, against or with respect to
\nany such Company Benefit Plan, including any audit or inquiry by the IRS, United
\nStates Department of Labor or other applicable Governmental Entity (other than
\nroutine benefits claims).<\/p>\n
(d) No Company Benefit Plan is a multiemployer pension plan
\n(as defined in Section 3(37) of ERISA) or other pension plan subject to Title IV
\nof ERISA or Section 412 of the Code and none of Company, any Company Subsidiary
\nor any Company ERISA Affiliate has sponsored or contributed to or been required
\nto contribute to a multiemployer pension plan or other pension plan subject to
\nTitle IV of ERISA. No material liability under Title IV of ERISA has been
\nincurred by Company, any Company Subsidiary or any Company ERISA Affiliate that
\nhas not been satisfied in full, and no condition exists that presents a
\nreasonable risk to Company, any Company Subsidiary or any Company ERISA
\nAffiliate of incurring or being subject <\/p>\n
21<\/p>\n
(whether primarily, jointly or secondarily) to a material liability thereunder.
\nNone of the assets of Company or any Company ERISA Affiliate is, or may
\nreasonably be expected to become, the subject of any lien arising under ERISA or
\nSection 412(n) of the Code.<\/p>\n
(e) Company has listed on SCHEDULE 4.09(E) of the Company
\nDisclosure Schedule and has delivered to Parent true, complete and correct
\ncopies of (i) all employment agreements with officers and all consulting
\nagreements of Company and each Company Subsidiary, (ii) all severance plans,
\nagreements, programs and policies of Company and each Company Subsidiary with or
\nrelating to their respective employees, directors or consultants, and (iii) all
\nplans, programs, agreements and other arrangements of Company and each Company
\nSubsidiary with or relating to their respective employees, directors or
\nconsultants which contain “change of control” provisions. Except as set forth in
\nSCHEDULE 4.09(E) of the Company Disclosure Schedule, which discloses the
\nCompany’s estimate of excess parachute payments based on assumptions described
\ntherein, no payment or benefit which will be made by Company or any Company
\nSubsidiary under any Company Benefit Plan or other arrangement will constitute
\nan excess parachute payment under Code Section 280G(b)(1), and the consummation
\nof the transactions contemplated by this Agreement will not individually or in
\nconjunction with any other possible event (including termination of employment)
\n(i) entitle any current or former employee or other service provider of Company
\nor any Company Subsidiary to severance benefits or any other payment,
\ncompensation or benefit (including forgiveness of indebtedness), except as
\nexpressly provided by this Agreement, or (ii) accelerate the time of payment or
\nvesting, or increase the amount of compensation or benefit due any such employee
\nor service provider.<\/p>\n
(f) Except as described in SCHEDULE 4.09(F) of the Company
\nDisclosure Schedule, neither Company nor any Company Subsidiary is a party to
\nany collective bargaining or other labor union contract applicable to Persons
\nemployed by Company or any Company Subsidiary and no collective bargaining
\nagreement is being negotiated by Company or any Company Subsidiary. There is no
\nlabor dispute, strike or work stoppage against Company or any Company Subsidiary
\npending or, to the Knowledge of Company, threatened in writing which may
\ninterfere with the respective business activities of Company or any Company
\nSubsidiary. To the Knowledge of Company, none of Company, any Company
\nSubsidiary, or any of their respective representatives or employees has
\ncommitted any unfair labor practice in connection with the operation of the
\nrespective businesses of Company or any Company Subsidiary, and there is no
\ncharge or complaint against Company or any Company Subsidiary by the National
\nLabor Relations Board or any comparable Governmental Entity pending or
\nthreatened in writing.<\/p>\n
(g) Except as required by Law, no Company Benefit Plan
\nprovides retiree or post-employment medical, disability or life insurance
\nbenefits to any Person. To the Knowledge of Company, Company and the Company
\nERISA Affiliates comply in all material respects with (i) the requirements of
\nthe applicable health care continuation and notice provisions of the
\nConsolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and the
\nregulations (including proposed regulations) thereunder and (ii) the applicable
\nrequirements of the Health Insurance Portability and Accountability Act of 1996
\nand the regulations (including the proposed regulations) thereunder.<\/p>\n
22<\/p>\n
(h) With respect to each Foreign Plan, the fair market value
\nof the assets of each funded Foreign Plan, the liability of each insurer for any
\nForeign Plan funded through insurance or the book reserve established for any
\nForeign Plan, together with any accrued contributions, is sufficient to procure
\nor provide for the accrued benefit obligations, as of the date of this
\nAgreement, with respect to all current and former participants in such Foreign
\nPlan according to actuarial assumptions and valuations most recently used to
\ndetermine employer contributions to such Foreign Plan and no transaction
\ncontemplated by this Agreement shall cause such assets or insurance obligations
\nto be less than such benefit obligations. Each Foreign Plan which is intended to
\noffer tax-favored treatment to its participants under applicable laws has
\nreceived, to the extent applicable, a favorable ruling or letter from the
\napplicable Governmental Entity as to its tax-favored status and to the Knowledge
\nof Company, no fact or event has occurred to adversely affect the tax-favored
\nstatus of such Foreign Plan.<\/p>\n
SECTION 4.10 CONTRACTS. Except for the contracts and
\nagreements described in SCHEDULE 4.10 of the Company Disclosure Schedule
\n(collectively, the “COMPANY MATERIAL CONTRACTS”), neither Company nor the
\nCompany Subsidiaries is a party to or bound by any material contract (it being
\nagreed that to the extent a contract is not listed on SCHEDULE 4.10 because of
\nthe dollar amount or other qualifications set forth in this Section 4.10, such
\ncontract shall not be deemed to be a material contract), including without
\nlimitation, the following contracts (which for purposes of this Agreement shall
\nbe deemed Company Material Contracts):<\/p>\n
(a) any distributor, sales, advertising, agency or
\nmanufacturer’s representative contract that constitutes five percent or more of
\nCompany’s gross revenues or that contains a revenue guarantee;<\/p>\n
(b) any continuing contract for the purchase of materials,
\nsupplies, equipment or services involving in the case of any such contract more
\nthan $50,000 per annum;<\/p>\n
(c) any contract that expires or may be renewed at the option
\nof any Person other than Company so as to expire more than one (1) year after
\nthe date of this Agreement;<\/p>\n
(d) any trust indenture, mortgage, promissory note, loan
\nagreement or other contract for the borrowing of money, any currency exchange,
\ncommodities or other hedging arrangement or any leasing transaction of the type
\nrequired to be capitalized in accordance with U.S. GAAP;<\/p>\n
(e) any contract for capital expenditures in excess of $50,000
\nin the aggregate;<\/p>\n
(f) any contract limiting the freedom of Company or any
\nCompany Subsidiary to engage in any line of business or to compete with any
\nother Person, or any confidentiality, secrecy or non-disclosure contract;<\/p>\n
(g) any contract pursuant to which Company or any Company
\nSubsidiary is a lessor or lessee of any machinery, equipment, motor vehicles,
\noffice furniture, fixtures or other personal property involving in the case of
\nany such contract more than $50,000 per annum;<\/p>\n
23<\/p>\n
(h) any contract with any Person with whom Company or any
\nCompany Subsidiary does not deal at arm’s length within the meaning of the Code;<\/p>\n
(i) any agreement of guarantee, support, indemnification,
\nassumption or endorsement of, or any similar commitment by Company or any
\nCompany Subsidiary with respect to, the obligations, liabilities (whether
\naccrued, absolute, contingent or otherwise) or indebtedness of any other Person;
\nor<\/p>\n
(j) any agreement relating to the acquisition or disposition
\nby Company or any Company Subsidiary of a business, line of business or material
\namount of assets.<\/p>\n
Company and\/or each Company Subsidiary, as applicable, has
\nperformed all of the material obligations required to be performed by it and is
\nentitled to all benefits under, and to the Knowledge of Company, is not alleged
\nto be in default in respect of, any Company Material Contract. Each of the
\nCompany Material Contracts is in full force and effect, unamended, and there
\nexists no material default or event of default or event, occurrence, condition
\nor act, with respect to Company or any Company Subsidiary or to the Knowledge of
\nCompany with respect to the other contracting party, which, with the giving of
\nnotice, the lapse of the time or the happening of any other event or conditions,
\nwould become a material default or event of default under any Company Material
\nContract. True, correct and complete copies of all Company Material Contracts
\nhave been delivered or made available to Parent.<\/p>\n
SECTION 4.11 LITIGATION. Except as set forth on SCHEDULE 4.11
\nof the Company Disclosure Schedule, there is no suit, claim, action, proceeding
\nor investigation pending or, to the Knowledge of Company, threatened in writing
\nagainst Company or any Company Subsidiary that could reasonably be expected to
\nhave, individually or in the aggregate, a Company Material Adverse Effect or
\nmaterially interfere with Company’s ability to consummate the transactions
\ncontemplated herein and, to the Knowledge of Company, there are no existing
\nfacts or circumstances that could reasonably be expected to result in such a
\nsuit, claim, actions, proceeding or investigation. To the Knowledge of Company,
\nthere are no facts or circumstances that could reasonably be expected to result
\nin the denial of insurance coverage under policies issued to Company and Company
\nSubsidiaries in respect of such suits, claims, actions, proceedings and
\ninvestigations, except in any case as could not reasonably be expected to have,
\nindividually or in the aggregate, a Company Material Adverse Effect. Neither
\nCompany nor any Company Subsidiary is subject to any outstanding order, writ,
\ninjunction or decree which could reasonably be expected to have, individually or
\nin the aggregate, a Company Material Adverse Effect or materially interfere with
\nCompany’s ability to consummate the transactions contemplated herein.<\/p>\n
SECTION 4.12 ENVIRONMENTAL MATTERS. Except as could not
\nreasonably be expected to have, individually or in the aggregate, a Company
\nMaterial Adverse Effect, (a) Company and the Company Subsidiaries are in
\ncompliance with all applicable Environmental Laws and all Company Permits
\nrequired by Environmental Laws, (b) all past noncompliance of Company or any
\nCompany Subsidiary with Environmental Laws or Environmental Permits has been
\nresolved without any pending, ongoing or future obligation, cost or liability,
\nand (c) neither Company nor any Company Subsidiary has released, nor to the
\nKnowledge of Company has any <\/p>\n
24<\/p>\n
other Person released, a Hazardous Material at, or transported a Hazardous
\nMaterial to or from, any real property currently or formerly owned, leased or
\noccupied by Company or any Company Subsidiary, in violation of, or under
\ncircumstances that could otherwise result in liability under, any Environmental
\nLaw.<\/p>\n
SECTION 4.13 INTELLECTUAL PROPERTY.<\/p>\n
(a) SCHEDULE 4.13(A) of the Company Disclosure Schedule
\ncontains an accurate and complete list of (i) all patents and patent
\napplications, trademarks, service marks, Internet domain names and applications
\ntherefor, and copyrights and copyright applications, which are part of the
\nCompany Intellectual Property and which have been issued or registered by, or
\nfiled with, any United States, foreign or international governmental or other
\nbody having authority to issue, register or review the same, and (ii) all
\nmaterial software licenses and all other licenses, sublicenses and other
\nagreements to which Company or any Company Subsidiary is a party and pursuant to
\nwhich any third party is authorized by Company or any Company Subsidiary to use
\nany Company Intellectual Property or pursuant to which Company or any Company
\nSubsidiary is granted rights under any third party Intellectual Property, other
\nthan licenses to use “off the shelf” software.<\/p>\n
(b) Except as provided in SCHEDULE 4.13(B) of the Company
\nDisclosure Schedule, the Company Intellectual Property is: (i) owned solely and
\nexclusively by Company or a Company Subsidiary, free and clear of any and all
\nmortgages, pledges, liens, security interests, conditional sale agreements or
\nencumbrances of any kind or (ii) rightfully used or otherwise enjoyed by Company
\nor the Company Subsidiaries pursuant to one or more license agreements, each of
\nwhich license agreements is, to the Knowledge of Company, valid and enforceable.<\/p>\n
(c) Except as set forth on SCHEDULE 4.13(C) of the Company
\nDisclosure Schedule, no action is currently pending which asserts that Company
\nor any Company Subsidiary is, and to the Knowledge of Company, neither Company
\nnor any Company Subsidiary is, infringing on, misappropriating or diluting any
\nIntellectual Property of any Person. Except as set forth on SCHEDULE 4.13(C) of
\nthe Company Disclosure Schedule, neither Company nor any Company Subsidiary has
\nreceived notice from any Person within the past twelve (12) months asserting
\nthat Company or any Company Subsidiary is infringing on, misappropriating or
\ndiluting any Intellectual Property of any such Person. To the Knowledge of
\nCompany, no action is currently pending which asserts that any Person is
\ninfringing on any Company Intellectual Property, and neither Company nor any
\nCompany Subsidiary has asserted any such claims against any Person within the
\npast twelve (12) months.<\/p>\n
(d) Except as set forth on SCHEDULE 4.13(D) of the Company
\nDisclosure Schedule, all patents and patent applications, trademarks, service
\nmarks, Internet domain names and applications therefor, and copyrights and
\ncopyright applications included in the Company Intellectual Property that are
\nowned by Company are being and have been duly maintained, are in full force and
\neffect and have not been cancelled, expired or abandoned.<\/p>\n
(e) Except as set forth on SCHEDULE 4.13(E) of the Company
\nDisclosure Schedule, Company has secured valid written assignments from all
\nconsultants and employees who made <\/p>\n
25<\/p>\n
material contributions to the creation or development of any Company
\nIntellectual Property of the rights to such contributions that Company does not
\nalready own by operation of law, and Company has caused such consultants and
\nemployees to comply with the minimum requirements for inventorship of patents
\nand authorship of copyrights applicable under the federal laws of the United
\nStates.<\/p>\n
(f) Company has taken all reasonably necessary and appropriate
\nsteps to protect and preserve the confidentiality of all Company Intellectual
\nProperty not otherwise protected by patents, patent applications or copyright
\n(“COMPANY CONFIDENTIAL INFORMATION”). All use, disclosure or appropriation of
\nCompany Confidential Information owned by Company by or to a third party has
\nbeen pursuant to the terms of a written agreement between Company and such third
\nparty. All use, disclosure or appropriation by Company of Company Confidential
\nInformation not owned by Company has been pursuant to the terms of a written
\nagreement between Company and the owner of such Company Confidential
\nInformation, or is otherwise lawful.<\/p>\n
SECTION 4.14 TAXES.<\/p>\n
(a) Company and each of the Company Subsidiaries, and any
\nconsolidated, combined, unitary or aggregate group for Tax purposes of which
\nCompany or any Company Subsidiary is or has been a member, have properly
\ncompleted and timely filed all Tax Returns required to be filed by them (or have
\ntimely filed requests for extensions of the filing dates and have met all
\nsubsequent filing deadlines with respect to such proceedings) and have paid all
\nTaxes shown thereon to be due. All Tax Returns filed by Company and each of the
\nCompany Subsidiaries are true, correct and complete in all material respects
\n(without limitation, indications of asset basis, asset class, and amount (if
\nany) of net operating losses shall be deemed not to be “material”). Neither
\nCompany nor any Company Subsidiary has any liability for unpaid Taxes (whether
\nor not shown to be due on any Tax Return) which has not been accrued for or
\nreserved on the Company Balance Sheet in accordance with U.S. GAAP, whether
\nasserted or unasserted, contingent or otherwise, other than liabilities for
\nunpaid Taxes that have accrued since September 30, 2001 in connection with the
\noperation of the business of Company and each Company Subsidiary consistent with
\npast practice.<\/p>\n
(b) Except as set forth on SCHEDULE 4.14 of the Company
\nDisclosure Schedule, there is (i) no material claim for Taxes that is a lien
\nagainst the property of Company or any Company Subsidiary or is being asserted
\nagainst Company or any Company Subsidiary other than liens for Taxes not yet due
\nand payable, (ii) no audit of any Tax Return of Company or any Company
\nSubsidiary being conducted by a Taxing Authority or, to the Knowledge of
\nCompany, is pending or threatened, (iii) no extension of the statute of
\nlimitations on the assessment of any Taxes granted by Company or any Company
\nSubsidiary and currently in effect, and (iv) no agreement, contract or
\narrangement to which Company or any Company Subsidiary is a party that may
\nresult in the payment of any amount that would not be deductible by reason of
\nSection 280G, Section 404 or Section 162(m) of the Code. There is no contract,
\nagreement, plan or arrangement to which Company or any Company Subsidiary is a
\nparty or by which it is bound to compensate any individual for excise taxes paid
\npursuant to Section 4999 of the Code.<\/p>\n
26<\/p>\n
(c) Company and the Company Subsidiaries have not been and
\nwill not be required to include any material adjustment in taxable income for
\nany Tax period (or portion thereof) pursuant to Section 481 of the Code or any
\ncomparable provision under state or foreign Tax laws as a result of
\ntransactions, events or accounting methods employed prior to the Merger.<\/p>\n
(d) Neither Company nor any Company Subsidiary has filed or
\nwill file any consent to have the provisions of Section 341(f)(2) of the Code
\n(or comparable provisions of any state Tax laws) apply to Company or any Company
\nSubsidiary.<\/p>\n
(e) Neither Company nor any Company Subsidiary is a party to
\nany Tax sharing, Tax indemnity or Tax allocation agreement or arrangement nor
\ndoes Company or any Company Subsidiary have any liability or potential liability
\nto another party under any such agreement.<\/p>\n
(f) Neither Company nor any Company Subsidiary has filed any
\ndisclosures under Section 6662 of the Code or comparable provisions of state,
\nlocal or foreign law to prevent the imposition of penalties with respect to any
\nTax reporting position taken on any Tax Return.<\/p>\n
(g) Neither Company nor any Company Subsidiary has ever been a
\nmember of a consolidated, combined or unitary group of which Principal
\nStockholder was not the ultimate parent corporation or is liable for any Tax
\nimposed on any other Person, except as the result of the application of Treasury
\nRegulation Section 1.1502-6 (or any comparable provision of state, local or
\nforeign law) to the affiliated group of which Principal Stockholder is the
\ncommon parent..<\/p>\n
(h) Company and each Company Subsidiary has in its possession
\nreceipts for any Taxes paid to foreign Tax authorities. Neither Company nor any
\nCompany Subsidiary has ever been a “personal holding company” within the meaning
\nof Section 542 of the Code or a “United Sates real property holding corporation”
\nwithin the meaning of Section 897 of the Code.<\/p>\n
(i) Neither Company nor any Company Subsidiary has constituted
\neither a “distributing corporation” or a “controlled corporation” in a
\ndistribution of stock qualifying for tax-free treatment under Section 355 of the
\nCode (x) in the two years prior to the date of this Agreement or (y) in a
\ndistribution which could otherwise constitute part of a “plan” or “series of
\nrelated transactions” (within the meaning of Section 355(e) of the Code) in
\nconjunction with the Merger.<\/p>\n
(j) Company and each Company Subsidiary are in full compliance
\nwith all terms and conditions of any Tax exemption, Tax holiday or other Tax
\nreduction agreement or order of a territorial or foreign government and the
\nconsummation of the Merger will not have any adverse effect on the continued
\nvalidity and effectiveness of any such Tax exemption, Tax holiday or other Tax
\nreduction agreement or order.<\/p>\n
(k) No claim has ever been made by any Taxing Authority in a
\njurisdiction where Company or any Company Subsidiary does not file Tax Returns
\nthat Company or any Company Subsidiary is or may be subject to taxation by that
\njurisdiction.<\/p>\n
27<\/p>\n
(l) Company and each Company Subsidiary have withheld and paid
\nover all Taxes required to have been withheld and paid over and complied with
\nall material information reporting and backup withholding requirements,
\nincluding maintenance of required records with respect thereto, in connection
\nwith amounts paid or owing to any employee, independent contractor, creditor,
\nstockholder or other third party.<\/p>\n
(m) No items of income attributable to transactions occurring
\non or before the close of the last preceding taxable year of Company or any
\nCompany Subsidiary will be required to be included in taxable income by Company
\nor any Company Subsidiary in a subsequent taxable year by reason of Company or
\nany Company Subsidiary reporting income on the installment sales method of
\naccounting, the cash method of accounting, the completed contract method of
\naccounting or the percentage of completion capitalized cost method of
\naccounting.<\/p>\n
(n) True and complete copies of all Tax Returns filed by
\nCompany and each Company Subsidiary for each of the taxable years ended on or
\nafter December 31, 1997 have been delivered or made available to Parent.<\/p>\n
SECTION 4.15 INSURANCE. Company and each Company Subsidiary is
\npresently insured against such risks as companies engaged in a similar business
\nwould, in accordance with good business practice, customarily be insured. The
\npolicies of fire, theft, liability and other insurance maintained with respect
\nto the assets or businesses of Company and the Company Subsidiaries provide, in
\nthe good faith judgment of the Company’s management, reasonably adequate
\ncoverage against loss. Company has heretofore furnished to Parent a complete and
\ncorrect list of all insurance policies maintained by Company or the Company
\nSubsidiaries as of the date hereof, and has made available to Parent complete
\nand correct copies of all such policies, together with all riders and amendments
\nthereto. All such policies are in full force and effect and all premiums due
\nthereon have been paid to the date hereof. Company and the Company Subsidiaries
\nhave complied in all material respects with the terms of such policies.<\/p>\n
SECTION 4.16 PROPERTIES. Except as set forth on SCHEDULE 4.16
\nof the Company Disclosure Schedule, Company and the Company Subsidiaries have
\ngood and valid title, free and clear of all Encumbrances, except for Permitted
\nEncumbrances, to all their material properties and assets, whether tangible or
\nintangible, real, personal or mixed, reflected in the Company Unaudited
\nFinancial Statements as being owned by Company and the Company Subsidiaries as
\nof the date thereof, other than (i) any properties or assets that have been sold
\nor otherwise disposed of in the ordinary course of business since the date of
\nsuch financial statements, (ii) liens disclosed in the notes to such financial
\nstatements and (iii) liens arising in the ordinary course of business after the
\ndate of such financial statements. All buildings, and all fixtures, equipment
\nand other property and assets that are material to Company’s business on a
\nconsolidated basis, held under leases or sub-leases by Company or any Company
\nSubsidiary are held under valid instruments enforceable in accordance with their
\nrespective terms, subject to applicable laws of bankruptcy, insolvency or
\nsimilar laws relating to creditors’ rights generally and to general principles
\nof equity (whether applied in a proceeding in law or equity). Substantially all
\nof Company’s and the Company Subsidiaries’ equipment in regular use has been
\nreasonably maintained and is in serviceable condition, reasonable wear and tear
\nexcepted.<\/p>\n
28<\/p>\n
SECTION 4.17 BROKERS. Except as set forth on SCHEDULE 4.17 of
\nthe Company Disclosure Schedule, no broker, finder or investment banker is
\nentitled to any brokerage, finder’s or other fee or commission in connection
\nwith the Merger based upon arrangements made by or on behalf of Company.<\/p>\n
SECTION 4.18 BUSINESS ACTIVITY RESTRICTION. Except as set
\nforth on SCHEDULE 4.18 of the Company Disclosure Schedule, neither Company nor
\nany Company Subsidiary has entered into any agreement under which Company or any
\nCompany Subsidiary is restricted from selling, licensing or otherwise
\ndistributing any of its technology or products to, or providing services to,
\ncustomers or potential customers or any class of customers, in any geographic
\narea, during any period of time or in any segment of the market or line of
\nbusiness.<\/p>\n
SECTION 4.19 AFFILIATE TRANSACTIONS. Except as set forth on
\nSCHEDULE 4.19 of the Company Disclosure Schedule, neither Company nor any
\nCompany Subsidiary is a party to any agreement with or has any interest in any
\nproperty (whether real or personal, tangible or intangible) of any of its
\naffiliates, stockholders, employees, officers, directors or any entities
\naffiliated with any such persons or any family members of any such persons, nor
\nare there any agreements or understandings for the provision, directly or
\nindirectly, of services by and between Company and any Company Subsidiary, on
\nthe one hand, and any of its affiliates, stockholders, employees, associates,
\nofficers, directors or any entities affiliated with any such persons or any
\nfamily members of any such persons, on the other hand (other than inter-company
\narrangements between Company and Company Subsidiaries and among Company
\nSubsidiaries and services provided in their capacity as employees, officers and
\ndirectors).<\/p>\n
SECTION 4.20 CERTAIN BUSINESS PRACTICES. Neither Company nor
\nany Company Subsidiary nor any directors, officers, agents or employees of
\nCompany or any Company Subsidiary (in their capacities as such) has (a) used any
\nfunds for unlawful contributions, gifts, entertainment or other unlawful
\nexpenses relating to political activity or (b) made any unlawful payment to
\nforeign or domestic government officials or employees or to foreign or domestic
\npolitical parties or campaigns or violated any provision of the Foreign Corrupt
\nPractices Act of 1977, as amended.<\/p>\n
SECTION 4.21 ACCREDITED INVESTORS. To the Knowledge of
\nCompany, following the filing of the Charter Amendment, no more than 35 of the
\nRolex Stockholders are not “accredited investors” as that term is defined in
\nRule 501 promulgated under the Securities Act.<\/p>\n
SECTION 4.22 CASH POSITIONS. As of the Closing, Company shall
\nhave cash on hand in an amount equal to or exceeding $1,500,000.<\/p>\n
ARTICLE IVA<\/p>\n
REPRESENTATIONS AND WARRANTIES OF PRINCIPAL STOCKHOLDER<\/p>\n
Principal Stockholder hereby represents and warrants to Parent
\nand Merger Sub, with respect to itself and the shares of Company set forth
\nopposite its name on SCHEDULE 4A.03, <\/p>\n
29<\/p>\n
subject to the exemptions specifically disclosed in writing in the Principal
\nStockholder Disclosure Schedule, all such exceptions to be referenced to a
\nspecific representation set forth in this Article IVA, that:<\/p>\n
SECTION 4A.01 ORGANIZATION AND QUALIFICATION. Principal
\nStockholder has been duly organized and is validly existing and in good standing
\nunder the laws of the jurisdiction of its incorporation or organization, as the
\ncase may be, and has the requisite corporate power and authority to own, lease
\nand operate its properties and to carry on its business as it is now being
\nconducted.<\/p>\n
SECTION 4A.02 CERTIFICATE OF INCORPORATION AND BYLAWS.
\nPrincipal Stockholder is not in violation of any of the provisions of its
\nCertificate of Incorporation or bylaws.<\/p>\n
SECTION 4A.03 TITLE TO SHARES. Principal Stockholder
\nrepresents that it owns the number and class and series of shares of Company set
\nforth opposite its name on SCHEDULE 4A.03 of the Principal Stockholder
\nDisclosure Schedule, free and clear of all claims, liens, security interests,
\npledges, charges, encumbrances, stockholders’ agreements and voting trusts.<\/p>\n
SECTION 4A.04 AUTHORITY RELATIVE TO THIS AGREEMENT.<\/p>\n
(a) Principal Stockholder has all necessary corporate power
\nand authority to execute and deliver this Agreement, to perform its obligations
\nhereunder and to consummate the transactions contemplated hereby. The execution
\nand delivery of this Agreement by Principal Stockholder and the consummation by
\nPrincipal Stockholder of the transactions contemplated hereby have been duly and
\nvalidly authorized by all necessary corporate action and no other corporate
\nproceedings on the part of Principal Stockholder are necessary to authorize this
\nAgreement or to consummate the transactions contemplated hereby. This Agreement
\nhas been duly executed and delivered by Principal Stockholder and, assuming the
\ndue authorization, execution and delivery by the other parties hereto,
\nconstitutes the legal, valid and binding obligation of Principal Stockholder,
\nenforceable against Principal Stockholder in accordance with its terms, except
\nto the extent that enforceability hereof may be limited by applicable
\nbankruptcy, insolvency, reorganization or other similar laws affecting the
\nenforcement of creditors’ rights generally and by principles of equity regarding
\nthe availability of remedies.<\/p>\n
(b) Principal Stockholder has all necessary corporate power
\nand authority to execute and deliver the Lock-Up Agreement and to perform its
\nobligations thereunder. The execution and delivery of the Lock-Up Agreement by
\nPrincipal Stockholder have been duly and validly authorized by all necessary
\ncorporate action and no other corporate proceedings on the part of Principal
\nStockholder are necessary to authorize the Lock-Up Agreement. The Lock-Up
\nAgreement has been duly executed and delivered by Principal Stockholder and,
\nassuming the due authorization, execution and delivery by Timex, constitutes the
\nlegal, valid and binding obligation of Principal Stockholder, enforceable
\nagainst Principal Stockholder in accordance with its terms, except to the extent
\nthat enforceability hereof may be limited by applicable <\/p>\n
30<\/p>\n
bankruptcy, insolvency, reorganization or other similar laws affecting the
\nenforcement of creditors’ rights generally and by principles of equity regarding
\nthe availability of remedies.<\/p>\n
SECTION 4A.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
\nAssuming that the Certificate of Merger is filed and recorded as required by
\nDelaware Law, the execution and delivery of this Agreement and the Lock-Up
\nAgreement by Principal Stockholder do not, and the performance by Principal
\nStockholder of its obligations hereunder and thereunder, and the consummation of
\nthe Merger will not, (i) conflict with or violate any provision of the
\nCertificate of Incorporation or bylaws of Principal Stockholder, (ii) conflict
\nwith or violate any Law applicable to Principal Stockholder or by which any
\nproperty or asset of Principal Stockholder is bound or affected or (iii) result
\nin any breach of or constitute a default (or an event which with the giving of
\nnotice or lapse of time or both could reasonably be expected to become a
\ndefault) under, or give to others any right of termination, amendment,
\nacceleration or cancellation of, or result in the creation of a lien or other
\nencumbrance on any property or asset of Principal Stockholder pursuant to, any
\nmaterial note, bond, mortgage, indenture, contract, agreement, lease, license,
\npermit, franchise or other instrument or obligation to which Principal
\nStockholder is a party or by which Principal Stockholder or any of its assets
\nare bound.<\/p>\n
SECTION 4A.06 ACQUISITION OF STOCK FOR INVESTMENT. Principal
\nStockholder acknowledges that the shares of Parent Common Stock that it receives
\nhereunder may not be sold, transferred, offered for sale, pledged, hypothecated
\nor otherwise disposed of by him, her or it without registration under the
\nSecurities Act, except pursuant to an exemption from such registration under the
\nSecurities Act, and in compliance with applicable Blue Sky Laws. Principal
\nStockholder represents that it has no current plan or current intention to
\ndispose of its Parent Common Stock after the Merger.<\/p>\n
SECTION 4A.07 ACCREDITED INVESTOR. Except as set forth in
\nSCHEDULE 4A.07 of the Principal Stockholder Disclosure Schedule, Principal
\nStockholder represents that it is an “accredited investor” as that term is
\ndefined in Rule 501 promulgated under the Securities Act.<\/p>\n
SECTION 4A.08 DISCLOSURE OF INFORMATION. Principal Stockholder
\nacknowledges that:<\/p>\n
(a) it has had an opportunity to ask questions of and to
\nreceive answers from the officers of Parent with respect to the business,
\nresults of operations, financial conditions and prospects of Parent and has read
\nthe Confidential Memorandum;<\/p>\n
(b) it has made its own independent examination,
\ninvestigation, analysis and evaluation of Parent, including but not limited to
\nan evaluation of the value of the Parent Common Stock to be received by it; and<\/p>\n
(c) it has not, in connection with this Agreement and the
\ntransactions contemplated hereby, relied in any respect on any information,
\nanalyses or materials (other than the representations and warranties set forth
\nherein and in the Confidential Memorandum) provided to it by Parent or any
\naffiliate of Parent or any officer or representative thereof.<\/p>\n
31<\/p>\n
ARTICLE V<\/p>\n
REPRESENTATIONS AND WARRANTIES
\n OF PARENT AND MERGER SUB<\/p>\n
Each of Parent and Merger Sub hereby represents and warrants
\nto Company and to Principal Stockholder, subject to the exceptions specifically
\ndisclosed in the Parent Disclosure Schedule, all such exceptions to be
\nreferenced to a specific representation set forth in this Article V, that:<\/p>\n
SECTION 5.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.<\/p>\n
Except as set forth in SCHEDULE 5.01 of the Parent Disclosure
\nSchedule, Parent and each Parent Subsidiary, including Merger Sub, has been duly
\norganized and is validly existing and in good standing under the laws of the
\njurisdiction of its incorporation or organization, as the case may be, and has
\nthe requisite corporate power and authority to own, lease and operate its
\nproperties and to carry on its business as it is now being conducted. Parent and
\neach Parent Subsidiary, including Merger Sub, is duly qualified or licensed to
\ndo business, and is in good standing (if such a concept exists in the applicable
\njurisdiction), in each jurisdiction where the character of the properties owned,
\nleased or operated by it or the nature of its business makes such qualification
\nor licensing necessary, except for such failures to be so qualified or licensed
\nand in good standing that could not reasonably be expected to have, individually
\nor in the aggregate, a Parent Material Adverse Effect. Merger Sub shall be the
\nwholly owned subsidiary of Neversleepagain Holding Corp., a Delaware
\ncorporation, which in turn shall be the wholly owned Subsidiary of Neversleep
\nHolding Corp., a Delaware corporation, which shall be the wholly owned
\nSubsidiary of Parent (the foregoing including Merger Sub but excluding Parent
\nbeing the “CHAIN SUBSIDIARIES”).<\/p>\n
SECTION 5.02 CERTIFICATE OF INCORPORATION AND BYLAWS. The
\ncopies of each of Parent’s and Merger Sub’s Certificates of Incorporation and
\nbylaws previously provided to Company by Parent are true, complete and correct
\ncopies thereof. Such Certificates of Incorporation and bylaws are in full force
\nand effect. Parent is not in violation of any of the provisions of its
\nCertificate of Incorporation or bylaws.<\/p>\n
SECTION 5.03 CAPITALIZATION.<\/p>\n
(a) The authorized capital stock of Parent consists of
\n140,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred
\nstock, par value $.01 per share. As of October 23, 2001, (i) 41,290,794 shares
\nof Parent Common Stock were issued and outstanding, all of which are validly
\nissued, fully paid and nonassessable, (ii) no shares of Parent Common Stock were
\nheld in the treasury of Parent, (iii) no shares of Parent Common Stock were held
\nby the Parent Subsidiaries and (iv) 11,236,173 shares of Parent Common Stock
\nwere reserved for future issuance pursuant to outstanding options (“PARENT STOCK
\nOPTIONS”) and Parent Warrants and Parent Restricted Stock. Between October 23,
\n2001 and the date of this Agreement, Parent has not issued any shares of Parent
\nCommon Stock, Parent Warrants, options or other securities, other than Parent
\nStock Options to new employees and shares of Parent Common Stock issued <\/p>\n
32<\/p>\n
upon exercise of Parent Stock Options which were outstanding as of October 23,
\n2001. Except for shares of Parent Common Stock issuable pursuant to the Parent
\nStock Plan and as otherwise set forth in SCHEDULE 5.03 of the Parent Disclosure
\nSchedule and 76,500 in Parent Restricted Stock, there are no options, warrants
\nor other rights, agreements, arrangements or commitments of any character to
\nwhich Parent is a party or by which Parent is bound relating to the issued or
\nunissued capital stock of Parent or any Parent Subsidiary or obligating Parent
\nor any Parent Subsidiary to issue or sell any shares of capital stock of, or
\nother equity interests in, Parent or any Parent Subsidiary. All shares of Parent
\nCommon Stock subject to issuance as aforesaid, upon issuance prior to the
\nEffective Time on the terms and conditions specified in the instruments pursuant
\nto which they are issuable, will be duly authorized, validly issued, fully paid
\nand nonassessable. There are no outstanding contractual obligations of Parent or
\nany Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of
\nParent Common Stock or any capital stock of any Parent Subsidiary. Each
\noutstanding share of capital stock of each Parent Subsidiary is duly authorized,
\nvalidly issued, fully paid and nonassessable and each such share owned by Parent
\nor another Parent Subsidiary is free and clear of all security interests, liens,
\nclaims, pledges, options, rights of first refusal, agreements, limitations on
\nParent’s or such other Parent Subsidiary’s voting rights, charges and other
\nencumbrances of any nature whatsoever. There are no material outstanding
\ncontractual obligations of Parent or any Parent Subsidiary to provide funds to,
\nor make any material investment (in the form of a loan, capital contribution or
\notherwise) in, any Parent Subsidiary or any other Person. Except as set forth in
\nSCHEDULE 5.03 of the Parent Disclosure Schedule, there are no agreements or
\ntrusts or other agreements or understandings to which the Parent or any Parent
\nSubsidiary is a party with respect to the voting or disposition of the Parent
\nCommon Stock, and Parent is not aware of any such agreements among its
\nstockholders. Except as set forth in SCHEDULE 5.03 of the Parent Disclosure
\nSchedule, there are no agreements, undertakings or arrangements granting any
\nPerson the right to require Parent or any Parent Subsidiary to register or to
\nallow such person to participate in any registration of any securities of Parent
\nor any Parent Subsidiary.<\/p>\n
(b) All of the shares of Parent Common Stock to be issued (i)
\nin connection with the Merger, when issued in accordance with this Agreement,
\nand (ii) upon the conversion of any Company Stock Option or Company Warrant into
\nan option or warrant, as the case may be, to purchase shares of Parent Common
\nStock in accordance with Section 3.05, when issued upon exercise thereof
\nfollowing the Effective Time, will be validly issued, fully paid and
\nnonassessable and will not be subject to preemptive rights or similar
\ncontractual rights granted by Parent.<\/p>\n
SECTION 5.04 AUTHORITY RELATIVE TO THIS AGREEMENT. (a) Each of
\nParent and Merger Sub has all necessary corporate power and authority to execute
\nand deliver this Agreement, to perform its obligations hereunder and to
\nconsummate the transactions contemplated hereby. The execution and delivery of
\nthis Agreement by each of Parent and Merger Sub and the consummation by Parent
\nand Merger Sub of the transactions contemplated hereby have been duly and
\nvalidly authorized by all necessary corporate action, and no other corporate
\nproceedings on the part of Parent or Merger Sub are necessary to authorize this
\nAgreement or to consummate the transactions contemplated hereby (other than the
\nfiling and recordation of the Certificate of Merger as required by Delaware
\nLaw). This Agreement has been duly executed and delivered by each of Parent and
\nMerger Sub and, assuming the due <\/p>\n
33<\/p>\n
authorization, execution and delivery hereof by Company, this Agreement
\nconstitutes a legal, valid and binding obligation of Parent and\/or Merger Sub,
\nas the case may be, enforceable against Parent and Merger Sub in accordance with
\nits terms, except to the extent that enforceability hereof may be limited by
\napplicable bankruptcy, insolvency, reorganization or other similar laws
\naffecting the enforcement of creditors’ rights generally and by principles of
\nequity regarding the availability of remedies.<\/p>\n
(b) Parent has all necessary corporate power and authority to
\nexecute and deliver the First Note, the Second Note and the note described in
\nSection 7.01(b) hereof (the “THIRD NOTE”), to perform its obligations thereunder
\nand to consummate the transactions contemplated thereby. The execution and
\ndelivery of the First Note, the Second Note and the Third Note by Parent and the
\nconsummation by Parent of the transactions contemplated thereby have been duly
\nand validly authorized by all necessary corporate action, and no other corporate
\nproceedings on the part of Parent are necessary to authorize the First Note or
\nto consummate the transactions contemplated thereby. The First Note has been
\nduly executed and delivered by Parent and constitutes, and, when issued, the
\nSecond Note and the Third Note each will constitute, the legal, valid and
\nbinding obligation of Parent, enforceable against Parent in accordance with its
\nterms, except to the extent that enforceability thereof may be limited by
\napplicable bankruptcy, insolvency, reorganization or other similar laws
\naffecting the enforcement of creditors’ rights generally and by principles of
\nequity regarding the availability of remedies.<\/p>\n
SECTION 5.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.<\/p>\n
(a) Assuming that the Certificate of Merger is filed and
\nrecorded as required by Delaware Law, the execution and delivery of this
\nAgreement by Parent and Merger Sub do not, and the performance by Parent and
\nMerger Sub of their obligations hereunder and the consummation of the Merger
\nwill not, (i) conflict with or violate any provision of the Certificate of
\nIncorporation or bylaws of Parent or any equivalent organizational documents of
\nany Parent Subsidiary, (ii) assuming that all consents, approvals,
\nauthorizations and permits described in Section 5.05(b) have been obtained or
\nwaived and all filings and notifications described in Section 5.05(b) have been
\nmade, conflict with or violate any Law applicable to Parent or any Parent
\nSubsidiary or by which any property or asset of Parent or any Parent Subsidiary
\nis bound or affected or (iii) assuming that all consents described in SCHEDULE
\n5.05 of the Parent Disclosure Schedule have been obtained or waived, result in
\nany breach of or constitute a default (or an event which with the giving of
\nnotice or lapse of time or both could reasonably be expected to become a
\ndefault) under, or give to others any right of termination, amendment,
\nacceleration or cancellation of, or result in the creation of a lien or other
\nencumbrance on any property or asset of Parent or any Parent Subsidiary pursuant
\nto, any material note, bond, mortgage, indenture, contract, agreement, lease,
\nlicense, permit, franchise or other instrument or obligation to which Parent or
\nany Parent Subsidiary is a party or by which Parent or any Parent Subsidiary or
\nany of their respective assets are bound.<\/p>\n
(b) The execution and delivery of this Agreement by Parent and
\nMerger Sub do not, and the performance by Parent and Merger Sub of their
\nobligations hereunder and the consummation of the Merger will not, require any
\nconsent, approval, authorization or permit of, or filing by Parent with or
\nnotification by Parent to, any Governmental Entity, except pursuant to<\/p>\n
34<\/p>\n
applicable requirements of the Exchange Act, the Securities Act, Blue Sky Laws,
\nthe premerger notification requirements of the HSR Act, if any, and the filing
\nand recordation of the Certificate of Merger as required by Delaware Law. In
\naddition, Parent will be required to make certain filings with the NNM.<\/p>\n
SECTION 5.06 PERMITS; COMPLIANCE WITH LAWS. Parent and the
\nParent Subsidiaries are in possession of all franchises, grants, authorizations,
\nlicenses, establishment registrations, product listings, permits, approvals and
\norders of any Governmental Entity necessary for Parent or any Parent Subsidiary
\nto own, lease and operate its properties and assets or otherwise to carry on its
\nbusiness as it is now being conducted, other than those, the failure of which to
\npossess, could not reasonably be expected to have, individually, or in the
\naggregate, a Parent Material Adverse Effect (collectively, the “PARENT
\nPERMITS”), and none of the Parent Permits has been suspended or cancelled nor is
\nany such suspension or cancellation pending or, to the Knowledge of Parent,
\nthreatened in writing. Neither Parent nor any Parent Subsidiary is in conflict
\nwith, or in default or violation of, (i) any Law applicable to Parent or any
\nParent Subsidiary or by which any property or asset of Parent or any Parent
\nSubsidiary is bound or affected or (ii) any Parent Permits, except for such
\nconflicts, defaults or violations that could not reasonably be expected to have,
\nindividually or in the aggregate, a Parent Material Adverse Effect. SCHEDULE
\n5.06 of the Parent Disclosure Schedule sets forth all actions, proceedings,
\ninvestigations or surveys pending or, to the Knowledge of Parent, threatened in
\nwriting against Parent or any Parent Subsidiary that could reasonably be
\nexpected to result in the suspension or cancellation of any material Parent
\nPermit. Since January 1, 2000, neither Parent nor any Parent Subsidiary has
\nreceived from any Governmental Entity any written notification with respect to
\npossible conflicts, defaults or violations of Laws.<\/p>\n
SECTION 5.07 SEC FILINGS; FINANCIAL STATEMENTS.<\/p>\n
(a) Parent has filed all forms, reports, statements and
\ndocuments required to be filed by it (A) with the SEC and the NNM since August
\n13, 1998 (collectively, together with any such forms, reports, statements and
\ndocuments Parent may file subsequent to the date hereof until the Closing, the
\n“PARENT REPORTS”) and (B) with any other Governmental Entities. Each Parent
\nReport filed prior to the date hereof (i) was prepared in accordance with the
\nrequirements of the Securities Act, the Exchange Act or the NNM, as the case may
\nbe, and (ii) did not at the time it was filed contain any untrue statement of a
\nmaterial fact or omit to state a material fact required to be stated therein or
\nnecessary in order to make the statements made therein, in the light of the
\ncircumstances under which they were made, not misleading. Each form, report,
\nstatement and document referred to in clause (B) of this Section 5.07(a) was
\nprepared in all material respects in accordance with the requirements of
\napplicable Law. No Parent Subsidiary is subject to the periodic reporting
\nrequirements of the Exchange Act or required to file any form, report or other
\ndocument with the SEC, the NNM, any other stock exchange or any other comparable
\nGovernmental Entity.<\/p>\n
(b) Each of the consolidated financial statements (including,
\nin each case, any notes thereto) contained in the Parent Reports was prepared in
\naccordance with U.S. GAAP (except, in the case of unaudited financial
\nstatements, for the absence of footnotes and subject to normal year end
\nadjustments, which adjustments are not material) applied on a consistent basis<\/p>\n
35<\/p>\n
throughout the periods indicated (except as may be indicated in the notes
\nthereto) and each presented fairly the consolidated financial position of Parent
\nand the Parent Subsidiaries as at the respective dates thereof, and their
\nconsolidated results of operations, stockholders’ equity and cash flows for the
\nrespective periods indicated therein, except as otherwise noted therein
\n(subject, in the case of unaudited statements, to normal and recurring
\nimmaterial year-end adjustments).<\/p>\n
(c) Except as and to the extent set forth or reserved against
\non the consolidated balance sheet of Parent and the Parent Subsidiaries as of
\nJune 30, 2001 as reported in Parent’s Quarterly Report on Form 10-Q for the
\nquarter ended June 30, 2001 (the “PARENT BALANCE SHEET”), none of Parent or any
\nParent Subsidiary has any liabilities or obligations of any nature (whether
\naccrued, absolute, contingent or otherwise) that would be required to be
\nreflected on a balance sheet or in notes thereto prepared in accordance with
\nU.S. GAAP, except for (i) liabilities or obligations which do not in the
\naggregate exceed $250,000 or (ii) liabilities or obligations incurred in the
\nordinary course of business consistent with past practice since June 30, 2001.<\/p>\n
SECTION 5.08 ABSENCE OF CERTAIN CHANGES OR EVENTS.<\/p>\n
Except as otherwise set forth on SCHEDULE 5.08 of the Parent
\nDisclosure Schedule, since June 30, 2001 and prior to the date hereof, there has
\nnot been (i) any event that could reasonably be expected to prevent or
\nmaterially delay the performance of Parent’s obligations pursuant to this
\nAgreement and the consummation of the Merger by Parent, (ii) any material change
\nby Parent or any Parent Subsidiary in its accounting methods, principles or
\npractices, (iii) any declaration, setting aside or payment of any dividend or
\ndistribution in respect of the Parent Common Stock or any redemption, purchase
\nor other acquisition by Parent of any of Parent’s securities, (iv) except in the
\nordinary course of business consistent with past practice, any increase in the
\ncompensation or benefits or establishment of any bonus, insurance, severance,
\nchange in control, deferred compensation, pension, retirement, profit sharing,
\nstock option (including, without limitation, the granting of stock options,
\nstock appreciation rights, performance awards or restricted stock awards), stock
\npurchase or other employee benefit plan, or any other increase in the
\ncompensation payable or to become payable to any executive officers of Parent or
\nany Parent Subsidiary, (v) any issuance or sale by Parent or any Parent
\nSubsidiary of any stock, notes, bonds or other securities other than pursuant to
\nthe exercise of outstanding securities, or entering into any agreement with
\nrespect thereto, (vi) any amendment to Parent’s Certificate of Incorporation or
\nbylaws, (vii) other than in the ordinary course of business, any (x) purchase,
\nsale, assignment or transfer of any material assets by Parent or any Parent
\nSubsidiary, (y) mortgage, pledge or the institution of any lien, encumbrance or
\ncharge on any material assets or properties, tangible or intangible, of Parent
\nor any Parent Subsidiary, except for liens for Taxes not yet delinquent and such
\nother liens, encumbrances or charges which do not have, and could not reasonably
\nbe expected to have, individually or in the aggregate, a Parent Material Adverse
\nEffect, or (z) waiver by Parent or any Parent Subsidiary of any rights of
\nmaterial value or cancellation or any material debts or claims, or (viii) any
\nentering into by Parent or any Parent Subsidiary of any transaction of a
\nmaterial nature other than in the ordinary course of business, consistent with
\npast practices.<\/p>\n
36<\/p>\n
SECTION 5.09 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.<\/p>\n
(a) With respect to each employee benefit fund, plan, program,
\narrangement and contract (including, without limitation, any “employee benefit
\nplan”, as defined in Section 3(3) of ERISA) maintained, sponsored or contributed
\nto or required to be contributed to by Parent or any Parent Subsidiary or other
\ntrade or business (whether or not incorporated) treated as a single employer
\nwith Parent (a “PARENT ERISA AFFILIATE”) pursuant to Code Section 414(b), (c),
\n(m) or (o), or with respect to which Parent or any Parent ERISA Affiliate could
\nincur liability under Section 4069, 4212(c) or 4204 of ERISA or Section 412 of
\nthe Code (the “PARENT BENEFIT PLANS”), Parent has delivered or made available to
\nCompany a true, complete and correct copy of (i) such Parent Benefit Plan and
\nthe most recent summary plan description related to such Parent Benefit Plan, if
\na summary plan description is required therefor, (ii) each trust agreement or
\nother funding arrangement relating to such Parent Benefit Plan, (iii) the most
\nrecent annual report (Form 5500) filed with the IRS with respect to such Parent
\nBenefit Plan, (iv) the most recent actuarial report or financial statement
\nrelating to such Parent Benefit Plan and (v) the most recent determination
\nletter issued by the IRS with respect to such Parent Benefit Plan, if it is
\nintended to be qualified under Section 401(a) of the Code. None of Parent, any
\nParent Subsidiary or any Parent Affiliate has any express or implied commitment,
\nwhether legally enforceable or not, to modify, change or terminate any Parent
\nBenefit Plan, other than with respect to a modification, change or termination
\nrequired by ERISA or the Code.<\/p>\n
(b) Each Parent Benefit Plan has been administered in all
\nmaterial respects in accordance with its terms and all applicable laws,
\nincluding, without limitation, ERISA and the Code, and all contributions
\nrequired to be made under the terms of any of the Parent Benefit Plans as of the
\ndate of this Agreement have been timely made or have been reflected on the most
\nrecent consolidated balance sheet filed or incorporated by reference in the
\nParent Reports prior to the date of this Agreement. With respect to the Parent
\nBenefit Plans, no event has occurred and, to the Knowledge of Parent, there
\nexists no condition or set of circumstances in connection with which Parent, any
\nParent Subsidiary or any Parent ERISA Affiliate could reasonably be expected to
\nbe subject to any material liability (other than for routine benefit
\nliabilities) under the terms of such Parent Benefit Plans, ERISA, the Code or
\nany other applicable Law.<\/p>\n
(c) (i) Each Parent Benefit Plan which is intended to be
\nqualified under Section 401(a) of the Code has received a favorable
\ndetermination letter from the IRS as to its qualified status under the Code and
\nas to the exempt status under Section 501(a) of the Code of each trust
\nestablished thereunder or Parent will apply to the IRS for such a determination
\nletter prior to the expiration of the requisite period under applicable Treasury
\nRegulations or IRS pronouncements in which to apply for such determination
\nletter and to make any amendments necessary to obtain a favorable determination,
\nand to the Knowledge of Parent no fact or event has occurred since the date of
\nsuch determination letter from the IRS to adversely affect the qualified status
\nof any such Parent Benefit Plan or the exempt status of any such trust; (ii) to
\nKnowledge of Parent, there has been no prohibited transaction (within the
\nmeaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any
\nParent Benefit Plan; (iii) each Parent Benefit Plan can be amended, terminated
\nor otherwise discontinued after the Effective Time in accordance with its terms,
\nwithout liability, other than (A) liability for ordinary administrative expenses
\ntypically incurred in a termination event or (B) if the Parent Benefit Plan is a
\npension benefit plan subject <\/p>\n
37<\/p>\n
to Part 3 of Title I of ERISA, liability for the accrued benefits as of the date
\nof such termination (if and to the extent required by ERISA) to the extent that
\neither there are sufficient assets set aside in a trust or insurance contract to
\nsatisfy such liability or such liability is reflected on the most recent
\nconsolidated balance sheet filed or incorporated by reference in the Parent
\nReports prior to the date of this Agreement. No suit, administrative proceeding,
\naction or other litigation has been brought, or to the Knowledge of Parent is
\nthreatened in writing, against or with respect to any such Parent Benefit Plan,
\nincluding any audit or inquiry by the IRS or United States Department of Labor
\n(other than routine benefits claims).<\/p>\n
(d) No Parent Benefit Plan is a multiemployer pension plan (as
\ndefined in Section 3(37) of ERISA) or other pension plan subject to Title IV of
\nERISA or Section 412 of the Code and none of Parent, any Parent Subsidiary or
\nany Parent ERISA Affiliate has sponsored or contributed to or been required to
\ncontribute to a multiemployer pension plan or other pension plan subject to
\nTitle IV of ERISA. No material liability under Title IV of ERISA has been
\nincurred by Parent, any Parent Subsidiary or any Parent ERISA Affiliate that has
\nnot been satisfied in full, and no condition exists that presents a reasonable
\nrisk to Parent, any Parent Subsidiary or any Parent ERISA Affiliate of incurring
\nor being subject (whether primarily, jointly or secondarily) to a material
\nliability thereunder. None of the assets of Parent or any Parent ERISA Affiliate
\nis, or may reasonably be expected to become, the subject of any lien arising
\nunder ERISA or Section 412(n) of the Code.<\/p>\n
(e) Parent has listed on SCHEDULE 5.09(E) of the Parent
\nDisclosure Schedule and has delivered to Company true, complete and correct
\ncopies of (i) all employment agreements with officers and all consulting
\nagreements of Parent and each Parent Subsidiary, (ii) all severance plans,
\nagreements, programs and policies of Parent and each Parent Subsidiary with or
\nrelating to their respective employees, directors or consultants, and (iii) all
\nplans, programs, agreements and other arrangements of Parent and each Parent
\nSubsidiary with or relating to their respective employees, directors or
\nconsultants which contain “change of control” provisions. Except as set forth in
\nSCHEDULE 5.09(E) of the Parent Disclosure Schedule, which discloses the Parent’s
\nestimate of excess parachute payments based on assumptions described therein, no
\npayment or benefit which will be made by Parent or any Parent Subsidiary under
\nany Parent Benefit Plan or other arrangement will constitute an excess parachute
\npayment under Code Section 280G(b)(1), and the consummation of the transactions
\ncontemplated by this Agreement will not individually or in conjunction with any
\nother possible event (including termination of employment) (i) entitle any
\ncurrent or former employee or other service provider of Parent or any Parent
\nSubsidiary to severance benefits or any other payment, compensation or benefit
\n(including forgiveness of indebtedness), except as expressly provided by this
\nAgreement, or (ii) accelerate the time of payment or vesting, or increase the
\namount of compensation or benefit due any such employee or service provider.<\/p>\n
(f) Neither Parent nor any Parent Subsidiary is a party to any
\ncollective bargaining or other labor union contract applicable to Persons
\nemployed by Parent or any Parent Subsidiary and no collective bargaining
\nagreement is being negotiated by Parent or any Parent Subsidiary. There is no
\nlabor dispute, strike or work stoppage against Parent or any Parent Subsidiary
\npending or, to the Knowledge of Parent, threatened in writing which may
\ninterfere with the respective business activities of Parent or any Parent
\nSubsidiary. To the Knowledge of <\/p>\n
38<\/p>\n
Parent, none of Parent, any Parent Subsidiary, or any of their respective
\nrepresentatives or employees has committed any unfair labor practice in
\nconnection with the operation of the respective businesses of Parent or any
\nParent Subsidiary, and there is no charge or complaint against Parent or any
\nParent Subsidiary by the National Labor Relations Board or any comparable
\nGovernmental Entity pending or threatened in writing.<\/p>\n
(g) Except as required by Law, no Parent Benefit Plan provides
\nretiree or post-employment medical, disability or life insurance benefits to any
\nPerson. To the Knowledge of Parent, Parent and the Parent ERISA Affiliates
\ncomply in all material respects with (i) the requirements of the applicable
\nhealth care continuation and notice provisions of COBRA and the regulations
\n(including proposed regulations) thereunder and (ii) the applicable requirements
\nof the Health Insurance Portability and Accountability Act of 1996 and the
\nregulations (including the proposed regulations) thereunder.<\/p>\n
SECTION 5.10 CONTRACTS. Except for the contracts and
\nagreements described in SCHEDULE 5.10 of the Parent Disclosure Schedule
\n(collectively, the “PARENT MATERIAL CONTRACTS”), neither Parent nor the Parent
\nSubsidiaries is a party to or bound by any material contract, including without
\nlimitation, the following contracts (which for purposes of this Agreement shall
\nbe deemed Parent Material Contracts):<\/p>\n
(a) any distributor, sales, advertising, agency or
\nmanufacturer’s representative contract;<\/p>\n
(b) any continuing contract for the purchase of materials,
\nsupplies, equipment or services involving in the case of any such contract more
\nthan $250,000 per annum;<\/p>\n
(c) any contract that expires or may be renewed at the option
\nof any Person other than Parent so as to expire more than one (1) year after the
\ndate of this Agreement;<\/p>\n
(d) any trust indenture, mortgage, promissory note, loan
\nagreement or other contract for the borrowing of money, any currency exchange,
\ncommodities or other hedging arrangement or any leasing transaction of the type
\nrequired to be capitalized in accordance with U.S. GAAP;<\/p>\n
(e) any contract for capital expenditures in excess of
\n$250,000 in the aggregate;<\/p>\n
(f) any contract limiting the freedom of Parent or any Parent
\nSubsidiary to engage in any line of business or to compete with any other
\nPerson, or any confidentiality, secrecy or non-disclosure contract;<\/p>\n
(g) any contract pursuant to which Parent or any Parent
\nSubsidiary is a lessor or lessee of any machinery, equipment, motor vehicles,
\noffice furniture, fixtures or other personal property involving in the case of
\nany such contract more than $250,000 per annum;<\/p>\n
(h) any contract with any Person with whom Parent or any
\nParent Subsidiary does not deal at arm’s length within the meaning of the Code;<\/p>\n
39<\/p>\n
(i) any agreement of guarantee, support, indemnification,
\nassumption or endorsement of, or any similar commitment by Parent or any Parent
\nSubsidiary with respect to, the obligations, liabilities (whether accrued,
\nabsolute, contingent or otherwise) or indebtedness of any other Person; or<\/p>\n
(j) any agreement relating to the acquisition or disposition
\nby Parent or any Parent Subsidiary of a business, line of business or material
\namount of assets.<\/p>\n
Parent and\/or each Parent Subsidiary, as applicable, has
\nperformed all of the material obligations required to be performed by it and is
\nentitled to all benefits under, and to the Knowledge of Parent, is not alleged
\nto be in default in respect of, any Parent Material Contract. Each of the Parent
\nMaterial Contracts is in full force and effect, unamended, and there exists no
\nmaterial default or event of default or event, occurrence, condition or act,
\nwith respect to Parent or any Parent Subsidiary or to the Knowledge of Parent
\nwith respect to the other contracting party, which, with the giving of notice,
\nthe lapse of the time or the happening of any other event or conditions, would
\nbecome a material default or event of default under any Parent Material
\nContract. True, correct and complete copies of all Parent Material Contracts
\nhave been delivered or made available to Company.<\/p>\n
SECTION 5.11 LITIGATION. Except as set forth on SCHEDULE 5.11
\nof the Parent Disclosure Schedule, there is no suit, claim, action, proceeding
\nor investigation pending or, to the Knowledge of Parent, threatened in writing
\nagainst Parent or any Parent Subsidiary that could reasonably be expected to
\nhave, individually or in the aggregate, a Parent Material Adverse Effect or
\nmaterially interfere with Parent’s ability to consummate the transactions
\ncontemplated herein, and, to the Knowledge of Parent, there are no existing
\nfacts or circumstances that could reasonably be expected to result in such a
\nsuit, claim, action, proceeding or investigation. To the Knowledge of Parent,
\nthere are no facts or circumstances which could reasonably be expected to result
\nin the denial of insurance coverage under policies issued to Parent and Parent
\nSubsidiaries in respect of such suits, claims, actions, proceedings and
\ninvestigations, except in any case as could not reasonably be expected to have,
\nindividually or in the aggregate, a Parent Material Adverse Effect. Neither
\nParent nor any Parent Subsidiary is subject to any outstanding order, writ,
\ninjunction or decree which could reasonably be expected to have, individually or
\nin the aggregate, a Parent Material Adverse Effect or materially interfere with
\nParent’s ability to consummate the transactions contemplated herein.<\/p>\n
SECTION 5.12 ENVIRONMENTAL MATTERS. Except as could not
\nreasonably be expected to have, individually or in the aggregate, a Parent
\nMaterial Adverse Effect, (a) Parent and the Parent Subsidiaries are in
\ncompliance with all applicable Environmental Laws and all Parent Permits
\nrequired by Environmental Laws, (b) all past noncompliance of Parent or any
\nParent Subsidiary with Environmental Laws or Environmental Permits has been
\nresolved without any pending, ongoing or future obligation, cost or liability
\nand (c) neither Parent nor any Parent Subsidiary has released, nor to the
\nKnowledge of Parent has any other Person released, a Hazardous Material at, or
\ntransported a Hazardous Material to or from, any real property currently or
\nformerly owned, leased or occupied by Parent or any Parent Subsidiary, in
\nviolation of, or under circumstances that could otherwise result in liability
\nunder, any Environmental Law.<\/p>\n
40<\/p>\n
SECTION 5.13 INTELLECTUAL PROPERTY.<\/p>\n
(a) SCHEDULE 5.13(A) of the Parent Disclosure Schedule
\ncontains an accurate and complete list of (i) all patents and patent
\napplications, trademarks, service marks, Internet domain names and applications
\ntherefor, and copyrights and copyright applications, which are part of the
\nParent Intellectual Property and which have been issued or registered by, or
\nfiled with, any United States, foreign or international governmental or other
\nbody having authority to issue, register or review the same, and (ii) all
\nlicenses, sublicenses and other agreements to which Parent or any Parent
\nSubsidiary is a party and pursuant to which Parent or any Parent Subsidiary is
\ngranted rights under any third party Intellectual Property, other than licenses
\nto use “off the shelf” software, or pursuant to which any third party is
\nauthorized by Parent or any Parent Subsidiary to use any Intellectual Property.<\/p>\n
(b) Except as provided in SCHEDULE 5.13(B) of the Parent
\nDisclosure Schedule, the Parent Intellectual Property is: (i) owned solely and
\nexclusively by Parent or a Parent Subsidiary, free and clear of any and all
\nmortgages, pledges, liens, security interests, conditional sale agreements or
\nencumbrances of any kind or (ii) rightfully used or otherwise enjoyed by Parent
\nor the Parent Subsidiaries pursuant to one or more license agreements, each of
\nwhich license agreements is, to the Knowledge of Parent, valid and enforceable.<\/p>\n
(c) To the Knowledge of Parent, neither Parent nor any Parent
\nSubsidiary is, and no action is currently pending which asserts that Parent or
\nany Parent Subsidiary is, infringing on any Intellectual Property of any Person.
\nNeither Parent nor any Parent Subsidiary has received notice from any Person
\nwithin the past twelve (12) months asserting that Parent or any Parent
\nSubsidiary is infringing on any Intellectual Property of any such Person. To the
\nKnowledge of Parent, no action is currently pending which asserts that any
\nPerson is infringing on any Parent Intellectual Property, and neither Parent nor
\nany Parent Subsidiary has asserted any claim of such infringement against any
\nPerson within the past twelve (12) months.<\/p>\n
(d) All intellectual property registrations included in the
\nParent Intellectual Property have been duly maintained, are in full force and
\neffect and have not been cancelled, expired or abandoned.<\/p>\n
(e) Parent has secured valid written assignments from all
\nconsultants and employees who contributed to the creation or development of any
\nParent Intellectual Property of the rights to such contributions that Parent
\ndoes not already own by operation of law.<\/p>\n
(f) Parent has taken all reasonably necessary and appropriate
\nsteps to protect and preserve the confidentiality of all Parent Intellectual
\nProperty not otherwise protected by patents, patent applications or copyright
\n(“PARENT CONFIDENTIAL INFORMATION”). All use, disclosure or appropriation of
\nParent Confidential Information owned by Parent by or to a third party has been
\npursuant to the terms of a written agreement between Parent and such third
\nparty. All use, disclosure or appropriation by Parent of Parent Confidential
\nInformation not owned by Parent has been pursuant to the terms of a written
\nagreement between Parent and the owner of such Parent Confidential Information,
\nor is otherwise lawful.<\/p>\n
41<\/p>\n
SECTION 5.14 TAXES.<\/p>\n
(a) Parent and each of the Parent Subsidiaries, and any
\nconsolidated, combined, unitary or aggregate group for Tax purposes of which
\nParent or any Parent Subsidiary is or has been a member, have properly completed
\nand timely filed all Tax Returns required to be filed by them (or have timely
\nfiled requests for extensions of the filing dates and have met all subsequent
\nfiling deadlines with respect to such extensions) and have paid all Taxes shown
\nthereon to be due. All Tax Returns filed by Parent and each of the Parent
\nSubsidiaries are true, correct and complete in all material respects. Neither
\nParent nor any Parent Subsidiary has any liability for unpaid Taxes (whether or
\nnot shown to be due on any Tax Return) which has not been accrued for or
\nreserved on the Parent Balance Sheet in accordance with U.S. GAAP, whether
\nasserted or unasserted, contingent or otherwise, other than liabilities for
\nunpaid Taxes that have accrued since June 30, 2001 in connection with the
\noperation of the business of Parent and each Parent Subsidiary consistent with
\npast practice.<\/p>\n
(b) There is (i) no material claim for Taxes that is a lien
\nagainst the property of Parent or any Parent Subsidiary or is being asserted
\nagainst Parent or any Parent Subsidiary other than liens for Taxes not yet due
\nand payable, (ii) no audit of any Tax Return of Parent or any Parent Subsidiary
\nbeing conducted by a Taxing Authority or, to the Knowledge of Parent, is pending
\nor threatened, (iii) no extension of the statute of limitations on the
\nassessment of any Taxes granted by Parent or any Parent Subsidiary and currently
\nin effect, and (iv) no agreement, contract or arrangement to which Parent or any
\nParent Subsidiary is a party that may result in the payment of any amount that
\nwould not be deductible by reason of Section 280G, Section 404 or Section 162(m)
\nof the Code. There is no contract, agreement, plan or arrangement to which
\nParent or any Parent Subsidiary is a party or by which it is bound to compensate
\nany individual for excise taxes paid pursuant to Section 4999 of the Code.<\/p>\n
(c) Parent and the Parent Subsidiaries have not been and will
\nnot be required to include any material adjustment in taxable income for any Tax
\nperiod (or portion thereof) pursuant to Section 481 of the Code or any
\ncomparable provision under state or foreign Tax laws as a result of
\ntransactions, events or accounting methods employed prior to the Merger.<\/p>\n
(d) Neither Parent nor any Parent Subsidiary has filed or will
\nfile any consent to have the provisions of Section 341(f)(2) of the Code (or
\ncomparable provisions of any state Tax laws) apply to Parent or any Parent
\nSubsidiary.<\/p>\n
(e) Neither Parent nor any Parent Subsidiary is a party to any
\nTax sharing, Tax indemnity or Tax allocation agreement or arrangement nor does
\nParent or any Parent Subsidiary have any liability or potential liability to
\nanother party under any such agreement.<\/p>\n
(f) Neither Parent nor any Parent Subsidiary has filed any
\ndisclosures under Section 6662 or the Code or comparable provisions of state,
\nlocal or foreign law to prevent the imposition of penalties with respect to any
\nTax reporting position taken on any Tax Return.<\/p>\n
(g) Neither Parent nor any Parent Subsidiary has ever been a
\nmember of a consolidated, combined or unitary group of which Parent was not the
\nultimate parent corporation <\/p>\n
42<\/p>\n
or is liable for any Tax imposed on any other Person, except as the result of
\nthe application of Treasury Regulation Section 1.1502-6 (or any comparable
\nprovision of state, local or foreign law) to the affiliated group of which
\nParent is the common parent.<\/p>\n
(h) Parent and each Parent Subsidiary has in its possession
\nreceipts for any Taxes paid to foreign Tax authorities. Neither Parent nor any
\nParent Subsidiary has ever been a “personal holding Parent” within the meaning
\nof Section 542 of the Code or a “United Sates real property holding corporation”
\nwithin the meaning of Section 897 of the Code.<\/p>\n
(i) Neither Parent nor any Parent Subsidiary has constituted
\neither a “distributing corporation” or a “controlled corporation” in a
\ndistribution of stock qualifying for tax-free treatment under Section 355 of the
\nCode (x) in the two years prior to the date of this Agreement or (y) in a
\ndistribution which could otherwise constitute part of a “plan” or “series of
\nrelated transactions” (within the meaning of Section 355(e) of the Code) in
\nconjunction with the Merger.<\/p>\n
(j) Parent and each Parent Subsidiary are in full compliance
\nwith all terms and conditions of any Tax exemption, Tax holiday or other Tax
\nreduction agreement or order of a territorial or foreign government and the
\nconsummation of the Merger will not have any adverse effect on the continued
\nvalidity and effectiveness of any such Tax exemption, Tax holiday or other Tax
\nreduction agreement or order.<\/p>\n
(k) No claim has ever been made by any Taxing Authority in a
\njurisdiction where Parent or any Parent Subsidiary does not file Tax Returns
\nthat Parent or any Parent Subsidiary is or may be subject to taxation by that
\njurisdiction.<\/p>\n
(l) Parent and each Parent Subsidiary have withheld and paid
\nover all Taxes required to have been withheld and paid over and complied with
\nall material information reporting and backup withholding requirements,
\nincluding maintenance of required records with respect thereto, in connection
\nwith amounts paid or owing to any employee, independent contractor, creditor,
\nstockholder or other third party.<\/p>\n
(m) No items of income attributable to transactions occurring
\non or before the close of the last preceding taxable year of Parent or any
\nParent Subsidiary will be required to be included in taxable income by Parent or
\nany Parent Subsidiary in a subsequent taxable year by reason of Parent or any
\nParent Subsidiary reporting income on the installment sales method of
\naccounting, the cash method of accounting, the completed contract method of
\naccounting or the percentage of completion capitalized cost method of
\naccounting.<\/p>\n
(n) True and complete copies of all Tax Returns filed by
\nParent and each Parent Subsidiary for each of the taxable years ended on or
\nafter December 31, 1997 have been delivered or made available to Company.<\/p>\n
(o) Parent has no present intention to eliminate at any time
\nany Chain Subsidiary or to cause at any time any transfer of assets referred to
\nin Section 6.14.<\/p>\n
SECTION 5.15 INSURANCE. Parent and each Parent Subsidiary is
\npresently insured against such risks as companies engaged in a similar business
\nwould, in accordance with <\/p>\n
43<\/p>\n
good business practice, customarily be insured. The policies of fire, theft,
\nliability and other insurance maintained with respect to the assets or
\nbusinesses of Parent and the Parent Subsidiaries provide, in the good faith
\njudgment of the Parent’s management, reasonably adequate coverage against loss.
\nParent has heretofore furnished to Company a complete and correct list of all
\ninsurance policies maintained by Parent or the Parent Subsidiaries as of the
\ndate hereof, and has made available to Company complete and correct copies of
\nall such policies, together with all riders and amendments thereto. All such
\npolicies are in full force and effect and all premiums due thereon have been
\npaid to the date hereof. Parent and the Parent Subsidiaries have complied in all
\nmaterial respects with the terms of such policies.<\/p>\n
SECTION 5.16 PROPERTIES. Parent and the Parent Subsidiaries
\nhave good and valid title, free and clear of all Encumbrances, except for
\nPermitted Encumbrances, to all their material properties and assets, whether
\ntangible or intangible, real, personal or mixed, reflected in the Parent Balance
\nSheet as being owned by Parent and the Parent Subsidiaries as of the date
\nthereof, other than (i) any properties or assets that have been sold or
\notherwise disposed of in the ordinary course of business since June 30, 2001,
\n(ii) liens disclosed in the notes to the Parent Balance Sheet and (iii) liens
\narising in the ordinary course of business after June 30, 2001. All buildings,
\nand all fixtures, equipment and other property and assets that are material to
\nParent business on a consolidated basis, held under leases or sub-leases by
\nParent or any Parent Subsidiary are held under valid instruments enforceable in
\naccordance with their respective terms, subject to applicable laws of
\nbankruptcy, insolvency or similar laws relating to creditors’ rights generally
\nand to general principles of equity (whether applied in a proceeding in law or
\nequity). Substantially all of Parent’s and the Parent Subsidiaries’ equipment in
\nregular use has been reasonably maintained and is in serviceable condition,
\nreasonable wear and tear excepted.<\/p>\n
SECTION 5.17 BROKERS. No broker, finder or investment banker
\nis entitled to any brokerage, finder’s or other fee or commission in connection
\nwith the Merger based upon arrangements made by or on behalf of Parent.<\/p>\n
SECTION 5.18 BUSINESS ACTIVITY RESTRICTION. Except as
\ndescribed in SCHEDULE 5.18 of the Parent Disclosure Schedule, neither Parent nor
\nany Parent Subsidiary has entered into any agreement under which Parent, any
\nParent Subsidiary, Company or any Company Subsidiary is restricted from selling,
\nlicensing or otherwise distributing any of its technology or products to, or
\nproviding services to, customers or potential customers or any class of
\ncustomers, in any geographic area, during any period of time or in any segment
\nof the market or line of business.<\/p>\n
SECTION 5.19 CERTAIN BUSINESS PRACTICES. Neither Parent nor
\nany Parent Subsidiary nor any directors, officers, agents or employees of Parent
\nor any Parent Subsidiary (in their capacities as such) has (a) used any funds
\nfor unlawful contributions, gifts, entertainment or other unlawful expenses
\nrelating to political activity or (b) made any unlawful payment to foreign or
\ndomestic government officials or employees or to foreign or domestic political
\nparties or campaigns or violated any provision of the Foreign Corrupt Practices
\nAct of 1977, as amended.<\/p>\n
44<\/p>\n
SECTION 5.20 NO PRIOR ACTIVITIES. There are not as of the date
\nhereof and there will not be at the Effective Time, any outstanding or
\nauthorized options, warrants, calls, rights, commitments or any other contracts
\nor agreements requiring Merger Sub to issue, transfer, sell, purchase, redeem or
\nacquire any shares of capital stock. Except for liabilities incurred in
\nconnection with its incorporation or organization, and consummation of this
\nAgreement and the transactions contemplated hereby, Merger Sub has not incurred
\nany liabilities, and has not engaged in any business or activities of any type
\nor kind whatsoever or entered into any agreements or arrangements with any
\nPerson. Merger Sub is a wholly owned Subsidiary of Parent.<\/p>\n
SECTION 5.21 AFFILIATE TRANSACTIONS. Except as described in
\nSCHEDULE 5.21 of the Parent Disclosure Schedule or in Parent’s Annual Report on
\nForm 10-K for the year ended December 31, 2000, neither Parent nor any Parent
\nSubsidiary is a party to any agreement with or has any interest in any property
\n(whether real or personal, tangible or intangible) of any of its affiliates,
\nstockholders, employees, officers, directors or any entities affiliated with any
\nsuch persons or any family members of any such persons, nor are there any
\nagreements or understandings for the provision, directly or indirectly, of
\nservices by and between Parent and any Parent Subsidiary, on the one hand, and
\nany of its affiliates, stockholders, employees, associates, officers, directors
\nor any entities affiliated with any such persons or any family members of any
\nsuch persons, on the other hand (other than inter-company arrangements between
\nParent and Parent Subsidiaries and among Parent Subsidiaries and services
\nprovided in their capacity as employees, officers and directors).<\/p>\n
SECTION 5.22 CASH POSITIONS. As of the Closing, Parent shall
\nhave cash on hand in an amount equal to or exceeding $7,200,000.<\/p>\n
ARTICLE VI<\/p>\n
COVENANTS<\/p>\n
SECTION 6.01 CONDUCT OF COMPANY PENDING THE CLOSING. Company
\nagrees that, subject to Section 10.01, between the date of this Agreement and
\nthe Effective Time, unless Parent shall otherwise agree in writing, except as
\nset forth on SCHEDULE 6.01 of the Company Disclosure Schedule, (x) the
\nrespective businesses of Company and the Company Subsidiaries shall be conducted
\nonly in, and Company and the Company Subsidiaries shall not take any action
\nexcept in, the ordinary course of business consistent with past practice and (y)
\nCompany shall use its reasonable efforts to keep available the services of such
\nof the current officers, significant employees and consultants of Company and
\nthe Company Subsidiaries and to preserve the current relationships of Company
\nand the Company Subsidiaries with such of the corporate partners, customers,
\nsuppliers and other Persons with which Company or any Company Subsidiary has
\nsignificant business relations in order to preserve substantially intact its
\nbusiness organization. Without limitation, except as set forth on SCHEDULE 6.01
\nof the Company Disclosure Schedule, neither Company nor any Company Subsidiary
\nshall, between the date of this Agreement and the Effective Time, directly or
\nindirectly, do, or agree to do, any of the following without the prior written
\nconsent of Parent:<\/p>\n
45<\/p>\n
(a) amend or otherwise change its Certificate of Incorporation
\n or bylaws or equivalent organizational documents;<\/p>\n
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
\n license, guarantee or encumber, or authorize the issuance, sale,
\n pledge, disposition, grant, transfer, lease, license or encumbrance of,
\n (i) any shares of capital stock of Company or any Company Subsidiary of
\n any class, or securities convertible into or exchangeable or
\n exercisable for any shares of such capital stock, or any options,
\n warrants or other rights of any kind to acquire any shares of such
\n capital stock, or any other ownership interest (including, without
\n limitation, any phantom interest), of Company or any Company
\n Subsidiary, other than the issuance of shares of Company Common Stock
\n pursuant to the exercise of stock options, warrants or convertible
\n securities therefor outstanding as of the date hereof or expressly
\n permitted by this Agreement or (ii) any material property or assets of
\n Company or any Company Subsidiary except (A) transactions pursuant to
\n existing contracts and (B) dispositions, leases or licenses of
\n inventory in the ordinary course of business consistent with past
\n practice;<\/p>\n
(c) (i) acquire (including, without limitation, by merger,
\n consolidation, or acquisition of stock or assets) any interest in any
\n corporation, partnership, other business organization or Person or any
\n division thereof, other than the purchase of assets for a price not to
\n exceed $100,000 in any instance; (ii) incur any indebtedness for
\n borrowed money (other than indebtedness with respect to working capital
\n in amounts consistent with past practice) or issue any debt securities
\n or assume, guarantee or endorse, or otherwise as an accommodation
\n become responsible for, the obligations of any Person (other than a
\n Company Subsidiary in immaterial amounts and consistent with past
\n practice) for borrowed money or make any loans or advances material to
\n the business, assets, liabilities, financial condition or results of
\n operations of Company and the Company Subsidiaries, taken as a whole;
\n (iii) terminate, cancel or request any material change in, or agree to
\n any material change in, any Company Material Contract other than in the
\n ordinary course of business consistent with past practice; (iv) waive
\n any rights of material value or cancel any material debts or claims;
\n (v) make or authorize any capital expenditure, other than capital
\n expenditures in the ordinary course of business consistent with past
\n practice that have been budgeted for fiscal year 2001 and disclosed in
\n writing to Parent and that are not, in the aggregate, in excess of
\n $250,000 for Company and the Company Subsidiaries taken as a whole; or
\n (vi) enter into or amend any contract, agreement, commitment or
\n arrangement that, if fully performed, would not be permitted under this
\n Section 6.01(c);<\/p>\n
(d) declare, set aside, make or pay any dividend or other
\n distribution, payable in cash, stock, property or otherwise, with
\n respect to any of its capital stock, except that any Company Subsidiary
\n may pay dividends or make other distributions to Company or any other
\n Company Subsidiary;<\/p>\n
(e) reclassify, combine, split, subdivide or redeem, purchase
\n or otherwise acquire, directly or indirectly, any of its capital stock
\n except repurchases of unvested <\/p>\n
46<\/p>\n
shares at cost in connection with the termination of the employment
\n relationship with any employee pursuant to stock option or purchase
\n agreements in effect on the date hereof;<\/p>\n
(f) amend or change the period (or permit any acceleration,
\n amendment or change) of exercisability of options granted under the
\n Company Stock Plan or authorize cash payments in exchange for any
\n Company Stock Options granted under any of such plans;<\/p>\n
(g) amend the terms of, repurchase, redeem or otherwise
\n acquire, or permit any Company Subsidiary to repurchase, redeem or
\n otherwise acquire, any of its securities or any securities of any
\n Company Subsidiary, except repurchases of unvested shares at cost in
\n connection with the termination of the employment relationship with any
\n employee pursuant to stock option or purchase agreements in effect on
\n the date hereof;<\/p>\n
(h) increase the compensation payable or to become payable to
\n its directors, officers, consultants or employees, grant any rights to
\n severance or termination pay to, or enter into any employment,
\n severance or other agreement which provides benefits upon a change in
\n control of Company that would be triggered by the Merger with, any
\n director, officer, consultant or other employee of Company or any
\n Company Subsidiary who is not currently entitled to such benefits from
\n the Merger, establish, adopt, enter into or amend any collective
\n bargaining, bonus, profit sharing, thrift, compensation, stock option,
\n restricted stock, pension, retirement, deferred compensation,
\n employment, termination, severance, change in control or other plan,
\n agreement, trust, fund, policy or arrangement for the benefit of any
\n director, officer, consultant or employee of Company or any Company
\n Subsidiary, except to the extent required by applicable Law, or enter
\n into or amend any contract, agreement, commitment or arrangement
\n between Company or any Company Subsidiary and any of Company’s
\n directors, officers, consultants or employees, except, in the ordinary
\n course of business consistent with past practice, for increases in
\n compensation paid to Persons who are not directors or officers of the
\n Company;<\/p>\n
(i) except as otherwise permitted or required under this
\n Agreement, pay, discharge or satisfy any claims, liabilities or
\n obligations (absolute, accrued, asserted or unasserted, contingent or
\n otherwise), other than the payment, discharge or satisfaction of
\n claims, liabilities or obligations in the ordinary course of business
\n and consistent with past practice;<\/p>\n
(j) except as required by any Governmental Entity, make any
\n material change with respect to Company’s accounting policies,
\n principles, methods or procedures, including, without limitation,
\n revenue recognition policies, other than as required by U.S. GAAP;<\/p>\n
(k) make any material Tax election or settle or compromise any
\n material Tax liability;<\/p>\n
47<\/p>\n
(l) enter into any transaction of a material nature other than
\n in the ordinary course of business, consistent with past practice; or<\/p>\n
(m) authorize or enter into any formal or informal agreement
\n or otherwise make any commitment to do any of the foregoing or to take
\n any action which would make any of the representations or warranties of
\n Company contained in this Agreement untrue or incorrect or prevent
\n Company from performing or cause Company not to perform its covenants
\n hereunder or result in any of the conditions to the Merger set forth
\n herein not being satisfied.<\/p>\n
SECTION 6.02 CONDUCT OF PARENT AND MERGER SUB PENDING THE
\nCLOSING. Each of Parent and Merger Sub agrees that, between the date of this
\nAgreement and the Effective Time, unless Company shall otherwise agree in
\nwriting, (x) the respective businesses of Parent and the Parent Subsidiaries
\nshall be conducted only in, and Parent and the Parent Subsidiaries shall not
\ntake any action except in, the ordinary course of business consistent with past
\npractice and (y) Parent shall use its reasonable efforts to keep available the
\nservices of such of the current officers, significant employees and consultants
\nof Parent and the Parent Subsidiaries and to preserve the current relationships
\nof Parent and the Parent Subsidiaries with such of the corporate partners,
\ncustomers, suppliers and other Persons with which Parent or any Parent
\nSubsidiary has significant business relations in order to preserve substantially
\nintact its business organization. Parent shall not, between the date of this
\nAgreement and the Effective Time, directly or directly, without the prior
\nwritten consent of Company, issue, sell, pledge, dispose of, grant, transfer,
\nlease, license, guarantee or encumber, or authorize the issuance, sale, pledge,
\ndisposition, grant, transfer, lease, license or encumbrance of, any shares of
\ncapital stock of Parent of any class, or securities convertible into or
\nexchangeable or exercisable for any shares of such capital stock, or any
\noptions, warrants or other rights of any kind to acquire any shares of such
\ncapital stock, or any other ownership interest (including, without limitation,
\nany phantom interest), of Parent, other than the issuance of shares of Parent
\nCommon Stock pursuant to the exercise of stock options, warrants or convertible
\nsecurities therefor outstanding as of the date hereof or expressly permitted by
\nthis Agreement.<\/p>\n
SECTION 6.03 NOTICES OF CERTAIN EVENTS. Each of Parent and
\nCompany shall give prompt notice to the other of: (a) any notice or other
\ncommunication from any Person alleging that the consent of such Person is or may
\nbe required in connection with the Merger; (b) any notice or other communication
\nfrom any Governmental Entity in connection with the Merger; (c) any actions,
\nsuits, claims, investigations or proceedings commenced or, to the Knowledge of
\nCompany or the Knowledge of Parent, as the case may be, threatened in writing
\nagainst, relating to or involving or otherwise affecting Parent or the Parent
\nSubsidiaries or Company or the Company Subsidiaries, respectively, which, if
\npending on the date hereof, would have been required to have been disclosed in
\nthis Agreement, or that relate to the consummation of the Merger; (d) the
\noccurrence of a default or event that, with the giving of notice or lapse of
\ntime or both, will become a default under any Company Material Contract or
\nParent Material Contract and (e) any change that could reasonably be expected to
\nhave a Parent Material Adverse Effect or a Company Material Adverse Effect,
\nrespectively, or to delay or impede the ability of either Parent or Company,
\nrespectively, to perform their respective obligations pursuant to this Agreement
\nor to effect the consummation of the Merger.<\/p>\n
48<\/p>\n
SECTION 6.04 ACCESS TO INFORMATION; CONFIDENTIALITY.<\/p>\n
(a) Except as required pursuant to any confidentiality
\nagreement or similar agreement or arrangement to which Parent or Company or any
\nof the Parent Subsidiaries or the Company Subsidiaries is a party or pursuant to
\napplicable Law or the regulations or requirements of any stock exchange or other
\nregulatory organization with whose rules a party hereto is required to comply,
\nfrom the date of this Agreement to the Effective Time, Parent and Company shall
\n(and shall cause the Parent Subsidiaries and Company Subsidiaries, respectively,
\nto) (i) provide to the other (and its officers, directors, employees,
\naccountants, consultants, legal counsel, agents and other representatives
\n(collectively, “REPRESENTATIVES”)) access at reasonable times upon prior notice
\nto its and its subsidiaries’ officers, employees, agents, properties, offices
\nand other facilities and to the books and records thereof, and (ii) furnish
\npromptly such information concerning its and its subsidiaries’ business,
\nproperties, contracts, assets, liabilities and personnel as the other party or
\nits Representatives may reasonably request. No investigation conducted pursuant
\nto this Section 6.04 shall affect or be deemed to modify any representation or
\nwarranty made in this Agreement.<\/p>\n
(b) The parties hereto shall comply with, and shall cause
\ntheir respective Representatives to comply with, all of their respective
\nobligations under the Confidentiality Agreement with respect to the information
\ndisclosed pursuant to this Agreement.<\/p>\n
SECTION 6.05 NO SOLICITATION OF TRANSACTIONS.<\/p>\n
(a) Company shall not, directly or indirectly, and shall not
\ndirect, authorize or permit its Representatives to, directly or indirectly,
\nsolicit, initiate or encourage (including by way of furnishing nonpublic
\ninformation) any inquiries or the making of any proposal or offer (including,
\nwithout limitation, any proposal or offer to its stockholders) that constitutes,
\nor may reasonably be expected to lead to, any Competing Transaction, or enter
\ninto or maintain or continue discussions or negotiate with any Person in
\nfurtherance of such inquiries or to obtain a Competing Transaction, or agree to
\nor endorse any Competing Transaction, or direct, authorize or permit any Company
\nSubsidiary, or any Representative retained by any Company Subsidiary, to take
\nany such action.<\/p>\n
SECTION 6.06 CONTROL OF OPERATIONS. Nothing contained in this
\nAgreement shall give Parent, directly or indirectly, the right to control or
\ndirect the operations of Company or the Company Subsidiaries prior to the
\nEffective Time. Prior to the Effective Time, Company shall exercise, consistent
\nwith the terms and conditions of this Agreement, complete control and
\nsupervision over its operations.<\/p>\n
SECTION 6.07 FURTHER ACTION; CONSENTS; FILINGS.<\/p>\n
(a) Upon the terms and subject to the conditions hereof, each
\nof the parties hereto shall use all reasonable efforts to (i) take, or cause to
\nbe taken, all appropriate action, and do, or cause to be done, all things
\nnecessary, proper or advisable under applicable Law or otherwise to consummate
\nand make effective the Merger, (ii) obtain from Governmental Entities any
\nconsents, licenses, permits, waivers, approvals, authorizations or orders
\nrequired to be obtained <\/p>\n
49<\/p>\n
or made by Parent or Company or any of their respective subsidiaries in
\nconnection with the authorization, execution and delivery of this Agreement and
\nthe consummation of the Merger and (iii) make all necessary filings, and
\nthereafter make any other required or appropriate submissions, with respect to
\nthis Agreement and the Merger required under (A) the rules and regulations of
\nthe NNM, (B) the Securities Act, the Exchange Act and any other applicable
\nfederal or state securities Laws, (C) the HSR Act, if applicable, and (D) any
\nother applicable Law. The parties hereto shall cooperate and consult with each
\nother in connection with the making of all such filings, including by providing
\ncopies of all such documents to the nonfiling parties and their advisors prior
\nto filing, and none of the parties shall file any such document if any of the
\nother parties shall have reasonably objected to the filing of such document. No
\nparty shall consent to any voluntary extension of any statutory deadline or
\nwaiting period or to any voluntary delay of the consummation of the Merger at
\nthe behest of any Governmental Entity without the consent and agreement of the
\nother parties hereto, which consent shall not be unreasonably withheld or
\ndelayed.<\/p>\n
(b) Each of Company and Parent will give (or will cause their
\nrespective subsidiaries to give) any notices to third Persons, and use, and
\ncause their respective subsidiaries to use, reasonable efforts to obtain any
\nconsents from third Persons necessary, proper or advisable to consummate the
\ntransactions contemplated by this Agreement.<\/p>\n
SECTION 6.08 ADDITIONAL REPORTS(a) . Parent shall furnish to
\nCompany copies of any Parent Reports which it files with the SEC or the NNM on
\nor after the date hereof, and Parent covenants and warrants that as of the
\nrespective dates thereof, such reports will not contain any untrue statement of
\na material fact or omit to state a material fact required to be stated therein
\nor necessary to make the statements therein, in light of the circumstances under
\nwhich they were made, not misleading. Any consolidated interim financial
\nstatements included in such reports (including any related notes and schedules)
\nwill fairly and accurately present the financial position of Parent and its
\nconsolidated subsidiaries as of the dates thereof and the results of operations
\nand changes in financial position or other information included therein for the
\nperiods or as of the date then ended (subject, in the case of unaudited
\nstatements, to normal year-end adjustments, which adjustments are not material),
\nin each case in accordance with past practice and U.S. GAAP (except for the
\nabsence of footnotes) consistently applied during the periods involved (except
\nas otherwise disclosed in the notes thereto).<\/p>\n
SECTION 6.09 NONCOMPETITION. For a period of two (2) years
\nfollowing the date hereof, Principal Stockholder shall not, directly or
\nindirectly, as principal, investor, or in any similar capacity (i) engage in the
\nBusiness anywhere in the world (except Switzerland), (ii) own, manage, operate
\nor control, or participate in the ownership, management, operation or control
\nof, any business which directly or indirectly competes with the Business
\nanywhere in the world (except Switzerland), or (iii) interfere with, disrupt or
\nattempt to disrupt any present or prospective relationship, contractual or
\notherwise, between Parent and any of its licensors, licensees, clients,
\ncustomers, suppliers, employees or other related parties, or employ, solicit or
\ninduce for hire any of the employees, agents, consultants or advisors of Parent
\nor Company or any employee who has left the employment of Parent or Company
\nwithin six months of the termination of said employee’s employment with Parent
\nor Company, as applicable, provided <\/p>\n
50<\/p>\n
that nothing herein shall preclude Principal Stockholder from beneficially
\nowning less than five percent of the stock of any publicly traded company or
\nmerging with any other entity.<\/p>\n
SECTION 6.10 USE OF FIRST NOTE PROCEEDS; CONDUCT OF
\nBUSINESS.<\/p>\n
(a) Parent shall cause the Company to apply the principal
\n amount delivered by Principal Stockholder in connection with the First
\n Note to the Company Restructuring; PROVIDED, HOWEVER, that to the
\n extent such principal amount exceeds the costs of the Company
\n Restructuring, Parent may use such excess in any manner that, in its
\n sole discretion, it deems advisable or appropriate.<\/p>\n
(b) Parent shall use commercially reasonable efforts to
\n operate the combined Business of Company and Parent as a going concern
\n and not with a view to dissolution or liquidation.<\/p>\n
SECTION 6.11 COMPANY INTELLECTUAL PROPERTY; ESCROW. Parent
\nwill grant to PubliGroupe S.A. and its Affiliates a license to the Company
\nIntellectual Property covered by the Technology Transfer Agreement dated March
\n15, 2000 between the Company and Real Media S.A. (the “TECHNOLOGY TRANSFER
\nAGREEMENT”), substantially on the terms of the Technology Transfer Agreement.
\nParent agrees to deposit the source code to all Company Intellectual Property
\ncovered by the Technology Transfer Agreement, including all updates, upgrades,
\npatches, documentation and other enhancements (collectively, the “ESCROW
\nMATERIALS”) with DSI Technology Escrow Services, Inc. or other mutually
\nacceptable independent third party escrow agent (the “ESCROW AGENT”) pursuant to
\nan agreement with the Escrow Agent (the “ESCROW AGREEMENT”) within thirty (30)
\ndays after the Effective Time. The Escrow Agreement shall provide at a minimum
\nthat, (i) Principal Stockholder will receive semi-annual reports regarding the
\nstatus of the Escrow Materials, (ii) the Escrow Agent will immediately release
\nthe Escrow Materials to PubliGroupe S.A., without limitation and for PubliGroupe
\nS.A.’s present use only, in the event that either (A) Parent ceases to conduct
\nbusiness in the ordinary course or (B) Parent ceases to maintain or support the
\nEscrow Materials generally in the normal course of Parent’s business and (iii)
\nthe Escrow Agreement may not be amended, assigned, or revoked without the prior
\nwritten consent of Principal Stockholder.<\/p>\n
SECTION 6.12 PAYMENTS TO FRACTIONAL SHARE HOLDERS. Parent
\nacknowledges that immediately prior to execution of this Agreement Company has
\neffected a one-for-2000 reverse stock split (the “REVERSE Split”), and that as a
\nresult thereof certain former stockholders of the Company became entitled to
\ncash in lieu of fractional shares of Company Common Stock, with the amount of
\ncash payable to each such former stockholder being equal to the product of (i)
\nthe fair market value of one share of Company Common Stock outstanding after the
\nReverse Split (the “PRE-SPLIT COMPANY COMMON STOCK”) on the effective date of
\nthe Reverse Split, as determined by the Board of Directors of the Company in its
\nsole discretion, multiplied by (ii) the number of shares of Pre-Split Company
\nCommon Stock held by such former stockholder that would otherwise have been
\nexchanged for such fractional share interests (the “FRACTIONAL SHARE PAYOUT”).
\nParent further agrees that Parent shall, or shall cause Merger Sub to, promptly
\nupon delivery of any certificate or certificates for Pre-Split Company Common
\nStock by the holder or holders thereof to Parent or Merger Sub after the
\nEffective Time, pay to such holder or holders the Fractional Share Payout.<\/p>\n
51<\/p>\n
SECTION 6.13 TAX NATURE OF TRANSACTION. The parties
\nacknowledge that the Merger is intended to constitute for tax purposes a fully
\ntaxable exchange of the shares of Company for shares of Parent by and between
\nNeversleepagain Holding Corp. and the stockholders of Company (including,
\nwithout limitation, the Principal Stockholder) (with no election under either or
\nboth of Sections 338(g) or 338(h)(10)). Additionally, it is understood that (i)
\nRolex Principal Stockholder will elect under Treasury Regulation Section
\n1.1502-20(g) to reattribute as much of the Tax net operating losses of Company
\nand any of Company’s Subsidiaries included in the federal Tax consolidated group
\nof which Rolex Principal Stockholder is a parent (the “COMPANY LOSS SUBGROUP”)
\nas is permissible under the Code and Treasury Regulations (and, if able to
\nreattribute less than all thereof, shall select such Tax net operating losses as
\nit chooses pursuant to such Code and Treasury Regulations) and (ii) will, if it
\ndeems necessary, elect to reattribute to itself all of Company Loss Subgroup’s
\nSection 382 limitation applicable to any losses of the Company Loss Subgroup
\npursuant to Treasury Regulation Sections 1.1502-91-96, 1.1502-20(g), and any
\nother relevant provisions of the Code or Treasury Regulations. Parent and Rolex
\nPrincipal Stockholder, PROVIDED that Parent is provided with all information
\nnecessary for such filings, shall make or cause any relevant Subsidiary,
\nincluding Company, to make all Tax filings consistently with the foregoing
\ntreatment. In no case will Parent or any of its Subsidiaries (including Company)
\ntake the position that it may utilize or deduct against any income any of the
\nlosses of Company with respect to which the elections referred to above have
\nbeen made regardless of whether Treasury Regulation Section 1.1502-20 is upheld
\nby the courts, except to the extent that there has been a final determination
\nwith respect to Principal Stockholder that those elections have not been
\neffective.<\/p>\n
SECTION 6.14 CHAIN SUBSIDIARIES. For the one-year period
\nfollowing the date of this Agreement, Parent shall take all actions necessary
\n(i) to maintain in separate existence at all times each of the Chain
\nSubsidiaries and (ii) prevent any transfer (through a sale, exchange, merger,
\nconsolidation, or otherwise) by any Chain Subsidiary at any time after the date
\nof the Merger of all or a significant portion of its business assets to any
\nother Chain Subsidiary or any other member of the Parent Group.<\/p>\n
SECTION 6.15 TAX COOPERATION. From and after the Effective
\nTime, Rolex Principal Stockholder, on the one hand, and Parent, Company, and
\neach Affiliate of Parent, on the other hand, shall cooperate, to the extent
\nreasonably requested by the other party, in connection with the filing of Tax
\nreturns or in connection with any audit, litigation, or other proceeding with
\nrespect to Taxes. Such cooperation shall include, without limitation, the
\nretention (unless otherwise consented to after prior written notice by the other
\nparty) by each party of books, records, and other information of such party
\nrelating to Taxes or separate taxable income and separate tax attributes of
\nCompany or Subsidiaries of the Company, as the case may be and (upon the other
\nparty’s request) the provision of such books, records, and other information,
\nand explanation of any material provided hereunder. The parties further agree,
\nupon request, to use their best efforts to obtain any certificate or other
\ndocument from any governmental authority or any other person as may be necessary
\nto mitigate, reduce, or eliminate any Tax that could be imposed or with respect
\nto any refund; provided that such reduction is not inconsistent with the other
\nprovisions of this Article VI and this Agreement, PROVIDED, HOWEVER, that any
\nexpense incurred in that connection shall be borne by the benefited party.<\/p>\n
52<\/p>\n
ARTICLE VII<\/p>\n
ADDITIONAL AGREEMENTS<\/p>\n
SECTION 7.01 NOTES.<\/p>\n
(a) On January 2, 2002, Parent shall issue the Second Note to
\n Principal Stockholder and Principal Stockholder shall deliver to Parent
\n in immediately available funds by wire transfer the principal amount of
\n the Second Note.<\/p>\n
(b) If Parent’s net loss from continuing operations before
\n extraordinary items, excluding interest, taxes, depreciation,
\n amortization, stock-based compensation, merger-related costs,
\n restructuring and exit costs, loss on sale of non-core assets,
\n impairment of intangible assets, minority interest, gain on sale of
\n investments and impairment of investments for the first fiscal quarter
\n of 2002, as reported by Parent in its quarterly earnings press release,
\n does not exceed ($3,531,905), Parent shall issue within five business
\n days following such earnings press release the Third Note on the same
\n terms and conditions (including the same principal amount) as the
\n Second Note and Company shall pay to Parent in immediately available
\n funds by wire transfer the principal amount of such Third Note.<\/p>\n
SECTION 7.02 DIRECTORS’ AND OFFICERS’ INDEMNIFICATION.<\/p>\n
Except as may be required by applicable Law, the provisions
\nwith respect to immunities and indemnification that are set forth in the
\nCertificate of Incorporation and bylaws of the Surviving Corporation shall not
\nbe amended, repealed or otherwise modified for a period of six (6) years from
\nthe Effective Time in any manner that would affect adversely the rights
\nthereunder of individuals who at or at any time prior to the Effective Time were
\ndirectors, officers, employees or agents of Company.<\/p>\n
SECTION 7.03 PUBLIC ANNOUNCEMENTS. The initial press release
\nconcerning the Merger to be released in connection with the execution and
\ndelivery of this Agreement shall be a joint press release and, thereafter,
\nParent, Company and the Principal Stockholder shall consult with each other
\nbefore issuing any press release or otherwise making any public statements with
\nrespect to this Agreement or the Merger and shall not issue any such press
\nrelease or make any such public statement without the prior approval of the
\nother, except to the extent required by applicable Law or the requirements of
\nthe rules and regulations of the NNM or the SWX Swiss Exchange, in which case
\nthe issuing party shall use all reasonable efforts to consult with the other
\nparty before issuing any such release or making any such public statement.<\/p>\n
SECTION 7.04 LISTING OF ADDITIONAL SHARES. Prior to the
\nEffective Time, Parent shall file with the NNM a Notification Form for Listing
\nof Additional Shares with respect to the shares of Parent Common Stock issued or
\nissuable in connection with the Merger and shall use all reasonable efforts to
\nhave such shares of Parent Common Stock approved for quotation on the NNM.<\/p>\n
53<\/p>\n
SECTION 7.05 BLUE SKY. Parent shall use all reasonable efforts
\nto obtain prior to the Effective Time all necessary permits and approvals
\nrequired under Blue Sky Laws to permit the distribution of the shares of Parent
\nCommon Stock to be issued in accordance with the provisions of this Agreement.<\/p>\n
SECTION 7.06 EMPLOYEE MATTERS. Simultaneously with the Merger,
\nthe Surviving Corporation shall assume all employment agreements, consulting
\nagreements and termination benefit agreements which are in effect at Company on
\nthe date hereof. As of the Effective Time, Parent shall cause the Surviving
\nCorporation to honor and satisfy all obligations and liabilities solely with
\nrespect to the Company Benefit Plans maintained at the Company or Subsidiary
\nlevel. Notwithstanding the foregoing, the Surviving Corporation shall not be
\nrequired to continue any such particular Company Benefit Plan after the
\nEffective Time, and any such Company Benefit Plan may be amended or terminated
\nin accordance with its terms and applicable law. To the extent that any Company
\nBenefit Plan is terminated or amended after the Effective Time so as to reduce
\nthe benefits that are then being provided with respect to participants
\nthereunder, Parent shall arrange for each individual who is then a participant
\nin such terminated or amended plan to participate in a comparable benefit plan
\nmaintained by Parent (solely in the event that Parent maintains a comparable
\nplan) in accordance with the eligibility criteria thereof, and each individual
\nshall be given credit, for purposes of any service requirement for participation
\nor vesting (but not benefit accrual for purposes of any defined benefit pension
\nplan), for his or her period of service with Company or any Company Subsidiary
\ncredited under a similar plan prior to the Effective Time, subject to
\nappropriate break in service rules. Subject to the approval of Parent’s board of
\ndirectors (or a duly authorized committee thereof), following the Effective
\nTime, Parent shall grant to employees of the Surviving Corporation options to
\npurchase shares of Parent Common Stock, based on the fair market value of
\nParent’s Common Stock on the actual date of grant, in amounts which are
\ncomparable to options granted to similarly situated employees of Parent but,
\nwhich are not, in the aggregate, less than the aggregate number of options to
\npurchase shares of Company Common Stock granted to employees of Company prior to
\nthe date hereof (after giving effect to the Reverse Split and the Exchange
\nRatio), which amounts shall be determined by Parent’s board of directors (or a
\nduly authorized committee thereof). Parent shall use its reasonable best efforts
\nto obtain such approval from its board of directors (or a duly authorized
\ncommittee thereof).<\/p>\n
SECTION 7.07 DIRECTORS OF PARENT FOLLOWING THE MERGER. Parent
\nshall take all steps as may be necessary to cause the board of directors of
\nParent to be reconstituted, as of the Effective Time, to consist of the persons
\nidentified on Schedule III hereto.<\/p>\n
54<\/p>\n
ARTICLE VIII<\/p>\n
CONDITIONS TO THE MERGER<\/p>\n
SECTION 8.01 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO
\nCONSUMMATE THE MERGER. The obligations of the parties hereto to consummate the
\nMerger are subject to the satisfaction or, if permitted by applicable Law,
\nwaiver of the following conditions:<\/p>\n
(a) no order, statute, rule, regulation, executive order,
\n stay, decree, judgment or injunction shall have been enacted, entered,
\n promulgated or enforced by any court or Governmental Entity which
\n prohibits or prevents the consummation of the Merger which has not been
\n vacated, dismissed or withdrawn prior to the Effective Time. Company
\n and Parent shall use their reasonable best efforts to have any of the
\n foregoing vacated, dismissed or withdrawn by the Effective Time;<\/p>\n
(b) any waiting period (and any extension thereof) applicable
\n to the consummation of the Merger under the HSR Act or any other
\n applicable competition, merger control or similar Law shall have
\n expired or been terminated;<\/p>\n
(c) all consents, approvals and authorizations legally
\n required to be obtained to consummate the Merger shall have been
\n obtained from all Governmental Entities, except where the failure to
\n obtain any such consent, approval or authorization could not reasonably
\n be expected to result in a Parent Material Adverse Effect or a Company
\n Material Adverse Effect; and<\/p>\n
(d) all consents, approvals and authorizations from third
\n parties required to be obtained to consummate the Merger shall have
\n been obtained or waived, except where the failure to obtain any such
\n consent, approval or authorization could not reasonably be expected to
\n result in a Parent Material Adverse Effect or a Company Material
\n Adverse Effect.<\/p>\n
SECTION 8.02 CONDITIONS TO THE OBLIGATIONS OF COMPANY. The
\nobligations of Company to consummate the Merger, or to permit the consummation
\nof the Merger are subject to the satisfaction or, if permitted by applicable
\nLaw, waiver of the following further conditions:<\/p>\n
(a) each of the representations and warranties of Parent and
\n Merger Sub contained in this Agreement that are qualified by a
\n reference to materiality or Parent Material Adverse Effect shall be
\n true, complete and correct in all respects both when made and on and as
\n of the Effective Time as if made at and as of the Effective Time (other
\n than representations and warranties that are so qualified which address
\n matters only as of a certain date which shall be true, complete and
\n correct in all respects as of such certain date), and the
\n representations and warranties of Parent and Merger Sub contained in
\n this Agreement that are not so qualified shall be true, complete and
\n correct in all material respects both when made and on and as of the
\n Effective Time as if made at and as of the Effective Time (except for
\n those representations and warranties that are not <\/p>\n
55<\/p>\n
so qualified which address matters only as of a certain date which
\n shall be true, complete and correct in all material respects as of such
\n certain date), except for changes contemplated by this Agreement;<\/p>\n
(b) Parent and Merger Sub shall have performed or complied in
\n all material respects with all covenants and agreements required by
\n this Agreement to be performed or complied with by them on or prior to
\n the Effective Time;<\/p>\n
(c) Company and Principal Stockholder shall have been provided
\n with a certificate executed on behalf of Parent and Merger Sub by
\n authorized officers certifying that the conditions set forth in Section
\n 8.02(a) and (b) shall have been fulfilled;<\/p>\n
(d) there shall have been no Parent Material Adverse Effect
\n since the date of this Agreement; and<\/p>\n
(e) Parent shall have issued the Parent Guarantee to Principal
\n Stockholder.<\/p>\n
SECTION 8.03 CONDITIONS TO THE OBLIGATIONS OF PARENT. The
\nobligations of Parent to consummate the Merger are subject to the satisfaction
\nor waiver of the following further conditions:<\/p>\n
(a) each of the representations and warranties of Company and
\n Principal Stockholder contained in this Agreement that are qualified by
\n a reference to materiality or Company Material Adverse Effect shall be
\n true, complete and correct in all respects both when made and on and as
\n of the Effective Time as if made at and as of the Effective Time (other
\n than representations and warranties that are so qualified which address
\n matters only as of a certain date which shall be true, complete and
\n correct in all respects as of such certain date), and the
\n representations and warranties of Company and Principal Stockholder
\n contained in this Agreement that are not so qualified shall be true,
\n complete and correct in all material respects both when made and on and
\n as of the Effective Time as if made at and as of the Effective Time
\n (except for those representations and warranties that are not so
\n qualified which address matters only as of a certain date which shall
\n be true, complete and correct in all material respects as of such
\n certain date), except for changes contemplated by this Agreement;<\/p>\n
(b) Company shall have performed or complied in all material
\n respects with all covenants and agreements required by this Agreement
\n to be performed or complied with by it on or prior to the Effective
\n Time;<\/p>\n
(c) Parent shall have been provided with a certificate
\n executed on behalf of Company by an authorized officer certifying that
\n the conditions set forth in Section 8.03(a) and (b) shall have been
\n fulfilled;<\/p>\n
(d) there shall have been no Company Material Adverse Effect
\n since the date of this Agreement;<\/p>\n
56<\/p>\n
(e) Company shall have caused the conversion into capital, or
\n otherwise discharged, the outstanding debt of Company (other than trade
\n payables incurred in the ordinary course of business consistent with
\n past practice), including accrued interest;<\/p>\n
(f) Company shall have cash on hand in an amount equal to or
\n exceeding $1,500,000;<\/p>\n
(g) Principal Stockholder shall have entered into the Lock-Up
\n Agreement;<\/p>\n
(h) On or prior to the date hereof, the board of directors of
\n Company shall have taken all action necessary to terminate all
\n outstanding options to purchase shares of Company Common Stock in
\n accordance with the terms of Company’s 1999 Employee Stock Option Plan
\n (the “COMPANY OPTION PLAN”), subject to the consummation of the
\n transactions contemplated hereby and the expiration of the twenty-day
\n notice period contemplated under the Company Option Plan; and<\/p>\n
(i) Principal Stockholder shall have delivered to Company in
\n immediately available funds by wire transfer the principal amount of
\n the First Note upon the execution and delivery of the First Note by
\n Company to Principal Stockholder.<\/p>\n
ARTICLE IX<\/p>\n
INDEMNIFICATION<\/p>\n
SECTION 9.01 INDEMNIFICATION BY PRINCIPAL STOCKHOLDER.
\nPrincipal Stockholder shall indemnify, defend and hold harmless Parent and its
\naffiliates (including the Surviving Corporation), promptly upon demand at any
\ntime and from time to time, against any and all losses, liabilities, claims,
\nactions, damages and expenses (including without limitation, reasonable
\nattorneys’ fees and disbursements) (collectively, “LOSSES”), arising out of or
\nin connection with any of the following: (i) any misrepresentation or breach of
\nany warranty made by the Company and\/or Principal Stockholder in this Agreement;
\n(ii) any breach or non-fulfillment of any covenant or agreement made by the
\nCompany or Principal Stockholder in this Agreement; (iii) any liability arising
\nat any time by reason of the Company being a member of a consolidated, combined
\nor unitary group; or (iv) the claims of any broker or finder engaged by the
\nCompany.<\/p>\n
SECTION 9.02 INDEMNIFICATION BY PARENT. Parent shall
\nindemnify, defend and hold harmless Principal Stockholder, promptly upon demand
\nat any time and from time to time, against any and all Losses arising out of or
\nin connection with any of the following: (i) any misrepresentation or breach of
\nany warranty made by Parent or Merger Sub in this Agreement; (ii) any breach or
\nnonfulfillment of any covenant or agreement made by Parent or Merger Sub in this
\nAgreement; or (iii) the claims of any broker or finder engaged by Parent or
\nMerger Sub.<\/p>\n
SECTION 9.03 SURVIVAL. The representations and warranties in
\nthis Agreement shall terminate on the first anniversary of the Effective Time or
\nupon the termination of this Agreement pursuant to Section 10.01, as the case
\nmay be; PROVIDED, HOWEVER, that (a) the <\/p>\n
57<\/p>\n
representations and warranties contained in Sections 4.01, 4.02, 4.03, 4.04,
\n4.05, 4A.03, 4A.04, 4A.05, 5.01, 5.02, 5.03, 5.04 and 5.05 shall remain in full
\nforce and effect indefinitely, (b) the representations and warranties contained
\nin Sections 4.09. 4.12, 4.14, 5.09, 5.12 and 5.14 shall remain in full force and
\neffect until the expiration of the applicable statute of limitations and (c) the
\nrepresentation contained in Section 5.14(o) shall expire at the Effective Time;
\nPROVIDED, HOWEVER, that if at the Effective Time a party has knowledge of facts
\nconstituting a breach by another party of any representation or warranty by such
\nother party, the party having such knowledge shall not be entitled to assert a
\nclaim for Losses under this Agreement arising out of such breach. This Section
\n9.03 shall not limit any covenant or agreement of the parties which by its terms
\ncontemplates performance after the Effective Time.<\/p>\n
SECTION 9.04 LIMITATIONS. Notwithstanding the foregoing,<\/p>\n
(a) The indemnification in Sections 9.01 and 9.02, as the case
\n may be, shall be the exclusive remedy of Principal Stockholder, the
\n Company, Merger Sub and of Parent and its affiliates with respect to
\n claims for Losses;<\/p>\n
(b) The indemnification provided for in Section 9.01(i) or
\n (ii) (other than any obligation of Principal Stockholder under Section
\n 7.01(a) or (b)) or Section 9.02(i) or (ii) (other than any obligation
\n of Parent under Section 7.01(a) or (b)) shall not be required unless
\n and until, at the time of any such determination, the total amount of
\n Losses otherwise subject to indemnification under such section exceeds
\n $500,000, in which event the indemnified party or parties will be
\n entitled to indemnification for the full amount of their Losses;<\/p>\n
(c) The total amount of indemnification pursuant to Section
\n 9.01(i)or (ii) (other than any obligation of Principal Stockholder
\n under Section 7.01(a) or (b)) or Section 9.02(i) or (ii) (other than
\n any obligation of Parent under Section 7.01(a) or (b)) shall in no
\n event exceed an amount equal to $2,000,000, PROVIDED, HOWEVER, that
\n with respect to any indemnification obligation on behalf of the
\n Principal Stockholder, Parent does hereby agree that the sole remedy of
\n Parent and its affiliates under Section 9.01(i) or (ii) (other than any
\n obligation of Principal Stockholder under Section 7.01(a) or (b)) shall
\n be the reduction in the principal amount of the First Note issued to
\n the Principal Stockholder in order to satisfy such indemnification
\n obligation hereunder;<\/p>\n
(d) Neither Principal Stockholder, on the one hand, nor Parent
\n or any of its affiliates, on the other, shall be entitled to
\n indemnification for Losses arising out of matters referred to in
\n Section 9.01(i) or Section 9.02(i), as applicable, unless it shall have
\n given written notice to the indemnifying party, setting forth its claim
\n for indemnification in reasonable detail, within the period from the
\n Closing until the first anniversary of the Effective Time;<\/p>\n
(e) An indemnified party shall promptly give written notice to
\n the indemnifying party after the indemnified party has knowledge that
\n any legal proceeding has been instituted or any claim has been asserted
\n in respect of which indemnification may be sought under the provisions
\n of Sections 9.01 or 9.02. If the indemnifying party, <\/p>\n
58<\/p>\n
within 30 days after the indemnified party has given such notice (or
\n within such shorter period of time as an answer or other responsive
\n motion may be required), shall have acknowledged in writing his or its
\n obligation to indemnify, then the indemnifying party shall have the
\n right to control the defense of such claim or proceeding, and the
\n indemnifying party shall not settle or compromise such claim or
\n proceeding without the written consent of the indemnified party. The
\n indemnified party may in any event participate in any such defense with
\n his or its own counsel and at his or its own expense. If the party
\n requested to indemnify declines to undertake the defense of the matter,
\n the requesting party shall proceed in a commercially reasonable manner
\n in the defense thereof and, if such matter is ultimately determined
\n between the parties hereto to be included in Losses for which indemnity
\n is appropriate, the requesting party may include as such Losses the
\n reasonable costs of settlement or payment of any resulting judgment and
\n the reasonable costs (including court costs and reasonable attorneys’
\n fees) of defending the claim; and<\/p>\n
(f) The indemnified party shall be kept fully informed by the
\n indemnifying party of such action, suit or proceeding at all stages
\n thereof, whether or not he or it is represented by counsel. The
\n indemnifying party shall, at the indemnifying party’s expense, make
\n available to the indemnified party and its attorneys and accountants
\n all books and records of the indemnifying party relating to such
\n action, suit or proceeding, and the parties hereto agree to render to
\n each other such assistance as they may reasonably require of each other
\n in order to ensure the proper and adequate defense of any such action,
\n suit or proceeding.<\/p>\n
SECTION 9.05 DELIVERY OF NOTICE. Parent and Principal
\nStockholder agree to promptly deliver a written notice to the other party upon
\nany determination that a claim for Losses under Section 9.01 or 9.02 is
\nreasonably likely to exist. Such notice shall describe with reasonable
\nspecificity the circumstances of the possible Losses as to allow the
\nindemnifying party to evaluate the alleged claim(s), and the indemnified party
\nshall provide reasonable responses to information requests that the indemnifying
\nparty may have in evaluating the possible existence of Losses.<\/p>\n
ARTICLE X<\/p>\n
TERMINATION, AMENDMENT AND WAIVER<\/p>\n
SECTION 10.01 TERMINATION. This Agreement may be terminated
\nand the Merger may be abandoned at any time prior to the Effective Time,
\nnotwithstanding any requisite adoption and approval of this Agreement, as
\nfollows:<\/p>\n
(a) by mutual written consent duly authorized by the boards of
\n directors of each of Parent and Company;<\/p>\n
(b) by either Parent or Company, if the Effective Time shall
\n not have occurred on or before December 31, 2001; PROVIDED, HOWEVER,
\n that the right to terminate <\/p>\n
59<\/p>\n
this Agreement under this Section 10.01(b) shall not be available to
\n any party whose failure to fulfill any obligation under this Agreement
\n shall have caused, or resulted in, the failure of the Effective Time to
\n occur on or before such date;<\/p>\n
(c) by either Parent or Company, if any Governmental Order,
\n writ, injunction or decree preventing the consummation of the Merger
\n shall have been entered by any court of competent jurisdiction and
\n shall have become final and nonappealable;<\/p>\n
(d) by Parent, twenty (20) days after receipt by Company of a
\n written notice from Parent of a breach of any representation, warranty,
\n covenant or agreement on the part of Company set forth in this
\n Agreement, or if any representation or warranty of Company shall have
\n become untrue, incomplete or incorrect, in either case such that the
\n conditions set forth in Section 8.03 would not be satisfied (a
\n “TERMINATING COMPANY BREACH”); PROVIDED, HOWEVER, that if such
\n Terminating Company Breach is cured by Company within such twenty (20)
\n day period, Parent may not terminate this Agreement under this Section
\n 10.01(d); or<\/p>\n
(e) by Company, twenty (20) days after receipt by Parent of a
\n written notice from Company of a breach of any representation,
\n warranty, covenant or agreement on the part of Parent or Merger Sub set
\n forth in this Agreement, or if any representation or warranty of Parent
\n or Merger Sub shall have become untrue, incomplete or incorrect, in
\n either case such that the conditions set forth in Section 8.02 would
\n not be satisfied (a “TERMINATING PARENT BREACH”); PROVIDED, HOWEVER,
\n that if such Terminating Parent Breach is cured by Parent within such
\n twenty (20) day period, Company may not terminate this Agreement under
\n this Section 10.01(e).<\/p>\n
The right of any party hereto to terminate this Agreement pursuant to this
\nSection 10.01 will remain operative and in full force and effect regardless of
\nany investigation made by or on behalf of any party hereto, any Person
\ncontrolling any such party or any of their respective officers, directors,
\nrepresentatives or agents, whether prior to or after the execution of this
\nAgreement.<\/p>\n
SECTION 10.02 EFFECT OF TERMINATION. Except as provided in
\nSection 10.05, in the event of termination of this Agreement pursuant to Section
\n10.01, this Agreement shall forthwith become void, there shall be no liability
\nunder this Agreement on the part of any party hereto or any of its Affiliates or
\nany of its or their officers or directors, and all rights and obligations of
\neach party hereto shall cease; PROVIDED, HOWEVER, that nothing herein shall
\nrelieve any party hereto from liability for the willful or intentional breach of
\nany of its representations and warranties or the willful or intentional breach
\nof any of its covenants or agreements set forth in this Agreement.<\/p>\n
SECTION 10.03 AMENDMENT. This Agreement may not be amended
\nexcept by an instrument in writing signed by the parties hereto.<\/p>\n
SECTION 10.04 WAIVER. At any time prior to the Effective Time,
\nany party hereto may (a) extend the time for or waive compliance with the
\nperformance of any obligation or other act of any other party hereto, (b) waive
\nany inaccuracy in the representations and <\/p>\n
60<\/p>\n
warranties contained herein or in any document delivered pursuant hereto and (c)
\nwaive compliance by the other party with any of the agreements or conditions
\ncontained herein. Any such extension or waiver shall be valid if set forth in an
\ninstrument in writing signed by the party or parties to be bound thereby.<\/p>\n
SECTION 10.05 TERMINATION FEE; EXPENSES.<\/p>\n
(a) Except as set forth in this Section 10.05, all Expenses
\nincurred in connection with this Agreement and the Merger shall be paid by the
\nparty incurring such Expenses, whether or not the Merger is consummated.<\/p>\n
(b) In the event that Parent shall terminate this Agreement
\npursuant to Section 10.01(b) or (d) and at any time after the date of this
\nAgreement there shall have been publicly announced a Competing Transaction with
\nrespect to Company and a binding agreement with respect to a Competing
\nTransaction is entered into by Company on or before December 17, 2001, then
\nCompany shall pay to Parent an amount equal to $100,000 (the “COMPANY
\nTERMINATION FEE”). Notwithstanding the foregoing, no fee shall be paid pursuant
\nto this Section 10.05(b) if Parent shall be in material breach of its
\nobligations hereunder. Any Company Termination Fee shall be paid in same day
\nfunds within three (3) Business Days of the date of termination or the execution
\nof a binding agreement with respect to a Competing Transaction, as applicable.<\/p>\n
(c) In the event that Company shall terminate this Agreement
\npursuant to Section 10.01(b) or (e) and at any time after the date of this
\nAgreement there shall have been publicly announced a Competing Transaction with
\nrespect to Parent and a binding agreement with respect to a Competing
\nTransaction is entered into by Parent on or before December 17, 2001, then
\nParent shall pay to Company an amount equal to $100,000 (the “PARENT TERMINATION
\nFEE”). Notwithstanding the foregoing, no fee shall be paid pursuant to this
\nSection 10.05(c) if Company shall be in material breach of its obligations
\nhereunder. Any Parent Termination Fee shall be paid in same day funds within
\nthree (3) Business Days of the date of termination or the execution of a binding
\nagreement with respect to a Competing Transaction, as applicable.<\/p>\n
(d) The parties agree that any remedy or amount payable
\npursuant to this Section 10.05 shall be an exclusive remedy, except for fraud,
\nany willful breach of any representation, warranty, covenant or agreement
\ncontained in this Agreement or any action seeking specific performance.<\/p>\n
ARTICLE XI<\/p>\n
GENERAL PROVISIONS<\/p>\n
SECTION 11.01 NOTICES. All notices, requests, claims, demands
\nand other communications hereunder shall be in writing and shall be given (and
\nshall be deemed to have been duly given upon receipt) by delivery in Person, by
\ntelecopy or facsimile, by registered or certified mail (postage prepaid, return
\nreceipt requested) or by a nationally recognized courier <\/p>\n
61<\/p>\n
service to the respective parties at the following addresses (or at such other
\naddress for a party as shall be specified in a notice given in accordance with
\nthis Section 11.01):<\/p>\n
(a) if to Company:<\/p>\n
260 Fifth Avenue, 4th Floor
\n New York, NY 10001
\n Attention: Chief Financial Officer
\n Facsimile: (212) 725-4573<\/p>\n
with a copy to:<\/p>\n
Davis & Gilbert LLP
\n 1740 Broadway
\n New York, NY 10019
\n Attention: Brad J. Schwartzberg, Esq.
\n Facsimile: (212) 468-4888<\/p>\n
(b) if to Parent or Merger Sub:<\/p>\n
24\/7 Media, Inc.
\n 1250 Broadway, 28th Floor
\n New York, NY 10001-3701
\n Attention: General Counsel
\n Fax: (212) 760-2811<\/p>\n
with a copy to:<\/p>\n
Proskauer Rose LLP
\n 1585 Broadway
\n New York, NY 10036
\n Attention: Ronald Papa, Esq.
\n Facsimile: (212) 969-2900<\/p>\n
(c) if to Principal Stockholder:<\/p>\n
PubliGroupe USA Holding, Inc.
\n 260 Fifth Avenue, 4th Floor
\n New York, NY 10001
\n Attention: Chief Financial Officer
\n Facsimile: (212) 725-4573<\/p>\n
with a copy to:<\/p>\n
Davis & Gilbert LLP
\n 1740 Broadway<\/p>\n
62<\/p>\n
New York, NY 10019
\n Attention: Brad J. Schwartzberg, Esq.
\n Facsimile: (212) 468-4888<\/p>\n
SECTION 11.02 SEVERABILITY. If any term or other provision of
\nthis Agreement is invalid, illegal or incapable of being enforced by any rule of
\nLaw or public policy, all other conditions and provisions of this Agreement
\nshall nevertheless remain in full force and effect so long as the economic or
\nlegal substance of the Merger is not affected in any manner materially adverse
\nto any party. Upon such determination that any term or other provision is
\ninvalid, illegal or incapable of being enforced, the parties hereto shall
\nnegotiate in good faith to modify this Agreement so as to effect the original
\nintent of the parties as closely as possible in a mutually acceptable manner to
\nthe fullest extent permitted by applicable Law in order that the Merger may be
\nconsummated as originally contemplated to the fullest extent possible.<\/p>\n
SECTION 11.03 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither
\nthis Agreement nor any of the rights, interests or obligations hereunder shall
\nbe assigned by any of the parties hereto (whether by operation of Law or
\notherwise) without the prior written consent of the other parties hereto.
\nSubject to the preceding sentence, this Agreement shall be binding upon and
\nshall inure to the benefit of the parties hereto and their respective successors
\nand permitted assigns. Notwithstanding anything contained in this Agreement to
\nthe contrary, other than Section 7.02, nothing in this Agreement, expressed or
\nimplied, is intended to confer on any Person other than the parties hereto or
\ntheir respective successors and permitted assigns any rights or remedies under
\nor by reason of this Agreement.<\/p>\n
SECTION 11.04 INCORPORATION OF EXHIBITS. The Parent Disclosure
\nSchedule, the Principal Stockholder Disclosure Schedule, Company Disclosure
\nSchedule and all Annexes and Schedules attached hereto and referred to herein
\nare hereby incorporated herein and made a part of this Agreement for all
\npurposes as if fully set forth herein. Parent, the Rolex Stockholders and
\nCompany acknowledge that the Parent Disclosure Schedule, the Rolex Stockholder
\nDisclosure Schedule and the Company Disclosure Schedule (i) are qualified in
\ntheir entirety by reference to specific provisions of this Agreement and (ii)
\nare not intended to constitute and shall not be construed as indicating that
\nsuch matter is required to be disclosed, nor shall such disclosure be construed
\nas an admission that such information is material with respect to Parent or
\nCompany, as the case may be, except to the extent required by this Agreement and
\nby applicable Law.<\/p>\n
SECTION 11.05 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
\nBY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
\nYORK.<\/p>\n
SECTION 11.06 JURISDICTION; WAIVER OF JURY TRIAL. Each party
\nhereto irrevocably consents to the exclusive jurisdiction of any court located
\nwithin the State of New York in connection with any matter based upon or arising
\nout of this Agreement or the matters contemplated herein, agrees that process
\nmay be served upon it in any manner authorized by the laws of the State of New
\nYork and waives and covenants not to assert or plead any objection which it
\nmight otherwise have to such jurisdiction and such process. EACH PARTY HERETO<\/p>\n
63<\/p>\n
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER
\nBASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
\nAGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF
\nANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
\nHEREOF.<\/p>\n
SECTION 11.07 HEADINGS; INTERPRETATION. The descriptive
\nheadings contained in this Agreement are included for convenience of reference
\nonly and shall not affect in any way the meaning or interpretation of this
\nAgreement. The parties have participated jointly in the negotiation and drafting
\nof this Agreement. In the event an ambiguity or question of intent or
\ninterpretation arises, this Agreement shall be construed as if drafted jointly
\nby the parties, and no presumption or burden of proof shall arise favoring or
\ndisfavoring any party by virtue of the authorship of any provisions of this
\nAgreement.<\/p>\n
SECTION 11.08 COUNTERPARTS. This Agreement may be executed and
\ndelivered (including by facsimile transmission) in one or more counterparts, and
\nby the different parties hereto in separate counterparts, each of which when
\nexecuted and delivered shall be deemed to be an original but all of which taken
\ntogether shall constitute one and the same agreement.<\/p>\n
SECTION 11.09 ENTIRE AGREEMENT. This Agreement (including the
\nSchedules and Annexes attached hereto, the Parent Disclosure Schedule, the
\nPrincipal Stockholder Disclosure Schedule and the Company Disclosure Schedule)
\nconstitutes the entire agreement among the parties with respect to the subject
\nmatter hereof and supersedes all prior agreements and understandings among the
\nparties with respect thereto.<\/p>\n
SECTION 11.10 SWISS ACCOUNTING. The parties agree that, solely
\nfor the purposes of Swiss generally accepted accounting principles, the
\neffective date of this Agreement shall be October 1, 2001.<\/p>\n
{SIGNATURE PAGES FOLLOW}<\/p>\n
64<\/p>\n
IN WITNESS WHEREOF, the parties hereto have caused this
\nAgreement to be executed as of the date first written above by their respective
\nofficers thereunto duly authorized.<\/p>\n
24\/7 MEDIA, INC.<\/p>\n
By: \/s\/ David J. Moore
\n ——————————–
\n Name: David J. Moore
\n Title: President<\/p>\n
CONTINUUM HOLDING CORP.<\/p>\n
By: \/s\/ David J. Moore
\n ——————————–
\n Name: David J. Moore
\n Title: President<\/p>\n
REAL MEDIA, INC.<\/p>\n
By: \/s\/ Walter Annasohn
\n ——————————–
\n Name: Walter Annasohn
\n Title: CEO<\/p>\n
PUBLIGROUPE USA HOLDING, INC.<\/p>\n
By: \/s\/ Walter Annasohn
\n ——————————–
\n Name: Walter Annasohn
\n Title: Director<\/p>\n
65<\/p>\n
SCHEDULE I<\/p>\n
OFFICERS OF THE SURVIVING CORPORATION<\/p>\n
David J. Moore President
\nMark E. Moran Senior Vice President and Secretary<\/p>\n
66<\/p>\n
SCHEDULE II<\/p>\n
DIRECTORS OF THE SURVIVING CORPORATION<\/p>\n
David J. Moore
\nMark E. Moran<\/p>\n
67<\/p>\n
SCHEDULE III<\/p>\n
Directors of Parent<\/p>\n
David J. Moore
\nArnie Semsky
\nJohn F. Barry
\nRichard Burns
\nRobert Perkins<\/p>\n
Two additional persons to be designated by Principal Stockholder, at least one
\nof whom must be “independent” (as determined in accordance with Nasdaq rules)<\/p>\n
Each independent designee shall be subject to the approval of Parent, such
\napproval not to be unreasonably withheld.<\/p>\n
68<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[6536],"corporate_contracts_industries":[9503],"corporate_contracts_types":[9622,9626],"class_list":["post-42992","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-247-media-inc","corporate_contracts_industries-services__advertising","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/42992","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=42992"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=42992"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=42992"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=42992"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}