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EXHIBIT 2.2
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AMONG
REDROLLER HOLDINGS, INC.
(formerly known as Aslahan Enterprises Ltd.)
REDROLLER ACQUISITION CORP.
AND
REDROLLER, INC.
November 13, 2007
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TABLE OF CONTENTS
PAGE
ARTICLE I - THE
MERGER.......................................................2
1.1 The
Merger.................................................2
1.2 The
Closing................................................2
1.3 Actions at the
Closing.....................................2
1.4 Additional
Actions.........................................3
1.5 Conversion of Company
Securities...........................3
1.6 Dissenting
Shares..........................................4
1.7 Fractional
Shares..........................................5
1.8
Options....................................................5
1.9
Escrow.....................................................6
1.10 Certificate of Incorporation and
Bylaws....................6
1.11 No Further
Rights..........................................7
1.12 Closing of Transfer
Books..................................7
1.13 Post-Closing
Adjustment....................................7
1.14 Exemption From
Registration................................8
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE
COMPANY...................8
2.1 Organization, Qualification and Corporate
Power............9
2.2
Capitalization.............................................9
2.3 Authorization of
Transaction..............................10
2.4
Noncontravention..........................................10
2.5
Subsidiaries..............................................11
2.6 Financial
Statements......................................12
2.7 Absence of Certain
Changes................................13
2.8 Undisclosed
Liabilities...................................13
2.9 Tax
Matters...............................................13
2.10
Assets....................................................16
2.11 Owned Real
Property.......................................16
2.12 Real Property
Leases......................................16
2.13
Contracts.................................................17
2.14 Accounts
Receivable.......................................18
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TABLE OF CONTENTS
PAGE
2.15 Powers of Attorney.
......................................18
2.16
Insurance.................................................19
2.17
Litigation................................................19
2.18
Employees.................................................19
2.19 Employee
Benefits.........................................20
2.20 Environmental
Matters.....................................23
2.21 Legal
Compliance..........................................24
2.22 Customers and
Suppliers...................................24
2.23
Permits...................................................24
2.24 Certain Business Relationships With
Affiliates............24
2.25 Brokers'
Fees.............................................25
2.26 Books and
Records.........................................25
2.27 Intellectual
Property.....................................25
2.28
Disclosure................................................26
2.29 Duty to Make
Inquiry......................................26
2.30 Board
Actions.............................................26
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE PARENT AND
THE
ACQUISITION
SUBSIDIARY........................................26
3.1 Organization, Qualification and Corporate
Power...........27
3.2
Capitalization............................................27
3.3 Authorization of
Transaction..............................28
3.4
Noncontravention..........................................28
3.5
Subsidiaries..............................................29
3.6 Exchange Act
Reports......................................30
3.7 Compliance with
Laws......................................30
3.8 Financial
Statements......................................31
3.9 Absence of Certain
Changes................................31
3.10
Litigation................................................31
3.11 Undisclosed
Liabilities...................................32
3.12 Tax
Matters...............................................32
3.13
Assets....................................................33
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TABLE OF CONTENTS
PAGE
3.14 Owned Real
Property.......................................34
3.15 Real Property
Leases......................................34
3.16
Contracts.................................................34
3.17 Accounts
Receivable.......................................36
3.18 Powers of
Attorney........................................36
3.19
Insurance.................................................36
3.20
Warranties................................................37
3.21
Employees.................................................37
3.22 Employee
Benefits.........................................37
3.23 Environmental
Matters.....................................39
3.24
Permits...................................................40
3.25 Certain Business Relationships With
Affiliates............40
3.26 Tax-Free
Reorganization...................................41
3.27
Split-Off.................................................42
3.28 Brokers'
Fees.............................................42
3.29
Disclosure................................................42
3.30 Interested Party
Transactions.............................43
3.31 Duty to Make
Inquiry......................................43
3.32
Accountants...............................................43
3.33 Minute
Books..............................................44
3.34 Board
Action..............................................44
ARTICLE IV -
COVENANTS......................................................44
4.1 Closing
Efforts...........................................44
4.2 Governmental and Third-Party Notices and
Consents.........44
4.3 Current
Report............................................45
4.4 Operation of Company's
Business...........................45
4.5 Access to Company
Information.............................46
4.6 Operation of Parent's
Business............................47
4.7 Access to Parent
Information..............................49
4.8
Expenses..................................................49
4.9
Indemnification...........................................50
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TABLE OF CONTENTS
PAGE
4.10 Listing of Merger
Shares..................................50
4.11 Name
Change...............................................50
4.12
Split-Off.................................................50
4.13 Stock Option
Plan.........................................50
4.14 Information Provided to Company
Stockholders..............51
4.16 No
Shorting...............................................51
4.17 Plan of
Reorganization....................................52
ARTICLE V - CONDITIONS TO CONSUMMATION OF
MERGER............................52
5.1 Conditions to Each Party's
Obligations....................52
5.2 Conditions to Obligations of the Parent and the
Acquisition Subsidiary....................................52
5.3 Conditions to Obligations of the
Company..................54
ARTICLE VI -
INDEMNIFICATION................................................55
6.1 Indemnification by the Company
Stockholders...............56
6.3 Indemnification Claims by the
Parent......................57
6.4 Survival of Representations and
Warranties................60
6.5 Limitations on Parent's Claims for
Indemnification........61
ARTICLE VII -
DEFINITIONS...................................................61
ARTICLE VIII -
TERMINATION..................................................64
8.1 Termination by Mutual
Agreement...........................64
8.2 Termination for Failure to
Close..........................64
8.3 Termination by Operation of
Law...........................64
8.5 Effect of Termination or Default;
Remedies................65
8.6 Remedies; Specific
Performance............................65
ARTICLE IX -
MISCELLANEOUS..................................................66
9.1 Press Releases and
Announcements..........................66
9.2 No Third Party
Beneficiaries..............................66
9.3 Entire
Agreement..........................................66
9.4 Succession and
Assignment.................................66
9.5 Counterparts and Facsimile
Signature......................66
9.6
Headings..................................................67
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TABLE OF CONTENTS
PAGE
9.7
Notices...................................................67
9.8 Governing
Law.............................................68
9.9 Amendments and
Waivers....................................68
9.10
Severability..............................................68
9.11 Submission to
Jurisdiction................................68
9.12
Construction..............................................69
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
November
13, 2007, by and among RedRoller Holdings, Inc. (formerly known
as Aslahan
Enterprises Ltd.), a Delaware corporation (the "Parent"),
RedRoller Acquisition
Corp., a Delaware corporation (the "Acquisition Subsidiary") and
RedRoller,
Inc., a Delaware corporation (the "Company"). The Parent, the
Acquisition
Subsidiary and the Company are each a "Party" and referred to
collectively
herein as the "Parties."
WHEREAS, this Agreement contemplates a merger of the
Acquisition
Subsidiary with and into the Company, with the Company remaining
as the
surviving entity after the merger (the "Merger"), whereby the
stockholders of
the Company will receive common stock of the Parent in exchange
for their
shares of capital stock of the Company;
WHEREAS, simultaneously with the closing of the Merger, the
Parent
shall complete a private placement of a minimum of 1,500,000
units (each, a
"Unit") and a maximum of 2,000,000 Units (exclusive of a 10%
over allotment
option) of securities of the Parent (the "Private Placement
Offering") at the
purchase price of $3.40 per Unit (the "PPO Price"), each Unit
consisting of four
shares of the Parent's common stock, par value $0.001 per share
(the "Parent
Common Stock"), and a five year warrant to purchase one share of
Parent Common
Stock for an exercise price of $1.28 per whole share;
WHEREAS, contemporaneously with the closing of the Merger, the
Parent
intends to split-off its wholly owned subsidiary, Aslahan Web
Services, Inc., a
Nevada corporation ("AWS"), through the sale of all of the
outstanding capital
stock of AWS (the "Split-Off") upon the terms and conditions of
a split-off
agreement by and among Parent, Tina Sangha (the "Buyer"), the
Company and AWS,
substantially in the form of Exhibit A attached hereto (the
"Split-Off
Agreement"); and
WHEREAS, the Parent, the Acquisition Subsidiary, and the Company
desire
that the Merger qualify as a "reorganization" under Section
368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations,
warranties and
covenants herein contained, and for other good and valuable
consideration the
receipt, adequacy and sufficiency of which are hereby
acknowledged, the Parties
hereto, intending legally to be bound, agree as follows:
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ARTICLE I - THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of
this Agreement,
the Acquisition Subsidiary shall merge with and into the Company
at the
Effective Time (as defined below). From and after the Effective
Time, the
separate corporate existence of the Acquisition Subsidiary shall
cease and the
Company shall continue as the surviving corporation in the
Merger (the
"Surviving Corporation"). The "Effective Time" shall be the time
at which a
certificate of merger (the "Certificate of Merger") and other
appropriate or
required documents prepared and executed in accordance with the
Delaware General
Corporation Law (the "GCL") are filed with the Secretary of
State of Delaware.
The Merger shall have the effects set forth in Section 259 of
the GCL.
1.2 The Closing. The closing of the transactions contemplated by
this Agreement
(the "Closing") shall take place at the offices of DLA Piper US
LLP in Boston,
Massachusetts commencing at 10:00 a.m. local time on November
13, 2007, or, if
all of the conditions to the obligations of the Parties to
consummate the
transactions contemplated hereby have not been satisfied or
waived by such date,
on such mutually agreeable later date as soon as practicable
(and in any event
not later than three (3) business days) after the satisfaction
or waiver of all
conditions (excluding the delivery of any documents to be
delivered at the
Closing by any of the Parties) set forth in Article V hereof
(the "Closing
Date").
1.3 Actions at the Closing. At the Closing:
(a) the Company shall deliver to the Parent and the Acquisition
Subsidiary the
various certificates, instruments and documents referred to in
Section 5.2;
(b) the Parent and the Acquisition Subsidiary shall deliver to
the Company the
various certificates, instruments and documents referred to in
Section 5.3;
(c) the Surviving Corporation shall file the Certificate of
Merger with the
Secretary of State of the State of Delaware;
(d) each of the stockholders of record of the Company
immediately prior to the
Effective Time (collectively, the "Company Stockholders") shall
deliver to the
Parent the certificate(s) representing his, her or its Company
Shares (as
defined below);
(e) the Parent shall deliver certificates for the Initial Shares
(as defined
below) to each Company Stockholder in accordance with Section
1.5;
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(f) the Parent shall deliver to the Company (i) evidence that
the Parent's board
of directors is authorized to consist of seven individuals, (ii)
the
resignations of all individuals who served as directors and/or
officers of the
Parent immediately prior to the Closing Date, which resignations
shall be
effective as of the Closing Date, (iii) evidence of the
appointment of five
directors to serve immediately upon the Closing Date, three of
whom shall have
been designated by the Company and two of whom shall have been
designated by the
Parent, and (v) evidence of the appointment of such executive
officers of the
Parent to serve immediately upon the Closing Date as shall have
been designated
by the Company; and
(g) the Parent, Bill Van Wyck (the "Indemnification
Representative") and U.S.
Bank, N.A. (the "Escrow Agent") shall execute and deliver the
Escrow Agreement
in substantially the form attached hereto as Exhibit B (the
"Escrow Agreement")
and the Parent shall deliver to the Escrow Agent a certificate
for the Escrow
Shares (as defined below) being placed in escrow on the Closing
Date pursuant to
Section 1.9.
1.4 Additional Actions. If at any time after the Effective Time
the Surviving
Corporation shall consider or be advised that any deeds, bills
of sale,
assignments or assurances or any other acts or things are
necessary, desirable
or proper (a) to vest, perfect or confirm, of record or
otherwise, in the
Surviving Corporation, its right, title or interest in, to or
under any of the
rights, privileges, powers, franchises, properties or assets of
either the
Company or the Acquisition Subsidiary or (b) otherwise to carry
out the purposes
of this Agreement, the Surviving Corporation and its proper
officers and
directors or their designees shall be authorized (to the fullest
extent allowed
under applicable law) to execute and deliver, in the name and on
behalf of
either the Company or the Acquisition Subsidiary, all such
deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of
the Company or
the Acquisition Subsidiary, all such other acts and things
necessary, desirable
or proper to vest, perfect or confirm its right, title or
interest in, to or
under any of the rights, privileges, powers, franchises,
properties or assets of
the Company or the Acquisition Subsidiary, as applicable, and
otherwise to carry
out the purposes of this Agreement.
1.5 Conversion of Company Securities. Before the Effective Time,
each issued and
outstanding share of the Company's Series A, Series B1 and
Series B2 Convertible
Preferred Stock (the "Preferred Stock") shall convert, into
shares of the
Company's common stock, apr value $0.01 per share ("Company
Shares"), as
provided in the Company's Certificate of Incorporation, as
amended. At the
Effective Time, by virtue of the Merger and without any action
on the part of
any Party or the holder of any of the following securities:
(a) Each Company Share issued and outstanding immediately prior
to the Effective
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Time (other than Company Shares owned beneficially by the Parent
or the
Acquisition Subsidiary and Dissenting Shares (as defined below))
shall be
converted into and represent the right to receive (subject to
the provisions of
Section 1.6) such number of shares of Parent Common Stock as is
equal to the
Common Conversion Ratio (as defined below). An aggregate of
10,230,940 shares of
Parent Common Stock shall be issued to the Company Stockholders
upon conversion
of their Company Shares in connection with the Merger. 5,216,121
shares of
Parent Common Stock shall be reserved for issuance to the
holders of
non-qualified stock options to acquire Company Shares ("Company
NQSOs") granted
outside of the Company's 2006 Stock Option and Stock Incentive
Plan (the
"Company Option Plan"), which such Company NQSOs shall be
converted into Parent
Options (as hereinafter defined) in accordance with Section 1.8
hereof..
(b) The "Common Conversion Ratio" shall be obtained by dividing
(i) 15,447,059
by (ii) the total number of outstanding Company Shares
immediately prior to the
Effective Time on a diluted basis after giving effect to the
exercise of all
outstanding Parent Options (as defined in Section 1.8(a)) and
all other rights
to acquire Company Shares. Stockholders of record of the Company
as of the
Closing Date (the "Indemnifying Stockholders") shall be entitled
to receive
immediately 95% of the shares of Parent Common Stock into which
their Company
Shares were converted pursuant to this Section 1.5 (the "Initial
Shares"); the
remaining 5% of the shares of Parent Common Stock into which
their Company
Shares were converted pursuant to this Section 1.5, rounded to
the nearest whole
number (with 0.5 shares rounded upward to the nearest whole
number) (the "Escrow
Shares"), shall be deposited in escrow pursuant to Section 1.9
and shall be held
and disposed of in accordance with the terms of the Escrow
Agreement. The
Initial Shares and the Escrow Shares shall together be referred
to herein as the
"Merger Shares."
(c) Each issued and outstanding share of common stock, no par
value per share,
of the Acquisition Subsidiary shall be converted into one
validly issued, fully
paid and nonassessable share of Surviving Corporation Common
Stock.
1.6 Dissenting Shares.
(a) For purposes of this Agreement, "Dissenting Shares" means
Company Shares
held as of the Effective Time by a Company Stockholder who has
not voted such
Company Shares in favor of the adoption of this Agreement and
the Merger and
with respect to which appraisal shall have been duly demanded
and perfected in
accordance with Section 262 of the GCL and not effectively
withdrawn or
forfeited prior to the Effective Time. Dissenting Shares shall
not be converted
into or represent the right to receive shares of Parent Common
Stock unless such
Company Stockholder's right to appraisal shall have ceased in
accordance with
Section 262 of the GCL. If such Company Stockholder has so
forfeited or
withdrawn his, her or its right to appraisal of Dissenting
Shares, then, (i) as
of the occurrence of such event, such holder's Dissenting Shares
shall cease to
be Dissenting Shares and shall be converted into and represent
the right to
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receive the Merger Shares issuable in respect of such Company
Shares pursuant to
Section 1.5, and (ii) promptly following the occurrence of such
event, the
Parent shall deliver to such Company Stockholder a certificate
representing 95%
of the Merger Shares to which such holder is entitled pursuant
to Section 1.5
(which shares shall be considered Initial Shares for all
purposes of this
Agreement) and shall deliver to the Escrow Agent a certificate
representing the
remaining 5% of the Merger Shares to which such holder is
entitled pursuant to
Section 1.5 (which shares shall be considered Escrow Shares for
all purposes of
this Agreement).
(b) The Company shall give the Parent prompt notice of any
written demands for
appraisal of any Company Shares, withdrawals of such demands,
and any other
instruments that relate to such demands received by the Company.
The Company
shall not, except with the prior written consent of the Parent,
make any payment
with respect to any demands for appraisal of Company Shares or
offer to settle
or settle any such demands.
1.7 Fractional Shares. No certificates or scrip representing
fractional Initial
Shares shall be issued to Company Stockholders on the surrender
for exchange of
certificates that immediately prior to the Effective Time
represented Company
Shares converted into Merger Shares pursuant to Section 1.5
("Certificates") and
such Company Stockholders shall not be entitled to any voting
rights, rights to
receive any dividends or distributions or other rights as a
stockholder of the
Parent with respect to any fractional Initial Shares that would
have otherwise
been issued to such Company Stockholders. In lieu of any
fractional Initial
Shares that would have otherwise been issued, each former
Company Stockholder
that would have been entitled to receive a fractional Initial
Share shall, on
proper surrender of such person's Certificates, receive such
whole number of
Initial Shares as is equal to the precise number of Initial
Shares to which such
Company Stockholder would be entitled, rounded up or down to the
nearest whole
number (with a fractional interest equal to 0.5 rounded upward
to the nearest
whole number); provided that each such Company Stockholder shall
receive at
least one Initial Share.
1.8 Options.
(a) As of the Effective Time, all Company NQSO's and options to
purchase Company
Shares issued under the Company Option Plan (collectively, the
"Options") to
purchase
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Company Shares issued by the Company, whether vested or
unvested, (the "Old
Options") shall automatically be converted to become options to
purchase shares
of Parent Common Stock ("Parent Options") without further action
by the holder
thereof, all in accordance with the applicable provisions of the
Company's 2006
Stock Option and Stock Incentive Plan. The Parent Option shall
constitute an
option to acquire such number of shares of Parent Common Stock
as is equal to
the number of Company Shares subject to the unexercised portion
of the Old
Options multiplied by the Common Conversion Ratio (with any
fraction resulting
from such multiplication to be rounded down to the nearest whole
number). The
exercise price per share of each such Parent Option shall be
equal to the
exercise price of such Old Option immediately prior to the
Effective Time,
divided by the Common Conversion Ratio (rounded up to the
nearest whole cent).
The Parent Options shall be granted under Parent's 2006 Stock
Option Plan (the
"Parent Option Plan") and that plan's terms, exercisability,
vesting schedule,
and status as an "incentive stock option" under Section 422 of
the Code, if
applicable. It is the Parties intention that any Old Options
intended to be
"incentive stock options" under Section 422 of the Code shall
remain incentive
stock options as Parent Options.
(b) As soon as practicable after the Effective Time, the Parent
or the Surviving
Corporation shall take appropriate actions to collect the Old
Options and the
agreements evidencing the Old Options, which shall be deemed to
be canceled and
shall entitle the holder to exchange the Old Options for Parent
Options in the
Parent.
(c) The Parent shall take all corporate action necessary to
reserve for issuance
a sufficient number of shares of Parent Common Stock for
delivery upon exercise
of the Parent Options to be issued for Old Options in accordance
with this
Section 1.8.
1.9 Escrow. On the Closing Date, the Parent shall deliver to the
Escrow Agent a
certificate (issued in the name of the Escrow Agent or its
nominee) representing
the Escrow Shares, as described in Section 1.5, for the purpose
of securing the
indemnification obligations of the Indemnifying Stockholders set
forth in this
Agreement. The Escrow Shares shall be held by the Escrow Agent
pursuant to the
Escrow Agreement, in substantially the form set forth in Exhibit
B attached
hereto. The Escrow Shares shall be held as a trust fund and
shall not be subject
to any lien, attachment, trustee process or any other judicial
process of any
creditor of any Party, and shall be held and disbursed solely
for the purposes
and in accordance with the terms of the Escrow Agreement.
1.10 Certificate of Incorporation and Bylaws.
(a) The certificate of incorporation of the Company in effect
immediately prior
to the Effective Time shall be the certificate of incorporation
of the Surviving
Corporation until duly amended or repealed.
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(b) The bylaws of the Company in effect immediately prior to the
Effective Time
shall be the bylaws of the Surviving Corporation until duly
amended or repealed.
1.11 No Further Rights. From and after the Effective Time, no
Company Shares
shall be deemed to be outstanding, and holders of Certificates
shall cease to
have any rights with respect thereto, except as provided herein
or by law.
1.12 Closing of Transfer Books. At the Effective Time, the stock
transfer books
of the Company shall be closed and no transfer of Company Shares
shall
thereafter be made. If, after the Effective Time, Certificates
are presented to
the Parent or the Surviving Corporation, they shall be cancelled
and exchanged
for Initial Shares in accordance with Section 1.5, subject to
Section 1.9 and to
applicable law in the case of Dissenting Shares.
1.13 Post-Closing Adjustment. In the event that, during the
period commencing
from the Closing Date and ending on the second anniversary of
the Closing Date,
the Company (or its controlling stockholders immediately prior
to the Merger)
incurs any Loss with respect to, in connection with, or arising
from any Parent
Liabilities, then promptly following the filing by the Parent
with the
Securities and Exchange Commission (the "SEC") of a quarterly
report relating to
the most recent completed quarter for which such determination
has been made,
the Parent shall issue to the Company Stockholders and/or their
designees such
number of shares of Parent Common Stock as would result from
dividing (x) the
whole dollar amount representing such Losses by (y) one-fourth
of the PPO Price.
The limit on the aggregate number of shares of Parent Common
Stock issuable
under this Section 1.13 shall be 2,000,000 shares. As used in
this Section 1.13:
(a) "Loss" shall mean any and all costs and expenses, including
reasonable
attorneys' fees, court costs, reasonable accountants' fees, and
damages and
losses, net of any insurance proceeds actually received by the
Party suffering
the Loss with respect thereto; (b) "Claims" shall include, but
are not limited
to, any claim, notice, suit, action, investigation, other
proceedings (whether
actual or threatened); and (c) "Parent Liabilities" shall mean
all Claims
against AWS or the Parent, and all liabilities, obligations or
indebtedness of
any nature whatsoever of AWS, whenever accruing, and of the
Parent, accruing on
or before the Closing Date (whether primary, secondary, direct,
indirect,
liquidated, unliquidated or contingent, matured or unmatured),
including, but
not limited to (i) any breach by the Parent or the Acquisition
Subsidiary of any
of their respective representations or warranties set forth in
Article III
herein, (ii) any breach by the Parent of any of the
representations or
warranties set forth in the subscription agreement delivered to
investors in
connection with the Private Placement Offering that has its
basis in the
operations of Parent prior to the Closing, (iii) any breach by
the Parent of any
of the representations or warranties of Parent set forth in that
certain
Placement Agent Agreement by and between Parent, the Company and
Joseph Gunnar &
Co., LLC, dated as of October 2, 2007, as amended, that has its
basis in the
operations of Parent prior to the Closing (iv) any litigation
threatened,
pending or for which a basis exists, that has resulted or may
result in the
entry of judgment in damages or otherwise against the Parent or
any Parent
Subsidiary (as defined in this Agreement); (v) any and all
outstanding debts
owed by the Parent or any Parent
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Subsidiary; (vi) any and all internal or employee related
disputes, arbitrations
or administrative proceedings threatened, pending or otherwise
outstanding,
(vii) any and all liens, foreclosures, settlements, or other
threatened, pending
or otherwise outstanding financial, legal or similar obligations
of the Parent
or any Parent Subsidiary, (viii) any and all Taxes for which
Parent or any of
its direct or indirect assets may be liable or subject, for any
taxable period
(or portion thereof) ending on or before the Closing Date,
including, without
limitation, any and all Taxes resulting from or attributable to
Parent's
ownership or operation of the AWS assets, (ix) any and all Taxes
for which
Parent or its assets may be liable or subject (including,
without limitation,
the interests and assets of the Surviving Corporation and any
Parent Subsidiary)
as a consequence of Parent's acquisition, formation,
capitalization, ownership,
and Split-Off of AWS, whether related to a taxable period (or
portion thereof)
ending on or after the Closing Date, and (x) all fees and
expenses incurred in
connection with effecting the adjustments contemplated by this
Section 1.13, as
such Parent Liabilities are determined by the Parent's
independent auditors, on
a quarterly basis.
1.14 Exemption From Registration. Parent and the Company intend
that the shares
of Parent Common Stock to be issued pursuant to Section 1.5
hereof or upon
exercise of Parent Options granted pursuant to Section 1.8
hereof in each case
in connection with the Merger will be issued in a transaction
exempt from
registration under the Securities Act of 1933, as amended
("Securities Act"), by
reason of section 4(2) of the Securities Act and/or Rule 506 of
Regulation D
promulgated by the SEC thereunder.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent that the
statements contained
in this Article II are true and correct, except as set forth in
the disclosure
schedule provided by the Company to the Parent on the date
hereof and accepted
in writing by the Parent (the "Disclosure Schedule"). The
Disclosure Schedule
the Company prepares shall be arranged in paragraphs
corresponding to the
numbered and lettered paragraphs contained in this Article II,
and except to the
extent that it is clear from the context thereof that such
disclosure also
applies to any other paragraph, the disclosures in any paragraph
of the
Disclosure Schedule shall qualify only the corresponding
paragraph in this
Article II. For purposes of this Article II, the phrase "to the
knowledge of the
Company" or any phrase of similar import shall be deemed to
refer to the actual
knowledge of the executive officers of the Company, as well as
any other
knowledge which such executive officers would have possessed had
they made
reasonable inquiry with respect to the matter in question.
2.1 Organization, Qualification and Corporate Power. The Company
is a
corporation
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<PAGE>
duly organized, validly existing and in corporate and tax good
standing under
the laws of the State of Delaware. The Company is duly qualified
to conduct
business and is in corporate and tax good standing under the
laws of each
jurisdiction in which the nature of its businesses or the
ownership or leasing
of its properties requires such qualification, except where the
failure to be so
qualified or in good standing, individually or in the aggregate,
has not had and
would not reasonably be expected to have a Company Material
Adverse Effect (as
defined below). The Company has all requisite corporate power
and authority to
carry on the businesses in which it is engaged and to own and
use the properties
owned and used by it. The Company has furnished or made
available to the Parent
complete and accurate copies of its certificate of incorporation
and bylaws. The
Company is not in default under or in violation of any provision
of its
certificate of incorporation, as amended to date, or its bylaws,
as amended to
date. For purposes of this Agreement, "Company Material Adverse
Effect" means a
material adverse effect on the assets, business, condition
(financial or
otherwise), results of operations or future prospects of the
Company.
2.2 Capitalization. The authorized capital stock of the Company
consists of
60,000,000 shares of which 50,000,000 are designated as Company
Shares and
10,000,000 are designated as shares of preferred stock, of which
3,607,784
shares are designated as Series A Convertible Preferred Stock,
par value $0.01
per share, and 1,000,000 shares are designated as Series B1
Convertible
Preferred Stock, par value $0.01 per share. As of the date of
this Agreement,
15,527,419 Company Shares were issued and outstanding, no shares
of any other
class of the Company's capital stock were issued and outstanding
and no Company
Shares were held in the treasury of the Company. Section 2.2 of
the Disclosure
Schedule sets forth a complete and accurate list of (i) all
stockholders of the
Company, indicating the number and class of Company Shares held
by each
stockholder, (ii) all outstanding Options, indicating (A) the
holder thereof,
(B) the number of Company Shares subject to each Option and
Existing Warrant,
(C) the exercise price, date of grant, vesting schedule and
expiration date for
each Option or Existing Warrant, and (D) any terms regarding the
acceleration of
vesting, and (iii) all stock option plans and other stock or
equity-related
plans of the Company. All of the issued and outstanding Company
Shares, and all
Company Shares that may be issued upon exercise of Options will
be (upon
issuance in accordance with their terms), duly authorized,
validly issued, fully
paid, nonassessable and free of all preemptive rights. Other
than the Options
listed in Section 2.2 of the Disclosure Schedule, there are no
notes or other
indebtedness convertible into shares of any class of the
Company's capital stock
(the "Convertible Notes"), outstanding or authorized options,
warrants, rights,
agreements or commitments to which the Company is a party or
which are binding
upon the Company providing for the issuance or redemption of any
of its capital
stock. There are no outstanding or authorized stock
appreciation, phantom stock
or similar rights with respect to the Company. Except as set
9
<PAGE>
forth in Section 2.2 of the Disclosure Schedule, there are no
agreements to
which the Company is a party or by which it is bound with
respect to the voting
(including without limitation voting trusts or proxies),
registration under the
Securities Act, or sale or transfer (including without
limitation agreements
relating to pre-emptive rights, rights of first refusal, co-sale
rights or
"drag-along" rights) of any securities of the Company. To the
knowledge of the
Company, there are no agreements among other parties, to which
the Company is
not a party and by which it is not bound, with respect to the
voting (including
without limitation voting trusts or proxies) or sale or transfer
(including
without limitation agreements relating to rights of first
refusal, co-sale
rights or "drag-along" rights) of any securities of the Company.
All of the
issued and outstanding Company Shares were issued in compliance
with applicable
federal and state securities laws.
2.3 Authorization of Transaction. The Company has all requisite
power and
authority to execute and deliver this Agreement and to perform
its obligations
hereunder. The execution and delivery by the Company of this
Agreement and,
subject to the adoption of this Agreement and the approval of
the Merger by no
less than a majority of the votes represented by the outstanding
Company Shares
entitled to vote on this Agreement and the Merger, the
consummation by the
Company of the transactions contemplated hereby have been duly
and validly
authorized by all necessary corporate action on the part of the
Company. Without
limiting the generality of the foregoing, the board of directors
of the Company
(i) determined that the Merger is fair and in the best interests
of the Company
and the Company Stockholders, (ii) adopted this Agreement in
accordance with the
provisions of the GCL, and (iii) directed that this Agreement
and the Merger be
submitted to the Company Stockholders for their adoption and
approval and
resolved to recommend that the Company Stockholders vote in
favor of the
adoption of this Agreement and the approval of the Merger. This
Agreement has
been duly and validly executed and delivered by the Company and
constitutes a
valid and binding obligation of the Company, enforceable against
the Company in
accordance with its terms.
2.4 Noncontravention. Except as set forth in Section 2.4 of the
Disclosure
Schedule, and subject to the filing of the Certificate of Merger
as required by
the GCL, neither the execution and delivery by the Company of
this Agreement,
nor the consummation by the Company of the transactions
contemplated hereby,
will (a) conflict with or violate any provision of the
certificate of
incorporation or bylaws of the Company, as amended to date,
bylaws or other
organizational document of any Subsidiary (as defined below),
(b) require on the
part of the Company or any Subsidiary any filing with, or any
permit,
authorization, consent or approval of, any court, arbitrational
tribunal,
administrative agency or commission or other governmental or
regulatory
authority or agency (a "Governmental Entity"), except for such
permits,
authorizations, consents and approvals
10
<PAGE>
for which the Company is obligated to use its Reasonable Best
Efforts to obtain
pursuant to Section 4.2(a), (c) conflict with, result in a
breach of, constitute
(with or without due notice or lapse of time or both) a default
under, result in
the acceleration of obligations under, create in any Party the
right to
terminate, modify or cancel, or require any notice, consent or
waiver under, any
contract or instrument to which the Company or any Subsidiary is
a party or by
which the Company or any Subsidiary is bound or to which any of
their assets is
subject, except for (i) any conflict, breach, default,
acceleration,
termination, modification or cancellation in any contract or
instrument set
forth in Section 2.4 of the Disclosure Schedule, for which the
Company is
obligated to use its Reasonable Best Efforts to obtain waiver,
consent or
approval pursuant to Section 4.2(b), (ii) any conflict, breach,
default,
acceleration, termination, modification or cancellation which,
individually or
in the aggregate, would not have a Company Material Adverse
Effect and would not
adversely affect the consummation of the transactions
contemplated hereby or
(iii) any notice, consent or waiver the absence of which,
individually or in the
aggregate, would not have a Company Material Adverse Effect and
would not
adversely affect the consummation of the transactions
contemplated hereby, (d)
result in the imposition of any Security Interest (as defined
below) upon any
assets of the Company or any Subsidiary or (e) violate any
order, writ,
injunction, decree, statute, rule or regulation applicable to
the Company, any
Subsidiary or any of their properties or assets. For purposes of
this Agreement:
"Security Interest" means any mortgage, pledge, security
interest, encumbrance,
charge or other lien (whether arising by contract or by
operation of law), other
than (i) mechanic's, materialmen's, and similar liens, (ii)
liens arising under
worker's compensation, unemployment insurance, social security,
retirement, and
similar legislation, and (iii) liens on goods in transit
incurred pursuant to
documentary letters of credit, in each case arising in the
Ordinary Course of
Business (as defined below) of the Company and not material to
the Company; and
"Ordinary Course of Business" means the ordinary course of the
Company's
business, consistent with past custom and practice (including
with respect to
frequency and amount).
2.5 Subsidiaries.
(a) Section 2.5 of the Disclosure Schedule sets forth: (i) the
name of each
Company Subsidiary; (ii) the number and type of outstanding
equity securities of
each Subsidiary and a list of the holders thereof; (iii) the
jurisdiction of
organization of each Subsidiary; (iv) the names of the officers
and directors of
each Company Subsidiary; and (v) the jurisdictions in which each
Company
Subsidiary is qualified or holds licenses to do business as a
foreign
corporation or other entity. For purposes of this Agreement, a
"Subsidiary"
shall mean any corporation, partnership, joint venture or other
entity in which
a Party has, directly or indirectly, an equity interest
representing 50% or more
of the equity securities thereof or other equity interests
therein
(collectively, the "Subsidiaries").
11
<PAGE>
(b) Each Subsidiary is an entity duly organized, validly
existing and in
corporate and tax good standing under the laws of the
jurisdiction of its
incorporation. Each Subsidiary is duly qualified to conduct
business and is in
corporate and tax good standing under the laws of each
jurisdiction in which the
nature of its businesses or the ownership or leasing of its
properties requires
qualification to do business, except where the failure to be so
qualified or in
good standing, individually or in the aggregate, has not had and
would not
reasonably be expected to have a Company Material Adverse
Effect. Each
Subsidiary has all requisite power and authority to carry on the
businesses in
which it is engaged and to own and use the properties owned and
used by it. The
Company has delivered or made available to the Parent complete
and accurate
copies of the charter, bylaws or other organizational documents
of each
Subsidiary. No Subsidiary is in default under or in violation of
any provision
of its charter, bylaws or other organizational documents. All of
the issued and
outstanding equity securities of each Subsidiary are duly
authorized, validly
issued, fully paid, nonassessable and free of preemptive rights.
All equity
securities of each Subsidiary that are held of record or owned
beneficially by
either the Company or any Subsidiary are held or owned free and
clear of any
restrictions on transfer (other than restrictions under the
Securities Act and
state securities laws), claims, Security Interests, options,
warrants, rights,
contracts, calls, commitments, equities and demands. There are
no outstanding or
authorized options, warrants, rights, agreements or commitments
to which the
Company or any Subsidiary is a party or which are binding on any
of them
providing for the issuance, disposition or acquisition of any
equity securities
of any Subsidiary. There are no outstanding stock appreciation,
phantom stock or
similar rights with respect to any Subsidiary. To the knowledge
of the Company,
there are no voting trusts, proxies or other agreements or
understandings with
respect to the voting of any equity securities of any
Subsidiary.
(c) Except as set forth in Section 2.5(c) of the Disclosure
Schedule, the
Company does not control directly or indirectly or have any
direct or indirect
equity participation or similar interest in any corporation,
partnership,
limited liability company, joint venture, trust or other
business association
which is not a Subsidiary.
2.6 Financial Statements. The Company has provided or made
available to the
Parent: (a) the audited balance sheet of the Company (the
"Company Balance
Sheet") at December 31, 2006 (the "Company Balance Sheet Date"),
and the related
statements of operations and cash flows for the period from
December 31, 2005
through December 31, 2006 (the "Year-End Financial Statements");
and (b) the
unaudited balance sheet of the Company (the "Company Interim
Balance Sheet") at
June 30, 2007 (the "Company Interim Balance Sheet Date") and the
related
statement of operations and cash flows for
12
<PAGE>
the nine months ended June 30, 2007 (the "Company Interim
Financial Statement"
and together with the Year-End Financial Statements, the
"Company Financial
Statements"). The Company Financial Statements have been
prepared in accordance
with United States generally accepted accounting principles
("GAAP") applied on
a consistent basis throughout the periods covered thereby,
fairly present the
financial condition, results of operations and cash flows of the
Company and the
Subsidiaries as of the respective dates thereof and for the
periods referred to
therein, comply as to form with the applicable rules and
regulations of the SEC
for inclusion of such Company Financial Statements in the
Parent's filings with
the SEC as required by the Securities Exchange Act of 1934 (the
"Exchange Act")
and are consistent with the books and records of the Company and
the
Subsidiaries, except as provided in the notes thereto.
2.7 Absence of Certain Changes. Since the Company Interim
Balance Sheet Date,
and except as set forth in Section 2.7 of the Disclosure
Schedule, (a) there has
occurred no event or development which, individually or in the
aggregate, has
had, or could reasonably be expected to have in the future, a
Company Material
Adverse Effect, and (b) neither the Company nor any Subsidiary
has taken any of
the actions set forth in paragraphs (a) through (m) of Section
4.4.
2.8 Undisclosed Liabilities. Except as set forth in Section 2.8
of the
Disclosure Schedule, none of the Company and its Subsidiaries
has any liability
(whether known or unknown, whether absolute or contingent,
whether liquidated or
unliquidated and whether due or to become due), except for (a)
liabilities shown
on the Company Balance Sheet and Company Interim Balance Sheet
referred to in
Section 2.6, (b) liabilities which have arisen since the Company
Interim Balance
Sheet Date in the Ordinary Course of Business and (c)
contractual and other
liabilities incurred in the Ordinary Course of Business which
are not required
by GAAP to be reflected on a balance sheet.
2.9 Tax Matters.
(a) For purposes of this Agreement, the following terms shall
have the following
meanings:
(i) "Taxes" means all taxes, charges, fees, levies or other
similar
assessments or liabilities, including without limitation income,
gross
receipts, ad valorem, premium, value-added, excise, real
property,
personal property, sales, use, transfer, withholding,
employment,
unemployment insurance, social security, business license,
business
organization, environmental, workers compensation, payroll,
profits,
license, lease, service, service use, severance, stamp,
occupation,
windfall profits, customs, duties, franchise and other taxes
imposed by
the United
13
<PAGE>
States of America or any state, local or foreign government, or
any
agency thereof, or other political subdivision of the United
States or
any such government, and any interest, fines, penalties,
assessments
or additions to tax resulting from, attributable to or incurred
in
connection with any tax or any contest or dispute thereof.
(ii) "Tax Returns" means all reports, returns, declarations,
statements
or other information required to be supplied to a taxing
authority in
connection with Taxes.
(b) Each of the Company and the Subsidiaries has filed on a
timely basis all Tax
Returns that it was required to file, and all such Tax Returns
were complete and
accurate in all material respects. Neither the Company nor any
Subsidiary is or
has ever been a member of a group of corporations with which it
has filed (or
been required to file) consolidated, combined or unitary Tax
Returns, other than
a group of which only the Company and the Subsidiaries are or
were members. Each
of the Company and the Subsidiaries has paid on a timely basis
all Taxes that
were due and payable. The unpaid Taxes of the Company and the
Subsidiaries for
tax periods through the Company Interim Balance Sheet Date do
not exceed the
accruals and reserves for Taxes (excluding accruals and reserves
for deferred
Taxes established to reflect timing differences between book and
Tax income) set
forth on the Company Interim Balance Sheet. Neither the Company
nor any
Subsidiary has any actual or potential liability for any Tax
obligation of any
taxpayer (including without limitation any affiliated group of
corporations or
other entities that included the Company or any Subsidiary
during a prior
period) other than the Company and the Subsidiaries. All Taxes
that the Company
or any Subsidiary is or was required by law to withhold or
collect have been
duly withheld or collected and, to the extent required, have
been paid to the
proper Governmental Entity.
(c) The Company has delivered or made available to the Parent
complete and
accurate copies of all federal income Tax Returns, examination
reports and
statements of deficiencies assessed against or agreed to by the
Company or any
Subsidiary since the Organization Date. No examination or audit
of any Tax
Return of the Company or any Subsidiary by any Governmental
Entity is currently
in progress or, to the knowledge of the Company, threatened or
contemplated.
Neither the Company nor any Subsidiary has been informed by any
jurisdiction
that the jurisdiction believes that the Company or Subsidiary
was required to
file any Tax Return that was not filed. Neither the Company nor
any Subsidiary
has waived any statute of limitations with respect to Taxes or
agreed to an
extension of time with respect to a Tax assessment or
deficiency.
(d) Neither the Company nor any Subsidiary: (i) is a "consenting
corporation"
within the meaning of former Section 341(f) of the Code, and
none of the assets
of the Company
14
<PAGE>
or the Subsidiaries are subject to an election under former
Section 341(f) of
the Code; (ii) has been a United States real property holding
corporation within
the meaning of Section 897(c)(2) of the Code during the
applicable period
specified in Section 897(c)(l)(A)(ii) of the Code; (iii) has
made any payments,
is obligated to make any payments, or is a party to any
agreement that could
obligate it to make any payments that may be treated as an
"excess parachute
payment" under Section 280G of the Code; (iv) has any actual or
potential
liability for any Taxes of any person (other than the Company
and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
similar
provision of federal, state, local, or foreign law), or as a
transferee or
successor, by contract, or otherwise; or (v) is or has been
required to make a
basis reduction pursuant to Treasury Regulation Section
1.1502-20(b) or Treasury
Regulation Section 1.337(d)-2(b).
(e) None of the assets of the Company or any Subsidiary: (i) is
property that is
required to be treated as being owned by any other person
pursuant to the
provisions of former Section 168(f)(8) of the Code; (ii) is
"tax-exempt use
property" within the meaning of Section 168(h) of the Code; or
(iii) directly or
indirectly secures any debt the interest on which is tax exempt
under Section
103(a) of the Code.
(f) Neither the Company nor any Subsidiary has undergone a
change in its method
of accounting resulting in an adjustment to its taxable income
pursuant to
Section 481 of the Code.
(g) The Company has not taken any action, nor to the Company's
knowledge is
there any fact or circumstance that could reasonably be expected
to prevent the
Merger from qualifying as a reorganization within the meaning of
Section 368(a)
of the Code. The Company is not an "investment company" as
defined in Section
368(a)(2)(F)(iii) and (iv) of the Code. Following the Merger,
Company will hold
at least 90% of the fair market value of its net assets and at
least 70% of the
fair market value of its gross assets held immediately prior to
the Merger.
Company has no obligation, understanding, agreement, plan or
intention to issue
additional shares of its stock that would result in Parent
failing to acquire or
losing "control" of Company within the meaning of Section 368(c)
of the Code.
Company is not aware of any plan on the part of Parent or any
person related to
Parent, within the meaning of Treasury Regulation Section
1.368-1(e)(3) to
reacquire any of the Parent Common Stock issued in the Merger,
other than the
potential forfeiture of Escrow Shares. To the Company's
knowledge, following the
Merger, Parent will cause Company to either continue its
historic business or
use a significant portion of its historic business assets in a
business as
described in Treasury Regulation Section 1.368-1(d).
2.10 Assets. Each of the Company and the Subsidiaries owns or
leases all
tangible
15
<PAGE>
assets necessary for the conduct of its businesses as presently
conducted and as
presently proposed to be conducted. Except as set forth in
Section 2.10 of the
Disclosure Schedule, each such tangible asset is free from
material defects, has
been maintained in accordance with normal industry practice, is
in good
operating condition and repair (subject to normal wear and tear)
and is suitable
for the purposes for which it presently is used. Except as set
forth in Section
2.10 of the Disclosure Schedule, no asset of the Company or any
Subsidiary
(tangible or intangible) is subject to any Security
Interest.
2.11 Owned Real Property. Neither the Company nor any Subsidiary
owns any real
property, except as otherwise listed in Section 2.11 of the
Disclosure Schedule.
2.12 Real Property Leases. Section 2.12 of the Disclosure
Schedule lists all
real property leased or subleased to or by the Company or any
Subsidiary and
lists the term of such lease, any extension and expansion
options, and the rent
payable thereunder. The Company has delivered or made available
to the Parent
complete and accurate copies of the leases and subleases listed
in Section 2.12
of the Disclosure Schedule. Except as set forth in Section 2.12
of the
Disclosure Schedule, with respect to each lease and sublease
listed in Section
2.12 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable
and in full
force and effect;
(b) the lease or sublease will continue to be legal, valid,
binding, enforceable
and in full force and effect immediately following the Closing
in accordance
with the terms thereof as in effect immediately prior to the
Closing;
(c) neither the Company nor any Subsidiary nor, to the knowledge
of the Company,
any other party, is in breach or violation of, or default under,
any such lease
or sublease, and no event has occurred, is pending or, to the
knowledge of the
Company, is threatened, which, after the giving of notice, with
lapse of time,
or otherwise, would constitute a breach or default by the
Company or any
Subsidiary or, to the knowledge of the Company, any other party
under such lease
or sublease;
(d) neither the Company nor any Subsidiary has assigned,
transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the
leasehold or
subleasehold; and
(e) to the knowledge of the Company, there is no Security
Interest, easement,
covenant or other restriction applicable to the real property
subject to such
lease, except for recorded easements, covenants and other
restrictions which do
not materially impair
16
<PAGE>
the current uses or the occupancy by the Company or a Subsidiary
of the property
subject thereto.
2.13 Contracts.
(a) Section 2.13 of the Disclosure Schedule lists the following
agreements
(written or oral) to which the Company or any Subsidiary is a
party as of the
date of this Agreement:
(i) any agreement (or group of related agreements) for the lease
of
personal property from or to third parties providing for lease
payments
in excess of $25,000 per annum or having a remaining term longer
than
12 months;
(ii) any agreement (or group of related agreements) for the
purchase or
sale of products or for the furnishing or receipt of services
(A) which
calls for performance over a period of more than one year, (B)
which
involves more than the sum of $25,000, or (C) in which the
Company or
any Subsidiary has granted manufacturing rights, "most favored
nation"
pricing provisions or exclusive marketing or distribution
rights
relating to any products or territory or has agreed to purchase
a
minimum quantity of goods or services or has agreed to purchase
goods
or services exclusively from a certain party;
(iii) any agreement which, to the knowledge of the Company,
establishes
a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has
created, incurred, assumed or guaranteed (or may create, incur,
assume
or guarantee) indebtedness (including capitalized lease
obligations)
involving more than $25,000 or under which it has imposed (or
may
impose) a Security Interest on any of its assets, tangible
or
intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any employment or consulting agreement;
(vii) any agreement involving any officer, director or
stockholder of
the Company or any affiliate, as defined in Rule 12b-2 under
the
Securities Exchange Act of 1934 (the "Exchange Act"), thereof
(an
"Affiliate");
(viii) any agreement under which the consequences of a default
or
termination would reasonably be expected to have a Company
Material
Adverse Effect;
17
<PAGE>
(ix) any agreement which contains any provisions requiring the
Company
or any Subsidiary to indemnify any other party thereto
(excluding
indemnities contained in agreements for the purchase, sale or
license
of products entered into in the Ordinary Course of Business);
and
(x) any other agreement (or group of related agreements)
either
involving more than $25,000 or not entered into in the Ordinary
Course
of Business.
(b) The Company has delivered or made available to the Parent a
complete and
accurate copy of each agreement listed in Section 2.13 of the
Disclosure
Schedule. With respect to each agreement so listed, and except
as set forth in
Section 2.13 of the Disclosure Schedule: (i) the agreement is
legal, valid,
binding and enforceable and in full force and effect; (ii) the
agreement will
continue to be legal, valid, binding and enforceable and in full
force and
effect immediately following the Closing in accordance with the
terms thereof as
in effect immediately prior to the Closing; and (iii) neither
the Company nor
any Subsidiary nor, to the knowledge of the Company, any other
party, is in
breach or violation of, or default under, any such agreement,
and no event has
occurred, is pending or, to the knowledge of the Company, is
threatened, which,
after the giving of notice, with lapse of time, or otherwise,
would constitute a
breach or default by the Company or any Subsidiary or, to the
knowledge of the
Company, any other party under such contract.
2.14 Accounts Receivable. All accounts receivable of the Company
and the
Subsidiaries reflected on the Company Interim Balance Sheet are
valid
receivables subject to no setoffs or counterclaims and are
current and, to the
Knowledge of the Company, collectible (within 90 days after the
date on which it
first became due and payable), net of the applicable reserve for
bad debts on
the Company Interim Balance Sheet. All accounts receivable
reflected in the
financial or accounting records of the Company that have arisen
since the
Company Interim Balance Sheet Date are valid receivables subject
to no setoffs
or counterclaims and are, to the Knowledge of the Company,
collectible (within
90 days after the date on which it first became due and
payable), net of a
reserve for bad debts in an amount proportionate to the reserve
shown on the
Company Interim Balance Sheet.
2.15 Powers of Attorney. Except as set forth in Section 2.15 of
the Disclosure
Schedule, there are no outstanding powers of attorney executed
on behalf of the
Company or any Subsidiary.
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<PAGE>
2.16 Insurance. Section 2.16 of the Disclosure Schedule lists
each insurance
policy (including fire, theft, casualty, general liability,
workers
compensation, business interruption, environmental, product
liability and
automobile insurance policies and bond and surety arrangements)
to which the
Company or any Subsidiary is a party. Such insurance policies
are of the type
and in amounts customarily carried by organizations conducting
businesses or
owning assets similar to those of the Company and the
Subsidiaries. There is no
material claim pending under any such policy as to which
coverage has been
questioned, denied or disputed by the underwriter of such
policy. All premiums
due and payable under all such policies have been paid, neither
the Company nor
any Subsidiary may be liable for retroactive premiums or similar
payments, and
the Company and the Subsidiaries are otherwise in compliance in
all material
respects with the terms of such policies. The Company has no
knowledge of any
threatened termination of, or material premium increase with
respect to, any
such policy. Each such policy will continue to be enforceable
and in full force
and effect immediately following the Effective Time in
accordance with the terms
thereof as in effect immediately prior to the Effective
Time.
2.17 Litigation. As of the date of this Agreement, there is no
action, suit,
proceeding, claim, arbitration or investigation before any
Governmental Entity
or before any arbitrator (a "Legal Proceeding") which is pending
or has been
threatened in writing against the Company or any Subsidiary
which (a) seeks
either damages in excess of $10,000 individually, or $25,000 in
the aggregate,
or equitable relief or (b) if determined adversely to the
Company or such
Subsidiary, could have, individually or in the aggregate, a
Company Material
Adverse Effect.
2.18 Employees.
(a) Section 2.18 of the Disclosure Schedule contains a list of
all employees of
the Company and each Subsidiary whose annual rate of
compensation exceeds
$50,000 per year, along with the position and the annual rate of
compensation of
each such person. Section 2.18 of the Disclosure Schedule
contains a list of all
employees of the Company or any Subsidiary who are a party to a
non-competition
agreement with the Company or any Subsidiary; copies of such
agreements have
previously been delivered or made available to the Parent. To
the knowledge of
the Company, no key employee or group of employees has any plans
to terminate
employment with the Company or any Subsidiary.
(b) Neither the Company nor any Subsidiary is a party to or
bound by any
collective bargaining agreement, nor has any of them experienced
any strikes,
grievances, claims of unfair labor practices or other collective
bargaining
disputes. To the knowledge of the Company, no organizational
effort has been
made or threatened, either currently or within
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the past two years, by or on behalf of any labor union with
respect to employees
of the Company or any Subsidiary. To the knowledge of the
Company there are no
circumstances or facts which could individually or collectively
give rise to a
suit based on discrimination of any kind.
2.19 Employee Benefits.
(a) For purposes of this Agreement, the following terms shall
have the following
meanings:
(i) "Employee Benefit Plan" means any "employee pension benefit
plan"
(as defined in Section 3(2) of ERISA), any "employee welfare
benefit
plan" (as defined in Section 3(1) of ERISA), and any other
written or
oral plan, agreement or arrangement involving direct or
indirect
compensation, including without limitation insurance
coverage,
severance benefits, disability benefits, deferred
compensation,
bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or
post-retirement compensation.
(ii) "ERISA" means the Employee Retirement Income Security Act
of 1974,
as amended.
(iii) "ERISA Affiliate" means any entity which is, or at any
applicable
time was, a member of (1) a controlled group of corporations
(as
defined in Section 414(b) of the Code), (2) a group of trades
or
businesses under common control (as defined in Section 414(c) of
the
Code), or (3) an affiliated service group (as defined under
Section
414(m) of the Code or the regulations under Section 414(o) of
the
Code), any of which includes or included the Company or a
Subsidiary.
(b) Section 2.19(b) of the Disclosure Schedule contains a
complete and accurate
list of all Employee Benefit Plans maintained, or contributed
to, by the
Company, any Subsidiary or any ERISA Affiliate. Complete and
accurate copies of
(i) all Employee Benefit Plans which have been reduced to
writing, (ii) written
summaries of all unwritten Employee Benefit Plans, (iii) all
related trust
agreements, insurance contracts and summary plan descriptions,
and (iv) all
annual reports filed on IRS Form 5500, 5500C or 5500R and (for
all funded plans)
all plan financial statements for the last five plan years for
each Employee
Benefit Plan, have previously been delivered or made available
to the Parent.
Each Employee Benefit Plan has been administered in all material
respects in
accordance with its terms and each of the Company, the
Subsidiaries and the
ERISA Affiliates has in
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all material respects met its obligations with respect to such
Employee Benefit
Plan and has made all required contributions thereto. The
Company, each
Subsidiary, each ERISA Affiliate and each Employee Benefit Plan
are in
compliance in all material respects with the currently
applicable provisions of
ERISA and the Code and the regulations thereunder (including
without limitation
Section 4980 B of the Code, Subtitle K, Chapter 100 of the Code
and Sections 601
through 608 and Section 701 et seq. of ERISA). All filings and
reports as to
each Employee Benefit Plan required to have been submitted to
the Internal
Revenue Service or to the United States Department of Labor have
been duly
submitted.
(c) To the knowledge of the Company, there are no Legal
Proceedings (except
claims for benefits payable in the normal operation of the
Employee Benefit
Plans and proceedings with respect to qualified domestic
relations orders)
against or involving any Employee Benefit Plan or asserting any
rights or claims
to benefits under any Employee Benefit Plan that could give rise
to any material
liability.
(d) All the Employee Benefit Plans that are intended to be
qualified under
Section 401(a) of the Code have received determination letters
from the Internal
Revenue Service to the effect that such Employee Benefit Plans
are qualified and
the plans and the trusts related thereto are exempt from federal
income taxes
under Sections 401(a) and 501(a), respectively, of the Code, no
such
determination letter has been revoked and revocation has not
been threatened,
and no such Employee Benefit Plan has been amended since the
date of its most
recent determination letter or application therefor in any
respect, and no act
or omission has occurred, that would adversely affect its
qualification or
materially increase its cost. Each Employee Benefit Plan which
is required to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has
been tested for
compliance with, and satisfies the requirements of, Section
401(k)(3) and
Section 401(m)(2) of the Code for each plan year ending prior to
the Closing
Date.
(e) Neither the Company, any Subsidiary, nor any ERISA Affiliate
has ever
maintained an Employee Benefit Plan subject to Section 412 of
the Code or Title
IV of ERISA.
(f) At no time has the Company, any Subsidiary or any ERISA
Affiliate been
obligated to contribute to any "multiemployer plan" (as defined
in Section
4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Employee Benefit
Plan providing
benefits after termination of employment to any employee of the
Company or any
Subsidiary (or to any beneficiary of any such employee),
including but not
limited to retiree health coverage and deferred compensation,
but excluding
continuation of health
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coverage required to be continued under Section 4980B of the
Code or other
applicable law and insurance conversion privileges under state
law. The assets
of each Employee Benefit Plan which is funded are reported at
their fair market
value on the books and records of such Employee Benefit
Plan.
(h) No act or omission has occurred and no condition exists with
respect to any
Employee Benefit Plan maintained by the Company, any Subsidiary
or any ERISA
Affiliate that would subject the Company, any Subsidiary or any
ERISA Affiliate
to (i) any material fine, penalty, tax or liability of any kind
imposed under
ERISA or the Code or (ii) any contractual indemnification or
contribution
obligation protecting any fiduciary, insurer or service provider
with respect to
any Employee Benefit Plan. (i) No Employee Benefit Plan is
funded by, associated
with or related to a "voluntary employee's beneficiary
association" within the
meaning of Section 501(c)(9) of the Code. (j) Each Employee
Benefit Plan is
amendable and terminable unilaterally by the Company at any time
without
liability to the Company as a result thereof and no Employee
Benefit Plan, plan
documentation or agreement, summary plan description or other
written
communication distributed generally to employees by its terms
prohibits the
Company from amending or terminating any such Employee Benefit
Plan.
(k) Section 2.19(k) of the Disclosure Schedule discloses each:
(i) agreement
with any stockholder, director, executive officer or other key
employee of the
Company or any Subsidiary (A) the benefits of which are
contingent, or the terms
of which are materially altered, upon the occurrence of a
transaction involving
the Company or any Subsidiary of the nature of any of the
transactions
contemplated by this Agreement, (B) providing any term of
employment or
compensation guarantee or (C) providing severance benefits or
other benefits
after the termination of employment of such director, executive
officer or key
employee; (ii) agreement, plan or arrangement under which any
person may receive
payments from the Company or any Subsidiary that may be subject
to the tax
imposed by Section 4999 of the Code or included in the
determination of such
person's "parachute payment" under Section 280G of the Code; and
(iii) agreement
or plan binding the Company or any Subsidiary, including without
limitation any
stock option plan, stock appreciation right plan, restricted
stock plan, stock
purchase plan, severance benefit plan or Employee Benefit Plan,
any of the
benefits of which will be increased, or the vesting of the
benefits of which
will be accelerated, by the occurrence of any of the
transactions contemplated
by this Agreement or the value of any of the benefits of which
will be
calculated on the basis of any of the transactions contemplated
by this
Agreement. The accruals for vacation, sickness and disability
expenses are
accounted for on the Company
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<PAGE>
Interim Balance Sheet and are adequate and properly reflect the
expenses
associated therewith in accordance with generally accepted
accounting
principles.
2.20 Environmental Matters.
(a) Each of the Company and the Subsidiaries has complied with
all applicable
Environmental Laws (as defined below), except for violations of
Environmental
Laws that, individually or in the aggregate, have not had and
would not
reasonably be expected to have a Company Material Adverse
Effect. There is no
pending or, to the knowledge of the Company, threatened civil or
criminal
litigation, written notice of violation, formal administrative
proceeding, or
investigation, inquiry or information request by any
Governmental Entity,
relating to any Environmental Law involving the Company or any
Subsidiary,
except for litigation, notices of violations, formal
administrative proceedings
or investigations, inquiries or information requests that,
individually or in
the aggregate, have not had and would not reasonably be expected
to have a
Company Material Adverse Effect. For purposes of this Agreement,
"Environmental
Law" means any federal, state or local law, statute, rule or
regulation or the
common law relating to the environment, including without
limitation any
statute, regulation, administrative decision or order pertaining
to (i)
treatment, storage, disposal, generation and transportation of
industrial, toxic
or hazardous materials or substances or solid or hazardous
waste; (ii) air,
water and noise pollution; (iii) groundwater and soil
contamination; (iv) the
release or threatened release into the environment of
industrial, toxic or
hazardous materials or substances, or solid or hazardous waste,
including
without limitation emissions, discharges, injections, spills,
escapes or dumping
of pollutants, contaminants or chemicals; (v) the protection of
wild life,
marine life and wetlands, including without limitation all
endangered and
threatened species; (vi) storage tanks, vessels, containers,
abandoned or
discarded barrels, and other closed receptacles; (vii) health
and safety of
employees and other persons; and (viii) manufacturing,
processing, using,
distributing, treating, storing, disposing, transporting or
handling of
materials regulated under any law as pollutants, contaminants,
toxic or
hazardous materials or substances or oil or petroleum products
or solid or
hazardous waste. As used above, the terms "release" and
"environment" shall have
the meaning set forth in the Comprehensive Environmental
Response, Compensation
and Liability Act of 1980, as amended ("CERCLA").
(b) Set forth in Section 2.20(b) of the Disclosure Schedule is a
list of all
documents (whether in hard copy or electronic form) that contain
any
environmental reports, investigations and audits relating to
premises currently
or previously owned or operated by the Company or a Subsidiary
(whether
conducted by or on behalf of the Company or a Subsidiary or a
third party, and
whether done at the initiative of the Company or a Subsidiary or
directed by a
Governmental Entity or other third party) which were issued
23
<PAGE>
or conducted during the past five years and which the Company
has possession of
or access to. A complete and accurate copy of each such document
has been
provided to the Parent.
(c) To the knowledge of the Company there is no material
environmental liability
with respect to any solid or hazardous waste transporter or
treatment, storage
or disposal facility that has been used by the Company or any
Subsidiary.
2.21 Legal Compliance. Each of the Company and the Subsidiaries,
and the conduct
and operations of their respective businesses, are in compliance
with each
applicable law (including rules and regulations thereunder) of
any federal,
state, local or foreign government, or any Governmental Entity,
except for any
violations or defaults that, individually or in the aggregate,
have not had and
would not reasonably be expected to have a Company Material
Adverse Effect.
2.22 Customers and Suppliers. Section 2.22 of the Disclosure
Schedule sets forth
a list of each customer that accounted for more than 5% of the
consolidated
revenues of the Company during the last full fiscal year or the
interim period
through the Company Interim Balance Sheet date and the amount of
revenues
accounted for by such customer during such period. No such
customer has notified
the Company in writing within the past year that it will stop
buying services
from the Company or any Subsidiary.
2.23 Permits. Section 2.23 of the Disclosure Schedule sets forth
a list of all
permits, licenses, registrations, certificates, orders or
approvals from any
Governmental Entity (including without limitation those issued
or required under
Environmental Laws and those relating to the occupancy or use of
owned or leased
real property) ("Permits") issued to or held by the Company or
any Subsidiary.
Such listed Permits are the only Permits that are required for
the Company and
the Subsidiaries to conduct their respective businesses as
presently conducted
except for those the absence of which, individually or in the
aggregate, have
not had and would not reasonably be expected to have a Company
Material Adverse
Effect. Each such Permit is in full force and effect and, to the
knowledge of
the Company, no suspension or cancellation of such Permit is
threatened and
there is no basis for believing that such Permit will not be
renewable upon
expiration. Each such Permit will continue in full force and
effect immediately
following the Closing.
2.24 Certain Business Relationships With Affiliates. Except as
listed in Section
2.24 of the Disclosure Schedule, no Affiliate of the Company or
of any
Subsidiary (a) owns any property or right, tangible or
intangible, which is used
in the business of the Company or any Subsidiary, (b) has any
claim or cause of
action against the Company or any
24
<PAGE>
Subsidiary, or (c) owes any money to, or is owed any money by,
the Company or
any Subsidiary. Section 2.24 of the Disclosure Schedule
describes any
transactions involving the receipt or payment in excess of
$25,000 in any fiscal
year between the Company or a Subsidiary and any Affiliate
thereof which have
occurred or existed since the Organization Date, other than
employment
agreements.
2.25 Brokers' Fees. Neither the Company nor any Subsidiary has
any liability or
obligation to pay any fees or commissions to any broker, finder
or agent with
respect to the transactions contemplated by this Agreement,
except as listed in
Section 2.25 of the Disclosure Schedule.
2.26 Books and Records. The minute books and other similar
records of the
Company and each Subsidiary contain complete and accur
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