Exhibit 2.1
___________________________________________________________
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LITCHFIELD FINANCIAL CORPORATION
STAMFORD ASSET RECOVERY CORPORATION
IRONWOOD ACCEPTANCE COMPANY, LLC
AND
THE MEMBERS OF
IRONWOOD ACCEPTANCE COMPANY, LLC
DATED
JUNE 16, 1999
___________________________________________________________
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 16, 1999 by and among
Litchfield Financial Corporation (the "Parent"), a corporation organized
under the laws of the Commonwealth of Massachusetts, Stamford Asset Recovery
Corporation ("Acquisition"), a corporation organized under the laws of the
State of Delaware and a wholly-owned subsidiary of the Parent, Ironwood
Acceptance Company, LLC, a limited liability company organized under the laws
of the State of Arizona (the "Company"), and the members of the Company, (the
"Members").
WHEREAS, the Boards of Directors of the Parent and Acquisition and the
Board of Managers of the Company have approved the merger of the Company with
and into the Acquisition (the "Merger"), pursuant to which Acquisition will
be the surviving corporation and the members of the Company immediately prior
to such merger (the "Members") will be entitled to receive the consideration
provided for in this Agreement, all upon the terms and subject to the
conditions set forth herein;
WHEREAS, as a condition and inducement to the Parent's willingness to
enter into this Agreement, all of the Members have, concurrently with the
execution of this Agreement, executed and delivered to the Parent written
consents approving this Agreement, the Merger and the other transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements set forth herein, and intending to
be legally bound hereby, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. (a) At the Effective Time (as defined in Section
1.2), and subject to and upon the terms and conditions of this Agreement, the
Arizona Limited Liability Company Act (the "ALLCA") and the Delaware General
Corporation Law (the "DGCL"), the Company shall be merged with and into
Acquisition, the separate existence of the Company shall cease, and
Acquisition shall continue as the surviving corporation. Acquisition as the
surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Article X and subject to the satisfaction or waiver of the conditions set
forth in Articles VIII and IX, the consummation of the Merger (the "Closing")
will take place as promptly as practicable (and in any event within two
business days) after satisfaction or waiver of the conditions set forth in
Articles VIII and IX, at the offices of Hutchins, Wheeler & Dittmar, A
Professional Corporation, 101 Federal Street, Boston, Massachusetts, unless
another date, time or place is agreed to in writing by the Company and the
Parent. The date of such Closing is referred to herein as the "Closing Date."
1.2 Effective Time. As promptly as practicable after the satisfaction
or waiver of the conditions set forth in Articles VIII and IX, the parties
hereto shall cause the Merger to be consummated by filing agreements,
certificates or articles of merger, as the case may be, as contemplated by
the ALLCA and the DGCL in the forms of Exhibit A-1 and Exhibit A-2 hereto
(collectively, the "Certificate of Merger"), together with any required
related certificates, with the Arizona Corporation Commission and the
Secretary of State of the State of Delaware, in such form as required by, and
executed in accordance with the relevant provisions of the ALLCA and the DGCL
(the time of such filings being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of the ALLCA and the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of the Company and
Acquisition shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Acquisition shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; By-Laws.
(a) Certificate of Incorporation. Unless otherwise determined by
the Parent prior to the Effective Time, at the Effective Time, the
Certificate of Incorporation of Acquisition, as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended in accordance with the DGCL
and Certificate of Incorporation.
(b) By-Laws. Unless otherwise determined by the Parent prior to
the Effective Time, the By-Laws of Acquisition, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended in accordance with the DGCL, the
Certificate of Incorporation of the Surviving Corporation and such By-Laws.
1.5 Directors and Officers. The directors of Acquisition immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Acquisition immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
1.6 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, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, or record or otherwise, in the
Surviving Corporation, its right, title or interest in or to any of the
rights, properties or assets of Acquisition or the Company acquired or to be
acquired by reason of, or as a result of, the Merger, or otherwise to carry
out the purposes of this Agreement, the Surviving Corporation and its proper
officers and directors shall be authorized to execute and deliver, in the
name and on behalf of Acquisition or the Company, all such deeds, bills of
sale, assignments and assurances and to do, in the name and on behalf of
Acquisition or the Company, all such other acts and things necessary or
desirable to vest, perfect or confirm any and all right, title or interest
in, to or under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES
2.1 Merger Consideration. Except as set forth in Section 2.2(e)
hereof, the consideration payable in the Merger to holders of membership
interests in the Company (the"Membership Units"), shall consist of (i) an
aggregate of $790,653.75 payable in cash by wire transfer of immediately
available funds to the Members on a pro rata basis based on the number of
Fully Diluted Shares (as defined below) held by each Member, and (ii) an
aggregate of 91,665 shares of the Common Stock, par value $.01 per share, of
the Parent (the "Parent Common Stock"), such shares of the Parent Common
Stock to be issuable at the Closing in accordance with the terms of this
Agreement.
2.2 Conversion of Shares.
(a) Conversion of Shares. Each Membership Unit issued and
outstanding as of the Effective Time (other than shares owned by holders who
have properly exercised their rights of appraisal within the meaning of the
ALLCA ("Dissenting Shares")) shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into (i)
the right to receive from the Parent $263.55 and (ii) that number of shares
of the Parent Common Stock as shall be obtained by dividing 91,665 (total
number of Parent Shares to be issued) by the number of Fully Diluted Shares
(as hereinafter defined) with the resulting quotient being carried to five
decimal places (the "Merger Consideration"). "Fully Diluted Shares" shall be
equal to the total number of outstanding Membership Units calculated on a
fully diluted, fully converted basis as though all convertible debt and
equity securities and options (whether vested or unvested) and warrants had
been converted or exercised. The Exchange Ratio shall not change as a result
of fluctuations in the market price of the Parent Common Stock between the
date of this Agreement and the Effective Time. The aggregate number of
shares of the Parent Common Stock issued pursuant to this Section 2.2(a)
shall be referred to in this Agreement as the "Merger Shares." On the
Closing Date, the Company will deliver to the Parent a certificate certifying
the cash proceeds received by the Company from the exercise of stock options.
(b) Treasury Shares. Each Membership Unit held in the Company's
treasury as of the Effective Time, if any, shall, by virtue of the Merger, be
canceled without payment of any consideration therefor.
(c) Stock Options. At the Effective Time, all outstanding options
to purchase Membership Units (each a "Stock Option"), whether vested or
unvested, shall be deemed assumed by the Parent and deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Stock Option prior to the Effective Time (including terms and conditions
relating to such Stock Option's term, exercisability, vesting schedule and
status as an "incentive stock option" under Section 422 of the Code), the
number (rounded down to the nearest whole number) of shares of the Parent
Common Stock equal to the aggregate of that number of shares of the Parent
Common Stock (based on the Exchange Ratio) as the holder of such Stock Option
would have been entitled to receive pursuant to the Merger had such holder
exercised such Option in full immediately prior to the Effective Time (not
taking into account whether or not such Option was in fact exercisable). The
exercise price for such Stock Options shall be the price per share equal to
(x) the aggregate exercise price for Membership Units otherwise purchasable
pursuant to such Stock Option divided by (y) the number of shares of the
Parent Common Stock deemed purchasable pursuant to such Stock Option (the
exercise price per share, so determined, being rounded up to the nearest full
cent). No payment shall be made for fractional shares. The aggregate number
of shares of the Parent Common Stock issuable upon the exercise of Options
assumed by the Parent pursuant to this Section 2.2(c) shall be referred to in
this Agreement as the "Option Shares." Any adjustment to an incentive stock
option made under this Section 2.2(c) shall comply with Section 424(a) of the
Code.
(d) Acquisition Shares. Each share of common stock, par value
$.01 per share, of Acquisition issued and outstanding at the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holder thereof, automatically be converted into one fully paid and
nonassessable share of common stock of the Surviving Corporation, as such
shares of common stock are constituted immediately following the Effective
Time.
(e) Dissenting Shares. Any Dissenting Shares shall be converted
into the right to receive from the Surviving Corporation such consideration
as may be determined to be due with respect to each such Dissenting Share
pursuant to the ALLCA; provided, however, Membership Units that are
Dissenting Shares at the Effective Time of the Merger and are held by a
holder who shall, after the Effective Time of the Merger, withdraw his demand
for appraisal or lose his right of appraisal as provided in the ALLCA, shall
be deemed to be converted, as of the Effective Time of the Merger, into the
right to receive the Merger Consideration in accordance with the procedures
specified in Section 2.3. The Company shall give the Parent (i) prompt
notice of any written demands for appraisal, withdrawals of demands for
appraisal and any other instruments served pursuant to the ALLCA received by
the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the ALLCA. The
Company will not voluntarily make any payment with respect to any demands for
appraisal and will not, except with the prior written consent of the Parent,
settle or offer to settle any such demands. It is understood and agreed that
the obligation to make any payment under the ALLCA shall be exclusively that
of the Surviving Corporation and that the Parent shall be under no obligation
to perform and discharge any such obligation or to reimburse or make any
contribution to the capital of the Surviving Corporation to enable it to
perform and discharge any such obligation.
2.3 Exchange of Certificates.
(a) At the Closing, certificates (the "Certificates") representing
all of the issued and outstanding Membership Units together with stock powers
executed in blank shall be surrendered for cancellation and termination in
the Merger. At the Effective Time, each Certificate shall be canceled in
exchange for a certificate representing the number of whole shares of the
Parent Common Stock (other than the Escrow Shares, as defined below) into
which the Membership Units evidenced by the Certificates so surrendered shall
have been converted pursuant to Section 2.2(a) of this Agreement. Such
certificates representing shares of the Parent Common Stock will be delivered
to the Members as soon as practicable but no later than five (5) business
days after the Closing. Until surrendered, each outstanding Certificate which
prior to the Effective Time represented Membership Units shall be deemed for
all corporate purposes to evidence ownership of the number of whole shares of
the Parent Common Stock into which the Membership Units have been converted
but shall, subject to applicable appraisal rights under the ABCA and ALLCA
and Section 2.2(e), have no other rights. Subject to appraisal rights under
the ABCA and ALLCA and Section 2.2(e), from and after the Effective Time, the
holders of Membership Units shall cease to have any rights in respect of such
units and their rights shall be solely in respect of the Parent Common Stock
into which the Membership Units have been converted.
(b) If any shares of the Parent Common Stock are to be issued in
the name of a person other than the person in whose name the Certificate(s)
surrendered in exchange therefor is registered, it shall be a condition to
the issuance of such shares that (i) the Certificate(s) so surrendered shall
be transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be proper and
(iii) the person requesting such transfer shall pay the Parent, or its
exchange agent, any transfer or other taxes payable by reason of the
foregoing or establish to the reasonable satisfaction of the Parent that such
taxes have been paid or are not required to be paid. Notwithstanding the
foregoing, neither the Parent nor the Company shall be liable to a holder of
Membership Units for shares of the Parent or the Company issuable to such
holder pursuant to the provisions of Section 2.2(a) of this Agreement that
are delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Parent shall
issue in exchange for such lost, stolen or destroyed Certificate the shares
of the Parent Common Stock issuable in exchange therefor pursuant to the
provisions of Section 2.2(a) of this Agreement. The Board of Directors of
the Parent may in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificate to
provide to the Parent, at the Parent's option, either a performance bond or
an indemnity agreement against any claim that may be made against the Parent
with respect to the Certificate alleged to have been lost, stolen or
destroyed.
2.4 No Fractional Securities. No fractional shares of the Parent
Common Stock shall be issuable by the Parent upon the conversion of
Membership Units in the Merger pursuant to Section 2.2(a) hereof. In lieu of
any such fractional shares, each holder of Membership Units who would
otherwise have been entitled to receive a fraction of a share of the Parent
Common Stock shall be entitled to receive instead an amount in cash equal to
such fraction multiplied by the Closing Market Price. For purposes of this
Agreement, the term "Closing Market Price" shall mean the last quoted sale
price for shares of the Parent Common Stock on The Nasdaq National Market the
day preceding the Effective Time.
2.5 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further
registration of transfers of Membership Units thereafter on the records of
the Company.
2.6 No Further Ownership Rights in Membership Units. The Merger Shares
delivered upon the surrender for exchange of Membership Units in accordance
with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation
of Membership Units which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, certificates for Membership Units are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article II.
2.7 Adjustment Event. If, between the date hereof and the Effective
Time, the issued and outstanding shares of the Parent Common Stock shall have
been combined, split, reclassified or otherwise changed into a different
number of shares or a different class of shares, an appropriate adjustment to
the Exchange Ratio shall be made to fully reflect such change in such manner
as is reasonably acceptable to the Parent and the Company.
2.8 Escrow. At the Effective Time, the Parent will deposit on behalf
of the Members (pro rata as to each Member) in escrow all certificates
representing the Merger Shares received by the Members, registered in the
name of Arizona Escrow & Financial Corporation, as Escrow Agent
(collectively, the "Escrow Shares"). The Escrow Shares shall be held as
security for the indemnification obligations under Article XI and shall be
distributed fifty percent (50%) on the first anniversary of the Closing and
fifty percent (50%) on the second anniversary of the Closing, or as otherwise
provided pursuant to the provisions of an Escrow Agreement (the "Escrow
Agreement") in the form of Exhibit B attached hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE MEMBERS
The Company and the Members jointly and severally represent and warrant
to the Parent and Acquisition as set forth below, subject to the exceptions
set forth in the disclosure schedules attached hereto (the "Disclosure
Schedules"), the section numbers and letters of which correspond to the
section and subsection numbers and letters of this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, any
information disclosed in one section of the Disclosure Schedules shall,
should the existence of the information be relevant to any other section of
the Disclosure Schedules, be deemed to be disclosed in all sections of the
Disclosure Schedules, but only to the extent that the relevance of such
information to such other section is reasonably apparent in the section of
the Disclosure Schedules on which such information is disclosed. The
disclosure of any information shall not be deemed to constitute an
acknowledgment that such information is required to be disclosed in
connection with the representations and warranties made by the Company in
this Agreement or that it is material, nor shall such information be deemed
to establish a standard of materiality
3.1 Company Organization. The Company is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Arizona. The Company has no Subsidiaries (as that term is
hereinafter defined) except for Palo Verde Trading Company, LLC which is a
wholly owned direct subsidiary of the Company. The Company has all requisite
power and authority to own, operate and lease the properties and assets it
now owns, operates and leases and to carry on its business as presently
conducted. The Company is duly qualified to transact business as a foreign
company and in good standing in the jurisdictions set forth in Schedule 3.1,
which are the only jurisdictions where such qualification is required by
reason of the nature of the properties and assets currently owned, operated
or leased by the Company or the business currently conducted by it, except
for such jurisdictions where the failure to be so qualified would not have a
Company Material Adverse Effect (as defined below). The Company has
previously delivered to the Parent complete and correct copies of its
Articles of Organization (certified by the secretary of state of the
jurisdiction in which it was formed as of a recent date) and its Operating
Agreement (certified by the Secretary of the Company as of a recent date).
Except as set forth in Schedule 3.1, neither the Articles of Organization nor
the Operating Agreement of the Company have been amended since the respective
dates of certification thereof, nor has any action been taken for the purpose
of effecting any amendment of such instruments. The term "Company Material
Adverse Effect" means, for purposes of this Agreement, any change, event or
effect that is, or that would be, materially adverse to the business,
operations, assets, liabilities, financial condition or results of operations
of the Company, taken as a whole.
3.2 Authorization. The Company has full limited liability company
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly approved by the Board of Managers and Members of the Company, and
no other action on the part of the Company is necessary to approve and
authorize the execution and delivery of this Agreement or (subject to the
filing of the Articles of Merger or Certificate of Merger pursuant to the
ALLCA and the DGCL respectively) the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
the Company and constitutes the valid and binding agreement of the Company,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether
such enforceability is considered in a proceeding in law or in equity.
3.3 Consents and Approvals; No Violations. Subject to the filing of
the Certificate of Merger with the Arizona Corporation Commission and the
Secretary of State of the State of Delaware and compliance with applicable
federal and state securities laws, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will
not: (i) violate or conflict with any provision of the Certificate of
Organization or Operating Agreement of the Company, (ii) breach, violate or
constitute an event of default (or an event which with the lapse of time or
the giving of notice or both would constitute an event of default) under,
give rise to any right of termination, cancellation, modification or
acceleration under, or require any consent or the giving of any notice under,
any note, bond, indenture, mortgage, security agreement, lease, license,
franchise, permit, agreement or other instrument or obligation to which the
Company is a party, or by which the Company or any of its properties or
assets may be bound, or result in the creation of any lien, claim or
encumbrance or other right of any third party of any kind whatsoever upon the
properties or assets of the Company pursuant to the terms of any such
instrument or obligation, other than any breach, violation, default,
termination, cancellation, modification or acceleration which would not have
a Company Material Adverse Effect, (iii) violate or conflict with any law,
statute, ordinance, code, rule, regulation, judgment, order, writ,
injunction, decree or other instrument of any Federal, state, local or
foreign court or governmental or regulatory body, agency or authority
applicable to the Company or by which any of its properties or assets may be
bound except for such violations and conflicts which would not have a Company
Material Adverse Effect or (iv) require, on the part of the Company, any
filing or registration with, or permit, license, exemption, consent,
authorization or approval of, or the giving of any notice to, any
governmental or regulatory body, agency or authority, other than any filing,
registration, permit, license, exemption, consent, authorization, approval or
notice which if not obtained would not have a Company Material Adverse Effect.
3.4 Capitalization.
(a) The authorized membership interests of the Company consists of
3,000 Membership Units, of which 3,000 Membership Units are issued and
outstanding. Schedule 3.4(a) sets forth a complete and correct list of the
record and beneficial ownership of the issued and outstanding Membership
Units. Except as set forth on Schedule 3.4(a), all of the issued and
outstanding Membership Units were duly authorized and validly issued and are
fully paid and nonassessable, and were not issued in violation of any
preemptive rights or Federal or state securities laws. Except as disclosed
in Schedule 3.4(a) hereto, the Company has never repurchased or redeemed any
Membership Units, and there are no amounts owed or which may be owed to any
person by the Company as a result of any repurchase or redemption of its
Membership Units. Except as disclosed in Schedule 3.4(a) hereto, there are
no agreements, arrangements or understandings to which the Company is a party
or by which it is bound to redeem or repurchase any Membership Units. Except
as set forth in Schedule 3.4(a), there are no outstanding options, warrants
or other rights to purchase, or any securities convertible into or
exchangeable for, Membership Units of the Company, and there are no
agreements, arrangements or understandings to which the Company is a party or
by which it is bound pursuant to which the Company is or may be required to
issue additional Membership Units.
(b) The Company does not own, directly or indirectly, any equity
securities, or options, warrants or other rights to acquire equity
securities, or securities convertible into or exchangeable for equity
securities, of any other corporation, or any partnership interest in any
general or limited partnership or unincorporated joint venture (a
"Subsidiary") except for Palo Verde Trading Company, LLC, a direct wholly
owned subsidiary of the Company.
3.5 Financial Statements; Business Information. (a) Attached hereto
as Schedule 3.5(a) are (i) the audited balance sheet of the Company as of
December 31, 1998 and the statements of income for the year then ended, and
(ii) the unaudited balance sheets of the Company as of May 31, 1999 and the
statements of income of the Company for the fiscal year or period then ended
(hereinafter collectively referred to as the "Financial Statements"). The
Financial Statements (i) have been prepared from the books and records of the
Company, (ii) have been prepared in accordance with generally accepted
accounting principles consistently applied during the periods covered
thereby, and (iii) present fairly in all material respects the financial
condition and results of operations of the Company as at the dates, and for
the periods, stated therein, except that the interim Financial Statements are
subject to normal year-end adjustments which will not be individually or in
the aggregate material in amount or effect and do not include footnotes.
3.6 Absence of Undisclosed Liabilities. Except (i) as set forth or
reserved against in the balance sheet of the Company dated as of May 31,
1999, included in the Financial Statements (the "Balance Sheet") and (ii) for
obligations incurred since May 31, 1999 in the ordinary course of business,
do not individually or in the aggregate exceed $10,000 (except for accrued
and unpaid interest payable to the Parent since May 31, 1999), the Company
does not have any material liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise.
3.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.7, since December 31, 1998, the Company has carried on its
business in all material respects in the ordinary course and consistent with
past practice. Except as set forth on Schedule 3.7 hereto, since December
31, 1998, the Company has not: (i) incurred any material obligation or
liability (whether absolute, accrued, contingent or otherwise) except in the
ordinary course of business and consistent with past practice; (ii)
experienced any Company Material Adverse Effect; (iii) made any change in
any accounting principle or practice or in its methods of applying any such
principle or practice; (iv) suffered any material damage, destruction or
loss, whether or not covered by insurance, affecting its properties, assets
or business; (v) mortgaged, pledged or subjected to any lien, charge or other
encumbrance, or granted to third parties any rights in, any of its assets,
tangible or intangible; (vi) sold or transferred any of its assets, except in
the ordinary course of business and consistent with past practice, or
canceled or compromised any debts or waived any claims or rights of a
material nature; (vii) issued any additional Membership Units or any rights,
options or warrants to purchase, or securities convertible into or
exchangeable for, its Membership Units; (viii) declared or paid any
dividends on or made any distributions (however characterized) in respect of
its Membership Units; (ix) repurchased or redeemed any Membership Units; (x)
granted any general or specific increase in the compensation payable or to
become payable to any of their Employees (as that term is hereinafter
defined) or any bonus or service award or other like benefit, or instituted,
increased, augmented or improved any Benefit Plan (as that term is
hereinafter defined); or (xi) entered into any agreement to do any of the
foregoing.
3.8 Legal Proceedings, etc. Except as set forth in Schedule 3.8, there
are no suits, actions, claims or proceedings (including, without limitation,
arbitral or administrative proceedings) or, to the knowledge of the Company
or the Members, investigations pending or, to the knowledge of the Company or
the Members, threatened against the Company or its properties, assets or
business or, to the best knowledge of the Company or the Members in their
capacity as such, pending or threatened against any of the officers,
directors, employees, agents or consultants of the Company in connection with
the business of the Company. There are no such suits, actions, claims,
proceedings or investigations pending against the Company, or, to the best
knowledge of the Company or the Members, threatened against the Company
challenging the validity or propriety of the transactions contemplated by
this Agreement. There is no judgment, order, injunction, decree or award
(whether issued by a court, an arbitrator or an administrative agency) to
which the Company is a party, or involving the Company's properties, assets
or business, which is unsatisfied or which requires continuing compliance
therewith by the Company.
3.9 Taxes.
(a) Except as set forth in Schedule 3.9, the Company has duly and
timely filed, all Tax returns and other filings in respect of Taxes (as that
term is hereinafter defined) required to be filed by it prior to May 31,
1999, and has in a timely manner paid all Taxes which are (or will be) due
for all periods ending on or before May 31, 1999, whether or not shown on
such returns. All such Tax returns have been, accurately and completely
prepared in all material respects in compliance with all laws, rules and
regulations.
(b) Except as set forth in Schedule 3.9 hereto, there are no
actions or proceedings currently pending or, to the knowledge of the Company
or the Members, threatened against the Company by any governmental authority
for the assessment or collection of Taxes, no claim for the assessment or
collection of Taxes has been asserted against the Company, and there are no
matters under discussion by the Company with any governmental authority
regarding claims for the assessment or collection of Taxes. Any Taxes that
have been claimed or imposed as a result of any examinations of any tax
return of the Company by any governmental authority are being contested in
good faith and have been disclosed in writing to the Parent. Except as set
forth in Schedule 3.9, there are no agreements or applications by the Company
for an extension of time for the assessment or payment of any Taxes nor any
waiver of the statute of limitations in respect of Taxes. There are no Tax
liens on any of the assets of the Company, except for liens for Taxes not yet
due or payable.
(c) For purposes of this Agreement, the terms "Tax" and "Taxes"
shall mean and include any and all United States, state, local, foreign or
other income, sales, use, withholding, employment, payroll, social security,
property taxes and all other taxes of any kind, deficiencies, fees or other
governmental charges, including, without limitation, any installment payment
for taxes and contributions or other amounts determined with respect to
compensation paid to directors, officers, employees or independent
contractors from time to time imposed by or required to be paid to any
governmental authority (including penalties and additions to tax thereon,
penalties for failure to file a return or report, and interest on any of the
foregoing).
(d) There is no agreement, plan or arrangement covering any
employee or independent contractor or former employee or independent
contractor of the Company that, considered individually or considered
collectively with any other such agreement, plan or arrangement, will, or
could reasonably be expected to, give rise directly or indirectly to the
payment of any amount that would not be deductible pursuant to Section 280G
of the Code or that would be subject to an excise tax under Section 4999 of
the Code.
(e) The Company is not and has never been a party to or bound by
any tax indemnity agreement, tax sharing agreement, tax allocation agreement
or similar agreement or arrangement and the Company does not have any
liability for Taxes of any person (other than the Company) under Treasury
Regulation 1.1502-6 (or any similar provision of state, local or foreign law).
(f) The Company has withheld amounts from its employees and other
persons required to be withheld under the tax, social security, unemployment
and other withholding provisions of all federal, state, local and foreign
laws.
3.10 Title to Properties and Related Matters. (a) Except as set forth
on Schedule 3.10(a), the Company has good and valid title to all personal
property, tangible or intangible, which the Company purports to own,
including the properties reflected on the Balance Sheet or acquired after the
date thereof (other than properties and assets sold or otherwise disposed of
in the ordinary course of business and consistent with past practice since
December 31, 1998), free and clear of any claims, liens, pledges, security
interests or encumbrances of any kind whatsoever (other than (i) purchase
money security interests and common law vendor's liens, in each case for
goods purchased on open account in the ordinary course of business and having
a fair market value of less than $10,000 in each individual case), (ii) liens
for Taxes not yet due and payable, and (iii) such imperfections of title and
encumbrances, if any, that are not material in character, amount or extent
and that do not materially detract from the value, or materially interfere
with the use of, the property subject thereto or affected thereby.
(b) Except as set forth on Schedule 3.10(b), the Company does not
own any real property or any interest in real property.
(c) Schedule 3.10(c) sets forth a list, which is correct and
complete in all material respects, of all equipment, machinery, instruments,
vehicles, furniture, fixtures and other items of personal property currently
owned or leased by the Company with a book value as of May 31, 1999, in each
case of $10,000 or more. All such personal property is in suitable operating
condition (ordinary and reasonable wear and tear excepted), is physically
located in or about one of the Company's places of business and is owned by
the Company or is leased by the Company under one of the leases set forth in
Schedule 3.10(d). Except as disclosed in Schedule 3.10(c), none of such
personal property is subject to any agreement or commitment for its use by
any person other than the Company. The maintenance and operation of such
personal property has been in material conformance with all applicable laws
and regulations except for such non-conformance as would not have a Company
Material Adverse Effect. There are no assets leased by the Company or
required for the operation of the business of the Company that are owned,
directly or indirectly, by any Related Person (as that term is hereinafter
defined).
(d) Schedule 3.10(d) sets forth a complete and correct list of all
real property and personal property leases to which the Company is a party.
The Company has previously delivered to the Parent complete and correct
copies of each lease (and any amendments or supplements thereto) listed in
Schedule 3.10(d). Except as set forth in Schedule 3.10(d), (i) each such
lease is valid and binding and in full force and effect; except to the extent
that applicable bankruptcy, reorganization, insolvency, moratorium or other
laws affecting the enforcement of creditors' rights may affect such validity
or enforceability, (ii) neither the Company nor (to the knowledge of the
Company or the Members) any other party is in default under any such lease,
and no event has occurred which constitutes, or with the lapse of time or the
giving of notice or both would constitute, a default by the Company or (to
the knowledge of the Company or the Members) a default by any other party
under such lease; (iii) to the knowledge of the Company or the Members, there
are no disputes or disagreements between the Company and any other party with
respect to any such lease; and (iv) the lessor under each such lease has
consented or been given notice (or prior to the Closing shall have consented
or been given notice), where such consent or the giving of such notice is
necessary, sufficient that such lease shall remain in full force and effect
following the consummation of the transactions contemplated by this Agreement
without requiring modification in the rights or obligations of the lessee
under any such lease.
(e) Schedule 3.10(e) sets forth a complete list of all
indebtedness of the Company in respect of borrowed money, including without
limitation all amounts guaranteed by the Company and capital leases entered
into by the Company.
3.11 Intellectual Property; Proprietary Rights; Employee Restrictions.
(a) Schedule 3.11 sets forth a complete and current list of all registered
copyrights, copyright registrations and copyright applications, trademark
registrations and applications for registration, patents and patent
applications, trademarks, service marks, trade names, or other intellectual
property rights (collectively, "Intellectual Property Rights") owned or
licensed by the Company. All Intellectual Property Rights purported to be
owned by the Company held by any employee, officer or consultant are owned by
the Company by operation of law or have been validly assigned to the
Company. The Intellectual Property Rights are sufficient in all material
respects to carry on the business of the Company as presently conducted. The
Company has exclusive ownership of or license to use all Intellectual
Property Rights identified in Schedule 3.11 as owned or licensed by the
Company or has obtained any licenses, releases or assignments reasonably
necessary to use all third parties' Intellectual Property Rights in works
embodied in the Company's products. The present business activities or
products of the Company do not infringe any Intellectual Property Rights of
others. Except as set forth in Schedule 3.11, the Company has not received
any notice or other claim from any person asserting that any of the Company's
present activities infringe in any material respect or may infringe any
Intellectual Property Rights of such person.
The Company has taken all reasonable measures to protect and preserve
the security and confidentiality of its trade secrets and other confidential
information. To the knowledge of the Company and the Members, all trade
secrets and other confidential information of the Company are not part of the
public domain or knowledge, nor, to the knowledge of the Company and the
Members, have they been misappropriated by any person having an obligation to
maintain such trade secrets or other confidential information in confidence
for the Company. To the knowledge of the Company and the Members, no
employee or consultant of the Company has used any trade secrets or other
confidential information of any other person in the course of their work for
the Company.
The Company is the exclusive owner of all right, title and interest
in its Intellectual Property Rights as purported to be owned by the Company,
and to the Company's and the Members' knowledge, such Intellectual Property
Rights are valid and in full force and effect. No university, government
agency (whether federal or state) or other organization which sponsored
research and development conducted by the Company or has any claim of right
to or ownership of or other encumbrance upon the Intellectual Property Rights
of the Company. The Company is not aware of any infringement by others of
its copyrights or other Intellectual Property Rights in any of its products,
technology or services, or any violation of the confidentiality of any of its
proprietary information. To the Company's and the Members' knowledge, the
Company is not making unlawful use of any confidential information or trade
secrets of any past or present employees of the Company.
Neither the Company nor, to the knowledge of the Company and the
Members, any of the Company's employees, have any agreements or arrangements
with former employers of such employees relating to confidential information
or trade secrets of such employers or are bound by any consulting agreement
relating to confidential information or trade secrets of another entity that
are being violated by such persons. The activities of the Company's
employees on behalf of the Company do not violate in any material respects
any agreements or arrangements known to the Company which any such employees
have with former employers or any other entity to whom such employees may
have rendered consulting services. For the purposes of this Section 3.11,
Intellectual Property Rights also includes any and all intellectual property
rights, licenses, databases, computer programs and other computer software
user interfaces, know-how, trade secrets, customer lists, proprietary
technology, processes and formulae, source code, object code, algorithms,
architecture, structure, display screens, layouts, development tools,
instructions, templates, marketing materials created by the Company,
inventions, trade dress, logos and designs.
(b) The Company has all franchises, permits, licenses and other
rights and privileges reasonably necessary to permit it to own its property
and to conduct its business as it is presently conducted.
(c) To the knowledge of the Company and the Members, except as set
forth in Schedule 3.11(c), the management information systems (including all
computer hardware and software) owned, licensed or otherwise used by the
Company will not perform differently or experience any material malfunctions
or usage problems due to the change in the calendar year from 1999 to the
year 2000.
3.12 Contracts. (a) Except as set forth in Schedule 3.12(a) (or in
Schedule 3.4, Schedule 3.10(d), Schedule 3.11, or Schedule 3.13(a)), the
Company is not a party to, or subject to:
(i) any contract, arrangement or understanding, or series of
related contracts, arrangements or understandings, which involves annual
expenditures or receipts by the Company of more than $25,000;
(ii) any note, indenture, credit facility, mortgage, security
agreement or other contract, arrangement or understanding relating to or
evidencing indebtedness for money borrowed or a security interest or mortgage
in the assets of the Company;
(iii)any guaranty issued by the Company;
(iv) any contract, arrangement or understanding relating to
the acquisition, issuance or transfer of any securities;
(v) any contract, arrangement or understanding relating to
the acquisition, transfer, distribution, use, development, sharing or license
of any technology or Intellectual Property Rights other than licenses granted
in the ordinary course of business with a term of less than one year;
(vi) any contract, arrangement or understanding granting to
any person the right to use any property or property right of the Company
other than licenses granted in the ordinary course of business with a term of
less than one year;
(vii)any contract, arrangement or understanding restricting
the Company's or any Subsidiary's right to (A) engage in any business
activity or compete with any business, or (B) develop or distribute any
technology;
(viii) any contract, arrangement or understanding relating
to the employment of, or the performance of services of, any employee,
consultant or independent contractor and pursuant to which the Company is
required to pay more than $25,000 per year;
(ix) any contract, arrangement or understanding with a Related
Person (as that term is hereinafter defined); or
(x) any outstanding offer, commitment or obligation to enter
into any contract or arrangement of the nature described in subsections (i)
through (vi) of this subsection 3.12(a).
(b) The Company has previously made available for inspection and
copying to the Parent complete and correct copies (or, in the case of oral
contracts, a complete and correct description) of each contract (and any
amendments or supplements thereto) listed on Schedule 3.12(a). Except as set
forth in Schedule 3.12(b), (i) each contract listed in Schedule 3.12(a) is in
full force and effect; (ii) neither the Company nor (to the knowledge of the
Company or the Members) any other party is in default under any material
contract, and no event has occurred which constitutes, or with the lapse of
time or the giving of notice or both would constitute, a default by the
Company or (to the knowledge of the Company or the Members) a default by any
other party under such contract; (iii) to the knowledge of the Company or the
Members, there are no disputes or disagreements between the Company and any
other party with respect to any material contract; and (iv) each other party
to each material contract has consented or been given notice (or prior to the
Closing shall have consented or been given notice), where such consent or the
giving of such notice is necessary, sufficient that such contract shall
remain in full force and effect following the consummation of the
transactions contemplated by this Agreement without modification in the
rights or obligations of the Company thereunder.
(c) Except as set forth and described in Schedule 3.12(d), the
Company has not issued any warranty or any agreement or commitment to
indemnify any person other than in the ordinary course of business.
3.13 Employees; Employee Benefits.
(a) Schedule 3.13(a) sets forth the names of all current employees
of the Company (the "Employees") and such Employee's job title, the location
of employment of such Employee, such Employee's current salary, the amount of
any bonuses or other compensation paid since December 31, 1998 to such
Employee, the date of employment of such Employee and the accrued vacation
time of such Employee. Schedule 3.13(a) hereto sets forth a true and correct
statement of the liability, if any, of the Company for accrued but unused
sick pay. Except as set forth on Schedule 3.13(a), there are no outstanding
loans from the Company to any officer, director, employee, agent or
consultant of the Company, or to any other Related Person. Schedule 3.13(a)
hereto sets forth a complete and correct description of all severance
policies of the Company. Complete and correct copies of all written
agreements with Employees and all employment policies, and all amendments and
supplements thereto, have previously been delivered or made available to the
Parent, and a list of all such agreements and policies is set forth on
Schedule 3.13(a). None of the Employees has, to the knowledge of the Company
or the Members, indicated a desire to terminate his or her employment, or any
intention to terminate his or her employment upon a sale of, or business
combination relating to, the Company or in connection with the transactions
contemplated by this Agreement. Except as set forth on Schedule 3.13(a),
since December 31, 1998, the Company has not (i) increased the salary or
other compensation payable or to become payable to or for the benefit of any
of the Employees, (ii) increased the term or tenure of employment for any
Employee, except in the ordinary course of business consistent with past
practice, (iii) increased the amounts payable to any of the Employees upon
the termination of any such person's employment or (iv) adopted, increased,
augmented or improved benefits granted to or for the benefit of any of the
Employees under any Benefit Plan.
(b) Except as disclosed on Schedule 3.13(b), the Company has
complied in all material respects with Title VII of the Civil Rights Act of
1964, as amended, the Age Discrimination in Employment Act, as amended, the
Fair Labor Standards Act, as amended, the Immigration Reform and Control Act
of 1986, and all applicable laws, rules and regulations governing payment of
minimum wages and overtime rates, the withholding and payment of taxes from
compensation, discriminatory practices with respect to employment and
discharge, or otherwise relating to the conduct of employers with respect to
Employees or potential employees, and there have been no claims made or, to
the knowledge of the Company or the Members, threatened thereunder against
the Company arising out of, relating to or alleging any violation of any of
the foregoing. Except as disclosed in Schedule 3.13(b), there are no
material controversies, strikes, work stoppages, picketing or disputes
pending or, to the knowledge of the Company or the Members, threatened
between the Company and any of the Employees or Former Employees; no labor
union or other collective bargaining unit represents or has ever represented
any of the Employees, including any "leased employees" (within the meaning of
Section 414(n) of the Code); no organizational effort by any labor union or
other collective bargaining unit currently is under way or, to the knowledge
of the Company or the Members, threatened with respect to any Employees; and
the consent of no labor union or other collective bargaining unit is required
to consummate the transactions contemplated by this Agreement.
(c) Schedule 3.13(c) sets forth a list of each material defined
benefit and defined contribution plan, stock ownership plan, employment or
consulting agreement, executive compensation plan, bonus plan, incentive
compensation plan or arrangement, deferred compensation agreement or
arrangement, agreement with respect to temporary employees or "leased
employees" (within the meaning of Section 414(n) of the Code), vacation pay,
sickness, disability or death benefit plan (whether provided through
insurance, on a funded or unfunded basis or otherwise), employee stock
option, stock appreciation rights or stock purchase plan, severance pay plan,
arrangement or practice, employee relations policy, practice or arrangement,
and each other employee benefit plan, program or arrangement, including,
without limitation, each "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), which has been maintained by the Company for the benefit
of or relating to any of the Employees or to any Former Employees or their
dependents, survivors or beneficiaries, whether or not legally binding,
whether written or oral or whether express or implied, all of which are
hereinafter referred to as the "Benefit Plans."
(d) Except as set forth on Schedule 3.13(d), each Benefit Plan
which is an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) and which is intended to meet the requirements of Section 401(a) of
the Code meets such requirements; the trust, if any, forming part of such
plan is exempt from U.S. federal income tax under Section 501(a) of the Code;
a favorable determination letter has been issued by the Internal Revenue
Service (the "IRS") with respect to each plan and trust and each amendment
thereto; and nothing has occurred since the date of such determination letter
that would adversely affect the qualification of such plan; no Benefit Plan
is a "voluntary employees beneficiary association" (within the meaning of
section 501(c)(9) of the Code) and there have been no other "welfare benefit
funds" (within the meaning of Section 419 of the Code) relating to Employees
or Former Employees; no event or condition exists with respect to any Benefit
Plan that could subject the Company to any material Tax under Section 4980B
of the Code. With respect to each Benefit Plan, the Company has heretofore
delivered or made available to the Parent complete and correct copies of the
following documents, where applicable and to the extent available: (i) the
most recent annual report (Form 5500 series), together with schedules, as
required, filed with the IRS, and any financial statements and opinion
required by Section 103(a)(3) of ERISA, (ii) the most recent determination
letter issued by the IRS, (iii) the most recent summary plan description and
all modifications, as well as all other descriptions distributed to Employees
or set forth in any manuals or other documents, (iv) the text of the Benefit
Plan and of any trust, insurance or annuity contracts maintained in
connection therewith and (v) the most recent actuarial report, if any,
relating to the Benefit Plan.
(e) There has been and will be no "excess parachute payment" (as
that term is defined in Section 280G(b)(1) of the Code) to any of the
Employees as a result of the consummation of the transactions contemplated
hereby.
3.14 Compliance with Applicable Law. The Company is not in violation
in any material respect of any applicable safety, health, environmental or
other law, statute, ordinance, code, rule, regulation, judgment, order,
injunction, writ or decree of any Federal, state, local or foreign court or
governmental or regulatory body, agency or authority having, asserting or
claiming jurisdiction over it or over any part of its business, operations,
properties or assets, except for any violation that would not have a Company
Material Adverse Effect or result in a fine or penalty in excess of $5,000
individually or in the aggregate. The Company has not received any notice
alleging any such violation, nor to the knowledge of the Company or any
Member, is there any inquiry, investigation or proceedings relating thereto.
3.15 Ability to Conduct the Business. There is no agreement,
arrangement or understanding, nor any judgment, order, writ, injunction or
decree of any court or governmental or regulatory body, agency or authority
applicable to the Company or to which the Company is a party or by which it
(or any of its properties or assets) is bound, that will prevent the use by
the Surviving Corporation, after the Effective Time, of the properties and
assets owned by, the business conducted by or the services rendered by the
Company on the date hereof, in each case on substantially the same basis as
the same are used, owned, conducted or rendered on the date hereof. The
Company has in force, and is in compliance with, in all material respects,
all material governmental permits, licenses, exemptions, consents,
authorizations and approvals used in or required for the conduct of their
business as presently conducted, all of which shall continue in full force
and effect, without requirement of any filing or the giving of any notice and
without modification thereof, following the consummation of the transactions
contemplated hereby. The Company has not received any notice of, and to the
knowledge of the Company or the Members, there are no inquiries, proceedings
or investigations relating to or which could result in the revocation or
modification of any such permit, license, exemption, consent, authorization
or approval.
3.16 Consultants, Sales Representatives and Other Agents. Schedule 3.16
hereto sets forth a complete and correct list of the names and addresses of
each consultant, sales representative or other agent (other than any such
person performing solely clerical functions) currently engaged by the Company
who is not an employee of the Company and who has received compensation in
excess of $25,000 in respect of the five months ended May 31, 1999, the
commission rates or other compensation applicable with respect to each such
person and the amount of commissions or other compensation earned by each
such person for the five months ended May 31, 1999. Except as described on
Schedule 3.16, complete and correct copies of all current agreements between
the Company and any such person have previously been delivered or made
available by the Company to the Parent.
3.17 Tax Liens. All tax liens of the Company reflected on the Balance
Sheet (i) arose from bona fide transactions in the ordinary course of
business and consistent with past practice, and (ii) except as set forth on
Schedule 3.17, are owned by the Company free and clear of any claim, security
interest, lien or other encumbrance, and (iii) are accurately and fairly
reflected on the Balance Sheet, or, with respect to accounts receivable of
the Company created after May 31, 1999, are accurately and fairly reflected
in the books and records of the Company. Except as described on Schedule
3.17, the reserves for bad debts reflected on the Balance Sheet are adequate
and were calculated in accordance with generally accepted accounting
principles consistent with past practice.
3.18 Insurance. Schedule 3.18 hereto is a true and complete list of all
insurance policies carried by the Company with respect to its business,
together with, in respect of each such policy, the name of the insurer, the
number of the policy, the annual policy premium payable therefor, the limits
of coverage, the deductible amount (if any), the expiration date thereof and
each pending claim thereunder. Complete and correct copies of each
certificate of insurance have previously been delivered or made available by
the Company to the Parent. All such policies are in full force and effect.
All premiums due thereon have been paid in a timely manner.
3.19 Bank Accounts; Powers of Attorney. Schedule 3.19 sets forth a
complete and correct list showing:
(i) all bank accounts of the Company, together with, with
respect to each such account, the account number, the names of all
signatories thereof, the authorized powers of each such signatory and the
approximate balance thereof on the date of this Agreement; and
(ii) the names of all persons holding powers of attorney from
the Company and a summary statement of the terms thereof.
3.20 Minute Books, etc. The minute books, stock certificate book and
stock ledger of the Company are complete and correct in all material
respects. The minute books of the Company contain accurate and complete
records of all meetings or written consents to action of the Board of
Managers and Members of the Company and accurately reflect all corporate
actions of the Company which are required by law to be passed upon by the
Board of Managers or Members of the Company.
3.21 Related Person Indebtedness and Contracts. Schedule 3.21 sets
forth a complete and correct summary of all contracts, commitments,
arrangements and understandings not described elsewhere in this Agreement
between the Company and any of the following (collectively, "Related
Persons"): (i) the Members; (ii) the spouses and children of any of the
Members (collectively, "near relatives"); (iii) any trust for the benefit of
any of the Members or any of their respective near relatives; or (iv) any
corporation, partnership, joint venture or other entity or enterprise owned
or controlled by any of the Members or by any of their respective near
relatives.
3.22 Brokers; Payments. Except as set forth on Schedule 3.22, no
broker, investment banker, financial advisor or other person is entitled to
any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or any Member.
The Company has suspended or terminated, and has the legal right to terminate
or suspend, all negotiations and discussions of Acquisition Transactions (as
defined in Section 6.4) with parties other than the Parent. No valid claim
exists against the Company or, based on any action by the Company, against
the Surviving Corporation or the Parent for payment of any "topping,"
"break-up" or "bust-up" fee or any similar compensation or payment arrangement
as a result of the transactions contemplated hereby.
3.23 Company Action. The Board of Managers of the Company, by unanimous
written consent or at a meeting duly called and held, has (i) determined that
the Merger is fair and in the best interests of the Company and its Members,
(ii) approved the Merger and this Agreement in accordance with the provisions
of the ALLCA, and (iii) directed that this Agreement and the Merger be
submitted to the Company Members for their approval and resolved to recommend
that the Company's Members vote in favor of the approval of this Agreement
and the Merger. The Members of the Company have approved the Merger and this
Agreement in accordance with the provisions of the ALLCA.
3.24 Year 2000 Matters. The management information systems (including
all computer hardware and software) owned, licensed or otherwise used by the
Company will not perform differently and experience any material malfunctions
or usage problems due to the change in the calendar year from 1999 to the
year 2000.
3.25 Disclosure. No representation or warranty by the Company or the
Members contained in this Agreement and no statement contained in any of the
Disclosure Schedules delivered or to be delivered pursuant to this Agreement
by the Company contains or will contain, when considered together as a whole,
any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make the statements contained therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE MEMBERS
4.1 Authorization etc. The Members represent and warrant to the Parent
and Acquisition as follows:
(i) the Members are the sole and exclusive record and
beneficial owners of the of the Company's Membership Units set forth opposite
their name in Schedule 3.4 hereto, free and clear of any claims, liens,
pledges, options, rights of first refusal or other encumbrances or
restrictions of any nature whatsoever (other than restrictions on transfer
imposed under applicable securities laws), and, except as set forth on
Schedule 3.4 hereto, there are no agreements, arrangements or understandings
to which the Members are parties (other than this Agreement) involving the
purchase, sale or other acquisition or disposition of Membership Units owned
by such Members;
(ii)such Members shall (A) concurrently with such Members'
execution and delivery of this Agreement, execute and deliver to the Parent a
written consent in which such Members voted all Membership Units owned by
such Members in favor of the Merger and the adoption of this Agreement by the
Company, (B) at the Effective Time, deliver or cause to be delivered to the
Parent certificates representing all Membership Units owned by such Members,
each such certificate to be duly endorsed for transfer and free and clear of
any claims, liens, pledges, options, rights of first refusal or other
encumbrances or restrictions of any nature whatsoever (other than
restrictions imposed under applicable securities laws);
(iii) such Members have all necessary legal capacity,
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and this Agreement
constitutes a valid and binding obligation of such Members enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditors, rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in law or in equity; and
(iv)the execution and delivery of this Agreement by such
Members and the consummation of the transactions contemplated hereby will not
(A) violate or conflict with any provision of any partnership agreement or
other constitutional documents of any such Members that is constituted as a
general or limited partnership, (B) breach, violate or constitute an event of
default (or an event which with the lapse of time or the giving of notice or
both would constitute an event of default) under, give rise to any right of
termination, cancellation, modification or acceleration under or require any
consent or the giving of any notice under, any note, bond, indenture,
mortgage, security agreement, lease, license, franchise, permit, agreement or
other instrument or obligation to which such Members are a party, or by which
such Members or the Membership Units held by such Members may be bound, or
result in the creation of any material lien, claim or encumbrance or other
right of any third party of any kind whatsoever upon the properties or assets
of such Members pursuant to the terms of any such instrument or obligation,
which breach, violation or event of default would have a material adverse
effect on such Members' ability to perform such Members' obligations
hereunder, or (C) to such Members' knowledge, violate or conflict with any
law, statute, ordinance, code, rule, regulation, judgment, order, writ,
injunction, decree or other instrument of any court or governmental or
regulatory body, agency or authority applicable to such Members or by which
such the Membership Units held by such Members may be bound.
4.2 The Parent Common Stock.
The Members acknowledge, represent and warrant to the Parent and
Acquisition as follows:
(i) The Members understands that the shares of the Parent
Common Stock to be issued to the Members in the Merger will not have been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities law by reason of specific exemptions under the
provisions thereof which depend in part upon the other representations and
warranties made by the Members in this Agreement. The Members understand
that the Parent is relying upon the Members' representation and warranties
contained in this Section 4.2 for the purpose of determining whether this
transaction meets the requirements for such exemptions.
(ii) The Members have such knowledge, skill and experience in
business, financial and investment matters so that the Members are capable of
evaluating the merits and risks of an investment in the Parent Common Stock
pursuant to the transactions contemplated by this Agreement or to the extent
that the Members have deemed it appropriate to do so, the Members have relied
upon appropriate professional advice regarding the tax, legal and financial
merits and consequences of an investment in the Parent Common Stock pursuant
to the transactions contemplated by this Agreement.
(iii)The Members have made, either alone or together with the
Members' advisors, such independent investigation of the Parent, its
management and related matters as the Members deem to be, or such advisors
have advised to be, necessary or advisable in connection with an investment
in the Parent Common Stock through the transactions contemplated by this
Agreement; and the Members and advisors have received all information and
data that the Members and such advisors believe to be necessary in order to
reach an informed decision as to the advisability of an investment in the
Parent Common Stock pursuant to the transactions contemplated by this
Agreement.
(iv) The Members have reviewed the Members' financial
condition and commitments, alone and together with the Members' advisors,
and, based on such review, the Members are satisfied that (A) the each Member
has adequate means of providing for such Members' financial needs and
possible contingencies and has assets or sources of income which, taken
together, are more than sufficient so that he could bear the risk of loss of
the Members' entire investment in the Parent Common Stock, (B) such Member
has no present or contemplated future need to dispose of all or any portion
of the Parent Common Stock to satisfy any existing or contemplated
undertaking, need or indebtedness, and (C) such Member is capable of bearing
the economic risk of an investment in the Parent Common Stock for the
indefinite future. The Members shall furnish any additional information
about the Members reasonably requested by the Parent to assure the compliance
of this transaction with applicable federal and state securities laws.
(v) The Members understand that the shares of the Parent
Common Stock to be received by the Members in the transactions contemplated
hereby will be "restricted securities" under applicable federal securities
laws and that the Securities Act and the rules of the Securities and Exchange
Commission (the "SEC") promulgated thereunder provide in substance that the
Members may dispose of such shares only pursuant to an effective registration
statement under the Securities Act or an exemption from registration if
available. The Members further understand that, except as provided in
Article XII, the Parent has no obligation or intention to register the sale
of any of the shares of the Parent Common stock to be received by the Members
in the transactions contemplated hereby, or take any other action so as to
permit sales pursuant to, the Securities Act. Accordingly, except as
provided in Article XII, the Members understand that the Members may dispose
of such shares only in transactions which are of a type exempt from
registration under the Securities Act, including (without limitation) a
"private placement," in which event the transferee will acquire such shares as
"restricted securities" and subject to the same limitations as in the hands
of the Members. The Members further understand that applicable state
securities laws may impose additional constraints upon the sale of
securities. As a consequence, the Members understand that the Members may
have to bear the economic risk of an investment in the Parent Common Stock to
be received by the Members pursuant to the transactions contemplated hereby
for an indefinite period of time.
(vi) The Members are acquiring shares of the Parent Common
Stock pursuant to the transactions contemplated hereby for investment only
and not with a view to or intention of or in connection with any resale or
distribution of such shares or any interest therein.
(vii)The certificate(s) evidencing the shares of the Parent
Common Stock to be issued pursuant to the transactions contemplated hereby
shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
or any state securities laws and may not be sold or
transferred in the absence of such registration or an
exemption therefrom under the Securities Act of 1933, as
amended, and applicable state securities laws."
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION
The Parent and Acquisition jointly and severally represent and warrant
to the Company that:
5.1 Corporate Organization. Each of the Parent and Acquisition is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation. Each of the Parent and Acquisition
has all requisite corporate power and authority to own, operate and lease the
properties and assets it now owns, operates and leases and to carry on its
business as now being conducted. The Parent and Acquisition are each duly
qualified to transact business as a foreign corporation and are each in good
standing in the jurisdictions set forth opposite their respective names in
Schedule 5.1, which are the only jurisdictions where such qualification is
required by reason of the nature of the properties and assets currently
owned, operated or leased by the Parent or Acquisition or the business
currently conducted by them, except for such jurisdictions where the failure
to be so qualified would not have a Parent Material Adverse Effect (as
defined below). Acquisition is a corporation newly formed by the Parent for
the sole purpose of consummating the transactions contemplated by this
Agreement and has not conducted any business other than as expressly set
forth in or contemplated by this Agreement. The Parent has previously
delivered to the Company complete and correct copies of (i) its Articles of
Organization (certified by the Secretary of State of Massachusetts as of a
recent date) and its By-Laws (certified by the Secretary of the Parent as of
a recent date) and (ii) the Certificate of Incorporation of Acquisition and
all amendments thereto to the date hereof (certified by the Secretary of
State of the State of Delaware as of a recent date) and the By-Laws of
Acquisition (certified by the secretary of Acquisition as of a recent date).
Neither the Certificate of Incorporation nor the By-Laws of the Parent or
Acquisition has been amended since the respective dates of certification
thereof, nor has any action been taken for the purpose of effecting any
amendment of such instruments. The term "Parent Material Adverse Effect"
means for purposes of this Agreement, any change, event or effect that is, or
would be, materially adverse to the business, operation, assets, liabilities,
financial condition or results of operations of the Parent and Acquisition,
taken as a whole.
5.2 Authorization. Each of the Parent and Acquisition has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly approved by the Boards of Directors of the Parent and
Acquisition and by the Parent as the sole shareholder of Acquisition, and no
other corporate proceedings on the part of the Parent or Acquisition are
necessary to approve and authorize the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Parent and Acquisition
and constitutes the valid and binding agreement of the Parent and
Acquisition, enforceable in accordance with its terms, except to the extent
that enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or in law).
5.3 Consents and Approvals; No Violations. Subject to (a) the filing
of Articles of Merger and a Certificate of Merger with the Arizona
Corporation Commission and the Secretary of State of the State of Delaware
respectively and (b) compliance with applicable federal and state securities
laws, the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not: (i) violate or conflict with
any provisions of the Certificate of Incorporation or By-Laws of the Parent
or Acquisition; (ii) breach, violate or constitute an event of default (or an
event which with the lapse of time or the giving of notice or both would
constitute an event of default) under, give rise to any right of termination,
cancellation, modification or acceleration under, or require any consent or
the giving of any notice under, any note, bond, indenture, mortgage, security
agreement, lease, license, franchise, permit, agreement or other instrument
or obligation to which the Parent or Acquisition is a party, or by which any
of them or any of their respective properties or assets may be bound, or
result in the creation of any lien, claim or encumbrance of any kind
whatsoever upon the properties or assets of the Parent or Acquisition
pursuant to the terms of any such instrument or obligation, other than any
breach, violation, default, termination, cancellation, modification or
acceleration which would not have a Parent Material Adverse Effect; (iii)
violate or conflict with any law, statute, ordinance, code, rule, regulation,
judgment, order, writ, injunction or decree or other instrument of any
Federal, state, local or foreign court or governmental or regulatory body,
agency or authority applicable to the Parent or Acquisition or by which any
of their respective properties or assets may be bound, except for such
violations or conflicts which would not have a Parent Material Adverse
Effect; or (iv) require, on the part of the Parent or Acquisition, any filing
or registration with, or permit, license, exemption, consent, authorization
or approval of, or the giving of any notice to, any governmental or
regulatory body, agency or authority other than any filing, registration,
permit, license, exemption, consent, authorization, approval or notice which
if not obtained or made would not have a Parent Material Adverse Effect.
5.4 Capitalization. (a) The authorized capital stock of the Parent
consists of 12,000,000 shares of the Parent Common Stock, of which 6,886,939
shares were issued and outstanding as of March 31, 1999 and 1,000,000 shares
of Preferred Stock, none of which are issued or outstanding. All of the
issued and outstanding shares of the Parent Common Stock are (and all shares
of the Parent Common Stock to be issued in connection with the Merger, when
issued in accordance with this Agreement, shall be) duly authorized, validly
issued, fully paid and nonassessable, and none of such shares has been issued
in violation of any applicable preemptive rights. There are no agreements or
commitments to which the Parent is a party or by which it is bound for the
redemption or repurchase of any shares of its capital stock. Except for
options issued under the Parent's stock option plan (the "Stock Option
Plan"), there are no outstanding options, warrants or other rights to
purchase, or securities convertible into or exchangeable for, shares of the
capital stock of the Parent, and (except as contemplated by this Agreement
and except with respect to options issued under the Stock Option Plan) there
are no agreements or commitments to which the Parent is a party or by which
it is bound pursuant to which the Parent is or may become obligated to issue
additional shares of its capital stock.
(b) The authorized capital stock of Acquisition consists of 1,000
shares of common stock, par value $0.01 per share, of which 100 shares are
issued and outstanding, all of which shares are owned beneficially and of
record by the Parent. There are no outstanding options, warrants or other
rights to purchase, or securities convertible into or exchangeable for,
shares of the capital stock of Acquisition, and there are no agreements or
commitments to which Acquisition is a party or by which it is bound pursuant
to which Acquisition is or may become obligated to issue additional shares of
its capital stock.
5.5 Absence of Certain Changes. Except as set forth in Schedule 5.5,
since December 31, 1998, the Parent has carried on its business in the
ordinary course and consistent with past practice. Except as set forth on
Schedule 5.5 hereto, since December 31, 1998, the Parent has not: (i)
incurred any material obligation or liability (whether absolute, accrued,
contingent or otherwise) except in the ordinary course of business and
consistent with past practice; (ii) experienced any Parent Material Adverse
Effect; (iii) made any change in any accounting principle or practice or in
its methods of applying any such principle or practice; (iv) suffered any
material damage, destruction or loss, whether or not covered by insurance,
affecting its properties, assets or business; (v) mortgaged, pledged or
subjected to any lien, charge or other encumbrance, or granted to third
parties any rights in, any of its assets, tangible or intangible; (vi) sold
or transferred any of its assets, except in the ordinary course of business
and consistent with past practice, or canceled or compromised any debts or
waived any claims or rights of a material nature; (vii) issued any additional
shares of capital stock or any rights, options or warrants to purchase, or
securities convertible into or exchangeable for, shares of its capital stock
other than options to purchase shares of the Parent Common Stock granted
under its employee stock plans, shares of the Parent Common Stock issued upon
exercise of employee stock options and shares of the Parent Common Stock
issued upon the exercise of outstanding warrants; (viii) declared or paid any
dividends on or made any distributions (however characterized) in respect of
shares of its capital stock; (ix) repurchased or redeemed any shares of its
capital stock; (x) granted any general or specific increase in the
compensation payable or to become payable to any of its executive officers or
any bonus or service award or other like benefit such persons; or (xi)
entered into any agreement to do any of the foregoing.
5.6 Litigation. Except as set forth in Schedule 5.6 hereto, there are
no suits, actions, claims, proceedings (including, without limitation,
arbitral or administrative proceedings) or investigations pending or, to the
knowledge of the Parent, threatened against the Parent or its properties,
assets or business or, to the knowledge of the Parent, pending or threatened
against any of the officers, directors, employees, agents or consultants of
the Parent in connection with the business of the Parent. There are no such
suits, actions, claims, proceedings or investigations pending, or, to the
knowledge of the Parent, threatened challenging the validity or propriety of
the transactions contemplated by this Agreement. There is no judgment,
order, injunction, decree or award (whether issued by a court, an arbitrator
or an administrative agency) to which the Parent is a party, or involving the
Parent's properties, assets or business, which is unsatisfied or which
requires continuing compliance therewith by the Parent.
5.7 Compliance with Applicable Law. Except as set forth in Schedule
5.7 the Parent is not in violation of any applicable safety, health,
environmental or other law, statute, ordinance, code, rule, regulation,
judgment, order, injunction, writ or decree of any Federal, state, local or
foreign court or governmental or regulatory body, agency or authority having,
asserting or claiming jurisdiction over it or over any part of its business,
operations, properties or assets, except where any such violation would not
have a Parent Material Adverse Effect. The Parent has not received any
notice alleging any such violation, nor to the knowledge of the Parent, is
there any inquiry, investigation or proceedings relating thereto.
5.8 Disclosure. No representation or warranty by the Parent or
Acquisition contained in this Agreement and no statement contained in any of
the Disclosure Schedules delivered or to be delivered pursuant to this
Agreement contains or will contain, when considered together as a whole, any
untrue statement of a material fact or omits or will omit to state any
material fact necessary to make the statements contained therein not
misleading.
5.9 The Parent Action. The Board of Directors of the Parent, by
unanimous written consent or at a meeting duly called and held, has approved
the Merger and this Agreement in accordance with the provisions of the DGCL.
5.10 Contracts. The Parent has filed as exhibits to the SEC Filings all
agreements which are required by Rule 601 of Regulation S-K promulgated under
the Securities Act to be filed with the SEC as material agreements.
5.11 Brokers Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of the Parent.
ARTICLE VI
CONDUCT OF BUSINESS OF THE COMPANY AND
THE PARENT PRIOR TO THE EFFECTIVE TIME
6.1 Conduct of Business of the Company. During the period commencing
on the date hereof and continuing until the Effective Time, the Company and
the Members agree that the Company, except as otherwise expressly
contemplated by this Agreement or agreed to in writing by the Parent:
(a) will carry on its business only in the ordinary course and
consistent with past practice;
(b) will not declare or pay any dividend on or make any other
distribution (however characterized) in respect of shares of its capital
stock;
(c) will not, directly or indirectly, redeem or repurchase, or
agree to redeem or repurchase, any Membership Units;
(d) will not amend its Certificate of Organization or Operating
Agreement;
(e) will not issue, or agree to issue, any Membership Units, or
any options, warrants or other rights to acquire Membership Units, or any
securities convertible into or exchangeable for shares of its Membership
Units;
(f) will not combine, split or otherwise reclassify any of its
Membership Units;
(g) will not form a Subsidiary;
(h) will use its commercially reasonable best efforts to preserve
intact its present business organization, keep available the services of its
officers and key employees and preserve its relationships with clients and
others having business dealings with it to the end that its goodwill and
ongoing business shall not be materially impaired at the Effective Time;
(i) will not (i) make any capital expenditures individually in
excess of $5,000 or in the aggregate in excess of $15,000, (ii) enter into
any Agreement involving individually in excess of $5,000, (iii) enter into or
terminate any lease of, or purchase or sell, any real property, (iv) enter
into any leases of personal property involving individually in excess of
$5,000 annually or in the aggregate in excess of $15,000 annually, (v) incur
or guarantee any additional indebtedness for borrowed money, (vi) create or
permit to become effective any security interest, mortgage, lien, charge or
other encumbrance on its properties or assets, or (vii) enter into any
agreement to do any of the foregoing;
(j) will not adopt or amend any Benefit Plan for the benefit of
Employees, or increase the salary or other compensation (including, without
limitation, bonuses or severance compensation) payable or to become payable
to its Employees or accelerate, amend or change the period of exercisability
or the vesting schedule of options granted under any stock option plan or
agreements except as specifically required by the terms of such plans or
agreements, or enter into any agreement to do any of the foregoing;
(k) will not accelerate receivables or delay payables;
(l) will promptly advise the Parent of the commencement of, or
threat of (to the extent that such threat comes to the knowledge of the
Company, or any of the Members), any claim, action, suit, proceeding or
investigation against, relating to or involving the Company or any of its
Subsidiaries or any of their directors, officers, employees, agents or
consultants in connection with their businesses or the transactions
contemplated hereby that could reasonably be expected to have a Company
Material Adverse Effect;
(m) will use its commercially reasonable efforts to maintain in
full force and effect all insurance policies maintained by the Company on the
date hereof; and
(n) will not enter into any agreement to dissolve, merge,
consolidate or, except in the ordinary course, sell any material assets of
the Company, or acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise acquire
or agree to acquire any assets in excess of $10,000 in the aggregate other
than tax liens acquired in the ordinary course of business in excess of
$10,000 in the aggregate.
6.2 Other Negotiations. Neither the
Company nor the Members will (nor will they permit any of their respective
officers, directors, employees, agents, partners and affiliates on their
behalf to) take any action to solicit, initiate, seek, encourage or support
any inquiry, proposal or offer from, furnish any information to, or
participate in any negotiations with, any corporation, partnership, person or
other entity or group (other than the Parent) regarding any acquisition of
the Company, any merger or consolidation with or involving the Company, or
any acquisition of any material portion of the stock or assets of the
Company, or any equity or debt financing of the Company or any material
license of Intellectual Property Rights (any of the foregoing being referred
to in this Agreement as an "Acquisition Transaction") or enter into an
agreement concerning any Acquisition Transaction with any party other than
the Parent. If between the date of this Agreement and the termination of
this Agreement pursuant to Article X, the Company receives from a third party
any offer to negotiate or consummate an Acquisition Transaction, the Company
shall (i) notify the Parent immediately (orally and in writing) of such
offer, including the identity of such party and the terms of any proposal
therein, and (ii) notify such third party of the Company's obligations under
this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access to Properties and Records. The Company and the Parent will
provide each other and their respective accountants, counsel and other
authorized advisors, with reasonable access, during business hours, to their
premises and properties and their books and records (including, without
limitation, contracts, leases, insurance policies, litigation files, minute
books, accounts, working papers and tax returns filed and in preparation) and
will cause its officers to furnish to each other and their respective
authorized advisors such additional financial, tax and operating data and
other information pertaining to their respective businesses as the Company or
the Parent, as the case may be, shall from time to time reasonably request.
All of such data and information shall be kept confidential by the Parent and
the Company until the consummation of the Merger.
7.2 Transfer of Shares. The Members agree that they (i) shall not
dispose of or in any way encumber their Membership Units prior to the
consummation of the transactions contemplated hereby, (ii) shall take no
action inconsistent with the approval and consummation of said transactions
and (iii) at the Closing shall surrender the certificates representing all
Membership Units owned by them, duly endorsed for transfer.
7.3 Reasonable Efforts; etc. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use his/its reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including obtaining any consents, authorizations, exemptions
and approvals from, and making all filings with, any governmental or
regulatory authority, agency or body which are necessary in connection with
the transactions contemplated by this Agreement.
7.4 Material Events. At all times prior to the Effective Time, each
party shall promptly notify the others in writing of the occurrence of any
event which will or may result in the failure to satisfy any of the
conditions specified in Article VIII or Article IX hereof.
7.5 Fees and Expenses. The parties hereto shall bear and pay all of
their own fees, costs and expenses relating to the transactions contemplated
by this Agreement, including, without limitation, the fees and expenses of
their respective counsel, accountants, brokers and financial advisors, except
that the Members shall be responsible for all fees, costs and expenses
incurred by the Company (except for expense incurred in connection with the
audit performed in connection with the Closing), which shall be borne by the
Surviving Corporation, in connection with this Agreement and the transactions
contemplated hereby and such fees, costs and expenses shall be deemed
expenses of the Members and paid by the Members.
7.6 Affiliates' Letters. Concurrently with the execution of the
Agreement, all persons who are "affiliates" of the Company or Parent for
purposes of Rule 145 under the Securities Act, agree to deliver to the
Company, a signed, written Agreement, in the form attached as Exhibit C
hereto.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF
THE PARENT AND ACQUISITION
The obligation of the Parent and Acquisition to consummate the
transactions contemplated hereby shall be subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions (any of which
may be waived in writing by the Parent and Acquisition in their sole
discretion):
8.1 Representations and Warranties True. The representations and
warranties of the Company and the Members which are contained in this
Agreement, or contained in any Schedule or certificate delivered or to be
delivered pursuant to this Agreement, shall be true and correct in all
material respects at and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date, and
at the Closing the Company shall have delivered to the Parent and Acquisition
a certificate (signed on behalf of the Company by the Chief Executive Officer
of the Company) to that effect with respect to all such representations and
warranties made by the Company, and the Members shall have executed and
delivered to the Parent and Acquisition a certificate to that effect with
respect to all such representations and warranties made by the Members.
8.2 Performance. The Company and the Members shall have performed and
complied in all material respects with all of the obligations under this
Agreement which are required to be performed or complied with by them on or
prior to the Closing Date, and at the Closing the Company shall have
delivered to the Parent and Acquisition a certificate (duly executed on
behalf of the Company by the Chief Executive Officer of the Company) to that
effect with respect to all such obligations required to have been performed
or complied with by the Company on or before the Closing Date, and the
Members shall have executed and delivered to the Parent and Acquisition a
certificate to that effect with respect to all such obligations required to
have been performed or complied with by the Members on or before the Closing
Date.
8.3 Absence of Litigation. No statute, rule or regulation shall have
been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory
body, agency or authority shall have been instituted by any person (or
instituted or threatened by any governmental or regulatory body, agency or
authority), and no investigation by any governmental or regulatory body,
agency or authority shall have been commenced with respect to the
transactions contemplated hereby or with respect to the Company which would
have a material adverse effect on the transactions contemplated hereby or on
the business of the Company taken as a whole.
8.4 Consents. All approvals, consents, waivers and authorizations
required to be obtained by the Company or any Member in connection with the
Merger and the other transactions contemplated by this Agreement (including
those identified on Schedule 3.3) shall have been obtained and shall be in
full force and effect.
8.5 Additional Agreements. The Parent shall have the following
agreements:
(i) the Employment and Non-Competition Agreement in the form of
Exhibit D hereto, duly executed by Peter Reardon;
(ii) the Escrow Agreement annexed as Exhibit B hereto, duly
executed by the Members; and
(iii)An executed Affiliate Letter in the form annexed as Exhibit C
hereto duly executed by each person who is an affiliate (as such term is
defined in Rule 145 of the Securities Act).
8.6 Opinion of Company Counsel. The Company shall have delivered to
the Parent an opinion of counsel for the Company, in substantially the form
attached as Exhibit E hereto.
8.7 Delivery of Certificates for Cancellation. The share certificates
representing all of the issued and outstanding Membership Units as of the
Closing Date, duly endorsed in blank, shall have been surrendered for
cancellation.
8.8 Appraisal Rights. The holders of 100% of the issued and
outstanding Membership Units shall have voted in favor of the approval of the
Merger and the transactions contemplated hereby and no holders of Membership
Units shall have demanded appraisal rights in respect of the Merger.
8.9 Articles/Certificate of Merger. The Company shall have executed
and delivered to the Parent counterparts of the Articles of Merger and
Certificate of Merger to be filed with the Arizona Corporation Commission and
the Secretary of State of the State of Delaware, as required, in connection
with the Merger.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AND THE MEMBERS
The obligation of the Company and the Members to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions (any of which may be waived in writing by the -Company and the
Members in their sole discretion):
9.1 Representations and Warranties True. The representations and
warranties of each of the Parent and Acquisition contained in this Agreement,
or contained in any Schedule, certificate or other instrument or document
delivered or to be delivered pursuant to this Agreement, shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date, and
at the Closing each of the Parent and Acquisition shall have delivered to the
Company and the Members a certificate (signed on its behalf by its President
and its Chief Financial Officer) to that effect with respect to all such
representations and warranties made by such entity.
9.2 Performance. Each of the Parent and Acquisition shall have
performed and complied in all material respects with all of the obligations
under this Agreement which are required to be performed or complied with by
them on or prior to the Closing Date, and at the Closing each of the Parent
and Acquisition shall have delivered to the Company and the Members a
certificate, signed on its behalf by its President and its Chief Financial
Officer, to that effect with respect to all such obligations required to have
been performed or complied with by such entity on or before the Closing Date.
9.3 Absence of Litigation. No statute, rule or regulation shall have
been enacted or promulgated, and no order, decree, writ or injunction shall
have been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental or regulatory
body, agency or authority shall have been instituted by any person (or
instituted or threatened by any governmental or regulatory body, agency or
authority) and no investigation by any governmental or regulatory body,
agency or authority shall have been commenced with respect to the
transactions contemplated hereby or with respect to the Parent or the Parent
Subsidiaries which would have a material adverse effect on the transactions
contemplated hereby or on the business of the Parent and the Parent
Subsidiaries taken as a whole.
9.4 Consents. All approvals, consents, waivers and authorizations
required to be obtained by the Parent or Acquisition in connection with the
Merger and the other transactions contemplated by this Agreement (including
those identified on Schedule 5.3) shall have been obtained and shall be in
full force and effect.
9.5 Additional Agreements. The Parent shall have executed and
delivered (and shall have agreed to cause the Surviving Corporation to
execute and deliver immediately following the Effective Time, as applicable)
counterparts of the following agreements;
(i) the Employment and Non-Competition Agreement referred to in
Section 8.7(i) hereof;
(ii) the Escrow Agreement referred to in Section 8.7(ii) hereof,
together with counterparts signed by the escrow agent named therein;
9.6 Opinion of Counsel for the Parent. The Parent shall have delivered
to the Company an opinion of Counsel for the Parent in substantially the form
annexed as Exhibit F hereto.
9.7 Articles/Certificate of Merger. The Parent and Acquisition shall
have executed and delivered to the Company counterparts of the Articles of
Merger and Certificate of Merger to be filed with the Arizona Corporation
Commission and the Secretary of the State of the State of Delaware, as
required, in connection with the Merger.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by the mutual written consent of the Company and the Parent;
(b) by either the Company or the Parent
(i) if any court or governmental or regulatory agency,
authority or body shall have enacted, promulgated or issued any statute,
rule, regulation, ruling, writ or injunction, or taken any other action,
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and all appeals and means of appeal therefrom have been exhausted; or
(ii) if the Effective Time shall not have occurred on or
before June 30, 1999; provided, however, that the right to terminate this
Agreement pursuant to this Section 10.1(b)(ii) shall not be available to any
party whose (or whose affiliate(s)') breach of any representation or warranty
or failure to perform or comply with any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Effective Time to occur
on or before such date; or
(c) by the Company, if any of the conditions specified in Article
IX have not been met or waived prior to such time as such condition can no
longer be satisfied; or
(d) by the Parent, if any of the conditions specified in Article
VIII shall not have been met or waived prior to such time as such condition
can no longer be satisfied.
10.2 Effect of Termination. In the event of termination of this
Agreement, this Agreement shall forthwith become void and there shall be no
liability on the part of any of the parties hereto or (in the case of the
Company, the Parent and Acquisition) their respective officers or directors,
except for Section 12.6 and the last sentence of Section 7.1, which shall
remain in full force and effect, and except that nothing herein shall relieve
any party from liability for a breach of this Agreement prior to the
termination hereof.
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
11.1 Indemnity Obligations. Subject to Section 11.4 hereof, the Members
hereby jointly and severally agree to indemnify and hold the Parent harmless
from, and to reimburse the Parent for, any Indemnity Claims (as that term is
hereinafter defined) arising under the terms and conditions of this
Agreement. For purposes of this Agreement, the term "Indemnity Claim" shall
mean any and all actual losses, damages, deficiencies, liabilities,
obligations, actions, claims, suits, proceedings, demands, assessments,
judgments, recoveries, fees, costs and expenses (including, without
limitation, all out-of-pocket expenses, reasonable investigation expenses and
reasonable fees and disbursements of accountants and counsel), in each case
only to the extent Parent incurs actual out-of-pocket damages and net of
insurance proceeds actually realized by the Parent (collectively, "Losses")
arising out of, based upon or resulting from (i) any inaccuracy in or breach
of any representation and warranty of the Company or the Members which is
contained in this Agreement or any Schedule or certificate delivered pursuant
hereto or thereto; or (ii) any breach or nonfulfillment of, or any failure to
perform, any of the covenants, agreements or undertakings of the Company
(which covenants, agreements or undertakings were to be performed or complied
with on or prior to the consummation of the Merger) or the Members which are
contained in or made pursuant to the terms and conditions of this Agreement.
Notwithstanding anything to the contrary contained herein, no Indemnity Claim
made pursuant to this Article XI may be based on consequential damages
sustained by the Parent.
11.2 Notification of Claims. Subject to the provisions of Section 11.3
below, in the event of the occurrence of an event which the Parent asserts
constitutes an Indemnity Claim, the Parent shall provide the Members with
prompt written notice of such event and shall otherwise promptly make
available to the Members all relevant information which is material to the
claim and which is in the possession of the indemnified party. If such event
involves the claim of any third party (a "Third-Party Claim"), the Members as
the indemnifying party shall have the right to elect to join in the defense,
settlement, adjustment or compromise of any such Third-Party Claim, and, if
he so elects to control such defense, settlement, adjustment or compromise,
and to employ counsel to assist such indemnifying party in connection with
the handling of such claim, at the sole expense of the indemnifying party, in
the case of the Members as the indemnifying party, to be paid from amounts
held in escrow by the Escrow Agent in accordance with the terms of the Escrow
Agreement. Unless the Members elect to assume such defense, settlement,
adjustment or compromise, the Parent shall have the right to settle any such
Third-Party Claim; provided, however, that the Parent may not effect the
settlement, adjustment or compromise of any such Third-Party Claim without
the written consent of the Members, which consent shall not be unreasonably
withheld. In the event that the Members have consented in writing to any
such settlement, adjustment or compromise, the Members shall have no power or
authority to object to the amount of any claim by the Parent against the
escrow for indemnity with respect to such settlement, adjustment or
compromise. The Members shall have the right to settle, adjust, or
compromise any Third-Party Claim, the defense of which is controlled by the
Members, using amounts held in escrow; provided, however, that, unless the
settlement, adjustment or compromise involves no more than the payment of an
amount that is less than the amount of funds then remaining in the escrow and
provides for the unconditional release of the Parent, the Company and their
respective affiliates, the Members may not effect the settlement, adjustment,
compromise or satisfaction of any such Third-Party Claim without the consent
of the Parent, which consent shall not be unreasonably withheld. The
Parent's failure to give timely notice or to promptly furnish the Members with
any relevant data and documents in connection with any Third-Party Claim
shall not constitute a defense (in part or in whole) to any claim for
indemnification by such party, except and only to the extent that such
failure shall result in any prejudice to the indemnifying party. In
connection with any Third-Party Claim, the indemnified party, or the
indemnifying party if it has assumed the defense of such claim pursuant to
the preceding sentence, shall diligently pursue the defense of such
Third-Party Claim.
11.3 Duration. Except as otherwise provided in this Agreement, all
representations, warranties, covenants and agreements of the parties
contained in this Agreement, and the rights of the parties to seek
indemnification with respect thereto, shall survive the Closing but, except
in respect of any claims for indemnification as to which notice shall have
been duly given prior to the Escrow Release Date (as defined below), the
representations and warranties of the Company and the Members contained in
this Agreement shall expire on the second anniversary of the Closing Date
(the "Escrow Release Date"). To be duly given, any such notice shall set
forth in reasonable detail the nature of such claim, the provisions under
this Agreement pursuant to which such claim is being asserted and, to the
extent feasible, a reasonable estimate of the anticipated amount of such
claim ("Claim Notice").
11.4 Escrow. At the Effective Time, the Escrow Shares shall be
delivered to Arizona Escrow & Financial Corporation, as escrow agent (the
"Escrow Agent"), to be held for a period ending, (i) with respect to fifty
percent (50%) of the Escrow Shares, on the first anniversary of the Closing
date and, (ii) with respect to the remaining Escrow Shares, on the Escrow
Release Date, except Escrow Shares may be withheld after the Escrow Release
Date to satisfy claims for indemnification which are the subject to a Claim
Notice delivered prior to the Escrow Release Date. The Escrow Shares shall
be held and disbursed by the Escrow Agent in accordance with the terms hereof
and pursuant to the Escrow Agreement in the form attached hereto as Exhibit
B. For the purpose of any claim against the Escrow Shares hereunder, the
value per share of the Escrow Shares shall be deemed to be the Then Market
Price. For purposes of this Agreement, the term "Then Market Price" shall
means the last quoted sales price for Shares on the Nasdaq National market on
the day on which an Indemnity Claim is made. Except with respect to claims
based on fraud committed by the Company or the Members, which shall be
unlimited as to amount recoverable, if the Closing occurs, the Parent agrees
that the Parent's sole and exclusive remedy and recourse against the Members
under this Agreement for Losses attributable to any inaccuracy or breach of
any representation or warranty of the Company or the Members which is
contained in this Agreement or any Schedule or certificate delivered pursuant
hereto or thereto, other than Losses arising from breaches of the
representations and warranties set forth in Sections 3.4 and 3.9 (the
"Covered Representations"), shall be against the Escrow Shares. Except as
provided in the next sentence, the maximum aggregate liability of the Members
hereunder shall not exceed the value (determined by reference to the Then
Market Price) of the Escrow Shares. Any claims for indemnification arising
from any inaccuracy in or breach of any Covered Representations will not be
subject to any limitation.
11.5 No Contribution. The Members hereby waive, and acknowledge and
agree that the Members shall not have and shall not exercise or assert (or
attempt to exercise or assert), any right of contribution, right of indemnity
or other right or remedy against the Parent, Acquisition, or the Company in
connection with any indemnification payments which the Members are required
to make under this Article XI.
ARTICLE XII
REGISTRATION RIGHTS
12.1 Registrable Shares. For purposes of this Agreement, "Registrable
Shares" shall mean the shares of Parent Common Stock issued in the Merger, no
longer subject to the terms of the Indemnification provisions of Article XI
provided, however, that a distribution of shares of Parent Common Stock
issued in the Merger without additional consideration, to underlying
beneficial owners (such as the general and limited partners, shareholders of
trust beneficiaries of a Member) shall not be deemed such a sale or transfer
for purposes of this Article XII and such underlying beneficial owners shall
be entitled to the same rights under this Article XII as the initial Member
from which the Registrable Shares were received and shall be deemed a Member
for the purposes of this Article XII.
12.2 Piggyback Registration
(a) Right to Piggyback. Subject to the provisions of Article XI
and the provisions of the Escrow Agreement, if at any time the Parent
proposes to file a registration statement under the Securities Act for any
shares of common stock or any options, warrants, units, convertibles, rights
or other securities related or linked to any shares of such common stock
(except with respect to registration statements on Form S-4 or S-8, or any
other form not available for registering the Registrable Securities for sale
to the public), with respect to an offering for its own account or for the
account of another person (other than the holders of Registrable Securities
in their capacity as such) of any class of security (a "Proposed
Registration"), then the Parent shall in each case give written notice of
such proposed filing to the holders of Registrable Securities at least
forty-five (45) days before the anticipated filing date, and shall, include
in such registration statement such amount of Registrable Securities as each
such holder may request within twenty (20) days of the receipt of such
notice. The Parent shall use its best efforts to cause the managing
underwriter or underwriters of a proposed underwritten offering to permit the
holders of Registrable Securities requesting to be included in the
registration for such offering to include such securities in such offering on
the same terms and conditions as the securities of the Parent included
therein.
(b) Priority on Piggyback Registrations. If the managing
underwriter or underwriters of such offering delivers a written opinion to
the holders of Registrable Securities that the number of Registrable
Securities which they and any other persons (including the Parent) intend to
include in such offering exceeds the number which can be sold in such
offering or is reasonably likely materially and adversely to affect the
success or offering price of such offering, then the amount of securities to
be offered for the accounts of holders of Registrable Securities shall be
reduced as follows: first, the securities which the Parent proposes to sell;
second, the Registrable Securities of the holders thereof who have made
requests to be included in such registration, pro rata (in accordance with
the number of Registrable Securities held by such holder requested to be
included in such registration); and third, the securities requested to be
included in such registration by other persons, pro rata in accordance with
the number of such securities held by such persons requested to be included
in such registration.
(c) Selection of Underwriters. If any registration pursuant to
this Article XII is an underwritten offering, the Parent will select a
managing underwriter or underwriters to administer the offering, which
managing underwriter or underwriters will be of nationally recognized
standing.
12.3 Expenses. The costs and expenses to be borne by Parent for
purposes of this Article XII shall include, without limitation, printing
expenses (including a reasonable number of prospectuses for circulation by
the selling Members), legal fees and disbursements of counsel for Parent,
"blue sky" expenses, accounting fees and filing fees, but shall not include
underwriting commissions or similar charges, legal fees (if any) and
disbursements of counsel for the selling Members.
12.4 Indemnification.
(a) To the extent permitted by law, Parent will indemnify and hold
harmless each Member, any underwriter (as defined in the Securities Act) for
such Member, its officers, directors, shareholders or partners and each
person, if any, who controls such Member or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (A) any untrue statement or alleged
untrue statement of a material fact contained or incorporated by reference in
the Registration Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (B)
the omission or alleged omission to state or incorporate by reference therein
a material fact required to be stated or incorporated by reference therein,
or necessary to make the statements included or incorporated by reference
therein not misleading, or (C) any violation or alleged violation by Parent
of the Securities Act, the Exchange Act, any state securities law or any rule
or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and Parent will pay to each such Member (and its
officers, directors, shareholders or partners), underwriter or controlling
person, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity Agreement contained in this
Section 12.4(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected
without the consent of Parent (which consent may not be unreasonably
withheld); nor shall Parent be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon (i) a Violation which occurs in reliance upon and in conformity
with written information furnished by any such Member expressly for use in
the Registration Statement, or (ii) a Violation that would not have occurred
if such Member had delivered to the purchaser the version of the Prospectus
most recently provided by Parent to the Member as of a date prior to such
sale.
(b) To the extent permitted by law, each selling Member, severally
and not jointly, will indemnify and hold harmless Parent, each of its
directors, each of its officers who has signed the Registration Statement,
each person, if any, who controls Parent within the meaning of the Securities
Act, any underwriter, any other Member selling securities pursuant to the
Registration Statement and any controlling person of any such underwriter or
other Member, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Securities Act, the Exchange Act or other federal or state law, insofar as,
and only to the extent that, such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation
(which includes without limitation the failure of the Member to comply with
the prospectus delivery requirements under the Securities Act, and the
failure of the Member to deliver the most current prospectus provided by
Parent prior to the date of such sale), in each case to the extent (and only
to the extent) that such Violation occurs in reliance upon and in conformity
with written information furnished by such Member expressly for use in the
Registration Statement or such Violation is caused by the Member's failure to
deliver to the purchaser of the Member's Registrable Shares a prospectus (or
amendment or supplement thereto) that had been made available to the Member
by Parent prior to the date of the sale; and each such Member will pay any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 12.4(b) in connection with investigating
or defending any such loss, claim, damage, liability, or action;, however,
that the indemnity Agreement contained in this Section 12.4(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Member, which consent shall not be unreasonably withheld. The aggregate
indemnification and contribution liability of each Member under this Section
12.4(b) shall not exceed the net proceeds received by such Member in
connection with sale of shares pursuant to the Registration Statement.
(c) Each person entitled to indemnification under this Section
12.4 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought and shall permit the Indemnifying Party to assume the defense of
any such claim and any litigation resulting therefrom, provided that counsel
for the Indemnifying Party who conducts the defense of such claim or any
litigation resulting therefrom shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 12.4 unless the Indemnifying Party is materially prejudiced thereby.
No Indemnifying Party, in the defense of any such claim or litigation, shall
(except with the consent of each Indemnified Party) consent to entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably
request in writing and as shall be reasonably required in connection with the
defense of such claim and litigation resulting therefrom.
(d) To the extent that the indemnification provided for in this
Section 12.4 is held by a court of competent jurisdiction to be unavailable
to an Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage or expense in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one had and of
the Indemnified Party on the other in connection with the statements or
omissions which resulted in such loss, liability, claim, damage or expense,
as well as any other relevant equitable considerations. The relative fault
of the Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue of alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
12.5 Procedures for Sale of Shares Under Registration Statement.
(a) Notice and Approval. Subject to the provisions of Article XI
and the provisions of the Escrow Agreement, if any Member shall propose to
sell (which may include an intent to sell over a specific period of time)
Registrable Shares pursuant to the Registration Statement, it shall notify
Parent of its intent to do so (including the proposed manner and timing of
all sales) at least one (1) full trading day prior to such sale, and the
provision of such notice to Parent shall conclusively be deemed to
reestablish and reconfirm an Agreement by such Member to comply with the
registration provisions set forth in this Agreement. Unless otherwise
specified in such notice, such notice shall be deemed to constitute a
representation that any information previously supplied by such Member
expressly for inclusion in the Registration Statement (as the same may have
been superseded by subsequent such information) is accurate as of the date of
such notice. At any time within such one (1) trading-day period, Parent may
refuse to permit the Member to resell any Registrable Shares pursuant to the
Registration Statement; provided, however, that in order to exercise this
right, Parent must deliver a certificate in writing to the Member to the
effect that a delay in such sale is necessary because a sale pursuant to the
Registration Statement in its then-current form without the addition of
material, non-public information about Parent, could constitute a violation
of the federal securities laws. Notwithstanding the foregoing, Parent will
ensure that in any event the Members shall have at least ten (10) trading
days (prorated for partial quarters) available to sell Registrable Shares
during each calendar quarter (or portion thereof) from the Pooling Release
Date until the expiration of the applicable Registration Effective Period.
(b) Delivery of Prospectus. For any offer or sale of any of the
Registrable Shares by a Member in a transaction that is not exempt under the
Securities Act, the Member, in addition to complying with any other federal
securities laws, shall deliver a copy of the final prospectus (or amendment
of or supplement to such prospectus) of Parent covering the Registrable
Shares in the form furnished to the Member by Parent to the purchaser of any
of the Registrable Shares on or before the settlement date for the purchase
of such Registrable Shares.
(c) Copies of Prospectuses. Subject to the provisions of this
Section 12.5, the provisions of Article XI and the provisions of the Escrow
Agreement, when a Member is entitled to sell and gives notice of its intent
to sell Registrable Shares pursuant to the Registration Statement, Parent
shall, within two (2) trading days following the request, furnish to such
Member a reasonable number of copies of a supplement to or in amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Shares, such prospectus shall not as of the
date of delivery to the Member include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statement therein not misleading or incomplete in the light of
the circumstances then existing.
12.6 Transferability of Registration Rights. The rights under this
Article XII are not transferable except (a) a transfer by will or intestacy,
(b) estate planning transfers consisting of gifts to the spouse or issue of
the transferee and transfers to trusts for the benefit of the spouse or issue
of the transferee, (c) a transfer to the constituent partners of a Member
that is a partnership as part of a pro rata distribution of the shares of
Parent Common Stock held by such partnership so long as all such transferees
appoint a single representative as their attorney-in-fact for the purpose of
receiving any notices and exercising their rights under this Article XII, or
(d) with the written consent of Parent.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Amendment. This Agreement may be amended by written agreement
among the Company and the Parent prior to the Effective Time.
13.2 Waiver of Compliance. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant or agreement contained herein may be waived only by a written notice
from the party or parties entitled to the benefits thereof. No failure by
any party hereto to exercise, and no delay in exercising, any right
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder preclude any other or future exercise of that
right by that party.
13.3 Notices. All notices and other communications hereunder shall be
deemed given if given in writing and delivered personally, by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier to the party to receive the same at its respective address set forth
below (or at such other address as may from time to time be designated by
such party to the others in accordance with this Section 13.3):
(a) if to the Company, to:
Ironwood Acceptance Company, LLC
13430 N. Scottsdale Road
Suite 206
Scottsdale, AZ 85254
with copies to:
(b) if to the Members, to:
Richard Miller
Mika Ag Corp.
7535 Hilltop Circle
Suite 200
Denver, CO 80221
William Crisp
6051 East Cactus Wren Road
Paradise Valley, AZ 85253
Peter Reardon
8550 East Bronco Trail
Scottsdale, AZ 85255
(c) if to the Parent or Acquisition, to:
Litchfield Financial Corporation
430 Main Street
Williamstown, MA 01267
Attention: John Malloy, Esq.
with copies to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 02110
Attention: James Westra, Esq.
All such notices and communications hereunder shall be deemed given when
received, as evidenced by the signed acknowledgment of receipt of the person
to whom such notice or communication shall have been personally delivered,
the acknowledgment of receipt returned to the sender by the applicable postal
authorities or the confirmation of delivery rendered by the applicable
overnight courier service.
13.4 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors (or, in the case of the Members, his heirs,
administrators, executors and personal representatives) and permitted
assigns. Neither this Agreement nor any rights, duties or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other parties hereto, except that vested rights to receive
payment or to initiate legal action with respect to causes of action that
have accrued hereunder shall be assignable by devise, descent or operation of
law.
13.5 No Third Party Beneficiaries. Neither this Agreement or any
provision hereof nor any Schedule, certificate or other instrument delivered
pursuant hereto, nor any agreement to be entered into pursuant hereto or any
provision hereof, is intended to create any right, claim or remedy in favor
of any person or entity, other than the parties hereto and their respective
successors (or, in the case of the Members, his heirs, administrators,
executors and personal representatives) and permitted assigns and any other
parties indemnified under Article XI.
13.6 Public Announcements. Promptly upon execution and delivery of this
Agreement, the Parent and the Company shall issue a press release in such
form as they shall mutually agree. Thereafter, and prior to the consummation
of the Merger or the termination of this Agreement, none of the parties
hereto shall, except as mutually agreed by the Parent and the Company, or
except as may be required by law or applicable regulatory authority
(including, without limitation, the rules applicable to Nasdaq National
Market companies), issue any reports, releases, announcements or other
statements to the public relating to the transactions contemplated hereby.
13.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.8 Headings. The article and section headings contained in this
Agreement are solely for convenience of reference, are not part of the
agreement of the parties and shall not be used in construing this Agreement
or in any way affect the meaning or interpretation of this Agreement.
13.9 Entire Agreement. This Agreement, and the Schedules, certificates
and other instruments and documents delivered pursuant hereto, together with
the other agreements referred to herein and to be entered into pursuant
hereto, embody the entire agreement of the parties hereto in respect of, and
there are no other agreements or understandings, written or oral, among the
parties relating to, the subject matter hereof, other than the
Confidentiality Agreements. This Agreement supersedes all prior agreements
and understandings, written or oral, between the parties with respect to such
subject matter, other than the Confidentiality Agreements.
13.10Governing Law. The parties hereby agree that this Agreement, and
the respective rights, duties and obligations of the parties hereunder, shall
be governed by and construed in accordance with the General Corporation Laws
of the State of Delaware as to matters within the scope thereof and, as to
all other matters shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without giving effect to
principles of conflicts of law thereunder. Each of the parties hereby (i)
irrevocably consents and agrees that any legal or equitable action or
proceeding arising under or in connection with this Agreement shall be
brought exclusively in the Federal or state courts sitting in Boston,
Massachusetts and any court to which an appeal may be taken in any such
litigation, and (ii) by execution and delivery of this Agreement, irrevocably
submits to and accepts, with respect to any such action or proceeding, for
itself and in respect of its properties and assets, generally and
unconditionally, the jurisdiction of the aforesaid courts, and irrevocably
waives any and all rights such party may now or hereafter have to object to
such jurisdiction.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Parent, Acquisition, the Company and the Members
named below have caused this Agreement to be duly executed and delivered as
of the date first above written.
LITCHFIELD FINANCIAL CORPORATION
By: /s/ Joseph S. Weingarten
Name: Joseph S. Weingarten
Title: Executive Vice President
STAMFORD ASSET RECOVERY CORPORATION
By: /s/ Heather A. Sica
Name: Heather A. Sica
Title: Executive Vice President
IRONWOOD ACCEPTANCE COMPANY, LLC
By: /s/ Peter Reardon
Name: Peter Reardon
Title: General Manager
MEMBERS:
/s/ Richard Miller
Richard Miller
/s/ William Crisp
William Crisp
/s/ Peter Reardon
Peter Reardon
HWD2: 531809-6