Agreement and Plan of Merger
among
TechSys, Inc.
Newco TKSS, Inc.
and
Fuel Cell Companies, Inc.
April 5, 2001
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TABLE OF CONTENTS
Section Page
No. No.
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ARTICLE I
THE MERGER
1.1 The Merger....................................................................................2
1.2 Certificate of Incorporation, Bylaws and Board of Directors...................................2
1.3 Effects of the Merger.........................................................................2
1.4 Manner of Conversion of Stock.................................................................2
1.5 Exchange of Certificates; Payment of Merger Consideration.....................................3
1.6 Tax Treatment.................................................................................4
1.7 Hart Scott Rodino.............................................................................4
1.8 Effective Time................................................................................5
1.9 Closing.......................................................................................5
1.10 Title; Risk of Loss...........................................................................5
ARTICLE II
DEFINITIONS
2.1 Definitions...................................................................................5
2.2 Other Definitional Provisions.................................................................10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Power........................................................................10
3.2 Capitalization................................................................................11
3.3 Validity of Shares of TechSys Common Stock....................................................11
3.4 Authorization; Binding Effect; No Breach......................................................12
3.5 TechSys Reports; Financial Statements.........................................................12
3.6 Governmental Filings..........................................................................13
3.7 Assets of TechSys.............................................................................13
3.8 Absence of Certain Changes....................................................................13
3.9 Litigation....................................................................................13
3.10 Brokerage.....................................................................................14
3.11 Insurance.....................................................................................14
3.12 Tax Matters...................................................................................14
3.13 Contracts and Commitments.....................................................................16
3.14 Proprietary Rights............................................................................17
3.15 Employees.....................................................................................19
3.16 ERISA.........................................................................................19
3.17 Real Estate...................................................................................20
3.18 Compliance with Laws..........................................................................21
3.19 Product Warranty..............................................................................23
3.20 Powers of Attorney............................................................................23
3.21 Bank Accounts.................................................................................23
3.22 Cash, Cash Equivalents and Collectibles.......................................................23
3.23 Disclosure....................................................................................23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization and Power; The Company Shares....................................................23
4.2 Capitalization................................................................................24
4.3 Authorization; Binding Effect; No Breach......................................................25
4.4 Subsidiaries; Investments.....................................................................26
4.5 Financial Statements and Related Matters......................................................26
4.6 Absence of Undisclosed Liabilities............................................................27
4.7 Assets of the Company.........................................................................27
4.8 Absence of Certain Developments...............................................................28
4.9 Governmental Filings..........................................................................29
4.10 Tax Matters...................................................................................29
4.11 Contracts and Commitments.....................................................................31
4.12 Proprietary Rights............................................................................33
4.13 Litigation....................................................................................34
4.14 Brokerage.....................................................................................35
4.15 Insurance.....................................................................................35
4.16 Employees.....................................................................................35
4.17 ERISA.........................................................................................35
4.18 Real Estate...................................................................................36
4.19 Compliance with Laws..........................................................................38
4.20 Product Warranty..............................................................................39
4.21 Powers of Attorney............................................................................39
4.22 Bank Accounts.................................................................................39
4.23 Disclosure....................................................................................39
ARTICLE V
COVENANTS
5.1 Proxy Statement/Prospectus; Registration Statement............................................40
5.2 Access to Properties and Records; Confidentiality.............................................41
5.3 Board Representation..........................................................................42
5.4 Post-Merger Officers of TechSys...............................................................43
5.5 Modification of Certain Warrants..............................................................43
5.6 Grant of Certain Warrants.....................................................................43
5.7 Exclusivity...................................................................................43
5.8 Representations and Warranties of Certain Stockholders of the Company.........................44
5.9 Employment Agreements.........................................................................44
5.10 Business Office...............................................................................44
5.11 TechSys Options...............................................................................44
5.12 Company Stockholder Representation Letter.....................................................44
5.13 Division or Combination of TechSys Common Stock...............................................44
5.14 Cancellation of Company Derivative Securities.................................................44
5.15 Offer by the Company..........................................................................44
5.16 Increase in Authorized Shares of TechSys......................................................45
5.17 Conduct of Business of the Company............................................................45
5.18 Negative Covenants............................................................................45
5.19 No Solicitation...............................................................................47
5.20 Further Assurances............................................................................48
5.21 Disbursements by TechSys......................................................................48
5.22 Disbursements by the Company..................................................................49
5.23 Termination of Certain Relationships by the Company Prior to Closing..........................49
5.24 Feldhammer Capital Warrants...................................................................49
5.25 Limitation on Outstanding Shares of Capital Stock of the Company..............................49
5.26 Ownership of Subsidiaries of the Company......................................................49
5.27 Grant of Additional TechSys Options...........................................................49
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligations to Effect the Merger...................................50
6.2 Conditions to Obligations of the Company to Effect the Merger.................................50
6.3 Conditions to Obligations of TechSys to Effect the Merger.....................................52
ARTICLE VII
[THIS ARTICLE HAS BEEN INTENTIONALLY LEFT BLANK]
ARTICLE VIII
TERMINATION
8.1 Events of Termination.........................................................................55
8.2 Effect of Termination.........................................................................56
8.3 Remedies of Termination After Expiration of Due Diligence Review Period.......................56
ARTICLE IX
MISCELLANEOUS
9.1 Rights and Remedies...........................................................................56
9.2 Waivers, Amendments to be in Writing..........................................................57
9.3 Successors and Assigns........................................................................57
9.4 Governing Law.................................................................................57
9.5 Jurisdiction..................................................................................57
9.6 Notices.......................................................................................57
9.7 Severability of Provisions....................................................................58
9.8 Schedules.....................................................................................58
9.9 Counterparts..................................................................................59
9.10 No Third-Party Beneficiaries..................................................................59
9.11 Headings......................................................................................59
9.12 Merger and Integration........................................................................59
9.13 Transaction Expenses..........................................................................59
9.14 Further Assurances............................................................................59
9.15 Announcements.................................................................................59
9.16 SEC...........................................................................................59
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit Exhibit No.
Form of Warrant Certificate........................................................................ A
Form of Company Stockholders Representation Letter................................................. B
Form of Employment Agreement....................................................................... C
Form of Employment Agreement....................................................................... D
Form of Company Affiliate Letter................................................................... E
Form of Stockholders Agreement......................................................................F
SCHEDULES
Schedule 1.2(a)(iii) - Board of Directors of Surviving Company
Schedule 1.2(a)(iv) - Officers of the Surviving Company
Schedule 1.4(c)(iv) - Surviving Derivative Securities
Schedule 3.1(c) - Directors, Officers, Certificate Of Incorporation and Bylaws of TechSys
Schedule 3.6 - Governmental Filings
Schedule 3.7 - Rights To Use Assets Used In The Business of TechSys
Schedule 3.9 - Litigation Involving The Purchasers
Schedule 3.11 - Insurance Policies of TechSys
Schedule 3.12 - Tax Matters of TechSys
Schedule 3.13(a) - Contracts and Commitments of TechSys
Schedule 3.13(e) - Affiliated Transactions
Schedule 3.14(a) - Proprietary Rights of TechSys
Schedule 3.14(c) - Required Consents to Assignment of Proprietary Rights
Schedule 3.15 - Employees of TechSys
Schedule 3.16 - ERISA - TechSys
Schedule 3.17(a) - Ownership of Real Property of TechSys
Schedule 3.17(b) - Leased Real Property of TechSys
Schedule 3.18(b) - Compliance With Laws For TechSys
Schedule 3.19 - Product Warranty By TechSys
Schedule 3.20 - Powers of Attorney On Behalf of TechSys
Schedule 3.21 - TechSys Bank Accounts
Schedule 3.22 - Cash, Cash Equivalent and Collectibles
Schedule 4.1(a) - Jurisdictions of the Company
Schedule 4.1(b) - Directors, Officers, Certificate of Incorporation and Bylaws of the Company
Schedule 4.2(a) - Capitalization
Schedule 4.2(b) - Capitalization of Subsidiaries of the Company
Schedule 4.3 - Authorizations of the Company
Schedule 4.4 - Subsidiaries and Investments of the Company
Schedule 4.5 - Financial Statements
Schedule 4.6 - Additional Liabilities
Schedule 4.7 - Rights to Use Assets Used in the Business of the Company
Schedule 4.8 - Changes Since the Latest Company Balance Sheet
Schedule 4.9 - Governmental Filings
Schedule 4.10 - Matters of the Company
Schedule 4.11(a) - Contracts and Commitments of the Company
Schedule 4.11(e) - Affiliated Transactions
Schedule 4.12(a) - Proprietary Rights of the Company
Schedule 4.12(c) - Required Consents to Assignment of Proprietary Rights
Schedule 4.13 - Litigation
Schedule 4.14 - Brokerage
Schedule 4.15 - Insurance Policies of the Company
Schedule 4.16 - Employees of the Company
Schedule 4.17 - ERISA - the Company
Schedule 4.18(a) - Ownership of Real Property of the Company
Schedule 4.18(b) - Leased Real Property of the Company
Schedule 4.19(b) - Compliance With Laws for the Company
Schedule 4.20 - Product Warranty by the Company
Schedule 4.21 - Powers of Attorney on Behalf of the Company
Schedule 4.22 - The Company Bank Accounts
Schedule 5.4(b) - Eligible Key Employees of the Company
Schedule 5.6 - Grant of Certain Warrants
Schedule 5.8 - Certain Stockholders of the Company
Schedule 5.11 - Allocation of TechSys Options to Certain Key Employees of TechSys
Schedule 5.12 - Certain Stockholders of the Company
Schedule 5.15 - Offer by the Company
Schedule 5.27 - Additional TechSys Options
Schedule 6.2(m) - Resignations of Certain Directors and Officers of TechSys
Schedule 6.3(q) - Resignations of Certain Directors and Officers of the Company
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER made as of April 5, 2001 (the
"Agreement"), by and among TechSys, Inc., a New Jersey corporation having its
principal office at 44 Aspen Drive, Livingston, New Jersey 07039 ("TechSys"),
Newco TKSS, Inc., a New Jersey corporation wholly-owned by TechSys having its
principal office at 44 Aspen Drive, Livingston, New Jersey 07039 ("Newco," and
together with TechSys, the "Purchasers") and Fuel Cell Companies, Inc., a Nevada
corporation having its principal office at 276 Belmont Place, Mahwah, New Jersey
07430 (the "Company," and together with the Purchasers, the "Parties").
WHEREAS, TechSys owns 100 shares of common stock, without par
value, of Newco (the "Newco Common Stock"), which TechSys represents constitute
all of the issued and outstanding capital stock of Newco;
WHEREAS, this Agreement contemplates a transaction in which
(i) Newco will merge with and into the Company (the "Merger") pursuant to this
Agreement and the Plan of Merger (as defined in Section 1.1) and the applicable
provisions of the laws of the State of New Jersey and the State of Nevada, (ii)
TechSys will issue the Merger Consideration (as defined in Section 1.4(c)(i)) in
accordance with Section 1.4, and (iii) TechSys shall own such number of shares
of the Capital Stock of the Company (as defined herein), which shall constitute
all of the outstanding Capital Stock of the Company, as provided in Section 1.4;
WHEREAS, the Boards of Directors of each of TechSys, Newco and
the Company have duly approved this Agreement and the transactions contemplated
hereby, including, without limitation, the Merger;
WHEREAS, prior to Closing (as defined herein), each of
TechSys, Newco and the Company shall obtain the approval of their respective
stockholders for the transactions contemplated by this Agreement;
WHEREAS, capitalized terms used in this Agreement but not
defined upon their first usage are defined in Section 2.1.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2),
Newco will be merged with and into the Company pursuant to this Agreement and
the Plan of Merger (the "Plan of Merger") to be filed in the Office of the
Treasurer of the State of New Jersey and in the Office of the Secretary of State
of the State of Nevada, and the separate existence of Newco shall cease. The
Company shall be the surviving corporation in the Merger and shall become a
wholly-owned Subsidiary of TechSys.
1.2 Certificate of Incorporation, Bylaws and Board of Directors.
(a) At the Effective Time:
(i) the articles of incorporation of the Company
shall be the articles of incorporation of the Surviving Company, except that the
articles of incorporation of the Surviving Company shall be amended to change
the name of the Surviving Company to Fuel Cell Cos., Inc. or such other name
upon which TechSys and the Company shall agree;
(ii) the bylaws of the Company, as in force and
effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Company;
(iii) the board of directors of the Surviving Company
serving after the Merger shall be those persons listed as directors on Schedule
1.2(a)(iii);
(iv) the officers of the Surviving Company serving
after the Merger and the positions held by each of them shall be as set forth on
Schedule 1.2(a)(iv).
(b) At the Effective Time, or as soon as practicable
thereafter, TechSys shall file with the Department of Treasury of the State of
New Jersey an amendment to its Certificate of Incorporation changing its name to
Fuel Cell Companies, Inc., or such other name as the Parties may agree.
1.3 Effects of the Merger. The Merger shall have the effects provided
therefor by Chapter 10 of the New Jersey Business Corporation Act and Section
92A of the Nevada Revised Statutes.
1.4 Manner of Conversion of Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any of TechSys, Newco, or the
Company, or any stockholder thereof, the shares of capital stock of the Parties
shall be converted as follows:
(a) Capital Stock of Newco. Each share of capital stock of
Newco issued and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and nonassessable share of common stock of the
Surviving Company.
(b) Cancellation of Capital Stock of the Company. Each share
of Capital Stock of the Company that is owned directly or indirectly by the
Company and each share of Capital Stock of the Company issued and held in the
Company's treasury shall be canceled and retired and shall cease to exist and no
capital stock of TechSys, cash or other consideration shall be paid or delivered
in exchange therefor.
(c) Issuance of Merger Consideration.
(i) Each share of the Capital Stock of the Company
issued and outstanding immediately prior to the Effective Time, excluding any
treasury shares and shares to be canceled pursuant to this Agreement
(collectively, the "Company Shares"), shall be converted at the Effective Time
into the right to receive 0.319746 shares (the "Exchange Ratio") of TechSys
Common Stock (the "Merger Consideration"); provided, that, immediately upon the
consummation of the Merger, TechSys shall effect a 1.56531 for 1 share division
of the TechSys Common Stock or a similarly proportioned stock dividend, in
accordance with Section 14A:7-15.1 of the New Jersey Business Corporations Act.
(ii) Lazar shall receive such number of shares of
TechSys Common Stock, if any, as agreed upon by the Company and Lazar, which in
no event shall exceed an aggregate of 819,000 shares.
(iii) Fractional Shares. No fraction of a share of
TechSys Common Stock will be issued in connection with the Merger. Calculations
of the number of shares to be received by a shareholder of the Company which
result in a fractional share equal to 0.5 or more of a share will be rounded up
to the nearest whole share of TechSys Common Stock and such calculations which
result in a fractional share equal to 0.49 or less of a share will be rounded
down to the nearest whole share of TechSys Common Stock.
(iv) Company Options and Warrants. At the Effective
Time, other than such warrants set forth on Schedule 1.4(c)(iv), all options or
warrants exercisable for or convertible into shares of Capital Stock of the
Company granted by the Company prior to the date hereof which are outstanding
and unexercised immediately prior to the Effective Time ("Company Derivative
Securities") shall terminate;
1.5 Exchange of Certificates; Payment of Merger Consideration.
(a) Certificate Delivery Requirements. Immediately after the
Effective Time, the Company shall submit a form of Letter of Transmittal to each
stockholder of the Company, pursuant to which each such stockholder of the
Company may surrender to TechSys the certificates that represent the Company
Shares held by such stockholder (the "Certificates"), accompanied by blank stock
powers duly executed by such stockholder of the Company, against delivery of the
portion of the Merger Consideration that is deliverable to such stockholder of
the Company. Each share of the Capital Stock of the Company shall entitle the
holder thereof to receive its share of the Merger Consideration in accordance
with a schedule of the Company's stockholders to be delivered by the Company to
TechSys immediately after the Closing. Until so surrendered, each Certificate
shall be deemed for all purposes, to evidence only the right to receive the
Merger Consideration in accordance with Section 1.4(c)(i), and from and after
the Effective Time, the stockholders of the Company shall each cease to have any
rights as a stockholder of the Company, except for the right to surrender
Certificates in exchange for payment of the Merger Consideration.
(b) Exchange Procedures. Upon surrender by each stockholder of
the Company of its Certificate(s), TechSys shall deliver to each such
stockholder a certificate representing the number of whole shares of TechSys
Common Stock to which such stockholder is entitled pursuant to Section 1.4, and
the Certificate(s) so surrendered shall be canceled immediately.
(c) No Further Transfers of Capital Stock of the Company. As
of the Effective Time, the stock transfer books of the Company shall be closed,
and thereafter there shall be no further registration of transfers on the stock
transfer books of the Surviving Company of the shares of the Company which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Company for any
reason, they shall be canceled and exchanged as provided in Section 1.5(a).
(d) Lost, Stolen or Destroyed Certificates. If any
Certificates evidencing Shares shall have been lost, stolen or destroyed, then
TechSys shall cause payment to be made in exchange for such lost, stolen or
destroyed certificates, upon the delivery to TechSys of an affidavit of that
fact by the holder thereof; provided, however, that TechSys may, in its sole
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver an
indemnification agreement, without a bond but secured by any shares of TechSys
Common Stock issuable to such holder, having such terms as it may reasonably
direct as indemnity against any claim that may be made against TechSys with
respect to the certificates alleged to have been so lost, stolen or destroyed.
1.6 Tax Treatment. The Parties intend that the Merger qualify as a
tax-free reorganization within the meaning of Section 368 (a)(1)(A) of the Code,
in accordance with Section 368(a)(2)(E) of the Code. Each Party agrees that it
will use all commercially reasonable efforts to assure that the Merger shall so
qualify, and TechSys and the Company each hereby agree that subsequent to the
Closing, neither it nor the Surviving Company will take any action, or take any
position in a Tax Return, that may reasonably be expected to result in the
failure of the Merger to so qualify.
1.7 Hart Scott Rodino. Each Party shall provide to the other Parties
such information as may be reasonably necessary for TechSys and the Company to
determine whether pre-merger notification of the Merger must be filed with the
Federal Trade Commission (the "FTC") pursuant to the Hart Scott Rodino Act
("Pre-Merger Notification"). In the event that counsel to TechSys determines
that Pre-Merger Notification must be filed with the FTC, each of the Parties
hereto shall provide such information as may be reasonably necessary to complete
and file the Pre-Merger Notification, and each of TechSys and the Company,
respectively, shall file such Pre-Merger Notification on a timely basis.
1.8 Effective Time. As soon as practicable following fulfillment or
waiver of the conditions specified in Article VI and the consummation of the
Closing, and provided that this Agreement has not been terminated pursuant to
Article VIII, TechSys and the Company shall file the Certificate of Merger with
the Department of Treasury of the State of New Jersey and with the Secretary of
State of the State of Nevada. The effective date and time of the Certificate of
Merger with the Department of Treasury of the State of New Jersey and with the
Secretary of State of the State of Nevada, or, if not simultaneous, the later
thereof, is referred to herein as, the "Effective Time."
1.9 Closing. The closing shall take place at the offices of Pitney,
Hardin, Kipp & Szuch, LLP, 200 Campus Drive, Florham Park, New Jersey commencing
at 10:00 a.m. local time (the "Closing"), or at such other time and place as the
Parties may agree, as soon as practicable after the later of (i) the day of (and
immediately following) the receipt of approval of the Merger by the stockholders
of TechSys and the stockholders of the Company, and (ii) the day on which the
last of the conditions set forth in Article VI is satisfied or duly waived. The
date and time of the Closing are herein referred to as the "Closing Date."
1.10 Title; Risk of Loss. Legal title and risk of loss with respect to
the Company Shares and the business of the Company shall not pass to TechSys
until the Effective Time.
ARTICLE II
DEFINITIONS
2.1 Definitions. For purposes hereof, the following terms, when used
herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any Person means any other Person controlling,
controlled by or under common control with such Person.
"Agreement" means this Agreement and Plan of Merger, including
all Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
"Assets of the Company" mean the assets of the Company and its
Subsidiaries shown on the Latest Company Balance Sheet or acquired by the
Company or any Subsidiary of the Company after the date of the Latest Company
Balance Sheet, less any assets disposed of by the Company or such Subsidiary in
the ordinary course of business after the date of the Latest Company Balance
Sheet.
"Assets of TechSys" mean the assets of TechSys and its
Subsidiaries shown on the Latest TechSys Balance Sheet or acquired by TechSys or
any Subsidiary of TechSys after the date of the Latest TechSys Balance Sheet,
less any assets disposed of by TechSys or such Subsidiary in the ordinary course
of business after the date of the Latest TechSys Balance Sheet.
"Books and Records" means all lists, records and other
information pertaining to assets, accounts, personnel and referral sources of
the Company, all lists and records pertaining to suppliers, customers licensees
and licensors of the Company, and all other books, ledgers, files and business
records of every kind relating or pertaining to the Business, in each case
whether evidenced in writing, electronically (including by computer) or
otherwise.
"Business of the Company" means the Company's business of
acquiring and developing technology and products involved in the delivery of
energy, with particular emphasis on fuel cells, for a variety of applications.
"Capital Stock of the Company" has the meaning set forth in
Section 4.2.
"Closing" has the meaning set forth in Section 1.9.
"Closing Date" has the meaning set forth in Section 1.9.
"Code" means the United States Internal Revenue Code of 1986,
as amended.
"Company Shares" has the meaning set forth in Section
1.4(c)(i).
"Due Diligence Review Period" means the period beginning on
the date of this Agreement and ending on the 35th calendar day following such
date; provided, that, the Due Diligence Review Period for TechSys shall end on
the later of: (i) the 35th calendar day following the date of this Agreement;
and (ii) the 10th calendar day following the receipt by TechSys of the Audited
Financial Statements of the Company (as defined in Section 4.5).
"Environmental and Safety Requirements" means all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including all those relating to the presence,
use, production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, control, or cleanup of any Hazardous Substance.
"Environmental Lien" means any Lien, whether recorded or
unrecorded, in favor of any Government Entity relating to any liability arising
under any Environmental and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means, at a given time, United States generally
accepted accounting principles, consistently applied.
"Government Entity" means the United States of America or any
other nation, any state or other political subdivision thereof, or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of government.
"Hazardous Substance" means any hazardous, toxic, radioactive
or chemical materials, mixtures, substances or wastes; and (whether or not
included in the foregoing), any pesticides, pollutants, contaminants, petroleum
products or by-products, asbestos, polychlorinated biphenyls (or PCBs), noise or
radiation.
"Indebtedness" of any Person means, without duplication: (a)
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise (other than trade payables and
other current liabilities incurred in the ordinary course of business) and any
commitment by which such Person assures a creditor against loss, including
contingent reimbursement obligations with respect to letters of credit; (b)
indebtedness guaranteed in any manner by such Person, including a guarantee in
the form of an agreement to repurchase or reimburse; (c) obligations under
capitalized leases in respect of which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which
obligations such Person assures a creditor against loss; (d) any unsatisfied
obligation of such Person for "withdrawal liability" to a "multiemployer plan,"
as such terms are defined under ERISA; and (e) any unfunded liability due to any
Person under any Plan.
"Investment" means, with respect to any Person, any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or other ownership or beneficial interest
(including partnership interests and joint venture interests) of any other
Person, and any capital contribution by such Person to any other Person.
"Knowledge" or "to the Knowledge of" means, with respect to a
Person, (a) the actual knowledge of such Person (which includes the actual
knowledge of all executive officers, directors and executive employees of such
Person) and (b) the knowledge which a prudent business person would have
obtained in the conduct of business after making reasonable inquiry and
reasonable diligence with respect to the particular matter in question.
"Legal Requirement" means any requirement arising under any
law, statute, ordinance, treaty, rule or regulation, determination, direction or
action of an arbitrator, or determination, directive or order of any Government
Entity, including any Environmental and Safety Requirement.
"Lien" means any mortgage, pledge, security interest,
encumbrance, easement, restriction on use, restriction on transfer, charge, or
other lien; provided, however, with respect to any Asset that is not owned,
"Lien" means any mortgage, pledge, security interest, encumbrance, easement,
lease, restriction on use, restriction on transfer, charge, or other lien on the
right of the Company to use or have possession thereof.
"Loss" means, with respect to any Person, any diminution in
value, consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any Government Entity) against or affecting
such Person or which, if determined adversely to such Person, would give rise
to, evidence the existence of, or relate to, any other Loss, and the
investigation, defense or settlement of any of the foregoing, together with any
interest that may accrue thereon.
"Officer's Certificate" of any Person means a certificate
signed by such Person's president or chief financial officer (or an individual
having comparable responsibilities with respect to such Person) stating that (a)
the individual signing such certificate has made or has caused to be made such
investigations as are necessary in order to permit such individual to verify the
accuracy of the information set forth in such certificate and (b) to the
Knowledge of such individual, such certificate does not misstate any material
fact and does not omit to state any fact necessary to make the fact stated
therein not misleading.
"Permitted Lien" means, as to the Company Shares, the TechSys
Shares (as defined herein), and, as to other Assets of the Company, and Assets
of TechSys, (i) any Lien for Taxes not yet due or delinquent or being contested
in good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any statutory Lien arising in the
ordinary course of business by operation of Law with respect to a Liability that
is not yet due or delinquent, and (iii) any minor imperfection of title or
similar Lien which individually or in the aggregate with other such Liens could
not reasonably be expected to materially adversely affect the Business of the
Company or the business of TechSys, as the case may be.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Plans" means all Employee Pension Plans, Employee Welfare
Plans, Other Plans and Multiemployer Plans to which the Company contributes or
is a party.
"Proprietary Rights" means all of the following owned by,
issued to or licensed to the Company: (a) all inventions (whether or not
patentable or reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof; (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith; (c) all
copyrightable works (including software developed by the Company for use in the
Business), all copyrights, and all applications, registrations, and renewals in
connection therewith; (d) all mask works and all applications, registrations,
and renewals in connection therewith; (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals);
(f) the Software; (g) all other proprietary rights; and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Release" means a release or discharge of substances,
including hazardous substances, as set forth in CERCLA.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities of Act 1933, as amended.
"Software" means all computer programs, software, data bases,
source codes, magnetic tape, diskettes and punchcards used by or useful to the
Company in the conduct of the Business as currently conducted and presently
proposed to be conducted.
"Subsidiary" of any Person means any corporation, partnership,
association or other business entity which such Person, directly or indirectly,
controls or in which such Person has a majority ownership interest. For purposes
of this definition, (i) a Person is deemed to have a majority ownership interest
in a partnership, association or other business entity if such Person is
allocated a majority of the gains or losses of such entity or is or controls the
managing director or general partner of such entity, and (ii) neither Technology
Keiretsu, L.L.C. , a New Jersey limited liability company, nor SupportScape
Inc., a New York corporation, shall be deemed to be a Subsidiary of TechSys.
"Surviving Company" means the Company after the Effective Time
of the Merger.
"Taxes" means any federal, state, county, local or foreign
taxes, charges, fees, levies, other assessments or withholding taxes or charges
imposed by any governmental entity and includes any interest and penalties
(civil or criminal) on or additions to any such taxes.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto and any amendment thereof.
"Transaction Documents" means this Agreement, and all other
agreements, instruments, certificates and other documents to be entered into or
delivered by any Party in connection with the Merger.
"Treasury Regulations" means the United States Treasury
Regulations promulgated pursuant to the Code.
2.2 Other Definitional Provisions.
(a) Accounting Terms. Accounting terms which are not defined
herein have the meanings given to them under GAAP. To the extent that the
definition of an accounting term set forth in this Agreement is inconsistent
with the meaning of such term under GAAP, the definition in this Agreement will
control. To the extent that financial statements were prepared in accordance
with GAAP, no change in accounting principles shall be made from those utilized
in preparing such financial statements (without regard to materiality) including
with respect to the nature of accounts, level of reserves or level of accruals.
For purposes of the preceding sentence, "changes in accounting principles"
includes all changes in accounting principles, policies, practices, procedures
or methodologies with respect to financial statements, their classification or
their display, as well as all changes in practices, methods, conventions or
assumptions (unless required by objective changes in underlying events) utilized
in making accounting estimates.
(b) "Hereof," etc. The terms "hereof," "herein" and
"hereunder" and terms of similar import are references to this Agreement,
including all exhibits and Schedules hereto, as a whole and not to any
particular provision of this Agreement. Section, clause, Schedule and exhibit
references contained in this Agreement are references to Sections, clauses,
Schedules and exhibits in or to this Agreement, unless otherwise specified.
(c) "Including". The term "including" means including, without
limitation.
(d) Successor Laws. Any reference to any particular Code
section or any other law or regulation will be interpreted to include any
revision of or successor to that section regardless of how it is numbered,
classified, or codified.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
As a material inducement to the Company to enter into this Agreement,
TechSys hereby represents and warrants to the Company that:
3.1 Organization and Power
(a) TechSys is a corporation duly organized, validly existing
and in good standing under the laws of the State of New Jersey. TechSys has the
requisite corporate power and authority and all licenses, permits and
authorizations necessary to enter into, deliver and carry out its obligations
pursuant to the Transaction Documents to which it is a party.
(b) Newco is a corporation duly organized, validly existing
and in good standing under the laws of the State of New Jersey. Newco has the
requisite corporate power and authority and all licenses, permits and
authorizations necessary to enter into, deliver and carry out its obligations
pursuant to the Transaction Documents to which it is a party. Newco was formed
by TechSys for the sole purpose of entering into the transactions contemplated
by the Transaction Documents, and except for the rights and obligations created
by this Agreement, Newco has no assets, liabilities or operations of any nature.
Newco has not engaged in any business activities or conducted any operations
other than in connection with the transactions contemplated by this Agreement.
(c) Schedule 3.1(c) lists the directors and officers of
TechSys. TechSys represents and warrants that TechSys has delivered correct and
complete copies of the articles of incorporation and bylaws of TechSys,
including all amendments thereto, to the Company prior to the date of this
Agreement. The minute books and stock transfer ledgers of TechSys, which TechSys
represents and warrants will be made available to the Company prior to Closing,
contain a true and complete record of all action taken at all meetings and by
all written consents in lieu of meetings of the stockholders, the board of
directors and the committees of the board of directors and all transfers in the
capital stock of TechSys.
3.2 Capitalization.
(a) The authorized capital stock of TechSys consists of
20,000,000 shares of Common Stock, without par value (the "TechSys Common
Stock") and 5,000,000 shares of preferred stock (the "TechSys Preferred Stock").
As of March 22, 2001, there were 3,923,544 shares of TechSys Common Stock
outstanding and no shares of TechSys Preferred Stock outstanding. As of March
22, 2001, a total of 7,068,600 shares of TechSys Common Stock were reserved for
issuance pursuant to outstanding securities that are convertible into or
exchangeable for shares of TechSys Common Stock, including: 1,066,100 shares
issuable upon the exercise of options held by employees of TechSys; 310,000
shares issuable upon the exercise of options held by directors of TechSys;
1,350,000 shares issuable upon the exercise of options held by certain
executives of TechSys, to be modified in accordance with Section 5.5 hereof;
75,000 shares issuable upon the exercise of options held by former directors and
employees of TechSys; 467,500 shares issuable upon the exercise of other
warrants; and shares issuable upon the exercise of options held by Lazar, to be
canceled at the Effective Time and 100,000 shares issuable upon the exercise of
options to be issued to Lazar at the Effective Time, in accordance with an
agreement executed by Lazar and TechSys on or before the Effective Time;
provided, that, TechSys and the Company have not otherwise determined that all
agreements between Lazar and TechSys and Lazar and the Company, respectively,
are not effective. Except for interests pursuant to which shares have been
reserved for issuance as set forth in the preceding sentence or pursuant to this
Agreement, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights or other
contracts or commitments that could require TechSys to issue, sell or otherwise
cause to become outstanding any of its capital stock or equity interests or
other instruments convertible into such interests.
(b) The authorized capital stock of Newco consists of 2,500
shares of common stock, without par value, of which 100 shares are issued and
outstanding. All of such issued and outstanding shares are owned by TechSys.
3.3 Validity of Shares of TechSys Common Stock. The shares of common
stock of TechSys to be issued in connection with the Merger (the "TechSys
Shares") have been duly authorized and will, when issued in accordance with the
terms hereof, be validly issued, fully paid and non-assessable, and free and
clear of any pre-emptive rights of the stockholders of TechSys.
3.4 Authorization; Binding Effect; No Breach.
(a) The execution, delivery and performance by TechSys of each
Transaction Document to which it is a party has been duly authorized by TechSys.
Each Transaction Document to which TechSys is a party constitutes a valid and
binding obligation of TechSys which is enforceable against TechSys in accordance
with its terms. The execution, delivery and performance by TechSys of the
Transaction Documents to which it is a party do not and will not (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in a violation of, or (iv) require any
authorization, consent, approval, exemption or other action by or declaration or
notice to any Government Entity pursuant to, the charter or bylaws of TechSys or
any agreement, instrument, or other document, or any Legal Requirement, to which
TechSys or any of its assets is subject.
(b) The execution, delivery and performance by Newco of each
Transaction Document to which it is a party has been duly authorized by Newco.
Each Transaction Document to which Newco is a party constitutes a valid and
binding obligation of Newco which is enforceable against Newco in accordance
with its terms. The execution, delivery and performance by Newco of the
Transaction Documents to which it is a party do not and will not (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in a violation of, or (iv) require any
authorization, consent, approval, exemption or other action by or declaration or
notice to any Government Entity pursuant to, the charter or bylaws of Newco or
any agreement, instrument, or other document, or any Legal Requirement, to which
Newco or any of its assets is subject.
3.5 TechSys Reports; Financial Statements. TechSys has filed with the
SEC each registration statement, report, proxy statement or information
statement required to be filed by it since January 1, 2000 through the date
hereof, including (i) TechSys' Annual Report on Form 10-KSB for the years ended
December 31, 1999 and 2000 (the "Form 10-KSBs"), and (ii) TechSys' Quarterly
Reports on Form 10-QSB for the calendar quarters ended March 31, 2000, June 30,
2000 and September 30, 2000 (collectively, the "TechSys Reports"), copies of
which have been made available to the Company.
(a) As of their respective dates, the TechSys Reports did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading.
(b) As of their respective dates, the consolidated financial
statements included in the Form 10-KSBs complied as to form in all material
respects with then applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto. Each of the consolidated
balance sheets included in or incorporated by reference into the Form 10-KSBs
(including the related notes and schedules) fairly presents in all material
respects the consolidated financial position of TechSys and its subsidiaries as
of its date and each of the consolidated statements of income and of changes in
cash flows included in or incorporated by reference into the Form 10-KSBs
(including any related notes and schedules) fairly presents in all material
respects the results of operations and changes in cash flows, as the case may
be, of TechSys for the periods set forth therein, in each case in accordance
with GAAP, except as may be noted therein.
3.6 Governmental Filings. Except as set forth on Schedule 3.6, other
than the filing of the Merger Certificate with the State of New Jersey and the
State of Nevada, respectively, the filing with the SEC of the preliminary Proxy
Statement/Prospectus and the Registration Statement (and any amendments
thereto), respectively, the filing with the SEC of a Current Report on Form 8-K
(and any amendments thereto) subsequent to the Effective Time and the Pre-Merger
Notification, if applicable, no notices, reports or other filings are required
to be made by TechSys with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by TechSys from, any
Government Entity in connection with the execution and delivery of this
Agreement by TechSys and the consummation of the transactions contemplated by
the Transaction Documents.
3.7 Assets of TechSys.
(a) The Assets of TechSys (which, for purposes of this
Section, 3.7, includes the assets of each Subsidiary of TechSys) and other
assets reflected in the Books and Records of TechSys constitute all of the
assets and rights which are used or useful in the business of TechSys as
currently conducted and presently proposed to be conducted;
(b) TechSys has good and marketable title to, or a valid
leasehold interest in or other rights to use (which other rights to use are
described on the attached Schedule 3.7), all properties and assets used by
TechSys in its business, located on its premises, shown on the Latest TechSys
Balance Sheet or acquired by TechSys since the date of the Latest TechSys
Balance Sheet, in each case free and clear of all Liens, other than Permitted
Liens, and other than (i) properties and assets disposed of in the ordinary
course of business and consistent with TechSys' past practice by TechSys since
the date of the Latest TechSys Balance Sheet (which disposals do not exceed
$25,000 in the aggregate) and (ii) Liens disclosed on the Latest TechSys Balance
Sheet (including any notes thereto); and
(c) TechSys' equipment and other tangible assets are in good
operating condition (subject to normal wear and tear) and fit for use in the
ordinary course of business of TechSys and consistent with its past practice.
3.8 Absence of Certain Changes. Except as disclosed in the TechSys
Reports filed prior to the date hereof, since December 31, 2000, TechSys and its
subsidiaries have conducted their respective businesses only in, and have not
engaged in any material transaction other than in, the ordinary and usual course
of such businesses and there has not been any material adverse change in the
financial condition, business, prospects or results of operations of TechSys and
its subsidiaries from December 31, 2000 through the date of this Agreement.
3.9 Litigation. Except as set forth on Schedule 3.9, there are no
civil, criminal or administrative actions, suits, claims, hearing,
investigations, arbitrations, or proceedings pending or, to the Knowledge of
Purchasers, threatened against Purchasers preventing, or which, if determined
adversely to Purchasers would prevent TechSys or Newco from consummating the
transactions contemplated by the Transaction Documents.
3.10 Brokerage. There is no claim for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
the Transaction Documents which is binding upon TechSys or any of its
Subsidiaries.
3.11 Insurance. The attached Schedule 3.11 contains a description of
each insurance policy maintained by TechSys or its Subsidiaries with respect to
TechSys, its Subsidiaries, its properties, assets or business, and each such
policy is in full force and effect. TechSys is not in default of any obligation
pursuant to any insurance policy described on Schedule 3.11.
3.12 Tax Matters. Except as set forth in the attached Schedule 3.12:
(a) TechSys and each Subsidiary of TechSys has timely filed
all Tax Returns that it was required to file.
(b) All such Tax Returns were and are true, correct and
complete in all respects.
(c) All Taxes owed by TechSys and each Subsidiary (whether or
not shown on any Tax Return for all time periods through the Closing Date) have
been paid. The amount of liability for unpaid Taxes for all time periods ending
on or before the Closing Date will not exceed the amount of current liability
accruals for Taxes (excluding reserves for deferred Taxes) as such accruals are
reflected on the most recent TechSys balance sheet.
(d) No information related to Tax matters has been requested
by any Taxing authority and there are no ongoing examinations or claims against
TechSys or any Subsidiary for Taxes, and no notice of any audit, examination, or
claim for Taxes, whether pending or threatened, has been received.
(e) TechSys and each Subsidiary currently are not the
beneficiary of any extension of time within which to file any Tax Return, except
with respect to such Tax Returns due in 2001;
(f) No claim has ever been made by an authority in a
jurisdiction where TechSys or a Subsidiary does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction. TechSys and each Subsidiary
is not required to file Tax Returns in any jurisdiction in which it is not
currently filing Tax Returns.
(g) There are (and as of immediately following the Closing
Date there will be) no Liens other than Permitted Liens on any of the Assets of
TechSys or a Subsidiary that arose in connection with any failure (or alleged
failure) to pay any Tax.
(h) TechSys and each Subsidiary has withheld and paid over to
the proper governmental entities all Taxes required to have been withheld and
paid over in all matters, including in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other third
party.
(i) To the Knowledge of any director or officer of TechSys,
there is no basis for the assertion of any claim relating or attributable to
Taxes which, if adversely determined, would result in any Lien on the Assets of
TechSys or otherwise have an adverse effect on TechSys or any of its
Subsidiaries or their respective businesses.
(j) There are no unresolved disputes or claims concerning the
Tax liability of TechSys or each Subsidiary.
(k) TechSys and each Subsidiary have been, and are currently
not, subject to a Tax audit.
(l) TechSys and each Subsidiary have never waived or extended
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to any Tax assessment or deficiency as to which the period of
extension has not elapsed.
(m) TechSys has not filed any consent agreement under Section
341(f) of the Code concerning collapsible corporations.
(n) TechSys has never made any payments, is not obligated to
make any payments, and is not a party to any agreement that could obligate it to
make any payments that will not be deductible under Sections 280(G) and 404 of
the Code.
(o) TechSys has never been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code.
(p) TechSys has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial understatement
of Federal Income Tax within the meaning of Section 6662 of the Code.
(q) TechSys and each Subsidiary are not a party to any Tax
allocation, Tax indemnity or Tax sharing agreement. TechSys (A) has never been a
member of an Affiliated Group filing a consolidated federal income Tax Return
and (B) has no liability for the Taxes of any Person (other than any of TechSys)
under Treas. Reg. ss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(r) TechSys has a taxable year ended on December 31 of each
year.
(s) TechSys currently utilizes the accrual method of
accounting for income Tax purposes and such method of accounting has not
changed.
(t) There are no tax rulings, requests for rulings, closing
agreements or changes of accounting method relating to TechSys or any of its
Subsidiaries that could affect their liability for Taxes for any period after
the Closing Date.
(u) No property of TechSys is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
(v) TechSys is not a party to any lease made pursuant to
Section 168(f) of the Code.
(w) TechSys will not be required to include in a taxable
period ending after the date of the Closing income attributable to a prior
taxable period that was not recognized in that prior taxable period as a result
of the installment method of accounting, the completed contract method of
accounting, the long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or comparable provisions of state or local
or foreign tax law.
3.13 Contracts and Commitments.
(a) Contracts. Schedule 3.13(a) sets forth a complete list of
all agreements to which TechSys is a party and all agreements to which any
Subsidiary is a party (the "TechSys Contracts"). All references to TechSys in
this Section 3.13 refer to both TechSys and to each Subsidiary of TechSys. Other
than this Agreement and the agreements described on the attached Schedule
3.13(a), neither TechSys nor any Subsidiary of TechSys is a party to any written
or oral:
(i) pension, profit sharing, stock option, employee
stock purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit, welfare or stock plan
or arrangement which is not described on Schedule 3.13(a), or any contract with
any labor union, or any severance agreement;
(ii) contract for the employment or engagement as an
independent contractor of any Person on a full-time, part-time, consulting or
other basis;
(iii) contract pursuant to which TechSys has advanced
or loaned funds, or agreed to advance or loan funds, to any other Person;
(iv) contract or indenture relating to any
Indebtedness or the mortgaging, pledging or otherwise placing a Lien on any of
the TechSys Shares or any of the Assets of TechSys;
(v) contract pursuant to which TechSys is the lessee
of, or holds or operates, any real or personal property owned by any other
Person;
(vi) contract pursuant to which TechSys is the lessor
of, or permits any third party to hold or operate, any real or personal property
owned by TechSys or of which TechSys is a lessee;
(vii) assignment, license, indemnification or other
contract with respect to any intangible property (including any Proprietary
Right) which is material to the business of TechSys and is not described on
Schedule 3.13(a);
(viii) contract or agreement with respect to services
rendered or goods sold or leased to or from others, other than any customer
purchase order accepted in the ordinary course of business and in accordance
with TechSys' past practice;
(ix) contract prohibiting TechSys from freely
engaging in any business anywhere in the world;
(x) independent sales representative or
distributorship agreement with respect to the business of TechSys; or
(xi) executory contract (other than one described in
Sections 3.13(a)(i) through 3.13(a)(x)) which is material to TechSys or involves
a consideration in excess of $5,000.
(b) Enforceability. Each TechSys Contract described on
Schedule 3.13(a) is a valid and binding agreement of TechSys, enforceable by
TechSys in accordance with its terms, except as such enforceability against the
other parties thereto may be limited by (i) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and (ii) applicable equitable principles (whether considered in a
proceeding at law or in equity).
(c) Compliance. TechSys has performed all obligations required
to be performed by it under each TechSys Contract, and TechSys is not in default
under or in breach of (nor is it in receipt of any claim of any such default
under or breach of) any such obligation. No event has occurred which with the
passage of time or the giving of notice (or both) would result in a default,
breach or event of noncompliance under any obligation of TechSys pursuant to any
TechSys Contract. TechSys has no present expectation or intention of not fully
performing any obligation of TechSys pursuant to any TechSys Contract, and
TechSys has no Knowledge of any breach or anticipated breach by any other party
to any TechSys Contract.
(d) Leases. With respect to each TechSys Contract which is a
lease of personal property, TechSys holds a valid and existing leasehold
interest under such lease for the term thereof.
(e) Affiliated Transactions. Except as set forth on Schedule
3.13(e), no officer, director, stockholder or Affiliate of TechSys (and no
individual related by blood or marriage to any such Person, and no entity in
which any such Person or individual owns any beneficial interest) is a party to
any agreement, contract, commitment or transaction with TechSys (other than this
Agreement) or has any interest in any property used by TechSys.
3.14 Proprietary Rights. All references to TechSys in this Section 3.14
refer to both TechSys and to each Subsidiary of TechSys.
(a) Schedule. The attached Schedule 3.14(a) contains a
complete and accurate list of all Proprietary Rights, both domestic and foreign,
including but not limited to (i) all patented or registered Proprietary Rights
owned by TechSys or used in connection with its business, (ii) all pending
patent applications and applications for registrations of other Proprietary
Rights filed by or on behalf of TechSys or used in connection with the Business,
(iii) all registered trade names, trademarks, corporate names, and websites, and
unregistered trade names, trademarks, and service marks owned by TechSys or used
in connection with its business, (iv) all inventions, trade secrets, or other
proprietary information not otherwise the subject of a patent, patent
application, or registered application to register Proprietary Rights, and (v)
all registered and unregistered copyrights and computer software which are
material to the financial condition, operating results, assets, customer or
supplier relations, employee relations or business prospects of TechSys. The
attached Schedule 3.14(a) also contains a complete and accurate list of all
licenses, covenants not to sue, and other rights granted by TechSys to any third
party, all licenses, covenants not to sue, and other rights granted by any third
party to TechSys, with respect to any Proprietary Rights, a general description
of all agreements or arrangements of escrows of source codes in favor of
licensees together with a description of the location of copies of all such
agreements. The Proprietary Rights comprise all intellectual property rights
which are used or useful in the operation of the business of TechSys or is
otherwise owned by TechSys.
(b) Ownership; Claims. TechSys owns and possesses all right,
title and interest in and to (or has the right to use pursuant to a valid and
enforceable license) all Proprietary Rights described on Schedule 3.14(a) which
are necessary or desirable for the operation of TechSys' business as presently
conducted and as presently proposed to be conducted, and TechSys has taken all
necessary actions to maintain and protect its interest in all the Proprietary
Rights. The owners of the Proprietary Rights licensed to TechSys have taken all
necessary actions to maintain and protect the Proprietary Rights which are
subject to such licenses.
(i) TechSys owns in the entirety or has the right to
use all of the Proprietary Rights described on such Schedule and each other
Proprietary Right which is material to the conduct of the business of TechSys
(in each case free and clear of all Liens and free of all claims to the use by
others),
(ii) there have been no claims made against TechSys
asserting the invalidity, misuse or unenforceability of any of such Proprietary
Rights, and there are no grounds known to TechSys for any such claim,
(iii) TechSys has not received any notice of (and is
not aware of any facts which indicate a likelihood of) any infringement or
misappropriation by, or conflict with, any Person with respect to any of such
Proprietary Rights (including any demand or request that TechSys license rights
from any Person),
(iv) the conduct of the business of TechSys has not
infringed, misappropriated or violated, and does not infringe, misappropriate or
violate in any respect, any proprietary right of any other Person;
(v) to the Knowledge of TechSys, such Proprietary
Rights have not been infringed, misappropriated or violated in any respect by
any other Person, and
(vi) the consummation of the transactions
contemplated by this Agreement will have no adverse effect on any such
Proprietary Right.
(c) Except as set forth on Schedule 3.14(c), all Proprietary
Rights set forth on Schedule 3.14(a) may be assigned by TechSys in accordance
with this Agreement without obtaining the prior consent of any Person other than
a Party to this Agreement.
3.15 Employees.
(a) Continued Employment. Except as set forth on Schedule
3.15, to TechSys' Knowledge, no executive or key employee of TechSys, or any
Subsidiary of TechSys, or any group of employees of TechSys or any Subsidiary of
TechSys, has any plans to terminate employment with TechSys or such Subsidiary.
(b) Compliance and Restrictions. TechSys and its Subsidiaries
have substantially complied with all laws relating to the employment of labor,
including provisions of such laws relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes, and
TechSys and its Subsidiaries have no labor relations problem (including any
union organization activities, threatened or actual strikes or work stoppages or
grievances). Except as set forth on the attached Schedule 3.15, neither TechSys,
any Subsidiary of TechSys, nor any employees of TechSys or any Subsidiary of
TechSys are subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreement relating to, affecting, or in
conflict with, the business activities as presently conducted or as proposed to
be conducted. Except as set forth on Schedule 3.15, the consummation of this
Agreement will not give rise to (i) the vesting of any restricted stock of
TechSys or any Subsidiary of TechSys, (ii) any change of control provisions set
forth in any agreement between any Person and TechSys or any Subsidiary of
TechSys, (iii) any severance payments to become due and owing to any Person by
TechSys or by any Subsidiary of TechSys, or (iv) any other similar benefits.
3.16 ERISA. All references to TechSys in this Section 3.16 refer to
both TechSys and to each Subsidiary of TechSys. Except as set forth on the
attached Schedule 3.16, with respect to all current employees (including those
on lay-off, disability or leave of absence), former employees, and retired
employees of TechSys:
(a) TechSys neither maintains nor contributes to any (i)
employee welfare benefit plans (as defined in Section 3(1) of ERISA) ("Employee
Welfare Plans"), or (ii) any plan, policy or arrangement which provides
nonqualified deferred compensation, bonus or retirement benefits, severance or
"change of control" (as set forth in Code Section 280G) benefits, or life,
disability, accident, vacation, tuition reimbursement or other fringe benefits
("Other Plans");
(b) TechSys does not maintain, contribute to, or participate
in any defined benefit plan or defined contribution plan which are employee
pension benefit plans (as defined in Section 3(2) of ERISA) ("Employee Pension
Plans");
(c) TechSys does not contribute to or participate in, and has
not contributed to or participated in for the past six years, any multiemployer
plan (as defined in Section 3(37) of ERISA) (a "Multiemployer Plan");
(d) TechSys does not maintain or have any obligation to
contribute to or provide any post-retirement health, accident or life insurance
benefits to any Employee, other than limited medical benefits required to be
provided under Code Section 4980B;
(e) all Plans (and all related trusts and insurance contracts)
comply in form and in operation in all material respects with the applicable
requirements of ERISA and the Code;
(f) all required reports and descriptions (including all Form
5500 Annual Reports, Summary Annual Reports, PBGC-1s and Summary Plan
Descriptions) with respect to all Plans have been properly filed with the
appropriate Government Entity or distributed to participants, and TechSys has
complied substantially with the requirements of Code Section 4980B;
(g) with respect to each Plan, all contributions, premiums or
payments which are due on or before the Closing Date have been paid to such
Plan; and
(h) TechSys has not incurred any liability to the Pension
Benefit Guaranty Corporation (the "PBGC"), the United States Internal Revenue
Service, any multiemployer plan or otherwise with respect to any employee
pension benefit plan or with respect to any employee pension benefit plan
currently or previously maintained by members of the controlled group of
companies (as defined in Sections 414(b) and (c) of the Code) that includes
TechSys (the "Controlled Group") that has not been satisfied in full, and no
condition exists that presents a risk to TechSys or any member of the Controlled
Group of incurring such a liability (other than liability for premiums due the
PBGC) which could reasonably be expected to have any adverse effect on TechSys
or any of the TechSys Shares or any of the Assets of TechSys after the Closing.
3.17 Real Estate.
(a) Owned Properties. Except as set forth on Schedule 3.17(a),
neither TechSys nor any Subsidiary owns any real property.
(b) Leased Property. The attached Schedule 3.17(b) lists and
describes briefly all real property leased or subleased to TechSys or to any
Subsidiary of TechSys, and all other real property which is used in the business
of TechSys (or any Subsidiary of TechSys) and not owned by TechSys or any
Subsidiary of TechSys (the "TechSys Leased Real Property"). TechSys has
delivered to the Company's legal counsel correct and complete copies of the
leases and subleases listed on Schedule 3.17(b) (collectively, the "TechSys
Leases"). With respect to the TechSys Leased Real Property and each of the
TechSys Leases, except as otherwise set forth on Schedule 3.17(b):
(i) such TechSys Lease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) TechSys is not aware that any party to such
TechSys Lease is in breach or default, and TechSys is not aware that any event
has occurred which, with notice or lapse of time, would constitute such a breach
or default or permit termination, modification, or acceleration of such TechSys
Lease;
(iii) TechSys is not aware that any party to such
TechSys Lease has repudiated any provision thereof;
(iv) there are no disputes, oral agreements, or
forbearance programs in effect as to such TechSys Lease;
(v) in the case of each TechSys Lease which is a
sublease, the representations and warranties set forth in clauses 3.17(b)(i)
through (v) are true and correct with respect to the underlying lease;
(vi) TechSys has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold created pursuant to such TechSys Lease;
(vii) none of the TechSys Leases has been modified in
any respect, except to the extent that such modifications are in writing and
have been delivered or made available to the Company;
(viii) to the Knowledge of TechSys, all buildings,
improvements and other structures located upon the TechSys Leased Real Property
have received all approvals of Governmental Entities, including licenses and
permits, required in connection with the operation of the business thereon and
have been operated and maintained in accordance with all applicable Legal
Requirements and the terms and conditions of the TechSys Leases; and
(ix) to the Knowledge of TechSys, all buildings,
structures and other improvements located upon the TechSys Leased Real Property,
including all components thereof, are in good operating condition subject to the
provision of usual and customary maintenance in the ordinary course of business
with respect to buildings, structures and improvements of like age and
construction and all water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage and other utility lines and systems
serving the TechSys Leased Real Property are sufficient to enable the continued
operation of the TechSys Leased Real Property in the manner currently being used
in connection with the operation of the business of TechSys.
3.18 Compliance with Laws. All references to TechSys in this Section
3.18 refer to both TechSys and to each Subsidiary of TechSys.
(a) Generally. TechSys has not violated any Legal Requirement,
and TechSys has not received notice alleging any such violation.
(b) Required Permits. TechSys has complied with (and is in
compliance with) all permits, licenses and other authorizations required for the
occupation of TechSys facilities and the operation of the business of TechSys.
The items described on the attached Schedule 3.18(b) constitute all of the
permits, filings, notices, licenses, consents, authorizations, accreditation,
waivers, approvals and the like of, to or with any Government Entity which are
required for the consummation of the Merger, or any other transaction
contemplated by the Transaction Documents or the conduct of the business of
TechSys (as it is presently conducted by TechSys) thereafter.
(c) Environmental and Safety Matters. Without limiting the
generality of Sections 3.18(a) and (b):
(i) TechSys has complied, and is in compliance with,
all Environmental and Safety Requirements.
(ii) Without limiting the generality of the
foregoing, TechSys has obtained and complied with, and is in compliance with,
all permits, licenses and other authorizations that may be required pursuant to
Environmental and Safety Requirements for the occupation of its facilities and
the operation of the Business. A list of all such permits, licenses and other
authorizations is set forth on the attached Schedule 3.18(b).
(iii) TechSys has not received any written or oral
notice, report or other information regarding any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) or investigatory, remedial or
corrective obligations, relating to it or its facilities and arising under
Environmental and Safety Requirements.
(iv) None of the following exists at any property or
facility owned, operated or occupied by TechSys:
(1) underground storage tanks or surface
impoundments
(2) asbestos-containing material in any form
or condition; or
(3) materials or equipment containing
polychlorinated biphenyls.
(v) TechSys has not treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled, or Released any
substance, including any Hazardous Substance, or owned or operated any facility
or property, so as to give rise to liabilities of TechSys for response costs,
natural resource damages or attorneys' fees pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or similar state or local Environmental and Safety Requirements.
(vi) Neither this Agreement nor the consummation of
the Merger will result in any obligations for site investigation or cleanup, or
notification to or consent of any Government Entity or third parties, pursuant
to any so-called "transaction-triggered" or "responsible property transfer"
Environmental and Safety Requirements.
(vii) TechSys has not, either expressly or by
operation of law, assumed or undertaken any liability, including any obligation
for corrective or remedial action, of any other Person relating to any
Environmental and Safety Requirements.
(viii) No Environmental Lien has attached to any
property now or previously owned, leased or operated by TechSys.
(ix) Without limiting the foregoing, no facts, events
or conditions relating to the Leased Real Property, or other past or present
facilities, properties or operations of TechSys will prevent, hinder or limit
continued compliance with Environmental and Safety Requirements, give rise to
any investigatory, remedial or corrective obligations pursuant to Environmental
and Safety Requirements, or give rise to any other liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) pursuant to Environmental and
Safety Requirements, including any relating to onsite or offsite Releases or
threatened Releases of Hazardous Substances, personal injury, property damage or
natural resource damage.
3.19 Product Warranty. Except as set forth on the attached Schedule
3.19, all products manufactured, serviced, distributed, sold or delivered by
TechSys have been manufactured, serviced, distributed, sold and/or delivered in
conformity with all applicable contractual commitments and all express and
implied warranties. No liability of TechSys exists for replacement or other
damages in connection with any such product.
3.20 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of TechSys, or on behalf of any Subsidiary of TechSys, except
as set forth on Schedule 3.20.
3.21 Bank Accounts. Schedule 3.21 identifies the names and locations of
all banks, depositories and other financial institutions in which TechSys, or
any Subsidiary of TechSys or any other Person on behalf of TechSys, has an
account or safe deposit box and the names of all persons authorized to draw on
such accounts or to have access to such safe deposit boxes.
3.22 Cash, Cash Equivalents and Collectibles. As of the date hereof,
TechSys has, in the aggregate, cash, cash equivalents and collectibles of no
less than $3,000,000 (the "TechSys Cash"), in accordance with Schedule 3.22.
3.23 Disclosure. Neither this Article III nor any certificate or other
item delivered to the Company by or on behalf of Purchasers with respect to the
transactions contemplated by the Transaction Documents contains any untrue
statement of a material fact or omits a material fact which is necessary to make
any statement contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to Purchasers to enter into this Agreement,
the Company hereby represents and warrants to Purchasers that:
4.1 Organization and Power; The Company Shares
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. The Company
is duly qualified to do business in each jurisdiction in which its ownership of
property or conduct of business requires it to so qualify. Schedule 4.1(a) lists
every jurisdiction where the Company is duly qualified to do business, lists all
states in which the Company owns, leases or is in control of any personal
property or real property and all states in which any employees of the Company
are located, and identifies each such employee and provides a brief description
of such property. The Company has the requisite corporate power necessary to own
and operate its properties, carry on the Business and enter into, deliver and
carry out the transactions contemplated by the Transaction Documents. Each
Subsidiary of the Company is a corporation duly organized, validly existing and
in good standing under the laws of its respective State of incorporation and is
duly qualified to do business in each jurisdiction in which its ownership of
property or conduct of business requires it to so qualify.
(b) Schedule 4.1(b) lists the directors and officers of the
Company. The Company represents and warrants that the Company has delivered
correct and complete copies of the articles of incorporation and bylaws of the
Company, including all amendments thereto, to TechSys prior to the date of this
Agreement. The minute books and stock transfer ledgers of the Company, which the
Company represents and warrants will be made available to TechSys prior to
Closing, contain a true and complete record of all action taken at all meetings
and by all written consents in lieu of meetings of the stockholders, the board
of directors and the committees of the board of directors and all transfers in
the Capital Stock of the Company.
4.2 Capitalization.
(a) As of the date hereof, the authorized capital stock of the
Company consists solely of 100,000,000 shares of common stock, $0.001 par value
(the "Capital Stock of the Company"), of which 90,556,750 shares are issued and
outstanding. At the Effective Time, the Company shall have no more than
99,900,000 shares of common stock issued and outstanding (including shares of
common stock issuable upon the exercise of options or warrants convertible into
shares of common stock of the Company). The Company is not authorized to issue
preferred stock. All issued and outstanding shares of Capital Stock of the
Company on the date hereof are, and all shares of Capital Stock of the Company
that will be issued and outstanding immediately prior to the Effective Time
shall be, duly authorized, validly issued, outstanding, fully paid and
nonassessable.
The Company owns each share of the Capital Stock of the
Company described in Section 1.4(b) beneficially and of record, free and clear
of all Liens. With respect to the Company and any Subsidiary of the Company,
except as set forth on Schedule 4.2(a):
(i) there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights or other contracts or commitments that could require the Company (or any
Subsidiary of the Company) to issue, sell or otherwise cause to become
outstanding any of its capital stock or equity interests or other instruments
convertible into such interests;
(ii) there are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights with respect
to the Capital Stock of the Company (or the capital stock of any Subsidiary of
the Company).
(iii) there are no voting trusts, proxies or other
agreements or understandings with respect to the voting of the capital stock of
the Company (or the capital stock of any Subsidiary of the Company);
(iv) no member of the Company has any rights in any
specific property of the Company (or any Subsidiary of the Company).
(v) neither the Company (or any Subsidiary of the
Company) nor any of its respective Affiliates has entered into any agreement, or
is bound by any obligation of any kind whatsoever, to transfer or dispose of the
Company Shares (or any shares of capital stock of any Subsidiary of the
Company), the Business of the Company (or any substantial portion thereof) to
any Person other than TechSys, and neither has entered into any agreement, nor
are either of them bound by any obligation of any kind whatsoever, to issue any
Capital Stock of the Company (or any capital stock of any Subsidiary of the
Company) to any Person.
(vi) since December 31, 1999, (i) the Company has not
declared or made any payment of any dividend or other distribution in respect of
the Capital Stock of the Company, and (ii) there has not been any split,
combination or reclassification or any shares of the Capital Stock of the
Company.
(b) The authorized capital stock of each Subsidiary of the
Company as of the date hereof, which shall be the authorized capital stock of
each such Subsidiary immediately prior to the Effective Time, is set forth on
Schedule 4.2(b). Schedule 4.2(b) also sets forth the number of issued and
outstanding shares of each Subsidiary of the Company on the date hereof, which
shall be the number of issued and outstanding shares of each such Subsidiary of
the Company immediately prior to the Effective Time. Except as set forth on
Schedule 4.2(b), no Subsidiary of the Company is authorized to issue preferred
stock. All issued and outstanding shares of capital stock of each Subsidiary of
the Company on the date hereof are, and all shares of capital stock of each
Subsidiary of the Company that will be issued and outstanding immediately prior
to the Effective Time shall be, duly authorized, validly issued, outstanding,
fully paid and nonassessable, except as set forth on Schedule 4.2(b).
4.3 Authorization; Binding Effect; No Breach. The execution, delivery
and performance by the Company of each Transaction Document to which it is a
party has been duly authorized by the Company. Each Transaction Document to
which the Company is a party constitutes a valid and binding obligation of the
Company which is enforceable against the Company in accordance with its terms.
Except as set forth on Schedule 4.3, the execution, delivery and performance of
the Transaction Documents to which the Company is a party do not and will not
(i) conflict with or result in a breach of the terms, conditions or provisions
of, (ii) constitute a default under, (iii) result in the creation of any Lien
upon any of the Company Shares or any of the Assets of the Company under, (iv)
give any third party the right to modify, terminate or accelerate any liability
or obligation of the Company under, (v) result in a violation of, or (vi)
require any authorization, consent, approval, exemption or other action by or
declaration or notice to any Government Entity pursuant to, the charter or
bylaws of the Company or any agreement, instrument or other document, or any
Legal Requirement, to which the Company, any of the Company Shares or any of the
Assets of the Company is subject. Without limiting the generality of the
foregoing, neither the Company nor any of its Affiliates has entered into any
agreement, or is bound by any obligation of any kind whatsoever, directly or
indirectly, to transfer or dispose of the Company Shares or any portion thereof,
except as provided herein, or, whether by sale of stock or assets, assignment,
merger, consolidation or otherwise, the Business of the Company or the Assets of
the Company (or any substantial portion thereof) to any Person other than
TechSys, and neither the Company nor any of its Affiliates has entered into any
agreement, nor is any such Person bound by any obligation of any kind
whatsoever, to issue any Capital Stock of the Company to any Person.
4.4 Subsidiaries; Investments. Schedule 4.4 sets forth a complete list
of all Subsidiaries of the Company, the respective states of incorporation of
each Subsidiary of the Company and the respective states in which each
Subsidiary of the Company is qualified to conduct business. The Company does not
own, or hold any rights to acquire, any capital stock or any other security,
interest or Investment in any other Person other than investments which
constitute cash or cash equivalents, other than as set forth on Schedule 4.4.
4.5 Financial Statements and Related Matters.
(a) Financial Statements. The Company has delivered to TechSys
the unaudited balance sheet of each of the Company and Micro Fuel Cell Systems,
Inc. as of December 31, 2000 (together, the "Latest Company Balance Sheet") and
the related unaudited consolidated statements of income and cash flows for the
two year period then ended (collectively, the "Unaudited Financial Statements"),
copies of which are annexed to Schedule 4.5. The Company shall, no later than
May 25, 2001, deliver to TechSys the audited consolidated balance sheets of the
Company as of December 31, 2000, and the audited related consolidated statements
of income and cash flows for the 12-month periods ending December 31, 2000 and
December 31, 1999 as well as the interim consolidated balance sheets and
consolidated statements of income and cash flows for the three month period
ended March 31, 2001 (the "Audited Financial Statements").
(i) Except as set forth on the attached Schedule 4.5,
each of the Unaudited Financial Statements (including in all cases the notes
thereto, if any) presents fairly in all material respects the financial
condition of the Company as of the dates of such statements and the results of
operation for such periods, is accurate and complete, is consistent with the
books and records of the Company (which, in turn, are accurate and complete) and
has been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby except as noted therein (subject to the
absence of notes and audit adjustments).
(ii) Except as set forth on the attached Schedule
4.5, each of the Audited Financial Statements (including in all cases the notes
thereto, if any) shall present fairly in all material respects the financial
condition of the Company as of the dates of such statements and the results of
operation for such periods, shall be accurate and complete, shall be consistent
with the books and records of the Company (which, in turn, are, and shall be,
accurate and complete) and shall be prepared in accordance with GAAP applied on
a consistent basis throughout the periods covered thereby except as noted
therein.
(b) Receivables. The notes and accounts receivable of the
Company on the Closing Date represent actual transactions, will be valid
receivables, will be current and collectible, will not be subject to valid
counterclaims or setoffs and will be collected in accordance with their terms at
the aggregate amount recorded on the Company's books and records as of the
Closing, net of an amount of allowances for doubtful accounts set forth on the
Latest Company Balance Sheet, as adjusted for the passage of time through the
Closing Date in accordance with GAAP.
(c) Inventory. The inventory of the Company of the date of the
Latest Company Balance Sheet, net of the reserves applicable to such inventory
set forth on the Latest Company Balance Sheet, as adjusted for the passage of
time through the Closing Date in accordance with GAAP, consists of a quantity
and quality which is usable and salable in the ordinary course of business, and
the items of such inventory are not defective, slow-moving, obsolete or damaged
and are merchantable and fit for their particular use.
(d) Reserves. The allowance for possible other reserves set
forth on the Latest Company Balance Sheet was adequate at the time to cover all
known or reasonably anticipated contingencies.
4.6 Absence of Undisclosed Liabilities. Except as set forth on Schedule
4.6, as of the Closing Date, neither the Company nor any Subsidiary of the
Company has any liability (whether accrued, absolute, contingent, unliquidated
or otherwise, whether or not known to the Company, whether due or to become due,
and regardless of when asserted) other than: (a) the liabilities set forth on
the face of the Latest Company Balance Sheet, (b) current liabilities which have
arisen after the date of the Latest Company Balance Sheet, in the ordinary
course of business and consistent with the Company's past practice, as
applicable (none of which is a liability resulting from breach of contract,
breach of warranty, tort, infringement, violation of law, claim or lawsuit), all
of which have been disclosed in writing to Purchasers, and (c) other liabilities
and obligations expressly disclosed and quantified in the other Schedules to
this Agreement.
4.7 Assets of the Company.
(a) The Assets of the Company (which, for purposes of this
Section 4.7, includes the assets of each Subsidiary of the Company), and other
assets reflected in the Books and Records of the Company constitute all of the
assets and rights which are used or useful in the Business as currently
conducted and presently proposed to be conducted;
(b) The Company has good and marketable title to, or a valid
leasehold interest in or other rights to use (which other rights to use are
described on the attached Schedule 4.7), all properties and assets used by it in
the Business of the Company, located on its premises, shown on the Latest
Company Balance Sheet or acquired by the Company since the date of the Latest
Company Balance Sheet, in the each case free and clear of all Liens, other than
Permitted Liens, and other than (i) properties and assets disposed of in the
ordinary course of business and consistent with the Company's past practice by
the Company since the date of the Latest Company Balance Sheet (which disposals
do not exceed $25,000 in the aggregate) and (ii) Liens disclosed on the Latest
Company Balance Sheet (including any notes thereto); and
(c) The Company's equipment and other tangible assets, and the
equipment and tangible assets of each Subsidiary of the Company, are in good
operating condition (subject to normal wear and tear) and fit for use in the
ordinary course of business of the Company and its Subsidiaries and consistent
with its past practice.
4.8 Absence of Certain Developments. Since December 31, 2000, there has
been no adverse change in the financial condition, operating results, assets,
customer or supplier relations, employee relations or business prospects of the
Company and no customer or vendor has any plans to terminate its relationship
with the Company or any of its Subsidiaries. Without limiting the generality of
the preceding sentence, except as set forth on Schedule 4.8 or otherwise
expressly contemplated by this Agreement, since the date of the Latest Company
Balance Sheet, neither the Company or any Subsidiary of the Company has:
(a) engaged in any activity which has resulted in (i) any
acceleration or delay of the collection of the Company's accounts or notes
receivable, (ii) any delay in the payment in the Company's accounts payable, or
(iii) any increase in the Company's purchases of raw materials, in each case as
compared with the Company's custom and practice in the conduct of the Business
immediately prior to the date of the Latest Company Balance Sheet;
(b) discharged or satisfied any Lien or paid any obligation or
liability, other than current liabilities paid in the ordinary course of
business and consistent with the Company's past practice;
(c) mortgaged or pledged any of the Company Shares or any
Asset or subjected any of the Company Shares or any Asset to any Lien;
(d) sold, assigned, conveyed, transferred, canceled or waived
any property, tangible asset or other intangible asset or right of the Company
other than in the ordinary course of business and consistent with the Company's
past practice;
(e) waived any right of the Company other than in the ordinary
course of business or consistent with the Company's past practice;
(f) made commitments for capital expenditures by the Company
which, in the aggregate, would exceed $10,000;
(g) made any loan or advance to, or guarantee for the benefit
of, or any Investment in, any other Person on behalf of the Company;
(h) granted any bonus or any increase in wages, salary or
other compensation to any employee of the Company (other than any increase in
wages or salaries granted in the ordinary course of business and consistent with
the Company's past practice granted to any employee who is not affiliated with
the Company other than by reason of such Person's employment by the Company);
(i) made any charitable contributions on behalf of the
Company;
(j) suffered damages, destruction or casualty losses which, in
the aggregate, exceed $10,000 (whether or not covered by insurance) to any
Asset;
(k) received any indication from any supplier of the Company
to the effect that such supplier will stop, or decrease the rate of, supplying
materials, products or services to the Company (whether or not the Merger is
consummated), or received any indication from any customer of the Company to the
effect that such customer will stop, or decrease the rate of, buying materials,
products or services from the Company (whether or not the Merger is
consummated);
(l) entered into any transaction other than in the ordinary
course of business and consistent with the Company's past practice, or entered
into any other transaction, whether or not in the ordinary course of business,
which may adversely affect the Company;
(m) declared, set aside, or paid any dividend or made any
distribution with respect to the Company's capital stock or equity interests or
redeemed, purchased, or otherwise acquired any of the Company's capital stock or
equity interests;
(n) adopted or amended any employee benefit or welfare plan
relating to the employees of the Company; or
(o) received any indication from any key employee to the
effect that such key employee will terminate employment with the Company; or
(p) agreed to do any act described in any of clauses 4.8(a)
through (o).
4.9 Governmental Filings. Except as set forth on Schedule 4.9, other
than the filing of the Merger Certificate with the State of New Jersey and the
State of Nevada, respectively, and the Pre-Merger Notification, if applicable,
no notices, reports or other filings are required to be made by the Company
with, nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by the Company from, any Government Entity in connection
with the execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated by the Transaction Documents.
4.10 Tax Matters. Except as set forth in the attached Schedule 4.10:
(a) The Company and each Subsidiary of the Company has timely
filed all Tax Returns that it was required to file.
(b) All such Tax Returns were and are true, correct and
complete in all respects.
(c) All Taxes owed by the Company and each Subsidiary (whether
or not shown on any Tax Return for all time periods through the Closing Date)
have been paid. The amount of liability for unpaid Taxes for all time periods
ending on or before the Closing Date will not exceed the amount of current
liability accruals for Taxes (excluding reserves for deferred Taxes) as such
accruals are reflected on the most recent the Company balance sheet.
(d) No information related to Tax matters has been requested
by any Taxing authority and there are no ongoing examinations or claims against
the Company or any Subsidiary for Taxes, and no notice of any audit,
examination, or claim for Taxes, whether pending or threatened, has been
received.
(e) The Company and each Subsidiary currently are not the
beneficiary of any extension of time within which to file any Tax Return, except
with respect to such Tax Returns due in 2001;
(f) No claim has ever been made by an authority in a
jurisdiction where the Company or a Subsidiary does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. The Company and each
Subsidiary is not required to file Tax Returns in any jurisdiction in which it
is not currently filing Tax Returns.
(g) There are (and as of immediately following the Closing
Date there will be) no Liens other than Permitted Liens on any of the Assets of
the Company or a Subsidiary that arose in connection with any failure (or
alleged failure) to pay any Tax.
(h) The Company and each Subsidiary has withheld and paid over
to the proper governmental entities all Taxes required to have been withheld and
paid over in all matters, including in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other third
party.
(i) To the Knowledge of any director or officer of the
Company, there is no basis for the assertion of any claim relating or
attributable to Taxes which, if adversely determined, would result in any Lien
on the Assets of the Company or otherwise have an adverse effect on the Company
or any of its Subsidiaries or their respective businesses.
(j) There are no unresolved disputes or claims concerning the
Tax liability of the Company or each Subsidiary.
(k) The Company and each Subsidiary have been, and are
currently not, subject to a Tax audit.
(l) The Company and each Subsidiary have never waived or
extended any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to any Tax assessment or deficiency as to which
the period of extension has not elapsed.
(m) The Company has not filed any consent agreement under
Section 341(f) of the Code concerning collapsible corporations.
(n) The Company has never made any payments, is not obligated
to make any payments, and is not a party to any agreement that could obligate it
to make any payments that will not be deductible under Sections 280(G) and 404
of the Code.
(o) The Company has never been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code.
(p) The Company has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of Federal Income Tax within the meaning of Section 6662 of the
Code.
(q) The Company and each Subsidiary are not a party to any Tax
allocation, Tax indemnity or Tax sharing agreement. The Company (A) has never
been a member of an Affiliated Group filing a consolidated federal income Tax
Return and (B) has no liability for the Taxes of any Person (other than any of
the Company) under Treas. Reg. ss.1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
(r) The Company has a taxable year ended on December 31 of
each year.
(s) The Company currently utilizes the accrual method of
accounting for income Tax purposes and such method of accounting has not
changed.
(t) There are no tax rulings, requests for rulings, closing
agreements or changes of accounting method relating to the Company or any of its
Subsidiaries that could affect their liability for Taxes for any period after
the Closing Date.
(u) No property of the Company is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(v) The Company is not a party to any lease made pursuant to
Section 168(f) of the Code.
(w) The Company will not be required to include in a taxable
period ending after the date of the Closing income attributable to a prior
taxable period that was not recognized in that prior taxable period as a result
of the installment method of accounting, the completed contract method of
accounting, the long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or comparable provisions of state or local
or foreign tax law.
4.11 Contracts and Commitments.
(a) Contracts. Schedule 4.11(a) sets forth a complete list of
all agreements to which the Company or any Subsidiary of the Company is a party
(the "Contracts"). All references to the Company in this Section 4.11(a) refer
to both the Company and to each Subsidiary of the Company. Other than this
Agreement and the agreements described on Schedule 4.11(a), neither the Company
nor any Subsidiary of the Company is a party to any written or oral:
(i) pension, profit sharing, stock option, employee
stock purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit, welfare or stock plan
or arrangement which is not described on the attached Schedule 4.17, or any
contract with any labor union, or any severance agreement;
(ii) contract for the employment or engagement as an
independent contractor of any Person on a full-time, part-time, consulting or
other basis;
(iii) contract pursuant to which the Company has
advanced or loaned funds, or agreed to advance or loan funds, to any other
Person;
(iv) contract or indenture relating to any
Indebtedness or the mortgaging, pledging or otherwise placing a Lien on any of
the Company Shares or any of the Assets of the Company;
(v) contract pursuant to which the Company is the
lessee of, or holds or operates, any real or personal property owned by any
other Person;
(vi) contract pursuant to which the Company is the
lessor of, or permits any third party to hold or operate, any real or personal
property owned by the Company or of which the Company is a lessee;
(vii) assignment, license, indemnification or other
contract with respect to any intangible property (including any Proprietary
Right) which is material to the Business and is not described on Schedule 4.12;
(viii) contract or agreement with respect to services
rendered or goods sold or leased to or from others, other than any customer
purchase order accepted in the ordinary course of business and in accordance
with the Company's past practice;
(ix) contract prohibiting the Company from freely
engaging in any business anywhere in the world;
(x) independent sales representative or
distributorship agreement with respect to the Business; or
(xi) executory contract (other than one described in
Sections 4.11(a)(i) through 4.11(a)(x)) which is material to the Company or
involves a consideration in excess of $5,000.
(b) Enforceability. Each Contract described on the attached
Schedule 4.11(a) is a valid and binding agreement of the Company, enforceable by
the Company in accordance with its terms, except as such enforceability against
the other parties thereto may be limited by (i) applicable insolvency,
bankruptcy, reorganization, moratorium or other similar laws affecting
creditors' rights generally and (ii) applicable equitable principles (whether
considered in a proceeding at law or in equity).
(c) Compliance. The Company has performed all obligations
required to be performed by it under each Contract, and the Company is not in
default under or in breach of (nor is it in receipt of any claim of any such
default under or breach of) any such obligation. No event has occurred which
with the passage of time or the giving of notice (or both) would result in a
default, breach or event of noncompliance under any obligation of the Company
pursuant to any Contract. The Company has no present expectation or intention of
not fully performing any obligation of the Company pursuant to any Contract, and
the Company have no Knowledge of any breach or anticipated breach by any other
party to any Contract.
(d) Leases. With respect to each Contract which is a lease of
personal property, the Company holds a valid and existing leasehold interest
under such lease for the term thereof.
(e) Affiliated Transactions. Except as set forth on Schedule
4.11(e), no officer, director, stockholder or Affiliate of the Company (and no
individual related by blood or marriage to any such Person, and no entity in
which any such Person or individual owns any beneficial interest) is a party to
any agreement, contract, commitment or transaction with the Company (other than
this Agreement) or has any interest in any property used by the Company.
(f) Copies. Purchasers' legal counsel has been supplied with a
true and correct copy of each written Contract, each as currently in effect.
4.12 Proprietary Rights. All references to the Company in this Section
4.12 refer to both the Company and to each Subsidiary of the Company.
(a) Schedule. The attached Schedule 4.12(a) contains a
complete and accurate list of all Proprietary Rights, both domestic and foreign,
including but not limited to (i) all patented or registered Proprietary Rights
owned by the Company or used in connection with the Business, (ii) all pending
patent applications and applications for registrations of other Proprietary
Rights filed by or on behalf of the Company or used in connection with the
Business, (iii) all registered trade names, trademarks, corporate names, and
websites, and unregistered trade names, trademarks and service marks owned by
the Company or used in connection with the Business, (iv) all inventions, trade
secrets or other proprietary information not otherwise the subject of a patent,
patent application, or registered application to register Proprietary Rights,
and (v) all registered and unregistered copyrights and computer software which
are material to the financial condition, operating results, assets, customer or
supplier relations, employee relations or business prospects of the Company. The
attached Schedule 4.12(a) also contains a complete and accurate list of all
licenses, covenants not to sue, and other rights granted by the Company to any
third party, all licenses, covenants not to sue, and other rights granted by any
third party to the Company, with respect to any Proprietary Rights, a general
description of all agreements or arrangements of escrows of source codes in
favor of licensees together with a description of the location of copies of all
such agreements. The Proprietary Rights comprise all intellectual property
rights which are used or useful in the operation of the Business or is otherwise
owned by the Company.
(b) Ownership; Claims. The Company believes that it owns and
possesses all right, title and interest in and to (or has the right to use
pursuant to a valid and enforceable license) all Proprietary Rights described on
Schedule 4.12(a) which are necessary or desirable for the operation of the
Company's business and is not aware of rights which it does not own or possess
which it believes are necessary for its business as presently conducted and as
presently proposed to be conducted, and the Company has taken all necessary
actions to maintain and protect its interest in all the Proprietary Rights. The
Company believes that the owners of the Proprietary Rights licensed to the
Company have taken all necessary actions to maintain and protect the Proprietary
Rights which are subject to such licenses in the United States and in the United
Kingdom.
(i) the Company owns in the entirety or has the right
to use all of the Proprietary Rights described on such Schedule and each other
Proprietary Right which is material to the conduct of the Business (in each case
free and clear of all Liens and free of all claims to the use by others),
(ii) there have been no claims made against the
Company asserting the invalidity, misuse or unenforceability of any of such
Proprietary Rights, and there are no grounds known to the Company for any such
claim,
(iii) the Company has not received any notice of (nor
is it aware of any facts which indicate a likelihood of) any infringement or
misappropriation by, or conflict with, any Person with respect to any of such
Proprietary Rights (including any demand or request that the Company license
rights from any Person),
(iv) the conduct of the Business has not infringed,
misappropriated, or violated, and does not infringe, misappropriate or violate
in any respect, any proprietary right of any other Person, nor would Purchasers'
conduct of the Business as presently conducted infringe, misappropriate or
violate in any respect any proprietary right of any other Person,
(v) to the Knowledge of the Company, such Proprietary
Rights have not been infringed, misappropriated or violated in any respect by
any other Person, and
(vi) the consummation of the transactions
contemplated by this Agreement will have no adverse effect on any such
Proprietary Right.
(c) Except as set forth on Schedule 4.12(c), all Proprietary
Rights set forth on Schedule 4.12(a) may be assigned by the Company in
accordance with this Agreement without obtaining the prior consent of any Person
other than a Party to this Agreement.
4.13 Litigation. Except as set forth on Schedule 4.13, there is no
action, suit, proceeding, order, investigation or claim pending against or
affecting the Company, any Subsidiary of the Company or the Business (pending or
threatened against or affecting any officer, director or employee of the Company
or of any Subsidiary of the Company), at law or in equity, or before or by any
Government Entity, including (a) with respect to the transactions contemplated
by the Transaction Documents, or (b) concerning the design, manufacture,
rendering or sale by the Company of any product or service or otherwise
concerning the conduct of the Business, and, in the case of subsections (a) and
(b), there is no basis for any of the foregoing.
4.14 Brokerage. Except as set forth on Schedule 4.14, there is no claim
for brokerage commissions, finders' fees or similar compensation in connection
with the transactions contemplated by the Transaction Documents which is binding
upon the Company or to which the Company or any of the Company Shares or any of
the Assets of the Company is subject.
4.15 Insurance. The attached Schedule 4.15 contains a description of
each insurance policy maintained by the Company or its Subsidiaries with respect
to the Company, its Subsidiaries, its properties, assets or business, and each
such policy is in full force and effect. The Company are not in default of any
obligation pursuant to any insurance policy described on Schedule 4.15.
4.16 Employees.
(a) Continued Employment. Except as set forth on Schedule
4.16, to the Knowledge of the Company, no executive or key employee of the
Company or any Subsidiary of the Company or any group of employees of the
Company or any Subsidiary of the Company has any plans to terminate employment
with the Company or such Subsidiary.
(b) Compliance and Restrictions. The Company and each of its
Subsidiaries have substantially complied with all laws relating to the
employment of labor, including provisions of such laws relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes, and the Company has no labor relations problem (including any union
organization activities, threatened or actual strikes or work stoppages or
grievances). Except as set forth on Schedule 4.16, neither the Company, any
Subsidiary of the Company nor any employees of the Company or of any Subsidiary
of the Company are subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreement relating to, affecting, or in
conflict with, the Business activities as presently conducted or as proposed to
be conducted. Except as set forth on Schedule 4.16, the consummation of this
Agreement will not give rise to (i) the vesting of any restricted stock of the
Company or any Subsidiary of the Company, (ii) any change of control provisions
set forth in any agreement between any Person and the Company (or any Subsidiary
of the Company), (iii) any severance payments to become due and owing to any
Person by the Company or by any Subsidiary of the Company, or (iv) any other
similar benefits becoming payable.
4.17 ERISA. All references to the Company in this Section 4.17 refer to
both the Company and to each Subsidiary of the Company. Except as set forth on
the attached Schedule 4.17, with respect to all current employees (including
those on lay-off, disability or leave of absence), former employees, and retired
employees of the Company:
(a) the Company neither maintains nor contributes to any (i)
employee welfare benefit plans (as defined in Section 3(1) of ERISA) (Employee
Welfare Plans), or (ii) any plan, policy or arrangement which provides
nonqualified deferred compensation, bonus or retirement benefits, severance or
"change of control" (as set forth in Code Section 280G) benefits, or life,
disability, accident, vacation, tuition reimbursement or other fringe benefits
(Other Plans);
(b) the Company does not maintain, contribute to, or
participate in any defined benefit plan or defined contribution plan which are
employee pension benefit plans (as defined in Section 3(2) of ERISA) (Employee
Pension Plans);
(c) the Company does not contribute to or participate in, and
has neither contributed to nor participated in for the past six years, any
multiemployer plan (as defined in Section 3(37) of ERISA) (a Multiemployer
Plan);
(d) the Company does not maintain or have any obligation to
contribute to or provide any post-retirement health, accident or life insurance
benefits to any Employee, other than limited medical benefits required to be
provided under Code Section 4980B;
(e) all Plans (and all related trusts and insurance contracts)
comply in form and in operation in all material respects with the applicable
requirements of ERISA and the Code;
(f) all required reports and descriptions (including all Form
5500 Annual Reports, Summary Annual Reports, PBGC-1s and Summary Plan
Descriptions) with respect to all Plans have been properly filed with the
appropriate Government Entity or distributed to participants, and the Company
has complied substantially with the requirements of Code Section 4980B;
(g) with respect to each Plan, all contributions, premiums or
payments which are due on or before the Closing Date have been paid to such
Plan; and
(h) the Company has not incurred any liability to the Pension
Benefit Guaranty Corporation (the PBGC), the United States Internal Revenue
Service, any multiemployer plan or otherwise with respect to any employee
pension benefit plan or with respect to any employee pension benefit plan
currently or previously maintained by members of the controlled group of
companies (as defined in Sections 414(b) and (c) of the Code) that includes the
Company (the Controlled Group) that has not been satisfied in full, and no
condition exists that presents a risk to the Company or any member of the
Controlled Group of incurring such a liability (other than liability for
premiums due the PBGC) which could reasonably be expected to have any adverse
effect on the Company or any of the Company Shares or any of the Assets of the
Company after the Closing.
4.18 Real Estate.
(a) Owned Properties. Except as set forth on Schedule 4.18(a),
neither the Company nor any Subsidiary thereof owns any real property.
(b) Leased Property. The attached Schedule 4.18(b) lists and
describes briefly all real property leased or subleased to the Company or to any
Subsidiary of the Company, and all other real property which is used in the
Business and not owned by the Company or any Subsidiary of the Company (the
"Leased Real Property of the Company"). The Company has delivered to Purchasers'
legal counsel correct and complete copies of the leases and subleases listed on
Schedule 4.18(b) (collectively, the "Company Leases"). With respect to the
Leased Real Property and each of the Leases, except as set forth on Schedule
4.18(b):
(i) such Company Lease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the Company is not aware that any party to such
Company Lease is in breach or default, and the Company is not aware that any
event has occurred which, with notice or lapse of time, would constitute such a
breach or default or permit termination, modification, or acceleration of such
Company Lease;
(iii) the Company is not aware that any party to such
Company Lease has repudiated any provision thereof;
(iv) there are no disputes, oral agreements, or
forbearance programs in effect as to such Company Lease;
(v) in the case of each Company Lease which is a
sublease, the representations and warranties set forth in clauses 4.18(b) (i)
through (v) are true and correct with respect to the underlying lease;
(vi) the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold created pursuant to such Company Lease;
(vii) none of the Company Leases has been modified in
any respect, except to the extent that such modifications are in writing and
have been delivered or made available to Purchasers;
(viii) to the Knowledge of the Company, all
buildings, improvements and other structures located upon the Leased Real
Property of the Company have received all approvals or Governmental Entities,
including licenses and permits, required in connection with the operation of the
Business thereon and have been operated and maintained in accordance with all
applicable Legal Requirements and the terms and conditions of the Company
Leases; and
(ix) to the Knowledge of the Company, all buildings,
structures and other improvements located upon the Leased Real Property of the
Company, including all components thereof, are in good operating condition
subject to the provision of usual and customary maintenance in the ordinary
course of business with respect to buildings, structures and improvements of
like age and construction and all water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage and other utility lines and systems
serving the Leased Real Property of the Company are sufficient to enable the
continued operation of the Leased Real Property of the Company in the manner
currently being used in connection with the operation of the Business of the
Company.
4.19 Compliance with Laws. All references to the Company in this
Section 4.19 refer to both the Company and to each Subsidiary of the Company.
(a) Generally. The Company has not violated any Legal
Requirement, and the Company have not received notice alleging any such
violation.
(b) Required Permits. The Company has complied with (and is in
compliance with) all permits, licenses and other authorizations required for the
occupation of the Company's facilities and the operation of the Business of the
Company. The items described on the attached Schedule 4.19(b) constitute all of
the permits, filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to or with any Government
Entity which are required for the consummation of the Merger, or any other
transaction contemplated by the Transaction Documents or the conduct of the
Business (as it is presently conducted by the Company) thereafter.
(c) Environmental and Safety Matters. Without limiting the
generality of Sections 4.19(a) and (b):
(i) The Company has complied, and is in compliance
with, all Environmental and Safety Requirements.
(ii) Without limiting the generality of the
foregoing, the Company has obtained and complied with, and is in compliance
with, all permits, licenses and other authorizations that may be required
pursuant to Environmental and Safety Requirements for the occupation of its
facilities and the operation of the Business. A list of all such permits,
licenses and other authorizations is set forth on the attached Schedule 4.19(b).
(iii) The Company has not received any written or
oral notice, report or other information regarding any liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) or investigatory,
remedial or corrective obligations, relating to it or its facilities and arising
under Environmental and Safety Requirements.
(iv) None of the following exists at any property or
facility owned, operated or occupied by the Company:
(1) underground storage tanks or surface
impoundments
(2) asbestos-containing material in any form
or condition; or
(3) materials or equipment containing
polychlorinated biphenyls.
(v) The Company has not treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled, or Released any
substance, including any Hazardous Substance, or owned or operated any facility
or property, so as to give rise to liabilities of the Company for response
costs, natural resource damages or attorneys' fees pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or similar state or local Environmental and Safety Requirements.
(vi) Neither this Agreement nor the consummation of
the Merger will result in any obligations for site investigation or cleanup, or
notification to or consent of any Government Entity or third parties, pursuant
to any so-called "transaction-triggered" or "responsible property transfer"
Environmental and Safety Requirements.
(vii) The Company has not, either expressly or by
operation of law, assumed or undertaken any liability, including any obligation
for corrective or remedial action, of any other Person relating to any
Environmental and Safety Requirements.
(viii) No Environmental Lien has attached to any
property now or previously owned, leased or operated by the Company.
(ix) Without limiting the foregoing, no facts, events
or conditions relating to the Leased Real Property, or other past or present
facilities, properties or operations of the Company will prevent, hinder or
limit continued compliance with Environmental and Safety Requirements, give rise
to any investigatory, remedial or corrective obligations pursuant to
Environmental and Safety Requirements, or give rise to any other liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental and Safety Requirements, including any relating to onsite or
offsite Releases or threatened Releases of Hazardous Substances, personal
injury, property damage or natural resource damage.
4.20 Product Warranty. Except as set forth on the attached Schedule
4.20, all products manufactured, serviced, distributed, sold or delivered by the
Company or by any Subsidiary of the Company have been manufactured, serviced,
distributed, sold and/or delivered in conformity with all applicable contractual
commitments and all express and implied warranties. No liability of the Company
or any Subsidiary of the Company exists for replacement or other damages in
connection with any such product.
4.21 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company, or on behalf of any Subsidiary of the
Company, except as set forth on Schedule 4.21.
4.22 Bank Accounts. Schedule 4.22 identifies the names and locations of
all banks, depositories and other financial institutions in which the Company,
or any Subsidiary of the Company or any other Person on behalf of the Company,
has an account or safe deposit box and the names of all persons authorized to
draw on such accounts or to have access to such safe deposit boxes.
4.23 Disclosure. Neither this Article IV nor any schedule, attachment,
written statement, certificate or similar item supplied to Purchasers by or on
behalf of the Company with respect to the transactions contemplated by the
Transaction Documents contains any untrue statement of a material fact or omits
a material fact necessary to make each statement contained herein or therein not
misleading. There is no fact which the Company have not disclosed to Purchasers
in writing and of which the Company or any officer, director or executive
employee of the Company are aware (other than matters of a general economic
nature) and which has had or could reasonably be expected to have a material
adverse effect upon the Assets of the Company, the Company Shares or the
financial condition, operating results, assets, customer or supplier relations,
employee relations or business prospects of the Business of the Company.
ARTICLE V
COVENANTS
5.1 Proxy Statement/Prospectus; Registration Statement.
(a) Proxy Statement/Prospectus. TechSys and the Company shall
cooperate in preparing a proxy statement (the "TechSys Proxy Statement") which
shall be utilized to solicit proxies in connection with the meeting at which the
stockholders of TechSys will vote on the Merger (the "TechSys Meeting") and a
proxy statement/prospectus (the "Proxy Statement/Prospectus") which shall be
utilized to solicit proxies in connection with the meeting at which the
Company's stockholders will vote upon the Merger (the "Company Meeting"). The
Proxy Statement/Prospectus shall also constitute a prospectus for the offer,
sale and registration of the TechSys Shares under the Securities Act. Promptly
after TechSys and the Company confirm that the Proxy Statement/Prospectus is
satisfactory for filing in preliminary form, such Proxy Statement/Prospectus
shall be filed with the SEC. Each party will promptly advise the other party in
writing if at any time prior to the Company Meeting and the TechSys Meeting it
obtains Knowledge of any facts that might make it necessary or appropriate to
amend or supplement the Proxy Statement/Prospectus or the TechSys Proxy
Statement in order to make the statements contained or incorporated by reference
therein not misleading or to comply with applicable law.
(b) Registration Statement. TechSys shall prepare and file
with the SEC a registration statement on Form S-4 (or other appropriate Form)
including such Proxy Statement/Prospectus (the "Registration Statement") to
register the Merger Consideration under the Securities Act as soon as is
reasonably practicable following receipt of final comments from the Staff of the
SEC on the Proxy Statement/Propectus (or advice that such Staff shall not review
such filing), and shall use all reasonable efforts to have the Registration
Statement declared effective by the SEC as promptly as practicable and to
maintain the effectiveness of such Registration Statement. TechSys will afford
the Company and its counsel a reasonable opportunity to comment on (i) the
Registration Statement in preliminary form prior to its being filed with the
SEC, (ii) any response to any comments from the Staff of the SEC with respect to
such Registration Statement in preliminary form, and (iii) any proposed
amendments to the Registration Statement. Each party will promptly advise the
other in writing if at any time prior to the TechSys Meeting and the Company
Meeting it shall obtain Knowledge of any facts that might make it necessary or
appropriate to amend or supplement the Registration Statement in order to make
the statements contained or incorporated by reference therein not misleading or
to comply with applicable law. TechSys shall also take any action required to be
taken under state blue sky or securities laws in connection with the issuance of
the TechSys Shares pursuant to the Merger, and the Company shall furnish TechSys
all information concerning the Company and the holders of its Capital Stock and
shall take any action as TechSys may reasonably request in connection with any
such action.
5.2. Access to Properties and Records; Confidentiality.
(a) TechSys shall permit the Company and its agents and
representatives, including, without limitation, officers, directors, employees,
attorneys, accountants and financial advisors (collectively, "Representatives"),
and the Company shall permit TechSys and its Representatives, reasonable access
to their respective properties, and shall disclose and make available to the
Company and its Representatives or TechSys and its Representatives, as the case
may be, all Books and Records thereof, including all books, papers and records,
electronic or otherwise, relating to their respective assets, stock ownership,
properties, operations, obligations and liabilities, including, but not limited
to, all books of account (including the general ledger and books of original
entry), tax records, minute books of directors' and stockholders' meetings,
organizational documents, bylaws, material contracts and agreements, filings
with any regulatory authority, independent auditors' work papers (subject to the
receipt by such auditors of a standard access representation letter), litigation
files, plans affecting employees, and any other business activities or prospects
in which the Company and its representatives or TechSys and its representatives
may have a reasonable interest. Neither party shall be required to provide
access to or to disclose information where such access or disclosure would
violate or prejudice the rights of any customer or would contravene any law,
rule, regulation, order or judgment or, in the case of a document which is
subject to an attorney-client privilege, would compromise the right of the
disclosing party to claim that privilege. The parties will use all reasonable
efforts to obtain waivers of any such restriction (other than the attorney
client privilege) and in any event make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(b) All information furnished by the parties hereto previously
in connection with transactions contemplated by this Agreement or pursuant
hereto shall be used solely for the purpose of evaluating the Merger
contemplated hereby, shall be kept confidential and shall be treated as the sole
property of the party delivering the information until consummation of the
Merger contemplated hereby and, if such Merger shall not occur, each party and
each party's Representatives shall return to the other party all documents or
other materials containing, reflecting or referring to such information, will
not retain any copies of such information, shall keep confidential all such
information, and shall not directly or indirectly use such information for any
competitive or commercial purposes or any other purpose not expressing permitted
hereby.
(i) Each party hereto shall inform its
Representatives of the terms of this Section 5.2.
(ii) Any breach of this Section 5.2 by a
Representative of a party hereto shall conclusively be deemed to be a breach
thereof by such party.
(iii) In the event that the Merger contemplated
hereby does not occur or this Agreement is terminated, all documents, notes and
other writings prepared by a party hereto or its Representatives based on
information furnished by the other party, and all other documents and records
obtained from another party hereto in connection herewith, shall be promptly
destroyed. The obligation to keep such information confidential shall continue
for 30 months from the date the proposed Merger is abandoned but shall not apply
to
(1) any information which:
(A) the party receiving the
information can establish by convincing evidence was already in its possession
prior to the disclosure thereof to it by the other party;
(B) was then generally known to the
public other than as a result of a disclosure by any party hereto or its
Representative;
(C) became known to the public
through no fault of the party receiving such information; or
(D) was disclosed to the party
receiving such information by a third party not bound by an obligation of
confidentiality; or
(2) disclosures pursuant to a legal,
regulatory or examination requirement or in accordance with an order of a court
of competent jurisdiction, provided that in the event of any disclosure required
by this clause (2), the disclosing party will give reasonable prior written
notice of such disclosure to the other parties and shall not disclose any such
information without an opinion of counsel supporting its position that such
information must be disclosed.
(c) In addition to all other remedies that may be available to
any party hereto in connection with a breach by any other party hereto of its or
its Representative's obligations under this Section 5.2, each party hereto shall
be entitled to specific performance and injunctive and other equitable relief
with respect to this Section 5.2. Each party hereto waives, and agrees to use
all reasonable efforts to cause its Representatives to waive, any requirement to
secure or post a bond in connection with any such relief.
5.3 Board Representation. Following the consummation of the Merger, the
respective boards of directors of TechSys and the Surviving Company will consist
of seven directors, of which four will be nominated by the board of directors of
the Company prior to the Effective Time (of which no less than one director will
be independent, as defined in NASD Rule 4200) and three will be nominated by the
board of directors of TechSys prior to the Effective Time (of which no less than
one will be independent, as defined in NASD Rule 4200), until such time as
TechSys is no longer qualified as a "Small Business Issuer," as such term is
defined by Rule 405 of the Securities Act, at which time the board of directors
of TechSys shall select an additional independent director, as defined in NASD
Rule 4200, to serve on such board.
5.4 Post-Merger Officers of TechSys. At the first meeting of the board
of directors of TechSys that occurs after the Effective Time:
(a) The following persons shall be elected to the following
offices:
(i) Malcolm Bricklin and Alvin S. Trenk shall be
elected to serve as Co-Chairmen of the board of directors of TechSys and
Co-Chief Executive Officers of TechSys;
(ii) Steven L. Trenk shall be elected to serve as
President and Chief Operating Officer of TechSys;
(iii) Richard Janowski, directly or by an entity
owned by Richard Janowski, shall be elected to serve as an officer of SOFC
Energy, Inc., which shall be an operating Subsidiary of TechSys after the
Effective Time; and
(iv) Rick Moore, directly or by an entity owned by
Rick Moore, shall be elected to serve as an officer of SOFC Energy, Inc., which
shall be an operating Subsidiary of TechSys after the Effective Time.
(b) The pre-Merger principals of the Company listed on
Schedule 5.4(b) shall each be named as eligible key employees under the TechSys
2000 Incentive Compensation Plan.
5.5 Modification of Certain Warrants. The warrants to purchase an
aggregate of 1,350,000 shares of TechSys held by each of Alvin S. Trenk, Steven
L. Trenk and Martin G. Jacobs, M.D., respectively, which were approved by the
stockholders of TechSys on August 16, 2001, shall be modified to be in
substantially the form of Exhibit A annexed hereto.
5.6 Grant of Certain Warrants. At the Effective Time, TechSys shall
grant to the individuals set forth on Schedule 5.6 fully vested warrants,
substantially in the form of Exhibit A annexed hereto, to purchase an aggregate
of 1,350,000 shares of TechSys Common Stock, at an exercise price of $3.00 per
share.
5.7 Exclusivity. Until September 30, 2001 (or the prior termination of
this Agreement), the Company will not and will cause its Affiliates,
representatives and agents not to (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of the Company (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing, unless such solicitation, initiation,
encouragement, participation or facilitation is effected jointly with TechSys.
The Company agrees to notify Purchasers immediately if any Person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
5.8 Representations and Warranties of Certain Stockholders of the
Company. The Company shall secure and deliver to TechSys at or prior to Closing
executed representations and warranties of the stockholders of the Company set
forth on Schedule 5.8, in substantially the form of Exhibit B attached hereto
(the "Company Stockholder Representations"), which are required for the issuance
of an Opinion of Counsel regarding the tax status of the Merger which shall be
filed with the SEC in connection with the Registration Statement.
5.9 Employment Agreements. At Closing, (i) Malcolm Bricklin and TechSys
shall enter into an employment agreement substantially in the form of Exhibit C
annexed hereto, and (ii) each of Richard Janowski and Rick Moore, respectively,
shall enter into separate employment agreements with TechSys substantially in
the form of Exhibit D annexed hereto. The existing employment agreements by and
between TechSys and Alvin S. Trenk and TechSys and Steven L. Trenk,
respectively, shall remain in full force and effect and shall be unaffected by
the consummation of the Merger and all other transactions contemplated by this
Agreement.
5.10 Business Office. The post-Merger business office of TechSys shall
be located at 147 Columbia Turnpike, Florham Park, New Jersey.
5.11 TechSys Options. At the Effective Time, the key employees of
TechSys set forth on Schedule 5.11 shall be granted options to purchase an
aggregate of 2,550,304 shares of TechSys Common Stock (the "TechSys Options"),
to be allocated to such key employees as set forth on Schedule 5.11, to be
granted as set forth on Schedule 5.11.
5.12 Company Stockholder Representation Letter. On or prior to Closing,
the Company shall deliver to TechSys a representation letter, substantially in
the form of Exhibit E annexed hereto, executed by each of the stockholders of
the Company set forth on Schedule 5.12, which acknowledges each such
stockholder's understanding of such stockholder's responsibilities under, and
restrictions on transfer of shares imposed by, Rule 144 of the Securities Act
and Section 16 of the Exchange Act with respect to the shares of TechSys Common
Stock acquired by such stockholder pursuant to this Agreement (the "Company
Stockholder Representation Letter").
5.13 Division or Combination of TechSys Common Stock. TechSys shall not
divide or combine the TechSys Common Stock prior to the Effective Time, except
as set forth in, and in accordance with, Section 1.4(c)(i).
5.14 Cancellation of Company Derivative Securities. The Company shall
take such action as is necessary to terminate all Company Derivative Securities
(as defined in Section 1.4(c)(iv)), other than such warrants set forth on
Schedule 1.4(c)(iv), at the Effective Time.
5.15 Offer by the Company.
(a) Prior to the submission of the Proxy Statement/Prospectus
to the stockholders of the Company, the Company and TechSys shall determine
whether any offer (an "Offer") to stockholders of the Company is necessary with
respect to any stock redemptions and, if such redemptions shall be made, the
Company shall have completed all payments, if any, due to such stockholders of
the Company pursuant to such Offer. Any Offer shall be made in accordance with
Schedule 5.15.
(b) In connection with any transfer or proposed transfer of
securities of the Company (other than as provided in this Agreement), the
Company shall disclose to any proposed transferee that the Company is
considering making an Offer.
5.16 Increase in Authorized Shares of TechSys. TechSys shall submit to
its stockholders at the next meeting of the stockholders of TechSys a proposal
to amend the Certificate of Incorporation of TechSys to increase the number of
shares of TechSys Common Stock that TechSys is authorized to issue to
100,000,000 shares and to increase the number of shares of TechSys Preferred
Stock that TechSys is authorized to issue to 10,000,000 shares.
5.17 Conduct of the Business of the Company. During the period from the
date of this Agreement to the Effective Time, the Company shall, and shall cause
each Subsidiary of the Company to, conduct their respective businesses only in
the ordinary course and consistent with prudent business practice, except for
transactions permitted hereunder or with the prior written consent of TechSys,
which consent will not be unreasonably withheld. The Company and each of its
Subsidiaries shall use its reasonable best efforts to:
(a) preserve its business organization and that of each
Subsidiary intact;
(b) keep available to itself and each Subsidiary of the
Company the present services of their respective employees; and
(c) preserve for itself and TechSys the goodwill of its
customers and those of the Subsidiaries of the Company and others with whom
business relationships exist.
5.18 Negative Covenants.
(a) Company Negative Covenants. From the date hereof to the
Effective Time, except as otherwise approved by TechSys in writing, or as
permitted or required by this Agreement, neither the Company nor any Subsidiary
of the Company will:
(i) change any provision of its Certificate of
Incorporation or any similar governing documents;
(ii) change any provision of its By-Laws without the
consent of TechSys which consent shall not be unreasonably withheld;
(iii) change the number of shares of its authorized
or issued capital stock (except to increase its issued and outstanding shares of
common stock of the Company to 96,556,750 shares) or issue or grant any option,
warrant, call, commitment, subscription, right to purchase or agreement of any
character relating to its authorized or issued capital stock, or any securities
convertible into shares of such stock, or split, combine or reclassify any
shares of its capital stock, or declare, set aside or pay any dividend, or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of its capital stock;
(iv) grant any severance or termination pay to, or
enter into or amend any employment or severance agreement with, any of its
directors, officers or employees; adopt any new employee benefit plan or
arrangement of any type; or award any increase in compensation or benefits to
its directors, officers or employees;
(v) sell or dispose of any substantial amount of
assets or voluntarily incur any significant liabilities other than in the
ordinary course of business consistent with past practices and policies or in
response to substantial financial demands upon the business of the Company or
any Subsidiary of the Company;
(vi) make any capital expenditures other than
pursuant to binding commitments existing on the date hereof, expenditures
necessary to maintain existing assets in good repair and expenditures described
in business plans or budgets previously furnished to TechSys.
(vii) file any applications or make any contract with
respect to branching or site location or relocation;
(viii) agree to acquire in any manner whatsoever
(other than to realize upon collateral for a defaulted loan) any business or
entity or make any new investments in securities without the prior written
consent of TechSys;
(ix) make any material change in its accounting
methods or practices, other than changes required in accordance with generally
accepted accounting principles or regulatory authorities;
(x) take any action that would result in any of its
representations and warranties contained in Article IV of this Agreement not
being true and correct in any material respect at the Effective Time or that
would cause any of its conditions to Closing not to be satisfied;
(xi) purchase any shares of TechSys Common Stock; or
(xii) agree to do any of the foregoing.
(b) TechSys Negative Covenants. From the date hereof to the
Effective Time, except as otherwise approved by the Company in writing, or as
permitted or required by this Agreement, neither TechSys nor any Subsidiary of
TechSys will:
(i) change any provision of its Certificate of
Incorporation or any similar governing documents;
(ii) change any provision of its By-Laws without the
consent of the Company, which consent shall not be unreasonably withheld;
(iii) change the number of shares of its authorized
or issued capital stock or issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to its
authorized or issued capital stock, or any securities convertible into shares of
such stock, or split, combine or reclassify any shares of its capital stock, or
declare, set aside or pay any dividend, or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
(iv) grant any severance or termination pay to, or
enter into or amend any employment or severance agreement with, any of its
directors, officers or employees; adopt any new employee benefit plan or
arrangement of any type, or award any increase in compensation or benefits to
its directors, officers or employees;
(v) sell or dispose of any substantial amount of
assets or voluntarily incur any significant liabilities other than in the
ordinary course of business consistent with past practices and policies or in
response to substantial financial demands upon the business of TechSys or any
Subsidiary of TechSys;
(vi) make any capital expenditures other than
pursuant to binding commitments existing on the date hereof, expenditures
necessary to maintain existing assets in good repair and expenditures described
in business plans or budgets previously furnished to the Company.
(vii) file any applications or make any contract with
respect to branching or site location or relocation;
(viii) agree to acquire in any manner whatsoever
(other than to realize upon collateral for a defaulted loan) any business or
entity or make any new investments in securities without the prior written
consent of the Company;
(ix) make any material change in its accounting
methods or practices, other than changes required in accordance with generally
accepted accounting principles or regulatory authorities;
(x) take any action that would result in any of its
representations and warranties contained in Article III of this Agreement not
being true and correct in any material respect at the Effective Time or that
would cause any of its conditions to Closing not to be satisfied;
(xi) purchase any shares of the Company Common Stock;
or
(xii) agree to do any of the foregoing.
5.19 No Solicitation.
(a) So long as this Agreement remains in effect, neither the
Company nor any Subsidiary of the Company shall, unless effected jointly with
TechSys, directly or indirectly, encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or group
(other than TechSys) concerning any merger or sale of shares of capital stock or
sale of substantial assets or liabilities not in the ordinary course of
business, or similar transactions involving the Company or any Subsidiary of the
Company.
(b) So long as this Agreement remains in effect, neither
TechSys nor any Subsidiary of TechSys shall, unless effected jointly with the
Company, directly or indirectly, encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or group
(other than the Company) concerning any merger or sale of shares of capital
stock or sale of substantial assets or liabilities not in the ordinary course of
business, or similar transactions involving TechSys or any Subsidiary of
TechSys.
5.20 Further Assurances.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to satisfy
the conditions to Closing and to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, using reasonable
efforts to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated by this Agreement and using its reasonable best efforts to prevent
the breach of any representation, warranty, covenant or agreement of such party
contained or referred to in this Agreement and to promptly remedy the same. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
Nothing in this section shall be construed to require any party to participate
in any threatened or actual legal, administrative or other proceedings (other
than proceedings, actions or investigations to which it is a party or subject or
threatened to be made a party or subject) in connection with consummation of the
transactions contemplated by this Agreement unless such party shall consent in
advance and in writing to such participation and the other party agrees to
reimburse and indemnify such party for and against any and all costs and damages
related thereto if the Merger is not consummated.
(b) TechSys agrees that from the date hereof to the Effective
Time, except as otherwise approved by the Company in writing or as permitted or
required by this Agreement, TechSys will use reasonable business efforts to
maintain and preserve intact its business organization, properties, leases,
employees and advantageous business relationships, and TechSys will not, nor
will it permit any Subsidiary of TechSys to, take any action: (i) that would
result in any of its representations and warranties contained in Article III of
this Agreement not being true and correct in any material respect at, or prior
to, the Effective Time, or (ii) that would cause any of its conditions to
Closing not to be satisfied, or (iii) that would constitute a breach or default
of its obligations under this Agreement.
5.21 Disbursements by TechSys. TechSys shall not make any disbursements
out of the TechSys Cash other than in the ordinary course of the business of
TechSys without obtaining the prior written consent of the Company prior to
making such disbursement.
5.22 Disbursements by the Company. After the date hereof and no later
than one day prior to the Closing Date, the Company shall increase the Company's
cash by raising no less than $3,000,000 (the "Additional Company Cash"). From
the date hereof until the Effective Time, the Company shall not disburse more
than (a) such amounts as are necessary to repay the Company's outstanding
obligation to Holding Capital Management, L.L.C. ("HCM") in the principal amount
of $500,000, and interest thereon, (b) such amounts expended by the Company in
connection with the Offer, and (c) any additional amounts other than in the
ordinary course of the operation of the Company's business, and no more than
$5,000 on any one item without obtaining the prior written consent of TechSys;
provided, that, no disbursements shall be made under the Company's agreement
with Wise Capital.com, which shall be terminated on or before one day prior to
Closing.
5.23 Termination of Certain Relationships by the Company Prior to
Closing.
(a) The Company shall terminate all agreements and all other
arrangements, written or otherwise, with Wise Capital.com on or before one day
prior to Closing;
(b) The Company shall terminate all agreements and all other
arrangements, written or otherwise, with HCM, other than the warrants set forth
on Schedule 4.7 (the "HCM Warrants"), on or before one day prior to Closing;
provided, that, the Company shall, no later than one day prior to Closing,
obtain the written consent of HCM to exchange the HCM Warrants for warrants
convertible into TechSys Common Stock, which shall be issued by TechSys after
Closing and shall be exercisable at such a price and for such number of shares
as adjusted in accordance with the Exchange Ratio and the share division or
stock dividend referred to in Section 1.4(c)(i).
5.24 Feldhammer Capital Warrants. The Company shall, no later than one
day prior to Closing, obtain the written consent of Feldhammer Capital to
exchange all warrants convertible into Capital Stock of the Company held by
Feldhammer Capital for warrants convertible into TechSys Common Stock, as
adjusted in accordance with the Exchange Ratio, equal in value to no less than
7% of the TechSys Cash at the Effective Time.
5.25 Limitation on Outstanding Shares of Capital Stock of the Company.
At the Effective Time, no more than an aggregate of 99,900,000 shares of the
Capital Stock of the Company shall be outstanding (or issuable upon the exercise
of options or warrants convertible into shares of Capital Stock of the Company).
5.26 Ownership of Subsidiaries of the Company. From the date of this
Agreement until the Effective Time, the Company shall at all times own no less
than 60% of the equity and voting power of each Subsidiary of the Company.
5.27 Grant of Additional TechSys Options. At or before the Effective
Time, TechSys shall grant options to purchase no more than an aggregate of
150,000 shares of TechSys Common Stock to the individuals set forth on Schedule
5.27.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment, at or prior to the Effective Time, of the following conditions:
(a) The Merger shall have been approved and adopted by the
requisite vote of the holders of the TechSys Common Stock, the holders of the
Newco Common Stock and by the requisite vote of the holders of the Company's
Capital Stock.
(b) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act. No stop order suspending
the effectiveness of the Registration Statement shall have been issued by the
SEC and remain in effect.
(c) Lazar's agreements to consent to the transactions
contemplated by this Agreement, to terminate options to purchase shares of
TechSys Common Stock held by Lazar, and to consent to the termination of the
respective agreements between Lazar and TechSys relating to shares of TechSys
Common Stock and options to purchase shares of TechSys Common Stock and between
Lazar and the Company relating to finders fees and stockholder relations shall
be delivered immediately prior to, or at, the Effective Time, or, if not so
delivered, the Company and TechSys shall have determined that the options to
purchase shares of TechSys Common Stock held by Lazar and the respective
agreements between Lazar and TechSys relating to shares of TechSys Common Stock
and options to purchase shares of TechSys Common Stock and between Lazar and the
Company relating to finders fees and stockholder relations are void, and that
the Company and TechSys have agreed to assert defenses to the enforcement
thereof.
(d) Notwithstanding the definition of "change of control" set
forth in Section 1.5 of the First Amended and Restated Employment Agreement,
dated as of December 31, 1997, by and between Continental Choice Care, Inc. and
Steven L. Trenk, Steven L. Trenk shall have agreed to waive his rights upon a
"change of control" under such Employment Agreement with respect to this
transaction (but not with respect to any future transaction).
(e) Each of TechTron, the shareholders of TechTron, Malcolm
Bricklin, Richard Janowski and Rick Moore shall have entered into a Stockholders
Agreement, substantially in the form of Exhibit F annexed hereto (the
"Stockholders Agreement").
(f) In the event that the Parties are required to file
Pre-Merger Notification with the FTC, the Parties shall have received written
approval of the Merger from the FTC.
6.2 Conditions to Obligations of the Company to Effect the Merger. The
obligations of the Company to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the additional
following conditions:
(a) Each representation and warranty set forth in Article III
shall be true and correct in all material respects as of the Closing.
(b) Purchasers shall have performed in all material respects
each covenant or other obligation required to be performed by them pursuant to
the Transaction Documents prior to the Closing.
(c) The consummation of the transactions contemplated by the
Transaction Documents shall not be prohibited by any Legal Requirement or
subject the Company to any penalty or liability arising under any Legal
Requirement or imposed by any Government Entity.
(d) No action, suit or proceeding shall be pending or
threatened before any Government Entity the result of which could prevent or
prohibit the consummation of any transaction pursuant to the Transaction
Documents, cause any such transaction to be rescinded following such
consummation or adversely affect Purchasers performance of their obligations
pursuant to the Transaction Documents, and no judgment, order, decree,
stipulation, injunction or charge having any such effect shall exists.
(e) All filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to or with any Government
Entity or any other Person that are required for the Purchasers to consummate
the Merger or any other transaction contemplated by the Transaction Documents or
to own the Company Shares or to conduct the Business thereafter (the
"Purchasers' Consents") shall have been duly made or obtained.
(f) TechSys shall have delivered to the Company a Certificate
dated the Closing Date, signed by the President of TechSys stating that the
conditions set forth in Section 6.2 (a) through (e) have been satisfied.
(g) TechSys shall have delivered to the Company a copy of the
resolutions duly adopted by TechSys' board of directors authorizing TechSys'
execution, delivery and performance of the Transaction Documents to which
TechSys is a party and the consummation of the Merger and all other transactions
contemplated by the Transaction Documents, as in effect as of the Closing,
certified by an officer of TechSys.
(h) TechSys shall have delivered to the Company a copy of the
resolutions duly adopted by Newco's board of directors authorizing Newco's
execution, delivery and performance of the Transaction Documents to which Newco
is a party and the consummation of the Merger and all other transactions
contemplated by the Transaction Documents, as in effect as of the Closing,
certified by an officer of Newco.
(i) TechSys shall have delivered to the Company a copy of the
resolutions duly adopted by TechSys as the stockholder of Newco approving the
Merger and this Agreement, certified by an officer of Newco.
(j) TechSys shall have delivered to the Company a certificate
(dated not less than five business days prior to the Closing) of the Treasurer
of the State of New Jersey as to the good standing of TechSys and Newco in New
Jersey.
(k) TechSys shall have delivered to the Company copies of the
Purchasers' Consents.
(l) TechSys shall have delivered to the Company such other
documents relating to the transactions contemplated by the Transaction Documents
to be consummated at the Closing as the Company may reasonably request.
(m) TechSys shall have delivered to the Company written
resignations from each director and officer of TechSys set forth on Schedule
6.2(m) from such directorships and offices, to take effect as of the Closing.
(n) The TechSys Shares, prior to their issuance pursuant to
this Agreement, will be listed on The Nasdaq SmallCap Market.
(o) The TechSys Cash shall not have been reduced by
disbursements made out of the ordinary course of the business of TechSys, unless
such disbursements were made after receipt by TechSys of the consent of the
Company to make such disbursement.
(p) The Company shall have received an Opinion of Counsel as
to the tax free status of the Merger.
6.3 Conditions to Obligations of TechSys to Effect the Merger. The
obligations of TechSys to effect the Merger shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the additional following
conditions.
(a) Each of Malcolm Bricklin, Richard Janowski and Rick Moore
shall have executed employment agreements with TechSys, as provided in Section
5.9.
(b) The Company shall have terminated the Company's agreement
with Wise Capital.com and shall have made no payments thereunder after the date
hereof.
(c) The Company shall have raised the Additional Company Cash
during the period commencing on the date hereof and ending no later than one day
prior to the Closing Date, and, from the date upon which the Company raised such
Additional Company Cash until the Effective Time, the Company shall not have
disbursed more than (i) such amounts as were necessary to repay the Company's
obligation to HCM in the principal amount of $500,000, and interest thereon,
(ii) such amounts expended by the Company in connection with the Offer, and
(iii) any additional amounts other than in the ordinary course of the operation
of the Company's business, and shall not have disbursed more than $5,000 on any
one item without obtaining the prior written consent of TechSys. The Company
shall not have made any disbursements under the Company's agreement with Wise
Capital.com, which shall be have been terminated on or before one day prior to
Closing.
(d) The Company shall have delivered the Company Stockholder
Representations (as defined in Section 5.8 hereof), duly executed by each of the
stockholders of the Company set forth on Schedule 5.8.
(e) The Company shall have delivered the Company Stockholder
Representation Letter (as defined in Section 5.12 hereof), duly executed by all
of the stockholders of the Company set forth on Schedule 5.12.
(f) Each representation and warranty set forth in Article IV
shall be true and correct in all material respects as of the Closing, and the
Audited Financial Statements shall present fairly in all material respects the
consolidated financial condition of the Company as of the dates of such
statements and the results of operation for such periods, shall be accurate and
complete, shall be consistent with the books and records of the Company (which,
in turn, are, and shall be, accurate and complete) and shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby except as noted therein.
(g) The Company and each Subsidiary of the Company shall have
performed in all material respects each covenant or other obligation required to
be performed by them pursuant to the Transaction Documents prior to the Closing.
(h) The consummation of the transactions contemplated by the
Transaction Documents shall not be prohibited by any Legal Requirement or
subject Purchasers, any of the Company Shares or any of the Assets of the
Company to any penalty or liability arising under any Legal Requirement or
imposed by any Government Entity.
(i) No action, suit or proceeding shall pending or threatened
before any Government Entity the result of which could prevent or prohibit the
consummation of any transaction pursuant to the Transaction Documents, cause any
such transaction to be rescinded following such consummation or adversely affect
Purchasers' right to conduct the Business or the Company's performance of its
obligations pursuant to the Transaction Documents, and no judgment, order,
decree, stipulation, injunction or charge having any such effect shall exist.
(j) All filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to or with any Government
Entity or any other Person that are required for the Company to consummate the
Merger or any other transaction contemplated by the Transaction Documents or to
own and transfer the Company Shares or permit the conduct of the Business by
Purchasers thereafter (the "Company's Consents") shall have been duly made or
obtained.
(k) The Company shall have delivered to Purchasers a
Certificate, dated the Closing Date, signed by the President of the Company
stating that the conditions set forth in Sections 6.3(e) through (j) have been
satisfied.
(l) The Company shall have delivered to Purchasers a copy of
the resolutions duly adopted by the Company's board of directors authorizing the
Company's execution, delivery and performance of the Transaction Documents to
which the Company is a party and the consummation of the Merger and all other
transactions contemplated by the Transaction Documents, as in effect as of the
Closing, certified by an officer of the Company;
(m) The Company shall have delivered to Purchasers a
certificate (dated not less than five business days prior to the Closing) of the
Secretary of State of the State of Nevada as to the good standing of the Company
in Nevada.
(n) The Company shall have delivered to Purchasers the Books
and Records;
(o) The Company shall have delivered to Purchasers copies of
the Company Consents.
(p) The Company shall have delivered to Purchasers such other
documents relating to the transactions contemplated by the Transaction Documents
as Purchasers reasonably request.
(q) The Company shall have delivered to Purchasers written
resignations from each director and officer of the Company set forth on Schedule
6.3(q) from such directorships and offices, to take effect as of the Closing.
(r) In the event that the board of directors of TechSys
determines, in its sole discretion, to pursue an opinion of an investment banker
or financial advisor that the Merger is fair to the stockholders of TechSys from
a financial point of view, the board of directors of TechSys shall have received
such opinion from the investment banker or financial advisor prior to Closing.
(s) The Company shall have terminated all agreements and all
other arrangements, written or otherwise, with HCM, other than the HCM Warrants,
and shall have obtained and delivered to TechSys the written consent of HCM to
exchange the HCM Warrants for warrants convertible into TechSys Common Stock.
(t) The Company shall have obtained and delivered to TechSys
the written consent of Feldhammer Capital to exchange all warrants convertible
into Capital Stock of the Company held by Feldhammer Capital for warrants
convertible into TechSys Common Stock.
(u) No more than an aggregate of 99,900,000 shares of the
Capital Stock of the Company shall be outstanding (or issuable upon the exercise
of options or warrants convertible into shares of Capital Stock of the Company).
(v) The Company shall own no less than 52% of the equity and
voting power of each Subsidiary of the Company.
(w) The Company shall have taken all action necessary so that
all Company Derivative Securities, other than such warrants set forth on
Schedule 1.4(c)(iv), will be canceled at the Effective Time.
(x) TechSys shall have received an Opinion of Counsel as to
the tax free status of the Merger.
ARTICLE VII
[THIS ARTICLE HAD BEEN INTENTIONALLY LEFT BLANK]
ARTICLE VIII
TERMINATION
8.1 Events of Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of TechSys and the Company,
(a) by mutual consent of the Boards of Directors of TechSys
and the Company;
(b) by either TechSys or the Company if the Merger shall not
have been consummated on or before October 31, 2001, provided the terminating
party is not otherwise in material breach of its obligations under this
Agreement;
(c) by either TechSys or the Company for any reason prior to
the expiration of the Due Diligence Review Period.
(d) by either TechSys or the Company if this Agreement is not
approved at the 2001 annual meeting of the stockholders of TechSys or at such
other meeting of the stockholders of TechSys held prior to September 15, 2001;
(e) by either TechSys or the Company in the event of (i) a
breach by the other party of any representation or warranty contained herein,
which breach has not been cured within 10 days after the giving of written
notice to the breaching party of such breach and which breach, individually or
in the aggregate when combined with other such breaches, would cause the
conditions set forth in Section 6.2 or 6.3, as the case may be, not to be met if
the date of the action described above were the date of the Closing or (ii) a
material breach by the other party of any of the covenants or agreements
contained herein, which breach has not been cured within 30 days after the
giving of written notice to the breaching party of such breach;
(f) by TechSys if any of the conditions specified in Sections
6.1 and 6.2 have not been met or waived by TechSys at such time as such
conditions can no longer be satisfied; and
(g) by the Company if any of the conditions specified in
Sections 6.1 and 6.3 have not been met or waived by the Company at such time as
such conditions can no longer be satisfied.
8.2 Effect of Termination.
In the event of the termination of this Agreement pursuant to Section
8.1, this Agreement, except for the provisions of Article VII and Article VIII,
shall become void and have no effect, without any liability on the part of any
party or its directors, officers or stockholders. Notwithstanding the foregoing,
nothing in this Section 8.2 shall relieve any Party of liability for a material
breach of any provision of this Agreement and provided, further, however, that
if it shall be judicially determined that termination of this Agreement was
caused by an intentional breach of this Agreement, then, in addition to other
remedies at law or equity for breach of this Agreement, the party so found to
have intentionally breached this Agreement shall indemnify and hold harmless the
other Parties for their respective out-of-pocket costs, fees and expenses of
their counsel, accountants, financial advisors and other experts and advisors as
well as fees and expenses incident to negotiation, preparation and execution of
this Agreement and related documentation and stockholders' meetings and
consents.
8.3 Remedies on Termination After Expiration of Due Diligence Review
Period.
(a) In the event that, after the expiration of the Due
Diligence Review Period, the Company terminates this Agreement for any reason
other than as set forth in Section 8.1, the Company shall bear the legal,
accounting and investment banking/financial advisor costs and expenses
(collectively, "Professional Expenses") incurred by TechSys in connection with
the negotiation and preparation of this Agreement and the transactions
contemplated hereby, in an aggregate maximum amount not to exceed $250,000.
(b) In the event that, after the expiration of the Due
Diligence Review Period, TechSys terminates this Agreement for any reason other
than as set forth in Section 8.1, TechSys shall bear the Professional Expenses
incurred by the Company in connection with the negotiation and preparation of
this Agreement and the transactions contemplated hereby, in an aggregate maximum
amount not to exceed $150,000.
ARTICLE IX
MISCELLANEOUS
9.1 Rights and Remedies. No course of dealing between the Parties or
failure or delay in exercising any right, remedy, power or privilege (each, a
"right") pursuant to this Agreement will operate as a waiver of any rights of
any Party, nor will any single or partial exercise of any right under this
Agreement preclude any other or further exercise of such right or the exercise
of any other right. Except as expressly set forth herein, the rights provided
pursuant to this Agreement are cumulative and not exhaustive of any other rights
which may be provided by law.
9.2 Waivers, Amendments to be in Writing. No waiver, amendment,
modification or supplement of this Agreement will be binding upon a Party unless
such waiver, amendment, modification or supplement is set forth in writing and
is executed by such Party.
9.3 Successors and Assigns. Except as otherwise expressly provided in
this Agreement, all covenants and agreements set forth in this Agreement by or
on behalf of the Company and TechSys will bind and inure to the benefit of the
respective successors and assigns of the Company and TechSys, whether so
expressed or not, except that neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by the Company without the
prior written consent of TechSys.
9.4 Governing Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of New Jersey, without giving
effect to any choice of law or conflict rule of any jurisdiction that would
cause the laws of any other jurisdiction to be applied. In furtherance of the
foregoing, the internal law of the State of New Jersey will control the
interpretation and construction of this Agreement, even if under any choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
9.5 Jurisdiction. Each of the Parties hereby (i) irrevocably submits to
the jurisdiction of the state courts of, and the federal courts located in, the
State of New Jersey in any action or proceeding arising out of or relating to,
this Agreement, (ii) waives, and agrees to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court, and waives and agrees not
to seek any review by any court of any other jurisdiction which may be called
upon to grant an enforcement of the judgment of any such court.
9.6 Notices.
(a) All demands, notices, communications and reports
("Notices") provided for in this Agreement will be in writing and will be either
personally delivered, mailed by first class mail (postage prepaid) or sent by
reputable overnight courier service (delivery charges prepaid) to any Party at
the address specified below, or at such address, to the attention of such other
Person, and with such other copy, as the recipient party has specified by prior
written Notice to the sending Party pursuant to the provisions of this Section
9.6.
If to the Company:
276 Belmont Place
Mahwah, New Jersey 07430
Attention: President
Facsimile Number:
with a copy, which will not constitute notice to the Company or the
Surviving Company (prior to the Closing), to:
Warnicke & Littler, P.L.C.
1411 North Third Street
Phoenix, Arizona 85004-1612
Attention: Ronald E. Warnicke
Facsimile Number: (602) 256-0345
If to Purchasers:
On or After April 25, 2001:
TechSys, Inc.
147 Columbia Turnpike
Florham Park, New Jersey 07932
Attention: President
Facsimile Number: (973) 236-1777
Prior to April 25, 2001:
TechSys, Inc.
44 Aspen Drive
Livingston, New Jersey 07039
Attention: President
Facsimile Number: (973) 422-1221
with a copy, which will not constitute notice to TechSys, Newco or the
Company (following the Closing), to:
Pitney, Hardin, Kipp & Szuch LLP
200 Campus Drive
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attention: Joseph Lunin
Facsimile Number: (973) 966-1550
(b) Any such notice will be deemed to have been given when
delivered personally, on the third business day after deposit in the U.S. mail
or on the business day after deposit with a reputable overnight courier service,
as the case may be.
9.7 Severability of Provisions. If any provision of this Agreement is
held to be invalid for any reason whatsoever, then such provision will be deemed
severable from the remaining provisions of this Agreement and will in no way
affect the validity or enforceability of any other provision of this Agreement.
9.8 Schedules. The Schedules constitute a part of this Agreement and
are incorporated into this Agreement for all purposes.
9.9 Counterparts. The Parties may execute this Agreement in separate
counterparts (no one of which need contain the signatures of all Parties), each
of which will be an original and all of which together will constitute one and
the same instrument.
9.10 No Third-Party Beneficiaries. Except as otherwise expressly
provided in this Agreement, no Person which is not a Party will have any right
or obligation pursuant to this Agreement.
9.11 Headings. The headings used in this Agreement are for the purpose
of reference only and will not affect the meaning or interpretation of any
provision of this Agreement.
9.12 Merger and Integration. Except as otherwise provided in this
Agreement, this Agreement sets forth the entire understanding of the Parties
relating to the subject matter hereof, and all prior understandings, whether
written or oral, are superseded by this Agreement.
9.13 Transaction Expenses. The Company (for itself and for the Company)
and TechSys, whether or not the Merger is consummated, shall bear their own
legal and other fees and expenses with respect to the Merger.
9.14 Further Assurances. From and after the Closing, the Company will,
and will cause their Affiliates to, execute all documents and take any other
action which it is reasonably requested to execute or take to further effectuate
the transactions contemplated by the Transaction Documents.
9.15 Announcements. TechSys and the Company shall cooperate with each
other in the development and distribution of all news releases and other public
filings and disclosures with respect to this Agreement or the Merger
transactions contemplated hereby, and TechSys and the Company agree that unless
approved mutually by them in advance, neither TechSys nor the Company, directly
or indirectly, will issue any press release or written statement for general
circulation relating primarily to the transactions contemplated hereby, except
as may be otherwise required by law or regulation upon the advice of counsel.
9.16 SEC. The Company acknowledges that following the Closing Date
certain stockholders of the Company will have obligations to file certain
reports pursuant to the Exchange Act.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date first written above.
FUEL CELL COMPANIES, INC.
By: ______________________________
Name: Malcolm Bricklin
Title: Chief Executive Officer
TECHSYS, INC.
By: _____________________________
Name: Steven L. Trenk
Title: President
NEWCO TKSS, INC.
By: _______________________________
Name: Steven L. Trenk
Title: President