================================================================================
Agreement and Plan of Merger
among
Base Ten Systems, Inc.
Newco B10, Inc.
and
ConvergenceHealth.com
January 18, 2002
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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.....................................4
1.6 Tax Treatment.................................................................................5
1.7 Effective Time................................................................................5
1.8 Closing.......................................................................................5
1.9 Title; Risk of Loss...........................................................................5
1.10 Hart Scott Rodino.............................................................................5
1.11 Investment in the Company.....................................................................5
ARTICLE II
DEFINITIONS
2.1 Definitions...................................................................................6
2.2 Other Definitional Provisions................................................................12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1 Organization and Power.......................................................................13
3.2 Capitalization...............................................................................14
3.3 Validity of Shares of Base Ten Common Stock..................................................14
3.4 Authorization; Binding Effect; No Breach.....................................................14
3.5 Base Ten Reports; Financial Statements.......................................................16
3.6 Governmental Filings.........................................................................16
3.7 Assets of Base Ten...........................................................................16
3.8 Absence of Certain Changes...................................................................17
3.9 Litigation...................................................................................17
3.10 Brokerage....................................................................................17
3.11 Insurance....................................................................................17
3.12 Tax Matters..................................................................................17
3.13 Contracts and Commitments....................................................................19
3.14 Proprietary Rights...........................................................................21
3.15 Employees....................................................................................22
3.16 ERISA........................................................................................23
3.17 Real Estate..................................................................................24
3.18 Compliance with Laws.........................................................................25
3.19 Product Warranty.............................................................................26
3.20 Powers of Attorney...........................................................................27
3.21 Bank Accounts................................................................................27
3.22 Disclosure...................................................................................27
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization and Power; The Company Shares...................................................27
4.2 Capitalization...............................................................................28
4.3 Authorization; Binding Effect; No Breach.....................................................29
4.4 Subsidiaries; Investments....................................................................30
4.5 Financial Statements and Related Matters.....................................................30
4.6 Absence of Undisclosed Liabilities...........................................................31
4.7 Assets of the Company........................................................................31
4.8 Absence of Certain Developments..............................................................32
4.9 Governmental Filings.........................................................................33
4.10 Tax Matters..................................................................................33
4.11 Contracts and Commitments....................................................................35
4.12 Proprietary Rights...........................................................................37
4.13 Litigation...................................................................................38
4.14 Brokerage....................................................................................38
4.15 Insurance....................................................................................38
4.16 Employees....................................................................................38
4.17 ERISA........................................................................................39
4.18 Real Estate..................................................................................40
4.19 Compliance with Laws.........................................................................41
4.20 Product Warranty.............................................................................42
4.21 Powers of Attorney...........................................................................43
4.22 Bank Accounts................................................................................43
4.23 Disclosure...................................................................................43
ARTICLE V
COVENANTS
5.1 Joint Proxy Statement; Issuance of Merger Consideration Without Consideration................43
5.2 Access to Properties and Records; Confidentiality............................................45
5.3 Board Representation.........................................................................47
5.4 Post-Merger Officers of Base Ten.............................................................47
5.5 Grant of Certain Warrants....................................................................47
5.6 Cancellation of Certain Base Ten Derivative Securities and Conversion of Certain Other
Base Ten Derivative Securities...............................................................47
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5.7 Tax Representation Letter....................................................................47
5.8 Company Affiliate Letter.....................................................................48
5.9 Business Office..............................................................................48
5.10 Cancellation of Certain Company Derivative Securities and Conversion of Certain Other
Company Derivative Securities................................................................48
5.11 Establishment of New Option Plan.............................................................48
5.12 Conduct of Business of the Company...........................................................48
5.13 Negative Covenants...........................................................................48
5.14 [RESERVED]...................................................................................51
5.15 Further Assurances...........................................................................51
5.16 Limitation on Outstanding Shares of Capital Stock of the Company.............................52
5.17 Incremental Funding..........................................................................52
5.18 Base Ten Share Combination...................................................................52
5.19 Reincorporation..............................................................................52
5.20 Exclusivity..................................................................................53
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligations to Effect the Merger..................................54
6.2 Conditions to Obligations of the Company to Effect the Merger................................54
6.3 Conditions to Obligations of Base Ten to Effect the Merger...................................55
ARTICLE VII
TERMINATION
7.1 Events of Termination........................................................................57
7.2 Effect of Termination........................................................................58
7.3 Remedies on Termination......................................................................58
ARTICLE VIII
MISCELLANEOUS
8.1 Rights and Remedies..........................................................................60
8.2 Waivers, Amendments to be in Writing.........................................................60
8.3 Successors and Assigns.......................................................................60
8.4 Governing Law................................................................................60
8.5 Jurisdiction.................................................................................60
8.6 Notices......................................................................................61
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8.7 Severability of Provisions...................................................................62
8.8 Schedules....................................................................................62
8.9 Counterparts.................................................................................62
8.10 No Third-Party Beneficiaries.................................................................62
8.11 Headings.....................................................................................62
8.12 Merger and Integration.......................................................................62
8.13 Transaction Expenses.........................................................................62
8.14 Further Assurances...........................................................................62
8.15 Announcements................................................................................63
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit Exhibit No.
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Form of Purchase Agreement.............................................................................A
Form of Gehring Agreement..............................................................................B
Form of Warrant Certificate........................................................................... C
Form of Tax Representation Letter..................................................................... D
Form of Company Affiliate Letter...................................................................... E
Form of Certificate of Amendment Effecting the Share Combination ......................................F
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SCHEDULES
Schedule 1.2(a)(iii) - Post-Merger Board of Directors of the Company
Schedule 1.2(a)(iv) - Post-Merger Officers of the Company
Schedule 1.4(b)(iii) - Company Derivative Securities Surviving the Merger
Schedule 1.4(b)(iv) - Base Ten Derivative Securities Surviving the Merger
Schedule 3.1(a) - Jurisdictions in which Base Ten is Qualified to Conduct Business
Schedule 3.1(c) - Jurisdictions in which Subsidiaries of Base Ten are Qualified to Conduct Business
Schedule 3.1(d) - Good Standing of each Subsidiary of Base Ten
Schedule 3.1(e) - Capitalization of each Subsidiary of Base Ten
Schedule 3.1(f) - Directors and Officers of Base Ten
Schedule 3.2(a) - Capitalization of Base Ten
Schedule 3.6 - Governmental Filings of Base Ten
Schedule 3.7 - Rights To Use Assets Used in the Business of Base Ten and each Subsidiary
Schedule 3.9 - Litigation Involving Purchasers
Schedule 3.11 - Insurance Policies of Base Ten and each Subsidiary
Schedule 3.12 - Tax Matters of Base Ten and each Subsidiary
Schedule 3.13(a) - Contracts and Commitments of Base Ten and each Subsidiary
Schedule 3.13(c) - Compliance with Base Ten Contracts
Schedule 3.13(e) - Affiliated Transactions
Schedule 3.14(a) - Proprietary Rights of Base Ten and each Subsidiary
Schedule 3.14(b) - Notice of Infringement or Misappropriation of Proprietary Rights of
Base Ten and each Subsidiary
Schedule 3.14(c) - Required Consents to Assignment of Proprietary Rights of Base Ten and
each Subsidiary
Schedule 3.15 - Employees of Base Ten and each Subsidiary
Schedule 3.16 - ERISA - Base Ten and each Subsidiary
Schedule 3.17(b) - Leased Real Property of Base Ten and each Subsidiary
Schedule 3.18(a) - Legal Requirements of Base Ten and each Subsidiary
Schedule 3.18(b) - Compliance with Permits, Licenses, and other Authorizations by Base
Ten and each Subsidiary
Schedule 3.18(c) - Environmental and Safety Requirements of Base Ten and each Subsidiary
Schedule 3.19 - Product Warranty By Base Ten
Schedule 3.20 - Powers of Attorney On Behalf of Base Ten and each Subsidiary
Schedule 3.21 - Bank Accounts of Base Ten and each Subsidiary
Schedule 4.1(a) - Jurisdictions in which the Company is Qualified to do Business
Schedule 4.1(b) - Directors and Officers of the Company
Schedule 4.2(b) - Capitalization of the Company
Schedule 4.3 - Authorizations of the Company
Schedule 4.4 - Subsidiaries
Schedule 4.5 - Financial Statements of the Company
Schedule 4.6 - Additional Liabilities of the Company
Schedule 4.7 - Rights to Use Assets Used in the Business of the Company and each Subsidiary
Schedule 4.8 - Changes Since the Latest Company Balance Sheet
Schedule 4.9 - Governmental Filings of the Company
Schedule 4.10 - Tax Matters of the Company
Schedule 4.11(a) - Contracts and Commitments of the Company
Schedule 4.11(c) - Compliance with Company Contracts
Schedule 4.11(e) - Affiliated Transactions
Schedule 4.12(a) - Proprietary Rights of the Company
Schedule 4.12(b) - Notice of Infringement or Misappropriation of Proprietary Rights of the Company
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Schedule 4.12(c) - Required Consents to Assignment of Proprietary Rights of the Company
Schedule 4.13 - Litigation of the Company
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(a) - Legal Requirements of the Company
Schedule 4.19(b) - Compliance with Permits, Licenses, and other Authorizations by the Company
Schedule 4.19(c) - Environmental and Safety Requirements of the Company
Schedule 4.20 - Product Warranty by the Company
Schedule 4.21 - Powers of Attorney on Behalf of the Company
Schedule 4.22 - Bank Accounts of the Company
Schedule 5.5 - Grant of Certain Warrants
Schedule 5.6 - Conversion of Base Ten Derivative Securities
Schedule 5.8 - Certain Stockholders of the Company (Affiliate Letter)
Schedule 5.10 - Conversion of Company Derivative Securities
Schedule 6.2(l) - Resignations of Certain Directors and Officers of Base Ten
Schedule 6.3(m) - Resignations of Certain Directors and Officers of the Company
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER made as of January 18, 2002 (the
"Agreement"), by and among Base Ten Systems, Inc., a New Jersey corporation
having its principal office at 535 East County Line Road, Suite 16, Lakewood,
New Jersey 08701 ("Base Ten"), Newco B10, Inc., a Nevada corporation
wholly-owned by Base Ten having its principal office at 535 East County Line
Road, Suite 16, Lakewood, New Jersey 08701 ("Newco," and together with Base Ten,
the "Purchasers") and ConvergenceHealth.com, a Nevada corporation having its
principal office at 774 Mays Boulevard, Suite 386, Incline Village, Nevada 89451
(the "Company," and together with the Purchasers, the "Parties").
WHEREAS, Base Ten owns 100 shares of common stock, without par
value, of Newco (the "Newco Common Stock"), which Base Ten 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 State of Nevada, (ii) immediately preceding the
Effective Time (as defined in Section 1.7), Base Ten will effect a one for one
thousand share combination of the outstanding shares of Base Ten Class A Common
Stock and Class B Common Stock (the "Share Combination"), (iii) after the
Effective Time, Base Ten will change its state of incorporation from New Jersey
to Nevada by means of a merger with and into a wholly-owned Nevada subsidiary of
Base Ten formed solely for the purpose of effecting such change (the
"Reincorporation"), (iv) Base Ten will issue the Merger Consideration (as
defined in Section 1.4(b)(i)) in accordance with Section 1.4, and (v) Base Ten
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 Base Ten, 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 Base
Ten, Newco, and the Company shall obtain the approval of their respective
stockholders for the transactions contemplated by this Agreement; and
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 premises and mutual
covenants and agreements set forth in this Agreement, the Parties hereby agree
as follows:
1
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.7),
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
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 thereupon be a wholly-owned Subsidiary of Base Ten.
1.2 Certificate of Incorporation, Bylaws, and Board of Directors.
(a) At the Effective Time:
(i) the articles of incorporation of the Company, as
in force and effect immediately prior to the Effective Time, shall be the
articles of incorporation of the Company;
(ii) the bylaws of the Company, as in force and
effect immediately prior to the Effective Time, shall be the bylaws of the
Company;
(iii) the board of directors of the Company serving
after the Merger shall be those persons listed as directors on Schedule
1.2(a)(iii);
(iv) the officers of the 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) Subject to the approval of Base Ten's stockholders, before
or at the Effective Time, or as soon as practicable thereafter, Base Ten shall
file with the Department of Treasury of the State of New Jersey an amendment to
its Certificate of Incorporation changing its name to Convergence Software
Systems, 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 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 Base Ten, Newco, 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.
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(b) 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,
subject to the Share Combination to occur prior to the issuance of the Merger
Consideration, into the right to receive 0.001919 shares (as may be adjusted
from time to time in accordance with Section 5.17 and based upon the actual
number of fractional shares of Base Ten Common Stock repurchased by Base Ten as
a result of the Share Combination; the "Exchange Ratio") of Base Ten Class A
Common Stock (the "Merger Consideration"). Each certificate representing the
Merger Consideration shall be stamped or otherwise imprinted with a restrictive
legend indicating that the shares represented by such certificate have not been
registered under the Securities Act and are not transferable unless subject to
registration or an exemption therefrom, as set forth in an Opinion of Counsel
acceptable to Base Ten. At the Effective Time, stockholders of the Company
immediately prior to the Effective Time will own approximately 67.33% of the
post merger outstanding shares of Base Ten and stockholders of Base Ten
immediately prior to the Effective Time will own approximately 32.66% of the
post merger outstanding shares of Base Ten, subject to the adjustment
contemplated in Section 5.17 and subject to the Share Combination All shares of
Capital Stock of the Company owned directly or indirectly by the Company shall
be canceled and retired and shall cease to exist and no capital stock of Base
Ten, cash or other consideration shall be paid or delivered in exchange
therefor.
(ii) Fractional Shares. No fraction of a share of
Base Ten Common Stock will be issued in connection with the Merger. Calculations
of the number of shares to be received by a stockholder 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 Base Ten Class A Common Stock and such
calculations which result in a fractional share less than 0.5 of a share will be
rounded down to the nearest whole share of Base Ten Class A Common Stock.
(iii) Company Options and Warrants. At the Effective
Time, other than such options and warrants set forth on Schedule 1.4(b)(iii), if
any, all options, warrants, or other rights exercisable for or convertible into
shares of Capital Stock of the Company arising or granted by the Company prior
to the date hereof that are outstanding and unexercised immediately prior to the
Effective Time ("Company Derivative Securities") shall terminate, and all
options, warrants, or other rights exercisable for or convertible into shares of
Capital Stock of the Company arising or granted by the Company after the date
hereof and prior to the Effective Time that are outstanding and unexercised
immediately prior to the Effective Time shall terminate.
(iv) Base Ten Options and Warrants. At the Effective
Time, other than such options and warrants set forth on Schedule 1.4(b)(iv), if
any, all options, warrants, or other rights exercisable for or convertible into
shares of Base Ten Common Stock or Base Ten Preferred Stock arising or granted
by Base Ten prior to the date hereof that are outstanding and unexercised
immediately prior to the Effective Time ("Base Ten Derivative Securities") shall
terminate, and all options, warrants, or other rights exercisable for or
convertible into shares of Base Ten Common Stock or Base Ten Preferred Stock
arising or granted by Base Ten after the date hereof and prior to the Effective
Time that are outstanding and unexercised immediately prior to the Effective
Time shall terminate.
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1.5 Exchange of Certificates; Payment of Merger Consideration.
(a) Certificate Delivery Requirements. Immediately after the
effective time of the Reincorporation, 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 Base Ten the certificates that
represent the Company Shares held by such stockholder ("Certificates"), 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 Base Ten
immediately after the Closing. Until so surrendered, each Certificate
representing Company Shares shall be deemed for all purposes to evidence only
the right to receive the Merger Consideration in accordance with Section
1.4(b)(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 delivery of the
Merger Consideration.
(b) Exchange Procedures. Upon surrender by each stockholder of
the Company of its Certificate(s), Base Ten shall deliver to each such
stockholder a certificate representing the number of whole shares of Base Ten
Class A 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 Company of the shares of the Company which were issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates representing Company Shares that were outstanding immediately
prior to the Effective Time are presented to the 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 Company Shares shall have been lost, stolen or
destroyed, then Base Ten shall cause the issuance of the appropriate portion of
the Merger Consideration to be made in exchange for such lost, stolen or
destroyed certificates, upon the delivery to Base Ten of an affidavit of that
fact by the holder thereof; provided, however, that Base Ten 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, with such bond as Base Ten may reasonably direct as
indemnity against any claim that may be made against Base Ten with respect to
the Certificates alleged to have been so lost, stolen or destroyed.
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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, and the Reincorporation
qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(F)
of the Code. Each Party agrees that it will use all commercially reasonable
efforts to assure that the Merger shall so qualify, and Base Ten 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 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, Base Ten and the Company shall file the Certificate of Merger with
the Secretary of State of the State of Nevada. The effective date and time of
the Certificate of Merger to be filed with the Secretary of State of the State
of Nevada to effectuate the Merger is referred to herein as, the "Effective
Time."
1.8 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 Base Ten 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."
1.9 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 Base Ten
until the Effective Time.
1.10 Hart Scott Rodino. The Parties represent to each other that they
are not that they are not aware of any facts relating to the transaction that
would require pre-merger notification to be filed with the Federal Trade
Commission pursuant to the Hart Scott Rodino Act.
1.11 Investment in the Company. Prior to or concurrent with the
execution of this Agreement, (i) Base Ten shall purchase 800,000 shares of the
Company's Series A-3 Preferred Stock (the "BT Purchased Shares") for an
aggregate purchase price of $200,000 ($0.25 per share), on the terms and
conditions set forth in the Purchase Agreement, dated as of the date hereof, by
and among Base Ten and the Company, substantially in the form of Exhibit A
annexed hereto (the "Purchase Agreement"), and (ii) Byron Gehring ("Gehring")
shall execute and deliver to Base Ten a letter, substantially in the form of
Exhibit B annexed hereto (the "Gehring Agreement"), by which Gehring shall agree
to the terms of the Limited Put Option described in Section 1.11(a) hereof. The
BT Purchased Shares shall be subject to the following Limited Put Option and
Limited Call Right upon the termination of this Agreement as a result of the
events specified below:
5
(a) Limited Put Option. In the event that the Merger is not
consummated on or before the date specified in Section 7.1(b) solely as a result
of the Company's failure to satisfy the condition required of it pursuant to
Section 6.3(q), Base Ten shall have the right (the "Limited Put Option") to
require Gehring to purchase the BT Purchase Shares for an aggregate
consideration of $100,000. Under the terms of the Gehring Agreement, Base Ten is
required to provide 30 days written notice of its intent to exercise the Limited
Put Option, and Gehring shall have 30 days from the date of such notice to
purchase the BT Purchased Shares.
(b) Limited Call Right. In the event that the Merger is not
consummated on or before the date specified in Section 7.1(b) due to Base Ten's
failure to close the Merger for any reason other than
(1) the Company's failure to satisfy any of the
conditions set forth in Section 6.3, or
(2) the non-occurrence of any the conditions set forth in
Section 6.1,
the Company shall have the right (the "Limited Call Right"), for a period
beginning on the date of termination of this Agreement and continuing until the
first annual anniversary of such date, to require Base Ten to sell the BT
Purchased Shares to the Company for an aggregate purchase price of $100,000. To
exercise the Limited Call Right, the Company is required to provide Base Ten
with 30 days advance written notice of its exercise of such right and Base Ten
shall effect the sale of the BT Purchased Shares no later than 30 days after the
date of such notice. The Limited Call Right is granted in lieu of the
availability to the Company of any provision for any reimbursement of
Professional Expenses.
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:
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"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.
6
"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 Base Ten" mean the assets of Base Ten and its
Subsidiaries shown on the Latest Base Ten Balance Sheet or acquired by Base Ten
or any Subsidiary of Base Ten after the date of the Latest Base Ten Balance
Sheet, less any assets disposed of by Base Ten or such Subsidiary in the
ordinary course of business after the date of the Latest Base Ten Balance Sheet.
"Base Ten" has the meaning set forth in the Preamble.
"Base Ten Class A Common Stock" has the meaning set forth in
Section 3.2(a).
"Base Ten Class B Common Stock" has the meaning set forth in
Section 3.2(a).
"Base Ten Common Stock" has the meaning set forth in Section
3.2(a).
"Base Ten Contracts" has the meaning set forth in Section 3.13(a).
"Base Ten Derivative Securities" has the meaning set forth in
Section 1.4(b)(iv).
"Base Ten Preferred Stock" has the meaning set forth in Section
3.2(a).
"Base Ten Meeting" has the meaning set forth in Section 5.1(a).
"Base Ten Reports" has the meaning set forth in Section 3.5.
"BT Purchased Shares" has the meaning set forth in Section 1.11.
"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, books of original entry, 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
developing and implementing niche software applications within the healthcare
industry and the provision of such products and services to insurance companies,
health maintenance organizations, preferred provider organizations,
corporations, and other entities providing healthcare services and products.
"Capital Stock of the Company" has the meaning set forth in Section
4.2.
"Certificates" has the meaning set forth in Section 1.5(a).
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"Closing" has the meaning set forth in Section 1.8.
"Closing Date" has the meaning set forth in Section 1.8.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Company" has the meaning set forth in the Preamble. Base Ten
acknowledges that the Company may be required to change its name from
ConvergenceHealth.com prior to the Effective Time, and the Parties agree that
such change shall in no way affect this Agreement.
"Company Affiliate Letter" has the meaning set forth in Section
5.8.
"Company Derivative Securities" has the meaning set forth in
Section 1.4(b)(iii).
"Company Meeting" has the meaning set forth in Section 5.1(a).
"Company Shares" has the meaning set forth in Section 1.4(b)(i).
"Tax Representation Letter" has the meaning set forth in Section
5.7.
"Effective Time" has the meaning set forth in Section 1.7.
"Employee Pension Plans" has the meaning set forth in Section
3.16(b).
"Employee Welfare Plans" has the meaning set forth in Section
3.16(a).
"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.
"Exchange Ratio" has the meaning set forth in Section 1.4(b)(i).
8
"Form 15" means a Certification and Notice of Termination and
Registration under Section 12(g) of the Securities Exchange Act of 1934 or
Suspension of Duty to File Reports under Sections 13 and 15(d) of the Exchange
Act of 1934.
"GAAP" means, at a given time, United States generally accepted
accounting principles, consistently applied.
"Gehring Agreement" has the meaning set forth in Section 1.11.
"Government Entity" means the United States of America or any other
nation, state, province, or political subdivision thereof, or any entity,
including any agency or commission, 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, any actual
or contingent: (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.
"Joint Proxy Statement" has the meaning set forth in Section
5.1(a).
"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.
9
"Legal Requirement" means any requirement arising under any law,
statute, ordinance, treaty, rule or regulation, and any requirement arising from
a determination, direction, action or order of an arbitrator or 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.
"Limited Call Right" has the meaning set forth in Section 1.11(b).
"Limited Put Option" has the meaning set forth in Section 1.11(a).
"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.
"Merger Consideration" has the meaning set forth in Section
1.4(b)(i).
"New Base Ten Option Plan" has the meaning set forth in Section
5.11.
"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 Base Ten
Shares (as defined herein), and, as to other Assets of the Company, and Assets
of Base Ten, (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 Base Ten, as the case may be.
10
"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.
"Plan of Merger" has the meaning set forth in Section 1.1.
"Plans" means all Employee Pension Plans, Employee Welfare Plans,
Other Plans and Multiemployer Plans to which a Party contributes or is a party.
"Professional Expenses" has the meaning set forth in Section 7.3.
"Proprietary Rights" means all of the following owned by, issued
to, or licensed to a Party: (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 a Party for use in its
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).
"Purchase Agreement" has the meaning set forth in Section 1.11.
"Quarterly Reports" has the meaning set forth in Section 3.5.
"Release" means a release or discharge of substances, including
hazardous substances, as set forth in CERCLA.
"Schedule 14A" has the meaning set forth in Section 5.1(a).
"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 a
Party in the conduct of its business as currently conducted and presently
proposed to be conducted.
11
"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 or, if less
than a majority ownership interest, has the right to select Persons to serve on
its governing board. For purposes of this definition, 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 manager, the managing director, or the general
partner of such entity.
"Taxes" means any federal, state, county, local or foreign taxes,
charges, fees, levies, other assessments or withholding taxes or charges imposed
by any Government 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.
12
(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,
Base Ten hereby represents and warrants to the Company that:
3.1 Organization and Power
(a) Base Ten is a corporation duly organized, validly existing
and in good standing under the laws of the State of New Jersey. Base Ten is duly
qualified to do business in each jurisdiction in which it owns or occupies real
property, each jurisdiction in which its employees are assigned, and each
jurisdiction in which its ownership of property or conduct of business requires
it to so qualify, except where the failure to be so qualified would not have a
material adverse effect on the business of Base Ten. Schedule 3.1(a) lists every
jurisdiction where Base Ten is duly qualified to do business, lists all states
in which Base Ten owns, leases or is in control of any personal property or real
property and all states in which any employees of Base Ten are located, and
identifies each such employee and provides a brief description of such property.
(b) Newco is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada. 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 Base Ten 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 each Subsidiary of Base Ten and the
jurisdiction of organization for each such Subsidiary of Base Ten.
(d) Except as set forth on Schedule 3.1(d), to the Knowledge
of Base Ten, each Subsidiary of Base Ten (excluding Newco and any entity formed
for the purpose of effecting the Reincorporation) is a corporation duly
organized, validly existing, and in good standing under the laws of its
respective jurisdiction of incorporation and is duly qualified to do business in
each jurisdiction in which it owns or occupies real property, each jurisdiction
in which its employees are assigned, and each jurisdiction in which its
ownership of property or conduct of business requires it to so qualify, except
to the extent that such failure to do so does not materially interfere with such
business or use of such property.
13
(e) Except as set forth on Schedule 3.1(e), all of the issued
and outstanding shares of each Subsidiary of Base Ten are owned by Base Ten.
(f) Schedule 3.1(f) lists the directors and officers of Base
Ten. Base Ten represents and warrants that Base Ten has delivered correct and
complete copies of the articles of incorporation and bylaws of Base Ten,
including all amendments thereto, to the Company prior to the date of this
Agreement. The minute books and stock transfer ledgers of Base Ten, which Base
Ten 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 Base Ten.
3.2 Capitalization.
(a) The authorized capital stock of Base Ten consists of
27,000,000 shares of Class A Common Stock, par value $5.00 per share (the "Base
Ten Class A Common Stock"), 400,000 shares of Class B Common Stock, par value
$5.00 per share (the "Base Ten Class B Common Stock," and together with the Base
Ten Class A Common Stock, the "Base Ten Common Stock"), and 994,200.9375 shares
of preferred stock, par value $1.00 per share (the "Base Ten Preferred Stock").
As of December 31, 2001, there were 5,358,812 shares of Base Ten Class A Common
Stock outstanding, 12,667 shares of Class B Common Stock outstanding, and no
shares of Base Ten Preferred Stock outstanding. As of December 31, 2001, a total
of 629,781 shares of Base Ten Common Stock were reserved for issuance pursuant
to outstanding securities that are convertible into or exchangeable for shares
of Base Ten Common Stock. Except as set forth on Schedule 3.2(a), there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts or commitments
that could require Base Ten 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 Base Ten.
3.3 Validity of Shares of Base Ten Common Stock. The shares of Base Ten
Common Stock to be issued in connection with the Merger (the "Base Ten Shares"),
each of which shall be shares of Base Ten Class A Common Stock, 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 Base Ten.
3.4 Authorization; Binding Effect; No Breach.
(a) The execution, delivery and performance by Base Ten of
each Transaction Document to which it is a party has been duly authorized by
Base Ten. Each Transaction Document to which Base Ten is a party constitutes a
valid and binding obligation of Base Ten which is enforceable against Base Ten
in accordance with its terms. The execution, delivery and performance by Base
Ten 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 Base Ten or any agreement, instrument, or other document, or any Legal
Requirement, to which Base Ten or any of its assets is subject.
14
(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.
(c) On or prior to the date hereof, Base Ten has delivered the
following documents to the Company
(i) copies of the resolutions duly adopted by Base Ten's
board of directors authorizing Base Ten's execution, delivery and performance of
this Agreement and the consummation of the Merger and all other transactions
contemplated by this Agreement, certified by an officer of Base Ten;
(ii) copies of the resolutions duly adopted by Newco's
board of directors authorizing Newco's execution, delivery and performance of
this Agreement and the consummation of the Merger and all other transactions
contemplated by this Agreement, certified by an officer of Newco;
(iii) copies of the resolutions duly adopted by Base Ten
as the stockholder of Newco approving the Merger and this Agreement, certified
by an officer of Newco; and
(iv) a certificate (dated not more than ten business days
prior to the date hereof) of the Treasurer of the State of New Jersey as to the
good standing of Base Ten in New Jersey.
15
3.5 Base Ten Reports; Financial Statements. Base Ten has filed with the
SEC each registration statement, report, proxy statement or information
statement required to be filed by it since January 1, 2001 through the date
hereof, including (i) Base Ten's Annual Report on Form 10-KSB for the year ended
December 31, 2000 (the "Form 10-KSB"), and (ii) Base Ten's Quarterly Reports on
Form 10-QSB for the calendar quarters ended March 31, 2001, June 30, 2001, and
September 30, 2001 (collectively, the "Quarterly Reports") copies of which have
been made available to the Company. The Form 10-KSB and the Quarterly Reports
are collectively referred to as, the "Base Ten Reports."
(a) As of their respective dates, the Base Ten 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-KSB 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-KSB
(including the related notes and schedules) fairly presents in all material
respects the consolidated financial position of Base Ten 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-KSB
(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 Base Ten 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 Nevada, the filing
with the SEC of the Joint Proxy Statement on Schedule 14A, both in preliminary
and definitive forms (and any amendments thereto), the filing with the SEC of a
Current Report on Form 8-K (and any amendments thereto), and filings with the
SEC of notification pursuant to Rule 425 of the Securities Act, if necessary,
the filing with the SEC of the Form 15, if eligible, and any filings with the
states of New Jersey and Nevada, respectively, to effect the Reincorporation,
subsequent to the Effective Time, no notices, reports or other filings are
required to be made by Base Ten with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by Base Ten from,
any Government Entity in connection with the execution and delivery of this
Agreement by Base Ten and the consummation of the transactions contemplated by
the Transaction Documents.
3.7 Assets of Base Ten.
(a) The Assets of Base Ten (which, for purposes of this Section
3.7, includes the assets of each Subsidiary of Base Ten) and other assets
reflected in the Books and Records of Base Ten constitute all of the assets and
rights which are used or useful in the business of Base Ten as currently
conducted and presently proposed to be conducted;
16
(b) Base Ten 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 Base Ten in its
business, located on its premises, shown on the Latest Base Ten Balance Sheet or
acquired by Base Ten since the date of the Latest Base Ten 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 past practice by Base Ten since the date of the Latest Base
Ten Balance Sheet (which disposals do not exceed $25,000 in the aggregate) and
(ii) Liens disclosed on the Latest Base Ten Balance Sheet (including any notes
thereto); and
(c) Base Ten's 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 Base Ten and consistent with its past practice.
3.8 Absence of Certain Changes. Except as disclosed in the Base Ten
Reports filed prior to the date hereof, since December 31, 2000, Base Ten 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 Base
Ten 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 Base Ten 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 Base Ten or any of its
Subsidiaries.
3.11 Insurance. The attached Schedule 3.11 contains a description of
each insurance policy maintained by Base Ten or its Subsidiaries with respect to
Base Ten, its Subsidiaries, its properties, assets or business, and each such
policy is in full force and effect. Base Ten 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) Base Ten and each Subsidiary of Base Ten 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 Base Ten and each Subsidiary of Base Ten
(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 Base Ten balance sheet.
17
(d) No information related to Tax matters has been requested by
any Taxing authority and there are no ongoing examinations or claims against
Base Ten or any Subsidiary of Base Ten for Taxes, and no notice of any audit,
examination, or claim for Taxes, whether pending or threatened, has been
received.
(e) Base Ten and each Subsidiary of Base Ten 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 Base Ten or a Subsidiary of Base Ten does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction. Base Ten 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 Base
Ten or a Subsidiary of Base Ten that arose in connection with any failure (or
alleged failure) to pay any Tax.
(h) Base Ten and each Subsidiary of Base Ten 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 Base Ten, 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 Base
Ten or otherwise have an adverse effect on Base Ten or any of its Subsidiaries
or their respective businesses.
(j) There are no unresolved disputes or claims concerning the Tax
liability of Base Ten or each Subsidiary of Base Ten.
(k) Base Ten and each Subsidiary of Base Ten have been, and are
currently not, subject to a Tax audit.
(l) Base Ten 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) Base Ten has not filed any consent agreement under Section
341(f) of the Code concerning collapsible corporations.
(n) Base Ten 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.
18
(o) Base Ten has never been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code.
(p) Base Ten 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) Base Ten and each Subsidiary of Base Ten are not a party to
any Tax allocation, Tax indemnity or Tax sharing agreement. Base Ten (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 Base Ten) 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) Base Ten's taxable year ends on December 31 of each year.
(s) Base Ten 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 Base Ten or any of its
Subsidiaries that could affect their liability for Taxes for any period after
the Closing Date.
(u) No property of Base Ten is "tax-exempt use property" within
the meaning of Section 168(h) of the Code.
(v) Base Ten is not a party to any lease made pursuant to Section
168(f) of the Code.
(w) Base Ten 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 Base Ten is a party and all agreements to which any
Subsidiary of Base Ten is a party (the "Base Ten Contracts"). All references to
Base Ten in this Section 3.13 refer to both Base Ten and to each Subsidiary of
Base Ten. Other than this Agreement and the agreements described on the attached
Schedule 3.13(a), neither Base Ten nor any Subsidiary of Base Ten is a party to
any currently in force 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;
19
(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 Base Ten 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 Base Ten
Shares or any of the Assets of Base Ten;
(v) contract pursuant to which Base Ten is the lessee of,
or holds or operates, any real or personal property owned by any other Person;
(vi) contract pursuant to which Base Ten is the lessor of,
or permits any third party to hold or operate, any real or personal property
owned by Base Ten or of which Base Ten 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 Base Ten 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 Base Ten's past practice;
(ix) contract prohibiting Base Ten from freely engaging in
any business anywhere in the world;
(x) independent sales representative or distributorship
agreement with respect to the business of Base Ten; or
(xi) executory contract (other than one described in
Sections 3.13(a)(i) through 3.13(a)(x)) which is material to Base Ten or
involves a consideration in excess of $5,000.
(b) Enforceability. Each Base Ten Contract described on
Schedule 3.13(a) is a valid and binding agreement of Base Ten, enforceable by
Base Ten 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).
20
(c) Compliance. Except as set forth on Schedule 3.13(c), Base
Ten has performed all obligations required to be performed by it under each Base
Ten Contract, and Base Ten 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 Base Ten pursuant to any Base Ten Contract. Base Ten has
no present expectation or intention of not fully performing any obligation of
Base Ten pursuant to any Base Ten Contract, and Base Ten has no Knowledge of any
breach or anticipated breach by any other party to any Base Ten Contract.
(d) Leases. With respect to each Base Ten Contract which is a
lease of personal property, Base Ten 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 current officer, director, stockholder or Affiliate of Base Ten (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 executory agreement, contract, commitment or transaction with Base Ten
(other than this Agreement) or has any interest in any property used by Base
Ten.
3.14 Proprietary Rights. All references to Base Ten in this Section
3.14 refer to both Base Ten and to each Subsidiary of Base Ten.
(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 Base Ten 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 Base Ten 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
Base Ten 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 Base Ten. 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 Base Ten to any
third party, all licenses, covenants not to sue, and other rights granted by any
third party to Base Ten, 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 Base Ten or
is otherwise owned by Base Ten.
21
(b) Ownership; Claims. Base Ten 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 Base Ten's business as presently
conducted and as presently proposed to be conducted, and Base Ten has taken all
necessary actions to maintain and protect its interest in all the Proprietary
Rights. The owners of the Proprietary Rights licensed to Base Ten have taken all
necessary actions to maintain and protect the Proprietary Rights which are
subject to such licenses.
(i) Base Ten owns in the entirety or has the right to use
all of the Proprietary Rights described on Schedule 3.14(a) and each other
Proprietary Right that is material to the conduct of the business of Base Ten
(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 Base Ten
asserting the invalidity, misuse or unenforceability of any of such Proprietary
Rights, and there are no grounds known to Base Ten for any such claim;
(iii) except as set forth on Schedule 3.14(b), Base Ten
has not received any notice of (and is not aware of any facts that 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 Base Ten license rights from any Person),
(iv) the conduct of the business of Base Ten has not
infringed, misappropriated or violated, and does not infringe, misappropriate or
violate in any respect, any proprietary right of any other Person;
(v) except as set forth on Schedule 3.14(b), to the
Knowledge of Base Ten, 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 Base Ten 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 Base Ten's Knowledge, no executive or key employee of Base Ten, or any
Subsidiary of Base Ten, or any group of employees of Base Ten or any Subsidiary
of Base Ten, has any plans to terminate employment with Base Ten or such
Subsidiary.
22
(b) Compliance and Restrictions. Base Ten 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
Base Ten 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 Base
Ten, any Subsidiary of Base Ten, nor any employees of Base Ten or any Subsidiary
of Base Ten 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 Base
Ten or any Subsidiary of Base Ten, (ii) any change of control provisions set
forth in any agreement between any Person and Base Ten or any Subsidiary of Base
Ten, (iii) any severance payments to become due and owing to any Person by Base
Ten or by any Subsidiary of Base Ten, or (iv) any other similar benefits.
3.16 ERISA. All references to Base Ten in this Section 3.16 refer to
both Base Ten and to each Subsidiary of Base Ten. 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 Base Ten:
(a) Base Ten 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) Base Ten 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) Base Ten 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) Base Ten 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 Base Ten has
complied substantially with the requirements of Code Section 4980B;
23
(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) Base Ten 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 Base
Ten (the "Controlled Group") that has not been satisfied in full, and no
condition exists that presents a risk to Base Ten 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 Base Ten or any of the Base Ten Shares or any of the Assets of Base
Ten after the Closing.
3.17 Real Estate.
(a) Owned Properties. Neither Base Ten nor any Subsidiary of
Base Ten owns any real property.
(b) Leased Property. The attached Schedule 3.17(b) lists all
real property leased or subleased to Base Ten or to any Subsidiary of Base Ten,
and all other real property which is used in the business of Base Ten (or any
Subsidiary of Base Ten) and not owned by Base Ten or any Subsidiary of Base Ten
(the "Base Ten Leased Real Property"). Base Ten 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 "Base Ten Leases"). With respect to the Base
Ten Leased Real Property and each of the Base Ten Leases:
(i) such Base Ten Lease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) Base Ten is not aware that any party to such Base Ten
Lease is in breach or default, and Base Ten 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 Base Ten
Lease;
(iii) Base Ten is not aware that any party to such Base
Ten Lease has repudiated any provision thereof;
(iv) there are no disputes, oral agreements, or
forbearance programs in effect as to such Base Ten Lease;
(v) in the case of each Base Ten 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) Base Ten has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold created pursuant to such Base Ten Lease;
24
(vii) none of the Base Ten 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 Base Ten, all buildings,
improvements and other structures located upon the Base Ten 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 Base Ten Leases; and
(ix) to the Knowledge of Base Ten, all buildings,
structures and other improvements located upon the Base Ten 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 Base Ten Leased Real Property are sufficient to enable the continued
operation of the Base Ten Leased Real Property in the manner currently being
used in connection with the operation of the business of Base Ten.
3.18 Compliance with Laws. All references to Base Ten in this Section
3.18 refer to both Base Ten and to each Subsidiary of Base Ten.
(a) Generally. Except as set forth on Schedule 3.18(a), Base Ten
has not violated any Legal Requirement, and Base Ten has not received notice
alleging any such violation.
(b) Required Permits. Base Ten has complied with (and is in
compliance with) all permits, licenses and other authorizations required for the
occupation of Base Ten facilities and the operation of the business of Base Ten.
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 Base
Ten (as it is presently conducted by Base Ten) thereafter.
(c) Environmental and Safety Matters. Without limiting the
generality of Sections 3.18(a) and (b), except as set forth on Schedule 3.18(c):
(i) Base Ten has complied, and is in compliance with, all
Environmental and Safety Requirements.
(ii) Without limiting the generality of the foregoing, Base
Ten 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).
25
(iii) Base Ten 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 Base Ten:
(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) Base Ten 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 Base Ten 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) Base Ten 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 Base Ten.
(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 Base Ten 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
Base Ten 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 Base Ten exists for replacement or other
damages in connection with any such product.
26
3.20 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of Base Ten, or on behalf of any Subsidiary of Base Ten,
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 Base Ten, or
any Subsidiary of Base Ten or any other Person on behalf of Base Ten, 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 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 it owns
or occupies real property, each jurisdiction in which its employees are
assigned, and each jurisdiction in which its ownership of property or conduct of
business requires it to so qualify, except where the failure to be so qualified
would not have a material adverse effect on the business of the Company.
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.
(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 Base Ten prior to the date of the
Agreement. The minute books and stock transfer ledgers of the Company, which the
Company represents and warrants will be made available to Base Ten 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.
27
4.2 Capitalization.
(a) As of December 31, 2001, the authorized capital stock of
the Company consists solely of 75,000,000 shares of capital stock (the "Capital
Stock of the Company"), including 50,000,000 shares of common stock, par value
$0.001 per share (the "Company Common Stock"), of which 2,655,000 shares are
issued and outstanding, and of which 2,017,722 shares of Company Common Stock
are not issued and outstanding but are issuable upon conversion or exercise of
other securities, 25,000,000 shares of preferred stock, par value $0.001 per
share (the "Company Preferred Stock"), of which 325,000 shares are designated as
Series A-1 Preferred Stock (of which 325,000 shares are issued and outstanding),
and 1,375,000 shares are designated as Series A-2 Preferred Stock (of which
1,316,009 shares are issued and outstanding), and 5,000,000 shares are
designated as Series A-3 Preferred Stock (of which 4,536,320 shares are issued
and outstanding, including shares issued to Base Ten and all shares of Series
A-3 Preferred Stock that may be or become issuable upon the exercise or
conversion of any security or upon exercise of any right). At the Effective
Time, the Company shall have no more than 5,000,000 shares of Company Common
Stock issued and outstanding (including shares of Company Common Stock issuable
upon the exercise or conversion of any security), and the Company shall have no
more than 7,000,000 shares of Company Preferred Stock issued and outstanding.
Each share of Company Preferred Stock is convertible into no more than one share
of Company Common 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.
(b) Except as set forth on Schedule 4.2(b):
(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 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;
(iii) there are no voting trusts, proxies or other
agreements or understandings with respect to the voting of the capital stock of
the Company;
(iv) no officer or director of the Company has any
rights in any specific property of the Company.
(v) neither 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 the Business of
the Company (or any substantial portion thereof) to any Person other than Base
Ten, 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
to any Person.
28
(vi) since September 30, 2001, (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, (ii) the Company has not redeemed,
purchased, or otherwise acquired any of the Company's capital stock or equity
interests, and (iii) there has not been any split, combination or
reclassification or any shares of the Capital Stock of the Company.
4.3 Authorization; Binding Effect; No Breach.
(a) 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 Base Ten, 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.
(b) On or prior to the date hereof, the Company has delivered
the following documents to Base Ten:
(i) copies of the resolutions duly adopted by the
Company's board of directors authorizing the Company's execution, delivery and
performance of this Agreement and the consummation of the Merger and all other
transactions contemplated by this Agreement, certified by an officer of the
Company;
(ii) a certificate (dated not more than ten business
days prior to the date hereof) of the Secretary of State of the State of Nevada
as to the good standing of the Company in Nevada; provided, that, the Company
may deliver such certificate to Base Ten on or before January 22, 2002.
29
4.4 Subsidiaries; Investments. Except as set forth on the attached
Schedule 4.4, the Company has no Subsidiaries and 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 that constitute cash or
cash equivalents.
4.5 Financial Statements and Related Matters.
(a) Financial Statements. The Company (i) has delivered to
Base Ten the unaudited balance sheet of each of the Company as of September 30,
2001 (the "Latest Company Balance Sheet"), the related unaudited consolidated
statements of income and cash flows for the nine month period then ended as well
as the interim consolidated balance sheets at September 30, 2001 and the
consolidated statements of income and cash flows for the three month period
ended September 30, 2001 (collectively, the "Unaudited Financial Statements"),
copies of which are annexed to Schedule 4.5, and (ii) will deliver to Base Ten,
on or before February 4, 2002, 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 (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), 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), and is consistent with the Audited Financial Statements.
(ii) Except as set forth on the attached Schedule 4.5,
each of the Audited Financial Statements (including in all cases the notes
thereto) 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, are accurate and complete, are consistent with the books and records of
the Company (which, in turn, are accurate and complete) and were 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.
30
(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 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.
31
4.8 Absence of Certain Developments. Since December 31, 2000, there has
been no material 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. Except as set forth on Schedule 4.8 or
otherwise expressly contemplated by this Agreement, since the date of the Latest
Company Balance Sheet, the Company has not:
(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);
32
(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 Nevada, 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 on Schedule 4.10:
(a) 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 (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
Latest 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 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;
33
(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 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 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 has been, and are currently not, subject to a Tax
audit.
(l) The Company has 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 is 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.
34
(r) The Company's taxable year ends 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 is a party (the "Contracts"). Other than this
Agreement and the agreements described on Schedule 4.11(a), the Company is not 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;
35
(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(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 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. Except as set forth on Schedule 4.11(c), 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.
36
4.12 Proprietary Rights.
(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.
37
(iii) Except as set forth on Schedule 4.12(b), 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.
(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 or the Business (pending or threatened against or
affecting any officer, director or employee 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 with respect Company's
properties, assets or business, and each such policy is in full force and
effect. The Company is 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 group of employees of the Company has any plans to terminate
employment with the Company.
38
(b) Compliance and Restrictions. The Company has 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 nor any employees 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, (ii) any change of control
provisions set forth in any agreement between any Person and the Company, (iii)
any severance payments to become due and owing to any Person by the Company, or
(iv) any other similar benefits becoming payable.
4.17 ERISA. 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
39
(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),
the Company owns no real property.
(b) Leased Property. The attached Schedule 4.18(b) lists and
describes briefly all real property leased or subleased to the Company and all
other real property which is used in the Business and not owned by 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;
40
(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.
(a) Generally. Except as set forth on Schedule 4.19(a), 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), except as set forth on Schedule 4.19(c):
(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).
41
(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 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 exists or has been asserted for
replacement or other damages in connection with any such product.
42
4.21 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf 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 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 Joint Proxy Statement; Issuance of Merger Consideration Without
Consideration.
(a) Joint Proxy Statement. Base Ten and the Company shall cooperate
in preparing a joint proxy statement (the "Joint Proxy Statement") which shall
be utilized to solicit proxies in connection with the meeting at which the
stockholders of Base Ten will vote on the Merger (the "Base Ten Meeting") and to
solicit proxies in connection with the meeting at which the Company's
stockholders will vote upon the Merger (the "Company Meeting"). Base Ten shall
file the appropriate portion of the Joint Proxy Statement with the SEC on
Schedule 14A (the "Schedule 14A"), in preliminary and definitive forms, and the
Company shall provide to Base Ten on a timely basis all such information as Base
Ten may require to promptly and properly prepare the Schedule 14A and file the
preliminary and definitive Schedule 14A (and any amendments thereto) with the
SEC.
(i) The Company shall prepare and provide to Base Ten on a
timely basis all financial statements required by the Company for inclusion in
the Joint Proxy Statement or the Schedule 14A and for any other filing required
to be made by Base Ten with the SEC or any other Government Entity.
43
(ii) Promptly after Base Ten and the Company confirm that the
Schedule 14A is satisfactory for filing in preliminary form, such Schedule 14A
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 Base Ten Meeting it
obtains Knowledge of any facts that might make it necessary or appropriate to
amend or supplement the Schedule 14A in order to make the statements contained
or incorporated by reference therein not misleading or to comply with applicable
law.
(b) Issuance of Merger Consideration without Registration.
(i) Base Ten shall issue the Merger Consideration without
registration under the Securities Act in reliance on the safe harbor provided in
Regulation D of the Securities Act or such other safe harbor or exemption from
registration as Base Ten may deem appropriate. Base Ten shall take any action
required to be taken under state blue sky or securities laws in connection with
the issuance of the Merger Consideration pursuant to the Merger, and the Company
shall furnish Base Ten all information concerning the Company and the holders of
its Capital Stock and shall take any action as Base Ten may reasonably request
in connection with any such action.
(ii) At or prior to the Effective Time, the Company shall
deliver to Base Ten confirmations from each stockholder of the Company that such
stockholder is either an Accredited Investor or that such stockholder, alone or
with such stockholder's representative:
(1) has such knowledge and experience in financial and
business matters that such stockholder is capable of evaluating the merits and
risks of the investment in Base Ten Common Stock;
(2) understands that an investment in Base Ten Common
Stock involves certain risks and such stockholder is able to bear the economic
risk of losing the entire investment in the Base Ten Common Stock;
(3) understands that the Base Ten Common Stock has not
been registered under the Securities Act or the securities laws of any other
state and are therefore subject to substantial restrictions on transfer;
(4) understands that Base Ten has no obligation or
intention to register the Base Ten Common Stock for resale under any federal or
state securities laws, and, therefore, such stockholder may be precluded from
selling or otherwise transferring or disposing of the Base Ten Common Stock or
any portion thereof and may have to bear the economic risk of investment in the
Base Ten Common Stock for an indefinite period of time;
(5) understands that no federal or state agency has
approved or disapproved the Base Ten Common Stock, passed upon or endorsed the
merits of the offering thereof, or made any finding or determination as to the
fairness of the Base Ten Common Stock for investment;
44
(6) acknowledges that such stockholder has had an
opportunity to consult with counsel and other advisers about an investment in
the Base Ten Common Stock and that all material documents, records and books
pertaining to this investment have, on request, been made available to such
stockholder and such stockholder's advisers;
(7) acknowledges that Base Ten has made available to such
stockholder and to such stockholder's advisors, the opportunity to ask questions
of, and receive answers from, Base Ten concerning Base Ten and to obtain any
additional necessary to verify the accuracy of the information given to such
stockholder or otherwise make an informed investment decision;
(8) understands that the Base Ten Common Stock is being
offered and issued in reliance on specific exemptions from the registration
requirements of federal and state securities laws and that Base Ten and
controlling persons thereof are relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings set
forth herein in order to determine the applicability of such exemptions and the
suitability of such stockholder to acquire the Base Ten Common Stock; and
(9) understands and acknowledges that, as a result of the
Merger, such stockholder will receive shares of Base Ten Common Stock for all of
such stockholder's shares of Capital Stock of the Company.
5.2. Access to Properties and Records; Confidentiality.
(a) Base Ten shall permit the Company and its agents and
representatives, including, without limitation, officers, directors, employees,
attorneys, auditors, accountants, and financial advisors (collectively, "Company
Representatives"), and the Company shall permit Base Ten and its agents and
representatives, including, without limitation, officers, directors, employees,
attorneys, auditors, accountants, and financial advisors (collectively, the
"Base Ten Representatives"), reasonable access to their respective properties,
and shall disclose and make available to the Company and the Company
Representatives or Base Ten and the Base Ten 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 the Company Representatives or Base Ten and the Base
Ten 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.
45
(b) All information furnished by the parties hereto previously
in connection with transactions contemplated by this Agreement or pursuant
hereto shall be used only for the purposes of evaluating the Merger contemplated
hereby, and for use in connection with the preparation and filing of the Joint
Proxy Statement with the SEC on Schedule 14A, in preliminary and definitive
forms (and any amendments thereto), and any other filings required to be made by
Base Ten with the SEC or any other Government Entity, including all preliminary
filing thereof and amendments thereto. Except as required to be disclosed in
connection with such filings, all such information 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;
provided, that, Base Ten may retain and utilize such information and materials
as maybe required by Base Ten for the preparation and filing of any Current
Report on Form 8-K by Base Ten with the SEC solely for such purposes. The
obligation to keep such information confidential shall continue indefinitely
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
46
(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 Base Ten and the Company will consist of the
following five directors: (a) Andrew Sycoff, (b) an individual designated by the
board of directors of Base Ten prior to the Effective Time, (c) Byron Gehring,
(d) Ken Waltzer, and (e) Jasna Gehring.
5.4 Post-Merger Officers of Base Ten. At the first meeting of the board
of directors of Base Ten that occurs after the Effective Time, Byron Gehring
shall be elected to serve as Chairman of the board of directors and the
President and Chief Executive Officer of Base Ten and Kenneth W. Riley shall be
elected to serve as Chief Financial Officer of Base Ten.
5.5 Grant of Certain Warrants. At the Effective Time, Base Ten shall
grant to the individuals set forth on Schedule 5.5 fully vested warrants,
substantially in the form of Exhibit C annexed hereto, to purchase an aggregate
number of shares of Base Ten Class A Common Stock representing 8% of the
outstanding shares of Base Ten Class A Common Stock immediately after the
Effective Time at an exercise price of $0.01 per share, in such proportions as
set forth on Schedule 5.5.
5.6 Cancellation of Certain Base Ten Derivative Securities and
Conversion of Certain Other Base Ten Derivative Securities. At the Effective
Time, the Base Ten Derivative Securities set forth on Schedule 1.4(b)(iv) shall
be converted into warrants to purchase shares of Base Ten Class A Common Stock
in accordance with Schedule 5.6, and all other Base Ten Derivative Securities
(as defined in Section 1.4(b)(iv)) shall terminate.
5.7 Tax Representation Letter. The Company shall secure and deliver to
Base Ten at or prior to Closing executed representations and warranties of each
of the Company and Byron Gehring, in substantially the form of Exhibit D
attached hereto (the "Tax Representation Letter"), which are required for the
issuance of an Opinion of Counsel regarding the tax status of the Merger.
47
5.8 Company Affiliate Letter. At or prior to Closing, the Company shall
deliver to Base Ten 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 5.8, which acknowledges each such stockholder's
understanding of such stockholder's responsibilities under, and restrictions on
transfer of shares imposed by, Rules 144 and 145 of the Securities Act with
respect to the shares of Base Ten Common Stock acquired by such stockholder
pursuant to this Agreement (the "Company Affiliate Letter").
5.9 Business Office. The post-Merger business office of Base Ten shall
be located at 774 Mays Boulevard, Suite 386, Incline Village, Nevada 89451.
5.10 Cancellation of Certain Company Derivative Securities and
Conversion of Certain Other Company Derivative Securities. At the Effective
Time, the Company Derivative Securities set forth on Schedule 1.4(b)(iii) shall
be converted into warrants to purchase shares of Base Ten Class A Common Stock
in accordance with Schedule 5.10, and all other Company Derivative Securities
(as defined in Section 1.4(b)(iii)) shall terminate.
5.11 Establishment of New Option Plan. Base Ten shall establish, and
submit to its stockholders for approval, a new employee stock option plan (the
"New Base Ten Option Plan") that, at the Effective Time, allocates a number of
shares which may be issued thereunder equal to 17% of the then outstanding
shares of Base Ten Class A Common Stock to such plan and which, when taken with
the warrants described in Section 5.5, shall allocate a minimum of an aggregate
of 25% of the then outstanding shares of Base Ten Class A Common Stock at the
Effective Time to such plan.
5.12 Conduct of the Business of the Company. During the period from the
date of this Agreement to the Effective Time, the Company shall conduct its
business only in the ordinary course and consistent with prudent business
practice, except for transactions permitted hereunder or with the prior written
consent of Base Ten, which consent will not be unreasonably withheld. The
Company shall use its reasonable best efforts to:
(a) preserve its business organization intact;
(b) keep available to itself the present services of their
respective employees; and
(c) preserve for itself and Base Ten the goodwill of its customers
and others with whom business relationships exist.
5.13 Negative Covenants.
(a) Company Negative Covenants. From the date hereof to the
Effective Time, except as otherwise approved by Base Ten in writing, or as
permitted or required by this Agreement, the Company shall not:
48
(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 Base Ten 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, reclassify, redeem, or repurchase 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;
(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 Base Ten.
(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 Base Ten;
(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 Base Ten Common Stock; or
(xii) agree to do any of the foregoing.
49
(b) Base Ten 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 Base Ten nor any Subsidiary of Base Ten
will:
(i) change any provision of its Certificate of Incorporation
or any similar governing documents; provided, that, Base Ten may file a
Certificate of Amendment to Base Ten's Certificate of Incorporation to effect
the Share Combination and to change its corporate name, as provided herein;
(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;
provided, that, Base Ten shall effect the Share Combination prior to the
Effective Time;
(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 Base Ten or any Subsidiary of
Base Ten;
(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, unless Base Ten is required to
relocate its business operations;
(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;
50
(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.
5.14 [RESERVED]
5.15 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) Base Ten 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, Base Ten will use reasonable business efforts to
maintain and preserve intact its business organization, properties, leases,
employees and advantageous business relationships, and Base Ten will not, nor
will it permit any Subsidiary of Base Ten 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.
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5.16 Limitation on Outstanding Shares of Capital Stock of the Company.
At the Effective Time, no more than an aggregate of 12,000,000 shares of the
Capital Stock of the Company shall be outstanding (or issuable upon the exercise
or conversion of any security).
5.17 Incremental Funding. In the event that the Company raises capital
through incremental equity funding during the period beginning on the date of
this Agreement and ending at the Effective Time, the Company will be compensated
by adjusting the resulting post-merger ownership interest of the shares of the
Company in Base Ten, in accordance with the following calculation (and the
Exchange Ratio and the Merger Consideration shall be adjusted accordingly):
Y = ($2,020,000 + X) / ($3,000,000 + X)
Where X represents the amount of incremental funding raised by the Company
during the period beginning on the date of this Agreement and ending at the
Effective Time, and Y represents the Company's respective ownership percentage
after accounting for the incremental funding. For example, if the Company raises
an additional $100,000 of capital during the referenced period, the post-Merger
ownership interest of the Company's stockholders in Base Ten shall be increased
from 67.33% to 68.39%. Notwithstanding the foregoing, it is expressly agreed and
understood that neither the amount of funds invested in the Company by Base Ten
in accordance with Section 1.11 nor the BT Purchased Shares (as defined in
Section 1.11) shall have an effect on the adjustment set forth in this Section
5.17. Without limiting the generality of the foregoing, in computing the
percentage equity interest in Base Ten to be held by the respective shareholders
in Base Ten and the Company post-Merger, the BT Purchased Shares shall not be
deemed to be outstanding shares and shall not be included in either calculation.
5.18. Base Ten Share Combination. Base Ten shall take all actions
necessary to effect the Share Combination immediately preceding the Effective
Time. Any stockholder of Base Ten who, as a result of the Share Combination,
owns less than one full share of Base Ten Common Stock, shall, at the Effective
Time, become entitled to be paid cash for such interest at the fair market value
of the Base Ten Common Stock at the Effective Time.
5.19 Reincorporation. Base Ten shall effect the Reincorporation as soon
as practicable after the later of (i) the Effective Time, and (ii) the effective
time of the Share Combination.
(a) Base Ten shall, in a timely manner, take all actions required
of Base Ten to expedite the Reincorporation, including, without limitation,
promptly delivering all notices relating to the Share Combination as may be
required by state and/or federal law and timely filing the Certificate of
Amendment to Base Ten's Certificate of Incorporation effecting the Share
Combination with the Treasurer of the State of New Jersey, which shall be
substantially in the form of Exhibit F annexed hereto.
(b) The Merger Consideration shall be issued by Base Ten as soon
as practicable after the effective time of the Reincorporation, and the Joint
Proxy Statement shall advise the respective stockholders of each of Base Ten and
the Company that, until immediately following the effective time of the
Reincorporation, (i) no certificates representing the Merger Consideration shall
be delivered to the stockholders of the Company, and (ii) no certificates
representing post-Share Combination shares of Base Ten Common Stock shall be
delivered to stockholders of Base Ten.
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5.20 Exclusivity.
(a) Between the date of this Agreement and the earlier to occur of
the Closing or the termination of this Agreement in accordance with Section 7.1,
neither Base Ten nor any person acting on its behalf shall hold discussions
with, negotiate with, provide any information to, or initiate, encourage,
solicit, or agree to any offer from, any person other than the Company,
regarding any merger, sale of securities, sale of assets, sale of liabilities,
or similar transaction involving Base Ten or any transaction that could be
expected to impede, delay, interfere with, prevent, or dilute the benefits to
the Company of the transactions contemplated hereby, unless:
(i) the board of directors of Base Ten determines in good
faith based on written advice of its outside legal counsel that the action is
necessary for the board of directors of Base Ten to comply with its fiduciary
duties to the shareholders of Base Ten under applicable law; and
(ii) prior to entering into negotiations, the board of
directors of Base Ten receives from the other party an executed confidentiality
agreement and proposal with terms no less favorable to Base Ten than those
contained in this Agreement; and
(iii) prior to entering into any such negotiations, Base Ten
provides written notice to the Company that includes the terms of the proposal,
the identity of the person making the proposal, and the fact that clauses (a)
and (b) of this Section 5.20(a) have been satisfied.
(b) Between the date of this Agreement and the earlier to occur of
the Closing or the termination of this Agreement in accordance with Section 7.1,
neither the Company nor any person acting on its behalf shall hold discussions,
negotiate with, provide any information to, or initiate, encourage, solicit, or
agree to any offer from, any person other than Base Ten regarding any merger,
sale of securities, sale of assets, sale of liabilities, or similar transaction
involving the Company or any transaction that could be expected to impede,
delay, interfere with, prevent, or dilute the benefits to Base Ten of the
transactions contemplated hereby, unless:
(i) the board of directors of the Company determines in good
faith based on written advice of its outside legal counsel that the action is
necessary for the board of directors of the Company to comply with its fiduciary
duties to the stockholders of the Company under applicable law; and
(ii) prior to entering into negotiations, the board of
directors of the Company receives from the other party an executed
confidentiality agreement and proposal with terms no less favorable to the
Company than those contained in this Agreement; and
(iii) prior to entering into any such negotiations, the
Company provides written notice to Base Ten that includes the terms of the
proposal, the identity of the person making the proposal, and the fact that
clauses (i) and (ii) of this Section 5.20(b) have been satisfied.
53
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 Merger being approved and adopted by the requisite vote of the holders of
the Base Ten Common Stock and by the requisite vote of the holders of the
Company's Capital Stock prior to the Effective Time.
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 exist.
(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) Base Ten shall have delivered to the Company a Certificate
dated the Closing Date, signed by the President of Base Ten stating that the
conditions set forth in Section 6.2 (a) through (e) have been satisfied.
(g) Base Ten shall have delivered to the Company a copy of the
resolutions duly adopted by Base Ten's board of directors authorizing Base Ten's
execution, delivery and performance of the Transaction Documents to which Base
Ten 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 Base Ten.
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(h) Base Ten 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) Base Ten shall have delivered to the Company a copy of the
resolutions duly adopted by Base Ten as the stockholder of Newco approving the
Merger and this Agreement, certified by an officer of Newco.
(j) Base Ten shall have delivered to the Company a certificate
(dated not more than five business days prior to the Closing) of the Treasurer
of the State of New Jersey as to the good standing of Base Ten in New Jersey and
a certificate (dated not more than five business days prior to the Closing) of
the Secretary of State of the State of Nevada as to the good standing of Newco
in Nevada.
(k) Base Ten shall have delivered to the Company copies of the
Purchasers' Consents.
(l) Base Ten shall have delivered to the Company written
resignations from each director and officer of Base Ten set forth on Schedule
6.2(l) from such directorships and offices, to take effect as of the Closing.
(m) At or prior to Closing, Base Ten shall file with the SEC a
Form 15, and such Form 15 shall not have been rejected by the SEC as of the
Effective Time; provided, that, such filing shall be made only if the Parties
anticipate that as a result of the Share Combination, Base Ten shall thereupon
have fewer than 300 stockholders of record, as determined in accordance with the
Exchange Act and the Regulations promulgated thereunder.
(n) On the Closing Date, Base Ten shall have cash or cash
equivalents of no less than $450,000.00 in the accounts identified on Schedule
3.21 after the payment of all current liabilities payable in the ordinary course
of business excluding $116,000 not expected to be paid, and the payment of
liabilities reflected as due upon the consummation of the Merger on Schedule
3.15.
6.3 Conditions to Obligations of Base Ten to Effect the Merger. The
obligations of Base Ten 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) The Company shall have delivered the Tax Representation Letter
(as defined in Section 5.7 hereof), duly executed by each of the Company and
Byron Gehring.
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(b) The Company shall have delivered the Company Affiliate Letter
(as defined in Section 5.8 hereof), duly executed by each of the stockholders of
the Company set forth on Schedule 5.8.
(c) 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.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) 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(c) through (h) have been satisfied.
(i) 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;
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(j) The Company shall have delivered to Purchasers a certificate
(dated not more 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.
(k) The Company shall have delivered to Purchasers the Books and
Records;
(l) The Company shall have delivered to Purchasers copies of the
Company Consents.
(m) The Company shall have delivered to Purchasers written
resignations from each director and officer of the Company set forth on Schedule
6.3(m) from such directorships and offices, to take effect as of the Closing.
(n) No more than an aggregate of 12,000,000 shares of Capital
Stock of the Company shall be outstanding (including shares of Capital Stock of
the Company issuable upon the exercise or conversion of any security).
(o) The Company shall have taken all action necessary so that all
Company Derivative Securities, other than such warrants set forth on Schedule
1.4(b)(iii), will be canceled at the Effective Time.
(p) [RESERVED]
(q) The Company's Personal Health Application software shall be
operational and live, the Company will have entered into an agreement with at
least one bona fide customer who neither owns 10% or more of the outstanding
shares of any class of the Company's securities, nor owns a 10% or greater
interest in any Affiliate of the Company, nor owns a 10% or greater interest in
any stockholder of the Company, which provides for payment representing fair
value for the use of the software for the period specified, and the software
shall have been delivered to such customer under such contract.
ARTICLE VII
TERMINATION
7.1 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 Base Ten and the Company,
(a) by mutual consent of the Boards of Directors of Base Ten and
the Company;
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(b) by either Base Ten or the Company if the Merger shall not have
been consummated on or before March 15, 2002, provided the terminating party is
not otherwise in material breach of its obligations under this Agreement;
(c) by either Base Ten or the Company if this Agreement is not
approved at the 2002 annual meeting of the stockholders of Base Ten or at such
other meeting of the stockholders of Base Ten held prior to March 15, 2002;
(d) by either Base Ten 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;
(e) by Base Ten if any of the conditions specified in Section 6.1,
as applicable to the Company, or Section 6.3 have not been met or waived by Base
Ten at such time as such conditions can no longer be satisfied; and
(f) by the Company if any of the conditions specified in Section
6.1, as applicable to Base Ten, or Section 6.2 have not been met or waived by
the Company at such time as such conditions can no longer be satisfied.
7.2 Effect of Termination.
In the event of the termination of this Agreement pursuant to
Section 7.1, this Agreement, except for the provisions of Article VII, 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 7.2 shall relieve any Party of liability for a material
breach of any provision of this Agreement and 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.
7.3 Remedies on Termination.
(a) In the event that this Agreement is terminated by Base Ten
solely as a result of the Company's failure to satisfy the condition required of
it pursuant to Section 6.3(q) of this Agreement:
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(i) Base Ten shall be entitled to the Limited Put Option
pursuant to Section 1.11(a) of this Agreement, and
(ii) the Company shall bear the legal, accounting and
investment banking/financial advisor costs and expenses (collectively,
"Professional Expenses") incurred by Base Ten in connection with the negotiation
and preparation of this Agreement and the transactions contemplated hereby, in
an aggregate maximum amount not to exceed $100,000.
(b) In the event that this Agreement is terminated by Base Ten as a
result of the Company's failure to satisfy the conditions required of it
pursuant to Sections 6.3(a) through 6.3(p) of this Agreement:
(i) the Company shall bear the Professional Expenses incurred
by Base Ten in connection with the negotiation and preparation of this Agreement
and the transactions contemplated hereby, in an aggregate maximum amount not to
exceed $100,000, and
(ii) Base Ten shall retain ownership of the BT Purchased
Shares.
(c) In the event that this Agreement is terminated by either the
Company or Base Ten solely as a result of either the stockholders of Base Ten
not approving and adopting the Merger or the stockholders of the Company not
approving and adopting the Merger:
(i) neither Base Ten nor the Company shall pay or receive any
reimbursement for Professional Expenses, and
(ii) Base Ten shall retain ownership of the BT Purchased
Shares.
(d) In the event that this Agreement is terminated by the Company
for any reason other than (i) the Company's failure to satisfy any of the
conditions set forth in Section 6.3 of this Agreement or (ii) the non-occurrence
of any of the conditions set forth in Section 6.1 of this Agreement:
(1) the Company shall be entitled to the Limited Call Right
pursuant to Section 1.11(b) of this Agreement, and
(2) neither Base Ten nor the Company shall pay or receive any
reimbursement for any Professional Expenses.
(e) In the event that this Agreement is terminated by either party
for the reason set forth in Section 7.1(a) of this Agreement:
(i) neither Base Ten nor the Company shall pay or receive any
reimbursement for any Professional Expenses, and
(ii) Base Ten shall retain the ownership of the BT Purchased
Shares.
59
(f) Neither Base Ten nor the Company may terminate this Agreement
in the event of (i) a breach of any of its own representations or warranties
contained herein, or (ii) for its own failure to meet any of its respective
conditions specified in Article VI of this Agreement; provided, however, that
Base Ten and the Company may terminate this Agreement upon the failure of their
respective shareholders to approve and adopt the Merger.
ARTICLE VIII
MISCELLANEOUS
8.1 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.
8.2 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.
8.3 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 Base Ten will bind and inure to the benefit of the
respective successors and assigns of the Company and Base Ten, whether so
expressed or not. Notwithstanding the foregoing, neither this Agreement nor any
of the rights, interests or obligations hereunder may be assigned by either
party without the prior written consent of the other party.
8.4 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.
8.5 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.
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8.6 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 8.6.
If to the Company:
ConvergenceHealth.com
774 Mays Boulevard - Suite 386
Incline Village, Nevada 89451
Attn: Byron Gehring
Facsimile Number: (775) 832-6642
with a copy, which will not constitute notice to the Company or the
Surviving Company (prior to the Closing), to:
Robison & Folk LLP
1415 Louisiana Street
Suite 2510
Houston, Texas 77002
Attention: Linda M. Robison
Facsimile Number: (713) 400-1515
If to Purchasers:
Base Ten Systems, Inc.
535 East County Road, Suite 16,
Lakewood, New Jersey 08701
Attention: Kenneth W. Riley
Facsimile Number: (732) 370-6897
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with a copy, which will not constitute notice to Base Ten, 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
(with proof of such deposit), as the case may be.
8.7 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.
8.8 Schedules. The Schedules constitute a part of this Agreement and
are incorporated into this Agreement for all purposes.
8.9 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.
8.10 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.
8.11 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.
8.12 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.
8.13 Transaction Expenses. Except as contemplated by Section 1.10 and
Section 7.1, Base Ten (for itself and for Newco) and the Company, whether or not
the Merger is consummated, shall bear their own respective legal and other fees
and expenses with respect to the Merger.
8.14 Further Assurances. From and after the Closing, Base Ten and the
Company will, and will cause their respective 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.
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8.15 Announcements. Base Ten 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 Base Ten and the Company agree that unless
approved mutually by them in advance, neither Base Ten 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.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the date first written above.
CONVERGENCEHEALTH.COM
By: ______________________________
Name: Byron Gehring
Title: Chief Executive Officer
BASE TEN SYSTEMS, INC.
By: _____________________________
Name: Kenneth W. Riley
Title: Chief Financial Officer
NEWCO B10, INC.
By: _______________________________
Name: Kenneth W. Riley
Title: President
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Exhibit A
FORM OF PURCHASE AGREEMENT
64
Exhibit B
FORM OF GEHRING AGREEMENT
65
Exhibit C
FORM OF WARRANT CERTIFICATE
66
Exhibit D
FORM OF TAX REPRESENTATION LETTER
67
Exhibit E
FORM OF COMPANY AFFILIATE LETTER
68
Exhibit F
FORM OF CERTIFICATE OF AMENDMENT EFFECTING THE SHARE COMBINATION
69