Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PROTOSOURCE CORPORATION,
PROTOSOURCE ACQUISITION LLC,
P2I, INC.
AND
P2I NEWSPAPER, INC.
Dated as of February 12, 2003
Effective as of February [ ], 2003
TABLE OF CONTENTS
Section Page
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ARTICLE I MERGER OF P2I NEWSPAPER WITH AND INTO NEWCO AND RELATED
MATTERS....................................................... 1
1.1 The Merger.................................................... 1
1.2 Conversion of Stock; Conversion of Outstanding Options........ 3
1.3 Merger Consideration.......................................... 4
1.4 Additional Rights; Taking of Necessary Action; Further Action. 5
1.5 No Further Rights or Transfers................................ 5
ARTICLE II THE CLOSING................................................... 5
2.1 Closing Date.................................................. 5
2.2 Closing Transactions.......................................... 6
ARTICLE III CERTAIN CORPORATE ACTION...................................... 8
3.1 P2i Corporate Action; Stockholder Consent..................... 8
3.2 P2i Newspaper Corporate Action; Stockholder Consent........... 8
3.3 Acquiror and Newco Corporate Action........................... 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................ 9
4.1 Representations and Warranties of P2i and P2i Newspaper....... 9
4.2 Representations and Warranties of Acquiror and Newco.......... 20
ARTICLE V AGREEMENTS OF THE PARTIES..................................... 30
5.1 Access to Information......................................... 30
5.2 Confidentiality; No Solicitation.............................. 30
5.3 Interim Operations............................................ 32
5.4 Consents...................................................... 35
5.5 All Reasonable Efforts........................................ 35
5.6 Public Announcements.......................................... 36
5.7 Notification of Certain Matters............................... 36
5.8 Expenses...................................................... 36
5.9 Documents at Closing.......................................... 36
5.10 Prohibition on Trading in Acquiror Stock...................... 36
5.11 Reservation of Shares; Post-Closing Amendments to
Acquiror's, P2i's and Newco's Certificates of Incorporation... 37
5.12 Indemnification: Directors' and Officers' Insurance........... 37
5.13 Acknowledgment of Approvals; Approval of P2i Stockholders..... 38
5.14 Acquiror Board of Directors................................... 39
5.15 Employment Agreements......................................... 39
5.16 Debt Conversion............................................... 40
5.17 Production of Schedules and Exhibits.......................... 40
5.18 Additional Funding............................................ 40
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Section Page
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ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER...................... 40
6.1 Conditions to Obligations of P2i and P2i Newspaper............ 40
6.2 Conditions to Acquiror's and Newco's Obligations.............. 42
ARTICLE VII TERMINATION................................................... 43
7.1 Termination................................................... 43
7.2 Notice and Effect of Termination.............................. 44
7.3 Extension; Waiver............................................. 44
7.4 Amendment and Modification.................................... 44
ARTICLE VIII MISCELLANEOUS................................................. 44
8.1 Survival of Certain Representations and Warranties; Remedies.. 44
8.2 Notices....................................................... 45
8.3 Agreement; Assignment......................................... 45
8.4 Binding Effect; Benefit....................................... 46
8.5 Headings...................................................... 46
8.6 Counterparts.................................................. 46
8.7 Governing Law................................................. 46
8.8 Arbitration................................................... 46
8.9 Severability.................................................. 46
8.10 Certain Definitions........................................... 46
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EXHIBITS
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Exhibit 1.3(d) - Form of Investment Letter
Exhibit 6.1(f) - Opinion of Counsel for Acquiror and Newco
Exhibit 6.2(f) - Opinion of Counsel for P2i and P2i Newspaper
SCHEDULES
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1.1(c)(vii) Officers and Directors of the Surviving Company
4.1(a) Articles of Incorporation and Bylaws of P2i Newspaper:
Subsidiaries
4.1(d) Capitalization and Share Ownership
4.1(f) Location of Leased Property
4.1(h) Litigation
4.1(i) Taxes
4.1(j)(i) Employee Benefit Plan
4.1(j)(ii) Employee Benefit Plan (for which P2i has obligation to
contribute)
4.1(k) Insurance Coverage
4.1(o) Intellectual Property
4.1(q) Contracts
4.1(r)(v) Strikes, grievance proceedings, arbitrations, etc.
4.1(r)(vi) Agreements, etc.
4.1(r)(vii) Employment and Benefit Arrangements
4.1(s) Suppliers and Clients
4.1(v) Absence of Certain Changes or Events
4.2(a) Certificate of Incorporation and Bylaws of Acquiror
4.2(d) Capitalization and Share Ownership
4.2(f) Property
4.2(g) No Contingent Liabilities
4.2(h) Litigation
4.2(i) Taxes
4.2(j)(i) Employee Benefit Plan
4.2(j)(ii) Employee Benefit Plan (for which P2i Newspaper has obligation to
contribute)
4.2(j)(iv) Material Employment Arrangements, Contracts, etc.
4.2(k) Insurance Coverage
4.2(o) Intellectual Property
4.2(p) Accounts Receivable
4.2(q) Contracts
4.2(r)(i) Labor Relations; Employees
4.2(r)(ii) List of Employees
4.2(r)(v) Strikes, grievance proceedings, arbitrations, etc.
4.2(r)(vii) Employment and Benefit Arrangements
4.2(t) Conflicting Interests
4.2(w) Absence of Certain Changes or Events
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement")dated as of February 12,
2003 and effective as of February [ ], 2003, by and among ProtoSource
Corporation, a California corporation ("Acquiror"), ProtoSource Acquisition LLC,
a Delaware limited liability company and wholly owned subsidiary of Acquiror
("Newco"), P2i, Inc., a Pennsylvania corporation ("P2i"), and P2i Newspaper,
Inc., a Delaware corporation ("P2i Newspaper").
Recitals
WHEREAS, Acquiror, P2i and P2i Newspaper have determined that it is in the
best interests of their respective stockholders for P2i Newspaper to merge with
and into Newco upon the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, the respective Boards of Directors of Acquiror, P2i, P2i Newspaper
and Newco have each approved this Agreement and the consummation of the
transactions contemplated hereby and approved the execution and delivery of this
Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
MERGER OF P2I NEWSPAPER WITH AND INTO NEWCO
AND RELATED MATTERS
1.1 The Merger.
(a) Upon the terms and conditions of this Agreement, at the "Effective
Time" (as defined herein), P2i Newspaper shall be merged with and into Newco
(the "Merger") in accordance with the provisions of the General Corporation Law
of the State of Delaware (the "DGCL"), the separate corporate existence of P2i
Newspaper shall cease and Newco shall continue as the surviving company (the
"Surviving Company") under the laws of the State of Delaware.
(b) The Merger shall become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Delaware (the "Certificate of
Merger") in accordance with the provisions of Section 252 of the DGCL and the
confirmation by the Certificate of Merger that the Merger is effective as of
such filing date. The date and time when the Merger shall become effective is
referred to herein as the "Effective Time."
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(c) At the Effective Time:
(i) Newco shall continue its existence under the laws of the State of
Delaware as the Surviving Company;
(ii) the separate corporate existence of P2i Newspaper shall cease;
(iii) all rights, title and interests to all assets, whether tangible
or intangible and any property or property rights owned by Newco or P2i
Newspaper shall be allocated to and vested in the Surviving Company without
reversion or impairment, without further act or deed, and without any transfer
or assignment having occurred, but subject to any existing liens or other
encumbrances thereon, and all liabilities and obligations of P2i Newspaper or
Newco shall be allocated to the Surviving Company, which shall be the primary
obligor therefor and, except as otherwise provided by law or contract, no other
party to the Merger, other than the Surviving Company, shall be liable therefor;
(iv) the Certificate of Formation of the Surviving Company shall be
the Certificate of Formation of Newco as in effect immediately prior to the
consummation of the Merger;
(v) Each of Newco and P2i Newspaper shall execute and deliver, and
file or cause to be filed with the Secretary of State of the State of Delaware,
the Certificate of Merger, with such amendments thereto as the parties hereto
shall deem mutually acceptable;
(vi) the operating agreement of the Surviving Company shall be the
operating agreement of Newco as in effect immediately prior to the consummation
of the Merger, and shall continue in full force and effect until thereafter
amended as provided by law and such operating agreement; provided, however, that
Newco shall cause its name to be changed to "P2i Newspaper, LLC"; and
(vii) (A) the board of managers of the Surviving Company shall consist
of five members. Those members shall be:
1. one member appointed by Andrew, Alexander, Wise & Company,
Incorporated;
2. Peter Wardle (the "Wardle Manager Seat");
3. Thomas Butera (the "Butera Manager Seat");
4. one member appointed by the former principal shareholders of
Suncoast Automation, Inc., as determined in the stock exchange agreement by and
among Protosource Corporation, Suncoast Automation, Inc., and the shareholders
of Suncoast Automation, Inc. (the "Suncoast Manager Seat"); and
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5. one member appointed by agreement of Mssrs. Wardle and Butera
(the "First Wardle/Butera Manager Seat").
(B) Subject to the execution under Section 3.3(c), upon the
expiration of the agreement whereby the shareholders of Suncoast Automation
appoint a member to the Board of Managers, as set forth in Section
1.1(c)(vii)(4) above, Mssrs. Wardle and Butera shall be entitled to appoint by
agreement a board member to replace the Suncoast Manager (the "Second
Wardle/Butera Manager Seat").
(C) So long as Messrs. Wardle and Butera's combined
ownership of the then outstanding stock of the Surviving Company is below
twenty-five percent (25%) but above ten percent (10%), then Mssrs. Wardle and
Butera shall forfeit the right to appoint the Wardle Manager Seat, Butera
Manager Seat, and the Second Wardle/Butera Manager Seat (if that right has
vested; if the right has not vested, Messrs. Wardle and Butera shall lose the
right to appoint when that right vests). This provision shall not prevent Mssrs.
Wardle and Butera from appointing either Mr. Wardle or Mr. Butera to fill the
First Wardle/Butera Manager Seat.
(D) So long as Messrs. Wardle and Butera's combined
ownership of the then outstanding stock of the Surviving Company is below ten
percent (10%), then Mssrs. Wardle and Butera shall forfeit the right to appoint
the Wardle Manager Seat, Butera Manager Seat, the First Wardle/Butera Manager
Seat and the Second Wardle/Butera Manager Seat (if that right has vested; if the
right has not vested, Messrs. Wardle and Butera shall lose the right to appoint
when that right vests).
(E) For so long as Peter Wardle and Thomas Butera own an
aggregate of at least 25% of the outstanding capital stock of P2i and P2i owns
at least 25% of the outstanding capital stock of Acquiror, three members shall
be appointed by P2i, one member shall be appointed by Andrew, Alexander, Wise &
Company, Incorporated ("AAWCO"), and one member shall be appointed by the former
principal stockholders of Suncoast Automation, Inc. The AAWCO appointment must
be approved by P2i but can't be withheld without good and sufficient cause and
can't be unreasonably withheld.
1.2 Conversion of Stock; Conversion of Outstanding Options.
(a) Conversion of Stock. At the Effective Time:
(i) the shares representing 100% of the issued and outstanding common
stock of P2i Newspaper ("P2i Newspaper Common Stock") as of the closing of the
merger (the "Closing") shall, by virtue of the Merger and without any action on
the part of P2i (the sole shareholder of P2i Newspaper) be converted into and
represent the right to receive, and shall be exchangeable for the merger
consideration identified at Section 1.3 hereafter (the "Merger Consideration");
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(ii) each share of capital stock of P2i Newspaper held in treasury as
of the Effective Time shall, by virtue of the Merger, be canceled without
payment of any consideration therefor and without any conversion thereof;
(iii) each share of Common Stock of P2i Newspaper outstanding as of
the Effective Time, by virtue of the Merger, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist.
(b) Transfer; Delivery of Certificates after Effective Time. From and after
the Effective Time, there shall be no transfers on the stock transfer books of
P2i Newspaper of shares of P2i Newspaper Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates for shares of P2i Newspaper Common Stock that were outstanding
immediately prior to the Effective Time shall be delivered to P2i Newspaper,
they shall be canceled.
1.3 Merger Consideration.
(a) Subject to the provisions of Section 1.3(d) hereafter, the Merger
Consideration, consisting of the total purchase price payable to the P2i
Newspaper Stockholder in connection with the acquisition by merger of P2i
Newspaper, shall be delivered and shall consist exclusively of a maximum of
19,383,531 newly issued shares of common stock, no par value per share, of
Acquiror (the "Acquiror Common Stock"), subject to adjustments as set forth
herein. The Merger Consideration shall be reduced by such number of shares of
Acquiror Common Stock as equal the total fees incurred to audit the financial
statements of P2i or P2i Newspaper, divided by $.50. In the event this agreement
is terminated for any reason other than a breach solely by Acquiror or Newco,
P2i shall immediately reimburse Acquiror for all accounting costs incurred in
connection with the preparation of financial statements of P2i or P2i Newspaper
which were paid by Acquiror.
(b) The Merger Consideration, as adjusted, shall be payable to P2i as
follows:
Commencing with the first calendar quarter of 2003, the total gross
revenues of Newco (gross sales income, without regard to cost, which shall be
known as "Gross Income"), as determined by Aquiror's regularly engaged auditors,
shall be calculated quarterly within 30 days after the end of each calendar
quarter during the years 2003, 2004 and 2005. For each $1.00 of Gross Income,
P2i shall be entitled to receive ten shares of Acquiror Common Stock, up to a
maximum aggregate number of shares for all periods equal to the Merger
Consideration, as adjusted. Such shares shall be delivered to P2i within ten
business days after the calculation of Gross Income for each calendar quarter.
It is intended that the delivery of the Merger Consideration shall qualify
as a tax-free exchange under the Code.
(c) The shares constituting the Merger Consideration shall be fully paid
and non-assessable and shall be free and clear of all liens, levies and
encumbrances except that such shares shall be "restricted securities" pursuant
to Rule 144, promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
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(d) Acquiror shall deliver certificates evidencing the Merger Consideration
to P2i upon the execution and delivery of a copy of an investment letter in the
form attached hereto as Exhibit 1.3(d) (the "Investment Letter") to comply with
applicable federal and state securities laws. Certificates representing the
Merger Consideration will contain a customary legend concerning the restricted
nature of the securities.
(e) Except as otherwise set forth herein, the Merger Consideration will be
subject to a three year Lock-Up agreement which may be released earlier upon 1)
Acquiror Common Stock closing at or above $4.50 per share for 20 consecutive
trading days, or 2) Acquiror Common Stock trading 500,000 or more shares per
week for 20 consecutive trading days at the closing price of at least $3.50 per
share. Certificates representing the Merger Consideration will contain a legend
evidencing the foregoing. Notwithstanding the foregoing, at P2i's request, up to
15% of the Merger Consideration may be included in a registration statement
filed by Acquiror with the Securities and Exchange Commission, in the event the
Acquiror undertakes an underwritten public offering and the underwriter of such
offering approves the inclusion of the Merger Consideration.
1.4 Additional Rights; Taking of Necessary Action; Further Action.
Each of Acquiror, P2i, P2i Newspaper and Newco, respectively, shall use
their best efforts to take all such action as may be necessary and appropriate
to effectuate the Merger under the DGCL and the PBCL as promptly as possible,
including, without limitation, the filing of the Certificate of Merger
consistent with the terms of this Agreement. If at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement, the officers of such corporations are fully authorized in the
name of their corporations or otherwise, and notwithstanding the Merger, to
take, and shall take, all lawful and necessary action.
1.5 No Further Rights or Transfers.
At and after the Effective Time, the P2i Newspaper capital stock
outstanding immediately prior to the Effective Time shall cease to provide the
holder thereof any rights as a stockholder of P2i, except for the right to
surrender the certificate or certificates representing such shares and to
receive the Merger Consideration to be received in the Merger as provided in
this Agreement or to receive the "fair value" of their shares as defined by and
in accordance with the procedures set forth in the PBCL.
ARTICLE II
THE CLOSING
2.1 Closing Date.
Subject to satisfaction or waiver of all conditions precedent set forth in
Section 6 of this Agreement, the Closing shall take place at the offices of
Sichenzia Ross Friedman Ference LLP, counsel to Acquiror, at 1065 Avenue of the
Americas, New York, New York 10018 on (a) the later of: (i) the first Business
Day following the day upon which all appropriate Acquiror, Newco, P2i and P2i
Newspaper corporate action has been taken in accordance with Section 3 of this
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Agreement; or (ii) the day on which the last of the conditions precedent set
forth in Article 6 of this Agreement is fulfilled or waived; or (b) at such
other time, date and place as the parties may agree, but in no event shall such
date be later than August 12, 2003 unless such date is extended by the mutual
agreement of the parties (the "Closing Date").
2.2 Closing Transactions.
At the Closing, the following transactions shall occur, all of such
transactions being deemed to occur simultaneously:
(a) P2i shall deliver, or cause to be delivered, to the Acquiror and Newco,
the following documents and shall take the following actions:
(i) A certificate of the Secretary of P2i certifying that the P2i
Stockholders have approved the Merger, this Agreement, and the transactions
contemplated hereby in accordance with the PBCL, P2i's Certificate of
Incorporation and Bylaws;
(ii) A certificate shall be executed by an authorized officer of P2i
to the effect that all representations and warranties made by P2i in this
Agreement are true and correct on and as of the Closing, as though originally
given to Acquiror and Newco on said date;
(iii) An incumbency certificate shall be delivered by P2i signed by
all of the officers thereof dated at or about the Closing;
(iv) Board and stockholder resolutions shall be delivered by the
Secretary of P2i dated at or about the Closing authorizing the transactions
contemplated by this Agreement;
(v) Each of the parties to this Agreement shall have otherwise
executed whatever documents and agreements, provided whatever consents or
approvals and taken all such actions as are required under this Agreement.
(b) P2i Newspaper shall deliver, or cause to be delivered, to the Acquiror
and Newco, the following documents and shall take the following actions:
(i) A certificate of the Secretary of P2i Newspaper certifying that
the P2i Newspaper Stockholder has approved the Merger, this Agreement, and the
transactions contemplated hereby in accordance with the PBCL, P2i Newspaper's
Certificate of Incorporation and Bylaws;
(ii) P2i Newspaper shall execute and deliver, and file or cause to be
filed with the Secretary of State of the State of Delaware, a Certificate of
Merger with such amendments thereto as the parties hereto shall deem mutually
acceptable;
(iii) P2i Newspaper shall execute and deliver, and file or cause to be
filed with the Secretary of State of the State of Delaware, such certificates or
other filings as the parties hereto shall deem mutually acceptable:
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(iv) A certificate shall be executed by an authorized officer of P2i
Newspaper to the effect that all representations and warranties made by P2i
Newspaper in this Agreement are true and correct on and as of the Closing, as
though originally given to Acquiror and Newco on said date;
(v) A certificate of good standing shall be delivered by P2i Newspaper
from the Secretary of State of the State of Delaware, dated at or about the
Closing, to the effect that such corporation is in good standing under the laws
of said state, similar good standing certificates shall be provided for each of
the Subsidiaries (as that term is defined in Section 4.1(a)(ii) hereof);
(vi) An incumbency certificate shall be delivered by P2i Newspaper
signed by all of the officers thereof dated at or about the Closing;
(vii) The Certificate of Incorporation of P2i Newspaper, as amended
and certified by the Secretary of State of the State of Delaware at or about the
Closing Date, and a copy of the Bylaws of P2i Newspaper certified by the
Secretary of P2i Newspaper dated at or about the Closing shall be delivered by
P2i Newspaper; similar Certificates, Bylaws or other governing instruments will
be delivered by each of the Subsidiaries;
(viii) Board and stockholder resolutions shall be delivered by the
Secretary of P2i Newspaper dated at or about the Closing authorizing the
transactions contemplated by this Agreement;
(ix) Each of the parties to this Agreement shall have otherwise
executed whatever documents and agreements, provided whatever consents or
approvals and taken all such actions as are required under this Agreement.
(c) Acquiror will deliver, or shall cause to be delivered, to P2i and P2i
Newspaper, the following documents and shall take the following actions:
(i) Newco shall execute and deliver, and file or cause to be filed
with the Secretary of State of the State of Delaware, the Certificate of Merger
with such amendments thereto as the parties hereto shall deem mutually
acceptable;
(ii) A certificate shall be executed by an authorized officer of
Acquiror to the effect that all representations and warranties of Acquiror under
this Agreement are true and correct as of the Closing, as though originally
given to P2i and P2i Newspaper on said date;
(iii) A certificate shall be executed by an authorized officer of
Newco to the effect that all representations and warranties of Newco under this
Agreement are true and correct as of the Closing, as though originally given to
P2i and P2i Newspaper on said date;
(iv) A certificate of good standing shall be delivered by Acquiror
from the Secretary of State of the State of California dated at or about the
Closing that Acquiror is in good standing under the laws of said state;
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(v) A certificate of good standing shall be delivered by Newco from
the Secretary of State of the State of Delaware dated at or about the Closing
that Newco is in good standing under the laws of said state;
(vi) An incumbency certificate shall be delivered by Acquiror signed
by all of its officers dated at or about the Closing;
(vii) An incumbency certificate shall be delivered by Newco signed by
all of its officers dated at or about the Closing;
(viii) Certificate of Incorporation of Acquiror certified by the
Secretary of State of the State of California at or about the Closing Date and a
copy of the Bylaws of Acquiror certified by the Secretary of Acquiror dated at
or about the Closing;
(ix) Certificate of Formation of Newco certified by the Secretary of
State of the State of Delaware at or about the Closing Date and a copy of the
operating agreement of Newco certified by the Secretary of Newco dated at or
about the Closing;
(x) A certified Board resolution shall be delivered by the Secretary
of Acquiror dated at or about the Closing authorizing the transactions
contemplated by this Agreement;
(xi) Certified Board and member resolutions shall be delivered by the
Secretary of Newco dated at or about the Closing authorizing the transactions
contemplated by this Agreement;
(xii) Each of the parties to this Agreement shall have otherwise
executed whatever documents and agreements, provided whatever consents or
approvals and shall have taken all such actions as are required under this
Agreement;
(xiii) Shareholder resolutions shall be delivered by the Secretary of
the Acquiror dated at or about the Closing authorizing the transactions
contemplated by this Agreement.
ARTICLE III
CERTAIN CORPORATE ACTION
3.1 P2i Corporate Action; Stockholder Consent.
(a) P2i, acting through its Board of Directors, shall, in accordance with
the PBCL, its Certificate of Incorporation and Bylaws obtain the approval of the
P2i Stockholders to the transactions contemplated hereby, including the Merger.
(b) P2i shall cause to occur all other corporate action necessary to effect
the Merger and to consummate the other transactions contemplated hereby.
3.2 P2i Newspaper Corporate Action; Stockholder Consent.
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(a) P2i, acting through its Board of Directors, shall, in accordance with
the PBCL, its Certificate of Incorporation and Bylaws obtain the approval of the
P2i Stockholders to the transactions contemplated hereby, including the Merger.
(b) P2i shall cause to occur all other corporate action necessary to effect
the Merger and to consummate the other transactions contemplated hereby.
3.3 Acquiror and Newco Corporate Action.
(a) Acquiror and Newco acting through their Board of Directors and Board of
Managers, respectively, shall, in accordance with the California General
Corporation Law (the "CGCL") and Delaware Limited Liability Company Act, its
Certificate of Incorporation and Bylaws obtain the approval of their
stockholders and members to the transactions contemplated hereby, including the
Merger.
(b) Acquiror and Newco shall cause to occur all other corporate action
necessary to effect the Merger and to consummate the other transactions
contemplated hereby.
(c) Acquiror shall use its best efforts to obtain a written agreement,
effective as of August 1, 2003, whereby all of the former shareholders of
Suncoast Automation, Inc. to the stock exchange agreement dated as of August 22,
2000 agree to give up their right under such agreement to appoint one person to
the Board of Directors of Acquiror.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of P2i and P2i Newspaper.
As a material inducement to Acquiror and Newco to execute this Agreement
and consummate the Merger and other transactions contemplated hereby, P2i and
P2i Newspaper, jointly and severally hereby make the following representations
and warranties to Acquiror and Newco. The representations and warranties are
true and correct in all material respects at this date, and will be true and
correct in all material respects on the Closing as though made on and as of such
date.
(a) Corporate Existence and Power.
(i) P2i Newspaper is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to have any of the foregoing would not have a Material Adverse Effect.
P2i Newspaper is duly qualified to do business as a foreign corporation and is
in good standing in each other jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect.
True, correct and complete copies of the Articles of Incorporation and Bylaws of
P2i Newspaper, as amended to date, are attached hereto on Schedule 4.1(a) and
are made a part hereof.
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(ii) P2i Newspaper owns no interest in any other entity other than
those listed on Schedule 4.1(a) (collectively the "Subsidiaries" and
individually a "Subsidiary"). Each Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
or country of its incorporation, and has all corporate powers and all government
licenses, authorizations, consents and approvals required to carry on its
business as now conducted, except where the failure to have any of the foregoing
would not have a Material Adverse Effect. Each Subsidiary is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities make such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect.
(iii) P2i is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to have any of the foregoing would not have a Material Adverse Effect.
P2i is duly qualified to do business as a foreign corporation and is in good
standing in each other jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. True, correct
and complete copies of the Articles of Incorporation and Bylaws of P2i, as
amended to date, are attached hereto on Schedule 4.1(a) and are made a part
hereof. P2i is the sole stockholder of P2i Newspaper.
(b) Due Authorization and Requisite Approvals. This Agreement has been duly
authorized, executed and delivered by P2i and P2i Newspaper and constitutes a
valid and binding agreement of P2i and P2i Newspaper, enforceable in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium, and other similar laws relating to, limiting
or affecting the enforcement of creditors rights generally or by the application
of equitable principles. As of the Closing all corporate action on the part of
P2i and P2i Newspaper required under applicable law in order to consummate the
Merger will have occurred; and the Boards of Directors of P2i and P2i Newspaper
have approved the execution of this Agreement and the consummation of the Merger
and related actions contemplated hereby.
(c) No Contravention. The execution and delivery of the Agreement does not,
and the consummation of the transactions contemplated hereby will not: (i)
conflict with or result in any violation of any provision of the Articles of
Incorporation or Bylaws of P2i, P2i Newspaper or any of their Subsidiaries; or
(ii) conflict with or result in any violation or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of a right or obligation or loss under, any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree, or,
to the best of its knowledge, statute, law, ordinance, rule or regulation
applicable to P2i, P2i Newspaper, any of their Subsidiaries, or any of their
respective properties or assets, or result in the creation or imposition of any
10
mortgage, lien, pledge, charge or security interest of any kind ("Encumbrance")
on any assets of P2i, P2i Newspaper or their Subsidiaries, except such as is not
reasonably likely to have a Material Adverse Effect or prevent P2i or P2i
Newspaper from consummating the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, is required by
or with respect to P2i, P2i Newspaper or any Subsidiary in connection with the
execution and delivery of this Agreement by P2i, P2i Newspaper or the
consummation by P2i or P2i Newspaper of the transactions contemplated hereby,
except the filing of the Certificate of Merger.
(d) Capitalization and Share Ownership. The authorized capital stock of P2i
Newspaper consists solely of one thousand (1,000) shares of common stock,
without par value. There are currently 100 shares of P2i Newspaper Common Stock
outstanding, all of which are owned by P2i. The outstanding shares of capital
stock of P2i Newspaper have been duly authorized and validly issued and are
fully paid and nonassessable and free of preemptive rights. Except as set forth
on Schedule 4.1(d) and in this Section 4.1(d), there are outstanding (A) no
shares of capital stock or other voting securities of P2i Newspaper, (B) no
securities of P2i Newspaper convertible into or exchangeable for shares of
capital stock or voting securities of P2i Newspaper and (C) no options, warrants
or other rights to acquire from P2i Newspaper, the P2i Newspaper Stockholders or
any other person, and no obligation of P2i Newspaper to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of P2i Newspaper, and there are no agreements
or commitments to do any of the foregoing. There are no voting trusts or voting
agreements applicable to any shares of capital stock of P2i Newspaper. The P2i
Newspaper Common Stock to be surrendered in the Merger is owned of record and
beneficially by P2i, free and clear of all liens and encumbrances of any kind
and nature, and have not been sold, pledged, assigned or otherwise transferred,
except in connection with loans made by Acquiror to P2i and that certain Pledge
and Escrow Agreement in favor of the Acquiror and purchasers of Acquiror's
convertible promissory notes. There are no agreements (other than this
Agreement) to sell, pledge, assign or otherwise transfer such securities. Except
as set forth on Schedule 4.1(d), all of the issued and outstanding shares of
capital stock of the Subsidiaries are owned by P2i Newspaper.
(e) Financial Statements. P2i Newspaper shall prepare and deliver to
Acquiror, no less than forty-five (45) days prior to Closing, copies of audited
consolidated financial statements of P2i Newspaper and any Subsidiaries for the
fiscal year ended December 31, 2001 and 2002 (the "Financial Statements"). Such
Financial Statements will have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
reported upon and will fairly present in all material respects the financial
position of P2i Newspaper and its Subsidiaries as of the dates thereof and the
results of operations for the periods then ended.
(f) Real Properties.
(i) P2i Newspaper and the Subsidiaries currently lease real property
at those locations identified on Schedule 4.1(f) hereto pursuant to the true,
correct and complete copies of the lease agreements attached to Schedule 4.1(f).
11
P2i Newspaper and the Subsidiaries own or lease no other real estate. None of
the leasehold interests held by P2i Newspaper or the Subsidiaries is subject to
any Encumbrance, except (a) liens for ad valorem taxes not yet due or being
contested in good faith; and (b) contractual or statutory mechanics or
materialmen's liens or other statutory or common law Encumbrances relating to
obligations of P2i Newspaper that are not delinquent or are being contested in
good faith. There are no Encumbrances which materially interfere with the
present use of such leasehold interests.
(ii) Neither P2i Newspaper nor any Subsidiary has received any written
notice from any governmental entity having jurisdiction over P2i Newspaper or
the Subsidiaries or over any of the real property leased by P2i Newspaper or the
Subsidiaries of any violation by P2i Newspaper or the Subsidiaries of any law,
regulation or ordinance relating to zoning, environmental matters, local
building or fire codes or similar matters relating to any of the real property
leased by P2i Newspaper or the Subsidiaries or of any condemnation or eminent
domain proceeding.
(iii) To the best of its Knowledge, all of the buildings leased by P2i
Newspaper or the Subsidiaries and all plumbing, HVAC, electrical, mechanical and
similar systems are in good repair and adequate for their current use, ordinary
wear and tear excepted.
(iv) Except as described on Schedule 4.1(f), neither P2i Newspaper nor
any Subsidiary is a party to any lease, sublease, lease assignment or other
agreement for the use or occupancy of any of the leasehold premises wherein P2i
Newspaper or the Subsidiary is the landlord, sub-landlord or assignor, whether
by name, as successor-in-interest or otherwise. There are no outstanding
agreements with any party to acquire the leasehold premises or any portion
thereof or any interest therein.
(v) To the best of its Knowledge, all certificates of occupancy and
all other licenses, permits, authorizations, consents, certificates and
approvals required by all governmental authorities having jurisdiction over the
leasehold premises occupied by P2i Newspaper or the Subsidiaries have been
issued, are fully paid for and are in full force and effect, will survive the
Closing and will not be invalidated, violated or otherwise adversely affected by
the Merger or the other transactions contemplated by this Agreement.
(g) No Contingent Liabilities. Except as contained within the Financial
Statements, at the Closing, P2i Newspaper and the Subsidiaries shall have no
material liabilities, whether related to tax or non-tax matters, known or
unknown, due or not yet due, liquidated or unliquidated, fixed or contingent,
determined or determinable in amount or otherwise, and to the best knowledge of
P2i Newspaper, after due inquiry, there is no existing condition, situation or
set of circumstances which could reasonably be expected to result in such a
liability, except as and to the extent reflected on this Agreement or any
Schedule or Exhibit hereto or which has been incurred in the ordinary course of
business and as accurately reflected on the books and records of P2i Newspaper
or the Subsidiaries.
(h) Litigation. Except as described on Schedule 4.1(h) hereto, there is no
action, suit, investigation or proceeding (or, to the knowledge of P2i
Newspaper, any basis therefor) pending against, or to the knowledge of P2i or
12
P2i Newspaper, threatened against or affecting P2i Newspaper or the Subsidiaries
or any of their properties before any court or arbitrator or any governmental
body, agency or official that (i) if adversely determined against P2i or P2i
Newspaper or the Subsidiaries, would have a Material Adverse Effect or (ii) in
any manner challenges or seeks to prevent, enjoin, alter or materially delay the
Merger or any of the other transactions contemplated by the Agreement.
(i) Taxes. P2i Newspaper and the Subsidiaries have timely filed all tax
returns required to be filed by them, or will timely file when due all tax
returns required to be filed by them between the date hereof and the Closing.
Except as disclosed on Schedule 4.1(i), P2i Newspaper and the Subsidiaries have
paid in a timely fashion or will pay when due in a timely fashion, all taxes
required to be paid in respect of the periods covered by such returns, and the
books and the financial statements of P2i Newspaper reflect, or will reflect,
adequate reserves for all taxes payable by P2i Newspaper and the Subsidiaries
which have been, or will be, accrued but are not yet due. Except as disclosed on
Schedule 4.1(i), neither P2i Newspaper nor any of the Subsidiaries is delinquent
in the payment of any material tax, assessment or governmental charge. Except as
disclosed on Schedule 4.1(i), no deficiencies for any taxes have been proposed,
asserted or assessed against P2i Newspaper or any Subsidiary. Except as
disclosed on Schedule 4.1(i), P2i Newspaper is not aware of any facts which
would constitute the basis for the proposal or assertion of any such deficiency
and there is no action, suit, proceeding, audit or claim now pending or
threatened against P2i Newspaper or the Subsidiaries, asserting any deficiency
in the payment of taxes. Except as disclosed on Schedule 4.1(i), all taxes which
P2i Newspaper or the Subsidiaries are required by law to withhold and collect
have been duly withheld and collected, and have been timely paid over to the
proper authorities to the extent due and payable. For the purposes of this
Agreement, the term "tax" shall include all federal state, local and foreign
income, property, sales, excise and other taxes of any nature whatsoever.
Neither P2i Newspaper nor the Subsidiaries nor any member of any affiliated or
combined group of which P2i Newspaper is or has been a member has granted any
extension or waiver of the limitation period applicable to any tax returns.
There are no Encumbrances for taxes upon the assets of P2i Newspaper or the
Subsidiaries. There are no tax sharing or tax allocation agreements to which P2i
Newspaper is now or ever has been a party. P2i Newspaper will not be required
under Section 481(c) of the Code to include any material adjustment in taxable
income for any period subsequent to the Merger. P2i Newspaper (a) has not been a
member of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was P2i Newspaper) and (b) has no
liability for the taxes of any person (other than P2i Newspaper), as a
transferee or successor, by contract or otherwise.
(j) ERISA.
(i) Schedule 4.1(j)(i) identifies each "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is subject to any provision of ERISA, and either (i)
is maintained, administered or contributed to by P2i Newspaper or any affiliate
(as defined below), (ii) covers any employee or former employee of P2i Newspaper
or any affiliate or (iii) under which P2i Newspaper or any affiliate has any
liability. Copies of such plans (and, if applicable, related trust agreements)
and all amendments thereto and any written interpretations thereof have been
13
furnished to Acquiror, together, if applicable, with (A) the most recent annual
reports (Form 5500 including, if applicable, Schedule B thereto) prepared in
connection with any such plan and (B) the most recent actuarial valuation report
prepared in connection with any such plan. Such plans are referred to
collectively herein as the "Employee Plans." Any Form 5500 for any plan year of
any Employee Plan that has not been filed, but for which the filing date has
passed on the date of this Agreement, shall be filed prior to the date of the
Merger. For purposes of this Section, "affiliate" of any Person means any other
Person which, together with such Person, would be treated as a single employer
for any purpose under Section 414 of the Code.
(ii) Schedule 4.1(j)(ii) identifies all Employee Plans to which P2i
Newspaper currently has any obligation to contribute. P2i Newspaper is not a
party to any multiemployer plan as defined in Section 4001(a) (3) of ERISA
("Multiemployer Plans"), and neither P2i Newspaper nor any affiliate has any
outstanding liability to contribute to any Multiemployer Plan, for delinquent
contributions or for withdrawal liability pursuant to Section 4201 of ERISA.
(iii) There are no Employee Plans that are intended to be qualified
plans under Section 401(a) of the Code, except as may have been shown and
identified as such on the list referred to in subparagraphs (i) or (ii) above.
Each Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Plan, other than any failure to comply that is not
reasonably likely to have a Material Adverse Effect.
(iv) P2i Newspaper has delivered to Acquiror a true and correct list
of each material employment, severance or other similar contract, arrangement or
policy and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits that is not an Employee Plan
and (A) is entered into, maintained or contributed to, as the case may be by P2i
Newspaper, any Subsidiary or any of their respective affiliates or (B) covers
any employee or former employee of P2i Newspaper, or any Subsidiary or any of
their respective affiliates or (C) under which P2i Newspaper, any Subsidiary or
any of their respective affiliates has liability. Such contracts, plans and
arrangements as are described above, copies of all of which have been furnished
previously to Acquiror, are referred to collectively herein as the "Benefit
Arrangements." Each Benefit Arrangement has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations that are applicable to such Benefit
Arrangement other than any failure to comply that is not reasonably likely to
have a Material Adverse Effect.
(v) Neither P2i Newspaper nor any affiliate has or maintains nor has
maintained any Employee Plan or Benefit Arrangement providing post-retirement
health or medical benefits in respect of any active or former employee of P2i
Newspaper or any affiliate or former affiliate, except as may be required
pursuant to the provisions of COBRA.
14
(k) Insurance Coverage. Schedule 4.1(k) sets forth a list of all P2i
Newspaper key-man life insurance policies and other insurance policies material
to the current and proposed business of P2i Newspaper and the Subsidiaries. P2i
Newspaper and the Subsidiaries maintain insurance covering their assets,
business, equipment, properties, operations, employees, officers and directors
with such coverage, in such amounts, and with such deductibles and premiums as
are consistent with insurance coverage provided for other companies of
comparable size and in comparable industries. All of such policies are in full
force and effect and all premiums payable have been paid in full and P2i
Newspaper and the Subsidiaries are in full compliance with the terms and
conditions of such policies. Neither P2i Newspaper nor any Subsidiary has
received any notice from any issuer of such policies of its intention to cancel
or refusal to renew any policy issued by it or of its intention to renew any
such policy based on a material increase in premium rates other than in the
ordinary course of business. None of such policies are subject to cancellation
by virtue of the Merger or the consummation of the other transactions
contemplated by this Agreement. There is no claim by P2i Newspaper pending under
any of such policies as to which coverage has been questioned or denied.
(l) Compliance with Laws. To the best of P2i Newspaper's Knowledge, neither
P2i Newspaper nor any Subsidiary is in violation of, nor has any such entity
violated, any applicable provisions of any laws, statues, ordinances or
regulations, other than as would not be reasonably likely to have a Material
Adverse Effect. Without limiting the generality of the foregoing, to the best
knowledge of P2i Newspaper, P2i Newspaper and the Subsidiaries have all
licenses, permits, certificates and authorizations needed or required for the
conduct of business of P2i Newspaper and the Subsidiaries as presently conducted
and for the use of its properties and premises occupied by it, except where the
failure to obtain a licenses, permit, certificate or authorization would not
have a Material Adverse Effect.
(m) Investment Banking Fees. There is no investment banker, broker, finder
or other similar intermediary which has been retained by, or is authorized by
P2i Newspaper to act on its behalf who might be entitled to any fee or
commission from P2i Newspaper, Acquiror, Newco or any of their respective
affiliates upon consummation of the transactions contemplated by this Agreement,
except for fees payable to Andrew, Alexander Wise & Co., Incorporated, as
indicated in Exhibit B to the Term Sheet between Acquiror and P2i.
(n) Personal Property. P2i Newspaper and the Subsidiaries have good and
valid title to all of their personal property, tangible and intangible,
reflected on the Financial Statements and to all other personal property owned
by them, free and clear of any Encumbrance. P2i Newspaper and the Subsidiaries
are the owner of all of its personal property now located in or upon their
leased premises and of all personal property which is used in the operation of
their business. To the best of P2i Newspaper's Knowledge, all such equipment,
furniture and fixtures and other tangible personal property are in good
operating condition and repair and do not require any repairs other than normal
routine maintenance to maintain such property in good operating condition and
repair.
(o) Intellectual Property; Intangible Property. The corporate names of P2i
Newspaper and the trade names and service marks listed on Schedule 4.1(o) are
the only names and service marks which are used by P2i Newspaper in the
operation of its business (the "Names and Service Marks"). P2i Newspaper and the
Subsidiaries have not done business and have not been known by any other name
15
other than by its Names and Service Marks. Schedule 4.1(o) also includes all
patents and patent applications held by or filed by or on behalf of P2i
Newspaper (collectively, the "Patents"). P2i Newspaper owns and has the
exclusive right within the states and countries in which it and its Subsidiaries
operate, to use all intellectual property presently in use by it and its
Subsidiaries and necessary for the operation of its businesses as now being
conducted, which intellectual property includes, but is not limited to, the
Patents, any trademarks, trade names, service marks, including the Names and
Service Marks, copyrights, trade secrets, customer lists, inventions, formulas,
methods, processes and other proprietary information. There are no outstanding
licenses or consents granting third parties the right to use any intellectual
property, including any of the Patents, owned by P2i Newspaper or the
Subsidiaries. No royalties or fees are payable by P2i Newspaper to any third
party by reason of the use of any of its intellectual property, including, but
not limited to, the Patents. Neither P2i Newspaper nor any subsidiary has
received notice of any adversely held patent, invention, trademark, copyright,
service mark or tradename of any person, or any claims of any other person
relating to any of the intellectual property subject hereto, and there is no
reasonable basis for any such charge or claim. There is no presently known or
threatened use or encroachment of any such intellectual property, including any
of the Patents.
(p) Accounts Receivable. The accounts receivable of P2i Newspaper and its
Subsidiaries referred to within the Financial Statements constitute valid claims
in the full amount thereof against the debtors charged therewith on the books of
P2i Newspaper and its Subsidiaries to which each such account is payable and has
been acquired in the ordinary course of business. The accounts receivable are
fully collectible to the extent of the face value thereof (less the amount of
the allowance for the doubtful accounts reflected on the Financial Statements)
in the due course of normal commercial dealings. To the best of P2i Newspaper's
Knowledge, no account debtor has any valid setoff, deduction or defense with
respect thereto, and no account debtor has asserted any such setoff, deduction
or defense. There are no accounts receivable which arise pursuant to an
agreement with the United States Government or any agency or instrumentality
thereof.
(q) Contracts, Leases, Agreements and Other Commitments. Neither P2i
Newspaper nor any Subsidiary is a party to or bound by any oral, written or
implied contracts, agreements, leases, powers of attorney, guaranties, surety
arrangements or other commitments excluding equipment and furniture leases
entered into in the ordinary course of business (which do not exceed $10,000 in
liabilities or commitments in the aggregate as of the date hereof), except for
the following (which are hereinafter collectively called the "Material
Contracts"):
(i) The leases and agreements described on Schedules 4.1(f), 4.1(j)(i)
and (ii), 4.1(q) and 4.1(r)(i);
(ii) Agreements involving a maximum possible expenditure or obligation
on the part of P2i Newspaper or any Subsidiary to expend more than Twenty
Thousand Dollars ($20,000) separately or less than Fifty Thousand Dollars
($50,000) in the aggregate; and
16
(iii) That certain General Security Agreement, dated May 16, 2002, in
favor of Acquiror and other lenders relating to convertible promissory notes
payable to the order of such lenders.
The Material Contracts constitute all of the material agreements and
instruments which are necessary and desirable to operate the business as
currently conducted by P2i Newspaper and the Subsidiaries. True, correct and
complete copies of each Material Contract described and listed under subsection
4.1(q) will be made available to Acquiror within ten (10) business days prior to
the Closing Date. The term "Material Contract" excludes purchase orders entered
into in the ordinary course for personal or inventory which may be returned to
the vendor without penalty. All of the Material Contracts are valid, binding and
enforceable against the respective parties thereto in accordance with their
respective terms. All parties to all of the Material Contracts have performed
all obligations required to be performed to date under such Material Contracts,
and neither P2i Newspaper, the Subsidiaries, and, to the best of their
knowledge, nor any other party, is in default or in arrears under the terms
thereof, and no condition exists or event has occurred which, with the giving of
notice or lapse of time or both, would constitute a default thereunder. None of
the terms or provisions of any Material Contract materially adversely affects
the business, prospects, financial condition or results of operations of P2i
Newspaper or the Subsidiaries.
(r) Labor Relations; Employees.
(i) P2i Newspaper will deliver to Acquiror a true and correct a list
of:
(A) All collective bargaining agreements and other agreements
requiring arbitration of employment disputes, and any written amendments
thereto, as well as all arbitration awards decided under any such agreements,
and all oral assurances or modifications, past practices, and/or arrangements
made in relation thereto, to which P2i Newspaper or any Subsidiary is a party or
by which it is bound; and
(B) All employment agreements, and all severance agreements which
have not been fully performed, to which P2i Newspaper or any Subsidiary is a
party or by which it is bound.
(ii) P2i Newspaper will deliver to Acquiror a true and correct a list
of all key management employees of P2i Newspaper or any Subsidiary, broken down
by location, together with their rate of compensation and title.
(iii) P2i Newspaper will deliver to Acquiror true and correct copies
of all of the documents referred to on Schedule 4.1(r)(i) hereof and all of the
personnel policies, employee and/or supervisor handbooks, procedures and forms
of employment applications relating to the employees of P2i Newspaper and its
Subsidiaries.
(iv) There is no union representing or purporting to represent any of
the employees of P2i Newspaper or any Subsidiary, and neither P2i Newspaper nor
any Subsidiary is subject to or currently negotiating any collective bargaining
agreements with any union representing or purporting to represent the employees
of any of the foregoing.
17
(v) Except as set forth on Schedule 4.1(r)(v):
(A) There are no strikes, slow downs or other work stoppages,
grievance proceedings, arbitrations, labor disputes or representation questions
pending or, to the best knowledge of P2i Newspaper, threatened;
(B) P2i Newspaper and the Subsidiaries have complied in all
material respects with all laws relating to labor, employment and employment
practices, including without limitation, any provisions thereof relating to
wages, hours and other terms of employment, collective bargaining,
nondiscrimination and the payment of social security, unemployment compensation
and similar taxes, and neither P2i Newspaper nor any Subsidiary is (1) liable
for any arrearages of wages or any taxes or penalties for failure to comply with
any of the foregoing or (2) delinquent in the payment of any severance, salary,
bonus, commission or other direct or indirect compensation for services
performed by any employee to the date hereof, or any amount required to be
reimbursed to any employee or former employee; and
(C) There are no charges, suits, actions, administrative
proceedings, investigations and/or claims pending or threatened against P2i
Newspaper or any Subsidiary, whether domestic or foreign, before any court,
governmental agency, department, board or instrumentality, or before any
arbitrator (collectively "Actions"), concerning or in any way relating to the
employees or employment practices of P2i Newspaper or any Subsidiary, including,
without limitation, Actions involving unfair labor practices, wrongful discharge
and/or any other restrictions on the right of P2i Newspaper or any Subsidiary to
terminate its respective employees, employment discrimination, occupational
safety and health, and workers' compensation.
(vi) Except as set forth on Schedule 4.1(r)(vi), there are no express
or implied agreements, policies, practices, or procedures, whether written or
oral, pursuant to which any employee of P2i Newspaper or any Subsidiary is not
terminable at will and except as required by law, no employee is entitled to any
benefit or to participate in any employee benefit plan of P2i Newspaper
following such termination of employment.
(vii) Except as set forth in Schedule 4.1(r)(vii), P2i Newspaper or
any Subsidiary is not a party to any oral or written (A) agreement with any
executive officer or other key employee of P2i Newspaper or any Subsidiary (1)
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving P2i Newspaper of the
nature of the transactions contemplated by this Agreement, (2) providing any
term of employment or compensation guarantee extending for a period longer than
one year, or (3) providing severance benefits or other benefits after the
termination of employment of such executive officer or key employee regardless
of the reason for such termination of employment; or (B) agreement or plan which
will remain in effect after the Closing, including, without limitation, any
stock option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
18
(viii) P2i Newspaper has not taken any action which requires or, taken
together with the transactions contemplated hereby, would require the giving of
any notice under the Worker Adjustment Retraining and Notification Act or any
comparable state or local law or regulation.
(s) Suppliers and Customers. P2i Newspaper will deliver to Acquiror a true
and correct a list of the ten largest customers of P2i Newspaper and its
Subsidiaries based on the percentage of revenue represented by those customers
for the fiscal year ended December 31, 2002. The relationship of P2i Newspaper
and its Subsidiaries with their suppliers and customers are good commercial
working relationships and to the best of P2i Newspaper's Knowledge and except as
set forth on Schedule 4.1(s), no material supplier or customer of P2i Newspaper
and its Subsidiaries has canceled, curtailed or otherwise terminated or
threatened to cancel or otherwise terminate, his or its relationship with P2i
Newspaper or any of its Subsidiaries. P2i Newspaper has no knowledge, or reason
to believe, that the Merger or any other transaction contemplated hereby would
adversely affect any such material supplier or customer relationship.
(t) Conflicting Interests. No director, officer or employee of P2i or P2i
Newspaper or any Subsidiary nor relative or affiliate of any of the foregoing
(i) sells or purchases goods or services from P2i Newspaper or any Subsidiary or
has any pecuniary interest in any supplier or client of any of the foregoing or
in any other business enterprise with which P2i Newspaper or any Subsidiary
conducts business or with which any of the foregoing is in competition, or (ii)
is indebted to P2i Newspaper or any Subsidiary except for money borrowed and as
set forth on the Financial Statements.
(u) Environmental Protection. Neither P2i Newspaper nor any Subsidiary has
been notified by any governmental authority, agency or third party, and P2i
Newspaper has no knowledge, of any violation by such person of any Environmental
Statute (as defined below). All registrations by P2i Newspaper with, licenses
from or permits issued by governmental agencies pursuant to environmental,
health and safety laws are in full force and effect. The term "Environmental
Statutes" means all statutes, ordinances, regulations, orders and requirements
of common law concerning discharges to the air, soil, surface water or
groundwater and concerning the storage, treatment or disposal of any waste or
hazardous substance. There is no hazardous substance at any premises currently
or previously occupied by P2i Newspaper or the Subsidiaries. Neither P2i
Newspaper nor any Subsidiary has received any notice or any request for
information, notice of claim, demand or other notification that it may be
potentially responsible with respect to any investigation or clean-up of any
threatened or actual release of hazardous substances. All hazardous wastes and
substances have been stored, treated, disposed of and transported in conformance
with all requirements applicable to such hazardous substances and wastes.
(v) Absence of Certain Changes or Events. Except as and to the extent set
forth on the Financial Statements, to the extent contained in this Agreement, or
as set forth on Schedule 4.1(v), between December 31, 2002 (the date of the most
recent Financial Statements) and the Closing, there will not be (i) any Material
Adverse Change in the business, assets, properties, results of operations,
financial condition or prospects of P2i Newspaper or any of its Subsidiaries,
(ii) any entry by P2i Newspaper or any of its Subsidiaries into any material
commitment or transaction which is not in the ordinary course of business; (iii)
any change by P2i Newspaper or any of its Subsidiaries in accounting principles
or methods except insofar as may be required by a change in generally accepted
accounting principles; (iv) any declaration, payment or setting aside for
19
payment of any dividends or other distributions (whether in cash, stock or
property) in respect of capital stock of P2i Newspaper or any Subsidiary, or any
direct or indirect redemption, purchase or any other type of acquisition by P2i
Newspaper, or any direct or indirect redemption, purchase or any other type of
acquisition by P2i Newspaper of any shares of its capital stock or any other
securities for an aggregate sum not in excess of $20,000, except with respect to
the payment to P2i Newspaper Shareholders in connection with the exercise of
dissenter's rights; (v) any agreement by P2i Newspaper, whether in writing or
otherwise, to take any action which, if taken prior to the date of this
Agreement, would have made any representation or warranty in this Section 4.1
untrue or incorrect; (vi) any acquisition of the assets of P2i Newspaper, other
than in the ordinary course of business and consistent with past practice and
not in excess of $20,000 in the aggregate; or (vii) any execution of any
agreement with any executive officer of P2i Newspaper providing for his or her
employment, or any increase in the compensation or in severance or termination
benefits payable or to become payable by P2i Newspaper to its officers or key
employees, or any material increase in benefits under any collective bargaining
agreement or in benefits under any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, insurance or other plan or arrangement or
understanding (whether or not legally binding) providing benefits to any present
or former employee of P2i Newspaper. Since the date of the Financial Statements,
there has not been and to the best of P2i Newspaper's Knowledge there is not
threatened, any material adverse change in financial condition, business,
results of operations or prospects of the business or any material physical
damage or loss to any of the properties or assets of the business or to the
premises occupied in connection with the business, whether or not such loss is
covered by insurance.
(w) Statements And Other Documents Not Misleading. Neither this Agreement,
including all exhibits and schedules and other closing documents, nor any other
financial statement, document or other instrument heretofore or hereafter
furnished by P2i or P2i Newspaper to Acquiror in connection with the Merger or
the other transactions contemplated hereby, contains or will contain any untrue
statement of any material fact or omit or will omit to state any material fact
required to be stated in order to make such statement, information, document or
other instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to P2i Newspaper which may have a Material
Adverse Effect on the business, prospects, financial condition or results of
operations of P2i Newspaper or of any of its properties or assets which has not
been set forth in this Agreement as an exhibit or schedule hereto.
4.2 Representations and Warranties of Acquiror and Newco.
As a material inducement to P2i and P2i Newspaper to execute this Agreement
and to consummate the Merger and the other transactions contemplated hereby,
Acquiror and Newco hereby jointly and severally make the following
representations and warranties to P2i and P2i Newspaper. The representations and
warranties are true and correct in all material respects at this date, and will
be true and correct in all material respects on the Closing as though made on
and as of such date:
20
(a) Corporate Existence and Power. Each of Acquiror and Newco is presently
a corporation duly incorporated or formed, as the case may be, validly existing
and in good standing under the laws of the State of California and Delaware,
respectively. Each of Acquiror and Newco has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, except where the failure to have any of the
foregoing would not have a Material Adverse Effect. Each of Acquiror and Newco
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. True, complete
and correct copies of the Certificate of Incorporation and Bylaws of Acquiror
and the Certificate of Formation and Operating Agreement of Newco, as amended to
date, are attached hereto as Schedule 4.2(a) and are made a part hereof. Newco
has conducted no operations to date, except in connection with its formation.
(b) Due Authorization and Requisite Approvals. This Agreement and the other
agreements described herein to which Acquiror or Newco will become a party at
the Closing have been, or as of the Closing will be, duly authorized, executed
and delivered by Acquiror or Newco, as applicable, and constitute, or as of the
Closing will constitute, a valid and binding agreement of Acquiror or Newco, as
applicable, enforceable in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, moratorium, and other
similar laws relating to, limiting or affecting the enforcement of creditors
rights generally or by the application of equitable principles. As of the
Closing all corporate action on the part of Acquiror and Newco required under
applicable law in order to consummate the Merger will have occurred; and the
Board of Directors of Acquiror and Managers of Newco have approved the execution
of this Agreement and the consummation of the Merger and related actions
contemplated hereby.
(c) No Contravention. The execution and delivery of the Agreement does not,
and the consummation of the transactions contemplated thereby will not (i)
conflict with or result in any violation of any provision of the Certificate of
Incorporation or Bylaws of Acquiror or Newco or (ii) conflict with or result in
any violation or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any right or obligation or to a loss or a benefit under, any provision of the
Certificate of Incorporation or Bylaws of Acquiror or the Certificate of
Formation or Operating Agreement of Newco or any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquiror or Newco or their
properties or assets or result in the creation or imposition of any Encumbrance
on any asset of Acquiror or Newco. No consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, is required by or with respect to Acquiror or Newco in
connection with the execution and delivery of this Agreement or the consummation
by them of the transactions contemplated hereby, except the filing of a
Certificate of Merger with the Secretary of the State of Delaware.
21
(d) Capitalization. The authorized capital stock of Acquiror consists of
10,000,000 shares of common stock, no par value per share and 5,000,000 shares
of preferred stock, no par value per share. As of the Closing, the outstanding
capital stock of the Acquiror shall consist solely of 7,489,828 shares of common
stock plus any increase for capital raised between the date of this Agreement
and Closing, prior to the issuance of the Merger Consideration. All shares of
capital stock of Acquiror outstanding as of the Closing, including the Merger
Consideration, will have been duly authorized and validly issued, fully paid and
nonassessable and free of preemptive rights. Upon the issuance of the Merger
Consideration, such shares will be duly authorized, validly issued, fully paid
and nonassessable shares of Acquiror. In addition to the foregoing, Acquiror has
outstanding the warrants, options and convertible promissory notes set forth on
Schedule 4.2(d) (the "Acquiror Rights"). Except for the Acquiror Rights,
Acquiror shall as of the Closing, have no outstanding options, warrants or other
convertible securities.
(e) Financial Statements. Acquiror shall prepare and deliver to P2i and P2i
Newspaper no less than forty-five (45) days prior to Closing, copies of audited
consolidated financial statements of Acquiror for the fiscal year ended December
31, 2001 and 2002 (the "Financial Statements"). Such Financial Statements will
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods reported upon and will fairly
present in all material respects the financial position of Acquiror as of the
dates thereof and the results of operations for the periods then ended.
(f) Real Properties.
(i) Acquiror currently leases real property at those locations
identified on Schedule 4.2(f)(i) hereto pursuant to the true, correct and
complete copies of the lease agreements attached to Schedule 4.2(f)(i). Acquiror
owns or leases no other real estate. None of the leasehold interests held by
Acquiror is subject to any Encumbrance, except (a) liens for ad valorem taxes
not yet due or being contested in good faith; and (b) contractual or statutory
mechanics or materialmen's liens or other statutory or common law Encumbrances
relating to obligations of Acquiror that are not delinquent or are being
contested in good faith. There are no Encumbrances which materially interfere
with the present use of such leasehold interests.
(ii) Except as described on Schedule 4.2(f)(ii) hereto, neither
Acquiror nor Newco has received any written notice from any governmental entity
having jurisdiction over Acquiror or Newco or over any of the real property
leased by Acquiror of any violation by Acquiror or Newco of any law, regulation
or ordinance relating to zoning, environmental matters, local building or fire
codes or similar matters relating to any of the real property leased by Acquiror
or of any condemnation or eminent domain proceeding.
(iii) To the best of Acquiror's Knowledge, all of the buildings leased
by Acquiror and all plumbing, HVAC, electrical, mechanical and similar systems
are in good repair and adequate for their current use, ordinary wear and tear
excepted.
(iv) Except as described on Schedule 4.2(f)(iv), Acquiror is not a
party to any lease, sublease, lease assignment or other agreement for the use or
occupancy of any of the leasehold premises wherein Acquiror is the landlord,
sub-landlord or assignor, whether by name, as successor-in-interest or
otherwise. There are no outstanding agreements with any party to acquire the
leasehold premises or any portion thereof or any interest therein.
22
(v) To the best of Acquiror's Knowledge, all certificates of occupancy
and all other licenses, permits, authorizations, consents, certificates and
approvals required by all governmental authorities having jurisdiction over the
leasehold premises occupied by Acquiror have been issued, are fully paid for and
are in full force and effect, will survive the Closing and will not be
invalidated, violated or otherwise adversely affected by the Merger or the other
transactions contemplated by this Agreement.
(g) No Contingent Liabilities. Except contained within the Financial
Statements or otherwise as described on Schedule 4.2(g), at the Closing,
Acquiror shall have no material liabilities, whether related to tax or non-tax
matters, known or unknown, due or not yet due, liquidated or unliquidated, fixed
or contingent, determined or determinable in amount or otherwise, and to the
best knowledge of Acquiror, after due inquiry, there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, except as and to the extent reflected on this Agreement or
any Schedule or Exhibit hereto or which has been incurred in the ordinary course
of business and as accurately reflected on the books and records of Acquiror.
(h) Litigation. Except as described on Schedule 4.2(h) hereto there is no
action, suit, investigation or proceeding (or, to the knowledge of Acquiror, any
basis therefor) pending against, or to the knowledge of Acquiror, threatened
against or affecting Acquiror or any of its properties before any court or
arbitrator or any governmental body, agency or official that (i) if adversely
determined against Acquiror, would have a Material Adverse Effect or (ii) in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
Merger or any of the other transactions contemplated by the Agreement.
(i) Taxes. Except as disclosed on Schedule 4.2(i), Acquiror has timely
filed all tax returns required to be filed by it, or will timely file when due
all tax returns required to be filed by them between the date hereof and the
Closing. Acquiror has paid in a timely fashion or will pay when due in a timely
fashion, all taxes required to be paid in respect of the periods covered by such
returns, and the books and the financial statements of Acquiror reflect, or will
reflect, adequate reserves for all taxes payable by Acquiror which have been, or
will be, accrued but are not yet due. Acquiror is not delinquent in the payment
of any material tax, assessment or governmental charge. No deficiencies for any
taxes have been proposed, asserted or assessed against Acquiror. Acquiror is not
aware of any facts which would constitute the basis for the proposal or
assertion of any such deficiency and there is no action, suit, proceeding, audit
or claim now pending or threatened against Acquiror, asserting any deficiency in
the payment of taxes. All taxes which Acquiror is required by law to withhold
and collect have been duly withheld and collected, and have been timely paid
over to the proper authorities to the extent due and payable. For the purposes
of this Agreement, the term "tax" shall include all federal state, local and
foreign income, property, sales, excise and other taxes of any nature
whatsoever. Acquiror nor any member of any affiliated or combined group of which
Acquiror is or has been a member has granted any extension or waiver of the
limitation period applicable to any tax returns. There are no Encumbrances for
taxes upon the assets of Acquiror. There are no tax sharing or tax allocation
23
agreements to which Acquiror is now or ever has been a party. Acquiror will not
be required under Section 481(c) of the Code to include any material adjustment
in taxable income for any period subsequent to the Merger. Acquiror (a) has not
been a member of an affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was Acquiror) and (b) has
no liability for the taxes of any person (other than Acquiror), as a transferee
or successor, by contract or otherwise.
(j) ERISA.
(i) Schedule 4.2(j)(i) identifies each "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is subject to any provision of ERISA, and either (i)
is maintained, administered or contributed to by Acquiror or any affiliate (as
defined below), (ii) covers any employee or former employee of Acquiror or any
affiliate or (iii) under which Acquiror or any affiliate has any liability.
Copies of such plans and, if applicable, related trust agreements) and all
amendments thereto and any written interpretations thereof have been furnished
to Acquiror, together, if applicable, with (A) the most recent annual reports
(Form 5500 including, if applicable, Schedule B thereto) prepared in connection
with any such plan and (B) the most recent actuarial valuation report prepared
in connection with any such plan. Such plans are referred to collectively herein
as the "Employee Plans." Any Form 5500 for any plan year of any Employee Plan
that has not been filed, but for which the filing date has passed on the date of
this Agreement, shall be filed prior to the date of the Merger. For purposes of
this Section, "affiliate" of any Person means any other Person which, together
with such Person, would be treated as a single employer for any purpose under
Section 414 of the Code.
(ii) Schedule 4.2(j)(ii) identifies all Employee Plans to which
Acquiror currently has any obligation to contribute. Acquiror is not a party to
any multiemployer plan as defined in Section 4001(a) (3) of ERISA
("Multiemployer Plans"), and neither Acquiror nor any affiliate has any
outstanding liability to contribute to any Multiemployer Plan, for delinquent
contributions or for withdrawal liability pursuant to Section 4201 of ERISA.
(iii) There are no Employee Plans that are intended to be qualified
plans under Section 401(a) of the Code, except as may have been shown and
identified as such on the list referred to in subparagraphs (i) or (ii) above.
Each Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Plan, other than any failure to comply that is not
reasonably likely to have a Material Adverse Effect.
(iv) Schedule 4.2(j)(iv) identifies each material employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation or post-retirement
insurance, compensation or benefits that is not an Employee Plan and (A) is
entered into, maintained or contributed to, as the case may be by Acquiror, or
any of its affiliates or (B) covers any employee or former employee of Acquiror,
or any of its affiliates or (C) under which Acquiror, or any of its affiliates
has liability. Such contracts, plans and arrangements as are described above,
copies of all of which have been furnished previously to Acquiror, are referred
to collectively herein as the "Benefit Arrangements." Each Benefit Arrangement
has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Benefit Arrangement other than any failure to comply
that is not reasonably likely to have a Material Adverse Effect.
24
(v) Neither Acquiror nor any affiliate has or maintains nor has
maintained any Employee Plan or Benefit Arrangement providing post-retirement
health or medical benefits in respect of any active or former employee of
Acquiror or any affiliate or former affiliate, except as may be required
pursuant to the provisions of COBRA.
(k) Insurance Coverage. Schedule 4.2(k) sets forth a list of all Acquiror
key-man life insurance policies and other insurance policies material to the
current and proposed business of Acquiror. Acquiror maintains insurance covering
its assets, business, equipment, properties, operations, employees, officers and
directors with such coverage, in such amounts, and with such deductibles and
premiums as are consistent with insurance coverage provided for other companies
of comparable size and in comparable industries. All of such policies are in
full force and effect and all premiums payable have been paid in full and
Acquiror is in full compliance with the terms and conditions of such policies.
Acquiror has not received any notice from any issuer of such policies of its
intention to cancel or refusal to renew any policy issued by it or of its
intention to renew any such policy based on a material increase in premium rates
other than in the ordinary course of business. None of such policies are subject
to cancellation by virtue of the Merger or the consummation of the other
transactions contemplated by this Agreement. There is no claim by Acquiror
pending under any of such policies as to which coverage has been questioned or
denied.
(l) Compliance with Laws. To the best of Acquiror's knowledge, Acquiror is
not in violation of, nor has Acquiror violated, any applicable provisions of any
laws, statues, ordinances or regulations, other than as would not be reasonably
likely to have a Material Adverse Effect. Without limiting the generality of the
foregoing, Acquiror has all licenses, permits, certificates and authorizations
needed or required for the conduct of business of Acquiror as presently
conducted and for the use of its properties and premises occupied by it, except
where the failure to obtain a license, permit, certificate or authorization
would not have a Material Adverse Effect.
(m) Investment Banking Fees. There is no investment banker, broker, finder
or other similar intermediary which has been retained by, or is authorized by
Acquiror to act on its behalf who might be entitled to any fee or commission
from Acquiror, Newco or any of their respective affiliates upon consummation of
the transactions contemplated by this Agreement, except for fees payable to
Andrew, Alexander Wise & Co., Incorporated, as indicated in Exhibit B to the
Term Sheet between Acquiror and P2i.
(n) Personal Property. Acquiror has good and valid title to all of its
personal property, tangible and intangible, reflected on the Financial
Statements and to all other personal property owned by it, free and clear of any
Encumbrance, except for liens in favor of convertible promissory note holders.
Acquiror is the owner of all of its personal property now located in or upon
their leased premises and of all personal property which is used in the
operation of its business. To the best of Acquiror's Knowledge, all such
equipment, furniture and fixtures and other tangible personal property are in
good operating condition and repair and do not require any repairs other than
normal routine maintenance to maintain such property in good operating condition
and repair.
25
(o) Intellectual Property; Intangible Property. The corporate name of
Acquiror and the trade names and service marks listed on Schedule 4.2(o) are the
only names and service marks which are used by Acquiror in the operation of its
business (the "Names and Service Marks"). Acquiror has not done business and has
not been known by any other name other than by its Names and Service Marks.
Acquiror has no patents or patent applications pending. Acquiror owns and has
the exclusive right within the states and countries in which it operates, to use
all intellectual property presently in use by it and necessary for the operation
of its business as now being conducted, which intellectual property includes,
but is not limited to, any trademarks, trade names, service marks, including the
Names and Service Marks, copyrights, trade secrets, customer lists, inventions,
formulas, methods, processes and other proprietary information. There are no
outstanding licenses or consents granting third parties the right to use any
intellectual property owned by Acquiror. No royalties or fees are payable by
Acquiror to any third party by reason of the use of any of its intellectual
property. Acquiror has not received notice of any adversely held patent,
invention, trademark, copyright, service mark or tradename of any person, or any
claims of any other person relating to any of the intellectual property subject
hereto, and there is no reasonable basis for any such charge or claim. There is
no presently known or threatened use or encroachment of any such intellectual
property
(p) Accounts Receivable. The accounts receivable of Acquiror referred to
within the Financial Statements constitute valid claims in the full amount
thereof against the debtors charged therewith on the books of Acquiror to which
each such account is payable and has been acquired in the ordinary course of
business. Except as set forth in Schedule 4.2(p), the accounts receivable are
fully collectible to the extent of the face value thereof (less the amount of
the allowance for the doubtful accounts reflected on the Financial Statements)
in the due course of normal commercial dealings. To the best of Acquiror's
Knowledge, no account debtor has any valid setoff, deduction or defense with
respect thereto, and no account debtor has asserted any such setoff, deduction
or defense. There are no accounts receivable which arise pursuant to an
agreement with the United States Government or any agency or instrumentality
thereof.
(q) Contracts, Leases, Agreements and Other Commitments. Acquiror is not a
party to or bound by any oral, written or implied contracts, agreements, leases,
powers of attorney, guaranties, surety arrangements or other commitments
excluding equipment and furniture leases entered into in the ordinary course of
business (which do not exceed $10,000 in liabilities or commitments in the
aggregate), except for the following (which are hereinafter collectively called
the "Material Contracts"):
(i) The leases and agreements described on Schedules 4.2(f), 4.2(j)(i)
and (ii) and 4.2(q)(i); and
(ii) Agreements involving a maximum possible expenditure or obligation
on the part of Acquiror to expend more than Twenty Thousand Dollars ($20,000)
separately or less than Fifty Thousand Dollars ($50,000) in the aggregate.
26
The Material Contracts constitute all of the material agreements and
instruments which are necessary and desirable to operate the business as
currently conducted by Acquiror. True, correct and complete copies of each
Material Contract described and listed under subsection 4.2(q) will be made
available to Acquiror within ten (10) business days prior to the Closing Date.
The term "Material Contract" excludes purchase orders entered into in the
ordinary course for personal or inventory which may be returned to the vendor
without penalty. All of the Material Contracts are valid, binding and
enforceable against the respective parties thereto in accordance with their
respective terms. All parties to all of the Material Contracts have performed
all obligations required to be performed to date under such Material Contracts,
and Acquiror, and, to the best of its knowledge, nor any other party, is in
default or in arrears under the terms thereof, and no condition exists or event
has occurred which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. The consummation of this Agreement and the
Merger will not result in an impairment or termination of any of the rights of
Acquiror under any Material Contract. None of the terms or provisions of any
Material Contract materially adversely affects the business, prospects,
financial condition or results of operations of Acquiror.
(r) Labor Relations; Employees.
(i) Set forth on Schedule 4.2(r)(i) is a list of:
(A) All collective bargaining agreements and other agreements
requiring arbitration of employment disputes, and any written amendments
thereto, as well as all arbitration awards decided under any such agreements,
and all oral assurances or modifications, past practices, and/or arrangements
made in relation thereto, to which Acquiror is a party or by which it is bound;
and
(B) All employment agreements, and all severance agreements which
have not been fully performed, to which Acquiror is a party or by which it is
bound.
(ii) Set forth on Schedule 4.2(r)(ii) is a list of all key management
employees of Acquiror, broken down by location, together with their rate of
compensation and title.
(iii) Acquiror will deliver to P2i true and correct copies of all of
the documents referred to on Schedule 4.2(r)(i) hereof and all of the personnel
policies, employee and/or supervisor handbooks, procedures and forms of
employment applications relating to the employees of Acquiror.
(iv) There is no union representing or purporting to represent any of
the employees of Acquiror, and Acquiror is not subject to or currently
negotiating any collective bargaining agreements with any union representing or
purporting to represent the employees of any of the foregoing.
(v) Except as set forth on Schedule 4.2(r)(v):
(A) There are no strikes, slow downs or other work stoppages,
grievance proceedings, arbitrations, labor disputes or representation questions
pending or, to the best knowledge of Acquiror, threatened;
27
(B) Acquiror has complied in all material respects with all laws
relating to labor, employment and employment practices, including without
limitation, any provisions thereof relating to wages, hours and other terms of
employment, collective bargaining, nondiscrimination and the payment of social
security, unemployment compensation and similar taxes, and Acquiror is not (1)
liable for any arrearages of wages or any taxes or penalties for failure to
comply with any of the foregoing or (2) delinquent in the payment of any
severance, salary, bonus, commission or other direct or indirect compensation
for services performed by any employee to the date hereof, or any amount
required to be reimbursed to any employee or former employee; and
(C) There are no charges, suits, actions, administrative
proceedings, investigations and/or claims pending or threatened against
Acquiror, whether domestic or foreign, before any court, governmental agency,
department, board or instrumentality, or before any arbitrator (collectively
"Actions"), concerning or in any way relating to the employees or employment
practices of Acquiror, including, without limitation, Actions involving unfair
labor practices, wrongful discharge and/or any other restrictions on the right
of Acquiror to terminate its employees, employment discrimination, occupational
safety and health, and workers' compensation.
(vi) There are no express or implied agreements, policies, practices,
or procedures, whether written or oral, pursuant to which any employee of
Acquiror is not terminable at will and except as required by law, no employee is
entitled to any benefit or to participate in any employee benefit plan of
Acquiror following such termination of employment.
(vii) Except as set forth in Schedule 4.2(r)(vii), Acquiror is not a
party to any oral or written (A) agreement with any executive officer or other
key employee of Acquiror (1) the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction involving
Acquiror of the nature of the transactions contemplated by this Agreement, (2)
providing any term of employment or compensation guarantee extending for a
period longer than one year, or (3) providing severance benefits or other
benefits after the termination of employment of such executive officer or key
employee regardless of the reason for such termination of employment; or (B)
agreement or plan which will remain in effect after the Closing, including,
without limitation, any stock option plan, stock appreciation right plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
(viii) Acquiror has not taken any action which requires or, taken
together with the transactions contemplated hereby, would require the giving of
any notice under the Worker Adjustment Retraining and Notification Act or any
comparable state or local law or regulation.
(s) Suppliers and Customers. The relationship of Acquiror with its
suppliers and customers are good commercial working relationships and to the
best of Acquiror's Knowledge, no material supplier or customer of Acquiror has
canceled, curtailed or otherwise terminated or threatened to cancel or otherwise
terminate, his or its relationship with Acquiror. Acquiror has no knowledge, or
reason to believe, that the Merger or any other transaction contemplated hereby
would adversely affect any such material supplier or customer relationship.
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(t) Conflicting Interests. Except as set forth on Schedule 4.2(t), no
director, officer or employee of Acquiror nor relative or affiliate thereof (i)
sells or purchases goods or services from Acquiror or has any pecuniary interest
in any supplier or client of any of the foregoing or in any other business
enterprise with which Acquiror conducts business or with which any of the
foregoing is in competition, or (ii) is indebted to Acquiror except for money
borrowed and as set forth on the Financial Statements.
(u) Environmental Protection. Acquiror has not been notified by any
governmental authority, agency or third party, and Acquiror has no knowledge, of
any violation by such person of any Environmental Statute. All registrations by
Acquiror with, licenses from or permits issued by governmental agencies pursuant
to environmental, health and safety laws are in full force and effect. There is
no hazardous substance at any premises currently or previously occupied by
Acquiror. Acquiror has not received any notice or any request for information,
notice of claim, demand or other notification that it may be potentially
responsible with respect to any investigation or clean-up of any threatened or
actual release of hazardous substances. All hazardous wastes and substances have
been stored, treated, disposed of and transported in conformance with all
requirements applicable to such hazardous substances and wastes.
(v) Reporting Company. The Common Stock of Acquiror is eligible for trading
on the OTC Electronic Bulletin Board. Acquiror is a reporting company under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act").
(w) Absence of Certain Changes or Events. Except as and to the extent set
forth on the Financial Statements, to the extent contained in this Agreement, or
as set forth on Schedule 4.2(w), between September 30, 2002 (the date of the
most recent Financial Statements) and the Closing, there will not be (i) any
Material Adverse Change in the business, assets, properties, results of
operations, financial condition or prospects of Acquiror, (ii) any entry by
Acquiror into any material commitment or transaction which is not in the
ordinary course of business; (iii) any change by Acquiror in accounting
principles or methods except insofar as may be required by a change in generally
accepted accounting principles; (iv) any declaration, payment or setting aside
for payment of any dividends or other distributions (whether in cash, stock or
property) in respect of capital stock of Acquiror, or any direct or indirect
redemption, purchase or any other type of acquisition by Acquiror, or any direct
or indirect redemption, purchase or any other type of acquisition by Acquiror of
any shares of its capital stock or any other securities for an aggregate sum not
in excess of $20,000, (v) any agreement by Acquiror, whether in writing or
otherwise, to take any action which, if taken prior to the date of this
Agreement, would have made any representation or warranty in this Section 4.2
untrue or incorrect; (vi) any acquisition of the assets of Acquiror, other than
in the ordinary course of business and consistent with past practice and not in
excess of $20,000 in the aggregate; or (vii) any execution of any agreement with
any executive officer of Acquiror providing for his or her employment, or any
increase in the compensation or in severance or termination benefits payable or
to become payable by Acquiror to its officers or key employees, or any material
29
increase in benefits under any collective bargaining agreement or in benefits
under any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance or other plan or arrangement or understanding (whether or not legally
binding) providing benefits to any present or former employee of Acquiror. Since
the date of the Financial Statements, there has not been and to the best of
Acquiror's Knowledge there is not threatened, any material adverse change in
financial condition, business, results of operations or prospects of the
business or any material physical damage or loss to any of the properties or
assets of the business or to the premises occupied in connection with the
business, whether or not such loss is covered by insurance.
(x) Statements And Other Documents Not Misleading. Neither this Agreement,
including all exhibits and schedules and other closing documents, nor any other
financial statement, document or other instrument heretofore or hereafter
furnished by Acquiror to P2i in connection with the Merger or the other
transactions contemplated hereby, contains or will contain any untrue statement
of any material fact or omit or will omit to state any material fact required to
be stated in order to make such statement, information, document or other
instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to Acquiror which may have a Material Adverse
Effect on the business, prospects, financial condition or results of operations
of P2i or of any of its properties or assets which has not been set forth in
this Agreement as an exhibit or schedule hereto.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 Access to Information.
At all times prior to the Closing or the earlier termination of this
Agreement in accordance with the provisions of Section 8, and in each case
subject to Section 5.2 below, each of the parties hereto shall provide to the
other parties (and the other parties' authorized representatives) full access
during normal business hours and upon reasonable prior notice to the premises,
properties, books, records, assets, liabilities, operations, contracts,
personnel, financial information and other data and information of or relating
to such party (including without limitation all written proprietary and trade
secret information and documents, and other written information and documents
relating to intellectual property rights and matters), and will cooperate with
the other party in conducting its due diligence investigation of such party.
5.2 Confidentiality; No Solicitation.
(a) Confidentiality of P2i and P2i Newspaper Related Information. With
respect to information concerning P2i or P2i Newspaper that is made available to
Acquiror pursuant to the terms of this Agreement, Acquiror agrees that it shall
hold such information in strict confidence, shall not use such information
except for the sole purpose of evaluating the Merger and related transactions
and shall not disseminate or disclose any of such information other than to its
directors, officers, employees, stockholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Merger and the related transactions (each of whom shall be
informed in writing by Acquiror or its representatives of the confidential
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nature of such information and directed by Acquiror in writing to treat such
information confidentially). If this Agreement is terminated pursuant to the
provisions of Section 8, Acquiror shall immediately return all such information,
all copies thereof and all information prepared by Acquiror based upon the same;
provided, however, that one copy of all such material may be retained by
Acquiror's outside legal counsel for purposes only of resolving any disputes
under this Agreement. The above limitations on use, dissemination and disclosure
shall not apply to information that (i) is learned by Acquiror from a third
party entitled to disclose it; (ii) becomes known publicly other than through
Acquiror or any party who received the same through Acquiror, provided that
Acquiror has no knowledge that the disclosing party was subject to an obligation
of confidentiality; (iii) is required by law or court order to be disclosed by
Acquiror; or (iv) is disclosed with the express prior written consent thereto of
P2i. Acquiror shall undertake all necessary steps to ensure that the secrecy and
confidentiality of such information will be maintained in accordance with the
provisions of this paragraph (a). Notwithstanding anything contained herein to
the contrary, in the event a party is required by court order or subpoena to
disclose information which is otherwise deemed to be confidential or subject to
the confidentiality obligations hereunder, prior to such disclosure, the
disclosing party shall: (A) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (B) cooperate with the non-disclosing party, at the
expense of the non-disclosing party in, obtaining a protective or similar order
with respect to such information; and (C) provide only such of the confidential
information as the disclosing party is advised by its counsel is necessary to
strictly comply with such court order or subpoena.
(b) Confidentiality of Acquiror-Related Information. With respect to
information concerning Acquiror that is made available to P2i or P2i Newspaper
pursuant to the provisions of this Agreement, P2i and P2i Newspaper agree that
they shall hold such information in strict confidence, shall not use such
information except for the sole purpose of evaluating the Merger and the related
transactions, and shall not disseminate or disclose any of such information
other than to its directors, officers, employees, stockholders, affiliates,
agents and representatives who need to know such information for the sole
purpose of evaluating the Merger and the related transactions (each of whom
shall be informed in writing by P2i, P2i Newspaper or their representatives of
the confidential nature of such information and directed by such party in
writing to treat such information confidentially). If this Agreement is
terminated pursuant to the provisions of Section 8, P2i and P2i Newspaper agree
to return immediately all such information, all copies thereof and all
information prepared by P2i or P2i Newspaper based upon the same; provided,
however, that one copy of all such material may be retained by outside legal
counsel for purposes only of resolving any disputes under this Agreement. The
above limitations on use, dissemination and disclosure shall not apply to
information that (i) is learned by P2i or P2i Newspaper from a third party
entitled to disclose it; (ii) becomes known publicly other than through P2i, P2i
Newspaper or any party who received the same through P2i or P2i Newspaper
provided that P2i and P2i Newspaper have no knowledge that the disclosing party
was subject to an obligation of confidentiality; (iii) is required by law or
court order to be disclosed by P2i; or (iv) is disclosed with the express prior
written consent thereto of Acquiror. P2i and P2i Newspaper agree to undertake
all necessary steps to ensure that the secrecy and confidentiality of such
information will be maintained in accordance with the provisions of this
paragraph (b). Notwithstanding anything contained herein to the contrary, in the
31
event a party is required by court order or subpoena to disclose information
which is otherwise deemed to be confidential or subject to the confidentiality
obligations hereunder, prior to such disclosure, the disclosing party shall: (A)
promptly notify the non-disclosing party and, if having received a court order
or subpoena, deliver a copy of the same to the non-disclosing party; (B)
cooperate with the non-disclosing party at the expense of the non-disclosing
party in obtaining a protective or similar order with respect to such
information; and (C) provide only such of the confidential information as the
disclosing party is advised by its counsel is necessary to strictly comply with
such court order or subpoena.
(c) Nondisclosure. Except as provided below, neither P2i, P2i Newspaper,
Acquiror nor Newco shall disclose to the public or to any third party the
existence of this Agreement or the transactions contemplated hereby or any other
material non-public information concerning or relating to any other party
hereto, other than with the express prior written consent of the other parties
hereto, except as may be required by law or court order or to enforce the rights
of such disclosing party under this Agreement, in which event the contents of
any proposed disclosure shall be discussed with the other party before release;
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, any party hereto may disclose this Agreement to any of its
directors, officers, employees, stockholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Merger, and to any person whose consent is required in connection
with the Merger or this Agreement. The parties anticipate issuing a mutually
acceptable, joint press release announcing the execution of this Agreement and
the consummation of the Merger.
(d) No Solicitation. In consideration of the substantial expenditure of
time, effort and money to be undertaken by Acquiror in connection with the
transactions contemplated by this Agreement, neither P2i, P2i Newspaper nor any
of their affiliates will, prior to the Closing directly or indirectly, through
any officer, director, agent or otherwise: (i) solicit, initiate or encourage
the submission of inquiries, proposals or offers from any person or entity
relating to any acquisition or purchase of assets of or any equity interest in
P2i, P2i Newspaper or any affiliate thereof or any tender offer (including a
self-tender offer), exchange offer, merger, consolidation, business combination,
sale of a substantial amount of assets or sale of securities, liquidation,
dissolution or similar transaction involving P2i, P2i Newspaper or their
affiliates (a "Transaction Proposal"); (b) enter into or participate in any
discussions or negotiations regarding a Transaction Proposal, or furnish to any
other person or entity any information with respect to the business, properties
or assets of P2i, P2i Newspaper or their affiliates in connection with a
Transaction Proposal; or (c) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage any effort or attempt by any other
person to do or seek a Transaction Proposal. P2i or P2i Newspaper shall promptly
notify Acquiror if any such proposal or offer, or any inquiry or contact with
any person or entity with respect thereto is made.
5.3 Interim Operations.
During the period from the date of this Agreement and continuing until the
Closing:
32
(a) Interim Operations of P2i Newspaper and Subsidiaries. P2i Newspaper
agrees (except as expressly contemplated by this Agreement, including any
Exhibits and Schedules hereto, or to the extent that Acquiror shall otherwise
consent in writing) that:
(i) Ordinary Course. P2i Newspaper and its Subsidiaries shall carry on
their business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and, to the extent consistent with such
business, use all reasonable efforts to preserve intact their present business
organizations, keep available the services of their present officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with them;
(ii) Dividends; Changes in Stock. P2i Newspaper and its Subsidiaries
shall not and shall not propose to (a) declare, set aside or pay any dividend,
on, or make other distributions in respect of, any of their capital stock, (b)
split, combine or reclassify any of their capital stock or issue, authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of their capital stock (c) redeem, repurchase or
otherwise acquire any shares of their capital stock or (d) otherwise change
their capitalization.
(iii) Issuance of Securities. Except as contemplated by this
Agreement, P2i Newspaper shall not sell, issue, pledge, authorize or propose the
sale or issuance of, pledge or purchase or propose the purchase of, any shares
of its capital stock of any class or securities convertible into, or rights,
warrants or options to acquire, any such shares or other convertible securities.
(iv) Governing Documents. P2i Newspaper shall not amend its Articles
of Incorporation or itsBylaws. None of the Subsidiaries shall amend their
respective corporate charters or governing documents.
(v) No Dispositions. P2i Newspaper and its Subsidiaries shall not
sell, lease, pledge, encumber or otherwise dispose of or agree to sell, lease,
pledge, encumber or otherwise dispose of, any of their material assets except in
the ordinary course of business consistent with prior practice and in no event
amounting in the aggregate to more than $20,000 in value of such assets.
(vi) Benefit Plans; Etc. P2i Newspaper and its Subsidiaries shall not
adopt or amend in any material respect any collective bargaining agreement or
Employee Benefit Plan (as defined herein).
(vii) Executive Compensation. P2i Newspaper and its Subsidiaries shall
not grant to any executive officer any increase in compensation or in severance
or termination pay, or enter into any employment agreement with any executive
officer.
(viii) Acquisitions. P2i Newspaper and its Subsidiaries shall not
acquire (by merger, consolidation or acquisition of stock or assets or
otherwise) any corporation, partnership or other business organization or
subdivision thereof, or make any investment by either purchase of stock or
securities, contributions to capital, property transfer or, except in the
ordinary course of business, purchase of any property or assets, of any other
individual or entity.
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(ix) Tax Elections. P2i Newspaper and its Subsidiaries shall not make
any material tax election or settle or compromise any material federal, state,
local or foreign tax liability which has the effect of materially increasing P2i
Newspaper's tax liabilities.
(x) Waivers and Releases. P2i Newspaper and its Subsidiaries shall not
waive, release, grant or transfer any rights of material value or modify or
change in any material respect any Material Agreement other than in the ordinary
course of business and consistent with past practice.
(xi) Other Actions. P2i Newspaper and its Subsidiaries shall not enter
into any agreement or arrangement to do any of the foregoing. P2i Newspaper and
its Subsidiaries shall not take any action, or fail to take any action, that is
reasonably likely to result in any of the representations and warranties of them
set forth in this Agreement becoming untrue in any material respect.
(b) Interim Operations of Acquiror and Newco. Acquiror and Newco agree
(except as expressly contemplated by this Agreement, including any Exhibits and
Schedules hereto, or to the extent that P2i Newspaper shall otherwise consent)
that:
(i) Ordinary Course. Acquiror and Newco shall conduct their business
in the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact their present business organizations, keep
available the services of their present officers and employees and preserve
their relationships with customers, suppliers and others having business
dealings with them.
(ii) Dividends; Changes in Stock. Neither Acquiror nor Newco shall
(and neither shall propose to) (a) declare or pay any dividend, on, or make
other distributions in respect of, any of its capital stock, (b) split, combine
or reclassify any of its capital stock or issue, authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (c) repurchase or otherwise acquire any shares
of its capital stock or (d) otherwise change its capitalization.
(iii) Issuance of Securities. Except as contemplated by this
Agreement, and except for the issuance of up to $750,000 of convertible
promissory notes, equity associated with the issuance of the convertible
promissory notes and related warrants, neither Acquiror nor Newco shall sell,
issue, pledge, authorize or propose the sale or issuance of, pledge or purchase
or propose the purchase of, any shares of its capital stock of any class or
securities convertible into, or rights, warrants or options to acquire, any such
shares or other convertible securities.
(iv) Governing Documents. Acquiror shall not amend its Articles of
Incorporation or its Bylaws. Newco shall not amend its Certificate of Formation
or Operating Agreement.
(v) No Dispositions. Other than Acquiror's planned disposition of its
ISP division, Acquiror shall not sell, lease, pledge, encumber or otherwise
dispose of, or agree to sell, lease, pledge, encumber or otherwise dispose of,
any of its assets that are material, or any other assets except in the ordinary
course of business consistent with prior practice.
34
(vi) Benefit Plans; Etc. Acquiror shall not adopt or amend in any
material respect any collective bargaining agreement or Employee Benefit Plan
(as defined herein).
(vii) Executive Compensation. Acquiror shall not grant to any
executive officer any increase in compensation or in severance or termination
pay, or enter into any employment agreement with any executive officer.
(viii) Acquisitions. Neither Acquiror nor Newco shall acquire (by
merger, consolidation or acquisition of stock or assets or otherwise) any
corporation, partnership or other business organization or subdivision thereof,
or make any investment by either purchase of stock or securities, contributions
to capital, property transfer or, except in the ordinary course of business,
purchase of any property or assets, of any other individual or entity.
(ix) Tax Elections. Neither Acquiror nor Newco shall make any material
tax election or settle or compromise any material federal, state, local or
foreign tax liability.
(x) Waivers and Releases. Acquiror shall not waive, release, grant or
transfer any rights of material value or modify or change in any material
respect any Material Agreement other than in the ordinary course of business and
consistent with past practice.
(xi) Other Actions. Acquiror shall take any action, or fail to take
any action, that is reasonably likely to result in any of its representations
and warranties set forth in this Agreement becoming untrue in any material
respect.
5.4 Consents.
Acquiror, Newco, P2i Newspaper and P2i shall cooperate and use their best
efforts to obtain, prior to the Closing, all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts as are necessary for the consummation of the
transactions contemplated by this Agreement; provided, however, that no loan
agreement or contract for borrowed monies shall be repaid and no contract shall
be amended materially to increase the amount payable thereunder or otherwise to
be materially more burdensome in order to obtain any such consent, approval or
authorization without first obtaining the written approval of the other parties
hereto.
5.5 All Reasonable Efforts.
Subject to the terms and conditions of this Agreement and to the fiduciary
duties and obligations of the boards of directors of the parties hereto to their
respective stockholders, as advised by their counsel, each of the parties to
this Agreement shall use all reasonable 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, or to remove any injunctions or
other impediments or delays, legal or otherwise, as soon as reasonably
practicable, to consummate the Merger and the other transactions contemplated by
this Agreement.
35
5.6 Public Announcements.
Acquiror, Newco, P2i Newspaper and P2i shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to the Merger, this Agreement or the other transactions contemplated by this
Agreement and shall not issue any other press release or make any other public
statement without prior consent of the other parties, except as may be required
by law or, with respect to Acquiror, by obligations pursuant to rule or
regulation of the Exchange Act, the Securities Act, any rule or regulation
promulgated thereunder or any rule or regulation of the NASD.
5.7 Notification of Certain Matters.
P2i Newspaper shall give prompt notice to Acquiror, and Acquiror shall give
prompt notice to P2i Newspaper of (a) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which would cause any of its
representations or warranties in this Agreement to be untrue or inaccurate in
any material respect at or prior to the Closing, and (b) any material failure of
P2i and P2i Newsapaper, on the one hand, or Acquiror and Newco, on the other
hand, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by them under this Agreement;
provided, however, the delivery of any notice pursuant to this Section shall not
limit or otherwise affect the remedies available to the party receiving such
notice under this Agreement as expressly provided in this Agreement.
5.8 Expenses.
All costs and expenses incurred in connection with the Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Merger is consummated. However, in the event that
the Merger is not consummated because of Acquiror, Acquiror shall pay the
reasonable accounting fees incurred by P2i.
5.9 Documents at Closing.
Each party to this Agreement agrees to execute and deliver at the Closing
those documents identified in Section 2.2.
5.10 Prohibition on Trading in Acquiror Stock.
P2i and P2i Newspaper acknowledge that the United States securities laws
prohibit any person who has received material non-public information concerning
the matters which are the subject matter of this Agreement from purchasing or
selling the securities of the Acquiror, or from communicating such information
to any person under circumstances in which it is reasonably foreseeable that
such person is likely to purchase or sell securities of the Acquiror.
Accordingly, until the Closing, P2i and P2i Newspaper agree that they will not
and shall instruct their officers, directors, employees and representatives not
to purchase or sell any securities of the Acquiror, or communicate such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell securities of the
Acquiror, until counsel for Acquiror believes that any such non-public
information has been adequately disseminated to the public.
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5.11 Reservation of Shares; Post-Closing Amendments to Acquiror's, P2i's
and Newco's Certificates of Incorporation.
As of the Closing, Acquiror shall have authorized and reserved for issuance
sufficient shares of Acquiror Common Stock to permit the issuance of the Merger
Consideration. Acquiror shall use best efforts to secure approval by its
stockholders as promptly as is practicable following the Effective Date of an
amendment to its Certificate of Incorporation that effectuates a change in its
name to P2i, Inc. P2i shall use best efforts to secure approval by its
stockholders as promptly as is practicable following the Effective Date of an
amendment to its Certificate of Incorporation that effectuates a change in its
name to P2i New Media, Inc. Newco shall use best efforts to secure approval by
its stockholders as promptly as is practicable following the Effective Date of
an amendment to its Certificate of Incorporation that effectuates a change in
its name to P2i Newspaper, LLC.
5.12 Indemnification: Directors' and Officers' Insurance.
(a) P2i and P2i Newspaper. P2i and P2i Newspaper shall jointly and
severally indemnify, defend and hold harmless Acquiror, including its present
and former officers, directors and employees of Acquiror ("Acquiror Indemnified
Party") from and against any and all demands, claims, actions or causes of
action, judgments, assessments, losses, liabilities, damages or penalties and
reasonable attorneys' fees and related disbursements including, without
limitation, unpaid taxes of any kind (collectively, "Claims") incurred by the
Acquiror Indemnified Party which arise out of or result from a
misrepresentation, breach of warranty, or breach of any covenant or agreement of
P2i or P2i Newspaper contained herein or in the Schedules annexed hereto or in
any deed, exhibit, closing certificate, schedule or any ancillary certificates
or other documents or instruments furnished by P2i or P2i Newspaper pursuant
hereto or in connection with the transactions contemplated hereby or thereby.
(b) Acquiror. Acquiror shall indemnify, defend and hold harmless P2i and
P2i Newspaper, including their officers, directors and employees ("P2i
Indemnified Party") from and against any and all Claims, incurred by the P2i
Indemnified Party which arise out of or result from a misrepresentation, breach
of warranty or breach of any covenant or agreement of Acquiror contained herein
or in the Schedules annexed hereto or in any deed, exhibit, closing certificate,
schedule or any ancillary certificates or other documents or instruments
furnished by Acquiror pursuant hereto or in connection with the transactions
contemplated hereby or thereby.
(c) Methods of Asserting Claims for Indemnification. All claims for
indemnification under this Agreement shall be asserted as follows:
(i) Third Party Claims. In the event that any Claim for which a party
(the "Indemnitee") would be entitled to indemnification under this Agreement is
asserted against or sought to be collected from the Indemnitee by a third party
the Indemnitee shall promptly notify the other party (the "Indemnitor") of such
Claim, specifying the nature thereof, the applicable provision in this Agreement
or other instrument under which the Claim arises, and the amount or the
estimated amount thereof (the "Claim Notice"). The Indemnitor shall have thirty
(30) days (or, if shorter, a period to a date not less than ten (10) days prior
to when a responsive pleading or other document is required to be filed but in
37
no event less than ten (10) days from delivery or mailing of the Claim Notice)
(the "Notice Period") to notify the Indemnitee (a) whether or not it disputes
the Claim and (b) if liability hereunder is not disputed, whether or not it
desires to defend the Indemnitee. If the Indemnitor elects to defend by
appropriate proceedings, such proceedings shall be promptly settled or
prosecuted to a final conclusion in such a manner as to avoid any risk of damage
to the Indemnitee; and all costs and expenses of such proceedings and the amount
of any judgment shall be paid by the Indemnitor.
If the Indemnitee desires to participate in, but not control, any such
defense or settlement, it may do so at its sole cost and expense. If the
Indemnitor has disputed the Claim, as provided above, and shall not defend such
Claim, the Indemnitee shall have the right to control the defense or settlement
of such Claim, in its sole discretion, and shall be reimbursed by the Indemnitor
for its reasonable costs and expenses of such defense. Neither Indemnitee nor
Indemnitor shall be liable for any settlement of any Claim without the prior
written consent of the other party.
(ii) Non-Third Party Claims. In the event that the Indemnitee should
have a Claim for indemnification hereunder which does not involve a Claim being
asserted against it or sought to be collected by a third party, the Indemnitee
shall promptly send a Claim Notice with respect to such Claim to the Indemnitor.
If the Indemnitor does not notify the Indemnitee within the Notice Period that
it disputes such Claim, the Indemnitor shall pay the amount thereof to the
Indemnitee. If the Indemnitor disputes the amount of such Claim, the controversy
in question shall be submitted to arbitration pursuant to Section 8.8 hereafter.
(d) For a period of six years after the Closing, the Acquiror or the
Surviving Company shall cause to be maintained in effect the current policies of
directors' and officer's liability insurance maintained by the Acquiror
(provided that Acquiror and the Surviving Company may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims or matters
existing or occurring before the Closing as well as after. Such policy shall
continue to cover former officers, directors and employees of Acquiror who
resigned prior to the Closing.
(e) This Section 5.12 shall survive the consummation of the Merger. The
provisions of this Section 5.12 are intended to be for the benefit of, and shall
be enforceable by, each Indemnified Party, his heirs and his representatives.
The rights provided Indemnified Parties shall be in addition to, and not in lieu
of, any rights to indemnity which such parties may have under the Certificate or
By-Laws of the Acquiror or the Surviving Company or any other agreements or
otherwise.
5.13 Acknowledgment of Approvals; Approval of P2i Stockholders.
By virtue of their respective signatures to this Agreement, Acquiror,
Newco, P2i Newspaper and P2i acknowledge their approval of this Agreement and
their consent to the consummation of the transactions identified herein. P2i and
Acquiror shall each hold a meeting of its respective stockholders prior to the
Closing to approve the Merger and this Agreement.
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5.14 Acquiror Board of Directors.
(a) Concurrent with the Closing, Acquiror's Board of Directors shall
consist of seven members. Those members shall be:
(i) one member appointed by Andrew, Alexander, Wise & Company,
Incorporated, subject to the consent of P2i, whose consent shall not be withheld
without good and sufficient cause and cannot be unreasonably withheld;
(ii) one member appointed by the former principal shareholders of
Suncoast Automation, Inc., as determined in the stock exchange agreement by and
among Protosource Corporation, Suncoast Automation, Inc., and the shareholders
of Suncoast Automation, Inc. (the "Suncoast Aquiror Board Seat");
(iii) Peter Wardle (the "Wardle Board Seat");
(iv) Thomas Butera (the "Butera Board Seat"); and
(v) three members appointed by agreement of Mssrs. Wardle and Butera
(the "Wardle/Butera Board Seats"), which members must be independent and
non-executives of the Acquiror or an affiliate of the Acquiror.
(b) Subject to execution under Section 3.3(c), upon the expiration of the
agreement whereby the shareholders of Suncoast Automation appoint a member to
the Board of Directors, as set forth in Section 5.14(a)(2) above, Mssrs. Wardle
and Butera shall be entitled to appoint by agreement a board director to replace
the Suncoast director (the "Fourth Wardle/Butera Board Seat").
(c) If Messrs. Wardle and Butera's combined ownership of the then
outstanding stock of the Acquiror falls below twenty-five percent (25%) but
remains above ten percent (10%), then Mssrs. Wardle and Butera shall forfeit the
right to appoint the Wardle Board Seat, Butera Board Seat, two of the three
Wardle/Butera Board Seats and the Fourth Wardle/Butera Board Seat (if that right
has vested; if the right has not vested, Messrs. Wardle and Butera shall lose
the right to appoint when that right would vest). This provision shall not
prevent Mssrs. Wardle and Butera from appointing either Mr. Wardle or Mr. Butera
to fill the second of the two Wardle/Butera Board Seats.
(d) If Messrs. Wardle and Butera's combined ownership of the then
outstanding stock of the Acquiror falls below ten percent (10%), then Mssrs.
Wardle and Butera shall forfeit the right to appoint the Wardle Board Seat,
Butera Board Seat, the Wardle/Butera Board Seats and the Fourth Wardle/Butera
Board Seat (if that right has vested; if the right has not vested, Messrs.
Wardle and Butera shall lose the right to appoint when that right would vest).
5.15 Employment Agreements.
Peter Wardle will continue to be compensated pursuant to the terms of his
employment agreement which provide a base salary of $250,000 and a one-year
severance in the event of certain corporate events. Of such amounts, 50% will be
paid in cash in accordance with Newco's regular payroll policies. The remaining
50% may also be paid in cash, but only from positive cash flow generated from
the combined operations of the Acquiror and Newco. If insufficient positive cash
flow is available to make such payments during any quarter of operations, Mr.
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Wardle will either (i) sell his shares of the Acquiror's common stock in such
amounts required to cover any short-fall in quarterly salary payments; or (ii)
receive a cash advance in such amount required to cover any short-fall in
quarterly salary payments and repay such advance from such sale. Through
December 31, 2006, any additional compensation to be paid to Messrs. Wardle or
Joseph DiMarino must be approved by Acquiror's compensation committee which
shall consist of Mr. Wardle, an appointee of the Acquiror's then current
investment banker of record and one of the two independent, non-executive
directors on the Acquiror's Board of Directors.
5.16 Debt Conversion.
P2i currently owes approximately $101,845 in debt to its principal
stockholders ("Shareholder Debt") and $146,845 to related parties ("Related
Party Debt"). The Shareholder Debt and the Related Party Debt will be repaid,
amortized over a term of one year commencing after the repayment or conversion
of Acquiror's currently outstanding convertible promissory notes or other form
of satisfaction of such notes.
5.17 Production of Schedules and Exhibits.
Each of the parties hereto shall utilize its reasonable best efforts to
produce all Schedules and Exhibits required to be produced by it under this
Agreement upon the execution hereof. In the event that any party has not
produced all Schedules and Exhibits required to be produced by it hereunder upon
the execution of this Agreement, all such Schedules and Exhibits shall be
produced by such party within fifteen (15) business days thereafter but in no
event shall such Schedules and Exhibits be delivered less than forty-five (45)
business days prior to the Closing Date. The Schedules and Exhibits produced
subsequent to the execution of this Agreement, shall be given such force and
effect as though such Schedules and Exhibits which were produced upon execution
of this Agreement.
5.18 Additional Funding.
Acquiror shall use its best efforts to raise up to $450,000 through the
sale of debt/equity securities. All such debt shall be secured by a first
priority lien on all assets of P2i Newspaper. Acquiror and P2i Newspaper will
use the proceeds of such funding for working capital, as mutually determined by
the Boards of Directors of both companies.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions to Obligations of P2i and P2i Newspaper.
The obligations of P2i and P2i Newspaper to consummate the Merger and the
other transactions contemplated to be consummated by it at the Closing are
subject to the satisfaction (or waiver by P2i and P2i Newspaper) at or prior to
the Closing (or at such other time prior thereto as may be expressly provided in
this Agreement) of each of the following conditions:
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(a) The representations and warranties of Acquiror and Newco set out in
this Agreement shall be true and correct in all material respects at and as of
the time of the Closing as though such representations and warranties were made
at and as of such time.
(b) Acquiror shall have complied in a timely manner and in all material
respects with the respective covenants and agreements set out in this Agreement
and, in the event that P2i or the Acquiror and Newco produce schedules or
exhibits subsequent to the execution of this Agreement, such schedules or
exhibits must be reasonably acceptable to the other party.
(c) The Merger shall have been approved by Newco in accordance with the
provisions of the DGCL. The Merger shall have been approved by Acquiror's
stockholders in accordance with the CGCL. The Board of Directors of Newco and
Acquiror shall have approved the execution of this Agreement and the Merger
thereby.
(d) There shall be delivered to P2i and P2i Newspaper an officer's
certificate of Acquiror to the effect that all of the representations and
warranties of Acquiror set forth herein are true and complete in all material
respects as of the Closing, and the Acquiror has complied in all material
respects with the covenants and agreements set forth herein that are required to
be complied with by the Closing.
(e) There shall be delivered to P2i and P2i Newspaper an officer's
certificate of Newco to the effect that all of the representations and
warranties of Newco set forth herein are true and complete in all material
respects as of the Closing, and Newco has complied in all material respects with
the covenants and agreements set forth herein that are required to be complied
with by the Closing. There shall be delivered to P2i and P2i Newspaper a chart
detailing all of Acquiror's outstanding shares, options and warrants.
(f) There shall be delivered to P2i and P2i Newspaper an opinion of counsel
for Acquiror and Newco in the form of Exhibit 6.1(f) attached hereto and made a
part hereof.
(g) All director, stockholder, lender, lessor and other parties' consents
and approvals, as well as all filings with, and all necessary consents or
approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Merger shall have been secured.
(h) P2i shall have received advice reasonably acceptable to it that the
Merger transaction will not result in a taxable event to the stockholders of
P2i.
(i) No statute, rule, regulation, executive order, decree, injunction or
restraining order shall have been enacted, entered, promulgated or enforced by
any court of competent jurisdiction or governmental authority that prohibits or
restricts the consummation of the Merger or the related transactions.
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(j) Acquiror shall have or be capable of acquiring reasonable amounts of
director and officer liability insurance.
(k) Acquiror and P2i shall have entered into a definitive agreement for the
purchase of 18% of P2i by Acquiror for an aggregate purchase price of
$1,100,000. Such agreement shall be in form and substance reasonably acceptable
to Acquiror and P2i.
6.2 Conditions to Acquiror's and Newco's Obligations.
The obligation of Acquiror and Newco to consummate the Merger and the other
transactions contemplated to be consummated by it at the Closing are subject to
the satisfaction (or waiver by Acquiror and/or Newco) at or prior to the Closing
(or at such other time prior thereto as may be expressly provided in this
Agreement) of each of the following conditions:
(a) The representations and warranties of P2i and P2i Newspaper set out in
this Agreement shall be true and correct in all material respects at and as of
the time of the Closing as though such representations and warranties were made
at and as of such time.
(b) P2i and P2i Newspaper shall have complied in a timely manner and in all
material respects with its covenants and agreements set out in this Agreement.
(c) There shall be delivered to Acquiror an officer's certificate of P2i
and P2i Newspaper to the effect that all of the representations and warranties
of P2i and P2i Newspaper set forth herein are true and complete in all material
respects as of the Closing, and that P2i and P2i Newspaper have complied in all
material respects with the covenants and agreements set forth herein that it is
required to comply with by the Closing.
(d) P2i shall have secured the approval of its stockholders necessary under
the PBCL, its Certificate of Incorporation and Bylaws to approve the Merger and
this Agreement and the transactions contemplated hereby, and shall have
delivered a certificate of an authorized officer of P2i to this effect.
(e) All director, stockholder, lender, lessor and other parties' consents
and approvals, as well as all filings with, and all necessary consents or
approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Merger shall have been secured.
(f) There shall be delivered to Acquiror and Newco an opinion of counsel
for P2i and P2i Newspaper in the form of Exhibit 6.2(f) attached hereto and made
a part hereof.
(g) The Boards of Directors of P2i and P2i Newspaper and the P2i Newspaper
Stockholder shall have approved the Merger in accordance with the PBCL.
(h) No statute, rule, regulation, executive order, decree, injunction or
restraining order shall have been enacted, entered, promulgated or enforced by
any court of competent jurisdiction or governmental authority that prohibits or
restricts the consummation of the Merger or the related transactions.
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(i) Acquiror and P2i shall have entered into a definitive agreement for the
purchase of 18% of P2i by Acquiror for an aggregate purchase price of
$1,100,000. Such agreement shall be in form and substance reasonably acceptable
to Acquiror and P2i.
ARTICLE VII
TERMINATION
7.1 Termination.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to or at the Closing:
(a) by mutual written consent of Acquiror, P2i Newspaper and P2i;
(b) by either Acquiror or P2i and P2i Newspaper:
(i) if the Closing shall not have occurred on or before August 12,
2003, unless otherwise extended in writing by all of the parties hereto;
provided, however, that the right to terminate this Agreement under this Section
7.1(b)(i) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before that date; or
(ii) if any court of competent jurisdiction, or any governmental body,
regulatory or administrative agency or commission having appropriate
jurisdiction shall have issued an order, decree or filing or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.
(c) by P2i and P2i Newspaper if any of the conditions specified in Section
6.1 have not been met or if satisfaction of such a condition is or becomes
impossible (other than through the failure of P2i to comply with their
respective obligations under this Agreement) and P2i has not waived such
conditions on or before the Closing; or
(d) by Acquiror if any of the conditions specified in Section 6.2 have not
been met or if satisfaction of such a condition is or becomes impossible (other
than through the failure of Acquiror to comply with their respective obligations
under this Agreement) and Acquiror has not waived such condition on or before
the Closing.
7.2 Notice and Effect of Termination.
In the event of the termination and abandonment of this Agreement pursuant
to Section 7.1, written notice thereof shall forthwith be given to the other
party or parties specifying the provision pursuant to which such termination is
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made. Upon termination, this Agreement shall forthwith become void and all
obligations of the parties under this Agreement will terminate without any
liability on the part of any party or its directors, officers or stockholders
and none of the parties shall have any claim or action against any other party,
except that the provisions of this Section 7.2 and Sections 5.2, 5.6 and 5.8,
shall survive any termination of this Agreement. Nothing contained in this
Section 7.2 shall relieve any party from any liability for any breach of this
Agreement other than in the event of a termination pursuant to Section 7.1.
7.3 Extension; Waiver.
Any time prior to the Closing, the parties may (a) extend the time for the
performance of any of the obligations or other acts of any other party under or
relating to this Agreement; (b) waive any inaccuracies in the representations or
warranties by any other party or (c) waive compliance with any of the agreements
of any other party or with any conditions to its own obligations. Any agreement
on the part of any other party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
7.4 Amendment and Modification.
This Agreement may be amended by written agreement of Acquiror, Newco, P2i
Newspaper and P2i.
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Certain Representations and Warranties; Remedies.
All representations and warranties contained herein shall survive the
Closing for a period of two years from the Closing Date. The right to
indemnification, payment of damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants,
and obligations. The rights and remedies of the parties to this Agreement are
cumulative, not alternative. In addition to their respective rights to damages
or other remedies they may have, and without limitation thereof, the parties
shall have the right to obtain injunctive relief to restrain any breach or
otherwise to specifically enforce the provisions of this Agreement, it being
agreed by the parties that money damages alone would be inadequate to compensate
for such breach or other failure to perform the obligations under this
Agreement.
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The rights and remedies of the parties to this Agreement are cumulative,
not alternative. In addition to their respective rights to damages or other
remedies they may have, and without limitation thereof, if either party
terminates this Agreement other than in accordance with Section 7 hereunder, or
fails to proceed to Closing as required hereunder, upon such termination or
failure to proceed, the other party shall be entitled to receive such number of
shares of common stock of the other as equal 25% of the then outstanding number
of shares of common stock of the breaching party.
8.2 Notices.
All notices requests, demands, waivers and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given on the date if delivered personally, or upon the
second business day after it shall have been deposited by certified or
registered mail with postage prepaid, or upon the next business day after it
shall have been deposited with a nationally recognized overnight courier such as
federal express, or sent by telex, telegram or telecopier, as follows (or at
such other address or facsimile number for a party as shall be specified by like
notice):
(a) if to P2i or P2i Newspaper: with a copy to:
One Bethlehem Plaza Antheil Maslow & MacMinn
Bethlehem, PA 18018 131 W. State Street
Attn: Peter Wardle Doylestown, PA 18901
Tel: 610-814-0550 Attn: Susan A. Maslow, Esq.
Fax: 610-954-8279 Tel: 215-230-7500
Fax: 215-230-7796
(b) if to Acquiror or Newco: with a copy to:
ProtoSource Corporation Sichenzia Ross Friedman
One Bethlehem Plaza Ference LLP
Bethlehem, PA 18018 1065 Avenue of the Americas
Attn: Peter Wardle New York, New York 10018
Tel: 610-814-0550 Attn: Thomas A. Rose, Esq.
Fax: 610-954-8279 Tel: 212-930-0700
Fax: 212-930-9725
___________________________________
8.3 Agreement; Assignment.
This Agreement, including all Exhibits and Schedules hereto, constitutes
the entire Agreement among the parties with respect to its subject matter and
supersedes all prior agreements and understandings, both written and oral, among
the parties or any of them with respect to such subject matter and shall not be
assigned by operation of law or otherwise.
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8.4 Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and assigns. Nothing in this Agreement
is intended to confer on any person other than the parties to this Agreement or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
8.5 Headings.
The descriptive headings of the sections of this Agreement are inserted for
convenience only, do not constitute a part of this Agreement and shall not
affect in any way the meaning or interpretation of this Agreement.
8.6 Counterparts.
This Agreement may be executed in two or more counterparts and delivered
via facsimile, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
8.7 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Pennsylvania, without regard to the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.
8.8 Arbitration.
If a dispute arises as to the interpretation of this Agreement, it shall be
decided finally in an arbitration proceeding conforming to the Rules of the
American Arbitration Association applicable to commercial arbitration then in
effect at the time of the dispute. The arbitration shall take place in
Philadelphia, Pennsylvania. The decision of the Arbitrators shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. The parties
shall share equally the costs of the arbitration.
8.9 Severability.
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the remainder of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
8.10 Certain Definitions.
As used herein:
(a) "Affiliate" shall have the meanings ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended to date (the "Exchange Act");
(b) "Business Day" shall mean any day other than a Saturday, Sunday or any
federal holiday listed in 5 U.S.C. ss.6103(a)..
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(c) "Encumbrance" shall mean any lien, encumbrance, pledge, hypothecation,
claim or charge.
(d) "P2i Stockholders" shall mean all common stockholders of P2i.
(e) "Knowledge" shall mean the actual current knowledge of the party,
and/or the executive management of the party to this Agreement, as the case may
be, to whom knowledge is ascribed.
(f) "Material Adverse Effect" shall mean any adverse effect on the
business, condition (financial or otherwise) or results of operation of the
relevant party and its subsidiaries, if any, which is material to such party and
its subsidiaries, if any, taken as a whole;
(g) "Person" means any individual, corporation, partnership, association,
trust or other entity or organization, including a governmental or political
subdivision or any agency or institution thereof.
[remainder intentionally blank]
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IN WITNESS WHEREOF, each of the undersigned has signed or has caused this
Agreement to be signed by their respective officers hereunto duly authorized,
all as of the date first written above.
PROTOSOURCE CORPORATION,
a California corporation
By:___________________________
Name: Peter Wardle
Title: Chief Executive Officer
PROTOSOURCE ACQUISITION, LLC,
a Delaware limited liability corporation
By:____________________________
Name: Peter Wardle
Title: President
P2I NEWSPAPER, INC.,
a Delaware corporation
By:____________________________
Name: Joseph D. Marino
Title: President
P2I, INC., a Pennsylvania corporation
By:____________________________
Name: Thomas Butera
Title: President
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Executed solely with regards to Section 5.15, Employment Agreements
____________________________
Peter Wardle
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