ACQUISITION AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 12, 1999
BETWEEN
VAN AMERICAN CAPITAL, LTD.
AND
SALESREPCENTRAL.COM
TABLE OF CONTENTS
ARTICLE 1. The Merger
Section 1.1. The Merger
Section 1.2. Effective Time
Section 1.3. Closing of the Merger
Section 1.4. Effects of the Merger
Section 1.5. Board of Directors and Officers
Section 1.6. Conversion of Shares
Section 1.7. Exchange of Certificates
Section 1.8. Stock Options
Section 1.9. Taking of Necessary Action; Further Action
ARTICLE 2. Representations and Warranties of VAC
Section 2.1. Organization and Qualification
Section 2.2. Capitalization of VAC
Section 2.3.Authority Relative to this Agreement; Recommendation.
Section 2.4. SEC Reports; Financial Statements
Section 2.5. Information Supplied
Section 2.6. Consents and Approvals; No Violations
Section 2.7. No Default
Section 2.8. No Undisclosed Liabilities; Absence of Changes
Section 2.9. Litigation
Section 2.10. Compliance with Applicable Law
Section 2.11. Employee Benefit Plans; Labor Matters
Section 2.12. Environmental Laws and Regulations
Section 2.13. Tax Matters
Section 2.14. Title To Property
Section 2.15. Intellectual Property
Section 2.16. Insurance
Section 2.17. Vote Required
Section 2.18. Tax Treatment
Section 2.19. Affiliates
Section 2.20. Certain Business Practices
Section 2.21. Insider Interests
Section 2.22. Opinion of Financial Adviser
Section 2.23. Brokers
Section 2.24. Disclosure
Section 2.25. No Existing Discussion
Section 2.26. Material Contracts
ARTICLE 3. Representations and Warranties of SRC.
Section 3.1. Organization and Qualification
Section 3.2. Capitalization of SRC
Section 3.3.Authority Relative to this Agreement; Recommendation
Section 3.4. SEC Reports; Financial Statements
Section 3.5. Information Supplied
Section 3.6. Consents and Approvals; No Violations
Section 3.7. No Default
Section 3.8 No Undisclosed Liabilities; Absence of Changes
Section 3.9. Litigation
Section 3.10. Compliance with Applicable Law
Section 3.11. Employee Benefit Plans; Labor Matters
Section 3.12. Environmental Laws and Regulations
Section 3.13. Tax Matters
Section 3.14. Title to Property
Section 3.15. Intellectual Property
Section 3.16. Insurance
Section 3.17. Vote Required
Section 3.18. Tax Treatment
Section 3.19. Affiliates
Section 3.20. Certain Business Practices
Section 3.21. Insider Interests
Section 3.22. Opinion of Financial Adviser
Section 3.23. Brokers
Section 3.24. Disclosure
Section 3.25. No Existing Discussions
Section 3.26. Material Contracts
ARTICLE 4. Covenants
Section 4.1. Conduct of Business of VAC
Section 4.2. Conduct of Business of SRC
Section 4.3. Preparation of 8-K and the Proxy Statement
Section 4.4. Other Potential Acquirers
Section 4.5. Meetings of Stockholders
Section 4.6. NASD OTC:BB Listing
Section 4.7. Access to Information
Section 4.8. Additional Agreements; Reasonable Efforts.
Section 4.9.Employee Benefits; Stock Option and Employee Purchase Plans
Section 4.10. Public Announcements
Section 4.11. Indemnification
Section 4.12. Notification of Certain Matters
ARTICLE 5. Conditions to Consummation of the Merger
Conditions to Each Party's Obligations to Effect the
Section 5.1. Merger
Section 5.2. Conditions to the Obligations of VAC
Section 5.3. Conditions to the Obligations of SRC
ARTICLE 6. Termination; Amendment; Waiver
Section 6.1. Termination
Section 6.2. Effect of Termination
Section 6.3. Fees and Expenses
Section 6.4. Amendment
Section 6.5. Extension; Waiver
ARTICLE 7. Miscellaneous
Section 7.1. Nonsurvival of Representations and Warranties
Section 7.2. Entire Agreement; Assignment
Section 7.3. Validity
Section 7.4. Notices
Section 7.5. Governing Law
Section 7.6. Descriptive Headings
Section 7.7. Parties in Interest
Section 7.8. Certain Definitions
Section 7.9. Personal Liability
Section 7.10. Specific Performance
Section 7.11. Counterparts
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of
October 12, 1999, is between Van American Capital, Ltd, a Nevada
corporation ("VAC"), and Salesrepcentral, Inc., a Nevada corporation
("SRC").
Whereas, the Boards of Directors of VAC and SRC each have, in light of
and subject to the terms and conditions set forth herein, (i) determined
that the Merger (as defined below) is fair to their respective stockholders
and in the best interests of such stockholders and (ii) approved the Merger
in accordance with this Agreement;
Whereas, for Federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
Whereas, VAC and SRC desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
to prescribe various conditions to the Merger.
Now, therefore, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, VAC and SRC hereby agree as follows:
ARTICLE I
The Merger
Section 1.1. The Merger. At the Effective Time (as defined below) and
upon the terms and subject to the conditions of this Agreement and in
accordance with the General Corporation Law of the state of Nevada (the
"NGCL"), SRC shall be merged with and into VAC (as defined below) (the
''Merger`). Following the Merger, VAC shall continue as the surviving
corporation (the "Surviving Corporation"), shall continue to be governed by
the laws of the jurisdiction of its incorporation or organization and the
separate corporate existence of SRC shall cease. Prior to the Effective
Time, the parties hereto shall mutually agree as to the name of the
Surviving Corporation; however, initially the Surviving Corporation shall
be named Salesrepcentral.com a Nevada corporation. The Merger is intended
to qualify as a tax-free reorganization under Section 368 of the Code as
relates to the non-cash exchange of stock referenced herein.
Section 1.2. Effective Time. Subject to the terms and conditions set forth
in this Agreement, a Certificate of Merger (the "Merger Certificate") shall
be duly executed and acknowledged by each of SRC and VAC, and thereafter
the Merger Certificate reflecting the Merger shall be delivered to the
Secretary of State of the State of Nevada for filing pursuant to the NGCL
on the Closing Date (as defined in Section 1.3). The Merger shall become
effective at such time as a properly executed and certified copy of the
Merger Certificate is duly filed by the Secretary of State of the State of
Nevada in accordance with the NGCL or such later time as the parties may
agree upon and set forth in the Merger Certificate (the time at which the
Merger becomes effective shall be referred to herein as the "Effective
Time").
Section 1.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date to be specified by the
parties, which shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Article
5 (the "Closing Date"), at the offices of Sperry Young & Stoecklein, 1850
E. Flamingo Rd., Suite 111, Las Vegas, Nevada, unless another time, date or
place is agreed to in writing by the parties hereto.
Section 1.4. Effects of the Merger. The Merger shall have the effects
set forth in the NGCL. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the properties, rights,
privileges, powers of SRC shall vest in the Surviving Corporation, and all
debts, liabilities and duties of SRC shall become the debts, liabilities
and duties of the Surviving Corporation.
Section 1.5. Board of Directors and Officers of VAC. At or prior to
the Effective Time, each of SRC and VAC agrees to take such action as is
necessary (i) to cause the number of directors comprising the full Board of
Directors of VAC to be one (1) person and (ii) to cause Ralph John
Massetti, Jr. (the "SRC Designee") to be elected as director of VAC. In
addition, VAC majority stockholders of VAC prior to the Effective Time
shall take all action necessary to cause, to the greatest extent
practicable, the SRC Designee to serve on VAC's Board of Directors until
the 2000 Annual Meeting. If the SRC Designee, respectively, shall decline
or be unable to serve as a director prior to the Effective Time, SRC shall
nominate another person to serve in such person's stead which such person
shall be subject to approval of the other party. From and after the
Effective Time, and until successors are duly elected or appointed and
qualified in accordance with applicable law, Ralph John Massetti, Jr. shall
be Chief Executive Officer, President Chairman, Secretary, and Treasurer
of VAC.
Section 1.6. Conversion of Shares.
(a) At the Effective Time, each share of common stock, par value $.001
per share of SRC (individually a "SRC Share" and collectively, the "SRC
Shares") issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of SRC,
VAC, or the holder thereof, be converted into and shall become fully paid
and nonassessable VAC common shares determined by dividing (i) Nine Million
Seven Hundred Ninety-Eight Thousand, One Hundred and Fifty (9,798,150), by
(ii) the total number of shares of SRC, Twenty Million Seven Hundred Fifty
Thousand (20,750,000) outstanding immediately prior to the Effective Time
(such quotient, the "Exchange Ratio"). The holder of one or more shares of
SRC common stock shall be entitled to receive in exchange therefor a number
of shares of VAC Common Stock equal to the product of (x) (the number of
shares of SRC common stock (20,750,000)), times (y) (the Exchange Ratio.
VAC Shares and SRC Shares are sometimes referred to collectively herein as
"Shares." By way of example, 9,798,150 / 20,750,000 = .4722 (the Exchange
Ratio). The number of shares of SRC common stock held by a stockholder
(100,000) times the Exchange Ratio of .4722 equals 47,220 shares of VAC
Shares to be issued.
(b) At the Effective Time, in addition to the common shares of VAC to
be issued, each share of common stock, par value $.001 per share of SRC
(individually a "SRC Share" and collectively, the "SRC Shares") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of SRC, VAC, or the holder
thereof, shall receive fully paid and nonassessable VAC preferred shares
determined by dividing (i) Fourteen Thousand Five Hundred and Twenty-Five
(14,525), by (ii) the total number of shares of SRC, Twenty Million Seven
Hundred Fifty Thousand (20,750,000) outstanding immediately prior to the
Effective Time (such quotient, the "Exchange Ratio"). The holder of one or
more shares of SRC common stock shall be entitled to receive in exchange
therefor a number of shares of VAC preferred stock equal to the product of
(x) (the number of shares of SRC Common Stock (20,750,000)), times (y) (the
Exchange Ratio. VAC Shares and SRC Shares are sometimes referred to
collectively herein as "Shares." By way of example, 14,525/20,750,000 =
.0007 (the Exchange Ratio). The number of shares of SRC common stock held
by a stockholder (100,000) times the Exchange Ratio of .0007 equals 70
shares of VAC preferred shares to be issued.
(b) At the Effective Time, each SRC Share held in the treasury of SRC,
by SRC immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of SRC or VAC be canceled,
retired and cease to exist and no payment shall be made with respect
thereto.
Section 1.7. Exchange of Certificates.
(a) Prior to the Effective Time, VAC shall enter into an agreement
with, and shall deposit with, Sperry Young & Stoecklein, or such other
agent or agents as may be satisfactory to VAC and SRC (the "Exchange
Agent'), for the benefit of the holders of SRC Shares, for exchange through
the Exchange Agent in accordance with this Article I: (i) certificates
representing the appropriate number of VAC Shares to be issued to holders
of SRC Shares issuable pursuant to Section 1.6 in exchange for outstanding
SRC Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding SRC Shares (the "Certificates") whose shares were converted
into the right to receive VAC Shares pursuant to Section 1.6: (i) a letter
of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as SRC and VAC may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing VAC Shares. Upon surrender of a
Certificate to the Exchange Agent, together with such letter of
transmittal, duly executed, and any other required documents, the holder of
such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole VAC Shares and, if
applicable, a check representing the cash consideration to which such
holder may be entitled on account of the Cash Fund, which such holder has
the right to receive pursuant to the provisions of this Article I, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of SRC Shares which are not registered in the
transfer records of SRC, a certificate representing the proper number of
VAC Shares may be issued to a transferee if the Certificate representing
such SRC Shares is presented to the Exchange Agent accompanied by all
documents required by the Exchange Agent or VAC to evidence and effect such
transfer and by evidence that any applicable stock transfer or other taxes
have been paid. Until surrendered as contemplated by this Section 1.7, each
Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing VAC Shares as contemplated by this Section 1.8.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to VAC Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the VAC Shares represented thereby until the holder of
record of such Certificate shall surrender such Certificate.
(d) In the event that any Certificate for SRC Shares or VAC Shares
shall have been lost, stolen or destroyed, the Exchange Agent shall issue
in exchange therefor, upon the making of an affidavit of that fact by the
holder thereof such VAC Shares and cash in lieu of fractional VAC Shares,
if any, as may be required pursuant to this Agreement; provided, however,
that VAC or the Exchange Agent, may, in its respective discretion, require
the delivery of a suitable bond, opinion or indemnity.
(e) All VAC Shares issued upon the surrender for exchange of SRC
Shares in accordance with the terms hereof (including any cash paid
pursuant to Section 1.10 shall be deemed to have been issued in full
satisfaction of all rights pertaining to such SRC Shares. There shall be no
further registration of transfers on the stock transfer books of either of
SRC or VAC of the SRC Shares or VAC Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to VAC for any reason, they shall be canceled
and exchanged as provided in this Article I.
(f) No fractional VAC Shares shall be issued in the Merger, but in
lieu thereof each holder of SRC Shares otherwise entitled to a fractional
VAC Share shall, upon surrender of its, his or her Certificate or
Certificates, be entitled to receive an additional share to round up to the
nearest round number of shares.
(g) The VAC Preferred Convertible Shares, shall be automatically
convertible into the Common Shares of VAC two years from the Closing Date,
at the rate of 1000 Common Shares for each convertible preferred share.
Section 1.8. At the Effective Time, each outstanding option to
purchase SRC Shares, if any (a "SRC Stock Option" or collectively, "SRC
Stock Options") issued pursuant to any SRC Stock Option Plan or SRC Long
Term Incentive Plan whether vested or unrested, shall be cancelled.
Section 1.9. Taking of Necessary Action; Further Action. If, at any
time after the Effective Time, SRC or VAC reasonably determines that any
deeds, assignments, or instruments or confirmations of transfer are
necessary or desirable to carry out the purposes of this Agreement and to
vest VAC with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of SRC, the officers and
directors of VAC and SRC are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such
lawful and necessary or desirable action.
ARTICLE 2
Representations and Warranties of VAC
Except as set forth on the Disclosure Schedule delivered by VAC to SRC
(the "VAC Disclosure Schedule"), VAC hereby represents and warrants to SRC
as follows:
Section 2.1. Organization and Qualification.
(a) VAC is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has
all requisite power and authority to own, lease and operate its properties
and to carry on its businesses as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such
power and authority would not have a Material Adverse Effect (as defined
below) on VAC. When used in connection with VAC, the term "Material Adverse
Effect" means any change or effect (i) that is or is reasonably likely to
be materially adverse to the business, results of operations, condition
(financial or otherwise) or prospects of VAC, other than any change or
effect arising out of general economic conditions unrelated to any business
in which VAC is engaged, or (ii) that may impair the ability of VAC to
perform its obligations hereunder or to consummate the transactions
contemplated hereby.
(b) VAC has heretofore delivered to SRC accurate and complete copies
of the Certificate of Incorporation and Bylaws (or similar governing
documents), as currently in effect, of VAC. Except as set forth on Schedule
2.1 of the VAC Disclosure Schedule, VAC is duly qualified or licensed and
in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by
it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in
good standing would not have a Material Adverse Effect on VAC.
Section 2.2. Capitalization of VAC.
(a) The authorized capital stock of VAC consists of: (i) Fifty Million
(50,000,000) VAC Shares, of which, as of September 30, 1999, 3,217,500 VAC
Shares were issued and outstanding, and no VAC Shares were held in
treasury. Concurrent with the execution of this Plan of Merger, the Board
of Directors of VAC shall approve a 1.5:1 forward split of its Common
Stock. After the 1.5:1 forward split there shall be 4,826,250 VAC common
shares issued and outstanding. In addition, concurrent with the Execution
of the Plan of Merger, the authorized preferred stock shall be Ten Million
(10,000,000) shares at $.001 par value. All of the outstanding VAC Shares
have been duly authorized and validly issued, and are fully paid,
nonassessable and free of preemptive rights. Except as set forth herein, as
of the date hereof, there are no outstanding (i) shares of capital stock or
other voting securities of VAC, (ii) securities of VAC convertible into or
exchangeable for shares of capital stock or voting securities of VAC,
except for the preferred shares of VAC, (iii) options or other rights to
acquire from VAC and, except as described in the VAC SEC Reports (as
defined below), no obligations of VAC to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock
or voting securities of VAC, and (iv) equity equivalents, interests in the
ownership or earnings of VAC or other similar rights (collectively, "VAC
Securities"). As of the date hereof, except as set forth on Schedule 2.2(a)
of the VAC Disclosure Schedule there are no outstanding obligations of VAC
or its subsidiaries to repurchase, redeem or otherwise acquire any VAC
Securities or stockholder agreements, voting trusts or other agreements or
understandings to which VAC is a party or by which it is bound relating to
the voting or registration of any shares of capital stock of VAC. For
purposes of this Agreement, ''Lien" means, with respect to any asset
(including, without limitation, any security) any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset.
(b) The VAC Shares constitute the only class of equity securities of
VAC registered or required to be registered under the Exchange Act.
(c) VAC does not own directly or indirectly more than fifty percent
(50%) of the outstanding voting securities or interests (including
membership interests) of any entity, other than as specifically disclosed
in the disclosure documents.
Section 2.3. Authority Relative to this Agreement; Recommendation.
(a) VAC has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of VAC (the "VAC Board") and no other
corporate proceedings on the part of VAC are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby, except, as
referred to in Section 2.17, the approval and adoption of this Agreement by
the holders of at least a majority of the then outstanding VAC Shares. This
Agreement has been duly and validly executed and delivered by VAC and
constitutes a valid, legal and binding agreement of VAC, enforceable
against VAC in accordance with its terms.
(b) The VAC Board has resolved to recommend that the stockholders of
VAC approve and adopt this Agreement.
Section 2.4. SEC Reports; Financial Statements.
(a) VAC has filed all required forms, reports and documents with the
Securities and Exchange Commission (the "SEC") since June 30, 1999, each of
which has complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and the Exchange Act (and the rules and regulations promulgated
thereunder, respectively), each as in effect on the dates such forms,
reports and documents were filed. VAC has heretofore delivered or promptly
will deliver prior to the Effective Date to SRC, in the form filed with the
SEC (including any amendments thereto but excluding any exhibits), (i) its
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999, (ii)
all definitive proxy statements relating to VAC's meetings of stockholders
(whether annual or special) held since June 30, 1999, if any, and (iii) all
other reports or registration statements filed by VAC with the SEC since
June 30, 1999 (all of the foregoing, collectively, the "VAC SEC Reports").
None of such VAC SEC Reports, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted
to state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The audited
financial statements of VAC included in the VAC SEC Reports fairly present,
in conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
financial position of VAC as of the dates thereof and its results of
operations and changes in financial position for the periods then ended.
All material agreements, contracts and other documents required to be filed
as exhibits to any of the VAC SEC Reports have been so filed.
(b) VAC has heretofore made available or promptly will make available
to SRC a complete and correct copy of any amendments or modifications which
are required to be filed with the SEC but have not yet been filed with the
SEC, to agreements, documents or other instruments which previously had
been filed by VAC with the SEC pursuant to the Exchange Act.
Section 2.5. Information Supplied. None of the information supplied or
to be supplied by VAC for inclusion or incorporation by reference in
connection with the Merger (the "Proxy Statement") will at the date mailed
to stockholders of VAC and at the times of the meeting or meetings of
stockholders of VAC to be held in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement, insofar as it relates to the meeting of
VAC's stockholders to vote on the Merger, will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
Section 2.6. Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the
Exchange Act, state securities or blue sky laws, the Hart-Scott-Rodino
Antitrust Improvements Act of 1916, as amended (the ''HSR Act''), the rules
of the National Association of Securities Dealers, Inc. ("NASD"), the
filing and recordation of the Merger Certificate as required by the NGCL,
and as set forth on Schedule 2.6 of the VAC Disclosure Schedule no filing
with or notice to, and no permit, authorization, consent or approval of,
any court or tribunal or administrative, governmental or regulatory body,
agency or authority (a "Governmental Entity") is necessary for the
execution and delivery by VAC of this Agreement or the consummation by VAC
of the transactions contemplated hereby, except where the failure to obtain
such permits, authorizations, consents or approvals or to make such filings
or give such notice would not have a Material Adverse Effect on VAC.
Except as set forth in Section 2.6 of the VAC Disclosure Schedule,
neither the execution, delivery and performance of this Agreement by VAC
nor the consummation by VAC of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the
respective Certificate of Incorporation or Bylaws (or similar governing
documents) of VAC, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give
rise to any right of termination, amendment, cancellation or acceleration
or Lien) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which VAC is a party or by which any of its
properties or assets may be bound, or (iii) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to VAC or
any of its properties or assets, except in the case of (ii) or (iii) for
violations, breaches or defaults which would not have a Material Adverse
Effect on VAC.
Section 2.7. No Default. Except as set forth in Section 2.7 of the VAC
Disclosure Schedule, VAC is not in breach, default or violation (and no
event has occurred which with notice or the lapse of time or both would
constitute a breach default or violation) of any term, condition or
provision of (i) its Certificate of Incorporation or Bylaws (or similar
governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which VAC
is now a party or by which any of its respective properties or assets may
be bound or (iii) any order, writ injunction, decree, law, statute, rule or
regulation applicable to VAC or any of its respective properties or assets,
except in the case of (ii) or (iii) for violations, breaches or defaults
that would not have a Material Adverse Effect on VAC. Except as set forth
in Section 2.7 of the VAC Disclosure Schedule, each note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which VAC is now a party or by which its respective
properties or assets may be bound that is material to VAC and that has not
expired is in full force and effect and is not subject to any material
default thereunder of which VAC is aware by any party obligated to VAC
thereunder.
Section 2.8. No Undisclosed Liabilities; Absence of Changes. Except as
set forth in Section 2.8 of the VAC Disclosure Schedule and except as and
to the extent publicly disclosed by VAC in the VAC SEC Reports, as of
December 31, 1996, VAC does not have any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be
required by generally accepted accounting principles to be reflected on a
balance sheet of VAC (including the notes thereto) or which would have a
Material Adverse Effect on VAC. Except as publicly disclosed by VAC, since
June 30, 1999, VAC has not incurred any liabilities of any nature, whether
or not accrued, contingent or otherwise, which could reasonably be expected
to have, and there have been no events, changes or effects with respect to
VAC having or which reasonably could be expected to have, a Material
Adverse Effect on VAC. Except as and to the extent publicly disclosed by
VAC in the VAC SEC Reports and except as set forth in Section 2.8 of the
VAC Disclosure Schedule, since June 30,1999, there has not been (i) any
material change by VAC in its accounting methods, principles or practices
(other than as required after the date hereof by concurrent changes in
generally accepted accounting principles), (ii) any revaluation by VAC of
any of its assets having a Material Adverse Effect on VAC, including,
without limitation, any write-down of the value of any assets other than in
the ordinary course of business or (iii) any other action or event that
would have required the consent of any other party hereto pursuant to
Section 4.1 of this Agreement had such action or event occurred after the
date of this Agreement.
Section 2.9. Litigation. Except as publicly disclosed by VAC in the
VAC SEC Reports, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of VAC, threatened against VAC
or any of its subsidiaries or any of their respective properties or assets
before any Governmental Entity which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on VAC or
could reasonably be expected to prevent or delay the consummation of the
transactions contemplated by this Agreement. Except as publicly disclosed
by VAC in the VAC SEC Reports, VAC is not subject to any outstanding order,
writ, injunction or decree which, insofar as can be reasonably foreseen in
the future, could reasonably be expected to have a Material Adverse Effect
on VAC or could reasonably be expected to prevent or delay the consummation
of the transactions contemplated hereby.
Section 2.10. Compliance with Applicable Law. Except as publicly
disclosed by VAC in the VAC SEC Reports, VAC holds all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the `'VAC
Permits"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which would not have a Material Adverse
Effect on VAC. Except as publicly disclosed by VAC in the VAC SEC Reports,
VAC is in compliance with the terms of the VAC Permits, except where the
failure so to comply would not have a Material Adverse Effect on VAC.
Except as publicly disclosed by VAC in the VAC SEC Reports, the business of
VAC is not being conducted in violation of any law, ordinance or regulation
of any Governmental Entity except that no representation or warranty is
made in this Section 2.10 with respect to Environmental Laws (as defined in
Section 2.12 below) and except for violations or possible violations which
do not, and, insofar as reasonably can be foreseen, in the future will not,
have a Material Adverse Effect on VAC. Except as publicly disclosed by VAC
in the VAC SEC Reports, no investigation or review by any Governmental
Entity with respect to VAC is pending or, to the knowledge of VAC,
threatened, nor, to the knowledge of VAC, has any Governmental Entity
indicated an intention to conduct the same, other than, in each case, those
which VAC reasonably believes will not have a Material Adverse Effect on
VAC.
Section 2.11. Employee Benefit Plans; Labor Matters.
(a) Except as set forth in Section 2.11(a) of the VAC Disclosure
Schedule with respect to each employee benefit plan, program, policy,
arrangement and contract (including, without limitation, any "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), maintained or contributed to
at any time by VAC or any entity required to be aggregated with VAC
pursuant to Section 414 of the Code (each, a "VAC Employee Plan"), no event
has occurred and to the knowledge of VAC, no condition or set of
circumstances exists in connection with which VAC could reasonably be
expected to be subject to any liability which would have a Material Adverse
Effect on VAC.
(b) (i) No VAC Employee Plan is or has been subject to Title IV of
ERISA or Section 412 of the Code; and (ii) each VAC Employee Plan intended
to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code is the subject of a favorable
Internal Revenue Service determination letter, and nothing has occurred
which could reasonably be expected to adversely affect such determination.
(c) Section 2.11(c) of the VAC Disclosure Schedule sets forth a true
and complete list, as of the date of this Agreement, of each person who
holds any VAC Stock Options, together with the number of VAC Shares which
are subject to such option, the date of grant of such option, the extent to
which such option is vested (or will become vested as a result of the
Merger), the option price of such option (to the extent determined as of
the date hereof), whether such option is a nonqualified stock option or is
intended to qualify as an incentive stock option within the meaning of
Section 422(b) of the Code, and the expiration date of such option. Section
2.11(c) of the VAC Disclosure Schedule also sets forth the total number of
such incentive stock options and such nonqualified options. VAC has
furnished SRC with complete copies of the plans pursuant to which the VAC
Stock Options were issued. Other than the automatic vesting of VAC Stock
Options that may occur without any action on the part of VAC or its
officers or directors, VAC has not taken any action that would result in
any VAC Stock Options that are unvested becoming vested in connection with
or as a result of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(d) VAC has made available to SRC (i) a description of the terms of
employment and compensation arrangements of all officers of VAC and a copy
of each such agreement currently in effect; (ii) copies of all agreements
with consultants who are individuals obligating VAC to make annual cash
payments in an amount exceeding $60,000; (iii) a schedule listing all
officers of VAC who have executed a non-competition agreement with VAC and
a copy of each such agreement currently in effect; (iv) copies (or
descriptions) of all severance agreements, programs and policies of VAC
with or relating to its employees, except programs and policies required to
be maintained by law; and (v) copies of all plans, programs, agreements and
other arrangements of VAC with or relating to its employees which contain
change in control provisions all of which are set forth in Section 2.11(d)
of the VAC Disclosure Schedule.
(e) There shall be no payment, accrual of additional benefits,
acceleration of payments, or vesting in any benefit under any VAC Employee
Plan or any agreement or arrangement disclosed under this Section 2.11
solely by reason of entering into or in connection with the transactions
contemplated by this Agreement.
(f) There are no controversies pending or, to the knowledge of VAC,
threatened, between VAC and any of their employees, which controversies
have or could reasonably be expected to have a Material Adverse Effect on
VAC. Neither VAC nor any of its subsidiaries is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by VAC or any of its subsidiaries (and neither VAC nor any of its
subsidiaries has any outstanding material liability with respect to any
terminated collective bargaining agreement or labor union contract), nor
does VAC know of any activities or proceedings of any labor union to
organize any of its or employees. VAC has no knowledge of any strike,
slowdown, work stoppage, lockout or threat thereof, by or with respect to
any of its employees.
Section 2.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by VAC in the VAC SEC Reports, (i)
VAC is in material compliance with all applicable federal, state, local and
foreign laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), except for non-compliance that would
not have a Material Adverse Effect on VAC, which compliance includes, but
is not limited to, the possession by VAC of all material permits and other
governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof; (ii) VAC has not
received written notice of, or, to the knowledge of VAC, is the subject of,
any action, cause of action, claim, investigation, demand or notice by any
person or entity alleging liability under or non-compliance with any
Environmental Law (an ''Environmental Claim") that could reasonably be
expected to have a Material Adverse Effect on VAC; and (iii) to the
knowledge of VAC, there are no circumstances that are reasonably likely to
prevent or interfere with such material compliance in the future.
(b) Except as publicly disclosed by VAC, there are no Environmental
Claims which could reasonably be expected to have a Material Adverse Effect
on VAC that are pending or, to the knowledge of VAC, threatened against VAC
or, to the knowledge of VAC, against any person or entity whose liability
for any Environmental Claim VAC has or may have retained or assumed either
contractually or by operation of law.
Section 2.13. Tax Matters.
(a) Except as set forth in Section 2.13 of the VAC Disclosure
Schedule: (i) VAC has filed or has had filed on its behalf in a timely
manner (within any applicable extension periods) with the appropriate
Governmental Entity all income and other material Tax Returns (as defined
herein) with respect to Taxes (as defined herein) of VAC and all Tax
Returns were in all material respects true, complete and correct; (ii) all
material Taxes with respect to VAC have been paid in full or have been
provided for in accordance with GAAP on VAC's most recent balance sheet
which is part of the VAC SEC Documents. (iii) there are no outstanding
agreements or waivers extending the statutory period of limitations
applicable to any federal, state, local or foreign income or other material
Tax Returns required to be filed by or with respect to VAC; (iv) to the
knowledge of VAC none of the Tax Returns of or with respect to VAC is
currently being audited or examined by any Governmental Entity; and (v) no
deficiency for any income or other material Taxes has been assessed with
respect to VAC which has not been abated or paid in full.
(b) For purposes of this Agreement, (i) "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, sales, use, ad valorem, goods and services,
capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp,
occupation, property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority and (ii) "Tax Return" shall mean any report, return, documents
declaration or other information or filing required to be supplied to any
taxing authority or jurisdiction with respect to Taxes.
Section 2.14. Title to Property. VAC has good and defensible title to
all of its properties and assets, free and clear of all liens, charges and
encumbrances except liens for taxes not yet due and payable and such liens
or other imperfections of title, if any, as do not materially detract from
the value of or interfere with the present use of the property affected
thereby or which, individually or in the aggregate, would not have a
Material Adverse Effect on VAC; and, to VAC's knowledge, all leases
pursuant to which VAC leases from others real or personal property are in
good standing, valid and effective in accordance with their respective
terms, and there is not, to the knowledge of VAC, under any of such leases,
any existing material default or event of default (or event which with
notice of lapse of time, or both, would constitute a default and in respect
of which VAC has not taken adequate steps to prevent such a default from
occurring) except where the lack of such good standing, validity and
effectiveness, or the existence of such default or event, would not have a
Material Adverse Effect on VAC.
Section 2.15. Intellectual Property.
(a) VAC owns, or possesses adequate licenses or other valid rights to
use, all existing United States and foreign patents, trademarks, trade
names, service marks, copyrights, trade secrets and applications therefor
that are material to its business as currently conducted (the "VAC
Intellectual Property Rights").
(b) The validity of the VAC Intellectual Property Rights and the title
thereto of VAC is not being questioned in any litigation to which VAC is a
party.
(c) Except as set forth in Section 2.15(c) of the VAC Disclosure
Schedule, the conduct of the business of VAC as now conducted does not, to
VAC's knowledge, infringe any valid patents, trademarks, trade names,
service marks or copyrights of others. The consummation of the transactions
completed hereby will not result in the loss or impairment of any VAC
Intellectual Property Rights.
(d) VAC has taken steps it believes appropriate to protect and
maintain its trade secrets as such, except in cases where VAC has elected
to rely on patent or copyright protection in lieu of trade secret
protection.
Section 2.16. Insurance. VAC currently does not maintain general
liability and other business insurance.
Section 2.17. Vote Required. The affirmative vote of the holders of at
least a majority of the outstanding VAC Shares is the only vote of the
holders of any class or series of VAC's capital stock necessary to approve
and adopt this Agreement and the Merger.
Section 2.18. Tax Treatment. Neither VAC nor, to the knowledge of VAC,
any of its affiliates has taken or agreed to take action that would prevent
the Merger from constituting a reorganization qualifying under the
provisions of Section 368(a) of the Code.
Section 2.19. Affiliates. Except for Principal VAC Stockholder ("PVS")
and the directors and executive officers of VAC, each of whom is listed in
Section 2.19 of the VAC Disclosure Schedule, there are no persons who, to
the knowledge of VAC, may be deemed to be affiliates of VAC under Rule
1-02(b) of Regulation S-X of the SEC (the "VAC Affiliates").
Section 2.20. Certain Business Practices. None of VAC or any
directors, officers, agents or employees of VAC has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to foreign
or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended (the "FCPA"), or (iii) made any
other unlawful payment.
Section 2.21. Insider Interests. Except as set forth in Section 2.21
of the VAC Disclosure Schedule, neither PVS nor any officer or director of
VAC has any interest in any material property, real or personal, tangible
or intangible, including without limitation, any computer software or VAC
Intellectual Property Rights, used in or pertaining to the business of VAC,
expect for the ordinary rights of a stockholder or employee stock
optionholder.
Section 2.22. Opinion of Financial Adviser. No advisers, as of the
date hereof, have delivered to the VAC Board a written opinion to the
effect that, as of such date, the exchange ratio contemplated by the Merger
is fair to the holders of VAC Shares.
Section 2.23. Brokers. No broker, finder or investment banker (other
than the VAC Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to SRC) is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of VAC.
Section 2.24. Disclosure. No representation or warranty of VAC in this
Agreement or any certificate, schedule, document or other instrument
furnished or to be furnished to SRC pursuant hereto or in connection
herewith contains, as of the date of such representation, warranty or
instrument, or will contain any untrue statement of a material fact or, at
the date thereof, omits or will omit to state a material fact necessary to
make any statement herein or therein, in light of the circumstances under
which such statement is or will be made, not misleading.
Section 2.25. No Existing Discussions. As of the date hereof, VAC is
not engaged, directly or indirectly, in any discussions or negotiations
with any other party with respect to any Third Party Acquisition (as
defined in Section 4.4).
Section 2.26. Material Contracts.
(a) VAC has delivered or otherwise made available to SRC true, correct
and complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which VAC is
a party affecting the obligations of any party thereunder) to which VAC is
a party or by which any of its properties or assets are bound that are,
material to the business, properties or assets of VAC taken as a whole,
including, without limitation, to the extent any of the following are,
individually or in the aggregate, material to the business, properties or
assets of VAC taken as a whole, all: (i) employment, product design or
development, personal services, consulting, non-competition, severance,
golden parachute or indemnification contracts (including, without
limitation, any contract to which VAC is a party involving employees of
VAC); (ii) licensing, publishing, merchandising or distribution agreements;
(iii) contracts granting rights of first refusal or first negotiation; (iv)
partnership or joint venture agreements; (v) agreements for the
acquisition, sale or lease of material properties or assets or stock or
otherwise entered into since June 30, 1999; (vi) contracts or agreements
with any Governmental Entity. and (vii) all commitments and agreements to
enter into any of the foregoing (collectively, together with any such
contracts entered into in accordance with Section 4.1 hereof, the "VAC
Contracts"). VAC is not a party to or bound by any severance, golden
parachute or other agreement with any employee or consultant pursuant to
which such person would be entitled to receive any additional compensation
or an accelerated payment of compensation as a result of the consummation
of the transactions contemplated hereby.
(b) Each of the VAC Contracts is valid and enforceable in accordance
with its terms, and there is no default under any VAC Contract so listed
either by VAC or, to the knowledge of VAC, by any other party thereto, and
no event has occurred that with the lapse of time or the giving of notice
or both would constitute a default thereunder by VAC or, to the knowledge
of VAC, any other party, in any such case in which such default or event
could reasonably be expected to have a Material Adverse Effect on VAC.
(c) No party to any such VAC Contract has given notice to VAC of or
made a claim against VAC with respect to any breach or default thereunder,
in any such case in which such breach or default could reasonably be
expected to have a Material Adverse Effect on VAC.
ARTICLE 3
Representations and Warranties of SRC
Except as set forth on the Disclosure Schedule delivered by SRC to VAC
(the "SRC Disclosure Schedule"), SRC hereby represents and warrants to VAC
as follows:
Section 3.1. Organization and Qualification.
(a) Each of SRC and its subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to
own, lease and operate its properties and to carry on its businesses as now
being conducted, except where the failure to be so organized, existing and
in good standing or to have such power and authority would not have a
Material Adverse Effect (as defined below) on SRC. When used in connection
with SRC, the term "Material Adverse Effect'' means any change or effect
(i) that is or is reasonably likely to be materially adverse to the
business, results of operations, condition (financial or otherwise) or
prospects of SRC and its subsidiaries, taken as a whole, other than any
change or effect arising out of general economic conditions unrelated to
any businesses in which SRC and its subsidiaries are engaged, or (ii) that
may impair the ability of SRC to consummate the transactions contemplated
hereby.
(b) SRC has heretofore delivered to VAC accurate and complete copies
of the Certificate of Incorporation and Bylaws (or similar governing
documents), as currently in effect, of SRC. Each of SRC and its
subsidiaries is duly qualified or licensed and in good standing to do
business in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not
have a Material Adverse Effect on SRC.
Section 3.2. Capitalization of SRC.
(a) As of August 31, 1999, the authorized capital stock of SRC
consists of; (i) One Hundred Million (100,000,000) SRC common Shares, $.001
par value, 20,750,000 common Shares were issued and were outstanding, and
(ii) Ten Million (10,000,000) SRC preferred shares, $.001 par value, and no
preferred shares were issued or outstanding. All of the outstanding SRC
Shares have been duly authorized and validly issued, and are fully paid,
nonassessable and free of preemptive rights.
(b) Except as set forth in Section 3.2(b) of the SRC Disclosure
Schedule, SRC is the record and beneficial owner of all of the issued and
outstanding shares of capital stock of its subsidiaries.
(c) Except as set forth in Section 3.2(c) of the SRC Disclosure
Schedule, between August 31, 1999 and the date hereof, no shares of SRC's
capital stock have been issued and no SRC Stock options have been granted.
Except as set forth in Section 3.2(a) above, as of the date hereof, there
are no outstanding (i) shares of capital stock or other voting securities
of SRC, (ii) securities of SRC or its subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of SRC, (iii)
options or other rights to acquire from SRC or its subsidiaries, or
obligations of SRC or its subsidiaries to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock
or voting securities of SRC, or (iv) equity equivalents, interests in the
ownership or earnings of SRC or its subsidiaries or other similar rights
(collectively, "SRC Securities"). As of the date hereof, there are no
outstanding obligations of SRC or any of its subsidiaries to repurchase,
redeem or otherwise acquire any SRC Securities. There are no stockholder
agreements, voting trusts or other agreements or understandings to which
SRC is a party or by which it is bound relating to the voting or
registration of any shares of capital stock of SRC.
(d) Except as set forth in Section 3.2(d) of the SRC Disclosure
Schedule, there are no securities of SRC convertible into or exchangeable
for, no options or other rights to acquire from SRC, and no other contract,
understanding, arrangement or obligation (whether or not contingent)
providing for the issuance or sale, directly or indirectly, of any capital
stock or other ownership interests in, or any other securities of, any
subsidiary of SRC.
(e) The SRC Shares constitute the only class of equity securities of
SRC or its subsidiaries.
(f) Except as set forth in Section 3.2(f) of the SRC Disclosure
Schedule, SRC does not own directly or indirectly more than fifty percent
(50%) of the outstanding voting securities or interests (including
membership interests) of any entity.
Section 3.3. Authority Relative to this Agreement; Recommendation.
(a) SRC has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of SRC (the "SRC Board"), and no other
corporate proceedings on the part of SRC are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby, except, as
referred to in Section 3.17, the approval and adoption of this Agreement by
the holders of at least a majority of the then outstanding SRC Shares. This
Agreement has been duly and validly executed and delivered by SRC and
constitutes a valid, legal and binding agreement of SRC, enforceable
against SRC in accordance with its terms.
(b) The SRC Board has resolved to recommend that the stockholders of
SRC approve and adopt this Agreement.
Section 3.4. SEC Reports; Financial Statements. SRC is not required to
file forms, reports and documents with the SEC.
Section 3.5. Information Supplied. None of the information supplied or
to be supplied by SRC for inclusion or incorporation by reference to (i)
the 8-K will, at the time the 8-K is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (ii)
the Proxy Statement will, at the date mailed to stockholders of VAC, if
any, and at the times of the meeting or meetings of stockholders of VAC to
be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy
Statement, insofar as it relates to the meeting of SRC's stockholders to
vote on the Merger, will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations
thereunder, and the 8-K will comply as to form in all material respects
with the provisions of the Securities Act and the rules and regulations
thereunder.
Section 3.6. Consents and Approvals; No Violations. Except as set
forth in Section 3.6 of the SRC Disclosure Schedule, and for filings,
permits, authorizations, consents and approvals as may be required under,
and other applicable requirements of, the Securities Act, the Exchange Act,
state securities or blue sky laws, the HSR Act, the rules of the NASD, and
the filing and recordation of the Merger Certificate as required by the
NGCL, no filing with or notice to, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution and
delivery by SRC of this Agreement or the consummation by SRC of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations consents or approvals or to make such filings or
give such notice would not have a Material Adverse Effect on SRC.
Neither the execution, delivery and performance of this Agreement by
SRC nor the consummation by SRC of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision of the
respective Certificate of Incorporation or Bylaws (or similar governing
documents) of SRC or any of SRC's subsidiaries, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which SRC or any
of SRCis subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound or (iii) violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to
SRC or any of SRC's subsidiaries or any of their respective properties or
assets, except in the case of (ii) or (iii) for violations, breaches or
defaults which would not have a Material Adverse Effect on SRC.
Section 3.7. No Default. None of SRC or any of its subsidiaries is in
breach, default or violation (and no event has occurred which with notice
or the lapse of time or both would constitute a breach, default or
violation) of any term, condition or provision of (i) its Certificate of
Incorporation or Bylaws (or similar governing documents), (ii) any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which SRC or any of its subsidiaries is now a
party or by which any of them or any of their respective properties or
assets may be bound or (iii) any order, writ, injunction, decree, law,
statute, rule or regulation applicable to SRC, its subsidiaries or any of
their respective properties or assets, except in the case of (ii) or (iii)
for violations, breaches or defaults that would not have a Material Adverse
Effect on SRC. Each note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which SRC or any
of its subsidiaries is now a party or by which any of them or any of their
respective properties or assets may be bound that is material to SRC and
its subsidiaries taken as a whole and that has not expired is in full force
and effect and is not subject to any material default thereunder of which
SRC is aware by any party obligated to SRC or any subsidiary thereunder.
Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except as
and to the extent disclosed by SRC in the SRC, none of SRC or its
subsidiaries had any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, that would be required by generally
accepted accounting principles to be reflected on a consolidated balance
sheet of SRC and its consolidated subsidiaries (including the notes
thereto) or which would have a Material Adverse Effect on SRC. Except as
disclosed by SRC, none of SRC or its subsidiaries has incurred any
liabilities of any nature, whether or not accrued, contingent or otherwise,
which could reasonably be expected to have, and there have been no events,
changes or effects with respect to SRC or its subsidiaries having or which
could reasonably be expected to have, a Material Adverse Effect on SRC.
Except as and to the extent disclosed by SRC there has not been (i) any
material change by SRC in its accounting methods, principles or practices
(other than as required after the date hereof by concurrent changes in
generally accepted accounting principles), (ii) any revaluation by SRC of
any of its assets having a Material Adverse Effect on SRC, including,
without limitation, any write-down of the value of any assets other than in
the ordinary course of business or (iii) any other action or event that
would have required the consent of any other party hereto pursuant to
Section 4.2 of this Agreement had such action or event occurred after the
date of this Agreement.
Section 3.9. Litigation. Except as set forth in Schedule 3.9 of the
SRC Disclosure Schedule there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of SRC, threatened against SRC
or any of its subsidiaries or any of their respective properties or assets
before any Governmental Entity which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on SRC or
could reasonably be expected to prevent or delay the consummation of the
transactions contemplated by this Agreement. Except as disclosed by SRC,
none of SRC or its subsidiaries is subject to any outstanding order, writ,
injunction or decree which, insofar as can be reasonably foreseen in the
future, could reasonably be expected to have a Material Adverse Effect on
SRC or could reasonably be expected to prevent or delay the consummation of
the transactions contemplated hereby.
Section 3.10. Compliance with Applicable Law. Except as disclosed by
SRC, SRC and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities necessary for
the lawful conduct of their respective businesses (the "SRC Permits"),
except for failures to hold such permits, licenses, variances, exemptions,
orders and approvals which would not have a Material Adverse Effect on SRC.
Except as disclosed by SRC, SRC and its subsidiaries are in compliance with
the terms of the SRC Permits, except where the failure so to comply would
not have a Material Adverse Effect on SRC. Except as disclosed by SRC, the
businesses of SRC and its subsidiaries are not being conducted in violation
of any law, ordinance or regulation of any Governmental Entity except that
no representation or warranty is made in this Section 3.10 with respect to
Environmental Laws and except for violations or possible violations which
do not, and, insofar as reasonably can be foreseen, in the future will not,
have a Material Adverse Effect on SRC. Except as disclosed by SRC no
investigation or review by any Governmental Entity with respect to SRC or
its subsidiaries is pending or, to the knowledge of SRC, threatened, nor,
to the knowledge of SRC, has any Governmental Entity indicated an intention
to conduct the same, other than, in each case, those which SRC reasonably
believes will not have a Material Adverse Effect on SRC.
Section 3.11. Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit plan, program, policy,
arrangement and contract (including, without limitation, any "employee
benefit plan," as defined in Section 3(3) of ERISA), maintained or
contributed to at any time by SRC, any of its subsidiaries or any entity
required to be aggregated with SRC or any of its subsidiaries pursuant to
Section 414 of the Code (each, a "SRC Employee Plan"), no event has
occurred and, to the knowledge of SRC, no condition or set of circumstances
exists in connection with which SRC or any of its subsidiaries could
reasonably be expected to be subject to any liability which would have a
Material Adverse Effect on SRC.
(b) (i) No SRC Employee Plan is or has been subject to Title IV of
ERISA or Section 412 of the Code; and (ii) each SRC Employee Plan intended
to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code is the subject of a favorable
Internal Revenue Service determination letter, and nothing has occurred
which could reasonably be expected to adversely affect such determination.
(c) Section 3.11(c) of the SRC Disclosure Schedule sets forth a true
and complete list, as of the date of this Agreement, of each person who
holds any SRC Stock Options, together with the number of SRC Shares which
are subject to such option, the date of grant of such option, the extent to
which such option is vested (or will become vested as a result of the
Merger), the option price of such option (to the extent determined as of
the date hereof), whether such option is a nonqualified stock option or is
intended to qualify as an incentive stock option within the meaning of
Section 422(b) of the Code, and the expiration date of such option. Section
3.11(c) of the SRC Disclosure Schedule also sets forth the total number of
such incentive stock options and such nonqualified options. SRC has
furnished VAC with complete copies of the plans pursuant to which the SRC
Stock Options were issued. Other than the automatic vesting of SRC Stock
Options that may occur without any action on the part of SRC or its
officers or directors, SRC has not taken any action that would result in
any SRC Stock Options that are unvested becoming vested in connection with
or as a result of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(d) SRC has made available to VAC (i) a description of the terms of
employment and compensation arrangements of all officers of SRC and a copy
of each such agreement currently in effect; (ii) copies of all agreements
with consultants who are individuals obligating SRC to make annual cash
payments in an amount exceeding $60,000; (iii) a schedule listing all
officers of SRC who have executed a non-competition agreement with SRC and
a copy of each such agreement currently in effect; (iv) copies (or
descriptions) of all severance agreements, programs and policies of SRC
with or relating to its employees, except programs and policies required to
be maintained by law; and (v) copies of all plans, programs, agreements and
other arrangements of the SRC with or relating to its employees which
contain change in control provisions.
(e) Except as disclosed in Section 3.11(e) of the SRC Disclosure
Schedule there shall be no payment, accrual of additional benefits,
acceleration of payments, or vesting in any benefit under any SRC Employee
Plan or any agreement or arrangement disclosed under this Section 3.11
solely by reason of entering into or in connection with the transactions
contemplated by this Agreement.
(f) There are no controversies pending or, to the knowledge of SRC
threatened, between SRC or any of its subsidiaries and any of their
respective employees, which controversies have or could reasonably be
expected to have a Material Adverse Effect on SRC. Neither SRC nor any of
its subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by SRC or any of its
subsidiaries (and neither SRC nor any of its subsidiaries has any
outstanding material liability with respect to any terminated collective
bargaining agreement or labor union contract), nor does SRC know of any
activities or proceedings of any labor union to organize any of its or any
of its subsidiaries' employees. SRC has no knowledge of any strike,
slowdown, work stoppage, lockout or threat thereof by or with respect to
any of its or any of its subsidiaries' employees.
Section 3.12. Environmental Laws and Regulations.
(a) Except as disclosed by SRC, (i) each of SRC and its subsidiaries
is in material compliance with all Environmental Laws, except for
non-compliance that would not have a Material Adverse Effect on SRC, which
compliance includes, but is not limited to, the possession by SRC and its
subsidiaries of all material permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms
and conditions thereof; (ii) none of SRC or its subsidiaries has received
written notice of, or, to the knowledge of SRC, is the subject of, any
Environmental Claim that could reasonably be expected to have a Material
Adverse Effect on SRC; and (iii) to the knowledge of SRC, there are no
circumstances that are reasonably likely to prevent or interfere with such
material compliance in the future.
(b) Except as disclosed by SRC, there are no Environmental Claims
which could reasonably be expected to have a Material Adverse Effect on SRC
that are pending or, to the knowledge of SRC, threatened against SRC or any
of its subsidiaries or, to the knowledge of SRC, against any person or
entity whose liability for any Environmental Claim SRC or its subsidiaries
has or may have retained or assumed either contractually or by operation of
law.
Section 3.13. Tax Matters. Except as set forth in Section 3.13 of the
SRC Disclosure Schedule: (i) SRC and each of its subsidiaries has filed or
has had filed on its behalf in a timely manner (within any applicable
extension periods) with the appropriate Governmental Entity all income and
other material Tax Returns with respect to Taxes of SRC and each of its
subsidiaries and all Tax Returns were in all material respects true,
complete and correct; (ii) all material Taxes with respect to SRC and each
of its subsidiaries have been paid in full or have been provided for in
accordance with GAAP on SRC's most recent balance sheet which is part of
the SRC SEC Documents; (iii) there are no outstanding agreements or waivers
extending the statutory period of limitations applicable to any federal,
state, local or foreign income or other material Tax Returns required to be
filed by or with respect to SRC or its subsidiaries; (iv) to the knowledge
of SRC none of the Tax Returns of or with respect to SRC or any of its
subsidiaries is currently being audited or examined by any Governmental
Entity; and (v) no deficiency for any income or other material Taxes has
been assessed with respect to SRC or any of its subsidiaries which has not
been abated or paid in full.
Section 3.14. Title to Property. SRC and each of its subsidiaries have
good and defensible title to all of their properties and assets, free and
clear of all liens, charges and encumbrances except liens for taxes not yet
due and payable and such liens or other imperfections of title, if any, as
do not materially detract from the value of or interfere with the present
use of the property affected thereby or which, individually or in the
aggregate, would not have a Material Adverse Effect on SRC; and, to SRC's
knowledge, all leases pursuant to which SRC or any of its subsidiaries
lease from others real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, to
the knowledge of SRC, under any of such leases, any existing material
default or event of default (or event which with notice or lapse of time,
or both, would constitute a material default and in respect of which SRC or
such subsidiary has not taken adequate steps to prevent such a default from
occurring) except where the lack of such good standing, validity and
effectiveness, or the existence of such default or event of default would
not have a Material Adverse Effect on SRC.
Section 3.15. Intellectual Property.
(a) Each of SRC and its subsidiaries owns, or possesses adequate
licenses or other valid rights to use, all existing United States and
foreign patents, trademarks, trade names, services marks, copyrights, trade
secrets, and applications therefor that are material to its business as
currently conducted (the "SRC Intellectual Property Rights").
(b) Except as set forth in Section 3.15(b) of the SRC Disclosure
Schedule the validity of the SRC Intellectual Property Rights and the title
thereto of SRC or any subsidiary, as the case may be, is not being
questioned in any litigation to which SRC or any subsidiary is a party.
(c) The conduct of the business of SRC and its subsidiaries as now
conducted does not, to SRCis knowledge, infringe any valid patents,
trademarks, tradenames, service marks or copyrights of others. The
consummation of the transactions contemplated hereby will not result in the
loss or impairment of any SRC Intellectual Property Rights.
(d) Each of SRC and its subsidiaries has taken steps it believes
appropriate to protect and maintain its trade secrets as such, except in
cases where SRC has elected to rely on patent or copyright protection in
lieu of trade secret protection.
Section 3.16. Insurance. SRC and its subsidiaries maintain general
liability and other business insurance that SRC believes to be reasonably
prudent for its business.
Section 3.17. Vote Required. The affirmative vote of the holders of at
least a majority of the outstanding SRC Shares is the only vote of the
holders of any class or series of SRC's capital stock necessary to approve
and adopt this Agreement and the Merger.
Section 3.18. Tax Treatment. Neither SRC nor, to the knowledge of SRC,
any of its affiliates has taken or agreed to take any action that would
prevent the Merger from constituting a reorganization qualifying under the
provisions of Section 368(a) of the Code.
Section 3.19. Affiliates. Except for the directors and executive
officers of SRC, each of whom is listed in Section 3.19 of the SRC
Disclosure Schedule, there are no persons who, to the knowledge of SRC, may
be deemed to be affiliates of SRC under Rule 1-02(b) of Regulation S-X of
the SEC (the "SRC Affiliates").
Section 3.20. Certain Business Practices. None of SRC, any of its
subsidiaries or any directors, officers, agents or employees of SRC or any
of its subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political
activity, (ii) made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the FCPA, or (iii) made any other
unlawful payment.
Section 3.21. Insider Interests. Except as set forth in Section 3.21
of the SRC Disclosure Schedule, no officer or director of SRC has any
interest in any material property, real or personal, tangible or
intangible, including without limitation, any computer software or SRC
Intellectual Property Rights, used in or pertaining to the business of SRC
or any subsidiary, except for the ordinary rights of a stockholder or
employee stock optionholder.
Section 3.22. Opinion of Financial Adviser. No advisers, as of the
date hereof, have delivered to the SRC Board a written opinion to the
effect that, as of such date, the exchange ratio contemplated by the Merger
is fair to the holders of SRC Shares.
Section 3.23. Brokers. No broker, finder or investment banker (other
than the SRC Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to VAC) is entitled to any brokerage, finders
or other fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of SRC.
Section 3.24. Disclosure. No representation or warranty of SRC in this
Agreement or any certificate, schedule, document or other instrument
furnished or to be furnished to VAC pursuant hereto or in connection
herewith contains, as of the date of such representation, warranty or
instrument, or will contain any untrue statement of a material fact or, at
the date thereof, omits or will omit to state a material fact necessary to
make any statement herein or therein, in light of the circumstances under
which such statement is or will be made, not misleading.
Section 3.25. No Existing Discussions. As of the date hereof, SRC is
not engaged, directly or indirectly, in any discussions or negotiations
with any other party with respect to any Third Party Acquisition (as
defined in Section 5.4).
Section 3.26. Material Contracts.
(a) SRC has delivered or otherwise made available to VAC true, correct
and complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which SRC is
a party affecting the obligations of any party thereunder) to which SRC or
any of its subsidiaries is a party or by which any of their properties or
assets are bound that are, material to the business, properties or assets
of SRC and its subsidiaries taken as a whole, including, without
limitation, to the extent any of the following are, individually or in the
aggregate, material to the business, properties or assets of SRC and its
subsidiaries taken as a whole, all: (i) employment, product design or
development, personal services, consulting, non-competition, severance,
golden parachute or indemnification contracts (including, without
limitation, any contract to which SRC is a party involving employees of
SRC); (ii) licensing, publishing, merchandising or distribution agreements;
(iii) contracts granting rights of first refusal or first negotiation; (iv)
partnership or joint venture agreements; (v) agreements for the
acquisition, sale or lease of material properties or assets or stock or
otherwise. (vi) contracts or agreements with any Governmental Entity; and
(vii) all commitments and agreements to enter into any of the foregoing
(collectively, together with any such contracts entered into in accordance
with Section 5.2 hereof, the 'SRC Contracts"). Neither SRC nor any of its
subsidiaries is a party to or bound by any severance, golden parachute or
other agreement with any employee or consultant pursuant to which such
person would be entitled to receive any additional compensation or an
accelerated payment of compensation as a result of the consummation of the
transactions contemplated hereby.
(b) Each of the SRC Contracts is valid and enforceable in accordance
with its terms, and there is no default under any SRC Contract so listed
either by SRC or, to the knowledge of SRC, by any other party thereto, and
no event has occurred that with the lapse of time or the giving of notice
or both would constitute a default thereunder by SRC or, to the knowledge
of SRC, any other party, in any such case in which such default or event
could reasonably be expected to have a Material Adverse Effect on SRC.
(c) No party to any such SRC Contract has given notice to SRC of or
made a claim against SRC with respect to any breach or default thereunder,
in any such case in which such breach or default could reasonably be
expected to have a Material Adverse Effect on SRC.
ARTICLE 4
Covenants
Section 4.1. Conduct of Business of VAC. Except as contemplated by
this Agreement or as described in Section 4.1 of the VAC Disclosure
Schedule, during the period from the date hereof to the Effective Time, VAC
will conduct its operations in the ordinary course of business consistent
with past practice and, to the extent consistent therewith, with no less
diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organization, keep
available the service of its current officers and employees and preserve
its relationships with customers, suppliers and others having business
dealings with it to the end that goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, except as otherwise expressly provided in this Agreement or as
described in Section 4.1 of the VAC Disclosure Schedule, prior to the
Effective Time, VAC will not, without the prior written consent of SRC:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend the terms of any stock of any class or any other securities
(except bank loans) or equity equivalents.
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, make any other actual, constructive or deemed distribution
in respect of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any
of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of VAC (other than the Merger);
(e) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings or issuances of letters of credit
under existing lines of credit in the ordinary course of business; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person. (iii) make any loans, advances or capital contributions to,
or investments in, any other person; (iv) pledge or otherwise encumber
shares of capital stock of VAC; or (v) mortgage or pledge any of its
material assets, tangible or intangible, or create or suffer to exist any
material Lien thereupon (other than tax Liens for taxes not yet due);
(f) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock
appreciation rights or performance units); provided, however, that this
paragraph (f) shall not prevent VAC from (i) entering into employment
agreements or severance agreements with employees in the ordinary course of
business and consistent with past practice or (ii) increasing annual
compensation and/or providing for or amending bonus arrangements for
employees for fiscal 1999 in the ordinary course of year-end compensation
reviews consistent with past practice and paying bonuses to employees for
fiscal 1999 in amounts previously disclosed to SRC (to the extent that such
compensation increases and new or amended bonus arrangements do not result
in a material increase in benefits or compensation expense to VAC);
(g) acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions (other than in the ordinary
course of business);
(h) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(i) revalue in any material respect any of its assets including,
without limitation, writing down the value of inventory or writing-off
notes or accounts receivable other than in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any
contract or agreement other than in the ordinary course of business
consistent with past practice which would be material to VAC; (iii)
authorize any new capital expenditure or expenditures which, individually
is in excess of $1,000 or, in the aggregate, are in excess of $5,000;
provided, however that none of the foregoing shall limit any capital
expenditure required pursuant to existing contracts;
(k) make any tax election or settle or compromise any income tax
liability material to VAC;
(l) settle or compromise any pending or threatened suit, action or
claim which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on
VAC;
(m) commence any material research and development project or
terminate any material research and development project that is currently
ongoing, in either case, except pursuant to the terms of existing contracts
or in the ordinary course of business; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through 4.1(m) or any action which would make
any of the representations or warranties of contained in this Agreement
untrue or incorrect.
Section 4.2. Conduct of Business of SRC. Except as contemplated by
this Agreement or as described in Section 4.2 of the SRC Disclosure
Schedule during the period from the date hereof to the Effective Time, SRC
will conduct its operations in the ordinary course of business consistent
with past practice and, to the extent consistent therewith, with no less
diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organization, keep
available the service of its current officers and employees and preserve
its relationships with customers, suppliers and others having business
dealings with it to the end that goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, except as otherwise expressly provided in this Agreement or as
described in Section 4.2 of the SRC Disclosure Schedule, prior to the
Effective Time, SRC will not, without the prior written consent of:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities (except bank
loans) or equity equivalents (including, without limitation, any stock
options or stock appreciation rights;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, make any other actual, constructive or deemed distribution
in respect of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any
of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger consolidation, restructuring, recapitalization or other
reorganization of SRC (other than the Merger);
(e) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings or issuances of letters of credit
under existing lines of credit in the ordinary course of business. (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person; (iii) make any loans, advances or capital contributions to or
investments in, any other person; (iv) pledge or otherwise encumber shares
of capital stock of SRC or its subsidiaries; or (v) mortgage or pledge any
of its material assets, tangible or intangible, or create or suffer to
exist any material Lien thereupon (other than tax Liens for taxes not yet
due);
(f) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock
appreciation rights or performance units); provided, however, that this
paragraph (f) shall not prevent SRC or its subsidiaries from (i) entering
into employment agreements or severance agreements with employees in the
ordinary course of business and consistent with past practice or (ii)
increasing annual compensation and/or providing for or amending bonus
arrangements for employees for fiscal 1999 in the ordinary course of year
end compensation reviews consistent with past practice and paying bonuses
to employees for fiscal 1999 in amounts previously disclosed to (to the
extent that such compensation increases and new or amended bonus
arrangements do not result in a material increase in benefits or
compensation expense to SRC);
(g) acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions other than in the ordinary
course of business;
(h) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(i) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory of writing-off
notes or accounts receivable other than in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership, or other business organization or
division thereof or any equity interest therein; (ii) enter into any
contract or agreement other than in the ordinary course of business
consistent with past practice which would be material to SRC; (iii)
authorize any new capital expenditure or expenditures which, individually,
is in excess of $1,000 or, in the aggregate, are in excess of $5,000:
provided, however that none of the foregoing shall limit any capital
expenditure required pursuant to existing contracts;
(k) make any tax election or settle or compromise any income tax
liability material to SRC and its subsidiaries taken as a whole;
(l) settle or compromise any pending or threatened suit, action or
claim which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on
SRC;
(m) commence any material research and development project or
terminate any material research and development project that is currently
ongoing, in either case, except pursuant to the terms of existing contracts
or except in the ordinary course of business; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.2(a) through 4.2(m) or any action which would make
any of the representations or warranties of the SRC contained in this
Agreement untrue or incorrect.
Section 4.3. Preparation of 8-K and the Proxy Statement. SRC and
shall promptly prepare and file with the SEC the Proxy Statement, if
required by counsel.
Section 4.4. Other Potential Acquirers.
(a) SRC, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore
with respect to any Third Party Acquisition.
Section 4.5. Meetings of Stockholders. Each of SRC and VAC shall take
all action necessary, in accordance with the respective General Corporation
Law of its respective state, and its respective certificate of
incorporation and bylaws, to duly call, give notice of, convene and hold a
meeting of its stockholders as promptly as practicable, to consider and
vote upon the adoption and approval of this Agreement and the transactions
contemplated hereby. The stockholder votes required for the adoption and
approval of the transactions contemplated by this Agreement shall be the
vote required by the NGCL and its charter and bylaws, in the case of VAC
and the General Corporation Law of its respective state, and its charter
and bylaws, in the case of SRC. VAC and SRC will, through their respective
Boards of Directors, recommend to their respective stockholders approval of
such matters
Section 4.6. OTC:BB Listing. The parties shall use all reasonable
efforts to cause the VAC Shares, subject to Rule 144, to be traded on the
Over The Counter Bulletin Board (OTC:BB).
Section 4.7. Access to Information.
(a) Between the date hereof and the Effective Time, VAC will give SRC
and its authorized representatives, and SRC will give VAC and its
authorized representatives, reasonable access to all employees, plants,
offices, warehouses and other facilities and to all books and records of
itself and its subsidiaries, will permit the other party to make such
inspections as such party may reasonably require and will cause its
officers and those of its subsidiaries to furnish the other party with such
financial and operating data and other information with respect to the
business and properties of itself and its subsidiaries as the other party
may from time to time reasonably request.
(b) Between the date hereof and the Effective Time, VAC shall furnish
to SRC, and SRC will furnish to VAC, within 25 business days after the end
of each quarter, quarterly statements prepared by such party in conformity
with its past practices) as of the last day of the period then ended.
(c) Each of the parties hereto will hold and will cause its
consultants and advisers to hold in confidence all documents and
information furnished to it in connection with the transactions
contemplated by this Agreement.
Section 4.8. Additional Agreements, Reasonable Efforts. Subject to the
terms and conditions herein provided, each of the parties hereto agrees to
use all reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including,
without limitation, (i) cooperating in the preparation and filing of the
Proxy Statement and the 8-K, any filings that may be required under the HSR
Act, and any amendments to any thereof; (ii) obtaining consents of all
third parties and Governmental Entities necessary, proper or advisable for
the consummation of the transactions contemplated by this Agreement; (iii)
contesting any legal proceeding relating to the Merger and (iv) the
execution of any additional instruments necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of
this Agreement, SRC and VAC agree to use all reasonable efforts to cause
the Effective Time to occur as soon as practicable after the stockholder
votes with respect to the Merger. In case at any time after the Effective
Time any further action is necessary to carry out the purposes of this
Agreement, the proper officers and directors of each party hereto shall
take all such necessary action.
Section 4.9. Employee Benefits; Stock Option and Employee Purchase
Plans. Subject to the provisions of Section 1.6(d) hereof, prior to the
Effective Time, VAC will take or cause to be taken all action necessary to
adopt and or revise the employment agreements of Ralph Massetti with VAC.
It is the parties' present intent to provide after the Effective Time to
employees of SRC employee benefit plans (other than stock option or other
plans involving the potential issuance of securities of VAC) which, in the
aggregate, are not less favorable than those currently provided by SRC.
Notwithstanding the foregoing, nothing contained herein shall be construed
as requiring the parties to continue any specific employee benefit plans.
Section 4.10. Public Announcements. SRC, and VAC will consult with one
another before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement,
including, without limitation, the Merger, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable law or by obligations pursuant to
any listing agreement with the NASD Over The Counter Bulletin Board
(OTC:BB) as determined by SRC or VAC.
Section 4.11. Indemnification.
(a) To the extent, if any, not provided by an existing right under one
of the parties' directors and officers liability insurance policies, from
and after the Effective Time, VAC shall, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof, or who becomes prior to
the Effective Time, a director, officer or employee of the parties hereto
or any subsidiary thereof (each an "Indemnified Party" and, collectively,
the ''Indemnified Parties") against all losses, expenses (including
reasonable attorneys' fees and expenses), claims, damages or liabilities
or, subject to the proviso of the next succeeding sentence, amounts paid in
settlement arising out of actions or omissions occurring at or prior to the
Effective Time and whether asserted or claimed prior to, at or after the
Effective Time) that are in whole or in part (i) based on, or arising out
of the fact that such person is or was a director, officer or employee of
such party or a subsidiary of such party or (ii) based on, arising out of
or pertaining to the transactions contemplated by this Agreement. In the
event of any such loss expense, claim, damage or liability (whether or not
arising before the Effective Time), (i) VAC shall pay the reasonable fees
and expenses of counsel selected by the Indemnified Parties, which counsel
shall be reasonably satisfactory to VAC, promptly after statements therefor
are received and otherwise advance to such Indemnified Party upon request
reimbursement of documented expenses reasonably incurred, in either case to
the extent not prohibited by the NGCL or its certificate of incorporation
or bylaws, (ii) VAC will cooperate in the defense of any such matter and
(iii) any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under the
NGCL and VAC's certificate of incorporation or bylaws shall be made by
independent counsel mutually acceptable to VAC and the Indemnified Party;
provided, however, that VAC shall not be liable for any settlement effected
without its written consent (which consent shall not be unreasonably
withheld). The Indemnified Parties as a group may retain only one law firm
with respect to each related matter except to the extent there is, in the
opinion of counsel to an Indemnified Party, under applicable standards of
professional conduct, c conflict on any significant issue between positions
of any two or more Indemnified Parties.
(b) In the event VAC or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity or such consolidation or
merger or (ii) transfers all or substantially all of its properties and
assets to any person, then and in either such case, proper provision shall
be made so that the successors and assigns of VAC shall assume the
obligations set forth in this Section 4.11.
(c) To the fullest extent permitted by law, from and after the
Effective Time, all rights to indemnification now existing in favor of the
employees, agents, directors or officers of VAC and SRC and their
subsidiaries with respect to their activities as such prior to the
Effective Time, as provided in VAC's and SRC's certificate of incorporation
or bylaws, in effect on the date thereof or otherwise in effect on the date
hereof, shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Time.
(d) The provisions of this Section 4.11 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
Section 4.12. Notification of Certain Matters. The parties hereto
shall give prompt notice to the other parties, of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would
be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time, (ii) any material failure of such party to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (iii) any notice of, or other communication
relating to, a default or event which, with notice or lapse of time or
both, would become a default, received by such party or any of its
subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any contract or agreement material to the financial
condition, properties, businesses or results of operations of such party
and its subsidiaries taken as a whole to which such party or any of its
subsidiaries is a party or is subject, (iv) any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions
contemplated by this Agreement, or (v) any material adverse change in their
respective financial condition, properties, businesses, results of
operations or prospects taken as a whole, other than changes resulting from
general economic conditions; provided, however, that the delivery of any
notice pursuant to this Section 4.12 shall not cure such breach or
non-compliance or limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
ARTICLE 5
Conditions to Consummation of the Merger
Section 5.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the
Merger are subject to the satisfaction at or prior to the Effective Time of
the following conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of VAC and SRC;
(b) this Agreement shall have been approved and adopted by the Board
of Directors of VAC and SRC;
(c) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which
prohibits, restrains, enjoins or restricts the consummation of the Merger;
(d) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired, and any other governmental or regulatory
notices or approvals required with respect to the transactions contemplated
hereby shall have been either filed or received; and
Section 5.2. Conditions to the Obligations of VAC. The obligation of
VAC to effect the Merger is subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) the representations of SRC contained in this Agreement or in any
other document delivered pursuant hereto shall be true and correct (except
to the extent that the breach thereof would not have a Material Adverse
Effect on SRC) at and as of the Effective Time with the same effect as if
made at and as of the Effective Time (except to the extent such
representations specifically related to an earlier date, in which case such
representations shall be true and correct as of such earlier date), and at
the Closing SRC shall have delivered to VAC a certificate to that effect;
(b) each of the covenants and obligations of SRC to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the
Effective Time and at the Closing SRC shall have delivered to VAC a
certificate to that effect;
(d) SRC shall have obtained the consent or approval of each person
whose consent or approval shall be required in order to permit the Merger
as relates to any obligation, right or interest of SRC under any loan or
credit agreement, note, mortgage, indenture, lease or other agreement or
instrument, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of VAC, individually or in
the aggregate, have a Material Adverse Effect on SRC;
(e) there shall have been no events, changes or effects with respect
to SRC or its subsidiaries having or which could reasonably be expected to
have a Material Adverse Effect on SRC; and
Section 5.3. Conditions to the Obligations of SRC. The respective
obligations of SRC to effect the Merger are subject to the satisfaction at
or prior to the Effective Time of the following conditions:
(a) the representations of VAC contained in this Agreement or in any
other document delivered pursuant hereto shall be true and correct (except
to the extent that the breach thereof would not have a Material Adverse
Effect on VAC) at and as of the Effective Time with the same effect as if
made at and as of the Effective Time (except to the extent such
representations specifically related to an earlier date, in which case such
representations shall be true and correct as of such earlier date), and at
the Closing VAC shall have delivered to SRC a certificate to that effect;
(b) each of the covenants and obligations of VAC to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the
Effective Time and at the Closing VAC shall have delivered to SRC a
certificate to that effect;
(c) there shall have been no events, changes or effects with respect
to VAC having or which could reasonably be expected to have a Material
Adverse Effect on VAC.
ARTICLE 6
Termination; Amendment; Waiver
Section 6.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether
before or after approval and adoption of this Agreement by VAC's or SRC's
stockholders:
(a) by mutual written consent of VAC and SRC;
(b) by SRC or VAC if (i) any court of competent jurisdiction in the
United States or other United States Governmental Entity shall have issued
a final order, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action is or shall have become nonappealable or
(ii) the Merger has not been consummated by November 30, 1999; provided,
however, that no party may terminate this Agreement pursuant to this clause
(ii) if such party's failure to fulfill any of its obligations under this
Agreement shall have been the reason that the Effective Time shall not have
occurred on or before said date;
(c) by VAC if (i) there shall have been a breach of any representation
or warranty on the part of SRC set forth in this Agreement, or if any
representation or warranty of SRC shall have become untrue, in either case
such that the conditions set forth in Section 5.2(a) would be incapable of
being satisfied by November 30, 1999 (or as otherwise extended), (ii) there
shall have been a breach by SRC of any of their respective covenants or
agreements hereunder having a Material Adverse Effect on SRC or materially
adversely affecting (or materially delaying) the consummation of the
Merger, and SRC, as the case may be, has not cured such breach within 20
business days after notice by VAC thereof, provided that VAC has not
breached any of its obligations hereunder, (iii) VAC shall have convened a
meeting of its stockholders to vote upon the Merger and shall have failed
to obtain the requisite vote of its stockholders; or (iv) VAC shall have
convened a meeting of its Board of Directors to vote upon the Merger and
shall have failed to obtain the requisite vote;
(d) by SRC if (i) there shall have been a breach of any representation
or warranty on the part of VAC set forth in this Agreement, or if any
representation or warranty of VAC shall have become untrue, in either case
such that the conditions set forth in Section 5.3(a) would be incapable of
being satisfied by November 30, 1999 (or as otherwise extended), (ii) there
shall have been a breach by VAC of its covenants or agreements hereunder
having a Material Adverse Effect on VAC or materially adversely affecting
(or materially delaying) the consummation of the Merger, and VAC, as the
case may be, has not cured such breach within twenty business days after
notice by SRC thereof, provided that SRC has not breached any of its
obligations hereunder, (iii) the VAC Board shall have recommended to VAC's
stockholders a Superior Proposal, (iv) the VAC Board shall have withdrawn,
modified or changed its approval or recommendation of this Agreement or the
Merger or shall have failed to call, give notice of, convene or hold a
stockholders' meeting to vote upon the Merger, or shall have adopted any
resolution to effect any of the foregoing, (v) SRC shall have convened a
meeting of its stockholders to vote upon the Merger and shall have failed
to obtain the requisite vote of its stockholders or (vi) VAC shall have
convened a meeting of its stockholders to vote upon the Merger and shall
have failed to obtain the requisite vote of its stockholders.
Section 6.2. Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 6.1, this Agreement
shall forthwith become void and have no effect, without any liability on
the part of any party hereto or its affiliates, directors, officers or
stockholders, other than the provisions of this Section 6.2 and Sections
4.7(c) and 6.3 hereof. Nothing contained in this Section 6.2 shall relieve
any party from liability for any breach of this Agreement.
Section 6.3. Fees and Expenses. Except as specifically provided in
this Section 6.3, each party shall bear its own expenses in connection with
this Agreement and the transactions contemplated hereby.
Section 6.4. Amendment. This Agreement may be amended by action taken
by VAC and SRC at any time before or after approval of the Merger by the
stockholders of VAC and SRC (if required by applicable law) but, after any
such approval, no amendment shall be made which requires the approval of
such stockholders under applicable law without such approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of the parties hereto.
Section 6.5. Extension; Waiver. At any time prior to the Effective
Time, each party hereto may (i) extend the time for the performance of any
of the obligations or other acts of any other party, (ii) waive any
inaccuracies in the representations and warranties of any other party
contained herein or in any document, certificate or writing delivered
pursuant hereto or (iii) waive compliance by any other party with any of
the agreements or conditions contained herein. Any agreement on the part of
any party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The
failure of any party hereto to assert any of its rights hereunder shall not
constitute a waiver of such rights.
ARTICLE 7
Miscellaneous
Section 7.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall
not limit any covenant or agreement of the parties hereto which by its
terms requires performance after the Effective Time.
Section 7.2. Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings both written and oral, between the parties with respect to
the subject matter hereof and (b) shall not be assigned by operation of law
or otherwise.
Section 7.3. Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby,
and to such end, the provisions of this Agreement are agreed to be
severable.
Section 7.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return
receipt requested), to each other party as follows:
If to SRC:
Salesrepcentral, Inc.
1850 East Flamingo Rd. Suite 111
Las Vegas, Nevada 89119
with a copy to:
Donald J. Stoecklein
Sperry Young & Stoecklein
1850 East Flamingo Rd. Suite 111
Las Vegas, Nevada 89119
(702) 792-2590
(702) 794-0744
if to VAC:
VAN AMERICAN CAPITAL, LTD.
Jeanette Huntley
1135 Terminal Way, Suite 209
Reno, NV
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.
Section 7.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada, without
regard to the principles of conflicts of law thereof.
Section 7.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 7.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 4.9 and 4.11, nothing
in this Agreement, express or implied, is intended to or shall confer upon
any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 7.8. Certain Definitions. For the purposes of this Agreement,
the term:
(a) "affiliate" means (except as otherwise provided in Sections 2.19,
3.19 and 4.13) a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person;
(b) "business day" means any day other than a day on which Nasdaq is
closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "knowledge'' or "known'' means, with respect to any matter in
question, if an executive officer of VAC or SRC or its subsidiaries, as the
case may be, has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(f) "subsidiary" or "subsidiaries" of VAC, SRC or any other person,
means any corporation, partnership, limited liability company, association,
trust, unincorporated association or other legal entity of which VAC, SRC
or any such other person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, 50% or
more of the capital stock, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of
such corporation or other legal entity.
Section 7.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part
of any direct or indirect stockholder of VAC, SRC or Newco or any officer,
director, employee, agent, representative or investor of any party hereto.
Section 7.10. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on
its part to the consummation of the Merger, will cause irreparable injury
to the other parties for which damages, even if available, will not be an
adequate remedy. Accordingly, each party hereby consents to the issuance of
injunctive relief by any court of competent jurisdiction to compel
performance of such party's obligations and to the granting by any court of
the remedy of specific performance of its obligations hereunder; provided,
however, that, if a party hereto is entitled to receive any payment or
reimbursement of expenses pursuant to Sections 6.3(a), (b) or (c), it shall
not be entitled to specific performance to compel the consummation of the
Merger.
Section 7.11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
In Witness Whereof, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
Salesrepcentral, Inc.
By:/s/ Ralph Massetti
Name: Ralph Massetti
Title: President
Van American Capital Ltd.
By:/s/ Jeanette Huntley
Name: Jeanette Huntley
Title: President
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VAC DISCLOSURE SCHEDULE
Schedule 2.1 Organization See Amended Articles/Bylaws/Minutes
Schedule 2.6 Consents & Approvals None Required
Schedule 2.7 No Default Not Applicable
Schedule 2.8 No Undisclosed Liability None Exist
Schedule 2.9 Litigation None Exist
Schedule 2.10 Compliance with Applicable Law Not Applicable - full
disclosed in 10KSB
Schedule 2.11 Employee Benefit Plans Section 2.11(a) Not Applicable
- - None Exist
Section 2.11(b) No Benefit Plan Exist
Section 2.11( c)No Options Exist
Section 2.11(d) No Agreements Exist
Schedule 2.12 Environmental Laws and Regs Not Applicable
Schedule 2.13 Tax Matters None Exist
Schedule 2.14 Title to Property None Exist
Schedule 2.15 Intellectual Property None Exist
Schedule 2.16 Insurance None Exist
Schedule 2.17 Vote Required See Shareholder Meeting
Certificate
Schedule 2.18 Tax Treatment Not Applicable
Schedule 2.19 Affiliates __________________
___________________
Schedule 2.20 Certain Business Practices None Exist
Schedule 2.21 Insider Interest None Exist
Schedule 2.22 Opinion of Financial Adviser Waived - None Exist
Schedule 2.23 Broker None Exist
Schedule 4.1 Conduct of Business See Amended & Restated
Articles
SRC DISCLOSURE SCHEDULE
Schedule 3.2(b) Subsidiary Stock None Exist
Schedule 3.2(c) Capital Stock Rights None Exist other than as
in Articles
Schedule 3.2(d) Securities conversions None Exist
Schedule 3.2 (f) Subsidiaries None Exist
Schedule 3.6 Consents & Approvals None Required
Schedule 3.7 No Default Not Applicable
Schedule 3.8 No Undisclosed Liability None Exist
Schedule 3.9 Litigation None Exist
Schedule 3.10 Compliance with Applicable Law Not Applicable - full
disclosed in 10KSB
Schedule 3.11 Employee Benefit Plans Section 3.11( c)No Options
Exist
Section 3.11(e) No Agreements Exist
Schedule 3.12 Environmental Laws and Regs Not Applicable
Schedule 3.13 Tax Matters None Exist
Schedule 3.14 Title to Property None Exist
Schedule 3.15(b) Intellectual Property None Exist
Schedule 3.16 Insurance None Exist
Schedule 3.17 Vote Required See Shareholder Meeting
Certificate
Schedule 3.18 Tax Treatment Not Applicable
Schedule 3.19 Affiliates __________________
___________________
Schedule 3.20 Certain Business Practices None Exist
Schedule 3.21 Insider Interest None Exist
Schedule 3.22 Opinion of Financial Adviser Waived - None Exist
Schedule 2.23 Broker None Exist
Schedule 4.2 Conduct of Business See Amended & Restated
Articles