AGREEMENT AND PLAN OF MERGER
AMONG
CONVERSION SERVICES INTERNATIONAL, INC.,
A DELAWARE CORPORATION,
MCKNIGHT ASSOCIATES, INC.,
A DELAWARE CORPORATION,
MCKNIGHT ASSOCIATES, INC.,
A TEXAS CORPORATION,
AND
WILLIAM MCKNIGHT
DATED AS OF JULY 22, 2005
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 22, 2005 (this
"Merger Agreement"), among Conversion Services International, Inc., a Delaware
corporation ("CSI"), McKnight Associates, Inc., a Delaware corporation and a
wholly owned subsidiary of CSI ("Merger Sub"), McKnight Associates, Inc., a
Texas corporation ("MAI") and William McKnight (the "Stockholder").
WHEREAS, the Boards of Directors of CSI, Merger Sub and MAI have
each approved the merger of MAI with and into Merger Sub (the "Merger") upon the
terms and subject to the conditions of this Merger Agreement, thus enabling
Merger Sub to acquire all of the common stock of MAI in exchange for cash and
CSI's common stock, par value $0.001 ("CSI Common Stock");
WHEREAS, the Stockholder has approved the Merger and the terms of
this Merger Agreement; and
WHEREAS, CSI, Merger Sub, MAI and the Stockholder 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 foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.01 The Merger; Effective Time of the Merger.
Upon the terms and conditions of this Merger Agreement and in accordance
with the Delaware General Corporation Law (the "DGCL") and the Texas Business
Corporation Act ("TBCA"), MAI shall be merged with and into Merger Sub at the
Effective Time (as hereinafter defined). The Merger shall become effective
immediately when the certificates of merger (the "Certificates of Merger"),
prepared and executed in accordance with the relevant provisions of the DGCL and
TBCA, as applicable, is duly filed with the Secretary of State of the State of
Delaware and the Secretary of State of the State of Texas (or other relevant
secretaries of state, as necessary) or, if agreed to by the parties, at such
time thereafter as is provided in the Certificates of Merger (the "Effective
Time"). The filing of the Certificates of Merger shall be made as soon as
practicable after the closing of the Merger (the "Closing").
Section 1.02 Closing.
The Closing shall take place at on a date and at a time to be specified by
the parties, which shall be no later than the fifth business day after
satisfaction (or waiver in accordance with this Merger Agreement) of the latest
to occur of the conditions set forth in Article VI (the "Closing Date"), at the
offices of CSI, unless another date, time or place is agreed to by the parties.
Section 1.03 Merger Consideration.
(a) Subject to adjustments set forth in Sections 1.03(b) and 1.03(c)
below, the aggregate consideration to be paid to the Stockholder shall consist
of cash and CSI common stock with an aggregate value of approximately $2,250,000
(the "Consideration"), consisting of: (i) at Closing, the Stockholder shall
receive cash of $500,000 and $1,500,000 of CSI Common Stock, based on the
closing price of the CSI Common Stock on the national securities exchange or
automated quotation system upon which shares of CSI Common Stock are then
listed; and (ii) within 60 days of the six (6) month anniversary of the Closing,
the Stockholder shall receive additional cash of $250,000, (the "Additional Cash
Sum") such additional payment being absolute and not being based upon any
performance requirements or other conditions of any kind, except Stockholder
shall not be entitled to such Additional Cash Sum if he resigns prior to the six
(6) month anniversary of the Closing Date in the absence of a breach by CSI
and/or Merger Sub. CSI and Merger Sub acknowledge and agree that the Additional
Cash Sum simply represents the remainder of the Consideration paid to acquire
MAI.
(i) As of the Closing Date, Stockholder will have the right to
retain all cash and funds contained in, and retain possession of, the MAI bank
account(s), as such cash balances and bank account(s) are disclosed on Section
1.03(a)(i) to the MAI Disclosure Letter. These funds shall be in addition to the
cash provided as part of the Consideration, as set forth in Section 1.03(a)
above;
(ii) MAI agrees that as of the Closing Date, the working capital
(current assets less current liabilities) of MAI shall equal $150,000 as shown
on the Current Balance Sheet (as defined below). As of the Closing Date, minus
the working capital of $150,000, Stockholder will have the right to all accounts
receivable and invoices for services provided by MAI through the Closing Date,
as such receivables and invoices are disclosed on Section 1.03(a)(ii) to the MAI
Disclosure Letter. CSI shall pay Stockholder an additional $172,000 by Tuesday,
July 26, 2005. Likewise, any work performed by MAI after the Closing Date, as
reflected in appropriate invoices, shall be for the benefit of CSI, Merger Sub
or an affiliate, and Stockholder shall not have any claim or right to such
funds. If Stockholder is paid directly or otherwise collects funds for such work
performed after the Closing Date, Stockholder will remit such promptly to CSI or
Merger Sub, as appropriate;
(iii) As of the Closing Date, CSI and/or Merger Sub agree agrees to
pay the liabilities of MAI incurred through the Closing Date, as such
liabilities are disclosed on Section 1.02(a)(iii) to the MAI Disclosure Letter,
IN addition, CSI or Merger Sub will pay the liabilities of MAI incurred after
the Closing Date;
(iv) CSI and Merger Sub agree that MAI does not own any hard assets,
furniture, fixtures, computers or equipment, with any such items being owned
personally by Stockholder, thus being excluded from this Agreement.
Section 1.04 Effects of the Merger.
(a) At the Effective Time: (i) MAI shall be merged with and into Merger
Sub, the separate existence of MAI shall cease and Merger Sub shall continue as
the surviving corporation (Merger Sub and MAI are sometimes referred to herein
as the "Constituent Corporations" and Merger Sub is sometimes referred to herein
as the "Surviving Corporation") and the merger shall have such effects as are
set forth in the DGCL and TBCA; (ii) the Certificate of Incorporation of Merger
Sub as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation; and (iii) the Bylaws
of Merger Sub as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation.
(b) The directors and officers of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors and officers of the
Surviving Corporation and shall serve until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and Bylaws.
(c) For federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF MERGER CONSIDERATION
Section 2.01 Effect on Capital Stock.
At the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any shares of common stock, no par value, of MAI ("MAI
Common Stock"), the Consideration paid or issued in accordance with the terms of
this Merger Agreement shall be deemed to have been issued, or shall have been
reserved for issuance, as applicable, in full satisfaction of all rights
pertaining to MAI Common Stock. At the Effective Time, each share of MAI Common
Stock owned prior to the Effective Time shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive its portion of the
Consideration.
If, subsequent to the date of this Merger Agreement but prior to the
Effective Time, the number of shares of CSI Common Stock issued and outstanding
is changed as a result of a stock split, reverse stock split, recapitalization,
reclassification or other similar transaction, the CSI Common Stock and other
items dependent thereon shall be appropriately and equitably adjusted herein.
Section 2.02 Exchange of Certificates for Merger Consideration.
(a) Exchange Procedures. Upon surrender of a certificate or certificates
which, immediately prior to the Effective Time, represented all the outstanding
shares of MAI Common Stock (the "Certificates") for cancellation to CSI or to
such other agent or agents as may be appointed by CSI, and any other required
documents, the holder of record of such Certificate shall be entitled to receive
in exchange therefor the portion of the Consideration which such holder has the
right to receive, and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of MAI Common Stock that is
not registered in the transfer records of MAI, the appropriate Consideration may
be issued to a transferee if the Certificate representing such MAI Common Stock
is presented to CSI accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.02, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the appropriate Consideration as contemplated by
Section 2.02(b).
(b) No Further Ownership Rights in MAI Common Stock. All shares of CSI
Common Stock issued in exchange for and upon the conversion of MAI Common Stock
in accordance with the terms hereof (including any cash paid pursuant to Section
2.02(a) or 2.02(c)) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of MAI Common Stock, subject, however, to
the rights pertaining to such shares of MAI Common Stock with respect to the
Consideration, and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of MAI Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article II.
(c) No Liability. None of the parties shall be liable to any holder of
shares of MAI Common Stock or CSI Common Stock, as the case may be, for such
shares (or dividends or distributions with respect thereto) or cash delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Stockholder.
Subject to the exceptions set forth in the disclosure letter to be
delivered by the Stockholder to CSI and Merger Sub in connection herewith (the
"MAI Disclosure Letter"), the Stockholder represents and warrants to CSI and
Merger Sub as follows:
(a) Organization, Standing and Power.
(i) MAI or any of its Subsidiary is an entity, duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted, and to
stockholders knowledge, is duly qualified and in good standing to do business in
each jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than where the failure to be so organized or so to qualify (individually
or in the aggregate) would not have a Material Adverse Effect (as hereinafter
defined) on MAI. To Stockholders Knowledge MAI is not required to be qualified
in any state or jurisdiction in order to conduct the operation of its business.
Stockholder is the sole stockholder of MAI Common Stock. MAI has delivered to
CSI complete and correct copies of its Certificate of Incorporation and Bylaws.
Section 3.01(a) of the MAI Disclosure Letter sets forth each direct, or
indirect, Subsidiary of MAI and its jurisdiction of organization and the
jurisdictions where it is qualified to do business.
(ii) As used in this Merger Agreement, the word "Subsidiary" means,
with respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which: (i) such party or any other Subsidiary
of such party is a general partner (excluding partnerships, the general
partnership interests of which are held by such party or any Subsidiary of such
party that do not have a majority of the voting interest in such partnership);
or (ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation or other
organization is, directly or indirectly, owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and any one or more of its
Subsidiaries.
(iii) As used in this Merger Agreement, a "Material Adverse Effect"
shall mean any effect or change that is or would be materially adverse to the
business, operations, assets, condition (financial or otherwise) or results of
operations of (i) in respect of MAI, MAI and its direct and indirect
Subsidiaries, taken as a whole, and (ii) in respect of CSI, CSI and all of its
direct and indirect Subsidiaries, taken as a whole.
(iv) As used in this Merger Agreement, "Knowledge" means actual
knowledge or items that one should reasonably have knowledge of, without any
independent investigation.
(b) Capital Structure.
(i) Section 3.01(b)(i) of the MAI Disclosure Letter sets forth the
authorized, issued and outstanding capital stock or other equity interests of
MAI and each of its Subsidiaries as well as any other securities (including debt
securities) of MAI or its respective Subsidiaries. All outstanding shares of
capital stock of MAI and its Subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable and were not issued in violation of
any preemptive rights or other preferential rights of subscription or purchase
other than those that have been waived or otherwise cured or satisfied and all
such shares owned by MAI, or a direct or indirect wholly owned Subsidiary of
MAI, are free and clear of all liens, charges, encumbrances, claims and options
of any nature.
(ii) Section 3.01(b)(ii) of the MAI Disclosure Letter sets forth a
list of all options, warrants, convertible securities, rights, commitments
(including pre-emptive rights) or agreements to which MAI or any Subsidiary of
MAI is bound to issue, deliver, sell, purchase, redeem or acquire or cause to be
issued, delivered, sold, purchased, redeemed or acquired, shares of MAI Common
Stock, capital stock of an MAI Subsidiary or any other securities of MAI or its
Subsidiaries.
(iii) There are not as of the date hereof, and there will not be at
the Effective Time, any stockholder agreements, voting trusts or other
agreements or understandings to which MAI or the Stockholder are a party or by
which it is bound relating to the voting of any shares of the capital stock of
MAI or any of its Subsidiaries. There are no restrictions on MAI to vote the
capital stock of any of its Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of MAI has approved the Merger and this
Merger Agreement, by vote of the directors with no negative vote, and has
resolved to deem this Merger Agreement and the transactions contemplated hereby,
including the Merger, advisable and fair to, and in the best interests of, MAI
and the Stockholder. MAI has all requisite corporate power and authority to
enter into this Merger Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Merger Agreement and each of the
agreements required to be executed in connection therewith and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of MAI. This Merger Agreement and
each of the agreements required to be executed in connection therewith have been
duly executed and delivered by MAI and constitutes a valid and binding
obligation of MAI enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or effecting creditors' rights and to general
principles of equity and limitations imposed on indemnity obligations by
applicable federal and state securities laws. This Merger Agreement and each of
the agreements required to be executed in connection therewith have been duly
executed and delivered by the Stockholder and constitutes a valid and binding
obligation of the Stockholder enforceable in accordance with its terms, subject,
as to enforceability, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or effecting creditors' rights and to
general principles of equity and limitations imposed on indemnity obligations by
applicable federal and state securities laws.
(ii) The execution and delivery of this Merger Agreement by MAI does
not, and the consummation by MAI of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of MAI or any of its respective Subsidiaries under any
provision of (A) the Certificate of Incorporation or Bylaws of MAI or any
provision of the comparable charter or organizational documents of any of its
Subsidiaries, (B) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to MAI or any of its respective Subsidiaries or (C) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to MAI or
any of its respective Subsidiaries or any of its respective properties or
assets, other than, in the case of clause (B) or (C), any such conflicts,
violations, defaults, rights, liens, security interests, charges or encumbrances
that are set forth on Section 3.01(a)(ii) of the MAI Disclosure Letter.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from, any U.S. or non-U.S.
court, administrative agency or commission or other governmental authority or
instrumentality (a "Governmental Entity"), is required by, or with respect to,
MAI or any of its respective Subsidiaries in connection with the execution and
delivery of this Merger Agreement by MAI or the consummation by MAI of the
transactions contemplated hereby, as to which the failure to obtain or make
would have a Material Adverse Effect on MAI, except for: (A) the filing of the
Certificates of Merger; or (B) such filings and approvals as may be required by
any applicable state securities, "blue sky" or takeover laws, or Environmental
Law.
(d) Financial Statements. Attached hereto as Section 3.01(d)(i) to the MAI
Disclosure Letter is a copy of MAI's financial statements as of and for the year
ended December 31, 2004 and financial statements as of and for the six-month
period ended June 30, 2005 (the "MAI Financial Statements"). The MAI Financial
Statements were not prepared in accordance with generally accepted accounting
principles ("GAAP"). However, the MAI Financial Statements already provided to
CSI fairly and accurately present the financial condition of MAI (subject, in
the case of the unaudited statements, to normal year-end adjustments and the
absence of footnotes).
(e) Absence of Certain Changes or Events. Except as disclosed in or as
reflected on the MAI Financial Statements, or except as contemplated by this
Merger Agreement, since May 30, 2005, there has not been: (i) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of MAI's capital stock; (ii) any
amendment of any term of any outstanding equity security of MAI or any
Subsidiary; (iii) any repurchase, redemption or other acquisition by MAI or any
Subsidiary of any outstanding shares of capital stock or other equity securities
of, or other ownership interests in, MAI or any Subsidiary; (iv) any change in
any method of accounting or accounting practice by MAI or any Subsidiary; or (v)
a Material Adverse Effect with respect to MAI.
(f) No Undisclosed Liabilities. There are no liabilities of MAI or any
Subsidiary of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than: (i) liabilities adequately
provided for on the Current Balance Sheet (as defined below) included in the MAI
Financial Statements; (ii) liabilities under this Merger Agreement; and (iii) as
disclosed on Section 3.01(f)(iii) to the MAI Disclosure Letter.
(g) No Default. Neither MAI nor any Subsidiary is in default or violation
(and no event has occurred which, with notice or the lapse of time or both,
would constitute a default or violation), nor is the execution of this Merger
Agreement a default or violation, of any term, condition or provision of (i) in
the case of MAI or any Subsidiary, their respective charters, agreements and
bylaws, (ii) any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which MAI or any Subsidiary is now a party or by
which MAI or any Subsidiary or any of their respective properties or assets may
be bound or (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to MAI or any Subsidiary.
(h) Compliance with Applicable Laws. MAI and any of its Subsidiaries hold
all permits, licenses, variances, exemptions, orders, franchises and approvals
of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "MAI Permits") and are in compliance with the terms
of the MAI Permits that would not have a Material Adverse Effect on MAI or its
Subsidiaries. To Stockholder's Knowledge, MAI is qualified in all states and
jurisdictions where required in order to conduct the operation of its business.
The businesses of MAI and its Subsidiaries are not being conducted in violation
of any law, ordinance or regulation of any Governmental Entity. No investigation
or review by any Governmental Entity with respect to MAI and its Subsidiaries is
pending or threatened.
(i) Litigation. There is no (i) suit, action or proceeding pending or, to
Stockholder's Knowledge, threatened against or affecting MAI and its
Subsidiaries, or (ii) judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against MAI and its Subsidiaries.
(j) Taxes.
(i) MAI is an "S corporation" as defined in the Internal Revenue
Code (the "Code"), and MAI and Stockholder have not taken any action that would
change such status of MAI. MAI and its Subsidiaries and any affiliate has (A)
timely (taking into account any extensions) filed in correct form all federal
and all state, local and non-U.S. returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed by or with
respect to it in respect of any Taxes (as hereinafter defined), (B) timely paid
all Taxes that are due and payable (except for audit adjustments that would not
have a Material Adverse Effect on MAI and its Subsidiaries in the aggregate or
to the extent that liability therefor is reserved for in MAI's most recent,
regularly-prepared balance sheet prepared as of June 30, 2005 (the "Current
Balance Sheet")) for which MAI and its Subsidiaries may be liable, and (C)
complied in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes and has in all respects timely
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over.
(ii) 2004 is the last taxable period through which the federal
income Tax Returns of MAI and its Subsidiaries have been examined by the
Internal Revenue Service ("IRS") or otherwise closed. All deficiencies asserted
as a result of such examinations and any examination by any applicable state,
local or non-U.S. taxing authority have been paid, fully settled or adequately
provided for in the Current Balance Sheet. No federal, state, local or non-U.S.
Tax audits or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes for which MAI or its Subsidiaries
would be liable, and no deficiency for any such Taxes has been proposed,
asserted or assessed pursuant to any such examination against MAI and its
Subsidiaries by any federal, state, local or non-U.S. taxing authority with
respect to any period.
(iii) Neither MAI nor its Subsidiaries (A) has executed or entered
into (or prior to the close of business on the Closing Date will execute or
enter into) with the IRS or any other taxing authority (x) any agreement or
other document extending or having the effect of extending the period for
assessments or collection of any Taxes for which MAI and its Subsidiaries would
be liable or (y) a closing agreement pursuant to Section 7121 of the Code, or
any predecessor provision thereof or any similar provision of state, local or
non-U.S. Tax law that relates to the assets or operations of MAI and its
Subsidiaries, (B) has made a change in method of accounting for a taxable period
ending on or prior to the Closing Date, or (C) has sold assets on the
installment method.
(iv) There are no liens or security interests on any of the assets
of MAI and its Subsidiaries that arose in connection with any failure or alleged
failure to pay any Tax other than for Taxes which are not yet delinquent.
(v) Neither MAI nor its Subsidiaries is a party to an agreement that
provides for the payment of any amount that would constitute a "parachute
payment" within the meaning of Section 280G of the Code.
(vi) Neither MAI nor its Subsidiaries has made an election under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by MAI and its Subsidiaries.
(vii) Neither MAI nor its Subsidiaries is a party to, is bound by or
has any obligation under any tax sharing agreement, tax indemnity agreement or
similar agreement or arrangement.
(viii) Neither MAI nor its Subsidiaries has any liability for Taxes
under Treas. Reg. ss. 1.1502-6, or any similar provision of state, local or
non-U.S. law, except for Taxes of the affiliated group of which MAI is the
common parent corporation, within the meaning of Section 1504(a)(1) of the Code
or any similar provision of state, local or non-U.S. law.
(ix) Neither MAI nor its Subsidiaries has participated in any
international boycott within the meaning of Section 999 of the Code.
(x) Except as disclosed on Section 3.01(j)(x) to the MAI Disclosure
Letter, neither MAI nor its Subsidiaries has had a permanent establishment in
any foreign country, as defined in any applicable treaty or convention between
the United States and such foreign country.
(xi) Neither MAI nor its Subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
For purposes of this Merger Agreement, "Taxes" shall mean all
federal, state, local, non-U.S. and other taxes, charges, fees, levies, imposts,
duties, licenses or other assessments, together with any interest, penalties,
additions to tax or additional amounts imposed by any taxing authority.
(k) Employee Matters; ERISA.
(i) Benefit Plans. Section 3.01(k)(i) to the MAI Disclosure Letter
contains a true and complete list and description of each of the following
items: each employee benefit plan, program or arrangement covering any current
or former officer, director, employee or independent contractor of MAI or its
Subsidiaries or any of their dependents or beneficiaries (each, an "MAI
Beneficiary") including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), whether or not terminated or covered by ERISA, if
MAI or its Subsidiaries could have statutory or contractual liability with
respect thereto on or after the date hereof. The items described above, together
with each management, employment, deferred compensation, severance, change in
control, bonus or other contract for personal services with or covering any MAI
Beneficiary, whether or not terminated, if MAI or its Subsidiaries could have
statutory or contractual liability with respect thereto on or after the date
hereof, are referred to collectively herein as the "MAI Benefit Plans."
(ii) Contributions and Payments. All contributions and other
payments required to have been made by MAI or any entity required to be
aggregated therewith pursuant to Code Section 414 (an "MAI ERISA Affiliate")
with respect to any MAI Benefit Plan (or to any person pursuant to the terms
thereof) have been or will be timely made and all such amounts properly accrued
through the date of this Merger Agreement have been reflected in the MAI
Financial Statements.
(iii) Qualification; Compliance. Each MAI Benefit Plan that is
intended to be "qualified" within the meaning of Code Section 401(a) has been
determined by the IRS to be so qualified or the applicable remedial period
applicable to the Plan will not have ended prior to the Effective Time, and no
event or condition exists or has occurred that would reasonably be expected to
result in the revocation or denial of any such determination which would have a
Material Adverse Effect on MAI. With respect to each MAI Benefit Plan, MAI and
each MAI ERISA Affiliate are in compliance with, and each MAI Benefit Plan and
related source of benefit payment is and has been operated in compliance with,
all applicable laws, rules and regulations governing such plan or source,
including, without limitation, ERISA, the Code and applicable local law
(including non-U.S. law), except for violations that would not have a Material
Adverse Effect on MAI. No MAI Benefit Plan is subject to any ongoing audit,
investigation or other administrative proceeding of the IRS, the Department of
Labor, or any other federal, state or local governmental entity or is scheduled
to be subject to such an audit, investigation or proceeding.
(iv) Liabilities. With respect to the MAI Benefit Plans,
individually and in the aggregate, to Stockholder's Knowledge, there exists no
condition or set of circumstances that could subject MAI or any MAI ERISA
Affiliate to any liability arising under the Code, ERISA or any other applicable
law (including, without limitation, any liability to or under any such plan or
to the Pension Benefit Guaranty Corporation ("PBGC"), or under any indemnity
agreement to which MAI or any MAI ERISA Affiliate is a party), which liability,
excluding liability for benefit claims, funding obligations and PBGC insurance
premiums, each payable in the ordinary course, would have a Material Adverse
Effect on MAI. No claim, action or litigation has been made, commenced or, to
Stockholder's Knowledge, threatened, by or against MAI or any of its
Subsidiaries with respect to any MAI Benefit Plan (other than for benefits or
PBGC premiums payable in the ordinary course).
(v) Retiree Welfare Plans. No MAI Benefit Plan that is a "welfare
plan" (within the meaning of ERISA Section 3(1)) provides benefits for any
retired or former employees (other than as required pursuant to ERISA Section
601).
(vi) Payments Resulting from Merger. The consummation or
announcement of any transaction contemplated by this Merger Agreement will not
(either alone or upon the occurrence of any additional or further acts or
events) result in (A) any payment (whether of severance pay or otherwise)
becoming due from MAI or any of its Subsidiaries to any MAI Beneficiary or to
the trustee under any "rabbi trust" or similar arrangement, (B) any benefit
under any MAI Benefit Plan being established or increased, or becoming
accelerated, vested or payable (except as provided in Section 2.01(g)(i)) or (C)
any payment that would not be deductible under Section 280G of the Code.
(vii) Funded Status of Plans. Each MAI Benefit Plan that is subject
to either the minimum funding requirements of ERISA Section 302 or to Title IV
of ERISA has assets that, as of the date hereof, have a fair market value not
less than the present value of the accrued benefit obligations thereunder on a
termination basis, as of the date hereof, based on the actuarial methods, tables
and assumptions utilized by such plan's independent actuary in preparing such
plan's most recently prepared actuarial valuation report, except to the extent
that applicable law would require the use of different actuarial assumptions if
such plan was to be terminated as of the date hereof, in which case those
different assumptions shall apply for purposes of this representation. MAI and
its Subsidiaries have no unfunded liabilities, as determined under local funding
requirements, with respect to any MAI Benefit Plans that cover such non-U.S.
employees.
(viii) Multiemployer Plans. No MAI Benefit Plan is or was a
"multiemployer plan" (within the meaning of ERISA Section 4001(a)(3)), a
multiple employer plan described in Code Section 413(c), or a "multiple employer
welfare arrangement" (within the meaning of ERISA Section 3(40)). Neither MAI
nor any MAI ERISA Affiliate has been obligated to contribute to, or otherwise
has or has had any liability with respect to, any multiemployer plan, multiple
employer plan, or multiple employer welfare arrangement.
(l) Labor Matters. Except as set forth in Section 3.01(l) to the MAI
Disclosure Letter,
(i) neither MAI nor any of its Subsidiaries is a party to any
collective bargaining agreement or other current labor agreement with any labor
union or organization, and there is no current union representation dispute
involving employees of MAI or any of its Subsidiaries nor does MAI or any of its
respective Subsidiaries know of any activity or proceeding of any labor
organization (or representative thereof) or employee group (or representative
thereof) to organize any such employees;
(ii) there is no unfair labor practice charge or grievance arising
out of a collective bargaining agreement or other grievance procedure against
MAI or any of its Subsidiaries pending or threatened;
(iii) there is no complaint, lawsuit or proceeding in any forum by
or on behalf of any present or former employee, any applicant for employment or
any classes of the foregoing alleging breach of any express or implied contract
of employment, any law or regulation governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship against MAI or any of its Subsidiaries pending or
threatened;
(iv) there is no strike, dispute, slowdown, work stoppage or lockout
pending or threatened against or involving MAI or any of its Subsidiaries;
(v) To Stockholder's Knowledge, MAI and its Subsidiaries are in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health that otherwise would not have a Material Adverse
Effect on MAI or its subsidiaries; and
(vi) There is no proceeding, claim, suit, action or governmental
investigation pending or, to Stockholder's Knowledge, threatened in respect to
which any current or former director, officer, employee or agent of MAI or any
of its Subsidiaries is or may be entitled to claim indemnification from MAI or
any of its Subsidiaries (A) pursuant to their respective charters, agreements or
bylaws, (B) as provided in any indemnification agreement to which MAI or any of
its Subsidiaries is a party or (C) pursuant to applicable law.
(m) Intellectual Property.
(i) "Intellectual Property" means:
(1) all issued patents, reissued or reexamined patents,
revivals of patents, utility models, certificates of invention, registrations of
patents and extensions thereof, regardless of country or formal name
(collectively, "Issued Patents");
(2) all published or unpublished nonprovisional and
provisional patent applications, reexamination proceedings, invention
disclosures and records of invention (collectively with the Issued Patents, the
"Patents");
(3) all copyrights, copyrightable works, semiconductor
topography and mask work rights, including all rights of authorship, use,
publication, reproduction, distribution, performance transformation, moral
rights and rights of ownership of copyrightable works, semiconductor topography
works and mask works, and all rights to register and obtain renewals and
extensions of registrations, together with all other interests accruing by
reason of international copyright, semiconductor topography and mask work
conventions (collectively, "Copyrights");
(4) common law trademarks, registered trademarks, applications
for registration of trademarks, common law service marks, registered service
marks, applications for registration of service marks, trade names, registered
trade names and applications for registrations of trade names and trade dress
(collectively, "Trademarks");
(5) all right, title and interest of MAI to the extent
required and used to conduct its business as presently conducted in, to, or
under (i) all invention disclosures, improvements, trade secrets, proprietary
information, technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (ii) all moral and economic
rights of authors and inventors, however denominated, (iii) database and data
collections and computer software, whether owned or licensed, to the extent
fully assignable; and (iv) all industrial designs and registration's and
applications therefor (collectively, as such is required and used to conduct the
business as currently conducted by MAI);
(6) all technology, ideas, inventions, designs, proprietary
information, manufacturing and operating specifications, know-how, formulae,
trade secrets, technical data, computer programs, hardware, software and
processes related to the business as such business is currently conducted and as
its business is proposed to be conducted;
(7) all domain names registered; and
(8) all other intangible intellectual property assets,
properties and rights (whether or not appropriate steps have been taken to
protect, under applicable law, such other intangible assets, properties or
rights).
(ii) MAI and any of its Subsidiaries owns and has good and
marketable title to, or possesses legally enforceable rights to use, all
Intellectual Property used in the business of MAI as currently conducted by MAI
and each of its Subsidiaries (the "MAI Intellectual Property"), free and clear
of all liens, claims or encumbrances. MAI Intellectual Property constitutes all
of the Intellectual Property necessary to enable MAI and each of its
Subsidiaries to conduct their business as such business is currently being
conducted. MAI and each of its Subsidiaries has not received notice that any
current or former officer, director, stockholder, employee, consultant or
independent contractor has asserted any right, claim or interest in or with
respect to any MAI Intellectual Property, and MAI and each of its Subsidiaries
are not aware of a reasonable basis for any such claim. To Stockholder's
Knowledge, there is no unauthorized use, disclosure or misappropriation of any
MAI Intellectual Property by any employee or former employee of MAI and each of
its Subsidiaries or by any other third party. There are no royalties, fees or
other payments payable by MAI and each of its Subsidiaries to any third person
under any written or oral contract or understanding by reason of the ownership,
use, sale or disposition of MAI Intellectual Property. To Stockholder's
Knowledge, the operation of the businesses of MAI and each of its Subsidiaries
does not conflict with, infringe upon, violate or interfere with or constitute
an appropriation of any right, title, interest or goodwill, including, without
limitation, any intellectual property right, trade secret, trademark, trade
name, patent, service mark, brand mark, brand name, computer program, database,
industrial design, copyright or any pending application therefor of any other
person and there have been no claims made or notices received in connection
therewith.
(iii) With respect to each item of MAI Intellectual Property
incorporated into any product of Subsidiaries or otherwise used in the business
of Subsidiaries, Section 3.01(m) to the MAI Disclosure Letter lists:
(1) all Patents, Copyrights and Trademarks issued to or
registered by MAI and each of its Subsidiaries, including the jurisdictions in
which each such Intellectual Property has been issued or registered or in which
any such application for such issuance and registration has been filed; and
(2) the following agreements relating to each of the
proprietary products of MAI and each of its Subsidiaries (the "MAI Products") or
other MAI Intellectual Property: (A) all agreements granting any right to
distribute or sublicense a MAI Product on any exclusive basis, (B) any exclusive
licenses of Intellectual Property to or from MAI and each of its Subsidiaries,
(C) agreements pursuant to which the amounts actually paid or payable under firm
commitments to MAI and each of its Subsidiaries are $5,000 or more, (D) joint
development agreements, (E) any agreement by which MAI and each of its
Subsidiaries grants any ownership right to any MAI Intellectual Property owned
by MAI and each of its Subsidiaries, (F) any judicial, administrative,
regulatory or other governmental order relating to Intellectual Property, (G)
any option relating to any MAI Intellectual Property, and (H) agreements
pursuant to which any party is granted any rights to access source code or to
use source code, including without limitation any rights to create derivative
works of MAI Products.
(iv) Section 3.01(m) to the MAI Disclosure Letter contains an
accurate list as of the date of this Merger Agreement of all licenses,
sublicenses and other agreements to which MAI and each of its Subsidiaries is a
party and pursuant to which MAI and each of its Subsidiaries is authorized to
use any Intellectual Property owned by any third party, excluding "off the
shelf" or other software at a cost not exceeding $5,000 and available through
regular commercial distribution channels on standard terms and conditions,
including any related support and maintenance ("Third Party Intellectual
Property").
(v) To Stockholder's Knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any MAI Intellectual Property,
including any Third Party Intellectual Property by any third party, including
any employee or former employee of Seller or any of its subsidiaries. Other than
in respect of agreements with MAI's officers and directors and MAI's
Subsidiaries' officers execution, delivery or performance of this Merger
Agreement or any ancillary agreement contemplated hereby nor the consummation of
the transactions contemplated by this Merger Agreement will contravene, conflict
with or result in an infringement on MAI Intellectual Property, including any
Third Party Intellectual Property.
(vi) All Patents, registered Copyrights, registered Trademarks and
registered service marks held by MAI and each of its Subsidiaries are, to
Stockholder's Knowledge, valid and subsisting. All maintenance and annual fees
due through the date of this Merger Agreement have been fully paid and all fees
paid during prosecution and after issuance of any patent compromising or
relating to such item have been paid in the correct entity status amounts. MAI
and each of its Subsidiaries have not received any notice or other communication
(in writing or otherwise) of any actual, alleged, possible or potential
infringement, misappropriation or unlawful use of any proprietary asset owned or
used by any third party. MAI and each of its Subsidiaries have not received
notice of any proceeding pending or threatened nor has any claim or demand been
made, which challenges the legality, validity, enforceability or ownership of
any item of MAI Intellectual Property or Third Party Intellectual Property or
alleges a claim of infringement of any Patents, Copyrights, Trademarks, service
marks or violation of any trade secret or other proprietary right of any third
party. MAI and each of its Subsidiaries has not brought a proceeding alleging
infringement of MAI Intellectual Property or breach of any license or agreement
involving Intellectual Property against any third party.
(vii) All current and former officers and employees of MAI and each
of its Subsidiaries have executed and delivered to MAI an agreement (containing
no exceptions or exclusions from the scope of its coverage) regarding the
protection of proprietary information and the assignment to MAI of any
Intellectual Property arising from services performed for MAI and each of its
Subsidiaries by such persons. All current and former consultants and independent
contractors to MAI and each of its Subsidiaries involved in the development,
modification, marketing and servicing of MAI Products and/or MAI Intellectual
Property have executed and delivered to MAI an agreement (containing no
exceptions or exclusions from the scope of its coverage) regarding the
protection of proprietary information and the assignment to MAI of any
Intellectual Property arising from services performed for MAI and each of its
Subsidiaries by such persons. No employee or independent contractor of MAI and
each of its Subsidiaries is in violation of any term of any patent disclosure
agreement or employment contract or any other contract or agreement relating to
the relationship of any such employee or independent contractor with MAI and
each of its Subsidiaries.
(viii) MAI and each of its Subsidiaries has taken commercially
reasonable and customary measures and precautions necessary to protect and
maintain the confidentiality of all MAI Intellectual Property (except such MAI
Intellectual Property whose value would be unimpaired by public disclosure) and
otherwise to maintain and protect the full value of all Intellectual Property it
owns or uses. All Intellectual Property not otherwise protected by Patents or
Copyrights owned by MAI and each of its Subsidiaries (except such MAI
Intellectual Property whose value would be unimpaired by public disclosure) used
by or disclosed to a third party has been pursuant to the terms of a written
agreement between MAI and each of its Subsidiaries and such third party.
(ix) No product liability claims have been communicated in writing
to or threatened against MAI and each of its Subsidiaries.
(x) A complete list of each of MAI Products and MAI's proprietary
software ("MAI Software"), together with a brief description of each, is set
forth in Section 3.01(m) to the MAI Disclosure Letter.
(xi) MAI and each of its Subsidiaries are not subject to any
proceeding or outstanding decree, order, judgment, or stipulation restricting in
any manner the use, transfer, or licensing thereof by MAI and each of its
Subsidiaries, or which may affect the validity, use or enforceability of such
MAI Intellectual Property. MAI and each of its Subsidiaries are not subject to
any agreement which restricts in any material respect the use, transfer, or
licensing by MAI and each of its Subsidiaries of the MAI Intellectual Property
owned by MAI and each of its Subsidiaries, or MAI Products.
(n) Environmental Matters. For purposes of this Merger Agreement:
(i) "Environmental Law" means any applicable law regulating,
prohibiting or requiring the notification of Releases into any part of the
natural environment, pertaining to the protection of natural resources, the
environment and public and employee health and safety, or governing or
regulating the use, storage, handling, transportation, treatment, processing,
disposal or generation of any Hazardous Materials, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Water Act (33
U.S.C. Section 1251 et seq.), the Clean Air Act (33 U.S.C. Section 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. Section 7401 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et
seq.), Emergency Planning and Community Right to Know Act (42 U.S.C. Section
11001 et seq.), Safe Drinking Water Act (Section 42 U.S.C. Section 300 et seq.)
and the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.) and
the regulations promulgated pursuant thereto, and any other such applicable
county, province, state or local statutes, and the regulations promulgated
pursuant thereto, as such laws have been and may be amended or supplemented
through the Closing Date.
(ii) "Hazardous Material" means any substance, material or waste
which is regulated pursuant to any Environmental Law by any public or
governmental authority in the jurisdictions in which the applicable party or its
Subsidiaries conducts business, or in the United States, including, without
limitation, any material or substance which is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "extremely hazardous waste" or
"restricted hazardous waste," "contaminant," "pollutant," "toxic waste" or
"toxic substance" under any provision of Environmental Law;
(iii) "Release" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment, or into or out of any
property owned, operated or leased by the applicable party or its Subsidiaries;
and
(iv) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a governmental entity or
required under any Environmental Law, or voluntarily undertaken to (I)
investigate, clean up, remove, treat, or in any other way ameliorate or address
any Hazardous Materials or other substance in the indoor or outdoor environment;
(II) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material so it does not endanger or threaten to endanger the
public health or welfare of the indoor or outdoor environment; (III) perform
pre-remedial studies and investigations or post-remedial monitoring and care
pertaining or relating to a Release; or (IV) bring the applicable party into
compliance with any Environmental Law.
(1) To Stockholder's Knowledge, the operations of MAI and its
Subsidiaries have been and, as of the Closing Date, will be in compliance with
all Environmental Laws;
(2) MAI and its Subsidiaries have obtained and will, as of the
Closing Date, maintain all permits required under applicable Environmental Laws
for the continued operations of their respective businesses;
(3) MAI and its Subsidiaries are not subject to any
outstanding orders, investigations or contracts with any Governmental Entity or
other person respecting (A) Environmental Laws, (B) Remedial Action or (C) any
Release or threatened Release of a Hazardous Material;
(4) MAI and its Subsidiaries have not received any written
communication alleging, with respect to any such party, the violation of or
liability under any Environmental Law or liability attributable to the Release
of any Hazardous Material;
(5) Neither MAI nor any of its Subsidiaries has any contingent
liabilities in connection with the Release of any Hazardous Material into the
indoor or outdoor environment (whether on-site or off-site);
(6) To Stockholder's Knowledge, the operations of MAI and its
Subsidiaries involving the generation, transportation, treatment, storage or
disposal of Hazardous Material or any state equivalent are in compliance with
applicable Environmental Laws; and
(7) There is not now on or in any property (leased or owned)
of MAI and its Subsidiaries any of the following: (A) any underground storage
tanks or surface impoundments; (B) any asbestos-containing materials; or (C) any
polychlorinated biphenyls.
(o) Vote Required. The affirmative, unanimous vote of the holders of the
outstanding shares of MAI Common Stock voting together as a single class are the
only votes of the holders of any class or series of MAI securities necessary to
approve this Merger Agreement and the transactions contemplated hereby, and such
votes approving the proposed transactions have been received. MAI has taken such
other action with respect to any other anti-takeover provisions in its
Certificate of Incorporation or Bylaws to the extent necessary to consummate the
Merger on the terms set forth in this Merger Agreement.
(p) Insurance. To Stockholder's Knowledge, MAI maintains insurance
coverage adequate for the operation of the business of MAI and its Subsidiaries,
and the transactions contemplated hereby will not materially adversely affect
such coverage. Section 3.01(p) to the MAI Disclosure Letter sets forth a true
and complete list of such coverage.
(q) Broker Fees. No broker, investment banker or other person is entitled
to any broker's, finder's or other similar fee or commission in connection with
the transactions contemplated by this Merger Agreement based upon arrangements
made by or on behalf of MAI.
(r) Material Contracts and Agreements. Section 3.01(r) to the MAI
Disclosure Letter includes: (a) a list of all written and oral contracts to
which MAI and its subsidiaries is a party or by which its property is bound that
involve consideration or other expenditure in excess of $5,000 or performance
over a period of more than six (6) months or that is otherwise material to its
business or operations (excluding licenses relating to third party Intellectual
Property at a cost not exceeding $5,000) ("Material Contracts"); (b) a list of
all real or personal property leases to which MAI or its subsidiaries is a party
involving consideration or other expenditure in excess of $5,000 over the term
of the lease ("Material Leases"); (c) a list of all guarantees of, or agreements
to indemnify or be contingently liable for, the payment or performance by any
individual or entity to which MAI or any of its respective subsidiaries is a
party (excluding indemnification provisions relating to the MAI Intellectual
Property arising in the ordinary course) ("Guarantees"); (d) each employment or
severance contract, lease agreement and credit agreement, note or other
instrument relating to indebtedness of MAI and its Subsidiaries; and (e) a list
of all contracts or other formal or informal understandings between MAI or its
subsidiaries and any of their respective officers, directors, members,
employees, agents, stockholders or affiliates ("Related Party Agreements"). True
and complete copies of each Material Contract, Material Lease, Guarantee and
Related Party Agreements, to the extent they are in written form, have been
furnished to CSI. Except as may be set forth in Section 3.01(r) to the MAI
Disclosure Letter, each Material Contract is in full force and effect, valid and
binding in accordance with its terms on MAI and no notice of any material breach
or violation thereof has been given to MAI. All agreements listed in Section
3.01(r) to the MAI Disclosure Letter are, valid, binding and enforceable in
accordance with their terms and are in full force and effect against MAI and the
other parties thereto, subject to (a) judicial principles limiting the
availability of specific performance, injunctive relief and other equitable
remedies, and (b) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or affecting
creditors' rights.
(s) Title to Properties.
(i) Section 3.01(s)(i) to the MAI Disclosure Letter sets forth a
true and complete list of properties owned or leased by MAI and its
Subsidiaries. Each of MAI and its Subsidiaries has good and indefeasible title
to, or valid leasehold interests in, all its properties and assets purported to
be owned by it, except for such as are no longer used or useful in the conduct
of its businesses or as have been disposed of in the ordinary course of
business. All such assets and properties, other than assets and properties in
which MAI and its Subsidiaries has leasehold interests, are free and clear of
all liens, other than those set forth on Section 3.01(s)(ii) to the MAI
Disclosure Letter.
(ii) Each of MAI and its Subsidiaries has complied in all material
respects with the terms of all leases to which it is a party and under which it
is in occupancy, and all such leases are in full force and effect and none of
MAI or its respective Subsidiaries have received any notice or other
communication, oral or written, indicating that any such lease will be
terminated other than in the ordinary course of business.
(t) Accounts Receivable. All the accounts receivable of MAI are listed on
Section 3.01(t) to the MAI Disclosure Letter, at the aggregate recorded amount
thereof. Except as otherwise noted therein, these accounts receivable are valid
receivables and to Stockholder's Knowledge, are subject to no valid
counterclaims or set-offs.
(u) Creditors; Bankruptcy, etc. MAI is not a party to any proceeding as a
debtor in any court under Title 11 of the United States Bankruptcy Code or any
other insolvency or debtors' relief act, whether state or federal, or for the
appointment of a trustee, receiver, liquidator, assignee, sequestrator or other
similar official of MAI or for a substantial part of any of their assets or
property.
(v) Clients and Customers. Section 3.01(v) to the MAI Disclosure Letter
lists the names and locations of the clients and customers of MAI from January
1, 2002 through the Closing Date.
(w) Contributions and Payments. Neither MAI nor any of its Subsidiaries,
and to Stockholder's Knowledge, nor any of their employees, officers, directors
or agents, at any time during the last five (5) years have: (i) made any
unlawful contribution to any candidate for foreign office or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
federal or state governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
(x) Bank Accounts; Powers of Attorney. Section 3.01(v) to the MAI
Disclosure Letter hereto sets forth a complete and correct list showing: (a) all
banks in which MAI and its Subsidiaries maintains a bank account or safe deposit
box (collectively, "MAI Bank Accounts"), together with, as to each such MAI Bank
Account, the account number, the names of all signatories thereof and the
authorized powers of each such signatory and, with respect to each such safe
deposit box, the number thereof and the names of all persons having access
thereto; and (b) the names of all persons holding powers of attorney from MAI,
true and correct copies thereof which have been delivered to the CSI.
Section 3.02 Representations and Warranties of CSI and Merger Sub.
Subject to the exceptions set forth in the disclosure letter to be
delivered to MAI in connection herewith (the "CSI Disclosure Letter"), CSI and
Merger Sub jointly and severally represent and warrant to MAI as follows:
(a) Organization, Standing and Power. Each of CSI and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the failure to be so organized or so to
qualify (individually or in the aggregate) would not have a Material Adverse
Effect on CSI or Merger Sub. CSI has heretofore delivered and made available to
MAI (or such information was readily accessible through the SEC Edgar Website)
accurate and complete copies of its Certificate of Incorporation and by-laws, or
other similar organizational documents, as currently in effect, of CSI and each
of its Subsidiaries.
(b) Capital Structure. As of the date hereof, the authorized capital stock
of CSI consists of 1,000,000,000 shares of CSI Common Stock and 20,000,000 of
preferred stock ("CSI Preferred Stock"). At the close of business on June 16,
2005, (i) 788,474,038 shares of CSI Common Stock were issued and outstanding,
and (ii) no shares of CSI Preferred Stock were outstanding. As of the date
hereof, the authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $0.001 per share, 100 shares of which are validly
issued, fully paid and nonassessable, and are owned by CSI. Merger Sub was
formed solely for the purpose of participating in the Merger, has no assets
other than that amount of cash that is required for it to be organized as a
corporation under the DGCL and has conducted no activities other than in
connection with its incorporation.
(c) Authority; No Violations, Consents and Approvals.
(i) Each of CSI and Merger Sub has all requisite corporate power and
authority to enter into this Merger Agreement and to consummate the transactions
contemplated hereby (including the issuance of shares of CSI Common Stock in the
Merger). The execution and delivery of this Merger Agreement and each of the
agreements required to be executed in connection therewith and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of CSI and Merger Sub (including the
issuance of shares of CSI Common Stock in the Merger). This Merger Agreement and
each of the agreements required to be executed in connection therewith has been
duly executed and delivered by CSI and Merger Sub. Assuming this Merger
Agreement constitutes the valid and binding obligation of MAI and the
Stockholder, it and each of the agreements required to be executed in connection
therewith also constitutes a valid and binding obligation of each of CSI and
Merger Sub and is enforceable against each of them in accordance with its terms;
provided, however, that such enforceability is subject to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity and
limitations imposed on indemnity obligations by applicable federal and state
securities laws.
(iii) Except as set forth on Section 3.02(c)(ii) to the CSI
Disclosure Letter, the execution and delivery of this Merger Agreement does not,
and the consummation of the transactions contemplated hereby and compliance with
the provisions hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
CSI or Merger Sub under, any provision of (A) the Certificate of Incorporation
or Bylaws of CSI or Merger Sub, (B) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to CSI or Merger Sub or (C) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to CSI or Merger
Sub or any of their properties or assets, other than, in the case of clause (B)
or (C), any such conflicts, violations, defaults, rights, liens, security
interests, charges or encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect on CSI, materially impair the ability of CSI
or Merger Sub to perform its respective obligations hereunder or prevent in any
material respect the consummation of any of the transactions contemplated
hereby.
(iv) To the Knowledge of CSI, no consent, approval, order or
authorization of, or registration, declaration or filing with, or permit from
any Governmental Entity is required by or with respect to CSI in connection with
the execution and delivery of this Merger Agreement by CSI and Merger Sub or the
consummation by CSI and Sub of the transactions contemplated hereby, as to which
the failure to obtain or make would have a Material Adverse Effect on CSI,
except for: (A) compliance with the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder as may be required
in connection with this Merger Agreement and the transactions contemplated
hereby, (B) the filing of the Certificates of Merger or (C) such filings and
approvals as may be required by any applicable state securities, "blue sky" or
takeover laws or Environmental Laws.
(d) SEC Documents. CSI has filed all reports, forms and documents required
to be filed by it with the Securities and Exchange Commission ("SEC"). A true
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by CSI with the SEC from January 30, 2004
through and including the Closing Date (the "CSI SEC Documents") has been made
available to MAI (or such information was readily accessible through the SEC
Edgar Website).
(e) Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the CSI SEC Documents, or except as contemplated by the Merger
Agreement, since the date of CSI's Current Balance Sheet (as defined below)
there has not been: (i) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of CSI's capital stock; (ii) any amendment of any material term of any
outstanding equity security of CSI or any Subsidiary; or (iii) a Material
Adverse Effect with respect to CSI.
(f) No Undisclosed Material Liabilities. Except as disclosed in the CSI
SEC Documents, to CSI's Knowledge, there are no liabilities of CSI or any of its
Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, that would have a Material Adverse Effect
on CSI, other than liabilities adequately provided for on the balance sheet of
CSI dated as of March 31, 2005 (including the notes thereto) contained in CSI's
Quarterly Report on Form 10-QSB for the three-month period ended March 31, 2005
("CSI's Current Balance Sheet").
(g) Litigation. Except as disclosed in the CSI SEC Documents, there is no
(i) suit, action or proceeding pending or threatened against or affecting CSI or
any Subsidiary of CSI, or (ii) judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against CSI or any Subsidiary
of CSI that (in any case) would have a Material Adverse Effect on CSI or prevent
CSI from consummating the transactions contemplated by this Merger Agreement.
(h) No Vote Required. No vote of the holders of any class or series of CSI
capital stock is necessary to approve the Merger Agreement or the transactions
contemplated hereby, including, without limitation, the issuance of CSI Common
Stock.
(i) Broker Fees. No broker, investment banker, or other person is entitled
to any broker's, finder's or other similar fee or commission in connection with
the transactions contemplated by this Merger Agreement based upon arrangements
made by or on behalf of CSI.
ARTICLE IV
ADDITIONAL AGREEMENTS
Section 4.01 Registration of Stock Consideration. Following the effective
registration of all shares being registered in the present Registration
Statement on Form SB-2 of CSI on file with the SEC, CSI shall file with the SEC,
within 30 days of the issuance of the shares of CSI Common Stock included in the
Consideration, a registration statement on Form SB-2 covering the resale of the
shares of CSI Common Stock included in the Consideration. If the present
Registration Statement on Form SB-2 of CSI on file with the SEC has not been
declared effective, then upon effectiveness of such Registration Statement on
Form SB-2, CSI shall file with the SEC, within 15 days of such effectiveness, a
registration statement on Form SB-2 covering the resale of the shares of CSI
Common Stock included in the Consideration. Notwithstanding the foregoing, CSI
shall use its best efforts to register the CSI Common Stock included as part of
the Consideration with the SEC (subject to the lock-up provisions set forth in
Section 4.07 herein below) and CSI will use its best efforts to ensure that such
shares of CSI Common Stock remain freely tradable following the release of the
respective lock-up time periods.
Section 4.02 Legal Conditions to Merger. Except as otherwise provided herein,
each of MAI, CSI and Merger Sub will take all reasonable actions necessary to
comply promptly with all legal requirements that may be imposed on such party
with respect to the Merger and will promptly cooperate with and furnish
information to each other in connection with any such requirements imposed upon
any of them or any of their Subsidiaries in connection with the Merger. Each of
MAI and CSI will, and will cause their respective Subsidiaries to, take all
actions reasonably necessary to obtain (and will cooperate with each other in
obtaining) any consent, acquiescence, authorization, order or approval of, or
any exemption or nonopposition by, any Governmental Entity or court required to
be obtained or made by MAI, CSI or any of their Subsidiaries in connection with
the Merger or the taking of any action contemplated thereby or by this Merger
Agreement.
Section 4.03 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages in
connection therewith, the parties hereto agree to cooperate and use their
reasonable efforts to defend against and respond thereto.
Section 4.04 Public Announcements and Regulation FD.
(a) CSI and MAI will agree with each other with respect to the contents
thereof before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Merger
Agreement, except as may be required by SEC rules and regulations, applicable
law or by obligations pursuant to any listing agreement with any national
securities exchange or transaction reporting system (but shall still provide a
copy of such release to the other party).
(b) Any information concerning MAI disclosed to CSI or Merger Sub or their
respective affiliates or representatives or any information concerning CSI or
Merger Sub or their respective affiliates or representatives disclosed to MAI,
which has not been publicly disclosed, shall be kept strictly confidential by
the parties hereto and shall not be disclosed or used by the recipients and
until publicly disclosed by the party to which such information relates;
provided, however, that the foregoing provision shall not prohibit disclosures
by any party of information that (i) was in the possession of a party prior to
the date hereof, provided that such information is not known by such party to be
subject to a confidentiality agreement, (ii) is or becomes generally available
to the public other than as a result of a disclosure by a party in violation of
this Section 4.04, or (iii) a party is required to disclose by law, including in
connection with a proceeding or in connection with the payment of Taxes. Each
party hereto hereby agrees that no public announcements concerning the terms of
this Merger Agreement or the transactions contemplated thereunder shall be made
without the mutual consent of the parties, not to be unreasonably withheld.
Notwithstanding the foregoing, CSI shall be entitled to issue a press release
announcing the execution of this Merger Agreement and the transactions
contemplated hereunder once the Closing occurs.
(c) All parties hereto agree not to use any confidential information to
purchase, sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise transfer or dispose of any shares of CSI Common Stock (or other
securities, warrants or other forms of convertible securities outstanding or
other rights to acquire such securities). All parties hereto acknowledge that
(i) a purpose of this Section 4.04(c) relating to confidentiality is so that CSI
will be in compliance with Regulation FD promulgated by the SEC, and other
applicable securities laws, and (ii) if MAI does not comply with the provisions
of this Section 4.04(c), CSI may be deemed by such action to be in violation of
such laws and regulations, which could have a Material Adverse Effect on the
business of CSI.
Section 4.05 Other Actions. Except as contemplated by this Merger Agreement,
neither CSI nor MAI shall, and shall not permit any of its Subsidiaries to, take
or agree or commit to take any action that is likely to result in any of its
respective representations or warranties hereunder being untrue or in any of the
conditions to the Merger set forth in Article VI not being satisfied.
Section 4.06 Advice of Changes. The parties hereto shall confer on a regular
basis with each other, report on operational matters and promptly advise each
other orally and in writing of any change or event having, or which, insofar as
can reasonably be foreseen, could have, a Material Adverse Effect on MAI.
Section 4.07 Lock-Up. One-third of the shares of CSI Common Stock received at
the Closing by the Stockholder shall be subject to a three (3) year lock-up
period after their registration with the SEC, one-third of the shares of CSI
Common Stock received at the Closing shall be subject to a two (2) year lock-up
period after their registration with the SEC, and one-third of the shares of CSI
Common Stock received at the Closing shall be subject to a one (1) year lock-up
period after their registration with the SEC.
Section 4.08 Indemnification.
(a) The Stockholder shall jointly and severally indemnify, defend and hold
harmless each of CSI, Merger Sub, their officers, directors, employees,
stockholders, agents and consultants, and their respective heirs, legal
representatives, successors and assigns (the "CSI Indemnified Parties") against
all losses, claims, damages, costs, expenses (including attorneys' fees),
liabilities or judgments or amounts that are paid ("Losses") in settlement of or
in connection with any threatened or actual claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out of
(i) the Lawsuits, (ii) any failure of any representation or warranty of MAI or
the Stockholder to be true and correct at or before the Closing, (iii) any act,
omission or conduct of MAI and their respective directors, officers, employees
or agents, or the Stockholder, prior to the Closing, whether asserted or claimed
prior to, or at or after, the Closing, or (iv) the consummation of the
transactions contemplated herein, and any action taken in connection therewith
("Indemnified Liabilities"). Any CSI Indemnified Party wishing to claim
indemnification under this Section 4.08, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify MAI (or the Surviving
Corporation, after the Closing), but the failure so to notify shall not relieve
a party from any liability that it may have under this Section 4.08, except to
the extent such failure materially prejudices such party. Notwithstanding the
foregoing, no claim for indemnification shall be asserted unless the monetary
claims are for more than an aggregate of $5,000.00.
(b) All rights to indemnification under this Section 4.08 shall survive
the consummation of the Merger and the termination of this Agreement until the
second anniversary of the Closing Date. The provisions of this Section 5.09 are
intended to be for the benefit of, and shall be enforceable by, each CSI
Indemnified Party, and his or her heirs and representatives. No party shall
enter into any settlement regarding the foregoing without prior approval of the
CSI Indemnified Party.
Section 4.09 Section 16. Prior to the Effective Time each of the parties hereto
shall take all such steps as may be required to cause the transactions
contemplated by this Merger Agreement including any dispositions of MAI Common
Stock and acquisitions of CSI Common Stock (including derivative securities with
respect to CSI Common Stock) by each Person who is or will be subject to the
reporting requirements of Section 16(a) of the Exchange Act with respect to MAI
or CSI, as the case may be, to be exempt under Rule 16b-3 promulgated under the
Exchange Act.
Section 4.10 Reservation of Common Shares. CSI shall at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued CSI Common Stock for the purpose of enabling it to
satisfy any obligation to issue CSI Common Stock included in the Consideration.
CSI or, if appointed, any transfer agent for the CSI Common Stock (the "Transfer
Agent"), will be irrevocably authorized and directed at all times to reserve
such number of authorized shares as shall be required for such purpose. CSI
shall keep a copy of this Merger Agreement on file with any such Transfer Agent.
CSI will supply any such Transfer Agent with duly executed certificates for such
purposes. CSI will furnish any such Transfer Agent a notice of all adjustments
and certificates related thereto made under Section 2.01(h) hereof. CSI
covenants that all CSI Common Stock included in the Consideration will be
validly authorized an issued, fully paid, nonassessable, free of preemptive
rights and free from all taxes, liens, charges and security interests with
respect to the issue thereof.
Section 4.11 Tax Matters. All the parties hereto shall cooperate with CSI and
Merger Sub, at CSI's sole expense, with respect to CSI's and Merger Sub's
preparation and filing of any application for exemption from any domestic or
foreign taxes, and shall provide CSI and Merger Sub with or access to the
appropriate information required in connection with any such application. In
addition, each of the parties hereto shall cooperate with CSI and Merger Sub so
that CSI and Merger Sub can obtain a step up in basis of the assets of MAI for
tax purposes, including without limitation making an election under Section
338(h)(10) of the Code, and to such effect will execute and deliver an
allocation of purchase price schedule substantially in the form of Exhibit A.
ARTICLE V
CLOSING DOCUMENTS
Section 5.01 Documents To Be Delivered to CSI and Merger Sub.
The obligations of CSI and Merger Sub to effect the Merger are subject to
the satisfaction of the following conditions, any or all of which may be waived
in whole or in part by CSI:
(a) Certifications and Opinion. MAI shall have furnished CSI and Merger
Sub with:
(i) a certified copy of a resolution or resolutions duly adopted by
the Board of Directors of MAI approving this Merger Agreement and consummation
of the Merger and the transactions contemplated hereby;
(ii) a certified copy of an unanimous resolution or resolutions duly
adopted by the holders of the outstanding shares of MAI Common Stock approving
the Merger and the transactions contemplated hereby;
(iii) a favorable opinion satisfactory to CSI, dated the Closing
Date, in customary form and substance, of Leggett & Clemons, PLLC, counsel to
MAI, dated the Closing Date.
(b) Good Standing Certificates. MAI shall have furnished CSI with good
standing and existence certificates for MAI and its Subsidiaries from their
respective jurisdictions of organization and other jurisdictions as CSI shall
reasonably request.
Section 5.02 Documents To Be Delivered to MAI.
The obligation of MAI to effect the Merger is subject to the satisfaction
of the following conditions, any or all of which may be waived in whole or in
part by MAI:
(a) Certifications and Opinion. CSI shall have furnished MAI with:
(i) a certified copy of a resolution or resolutions duly adopted by
the Board of Directors of CSI and Merger Sub approving this Merger Agreement and
consummation of the Merger and the transactions contemplated hereby; and
(ii) a favorable opinion , dated the Closing Date, in customary form
and substance, of Ellenoff Grossman & Schole LLP, counsel to CSI and Merger Sub,
substantially to the effect that:
1) Each of CSI and Merger Sub is a corporation validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has corporate power to own its properties and assets and to
carry on its business as presently conducted;
2) Each of CSI and Merger Sub has the requisite corporate
power to effect the Merger as contemplated by this Merger Agreement; the
execution and delivery of this Merger Agreement and each of the agreements
required to be executed in connection herewith did not, and the consummation of
the Merger will not, violate any provision of CSI's or Merger Sub's Certificate
of Incorporation or Bylaws; and upon the filing by the Surviving Corporation of
the Certificates of Merger, the Merger shall become effective;
3) The respective Board of Directors of CSI and Merger Sub
have taken all action required under its jurisdiction of incorporation, its
Certificate of Incorporation or its Bylaws to authorize the execution and
delivery of this Merger Agreement and each of the agreements required to be
executed in connection herewith and the transactions contemplated hereby, and to
authorize the Merger in accordance with the terms of this Merger Agreement; and
this Merger Agreement and each of the agreements required to be executed in
connection herewith is a valid and binding agreement of CSI and Merger Sub
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws or judicial decisions now or hereafter in effect relating to creditors'
rights generally or governing the availability of equitable relief;
ARTICLE VI
GENERAL PROVISIONS
Section 6.01 Termination. This Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time by mutual written
consent of MAI, the Stockholder and CSI, or by mutual action of their respective
Boards of Directors.
Section 6.02 Amendment. This Merger Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 6.03 Payment of Expenses. Stockholder shall pay all expenses related to
MAI and itself (including legal and accounting fees) incident to preparing for
entering into and carrying out this Merger Agreement and the consummation of the
transactions contemplated hereby as well as for any audit fees for prior fiscal
years, whether or not the Merger shall be consummated. CSI and/or Merger Sub
shall pay all expenses related to CSI and/or Merger Sub (including legal and
accounting fees) incident to preparing for entering into and carrying out this
Merger Agreement and the consummation of the transactions contemplated hereby,
whether or not the Merger shall be consummated.
Section 6.04 Survival of Representations, Warranties and Agreements. All of the
representations, warranties and agreements in this Merger Agreement or in any
instrument delivered pursuant to this Merger Agreement shall survive the
Effective Time, for a period of two years from the Closing Date, except for
those related to taxes, which shall survive as long as the applicable statute of
limitations.
Section 6.05 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and shall
be deemed to be given, dated and received when so delivered personally,
telegraphed or telecopied or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address or
addresses as such person may subsequently designate by notice given hereunder:
(a) if to CSI or Merger Sub, to:
Conversion Services International, Inc.
100 Eagle Rock Avenue
East Hanover, NJ 07936
Attention: Scott Newman
Fax: 973-560-9500
with a copy to:
Ellenoff Grossman & Schole LLP
370 Lexington Avenue
New York, NY 10017
Attention: Stuart Neuhauser, Esq.
Fax: 212-370-7889
(b) if to MAI, to:
McKnight Associates, Inc.
5960 W. Parker Rd., Suite 278, #133
Plano, TX 75093
Attention: William McKnight
Fax: _____
with a copy to:
Leggett & Clemons, PLLC
2745 N. Dallas Parkway, Suite 310
Plano, Texas 75093
Attention: Steve H. Clemons
Fax 214 473-8685
Section 6.06 Interpretation: Certain Definitions. When a reference is made in
this Merger Agreement to Sections, such reference shall be to a Section of this
Merger Agreement unless otherwise indicated. The table of contents, glossary of
defined terms and headings contained in this Merger Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Merger Agreement. Whenever the word "include," "includes" or "including" is
used in this Merger Agreement, it shall be deemed to be followed by the words
"without limitation." The phrase "made available" in this Merger Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. As used in this
Merger Agreement, "affiliate" means, as to the person specified, any person
controlled, controlled by, or under common control with such person, and
"person" means any individual, corporation, general or limited partnership,
limited liability company, joint venture, estate, trust or other entity.
Section 6.07 Counterparts. This Merger Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 6.08 Entire Agreement; No Third-Party Beneficiaries. This Merger
Agreement (together with any other documents and instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereto and (b) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
Section 6.09 Governing Law. Except to the extent Delaware law is mandatorily
applicable to the Merger, this Merger Agreement shall be governed and construed
in accordance with the laws of the State of New Jersey, without giving effect to
the principles of conflicts of law thereof.
Section 6.10 Assignment. Neither this Merger Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Merger Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to any
newly formed direct or indirect wholly owned Subsidiary of CSI. Subject to the
preceding sentence, this Merger Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
Section 6.11 No Remedy in Certain Circumstances. Each party agrees that, should
any court or other competent authority hold any provision of this Merger
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith or not to take an action consistent
herewith or required hereby, the validity, legality and enforceability of the
remaining provisions and obligations contained or set forth herein shall not in
any way be affected or impaired thereby, unless the foregoing inconsistent
action or the failure to take an action constitutes a material breach of this
Merger Agreement or makes the Merger Agreement impossible to perform in which
case this Merger Agreement shall terminate. Except as otherwise contemplated by
this Merger Agreement, to the extent that a party hereto took an action
inconsistent herewith or failed to take action consistent herewith or required
hereby pursuant to an order or judgment of a court or other competent authority,
such party shall not incur any liability or obligation unless such party
breached its obligations under Section 5.03 hereof or did not in good faith seek
to resist or object to the imposition or entering of such order or judgment.
Section 6.12 Enforcement of the Agreement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Merger
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Merger Agreement and
to enforce specifically the terms and provisions hereof in any court of the
United States located in the State of New Jersey, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any federal or state court sitting in New Jersey in the event any dispute
between the parties hereto arises out of this merger Agreement solely in
connection with such a suit between the parties, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Merger Agreement in any court other than a Federal or state
court sitting in New Jersey.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, each of the following has caused this Merger Agreement
to be signed by its respective officers thereunto duly authorized, all as of the
date first written above.
CONVERSION SERVICES INTERNATIONAL, INC.
By:/s/ Scott Newman
-------------------------------------------------
Name: Scott Newman
Title: President and Chief Executive Officer
MCKNIGHT ASSOCIATES, INC.
By:/s/ Scott Newman
-------------------------------------------------
Name: Scott Newman
Title: President and Chief Executive Officer
MCKNIGHT ASSOCIATES, INC.
By: /s/ William McKnight
-------------------------------------------------
Name: William McKnight
Title: President
STOCKHOLDER
/s/ William McKnight
----------------------------------------------------
WILLIAM MCKNIGHT