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EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PROXICOM, INC.,
PROXICOM ACQUISITION CORP.,
SQUARE EARTH, INC.,
AND
THE STOCKHOLDERS OF SQUARE EARTH, INC.
DATED AS OF JANUARY 30, 1998
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TABLE OF CONTENTS
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AGREEMENT AND PLAN OF MERGER..................................................1
ARTICLE I THE MERGER..............................................................2
SECTION 1.1. The Merger.......................................................2
SECTION 1.2. Effective Time...................................................2
SECTION 1.3. Effect of the Merger.............................................2
SECTION 1.4. Certificate of Incorporation; Bylaws.............................2
SECTION 1.5. Directors and Officers...........................................3
SECTION 1.6. Closing..........................................................3
SECTION 1.7. Subsequent Actions...............................................3
SECTION 1.8. Tax and Accounting Treatment of the Merger.......................3
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.....................4
SECTION 2.1. Conversion of Securities.........................................4
SECTION 2.2. Escrowed Merger Stock; Stockholders' Representative..............5
SECTION 2.3. Exchange of Certificates.........................................5
SECTION 2.4. Stock Transfer Books.............................................6
SECTION 2.5. Transferability of Acquiror Common Stock.........................6
SECTION 2.6. Legend; Subsequent Transfer......................................6
SECTION 2.7. Conversion of Company Stock Options..............................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS....7
SECTION 3.1. Organization and Qualification...................................7
SECTION 3.2. Subsidiaries.....................................................8
SECTION 3.3. Certificate of Incorporation and Bylaws..........................8
SECTION 3.4. Capitalization...................................................8
SECTION 3.5. Authority........................................................9
SECTION 3.6. No Conflict; Required Filings and Consents.......................9
SECTION 3.7. Company Financial Statements; No Liabilities.....................10
SECTION 3.8. Accounts Receivable..............................................10
SECTION 3.9. Absence of Certain Changes or Events.............................10
SECTION 3.10. Assets..........................................................11
SECTION 3.11. Leases..........................................................11
SECTION 3.12. Contracts.......................................................11
SECTION 3.13. Real Property...................................................12
SECTION 3.14 Intellectual Property............................................13
SECTION 3.15. Environmental Matters...........................................14
SECTION 3.16 Absence of Litigation............................................15
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SECTION 3.17 Pooling of Interests.............................................15
SECTION 3.18. Books and Records...............................................15
SECTION 3.19. Taxes and Assessments...........................................16
SECTION 3.20. Employment Matters..............................................16
SECTION 3.21. Employee Benefit Plans..........................................17
SECTION 3.22. Transactions with Related Parties...............................18
SECTION 3.23. Insurance.......................................................19
SECTION 3.24. Brokers.........................................................19
SECTION 3.25. Minute Books....................................................19
SECTION 3.26. Disclosure......................................................19
SECTION 3.27. Permits.........................................................20
SECTION 3.28. Reorganization Treatment........................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................20
SECTION 4.1. Authority and Capacity...........................................20
SECTION 4.2. Absence of Violation.............................................20
SECTION 4.3. Restrictions and Consents........................................21
SECTION 4.4. Title to Capital Stock...........................................21
SECTION 4.5. Non-Registration of Securities; Purchase for Investment Only.....21
SECTION 4.6. Ability of Stockholder to Evaluate Investment and Bear
Economic Risk..........................................................22
SECTION 4.7. Waiver of Dissenter's Rights.....................................22
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR..............................22
SECTION 5.1. Organization and Qualification...................................22
SECTION 5.2. Certificate of Incorporation and Bylaws..........................23
SECTION 5.3. Capitalization...................................................23
SECTION 5.4. Authority........................................................23
SECTION 5.5. No Conflict; Required Filings and Consents.......................24
SECTION 5.6. Acquiror Financial Statements; No Liabilities....................24
SECTION 5.7. Absence of Certain Changes or Events.............................25
SECTION 5.8. Absence of Litigation............................................25
SECTION 5.9. Taxes and Assessments............................................26
SECTION 5.10. Permits.........................................................26
SECTION 5.11. Labor...........................................................26
SECTION 5.12. Brokers.........................................................26
SECTION 5.13. Disclosure......................................................27
SECTION 5.14. Reorganization Treatment........................................27
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF MERGER SUB...........................27
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SECTION 6.1. Organization and Qualification...................................27
SECTION 6.2. Certificate of Incorporation and Bylaws..........................27
SECTION 6.3. Authority........................................................28
SECTION 6.4. No Conflict; Required Filings and Consents.......................28
ARTICLE VII COVENANTS..............................................................29
SECTION 7.1. Affirmative Covenants of the Company.............................29
SECTION 7.2. Negative Covenants of the Company................................29
SECTION 7.3. Negative Covenants of the Stockholders...........................31
ARTICLE VIII ADDITIONAL AGREEMENTS................................................31
SECTION 8.1. Consents and Approvals; Filings and Notices......................31
SECTION 8.2. Access to Information............................................31
SECTION 8.3. Confidentiality..................................................32
SECTION 8.4. Further Action; Reasonable Best Efforts..........................32
SECTION 8.5. Public Announcements.............................................32
SECTION 8.6. No Solicitation..................................................32
SECTION 8.7. Employees........................................................33
SECTION 8.8. Pooling Accounting...............................................33
SECTION 8.9. Acquiror Financial Statements and Other Information..............33
SECTION 8.10. Stockholders' Covenant Not To Compete...........................33
ARTICLE IX CLOSING CONDITIONS.....................................................35
SECTION 9.1. Conditions to Obligations of the Parties.........................35
SECTION 9.2. Additional Conditions to Obligations of Acquiror.................35
SECTION 9.3. Additional Conditions to Obligations of the Company and the
Stockholders...........................................................37
SECTION 9.4. Waiver...........................................................37
ARTICLE X TERMINATION, AMENDMENT AND WAIVER.......................................38
SECTION 10.1. Termination.....................................................38
SECTION 10.2. Effect of Termination...........................................39
SECTION 10.3. Amendment.......................................................39
SECTION 10.4. Waiver..........................................................39
ARTICLE XI SURVIVAL OF REPRESENTATIONS; ESCROW ARRANGEMENTS; REMEDIES.............39
SECTION 11.1. Survival of Representations.....................................39
SECTION 11.2. Indemnification by the Stockholders; Escrow Arrangements........40
SECTION 11.3. Indemnification by Acquiror.....................................40
SECTION 11.4. Third Party Claims..............................................41
SECTION 11.5. Remedies Cumulative.............................................42
ARTICLE XII GENERAL PROVISIONS....................................................43
SECTION 12.1. Notices.........................................................43
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SECTION 12.2. Certain Definitions.............................................44
SECTION 12.3. Headings........................................................46
SECTION 12.4. Severability....................................................46
SECTION 12.5. Entire Agreement................................................46
SECTION 12.6. Specific Performance............................................47
SECTION 12.7. Assignment......................................................47
SECTION 12.8. Third Party Beneficiaries.......................................47
SECTION 12.9. Governing Law...................................................47
SECTION 12.10. Counterparts...................................................48
SECTION 12.11. Fees and Expenses..............................................48
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SCHEDULES
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Schedule 3.4 Beneficial and Record Ownership of Shares of the Company
Schedule 3.6 Company Required Consents
Schedule 3.10 Encumbrances
Schedule 3.11 Leases
Schedule 3.12 Contracts
Schedule 3.13 Real Property
Schedule 3.14 Intellectual Property
Schedule 3.15 Environmental Matters
Schedule 3.16 Company's Litigation
Schedule 3.20 Employment Matters
Schedule 3.21 Employee Benefit Plans
Schedule 3.22 Transactions with Related Parties
Schedule 3.23 Insurance
Schedule 5.3 Capitalization
Schedule 5.9 Acquiror Tax Matters
EXHIBITS
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Exhibit A Form of Escrow Agreement
Exhibit B Form of Legal Opinion of Pitney, Xxxxxx, Xxxx & Xxxxx
Exhibit C-1 Form of Legal Opinion of Acquiror's General Counsel
Exhibit C-2 Form of Legal Opinion of Xxxxx & Xxxxxxx L.L.P.
The Exhibits and Schedules to this Agreement and Plan of Merger are not included
with this Registration Statement on Form S-1. The Registrant will provide these
Exhibits and Schedules upon the request of the Securities and Exchange
Commission.
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Index of Defined Terms
Section
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Acquiror.................................................... PREAMBLE
Acquiror Audited Financial Statements....................... 5.6
Acquiror Common Stock....................................... PREAMBLE
Acquiror Financial Statements............................... 5.6
Acquiror Indemnified Persons................................ 11.2
Acquiror Material Adverse Effect............................ 12.2(a)
Acquiror Unaudited Financial Statements..................... 5.6
Affiliate Agreement......................................... PREAMBLE
affiliate and/or Affiliate.................................. PREAMBLE, 12.2(b)
Agreement .................................................. PREAMBLE
Assets...................................................... 12.2(c)
Balance Sheet Date.......................................... 3.7
benefit liabilities......................................... 3.21(c)
Benefit Plans............................................... 3.21(a)
business day................................................ 12.2(d)
Certificate and/or Certificates............................. 2.1(a)
Certificate of Merger....................................... 1.2
Closing..................................................... 1.6
Closing Date................................................ 1.6
Code........................................................ 1.8
Commonly Controlled Entity.................................. 3.21(a)
Company..................................................... PREAMBLE
Company Balance Sheet....................................... 3.7
Company Common Stock........................................ 2.1(a)
Company Confidential Information............................ 3.14(g)
Company Financial Statements................................ 3.7
Company Material Adverse Effect............................. 12.2(e)
Competitive Business........................................ 8.10(a)
Contract Workers............................................ 3.20(a)
Contracts................................................... 3.12(a)
control, controlled by, under common control with........... 12.2(f)
DGCL........................................................ PREAMBLE
Effective Time.............................................. 1.2
employee benefit plans...................................... 3.21(a)
employee pension benefit plan............................... 3.21(a)
Employment Agreements....................................... PREAMBLE
Encumbrances................................................ 12.2(g)
Environmental Laws.......................................... 3.15(b)(i)
ERISA....................................................... 3.21(a)
ERISA Plan.................................................. 3.21(a)
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Section
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Escrow Agent................................................ PREAMBLE
Escrow Agreement............................................ PREAMBLE
Escrow Stock................................................ 2.2(a)
Exchange Ratio.............................................. 2.1(a)
Government Entity........................................... 12.2(h)
Hazardous Materials......................................... 3.15(b)(ii)
Indemnified Party........................................... 11.4(a)
Indemnifying Party.......................................... 11.4(a)
Intellectual Property....................................... 3.14(a)
Laws........................................................ 12.2(i)
Legend...................................................... 2.6
Letter of Intent............................................ 8.3
Losses...................................................... 12.2(j)
Merger...................................................... 1.1
Merger Stock................................................ 2.1(a)
Merger Sub.................................................. PREAMBLE
Multiemployer Plan.......................................... 3.21(d)
New Option.................................................. 2.7
Noncompete Period........................................... 8.10(a)
Nondisclosure Agreement..................................... 8.3
person...................................................... 12.2(k)
plan of reorganization...................................... 1.8
qualified................................................... 3.21(b)
Real Property ............................................. 3.13
Related Agreements.......................................... PREAMBLE
Securities Act.............................................. 2.5
Stock Option................................................ 2.7
Stockholders................................................ PREAMBLE
Stockholders' Representative................................ 2.2(b)
Subsidiary.................................................. 12.2(l)
Surviving Corporation....................................... 1.1
Taxes....................................................... 12.2(m)
Third Party Claim........................................... 12.2(n)
Third Party Intellectual Property Rights.................... 3.14(b)
unfunded current liability.................................. 3.21(c)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered
into this 30th day of January, 1998, by and among PROXICOM, INC., a Delaware
corporation ("Acquiror"), PROXICOM ACQUISITION CORP., a Delaware corporation and
a wholly-owned subsidiary of Acquiror ("Merger Sub"), SQUARE EARTH, INC., a
Delaware corporation (the "Company"), and the undersigned stockholders of the
Company (the "Stockholders").
WHEREAS, the Boards of Directors of each of Acquiror, Merger Sub
and the Company have determined that it is in the best interests of their
respective companies and stockholders that Merger Sub merge with and into the
Company, pursuant to and subject to the terms and conditions of this Agreement
and the Delaware General Corporation Law (the "DGCL");
WHEREAS, concurrently with the execution of this Agreement and as
an inducement to Acquiror and Merger Sub to enter into this Agreement, the
Stockholders have entered into employment agreements with Acquiror (the
"Employment Agreements"), the effectiveness of which is conditioned upon
consummation of the Merger;
WHEREAS, in connection with the transactions contemplated by this
Agreement and as a condition to consummation of the Merger, at Closing, the
Company, the Stockholders and the Stockholders' Representative (as defined in
Section 2.2(b)) shall enter into an escrow agreement with Acquiror, Merger Sub
and Crestar Bank (the "Escrow Agent"), in the form attached hereto as Exhibit A
(the "Escrow Agreement" and together with the Employment Agreements, the
"Related Agreements"), pursuant to which a certain percentage of the shares of
common stock, par value $.01 per share, of Acquiror (the "Acquiror Common
Stock"), to be issued as consideration in the Merger will be retained in escrow;
and
WHEREAS, as a material inducement for Acquiror to enter into this
Agreement and to consummate the Merger, each of the "affiliates" of the Company
(as such term is used in SEC Accounting Series Release Number 130 and Release
Number 135 and Rule 145 under the Securities Act) has executed and delivered a
written agreement (the "Affiliate Agreement") which, among other things,
contains a representation by each affiliate that such affiliate will not offer
to sell, sell or otherwise dispose of any of the shares of Acquiror Common Stock
issued to such affiliate in connection with the Merger, except in accordance
with the terms of the Affiliate Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth in
this Agreement, the parties hereto agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER.
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the DGCL, at the Effective Time (as defined in
Section 1.2), Merger Sub shall be merged with and into the Company (the
"Merger"). As a result of the Merger, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation of
the Merger (sometimes referred to herein as the "Surviving Corporation") as a
wholly-owned subsidiary of Acquiror. The name of the Company shall continue as
the name of the Surviving Corporation.
SECTION 1.2. EFFECTIVE TIME.
At the Closing (as defined in Section 1.6), the parties hereto
shall cause the Merger to be consummated by filing a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware in
such form as required by, and executed in accordance with the relevant
provisions of the DGCL and in such form as approved by the Company and Acquiror
prior to such filing (the date and time of the filing of the Certificate of
Merger or such subsequent date or time specified therein being the "Effective
Time").
SECTION 1.3. EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as
provided in this Agreement and the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise provided herein, all the property, rights, privileges,
powers and franchises of Merger Sub and the Company shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Merger Sub and the Company
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.4. CERTIFICATE OF INCORPORATION; BYLAWS.
At the Effective Time, the certificate of incorporation of Merger
Sub, as in effect immediately prior to the Effective Time and as amended by the
Certificate of Merger, shall be the certificate of incorporation of the
Surviving Corporation, and the bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the bylaws of the Surviving Corporation.
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SECTION 1.5. DIRECTORS AND OFFICERS.
The directors of Merger Sub (or such other or additional
individuals as Acquiror may designate prior to Closing) shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the certificate of incorporation and bylaws of the Surviving Corporation; and
the officers of Merger Sub shall continue as the officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
SECTION 1.6. CLOSING.
Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place as promptly as practicable
after satisfaction of the latest to occur or, if permissible, waiver of the
conditions set forth in Article IX hereof (the "Closing Date"), at the offices
of Xxxxx & Xxxxxxx L.L.P., 0000 Xxxxxxxxxx Xxxxx, Xxxxx 0000, XxXxxx, Xxxxxxxx
00000, unless another date or place is agreed to by the parties hereto.
SECTION 1.7. SUBSEQUENT ACTIONS.
If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to continue in, vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties, privileges, franchises or Assets of either of its
constituent corporations acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
directed and authorized to execute and deliver, in the name and on behalf of
either of such constituent corporations, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of each
of such corporations or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties, privileges, franchises or
Assets in the Surviving Corporation or otherwise to carry out this Agreement.
SECTION 1.8. TAX AND ACCOUNTING TREATMENT OF THE MERGER.
It is intended by the parties hereto that the Merger shall (a)
constitute a reorganization of Merger Sub and the Company within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code") and
(b) qualify for accounting treatment as a pooling of interests. The parties
hereby adopt this Agreement as a "plan of reorganization" of Merger Sub and the
Company
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within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Treasury Regulations.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. CONVERSION OF SECURITIES.
At the Effective Time, by virtue of the Merger and without any
action on the part of the parties hereto or the holders of the following
securities:
(a) Outstanding Company Common Stock. Subject to the provisions
hereof, each share of common stock, par value $.01 per share of the Company (the
"Company Common Stock"), issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive 0.445833 share of
Acquiror Common Stock (the "Exchange Ratio") (The shares of Acquiror Common
Stock issuable pursuant to this Section 2.1(a) are referred to herein as the
"Merger Stock"). All such shares of Company Common Stock shall cease to be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate (a "Certificate") previously evidencing such shares
shall thereafter represent only the right to receive the Acquiror Common Stock.
The Stockholders shall cease to have any rights with respect to such shares of
Company Common Stock.
(b) Treasury Stock. All shares of capital stock of the Company
held in the treasury of the Company immediately prior to the Effective Time
shall be canceled and extinguished without any conversion thereof and no
Acquiror Common Stock or other consideration shall be delivered or deliverable
in exchange therefor.
(c) Merger Sub Stock. Each share of common stock, par value $.01
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one (1) duly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
(d) No Fractional Shares. No fraction of a share of Acquiror
Common Stock shall be issued in connection with the Merger. In lieu of any such
fractional share, the holder of the Company Common Stock that would be entitled
to a fractional share shall have the right to receive an amount in cash, without
interest, equal to the product of such fractional share multiplied by $4.77.
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SECTION 2.2. ESCROWED MERGER STOCK; STOCKHOLDERS'
REPRESENTATIVE.
(a) When making the issuances of the Merger Stock required by
Section 2.1(a) above, Acquiror shall withhold and retain in escrow from the
Stockholders ten percent (10%) of the aggregate number of shares of Acquiror
Common Stock issuable pursuant to Section 2.1(a) (as adjusted pursuant to
Section 2.1(d)) (the "Escrow Stock"). The Escrow Stock will be placed in escrow
pursuant to the Escrow Agreement as security for the performance of the
indemnity obligations of the Company and the Stockholders under Section 11.2 of
this Agreement. The Escrow Stock shall be registered in the name of the
Stockholders and the certificates therefor shall contain a legend indicating
that the Escrow Stock is being held in escrow pursuant to the Escrow Agreement.
The Escrow Stock shall be released to the Stockholders or Acquiror, as the case
may be, only in accordance with the terms of the Escrow Agreement.
(b) Each Stockholder hereby appoints Xxxxxxx Xxxxx as
attorney-in-fact with full power and authority to act for and on behalf of any
or all of the Stockholders (with full power of substitution in the premises), in
connection with the indemnity provisions of Section 11.2 as they relate to the
Stockholders generally and such other matters as are reasonably necessary for
the consummation of the transactions contemplated hereby including, without
limitation, (i) to review all claims for indemnification asserted by an Acquiror
Indemnified Person, and, to the extent deemed appropriate, dispute, question the
accuracy of, compromise, settle or otherwise resolve any and all such claims,
(ii) to compromise on their behalf with Acquiror any claims asserted thereunder,
(iii) to authorize payments to be made with respect to any such claims for
indemnification, (iv) to execute and deliver on behalf of the Stockholders any
document or agreement contemplated by or necessary or desirable in connection
with this Agreement, the Escrow Agreement and the transactions contemplated
hereby and thereby, and (v) to take such further actions including coordinating
and administering post-closing matters related to the rights and obligations of
the Stockholders as are authorized in this Agreement (the above named
representative, as well as any subsequent representative of the Stockholders
appointed by the Stockholders being referred to herein as the "Stockholders'
Representative"). Acquiror and Merger Sub shall be entitled to rely on such
appointment and treat such Stockholders' Representative as the duly appointed
attorney-in-fact of each Stockholder.
SECTION 2.3. EXCHANGE OF CERTIFICATES.
At the Closing, each Stockholder shall deliver to Acquiror for
cancellation, such Stockholder's Certificate(s) representing his shares of
Company Common Stock held immediately prior to the Effective Time, duly endorsed
in blank
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or with duly executed stock powers attached. In exchange for the Certificates,
promptly following the Effective Time, Acquiror shall deliver to each
Stockholder (i) a stock certificate representing the aggregate number of whole
shares of Merger Stock issuable pursuant to Section 2.1(a) (less shares of
Escrow Stock to be deposited in escrow pursuant to Section 2.2(a)), which shares
of Merger Stock shall be deemed to have been issued at the Effective Time and
(ii) sufficient cash to pay the amounts contemplated by Section 2.1(d).
SECTION 2.4. STOCK TRANSFER BOOKS.
At the Effective Time, the stock transfer books of the Company
with respect to all shares of capital stock of the Company shall be closed and
no further registration of transfers of such shares of capital stock shall
thereafter be made on the records of the Company.
SECTION 2.5. TRANSFERABILITY OF ACQUIROR COMMON STOCK.
The shares of Acquiror Common Stock to be issued and delivered to
the Stockholders in the Merger in accordance with the provisions of Section 2.1
hereof will not have been registered under the Securities Act of 1933, as
amended (the "Securities Act") or under the securities laws of any state as of
the Effective Time. Accordingly, such shares of Acquiror Common Stock will not
be transferable except upon compliance with the Securities Act, any state
securities laws, the rules, regulations and other administrative regulations
promulgated under the Securities Act and any state securities laws and shall
bear appropriate legends to this effect as set forth in Section 2.6 below. In
addition, where applicable, the legend shall provide notice as to the
restrictions on transfer pursuant to the Affiliate Agreement.
SECTION 2.6. LEGEND; SUBSEQUENT TRANSFER.
Each certificate representing Acquiror Common Stock issued to the
Stockholders hereunder shall be stamped or otherwise imprinted with a legend
(the "Legend") in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH
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LAWS UPON RECEIPT BY PROXICOM, INC. ("ACQUIROR") OF A WRITTEN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO ACQUIROR THAT SUCH REGISTRATION IS
NOT REQUIRED.
Acquiror agrees to remove such Legend upon the earlier of the
registration under the Securities Act of the Acquiror Common Stock received by
the Stockholders or the expiration of any required holding period of Rule 144
under the Securities Act.
SECTION 2.7. CONVERSION OF COMPANY STOCK OPTIONS.
As of the Effective Time, each outstanding unexpired and
unexercised option to purchase shares of Company Common Stock described on
Schedule 3.4 hereto (each a "Stock Option"), shall automatically be converted
into an option (each a "New Option") to purchase a number of whole shares of
Acquiror Common Stock equal to the number of shares of Company Common Stock that
could have been purchased (assuming full vesting) under such Stock Option
multiplied by the Exchange Ratio, at a price per share of Acquiror Common Stock
equal to the per-share option exercise price specified in such Stock Option
divided by the Exchange Ratio. Nothing in this Section 2.7 shall affect the
vesting schedule in effect for each Stock Option as of the date hereof, and each
New Option shall have the same vesting schedule as in effect for the
corresponding Stock Option as of the date hereof. In addition to the New
Options, promptly after the Effective Time, Acquiror shall issue to certain
holders of Stock Options such additional options to purchase shares of Acquiror
Common Stock that, when added together with the New Options, shall equal options
to acquire, in the aggregate, 67,738 shares of Acquiror Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS
The Company and the Stockholders jointly and severally represent
and warrant to Acquiror and Merger Sub as follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware. The Company has the
requisite power and authority to own, lease and operate its business as it is
now being conducted and to perform the terms of this Agreement and the
transactions
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contemplated hereby. The Company is duly qualified to conduct its business, and
is in good standing, in Delaware, New York and California and, to the knowledge
of the Company, each other jurisdiction in which the ownership or leasing of its
Assets or the nature of its activities in connection with the conduct of its
business makes such qualification necessary.
SECTION 3.2. SUBSIDIARIES.
The Company has no Subsidiaries and no equity interest or other
investment in any person.
SECTION 3.3. CERTIFICATE OF INCORPORATION AND BYLAWS.
The Company has heretofore delivered to Acquiror a complete and
correct copy of each of the certificate of incorporation and bylaws of the
Company, each as amended to date. Such certificate of incorporation and bylaws
are in full force and effect. The Company is not in violation of any of the
provisions of its certificate of incorporation or bylaws.
SECTION 3.4. CAPITALIZATION.
The authorized capital stock of the Company consists of one
million five hundred thousand (1,500,000) shares of Company Common Stock, of
which one million two hundred thousand (1,200,000) shares are issued and
outstanding. All of the outstanding shares of capital stock of the Company are
owned beneficially and of record by the Stockholders as set forth in Schedule
3.4, free and clear of all Encumbrances. Except as set forth in Schedule 3.4
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock of
the Company or obligating the Company to issue or sell any shares of capital
stock of, or other equity interests in the Company, including any securities
directly or indirectly convertible into or exercisable or exchangeable for any
capital stock or other equity securities of the Company. There are no
outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any shares of its capital stock or make any investment (in the form of a
loan, capital contribution or otherwise) in any other person. All of the issued
and outstanding shares of Company Common Stock have been duly authorized and
validly issued in accordance with applicable laws and are fully paid and
nonassessable and not subject to preemptive rights. Except as set forth in
Schedule 3.4, no shares of capital stock of the Company have been reserved for
any purpose.
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SECTION 3.5. AUTHORITY.
The Company has the necessary corporate power and authority to
enter into this Agreement and the Related Agreements and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Related Agreements by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement and the Related Agreements
or to consummate the transactions contemplated hereby and thereby. This
Agreement and the Related Agreements have been duly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by
Acquiror and Merger Sub, constitute legal, valid and binding obligations of the
Company, enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
SECTION 3.6. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Schedule 3.6 hereto, the execution and
delivery of this Agreement and the Related Agreements by the Company do not, and
the performance by the Company of its obligations under this Agreement and the
Related Agreements will not, (i) conflict with or violate the certificate of
incorporation, bylaws or other organizational document of the Company, (ii)
conflict with or violate any Laws applicable to the Company or to its Assets, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company is a party or by which the
Company is bound or to which any of its Assets is subject.
(b) Except as set forth in Schedule 3.6 hereto, the Company's
execution and delivery of this Agreement and the Related Agreements does not,
and the Company's performance of this Agreement and the Related Agreements will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any third party or any court, arbitral tribunal,
administrative agency or commission, whether national or foreign, or Government
Entity, except for the filing and recordation of appropriate merger documents as
required by the DGCL.
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SECTION 3.7. COMPANY FINANCIAL STATEMENTS; NO LIABILITIES.
The Company has furnished to the Acquiror an unaudited balance
sheet of the Company as at each of December 31, 1996, and December 31, 1997, and
an unaudited statement of income and cash flow for each of the years ended
December 31, 1996, and December 31, 1997 (the "Company Financial Statements").
The Company Financial Statements were prepared by management or based on
information supplied by management of the Company, and are true and complete in
all material respects and accurately reflect in all material respects the
financial condition of the Company as at such dates and the results of its
operations over such years. Except as reflected in the balance sheet of the
Company (the "Company Balance Sheet") as at December 31, 1997 (the "Balance
Sheet Date"), the Company has no material liabilities, contingent or absolute,
matured or unmatured, except for liabilities incurred in the ordinary course of
business since the Balance Sheet Date, none of which would have a Company
Material Adverse Effect.
SECTION 3.8. ACCOUNTS RECEIVABLE.
The accounts receivable of the Company shown on the Company
Balance Sheet, or acquired by the Company after the Balance Sheet Date, have
been collected or are collectible in amounts not less than the amounts thereof
carried on the books of the Company, except to the extent of the allowance for
doubtful accounts shown on such balance sheets.
SECTION 3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since the Balance Sheet Date, there has been no Company Material
Adverse Effect. Since the Balance Sheet Date, the Company has conducted its
business in the ordinary course, and the Company has not (a) paid any dividend
or distribution in respect of, or redeemed or repurchased any of, its capital
stock; (b) issued any capital stock, bonds or other corporate securities or debt
instruments, granted any options, warrants or other rights calling for the
issuance thereof, or borrowed any funds; (c) incurred loss of, or significant
injury to, any of their respective Assets as the result of any fire, explosion,
flood, windstorm, earthquake, labor trouble, riot, accident, act of God or
public enemy or armed forces, or other casualty; (d) incurred, or become subject
to, any obligation or liability (absolute or contingent, matured or unmatured,
known or unknown), except current liabilities incurred in the ordinary course of
business; (e) mortgaged, pledged or subjected to any Encumbrance any of its
Assets; (f) sold, exchanged, transferred or otherwise disposed of any of its
Assets or canceled any debts or claims; (g) written down the value of any of its
Assets or written off as uncollectible any accounts receivable, except write
downs and write-offs in the ordinary course of business, none of which,
individually or in the aggregate, are material; (h) entered into any
transactions
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other than in the ordinary course of business; (i) made any change in any method
of accounting or accounting practice; or (j) made any agreement to do any of the
foregoing.
SECTION 3.10. ASSETS.
The Company is the sole and exclusive legal and equitable owner
of and has good and marketable title to its Assets free and clear of all
Encumbrances, except as set forth in Schedule 3.10. No person or Government
Entity has an option to purchase, right of first refusal or other similar right
with respect to all or any part of the Company's Assets. All of the personal
property of the Company is in good working order and repair, ordinary wear and
tear excepted, and is suitable and adequate for the uses for which it is
intended or is being used.
SECTION 3.11. LEASES.
Schedule 3.11 lists and describes all leases and other agreements
under which the Company is lessee or lessor of any Asset, or holds, manages or
operates any Asset owned by any third party, or under which any Asset owned by
the Company is held, operated or managed by a third party and under which the
Company is obligated to pay or is entitled to receive more than One Thousand
Dollars ($1,000) per year. To the Company's knowledge, each such lease and other
agreement grants the leasehold estate it purports to grant free and clear of all
Encumbrances. To the Company's knowledge, (a) all necessary governmental
approvals with respect thereto required to be obtained by the Company have been
obtained, (b) all necessary filings or registrations therefor required to be
made by the Company have been made, and (c) there have been no threatened
cancellations thereof and no outstanding disputes thereunder. The Company has
performed in all material respects all obligations thereunder required to be
performed by the Company to date. To the knowledge of the Company, no party is
in default in any material respect under any of the foregoing, and there has not
occurred any event which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a default.
SECTION 3.12. CONTRACTS.
(a) Schedule 3.12 sets forth a complete and correct list of all
agreements, contracts and commitments (whether written or oral) to which the
Company is a party or by which the Company or any of its Assets are bound
(collectively, the "Contracts"), including, without limitation, the following
types of contracts and agreements: (i) employment, severance, termination,
consulting and retirement agreements; (ii) license agreements or distributor,
dealer, manufacturer's representative, sales agency and advertising agreements;
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(iii) agreements with any labor organization or other collective bargaining
unit; (iv) agreements for the future purchase of materials, supplies, services,
merchandise or equipment involving payments of more than $1,000 individually (or
$5,000 in the aggregate for all such agreements) over its remaining term
(including, without limitation, periods covered by any option to renew by either
party); (v) agreements for the purchase, sale or lease of any real estate or
other Assets; (vi) profit-sharing, bonus, incentive compensation, deferred
compensation, stock option, severance pay, stock purchase, employee benefit,
insurance, hospitalization, pension, retirement or other similar plans or
agreements; (vii) agreements for the sale of Assets other than in the ordinary
course of business or the grant of any preferential rights to purchase Assets;
(viii) agreements which contain provisions requiring the Company to indemnify
any person; (ix) joint venture agreements or other agreements involving the
sharing of profits; (x) outstanding loans to any persons or entities or
receivables due from any stockholders or any affiliates of the Company; (xi)
agreements (including, without limitation, agreements not to compete and
exclusivity agreements) that reasonably could be interpreted to impose any
restriction on any business operations of the Company; (xii) agreements, notes
and other instruments evidencing indebtedness for borrowed money and grants of
Encumbrances on any of the Assets of the Company and (xiii) other agreement
which by its terms does not terminate or is not terminable by the Company within
thirty (30) days or upon thirty (30) days' (or less) notice. Schedule 3.12
includes a brief description of all oral Contracts of the types described in
clauses (i) through (xiii) above.
(b) All the Contracts are valid and in full force and effect and
constitute legal, valid and binding obligations of, and are legally enforceable
against, the Company and, to the knowledge of the Company, the other party or
respective parties thereto. To the knowledge of the Company, (i) all necessary
governmental approvals with respect thereto required to be obtained by the
Company have been obtained, (ii) all necessary filings or registrations therefor
required to be made by the Company have been made, and (iii) there have been no
threatened cancellations thereof and no outstanding disputes thereunder. The
Company has in all material respects performed all the obligations thereunder
required to be performed by the Company to date. The Company is not and, to the
knowledge of the Company, no other party is in default in any material respect
under any of the Contracts, and there has not occurred any event which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute such a default. True and complete copies of all
Contracts have been delivered to Acquiror or made available for inspection.
SECTION 3.13. REAL PROPERTY.
Schedule 3.13 contains a list and brief description of all
leasehold interests in real estate, easements, rights to access, rights-of-way
and other real
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property interests which are owned, leased, used or held for use by the Company
(collectively, the "Real Property"). The Company does not hold any fee simple
interest in any real estate. The Real Property described in Schedule 3.13
constitutes all real property interests of the Company.
SECTION 3.14 INTELLECTUAL PROPERTY.
(a) The Company owns, or is licensed or otherwise possesses all
necessary rights to use all patents, trademarks, trade names, service marks,
copyrights and any applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas, algorithms, processes,
computer software programs and applications (in both source code and object code
form), and tangible or intangible proprietary information or material
("Intellectual Property") that are used in the business of the Company.
(b) Schedule 3.14 lists all (i) registered and unregistered
trademarks, trade names and service marks, registered and unregistered
copyrights, and maskworks, included in the Intellectual Property, including the
jurisdictions in which each such Intellectual Property right has been issued or
registered or in which any application for such issuance and registration has
been filed, (ii) licenses, sublicenses and other agreements as to which the
Company is a party and pursuant to which any person is authorized to use any
Intellectual Property, and (iii) licenses, sublicenses and other agreements as
to which the Company is a party and pursuant to which the Company is authorized
to use any third party patents, trademarks or copyrights, including software
("Third Party Intellectual Property Rights") which are incorporated in, are or
form a part of any Company product.
(c) To the knowledge of the Company, there is no unauthorized
use, disclosure, infringement or misappropriation of any Intellectual Property
rights of the Company, any trade secret material to the Company, or any
Intellectual Property right of any third party to the extent licensed by or
through the Company, by any third party, including any employee or former
employee of the Company. Except as set forth in Schedule 3.14, the Company has
not entered into any agreement to indemnify any other person against any charge
of infringement of any Intellectual Property. Except as set forth in Schedule
3.14, there are no royalties, fees or other payments payable by the Company to
any person by reason of the ownership, use, sale or disposition of Intellectual
Property.
(d) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of it obligations
under this Agreement, in breach of any license, sublicense or other agreement
relating to the Intellectual Property or Third Party Intellectual Property
Rights.
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(e) The Company has no patents, registered trademarks, registered
service marks or registered copyrights. The Company (i) has not been served with
process, and is not aware that any person is intending to serve process on the
Company, in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, copyrights or violation
of any trade secret or other proprietary right of any third party; (ii) has no
knowledge that the conduct of the business of the Company infringes any patent,
trademark, service xxxx, copyright, trade secret or other propriety right of any
third party; and (iii) has not brought any action, suit or proceeding for
infringement of Intellectual Property or breach of any license or agreement
involving Intellectual Property against any third party.
(f) All officers, employees and consultants of the Company have
executed and delivered to the Company an agreement regarding the protection of
proprietary information and the assignment to the Company of any Intellectual
Property arising from services performed for the Company by such persons.
(g) The Company has, to the extent it deemed necessary and
appropriate, obtained or entered into written agreements with third parties in
connection with the disclosure to, or use or appropriation by, third parties, of
trade secret or proprietary Intellectual Property owned by the Company and not
otherwise protected by a patent, a patent application, copyright, trademark, or
other registration or legal scheme ("Company Confidential Information"), and
does not know of any situation involving such third party use, disclosure or
appropriation of Company Confidential Information where the lack of such a
written agreement is likely to result in any Company Material Adverse Effect.
SECTION 3.15. ENVIRONMENTAL MATTERS.
(a) To the knowledge of the Company, the Company has complied and
is in compliance with all Environmental Laws (as defined below). There are no
pending or, to the knowledge of the Company, threatened actions, suits, claims,
legal proceedings or other proceedings based on, and the Company has not
directly or indirectly received any notice of any complaint, order, directive,
citation, notice of responsibility, notice of potential responsibility, or
information request from any Government Entity or any other person arising out
of or attributable to: (i) the current or past presence at any part of the Real
Property of Hazardous Materials (as defined below) or any substances that pose a
hazard to human health or an impediment to working conditions; (ii) the current
or past release or threatened release into the environment from the Real
Property (including, without limitation, into any storm drain, sewer, septic
system or publicly owned treatment works) of any Hazardous Materials or any
substances that pose a hazard to human health or an impediment to working
conditions; (iii) the off-site disposal of Hazardous Materials originating on or
from the Real Property; or (iv) any violation of
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Environmental Laws at any part of the Real Property or otherwise arising from
the Company's activities involving Hazardous Materials.
(b) As used herein, these terms shall have the following
meanings:
(i) "Environmental Laws" means all applicable federal, state
and local laws (including the common law), rules, requirements and regulations
relating to pollution, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
protection of human health as it relates to the environment including, without
limitation, laws and regulations relating to releases of Hazardous Materials, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials or relating to
management of asbestos in buildings.
(ii) "Hazardous Materials" means wastes, substances, or
materials (whether solids, liquids or gases) that are deemed hazardous, toxic,
pollutants, or contaminants, including without limitation, substances defined as
"hazardous substances", "toxic substances", "radioactive materials", or other
similar designations in, or otherwise subject to regulation under, any
Environmental Laws.
SECTION 3.16 ABSENCE OF LITIGATION.
Except as set forth in Schedule 3.16, there are (a) no claims,
actions, suits, investigations, or proceedings pending or, to the Company's
knowledge, threatened against the Company or any of its properties or Assets
before any court, administrative, governmental, arbitral, mediation or
regulatory authority or body, domestic or foreign, that challenge or seek to
prevent, enjoin, alter or materially delay the transactions contemplated hereby,
and (b) no judgments, decrees, injunctions or orders of any Government Entity or
arbitrator outstanding against the Company or any of its properties or Assets.
SECTION 3.17 POOLING OF INTERESTS.
Neither the Company nor any of its directors, officers or
stockholders has taken any action which would interfere with Acquiror's ability
to account for the Merger as a pooling of interests.
SECTION 3.18. BOOKS AND RECORDS.
The books of account, stock records, minute books and other
records of the Company are true and complete in all material respects, and the
matters
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contained therein are appropriately and accurately reflected in the financial
statements to the extent required to be reflected therein.
SECTION 3.19. TAXES AND ASSESSMENTS.
The Company has duly and timely paid all Taxes (as defined below)
which have become due and payable by it. The Company has not received notice of,
nor does the Company have any knowledge of, any notice of deficiency or
assessment or proposed deficiency or assessment from any taxing Government
Entity. To the Company's knowledge, there are no audits pending and there are no
outstanding agreements or waivers by the Company that extend the statutory
period of limitations applicable to any federal, state, local, or foreign tax
returns or Taxes.
SECTION 3.20. EMPLOYMENT MATTERS.
(a) Schedule 3.20 contains a true and complete list of names,
positions and annual rates of compensation (including bonuses) of all current
directors, officers and employees of the Company, and all workers currently
supplied to the Company pursuant to that certain Client Service Agreement dated
January 28, 1997, between Xxxxxxx Employer Group, LLC and the Company (such
workers, collectively, the "Contract Workers"). With respect to any persons
employed by the Company and the Contract Workers, the Company is in compliance
with all Laws respecting employment conditions and practices, have withheld all
amounts required by any applicable Laws to be withheld from wages or any Taxes
or penalties for failure to comply with any of the foregoing.
(b) There are no collective bargaining agreements applicable to
any Company employees and the Company does not have a duty to bargain with any
labor organization with respect to any such persons. There is not pending any
demand for recognition or any other request or demand from a labor organization
for representative status with respect to any persons employed by the Company.
(c) With respect to the Contract Workers and any persons employed
by the Company, (i) the Company has not engaged in any unfair labor practice
within the meaning of the National Labor Relations Act and has not violated any
legal requirement prohibiting discrimination on the basis of race, color,
national origin, sex, religion, age, marital status, or handicap in its
employment conditions or practices; and (ii) there are no pending or, to the
knowledge of the Company, threatened unfair labor practice charges or
discrimination complaints relating to race, color, national origin, sex,
religion, age, marital status, or handicap against the Company before any
Government Entity nor, to the knowledge of the Company, does any basis therefor
exist.
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SECTION 3.21. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.21 sets forth a list of all of the pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, sabbatical, vacation, bonus, loans, medical, dental,
vision care, disability, life insurance or other employee programs, arrangements
or agreements and all other material employee benefit plans or fringe benefit
plans, including, without limitation, all "employee benefit plans" as that term
is defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), currently adopted, maintained by, sponsored in whole
or in part by, or contributed to by the Company or for which the Company could
incur a liability or any entity required to be aggregated with the Company
(each, a "Commonly Controlled Entity") pursuant to Section 414 of the Code for
the benefit of present and former employees, Contract Workers or directors of
the Company or their beneficiaries, or providing benefits to such persons in
respect of services provided to any such entity (collectively, the "Benefit
Plans"). Any of the Benefit Plans which is an "employee pension benefit plan",
as that term is defined in Section 3(2) of ERISA, is referred to herein as an
"ERISA Plan".
(b) Each of the Benefit Plans intended to be "qualified" within
the meaning of Section 401(a) or 501 of the Code has been determined by the
Internal Revenue Service to be so qualified and to the Company's knowledge, no
circumstances exist that could reasonably be expected by the Company to result
in the revocation of any such determination. Each of the Benefit Plans is in
compliance with their terms and the applicable terms of ERISA and the Code and
any other applicable laws, rules and regulations the breach or violation of
which could result in a material liability to the Company or any Commonly
Controlled Entity.
(c) No ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability", as that term is defined in Section 302(d)(8)(A) of
ERISA, and the present fair market value of the assets of any such plan equals
or exceeds the plan's "benefit liabilities", as that term is defined in Section
4001(a)(16) of ERISA, when determined under actuarial factors that would apply
if the plan terminated in accordance with all applicable legal requirements. All
contributions, premiums and other payments with respect to each ERISA Plan which
have become due and payable have been paid.
(d) No Benefit Plan is or has been a multiemployer plan within
the meaning of Section 3(37) of ERISA (a "Multiemployer Plan"). Neither the
Company nor any Commonly Controlled Entity has completely or partially withdrawn
from any Multiemployer Plan. No termination liability to the Pension Benefit
Guaranty
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Corporation or withdrawal liability to any Multiemployer Plan that is
material in the aggregate has been or is reasonably expected to be incurred with
respect to any Multiemployer Plan by the Company or any Commonly Controlled
Entity.
(e) The Company has made available to Acquiror complete copies,
as of the date hereof, of all of the Benefit Plans that have been reduced to
writing, together with all documents establishing or constituting any related
trust, annuity contract, insurance contract or other funding instrument. The
Company has made available to Acquiror complete copies of current plan
summaries, employee booklets, personnel manuals and other material documents or
written materials concerning the Benefit Plans that are in the possession of the
Company as of the date hereof.
(f) No claim, lawsuit, arbitration or other action has been
threatened or instituted against any Benefit Plan.
(g) Except as set forth in Schedule 3.21 or as otherwise
contemplated by the terms of this Agreement, the consummation of the
transactions contemplated by this Agreement will not give rise to any liability,
including, without limitation, liability for severance pay or termination pay,
or accelerate the time of payment or vesting or increase the amount of
compensation or benefits due to any employee, Contract Worker, director or
stockholder of the Company (whether current, former, or retired) or their
beneficiaries solely by reason of such transactions. No amounts payable under
any Benefit Plan will fail to be deductible for federal income tax purposes by
virtue of Section 280G or 162(m) of the Code.
(h) The Company does not maintain, contribute to, or in any way
provide for any benefits of any kind (other than under Section 4980B of the
Code, the Federal Social Security Act, or a plan qualified under Section 401(a)
of the Code) to any current or future retiree or terminee.
(i) Neither the Company nor any Commonly Controlled Entity has
(or could incur) any liability under Title IV of ERISA.
SECTION 3.22. TRANSACTIONS WITH RELATED PARTIES.
Except as set forth in Schedule 3.22, no present or former
officer, director, stockholder or person known by the Company to be an affiliate
of the Company, nor any person known by the Company to be an affiliate of any
such person, is currently a party to any transaction or agreement with the
Company, including any agreement providing for any loans, advances, the
employment of, furnishing of services by, rental of their respective Assets from
or to, or otherwise requiring payments to, any such officer, director,
stockholder or affiliate.
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SECTION 3.23. INSURANCE.
Schedule 3.23 contains a list of all insurance policies of title,
property, fire, casualty, liability, life, worker's compensation, libel and
slander, and other forms of insurance of any kind relating to the Assets or the
business and operations of the Company, true and correct copies of which have
been made available to Acquiror. All premiums with respect to such policies
covering all periods up to and including the date hereof have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy. All such policies are in full force and effect. There are no pending
claims under any insurance policies and the Company is not aware of any facts
which would lead the Company to believe that the Company will likely receive a
claim under any insurance policies.
SECTION 3.24. BROKERS.
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
SECTION 3.25. MINUTE BOOKS.
The minute books of the Company made available to Acquiror
contain a complete and accurate summary of all meetings of directors and
shareholders or actions by written consent since the time of incorporation of
the Company through the date of this Agreement, and reflect all transactions
referred to in such minutes accurately in all material respects.
SECTION 3.26. DISCLOSURE.
No representations or warranties by the Company in this Agreement
and no statement or information contained in the Schedules hereto or any
certificate furnished or to be furnished by the Company to Acquiror pursuant to
the provisions of this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state any fact necessary, in light
of the circumstances under which it was made, in order to make the statements
herein or therein not misleading.
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SECTION 3.27. PERMITS.
The Company holds all licenses and permits from Government
Entities which are necessary for the conduct of its business, except where the
failure to hold any such license or permit would not have a Company Material
Adverse Effect.
SECTION 3.28. REORGANIZATION TREATMENT.
Neither the Company nor any Stockholder has taken, agreed to
take, or intends to take any action that would cause the Merger to fail to
qualify as a reorganization within the meaning of Section 368 of the Code.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
In addition to the representations and warranties made by the
Stockholders in Article III hereof, each Stockholder hereby jointly and
severally, represents and warrants to Acquiror and Merger Sub as follows:
SECTION 4.1. AUTHORITY AND CAPACITY.
Such Stockholder has full legal right, capacity, power and
authority necessary to execute and deliver this Agreement and all other Related
Agreements, to perform the obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. This Agreement and
the Related Agreements have been duly executed and delivered by such Stockholder
and, assuming due authorization, execution and delivery by Acquiror, Merger Sub
and the other parties hereto and thereto, constitute legal, valid and binding
obligations of such Stockholder, enforceable in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditor's rights generally and by the applications of
general principles of equity.
SECTION 4.2. ABSENCE OF VIOLATION.
The execution, delivery and performance by such Stockholder of
this Agreement and all other Related Agreements, the fulfillment of and the
compliance with the respective terms and provisions hereof and thereof, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not (a) conflict with, or violate any provision of, any Laws applicable to
the Stockholder; or (b) conflict with, or result in any breach of, or constitute
a default under, any
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agreement to which such Stockholder is a party or by which such Stockholder or
such Stockholder's property is bound or affected.
SECTION 4.3. RESTRICTIONS AND CONSENTS.
Such Stockholder's execution and delivery of this Agreement and
the Related Agreements does not, and such Stockholder's performance of this
Agreement and the Related Agreements will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any third party
or any court, arbitral tribunal, administrative agency or commission or
Government Entity, except for the filing and recordation of appropriate merger
documents as required by the DGCL.
SECTION 4.4. TITLE TO CAPITAL STOCK.
The shares of Company Common Stock reflected on Schedule 3.4 as
being owned by such Stockholder are the only shares of voting stock owned
beneficially or of record by such Stockholder, and except as set forth in
Schedule 3.4, such Stockholder does not own any other options, warrants or
rights to acquire shares of any class of capital stock of the Company. Such
Stockholder has the sole power respecting voting and transfer of such
Stockholder's shares. The shares of Company Common Stock of such Stockholder are
now, and at all times prior to the Effective Time will be, owned as indicated on
Schedule 3.4 by such Stockholder, free and clear of all Encumbrances.
SECTION 4.5. NON-REGISTRATION OF SECURITIES; PURCHASE FOR
INVESTMENT ONLY.
(a) The Merger Stock issued to such Stockholder will be acquired
for investment for such Stockholder's own account, not as a nominee or agent,
and not with a view to the sale or distribution of any part thereof, and such
Stockholder has no present intention of selling, granting any participation in,
or otherwise distributing the same. Such Stockholder represents that the legal
and beneficial interest of the Merger Stock issued to such Stockholder
(including the Escrow Stock) will be held for such Stockholder's account only,
and neither in whole or in part for any other person. Such Stockholder further
represents that such Stockholder has no present contract, undertaking, agreement
or arrangement with any person to sell, transfer, or grant participation to such
person or to any third person, with respect to any of the Merger Stock.
(b) Such Stockholder understands and acknowledges that the
offering of the Merger Stock pursuant to the Merger Agreement is being conducted
on the basis of an exemption from registration under the Securities Act and that
the
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Acquiror's reliance upon such exemption is predicated upon such Stockholder's
representations.
SECTION 4.6. ABILITY OF STOCKHOLDER TO EVALUATE INVESTMENT AND BEAR
ECONOMIC RISK.
Such Stockholder further represents that he: (a) has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of such Stockholder's prospective investment in
the Merger Stock and such Stockholder's liabilities and obligations under this
Agreement; (b) has received all of the information he has requested from the
Acquiror for deciding whether to accept the Merger Stock; (c) has the ability to
bear the economic risks of such Stockholder's prospective investment; (d) is
able, without materially impairing his financial condition, to hold the Merger
Stock for an indefinite period of time and to suffer complete loss on his
investment; and (e) has been given sufficient time and opportunity to seek the
advice of counsel regarding such Stockholder's liabilities and obligations
hereunder.
SECTION 4.7. WAIVER OF DISSENTER'S RIGHTS.
Such Stockholder, by executing this Agreement, approves the
Merger and hereby waives any dissenter's rights to receive payment of the
appraisal value of such shares of the Company Common Stock held by them pursuant
to Section 262 of the DGCL.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION.
Acquiror is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Acquiror has the
requisite power and authority to own, lease and operate its Assets and
properties and to carry on its business as it is now being conducted and to
perform the terms of this Agreement and the transaction
contemplated hereby. Acquiror is duly qualified to conduct its business, and is
in good standing, in each jurisdiction where the ownership or leasing of its
properties or the nature of its activities in connection with the conduct of its
business makes such qualification necessary.
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SECTION 5.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
Acquiror has heretofore delivered to the Company a complete and
correct copy of the certificate of incorporation and the bylaws of Acquiror,
each as amended to date. Such certificate of incorporation and bylaws are in
full force and effect. Acquiror is not in violation of any of the provisions of
its certificate of incorporation or bylaws.
SECTION 5.3. CAPITALIZATION.
The authorized capital stock of Acquiror consists of: (i) twenty
million (20,000,000) shares of Acquiror Common Stock, of which eight million
nine hundred forty-six thousand eight hundred seventy-one (8,946,871) shares are
issued and outstanding; and (ii) five million (5,000,000) shares of preferred
stock, par value $.01 per share, of which two million twelve thousand eight
hundred sixty-one (2,012,861) shares are issued and outstanding. Except as set
forth in Schedule 5.3 there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of Acquiror or obligating Acquiror to issue or sell
any shares of capital stock of, or other equity interests in Acquiror, including
any securities directly or indirectly convertible into or exercisable or
exchangeable for any capital stock or other equity securities of Acquiror. There
are no outstanding obligations of Acquiror to repurchase, redeem or otherwise
acquire any shares of its capital stock or make any investment (in the form of a
loan, capital contribution or otherwise) in any other person. All of the issued
and outstanding shares of Acquiror Common Stock have been, and the shares of
Acquiror Common Stock to be issued in the Merger will be, duly authorized and
validly issued in accordance with applicable laws and are and will be fully paid
and nonassessable and not subject to preemptive rights. Except as set forth in
Schedule 5.3, no shares of capital stock of Acquiror have been reserved for any
purpose.
SECTION 5.4. AUTHORITY.
Acquiror has the necessary corporate power and authority to enter
into this Agreement and the Related Agreements, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Related
Agreements by Acquiror and the consummation by Acquiror of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Acquiror are
necessary to authorize this Agreement and the Related Agreements or to
consummate the transactions contemplated hereby and thereby. This Agreement and
the Related Agreements have been duly executed and delivered by Acquiror and,
assuming the due authorization, execution and delivery by the Company,
constitute legal, valid and
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binding obligations of Acquiror, enforceable in accordance with their terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity.
SECTION 5.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement and the Related
Agreements by Acquiror do not, and the performance by Acquiror of its
obligations under this Agreement and the Related Agreements will not, (i)
conflict with or violate the certificate of incorporation, bylaws or other
organizational document of Acquiror, (ii) conflict with or violate any Laws
applicable to Acquiror or its Assets, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Acquiror is a party or by which Acquiror is bound, or by which any of
its Assets is subject.
(b) The execution and delivery of this Agreement and the Related
Agreements by Acquiror does not, and the performance of this Agreement by
Acquiror will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any third party or any court, arbitral tribunal,
administrative agency or commission or Government Entity, except for the filing
and recordation of appropriate merger documents as required by the DGCL.
SECTION 5.6. ACQUIROR FINANCIAL STATEMENTS; NO LIABILITIES.
The Acquiror has furnished to the Company (a) the audited balance
sheets of the Acquiror as of December 31, 1995, and 1996, and the related
audited statements of income and cash flows for the fiscal years then ended
(such audited financial statements, including the schedules and notes thereto,
collectively, the "Acquiror Audited Financial Statements"); and (b) the
unaudited balance sheet of the Acquiror as of December 31, 1997, and the
unaudited statements of income and cash flows for the year then ended (such
unaudited financial statements, collectively, the "Acquiror Unaudited Financial
Statements" and together with the Audited Acquiror Financial Statements, the
"Acquiror Financial Statements"). The Acquiror Financial Statements referred to
in this Section 5.6, including the related schedules and notes, present fairly
the financial condition of the Acquiror as of their respective dates and the
results of operations and cash flows for the respective periods indicated and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as otherwise noted in the notes thereto
and that the Acquiror Unaudited Financial Statements do not contain all required
footnotes and are subject to normal recurring year-end adjustments). Except as
reflected in the Acquiror Unaudited Financial Statements as of the
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Balance Sheet Date, Acquiror has no liabilities, contingent or absolute, matured
or unmatured, known or unknown, except for liabilities incurred in the ordinary
course of business since the Balance Sheet Date, none of which, individually or
in the aggregate, would have an Acquiror Material Adverse Effect.
SECTION 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since the Balance Sheet Date, there has been no Acquiror Material
Adverse Effect and Acquiror has conducted its business in the ordinary course,
and Acquiror has not (a) paid any dividend or distribution in respect of, or
redeemed or repurchased any of, its capital stock; (b) issued any capital stock,
bonds or other corporate securities or debt instruments, granted any options,
warrants or other rights calling for the issuance thereof, or borrowed any
funds; (c) incurred loss of, or significant injury to, any of the Assets as the
result of any fire, explosion, flood, windstorm, earthquake, labor trouble,
riot, accident, act of God or public enemy or armed forces, or other casualty;
(d) incurred, or become subject to, any obligation or liability (absolute or
contingent, matured or unmatured, known or unknown), except current liabilities
incurred in the ordinary course of business; (e) mortgaged, pledged or subjected
to any Encumbrance any of the Assets; (f) sold, exchanged, transferred or
otherwise disposed of any of its Assets except in the ordinary course of
business, or canceled any debts or claims; (g) written down the value of any
Assets or written off as uncollectible any accounts receivable, except write
downs and write-offs in the ordinary course of business, none of which,
individually or in the aggregate, are material; (h) entered into any
transactions other than in the ordinary course of business; (i) made any change
in any method of accounting or accounting practice; or (j) made any agreement to
do any of the foregoing.
SECTION 5.8. ABSENCE OF LITIGATION.
There are (a) no claims, actions, suits, investigations, or
proceedings pending or, to Acquiror's knowledge, threatened against Acquiror or
any of its properties or Assets before any court, administrative, governmental,
arbitral, mediation or regulatory authority or body, domestic or foreign, that
challenge or seek to prevent, enjoin, alter or materially delay the transactions
contemplated hereby, or which, if determined adversely against Acquiror or
Merger Sub would have an Acquiror Material Adverse Effect, and (b) no judgments,
decrees, injunctions or orders of any Government Entity or arbitrator
outstanding against Acquiror or any of its properties or Assets which would have
an Acquiror Material Adverse Effect. The United States Securities and Exchange
Commission (the "Commission") has not issued an order preventing or suspending
the right of the Acquiror or any affiliate of the Acquiror from being engaged in
any offer or sale of any securities, nor instituted proceedings for that purpose
nor to Acquiror's knowledge, are any such proceedings contemplated by the
Commission.
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SECTION 5.9. TAXES AND ASSESSMENTS.
Except as set forth on Schedule 5.9, Acquiror has duly and timely
paid all Taxes which have become due and payable by it. Acquiror has not
received notice of, nor does Acquiror have any knowledge of, any notice of
deficiency or assessment or proposed deficiency or assessment from any taxing
Government Entity. To Acquiror's knowledge, there are no audits pending and
there are no outstanding agreements or waivers by Acquiror that extend the
statutory period of limitations applicable to any federal, state, local, or
foreign tax returns or Taxes.
SECTION 5.10. PERMITS.
Acquiror holds all licenses and permits from Government Entities
which are necessary for the conduct of its business, except where the failure to
hold any such license or permit would not have an Acquiror Material Adverse
Effect.
SECTION 5.11. LABOR.
(a) Acquiror is in compliance in all material respects with all
provisions of ERISA presently applicable to Acquiror; no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) of Acquiror for which the Acquiror would have any material liability;
Acquiror has not incurred and does not reasonably expect to incur material
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Section 412 or 4971 of the Code; and
each "pension plan" for which Acquiror would have any liability that is intended
to be qualified under Section 401(a) of the Code is so qualified in all material
respects and, to Acquiror's knowledge, nothing has occurred, whether by action
or by failure to act, which would reasonably be expected to cause the loss of
such qualification.
(b) No material labor dispute between Acquiror and its employees
exists as of the date hereof, and Acquiror is not aware that any material labor
dispute with its employees is imminent.
SECTION 5.12. BROKERS.
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Acquiror.
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SECTION 5.13. DISCLOSURE.
No representations or warranties by Acquiror in this Agreement
and no statement or information contained in the Schedules hereto or any
certificate furnished or to be furnished by Acquiror to the Company pursuant to
the provisions of this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state any fact necessary, in light
of the circumstances under which it was made, in order to make the statements
herein or therein not misleading.
SECTION 5.14. REORGANIZATION TREATMENT.
Neither Acquiror nor the Merger Sub has taken, agreed to take, or
intends to take any action that would cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368 of the Code.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF MERGER SUB
Acquiror and Merger Sub jointly and severally represent and
warrant to the Company and the Stockholders as follows:
SECTION 6.1. ORGANIZATION AND QUALIFICATION.
Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Merger Sub was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement. As of the date of this Agreement, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement, Merger Sub has not incurred,
directly or indirectly, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
SECTION 6.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
Merger Sub has heretofore made available to the Company a
complete and correct copy of the certificate of incorporation and the bylaws of
Merger Sub, each as amended to date. Such certificate of incorporation and
bylaws are in full force and effect. Merger Sub is not in violation of any of
the provisions of its
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certificate of incorporation or bylaws or other organizational or governing
document.
SECTION 6.3. AUTHORITY.
Merger Sub has the necessary corporate power and authority to
enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Merger Sub and the consummation by Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Merger Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Merger Sub and, assuming the due authorization, execution and
delivery by the Company and Acquiror, constitutes a legal, valid and binding
obligation of Merger Sub, enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
SECTION 6.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Merger Sub do
not, and the performance by Merger Sub of its obligations under this Agreement
will not, (i) conflict with or violate the certificate of incorporation or
bylaws of Merger Sub, (ii) conflict with or violate any Laws applicable to
Merger Sub or its Assets, or (iii) result in any breach of or constitute a
default under any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Merger Sub
is a party or by which Merger Sub is bound, or by which any of its Assets is
subject.
(b) The execution and delivery of this Agreement by Merger Sub
does not, and the performance of this Agreement by Merger Sub will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Government Entity, except for the filing and recordation of
appropriate merger documents as required by the DGCL.
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ARTICLE VII
COVENANTS
SECTION 7.1. AFFIRMATIVE COVENANTS OF THE COMPANY.
The Company hereby covenants and agrees that, prior to the
Effective Time, unless otherwise expressly contemplated by this Agreement or
consented to in writing by Acquiror, the Company shall (a) operate its business
in the usual and ordinary course consistent with past practices and in
accordance with applicable Laws; (b) preserve substantially intact its business
organization, maintain its rights and contracts, use its best efforts to retain
the services of its respective principal officers and key employees and maintain
its relationship with its respective suppliers, contractors, distributors,
customers and others having business relationships with it; (c) keep its Assets
in as good repair and condition as at present, ordinary wear and tear excepted;
and (d) keep in full force and effect insurance comparable in amount and scope
of coverage to that currently maintained.
SECTION 7.2. NEGATIVE COVENANTS OF THE COMPANY.
Except as expressly contemplated by this Agreement or otherwise
consented to in writing by Acquiror, from the date hereof until the Effective
Time, the Company shall not do any of the following:
(a) (i) increase the compensation payable to or to become payable
to any of its directors, officers or employees; (ii) grant any severance or
termination pay to, or enter into or modify any employment or severance
agreement with, any of its directors, officers or employees; or (iii) adopt or
amend any employee benefit plan or arrangement, except as may be required by
applicable Law;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of, any of its capital stock;
(c) (i) redeem, repurchase or otherwise reacquire any share of
its capital stock or any securities or obligations convertible into or
exchangeable for any share of its capital stock, or any options, warrants or
conversion or other rights to acquire any shares of its capital stock or any
such securities or obligations; (ii) effect any reorganization or
recapitalization; or (iii) split, combine or reclassify any of its capital stock
or issue or authorize or propose the issuance of any other securities in respect
of, in lieu of, or in substitution for, shares of its capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale (including the grant of any
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Encumbrances) of, any shares of any class of its capital stock (including shares
held in treasury) or other equity securities, any securities or obligations
directly or indirectly convertible into or exercisable or exchangeable for any
such shares, or any rights, warrants or options to acquire, any such shares or
securities or any rights, warrants or options directly or indirectly to acquire
any such shares or securities; or (ii) amend or otherwise modify the terms of
any such securities, obligations, rights, warrants or options in a manner
inconsistent with the provisions of this Agreement or the effect of which shall
be to make such terms more favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in or a portion of the Assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any Assets of any other person (other than the purchase of inventory
in the ordinary course of business and consistent with past practice), or make
or commit to make any capital expenditures;
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of its Assets;
(g) propose or adopt any amendments to its certificate of
incorporation or bylaws;
(h) (i) change any of its methods of accounting in effect at
January 1, 1997, or (ii) make or rescind any express or deemed election relating
to taxes, settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, or change
any of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income tax
returns for the taxable years ending December 31, 1996 and 1997, except, in the
case of clause (i) or clause (ii), as may be required by law or generally
accepted accounting principles, consistently applied;
(i) prepay, before the scheduled maturity thereof, any of its
long-term debt, or incur any obligation for borrowed money, whether or not
evidenced by a note, bond, debenture or similar instrument, other than trade
payables incurred in the ordinary course of business consistent with past
practices.
(j) enter into or modify in any material respect any Contract;
(k) take any action that would or could reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being
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untrue or in any of the conditions to the Merger set forth in Article IX not
being satisfied; or
(l) agree in writing or otherwise to do any of the foregoing.
SECTION 7.3. NEGATIVE COVENANTS OF THE STOCKHOLDERS.
Each Stockholder covenants and agrees that such Stockholder will
not sell, transfer, pledge, assign or otherwise encumber or dispose of or enter
into any contract, option or other agreement with respect to, the sale,
transfer, pledge, assignment or other encumbrance or disposition of, any shares
of Company Common Stock or any other voting interests in the Company now owned
or hereafter acquired beneficially or of record by such Stockholder, except for
the conversion of any such shares in accordance with the terms of this
Agreement.
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1. CONSENTS AND APPROVALS; FILINGS AND NOTICES.
The Company shall use reasonable efforts to as promptly as
possible make all filings with, provide all notices to and obtain all consents
and approvals from third parties required to be obtained by the Company in
connection with the transactions contemplated hereunder, including all filings
with, notices to and consents and approvals from any Government Entities and
other persons.
SECTION 8.2. ACCESS TO INFORMATION.
The Company has afforded and shall afford Acquiror and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of the
Company's properties, books, contracts, commitments and records, and (b) all
other information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of the Company and as Acquiror may
reasonably request. The Company agrees to provide to Acquiror and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request. No information or knowledge obtained in any
investigation pursuant to this Section 8.2 shall affect or be deemed to modify
any representation or warranty of the Company or the Stockholders contained
herein. In the event of the termination of this Agreement, Acquiror shall
destroy or deliver to the Company all confidential documents, work papers and
other materials, and all copies thereof, obtained by Acquiror from the Company
as a result of this
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Agreement or in connection herewith, whether obtained before or after the
execution and delivery of this Agreement.
SECTION 8.3. CONFIDENTIALITY.
Each of the parties hereto hereby agrees that any and all
information or knowledge obtained pursuant to this Agreement, or pursuant to the
negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby shall be subject to the Mutual Non-Disclosure
Agreement dated November 5, 1997 (the "Nondisclosure Agreement") and the Letter
of Intent dated December 15, 1997 (the "Letter of Intent").
SECTION 8.4. FURTHER ACTION; REASONABLE BEST EFFORTS.
Subject to the terms and conditions herein provided, each of the
parties shall use reasonable best efforts to take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper or
advisable under applicable Laws or otherwise to consummate and make effective
the transactions contemplated by this Agreement as promptly as practicable,
including using its reasonable best efforts to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of Government
Entities and parties to contracts with the Company and Acquiror as are necessary
for the transactions contemplated herein.
SECTION 8.5. PUBLIC ANNOUNCEMENTS.
Acquiror and the Company agree that neither will issue any press
release or otherwise make any public statements concerning this Agreement or the
transactions contemplated hereby without the prior written consent of the other
party.
SECTION 8.6. NO SOLICITATION.
During the term of this Agreement, neither the Company, any
Stockholder nor any of their respective affiliates or any person acting on
behalf of such party shall (a) solicit or favorably respond to indications of
interest from, or enter into negotiations with, any third party for any proposed
merger, consolidation, sale or acquisition of the Company, the Assets or the
Company Common Stock or (b) furnish or cause to be furnished any nonpublic
information concerning the business to any person other than in the ordinary
course of business or pursuant to applicable Laws and after prior written notice
to Acquiror.
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SECTION 8.7. EMPLOYEES.
(a) The Company shall, subject to the terms and conditions of
this Agreement, use its reasonable efforts to encourage the current employees of
the Company and Contract Workers to continue their employment and relationship
with the Company following the Effective Time.
(b) Acquiror agrees that, as of the Effective Time, Acquiror
shall use reasonable efforts to cause the Surviving Corporation to continue to
employ or retain all of the employees and Contract Workers of the Company, it
being understood that nothing in this Agreement shall be deemed to create any
employment status other than employment at will.
SECTION 8.8. POOLING ACCOUNTING.
Acquiror and the Company shall each use its reasonable efforts to
cause the business combination to be effected by the Merger to be accounted for
as a pooling of interests. Each of Acquiror and the Company shall use its
reasonable efforts to cause its Affiliates not to take any action that would
adversely affect the ability of Acquiror to account for the business combination
to be effected by the Merger as a pooling of interests.
SECTION 8.9. ACQUIROR FINANCIAL STATEMENTS AND OTHER
INFORMATION
Commencing with the fiscal quarter ending March 31, 1998 and for
each fiscal quarter thereafter for so long as each Stockholder shall own at
least 80% of the Acquiror Common Stock issued to him in the Merger, Acquiror
shall deliver to such Stockholder an unaudited balance sheet and related
statements of operations and cash flows for such quarter. In addition, Acquiror
shall use reasonable efforts to keep the Stockholders' Representative informed
of the status of Acquiror's initial public offering. The provisions of this
Section 8.9 shall automatically terminate upon the completion of Acquiror's
initial public offering.
SECTION 8.10. STOCKHOLDERS' COVENANT NOT TO COMPETE
(a) Each Stockholder acknowledges that the business of the
Company and Acquiror are conducted throughout the United States, and
acknowledges and recognizes the highly competitive nature of the industry in
which such business is involved. Accordingly, in consideration of the premises
contained herein, the consideration to be received by the Stockholders hereunder
and their Employment Agreements, and in consideration of and as an inducement to
Acquiror to consummate the transactions contemplated hereby, each Stockholder
covenants
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and agrees that during the Noncompete Period (as defined below), such
Stockholder shall not, directly or indirectly: (i) engage in, participate in,
represent in any way or be connected with, as officer, director, partner, owner,
employee, agent, sales representative, distributor, independent contractor,
consultant, proprietor, stockholder or otherwise, any Competitive Business (as
defined below) in the United States; (ii) solicit (other than on behalf of the
Company or Acquiror) business or contracts for any products or services of the
type provided, developed or under development by the Company or Acquiror during
the Noncompete Period, from or with (A) any person or entity which was a client
of the Company or Acquiror for such products or services as of, or within twelve
(12) months prior to the expiration of, the Noncompete Period, or (B) any
prospective client which the Company or Acquiror was actively soliciting as of,
or within twelve (12) months prior to the expiration of, the Noncompete Period;
(iii) solicit or induce or attempt to solicit or induce any employee of the
Company or Acquiror to leave the employ of the Company or Acquiror for any
reason whatsoever, or hire any employee or any person who was an employee of the
Company or Acquiror within the twelve (12) month period prior to such hiring
(provided it shall not be a breach of this Section 8.10 to unknowingly hire any
such employee or person if upon notice and evidence of such former employment,
such Shareholder or other entity terminates its employment of, and any other
business relationship with, such individual); or (iv) interfere with, disrupt or
attempt to disrupt the relationship, contractual or otherwise, between the
Company or Acquiror and any third party, including, without limitation, any
customer, supplier or employee of the Company or Acquiror.
The "Noncompete Period" for each Stockholder shall mean the
period from and after the Effective Time until the later to occur of (i) two (2)
years after the Effective Time, or (ii) one (1) year after the effective date of
termination of such Stockholder's employment or Employment Agreement with the
Company or Acquiror. A "Competitive Business" shall mean any business in which
the Company or Acquiror is engaged at any time during the Noncompete Period,
including without limitation, the business of providing internet-based solutions
for business.
(b) The covenants contained in this Section 8.10 shall be
construed as a series of separate and severable covenants which are identical in
terms except for geographic coverage. The parties hereto agree that if in any
proceeding, the tribunal shall refuse to enforce fully any covenants contained
herein because such covenants cover too extensive a geographic area or too long
a period of time or for any other reason whatsoever, any such covenant shall be
deemed amended to the extent (but only to the extent) required by law. Each
party acknowledges that the covenants contained in this Section 8.10 are
reasonable and necessary to protect the business and interests of the Company
and Acquiror and that any violation of these covenants would cause substantial
irreparable injury. Accordingly, each party agrees that a remedy at law for any
breach of the foregoing covenants would be
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inadequate and that the Company and Acquiror, in addition to any other remedies
available, shall be entitled to obtain preliminary and permanent injunctive
relief to secure specific performance of such covenants and to prevent a breach
or contemplated breach of such covenants without the necessity of proving actual
damage.
(c) The obligations of each Stockholder under this Section 8.10
shall survive the Effective Time of the Merger and the termination of such
Stockholder's Employment Agreement.
ARTICLE IX
CLOSING CONDITIONS
SECTION 9.1. CONDITIONS TO OBLIGATIONS OF THE PARTIES.
The respective obligations of the parties hereto to effect the
Merger and the other transactions contemplated herein shall be subject to the
satisfaction at or prior to the Effective Time of the following condition, which
may be waived, in whole or in part, to the extent permitted by applicable law:
(a) Legal Proceedings. No action or proceeding before any
Government Entity shall have been instituted or threatened (and not subsequently
settled, dismissed, or otherwise terminated) which is reasonably expected to
restrain, prohibit or invalidate the Merger or other transactions contemplated
by this Agreement other than an action or proceeding instituted or threatened by
a party hereto.
SECTION 9.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR.
The obligations of Acquiror and Merger Sub to effect the Merger
and the other transactions contemplated in this Agreement are also subject to
the fulfillment at or prior to the Effective Time of the following conditions,
any or all of which may be waived, in whole or in part, to the extent permitted
by applicable law:
(a) Representations and Warranties. The representations and
warranties of the Company and the Stockholders made in this Agreement shall be
true and correct in all material respects, on and as of the Effective Time with
the same effect as though such representations and warranties had been made on
and as of the Effective Time (provided that any representation or warranty
contained herein that is qualified by a materiality standard shall not be
further qualified hereby), except for representations and warranties that speak
as of a specific date or time (which need only be true and correct in all
material respects as of such date
35
44
or time). Acquiror shall have received a certificate signed on behalf of the
Company by the chief executive officer of the Company to that effect with
respect to the Company's representations and warranties and a certificate signed
by each Stockholder to that effect with respect to such Stockholder's
representations and warranties.
(b) Agreements and Covenants. The agreements and covenants of the
Company and the Stockholders required to be performed on or before the Effective
Time shall have been performed in all material respects. Acquiror shall have
received a certificate signed on behalf of the Company by the chief executive
officer of the Company to that effect with respect to the Company's covenants
and agreements and a certificate signed by each Stockholder to that effect with
respect to such Stockholder's covenants and agreements.
(c) No Company Material Adverse Effect. Since the date of this
Agreement, no Company Material Adverse Effect shall have occurred and be
continuing.
(d) Required Consents. The Company shall have delivered to
Acquiror at or before Closing all consents or notices necessary to be obtained
or made by the Company in connection with the transactions contemplated by this
Agreement.
(e) Pooling of Interests. Acquiror shall have received reasonable
assurances from Price Waterhouse, in form and substance reasonably satisfactory
to Acquiror that the Merger will qualify as a "pooling of interests" in
accordance with generally accepted accounting principles.
(f) Escrow Agreement. Acquiror, Merger Sub, the Escrow Agent and
the Stockholders' Representative shall have entered into the Escrow Agreement at
or before Closing in a form substantially similar to Exhibit A, pursuant to
which the Escrow Stock shall have been retained in escrow.
(g) Legal Opinion. Acquiror shall have received an opinion from
Pitney, Xxxxxx, Xxxx & Xxxxx, counsel to the Company, substantially in the form
of Exhibit B hereto.
(h) Employment Agreements. The Employment Agreements shall remain
in full force and effect.
(i) Other Closing Documents. The Company shall have executed
and/or delivered to Acquiror such additional documents, certificates, opinions
and agreements as Acquiror may reasonably request.
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45
SECTION 9.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY AND
THE STOCKHOLDERS.
The obligations of the Company and the Stockholders to effect the
Merger and the other transactions contemplated in this Agreement are also
subject to the fulfillment at or prior to the Effective Time of the following
conditions any or all of which may be waived, in whole or in part, to the extent
permitted by applicable law:
(a) Representations and Warranties. The representations and
warranties of Acquiror and Merger Sub made in this Agreement shall be true and
correct in all material respects, on and as of the Effective Time with the same
effect as though such representations and warranties had been made on and as of
the Effective Time (provided that any representation or warranty contained
herein that is qualified by a materiality standard shall not be further
qualified hereby), except for representations and warranties that speak as of a
specific date or time other than the Effective Time (which need only be true and
correct in all material respects as of such date or time). The Company and the
Stockholders shall each have received a certificate of the chief executive
officer of Acquiror to that effect.
(b) Agreements and Covenants. The agreements and covenants of
Acquiror and Merger Sub required to be performed on or before the Effective Time
shall have been performed in all material respects. The Company and the
Stockholders shall each have received a certificate of the chief executive
officer of Acquiror to that effect.
(c) Legal Opinion. The Stockholders shall each have received (i)
an opinion from Acquiror's General Counsel, substantially in the form of Exhibit
C-1 hereto, and (ii) an opinion from Xxxxx & Xxxxxxx L.L.P., substantially in
the form of Exhibit C-2 hereto.
(d) No Acquiror Material Adverse Effect. Since the date of this
Agreement, no Acquiror Material Adverse Effect shall have occurred and be
continuing.
SECTION 9.4. WAIVER.
To the extent any condition precedent set forth in this Article
IX has not been satisfied as of the occurrence of the Effective Time, such
condition precedent shall be deemed to have been waived by the party which could
have required the same; provided, however, that the acceptance by any party
hereto of delivery of the certificates required by Sections 9.2(a) and (b) and
Sections 9.3(a) and (b) shall not be deemed to waive any rights of such party
pursuant to Article XI hereof.
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ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1. TERMINATION.
This Agreement may be terminated at any time prior to the
Effective Time:
(a) by mutual written consent of Acquiror and the Company;
(b) by Acquiror if the Company or any Stockholder shall have
breached any of its representations, warranties, covenants or agreements
contained in this Agreement, or any such representation or warranty shall have
become untrue, in any such case such that the conditions precedent to the
obligations of Acquiror to close specified in Section 9.2 will not be satisfied
and such breach has not been promptly cured within thirty (30) days following
receipt by the Company of written notice of such breach;
(c) by either the Company or any Stockholder if Acquiror or
Merger Sub shall have breached any of its representations, warranties, covenants
or agreements contained in this Agreement, or any such representation or
warranty shall have become untrue, in any such case such that the conditions
precedent to the obligation of the Company and the Stockholders to close
specified in Section 9.3, will not be satisfied and such breach has not been
promptly cured within thirty (30) days following receipt by Acquiror of written
notice of such breach;
(d) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Government Entity preventing or prohibiting consummation of
the Merger shall have become final and nonappealable; or
(e) by either Acquiror or the Company if the Effective Time has
not occurred on or prior to March 31, 1998 (unless such date shall be extended
by the mutual written consent of the parties); provided, that the right to
terminate this Agreement under this Section 10.1(e) shall not be available to
any party whose breach of representations, warranties, covenants or agreements
contained in this Agreement has been the sole cause of, or resulted in, the
failure of the Effective Time to occur by such date or the inability of such
condition to be satisfied.
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SECTION 10.2. EFFECT OF TERMINATION.
If this Agreement is terminated pursuant to Section 10.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any party hereto, except that the provisions of
Sections 3.25, 8.3 and 12.11 shall not be extinguished but shall survive such
termination, and nothing herein shall relieve any party from liability for any
breach hereof and each party shall be entitled to any remedies at law or in
equity for such breach.
SECTION 10.3. AMENDMENT.
This Agreement may not be amended except by an instrument in
writing signed by the Company, Acquiror, Merger Sub and the Stockholders'
Representative.
SECTION 10.4. WAIVER.
At any time prior to the Effective Time, one party may (a) extend
the time for the performance of any of the obligations or other acts of the
other party, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement of the other party and (c) waive compliance by the other party with
any of the agreements or conditions contained in this Agreement. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS; ESCROW ARRANGEMENTS;
REMEDIES
SECTION 11.1. SURVIVAL OF REPRESENTATIONS.
All representations, warranties, covenants, indemnities and other
agreements made by any party to this Agreement herein, shall be deemed made on
and as of the Effective Time as though such representations, warranties,
covenants, indemnities and other agreements were made on and as of such date,
and all such representations, warranties, covenants, indemnities and other
agreements shall survive for a period of eighteen (18) months after the
Effective Time; provided, that the covenants and agreements of the Stockholders
contained in Section 8.10 hereof shall survive for the period of time set forth
therein. Notwithstanding anything herein to the contrary, any representation,
warranty, covenant, agreement or indemnity which is the subject of a claim which
is asserted in writing prior to the
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expiration of the applicable period set forth above shall survive solely with
respect to such claim until the final resolution thereof.
SECTION 11.2. INDEMNIFICATION BY THE STOCKHOLDERS; ESCROW
ARRANGEMENTS.
Each Stockholder, jointly and severally, hereby agrees to
indemnify and hold Acquiror and the Surviving Corporation (collectively, the
"Acquiror Indemnified Persons") harmless against all Losses resulting from,
imposed upon or incurred by any Acquiror Indemnified Person, directly or
indirectly, as a result of (a) any inaccuracy or breach of a representation or
warranty of the Company or any Stockholder, or (b) any failure by the Company or
any Stockholder to perform or comply with any covenant or agreement contained in
this Agreement or in any Related Agreement; provided, however, that except for
Losses arising out of a willful or intentional breach of representations,
warranties or covenants by the Company or any Stockholder, none of which shall
be subject to the following limitation, no Stockholder shall have liability
under Section 11.2 unless and until the aggregate amount of claims for Losses
asserted under such Section exceeds thirty thousand dollars ($30,000) and then
only to the extent of such excess (subject to the other limitations set forth
herein). The Escrow Stock shall be available to the Acquiror Indemnified Persons
to compensate them for any such Losses pursuant to the terms and conditions of
the Escrow Agreement. The Escrow Stock shall in no way be deemed to be a
limitation on the recourse available to the Acquiror Indemnified Persons for the
indemnification obligations of the Stockholders hereunder; provided, however, in
no event shall the aggregate amount of liability of the Stockholders for Losses
in excess of the Escrow Stock (except for Losses arising out of a willful or
intentional breach of representations, warranties or covenants by the Company or
any Stockholder), exceed two hundred fifty-five thousand one hundred ninety-five
dollars ($255,195). No Losses shall be deemed to have been paid which might
otherwise be subject to indemnification hereunder to the extent of any proceeds
Acquiror or the Surviving Corporation receives from any insurance policies owned
by any Stockholder or the Company prior to the Effective Time.
SECTION 11.3. INDEMNIFICATION BY ACQUIROR.
Acquiror hereby agrees to indemnify and hold the Stockholders
harmless against all Losses resulting from, imposed upon or incurred by any
Stockholder, directly or indirectly, as a result of (a) any inaccuracy or breach
of a representation or warranty of Acquiror or Merger Sub or (b) any failure by
Acquiror or Merger Sub to perform or comply with any covenant or agreement
contained in this Agreement or in any Related Agreement; provided, however, that
except for Losses arising out of a willful or intentional breach of
representations, warranties or covenants by Acquiror, none of which shall be
subject to the following limitation,
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49
Acquiror shall not have any liability under Section 11.3 except to the extent
that the aggregate amount of claims for Losses asserted under such Section
exceeds Thirty Thousand Dollars ($30,000) and then only to the extent of such
excess (subject to the other limitations set forth herein). No Losses shall be
deemed to have been paid which might otherwise be subject to indemnification
hereunder to the extent of any proceeds any Stockholder receives from any
insurance policies owned by the Company or any Stockholder prior to the
Effective Time. The aggregate amount of liability of Acquiror for Losses
asserted under this Section 11.3 (except for Losses arising out of a willful or
intentional breach of representations, warranties or covenants by Acquiror),
shall not exceed five hundred ten thousand three hundred ninety dollars
($510,390).
SECTION 11.4. THIRD PARTY CLAIMS.
The obligations and liabilities of the parties hereto with
respect to their respective indemnities pursuant to this Article XI, resulting
from any Third Party Claim shall be subject to the following terms and
conditions:
(a) The party seeking indemnification (the "Indemnified Party")
must give the other party (the "Indemnifying Party"), notice of any Third Party
Claim which is asserted against, resulting to, imposed upon or incurred by the
Indemnified Party and which may give rise to liability of the Indemnifying Party
pursuant to this Article XI, stating (to the extent known or reasonably
anticipated) the nature and basis of such Third Party Claim and the amount
thereof; provided that the failure to give such notice shall not affect the
rights of the Indemnified Party hereunder except to the extent (i) that the
Indemnifying Party shall have suffered actual material damage by reason of such
failure, or (ii) such failure or delay materially adversely affects the ability
of the Indemnifying Party to defend, settle or compromise such Third Party
Claim.
(b) Subject to Section 11.4(c) below, if the Indemnifying Party
assumes responsibility for Losses arising out of such Third Party Claim, then
the Indemnifying Party shall have the right to undertake, by counsel or other
representatives of its own choosing, the defense of such Third Party Claim at
the Indemnifying Party's risk and expense.
(c) In the event that (i) the Indemnifying Party shall elect not
to undertake such defense, (ii) within a reasonable time after notice from the
Indemnified Party of any such Third Party Claim, the Indemnifying Party shall
fail to undertake to defend such Third Party Claim, (iii) there is a reasonable
probability that such Third Party Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other money
payments, or (iv) there is a reasonable probability that the amount of Losses
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asserted under such Third Party Claim may exceed the Indemnifying Party's
obligations under this Article XI, then the Indemnified Party (upon further
written notice to the Indemnifying Party) shall have the right to undertake the
defense, compromise or settlement of such Third Party Claim, by counsel or other
representatives of its own choosing, on behalf of and for the account and risk
of the Indemnifying Party. In the event that the Indemnified Party undertakes
the defense of a Third Party Claim under this Section 11.4(c), the Indemnifying
Party shall pay to the Indemnified Party, in addition to the other sums required
to be paid hereunder, the reasonable costs and expenses incurred by the
Indemnified Party in connection with such defense, compromise or settlement as
and when such costs and expenses are so incurred.
(d) Anything in this Section 11.4 to the contrary
notwithstanding, (i) neither Party shall, without the other party's written
consent (which consent shall not be unreasonably withheld or delayed), settle or
compromise such Third Party Claim or consent to entry of any judgment which does
not include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such Third Party Claim in form and substance satisfactory to the Indemnified
Party; (ii) in the event that a party hereto undertakes defense of such Third
Party Claim in accordance with this Section 11.4, the other parties, by counsel
or other representative of their own choosing and at their sole cost and
expense, shall have the right to participate in the defense, compromise or
settlement thereof and each party and its counsel and other representatives
shall cooperate with the other party and its counsel and representatives in
connection therewith; and (iii) the party that undertakes the defense of such
Third Party Claim in accordance with this Section 11.4, shall have an obligation
to keep the other parties informed of the status of the defense of such Third
Party Claim and furnish the other parties with all documents, instruments and
information that the other parties shall reasonably request in connection
therewith.
(e) Any claim for indemnification under this Article XI must be
made (i) on or prior to the Claims Deadline (as defined in the Escrow Agreement)
for any claims against the Escrow Stock, and (ii) on or prior to eighteen (18)
months after the Effective Time otherwise.
SECTION 11.5. REMEDIES CUMULATIVE
Subject to the limitations and qualifications set forth in this
Article XI, the remedies provided herein shall be cumulative and shall not
preclude the assertion by the parties hereto of any other rights or the seeking
of any other remedies against the other, or their respective successors or
assigns.
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ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1. NOTICES.
All notices, demands, requests, or other communications which may
be or are required to be given, served, or sent by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered, sent
by overnight courier or mailed by first-class, registered or certified mail,
return receipt requested, postage prepaid, or transmitted by telegram, telecopy
or telex, addressed as follows:
(a) If to Acquiror:
Proxicom, Inc.
00000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxxxxxx Xxxxxxx, Esq.,
General Counsel
With a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx L.L.P.
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X.X. Xxxxxx, Xx.
(b) If to the Company:
Square Earth, Inc.
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx
Chief Executive Officer
With a copy (which shall not constitute notice) to:
Pitney, Xxxxxx, Xxxx & Xxxxx
X.X. Xxx 0000
- 00 -
00
Xxxxxxxxxx, Xxx Xxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
(c) If to the Stockholders:
Xxxxxxx Xxxxx
c/o Square Earth, Inc.
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Xxxxx Xxxxxxxxxxx
c/o Square Earth, Inc.
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Xxxxxxx Xxxxxxx
c/o Square Earth, Inc.
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Each party may designate by notice in writing a new address to
which any notice, demand, request or communication may thereafter be so given,
served or sent. Each notice, demand, request, or communication which shall be
hand delivered, sent, mailed, telecopied or telexed in the manner described
above, or which shall be delivered to a telegraph company, shall be deemed
sufficiently given, served, sent, received or delivered for all purposes at such
time as it is delivered to the addressee (with the return receipt, the delivery
receipt, or (with respect to a telecopy or telex) the answerback being deemed
conclusive, but not exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
SECTION 12.2. CERTAIN DEFINITIONS.
For purposes of this Agreement, the term:
(a) "Acquiror Material Adverse Effect" means any material
adverse effect on the Assets or the business, financial condition or results of
operations of Acquiror.
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(b) "affiliate" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
(c) "Assets" shall mean the assets, rights and properties,
whether owned, leased or licensed, real, personal or mixed, tangible or
intangible, that are used, useful or held for use in connection with the
business of an entity.
(d) "business day" shall mean any day other than a day on which
banks in the Commonwealth of Virginia are authorized or obligated to be closed.
(e) "Company Material Adverse Effect" means any material adverse
effect on the Assets or the business, financial condition or results of
operations of the Company.
(f) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise.
(g) "Encumbrances" means mortgages, liens, pledges,
encumbrances, security interests, deeds of trust, options, encroachments,
reservations, orders, decrees, judgments, restrictions, charges, contract
rights, claims or equity of any kind.
(h) "Government Entity" means any United States or other
national, state, municipal or local government, domestic or foreign, any
subdivision, agency, entity, commission or authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or other governmental or quasi-governmental authority.
(i) "Laws" means all foreign, federal, state and local laws,
statutes, regulations and rules applicable to the specified person or entity,
and all resolutions, orders, determinations, writs, injunctions, awards
(including, without limitation, awards of any arbitrator), judgments and decrees
applicable to the specified persons or entities.
(j) "Losses" means all demands, losses, claims, actions or
causes of action, assessments, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and reasonable attorneys'
fees and disbursements.
(k) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended).
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(l) "Subsidiary" means any corporation, partnership, joint
venture or other legal entity of which such person (either alone or through or
together with any other Subsidiary) (i) owns, directly or indirectly, fifty
percent (50%) or more of the stock, partnership interests or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation,
partnership, joint venture or other legal entity; or (ii) possesses, directly or
indirectly, control over the direction of management or policies of such
corporation, partnership, joint venture or other legal entity (whether through
ownership of voting securities, by agreement or otherwise).
(m) "Taxes" shall mean all federal, state, local and foreign
taxes (including income, profit, franchise, sales, use, real property, personal
property, ad valorem, excise, employment, social security and wage withholding
taxes) and installments of estimated taxes, assessments, deficiencies, levies,
imports, duties, license fees, registration, fees, withholdings or other similar
charges of every kind, character or description imposed by any governmental
authorities, and any interest, penalties or additions to tax imposed thereon or
in connection therewith.
(n) "Third Party Claim" means any claim or other assertion of
liability by any third party.
SECTION 12.3. HEADINGS.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 12.4. SEVERABILITY.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 12.5. ENTIRE AGREEMENT.
This Agreement (together with the Exhibits, the Schedules and the
other documents delivered pursuant hereto), together with the Related
Agreements,
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55
the Nondisclosure Agreement and the Letter of Intent constitute the entire
agreement of the parties and supersede all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other person any rights or remedies hereunder.
SECTION 12.6. SPECIFIC PERFORMANCE.
The transactions contemplated by this Agreement are unique.
Accordingly, each of the parties acknowledges and agrees that, in addition to
all other remedies to which it may be entitled, each of the parties hereto is
entitled to a decree of specific performance, provided such party is not in
material default hereunder.
SECTION 12.7. ASSIGNMENT.
Neither this 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
party; provided, however, that Acquiror and Merger Sub shall have the right to
assign this Agreement without the prior written consent of the Company to a
direct or indirect subsidiary of Acquiror, but no such assignment shall relieve
Acquiror or Merger Sub, as the case may be, of its obligations hereunder.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
SECTION 12.8. THIRD PARTY BENEFICIARIES.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 12.9. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Virginia, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law, except
that, to the extent applicable, the laws of the State of Delaware shall govern
the effectiveness and effect of the Merger.
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56
SECTION 12.10.COUNTERPARTS.
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed and delivered shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement.
SECTION 12.11.FEES AND EXPENSES.
Except as otherwise provided for in this Agreement, each party
hereto shall pay its own fees, costs and expenses incurred in connection with
this Agreement and in the preparation for and consummation of the transactions
provided for herein.
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IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT
AND PLAN OF MERGER to be executed and delivered as of the date first written
above.
PROXICOM, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxxx
-----------------------------
Title: President and CEO
----------------------------
PROXICOM ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxx
-----------------------------
Title: President
----------------------------
SQUARE EARTH, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
-----------------------------
Title: President
----------------------------
STOCKHOLDERS
/s/ Xxxxxxx X. Xxxxx
----------------------------------
Xxxxxxx Xxxxx
/s/ Xxxxx Xxxxxxxxxxx
----------------------------------
Xxxxx Xxxxxxxxxxx
/s/ Xxxxxxx Xxxxxxx
----------------------------------
Xxxxxxx Xxxxxxx
