Exhibit 2.7
**Confidential portions have been omitted pursuant to a request for confidential
treatment and have been filed separately with the Securities and Exchange
Commission (the "Commission").**
AGREEMENT AND PLAN OF MERGER
AMONG
IRON MOUNTAIN INCORPORATED
IM-3 ACQUISITION CORP.
AND
INTERMATION, INC.
FEBRUARY 24, 1998
TABLE OF CONTENTS
1. DEFINITIONS...........................................................1
2. BASIC TRANSACTION.....................................................7
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................14
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSACTION SUBSIDIARY.......................................23
5. PRE-CLOSING COVENANTS................................................25
6. POST-CLOSING COVENANTS...............................................30
7. CONDITIONS TO OBLIGATION TO CLOSE....................................31
8. DELIVERIES AND ACTIONS AT CLOSING....................................34
9. TERMINATION..........................................................36
10. REMEDIES FOR BREACHES OF REPRESENTATIONS
AND WARRANTIES.......................................................37
11. MISCELLANEOUS........................................................41
The following schedules and exhibits have been omitted and will be
supplementally filed with the Commission upon request.
SCHEDULES
---------
Schedule 1 Designated Recipients
Schedule 2 Net Operating Income
Schedule 3 Principal Stockholders
Disclosure Schedule
EXHIBITS
--------
2(c)-1 Delaware Certificate of Merger
2(c)-2 Washington Articles of Merger
2(e)(i) Post Closing Escrow Agreement
2(e)(ii) Letter of Transmittal
3(f)-1 Articles of Incorporation of the Company
3(f)-2 Bylaws of the Company
5(e) Buyer Confidentiality Agreement
MERGER AGREEMENT
Agreement entered into on February 24, 1998, by and among Iron Mountain
Incorporated, a Delaware corporation (the "Buyer"), IM-3 Acquisition Corp., a
Delaware corporation and a wholly-owned Subsidiary of the Buyer (the
"Transaction Subsidiary"), and InterMation, Inc., a Washington corporation (the
"Company"). The Buyer, the Transaction Subsidiary and the Company are referred
to collectively herein as the "Parties".
This Agreement contemplates a transaction in which the Company will be
merged into the Transaction Subsidiary, the Company Stockholders will receive
cash and shares of Common Stock, par value $.01 per share, of the Buyer ("Buyer
Common Stock") in exchange for their Company Shares and the issued and
outstanding shares of the Transaction Subsidiary will remain issued and
outstanding, all as more fully set forth below.
The Board of Directors of the Company has unanimously determined that the
Merger (as defined in ss.2(a)) is in the best interests of the Company and the
Company Stockholders; and the Board of Directors of the Buyer has unanimously
approved this Agreement and the Merger on behalf of the Buyer and the
Transaction Subsidiary as a wholly-owned subsidiary of the Buyer, and the sole
Director of the Transaction Subsidiary has approved this Agreement and the
Merger.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS. The following capitalized terms shall have the indicated
meanings as used in this Agreement, unless the context clearly otherwise
requires.
"Accredited Investor" shall have the meaning given such term in Rule 501
under the Securities Act.
"Adjusted Merger Consideration" shall mean the net amount determined
pursuant to the following formula: (a) $24,500,000, (b) less the sum of: (1) the
amount, if any, determined pursuant to ss.2(d)(vii) below, (2) the amount
determined pursuant to ss.5(k) below, and (3) the excess legal fees, if any,
described in ss.11(k), (c) plus the sum of: (1) the Net Operating Income
Adjustment, if any, and (2) the aggregate exercise price of all Vested Rights
paid in cash to the Company upon the exercise of such Vested Rights between the
date hereof and the Closing.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliate Group" means any affiliated group within the meaning of Code
ss.1504(a).
"Buyer" has the meaning set forth in the preface above.
"Buyer Common Stock" has the meaning set forth in the preface above.
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"Buyer Confidentiality Agreement" has the meaning set forth in ss.5(e)
below.
"Buyer Net Operating Income Calculation" has the meaning set forth in
ss.10(b)(iii)(A) below.
"Claims" has the meaning set forth in ss.10 below.
"Closing" has the meaning set forth in ss.2(b) below.
"Closing Date" has the meaning set forth in ss.2(b) below.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of ERISA
and Code ss.4980B.
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Election" has the meaning set forth in ss.2(d)(ix) below.
"Common Stock" means the common stock, $0.01 par value per share, of the
Company.
"Company" has the meaning set forth in the preface above.
"Company Meeting" means the meeting of the Company Stockholders relating to
the approval of this Agreement.
"Company Net Operating Income Calculation" has the meaning set forth in
ss.5(o) below.
"Company Share" means any of the outstanding shares of the Common Stock.
"Company Stockholder" means any Person who or which holds any Company
Shares.
"Confidential Information" means any information defined as "Evaluation
Materials" in the Confidentiality Agreement or the Buyer Confidentiality
Agreement.
"Confidentiality Agreement" means that certain letter agreement between the
Company and the Buyer dated November 3, 1997.
"Delaware Certificate of Merger" has the meaning set forth in ss.2(c)
below.
"Delaware General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended.
"Designated Recipients" means those current or former Company Stockholders
identified on Schedule 1.
"Determination Price" shall mean the average closing price per share of
Buyer Common Stock for the period of 20 trading days ending two trading days
prior to the Closing Date.
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Notwithstanding the foregoing, (i) if the Closing Date occurs on or before **The
confidential portion has been so omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.** and (a) the
average closing price per share of Buyer Common Stock for such period is equal
to or less than **The confidential portion has been so omitted pursuant to a
request for confidential treatment and has been filed separately with the
Commission.**, then the Determination Price shall be **The confidential portion
has been so omitted pursuant to a request for confidential treatment and has
been filed separately with the Commission.** or (b) if the average closing price
per share of Buyer Common Stock for such period is equal to or greater than
**The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Commission.**,
then the Determination Price shall be **The confidential portion has been so
omitted pursuant to a request for confidential treatment and has been filed
separately with the Commission.**; and (ii) if the Closing Date occurs after
**The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Commission.** and
(a) the average closing price per share of Buyer Common Stock for such period is
equal to or less than **The confidential portion has been so omitted pursuant to
a request for confidential treatment and has been filed separately with the
Commission.**, then the Determination Price shall be **The confidential portion
has been so omitted pursuant to a request for confidential treatment and has
been filed separately with the Commission.**, or (b) if the average closing
price per share of Buyer Common Stock for such period is equal to or greater
than **The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Commission.**,
then the Determination Price shall be **The confidential portion has been so
omitted pursuant to a request for confidential treatment and has been filed
separately with the Commission.**. For purposes of calculating the Determination
Price, the closing price for each such trading day shall be the last quoted sale
price or, if not so quoted, the average of the low bid and high asked prices on
the Nasdaq National Market System. The calculation of Determination Price shall
be subject to equitable adjustment in the event of any stock split, stock
dividend, reverse stock split or other similar recapitalization with respect to
the Buyer Common Stock.
"Disclosure Schedule" has the meaning set forth in ss.3 below.
"Dissenting Share" means any Company Share with respect to which any
Company Stockholder has exercised his or its appraisal rights under the
Washington Business Corporation Act.
"Xxxxxxx Money Escrow Agent" means Chase Manhattan Bank & Trust Company,
N.A.
"Xxxxxxx Money Escrow Agreement" means that certain Escrow Agreement among
the Xxxxxxx Money Escrow Agent, the Buyer and the Company, dated December 9,
1997.
"Xxxxxxx Money Escrow Deposit" means the **The confidential portion has
been so omitted pursuant to a request for confidential treatment and has been
filed separately with the Commission.** xxxxxxx money escrow deposit deposited
by the Buyer with the Xxxxxxx Money Escrow Agent pursuant to the Xxxxxxx Money
Escrow Agreement.
"Xxxxxxx Money Escrow Fund" means the Xxxxxxx Money Escrow Deposit,
together with all interest or dividends accrued thereon.
"Effective Time" has the meaning set forth in ss.2(d)(i) below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement, (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit
Plan or Material fringe benefit or other retirement, bonus or incentive plan or
program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss.3(1).
"Enforceability Exceptions" has the meaning set forth in ss.3(c) below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"ERISA Affiliate" means each entity which is treated as a single employer
with the Company for purposes of Code ss.414.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means Xxxxx Xxxxxx Shareholder Services LLC, a Maryland
limited liability company.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Funded Indebtedness" means all indebtedness and other monetary obligations
of the Company, including all bank debt and all amounts payable to Company
Stockholders (other than amounts payable to Company Stockholders in respect of
their Company Shares), but excluding trade payables and capitalized lease
obligations. Funded Indebtedness payable as of the Closing Date will be listed
on a schedule delivered to the Buyer by the Company prior to the Closing as
further described in ss.5(l).
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Information Statement" means the Company's Information Statement dated
November 1, 1997.
"Intellectual Property" means (a) inventions (whether patentable or
unpatentable and whether or not reduced to practice) and all improvements
thereto, (b) trademarks, service marks, trade dress, logos, trade names, and
corporate names, and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) trade
secrets and confidential business information (including ideas, know-how, work
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (d) computer software (including data and
related documentation), (e) other proprietary rights, and (f) copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" with respect to a representation or warranty by the Company
means actual knowledge of any member of the Board of Directors of the Company
after inquiry of employees of the Company whose responsibilities cover the
subject matter of the representation or warranty.
"Material" means, when used in connection with any action, representation,
warranty, covenant, inaction or undertaking, an amount or effect on the matter
so qualified in excess of **The confidential portion has been so omitted
pursuant to a request for confidential treatment and has been filed separately
with the Commission.**.
"Material Adverse Effect" means, when used in connection with any
representation, warranty or covenant, any breach or failure to comply resulting
in a loss or losses in an amount in excess of **The confidential portion has
been so omitted pursuant to a request for confidential treatment and has been
filed separately with the Commission.**.
"Merger" has the meaning set forth in ss.2(a) below.
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"Merger Consideration" means the aggregate Per Share Merger Consideration
payable in respect of all of the Pro Forma Outstanding Company Shares.
"Merger Documents" means the Washington Articles of Merger and the Delaware
Certificate of Merger, including all attachments thereto.
"Net Operating Income" means the total revenues of the Company less the
total operating expenses of the Company, calculated pursuant to the format set
forth in Schedule 2 in accordance with GAAP and on a basis consistent with the
past practices of the Company; provided, however, that any accruals customarily
done on an annual basis shall be done on a monthly basis; and provided, further,
that any expenses incurred by the Company (i) in the preparation of audited
financial statements that are to be borne by the Buyer pursuant to ss.5(n)
below, (ii) in connection with employee bonuses permitted under ss.5(d) below or
(iii) that relate solely to the transactions contemplated by this Agreement
shall be excluded from the calculation of Net Operating Income.
"Net Operating Income Adjustment" means the sum of (a) the product obtained
by multiplying (i) **The confidential portion has been so omitted pursuant to a
request for confidential treatment and has been filed separately with the
Commission.** by (ii) that number of whole calendar months, if any, (x) that
shall have elapsed beginning with the month of March 1998 to (but in no event
including) the month in which the Closing occurs and (y) for which the Net
Operating Income of the Company shall have been equal to or greater than **The
confidential portion has been so omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.** and (b) the
product obtained by multiplying (i) **The confidential portion has been so
omitted pursuant to a request for confidential treatment and has been filed
separately with the Commission.** and (ii) a fraction, the numerator of which is
the number of days from the first day of the month in which the Closing occurs
to and including the Closing Date and the denominator of which is the total
number of days in the month in which the Closing occurs.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency), and for the Company shall include, among other things, the
continuation of the Company's program of racking and facility relocation
projects in Seattle and the move-in of major new accounts in accordance with the
Company's existing plans.
"Party" has the meaning set forth in the preface above.
"Per Share Escrow Deposit" means the amount deposited with the Post Closing
Escrow Agent pursuant to ss.2(e)(i)(C).
"Per Share Merger Consideration" has the meaning set forth in ss.2(d)(v)(A)
below.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Post Closing Escrow Agent" means Chase Manhattan Bank & Trust Company,
N.A.
"Post Closing Escrow Agreement" has the meaning set forth in ss.2(e) below.
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"Post Closing Escrow Deposit" means the aggregate of all Per Share Escrow
Deposits deposited with the Escrow Agent in respect of all Company Shares
outstanding immediately prior to the Effective Time.
"Post Closing Escrow Fund" means the Post Closing Escrow Deposit, plus any
interest or dividends accrued thereon from and after the Effective Time.
"Principal Stockholders" means those Company Stockholders identified on
Schedule 3.
"Pro Forma Outstanding Company Shares" has the meaning set forth in
ss.2(d)(vi) below.
"Prospectus" has the meaning set forth in ss.4(f)(i) below.
"Reportable Event" has the meaning set forth in ERISA ss.4043.
"Representatives" has the meaning set forth in Section 10(d)(v).
"Requisite Stockholders" means those Company Stockholders necessary to
effect the Requisite Stockholder Approval.
"Requisite Stockholder Approval" means the following: (i) the approval of
the Merger and this Agreement by the vote of Company Stockholders and (ii) the
approval of the Merger and this Agreement by the vote of those Company
Stockholders who are to receive Combined Stockholder Merger Consideration
hereunder as a separate voting group. The vote under each of the items described
in the preceding sentence must be by a two-thirds majority of the Company Shares
entitled to vote.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge
or other security interest, other than (a) mechanic's, materialman's, and
similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Share Price" equals the quotient of the Adjusted Merger Consideration
divided by the Pro Forma Outstanding Company Shares.
"Stockholders Agreement" means that Stockholders Agreement dated as of the
date hereof, among the Buyer and the Principal Stockholders.
"Subsidiary" means any corporation or limited liability company with
respect to which a specified Person (or a Subsidiary thereof) owns a majority of
the common stock or other equity interest or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors or similar
managing body.
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"Surviving Corporation" has the meaning set forth in ss.2(a) below.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code ss.59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Transaction Subsidiary" has the meaning set forth in the preface above.
"Vested Rights" means all Common Stock issuable under all options,
warrants, securities convertible into Common Stock and similar rights to acquire
Common Stock exercisable at or prior to the Closing.
"Washington Articles of Merger" has the meaning set forth in ss.2(c) below.
"Washington Business Corporation Act" means the Washington Business
Corporation Act, RCW23B, et seq., as amended.
2. BASIC TRANSACTION.
(a) The Merger. On and subject to the terms and conditions of this
Agreement, the Company will merge with and into the Transaction Subsidiary (the
"Merger") at the Effective Time. The Transaction Subsidiary shall be the
corporation surviving the Merger (the "Surviving Corporation").
(b) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxx & Xxxxx LLP,
0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx, commencing at 9:00 a.m.
local time on the date (the "Closing Date") designated by the Buyer to the
Company in writing upon not less than two business days' notice; provided,
however, that none of the Parties shall be obligated to close on a date so
designated unless all conditions to the obligations of the Parties to consummate
the transactions contemplated hereby shall have been satisfied or waived; and
provided, further, that the Closing Date shall be no earlier than March 26, 1998
nor later than June 24, 1998.
(c) Actions at the Closing. At the Closing, (i) the Company will deliver to
the Buyer and the Transaction Subsidiary the certificates, instruments, and
documents specifically listed in ss.8(a) below, (ii) the Buyer and the
Transaction Subsidiary will deliver to the Company the certificates,
instruments, and documents specifically listed in ss.8(b) below, (iii) the
Company and the Transaction Subsidiary will file with the Secretary of State of
the State of Delaware a Certificate of Merger in the form attached hereto as
Exhibit 2(c)-1 (the "Delaware Certificate of Merger") and the
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Transaction Subsidiary will file with the Secretary of State of the State of
Washington Articles of Merger in the form attached hereto as Exhibit 2(c)-2 (the
"Washington Articles of Merger"), (iv) the Buyer will deliver the amounts
described in ss.5(k) to the Company for payment to the Designated Recipients,
(v) the Buyer will cause the Surviving Corporation to deliver the Per Share
Escrow Deposit to the Post Closing Escrow Agent in the manner provided in
ss.2(e)(i)(B)(2) below, (vi) the Buyer will cause the Surviving Corporation to
pay the Funded Indebtedness, and (vii) the Buyer will cause the Surviving
Corporation to deliver the Merger Consideration to the Exchange Agent in the
manner provided below in this ss.2.
(d) Effect of Merger.
(i) General. The Merger shall become effective upon the filing of the
Washington Articles of Merger with the Secretary of State of the State of
Washington and the Delaware Certificate of Merger with the Secretary of State of
the State of Delaware, or at such date and time thereafter as is provided in the
Merger Documents (the "Effective Time"). The Merger shall have the effect set
forth in the Washington Business Corporation Act and the Delaware General
Corporation Law. The Surviving Corporation may, at any time after the Effective
Time, take any action (including executing and delivering any document) in the
name and on behalf of either the Company or the Transaction Subsidiary in order
to carry out and effectuate the transactions contemplated by this Agreement.
(ii) Certificate of Incorporation. The Certificate of Incorporation of
the Surviving Corporation shall be the Certificate of Incorporation of the
Transaction Subsidiary immediately prior to the Effective Time.
(iii) Bylaws. The Bylaws of the Surviving Corporation shall be the
Bylaws of the Transaction Subsidiary immediately prior to the Effective Time.
(iv) Directors and Officers. The directors and officers of the
Transaction Subsidiary immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation as of and after the
Effective Time (retaining their respective positions and terms of office), and
the directors and officers of the Company prior to the Effective time shall not
be directors or officers of the Surviving Corporation.
(v) Conversion of Company Shares. At and as of the Effective Time:
(A) Each Company Share (other than shares of Common Stock owned
by any Subsidiary of the Company and other than Dissenting Shares) shall, by
reason of the Merger and without any action by the holders thereof, be converted
into one of the following (the "Per Share Merger Consideration"):
(1) for such Company Shares held by Company Stockholders who
have not effectively made a Combined Election or who have properly
revoked a Combined Election ("Cash Stockholders"), the right to receive
cash in an amount equal to the Share Price (the "Cash Stockholder Merger
Consideration"); or
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(2) for such Company Shares held by Company Stockholders who
have effectively made and not revoked a Combined Election ("Combined
Stockholders"), the right to receive:
(x) subject to the adjustments described in ss.2(d)(v)(B),
$9,500,000 (the "Original Cash Amount") less the sum of:
(i) Funded Indebtedness as of the Closing Date as described in
ss.5(l), (ii) the aggregate Cash Stockholder Merger Consideration
payable to all Cash Stockholders, (iii) the payment to Designated
Recipients described in ss.5(k) and (iv) the excess legal fees, if
any, described in ss.11(k), divided by the number of Pro Forma
Outstanding Company Shares held by Combined Stockholders (the
"Combined Stockholder Cash Amount"); plus
(y) that number of shares of Buyer Common Stock calculated
by (i) subtracting the Combined Stockholder Cash Amount from the
Share Price and (ii) dividing the resulting amount by the
Determination Price (the "Combined Stockholder Stock Amount" and,
collectively with the Combined Stockholder Cash Amount, the
"Combined Stockholder Merger Consideration").
(B) In the event the Buyer shall have consummated a public
offering of Buyer Common Stock for cash between the date hereof and the Closing
Date, the Original Cash Amount shall, subject in each instance to the proviso
below, be adjusted at Closing as follows:
(1) if the proceeds to the Buyer of such offering (net of
underwriting discounts and commissions and associated expenses) exceed
$75,000,000, the Original Cash Amount shall be changed to $12,500,000;
and
(2) if the proceeds to the Buyer of such offering (net of
underwriting discounts and commissions and associated expenses) exceed
$100,000,000, the Original Cash Amount shall be changed to $15,250,000;
provided, however, that in the event any such change in the Original Cash Amount
were to result in the value of the aggregate Combined Stockholder Stock Amount,
based on the lower of (i) the closing price of Buyer Common Stock on the Nasdaq
National Market System for the trading day immediately prior to the Closing
Date, as provided by the Nasdaq National Market System and (ii) the
Determination Price (the "Aggregate Stock Consideration Amount"), being less
than 45% of the sum of the value of the Merger Consideration based on such
closing price plus amounts payable upon Closing to Designated Recipients
pursuant to ss.5(k) (the "Aggregate Consideration Amount"), then any applicable
change in the Original Cash Amount provided for in clause (B)(1) or (B)(2) above
shall be limited to a change to the highest amount such that the Aggregate Stock
Consideration Amount would be equal to or greater than 45% of the Aggregate
Consideration Amount.
(C) Any Combined Stockholders who are Affiliates with one
another may give irrevocable written notice to the Exchange Agent and the Buyer
not less than five days prior to the Closing Date of the proportions in which
such Persons elect to allocate among themselves the
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aggregate Combined Stockholder Cash Amount and aggregate Combined Stockholder
Stock Amount which they are entitled to receive upon the Merger, and the Buyer
shall instruct the Exchange Agent to pay the Combined Stockholder Merger
Consideration to be paid to such Persons in accordance with such election.
(D) In lieu of issuing fractional shares, the Buyer may convert a
Combined Stockholder's right to receive shares of the Buyer Common Stock
pursuant to Section 2(d)(v)(A)(2)(y) into a right to receive the highest whole
number of shares of the Buyer Common Stock constituting the aggregate Combined
Stockholder Stock Amount to which the Combined Stockholder is entitled plus cash
equal to the fraction of a share of the Buyer Common Stock to which the Combined
Stockholder would otherwise be entitled multiplied by the Determination Price,
and the aggregate Combined Stockholder Stock Amount to which the Combined
Stockholder is entitled shall be deemed to be such number of shares of the Buyer
Common Stock plus such cash.
After the Effective Time, no Company Share shall be deemed to be outstanding or
to have any rights other than those set forth above in this ss.2(d)(v).
(vi) Pro Forma Outstanding Company Shares; Treatment of Vested Rights.
For purposes of this ss.2(d), "Pro Forma Outstanding Company Shares" means the
aggregate number of Company Shares outstanding at or immediately prior to the
Effective Time after the cash exercise (as contemplated by the definition of
Adjusted Merger Consideration) of all Vested Rights then exercisable.
(vii) Adjustment for Dividends, Distributions, Etc. The amount payable
by the Buyer hereunder shall be decreased, as described in the definition of
Adjusted Merger Consideration above, by an amount equal to any payment or
distribution made by the Company in respect of any dividends or distributions of
cash or other assets of the Company to the Company Stockholders in respect of
their Company Shares or with respect to any redemptions of Company Shares in
contravention of the provisions of ss.3(f)(ix) or ss.5(d)(iii) below.
(viii) Capital Stock of the Transaction Subsidiary. At and as of the
Effective Time, each issued and outstanding share of common stock, $.01 par
value per share, of the Transaction Subsidiary shall continue to be an issued
and outstanding share of the common stock of the Surviving Corporation.
(ix) Procedures for Making Combined Elections.
(A) Each Person who, at the record date (the "Company Record
Date") for determining Company Stockholders eligible to vote the shares of
Common Stock at the Company Meeting, (x) is a record holder of shares of Common
Stock (other than the Company or any Subsidiary of the Company) or Vested
Rights, (y) votes such shares in favor of this Agreement, and (z) is an
Accredited Investor, shall have the right to submit an Election Form (as defined
in ss.2(d)(ix)(B)) specifying that such Person elects to have all shares of
Common Stock held by such Person as of the Company Record Date, and any
additional shares held as of the Effective Time pursuant to the exercise of
Vested Rights, converted into the right to receive the Combined Stockholder
Merger Consideration (the "Combined Election").
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(B) The Company shall mail to Company Stockholders, together with
the notice of meeting, the Prospectus (if not already delivered) and the other
information to be delivered to such Stockholders, an election form (the
"Election Form") providing for such Stockholders (x) to make a Combined
Election, (y) to certify as to their status as Accredited Investors and (z) to
agree to hold shares of Buyer Common Stock received in the Merger subject to
lock-up terms identical to those contained in the Stockholders Agreement. As of
12:00 noon Seattle, Washington time on the date of the Company Meeting (the
"Election Deadline"), all Company Stockholders on the Company Record Date that
shall not have submitted to the Company or shall have properly revoked an
effective, properly completed Election Form shall be deemed not to have made a
Combined Election and, accordingly, shall receive the Cash Stockholder Merger
Consideration.
(C) Any Combined Election shall have been validly made only if
the Company shall have received by the Election Deadline, an Election Form
properly completed and executed by such Stockholder. Such Combined Election
shall be binding upon any subsequent holder of Common Stock in respect of which
a Combined Election has been made. Any Company Stockholder (other than a holder
who has submitted an irrevocable election) may at any time prior to the Election
Deadline revoke such holder's election by written notice to the Company received
by the close of business on the day prior to the Election Deadline. As soon as
practicable after the Election Deadline, the Company and the Buyer shall
determine the allocation of the cash portion of the Merger Consideration and the
stock portion of the Merger Consideration.
(D) The Company and the Buyer shall reasonably agree on such
reasonable rules, not inconsistent with the terms of this Agreement, governing
the validity of the Election Forms and the manner and extent to which Combined
Elections are to be taken into account in making the determinations prescribed
by ss.2(d).
(e) Procedure for Payment.
(i) (A) On the Closing Date, with respect to the Company Shares
which are not Dissenting Shares, the Buyer shall cause to be delivered to the
Exchange Agent the Merger Consideration (including, to the extent applicable,
certificates for shares of Buyer Common Stock), less the sum of (i) the Xxxxxxx
Money Escrow Deposit in respect of such Company Shares which are not Dissenting
Shares and (ii) the Post Closing Escrow Deposit.
(B) On the Closing Date, the Buyer and the Company shall issue
joint written instructions to the Xxxxxxx Money Escrow Agent: (1) to disburse
**The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Commission.** of
the Xxxxxxx Money Escrow Fund, less the Xxxxxxx Money Escrow Deposit in respect
of Company Shares which are not Dissenting Shares, to the Exchange Agent as part
of the Merger Consideration, and (2) to disburse the balance of the Xxxxxxx
Money Escrow Fund to the Buyer.
(C) On the Closing Date, with respect to the Company Shares which
are not Dissenting Shares, the Buyer shall cause an amount in cash (the "Per
Share Escrow Deposit") equal to the quotient derived by dividing **The
confidential portion has been so omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.** by the Pro Forma
Outstanding Company Shares to be paid to the Post Closing Escrow Agent pursuant
to the terms of a Post Closing Escrow Agreement substantially in the form of
Exhibit 2(e)(i) among the Buyer, the Surviving Corporation, the Post Closing
Escrow Agent and the Representatives, as agents for and representatives of the
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Company Stockholders (the "Post Closing Escrow Agreement"); provided, however,
that with respect to any Combined Stockholder, the aggregate Per Share Escrow
Deposit attributable to such Stockholder in respect of all shares of Common
Stock held by such Stockholder shall be withheld from the shares of Buyer Common
Stock otherwise to be issued to such Stockholder in an amount (rounded up to the
nearest whole share) equal to the quotient obtained by dividing (x) the
aggregate Per Share Escrow Deposit otherwise attributable to such Stockholder in
respect of all shares of Common Stock held by such Stockholder by (y) the
Determination Price. The respective interests of the Company Stockholders in the
Post Closing Escrow Fund (other than those Company Stockholders holding
Dissenting Shares) shall be based on whether cash or Buyer Common Stock was
contributed to the Post Closing Escrow Fund in respect of such Stockholder.
(ii) The procedure for payment of the Cash Stockholder Merger
Consideration and Combined Stockholder Merger Consideration for all Company
Shares which are not Dissenting Shares shall be as follows:
(A) As promptly as practicable after the Effective Time, the
Exchange Agent shall mail or deliver to each Company Stockholder holding a
certificate or certificates which prior to the Effective Time represented
Company Shares a letter of transmittal substantially in the form of Exhibit
2(e)(ii) (the "Letter of Transmittal") and instructions to effect the surrender
of such certificates in exchange for such Company Stockholder's portion of the
aggregate Cash Stockholder Merger Consideration or aggregate Combined
Stockholder Merger Consideration, as applicable (minus in each case such Company
Stockholder's share of the Per Share Escrow Deposit, as stated in a schedule
given by the Company to the Exchange Agent, until disbursement thereof). The
Exchange Agent will accept the surrender of properly tendered certificates which
formerly represented the holders' Company Shares, effect payment of the Cash
Stockholder Merger Consideration or Combined Stockholder Merger Consideration,
as applicable (minus the Per Share Escrow Deposit until disbursement thereof)
allocable to each holder of Company Shares, and deliver to the Buyer such
surrendered certificates. No interest will accrue or be paid to the holder of
any outstanding Company Shares.
(B) In the event any former Company Stockholder (including
Company Stockholders with respect to Dissenting Shares) fails or refuses to
tender certificates for his Company Shares within 180 days after the Effective
Time, the Buyer may cause the Exchange Agent to pay over to the Surviving
Corporation any portion of the Merger Consideration then held in respect of such
former Company Stockholders, and thereafter all such former Company Stockholders
shall be entitled to look only to the Surviving Corporation (subject to
abandoned property, escheat and other similar laws) as general creditors thereof
with respect to the portion of the Merger Consideration payable or issuable upon
surrender of their certificates. None of the directors, officers or employees of
the Company, the Buyer or the Transaction Subsidiary or any Company Stockholder
or stockholder of the Buyer shall have any liability to any such former Company
Stockholder or to any governmental agency in respect of such payments.
(iii) The Buyer shall cause the Surviving Corporation to pay all
charges and expenses of the Exchange Agent.
-13-
(f) Lost or Stolen Certificates. In the event any certificate representing
Company Shares shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed and the execution of an indemnity in respect thereof (all as
provided in the Letter of Transmittal), the Exchange Agent shall be authorized,
in exchange for such affidavit and indemnity, to deliver the Cash Stockholder
Merger Consideration or Combined Stockholder Merger Consideration (minus the Per
Share Escrow Deposit until disbursement thereof) in respect of such lost,
stolen, or destroyed certificate representing Company Shares.
(g) Closing of Transfer Records. After the close of business on the Closing
Date, transfers of Company Shares outstanding prior to the Effective Time shall
not be made on the stock transfer books of the Surviving Corporation.
(h) Dissenting Shares.
(i) Notwithstanding any other provision of this Agreement to the
contrary, Company Shares outstanding immediately prior to the Effective Time
that are held by Company Stockholders who have not voted such Company Shares in
favor of the Merger and who shall have demanded properly in writing appraisal
for such Company Shares in accordance with the Washington Business Corporation
Act, and who shall not have withdrawn such demand or otherwise have forfeited
appraisal rights (collectively, the "Dissenting Shares"), shall not be converted
into or represent the right to receive any portion of the Merger Consideration.
Such Company Stockholders shall be entitled to receive payment of the appraised
value of such Company Shares held by them in accordance with the provisions of
the Washington Business Corporation Act, except that all Dissenting Shares held
by Company Stockholders who shall have failed to perfect or who effectively
shall have withdrawn, forfeited or lost their rights to appraisal of such
Company Shares under the Washington Business Corporation Act shall thereupon be
deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive, without any interest thereon, the
portion of the aggregate Cash Stockholder Merger Consideration or the portion of
the aggregate Combined Stockholder Merger Consideration, as the case may be, to
which such Company Stockholder would have been entitled in respect of such
Company Shares but for such Company Stockholder's demand for an appraisal (less
the Per Share Escrow Deposit in respect of such Company Shares until
disbursement thereof), upon surrender of the certificates that formerly
evidenced such Company Shares in the manner provided in ss.2(e) (upon which
surrender the Company will cause the Per Share Escrow Deposit in respect of such
Company Shares to be paid to the Post Closing Escrow Agent pursuant to the terms
of Post Closing Escrow Agreement). The Surviving Corporation shall pay the
appraised value for any Dissenting Shares as determined in accordance with the
Washington Business Corporation Act, and no such payment shall form the basis of
a claim against the Company Stockholders under this Agreement or the Post
Closing Escrow Agreement.
(ii) The Company shall give the Buyer prompt written notice of its
receipt of any demands for appraisal, any withdrawals of such demands and any
other instruments served by Company Stockholders pursuant to the Washington
Business Corporation Act relating thereto. The Company and the Buyer shall
jointly direct all negotiations and proceedings with respect to demands for
appraisal under the Washington Business Corporation Act. The Company shall not,
except with
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the prior written consent of the Buyer, settle or offer to settle, or make any
payment with respect to, any demands for appraisal.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Buyer and the Transaction Subsidiary that the statements
contained in this ss.3 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made as of
the Closing Date), except those statements which specify a different date (which
shall be correct and complete as of such date) and as set forth in the
disclosure schedule accompanying this Agreement (the "Disclosure Schedule"). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this ss.3. The Company makes no
representations and warranties of any kind in connection with the transactions
contemplated by this Agreement except as expressly set forth in this ss.3.
(a) Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized and validly existing under the laws of the State of
Washington. The Company is duly authorized to conduct business and is in good
standing as a foreign corporation under the laws of the State of Oregon, which
is the only jurisdiction where such qualification is required, except where the
lack of such qualification would not have a Material Adverse Effect on the
financial condition, business, assets or operating cash flow of the Company,
taken as a whole, or on the ability of the Company to consummate the
transactions contemplated by this Agreement. The Company has full corporate
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it.
(b) Capitalization; Subsidiaries. The entire authorized capital stock of
the Company consists of 20,000,000 shares of Common Stock, of which 10,534,063
shares are issued and outstanding as of the date of this Agreement and, upon
exercise of all Vested Rights, 10,971,863 will be issued and outstanding as of
immediately prior to the Effective Time. The Disclosure Schedule identifies each
of the Company Stockholders, and the number of Company Shares which will be held
by each after giving effect to the exercise of the Vested Rights contemplated by
this Agreement. All of the Company Shares have been duly authorized and are
validly issued, fully paid and nonassessable. The Disclosure Schedule describes
all outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Company to issue, sell, or otherwise cause to become
outstanding any of the Common Stock. The Buyer and the Transaction Subsidiary
shall not be required to pay any amounts in order to terminate any such options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights or other similar contracts and commitments, all of which will have been
fully exercised or cancelled prior to or as of the Effective Time. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Company.
Except as set forth on the Disclosure Schedule: (i) the Company has no
Subsidiaries and has never had any Subsidiaries, and (ii) the Company does not
own, directly or indirectly, any interest in any other corporation, limited
liability company, business trust, joint stock company, partnership or other
business organization, or the right to acquire an interest in, or to control,
any such entity.
-15-
(c) Authorization of Transaction. The Company has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder; provided, however, that the
consummation of the Merger is subject to the Requisite Stockholder Approval.
This Agreement and the transactions contemplated herein have been duly
authorized by all necessary corporate action (other than the Requisite
Stockholder Approval) on the part of the Company, and in connection therewith
the board of directors of the Company has determined or will determine, in
accordance with its statutory duties, that this Agreement and the Merger are in
the best interests of the Company and the Company Stockholders and that the
board of directors will recommend approval thereof by the Company Stockholders.
Subject to receipt of the Requisite Stockholder Approval, this Agreement
constitutes the valid and legally binding obligation of the Company, enforceable
in accordance with its terms and conditions, except that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or other similar laws of general application now or
hereafter in effect relating to the enforcement of creditors' rights generally
and except that the remedies of specific performance, injunction and other forms
of equitable relief are subject to certain tests of equity jurisdiction,
equitable defenses and the discretion of the court before which any proceeding
therefor may be brought (the "Enforceability Exceptions").
(d) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Company is subject or any provision of the articles of
incorporation or bylaws of the Company or (ii) except as set forth in the
Disclosure Schedule, conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license or instrument to which the Company is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets),
except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation or failure to give notice would not have
a Material Adverse Effect on the business, financial condition, operations,
assets or operating cash flow of the Company, taken as a whole, or on the
ability of the Company to consummate the transactions contemplated by this
Agreement. To the Knowledge of the Company, other than in connection with the
provisions of the Washington Business Corporation Act, the Company does not need
to give any notice to, make any filing with, or obtain any authorization,
consent or approval of any government or governmental agency in order for the
Company to consummate the transactions contemplated by this Agreement.
(e) Financial Statements. The Company has furnished to the Buyer the
following financial statements (together, the "Financial Statements"): (i) the
unaudited balance sheet of the Company as of September 30, 1997 and (ii) the
statement of income and expenses of the Company for the nine-month period ended
September 30, 1997.
The Financial Statements have been prepared in accordance with GAAP applied
on a consistent basis throughout the period covered thereby, and present fairly
the financial condition of the Company as of such date and the results of
operations of the Company for such period, and are consistent with the books and
records of the Company; provided, however, that the Financial
-16-
Statements are subject to normal year-end adjustments (which will not be
Material individually or in the aggregate) and lack footnotes and other
presentation items.
Notwithstanding the foregoing, the Company makes no representation or
warranty of any kind as to the Financial Statements as they relate to
InterMation Software LLC ("Software LLC"). The Financial Statements do not
include any income, expense, asset or liability items related to Software LLC,
and the Company has no liability or obligation (financial or otherwise) to
Software LLC, and is not liable, directly or contingently, for any liability of
Software LLC or any lease to which Software LLC is a party.
The Disclosure Schedule identifies (i) each bank and other financial
institution to which the Company is indebted and the amount of indebtedness owed
as of January 31, 1998, (ii) each Company Stockholder to which the Company is
indebted and the amount of indebtedness owed as of January 31, 1998, and (iii)
each Company Stockholder who has guaranteed obligations of the Company (and the
obligations guaranteed).
(f) Absence of Certain Changes or Events. Since September 30, 1997 there
has not been any Material adverse change in the business, financial condition,
operations, assets or operating cash flow of the Company, taken as a whole.
Without limiting the generality of the foregoing, during such period, except as
set forth in the Disclosure Schedule, the Company has not:
(i) voluntarily incurred any obligation or liability (fixed or
contingent), except (A) normal trade or business obligations or liabilities, and
(B) increases in Funded Indebtedness, in each case incurred in the Ordinary
Course of Business, none of which would have a Material Adverse Effect on the
business, financial condition, assets or cash flow of the Company, taken as a
whole, and (C) in connection with this Agreement, the agreements contemplated
hereby and the transactions contemplated hereby and thereby;
(ii) discharged or satisfied any Material Security Interest or paid
any Material obligation or liability (fixed or contingent), other than in the
Ordinary Course of Business;
(iii) mortgaged, pledged or subjected to any Security Interest any of
its assets or properties;
(iv) transferred, leased or otherwise disposed of any of its Material
assets or properties or acquired any Material assets or properties except in
each case in the Ordinary Course of Business;
(v) made any capital investment or expenditure (or series of related
capital investments and expenditures) either involving more than **The
confidential portion has been so omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.** or outside the
Ordinary Course of Business;
(vi) delayed or postponed the payment of Material accounts payable or
other Material liabilities other than in the Ordinary Course of Business;
-17-
(vii) made or granted any wage or salary increase or bonus applicable
to any group or classification of employees generally or to any officer of the
Company, except in each case in the Ordinary Course of Business, or entered into
any written employment contract with, or made any Material loan (other than
advances in the Ordinary Course of Business) to, or entered into any Material
transaction of any other nature with, any officer or employee of the Company, or
adjusted, amended or terminated any bonus, profit-sharing, incentive, severance
or other plan, contract or commitment for the benefit of its employees or
officers (or taken any such action with respect to any other Employee Benefit
Plan);
(viii) suffered any casualty loss or damage (whether or not such loss
or damage shall have been covered by insurance) which affects in any Material
respect its ability to conduct business;
(ix) declared any dividends or distributed any cash or other assets to
Company Stockholders in respect of the Company Shares, repurchased or redeemed
any Company Shares from any Company Stockholders or engaged in any similar
transactions since September 30, 1997, except for redemptions of Company Stock
pursuant to the Company's solicitation dated on or about May 23, 1997 (the "1997
Redemption"), pursuant to which approximately 850 Company Shares were redeemed
since September 30, 1997 for an aggregate redemption price of less than $5,000;
(x) authorized or effected any amendment or restatement of the
articles of incorporation or by-laws of the Company; or
(xi) made any binding commitment to do any of the foregoing.
In addition, the Company has not amended its Articles of Incorporation or Bylaws
since the date of the Articles of Incorporation and Bylaws provided by the
Company to the Buyer pursuant to Buyer's due diligence request, copies of which
are attached hereto as Exhibits 3(f)-1 and 3(f)-2, respectively.
(g) Undisclosed Liabilities. To the Knowledge of the Company, the Company
has no liability (whether asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, or due or to become due),
including any liability for Taxes, except for (i) liabilities set forth in the
September 30, 1997 balance sheet, (ii) liabilities which have arisen after
September 30, 1997 in the Ordinary Course of Business (none of which results
from, arises out of, relates to, or was caused by any breach of contract,
intentional tort, infringement or violation of law), and (iii) liabilities set
forth in the Disclosure Schedule.
(h) Taxes. With respect to Taxes:
(i) the Company has filed, within the time and in the manner
prescribed by law, all Tax Returns, required to be filed under federal, state or
local laws by the Company;
(ii) the Company has within the time and in the manner prescribed by
law, paid (and until the Effective Time will, within the time and in the manner
prescribed by law, pay) all Taxes that are shown as due and payable on all Tax
Returns filed by the Company;
-18-
(iii) the Company has established (and until the Effective Time will
establish) on its books and records reserves (to be specifically designated as
an increase to current liabilities) that are adequate for the payment of all
Taxes accrued or accruable under GAAP for all periods prior to and including the
Closing Date;
(iv) there are no liens for Taxes upon the assets of the Company or
Software LLC except liens for Taxes not yet due;
(v) the Company has not filed (and will not file prior to the
Effective Time) any consent agreement under ss.341(f) of the Code and none of
the assets of the Company are subject to an election under ss.341(f) of the
Code. The Company has not been a United States real property holding corporation
within the meaning of ss.897(c)(2) of the Code during the applicable period
specified in ss.897(c)(1)(A)(ii) of the Code;
(vi) except as set forth in the Disclosure Schedule (which shall set
forth the type of return, date filed, and date of expiration of the statute of
limitations), no deficiency for any Taxes has been proposed, asserted or
assessed against the Company which has not been resolved and paid in full;
(vii) except as set forth in the Disclosure Schedule, there are no
outstanding written waivers or comparable written consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns that have been given by the Company;
(viii) except as set forth in the Disclosure Schedule, which shall set
forth the nature of the proceeding, the type of return, the deficiencies
proposed or assessed and the amount thereof, and the taxable year in question,
no federal, state or local audits or other administrative proceedings or court
proceedings are presently pending, or to the Knowledge of the Company,
threatened, with regard to any Taxes or Tax Returns;
(ix) the Company is not a party to any tax-sharing or allocation
agreement, nor does it owe any amount under any tax-sharing or allocation
agreement;
(x) the Company has no actual or potential liability for any tax
obligation of any taxpayer (including without limitation any affiliated group of
corporations or other entities that included the Company during a prior period)
other than itself;
(xi) no amounts payable by the Company will fail to be deductible for
federal income tax purposes by virtue of ss.280G of the Code;
(xii) except as set forth in the Disclosure Schedule, the Company has
complied (and until the Effective Time will comply) with all applicable laws,
rules and regulations relating to the payment of withholding Taxes (including,
without limitation, withholding of Taxes pursuant to Sections 1441 or 1442 of
the Code) and has, within the time and in the manner prescribed by law, withheld
from employees' wages and paid over to the proper governmental authorities all
Material amounts required to be so withheld and paid over under all applicable
laws;
-19-
(xiii) until March 23, 1995 the Company was a member of an Affiliate
Group of which Shurgard Incorporated ("Shurgard") was the parent company. The
Tax Returns of Shurgard for the Tax years through 1994 and for the Tax period of
January 1, 1995 through March 23, 1995 have been audited (or the statutes of
limitations with respect to such Tax Returns have expired) and all Taxes, if
any, determined pursuant to such audits to be due have been paid in full; and
(xiv) copies of all federal, state and local income Tax Returns,
examinations, reports and statements of income tax deficiencies assessed against
or agreed to by the Company and for any and all taxable periods with respect to
which the statute of limitations for the collection of any Tax has not expired
have been made available by the Company for inspection by the Buyer, other than
such materials for periods when the Company was owned by Shurgard Incorporated
or its Affiliates, which the Company has not provided to the Buyer.
(i) Title to Property and Assets. The Company has good and marketable title
to all of the properties and assets reflected on the September 30, 1997 balance
sheet as being owned by the Company except any thereof since disposed of in the
Ordinary Course of Business, and none of such properties or assets is, except as
disclosed in the Financial Statements or the Disclosure Schedule, subject to any
Security Interest.
(j) Real Property.
(i) The Company does not now own, and has never owned, any real
property.
(ii) The Company is party as tenant or subtenant to the real property
leases and subleases as described in the Disclosure Schedule. With respect to
each lease or sublease described in the Disclosure Schedule:
(A) the lease or sublease is a legal, valid, binding, enforceable
obligation of the Company, and, to the Knowledge of the Company, of the other
parties thereto, and is in full force and effect;
(B) the Company is not in breach or default, and no event has
occurred with respect to the Company which, with notice or lapse of time, would
constitute a breach or default thereunder or permit termination, modification,
or acceleration thereof;
(C) to the Knowledge of the Company, there are no disputes, oral
agreements, or forbearance programs in effect as to the lease or sublease;
(D) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (C) above are true and correct
with respect to the underlying lease; and
(E) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold.
-20-
(k) Intellectual Property.
(i) To the Knowledge of the Company, the Company owns or has the right
to use pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for the operation of the business of the Company as presently
conducted.
(ii) To the Knowledge of the Company, the Company has not infringed
upon or misappropriated any Intellectual Property rights of third parties, and
the Company has never received any written charge, complaint, claim, demand, or
notice alleging any such infringement or misappropriation (including any claim
that the Company must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of the Company, no third party has
infringed upon or misappropriated any Intellectual Property rights of the
Company.
(iii) The Company has no registered trademarks, service marks, trade
dress, logos, trade names or corporate names which are used in the operation of
the Company's business as presently conducted other than as set forth in the
Disclosure Schedule, which identifies the entity in whose name each such
registered xxxx is held.
(l) List of Contracts and Other Data. The Disclosure Schedule sets forth a
listing of the following contracts and other data relating to the Company:
(i) all computer software used by the Company for inventory control,
billing and work management, and all licenses granted to the Company and all
other agreements to which the Company is a party and which relate, in whole or
in part, to such software;
(ii) all unregistered trade names, service marks, logos and trademarks
used by the Company;
(iii) all employment and consulting agreements, executive compensation
plans, bonus plans and other Employee Benefit Plans of the Company; and
(iv) any written agreement pursuant to which the Company has purchased
or acquired any material operating assets, as a going concern, of any entity
since December 31, 1994.
The Company has not knowingly withheld from the Buyer copies of any of the
documents referred to above or any of the following documents relating to the
Company:
(i) any written arrangement to which the Company is a party or by
which the Company or any of its property is bound or protected (or group of
related written arrangements) for the lease of personal property from or to
third parties providing for lease payments in excess of **The confidential
portion has been so omitted pursuant to a request for confidential treatment and
has been filed separately with the Commission.** per annum;
(ii) any written arrangement (or group of related written
arrangements) for the purchase by the Company of shelving, supplies, products or
other personal property or for the receipt of services which involve more than
**The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Commission.** or
are not cancelable on ninety days' notice or less in the ordinary course of
business;
-21-
(iii) any written arrangement to which the Company is a party or by
which the Company or any of its property is bound or protected establishing a
partnership or joint venture;
(iv) any written arrangement (or group of related written
arrangements) under which the Company has created, incurred, assumed or
guaranteed (or may create, incur, assume or guarantee) indebtedness for borrowed
money or leased property (including capitalized lease obligations) or under
which it has granted (or may grant) a security interest on any of its material
assets, tangible or intangible;
(v) any written arrangement to which the Company is a party or by
which the Company or any of its property is bound or protected concerning
confidentiality or noncompetition;
(vi) any written arrangement relating to the Company and involving any
of the Company Stockholders; and
(vii) any written agreement under which the Company has made
representations or warranties or has agreed to provide indemnification to a
third party, other than (x) any such agreement in which the aggregate
liabilities thereunder, by the terms thereof, would not exceed **The
confidential portion has been so omitted pursuant to a request for confidential
treatment and has been filed separately with the Commission.** and (y) customer
contracts (standard forms of which, as well as a description of limited
liability contract terms varying therefrom, have previously been provided to the
Buyer).
(m) Labor Matters.
(i) The Company is not a party to or bound by any collective
bargaining agreement, and has not experienced any strikes, claims of unfair
labor practices or other collective bargaining disputes. To the Knowledge of the
Company, its employees have not been the subject of a union organizing effort
since January 1, 1993.
(ii) The Company has not received written notice of any claim from the
Equal Employment Opportunity Commission or from any state or local government
agency or been served with any legal process alleging that it either has not
complied with any laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining, equal
employment opportunity, employment discrimination and employment safety, or that
it is liable for any arrears of wages or penalties for failure to comply with
any of the foregoing.
(n) Employee Benefits.
(i) The Disclosure Schedule lists each Employee Benefit Plan that the
Company (which term, for purposes of this ss.3(n)(i), shall include a
Subsidiary) maintains or to which the Company contributes or has any obligation
to contribute or has contributed to or sponsored.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all respects
with the applicable requirements of ERISA, the Code, and other applicable laws,
and the Company has not received any outstanding notice from any governmental
agency or authority questioning or challenging such compliance.
-22-
(B) All required reports, returns and descriptions (including
Form 5500 Annual Reports, summary annual reports and summary plan descriptions)
have been timely filed and distributed appropriately with respect to each such
Employee Benefit Plan and its related trust, if any. The requirements of COBRA
have been met with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan and subject to COBRA.
(C) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been timely paid to
each such Employee Benefit Plan (or its related trust) which is an Employee
Pension Benefit Plan and all contributions for any period ending on or before
the Closing Date which are not yet due will, as of the Closing Date, have been
paid to each such Employee Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Company. All premiums or other payments for
all periods ending on or before the Closing Date have been paid with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan meets the requirements of a "qualified plan" under Code ss.401(a)
in form and operation, and to the Knowledge of the Company, there are no
presently existing facts or circumstances that will or could reasonably be
expected to give rise to disqualification of any such plan under Code ss.401(a)
or to a tax under Code ss.511.
(E) The Company has delivered to the Buyer correct and complete
copies of the plan documents, including amendments, summary plan descriptions
and summaries of material modifications, if any, the three most recent Form 5500
Annual Reports, and accountant's opinion, if applicable, and all related trust
agreements, insurance contracts, and other funding agreements which implement
each such Employee Benefit Plan and all written communications, if any, to
employees to the extent the substance of the plan described therein differs
materially from the other documentation furnished.
(F) There have been no acts or omissions by the Company that have
given rise to or may reasonably be expected to give rise to material fines,
penalties, taxes or related charges under Sections 502(c), 502(i) or 4071 of
ERISA or Chapter 43 of the Code for which the Company may be liable.
(ii) With respect to each Employee Benefit Plan that the Company and
any ERISA Affiliate maintains or ever has maintained or to which any of them
contributes, ever has contributed or ever has been required to contribute, there
have been, and are, no "prohibited transactions" (as defined in ss.406 of ERISA
and Code ss.4975) with respect to any such Employee Benefit Plan. To the
Knowledge of the Company, no Fiduciary has any liability for breach of fiduciary
duty or any other failure to act or comply in connection with the administration
or investment of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of the Company, threatened.
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(iii) Neither the Company, any current ERISA Affiliate, nor, to the
Knowledge of the Company, any business or entity that has been an ERISA
Affiliate within the past five years sponsors or contributes to or has ever
sponsored or contributed to a plan subject to Title IV of ERISA or any
Multiemployer Plan or has any liability (including any withdrawal liability as
defined in ERISA ss.4201) under any Multiemployer Plan.
(iv) Except as set forth in the Disclosure Schedule, the Company does
not maintain and has never maintained or contributed, and has never been
required to contribute to, any Employee Welfare Benefit Plan providing medical,
health or life insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses or their dependents (other than
in accordance with COBRA).
(o) Litigation. There are no actions, suits or proceedings with respect to
the Company involving claims by or against the Company which are pending or, to
the Knowledge of the Company, threatened, at law or in equity, before or by any
federal or state court or any municipal or other governmental department,
commission, board, bureau, agency or instrumentality. To the Knowledge of the
Company, there are no writs, judgments, injunctions or decrees of any court or
any governmental agency with respect to which the Company has been named or to
which the Company is a party which apply, in whole or in part, to the business
of the Company or to any of the assets or properties of the Company or the
Company Shares or which would result in a Material Adverse Effect on the
business, financial condition, operations, assets, cash flow or future prospects
of the Company, taken as a whole.
(p) Certain Business Relationships with the Company. Except as set forth in
the Disclosure Schedule, none of the Company Stockholders and no Affiliate owns
any asset, tangible or intangible, which is used in the business of the Company
or has a contractual relationship with the Company that is not terminable by the
Company upon thirty days' notice.
(q) Brokers. The Company has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
(r) Officers and Directors; Bank Accounts. The officers and directors of
the Company as of the date of this Agreement are as set forth in the Disclosure
Schedule. The Disclosure Schedule also sets forth the name of each bank, savings
institution or other person with which the Company has an account or safe
deposit box and the names and identification of all such accounts or safe
deposit boxes and the names and identification of all persons authorized to draw
thereon or to have access thereto.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSACTION SUBSIDIARY.
Each of the Buyer and the Transaction Subsidiary represents and warrants to the
Company that the statements contained in this ss.4 are correct and complete as
of the date of this Agreement and will be correct and complete as of the Closing
Date (as though made as of the Closing Date), except those statements which
specify a different date (which shall be correct and complete as of such date).
The Buyer and the Transaction Subsidiary make no representations and warranties
of any kind in connection with the transactions contemplated by this Agreement,
except as expressly set forth in this ss.4.
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(a) Organization. Each of the Buyer and the Transaction Subsidiary is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Transaction Subsidiary is, or
on the Closing Date will be, duly authorized to conduct business and in good
standing as a foreign corporation under the laws of the States of Oregon and
Washington.
(b) Authorization of Transaction. Each of the Buyer and the Transaction
Subsidiary has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement and the transactions contemplated herein have been
duly authorized by all necessary corporate and shareholder actions on the part
of the Buyer and the Transaction Subsidiary. This Agreement constitutes the
valid and legally binding obligation of each of the Buyer and the Transaction
Subsidiary, enforceable in accordance with its terms and conditions, subject to
the Enforceability Exceptions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which either the Buyer or the Transaction Subsidiary is subject or any
provision of the Certificate of Incorporation or bylaws of either the Buyer or
the Transaction Subsidiary or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which either the Buyer or the Transaction Subsidiary is a party or by which
it is bound or to which any of its assets is subject, except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, or failure to give notice would not have a Material Adverse Effect
on the ability of the Buyer or the Transaction Subsidiary to consummate the
transactions contemplated by this Agreement. To the Knowledge of the Buyer,
except for the Delaware General Corporation Law and the Washington Business
Corporation Act, and except as disclosed by the Company, neither the Buyer nor
the Transaction Subsidiary needs to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Buyer and the Transaction Subsidiary to consummate the
transactions contemplated by this Agreement, except where the failure to give
notice, to file, or to obtain any authorization, consent, or approval would not
have a Material Adverse Effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement.
(d) Brokers' Fees. Neither the Buyer nor the Transaction Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
any of the Company or the Company Stockholders could become liable or obligated.
(e) Capitalization of the Buyer. As of the date hereof, the entire
authorized capital stock of the Buyer consists of 100,000,000 shares of Buyer
Common Stock, of which 14,919,124 shares are issued and outstanding (assuming
all former stockholders of Arcus Group, Inc. have exchanged their shares of
capital stock of Arcus Group, Inc. for Buyer Common Stock); 2,000,000 shares of
Preferred Stock, $.01 par value per share, of which none are issued and
outstanding; and 1,000,000
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shares of Nonvoting Common Stock, $.01 par value per share, of which none are
issued and outstanding. All of such outstanding capital stock has been duly
authorized and validly issued, is fully paid and nonassessable and is not
subject to any preemptive or similar rights. When issued to the Company
Stockholders in connection with the Merger, the Buyer Common Stock will be duly
authorized, validly issued, fully paid, nonassessable, registered under the
Securities Act and will not be subject to any preemptive or similar rights, and,
subject only to (i) the lock-up provisions in the Stockholders Agreement, (ii)
applicable restrictions under Rule 145 under the Securities Act and (iii)
antifraud provisions of the Exchange Act and the rules and regulations
thereunder, will be freely tradeable.
(f) SEC Filings; Financial Statements and Other Information. The Buyer has
filed all forms, reports and documents required to be filed by it with the
Securities and Exchange Commission (the "SEC") since January 1, 1997, and has
heretofore made available to the Company, in the form filed with the SEC
(including any exhibits thereto), its Final Prospectus dated January 20, 1998
(the "Prospectus") forming part of its Registration Statement on Form S-4 (file
number 333-44187) declared effective on January 20, 1998 (the "Registration
Statement"). The Prospectus and the Registration Statement and any forms,
reports and other documents incorporated by reference into the Prospectus or
filed by the Buyer with the SEC after the date of this Agreement and until the
Closing Date, (x) complied with or will comply in all material respects with the
requirements of the Securities Act and the Exchange Act, as the case may be, and
the rules and regulations thereunder and (y) did not at the time they were filed
and (if previously filed) do not at the date hereof, or will not at the time
they are filed or at the date of the Company Meeting, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
5. PRE-CLOSING COVENANTS. Between the execution of this Agreement and the
Closing:
(a) General. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
ss.7 below) on or before March 30, 1998. Without limiting the generality of the
foregoing, the Company, acting through its Board of Directors, shall, in
accordance with the Washington Business Corporation Act and its articles of
incorporation and bylaws: (i) as soon as reasonably practicable (and in any
event not later than March 27, 1998), duly call, give notice of, convene and
hold the Company Meeting, or to the extent permitted by the Washington Business
Corporation Act submit this Agreement and the Merger for approval and adoption
by written consent by the Company Stockholders; (ii) include in any proxy
statement the conclusion and recommendation of the Board of Directors (to the
extent consistent with its fiduciary duties) to the effect that the Board of
Directors, having determined that this Agreement and the Merger are in the best
interests of the Company and the Company Stockholders, has approved this
Agreement and the Merger and recommends that the Company Stockholders vote in
favor of the approval and adoption of this Agreement and the Merger; and (iii)
use its reasonable best efforts to obtain the necessary approval and adoption of
this Agreement and the Merger by the Company Stockholders. The Company further
agrees to deliver or cause to be delivered (to the extent it has not already
done so)
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copies of the Prospectus to the Company Stockholders as soon as reasonably
practicable (and in any event not later than February 26, 1998) on behalf of the
Buyer.
(b) Notices and Consents. The Company will give any notices to third
parties, and will use its reasonable best efforts to obtain any third party
consents, which in either case are required for it to consummate the
transactions contemplated by this Agreement. The Buyer and the Transaction
Subsidiary will give any notice to third parties, and will use their respective
reasonable best efforts to obtain any third party consents, which in either case
are required for them to consummate the transactions contemplated by this
Agreement.
(c) Regulatory Matters and Approvals. Each of the Parties will give any
notices to, make any filings with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in ss.3(d) and ss.4(c)
above.
(d) Operation of Business. The Company will continue to operate its
business in the Ordinary Course of Business and will not engage in any practice,
take any action or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing:
(i) the Company will not authorize or effect any change in its
articles of incorporation or bylaws;
(ii) the Company will not grant any options, warrants, or other rights
to purchase or obtain any of its capital stock or issue, sell, or otherwise
dispose of any of its capital stock (except upon the conversion or exercise of
options, warrants, and other rights currently issued or outstanding, all of
which the Company will cause to be fully exercised or cancelled prior to or as
of the Effective Time);
(iii) the Company will not declare, set aside or pay any dividend or
distribution with respect to its capital stock (whether in cash or in kind), or
redeem, repurchase, or otherwise acquire any of its capital stock or any
options, warrants or other rights to purchase or obtain any of its capital
stock;
(iv) the Company will not issue any note, bond or other debt security
or create, incur, assume, or guarantee any indebtedness for borrowed money
(including without limitation Funded Indebtedness) or capitalized or operating
lease obligation (other than (x) pursuant to existing contracts or arrangements
described in the Disclosure Schedule and in the Ordinary Course of Business and
(y) operating lease obligations incurred in the Ordinary Course of Business);
(v) the Company will not grant any Security Interest in any of its
assets;
(vi) the Company will not make any capital investment in, make any
loan to, or acquire the securities or assets of any other Person outside the
Ordinary Course of Business;
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(vii) the Company will not delay or postpone the payment of accounts
payable or other liabilities or accelerate receivables other than in the
Ordinary Course of Business;
(viii) the Company will not make any change in employment terms for
any of its directors, officers, or employees;
(ix) the Company will not take any of the other actions set forth in
ss.3(f); and
(x) the Company will not make any binding commitment to do any of the
foregoing.
Nothing in this ss.5(d) shall be construed to prohibit the Company from
incurring obligations to pay bonuses to employees, not to exceed $500,000 in the
aggregate, in respect of such employees' performance.
(e) Full Access. The Company will permit representatives of the Buyer to
have access at all reasonable times, and in a manner so as not to interfere with
the normal business operations of the Company, to all premises, properties,
personnel, books, records (including tax records), contracts, and documents of
or pertaining to the Company; provided that all due diligence investigations
related to the Company's customers and employees shall be subject to the
exclusive control (including nature, extent and timing) of the Company, and the
identity of the Company's customers shall not be disclosed until immediately
after the Closing.
Each of the Buyer and the Transaction Subsidiary will treat and hold any
Confidential Information it receives from the Company in accordance with the
provisions of the Confidentiality Agreement, which the Transaction Subsidiary
hereby agrees to abide by as though it were a party thereto.
Subject to receipt of a confidentiality agreement in the form attached
hereto as Exhibit 5(e) (the "Buyer Confidentiality Agreement"), the Buyer will
permit representatives of the Company and the Company Stockholders that are
considering making a Combined Election to have access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Buyer, to all information reasonably necessary for such Company Stockholder
to make the investment decision to acquire shares of Buyer Common Stock as part
of the Combined Stockholder Merger Consideration (it being understood that,
absent a material breach of the representation set forth in Section 4(f) hereof
which would result in the failure to satisfy the condition in ss.7(b)(ii), the
results of such investigation shall not excuse performance by a Principal
Stockholder of his, her or its obligations under the Stockholders Agreement).
(f) Notice of Developments. Each Party will give prompt written notice to
the others of any action or event giving rise to a Material Adverse Effect on
the Party or causing a breach of any of its own representations and warranties
in ss.3 and ss.4 above. The Company, on the one hand, and the Buyer and the
Transaction Subsidiary, on the other hand, shall be entitled to update the
information contained in the Disclosure Schedule (or, for the Buyer and the
Transaction Subsidiary, to provide information which would be includable in a
disclosure schedule), at any time and from time to time prior to the Effective
Time for matters arising after the date of this Agreement, and the
-28-
addition of any such items shall not form the basis of any claim against the
Company Stockholders on the one hand, or the Buyer and the Transaction
Subsidiary, on the other hand, under ss.10 below. No disclosure by any Party
pursuant to this ss.5(f) which constitutes a Material change in information
originally presented in this Agreement or the Disclosure Schedule shall
constitute a waiver by the Party receiving such disclosure of any condition to
such Party's obligation to close the transactions contemplated hereby unless the
Party to which such disclosure is made agrees in writing to waive such
condition.
(g) Exclusivity. The Company will not solicit, initiate or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of all or substantially all of the capital stock or assets of the Company
(including any acquisition structured as a merger, consolidation, or share
exchange), and none of its directors, officers or agents shall be permitted to
take such action. The Company shall notify the Buyer immediately if any Person
who received the Information Statement makes any such proposal, offer or
inquiry, or if any other Person makes any such proposal, offer or inquiry in
writing.
(h) Continuation of Projects. The Company will continue the racking and
facility relocation projects in Seattle and move-in of new accounts in the
Ordinary Course of Business in accordance with the Company's existing plans and
properties.
(i) Termination of 401(k) Plan. Not later than the day prior to the Closing
Date the Board of Directors of the Company and each current ERISA Affiliate will
adopt resolutions effecting the termination of the Company's 401(k) Employee
Benefit Plan and any other defined contribution plan maintained by the Company
or a current ERISA Affiliate.
(j) Release of Guaranties. The Buyer and the Transaction Subsidiary shall
use their commercially reasonable efforts to obtain the release of those Company
Stockholders identified on the Disclosure Schedule as having guaranteed any
obligations of the Company from their personal guaranties of such Company
obligations (the "Guaranties"). The Company hereby consents to such disclosure
of the transactions contemplated by this Agreement as is reasonably necessary to
request and obtain such consents.
(k) Designated Recipients. Subject to the approval of the Company
Stockholders, on the Closing Date immediately prior to the Effective Time, the
Buyer shall deliver to the Company an amount to be paid by the Company to the
Designated Recipients as additional consideration for their shares of Common
Stock which were redeemed pursuant to the 1997 Redemption, such that each
Designated Recipient shall have received from the Company in respect of his
shares of Common Stock, pursuant to the 1997 Redemption and this ss.5(k), an
aggregate cash amount per share equal to the Share Price, giving effect to all
of the adjustments hereunder, including the adjustment for the payment described
in this ss.5(k). The amount of such payment shall reduce the Adjusted Merger
Consideration as described in the definition thereof above.
(l) Funded Indebtedness. Not less than two (2) business days prior to the
Closing, the Company shall provide to the Buyer a schedule showing a true and
correct listing of all Funded Indebtedness and the amounts thereof due as of the
Closing Date, including interest, prepayment premiums and penalties. At the
Closing, the Buyer shall deliver (i) to the Company sufficient funds
-29-
for the payment of all such Funded Indebtedness that is unsecured and (ii) to a
trust account in the name of Xxxxxx & Xxxxx LLP sufficient funds for the payment
of all such Funded Indebtedness that is secured. At the Closing, the Company
shall pay, with funds provided by the Buyer, all Funded Indebtedness existing as
of the Closing Date. The amount of such payment shall be in addition to the
Merger Consideration.
(m) Tax Treatment. Each of the Parties intends the Merger to qualify as a
tax-free reorganization under the provisions of Section 368(a) of the Code,
agrees to report the Merger as a tax-free reorganization under the provisions of
Section 368(a) of the Code and agrees not to take any action inconsistent with
the qualification of the Merger as a tax-free reorganization under the
provisions of Section 368(a) of the Code.
(n) Audit. At the request and the expense of the Buyer, the Company shall
cause its independent accountants to cooperate with the Buyer and shall assist
in the preparation of audited financial statements for the Company. Without
limiting the generality of the foregoing, the Company agrees that it will (i)
consent to the use of such audited financial statements in any registration
statement or other document filed by the Buyer under the Securities Act or the
Exchange Act, and (ii) execute and deliver, and cause its officers to execute
and deliver, such "representation" letters as are customarily delivered in
connection with audits and as the Buyer's independent accountants may reasonably
request under the circumstances. Notwithstanding the foregoing, the Parties
agree that it shall not be a condition to closing of the Merger that any such
audit be completed prior to the Closing Date.
(o) Net Operating Income. Immediately prior to the Effective Time, the
Company shall prepare and deliver to the Buyer a schedule showing the Company's
best estimate of the Net Operating Income of the Company for each whole calendar
month, if any, that shall have elapsed beginning with the month of March 1998 to
(but in no event including) the month in which the Closing occurs (the "Company
Net Operating Income Calculation"). The amount of the Net Operating Income
Adjustment derived from the Company Net Operating Income Calculation and from
the pro rata portion of **The confidential portion has been so omitted pursuant
to a request for confidential treatment and has been filed separately with the
Commission.** accrued, as set forth in clause (b) of the definition of Net
Operating Income Adjustment, from the first day of the month in which the
Closing occurs to and including the Closing Date, shall increase the Adjusted
Merger Consideration as described in the definition thereof above.
(p) Certain Leases. Notwithstanding any provision herein to the contrary,
the Company may negotiate and enter into a lease for additional warehouse space
in Portland, Oregon upon commercially reasonable terms and for a period not to
exceed six months. Upon request by the Company, the Buyer shall agree to
sublease a portion of the building leased by a subsidiary of the Buyer at 0000
XX 00xx Xxxxxx, Xxxxxxxx, Xxxxxx, to the Company at a rent to be mutually agreed
upon by the Buyer and the Company and upon other commercially reasonable terms
and for a period not to exceed six months. If this Agreement is terminated prior
to the consummation of the Merger, (i) in addition to any other amounts payable
hereunder, the Buyer shall pay the out of pocket expenses incurred by the
Company to relocate customer boxes and other materials stored by the Company in
any such leased space (whether subleased from the Buyer or otherwise) to another
Portland area location leased by the Company and (ii) if such space is subleased
from the Buyer, the Company will have no obligation to pay rent under the
sublease with respect to any period following
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such termination and the Company shall relocate all materials stored by it in
such space by the date which is two months after the termination of this
Agreement (upon which date, the Buyer will have no further obligation to the
Company as sublessor under such sublease).
(q) Financial Information. As promptly as practicable after the end of each
month, the Company shall provide to the Buyer a balance sheet of the Company as
of the end of each such month and statements of income and expenses of the
Company for the month then ended.
(r) Stockholder Approvals. As promptly as practicable after the Company
Meeting, the Company shall provide to the Buyer a tabulation of the shares of
Company Stock voted by the Company Stockholders in favor of or against this
Agreement and the Merger and any shares not voted.
6. POST-CLOSING COVENANTS. From and after the Closing Date:
(a) Indemnification of Officers and Directors. The Surviving Corporation
agrees to defend, indemnify and hold harmless from all claims all persons who
served as directors and officers of the Company prior to the Effective Time in
respect of matters for which they would have been entitled to indemnification
under any exculpatory or indemnification provisions existing as of the date of
this Agreement in the Articles of Incorporation or Bylaws of the Company for the
benefit of any individual who served as a director or officer of the Company.
The foregoing indemnity shall be without regard to any of the limitations on
Claims (as defined in ss.10) set forth in ss.10 below. The Buyer shall, and does
hereby, indemnify the officers and directors of the Company, to the extent they
would have been entitled to indemnification under any exculpatory or
indemnification provisions existing as of the date of this Agreement in the
Articles of Incorporation or Bylaws of the Company, in respect of any
occurrences or events related to the Surviving Corporation which occur after the
Effective Time.
(b) Indemnification for Guaranties. To the extent that any of the Company
Stockholders have not been released from any Guaranties on or prior to the
Closing Date, the Buyer and the Surviving Corporation will continue to use
commercially reasonable efforts to obtain their release, and, jointly and
severally, hereby agree to defend, indemnify and hold the Company Stockholders
harmless from and against all Claims arising with respect to such Guaranties.
The foregoing indemnity shall be without regard to any of the limitations on
Claims set forth in ss.10 below.
(c) Certain Payments. The Buyer or the Surviving Corporation shall pay all
trade payables and capitalized lease obligations of the Company incurred on or
prior to the Closing Date in accordance with their respective terms.
(d) Credit for Years of Service. From and after the Closing, the Buyer and
the Surviving Corporation will cause the Employee Benefits Plans, if any,
maintained by the Buyer and the Surviving Corporation to provide that the
Company's employees will be entitled to credit, for purposes of determining
eligibility in such plans, for their years of service with the Company prior to
the Closing.
-31-
(e) Employee Bonuses. To the extent that the Company shall have committed
prior to the Closing to pay bonuses to employees, not to exceed $500,000 in the
aggregate, in respect of such employees' performance, as permitted by ss.5(d)
above, and shall not have paid such bonuses on or prior to the Closing Date, the
Buyer and the Surviving Corporation will pay such employee bonuses, not to
exceed $500,000 in the aggregate, promptly following the Closing, and, jointly
and severally, hereby agree to defend, indemnify and hold the Company
Stockholders harmless from and against all Claims with respect to the nonpayment
of such bonuses (including the cost to the Company Stockholders of the Company
Stockholders' paying such bonuses). The foregoing indemnity shall be without
regard to any of the limitations on Claims set forth in ss.10 below, but shall
in no event exceed $500,000 in the aggregate.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) Conditions to Obligation of the Buyer and the Transaction Subsidiary.
The obligation of each of the Buyer and the Transaction Subsidiary to consummate
the transactions to be performed by them in connection with the Closing is
subject to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the Requisite
Stockholder Approval not later than March 27, 1998 and the Company Stockholders
who have given notice of their intent to cause their Company Shares to become
Dissenting Shares do not hold more than 3% of the Company Shares then
outstanding;
(ii) the Company shall have procured all of the following third party
consents:
(A) Consent of the landlord under the lease dated March 2, 1990
between Xxxxxxx X. and Xxxx Xxxxx, as landlord, and the Company, as successor to
Shurgard Capital Management Corporation, as tenant, as amended by amendment
dated August 28, 1997;
(B) Consent of the landlord under the lease dated July 19, 1994
between Northwest Group A, as landlord, and the Company, as successor to
Professional Records Center, Inc., as tenant;
(C) Consent of the landlord under the lease dated May 31, 1996
between Boeing Mesabi Trust, as landlord, and the Company, as tenant;
(D) Consent of the landlord under the lease dated March 23, 1995
between Shurgard Storage Center, Inc., as landlord, and the Company, as tenant;
and
(E) Consent of the licensor under the software license agreement
dated November 7, 1997 between O'Neil Software, Inc., as licensor, and the
Company, as licensee.
(iii) the representations and warranties of the Company set forth in
ss.3 above shall be true and correct in all Material respects at and as of the
Closing Date;
(iv) the Company shall have performed and complied with all of its
covenants hereunder in all Material respects at and as of the Closing Date;
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(v) no action, suit or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state or local
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of the Surviving Corporation to
own its assets and to operate its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(vi) the Company shall have delivered to the Buyer and the Transaction
Subsidiary a certificate to the effect that each of the conditions specified in
ss.7(a)(i) through (v) is satisfied in all respects;
(vii) the Parties shall have received all authorizations, consents and
approvals of governments and governmental agencies referred to in ss.5(c) above;
(viii) the Buyer and the Transaction Subsidiary shall have received
from Xxxxxx & Xxxxx LLP, counsel to the Company, an opinion in form and
substance reasonably satisfactory to the Buyer and the Transaction Subsidiary,
addressed to the Buyer and the Transaction Subsidiary, and dated as of the
Closing Date;
(ix) the Buyer and the Transaction Subsidiary shall have received the
resignations, effective as of the Closing, of each director and officer of the
Company;
(x) the Post Closing Escrow Agreement shall have been executed by the
Post Closing Escrow Agent and by the Representatives on behalf of Company
Stockholders representing not less than 90% of the Company Shares;
(xi) there shall not have occurred any Material adverse change in the
business, assets, operations or cash flow of the Company when compared to the
condition of the Company reflected in the Financial Statements; provided,
however, that after the 60th day following the date of this Agreement, so long
as the delay in the Closing Date past such 60th day is not caused by a failure
by the Company to perform or comply with its covenants hereunder, any such
adverse change shall not be deemed Material for purposes of this clause 7(a)(xi)
unless its effect exceeds **The confidential portion has been so omitted
pursuant to a request for confidential treatment and has been filed separately
with the Commission.**;
(xii) the Company shall have executed the Merger Documents to which it
is a party;
(xiii) the Company shall have liquidated Software LLC in accordance
with applicable law;
(xiv) any registered trademarks, service marks, trade names or logos
of the Company used in the operation of the Company's business as presently
conducted which are registered in the name of an entity other than the Company
shall have been assigned to the Company;
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(xv) the Company shall have delivered copies of the Prospectus to the
Company Stockholders on behalf of the Buyer not less than twenty business days
prior to the date of the Company Meeting, and the Company shall not have taken
any steps that would cause the issuance of shares of Buyer Common Stock in
accordance with the terms of this Agreement not to be exempt from registration
under the Securities Act;
(xvi) the Buyer shall have received a favorable opinion, dated the
Closing Date, of Xxxxxxxx & Worcester LLP, its special tax counsel, to the
effect that this Agreement constitutes a tax- free plan of reorganization in
accordance with the provisions of Section 368(a) of the Code and as to the
consequences thereof to the Buyer;
(xvii) the Board of Directors of the Company and each current ERISA
Affiliate shall have adopted resolutions effecting the termination of the
Company's 401(k) Employee Benefit Plan and any other defined contribution plan
maintained by the Company or a current ERISA Affiliate;
(xviii) there shall be no more than twenty Combined Stockholders, and
the Combined Stockholders shall hold in the aggregate as of immediately prior to
the Effective Time a sufficient number of Company Shares such that the aggregate
amount of the cash portion of the Merger Consideration payable at Closing shall
not exceed the amount, determined in accordance with clauses (A) and (B) of
ss.2(d)(v) above, of the Original Cash Amount; and
(xix) all Vested Rights shall have been exercised or cancelled.
The Buyer and the Transaction Subsidiary may waive any condition specified in
this ss.7(a) if they execute a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Company. The obligation of the Company
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the Requisite
Stockholder Approval;
(ii) the representations and warranties of the Buyer and the
Transaction Subsidiary set forth in ss.4 above shall be true and correct in all
Material respects at and as of the Closing Date;
(iii) each of the Buyer and the Transaction Subsidiary shall have
performed and complied with all of its covenants hereunder in all Material
respects at and as of the Closing;
(iv) no action, suit or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state or local
jurisdiction or before any arbitrator where an unfavorable injunction, judgment,
order, decree, ruling or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling or charge
shall be in effect);
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(v) each of the Buyer and the Transaction Subsidiary shall have
delivered to the Company a certificate to the effect that each of the conditions
specified above in ss.7(b)(i) through (iv) is satisfied in all respects;
(vi) the Company shall have received from Xxxxxxxx & Worcester LLP,
special counsel to the Buyer, an opinion in form and substance reasonably
satisfactory to the Company, addressed to the Company and dated as of the
Closing Date.
(vii) each of the Buyer and the Transaction Subsidiary shall have
executed the Merger Documents to which it is a party;
(viii) the Parties shall have received all authorizations, consents,
and approvals of governments and governmental agencies referred to in ss.5(c)
above;
(ix) the Post Closing Escrow Agreement shall have been executed by the
Post Closing Escrow Agent and by the Buyer and the Transaction Subsidiary; and
(x) the Company shall have received a favorable opinion, dated the
Closing Date, of Xxxxxx & Xxxxx LLP, its special tax counsel, to the effect that
this Agreement constitutes a tax-free plan of reorganization in accordance with
the provisions of Section 368(a) of the Code and as to the consequences thereof
to the Company Stockholders that are receiving Combined Stockholder Merger
Consideration.
The Company may waive any condition specified in this ss.7(b) if it executes a
writing so stating at or prior to the Closing.
8. DELIVERIES AND ACTIONS AT CLOSING. At the Closing the Parties shall deliver
the following documents, instruments and agreements, and shall take the
following described actions, all of which shall be deemed part of a single
transaction. No part of the described deliveries and actions shall occur unless
all shall occur.
(a) Deliveries and Actions by the Company. The Company shall deliver or
cause to be delivered to the Buyer and the Transaction Subsidiary, or to other
persons, as appropriate, the following documents, instruments and agreements,
and shall take the following actions:
(i) a copy of the Articles of Incorporation of the Company, certified
by the Secretary of State of the State of Washington;
(ii) a certificate of legal existence for the Company issued by the
appropriate officer of the state of Washington and a certificate of
authorization for the Company issued by the appropriate officer of the state of
Oregon;
(iii) a certificate of the Company to the effect that each of the
conditions specified in ss.7(a)(i) through (v) has been satisfied in all
Material respects;
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(iv) originals or copies of each consent, authorization and approval
referred to in ss.ss.7(a)(ii) and 7(a)(vii);
(v) the opinion of Xxxxxx & Xxxxx LLP, referred to in ss.7(a)(viii);
(vi) the resignations described in ss.7(a)(ix), effective as of the
Closing, of each director and officer of the Company;
(vii) the Post Closing Escrow Agreement, executed by the Post Closing
Escrow Agent and by the Representatives on behalf of Company Stockholders
representing not less than 90% of the Company Shares;
(viii) originals of the Merger Documents executed by the Company;
(ix) a certificate of the Secretary of the Company certifying as to
the Articles of Incorporation and Bylaws of the Company and resolutions adopted
by the Board of Directors and Company Stockholders in connection with the
transactions contemplated by this Agreement; and
(x) joint written instructions to the Xxxxxxx Money Escrow Agent, as
provided in ss.2(e)(i)(B).
(b) Deliveries and Actions by the Buyer and the Transaction Subsidiary. The
Buyer and the Transaction Subsidiary shall deliver, or cause to be delivered to
the Company, or to other persons, as appropriate, the following documents,
instruments and agreements, and shall take the following actions:
(i) a copy of the Certificate of Incorporation for the Buyer and the
Transaction Subsidiary, certified by the Secretary of State of the State of
Delaware;
(ii) certificates of good standing for the Buyer and the Transaction
Subsidiary issued by the Delaware Secretary of State;
(iii) certificates of authorization for the Transaction Subsidiary
issued by the appropriate officers of the states of Washington and Oregon;
(iv) certificate of the Buyer and the Transaction Subsidiary to the
effect that each of the conditions specified in ss.7(b)(i) through (iv) has been
satisfied in all Material respects;
(v) originals or copies of each consent, authorization or approval
referred to in ss.7(b)(viii);
(vi) the Post Closing Escrow Agreement, executed by the Post Closing
Escrow Agent and by the Buyer and the Transaction Subsidiary;
(vii) a copy of the Exchange Agent Agreement, executed by the Buyer
and the Exchange Agent;
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(viii) originals of the Merger Documents, executed by the Transaction
Subsidiary;
(ix) the opinion of Xxxxxxxx & Worcester LLP, special counsel to the
Buyer, referred to in ss.7(b)(vi);
(x) a certificate of the Secretary of the Buyer and the Transaction
Subsidiary certifying as to resolutions adopted by the Board of Directors of
each in connection with the transactions contemplated by this Agreement; and
(xi) joint written instructions to the Xxxxxxx Money Escrow Agent, as
provided in ss.2(e)(i)(B)(1).
(c) Other Actions. The actions described in ss.2(c) will be taken by the
Parties.
9. TERMINATION.
(a) Termination of Agreement. Any of the Parties may terminate this
Agreement as provided below:
(i) the Parties may terminate this Agreement by mutual written consent
at any time prior to the Effective Time;
(ii) the Buyer and the Transaction Subsidiary may terminate this
Agreement by giving written notice to the Company at any time prior to the
Effective Time: (A) in the event the Company has breached any representation,
warranty, or covenant contained in this Agreement in any Material respect, the
Buyer or the Transaction Subsidiary has notified the Company of the breach, and
the breach has continued without cure for a period of 30 days after the notice
of breach, or (B) if the Closing shall not have occurred on or before June 24,
1998 (the "Termination Date"), by reason of the failure of any condition
precedent under ss.7(a) hereof (unless the failure results primarily from the
Buyer or the Transaction Subsidiary breaching any representation, warranty, or
covenant contained in this Agreement); or
(iii) the Company may terminate this Agreement by giving written
notice to the Buyer and the Transaction Subsidiary at any time prior to the
Effective Time: (A) in the event the Buyer or the Transaction Subsidiary has
breached any representation, warranty, or covenant contained in this Agreement
in any Material respect, the Company has notified the Buyer and the Transaction
Subsidiary of the breach, and the breach has continued without cure for a period
of 30 days after the notice of breach, or (B) if the Closing shall not have
occurred on or before the Termination Date, by reason of the failure of any
condition precedent under ss.7(b) hereof (unless the failure results primarily
from the Company breaching any representation, warranty, or covenant contained
in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to ss.9(a) above, all rights and obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party then in breach); provided, however,
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the Confidentiality Agreement and any Buyer Confidentiality Agreement shall
survive any such termination.
Upon any termination of this Agreement, the Xxxxxxx Money Escrow Fund shall
be paid to the Company, except in the following circumstances, in which the
Xxxxxxx Money Escrow Fund shall be paid to the Buyer:
(i) the Company's representations and warranties contained in ss.3 of
this Agreement are determined prior to the Closing to be Materially inaccurate
when taken as a whole; or
(ii) the Company Stockholders fail or refuse to carry out the
transactions contemplated hereby without a legal excuse therefor (including any
failure of the Company Stockholders to provide the Requisite Stockholders
Approval).
10. REMEDIES FOR BREACHES OF REPRESENTATIONS AND WARRANTIES.
(a) Survival of Representations and Warranties. All of the representations
and warranties of the Company, the Buyer and the Transaction Subsidiary
contained in this Agreement shall survive the Closing hereunder and continue in
full force and effect for a period of one year thereafter (the "Survival
Period").
(b) Indemnification by Company Stockholders.
(i) The Company Stockholders, pursuant to the terms of this Agreement
and the Post Closing Escrow Agreement, severally, and not jointly, shall
indemnify the Buyer and the Surviving Corporation from and against any costs,
losses or expenses, including attorneys' fees (together, the "Claims") the Buyer
or the Surviving Corporation may suffer from and after the Closing Date
resulting from, arising out of or caused by:
(A) any breach by the Company of (1) its representations and
warranties contained in ss.3 above or (2) its covenants contained in clause
(ii), (iii) or (iv) of ss.5(d) above; provided that the Company Stockholders
shall not have any obligation to indemnify the Buyer or the Surviving
Corporation from and against any liability for Claims resulting from, arising
out of or caused by any breach described in clause (A)(1) of this ss.10(b)(i)
until the Buyer or the Surviving Corporation has suffered Claims by reason of
all such breaches in excess of **The confidential portion has been so omitted
pursuant to a request for confidential treatment and has been filed separately
with the Commission.** (the "Threshold") (at which point the Company
Stockholders will be obligated to indemnify the Buyer from and against such
Claims only to the extent they exceed the Threshold in the aggregate); and
provided further, that the Buyer makes a written claim for indemnification
against the Company Stockholders pursuant to the terms of the Post Closing
Escrow Agreement within fifteen days after the end of the Survival Period; or
(B) that portion of the Net Operating Income Adjustment derived
from the Company Net Operating Income Calculation exceeding that portion of the
Net Operating Income Adjustment derived from the final determination (whether as
a result of the Representatives failing to give notice of the Representatives'
disagreement with the Buyer Net Operating Income
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Calculation within the time period prescribed below, a resolution by the Buyer
and the Representatives of any such disagreement, or a determination by an
accounting firm selected pursuant to ss.10(b)(iii)(B) below to resolve any
disagreement among the parties) of the Net Operating Income of the Company for
each whole calendar month, if any, that shall have elapsed from March 1998 to
(but in no event including) the month in which the Closing occurs in accordance
with ss.10(b)(iii) below, which right to indemnification shall, notwithstanding
anything to the contrary contained herein, be without regard to the Threshold;
provided, however, that the Buyer makes a written claim for indemnification
against the Company Stockholders pursuant to the terms of the Post Closing
Escrow Agreement concurrently with the delivery of the Buyer Net Operating
Income Calculation to the Representatives in accordance with ss.10(b)(iii)(A)
below;
and provided, further, in the case of both clause (A) and clause (B) of this
ss.10(b)(i), that the Buyer's and the Surviving Corporation's right to
indemnification under this ss.10(b)(i) shall, except to the extent otherwise set
forth herein, be subject to and limited by each of the other provisions of this
ss.10.
(ii) Notwithstanding any provision to the contrary, the Company
Stockholders shall have no liability to the Buyer and the Surviving Corporation,
whether in respect of the indemnification obligations described in ss.10(b)(i)
or otherwise, except for their respective interests in the Post Closing Escrow
Fund. The Buyer's and the Surviving Corporation's sole and only recourse in
respect of any Claims hereunder shall be against the Post Closing Escrow Fund,
in the maximum amount thereof as shall exist from time to time, subject to the
procedures described in the Post Closing Escrow Agreement.
(iii) (A) As promptly as practicable after the Effective Time,
but in any event within 60 days thereafter, the Buyer shall prepare and deliver
(x) to the Representatives a schedule showing the Buyer's determination of the
Net Operating Income of the Company (which shall be calculated pursuant to the
format set forth in Schedule 2 in accordance with GAAP and on a basis consistent
with the past practices of the Company; provided, however, that any accruals
customarily done on an annual basis shall be done on a monthly basis; and
provided, further, that any expenses incurred by the Company (i) in the
preparation of audited financial statements that are to be borne by the Buyer
pursuant to ss.5(n) above, (ii) in connection with employee bonuses permitted
under ss.5(d) above or (iii) that relate solely to the transactions contemplated
by this Agreement shall be excluded from the calculation of Net Operating
Income) for each whole calendar month, if any, that shall have elapsed beginning
with the month of March 1998 to (but in no event including) the month in which
the Closing occurs (the "Buyer Net Operating Income Calculation") and (y) if
applicable, to the Representatives and the Post Closing Escrow Agent a written
claim for indemnification under ss.10(b)(i)(B) above against the Company
Stockholders pursuant to the terms of the Post Closing Escrow Agreement. If the
Representatives disagree with the Buyer Net Operating Income Calculation, the
Representatives shall give notice thereof to the Buyer within 20 days after
delivery of the Buyer Net Operating Income Calculation to the Representatives.
(B) The Buyer and the Representatives shall attempt to
settle any such dispute; and any such settlement shall be final and binding upon
the Buyer, the Company Stockholders and the Representatives. If, however, the
Buyer and the Representatives are unable to settle such dispute within 20 days
after receipt of such notice of dispute by the Buyer, the dispute
-39-
shall be submitted to an independent certified public accounting firm mutually
acceptable to the Buyer and the Representatives for resolution, and the decision
of such independent certified public accountants shall be final and binding upon
the Buyer and the Representatives. All costs incurred in connection with the
resolution of said dispute by such independent public accountants, including
expenses and fees for services rendered, shall be paid (x) by the
Representatives, as agents for the Company Stockholders, if the Buyer Net
Operating Income Calculation for the month or months, if any, preceding the
month in which the Closing occurs is closer to the accountants' final
determination, pursuant to this ss.10(b)(iii)(B), of Net Operating Income for
such period than is the Company Net Operating Income Calculation for such
period, (y) by the Buyer if the Company Net Operating Income Calculation for
such period is closer to the accountants' final determination, pursuant to this
ss.10(b)(iii)(B), of Net Operating Income for such period than is the Buyer Net
Operating Income Calculation for such period, and (z) otherwise, one half by the
Buyer and one half by the Representatives. The Buyer and the Representatives
shall use reasonable best efforts to have the dispute resolved within 60 days
after such dispute is submitted to said independent public accountants, but
neither the Buyer nor the Representatives shall have any liability to any party
hereto for the delay in the resolution of such dispute if such dispute is not
resolved within such 60-day period.
(c) Indemnification by Buyer. The Buyer and the Surviving Corporation shall
indemnify the Company Stockholders from and against any Claims the Company
Stockholders may suffer from and after the Closing Date resulting from or
arising out of any breach by the Buyer or the Transaction Subsidiary of their
representations and warranties contained in ss.4 above; provided, that the Buyer
and the Surviving Corporation shall not have any obligation to indemnify the
Company Stockholders from and against any liability for Claims resulting from,
arising out of or caused by any breach by the Buyer or the Transaction
Subsidiary of any of their representations and warranties contained in ss.4(a),
ss.4(b), ss.4(c) or ss.4(d) above until the Company Stockholders have suffered
Claims by reason of all such breaches in excess of **The confidential portion
has been so omitted pursuant to a request for confidential treatment and has
been filed separately with the Commission.** (at which point the Buyer and the
Surviving Corporation will be obligated to indemnify the Company Stockholders
from and against such Claims only to the extent they exceed **The confidential
portion has been so omitted pursuant to a request for confidential treatment and
has been filed separately with the Commission.** in the aggregate); and provided
further, that the Company Stockholders make a written claim for indemnification
against the Buyer or the Surviving Corporation pursuant to the terms of the Post
Closing Escrow Agreement within fifteen days after the Survival Period; and
provided further, that the Company Stockholders' right to indemnification under
this ss.10(c) shall be subject to and limited by each of the other provisions of
this ss.10.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Person (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Person (the "Indemnifying
Party") under this ss.10, then the Indemnified Party shall promptly notify the
Indemnifying Party or its representative, as applicable, thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
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(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any costs, losses and expenses the Indemnified Party may suffer
resulting from, arising out of or caused by the Third Party Claim, (subject to
the limits of liability described in this ss.10), (B) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (C) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice adverse to the continuing
business interests of the Indemnified Party, and (D) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with ss.10(d)(ii) above, (A) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably); provided, that the
Indemnified Party shall consent to any settlement with respect to a Third Party
Claim where the settlement involves only the payment of money damages and the
amount thereof is fully paid by the Indemnifying Party;
(iv) In the event any of the conditions in ss.10(d)(ii) above is or
becomes unsatisfied, however: (A) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), subject to the limitations of its liability authorized in this
ss.10, and (C) the Indemnifying Party will remain responsible for any Claims the
Indemnified Party may suffer resulting from, arising out of or caused by the
Third Party Claim, subject to the limitations of its liability contained in this
ss.10.
(v) The Company shall cause the Company Stockholders, through the
Letter of Transmittal, irrevocably to appoint three Persons (the
"Representatives"), to act as their agent and attorneys-in-fact, with full power
of substitution, to execute the Post Closing Escrow Agreement in their name and
to take all actions called for by this ss.10 and the Post Closing Escrow
Agreement on their behalf, all in accordance with the terms of this ss.10 and
the Post Closing Escrow Agreement.
(e) Determination of Adverse Consequences. The amount payable by an
Indemnifying Party with respect to any Claim under this ss.10 shall be reduced
by the amount of any insurance proceeds and tax benefits received by an
Indemnified Party with respect to any insurance or tax
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claim made with respect thereto. All indemnification payments under this ss.10
shall be deemed adjustments to the Merger Consideration.
11. MISCELLANEOUS.
(a) Press Releases and Public Announcements. Until the Closing or, in the
event of termination of this Agreement, until the date of such termination, each
Party or its Affiliates shall consult with the other before issuing any press
release or otherwise making any public statements (including statements
contained in public securities filings) with respect to this Agreement or the
Merger and shall not issue any such press release or make any such public
statement without the prior consent of the other, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, the Buyer may,
without the prior consent of the Company, issue such press releases or make such
public statements which the Buyer determines to be necessary or appropriate
(including, without limitation, any such statements that it believes are
required by applicable law, or by the terms of any agreement or instrument with
any exchange, including without limitation the Nasdaq National Market System, on
which the Company's securities are listed), in which case the Buyer shall make
reasonable best efforts to advise the Company and afford it the opportunity to
review and comment upon its contents (it being understood that the form and
substance of any such press release or public statement shall be in the Buyer's
sole discretion).
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns; provided, however, that this Agreement is
intended for the benefit of the Company Stockholders.
(c) Entire Agreement. This Agreement, the Exhibits and Schedules, the
Xxxxxxx Money Escrow Agreement, the Post Closing Escrow Agreement, the Exchange
Agreement and the Confidentiality Agreement constitute the entire agreement
among the Parties and collectively supersede any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties; provided that the Buyer may cause a wholly owned
Subsidiary of the Buyer to be substituted for the Transaction Subsidiary as the
party to the Merger and may, in addition, assign the other rights, but not its
obligations, including, without limitation, its obligation to pay the Merger
Consideration, under this Agreement to such Subsidiary.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to the Company:
InterMation, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
Copy to:
Xxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxxx LLP
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
If to the Buyer and/or the Transaction Subsidiary:
Iron Mountain Incorporated
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx, Xx.
Fax: (000) 000-0000
Copies to:
Xxxxx X. Xxxxxx, Esq.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
and
Xxxxxxx X. Xxxxx, Esq.
Xxxxxxxx & Worcester LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
Notice shall be deemed received: if by personal delivery, upon actual receipt;
if by national overnight courier, on the business day following the sender's
delivery to such courier; if by facsimile, upon electric confirmation of
delivery by the sender's facsimile machine; and if by certified mail, on the
fifth (5th) business day after deposit in the U.S. Mail. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
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(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Washington without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Washington or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Washington.
(i) Amendments and Waivers. The Parties may mutually amend any provision of
this Agreement at any time prior to the Effective Time; provided, however, that
any amendment effected subsequent to stockholder approval will be subject to the
restrictions contained in the Washington Business Corporation Act. No amendment
of any provision of this Agreement shall be valid unless the same shall be in
writing and signed by all of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby; provided, that if the transactions
contemplated by this Agreement close, the legal fees and expenses of the Company
which exceed **The confidential portion has been so omitted pursuant to a
request for confidential treatment and has been filed separately with the
Commission.**, if any, will be deducted from the Merger Consideration payable by
the Buyer in connection with such transactions in the manner set forth in the
definition of Adjusted Merger Consideration above and ss.2(d)(v)(A)(2)(x).
(l) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean "including without limitation".
(m) Jurisdiction; Venue. The Parties, to the extent they may lawfully do
so, hereby consent to the jurisdiction of the courts of the State of Washington,
King County, and the United States District Court of Washington, as well as to
the jurisdiction of all courts from which an appeal may be taken from such
courts, for the purpose of any suit, action or other proceeding arising out of
any of their obligations arising hereunder or with respect to the transactions
contemplated hereby and expressly waive any and all objections they any have as
to venue in any of such courts.
(n) Litigation Costs. The prevailing party in any legal proceeding arising
from this Agreement shall be entitled to an award of reasonable attorneys' fees
incurred in connection with the litigation. The non-prevailing party shall pay
such fees, together with the costs and expenses of the litigation.
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(o) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
IRON MOUNTAIN INCORPORATED
By: /s/ C. Xxxxxxx Xxxxx
------------------------
Name: C. Xxxxxxx Xxxxx
Title: Chairman and Chief Executive Officer
IM-3 ACQUISITION CORP.
By: /s/ C. Xxxxxxx Xxxxx
----------------------
Name: C. Xxxxxxx Xxxxx
Title: President
INTERMATION, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------
Name: Xxxxxxx X. Xxxxx
Title: President
