Exhibit 10.26
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AGREEMENT
AND
PLAN OF REORGANIZATION
BETWEEN
INTEK INFORMATION, INC.
AND
PROTOCALL NEW BUSINESS SPECIALISTS, INC.
DATED AS OF FEBRUARY 3, 1997
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SCHEDULES TO
AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
INTEK INFORMATION, INC. and PROTOCALL NEW BUSINESS SPECIALISTS, INC.
Schedule No. Description
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1.5 Officers and Directors of Surviving Corp.
2.1 Protocall Shareholders
2.2 Protocall good standing states
2.4.A Protocall Articles and Bylaws
2.4.B Officers and directors of Protocall
2.5 Subsidiaries of Protocall
2.7.A Exceptions to acquisition effect on government permits
2.7.B Exceptions to effect on contracts
2.10 Permits, licenses of Protocall
2.11.1 Protocall financial statements
2.11.2 Exceptions to financial statements
2.12.2.A Exceptions to Taxes representation
2.12.2.B Exception to Taxes representation
2.13 Title to properties and assets; liens and encumbrances
2.14 Furniture, fixtures and equipment
2.15.A Insurance
2.15.B Exceptions to Insurance Rates
2.16 Leases and other material contracts
2.17 Litigation
2.18 Intellectual property
2.19 Interests in competitors
2.21 Insider transactions
2.23 Labor and employment disputes
2.24 Employee benefit plans
2.25 Banking and investment information
2.28 Certain changes
2.30.7 Shareholder mailing addresses and states of residence
2.31.A Material agreements with customers or suppliers
2.31.B 5% customers or suppliers
3.1 Intek Good Standing States
3.4 Intek Capitalization
3.5.A Intek Charter and Bylaws
3.5.B Intek Officers and Directors
3.7 Intek Financial Statements
3.9 Intek Title Properties, Assets and Liens, etc.
3.11 Intek Patents and Other Intangible Assets
3.12 Intek Material Contracts and Commitments
3.14 Intek Litigation
3.19 Intek Transactions with its Officers, Directors,
or Shareholders
3.20 Intek Tax Exceptions
3.23.1 Intek Material Licenses
3.27 Intek Benefit Plans
3.28 Intek Effect of Agreement
3.30 Intek Insurance
3.31 Intek Insider Transactions
4.22 Guarantees
EXHIBITS TO
AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
INTEK INFORMATION, INC. and PROTOCALL NEW BUSINESS SPECIALISTS, INC.
Exhibit No. Description
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1.1.A Certificate of Merger (California)
1.1.B Articles of Merger (Colorado)
1.15 Escrow Agreement
2.44 Tax Opinion of Xxxxxxx & Xxxxx, LLP
3.36 Tax Opinion of Xxxxxxxx, Xxxxx & Xxxxxxx, P.C.
4.5 Employment Agreements and Option Agreements
4.10 Affiliate Letter and Shareholder Certificate Re Tax-Free
Reorganization
4.29 FIRPTA Certificate
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN INTEK INFORMATION, INC.
AND PROTOCALL NEW BUSINESS SPECIALISTS, INC.
This Agreement is dated as of February 3, 1997, among Intek Information,
Inc., a Delaware corporation ("Intek") and Protocall New Business Specialists,
Inc., a California corporation, ("Protocall"). For certain limited purposes,
the shareholders of Protocall (the "Shareholders") are parties to this
Agreement.
RECITALS
A. Protocall is the owner of a business generally engaged in the
provision of call centers providing outsourced teleservicing services.
B. Intek and Protocall desire to have Intek acquire Protocall by means of
a merger of Protocall with and into Intek Acquisition Corp., a Colorado
corporation ("Sub"), a wholly owned subsidiary of Intek, by means of a forward
triangular merger (the "Merger") intended to qualify as a partially tax free
reorganization under Section 368(a)(2)(D) of the Internal Revenue Code.
C. The parties understand that the Merger will not be treated as a
pooling of interests for accounting purposes.
D. Concurrently with the "Closing" (as defined below) of this Agreement,
among other things: (i) a Shareholders Agreement (the "Shareholders Agreement")
will be entered into by and among Intek, the Shareholders receiving stock of
Intek hereunder and the other stockholders of Intek, (ii) a Registration Rights
Agreement (the "Registration Rights Agreement") will be entered into by and
between Intek, the Shareholders receiving stock of Intek hereunder and possibly
certain other persons, (iii) certain employees of Protocall will enter into
employment agreements and stock option agreements with Sub or Intek; and (iv)
Intek, the Shareholders and an escrow agent for the escrow of certain of the
"Exchange Consideration" (as defined below) will enter into an Escrow Agreement.
Each of those agreements shall become effective only upon the Effective Time of
the Merger (as defined below); and each of those documents and the other
operative documents and certificates (including affiliate letters) to be
executed and delivered in connection herewith is referred to as a "Document" or
the "Documents."
AGREEMENT AND PLAN OF MERGER
ARTICLE I
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THE MERGER
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1.1. Effective Time of the Merger. The Merger shall become effective
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at the later of the time of the filing of a Certificate of Merger and related
Agreement and Plan of Merger substantially in the form attached as Exhibit
1.1.A. hereto with the Secretary of State of California and the filing of the
Articles of Merger substantially in the form of Exhibit 1.1.B. with the
Secretary of State of Colorado, which filings shall be made immediately
following Closing. The time the Merger becomes effective is hereinafter
referred to as the "Effective Time of the Merger." The delivery of the
California tax certificate referenced herein is not a precondition to the filing
of the Merger documents.
1.2. Surviving Corporation. At the Effective Time of the Merger,
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Protocall shall be merged with and into Sub, which shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") and which
shall continue its corporate existence under the laws of the State of Colorado.
1.3. Articles of Incorporation. The Articles of Incorporation of Sub,
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as in effect at the Effective Time of the Merger, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law; provided, however, that the Articles of Merger shall change the name of
Sub to Protocall New Business Specialists, Inc.
1.4. Bylaws. The Bylaws of Sub, as in effect at the Effective Time of
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the Merger, shall be the Bylaws of the Surviving Corporation until thereafter
amended as provided by law.
1.5. Directors and Officers. The officers of the Surviving
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Corporation and the directors of the Surviving Corporation immediately after the
Effective Time of the Merger shall be as set forth on Schedule 1.5; such
officers and directors to hold office in accordance with and subject to the
Articles of Incorporation and Bylaws of the Surviving Corporation.
1.6. Protocall Capitalization. At the Effective Time of the Merger,
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the outstanding capitalization of Protocall consists solely of 2,025 shares of
Protocall Series A Preferred Stock ("Protocall Preferred") and 9,775 shares of
Protocall Common Stock ("Protocall Common") (collectively "Protocall Stock").
1.7. Conversion of Shares. As of the Effective Time of the Merger, by
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virtue of the Merger and without any action on the part of the holder of any
share of Protocall Stock, or on the part of the holder of any share of common
stock of Sub ("Sub Common Stock"), aggregate Exchange Consideration (as defined
below), which the parties hereto have agreed is worth $6,457,735, shall be
delivered to the Shareholders, and shall be paid out as follows:
(a) Each share of Protocall Preferred outstanding immediately
prior to the Effective Time of the Merger (excluding those shares of Protocall
Preferred held by Protocall as treasury shares or those held by Intek or its
subsidiaries, which shall cease to exist and be cancelled as of the Effective
Time of the Merger) shall be converted into (i) $466.61 (being
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$944,884 divided by 2,025), less the amount of applicable withholding taxes.
Such amount shall be payable by wire transfers in the aggregate amount of
$807,595.86 (being $944,884, less the sum of $137,288.14 previously delivered to
purchase the Option). Of such $807,595.86, $73,502.64 shall be placed in the
Escrow Agreement escrow. The Delay Payment allocable to the Protocall Preferred
($193.60 per day) shall be added to the amount of $807,595, as Exchange
Consideration, but shall not affect the Option amount or the amount placed in
escrow.
(b) Each share of Protocall Common outstanding immediately prior
to the Effective Time of the Merger (excluding those shares of Protocall Common
held by Protocall as treasury shares or those held by Intek or its subsidiaries,
which shall cease to exist and be cancelled) shall be converted into (i) 190.616
shares of Series B Convertible Preferred Stock of Intek ("Series B") which is
equal to 1,863,271 (subject to adjustment as provided in Section 1.7(d) divided
by 9,775 (9,775 being the outstanding number of shares of Protocall Common)),
plus (ii) $232.11 (being $2,268,896 divided by 9,775 [Number of shares of
Protocall Common]). Such amount shall be payable by wire transfer in the
aggregate amount of $1,606,184.20 (being $2,268,896 less the sum of $662,711.86
previously delivered to purchase the Option). Of such $1,606,184.20, $176,497.36
shall be placed in the Escrow Agreement escrow, and 144,000 shares of Series B
shall be placed into such escrow. The Delay Payment allocable to the Protocall
Common ($385.05 per day) shall be added to the amount of $1,606,184.20 as
Exchange Consideration, but shall not affect the Option amount or the amount
placed in the escrow.
(c) The amount to be so received (including amounts previously
delivered) per share of Protocall Stock is referred to as the "Exchange
Consideration." The Exchange Consideration relative to a share of Protocall
Stock is herein sometimes referred to as the "Conversion Ratio."
(d) Intek contemplates an investment by The Beacon Group III -
Focus Value Fund L.P. ("Beacon") in Intek. That investment contemplates certain
documents including the Shareholders Agreement and the registration rights
agreement which Beacon will enter into with Intek (the "Beacon Registration
Agreement"). Intek has delivered to the Shareholders Representative the
Shareholders Agreement, the Beacon Registration Agreement, the Registration
Rights Agreement, the Series B Stock Purchase Agreement, the registration rights
agreement, as amended, among Resource BancShares Corporation, Xxxxxxx X.
X'Xxxxxxx and Intek, the Intek Amended and Restated Certificate of
Incorporation, and the By-laws of Intek, related to the Beacon transaction.
Those documents provide for a Conversion Price of $1.741 per share with respect
to the conversion of the Series B to Intek common stock. If the actual initial
Conversion Price is more or less than $1.741 then the number of shares of Series
B issuable as the aggregate Exchange Consideration shall be adjusted to that
number which when multiplied by the actual Series B Conversion Price equals
$3,243,955.
(e) The cash to be delivered as part of the Exchange
Consideration (including amounts previously delivered) is in the aggregate
$3,213,780 and is referred to as the
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"Cash Consideration."
(f) Protocall and the Shareholders agree, and warrant to Intek,
that the value of the Exchange Consideration per share of Protocall Preferred is
appropriate relative to the value of the Exchange Consideration per share of
Protocall Common and that notwithstanding any provision of Protocall's governing
documents, including its Articles of Incorporation, or any agreement, no
Shareholder is entitled to any amount in respect of Protocall capital stock
except the Exchange Consideration to be received by him as provided herein.
(g) The $25,000 payment and $75,000 principal amount loan
previously made by Intek to Protocall is not a part of the Exchange
Consideration and does not reduce the Exchange Consideration, and such $75,000
principal amount loan will not be cancelled or forgiven as a result of the
Merger.
1.8. No Fractional Shares. Notwithstanding any other provision
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hereof, no fractional shares of Series B shall be issued to holders of Protocall
Stock. In lieu thereof, each holder of shares of Protocall Stock who is
entitled to a fraction of a share of Series B shall receive an amount of cash
equal to the conversion price of the Series B multiplied by the fraction of a
share of Series B to which such stockholder would be otherwise entitled. No
such holder shall be entitled to dividends, voting rights or any other right of
stockholders in respect of any fractional share.
1.9. Options and Warrants. Protocall as of Closing does not have
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options, warrants, convertible debt, convertible securities, or other rights
outstanding to acquire any Protocall Stock or other Protocall securities so no
provision is made in respect thereof. The Shareholders have issued the "Option"
(as defined in Section 1.19).
1.10. Adjustments. If between the date of this Agreement and the
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Effective Time of the Merger the outstanding shares of Protocall Stock, Intek
Common Stock or Series B, shall be changed into a different number of shares by
reason of any reclassification, recapitalization, split-up, combination or
exchange of shares or if a stock dividend thereon shall be declared with a
record date within said period, or if for any other reason as of the Effective
Time of the Merger there are more then the above specified number of shares of
Protocall Stock outstanding, the Conversion Ratio shall be adjusted accordingly.
1.11. Stock Transfer Books. At the Effective Time of the Merger,
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the stock transfer books of Protocall shall be closed and no transfer of shares
of Protocall Stock outstanding immediately prior to the Effective Time of the
Merger shall thereafter be made. If certificates representing such shares are
presented to the Surviving Corporation, they shall be cancelled and exchanged
for the Exchange Consideration as provided in Section 1.13.
1.12. Closing. The closing of the transactions contemplated by
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this Agreement
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(the "Closing") shall take place on the date the proceeds from Beacon of the
Series B financing are received, as required in Section 5.1.1., and 5.2.1. but
not later than twenty-one days after the date hereof. The Closing will take
place at Xxxxxxxx, Xxxxx & Xxxxxxx, P.C., 0000 Xxxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000, (000) 000-0000, or in New York, New York at the location of the
closing of the Series B transaction with Beacon, as designated by Intek not less
than three (3) days before the Closing, unless otherwise mutually agreed.
1.13. Issuance and Delivery of Exchange Consideration.
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Immediately after the Effective Time of the Merger, Intek shall deliver to each
holder of shares of Protocall Stock converted into Exchange Consideration
pursuant to Section 1.7 hereof, upon surrender by such holder to Intek of one or
more certificates representing such shares for cancellation (except as to items
to be delivered to the escrow agent as provided in Section 1.15): (i) if
applicable, certificates representing the aggregate number of shares of Series B
into which such surrendered shares have been converted and (ii) a wire transfer
into such account as such Protocall Shareholder shall designate for the
aggregate unpaid Cash Consideration in respect of such Protocall shares and a
wire transfer in the amount, if any, payable pursuant to Section 1.8. in respect
of fractional shares. Subsequent to the Effective Time of the Merger, unless
and until an outstanding Protocall certificate is so surrendered, (i) no
dividends or distributions of any kind payable to the holders of record of
Series B or Intek Common Stock into which the Series B may be converted, shall
be paid by Intek to the holder of such an outstanding certificate representing
Protocall Stock, and (ii) no such holder shall have a right to receive such
dividends or distributions. Upon the surrender and exchange of such an
outstanding Protocall certificate, the holder shall be paid, without interest,
the amount of any dividends or distributions which theretofore became payable
with respect to the shares of Series B or Intek Common Stock, as applicable,
evidenced by such certificate.
1.14. Intek Stock. The Series B will be restricted stock subject
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to certain restrictions on transfer including, without limitation, the
restrictions contained herein and in the Shareholders Agreement and in the
Registration Rights Agreement. The Series B to be issued will not have been
registered under the Securities Act of 1933, as amended, or qualified under
applicable Blue Sky laws.
1.15. Escrow. As security for the indemnity provisions of this
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Agreement from Protocall and the Shareholders to Intek, $250,000 in cash and
144,000 shares of Series B representing a proportionate part of the Exchange
Consideration deliverable hereunder to each Shareholder shall be physically held
for thirteen (13) months after the Closing by Bank One, N.A., Denver, Colorado
as escrow agent, in escrow, but issued in the names of the Shareholders. The
parties specifically understand that this is not an "earn out" or similar
provision. The Escrow Agreement shall be in substantially the form of Exhibit
1.15. attached hereto.
1.16. Transaction Costs. The amount of all fees and costs of or
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related to the negotiation, structuring or documentation of the transactions
described herein, including all professional fees, finders fees, investment
banker fees and consultant fees, paid, incurred or
5
accrued by Protocall ("Transaction Costs") through the Effective Time of the
Merger shall not exceed the following payments: (i) the tax and accounting fees
of Xxxxxx Xxxxxxxx LLP ("Xxxxxx Xxxxxxxx") (estimated unpaid cost at $20,000);
(ii) the consulting fees of Xxxx Xxxxxxx ($61,000); (iii) miscellaneous
reasonable travel costs and miscellaneous consulting fees (to other than Xxxx
Xxxxxxx) of up to $10,000 (coach class, standard hotel room); and (iv) fees and
expenses of Xxxxxxx & Xxxxx up to $50,000. All such xxxxxxxx are subject to the
review of Intek. Protocall shall pay all such expenses in any event. To the
extent any amount listed above is exceeded the aggregate Cash Consideration
shall be reduced in the amount of such excess. Persons who will enter into
employment agreements with Intek or Sub will pay the legal fees associated with
the negotiation by them of such agreements. Each Shareholder shall bear their
own costs of the transactions contemplated herein to avoid an imputed payment of
cash consideration affecting the partially tax-free reorganization treatment of
the Merger and the foregoing allocation is intended to reach such result.
Notwithstanding the foregoing, as to work requested by Intek of Xxxxxx Xxxxxxxx,
the parties acknowledge any actual audit of Protocall to prepare audited
financial statements is for the benefit of Intek and will be paid by Intek
regardless of whether the Closing occurs.
1.17 Second Round Financing Requirements. Beacon as a purchaser of
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Intek securities requires execution and delivery of the Shareholders Agreement,
the Beacon Registration Agreement, the Registration Rights Agreement, and the
Amended and Restated Certificate of Incorporation of Intek (the "Series B
Documents").
1.18 Delay Payment. The "Delay Payment" is in the aggregate $578.65
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for each day after February 4, 1997 up to and including the Closing Date, and
shall be allocated to each share of Protocall Stock in the same ratio as the
Cash portion of the Exchange Consideration is paid.
1.19 Option Sale. Contemporaneous with the execution of this
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Agreement, Intek shall purchase from the Shareholders of Protocall for an
aggregate price of $800,000 an option (the "Option") to effect the Merger of
Protocall into Sub pursuant to the terms of this Agreement. Such consideration
is to be divided pro rata among the Shareholders of Protocall. Upon consummation
of the Merger, the purchase price of the Option shall be treated hereunder as a
portion of the aggregate Exchange Consideration. If the Merger is not
consummated pursuant to the terms of this Agreement prior to the date twenty-one
days following the date hereof, for any reason other than by an action or
omission by Protocall that directly leads to a material breach of this Agreement
by Protocall, the Option shall automatically expire as of such date, this
Agreement shall be terminated and the purchase price of the Option shall be
retained by the Shareholders of Protocall. If the Merger is not consummated
pursuant to the terms of this Agreement prior to the date twenty-one days
following the date hereof due solely to an action or omission by Protocall that
directly leads to a material breach of this Agreement by Protocall, then the
full purchase price of the Option shall be repaid immediately to Intek.
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ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF PROTOCALL
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AND THE SHAREHOLDERS
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Protocall and the Shareholders (as limited by Article VII) (collectively
and singly, the "Representing Party") represent and warrant to Intek as follows
as of the date hereof, as of the Closing and as of the Effective Time of the
Merger.
2.1. Authorization Capitalization; Outstanding Shares. The authorized
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capital stock of Protocall on the date hereof consists of 100,000 shares of one
class of common stock without a stated par value per share, of which 9,775
shares are issued and outstanding, and 50,000 shares of Preferred Stock of which
25,000 are undesignated and 25,000 shares are designated as Series A Convertible
Preferred Stock without a stated par value per share, of which 2,025 shares of
Series A Convertible Preferred Stock are issued and outstanding. All of the
issued and outstanding shares of Protocall Stock are duly authorized, fully
paid, validly issued and non-assessable, with no personal liability attaching to
the ownership hereof. Each Shareholder is the record and beneficial owner of,
and has marketable, legal and valid title to, the shares of Protocall Stock as
set forth on Schedule 2.1 under the caption "Current Ownership." As of the
Closing and as of the Effective Time of the Merger each Shareholder is and will
be the beneficial owner of, and have marketable, legal and valid title to, the
Protocall Stock as set forth on Schedule 2.1. under the caption "Closing
Ownership."
2.2 Organization; Good Standing; Power; Etc.; Protocall Partnership.
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Protocall: (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of California; (ii) is authorized or
licensed to do business as a foreign corporation and is in good standing in the
jurisdictions listed in Schedule 2.2; (iii) is not required to be authorized or
licensed to do business as a foreign corporation in any other jurisdiction
(within or without the United States) except jurisdictions in which Protocall's
failure to qualify to do business will have no Material adverse effect on the
business, prospects, operations, properties, assets or condition (financial or
otherwise) of Protocall or, if Protocall is not so qualified in any such
jurisdiction, it can become so qualified in such jurisdiction without any
Material adverse effect; and (iv) has the requisite power and authority to own,
lease and operate its properties and to carry on its business as currently
conducted.
Protocall was capitalized by a contribution of all the assets of a
general partnership (the "Partnership") known as "Protocall," the only partners
of which were Xxxxx Xxxxxxxx and Xxxx Xxxxxx. Xxxxx Xxxxxxxx and Xxxx Xxxxxx
will make a good faith effort to provide copies of the documents pursuant to
which that contribution occurred to Intek after the Closing. The Partnership
has been dissolved.
2.3 Agreements Relating to Stock; Options; Warrants; Restrictions on
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Shares; Etc. Except for the Option, neither Protocall nor any Shareholder, is a
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party to any written or oral agreement, understanding, arrangement or commitment
or bound by any certificate of
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incorporation, bylaw or instrument (including options, warrants or convertible
securities) which creates any rights in any person with respect to shares of the
capital stock or any other securities of Protocall including any which relates
to the voting of, restricts the transfer of, requires Protocall or the
Shareholder to issue or sell, or creates rights in any person with respect to
the capital stock or other securities of Protocall (or warrants or rights with
respect thereto). Except for the Option, there exist no options or other rights
to purchase, or rights to convert any securities or obligations into, any shares
of the capital stock or other securities of Protocall.
2.4. Charter and Bylaws; Officers and Directors. Complete and correct
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copies of: (i) Protocall's corporate charter or articles, as amended to date
("Charter"), certified by the appropriate officials of the jurisdiction of
incorporation; and (ii) Protocall's Bylaws, as amended to date ("Bylaws"), are
attached as Schedule 2.4.A. Such Charter and Bylaws are fully in force and
effect, and Protocall is not in violation of any of the provisions thereof. A
complete and correct list of all officers and directors of Protocall is set
forth in Schedule 2.4.B.
2.5. No Subsidiaries. Protocall does not own and Protocall has never
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owned, any interest, directly or indirectly, in any other corporation, person,
company, limited liability company, business, trust, partnership, limited
partnership, joint venture, or other entity or association, except as listed on
Schedule 2.5.
2.6. Authorizations and Enforceability. Each Shareholder and
---------------------------------
Protocall has all requisite power and authority to execute, deliver and perform
this Agreement, and any ancillary agreements hereto, and to consummate the
transactions contemplated hereby. This Agreement and the Documents have been
duly and validly authorized by Protocall, and have been duly and validly
executed and delivered by each Shareholder and Protocall and constitute the
valid and binding obligation of each Shareholder and Protocall fully enforceable
in accordance with their respective terms, except as may be limited by
principles of public policy and except as indemnification provisions may be
limited by securities laws, and subject to laws of general application relating
to bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
2.7. Effect of Agreement, Etc.. The execution, delivery and
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performance of this Agreement by each Shareholder and Protocall and the
consummation of the transactions contemplated hereby will not, with or without
the giving of notice of the lapse of time, or both: (i) violate any provision of
law, statute, rule or regulation to which Protocall or any Shareholder is
subject; (ii) violate any judgment, order, writ or decree of any court,
arbitrator or governmental agency applicable to Protocall or any Shareholder;
(iii) have any effect on any of Protocall's permits, licenses, tariffs, orders
or approvals or the ability of Protocall to make use of such permits, licenses,
tariffs, orders or approvals, except as set forth in Schedule 2.7.A.; or (iv)
result in the breach of or conflict with any term, covenant, condition or
provision of, result in the modification or termination of, constitute a default
under, or result in the creation or imposition of, any lien, security interest,
charge or encumbrance upon any of the properties or assets of Protocall pursuant
to any charter, bylaw, commitment, contract or other agreement or instrument,
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including any of the Commitments (as defined in Section 2.16) to which Protocall
is a party or by which any of its assets or properties are or may be bound or
affected or from which Protocall derives benefit except as set forth in Schedule
2.7.B.
2.8. Restrictions; Burdensome Agreements. Neither Protocall nor any
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of the Shareholders is a party to any contract, commitment or agreement, and
neither Protocall nor any of the Shareholders or any of their respective
properties and assets are subject to or bound or affected, by any charter, bylaw
or other corporate restriction, or any order, judgment, decree, law, statute,
ordinance, rule, regulation or other restriction of any kind or character, which
would: (i) prevent any Shareholder or Protocall from entering into this
Agreement or from consummating the transactions contemplated hereby; or (ii)
have a Material adverse effect on the business, properties, prospects or the
condition, financial or otherwise, of Protocall. Protocall has no Knowledge
that any of Protocall's contracts or agreements are on terms more burdensome to
Protocall than typical contracts and agreements in its industry for companies
the size and scope of Protocall.
2.9. Government Consents. No consent, authorization or approval of,
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or exemption by, or filing with, any governmental, public or self-regulating
body or authority (including, but not limited to, any licensing authority with
jurisdiction over the telecommunication services used or provided by Protocall)
is required by any Shareholder or Protocall for consummation of this Agreement
or any of the instruments or agreements herein referred to, or the taking of any
action herein contemplated.
2.10. Compliance; Licenses and Permits.
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2.10.1 Protocall has all requisite corporate power and
authority, and all permits, licenses, tariffs, orders and approvals of
governmental and administrative authorities which are Material, to own,
lease and operate its properties and to carry on its business as presently
or previously conducted; all such presently existing permits, licenses,
tariffs, orders and approvals Material to the conduct of the business of
Protocall are listed in Schedule 2.10, are in full force and effect, and no
suspension or cancellation of any of them is pending or, to the Knowledge
of Protocall, threatened.
2.10.2 Protocall has complied in all respects with, and is not
in violation in any respect of, all or any Legal Requirements applicable to
the business of Protocall as presently or previously conducted, or as
currently proposed to be conducted, except where such non-compliance or
violation has not had, and could not reasonably be expected to have, a
Material adverse effect upon Protocall. Protocall (including to
Protocall's Knowledge all applicable employees) has all Federal, state,
local and foreign governmental tariffs, orders, licenses and permits
(collectively, "Permits") which are required for the conduct of its
business presently or previously conducted by Protocall, which Permits are
in full force and effect, and no violations are outstanding or uncured with
respect to any such Permits and no proceeding is pending or, to the
Knowledge of
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Protocall, threatened to revoke or limit any thereof. No condition or
event has occurred which, with notice or the passage of time or both, would
constitute a violation of a Legal Requirement or Permit except where such
noncompliance or violation has not had, and could not reasonably be
expected to have, a Material adverse effect upon Protocall. "Legal
Requirement" means any applicable law, rule, regulation, order or
ordinance. To the Knowledge of Protocall its proposed activities will not
violate any Legal Requirement proposed to be adopted, in such a fashion as
to have a Material adverse effect on Protocall.
2.11. Financial Statements; Absence of Undisclosed Liabilities.
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2.11.1. Protocall's unaudited balance sheets dated as of July
31, 1995, July 31, 1996 and November 30, 1996, and Protocall's unaudited
statements of operations for the fiscal year ended July 31, 1996 and four-
month period ended November 30, 1996 (the "Protocall Financial Statements")
are attached as Schedule 2.11.1 The Protocall Financial Statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") (except for the absence of notes, or in the case of the statements
for the period ended November 30, 1996, normal year end adjustments). The
Protocall Financial Statements fairly present, in all Material respects,
the financial condition and results of operations of Protocall as of the
dates indicated. The November 30, 1996 balance sheet is referred to as the
"Balance Sheet" and November 30, 1996 is referred to as the "Balance Sheet
Date."
2.11.2. Except to the extent reflected or reserved against or
otherwise disclosed in the Protocall Financial Statements, in another
Schedule hereto as cross-referenced in Schedule 2.11.2, or in Schedule
2.11.2, as of the Balance Sheet Date, Protocall had no liabilities, debts
or other obligations of any nature, whether absolute, accrued, contingent
or otherwise, or whether due or to become due, including, without
limitation, liabilities for Taxes, in excess of $15,000 in any one case or
which in the aggregate are Material. Subsequent to the Balance Sheet Date,
Protocall has not incurred any liabilities, debts or obligations other than
in the ordinary course of business (and such ordinary course items do not
in the aggregate exceed $100,000), except as listed in Schedule 2.11.2, or
otherwise disclosed herein including the payables run described below or in
the Schedules hereto, and has endeavored to properly record in its books of
account all items of income and expense and all other proper charges and
accruals required to be made in accordance with GAAP. Since the Balance
Sheet Date, no debts or liabilities of or to Protocall have been forgiven,
settled or compromised, except for full consideration or except in the
ordinary course of business. To assist in disclosing the status of its
debts Protocall has delivered to Intek an accounts payable run off
Protocall's computer, as prepared in the ordinary course of Protocall's
business, which run occurred not more than five (5) days before the date of
this Agreement. The parties recognize that in the ordinary course of
business invoices arrive at various times.
10
2.12. Tax Matters.
-----------
2.12.1. Protocall's fiscal year for income tax reporting
purposes ends July 31.
2.12.2. Protocall has timely filed (including extension) all
Tax returns that are required to have been filed by it with appropriate
federal, state, county and local government agencies or instrumentalities,
that would have a Material adverse effect if not filed, except as provided
in Schedule 2.12.2.A. Protocall has paid or established reserves for all
income, franchise, payroll and other Taxes except as set forth in Schedule
2.12.2.B. An estimate of accrued Taxes is set forth in Schedule 2.12.B.
There is no pending dispute with any Taxing authority relating to any of
Protocall's Returns. Protocall has no Knowledge of any proposed Material
liability for any Tax to be imposed upon its properties or assets for which
there is not an adequate reserve reflected in the Protocall Financial
Statements or accrued since the date of the Protocall Financial Statements.
No federal or state income or sales Tax Returns of Protocall have been
audited. Neither Protocall nor the Partnership have executed or filed with
any Taxing authority any agreement extending the period for assessment or
collection of any Taxes. Protocall has not consented to have the provisions
of Section 341(f) (which relates to collapsible corporations) of the
Internal Revenue Code of 1986, as amended (the "Code") apply to it.
Complete and correct copies of the income tax returns of Protocall and the
Partnership for fiscal years ending in 1993, 1994, 1995, and 1996 as filed
with the Internal Revenue Service and all state taxing authorities,
together with all related correspondence and notices, have previously been
delivered to Intek.
2.12.3. Protocall has never been taxed pursuant to Subchapter S
of the Code.
2.13. Title to Properties; Absence of Liens and Encumbrances; Etc..
------------------------------------------------------------
Except as disclosed on Schedule 2.13 Protocall does not own any real property.
Except as set forth in Schedule 2.13, Protocall owns good and marketable title
to the properties and assets used in its business (including, without
limitation, the assets reflected in the Protocall Financial Statements, except
as since sold or otherwise disposed of in the ordinary course of business), free
and clear of all mortgages, security interests, claims, liens, charges,
encumbrances, restrictions on use or transfer or other defects in title. The
fixed assets of Protocall reflected in the Protocall Financial Statements are
all located on real property owned or leased by Protocall and all personal
property located at or on such real property is owned or leased (as disclosed in
the Schedules) by Protocall. Protocall is not a bailee for any other entity,
except as set forth on Schedule 2.13. The leases and other agreements under
which Protocall holds, leases or is entitled to the use of any real property or
personal property involving lease payments of over $25,000 per year, are set
forth in Scheduled 2.16, and are in full force and effect, and all rentals,
royalties or other payments payable thereunder prior to the date hereof have
been duly paid. All "buy-out" prices under operating or capital leases are shown
on Schedule 2.16 if such payout price is in excess of
11
$25,000 under any one lease, regardless as to whether the lessee has any
obligation to purchase such property.
2.14. Facilities; Equipment and Condition. Schedule 2.14 sets forth
-----------------------------------
a correct and complete list of all of the furniture, fixtures or equipment
having a book value, before accumulated depreciation or amortization, of more
than $25,000 (or, in the case of any such equipment which is leased and does not
have a book value for purposes of Protocall's financial statements, in the
opinion of Protocall management has a fair market value in excess of $25,000),
buildings, plants, warehouses and other real estate owned or used by Protocall
in the conduct of its businesses ("Fixed Assets"), indicating whether such
property is owned or leased, and complete legal descriptions of all real
property. The Fixed Assets owned, operated or leased by Protocall are in good
condition and repair (ordinary wear and tear excepted) and suitable for the uses
for which intended. All such Fixed Assets are operated in conformity with all
applicable laws, ordinances, regulations, orders and other requirements relating
thereto currently in effect, scheduled to come into effect or, to the Knowledge
of Protocall, proposed.
2.15. Insurance. Schedule 2.15.A. consists of declaration pages
---------
(including amounts, scope and coverage) of all of the policies of insurance and
fidelity or surety bonds carried by Protocall since January 1, 1993. All
current policies are in full effect. Protocall has not failed to give any
notice or present any claim under any insurance policy, fidelity bond or surety
bond in due and timely fashion. To Protocall's Knowledge there are no
outstanding requirements or recommendations by any insurance company that issued
a policy with respect to any of the properties and assets owned or leased by
Protocall, by any Board of Fire Underwriters or other body exercising similar
functions or by any governmental authority requiring or recommending any repairs
or other work to be done on or with respect to any of the properties and assets
owned or leased by Protocall or requiring or recommending any equipment or
facilities to be installed on or in connection with any of the properties or
assets owned or leased by Protocall. The workmen's compensation and
unemployment insurance ratings of Protocall have been made available to Intek.
Protocall has no Knowledge of any proposed increase therein and knows of no
conditions or circumstances applicable to the business of Protocall which might
result in such increase except as shown on Schedule 2.15.B.
2.16 Contracts. All contracts, agreements and instruments, to which
---------
Protocall is a party are valid, binding and in full force and effect in all
Material respects, and are valid, binding and enforceable by Protocall in
accordance with their respective terms, subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies. Neither Protocall nor to Protocall's Knowledge any other
party to such contract is in default in any Material respect under such
contracts, agreements or instruments. Each of such Material contracts,
agreements and instruments has been listed on Schedule 2.16 attached hereto.
Except as set forth in Schedule 2.16, or another Schedule hereto,
Protocall is not a party to, nor are its properties and assets bound or affected
by, any oral or written:
12
2.16.1. contracts, agreements, or instruments providing for
payments by or to Protocall of $50,000 or more per year;
2.16.2. employment or consulting agreements which provide for
compensation at the rate of more than $50,000 per year (including all
salary, bonuses and commissions);
2.16.3. employment or consultant policies or agreements, express
or implied, placing any limits (other than a notice period not exceeding 30
days) on Protocall's right to terminate at will the employment or retention
of any employee or consultant;
2.16.4. agreement involving more than $10,000 guaranteeing,
indemnifying or otherwise becoming liable for the obligations or
liabilities of another, or involving more than $10,000 providing
compensating balances or agreeing to assure another person meets any
financial covenant;
2.16.5. agreement which restricts the conduct of business
anywhere in the world;
Correct and complete copies of all such agreements, plans, policies, documents
and arrangements (or, where they are oral, true and complete written summaries
thereof) (collectively referred to herein as the "Commitments") have been
delivered to Intek prior to the date hereof.
2.17 Litigation. Except as set forth in Schedule 2.17, there is no
----------
claim, action, suit, proceeding, arbitration, investigation or inquiry pending
before any Federal, state, municipal, foreign or other court or any
governmental, administrative or self-regulatory body or agency, or any private
arbitration tribunal, (or, to Protocall's Knowledge, is there any threatened, or
basis for, any such claim, action, suit, proceeding, arbitration, investigation
or inquiry) which may have any Material adverse effect upon the assets,
properties or business of Protocall or the transactions contemplated by this
Agreement. Neither Protocall, the Partnership, nor any officer, director,
partner, agent or employee of Protocall or the Partnership has been permanently
or temporarily enjoined or barred by order, judgment or decree of any court or
other tribunal or any agency or self-regulatory body from engaging in or
continuing any conduct or practice in connection with the business engaged in by
Protocall or the Partnership. Except as set forth in Schedule 2.17, there is
not in existence at present any order, judgment or decree of any court or other
tribunal or any agency or self-regulatory body to which Protocall, the
Partnership, or the business, properties or assets of Protocall are subject or
by which they are bound. Protocall is not in Material default under any order,
license, tariff, regulation or demand of any Federal, state, municipal, foreign
or other governmental, administrative or self-regulatory body or with respect to
any order, writ, injunction or decree of any court or arbitration body.
13
2.18 Patents and Other Intangible Assets.
-----------------------------------
a) Protocall, to the best of its Knowledge, except as set forth in
Schedule 2.18, (i) owns or has the right to use, free and clear of all
liens, claims and restrictions, all patents, trademarks, service marks,
trade names, copyrights, license and rights, used in the conduct of its
business as now conducted or as proposed to be conducted without infringing
upon or otherwise acting adversely to the right or claimed right of any
person under or with respect to any of the foregoing, and (ii) is not
obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner of, licensor of, or other
claimant to, any patent, trademark, tradename, copyright or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise Protocall has not received any
communication alleging that, and has no Knowledge of any allegation that,
Protocall or any of its employees has violated or infringed upon, or, by
conducting Protocall's business as proposed, would violate or infringe
upon, any patent, trademark, service xxxx, trade name, copyright, license
or right of any other person or entity. All patents, trademarks, service
marks, tradenames, copyrights and licenses (and applications therefor)
owned or used by Protocall are listed on Schedule 2.18 hereto, and such
schedule indicates which such rights are owned.
b) To its Knowledge, Protocall owns or has the unrestricted right to
use all trade secrets, including know-how, inventions, designs, processes,
computer programs and technical data required for or incident to the
development, manufacture, operation and sale of all products and services
sold or proposed to be sold by Protocall, free and clear of any rights,
liens or claims of others, including without limitation former employers of
all employees of Protocall.
c) Protocall has no Knowledge of any infringement by others of
intellectual property rights owned or used by Protocall.
2.19 No Interest in Competitors; Etc. Except as set forth in
-------------------------------
Schedule 2.19, no five percent (5%) or more beneficial owner, officer or
director of Protocall or any immediate family member or spouse of any such
person, or trust for their benefit, directly or indirectly, owns any interest in
(excluding the ownership of securities representing less than 1% of any class of
publicly traded securities) or controls or is an employee, officer, director or
partner of, or participant in or consultant to, any corporation, partnership,
limited liability company, limited partnership, joint venture, association or
other entity which is in the same line of business as Protocall, or a creditor,
debtor, supplier, customer, landlord, tenant, lessor or lessee, of Protocall, or
has any type of business, commercial, consulting or professional relationship
with Protocall.
2.20 Books and Records. The books and records of Protocall are
-----------------
located at 000 Xxxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxxx. The books of account and
other financial and corporate records of Protocall are in all Material respects
complete and correct, and are maintained in accordance with good business
practices, as could reasonably be expected for a company the size
14
and scope of Protocall (provided, however, that this representation does not
diminish the representations in Section 2.11). The minute books of Protocall, as
made available to Intek and its counsel, contain complete and accurate records
of all meetings and accurately reflect all other corporate action of the
stockholders and directors (and committees thereof) of Protocall through the
date hereof.
2.21 Insider Transactions. Schedule 2.21 (when read with Schedule
--------------------
2.19) sets forth: (i) the amounts and other essential terms of indebtedness or
other obligations, liabilities or commitments (contingent or otherwise) of
Protocall to or from any past or present officer, director, or stockholder or
any person related to, controlling, controlled by or under common control with
any of the foregoing (other than for usual services performed within the past
two months, the payment for which is not yet due); and (ii) all proposed
transactions with such persons, together with the essential terms thereof if the
amount payable thereunder will exceed $5,000 in any year.
2.22 Employees. Since January 1, 1996, there has been no resignation
---------
or termination of any officer or key employee of Protocall that has had or is
expected to have a Material adverse effect on Protocall. Protocall has no
Knowledge of any key employee or consultant of Protocall who is considering: (i)
terminating her or his employment or consultant status; or (ii) seeking a
substantial increase in compensation or benefit.
2.23 Union Contracts; Labor Relations; Etc. Protocall is not
-------------------------------------
presently, and has not been, party to any union or collective bargaining
agreement. Protocall is in compliance in all material respects with all
applicable laws, rules and regulations respecting employment conditions and
practices, has withheld all amounts required by law or agreement to be withheld
from the wages or salaries of its employees and Protocall is not liable for
arrears of wages or any taxes or penalties for failure to comply with any of the
foregoing. Protocall has not engaged in any unfair labor practice, nor has
Protocall discriminated on the basis of race, religion, age or sex, or other
protected category in its employment conditions or practices, nor has Protocall
taken any Material adverse action against any employee or consultant in breach
of any agreement or policy, express or implied, oral or written, nor taken any
Material adverse action against any employee or consultant in violation of
public policy. Except as set forth in Schedule 2.23 or in another Schedule to
this Agreement, there are no: (i) charges or complaints of unfair labor
practices, race, religion, age, sex or other discrimination, breach of
employment or consultant agreement or policy, or breach of public policy pending
or threatened against Protocall before any board, department, commission, agency
or court, nor does any basis therefor exist; (ii) existing or, to Protocall's
Knowledge, threatened labor strikes, disputes, grievances, controversies or
other labor troubles affecting Protocall; or (iii) pending or, to Protocall's
Knowledge, threatened union representation questions respecting the employees of
Protocall. Schedule 2.23 describes all labor strikes, disputes, grievances,
controversies or other labor troubles since January 1, 1995 which have affected
Protocall.
2.24 Employee Benefit Plans; Etc. Except as listed on Schedule 2.24,
---------------------------
15
Protocall has and has not had, any employee benefit plan, stock option plan,
stock appreciation plan, stock purchase plan, profit sharing plan, or retirement
or deferred compensation plan (collectively "Plans"). Protocall has no
liability (contingent or otherwise) to any other person (including a Plan trust
or Plan) in respect of any profit sharing, retirement, deferred compensation or
other employee benefit plan that is maintained, sponsored or contributed to by
another person.
2.25 Bank Accounts and Safe Deposit Arrangements. Schedule 2.25 sets
-------------------------------------------
forth a correct and complete list of each bank account, brokerage account,
similar account and safe deposit box maintained by Protocall, and the names of
all persons authorized to deal with such matters.
2.26 Powers of Attorney. No person has any power of attorney to act
------------------
on behalf of Protocall in connection with any of the properties or business
affairs of Protocall.
2.27 No Finder. Except as provided for in Section 1.16, neither
---------
Protocall nor the Shareholders has taken any action which would give to any
person a right to a consultant's or finder's fee or any type of brokerage
commission in relation to or in connection with the transactions contemplated by
this Agreement.
2.28 No Material Adverse Change. Except as set forth in Schedule
--------------------------
2.28 since the Protocall Balance Sheet Date:
a) Protocall has not entered into any transaction which was not in
the ordinary course of its business except as contemplated or disclosed by
this Agreement.
b) There has been no Material adverse change as to Protocall other
than changes in the ordinary course of its business, none of which,
individually or in the aggregate, has a Material adverse effect.
c) There has been no damage to, destruction of or loss of physical
property (whether or not covered by insurance) that has had a Material
adverse effect on the business or operations of Protocall.
d) There has been no resignation or termination of employment of any
officer or key employee of Protocall, and Protocall does not know of the
impending resignation or termination of employment of any officer or
employee of Protocall that would have a Material adverse effect on the
business of Protocall.
e) There have been no loans or advances made by Protocall to
employees, officers or directors.
f) Protocall has not made or granted any employee bonus, or any
general or
16
specific wage or salary increase outside the ordinary course of business
(and in any event less than 5%), engaged any new officer, or engaged any
new employee outside the ordinary course of business;
g) Protocall has not made any increase in or commitment to increase
any employee benefits or adopted or made any commitments to adopt any
additional employee benefit plan;
h) Protocall has not declared or paid any distribution to its
shareholders, whether in the nature of dividends or otherwise, or purchased
or redeemed any of its outstanding shares of capital stock or other
securities, or paid any debt for borrowed money to any Shareholder or any
affiliate of a Shareholder; and
i) Protocall has not issued or sold any shares of its capital stock
or any other securities, or granted any options or other rights for the
purchase of any shares of its capital stock or other securities.
2.29 Questionnaires. To the Knowledge of Protocall, Protocall has
--------------
made a good faith effort to respond to the Confidential Document and Information
Request bearing a date of October 12, 1996 delivered by Intek to Protocall in
October 1996.
2.30 Investment Representations. Each Shareholder individually
--------------------------
represents and warrants to Intek that:
2.30.1 he is acquiring the Series B, if applicable, for his own
account for investment, not for the interest of any other person, not for
resale to any other person and not with a view to or in connection with a
sale or distribution;
2.30.2 he has provided the information requested in written due
diligence requests to the Shareholder related to the Shareholder, provided
by Intek, and that such information provided by such Shareholder is true
and correct in all respects;
2.30.3 the Shareholders' Representative (as defined below), on
behalf of Shareholder, has had an opportunity to ask questions of and
receive answers from representatives of Intek with respect to the
acquisition of the Series B. Intek has made available to the Shareholder's
Representative all documents requested and has provided answers to all such
persons' questions relating to receipt of the Series B including the Intek
Financial Statements (as defined in Section 3.7);
2.30.4 he acknowledges that because the Series B, and the Intek
Common Stock received on conversion of the Series B, will not have been
registered under the Securities Act of 1933, as amended, or applicable
state securities laws, any resale inconsistent with the Securities Act of
1933, as amended, may create liability on the
17
Shareholder's part and/or the part of Intek, and agrees not to assign,
sell, pledge, transfer or otherwise dispose of or transfer any of the
shares of Intek stock unless registered under the Securities Act and
applicable state securities laws or he has delivered an opinion of counsel
satisfactory to Intek that such registration is not required.
2.30.5 he is able to bear the economic risk of an investment in
the Series B and by reason of his business or financial experience or the
business or financial experience of his professional advisors who are
unaffiliated with and who are not compensated by Intek, directly or
indirectly, have the capacity to protect his own interests in connection
with the transactions contemplated hereby.
2.30.6 he acknowledges that all certificates of Series B or
other Intek securities issued pursuant hereto, shall contain substantially
the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THEY
MAY NOT BE OFFERED OR TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE OR OTHERWISE
UNLESS (I) A REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT IS IN EFFECT OR (II) THE CORPORATION HAS RECEIVED AN OPINION OF
COUNSEL, WHICH OPINION IS SATISFACTORY TO THE CORPORATION, TO THE EFFECT
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT
TO, AND ARE SUBJECT TO AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
INTEK INFORMATION, INC. AND PROTOCALL NEW BUSINESS SPECIALISTS, INC. DATED
__________, A COPY OF WHICH IS AVAILABLE AT THE OFFICES OF THE ISSUER.
[LEGENDS REQUIRED BY STATE LAW]
[SUCH LEGENDS AS REQUIRED TO BE PLACED ON THE SERIES B CERTIFICATES
PURSUANT TO THE SERIES B DOCUMENTS.]
2.30.7 his state of residence and mailing address is as shown on
Schedule 2.30.7.
2.31 Suppliers and Customers. Except as set forth in Schedule 2.31.A.
-----------------------
there are no Material agreements of over 12 months duration which commit
Protocall to carry on business at fixed prices or prices determined by an
established formula. Except as set forth in Schedule 2.31.B. no supplier or
customer accounted for more than five percent of Protocall's
18
consolidated sales or purchases in either the past fiscal year or in the four
month period ended November 30, 1996, and no supplier or customer Material to
Protocall's business has terminated its relationship with Protocall, or has
since January 1, 1996 decreased or delayed Materially, or, to Protocall's
Knowledge, threatened to decrease or delay Materially, its services or supplies
to Protocall.
2.32 Factoring. The factored accounts receivable of Protocall do not
---------
appear as assets of Protocall on the Protocall Financial Statements. All
factoring agreements to which Protocall is a party can be terminated without
penalty or termination fee to Protocall. Protocall as of the date hereof and in
the aggregate through the Closing has not received notice from the factor that
it intends on or after the date hereof to return more than $30,000 of factored
accounts to Protocall.
2.33 Xxxxx Xxxxxxxx. Xxxxx Xxxxxxxx separately represents and
--------------
warrants that no disclosure would be required concerning him pursuant to Item
401(f) of Regulation S-K promulgated under the Securities Act of 1933, as amend
(the "Securities Act"), if such disclosure were made on the date hereof, at the
Closing Date or at the Effective Time of the Merger.
2.34 NASD Matters. Shareholders' acquisition of Series B or the
------------
presence of Xxxxx Xxxxxxxx on the Board of Intek would not, to each
Shareholders' and Protocall's Knowledge without inquiry, cause the U.S.
Securities and Exchange Commission ("SEC"), National Association of Securities
Dealers, Inc., or any state securities commission, to seek, or provide any basis
for any such body to seek, to deny, modify, terminate or fail to renew any
license, permit or accreditation necessary to operate the business of Intek or
its subsidiaries.
2.35 Securities Act, etc. Neither Protocall, nor its respective
-------------------
officers, directors, or to Protocall's Knowledge and belief without inquiry,
controlling persons (a) have been convicted within the ten years preceding the
date of this Agreement of any felony or misdemeanor of the types described in
Rule 262 (b)(1) under the Securities Act, (b) are subject to an order, judgment
or decree of the types described in Rule 262(b)(2) under the Securities Act, (c)
are subject to an order of the SEC of the types described in Rule 262(b)(3)
under the Securities Act, (d) have been suspended or expelled from, or suspended
or barred from association with a member of, a national securities exchange or
as described in Rule 262(b)(4) under the Securities Act or (e) are subject to an
order or injunction as described in Rule 262(b)(5) under the Securities Act.
2.36 Lawyers and Accountants. Protocall and the Shareholders are not
-----------------------
relying upon any investigation made by Intek's counsel or accountants or the
presence of such counsel or accountants as an indication that counsel or the
accountants has reviewed or passed upon the representations, warranties,
projections or business plan of Intek or the wisdom of an investment in Intek.
19
2.37 Accounting Controls. To the Knowledge of Protocall, neither
-------------------
Protocall, nor any director, officer, agent, employee, consultant or other
person associated with or acting on behalf of any Protocall, has (a) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity or (b) made any direct or
indirect unlawful payments to government officials or others from corporate
funds or established or maintained any unlawful or unrecorded funds.
2.38 Essex, Iowa Matters. Other than the Xxxxxx'x dispute as set
-------------------
forth in Schedule 2.11.5., all claims of any type which may be asserted against
Protocall related to the closing of the Essex, Iowa facility, including as to
employees, development authorities and governmental bodies, have been paid and
discharged in full.
2.39 Names. Since January 1, 1991, neither Protocall nor the
-----
Partnership have used any trade name, d/b/a, or other name to identify itself,
except Protocall New Business Specialists, Inc. or Protocall.
2.40 Material Misstatements or Omissions. No representations or
-----------------------------------
warranties by any Representing Party in this Agreement, or any Document,
exhibit, statement, certificate or schedule furnished to Intek by a Representing
Party pursuant hereto, or in connection with the transactions contemplated
hereby, to such Representing Party's Knowledge, contain any untrue statement of
a Material fact, or omit to state any Material fact necessary to make the
statements or facts contained herein or therein in the context in which they
were made not misleading. Any forecasts or projections delivered by or on
behalf of Protocall are not guarantees or representations as to performance.
2.41 Other. Protocall has delivered to Intek Certificates of the
-----
Secretary of State (or other authorized officer) of the State of California
certifying as of a date within 30 days before the delivery that Protocall is, as
of such date, in good standing and authorized to transact business as a domestic
corporation. Protocall has delivered to Intek Certificates of the Secretary of
State (or other authorized officer) of each jurisdiction in which Protocall is
qualified to do business as a foreign corporation, certifying as of a date
within 30 days before the delivery that Protocall is, as of such date, in good
standing and authorized to transact business as a foreign corporation in such
jurisdiction. Protocall has delivered the written resignations, effective on
the Effective Date of the Merger, of all officers and members of the Board of
Directors of Protocall except those persons to remain as directors or officers,
as applicable, hereunder. The approvals and all consents from third parties and
governmental agencies (including under Blue Sky laws) required by Protocall, or
a Shareholder (other than approvals or consents required by Protocall the
absence of which would not have a Material adverse effect on the ability of
Intek or Protocall to operate their respective business after the Effective Time
of the Merger) required to consummate the transactions contemplated hereby and
any additional regulatory consents have been obtained. The Protocall Incentive
Plan never went into effect. No Shareholder or other holder of securities of
Protocall has exercised dissenting shareholder or similar rights.
20
2.42 Protocall Shareholder Meetings. Protocall has held its
------------------------------
shareholders meeting to approve the matters herein and has received the
unanimous written consent of its shareholders.
2.43 Certificates. Shareholders have delivered to Xxxxxxxx, Xxxxx &
------------
Xxxxxxx, P.C. as escrow agent, for delivery to Intek upon Closing distribution
of the escrow, certificates and other instruments representing all shares of
Protocall, duly endorsed for transfer or accompanied by appropriate stock powers
(in either case executed in blank or in favor of Intek), together with all other
documents necessary or appropriate to validly transfer the shares to Intek free
and clear of all security interests, liens, encumbrances and adverse claims.
2.44 Tax Opinion. Intek has received from Xxxxxxx & Xxxxx, LLP,
-----------
counsel to Protocall, an opinion dated the date hereof in the form attached
hereto as Exhibit 2.44 that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
2.45 Employment Agreements. Protocall and the Shareholders have
---------------------
approved the existing employment and consulting agreements with Xxxxx X.
Xxxxxxx, Xxxxxxx X. Xxxx, Xxxxxx X. Xxxxx, Xxxx Xxxxxxx and Xxxxx Xxxxxx in such
a manner as to avoid the application of Section 280G of the Code, if such
approval is required to avoid the application of such Section.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF INTEK
---------------------------------------
Intek represents and warrants to Protocall and the Shareholders as follows
as of the date hereof, as of the Closing and as of the Effective Time of the
Merger:
3.1 Organization; Good Standing; Power; Etc. Intek (i) is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware; (ii) is authorized or licensed to do business as a
foreign corporation and is in good standing in the jurisdictions listed in
Schedule 3.1; (iii) is not required to be authorized or licensed to do business
as a foreign corporation in any other jurisdiction (within or without the United
States) except jurisdictions in which Intek's failure to qualify to do business
will have no Material adverse effect on the business, prospects, operations,
properties, assets or condition (financial or otherwise) of Intek or, if Intek
is not so qualified in any such jurisdiction, it can become so qualified in such
jurisdiction without any Material adverse effect; and (iv) has the requisite
power and authority to own, lease and operate its properties and to carry on its
business as currently conducted.
3.2 Restrictions; Burdensome Agreements. Intek is not a party to any
-----------------------------------
contract, commitment or agreement, and its properties and assets are not subject
to or bound or affected, by any charter, bylaw or other corporate restriction,
or any order, judgment, decree, law, statute, ordinance, rule, regulation or
other restriction of any kind or character, which would: (i)
21
prevent Intek from entering into this Agreement or from consummating the
transactions contemplated hereby; or (ii) have a Material adverse effect on the
business, properties, prospects or the condition, financial or otherwise, of
Intek. Intek has no Knowledge that any of Intek's contracts or agreements are on
terms more burdensome to Intek than typical contracts and agreements in its
industry for companies the size and scope of Intek.
3.3. Subsidiaries. Intek does not own and Intek has never owned, any
------------
interest, directly or indirectly, in any other corporation, person, company,
limited liability company, business, trust, partnership, limited partnership,
joint venture, or other entity or association, except Brokerage Administrators
Corporation.
3.4 Capitalization; Outstanding Shares. The authorized capital stock
----------------------------------
of Intek consists solely of 45,000,000 shares of Common Stock, of which
7,428,571 shares are or will be issued and outstanding immediately prior to the
Closing and 2,000,000 shares of outstanding Preferred Stock, (i) 20,000 of which
are designated as Series A Preferred Stock, 20,000 of which are issued and
outstanding, and 5,000 of which are expected to be repurchased and cancelled by
Intek in connection with Beacon's investment in Intek. In addition, it is
anticipated that (i) approximately 9,615,738 shares of Series B will be issued
to Beacon and 287,191 to Xxxx & Co., Inc. and 287,191 to Squam Lake Investors
II, L.P. and up to 478,856 shares of Series B will be issued to other investors
on or prior to April 1, 1997. The outstanding shares of capital stock have been
duly authorized and validly issued, and are fully paid and nonassessable. As of
the Closing Intek shall have reserved all Series B for issuance hereunder and
sufficient Intek Common Stock to cover the conversion of Series B. A complete
and accurate schedule listing (i) all stockholders of Intek and the number of
shares held by each such stockholder, and (ii) all outstanding options and
warrants and any other obligation of Intek convertible into capital stock of
Intek, are set forth as Schedule 3.4 hereto and Schedule 3.4 will be updated as
of the Closing by an officer's certificate of the Company. Except as set forth
in (i) Schedule 3.4, (ii) the Intek Certificate of Incorporation, as amended;
(iii) the Stockholders Agreement dated August 2, 1996 with Resource BancShares
Corporation (which will be superseded in its entirety by the Shareholders
Agreement), (iv) the Shareholders Agreement, and (v) anticipated options
issuable under Intek stock option plans and warrants for an aggregate of up to
4,972,206 shares of Intek Common Stock (including options to be issued to
Protocall employees as provided herein), there are no options, warrants or other
rights to purchase any of Intek's authorized and unissued capital stock and,
further, there are no preemptive rights or rights of first refusal with respect
to Intek's capital stock or other contracts or agreements which, through anti-
dilution protection or otherwise, obligate Intek to issue its capital stock.
3.5 Charter and Bylaws; Officers and Directors. Complete and correct
------------------------------------------
copies of: (i) Intek's corporate charter or articles, as amended to date
("Intek Charter"), certified by the appropriate officials of the jurisdiction of
incorporation; and (ii) Intek's Bylaws, as amended to date ("Intek Bylaws"), are
attached as Schedule 3.5.A. Such Charter and Bylaws are fully in force and
effect, and Intek is not in violation of any of the provisions thereof. A
complete and correct list of all officers and directors of Intek is set forth in
Schedule 3.5.B.
22
3.6 Authorization. All corporate action on the part of Intek, its
-------------
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement and the Documents by Intek, the authorization,
sale, issuance and delivery of the Series B and the performance of all of
Intek's obligations hereunder and thereunder, has been taken. This Agreement
constitutes, and the Documents constitute, valid and binding obligations of
Intek, enforceable in accordance with their respective terms, except as may be
limited by principles of public policy and except as indemnification provisions
may be limited by securities laws, and subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
The Series B and the underlying shares of Intek Common Stock issuable upon
conversion of the Series B, when issued in compliance with the provisions of
this Agreement at their respective times of issuance, (i) will be validly
issued, fully paid and nonassessable, will be free of any liens or encumbrances,
and will not be subject to any restrictions on transfer (except for those set
forth in the Shareholders Agreement, the Registration Rights Agreement, herein,
or in another Document), provided, however, that such shares may be subject to
restrictions on transfer under the state and/or federal securities laws as set
forth herein, and (ii) are not and will not be subject to any preemptive rights
or rights of first refusal except for those in the Shareholders Agreement.
3.7 Financial Statements. Intek's unaudited pro forma estimated
--------------------
balance sheet reflecting the transactions contemplated herein and the Beacon
investment (the "Intek Financial Statements") is attached as Schedule 3.7. The
Intek Financial Statements are pro forma, but are complete and correct in all
Material respects and have been prepared in accordance with generally accepted
accounting principles (except for the absence of notes or normal year end
adjustments). The Intek Financial Statements fairly presents, in all Material
respects, the financial condition of Intek as of the date indicated and the
effect of the merger of Intek Information, Inc., a Colorado corporation ("Intek
Colorado") with and into Intek.
3.8 No Material Adverse Change. Since November 30, 1996 (the "Intek
--------------------------
Reference Date"):
a) Intek has not entered into any transaction which was not in the
ordinary course of its business except as contemplated or disclosed by this
Agreement.
b) There has been no Material adverse change as to Intek other than
changes in the ordinary course of its business, none of which, individually
or in the aggregate, has a Material adverse effect.
c) There has been no damage to, destruction of or loss of physical
property (whether or not covered by insurance) that has had a Material
adverse effect on the business or operations of Intek.
d) There has been no resignation or termination of employment of any
officer
23
or key employee of Intek, and Intek does not know of the impending
resignation or termination of employment of any officer or employee of
Intek that would have a Material adverse effect on the business of Intek.
e) There have been no loans or advances made by Intek to employees,
officers or directors.
3.9 Title to Properties; Absence of Liens and Encumbrances; Etc..
------------------------------------------------------------
Intek does not own any real property other than certain leasehold improvements
in multi-tenant buildings. Except as set forth in Schedule 3.9, Intek owns good
and marketable title to the properties and assets used in its business
(including, without limitation, the Intek assets reflected in the Intek
Financial Statements, except as since sold or otherwise disposed of in the
ordinary course of business), free and clear of all mortgages, security
interests, claims, liens, charges, encumbrances, restrictions on use or transfer
or other defects in title. The fixed assets of Intek reflected in the Intek
Financial Statements are all located on real property owned or leased by Intek
or an Intek subsidiary and all personal property located at or on such real
property is owned or leased by Intek or an Intek subsidiary. Intek is not a
bailee for any other entity, except as set forth on Schedule 3.9. The leases
and other agreements or instruments under which Protocall holds, leases or is
entitled to the use of any real property or personal property are in full force
and effect, and all rentals, royalties or other payments payable thereunder
prior to the date hereof have been duly paid.
3.10 Material Liabilities. Except as described in the Intek Financial
--------------------
Statements, herein, or a Schedule hereto, and other than the loan of $800,000
from The Beacon Group or its affiliate, Intek as of the Effective Time of the
Merger, on a pro forma basis, does not have any obligations or liabilities
(whether accrued, absolute or contingent) other than obligations or liabilities
incurred in the ordinary course of business since the Intek Reference Date, in
excess of $15,000 in any one case or which is Material. Pursuant to the
Agreement and Plan of Merger dated as of August 2, 1996 with Intek Colorado,
Intek has assumed certain liabilities and obligations of that company all of
which are set forth in the representations and warranties herein, and the
representations and warranties made by Intek in this Agreement reflect the
merger of Intek Colorado with and into Intek.
3.11 Patents and Other Intangible Assets.
-----------------------------------
(a) Intek to the best of its Knowledge (i) owns or has the right to
use, free and clear of all liens, claims and restrictions, all patents,
trademarks, service marks, trade names, copyrights, licenses and rights,
used in the conduct of its business as now conducted or as proposed to be
conducted without infringing upon or otherwise acting adversely to the
right or claimed right of any person under or with respect to any of the
foregoing, and (ii) is not obligated or under any liability whatsoever to
make any payments by way of royalties, fees or otherwise to any owner of,
licensor of, or other claimant to, any patent, trademark, tradename,
copyright or other intangible asset, with
24
respect to the use thereof or in connection with the conduct of its
business or otherwise, except for the Eden Debt as defined in Schedule
3.12. Intek has not received any communication alleging that, and has no
Knowledge of any allegation that, Intek or any of its employees has
violated or infringed upon or, by conducting Intek's business as proposed,
would violate or infringe upon, any patent, trademark, service xxxx, trade
name, copyright, license or right of any other person or entity provided,
however, that because of the existence of a company named Intec Information
Systems, Intek has qualified to do business in California under the name
Delaware Intek Information, Inc. All patents, trademarks, service marks,
tradenames, copyrights and licenses (and applications therefor) owned or
used by Intek are listed on Schedule 3.11 hereto and such Schedule
indicates which such rights are owned.
(b) To its Knowledge, Intek owns or has the unrestricted right to use
all trade secrets, including know-how, inventions, designs, processes,
computer programs and technical data required for or incident to the
development, manufacture, operation and sale of all products and services
sold or proposed to be sold by Intek, free and clear of any rights, liens
or claims of others, including without limitation former employers of all
employees of Intek.
(c) Intek has no Knowledge of any infringement by others of
intellectual property rights owned or used by Intek.
3.12 Material Contracts. All contracts, agreements and instruments to
------------------
which Intek is a party are valid, binding and in full force and effect in all
Material respects, and are valid, binding and enforceable by Intek in accordance
with their respective terms, subject to the laws of general application relating
to bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies. Neither
Intek nor to Intek's Knowledge any other party to such contracts, agreements or
instruments is in default in any Material respect under such contracts,
agreements or instruments, except as listed on Schedule 3.12. Each of such
Material contracts, agreements and instruments has been listed on Schedule 3.12
attached hereto.
3.13 Compliance with Other Instruments, None Burdensome, Etc. Intek
--------------------------------------------------------
is not in violation of any Material term or provision of the Intek Charter or
Intek Bylaws, or any Material mortgage, indebtedness, indenture, contract,
agreement, instrument, judgment or decree, and to its Knowledge is not in
violation of any order, statute, rule or regulation applicable to Intek. The
execution, delivery and performance of and compliance with this Agreement and
the Documents, and the issuance of the Series B, have not resulted and will not
result in any violation of, or conflict with, or constitute a default under, any
of the terms of the Intek Charter or Intek Bylaws or any corporate restriction
or of any indenture, mortgage, deed of trust, pledge, bank loan or credit
agreement, or any instrument, document or agreement by which Intek or its
properties may be bound or affected, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of
Intek.
25
3.14 Litigation, Etc. Except as set forth in Schedule 3.14, there is
----------------
no claim, action, suit, proceeding, arbitration, investigation or inquiry
pending before any Federal, state, municipal, foreign or other court or any
governmental, administrative or self-regulatory body or agency, or any private
arbitration tribunal, (or to Intek's Knowledge is there any threat, or basis
for, any such claim, action, suit, proceeding arbitration, investigation or
inquiry), which may have any Material adverse effect upon the assets, properties
or business of Intek or the transactions contemplated by this Agreement.
Neither Intek nor any officer, director, partner, agent or employee of Intek has
been permanently or temporarily enjoined or barred by order, judgment or decree
of any court or other tribunal or any agency or self-regulatory body from
engaging in or continuing any conduct or practice in connection with the
business engaged in by Intek. There is not in existence at present any order,
judgment or decree of any court or other tribunal or any agency or self-
regulatory body to which Intek or the business, properties or assets, of Intek
are subject or by which they are bound. Intek is not in Material default under
any order, license, tariff, regulation or demand of any Federal, state,
municipal, foreign or other governmental, administrative or self-regulatory body
or with respect to any order, writ, injunction or decree of any court or
arbitration body.
3.15 Employees. Intek has no Knowledge of any key employee or
---------
consultant of Intek who is considering: (i) terminating her or his employment or
consultant status; or (ii) seeking a substantial increase in compensation or
benefit.
3.16 Accounting Controls. To the Knowledge of Intek, neither Intek,
-------------------
nor any director, officer, agent, employee, consultant or other person
associated with or acting on behalf of Intek, has (a) used any corporate funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity or (b) made any direct or indirect unlawful
payments to government officials or others from corporate funds or established
or maintained any unlawful or unrecorded funds.
3.17 Registration Rights. Except as set forth in the registration
-------------------
rights agreement with Resource and Xxxxxxx X'Xxxxxxx, the Registration Rights
Agreement and the Beacon Registration Agreement, Intek is not under any
obligation to register any of its presently outstanding securities or any of its
securities that may hereafter be issued.
3.18 Governmental Consents. No consent, approval or authorization of,
---------------------
or exemption by, or filing with any governmental, public or self regulatory body
or authority is required by Intek for the consummation of this Agreement or any
of the instruments or agreements referred to, or the taking of any action,
herein contemplated, except for the qualification (or taking such action as may
be necessary to secure an exemption from qualification, if available) of the
offer and sale of the Series B, and Intek Common Stock issuable upon conversion
thereof under applicable Blue Sky laws or SEC rules and regulations, which
filings and qualifications, if required, will be accomplished by Intek in a
timely manner prior to or within ten (10) days after the Closing.
26
3.19 Intek Transactions with its Officers, Directors, or Shareholders;
-----------------------------------------------------------------
Interest in Competitors. Except as set forth in Schedule 3.19, Intek is not
-----------------------
indebted, either directly or indirectly, to any of its officers, directors or
shareholders or to their respective spouses or children, in any amount
whatsoever, other than for payment of salary for services rendered and
reasonable employee expenses. Except as set forth in Schedule 3.19, none of
Intek's officers, directors, or shareholders or any members of their immediate
families is indebted to Intek. Except as set forth in Schedule 3.19, no five
percent (5%) or more beneficial owner, officer or director of Intek or any
immediate family member or spouse of any such person, or trust for their
benefit, directly or indirectly, owns any interest in (excluding the ownership
of securities representing less than 1% of any class of publicly traded
securities) or controls or is an employee, officer, director or partner of, or
participant in or consultant to, any corporation, partnership, limited liability
company, limited partnership, joint venture, association or other entity which
is in the same line of business as Intek, or a creditor, debtor, supplier,
customer, landlord, tenant, lessor or lessee, of Intek, or has any type of
business, commercial, consulting or professional relationship with Intek. Intek
is not a guarantor or indemnitor of any indebtedness of any other person, firm
or corporation, but does provide indemnification to certain of its and its
subsidiaries' officers, directors, agents and employees.
3.20 Intek Tax Matters.
-----------------
3.20.1. Intek's fiscal year for income tax reporting purposes
ends December 31.
3.20.2. Intek has timely filed (including extension) all Tax
Returns that are required to have been filed by it with appropriate
federal, state, county and local government agencies or instrumentalities,
that would have a Material adverse effect if not filed, except as provided
in Schedule 3.20. Intek has paid or established reserves for all income,
franchise, payroll and other Taxes except as set forth in Schedule 3.20.
There is no pending dispute with any Taxing authority relating to any of
Intek's Returns. Intek has no Knowledge of any proposed Material liability
for any Tax to be imposed upon its properties or assets for which there is
not an adequate reserve reflected in the Intek Financial Statements or
accrued since the date of the Intek Financial Statements. No federal or
state income or sales Tax Returns of Intek have been audited. An estimate
of accrued Taxes is set forth in Schedule 3.20. Intek has not executed or
filed with any Taxing authority any agreement extending the period for
assessment or collection of any Taxes. Intek has not consented to have the
provisions of Section 341(f) (which relates to collapsible corporations) of
the Code apply to it.
3.20.3. Intek has never been taxed pursuant to Subchapter S of
the Code.
3.21 Offering. Subject to the accuracy of Protocall's and the
--------
Shareholders' representations in ARTICLE II hereof, the offer, sale and issuance
of the Series B and the issuance of the Intek Common Stock issuable upon
conversion thereof constitute transactions
27
exempt from the registration requirements of Section 5 of the Securities Act and
applicable Blue Sky laws. Neither Intek nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
3.22 Brokers or Finders. Intek has not incurred, and will not incur,
------------------
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement.
3.23 Compliance; Licenses and Permits.
--------------------------------
3.23.1 Intek has all requisite corporate power and authority,
and all permits, licenses, tariffs, orders and approvals of governmental
and administrative authorities which are Material, to own, lease and
operate its properties and to carry on its business as presently or
previously conducted; all such presently existing permits, licenses,
tariffs, orders and approvals Material to the conduct of the business of
Intek are listed in Schedule 3.23.1, are in full force and effect, and no
suspension or cancellation of any of them is pending or, to the Knowledge
of Intek, threatened.
3.23.2 Intek has complied in all respects with, and is not in
violation in any respect of, all or any Legal Requirements applicable to
the business of Intek as presently or previously conducted, or as currently
proposed to be conducted except where such non-compliance or violation has
not had, and could not reasonably be expected to have, a Material adverse
effect upon Intek. Intek (including to Intek's Knowledge all applicable
employees) has all Permits which are required for the conduct of its
business presently or previously conducted by Intek, which Permits are in
full force and effect, and no violations are outstanding or uncured with
respect to any such Permits and no proceeding is pending or, to the
Knowledge of Intek, threatened to revoke or limit any thereof. No
condition or event has occurred which, with notice or the passage of time
or both, would constitute a violation of a Legal Requirement or Permit
except where such noncompliance or violation has not had, and could not
reasonably be expected to have, a Material adverse effect upon Intek.
Intek's subsidiary, Brokerage Administrators Corporation, will be or is
licensed pursuant to requirements of the SEC to conduct certain of its
activities. To the Knowledge of Intek its proposed activities will not
violate any Legal Requirement proposed to be adopted, in such a fashion as
to have a Material adverse effect on Protocall.
3.24 Minute Books. The copy of the minute books of Intek provided to
------------
Protocall contains complete and accurate minutes of all meetings of
incorporators, directors and stockholders (and all actions by written consent
without a meeting in lieu thereof) as to Intek and any predecessor entities and
accurately reflect all corporate actions by directors (and committees thereof)
and stockholders with respect to the transactions referred to in such minutes.
3.25 Material Misstatements or Omissions. No representations or
-----------------------------------
warranties by
28
Intek in this Agreement, or any Document, exhibit, statement, certificate or
schedule furnished by Intek to a Shareholder or Protocall pursuant hereto, or in
connection with the transactions contemplated hereby, to Intek's Knowledge
contain any untrue statement of a Material fact, or omit to state any Material
fact necessary to make the statements or facts contained herein or therein in
the context in which they were made not misleading. Any forecasts or projections
delivered by or on behalf of Intek are not guarantees or representations as to
performance.
3.26 Lawyers and Accountants. Intek is not relying upon any
-----------------------
investigation made by Protocall's counsel or accountants or the presence of such
counsel or accountants as an indication counsel or the accountants has reviewed
or passed upon the representations, warranties, projections or business plan of
Protocall or the wisdom of an investment in Protocall.
3.27 Intek Employee Benefit Plans; Etc.. Except as listed on
----------------------------------
Schedule 3.27 Intek has, and has not had, any Plan. Intek has no liability to
any other person (including a Plan trust or Plan, but excluding in respect of
Intek subsidiaries) in respect of any Plan which is Plan of any other person.
3.28 Effect of Agreement, Etc.. The execution, delivery and
-------------------------
performance of this Agreement by Intek and the consummation of the transactions
contemplated hereby will not, with or without the giving of notice of the lapse
of time, or both: (i) violate any provision of law, statute, rule or regulation
to which Intek is subject; (ii) violate any judgment, order, writ or decree of
any court, arbitrator or governmental agency applicable to Intek; (iii) have any
effect on any of Intek's permits, licenses, tariffs, orders or approvals or the
ability of Intek to make use of such permits, licenses, tariffs, orders or
approvals, except as set forth in Schedule 3.28; or (iv) result in the breach of
or conflict with any term, covenant, condition or provision of, result in the
modification or termination of, constitute a default under, or result in the
creation or imposition of, any lien, security interest, charge or encumbrance
upon any of the properties or assets of Intek pursuant to any charter, bylaw,
commitment, contract or other agreement or instrument to which Intek is a party
or by which any of its assets or properties are or may be bound or affected or
from which Intek derives benefit.
3.29. Facilities; Equipment and Condition. All of the material
-----------------------------------
furniture, fixtures or equipment, buildings, plants, warehouses and other real
estate owned or used by Protocall in the conduct of its businesses are referred
to as the "Intek Fixed Assets". The Material Intek Fixed Assets owned, operated
or leased by Intek are in good condition and repair (ordinary wear and tear
excepted) and suitable for the uses for which intended. All Material Intek
Fixed Assets are operated in conformity with all applicable laws (including the
Americans With Disabilities Act), ordinances, regulations, orders and other
requirements relating thereto currently in effect, scheduled to come into effect
or, to the Knowledge of Intek, are proposed. All real estate used by Intek is
supplied with adequate utilities and access, and Intek has no Knowledge such
situation will change.
3.30. Insurance. Schedule 3.30 consists of declaration pages
---------
(including
29
amounts, scope and coverage) of all of the policies of insurance and fidelity or
surety bonds carried by Intek since January 1, 1993. All current policies are in
full effect. Intek has not failed to give any notice or present any claim under
any insurance policy, fidelity bond or surety bond in due and timely fashion. To
Intek's Knowledge there are no outstanding requirements or recommendations by
any insurance company that issued a policy with respect to any of the properties
and assets owned or leased by Intek, by any Board of Fire Underwriters or other
body exercising similar functions or by any governmental authority requiring or
recommending any repairs or other work to be done on or with respect to any of
the properties and assets owned or leased by Intek or requiring or recommending
any equipment or facilities to be installed on or in connection with any of the
properties or assets owned or leased by Intek. The workmen's compensation and
unemployment insurance ratings of Intek have been made available to Protocall.
Intek has no Knowledge of any proposed increase therein and knows of no
conditions or circumstances applicable to the business of Intek which might
result in such increase.
3.31 Insider Transactions. Schedule 3.31 (when read with Schedule
--------------------
3.19) sets forth: (i) the amounts and other essential terms of indebtedness or
other obligations, liabilities or commitments (contingent or otherwise) of Intek
to or from any past or present officer, director, or stockholder or any person
related to, controlling, controlled by or under common control with any of the
foregoing (other than for usual services performed within the past two months,
the payment for which is not yet due); and (ii) all proposed transactions with
such persons, together with the essential terms thereof if the amount payable
thereunder will exceed $5,000 in any year.
3.32 Questionnaires. To the Knowledge of Intek, Intek has fully
--------------
responded to the Information Request bearing a date of January 17, 1997
delivered by Intek to Protocall in January, 1997.
3.33 Other. Intek has delivered to Protocall Certificates of the
-----
Secretary of State (or other authorized officer) of the State of Delaware
certifying as of a date within 30 days before delivery Date that Intek is, as of
such date, in good standing and authorized to transact business as a domestic
corporation. Intek has delivered to Protocall Certificates of the Secretary of
State (or other authorized officer) of each jurisdiction in which Intek is
qualified to do business as a foreign corporation certifying as of a date within
30 days before delivery that Intek is, as of such date, in good standing and
authorized to transact business as a foreign corporation in such jurisdiction.
The approvals and all consents from third parties and governmental agencies
(including under Blue Sky laws) required by Intek (other than approvals or
consents required by Intek the absence of which would not have a Material
adverse effect on the ability of Intek or Protocall to operate their respective
business after the Effective Time of the Merger) required to consummate the
transactions contemplated hereby and any additional regulatory consents have
been obtained. Provided, however, that a post-Closing filing is required
pursuant to the California Blue Sky Laws.
3.34 Intek Shareholder Meeting. Intek has held its stockholders'
-------------------------
meeting to approve the matters contemplated herein and has received the
unanimous written consent of its
30
stockholders.
3.35 Stock Certificates. Intek has delivered to Xxxxxxxx, Xxxxx &
------------------
Xxxxxxx, P.C., as escrow agent, for delivery to the Shareholder Representative
upon Closing distribution under the escrow, for deliver on to the Shareholders,
certificates and other instruments representing the Exchange Consideration
(other than cash, and other than the Exchange Consideration to be delivered to
the escrow agent), free and clear of all security interests, liens, encumbrances
and adverse claims other than those created hereunder or described herein.
3.36 Tax Opinion. Protocall has received from Xxxxxxxx, Xxxxx &
-----------
Xxxxxxx, P.C., counsel to Intek, an opinion dated the Closing date in the form
attached hereto as Exhibit 3.3.6. that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code.
ARTICLE IV
----------
OTHER COVENANTS AND AGREEMENT
-----------------------------
Protocall, Shareholders and Intek covenant that from the date of this
Agreement until the Effective Time of the Merger (and continuing after the
Closing as to the parties named in and covenants contained in Sections 4.3, 4.6,
4.8, 4.19, 4.21, 4.22, 4.26, 4.27, 4.28 4.30 and 4.31):
4.1 Access to Information.
---------------------
Intek and its counsel, accountants, and other representatives shall
have full access during normal business hours to all properties, employees,
documents, books and records relating to the operation of the business of
Protocall. Protocall and the Shareholders shall furnish to Intek and its
representatives all data and information concerning operations of the businesses
that may reasonably be requested. Intek will give Protocall and the
Shareholders reasonable notice of times it wishes to review documents or
otherwise conduct its due diligence and attempt to minimize any disruption
caused by such matters.
Protocall, through Xxxxx Xxxxxxxx, and its counsel and accountants,
shall have full access during normal business hours to all properties,
employees, documents, books and records relating to the operation of the
business of Intek. Intek shall furnish to Protocall, through Xxxxx Xxxxxxxx,
its counsel and accountants, all data and information concerning operations of
the businesses that may reasonably be requested. Protocall will give Intek
reasonable notice of times it wishes to review documents or otherwise conduct
its due diligence and attempt to minimize any disruption caused by such matters.
4.2 Business Relationships. Protocall shall use all reasonable
----------------------
efforts to preserve present relationships with suppliers, customers, employees,
vendors, and others having relationships with the businesses of Protocall.
Protocall will conduct its operations and business
31
only in the normal course of business consistent with past practices and in
compliance with all applicable laws, statutes, rules, regulations, ordinances
and orders.
4.3 Delivery of Records. As soon as practicable after Closing, but
-------------------
no later than ten (10) days, Protocall will cause to be delivered to Intek all
books, records, stock transfer ledgers, unissued stock certificates, minutes of
shareholders and directors meetings, certificates of authority to conduct
business in all other jurisdictions, tax records and all other documents, files,
notes, and records of Protocall.
4.4 No Shop. Between the date of this Agreement and Closing, none of
-------
the Shareholders, nor Protocall, nor any of their respective agents shall,
directly or indirectly, (a) solicit offers, inquiries or proposals, or entertain
any offer, inquiry or proposal, to enter into any transaction that has as a
purpose a business combination, a financing transaction of any type, a
transaction comparable to or similar to the transaction with Intek, a sale of
all or any part of Protocall's stock or assets, or a public offering or private
placement of securities of Protocall (any of the foregoing, a "Competing
Transaction"), (b) provide information to any other person regarding a Competing
Transaction (except in the ordinary course of business) or (c) enter into any
discussions or negotiations, or enter into any agreement, arrangement or
understanding, regarding a Competing Transaction. Protocall and the
Shareholders shall promptly notify Intek if it receives any offers, inquiries or
proposals regarding a Competing Transaction and the details thereof, and keep
Intek informed with respect thereto. Protocall and the Shareholders shall
provide Intek with any written copies of such offers, inquiries or proposals.
Notwithstanding the foregoing Protocall may (i) negotiate for and acquire up to
$200,000 of capital leases without equity components; (ii) obtain lease
financing for Protocall's new EIS system valued at $379,780; and (iii) factor
accounts receivable to finance working capital needs in the regular course of
business. Intek and Protocall will discuss the terms and business
appropriateness of the capital leases. Intek will either consent to those
leases or provide the capital lease or debt funding on similar terms.
4.5 Employment and Option Agreements. Sub on the one hand, and Xxx
--------------------------------
Rocca, Xxxxx Xxxxxxx and Xxxx Xxxx on the other, have executed and delivered
employment agreements attached as Exhibit 4.5. Xxxxx Xxxxxxxx and Xxxx Xxxxxx
on the one hand and Intek on the other have executed and delivered employment
agreements attached as Exhibit 4.5. Intek on the one hand, and Xxxxx Xxxxxxxx,
Xxx Xxxxx, Xxxxx Xxxxxxx, Xxxx Xxxxxx and Xxxx Xxxx on the other, have executed
and delivered stock option agreements attached as Exhibit 4.5. Such agreements
shall become effective only at the Effective Time of the Merger. Such stock
options grant options to acquire an aggregate of (i) 200,000 shares of Intek
Common Stock plus (ii) an aggregate of 1,189,206 shares of Intek Common Stock
less (iii) 94,206 shares which are reserved for future issuances to Sub
employees.
4.6 Shareholder Representative. Each Shareholder confirms the
--------------------------
effectiveness of the appointment of Xxxxx Xxxxxxxx as the "Shareholder
Representative" as that term is used herein.
32
4.7 Amendments. Protocall agrees not to amend, revoke or suspend any
----------
provision in its charter or Bylaws except as requested by Intek in connection
herewith.
4.8 Resignations and Closing Date Boards. The Shareholders and
------------------------------------
Protocall have caused the resignation of all necessary officers and directors,
and the election of officers and directors, so that immediately after the
Effective Time of the Merger the Board of Directors and officers of Protocall
may be as contemplated in Section 1.5.
4.9 Signature Cards. Protocall shall prepare new signature cards for
---------------
each bank, depository, savings, brokerage or similar account, of Protocall,
effective as of the Effective Time of the Merger.
4.10 Shareholders Agreement; Registration Rights Agreement; Affiliate
----------------------------------------------------------------
Letter. Each Shareholder who will receive Series B has executed and delivered
------
the Shareholders Agreement, and the Registration Rights Agreement; and each
Shareholder has executed and delivered an Affiliate Letter and Certificate Re:
Tax Free Reorganization attached hereto as Exhibit 4.10., to Intek, Xxxxxxxx,
Xxxxx & Xxxxxxx P.C. and Xxxxxxx & Xxxxx, L.L.P.
4.11 Audit. Xxxxxx Xxxxxxxx shall have the full and complete
-----
cooperation of Protocall and its advisors and accountants, including access to
accountant's work papers, to continue working on Protocall matters requested by
Intek. All costs and fees of Xxxxxx Xxxxxxxx for such work shall be paid by
Intek. The parties recognized Xxxxxx Xxxxxxxx also provides accounting services
directly to Protocall.
4.12 Additional Financial Statements. Between the date hereof and the
-------------------------------
Effective Time of the Merger Protocall shall deliver to Intek the December 31,
1996 reconciled bank statement, check register, accounts receivable aging report
and accounts payable aging reports of Protocall, prepared in the ordinary course
of business, but in no event shall any such monthly statements be delivered
later than fifty (50) days after the end of the applicable period.
4.13 Satisfaction of Conditions. The parties hereto each shall use
--------------------------
their best efforts to satisfy any conditions of Closing set forth herein or in
any other document.
4.14 Tax Elections - Post Closing Change. No new elections with
-----------------------------------
respect to taxes or any changes in current elections with respect to taxes
affecting Protocall shall be made after the date of this Agreement and prior to
the Effective Time of the Merger without the prior written consent of Intek.
After the Effective Time of the Merger the fiscal year and tax year of Protocall
may be changed to be the same as Intek's.
4.15 Mutual Notification. Protocall and each Shareholder shall give
-------------------
prompt notice to Intek of the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty by it contained herein to be untrue or inaccurate in any Material
respect at any time from the date hereof to the Effective Time of the
33
Merger. Without limitation Protocall shall inform Intek of (i) the loss of any
service contract, (ii) the hiring of any new employee at $50,000 or more per
year, or (iii) any loans or acquisitions of a new liability in excess of
$25,000. Intek shall give prompt notice to Protocall of the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty by it contained herein to be untrue or
inaccurate in any Material respect any time from the date hereof to the
Effective Time of the Merger.
4.16, 4.17, 4.18 Intentionally Left Blank.
------------------------
4.19 Confidentiality. The existing Confidentiality Agreement between
---------------
Protocall and Intek shall remain in effect up to the Effective Time of the
Merger. Each Shareholder and Protocall hereby agrees to maintain the
confidentiality of all proprietary or trade secret information of Intek provided
to the Shareholder and Protocall and to promptly return such information if the
Merger does not occur. A Shareholder may share such information on a
confidential basis with the Shareholder's financial and legal advisors. Intek
hereby agrees to maintain the confidentiality of all proprietary or trade secret
information of Protocall provided to Intek and to promptly return such
information, in each case if the Merger does not occur. Intek may share such
information on a confidential basis with Intek's financial and legal advisors,
Beacon and Xxxx & Co.
4.20 Intentionally Left Blank.
------------------------
4.21 Covenant Not to Compete; Confidentiality.
----------------------------------------
a. Covenant. In exchange for $3,250 of the Cash Consideration
--------
provided by Intek in the form of the Exchange Consideration and the
entering into of this Agreement, and in order to protect the trade secrets
of the Subject Company (as defined below), each Shareholder severally, not
jointly, hereby agrees with Intek that such Shareholder shall not compete
directly or indirectly with a Subject Company in the business of (i)
inbound or outbound telemarketing or teleservicing; or (ii) outsourced
teleservicing (the "Business"), during the Non-Compete Period (as defined
below). The parties agree that they shall not during such period make
public statements in derogation of each other, except as may be required by
law. For the purposes of this Section, the term "Subject Company" shall
mean Intek and any direct or indirect subsidiaries, parents and affiliates
of Intek. Competing directly or indirectly with the Subject Company shall
mean (a) either (i) engaging or (ii) having a material interest, directly
or indirectly, as owner, employee, officer, director, partner, venturer,
stockholder, capital investor, consultant, agent, principal, advisor or
otherwise, either alone or in association with others, in the operation of
any individual or entity engaged in (b) the Business within the continental
United States, including the California counties which would appear here if
each county in California was listed here. Competing directly or
indirectly with the Subject Company, as used in this Agreement, shall be
deemed not to include an ownership interest as an inactive investor, which
for purposes of this Section shall mean
34
the beneficial ownership of less than one percent of the outstanding shares
of any series or class of securities of any competitor of the Subject
Company, which shares are publicly traded in the securities markets.
Shareholder agrees that the outsourced teleservicing business and inbound
and outbound telemarketing business is inherently nationwide in scope.
Shareholder acknowledges that he has had contacts with employees and/or
customers of Protocall. Accordingly, Shareholder covenants and agrees that
during the term of the Non-Compete Period, he will not (i) solicit or hire
any of the employees of a Subject Company who were employed by a Subject
Company at or within one month before the Closing, (ii) interfere with the
relationship of the Subject Company with any such employees or (iii)
personally target or solicit, or assist another to target or solicit,
customers of Protocall for activities related to the Business.
b. Remedies. Shareholder acknowledges and agrees that his
--------
obligations provided herein are necessary and reasonable in order to
protect the Subject Companies and their respective businesses, and
Shareholder expressly agrees that monetary damages may be inadequate to
compensate a Subject Company for any breach by Shareholder of his covenants
and agreements set forth herein. Accordingly, Shareholder agrees and
acknowledges that, in addition to any other remedies that may be available,
in law, in equity or otherwise, a Subject Company, and any successor or
assign thereof, shall be entitled to obtain specific performance of this
Covenant.
c. Term. The term of the Covenant Not to Compete set forth
----
herein (the "Non-Compete Period") shall begin on the Closing Date and end
on December 31, 1999. Notwithstanding the foregoing provisions of this
Section 4.21, the Covenant Not to Compete may be reduced in scope,
geographic area or time as to a particular Shareholder pursuant to the
written employment agreements that have been attached as Exhibit 4.5. This
provision does not prohibit any Subject Company and any other person from
entering into any other covenant not to compete or other agreement with
different provisions.
d. Confidential Information. Shareholder acknowledges and
------------------------
agrees that Intek and Protocall are actively doing business throughout the
State of California and in other areas of the United States and as an
officer, director and/or shareholder of Protocall Shareholder gained access
to certain "Confidential Information" (as defined below) of Protocall, and
in the future may gain additional Confidential Information of the Subject
Companies. For the purpose of this Agreement, "Confidential Information"
shall mean (x) information regarding the business of the Subject Companies
which is not generally known and which gives such entity an advantage over
competitors who do not know or use it, including but not limited to the
Subject Companies' plans for their own future products or developments and
(y) confidential information concerning third persons (including employees)
which is not generally known; but excluding (i) information which
35
is, or was at the time it was disclosed, generally or readily obtainable by
the public or the trade, (ii) information which is publicly known or
becomes known, through no fault or activity of Shareholder, (iii)
information disclosed pursuant to the requirement of a court,
administrative agency, or other governmental body, or (iv) information
which is disclosed pursuant to applicable law, rule or regulation.
Shareholder agrees at all times to regard and preserve as confidential such
Confidential Information, and to refrain from publishing or disclosing any
part of it and from using, copying or duplicating it in any way or by any
means whatsoever. Shareholder agrees to return any Confidential Information
to Intek upon Intek's request.
e. Severability. Should any one or more of the provisions of
------------
this Section 4.21 be determined to be illegal or unenforceable, then such
illegal or unenforceable provision shall be modified by the proper court or
arbitrator to the extent necessary and possible to make such provision
enforceable, and such modified provision and all other provisions of this
Section and of each other agreement entered into pursuant to this Section
shall be given effect separately from the provision or portion thereof
determined to be illegal or unenforceable and shall not be affected
thereby. If any of the provisions of Section 4.21 relating to the scope,
periods or geographic area of restriction shall be deemed to exceed the
maximum scope, periods of time or geographic area which a court of
competent jurisdiction would deem enforceable, the scope, times and
geographic area shall, for the purposes of Section 4.21, be deemed to be
the maximum scope, time periods and geographic area which a court of
competent jurisdiction would deem valid and enforceable in any state in
which such court of competent jurisdiction shall be convened. The
invalidity or unenforceability of any such provision in one jurisdiction
shall not affect its validity or enforceability in another jurisdiction.
4.22 Guaranty. After the Effective Time of the Merger Intek shall
--------
make a good faith effort to obtain the release of Xxxxx Xxxxxxxx and Xxxx Xxxxxx
from their possible guarantees of obligations of Protocall listed on Schedule
4.22. "Good faith effort" does not include pledging assets not previously
pledged to secure the guaranteed obligation or agreeing to a modification in the
financial terms of the obligation. Intek will indemnify Xxxxx Xxxxxxxx and Xxxx
Xxxxxx for claims on such guarantees of the obligations listed in Schedule 4.22.
4.23 Customer Contact. Between the date hereof and the Effective Time
----------------
of the Merger Protocall and Intek may contact customers of Protocall. That
contact will be done in a coordinated and appropriate fashion and with
Protocall's participation.
4.24 No Transfer. No Shareholder will transfer any securities of
-----------
Protocall between the date hereof and the Effective Time of the Merger.
4.25 Xxxxx Xxxxxxxx Director. At the Effective Time of the Merger
-----------------------
Xxxxx Xxxxxxxx shall be appointed as a director of Intek to fill a vacancy on
the Board of Directors of Intek.
36
4.26 Governmental Filings. If any filings are required under Federal,
--------------------
California or other securities laws for the Merger or the delivery of the
Exchange Consideration, the parties will cooperate in such filings.
4.27 Good Faith. The parties will act in good faith in connection
----------
with the matters described herein.
4.28 Tax Free Transaction. The parties hereto: intend that the
--------------------
Merger shall be treated as a tax-free reorganization under the Code to the
extent the Exchange Consideration is Series B; shall report the Merger as such
for federal and state Tax purposes; and shall take no action before or after the
Effective Time to adversely affect the status of the Merger as a tax-free
reorganization under the Code to the extent the Exchange Consideration is Series
B. Shareholders acknowledge that the treatment of the Merger as a taxable
transaction would result in substantial adverse consequences to Intek and
Protocall. Each Shareholder therefore (a) acknowledges that a transfer of any
of the Series B within two years (or possibly longer) from the Effective Time of
the Merger may be viewed as evidence that the representations in the Affiliate
Letter were not true, and (b) agrees to notify Intek of a disposition occurring
within two years of the Effective Time of the Merger not less than 20 days
before such disposition.
4.29 FIRPTA Certificate. Protocall has delivered to Intek the "FIRPTA
------------------
Certificate" substantially in the form attached hereto as Exhibit 4.29, dated
not more than 30 days prior to the Closing Date, and provide timely notice to
the Internal Revenue Service of its delivery of that certification to Intek.
4.30 Partnership Records. Upon request of Intek each Shareholder
-------------------
agrees to provide Intek books, records, documents and information (if any) that
the Shareholder has of or related to the Partnership.
4.31 Tax Certificate. Protocall and Intek shall cooperate to have
---------------
delivered to Intek as soon as possible after the Closing a certificate of
satisfaction of the California Franchise Tax Board certifying Protocall has
secured or paid all taxes imposed under the California Bank and Corporation Tax
Law.
ARTICLE V
---------
CONDITIONS OF CLOSING
---------------------
5.1 Intek's and Subsidiaries' Conditions of Closing. The obligation
-----------------------------------------------
of Intek and Sub to consummate the Closing and the Merger shall be subject to
and conditioned upon the satisfaction at the Closing and the Effective Time of
the Merger of each of the following conditions and no other conditions:
5.1.1 Tax Change. Intek shall not have received notice from
----------
Xxxxxxx & Xxxxx,
37
LLP that it is withdrawing its opinion delivered under Section 2.44, which
opinion may only be withdrawn due to a change in fact or law subsequent to the
date hereof and prior to the Closing.
5.1.2 Intek shall have received additional equity financing of at
least $15,000,000 (and cash of at least $15,000,000 shall have been received).
5.2 Protocall's Conditions of Closing. The obligation of Protocall
---------------------------------
to consummate the Closing and the Merger shall be subject to and conditioned
upon the satisfaction at the Closing and the Effective Time of the Merger of
each of the following conditions and no other conditions:
5.2.1 Tax Change. Protocall shall not have received notice from
----------
Xxxxxxxx, Xxxxx & Xxxxxxx, P.C. that it is withdrawing its opinion delivered
under Section 3.36, which opinion may only be withdrawn due to a change in fact
or law subsequent to the date hereof and prior to the Closing.
5.2.2 Intek shall have received additional equity financing on terms
approved by the Board of Intek of at least $15,000,000 (and cash of at least
$15,000,000 shall have been received).
ARTICLE VI
----------
TERMINATION AND ABANDONMENT; AMENDMENT
--------------------------------------
6.1 Methods of Termination. The transactions contemplated herein
----------------------
may be terminated and/or abandoned at any time prior to the Effective Time of
the Merger:
6.1.1 By written consent of Intek and Protocall.
6.1.2 By either Intek or Protocall if: (i) the Closing shall
not have occurred on or before February 24, 1997 (the "Termination Date");
or (ii) any court of competent jurisdiction of the United States or any
State shall have issued an order, judgment or decree (other than temporary
restraining order) restraining, enjoining or otherwise prohibiting the
consummation of the transaction contemplated hereby and such order,
judgment or decree shall have become final and nonappealable.
6.2 Effect of Termination. In the event of termination of this
---------------------
Agreement pursuant to the provisions of Section 6.1, this Agreement (except for
Sections 4.19, 8.1, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8 and 8.16, and Article VII,
which shall continue) shall become void and of no effect, without any liability
on the part of the parties, unless the termination was the result of the
representations and warranties of a party being incorrect when made or the
breach by a party of a covenant herein contained, in which event the party whose
representations and warranties were incorrect or which breached such covenants
shall be liable to the other party for damages
38
suffered by the other party.
6.3 Procedure Upon Termination. In the event of termination and/or
--------------------------
abandonment by any party pursuant to Section 6.1 hereof, written notice thereof
shall forthwith be given to the other party and the transactions contemplated by
this Agreement shall be terminated and/or abandoned, without further action by
any person. If the transactions contemplated by this Agreement are terminated
and/or abandoned as provided herein, each party will redeliver all documents,
work papers and other information of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution of this Agreement, to the party furnishing the same, except that such
party may keep one copy thereof in a secure location for its legal files.
6.4 Amendment. This Agreement may be amended by Intek and
---------
Protocall by action taken by their respective Boards of Directors at any time
before or after approval hereof by the stockholders of Intek and/or Protocall,
but no amendment after approval by the stockholders of Intek or Protocall shall
be made which changes any of the principal terms of this Agreement. This
Agreement may not be amended except by an instrument in writing signed on behalf
of Intek, Protocall and the Shareholder Representative.
ARTICLE VII
-----------
INDEMNIFICATION
---------------
7.1 Shareholder General Indemnification Covenants. Subject to the
---------------------------------------------
provisions of this Article VII, Shareholders severally, and Protocall
(collectively, the "Protocall Parties" but Protocall shall not be a Protocall
Party after the Effective Time of the Merger) jointly and severally, shall
indemnify, defend, save and keep Intek and its affiliates (including Protocall),
officers, directors, successors and assigns (collectively, the "Intek
Indemnitees"), harmless against and from all liability, demands, claims, actions
or causes of action, assessments, losses, fines, penalties, costs, damages and
expenses, including without limitation, reasonable attorneys' fees,
disbursements and expenses including any diminution in the value of Protocall or
the Protocall stock held by Intek (collectively "Damages"), sustained or
incurred by any of the Intek Indemnitees as a result of, arising out or by
virtue of any misrepresentations, breach of any warranty or representation, or
non-fulfillment of any agreement or covenant on the part of the Shareholders or
a Protocall, whether contained in this Agreement, any Document or any exhibit or
schedule hereto or thereto, or any written statement or certificate furnished or
to be furnished to Intek pursuant hereto or in any closing document delivered by
Protocall or Shareholders to Intek in connection herewith, including, without
limitation, any Affiliate Letter and Certificate Re: Tax-Free Reorganization.
Such obligations apply regardless of the presence of a Third Party Claim (as
defined below). For purposes of determining the amount of Damages for which
indemnification is provided hereunder (but not for the purpose whether a breach
of a representation, warranty or covenant has occurred), each of the
representations, warranties and covenants made by any party in this Agreement or
in any certificate or other instrument delivered
39
pursuant hereto, including, without limitation, the Documents, shall be deemed
to have been made without the inclusion of limitations or qualifications as to
materiality such as the word "Material," if with the inclusion of such
-- ----
limitation or qualification the representation, warranty or covenant was
breached. For example, if there was a $70,000 misrepresentation (which is over
the Material threshold), the Damages would be $70,000.
7.2 Procedures for Indemnification Pursuant to Section 7.1.
------------------------------------------------------
7.2.1 Promptly following the receipt by a Intek Indemnitee of
notice of a demand, claim, action, assessment or proceeding made or brought
by a third party, including a governmental agency (a "Third Party Claim")
or Intek receiving Knowledge of the basis of a claim for Damages, the Intek
Indemnitee receiving the notice of the Third Party Claim or Knowledge of
the basis for a claim: (i) shall notify Protocall (if the Merger has not
occurred) and the Shareholder Representative, of its existence, setting
forth the facts and circumstances of which such Intek Indemnitee has
received notice or Knowledge; and (ii) if the Intek Indemnitee giving such
notice is a person entitled to indemnification under this Section 7 (an
"Indemnified Party"), specifying the basis hereunder upon which the
Indemnified Party's claim for indemnification is asserted; provided,
--------
however, that a failure to provide prompt notification shall not prevent or
-------
prejudice a claim under this Article VII except to the extent such failure
has prejudiced the rights or defenses of the Protocall Parties.
7.2.2 The Indemnified Party shall, upon reasonable notice by
the Shareholder Representative, tender the defense of a Third Party Claim
to the Protocall Parties. If the Protocall Parties accept responsibility
for the defense of a Third Party Claim, then the Protocall Parties shall
have the right to contest, defend and litigate the Third Party Claim and
shall have the exclusive right, in their discretion exercised in good faith
and upon the advice of counsel, and subject to the consent of the
Indemnified Party (which shall not be unreasonably withheld) to settle any
such matter, either before or after the initiation of litigation provided
that at least ten (10) days prior to any such settlement, they shall give
written notice of their intention to settle to the Indemnified Party. The
Indemnified Party shall have the right to be represented by counsel at its
own expense in any defense conducted by the Protocall Parties.
7.2.3 Notwithstanding the foregoing, in connection with any
settlement negotiated by the Protocall Parties, no Indemnified Party shall
be required to: (i) enter into or be bound by or obligated under any
settlement (a) that does not include the delivery by the claimant or
plaintiff to the Indemnified Party of a release from all liability in
respect of such claim or litigation, (b) if the Indemnified Party shall, in
writing to the Protocall Parties within the ten (10) day period prior to
such proposed settlement, unreasonably withhold its consent with respect to
such settlement proposal as contemplated by Section 7.2.2., and desire to
have the Protocall Parties tender the defense of such matter back to the
Indemnified Party, or (c) that requires an Indemnified Party to
40
take any unreasonable affirmative actions as a condition of such
settlement; or (ii) consent to the entry of any judgment that does not
include a full dismissal of the litigation or proceeding against the
Indemnified Party with prejudice; provided, however, that should the
Indemnified Party disapprove of a settlement proposal pursuant to Clause
(b) above, the Indemnified Party shall thereafter have all of the
responsibility for defending, contesting and settling such Third Party
Claim but shall not be entitled to indemnification by the Protocall Parties
to the extent that, upon final resolution of such Third Party Claim, the
Protocall Parties' liability to the Indemnified Party but for this proviso
exceeds what the Protocall Parties' liability to the Indemnified Party
would have been if the Protocall Parties were permitted to settle such
Third Party Claim in the absence of the Indemnified Party exercising its
right under Clause (b) above.
7.2.4 If, in accordance with the foregoing provisions of this
Section 7.2, an Indemnified Party shall be entitled to indemnification
against a Third Party Claim, and if the Protocall Parties shall fail to
accept the defense of a Third Party Claim which has been tendered in
accordance with this Section 7.2, the Indemnified Party shall have the
right, without prejudice to its rights of indemnification hereunder, in its
discretion exercised in good faith and upon the advice of counsel, to
contest, defend and litigate such Third Party Claim, and may settle such
Third Party Claim, either before or after the initiation of litigation, at
such time and upon such terms as the Indemnified Party deems fair and
reasonable, provided at least ten (10) days prior to any such settlement,
written notice of its intention to settle is given to the Shareholders.
If, pursuant to this Section 7.2, the Indemnified Party so defends or
settles a Third Party Claim for which it is entitled to indemnification
hereunder, as hereinabove provided, the Indemnified Party shall be
reimbursed by the Protocall Parties for the reasonable attorneys' fees and
other expenses of defending the Third Party Claim which are incurred from
time to time, forthwith following the presentation to Shareholders of
itemized bills for said attorneys' fees and other expenses. No failure by
the Protocall Parties to acknowledge in writing their indemnification
obligations under this Article VII shall relieve them of such obligations
to the extent they exist.
7.2.5 In order to induce a rapid, fair and acceptable
resolution of Third Party Claims, Intek will also be entitled to a
distribution from the Active Fund as defined in the Escrow Agreement,
attached hereto as Exhibit 1.15, in an amount equal to twenty percent (20%)
of any funds remaining in the Active Fund, only, on the later of March 3,
1998, or such a time that all payments have been made for claims under the
Escrow Agreement. The intent of this provision is to induce Intek to settle
any and all Third Party Claims at a fair amount and share to the extent of
20% of the benefits of such settlement upon the breaking of the Active
Fund. Provided, however, that (i) this Section 7.2.5. only applies to the
amounts held in the Active Fund as defined in the Escrow Agreement
established under Section 1.15 and (ii) Intek shall not in any event be
entitled to more than twenty percent (20%) of the amount left in the Active
Fund after all payments are made for claims under the Escrow Agreement.
41
7.3 Certain Information. The parties hereto shall furnish or cause
-------------------
to be furnished to each other (at reasonable times and at no charge) upon
request as promptly as practicable such information (including access to books
and records) pertinent to Protocall, the Partnership, or Intek and assistance
relating to Protocall or Intek as is reasonably necessary for the preparation,
review and audit of financial statements, the preparation, review, audit and
filing of any Tax Return, the preparation for any audit or the prosecution or
defense of any claim, suit or proceeding relating to any proposed adjustment or
which may result in Shareholders or Intek being liable under the indemnification
provisions of this Article VII; provided, that access shall be limited to items
pertaining solely to Protocall and the Partnership.
7.4 Release by Shareholders. Shareholders, as of the Effective
-----------------------
Time of the Merger, hereby release and discharge Protocall and its officers and
directors from, and agree and covenant that in no event will Shareholders
commence any litigation or other legal or administrative proceeding against,
Protocall or any of its officers or directors, either in law or equity, relating
to any and all claims and demands, known and unknown, suspected and unsuspected,
disclosed and undisclosed, for damages, actual, consequential, or otherwise,
past, present and future, arising out of or in any way connected with their
ownership of the equity securities of Protocall or any employment or consulting
relationship (other than for wages or employee benefits accrued but not yet
paid, or under debts for borrowed money as listed on a Schedule hereto) prior to
or at the Effective Time of the Merger. Except for this Agreement and the
agreements entered into hereunder, as of the Closing without further action, all
shareholders, voting, preemptive, buy-sell, first refusal or similar rights,
employment or consulting rights, by agreement or statute, of a Shareholder of
Protocall, shall terminate as to securities of Protocall and as to Protocall.
This Section shall in no way release, waive or extinguish claims that any
Shareholder or Protocall has or will have against Intek arising in the past,
present or future, including under this Agreement and the agreements entered
into hereunder.
Section 1542 Waiver. With respect to all released Claims, Shareholder
-------------------
waives all rights against the released party under Section 1542 of the
California Civil Code, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
The parties acknowledge that they may discover facts different from or in
addition to those which they now believe to be true with respect to this
section. The parties agree that, except as provided herein, this section shall
be and remain effective notwithstanding the discovery of any different or
additional facts. Except as expressly provided in this Agreement, no party nor
any agent has made any statement or representation to any other party regarding
any fact relied upon
42
in entering into the release contained in this section, and each party expressly
states that such party does not rely upon any statement, representation or
promise of any other party or other party's agent in executing the release
contained in this section except for those set forth in this Agreement. Each
party hereto has made an investigation of the facts pertaining to this release
as it deems necessary. In agreeing to this release, each releasing party assumes
the risk of any misrepresentation, concealment or mistake with respect to the
subject matter of this release except as set forth in this Agreement. If any
releasing party should subsequently discover that any fact relied upon by the
party in agreeing to this release was untrue, or that any fact was concealed
from that party, or that the party's understanding of the law or facts was
incorrect, the releasing party shall not be entitled to any relief as a result,
including any alleged right or claim to set aside or rescind this release.
7.5 Indemnification by Intek. Subject to the provisions of this
------------------------
Article VII, Intek agrees to indemnify and hold Shareholders harmless against,
and will reimburse Shareholders on demand for, any Damages (as defined in
Section 7.1) sustained or incurred by any of the Shareholders as a result of,
arising out of or by virtue of any misrepresentation, breach of any warranty or
representation, or non-fulfillment of any agreement or covenant on the part of
Intek, whether contained in this Agreement, any Document or any exhibit or
schedule hereto or thereto or any written statement or certificate furnished or
be to furnished to Intek pursuant hereto or in any closing document delivered by
Intek to Shareholders in connection herewith. The procedures set forth in
Sections 7.2 and 7.3 shall be applied to any claim under this Section by a
Shareholder, and the Shareholder shall be the "Intek Indemnitees" and
"Indemnifying Party" for such purposes and Intek shall be the "Protocall Party"
or "Shareholder." Such obligations apply regardless of the presence of a Third
Party Claim.
7.6 Exclusive Remedy. The remedies provided in this Article VII
----------------
are, to the extent permitted by law, the sole and exclusive remedies related to
representations, warranties or covenants made or to be performed at or before
the Closing or Effective Time of the Merger, and there are no other remedies
otherwise available to any of the parties, for any claim by one party against
any other party under this Agreement or with respect to the transactions
contemplated by it related to representations, warranties or covenants made or
to be performed at or before the Closing, except for equitable injunctive
relief. No party shall make any claim under any theory, in tort, contract,
statute or otherwise, which could not be brought directly hereunder due to the
time or dollar limitations set forth in Sections 7.8.
7.7 No Rights of Shareholders Against Protocall. No Shareholder
-------------------------------------------
has any claim or cause of action, directly, by contribution, by subrogation or
otherwise, against Protocall or Sub for any matter for which a Shareholder must
provide indemnification, defense or hold harmless hereunder or under any other
document or agreement.
7.8 Limits on Each Person's Indemnification; Survival Periods.
---------------------------------------------------------
43
7.8.1 The limits on indemnification, defense and hold harmless
("Indemnity") obligations hereunder are based on whether Damages for which
indemnification is to be paid arise out of circumstances (i) of which Intek
(if Intek is the indemnifying party or Protocall (if Protocall or a
Shareholder is the indemnifying party and the claim relates to Protocall),
or a Shareholder (if the claim relates solely to the Shareholder) is
required to pay indemnification ("Indemnifying Party") had Knowledge or
reasonably should have had Knowledge at the time of Closing ("Known
Liabilities"), or (ii) of which the Indemnifying Party did not have
Knowledge and reasonably should not have had Knowledge at the time of
Closing ("Unknown Liabilities"). For purposes of this subsection 7.8.1,
any indemnity obligation with respect to Taxes is deemed to be a Known
Liability. The indemnity for Damages shall be limited in the case of any
party (for this purpose all the Shareholders in the aggregate are one
party) to: (a) as to Known Liabilities, $3,000,000 for claims asserted by
an Indemnified Party within twelve (12) months after Closing, $2,000,000
for claims asserted by an Indemnified Party after twelve (12) months after
Closing and before twenty-four (24) months after Closing, and $1,000,000
for claims asserted by an Indemnified Party after twenty-four (24) months
after Closing and through three (3) years after Closing; and (b) as to
Unknown Liabilities, $1,000,000 for claims asserted by an Indemnified Party
before twenty-four (24) months after Closing. For purposes of the
limitation reductions at twelve (12) and twenty-four (24) months, a claim
will also be deemed made by the Indemnified Party within the applicable
time period if a Third Party Claim is asserted by way of the filing of a
lawsuit, arbitration, or complaint, claim or demand with a governmental
body, within the twelve (12) or twenty-four (24) month period, as
applicable, so long as the Indemnified Party has provided notice hereunder
of a claim of Damages to the Indemnifying Party within thirty (30) days
after the end of such twelve (12) or twenty-four (24) month period, as
applicable (but this thirty (30) day grace period does not apply to Third
Party Claims made other than by such a filing). The filing of a lawsuit,
arbitration, or complaint, claim or demand with a governmental body, is not
a condition for a Third Party Claim to exist. The indemnification
limitation for Known Liabilities and Unknown Liabilities are independent,
such that if the limitation for Unknown Liabilities is met, an Indemnified
Party may still require indemnification with respect to a Known Liability
up to the then applicable limitation. The amount of Damages for which
indemnification to be paid by a party will in no case exceed $3,000,000.
The indemnification obligations of the parties shall in all cases expire
three (3) years after Closing for all claims for which notification has not
been provided under Article VII to the Indemnifying Party by the
Indemnified Party. Notwithstanding any other provision of this Article
VII, an Indemnifying Party shall not be liable for indemnification unless
the aggregate amount of Damages for which the Indemnifying Party would be
liable, but for this paragraph exceeds $100,000 (the "Basket"); provided,
however, that if the Basket is met it shall not serve to reduce the amount
of Damages suffered by an Indemnified Party and the $100,000 shall
thereupon be a part of the indemnifiable amount.
44
A Shareholder may pay an indemnification by delivery of cash or
shares of Series B which shall be deemed to be valued at the initial
Conversion Price per share (subject to adjustment only for stock splits,
stock dividends, stock combinations and recapitalizations) ("Series B
Value") unless in the sole reasoned opinion of Intek's counsel such payment
will potentially adversely affect the treatment of the Merger as a
reorganization pursuant to Code Section 368(a)(2)(D); provided, however,
that the ratio of the aggregate indemnification paid in shares of Series B
may not exceed the ratio that the Series B Value bears to the total
Exchange Consideration. If a Shareholder disagrees with that legal
opinion, he may bring his disagreement to the attention of Intek and
Intek's counsel will consider the basis of the disagreement and respond in
writing as to its agreement or disagreement with the Shareholder's
position. If the Shareholder still disagrees with the opinion of Intek's
counsel, and that Shareholder or Shareholders also disagreeing are liable
for fifteen percent (15%) or more of the Damages, the Shareholder(s) will
so notify Intek. Within twenty (20) days of that notice Intek will select
three (3) nationally recognized law firms with which Intek does not have a
prior relationship to render an opinion on that matter. The notifying
Shareholders (by vote by the Shareholders liable for a majority of Damages)
shall promptly select the firm from that list. Intek and such Shareholders
shall each deliver a $5,000 retainer to such firm and such Shareholder(s)
and Intek will request a legal opinion of that firm that such method of
payment will not adversely affect the treatment of the Merger as a
reorganization pursuant to Code Section 368(a)(2)(D). That opinion will be
addressed to Intek and will be a "will not" opinion, not a "should not" or
"more likely than not" opinion, and shall have only normal and reasonable
assumptions and qualifications. If that opinion is delivered Intek will
pay such counsel's fees and expenses and permit payment of indemnification
as provided in this paragraph and if it is not delivered the requesting
Shareholders will pay such counsel's fees and expenses and such method of
payment will not be permitted.
Intek shall make claims initially against, and such claims
shall be paid by, the Indemnification Escrow and only after that escrow has
been exceeded will a claim be made against a Shareholder.
7.8.2 The indemnity, defense and hold harmless obligations of
the Shareholders hereunder for a claim related to Protocall shall be
proportional to the Exchange Consideration received by them valuing (i) the
Series B at the Series B Value, and (ii) cash on a dollar for dollar basis.
If Damages relate to a claim for which solely the Shareholder is liable
(for example, his investment representations) the Damages payable by the
Shareholder shall be limited to an amount equal to the maximum amount which
the Shareholder could owe at the time of the claim for any potential
Damages related to Protocall under Section 7.8.1. (regardless of whether
any Damages in fact exist).
7.8.3 The parties recognize that the period for indemnification
hereunder
45
is shorter than the statute of limitations for certain Third Party Claims.
Accordingly, if a person has determined that grounds for a Third Party
Claim exist, a person may notify the Indemnifying Party and, upon such
notice, the rights of the person seeking indemnity shall be preserved and
the later reduction in the amount of indemnity owing hereunder, or the time
for asserting a claim hereunder, shall not apply to such potential Third
Party Claim to the extend and in the amount described in such
indemnification notice.
ARTICLE VIII
------------
MISCELLANEOUS
-------------
8.1 Notice. Any notice required or permitted hereunder shall be in
------
writing and shall be sufficiently given if (i) personally delivered, (ii) mailed
by certified or registered United States mail, return receipt requested, or
(iii) sent by recognized air express courier for next business day delivery,
addressed as follows:
If to Intek: Intek Information Inc.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. X'Xxxxxxx
Telephone: (000) 000-0000
Copy to: Xxxxxxxx, Xxxxx & Xxxxxxx, P.C.
0000 00xx Xxxxxx
Xxxxxxx, XX 00000
Attn: G. Xxxxx Xxxxxxxx, Jr.
Telephone: (000) 000-0000
If to Shareholders at any time,
or to Protocall before the
Effective Time of the
Merger: Xxxxx Xxxxxxxx
PROTOCALL New Business Specialists, Inc.
000 Xxxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
46
Copy to: Xxxxxxx & Xxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
(or to such other address as any party shall specify by written notice so
given), and shall be deemed to have been delivered as of the date so personally
delivered, or two calendar days after mailed or as of the date delivered to the
air express courier.
8.2 Execution of Additional Documents. The parties hereto will at
---------------------------------
any time, and from time to time after the Closing date, upon reasonable request
of the other party, execute, acknowledge and deliver all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may be required to carry out the intent of this Agreement, and to transfer and
vest title to any securities being transferred hereunder, and to protect the
right, title and interest in and enjoyment of all of the securities transferred,
delivered and conveyed pursuant to this Agreement; provided, however, that this
Agreement shall be effective regardless of whether any such additional documents
are executed.
8.3 Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
and shall inure to the benefit of the parties hereto and their respective heirs,
successors, executors, administrators and assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
8.4 Entire Agreement. This Agreement, together with the exhibits,
----------------
schedules and other documents contemplated hereby, constitutes the final written
expression of all of the agreements between the parties, and is a complete and
exclusive statement of those terms. It supersedes all understandings and
negotiations concerning the matters specified herein. Any representations,
promises, warranties or statements made by either party that differ in any way
from the terms of this Agreement and the exhibits, schedules and other documents
contemplated hereby, shall be given no force or effect. The parties
specifically represent, each to the other, that there are no additional or
supplemental agreements between them related in any way to the matters herein
contained unless specifically included or referred to herein. No addition to or
modification of any provision of this Agreement shall be binding upon any party
unless made in writing. This Agreement does not, however, supersede the $75,000
principal amount promissory note from Protocall to Intek dated December 6, 1996
or the related Security Agreement and Financing Statements.
8.5 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Colorado exclusive of the conflict
of law
47
provisions thereof.
8.6 Arbitration; Consent to Jurisdiction. Except as provided below
------------------------------------
in this paragraph, any and all disputes arising under or related to this
Agreement shall be submitted to binding arbitration before the American
Arbitration Association ("AAA") in accordance with its rules of Commercial
Arbitration. The decision of the arbiter shall be final and binding upon the
parties, and it may be entered in any court of competent jurisdiction. The
arbitration shall take place in Denver, Colorado. The arbiter shall be bound by
the laws of the State of Colorado applicable to all relevant privileges and the
attorney work product doctrine. The arbiter shall have the power to grant
equitable relief where applicable under Colorado law and shall not be entitled
to make an award of punitive damages. The arbiter shall issue a written opinion
setting forth its decision and the reasons therefor within thirty (30) days
after the arbitration proceeding is concluded. The obligation of the parties to
submit any dispute arising under or related to this Agreement to arbitration as
provided in this Section shall survive the expiration or earlier termination of
this Agreement. Notwithstanding the foregoing, any party may seek and obtain an
injunction or other appropriate relief from a court of competent jurisdiction to
preserve or protect the status quo with respect to any matter pending conclusion
of the arbitration proceeding, but no such application to a court shall in any
way be permitted to stay or otherwise impede the progress of the arbitration
proceeding.
Shareholders, Intek, and Protocall hereby consent to the jurisdiction of
the courts of the State of Colorado and the United States District Courts for
the District of Colorado and Northern District of California, 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 may have as
to venue in any of such courts.
8.7 Attorneys' Fees and Costs. In the event of any arbitration or
-------------------------
litigation being filed or instituted between two or more of the parties
concerning this Agreement, the Prevailing Party will be entitled to receive from
the other party or parties its attorneys' fees, experts' fees, costs and
expenses, whether or not such controversy, claim or action is prosecuted to
judgment or other form of relief. The "Prevailing Party" is that party which is
awarded judgment or other legal or equitable relief as a result of trial or
arbitration, or who receives or is entitled to receive a payment of money from
the other party in settlement of claims asserted by such party. If both parties
receive a judgment or other award of relief, the court or the arbiter shall
determine which party is the prevailing party, taking into consideration the
merits of the claims asserted by each party, the relative values of the
judgments or other forms of relief received by each party, and the relative
equities between the parties.
8.8 Survival. All of the terms, covenants, conditions, warranties
--------
and representations contained in this Agreement and any Document shall survive
the execution hereof, the Closing hereunder and the Effective Time of the
Merger.
48
8.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
8.10 Headings. Headings of the Sections of this Agreement are for the
--------
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
8.11 Waivers. Either Intek or Protocall may, by written notice to the
-------
other: (i) extend the time for the performance of any of the obligations or
other actions of the other under this Agreement; (ii) waive any inaccuracies in
the representations or warranties of the other contained in this Agreement or in
any document delivered pursuant to this Agreement; (iii) waive compliance with
any of the conditions or covenants of the other contained in this Agreement; or
(iv) waive performance of any of the obligations of the other under this
Agreement. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder
nor as a waiver of any claim for breach of representation, warranty or covenant.
8.12 Merger of Documents. This Agreement and all agreements and
-------------------
documents contemplated hereby constitute one agreement and are interdependent
upon each other in all respects.
8.13 Incorporation of Exhibits and Schedules. All exhibits and
---------------------------------------
schedules attached hereto are by this reference incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
8.14 Severability. If for any reason whatsoever any one or more of
------------
the provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid as applied to any particular case or in all cases, such
circumstances shall not have the effect of rendering such provision invalid in
any other case or of rendering any of the other provisions of this Agreement
inoperative, unenforceable or invalid.
8.15 Assignability. Neither this Agreement nor any of the parties'
-------------
rights or obligations hereunder shall be assignable by any party hereto prior to
the Effective Time of the Merger without the prior written consent of the other
parties hereto and no assignment after the Effective Time of the Merger shall
relieve a party of its obligations hereunder.
8.16 No Action for Failure to Deliver Opinions, Etc. No party shall
----------------------------------------------
have any claim or right of action against the legal counsel or accountants of
the other party for the failure
49
or refusal of such counsel or accountants to deliver any opinion, certification
or letter requested hereunder.
8.17 Effectiveness of Agreement. This Agreement shall become
--------------------------
effective and binding on the parties hereto only when signed and delivered by
each of the parties hereto. There are no third party beneficiaries of this
Agreement.
8.18 Person. The term "person" is to be broadly construed and
------
includes, without limitation, any entity, body, association, governmental body
or agency, natural person or trust.
8.19 Material. The term "Material" shall mean a material effect on
--------
(i) the business operations, condition (financial or otherwise), prospects,
assets, liabilities or results of operations of either Protocall or Intek, taken
as a whole, (ii) the value, condition or marketability of any material assets of
either Protocall or Intek, taken as a whole or (iii) the ability of either
Protocall or Intek to perform on a timely basis its obligations under any
material contract or to exercise or enforce any of its material rights, powers
or remedies under any material contract; provided, that no prospective change in
the business, operations, condition (financial or otherwise) or results of
operations of Protocall or Intek, on account of general economic conditions or
local, regional, national or international industry conditions shall be deemed
to constitute a Material effect.
8.20 Knowledge. The term "Knowledge" shall mean, when used in any
---------
representation, covenant or warranty of either Protocall or Intek contained
herein, the actual knowledge of any officer, director, key employee, division
head or similar person of either Protocall or Intek, as applicable.
8.21 Taxes. The term "Taxes" means, any taxes, assessments, duties,
-----
fees, levies, imposts, deductions, withholdings, including, without limitation,
income, gross receipts, ad valorem, value added, excise, real or personal
property, asset, sales, use, license, payroll, transaction, capital, net worth
and franchise taxes, estimated taxes, withholding, employment, social security,
workers compensation, utility, severance, production, unemployment compensation,
occupation, premium, windfall profits, transfer and gains taxes, or other
governmental charges of any nature whatsoever imposed by any government or
taxing authority of any country or political subdivision of any country and any
liabilities with respect thereto, including any penalties, additions to tax,
fines or interest thereon, and includes any liability of the company arising
under any tax sharing agreement to which the company is or has been a party; and
(ii) "Return" means any report, return, statement, estimate, declaration,
notice, form or other information required to be supplied to a taxing authority
in connection with Taxes.
50
INTEK INFORMATION, INC. PROTOCALL NEW BUSINESS
a Delaware corporation SPECIALISTS, INC.
a California corporation
By: /S/ XXXXXXX X. X'XXXXXXX By: /S/ XXXXX X. XXXXXXXX
------------------------------ ------------------------------
Its: President Its: President
By: By:
------------------------------ -------------------------------
Its: Secretary Its: Assistant Secretary
Shareholders of Protocall, solely for purposes of the Sections herein as to
which by their terms the Shareholders are parties.
/S/ XXXXX X. XXXXXXXX
-------------------------------
Xxxxx X. Xxxxxxxx
/S/ XXXX X. XXXXXX /S/ XXXXXXXX X. XXXXXXXXXX
------------------------------- -------------------------------
Xxxx X. Xxxxxx Xxxxxxxx X. Xxxxxxxxxx
/S/ XXXXXX X. XXXXX /S/ XXXX X.. FIELDS
------------------------------- -------------------------------
Xxxxxx X. Xxxxx Xxxx X. Xxxxxx
/S/ XXXXX X. XXXXXXX /S/ XXXXX X. XXXXXX
------------------------------- -------------------------------
Xxxxx X. Xxxxxxx Xxxxx X. Xxxxxx
/S/ XXXXXXX X. XXXX /S/ XXXXXXXX X. XXXXXX
------------------------------- -------------------------------
Xxxxxxx X. Xxxx Xxxxxxxx X. Xxxxxx
/S/ XXXX XXXXXXX /S/ XXXXXX X. XXXXXX
------------------------------- -------------------------------
Xxxx Xxxxxxx Xxxxxx X. Xxxxxx
/S/ XXXX X. XXXXXXXXXX, XX. /S/ XXXXX XXXXXX
------------------------------- -------------------------------
Xxxx X. Xxxxxxxxxx, Xx. Xxxxx Xxxxxx
51
