1
EXHIBIT 2.1
PLAN OF MERGER AND ACQUISITION AGREEMENT
DATED DECEMBER 14, 1998
BY AND AMONG
BILLING CONCEPTS CORP.,
CONCEPTS ACQUISITION CORP.,
COMMUNICATIONS SOFTWARE CONSULTANTS, INC.
AND
XXXXX X. XXXXX
2
TABLE OF CONTENTS
1. GENERAL DEFINITIONS......................................................................................1
1.1 "Accounts Receivable"...........................................................................1
1.2 "Affiliate".....................................................................................2
1.3 "Article".......................................................................................2
1.4 "Assets"........................................................................................2
1.5 "Associate".....................................................................................2
1.6 "Authorization".................................................................................2
1.7 "Balance Sheet Date"............................................................................2
1.8 "Best Knowledge"................................................................................2
1.9 "BCC Stock".....................................................................................2
1.9A "BCC Stock Option Plan".........................................................................2
1.10 "Business Combination"..........................................................................2
1.11 "Business Day"..................................................................................2
1.12 "CERCLA"........................................................................................2
1.13 "Certificate"...................................................................................3
1.14 "Code"..........................................................................................3
1.15 "Contracts".....................................................................................3
1.16 "Control".......................................................................................3
1.17 "Damages".......................................................................................3
1.17A "Deposits"......................................................................................3
1.18 "Effective Time"................................................................................3
1.18A "Eligible Grantee"..............................................................................3
1.19 "Encumbrance"...................................................................................3
1.20 "Environmental Laws"............................................................................3
1.21 "Environmental Liabilities".....................................................................4
1.22 "ERISA".........................................................................................4
1.23 "Escrow Agreement"..............................................................................4
1.24 "Escrow Agent"..................................................................................4
1.25 "Exchange Act"..................................................................................4
1.26 "Financial Statements"..........................................................................4
1.27 "Former Seller Shareholder".....................................................................4
1.28 "Governmental Authority"........................................................................4
1.29 "Governmental Requirement"......................................................................4
1.30 "Holdback Shares"...............................................................................5
1.31 "HSR Act "......................................................................................5
1.32 "Indemnitee"....................................................................................5
1.33 "Indemnitor"....................................................................................5
1.34 "Intellectual Property".........................................................................5
1.35 "IRS"...........................................................................................6
1.36 "Losses"........................................................................................6
-ii-
3
1.37 "Material Adverse Effect".......................................................................6
1.38 "Merger Consideration"..........................................................................6
1.38A "Option Ratio"..................................................................................6
1.39 "Parties "......................................................................................6
1.40 "PBGC"..........................................................................................6
1.41 "Permitted Encumbrances"........................................................................6
1.42 "Person"........................................................................................6
1.43 "Purchaser Stock"...............................................................................6
1.44 "RCRA"..........................................................................................6
1.45 "Reference Balance Sheet".......................................................................7
1.46 "Reorganization"................................................................................7
1.47 "Schedule"......................................................................................7
1.48 "SEC" or "Commission"...........................................................................7
1.49 "SEC Documents".................................................................................7
1.50 "Section".......................................................................................7
1.51 "Securities Act"................................................................................7
1.52 "Seller Stock"..................................................................................7
1.52A "Seller Employee Stock Options".................................................................7
1.53 "Software"......................................................................................7
1.54 "Software Trade Secret".........................................................................7
1.55 "Subsidiary"....................................................................................7
1.55A "Substitute Options"............................................................................8
1.56 "Surviving Corporation".........................................................................8
1.57 "System Documentation"..........................................................................8
1.58 "Taxes".........................................................................................8
1.59 "Tax Returns"...................................................................................8
1.60 "Third-Party Claims"............................................................................8
1.61 "Third-Party Software"..........................................................................8
1.62 "Third-Party Software Agreements"...............................................................8
1.63 "User Documentation"............................................................................8
1.64 "Waste Materials"...............................................................................8
2. MERGER...................................................................................................8
2.1 The Merger......................................................................................8
2.2 Surviving Corporation...........................................................................9
2.3 Liabilities.....................................................................................9
2.4 Certificate of Incorporation and Bylaws.........................................................9
2.5 Directors and Officers..........................................................................9
2.6 Conversion or Cancellation of Stock Upon Merger.................................................9
2.7 Fractional Shares..............................................................................11
2.8 Exchange Procedures............................................................................11
2.9 Interim Dividends..............................................................................11
2.10 Further Assurances.............................................................................11
2.11 Pooling of Interests...........................................................................12
-iii-
4
3. CLOSING; CLOSING DATE...................................................................................12
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER............................................12
4.1 Incorporation..................................................................................12
4.2 Share Capital..................................................................................13
4.3 Financial Statements...........................................................................13
4.4 Events Since the Balance Sheet Date............................................................14
4.5 Competing Interests............................................................................15
4.6 Taxes..........................................................................................16
4.7 Employee Matters...............................................................................16
4.8 Contracts and Agreements.......................................................................17
4.9 Effect of Agreement............................................................................20
4.10 Properties, Assets and Leasehold Estates.......................................................20
4.11 Intellectual Property..........................................................................21
4.12 Suits, Actions and Claims......................................................................23
4.13 Licenses and Permits; Compliance With Governmental Requirements................................23
4.14 Authorization..................................................................................24
4.15 Records........................................................................................24
4.16 Environmental Protection Laws..................................................................24
4.17 Accounts Receivable............................................................................25
4.18 Brokers and Finders............................................................................26
4.19 Deposits.......................................................................................26
4.20 Work Orders....................................................................................26
4.21 Customer List; Supplier List...................................................................26
4.22 No Royalties...................................................................................26
4.23 Bank Accounts..................................................................................26
4.24 Insurance......................................................................................27
4.25 Employee Benefit Matters.......................................................................27
4.26 Warranties and Product Liability...............................................................29
4.27 Securities Laws Matters........................................................................30
4.28 No Untrue Statements...........................................................................31
5. REPRESENTATIONS AND WARRANTIES OF THE BCC PARTIES.......................................................32
5.1 Purchaser Incorporation........................................................................32
5.2 BCC Incorporation..............................................................................32
5.3 Authorization..................................................................................32
5.4 Brokers and Finders............................................................................32
5.5 Authorization for Merger Consideration.........................................................32
5.6 SEC Documents..................................................................................32
5.7 Form S-3.......................................................................................33
-iv-
5
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES, REPRESENTATIONS AND WARRANTIES OF
SELLER AND THE SHAREHOLDER..............................................................................33
7. TAX TREATMENT...........................................................................................34
8. PRE-CLOSING COVENANTS...................................................................................34
8.1 General........................................................................................34
8.2 Notices and Consents...........................................................................34
8.3 Operation of Business..........................................................................34
8.4 Filings Under HSR Act..........................................................................36
8.5 Full Access....................................................................................36
8.6 Notice of Developments.........................................................................36
8.7 Updated Financial Statements...................................................................36
8.8 Exclusivity....................................................................................37
8.9 Schedules......................................................................................37
8.10 Seller Information.............................................................................37
8.11 Voting of Seller Stock.........................................................................37
8.12 Affiliate Letters..............................................................................38
8.13 Employment Arrangements........................................................................38
8.14 Stock Pledge and Escrow Agreement..............................................................38
8.15 Intellectual Property Assignment...............................................................38
8.16 Termination of Contracts.......................................................................38
9. CONDITIONS TO OBLIGATION TO CLOSE.......................................................................38
9.1 Conditions to Obligation of the BCC Parties....................................................38
9.2 Conditions to Obligation of Seller and Shareholder.............................................41
10. SPECIAL CLOSING AND POST-CLOSING COVENANTS..............................................................42
10.1 General........................................................................................42
10.2 Litigation Support.............................................................................42
10.3 Transition.....................................................................................43
10.4 Termination of Agreements......................................................................43
10.5 Intellectual Property Assignment...............................................................43
10.6 Use of Name of Seller..........................................................................43
10.7 Employee Benefits Matter.......................................................................43
10.8 Pooling of Interests Accounting................................................................44
10.9 Tax-Free Reorganization........................................................................44
10.10 Board Representation...........................................................................44
10.11 Principal Office of Seller.....................................................................44
10.12 Earnings Release...............................................................................44
11. INDEMNITY BY THE SHAREHOLDER............................................................................44
11.1 Indemnification by the Shareholder.............................................................44
-v-
6
11.2 Environmental Indemnification..................................................................45
11.3 Tax Indemnification............................................................................45
11.4 Products Liability and Warranty Indemnification................................................45
11.5 Indemnification by the BCC Parties.............................................................45
11.6 Limitation on Indemnification; Basket..........................................................46
11.7 Holdback.......................................................................................46
11.8 Escrow.........................................................................................47
11.9 Procedure......................................................................................47
11.10 Payment........................................................................................48
11.11 Adjustment of Liability........................................................................48
11.12 Failure to Pay Indemnification.................................................................48
11.13 Cooperation....................................................................................49
11.14 Indemnification if Negligence of Indemnitee....................................................49
11.15 Appointment of Successor Escrow Agent..........................................................49
12. EMPLOYMENT AND CONSULTING ARRANGEMENTS..................................................................49
13. NON-COMPETITION AGREEMENT...............................................................................49
13.1 Non-Competition................................................................................49
13.2 Judicial Reformation...........................................................................50
13.3 Customer Lists; Non-Solicitation...............................................................50
13.4 Covenants Independent..........................................................................50
13.5 Remedies.......................................................................................51
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................51
15. NOTICES.................................................................................................51
16. REGISTRATION............................................................................................53
16.1 Registration Rights............................................................................53
16.2 Registration Procedures and Expenses...........................................................54
16.3 Agreement by the Shareholder...................................................................54
16.4 Allocation of Expenses.........................................................................55
16.5 Indemnification................................................................................55
17. TERMINATION.............................................................................................57
17.1 Termination of Agreement.......................................................................57
17.2 Effect of Termination..........................................................................58
18. GUARANTEE...............................................................................................58
19. GENERAL PROVISIONS......................................................................................58
19.1 Governing Law; Interpretation; Section Headings................................................58
19.2 Severability...................................................................................58
-vi-
7
19.3 Entire Agreement...............................................................................58
19.4 Binding Effect.................................................................................59
19.5 Assignment.....................................................................................59
19.6 Amendment; Waiver..............................................................................59
19.7 Gender; Numbers................................................................................59
19.8 Counterparts...................................................................................59
19.9 Telecopy Execution and Delivery................................................................59
19.10 Expenses.......................................................................................59
19.11 Arbitration....................................................................................60
19.12 Damage to Assets...............................................................................61
19.14 Press Releases and Public Announcements........................................................61
19.15 No Third Party Beneficiaries...................................................................61
19.16 Construction...................................................................................61
19.17 Incorporation of Exhibits, Annexes and Schedules...............................................62
19.18 Specific Performance...........................................................................62
19.19 Remedies Cumulative............................................................................62
-vii-
8
PLAN OF MERGER AND ACQUISITION AGREEMENT
THIS PLAN OF MERGER AND ACQUISITION AGREEMENT (this "Agreement") is
made and entered into this 14th day of December, 1998, to be effective December
1, 1998 by and among (i) Communications Software Consultants, Inc., a New York
corporation ("Seller"), (ii) Xxxxx X. Xxxxx, the owner of all of the capital
stock of Seller (the "Shareholder"), (iii) Billing Concepts Corp., a Delaware
corporation ("BCC"), and (iv) Concepts Acquisition Corp., a Delaware corporation
("Purchaser," and, together with BCC, the "BCC Parties").
W I T N E S S E T H :
WHEREAS, BCC is primarily in the business of providing billing
clearinghouse and information services; and
WHEREAS, in connection with the transactions contemplated by this
Agreement, BCC previously caused Purchaser to be organized and to issue to BCC
all of the issued and outstanding shares of capital stock of Purchaser; and
WHEREAS, Seller is a developer of computer software for the
telecommunications and cable industries and various related businesses (the
"Business"); and
WHEREAS, the Shareholder is the sole shareholder of Seller, holding all
of the issued and outstanding shares of capital stock of Seller; and
WHEREAS, the respective boards of directors of Purchaser and Seller
have voted to approve the merger of Seller with and into Purchaser (the
"Merger") pursuant to the terms and subject to the conditions of this Agreement;
and
WHEREAS, this Agreement is intended to qualify under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree that Seller shall be merged with and into
Purchaser and that the terms and conditions of the Merger, the method of
carrying the Merger into effect and certain other provisions relating thereto
shall be as hereinafter set forth:
1. GENERAL DEFINITIONS. For purposes of this Agreement, the following
terms shall have the respective meanings set forth below:
1.1 "Accounts Receivable" shall have the meaning assigned to it in
Section 4.17.
1
9
1.2 "Affiliate" of any Person shall mean any Person Controlling,
Controlled by or under common Control with such Person.
1.3 "Article" shall mean an Article of this Agreement unless otherwise
stated.
1.4 "Assets" shall mean the assets, properties and rights of Seller of
every nature, kind and description, wherever located, tangible and intangible,
real, personal and mixed, whether or not reflected in the books and records of
Seller, necessary or desirable to permit the Business to be carried on in the
manner as is presently conducted.
1.5 "Associate" shall have the meaning assigned to it in Section 4.5.
1.6 "Authorization" shall mean any consent, approval or authorization
of, expiration or termination of any waiting period requirement (including
pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended) by, or filing, registration, qualification, declaration or designation
with, any Governmental Authority.
1.7 "Balance Sheet Date" shall have the meaning assigned to it in
Section 4.3.
1.8 "Best Knowledge" shall mean both what a Person knew as well as what
the Person should have known had the person exercised reasonable diligence. When
used with respect to a Person other than a natural person, the term "Best
Knowledge" shall include the directors, officers, partners, trustees,
administrators, beneficiaries, executors, managers, employees, consultants and
agents of the Person.
1.9 "BCC Stock" shall mean the common stock, $.01 par value, of BCC.
1.9A "BCC Stock Option Plan" shall have the meaning assigned to it in
Section 2.6A.
1.10 "Business Combination" shall mean (i) any merger or consolidation
of, or share exchange involving, the Seller with or into any Person, (ii) any
sale, lease, exchange, transfer or other disposition (whether in one transaction
or a series of related transactions) of more than ten percent of the Seller's
consolidated assets, (iii) the adoption of any plan or proposal for the
liquidation or dissolution of the Seller, (iv) any issuance, sale, purchase or
redemption of equity securities, any reclassification of equity securities or
recapitalization of the Seller, and (v) any transaction having an effect similar
to those described above.
1.11 "Business Day" shall mean any day other than Saturday, Sunday or
other day on which federally chartered commercial banks in San Antonio, Texas
are authorized or required by law to close.
1.12 "CERCLA" shall mean the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended.
2
10
1.13 "Certificate" shall mean each stock certificate representing
shares of Seller Stock.
1.14 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.15 "Contracts" shall have the meaning assigned to it in Section 4.8.
1.16 "Control" and all derivations thereof shall mean the ability to
either (a) vote (or direct the vote of) 50% or more of the voting interests in
any Person or (b) direct the affairs of another, whether through voting power,
contract or otherwise.
1.17 "Damages" shall mean any and all liabilities, losses, damages,
demands, assessments, punitive damages, loss of profits, refund obligations
(including, without limitation, interest and penalties thereon), claims of any
and every kind whatsoever, costs and expenses (including interest, awards,
judgments, penalties, settlements, fines, costs of remediation, diminutions in
value, costs and expenses incurred in connection with investigating, prosecuting
and defending any claims or causes of action (including, without limitation,
reasonable attorneys' fees and reasonable expenses and all reasonable fees and
reasonable expenses of consultants and other professionals)).
1.17A "Deposits" shall have the meaning assigned to it in Section 4.19.
1.18 "Effective Time" shall mean the time at which a properly executed
certificate of merger in substantially the form attached to this Agreement as
Schedule 1.18(a) (together with other documents required by law to effect the
Merger) shall have been filed with the Secretary of State of Delaware, properly
executed articles of merger in substantially the form attached to this Agreement
as Schedule 1.18(b) (together with other documents required by law to effect the
Merger) shall have been filed with the Secretary of State of New York and such
other documents and instruments shall have been filed in any other jurisdiction
where such a certificate or articles of merger is required.
1.18A "Eligible Grantee" shall have the meaning assigned to it in
Section 2.6A.
1.19 "Encumbrance" shall mean any security interest, mortgage, pledge,
trust, claim, lien, charge, option, defect, restriction, encumbrance or other
right or interest of any third Person of any nature whatsoever.
1.20 "Environmental Laws" shall mean any and all applicable laws,
statutes, ordinances, rules, regulations, orders, or determinations of any
Governmental Authority pertaining to the environment heretofore or currently in
effect in any and all jurisdictions in which Seller is conducting or at any time
has conducted business, or where any of the Assets are located, or where any
hazardous substances generated by or disposed of by Seller are located.
"Environmental Laws" shall include, but not be limited to, the Clean Air Act, as
amended, CERCLA, the Federal Water Pollution Control Act, as amended, RCRA, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, and all other applicable laws, statutes, ordinances, rules,
regulations, orders and determinations of any Governmental Authority relating to
(a) the control of
3
11
any potential pollutant or protection of the air, water or land, (b) solid,
gaseous or liquid waste generation, handling, treatment, storage, disposal or
transportation and (c) exposure to hazardous, toxic or other substances alleged
to be harmful. The terms "hazardous substance," "release" and "threatened
release" shall have the meanings specified in CERCLA, and the terms "solid
waste" and "disposal" (or "disposed") have the meanings specified in RCRA.
1.21 "Environmental Liabilities" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remediation, removal,
response, abatement, clean-up, investigative or monitoring costs and any other
related costs and reasonable expenses), other causes of action recognized now or
at any later time, damages, settlements, reasonable expenses, charges,
assessments, liens, penalties, fines, pre-judgment and post-judgment interest,
reasonable attorneys' fees and other reasonable legal fees (a) pursuant to any
agreement, order, notice or responsibility, directive embodied in Environmental
Laws or relating to environmental matters, injunction, judgment or similar
documents (including settlements) relating to environmental matters or (b)
pursuant to any claim by a Governmental Authority or other person for personal
injury, property damage, damage to natural resources, remediation or similar
costs or expenses incurred by such Governmental Authority or person pursuant to
common law or statute.
1.22 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.23 "Escrow Agreement" shall have the meaning assigned to it in
Section 8.14.
1.24 "Escrow Agent" shall have the meaning assigned to it in Section
2.8(c).
1.25 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.26 "Financial Statements" shall have the meaning assigned to it in
Section 4.3.
1.27 "Former Seller Shareholder" shall mean each Person who was,
immediately before the Effective Time, a holder of issued and outstanding shares
of Seller Stock.
1.28 "Governmental Authority" shall mean any and all foreign, federal,
state or local governments, governmental institutions, public authorities and
governmental entities of any nature whatsoever, and any subdivisions or
instrumentalities thereof, including, but not limited to, departments, boards,
bureaus, commissions, agencies, courts, administrations and panels, and any
divisions or instrumentalities thereof, whether permanent or ad hoc and whether
now or hereafter constituted or existing.
1.29 "Governmental Requirement" shall mean any and all applicable laws
(including, but not limited to, applicable common law principles), statutes,
ordinances, codes, rules, regulations, interpretations, guidelines, directions,
orders, judgments, writs, injunctions, decrees, decisions or
4
12
similar items or pronouncements, promulgated, issued, passed or set forth by any
Governmental Authority in effect as of the Effective Time.
1.30 "Holdback Shares" shall have the meaning assigned to it in Section
2.6.
1.31 "HSR Act " shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
1.32 "Indemnitee" shall mean the BCC Parties and the Surviving
Corporation and each of their respective Associates, Affiliates, officers,
directors, employees, agents, consultants, representatives, shareholders and
controlling Persons and their respective successors and assigns, on the one
hand, and the Shareholder and his heirs, beneficiaries, successors and assigns,
on the other hand, whether indemnified, or entitled, or claiming to be entitled
to be indemnified or receive property, pursuant to the provisions of Article 11
hereof.
1.33 "Indemnitor" shall mean the Person or Persons having the
obligation to indemnify or make payment pursuant to the provisions of Article 11
hereof.
1.34 "Intellectual Property" shall mean:
(a) the Software and the Software Trade Secrets; and
(b) all of Seller's patents and applications therefor, further
including, but not limited to, all divisions, reissues, substitutions,
reexaminations, continuations, continuations-in-part and extensions thereof; and
(c) all of Seller's inventions, whether or not patentable,
further including, but not limited to, all new developments and inventions, as
well as all improvements on prior inventions regardless of prior inventorship;
and
(d) all of Seller's know-how and work product, regardless of
form and whether tangible or intangible, further including, but not limited to,
invention and laboratory notebooks, source code and object code, system design,
system specifications, flow charts, test data, records and journals; blueprints,
drawings and photographs; research and engineering reports, including any models
or other hardware; licensing, marketing or development analysis; and customer or
prospective customer lists; and
(e) all of Seller's copyright interests regardless of actual
or potential registrability, and including moral rights, rights of publication
and rights of attribution and integrity; and
(f) all of Seller's trademark or service xxxx interests,
together with all of the goodwill of the business associated therewith and
represented thereby; and
5
13
(g) all of Seller's trade secrets; and
(h) all of Seller's other intellectual property and other
proprietary interests, whether or not identifiable as of the date of execution
hereof, relating to, or used in connection with, the Business or Assets now or
at any time in the future.
1.35 "IRS" shall mean the Internal Revenue Service.
1.36 "Losses" shall mean General Losses, Environmental Losses, Tax
Losses and Product Losses (each as defined in Article 11 hereof), as the case
may be.
1.37 "Material Adverse Effect" shall mean a material adverse effect on
the Business, Assets, properties, operations, condition (financial or otherwise)
or results of operations of Seller, or BCC and its Subsidiaries, taken as a
whole, as applicable.
1.38 "Merger Consideration" shall have the meaning assigned to it in
Section 2.6.
1.38A "Option Ratio" shall have the meaning assigned to it in Section
2.6A.
1.39 "Parties " or "parties" shall mean collectively the BCC Parties,
the Shareholder and Seller.
1.40 "PBGC" shall have the meaning assigned to it in Section 4.25.
1.41 "Permitted Encumbrances" shall mean (a) Encumbrances for current
taxes and assessments not yet past due or which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves are
reflected in the Financial Statements, (b) mechanics and materialmen
Encumbrances for construction in progress to the extent not perfected by filing,
recording, giving of notice or other appropriate action in the relevant
jurisdiction, (c) workmen, repairmen, warehousemen, carriers, lessors and
operators Encumbrances arising in the ordinary course of business to the extent
not perfected by filing, recording, giving of notice or other appropriate action
in the relevant jurisdiction and (d) easements, including agreements and deeds
of easement, and other minor imperfections of title which would not have a
Material Adverse Effect.
1.42 "Person" shall mean any natural person, any Governmental Authority
and any entity, the separate existence of which is recognized by any
Governmental Authority or Governmental Requirement, including, but not limited
to, corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or otherwise.
1.43 "Purchaser Stock" shall mean the common stock, $.01 par value, of
Purchaser.
1.44 "RCRA" shall mean the Resource Conservation and Recovery Act of
1976, as amended.
6
14
1.45 "Reference Balance Sheet" shall have the meaning assigned to it in
Section 4.3.
1.46 "Reorganization" shall have the meaning assigned to it in Article
7.
1.47 "Schedule" shall mean a Schedule to this Agreement unless
otherwise stated. The Schedules to this Agreement may be attached to this
Agreement or may be set forth in a separate document denoted as the Schedules to
this Agreement, or both.
1.48 "SEC" or "Commission" shall mean the United States Securities and
Exchange Commission.
1.49 "SEC Documents" shall have the meaning assigned to it in Section
5.6.
1.50 "Section" shall mean a Section of this Agreement unless otherwise
stated.
1.51 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.52 "Seller Stock" shall mean the Class A common stock, par value
$.001, of Seller.
1.52A "Seller Employee Stock Options" shall have the meaning assigned
to it in Section 2.6A.
1.53 "Software" shall mean all of Seller's computer programs owned by
Seller as of the date of Closing, including (without limitation) those itemized
on Schedule 1.53, whether in source code or object code or other forms, and
regardless of the format or medium in which said code may be stored or embodied.
Software further includes (i) any and all improvements, corrections,
modifications, updates, enhancements or other changes made thereto as of the
Closing Date and owned by Seller, whether or not included in the most recent
version thereof; (ii) any separate media objects or files embedded therein; and
(iii) all System Documentation and User Documentation relating to the Software.
1.54 "Software Trade Secret" shall mean any non-public information,
design, process, procedure, formula or improvement included in or related to the
Software that is valuable, not generally known in the industry, and gives the
owner of the Software a competitive advantage over those competitors who do not
know or use such information.
1.55 "Subsidiary" shall mean, with respect to any Person (the
"parent"), (a) any corporation, association, joint venture, partnership or other
business entity of which securities or other ownership interests representing
more than 50% of the ordinary voting power or beneficial interest are, at the
time as of which any determination is being made, owned or controlled by the
parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent and (b) any joint venture or partnership of
which the parent or any Subsidiary of the parent is a general partner or has
responsibility for its management.
7
15
1.55A "Substitute Options" shall have the meaning assigned to it in
Section 2.6A.
1.56 "Surviving Corporation" shall mean the corporation existing at and
after the Effective Time as a result of the Merger.
1.57 "System Documentation" shall mean all documentation, whether in
tangible or electronic format, used in the development and updating of the
Software at any time, including, but not limited to, design or development
specifications, error reports, and related correspondence and memoranda.
1.58 "Taxes" shall mean any foreign, federal, state or local tax,
assessment, levy, impost, duty, withholding, estimated payment or other similar
governmental charge, together with any penalties, additions to tax, fines,
interest and similar charges thereon or related thereto.
1.59 "Tax Returns" shall mean all Tax returns and reports (including,
without limitation, income, franchise, sales and use, unemployment compensation,
excise, severance, property, gross receipts, profits, payroll and withholding
Tax returns and information returns).
1.60 "Third-Party Claims" shall have the meaning such term is given in
Section 11.9(b) hereof.
1.61 "Third-Party Software" shall mean computer software not owned by
Seller but in which Seller has rights and/or obligations, all of which is
reflected on Schedule 1.61.
1.62 "Third-Party Software Agreements" shall mean the agreements
itemized on Schedule 1.62.
1.63 "User Documentation" shall mean all end-user instruction manuals,
whether in tangible or electronic format, that have accompanied the Software
instructing end users in the use thereof.
1.64 "Waste Materials" shall mean any toxic or hazardous materials or
substances, or solid wastes, including asbestos, buried contaminants, chemicals,
flammable or explosive materials, radioactive materials, petroleum and petroleum
products, and any other chemical, pollutant, contaminant, substance or waste
that is regulated by any Governmental Authority under any Environmental Law.
2. MERGER.
2.65 The Merger. Subject to the terms and conditions of this Agreement,
Seller shall be merged with and into Purchaser in accordance with all applicable
laws, with Purchaser being the Surviving Corporation. Purchaser and Seller shall
cause a certificate of merger to be filed with the Secretary of State of
Delaware, articles of merger to be filed with the Secretary of State of New York
8
16
and such other documents and instruments to be filed in any other jurisdiction
where such a certificate or articles of merger is required, within two business
days after the Closing Date (as hereinafter defined), unless legally prohibited
from doing so. The Merger shall be effective at the Effective Time.
2.66 Surviving Corporation. From and after the Effective Time, the
Surviving Corporation shall have the name "Concepts Acquisition Corp." d/b/a
Communication Software Consultants and CommSoft and shall possess all assets and
property of every description, and every interest in the assets and property,
wherever located, and the rights, privileges, immunities, powers, franchises and
authority, of a public as well as of a private nature, of each of Seller and
Purchaser, and all debts and all other things in action or belonging or due to
each of Seller and Purchaser, all of which shall be vested in the Surviving
Corporation without further act or deed, and title to any real estate or any
interest in the real estate vested in either Seller or Purchaser shall not
revert or in any way be impaired.
2.67 Liabilities. The Surviving Corporation shall be liable for all the
debts, liabilities and duties of each of Seller and Purchaser; any action or
proceeding pending, by or against either Seller or Purchaser, may be prosecuted
to judgment, with right of appeal, as if the Merger had not taken place, or the
Surviving Corporation may be substituted in its place, and all the rights of
creditors of each of Seller and Purchaser shall be preserved unimpaired, and all
liens upon the property of each of Seller and Purchaser shall be preserved
unimpaired, on only the property affected by the liens immediately prior to the
Effective Time.
2.68 Certificate of Incorporation and Bylaws. The certificate of
incorporation and bylaws of Purchaser in effect immediately prior to the
Effective Time shall be the certificate of incorporation and bylaws of the
Surviving Corporation following the Merger until otherwise amended or repealed.
2.69 Directors and Officers. The directors and officers of Purchaser
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation until their successors are duly elected or appointed
and qualified in the manner provided in the bylaws of the Surviving Corporation,
or as otherwise provided by law.
2.70 Conversion or Cancellation of Stock Upon Merger In consideration
for the Merger and non-disclosure agreement in Article 14 hereof, as of the
Effective Time, by virtue of the Merger and without any action on the part of
the holders of any shares of Seller Stock, or the holder of the shares of
Purchaser Stock, (a) Seller Stock outstanding immediately before the Effective
Time shall be converted into, subject to Section 2.7, an aggregate of 2,482,759
shares of BCC Stock (the "Merger Consideration"); provided, however, that
248,275 shares of the Merger Consideration (the "Holdback Shares") shall be
pledged by the Shareholder to secure the indemnification obligations of the
Shareholder pursuant to Article 11 hereof, and (b) each share of Purchaser Stock
outstanding immediately before the Effective Time shall be converted into one
share of common stock of the Surviving Corporation. At the Closing, BCC shall
issue certificates representing the Merger Consideration (less the Holdback
Shares) to the Shareholder.
9
17
2.6A Seller Option Plan. (a) As soon as practicable following the date
of this Agreement, the Seller shall take such actions as may be required to make
such changes to the Seller 1996 and 1998 Incentive Stock Option Plans and the
outstanding options to purchase Seller Stock held by all current and former
employees and directors of Seller ("Seller Employee Stock Options") as it deems
appropriate to give effect to the Merger.
(b) As soon as practicable following the date of this
Agreement, BCC shall take such actions as may be required to adopt a plan ("BCC
Stock Option Plan") under which BCC will grant options ("Substitute Options") to
purchase shares of BCC Stock to replace any Seller Employee Stock Options that
are outstanding at the Effective Time, which plan will include, but not be
limited to, the terms and conditions described in Section 2.6A(c) below.
(c) Pursuant to the BCC Stock Option Plan each current and
former director and employee of the Seller who holds one or more unexercised
Seller Employee Stock Options at the Effective Time ("Eligible Grantee") shall,
subject to the terms and conditions set forth below, automatically receive a
grant as of the Effective Time of one or more Substitute Options in replacement
of his or her Seller Employee Stock Options. Each Substitute Option granted to
an Eligible Grantee pursuant to this Section 2.6A(c) shall:
(i) be for a number of shares of BCC Stock equal to
the number of shares of Seller Stock subject to the Seller Employee
Stock Option, multiplied by the option Ratio (as defined below),
rounded up to the next whole number of shares;
(ii) be for a per share exercise price equal to the
exercise price per share for the shares of Seller Stock otherwise
purchasable pursuant to such Seller Employee Stock Option divided by
the Option Ratio, rounded to the nearest hundredth of a cent; and
(iii) be immediately exercisable upon the Eligible
Grantee's execution of the Option Agreement (referred to below); and
shall expire no earlier than the date the Seller Employee Stock Option
would expire if the Eligible Grantee would have remained continuously
employed by the Seller until such date.
For purposes of this Section 2.6A, "Option Ratio" shall mean .35467.
(d) As soon as practicable after the Effective Time, BCC shall
deliver to the holders of Seller Employee Stock Options, appropriate notices
setting forth such holders' rights pursuant to the BCC Stock Option Plan, and
the Option Agreements, evidencing the grants of such Substitute Options and the
provisions of this Section 2.6A. Execution of the Option Agreement by an
Eligible Grantee shall result in the replacement of his or her Seller Employee
Stock Options with Substitute Options as described above and immediate
cancellation of all of the Eligible Grantee's rights under the Seller Employee
Stock Options.
10
18
2.71 Fractional Shares Notwithstanding Section 2.6, no certificates or
scrip representing. fractional shares of BCC Stock shall be issued upon the
surrender for exchange of certificates that prior to the Effective Time
represented shares of Seller Stock, no dividend or distribution of BCC shall
relate to any fractional share interest and no fractional share interest shall
entitle the owner thereof to vote or to exercise any rights of a stockholder of
BCC. In the event that any Former Seller Shareholder shall be entitled to any
fractional share interest, then any fractional amount shall be rounded down to
the nearest whole share.
2.72 Exchange Procedures.
(a) After the Effective Time, each outstanding Certificate
shall, until duly surrendered to Purchaser as contemplated by this Section 2.8,
be deemed to represent only the right to receive the Merger Consideration.
(b) After the Effective Time, there shall be no further
transfer on the records of Seller of Certificates, and each share of Seller
Stock presented or surrendered to Purchaser shall be canceled in exchange for
the Merger Consideration as contemplated by Section 2.6. Purchaser shall not be
obligated to deliver Merger Consideration to any holder of a Certificate until
such holder surrenders such Certificate as provided herein.
(c) Certificates representing the Holdback Shares shall be
held in escrow by U.S. Trust Company of Texas, Inc., Dallas, Texas, or another
escrow agent selected by BCC (the "Escrow Agent," which term shall include any
successor escrow agent appointed pursuant to the provisions of Section 11.15),
in accordance with Article 11 of this Agreement.
2.73 Interim Dividends. No dividends or other distributions declared
after the Effective Time on BCC Stock issuable pursuant to the Merger and
payable to the Former Seller Shareholder after the Effective Time shall be paid
to the holder of any unsurrendered certificates formerly representing shares of
Seller Stock until the certificates shall be surrendered as provided herein,
provided, however, that (a) upon surrender there shall be paid to the
shareholder in whose name the certificates representing the shares of BCC Stock
shall be issued the amount of unpaid dividends with respect to the holder's
shares of BCC Stock and (b) at the appropriate payment date, or as soon as
practicable thereafter, there shall be paid to the shareholder the amount of
dividends declared with respect to whole shares of BCC Stock with a record date
on or after the Effective Time but before surrender and a payment date
subsequent to surrender, subject in any case to any applicable escheat laws. No
interest shall be payable with respect to the payment of dividends or other
distributions on surrender of outstanding certificates.
2.74 Further Assurances. If at any time after the Effective Time the
Surviving Corporation. shall consider or be advised that any further assignments
or assurances in law or otherwise are necessary or desirable to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation, all rights, title
and interests in all the Assets and all privileges, powers and franchises of
Seller and Purchaser, the Surviving Corporation and its proper officers and
directors,
11
19
in the name and on behalf of Seller and Purchaser, shall execute and deliver all
such proper deeds, assignments and assurances in law and do all things necessary
and proper to vest, perfect or confirm title to such property or rights in the
Surviving Corporation and otherwise to carry out the purpose of this Agreement,
and the proper officers and directors of the Surviving Corporation are fully
authorized in the name of Seller or otherwise to take any and all such action.
2.75 Pooling of Interests. BCC and Seller intend for the transactions
contemplated by this Agreement to qualify for "pooling of interests" treatment
for purposes of BCC's accounting. Seller acknowledges that BCC expressed a
preference to exchange shares of BCC's Stock (as opposed to cash) for Seller
Stock.
30 CLOSING; CLOSING DATE.
As soon as practicable after satisfaction or waiver of all conditions
to the Merger, including the expiration of any waiting period or extension
thereof applicable to the Merger under the HSR Act, the consummation of the
transactions referenced above shall take place (the "Closing") at 10:00 a.m.,
San Antonio time, at the offices of BCC, 0000 Xxxx Xxxxx Xxxxx, Xxxxx 000, Xxx
Xxxxxxx, Xxxxx , or at such other time, date and place as BCC and Seller shall
in writing designate. The date of the Closing is referred to herein as the
"Closing Date."
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER. Seller
and the Shareholder hereby, jointly and severally, represent and warrant to the
BCC Parties as follows:
4.1 Incorporation. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, and is
duly authorized, qualified and licensed under all applicable Governmental
Requirements to carry on its business in the places and in the manner as now
conducted and to own, operate and lease the Assets it now owns, operates or
holds under lease. There has not been any claim by any other jurisdiction to the
effect that Seller is required to qualify or otherwise be authorized to do
business as a foreign corporation therein in order to carry on any of its
businesses as now conducted or to own, lease or operate the Assets. Schedule 4.1
sets forth a complete list of all jurisdictions in which Seller is qualified as
a foreign corporation, and Seller is in good standing in each of such
jurisdictions. To the Best Knowledge of the Seller and the Shareholder, there
has not been any claim by any other jurisdiction to the effect that Seller is
required to qualify or otherwise be authorized to do business as a foreign
corporation therein in order to carry on any of its businesses as now conducted
or to own, lease or operate the Assets. Complete and correct copies of the
Articles of Incorporation of Seller and all amendments thereto, certified in
each case by the Secretary of State of the State of New York, and of the Bylaws
of Seller and all amendments thereto, certified by the Secretary of Seller,
heretofore have been delivered to the BCC Parties. The minute books of Seller
previously made available to the BCC Parties are complete and accurately reflect
all action taken prior to the date of this Agreement by its board of directors
and shareholders, in their capacities as such. Neither Seller nor the
Shareholder has, to their Best Knowledge, taken any action, or failed to take
any action which action or failure will preclude or
12
20
prevent Seller's business from being conducted in substantially the same manner
in which Seller has heretofore conducted the same. Seller has no Subsidiaries.
Seller is not engaged in any business or operations other than the Business.
4.2 Share Capital
(a) The authorized capital stock of Seller consists of
9,000,000 shares of Seller Stock, of which 7,000,000 shares are outstanding as
of the date hereof, and 1,000,000 shares of Class B common stock, $.001 par
value, none of which shares are issued as of the date hereof. All of the
outstanding Seller Stock is held of record and beneficially by the Shareholder.
All outstanding Seller Stock is duly authorized and issued in compliance with
all federal, state and foreign securities laws. True and correct copies of the
stock records of Seller, showing all issuances and transfers of shares of
capital stock of Seller since inception, have been provided to BCC.
(b) Except as set forth on Schedule 4.2(b), There are
outstanding on the date hereof no rights of first refusal, preemptive rights,
conversion rights, options, warrants or other rights to acquire, directly or
indirectly, capital stock from Seller or, to Seller's Best Knowledge, from
Shareholder or any holder of Seller Employee Stock Options except Seller
Employee Stock Options representing in the aggregate the right to purchase up to
488,020 shares of class B common stock, $.001 par value from Seller. Set forth
in Schedule 4.2(a) is a spreadsheet accurately reflecting the number of options
outstanding, the grant dates, vesting schedules and exercise prices thereof (in
each case, as applicable), and the identities of the holders thereof and an
indication of their relationships to Seller. The respective exercise prices of
all such Seller Employee Stock Options are at least equal to the fair market
value per share of Seller Stock on the date such Seller Employee Stock Options
were granted.
(c) Seller is not a party or subject to any agreement or
understanding, and there is no agreement or understanding between any Persons,
that affects or relates to the voting or giving of written consents with respect
to any securities of Seller or the voting by any director of Seller. Except as
reflected on the Referenced Balance Sheet, neither Shareholder nor any Affiliate
thereof is indebted to Seller. Seller is not indebted to any Shareholder or any
Affiliate thereof and Seller is not under any contractual or other obligation to
register any of its presently outstanding securities or any of its securities
which may hereafter be issued.
4.3 Financial Statements. Seller has delivered to the BCC Parties
copies of the following financial statements for Seller, all of which financial
statements are included in Schedule 4.3(a) (collectively, the "Financial
Statements"):
(a) Unaudited Balance Sheet of Seller (the "Reference Balance
Sheet") as of September 30, 1998 (the "Balance Sheet Date") and Unaudited Income
Statement of Seller for the nine-month period ended on the Balance Sheet Date;
and
13
21
(b) Audited Balance Sheets, Income Statements and Statements
of Changes in Financial Position for each of Seller's three most recent fiscal
years.
All financial statements supplied to the BCC Parties by Seller, whether or not
included in Schedule 4.3(a), are true and accurate in all respects, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated, and present fairly the
financial condition of Seller as of the dates and for the periods indicated
thereon. The Reference Balance Sheet reflects, as of the Balance Sheet Date, all
liabilities, debts and obligations of any nature, kind or manner of Seller,
whether direct, accrued, absolute, contingent or otherwise, and whether due, or
to become due, whether or not such items are required to be reflected on such
balance sheet under generally accepted accounting principles consistently
applied. Except as set forth in Schedule 4.3(b) attached hereto and made a part
hereof or on the Reference Balance Sheet, Seller does not have, and none of the
Assets, properties or Business of Seller is subject to, any liabilities or
obligations (accrued, absolute, contingent or otherwise), whether or not such
liabilities are normally shown or reflected on a balance sheet prepared in a
manner consistent with tax-basis or generally accepted accounting principles,
except for liabilities (i) incurred in the ordinary course of Seller's business,
or (ii) fully covered by Seller's insurance policies, none of which have had a
Material Adverse Effect.
4.4 Events Since the Balance Sheet Date. Since the Balance Sheet Date,
there has not been:
(a) any change in the condition (financial or otherwise) or in
the properties, assets, liabilities, business or prospects of the Business,
except normal and usual changes in the ordinary course of business, none of
which has been adverse and all of which in the aggregate have not been adverse;
(b) any labor trouble, strike or any other occurrence, event or condition
affecting the employees of Seller that adversely affects the condition
(financial or otherwise) of the Assets or the Business; (c) any breach or
default by Seller or, to the Best Knowledge of Seller and the Shareholder, by
any other party, under any agreement or obligation included in the Assets or by
which any of the Assets are bound; (d) any damage, destruction or loss (whether
or not covered by insurance) adversely affecting the Assets or the Business; (e)
to the Best Knowledge of Seller and the Shareholder, any legislative or
regulatory change adversely affecting the Assets or the Business; (f) any change
in the types, nature, composition or quality of the services of the Business,
any adverse change in the contributions of any of the service lines of the
Business to the revenues or net income of such Business, or any adverse change
in the sales, revenue or net income of the Business; (g) any transaction related
to or affecting the Assets or the Business other than transactions in the
ordinary course of business of Seller; (h) any other occurrence, event or
condition that has adversely affected (or, to the Best Knowledge of the Seller
and the Shareholder, can reasonably be expected to adversely affect) the Assets
or the Business; (i) any declaration, setting aside or payment of any dividend
(whether in cash, stock or property) with respect to any of Seller's capital
stock; (j) (i) any granting by Seller to any executive officer of Seller of any
increase in compensation, (ii) any granting by Seller to any executive officer
of any increase in severance or termination pay, or (iii) any entry by Seller
into any employment, severance or termination agreement with any
14
22
executive officer; (k) any change in accounting methods, principles or practices
by Seller materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in tax-basis or generally accepted
accounting principles, and except as required by the BCC Parties; (l) to the
Best Knowledge of the Seller and the Shareholder, any condition, event or
occurrence through the date hereof which, individually or in the aggregate,
could reasonably be expected to prevent, hinder or delay in any material respect
the ability of Seller to consummate the transactions contemplated by this
Agreement; or (m) any agreement, in writing or otherwise, by Seller or any
corporate action by Seller with respect to the foregoing.
4.5 Competing Interests. Neither Seller nor the Shareholder, nor, to
the Best Knowledge of such parties, any director or officer of, or consultant
to, Seller, and no Associate (as hereinafter defined) of Seller or the
Shareholder:
(a) owns, directly or indirectly, any equity interests in, or
is a director, officer or employee of, or consultant to, any entity which is a
competitor, supplier or customer of the Business, or, to the Best Knowledge of
Seller and the Shareholder, a competitor, supplier or customer of Purchaser or
Seller or an Associate of Purchaser or Seller (except for ownership, if any, of
less than one percent of the outstanding capital stock of any corporation the
capital stock of which is traded on a nationally recognized securities exchange
or which has a class of securities registered pursuant to the Exchange Act), or
(b) owns, directly or indirectly, in whole or in part, any
property, asset or right which is associated with the Assets or the Business or
which Seller is presently operating or using in connection with or the use of
which is necessary for or material to the operation of the Business.
For purposes of this Agreement, the term "Associate" shall mean:
(y) with respect to an individual:
(i) the spouse of the individual and all ancestors
and lineal descendants of the individual and the spouse,
(ii) any trust in which the individual or any person
described in (i) above has a pecuniary interest or any trustee of such
a trust, and
(iii) any business entity which is directly or
indirectly Controlled by any of the foregoing; and
(z) with respect to a Person other than a natural person, any
Person Controlling, Controlled by or under common Control with such Person, and
any director, officer, partner, trustee, administrator, beneficiary, executor,
manager, employee, consultant or agent of such Person and any Associate of any
Person described in this clause (z).
15
23
4.6 Taxes. Except as set forth in Schedule 4.6:
(a) to the Best Knowledge of the Seller and the Shareholder,
all Tax Returns of or relating to any Taxes that are required to be filed on or
before the Effective Time, subject to any allowable extension periods, for, by,
on behalf of or with respect to Seller, including, but not limited to, those
relating to the income, business, operations or property of Seller (whether on a
separate, consolidated, affiliated, combined, unitary or any other basis), have
been timely filed with the appropriate foreign, federal, state and local
authorities, and all Taxes shown to be due and payable on such Tax Returns or
related to such Tax Returns have been paid in full on or before the Effective
Time, except Taxes which have not yet accrued or otherwise become due, all of
which are reflected on the Reference Balance Sheet;
(b) all such Tax Returns and the information and data
contained therein have been properly and accurately compiled and completed in
all material respects, fairly present the information purported to be shown
therein, and reflect all liabilities for Taxes for the periods covered by such
Tax Returns, net of any applicable reserves;
(c) none of such Tax Returns are under audit or examination by
any foreign, federal, state or local authority and there are no agreements,
waivers or other arrangements providing for an extension of time with respect to
the assessment or collection of any Tax or deficiency of any nature against
Seller or with respect to any such Tax Return, or any suits or other actions,
proceedings, investigations or claims now pending or, to the Best Knowledge of
Seller and the Shareholder, threatened against Seller with respect to any Tax,
or any matters under discussion with any foreign, federal, state or local
authority relating to any Tax, or any claims for any additional Tax asserted by
any such authority;
(d) all Taxes assessed and due and owing from or against
Seller on or before the Effective Time (including, but not limited to, ad
valorem taxes relating to any property of Seller) have been timely paid in full
on or before the Effective Time;
(e) all withholding Tax, Tax deposit and estimated Tax payment
requirements imposed on Seller for any and all periods ending on or before the
Effective Time, or through and including the Effective Time for periods that
have not ended on or before the Effective Time, have been satisfied in full on
or before the Effective Time or reserves adequate for the payment of such
withholding, deposit and estimated Taxes have been or will be established in the
financial statements of Seller on or before the Effective Time, a copy of which
has been provided to BCC; and
(f) the Financial Statements reflect and include adequate
charges, accruals, reserves and provisions for the payment in full of any and
all Taxes payable with respect to any and all periods ending on or before the
respective dates thereof.
4.7 Employee Matters. Schedule 4.7 sets forth a true and complete list
of the names of, and current annual compensation paid by Seller to, each
employee of Seller utilized in connection
16
24
with the operation of the Business. Seller is not a party to or bound by any
collective bargaining or other union agreements. Seller has not, within the last
five years, had or been threatened with any union activities, work stoppages or
other labor trouble with respect to its employees. As of the date hereof, there
are no disputes with employees in general to which Seller is a party. As of the
date hereof, there are no strikes, slowdowns or picketing against Seller (or, to
the Best Knowledge of Seller and the Shareholder, against any material supplier
of goods or services to Seller) pending or, to the Best Knowledge of Seller and
the Shareholder, threatened. As of the date hereof, Seller has not received
notice from any union or employees setting forth demands for representation,
elections or for present or future changes in wages, terms of employment or
working conditions. Other than wage increases in the ordinary course of
business, since the Balance Sheet Date, Seller has not made any commitment or
agreement to increase the wages or modify the conditions or terms of employment
of any of the employees of Seller used in connection with the Business.
4.8 Contracts and Agreements. (a) Except as set forth in Schedule
4.8(a), Seller is not a party to or bound by:
(i) any contract, agreement or commitment in respect of the
sale of products or services or the purchase of raw materials, supplies or other
products or utilities;
(ii) any offer, tender or the like outstanding and capable of
being converted into an obligation of Seller by the passage of time or by an
acceptance or other act of some other person or entity or both, except for those
incurred in the ordinary course of Seller's business, none of which have had a
Material Adverse Effect;
(iii) any sale, agency, distributorship agreement, franchise
agreement or legally enforceable commitment or obligation with respect thereto;
(iv) any collective bargaining agreement, union agreement,
employment agreement, consulting agreement, management service agreement,
agreement providing for the services of an independent contractor or any other
similar type of contract or agreement;
(v) any profit-sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance or
other employee benefit plan, agreement, arrangement or commitment of a similar
nature or any agreement with any present or former officer, director or
shareholder of Seller, except as indicated in Schedule 4.25;
(vi) any loan or credit agreement, indenture, guarantee (other
than endorsements made for collection), mortgage, pledge, conditional sale or
other title retention agreement, any equipment financing obligation, lease and
lease-purchase agreement, except as indicated in Schedule 4.8(b);
(vii) any lease related to the Assets or the Business, and any
other contract, agreement or legally enforceable commitment relating to or
affecting the Assets or the Business;
17
25
(viii) any performance bond, bid bond, surety bond and the
like, any contract and bid covered by such bond, and any letter of credit and
guaranty;
(ix) any consent decree and other judgment, decree or order,
settlement agreement and agreement relating to competitive activities, requiring
or prohibiting any future action;
(x) any contract, commitment or agreement of any nature with
the Shareholder, or any Associate (as defined in Section 4.5) of the Shareholder
or Affiliate of the Shareholder;
(xi) any contracts, commitments and agreements entered into
outside the ordinary course of the operation of the Business;
(xii) any agreement, indenture or other instrument which
contains restrictions with respect to the payment of dividends or any other
distribution in respect of its capital stock or the purchase, redemption or
other acquisition of capital stock;
(xiii) other than expenditures regularly made in the ordinary
course of business of Seller for items that are not property, plant or
equipment, any agreement, contract or commitment relating to any expenditure or
a series of related expenditures in excess of $10,000;
(xiv) any outstanding loan or advance by Seller to, or
investment by Seller in, any Person, or any agreement, contract, commitment or
understanding relating to the making of any such loan, advance or investment
(excluding trade receivables);
(xv) any contract, agreement, indenture, note or other
instrument relating to (A) the borrowing of money by Seller or the granting of
any Encumbrance or (B) any guarantee or other contingent liability (identifying
the primary contract or agreement to which such guarantee or contingent
liability relates or the agreement pursuant to which such guarantee was
delivered) in respect of any indebtedness, commitment, liability or obligation
of any Person (other than the endorsement of negotiable instruments for deposit
or collection in the ordinary course of business);
(xvi) any agreement, contract or commitment limiting the
freedom of Seller or any Affiliate of Seller to engage in any line of business,
to own, operate, sell, transfer, pledge or otherwise dispose of or encumber any
Asset or to compete with any Person or to engage in any business or activity in
any geographic area;
(xvii) any agreement, lease, contract or commitment or series
of related agreements, leases, contracts or commitments not entered into in the
ordinary course of business that is not cancelable under the terms of such
agreement, lease, contract or commitment without penalty to Seller within 30
days;
18
26
(xviii) any agreement, contract or commitment requiring (A)
the payment for goods or services whether or not such goods or services are
actually provided or (B) the furnishing of goods or services at a price less
than Seller's cost of producing such goods or providing such services;
(xix) any agreement or contract obligating Seller or that
would obligate or require any subsequent owner of the business currently
conducted by Seller or any of the Assets to provide for indemnification or
contribution with respect to any matter (other than customary indemnification
provisions in leases of property leased by Seller);
(xx) any license, royalty or similar agreement; or
(xxi) any agreement, contract or commitment that Seller
expects to have a Material Adverse Effect on Seller and/or Purchaser subsequent
to Closing.
Schedule 4.8(a) sets forth with respect to each mortgage, security agreement,
letter of credit or guaranty, a cross-reference to the principal agreement,
instrument or document referred to in Schedule 4.8(a) pursuant to which such
mortgage, security agreement, letter of credit or guaranty was executed or to
which such mortgage, security agreement, letter of credit or guaranty relates.
(b) Schedule 4.8(b) sets forth (i) the aggregate outstanding
principal amount as of September 30, 1998, with respect to each loan, credit or
other agreement, instrument or document listed in Schedule 4.8(b) hereto
relating to the borrowing of money by Seller and (ii) the amount of available
borrowings as of September 30, 1998, with respect to each such loan, credit or
other agreement, instrument or document.
(c) All of such contracts, agreements, leases, licenses,
plans, arrangements, commitments and documents listed in Schedule 4.8(a)
(collectively, the "Contracts") are valid, binding and in full force and effect
in accordance with their terms and conditions, other than as set forth in
Schedule 4.12(a), and there is no existing default thereunder or breach thereof
by Seller, or, to the Best Knowledge of Seller and the Shareholder, by any other
party to a Contract, or any conditions which, with the passage of time or the
giving of notice or both, might reasonably constitute such a default by Seller,
or, to the Best Knowledge of Seller and the Shareholder, by any other party to a
Contract, and none of the Contracts will be breached by or give any other party
a right of termination as a result of the transactions contemplated by this
Agreement. There are no pending or, to the Best Knowledge of Seller and the
Shareholder, threatened disputes with respect to the Contracts. Seller is not
obligated to pay any liquidated damages under any of the Contracts and to the
Best Knowledge of Seller and the Shareholder, there are no facts or
circumstances that could reasonably be expected to result in an obligation of
Seller to pay any such liquidated damages. To the Best Knowledge of Seller and
Shareholder, there is no reason why any of the Contracts (i) will result in a
loss to the Surviving Corporation on completion by performance or (ii) cannot
readily be fulfilled or performed by the Surviving Corporation on time without
undue or unusual expenditure of money or effort. Copies of all of the documents
(or in the case of oral commitments, descriptions of the material terms thereof)
relevant to the Contracts have been delivered by Seller
19
27
to the BCC Parties, and such copies and/or descriptions are true, complete and
accurate and include all amendments, supplements or modifications thereto. All
of the Contracts will be fully vested in Purchaser as of the Effective Time of
the Merger, without the approval or consent of any Person, or, if such approval
or consent is required, it will be obtained by Seller and delivered to the BCC
Parties at or prior to the Closing.
4.9 Effect of Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not (a)
violate any provision of the Articles of Incorporation or other charter
documents or bylaws of Seller; (b) result in any violation of any Governmental
Requirement applicable to Shareholder, Seller, the Assets or the Business; (c
conflict with, or result in any breach of, or default or loss of any right under
(or an event or circumstance that, with notice or the lapse of time, or both,
would result in a default), or the creation of an Encumbrance pursuant to, or
cause or permit the acceleration prior to maturity or "put" right with respect
to, any obligation under, any contract, indenture, mortgage, deed of trust,
lease, loan agreement or other agreement or instrument to which Seller or
Shareholder is a party or to which any of the Assets or Business are subject;
(d) relieve any Person of any obligation (whether contractual or otherwise) or
enable any Person to accelerate or terminate any such obligation or any right or
benefit enjoyed by Seller or to exercise any right under any agreement in
respect of the Assets or the Business; and (e) require notice to or the consent,
authorization, approval, clearance, waiver or order of any Person (except as may
be contemplated by the last sentence of Section 4.8). To the Best Knowledge of
Seller and the Shareholder, the business relationships of clients, customers and
suppliers of the Business will not be adversely affected by the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby. Except as set forth on Schedule 4.9 hereto, the execution, delivery and
performance of this Agreement by Seller will not result in the loss of any
governmental license, franchise or permit possessed by Seller.
4.10 Properties, Assets and Leasehold Estates.
(a) Set forth on Schedule 4.10(a) is a description of each
item of personal property, excluding inventory, owned by Seller that had a book
value as of the Balance Sheet Date greater than $10,000. For purposes of this
Section 4.10, "personal property" excludes Intellectual Property. Seller has
good title to all of its personal property that is material to Seller's
business, results of operations, financial condition or Assets (including,
without limitation, those items of personal property set forth on Schedule
4.10(a)), free and clear of all Encumbrances, except for Permitted Encumbrances
and those Encumbrances set forth on Schedule 4.10(a).
(b) Set forth on Schedule 4.10(b) is a description of each
item of personal property leased by Seller for which the annual rent payable
under the applicable lease or contract exceeds $10,000. Seller has good title to
all the leasehold estates pursuant to which the personal property set forth on
Schedule 4.10(b) is leased, free and clear of all Encumbrances, except for
Permitted Encumbrances and those Encumbrances set forth on Schedule 4.10(b).
Seller has not breached any provision of and is not in default (and no event or
circumstance exists that with notice, or the lapse of time or both, would
constitute a default by Seller) under the terms of any lease or
20
28
other agreement pursuant to which the personal property set forth on Schedule
4.10(b) is leased. To the Best Knowledge of Seller and the Shareholder, all of
such leases or other agreements are in full force and effect. There are no
pending or, to the Best Knowledge of Seller and the Shareholder, threatened
disputes with respect to any lease or other agreement pursuant to which the
personal property set forth on Schedule 4.10(b) is leased and, to the Best
Knowledge of Seller and the Shareholder, the lessor thereunder has not breached
any provision of and is not in default (and no event or circumstance exists that
with notice, or the lapse or time or both, would constitute a default by the
lessor) under the terms of any such lease or other agreement.
(c) Seller owns no real property.
(d) Set forth on Schedule 4.10(d) is a list of all leases of
Seller with respect to real property leased by Seller for which the annual rent
payable under the applicable lease or contract exceeds $10,000. Seller has good
and marketable title to all the leasehold estates pursuant to which the real
property set forth on Schedule 4.10(d) is leased, free and clear of all
Encumbrances, except for Permitted Encumbrances. Seller has not breached any
provision of and is not in default (and no event or circumstance exists that
with notice, or the lapse of time or both, would constitute a default by Seller)
under the terms of any lease or other agreement pursuant to which the real
property set forth on Schedule 4.10(d) is leased. To the Best Knowledge of
Seller and the Shareholder, all of such leases or other agreements are in full
force and effect. There are no pending or, to the Best Knowledge of Seller and
the Shareholder, threatened disputes with respect to any lease or other
agreement pursuant to which the real property set forth on Schedule 4.10(d) is
leased and, to the Best Knowledge of Seller and the Shareholder, the lessor
thereunder has not breached any provision of and is not in default (and no event
or circumstance exists that with notice, or the lapse of time or both, would
constitute a default by the lessor) under the terms of any such lease or other
agreement.
(e) To the Best Knowledge of Seller and Shareholder, there is
no (i) change contemplated in any applicable law, statute, ordinance, rule,
regulation, order or determination of any Governmental Authority, (ii)
applicable law, statute, ordinance, rule, regulation, order or determination of
any Governmental Authority or any restrictive covenant or deed restriction
affecting the real property described in Section 4.10(c) and (d) hereof,
including without limitation any zoning ordinances, building codes, flood
disaster laws, wetlands regulations, health laws or environmental laws, (iii)
judicial or administrative action, (iv) action by adjacent landowners, (v)
administrative action, (vi) natural or artificial conditions on or about the
real property identified in Section 4.10(c) and (d) or (vii) significant adverse
fact or condition relating to such real property or its use that would, in each
case, prevent, limit, impede or render more costly the ownership, operation or
maintenance of such real property compared to the cost as of the date hereof.
4.11 Intellectual Property.
(a) Schedules 1.53 and 1.61 are a complete list of Software in
which Seller either has an ownership interest or rights/obligations pursuant to
an agreement with a third party. Schedule 1.62 is a complete list of agreements
under which Seller has rights/obligations in respect of Third-
21
29
Party Software. Schedule 4.11(a) is a complete list of all Intellectual
Property, except as set forth on Schedules 1.53 and 1.61, including but not
limited to (i) all trademarks, service marks and trade names owned or claimed by
Seller, together with all U.S., state and foreign registrations thereof and/or
applications therefor, (ii) all U.S and foreign copyright registrations owned or
claimed by Seller and/or applications therefor, and (iii) all U.S. and foreign
patents and applications therefor on inventions, discoveries, improvements,
ideas or know-how owned or claimed by Seller.
(b) All Software performs as intended in System Documentation
and User Documentation (subject to minor imperfections in the Software that are
standard in the software industry) and is free from defects, viruses or any
other impediment to Purchaser's quiet enjoyment in the operation thereof
(subject to minor imperfections in the Software that are standard in the
software industry).
(c) Seller has developed all Intellectual Property through its
own efforts for its own account and has good and clear title thereto, and,
except as set forth in agreements itemized on Schedule 4.11(c), there is no
contract obligation, license, lien, encumbrance, alleged infringement, dispute,
potential dispute, claim or other cloud of title concerning such Intellectual
Property whatsoever. The Intellectual Property neither infringes nor is being
infringed by any third party proprietary interest, including (without
limitation) any third party patent, copyright, trademark, or trade secret
interest. The Intellectual Property is fully eligible for protection under
applicable law and has not been forfeited, abandoned, lapsed or donated in any
way into the public domain. All of Seller's trade secrets, including source
code, system specifications and other Software Trade Secrets embodied in the
Intellectual Property have been maintained in confidence and, except as set
forth in agreements itemized on Schedule 4.11(c), are not known to any third
party. All personnel, including employees, agents, consultants and contractors,
who have contributed to or participated in the conception and development of the
Intellectual Property either (i) have been a party to a work-for-hire
relationship with Seller that has accorded Seller full, effective and exclusive
original ownership of all tangible and intangible property arising with respect
to the Intellectual Property or (ii) have executed appropriate instruments of
assignment in favor of Seller as assignee that have conveyed to Seller full,
effective and exclusive ownership of all tangible and intangible property
thereby arising with respect to the Intellectual Property. Except for agreements
itemized on Schedule 4.11(c), no agreements or arrangements are in effect with
respect to the development, nondisclosure, marketing, distribution, licensing or
promotion of the Intellectual Property by any independent contractor,
salesperson, distributor, sublicensor or other remarketer or sales organization.
(d) All Third-Party Software Agreements are freely assignable
to and assumable by Purchaser as set forth herein so as to give Purchaser
exactly the same rights and/or obligations thereunder enjoyed by Seller, without
the requirement of obtaining any consent or approval, giving any prior or
subsequent notice, paying any further royalty or fee to any party thereto or to
any other third party, or performing any duty that has not already been fully
performed by Seller. Each Third-Party Software Agreement is in full force and
effect in accordance with its terms without modification or amendment and
without default by either party thereto, and without dispute by any party as to
any term or condition thereof. To the Best Knowledge of the Seller and the
Shareholder,
22
30
there are no facts or documents rendering any Third-Party Software Agreement
unenforceable by Seller or otherwise invalid. To the Best Knowledge of the
Seller and the Shareholder, there are no obligations, including payment of
money, past due by either party to any Third-Party Software Agreement. To the
Best Knowledge of the Seller and the Shareholder, there are no disclosed or
undisclosed breaches of warranty, whether or not within a time period to cure,
pertaining to any Third-Party Software Agreement. To the Best Knowledge of the
Seller and the Shareholder, there is no condition existing that has or will
trigger a right to terminate any Third-Party Software Agreement. To the Best
Knowledge of the Seller and the Shareholder, there is no requirement in any
Third-Party Software Agreement requiring a third party to be a signatory to this
Agreement. The Third-Party Software neither infringes nor is being infringed by
any third party proprietary interest, including (without limitation) any third
party patent, copyright, trademark or trade secret interest.
4.12 Suits, Actions and Claims. Except as set forth in Schedule 4.12,
(a) there are no suits, actions, claims, inquiries or investigations by any
Person, or any legal, administrative or arbitration proceedings in which Seller
is engaged or which are pending or, to the Best Knowledge of Seller and the
Shareholder, threatened against or affecting Seller or any of its properties,
assets or business, or to which Seller is or might become a party, or which
question the validity or legality of the transactions contemplated hereby, (b)
to the Best Knowledge of the Seller and the Shareholder, no reasonable basis or
reasonable grounds for any such suit, action, claim, inquiry, investigation or
proceeding exists and (c) there is no outstanding order, writ, injunction or
decree of any Governmental Authority against or affecting Seller or any of its
properties, assets or business. Without limiting the foregoing, to the Best
Knowledge of Seller and Shareholder, there is no state of facts or the
occurrence of any event forming the basis of any present or potential claim
against Seller.
4.13 Licenses and Permits; Compliance With Governmental Requirements.
Except as set forth in Schedule 4.13, Seller has all federal, state, local and
foreign governmental licenses and permits necessary to the conduct of the
operations of Seller's business as currently conducted, such licenses and
permits are in full force and effect, no material violations currently exist in
respect of any thereof and no proceeding is pending or, to the Best Knowledge of
Seller and the Shareholder, threatened to revoke or limit any thereof. Schedule
4.13 contains a true, complete and accurate list of (a) all such governmental
licenses and permits, (b) all consents, orders, decrees and other compliance
agreements under which Seller is operating or bound, copies of all of which have
been furnished to the BCC Parties, and (c) all material governmental licenses
and permits applied for but not yet received by Seller. Seller has not received
and is not aware of any reports of inspections under the United States
Occupational Safety and Health Act, or under any other applicable federal, state
or local health and safety laws and regulations relating to Seller, the Assets
or the operation of Seller's business. There are no safety, health,
anti-competitive or discrimination claims that have been made or are pending or,
to the Best Knowledge of Seller and the Shareholder, that are threatened
relating to the business or employment practices of Seller. Seller has complied
with all Governmental Requirements applicable to its business and all
Governmental Requirements with respect to the distribution and sale of products
and services by it.
23
31
4.14 Authorization.
(a) Seller has full legal right, power and authority to enter
into and deliver this Agreement, to consummate the transactions set forth herein
and to perform all the terms and conditions hereof to be performed by it. The
execution and delivery of this Agreement by Seller and the performance by it of
the transactions contemplated herein have been duly and validly authorized by
all requisite corporate actions of Seller, and this Agreement has been duly and
validly executed and delivered by Seller and is the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with the terms of
the Agreement, except as limited by applicable bankruptcy, moratorium,
insolvency or other similar laws affecting generally the rights of creditors or
by principles of equity.
(b) Shareholder has full legal right, power and authority to
enter into and deliver this Agreement and the Affiliate Letter (as defined
herein), to consummate the transactions set forth herein and to perform all the
terms and conditions hereof to be performed by it. This Agreement has been duly
and validly executed and delivered by Shareholder and is the legal, valid and
binding obligation of Shareholder, enforceable against Shareholder in accordance
with the terms of the Agreement, except as limited by applicable bankruptcy,
moratorium, insolvency or similar laws affecting generally the rights of
creditors or by principles of equity.
4.15 Records. The books, records and minutes kept by Seller with
respect to the Assets and the Business, including, but not limited to, all
customer files, service agreements, correspondence and historic revenue of
Seller, have been kept properly and contain records of all matters required to
be included therein by any Governmental Requirement or by generally accepted
accounting principles, and such books, records and minutes are true, accurate
and complete.
4.16 Environmental Protection Laws.
(a) Except as set forth in Schedule 4.16, to the Best
Knowledge of the Seller and the Shareholder, Seller has at all times operated in
compliance with all applicable limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations of Environmental Laws and related
orders of any court or other Governmental Authority.
(b) Except as set forth in Schedule 4.16, there are no
existing, pending or, to the Best Knowledge of Seller and the Shareholder,
threatened actions, suits, claims, investigations, inquiries or proceedings by
or before any court or any other Governmental Authority directed against Seller
or its Assets or the Business which pertain or relate to (i) any remedial
obligations under any applicable Environmental Law, (ii) violations of any
Environmental Law, (iii) personal injury or property damage claims relating to
the release of chemicals or Waste Materials or (iv) response, removal or
remedial costs under CERCLA or any similar state law.
(c) Except as set forth in Schedule 4.16, all notices,
permits, licenses or similar authorizations required to be obtained or filed by
Seller under all applicable Environmental Laws
24
32
in connection with its current and previous operation or use of the Assets, any
other assets or properties currently or previously leased or owned by Seller or
the current and previous conduct of its business have been duly obtained or
filed and are in full force and effect.
(c) Neither Seller nor the Shareholder has received notice
that any permit, license or similar authorization is to be revoked or suspended
by any Governmental Authority.
(d) Seller does not own or operate any underground storage
tanks.
(e) No portion of the Assets or any other assets or properties
currently or previously leased or owned by Seller is part of a Superfund site
under CERCLA or any similar ranking or listing under any similar state law.
(f) All Waste Materials generated by Seller have been
transported, stored, treated and disposed of by carriers, storage, treatment and
disposal facilities authorized and maintaining valid permits under all
applicable Environmental Laws.
(g) No Person has disposed or released any Waste Materials on
or under the Assets or any other asset or property currently or previously
leased or owned by Seller and Seller has not disposed or released Waste
Materials on or under the Assets or any other asset or property currently or
previously leased or owned by Seller, except in compliance with all
Environmental Laws.
(h) No facts or circumstances exist which could reasonably be
expected to result in any liability to any Person with respect to the current or
past business and operations of Seller, the Assets or any other assets or
properties currently or previously leased or owned by Seller in connection with
(i) any release, transportation or disposal of any Waste Materials, hazardous
substance or solid waste or (ii) action taken or omitted that was not in full
compliance with or was in violation of, any applicable Environmental Law.
4.17 Accounts Receivable. All notes and accounts receivable of Seller
that are reflected on the Reference Balance Sheet or that have arisen since the
Balance Sheet Date ("Accounts Receivable") have arisen in the ordinary course of
business. All Accounts Receivable either (a) have been collected or (b) are
collectible on the respective due dates thereof, or, if no due date is stated
with respect thereto, within 90 days of their creation in the ordinary course of
business, in each case in the aggregate recorded amounts thereof, less the
applicable reserves with respect thereto reflected on the Reference Balance
Sheet. Seller has not factored or discounted or agreed to factor or discount any
Account Receivable. The values at which the Accounts Receivable are carried on
the Reference Balance Sheet reflect the accounts receivable valuation policy of
Seller which is consistent with Seller's past practice and in accordance with
generally accepted accounting principles consistently applied. Schedule 4.17
sets forth a true, correct and complete list of all Accounts Receivable written
off by Seller, in whole or in part, as uncollectible during the two years
preceding the date hereof. Schedule 4.17 also sets forth a true, correct and
complete aging of the Accounts Receivable of Seller as of the most recent
practicable date.
25
33
4.18 Brokers and Finders. No broker or finder has acted for Seller or
the Shareholder in connection with this Agreement or the transactions
contemplated by this Agreement and no broker or finder is entitled to any
brokerage or finder's fee or to any commission in respect thereof based in any
way on agreements, arrangements or understandings made by or on behalf of Seller
or the Shareholder.
4.19 Deposits. Except as set forth on Schedule 4.19, Seller does not
now hold any deposits or prepayments by third parties with respect to any of the
Assets or the Business ("Deposits").
4.20 Work Orders. There are no outstanding work orders or contracts
relating to any portion of the Assets from or required by any policy of
insurance, fire department, sanitation department, health authority or other
Governmental Authority nor is there any matter under discussion with any such
parties or authorities relating to work orders or contracts.
4.21 Customer List; Supplier List.
(a) Schedule 4.21(a) sets forth a true, correct and complete list of
all customers of the Business to which Seller has sold or provided products or
services during the two years immediately preceding the date hereof. This list
provides an accurate statement of the gross revenues received from each such
customer by the Business during the twelve-month period ended September 30,
1998. This list also indicates by special designation all customers on the list
with respect to which the Business has not sold or provided products or services
during the nine-month period immediately preceding September 30, 1998.
(b) Schedule 4.21(b) sets forth a true, correct and complete list of
all suppliers of the Business from which Seller has purchased or otherwise
received more than $10,000 worth of products or services during either of the
two years immediately preceding the date hereof. This list provides an accurate
statement of the gross payments to each such supplier by the Business during the
twelve-month period ended September 30, 1998. This list also indicates by
special designation all suppliers on the list with respect to which the Business
has not purchased or otherwise received products or services during the
nine-month period immediately preceding September 30, 1998.
4.22 No Royalties. No royalty or similar item or amount is being paid
or is owing by Seller, nor is any such item accruing, with respect to the
operation, ownership or use of the Business or the Assets.
4.23 Bank Accounts. Schedule 4.23 sets forth a true and complete list
of all bank or financial accounts and safe deposit boxes of Seller and of the
credit and debit balances of such bank and financial accounts as of the most
recent practicable date. Except as set forth in Schedule 4.23, since the date of
the balances set forth on such list, there have been no payments out of or
drafts against any of the accounts included therein other than routine payments
and drafts in the ordinary course of business, and the balances in such accounts
as of the date hereof are not materially
26
34
different from those reflected in such list. Schedule 4.23 also lists all
persons having signatory authority over or access to such bank and financial
accounts and safe deposit boxes.
4.24 Insurance. Schedule 4.24 sets forth all existing insurance
policies held by Seller relating to the Business, Assets, employees or agents of
Seller. Each such policy is in full force and effect and is with insurance
carriers believed by Seller to be responsible. There is no dispute with respect
to such policies, and all claims arising from events or circumstances occurring
prior to the date hereof have been paid in full or adequate reserves therefor
are recorded in the Reference Balance Sheet. All retroactive premium adjustments
for any period ended on or before September 30, 1998, under any worker's
compensation policy or any other insurance policies of Seller have been recorded
in accordance with generally accepted accounting principles and are reflected in
the Reference Balance Sheet. Except for the policies identified as such on
Schedule 4.24, none of the policies set forth on Schedule 4.24 will terminate as
a result of the transactions contemplated by this Agreement.
4.25 Employee Benefit Matters. As used in this Section 4.25, "Seller"
shall include Seller and any member of a controlled group or affiliated service
group as defined in Sections 414(b), (c), (m) and (o) of the Code of which
Seller is a member.
(a) List of all Benefit Plans and Compensation Agreements.
Schedule 4.25(a) includes a complete and accurate list of all employee welfare
benefit and employee pension benefit plans as defined in Sections 3(1), 3(2) and
3(3) of ERISA and all other employee benefit agreements or arrangements,
including, but not limited to, deferred compensation plans, incentive plans,
bonus plans or arrangements, stock option plans, stock purchase plans, golden
parachute agreements, severance pay plans, dependent care plans, cafeteria
plans, employee assistance programs, scholarship programs, employment contracts
and other similar plans, agreements and arrangements that are currently in
effect or were maintained within three years of the Closing Date, or have been
approved before this date but are not yet effective, for the benefit of
directors, officers, employees, or former employees (or their beneficiaries) of
Seller. Seller is not aware of any commitment to create any new plan, agreement
or arrangement or modify any now existing. Seller has delivered to the BCC
Parties, as to each plan, agreement or arrangement listed in Schedule 4.25(a),
as applicable, a complete and accurate copy of (i) each plan, agreement or
arrangement listed, (ii) the trust, group annuity contract or other document
which provides the funding for the plan, agreement or arrangement, (iii) the
three most recent annual Form 5500, 990 and 1041 reports, (iv) the most recent
actuarial report or valuation statement, (v) the most current summary plan
description, booklet, or other descriptive written materials, and each summary
of material modifications prepared after the last summary plan description, (vi)
the most recent IRS determination letter and all rulings or determinations
requested from the IRS subsequent to the date of that exemption letter and (vii)
all other correspondence from the IRS or the Department of Labor received which
relates to one or more of the plans, agreements or arrangements. There are no
pending or, to the Best Knowledge of Seller and the Shareholder, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the plans disclosed on Schedule 4.25(a) or their related trusts.
27
35
(b) Representations Pertaining to all Employee Benefit Plans.
Each employee welfare benefit plan and every employee pension benefit plan as
defined in Sections 3(1), 3(2) and 3(3) of ERISA which has been or is sponsored
by, participated in by or contributed to by Seller: (i) is in compliance with
the Code and ERISA, including, but not limited to, all reporting and disclosure
requirements of Part 1 of Subtitle B of Title I of ERISA; (ii) has had the
appropriate Form 5500 filed timely for each year of its existence; (iii) has not
engaged in any transaction described in Sections 406 or 407 of ERISA or Section
4975 of the Code unless exempt under Section 408 of ERISA or Section 4975 of the
Code, as applicable; (iv) has at all times complied with the bonding
requirements of Section 412 of ERISA; (v) has no issue pending (other than the
payment of benefits in the normal course) nor any issue resolved adversely to
Seller which may subject Seller to the payment of a penalty, interest, tax or
other amount and (vi) can be unilaterally terminated or amended on no more than
90 days notice [other than collectively bargained union plans], and (vii) all
contributions or other amounts payable by Seller as of the Closing Date with
respect to each employee welfare benefit plan and each employee pension benefit
plan, other than an employee pension benefit plan which is subject to Section
412 of the Code, have either been paid or accrued in the Reference Balance
Sheet, a copy of which has been furnished to the BCC Parties. No notice has been
received by Seller of an increase or proposed increase in the cost of any
employee welfare benefit or employee pension benefit plan or other employee
benefit agreement or arrangement listed in Schedule 4.25(a).
(c) Additional Representations Pertaining to Certain Employee
Welfare Benefit Plans. All voluntary employee benefit associations have been
submitted to and approved as exempt from federal income tax under Section
501(c)(9) of the Code by the IRS or the applicable submission period will not
have ended prior to the Closing. No plan, arrangement or agreement with any one
or more employees will cause Seller to have liability for severance pay as a
result of the Merger. Except as listed in Schedule 4.25(a), Seller does not
provide employee benefits, including without limitation, death, post-retirement
medical or health coverage (whether or not insured) or contribute to or maintain
any employee benefit plan which provides for benefit coverage following
termination of employment, nor has it made any representations, agreements,
covenants or commitments to provide that coverage, except (i) as is required by
Section 4980B(f) of the Code or other applicable statute, (ii) death benefits or
retirement benefits under any employee pension benefit plan as defined in
Section 3(2) of ERISA, (iii) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), or (iv) deferred compensation
benefits which have been accrued as liabilities on the books of Seller and
disclosed on its Financial Statements. All group health plans maintained by
Seller have been operated in compliance with Section 4980B(f) of the Code.
(d) Additional Representations Pertaining to Certain Employee
Pension Benefit Plans. All employee pension benefit plans as defined in Section
3(2) of ERISA which are intended to qualify under Section 401(a) of the Code
have been submitted to and approved as qualifying under Section 401(a) of the
Code by the IRS or the applicable remedial amendment period will not have ended
prior to the Closing. No facts have occurred which if known by the IRS could
cause disqualification of those plans. All employee pension benefit plans to
which Section 412 of the Code is applicable have fully complied with the funding
requirements of that Section and there is no accumulated funding deficiency as
defined in Section 302(a)(2) of ERISA (whether or not
28
36
waived) in any one or more of those plans. Seller has paid all premiums (any
interest, charges and penalties for late payment, if any applicable) due the
Pension Benefit Guaranty Corporation (the "PBGC") with respect to each employee
pension benefit plan for which premiums are required. No facts are known by
Seller which will materially increase those premiums within three years of the
Closing Date. Except as set forth on Schedule 4.25(d), no employee pension
benefit plan maintained by Seller has been terminated under circumstances which
would result in liability to the PBGC. There has been no "reportable event" (as
defined in Section 4043(b) of ERISA and the regulations under that Section) with
respect to any employee pension benefit plan subject to Title IV of ERISA.
Seller has not ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA, withdrawn as a substantial employer so
as to become subject to the provisions of Section 4063 of ERISA or ceased making
contributions on or before the date of the Closing to any employee pension
benefit plan subject to Section 4064(a) of ERISA to which Seller made
contributions at any time during the six years prior to the date of Closing.
Seller has not made a complete or partial withdrawal from a multiemployer plan
(as defined in Section 3(37) of ERISA) so as to incur withdrawal liability as
defined in Section 4201 of ERISA. The aggregate withdrawal liability of Seller,
computed as if a complete withdrawal by Seller had occurred under each
multiemployer pension plan as of the date hereof, would not exceed $10,000.
(e) Except as disclosed in Section 4.25(e), the transactions
contemplated by this Agreement will not accelerate the time of payment or
vesting, or increase the amount, of compensation due any director, officer or
employee or former director, officer or employee (including any beneficiary)
from Seller.
4.26 Warranties and Product Liability.
(a) Except for (i) warranties implied by law and (ii)
warranties disclosed on Schedule 4.26, Seller has not given or made any
warranties either express or implied in connection with the sale or rental of
goods or services, including, without limitation, warranties covering the
customer's consequential damages. To the Best Knowledge of Seller and the
Shareholder, and except as set forth in Schedule 4.26, there is no state of
facts or occurrence of any event forming the basis of any present claim against
Seller with respect to warranties relating to products produced, manufactured,
marketed, sold, transported or distributed by Seller or services rendered or
allegedly offered by or on behalf of Seller that could reasonably be expected to
materially exceed the reserves therefor.
(b) To the Best Knowledge of Seller and the Shareholder, there
is no state of facts or any event forming the basis of any present claim against
Seller not fully covered by insurance for personal injury or property damage
alleged to be caused by products produced, manufactured, marketed, sold,
transported or distributed by Seller or services rendered or allegedly offered
by or on behalf of Seller, except for deductibles and self-insurance retentions.
29
37
4.27 Securities Laws Matters.
(a) Except as contemplated by Article 16 hereof, the
Shareholder recognizes and understands that the Merger Consideration to be
issued to the Shareholder pursuant to the Merger (the "securities") will not be
registered under the Securities Act, or under the securities laws of any state
(the "securities laws"). The securities are not being so registered in reliance
upon exemptions from the Securities Act and the securities laws which are
predicated, in part, on the representations, warranties and agreements of the
Shareholder contained herein.
(b) The Shareholder represents and warrants that (i)
Shareholder has business knowledge and experience, such experience being based
on actual participation therein, (ii) Shareholder is capable of evaluating the
merits and risks of an investment in the Merger Consideration and the
suitability thereof as an investment therefor, (iii) the Merger Consideration to
be acquired by the Shareholder in connection with the Merger will be acquired
solely for investment and not with a view toward resale or redistribution in
violation of the securities laws, (iv) Shareholder's residence and domicile is
in the State of Florida, (v) in connection with the transactions contemplated
hereby, no assurances have been made concerning the future results of the BCC
Parties or either of them or as to the value of the Merger Consideration and
(vi) Shareholder is an "accredited investor" within the meaning of Regulation D
promulgated by the SEC pursuant to the Securities Act. The Shareholder
understands that none of the BCC Parties is under any obligation to file a
registration statement or to take any other action under the securities laws
with respect to any such securities except as expressly set forth in Article 16
hereof.
(c) The Shareholder has consulted with Shareholder's
securities counsel in regard to the securities laws and is fully aware (iii) of
the circumstances under which the Shareholder is required to hold the
securities, (iv) of the limitations on the transfer or disposition of the
securities, (v) that the securities must be held indefinitely unless the
transfer thereof is registered under the securities laws or an exemption from
registration is available and (vi) that no exemption from registration is likely
to become available for at least one year from the date of acquisition of the
securities. The Shareholder has been advised by Shareholder's securities counsel
as to the provisions of Rules 144 and 145 as promulgated by the Commission under
the Securities Act and has been advised of the applicable limitations thereof.
The Shareholder acknowledges that the BCC Parties are relying upon the truth and
accuracy of the representations and warranties in this Section 4.27 by the
Shareholder in consummating the transactions contemplated by this Agreement
without registering the securities under the securities laws.
(d) The Shareholder has been furnished with (i) the definitive
proxy statement filed with the Commission in connection with the annual meeting
of stockholders of BCC held on February 26, 1998 and (ii) copies of BCC's Annual
Report on Form 10-K for the year ended September 30, 1997, and Quarterly Reports
on Form 10-Q for the quarters ended December 31, 1997, March 31, 1998, and June
30, 1998, filed with the Commission under the Exchange Act. The Shareholder has
been furnished with the complete financial statements of BCC for the fiscal
years ended September 30, 1995, 1996 and 1997, and the three, six and nine
months ended December 31,
30
38
1997, March 31, 1998, and June 30, 1998, respectively. The Shareholder has been
furnished with a summary description of the terms of the BCC Stock and the BCC
Parties have made available to the Shareholder the opportunity to ask questions
and receive answers concerning the terms and conditions of the transactions
contemplated by this Agreement and to obtain any additional information which
they possess or could reasonably acquire for the purpose of verifying the
accuracy of information furnished to the Shareholder as set forth herein or for
the purpose of considering the transactions contemplated hereby. BCC has offered
to make available to the Shareholder upon request at any time all exhibits filed
by BCC with the Commission as part of any of the reports filed therewith.
(e) The Shareholder agrees that the certificates representing
such Shareholder's Merger Consideration to be acquired pursuant to the Merger
will be imprinted with the following legend, the terms of which are specifically
agreed to:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS AND ARE "RESTRICTED SECURITIES" AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE SECURITIES LAWS OR
AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN
THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COUNSEL FOR THIS CORPORATION, IS
AVAILABLE.
The Shareholder understands and agrees that appropriate stop transfer notations
will be placed in the records of BCC and with its transfer agent in respect of
the securities which are to be issued to the Shareholder in the Merger. BCC
shall be obligated to reissue promptly unlegended certificates and remove any
stop-transfer instructions at the request of Shareholder if Shareholder shall
have obtained an opinion of counsel at such Shareholder's expense (which counsel
may be counsel to BCC) reasonably acceptable to BCC to the effect that the
subject securities or a portion of the subject securities may lawfully be
transferred without registration, qualification or legend.
4.28 No Untrue Statements. The statements, representations and
warranties of Seller and the Shareholder set forth in this Agreement and the
Schedules and in all other documents and information furnished to the BCC
Parties, or either of them, and their representatives in connection herewith do
not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements, representations and warranties
made not misleading. To the Best Knowledge of Seller and Shareholder, there is
no fact or matter that is not disclosed to the BCC Parties in this Agreement or
the Schedules that materially and adversely affects or, so far as Seller
31
39
or Shareholder can now reasonably foresee, could materially and adversely affect
the condition (financial or otherwise) of any of the Assets or the Business or
the ability of Seller or Shareholder to perform their respective obligations
under this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE BCC PARTIES. The BCC Parties
jointly and severally represent and warrant to the Shareholder as follows:
5.1 Purchaser Incorporation. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
5.2 BCC Incorporation. BCC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.3 Authorization. The BCC Parties have full legal right, power and
authority, corporate and otherwise, to enter into this Agreement and to
consummate the transactions set forth herein and to perform all the terms and
conditions hereof to be performed by them. The execution and delivery of this
Agreement and the performance by the BCC Parties of the transactions
contemplated herein have been duly authorized by all requisite corporate action
of the BCC Parties and is the legal, valid and binding obligation of each of
them, enforceable against each of them in accordance with its terms, except as
limited by applicable bankruptcy, moratorium, insolvency or similar laws
affecting generally the rights of creditors or by principles of equity.
5.4 Brokers and Finders. Except as set forth in Schedule 5.4, no broker
or finder has acted for the BCC Parties in connection with this Agreement or the
transactions contemplated by this Agreement and no broker or finder is entitled
to any brokerage or finder's fee or to any commission in respect thereof based
in any way on agreements, arrangements or understandings made by or on behalf of
the BCC Parties. All fees and commissions related to the arrangement set forth
in Schedule 5.4, or any other arrangement between the BCC Parties and any broker
or finder, shall be paid by BCC.
5.5 Authorization for Merger Consideration. BCC has taken all necessary
action to permit it to issue the number of shares of Merger Consideration
required to be issued pursuant to the terms of this Agreement. The shares of
Merger Consideration issued pursuant to the terms of this Agreement will, when
issued, be validly issued, fully paid and nonassessable and not subject to
preemptive rights. The Merger Consideration issuable pursuant to this Agreement
will, when issued, be listed on the Nasdaq National Market.
5.6 SEC Documents. BCC has provided to Seller and the Shareholder its
Annual Report on Form 10-K for the year ended September 30, 1997, its Quarterly
Reports on Form 10-Q for the quarters ended December 31, 1997, March 31, 1998,
and June 30, 1998, and its proxy statement with respect to the Annual Meeting of
Stockholders held on February 26, 1998 (such documents collectively referred to
herein as the "SEC Documents"). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act and
the rules
32
40
and regulations of the Commission promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of BCC included in the SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto, have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of BCC and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (except in
the case of interim period financial information for normal year-end
adjustments).
5.7 Form S-3. BCC is a registrant qualified and entitled to use a
registration statement on Form S-3.
6. NATURE OF STATEMENTS AND SURVIVAL OF INDEMNIFICATIONS, GUARANTEES,
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDER.
(a) All statements of fact contained in this Agreement or in
any written statement (including financial statements), certificate, schedule or
other document delivered by or on behalf of Seller or the Shareholder pursuant
to this Agreement or in connection with the transactions contemplated hereby
shall be deemed representations and warranties of Seller and the Shareholder
hereunder. All indemnifications, representations and warranties made by Seller
and/or the Shareholder hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Effective Time regardless of
any investigation at any time made by or on behalf of the BCC Parties. The
covenants and agreements made by Seller and/or the Shareholder hereunder or
pursuant hereto or in connection with the transactions contemplated hereby shall
continue until all obligations with respect thereto shall have been performed or
satisfied or shall have been terminated in accordance with their terms.
(b) All statements of fact contained in the Agreement or in
any written statement (including financial Statements), certificate, schedule or
other document delivered by or on behalf of the BCC Parties pursuant to this
Agreement or in connection with the transactions contemplated hereby shall be
deemed representations and warranties of the BCC Parties hereunder. All
indemnifications, representations and warranties made by the BCC Parties
hereunder or pursuant hereto or in connection with the transactions contemplated
hereby shall survive the Effective Time. The covenants and agreements made by
the BCC Parties hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall continue until all obligations with
respect thereto shall have been performed or satisfied or shall have been
terminated in accordance with their terms.
33
41
7. TAX TREATMENT.
Seller, the Shareholder and the BCC Parties intend that the
transactions contemplated hereunder constitute a tax-free reorganization (a
"Reorganization") for federal income tax purposes under Sections 368(a)(1) and
368(a)(2)(D) of the Code, and agree to treat and report for federal income tax
purposes the transactions hereunder as a Reorganization. This Agreement shall be
construed in a manner to result in treatment of the transactions hereunder as a
Reorganization for federal income tax purposes.
8.. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
8.1 General. Each of the Parties will use his or its best
efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver,
of the closing conditions set forth in Section 9).
8.2 Notices and Consents. Each of the Parties, as promptly as
practicable, (i) will make, or cause to be made, all filings and
submissions required under laws, rules and regulations applicable to
it, or to its Subsidiaries and Affiliates, as may be required for it to
consummate the transactions contemplated hereby; (ii) will use their
best efforts to obtain, or cause to be obtained, all authorizations,
approvals, consents and waivers from all Persons and Governmental
Authorities necessary to be obtained by each of them, or any of their
respective Subsidiaries or Affiliates, in order for each of them,
respectively, so to consummate such transactions; and (iii) will use
their respective best efforts to take, or cause to be taken, all other
actions necessary, proper or advisable in order for each of them to
fulfill their respective obligations hereunder.
8.3 Operation of Business. Except as contemplated by this
Agreement or as set forth in the Schedules, during the period from the
date of this Agreement to the Effective Time, (a) Seller will conduct
its operations according to its ordinary course of business and
consistent with past practice, (b) Seller will not enter into any
material transaction other than in the ordinary course of business and
consistent with past practice, and (c) to the extent consistent with
the foregoing, with no less diligence and effort than would be applied
in the absence of this Agreement, Seller will seek to preserve intact
its current business organizations, keep available the services of its
current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it with
the objective that their goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Without limiting the generality of
the foregoing, and except as otherwise permitted in this Agreement,
prior to the Effective Time, Seller will not, and will not permit any
of its Subsidiaries to, without the prior written consent of BCC:
34
42
(a) issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, delivery, sale,
disposition or pledge or other Encumbrance of (i) any additional shares
of its capital stock of any class (including the Seller Stock), or any
securities or rights convertible into, exchangeable for or evidencing
the right to subscribe for any shares of its capital stock, or any
rights, warrants, options, calls, commitments or any other agreements
of any character to purchase or acquire any shares of its capital stock
or any securities or rights convertible into, exchangeable for or
evidencing the right to subscribe for any shares of its capital stock,
or (ii) any other securities in respect of, in lieu of or in
substitution for Seller Stock outstanding on the date hereof;
(b) redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any of its outstanding
securities (including the Seller Stock);
(c) split, combine, subdivide or reclassify any shares of its
capital stock or declare, set aside for payment or pay any dividend, or
make any other actual, constructive or deemed distribution in respect
of any shares of its capital stock or otherwise make any payments to
the Seller's shareholders in their capacity as such;
(d) (i) grant any increases in the compensation of any of its
directors, officers or key employees, (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required or
contemplated by any employee benefit plan as in effect on the date
hereof to any such director, officer or key employee, whether past or
present, (iii) enter into any new, or amend any existing, employment
agreement with any such director, officer or key employee, (iv) enter
into any new, or amend any existing, severance agreement with any such
director, officer or key employee, or (v) except as may be required to
comply with applicable law, amend any existing, or become obligated
under any new, employee benefit plan;
(e) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of Seller (other than the Merger);
(f) make any acquisition, by means of merger, consolidation or
otherwise, of (i) any direct or indirect ownership interest in or
assets comprising any business enterprise or operation or (ii) except
in the ordinary course of business and consistent with past practice,
any other assets in excess of $10,000;
(g) adopt any amendments to its charter or Bylaws;
(h) incur any indebtedness for borrowed money or guarantee any
such indebtedness or make any loans, advances or capital contributions
to, or investments in, any other Person;
35
43
(i) engage in the conduct of any business the nature of which
is different than the business Seller is currently engaged in;
(j) enter into any agreement providing for acceleration of
payment or performance or other consequence as a result of a change of
control of Seller or its Subsidiaries;
(k) enter into any contract, arrangement or understanding
requiring the purchase of equipment, materials, supplies or services
over a period greater than 12 months and for the expenditure of greater
than $10,000 per year which is not cancelable without penalty on 30
days' or less notice; or
(l) authorize or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
8.4 Filings Under HSR Act. As soon as practicable, each of BCC
and the Seller shall file with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "Antitrust
Division") a premerger notification form and any supplemental
information (other than privileged information) which may be requested
in connection therewith pursuant to the HSR Act, which filings and
supplemental information will comply in all material respects with the
requirements of the HSR Act. Each of the Seller and BCC shall cooperate
fully with the other in connection with the preparation of such filings
and shall use best efforts to respond to any requests for supplemental
information from the FTC or the Antitrust Division and to obtain early
termination of any waiting period applicable to the merger under the
HSR Act. Any and all filing fees required to be paid in connection with
the premerger notification pursuant to the HSR Act shall be borne and
paid by BCC.
8.5 Full Access. The Seller and Shareholder will, and
Shareholder will cause the Seller to, permit representatives of the BCC
Parties and its financing parties to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Seller, to all premises, properties, personnel,
books, records (including Tax records and the workpapers of the
independent accountants for the Seller), contracts and documents of or
pertaining to the Seller .
8.6 Notice of Developments. Each Party will give prompt
written notice to the others of any material adverse development
causing a breach of any of his or its own representations and
warranties in Sections 4 or 5 above. No disclosure by any Party
pursuant to this Section 8.6, however, shall be deemed to amend or
supplement the Schedules hereto or to prevent or cure any
misrepresentation, breach of warranty or breach of covenant.
8.7 Updated Financial Statements. As soon as available and in
any event within 30 days after the end of each month prior to the
Closing Date, commencing with October 30, 1998, Seller shall deliver to
BCC a consolidated balance sheet and related statement of
36
44
operations and cash flows of Seller. All such financial statements
shall be covered by and conform to the representations and warranties
set forth in Section 4.3 hereof and shall be included in the term
"Financial Statements" for purposes of this Agreement.
8.8 Exclusivity.
(i) Shareholder will not, and will not cause or
permit Seller to, (i) solicit, initiate or encourage the
submission of any proposal or offer from any Person relating
to a Business Combination or (ii) participate in any
discussions or negotiations regarding, furnish any information
with respect to, assist or participate in, or facilitate in
any other manner any effort or attempt by any Person to do or
seek a Business Combination. Shareholder will notify BCC
immediately if any Person makes any proposal, offer, inquiry
or contact with respect to any of the foregoing.
(ii) The Parties hereto recognize and acknowledge
that a breach by Shareholder or Seller of this Section 8.8
will cause irreparable and material loss and damage to BCC as
to which it will not have an adequate remedy at law or in
damages. Accordingly, each Party acknowledges and agrees that
the issuance of an injunction or other equitable remedy is an
appropriate remedy for any such breach. In addition, in the
event of any breach of the foregoing which results in Business
Combination with a Person other than BCC, Seller and
Shareholder shall promptly reimburse BCC for the reasonable
expenses incurred by BCC in connection with the transactions
contemplated by this Agreement.
8.9 Schedules. From time to time prior to the Closing, Seller
and the Shareholder will promptly supplement or amend the Schedules
hereto with respect to any matter hereafter arising which, if existing
or occurring at the date of this Agreement, would have been required to
be set forth or described in such Schedules. No supplement or amendment
of the Schedules made pursuant to this Section shall be deemed to cure
any breach of, affect or otherwise diminish any representation or
warranty made in this Agreement unless BCC specifically agrees thereto
in writing.
8.10 Seller Information. The Shareholder and Seller shall
provide to BCC all financial information of the Seller in the format
required in connection with the filing of financial information of the
Seller with BCC's Current Report on Form 8-K under the Exchange Act
required in connection with BCC's acquisition of the Business.
8.11 Voting of Seller Stock. Until this Agreement has been
terminated under Article 17, Shareholder agrees to vote all shares of
Seller Stock held by him in favor of the approval of this Agreement and
the transactions contemplated hereby and not to exercise any
dissenters' rights he may have under New York law. Shareholder hereby
grants to the BCC Parties for a period commencing on the date hereof an
continuing so long as this Agreement
37
45
is in effect, an irrevocable proxy, which is coupled with an interest,
to vote such shares of Seller Stock held by it to approve this
Agreement and the transaction contemplated hereby.
8.12 Affiliate Letters. Prior to the Closing Date, the Seller
shall identify to the BCC Parties all persons who, at the time of the
vote of the Seller's shareholders on the Merger, may be "affiliates" of
the Seller within the meaning of Rule 145 under the Securities Act. The
Seller shall use best efforts to provide the Purchaser with such
information as the BCC Parties shall reasonably request for purposes of
making its own determination of persons who may be deemed to be
affiliates of the Seller. The Seller shall use best efforts to deliver
to the BCC Parties prior to the Closing Date a letter from each of the
affiliates specified by the BCC Parties in substantially the form
attached hereto as Schedule 8.12 (an "Affiliate Letter"), and each
Person who is identified as an affiliate by the Seller and the BCC
Parties has delivered, or agrees to deliver to the BCC Parties prior to
the Closing Date, an Affiliate Letter.
8.13 Employment Arrangements. Xxxxx X. Xxxxx shall enter into
an employment arrangement with Purchaser or BCC as contemplated by
Article 12.
8.14 Stock Pledge and Escrow Agreement. The Shareholder shall
execute and deliver a Stock Pledge and Escrow Agreement (the "Escrow
Agreement") in substantially the form attached hereto as Schedule 8.14.
8.15 Intellectual Property Assignment. Seller shall have
executed and delivered to Purchaser at Closing the intellectual
property assignment (the "Intellectual Property Assignment") as
contemplated by Section 10.5.
8.16 Termination of Contracts. The contracts, agreements and
other instruments listed on Schedule 8.16 shall have been duly and
validly terminated without any liability on the part of Seller, and
Seller and Shareholders shall have delivered to the BCC Parties at
Closing a certificate to such effect.
9. CONDITIONS TO OBLIGATION TO CLOSE
9.1 Conditions to Obligation of the BCC Parties. The
obligation of the BCC Parties to consummate the transactions to be
performed by them in connection with the Closing is subject to
satisfaction of the following conditions:
(a) all representations and warranties of the
Shareholder and Seller contained in this Agreement (including
the Schedules hereto), and all written information delivered
to the BCC Parties by the Shareholder and Seller on or prior
to the Closing Date pursuant to this Agreement, (i) that are
qualified as to materiality shall be true in all respects on
and as of the Closing Date and (ii) that are not qualified as
to materiality shall be true in all material respects on and
as of the Closing Date, with the same force and effect as
though such representations and
38
46
warranties were made, and such written information was
delivered, on and as of the Closing Date;
(b) the Shareholder and Seller shall have performed
and complied with all of its or his covenants hereunder in all
material respects through the Closing;
(c) there shall have been no material adverse change
in the Seller from September 30, 1998 to the Closing Date not
consented to by BCC in writing;
(d) the Seller and Shareholder shall have procured
all of the third party consents required in connection with
the consummation of the transactions contemplated hereby;
(e) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would
(i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation, (iii) affect adversely the right of
BCC to control the Seller, (iv) affect adversely the right of
the Seller to own its assets and to operate its businesses,
(v) require or could reasonably be expected to require any
divestiture by the Seller of a portion of its business that
BCC in its reasonable judgment believes will have a material
adverse effect on the Seller or (vi) imposes any condition
upon the Seller that in BCC's reasonable judgment (x) would be
materially burdensome to the Seller or (y) would materially
increase the costs incurred or that will be incurred by BCC as
a result of consummating the merger and the other transactions
contemplated hereby (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect);
(f) Seller shall have delivered to BCC a certificate
to the effect that (i) each of the conditions specified above
in Section 9.1(a) through (e) is satisfied in all respects;
(g) all applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or
otherwise been terminated and the Parties shall have received
all other authorizations, consents, and approvals of any
Governmental Authority required in connection with the
consummation of the transactions contemplated hereby;
(h) BCC shall have received from counsel to Seller an
opinion in form and substance reasonably acceptable to BCC,
addressed to BCC, and dated as of the Closing Date;
39
47
(i) all actions, proceedings, instruments and
documents required or incidental to carrying out this
Agreement and all other related legal matters shall have been
approved by counsel to BCC;
(j) the board of directors of the BCC parties shall
have approved this Agreement and the consummation by the BCC
Parties of the transactions contemplated hereby;
(k) BCC is satisfied with the results of its
continuing business, legal and accounting due diligence
regarding Seller;
(l) the Shareholder and Seller shall have provided to
BCC all financial information of the Seller in the format
required in connection with the filing of financial
information of the Seller with BCC's Current Report on Form
8-K under the Exchange Act required in connection with BCC's
acquisition of the Business;
(m) all actions to be taken by Seller and Shareholder
in connection with consummation of the transactions
contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to BCC;
(o) BCC shall have received a letter from the
independent accountants for the Seller to the effect that the
Seller meets the requirements applicable to a combining
company for pooling of interest accounting treatment;
(p) BCC shall have received a letter from the
independent accountants for BCC to the effect that the Merger
will qualify for pooling of interests accounting treatment;
(q) BCC shall have received a letter, dated the
Closing Date, from Xxxxxx Xxxxxxxx LLP, accountants to BCC,
substantially to the effect that, on the basis of the facts
and representations set forth in such opinion, or set forth in
writing elsewhere and referred to therein, for federal income
tax purposes the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code and that no
gain or loss will be recognized by and there will be no
corporate income tax liability to BCC or Seller by reason of
the Merger;
(r) BCC shall have received the Affiliate Letters;
and
(s) all of the employees designated by Purchaser with
an asterisk on Schedule 4.7 hereto shall continue to be
employees of Seller, and none shall have communicated to
Seller any intent to leave Seller's employ within 12 months
after the date of this Agreement; and
40
48
(t) as of the Closing Date, no shareholder of Seller
shall have demanded or otherwise purported to exercise
dissenter's rights, if any, pursuant to New York law with
respect to all or any portion of the Seller Stock.
BCC may waive any condition specified in this Section 9.1 if it
executes a writing so stating at or prior to the Closing.
9.2 Conditions to Obligation of Seller and Shareholder. The
obligation of Seller and Shareholder to consummate the transactions to
be performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(a) all representations and warranties of BCC
contained in this Agreement, and all written information
delivered to Seller by BCC on or prior to the Closing Date
pursuant to this Agreement, (i) that are qualified as to
materiality shall be true in all respects on and as of the
Closing Date and (ii) that are not qualified as to materiality
shall be true in all material respects on and as of the
Closing Date, with the same force and effect as though such
representations and warranties were made, and such written
information was delivered, on and as of the Closing Date;
(b) BCC shall have performed and complied with all of
its covenants hereunder in all material respects through the
Closing;
(c) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling or charge would
(A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment,
order, decree, ruling or charge shall be in effect);
(d) BCC shall have delivered to Seller a certificate
to the effect that each of the conditions specified above in
Section 9.2(a) through (c) is satisfied in all respects;
(e) all applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or
otherwise been terminated and the Parties shall have received
all other authorizations, consents and approvals of any
Governmental Authority required in connection with the
consummation of the transactions contemplated hereby;
(f) Seller shall have received from the general
counsel of BCC an opinion in form and substance reasonably
satisfactory to the Seller, addressed to Seller, and dated as
of the Closing Date;
41
49
(g) all actions to be taken by BCC in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to Seller;
(h) Seller shall have received a letter, dated the
Closing Date, from KPMG Peat Marwick, LLP, accountants to
Seller, substantially to the effect that, in its opinion, the
consummation of the transactions contemplated by this
Agreement will constitute a reorganization within the meaning
of Section 368(a) of the Code and that no gain or loss will be
recognized by Seller and that there will be no corporate
income tax liability to Seller; that Shareholder's receipt of
the BCC Stock in exchange for Seller Stock will not constitute
a taxable event for Shareholder and that no gain or loss will
be recognized and no income tax liability incurred thereby;
and that the BCC Stock once received by Shareholder will be
deemed to have the same holding period for long term capital
gain or loss purposes upon its disposition as the Seller Stock
given in exchange for such BCC Stock;
(i) Seller and Shareholder shall have received from
its Securities Counsel, Bond, Xxxxxxxxx & Xxxx, LLP, an
opinion in form and substance reasonably satisfactory to the
Seller and Shareholder, addressed to Shareholder, and dated as
of the Closing Date;
(j) The Board of Directors of Seller shall have
approved this Agreement and the consummation by Seller of the
transactions contemplated hereby; and
(k) There shall have been no material adverse change
in the BCC Parties from the date hereof to the Closing Date
not consented to by Shareholder in writing.
Seller may waive any condition specified in this Section 9.2 if it
executes a writing so stating at or prior to the Closing.
10. SPECIAL CLOSING AND POST-CLOSING COVENANTS. The Parties agree as
follows with respect to the period following the Closing:
10.1 General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Article 11).
Seller and Shareholder acknowledge and agree that from and after the Closing BCC
will be entitled to possession of all documents, books, records (including Tax
records), agreements and financial data of any sort relating to the Seller.
10.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim
42
50
or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act or
transaction on or prior to the Closing Date involving the Seller, each of the
other Parties will cooperate with him or it and his or its counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Article 11).
10.3 Transition. Seller and Shareholder will not take any action that
is designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of the Seller from maintaining
the same business relationships with the Surviving Corporation after the Closing
as it maintained with the Seller prior to the Closing. Seller and Shareholder
will refer all customer inquiries relating to the businesses of the Seller to
BCC from and after the Closing.
10.4 Termination of Agreements. Seller and Shareholder shall take all
necessary efforts to ensure that the Agreements listed on Schedule 8.16 are
terminated prior to Closing.
10.5 Intellectual Property Assignment. Although acknowledged by all
parties as also fully enabled by the Merger memorialized by this Agreement,
Seller shall also execute a separate assignment to Purchaser of all of Seller's
right, title and interest in and to Intellectual Property, including the
Software itemized on Schedule 1.53. This separate assignment shall be set forth
as Schedule 10.5 to this Agreement, and recordation thereof shall be at the sole
discretion of Purchaser.
10.6 Use of Name of Seller. Immediately upon the occurrence of the
Closing, Seller and Shareholder shall cease using the name "Communications
Software Consultants, Inc.," "CommSoft," "CommVergence," and all derivations
thereof. Seller and Shareholder covenant and agree that after the Closing they
will not, directly or indirectly, use the name "Communications Software
Consultants, Inc.," "CommSoft," "CommVergence," or any derivation thereof in
connection with any business enterprise.
10.7 Employee Benefits Matter.
(a) Seller and BCC shall cooperate to ensure orderly transfer of
employees of the Seller to employee benefit plans of BCC.
(b) This Section 10.7 reflects the agreements of the parties but does
not create any rights or obligations except as among the parties to this
Agreement, and it is specifically agreed that no present or future employee of
the Seller or its Subsidiaries will be treated as a third-party beneficiary of
the provisions of this Section 10.7. Nothing in this Section 10.7 or elsewhere
in this Agreement will preclude the Seller or any of its Subsidiaries from
terminating the employment of any employee of the Seller or its Subsidiaries, or
preclude the Seller from amending or terminating in its discretion any employee
benefit plan maintained by the Seller or any of its Subsidiaries.
43
51
10.8 Pooling of Interests Accounting. Seller and Shareholder shall use
their best efforts not to, and Shareholder shall use his best efforts to cause
the Seller and each holder of a Seller Employee Stock Option not to, take any
action which would disqualify the transactions contemplated by this Agreement
from pooling of interests accounting treatment by BCC. Without limiting the
foregoing, Shareholder shall not sell, transfer, pledge, or otherwise dispose of
such Shareholder's interests in or reduce such Shareholder's risk relative to
any of the shares of the BCC Stock issued to such Shareholder pursuant to
Article 2 above prior to the consummation of the transaction contemplated by
this Agreement.
10.9 Tax-Free Reorganization. Seller shall not, nor permit any
Shareholder or holder of a Seller Employee Stock Option to, nor shall Purchaser
or BCC, take any action which would disqualify the transactions contemplated by
this Agreement from treatment as a tax-free reorganization of the Seller, to the
extent that such treatment is otherwise available to the Shareholder.
10.10 Board Representation. At or prior to the Closing, BCC's Board of
Directors shall appoint Xxxxx X. Xxxxx to serve as a director of BCC effective
as of the Effective Time. BCC shall take all requisite action to amend its
Bylaws, if necessary, to increase the size of its Board of Directors in order to
effect the appointment contemplated by this Section 10.10. In connection with
the first annual meeting of BCC shareholders following the Effective Time, BCC
will nominate Xxxxx X. Xxxxx to serve as a director of BCC.
10.11 Principal Office of Seller. BCC and Purchaser agree that the
principal offices of Seller shall remain in the "Capital Region" (Xxxxxx, Xxx
Xxxx xxxx) for no less than four years following the Closing.
10.12 Earnings Release. BCC agrees that it will publish results
covering at least 30 days of post Merger combined operations of BCC and Seller
as soon as reasonably practicable, and in any event no later than 30 days after
the end of the first full calendar month of post Merger combined operations of
BCC and Seller.
11. INDEMNITY BY THE SHAREHOLDER.
11.1 Indemnification by the Shareholder. The Shareholder agrees to
indemnify, defend and hold harmless the BCC Parties and the Surviving
Corporation and each of their respective Associates, Affiliates, officers,
directors, employees, agents, consultants, representatives, shareholders and
controlling Persons and their respective successors and assigns from and against
and in respect of any and all Damages which may now or in the future be paid,
incurred or suffered by or asserted against such party (collectively, "General
Losses"), arising out of or resulting from or relating to any inaccuracy in or
breach of any representation, warranty, covenant, commitment or agreement made
or undertaken by Seller or the Shareholder in this Agreement. Any claim for
44
52
indemnification under this Section 11.1 must be made within one year after the
Effective Time (the "Indemnification Period").
11.2 Environmental Indemnification. The Shareholder agrees to
indemnify, defend and hold harmless the BCC Parties and the Surviving
Corporation and each of their respective Associates, Affiliates, officers,
directors, employees, agents, consultants, representatives, shareholders and
controlling Persons and their respective successors and assigns from and against
and in respect of any and all Environmental Liabilities which may now or in the
future be paid, incurred or suffered by or asserted against such party, arising
out of or resulting from or relating to or in connection with (a) the acts or
omissions of any Person prior to the Effective Time relating to Seller, any
business currently or previously conducted by Seller, the Assets, the operations
currently or previously conducted by Seller or any other assets or properties
currently or previously leased or owned by Seller, or (b) any inaccuracy or
breach by Seller or the Shareholder of a representation or warranty contained in
Section 4.16 hereof (collectively, "Environmental Losses"). Any claim for
indemnification under this Section 11.2 must be made within the Indemnification
Period.
11.3 Tax Indemnification The Shareholder agrees to indemnify, defend
and hold harmless the BCC Parties and the Surviving Corporation and each of
their respective Associates, Affiliates, officers, directors, employees, agents,
consultants, representatives, shareholders and controlling Persons and their
respective successors and assigns from and against and in respect of any and all
Damages which may now or in the future be paid, incurred or suffered by or
asserted against such party arising out of or resulting from or relating to any
Taxes or Tax Returns of Seller for any period, or portion thereof, up to and
including the Effective Time (collectively, "Tax Losses"). Any claim for
indemnification under this Section 11.3 must be made within the Indemnification
Period.
11.4 Products Liability and Warranty Indemnification. The Shareholder
agrees to indemnify, defend and hold harmless the BCC Parties and the Surviving
Corporation and each of their respective Associates, Affiliates, officers,
directors, employees, agents, consultants, representatives, shareholders and
controlling Persons and their respective successors and assigns from and against
and in respect of any and all Damages which may now or in the future be paid,
incurred or suffered by or asserted against such party arising out of or
resulting from or relating to any products manufactured, sold or distributed or
services provided by or on behalf of Seller on or prior to the Effective Time or
with respect to any claims made pursuant to warranties to third Persons in
connection with products manufactured, sold or distributed or services provided
by or on behalf of Seller on or prior to the Effective Time (collectively,
"Product Losses"). Any claim for indemnification under this Section 11.4 must be
made within the Indemnification Period.
11.5 Indemnification by the BCC Parties. The BCC Parties, jointly and
severally, agree to indemnify, defend and hold harmless the Shareholder and his
heirs, successors and assigns from and against and in respect of any and all
Damages which may now or in the future be paid, incurred or suffered by or
asserted against any such party, arising out of or resulting from or relating to
any inaccuracy in or breach of any representation, warranty, covenant,
commitment or agreement made
45
53
or undertaken by the BCC Parties in this Agreement. Any claim for
indemnification under this Section 11.5 must be made within the Indemnification
Period.
11.6 Limitation on Indemnification; Basket.
(a) The Holdback Shares are the source from which any and all
potential claims for indemnification by the BCC Parties and any other Indemnitee
other than the Shareholder under this Article 11 shall be satisfied and
Shareholder shall not have any liability for indemnity claims hereunder other
than the Holdback Shares, except (i) to the extent otherwise provided in Section
13.5 and Article 14 below, (ii) with respect to claims for indemnification under
Section 11.5 hereof, for which Damages shall be paid in cash by the BCC Parties,
(iii) any claim for indemnification based on a breach of a representation,
warranty or covenant contained in Section 4.18 for which Damages shall be paid
in cash by the Shareholder (without regard to the Holdback Shares), and (iv) any
claim involving the assertion of an intentional fraud, fraud in the inducement
or intentional misrepresentation or breach, for which Damages shall be paid in
cash by the Shareholder (without regarding to the Holdback Shares). The
indemnification obligations of the Shareholder pursuant to Sections 11.1 through
11.4 above shall be satisfied through a reduction of the Merger Consideration
effected by cancellation or other disposition by BCC of Holdback Shares pursuant
to Section 11.7 of this Agreement. For purposes of any indemnification claim
under this Article 11, the Holdback Shares shall be valued on the basis of the
average of the last reported sales price of BCC Stock on the Nasdaq National
Market over the 20 trading days preceding the Closing Date.
(b) No claim for indemnification under Sections 11.1, 11.2,
11.3, 11.4 and 11.5 may be brought after the expiration of the Indemnification
Period, except for claims made in accordance with Section 11.9 prior to such
expiration (whether or not any action, demand or proceeding is instituted with
respect to such claims prior to the expiration of the Indemnification Period),
it being understood, without limitation, that any Damages arising after the
expiration of the Indemnification Period shall be recoverable upon notice
properly given prior to the expiration of the Indemnification Period.
(c) An Indemnitee shall not be entitled to assert any claim
for indemnification under this Article 11 unless and until such time as all
claims for Damages of the Indemnitee exceed $35,000 in the aggregate (the
"Basket"). Once all Damages of an Indemnitee exceed the Basket, the Indemnitee
shall, subject to the terms of this Article 11, be entitled to full
indemnification for all Damages up to and in excess of the Basket.
11.7 Holdback. The Holdback Shares (which shall include for purposes of
this Section 11.7, the net proceeds of any sale of Holdback Shares and any other
securities or property which may be issued after the date hereof in exchange for
such shares in any merger or recapitalization or similar transaction involving
BCC) shall be deemed as of the Effective Time to be deposited by the Shareholder
with the Escrow Agent, and certificates representing the Holdback Shares shall
be held by the Escrow Agent. The Shareholder shall deliver to the Escrow Agent
at the Closing the Escrow Agreement, appropriate stock powers endorsed in blank
and such other documentation as the Escrow
46
54
Agent may reasonably prescribe to carry out the purposes of this Section 11.7 So
long as any Holdback Shares are held by the Escrow Agent hereunder, BCC shall
have, and the Shareholder by execution and/or approval of this Agreement hereby
grants, effective as of the Effective Time, a perfected, first priority security
interest in such Holdback Shares to secure payment of amounts payable by the
Shareholder in respect of claims under this Article 11. In connection therewith,
the Shareholder shall execute and deliver such instruments as BCC or the Escrow
Agent may from time to time reasonably request for the purpose of evidencing and
perfecting such security interest.
11.8 Escrow. At Closing, the Purchaser and Seller shall deposit
Holdback Shares with the Escrow Agent pursuant to the Escrow Agreement. The
Escrow Agreement shall be executed and delivered by the Shareholder and the
appropriate BCC Parties at Closing. Until such time as the Holdback Shares shall
have been delivered to the Shareholder pursuant to the terms of the Escrow
Agreement, the Shareholder covenants and agrees with the BCC Parties that the
Shareholder will not sell, transfer, pledge, assign, hypothecate or otherwise
dispose of, or enter into any contract, option or other pledge agreement or
understanding (either written or oral) with respect to the sale, transfer,
pledge, assignment, hypothecation or other disposition of any Holdback Shares.
11.9 Procedure. All claims for indemnification or payment under this
Article 11 shall be asserted and resolved as follows:
(a) An Indemnitee shall promptly give the Indemnitor notice of
any matter which an Indemnitee has determined has given or could give rise to a
right of indemnification under this Agreement stating the amount of the Loss, if
known, and method of computation thereof, all with reasonable particularity, and
stating with particularity the nature of such matter. Failure to provide such
notice shall not affect the right of the Indemnitee to indemnification except to
the extent such failure shall have resulted in liability to the Indemnitor that
could have been actually avoided had such notice been provided within such
required time period.
(b) The obligations and liabilities of an Indemnitor under
this Article 11 with respect to Losses arising from claims of any third party
that are subject to the indemnification provided for in this Article 11
("Third-Party Claims") shall be governed by and contingent upon the following
additional terms and conditions: if an Indemnitee shall receive notice of any
Third-Party Claim, the Indemnitee shall give the Indemnitor prompt notice of
such Third-Party Claim and the Indemnitor may, at its option, assume and control
the defense of such Third-Party Claim at the Indemnitor's expense and through
counsel of the Indemnitor's choice reasonably acceptable to Indemnitee. Subject
to the condition that notice be delivered prior to the expiration of one year
after the Effective Time, failure to provide such notice shall not affect the
right of the Indemnitee to indemnification except to the extent such failure
shall have resulted in liability to the Indemnitor that could have been actually
avoided had such notice been provided within such required time period. In the
event the Indemnitor assumes the defense against any such Third-Party Claim as
provided above, the Indemnitee shall have the right to participate at its own
expense in the defense of such asserted liability, shall cooperate with the
Indemnitor in such defense and will attempt to make available on a reasonable
basis to the Indemnitor all witnesses, pertinent records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the
47
55
Indemnitor. In the event the Indemnitor does not elect to conduct the defense
against any such Third-Party Claim, the Indemnitor shall cooperate with the
Indemnitee (and be entitled to participate) in such defense and attempt to make
available to it on a reasonable basis all such witnesses, records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the Indemnitee. The Indemnitor understands that if such
Third-Party Claim results in an obligation to indemnify hereunder, Damages shall
include all reasonable costs and expenses of such defense. No Third-Party Claim
may be settled by Indemnitor without the written consent of the Indemnitee. So
long as the Indemnitor is vigorously contesting any such Third-Party Claim in
good faith, the Indemnitee shall not pay or settle such claim without the
Indemnitor's consent, which consent shall not be unreasonably withheld. Written
notice of any proposed settlement of any such claim and the material terms
thereof shall be delivered by Indemnitor to Indemnitee at least ten Business
Days prior to any settlement of any such claim.
(c) If a claim for indemnity is provided pursuant to this
Article 11 by an Indemnitee and the Indemnitor does not pay such claim or object
to such claim within 15 Business Days after notice is received by the
Indemnitor, such claim shall be deemed agreed to by the Indemnitor. If the
Indemnitor shall object to such claim, a written notice of such objection
setting forth in reasonable detail the basis for such objection shall be
provided to the Indemnitee and such dispute shall be resolved in accordance with
Section 19.11 hereof. In addition, if the claim shall have been determined to
have been a valid claim, Damages shall include interest at the prime rate as
quoted from time to time by Frost National Bank (San Antonio), N.A. (the "Prime
Rate") from the date the claim is first made until fully paid.
11.10 Payment.
(a) Payment of any amounts due pursuant to this Article 11
shall be made within ten Business Days after resolution of the claim.
11.11 Adjustment of Liability. The amount which an Indemnitee shall be
entitled to receive from an Indemnitor with respect to a Loss under this Article
11 shall be net of any insurance recovery by the Indemnitee on account of such
Loss from an unaffiliated party. Any tax benefit actually realized by an
Indemnitee on account of a Loss that is fully indemnified by an Indemnitor shall
be paid to the Indemnitor when and if such benefit is actually realized and then
only to the extent such benefit is attributable to the indemnified portion of
the Loss. The benefit actually realized shall be based on the Federal Tax
Returns of the Indemnitee and any benefit shall not be considered realized
unless and until the Tax Return reflecting such benefit is filed. To the extent
such benefit is disallowed or reduced in connection with any audit, the
Indemnitor shall promptly refund the amount of the benefit so disallowed or
reduced.
11.12 Failure to Pay Indemnification. If Indemnitor fails or refuses to
pay any amount due under this Article 11, the Indemnitee shall proceed in
accordance with the arbitration provisions of Section 19.11 hereof; provided,
however, that in the case of indemnification for a Third-Party Claim,
48
56
such matter need not be resolved by arbitration until the underlying Third-Party
Claim is finally resolved.
11.13 Cooperation. The Indemnitor and the Indemnitee shall cooperate
with each other with regard to any indemnification obligation under this Article
11 and each shall attempt to make available to the other on a reasonable basis
all personnel records, materials and information in its possession or under its
control as is reasonably requested by the other.
11.14 INDEMNIFICATION IF NEGLIGENCE OF INDEMNITEE. THE INDEMNIFICATION
PROVIDED IN THIS ARTICLE 11 SHALL BE APPLICABLE WHETHER OR NOT THE SOLE OR
CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OF THE PARTY SEEKING INDEMNIFICATION,
OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED ON THE PARTY SEEKING
INDEMNIFICATION, OR THE SOLE OR CONCURRENT LIABILITY IMPOSED VICARIOUSLY ON THE
PARTY SEEKING INDEMNIFICATION, IS ALLEGED OR PROVEN.
11.15 Appointment of Successor Escrow Agent. In the event the Escrow
Agent resigns and is discharged from its duties or obligations under the Escrow
Agreement, BCC will designate a successor Escrow Agent prior to the expiration
of the ten-day period following the notice date of the Escrow Agent's
resignation, by giving written notice to the Escrow Agent and the Shareholder.
BCC may appoint a successor Escrow Agent without the consent of the Shareholder
so long as such successor is a bank with assets of at least $500 million, and
may appoint any other successor Escrow Agent with the consent of the
Shareholder, which consent shall not be unreasonably withheld.
12. EMPLOYMENT AND CONSULTING ARRANGEMENTS. Xxxxx X. Xxxxx on the one
hand, and Purchaser on the other hand, shall enter into the employment agreement
substantially in the form attached hereto as Schedule 12 on or before the
Closing Date whereby Xxxxx X. Xxxxx shall provide services to Purchaser.
13. NON-COMPETITION AGREEMENT.
13.1 Non-Competition. In consideration of the benefits of this
Agreement to the Shareholder and as a material inducement to the BCC Parties to
enter into this Agreement and pay 10,000 shares of BCC Stock to Shareholder at
Closing in addition to the Merger Consideration, the Shareholder hereby
covenants and agrees that, commencing on the Closing Date and ending three years
following the termination of the employment agreement between BCC and the
Shareholder referenced in Article 12, regardless of how such termination is
brought about, Shareholder shall not, and the Shareholder shall cause his
Associates, Affiliates and representatives not to, directly or indirectly, as
proprietor, partner, stockholder, director, executive, officer, employee,
consultant, joint venturer, investor or in any other capacity, engage in, or
own, manage, operate or control, or participate in the ownership, management,
operation or control, of any entity which engages anywhere in the United States
or Canada in any business activity in which Seller or the BCC Parties or their
Affiliates participates or participated as of the Closing Date including, but
not limited to, the
49
57
activities of BCC listed on Schedule 13.1 hereto; provided, however, the
foregoing shall not prohibit the Shareholder, his Associates, Affiliates and
representatives from purchasing and holding as an investment not more than 1% of
any class of publicly traded securities of any entity which conducts a business
in competition with the business of the BCC Parties, so long as the Shareholder,
his Associates, Affiliates and representatives do not participate in any way in
the management, operation or control of such entity.
13.2 Judicial Reformation. The Shareholder acknowledges that, given the
nature of the BCC Parties' business, the covenants contained in Section 13.1
establish reasonable limitations as to time, geographic area and scope of
activity to be restrained and do not impose a greater restraint than is
reasonably necessary to protect and preserve the goodwill of the BCC Parties'
business and to protect their legitimate business interests. If, however,
Section 13.1 is determined by any court of competent jurisdiction to be
unenforceable by reason of its extending for too long a period of time or over
too large a geographic area or by reason of it being too extensive in any other
respect or for any other reason, it will be interpreted to extend only over the
longest period of time for which it may be enforceable and/or over the largest
geographic area as to which it may be enforceable and/or to the maximum extent
in all other aspects as to which it may be enforceable, all as determined by
such court.
13.3 Customer Lists; Non-Solicitation. Shareholder further covenants
and agrees that he shall not, and the Shareholder will cause his Associates,
Affiliates and representatives not to, directly or indirectly, (a) use or make
known to any person or entity the names or addresses of any clients or customers
of Seller or the BCC Parties or any other information pertaining to them,
provided, however, such limitation shall not apply to any information which (i)
is then generally known to the public, (ii) become or becomes generally known to
the public through no fault of the Shareholder, his Associates, Affiliates and
representatives, and (iii) is disclosed in accordance with an order of a court
of competent jurisdiction or applicable law, (b) call on, solicit, take away or
attempt to call on, solicit or take away any clients or customers of Seller or
the BCC Parties, nor (c) solicit for employment, recruit, hire or attempt to
recruit or hire any employees of Seller or the BCC Parties.
13.4 Covenants Independent The covenants of the Shareholder contained
in Sections 13.1, 13.2 and 13.3 of this Agreement will be construed as
independent of any other provision in this Agreement, and the existence of any
claim or cause of action by the Shareholder against the BCC Parties will not
constitute a defense to the enforcement by the BCC Parties of said provisions.
The Shareholder understands that the provisions contained in Sections 13.1, 13.2
and 13.3 are essential elements of the transactions contemplated by this
Agreement and, but for the agreement of the Shareholder to be bound by the
provisions of Sections 13.1, 13.2 and 13.3, the BCC Parties would not have
agreed to enter into this Agreement and the transactions contemplated herein.
The Shareholder has been advised to consult with, and represents that he has
consulted with, counsel in order to be informed in all respects concerning the
reasonableness and propriety of Sections 13.1, 13.2 and 13.3 with specific
regard to the nature of the business conducted by Seller and the BCC Parties and
the Shareholder acknowledge that Sections 13.1, 13.2 and 13.3 are reasonable in
all respects.
50
58
13.5 Remedies Shareholder acknowledges that in the event of a breach or
a threatened breach by the Shareholder of any of the provisions contained in
Sections 13.1, 13.2 or 13.3 of this Agreement, the BCC Parties will suffer
irreparable damage or injury not fully compensable by money damages, or the
exact amount of which may be impossible to ascertain, and therefore, the BCC
Parties will not have an adequate remedy at law. Accordingly, the BCC Parties
shall be entitled to such injunctive relief or other equitable relief, without
the necessity of posti xx xxxx therefor, from any court of competent
jurisdiction as may be necessary or appropriate to prevent or curtail any such
actual or threatened breach. The foregoing shall be in addition to and without
prejudice to any other rights that the BCC Parties may have under this
Agreement, at law or in equity, including, without limitation, the right to xxx
for and recover money damages.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Shareholder
recognizes and acknowledges that he has and will have access to certain
confidential information of Seller that is included in the Assets (including,
but not limited to, lists of customers, software designs, system specifications,
trade secrets, Software source code, and costs and financial information) that
after the consummation of the transactions contemplated hereby will be valuable,
special and unique property of Purchaser. The Shareholder agrees that he will,
and will cause his Associates, Affiliates and representatives, to keep
confidential and not disclose to any other Person or use for his own benefit or
for the benefit of any other Person, and he will use his best efforts to prevent
disclosure by any other Person of, any such confidential information to any
Person for any purpose or reason whatsoever, except to authorized
representatives of Purchaser; provided, however, such limitation shall not apply
to any information which (i) is then generally known to the public; (ii) become
or becomes generally known to the public through no fault of the Shareholder,
his Associates, Affiliates and representatives, and (iii) is disclosed in
accordance with an order of a court of competent jurisdiction or applicable law.
Seller or the Shareholder may have entered into certain confidentiality
agreements with third parties regarding the possible sale of Seller or its
Business. Seller and/or the Shareholder has previously requested that all such
third parties return to Seller all confidential information provided to such
parties by or on behalf of Seller or the Shareholder or that such information be
destroyed. At the Closing, Seller shall assign all of its rights in and to any
such confidentiality agreements to Purchaser. Shareholder acknowledges that in
the event of a breach or threatened breach by the Shareholder of any of the
provisions contained in this Article 14, the BCC Parties will suffer irreparable
damage or injury not fully compensable by money damages, or the exact amount of
which may be impossible to ascertain, and therefore, the BCC Parties will not
have an adequate remedy at law. Accordingly, the BCC Parties shall be entitled
to such injunctive relief or other equitable relief, without the necessity of
posting bond therefor, from any court of competent jurisdiction as may be
necessary or appropriate to prevent or curtail any such actual or threatened
breach. The foregoing shall be in addition to and without prejudice to any other
rights that the BCC Parties may have under this Agreement, at law or in equity,
including, without limitation, the right to xxx for and recover money damages.
15. NOTICES. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by prepaid telex
or telegram or by facsimile or other similar
51
59
instantaneous electronic transmission device or mailed first class, postage
prepaid, certified United States mail, return receipt requested, as follows:
(a) If to Purchaser or BCC, at:
Billing Concepts Corp.
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
Attention: W. Xxxxx Xxxx
Facsimile No.: (000) 000-0000
With a copy to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
(b) If to Seller, at:
Communications Software Consultants, Inc.
Seven Xxxxxxxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
With a copy to:
Xxxxx & Xxxxxx
000 Xxxxxxxx
Xxxxxx, Xxx Xxxx 00000
Attention: F. Xxxxxx Xxxxx
Facsimile No.: (000) 000-0000
(c) If to the Shareholder, at:
Xxxxx X. Xxxxx
Communications Software Consultants, Inc.
Seven Xxxxxxxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxx 00000-0000
Facsimile No.: (000) 000-0000
52
60
With a copy to:
Xxxxx & Xxxxxx
000 Xxxxxxxx
Xxxxxx, Xxx Xxxx 00000
Attention: F. Xxxxxx Xxxxx
Facsimile No.: (000) 000-0000
provided that any party may change its address for notice by giving to the other
party written notice of such change. Any notice given under this Article 15
shall be effective (x) when delivered, if delivered personally, (y) 24 hours
after sending, if sent by telex or telegram or by facsimile or other similar
instantaneous electronic transmission device, and (z) 5 business days after
mailing, if mailed.
16. REGISTRATION. BCC shall be obligated to the Shareholder as follows:
16.1 Registration Rights. As soon after Closing as is reasonably
practicable, but not later than March 31, 1999, BCC will, if it is a registrant
entitled to use Form S-3 (or other appropriate registration statement) to
register the Merger Consideration, use its best efforts to file a registration
statement on Form S-3 (or any successor to Form S-3) (or other appropriate
registration statement) with the Commission and such applications or other
filings as required under applicable state securities or blue sky laws
sufficient to permit the public offering of the Merger Consideration (excluding
the Holdback Shares) to be made on a continuous basis pursuant to Rule 415 under
the Act, and shall use its best efforts to cause such registration statement to
be declared effective so that the Merger Consideration will be registered for
the offering on such Form; provided, however, that BCC shall only be obligated
to file one such registration statement on Form S-3 (or other appropriate
registration statement) under this Section 16.1. The one registration statement
requirement shall not be deemed to be satisfied until such registration
statement has become effective under the Securities Act and Shareholder has had
the opportunity to sell the Merger Consideration in accordance with Section
16.2(c) below. Notwithstanding the foregoing, BCC shall not be obligated to
effect a registration pursuant to this Section 16.1: (a) in any particular
jurisdiction in which BCC would be required to execute a general consent to
service of process in effecting such registration, qualification or compliance
unless BCC is already subject to service in such jurisdiction and except as may
be required by the Securities Act; (b) if after three months from the Closing
Date, BCC gives notice of its bona fide intention to effect the filing of a
registration statement with the Commission within 90 days of such notice; (c) if
after three months from the Closing Date, during the period starting with the
date 30 days prior to BCC's good faith estimated date of filing of, and ending
on the date six months immediately following the effective date of any
registration statement pertaining to securities of BCC, provided that BCC is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; (d) if after three months from the
Closing Date, BCC shall furnish to the Shareholder a certificate signed by the
President of BCC stating that in the good faith judgment of the Board of
Directors the filing of a registration statement would require the disclosure of
material information that BCC has a bona fide business purpose for preserving as
confidential and that is not then otherwise required to be disclosed, then BCC's
obligation to use its
53
61
best efforts to file a registration statement shall be deferred for a period not
to exceed 90 days from the receipt of the request to file such registration by
the Shareholder.
16.2 Registration Procedures and Expenses. If and whenever BCC is
required to include the Merger Consideration in a registration statement under
the Securities Act, as provided in Section 16.1 hereof, BCC shall, as
expeditiously as is reasonably practicable, do each of the following:
(a) prepare and file with the SEC a registration statement
with respect to the Merger Consideration and, subject to the limitations under
Section 16.1 hereof, use its best efforts to cause such registration statement
to become effective and remain effective as provided herein;
(b) cooperate with the Shareholder and any underwriter who
shall sell the Merger Consideration in connection with their review of BCC made
in connection with such registration;
(c) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until the earlier to occur of (i) the sale of all of the Merger Consideration by
the Shareholder and (ii) the second anniversary of the effectiveness of the
registration statement, and to comply with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all the Merger
Consideration covered by such registration statement for such period;
(d) furnish to the Shareholder such number of copies of the
prospectus forming a part of such registration statement (including each
preliminary prospectus), in conformity with the requirements of the Securities
Act, and such other documents as the Shareholder may reasonably request in order
to facilitate the disposition of the Merger Consideration; and
(e) notify the Shareholder at any time when a prospectus
relating to the Merger Consideration is required to be delivered under the
Securities Act, (i) of the happening of any event as a result of which the
prospectus forming a part of such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and (ii) at the
request of Shareholder, prepare and furnish to the Shareholder a reasonable
number of copies of any supplement to or any amendment of such prospectus that
may be necessary so that, as thereafter delivered to the purchasers of the
Merger Consideration, such prospectus shall not include any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing.
16.3 Agreement by the Shareholder. In the event that the Shareholder
participates, pursuant to this Article 16, in the offering of the Merger
Consideration, the Shareholder shall:
54
62
(a) furnish BCC all material information reasonably requested
by BCC concerning the Shareholder and the proposed method of sale or other
disposition of the Merger Consideration and such other information and
undertakings as shall be reasonably required in connection with the preparation
and filing of the registration statement covering the Merger Consideration in
order to ensure full compliance with the Securities Act and the rules and
regulations of the SEC thereunder;
(b) cooperate in good faith with BCC and its underwriters, if
any, in connection with such registration, including placing the Merger
Consideration in escrow or custody to facilitate the sale and distribution
thereof, provided that such escrow or custody arrangement shall be no more
restrictive upon the Shareholder than upon any other holder of BCC Stock for the
benefit of whom such registration is undertaken; and
(c) make no further sales or other dispositions, or offers
therefor, of the Merger Consideration under such registration statement if,
during the effectiveness of such registration statement, an intervening event
should occur which, in the opinion of counsel to BCC, makes the prospectus
included in such registration statement no longer comply with the Securities
Act, so long as written notice containing the facts and legal conclusions relied
upon by BCC in this regard has been received by the Shareholder from BCC, until
such time as the Shareholder has received from BCC copies of a new, amended or
supplemented prospectus complying with the Securities Act, which prospectus
shall be delivered to the Shareholder by BCC as soon as practicable after such
notice.
16.4 Allocation of Expenses. If and whenever BCC is required by the
provisions of this Article 16 to use its best efforts to effect the registration
of the Merger Consideration under the Securities Act, BCC shall pay the costs
and expenses in connection therewith, other than the attorneys' fees of the
Shareholder; provided, however, that the Shareholder shall pay all underwriting
discounts, selling commissions and stock transfer taxes attributable to the
Merger Consideration under such registration statement.
16.5 Indemnification. In the event of any registration of any of the
Merger Consideration under the Securities Act pursuant to this Article 16, the
Shareholder shall indemnify and hold harmless BCC, each director of BCC, each
officer of BCC who shall sign such registration statement, each underwriter and
any person who controls BCC or such underwriter within the meaning of the
Securities Act, and BCC's accountants and legal counsel, against all expenses,
claims, losses, damages and liabilities (or actions or proceedings in respect
thereof) including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, with respect to any untrue statement of any
material fact in, or omission of any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading from such registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, if such statement or omission was made in reliance upon
and in conformity with written information furnished to BCC or its underwriter
through an instrument duly executed by or on behalf of the Shareholder
specifically for use in the preparation of such registration statement,
preliminary prospectus, final prospectus or amendment or supplement.
55
63
(a) BCC will indemnify the Shareholder, his legal counsel and
accountants and each person controlling the Shareholder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions or proceedings in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereof, incident to any such registration, qualification or
compliance, or arising out of or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading, provided that BCC will not be liable to indemnify the
Shareholder or underwriter in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to BCC by an
instrument duly executed by or on behalf of the Shareholder or underwriter and
stated to be specifically for use therein.
(b) Each party entitled to indemnification under this Section
16.5 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld). Without limiting the generality of the foregoing, the
Indemnified Party may withhold its consent to any such counsel who also acts as
counsel to the Indemnifying Party (with respect to such claim or otherwise) if
the Indemnified Party reasonably believes that there exists a conflict of
interest between the Indemnified Party and the Indemnifying Party, with respect
to such claim or litigation. In such event, the Indemnifying Party shall bear
the expense of another counsel who shall represent the Indemnified Party and any
other persons or entities who have indemnification rights from the Indemnifying
Party hereunder, with respect to such claim or litigation, and shall be selected
as provided in the first sentence of this Section 16.5(b). The Indemnified Party
may participate in such defense at such party's expense (except to the extent
that the Indemnifying Party is required to pay the expense of such counsel
pursuant to this Section 16.5(b)), and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is prejudicial to the Indemnifying Party in defending such claim or litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability with respect to such claim or litigation.
56
64
(c) If the indemnification provided for in this Section 16.5
is held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by or on
behalf of the Indemnifying Party or by the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(d) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into a connection with an underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
17. TERMINATION.
17.1 Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(a) BCC and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) BCC may terminate this Agreement by giving written notice
to Seller on or before the Closing Date if BCC is not satisfied with the results
of its continuing business, legal and accounting due diligence regarding the
Seller;
(c) BCC may terminate this Agreement by giving written notice
to Seller at any time prior to the Closing (i) in the event the Seller or
Shareholder has breached any representation, warranty or covenant contained in
this Agreement in any material respect, BCC has notified Seller of the breach,
and the breach has continued without cure for a period of 15 days after the
notice of breach or (ii) if the Closing shall not have occurred on or before
March 31, 1999, by reason of the failure of any condition precedent under
Section 9.1 hereof (unless the failure results primarily from BCC itself
breaching any representation, warranty or covenant contained in this Agreement);
and
(d) Seller and Shareholder may terminate this Agreement by
giving written notice to BCC at any time prior to the Closing (i) in the event
BCC has breached any representation, warranty or covenant contained in this
Agreement in any material respect, Seller has notified BCC of the breach, and
the breach has continued without cure for a period of 15 days after the notice
of
57
65
breach or (ii) if the Closing shall not have occurred on or before March 31,
1999, by reason of the failure of any condition precedent under Section 9.2
hereof (unless the failure results primarily from the Shareholder or Seller
themselves breaching any representation, warranty or covenant contained in this
Agreement).
17.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Article 17 above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach).
18. GUARANTEE. Shareholder hereby (a) unconditionally guarantees the
prompt performance of the obligations of Seller under this Agreement, (b) waives
any requirements of notice, protest, demand or grace with respect thereto and
(c) agrees that the BCC Parties shall not be required to exhaust their remedies
against any other person or party (including, but not limited to, Seller or
Shareholder) before enforcing the provisions of this guarantee. Shareholder
recognizes and acknowledges that the BCC Parties are relying on this guarantee
in entering into and consummating the transactions contemplated by this
Agreement, and that but for this guarantee the BCC Parties would not enter into
this Agreement or consummate the transactions contemplated hereby. Any liability
resulting from the foregoing guarantee shall be limited to the Holdback Shares.
19. GENERAL PROVISIONS.
19.1 Governing Law; Interpretation; Section Headings. This Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of Texas without regard to conflict-of-laws rules as applied in Texas.
The section headings contained herein are for purposes of convenience only and
shall not be deemed to constitute a part of this Agreement or to affect the
meaning or interpretation of this Agreement in any way.
19.2 Severability. Should any provision of this Agreement be held
unenforceable or invalid under the laws of the United States of America or the
State of Texas, or under any other applicable laws of any other jurisdiction,
then the parties hereto agree that such provision shall be deemed modified for
purposes of performance of this Agreement in such jurisdiction to the extent
necessary to render it lawful and enforceable, or if such a modification is not
possible without materially altering the intention of the parties hereto, then
such provision shall be severed herefrom for purposes of performance of this
Agreement in such jurisdiction. The validity of the remaining provisions of this
Agreement shall not be affected by any such modification or severance, except
that if any severance materially alters the intentions of the parties hereto as
expressed herein (a modification being permitted only if there is no material
alteration), then the parties hereto shall use commercially reasonable efforts
to agree to appropriate equitable amendments to this Agreement in light of such
severance, and if no such agreement can be reached within a reasonable time, any
party hereto may initiate arbitration pursuant to the provisions of Section
19.11 to determine and effect such appropriate equitable amendments.
58
66
19.3 Entire Agreement. This Agreement, the Schedules and the documents
and agreements referenced herein set forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements, arrangements and
understandings related to the subject matter hereof. No representation, promise,
inducement or statement of intention has been made by any party hereto which is
not embodied or referenced in this Agreement, the Schedules or the documents or
agreements referenced herein, and no party hereto shall be bound by or liable
for any alleged representation, promise, inducement or statement of intention
not so set forth.
19.4 Binding Effect. All the terms, provisions, covenants and
conditions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective heirs, executors,
administrators, representatives, successors and assigns.
19.5 Assignment. This Agreement and the rights and obligations of the
parties hereto shall not be assigned or delegated by any party hereto without
the prior written consent of the other parties hereto.
19.6 Amendment; Waiver. This Agreement may be amended, modified,
superseded or canceled, and any of the terms, provisions, representations,
warranties, covenants or conditions hereof may be waived, only by a written
instrument executed by all parties hereto, or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition contained in this
Agreement, or of the breach of any term, provision, representation, warranty or
covenant contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach, or as a waiver of any other condition or of the breach of
any other term, provision, representation, warranty or covenant.
19.7 Gender; Numbers. All references in this Agreement to the
masculine, feminine or neuter genders shall, where appropriate, be deemed to
include all other genders. All plurals used in this Agreement shall, where
appropriate, be deemed to be singular, and vice versa.
19.8 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall be binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of the parties reflected hereon as
signatories.
19.9 Telecopy Execution and Delivery. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more parties hereto,
and an executed copy of this Agreement may be delivered by one or more parties
hereto by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. At the
59
67
request of any party hereto, all parties hereto agree to execute an original of
this Agreement as well as any facsimile, telecopy or other reproduction hereof.
19.10 Expenses. Whether or not the transactions contemplated hereby are
consummated, each of the parties will pay all costs and expenses of its or his
performance of and compliance with this Agreement.
19.11 Arbitration. The parties acknowledge that money damages are not
an adequate remedy for violations of this Agreement and that, prior to the
Effective Time, any party may, in its sole discretion, apply to a court of
competent jurisdiction for specific performance or injunctive or such other
relief as such court may deem just and proper to enforce this Agreement or to
prevent any violation hereof and, to the extent permitted by applicable law,
each party waives any objection to the imposition of such relief. Except for the
provisions of Articles 13 and 14 of this Agreement dealing with restrictive
covenants and nondisclosure of confidential information, with respect to which
the BCC Parties expressly reserve the right to petition a court directly for
injunctive and other relief, any controversy of any nature whatsoever, including
but not limited to tort claims or contract disputes, between the parties to this
Agreement or their respective heirs, executors, administrators, legal
representatives, successors and assigns, as applicable, arising out of or
related to this Agreement after the Effective Time, including the
implementation, applicability and interpretation thereof, shall, upon the
written request of one party served upon the other, be submitted to and settled
by arbitration in accordance with the provisions of the Federal Arbitration Act,
9 U.S.C. ss.ss.1-15, as amended. The terms of the commercial arbitration rules
of the American Arbitration Association (the "AAA") shall apply except to the
extent they conflict with the provisions of this paragraph. If the amount in
controversy in the arbitration exceeds Two Hundred and Fifty Thousand Dollars
($250,000), exclusive of interest, attorneys' fees and costs, the arbitration
shall be conducted by a panel of three independent arbitrators. Otherwise, the
arbitration shall be conducted by a single independent arbitrator. The parties
shall endeavor to select independent arbitrators by mutual agreement. If such
agreement cannot be reached within 30 calendar days after a dispute has arisen
which is to be decided by arbitration, the selection of the arbitrator(s) shall
be made in accordance with Rule 13 of the Rules as presently in effect. If three
arbitrators are selected, the arbitrators shall elect a chairperson to preside
at all meetings and hearings. If a dispute is to be resolved by a sole
arbitrator in accordance with the terms hereof, or if the dispute is to be
resolved by a panel of three arbitrators as provided hereinabove, then each such
arbitrator shall be a member of a state bar engaged in the practice of law in
the United States or a retired member of a state or the federal judiciary in the
United States. The award of the arbitrator(s) shall require a majority of the
arbitrators in the case of a panel of arbitrators, shall be based on the
evidence admitted and the substantive law of the State of Texas and shall
contain an award for each issue and counterclaim. The award shall be made 30
days following the close of the final hearing and the filing of any post hearing
briefs authorized by the arbitrator(s). The award of the arbitrator(s) shall be
final and binding on the parties hereto. Each party shall be entitled to inspect
and obtain a copy of non-privileged relevant documents in the possession or
control of the other party. All such discovery shall be in accordance with
procedures approved by the arbitrator(s). Unless otherwise provided in the
award, each party shall bear its own costs of discovery. Each party shall be
entitled to take one deposition. Each party shall be entitled to submit one set
of interrogatories which require no more
60
68
than 30 answers. All discovery shall be expedited, consistent with the nature
and complexity of the claim or dispute and consistent with fairness and justice.
The arbitrator(s) shall have the power to compel any party to comply with
discovery requests of the other parties and to issue binding orders relating to
any discovery dispute which shall be enforceable in the same manner as awards.
The arbitrator(s) also shall have the power to impose sanctions for abuse or
frustration of the arbitration process, including without limitation, the
refusal to comply with orders of the arbitrator(s) relating to discovery and
compliance with subpoenas. The arbitrator(s) shall require the non-prevailing
party to pay the prevailing party's attorneys' fees and costs incurred in
connection with the arbitration. It is further agreed that any of the parties
hereto may petition the United States District Court for the Western District of
Texas, San Antonio Division, for a judgment to be entered upon any award entered
through such arbitration proceedings. All arbitration proceedings shall be
conducted in San Antonio, Texas.
19.12 Damage to Assets. If, on or before the Closing Date, the assets
or properties of the Seller are damaged or destroyed, Seller and Shareholder
shall notify BCC of such damage or destruction. In the event of any such damage
or destruction, BCC shall have the right, in its sole discretion, to either (i)
reduce the Merger Consideration by an amount equal to the value of the damaged
or destroyed asset or assets, and complete the purchase, or (ii) terminate this
Agreement as provided by Section 17.1 hereof and not complete the purchase.
19.13 Effect of Due Diligence. No investigation by or on behalf of the
BCC Parties into the business, operations, prospects, assets or condition
(financial or otherwise) of the Seller shall diminish in any way the effect of
any representations or warranties made by Seller and the Shareholder in this
Agreement or shall relieve Seller or the Shareholder of any of its or his
obligations under this Agreement.
19.14 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of BCC
and Seller; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law (in which case the
disclosing Party will use its reasonable best efforts to advise the other
Parties prior to making the disclosure).
19.15 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
19.16 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties
61
69
intend that each representation, warranty and covenant contained herein shall
have independent significance. If any Party has breached any representation,
warranty or covenant contained herein in any respect, the fact that there exists
another representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty or covenant.
19.17 Incorporation of Exhibits, Annexes and Schedules. The Exhibits,
Annexes and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
19.18 Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which they may be
entitled, at law or in equity.
19.19 Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise or beginning of
the exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
[Signatures of following page.]
62
70
IN WITNESS WHEREOF, the parties have executed this Plan of Merger and
Acquisition Agreement as of the date first above written.
PURCHASER:
CONCEPTS ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------------
Xxxxx X. Xxxxxxx,
Executive Vice President
BCC:
BILLING CONCEPTS CORP.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxx,
Executive Vice President and
Chief Financial Officer
SELLER:
COMMUNICATIONS SOFTWARE
CONSULTANTS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxx
---------------------------------------
Title: President & COO
--------------------------------------
SHAREHOLDER:
/s/ Xxxxx X. Xxxxx
--------------------------------------------
Xxxxx X. Xxxxx, Individually
63
