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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THINK NEW IDEAS, INC.,
INTERWEB, INC.,
AND
THE STOCKHOLDERS OF INTERWEB, INC.
JUNE 2, 1998
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT (the "Agreement") is entered into as of this 2nd day of
June, 1998, by and among THINK New Ideas, Inc., a Delaware corporation
("THINK"), Interweb, Inc., a Georgia corporation (the "Company"), the
stockholders listed on Schedule A hereto (each individually referred to
hereinafter as a "Management Stockholder" and collectively referred to
hereinafter as the "Management Stockholders") and the stockholders listed on
Schedule B (each individually referred to hereinafter as a "Non-Management
Stockholder" and collectively referred to hereinafter as the "Non-Management
Stockholders"; each of the Management Stockholders, and the Non-Management
Stockholders is referred to herein individually as a "Stockholder" and
collectively are referred to herein as the "Stockholders").
WITNESSETH:
WHEREAS, the authorized capital stock of the Company consists of 1,000,000
shares of common stock, par value $0.01 per share (the "Company Stock");
WHEREAS, each of the Management Stockholders owns the number of shares of
Company Stock set forth opposite his name on Schedule A hereto, representing in
the aggregate 86.08 percent of the issued and outstanding shares of capital
stock of the Company as of the time of the execution of this Agreement;
WHEREAS, each of the Non-Management Stockholders owns the number of shares
of Company Stock set forth opposite such Non-Management Stockholder's name shown
on Schedule B hereto, representing in the aggregate 13.92 percent of the issued
and outstanding shares of capital stock of the Company as of the time of the
execution of this Agreement;
WHEREAS, following the execution of this Agreement and prior to the
consummation of the Merger, as hereinbelow defined, the Company intends to
cancel all outstanding options granted under its Stock Incentive Plan in
exchange for cash and shares of Company Stock, with the result that optionees
under the Stock Incentive Plan, whose names appear on Schedule C hereto (the
"Subsequent Stockholders"), will become shareholders of the Company and
participate in the exchange of Company Stock for THINK Stock (hereinafter
defined) in the Merger;
WHEREAS, the Stockholders are the sole stockholders of the Company as of
the time of the execution of this Agreement, and as such, each Stockholder
desires to sell, assign, transfer and convey to THINK all of each Stockholder's
right, title and interest in and to the issued and outstanding shares of Company
Stock pursuant to the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, it is the desire of THINK to purchase, obtain and acquire from
the Stockholders all of each such individual's right, title and interest in and
to all of the issued and outstanding shares Company Stock pursuant to the terms
and subject to the conditions set forth in this Agreement;
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WHEREAS, the authorized capital stock of THINK consists of 50,000,000
shares of common stock, par value $.0001 per share (the "THINK Stock"), and
5,000,000 shares of preferred stock, par value $.0001 per share (the "Preferred
Stock"), of which 7,364,279 shares of THINK Stock were issued and outstanding as
of April 16, 1998 and no shares of Preferred Stock are issued and outstanding as
of the date hereof;
WHEREAS, the respective Boards of Directors of THINK and the Company deem
it advisable and in the best interests of THINK and the Company and their
respective stockholders that the Company merge with and into THINK (the
"Merger") pursuant to the terms of the Agreement and the applicable provisions
of the laws of the State of Delaware and the State of Georgia;
WHEREAS, the Stockholders are currently the only stockholders of the
Company entitled to vote on the Merger and have unanimously voted in favor of
the Merger; and
WHEREAS, the Merger is intended to be treated as a tax-free reorganization
pursuant to the provisions of Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and mutual covenants,
conditions and agreements contained herein and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, each intending to be legally bound hereby, agree as follows:
ARTICLE I.
TERMS OF MERGER
1.1 MERGER. Upon the terms and subject to the conditions set forth in this
Agreement, the Company shall be merged with and into THINK and the Stockholders
shall transfer and convey to THINK all of the Stockholders' right, title and
interest in and to all of the issued and outstanding shares of Company Stock.
The Stockholders hereby agree, upon the terms and subject to the conditions set
forth herein, to transfer and deliver to THINK (for cancellation) certificates,
properly endorsed in blank or accompanied by a properly executed stock power,
representing all of the issued and outstanding shares of Company Stock.
1.2 MERGER CONSIDERATION. In consideration of and in exchange for all of
the issued and outstanding shares of Company Stock as set forth in Section 1.1
above, THINK shall issue to the Stockholders and Subsequent Stockholders a total
of 600,000 shares of THINK Stock (the "Stock Consideration") and pay an
aggregate of $200,000 in cash ( the "Cash Consideration"). The Stock
Consideration and the Cash Consideration are referred to herein collectively as
the "Purchase Price". The Purchase Price shall be allocated among the
Stockholders and the Subsequent Stockholders as set forth on Schedule 1.2
hereto.
1.3 EFFECTIVE TIME OF MERGER. Subject to the terms and conditions of this
Agreement, the articles of merger, in substantially the form of Exhibit 1.3(a)
(the "Articles of Merger"), required by Section 14-2-1105 of the Georgia
Business Corporation Code ( the "GBCC") and the certificate of merger, in
substantially the form of Exhibit 1.3(b) (the "Certificate of Merger"), required
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by Section 252 of the Delaware General Corporation Law ( the "DGCL") shall be
duly executed and acknowledged by the Constituent Corporations (as hereinafter
defined) and thereafter delivered to the Secretaries of the State of Georgia and
the State of Delaware for filing pursuant to the GBCC and the DGCL,
respectively, on the day immediately following the Closing Date (as hereinafter
defined). The Merger shall become effective (the "Effective Time") upon the
filing of the Articles of Merger with the Secretaries of the State of Georgia
and the State of Delaware and THE filing of the Certificate of Merger with the
Secretary of the State of Delaware (the "Merger Documents").
1.4 EFFECTS OF THE MERGER.
(a) At the Effective Time: (i) the separate existence of the Company
shall cease and the Company shall be merged with and into THINK (the Company and
THINK are sometimes referred to herein as the "Constituent Corporations" and
THINK is sometimes referred to herein as the "Surviving Corporation"); (ii) the
Certificate of Incorporation of THINK as in effect immediately prior to the
Effective Time shall continue to be the Certificate of Incorporation of the
Surviving Corporation; and (iii) the Bylaws of THINK as in effect immediately
prior to the Effective Time shall continue to be the Bylaws of the Surviving
Corporation.
(b) At and after the Effective Time, the Merger shall have the
effects set forth in Section 14-2-1106 of the GBCC and in Section 259 of the
DGCL. Without limiting the foregoing, at the Effective Time, THINK as the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises of a public as well as a private nature, and be subject to all the
restrictions, disabilities and duties of each of the Constituent Corporations,
and all singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, and all
debts due to either of the Constituent Corporations on whatever account, as well
as for stock subscriptions and all other things in action or belonging to each
of the Constituent Corporations, shall be vested in THINK as the Surviving
Corporation and all property, rights, privileges, powers and franchises, and all
and every other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the Constituent Corporations, and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of the Constituent
Corporations shall thenceforth attach to THINK as the Surviving Corporation, and
may be enforced against it to the same extent as if said debts and liabilities
had been incurred by it.
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors and
officers of THINK immediately prior to the Effective Time shall continue to be
the directors and officers of THINK as the Surviving Corporation until their
successors shall have been duly elected, appointed and/or qualified or until
their earlier death, resignation or removal in accordance with the Certificate
of Incorporation and Bylaws of THINK.
1.6 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder of shares of Company
Stock or shares of THINK Stock:
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(a) THINK STOCK. Each issued and outstanding share of THINK Stock
shall continue to be issued and outstanding and shall not be effected by the
Merger.
(b) CONVERSION OF COMPANY STOCK. The shares of Company Stock issued
and outstanding as of the Effective Time shall be converted into shares of THINK
Stock (and Cash Consideration, if applicable) as set forth in Section 1.2
hereof. All such shares of Company Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the shares
of THINK Stock to be issued or paid in consideration therefor upon the surrender
of such certificate for exchange to THINK at the Closing (as hereinafter
defined).
(c) CANCELLATION OF COMPANY OPTIONS. Pursuant to Section 12(a) of
the Company's Stock Incentive Plan, on the Closing Date, and in any event, at
least one day prior to the Effective Date, the Company shall cause all of the
outstanding options granted under the Stock Incentive Plan to be canceled in
exchange for the payment to the optionees of the cash and issuance of the shares
of Company Stock to the optionees as set forth on Schedule 1.6(c) hereto.
1.7 RESTRICTIONS ON RESALE OF THINK STOCK. The shares of THINK Stock
received by the Stockholders pursuant to this Agreement may not be sold,
assigned, pledged, hypothecated or transferred, or any interest therein conveyed
to any other person, except in accordance with the registration provisions of
the federal and state securities laws or applicable exemption therefrom, and the
certificates representing such shares shall contain an appropriate legend to
that effect.
1.8 TAX-FREE REORGANIZATION. The parties intend that the Merger qualify as
a tax-free reorganization under Section 368(a)(1)(A) of the Code. Unless
required by a final determination of the Internal Revenue Service (or other
governing body having jurisdiction over these matters) or a court of competent
jurisdiction, the parties shall not take any position on any subsequently filed
tax return inconsistent with this section. Each party hereto represents to each
other that there exists no indebtedness between THINK and the Company and that
such party is not an investment company as defined in Subsections
368(a)(2)(F)(iii) and (iv) of the Code. The parties hereby agree to comply with
the reporting requirements of Treasury Regulation Section 1.368-3.
In furtherance of the foregoing, THINK hereby represents, warrants and
covenants that:
(a) it has no plan or intention to reacquire any THINK Stock
issued to the Stockholders;
(b) it has no plan or intention to sell or otherwise dispose of any
of the assets of the Company, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the Code;
and
(c) there is no plan or intention by THINK to acquire, directly or
through parties related to THINK (within the meaning of Section 1.368-1(c)(1)
and (2) of the Treasury Regulations) shares of THINK Stock issued to the
Stockholders hereunder such that the continuity of interest requirement set
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forth in Section 1.368-1(e) of the Treasury Regulations (the "Continuity of
Interest Requirement") would be violated.
(d) following the Merger, THINK will continue the historic business
of the Company or use a significant portion of the Company's historic business
assets its business in accordance with Section 1.368-1 of the Treasury
Regulations.
In addition, each of the Company and the Stockholders hereby represents,
warrants and covenants that:
(e) prior to the Merger, the liabilities of the Company were
incurred by the Company in the ordinary course of its business;
(f) the Company is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code;
(g) as of the Effective Date, the fair market value of the assets of
the Company equal or exceed the sum of the liabilities of the Company; and
(h) there is no plan or intention by the Stockholders to sell,
exchange or otherwise dispose of shares of THINK Stock received by them
hereunder to THINK or persons or parties related to THINK such that the
Continuity of Interest Requirement would be violated.
1.9 REGISTRATION RIGHTS OF STOCKHOLDERS. For a period of one (1) year
following the Closing, in the event that THINK proposes to register any of its
securities under the Securities Act of 1933, as amended (the "Securities Act")
in connection with an underwritten public offering of such securities or the
resale of securities owned by Xxx Xxxxx or Xxxx Xxxxx (the "Principal
Stockholders") solely for cash (other than registration on Form X-0, Xxxx X-0 or
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
shares of THINK Stock owned by the Stockholders), THINK shall notify the
Stockholders of such registration (the "Piggyback Notice"). Upon the written
request of holders of at least twenty-five percent (25%) of the THINK Stock
issued at Closing to the Stockholders given within twenty (20) days after
receipt of such Piggyback Notice from THINK, THINK shall cause to be included in
the registration statement (the "Registration Statement") filed under the
Securities Act up to that number of shares of THINK Stock owned by the
Stockholders resulting from: (a) dividing the number of shares of THINK Stock
owned by the Stockholders by (b) the number of shares of THINK Stock owned by
the Principal Stockholders multiplied by (c) the number of shares of THINK Stock
being registered for resale by the Principal Stockholders; provided that, with
respect to a Registration Statement filed by THINK within four (4) months of the
Closing, the amount of shares of THINK Stock issued to the Stockholders
hereunder to be included in the Registration Statement shall be limited to
fifteen percent (15%) of the number of shares of THINK Stock owned by such
Stockholders. Notwithstanding the foregoing, if the registration which THINK
gives notice is for a registered public offering involving an underwriting and
the underwriter advises THINK in writing that marketing factors require a
limitation on the number of shares to be underwritten, the representative may
(subject to the limitations set forth below) exclude all of the Stockholders'
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THINK Stock from, or limit the number of shares of THINK Stock held by the
Stockholders to be included in, the registration and underwriting. THINK shall
so advise all Stockholders requesting registration, and the number of shares of
THINK Stock that are entitled to be included in the Registration Statement shall
be allocated among the Stockholders and other persons ("Other Holders") who, by
virtue of agreements with THINK other than this Agreement, are entitled to
include their securities in such registration, pro rata on the basis of the
number of shares of THINK Stock held by the Stockholders requesting registration
and the Other Holders; provided, however, that such allocation shall not operate
to reduce the aggregate number of shares of THINK Stock held by the Stockholders
and the Other Holders to be included in such registration. If any Stockholder or
Other Holder does not request inclusion of the maximum number of shares of THINK
Stock allocated to him or her pursuant to the above-described procedure, the
remaining portion of his or her allocation shall be reallocated among those
requesting Stockholders and Other Holders whose allocations did not satisfy
their requests pro rata on the basis of the number of shares of THINK Stock held
by such Stockholders and such Other Holders, and this procedure shall be
repeated until all of the shares of THINK Stock held by such Stockholders and
such Other Holders which may be included in the registration on behalf of the
Stockholders and the Other Holders have been so allocated. Inclusion of any of a
Stockholder's shares of THINK Stock in a Registration Statement pursuant hereto
shall be deemed to fulfill THINK's obligations hereunder with respect to such
Stockholder.
ARTICLE II
CLOSING
2.1 DATE AND TIME OF CLOSING. Subject to satisfaction of the conditions
set forth in this Agreement and compliance with the other provisions hereof, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place on June 2, 1998 at 10:00 a.m. (eastern daylight savings time) at the
law offices of Xxxxxx, Xxxxxxx & Xxxxxx, L.L.P., 1600 Atlanta Financial Center,
0000 Xxxxxxxxx Xxxx, X.X., Xxxxxxx, Xxxxxxx 00000, or at such other place and
time thereafter as shall be mutually agreeable to the parties hereto (the
"Closing Date").
2.2 CLOSING DOCUMENTS. Upon fulfillment of the conditions set forth
herein, (i) on the Closing Date, each party hereto will execute and deliver to
the other parties hereto such other documents and instruments as are
contemplated herein, and (ii) on the day immediately following the Closing Date,
the parties hereto shall cause the Merger Documents to be filed as contemplated
in Section 1.3 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MANAGEMENT
STOCKHOLDERS. The Company and the Management Stockholders, jointly and
severally, except as specifically provided herein, represent and warrant to
THINK as follows:
(a) AUTHORIZATION. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby have been
duly authorized, adopted and approved by the board of directors of the Company
and by each of the Management Stockholders. The Company has taken all necessary
corporate action and has all of the necessary corporate power to enter into this
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Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by an officer of the Company on
its behalf and assuming that this Agreement is the valid and binding obligation
of THINK, is the valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect, or by legal or equitable
principles, relating to or limiting creditors' rights generally and except that
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought. Each Management
Stockholder severally represents and warrants that he has the ability to
consummate the transactions contemplated hereby, that this Agreement has been
duly executed and validly delivered by him and that this Agreement is the valid
and binding obligation of such Management Stockholder, enforceable against each
such Management Stockholder in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect, or by legal or
equitable principles, relating to or limiting creditors' rights generally and
except that the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(b) ORGANIZATION: SUBSIDIARIES. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia. The Company has the corporate power and authority to own and lease its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business as a foreign corporation in each
jurisdiction where it owns or leases real property or conducts business, except
where the failure to be so qualified would not have a material adverse effect on
the business, operations, earnings, prospects, assets or condition (financial or
otherwise) of the Company ("Material Adverse Effect"). Set forth on Schedule
3.1(b) hereto is a true and correct list of each jurisdiction in which the
Company is qualified to do business. The Company does not own any shares of
capital stock or other interest in any corporation, partnership, association or
other entity.
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(c) CAPITALIZATION. The number of authorized, issued and outstanding
shares of capital stock of the Company as of the date hereof is as set forth
above in the recitals to this Agreement. The outstanding shares of Company Stock
have been duly authorized, validly issued and are fully paid and non-assessable.
Each Management Stockholder hereby severally represents and warrants that he is
the sole legal and beneficial owner of the number of shares of Company Stock as
set forth in the recitals to this Agreement. Each Management Stockholder hereby
severally represents and warrants that the issued and outstanding shares of
Company Stock owned by such Management Stockholder are owned free of preemptive
rights and free and clear of any and all adverse claims, liens, mortgages,
charges, security interests, encumbrances and other restrictions or limitations
of any kind whatsoever. The Company has not issued any shares of capital stock
which could give rise to claims for violation of any federal or state securities
laws (including any rules or regulations promulgated thereunder) or the
securities laws of any other jurisdiction (including any rules or regulations
promulgated thereunder). Except as set forth on Schedule 3.1(c), there are no
options, warrants, calls, convertible securities or commitments of any kind
whatsoever relating to the shares of the Company Stock subject hereto or any of
the unissued shares of capital stock of the Company, and there are no voting
trusts, voting agreements, stockholder agreements or other agreements or
understandings of any kind whatsoever which relate to the voting of the capital
stock of the Company.
(d) FINANCIAL STATEMENTS. The Company has heretofore delivered to
THINK: (i) audited financial statements of the Company as at December 31, 1997
(the "Audited Statements") accompanied by the corresponding relevant opinion and
report of the Company's independent auditors as of the same date and for the
same period; and (ii) unaudited monthly financial statements of the Company for
each month after January 1, 1998 until April 30, 1998 (the "Interim Statements")
(all of the foregoing, including the notes thereto, may collectively be referred
to hereinafter as the "Financial Statements"). The Financial Statements present
fairly, in all material respects, the financial position of the Company as of
the respective dates indicated and the results of operations and cash flows of
the Company for the respective periods indicated in conformity with generally
accepted accounting principles applied on a consistent basis.
(e) OWNED REAL PROPERTY. The Company does not own nor does it have
any interest in, any real property other than the leased real property set forth
below.
(f) LEASED REAL PROPERTY: TENANCIES. Set forth on Schedule 3.1(f)
hereto is a true, correct and complete list of all of the leases and subleases
(the "Real Property Leases") with respect to real property leased by the Company
as lessee and used in the conduct of its business or otherwise (the "Leased Real
Property"). Also set forth on Schedule 3.1(f) is a true, correct and complete
list of the monthly or annual rental payments due thereunder as of the date
hereof and the expiration dates thereof. The Company has delivered to THINK
true, correct and complete copies of each of the Real Property Leases. Except as
set forth on Schedule 3.1(f), the Company is not required pursuant to the
provisions of any of the Real Property Leases (or otherwise) to obtain the
consent of any lessor with respect to the Leased Real Property prior to or in
connection with consummation of the transactions contemplated hereby. Neither
the Company nor, to the Company's or the Management Stockholders' knowledge, any
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third party is in default under any of the Real Property Leases. Except as set
forth on Schedule 3.1(f), there are no subleases or subtenancies for any part of
the Leased Real Property that shall remain in effect after the Closing Date and
there is no third party which has any right to purchase, use or otherwise
possess all or any part of the Leased Real Property. To the knowledge of the
Company and the Management Stockholders, the rent paid by the Company to lease
the office space currently occupied by the Company at 0000 Xxxx Xxxxxxxxx
Xxxxxx, X.X., Xxxxxxx, Xxxxxxx is commercially reasonable based on the current
fair market value of the 14,670 gross square feet of such space.
(g) TITLE. The Company: (i) holds a valid and enforceable leasehold
interest in the Leased Real Property; and (ii) owns good and marketable title to
all of the assets and properties reflected on the balance sheet of the Audited
Statements and the balance sheet of the Interim Statements or purchased by the
Company after the date thereof, except supplies consumed or assets or properties
sold in the ordinary course of business subsequent to the date thereof. To the
knowledge of the Company and the Management Stockholders, the Leased Real
Property is leased free of all adverse claims, liens, mortgages, charges,
security interests, encumbrances and other restrictions or limitations of any
kind whatsoever, except: (A) as stated in the Financial Statements; (B) for
liens for taxes or assessments not yet due and payable or which are being
contested by the Company in good faith; (C) for minor liens imposed by law for
sums not yet due or which are being contested by the Company in good faith; and
(D) for imperfections of title, adverse claims, charges, restrictions,
limitations, encumbrances, liens or security interests that are minor and which
do not detract from the value of the Leased Real Property subject thereto or
which do not impair the operations of the Company or affect the present use of
the Leased Real Property. There is no condemnation or eminent domain proceeding
pending or, to the Company's or the Management Stockholders' knowledge,
threatened against the Leased Real Property (or any part thereof). The Company
has not made any commitments or received any notice, oral or written, from any
public authority or other entity with respect to the taking or use of the Leased
Real Property (or any part thereof), whether temporarily or permanently, for
easements, rights-of-way or other public or quasi-public purposes or for any
other purpose whatsoever nor is there any proceeding pending or, to the
Company's or the Management Stockholders' knowledge, threatened which could
adversely affect the zoning classification relating to such property or its use
by the Company as of the date hereof. The assets reflected on the balance sheet
of the Financial Statements and those purchased by the Company after the date of
the most recent thereof, are owned free and clear of all adverse claims, liens,
mortgages, charges, security interests, encumbrances and other restrictions or
limitations of any kind whatsoever, except: (A) as stated in the Financial
Statements; (B) for liens for taxes or assessments not yet due and payable or
which are being contested by the Company in good faith; (C) for minor liens
imposed by law for sums not yet due or which are being contested by the Company
in good faith; and (D) for imperfections of title, adverse claims, charges,
restrictions, limitations, encumbrances, liens or security interests that are
minor and which do not detract in any material respect from the value of any of
the assets subject thereto or which do not impair the operations of the Company
in any material respect or affect the present use of the assets in any material
respect. The Company has not made any commitments or received any notice, oral
or written, from any public authority or other entity with respect to the taking
or use of any of the Company's assets, whether temporarily or permanently, for
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any purpose whatsoever, nor is there any proceeding pending or, to the Company's
or the Management Stockholders' knowledge, threatened which could adversely
affect any asset owned or used by the Company as of the date hereof.
(h) CONDITION OF ASSETS. The Real Property Leases and all other
documents and agreements pursuant to which the Company has obtained the right to
use or occupy any real property, personal property or assets, are valid and
enforceable in all respects in accordance with their respective terms, except as
such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect, or
by legal or equitable principles, relating to or limiting creditors' rights
generally and except that the remedy of specific performance and injunctive and
other forms of equitable relief are subject to certain equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
All licenses, permits and authorizations related to the location or operation of
the business of the Company are in good standing and are valid and enforceable
in all material respects in accordance with their respective terms. There is
not, under any of the foregoing instruments, documents or agreements, any
existing default, nor is there any event which, with notice or lapse of time or
both, would constitute a default arising through the Company or any third party
which could: (i) have a Material Adverse Effect on the Company; or (ii)
materially adversely affect its use of the Leased Real Property or the title to
its assets. To the Company's and each Management Stockholders' knowledge, the
Company is not in violation of and has complied with all applicable zoning,
building or other codes, statutes, regulations, ordinances, notices and orders
of any governmental authority with respect to the occupancy, use, maintenance,
condition, operation and improvement of the Leased Real Property or assets,
except where the failure to comply would not have a Material Adverse Effect. The
Company's use of any improvements for the purposes for which any of the Leased
Real Property or assets are being used as of the date hereof does not violate in
any material respect any such code, statute, regulation, ordinance, notice or
order. The Company possesses all licenses, certificates of occupancy, permits
and authorizations required to be obtained by the Company with respect to the
Company's operation and maintenance of the Leased Real Property or assets for
all uses for which such property is or assets are operated or used by the
Company as of the date hereof, except where the failure to do so would not have
a Material Adverse Effect on the Company. All of the Leased Real Property and
assets (whether owned or leased by the Company) are in good operating condition
and repair, subject to normal wear and use and each such item is usable in a
manner consistent with current use by the Company.
(i) INTELLECTUAL PROPERTY.
(i) Schedule 3.1(i) hereto sets forth a true, correct and
complete list (including where applicable, the date of registration
and the serial or registration number) of all registered and
unregistered trademarks, service marks and trade names (including
any applications for the same), trade secrets, registered and
unregistered copyrights, and computer programs and software (whether
or not protected by patent, copyright or otherwise) which are owned
by, licensed by, used in or are material to the business of the
Company (the "Intellectual Property") . With respect to each of the
foregoing items, there is listed on Schedule 3.1 (i) hereto the
following: (A) the extent of the Company's interest therein; (B)
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each agreement and all other material documents evidencing the
Company's interest therein; (C) the extent of the interest of any
third party therein; and (D) each agreement and all other material
documents evidencing the interest of any third party therein.
(ii) Except as otherwise set forth on Schedule 3.1(i) hereto
and to the best knowledge of the Company and the Management
Stockholders, the Company's right, title or interest in the
Intellectual Property is free and clear of adverse claims, liens,
mortgages, charges, security interests and encumbrances or other
restrictions or limitations of any kind whatsoever.
(iii) To the Company's and each Management Stockholder's
knowledge, the Company has not committed any acts of unfair
competition or directly, indirectly, contributorily or by
inducement, infringed upon any patent, trademark, service xxxx,
trade name, copyright, computer program or software, or any other
intellectual property, nor has the Company misappropriated any of
the foregoing from any other person or entity or received from any
other person or entity any notice, charge, claim or other assertion
with respect thereto, except in each case where such action could
not reasonably be expected to have a Material Adverse Effect on the
Company.
(iv) The Company has not sent or otherwise communicated to any
other person or entity any notice, charge, claim or other assertion
of, nor has the Company any knowledge of, any present, impending or
threatened infringement upon any of the Intellectual Property by any
other person or entity, or misappropriation of any of the foregoing
by any other person or entity, or any commission of acts of unfair
competition by any other person or entity.
(j) ACCOUNTS RECEIVABLE. Schedule 3.1(j) hereto sets forth a true,
correct and complete list of the Company's accounts receivable (the "Accounts
Receivable") as of March 31, 1998. Such schedule accurately, correctly and
completely reflects the Accounts Receivable as of such date. The Accounts
Receivable are valid, arose out of bona fide transactions in the ordinary course
of business, and are the valid and binding obligations of and are enforceable
against the respective account debtors thereunder, except as such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect. There is no contest, claim or
right of set-off contained in any written agreement with any account debtor
relating to the amount or validity of any Account Receivable.
(k) ACCOUNTS PAYABLE. Schedule 3.1(k) hereto sets forth a true,
correct and complete list of the Company's accounts payable (the "Accounts
Payable") as of March 31, 1998. Such schedule accurately, correctly and
completely reflects the aggregate amount of Accounts Payable as of such date.
Prior to the Closing Date, all outstanding Accounts Payable will have been paid
by the Company in a manner consistent with past practice.
(l) ABSENCE OF UNDISCLOSED LIABILITIES. Other than as set forth on
the Financial Statements, the Company has not had nor does it have any
indebtedness, loss or liability of any nature whatsoever (other than as incurred
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in the ordinary course of business), whether accrued, absolute, contingent or
otherwise and whether due or become due, which is material to the Company's
business or the Assets, or the operations, prospects, earnings or condition
(financial or otherwise) of the Company.
(m) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 3.1(m) and except as expressly set forth in this Agreement, the Company
has not, since December 31, 1997:
(i) issued, sold, granted or contracted to issue, sell or
grant any of its stock, notes, bonds, other securities or any option
to purchase any of the same;
(ii) amended its articles of organization or bylaws;
(iii) made any capital expenditures or commitments for the
acquisition or construction of any property, plant or equipment
other than in the ordinary course of business of the Company;
(iv) entered into any material transaction in any way
inconsistent with the past practices of its business or conducted
its business in any manner inconsistent with its past practices;
(v) incurred any damage, destruction or any other loss to any
of its property or assets in an aggregate amount exceeding Fifty
Thousand Dollars ($50,000) whether or not covered by insurance;
(vi) suffered any loss in an aggregate amount exceeding Fifty
Thousand Dollars ($50,000) and, neither the Company nor the
Management Stockholders has become aware of any intention on the
part of any client, dealer or supplier to discontinue its current
relationship with the Company, the loss or discontinuance of which,
alone or in the aggregate, could have a Material Adverse Effect on
the Company;
(vii) modified, amended or altered any contractual arrangement
with any client, dealer or supplier, the modification, amendment or
alteration of which, alone or in the aggregate, could have a
Material Adverse Effect on the Company;
(viii) incurred any material liability or obligation (absolute
or contingent) or made any material expenditure other than in the
ordinary course of business of the Company;
(ix) experienced any material adverse change in the Company's
business or the Assets, or the operations, earnings, prospects or
condition (financial or otherwise) of the Company or experienced or
have knowledge of any event which could have a Material Adverse
Effect on the Company;
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(x) declared, set aside (other than Subchapter S distributions
to the Stockholders that have been set aside in accordance with this
Agreement) or paid any dividend or other distribution in respect of
the capital stock of the Company;
(xi) redeemed, repurchased, or otherwise acquired any of its
capital stock or securities convertible into or exchangeable for its
capital stock or entered into any agreement with respect to any of
the foregoing;
(xii) granted, conveyed, transferred, assigned or made any
sale of Accounts Receivable or any accrual of liabilities outside of
the ordinary course of its business;
(xiii) granted, conveyed, transferred, assigned or
made any sale of any material interest in the Intellectual
Property;
(xiv) purchased, disposed of or contracted to purchase or
dispose of, or granted or received an option or any other right to
purchase or sell, any of its property or assets, except in the
ordinary course of business;
(xv) increased the rate of compensation payable or to become
payable to the officers or employees of the Company, or increased
the amounts paid or payable to such officers or employees under any
bonus, insurance, pension or other benefit plan, or made any
arrangements therefor with or for any of said officers or employees
except for increases consistent with the Company's ordinary course
of business or increases resulting from the application of existing
formulas under existing plans, agreements or policies relating to
employee compensation:
(xvi) adopted or amended any collective bargaining, bonus,
profit-sharing, compensation, stock option, pension, retirement,
deferred compensation or other plan, agreement, trust, fund or
arrangement for the benefit of its employees, except as otherwise
required or permitted herein; or
(xvii) changed any material accounting principle, procedure or
practice followed by the Company or changed the method of applying
such principle, procedure or practice.
(n) AGREEMENTS. Set forth on Schedule 3.1(n) hereto is a true,
correct and complete list of all contracts and agreements material to the
business or operations of the Company, including without limitation, those to
which the Company is a party and those by which any of its property or assets
are bound ("Material Agreements"). Copies of all such contracts and agreements
have heretofore been delivered or made available by the Company to THINK. Other
than as set forth on Schedule 3.1(n) and 3.1(f), there is no contract or
agreement to which the Company or any Management Stockholder is a party or which
affects the assets, liabilities or outstanding securities of the Company, which
is material to the business, assets or operations of the Company. None of the
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foregoing agreements limits the freedom of the Company to compete in any line of
business or with any person or other entity in any geographic region within or
outside of the United States of America.
Neither the Company, the Management Stockholders (each severally and
not jointly), nor any third party is in material default and no event has
occurred which, with notice or lapse of time or both, could reasonably be
expected to cause or become a material default by the Company, the Management
Stockholders or any third party, under any Material Agreement. Each Material
Agreement is enforceable in accordance with its terms, against all other parties
thereto, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect, or by legal or equitable principles, relating to or limiting creditors'
rights generally and except that the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(o) NON-CONTRAVENTION; CONSENTS. Except as set forth on Schedule
3.1(o), neither the execution and delivery of this Agreement by the Company and
each of the Management Stockholders, nor consummation of the transactions
contemplated hereby, does or will: (i) violate or conflict with any provision of
the articles of incorporation or bylaws of the Company; (ii) violate or, with
the passage of time, result in the violation of any provision of, or result in
the acceleration of or entitle any party to accelerate any obligation under, or
result in the creation an imposition of any lien, charge, pledge, security
interest or other encumbrance upon any of the property or assets, which are
material to the business or operations of the Company, pursuant to any provision
of any mortgage, lien, lease, agreement, permit, indenture, license, instrument,
law, order, arbitration award, judgment or decree to which the Company is a
party or by which it or any of such property or assets are bound, the effect of
which violation, acceleration, creation or imposition could have a Material
Adverse Effect on the Company; (iii) violate or conflict with any other
restriction of any kind whatsoever to which the Company or any Management
Stockholder is subject or by which any of their properties or assets may be
bound, the effect of any of which violation or conflict could have a Material
Adverse Effect on the Company; or (iv) constitute an event permitting
termination by a third party of any agreement to which the Company or any
Management Stockholder is a party or is subject, which termination could have a
Material Adverse Effect on the Company. No consent, authorization, order or
approval of, or filing or registration with, any governmental commission, board
or other regulatory body is required in connection with the execution, delivery
and performance by the Company and the Management Stockholders of the terms of
this Agreement and consummation of the transactions contemplated hereby.
(p) EMPLOYEE BENEFIT PLANS. Schedule 3.1(p) hereto sets forth a
true, correct and complete list of all "employee benefit plans" as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (the "Benefit Plans") covering the employees of the Company
(the "Employees"). Each Benefit Plan is in compliance in all material respects
with all applicable provisions of law, including ERISA and the Code. There are
no pending or, to the Company's or the Management Stockholders' knowledge,
threatened claims against any Benefit Plan (except for claims for benefits
payable in the normal operation of the Benefit Plans) that could give rise to
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any material liability to the Company. All reports, notices and returns required
to be filed with any governmental agency or provided to any person or entity
with respect to the Benefit Plans have been timely filed. The Company has never
had and does not now have any Benefit Plan that is an employee pension plan (as
defined in Section 3(2) of ERISA) nor does the Company contribute to any
multiemployer pension or multiemployer welfare benefit plan (within the meaning
of Section 3(37) of ERISA).
(q) LABOR RELATIONS. There are no agreements with or pending
petitions for recognition of any labor union or association as the exclusive
bargaining agent for any or all of the employees of the Company and no such
petition has been pending at any time during the two years prior to the date
hereof. To the Company's or the Management Stockholders' knowledge, there has
not been any organizing effort by any union or other group seeking to represent
any employees of the Company as its exclusive bargaining agent at any time
during the two years prior to the date hereof. There are no labor strikes, work
stoppages or other labor disputes now pending or to the knowledge of the Company
and the Management Stockholders, threatened against the Company, nor has there
been any such labor strike, work stoppage or other labor dispute or grievance at
any time during the two years prior to the date hereof. Neither the Company nor
the Management Stockholders has any knowledge that any executive, key employee
or any group of employees of the Company has any plans to terminate his/her
employment with the Company.
(r) INSURANCE. Schedule 3.1(r) hereto sets forth a true, correct and
complete list of all insurance policies or binders of insurance or programs of
self-insurance which relate to the business of the Company as of the date
hereof. The coverage under each such policy and binder is in full force and
effect. Neither the Company nor the Management Stockholders have knowledge of
nor has the Company or the Management Stockholders received any notice of
cancellation, termination, nonrenewal or disallowance of any claim thereunder or
with respect thereto. Neither the Company nor the Management Stockholders have
knowledge of any claim against the Company relating to its business, assets,
properties or operations which could increase the insurance premiums payable by
the Company under such policy or binder in excess of normal increases consistent
with industry practices.
(s) TAX MATTERS. The Company is not a member of an affiliated group,
within the meaning of Section 1504 of the Code (an "Affiliated Group"). The
Company has filed when due and will file if and when due prior to the Closing
Date (after giving effect to any extensions granted by the requisite legal or
regulatory authority) all returns, reports, elections, estimates, declarations,
schedules, forms and other documents ("Tax Returns") relating to taxes required
to be filed by the Code or by any applicable federal, state, county, municipal,
local, foreign or other laws, including, without limitation, consolidated,
combined or unitary returns, for any taxable period ending prior to or on the
Closing Date (the "Pre-Closing Tax Period"). The taxable year of the Company for
federal and state income and business tax purposes currently ends on December 31
of each year. All taxes shown on any Tax Return required to be filed with
respect to the Company for any Pre-Closing Tax Period have been, or will have
been, paid or accrued prior to the Closing. The Company has heretofore delivered
to THINK all Tax Returns filed on its behalf for the fiscal years ended December
31, 1994, 1995, 1996 and 1997. The Company has fully accrued on its books all
taxes (other than income taxes) for any periods which are not yet due. No tax
liens have been filed, and no material claims have been or are being asserted
or, to the Company's or the Management Stockholders' knowledge, threatened
against the Company with respect to any taxes. No Tax Returns of the Company
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have been audited in the past four (4) years by any taxing authority, no
deficiencies or claims have been proposed, assessed or claimed (including
interest and penalties) against the Company which have not been paid or accrued,
and the Company has not waived or extended any statute of limitations with
respect to the assessment of any taxes, which waiver or extension has not yet
expired by its terms. There are no suits, actions, proceedings, claims or
investigations now pending against the Company with respect to any taxes. The
Company has withheld or collected from each payment made to each of its
employees, consultants, contractors and other payees the amount of all taxes
(including, but not limited to, federal income taxes, state and local income and
wage taxes, payroll taxes, workers' compensation and unemployment taxes)
required to be withheld or collected therefrom for all Pre-Closing Tax Periods
and the Company has timely paid or accrued and reported the same in respect of
its employees, consultants, contractors and other payees to the proper tax
receiving offices. The Company does not have any material liability for any
taxes of any nature whatsoever other than as shown on the Financial Statements
(except for liabilities for taxes accruing after the date of such balance sheet
in the ordinary course of business) and neither the Management Stockholders nor
the Company is aware of any basis for any additional liabilities for taxes for
any Pre-Closing Tax Period. The reserve for accrued but unpaid taxes for the
period ending December 31, 1997 includes adequate provision for all taxes which
have been assessed or which will be due and payable by the Company for all
Pre-Closing Tax Periods. The Company does not file any state or local tax
returns on a unitary or combined basis with any other member of an Affiliated
Group.
The term "taxes" or "tax" as used in this section or referred to
elsewhere in this Agreement shall mean all taxes, charges, fees, levies,
penalties, or other assessments, including without limitation, income, capital
gain, profit, gross receipts, ad valorem, excise, property, payroll,
withholding, employment, severance, social security, workers' compensation,
occupation, premium, customs duties, windfall profits, sales, use, and franchise
taxes, imposed by the United States, or any state, county, local or foreign
government or any subdivision or agency thereof, and including any interest,
penalties. or additions attributable thereto.
(t) COMPLIANCE WITH APPLICABLE LAW. The Company has been and is in
compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules and regulations applicable to the business, except where the
failure to comply with which would not (i) Materially Adversely Effect the
Company or (ii) subject any officer or director of the Company to civil or
criminal penalties or imprisonment. The Company has complied with the rules and
regulations of all governmental agencies having authority over its business or
its operations, including without limitation, agencies concerned with intrastate
and interstate commerce, occupational safety and employment practices, except
where the failure to comply would not have a Material Adverse Effect on the
Company. Neither the Company nor Management Stockholders have any knowledge of
or received any notice of violation of any such rule or regulation during the
four (4) years prior to the date hereof which could result in any liability of
the Company for penalties or damages or which could subject the Company to any
injunction or government writ, order or decree. To the Company's or the
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Management Stockholders' knowledge, there are no facts, events or conditions
that could interfere with, prevent continued compliance with or give rise to any
liability under any foreign, federal, state or local governmental laws,
statutes, ordinances or regulations applicable to the business, assets,
operations, earnings, prospects or condition (financial or otherwise) of the
Company, except where such interference, noncompliance or liability would not
have a Material Adverse Effect on the Company.
(u) LITIGATION. Except as set forth on Schedule 3.1(u) hereto, there
is no action, suit, proceeding or investigation pending or, to the Company's or
the Management Stockholders' knowledge, threatened, which could restrict the
Company or the Management Stockholders' ability to perform his respective
obligations hereunder or could have a Material Adverse Effect on the Company.
Neither the Company nor any of the Management Stockholders are in default in
respect of any judgment, order, writ, injunction or decree of any court or any
federal, state, local or other governmental agency, authority, body, board,
bureau, commission, department or instrumentality which could have a Material
Adverse Effect on the Company.
(v) PERMITS. The Company holds all permits, licenses, orders and
approvals of all federal, state or local governmental or regulatory authorities,
agencies or bodies required for the conduct and operation of the Company's
business as currently conducted, except where the failure to do so would not
have a Material Adverse Effect on the Company. All such permits, licenses,
orders, and approvals are in full force and effect and, to the knowledge of the
Company and the Management Stockholders, no suspension, termination or
revocation of any of the foregoing is threatened. None of such permits,
licenses, orders or approvals will be materially adversely affected by
consummation of the transactions contemplated by this Agreement. The Company has
no knowledge of nor has it received any notice of violation of any of such rules
or regulations during the four (4) years prior to the date hereof which would
result in any liability of the Company for penalties or damages or which would
subject the Company to any injunction or governmental writ, order or decree.
(w) UNLAWFUL PAYMENTS. Neither the Company, the Management
Stockholders, nor any officer, director, employee, agent or representative of
the Company (other than the Management Stockholders acting in their respective
capacities as any of the foregoing) has made, directly or indirectly, any bribe
or kickback, illegal political contribution, payment from corporate funds which
was incorrectly recorded on the books and records of the Company, unlawful
payment from corporate funds to governmental or municipal officials in their
individual capacities for the purpose of affecting their action or the actions
of the jurisdiction which they represent to obtain favorable treatment in
securing business or licenses or to obtain special concessions of any kind
whatsoever, or illegal payment from corporate funds to obtain or retain any
business.
(x) WARRANTIES. Except as required or implied by federal or state
law or as otherwise disclosed on Schedule 3.1(x) hereto, the Company has not
made, extended or otherwise represented that it would provide any express
warranty with respect to the products or services sold, distributed or leased to
its clients or customers.
(y) OFFICERS, DIRECTORS AND EMPLOYEES. Schedule 3.1(y) hereto sets
forth a true, correct and complete list of all of the officers, directors and
employees of the Company as of the date hereof, including their respective
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names, titles and salaries. The Company has also provided true, correct and
complete copies of any employment agreements between the Company and any of the
foregoing officers, directors and employees of the Company in effect as of the
date hereof.
(z) LOANS TO OR FROM AFFILIATES. Except as set forth on Schedule
3.1(z) hereto, there exist no outstanding loans by the Company to any current or
former officer, director, employee, consultant or stockholder of the Company or
any affiliate of any of the foregoing. There are no outstanding loans to the
Company by any current or former officer, director, employee, consultant or
stockholder of the Company.
(aa) BOOKS AND RECORDS.
(i) The books of account and other financial records of the
Company are complete and correct in all material respects and have
been maintained in accordance with good business practices.
(ii) All material corporate action of the Company's board of
directors (including any committees) and stockholders of the Company
since the date of the Company's incorporation has been authorized,
approved and/or ratified in the minute books of the Company.
(bb) BANK ACCOUNTS. Set forth on Schedule 3.1(bb) is a true, correct
and complete list of the names of each bank, savings and loan, or other
financial institution, at which the Company maintains any account (including any
cash contribution or similar accounts) and the names of all persons authorized
to draw thereon or who have access thereto. Schedule 3.1 (bb) includes a true,
correct and complete list of each credit or loan facility or guaranty
established and/or maintained by or on behalf of the Company, including the
amounts available to the Company under each such facility, the outstanding
principal balance thereunder as of the date hereof, the interest rate applicable
thereto and the maturity date thereof.
(cc) SOLVENCY OF THE COMPANY. Since its formation and through the
Closing Date, the Company has been and will be solvent. "Solvent" shall mean,
for purposes of application of this provision, that: (i) the fair salable value
of the Company's property is in excess of the total amount of its debts; and
(ii) the Company is able to pay its debts as they mature.
(dd) INVESTMENT PURPOSE. Each Management Stockholder represents that
each such Management Stockholder is acquiring and will acquire, as the case may
be, the shares of THINK Stock issuable to him pursuant hereto solely for his own
account for investment purposes only and not with a view toward resale or
distribution thereof other than pursuant to an effective registration statement
or applicable exemption from the registration requirements of the Securities
Act. Each Management Stockholder, other than Xxxxxx X. Xxxxxxx, represents that
he is an "accredited investor" as such term is defined pursuant to Rule 501(a)
of Regulation D promulgated under the Securities Act. Each Management
Stockholder understands that such shares of THINK Stock will be issued in
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reliance upon an exemption from the registration requirements of the Securities
Act and that subsequent sale or transfer of such securities is prohibited absent
registration or exemption from the provisions of the Securities Act. Each
Management Stockholder hereby agrees, severally and not jointly, that he will
not sell, assign, transfer, pledge or otherwise convey any of the shares of the
THINK Stock issuable to him pursuant hereto, except in compliance with the
provisions of the Securities Act and in accordance with any transfer
restrictions or similar terms set forth on the certificates representing such
securities or otherwise set forth herein.
(ee) AGREEMENTS WITH AFFILIATES. Except as set forth on Schedule
3.1(ee) hereto, the Company is not a party to any instrument, license, lease or
other agreement, written or oral, with any officer, director or Stockholder of
the Company.
(ff) ACCURACY OF INFORMATION FURNISHED. The Company and the
Management Stockholders (severally and not jointly with respect to those
statements, representations and warranties made severally and not jointly by
such Management Stockholders) represent that no statement by the Company or the
Management Stockholders set forth herein or in the exhibits or the schedules
hereto, and no statement set forth in any certificate or other instrument or
document required to be delivered by or on behalf of the Company or the
Management Stockholders pursuant hereto or in connection with the consummation
of the transactions contemplated hereby, contained, contains or will contain any
untrue statement of a material fact, or omits, omitted or will omit to state any
material fact which is necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
3.2 REPRESENTATIONS AND WARRANTIES OF NON-MANAGEMENT STOCKHOLDERS. Each
Non-Management Stockholder represents and warrants to THINK, severally and not
jointly, as follows:
(a) AUTHORIZATION. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby have been
duly authorized, adopted and approved by the Non-Management Stockholder. Each
Non-Management Stockholder represents and warrants that he or she has the
ability to consummate the transactions contemplated hereby, that this Agreement
has been duly executed and validly delivered by him or her and that this
Agreement is the valid and binding obligation of such Non-Management
Stockholder, enforceable against such Non-Management Stockholder in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, or by legal or equitable principles, relating to or
limiting creditors' rights generally and except that the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) TITLE TO SHARES. Each Non-Management Stockholder hereby
represents and warrants that he or she is the sole legal and beneficial owner of
the shares of the Company Stock as set forth in the recitals to this Agreement.
Each Non-Management Stockholder hereby represents and warrants that the issued
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and outstanding shares of Company Stock owned by such Non-Management Stockholder
are owned free of preemptive rights and free and clear of any and all adverse
claims, liens, mortgages, charges, security interest, encumbrances and other
restrictions or limitations of any kind whatsoever.
(c) NON-CONTRAVENTIONS; CONSENTS. Neither the execution and delivery
of this Agreement by the Non-Management Stockholder or consummation of the
transactions contemplated hereby, does or will; (i) violate or conflict with any
restriction of any kind whatsoever to which the Non-Management Stockholder is
subject or by which any of his or her properties or assets may be bound, the
effect of any of which violation or conflict could have a Material Adverse
Effect on the Company, or (ii) constitute an event permitting termination by a
third party of any Agreement to which the Non-Management Stockholder is a party
or is subject, which termination could have a Material Adverse Effect on the
Company. No consent, authorization, order, or approval of, or filing or
registration with, any governmental commission, board, or other regulatory body
is required in connection with the execution, delivery, and performance by the
Non-Management Stockholder of the terms of this Agreement and the consummation
by the Non-Management Stockholder of the transactions contemplated hereby.
(d) LITIGATION. There is no action, suit, preceding, or
investigation pending, or, to the Non-Management Stockholder's knowledge,
threatened, which could restrict the Non-Management Stockholder's ability to
perform his or her respective obligations hereunder, or could have a Material
Adverse Effect on the Company.
(e) INVESTMENT PURPOSE. Each Non-Management Stockholder represents
that each Non-Management Stockholder is acquiring and will acquire, as the case
may be, the shares of THINK Stock issuable to him or her pursuant hereto solely
for his or her own account for investment purposes only and not with a view
toward resale or distribution thereof other than pursuant to an effective
registration statement or applicable exemption from the registration
requirements of the Securities Act. Each Non-Management Stockholder understands
that shares of THINK Stock will be issued in reliance upon an exemption from the
registration requirements of the Securities Act and that subsequent sale or
transfer of such securities is prohibited absent registration or exemption from
the provisions from the Securities Act. Each Non-Management Stockholder hereby
agrees that he or she will not sell, assign, transfer, pledge or otherwise
convey any of the shares of the THINK Stock issuable to him or her pursuant
hereto, except in compliance with the provisions of the Securities Act and in
accordance with any transfer restrictions or similar terms set forth on the
certificates representing such securities or otherwise set forth herein.
3.3 REPRESENTATIONS AND WARRANTIES OF THINK. THINK represents and warrants
to the Company and the Stockholders as follows:
(a) AUTHORIZATION. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby have been
duly authorized, adopted and approved by the board of directors of THINK. THINK
has taken all necessary corporate action and has all of the necessary corporate
power to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the officers of THINK on behalf of THINK and, assuming that this
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Agreement is the valid and binding obligation of the Company and the
Stockholders, is the valid and binding obligation of THINK, enforceable against
it in accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect, or by legal or equitable principles, relating
to or limiting creditors' rights generally and except that the remedy of
specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(b) ORGANIZATION. THINK is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. THINK has
the corporate power and authority to own and lease its properties and assets,
and to carry on its business as it is now being conducted. THINK is duly
qualified to do business as a foreign corporation in each jurisdiction where it
owns or leases real property or conducts business, except where the failure to
be so qualified would not have a Material Adverse Effect on THINK.
(c) CAPITALIZATION. The number of authorized, issued and outstanding
shares of capital stock of THINK as of the date hereof is as set forth above in
the recitals to this Agreement. The outstanding shares of THINK Stock have been
duly authorized and validly issued and are fully paid and nonassessable. As of
the date hereof, the number of shares of capital stock that THINK is currently
authorized to issue is adequate to permit THINK to fulfill its obligations
hereunder with respect to issuance of the shares of THINK Stock to the
Stockholders pursuant hereto. The shares of THINK Stock issuable to the
Stockholders pursuant to Section 1.2, when issued, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights.
THINK has not issued any shares of capital stock which could give rise to claims
for violation of any federal or state securities laws (including any rules or
regulations promulgated thereunder) or the securities laws of any other
jurisdiction (including any rules or regulations promulgated thereunder). As of
the date hereof, there are no options, warrants, calls, convertible securities
or commitments of any kind whatsoever relating to the shares of THINK Stock
subject hereto.
(d) NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery
of this Agreement, nor consummation of the transactions contemplated hereby,
does or will: (i) violate or conflict with any provision of the certificate of
incorporation or bylaws of THINK; (ii) violate or conflict with any material
provision of any mortgage, lien, lease, agreement, permit, indenture, license,
instrument, law, order, arbitration award, judgment or decree to which THINK is
a party or by which it or the property or assets which are material to its
business or operation are bound, the effect of any of which violation would have
a Material Adverse Effect on THINK; (iii) violate or conflict with any other
restriction to which THINK is subject or by which any of the property or assets
which are material to the business or operation of THINK may be bound, the
effect of any of which violation or conflict would have a Material Adverse
Effect on THINK; or (iv) constitute an event permitting termination of any
agreement to which THINK is subject by any other party thereto, if in any such
circumstance such termination could have a Material Adverse Effect on THINK.
Other than as provided herein with respect to the filing of the Merger
Documents, no consent, authorization, order or approval of, or filing or
registration with, any governmental commission, board or other regulatory body
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is required in connection with the execution, delivery and performance of the
terms of this Agreement by THINK and consummation by THINK of any of the
transactions contemplated hereby.
(e) LITIGATION. There is no action, suit, proceeding or
investigation pending against or related to THINK, nor, to the best knowledge of
THINK, has THINK been threatened with any such action, suit, proceeding or
investigation, which would restrict the ability of either to perform its
respective obligations hereunder or which would have a Material Adverse Effect
on THINK. THINK is not in default in respect of any judgment, order, writ,
injunction or decree of any court or any federal, state, local or other
governmental agency, authority, body, board, bureau, commission, department or
instrumentality which could have a Material Adverse Effect on THINK.
(f) ACCURACY OF INFORMATION FURNISHED. No statement by THINK set
forth herein or in the exhibits or the schedules hereto, and no statement set
forth in any certificate or other instrument or document required to be
delivered by or on behalf of THINK pursuant hereto or in connection with
consummation of the transactions contemplated hereby, contained, contains or
will contain any untrue statement of a material fact, or omitted, omits or will
omit to state any material fact which is necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
(g) COMPLIANCE WITH APPLICABLE LAW. THINK has been and is in
compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules and regulations (including without limitation the Securities
Act and the Securities Exchange Act of 1934, as amended) as of the date hereof,
the failure to comply with which could materially adversely affect the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
THINK or which would subject any officer or director of THINK to civil or
criminal penalties or imprisonment. THINK has complied with the rules and
regulations of all governmental agencies having authority over its business or
its operations, including without limitation, agencies concerned with intrastate
and interstate commerce, occupational safety, environmental protection and
employment practices, except where the failure to comply would not have a
Material Adverse Effect on THINK. THINK has no knowledge of and has not received
any notice of violation of any such rule or regulation during the two years
prior to the date hereof which could result in any liability of THINK for
penalties or damages or which could subject it to any injunction or government
writ, order or decree. To the best knowledge of THINK, there are no facts,
events or conditions that could interfere with, prevent continued compliance
with or give rise to any liability under any foreign, federal, state or local
governmental laws, statutes, ordinances or regulations applicable to the
business, assets, operations, earnings, prospects or condition (financial or
otherwise) of THINK, except where the failure to do so would not have a Material
Adverse Effect on THINK.
(i) NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, affairs, prospects, properties, assets, existing and
potential liabilities, obligations, profits or condition (financial or
otherwise) of THINK has occurred since December 31, 1997.
(j) EMPLOYEE BENEFIT PLANS. Schedule 3.3(j) hereto sets forth a
true, correct and complete list of all of THINK's Benefit Plans (the "THINK
Benefit Plans") covering the employees of the THINK (the "THINK Employees").
Each THINK Benefit Plan is in compliance in all material respects with all
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applicable provisions of law, including ERISA and the Code. There are no pending
or, to THINK's knowledge, threatened claims against any THINK Benefit Plan
(except for claims for benefits payable in the normal operation of the THINK
Benefit Plans) that could give rise to any material liability to the THINK. All
material reports, notices and returns required to be filed with any governmental
agency or provided to any person or entity with respect to the THINK Benefit
Plans have been timely filed. THINK has never had and does not now have any
THINK Benefit Plan that is an employee pension plan (as defined in Section 3(2)
of ERISA) nor does THINK contribute to any multiemployer pension or
multiemployer welfare benefit plan (within the meaning of Section 3(37) of
ERISA).
(k) NASDAQ NATIONAL MARKET LISTING. The THINK Stock is duly listed
on the Nasdaq National Market and no inquiry or proceeding has been initiated
or, to THINK's best knowledge, threatened for the purpose of causing such
listing to be terminated or restricted.
3.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in Sections 3.1, 3.2 and 3.3 hereof shall survive until the
close of business on the first anniversary of the Closing Date, PROVIDED THAT,
notice or demand with respect to any alleged breach thereof is given as required
pursuant to Article VI hereof; and FURTHER PROVIDED THAT, with respect to claims
for damages arising out of any misrepresentation or breach of warranty made by
the Company and the Management Stockholders relating to taxes, notice shall have
been given on or before the close of business on the sixtieth (60th) day
following the later to occur of: (i) the expiration date of the statute of
limitations applicable to any indemnified federal, state or local tax liability;
and (ii) the final determination of any such tax liability, including the final
administrative and/or judicial determination thereof.
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ARTICLE IV
COVENANTS
4.1 COVENANTS OF THINK.
(a) OPTION PLAN PARTICIPATION. As soon as practicable subsequent to
the Closing, the board of directors of THINK (the "Board") or other
administrator under THINK's stock option plans shall (i) ratify a list mutually
agreed to by the Management Stockholders and THINK of the employees (excluding
the Management Stockholders) of Consolidated THINK Atlanta (as hereinafter
defined) who shall be granted options to acquire in the aggregate 150,000 shares
of THINK Stock ("Employee Options"), and (ii) ratify the list provided to THINK
in Schedule 4.1(a) attached hereto of the Management Stockholders who shall be
granted options to acquire in the aggregate 250,000 shares of THINK Stock
("Management Options"), all of such options to be issued under a stock option
plan to be adopted by the Board within ninety (90) days following the Closing.
Upon ratification by the Board (or such other administrator), such options shall
be exercisable over not longer than a four (4) year period and shall contain
terms comparable to the options granted to similarly situated employees of THINK
under THINK's current stock option plan; PROVIDED, HOWEVER, that (i) the list of
Employee Options ratified by the Board shall reflect a fair and equitable
distribution of such Employee Options among all employees of Consolidated THINK
Atlanta (excluding the Management Stockholders); and (ii) the Board (or such
other administrator) shall provide that the date of exercisability of the
Management Options will be accelerated as follows and in the manner set forth on
Schedule 4.1(a) hereto: (A) one-third shall become exercisable upon the
achievement by Consolidated THINK Atlanta of $5 million in Consolidated Revenue
(as hereinafter defined) during the 24 month period commencing July 1, 1998 and
ending June 30, 2000, (B) one-third shall vest upon the achievement by
Consolidated THINK Atlanta of $10 million in Consolidated Revenue during the
24-month period commencing July 1, 1998, and ending June 30, 2000, and (C)
one-third shall become exercisable upon the achievement by Consolidated THINK
Atlanta of $14 million in Consolidated Revenue during the 24 month period
commencing July 1, 1998 and ending June 30, 2000.
For purposes hereof, "Consolidated THINK Atlanta" means the business
and operations of the Company following the Closing which will be operating for
THINK internal accounting purposes as a separate division of THINK, including
the current operations of THINK's existing Atlanta office ("THINK Atlanta")
which will be consolidated with the Company's operations as of the Closing Date.
For purposes hereof, Consolidated Revenue means all revenues generated by
Consolidated THINK Atlanta, including all revenues derived from Application
Licensing Revenue (as hereinafter defined). For purposes hereof, "Application
Licensing Revenue" means all revenue and income derived from selling, licensing,
or servicing software applications developed by Consolidated THINK Atlanta,
including without limitation all software applications developed by Consolidated
THINK Atlanta using the Company's Net3 technology or any derivation thereof
(collectively "Company Developed Applications"). Consolidated Revenue shall
include (i) one hundred percent (100%) of all revenue and income derived from
sales, licensing, and servicing by Consolidated THINK Atlanta, (ii) seventy-five
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percent (75%) of all revenue derived from the sale or licensing of Company
Developed Applications by THINK or any of its divisions other than Consolidated
THINK Atlanta, and (iii) twenty-five percent (25%) of all revenue derived from
sales and licensing by Consolidated THINK Atlanta of software applications
developed by THINK or any of its divisions other than Consolidated THINK
Atlanta.
(b) PARTICIPATION IN OPERATIONS. Subsequent to the Closing, two of
the Stockholders shall be entitled to participate as members on THINK's internal
operating committee, it being expressly understood that Xxxxxxx P.H. duPont
shall initially be one of the participants. In addition, upon Closing: (i)
Xxxxxxx P.H. xxXxxx will be named Managing Director of the Atlanta office of
THINK ("THINK Atlanta"), having responsibilities for the operations of THINK in
the southeast region of the United States; (ii) W. Xxxxxxxx Xxxx will be named
Director of Operations of THINK Atlanta; (iii) Xxxx X. Xxxxxx will be named
Director of Technology of THINK Atlanta; (iv) Xxxxxx X. Xxxxxxxxx III will be
named the Director of Business Development for THINK Atlanta; and (v) Xxxxxx X.
Xxxxxxx will be named Chief Creative Officer for THINK Atlanta. The foregoing
individuals will be responsible for the day to day operations of the southeast
region of the United States as determined by THINK based upon the corporate and
business guidelines established by THINK.
(c) OPERATIONS POST-CLOSING. THINK shall relocate its existing
facilities in Atlanta into the offices currently leased by the Company at 0000
Xxxx Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx; PROVIDED that the rent paid by
the Company to lease such offices is commercially reasonable based on the
current fair market value of the 14,670 gross square feet of such space.
(d) RULE 144 REPORTING. To the extent that subsequent to the Closing
a Stockholder desires to sell pursuant to Rule 144 under the Securities Act
("Rule 144") shares of THINK Stock received by such Stockholder hereunder, but
is unable to do so solely as a result of action or inaction by THINK and such
inability continues for a period of thirty (30) days after THINK receives notice
thereof from the Stockholder, THINK agrees to use its best efforts to file a
registration statement at its sole cost and expense on an appropriate form
relating to the sale by the Stockholder of that amount of shares of THINK Stock
that such Stockholder would otherwise be able to sell pursuant to Rule 144 but
for the action or inaction of THINK, and to keep such registration effective for
a reasonable period of time; provided that, THINK shall have no obligation to
file such a registration statement if the Stockholder's inability to rely on
Rule 144 is in any way the result of such Stockholder's action or inaction..
(e) RELEASE OF STOCKHOLDER GUARANTEES. To the extent that the
subject debt does not exceed $20,000 in the aggregate, THINK agrees that it will
use its best efforts to have the Management Stockholders (and their spouses if
applicable) released from any obligations of the Company for which they are
personally liable as disclosed on Schedule 4.1(e) within thirty (30) days
following the Closing. If THINK is unable to secure a release within the stated
time period, then THINK shall pay in full the applicable obligation to the
extent such obligations do not exceed $20,000 in the aggregate.
4.2 GOVERNMENTAL FILINGS AND CONSENTS. The Company, the Stockholders and
THINK shall cooperate with one another in filing any necessary applications,
reports or other documents with any federal or state agencies, authorities or
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bodies having jurisdiction with respect to the business of the Company or the
transactions contemplated by this Agreement, and in seeking any necessary
approval, consultation or prompt favorable action of, with or by any of such
agencies, authorities or bodies.
4.3 PUBLICITY. The Company, the Stockholders and THINK will consult with
each other party hereto prior to making, releasing or otherwise disseminating
any public announcements with respect to the transactions contemplated by this
Agreement. Any public announcements permitted hereunder shall be made only at
such time and in such manner as the Company and the Stockholders (collectively
acting as one) and THINK shall mutually agree, except that any party hereto
shall be free to make such public announcements as it shall reasonably deem
necessary to comply with federal or state laws, provided that such announcement
is simultaneously delivered to the other parties hereto.
ARTICLE V
CLOSING
5.1 DELIVERIES BY THE COMPANY AND THE STOCKHOLDERS. At the Closing, the
Company and the Stockholders shall deliver the following:
(a) COPIES OF RESOLUTIONS. The Company shall furnish THINK with
certified copies of resolutions duly adopted by the board of directors of the
Company and the Stockholders authorizing the execution, delivery and performance
of the terms of this Agreement and all other necessary or proper corporate
action to enable the Company to comply with the terms of this Agreement.
(b) CERTIFICATES OF GOOD STANDING. The Company shall furnish THINK
with a certified copy of a certificate of good standing of the Company dated not
more than five (5) business days prior to the Closing Date from the State of
Georgia.
(c) OPINION OF THE COMPANY'S AND STOCKHOLDERS' COUNSEL. The Company
shall have furnished THINK with an opinion of Xxxxxx, Xxxxxxx & Xxxxxx, L.L.P.,
counsel to the Company, dated as of the Closing Date, substantially in the form
attached hereto as Exhibit 5.1(c).
(d) ACCURACY OF REPRESENTATIONS AND WARRANTIES: PERFORMANCE OF
COVENANTS. The Company and each of the Stockholders shall deliver to THINK
certificates, dated the Closing Date, and signed by an executive officer of the
Company (with respect to the Company) and by each of the Stockholders
individually, representing and affirming that: (i) each of the representations
and warranties of the Company and each of the Stockholders set forth in this
Agreement is true, correct and complete in all material respects at and as of
the Closing Date, and (ii) the Company and the Stockholders have performed and
complied in all material respects with all agreements and covenants required by
this Agreement to be performed by the Company and each of the Stockholders at or
prior to the Closing Date (except, with respect to the certificates of the
Non-Management Stockholders, such certificates shall be limited to
representations and warranties of the Non-Management Stockholders and the
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performance and compliance of such Non-Management Stockholders, and shall not be
construed to include certification as to representations and warranties of the
Management Stockholders or the Company). The Company shall also deliver a
certificate signed by the Secretary of the Company with respect to the authority
and incumbency of the officers of the Company executing this Agreement and any
documents required to be executed or delivered in connection therewith.
(e) DELIVERY OF STOCK CERTIFICATES. The Stockholders shall deliver
to THINK certificates representing all of the issued and outstanding capital
stock of the Company, which certificates shall be properly endorsed in blank or
shall be accompanied by a properly executed stock power. On the day immediately
following the Closing Date, the Company shall also deliver to THINK the
certificates representing all of the issued and outstanding capital stock of the
Company held by the Subsequent Stockholders, which certificates shall be
properly endorsed in blank or shall be accompanied by a properly executed stock
power.
(f) CONSENTS AND WAIVERS. The Company shall provide evidence that
any and all necessary consents, authorizations, orders or approvals described in
Subsection 3.1(o) above have been obtained, except as the same shall have been
waived by THINK.
(g) EMPLOYMENT AGREEMENTS OF MANAGEMENT STOCKHOLDERS. Each of the
Management Stockholders shall enter into an employment agreement substantially
in the form attached hereto as Exhibit 5. l(g), dated as of the Closing Date,
having an initial term of three (3) years and providing for each such
Stockholder's employment with THINK, an annual base salary of $80,000 and such
terms as to bonus, benefits, termination and severance as afforded other
employees of THINK serving in similar or like capacity as the Management
Stockholders. Such agreement shall contain a non-compete provision having a term
of one (1) year following termination of employment.
(h) DELIVERY OF DOCUMENTS AND OTHER INFORMATION. The Company shall
deliver to THINK all of the agreements, contracts, documents and other
instruments required to be delivered at the Closing pursuant to the provisions
of this Agreement.
5.2 DELIVERIES BY THINK. At the Closing, THINK shall deliver the
following:
(a) COPIES OF RESOLUTIONS. THINK shall furnish the Company with
certified copies of resolutions duly adopted by the board of directors of THINK
authorizing the execution, delivery and performance of the terms of this
Agreement (including the execution, delivery and performance of the Employment
Agreements referred to in Section 5.1(g) and the issuance of THINK Stock
referred to in Section 1.2) and all other necessary or proper corporate action
to enable THINK to comply with the terms of this Agreement.
(b) CERTIFICATES OF GOOD STANDING. THINK shall furnish the Company
with certified copies of certificates of good standing of THINK dated not more
than five (5) business days prior to the Closing Date from the State of Delaware
and each other jurisdiction in which THINK is qualified to do business.
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(c) OPINION OF THINK'S COUNSEL. THINK shall furnish to the Company,
at the Closing, with an opinion of Xxxxxxxxxxx & Xxxxxxxx LLP, counsel to THINK,
dated as of the Closing Date, substantially in the form attached hereto as
Exhibit 5.2(c).
(d) DELIVERY OF OFFICERS' CERTIFICATES. THINK shall deliver to the
Company and the Stockholders certificates, dated the Closing Date and signed by
an executive officer of THINK, affirming that: (i) each of the representations
and warranties of THINK is true, correct and complete in all material respects;
and (ii) THINK has performed and complied with in all material respects all
agreements and covenants required by this Agreement to be performed by THINK at
or prior to the Closing Date. THINK shall also deliver a certificate signed by
the Secretary of THINK with respect to the authority and incumbency of the
officers of THINK executing this Agreement and any documents required to be
executed or delivered in connection therewith.
(e) STOCK CERTIFICATES. Within five (5) business days of the Closing
Date, THINK shall issue and deliver to the Stockholders and Subsequent
Stockholders certificates representing the shares of THINK Stock issuable
pursuant hereto, which certificates shall be in the respective names of the
Stockholders and Subsequent Stockholders.
(f) CASH PAYMENT. THINK shall pay the cash amount of the Purchase
Price payable pursuant to Section 1.2(a) hereof to the Stockholders as set forth
in Schedule 1.2(a).
(g) EMPLOYMENT AGREEMENTS WITH STOCKHOLDERS. THINK shall enter into
an employment agreement with each of the Management Stockholders as set forth in
Subsection 5.1(g), dated as of the Closing Date, having the initial term set
forth herein and providing for each such Management Stockholder's employment
with THINK, in the form attached as Exhibit 5.1(g) hereto.
ARTICLE VI
INDEMNIFICATION AND CLAIMS
6.1 INDEMNIFICATION BY THE MANAGEMENT STOCKHOLDERS.
(a) Subject to Sections 6.1(b), 6.1(c) and 6.6 hereof, the
Management Stockholders hereby agree, jointly and severally, except as otherwise
specifically provided throughout this Agreement with respect to representations
and warranties made severally and not jointly by each Management Stockholder as
to which each such Management Stockholder hereby severally and not jointly
agrees, to indemnify and hold harmless THINK against and in respect of all
damages, claims, losses and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) reasonably incurred by THINK (all such
amounts may hereinafter be referred to as the "Damages") arising out of: (i) any
misrepresentation or breach of any representation or warranty made by the
Company or the Management Stockholders pursuant to the provisions of this
Agreement or in any statement, certificate or other document furnished by the
Company or the Management Stockholders pursuant to this Agreement; and (ii) the
nonperformance or breach of any covenant, agreement or obligation of the Company
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or the Management Stockholders contained in this Agreement which has not been
waived by THINK in writing. The Management Stockholders shall have no right to
seek contribution from the Company in the event that they are required to make
any payments hereunder.
(b) Subject to Section 3.4 hereof, the Management Stockholders shall
be obligated to indemnify THINK pursuant to this Section 6.1 with respect to
claims for Damages as to which THINK shall have given written notice to the
Management Stockholders on or before the close of business on the sixtieth
(60th) day following the first anniversary of the Closing Date; PROVIDED,
HOWEVER, that with respect to the representations and warranties made in Section
3.1(i) relating to the software developed or in development by the Company or
the Stockholders, such indemnification obligation shall extend to claims for
Damages as to which THINK shall have given written notice to the Management
Stockholders on or before the close of business on the sixtieth (60th) day
following the second anniversary of the Closing Date. The Management
Stockholders shall be obligated to indemnify THINK with respect to claims for
Damages arising out of any misrepresentation or breach of warranty made by the
Company or the Management Stockholders relating to Subsection 3.1(s) as to which
THINK shall have given notice on or before the close of business on the sixtieth
(60) day following the later of: (i) the expiration date of the statute of
limitations applicable to any indemnified federal, state, foreign or local tax
liability; or (ii) the final determination of any such tax liability, including
the final administrative and/or judicial determination thereof.
(c) Notwithstanding the indemnification provided pursuant to
Subsection 6.1(a) and 6.1(b) above, no amount shall be payable by the Management
Stockholders in indemnification hereunder or under any other provision of this
Agreement unless the aggregate amount of such Damages in respect of which the
Company or the Management Stockholders would be liable, but for operation and
application of the provisions of this Section 6.1(c), exceeds on a cumulative
basis Fifty Thousand Dollars ($50,000) and then only to the extent of such
excess. Each such Management Stockholder shall be liable for his pro rata
portion of any claim based upon that portion of the total Purchase Price he is
entitled to receive pursuant hereto.
(d) In any case where the Management Stockholders have indemnified
THINK for any Damages and THINK recovers from a third party all or any part of
the amount so indemnified by the Management Stockholders, THINK shall promptly
reimburse to the Management Stockholders the amount so recovered.
6.2 INDEMNIFICATION BY THE NON-MANAGEMENT STOCKHOLDERS.
(a) Subject to Sections 6.2(b), 6.2(c) and 6.6 hereof, the
Non-Management Stockholders hereby agree, severally and not jointly, to
indemnify and hold harmless THINK against and in respect of all Damages arising
out of: (i) any misrepresentation or breach of any representation or warranty
made by the Non-Management Stockholders pursuant to the provisions of this
Agreement or in any statement, certificate or other document furnished by the
Non-Management Stockholders pursuant to this Agreement; and (ii) the
non-performance or breach of any covenant, agreement or obligation of the
Non-Management Stockholders contained in this Agreement which has not been
waived by THINK in writing. The Non-Management Stockholders shall have no right
to seek contribution from the Company in the event they are required to make any
payments hereunder.
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(b) Subject to Section 3.4 hereof, the Non-Management Stockholders
shall be obligated to indemnify THINK pursuant to this Section 6.2 with respect
to claims for Damages as to which THINK shall have given written notice to the
Non-Management Stockholders on or before the close of business on the 60th day
following the first anniversary of the Closing Date.
(c) Notwithstanding the indemnification provided pursuant to
Subsection 6.2(a) and 6.2(b) above, no amount shall be payable by the
Non-Management Stockholders in indemnification hereunder or under any other
provision of this Agreement unless the aggregate amount of such Damages in
respect of which the Non-Management Stockholders would be liable, but for
operation and application of the provisions of this Section 6.2(c) exceeds on a
cumulative basis $50,000 and then only to the extent of such excess. Each
Non-Management Stockholder shall be liable for his pro rata portion of any claim
based upon that portion of the total Purchase Price he is entitled to receive
pursuant hereto.
6.3 CLAIMS AGAINST THINK. With respect to claims or demands by third
parties, whenever THINK shall have received notice that such a claim or demand
has been asserted or threatened which, if valid, would be subject to
indemnification under Section 6.1 or Section 6.2 hereof, THINK shall as soon as
reasonably possible and in any event within thirty (30) days of receipt of such
notice, notify the Management Stockholders or the Non-Management Stockholders,
as applicable, of such claim or demand and of all relevant facts within its
knowledge which relate thereto. The Management Stockholders or the
Non-Management Stockholders, as applicable, shall then have the right at their
own expense to undertake the defense of any such claims or demands utilizing
counsel selected by the Management Stockholders or the Non-Management
Stockholders, as applicable, and approved by THINK, which approval shall not be
unreasonably withheld. In the event that the Management Stockholders or the
Non-Management Stockholders, as applicable, should fail to give notice of the
intention to undertake the defense of any such claim or demand within sixty (60)
days after receiving notice that it has been asserted or threatened, THINK shall
have the right to defend, satisfy and discharge the same by payment, compromise
or otherwise and shall give written notice of any such payment, compromise or
settlement to the Management Stockholders or the Non-Management Stockholders, as
applicable.
6.4 INDEMNIFICATION BY THINK.
(a) Subject to Sections 6.4(b) and 6.6 hereof, THINK hereby agrees
to indemnify and hold harmless the Company, the Stockholders and the Subsequent
Stockholders against and in respect of all damages, claims, losses and expenses
(including without limitation, reasonable attorneys' fees and disbursements)
reasonably incurred by the Stockholders or the Subsequent Stockholders with
respect thereto (all such amounts may hereinafter be referred to as "Stockholder
Damages") arising out of: (i) any misrepresentation or breach of any
representation or warranty made by THINK pursuant to the provisions of this
Agreement or in any statement, certificate or other document furnished by THINK
pursuant to this Agreement; and (ii) the nonperformance or breach of any
covenant, agreement or obligation of THINK which has not been waived by the
Stockholders and the Subsequent Stockholders unanimously in writing; provided,
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however, that THINK's indemnification obligations to the Subsequent Stockholders
shall be limited to Stockholder Damages arising out of the provisions of this
Agreement to which the Subsequent Stockholders are third-party beneficiaries as
set forth in Section 7.4 hereof.
(b) Subject to Section 3.4 hereof, THINK shall be obligated to
indemnify the Stockholders pursuant to this Section 6.4 only with respect to
claims for Stockholder Damages as to which the Stockholders or the Subsequent
Stockholders shall have given written notice to THINK on or before the close of
business on the sixtieth (60th) day following the first anniversary of the
Closing Date.
(c) Notwithstanding the indemnification provided pursuant to
Subsection 6.4(a) above, no amount shall be payable by THINK in indemnification
hereunder or under any other provision of this Agreement unless the aggregate
amount of Stockholder Damages in respect of which THINK would be liable, but for
operation and application of the provisions of this subsection, exceeds on a
cumulative basis Fifty Thousand Dollars ($50,000) and then only to the extent of
such excess.
(d) In any case where the Non-Management Stockholders have
indemnified THINK for any Damages and THINK recovers from a third party all or
any part of the amount so indemnified by the Non-Management Stockholders, THINK
shall promptly reimburse to the Non-Management Stockholders the amount so
recovered.
(e) In any case where THINK has indemnified the Stockholders or the
Subsequent Stockholders, as the case may be, for any Stockholder Damages and the
Stockholders or the Subsequent Stockholders, as the case may be, recover from a
third party all or any part of the amount so indemnified by THINK, the
Stockholders or the Subsequent Stockholders, as the case may be, shall promptly
reimburse to THINK the amount so recovered.
6.5 CLAIMS AGAINST THE STOCKHOLDERS. With respect to claims or demands by
third parties, whenever the Stockholders or Subsequent Stockholders, as the case
may be, shall have received notice that such a claim or demand has been asserted
or threatened, which, if valid, would be subject to indemnification under
Section 6.5 hereof, the Stockholders or Subsequent Stockholders, as the case may
be, shall as soon as reasonably possible and in any event within thirty (30)
days of receipt of such notice, notify THINK of such claim or demand and of all
relevant facts within its knowledge which relate thereto. THINK shall have the
right at their own expense to undertake the defense of any such claim or demand
utilizing counsel selected by THINK and approved by the Stockholders or
Subsequent Stockholders, as the case may be. In the event that THINK should fail
to give notice of its intention to undertake the defense of any such claim or
demand within sixty (60) days after receiving notice that it has been asserted
or threatened, the Stockholders or Subsequent Stockholders, as the case may be,
shall have the right to defend, satisfy and discharge the same by payment,
compromise or otherwise and shall give written notice of any such payment,
compromise or settlement to THINK.
6.6 LIMITATION OF LIABILITY. THINK, the Company and the Stockholders agree
that (a) the liability of the Stockholders in the aggregate under this Agreement
shall be limited to the Purchase Price actually received, and (b) the liability
of THINK under this Agreement shall be limited to the Purchase Price actually
paid.
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ARTICLE VII
MISCELLANEOUS
7.1 FEES AND EXPENSES. Reasonable costs and expenses of the Stockholders
and the Company incident to negotiation, execution, delivery and performance of
the terms of this Agreement and the consummation of the transactions
contemplated hereby shall be paid by THINK at the Closing, and THINK shall pay
its own expenses incident to the negotiation, execution, delivery and
performance of the terms of this Agreement and the consummation of the
transactions contemplated hereby.
7.2 MODIFICATION, AMENDMENTS AND WAIVER. The parties hereto may amend,
modify or otherwise waive any provision of this Agreement by unanimous consent,
provided that such consent and any amendment, modification or waiver is in
writing and is signed by each of the parties hereto.
7.3 ASSIGNMENT. None of the parties hereto shall have the authority to
assign its respective rights or obligations under this Agreement without the
prior written consent of a majority of the Management Stockholders, except that
THINK may assign all or any portion of its respective rights hereunder without
the prior written consent of the Company or the Stockholders in the event of a
combination, consolidation or merger of THINK with or into, the transfer by
THINK of all or substantially all of its assets to, or the formation by THINK of
a partnership or joint venture with, another corporation or other entity, or the
consummation of another kind of corporate combination, provided that, the
corporation resulting from or surviving such combination, consolidation or
merger, or to which such assets are transferred, or such partnership or joint
venture, assumes this Agreement and all obligations and undertakings of THINK to
the Stockholders hereunder. Upon such a consolidation, merger, transfer of
assets or formation of such partnership or joint venture, this Agreement shall
inure to the benefit of, be assumed by, and be binding upon such resulting or
surviving transferee corporation or such partnership or joint venture, and the
term "THINK," as used in this Agreement, shall mean such corporation,
partnership or joint venture, or other entity, and this Agreement shall continue
in full force and effect and shall entitle the Stockholders and their respective
heirs, beneficiaries and representatives to exactly the same rights as would
have been their entitlement had such combination, consolidation, merger,
transfer of assets or formation of such partnership or joint venture not
occurred. The surviving company following the change in control shall expressly
assume in writing THINK's obligations under this Agreement, and the Company and
the Stockholders shall execute such documents as are necessary in order to
effectuate such assignments.
7.4 BURDEN AND BENEFIT. This Agreement shall be binding upon and, to the
extent permitted in this Agreement, shall inure to the benefit of the parties
and their respective successors and assigns. The provisions of Sections 3.3,
4.1(d), 6.4, 6.5, and 6.6 shall expressly benefit the Subsequent Stockholders as
third-party beneficiaries thereof, to the same extent as if such Subsequent
Stockholders had been signatories to this Agreement. In the event of a default
by the Company or the Stockholders of any of their respective obligations
hereunder, the sole and exclusive recourse and remedy of THINK shall be against
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EXECUTION COPY
the Company and the Stockholders, as the case may be, and any of the Company's
or the Stockholder's assets; under no circumstances shall any officer or
director of the Company be liable in law or equity for any obligations of the
Company or the Stockholders hereunder. In the event of a default by THINK of any
of its obligations hereunder, the sole and exclusive recourse and remedy of the
Stockholders and the Company shall be against THINK and its assets; under no
circumstances shall any officer, director, stockholder or affiliate of THINK be
liable in law or equity for any obligations of THINK hereunder.
7.5 BROKERS. The Company and the Stockholders represent and warrant to
THINK that there are no brokers or finders entitled to any brokerage or finder's
fee or other commission or fee based upon arrangements made by or on behalf of
the Company or the Stockholders or any other person in connection with this
Agreement or any of the transactions contemplated hereby. THINK represents and
warrants to the Company and the Stockholders that no other broker or finder is
entitled to any brokerage or finder's fee or other commission or fee based upon
arrangements made by or on behalf of THINK in connection with this Agreement or
any of the transactions contemplated hereby, other than fees or commissions for
which THINK shall be solely responsible.
7.6 ENTIRE AGREEMENT. This Agreement and the schedules, exhibits, lists
and other documents referred to herein contain the entire agreement among the
parties hereto with respect to the transactions contemplated hereby and
supersede all prior agreements with respect thereto, whether written or oral.
7.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of laws thereof.
7.8 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party hereto shall be in writing and delivered
personally, by facsimile transmission, or sent by commercial expedited delivery
service or registered or certified mail (return receipt requested), postage
prepaid, addressed as follows:
If to the Company
or the Stockholders: Interweb, Inc.
0000 Xxxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx, 00000
Attn: Xxxxxxx P.H. duPont
Facsimile: (000) 000-0000
with a copy to: Xxxxxx, Xxxxxxx & Xxxxxx, L.L.P.
1600 Atlanta Financial Center
0000 Xxxxxxxxx Xxxx, XX
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
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If to THINK: THINK New Ideas, Inc.
00 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If sent as aforesaid, the date any such notice
shall be deemed to have been delivered on the date of transmission of a
facsimile, the day after delivery to a commercial overnight delivery service, or
five days after delivery into a United States Postal facility.
7.9 COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
7.10 RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
7.11 SEVERABILITY OF PROVISIONS. The provisions of this Agreement shall be
considered severable in the event that any of such provisions are held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable.
Such invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are valid and enforceable and which are as
similar as possible in term and intent to those provisions deemed to be invalid,
void or otherwise unenforceable. Notwithstanding the foregoing, the remaining
provisions hereof shall remain enforceable to the fullest extent permitted by
law.
7.12 HEADINGS. The headings set forth in the articles and sections of this
Agreement and in the exhibits and the schedules to this Agreement are inserted
for convenience of reference only and shall not be deemed to constitute a part
hereof.
7.13 KNOWLEDGE STANDARD. When used in this Agreement, the phrase "to the
best knowledge of, " "knowledge of, " "known to" or similar phrases shall mean
the actual knowledge of: (i) with respect to THINK, the officers and directors
of THINK; (ii) with respect to the Company, the officers and directors of the
Company; (iii) with respect to the Management Stockholders, the individuals
listed on Schedule A hereto; and (iv) with respect to the Non-Management
Stockholders, the individuals listed on Schedule B hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date and year first above written.
ATTEST: THINK NEW IDEAS, INC.
By: ______________________________ By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Name: _________________________ Xxxxxx X. Xxxxx, President
Title:_________________________
ATTEST: INTERWEB, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx By: /s/ Xxxxxxx P. H. DuPont
------------------------------- ---------------------------------
Name: Xxxxxx X. Xxxxxxxxx Name: Xxxxxxx P. H. DuPont
Title: Secretary Title: President
WITNESS: THE STOCKHOLDERS:
signed /s/ W. Xxxxxxxx Xxxx
---------------------------------- -------------------------------------
W. Xxxxxxxx Xxxx
WITNESS:
signed /s/ Xxxxxxx P.H. xxXxxx
---------------------------------- -------------------------------------
Xxxxxxx P.H. duPont
WITNESS:
signed /s/ Xxxxxx X. Xxxxxxxxx, III
---------------------------------- -------------------------------------
Xxxxxx X. Xxxxxxxxx, III
WITNESS:
signed /s/ Xxxx X. Xxxxxx
---------------------------------- -------------------------------------
Xxxx X. Xxxxxx
WITNESS:
signed /s/ Xxxxxx X. Xxxxxxx
---------------------------------- -------------------------------------
Xxxxxx X. Xxxxxxx
WITNESS:
signed /s/ Xxxxxx X. Xxxxxx III
---------------------------------- -------------------------------------
Xxxxxx X. Xxxxxx III
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WITNESS:
signed /s/ Xxxxxx Xxxxx Xxxxxx
---------------------------------- -------------------------------------
Xxxxxx Xxxxx Xxxxxx
WITNESS:
signed /s/ Xxxxxxx Xxxxxxx duPont
---------------------------------- -------------------------------------
Xxxxxxx Xxxxxxx xxXxxx
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SCHEDULE A
MANAGEMENT STOCKHOLDERS
Percentage Ownership
Stockholder No. of Shares as of Closing Date
----------- ------------- ------------------
Xxxxxxx P.H. duPont 15,500 14.14%
Xxxxxx X. Xxxxxxxxx 28,872 26.33%
W. Xxxxxxxx Xxxx 21,978 20.04%
Xxxx X. Xxxxxx 23,650 21.57%
Xxxxxx X. Xxxxxxx 4,386 4.00%
------ -----
TOTAL 94,386 86.08%
EXECUTION COPY
SCHEDULE B
NON-MANAGEMENT STOCKHOLDERS
Percentage Ownership
Stockholder No. of Shares as of Closing Date
----------- ------------- ------------------
Xxxxxx X. Xxxxxx 5,263 4.80%
Xxxxxx X. Xxxxxx 5,000 4.56%
Xxxxxxx Xxxxxxx xxXxxx 5,000 4.56%
----- -----
TOTAL 15,263 13.92%
EXECUTION COPY
SCHEDULE C
OUTSTANDING OPTIONS GRANTED UNDER INTERWEB, INC. STOCK INCENTIVE PLAN
Date of Number of
Optionee Grant Type of Option Shares Exercise Price
-------- ----- -------------- ------ --------------
Xxxxx Xxxxxxx 12/31/97 Incentive 25 $44.65
Xxxxxxxxx Xxxxxxx 12/31/97 Incentive 9 $44.65
Xxxxxxx Xxxxx 12/31/97 Incentive 44 $44.65
Xxxxx Xxxxx 12/31/97 Incentive 74 $44.65
Xxxxxxx Xxxxx 12/31/97 Incentive 64 $44.65
Xxxxxxx Xxxxxxxxx 12/31/97 Incentive 22 $44.65
Xxxxxx Xxxxxx 12/31/97 Incentive 53 $44.65
Xxx Xxxxxxxx 12/31/97 Incentive 39 $44.65
Xxxxxxx Xxxxxx 12/31/97 Incentive 24 $44.65
Xxxx Xxxxxxxxx 12/31/97 Incentive 48 $44.65
Xxxxxx Xxxxx 12/31/97 Incentive 60 $44.65
Xxxx XxXxxxxx 12/31/97 Incentive 57 $44.65
Xxxxx Xxxxx 12/31/97 Incentive 26 $44.65
Xxxxxxx Xxxxxxx 12/31/97 Incentive 49 $44.65
Xxxxxxxx Xxxxxx 12/31/97 Incentive 45 $44.65
Xxxx Xxxxx 12/31/97 Incentive 67 $44.65
Xxxx X. Xxxxx 12/31/97 Incentive 21 $44.65
Xxxxx Xxxx 12/31/97 Incentive 59 $44.65
Xxx Xxxxxx 12/31/97 Incentive 64 $44.65
Xxxx Xxxxx 12/31/97 Incentive 139 $44.65
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Xxxx Xxxxx 12/31/97 Incentive 15 $44.65
Xxxx Xxxxxx 12/31/97 Incentive 43 $44.65
Xxxx Xxxxxxx 12/31/97 Incentive 67 $44.65
Xxxx Xxxx 12/31/97 Incentive 96 $44.65
Xxxx Xxxxxxxx 12/31/97 Incentive 477 $44.65
Xxxxx Xxxxxxx 12/31/97 Incentive 44 $44.65
Xxxx Xxxxxxxxx 12/31/97 Incentive 477 $44.65
Xxxxxx Xxxxxxx 12/31/97 Incentive 20 $44.65
Xxxxx Xxxxxxx 12/31/97 Incentive 75 $44.65
Xxxxxx Xxxxxxxxx 12/31/97 Incentive 448 $44.65
Xxxxxxx xxXxxx 12/31/97 Incentive 448 $44.65
Xxxxxx Xxxxxxx 12/31/97 Incentive 239 $44.65
Xxxx Xxxxxx 12/31/97 Incentive 448 $44.65
W. Xxxxxxxx Xxxx 12/31/97 Incentive 896 $44.65
Xxxxxxx Xxxxxx 12/31/97 Nonqualified 200 $44.65
-------------
TOTAL 4,982
