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| Exhibit 2.5 |
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| Agreement and Plan of Merger |
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| By and Among |
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| Xxxxx Communications, Inc. |
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| ACI Telecommunications Financial Services Corporation |
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| Primal Systems, Inc. |
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| Xxxx X. Xxxxxxx |
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| Xxxx Xxxxxx |
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| Xxxxxx X. Xxxxxxx |
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| and |
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| Xxxxx Xxxxxx |
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| ______________________________________ |
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| DATED AS OF MARCH 19, 1999 |
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| ______________________________________ |
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|______________________________________________________________________________|
Table of Contents
PAGE
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1. TERMS OF THE MERGER.......................................................2
1.1 Statutory Merger...................................................2
1.2 Effective Time.....................................................2
1.3 Effects of the Merger..............................................2
1.4 Certificate of Incorporation.......................................3
1.5 Bylaws.............................................................3
1.6 Directors and Officers.............................................3
2. CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES........................3
2.1 Merger Consideration; Conversion and Cancellation of Securities....3
2.2 Dissenting Shares..................................................4
2.3 Exchange of Certificates...........................................5
2.4 Stock Transfer Books...............................................8
3. CLOSING...................................................................8
3.1 Closing............................................................8
3.2 Closing Obligations................................................8
3.3 Adjustment of Merger Consideration; Contingent Merger C
Consideration.....................................................9
3.4 Contingent Pay-Out Procedures.....................................11
4. REPRESENTATIONS AND WARRANTIES OF PRIMAL.................................11
4.1 Organization and Good Standing....................................11
4.2 Authority; No Conflict............................................12
4.3 Capitalization....................................................13
4.4 Financial Statements..............................................14
4.5 Books and Records.................................................14
4.6 Title to Properties; Encumbrances.................................15
4.7 Condition and Sufficiency of Assets...............................16
4.8 Accounts Receivable...............................................16
4.9 Inventory.........................................................16
4.10 No Undisclosed Liabilities........................................16
4.11 Taxes.............................................................17
4.12 No Material Adverse Change........................................17
4.13 Employee Benefits.................................................18
4.14 Compliance with Legal Requirements; Governmental Authorizations...19
4.15 Legal Proceedings; Orders.........................................20
4.16 Absence of Certain Changes and Events.............................21
4.17 Contracts; No Defaults............................................22
4.18 Insurance.........................................................25
(i)
Table of Contents
(Continued)
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4.19 Environmental Matters.............................................27
4.20 Employees.........................................................28
4.21 Labor Relations; Compliance.......................................29
4.22 Intellectual Property.............................................29
4.23 Relationships with Related Persons................................31
4.24 Projections of Financial Performance..............................32
4.25 Tax Matters.......................................................32
4.26 Certain Business Practices........................................32
4.27 Interest Rate and Foreign Exchange Contracts......................32
4.28 Year 2000 Matters.................................................32
4.29 Proxy Statement...................................................33
4.30 Brokers or Finders................................................33
4.31 Disclosure........................................................33
5. REPRESENTATIONS AND WARRANTIES OF XXXXX..................................34
5.1 Organization and Good Standing....................................34
5.2 Authority; No Conflict............................................34
5.3 Capitalization....................................................35
5.4 Financial Statements..............................................36
5.5 Books and Records.................................................37
5.6 Title to Properties; Encumbrances.................................37
5.7 Accounts Receivable...............................................38
5.8 No Undisclosed Liabilities........................................38
5.9 Taxes.............................................................38
5.10 No Material Adverse Change........................................38
5.11 Compliance with Legal Requirements; Governmental Authorizations...39
5.12 Legal Proceedings; Orders.........................................39
5.13 Absence of Certain Changes and Events.............................40
5.14 Contracts; No Defaults............................................41
5.15 Insurance.........................................................42
5.16 Proxy Statement...................................................42
5.17 Tax Matters.......................................................43
5.18 Brokers or Finders................................................43
5.19 Disclosure........................................................43
(ii)
Table of Contents
(Continued)
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6. COVENANTS OF PRIMAL PRIOR TO CLOSING DATE................................43
6.1 Access and Investigation..........................................43
6.2 Delivery of Primal Disclosure Letter..............................44
6.3 Operation of the Businesses of the Acquired Companies.............44
6.4 Negative Covenant.................................................45
6.5 Required Approvals................................................45
6.6 Notification......................................................45
6.7 No Negotiation....................................................46
6.8 Best Efforts......................................................46
7. COVENANTS OF XXXXX PRIOR TO CLOSING DATE.................................46
7.1 Access and Investigation..........................................46
7.2 Approvals of Governmental Bodies..................................46
7.3 Notification......................................................47
7.4 Best Efforts......................................................47
8. CONDITIONS PRECEDENT TO XXXXX'X OBLIGATION TO CLOSE......................47
8.1 Accuracy of Representations.......................................47
8.2 Primal's Performance..............................................48
8.3 Consents..........................................................48
8.4 Additional Documents..............................................48
8.5 No Proceedings....................................................48
8.6 No Claim Regarding Stock Ownership or Merger Consideration........49
8.7 No Prohibition....................................................49
9. CONDITIONS PRECEDENT TO PRIMAL'S OBLIGATION TO CLOSE.....................49
9.1 Accuracy of Representations.......................................49
9.2 Xxxxx'x Performance...............................................49
9.3 Consents..........................................................50
9.4 Additional Documents..............................................50
9.5 No Injunction.....................................................50
10. ADDITIONAL AGREEMENTS....................................................50
10.1 Meeting of Stockholders...........................................50
10.2 Tax Treatment.....................................................50
10.3 Conveyance Taxes..................................................51
10.4 Voting Agreement..................................................51
(iii)
Table of Contents
(Continued)
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11. TERMINATION..............................................................51
11.1 Termination Events................................................51
11.2 Effect of Termination.............................................52
11.3 Purchase of 20% of the Shares of Primal of Primal Common Stock....52
12. INDEMNIFICATION; REMEDIES................................................53
12.1 Survival; Right to Indemnification Not Affected By Knowledge......53
12.2 Indemnification and Payment of Damages By Stockholders............53
12.3 Time Limitations..................................................54
12.4 Limitations on Amount-- Stockholders..............................54
12.5 Escrow; Right of Set-Off..........................................55
12.6 Procedure for Indemnification--Third-Party Claims.................57
12.7 Procedure for Indemnification--Other Claims.......................58
13. DEFINITIONS; CONSTRUCTION................................................58
"Acquired Companies".....................................................58
"Applicable Contract"....................................................58
"Xxxxx"..................................................................58
"Xxxxx Applicable Contract"..............................................58
"Xxxxx Common Stock".....................................................58
"Xxxxx Disclosure Letter"................................................58
"Xxxxx Material Adverse Effect"..........................................58
"Xxxxx Preferred Stock"..................................................59
"Xxxxx Stock"............................................................59
"Balance Sheet"..........................................................59
"Best Efforts"...........................................................59
"Breach".................................................................59
"CGCL"...................................................................59
"Closing"................................................................59
"Closing Date"...........................................................59
"Consent"................................................................59
"Constituent Corporations"...............................................60
"Contemplated Transactions"..............................................60
"Contract"...............................................................60
"Corsair Agreement"......................................................60
"Damages"................................................................60
"DGCL"...................................................................60
(iv)
Table of Contents
(Continued)
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"Employment Agreements"..................................................60
"Encumbrance"............................................................60
"End-User Licenses"......................................................60
"Environment"............................................................60
"Environmental Law"......................................................61
"Environmental Liabilities"..............................................61
"ERISA"..................................................................62
"Escrow Agreement".......................................................62
"GAAP"...................................................................62
"Governmental Authorization".............................................62
"Governmental Body"......................................................62
"Hazardous Materials"....................................................63
"HSR Act"................................................................63
"Intellectual Property Assets"...........................................63
"Interim Balance Sheet"..................................................63
"IRC"....................................................................63
"IRS"....................................................................63
"Knowledge"..............................................................63
"Legal Requirement"......................................................64
"Material Xxxxx Contract"................................................64
"Merger".................................................................64
"Merger Sub".............................................................64
"Occupational Safety and Health Law".....................................64
"Order"..................................................................64
"Ordinary Course of Business"............................................64
"Organizational Documents"...............................................64
"Outfront Software"......................................................65
"Person".................................................................65
"Plan"...................................................................65
"Primal Disclosure Letter"...............................................65
"Primal Intellectual Property Asset".....................................65
"Primal Material Adverse Effect..........................................65
"Proceeding".............................................................65
"Related Person".........................................................66
"Release"................................................................66
"Representative".........................................................67
"Securities Act".........................................................67
"Securityholder Agent"...................................................67
(v)
Table of Contents
(Continued)
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"Software" ............................................................67
"Source Code"............................................................67
"Stockholders"...........................................................67
"Stockholders' Releases".................................................67
"Subscriber Assets"......................................................67
"Subsidiary" ............................................................67
"Surviving Corporation"..................................................68
"Tax" ............................................................68
"Tax Return" ............................................................68
"Threatened" ............................................................68
"Trading Day"............................................................68
"Value" ............................................................68
"WBS" ............................................................69
"WBS Transaction"........................................................69
14. GENERAL PROVISIONS.......................................................69
14.1 Expenses..........................................................69
14.2 Public Announcements..............................................69
14.3 Confidentiality...................................................69
14.4 Notices...........................................................70
14.5 Jurisdiction; Service of Process..................................71
14.6 Further Assurances................................................71
14.7 Waiver............................................................71
14.8 Entire Agreement and Modification.................................72
14.9 Disclosure Letters................................................72
14.10 Assignments, Successors, and Third-Party Rights...................72
14.11 Severability......................................................73
14.12 Interpretation....................................................73
14.13 Time of Essence...................................................73
14.14 Governing Law.....................................................74
14.15 Counterparts......................................................74
Annex A Form of Voting Agreement
Annex B Certificate of Designations of Series F Junior Participating
Convertible Preferred Stock
(vi)
Table of Contents
(Continued)
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Exhibit 3.2(a)(i) Form of Stockholders' Releases
Exhibit 3.2(a)(ii) Form of Employment Agreements
Exhibit 3.2(a)(iii) Form of Lockup Letters
Exhibit 3.2(b) Escrow Agreement
Exhibit 3.2(d) Investors Rights Agreement
Exhibit 8.4(b) Form of Estoppel Certificates
(vii)
Agreement and Plan of Merger
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of March
19, 1999, by and among Xxxxx Communications, Inc., a Delaware corporation
("Xxxxx"), ACI Telecommunications Financial Services Corporation, a Delaware
corporation and wholly owned subsidiary of Xxxxx ("Merger Sub"), Primal Systems,
Inc., a California corporation (the "Primal"), Xxxx X. Xxxxxxx, an individual
resident in San Juan Capistrano, California ("Xxxxxxx"), Xxxx Xxxxxx, an
individual resident in Orange, California ("Xxxxxx"), Xxxxxx X. Xxxxxxx, an
individual resident in Aliso Viejo, California ("Xxxxxxx"), and Xxxxx Xxxxxx, an
individual resident in Irvine, California ("Xxxxxx," and, collectively with
Nielsen, Faltys, and Xxxxxxx, the "Stockholders").
Recitals
A. The Boards of Directors of Xxxxx, Merger Sub and Primal deem it
advisable and in the best interests of their respective companies and their
respective stockholders to enter into a business combination by means of the
merger of Primal with and into Merger Sub under the terms of this Agreement and
have approved and adopted this Agreement.
B. Concurrently with the execution and delivery of this Agreement and as
a condition and inducement to the willingness of Xxxxx and Merger Sub to enter
into this Agreement, certain holders of common stock, with no par value per
share (the "Primal Common Stock"), of Primal have each entered into a Voting
Agreement in the form attached hereto as Annex A (the "Voting Agreement") dated
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as of the date hereof pursuant to which such holders have agreed to vote their
shares of Primal Common Stock in the manner set forth therein.
C. Upon the terms and subject to the conditions of this Agreement and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL") and the General Corporation Law of the State of California (the "CGCL"),
Primal will merge with and into Merger Sub (the "Merger") and Merger Sub will
survive (the "Surviving Corporation").
D. For United States federal income tax purposes, it is intended that the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement shall be, and is hereby, adopted as a plan of reorganization for
purposes of Section 368 of the Code.
E. For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the terms defined in Section
13 have the meanings assigned to them or referred to in Section 13, and include
the plural as well as the singular.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto, intending to be legally bound, agree as follows:
Agreement
1. TERMS OF THE MERGER
1.1 Statutory Merger
Subject to the terms and conditions and in reliance upon the representations,
warranties, covenants and agreements contained herein, Primal will merge with
and into Merger Sub at the Effective Time. The terms and conditions of the
Merger and the mode of carrying the same into effect will be as set forth in
this Agreement. As a result of the Merger, the separate corporate existence of
Primal will cease and Merger Sub will continue as the surviving corporation and
as a wholly owned subsidiary of Xxxxx. Merger Sub as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
1.2 Effective Time
Subject to the terms and conditions set forth in this Agreement (a) an agreement
of merger and accompanying officers' certificates (together, the "CA Agreement
of Merger") shall be duly executed and acknowledged by Xxxxx, Merger Sub and
Primal and thereafter delivered to the Secretary of State of the State of
California for filing pursuant to the CGCL on the Closing Date, and (b) a
Certificate of Merger (the "Merger Certificate") shall be duly executed and
acknowledged by Merger Sub and thereafter delivered to the Secretary of State of
the State of Delaware for filing pursuant to the DGCL on the Closing Date. The
Merger shall become effective at such time as a properly executed copy of the CA
Agreement of Merger is duly filed with the Secretary of State of the State of
California in accordance with the CGCL, or such later time as Merger Sub and
Primal may agree upon and set forth in the CA Agreement of Merger and the Merger
Certificate (the time the Merger becomes effective being referred to herein as
the "Effective Time").
1.3 Effects of the Merger
On and after the Effective Time (a) the Merger in all respects shall have the
effect provided for in Section 259 of the DGCL, in Section 1107 of the CGCL and
in this Agreement; (b) the Surviving Corporation shall possess all the rights,
privileges, powers and franchises of a public as well as of a private nature of
each of the Constituent Corporations; (c) the Surviving Corporation shall be
subject to all of the restrictions, disabilities and duties of each of the
Constituent Corporations; (d) all property, real, personal and mixed, and all
debts due to either of the Constituent Corporations on whatever account, as well
as all other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Surviving Corporation; (e) all property,
rights, privileges, powers and franchises and all and every other interest of
each of the Constituent Corporations shall be thereafter the property of the
Surviving Corporation as they were of the respective Constituent Corporations,
and the title to real estate (if any) vested by deed or otherwise, in either of
the Constituent Corporations, shall not revert or be in any way impaired; (f)
all rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired;
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and (g) all debts, liabilities and duties of the Constituent Corporations shall
thenceforth attach to the Surviving Corporation and may be enforced against it
to the same extent as if said debts, liabilities and duties had been incurred by
it.
1.4 Certificate of Incorporation
Unless otherwise determined by Xxxxx prior to the Effective Time, at the
Effective Time, the Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation, except that Article I of the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read in its entirety as follows: "The name of the corporation is Primal
Solutions, Inc."
1.5 Bylaws
Unless otherwise determined by Xxxxx, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended.
1.6 Directors and Officers
The director(s) of Merger Sub immediately prior to the Effective Time shall be
the director(s) of the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and Bylaws of the Surviving Corporation.
The officers of Merger Sub immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, each to hold office in accordance
with the Bylaws of the Surviving Corporation.
2. CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
2.1 Merger Consideration; Conversion and Cancellation of Securities
The maximum number of shares of Xxxxx Preferred Stock to be issued in exchange
for the acquisition by Xxxxx of all outstanding shares of Primal Common Stock
shall not exceed the result of (i) 4,000,000 shares of Xxxxx Preferred Stock
minus (ii) such number of shares of the Xxxxx Preferred Stock as would, at the
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Effective Time, be convertible into the number of shares of Xxxxx Common Stock
to be reserved for issuance upon the exercise of options to be granted by Xxxxx
to former employees of Primal (such result being herein referred to as the
"Merger Consideration"). At the Effective Time, by virtue of the Merger and
without any action on the part of the holders of any of the following
securities:
(a) Subject to the other provisions of this Section 2, each share of Primal
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding any Primal Common Stock described in Section 2.1(c) will be converted
into the right to receive that fraction of a share of Xxxxx Preferred Stock
equal to the product (the "Preferred Exchange Ratio") of (1) one share
-3-
of Primal Common Stock multiplied by (2) a fraction, the numerator of which is
the Merger Consideration and the denominator of which is the lesser of (A)
11,311,196 or (B) the actual number of shares of Primal Common Stock outstanding
immediately prior to the Effective Time. Notwithstanding the foregoing, if
between the date of this Agreement and the Effective Time the outstanding shares
of Xxxxx Stock or Primal Common Stock shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, conversion,
consolidation, combination or exchange of shares, the Preferred Exchange Ratio
will be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, conversion, consolidation,
combination or exchange of shares.
(b) Subject to the other provisions of this Section 2, all shares of Primal
Common Stock will, upon conversion thereof into shares of Xxxxx Preferred Stock
at the Effective Time, cease to be outstanding and will automatically be
canceled and retired, and each certificate previously evidencing Primal Common
Stock outstanding immediately prior to the Effective Time (other than Primal
Common Stock described in Section 2.1(c) will thereafter represent only the
right to receive (i) the number of whole shares of Xxxxx Preferred Stock and
(ii) as provided in Section 3.2(e), cash in lieu of fractional shares into which
the shares of Primal Common Stock represented by such certificate have been
converted pursuant to this Section 2.1(b). The holders of certificates
previously evidencing Primal Common Stock will cease to have any rights with
respect to such Primal Common Stock except as otherwise provided herein or by
Law.
(c) Notwithstanding any provision of this Agreement to the contrary, each
share of Primal Common Stock held in the treasury of Primal and each share of
Primal Common Stock, if any, owned by Xxxxx or any direct or indirect wholly
owned Subsidiary of Xxxxx or of Primal immediately prior to the Effective Time
will be canceled.
(d) Each share of common stock, par value $.01 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
2.2 Dissenting Shares
(a) Notwithstanding any provision of this Agreement to the contrary, any
shares of Primal Common Stock held by a holder who has demanded and perfected
appraisal or dissenters' rights for such shares in accordance with the CGCL and
who, as of the Effective Time, has not effectively withdrawn or lost such
appraisal or dissenters' rights ("Dissenting Shares") shall not be converted
into or represent a right to receive Xxxxx Preferred Stock pursuant to Section
2.1, but the holder thereof shall only be entitled to such rights as are granted
by the CGCL.
(b) Notwithstanding the provisions of subsection (a), if any holder of
shares of Primal Common Stock who demands appraisal of such shares under the
CGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the
-4-
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Xxxxx
Preferred Stock and payment for any fractional share as provided in Section
2.3(e), without interest thereon, upon surrender of the certificate representing
such shares.
(c) Primal shall give Xxxxx (i) prompt notice of any written demands for
appraisal of any shares of Primal Common Stock, withdrawals of such demands, and
any other instruments served pursuant to the CGCL and received by Primal and
(ii) the opportunity to participate in all negotiations and proceedings with
respect to demands for appraisal under the CGCL. Primal shall not, except with
the prior written consent of Xxxxx, voluntarily make any payment with respect to
any demands for appraisal of capital stock of Primal or offer to settle or
settle any such demands.
2.3 Exchange of Certificates
(a) Exchange Fund; Escrow. On the day of the Effective Time, Xxxxx will
deposit, or cause to be deposited, with the Exchange Agent, for the benefit of
the former holders of Primal Common Stock, for exchange in accordance with this
Section 2, through the Exchange Agent, certificates representing no more than
2,000,000 shares of Xxxxx Preferred Stock issuable pursuant to Section 2.1 in
exchange for certificates representing Primal Common Stock immediately prior to
the Effective Time (such shares of Xxxxx Preferred Stock so deposited, together
with cash realized and held by the Exchange Agent for the benefit of such former
holders of Primal Common Stock in accordance with Section 2.3(e), being referred
to as the "Exchange Fund"). Thereafter, Xxxxx will deposit, or cause to be
deposited, with the Exchange Agent, for the benefit of any former holders of
Primal Common Stock who have not yet surrendered their shares of Primal Common
Stock for exchange, at the appropriate payment date, the amount of dividends or
other distributions, with a record date after the Effective Time but prior to
surrender, payable with respect to any shares of Xxxxx Preferred Stock remaining
in the Exchange Fund on such record date. The Exchange Agent will, pursuant to
irrevocable instructions from Xxxxx, deliver Xxxxx Preferred Stock and any such
dividends or distributions related thereto, in exchange for certificates
theretofore evidencing Primal Common Stock surrendered to the Exchange Agent
pursuant to Section 2.3(c).
On the day of the Effective Time, Xxxxx will deposit, or cause to be deposited,
with the Escrow Agent 2,000,000 shares of the Xxxxx Preferred Stock (the "Escrow
Shares") to be held by the Escrow Agent pursuant to the terms of this Agreement
and the Escrow Agreement.
(b) Letter of Transmittal. Promptly after the Effective Time, Xxxxx will
cause the Exchange Agent to mail to each record holder of a certificate or
certificates representing Primal Common Stock immediately prior to the Effective
Time (i) a letter of transmittal which shall specify that delivery shall be
effected, and risk of loss and title to the certificates formerly representing
Primal Common Stock shall pass, only upon delivery of such certificates to the
Exchange Agent and shall be in such form and have such other provisions,
including appropriate provisions with respect to back-up withholding, as Xxxxx
may reasonably specify, and (ii) instructions for use in effecting the surrender
of the certificates formerly representing Primal Common Stock. Upon surrender
of
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a certificate formerly representing Primal Common Stock for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder thereof shall
be entitled to receive in exchange therefor that portion of the Exchange Fund
which such holder has the right to receive pursuant to the provisions of this
Section 2, after giving effect to any required withholding Tax, and the
certificate formerly representing Primal Common Stock so surrendered shall
forthwith be canceled. No interest will be paid or accrued on the cash to be
paid which is in the Exchange Fund.
(c) Exchange Procedures. Promptly after the Effective Time, the Exchange
Agent will distribute to each former holder of Primal Common Stock, upon
surrender to the Exchange Agent for cancellation of one or more certificates,
accompanied by a duly executed letter of transmittal, that theretofore evidenced
shares of Primal Common Stock, certificates evidencing the appropriate number of
shares of Xxxxx Preferred Stock into which such shares of Primal Common Stock
were converted pursuant to the Merger, less such holder's pro rata share of the
Escrow Shares, and any dividends or distributions related thereto which such
former holder of Primal Common Stock is entitled to receive pursuant to the
provisions of this Section 2. If shares of Xxxxx Preferred Stock are to be
issued to a Person other than the Person in whose name the surrendered
certificate or certificates are registered, it will be a condition of issuance
of Xxxxx Preferred Stock that the surrendered certificate or certificates shall
be properly endorsed, with signatures guaranteed by a member firm of the New
York Stock Exchange or a bank chartered under the Laws of the United States, or
otherwise in proper form for transfer and that the Person requesting such
payment shall pay any transfer or other Taxes required by reason of the issuance
of Xxxxx Preferred Stock to a Person other than the registered holder of the
surrendered certificate or certificates or such Person shall establish to the
satisfaction of Xxxxx that any such Tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
will be liable to any former holder of Primal Common Stock for any Xxxxx
Preferred Stock or cash or dividends or distributions thereon delivered to a
public official pursuant to any applicable escheat Law.
(d) Distributions with Respect to Unexchanged Shares of Primal Common
Stock. No dividends or other distributions declared or made with respect to
Xxxxx Preferred Stock on or after the Effective Time will be paid to the holder
of any certificate that theretofore evidenced shares of Primal Common Stock
until the holder of such certificate shall surrender such certificate. Subject
to the effect of any applicable abandoned property, escheat or other similar
Laws, following surrender of any such certificate, there will be paid from the
Exchange Fund to the holder of the certificates evidencing whole shares of Xxxxx
Preferred Stock issued in exchange therefor, without interest, (i) promptly, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Xxxxx
Preferred Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date after the Effective Time
but prior to surrender and a payment date occurring after surrender, payable
with respect to such whole shares of Xxxxx Preferred Stock.
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(e) No Fractional Shares. No certificates or scrip representing fractional
shares of Xxxxx Preferred Stock shall be issued upon the surrender for exchange
of certificates formerly representing shares of Primal Common Stock pursuant to
this Section 2; no dividend, stock split or other change in the capital
structure of Xxxxx shall relate to any fractional security; and such fractional
interests shall not entitle the owner thereof to vote or to any rights of a
security holder. In lieu of a fraction of a share of Xxxxx Preferred Stock,
each holder of shares of Primal Common Stock who would otherwise be entitled to
a fraction of a share of Xxxxx Preferred Stock shall be entitled to receive,
except as provided below, that number of whole shares of Xxxxx Preferred Stock
determined, to the extent reasonably practicable, by rounding such fraction
upward or downward to the nearest whole number of shares of Xxxxx Preferred
Stock. Notwithstanding the foregoing, however, appropriate adjustments, either
upward or downward, and in no event in an amount equal to or exceeding one whole
share of Xxxxx Preferred Stock, shall be made as necessary to the determination
of the number of whole shares of Xxxxx Preferred Stock to which a holder of
Primal Common Stock is entitled so that a total of 2,000,000 shares of the Xxxxx
Preferred Stock are issued to the holders of the Primal Common Stock at the
Effective Time and so that a total 2,000,000 shares of Xxxxx Preferred Stock are
deposited with the Escrow Agent pursuant to the terms of this Agreement and the
Escrow Agreement on the day of the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains unclaimed by the former holders of Primal Common Stock for twelve months
after the Effective Time will be delivered to Xxxxx, upon demand, and any former
holders of Primal Common Stock who have not theretofore complied with this
Section 2 will, subject to applicable abandoned property, escheat and other
similar Laws, thereafter look only to Xxxxx for Xxxxx Preferred Stock and any
cash to which they are entitled.
(g) Withholding of Tax. Xxxxx or the Exchange Agent will be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any former holder of Primal Common Stock such amounts as Xxxxx (or
any Affiliate thereof) or the Exchange Agent are required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign Tax Law. To the extent that amounts are so withheld by
Xxxxx or the Exchange Agent, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the former holder of Primal
Common Stock in respect of whom such deduction and withholding was made by Xxxxx
or the Exchange Agent.
(h) Lost Certificates. If any certificate evidencing Primal Common Stock
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such certificate to be lost, stolen or
destroyed and, if required by Xxxxx, the posting by such Person of a bond, in
such reasonable amount as Xxxxx or its transfer agent may direct, as indemnity
against claims that may be made against it with respect to such certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
certificate that number of shares of Xxxxx Preferred Stock to which the holder
may be entitled pursuant to this Section 2 and cash and any dividends or other
distributions to which the holder thereof may be entitled pursuant to Section
2.3(d) or Section 2.3(e).
-7-
2.4 Stock Transfer Books
At the Effective Time, the stock transfer books of Primal will be closed and
there will be no further registration of transfers of shares of Primal Common
Stock thereafter on the records of Primal. If, after the Effective Time,
certificates formerly representing Primal Common Stock are presented to the
Surviving Corporation, they shall be canceled and exchanged for certificates
representing Xxxxx Stock and such other cash and property as are then in the
Exchange Fund.
3. CLOSING
3.1 Closing
The Closing will take place at the offices of Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.,
5400 Renaissance Tower, 0000 Xxx Xxxxxx, Xxxxxx, Xxxxx, at 10:00 a.m. on the
tenth Business Day following the date on which the conditions to the Closing
have been satisfied or waived and Xxxxx notifies Primal of its election, which
Xxxxx may make in its sole and absolute discretion, to cause the Merger and the
Closing to occur, or at such other place, time and date as the parties hereto
may agree. At the conclusion of the Closing on the Closing Date, the parties
hereto will cause the Merger Certificate to be filed with the Secretary of State
of the State of Delaware and the CA Agreement of Merger to be filed with the
Secretary of State of the State of California. Subject to the provisions of
Section 11, failure to consummate the Merger provided for in this Agreement on
the date and time and at the place determined pursuant to this Section 3.1 will
not result in the termination of this Agreement and will not relieve any party
of any obligation under this Agreement.
3.2 Closing Obligations
At the Closing:
(a) Primal will deliver to Xxxxx:
(i) releases in the form of Exhibit 3.2(a)(i) executed by
-----------------
Stockholders (collectively, "Stockholders' Releases");
(ii) employment agreements in the form of Exhibit 3.2(a)(ii) executed
------------------
by Xxxxxx, Xxxxxxx and Xxxxxx (collectively, "Employment Agreements"); and
(iii) letters in the form of Exhibit 3.2(a)(iii) executed by the
-------------------
Stockholders (collectively, the "Lockup Letters").
(b) Xxxxx and Stockholders will enter into an escrow agreement in the form
of Exhibit 3.2(b) (the "Escrow Agreement") with Bank One, Texas, NA (the "Escrow
--------------
Agent").
(c) Xxxxx will deliver, or cause to be delivered, the Escrow Shares to the
Escrow Agent.
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(d) Xxxxx and Stockholders will enter into an investors rights agreement in
the form of Exhibit 3.2(d) (the "Investors Rights Agreement").
--------------
3.3 Adjustment of Merger Consideration; Contingent Merger Consideration
In addition to the Merger Consideration, the holders of Primal Common Stock at
the Effective Time shall be entitled to a release of the Escrow Shares and to
receive additional merger consideration consisting of shares of the Xxxxx
Preferred Stock (the "Additional Merger Consideration") based upon the aggregate
revenues and earnings of the Surviving Corporation for the period commencing
August 1, 1999, and ending on July 31, 2000 (the "Earn-Out Period"), as follows:
August 1, 1999 to July 31, 2000
-------------------------------
Loss Shares of
Differential Xxxxx Preferred Stock/1/
Revenues Base Loss Multiplier (Subject to Adjustment/2/)
------------- ------------- ---------------- ------------------------------
$2,550,000 $1,082,000 100% 0
$3,060,000 $1,082,000 120% 300,000
$3,825,000 $1,082,000 150% 850,000
$4,080,000 $1,082,000 160% 1,250,000
$4,590,000 $1,082,000 180% 2,000,000
$5,100,000 $1,082,000 200% $1,250,000
$5,610,000 $1,122,000 220% $2,250,000
$6,375,000 $1,275,000 250% $4,000,000
$6,885,000 $1,377,000 270% $5,250,000
$7,650,000 $1,530,000 300% $6,900,000
$8,160,000 $1,632,000 320% $8,000,000
---------------------------------
/1/ Numbers expressed in shares in Escrow Shares. Numbers expressed in
dollars in this column will be paid in additional shares of Xxxxx
Preferred Stock, such number of shares being determined as provided
below.
/2/ The shares of Xxxxx Preferred Stock are subject to reduction as
provided below.
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The number of shares of Xxxxx Preferred Stock eligible for release from the
Escrow Agreement or that may be issued as Additional Merger Consideration, in
each case as set forth in the table above, will be reduced if Primal's loss for
the Earn-Out Period, determined without any reduction for taxes, depreciation or
amortization (the "Actual Operating Loss"), were to be more than the Base Loss.
The Base Loss for the Earn-Out Period for all revenue amounts up to $5,100,000
set forth in the table above shall be deemed to be $1,082,000. For revenues
greater than $5,100,000 set forth in the table above, the Base Loss shall be
deemed to equal to 20% of Primal's actual revenues for the Earn-Out Period. If
the Actual Operating Loss is greater than the Base Loss, then the amount by
which the Actual Operating Loss exceeds the Base Loss shall be multiplied by the
"Loss Differential Multiplier" specified in the table above. The resulting
dollar amount will be deducted from the earn-out amounts expressed in dollars in
the table above, or reduce the number of Escrow Shares eligible for release from
the Escrow Agreement set forth in the table above, such number of shares being
determined by first dividing (i) the resulting dollar amount by (ii) the Value
of a share of Xxxxx Common Stock on the Determination Date, and then multiplying
that result by the "Current Conversion Price" for the Xxxxx Preferred Stock on
the Determination Date.
The maximum number of shares of Xxxxx Preferred Stock that may be issued as
Additional Merger Consideration shall not exceed 4,000,000 shares of Xxxxx
Preferred Stock.
For purposes of determining the number of shares of Xxxxx Preferred Stock to be
issued as Additional Merger Consideration, the Value of a share of Xxxxx Common
Stock shall be equal to the greater of (i) the Value of a share of Xxxxx Common
Stock on the Determination Date or (ii) $2.00. The amounts expressed in dollars
in the table above shall be divided by the Value of a share of Xxxxx Common
Stock as so determined. The number of shares of Xxxxx Preferred Stock, if any,
to be issued as Additional Merger Consideration shall be determined by
multiplying such number by the "Current Conversion Price" for the Xxxxx
Preferred Stock on the Determination Date.
To the extent that less than all the Escrow Shares are entitled to be released
from the Escrow Agreement because the thresholds set forth in the table above
are not met, such Escrow Shares not released shall be returned to Xxxxx for
cancellation and the holders of shares of the Primal Common Stock at the
Effective Time shall have no rights thereto whatsoever.
Notwithstanding the foregoing, if between the date of this Agreement and the
Determination Date the outstanding shares of Xxxxx Preferred Stock shall have
been changed into a different number of shares or a different class, by reason
of any stock dividend, subdivision, reclassification, recapitalization, split,
conversion, consolidation, combination or exchange of shares, the provisions for
determining the Additional Merger Consideration will be correspondingly adjusted
to reflect such stock dividend, subdivision, reclassification, recapitalization,
split, conversion, consolidation, combination or exchange of shares.
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3.4 Contingent Pay-Out Procedures
(a) Xxxxx will prepare and will cause PricewaterhouseCoopers LLP, Xxxxx'x
certified public accountants, to review financial statements ("Closing Financial
Statements") of Primal for the Earn-Out Period. Xxxxx will deliver the Closing
Financial Statements to the Stockholders within forty-five days after the last
day of the Earn-Out Period. If within thirty days following delivery of the
Closing Financial Statements, the Stockholders have not given Xxxxx notice of
their objection to the Closing Financial Statements (such notice must contain a
statement of the basis of such objection), then the revenues and earnings or
losses reflected in the Closing Financial Statements will be used in computing
the Additional Merger Consideration. If Xxxxx gives such notice of objection,
then the issues in dispute will be submitted to Ernst & Young LLP, certified
public accountants (the "Accountants"), for resolution. If issues in dispute
are submitted to the Accountants for resolution, (i) each party will furnish to
the Accountants such workpapers and other documents and information relating to
the disputed issues as the Accountants may request and are available to that
party or its Subsidiaries (or its independent public accountants), and will be
afforded the opportunity to present to the Accountants any material relating to
the determination and to discuss the determination with the Accountants; (ii)
the determination by the Accountants, as set forth in a notice delivered to both
parties by the Accountants, will be binding and conclusive on the parties; and
(iii) Xxxxx and Stockholders will each bear 50% of the fees of the Accountants
for such determination. The date on which the final determination of the
Additional Merger Consideration is made is herein called the "Determination
Date."
(b) On the tenth business day following the Determination Date, Xxxxx will
cause to be released from the Escrow Agreement, or will issue, or cause to be
issued, or both, shares of Xxxxx Preferred Stock equal to the Additional Merger
Consideration.
4. REPRESENTATIONS AND WARRANTIES OF PRIMAL
WBS is expressly excluded from any representation and warranty of Primal
contained herein. Subject to the foregoing, Primal represents and warrants to
Xxxxx as follows:
4.1 Organization and Good Standing
(a) Part 4.1 of the Primal Disclosure Letter contains a complete and
accurate list for each Acquired Company of its name, its jurisdiction of
incorporation, other jurisdictions in which it is authorized to do business, and
its capitalization (including the identity of each stockholder and the number of
shares held by each). Each Acquired Company is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under Applicable
Contracts. Each Acquired Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted
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by it, requires such qualification, except for such failures to be so qualified
and in good standing that would not have a Primal Material Adverse Effect.
(b) Primal has delivered to Xxxxx copies of the Organizational Documents of
each Acquired Company, as currently in effect.
4.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid, and binding obligation of
Primal, enforceable against Primal in accordance with its terms. Primal has the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and to perform its obligations under this Agreement.
(b) Except as set forth in Part 4.2 of the Primal Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Acquired Companies, or (B) any
resolution adopted by the board of directors or the stockholders of any Acquired
Company;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which any Acquired Company, or any of the
assets owned or used by any Acquired Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by any Acquired Company or that otherwise relates to the business
of, or any of the assets owned or used by, any Acquired Company;
(iv) cause Xxxxx or any Acquired Company to become subject to, or to
become liable for the payment of, any Tax;
(v) cause any of the assets owned by any Acquired Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
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(vii) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by any Acquired Company.
Except as set forth in Part 4.2 of the Primal Disclosure Letter, no Acquired
Company is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
4.3 Capitalization
(a) The authorized equity securities of Primal consist of 50,000,000
shares of common stock, no par value per share, of which 8,956,003 shares are
issued and outstanding and constitute the Shares. The Primal Common Stock is
held of record by the persons, with the addresses of record and in the amounts
set forth on Part 4.3(a) of the Primal Disclosure Letter, along with the vesting
schedule for such shares, if any. Except as set forth on Part 4.3(a) of the
Primal Disclosure Letter, all outstanding shares of Primal Common Stock are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Articles of Incorporation or Bylaws of
the Company or any agreement to which the Company is a party or by which it is
bound.
(b) The Company has reserved 2,750,000 shares of Common Stock for issuance
to employees and consultants pursuant to the 1998 Stock Option Plan (the "Primal
Option Plan") of Primal, of which 2,355,193 shares are subject to outstanding,
unexercised options (each, a "Primal Option"), 644,413 shares remain available
for future grant and no shares have been issued pursuant to the exercise of
options issued under the Primal Option Plan. Part 4.3(b) of the Primal
Disclosure Letter sets forth for each outstanding Primal Option the name of the
holder of such Primal Option, the domicile address of such holder, the number of
shares of Primal Common Stock subject to such Primal Option, the exercise price
of such Primal Option, and the vesting schedule for such Primal Option,
including the extent vested to date and whether the exercisability of such
Primal Option will be accelerated and become exercisable by reason of the
transactions contemplated by this Agreement. Except for the Primal Option Plan
and the Primal Options granted, issued and outstanding thereunder, no shares of
Primal Common Stock are reserved for issuance, and there are no contracts,
agreements, commitments or arrangements obligating Primal to offer, sell, issue
or grant any shares of, or any options, warrants or rights of any kind to
acquire any shares of, or any securities that are convertible into or
exchangeable for any shares of, capital stock of Primal, to redeem, purchase or
acquire, or offer to purchase or acquire, any outstanding shares of, or any
outstanding options, warrants or rights of any kind to acquire any shares of, or
any outstanding securities that are convertible into or exchangeable for any
shares of, capital stock of Primal or to grant any Encumbrance on any shares of
capital stock of Primal.
(c) The authorized, issued and outstanding capital stock of, or other
equity interests in, each of Primal's Subsidiaries and the names of the holders
of record of the capital stock or other equity interests of each such
Subsidiary, in each case, as of the date hereof, are set forth in Part 4.3(c)
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of the Primal Disclosure Letter. The issued and outstanding shares of capital
stock of, or other equity interests in, each of the Subsidiaries of Primal that
are owned by Primal or any of its Subsidiaries have been duly authorized and are
validly issued, and, with respect to capital stock, are fully paid and
nonassessable, and were not issued in violation of any preemptive or similar
rights of any Person. All such issued and outstanding shares or other equity
interests, that are indicated as owned by Primal or one of its Subsidiaries in
Part 4.3(c) of Primal's Disclosure Letter, are owned beneficially as set forth
therein and free and clear of all Encumbrances. No shares of capital stock of,
or other equity interests in, any Subsidiary of Primal are reserved for
issuance, and there are no contracts, agreements, commitments or arrangements
obligating Primal or any of its Subsidiaries (i) to offer, sell, issue, grant,
pledge, dispose of or encumber any shares of capital stock of, or other equity
interests in, or any options, warrants or rights of any kind to acquire any
shares of capital stock of, or other equity interests in, or any securities that
are convertible into or exchangeable for any shares of capital stock of, or
other equity interests in, any of the Subsidiaries of Primal, (ii) to redeem,
purchase or acquire, or offer to purchase or acquire, any outstanding shares of
capital stock of, or other equity interests in, or any outstanding options,
warrants or rights of any kind to acquire any shares of capital stock of, or
other equity interest in, or any outstanding securities that are convertible
into or exchangeable for, any shares of capital stock of, or other equity
interests in, any of the Subsidiaries of Primal or (iii) to grant any
Encumbrance on any outstanding shares of capital stock of, or other equity
interest in, any of the Subsidiaries of Primal.
4.4 Financial Statements
Primal has delivered to Xxxxx: (a) an unaudited balance sheet of Primal as at
December 31, 1998 (the "Balance Sheet"), and the related unaudited statements of
income, changes in stockholders' equity, and cash flows for the fiscal year then
ended, and (b) an unaudited balance sheet of Primal as at February 28, 1999 (the
"Interim Balance Sheet"), and the related unaudited statements of income,
changes in stockholders' equity, and cash flows for the two-months then ended,
including in each case the notes thereto. Such financial statements and notes
fairly present the financial condition and the results of operations, changes in
stockholders' equity, and cash flows of Primal as at the respective dates of and
for the periods referred to in such financial statements, all in accordance with
GAAP, subject, in the case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse) and the absence of notes (that, if presented,
would not differ materially from those included in the Balance Sheet); the
financial statements referred to in this Section 4.4 reflect the consistent
application of such accounting principles throughout the periods involved.
4.5 Books and Records
The books of account, minute books, stock record books, and other records of the
Acquired Companies, all of which have been made available to Xxxxx, are complete
and correct and have been maintained in accordance with sound business practices
and the requirements of Section 13(b)(2) of the Securities Exchange Act of 1934,
as amended (regardless of whether or not the Acquired Companies are subject to
that Section), including the maintenance of an adequate system of internal
-14-
controls. The minute books of the Acquired Companies contain accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Acquired Companies, and no meeting of any such stockholders, Board of
Directors, or committee has been held for which minutes have not been prepared
and are not contained in such minute books. At the Closing, all of those books
and records will be in the possession of the Acquired Companies.
4.6 Title to Properties; Encumbrances
Part 4.6 of the Primal Disclosure Letter contains a complete and accurate list
of all real property, leaseholds, or other interests therein owned by any
Acquired Company. The Acquired Companies own (with good and marketable title in
the case of real property, subject only to the matters permitted by the
following sentence) all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) that they purport to own located in
the facilities owned or operated by the Acquired Companies or reflected as owned
in the books and records of the Acquired Companies, including all of the
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet (except for assets held under capitalized leases disclosed or not required
to be disclosed in Part 4.6 of the Primal Disclosure Letter and personal
property sold since the date of the Balance Sheet and the Interim Balance Sheet,
as the case may be, in the Ordinary Course of Business), and all of the
properties and assets purchased or otherwise acquired by the Acquired Companies
since the date of the Balance Sheet (except for personal property acquired and
sold since the date of the Balance Sheet in the Ordinary Course of Business and
consistent with past practice). All material properties and assets reflected in
the Balance Sheet and the Interim Balance Sheet are free and clear of all
Encumbrances and are not, in the case of real property, subject to any rights of
way, building use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Balance Sheet or the
Interim Balance Sheet as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the Interim Balance Sheet (such mortgages and security interests being limited
to the property or assets so acquired), with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a default)
exists, (c) liens for current taxes not yet due, and (d) with respect to real
property, (i) minor imperfections of title, if any, none of which is substantial
in amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of any Acquired Company, and (ii)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto. All buildings, plants, and
structures owned by the Acquired Companies lie wholly within the boundaries of
the real property owned by the Acquired Companies and do not encroach upon the
property of, or otherwise conflict with the property rights of, any other
Person.
-15-
4.7 Condition and Sufficiency of Assets
The buildings, plants, structures, and equipment of the Acquired Companies are
sufficient for the continued conduct of the Acquired Companies' businesses after
the Closing in substantially the same manner as conducted prior to the Closing.
4.8 Accounts Receivable
All accounts receivable of the Acquired Companies that are reflected on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Acquired Companies as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of the respective reserves shown
on the Balance Sheet or the Interim Balance Sheet or on the accounting records
of the Acquired Companies as of the Closing Date (which reserves are adequate
and calculated consistent with past practice and, in the case of the reserve as
of the Closing Date, will not represent a greater percentage of the Accounts
Receivable as of the Closing Date than the reserve reflected in the Interim
Balance Sheet represented of the Accounts Receivable reflected therein and will
not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, and except as set
forth in Part 4.8 of the Primal Disclosure Letter, each of the Accounts
Receivable either has been or will be collected in full, without any set-off,
within ninety days after the day on which it first becomes due and payable.
There is no contest, claim, or right of set-off, other than returns in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable. Part
4.8 of the Primal Disclosure Letter contains a complete and accurate list of all
Accounts Receivable as of the date of the Interim Balance Sheet, which list sets
forth the aging of such Accounts Receivable.
4.9 Inventory
None of the Acquired Companies has or owns any inventory, whether or not
required to be reflected in the Balance Sheet or the Interim Balance Sheet.
4.10 No Undisclosed Liabilities
Except as set forth in Part 4.10 of the Primal Disclosure Letter, the Acquired
Companies have no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet or
the Interim Balance Sheet and current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof.
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4.11 Taxes
(a) The Acquired Companies have filed or caused to be filed (on a timely
basis since June 17, 1996) all Tax Returns that are or were required to be filed
by or with respect to any of them, either separately or as a member of a group
of corporations, pursuant to applicable Legal Requirements. Primal has
delivered to Xxxxx copies of, and Part 4.11 of the Primal Disclosure Letter
contains a complete and accurate list of, all such Tax Returns filed since June
17, 1996. The Acquired Companies have paid, or made provision for the payment
of, all Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by any Acquired Company,
except such Taxes, if any, as are listed in Part 4.11 of the Primal Disclosure
Letter and are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Balance Sheet and
the Interim Balance Sheet.
(b) None of the United States federal and state income Tax Returns of any
Acquired Company subject to such Taxes has been audited by the IRS or relevant
state tax authorities. Except as described in Part 4.11 of the Primal Disclosure
Letter, no Acquired Company has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of Taxes of
any Acquired Company or for which any Acquired Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of each Acquired Company are adequate (determined in accordance
with GAAP) and are at least equal to that Acquired Company's liability for
Taxes. There exists no proposed tax assessment against any Acquired Company
except as disclosed in the Balance Sheet or in Part 4.11 of the Primal
Disclosure Letter. No consent to the application of Section 341(f)(2) of the IRC
has been filed with respect to any property or assets held, acquired, or to be
acquired by any Acquired Company. All Taxes that any Acquired Company is or was
required by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated basis) any
Acquired Company are true, correct, and complete. There is no tax sharing
agreement that will require any payment by any Acquired Company after the date
of this Agreement. No Acquired Company is, or within the five-year period
preceding the Closing Date has been, an "S" corporation.
4.12 No Material Adverse Change
Since the date of the Balance Sheet, there has not been any Primal Material
Adverse Effect, and no event has occurred or circumstance exists that may result
in any Primal Material Adverse Effect.
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4.13 Employee Benefits
(a) Part 4.13 of the Primal's Disclosure Letter contains a true and
complete list of each deferred compensation, incentive compensation, stock
purchase, stock option and other equity compensation plan, "welfare" plan, fund
or program (within the meaning of ERISA (S) 3(1)); each "pension" plan, fund or
program (within the meaning of ERISA (S) 3(2)); each employment, termination or
severance agreement with individuals whose annual compensation is at a base rate
exceeding $50,000, and each other material employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained or
contributed to or required to be contributed to by Primal or any entity, that
together with Primal would be deemed a "single employer" within the meaning of
ERISA (S) 4001(b) or under IRC (S) 414 (an "ERISA Affiliate"), or to which
Primal or an ERISA Affiliate is a party, whether written or oral, for the
benefit of any employee or former employee of Primal or any of its Subsidiaries
(the "Primal Plans").
(b) With respect to each Primal Plan, Primal has heretofore delivered or
made available to Xxxxx true and complete copies of the Primal Plan and any
amendments thereto (or if the Primal Plan is not a written Primal Plan, a
description thereof), any related trust or other funding vehicle, any reports or
summaries required under ERISA or the Code and the most recent determination
letter received from the Internal Revenue Service with respect to each Primal
Plan intended to qualify under IRC (S) 401.
(c) No material liability under ERISA Title IV or (S) 302 has been
incurred by Primal or any ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to Primal or any ERISA
Affiliate of incurring any such liability.
(d) No Primal Plan is subject to ERISA Title IV or IRC (S) 412, nor is any
Primal Plan a "multiemployer pension plan," as defined in ERISA (S) 3(37), or
subject to ERISA (S) 302.
(e) Each Primal Plan has been operated and administered in all material
respects in accordance with its terms and applicable Law, including ERISA and
the IRC.
(f) Each Primal Plan intended or required to be "qualified" within the
meaning of IRC (S) 401(a) is so qualified and the applicable trust or trusts
maintained thereunder are exempt from taxation under IRC (S) 501(a).
(g) No Primal Plan provides material medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of Primal or any of its Subsidiaries for periods extending beyond
their retirement or other termination of service, other than (i) coverage
mandated by applicable Law, (ii) death benefits under any "pension plan", or
(iii) benefits the full cost of which is borne by the current or former employee
(or his beneficiary). No Primal Plans are self-insured "multiple employer
welfare arrangements," as such term is defined in ERISA (S) 3(40).
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(h) No amounts payable under the Primal Plans will fail to be deductible
for federal income Tax purposes by virtue of IRC (S) 162(a)(1) or IRC (S) 280G
or would require the payment of an excise Tax imposed by IRC (S) 4999.
(i) The execution, delivery and performance of, and consummation of the
transactions contemplated by, this Agreement or the Voting Agreement will not
(i) entitle any current or former employee or officer of Primal or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment, (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer, or (iii) except for the
outstanding Primal Options, accelerate the vesting of any stock option or of any
shares of restricted stock.
(j) Except as would not be material in any respect to Primal, there are no
pending or, to the Knowledge of Primal, any threatened or anticipated claims by
or on behalf of any Primal Plan, by any employee or beneficiary covered under
any such Primal Plan, or otherwise involving any such Primal Plan (other than
routine claims for benefits).
4.14 Compliance with Legal Requirements; Governmental Authorizations
(a) Except as set forth in Part 4.14 of the Primal Disclosure Letter:
(i) each Acquired Company is, and at all times since June 17, 1996,
has been, in compliance in all material respects with each Legal Requirement
that is or was applicable to it or to the conduct or operation of its business
or the ownership or use of any of its assets, and no failure to comply with any
such Legal Requirement has had or could have a Primal Material Adverse Effect;
(ii) to the Knowledge of Primal, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (A) may
constitute or result in a violation by any Acquired Company of, or a failure on
the part of any Acquired Company to comply with, any Legal Requirement, or (B)
may give rise to any obligation on the part of any Acquired Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature; and
(iii) no Acquired Company has received, at any time since June 17,
1996, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or potential obligation on
the part of any Acquired Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature.
(b) Part 4.14 of the Primal Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by any Acquired
Company or that otherwise relates to the business of, or to any of the assets
owned or used by, any Acquired Company. Each Governmental Authorization listed
or required to be listed in Part 4.14 of the Primal Disclosure Letter is valid
and in full force and effect. Except as set forth in Part 4.14 of the Primal
Disclosure Letter:
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(i) each Acquired Company is, and at all times since June 17, 1996,
has been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in Part 4.14
of the Primal Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or indirectly
in a violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Part 4.14 of the
Primal Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Part 4.14 of the Primal Disclosure Letter;
(iii) no Acquired Company has received, at any time since June 17,
1996, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of
the Governmental Authorizations listed or required to be listed in Part 4.14 of
the Primal Disclosure Letter have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
To the Knowledge of Primal, the Governmental Authorizations listed in Part 4.14
of the Primal Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Acquired Companies lawfully to conduct
and operate their businesses in the manner they currently conduct and operate
such businesses and to permit the Acquired Companies to own and use their assets
in the manner in which they currently own and use such assets.
4.15 Legal Proceedings; Orders
(a) Except as set forth in Part 4.15 of the Primal Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against any Acquired Company or,
to the Knowledge of Primal, that otherwise relates to or may affect the business
of, or any of the assets owned or used by, any Acquired Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, the Merger, Xxxxx'x
exercise of control over any Acquired Company, or any of the other Contemplated
Transactions.
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To the Knowledge of the Acquired Companies, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding. Primal
has delivered to Xxxxx copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Part 4.15 of the Primal
Disclosure Letter. The Proceedings listed in Part 4.15 of the Primal Disclosure
Letter will not have a Primal Material Adverse Effect on any Acquired Company.
(b) Except as set forth in Part 4.15 of the Primal Disclosure Letter:
(i) there is no Order to which any of the Acquired Companies, or
any of the assets owned or used by any Acquired Company, is subject; and
(ii) to the Knowledge of Primal, no officer, director, agent, or
employee of any Acquired Company is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of any Acquired Company.
(c) Except as set forth in Part 4.15 of the Primal Disclosure Letter:
(i) each Acquired Company is, and at all times since June 17, 1996,
has been, in full compliance with all of the terms and requirements of each
Order to which it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which any
Acquired Company, or any of the assets owned or used by any Acquired Company, is
subject; and
(iii) no Acquired Company has received, at any time since June 17,
1996, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which any Acquired Company, or any of the assets owned or used by
any Acquired Company, is or has been subject.
4.16 Absence of Certain Changes and Events
Except as set forth in Part 4.16 of the Primal Disclosure Letter, and except for
the WBS Transaction, since the date of the Balance Sheet, the Acquired Companies
have conducted their businesses only in the Ordinary Course of Business and
there has not been any:
(a) change in any Acquired Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of any
Acquired Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption,
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retirement, or other acquisition by any Acquired Company of any shares of any
such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of any Acquired Company;
(c) payment or increase by any Acquired Company of any bonuses, salaries,
or other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Acquired Company;
(e) damage to or destruction or loss of any asset or property of any
Acquired Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects of
the Acquired Companies, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of (i)
any license, distributorship, dealer, sales representative, joint venture,
credit, or similar agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to any Acquired Company of at least $10,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of any Acquired
Company or mortgage, pledge, or except for the Xxxxx Loan, imposition of any
lien or other encumbrance on any material asset or property of any Acquired
Company, including the sale, lease, or other disposition of any of the
Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to any
Acquired Company in excess of $10,000;
(i) material change in the accounting methods used by any Acquired
Company; or
(j) agreement, whether oral or written, by any Acquired Company to
do any of the foregoing.
4.17 Contracts; No Defaults
(a) Part 4.17(a) of the Primal Disclosure Letter contains a complete and
accurate list, and Primal has delivered to Xxxxx true and complete copies, of:
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(i) each licensing agreement or other Applicable Contract with
respect to the Software (collectively, the "Software Licenses");
(ii) each Applicable Contract with respect to the providing of
consulting services by one or more of the Acquired Companies or any of their
employees or agents (collectively, the "Consulting Contracts");
(iii) each Applicable Contract (other than the Software Licenses and
the Consulting Contracts) that involves performance of services or delivery of
goods or materials by one or more Acquired Companies of an amount or value in
excess of $10,000;
(iv) each Applicable Contract that involves performance of services
or delivery of goods or materials to one or more Acquired Companies of an amount
or value in excess of $10,000;
(v) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of one or
more Acquired Companies in excess of $10,000;
(vi) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $10,000 and with terms of less than one
year);
(vii) each licensing agreement or other Applicable Contract (other
than the Software Licenses) with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current or former
employees, consultants, or contractors regarding the appropriation or the non-
disclosure of any of the Intellectual Property Assets;
(viii) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
(ix) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or liabilities by
any Acquired Company with any other Person;
(x) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of any Acquired Company or any
Affiliate of an Acquired Company or limit the freedom of any Acquired Company or
any Affiliate of an Acquired Company to engage in any line of business or to
compete with any Person;
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(xi) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct payments for
goods;
(xii) each power of attorney that is currently effective and
outstanding;
(xiii) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by any Acquired Company to be responsible for consequential damages;
(xiv) each Applicable Contract for capital expenditures in excess of
$10,000;
(xv) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any Acquired
Company other than in the Ordinary Course of Business; and
(xvi) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
Part 4.17(a) of the Primal Disclosure Letter sets forth reasonably complete
details concerning such Contracts, including the parties to the Contracts, the
amount of the remaining commitment of the Acquired Companies under the
Contracts, and the Acquired Companies' office where details relating to the
Contracts are located.
(b) Except as set forth in Part 4.17(b) of the Primal Disclosure Letter:
(i) no stockholder of Primal (and no Related Person of any
stockholder of Primal) has or may acquire any rights under, and no stockholder
of Primal has or may become subject to any obligation or liability under, any
Contract that relates to the business of, or any of the assets owned or used by,
any Acquired Company; and
(ii) to the Knowledge of the Acquired Companies, no officer,
director, agent, employee, consultant, or contractor of any Acquired Company is
bound by any Contract that purports to limit the ability of such officer,
director, agent, employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the business of any
Acquired Company, or (B) assign to any Acquired Company or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 4.17(c) of the Primal Disclosure Letter,
each Contract identified or required to be identified in Part 4.17(a) of the
Primal Disclosure Letter is in full force and effect and, to the Knowledge of
Primal, is valid and enforceable in accordance with its terms.
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(d) Except as set forth in Part 4.17(d) of the Primal Disclosure Letter:
(i) each Acquired Company is, and at all times since June 17, 1996,
has been, in full compliance with all applicable terms and requirements of each
Contract under which such Acquired Company has or had any obligation or
liability or by which such Acquired Company or any of the assets owned or used
by such Acquired Company is or was bound;
(ii) to the Knowledge of Primal, each other Person that has or had
any obligation or liability under any Contract under which an Acquired Company
has or had any rights is, and at all times since June 17, 1996, has been, in
full compliance with all applicable terms and requirements of such Contract;
(iii) to the Knowledge of Primal, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give any
Acquired Company or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received from any other
Person, at any time since June 17, 1996, any written notice or other written
communication regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to any
Acquired Company under current or completed Contracts with any Person and, to
the Knowledge of the Acquired Companies, no such Person has made written demand
for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or provision
of products or services by the Acquired Companies have been entered into in the
Ordinary Course of Business and, to the Knowledge of Primal, have been entered
into without the commission of any act alone or in concert with any other
Person, or any consideration having been paid or promised, that is or would be
in violation of any Legal Requirement.
4.18 Insurance
(a) Primal has delivered to Xxxxx:
(i) true and complete copies of all policies of insurance to which
any Acquired Company is a party or under which any Acquired Company, or any
director of any Acquired Company, is or has been covered at any time within the
three years preceding the date of this Agreement;
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(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of any Acquired Company's
financial statements with regard to the adequacy of such entity's coverage or of
the reserves for claims.
(b) Part 4.18(b) of the Primal Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting any Acquired
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by any Acquired Company; and
(iii) all obligations of the Acquired Companies to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) Part 4.18(c) of the Primal Disclosure Letter sets forth, by year, for
the current policy year and each of the three preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance policy for
an amount in excess of $10,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of insurance,
and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims that
were self-insured, including the number and aggregate cost of such claims.
(d) Except as set forth on Part 4.18(d) of the Primal Disclosure Letter:
(i) All policies to which any Acquired Company is a party or that
provide coverage to any Acquired Company, or any director or officer of an
Acquired Company:
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(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for
the assets and the operations of the Acquired Companies for all risks normally
insured against by a Person carrying on the same business or businesses as the
Acquired Companies;
(D) are sufficient for compliance with all Legal Requirements
and Contracts to which any Acquired Company is a party or by which any of them
is bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment or
other experienced-based liability on the part of any Acquired Company.
(ii) No Acquired Company has received (A) any refusal of coverage or
any notice that a defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations thereunder.
(iii) The Acquired Companies have paid all premiums due, and have
otherwise performed all of their respective obligations, under each policy to
which any Acquired Company is a party or that provides coverage to any Acquired
Company or director thereof.
(iv) The Acquired Companies have given notice to the insurer of all
claims that may be insured thereby.
4.19 Environmental Matters
Except as set forth in Part 4.19 of the Primal Disclosure Letter:
(a) All of the current operations of the Acquired Companies and their
respective assets, businesses and real property, including any operations at or
from any real property presently owned, used, leased, occupied, managed or
operated by any Acquired Company (collectively, the "Real Property"), comply and
have at all times complied with all applicable Environmental Laws.
(b) To the knowledge of Primal, none of the assets of the Acquired
Companies, nor any of the Real Property, contains any Hazardous Materials in,
on, over, under or at it, in concentrations which would violate any applicable
Environmental Laws or reasonably would be likely to result in the imposition of
liability or obligations on any of the Acquired Companies under any applicable
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Environmental Laws, including any liability or obligations for the
investigation, corrective action, remediation or monitoring of Hazardous
Materials in, on, over, under or at the Real Property.
(c) None of the Real Property is listed or proposed for listing on the
National Priorities List pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. (S) 9601 et seq., as
amended, or any similar inventory of sites requiring investigation or
remediation maintained by any state or locality. None of the Acquired Companies
has received any notice, whether oral or written, from any Governmental Body or
third party of any actual or threatened Environmental Liabilities.
(d) To the Knowledge of Primal, each of the Acquired Companies has all the
permits, licenses, authorizations and approvals necessary for the conduct of
their businesses and for the operations on, in or at the Real Property (the
"Environmental Permits"), which are required under applicable Environmental Laws
and they are in compliance in all material respects with the terms and
conditions of all such Environmental Permits. To the Knowledge of Primal, no
reason exists why any of the Acquired Companies would not be capable of
continued operation of their businesses in compliance in all material respects
with the Environmental Permits all applicable Environmental Laws.
(e) None of the Acquired Companies has incurred any Environmental
Liabilities, or has contractually assumed or succeeded to, or received any
written notice that it has assumed or succeeded to by operation of Law,
including Environmental Laws and common law, or otherwise, any Environmental
Liabilities of any other Person.
4.20 Employees
(a) Part 4.20 of the Primal Disclosure Letter contains a complete and
accurate list of the following information for each employee or director of the
Acquired Companies, including each employee on leave of absence or layoff
status: employer; name; social security number; job title; current compensation
paid or payable and any change in compensation since January 1, 1998; vacation
accrued; and service credited for purposes of vesting and eligibility to
participate under any Acquired Company's pension, retirement, profit-sharing,
thrift-savings, deferred compensation, stock bonus, stock option, cash bonus,
employee stock ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare, or vacation plan, other
Primal Plan, or any other employee benefit plan.
(b) No employee or director of any Acquired Company is a party to, or, to
the Knowledge of Primal, is otherwise bound by, any agreement or arrangement,
including any confidentiality, noncompetition, or proprietary rights agreement,
between such employee or director and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects or will affect (i) the performance
of such employee's duties as an employee or director of the Acquired Companies,
or (ii) the ability of any Acquired Company to conduct its business, including
any Proprietary Rights Agreement with the Acquired Companies by any such
employee or director. To Primal's
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Knowledge, no director, officer, or other key employee of any Acquired Company
intends to terminate his or her employment with such Acquired Company.
(c) Part 4.20 of the Primal Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee or director
of the Acquired Companies, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefit, pension option
election, retiree medical insurance coverage, retiree life insurance coverage,
and other benefits.
4.21 Labor Relations; Compliance
Since June 17, 1996, no Acquired Company has been or is a party to any
collective bargaining or other labor Contract. Since June 17, 1996, there has
not been, there is not presently pending or existing, and to Primal's Knowledge
there is not Threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or affecting any Acquired
Company relating to the alleged violation of any Legal Requirement pertaining to
labor relations or employment matters, including any charge or complaint filed
by an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting any of the Acquired Companies or their premises, or (c) any
application for certification of a collective bargaining agent. To Primal's
Knowledge, no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by any Acquired Company, and no such action is contemplated by any
Acquired Company. Each Acquired Company has complied in all respects with all
Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment, except as set forth in Part 4.21 of the Primal Disclosure Letter,
of social security and similar taxes, occupational safety and health, and plant
closing. Except as set forth in Part 4.21 of the Primal Disclosure Letter, no
Acquired Company is liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements.
4.22 Intellectual Property
(a) Part 4.22(a) of the Primal Disclosure Letter sets forth a complete and
accurate description of the Outfront Software, the specifications for the
Outfront Software and a list of each Applicable Contract relating to the
Outfront Software, including each license granted by Primal to any Person to use
the Outfront Software. Part 4.22(a) also separately sets forth a complete and
accurate list of all Software licensed by Primal from other Persons and used in,
and delivered as an integral part of, the Outfront Software ("Third Party
Software"), and a brief description of such Third Party Software and the terms
of the licenses or other Applicable Contract (collectively, the "Third Party
Licenses") governing the use of such Third Party Software by Primal in the
Outfront Software, including the royalties or other fees required thereby.
Subject only to the terms of the
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Third Party Licenses requiring the payment of royalties or other fees to the
owners of the Third Party Software, Primal has the unrestricted right to use the
Third Party Software in the Outfront Software and to furnish the Third Party
Software to the customers of Primal as part of the Outfront Software system. No
Person not subject to a valid and enforceable non-disclosure agreement in favor
of Primal is authorized to have access to, or to alter, modify or make any other
changes or revisions to, the Source Code for the Outfront Software, except as
provided in, and subject to the terms and provisions of, those Applicable
Contracts pursuant to which the Source Code for the Outfront Software has been
placed in escrow ("Source Code Escrow Agreements"). A complete and accurate list
of all Source Code Escrow Agreements to which any Acquired Company is a party is
set forth separately in Part 4.22(a) of the Primal Disclosure Letter.
(b) No Primal Intellectual Property Asset has been registered with any
Governmental Body and no application for such registration has been filed with
any Governmental Body. Part 4.22(b) of the Primal Disclosure Letter identifies
and provides a brief description of all other Primal Intellectual Property
Assets not described in Part 4.22(a) of the Primal Disclosure Letter that are
owned by Primal and are necessary to the conduct of the business of any of the
Acquired Companies. Part 4.22(b) of the Primal Disclosure Letter identifies and
provides a brief description of each Primal Intellectual Property Asset licensed
to Primal by any Person (except for the Third Party Licenses and End-User
Licenses) and identifies the license agreement or other Applicable Contract
under which such Primal Intellectual Property Asset is being licensed to Primal.
Primal has good, valid and marketable title to all of the Primal Intellectual
Property Assets owned by Primal, free and clear of all Encumbrances, and has a
valid right to use all Primal Intellectual Property Assets licensed to Primal
and identified in Part 4.22(b) of the Primal Disclosure Letter. Except as set
forth in Part 4.22(a) of the Primal Disclosure Letter with respect to the Third
Party Software, and except for one-time payments to purchase End-User Licenses,
none of the Acquired Companies is obligated to make any payment to any Person
for the use of any Intellectual Property Asset used in the business of any of
the Acquired Companies. Except as set forth in Part 4.22(b) of the Primal
Disclosure Letter, Primal is free to use, and, except for the Third Party
Software and Software licensed to Primal under an End-User License, Primal is
free to modify, copy, distribute, sell, license or otherwise exploit each of the
Primal Intellectual Property Assets on an exclusive basis (other than the Third
Party Software and End-User Licenses, with respect to which Primal's rights are
not exclusive).
(c) Primal has not disclosed or delivered to any Person not subject to a
valid and enforceable non-disclosure agreement in favor of Primal, or permitted
the disclosure or delivery to any Person not subject to a valid and enforceable
non-disclosure agreement in favor of Primal, of the Source Code, or any portion
or aspect of the Source Code, of any Primal Intellectual Property Asset. Primal
has not disclosed or delivered to any Person, or permitted the disclosure or
delivery to any Person, of the object code of any Primal Intellectual Property
Asset except pursuant to valid and enforceable license agreements or pursuant to
valid and enforceable non-disclosure agreements.
(d) To the Knowledge of Primal, none of the Primal Intellectual Property
Assets infringe or conflict with any Intellectual Property Asset owned or used
by any other Person. Primal has not
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at any time received any written notice or other written communication, or to
the Knowledge of Primal, any oral notice or other oral communication, of any
such infringement or conflict. Primal is not infringing, misappropriating or
making any unlawful use of, and Primal has not at any time infringed,
misappropriated or made any unlawful use of, or received any notice or other
communication of any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Intellectual Property Asset owned or
used by any other Person. To the Knowledge of Primal, no other Person is
infringing, misappropriating or making any unlawful use of, and no Intellectual
Property Asset owned or used by any other Person infringes or conflicts with,
any Primal Intellectual Property Asset.
(e) The Primal Intellectual Property Assets constitute all the
Intellectual Property Assets necessary to enable Primal to conduct its business
in the manner in which such business has been and is being conducted. Except as
set forth in Part 4.22(a) of the Primal Disclosure Letter, (i) Primal has not
licensed any of the Primal Intellectual Property Assets to any Person and (ii)
Primal has not entered into any covenant not to compete or any Contract limiting
its ability to exploit fully any of its Intellectual Property Assets or to
transact business in any market or geographical area or with any Person.
(f) Except in the Ordinary Course of Business, Primal has not entered into
and is not bound by any Contract under which any Person has the right to
distribute or license, on a commercial basis, any Primal Intellectual Property
Asset, including Source Code, object code or any versions, modifications or
derivative works of Source Code or object code in any Primal Intellectual
Property Asset.
4.23 Relationships with Related Persons
No Stockholder or any Related Person of Stockholders or of any Acquired Company
has, or since the first day of the next to last completed fiscal year of the
Acquired Companies has had, any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Acquired Companies' businesses. No Stockholder or any Related Person of
Stockholders or of any Acquired Company is, or since the first day of the next
to last completed fiscal year of the Acquired Companies has owned (of record or
as a beneficial owner) an equity interest or any other financial or profit
interest in, a Person that has (i) had business dealings or a material financial
interest in any transaction with any Acquired Company other than business
dealings or transactions conducted in the Ordinary Course of Business with the
Acquired Companies at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in competition with any
Acquired Company with respect to any line of the products or services of such
Acquired Company (a "Competing Business") in any market presently served by such
Acquired Company except for less than one percent of the outstanding capital
stock of any Competing Business that is publicly traded on any recognized
exchange or in the over-the-counter market. Except as set forth in Part 4.23 of
the Primal Disclosure Letter, no Stockholder or any Related Person of
Stockholders or of any Acquired Company is a party to any Contract with, or has
any claim or right against, any Acquired Company.
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4.24 Projections of Financial Performance
Primal has previously presented and delivered to Xxxxx Primal's business plan
entitled "Confidential Business Plan" (the "Primal Business Plan"). The 3-year
pro forma projected income statements, 3-year pro forma projected balance
sheets, and 3-year pro forma projected statements of cash flows and the other
projections and estimates contained in Primal Business Plan are based upon
factual assumptions that were reasonably made by Primal and were made in good
faith at the time such projections and estimates were made, and such factual
assumptions remain reasonable and good faith assumptions on and as of the date
of this Agreement. There has been no material change in the business prospects
of Primal or in any other fact or circumstance which would or could reasonably
be expected to render any such projections or estimates, or the assumptions upon
which they were based, unreasonable or not made in good faith in any material
respect. The budgeted operating loss for Primal for the Earn-Out Period is
$1,082,000.
4.25 Tax Matters
To the Knowledge of Primal, neither Primal nor any of its Affiliates has taken
or agreed to take any action or failed to take any action that would prevent the
Merger from constituting a reorganization within the meaning of IRC (S) 368(a).
4.26 Certain Business Practices
Neither Primal nor any of its Subsidiaries nor any director, officer, employee
or agent of Primal or any of its Subsidiaries has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful payments relating
to political activity, (ii) made any unlawful payment to any foreign or domestic
government official or employee or to any foreign or domestic political party or
campaign or violated any provision of the Foreign Corrupt Practices Act of 1977,
as amended, (iii) consummated any transaction, made any payment, entered into
any agreement or arrangement or taken any other action in violation of Section
1128B(b) of the Social Security Act, as amended, or (iv) made any other unlawful
payment except for the foregoing matters that are not material in any respect to
Primal.
4.27 Interest Rate and Foreign Exchange Contracts
No Acquired Company is a party to or otherwise bound by any Contract relating to
interest rate swaps, caps, floors or option agreements or other interest rate
risk management arrangements or foreign exchange contracts to hedge its
investments in foreign currencies.
4.28 Year 2000 Matters
Except as set forth in Part 4.28 of the Primal Disclosure Letter, the Outfront
Software, the computer programs and the technical systems owned, leased,
licensed or used by the Acquired Companies are year 2000 compliant, will
function and operate prior to, during and after the calendar year 2000 in
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accordance with their specifications and will provide the required output
without experiencing abnormal ending dates and/or invalid or incorrect years and
shall incorporate century recognition date data, calculations that use same
century and multi-century formulas and date values that reflect the current
century in all transactions. In addition, all such computer programs and
technical systems will process, manage and manipulate data involving dates,
including single century and multi-century formulas, and will not cause an
abnormally ending scenario within the application or generate incorrect values
or invalid results involving such dates.
4.29 Proxy Statement
The information supplied by Primal or required to be supplied by Primal (except
to the extent revised or superseded by amendments or supplements) for inclusion
in the proxy statement or any amendment or supplement thereto to be sent to the
stockholders of Primal in connection with the meeting of Primal's stockholders
to consider the Merger (the "Primal Stockholders' Meeting") (such proxy
statement, as amended or supplemented, is referred to herein as the "Proxy
Statement") shall not, on the date the Proxy Statement is first mailed to
Primal's stockholders, at the time of the Primal Stockholders' Meeting and at
the Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies by or on behalf of
Primal for the Primal Stockholders' Meeting which has become false or
misleading. Notwithstanding the foregoing, Primal makes no representation,
warranty or covenant with respect to any information supplied or required to be
supplied by Xxxxx which is contained in or omitted from any of the foregoing
documents.
4.30 Brokers or Finders
Primal and its agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
4.31 Disclosure
(a) No representation or warranty of Primal in this Agreement and no
statement in the Primal Disclosure Letter omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 6.6 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
(c) There is no fact known to any of the Acquired Companies that has
specific application to any Acquired Company (other than general economic or
industry conditions) and that
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materially adversely affects or, as far as Primal can reasonably foresee,
materially threatens, the assets, business, financial condition, or results of
operations of the Acquired Companies (on a consolidated basis) that has not been
set forth in this Agreement or the Primal Disclosure Letter.
5. REPRESENTATIONS AND WARRANTIES OF XXXXX
Xxxxx represents and warrants to Primal as follows:
5.1 Organization and Good Standing
(a) Xxxxx is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. Xxxxx is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except for such failures to be so
qualified or in good standing that would not have an Xxxxx Material Adverse
Effect.
(b) Merger Sub is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. Merger Sub
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except for such
failures to be so qualified or in good standing that would not have an Xxxxx
Material Adverse Effect.
5.2 Authority; No Conflict
(a) This Agreement constitutes the legal, valid, and binding obligation of
Xxxxx and Merger Sub, enforceable against Xxxxx and Merger Sub in accordance
with its terms. Xxxxx and Merger Sub have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of Xxxxx or Merger Sub, or (B) any
resolution adopted by the board of directors or the stockholders of Xxxxx or
Merger Sub;
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(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which Xxxxx or Merger Sub, or any of the
assets owned or used by Xxxxx or Merger Sub, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by Xxxxx or Merger Sub or that otherwise relates to the business
of, or any of the assets owned or used by, Xxxxx or Merger Sub; or
(iv) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Xxxxx Applicable Contract; the effect of which would
cause an Xxxxx Material Adverse Effect or would prevent or delay the Merger or
otherwise prevent Xxxxx or Merger Sub from performing their respective
obligations under this Agreement.
Except as set forth in Part 5.2 of the Xxxxx Disclosure Letter, neither Xxxxx
nor Merger Sub is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
5.3 Capitalization
The authorized capital stock of Xxxxx consists solely of 20,000,000 shares of
common stock, par value $0.01 per share ("Common Stock"), and 20,000,000 shares
of preferred stock, par value $0.01 per share ("Preferred Stock"). As of
February 7, 1999, there were 9,836,526 shares of Common Stock issued and
outstanding and 2,826,667 shares of Preferred Stock issued and outstanding. The
shares of Preferred Stock are divided into eight series, of which 800,000 shares
have been designated as the Series A Junior Convertible Redeemable Preferred
Stock (the "Series A Preferred Stock"), 1,050,000 shares have been designated as
the Series B Junior Convertible Redeemable Preferred Stock (the "Series B
Preferred Stock"), 340,000 have been designated as the Series C Junior
Convertible Redeemable Preferred Stock (the "Series C Preferred Stock"),
5,000,000 shares have been designated as the Senior Cumulative Redeemable
Preferred Stock, 1996 HBS Series (the "HBS Senior Preferred Stock"), 1,500,000
shares have been designated as the Series D Senior Convertible Redeemable
Preferred Stock (the "Series D Preferred Stock"), 350,000 shares have been
designated as the Series E Junior Convertible Redeemable Preferred Stock (the
"Series E Preferred Stock"), 940,000 shares have been designated as the Senior
Cumulative Redeemable Convertible Preferred Stock, 1997 HBS Exchange Series (the
"1997 HBS Senior Preferred Stock"), and 1,050,000 shares have been designated as
the Junior Convertible Redeemable Preferred Stock, Series B Exchange Series (the
"Series B Exchange Preferred Stock"). As of February 7, 1999, Xxxxx had issued
and outstanding 400,000 shares of the Series A Preferred Stock, 500,000 shares
of the Series B Preferred
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Stock,76,667 shares of the Series C Preferred Stock, 1,500,000 shares of the
Series D Preferred Stock, and 350,000 shares of the Series E Preferred Stock.
All such issued and outstanding shares of Common Stock and Preferred Stock have
been duly authorized and validly issued, and are fully paid, nonassessable and
free of preemptive rights. Except for options, warrants and convertible
securities that on February 7, 1999, were exercisable for or convertible into an
aggregate of 3,213,552 shares of Xxxxx Common Stock, and except as contemplated
by this Agreement, there are no options, warrants, calls, subscriptions,
convertible securities, phantom stock rights, or other rights, Contracts,
agreements or commitments which obligates Xxxxx or any of its Subsidiaries to
issue, transfer or sell any shares of capital stock of Xxxxx or any of its
Subsidiaries, or, except as set forth in the Organizational Documents of Xxxxx
relating to the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stock, and the Series E
Preferred Stock, any obligation of Xxxxx or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding capital stock of Xxxxx
or any of its Subsidiaries, or otherwise entitle the holder thereof to receive
or exercise any benefits or rights similar to any rights enjoyed by or accruing
to the holder of shares of capital stock of Xxxxx or any of its Subsidiaries.
5.4 Financial Statements
Xxxxx has delivered to Stockholders: (a) consolidated balance sheets of Xxxxx as
at December 31 in each of the years 1996 through 1997, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flow for each of the fiscal years then ended, together with the report thereon
of King Xxxxxxx & Xxxxxxx, LLP, independent certified public accountants, (b) a
consolidated balance sheet of Xxxxx as at December 31, 1997 (including the notes
thereto, the "Xxxxx Balance Sheet"), and the related consolidated statements of
income, changes in stockholders' equity, and cash flow for the fiscal year then
ended, together with the report thereon of King Xxxxxxx & Xxxxxxx, LLP,
independent certified public accountants, and (c) an unaudited consolidated
balance sheet of Xxxxx as at September 30, 1998 (the "Xxxxx Interim Balance
Sheet") and the related unaudited consolidated statements of income, changes in
stockholders' equity, and cash flow for the nine months then ended, including in
each case the notes thereto. Such financial statements and notes fairly present
the financial condition and the results of operations, changes in stockholders'
equity, and cash flow of the Acquired Companies as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially from those included in the Xxxxx Balance
Sheet); the financial statements referred to in this Section 5.4 reflect the
consistent application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial statements.
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5.5 Books and Records
The books of account, minute books, stock record books, and other records of
Xxxxx, all of which have been made available to Primal, are complete and correct
and have been maintained in accordance with sound business practices and the
requirements of Section 13(b)(2) of the Securities Exchange Act of 1934, as
amended (regardless of whether or not the Acquired Companies are subject to that
Section), including the maintenance of an adequate system of internal controls.
The minute books of Xxxxx contain accurate and complete records of all meetings
held of, and corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of Xxxxx, and no meeting of
any such stockholders, Board of Directors, or committee has been held for which
minutes have not been prepared and are not contained in such minute books.
5.6 Title to Properties; Encumbrances
Xxxxx owns (with good and marketable title in the case of real property, subject
only to the matters permitted by the following sentence) all the properties and
assets (whether real, personal, or mixed and whether tangible or intangible)
that they purport to own, including all of the properties and assets reflected
in the Xxxxx Balance Sheet and the Xxxxx Interim Balance Sheet (except for
assets held under capitalized leases disclosed and personal property sold since
the date of the Balance Sheet and the Interim Balance Sheet, as the case may be,
in the Ordinary Course of Business), and all of the properties and assets
purchased or otherwise acquired by Xxxxx since the date of the Balance Sheet
(except for personal property acquired and sold since the date of the Balance
Sheet in the Ordinary Course of Business and consistent with past practice).
All material properties and assets reflected in the Xxxxx Balance Sheet and the
Xxxxx Interim Balance Sheet are free and clear of all Encumbrances and are not,
in the case of real property, subject to any rights of way, building use
restrictions, exceptions, variances, reservations, or limitations of any nature
except, with respect to all such properties and assets, (a) mortgages or
security interests shown on the Xxxxx Balance Sheet or the Xxxxx Interim Balance
Sheet as securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the Interim Balance Sheet
(such mortgages and security interests being limited to the property or assets
so acquired), with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, (c) liens for current
taxes not yet due, and (d) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of Xxxxx or any of its Subsidiaries, and (ii)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto. All buildings, plants, and
structures owned by Xxxxx and its Subsidiaries lie wholly within the boundaries
of the real property owned by Xxxxx and its Subsidiaries and do not encroach
upon the property of, or otherwise conflict with the property rights of, any
other Person.
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5.7 Accounts Receivable
All accounts receivable of Xxxxx that are reflected on the Xxxxx Balance Sheet
or the Xxxxx Interim Balance Sheet (collectively, the "Xxxxx Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of the respective reserves shown
on the Xxxxx Balance Sheet or the Interim Balance Sheet (which reserves are
adequate and calculated consistent with past practice). There is no contest,
claim, or right of set-off, other than in the Ordinary Course of Business, under
any Contract with any obligor of an Accounts Receivable relating to the amount
or validity of such Accounts Receivable.
5.8 No Undisclosed Liabilities
Except as set forth in Part 5.8 of the Xxxxx Disclosure Letter, Xxxxx has no
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Xxxxx Balance Sheet or the
Xxxxx Interim Balance Sheet and current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof.
5.9 Taxes
(a) Xxxxx has filed or caused to be filed (on a timely basis since January
1, 1996) all Tax Returns that are or were required to be filed by or with
respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. Xxxxx has paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by Xxxxx, except such Taxes, if any, as are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Xxxxx Balance Sheet and the Xxxxx Interim Balance
Sheet.
(b) The charges, accruals, and reserves with respect to Taxes on the
respective books of Xxxxx are adequate (determined in accordance with GAAP) and
are at least equal to Xxxxx'x liability for Taxes. There exists no proposed tax
assessment against Xxxxx except as disclosed in the Xxxxx Balance Sheet. All
Taxes that Xxxxx is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Body or other Person.
5.10 No Material Adverse Change
Since the date of the Xxxxx Balance Sheet, there has not been an Xxxxx Material
Adverse Effect, and no event has occurred or circumstance exists that may result
in an Xxxxx Material Adverse Effect.
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5.11 Compliance with Legal Requirements; Governmental Authorizations
Except as set forth in Part 5.11 of the Xxxxx Disclosure Letter or except as
have not had and would not reasonably be expected to have an Xxxxx Material
Adverse Effect:
(i) Xxxxx is, and at all times since January 1, 1998, has been, in
compliance in all material respects with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
Xxxxx of, or a failure on the part of Xxxxx to comply with, any Legal
Requirement, or (B) may give rise to any obligation on the part of Xxxxx to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature; and
(iii) Xxxxx has not received, at any time since January 1, 1998, any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal Requirement, or (B)
any actual, alleged, possible, or potential obligation on the part of any
Acquired Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
5.12 Legal Proceedings; Orders
(a) Except as set forth in Part 5.12 of the Xxxxx Disclosure Letter, there
is no pending Proceeding:
(i) that has been commenced by or against Xxxxx or that otherwise
relates to or may affect the business of, or any of the assets owned or used by,
Xxxxx, which, if adversely determined, would have an Xxxxx Material Adverse
Effect; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
To the Knowledge of Xxxxx, (1) no such Proceeding has been Threatened, and (2)
no event has occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Proceeding.
(b) Except as set forth in Part 5.12 of the Xxxxx Disclosure Letter:
(i) there is no Order to which Xxxxx or any of its Subsidiaries, or
any of the assets owned or used by Xxxxx or any of its Subsidiaries, is subject;
and
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(ii) to the Knowledge of Xxxxx, no officer, director, agent, or
employee of Xxxxx or any of its Subsidiaries is subject to any Order that
prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of Xxxxx
or any of its Subsidiaries.
(c) Except as set forth in Part 5.12 of the Xxxxx Disclosure Letter or
except as have not had and would not reasonably be expected to have an Xxxxx
Material Adverse Effect:
(i) Xxxxx and its Subsidiaries are, and at all times since January
1, 1998, have been, in full compliance with all of the terms and requirements of
each Order to which any of them, or any of the assets owned or used by them, is
or has been subject;
(ii) no event has occurred or circumstance exists that may constitute
or result in (with or without notice or lapse of time) a violation of or failure
to comply with any term or requirement of any Order to which Xxxxx or any of its
Subsidiaries, or any of the assets owned or used by Xxxxx or any of its
Subsidiaries, is subject; and
(iii) Neither Xxxxx nor any of its Subsidiaries has received, at any
time since January 1, 1998, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding any actual,
alleged, possible, or potential violation of, or failure to comply with, any
term or requirement of any Order to which Xxxxx or any of its Subsidiaries, or
any of the assets owned or used by Xxxxx or any of its Subsidiaries, is or has
been subject.
5.13 Absence of Certain Changes and Events
Except as set forth in Part 5.13 of the Xxxxx Disclosure Letter, since the date
of the Xxxxx Balance Sheet, Xxxxx and its Subsidiaries have conducted their
businesses only in the Ordinary Course of Business and there has not been any:
(a) change in Xxxxx'x authorized or issued capital stock; grant of any
stock option or right to purchase shares of capital stock of Xxxxx; issuance of
any security convertible into such capital stock; grant of any registration
rights; purchase, redemption, retirement, or other acquisition by Xxxxx of any
shares of any such capital stock; or declaration or payment of any dividend or
other distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of Xxxxx;
(c) damage to or destruction or loss of any asset or property of Xxxxx,
whether or not covered by insurance, materially and adversely affecting the
properties, assets, business, financial condition, or prospects of Xxxxx and its
Subsidiaries, taken as a whole;
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(d) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of any Acquired
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of Xxxxx;
(e) cancellation or waiver of any claims or rights with a value to any
Acquired Company in excess of $100,000;
(f) material change in the accounting methods used by Xxxxx; or
(g) agreement, whether oral or written, by Xxxxx to do any of the
foregoing.
5.14 Contracts; No Defaults
(a) Each Material Xxxxx Contract is in full force and effect and is valid
and enforceable in accordance with its terms.
(b) Except as set forth in Part 5.14(b) of the Xxxxx Disclosure Letter:
(i) Xxxxx and its Subsidiaries are, and at all times since January 1,
1996, have been, in full compliance with all applicable terms and requirements
of each Material Xxxxx Contract under which Xxxxx or any of its Subsidiaries has
or had any obligation or liability or by which such Xxxxx or any of its
Subsidiaries or any of the assets owned or used by Xxxxx or any of its
Subsidiaries is or was bound;
(ii) each other Person that has or had any obligation or liability
under any Material Xxxxx Contract under which Xxxxx or any of its Subsidiaries
has or had any rights is, and at all times since January 1, 1996, has been, in
full compliance with all applicable terms and requirements of such Material
Xxxxx Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or result in a
violation or breach of, or give Xxxxx or any of its Subsidiaries or other Person
the right to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or to cancel, terminate, or modify, any Material
Xxxxx Contract; and
(iv) neither Xxxxx nor any of its Subsidiaries has given to or
received from any other Person, at any time since January 1, 1996, any notice or
other communication (whether oral or written) regarding any actual, alleged,
possible, or potential violation or breach of, or default under, any Material
Xxxxx Contract.
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5.15 Insurance
(a) Except as set forth on Part 5.15 of the Xxxxx Disclosure Letter:
(i) All policies of insurance to which Xxxxx is a party or that
provide coverage to Xxxxx, any of its Subsidiaries, or any director or officer
of Xxxxx or any of its Subsidiaries:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for the
assets and the operations of Xxxxx for all risks normally insured against by a
Person carrying on the same business or businesses as Xxxxx and its
Subsidiaries;
(D) are sufficient for compliance with all Legal Requirements and
Contracts to which Xxxxx or any of its Subsidiaries is a party or by which any
of them is bound; and
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions.
(ii) Xxxxx has paid all premiums due, and have otherwise performed all
of its obligations, under each policy to which Xxxxx is a party or that provides
coverage to Xxxxx, its Subsidiaries, or any director or officer of Xxxxx or any
of its Subsidiaries.
5.16 Proxy Statement
The information supplied by Xxxxx or required to be supplied by the Xxxxx
(except to the extent revised or superseded by amendments or supplements) for
inclusion in the Proxy Statement shall not, on the date the Proxy Statement is
first mailed to Primal's stockholders, at the time of the Primal Stockholders'
Meeting and at the Effective Time, contain any statement which, at such time, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not false or misleading, or
omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies by or on
behalf of Primal for the Primal Stockholders' Meeting which has become false or
misleading. Notwithstanding the foregoing, Xxxxx makes no representation,
warranty or covenant with respect to any information supplied or required to be
supplied by Primal which is contained in or omitted from any of the foregoing
documents.
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5.17 Tax Matters
To the Knowledge of Xxxxx, neither Xxxxx nor any of its Affiliates has taken or
agreed to take any action or failed to take any action that would prevent the
Merger from constituting a reorganization within the meaning of IRC (S) 368(a).
5.18 Brokers or Finders
Neither Xxxxx nor its agents have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
5.19 Disclosure
(a) No representation or warranty of Xxxxx in this Agreement and no
statement in the Xxxxx Disclosure Letter omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 7.3 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
(c) There is no fact known to Xxxxx that has specific application to Xxxxx
(other than general economic or industry conditions) and that materially
adversely affects the assets, business, prospects, financial condition, or
results of operations of Xxxxx (on a consolidated basis) that has not been set
forth in this Agreement or the Xxxxx Disclosure Letter.
6. COVENANTS OF PRIMAL PRIOR TO CLOSING DATE
6.1 Access and Investigation
Between the date of this Agreement and the Closing Date, each Acquired Company
and its Representatives will, (a) afford Xxxxx and its Representatives and
prospective lenders and their Representatives (collectively, "Xxxxx'x Advisors")
full and free access to each Acquired Company's personnel, properties (including
subsurface testing), contracts, books and records, and other documents and data,
(b) furnish Avery and Xxxxx'x Advisors with copies of all such contracts, books
and records, and other existing documents and data as Xxxxx may reasonably
request, and (c) furnish Avery and Xxxxx'x Advisors with such additional
financial, operating, and other data and information as Xxxxx may reasonably
request.
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6.2 Delivery of Primal Disclosure Letter
Primal shall deliver the Primal Disclosure Letter to Xxxxx or its counsel on or
before 5:00 p.m., Central Standard or Daylight Savings Time, as the case may be
on April 8, 1999. At least one copy of the Primal Disclosure Letter shall be
delivered to counsel for Xxxxx at their offices in Dallas, Texas.
Xxxxx shall have through 5:00 p.m., Central Standard or Daylight Savings Time,
as the case may be, on the fourteenth calendar day (or, if not a Business Day,
the next Business Day after such fourteenth calendar day) following the date on
which the Primal Disclosure Letter is delivered to Xxxxx and its counsel as
herein provided (such day being referred to herein as the "Review Termination
Date") to review the contents of and disclosures in the Primal Disclosure Letter
and to complete its review of the books, records and operations of Primal. At
any time through and including the Review Termination Date, Xxxxx shall have the
right to notify Primal whether it elects to proceed with the transactions
contemplated by this Agreement, or to terminate this Agreement. In the event
Xxxxx elects to terminate this Agreement, the provisions of Section 11 shall
govern and apply for all purposes, except that (i) the provisions of Section
11.3 shall not be thereafter applicable and Xxxxx shall have no obligation
whatsoever to purchase the 20% Investment Shares, and (ii) the provisions of the
second sentence of Section 14.1 shall not be thereafter applicable and Xxxxx
shall have no obligation whatsoever to reimburse Primal for legal fees as
therein provided. The termination of this Agreement by Xxxxx pursuant to this
Section 6.2 shall in no event or under any circumstance be or be deemed to be a
termination of this Agreement to which the proviso of the second sentence of
Section 11.2 refers.
6.3 Operation of the Businesses of the Acquired Companies
Between the date of this Agreement and the Closing Date, each Acquired Company
will:
(a) conduct the business of such Acquired Company only in the Ordinary
Course of Business;
(b) use its Best Efforts to preserve intact the current business
organization of such Acquired Company, keep available the services of the
current officers, employees, and agents of such Acquired Company, and maintain
the relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with such Acquired
Company;
(c) take commercially reasonable measures and precautions necessary to
protect the confidentiality and value of each Primal Intellectual Property Asset
(except Primal Intellectual Property Assets whose value would be unimpaired by
public disclosure) and otherwise to maintain and protect the value of all Primal
Intellectual Property Assets;
(d) confer with Xxxxx concerning operational matters of a material nature;
and
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(e) otherwise report periodically to Xxxxx concerning the status of the
business, operations, and finances of such Acquired Company.
6.4 Negative Covenant
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Closing Date, each Acquired Company will not, without the
prior written consent of Xxxxx, take any affirmative action, or fail to take any
reasonable action within its control, as a result of which any of the changes or
events listed in Section 4.16 is likely to occur, except that Primal may enter
into any Contract or transaction involving a total remaining commitment to
Primal of $10,000 or more if such Contract would be either a Software License or
a Consulting Contract and it is entered in the Ordinary Course of Business.
6.5 Required Approvals
As promptly as practicable after the date of this Agreement, each Acquired
Company will make all filings required by Legal Requirements to be made by it in
order to consummate the Contemplated Transactions (including all filings under
the HSR Act). Between the date of this Agreement and the Closing Date, each
Acquired Company will (a) cooperate with Xxxxx with respect to all filings that
Xxxxx elects to make or is required by Legal Requirements to make in connection
with the Contemplated Transactions, and (b) cooperate with Xxxxx in obtaining
all consents identified in Part 4.2 of the Primal Disclosure Letter (including
taking all actions requested by Xxxxx to cause early termination of any
applicable waiting period under the HSR Act).
6.6 Notification
Between the date of this Agreement and the Closing Date, Primal will promptly
notify Xxxxx in writing if any Acquired Company becomes aware of any fact or
condition that causes or constitutes a Breach of any of Primal's representations
and warranties as of the date of this Agreement, or if any Acquired Company
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Primal Disclosure Letter if the Primal Disclosure Letter were dated the
date of the occurrence or discovery of any such fact or condition, Primal will
promptly deliver to Xxxxx a supplement to the Primal Disclosure Letter
specifying such change. During the same period, Primal will promptly notify
Xxxxx of the occurrence of any Breach of any covenant of Primal in this Section
6 or of the occurrence of any event that may make the satisfaction of the
conditions in Section 8 impossible or unlikely. For so long as representatives
of Xxxxx constitute a majority of the members of the board of directors of WBS,
Primal shall have no obligation to notify Xxxxx as herein provided with respect
to changes in the business operations of WBS that would, but for this sentence,
be required by this Section 6.6.
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6.7 No Negotiation
Until such time, if any, as this Agreement is terminated pursuant to Section 11,
each Acquired Company and each of their Representatives will not, directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Xxxxx) relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of any Acquired Company,
or any of the capital stock of any Acquired Company, or any merger,
consolidation, business combination, or similar transaction involving any
Acquired Company.
6.8 Best Efforts
Between the date of this Agreement and the Closing Date, Primal will use its
Best Efforts to cause the conditions in Sections 8 and 9 to be satisfied.
7. COVENANTS OF XXXXX PRIOR TO CLOSING DATE
7.1 Access and Investigation
Between the date of this Agreement and the Closing Date, each Acquired Company
and its Representatives will, (a) afford Primal and its Representatives
(collectively, "Primal's Advisors") full and free access to each Acquired
Company's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data, (b) furnish Primal and Primal's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as Primal may reasonably request, and (c) furnish
Primal and Primal's Advisors with such additional financial, operating, and
other data and information as Primal may reasonably request.
7.2 Approvals of Governmental Bodies
As promptly as practicable after the date of this Agreement, Xxxxx will, and
will cause each of its Related Persons to, make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions
(including all filings under the HSR Act). Between the date of this Agreement
and the Closing Date, Xxxxx will, and will cause each of its Related Persons to,
cooperate with Primal with respect to all filings that Primal is required by
Legal Requirements to make in connection with the Contemplated Transactions, and
(ii) cooperate with Primal in obtaining all consents identified in Part 4.2 of
the Primal Disclosure Letter; provided, however, that this Agreement will not
require Xxxxx to dispose of or make any change in any portion of its business or
to incur any other burden to obtain a Governmental Authorization.
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7.3 Notification
Between the date of this Agreement and the Closing Date, Xxxxx will promptly
notify Primal in writing if Xxxxx becomes aware of any fact or condition that
causes or constitutes a Breach of any of Xxxxx'x representations and warranties
as of the date of this Agreement, or if Xxxxx becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Xxxxx Disclosure Letter if the
Xxxxx Disclosure Letter were dated the date of the occurrence or discovery of
any such fact or condition, Xxxxx will promptly deliver to Primal a supplement
to the Xxxxx Disclosure Letter specifying such change. During the same period,
Xxxxx will promptly notify Primal of the occurrence of any Breach of any
covenant of Xxxxx in this Section 7 or of the occurrence of any event that may
make the satisfaction of the conditions in Section 9 impossible or unlikely.
7.4 Best Efforts
Except as set forth in the proviso to Section 7.2, between the date of this
Agreement and the Closing Date, Xxxxx will use its Best Efforts to cause the
conditions in Sections 8 and 9 to be satisfied.
8. CONDITIONS PRECEDENT TO XXXXX'X OBLIGATION TO CLOSE
Xxxxx'x obligation to consummate the Merger and to take the other actions
required to be taken by Xxxxx at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Xxxxx, in whole or in part):
8.1 Accuracy of Representations
(a) All of Primal's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Primal Disclosure Letter, and Primal shall have delivered to
Xxxxx a certificate, executed by the President of Primal, to such effect.
(b) Each of Primal's representations and warranties in Sections
4.2(b)(iv), 4.3, 4.4, 4.12, and 4.31 and in the penultimate sentence of Section
4.24 must have been accurate in all respects as of the date of this Agreement,
and must be accurate in all respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Primal Disclosure
Letter, and Primal shall have delivered to Xxxxx a certificate, executed by the
President of Primal, to such effect.
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8.2 Primal's Performance
(a) All of the covenants and obligations that Primal is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects, and Primal shall have delivered to Xxxxx a certificate,
executed by the President of Primal, to such effect.
(b) Each document required to be delivered pursuant to Section 3.2 must
have been delivered, and each of the other covenants and obligations in Sections
6.5 and 6.8 must have been performed and complied with in all respects, and
Primal shall have delivered to Xxxxx a certificate, executed by the President of
Primal, to such effect.
8.3 Consents
Each of the Consents identified in Part 4.2 of the Primal Disclosure Letter must
have been obtained and must be in full force and effect.
8.4 Additional Documents
Each of the following documents must have been delivered to Xxxxx:
(a) estoppel certificates executed on behalf of the landlord for Primal's
office space on the Closing Date, dated as of a date not more than five days
prior to the Closing Date, each in the form of Exhibit 8.4(b); and
----------
(b) such other certificates and documents as Xxxxx may reasonably request
for the purpose of (i) evidencing the accuracy of any of Primal's
representations and warranties, (ii) evidencing the performance by Primal of, or
the compliance by Primal with, any covenant or obligation required to be
performed or complied with by Primal, (iii) evidencing the satisfaction of any
condition referred to in this Section 8, or (iv) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
8.5 No Proceedings
Since the date of this Agreement, there must not have been commenced or
Threatened against Xxxxx, or against any Person affiliated with Xxxxx, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
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8.6 No Claim Regarding Stock Ownership or Merger Consideration
There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Acquired Companies, or (b)
is entitled to all or any portion of the Merger Consideration.
8.7 No Prohibition
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Xxxxx or any Person affiliated with Xxxxx to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
9. CONDITIONS PRECEDENT TO PRIMAL'S OBLIGATION TO CLOSE
Primal's obligation to consummate the Merger and to take the other actions
required to be taken by Primal at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Primal, in whole or in part):
9.1 Accuracy of Representations
All of Xxxxx'x representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
9.2 Xxxxx'x Performance
(a) All of the covenants and obligations that Xxxxx is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
material respects, and Xxxxx shall have delivered to Primal a certificate,
executed by an executive officer of Xxxxx, to such effect.
(b) Xxxxx must have delivered each of the documents required to be
delivered by Xxxxx pursuant to Section 3.2, and Xxxxx shall have delivered to
Primal a certificate, executed by an executive officer of Xxxxx, to such effect.
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9.3 Consents
Each of the Consents identified in Part 4.2 of the Primal Disclosure Letter must
have been obtained and must be in full force and effect.
9.4 Additional Documents
Xxxxx must have caused the following documents to be delivered to Primal:
(a) such other certificates and documents as Primal may reasonably request
for the purpose of (i) evidencing the accuracy of any representation or warranty
of Xxxxx, (ii) evidencing the performance by Xxxxx of, or the compliance by
Xxxxx with, any covenant or obligation required to be performed or complied with
by Xxxxx, (iii) evidencing the satisfaction of any condition referred to in this
Section 9, or (iv) otherwise facilitating the consummation of any of the
Contemplated Transactions.
9.5 No Injunction
There must not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the Merger, and (b) has been adopted or issued, or has
otherwise become effective, since the date of this Agreement.
10. ADDITIONAL AGREEMENTS
10.1 Meeting of Stockholders
Primal, acting through its Board of Directors, shall, in accordance with the
CGCL and its Organizational Documents, promptly and duly call, give notice of,
convene and hold as soon as practicable following the date hereof, the Primal
Stockholders' Meeting, and Primal shall consult with Xxxxx in connection
therewith. The Board of Directors of Primal shall declare that this Agreement
is advisable and recommend that the Agreement and the transactions contemplated
hereby be approved and adopted by the stockholders of Primal and include in the
Proxy Statement a copy of such recommendations. Primal shall use reasonable
efforts to secure the vote or consent of stockholders required by the CGCL and
its Organizational Documents to approve and adopt this Agreement and the Merger.
10.2 Tax Treatment
Xxxxx and Primal will each use reasonable efforts before and after the Closing
to cause the Merger to qualify as a reorganization within the meaning of IRC (S)
368(a), and will not take, and will use reasonable efforts to prevent any
Affiliate of such party from taking, any actions which could prevent the Merger
from qualifying as such a reorganization, and will take such action as is
available and may be reasonably required to negate the impact of any past
actions by such party or its respective
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Affiliates which would reasonably be expected to adversely impact the
qualification of the Merger as a reorganization within the meaning of IRC (S)
368(a).
10.3 Conveyance Taxes
Xxxxx and Primal shall cooperate in the preparation, execution and filing of all
returns, questionnaires, applications, or other documents regarding (i) any real
property transfer gains, sales, use, transfer, value-added, stock transfer, and
stamp Taxes (ii) any recording, registration and other fees, and (iii) any
similar Taxes or fees that become payable in connection with the transactions
contemplated hereby. The Taxes described in clause (i) above shall be paid by
Primal.
10.4 Voting Agreement
Primal shall use reasonable efforts, on behalf of Xxxxx and pursuant to the
request of Xxxxx, to cause each Stockholder to execute and deliver to Xxxxx the
Voting Agreement concurrently with the execution of this Agreement.
11. TERMINATION
11.1 Termination Events
This Agreement may, by notice given prior to or at the Closing, be terminated:
(a) by Xxxxx, in its sole and absolute discretion, at any time from and
after the date of this Agreement through and including the date that is 270
calendar days after the date of this Agreement (the date of this Agreement being
excluded from such 270-day period);
(b) by either Xxxxx or Primal if a material Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived;
(c) (i) by Xxxxx if any of the conditions in Section 8 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Xxxxx to comply with its
obligations under this Agreement) and Xxxxx has not waived such condition on or
before the Closing Date; or (ii) by Primal, if any of the conditions in Section
9 has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of the
Acquired Companies to comply with their obligations under this Agreement) and
Primal has not waived such condition on or before the Closing Date;
(d) by mutual consent of Xxxxx and Primal; or
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(e) by either Xxxxx or Primal if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before March 31, 2000, or
such later date as the parties may agree upon.
11.2 Effect of Termination
Each party's right of termination under Section 11.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 11.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
11.3, 14.1 and 14.3 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
11.3 Purchase of 20% of the Shares of Primal of Primal Common Stock
If Xxxxx terminates this Agreement pursuant to Section 11.1(a), or pursuant to
Section 11.1(c)(ii) because of the non-fulfillment of a condition specified in
Sections 9.1, 9.2 or 9.4, then, in such event, Primal agrees to sell, and Xxxxx
agrees to purchase, that number of shares of Primal Common Stock (collectively,
the "20% Investment Shares") as shall equal the quotient obtained by dividing
(i) the sum, without duplication, of (A) the number of outstanding shares of
Primal Common Stock on the date of the termination of this Agreement, plus (B)
the number of shares of Primal Common Stock reserved for issuance on the date of
the termination of this Agreement upon the exercise of any outstanding options,
warrants or rights of any kind to acquire any shares of, or upon the conversion
or exchange of any securities convertible into or exchangeable for any shares
of, Primal Common Stock, plus (C) the number of shares of Primal Common Stock
reserved for issuance on the date of the termination of this Agreement pursuant
to any contract, agreement, commitment or arrangement obligating Primal to
offer, sell, issue or grant any shares of, or any options, warrants or rights of
any kind to acquire any shares of, or any securities convertible into or
exchangeable for any shares of, Primal Common Stock, excluding those shares
reserved for issuance included in clause (C) hereof, plus (D) the number of
shares of Primal Common Stock reserved for issuance on the date of the
termination of this Agreement pursuant to future awards that could be granted
under the Primal Option Plan, by (ii) eight-tenths (0.8). The purchase price
(the "20% Investment Purchase Price") for the 20% Investment Shares shall be
$2,000,000. The 20% Investment Purchase Price shall be payable as follows:
first, by the cancellation of indebtedness owed by Primal to Xxxxx for money
borrowed, including accrued and unpaid interest thereon; and second, by the wire
transfer of immediately available funds for the difference, if any, between the
20% Investment Purchase Price and the amount credited toward the 20% Investment
Purchase Price by the cancellation of such indebtedness and accrued and unpaid
interest. The consummation of the purchase and sale contemplated hereby (the
"Investment Closing") shall take place as provided in Section 3.1 on the
thirtieth Business Day following the date on which notice of termination of this
Agreement is
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delivered by Xxxxx to Primal pursuant to Section 11.1. Xxxxx'x obligation to
purchase the Investment Shares and to take the other actions required to be
taken at the Investment Closing is subject to the satisfaction, at or prior to
the Investment Closing, of each of the conditions (any of which may be waived by
Xxxxx, in whole or in part) set forth in Section 8. At the Investment Closing,
payment of the 20% Investment Purchase Price shall be made against delivery of a
certificate representing the 20% Investment Shares, and such payment and
delivery shall be evidenced by the delivery of an appropriate cross-receipt
signed by Xxxxx and Primal.
12. INDEMNIFICATION; REMEDIES
12.1 Survival; Right to Indemnification Not Affected By Knowledge
All representations, warranties, covenants, and obligations in this Agreement,
the Primal Disclosure Letter, the supplements to the Primal Disclosure Letter,
the certificates delivered pursuant to Section 8, and any other certificate or
document delivered pursuant to this Agreement will survive the Closing for a
period of two years. The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
Knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
12.2 Indemnification and Payment of Damages By Stockholders
Stockholders, jointly and severally, will indemnify and hold harmless Xxxxx, the
Acquired Companies, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage (including incidental and consequential damages), expense
(including costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim, in all cases,
net of aggregate tax benefits or aggregate third party recoveries actually
received by the indemnified party or estimated in good faith to be received by
the indemnified party on or before the second anniversary of the Closing Date
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by Primal in this
Agreement (without giving effect to any supplement to the Primal Disclosure
Letter), the Primal Disclosure Letter, the supplements to the Primal Disclosure
Letter, or any other certificate or document delivered by Primal pursuant to
this Agreement;
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(b) any Breach of any representation or warranty made by Primal in this
Agreement as if such representation or warranty were made on and as of the
Closing Date without giving effect to any supplement to the Primal Disclosure
Letter, other than any such Breach that is disclosed in a supplement to the
Primal Disclosure Letter and is expressly identified in the certificates
delivered pursuant to Section 8.1 as having caused the condition specified in
Section 8.1 not to be satisfied;
(c) any Breach by Primal of any covenant or obligation of Primal in this
Agreement;
(d) any services provided by any Acquired Company prior to the Closing
Date;
(e) any matter disclosed in Parts 4.2(b)(iv) and 4.15 of the Primal
Disclosure Letter; or
(f) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any such Person with either Stockholder or any Acquired Company (or
any Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The remedies provided in this Section 12.2 will not be exclusive of or limit any
other remedies that may be available to Xxxxx or the other Indemnified Persons.
12.3 Time Limitations
If the Closing occurs, Stockholders will have no liability (for indemnification
or otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, other
than those in Sections 4.2(b)(iv), 4.3, 4.11, 4.13, and 4.19, unless on or
before two years following the Closing Date Xxxxx notifies Stockholders of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Xxxxx; a claim with respect to Sections 4.2(b)(iv), 4.3,
4.11, 4.13, and 4.19, or a claim for indemnification or reimbursement not based
upon any representation or warranty or any covenant or obligation to be
performed and complied with prior to the Closing Date, may be made at any time.
If the Closing occurs, Xxxxx will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before two years following the Closing Date Primal, acting through the
Securityholder Agent, notifies Xxxxx of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Primal.
12.4 Limitations on Amount -- Stockholders
Stockholders will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a), clause (b) or, to the extent
relating to any failure to perform or comply prior to the Closing Date, clause
(c) of Section 12.2 until the total of all Damages with respect to such matters
exceeds $50,000.00, and then only for the amount by which such Damages exceed
$50,000.00. Stockholders will have no liability (for indemnification or
otherwise) with respect to
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the matters described in clause (a) or clause (b), other than, in each case, for
a Breach of the representations and warranties in Sections 4.2(b)(iv), 4.3 and
4.11, or, to the extent relating to any failure to perform or comply prior to
the Closing Date, clause (c) of Section 12.2, in an amount that is greater than
the sum of the Value of the Merger Consideration as of the Effective Time and
the Value of the Additional Merger Consideration, if any, as of the
Determination Date. Stockholders will have no liability (for indemnification or
otherwise) with respect to a Breach of the representations and warranties in
Sections 4.2(b)(iv) and 4.11 in an amount that is greater than the aggregate
liability for Taxes that the stockholders of Primal would have incurred if they
had sold their respective shares of the Primal Common Stock for cash on the
Effective Date. Stockholders' liability (for indemnification or otherwise) with
respect to a Breach of the representations and warranties in Section 4.3 will
not be limited in amount. The foregoing notwithstanding, however, this Section
12.4 will not apply to any Breach of any of Primal's representations and
warranties of which any Stockholder had actual knowledge at any time prior to
the date on which such representation and warranty is made or any intentional
Breach by Primal of any covenant or obligation, and Stockholders will be jointly
and severally liable for all Damages with respect to such Breaches.
12.5 Escrow; Right of Set-Off
At the Effective Time, Primal's stockholders will be deemed to have received and
deposited with the Escrow Agent the Escrow Shares (plus any additional shares as
may be issued upon any stock split, stock dividend or recapitalization effected
by Xxxxx after the Effective Time) without any act of any stockholder. The
portion of the Escrow Shares contributed on behalf of each stockholder of Primal
shall be in proportion to the aggregate Merger Consideration to which such
holder would otherwise be entitled at the Effective Time. The Escrow Shares
shall be available to compensate Xxxxx and its a Affiliates for any Damages
pursuant to Section 12.2.
Upon notice to Stockholders specifying in reasonable detail the basis for such
set-off, Xxxxx may set off any amount to which it may be entitled under this
Section 12, determined in the same manner as claims under the Escrow Agreement,
against amounts otherwise payable hereunder as Additional Merger Consideration
or may give notice of a claim in such amount under the Escrow Agreement, or
both. The exercise of such right of set-off by Xxxxx in good faith, whether or
not ultimately determined to be justified, will not constitute an event of
default hereunder. Neither the exercise of nor the failure to exercise such
right of set-off or to give a notice of a claim under the Escrow Agreement will
constitute an election of remedies or limit Xxxxx in any manner in the
enforcement of any other remedies that may be available to it.
In the event that the Merger is approved, effective upon such vote, and without
further act of any stockholder, a committee comprised of Xxxxxx, Xxxxxxx and
Xxxxxx shall be appointed as agent and attorney-in-fact (such committee, the
"Securityholder Agent") for each stockholder of Primal (except such
stockholders, if any, as shall have perfected their appraisal or dissenters'
rights under the CGCL), for and on behalf of each stockholder of Primal, to give
and receive notices and communications, to authorize delivery to Xxxxx of shares
of Xxxxx Preferred Stock from the Escrow
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Shares in satisfaction of claims by Xxxxx, to object to such deliveries, to
agree to, negotiate, enter into settlements and compromises of, and, if
permitted, to demand arbitration and to comply with orders of courts and awards
of arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of the Securityholder Agent for the accomplishment
of the foregoing. The majority vote of the three members of such committee shall
be deemed to be the act of the Securityholder Agent. Such Securityholder Agent
may be changed by the stockholders of Primal from time to time upon not less
than thirty (30) days' prior written notice to Xxxxx; provided that the
Securityholder Agent may not be removed unless holders of a two-thirds interest
of the Escrow Shares agree to such removal and to the identity of the
substituted agent. Any vacancy in the position of Securityholder Agent may be
filled by approval of the holders of a majority in interest of the Escrow
Shares. No bond shall be required of the Securityholder Agent, and the
Securityholder Agent shall not receive compensation for his or her services.
Notice or communications to or from the Securityholder Agent shall constitute
notice to or form each of the stockholders of Primal. In performing any duties
under the Agreement, the Securityholder Agent shall not be liable to any party
for damages, losses, or expenses, except for gross negligence or willful
misconduct on the part of the Securityholder Agent. The Securityholder Agent
shall not incur any such liability for (A) any act or failure to act made or
omitted in good faith, or (B) any action taken or omitted in reliance upon any
instrument, including any written statement or affidavit provided for in this
Agreement that the Securityholder Agent shall in good faith believe to be
genuine, nor will the Securityholder Agent be liable or responsible for
forgeries, fraud, impersonations, or determining the scope of any representative
authority. In addition, the Securityholder Agent may consult with the legal
counsel in connection with Securityholder Agent's duties under this Agreement
and shall be fully protected in any act taken, suffered, or permitted by it in
good faith in accordance with the advice of counsel. The Securityholder Agent is
not responsible for determining and verifying the authority of any Person acting
or purporting to act on behalf of any party to this Agreement. Each stockholder
of Primal on whose behalf the Escrow Shares were delivered to the Escrow Agent
pursuant to the Escrow Agreement shall indemnify the Securityholder Agent and
hold the Securityholder Agent harmless against any loss, liability or expense
incurred without gross negligence or willful misconduct on the part of the
Securityholder Agent and arising out of or in connection with the acceptance or
administration of the Securityholder Agent's duties hereunder. A decision, act,
consent or instruction of the Securityholder Agent shall constitute a decision
of all the stockholders for whom a portion of the Escrow Shares otherwise
issuable to them are deposited with the Escrow Agent pursuant to the Escrow
Agreement, and shall be final, binding and conclusive upon each of such
stockholders, and the Escrow Agent and Xxxxx may rely upon any such decision,
act, consent or instruction of the Securityholder Agent as being the decision,
act, consent or instruction of each every such stockholder of Primal. The Escrow
Agent and Xxxxx are hereby relieved from any liability to any Person for any
acts done by them in accordance with such decision, act, consent or instruction
of the Securityholder Agent.
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12.6 Procedure for Indemnification--Third-Party Claims
(a) Promptly after receipt by an indemnified party under Section 12.2 of
notice of any Threatened Proceeding against it or the commencement of any
Proceeding against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is prejudiced by
the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 12.6(a) is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), unless the claim
involves Taxes, to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 12 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to
an indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its Affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound
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by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) Stockholders hereby consent to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on Stockholders with respect to such a claim anywhere in
the world.
12.7 Procedure for Indemnification--Other Claims
A claim for indemnification for any matter not involving a third-party claim may
be asserted by notice to the party from whom indemnification is sought.
13. DEFINITIONS; CONSTRUCTION
For all purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, the terms defined in this Section 13
have the meanings assigned to them or referred to in this Section 13, and
include the plural as well as the singular:
"Acquired Companies"--Primal and its Subsidiaries (other than WBS),
collectively.
"Applicable Contract"--any Contract (a) under which any Acquired Company has
or may acquire any rights, (b) under which any Acquired Company has or may
become subject to any obligation or liability, or (c) by which any Acquired
Company or any of the assets owned or used by it is or may become bound.
"Xxxxx"--as defined in the first paragraph of this Agreement.
"Xxxxx Applicable Contract"--any Contract (a) under which Xxxxx or any of its
Subsidiaries has or may acquire any rights, (b) under which Xxxxx or any of its
Subsidiaries has or may become subject to any obligation or liability, or (c) by
which Xxxxx or any of its Subsidiaries or any of the assets owned or used by any
of them is or may become bound.
"Xxxxx Common Stock"--the common stock, par value $0.01 per share, of Xxxxx.
"Xxxxx Disclosure Letter"--the disclosure letter delivered by Xxxxx to Primal
concurrently with the execution of this Agreement or, at Xxxxx'x option, on or
before 5:00 p.m., California time, on April 8, 1999.
"Xxxxx Material Adverse Effect"--any change or effect that, individually or
when taken together with all other such changes or effects that have occurred
prior to the date of determination of the occurrence of the Xxxxx Material
Adverse Effect, is materially adverse to the business, results of
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operations, or financial condition of Xxxxx and its Subsidiaries, taken as a
whole; provided, however, that in determining whether there has been a Xxxxx
Material Adverse Effect, any adverse effect attributable to the following shall
be disregarded: (i) general economic or business conditions; (ii) general
industry conditions; (iii) the taking of any action permitted or required by
this Agreement; (iv) the announcement or pendency of the Merger or any of the
other transactions contemplated by this Agreement; (v) the Breach by the Primal
or the Stockholders of this Agreement; and (vi) a decline in Xxxxx'x stock
price; in each case, to the extent that such adverse effect is attributable to
such event.
"Xxxxx Preferred Stock"--the non-voting Series F Junior Participating
Convertible Preferred Stock, par value $0.01 per share, having the preferences,
limitations and rights set forth in the Certificate of Designations attached
hereto as Annex B.
-------
"Xxxxx Stock"--collectively, the Xxxxx Common Stock and the Xxxxx Preferred
Stock.
"Balance Sheet"--as defined in Section 4.4(a).
"Best Efforts"--the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible; provided, however, that an obligation to use Best
Efforts under this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to such Person of this Agreement and the Contemplated Transactions.
"Breach"--a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"CGCL"--the General Corporation Law of the State of California.
"Closing"--means a meeting, which will be held in accordance with Section 3.3,
of all Persons interested in the transactions contemplated by this Agreement at
which all documents necessary to evidence the fulfillment or waiver of all
conditions precedent to the consummation of the transactions contemplated by
this Agreement are executed and delivered.
"Closing Date"--the date on which the Closing actually takes place.
"Consent"--any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
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"Constituent Corporations"--Merger Sub and Primal.
"Contemplated Transactions"--all of the transactions contemplated by this
Agreement, including:
(a) the Merger;
(b) the execution, delivery, and performance of the Employment
Agreements, the Registration Rights Agreement, the Stockholders' Releases,
and the Escrow Agreement;
(c) the performance by Xxxxx, Merger Sub, Primal and the Stockholders
of their respective covenants and obligations under this Agreement; and
(d) Xxxxx'x exercise of control over the Acquired Companies;
provided, however, that, when used in any representation, warranty or agreement
herein, the term shall refer only to those matters applicable to the Person
making such representation, warranty or agreement, the intent being that, unless
otherwise expressly provided in this Agreement, no party to this Agreement is
making or shall have been deemed to have made any representations, warranties or
agreements for any other party to this Agreement by using this defined term.
"Contract"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Corsair Agreement"--Asset Purchase Agreement, dated as of February 3, 1999,
by and between Corsair Communications, Inc., a Delaware corporation, Subscriber
Computing, Inc., a Delaware corporation, WBS and Xxxxx, and the Schedules and
Exhibits thereto.
"Damages"--as defined in Section 12.2.
"DGCL"--the General Corporation Law of the State of Delaware.
"Employment Agreements"--as defined in Section 3.2(a)(ii).
"Encumbrance"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"End-User Licenses"--object code end-user licenses granted to end users in the
ordinary course of business that permit use of Software products generally
available to the public without a right to modify, distribute or sublicense such
Software products.
"Environment"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply,
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stream sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
"Environmental Law"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual Releases of pollutants or Hazardous Materials,
violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction,
that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the Release of
pollutants or Hazardous Materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been Released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting self-
appointed representatives of the public interest to recover for injuries
done to public assets.
"Environmental Liabilities"--any cost, damages, expense, liability,
obligation, or other responsibility arising from or under Environmental Law or
Occupational Safety and Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or
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inspection costs and expenses arising under Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or
response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and for
any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., as amended
("CERCLA").
"ERISA"--the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"Escrow Agreement"--as defined in Section 3.2(b).
"GAAP"--generally accepted United States accounting principles.
"Governmental Authorization"--any approval, consent, license, permit, waiver,
or other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body"--any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity
and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
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"Hazardous Materials"--any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"HSR Act"--the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Intellectual Property Assets"-- any (i) patent, patent application, trademark
(whether registered or unregistered), trademark application, trade name,
fictitious business name, service xxxx (whether registered or unregistered),
service xxxx application, copyright (whether registered or unregistered),
copyright application, maskwork, maskwork application, trade secret, know-how,
customer list, franchise, system, Software, Source Code, computer program,
domain name or registration for any Internet site, invention, design (including
any design forming any part of any Internet site), blueprint, engineering
drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset; or (ii) right to use or exploit
any of the foregoing.
"Interim Balance Sheet"--as defined in Section 4.4(b).
"IRC"--the Internal Revenue Code of 1986 or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a particular
fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual serving in the same or similar capacity as
such individual would or could be expected to discover or otherwise become
aware of such fact or other matter in the course of serving in the same or
similar capacity as such individual.
An individual is under no obligation to make any investigation for the purposes
of this definition.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
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"Legal Requirement"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Material Xxxxx Contract"--an Xxxxx Applicable Contract that is material to
Xxxxx and its Subsidiaries taken as a whole.
"Merger"--the merger of Primal with and into Merger Sub for which provision is
made in this Agreement.
"Merger Sub"--ACI Telecommunications Financial Services Corporation, a
Delaware corporation.
"Occupational Safety and Health Law"--any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Order"--any award, decision, injunction, judgment, order, ruling, subpoena,
or verdict entered, issued, made, or rendered by any court, administrative
agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of
such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or
by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that
are in the same line of business as such Person.
"Organizational Documents"--(a) the articles or certificate of incorporation
and the bylaws of a corporation; (b) the partnership agreement and any statement
of partnership of a general partnership; (c) the limited partnership agreement
and the certificate of limited partnership of a limited partnership; (d) any
charter or similar document adopted or filed in connection with the creation,
formation, or organization of a Person; and (e) any amendment to any of the
foregoing.
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"Outfront Software"--the current version of the Software system developed by
Primal known as "Outfront," including any and all Software implementations of
algorithms, models and methodologies, whether in Source Code or object code,
interfaces, navigational devices, menus, menu structures or arrangements, icons,
help and other operational instructions and the literal expressions of ideas
that operate, cause, create, direct, manipulate, access or otherwise affect the
operation of such Software system, and all documentation, including user manuals
and training materials, relating to such Software system.
"Person"--any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"Plan"--as defined in Section 4.24.
"Primal Disclosure Letter"--the disclosure letter delivered by Primal to Xxxxx
concurrently with the execution and delivery of this Agreement or, at Primal's
option, as provided in Section 6.2.
"Primal Intellectual Property Asset"--means any Intellectual Property Asset
owned by or licensed to any of the Acquired Companies, including the Outfront
Software and the Source Code for the Outfront Software and the names "Primal
Systems," Primal Billing Systems" and "Wireless Billing Systems."
"Primal Material Adverse Effect"--any change or effect that, individually or
when taken together with all other such changes or effects that have occurred
prior to the date of determination of the occurrence of the Primal Material
Adverse Effect, is materially adverse to the business, results of operations, or
financial condition of the Primal and its Subsidiaries (excluding WBS for all
purposes), taken as a whole; provided, however, that in determining whether
there has been a Primal Material Adverse Effect, any adverse effect attributable
to the following shall be disregarded: (i) general economic or business
conditions; (ii) general industry conditions; (iii) the taking of any action
permitted or required by this Agreement; (iv) the announcement or pendency of
the Merger or any of the other transactions contemplated by this Agreement; (v)
the Breach by Xxxxx or Merger Sub of this Agreement; in each case, to the extent
that such adverse effect is attributable to such event.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
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"Related Person"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse and former spouses, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
"Release"--any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
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"Representative"--with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Securityholder Agent"--as defined in Section 12.5.
"Software"--any and all (i) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code
or object code, interfaces, navigational devices, menus, menu structures or
arrangements, icons, help and other operational instructions and the literal
expressions of ideas that operate, cause, create, direct, manipulate, access or
otherwise affect the operation of such computer programs, (ii) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (iii) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the foregoing, and
(iv) all documentation, including user manuals and training materials, relating
to any of the foregoing.
"Source Code"--the complete instruction set for any Software, including all
comments and procedural code, such as compilation switches, job control language
statements and a description of the system/program generation procedure, in a
form intelligible to human programmers and capable of being readily translated
by such programmers into object code for execution on computer equipment through
assembly or compiling, together with all documentation to facilitate such
translation, assembly and compiling; including, without limitation, programmers'
notes, technical and functional specifications, flow charts, schematics, test
programs, statements of principles of operations, architectural and design
standards, and descriptions of data flows, data structures and control logic.
"Stockholders"--as defined in the first paragraph of this Agreement.
"Stockholders' Releases"--as defined in Section 3.2(a)(i).
"Subscriber Assets"--the "Assets" as defined in the Corsair Agreement.
"Subsidiary"--with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of Primal.
-67-
"Surviving Corporation"--Merger Sub.
"Tax"--any tax (including any income tax, capital gains tax, value-added tax,
sales tax, property tax, gift tax, or estate tax), levy, assessment, tariff,
duty (including any customs duty), deficiency, or other fee, and any related
charge or amount (including any fine, penalty, interest, or addition to tax),
imposed, assessed, or collected by or under the authority of any Governmental
Body or payable pursuant to any tax-sharing agreement or any other Contract
relating to the sharing or payment of any such tax, levy, assessment, tariff,
duty, deficiency, or fee.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment
of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"Trading Day"--a day on which the principal national securities exchange on
which the shares of the Xxxxx Common Stock are listed or admitted to trading is
open for the transaction of business or, if the shares of the Xxxxx Common Stock
are not listed or admitted to trading, means a Business Day.
"Value"--with respect to a share of the Xxxxx Common Stock as of any date,
the average of the "closing price" for the ten (10) consecutive Trading Days
immediately preceding such date. The "closing price" for each such Trading Day
means the last sale price, regular way on such day, or, if no such sale takes
place on that day, the average of the closing bid and asked prices on that day,
regular way, in either case as reported on the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange, or if the shares of the Xxxxx Common
Stock are not so listed or admitted to trading, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange (including the National Market System
of The Nasdaq Stock Market) on which the shares of the Xxxxx Common Stock are
listed or admitted to trading or, if the shares of the Xxxxx Common Stock are
not so listed or admitted to trading, the last quoted price or, if not quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the principal automated
quotation system then in use or, if the shares of the Xxxxx Common Stock are not
so quoted by any such system, the average of the closing bid and asked prices as
furnished by a professional market maker selected by the board of directors of
Xxxxx making a market in the shares of the Xxxxx Common Stock, or, if there is
no such market maker or
-68-
such closing prices otherwise are not available, the fair market value of the
shares of the Xxxxx Common Stock as of such day, as determined by the board of
directors of Xxxxx in good faith. In the event Xxxxx issues to all holders of
the shares of the Xxxxx Common Stock rights, options, warrants or convertible or
exchangeable securities entitling the shareholders to subscribe for or purchase
shares of the Xxxxx Stock or any other property, then the Value of a share of
the Xxxxx Common Stock shall include the value of such rights, as determined by
the board of directors of Xxxxx acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate.
"WBS"--Wireless Billing Systems, a California corporation.
"WBS Transaction"--the acquisition of the Subscriber Assets by WBS pursuant to
the Corsair Agreement.
14. GENERAL PROVISIONS
14.1 Expenses
Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Xxxxx will reimburse Primal for all legal fees
incurred by Primal in connection with the preparation, execution, and
performance of this Agreement and the Contemplated Transactions. In the event
of termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a Breach of
this Agreement by another party.
14.2 Public Announcements
Any public announcement or similar publicity with respect to this Agreement or
the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Xxxxx determines. Unless consented to by Xxxxx in advance or
required by Legal Requirements, prior to the Closing the Acquired Companies
shall keep this Agreement strictly confidential and may not make any disclosure
of this Agreement to any Person. Primal and Xxxxx will consult with each other
concerning the means by which the Acquired Companies' employees, customers, and
suppliers and others having dealings with the Acquired Companies will be
informed of the Contemplated Transactions, and Xxxxx will have the right to be
present for any such communication.
14.3 Confidentiality
Between the date of this Agreement and the Closing Date, Xxxxx, Primal and
Stockholders will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Xxxxx and the Acquired Companies to
maintain in confidence, and not use to the detriment of
-69-
another party or an Acquired Company any written, oral, or other information
obtained in confidence from another party or an Acquired Company in connection
with this Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by or necessary or appropriate in connection with
legal proceedings.
If the Contemplated Transactions are not consummated, each party will return or
destroy as much of such written information as the other party may reasonably
request. Whether or not the Closing takes place, the Acquired Companies and
Xxxxx waive any cause of action, right, or claim arising out of the access of
Xxxxx or its Representatives or Primal and its Representatives, as the case may
be, to any trade secrets or other confidential information of the Acquired
Companies or Xxxxx, as the case may be, except for the intentional competitive
misuse by Xxxxx or Primal, as the case may be, of such trade secrets or
confidential information.
14.4 Notices
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
If to Xxxxx or Merger Sub, to:
Xxxxx Communications, Inc.
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, III, Chairman
With Copy to:
Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
5400 Renaissance Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
-70-
If to Primal or the Stockholders, to:
Primal Systems, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxx Xxxxxx, President
With copy to:
Xxxxx & Xxxxxx LLP
Five Park Plaza, 10th Floor
Jamboree Center
Xxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxxxx X. XxXxxxx, Esq.
14.5 Jurisdiction; Service of Process
Courts within the state of Delaware will have jurisdiction over any and all
disputes between the parties hereto, whether in law or equity, arising out of or
relating to this Agreement, the Contemplated Transactions or the agreements,
instruments and documents contemplated hereby. The parties consent to and agree
to submit to the jurisdiction of such courts. Each of the parties hereby
waives, and agrees not to assert in any such dispute, to the fullest extent
permitted by applicable Law, any claim that (i) such party is not personally
subject to the jurisdiction of such courts, (ii) such party and such party's
property is immune from any legal process issued by such courts or (iii) any
Proceeding commenced in such courts is brought in an inconvenient forum. Process
in any action or proceeding referred to in the preceding sentence may be served
on any party anywhere in the world.
14.6 Further Assurances
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
14.7 Waiver
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
-71-
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable Law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless
in writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
14.8 Entire Agreement and Modification
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter and constitutes (along with the documents referred to in
this Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
14.9 Disclosure Letters
(a) The disclosures in the Primal Disclosure Letter and the Xxxxx
Disclosure Letter, and those in any Supplement thereto, must relate only to the
representations and warranties in the Section of the Agreement to which they
expressly relate and not to any other representation or warranty in this
Agreement.
(b) In the event of any inconsistency between the statements in the body of
this Agreement and those in the Primal Disclosure Letter or the Xxxxx Disclosure
Letter (other than an exception expressly set forth as such in either such
Disclosure Letter with respect to a specifically identified representation or
warranty), the statements in the body of this Agreement will control.
14.10 Assignments, Successors, and Third-Party Rights
No party may assign any of its rights under this Agreement without the prior
consent of the other parties, which will not be unreasonably withheld, except
that Xxxxx may assign any of its rights under this Agreement to any Subsidiary
of Xxxxx. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement and the Indemnified Persons any legal or equitable right, remedy, or
claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement, the Indemnified
Persons and their successors and assigns.
-72-
14.11 Severability
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
14.12 Interpretation
(a) When a reference is made in this Agreement to a section or article,
such reference shall be to a section or article of this Agreement unless
otherwise clearly indicated to the contrary.
(b) Whenever the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation."
(c) The words "hereof," "hereby," "herein" and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified.
(d) The plural of any defined term shall have a meaning correlative to such
defined term, and words denoting any gender shall include all genders. Where a
word or phrase is defined herein, each of its other grammatical forms shall have
a corresponding meaning.
(e) A reference to any legislation or to any provision of any legislation
shall include any amendment, modification or re-enactment thereof, any
legislative provision substituted therefor and all rules, regulations and
statutory instruments issued thereunder or pursuant thereto.
(f) The parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
14.13 Time of Essence
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
-73-
14.14 Governing Law
This Agreement will be governed by the laws of the State of Delaware without
regard to conflicts of laws principles.
14.15 Counterparts
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
[The remainder of this page has been left blank intentionally.
Signatures of the parties appear on the following page.]
-74-
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
XXXXX COMMUNICATIONS, INC.
By:_____________________________
Xxxx X. XxXxxxxxx
Vice President
ACI TELECOMMUNICATIONS FINANCIAL
SERVICES CORPORATION
By:_____________________________
Xxxx X. XxXxxxxxx
Vice President
PRIMAL SYSTEMS, INC.
By:_____________________________
Xxxx Xxxxxx
President
S-1
STOCKHOLDERS:
________________________________
Xxxx X. Xxxxxxx
________________________________
Xxxx Xxxxxx
________________________________
Xxxxxx X. Xxxxxxx
________________________________
Xxxxx Xxxxxx
X-0
Index of Defined Terms
1997 HBS Senior Preferred Stock..............................................35
20% Investment Purchase Price................................................52
20% Investment Shares........................................................52
Accountants..................................................................11
Accounts Receivable..........................................................16
Acquired Companies...........................................................58
Actual Operating Loss........................................................10
Additional Merger Consideration...............................................9
Agreement.....................................................................1
Applicable Contract..........................................................58
Xxxxx.....................................................................1, 58
Xxxxx Accounts Receivable....................................................38
Xxxxx Applicable Contract....................................................58
Xxxxx Balance Sheet..........................................................36
Xxxxx Common Stock...........................................................58
Xxxxx Disclosure Letter......................................................58
Xxxxx Interim Balance Sheet..................................................36
Xxxxx Material Adverse Effect................................................58
Xxxxx Preferred Stock........................................................59
Xxxxx Stock..................................................................59
Xxxxx'x Advisors.............................................................43
Balance Sheet............................................................14, 59
Best Efforts.................................................................59
Breach.......................................................................59
CA Agreement of Merger........................................................2
CERCLA...................................................................28, 62
CGCL......................................................................1, 59
Closing......................................................................59
Closing Date.................................................................59
Closing Financial Statements.................................................11
closing price................................................................68
Code..........................................................................1
Common Stock.................................................................35
Competing Business...........................................................31
Consent......................................................................59
Constituent Corporations.....................................................60
Consulting Contracts.........................................................23
Contemplated Transactions....................................................60
Contract.....................................................................60
Corsair Agreement............................................................60
Damages..................................................................53, 60
(i)
Determination Date...........................................................11
DGCL......................................................................1, 60
Dissenting Shares.............................................................4
Earn-Out Period...............................................................9
Effective Time................................................................2
Employment Agreements.....................................................8, 60
Encumbrance..................................................................60
End-User Licenses ...........................................................60
Environment..................................................................60
Environmental Law............................................................61
Environmental Liabilities....................................................61
Environmental Permits........................................................28
ERISA........................................................................62
ERISA Affiliate..............................................................18
Escrow Agent..................................................................8
Escrow Agreement..........................................................8, 62
Escrow Shares.................................................................5
Exchange Fund.................................................................5
Xxxxxx........................................................................1
Family.......................................................................66
GAAP.........................................................................62
Governmental Authorization...................................................62
Governmental Body............................................................62
Xxxxxx........................................................................1
Hazardous Materials..........................................................63
HBS Senior Preferred Stock...................................................35
HSR Act......................................................................63
Indemnified Persons..........................................................53
Intellectual Property Assets.................................................63
Interim Balance Sheet....................................................14, 63
Investment Closing...........................................................52
Investors Rights Agreement....................................................9
IRC..........................................................................63
IRS..........................................................................63
Knowledge....................................................................63
Legal Requirement............................................................64
Lockup Letters................................................................8
Material Xxxxx Contract......................................................64
Material Interest ...........................................................66
Merger....................................................................1, 64
Merger Certificate............................................................2
Merger Consideration..........................................................3
Merger Sub................................................................1, 64
(ii)
Xxxxxxx.......................................................................1
Occupational Safety and Health Law...........................................64
Order........................................................................64
Ordinary Course of Business..................................................64
Organizational Documents.....................................................64
Outfront Software............................................................65
Owner........................................................................67
Person.......................................................................65
Plan.........................................................................65
Preferred Exchange Ratio......................................................3
Preferred Stock..............................................................35
Primal........................................................................1
Primal Business Plan.........................................................32
Primal Common Stock...........................................................1
Primal Disclosure Letter.....................................................65
Primal Intellectual Property Asset...........................................65
Primal Material Adverse Effect...............................................65
Primal Option................................................................13
Primal Option Plan...........................................................13
Primal Plans.................................................................18
Primal Stockholders' Meeting.................................................33
Primal's Advisors............................................................46
Proceeding...................................................................65
Proprietary Rights Agreement.................................................28
Proxy Statement..............................................................33
Real Property................................................................27
Related Person...............................................................66
Release......................................................................66
Representative...............................................................67
Review Termination Date......................................................44
Securities Act...............................................................67
Securityholder Agent.....................................................55, 67
Series A Preferred Stock.....................................................35
Series B Exchange Preferred Stock............................................35
Series B Preferred Stock.....................................................35
Series C Preferred Stock.....................................................35
Series D Preferred Stock.....................................................35
Series E Preferred Stock.....................................................35
Xxxxxxx.......................................................................1
Software.....................................................................67
Software Licenses............................................................23
Source Code..................................................................67
Source Code Escrow Agreements................................................30
(iii)
Stockholders..............................................................1, 67
Stockholders' Releases....................................................8, 67
Subscriber Assets............................................................67
Subsidiary...................................................................67
Surviving Corporation..................................................1, 2, 68
Tax..........................................................................68
Tax Return...................................................................68
Third Party Licenses.........................................................29
Third Party Software.........................................................29
Threatened...................................................................68
Trading Day..................................................................68
Value........................................................................68
Voting Agreement..............................................................1
WBS..........................................................................69
WBS Transaction..............................................................69
1997 HBS Senior Preferred Stock..............................................35
20% Investment Purchase Price................................................52
20% Investment Shares........................................................52
Accountants..................................................................11
Accounts Receivable..........................................................16
Acquired Companies...........................................................58
Actual Operating Loss........................................................10
Additional Merger Consideration...............................................9
Agreement.....................................................................1
Applicable Contract..........................................................58
Xxxxx.....................................................................1, 58
Xxxxx Accounts Receivable....................................................38
Xxxxx Applicable Contract....................................................58
Xxxxx Balance Sheet..........................................................36
Xxxxx Common Stock...........................................................58
Xxxxx Disclosure Letter......................................................58
Xxxxx Interim Balance Sheet..................................................36
Xxxxx Material Adverse Effect................................................58
Xxxxx Preferred Stock........................................................59
Xxxxx Stock..................................................................59
Xxxxx'x Advisors.............................................................43
Balance Sheet............................................................14, 59
Best Efforts.................................................................59
Breach.......................................................................59
CA Agreement of Merger........................................................2
CERCLA...................................................................28, 62
CGCL......................................................................1, 59
Closing......................................................................59
(iv)
Closing Date.................................................................59
Closing Financial Statements.................................................11
closing price................................................................68
Code..........................................................................1
Common Stock.................................................................35
Competing Business...........................................................31
Consent......................................................................59
Constituent Corporations.....................................................60
Consulting Contracts.........................................................23
Contemplated Transactions....................................................60
Contract.....................................................................60
Corsair Agreement............................................................60
Damages..................................................................53, 60
Determination Date...........................................................11
DGCL......................................................................1, 60
Dissenting Shares.............................................................4
Earn-Out Period...............................................................9
Effective Time................................................................2
Employment Agreements.....................................................8, 60
Encumbrance..................................................................60
End-User Licenses............................................................60
Environment..................................................................60
Environmental Law............................................................61
Environmental Liabilities....................................................61
Environmental Permits........................................................28
ERISA........................................................................62
ERISA Affiliate..............................................................18
Escrow Agent..................................................................8
Escrow Agreement..........................................................8, 62
Escrow Shares.................................................................5
Exchange Fund.................................................................5
Xxxxxx........................................................................1
Family.......................................................................66
GAAP.........................................................................62
Governmental Authorization...................................................62
Governmental Body............................................................62
Xxxxxx........................................................................1
Hazardous Materials..........................................................63
HBS Senior Preferred Stock...................................................35
HSR Act......................................................................63
Indemnified Persons..........................................................53
Intellectual Property Assets.................................................63
Interim Balance Sheet....................................................14, 63
(v)
Investment Closing...........................................................52
Investors Rights Agreement....................................................9
IRC..........................................................................63
IRS..........................................................................63
Knowledge....................................................................63
Legal Requirement............................................................64
Lockup Letters................................................................8
Material Xxxxx Contract......................................................64
Material Interest............................................................66
Merger....................................................................1, 64
Merger Certificate............................................................2
Merger Consideration..........................................................3
Merger Sub................................................................1, 64
Xxxxxxx.......................................................................1
Occupational Safety and Health Law...........................................64
Order........................................................................64
Ordinary Course of Business..................................................64
Organizational Documents.....................................................64
Outfront Software............................................................65
Owner........................................................................67
Person.......................................................................65
Plan.........................................................................65
Preferred Exchange Ratio......................................................3
Preferred Stock..............................................................35
Primal........................................................................1
Primal Business Plan.........................................................32
Primal Common Stock...........................................................1
Primal Disclosure Letter.....................................................65
Primal Intellectual Property Asset...........................................65
Primal Material Adverse Effect...............................................65
Primal Option................................................................13
Primal Option Plan...........................................................13
Primal Plans.................................................................18
Primal Stockholders' Meeting.................................................33
Primal's Advisors............................................................46
Proceeding...................................................................65
Proprietary Rights Agreement.................................................28
Proxy Statement..............................................................33
Real Property................................................................27
Related Person...............................................................66
Release......................................................................66
Representative...............................................................67
Review Termination Date......................................................44
(vi)
Securities Act...............................................................67
Securityholder Agent.....................................................55, 67
Series A Preferred Stock.....................................................35
Series B Exchange Preferred Stock............................................35
Series B Preferred Stock.....................................................35
Series C Preferred Stock.....................................................35
Series D Preferred Stock.....................................................35
Series E Preferred Stock.....................................................35
Xxxxxxx.......................................................................1
Software.....................................................................67
Software Licenses............................................................23
Source Code..................................................................67
Source Code Escrow Agreements................................................30
Stockholders..............................................................1, 67
Stockholders' Releases....................................................8, 67
Subscriber Assets............................................................67
Subsidiary...................................................................67
Surviving Corporation......................................................1, 2
Tax..........................................................................68
Tax Return...................................................................68
Third Party Licenses.........................................................29
Third Party Software.........................................................29
Threatened...................................................................68
Trading Day..................................................................68
Value........................................................................68
Voting Agreement..............................................................1
WBS..........................................................................69
WBS Transaction..............................................................69
(vii)
