Prepared by XXXXXXX CORPORATION xxx.xxxxxxxxxxxxxx.xxx
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Exhibit 10.01
AGREEMENT AND PLAN OF REORGANIZATION
among
ZAMBA CORPORATION
ZFA CORP.
FUSION CONSULTING, INC.
THE SHAREHOLDERS
appearing on the signature page hereto
and the
SHAREHOLDER REPRESENTATIVE
appearing on the signature page hereto
Dated as of January 7, 2000
TABLE OF CONTENTS
| ARTICLE I THE MERGER
|
| 1
|
| SECTION 1.1
|
| The Merger
|
| 1
|
| SECTION 1.2
|
| Effective Time; Closing
|
| 1
|
| SECTION 1.3
|
| Effect of the Merger
|
| 1
|
| SECTION 1.4
|
| Certificate of Incorporation; Bylaws
|
| 2
|
| SECTION 1.5
|
| Directors and Officers
|
| 2
|
| SECTION 1.6
|
| Effect on Capital Stock
|
| 2
|
| SECTION 1.7
|
| Delivery of Parent Shares
|
| 2
|
| SECTION 1.8
|
| Escrowed Shares
|
| 2
|
| SECTION 1.9
|
| No Fractional Shares
|
| 3
|
| SECTION 1.10
|
| Effect of Failure to Deliver Fusion Common Stock
|
| 3
|
| SECTION 1.11
|
| Distributions With Respect to Unexchanged Shares
|
| 3
|
| SECTION 1.12
|
| Transfers of Ownership
|
| 3
|
| SECTION 1.13
|
| No Further Ownership Rights in Fusion Common Stock
|
| 3
|
| SECTION 1.14
|
| Lost, Stolen or Destroyed Certificates
|
| 3
|
| SECTION 1.15
|
| Tax Consequences
|
| 4
|
| SECTION 1.16
|
| Taking of Necessary Action; Further Action
|
| 4
|
| SECTION 1.17
|
| Legends on Shares
|
| 4
|
| ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
|
| 4
|
| SECTION 2.1
|
| Share Ownership
|
| 4
|
| SECTION 2.2
|
| Legal Power; Organization; Qualification of Shareholders
|
| 4
|
| SECTION 2.3
|
| Binding Agreement
|
| 4
|
| SECTION 2.4
|
| No Shareholder Conflict or Default
|
| 5
|
| SECTION 2.5
|
| Ownership and Possession of Shares
|
| 5
|
| SECTION 2.6
|
| Dissenter's Rights
|
| 5
|
| SECTION 2.7
|
| Dividends
|
| 5
|
| SECTION 2.8
|
| Accounting Matters
|
| 5
|
| SECTION 2.9
|
| Investment Representations
|
| 6
|
| SECTION 2.10
|
| Restrictions on Transfer
|
| 6
|
| SECTION 2.11
|
| Investigation
|
| 6
|
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF FUSION AND THE SHAREHOLDERS
|
| 6
|
| SECTION 3.1
|
| Organization of Fusion
|
| 6
|
| SECTION 3.2
|
| Fusion Capital Structure
|
| 7
|
| SECTION 3.3
|
| Obligations With Respect to Capital Stock
|
| 7
|
| SECTION 3.4
|
| Authority
|
| 7
|
| SECTION 3.5
|
| Fusion Financial Statements
|
| 8
|
| SECTION 3.6
|
| Absence of Certain Changes or Events
|
| 9
|
| SECTION 3.7
|
| Taxes
|
| 10
i
| SECTION 3.8
|
| Restrictions on Business Activities
|
| 11
|
| SECTION 3.9
|
| Title to Properties; Absence of Liens and Encumbrances
|
| 12
|
| SECTION 3.10
|
| Intellectual Property
|
| 12
|
| SECTION 3.11
|
| Compliance; Permits; Restrictions
|
| 13
|
| SECTION 3.12
|
| Litigation
|
| 14
|
| SECTION 3.13
|
| Brokers' and Finders' Fees; Transaction Expenses
|
| 14
|
| SECTION 3.14
|
| Employee Benefits
|
| 14
|
| SECTION 3.15
|
| Employment Matters
|
| 15
|
| SECTION 3.16
|
| Environmental Matters
|
| 16
|
| SECTION 3.17
|
| Agreements, Contracts and Commitments
|
| 16
|
| SECTION 3.18
|
| Accounting Matters
|
| 17
|
| SECTION 3.19
|
| Entire Business
|
| 17
|
| SECTION 3.20
|
| Change in Control
|
| 17
|
| SECTION 3.21
|
| Insurance
|
| 17
|
| SECTION 3.22
|
| Bank Accounts
|
| 17
|
| SECTION 3.23
|
| Prior Transactions
|
| 17
|
| SECTION 3.24
|
| Other
|
| 17
|
| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
|
| 18
|
| SECTION 4.1
|
| Organization of Parent
|
| 18
|
| SECTION 4.2
|
| Capital Structure
|
| 18
|
| SECTION 4.3
|
| Authority
|
| 18
|
| SECTION 4.4
|
| SEC Filings; Parent Financial Statements
|
| 19
|
| SECTION 4.5
|
| Absence of Certain Changes or Events
|
| 20
|
| SECTION 4.6
|
| Litigation
|
| 20
|
| SECTION 4.7
|
| Interim Operations of Merger Sub
|
| 20
|
| SECTION 4.8
|
| Pooling Letter From KPMG LLP
|
| 20
|
| ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER
|
| 20
|
| SECTION 5.1
|
| Conduct of Business by Fusion Pending the Merger
|
| 20
|
| SECTION 5.2
|
| Conduct of Business by Parent and Fusion Pending the Merger
|
| 21
|
| ARTICLE VI ADDITIONAL AGREEMENTS
|
| 21
|
| SECTION 6.1
|
| Shareholder's Action
|
| 21
|
| SECTION 6.2
|
| Appropriate Action; Consents; Filings
|
| 22
|
| SECTION 6.3
|
| Access to Information; Confidentiality
|
| 22
|
| SECTION 6.4
|
| No Solicitation of Competing Transactions
|
| 22
|
| SECTION 6.5
|
| NMS Listing
|
| 23
|
| SECTION 6.6
|
| Registration Rights
|
| 23
|
| SECTION 6.7
|
| Fees and Expenses
|
| 23
|
| SECTION 6.8
|
| Public Announcements
|
| 23
|
| SECTION 6.9
|
| Legal Requirements
|
| 23
|
| SECTION 6.10
|
| Affiliates
|
| 23
|
| SECTION 6.11
|
| Audited Financial Statements
|
| 23
ii
| ARTICLE VII CLOSING
|
| 23
|
| SECTION 7.1
|
| Conditions to the Obligations of Each Party
|
| 23
|
| SECTION 7.2
|
| Conditions to the Obligations of Parent and Merger Sub
|
| 24
|
| SECTION 7.3
|
| Conditions to the Obligations of Fusion
|
| 24
|
| ARTICLE VIII TERMINATION AND AMENDMENT
|
| 25
|
| SECTION 8.1
|
| Termination
|
| 25
|
| SECTION 8.2
|
| Effect of Termination
|
| 26
|
| SECTION 8.3
|
| Amendment
|
| 26
|
| SECTION 8.4
|
| Waiver
|
| 26
|
| ARTICLE IX INDEMNIFICATION AND ESCROW
|
| 26
|
| SECTION 9.1
|
| Indemnification by the Company Shareholders
|
| 26
|
| SECTION 9.2
|
| Indemnification by Parent and Merger Sub
|
| 26
|
| SECTION 9.3
|
| Procedure for Third Party Claims
|
| 26
|
| SECTION 9.4
|
| Indemnity Period
|
| 27
|
| SECTION 9.5
|
| Satisfaction of Indemnification Claim
|
| 27
|
| SECTION 9.6
|
| The Shareholder Representative
|
| 27
|
| ARTICLE X DISPUTE RESOLUTION
|
| 28
|
| SECTION 10.1
|
| Initial Meeting
|
| 28
|
| SECTION 10.2
|
| Mediation
|
| 28
|
| SECTION 10.3
|
| Binding Arbitration
|
| 28
|
| SECTION 10.4
|
| Discovery
|
| 28
|
| SECTION 10.5
|
| Expeditious Proceedings
|
| 28
|
| SECTION 10.6
|
| Attorneys' Fees
|
| 28
|
| SECTION 10.7
|
| Enforcement of Awards
|
| 28
|
| SECTION 10.8
|
| Equitable Relief
|
| 29
|
| ARTICLE XI GENERAL PROVISIONS
|
| 29
|
| SECTION 11.1
|
| Representations, Warranties and Agreements
|
| 29
|
| SECTION 11.2
|
| Notices
|
| 29
|
| SECTION 11.3
|
| Interpretation
|
| 29
|
| SECTION 11.4
|
| Counterparts
|
| 30
|
| SECTION 11.5
|
| Entire Agreement
|
| 30
|
| SECTION 11.6
|
| Severability
|
| 30
|
| SECTION 11.7
|
| Other Remedies; Specific Performance
|
| 30
|
| SECTION 11.8
|
| Governing Law
|
| 30
|
| SECTION 11.9
|
| Rules of Construction
|
| 30
|
| SECTION 11.10
|
| Assignment
|
| 30
iii
ANNEXES, EXHIBITS AND SCHEDULES
| Annex I
|
| Amended and Restated Articles of Incorporation of Merger Sub
|
| Schedule A
|
| Share Ownership Information
|
| Exhibit A
|
| Escrow Agreement
|
| Exhibit B
|
| Purchaser Representative Letter
|
| Exhibit C
|
| Shareholder Pooling Letter
|
| Exhibit D
|
| Pooling Comfort Letter
|
| Exhibit E
|
| Registration and Rights Agreement
|
| Exhibit F
|
| Employment Agreement
|
| Exhibit G
|
| Lock-Up Agreement
iv
INDEX OF DEFINED TERMS
Defined Term
|
| Location
of Definition
|
| Accelerated Stock Options
|
| 6.5(a)
|
| Adjusted Parent Stock Price
|
| 1.6(b)
|
| Agreement
|
| 1.2
|
| Allocation Ratio
|
|
|
| Ancillary Agreements
|
|
|
| Articles of Merger
|
| 1.2
|
| Average Parent Stock Price
|
| 1.6(b)
|
| Balance Sheet Date
|
| 2.5
|
| Certificates
|
| 1.7
|
| Closing
|
| 1.2
|
| Closing Date
|
| 1.2
|
| Code
|
| Recitals
|
| Common Exchange Ratio
|
| 1.6(a)
|
| Competing Transaction
|
| 6.4(b)
|
| Customers
|
| 3.17(c)
|
| Damages
|
| 9.1
|
| Drop Dead Date
|
| 8.1(b)
|
| Dissenter's Rights
|
| 2.6
|
| Effective Time
|
| 1.2
|
| Employee Benefit Plan
|
| 3.14(a)
|
| ERISA
|
| 3.14(a)
|
| ERISA Affiliate
|
| 3.14(a)
|
| Escrow Agreement
|
| 1.8
|
| Exchange Act
|
| 4.4
|
| Fully Diluted Fusion Shares Outstanding
|
| 1.6(e)
|
| Fusion
|
| Parties
|
| Fusion Balance Sheet
|
| 3.5
|
| Fusion Common Stock
|
| 3.2
|
| Fusion Disclosure Schedule
|
| Article III
|
| Fusion Financial Statements
|
| 2.5
|
| Fusion Intellectual Property
|
| 3.10
|
| Fusion Material Adverse Effect
|
| 3.1
|
| Fusion Permits
|
| 3.11(b)
|
| Liens
|
| 3.7(b)
|
| Merger
|
| 1.1
|
| Merger Sub
|
| Parties
|
| Millenial Date Data
|
| 3.1(e)
|
| NASDAQ
|
| 1.6(b)
|
| Notice of Dispute
|
| 10.1
|
| Parent Balance Sheet
|
| 4.4(b)
|
| Parent Common Stock
|
| 1.6(a)
|
| Parent Financials
|
| 4.4(b)
|
| Parent Material Adverse Effect
|
| 4.1
|
| Parent SEC Reports
|
| 4.4(a)
|
| Registration and Rights Agreement
|
| 6.6
|
| Representatives
|
| 6.3
|
| Returns
|
| 3.7(b)
v
| SEC
|
| 1.19
|
| Securities Act
|
| 4.4
|
| Several Representations
|
| Article II
|
| Shareholders
|
| Parties
|
| Shareholder Representative
|
| Parties
|
| Software
|
| 3.1(d)
|
| Shareholders Action
|
| 5.1
|
| Subsidiary
|
| 3.1
|
| Surviving Corporation
|
| 1.1
|
| System
|
| 3.1(f)
|
| Tax
|
| 3.7(a)
|
| Terminating Fusion Breach
|
| 8.1(f)
|
| Terminating Parent Breach
|
| 8.1(e)
|
| Third Party Claim
|
| 9.3
vi
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION dated as of January 7, 2000 among Zamba Corporation
("Parent"), a Delaware corporation, ZFA Corp. ("Merger Sub"), a Delaware corporation and a wholly owned
subsidiary of Parent, Fusion Consulting, Inc. ("Fusion"), a Colorado corporation, the shareholders of Fusion (the
"Shareholders") appearing on the signature pages hereto and the shareholder representative (the "Shareholder Representative") appearing on the
signature pages hereto.
RECITALS
A. Upon
the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law and Colorado Business Corporation Act
Parent and Fusion will enter into a business combination transaction pursuant to which Fusion will merge with and into Merger Sub.
B. Parent,
Fusion, Merger Sub and the Shareholders desire to make certain representations and warranties and other agreements in connection with the Merger.
C. The
parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code").
D. The
parties intend that for accounting purposes the transaction be treated as a "pooling of interests" under
generally accepted accounting principles.
NOW,
THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
ARTICLE I THE MERGER
SECTION
1.1 The Merger. At the Effective Time and subject to and upon the terms and conditions of this
Agreement and the applicable provisions of the Delaware General Corporation Law ("DGCL") and the Colorado Business Corporation Act ("CBCA") Fusion shall be merged (the
"Merger") with and into Merger Sub, the separate corporate existence of Fusion shall cease and Merger Sub shall continue as the surviving corporation
(sometimes referred to herein as the "Surviving Corporation").
SECTION
1.2 Effective Time; Closing. Subject to the provisions of this Agreement, the parties hereto
shall cause the Merger to be consummated by filing a certificate of merger with the Delaware Secretary of State in accordance with the relevant provisions of the DGCL (the "Delaware Certificate of
Merger") and a certificate of merger with the Colorado Secretary of State in accordance with the relevant provisions of the CBCA (the "Colorado Certificate of Merger") as soon as practicable on or
after the Closing Date. When used in this Agreement, "Effective Time" means the date and time specified in the Delaware Certificate of Merger as the date and time at which the Merger shall become
effective, which date and time shall not precede the time of filing of the Colorado Certificate of Merger and shall not be later than the third business day following the Closing Date. Unless the
context otherwise requires, the term "Agreement" as used herein includes this Agreement and Plan of Reorganization and the Delaware and Colorado
Certificates of Merger. The closing (the "Closing") of
the merger shall take place at the offices of Zamba Corporation, at a time and date to be specified by Parent and Fusion (the "Closing Date") which
shall be no later than 20 days following the date of execution hereof.
SECTION
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided
in this Agreement and the applicable provisions of the DGCL and CBCA. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of Fusion and Merger Sub shall vest in the Surviving Corporation, and all debts,
1
liabilities
and duties of Fusion and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION
1.4 Certificate of Incorporation; Bylaws.
(a) 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 unless and until thereafter amended.
(b) The
Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving Corporation until
thereafter amended.
SECTION
1.5 Directors and Officers. The directors of Merger Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation, to serve until their respective successors are duly elected or appointed and qualified. The officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, to serve until their successors are duly elected or appointed or qualified.
SECTION
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Fusion or the holders of capital stock of Merger Sub or Fusion, the following actions shall occur with respect to the capital stock of Fusion and Merger Sub:
(a) Fusion Common Stock. Each share of Fusion Common Stock issued and outstanding immediately prior to
the Effective Time (other than any Shares to be canceled pursuant to Section 1.6(d) and for any Dissenter's Shares) shall be converted into the right to receive 533.34 shares (the
"Common Exchange Ratio") of Parent common stock, par value $.01 per share ("Parent Common Stock").
Parent shall notify Fusion prior to the opening of trading on the day prior to the Closing Date, announcing the Common Exchange Ratio as determined pursuant to this Section 1.6(a).
(b) Treasury Stock. Each share of Fusion Common Stock, held in the treasury of Fusion and each share
owned by Parent or any direct or indirect wholly owned subsidiary of Parent immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof and no payment
shall be made with respect thereto.
(c) Common Stock of Merger Sub. Each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.
(d) Adjustments to Exchange Ratio. The Common Exchange Ratio shall be adjusted appropriately to reflect
any stock split, reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Fusion Common Stock), reorganization, recapitalization, reclassification or other like change with respect to capital stock of Parent or Fusion
occurring on or after the date hereof and prior to the Effective Time.
SECTION
1.7 Delivery of Parent Shares. Within fourteen (14) days after the Effective Time,
Parent shall deliver to the Shareholders a number of shares of Parent Common Stock calculated in accordance with Section 1.6, less the number of shares of Parent Common Stock to be deposited
into escrow pursuant to Section 1.8, and each Shareholder shall surrender all certificates ("Certificates") representing such Shareholder's
shares of Fusion Common Stock in exchange therefor.
SECTION
1.8 Escrowed Shares. Within 14 days of the Closing Date, Parent, on behalf of the
Shareholders, shall deposit into escrow, in accordance with the terms of the Escrow Agreement (the "Escrow Agreement") in the form attached hereto as Exhibit A, to be entered into pursuant to
Section 7.2(e), 10% of the shares (the "Indemnity Escrow Amount") of Parent Common Stock to be issued pursuant to Section 1.6 registered in the name of the Escrow Agent. The Indemnity
Escrow Amount shall be deposited on behalf of the Shareholders pro rata based on the Allocation Ratio, from the shares of
2
Parent
Common Stock to be issued and delivered to each Shareholder as of the Effective Time. "Allocation Ratio" means (i) the number of shares of
Parent Common Stock to be issued to such Shareholder with respect to all its shares of Fusion Common Stock divided by (ii) the total number of shares of Parent Common Stock to be issued as of
the Effective Time to all the Shareholders.
SECTION
1.9 No Fractional Shares. No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any other rights of a stockholder of
Parent. All shares of Parent Common Stock to be issued pursuant to Section 1.6 shall be rounded up to the nearest whole share.
SECTION
1.10 Effect of Failure to Deliver Fusion Common Stock. Until surrendered in accordance with the
provisions of this Section, each certificate representing Fusion Common Stock held by a Shareholder shall be deemed from and after the Effective Time, for all corporate purposes, to evidence only
ownership of the number of full shares of Parent Common Stock into which such shares of Fusion Common Stock shall have been so converted and any dividends or distributions to which the holder is
entitled pursuant to Section 1.11.
SECTION
1.11 Distributions With Respect to Unexchanged Shares. No dividends or other distributions
declared or made after the date of this Agreement with respect to Parent Common Stock with a record date after the Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the holder of record of such Certificate shall surrender such Certificate. Subject to applicable law, following surrender of any
such Certificate, there shall be paid to the record holder thereof certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, along with the amount of
dividends or other distributions with a record date after the Effective Time payable with respect to such whole shares of Parent Common Stock.
SECTION
1.12 Transfers of Ownership. If any certificate for shares of Parent Common Stock is to be
issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it will be a condition of the issuance thereof that (i) the Certificate so surrendered
will be properly endorsed, accompanied by any documents required to evidence and effect such transfer and otherwise in proper form for transfer and that the person requesting such exchange will have
paid to Parent or any agent designated by it any applicable transfer taxes required by reason of the issuance of
a certificate for shares of Parent Common Stock in any name other than that of the registered holder of the Certificate surrendered, or shall provide evidence that any applicable transfer taxes have
been paid, and (ii) the transferee shall execute letters substantially similar to those referenced in Section 2.8 during any period of time when such letters impose restrictions on
transfer.
SECTION
1.13 No Further Ownership Rights in Fusion Common Stock. All shares of Parent Common Stock into
which shares of Fusion Common Stock shall have been so converted and any dividends or distributions to which the holder is entitled pursuant to Section 1.11 shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Fusion Common Stock, and there shall be no further registration of transfers on the records of the Surviving Corporation of shares of
Fusion Common Stock that were outstanding immediately prior to the Effective Time. If after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Article I.
SECTION
1.14 Lost, Stolen or Destroyed Certificates. In the event any Certificate shall have been lost,
stolen or destroyed, Parent shall direct its transfer agent to issue in exchange for such lost, stolen or destroyed Certificate, upon the making of an affidavit of that fact by the holder thereof,
such shares of Parent Common Stock and any dividends or distributions to which the holder is entitled pursuant to Section 1.11; provided, however, that Parent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to deliver a bond in such
3
sum
as it may reasonably direct as indemnity against any claim that may be made against Parent or the transfer agent with respect to the Certificates alleged to have been lost, stolen or destroyed.
SECTION
1.15 Tax Consequences. It is intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Code. The parties hereto adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations.
SECTION
1.16 Taking of Necessary Action; Further Action. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of Fusion and Merger Sub, the officers and directors of Fusion and Merger Sub are fully authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action, so long as such action is consistent with this Agreement.
SECTION
1.17 Legends on Shares. Shares of Parent Common Stock issued pursuant to Section 1.6
shall bear the following legend:
The
shares represented by this certificate have not been registered under the Securities Act of 1933 and are subject to a Lock-Up Agreement with the Issuer that places restrictions on
transfer. Such shares may not be transferred or otherwise disposed of unless and until (i) the shares are registered under such Act or (ii) an opinion of counsel reasonably satisfactory
to the Issuer to the effect that registration under such Act is not required and (iii) the restrictions set forth in the Lock-Up Agreement have been released in accordance with the
terms thereof.
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, jointly and severally, represents and warrants to Parent and Merger Sub as of the date hereof and as of the Closing Date, as set forth below
(other than the several representations and warranties (the "Several Representations") set forth in Sections 2.9 through 2.11, which are made
severally and not jointly:
SECTION
2.1 Share Ownership. The Shareholder is the record and beneficial owner of the number of Shares
set forth opposite such Shareholder's name on Schedule A. The Shareholder does not own any securities issued by, or other obligations of, Fusion which are not listed on Schedule A.
SECTION
2.2 Legal Power; Organization; Qualification of Shareholders. The Shareholder is a natural
person or a legal entity of the type set forth opposite such Shareholder's name on Schedule A. Each Shareholder who is a natural person is competent and has all requisite power and authority to
execute and deliver this Agreement and to consummate the Merger. Each Shareholder which is not a natural person has been duly organized, and is validly existing and in good standing, under the laws of
its jurisdiction of formation, has all requisite power and authority to execute and deliver this Agreement and each of the documents and instruments executed in connection therewith (the
"Ancillary Agreements") to which the Shareholder is a party and to consummate the Merger, and has taken all necessary corporate or other action to
authorize the execution, delivery and performance of this Agreement and each of the Ancillary Agreements to which the Shareholder is a party.
SECTION
2.3 Binding Agreement. This Agreement has been duly executed and delivered by the Shareholder
and, assuming due and valid authorization, execution and delivery by Parent, Merger Sub and Fusion, where applicable, this Agreement is and each of the Ancillary Agreements to which the Shareholder is
a party, when executed and delivered by the Shareholder will, constitute a legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
4
other
similar laws of general application affecting enforcement of creditors' rights generally and (ii) the availability of the remedy of specific performance or injunctive or other forms of
equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought.
SECTION
2.4 No Shareholder Conflict or Default.
(a) Neither
the execution and delivery of this Agreement nor any of the Ancillary Agreements to which the Shareholder is a party nor the consummation by Fusion of, nor
the participation by the Shareholder in the Merger will result in a violation of, or a default under, or conflict with, or require any consent, approval or notice under, any contract, trust,
commitment, agreement, obligation, understanding, arrangement or restriction of any kind to which the Shareholder is a party or by which the Shareholder is bound or to which Fusion Common Stock owned
by the Shareholder are subject. Participation in the Merger by the Shareholder will not violate, or require any consent, approval or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to the Shareholder or Fusion Common Stock owned by the Shareholder.
(b) No
filing by the Shareholder is required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as amended (the "HSR
Act"), in connection with any of the transactions contemplated by this Agreement.
(c) Each
Shareholder has the sole and exclusive right to take all actions with respect to the Fusion Common Stock owned by it (including actions with respect to
shareholder approval necessary for the Merger, execution of the Agreement and waiver of dissenters' rights), free from any community property laws, spousal consent, divorce proceeding, property
settlement made or pending in connection with a divorce, and the like.
SECTION
2.5 Ownership and Possession of Shares. The shares of Fusion Common Stock, owned by the
Shareholder, and the certificates representing such Fusion Common Stock are now, and at all times during the term hereof shall be, held by the Shareholder, or by a nominee or custodian for the sole
and exclusive benefit of the Shareholder, free and clear of all Liens (as defined herein) whatsoever, except for any Liens created by this Agreement and Liens arising under any federal or state
securities laws.
SECTION
2.6 Dissenter's Rights. The Shareholder represents and warrants that (1) the Shareholder
has been advised of the dissenters rights set forth in Article 113 of the CBCA ("Dissenter's Rights") and (ii) further represents that by approving the Merger as required by
Section 6.1, such Shareholder waives any statutory notice under the CBCA of the Dissenters Rights and hereby waives the Dissenters Rights.
SECTION
2.7 Dividends. Each Shareholder represents, warrants and agrees that, with respect to all
amounts previously paid to the Shareholders and previously classified as dividends which the parties have agreed to reclassify as wages, each Shareholder shall pay to the appropriate taxing
authorities all federal and state income tax and the employee portion of all social security and medicare taxes and any local taxes due and owing with respect to such dividends, and the Parent will
pay the employer portion of such social security and medicare.
SECTION
2.8 Accounting Matters.
(a) Each
Shareholder represents and warrants, other than the execution and delivery of this Agreement, such Shareholder has not taken or agreed to take any action that
would prevent Parent from accounting for the business combination to be effected pursuant this agreement as a pooling of interest under GAAP.
(b) Concurrently
with the execution and delivery of this Agreement and as a condition and inducement to Parent's and Merger Sub's willingness to enter into this
Agreement, such Shareholder
5
has
delivered a pooling letter agreement as of the date hereof in the form attached as Exhibit C hereto.
Each
Shareholder individually and not jointly, makes the following representations and warranties as of the date hereof and as of the Closing Date:
SECTION
2.9 Investment Representations. The Shareholder, either individually or through a purchaser
representative (as evidenced by the Purchaser Representative Letter attached hereto as Exhibit B, has such knowledge and experience in financial and business matters that he or it is capable of
evaluating the merits and risks of an investment in shares of the Parent Common Stock. The Shareholder is acquiring the Parent Common Stock for the Shareholder's own account for investment and not
with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing the Parent Common Stock. The Shareholder acknowledges that the shares of Parent
Common Stock are restricted securities that are unregistered; that the Shareholder must hold the Shares indefinitely unless they are subsequently registered under the Securities Act or an exemption
from such registration is available; and that the Registration Rights Agreement constitutes the only obligation of Parent to register the Shares. The Shareholder is a resident of the State of
Colorado.
SECTION
2.10 Restrictions on Transfer. The Shareholder will not sell, transfer, distribute or otherwise
dispose of the Parent Common Stock except (a) (i) pursuant to an effective registration statement under the Securities Act as then in effect covering the Shares and proposed
distribution, or (ii) upon first furnishing to Parent an opinion of counsel reasonably satisfactory to it stating that the proposed disposition is not in violation of the registration
requirements of the Securities Act and such undertakings and agreements with Parent by the proposed transferee as Parent may reasonably require to ensure compliance with the Securities Act; and
(b) in accordance with the terms of the Lock-Up Agreement in the form attached hereto as Exhibit G.
SECTION
2.11 Investigation. The Shareholder has been furnished with, and has had an opportunity to
read, the Agreement and all materials relating to the business, finances, operations, and prospects of Parent that have been reasonably requested by it, including but not limited to the reports filed
by Parent with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Each Shareholder understands that the Shares are being or will be issued in exchange
for Fusion Common Stock without any particular offering or disclosure document, but acknowledges that the Shareholder has been given ample opportunity to ask questions and request information of and
receive answers from Parent officials concerning the business, finances and operations of Parent.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF FUSION AND THE SHAREHOLDERS
Fusion and each of the Shareholders jointly and severally represent and warrant to Parent and Merger Sub as of the date hereof and as of the Closing Date,
subject to the exceptions specifically disclosed in writing in the disclosure schedule supplied by Fusion to Parent (the "Fusion Disclosure Schedule"),
the section references of which correspond to the sections and subsections of this Agreement to which they relate, as follows:
SECTION
3.1 Organization of Fusion. Fusion is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado, has the requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and as proposed by
Fusion to be conducted, and is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would have an Fusion Material
Adverse Effect. Fusion has no Subsidiaries. Fusion has delivered or made available to Parent a true and correct copy of its Articles of Incorporation and its Bylaws each as amended to date. The minute
books of Fusion made available to Parent are the only minute books of Fusion, and the minutes contain an accurate record of all actions
6
taken
in all meetings of directors (or committees thereof) and Shareholders or by written consent. The term "Fusion Material Adverse Effect" means, for
purposes of this Agreement, any change, event or effect that is, or that would reasonably be expected to be, materially adverse to the business, assets (including intangible assets), financial
condition or prospects of Fusion or the Surviving Corporation. "Subsidiary" means, with respect to any party, any corporation or other organization,
whether incorporated or unincorporated, of which (i) such party or any other Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority of the voting interest in such partnership) or (ii) at least 50% of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization are directly or indirectly owned
or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries.
SECTION
3.2 Fusion Capital Structure.
(a) The
authorized capital stock of Fusion consists of one hundred fifty (150) shares of common stock, with no par value specified ("Fusion Common Stock"), of
which 150 shares are issued and outstanding as of the date hereof. The outstanding shares of Fusion Common Stock are held of record and beneficially by the persons and in the amounts set forth on the
Schedule A. All outstanding shares of Fusion Common Stock are duly authorized, validly issued, fully paid and non-assessable and are not subject to preemptive or similar rights
created by statute, the Certificate of Incorporation or Bylaws of Fusion or any agreement or document to which Fusion is a party or by which it is bound.
(b) There
are no agreements governing the relations of the Shareholders with respect to the capital stock of Fusion, including, rights of first refusal, voting and like
matters.
(c) All
shares or other ownership interests in Fusion previously held by Xxxx Xxxxxxx May have been duly and validly redeemed and Xxxx Xxxxxxx May has no
further ownership interests in the equity or assets of Fusion and no amounts are otherwise payable to him by Fusion or as a result of the transactions contemplated hereby. The Shareholders expressly
agree that the disclosures made in the Fusion Disclosure Schedule shall in no way limit or otherwise modify the Shareholders' representations and warranties under this or any other Subsection related
to the matters contemplated by this Subsection or reduce or restrict the Shareholder's indemnity obligations with respect thereto.
SECTION
3.3 Obligations With Respect to Capital Stock. There are no equity securities of any class of
Fusion, options, warrants, or any securities exchangeable or convertible into or exercisable for such equity securities, issued, reserved for issuance or outstanding, there are no calls, rights
(including preemptive rights), commitments or agreements of any character to which Fusion is a party or by which it is bound obligating Fusion to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or acquisition, of any shares of capital stock of Fusion or obligating Fusion to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity security, call, right, commitment or agreement. There are no registration rights and, to the knowledge of Fusion or any
Shareholder, there are no voting trusts, proxies or other agreements or understandings, with respect to any equity security of any class of Fusion.
SECTION
3.4 Authority. (a) Fusion has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Fusion. This Agreement has been duly executed and delivered by Fusion and, assuming the due authorization, execution and delivery by Parent
and Merger Sub, this Agreement constitutes the valid and binding obligation of Fusion, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general
7
principles
of equity. The execution and delivery of this Agreement by Fusion does not, and the performance of this Agreement by Fusion will not (i) conflict with or violate the Articles of
Incorporation or Bylaws of Fusion, (ii) subject to compliance with the requirements set forth in Section 3.4(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree (collectively "Laws") applicable to Fusion or by which any of its properties is bound, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both would become a default) under, or impair the rights of Fusion or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Fusion pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to
which Fusion is a party or by which Fusion or its properties are bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, defaults or other
occurrences that would not, individually or in the aggregate, have a Fusion Material Adverse Effect. The Fusion Disclosure Schedule lists all consents, waivers and approvals under any of Fusion's
agreements, contracts, licenses or leases required to be obtained in connection with the consummation of the transactions contemplated hereby.
(b) Each
consent, approval, order or authorization of, or registration, declaration or filing with any court, administrative agency or commission or other governmental
or regulatory body or authority or instrumentality ("Governmental Entity") required by or with respect to Fusion in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated hereby has been obtained, except for (i) the filing of the Certificate of Merger with the Secretary of State of
Colorado, (ii) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities laws and the laws of
any foreign country, and (iii) such other consents, authorizations, filings, approvals and registrations that are set forth on the Fusion Disclosure Schedule.
SECTION
3.5 Fusion Financial Statements.
(a) Fusion
has previously delivered to Parent the financial statements as of and for the 11 month period ended November 30, 1999 (collectively, the
"Fusion Financial Statements"), including the balance sheet (the "Fusion Balance Sheet") of Fusion as of
November 30, 1999 (the date of such Fusion Balance Sheet being referred to herein as the "Balance Sheet Date") and the profit and loss statement
or the 11 month period ended November 30, 1999. The Fusion Financial Statements have been prepared from, and are in accordance with, the books and records of Fusion and present fairly
the financial position and the results of operations of Fusion as of the dates and for the periods indicated, on an "other comprehensive" basis of accounting consistently applied throughout the
periods involved except as otherwise stated therein. Fusion has no liabilities (absolute, accrued, contingent or otherwise), whether or not of a nature required to be disclosed on a balance sheet or
in the related notes to the consolidated financial statements that are, individually or in the aggregate, material to the business, results of operations or financial condition of Fusion, except
liabilities (i) provided for in the Fusion Balance Sheet, (ii) incurred since the Balance Sheet Date in the ordinary course of business consistent with past practices or
(iii) incurred in connection with the transactions contemplated hereby.
(b) The
books and records and internal controls of Fusion are auditable and adequate to permit the preparation after the Effective Time of audited financial statements
of Fusion and pro forma information in accordance with GAAP and the rules and regulations of the SEC, for all periods required to be presented by the rules and regulations of the SEC,
and within the time limits imposed by the rules and regulations of the SEC.
(c) All
accounts receivable and unbilled accounts receivable of Fusion are collectible within 60 days of the Effective Time.
8
(d) All
accounts payable and accrued liabilities of Fusion were incurred in the ordinary course of business under standard terms and conditions.
SECTION
3.6 Absence of Certain Changes or Events. Since the Balance Sheet Date, there has not occurred
any Fusion Material Adverse Effect and there has not been, occurred or arisen any:
(a) amendments
or changes to the Articles of Incorporation or Bylaws of Fusion;
(b) individual
capital expenditure or commitment, or series of related capital expenditure or commitments, by Fusion exceeding $5,000;
(c) destruction
of, damage to or loss of any assets material to the business of Fusion (whether or not covered by insurance);
(d) notification
from a material customer of an intent to discontinue to do business with Fusion;
(e) labor
trouble or claim of wrongful discharge (except for such claims as would not reasonably be expected to result in potential damages greater than $5,000) or
other unlawful labor practice or action;
(f) material
change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by Fusion (unless required by Parent to
complete the merger);
(g) material
revaluation by Fusion of any of its assets (unless required by Parent to complete the merger);
(h) declaration,
setting aside or payment of a dividend or other distribution with respect to the capital stock of Fusion, or any direct or indirect redemption,
purchase or other acquisition by Fusion of any of its capital stock;
(i) except
as described on the Fusion Disclosure Schedule, increase in the salary or other compensation payable or to become payable to any of its (i) officers
or directors or (ii) any employee or advisor receiving, after such increase, annualized compensation in excess of $5,000 per year, declaration, payment or commitment or obligation of any kind
for the payment of a bonus or other additional salary or compensation to any such person or grant or amendment of any stock option or other agreement pertaining to any such person;
(j) sale,
lease, license or other disposition of any material amount of the assets or properties of Fusion;
(k) amendment
or termination of any material contract, agreement or license to which Fusion is a party or by which it is bound or any contract listed in
Section 3.17 of the Fusion Disclosure Schedule;
(l) loan
by Fusion to any person or entity, incurring by Fusion of any indebtedness for borrowed money, guaranteeing by Fusion of any indebtedness, issuance or sale of
any debt securities of Fusion or guaranteeing of any debt securities of others, except for advances to employees for travel and business expenses and endorsing of checks payable to Fusion in the
ordinary course of business, consistent with past practices;
(m) waiver
or release of any material right or claim of Fusion, including any write-off or other compromise of any account receivable of Fusion other than
in the ordinary course of business, consistent with past practices and included in the Fusion Disclosure Schedule;
(n) change
in pricing or royalties set or charged by Fusion to its customers or licensees or in pricing or royalties set or charged by persons who have licensed Fusion
Intellectual Property to Fusion other than in the ordinary course of business and consistent with past practices;
(o) other
transaction by Fusion except in the ordinary course of business as conducted on the Balance Sheet Date and consistent with past practices; or
9
(p) commitment,
understanding or agreement by Fusion or any officer or employee thereof to do any of the things described in the preceding clauses (a) through
(o) (other than this Agreement and as disclosed in the Fusion Disclosure Schedule).
SECTION
3.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes", means any and all federal, state, local and foreign taxes, assessments
and other governmental charges, duties, impositions and liabilities in the nature of a tax including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such
amounts and any obligations under any agreements or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) Fusion
has prepared and filed all required federal, state, local and foreign returns, estimates, information statements and reports
("Returns") relating to any and all Taxes concerning or attributable to Fusion or its operations and such Returns are true and correct in all material
respects and have been completed in all material respects in accordance with applicable law or, with respect to any Taxes payable, an adequate reserve has been established on the Fusion Balance Sheet.
(ii) Fusion
(A) has paid or accrued all Taxes set forth on its Returns, and (B) has withheld and paid (or will pay at the time required) with respect to
its employees all federal and state income taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) Fusion
is not delinquent in any material respect in the payment of any Tax nor is there any material Tax deficiency outstanding, proposed or assessed against
Fusion, nor has Fusion executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax.
(iv) No
audit or other examination of any Return of Fusion is currently in progress, nor has Fusion been notified of any request for such an audit or other examination.
(v) Fusion
did not have, as of the Balance Sheet Date, any liabilities, whether asserted or unasserted, contingent or otherwise, for unpaid federal, state, local and
foreign Taxes that have not been accrued or reserved against on the Fusion Balance Sheet, and Fusion has not incurred any such liabilities since such date except in the ordinary course of business and
consistent with past practices.
(vi) Fusion
has made available to Parent copies of all federal and state income and all state sales and use Returns for all periods since inception of Fusion.
(vii) There
are (and as of immediately following the Effective Date there will be) no liens, pledges, charges, claims, security interests or other encumbrances of any
sort ("Liens") of a material nature on the assets of Fusion relating to or attributable to Taxes, except for Liens for Taxes not yet due and payable or
that are being contested in good faith by appropriate proceedings as described on the Disclosure Schedule. Fusion has not received written or oral notice of any claim relating or attributable
to Taxes that, if adversely determined, would result in any Lien on the assets of Fusion.
10
(viii) There
is no contract, agreement, plan or arrangement, including but not limited to the provisions of this Agreement, covering any employee or former employee of
Fusion that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Section 280G of the Code or the limitations in
Sections 162 of the Code.
(ix) Fusion
has not filed any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by Fusion.
(x) Fusion
has not agreed to, or is required to, make any adjustments under Section 481(c) of the Code by reason of a change in accounting method or
otherwise.
(xi) The
Surviving Corporation shall not be required to include in a taxable period ending after the Effective Time taxable income, profits, gains or returns (together
"income") attributable to income that either accrued or arose by reference to any events or transactions which occurred in a prior taxable period but was not recognized in any prior taxable period
whether or not as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting or comparable provisions of
state, local or foreign tax law.
(xii) Fusion
has paid all taxes due to any state or foreign jurisdiction as a result of sales into such jurisdiction.
(xiii) Fusion
has made and each Shareholder has consented to a valid election (which has not been revoked or terminated or otherwise become ineffective) under
Section 1362(a) of the Code to be taxed as an "S corporation" under Section 1361 through 1379 of the Code. Fusion and each Shareholder have made and consented to valid elections
to be taxed in a comparable fashion under comparable state, local, provincial or foreign Tax law. Fusion has not been, nor will it be, subject to any Federal corporate income taxes imposed under
Chapter 1 of the Code (other than Code Sections 1374 and 1375 (and their predecessor Sections under the Internal Revenue Code of 1954, as amended)) or any state, local, provincial or
foreign income or franchise Taxes. Fusion has not had any taxable earnings or profits during a taxable year with respect to which an election under Section 1362(a) of the Code to be
treated as an "S Corporation" was not in effect.
(xiv) Fusion
has not been a member of any affiliated, consolidated, combined, unitary or aggregate group for the purpose of filing Tax returns and Fusion has no
liability for Taxes of such a Group. Neither Fusion nor any of its Shareholders have made any election under Section 341 (collapsible corporations) of the Code.
(xv) Fusion
does not have any reason to believe that any conditions exist that could reasonably be expected to prevent the Merger as qualifying as a "reorganization"
under Section 368 of the Code.
SECTION
3.8 Restrictions on Business Activities. There is no agreement (noncompete or otherwise),
commitment, judgment, injunction, order or decree to which Fusion is a party or, to the knowledge of Fusion or any Shareholder, otherwise binding upon Fusion, that has or reasonably could be expected
to have the effect of prohibiting or impairing in a material way any business practice of Fusion, any acquisition of property (tangible or intangible) by Fusion or the conduct of business by Fusion.
Without limiting the foregoing, Fusion has not entered into any agreement under which Fusion is restricted from selling, licensing or otherwise distributing any of its products or services to any
class of customers, in any geographic area, during any period of time or in any segment of the market, and Fusion has not
granted any exclusive rights with respect to any of its products to any other person except as described in the Fusion Disclosure Schedule.
11
SECTION
3.9 Title to Properties; Absence of Liens and Encumbrances.
(a) Fusion
does not own any real property. Section 3.9[?](a) of the Fusion Disclosure Schedule lists all real property leases to which
Fusion is a party and each amendment thereto. All such current leases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of
such leases, any existing default or event of default (or event which with notice or lapse of time, or both, would constitute a default) that would give rise to a claim in an amount greater than
$5,000.
(b) Fusion
has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in its business, and such properties and assets, as well as all other properties and assets of Fusion, whether tangible or intangible, are free and clear of
any Liens, except as reflected in the Fusion Financial Statements or in the Fusion Disclosure Schedule and except for Liens for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, that are not material in character, amount or extent, and that do not materially detract from the value, or materially interfere with the present use, of the property subject
thereto or affected thereby. All property of Fusion is in good working condition.
SECTION
3.10 Intellectual Property. (a) Fusion owns, is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, domain names, trade names, service marks, copyrights, and any applications therefor, schematics, technology, know-how, computer software
programs or applications (in both source code and object code form), and tangible or intangible proprietary information or material that are (i) required or reasonably necessary for the conduct
of business of Fusion as currently conducted or (ii) under development for such business (collectively, the "Fusion Intellectual Property").
(b) The
Fusion Disclosure Schedule sets forth a list of all federal, state and foreign patents, registered copyrights, registered trademarks, domain registrations, and
any applications therefor included in the Fusion Intellectual Property, and specifies, where applicable, the jurisdictions in which each such item of Fusion Intellectual Property has been issued or
registered or in which an application for such issuance or registration has been filed, including the respective registration or application numbers and the names of all registered owners. The Fusion
Disclosure Schedule sets forth a list of all material licenses, sublicenses and other agreements to which Fusion is a party and pursuant to which Fusion or any other person is authorized to use or
license the use of any (i) Fusion Intellectual Property or trade secret of Fusion and (ii) third party patents, copyrights, trademarks, and applications for registration thereof,
schematics, technology, know-how, computer software programs or applications (in both source code and object code form), and tangible or intangible proprietary information or material that
are, are incorporated in, or form a part of any Fusion Intellectual Property. The execution and delivery of this Agreement by Fusion, and the consummation of the transactions contemplated
hereby, will not cause Fusion to be in violation or default under any such license, sublicense or agreement, nor entitle any other party to any such license, sublicense or agreement to terminate or
modify such license, sublicense or agreement. Fusion is (i) the sole and exclusive owner of, with all right, title and interest in and to (free and clear of any Liens), the Fusion Intellectual
Property, or (ii) a licensee of the Fusion Intellectual Property under valid and binding license agreements listed in the Fusion Disclosure Schedule.
(c) No
claims with respect to Fusion Intellectual Property have been asserted in writing or are, to the knowledge of Fusion or any Shareholder, threatened by any person
(i) to the effect that the manufacture, sale, licensing or use of any of the products of Fusion infringes on any copyright, patent, trademark, service xxxx, trade secret or other proprietary
right of any third party, (ii) against the use by Fusion of any trademarks, service marks, trade names, trade secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in Fusion's business as currently conducted or under development for use in such business or (iii) challenging the ownership by Fusion,
12
or
the validity or effectiveness, of any of the Fusion Intellectual Property. Fusion has not infringed, and the business of Fusion does not infringe, any copyright, patent, trade secret or other
proprietary right of any third party. There is no material unauthorized use, infringement or misappropriation of any of Fusion Intellectual Property by any third party, including any employee or
former employee of Fusion. No Fusion Intellectual Property or product of Fusion is subject to any outstanding decree, order, judgment or stipulation restricting in any manner the licensing thereof by
Fusion.
(d) Section 3.10(d)
of the Fusion Disclosure Schedule lists all Software (other than Software acquired in the ordinary course of business or having an
acquisition price of less than $1,000) owned, licensed, leased, or otherwise used by the Fusion, and identifies which Software is owned, licensed, leased, or otherwise used, as the case may be.
Section 3.10(d) of the Fusion Disclosure Schedule lists all Software sold, licensed, leased or otherwise distributed by Fusion to any third party, and identifies which Software is sold,
licensed, leased, or otherwise distributed as the case may be. With respect to the Software set forth in Section 3.10(d) of the Fusion Disclosure Schedule which Fusion purports to own, such
Software was either developed (1) by employees of the Company within the scope of their employment, or (2) by independent contractors who have assigned their rights to the Company
pursuant to written agreements. In each agreement pursuant to which Fusion has licensed its Software to third parties, Fusion has not (1) failed to limit its liability to the amount of the fees
paid pursuant to the agreements or (2) warranted as to the performance or functionality of the Software other than to state that the Software would perform in accordance with its documentation
and/or specifications. "Software" means any and all (v) computer programs, including any and all software implementations of algorithms, models
and methodologies, whether in source code or object code, (w) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise,
(x) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, (y) the technology (other than hardware) supporting any
Internet site(s) operated by or on behalf of the Fusion, and (z) all documentation, including user manuals and training materials, relating to any of the foregoing.
(e) Any
Software that Fusion licenses and maintains pursuant to contracts with third parties ("Licensed Software") based
solely on the manufacturer's claims and information they provide processes accurately (including calculating, comparing and sequencing) in all material respects date data from, into and between the
twentieth and twenty-first centuries, including leap year calculations ("Millennial Date Data"). All such Licensed Software processes Millennial Date
Data without material errors or omissions and without materially affecting functionality when used in accordance with the product documentation provided by Fusion therefor and provided that all other
software and all hardware and firmware used in combination with such Licensed Software properly exchanges date data with it. Fusion has not made any representation or warranty to any third party that
varies in any material respect from the preceding representation. Fusion Consulting does not warrant or guarantee that the date calculations on any licensed software is accurate except as provided
above.
(f) Each
current and former employee and officer of Fusion has executed a Proprietary Information Agreement in substantially the form previously provided to Parent.
SECTION
3.11 Compliance; Permits; Restrictions.
(a) To
the knowledge of Fusion, Fusion is not in conflict with, or in default or violation of, (i) any law, rule, regulation, order, judgment or decree
applicable to Fusion or by which any of its properties is bound or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Fusion is a party or by which Fusion or any of its properties is bound or affected, except for any conflicts, defaults or violations that, individually or in the
aggregate, would not have an Fusion Material Adverse Effect.
(b) To
the knowledge of Fusion, Fusion holds all consents, permits, licenses, variances, exemptions, orders and approvals from governmental authorities that are
material to the operation of the
13
business
of Fusion (collectively, the "Fusion Permits"). The Fusion Disclosure Schedule contains a complete and accurate list of all Fusion Permits.
Fusion is in compliance with the terms of Fusion Permits, except where the failure to so comply, individually or in the aggregate, would not have an Fusion Material Adverse Effect.
SECTION
3.12 Litigation. There is no action, suit or proceeding of any nature pending or, to the
knowledge of Fusion or any Shareholder, threatened against Fusion or any of its properties, officers or directors, in their respective capacities as such (i) involving Fusion Intellectual
Property or in which injunctive or other equitable relief or damages in excess of $5,000 are or are reasonably likely to be sought against Fusion or that could otherwise result in a Fusion Material
Adverse Effect or (ii) that in any manner challenges or seeks to prevent, enjoin, alter or delay any of the transactions contemplated by this Agreement. To the knowledge of Fusion or any
Shareholder, there is no investigation pending or threatened against Fusion, its properties or any of its officers or directors by or before any Governmental Entity that would have an Fusion Material
Adverse Effect. The Fusion Disclosure Schedule sets forth, with respect to any pending or threatened action, suit, proceeding or investigation, the forum, the parties thereto, the subject matter
thereof and the amount of damages claimed or other remedy requested. To the knowledge of Fusion or any Shareholder, no Governmental Entity has at any time challenged or questioned in writing the legal
right of Fusion to manufacture, offer or sell any of its products or services in the present manner or style thereof.
SECTION
3.13 Brokers' and Finders' Fees; Transaction Expenses. Fusion has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby.
Section 3.13 of the Fusion Disclosure Schedule sets forth Fusion' best estimate of legal, accounting and other transaction costs and expenses to be incurred in connection with the Merger.
SECTION
3.14 Employee Benefits.
(a) The
Fusion Disclosure Schedule contains a complete and accurate list of all Employee Benefit Plans maintained or contributed to by Fusion, or any ERISA Affiliate.
For purposes of this Agreement, "Employee Benefit Plan" means (i) any "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), (ii) any "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA), and (iii) any other written or oral plan, agreement or arrangement involving direct or indirect compensation, including without limitation insurance coverage,
severance benefits, disability benefits, health benefits, life insurance or death benefits, dependent care benefits, deferred compensation, bonuses, Fusion paid perks (including use of autos, auto
allowances, memberships, cell phone arrangements, telephone lines or other arrangements permitting the use of Fusion property or reimbursement of expenses), stock options, stock purchase, phantom
stock, stock appreciation or other forms of incentive compensation or post-retirement or post-termination compensation, vacation, and sick pay, or other paid or unpaid time off
benefits, transportation benefits, or fringe benefits in each case relating to any current or former director, employee or consultant of Fusion. For purposes of this Agreement,
"ERISA Affiliate" means any entity which is a member of (i) a controlled group of corporations (as defined in Section 414(b) of the Code),
(ii) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (iii) an affiliated service group (as defined under Section 414(m)
of the Code), any of which includes Fusion. Complete and accurate copies of all Employee Benefit Plans that have been reduced to writing have been provided to Parent, and Fusion has made available to
Parent written summaries of any such plans that have not been reduced to writing.
(b) The
Fusion Disclosure Schedule lists each Employee Benefit Plan pursuant to which (i) any amount in excess of $5,000 may become payable (whether currently or
in the future), any of the benefits of which will be increased, or the vesting of the benefits under which will be accelerated, by
14
the
occurrence of any of the transactions contemplated by this Agreement or (ii) the value of any of the benefits will be calculated on the basis of any of the transactions contemplated by this
Agreement.
(c) All
Employee Benefit Plans are in compliance in all material respects with the currently applicable provisions of the terms of the Plans (except to the extent of
any change in applicable governing law not yet required to be incorporated into the instruments or documents governing the Plans), ERISA and the Code and the regulations thereunder.
(d) Each
Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and has been so qualified during the period from
its adoption to the date hereof, and each trust forming a part thereof is exempt from tax pursuant to Section 501(a) of the Code. Fusion does not know of any facts or circumstances that would
materially adversely affect such qualification.
(e) No
Employee Benefit Plan constitutes or since the enactment of ERISA has constituted a "multiemployer plan," as defined in Section 3(37) of ERISA (a
"Multiemployer Plan") or an employee stock ownership plan (ESOP) as defined in Section 4975(e)(7) of the Code, or a multiple employer welfare arrangement under Section 3(40) of ERISA. No
Employee Benefit Plans is subject to Title IV of ERISA.
(f) There
are no pending or, to the knowledge of Fusion or any Shareholder, threatened claims (other than routine claims for benefits), actions, suits or proceedings
by, or on behalf of or against any of the Employee Benefit Plans or any trusts related thereto.
(g) With
respect to each Employee Benefit Plan, neither Fusion nor any ERISA Affiliate has engaged in a "prohibited transaction" (as such term is defined in
Section 4975 of the Code or Section 406 of ERISA) that would subject Fusion, the Surviving Corporation or the Parent to any taxes, penalties or other liabilities resulting from
prohibited transactions under Section 4975 of the Code or Section 409 or 502(i) of ERISA. Neither Fusion nor any ERISA Affiliate has engaged or failed to engage in any conduct
which could subject Fusion, the Surviving Corporation or the Parent to any liability arising out of or relating to a breach of fiduciary duty, including, but not limited to, liability under ERISA.
(h) No
Employee Benefit Plan provides benefits to former employees of Fusion other than continuation coverage required by Section 4980B of the Code and
Section 601 of ERISA, or similar provisions of applicable state law.
(i) There
is no requirement that the Parent, Surviving Corporation or Fusion make any further contributions to any Employee Benefit Plan after the Closing Date, and
each Employee Benefit Plan which provides benefits to or on behalf of employees or former employees of Fusion may be terminated by Fusion, Surviving Corporation or Parent in its sole discretion on or
after the Closing Date without liability of any kind or description whatsoever to Fusion, Surviving Corporation, Parent, any of Fusion's ERISA Affiliates, or any other person, entity or governmental
agency.
SECTION
3.15 Employment Matters.
(a) Compliance. Other than as described on the Fusion Disclosure Schedule, Fusion (i) is in
compliance in all material respects with all applicable foreign, federal, state and local laws, rules and regulations respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to its employees; (ii) has withheld and paid to the appropriate governmental authority all amounts required by law or by agreement to be withheld
from the wages, salaries and other payments to its employees; (iii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to
15
unemployment
compensation benefits, social security or other benefits or obligations for its employees (other than routine payments to be made in the normal course of business and consistent with past
practice).
(b) Labor. No work stoppage or labor strike against Fusion is pending or, to the knowledge of Fusion or
any Shareholder, threatened. Except as set forth in the Fusion Disclosure Schedule, Fusion is not involved in or, to the knowledge of Fusion or any Shareholder, threatened with, any labor dispute,
grievance, or litigation relating to labor, safety or discrimination matters involving any Employee, including, without limitation, charges of unfair labor practices or discrimination complaints,
that, if adversely determined, would, individually or in the aggregate, have an Fusion Material Adverse Effect. Fusion has not engaged in any unfair labor practices within the meaning of the National
Labor Relations Act that would, individually or in the aggregate, directly or indirectly have an Fusion Material Adverse Effect. Fusion is not presently, nor has it been in the past, a party to, or
bound by, (i) any collective bargaining agreement or union contract with respect to its employees and no collective bargaining agreement is being negotiated by Fusion or (ii) any
statutory works council or other agreement, statute, rule or regulation that mandates employee approval, participation, consultation or consent with regard to the transactions contemplated hereby.
(c) Employees. To the knowledge of Fusion or any Shareholder, no employee of Fusion (i) is in
violation of any term of any employment contract, patent disclosure agreement, non-competition agreement, or any restrictive covenant to a former employer relating to the right of any such
employee to be employed by Fusion because of the nature of the business conducted or presently proposed to be conducted by Fusion or to the use of trade secrets or proprietary information of others or
(ii) with respect to officers of Fusion, no officer has given notice to Fusion, nor is Fusion otherwise aware, that any such officer intends to terminate his or her employment with Fusion.
Fusion has not engaged any individual as an independent contractor or made payments for services to be performed by any individual as an independent contractor who should be considered, under
applicable law, an employee of, rather than an independent contractor to, Fusion.
(d) Payroll. Section 3.15(d) of the Fusion Disclosure Schedule includes a complete and accurate
list of all officers and employees of Fusion, as of the date hereof, including, for each such person, job title/ category, salary paid in calendar year 1999, salary payable in calendar year 2000, and
bonuses paid or to be paid with respect to calendar year 1999.
SECTION
3.16 Environmental Matters. Fusion has complied in all material respects with all applicable
laws and regulations relating to the environment or occupational health and safety. There is no pending or, to the knowledge of Fusion or any Shareholder, threatened civil or criminal litigation,
written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any such law. There have been no releases by
Fusion, or to Fusion's knowledge, by others, of any chemicals, pollutants, contaminants, or hazardous substances into the environment at any parcel of real property or any facility formerly or
currently owned, leased, operated or controlled by Fusion in violation of environmental law.
SECTION
3.17 Agreements, Contracts and Commitments.
(a) Certain Material Contracts. Section 3.17(a) of the Disclosure Schedule sets forth a complete
and accurate list of the following:
(i) any
agreement, contract or commitment containing any covenant limiting the freedom of Fusion to engage in any line of business or compete with any person or to
disclose information to any third party;
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